Introduction

The case of The Tata Power Company Limited Transmission v. Maharashtra Electricity Regulatory Commission (2022 INSC 1222) presents a pivotal examination of the regulatory framework governing tariff determination for intra-state transmission projects in India. The appellant, Tata Power Company Limited Transmission (TPC-T), challenged the decision of the Maharashtra Electricity Regulatory Commission (MERC) to grant a transmission license under Section 62 (Regulated Tariff Mechanism) of the Electricity Act, 2003, without adhering to the Tariff Based Competitive Bidding (TBCB) process prescribed under Section 63.

The primary issue revolved around whether MERC's discretion to determine tariffs under Section 62 was compromised by the failure to follow the competitive bidding route mandated for new transmission projects exceeding a specified threshold.

Summary of the Judgment

The Supreme Court of India, led by Chief Justice Dr. Dhananjaya Y. Chandrachud, upheld MERC's decision to grant the transmission license to AEML-T (a subsidiary of Tata Power) under Section 62. The Court reasoned that Section 63's TBCB process is an alternative route rather than a dominant one over Section 62. It was determined that the HVDC Kudus-Aarey project, in question, was an "existing" project as of the Government of Maharashtra's resolution dated 4 January 2019. Consequently, MERC was within its regulatory discretion to determine the tariffs through the Regulated Tariff Mechanism without mandating the TBCB route.

The judgment clarified the interplay between Sections 62 and 63 of the Electricity Act, emphasizing that both sections operate on an equal footing, providing alternative modalities for tariff determination based on the specifics of each project.

Analysis

Precedents Cited

The judgment extensively referenced earlier cases to substantiate its reasoning:

• Energy Watchdog v. Central Electricity Regulatory Commission (CERC): Clarified the operational dynamics between Sections 62 and 63, asserting that Section 63 does not supersede Section 62 but offers an alternative tariff determination route.
• Reliance Infrastructure Limited v. State of Maharashtra: Reinforced the autonomy of Regulatory Commissions in tariff determination and emphasized that Regulatory Commissions are not mere "post offices" but active decision-makers guided by statutory principles.
• PTC India Ltd. v. CERC: Highlighted the separation of regulatory functions and the importance of Regulatory Commissions adhering to prescribed guidelines while exercising their powers.

Legal Reasoning

The Court delved deep into the statutory provisions of the Electricity Act, 2003, particularly Sections 61, 62, and 63. Key points of the legal reasoning include:

• Section 61: Mandates the Appropriate Commission to specify terms and conditions for tariff determination, guided by the National Electricity Policy (NEP) and National Tariff Policy (NTP).
• Section 62: Empowers the Commission to determine tariffs via the Regulated Tariff Mechanism (RTM), where tariffs are set based on statutes without a bidding process.
• Section 63: Provides an alternative route where tariffs can be adopted if determined through a transparent bidding process in line with Central Government guidelines.

The Court clarified that Section 63 does not render it the primary or dominant route but exists alongside Section 62 as a separate modality. Therefore, Regulatory Commissions retain the discretion to choose either route based on the project's nature and urgency.

Additionally, the Court examined the Government of Maharashtra's Resolution (GoM GR) and concluded that the HVDC Kudus-Aarey project was classified as an "existing" project, thereby not mandating adherence to the TBCB route.

Impact

This judgment has far-reaching implications for the electricity transmission sector in India:

• Regulatory Autonomy: Reinforces the autonomy of State Regulatory Commissions in determining the most suitable tariff determination route.
• Flexibility in Tariff Determination: Empowers Regulatory Commissions to exercise discretion rather than being bound to a singular method, fostering adaptability based on project specifics.
• Clarity on Project Classification: Provides a clear framework for classifying projects as "new" or "existing," influencing future licensing and tariff strategies.
• Policy Formulation: Highlights the need for Regulatory Commissions to promptly formulate and notify regulations under Section 181 to guide tariff determination processes effectively.

Complex Concepts Simplified

Tariff Based Competitive Bidding (TBCB)

TBCB is a process where transmission projects are awarded based on competitive bids. It is designed to ensure transparency, promote competition, and potentially reduce costs through competitive pricing mechanisms.

Regulated Tariff Mechanism (RTM)

RTM is a traditional method where tariffs are determined by the Regulatory Commission without a bidding process. Tariffs are set based on the cost of supply, ensuring that the electricity supply remains financially viable while protecting consumer interests.

National Tariff Policy (NTP)

The NTP provides overarching guidelines for tariff determination across India, aiming to create a balanced framework that encourages competition, efficiency, and sustainable investment in the electricity sector.

State Transmission Utility (STU)

An STU, such as MSETCL in Maharashtra, is responsible for intra-state transmission of electricity. It plays a crucial role in planning, coordination, and execution of transmission projects within the state.

Conclusion

The Supreme Court's ruling in this case underscores the critical balance between regulatory autonomy and adherence to statutory guidelines in the determination of electricity tariffs. By affirming MERC's discretion to choose the appropriate tariff determination route, the judgment paves the way for more flexible and context-sensitive regulatory practices.

Furthermore, the decision emphasizes the necessity for Regulatory Commissions to promptly establish and notify relevant guidelines and thresholds to guide their decision-making processes effectively. This ensures that the regulatory framework remains robust, transparent, and conducive to the evolving dynamics of the power sector.

Ultimately, the judgment serves the broader objective of fostering a competitive, efficient, and consumer-friendly electricity market in India, aligning with the foundational principles of the Electricity Act, 2003.

Glossary of Defined Terms

• Act: Electricity Act, 2003
• AEMIL/second respondent: Adani Electricity Mumbai Infra Limited
• AEML-T third respondent: Adani Electricity Mumbai Limited – Transmission
• APTEL: Appellate Tribunal for Electricity
• CEAC: Central Electricity Authority
• MERC: Maharashtra Electricity Regulatory Commission
• MoP: Ministry of Power
• NEP: National Electricity Policy
• NTP: National Tariff Policy
• STU: State Transmission Utility
• TBCB: Tariff Based Competitive Bidding
• VSC: Voltage Source Converter