RERC’s Jurisdiction Over Intra-State Aspects of Inter-State Open Access: A New Milestone in Electricity Regulation

I. Introduction

In Ramayana Ispat Pvt. Ltd. & Anr. v. State of Rajasthan & Ors. (2025 INSC 424), a cluster of appeals emerged before the Supreme Court of India challenging the constitutionality and validity of the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016 (“Regulations of 2016” or “impugned regulations”). The appellants, industrial enterprises either operating captive power plants (CPPs) or seeking to purchase electricity from outside Rajasthan via open access, argued that certain provisions of these regulations:

• Exceeded the judicially recognized jurisdiction of the Rajasthan Electricity Regulatory Commission (RERC).
• Imposed unreasonable restrictions on the simultaneous use of open access and contracted demand from local distribution companies.
• Needed to be struck down as arbitrary, discriminatory, and ultra vires the Electricity Act, 2003.

The respondents, including the State of Rajasthan, RERC, and local distribution licensees, defended the Regulations of 2016. They contended that the new requirements:

• Promoted grid stability.
• Maintained discipline in power scheduling.
• Prevented predatory or speculative behavior detrimental to other grid participants.

The case was initially adjudicated by two different High Court Benches in Rajasthan—at Jodhpur and at Jaipur. Both Benches upheld the validity of the Regulations of 2016. Subsequently, the appellants moved the Supreme Court, arguing that critical issues concerning inter-state open access, extra-territorial reach, and alleged discrimination against captive power plants had not been adequately addressed.

Ultimately, the Supreme Court dismissed all three appeals, affirming RERC’s jurisdiction to regulate the intra-state aspects of open access, including short-term inter-state transactions that culminate in electricity consumption within Rajasthan. The judgment elaborates on critical aspects of open access under the Electricity Act, 2003, clarifying the scope of state commission regulations and underscoring the importance of grid discipline, scheduling norms, and non-discriminatory market principles.

II. Summary of the Judgment

Delivering the judgment, the Supreme Court upheld the validity of the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016, confirming the following:

1. Jurisdiction of RERC: The Court clarified that while the Central Electricity Regulatory Commission (CERC) regulates inter-state transmission under Section 79 of the Electricity Act, 2003, the Rajasthan Electricity Regulatory Commission retains full authority to oversee any open access consumption and transactions happening within Rajasthan’s grid. Consequently, RERC has jurisdiction over the “intra-state aspect” even when the power source is located outside the state.
2. Penalties and Restrictions: The Supreme Court found the new tariff structures, scheduling requirements, and penalties for deviations justified. They serve to preserve grid stability and prevent the commercial “gaming” of power scheduling. These measures, according to the Court, are reasonable, non-arbitrary, and within the permissible regulatory ambit.
3. Advance Notice for Scheduling: The requirement for a 24-hour advance notice under Regulation 26(7) was held valid. According to the Court, this scheduling regulation is warranted because it ensures predictability and avoids last-minute fluctuations that may destabilize the state grid.
4. Distinction Between Captive Generators and Discoms: The Court rejected the contention that CPPs were singled out or burdened with harsher obligations under Regulation 21. Instead, the difference in how captive generators versus distribution licensees are regulated was found to be rational, arising from the distinct nature of each entity.
5. Open Access Rights Remain Intact: The Court underscored that open access rights are not dismantled by these regulations. Rather, the conditions — including penalties and scheduling obligations — are lawful levers to ensure more orderly and non-disruptive transactions.

Hence, the validity of the Regulations of 2016 stands. The Supreme Court found that the restrictions did not violate constitutional rights or exceed statutory mandates. Appeals against the previous High Court orders were consequently dismissed.

III. Analysis

A. Precedents Cited

Throughout the judgment, the Supreme Court referenced key judicial precedents:

• Energy Watchdog v. Central Electricity Regulatory Commission: This ruling clarified the division of authority between CERC and State Commissions, holding that while CERC oversees inter-state generation and sale, state regulators remain competent to handle intra-state supply and distribution to local consumers.
• Reliance Infrastructure v. State of Maharashtra: The Supreme Court emphasized deference to expert regulatory bodies, indicating that courts should refrain from interfering unless the regulatory framework is manifestly arbitrary or contravenes core statutory provisions.
• Hindustan Zinc Ltd. v. RERC: This precedent reinforced the presumption of constitutionality for subordinate legislation and recognized that specialized commissions act within their sphere of competence unless proven otherwise.

These authorities collectively guided the Court’s reasoning in dismissing the appellants’ claims that RERC lacked jurisdiction or had framed regulations that were discriminatory or ultra vires.

B. Legal Reasoning

1. Jurisdictional Interpretation under the Electricity Act, 2003: The Court undertook a detailed examination of Sections 42, 79, and 86 of the Electricity Act, 2003. While Section 79(1)(c) vests CERC with authority over inter-state transmission, Section 42 empowers state commissions to administer open access conditions, especially for end-consumers situated within a given state’s boundaries.

2. Grid Stability and Scheduling Obligations: The Court affirmed that scheduling, advance notice requirements, and penalties for over-drawal or under-drawal play an essential role in preventing unexpected frequency shifts or voltage collapses. Since electricity cannot easily be stored, real-time balance is critical, and enforcing discipline through penalties is a legitimate regulatory objective.

3. Non-Discrimination of Captive Power Plants: The judgment systematically dismantled allegations that captive plants were being penalized offensively. It concluded that the regulatory framework applies equally to all generators under open access. The difference in provisions for captive plants and distribution licensees arises from distinct statutory obligations and does not translate into unlawful discrimination.

4. Scope of Regulatory Oversight: The Court underscored that RERC is an expert commission with specialized knowledge in balancing technical, economic, and legal elements within the electricity sector. Reliance on its domain expertise is warranted unless there is a clear overreach of statutory powers.

5. Reasonableness of the 24-Hour Notice Requirement: Contrary to the claim that this restriction cripples the fundamental open access right, the Court found it commensurate with the need to forecast load and dispatch accurately. Power exchanges still offer real-time or day-ahead markets, which means urgent procurement remains feasible (albeit subject to compliance with the overarching operational constraints).

C. Impact on Future Cases and Law

The Supreme Court’s ruling carries far-reaching implications for open access frameworks, both in Rajasthan and in other states:

• Affirmation of State Commission Domain: State commissions can legitimately regulate inter-state open access transactions insofar as these transactions move through local distribution networks. This reaffirms a broad interpretative approach to intra-state aspects.
• Emphasis on Grid Discipline and Scheduling: Other state regulators are likely to strengthen or replicate similar scheduling notice requirements, penalty regimes, and discipline measures to avoid sudden operational imbalances.
• CPPs as Key Stakeholders: While the right to set up captive plants remains untouched, operators must align with fair scheduling norms. The ruling opens the door to refining existing captive generation policies if states so choose, ensuring a stable and competitive market environment.

IV. Complex Concepts Simplified

• Open Access: Under the Electricity Act, 2003, “open access” allows any eligible consumer to procure electricity from a source other than the local distribution licensee. Essentially, it fosters competition by letting consumers buy power from multiple sellers if they have the requisite network access.
• Grid Stability: Electricity must be consumed the moment it is generated, as large-scale storage technology is limited. To avoid blackouts or equipment damage, the supply and demand must be balanced in real time, making scheduling crucial.
• Captive Power Plants (CPPs): Industrial units often set up their own power plants for self-consumption. CPPs enjoy certain statutory incentives, but they are also bound by regulatory requirements to ensure their electricity injection or drawal does not harm grid stability.
• Scheduling Requirements: A day-ahead or hourly “schedule” helps predict the power flow across the grid. Consumers and generators must declare their usage or generation so that the load dispatch centers can plan accordingly and avoid disruption.

V. Conclusion

The Supreme Court’s verdict in Ramayana Ispat Pvt. Ltd. & Anr. v. State of Rajasthan & Ors. provides a seminal affirmation of the balance between individual open access rights and the overarching necessity of grid discipline. It upholds RERC’s authority to regulate intra-state consumption, even if the electricity is nominally sourced from outside the state. By rejecting arguments of discrimination against captive power plants and clarifying that compliance with scheduling and penalty mechanisms is vital for system stability and fairness, the Court has reinforced the purposeful design of the Electricity Act, 2003.

In practical terms, this ruling:

• Validates state commissions’ powers to impose robust scheduling requirements, bringing clarity for industrial consumers and captive producers.
• Continues to incentivize open access in a structured manner, balancing price benefits with reliability imperatives.
• Provides assurance that statutory regulations, framed through consultative processes and aimed at preventing gaming or undue advantage, will be upheld unless shown to be manifestly arbitrary or unconstitutional.

Overall, the case underscores the judicial endorsement of measured, carefully designed regulatory frameworks that simultaneously nurture competition and safeguard grid operations. By harmonizing the interests of diverse stakeholders — from large industrial consumers to state distribution licensees — and ensuring continuity of supply, the Regulations of 2016 have now received the Supreme Court’s stamp of approval, shaping the future contours of open access regimes across India.