Mansukhmal Investments Private ... vs Union Of India on 20 December, 2024

[Cites 55, Cited by 0]

Karnataka High Court

Mansukhmal Investments Private ... vs Union Of India on 20 December, 2024

NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases (4) Where the State Commission permits a consumer or class of consumers to receive supply of electricity from a person other than the distribution licensee of his area of supply, such consumer shall be liable to pay an additional surcharge on the charges of wheeling, as may be specified by the State Commission, to meet the fixed cost of such distribution licensee arising out of his obligation to supply. (5) Every distribution licensee shall, within six months from the appointed date or date of grant of licence, whichever is earlier, establish a forum for redressal of grievances of the consumers in accordance with the guidelines as may be specified by the State Commission. (6) Any consumer, who is aggrieved by non- redressal of his grievances under sub-section (5), may make a representation for the redressal of his grievance to an authority to be known as Ombudsman to be appointed or designated by the State Commission. (7) The Ombudsman shall settle the grievance of the consumer within such time and in such manner as may be specified by the State Commission.

(8) The provisions of sub-sections (5), (6) and (7) shall be without prejudice to right which the consumer may have apart from the rights conferred upon him by those sub-sections."

94. As could be seen from sub-section (1) of Section 42 of the Electricity Act, it would be the duty of the distribution licensee to develop and maintain an efficient, co-ordinated

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases and economical distribution system in his area of supply and to supply electricity in accordance with the provisions of the Electricity Act.

95. Sub-section (2) of Section 42 of the Electricity Act -- with which we are mainly concerned with in this batch of writ petitions -- makes it obligatory for the State Commission to introduce open access in such phases and, subject to such conditions as may be specified, within one year of the appointed date by it, the Commission is required to specify the extent of open access in successive phases.

96. In the matter of determining the charges for wheeling, the Commission is required to have due regard to all relevant factors including such cross-subsidies, and other operational constraints.

97. The proviso also enables the availment of open access on payment of a surcharge, in addition to the charges for wheeling. It is made clear that the surcharge should be utilised to meet the requirements of current level of cross

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases subsidy and this surcharge, and cross-subsidies are to be progressively reduced in the manner specified by the State Commission.

98. Sub-section (3) of Section 42 of the Act obligates a distribution licensee, when put on notice by any person whose premises are situated within the area of supply of a distribution licensee, to supply electricity from a generating company or any other licensee for wheeling of electricity in accordance with the regulations made by the State Commission.

99. Sub-section (4) thereof provides for payment of additional surcharge on the charges of wheeling, whenever the State Commission permits a consumer to receive supply of electricity from a person other than the distribution licensee of his area of supply.

100. Sub-section (5) obligates every distribution licensee to establish a forum for redressal of grievances of the consumers in accordance with the guidelines specified by

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases the State Commission and any consumer who is aggrieved by non-redressal of his grievance(s) can make a representation for the redressal of his grievance(s) to an Ombudsman, who is to be appointed or designated by the State Commission.

101. A reading of Section 42 of the Act would clearly indicate that in the matter of distribution of electricity, especially in the matter of providing open access, it is the exclusive responsibility of the State Commission to deal with all aspects of distribution, especially in the matter of providing open access. In the matter of distribution of electricity and open access, apart from the State Commission, no other entity has been given with any role to play.

102. The fact that it is the State Commission alone which is conferred with the responsibility of introducing open access, determining charges for wheeling and payment of surcharge, would, by itself, clearly indicate that no other

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases entity apart from the State Commission can even attempt to get involved in the matters of distribution and, more importantly, providing open access.

103. Section 49 of Part VI states that whenever the Appropriate Commission has allowed open access to certain consumers under Section 42, such consumers could enter into an agreement with any person for supply or purchase of electricity on such terms and conditions, including tariff, as may be agreed upon by them.

104. Thus, whenever open access is provided by the Commission, the consumer who has been allowed open access can enter into an independent contract for supply or for purchase of electricity on such terms and conditions as may be agreed upon mutually. The charges for transmission (including surcharge) and the charges for wheeling will, however, have to be determined only by the State Commission.

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105. In other words, even if the open access consumer decides to purchase or supply electricity, such consumer will have to necessarily pay the charges for transmission and for wheeling, including the payment of surcharge as may be specified by the Commission, notwithstanding the fact that he can enter into an agreement for supply and purchase as regards electricity in any manner that they deem fit. In other words, the aspect of transmission and wheeling charges in respect of open access consumers is completely governed by the specifications i.e., regulations to made by the Regulator i.e., the appropriate State Commission.

106. It is also to be kept in mind that the main purpose of creating a Regulatory Commission is to ensure that there is an independent and impartial body to deal with the charges that can be levied in the matter of open access, and this is obviously with the intent that the Regulatory Commission would ensure a fair determination of the charges that would become payable.

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107. The fact that this task is entrusted to the Commission would also ensure that there is no governmental interference of any kind in providing open access and levying a charge for availing open access. In essence, it is the deliberate statutory intent that neither the State nor the Central Government should not have any role in the matter regarding provision of open access.

108. This part also provides for provisions with respect to electricity traders in terms of supply as well as consumer protection and standards of performance.

109. Thus, the entire ambit of electricity supply is to be administered by the Regulatory Commission and the Government (either State or Central) has not been conferred with any power or responsibility to interfere or interject in this process. In other words, all aspects of the supply of electricity are to be administered or governed by the Regulatory Commission and not by any other authority.

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110. Part VII of the Electricity Act provides for tariff and the provisions of this part empower only the appropriate commission to specify the terms and conditions for the determination of tariff and it is the Appropriate Commission which is required to determine tariff for the supply of electricity by a generating company or distribution / transmission / wheeling of electricity and for retail sale of electricity.

111. A specific procedure is prescribed for passing a tariff order and this requires an application to be made by the generating company, and this application is required to be published inviting suggestions and objections and the Appropriate Commission is required to consider all suggestions and objections received from the public and issue a tariff order accepting the application with such modifications or conditions. It is also empowered to reject the application for determination of the tariff.

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112. The Commission is required to send a copy of the tariff order to the Government, the concerned agencies, and to other persons concerned. The tariff order which is accepted and passed by the State Commission would continue to be in force for such period as may be specified in the order, and this order is also capable of being amended or revoked.

113. As could be noticed from Section 64 of the Electricity Act, the appropriate Commission is not required to consult the State Government or secure its concurrence for passing a tariff order, but it is required to communicate the order that it has passed to the State Government.

114. Section 65 of the Act under Part VII states that in the event of the State Government requiring grant of any subsidy to any consumer or class of consumers in the tariff determined by the State Commission, the State Government shall pay the subsidy amount in advance and in such manner as may be specified, to compensate the

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases person affected by the grant of subsidy as a condition for the licence or any other person concerned to implement the subsidy. It is therefore clear that the State Government does not have the power to tinker with a tariff order accepted and passed by the Commission in any manner, and if it decides to give subsidy to a particular class of consumers who are affected by the tariff order, it is required to pay in advance the amount which it is granting as subsidy.

115. Section 66 of the Act also categorically clarifies that it is the Appropriate Commission which shall endeavour to promote the development of a market in power in such manner as may be specified and it shall be guided by the National Electricity Policy.

116. Part IX of the Act provides for creation for the Central Electricity Authority. It provides that the Central Electricity Authority established under Section 3 of the Electricity (Supply) Act, 1948 shall be deemed to be the Central

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases Electricity Authority under the Electricity Act, and the power to appoint members to that authority is conferred on the Central Government. The functions of the authority are essentially to advise the Central Government on the matters relating to the National Electricity Policy, formulate short-term and perspective plans for development of the electricity system, co-ordinate the activities of the planning agencies as well as specify the technical standards, grid standards and the conditions for installation of meters for transmission and supply of electricity.

117. In essence, the authority is an advisory body to the Central Government and it does not in any way monitor the generation, transmission or distribution of the electricity and deals only with technical aspects.

118. Section 75 in Part IX states that in the discharge of its functions, the Authority shall be guided by such directions in the matters of policy involving public interest as the

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases Central Government may provide in writing. It is to be noticed here that the directions issued by the Central Government are not binding on the authority and the directions so issued will only be a guiding factor for the authority.

119. Part X of the Act deals with the Regulatory Commissions.

It contemplates the constitution, powers and functions of the Central Commission or State Commission or even a Joint Commission.

120. The Central Commission is given the function of regulating the tariff of generating companies owned or controlled by the Central Government and also to regulate the tariff of generating companies other than those owned or controlled by the Central Government as specified in clause (a) of Section 79 of the Electricity Act, if such generating companies enter into or have a composite scheme for generation and sale of electricity in more than one State as provided in clause (d) of Section 79. It has

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases also given the function to regulate the inter-State transmission of electricity and to determine tariff for inter- State transmission of electricity as per clauses (c) and (d) of Section 79 of the Electricity Act.

121. In short, the Central Commission is required to regulate the tariff for Central Government companies or for Companies which have a scheme for generation and sale of electricity in more than one State and, ultimately, to regulate inter-state transmissions.

122. The proviso to S. 82 states that the State Electricity Regulatory Commission established under the Electricity Regulatory Commissions Act, 1998 would be the State Commission under the 2003 Act. Thus, the Regulatory Commission which were already established under the earlier laws have been continued as the Regulatory Commission in the 2003 Act.

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123. The State Commission, on the other hand, is entrusted with the following functions as enumerated in the following provision:

"Section 86. (Functions of State Commission): --

- (1) The State Commission shall discharge the following functions, namely: -

(a) determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State:

Provided that where open access has been permitted to a category of consumers under section 42, the State Commission shall determine only the wheeling charges and surcharge thereon, if any, for the said category of consumers;

(b) regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State;

(c) facilitate intra-State transmission and wheeling of electricity;

(d) issue licenses to persons seeking to act as transmission licensees, distribution licensees and electricity traders with respect to their operations within the State;

(e) promote co-generation and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee;

(f) adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration;

(g) levy fee for the purposes of this Act;

(h) specify State Grid Code consistent with the Grid Code specified under clause (h) of sub-section (1) of section 79;

(I) specify or enforce standards with respect to quality, continuity and reliability of service by licensees;

(j) fix the trading margin in the intra-State trading of electricity, if considered, necessary;

(k) and discharge such other functions as may be assigned to it under this Act.

The State Commission shall advise the State Government on all or any of the following matters, namely: -.

(i) promotion of competition, efficiency and economy in activities of the electricity industry;

(ii) promotion of investment in electricity industry;

(iii) reorganization and restructuring of electricity industry in the State;

(iv) matters concerning generation, transmission , distribution and trading of electricity or any other matter

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases referred to the State Commission by that Government.

(3) The State Commission shall ensure transparency while exercising its powers and discharging its functions.

(4) In discharge of its functions, the State Commission shall be guided by the National Electricity Policy, National Electricity Plan and tariff policy published under section 3."

124. As could be seen from above, the State Commission is entrusted with the function of determining the tariff for generation, supply, transmission and wheeling of electricity. The proviso to Section 86 makes it clear that where open access has been permitted to a category of consumers under Section 42, the State Commission is required to determine the wheeling charges and surcharge thereon.

125. The State Commission is also given the task of regulating electricity purchase and procurement process of distribution licensees, including the price at which electricity shall be procured from the generating companies through agreements for purchase of power for

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases distribution and supply within the State. To facilitate intra- State transmission and wheeling of electricity is also the function of State Commission, apart from the power to issue licences for transmission, distribution and electricity trading. In short, all aspects of determination of tariff and regulation of electricity purchase and the facilitation of intra-State transmission is to be monitored by the State Commission.

126. Unlike the Central Commission, Section 86 (1)(e) of the Electricity Act casts an obligation to promote co-generation and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee.

127. As stated above, the Central Commission, which is constituted under Section 76 and whose functions are

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases enumerated in Section 79, does not give any responsibility on the Central Commission regarding generation of electricity from renewable energy sources.

128. In other words, by virtue of Section 86(1)(e), the generation of electricity from renewable energy sources -- insofar as it relates to providing suitable measures for connectivity with the grid and sale of electricity to any person including specifying a percentage of the total consumption of electricity in the area of a distribution licensee -- is cast statutorily only on the State Commission.

129. The effect of not giving a similar function to the Central Commission, as stated in Section 76 of the Act, is that in the matter of generation of electricity from renewable sources of energy, it is the State Commission alone which will have to monitor and administer the generation of such electricity.

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130. Sections 107 and 108 of the Electricity Act under Part X provide for issuance of directions by the Central Government and the same reads as under:

"Section 107. (Directions by Central Government): --- (1) In the discharge of its functions, the Central Commission shall be guided by such directions in matters of policy involving public interest as the Central Government may give to it in writing.

(2) If any question arises as to whether any such direction relates to a matter of policy involving public interest, the decision of the Central Government thereon shall be final.

*** Section 108. (Directions by State Government):

---- (1) In the discharge of its functions, the State Commission shall be guided by such directions in matters of policy involving public interest as the State Government may give to it in writing.

(2) If any question arises as to whether any such direction relates to a matter of policy involving public interest, the decision of the State Government thereon shall be final."

(Emphasis supplied)

131. As could be seen from the above, in the discharge of its functions, the Commission (Central or State) is required to be guided by such directions in matters of policy involving

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases public interest, if they are given to it in writing by the respective Governments. The use of the phrase "be guided" in both the provisions would indicate that the directions given in writing will not be binding on the respective Commissions but they would only act as guiding factors.

132. A three-Judge Bench of the Hon'ble Supreme Court in a recent decision rendered in Kerala State Electricity Board2 has, while interpreting Section 108 of the Electricity Act, has held as follows:

"16. We are in agreement with the judgment of APTEL insofar as it holds that the directive which was issued by the State government under Section 108 could not have displaced the adjudicatory function which was entrusted to KSERC. The State government while issuing a policy directive in the exercise of its power under Section 108 cannot impinge on the adjudicatory discretion which is vested in an authority under the Act. In this regard, we may helpfully refer to the observations of this Court in A.P. TRANSCO v. Sai Renewable 2 Kerala State Electricity Board v. Jhabua Power Limited & Ors., in Civil Appeal Nos.10046-47 of 2024 (disposed of on 30.09.2024)

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases Power (P) Ltd., (2011) 11 SCC 34, in the context of a similar provision in the erstwhile Andhra Pradesh Electricity Reforms Act 1998 (which was repealed by the Electricity Act 2003). A two-judge bench of this Court, speaking through Justice Swatanter Kumar, observed:

"59. Section 12 of the Act vests the State Government with the power to issue policy directions on matters concerning electricity in the State including the overall planning and coordination. All policy directions shall be issued by the State Government consistent with the objects sought to be achieved by this Act and, accordingly, shall not adversely affect or interfere with the functions and powers of the Regulatory Commission including, but not limited to, determination of the structure of tariffs for supply of electricity to various classes of consumers. The State Government is further expected to consult the Regulatory Commission in regard to the proposed legislation or rules concerning any policy direction and shall duly take into account the recommendation by the Regulatory Commission on all such matters. Thus the scheme of these provisions is to grant supremacy to the Regulatory Commission and the State is not expected to take any policy decision or planning which would adversely affect the functioning of the Regulatory Commission or interfere with its functions. This provision also clearly

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases implies that fixation of tariff is the function of the Regulatory Commission and the State Government has a minimum role in that regard."

17. That the state regulatory commissions are not 'bound' by the directions of the state government, or the Central Government is also evident from the text of Section 108. The provision reads: "In the discharge of its functions, the State Commission shall be guided by such directions in matters of policy ...". This indicates that the state commission shall only be 'guided' by the directions issued by the state government and is not automatically bound by them. This interpretation is strengthened by the divergence in the language used in other provisions of the Act, such as Section 11 of the Act which reads as follows:

"Section 11. (Directions to generating companies): --- (1) Appropriate Government may specify that a generating company shall, in extraordinary circumstances operate and maintain any generating station in accordance with the directions of that Government. Explanation. - For the purposes of this section, the expression "extraordinary circumstances" means circumstances arising out of threat to security of the State, public order or a natural calamity or such other circumstances arising in the public interest. ..."

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18. The above provision uses mandatory language and provides that the generating company "shall ... operate and maintain any generating station in accordance with the directions of that Government" in extraordinary circumstances. This can be distinguished from the language in Section 108, which merely requires that the state commission "be guided by" the directions of the State Government. The provision, in no manner, seeks to control the exercise of quasi-judicial power by the state commissions based on directions issued by the state government."

(Emphasis supplied)

133. Thus, the directions given in writing by the Central or State Government can only be a guiding factor and the same will not bind the Commissions. It will have to be kept in mind that the function of the Commission is essentially to act as a neutral body and ensure that there is an efficient distribution network in which the interests of all the stakeholders are safeguarded.

134. The Regulator, by its very nature, is required to be an impartial body which can regulate the functioning of the distribution and supply of electricity in a fair manner and

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases ensure that public interest does not suffer, and, at the same time, also ensure that the interest of generators, transmitters and distributors are not affected in any manner.

135. Part XVIII of the Electricity Act deals with miscellaneous provisions. Section 176 confers power on the Central Government to make rules. Sub-section (1) thereof states that the Central Government may make rules for carrying out the provisions of the Act, while Sub-section (2) states that without prejudice to the generality of the power to make Rules under Sub-section (1), it may make rules which provide for several matters including, as stated in clause (z) of Sub-section (2), any other matter which is required to be, or may be, prescribed.

136. Sub-section (52) of Section 2 defines "prescribed" as prescribed by rules made by the Appropriate Government under the Act, while Sub-section (62) defines "specified" to mean specified by the regulations made by the

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases Appropriate Commission or the Authority, as the case may be, under the Act. Sub-section (57) defines "regulations" to mean the regulations made under the Act.

137. Section 177 of the Act empowers the authority to make regulations which are consistent with the Act and the Rules to carry out the provisions of the Act. Sub-section (2) thereof confers the powers in respect of several matters mentioned thereunder.

138. Section 178 of the Electricity Act deals with the powers of Central Commission to make regulations, and Section 180 confers power on the State Government to make Rules.

139. Section 181 deals with the powers of the State Commission to make regulations. Clauses (i), (j), (k), (l),

(m), (n), (o), (p), (q) and (r) of Subsection (2) of Section 181, which are relevant for these cases, reads as under:

"Section 181. (Powers of State Commissions to make regulations): --- (1) The State Commissions may, by notification, make regulations consistent with this Act and the rules generally to carry out the provisions of this Act.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases (2) In particular and without prejudice to the generality of the power contained in sub-section (1), such regulations may provide for all or any of the following matters, namely:

(a) x x x

(i) payment of the transmission charges and a surcharge under sub-clause (ii) of clause(d) of sub-section (2) of section 39;

(j) reduction of surcharge and cross subsidies under second proviso to sub-clause (ii) of clause (d) of sub-section (2) of section 39;

(k) manner and utilisation of payment and surcharge under the fourth proviso to sub-

clause(ii) of clause (d) of sub-section (2) of section 39;

(l) payment of the transmission charges and a surcharge under sub-clause(ii) of clause (c) of section 40;

(m) reduction of surcharge and cross subsidies under second proviso to sub-clause (ii) of clause (c) of section 40;

(n) the manner of payment of surcharge under the fourth proviso to sub-clause (ii) of clause

(o) proportion of revenues from other business to be utilised for reducing the transmission and wheeling charges under proviso to section 41;

(p) reduction of surcharge and cross-subsidies under the third proviso to sub-section (2) of section 42;

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(q) payment of additional charges on charges of wheeling under subsection (4) of section 42;

(r) guidelines under sub-section (5) of section 42; the time and manner for settlement of grievances under sub-section (7) of section 42;"

140. As could be seen from the above, the power to frame regulations in respect of charges for transmission, open access and the charges for wheeling and surcharge is specifically conferred on the State Commission.

141. If the power to frame regulation in the matter of determination of charges in respect of transmission and wheeling is conferred on the Commission and the substantive provision also categorically states that the aspects of transmission and distribution, especially in relation to open access, are to be determined by the State Commission, it is obvious that no other authority can have a role to play nor can any other authority have even a supervisory role in these matters.

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142. Since the power to regulate the transmission, determination and, more specifically, all aspects relating to open access is conferred exclusively on the State Commission under Sections 42(2) and 181 of the Electricity Act, it is obvious that all aspects of open access lie within the exclusive domain of the State Commission. Since the power to administer and monitor open access is conferred on the State Commission, it is obvious that the Central Government does not have the power to frame any Rules.

143. The Central Government cannot, in the guise of exercising its residual power under Section 176(2) of the Act, contend that it can frame rules to carry out the provisions of the Act.

144. As already extracted and enunciated above, the Apex Court in the case of Naresh Chandra Agarwal (supra) has laid down the law that a rule-making body must function within the purview of the authority conferred to it.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases While dealing with the phrases used in the rule making power i.e., "to carry out the provisions of the Act" or "to carry out the purposes" and "without prejudice to the generality of the foregoing power", the Apex Court has laid down the principle that where a statute confers particular powers without prejudice to the generality of a power already conferred, the particular powers are only illustrative of the general power, and do not, in any way, restrict the general power.

145. The Apex Court has stated that even if the Rules framed can be related to general powers, it must be remembered that such power delegated by an enactment does not enable the authority, by rules or by regulations, to extend the scope or general operation of the enactment and it is strictly ancillary. In fact, it is stated that the Rules will authorize the provision of subsidiary means of carrying into effect what is enacted in the statute itself and will cover what is incidental to the execution of its specific provision and, as a consequence, the general power

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases cannot be exercised so as to bring into existence substantive rights or obligations or disabilities not contemplated by the provisions of the Electricity Act itself.

146. If the provisions of the Electricity Act exclude the Central Government from playing any role in the matter pertaining to granting open access and specifically confers the powers in relation to open access only to the Appropriate Commission, this substantive provision of administering open access cannot be usurped by the Central Government by placing reliance on the residuary powers granted to frame rules to carry out the purposes of the Electricity Act.

147. If the substantive provision of the statute specifically enables a particular authority to monitor all aspects of a particular matter, another rule-making authority cannot frame rules which have the effect of amending the substantive provision itself.

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148. If the impugned Rules framed by the Central Government are accepted, then the aspect of providing open access to renewable sources of energy as specified by the State Commissions stands nullified. As a consequence, the powers of State Commission to administer all aspects of open access to green energy producers will also be nullified. In effect, the Rules framed by the Central Government would amend Section 42(2) of the Electricity Act in its entirety. It cannot be in dispute that a piece of subsidiary or a delegated legislation cannot have the effect of amending a substantive provision.

149. In a case where the power to make rules and regulations are separately specified for different authorities, one authority cannot frame a rule which has the effect of obliterating or diluting the substantive power granted to another authority under the Act.

150. It is to be noticed that the architecture of the Electricity Act has been designed in such a way that specific roles are

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases carved out for different authorities with the ultimate objective of ensuring the creation of a fair, transparent and vibrant electricity sector which would be beneficial to the nation as a whole.

151. It is therefore clear that it is only the State Commission which has the power to make regulations and the Central Government lacks the legislative competence to frame rules in this regard.

152. It will therefore have to be held that the impugned GEOA Rules, 2022 framed by the Central Government is beyond its competence and it lacks legal authority to do so, and the said Rules will thus have to be struck down.

153. Another factor which has to be noticed here is that Rule 5 of the GEOA Rules that have been framed by the Central Government positively directs the State Commissions to amend the State Regulations to conform to the impugned GEOA Rules. Rule 5 of said Rules reads as follows:

"5. Green Energy Open Access.- (1) To provide Green Energy Open Access to consumers of green

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases energy, the appropriate Commission may, if necessary, amend the relevant regulations made by it and such regulations shall be consistent with these rules.

(2) All applications for open access of green energy in this regard shall be allowed by the nodal agency within a period of fifteen days:

Provided that only consumers who have contracted demand or sanctioned load of hundred kW and above shall be eligible to take power through Green Energy Open Access and there shall be no limit of supply of power for the captive consumers taking power under Green Energy Open Access:

Provided further that reasonable conditions such as the minimum number of time blocks, which shall not be more than twelve-time blocks, for which the consumer shall not change the quantum of power consumed through open access may be imposed so as to avoid high variation in demand to be met by the distribution licensee."

154. As could be seen from the above, the Central Government has framed a rule which has the effect of directing a State Commission (which is statutorily made responsible for dealing with all aspects of distribution of electricity) to amend its own regulations to ensure it is in conformity with the GEOA Rules framed by the Central Government. The Regulatory Commissions have, in effect, been specifically directed under the Central Government Rules

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases to amend their Regulations, which is clearly impermissible under the Act.

155. As already noticed above, the concept of a Regulatory Commission was brought in under the 2003 Act to ensure that the electricity sector is monitored by an independent and impartial regulator, and the role of the Governments would be restricted only to the framing of polices which would guide the Appropriate Commissions. A rule which basically directs the statutory Regulatory Commission to frame Regulations would nullify the powers of State Commission granted under the substantive provisions of the Electricity Act, and, on this score also, the rules will have to be struck down.

156. It is not in serious dispute that pursuant to the rules framed by the Central Government, the KERC proceeded to frame regulations so as to have its regulations to be in conformity with the 2022 Rules.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases

157. The preamble to the Regulations also indicates that the Regulations were framed only because of the Rules framed by the Government in the year 2022. It is hence clear that the Regulations are framed only as a consequence of the 2022 Rules and they are not regulations framed independently by the Commission. Therefore, the consequent Regulations framed by the KERC will also have to be struck down.

VIII. BANKING OF ELECTRICITY -- PROVISION OF BANKING FACILITY AND THE GRIEVANCE RAISED BY THE PRESENT PETITIONERS:

158. The petitioners, by virtue of challenging the impugned Central Government GEOA Rules and the consequential KERC Regulations, have also raised a question regarding banking facility to be provided to them. It was their contention that the agreement entered into with the Government under the 2004 Regulations provided them with an annual banking facility which enabled them to bank their energy which they generated through

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases renewable sources such as water, wind and air, but under the impugned Regulations the banking facility was curtailed to a monthly facility. They also contended that the KERC, being entrusted with the task of promoting the generation of renewable energy, was bound to provide them with annual banking facility and this was sought to be nullified by the regulations.

159. The KERC as well as the distribution licensees contended that the petitioners have no statutory right of banking and, in fact, the concept of banking is not even provided for in the statute. It is contended that in order to encourage generation of green energy, the Regulator had provided for banking as a promotional measure. It is contended that the provision for banking was only related to the contract and not to any statutory regulations, and since the contract with the petitioners had come to an end, they could not demand that they be provided with banking facility as before.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases

160. The Act does not contain any provision which entitles the generating company to demand a banking facility. The banking facility is, in essence, a process where a generating company injects the energy that it has generated into the grid and withdraws the same at a subsequent point in time, as per its choice and convenience. Electricity generated by a generating company, euphemistically speaking, is deposited in a Bank i.e., the Grid and this energy is withdrawn from the bank (i.e., the Grid) whenever the generating company desires.

161. This is because the electricity once generated will have to be consumed and cannot be stored, but the concept of banking enables the generating company to inject energy into the grid, which is utilised by the distribution licencees or any other entity, and when this energy is sought to be withdrawn by the generating company at a later point in time, necessarily, the distribution licencee will have to provide that energy either from its own generative source or by purchasing the electricity from another source.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases

162. It has to be stated here that a renewable energy generator can generate energy only during certain periods. A solar energy producer can only produce electricity during the day; a wind energy generator can generate only when there is wind; and similarly, a hydel power generator can generate energy only when there is abundance of water, which is normally only during the monsoon season.

163. In other words, the green energy that is generated is usually not perennial and is available only during certain periods. Since green energy is a clean source of energy, the generators of green energy are given the facility of banking so that the energy they generate could be profitably sold when the price for electricity (vis-à-vis its demand and supply) is higher.

164. For example, hydel power generators can generate power during the monsoon when the demand for energy is low and, consequently, the price of electricity is also low. However, when the demand for energy is high, i.e., during

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases peak summer months, hydel power generators would be entitled to utilise the energy that it had banked and sell the same to its consumers for much higher price. The consequence of providing banking facility is that the distribution licencees would have consumed the power that the hydel power generating company had generated when the energy price was low but would have to provide energy to the hydel power generating company by procuring electricity at a higher rate during the peak summer months. This, therefore, necessarily causes a huge financial burden on the licencees.

165. It has to be stated here that the provision of the Electricity Act only statutorily obligates the regulators to provide for open access as providing open access is essential to encourage private sector participation in the generation of electricity. It is to be noticed here that if the same private generator is called upon also to lay transmission lines for the distribution of electricity generated by it, that would

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases cause a huge burden on them resulting in their generation of electricity being unviable for commercial exploitation.

166. Consequently, the law provides for such generator to utilise the transmission network as well as distribution network which has already been established by the Central Government as well as by the respective State Electricity Boards and this would also result in better and optimal utilisation of the State's infrastructure with the consequential saving a huge amount of capital expenditure.

167. The law, while providing access to these transmission and distribution network, basically provides for transmission licencees and distribution licencees to monetise their respective networks by facilitating the collection of transmission and wheeling charges, which is to be determined by the Regulatory Commission. This would enable the transmission licencee to secure charges for transmitting the energy generated by the private sector

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases generating company, while the distribution company would be entitled to claim wheeling charges for wheeling the energy generated by the private generating company through its distribution network. This would help the generators, transmitters and also the distributors.

168. As already noticed above, the wheeling and transmission charges are both required to be determined by the Regulatory Commissions.

169. The statute, as stated above, does not really contemplate banking facility to be provided to a private generating company. Thus, while the generating company has the statutory right, subject to the regulations framed by the KERC, to inject the energy that is generated into the grid and have the same to be transmitted and distributed to its consumers, it would not have any statutory right to bank its energy. If the statute does not provide for a statutory right to bank the energy so generated, the private power

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases generator, such as the green energy producer, cannot demand that he be provided with banking facility.

170. However, the Regulator has provided for banking facility by means of passing an order while determining the transmission charges, wheeling charges and cross-subsidy surcharges under open access. In the first of its order dated 09.06.2005, the Commission -- taking note of the fact that the stake-holders including the Government of Karnataka and utilities were in favour of the banking for renewable source of energy -- decided to allow banking facility in respect of wind and mini-hydel projects in the following terms:

"7.06 Banking facility to be provided for Renewable Sources of Energy:

Commission's Proposal:

The Commission had observed that, due to the nature of electricity, it would be difficult to match the demand at the consumer end with that of the supply from the contracted source in real time operation under open access. Especially, in case of wind and mini hydel projects the generation is infirm and is dependent on nature such as wind or rainfall as the case may be and hence scheduling and balancing will not be practicable on a real time basis under open access. In this contest

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases commission had opined that in such cases banking facility for a period of 1 month needs to be provided without carry over to the next financially year.

Comments received Special Secretary Gok is of the view that banking can be allowed only when both the input and drawal of energy is based on TOD meters and seasonal tariff. ESCOMs are not in favour of giving Banking facility to renewable sources of every. KPTCL has stated that it is agreeable to provide banking facility to wind and mini-hydel projects on the condition that they pay the difference between the UI charge at the time of injection and the UI charge at the time of drawal without any time limit. IPPAI and IWPA also agreed to the said proposal of KPTCL. REDAK have suggested if banking is allowed, banking charges of 0.5% in kind shall be levied. Reliance Energy is in favour of providing Banking only for NCE and infirm sources of power. IWPA has stated that banking facility is bare necessity for the viability of the wind projects. Kalayni steels is in favour of Banking facility at no or minimal charges. Similar views are expressed by Knowledge infrastructure & Energy Consulting Engineers. BEL states that for banking the charges should be 2%. Bangalore Chamber of Industry & Commerce states that banking facility should be based on commercial considerations. Sri Venkata Subba Rao is in favour of providing banking facility on a quarterly basis.

Commission's Views/Decision: The Commission notes that most of the stakeholders including the GOK and utilities are in favour of banking to infirm sources of energy. After considering the above views, the

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases commission hereby decides to allow banking facility in respect of wind and mini-hydel projects subject to payment of difference of UI charges between the time of injection and time drawal of the power from these sources, as suggested by KPTCL and also payment of banking charges @ 2% of the input energy.

In case the UI charges are negative, KPTCL/ESCOMs are not liable to pay the difference in UI charges. KPTCL/ESCOM shall ensure that appropriate metering is provided both at injection and drawal points to facilitate computation of UI charges. However, merit order despatch and scheduling shall not be applicable for these sources of energy."

171. Thereafter, on 11.07.2008, the Regulator approved the standard wheeling and banking commission for renewable energy projects, which was to be valid for a period of ten years from the date of commercial operation of the project. In respect of the projects which had been commissioned between 11.07.2008 to 10.07.2013, the agreements would be valid only for a period of five years.

172. Subsequently, the validity of the order dated 11.07.2008 was extended by three months and thereafter, by another order dated 09.10.2013, it was continued till 31.03.2014

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases and by another order dated 24.04.2014, it was further extended till 30.06.2014 or till a revised order was passed.

173. Ultimately, on 04.07.2014, the Regulator passed an order stating that the existing annual banking facility was to be continued for renewable energy projects as a promotional measure and the wheeling charges would be at 5% of the injected energy for wind, mini-hydel, bagasse-based co- generation plants and biomass based projects, while the banking charges would be at 2% of the injected energy applicable for wind and mini-hydel projects only.

174. The annual banking facility was also continued with a condition that if the banking energy was unutilised at the end of the wind year, water year or financial year, it was deemed to have been purchased by the distribution licencees of the area where the generator was located and the generator would be paid 85% of the generic tariff determined by the Commission.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases

175. It is on the basis of this order that the petitioners have entered into wheeling and banking agreements which were valid for a period of ten years, and the same have admittedly expired. Since the banking facility was a creation of the contract, which is approved by the Regulatory Commission, upon expiry of the contract, the contractual right of the generators to demand banking facility would also cease.

176. As already stated above, the generators have entered into an agreement, and the terms of the agreement read as follows:

"Article 11 TERM, TERMINATION AND DEFAULT 11.1 Term of the Agreement: This Agreement shall become effective upon the execution and delivery thereof by the Parties hereto and unless terminated pursuant to other Provisions of the Agreement, shall continue to be in force for such time until the completion of a period of ten (10) years from the date of execution and may be renewed for further period on the terms and conditions as may be mutually agreed upon between the Parties and as approved by Commission.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases 11.2 Events of Default:

Company's Default: The occurrence of any of the following events at any time during the Term of this Agreement shall constitute an Event of Default by Company:

a. If the COMPANY does not generate and wheel energy continuously for period of 8 months in a water/wind year.

b. Failure or refusal by COMPANY to perform its material obligations under this Agreement.

c. If the Company draws energy over and above the injection in any month other than zero injection.

d. Continuous overdraw of power from the grid by exclusive consumers for more than 15 days.

e. Company indulges in any malpractice. 11.3 Termination:

Termination for Company's Default:

i. Upon the occurrence of an event of default as set out in sub-clause 11.2 above, CESC may deliver a Default Notice to the COMPANY in writing, which shall specify in reasonable detail the Event of Default giving rise to the default notice. And calling upon the COMPANY to remedy the same within a month, failing which the present agreement gets terminated automatically.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases ii. In case of breach of any of the terms of this agreement the party not in default may terminate this agreement after filing 3 months notice in writing. However, termination shall not affect the rights that have already accrued to the other party to the date of termination.

iii. Upon termination of this agreement, CESC shall stand discharged of its entire obligation. However, the Parties shall meet all payment obligations as per the Agreement prior to the date of termination."

(Emphasis supplied)

177. As could be seen from the above, the agreement would come to an end on the completion of ten years from the date of its execution and was capable of renewal on such terms as may be agreed upon by the parties. Thus, if the agreements are not renewed, as a matter of course, the contractual right to bank the electricity generated will automatically expire along with the agreement.

178. An argument is, however, advanced by Sri. Uday Holla, learned Senior counsel and also by Sri. Shridhar Prabhu, learned counsel, in respect of two cases, i.e., in the petitions filed by M/s. Soham Renewable Energy India Private Limited--W.P. No.23729 of 2023 and in the writ

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases petition filed by M/s.Brindavan Hydropower Private Limited--W.P. No.11235 of 2024 to the effect that the petitioners therein were signatories to an agreement of the year 1995 which guaranteed them the right of annual banking facility for a period of thirty years and, therefore, the Regulator could not reduce the banking facility to a period less than a year.

179. It is also contended by them that the agreement entered into by the petitioners is saved under the provisions of KER Act and therefore, these agreements should be adhered to and not the subsequent agreements.

180. This argument was countered by the respondents to the effect that though the agreements were entered into in the year 1995 i.e., prior to the enactment of the Electricity Act of 2003, subsequently, on the enactment coming into force, the Regulator was obligated to frame statutory regulations to administer the entire process of granting open access and the Regulator in exercise of its statutory

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases power had framed Regulations and had also approved the standard Wheeling and Banking Agreement, which the petitioners had admittedly accepted and executed. It is contended that since the petitioners have entered into subsequent agreements pursuant to the regulations framed by the Regulator, reliance placed upon the earlier agreement would be untenable.

181. It is contended that the agreements entered into pursuant to the statutory regulations and the order passed by the Commission basically rescind the earlier contract and create a new contract, and by virtue of Section 623 of the Indian Contract Act of 1872, it is the subsequent contract which should prevail and not the earlier agreement.

182. The petitioners have admitted entering into an agreement in the year 2004 which conferred a right on them to avail of banking facility, annually, for a period of ten years. The 3

62. Effect of novation, rescission, and alteration of contract.--If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract, need not be performed.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases petitioners, having entered into this agreement, cannot be permitted to contend that the earlier agreement would prevail. The petitioners have also acted in terms of the agreement for the past ten years and have taken complete advantage of the terms of the agreement and they cannot now contend that they are still entitled to rely upon the terms of the earlier agreement of the year 1995.

183. Once an agreement in respect of banking is superseded by another agreement, which is statutory in character, which changes the terms and conditions of the first agreement, it is only the later agreement which would prevail and not the earlier one. The agreements entered into in the year 2014 are, essentially, statutory agreements since they are prescribed by the Regulator in terms of its regulation- making power and it will have to be therefore held that the earlier contracts that the petitioners entered into with the Government stood superseded by the statutory contract.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases

184. It may also be noticed here that the petitioners cannot be permitted to put forth this contention that the earlier agreement would prevail after having enjoyed the benefits of the agreement that they had entered into in the year 2004 for a period of ten years. At any rate, the petitioners cannot be permitted to contend after the expiry of the 2014 agreement in 2024 that they are entitled to fall back upon the 1995 agreement. The arguments of the petitioners, who were the executants of the 1995 agreement, cannot therefore be accepted and the same are rejected.

185. Another argument was advanced by the petitioners to the effect that the APTEL in the case of Fortune Five Hydel Projects Pvt. Ltd. (supra) has held that the Regulations cannot alter the terms of the Wheeling and Banking Agreement. As already observed above, the Regulator has passed an order on 09.01.2018 by which it had reduced the banking period from one year to six

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases months and ordered levy of additional surcharge on open access customers.

186. This order was the subject matter of an appeal before the APTEL in Appeal No.42 of 2018. The APTEL while deciding the appeal took note of the fact that there was an existing Wheeling and Banking Agreement which provided for annual banking and in light of this agreement, it was impermissible for the Regulator to reduce the banking period from one year to six months, especially in the absence of sufficient data and analysis of the said data.

187. Obviously, a decision rendered by the APTEL -- to the effect that the terms of an existing Wheeling and Banking Agreement cannot be modified by an order of the Regulator in the absence of data to back the order -- cannot be relied upon to contend that the generating companies have an absolute right to demand banking facility and, that too, for a year.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases

188. In my view, since the order of the APTEL was essentially determining the right of the Regulator to modify the existing Wheeling and Banking Agreement, said decision can have no application in the present cases when, admittedly, the Wheeling and Banking Agreements have expired and with the concept of banking being a contractual right, the petitioners who would have no right to demand banking under the subsisting agreement.

189. An argument is also advanced by the Union of India that it was a party to the 26th Conference of the Parties held in November of 20214, wherein it had committed to achieving net-zero emission by 2017 as per the Paris Agreement - 2015 which was signed by 175 countries, including India, on 22.04.2016 and to give effect to this pledge, it was imperative that the Union of India framed the requisite policies and Rules.

4 The 2021 United Nations Climate Change Conference, more commonly referred to as COP26, was the 26th United Nations Climate Change conference held at the SEC Centre in Glasgow, Scotland, United Kingdom, from the 31st of October. 2021 to the 13th of November, 2021.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases

190. It has to be stated here that Article 253 of the Constitution of India (and Entry Nos.13 and 14 of the Union List of the Constitution of India) does confer power on the Parliament to make any law for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries or any decision made at any international conference, Association or other body.

191. The underlying intent of Article 253 of the Constitution of India is basically to ensure that the Union should abide by any treaty that it has entered into with a foreign country or countries at any international conference.

192. The commitment of the country to achieve net-zero emission would therefore entitle the Union to frame a law in that regard. However, this power to enact a law to achieve net-zero emission cannot empower the Central Government to transgress an existing law and frame

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases rules/regulations in contravention of a law that the Parliament had enacted in the year 2003.

193. To put it differently, the Parliament is empowered to amend the Electricity Act if it is of the view that the nation has to implement any international treaty that it had signed. Unless the Electricity Act is amended and the Central Government is empowered to frame Rules under the said amendment, the Union cannot use the commitment given by it to achieve net-zero emission to frame rules in transgression of an existing law.

194. As already stated above, the Parliament has enacted the Electricity Act with the underlying purpose of de-licensing the entire electricity Sector and one of the important facets of the de-licensing is to establish a Regulator which would be able to promote, co-ordinate and administer the generation, transmission and distribution of the electricity generated.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases

195. If the Parliament made a law specifically conferring power on the Regulator to frame Regulations which governed every aspect of open access, it is inconceivable that the Central Government can side-step the requirement of the Parliament enacting a law in that regard and straight away proceed to frame the impugned Rules.

196. If Article 253 of the Constitution of India contemplates a law to be made by the Parliament, necessarily, the Parliament has to pass the enactment. The Central Government cannot use the power to frame Rules -- which is only a piece of sub-ordinate or delegated legislation -- to side-step the Parliament. I am therefore of the view that this argument of the Union also does not merit acceptance.

197. As already observed above, the role of the Government under the Act is essentially to frame a policy and it can only issue directions to the Regulator, and the Regulator

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases can only be guided by such directions and not be bound by it.

198. The Electricity Policy framed by the Central Government does not contain any policy directive to facilitate the manner of granting open access or banking. It will be open for the Central Government to incorporate the manner of granting open access to green energy generation in its policy and when that is done, the Regulator would obviously have to be guided by such policy while framing its regulations. Since, the electricity policy, as it stands, does not contain any specific policy directive in the manner of granting open access, the Central Government cannot get over this anomaly by falling upon the residuary power to frame rules and create a set of rules to regulate the open access to green energy generators and consumers.

199. The questions for consideration are answered accordingly.

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                                                        NC: 2024:KHC:53048
                                                   WP No. 11235 of 2024
                                               C/W WP No. 22770 of 2023
                                                   WP No. 23729 of 2023
                                                     And 12 other cases


IX.    CONCLUSION:

200. In the result, I allow these writ petitions in part, and hold and direct as follows:

(i) The impugned Rules as well as the Regulations framed by the Central Government and the KERC are struck down.

(ii) The KERC is directed to frame appropriate Regulations if it so desires in the matter of granting of open access to green energy generators and consumers.

(iii) During this exercise, the Commission will only be guided by the National Electricity Policy and the Tariff Policy framed by the Central Government, and shall independently consider the interests of all the stakeholders before framing the Regulations.

(iv) This direction will, however, not mean that the KERC will have to necessarily frame fresh Regulations and if it so desires, it can continue with the 2004 Regulations.

201. Taking cognizance of the fact that this order would leave a vacuum till the Regulations are framed by the KERC

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases independently as observed above, an interim arrangement would therefore have to be made to ensure that the wheeling and banking facilities availed hitherto by the petitioners are facilitated.

202. This Court had granted an interim order permitting the petitioners to pay 50% of the transmission charges determined by the KERC vide its order dated 08.06.2023. In my view, interest of justice would be met if the petitioners are directed to pay 50% of the transmission charges as per the interim order dated 05.07.2024 passed in these writ petitions.

203. The petitioners, under the orders of the KERC pursuant to which they had entered into Wheeling and Banking Agreements, were also required to pay wheeling charges at 5% till the KERC frames regulations for open access to the green energy generators pending framing regulations. The petitioners shall continue to pay wheeling charges at 5%.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases

204. The petitioners were also permitted to bank their energy annually, subject to payment of 2% under the Wheeling and Banking Agreement. However, by virtue of the Regulations which have now been invalidated, they were required to pay 8%.

205. Since these regulations have been struck down and liberty is given to the KERC to frame regulations for grant of open access to green energy generators and consumers, the petitioners shall be permitted to avail banking facility subject to payment of 4%.

206. The petitioners had the benefit of annual banking facility from 2014 in the standard Wheeling and Banking Agreement. Since the Wheeling and Banking Agreements have expired, they obviously would not have a contractual right to demand annual banking facility. Till the KERC frames regulations regarding banking as aforesaid, the petitioners shall be entitled to a monthly banking facility.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases X. DIRECTIONS AND SUGGESTIONS TO THE KERC:

207. Before parting with the case, it would be appropriate to direct the KERC to examine the possibility of providing the annual banking facility as sought by the generating companies in this manner.

208. The KERC could ensure that the generators do not take advantage of the annual banking facility, by holding that the generators would be entitled to energy charges as was prevailing on the date of injection into the grid and not the charges that are prevailing on the date they seek to withdraw the energy from the grid.

209. This would ensure that the green energy generators do not hedge their profits by taking advantage of the annual banking facility and entitle themselves to a higher energy charge during periods when the demand for electricity is high and, consequently, higher electricity prices would be prevailing in the market.

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NC: 2024:KHC:53048 WP No. 11235 of 2024 C/W WP No. 22770 of 2023 WP No. 23729 of 2023 And 12 other cases

210. This is, however, only a suggestion made by this Court and would not, in any way, bind the KERC while framing Regulations in this regard. It is also clarified that the KERC can and should take an independent view on the matter relating to banking, including whether it desires to provide for a banking facility.

XI. ORDER ON THE SUBSEQUENT INTERLOCUTORY APPLICATIONS FILED BY THE PETITIONERS:

211. After the arguments were heard and judgment was reserved, application in I.A. No.2 of 2024 (in WP No.11235 of 2024) has been filed by the petitioner seeking a direction to respondent Nos.4 and 5 to make payment at the rate of INR 4.86/- per unit for the energy supplied by the petitioner during the period from 27.06.2024 to 26.07.2024.

212. An argument was also advanced that the respondents were not making the payments for the energy injected to the grid on the ground that they did not have a subsisting

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213. It has to be stated here that so long as the transmission licencee and distribution licencee permit the injection of electric energy to the grid, they would be required to pay charges for the energy so injected and they cannot take shelter under the fact that there is no subsisting contract.

214. It is therefore made clear that in respect of the energy that is injected by the petitioners, even after the expiry of their contract, the respondents would be bound to pay the electrical energy charges on the basis of the generic tariff that was applicable as on the date the energy was injected into the grid by the petitioners.

215. Subsequently, one more application in I.A. No.2 of 2024 (in WP No.19035 of 2024 & other cases) was filed seeking directions to the SLDC and the KPTCL to grant unhindered and un-obstructive open access pending final disposal of these writ petitions.

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216. A grievance was put forth that the respondents were raising demands for payment of arrears in contravention of the interim order passed on 05.07.2024 (in WP No.11235 of 2024) by which the generating companies i.e., the petitioners were directed to pay only 50% of the monthly charges.

217. In response to said application, learned counsel appearing for the KPTCL and the distribution licencees stated that if demands had been made for payment of transmission charges prior to the interim order, the same could not be enforced and the demand would continue only in respect of the period after the interim order has been passed.

218. Until the directions issued above are complied with, the respondents shall continue to collect the transmission charges in terms of the interim order dated 05.07.2024 i.e., 50% of the transmission charges that had been determined by the KERC in its order dated 08.06.2023.

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219. An oral request for grant of stay of this order was made at the time of pronouncement of this order, and the same is refused since it has been held that Central Government lacked the competence to frame the GEOA Rules and therefore the question of permitting it to continue would be illegal.

Sd/-

(N S SANJAY GOWDA) JUDGE RK CT: SN List No.: 1 Sl No.: 51

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Karnataka High Court