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(2) Whether as per the Scheme of the Act, the Regulatory Commission has framed the impugned Regulations repugnant to the National Electricity Policy, 2005 and Tariff Policy, 2006;

(3) Whether the Regulatory Commission could have imposed surcharge on the captive power plants and open access consumers in the event of their failure to fulfil the RE obligation.

In order to appreciate the controversy, it is necessary to consider the relevant provisions of the Electricity Act , 2003.

The Electricity Act, 2003 was enacted to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto.

60. Market domination.- The Appropriate Commission may issue such directions as it considers appropriate to a licensee or a generating company if such licensee or generating company enters into any agreement or abuses its dominant position or enters into a combination which is likely to cause or causes an adverse effect on competition in electricity industry.

Tariff has been defined in Part VII of the Act of 2003. Section 61 provides that the Appropriate Commission has power to promote co-generation and generation of electricity from renewable sources of energy and it can specify the terms and conditions for the determination of tariff. Section 62 also deals with determination of tariff by the Appropriate Commission in accordance with the Act of 2003. Section 66 provides that Appropriate Commission shall endeavor to promote the development of market including trading in power in such manner as may be specified and shall be guided by the National Electricity Policy referred to in section 3 in this regard. As Sections 61 and 66 were also invoked while framing the Regulations of 2010, they are quoted below:-

(c) the factors which would encourage competition, efficiency, economical use of the resources, good performance and optimum investments;

(d) safeguarding of consumers' interest and at the same time, recovery of the cost of electricity in a reasonable manner;

(e) the principles rewarding efficiency in performance;

(f) multi year tariff principles;

(g) that the tariff progressively reflects the cost of supply of electricity and also, reduces cross-subsidies in the manner specified by the Appropriate Commission;

(2) Such procurement by Distribution Licensees for future requirements shall be done, as far as possible, through competitive bidding process under Section 63 of the Act within suppliers offering energy from same type of non-conventional sources. In the long term, these technologies would need to compete with other sources in terms of full costs.

(3) The Central Commission should lay down guidelines within three months for pricing non-firm power, especially from non-conventional sources, to be followed in cases where such procurement is not through competitive bidding.