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The Tata Power Company Limited Transmission vs. Maharashtra Electricity Regulatory Commission & Ors.

Civil Appeal · 2022 INSC 1222Decided 23 Nov 2022
Civil Appeal No. 1933 of 2022
Dr. Dhananjaya Y. Chandrachud · A.S. Bopanna · J.B. Pardiwala

Background

Maharashtra needed a new 1000 MW HVDC transmission link between Kudus and Aarey to strengthen Mumbai's power supply. Instead of putting the project out for competitive bidding (Tariff Based Competitive Bidding, or "TBCB"), the Maharashtra State Electricity Transmission Company (MSETCL) treated it as an "old" project already in the pipeline and the Maharashtra Electricity Regulatory Commission (MERC) granted the transmission licence to Adani Electricity Mumbai Infra Limited directly, fixing tariff under its general regulatory powers instead of through bidding. Tata Power Transmission, a rival transmission company, challenged this before the Appellate Tribunal for Electricity (APTEL), arguing the law required competitive bidding; APTEL dismissed the challenge, and Tata Power then appealed to the Supreme Court under Section 125 of the Electricity Act.

Decision Breakdown

The Supreme Court held that the Electricity Act, 2003 does not prescribe one single mandatory method for fixing tariff: Section 63 (competitive bidding) applies once a bidding process has actually been conducted, while Section 62 (general regulatory tariff-fixing) applies otherwise, and neither section takes automatic precedence over the other unless the regulator has notified specific criteria for choosing between them. Since MERC had not notified any threshold or criteria mandating TBCB for this class of project, and MERC/APTEL had concurrently found the HVDC project to be an "existing" (not "new") project under the state government's policy, it was open to MERC to allot the project outside the bidding route. The Court dismissed Tata Power's appeal, but criticised the ad-hoc, inconsistent manner in which MSETCL had handled the project's classification over the years, and directed all State Electricity Regulatory Commissions across India to frame formal regulations under Section 181 of the Act laying down clear criteria for choosing between tariff-determination methods within three months.

Lesson Learnt

A statutory regulator's choice of tariff-fixing method (bidding vs. general regulatory power) will be upheld by courts as long as it acted within its statutory discretion in the absence of binding rules, but this case also triggered a nationwide directive requiring electricity regulators to frame clear, transparent rules on the subject so such disputes don't recur.

Official source (sci.gov.in)View Judgment (PDF)

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