A) ABSTRACT / HEADNOTE

Ramayana Ispat Pvt. Ltd. & Anr. v. State of Rajasthan & Ors., Civil Appeal No. 7964/2019 (decided 1 Apr. 2025, Vikram Nath & Prasanna B. Varale, JJ.) addresses the conflict between the statutory scheme of the Electricity Act, 2003 and the territorial reach and substance of the Rajasthan Electricity Regulatory Commission (Terms & Conditions for Open Access) Regulations, 2016 (“Regulations of 2016”).

The principal controversies concerned:

(i) whether a State Electricity Regulatory Commission may regulate aspects of open access where electricity is sourced inter-state but delivered/consumed within the State;

(ii) whether scheduling conditions (notably a 24-hour advance scheduling requirement in Regulation 26(7)) and penalties for deviation (notably Regulation 21 on unscheduled interchange pricing) unlawfully trench upon the statutory right to open access and are arbitrary or discriminatory (particularly as against captive power producers CPPs); and

(iii) whether the combined effect of the Regulations forecloses open access.

The Supreme Court upheld the Regulations. It read the Act as drawing a practical distinction between inter-state transmission (CERC domain under Section 79(1)(c)) and intra-state aspects of open access (State Commission domain under Section 42 and Section 86), emphasised grid stability and the technical necessity of scheduling and deviation charges, and held that the impugned provisions are reasonable, proportionate and within the competence of the RERC.

The Court relied on statutory architecture, Energy Watchdog v. CERC, and prior precedents, while giving weight to the regulatory expertise of commissions in framing operational rules for system security.

Keywords: open access, Rajasthan Electricity Regulatory Commission, Section 42, Regulation 26(7), Regulation 21, captive generation, inter-state transmission, grid stability.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The appeals arise from two High Court orders (Jodhpur Bench, 29.08.2016; Jaipur Bench, 06.09.2016) upholding the Regulations of 2016 promulgated by the Rajasthan Electricity Regulatory Commission (RERC). Industrial consumers and captive generators (including Hindustan Zinc Ltd. and Ramayana Ispat) challenged provisions that materially altered the earlier 2004 regime: the Regulations of 2016 curtailed simultaneous drawal from contracted demand and open access, required advance scheduling (24-hour notice for certain short-term inter-state open access), and imposed deviation penalties and altered unscheduled interchange pricing mechanisms.

Appellants argued the State Commission had overreached into the Central Commission’s domain (inter-state open access being exclusively CERC’s preserve under Section 79(1)(c)) and that the Regulations unreasonably restricted statutory open access rights (Sections 9 and 42), discriminated against CPPs, and effectively foreclosed open access. Respondents (RERC and DISCOMs) defended the Regulations as necessary, proportionate and within the State Commission’s authority under Sections 42, 86 and 181, grounded in technical necessities of grid stability and to prevent gaming/speculation.

The Supreme Court, after analysing statutory text, legislative intent and precedent, validated RERC’s regulatory reach over intra-state aspects affecting Rajasthan’s grid even when power originates inter-state, and sustained the requirements and penalties as bona fide regulatory measures aimed at preserving system reliability.

D) FACTS OF THE CASE

Industrials with substantial demand some with CPPs had earlier availed open access under the RERC 2004 Regulations, which permitted scheduling on a day-ahead basis in 15-minute blocks and flexible reliance on contracted demand to meet shortfalls.

The 2016 Regulations changed the operational matrix: scheduled open access reduced contracted demand pro-rata; under/over-drawals attracted penalties; short-term open access required prior intimation (24 hours in R.26(7)) and minimum utilisation thresholds were prescribed; R.21 fixed unscheduled interchange settlement rules with asymmetric pricing and limited compensation for surplus injected energy by CPPs.

Appellants contended the new rules impeded urgent procurement, penalised genuine operational deviations (e.g., breakdowns), discriminated against CPPs, and encroached on CERC’s domain where the power was procured inter-state.

Respondents emphasized grid technicalities (frequency, real-time balance), the SLDC’s role (Sections 32-33) and the State Commission’s regulatory function to set conditions for open access to safeguard systemic stability and DISCOM financial health. The High Courts upheld the Regulations; the appellants appealed to this Court.

E) LEGAL ISSUES RAISED

i. Does RERC have jurisdiction to regulate inter-state open access aspects that affect electricity delivered/consumed within Rajasthan?
ii. Do penalties for deviations from contracted demand (including R.21) unreasonably restrict the statutory right to open access under Section 42?
iii. Is Regulation 26(7) (24-hour advance notice for short-term open access) ultra vires for preventing urgent procurement?
iv. Is Regulation 21 arbitrary or discriminatory against CPPs vis-à-vis DISCOMs?
v. Do the Regulations of 2016, in aggregate, foreclose the right to open access?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for Petitioners/Appellants submitted that: the statutory scheme (notably Section 79(1)(c) and Section 2(36)) vests exclusive jurisdiction over inter-state transmission and associated open access with the Central Electricity Regulatory Commission; RERC’s Reg.26(7) imposes extraterritorial conditions that effectively bar intraday/real-time purchases; Reg.21 imposes punitive, asymmetric pricing that disincentivises captive generation, contrary to Section 9 and National Electricity Policy objectives; the combined effect is to nullify the operational utility of open access and to protect DISCOM revenue at the expense of competition.

G) RESPONDENT’S ARGUMENTS

The counsels for Respondents submitted that: State Commissions may regulate intra-state aspects of open access under Section 42/86 even if supply originates outside the State, because the delivery, consumption and grid impact fall within State jurisdiction; Section 181 empowers framing of regulations for implementation; scheduling and deviation penalties are necessary for grid security and to prevent speculative gaming; Reg.26(7) is procedural, reasonable and alternatives (real-time markets, day-ahead markets) remain available; differential treatment of CPPs is justified by their operational flexibility and potential to destabilise the grid; judicial interference must be cautious given regulatory expertise.

H) JUDGMENT

The Court framed the dispute around statutory text and purpose. It emphasised that Section 79(1)(c) concerns inter-state transmission, but does not oust State Commissions from regulating intra-state consequences of open access; Section 42(2)-(3) expressly authorises State Commissions to phase and condition open access and to prescribe wheeling and surcharge mechanisms.

The Court adopted a functional test: the relevant determinant is delivery/consumption within the State (and SLDC/State grid operation), not the geographic origin of generation. Therefore RERC’s rules governing scheduling, reduction of contracted demand on scheduled open access, deviation penalties and unscheduled interchange pricing fall within its competence.

The Court recognised the technical imperatives of grid stability real-time frequency/demand-supply matching and accepted penalties as deterrents against gaming and as instruments to internalise the costs of imbalance. Regulation 26(7)’s 24-hour requirement was characterised as a reasonable procedural safeguard to allow SLDCs/DISCOMs to plan and avoid last-minute system stress; the Court observed that the regulations do not eliminate real-time market options.

On discrimination, the Court held differential treatment must be rationally connected to legitimate state objectives; Reg.21’s asymmetries are defensible as proportionate measures to secure predictability and to protect DISCOM fixed-cost recovery. The Court declined to hold the Regulations foreclose open access, finding they operationalise open access within manageable constraints and are not manifestly arbitrary.

Reliance was placed on Energy Watchdog v. CERC (interpreting the Centre/State demarcation), Reliance Infrastructure v. State of Maharashtra and Hindustan Zinc v. RERC for principles of deference to regulatory expertise. Appeals dismissed.

a. RATIO DECIDENDI

The operative ratio is twofold:

(1) State Commissions have competence to regulate intra-state aspects of open access (including those arising from inter-state sourced power that impacts the State grid) under Sections 42, 86 & 181; and

(2) operational regulations (scheduling windows, deviation penalties and unscheduled interchange pricing) directed at preserving grid stability, preventing speculative misuse, and protecting DISCOM interests are reasonable, proportionate and within the regulatory mandate so long as they do not abrogate the statutory right to open access.

b. OBITER DICTA

The Court observed (obiter) that the technical realities of electric systems justify differentiated rules and that avenues such as real-time and day-ahead markets mitigate any hardship arising from advance scheduling.

The analogy with tolls on national highways was used to illustrate how central subjects may be regulated locally when local operation/usage is implicated. The Court reiterated judicial restraint in reviewing expert regulatory norms unless manifest arbitrariness is shown.

c. GUIDELINES

• State Commissions may regulate intra-state implementation of open access, even when electricity originates outside the State, focusing on delivery/consumption impacts.

• Scheduling rules and advance notice requirements must be uniformly applied and proportionate to grid security needs.

• Deviation penalties should be designed as deterrents and to internalise imbalance costs, but should allow reasonable exceptions for bona fide operational exigencies as per SLDC directions.

• Differential treatment of CPPs must be rationally linked to legitimate objectives (system stability, DISCOM cost recovery) and not be punitive in form or effect.

I) CONCLUSION & COMMENTS

The judgment reconciles the statutory partition between CERC and State Commissions by focusing on the locus of delivery/impact rather than origin of generation. It defers to regulatory expertise and technical necessity, upholding RERC’s 2016 framework as a lawful calibration of open access to safeguard system integrity and DISCOM viability.

Practically, the decision affirms that States can impose operational disciplines on open access users operating within their grids while preserving the broader right to access; it however leaves room for close factual scrutiny where a regulation’s design produces disproportionate economic or operational burden on CPPs or bona fide short-term purchasers.

For practitioners: challenges to similar regulations should attack manifest arbitrariness, demonstrate disproportionality, or show absence of procedural safeguards for genuine urgent procurement, and should marshal comparative regulatory data and SLDC impact assessments.

J) REFERENCES

a. Important Cases Referred

i. Energy Watchdog v. Central Electricity Regulatory Commission, (2017) 14 SCC 80.
ii. Reliance Infrastructure v. State of Maharashtra, (2019) 3 SCC 352.
iii. Hindustan Zinc v. RERC, (2015) 12 SCC 611.
iv. Ramayana Ispat Pvt. Ltd. & Anr. v. State of Rajasthan & Ors., Civil Appeal No. 7964 of 2019, Supreme Court (01 Apr. 2025).

b. Important Statutes / Instruments Referred

i. Electricity Act, 2003 — Sections 2, 9, 32, 33, 42, 79, 86, 178, 181.
ii. Rajasthan Electricity Regulatory Commission (Terms & Conditions for Open Access) Regulations, 2016 — Regulations 5, 6, 21, 26(6)/(7).