KPTC Ltd. & Anr. v. M/s Shamanur Sugars Ltd. & Anr. – Judgment on Intra-Court Appeal (WA No. 927 of 2023) – EQ

Summary:

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### 1. **CERC’s Jurisdiction Over UI Charges & Inter-State Open Access is Plenary**

| Contention by KPTCL/SLDC | Court’s Ruling |
|————————–|—————-|
| SLDC acted under statutory powers (Sections 32, 33 of the Act) | **Rejected.** SLDC’s powers are confined to **intra-state** matters. For inter-state transmission, CERC regulations prevail. |
| CERC cannot sit in appeal over SLDC’s statutory directions | **Rejected.** CERC has **adjudicatory powers** under Section 79(1)(f) for disputes involving inter-state transmission. |
| Regulation 8 of Open Access Regulations is ultra vires | **Rejected.** Regulation 8 is within CERC’s delegated legislative power under Section 178. |

**Business Impact:**
Any generator or consumer using **inter-state open access** must comply with **CERC’s UI mechanism** (105% for over-drawal/under-generation; 95% for under-drawal/over-generation). State entities cannot unilaterally alter these rates.

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### 2. **SLDC Cannot Impose Discriminatory or Arbitrary Conditions on Open Access**

– The impugned clause (m) stated:
*“For any excess generation, rates fixed by KERC for old plants only will be paid – not UI rates. For shortfall, firm will pay UI rates.”*

| Violation Identified | Reasoning |
|———————-|———–|
| **Arbitrary & discriminatory** | Generator pays UI rate for shortfall but receives lower KERC rate for excess – asymmetry not permitted under Regulation 20(5). |
| **Profiteering by SLDC** | SLDC would receive UI rate from RLDC but pay lower rate to generator – earning a margin. |
| **Contrary to statutory regulations** | Regulation 20(5) prescribes symmetric UI rates (105%/95% of regional UI rate). State Commission may specify otherwise – but KERC had not done so. |

**Business Impact:**
SLDCs cannot insert conditions that alter **statutorily prescribed UI charges** or create **unequal treatment** between over-injection and under-injection. Such conditions will be struck down.

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### 3. **Validity of Regulation 8 of Open Access Regulations (2008) Upheld**

– KPTCL argued that Regulation 8 (requiring SLDC’s concurrence for bilateral/collective transactions) encroaches upon SLDC’s powers under Sections 32-33.
– **Court held:** Regulation 8 is **procedural** – it ensures grid stability, metering infrastructure, and surplus capacity verification. It does not dilute SLDC’s statutory functions but harmonizes them with **CERC’s grid oversight**.

**Business Impact:**
SLDCs must process open access applications strictly within **Regulation 8 timelines** (3-7 working days) and cannot refuse without valid reasons (lack of infrastructure or surplus capacity). Deemed concurrence applies if SLDC fails to respond.

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### 4. **Potential “Gaming” Concern – Not a Valid Ground to Deviate from UI Rates**

– KPTCL argued SSL had a history of **drastic deviations** and “gaming” (mis-declaring capacity for undue UI gains).
– **Court noted:**
– UI Regulations already contain **anti-gaming provisions** (Regulation 6 – CERC can disallow UI charges if gaming proved).
– No finding of gaming was recorded against SSL.
– SLDC’s unilateral substitution of rates was **not a proportionate or authorized remedy**.

**Business Impact:**
SLDCs must invoke **existing CERC mechanisms** (e.g., reporting gaming to CERC) rather than imposing ad-hoc conditions. Generators should maintain scheduling discipline to avoid regulatory scrutiny.

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### 5. **KERC Had Not Specified Any Alternative UI Rate – So CERC’s Default UI Rate Applies**

– Regulation 20(5) allows State Commission to specify a different UI rate for intra-state entities.
– KERC had not prescribed any such rate for generators <25 MW (like SSL).
– Therefore, the **default symmetric UI rate** (105%/95% of regional UI rate) applied.

**Business Impact:**
State Commissions must proactively frame UI rules for intra-state entities if they wish to deviate from CERC’s default rates. In absence of such specification, **CERC rates automatically apply** even for intra-state legs of inter-state transactions.

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### 6. **Alternative Remedy (Appeal to APTEL) – Not Insisted After 11 Years**

– KPTCL argued that writ petition should not be entertained because an **appeal to APTEL** under Section 111 of the Act was available.
– **Court held:** Matter pending since 2012; all parties had argued on merits; relegating to APTEL after 11 years would be a **travesty of justice**.

**Business Impact:**
While APTEL remains the primary appellate forum for CERC orders, High Courts may still entertain writ petitions in exceptional cases of **jurisdictional error** or **prolonged delay**.

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### 7. **Separate Entity for SLDC – Long-Pending Direction Reiterated**

– The Single Judge had noted that SLDC continues to operate under KPTCL (State Transmission Utility) even after 20 years of the Act, creating an **inherent conflict of interest**.
– The Division Bench did not explicitly rule on this but did not overturn the observation.

**Business Impact:**
State governments are expected to establish **independent SLDCs** as per Section 31(2) of the Act. Until then, generators may challenge SLDC actions that appear commercially biased or inconsistent with CERC regulations.

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