Electricity Regulators Have Tariff Power but Must Respect Renewable Incentive Purpose: Supreme Court – EQ
Summary:
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### Facts of the Case
– The **MNRE** introduced the **Generation Based Incentive (GBI)** Scheme in 2009 to promote wind energy. The scheme explicitly stated that the incentive was “over and above the tariff that may be approved by the State Electricity Regulatory Commissions.”
– The **Andhra Pradesh Electricity Regulatory Commission (APERC)** framed its Tariff Regulations in 2015. **Regulation 20** stated that the Commission “shall take into consideration any incentive or subsidy offered by the Central or State Government” while determining tariff.
– Initially, APERC determined tariffs without factoring in the GBI. Later, at the request of the distribution companies (DISCOMs), APERC amended its orders to deduct the GBI amount from the tariff payable to the generating companies (GENCOs).
– The GENCOs appealed to the **Appellate Tribunal for Electricity (APTEL)** , which ruled in their favor, holding that APERC could not factor in the GBI as it was a central government incentive meant to be paid over and above the tariff.
### Supreme Court’s Decision
The Supreme Court dismissed the appeal filed by the DISCOMs, upholding the APTEL’s decision.
#### Key Findings and Principles
**1. Power of the SERC (Issue i)**
– The Court held that **SERCs have plenary power and exclusive jurisdiction over tariff determination** under the Electricity Act, 2003.
– An SERC does have the power to “consider and factor in” incentives like GBI under Regulation 20. The argument that a grant under **Article 282** of the Constitution (central government grants) cannot be considered by the SERC was rejected.
– Factoring in the GBI does not amount to “altering the destination” of a parliamentary grant, as the money still reaches the GENCO. The Commission merely determines the tariff payable by the DISCOM.
**2. How the Power Must be Exercised (Issue ii)**
– Although SERCs have the power to consider GBI, they are **not obligated to deduct it automatically**.
– The Court emphasized that regulators must act as part of a **”collaborative enterprise”** and not in silos. They must balance competing interests, including consumer protection, investor stability, and national goals like energy security and the transition to renewable energy.
– The GBI was designed as a **”generator-focused incentive”** to attract investment in renewable energy. The Commission must respect this underlying objective.
**3. The Role of Regulation 20**
– The Court clarified that the phrase “shall take into consideration” in Regulation 20 does not mean a mandatory deduction. It requires the Commission to give contextual and purposive treatment to the incentive.
– The APERC’s mechanical deduction of GBI from the tariff was held to be incorrect, as it nullified the policy intent of the central government to provide an additional incentive to promote wind energy.
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