SC upholds Himachal’s right to 18% free power from JSW

The Supreme Court has ordered JSW Hydro Energy Ltd to supply 18 per cent free electricity to Himachal Pradesh, as per the 1999 agreement though the Central Electricity Regulatory Commission (CERC) regulations cap free power at 13 per cent for tariff determination.

“We hold that the CERC Regulations, 2019, do not prohibit respondent No. 1 (JSW Hydro Energy Ltd) from supplying free power beyond 13 per cent to the appellant state (Himachal Pradesh) and the implementation agreement does not stand overridden by the operation of these regulations,” a Bench of Justice PS Narasimha and Justice Joymalya Bagchi, while upholding that regulations cannot override freely negotiated contracts, said in its July 16 verdict.

The Bench allowed an appeal filed by the state of Himachal Pradesh against the May 28, 2024, order of the Himachal Pradesh High Court and held that the CERC tariff regulations did not override contractual obligations between a state and a generating company to supply free power beyond the regulatory cap of 13 per cent.

Justice Narasimha, while writing the judgment for the Bench, faulted the High Court for having entered into the domain of interpreting the CERC Regulations on tariff determination, saying the same fell within the exclusive domain of the CERC.

“The Electricity Act itself provides the appellate mechanisms by establishing a specialised and permanent tribunal, namely the APTEL, and file an appeal before this court against the CERC’s orders. In view of the existence of a statutory regulatory forum, the High Court should not have entertained the writ petition by interpreting the CERC Regulations, 2019,” it noted.

JSW Hydro Energy Limited had moved the High Court seeking modification in its implementation agreement with the Himachal Pradesh Government to limit its free power supply obligation to 13 per cent, as per the CERC tariff regulations of 2019 even as the company was contractually bound to supply 18 per cent of the net electricity generated to the state free of cost from 2023 to 2051.

The High Court had allowed the company’s petition and directed the state to align the contract with the CERC norms. On an appeal filed by the state, the top court concluded that the High Court exceeded its jurisdiction by entertaining the petition, as it fell within the jurisdiction of the CERC – a specialised regulator.

“Free power supply is part of the consideration … .for undertaking its commercial activity of power generation,” the top court said. It also rejected the company’s contention that the state was a “deemed licensee” under the Electricity Act, thereby falling within the scope of the CERC’s regulatory jurisdiction.

Himachal Tribune