In a significant judgment, the Karnataka High Court invalidated the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022, established by the Central Government. The Court determined that the Central Government lacked the authority under the Electricity Act, 2003, to enact these rules, as the Act delegates such powers exclusively to State Commissions, including the Karnataka Electricity Regulatory Commission (KERC).
Background
The Electricity Act, 2003, was enacted to consolidate laws related to the generation, transmission, distribution, and trading of electricity in India. A key feature of the Act is the promotion of open access in the transmission and distribution of electricity, aiming to foster competition and enhance efficiency. Section 42(2) of the Act mandates State Commissions to introduce open access in distribution, ensuring non-discriminatory access to the network.
In 2022, the Central Government introduced the Green Energy Open Access (GEOA) Rules to promote renewable energy generation and consumption. These rules sought to streamline the process for green energy producers and consumers to access the electricity grid. However, their introduction led to legal challenges questioning the Central Government's authority to frame such rules.
Legal Challenge
Several hydro power generating companies filed petitions before the Karnataka High Court, contending that the Central Government overstepped its jurisdiction by framing the GEOA Rules. They argued that the authority to regulate open access lies solely with State Commissions under Sections 42(2) and 181 of the Electricity Act. The petitioners asserted that the Central Government's rules encroached upon the statutory functions reserved for KERC.
Court's Analysis
Justice N.S. Sanjay Gowda presided over the case and delivered the judgment on December 20, 2024. The Court meticulously analyzed the provisions of the Electricity Act, emphasizing the following points:
Exclusive Authority of State Commissions: The Court highlighted that Sections 42(2) and 181 of the Act confer exclusive powers on State Commissions to regulate open access. This includes overseeing the distribution and ensuring non-discriminatory access to the transmission and distribution systems within the state.
Lack of Central Government's Authority: The Court observed that the Act does not grant the Central Government inherent power to frame rules concerning open access. The Central Government's residual powers under Section 176(2) cannot be invoked to encroach upon the domain explicitly reserved for State Commissions.
Invalidity of KERC's Conforming Regulations: The Court also struck down the KERC (Terms and Conditions for Green Energy Open Access) Regulations, 2022. It reasoned that these regulations were formulated merely to align with the Union Government's GEOA Rules and were not an independent exercise of KERC's statutory powers. As the foundational GEOA Rules were invalid, the conforming KERC regulations could not stand independently.
Implications of Central Rules: Accepting the Central Government's GEOA Rules would effectively nullify the powers of State Commissions to manage open access. The Court stated that subordinate legislation, such as the GEOA Rules, cannot amend or override substantive provisions of the Act.
Conclusion and Directions
The Karnataka High Court concluded that the Central Government exceeded its jurisdiction by framing the GEOA Rules, thereby infringing upon the exclusive domain of State Commissions. Consequently, it struck down both the Central GEOA Rules and the corresponding KERC regulations.
The Court directed KERC to independently frame appropriate regulations concerning open access for green energy generators and consumers. In doing so, KERC should be guided by the National Electricity Policy and the Tariff Policy formulated by the Union Government but must consider the interests of all stakeholders within the state.
This judgment underscores the federal structure embedded in the Electricity Act, 2003, delineating clear boundaries between Central and State authorities. It reaffirms the autonomy of State Commissions in regulating open access and emphasizes the need for adherence to statutory provisions when formulating policies impacting the electricity sector.
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