In a significant judgment relating to power distribution laws, the Supreme Court has clarified that Electricity Regulatory Commissions (ERCs) cannot consider cases on grounds of “public interest” alone. It also said that these commissions do not have direct regulatory oversight over distribution franchises, and any regulation must be through distribution licensees.
A bench of Justices JB Pardiwala and R Mahadevan made these observations while hearing a civil appeal in Torrent Power Ltd vs Uttar Pradesh Electricity Regulatory Commission and others.
The court categorically stated, “ERCs are not competent to consider a case on grounds of public interest alone.”
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Background of the Case:
The case arose when Respondent No. 4 filed a petition before the Uttar Pradesh Electricity Regulatory Commission (UPERC) challenging the distribution franchise agreement (DFA) entered into between the appellant (franchisee) and respondent No. 3 (distribution licensee). The petitioner alleged that the approval of UPERC was not taken before the appointment of the franchisee for distribution of electricity in urban Agra.
The franchisee (appellant) questioned the jurisdiction and maintainability of the case. However, UPERC admitted the petition citing public interest and ordered an inquiry into the conduct of the franchisee.
On appeal, the Appellate Tribunal for Electricity (APTEL) ruled that PILs are not maintainable before the ERC but admitted the petition as it was not filed solely in public interest.
- Can a person invoke the jurisdiction of the State ERC on the ground of public interest alone?
- Does the ERC have jurisdiction to review the functioning of a distribution licensee supplying electricity through a franchise?
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The Court emphasised that Electricity Regulatory Commissions (ERCs) are statutory bodies and can only exercise powers conferred under the Electricity Act, 2003.
"They will not be permitted to exercise powers which are not expressly vested in them," the bench said.
Citing Sections 79 and 86, the Court clarified that though the jurisdiction of State Electricity Regulatory Commissions is wider than that of the Central Electricity Regulatory Commission, it does not include disputes involving consumer complaints, even if they are raised in public interest.
The Court, however, distinguished the case, noting that the petition was filed under Section 128, which deals with investigation of licensee operations and not consumer disputes. Thus, the jurisdiction of UPERC was found to be valid under Section 128, agreeing with the findings of APTEL.
The appellant cited Maharashtra Electricity Regulatory Commission vs Reliance Energy Ltd. However, the Supreme Court clarified that it was not applicable, as Uttar Pradesh has its own Consumer Redressal Rules (2007), which exclude cases falling under Section 128.
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Further, the Court also said that no valid grounds or material were presented by the petitioner to justify an investigation under Section 128.
“The threshold of satisfaction required to order an investigation under Section 128 was not met by Respondent No. 4.”
The Court concluded that an ERC can monitor the delegation process of a licensee, but cannot directly regulate a franchisee.
“Only the distribution licensee can be investigated, not the franchisee,” the Court said.
This follows the agency theory – where the actions of the franchisee are treated as the actions of the licensee itself. Therefore, any regulatory action must be against the licensee.
The Supreme Court allowed the appeal, set aside APTEL’s order and invalidated the UPERC expert committee report.
“UPERC and APTEL could not micro-manage the franchisee’s activities or indirectly question operational details.”
Case Title: TORRENT POWER LIMITED VERSUS U.P. ELECTRICITY REGULATORY COMMISSION & ORS., CIVIL APPEAL NO. 23514 OF 2017