State Commission Can Adopt Tariff Determined Through Transparent Bidding; APTEL Order Quashed

A bench of Justice B.R. Gavai and Justice K.V. Viswanathan heard Civil Appeal Nos. 7463-7464 of 2023 arising under Section 125 of the Electricity Act, 2003, in which the Municipal Corporation of Delhi (MCD) challenged the Appellate Tribunal for Electricity’s decision that set aside Delhi Electricity Regulatory Commission (DERC) orders approving a tariff and the MCD’s authority to issue a tariff‑based Request for Proposal for a Waste‑to‑Energy (WTE) project.

The Supreme Court allowed the appeals, quashed the APTEL judgment dated 31 August 2023 and affirmed the DERC orders of 6 and 7 March 2023 approving the competitive bid and adopting the levelised tariff of Rs. 7.38/KWh. The Court held that Section 63 of the Electricity Act, on a plain reading, did not restrict invocation of the mechanism to distribution licensees or generating companies alone and must be read in harmony with Section 86(1)(b) which empowers State Commissions to “regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured.” The Court noted in quoting Section 63: “The Appropriate Commission shall adopt the tariff if such tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central Government.” The Court, in its reasoning, observed: “If the provisions of Section 63 of the Act are read in harmony with the provisions of Section 86(1)(b) of the Act, the legislative intent that could be gathered is that the State Commission while exercising its powers under Section 63 of the Act shall adopt the tariff when it has been determined in the bidding process. However, while adopting the same it will have to be satisfied that the same is done in a transparent manner. It will also have to be examined as to whether the interests of the generators/Discoms on one hand are balanced with the interests of the consumers.”

Background The dispute arose after the MCD, pursuant to its duties under Rule 15 of the Solid Waste Management Rules, 2016, organised stakeholders and issued a Notice Inviting Tender and RfP in July and October 2022 for a Design‑Build‑Finance‑Operate WTE plant at Narela‑Bawana (28 MW, approx. 3,000 TPD). Bids were opened on 14 November 2022; M/s JITF Urban Infrastructure Ltd. emerged as L‑1 with a levelised tariff of Rs. 7.380/KWh. The MCD filed Petition No. 72 of 2022 before DERC for adoption of the tariff and approval of the draft PPA; WTERT (Waste to Energy Research & Technology Council) filed Petition No. 65 of 2022 challenging MCD’s authority to issue a tariff‑based bid and use Section 63.

DERC dismissed WTERT’s challenge and, relying on Rule 15 of the SWM Rules and the National Tariff Policy (Rule 6.4), approved the bid tariff on 7 March 2023 and directed Discoms to negotiate the PPA. APTEL set aside those orders on jurisdictional grounds, holding that Section 63 applications could be filed only by distribution licensees or generating companies. On appeal, the Supreme Court held that APTEL erred in adopting a restrictive reading of Section 63 and in isolating it from Section 86(1)(b), the Tariff Policy and SWM Rules; the Court emphasised the plain‑language rule of statutory interpretation and the requirement of harmonious construction of related provisions. The Court also observed that MCD was not a “stranger” to the project — ownership was to remain with MCD and the facility was to be transferred back after 25 years — and noted that DERC had considered the mandate under SWM Rules, the evaluation report and certification of a transparent bidding process. The appeals were allowed, the APTEL order quashed and the DERC orders affirmed. Pending applications stood disposed of.

Case No.: Civil Appeal Nos. 7463-7464 of 2023 Case Title: Municipal Corporation of Delhi v. Gagan Narang & Ors. Appearances: For the Petitioner(s): Mr. Ramji Srinivasan, Senior Counsel (for MCD) For the Respondent(s): Mr. Basava Prabhu Patil, Senior Counsel (for Respondent No.1); Mr. Krishna M. Singh, Ms. Ishita Jain, Mr. Buddy Ranganathan, Mr. Suresh Chandra Tripathi (for other respondents); Mr. Pukhrambam Ramesh Kumar (for applicant)