Supreme Court Restores State Commission Order on Cross‑Subsidy Surcharge, Holds CSS Need Not Coincide with Tariff Determination

A bench of Justice Abhay S. Oka and Justice Augustine George Masih heard statutory appeals under Section 125 of the Electricity Act, 2003 arising from APTEL's setting aside of a Rajasthan Electricity Regulatory Commission order that had fixed the Cross‑Subsidy Surcharge (CSS) with effect from December 1, 2016. The appeals concerned whether the State Commission erred in determining CSS separately from its tariff order dated September 22, 2016.

The Court allowed the appeals, held that the Appellate Tribunal for Electricity had erred in requiring CSS determination to always coincide with tariff determination, and restored the State Commission's December 1, 2016 order. The bench noted that Regulation 90 of the Rajasthan Tariff Regulations, 2014 provided a formula for CSS that was tied to the "tariff payable by the relevant category of consumers" and therefore permitted the Commission to compute CSS based on the prevailing tariff. The Court observed that "the CSS is in the nature of compensation qua the tariff, which the distribution licensees would have received from the open access consumers but for their availing power from other sources." The Court emphasised that "the CSS must be based on the applicable retail tariff recoverable during the relevant period." The Court, in its reasoning, observed: "Regulation 90 contains a formula for the determination of the CSS, which is based on the tariff payable by the relevant category of consumers. Thus, the CSS has to be determined based on the prevailing tariff rates. Neither in the provisions of the 2003 Act nor under the provisions of the Rajasthan Tariff Regulations, 2014, is there a provision which makes the determination of the CSS simultaneously with the determination of the tariff mandatory." The judgment set aside the impugned APTEL decision and restored the State Commission order, noting that the December 1, 2016 determination remained in force only until the subsequent tariff order of November 2, 2017.

Background The dispute arose when distribution licensees in Rajasthan sought determination of CSS under Section 42(2) of the Electricity Act, 2003 and Regulation 90 of the Rajasthan Tariff Regulations, 2014. The State Commission had fixed retail tariff by order dated September 22, 2016 (to remain in force till the next tariff order) and later, on December 1, 2016, computed CSS for open‑access consumers by applying Regulation 90's formula to values approved in the September tariff order. Industrial consumers who used open access challenged the December 1, 2016 order before the Appellate Tribunal for Electricity. APTEL set aside the State Commission order, taking the view that CSS determination should have coincided with tariff determination, and relying on earlier APTEL precedents including Tata Power and Reliance Infrastructure as well as D.P. Chirania. The Supreme Court reviewed the statutory scheme (notably Section 42(2)'s provisos) and the Rajasthan Regulations, and relied on this Court's earlier exposition of CSS rationale in Sesa Sterlite Ltd. v. OERC. The Court held that Regulation 90 expressly linked CSS to the prevailing tariff payable by the relevant consumer category and there was no statutory mandate requiring simultaneous determination of tariff and CSS. The Court found that the State Commission had legitimately determined CSS based on the September 22, 2016 tariff and that APTEL's interference was unwarranted. Consequentially, the appeals succeeded, the APTEL judgment was set aside, and the State Commission's December 1, 2016 order was restored; the Court noted that the December 1, 2016 order remained operative only until the tariff order of November 2, 2017.

Case Details: Case No.: 2025 INSC 592; Civil Appeal Nos. 8862‑8868 of 2022 Case Title: Jaipur Vidyut Vitaran Nigam Limited and Ors. v. Rajasthan Textile Mills Association & Anr. etc. Appearances: For the Petitioner(s): [Not indicated in the judgment] For the Respondent(s): [Not indicated in the judgment]