Supreme Court upholds Rajasthan open‑access rules, holds State can regulate intra‑state aspects even when power is sourced inter‑state

A bench of Justices Vikram Nath and Prasanna B. Varale heard appeals by industrial consumers and captive generators challenging the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016. The appeals arose from separate judgments of the Rajasthan High Court (Jodhpur and Jaipur Benches) and raised questions on RERC’s jurisdiction to regulate inter‑state open access, the validity of scheduling and 24‑hour advance notice requirements, the imposition of penalties for deviations and alleged discrimination against captive power plants (CPPs).

The Court dismissed the appeals and affirmed the High Court orders upholding the 2016 Regulations. It held that RERC lawfully regulated intra‑state aspects of open access even where electricity was sourced from outside Rajasthan, and that scheduling requirements, deviation penalties and Regulation 21’s pricing and settlement mechanism fell within the Commission’s regulatory mandate to protect grid stability and distribution licensees’ financial viability. The Court, in its reasoning, observed: “The key determinant is not the source of power but its delivery, end‑user, and consumption within Rajasthan's intra‑state grid. The Act of 2003 provides a framework for demarcating responsibilities between CERC and State Commissions, ensuring that intra‑state aspects of electricity regulation remain within the purview of State Commissions.” The Court further emphasised that “merely because the Regulations of 2016 are claimed to cause certain inconvenience or hardship, they cannot be held to be illegal.”

Background The disputes arose when RERC replaced its 2004 open‑access framework with the 2016 Regulations. Under the new regime RERC limited simultaneous drawal from a distribution licensee and open access sources by reducing contracted demand by the quantum scheduled under open access, and prescribed penalties for over‑drawal and under‑injection. Major industrial consumers (including appellants that relied on captive generation and purchases from power exchanges or other states) contended that the Regulations frustrated open access rights under Sections 9 and 42 of the Electricity Act, 2003, and that Regulation 26(7) unlawfully regulated inter‑state transactions reserved for the Central Electricity Regulatory Commission (CERC). CPP owners challenged Regulation 21 as discriminatory, asserting it made open access economically unviable by imposing higher charges for under‑injection while exempting long‑term state contracts.

RERC and distribution licensees defended the Regulations as legitimate exercises of power under Sections 42, 86 and 181 to ensure grid discipline, proper scheduling, and to protect distribution licensees from fixed‑cost burdens arising from unutilised contracted demand. The Rajasthan High Court (Jodhpur Bench) upheld the Regulations on 29.08.2016, finding them necessary for grid stability and not manifestly arbitrary; the Jaipur Bench (06.09.2016) dismissed a related petition as covered by the Jodhpur decision. On appeal the Supreme Court reviewed the statutory scheme—Sections 2, 9, 32–33, 42, 79, 86, 178 and 181—and affirmed that State Commissions could regulate intra‑state aspects impacting their grids even if power originated outside the State. The Court rejected the claim that Regulation 26(7)’s 24‑hour scheduling requirement or deviation penalties amounted to unreasonable fetters on open access, finding instead that they were proportionate measures to prevent market gaming and to maintain system security. The appeals were dismissed and the High Court orders were upheld; no interim relief was granted and no alteration to the Regulations was directed.

Case Details: Case No.: Civil Appeal No. 7964 of 2019 (with Civil Appeal Nos. 7965 and 7966 of 2019) Case Title: Ramayana Ispat Pvt. Ltd. & Anr. v. State of Rajasthan & Ors. Appearances: For the Petitioner(s): Advocates not indicated in the reported text For the Respondent(s): Advocates not indicated in the reported text