Regulatory Commissions Must Reflect Policy Intent In Tariff Determination: SC

(MENAFN- KNN India) New Delhi, Mar 30 (KNN) The Supreme Court has observed that while electricity tariff determination falls exclusively within the domain of State Electricity Regulatory Commissions, such powers must be exercised in alignment with the purpose of government policy incentives.

A Bench comprising Justices Pamidighantam Sri Narasimha and Atul S. Chandurkar said that regulatory commissions have plenary authority over tariff-setting, including the power to consider grants extended by the government. However, it cautioned that this authority cannot be used in a manner that defeats the objective of such incentives.

No Mechanical Deduction of Incentives

The Court emphasised that while incentives or subsidies may be factored into tariff calculations, this does not imply automatic or mechanical deduction. Instead, commissions must adopt a purposive approach, ensuring that policy intent-particularly in promoting sectors like renewable energy-is preserved.

It underlined that tariff regulation must function as a“collaborative enterprise,” taking into account the objectives of policies framed by other stakeholders, including the government.

Case on Wind Energy Incentive

The ruling came in a dispute involving the Andhra Pradesh Electricity Regulatory Commission (APSERC) and power distribution companies, where the treatment of the Generation-Based Incentive (GBI) for wind energy was under challenge.

The GBI scheme, introduced by the Ministry of New and Renewable Energy (MNRE) in 2009, provided Rs 0.50 per unit of electricity generated, explicitly stating that the incentive was to be over and above tariffs approved by regulators.

While APSERC considered the incentive during tariff determination, it deducted the amount from the tariff payable to generators, effectively passing the benefit to distribution companies (DISCOMs).

Court Faults Regulatory Approach

The Court upheld the Commission's authority to consider the incentive but criticised its approach of deducting the benefit from tariffs. It noted that such treatment undermined the objective of the scheme, which was to incentivise renewable energy producers.

The judgment clarified that incentives designed for generators cannot be redirected in a way that benefits other stakeholders, such as DISCOMs, contrary to policy intent.

Appeal Dismissed

The Court dismissed the appeal filed against an earlier order of the Appellate Tribunal for Electricity (APTEL), while partially disagreeing with its reasoning.

It held that although regulators must consider incentives, they must do so contextually and in line with the purpose of the scheme.

(KNN Bureau)

MENAFN30032026000155011030ID1110919838