SC dismisses power trading cos' plea on trading margins

Power trading companies today received a setback when a Constitution Bench of the Supreme Court dismissed their appeals against the Central Electricity Regulatory Commission (CERC) on imposing trading margins.

Tata Power, Reliance Energy Trading, PTC India and several others had appealed against the 2006 ruling of the Appellate Tribunal for Electricity against the commission’s January 2006 order fixing margin at 4 paise per unit. 

The power companies wanted the tribunal to set aside the order passed under the CERC (Fixation of Trading Margin) Regulations 2006. They argued that CERC could have determined margins as per licence conditions, but opted to frame the regulations to avoid the challenge. 

When their petitions were dismissed by the tribunal, they moved the Supreme Court. Owing to certain doubts in the interpretation of an earlier judgment of the court, a three-judge bench referred the issues to a five-judge constitution bench, headed by Chief Justice K G Balakrishnan. The crucial constitutional issue was whether the Appellate Tribunal for Electricity had the jurisdiction to deal with the validity of regulations framed by CERC.

The referral bench of the Supreme Court framed the issue thus: “Considering the importance of the matter, we feel it necessary to refer the matter to a larger bench to consider whether the West Bengal Electricity case can have application to the cases coming under the 2003 Act (Electricity Act, 2003), where the parties go before the tribunal in terms of Section 121 of the 2003 Act.” 

The Constitution Bench was unanimous in dismissing the appeals. The judgment was written by Justice S H Kapadia. 

While the CERC maintained that its decision was aimed at protecting consumers and giving reasonable return to traders, the generating companies opposed it on the ground that it would severely affect their revenues and profitability. CERC contended that under the Electricity Act, 2003, the tribunal had no authority or jurisdiction to examine the validity of these regulations. Moreover, since these rules were in the nature of a subordinate legislation, the tribunal had no jurisdiction over them. 

Accepting the view of the regulator, the tribunal had ruled that it was not empowered to look into the validity of the regulations framed by the CERC. It relied on a Supreme Court judgment in the case of the West Bengal Electricity Regulatory Commission case that the tribunal, which is a creature of statute, cannot question the provisions under which it functions.