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Informist, Wednesday, Mar. 25, 2026

 

NEW DELHI – The Supreme Court Wednesday held that tariff determination is the exclusive province or jurisdiction of the state electricity regulatory commissions. The parliamentary allocation and grant of generation based incentive does not "ipso facto" exclude the regulatory mechanism, nor does it denude the power regulators of its tariff determination power.

 

The state electricity regulators possess the power to take into consideration the benefit offered under generation based incentive while determining tariff, provided, such exercise is within the statutory framework of the Electricity Act, 2003 and the regulations framed thereunder, said the court. The power regulators maintain their independence and autonomy and ensure that the final decision with respect to fixation of tariff will be that of theirs alone, said the court.

 

However, this regulatory power must be exercised as a collaborative enterprise, said the court. It must not be exercised in a manner that ignores the purpose and object of a policy or grant by other stakeholders, it said. The electricity sector functions through the coordinated action of the Centre, state governments and independent regulatory commissions, said the court. The powers of these duty bearers must be read harmoniously so that each operates within their sphere without rendering the other irrelevant, said the court.

 

In its verdict, the top court said Andhra Pradesh Electricity Regulatory Commission was obligated to apply generation based incentive in furtherance of the purpose for which it was designed, which was to incentivise renewable power generators and give the benefit as intended in the scheme. It held that generation based incentive was "intended to be disbursed to the GENCOs (renewable energy generating companies) over and above the tariff".

 

The case has its genesis from the Centre coming out with a generation based incentive scheme in 2009. The scheme granted wind power generators an incentive of INR 0.50 per unit of electricity fed into the grid for four to ten years, with a cap of INR 6.20 million per megawatt. The grant of the incentive to wind power projects was intended to attract investment in the wind energy sector and increase the quantum of grid-interactive renewable power. The incentive was, therefore, complementary to the tariff approved by the regulatory commissions, intended to encourage larger investment in renewable energy projects. 

 

The Andhra Pradesh Electricity Regulatory Commission determined the tariff of the renewable energy generating companies by factoring in the incentive granted by the Centre. However, in an appeal, the Appellate Tribunal for Electricity took a different view and held that the state regulatory commission had no such power.  End

 

Reported by Surya Tripathi

Edited by Deepshikha Bhardwaj

 

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