CERC can cap trading margins for consumer benefit: Supreme Court

Regulations Cannot Be Questioned In Tribunals, It Says

Dhananjay Mahapatra | TNN New Delhi: In a judgment that could make power tariff more consumer friendly, the Supreme Court has green lighted the Central Electricity Regulatory Commissions authority to cap profit margin on trading of electricity. Importantly, a five-judge constitution Bench held that power traders can no longer rush to the Electricity Tribunals every now and then to question the validity of CERC regulations and in the process stall their implementation. It completely ousted the tribunals from hearing disputes relating to capping of trading margin. We hold that CERC was empowered to cap the trading margin under the authority of delegated legislation under Section 178 of the Electricity Act, 2003 vide notification dated January 23, 2006, said the Bench comprising Chief Justice K G Balakrishnan and Justices S H Kapadia, R V Raveendran, B Sudershan Reddy and P Sathsivam on Monday. In the process, it rejected the petitions filed by virtually the whos who in the power trading sector Power Trading Corporation, Reliance Energy Trading Ltd, NTPC, Neyveli Lignite Corporation, Delhi Transco and UP Power Corporation. The apex court noted that the tariff policy, which came into effect from January 6, 2006, intends to ensure availability of electricity to consumers at reasonable and competitive rate. Under the tariff policy, there is a mandate given to the Regulatory Commissions, namely, to monitor the trading transactions continuously and ensure that the electricity traders do not indulge in profiteering in cases of market failure, said Justice Kapadia, writing the unanimous 86-page judgment for the Bench. The SC said the policy directed the regulatory commission to fix the trading margin in a manner which would reduce the costs of electricity to the consumers and at the same time allow them to endeavour to meet the requirements for investments. The question arose as to what would happen to power trading contracts signed by parties prior to laying down of regulation by CERC. The apex court did not grant any relief in such cases too and said CERCs regulation capping trade margins had an overriding effect on all existing contracts. It casts a statutotry obligation on the regulated entities (parties to contract) to align their existing and future contracts with the CERCs regulations, the Bench said. tCERC can cap trading margins in power sector tTribunals have no jurisdiction to decide validity of CERC regulations capping trade margins tCERC regulations on trade margin override all existing and future contracts tPower traders can challenge CERC regulation before High Courts