Reliance’ s plea challenging MERC Tariff Regulation ‘affecting’ one of it’s thermal plants dismissed

Supreme Court: In the matter where the validity of a tariff regulation framed by the Maharashtra Electricity Regulatory Commission (MERC) was under challenge, the bench of Dr. DY Chandrachud and Hemant Gupta, JJ emphasised on the scope of judicial review in such matters and said:

“MERC is an expert body which is entrusted with the duty and function to frame regulations, including the terms and conditions for the determination of tariff. The Court, while exercising its power of judicial review, can step in where a case of manifest unreasonableness or arbitrariness is made out. Similarly, where the delegate of the legislature has failed to follow statutory procedures or to take into account factors which it is mandated by the statute to consider or has founded its determination of tariffs on extraneous considerations, the Court in the exercise of its power of judicial review will ensure that the statute is not breached. However, it is no part of the function of the Court to substitute its own determination for a determination which was made by an expert body after due consideration of material circumstances.”

In the present matter, Reliance Infrastructure Limited, the appellants, had challenged the its thermal power station at Dahanu has been subjected to a more stringent norm than other comparable units. Asserting that MERC has breached the National Tariff Policy 2006, the appellants argued that a tighter standard or norm has been prescribed for its Dahanu TPS. As opposed to the uniform criterion of 2450 kCal/kWh in Regulation 44.2(a), the SHR for the Dahanu TPS varies between 2350 in financial year 2011-12 to 2370 in financial year 2015-16.

The Court, however, upheld the validity of the Tariff Regulation in question and held:

“The tariff policy requires that the operating norms should be efficient, relatable to past performance, capable of achievement and progressively reflect increased efficiencies. They may also take into consideration technical advancements, fuel, vintage of equipment, nature of operations and the level of service among other factors.”

On the submission that the operating parameters and tariffs should be at “normative levels” only and not at the “lower of normative and actuals”, the Court explained:

“Normative levels are those which are fixed by the application of the standards guided by the terms of the tariff policy while actual levels are those which have been achieved as a matter of fact, in the past. The emphasis in the tariff policy is on creating incentives for achieving higher efficiency in order to enable the ultimate consumer to have the benefit of efficient operations.”

[Reliance Infrastructure Limited v. State of Maharashtra, 2019 SCC OnLine SC 49, decided on 21.01.2019]

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