JAIPUR VIDYUT VITARAN NIGAM LIMITED AND ORS. V. RAJASTHAN TEXTILE MILLS ASSOCIATION & ANR. ETC 2025 INSC 592:

JAIPUR VIDYUT VITARAN NIGAM LIMITED AND ORS. V. RAJASTHAN TEXTILE MILLS ASSOCIATION & ANR. ETC 2025 INSC 592:

DATE: 29/04/2025

COURT: Supreme Court of India

BENCH: Justice Abhay S. Oka and Justice Augustine George Masih

FACTS:

These statutory appeals, filed under Section 125 of the Electricity Act, 2003, challenge a common judgment delivered by the Appellate Tribunal for Electricity (APTEL). The matter concerns the determination of Cross-Subsidy Surcharges (CSS) by the Rajasthan Electricity Regulatory Commission (State Commission) under Section 42(2) of the Act. The respondents in the present appeal—industrial units located across Rajasthan—were consumers receiving electricity through the state grid at high transmission voltages (132/33/11 KV) via open access, including from power exchanges. These consumers were aggrieved by the State Commission’s order dated 1st December 2016, which determined CSS rates based on tariffs fixed for FY 2015-16 and made them applicable from 1st December 2016, despite the absence of a tariff petition for FY 2016-17. The State Commission held that the previous tariff would remain in force until a new one was issued and computed CSS accordingly, setting different rates for different voltage levels.

The APTEL, however, allowed the appeal filed by the consumers and set aside the State Commission’s order. It held that the Commission had ignored binding precedents, including the Tata Power and Reliance Infrastructure cases, and erred by proceeding without audited data and a valid tariff petition for FY 2016-17. APTEL also emphasized that the CSS rates should progressively reduce, as envisioned by the 2003 Act, and criticized the substantial increase in CSS as unjustified, particularly when the distribution licensees had failed to submit tariff petitions in a timely manner. It concluded that the existing CSS rates under the previous tariff order dated 22nd September 2016 should have continued unchanged until 2nd November 2017, when the next tariff order was passed.

ISSUES:

The key issues presented in this case were whether the Rajasthan Electricity Regulatory Commission was justified in determining the Cross-Subsidy Surcharge (CSS) based on the prevailing tariff rates of FY 2015–2016 in the absence of a tariff petition for FY 2016–2017, and whether such determination could legally remain in force until a new tariff order was issued. The dispute also involved whether the Appellate Tribunal for Electricity (APTEL) erred in setting aside the Commission's order despite the CSS being calculated in accordance with established regulations and applicable tariffs.

JUDGEMENT WITH REASONING:

The Supreme Court allowed the appeals and set aside the judgment of the Appellate Tribunal for Electricity (APTEL), restoring the order dated 1st December 2016 passed by the State Commission. The Court held that the CSS (Cross-Subsidy Surcharge) had been rightly determined based on the prevailing tariff rates as of the effective date and that the APTEL erred in requiring the simultaneous determination of tariff and CSS.

The Court reasoned that Regulation 90 of the Rajasthan Tariff Regulations, 2014, provides a clear formula for calculating the CSS, which is inherently linked to the prevailing retail tariff rates applicable to different consumer categories. It emphasized that neither the Electricity Act, 2003 nor the relevant Regulations mandates that the CSS and the tariff must be determined simultaneously. The CSS serves as compensation to distribution licensees for the loss of revenue they would have earned from open access consumers, and its calculation is contingent upon the existing tariff structure at the time. The Court noted that the Commission correctly determined the CSS with effect from 1st December 2016 by using the prevailing tariff set out in its earlier order dated 22nd September 2016, which was consistent with regulatory provisions.

Further, the Supreme Court observed that the order dated 1st December 2016 continued to remain valid until a new determination was made on 2nd November 2017. It acknowledged that although the petition for determining the CSS was filed while the FY 2015–2016 tariff petition was still pending, the CSS determination based on the then-prevailing tariff was appropriate. The Court held that the APTEL's finding requiring the Commission to fix tariff and CSS together was legally unsound. As a result, the Supreme Court concluded that the Commission acted within its jurisdiction and regulatory framework, and there was no fault in its methodology for determining the CSS.

ANALYSIS:

This case highlights the legal and regulatory complexities involved in determining Cross-Subsidy Surcharges (CSS) within the framework of the Electricity Act, 2003. The primary contention revolved around whether the Rajasthan Electricity Regulatory Commission could justifiably fix CSS rates based on an earlier fiscal year’s tariff when no new tariff order was in place for the relevant year. The Supreme Court's decision affirms the regulatory autonomy of the Commission in using prevailing tariff rates for CSS calculation, even in the absence of a new tariff petition, as long as the method aligns with the established statutory framework. By emphasizing that Regulation 90 provides a valid basis for such determination, the Court clarified that there is no statutory requirement for the concurrent issuance of tariff and CSS orders. This reasserts the principle that regulatory decisions should focus on the substance and legality of the methodology, rather than rigid procedural timelines, especially when prior orders are still in force.

Moreover, the judgment addresses broader policy objectives under the 2003 Act, such as consumer choice via open access and the financial sustainability of distribution licensees through CSS. The Supreme Court’s ruling also critically evaluates APTEL’s interpretation, rejecting its view that the failure to file new tariff petitions invalidated the CSS determination. Instead, the Court maintained that the use of the previous tariff was consistent with regulatory continuity and did not violate legal or procedural norms. This decision reinforces the judiciary’s role in balancing the interests of utilities and consumers, and it underscores that regulatory commissions must have the flexibility to operate within existing tariff structures to ensure financial recovery and sectoral stability, even when procedural delays occur.