IMPORTANT POINTS
Validity of Regulations could not be challenged before Tribunal but only before Court.
Regulation framed on basis of CPRI report following statutory procedures; taking into account factors to be considered mandated by statute, Electricity act, 2003, section 181; National tariff policy and duly considering suggestions of stakeholders does not warrant interference.

JUDGMENT :

Dhananjaya Y. Chandrachud, J.

Leave granted.

2. The validity of a tariff regulation framed by the Maharashtra Electricity Regulatory Commission (MERC) was questioned before the High Court of Judicature at Bombay. Bereft of jargon – both legal and scientific – the plea of the appellant is of discrimination. The discrimination, according to the appellant, lies in a statutory regulation determining the Station Heat Rate. According to the appellant, its thermal power station at Dahanu has been subjected to a more stringent norm than other comparable units. MERC, it is asserted, breached the National Tariff Policy 2006. The High Court held against the appellant both on the maintainability of its writ petition under Article 226 of the Constitution and on the merits of the challenge to the validity of the statutory regulation. The case has thus travelled to this Court.

3. The Electricity Act 2003 came into force on 10 June 2003. Electricity Regulatory Commissions constituted under Section 82 are empowered to frame regulations under Section 181, including the terms and conditions for determination of tariff under Section 61 [Section 181(2)(zd)]. The MERC framed the MERC (Terms and Conditions of Tariff) Regulations 2005 [Tariff Regulations 2005] for a period of five years, upto financial year 2010-11. The regulations, in so far as the appellant is concerned were extended for a further period of one year upto financial year 2011-12.

4. Regulation 33.1.3 prescribed the Station Heat Rate (SHR). The SHR is the heat energy required to generate one unit of electrical energy. The SHR is significant because it represents the ratio between heat input and the energy output. SHR has a co-relationship with efficiency: a higher SHR reflects comparative inefficiency while a reduction in the SHR is associated with increasing levels of efficiency. In the Tariff Regulations 2005, the gross SHR was defined in the following terms:

“33.1.3. Gross station heat rate

(a) Gross station heat rate for coal-based generating stations

	200/210/250 MW sets	500 MW and above sets
During stabilization Period	2600 kCal/kWh	2550 kCal/kWh
Subsequent period	2500 kCal/kWh	2450 kCal/kWh

Note 1:

In respect of 500 MW and above units where the boiler feed pumps are electrically operated, the gross station heat rate shall be 40 kCal/kWh lower than the station heat rate indicated above.

Note 2:

For generating stations having combination of 200/210/250 MW seats and 500 MW and above sets, the normative gross station heat rate shall be the weighted average station heat rate.”

In the above regulations, uniform norms were fixed for all coal based thermal generating stations, without any distinction between individual generating stations. The norm applicable to the Dahanu Thermal Power Station of the appellant was 2500 kCal/kWh. This norm also applied to other generating stations in the State of Maharashtra.

5. On 6 January 2006 the Union of India in the Ministry of Power notified the National Tariff Policy under Section 3 of the Electricity Act 2003. The policy, inter alia, spelt out the general approach to be followed for the purpose of determining tariffs including operating norms for generating stations. Clause 4 of the policy laid out its objectives in the following terms:

“(a) Ensure availability of electricity to consumers at reasonable and competitive rates;

(b) Ensure financial viability of the sector and attract investments;

(c) Promote transparency, consistency and predictability in regulatory approaches across jurisdictions and minimise perceptions of regulatory risks;

(d) Promote competition, efficiency in operation and improvement in quality of supply.”

Clause 5.0 spells out the “general approach to tariff”. Clause 5(f) stipulates operating norms:

“(f) Operating Norms

Suitable performance norms of operations together with incentives and disincentives