1. Dispute over determination of Cross-Subsidy Surcharges under Section 42(2) of the Electricity Act, 2003, involving open access consumers and distribution licensees. (Para 1 , 2 , 3 , 4 , 5 , 6 )
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2025 Supreme(SC) 739
SUPREME COURT OF INDIA
ABHAY S. OKA, AUGUSTINE GEORGE MASIH, JJ.
Jaipur Vidyut Vitaran Nigam Limited and Ors. – Appellants
Versus
Rajasthan Textile Mills Association & Anr. Etc. – Respondents
Civil Appeal Nos. 8862-8868 of 2022
Decided On : 29-04-2025
Important Points
The determination of Cross-Subsidy Surcharge (CSS) can be made separately from tariff determination, based on the prevailing tariff rates as per Regulation 90 of the Rajasthan Tariff Regulations, 2014.
Subject
Energy Law - Electricity Regulation
Act Referred
ELECTRICITY ACT: S.125, S.181, S.39, S.40, S.42, S.61
Rajasthan Electricity Regulatory Commission Terms and Conditions for Determination of Tariff Regulations: Reg.2(a)(4), Reg.89, Reg.90
Rajasthan Electricity Regulatory Commission Terms and Conditions for Determination of Tariff Regulations: Reg.2(a)(4), Reg.89, Reg.90
Headnote
(A) Electricity Act, 2003 - Section 42(2) - Cross-Subsidy Surcharge (CSS) - Statutory appeals against APTEL judgment regarding CSS determination by Rajasthan Electricity Regulatory Commission - APTEL set aside State Commission's order, allowing CSS based on previous tariff - Court restored State Commission's order, affirming CSS determination based on prevailing tariff. (Paras 1, 21)
(B) Open Access - Concept introduced under the 2003 Act allowing consumers to procure electricity from sources other than distribution licensees - CSS compensates distribution licensees for loss of subsidy due to open access. (Paras 2, 3)
(C) Regulatory Framework - Rajasthan Tariff Regulations, 2014 - Regulation 90 provides formula for CSS determination based on tariff payable by consumers - No mandatory requirement for simultaneous determination of CSS and tariff. (Paras 15, 16)
Facts of the case:
Statutory appeals were filed against APTEL's judgment which set aside the State Commission's order determining CSS applicable from 1st December 2016. The APTEL ruled that the CSS determination should coincide with tariff determination, which was contested by the appellants.
Findings of Court:
The court found the APTEL's view erroneous, restoring the State Commission's order determining CSS based on the prevailing tariff.
Issues: The main issues included whether the State Commission was entitled to determine CSS without a concurrent tariff petition and the validity of the CSS rates set by the State Commission.
Ratio Decidendi: The court held that the CSS can be determined separately from the tariff and must be based on the applicable retail tariff recoverable during the relevant period, as per Regulation 90.
Result: Appeals allowed.
(B) Open Access - Concept introduced under the 2003 Act allowing consumers to procure electricity from sources other than distribution licensees - CSS compensates distribution licensees for loss of subsidy due to open access. (Paras 2, 3)
(C) Regulatory Framework - Rajasthan Tariff Regulations, 2014 - Regulation 90 provides formula for CSS determination based on tariff payable by consumers - No mandatory requirement for simultaneous determination of CSS and tariff. (Paras 15, 16)
Facts of the case:
Statutory appeals were filed against APTEL's judgment which set aside the State Commission's order determining CSS applicable from 1st December 2016. The APTEL ruled that the CSS determination should coincide with tariff determination, which was contested by the appellants.
Findings of Court:
The court found the APTEL's view erroneous, restoring the State Commission's order determining CSS based on the prevailing tariff.
Issues: The main issues included whether the State Commission was entitled to determine CSS without a concurrent tariff petition and the validity of the CSS rates set by the State Commission.
Ratio Decidendi: The court held that the CSS can be determined separately from the tariff and must be based on the applicable retail tariff recoverable during the relevant period, as per Regulation 90.
Result: Appeals allowed.
Legal Category Hierarchy
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administrative law
-
energy law
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electricity regulation
- tariff and surcharges
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electricity regulation
-
energy law
Advocates appeared:
For the Appellant(s) : Mr. M.G. Ramachandran, Sr. Adv. Ms. Poorva Saigal, Adv. Mr. Shubham Arya, Adv. Mr. Nikunj Dayal, AOR Ms. Pallavi Saigal, Adv. Ms. Reeha Singh, Adv. Mr. Aneesh Bajaj, Adv. Mr. Pramod Dayal, Adv.
For the Respondent(s): Mr. Anand Ganesan, Adv. Ms. Swapna Sesadri, Adv. Ms. Jesal Wahi, AOR Mr. Ishaan George, AOR Mr. Amit Verma , AOR Mrs. Vanita Bhargava, Adv. Mr. Ajay Bhargava, Adv. Ms. Nanadita Chauhan, Adv. Ms. Tijal Thakur, Adv. For M/S. Khaitan & Co., AOR Mr. Shantanu Sagar, AOR
For the Appellant(s) : Mr. M.G. Ramachandran, Sr. Adv. Ms. Poorva Saigal, Adv. Mr. Shubham Arya, Adv. Mr. Nikunj Dayal, AOR Ms. Pallavi Saigal, Adv. Ms. Reeha Singh, Adv. Mr. Aneesh Bajaj, Adv. Mr. Pramod Dayal, Adv.
For the Respondent(s): Mr. Anand Ganesan, Adv. Ms. Swapna Sesadri, Adv. Ms. Jesal Wahi, AOR Mr. Ishaan George, AOR Mr. Amit Verma , AOR Mrs. Vanita Bhargava, Adv. Mr. Ajay Bhargava, Adv. Ms. Nanadita Chauhan, Adv. Ms. Tijal Thakur, Adv. For M/S. Khaitan & Co., AOR Mr. Shantanu Sagar, AOR
Table of Contents
2. Whether Cross-Subsidy Surcharge determination must coincide with tariff fixation or can be determined separately based on the prevailing tariff rates. (Para 7 , 8 , 9 , 10 , 11 )
3. The court observed that surcharge determination is not necessarily part of the tariff process and is compensation based on the applicable retail tariff. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 )
4. Determination of Cross-Subsidy Surcharge is not mandatory to be simultaneous with tariff determination and may be determined separately based on prevailing tariff rates. (Para 15 , 19 )
5. Appeals allowed; judgment of the Appellate Tribunal for Electricity set aside and the State Commission's order restored. (Para 21 , 22 )
6. Is the determination of Cross-Subsidy Surcharge (CSS) required to be simultaneous with the determination of the tariff?
No. There is no provision in the Electricity Act, 2003, or the relevant Tariff Regulations making simultaneous determination mandatory. CSS can be determined separately based on the prevailing tariff rates. (Para 15 , 19 )
7. What is the rationale and purpose of levying the Cross-Subsidy Surcharge (CSS)?
CSS serves as compensation to distribution licensees for the loss of subsidisation when bulk consumers use open access to source electricity from other providers, balancing consumer choice with licensee interests. (Para 3 , 14 )
8. On what basis should the Cross-Subsidy Surcharge be computed?
CSS must be based on the applicable retail tariff recoverable during the relevant period, as it is a derivative of the effective tariff payable by the relevant category of consumers. (Para 15 , 19 )
JUDGMENT :
ABHAY S. OKA, J.
FACTUAL ASPECT
1. These are the statutory appeals under Section 125 of the Electricity Act, 2003 (for short, ‘the 2003 Act’) against a common judgment delivered by the Appellate Tribunal for Electricity (for short, ‘the APTEL’) in a group of appeals. The issue involved in these appeals relates to the determination of the Cross-Subsidy Surcharges (for short, ‘the CSS’) by the Rajasthan Electricity Regulatory Commission (for short, ‘the State Commission’). The determination was made under Section 42 (2) of the 2003 Act. The present appellants were the respondents before the APTEL. The respondents (appellants before the APTEL) are the industries/industrial units located in various parts of the State of Rajasthan, running their operations by availing their supply of electricity from connectivity through the State grid at EHT levels of 132/33/11 KV voltage. These industrial units were granted open access within the contract demand for drawing electricity through such open access, including from power exchanges. These industrial units (appellants before the APTEL) were aggrieved by the determination of the CSS made applicable from 1st December 2016 by the order passed on 1st December 2016 by the State Commission. Being aggrieved by the said order of the State Commission, the industrial units preferred statutory appeals before the APTEL. By the impugned judgment, the order of the State Commission was set aside. However, the APTEL clarified that the State Commission will be within its jurisdiction to undertake the process of revisiting the subject of the CSS vis-à-vis distribution licensees operating in the State of Rajasthan as and when it takes up the exercise of tariff determination in future in accordance with law.
2. The 2003 Act introduced the concept of open access, enabling the consumers/end users to procure electricity from sources other than the distribution licensees of the area where the premises of such end use are situated. Earlier, electricity was generally procured only from distribution licensees.
3. There was a significant amount of cross-subsidisation of certain categories of consumers by other categories of consumers. The consumers benefitting from the subsidy include agricultural consumers, low-end domestic consumers and public works. They are known as subsidised consumers. The consumers paying for the subsidy include industrial consumers, commercial consumers, and high-end domestic consumers, and they are known as subsidising consumers. Allowing open access users to source electricity from sources other than distribution licensees benefited such subsidising consumers and would become a burden on the distribution licensee. The reason is that such customers stopped taking electricity from the distribution licensees, thereby reducing the distribution licensees’ funds to subsidise the subsidised consumers. The CSS is, in a sense, compensation to the distribution licensees for being deprived of the subsidisation prevalent in the retail supply tariff. The CSS is a statutory charge payable by the consumers who decide to source electricity through open access from sources other than the distribution licensee of the area.
4. In exercise of the powers under Section 61 read with Section 181 of the 2003 Act, the State Commission notified the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff) Regulations, 2014 (for short, ‘the Rajasthan Tariff Regulations, 2014’). Regulation 89 thereof deals with the cross-subsidy. Regulation 90 provides a formula for determining the CSS payable by the consumer opting for open access.
5. The State Commission determined the tariff for the Financial Year (FY) 2015-2016 by the tariff order dated 22nd September 2016. On 20th July 2016, the distribution licensees approached the State Commission by a petition praying for determination of the CSS under Section 42 (2) read with Sections 39 and 40 of the 2003 Act. While dealing with the
