Regulatory Commissions possess exclusive power to determine tariffs, which must consider Generation Based Incentives to promote renewable energy, reflecting collaborative governance.

JUDGMENT :

I. Introduction

1. We are called upon to decide if the State Electricity Regulatory Commission (SERC) while exercising its power to determine tariff can “consider and factor in” the “Generation Based Incentive” (GBI) granted under a financial policy designed by the Ministry of New and Renewable Energy (MNRE) for incentivising actual renewable energy generation by the renewable energy generating companies (GENCOs). While GENCOs contend that there is no such power, the SERC and the distribution companies (DISCOMs) insist that tariff fixation is the exclusive province of the SERCs and that this power cannot be denuded by operation of an incentive scheme formulated in exercise of executive power. On facts, the Andhra Pradesh Electricity Regulatory Commission (APERC) determined the tariff of the GENCOs by factoring in the GBI granted by the MNRE, but in appeal the APTEL took a different view and held that the SERC has no such power. The well-refined arguments of the learned counsels appearing before us maintained the same stand of either total and exclusive province of the SERC to determine tariff, or absolute non-existence of power to “consider and take into account” GBI for fixation of tariff.

1.1 We have answered the question holding that tariff determination must, of course, be the exclusive province of SERCs and those powers are not denuded because Parliament assented to the estimates/demands of the MNRE and the Government transferred the GBI to the GENCOs. However, even when the SERC has the power and jurisdiction to “consider and factor in” GBI while determining tariff, the decision must be based on relevant principles governing tariff fixation and be in consonance with statutory policy. For the reasons to follow, we have held that the GBI is designed to subserve a very important policy consideration effecting energy security as well as the obligation to transition from fossil fuels to renewable energy. In this context, we found it necessary to indicate how sectoral regulators like the SERCs have to work in tandem with other duty bearers to subserve the purpose of the Electricity Act, 2003. While interpreting regulatory statutes, Constitutional Courts will not choose any of the conflicting claims but will balance plurality of interests such as energy security, consumer interests, developers’ stability as well as environmental concerns, such as global warming.

2. We will first examine the powers of the SERC to determine tariff. Thereafter, we will consider the endeavour of MNRE in reducing dependence on fossil fuels and the compelling need to shift gear towards renewable energy. We will then consider the competing submissions about the regulatory treatment of GBI and make our interpretative choice.

II. Facts

3. The Ministry of Ne