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SC rules in favour of Himachal in power dispute with JSW Hydro Energy

The Supreme Court on Wednesday ruled against JSW Hydro Energy, a subsidiary of JSW Energy, in its dispute with the Himachal Pradesh government over the supply of 18 per cent free power to the state. JSW Hydro Energy had argued that, under the Central Electricity Regulatory Commission (CERC) Tariff Regulations, it was required to supply no more than 13 per cent as free power. 'We have allowed the appeal by the State of Himachal Pradesh by interpreting the provisions of the Electricity Act, 2003 and the CERC Regulations, 2019 in the context of the subsisting and continuing contractual relationship between the parties,' said a Bench of Justices P S Narasimha and Joymalya Bagchi. The Bench held that the CERC Regulations, 2019, did not prohibit the company from supplying free power beyond 13 per cent and that the Implementation Agreement remained valid and enforceable. While CERC must give effect to its regulations and allow a pass-through of up to 13 per cent free power in tariff calculation, any additional supply is a contractual obligation governed by the Implementation Agreement. On interpreting the CERC Regulations, the court stated that the 13 per cent limit applies only for tariff purposes and does not prevent the company from supplying more than that amount of free power. 'Further, a writ petition before the High Court for aligning the Implementation Agreement with the CERC Regulations, 2019, and the CERC's order dated 17.03.2022 is not maintainable,' the court held. In allowing the state's appeal, the Supreme Court criticised the High Court for intervening in the tariff fixation domain, which falls within the exclusive jurisdiction of the CERC. 'Considering the expertise and specialisation of the CERC as a statutory regulator and the wide-ranging jurisdiction it exercises under the Electricity Act, as well as Respondent No. 1's (JSW Hydro Energy) conduct in not seeking relief against the appellant (State of Himachal Pradesh) before the CERC, we have held that the present writ petition was not maintainable before the High Court,' the Bench added. JSW Hydro Energy Limited operates a 1,045 MW hydroelectric project at Karcham Wangtoo, originally allotted to Jaiprakash Industries Limited under a Memorandum of Understanding signed in 1993. Under the subsequent Implementation Agreement with the Himachal Pradesh government, JSW (through its predecessor) had agreed to provide 18 per cent of net power generation to the state free of cost after the first 12 years of commercial operation. Later, JSW approached the CERC and then the High Court when the state declined to revise the free power obligation to 13 per cent in line with the 2019 regulations. The High Court had ruled in favour of JSW and directed the state to align the Implementation Agreement with the CERC Regulations. The Supreme Court has now overturned that ruling.