Source: Supreme Court  

Why in News? 

The Supreme Court upheld the Municipal Corporation of Delhi's (MCD) authority to issue tariff-based bids for Waste-to-Energy (WTE) projects under the Electricity Act 2003. This decision overturned an earlier Appellate Tribunal for Electricity (APTEL) order, public interest in managing Delhi's waste efficiently through the Narela Bawana WTE project. 

• Justices BR Gavai and KV Viswanathan held this in the case of Municipal Corporation of Delhi v. Gagan Narang & Ors. Etc. 

What was the Background of Municipal Corporation of Delhi v. Gagan Narang & Ors. Etc.? 

• The Municipal Corporation of Delhi (MCD) organized a meeting with Delhi Distribution Licensees and stakeholders on May 14, 2022, where they agreed to adopt a tariff-based bidding model for a Waste-to-Energy (WTE) project. 
• The key decisions made in this meeting included: 
  • Details about waste volume and total power generation were finalized. 
  • Power sales would be distributed among Distribution Licensees based on their Renewable Purchase Obligation. 
  • MCD was authorized to conduct the bidding process under Section 63 of the Electricity Act 2003. 
• MCD then issued: 
  • A Notice Inviting Tender (NIT). 
  • Request for Proposal (RfP) dated July 15, 2022. 
  • These were for procurement of power from a WTE project at Narela Bawana, New Delhi. 
  • The project specifications included minimum 28 MW capacity and 3000 (+/- 20%) TPD of Municipal Solid Waste. 
• DERC (Delhi Electricity Regulatory Commission) directed MCD to file a petition for approval of the Power Purchase Agreement and RFP through a letter dated 24th August 2022. 
• MCD closed the initial bidding process and issued a new NIT on 21st October 2022, with identical terms. 
• The Waste to Energy Research & Technology Council (WTERT) filed Petition No. 65 of 2022 challenging MCD's authority to issue the tariff-based bid and RfP. 
• During this petition's pendency: 
  • Two companies submitted bids on 14^th November, 2022: M/s JITF Urban Infrastructure Ltd. and M/s JBM Renewables Pvt. Ltd. 
  • Both bidders were declared technically qualified. 
  • JITF Urban Infrastructure Limited emerged as the lowest bidder with a tariff of Rs. 7.380/KWh. 
  • JBM Renewable quoted Rs. 9.909/KWh. 
• MCD filed Petition No. 72 of 2022 seeking approval for the bidding process. 
• DERC issued two orders in March 2023: 
  • March 6: Dismissed WTERT's petition. 
  • March 7: Approved the bid tariff of Rs. 7.38/KWh and directed negotiation of Power Purchase Agreement terms. 
• Respondent No. 1 (Mr. Gagan Narang) filed two appeals against these DERC orders with the Appellate Tribunal for Electricity (APTEL): 
  • DFR No. 245 of 2023 against March 7 order. 
  • DFR No. 247 of 2023 against March 6 order. 
• APTEL set aside both DERC orders on 31st August, 2023, ruling that DERC lacked jurisdiction to entertain MCD's petition. 
• MCD then filed appeals under Section 125 of the Electricity Act 2003 against APTEL's decision. 

What were the Court’s Observations? 

• The Supreme Court found that Section 63 of the Electricity Act, upon plain reading, did not restrict the invocation of State Commission's jurisdiction only to Discoms or generating companies, and APTEL's interpretation impermissibly added words not intended by the legislature. 
• The Court determined that Section 63's legislative intent was focused on two primary conditions: that tariff-setting must occur through a transparent bidding process and must follow Union government guidelines. The Court cited the Energy Watchdog case to establish that in absence of guidelines, the Commission could exercise power under Section 86(1)(b). 
• On examining Section 86(1)(b), the Court observed that it imposed a tripartite duty on State Commissions: to regulate electricity purchase and procurement process of distribution licensees, to regulate price of electricity from generating companies/licensees, and to regulate procurement from other sources through power purchase agreements. 
• The Court emphasized that Section 63 must be read harmoniously with Section 86(1)(b), requiring State Commissions to not merely act as a "post office" but to balance interests between power generators/discoms and end consumers while adopting tariffs through transparent bidding. 
• Regarding MCD's authority, the Court found no inconsistency between Section 63 and Rule 15 of SWM Rules 2016, noting that per Section 175 of the Electricity Act, its provisions are supplementary to other laws rather than derogatory. 
• The Court observed that Rule 6.4 of the Tariff Policy, read with Section 86(1)(e), mandated distribution licensees to procure 100% power from WTE plants while promoting renewable energy generation, thereby establishing MCD's clear mandate for WTE projects. 
• Based on these observations, the Court concluded that APTEL erred in curtailing State Commission's powers by restrictively interpreting that Section 63 could only be invoked by Discoms or generating companies. 

Electricity Act 2003 

• The Electricity Act, 2003 is India's primary electricity sector legislation, consolidating and replacing three previous laws (Indian Electricity Act 1910, Electricity Supply Act 1948, and Electricity Regulatory Commissions Act 1998) to create a comprehensive framework for generation, transmission, distribution, trading, and electricity use. 
• The Act established a two-tier regulatory system through the creation of Central and State Electricity Regulatory Commissions, tasked with overseeing the sector and protecting consumer interests while promoting competition. 
• It introduced significant market reforms including open access in transmission, phased open access in distribution, mandatory metering, and recognition of electricity trading as a distinct activity. 
• The Appellate Tribunal for Electricity (APTEL), established in 2005 under the Act, serves as a specialized appellate body hearing appeals against orders of the Central and State Electricity Regulatory Commissions. 
• APTEL's composition is designed to combine legal and technical expertise, requiring a chairperson (former Supreme Court Judge or High Court Chief Justice), one Judicial Member, and three Technical Members (two electricity experts, one petroleum/gas expert). 
• The Act promotes universal electricity access, including rural areas, while encouraging private sector participation across generation, transmission, and distribution sectors. 
• APTEL has a supervisory role over regulators under Section 121, allowing it to issue binding directions to State or Central Electricity Regulatory Commissions, with a 180-day timeframe for disposing of appeals. 
• Appeals against APTEL's decisions can only be filed before the Supreme Court on substantial questions of law, creating a structured appellate mechanism. 
• The Act establishes a multi-year tariff framework and introduces stricter penalties for electricity theft, demonstrating its focus on both commercial and enforcement aspects. 
• Since 2007, APTEL's jurisdiction expanded to include appeals against orders of the Petroleum and Natural Gas Regulatory Board, making it a crucial authority in India's energy sector regulation. 

Important Legal Provision of Electricity Act, 2003 

• Section 63 - Determination of Tariff by Bidding Process:  
  • "Notwithstanding anything contained in Section 62, the Appropriate Commission shall adopt the tariff if such tariff has been determined through a transparent process of bidding in accordance with the guidelines issued by the Central Government." 
• Section 86 - Functions of State Commission: 
  • The State Commission shall discharge following functions: 
    • a) Determine tariffs for electricity generation, supply, transmission and wheeling within the state. 
    • b) Regulate electricity purchase and procurement process of distribution licensees, including price at which electricity shall be procured through power purchase agreements. 
    • c) Facilitate intra-state transmission and wheeling of electricity. 
    • d) Issue licenses to persons seeking to operate as transmission licensees, distribution licensees, and electricity traders. 
    • e) Promote cogeneration and generation from renewable sources by providing grid connectivity and specifying percentage purchase from such sources. 
    • f) Adjudicate disputes between licensees and generating companies. 
    • g) Levy fees for purposes of the Act. 
    • h) Specify State Grid Code consistent with the Grid Code under Section 79 (i) Specify or enforce standards for quality, continuity, and reliability of service. 
    • j) Fix trading margin for intra-state trade if considered necessary. 
    • k) Discharge other functions assigned under the Act. 
• The State Commission shall advise the State Government on:  
  • Promoting competition, efficiency, and economy in the electricity industry. 
  • Promoting investment. 
  • Restructuring of electricity industry. 
  • Other matters referred to by the State Government. 
• The State Commission shall ensure transparency while exercising its powers and functions. 
• The State Commission shall be guided by National Electricity Policy, National Electricity Plan, and Tariff Policy in discharge of its functions. 
• Section 175 - Provisions of Act to be in addition to and not in derogation of other laws:  
  • "The provisions of this Act are in addition to and not in derogation of any other law for the time being in force." 

What is Section 125 of Act? 

• Section 125 deals with the appeal to Supreme Court. 
• "Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him, on any one or more of the grounds specified in Section 100 of the Code of Civil Procedure, 1908 (5 of 1908): 
• Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days." 
• Key points: 
  • Right to appeal to Supreme Court against APTEL's decisions/orders. 
  • Time limit: 60 days from date of communication. 
  • Grounds for appeal must be based on grounds specified in Section 100 of Civil Procedure Code, 1908. 
  • Extension provision: Supreme Court may allow additional period up to 60 days if satisfied with cause of delay. 
  • Appeal must be filed by "person aggrieved" by APTEL's decision/order.