Supreme Court Highlights Importance Of Consumer Interest In Electricity Cases

Consumer interest should not be compromised in cases pertaining to electricity bidding, as electricity procurement at a higher rate will ultimately be passed on to the consumers, which will go against the larger public interest, the Supreme Court said.

The court said so in a case pertaining to electricity supply procurement by Rajasthan Rajya Vidyut Prasaran Nigam Ltd. through a bidding process.

In 2009, RVPN sought approval from the Rajasthan Electricity Regulatory Commission for the procurement of 1,000 MW of power through a competitive bidding process. Various bids were submitted, with wide variations in the prices quoted.

Thereafter, the state electricity commission held that certain bids were not aligned to the prevailing market prices and rejected those bids. Aggrieved by this, certain bidders, whose bids were rejected, challenged this order before the Appellate Tribunal for Electricity.

The tribunal held that the state commission had to necessarily adopt the quoted tariffs and had no power to consider whether the tariff was aligned with market prices.

This prompted the bidders to file an appeal before the Rajasthan High Court.

Relying on the tribunal’s order, MB Power (Madhya Pradesh) Ltd., one of the bidders, contended before the Rajasthan High Court that RVPN was bound to procure electricity from the bidders going down the ladder until the entire procurement was done.

It was argued that once the bid evaluation process has been complied with, it is presumed that the process was transparent, and it is not permissible for the state commission to go into the question of market-aligned tariffs and their impact on consumer interest.

In 2021, the high court accepted this argument and directed the state electricity commission to take a supply of 200 MW from MB Power, as there was a 300 MW gap between RVPN’s procurement from the bidders who were quoting a better price and the revised 906 MW ceiling for procurement.

This entire fiasco led to an appeal being filed before the top court.

The apex court held that state electricity commissions have ample power to regulate the electricity purchase and procurement processes of distribution licensees.

It is further said that the Electricity Act also empowers these commissions to regulate the price at which electricity shall be procured from the generating companies. Accepting bids quoted by bidders without going into the question of whether they are market-aligned or not is without substance, the top court held.

If the electricity is to be procured by the procurers at the rates MB Power had quoted, then the state would have been required to bear a financial burden of thousands of crore rupees, which would have, in turn, been passed on to the consumers, the court said.

Setting aside the high court ruling, the top court said that the high court could not have issued an order to the instrumentalities of the state to enter into a contract, which was totally harmful to the public interest.