THE TATA POWER COMPANY LIMITED TRANSMISSION v. MAHARASHTRA ELECTRICITY REGULATORY COMMISSION AND ORS.

Citation: [2022] 19 S.C.R. 620; 2022 INSC 1222

Court: Supreme Court of India

Bench: D.Y. CHANDRACHUD , A.S. BOPANNA, J.B. PARDIWALA

Judgment date: 2022-11-23

Case summary

2022 INSC 1222. Supreme Court of India judgment dated 2022-11-23. THE TATA POWER COMPANY LIMITED TRANSMISSION v. MAHARASHTRA ELECTRICITY REGULATORY...

Judgment text

620 SUPREME COURT REPORTS[2022] 19 S. C. R. 620 [2022] 19 S. C. R. A THE TATA POWER COMPANY LIMITED TRANSMISSION v. MAHARASHTRA ELECTRICITY REGULATORY COMMISSION AND ORS. (Civil Appeal No. 1933 of 2022) B NOVEMBER 23, 2022 [DR. DHANANJAYA Y CHANDRACHUD, CJI, A. S. BOPANNA AND J. B. PARDIWALA, JJ. ] Electricity Act, 2003 – ss. 61-63, 86, 125, 181 – Maharashtra C Electricity Regulatory Commission (MERC) issued an order granting Adani Electricity Mumbai Infra Limited (AEMIL) the transmission licence to develop the Aarey-Kudus transmission project based on High Voltage Direct Current (HVDC) technology where tariff was to be determined through the Regulated Tariff Mechanism (RTM) approach u/s. 62 – Order challenged by appellant before Appellate D Tribunal for Electricity (APTEL) – Appeal dismissed by APTEL – Held: Provisions of the Electricity Act 2003 do not prescribe one dominant method to determine tariff – ss.

62 and 63 stipulate the modalities of tariff determination – The non-obstante clause in s. 63 cannot be interpreted to mean that s. 63 would take precedence over E s. 62 at the stage of choosing the modality to determine tariff – The criteria or guidelines for the determination of the modality of tariff determination ought to be notified by the Appropriate State Commission either through regulations u/s. 181 of the Act or guidelines u/s. 61 of the Act – In the present case, MERC has neither framed regulations nor notified guidelines prescribing the criteria F or guidelines for choosing the modalities to determine tariff – Thus, MERC shall determine the tariff by exercising its general regulatory powers u/s. 86(1)(a) of the Act – MERC while exercising its general regulatory powers u/s.

86(1)(a) shall be guided by the National Tariff Policy 2016, which shall be a material consideration – Further, G MERC and APTEL have arrived at concurrent findings that the 1000MW HVDC Aarey-Kudus project is an ‘existing project’ for the purpose of the applicability of the GoM’s GR 2019 – Supreme Court deciding a statutory appeal u/s. 125 of the Act cannot interfere with the concurrent findings on a question of fact – Nonetheless, even on an independent assessment of the facts, the HVDC project H 620 TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 621 COMMISSION is an existing project – The Electricity Act, 2003 or the policy A framework did not make it binding upon MERC to allot the HVDC project only through the Tariff Based Competitive Bidding (TBCB) route – Therefore, the Regulatory Commission’s decision to grant the HVDC project u/s. 62 was within a reasonable exercise of its powers. B Electricity Act, 2003 – ss.

61, 181 – Framing of necessary regulations by Regulatory Commissions to put into effect the principles prescribed under the Act – All State Regulatory Commissions directed to frame Regulations u/s. 181 of the Act on the terms and conditions for determination of tariff – Appropriate C Commission shall be guided by the principles prescribed in s. 61, which also includes the National Electricity Policy (NEP) and National Tariff Policy (NTP) – The Commissions while being guided by the principles contained in sec.

61 shall effectuate a balance that would create a sustainable model of electricity regulation in the States – The Regulatory Commission shall curate to the specific D needs of the State while framing these regulations – Further, the regulations framed must be in consonance with the objective of the Electricity Act 2003, which is to enhance the investment of private stakeholders in the electricity regulatory sector so as to create a sustainable and effective system of tariff determination that is cost E efficient so that such benefits percolate to the end consumers. Dismissing the appeal, the Court HELD: 1. The Appropriate Commission is not mandated to adopt the tariff determined through the bidding process irrespective of the fulfilment of the statutory requirements. The F Commission can reject the tariff determined through the bid if the tariff process is not (i) transparent; and (ii) in accordance with the guidelines issued by the Central Government.

Thus, if the Commission does not adopt the tariff determined through bidding, and if the decision is challenged, the bidding process G can be reviewed substantively (on the ground of transparency) and procedurally (on the ground of compliance with Central Government guidelines) to determine if the Commission could have exercised its discretion to determine the tariff under Section 62 while rejecting the tariff determined under Section 63. Therefore, Section 63 can only be invoked after the tariff has H 622 SUPREME COURT REPORTS [2022] 19 S. C. R. A been determined through bidding. The terms and conditions notified by the Appropriate Commission under Section 61 will have to be referred for the purpose of choosing the modality of tariff determination that the Commission should undertake. In view of the above discussion, the argument of the appellant that a reading of Section 61, 62 and 63 indicates that the TBCB route B is the dominant route of tariff determination does not hold merit.

[Para 77][677-F-H; 678-A-B] 2. 1 The value of TBCB Guidelines prescribed under Section 63 C Section 63 of the Act does not prescribe bidding as the dominant route of tariff determination. The Guidelines framed by the Central Government under Section 63 prescribe the mechanism and procedure for bidding. The Guidelines framed under Section 63 of the Act cannot be used to determine whether the RTM route or the TBCB route ought to be followed. [Para D 78][678-B-C] 2. 2 On 13 April 2006, the MoP framed the TBCB Guidelines under Section 63 of the Act. Clause 2. 2 of the Guidelines states that it shall apply for the procurement of transmission services through competitive bidding according to the mechanism E described in the notification. [Para 79][678-D] 2. 3 A reading of the clauses indicates that the TBCB Guidelines shall apply for (i) procurement of transmission services, which would include HVDC links; and (ii) selecting the transmission provider for a new transmission line.

The TBCB F Guidelines also advert to the appointment of a Bid Process Coordinator who would be responsible for coordinating the bid process for procurement of required transmission services. The TBCB Guidelines prescribe the procedure for conducting bids for procurement of, among other services, transmission services. Clause 3. 3 states that for the procurement of transmission G services required for intra-state transmission, the State Government may notify the organisation or the State Public Sector Undertaking to be the Bid Process Coordinator. A reading of clauses 2. 2 and 2. 4 does not indicate that that the tariff for all H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 623 COMMISSION new transmission projects shall be determined by competitive A bidding. It notifies the procedural mechanism for competitive bidding.

As observed earlier, the reference in Section 63 to the Guidelines framed by the Central Government is made to the limited extent of determining whether the procedure of bidding was in accordance to the Guidelines framed thereunder, which is B the TBCB Guidelines. [Para 80][678-G-H; 679-A-C] 3. 1 General Regulatory Power of the Appropriate Commission In the case of intra-state transmission of electricity, the State Commission would be bound by the guidelines issued under C Section 63. In addition to the guidelines under Section 63 of the Act, the State Commission shall also be bound by the regulations framed by it under Section 181(zd) read with Section 61 while it discharges its function of determining the tariff under Section 86 of the Act.

However, if the guidelines issued under Section 63 or D the regulations framed under Section 181(zd) of the Act have not been notified or if the guidelines do not deal with a given situation, then the Commission shall exercise its general regulatory power under Section 86(1)(a) of the Act to regulate tariff. [Para 85][681- E-F] E 3. 2 The TBCB Guidelines issued by the Central Government under Section 63 of the Act prescribe the mechanism of the bidding process and do not lay down the criteria or guidelines for choosing between the alternative routes under Section 62 and 63 of the Act. MERC has neither notified any Regulations under Section 181 nor has it notified the terms and F conditions under Section 61 of the Act. That being the case, the Commission could choose the modality of tariff determination by taking recourse to the general regulatory power under Section 86. [Para 87][683-G-H; 684-A] 4.

1 The nature of NTP- binding or a material consideration G Even in the absence of guidelines under Section 61 or Regulations under Section 181 (zd), the Commission does not possess unbridled power or discretion while choosing the modality to determine tariff. Sub-Sections (3) and (4) of Section 86 provide that the State Commission while discharging its H 624 SUPREME COURT REPORTS [2022] 19 S. C. R. A functions must ensure transparency and ‘shall be guided’ by the NTP and NEP. [Para 88][684-B-C] 4. 2 Both NTP 2006 and NTP 2016 as a general rule prescribe competitive bidding for determination of tariff for all ‘new projects’. There are two prominent differences between NTP 2006 B and NTP 2016. Firstly, the projects owned or controlled by the Government were exempted from bidding under NTP 2006. However, according to NTP 2016, the tariff for government owned projects is also to be determined by bidding, unless otherwise specified. Secondly, NTP 2016 introduced the threshold limit rule.

State Commissions are required to notify the threshold limit. If C the cost of the project exceeds the threshold limit, then the Commission is mandated to follow the bidding process for the determination of tariff. NTP 2016, by providing that state owned projects are not exempted from the TBCB process, has implemented the object of the Act, which is to create a fine balance D between promoting competition and protecting the interests of the consumers. NTP 2006 was formulated with the objective of enhancing the participation of private players in the generation, transmission and distribution of electricity. The Central Government adopted a policy decision to introduce the bidding process for the determination of the tariff for all new transmission E projects in 2006 but excluded its application to State projects. However, the distinction between State and private parties for the purpose of tariff determination through bidding was removed in NTP 2016.

This transition between NTP 2006 and NTP 2016 depicts the intention of the Government to rationalise the tariff F policy and to transfer the benefits of the rationalised tariff to the consumers. According to NTP 2016, the tariff for all new electricity transmission projects that cost above the threshold amount notified by the State Commission shall be determined through bidding. However, the MERC had not notified the threshold limit as on the date when it passed the order granting transmission G licence to AEML-T. MERC notified the Maharashtra Electricity Regulatory Commission (Multi Year Tariff) Regulations 2019 under Section 181 of the Act. The MERC MYT Regulations does not provide the guidelines or the criteria for the choosing the modality of tariff determination. The guidelines for choosing the H TATA POWER CO. v.

MAHARASHTRA ELECTRICITY REGULATORY 625 COMMISSION modalities are sought to be introduced by the Maharashtra A Electricity Regulatory Commission (Multi Year Tariff) (First Amendment) Regulations 2022. MERC circulated the draft of the MERC MYT Amendment Regulations on 19 August 2022 for comments, suggestions and objections. [Paras 90-92][684-G- H; 685-A-G] B 4. 3 When the application seeking licence for the HVDC Kudus- Aarey transmission project was filed, and when it was granted by MERC, the threshold limit as required to be provided by NTP 2016 was not notified by MERC. Thus, the question is whether in the absence of any notification of the threshold by C MERC, would MERC still be mandated to determine tariff for the transmission project through the TBCB route in view of NTP 2016. Merely because the threshold limit is not notified, it would not mean that MERC only had to determine tariff through the RTM route.

It is open to MERC to determine the tariff through either the Section 63 or the Section 62 route. When MERC is D exercising its general regulatory power under Section 86 to determine tariff, the NTP is a material consideration. Thus, the absence of a threshold limit would not affect the power that MERC holds to determine tariff (and its modalities). Since MERC has the power to regulate and determine tariff for the intra-state E transmission of electricity, the guidelines and regulations issued by MERC, if any, must be analysed to determine if MERC was mandated to choose one of the two routes for the determination of tariff or whether it could exercise its discretion to choose the modality. [Paras 93, 100][687-D; 691-H; 692-A-C] F Energy Watchdog v. Central Electricity Regulatory Commission (2017) 14 SCC 80 : [2017] 3 SCR 153; PTC India Ltd. v. Central Electricity Regulatory Commission (2010) 4 SCC 603 : [2010] 3 SCR 609; Reliance Infrastructure Limited v.

State of Maharashtra (2019) 3 SCC 352 : [2019] 1 SCR 886 – referred to. G 5. 1 The New - Old Conundrum The 1000MW Aarey-Kudus HVDC project by AEMIL is an ‘existing’ or an ‘old’ project with reference to the GoM GR for the following reasons: Firstly, the H 626 SUPREME COURT REPORTS [2022] 19 S. C. R. A GR does not provide or explain the meaning of the phrase ‘new’ projects. Hence, MERC has the discretion to formulate its understanding of the phrase ‘new’ projects so long as it is reasonable and does not rely on factors extraneous to the decision making process. In view of the decisions of this Court discussed above and the provisions of the Act, MERC has the power to B regulate tariff determination. MERC has not defined the phrase ‘new’ projects through the regulations. In this situation, MERC has the discretion to interpret the phrase ‘new’ projects which it did in the course of its judgment granting AEMIL the transmission license.

MERC held that generally the cancellation of approval C would amount to the closure of the project, unless the peculiar nature of the facts leads to an alternative conclusion (as in this case); Secondly, on applying the facts to the interpretation of the phrase ‘new’ project, MERC observed that the HVDC Kudus- Aarey project is not a new project. APTEL, on appeal, upheld the observations of MERC that it is an ‘existing project’. The D appeal against the judgment of APTEL before this Court under Section 125 of the Act can only be on the grounds mentioned in Section 100 of CPC. Section 100 of the Code of Civil Procedure 1908 stipulates that a second appeal shall lie only if the court (in this case the Supreme Court) is satisfied that the case involves a E substantial question of law. It is settled law that concurrent findings of fact recorded by the fora below (MERC and APTEL) cannot be interfered with by this Court. [Para 106-106. 2][695-F- H; 696-A-C, F-G] DSR (Steel) Pvt. Ltd. v.

State of Rajasthan (2012) 6 SCC F 782 : [2012] 5 SCR 583 – referred to. 5. 2 On 12 November 2007, MSETCL issued a communication to CEA setting out the steps proposed to meet the growing demand of power for Mumbai’s load centres. The communication stated that TPC had proposed the setting up of overhead lines and underground cables while REL had proposed G connections to Aarey by using the HVDC (VSC based) technology. MSETCL notified a five-year plan for 2009-10 to 2013-14 envisaging the use of the HVDC technology. The plan specifically provided for the ongoing schemes of R-infra together with new schemes including the HVDC based link between Nagothane and H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 627 COMMISSION Aarey. Similar details were provided in relation to TPC’s ongoing A and new schemes. Both TPC and R-infra were in the fray from the inception.

While TPC was primarily in the overhead transmission line segment, R-infra had proposed the setting up of transmission lines on the HVDC technology. The criticality of the HVDC technology assumes importance after the grid failure B which Mumbai experienced in November 2010. The committee chaired by a Professor of IIT recommended the HVDC technology as a long-term solution for ensuring reliability of power supply for Mumbai. MERC granted a transmission licence to R-infra on 11 August 2011. R-infra submitted a DPR to MERC for the appointment of a consultant for the transmission line from C Nagothane to Aarey on 1 February 2013. On 7 March 2013, MSETCL confirmed that the Nagothane -Aarey project was a part of the STU five-year plan for FY 2013-14 to 2017-18. MERC approved the hiring of the consultant on 5 April 2013. The application for the grant of grid connectivity for the proposed D HVDC project was allowed on 21 August 2013.

When matters were thus progressing, in November 2013 MSETCL had in a meeting with R-Infra proposed that R-Infra can avail of connectivity from the Kudus sub-station which was closer to the Aarey sub-station as compared to the sub-station at Nagothane. R-infra expressed its concern over the proposed revision on the E point of connectivity. On 10 April 2014, MERC granted an in-principle clearance for the HVDC Scheme. In January 2015, MSETCL proposed a revised scheme for where the 400KV Kudus-Aarey HVAC scheme was proposed by MSETCL. On 2 May 2016, the in-principle clearance granted to the Nagothane- F Aarey HVDC Scheme was cancelled by MERC. [Paras 106. 2. 1, 106. 2. 2][697-G-H; 698-A-H; 699-A] 5.

3 However, since the HVAC scheme of MSETCL did not take off, AEML-T submitted an application for HVDC Scheme between Aarey to Kudus on 23 November 2018 where an G amendment to the letter issued by MERC granting grid connectivity to the 2 x 500 HVDC (VSC based) scheme from Nagothane to Aarey was sought. The narration of facts indicates that AEML-T(or its predecessor in interest) has been involved in the execution of the HVDC Scheme since the inception of the H 628 SUPREME COURT REPORTS [2022] 19 S. C. R. A scheme. The cancellation of the in-principle approval accorded to AEML-T by MERC cannot be held to terminate the project in view of the peculiar background of this case. It is due to the indecisiveness of MSETCL on the HVDC and HVAC technologies that AEML-T’s clearance was cancelled. The HVDC Scheme was attributed to R-Infra or, as the case may be, AEML- B T since 2009.

In the electricity regulatory sector, where the State Regulatory Commissions and STUs’ have been functioning in an ad-hoc manner running in many loops, the question of whether the project is an old or a new project must be determined through a holistic purview of the factual background. In view of the above C factual narration, it is evident that the HVDC Scheme is an old project and the change in the location of the injection point from Nagothane to Kudus would not lead to the closure of the old project. [Paras 106. 2. 3, 106. 2. 4][699-B-F] 6. Relevance of GoM GR for MERC’s Decision D The fixation of tariff falls within the independent statutory domain of the Regulatory Commission. The State Government has the power to issue directions to the State Commission in matters of ‘policy involving public interest’ under Section 108 of the Act.

While stating that the State Government may issue directions in matters of policy involving public interest, Section E 108(2) states that if any question arises as to whether such direction relates to matters of policy involving public interest, the decision of the State Government on it shall be final. The provision further states that the State Commission shall be guided by the directions of the State Government in discharge of its F functions. Section 108 deals with “directions in matters of policy involving public interest as the State Government may give to it in writing. ” In the provision, the term ‘it’ refers to the State Commission. The GoM’s GR does not mention the State Commission and has not been issued as a direction to the MERC as envisaged in Section 108. Therefore, the HVDC Project is, G firstly, an existing project in terms of the GoM GR, and secondly, the GoM GR has not been issued in terms of Section 108 as a direction to the State Commission.

[Paras 111, 112][701-D-E, G- H; 702-A] 7. 1 Relevance of GoM GR vis-à-vis MSETCL’s decision H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 629 COMMISSION It is clear from a reading of the Development Guidelines A read with the functions of the State Utility in terms of Section 39(2) of the Act that while the State Transmission Utility shall be the apex authority for planning of intra-state transmission projects, the Empowered Committee is to identify projects to be undertaken under the TBCB route. [Para 120][704-G-H] B 7. 2 It is clear that the MSETCL’s decision regarding the HVDC Project not being referred under the TBCB route was in line with the Empowered Committee’s directions which have been set up in terms of the GoM GR and which has been granted the power to select projects to be taken up under the TBCB route. C [Para 127][707-D-E] 8.

1 Conclusion The Electricity Act, 2003 provides the States sufficient flexibility to regulate the intra-state transmission systems, wherein the Appropriate State Commissions possess the power D to determine and regulate tariff. The Electricity Act 2003 seeks to distance the State Governments from the determination and Regulation of tariff, placing such power completely within the ambit of the Appropriate Commissions. The provisions of the Electricity Act 2003 do not prescribe one dominant method to determine E tariff. Section 63 operates after the bidding process has been conducted. Where the tariff has already been determined through bidding, the Appropriate Commission has to adopt such tariff that has been determined. The Appropriate Commission cannot negate such tariff determined through bidding by using its powers under Section 62.

The tariff determined through the bidding F process may not be adopted by the Appropriate Commission only if the bidding process was not transparent (undertaking a substantive review) or the procedure prescribed by the Central Government guidelines under Section 63 was not followed (undertaking a procedural review). Sections 62 and 63 stipulate G the modalities of tariff determination. The non-obstante Clause in Section 63 cannot be interpreted to mean that Section 63 would take precedence over Section 62 at the stage of choosing the modality to determine tariff. The criteria or guidelines for the determination of the modality of tariff determination ought to be H 630 SUPREME COURT REPORTS [2022] 19 S. C. R. A notified by the Appropriate State Commission either through Regulations under Section 181 of the Act or guidelines Under Section 61 of the Act.

MERC has neither framed Regulations nor notified guidelines prescribing the criteria or guidelines for choosing the modalities to determine tariff. Thus, MERC shall determine the tariff by exercising its general regulatory powers B under Section 86(1)(a) of the Act. MERC while exercising its general regulatory powers under Section 86(1)(a) shall be guided by the NTP 2016, which shall be a material consideration. Accordingly, while NTP 2016 requires intra-state transmission projects above the threshold limit to be allotted through the C TBCB route, this constitutes a material consideration to be taken into account. The threshold value in the case of Maharashtra has not yet been notified by MERC. The threshold limit not having been notified by MERC, it was open to MERC to allot the HVDC project either under the RTM or the TBCB route.

MERC and APTEL have arrived at concurrent findings that the 1000 MW D HVDC Aarey-Kudus project is an ‘existing project’ for the purpose of the applicability of the GoM’s GR 2019. This Court deciding a statutory appeal under Section 125 of the Act cannot interfere with the concurrent findings on a question of fact. Nonetheless, even on an independent assessment of the facts, E the HVDC project is an existing project. Even if the HVDC Project were to be considered a ‘new project’ in terms of the GoM’s GR, the same not having been issued in terms of Section 108 as a direction to the State Commission, MERC’s decision cannot be challenged for failing to comply with the same as MERC is an independent body with statutory powers to determine and F regulate tariff. MSETCL has acted in terms of the GoM’s GR as it has referred the HVDC project to the Empowered Committee and the decision to not refer the HVDC project under the TBCB route was in line with the Empowered Committee’s directions.

The Empowered Committee has the power to select projects to G be taken up under the TBCB route under the GoM’s GR. [Para 128][707-F-H; 708-A-H; 709-A-D] 8. 2 The Electricity Act 2003 or the policy framework, particularly NTP 2016 read with the GoM GR dated 4 January 2019, did not make it binding upon MERC to allot the HVDC project only through the TBCB route. The Regulatory H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 631 COMMISSION Commission’s decision to grant the HVDC project under Section A 62 was within a reasonable exercise of its powers. [Para 129][709- E] 8. 3 This case has brought the ad-hoc nature of the functioning of the STU to the notice of this Court. MSETCL has been changing its stance on the HVDC technology without B following any due procedure. The flip-flops by MSETCL have led to the loss of time and investment while the demand in the electricity sector has been increasing exponentially.

In matters dealing with electricity regulation, the regulatory commissions and the transmission utilities are usually bogged down by factors C such as technological uncertainty, requirement of heavy investment and issues of right of way. The ad- hoc functioning of the transmission utilities is also attributable to the lacunae in the regulations guiding the exercise of their functions. The Electricity Act 2003 was enacted with the objective of providing the States with sufficient flexibility to regulate the intra-state electricity D system and simultaneously provided the regulatory commissions with the power to determine tariffs. Though the Government, both at the Centre and in the States, have framed statutory policies and guidelines regulating the electricity sector, the Regulatory Commissions have not framed the necessary E regulations to put into effect the principles prescribed under the Act.

All State Regulatory Commissions are directed to frame Regulations under Section 181 of the Act on the terms and conditions for determination of tariff within three months from the date of this judgment. While framing these guidelines on determination of tariff, the Appropriate Commission shall be F guided by the principles prescribed in Section 61, which also includes the NEP and NTP. Where the Appropriate Commission(s) has already framed regulations, they shall be amended to include provisions on the criteria for choosing the modalities to determine the tariff, in case they have not been G already included. The Commissions while being guided by the principles contained in Section 61 shall effectuate a balance that would create a sustainable model of electricity regulation in the States. The Regulatory Commission shall curate to the specific needs of the State while framing these regulations.

Further, the regulations framed must be in consonance with the objective of H 632 SUPREME COURT REPORTS [2022] 19 S. C. R. A the Electricity Act 2003, which is to enhance the investment of private stakeholders in the electricity regulatory sector so as to create a sustainable and effective system of tariff determination that is cost efficient so that such benefits percolate to the end consumers. [Paras 130, 131][709-F-H; 710-A-E] B Govindaraju v. Mariamman (2005) 2 SCC 500 : [2005] 1 SCR 1100; Hari Singh v. Kanhaiya Lal (1999) 7 SCC 288 : [1999] 2 Suppl. SCR 216; Ramaswamy Kalingaryar v. Mathayan Padayachi (1992) 1 Supp SCC 712; Kehar Singh v. Yash Pal (2015) 7 SCC 769; Bismillah Begum v. Rahmatullah Khan (1998) 2 SCC C 226 : [1998] 1 SCR 284 – referred to. Case Law Reference [2017] 3 SCR 153 referred to Para 39 [2010] 3 SCR 609 referred to Para 86 D [2019] 1 SCR 886 referred to Para 94 [2012] 5 SCR 583 referred to Para 106. 2 [2005] 1 SCR 1100 referred to Para 106. 2 [1999] 2 Suppl.

SCR 216 referred to Para 106. 2 E [1998] 1 SCR 284 referred to Para 106. 2 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1933 of 2022. From the Judgment and Order dated 18. 02. 2022 of the Appellate F Tribunal for Electricity in Appeal No. 280 of 2021. Shyam Divan, Sr. Adv. , Shri Venkatesh, Ms. Kanika Chugh, Nitin Saluja, Suhael Buttan, Siddharth Joshi, Vineet Kumar, Anant Singh, Advs. for the Appellant. Dr. A. M. Singhvi, Vikas Singh, Sr Advs. , Ms. Deepa Chawan, G Mahesh Agarwal, Hemant Singh, Arshit Anand, Ms. Geetika Sharma, Harshit Singh, Mridul Chakravarty, Biju Mattam, Lakshyajit Singh Bagdwal, Ms. Lavanya Panwar, Ms. Reshma Nathani, E. C. Agrawala, Ms. Deepieka Kalia, Kapish Seth, Ms. Priyanka Khosla, Buddy Ranganathan, Ms. Prititi Rungta, Sumit Pargal, Ms. Amita Singh Kalkal, H Sudhanshu S. Choudhari, Rahul Chitnis, Sachin Patil, Aaditya A. Pande, TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 633 COMMISSION Geo Joseph, Ms. Shwetal Shepal, Durgesh Gupta, Advs.

for the A Respondents. The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, CJI A glossary of defined terms used in the judgment has been provided B below: C D E F G H 634 SUPREME COURT REPORTS [2022] 19 S. C. R. A RInfra Reliance Infrastructure Limited RTM Regulated Tariff Mechanism STU State Transmission Utility TBCB Tariff Based Competitive Bidding B TBCB Guidelines Tariff Based Competitive Bidding Guidelines for Transmission Service issued by the MoP dated 13. 04. 2006 TPC-T/ appellant Tata Power Company Limited Transmission VSC Voltage Source Converter C This judgment has been divided into the following sections to facilitate analysis: A. The Facts ......................................................................... 5* B. Proceedings before the MERC and APTEL ................. 27* D C. The Submissions ............................................................ 34* D. Regulatory Framework ................................................. 37* D.

1 Electricity Act 2003 .............................................. 37* D. 2 Policy framework .................................................. 42* E D. 2. 1 Central Policies ............................................. 42* D. 2. 2 State Policies ................................................. 47* E. The Analysis .................................................................. 48* E. 1 Section 63: The dominant route or the alternative F route............................................................................... 49* E. 1. 1. The value of TBCB Guidelines prescribed under Section 63 ....................................................... 54* G E. 2 General Regulatory Power of the Appropriate Commission ................................................................... 56* E. 2. 1 The nature of NTP- binding or a material consideration............................................... 61* *Ed Note : Pegination is as per the original judgment. H TATA POWER CO. v.

MAHARASHTRA ELECTRICITY REGULATORY 635 COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI] E. 3 Value of GoM GR .................................................. 72* A E. 3. 1The New- Old Conundrum ............................ 73* E. 3. 2 Relevance of GoM GR for MERC’s Decision .................................................................... 80* B E. 3. 3 Relevance of GoM GR vis-à-vis MSETCL’s decision ................................................. 83* F Conclusion ....................................................................... 89* 1. APTEL, by its judgment dated 18 February 2022, dismissed an appeal under Section 111 of the Act instituted by the appellant against a C decision of MERC dated 21 March 2021. 2. On 21 March 2021, MERC granted a transmission licence to AEMIL under Sections 14 and 15 of the Act for setting up a 1000 MW HVDC (VSC based) link between 400 kV MSETCL Kudus and 220 kV AEML Aarey EHV Station. D 3.

The appellant challenged MERC’s order before APTEL, inter alia, on the ground that the grant of the licence was not preceded by a TBCB process. TPC-T contended that the failure to adhere to a TBCB process pursuant to Section 63 was contrary to public interest and statutory mandate. APTEL dismissed the appeal. This has given rise to E a statutory appeal under Section 125 of the Act. A. The Facts 4. On 12 November 2007, MSETCL issued a communication to CEA stating, inter alia, that it was difficult to lay overhead AC lines to F bring power from the new 400kV sub-station, which was required to meet Mumbai’s growing demand of power, to Mumbai’s load centres due to constraints. Hence, it was proposed that VSC based HVDC technology may be utilised to connect the new sub-station with major load centres in Mumbai through DC cables. In that context, the letter stated: G “M/s. Reliance energy (REL) and M/s. TATA Power Co. Ltd. (TPC) has carried out necessary survey and accordingly M/s.

REL has proposed to connect Mumbai new location to Ghodbunder partly by overhead line and partly by underground cables. Further, H 636 SUPREME COURT REPORTS [2022] 19 S. C. R. A M/s. REL also proposed to connect Mumbai New Location to Aarey by HVDC (VSC based technology). M/s. TPC has planned to establish a 220 kV substation at Vikhroli and have existing Salset, Dharavi and Trombay substations. These substations will be fed from 400 kV proposed substation at B Ghatkopar. Thus the major load centres in Mumbai will be fed as below. Colaba area will be fed by 220KV Dharavi S/S (Tata) Andheri area will be fed by 220KV Versova & Aarey S/S (REL) C Bandra area will be fed by 220KV Aarey S/S Maharashtra State Transmission Company Ltd. (MSETCL) has also proposed to connect 400KV Mumbai New Location with 400KV New Mumbai (Panvel) for system strengthening.

State Transmission Utility (STU) office would appoint a Consultant D who is having sufficient knowledge in VSC based HVDC technology for finalizing the scheme, subject to M/s REL agreeing to bear the cost of the same. ” (emphasis supplied) E REL envisaged a transmission project by deploying HVDC (VSC) based technology, where the load/evacuation point for the power to be received into Mumbai city was at Aarey. Both REL and TPC-T were to participate in identifiable segments for bringing power to Mumbai’s load centres. 5. On 5 May 2009, MSETCL notified a five-year plan for the F period 2009-10 to 2013-14. The plan included the Nagothane-Aarey HVDC link. Likewise, details of the on-going and new schemes of TPC- T were also provided. In terms of the plan, REL was to execute the Nagothane - Aarey transmission project. 6. In November 2010, Mumbai experienced a partial grid G disturbance. A Committee chaired by Professor Dr SA Khaparde of IIT Mumbai was constituted to study the situation.

The Committee recommended adopting the HVDC technology as a long-term solution for ensuring the reliability of power supply for Mumbai for the proposed transmission project with a 2 x 350 MW HVDC voltage source converter H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 637 COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI] based transmission link for Mumbai. This was identified as a critical A bulk power injection scheme. 7. On 13 May 2011, RInfra submitted an application under the provisions of Section 14 and 15 of the Act for the grant of a transmission licence for the entire State of Maharashtra. By an order dated 11 August 2011, MERC observed that R-Infra cannot be granted a transmission B licence for the entire State of Maharashtra as paragraph 5. 1 read with 7. 1. 6 of NTP 2016 mandated TBCB for transmission services. Instead, MERC granted RInfra a transmission licence to establish and operate specific transmission lines for a period of twenty-five years.

The transmission lines in respect of which the licence was granted to R- C Infra were specified in the communication dated 11 August 2011. 8. On 2 November 2012, the report of the HVDC sub-committee for finalization of the consultant noted the reasons for adopting HVDC (VSC) based technology to meet the power demand for Mumbai. The following extract indicates that after exploring various operations it was D found that connectivity at Nagothane was suitable. On the other hand, Aarey being a major load centre was a “suitable sink point for connection”: “The First Meeting of the Sub-Committee was held on 28. 08. 2012, where in following as discussed and agreed upon E Following requirements were discussed & considered: i. Classic HVDC has limited capability of Active / Reactive Power control, whereas VSC HVDC has dynamic control of Active & Reactive Power Control ii.

Classic HVDC has no Blackstart facility; whereas VSC HVDC F has blackstart facility which can be a major support to revive Grid failures. iii. Classic HVDC requires more footprints. VSC HVDC being compact and modular in design hence it requires only 30% footprint area to setup a converter station G iv. Short Circuit levels are increasing, hence HVDC link to Mumbai shall be ideal To meet the above, it is concluded that, 2x500 MW HVDC Voltage Source Converter (VSC) based technology for Mumbai is essential. H 638 SUPREME COURT REPORTS [2022] 19 S. C. R. A For connectivity with the grid, various options were explored and it is concluded that electrical connectivity at Nagothane is suitable. Similarly Aarey, being the major load centre, it is concluded that Aarey is the suitable sink point for connection. ” 9.

On 1 February 2013, RInfra submitted a DPR to MERC for B the appointment of a consultant for its proposed 2 x 500 MW HVDC (VSC) based transmission line from MSETCL’s 400 kV Nagothane station to the 220 kV Aarey sub-station. 10. On 5 April 2013, MERC addressed a letter to R-Infra, granting it in-principle clearance for hiring a consultant for the Nagothane-Aarey C HVDC Scheme to study the system and assist in the selection and design of the technology and bidding process of the DPR. However, it was noted that the ‘in-principle’ clearance should not be construed as a final approval for the purposes of the Annual Recurring Revenue and the scheme would be open to scrutiny during the tariff determination process, particularly in the context of actual cost incurred, scope and objective D achieved. MERC approved the hiring of the consultant for the implementation of R-Infra’s transmission projects.

R-Infra was directed to submit quarterly progress reports on the transmission projects based on HVDC technology. 11. The five-year plan is submitted by MSETCL in terms of Section E 39 of the Act and Regulation 8 of the MERC (State Grid Code) Regulations 2006. On 7 March 2013, MSETCL in a communication to MERC confirmed that the following scheme was being considered in the five-year plan for 2013-14 to 2017-18 for the Mumbai Metropolitan region: F S. Name of Scheme Year of Remarks No. Commissioning 1. 2x500 MW HVDC IGBT (VSC) based 2016-17 Implementation Aarey – Nagothane Link (120 Ckt km) utility RInfra-T G with Bays. 12. On 19 March 2013, RInfra submitted an application to MSETCL seeking grid connectivity for the Nagothane-Aarey HVDC Scheme. This was allowed on 21 August 2013 by MSETCL. The letter detailed H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 639 COMMISSION [DR.

DHANANJAYA Y CHANDRACHUD, CJI] out the scope of the work to be carried out by R-Infra and specified the A conditions for compliance. 13. On 20 November 2013, a meeting was held between MSETCL and R- Infra to discuss and review the HVDC connectivity to the Aarey sub-station. In the meeting, MSETCL proposed availing of connectivity from the 400kV Kudus substation instead of the 400kV substation at B Nagothane. The reason for the change in the point of connectivity being sought from Nagothane as originally envisaged to Kudus was as follows: “ • Director (Operations) suggested that R-Infra can avail C connectivity from 400 KV Kudus (MSETCL) Substation which is much near to Aarey Substation (R-Infra) as compared to 400 KV Nagothane (MSETCL) substation (125 km). Proposed 400 KV Kudus (MSETCL) Substation will be commissioned within 2 years.

400 KV Kudus S/S will have strong source of 765 KV Kudus (PG) and other 400 KV network from Vapl(PG) 400 D Bubheswar MSETCL), 400 KV Nashik (MSETCL) 400 KV Padgha (MSETCL) 400 KV Bolsar (PG) compared to 400 KV Nagothane (MSETCL) S/S. Therefore 400 KV Kudus Substation is a better option for HVDC connectivity. The route cable linkage cost will be considerably lower. E • Chief Engineer (STU) submitted that when original plan was made for R-Infra HVDC project, the 400 KV Kudus s/s (MSETCL) was not in the STU plan but now it has been included I STU plan. Therefore it should be examined positively for HVDC connection with Aarey. The cost of the project will be reduced considerably. ” F Evidently, R-Infra had reservations about revising the point for HVDC connectivity from Nagothane to Kudus. The Minutes of the Meeting of 20 November 2013 indicate those concerns: “R-infra expressed their concern to consider the revision of scope G of connectivity which was decided by standing committee.

R-infra already initiated procurement of land near Nagothane (MSETCL) and detail survey. All required clearance proposals are initiated by R-Infra for which approvals are in a pipeline and at this stage it is very difficult to consider the new proposal. ” H 640 SUPREME COURT REPORTS [2022] 19 S. C. R. A The Director (Operations) of MSETCL advised R-Infra, while agreeing to its concerns, to nonetheless examine the suggested proposal and submit its comments. 14. On 14 February 2014, R-Infra submitted a DPR for the transmission link between Nagothane and Aarey under the HVDC (VSC) B project. On 10 April 2014, MERC granted in-principle clearance to R- Infra for the Nagothane-Aarey HVDC Scheme. R-Infra was intimated that the in-principle approval was subject to it filing a petition for the amendment of its transmission licence.

It was also mentioned that the in-principle clearance should not be construed as a final approval for Annual Recurring Revenue purposes and that the scheme will be open C for scrutiny during tariff determination: “5. Please note that this in-principle clearance should not be construed as final approval for ARR purpose and the scheme will be open for scrutiny during tariff determination process/ARR review, particularly in the context of actual cost incurred, scope D and objective achieved etc. ex-post after implementation of the scheme. RInfra-T will be required to submit the status of implementation of the scheme with cost incurred till date along with their ARR Petition or during the tariff determination process at the appropriate time. E [.. ] 7.

Immediately after the completion/commissioning of the scheme, R-Infra-T should communicate to the Commission, the date of completion of the scheme, actual cost incurred, escalation in cost, if any with reasons, the scope and objectives of the scheme and F to what extent they have been achieved, etc. so as to facilitate a comparison between the in-principle clearance and the actual. ” 15. On 5 January 2015, MSETCL proposed a revised scheme for strengthening Mumbai’s transmission system to MERC. MSETCL proposed that it would establish a 400kV Kudus – Aarey HVAC scheme. G The reason for substituting the HVDC project to be executed by R- Infra with MSETCL’s HVAC transmission link from Kudus to Aarey was clarified in paragraph 9 of the letter which has been extracted below: “9) In view of above, the HVDC project of R-Infra T is reviewed considering uncertainties in source generation and upcoming strong H source of 400 KV Kudus at much shorter distance (approx. 80km) TATA POWER CO. v.

MAHARASHTRA ELECTRICITY REGULATORY 641 COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI] than 400 KV Nagothane S/s. Therefore, considering the above A changes in network configuration, it is proposed to establish 400 KV substation in Mumbai for the enhancement of Transmission corridor capacity to Mumbai system through 400 KV D/C Quad line from 400 KV Kudus (MSETCL) substation. This will enhance the transmission capacity by 1500-2000 MW. ” B The scope of the scheme proposed by MSECTL was delineated in paragraph 11 of the communication which is extracted below: “11) The scope of proposed scheme for above purpose is as given below: C i) 400 KV Kudus (MSETCL)-400 KV Aarey (MSETCL) D/C quad line-80 km. ii) 400/200 KV, 2x500 MVA ICTs. iii) 200 KV Interconnection between 400/220 KV Aarey and proposed 200 KV Goregaon Film city with bays. D iv) 6x200 KV bays for 220 KV interconnection with TPC and R Infra (T) lines. v) 400 KV spare bays for interconnection with 400 KV Vikhroli (TPC).

E vi) 400/220 KV, 2x500 MVA ICTS for future expansion. The scheme of establishment of 400 KV Aarey (MSETCL) Mumbai will be included in five year STU Pan 2015-16 to 2019- 20 for commissioning during 2017-18. The HVDC project stands cancelled for the reasons as mentioned above. Necessary DPR F of the scheme will be submitted to Hon’ble Commission in due course of time for in-principle clearance. ” In other words, instead of R-Infra developing a transmission link between Nagothane and Aarey using the HVDC technology, MSECTL proposed to establish the link between Kudus and Aarey itself using G HVAC technology by including it in the five-year plan for 2015-16 to 2019-20. 16. On 23 January 2015, R-Infra addressed a communication to MSETCL responding to the communication dated 5 January 2015. R- Infra responded to the proposal of the substitution of the HVDC (VSC based) scheme from Nagothane to Aarey with an overhead transmission H 642 SUPREME COURT REPORTS [2022] 19 S. C. R.

A line from Kudus to Aarey to be executed by MSETCL. The letter noted that: (i) The approved HVDC Scheme had been recommended by the Standing committee appointed by MERC; (ii) The HVDC project which was envisaged with VSC based B technology had significant technological advantages over the HVAC technology proposed by MSETCL; and (iii) In the past, Power Grid Corporation of India Limited and MSETCL had cancelled proposed HVAC transmission lines for bringing power into Mumbai or terminated them outside C Mumbai on account of severe right-of-way constraints in and around Mumbai. R-Infra therefore reiterated that the HVDC – VSC based scheme as approved should be continued. However, R-Infra indicated that the injection point could be relocated to Kudus while retaining the HVDC D Scheme for bulk power injection to Mumbai. 17. On 2 May 2016, MERC cancelled the in-principle approval accorded to R-Infra’s HVDC Scheme.

The letter of cancellation is extracted below: “This has reference to review report of approved capex E Schemes submitted by RInfra-T vide letter dated 5 April 2016; 1) RInfra – T has submitted the review of 7 schemes, as inspite of having been approved by the Commission long back, the work against the schemes are yet to be initiated for various F reasons. 2) R-Infra-T has submitted as follows; a) 3 Schemes (EHV Scheme for 220KV Golibar S/s, 220 kV Dahisar Housing S/s & 220 kV Airport S/s) G amounting to Rs. 600. 51 Crore will be submitted for revised approval after allocation of land. b) 2 Schemes (HVDC Consultancy, 2x500 MW HVDC Scheme) amounting to Rs. 7103. 99 Crore are kept on hold as the STU reply is awaited. H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 643 COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI] c) I Scheme (Land DPR) amounting to Rs. 232. 55 Crore A is withdrawn as the approved land cost is already considered in the respective DPR schemes.

d) Regarding the Scheme of establishment of Nagri- Niwara substation amounting to Rs. 460. 59 Crore, RInfra has submitted that it has executed a part, i. e. , B the cable laying portion between RInfra Aarey and MSETCL Borivali stations, as MSETCL has proposed EHV station in the same area catering to RInfra-D & MSEDCL load and the substation portion is proposed for withdrawal. C 3) Due to change in scope of work of RInfra-T (i. e. establishing cable connectivity between RInfra-T Aarey & MSETCL Borivali without installing Nagri-Niwara substation), Rinfra- T is required to take revised approval of the scheme along with STU recommendation for such change. D 4) In view of the above, I am directed to communicate that in principle approvals given to DPRs submitted by R Infra-T for EHV Scheme for 220 kV Golibar S/s, 220kV Dahisar Housing S/s, 220 kV Airport S/s, Land DPR, HVDC consultancy, HVDC Line& substation portion of Nagri- E Niwara scheme stand cancelled. ” (emphasis supplied) 18.

On 22 December 2016, MSETCL submitted its five-year plan for FY 2016-17 to 2021-22 wherein the HVDC Scheme was removed. The HVDC Scheme was not included in the 5-year plan submitted for F the FY 2017-18 to 2022-23. On 29 August 2018, AEML acquired R- Infra. 19. At this stage, it is material to note that the appellant, TPC-T, had submitted a DPR for commissioning a 400kV receiving station at Vikhroli which was approved by MERC on 2 June 2011 with a capital G cost of Rs 846. 19 crores. In terms of the DPR, the work was to be completed in March 2015. TPC-T proposed revised timelines for the completion of the scheme in financial year 2017-18 on the ground that the approval required for it including clearances from Ministry of Environment, Forest and Climate Change and the Airport Authority of India were at various stages and the land required was in the final stage H 644 SUPREME COURT REPORTS [2022] 19 S. C. R. A of being taken into possession.

By its order dated 12 September 2018, MERC noted that TPC-T has submitted a revised DPR twice, pursuant to which it had approved the extension of the target plan date to March 2017 and later, March 2019. TPC-T proposed a revised completion date of March 2022. Noting the absence of any progress in the scheme of TPC-T, MERC closed the scheme. It observed: B “7. 12. 1 As regards, 400 kV Receiving station at Vikhroli, the Commission notes that TPC-T had submitted its DPR for commissioning of 400 kV Receiving Station at Vikhroli and the Commission has approved the same oa2 June, 2011 with capital cost of Rs. 846. 19 Cr. In the DPR, TPC-T had submitted that the C work shall be completed in March, 2015. ” “7. 12.

8 Based on TPC-T’s submissions in the present Petition, the Commission further notes, TPC-T had envisaged imminent load requirement and exponential increase in the power requirement due to large scale development in residential and D commercial properties (especially in Godrej area) at Vikhroli and around area. In actual, the predicted load growth has not come up in the area. ” “7. 12. 9 Considering above, the Commission noted that STU has observed that there is an inordinate delay in completion of this E scheme and suggested to take up this scheme under Tariff Based Competitive Bidding (TBCB) route. The Commission is concerned about the approach adopted by TPC-T for execution of the scheme. This scheme is being treated as deemed closed by the Commission and the Commission directs STU to take a review of such critical schemes and propose a way forward.

STU is directed F to submit its report to the Commission on review of TPC-T’s proposed 400 kV Vikhroli Receiving Station within a month. ” The Vikhroli transmission scheme which envisaged the setting up of a 400kV receiving station by the appellant was hence deemed to be closed by MERC on the ground of TPC-Ts inordinate delay in completion. G The project was instead suggested to be allotted through the TBCB route. 20. On 23 November 2018, AEML submitted a proposal to MSETCL indicating that in view of the severe constraints on the construction of overhead lines in and around Mumbai, the 400kV Aarey H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 645 COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI] – Kudus overhead transmission scheme of MSETCL “never took off”. A Hence AEML proposed the development of a 2 x 500 MW HVDC (VSC) based link between Kudus and Aarey and the inclusion of the project in the transmission licence of AEML.

AEML submitted a revised ‘connection application’ for carrying bulk power from the state grid to Mumbai; an amendment to the earlier application over which grid B connectivity for the Nagothane-Aarey HVDC project was granted by MSETCL on 21 August 2013; and for the grant of connectivity and implementation of the 2 x 500 MW HVDC (VSC) link. 21. TPC-T sought a review of the order dated 12 September 2018 by MERC cancelling its licence for the Vikhroli transmission C scheme. On 29 January 2019, the review petition was dismissed by MERC reiterating its earlier reasoning that TPC-T had substantially delayed the project and noting that there was no defect or error apparent on the face of the record. 22. On 28 May 2019, MSETCL submitted its five-year plan for D 2018-19 to 2023-24 to MERC under which the HVDC Scheme was included as an additional scheme within the scope of AEML-T. The plan included the Aarey-Kudus HVDC Scheme by AEML-T and was made available on the website of MSETCL. 23.

AEML-T sought the suggestion of CEA on a VSC based E underground cable system for bulk power injection into the existing network of Mumbai. CEA in its communication dated 13 June 2019 stated that it had held meetings on 8 May 2019 and 31 May 2019 with MSETCL, AEML-T and TPC-T besides the central transmission utility. The communication noted that in those meetings there was a consensus for planning a transmission scheme of feeding power to the Mumbai F region in the time frame of 2025-26 and 2030 based on studies. AEML- T and TPC-T were requested to provide substation wise load data with any additional transmission element which was planned in the above time frames. In response, both AEML-T and TPC-T furnished sub-station wise load for 2024-25 and details of the transmission schemes G planned during 2024-25. Load flow studies were also carried out for 2024-25 conditions considering all schemes planned by AEML-T and TPC-T till 2024-25 and schemes of the STU until 2021-22.

The primary findings which were recorded by the CEA were in the following terms: “1. 0 Transmission elements which are not N-1 compliant H 646 SUPREME COURT REPORTS [2022] 19 S. C. R. A i) Borivali – Array 220 kV D/c line ( caters to MMR load) ii) Kalwa – Mulund 220 kV S/c line (2 ckts) ( caters to load of Mulund and Bhandup which are outside MMR) 2. 0 High loadings on transmission elements ( 400/220 kV ICTs and 220 kV lines) with N-1 contingency criteria B i) 400/220 kV ICTs at Kalwa S/s ii) 400/220 kV ICTs at boisar (PG) S/s 3. 0 Loading above 300 MW on 220 kV substations i) 220 kV Array S/s C ii) 220 kV Dharavi S/s iii) 220 kV Carnac S/s iv) 220 kV Varsosa S/s (AEML) 4. 0 With provision of 1000 MW feed from Kudus to Array it is D observed that i) All transmission elements are N-I compliant (except for Kalwa- Mulund 220 kV S/C lines – 2nos.

This can be overcome by LILO of either Kalwa-Trombay 220kV S/C line or Kalwa-Borivali 220 kV S/C line at Mulund or by shifting of LILO at Bhandup from E Mulund – Borivali 220 kV line to Kalwa-Borivali 220 kV line ii) The loadings on transmission elements are reduced. ” 24. CEA, in view of above findings found that the Kudus-Aarey 1000MW HVDC link will provide ‘in feed’ to Mumbai and increase F reliability. Moreover, since the link was based on VSC technology it would help in voltage regulation. Keeping the power requirements in consideration, CEA proposed that the possibility for another 1000 MW may be explored along with the Kudus to Aarey HVDC link. Based on the study report of CEA, MSETCL by a letter dated 27 June 2019 confirmed that the Kudus-Aarey 1000MW HVDC link may be required G for pushing additional power into Mumbai as the link creates a separate and additional transmission corridor. 25.

On 28 June 2019, MERC issued a letter to MSETCL directing it to take necessary steps for the expeditious execution of Kudus-Aarey 1000 MW HVDC link by AEML-T according to the five-year H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 647 COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI] transmission plan of the STU dated 28 May 2019. MERC’s letter took A note of the fact that based on the study report of CEA which recommended the Kudus-Aarey 1000MW HVDC based transmission project for increasing reliability and voltage regulation, MSETCL would take necessary steps for expeditious execution of the project in terms of the five-year transmission plan: B “5. Considering the STU Plan of incorporating 2 x 500 MW Kudus- Aarey HVDC link, CEA’s load flow study recommending 1000 MW Kudus-Aarey HVDC link for Mumbai region, and STU’s confirmation vide its letter dated 27. 06.

2019, the Commission directs MSETCL/STU to take all necessary steps for expeditious C execution of Kudus-Aarey 1000 MW HVDC link by AEML-T as per 5 Year Transmission Plan of STU dated 28. 05. 2019 communicated to Commission. The Commission further directs MSETCL/STU to take similar steps for expeditious execution of the other Mumbai Transmission schemes proposed in its STU plan with the likely modifications as referred in the letter of STU D dated 27 June 2019 under reference at sl. no. 7 above. ” 26. On 23 September 2019, TPC-T instituted an appeal before APTEL against MERC’s order dated 12 September 2018 providing for a deemed closure of its Vikhroli scheme. In its order dated 23 September 2019, APTEL noted that there was an inordinate delay of eight years on E the part of TPC-T as a consequence of which the project was directed to be placed under the TBCB route.

APTEL held that TPC-T had not taken adequate steps since 2011 to ensure the completion of the project, which was envisaged in the interest of the consumers of Mumbai: “77. The contention of the Appellant that if the implementation of F scheme under TBCB is allowed, it would further delay the scheme in question is not acceptable to us, since in the TBCB process the scheme has to be executed on timely basis, which also optimises the cost of the project thereby reducing the financial burden on the consumers. The Appellant, right from 2011 till date, has not G taken any active steps to achieve the completion of the project, which helps the consumers of Mumbai. Now, at this stage, the Appellant claims that it has put in lot of efforts and is ready to complete the project. The Appellant was also permitted to participate in the TBCB process. Therefore, the observation of the Commission pertaining to delay in implementing the scheme H 648 SUPREME COURT REPORTS [2022] 19 S. C. R.

A in question by 8 years cannot be found fault with. In the above paragraphs several observations on facts are made how the Appellant moved at snail’s pace to start and implement the project. The TBCB process is in conformity with the tariff policy notified by the Ministry of Power, Government of India. As far as the so called efforts and the expenditure made, if any, by the Appellant, B the Respondent-Commission has made observations that’ the said amount spent/claimed by the Appellant has to be refunded to the Appellant since it is part of conditions of the bid in question. ” 27. On 2 December 2019, AEML-T filed a petition seeking to amend its licence so as to include the HVDC project since the licence C issued to AEML-T was line specific, which means that it authorized AEML-T to create, operate and maintain assets that were specifically identified in the license.

TPC-T filed its objections in response to a public notice issued by AEML-T, on the ground that the HVDC Scheme should be executed under the TBCB route in terms of GoM’s GR dated 4 D January 2019. On 15 January 2020, MERC sought the recommendations of the STU on the amendment application made by AEML-T. On 22 January 2020, the STU indicated that the HVDC project was proposed in the agenda in a forthcoming EC meeting for being considered under the TBCB route. 28. On 30 March 2020, MERC issued its multi-year tariff order in E case No 297 of 2019 filed by AEML-T stating that: (i) The HVDC project was referred to the EC whose decision was awaited; (ii) The decision on implementing the HVDC project was to be F taken in the amendment application or in any other proceedings. The relevant observations are extracted below: “2. 1. 21 Further, AEML-T has already filed its Petition in Case No. 195 of 2019 seeking of its Transmission Licence which also includes the proposed HVDC G scheme.

The Petition for Transmission Licence amendment is under consideration with the Commission. 2. 1. 22 As regards the project to be undertaken under TBCB, the STU vide its letter dated 22 January, 2020 has submitted that the 1000 MW HVDC Kudus-Aarey H schemes has been referred to the Empowered TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 649 COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI] Committee formed by the Govt. of Maharashtra and A the decision of Empowered Committee is awaited. 2. 1. 23 In view of the above, the Commission will decide regarding the HVDC scheme during proposed Transmission Licence Amendment of AEML-T in Case No. 195 of 2019 or any other proceedings as deemed B appropriate. ” 29. In paragraph 5. 3. 12 of its order, MERC noted that the HVDC Scheme was critical for strengthening the Mumbai transmission corridor and observed: C “5. 3. 12 In continuation to the above, the Commission, as discussed in Paras 2. 1. 19 to 2. 1.

23 of this Order considers the timely implementation of the schemes pertaining to the strengthening of the Mumbai transmission corridor viz. Interconnection Point at Vikhroli and HVDC scheme, as very critical. The HVDC scheme is already part of the STU Five Year Plan (FY 2018-19 to FY D 2023-24) and as per the plan, the scheme is envisaged to be executed by AEML-T in the year 2023-24. In this regard, AEML- T has already approached the Commission with a Petition to amend its existing Transmission License in Case No. 195 of 2019 to include the proposed HVDC scheme along with other proposed E amendments which is under consideration with the Commission. Also, in order to assess its reasonability of the cost, AEML-T has recently submitted its DPR for in-principle approval of the Commission.

Considering the critical nature of these schemes and time required for obtaining the necessary regulatory approvals, the Commission directs the STU and AEML-T to initiate all the F necessary steps for implementing the critical schemes within the timeframe envisaged in the STU Five Year Plan. However, the implementation of the scheme would be subject to necessary Regulatory approvals. ” 30. On 30 May 2020, the EC of GoM conducted its fourth meeting G at which it opined that the HVDC Scheme which was a part of the earlier five-year plan for 2018-19 to 2023-24 was not a part of the plan for 2019-20 to 2024-25. The members of the EC opined that the HVDC Scheme, not being a part of the five-year plan, need not be considered for TBCB at that point and deferred the decision. The STU was directed to send its plan for 2019-20 to 2024-25 to MERC. H 650 SUPREME COURT REPORTS [2022] 19 S. C. R. A 31.

On 3 September 2020, MSETCL submitted its five-year plan for financial years 2019-20 to 2024-25 before MERC. The plan included the HVDC project in FY 2024-25, subject to comments from CEA. The plan envisaged 1000 MW HDVC terminal stations at Kudus to Aarey for 2024-25. The note appended to the foot of the tabulated statement is in the following terms: B Note: ** 1000 MW HVDC Terminal Stations at Kudus & Aarey and HVDC Link Two HVDC schemes were part of STU plan 2018-19 to 2023-24 with a note that consolidated detail study will be carried out considering all Mumbai related schemes separately. Subsequent STU study indicated that with inclusion of 400kV Velgaon, 400 kV Kalwa Switching, 400 kV Kalwa-Padghe M/Cline ect. , these C HVDC schemes will not be required. However, in view of earlier CEA study in this regard and as HVAS schemes were not referred to CEA, the STU study including these HVDC schemes has been referred to CEA for their comments.

Hence 1000 MW Kudus-Aarey HVDC link is included in the year 2024-25 of this STU five year plan (2019-20 to 2024-25) is subject to averse comments if any by CEA in the matter may lead to deletion of the scheme from STU five year plan. D 32. On 21 September 2020, AEML-T filed an application in Case 195 of 2019 before MERC proposing to amend its licence and sought permission to delete the HVDC Scheme in its entirety from the scheme proposed in the petition on the ground that the scheme is proposed to be executed by its subsidiary company, AEMIL. On the same day, AEMIL and AEML-T filed a joint petition bearing Case No 190 of 2020 before E MERC for a line specific transmission licence for the proposed HVDC project in the name of AEMIL.

AEMIL and AEML-T stated that in view of the transmission constraints and time period involved in the commissioning of bulk power schemes, the need for an HVDC Scheme was discussed during the first meeting of the Standing Committee chaired F by the Secretary, Energy, GoM on 29 January 2018 for strengthening the electricity supply system to Mumbai city. Moreover, the HVAC scheme which was proposed by MSETCL had not progressed beyond the stage of a route survey despite the passage of three years. The above amendment, this Court is informed, was in order to drop the transmission project which was based on HVDC technology from AEML G -T’s scope of work. Instead, a fresh transmission licence was sought in the name of AEML-T’s subsidiary, AEMIL. It was stated that the amendment was necessitated because: (i) With a four to five year execution period, the scheme was capital intensive, requiring finance from multiple financial H institutions; TATA POWER CO. v.

MAHARASHTRA ELECTRICITY REGULATORY 651 COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI] (ii) In view of the substantial financial investment which was A required, financial institutions required identified target funds which could be strictly monitored and controlled; and (iii) There was a need to ensure timely inclusion and financial closure. B 33. On 12 October 2020, MSETCL filed its reply stating that it does not recommend the grant of a transmission licence for the HVDC project to AEMIL on the grounds that: (a) In the transmission licence granted to AEML-T on 11 August 2011 to R-Infra, there is no mention of transfer of a part of the licence to another company; (b) AEMIL is a separate legal entity and would have to make a fresh application to MERC C for a transmission licence under Sections 14 and 15 of the Act; and (c) If AEMIL satisfies the requirements under Section 14 and 15 of the Act, the licence shall be granted at the discretion of MERC. 34.

On 23 October 2020, a communication was addressed by CEA to MSETCL recording that: D “iii. It may be noted that considering the need for availability of power supply in the Mumbai area and ROW problem in constructing overhead transmission lines to Mumbai, CEA on the request of AEML has already suggested a scheme for bulk power injection to Mumbai i. e. 1000 MW VSC based HVDC from E Kudus to Array along with future for another 1000 MW. This suggestion was made based on the studies carried out for 2024- 25 conditions. Requisite land provision in AEML S/S at Kudus and Array is available for construction of the VSC HVDC S/S. This system would provide the required reliability of additional independent feed to Mumbai area when the generation sources in F TATA system is likely to do down. ” The need for implementing the HVDC Scheme as proposed was highlighted in the following extracts of the letter: “iv. Recent blackout incidence (12. 10.

2020) of Mumbai also the G need for immediate implementation of the 1000 MW VSC based HVDC from Kudus to Aaray system so that the increasing load of MMR can be met reliably. The multiple feeding points i. e. Kudus Aaray VSC link and under implementation Phadge-New Mumbai- Khargar 400 kV link would provide additional feeding point and enhance the reliability of Mumbai system. H 652 SUPREME COURT REPORTS [2022] 19 S. C. R. A v. Considering the fact that the present power demand of Mumbai to be around 3700-3800 MW and the maximum embedded generation available in TATA area is about 1349 MW against generation capacity of 1627 MW. In Adani area generation about 350 MW against 500 MW is available. So presently under best generation availability condition, more than 50% power demand B of MMR is required to be imported from 400 kV Pune, Phadge, Boiser link.

Since the link from Pune and Phadge are old and with moose conductor so in case of outage of any link serious transmission constraint for import of power into Mumbai area is observed. This further get aggravated when the generation in C TATA system is low. It is also a known fact that the machines in TATA and Adani area are going to be phased out gradually. Under that circumstances the whole of power demand of MMR has to be met through import only. ” In this backdrop, the letter stated that an additional infeed to the Mumbai area from sources such as the 1000MV VSC based HVDC D from Kudus to Aarey as suggested by CEA was required to be implemented on a priority basis. 35. On 24 December 2020, the EC conducted its fifth meeting.

In Agenda item 3 pertaining to the threshold limit (according to NTP 2016) for development of intra state transmission projects through the TBCB E route, the EC decided that: (i) All projects in the STU plan costing Rs 500 crore or more would be referred to the EC for execution under the TBCB route; (ii) If the STU proposed a project costing over 500 crore would F not be taken under the TBCB route “for reasons peculiar to the project” and would be executed under any other mechanism, the justification would be placed before the EC for its consideration”; (iii) The threshold limit of Rs 500 crore would be reviewed G annually; and (iv) Once the EC decides to recommend the project under TBCB route or otherwise, the STU is to petition MERC for final approval “of fresh transmission licence or for extending existing transmission licence by following due process of law”. H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 653 COMMISSION [DR.

DHANANJAYA Y CHANDRACHUD, CJI] Apart from the above decisions, the applicability of the limit of Rs A 500 crore to “new / old projects” was discussed and it was decided that: “i. All the projects that are already part of license of a licensee as decided by MERC and MERC has already allotted the work for execution to the licensee, will not be forwarded for further consideration to the committee. B ii. Projects that are under active consideration of MERC where STU has already recommended execution under a particular mechanism and where MERC has initiated substantially the process of inclusion of the project in scope of any existing or new transmission license on the basis of this recommendation, may C not be put to committee for fresh consideration. Any further recommendation, if asked of STU by MERC or any other legal forum, STU may agitate the committee for the same as per the threshold limit decided above. ” 36.

Agenda Item No 4 of the same meeting dealt with the 1000MW D HVDC Kudus- Aarey project. On this aspect, it was decided that STU must place its recommendation on the tariff determination of the 1000MW HVDC Kudus- Aarey project based on the decision in Agenda 3. The relevant extract from the Minutes of the Meeting is extracted below: “Agenda Item 4: Appraisal of inclusion of 1000 MW HVDC E Kudus-Aarey project in the STU five Year plan (2019-20 – 2024-25) referred to Empowered Committee in last meeting. The Agenda “1000 MW HVDC project of Kudus – Aarey to be taken under TBCB” was discussed in 4th Empowered Committee F meeting on 30th May 2020. ” At that time the HVDC project was not part of STU five-year plan. Hence the agenda item was deferred. Now the Empowered G Committee has been apprised about inclusion of 1000 MW HVDC project of Kudus – Aarey in the STU Five-year plan.

Post appraisal of inclusion, the Committee informed STU that they should proceed as per the decision given by the Empowered Committee vide Agenda No. 3. ” H 654 SUPREME COURT REPORTS [2022] 19 S. C. R. A 37. On 29 December 2020, the appellant filed objections before MERC objecting to the transmission application filed by AEMIL and AEML-T. In their response dated 31 December 2020, AEMIL and AEML-T stated that the approval of the DPR was cancelled by MERC only due to the proposal of MSETCL that the technology be altered from HVDC to HVAC. However, the overhead HVAC scheme which B was proposed by MSETCL was not implemented. Hence, the HVDC Scheme as a bulk power injection scheme for Mumbai was deliberated which resulted in reconsideration of the transmission project based on HVDC technology which had already been approved earlier. 38.

In its additional submission dated 20 January 2021 filed before C MERC, MSETCL adverted to the CEA report and stated that it would proceed in accordance with the decision of the EC. On 27 January 2021, MSETCL filed submissions indicating that: (i) A 1000MW HVDC link between Kudus and Aarey for which a licence had been sought was part of the five-year D transmission plan prepared by the STU; (ii) The HVDC Scheme was under consideration for several years and was recommended by several committees; (iii) The bulk power transmission scheme was essential for meeting the requirement of Mumbai’s transmission system; E (iv) While other alternatives had been explored including HVAC technology, the HVDC Scheme was found to be more reliable by the CEA in its letter dated 23 October 2020 which emphasised the need to implement it on a priority basis; F (v) The HVDC project is an old project; and (vi) The threshold limit which was decided by the EC on 24 December 2020 is yet to be approved by MERC.

In this backdrop, MSETCL stated that following the TBCB route would take between one to two years as was the experience in other G MERC projects. However, it was indicated that MERC may suggest a suitable strategy for cost competitiveness which would benefit the consumers in Maharashtra. H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 655 COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI] B. Proceedings before MERC and APTEL A 39. On 21 March 2021, MERC issued an order granting AEMIL the transmission licence to develop the Aarey-Kudus transmission project based on HVDC technology where tariff was to be determined through the RTM approach under Section 62 of the Act. The Commission observed that: B (i) The Kudus-Aarey project is essential for strengthening Mumbai’s transmission system, and should be undertaken for execution on an immediate basis as planned by STU; (ii) The Supreme Court in Energy Watchdog v.

Central 1 C Electricity Regulatory Commission held that NTP 2016 is a ‘statutory policy’ and has the ‘effect of law’. NTP 2016 mandates that the State Commissions’ must notify a threshold limit to determine the projects that will have to be taken through the TBCB route. MERC has not notified the threshold yet; D (iii) GoM’s GR is an executive decision under Section 63 and not subordinate legislation under Section 180 of the Act. The relevant date for determining if a project is a ‘new’ or an ‘existing’ project under the GR is 4 January 2019, that is the date of notification of the GR forming the EC. As on 4 E January 2019, the HVDC project was an ‘existing’ project for the following reasons: (a) The cancellation of the DPR by the Commission in May 2016 was specific to the ‘technology’. The need for the bulk power injection for Mumbai was never F cancelled or withdrawn.

The scope of the old approved HVDC Scheme was changed by STU and not by AEML-T ; and (b) Once the approval of a scheme is cancelled, it ceases to exist for consideration. However, the Kudus- G Aarey HVDC Scheme was proposed in November 2018, before the GoM’s GR was notified. Planning and preparatory work such as technical studies, cost estimation, identification of land, and preparation of DPR had also been initiated. 1 (2017) 14 SCC 80 H 656 SUPREME COURT REPORTS [2022] 19 S. C. R. A (iv) Multiple transmission licenses in the State of Maharashtra have been granted under capital expenditure schemes under Section 62 of the Act after the NTP 2016 was notified. If the argument that projects cannot be undertaken under the Section 62 route after the GR is notified is accepted, it would mean that none of the other projects could have been B notified through the RTM route as well.

(v) Even if the GR is held to be applicable which would give the EC statutory force for identification of projects under the TBCB route, the HVDC Kudus-Aarey project is still not mandated to be allotted through the TBCB route since: C (a) Merely because STU has listed the HVDC Scheme in the agenda for the EC Meeting, it does not mean that the scheme has been chosen for TBCB. STU has only sought the opinion of the EC. Further, the EC has not recommended that the HVDC Scheme D is to be undertaken under the TBCB route; (b) The EC in its meeting held on 24 December 2020 recommended that all the projects in the STU plan that cost more than 500 Crore must be referred to EC for consideration for execution under the TBCB E route. However, it was decided that it would only be applicable to new projects.

It was recommended that projects that are under active consideration of MERC where the STU has already recommended execution under a certain mechanism and where MERC has substantially initiated the process of inclusion of the F project in the scope of any existing or new transmission licensee on the basis of its recommendation shall not be put to the EC for fresh consideration. The HVDC project is under active consideration of MERC as the project has been G included in STU’s five-year plan and the project has been allotted to AEML-T. Since the HVDC project falls under the exception, the EC has not recommended that the HVDC Scheme must be allotted through the TBCB route since it is an existing project and not a ‘new’ project. H TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 657 COMMISSION [DR.

DHANANJAYA Y CHANDRACHUD, CJI] (vi) The GoM’s GR is not applicable to the Aarey-Kudus HVDC A project, and even if applicable, it does not qualify as a ‘new’ project in view of the exceptions laid down by the EC. Thus, MERC has the discretion to choose from either the Section 62 or the Section 63 route. MERC must choose the most appropriate route for undertaking the project, considering B the need for the scheme, the urgency associated with the scheme, the historical background, and the peculiarities of the scheme. The HVDC Scheme according to the STU Plan 2019-20 to 2024-25 should be undertaken under Section 62 because: C (a) The cost- benefits of the project if awarded under the TBCB route cannot be assessed since there is no precedent of a completed HVDC Scheme being awarded through the TBCB route; (b) HVDC Scheme is a high-cost project with high end D technology with limited international suppliers.

It has relatively limited scope for cost reduction when compared to HVAC schemes; (c) AEMIL has already taken steps to procure land at Aarey and Kudus for the HVDC Scheme. It will E facilitate the timely completion of the project; (d) STU has expressed reservations regarding undertaking the HVDC Scheme through the competitive bidding route since the competitive bidding process would take an additional two years for completion. Two transmission projects that were F decided to be undertaken under th

Source: Supreme Court eSCR. Dataset: Dattam Labs, CC BY 4.0. Text extracted automatically; compare with the source PDF for layout and accuracy.