APTEL Quashes RERC’s Order Allowing INR 0.80/kWh Additional Surcharge on Open Access Consumers

The Appellate Tribunal for Electricity (APTEL) has quashed an order of the Rajasthan Electricity Regulatory Commission (RERC) that permitted state distribution companies to levy an additional surcharge of INR 0.80 per unit on open access consumers.

The tribunal’s ruling came in response to a batch of five appeals filed by industrial consumers and associations in Rajasthan, challenging the legality of RERC’s directive dated 24 August 2016. That order had allowed three discoms, viz. Jaipur Vidyut Vitran Nigam Ltd. (JVVNL), Ajmer Vidyut Vitran Nigam Ltd. (AVVNL) and Jodhpur Vidyut Vitran Nigam Ltd. (JoVVNL) to impose the surcharge on electricity procured through open access from 1 May 2016. 

The dispute centered on whether RERC had properly applied Section 42(4) of the Electricity Act, 2003, about charging an additional surcharge.. The appellants argued that the commission had failed to require the discoms to prove that their stranded capacity and the associated fixed costs were solely due to consumers exercising their right to procure power from outside sources. They pointed out that Rajasthan remained a power-deficit state and that discoms were simultaneously procuring short-term power even as they backed down long-term contracts, often for cost-saving reasons.

In its analysis, APTEL underscored that an additional surcharge cannot be imposed automatically but serves as a compensatory mechanism for distribution licensees when long-term power purchase agreements are stranded by the migration of consumers to open access. The tribunal made it clear that the burden of proof lies squarely with the discoms, who must conclusively demonstrate that any stranded capacity is directly and exclusively caused by open access consumers. Stranded capacity resulting from discoms’ own operational decisions, inefficiencies, or procurement strategies cannot justify such a levy.

The tribunal was sharply critical of the RERC’s approach, describing it as a 'grave error.' It noted that the regulator had assumed the existence of stranded capacity and treated it as sufficient grounds for imposing the surcharge without investigating its root cause. This, APTEL said, was a failure to address the central question raised by the appellants and left consumers vulnerable to charges that were not legally substantiated.

APTEL’s decision drew support from multiple precedents and policies. It cited the Supreme Court’s judgment in Sesa Sterlite Ltd. v. OERC, which clarified that the surcharge exists both to protect cross-subsidies and to cover stranded fixed costs. It also referenced the National Tariff Policy of 2006 and 2016, which explicitly state that the surcharge should apply only when stranded power purchase commitments are conclusively demonstrated to result from open access. Additionally, the tribunal reaffirmed its own earlier ruling in Renew Power v. BESCOM, which required distribution companies to prove their inability to schedule contracted power specifically because consumers had switched to open access.

In its final order, APTEL set aside the impugned decision of the RERC and remanded the case for fresh consideration. The regulator was directed to re-examine the matter and specifically determine whether any stranded capacity of the discoms arose solely due to consumers opting for open access. Only such evidence, the tribunal held, could justify the imposition of an additional surcharge.

The judgment is being treated as a key precedent for consumer rights, and in the outcome, the appeals were allowed and RERC’s order was struck down.