Karnataka High Court Strikes Down Centre’s Green Energy Open Access Rules, Reinforces State Commission Authority

The Karnataka High Court has recently struck down the Centre’s Green Energy Open Access (GEOA) Rules, which were introduced by the Central Government in 2022 to regulate the generation, purchase, and consumption of green energy, or electrical energy derived from renewable sources. The ruling came after a batch of petitions filed by companies engaged in hydropower generation, who argued that the Centre lacked the authority to frame such rules.

The petitioners contended that the Electricity Act, 2003, only grants the power to create open access rules to state regulatory commissions like the Karnataka Electricity Regulatory Commission (KERC), and not to the central government. They argued that by introducing the GEOA Rules, the Centre had essentially overstepped its boundaries and usurped powers that were meant to be under the control of state bodies. This, they claimed, violated the fundamental framework of the Electricity Act, which is intended to keep the government at arm’s length from the day-to-day functioning of the electricity sector.

In its judgment, the single judge, Justice N.S. Sanjay Gowda agreed with the petitioners. He observed that the Centre does not have the authority to frame the GEOA Rules under the Electricity Act. The court pointed out that Section 42(2) and Section 181 of the Electricity Act grant such powers exclusively to state regulatory commissions like KERC. The court also found that the central government’s role in the electricity sector is more limited and that it could not exercise residual powers under Section 176(2) of the Act to bypass the state commissions.

The Court’s ruling also addressed the KERC regulations, which were framed under the now-invalidated GEOA Rules. These KERC regulations were also struck down, and the court directed KERC to reframe appropriate regulations if it wished to continue granting open access to green energy generators and consumers. In addition, the court highlighted that the state regulatory commissions are primarily responsible for ensuring non-discriminatory open access and determining the related charges. Therefore, no other entity, including the Centre, should interfere in this process.

The court clarified that the purpose of regulatory commissions like KERC is to remain independent and impartial in handling open access matters. By allowing the government too much influence, the basic objective of the Electricity Act would be undermined. The court’s decision pointed to the Electricity Policy of 2005, which specifically assigns the responsibility of open access facilitation to state commissions.

Furthermore, the court referred to the Karnataka Electricity Reforms Act, 1999, which grants the state government limited power to issue directives to KERC. However, the court emphasized that these directives must align with the objectives of the KER Act and not interfere with KERC’s powers.

Until fresh regulations are framed by KERC, the court has ordered that the existing wheeling and banking arrangements enjoyed by the petitioners continue. The court also suggested that KERC explore the option of offering annual banking facilities to green energy generators but with conditions to prevent misuse of these facilities.

The court’s verdict not only invalidated the GEOA Rules but also reinforced the importance of state regulatory commissions in overseeing the green energy open access framework. This ruling marks a significant step in clarifying the balance of powers between the Centre and the state commissions in the energy sector.