The Karnataka High Court has invalidated the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022, formulated by the Central Government for the generation, purchase, and consumption of renewable energy.

The Court ruled that the Centre lacked the authority under the Electricity Act, 2003, to frame such rules, as the Act specifically grants this power to the Karnataka Electricity Regulatory Commission (KERC).

Justice N S Sanjay Gowda noted that the Act was designed to ensure that regulatory powers, including tariff determination and open access provisions, are handled by independent bodies like the KERC, free from governmental interference.

"The Parliament, through the Electricity Act, entrusted the Regulatory Commissions with the exclusive power to oversee open access. The Central Government cannot bypass this legislative mandate by framing its own rules," the Court stated.

The Court also struck down the Karnataka Regulatory Commission (Terms and Conditions for Green Energy Open Access) Regulations, 2022, which were framed by KERC in compliance with the now-invalidated Central Rules. It directed KERC to draft fresh regulations, if necessary, for granting open access to renewable energy generators and consumers.

The judgment came in response to petitions filed by hydroelectric companies that argued the Central Rules infringed on KERC's exclusive powers under Sections 42(2) and 181 of the Electricity Act. The companies claimed the rules diminished KERC's authority, making it subservient to the Central Government, contrary to the Act's intent of insulating the sector from governmental control.

The Centre defended the rules, citing its powers under Entry 14 of the Union List and Entry 38 of the Concurrent List, and Section 176(1) of the Electricity Act. It argued the rules were necessary to fulfil international treaty obligations.

In its ruling, the Court emphasised that the Central Government's powers under Section 176(2) do not extend to framing rules that conflict with the regulatory framework established by Parliament. It highlighted that the Electricity Policy, 2005, places the responsibility for facilitating open access squarely on State Regulatory Commissions.

The Court further explained that regulatory commissions like KERC were established to function independently and impartially, ensuring fairness in electricity distribution and open access provisions. It stated that neither the Central nor State Governments have the authority to interfere in these regulatory functions.

To prevent disruption, the Court extended its interim order, allowing petitioners to continue accessing wheeling and banking facilities until new regulations are framed.

It also suggested to KERC to consider providing an annual banking facility for green energy generators, with safeguards to prevent profiteering.

Generators would be credited based on the energy charges at the time of injection into the grid, not at withdrawal, to prevent market exploitation, it observed.

The Court clarified that, until further directions, the Karnataka government must continue to collect 50 per cent of the transmission charges as determined by KERC's June 2023 order.

The ruling underscores the importance of maintaining the autonomy of regulatory bodies in the electricity sector, preserving the legislative intent of the Electricity Act, 2003.