Embedded power firms must comply with state directives in crises: Karnataka High Court

Bengaluru: The High Court has ruled that state-embedded generators cannot claim an absolute right of transmission/supply of electricity to any licensee and the same is subject to directions of the government in an extraordinary circumstance, arising in public interest. 

The court said under extraordinary circumstances, the government can issue directions under Sec 11 of Electricity Act to embedded generating companies, since they do not qualify as interstate generating firms within the meaning of Sec 2(36) of the Electricity Act. 

A division bench of Justices Anu Sivaraman and Rajesh Rai K observed this while allowing a batch of writ appeals filed by State Load Despatch Centre (SLDC) and Karnataka Power Transmission Corporation Limited (KPTCL). 

The appellants had challenged the Mar 11, 2024, order of the single bench quashing the Oct 16, 2023, order by the government under Sec 11.  

The order was challenged before the single bench by Altilium Energie Private Limited, a company into electricity trading, NSL Sugars Limited and Chamundeshwari Sugars Limited, both sugar factories having embedded cogeneration plants. 

In appeal proceedings, the state submitted that Sec 11 is an exclusive emergency power designed to address extraordinary circumstances threatening state’s security and public order arising from natural calamities or other public interest considerations. 

The bench said electricity crises are the archetypical regional or state-specific phenomenon. During drought-induced power crisis, government is compelled to handle the situation by exercising emergency power stipulated under Sec 11 over generators embedded in state when those generators occasionally sell surplus power to other states. 

The bench said the state issued the notification in an extraordinary circumstance, the public order arising from natural calamities, such as failed monsoon, reservoir depilation, recorded peak demand 16,950 MW and energy consumption of 294 MU in Aug 2023 due to a monsoon deficit. It is pivotal to note that the government took the decision as a remedial and protective one in state’s interest, the bench said. 

"We are of the view that, "appropriate government" as defined in Sec 11 of the Act must be interpreted contextually to mean state government for embedded generators facing state-specific extraordinary circumstances, rather than rigidly applying the definition stipulated under Sec 2(5)(a)(ii) of the Act, which defines “appropriate government” for purpose of legislation,” it said. 

On Altilium, the bench said the state’s notification imposed no obligation on it, conferred no right on it, but was only commercially affected. Hence, Altilium cannot maintain a writ petition to challenge the order, it said. Insofar as sugar manufacturing firms are concerned, the bench said they were primarily established to meet individual power requirements for sugar production and surplus power alone was sold externally.