In a significant ruling for the state's power sector, the Karnataka High Court has affirmed the government's authority to mandate embedded electricity generators to supply their output to the state grid in the public interest. The court clarified that these generators do not possess an absolute, unfettered right to sell power freely on the open market.
Court Overturns Single Bench Decision, Reinstates State Order
A division bench comprising Justices Anu Sivaraman and Rajesh Rai K delivered the verdict, allowing appeals filed by the State Load Dispatch Centre (SLDC) and the Karnataka Power Transmission Corporation Limited (KPTCL). The appeals challenged a single bench's decision from March 11, 2024, which had struck down a key government notification.
The contested notification was issued by the state government on October 16, 2023, under Section 11 of the Electricity Act, 2003. This order directed all generators within Karnataka to operate their plants at maximum exportable capacity and to supply all generated electricity to the state grid. The power was to be supplied at a provisional tariff of Rs 4.86 per unit, pending a final determination by the Karnataka Electricity Regulatory Commission (KERC) as per Section 11(2) of the Act.
Legal Challenge by Sugar Companies and Trader
The government's directive was originally challenged by M/s Altilium Energie Private Limited, an electricity trading company, along with two sugar manufacturers—M/s NSL Sugars Limited and M/s Chamundeshwari Sugars Limited. These sugar companies operate embedded cogeneration plants, producing power primarily as a by-product of their core sugar manufacturing process.
However, the division bench, after examining the case materials, noted a crucial point: the state government's directions were not specifically issued to M/s Altilium. Furthermore, the bench clarified that the sugar companies involved do not qualify as interstate generating companies as defined under Section 2(36) of the Electricity Act.
State's Jurisdiction Over Embedded Generators Upheld
The court's reasoning centered on the operational nature of these cogeneration plants. It observed that for such industries, power sales are typically opportunistic and short-term, rather than being based on long-term, pre-existing commitments for multi-state sales.
The bench emphasized that operational control and regulatory oversight of these generating units firmly rest with the state authorities. The SLDC is vested with critical responsibilities including scheduling, dispatch control, metering, energy accounting, and issuing necessary No Objection Certificates (NOCs) for their operations.
While the Regional Load Dispatch Centre (RLDC) and National Load Dispatch Centre (NLDC) facilitate interstate transactions, they do not exercise direct operational control over these state-embedded generators. Matters like schedule deviations, grid management, and grid code compliance are handled by the SLDC in coordination with other entities, but the primary responsibility remains with the state body.
This, the court stated, reflects the embedded nature of these generators within Karnataka's power system. They primarily serve local or captive needs and engage in interstate transactions only marginally. Consequently, the bench concluded that such entities fall squarely within the state government's jurisdiction under Section 11, as their operations are based within the state and rely on its transmission infrastructure.
The court recognized that the state government holds the power to issue such directives under Section 11 in extraordinary circumstances, which may involve state-specific conditions affecting the captive operations of these plants. With this ruling, the division bench has effectively reinstated the October 16, 2023 notification and all related communications addressed to the sugar manufacturing companies.
