Court Rules Regulation 12(c) as Intra Vires, Aligns with National Tariff Policy and Electricity Act, 2003
The Karnataka High Court has upheld the validity of Regulation 12(c) of the Karnataka Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2025, which prescribes the Cross-Subsidy Surcharge (CSS) for Open Access consumers. The decision was delivered by Justice Sachin Shankar Magadum on June 18, 2026, in the case of Soham Infrastructure Private Limited v. Karnataka Electricity Regulatory Commission.
The petitioners, led by Soham Infrastructure Private Limited, challenged the regulation on the grounds that it imposed an arbitrary surcharge burden on Open Access consumers and was contrary to the Electricity Act, 2003, the Electricity Rules, 2005, and the National Tariff Policy. They argued that the surcharge was excessively high, rendering renewable energy procurement commercially unviable, and violated Article 14 of the Constitution by discriminating against Open Access consumers.
However, the court found that the Cross-Subsidy Surcharge is compensatory in nature, designed to offset the financial implications for distribution licensees due to the migration of high-paying consumers to Open Access. The court emphasized that the surcharge does not need to mirror the exact cross-subsidy component in tariffs but should account for broader economic consequences.
The court also noted that the methodology under Regulation 12(c) aligns with the National Tariff Policy, which considers factors such as tariff differential, weighted average cost of marginal power procurement, and system losses. It ruled that Open Access consumers and ESCOM consumers do not form a homogeneous class, thus no violation of Article 14 occurred.
The decision reinforces the statutory legitimacy of Cross-Subsidy Surcharge under Section 42(2) of the Electricity Act, 2003, and supports the regulatory framework's objective of balancing market liberalization with the financial viability of distribution utilities.
Bottom line:-
Regulation 12(c) of the Karnataka Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2025 prescribing Cross-Subsidy Surcharge (CSS) upheld as intra vires the Electricity Act, 2003, the Electricity Rules, 2005, and the National Tariff Policy. Open Access consumers and ESCOM consumers do not constitute a homogeneous class, and surcharge determination is compensatory, not confined to the exact cross-subsidy component.
Statutory provision(s): Electricity Act, 2003 Sections 42(2), 61(c), 61(h), 86(1)(e), Constitution of India, 1950 Article 14
