CERC Exercises Regulatory Power Under Section 79(1) Which Are of Ad‑Hoc Nature

The Central Electricity Regulatory Commission (“CERC”) derives its authority under Section 79(1) of the Electricity Act, 2003, empowering it to “regulate” matters relating to the inter-state transmission of electricity, tariff determination, and ancillary activities.Importantly, under Section 178, CERC is mandated to frame regulations through a formal, consultative process—these bear a general, binding effect. In contrast, Section 79(1) vests CERC with ad‑hoc regulatory powers, exercised via orders tailored to specific disputes between identified parties.

Judicial Clarification: Scope of Section 79(1)

In Power Grid Corporation of India Ltd. v. MPPTCL, the Supreme Court reaffirmed that Section 79(1) empowers CERC not only to adjudicate on tariff matters but also to intervene administratively to address regulatory deficiencies on a case-by-case basis. The Court held:

“The regulatory powers provided to the CERC under Section 79 are of ad hoc nature and are required to be exercised … to ensure that regulatory gaps … are filled or removed.” 

It further noted that orders under Section 79 are appealable to the Appellate Tribunal for Electricity (“APTEL”) under Section 111, distinguishing them from general regulations under Section 178. 

Case Facts: MPPTCL–PGCIL Dispute

• Parties: Power Grid Corporation of India Ltd. (PGCIL) – Central Transmission Utility; MP Power Transmission Co. Ltd. (MPPTCL) – State Transmission Utility.
• Issue: Delayed commissioning of MPPTCL’s intra-state transmission assets hampered PGCIL’s inter-state lines under WRSS‑XIV/XVI schemes. PGCIL petitioned CERC seeking compensation for the consequent revenue loss.
• CERC Order: Imposed liability on MPPTCL to compensate PGCIL for delay-period transmission charges—characterised as regulatory fill-in for an unaddressed gap in the 2014 Tariff Regulations.
• Challenge: MPPTCL filed writ petitions before the Madhya Pradesh High Court questioning CERC’s jurisdiction absent a Section 178 regulation on the issue. The High Court admitted those petitions.
• Appeal: The Supreme Court set aside the High Court, affirming that CERC’s action was lawful under Section 79(1), and the Plaintiffs were obliged to pursue appeals under Section 111.

Legal Interpretation: Section 79(1) vs. Section 178

A key doctrinal distinction reinforced by the Supreme Court is between statutory rule-making powers under Section 178 and regulatory powers under Section 79(1). While Section 178 authorises the CERC to make subordinate legislation (rules of general application), Section 79(1) grants quasi-judicial and administrative authority to regulate inter-state transmission matters through individualised orders.

This difference was earlier articulated in PTC India Ltd. v. CERC, (2010) 4 SCC 603, where the Constitution Bench held:

“Section 178 confers regulation-making power, whereas Section 79 deals with execution and implementation of such regulations along with adjudication and administrative functions.”

Thus, the exercise of powers under Section 79(1) may fill legislative gaps where regulations under Section 178 are silent, provided such orders are reasoned, non-arbitrary, and subject to appellate scrutiny under Section 111.

Regulatory Context and Necessity of Ad-Hoc Powers

In complex infrastructure sectors such as electricity, statutory gaps often arise due to evolving technical standards, unforeseen delays, or novel project configurations. The CERC’s capacity to respond in real-time with specific orders under Section 79(1) is critical to maintain regulatory continuity and fairness.

Such powers are routinely exercised by CERC to:

• Grant compensation for delay in commissioning by third parties;
• Approve deviations from bidding guidelines or technical norms;
• Set up dispute-resolution mechanisms in absence of contractual clarity;
• Address force majeure events affecting tariff computation.

By enabling responsive and fact-specific interventions, Section 79(1) acts as a constitutional safeguard against regulatory paralysis.

Appellate Scrutiny and Locus of Challenge

The Court reiterated that High Courts ought not to entertain writ petitions under Article 226 when there exists a statutory appeal under Section 111 of the Electricity Act. In this case, since the CERC’s impugned order was appealable, MPPTCL’s recourse to the High Court was premature and impermissible.

Citing Union of India v. T.R. Varma, AIR 1957 SC 882, the Court noted that:

“Writ jurisdiction should not be invoked merely to bypass an efficacious statutory remedy.”

This judicial stance also upholds the legislative architecture envisioned by the Electricity Act, ensuring domain expertise and appellate consistency through specialised tribunals.

Practical Implications and Future Outlook

The reaffirmation of CERC’s ad-hoc regulatory powers under Section 79(1) holds significant consequences for various stakeholders:

a) For Generating and Transmission Companies

Entities such as PGCIL, NTPC, and inter-state developers can now rely on the CERC’s authority to grant case-specific reliefs, especially when regulatory instruments are silent. This recognition allows flexibility in project implementation and provides a mechanism for compensatory mechanisms without necessitating new regulations each time.

b) For State Utilities and Discoms

State Transmission Utilities (STUs) and Distribution Licensees must account for the regulatory scrutiny of their performance—especially in cases of delay or non-compliance—even in the absence of explicit regulations. This judgment acts as a deterrent against administrative inertia, holding parties accountable under broader regulatory objectives.

c) For Policy Makers

The decision also sends a clear message that administrative and adjudicatory interventions by sectoral regulators must be respected within their statutory frameworks. The doctrine of specialised jurisdiction is thus reaffirmed, enabling dynamic governance in technically intensive domains like electricity transmission.

Doctrinal Significance

This ruling aligns with the jurisprudence that regulatory commissions are not merely adjudicatory forums but also active regulators mandated to intervene where markets, policies, or contracts fall short. This distinction between rule-making (Section 178) and regulatory execution (Section 79(1)) is crucial to sustaining flexibility, innovation, and efficiency in the electricity sector.

Moreover, the ruling also strengthens the hierarchical coherence of the Electricity Act, ensuring that challenges to quasi-judicial orders follow the correct appellate trajectory instead of circumventing it through writ jurisdiction.

Conclusion

The Supreme Court’s judgment in PGCIL v. MPPTCL is a timely clarification of the scope and strength of Section 79(1) powers. By establishing that such powers can be exercised independently of general regulations, and that such orders are amenable to appeal under Section 111—not writ—jurisdiction, the decision enhances regulatory certainty and jurisprudential clarity.

In the dynamic, project-driven environment of India’s power sector, such ad-hoc regulatory powers play a critical role in sustaining operational integrity, investor confidence, and judicial consistency. Going forward, electricity stakeholders—both public and private—must treat Section 79(1) not as a residual provision but as a central pillar of India’s regulatory infrastructure.

 

Power Grid Corporation Of India Limited vs Madhya Pradesh Power Transmission Company Limited