Karnataka High Court Stays CERC's New Deviation Penalty Formula For Renewable Energy Generators, 2014 Regime To Continue In Interim

The Karnataka High Court in an interim order on Monday (April 27) stayed the operation of certain provisions of the Central Electricity Regulatory Commission (Deviation Settlement Mechanism and Related Matters) Regulations 2024, concerning electricity grid discipline which came into effect from April 1 in the renewable energy sector.The court passed was the order in a batch of petitions filed by renewable energy entities–National Solar Energy Federation of India and companies such as Renew Wind Energy, Sembcorp Green Infra, JSW Neo Energy, Indigrid, etc.Justice K S Hemalekha in her order, said that provisions enforcing the revised deviation formula and stricter deviation bands with enhanced penalties, laid down in Regulation 6(2)(b) [Revised Mode of calculation of Deviation] and Regulation 8(4) [Charging structure for Deviation] respectively shall not be enforced against the petitioners till the next date of hearing. “Having regard to the submission made and a prima facie case being made out, pending consideration of the writ petition and that the petitioners are willing to continue under the earlier DSM regime[2014] and comply with the existing deviation norms, the operation of Regulations 6(2)(b) and 8(4) of the DSM Regulations, 2024 shall not be enforced against the petitioners to the extent of revised formula and enhanced penalties, till the next date of hearing”, the court noted. The petitions have sought to quashing of the impugned regulations as violative of Articles 14, 19(1)(G), and 300A of the Constitution of India and the Electricity Act, 2003. The companies also requested the court not to apply the CERC (Deviation Settlement Mechanism and Related Matters) Regulations, 2024, in its entirety to projects that have been bid or commissioned before 16.09.2024.By virtue of the interim order, the petitioners would now be governed by the earlier Deviation Settlement Mechanism (DSM) framework in 2014, including the permissible deviation band of up to 15%, and pay deviation charges accordingly till the next date of hearing. The petitioners had submitted that without prejudice to their rights and contentions, they are willing to continue adhering to the earlier DSM framework. For context, every power generator, be it renewable or non-renewable, tells the grid operator beforehand about the electricity that will be injected into the power grid in each 15‑minute block, called a 'Schedule'. When the generator makes discrepancies in the power supply against the schedule, it is termed as 'Deviation', and charges would apply for the said deviation.Under the old 2014 CERC Regulations, renewable energy generators enjoyed a slightly relaxed band wherein deviations up to 15% were subject to a more moderate charge structure, taking into account the unpredictable nature of external factors involved the generation of renewable energy.The court also issued notice to the Union of India, the Ministry of New and Renewable Energy, the CERC, the India Meteorological Department, and the National Centre for Medium Range Weather Forecasting.The case will be heard next on June 10.Regulations issued without prior publication, blind sided partiesDuring the hearing, senior advocate Sajan Poovayya appearing for the petitioners, contended that the CERC Regulations were issued without the mandatory prior publication contemplated under Section 178(3) of the Electricity Act 2003. For context, Section 178(3) states that when CERC frames any regulation that affects the rights of stakeholders, it must first publish a draft, invite objections and suggestions from the public within a reasonable time, and consider those inputs before finalising the regulations.The initial draft notification lacked the 'revised deviation formula' under challenge, which blindsided the parties and deprived the stakeholders in the energy sector of their right to be heard, Poovayya said. Relying on Supreme Court's decision in Ramakrishna Vivekananda Mission v. State of West Bengal and Bombay High Court's decision in Avinash Ramkrishna Kashiwar v. State of Maharashtra, the petitioners submitted that inviting objections against the final draft is not an 'empty formality' and no regulations could have been promulgated that depart substantially from the draft made available to the public. The petitioners contended that such actions have been violative of the principles of natural justice.It was also contended that renewable energy sector cannot be placed in parity with the conventional energy sector due to weather variations and other uncontrollable factors, argued the petitioners. The petitioners also told the court that non-flexible deviation bands and penalties applicable to the conventional sources of energy should not be imposed on the renewable energy sector. Poovayya submitted that there is no rationale behind the change in the deviation% formula (Regulation 6 (2) (b)) and tightening bands and charging structure(Regulation 8 (b)), and it is totally contrary to...

Karnataka High Court Stays CERC's New Deviation Penalty Formula For Renewable Energy Generators, 2014 Regime To Continue In Interim

Sebin James

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