New Delhi: In a move that will strengthen the electricity regulator, the Supreme Court on Monday upheld the authority of the Central Electricity Regulatory Commission (CERC) to regulate margins on resale of electricity. It also ruled that these cannot be challenged in a tribunal.

The judgement, delivered by a five-judge Constitution bench headed by Chief Justice K.G. Balakrishnan, has settled the question of law in favour of the regulator. This will reduce litigation before the appellate tribunal for electricity. Mint could not independently ascertain the number of pending cases before the electricity tribunal.

The court clarified that the interpretation was only applicable to CERC and cannot be extended to other regulators.

Pramod Deo, chairman of CERC, said he had not seen the judgement, but added the regulator “had framed regulations on trading margins. That is the issue that has been settled by the Supreme Court in our favour”.

The apex court dismissed petitions of power trading companies such as PTC India Ltd, Tata Power Trading Co. Ltd and Reliance Energy Trading Ltd, which had challenged the regulator’s move to cap trading margin at 4 paise per kWh through a regulation in January 2006. It later increased this to 7 paise on trades done at a rate higher than Rs3 per unit of power.

CERC had imposed the cap to check the prices of short-term power and prevent traders from making supernormal profits. India faces an electricity shortage of 12% during peak demand.

“The Apellate Tribunal for Electricity has no jurisdiction to decide the validity of the regulations framed by the Central Electricity Regulatory Commission,” the judgement stated.

Instead, companies can seek relief by directly approaching the high court.

Any dispute pertaining to the power sector is first raised in the tribunal, similar to civil litigation in the lower courts.

The companies first approached the tribunal which dismissed the petition on the grounds that it has no jurisdiction. Since the matter involved an important question of law, it was sent to a five-judge Constitution bench for settlement.

Vikas Singh, counsel for PTC India, had argued that fixing trading margins was contradictory and harmful to the functioning of the market. Such capping of margins results in relegating electricity traders to mere commission agents, he had said.

Trading has stagnated because of the cap of 4 paise per unit on trading margins stipulated by CERC.

Solicitor general of India Gopal Subramanium, who argued for CERC, said some traders were operating on higher margins; since margins determined the final price for retail consumers, regulation was required to protect them, he said.

Some of the other firms active in the power trading market include NTPC Vidyut Vyapar Nigam Ltd and Adani Enterprise Ltd.

While the Tata Power spokesperson did not respond to Mint’s query till late Monday evening, Tantra Narayan Thakur, chairman and managing director of PTC India, declined comment on the judgement since he was yet to see a copy of the judgement. A spokesperson for Reliance-Anil Dhirubhai Ambani Group declined comment.

manish.r@livemint.com