Karnataka High Court Strikes Down Central Government's GEOA Rules, Upholds State Commission's Authority

The Karnataka High Court has invalidated the Green Energy Open Access (GEOA) Rules, 2022, issued by the Central Government on June 6, 2022, citing the Central Government’s lack of legislative competence.

The ruling reaffirmed that regulating green energy open access falls exclusively under the authority of State Electricity Regulatory Commissions (SERCs), including the Karnataka Electricity Regulatory Commission (KERC).

This ruling came after a batch of petitions were filed by hydropower-generating companies, who argued that the Central Government did not have the authority to frame the GEOA Rules. The petitioners contended that the government had overstepped its statutory functions, which are exclusively assigned to KERC under Sections 42(2) and 181 of the Electricity Act.

Single-judge Justice N. S. Sanjay Gowda, in his December 20, 2024, order, emphasised, “It is therefore clear that it is only the State Commission that has the power to make regulations, and the Central Government lacks the legislative competence to frame rules in this regard.” He further noted that the KERC regulations, which were framed in accordance with the Central Government’s GEOA Rules, must also be struck down, as the Court said, "The impugned Regulations framed by KERC pursuant to the impugned Rules of the Central Government are also liable to be struck down since they were framed only because the Rules mandated them to frame the Regulations in accordance with the Rules. The KERC Regulations were framed to be in conformity with the Central Government Rules and were not framed in exercise of the powers conferred to the Commission independently and cannot thus survive by themselves."

The Court directed KERC to independently frame new regulations for granting open access to green energy generators and consumers, guided by  National Electricity Policy and the Tariff Policy. The court stated, “The KERC shall independently consider the interests of all the stakeholders before framing the Regulations.” However, KERC may continue with the existing 2004 Regulations if it chooses to do so, as per Justice Gowda’s statement, “This direction will, however, not mean that the KERC will have to necessarily frame fresh Regulations and if it so desires, it can continue with the 2004 Regulations.”

The Court also addressed the interim situation created by the ruling, ordering that petitioners continue paying 50 percent of transmission charges as per an interim order and continue availing themselves of wheeling and banking facilities at adjusted rates until new regulations are framed. Furthermore, the Court ruled that energy injected into the grid after the expiry of contracts must be compensated based on the prevailing tariff at the time of injection. KERC was also encouraged to explore offering annual banking facilities to generators with safeguards to prevent profiteering from energy price fluctuations.

This judgement underscores the constitutional framework and division of powers between the Central and State governments, particularly in energy sector reforms, while emphasising the need for proper legislative procedures in regulating green energy open access.