Holding

The CSS may be determined separately from the tariff, provided it is based on the prevailing tariff rates as prescribed by Regulation 90, and therefore the APTEL’s requirement of simultaneous determination is erroneous.

Summary

The Supreme Court considered appeals by Jaipur Vidyut Vitaran Nigam Ltd. and other distribution licensees challenging an Appellate Tribunal for Electricity (APTEL) order that set aside the Rajasthan Electricity Regulatory Commission's (State Commission) determination of Cross‑Subsidy Surcharges (CSS) effective 1 December 2016. The dispute centered on whether the CSS must be fixed simultaneously with the tariff or may be determined separately based on the prevailing tariff rates. The Court examined the statutory framework under Section 42(2) of the Electricity Act, 2003 and Regulation 90 of the Rajasthan Tariff Regulations, 2014, which ties the CSS to the tariff payable by the relevant consumer category. It held that the regulations do not mandate concurrent determination of tariff and CSS; the CSS can be fixed separately using the prevailing tariff as a basis. Consequently, the Court found the APTEL’s view erroneous, set aside its judgment, and restored the State Commission’s order dated 1 December 2016, which remained effective until 2 November 2017. The appeals were allowed.

Issues considered

The CSS must be determined simultaneously with the tariff determination under the Electricity Act, 2003 and Rajasthan Tariff Regulations, 2014.
Whether the CSS can be fixed separately based on the prevailing tariff rates.
The applicability of Regulation 90 in computing the CSS and its dependence on the tariff order of 22 September 2016.

Legislation cited

Electricity Act, 2003s. 181, s. 42(2), s. 61
National Tariff Policy 2016
Rajasthan Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff) Regulations, 2014s. Regulation 2(a)(60), s. Regulation 89, s. Regulation 90

Headnote

Issue for Consideration Issue relates to the determination of the Cross-Subsidy Surcharges by the Rajasthan Electricity Regulatory Commission (State Commission). Headnotes† Electricity Act, 2003 – s.42(2) – Rajasthan Electricity and Conditions for Determination of Tariff) Regulations, 2014 – Regulations 90, 2(a)(60) – Cross-Subsidy Surcharge (CSS) – Determination of: Held: The CSS has to be determined based on the prevailing tariff rates – Neither the 2003 Act nor the 2014 Regulations makes the

Subjects

Cross-subsidy Surcharges (CSS)Determination of the CSSPrevailing rates of tariffDistribution licenseesOpen access customersRajasthan Electricity Regulatory CommissionSubsidised consumersSubsidising consumersStatutory chargeCross-subsidisationRetail tariffTariff determination processApplicable retail tariff

Judgment

[2025] 4 S.C.R. 2028 : 2025 INSC 592

Jaipur Vidyut Vitaran Nigam Limited and Ors.
v.
Rajasthan Textile Mills Association & Anr. Etc.
(Civil Appeal No(s). 8862-8868 of 2022)
29 April 2025
[Abhay S. Oka* and Augustine George Masih, JJ.]

Issue for Consideration
Issue relates to the determination of the Cross-Subsidy Surcharges
by the Rajasthan Electricity Regulatory Commission (State
Commission).

Headnotes†
Electricity Act, 2003 – s.42(2) – Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Determination of Tariff)
Regulations, 2014 – Regulations 90, 2(a)(60) – Cross-Subsidy
Surcharge (CSS) – Determination of:
Held: The CSS has to be determined based on the prevailing tariff
rates – Neither the 2003 Act nor the 2014 Regulations makes the
determination of the CSS simultaneously with the determination of
the tariff mandatory – The determination of CSS is not necessarily a
part of the tariff determination process – The CSS can be determined
along with the tariff – But, it can be determined separately in
accordance with Regulation 90 based on the prevailing rate of
tariff – In fact, as per Regulation 90, the tariff payable by the relevant
category of consumers is the basis for the CSS – Thus, APTEL erred
in holding that the determination of the tariff and the determination
of the CSS should always coincide – While determining rates of the
CSS w.e.f 01.12.2016, the commission relied upon the tariff fixed in
terms of the order dated 22.09.2016, which was the prevailing tariff
as of 01.12.2016 – The CSS is in the nature of compensation qua
the tariff which the distribution licensees would have received from
the open access consumers but for their availing power from other
sources – Hence, the CSS must be based on the applicable retail
tariff recoverable during the relevant period – When the CSS was
determined based on the prevailing rates of tariff, APTEL ought not
to have found fault with the State Commission’s determination of
rates of the CSS – Impugned judgment of the APTEL set aside –
Order of the State Commission restored. [Paras 15, 19-21]
* Author
[2025] 4 S.C.R. 2029

Jaipur Vidyut Vitaran Nigam Limited and Ors. v.
Rajasthan Textile Mills Association & Anr. Etc..

Case Law Cited
Sesa Sterlite Ltd. v. Orissa Electricity Regulatory Commission &
Ors. [2014] 13 SCR 426 : (2014) 8 SCC 444 – referred to.
Tata Power Company Limited v. Maharashtra Electricity Regulatory
Commission & Ors., Appeal No. 107 of 2013 (before the Appellate
Tribunal for Electricity); Reliance Infrastructure Limited (R-infra) v.
Maharashtra Electricity Regulatory Commission & Ors., Appeal No.
178 of 2011 (before the Appellate Tribunal for Electricity) : 2013
SCC OnLine APTEL 150; D.P. Chirania v. Rajasthan Electricity
Regulatory Commission & Ors., Appeal No. 16 of 2014 (before
the Appellate Tribunal for Electricity) : 2015 SCC OnLine
APTEL 75 – referred to.

List of Acts
Electricity Act, 2003; Rajasthan Electricity Regulatory Commission
(Terms and Conditions for Determination of Tariff) Regulations,
2014; National Tariff Policy, 2016.

List of Keywords
Cross-subsidy Surcharges (CSS); Determination of the CSS;
Prevailing rates of tariff; Distribution licensees; Open access
customers; Rajasthan Electricity Regulatory Commission;
Subsidised consumers; Subsidising consumers; Statutory charge;
Cross-subsidisation; Retail tariff; Tariff determination process;
Applicable retail tariff.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s). 8862-8868
of 2022
From the Judgment and Order dated 15.09.2022 of the Appellate
Tribunal for Electricity at New Delhi in AN Nos. 14, 49, 54, 167,
168, 169 and 170 of 2017

Appearances for Parties
Advs. for the Appellants:
M.G. Ramachandran, Sr. Adv., Ms. Poorva Saigal, Shubham Arya,
Nikunj Dayal, Ms. Pallavi Saigal, Ms. Reeha Singh, Aneesh Bajaj.
2030 [2025] 4 S.C.R.

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Advs. for the Respondents:
Anand Ganesan, Ms. Swapna Seshadri, Ms. Jesal Wahi, Amal
Nair, Ishaan George, Amit Verma, Mrs. Vanita Bhargava, Ajay
Bhargava, Ms. Nanadita Chauhan, Ms. Tijal Thakur, M/S. Khaitan
& Co., P.N Bhandari, Prabhat Ranjan Raj, Anil Kumar, Gunjesh
Ranjan, Vaibhav Jain, Keshav Khandelwal, Shantanu Sagar.

Judgment / Order of the Supreme Court

Judgment

Abhay S. Oka, J.

FACTUAL ASPECT
1. These are the statutory appeals under Section 125 of the Electricity
Act, 2003 (for short, ‘the 2003 Act’) against a common judgment
delivered by the Appellate Tribunal for Electricity (for short, ‘the
APTEL’) in a group of appeals. The issue involved in these appeals
relates to the determination of the Cross-Subsidy Surcharges (for
short, ‘the CSS’) by the Rajasthan Electricity Regulatory Commission
(for short, ‘the State Commission’). The determination was made
under Section 42 (2) of the 2003 Act. The present appellants were the
respondents before the APTEL. The respondents (appellants before
the APTEL) are the industries/industrial units located in various parts
of the State of Rajasthan, running their operations by availing their
supply of electricity from connectivity through the State grid at EHT
levels of 132/33/11 KV voltage. These industrial units were granted
open access within the contract demand for drawing electricity
through such open access, including from power exchanges. These
industrial units (appellants before the APTEL) were aggrieved by the
determination of the CSS made applicable from 1st December 2016
by the order passed on 1st December 2016 by the State Commission.
Being aggrieved by the said order of the State Commission, the
industrial units preferred statutory appeals before the APTEL. By
the impugned judgment, the order of the State Commission was
set aside. However, the APTEL clarified that the State Commission
will be within its jurisdiction to undertake the process of revisiting
the subject of the CSS vis-à-vis distribution licensees operating in
the State of Rajasthan as and when it takes up the exercise of tariff
determination in future in accordance with law.
[2025] 4 S.C.R. 2031

Jaipur Vidyut Vitaran Nigam Limited and Ors. v.
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2. The 2003 Act introduced the concept of open access, enabling the
consumers/end users to procure electricity from sources other than
the distribution licensees of the area where the premises of such
end use are situated. Earlier, electricity was generally procured only
from distribution licensees.
3. There was a significant amount of cross-subsidisation of certain
categories of consumers by other categories of consumers. The
consumers benefitting from the subsidy include agricultural consumers,
low-end domestic consumers and public works. They are known as
subsidised consumers. The consumers paying for the subsidy include
industrial consumers, commercial consumers, and high-end domestic
consumers, and they are known as subsidising consumers. Allowing
open access users to source electricity from sources other than
distribution licensees benefited such subsidising consumers and would
become a burden on the distribution licensee. The reason is that such
customers stopped taking electricity from the distribution licensees,
thereby reducing the distribution licensees’ funds to subsidise the
subsidised consumers. The CSS is, in a sense, compensation to the
distribution licensees for being deprived of the subsidisation prevalent
in the retail supply tariff. The CSS is a statutory charge payable by
the consumers who decide to source electricity through open access
from sources other than the distribution licensee of the area.
4. In exercise of the powers under Section 61 read with Section 181 of
the 2003 Act, the State Commission notified the Rajasthan Electricity
Regulatory Commission (Terms and Conditions for Determination of
Tariff) Regulations, 2014 (for short, ‘the Rajasthan Tariff Regulations,
2014’). Regulation 89 thereof deals with the cross-subsidy. Regulation
90 provides a formula for determining the CSS payable by the
consumer opting for open access.
5. The State Commission determined the tariff for the Financial Year (FY)
2015-2016 by the tariff order dated 22nd September 2016. On 20th July
2016, the distribution licensees approached the State Commission
by a petition praying for determination of the CSS under Section
42 (2) read with Sections 39 and 40 of the 2003 Act. While dealing
with the said petition, the State Commission identified the issues
for its consideration, including the issue as to whether distribution
licensees were entitled to claim the CSS, and if so entitled to, what
the appropriate formula for its determination is. The State Commission
noted that the distribution licensees had not applied for fixation of
2032 [2025] 4 S.C.R.

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tariff for the F.Y. 2016-2017, and the tariff petition for F.Y. 2015-2016
had been decided by the commission in September 2016 by holding
that the tariff will be in force till the next tariff order. The commission
observed that mere absence of tariff petition for F.Y. 2016-2017 will
not restrict or prevent the State Commission from determining the
CSS for F.Y. 2015-2016 and apply the same for F.Y. 2016-2017 till
new tariff petition for F.Y. 2016-2017 is filed and the CSS is revised
based on the same. After hearing the respondents-consumers, the
State Commission, by order dated 1st December 2016, determined
the CSS payable entirely based on the tariff determined for F.Y. 2015-
2016 by order dated 22nd September 2016. The State Commission
proceeded to compute the rate of the CSS, taking note of the formula
prescribed by Regulation 90 of the Rajasthan Tariff Regulations,
2014, fixing the CSS rate to Rs.1.63 per unit for 132 KV and above
consumers, Rs.1.39 per unit for 33 KV consumers and Rs.0.83 per
unit for 11 KV consumers of the large industrial service open access
consumers category.
6. This order dated 1 st December 2016, passed by the State
Commission, was challenged by the respondents herein by preferring
an appeal before the APTEL, which was allowed by the impugned
judgment. In appeal, the APTEL relied upon its own decision
dated 28th November 2014 in the case of Tata Power Company
Limited v Maharashtra Electricity Regulatory Commission &
Ors.1 as well as judgment dated 2nd December 2013 in the case
of Reliance Infrastructure Limited (R-infra) v Maharashtra
Electricity Regulatory Commission & Ors.2 The APTEL held
that the State Commission completely brushed aside its decision
in the case of Tata Power Company Limited1. The absence of a
tariff petition for F.Y. 2016-2017 could not have been ignored. The
APTEL relied upon its decision dated 18th May 2015 in the case of
D.P. Chirania v Rajasthan Electricity Regulatory Commission
& Ors.3 It was held that the State Commission should not have
entertained the CSS petition until the distribution licensees provided
authenticated and audited data, which was necessary not only for
tariff fixation but also for determining the CSS. The APTEL further

1 Appeal No. 107 of 2013 (before the Appellate Tribunal for Electricity)
2 Appeal No. 178 of 2011 (before the Appellate Tribunal for Electricity); 2013 SCC OnLine APTEL 150
3 Appeal No. 16 of 2014 (before the Appellate Tribunal for Electricity); 2015 SCC OnLine APTEL 75
[2025] 4 S.C.R. 2033

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observed that the tariff petition for the control period of 2016-2017
was filed along with a petition for the subsequent control period of
2017-2018. Ultimately, the APTEL held that the impugned order of
the State Commission resulted in a quantum jump in the rate of
the CSS, which was against the policy enumerated in the 2003 Act,
which requires the CSS rates to be progressively reduced. It was
held that, as the distribution licensees have failed to explain the
default in the timely filing of the tariff petitions, it would be unfair to
give them the advantage of such a substantial increase in the CSS.
The APTEL also observed that the tariff order dated 22nd September
2016 for F.Y. 2015-2016 had directed that it shall continue to be in
force till the next tariff order, which was passed on 2nd November
2017. The CSS rates were part of the tariff regime put in place by
the order dated 22nd September 2016. Therefore, the rates of the
CSS should not have been altered till 2nd November 2017, when
the new tariff order was passed.

SUBMISSIONS
7. The learned senior counsel appearing for the appellants did not
dispute the proposition that the tariff determined for the earlier period
would continue till the new tariff is determined. He pointed out that by
the order dated 1st December 2016, the State Commission determined
the CSS payable entirely based on the tariff determined for F.Y. 2015-
2016 under the order dated 22nd September 2016 by computing the
same as provided in the formula incorporated in Regulation 90. The
learned senior counsel submitted that the CSS is relevant when the
consumer of electricity in the area of the distribution licensee decides
to source a part or whole of his electricity requirements from sources
other than the distribution licensee. But for such power sourcing
from outside sources, the said consumer would have contributed to
the cross-subsidisation prevalent in the retail tariff. Therefore, the
CSS is the overriding consequential statutory obligation on such
consumers to pay to the distribution licensee, which the 2003 Act
considers necessary to compensate the distribution licensee. He
pointed out that the CSS for the period from 1st December 2016
was based on the current tariff being charged during the period. This
tariff was fixed by the State Commission by the tariff order dated
22nd September 2016. Learned senior counsel pointed out that the
State Commission passed the next tariff order, including an order of
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the CSS applicable with effect from 1st November 2017, effectively
maintaining both at the same level as before.
8. If there is a delay in determination of the revenue requirements of
the distribution licensee concerning a particular financial year for
any reason, the tariff prevalent as per the earlier tariff order will
be the applicable tariff to the consumers and consequentially the
CSS payable by the open access consumers will also be computed
with reference to such prevalent tariff. As and when a new tariff is
determined, the same applies prospectively, and the CSS applicable
will also consequently get revised. He submitted that the respondents-
consumers have not challenged the findings recorded in the tariff
order dated 22nd September 2016.
9. The learned counsel submitted that the view of the APTEL that the
CSS should have been determined simultaneously with the order
dated 22nd September 2016 was hyper-technical and erroneous.
He again submitted that the determination of the CSS by the order
dated 1st December 2016 was based on the financials and the tariff
as determined by the State Commission in the tariff order dated
22nd September 2016 and not on any other basis. He pointed out
that the tariff order dated 22nd September 2016 was effective from
1st September 2016. He pointed out that the distribution licensees
did not have to pay the higher CSS from 1st September 2016 to 30th
November 2016.
10. The submission of learned senior counsel is that there is no stipulation
which prevents the increase of the CSS in monetary terms. The
only stipulation in the Rajasthan Tariff Regulations, 2014 is that the
extent of cross-subsidy to any consumer category should be within
the range of +/- 20% of the average cost of supply. The learned
senior counsel distinguished the decision in the case of Tata Power
Company Limited1 and Reliance infrastructure Limited.2 He
pointed out that in the case of Tata Power Company Limited,1 the
State Commission, having access to the data and financials for the
relevant period, proceeded to determine the CSS based on the prior
date. Moreover, in the case of Reliance infrastructure Limited,2 the
APTEL has unequivocally stated that the CSS should be a derivative
of the effective tariff applicable for the relevant period. He submitted
that there are no adverse implications to the consumers by reason
of the determination of the CSS subsequently by the order dated
1st December 2016.
[2025] 4 S.C.R. 2035

Jaipur Vidyut Vitaran Nigam Limited and Ors. v.
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11. The learned counsel appearing for the respondents supported the
impugned judgment of the APTEL. By relying upon the tariff order
dated 22nd September 2016, it was contended that the rates of the
CSS were part of the tariff regime put in place by the previous order
dated 22nd September 2016. Learned counsel invited our attention
to the decision of the APTEL in the case of Tata Power Company
Limited.1 The said decision categorically holds that the CSS has to
be determined by the State Commission every year, along with the
determination of the tariff. Even in the case of Reliance Infrastructure
Limited,2 the APTEL held that the State Commission must compute
the CSS to meet the requirement of the current level of cross-subsidy.
The learned counsel submitted that the decision of the APTEL in
the case of D. P. Chirania3 has been rightly applied. The learned
counsel pointed out that the rates of the CSS could have been
revisited only on 2nd November 2017, when the State Commission
passed the subsequent tariff order.

CONSIDERATION OF SUBMISSIONS
12. In the light of these submissions, it is necessary to refer to the
provision of Section 42 of the 2003 Act, which reads thus:
“42. Duties of distribution licensee and open access.—(1)
It shall be the duty of a distribution licensee to develop
and maintain an efficient, co-ordinated and economical
distribution system in his area of supply and to supply
electricity in accordance with the provisions contained in
this Act.
(2) The State Commission shall introduce open access in
such phases and subject to such conditions, (including
the cross subsidies, and other operational constraints)
as may be specified within one year of the appointed
date by it and in specifying the extent of open access
in successive phases and in determining the charges
for wheeling, it shall have due regard to all relevant
factors including such cross-subsidies, and other
operational constraints:
Provided that [such open access shall be allowed on
payment of a surcharge] in addition to the charges
for wheeling as may be determined by the State
Commission:
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Provided further that such surcharge shall be utilised to
meet the requirements of current level of cross-subsidy
within the area of supply of the distribution licensee:
Provided also that such surcharge and cross-subsidies
shall be progressively reduced in the manner as may be
specified by the State Commission:
Provided also that such surcharge shall not be leviable
in case open access is provided to a person who has
established a captive generating plant for carrying the
electricity to the destination of his own use:
[Provided also that the State Commission shall, not
later than five years from the date of commencement of
the Electricity (Amendment) Act, 2003 (57 of 2003), by
regulations, provide such open access to all consumers
who require a supply of electricity where the maximum
power to be made available at any time exceeds one
megawatt.]
(3) Where any person, whose premises are situated within
the area of supply of a distribution licensee, (not being a
local authority engaged in the business of distribution of
electricity before the appointed date) requires a supply
of electricity from a generating company or any licensee
other than such distribution licensee, such person may,
by notice, require the distribution licensee for wheeling
such electricity in accordance with regulations made by
the State Commission and the duties of the distribution
licensee with respect to such supply shall be of a common
carrier providing non-discriminatory open access.
(4) Where the State Commission permits a consumer or
class of consumers to receive supply of electricity from a
person other than the distribution licensee of his area of
supply, such consumer shall be liable to pay an additional
surcharge on the charges of wheeling, as may be specified
by the State Commission, to meet the fixed cost of such
distribution licensee arising out of his obligation to supply.
(5) Every distribution licensee shall, within six months from
the appointed date or date of grant of licence, whichever
[2025] 4 S.C.R. 2037

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is earlier, establish a forum for redressal of grievances of
the consumers in accordance with the guidelines as may
be specified by the State Commission.
(6) Any consumer, who is aggrieved by non-redressal
of his grievances under sub-section 5, may make a
representation for the redressal of his grievance to an
authority to be known as Ombudsman to be appointed
or designated by the State Commission.
(7) The Ombudsman shall settle the grievance of the
consumer within such time and in such manner as may
be specified by the State Commission.
(8) The provisions of sub-sections (5), (6) and (7) shall
be without prejudice to right which the consumer may
have apart from the rights conferred upon him by those
sub-sections.”
(emphasis added)

13. In the present case, the appellants are the distribution licensees. The
duties of the distribution licensees have been specified in Section
42. Sub-Section (2) of Section 42 provides for the State Commission
introducing open access. The first proviso to Sub-Section (2) provides
that such open access shall be allowed on payment of a surcharge
in addition to the charges for wheeling as may be determined by
the State Commission. The said surcharge is the CSS. The second
proviso to Sub-Section (2) provides that the CSS shall be utilised
to meet the requirements of the current subsidy level within the
distribution licensee’s supply area.
14. As far as the CSS is concerned, this Court in the case of Sesa
Sterlite Ltd. v. Orissa Electricity Regulatory Commission &
ors.,4 has laid down the rationale and purpose of levying the CSS.
Paragraphs 25 to 29 of the said decision read thus:
25. While open access in transmission implies freedom
to the licensee to procure power from any source of his
choice, open access in distribution with which we are

4 (2014) 8 SCC 444
2038 [2025] 4 S.C.R.

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concerned here, means freedom to the consumer to get
supply from any source of his choice. The provision of open
access to consumers, ensures right of the consumer to get
supply from a person other than the distribution licensee
of his area of supply by using the distribution system of
such distribution licensee. Unlike in transmission, open
access in distribution has not been allowed from the outset
primarily because of considerations of cross-subsidies.
The law provides that open access in distribution would
be allowed by the State Commissions in phases. For this
purpose, the State Commissions are required to specify
the phases and conditions of introduction of open access.
26. However open access can be allowed on payment of
a surcharge, to be determined by the State Commission,
to take care of the requirements of current level of cross-
subsidy and the fixed cost arising out of the licensee›s
obligation to supply. Consequent to the enactment of
the Electricity (Amendment) Act, 2003, it has been
mandated that the State Commission shall within five
years necessarily allow open access to consumers having
demand exceeding one megawatt.
(3) Cross-Subsidy Surcharge (CSS)—Its rationale
27. The issue of open access surcharge is very crucial
and implementation of the provision of open access
depends on judicious determination of surcharge by
the State Commissions. There are two aspects to
the concept of surcharge — one, the cross-subsidy
surcharge i.e. the surcharge meant to take care of
the requirements of current levels of cross-subsidy,
and the other, the additional surcharge to meet the
fixed cost of the distribution licensee arising out of
his obligation to supply. The presumption, normally is
that generally the bulk consumers would avail of open
access, who also pay at relatively higher rates. As
such, their exit would necessarily have adverse effect
on the finances of the existing licensee, primarily on
two counts — one, on its ability to cross-subsidise the
vulnerable sections of society and the other, in terms
of recovery of the fixed cost such licensee might have
[2025] 4 S.C.R. 2039

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incurred as part of his obligation to supply electricity
to that consumer on demand (stranded costs). The
mechanism of surcharge is meant to compensate the
licensee for both these aspects.
28. Through this provision of open access, the law thus
balances the right of the consumers to procure power from
a source of his choice and the legitimate claims/interests
of the existing licensees. Apart from ensuring freedom to
the consumers, the provision of open access is expected
to encourage competition amongst the suppliers and also
to put pressure on the existing utilities to improve their
performance in terms of quality and price of supply so as
to ensure that the consumers do not go out of their fold
to get supply from some other source.
29. With this open access policy, the consumer is given
a choice to take electricity from any distribution licensee.
However, at the same time the Act makes provision of
surcharge for taking care of current level of cross-subsidy.
Thus, the State Electricity Regulatory Commissions are
authorised to frame open access in distribution in phases
with surcharge for:
4. (vi)(a) current level of cross-subsidy to be gradually
phased out along with cross-subsidies; and
(b) obligation to supply.”
(emphasis added)

15. Section 61 of the 2003 Act provides for the Regulatory Commission
specifying the terms and conditions for determining a tariff. Under
Section 181 of the 2003 Act, the State Commission is empowered to
make regulations to carry out the provisions of the Act. Accordingly,
the Rajasthan Tariff Regulations, 2014 have been framed. Regulation
2(a)(60) defines tariff as the schedule of charges for generation,
transmission, wheeling and supply of electricity together with terms
and conditions for application thereof. Under Regulation 2(a)(4),
“Aggregate Revenue Requirement” means the requirement of the
Licensee or Generating Company for recovery, through tariffs, of
allowable expenses and return on equity capital pertaining to its
Licensed/Regulated Business, in accordance with these Regulations.
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Regulation 11 provides for filing a petition for approval of the aggregate
revenue requirement and the determination of the tariff. The procedure
to be followed by the Commission for determining the tariff is in Part
II of the regulations. Regulations 89 and 90 dealing with the CSS
are relevant for our purposes, which read thus:
"89. Cross subsidy
(1) The average cost of supply and realization from
a category of consumer shall form the basis of
estimating the extent of cross subsidy for that
consumer category.
(2) The Commission shall endeavour to determine the
tariff in such a manner that it progressively reflects
the average cost of supply and the extent of cross
subsidy to any consumer category is within maximum
range of +/- 20% of average cost of supply:
Provided that consumers below poverty line who
consume below specified level say 50 units per month
may receive special support through cross-subsidy.
Tariff for such designated group of consumers shall
be at least 50% of the average cost of supply.
90. Cross-subsidy Surcharge
The surcharge payable by consumers opting for open
access on the network of the distribution licensee
or transmission licensee will be determined by the
Commission as per the following Formula:
S = T – [C/(1 – (L/100)) + D]
Where,
S is the surcharge
T is the Tariff payable by the relevant category
of consumers;
C is the weighted average cost of power purchase
of top 5% at margin excluding liquid fuel source and
renewable energy sources
D is the wheeling charge
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L is the system losses of distribution licensee for the
applicable voltage level, as a percentage:
Provided that if S is computed to be negative as
per above Formula, S shall be considered as Zero.”
(emphasis added)

Regulation 90 contains a formula for the determination of the CSS,
which is based on the tariff payable by the relevant category of
consumers. Thus, the CSS has to be determined based on the
prevailing tariff rates. Neither in the provisions of the 2003 Act nor
under the provisions of the Rajasthan Tariff Regulations, 2014, is there
a provision which makes the determination of the CSS simultaneously
with the determination of the tariff mandatory.
16. Now, we turn to the order dated 22nd September 2016 passed by the
State Commission. By the said order, the tariff was fixed with effect
from 1st September 2016, which was to remain in force till the next
tariff order of the Commission. The appellants filed an application/
petition before the State Commission to determine the CSS. The
prayer in the said petition was for the determination of the CSS
payable by open access customers to the distribution licensees in
accordance with the provisions of the 2003 Act, the National Tariff
Policy, 2016 and the Rajasthan Tariff Regulations, 2014. The petition
was filed on 20th July 2016. The petition was decided by order dated
1st December 2016. The following three issues were considered by
the Commission, which are as follows:
(i) Whether Petitioners in law are entitled to claim Cross
Subsidy Surcharge under the provisions of Electricity
Act, 2003?
(ii) If yes, whether the same shall be determined on the
basis of formula specified in the RERC (Terms and
Conditions for Determination of Tariff) Regulations,
2014 or formula provided in new National Tariff Policy,
2016 and based on the values approved in the Tariff
order dated 22.09.2016 which is in force?
(iii) What is the Cross Subsidy Surcharge payable by
Open access consumers?
2042 [2025] 4 S.C.R.

Supreme Court Reports

17. The Commission answered the first issue by holding that the
appellants (distribution licensees) were entitled to the CSS as may
be determined by the Commission. The Commission held that in
view of the decision of this Court in the case of Sesa Sterlite Ltd.4,
no one can dispute the legal entitlement of the present appellants
to the CSS. On the second issue, the State Commission specifically
held that determination of the CSS will have to be made as per
the formula provided under Regulation 90 of the Rajasthan Tariff
Regulations, 2014, based on values approved in the F.Y. 2015-
2016 tariff order. While dealing with the third issue, the commission
specifically observed that the computation of the CSS will have
to be made as provided in Regulation 90 based on the values
approved in the current tariff order dated 22nd September 2016. It
must be noted here that there was no challenge to the order dated
22nd September 2016 fixing the tariff for F.Y. 2015-2016. The State
Commission accordingly computed and determined the CSS rates.
The Commission clarified that the CSS shall be levied and collected
from the date of the order, i.e., 1st December 2016. The commission
also directed that the order will remain in force till the CSS is re-
determined by the Commission.
18. This order has been upset by the APTEL by the impugned judgment.
In paragraph 18 of the impugned judgment, the APTEL observed
that the information relating to the previous period could not be
conceivably reflected in the current state of affairs. It was further
observed that the tariff for F.Y. 2016-2017 and 2017-2018 was fixed
by the order dated 2nd November 2017. The APTEL further observed
that it is not clear why the exercise of the determination of the CSS
could not coincide with the tariff determination. Further, in paragraph
19, the APTEL observed that the determination of the CSS could not
have been done without examining the requirements of the current
level of cross-subsidy. There is one more reason assigned by the
APTEL. It was held that the tariff order dated 22nd September 2016
for the F.Y. 2015-2016 declared that it shall continue to be in force
till the next tariff order, which was made only on 2nd November 2017.
19. We find no basis for the opinion expressed by the APTEL that
determination of the CSS should coincide with the tariff determination.
In the Rajasthan Tariff Regulations, 2014, under Regulation 2(a)(60),
tariff has been defined as under:
[2025] 4 S.C.R. 2043

Jaipur Vidyut Vitaran Nigam Limited and Ors. v.
Rajasthan Textile Mills Association & Anr. Etc..

“(60) “Tariff” means the schedule of charges for generation,
transmission, wheeling and supply of electricity together
with terms and conditions for application thereof;”
Thus, the determination of CSS is not necessarily a part of the tariff
determination process. The CSS can be determined along with
the tariff. But, it can be determined separately in accordance with
Regulation 90 based on the prevailing rate of tariff. In fact, as per
Regulation 90, the tariff payable by the relevant category of consumers
is the basis for the CSS. Therefore, the APTEL committed an error
by holding that the determination of the tariff and the determination of
the CSS should always coincide. While determining rates of the CSS
with effect from 1st December 2016, the commission relied upon the
tariff fixed in terms of the order dated 22nd September 2016, which
was the prevailing tariff as of 1st December 2016. The CSS is in the
nature of compensation qua the tariff, which the distribution licensees
would have received from the open access consumers but for their
availing power from other sources. Hence, the CSS must be based
on the applicable retail tariff recoverable during the relevant period.
That is precisely provided in Regulation 90. The State Commission
determined the CSS based on the data and financials provided in
the order dated 22nd September 2016. As provided in the said order
dated 22nd September 2016, the same was to be in force until there
was a fresh tariff determination. The order dated 22nd September
2016 continued to be in force till 2nd November 2017. Moreover,
the perusal of the order dated 22nd September 2016 shows that the
determination of the CSS was not undertaken while doing the exercise
of tariff determination. In fact, by the further order dated 2nd November
2017 passed by the State Commission, the determination of the CSS
has been made along with the determination of the tariff. Thus, the
determination made by order dated 1st December 2016 remained in
force until 2nd November 2017. The effect of the determination of the
CSS from 1st December 2016 is that the respondents-consumers
were not charged the CSS as per the order from 22nd September
2016 till 1st December 2016. We may also note that the petition for
the determination of the CSS was filed when the petition for fixing
the F.Y. 2015-2016 tariff was pending.
20. When the CSS was determined based on the prevailing rates of
tariff, the APTEL ought not to have found fault with the Commission’s
determination of rates of the CSS.
2044 [2025] 4 S.C.R.

Supreme Court Reports

21. In the circumstances, we find that the view taken by the APTEL is
erroneous. Therefore, the impugned judgment of the APTEL cannot
be sustained, and the same is accordingly set aside. Accordingly, the
order dated 1st December 2016 passed by the State Commission is
restored. Needless to add that the order dated 1st December 2016
was to remain in force only till 2nd November 2017.
22. Appeals are allowed on the above terms.

Result of the case: Appeals allowed.

†
Headnotes prepared by: Divya Pandey