Hindustan Zinc Ltd. v. Rajasthan Electricity Regulatory Commission

On August 31, 2012, the High Court of Rajasthan passed a judgment requiring companies having captive generation power plants to purchase a minimum amount of energy from renewable sources. The Rajasthan Electricity Regulatory Commission (Renewable Energy Obligation) Regulations, 2007 and Rajasthan Electricity Regulatory Commission (Renewable Energy Certificate and Renewable Purchase Obligation Compliance Framework) Regulations 2010 imposed the Renewable Energy obligation (RE obligation) on the captive generation entities to purchase a certain minimum amount of energy from renewable sources and to pay a surcharge in case of shortfall in meeting the RE obligation. Aggrieved by the judgment, in 2013 the captive generation companies filed an appeal before the Supreme Court. The companies contended that they established their own captive generation power plants in terms of the Electricity Act, 2003. They argued that the purpose of the Electricity Act 2003 is to encourage participation of private sectors involved in generation of electricity and with that objective, generation of electricity was de-licensed and captive generation was freely promoted. It liberalized the establishment of captive power plants and exempted them from any licensing and regulatory regime. Further, the companies argued that the National Electricity Policy, 2005 and the Tariff Policy, 2006 were framed to promote production and utilization of energy to the maximum extent in respect of the captive generation plants. It was not intended to compulsorily force these companies to lower their production of energy by making them purchase renewable energy. Consequently, they argued that the 2007 and 2010 Regulations are violative the basic object and purpose of the Electricity Act 2003. The issue in this case relates to whether the aggrieved captive power plant companies are covered by the 2007 and 2010 regulations that mandate green power purchase. On 13 May 2015, the Supreme Court of India upheld the validity of the 2007 and 2010 Regulations with respect to the renewable energy purchase obligation. The Court approved the promotion and co-generation of electricity from renewable sources of energy by employing constitutional mandates that focus on larger public interest and the right to a clean environment. The State and its instrumentalities are under a duty to protect the environment in order to ensure that the citizens/residents of the area lead a healthy life. Accordingly the Supreme Court observed “the National Action Plan on Climate Change and Preamble of the Act of 2003 emphasizes promotion of efficient and environmentally benign policies to encourage generation and consumption of green energy to sub-serve the mandate of Article 21 read with Article 48A of the Directive Principles of the State Policy and Article 51A(g) of the Fundamental Duties enlisted under Chapter IVA of the Constitution of India. Further, the said Regulations are consistent with the International obligations of India, as India has ratified to the Kyoto Protocol.”