Can a State Electricity Regulatory Commission, while exercising its power to determine tariff under the Electricity Act, 2003, consider and factor in a Generation Based Incentive granted by the Union Government?

Yes. Tariff determination is the exclusive province of the Regulatory Commissions and there is no unallocated regulatory residue left outside their jurisdiction. The direction that the Commission shall take into consideration any incentive or subsidy offered by the Central or State Government denotes a statutory obligation to consider the impact of such incentive in the process of tariff determination, and that regulatory power is not excluded by the mere existence of a Union grant.

Electricity Act, 2003 — ss.61, 64(6) and 86 — Tariff determination — Generation Based Incentive — Regulation 20, APERC (Terms and Conditions for Tariff Determination for Wind Power Projects) Regulations, 2015 — Constitution of India, Arts. 282 and 114(2) — Regulatory autonomy — Collaborative enterprise — Electricity Act, 2003 — ss.61 and 86 — Exclusive province of the Regulatory Commission — Incentive or subsidy — Held: There is no unallocated regulatory residue left outside the Electricity Regulatory Commissions' jurisdiction, tariff determination being their exclusive province. The direction that the Commission "shall take into consideration any incentive or subsidy offered by the Central or State Government" denotes a statutory obligation to consider its bearing on tariff, and that power is not excluded by the mere existence of a Union grant. (¶21, 22, 28) Constitution of India — Arts. 282 and 114(2) — Destination of a Parliamentary grant — Held further: The grant reached its destination when it was released in favour of the wind GENCOs, and there has been no diversion, much less subversion, of the sums allocated. The beneficiary remains the GENCO; the Commission does not intercept or redirect the payment, it merely determines the tariff payable by the DISCOM to the GENCO. (¶26, 27) Electricity Act, 2003 — Regulatory power as a collaborative enterprise — Contextual and purposive treatment — Held further: The need to "take into account" does not mechanically translate into either a mandatory deduction or automatic pass-through, but requires a contextual and purposive treatment. Regulatory authority cannot be exercised in a manner that nullifies the legislative or policy intent or the intent of the grant; the appeal was dismissed. (¶43, 46, 47)

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