MULTI-LEVEL GOVERNANCE OF ELECTRICITY SYSTEMS

Introduction

Multi-Level Governance of Electricity Systems refers to the distribution and coordination of decision-making powers among different levels of government, regulatory authorities, system operators, electricity utilities, and specialised tribunals. Electricity governance is inherently multi-level because generation, transmission, distribution, markets, consumer protection, environmental regulation and grid security operate across local, State and national boundaries.

In India, the Electricity Act, 2003 establishes an institutional framework in which the Central Electricity Regulatory Commission (CERC), State Electricity Regulatory Commissions (SERCs), the Central Government, State Governments, the Central Electricity Authority (CEA), Appellate Tribunal for Electricity (APTEL) and courts perform different functions. The Supreme Court has repeatedly emphasised that these authorities must operate within the jurisdiction assigned to them by statute.

1. Meaning of Multi-Level Governance

Multi-level governance means that electricity regulation is not concentrated in a single authority. Instead, powers are divided according to the geographical and functional character of electricity activities.

The principal levels include:

National/Central Level – Central Government, CERC, CEA and national institutions.

Inter-State Level – Regulation of inter-State transmission, trading and other matters crossing State boundaries.

State Level – SERCs and State Governments dealing primarily with intra-State electricity matters.

Distribution Level – Distribution licensees and local electricity systems interacting directly with consumers.

Judicial/Appellate Level – APTEL and constitutional courts reviewing regulatory and adjudicatory decisions.

Thus, multi-level governance seeks to create coordination while preserving legally defined institutional responsibilities.

2. Central Level Governance

The Central level performs functions involving the national electricity system and inter-State activities.

Under the Electricity Act, 2003, CERC has important regulatory functions relating to inter-State transmission, inter-State electricity trading and other matters assigned to it by the statute.

The Central Government also has policy-making responsibilities. Section 107 permits the Central Government to issue directions to CERC concerning matters of policy involving public interest. Similarly, Section 108 recognises the role of State Government policy directions to SERCs. The Supreme Court has examined this relationship between governmental policy and regulatory autonomy.

3. State-Level Governance

State Electricity Regulatory Commissions regulate important intra-State aspects of electricity.

Their functions include:

determination of tariffs in appropriate cases;

regulation of electricity procurement;

regulation of intra-State transmission and distribution;

licensing functions;

consumer-related regulatory matters;

promotion of competition and efficiency;

resolution of specified disputes under the Electricity Act.

The division between CERC and SERC jurisdiction is particularly important because electricity networks frequently cross State boundaries.

The Supreme Court has recently reiterated that CERC's jurisdiction over inter-State transmission does not automatically eliminate the jurisdiction of State Commissions over intra-State aspects. In relation to open access, for example, Section 42(2) specifically gives State Commissions authority over intra-State open access.

4. Functional Distribution of Powers

Multi-level governance is not merely geographical. It is also functional.

Different institutions may perform different functions within the same electricity system:

This structure prevents a single institution from controlling every aspect of the electricity sector.

5. Coordination Between CERC and SERCs

One of the central features of multi-level electricity governance is coordination between CERC and SERCs.

For example, an electricity transaction may involve:

Generating Station → Inter-State Transmission → State Transmission Network → Distribution Licensee → Consumer

Different statutory authorities may therefore become relevant at different stages.

The Supreme Court has recognised that statutory jurisdiction must be determined according to the Electricity Act rather than simply according to administrative convenience. In Bhadreshwar Vidyut (P) Ltd. v. Maharashtra ERC, the principle was noted that jurisdiction cannot be transferred merely because another regulatory forum might be more convenient; jurisdiction must come from statutory enactment.

6. Regulatory Independence and Government Policy

Multi-level governance requires a balance between democratic policy control and independent technical regulation.

Governments formulate broad public-interest policies, while regulatory commissions apply statutory standards to particular regulatory questions.

In Energy Watchdog v. CERC, the Supreme Court considered the statutory structure of electricity regulation and recognised the importance of the regulatory framework established by the Electricity Act, 2003.

The existence of governmental policy powers does not mean that a regulator can disregard the Electricity Act. Regulatory bodies are statutory creations and must exercise powers within their legislative mandate.

7. Case Law: PTC India Ltd. v. CERC

In PTC India Ltd. v. Central Electricity Regulatory Commission, (2010) 4 SCC 603, the Supreme Court examined the nature of CERC's regulatory powers.

The judgment is important because it distinguished between:

regulations having the character of subordinate legislation, and

orders or decisions made by the Commission in exercise of its regulatory/adjudicatory functions.

The distinction is significant for understanding the hierarchy of electricity governance. Regulations made under Section 178 have a different legal character from individual regulatory orders. Later decisions continue to rely on this distinction.

8. Case Law: Gujarat Urja Vikas Nigam Ltd. v. Solar Semiconductor Power Co.

In Gujarat Urja Vikas Nigam Ltd. v. Solar Semiconductor Power Co. (India) Pvt. Ltd., (2017) 16 SCC 498, the Supreme Court emphasised that a regulatory commission is a creature of statute.

The Commission cannot assume powers merely because it considers them useful or convenient. Its authority must be traced to the parent legislation.

This principle is fundamental to multi-level governance because it prevents one regulatory level from encroaching upon the legally assigned powers of another.

9. Case Law: Power Grid Corporation of India Ltd. v. CERC

In Power Grid Corporation of India Ltd. v. Central Electricity Regulatory Commission, the Supreme Court considered disputes concerning CERC's regulatory authority over the national transmission system.

The case illustrates how central regulatory institutions operate in relation to electricity transmission infrastructure extending across different States. The Supreme Court's electricity jurisprudence recognises the special importance of national and inter-State transmission regulation.

10. Case Law: Recent Supreme Court Approach

Recent Supreme Court decisions continue to emphasise the statutory division between Central and State regulatory authorities.

In a 2025 judgment concerning open access, the Court explained that Section 79(1)(c) gives CERC authority over inter-State transmission, while Section 42(2) preserves State Commission authority over intra-State open access. This demonstrates that multi-level governance is based upon complementary rather than automatically exclusive jurisdictions.

The Court has also stressed the importance of using the specialised statutory mechanism provided under electricity legislation before invoking constitutional jurisdiction in ordinary regulatory disputes.

11. Importance of Multi-Level Governance

Multi-level governance provides several advantages:

(a) Specialisation

Different authorities can develop expertise in technical, economic and legal aspects of electricity.

(b) Federal Coordination

Electricity frequently involves both State and inter-State interests. Divided regulatory authority facilitates federal coordination.

(c) Consumer Protection

State-level regulation allows consumer and distribution issues to be addressed closer to the point of supply.

(d) National Grid Security

Central institutions can address matters involving the integrated national grid and inter-State transmission.

(e) Accountability

Multiple regulatory and appellate levels provide opportunities for review and correction.

(f) Regulatory Flexibility

State-level authorities can respond to local electricity conditions while remaining within the national statutory framework.

12. Challenges

Despite its advantages, multi-level governance can produce:

jurisdictional conflicts between CERC and SERCs;

overlapping regulatory responsibilities;

delays in decision-making;

inconsistent regulatory approaches;

disputes concerning inter-State and intra-State activities;

coordination problems between policy-makers and regulators;

difficulties in integrating renewable energy and distributed generation into existing regulatory structures.

Therefore, effective multi-level governance requires clear statutory boundaries, institutional coordination, information sharing and efficient appellate mechanisms.

Conclusion

Multi-Level Governance of Electricity Systems represents a federal and institutionally distributed model of electricity regulation. In India, the Electricity Act, 2003 creates a system in which Central institutions, State Commissions, governments, technical bodies, utilities, tribunals and courts perform interconnected but legally differentiated functions.

The jurisprudence of the Supreme Court demonstrates three fundamental principles: first, regulatory jurisdiction must originate in statute; second, CERC and SERCs possess distinct areas of authority; and third, coordination between different levels must respect the statutory allocation of powers. The decisions in PTC India Ltd. v. CERC, Gujarat Urja Vikas Nigam Ltd. v. Solar Semiconductor Power Co., and recent decisions concerning CERC-SERC jurisdiction collectively illustrate these principles.

Consequently, multi-level governance provides the institutional foundation for managing India's complex electricity system while maintaining regulatory expertise, federal coordination, consumer protection and accountability.