Case Note & Summary
The Supreme Court allowed the appeal filed by the Delhi Electricity Regulatory Commission (Commission) against the judgment of the Appellate Tribunal for Electricity (APTEL). The dispute arose from the setting up of a temporary 108-megawatts gas-based power plant at Rithala, Delhi, by Tata Power Delhi Distribution Limited (TPDDL) to augment power supply for the Commonwealth Games 2010. The plant was approved with an operational tenure limited to 5-6 years, and the Power Purchase Agreement (PPA) restricted supply up to March 2018. The Commission, by order dated 31.08.2017, determined the capital cost at ₹197.70 crores and allowed the plant to operate only till March 2018. Subsequently, in a true-up petition, the Commission allowed depreciation only up to Financial Year 2017-2018, resulting in cumulative depreciation of ₹83.34 crores, and disallowed recovery of the remaining capital cost of approximately ₹94.59 crores on the ground that the plant had ceased to supply electricity after March 2018. APTEL set aside this order, directing that the entire capital cost be recovered through depreciation over the useful life of 15 years. The Supreme Court framed three substantial questions of law: whether depreciation must be allowed over the entire technical useful life irrespective of actual supply; whether Regulation 6.32 confers an absolute right to recover capital cost over useful life even if the asset ceases to supply; and whether APTEL erred in disregarding the regulatory framework limiting the operational period to six years. The Court answered the first question in the negative, holding that consumers cannot be required to pay for electricity not supplied. On the second question, the Court held that Regulation 6.32 must be read harmoniously with Regulation 4.1, which mandates tariff determination in accordance with the PPA. The Court found that APTEL erred in disregarding the approved PPA period and the regulatory framework. The Court set aside the APTEL judgment and restored the Commission's order dated 11.11.2019, thereby allowing the appeal.
Headnote
A) Electricity Law - Tariff Determination - Depreciation - Section 61(d), Section 62, Electricity Act, 2003; Regulation 6.32, DERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2011 - Depreciation must be allowed only for the period during which electricity is actually supplied to consumers - The Supreme Court held that consumers cannot be required to pay for a service they no longer receive, and the regulatory framework must balance cost recovery with consumer interest (Paras 19-20). B) Electricity Law - Interpretation of Regulations - Harmonious Construction - Regulation 6.32 read with Regulation 4.1, DERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2011 - Regulation 6.32 must be read harmoniously with Regulation 4.1, which mandates tariff determination in accordance with the Power Purchase Agreement - The Court held that depreciation cannot be claimed beyond the period approved in the PPA (Paras 21-22). C) Electricity Law - Consumer Protection - Section 61(d), Electricity Act, 2003 - Consumer interest is a central guiding principle in tariff determination - The Court held that safeguarding consumers' interests is paramount and utilities cannot burden consumers with charges for electricity not supplied (Paras 15, 20).
Issue of Consideration
Whether depreciation under tariff regulations must be allowed over entire technical useful life of an asset irrespective of actual period of supply; whether Regulation 6.32 confers absolute right to recover capital cost over useful life even if asset ceases to supply electricity; whether APTEL erred in disregarding regulatory framework limiting operational period to six years
Final Decision
Appeal allowed. Impugned judgment of APTEL dated 10.02.2025 set aside. Order of Delhi Electricity Regulatory Commission dated 11.11.2019 restored. No order as to costs.
Law Points
- Depreciation allowed only for period of actual supply
- Regulation 6.32 must be read with Regulation 4.1
- Consumer interest paramount under Section 61(d) of Electricity Act
- 2003
- Tariff cannot be recovered for electricity not supplied
