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Informist, Thursday, May 7, 2026

 

NEW DELHI – The Supreme Court Thursday held that power generating utilities do not have an unconditional right to recover depreciation of the entire capital costs of plants from consumers if these plants have ceased to supply electricity to consumers after a given time. Consumers cannot be required to pay for a service which they no longer receive, the top court said. 

 

It set aside an order by the Appellate Tribunal for Electricity in 2025 that directed Tata Power Delhi Distribution Ltd. to recover the entire capital cost of Rithala Combined Cycle Power Plant in Delhi through depreciation over a period of 15 years despite the plant ceasing to supply electricity to consumers after six years. Tata Power Delhi Distribution, a joint venture between Tata Power Co. Ltd. and Delhi Power Co. Ltd., couldn't be permitted to burden consumers with tariff charges beyond March 2018, said the apex court.

 

Tariff determination is not merely a mathematical exercise but a regulatory balancing act, said a bench of Justice P.S. Narasimha and Justice Alok Aradhe. The object of enabling reasonable cost recovery for utilities must be weighed against and calibrated with, paramount obligation to safeguard consumer interest, said the bench. 

 

The top court noted that Delhi Electricity Regulatory Commission in its order in 2017, which was not challenged by Tata Power Delhi, had approved the power purchase agreement only for a period of six years from the date of commercial operation till March 2018. The appellate tribunal ought to have appreciated that the distinction between 15 years of technical useful life and six years of regulatory recovery period is not merely semantic but the tariff framework drew the distinction clearly, said the court. The appellate tribunal erred, therefore, in disregarding the regulatory framework and conditions of approval, said the court.

 

The case has its genesis in Tata Power Delhi intimating the regulatory commission of its intention to establish and operate the Rithala plant. Accordingly, an in-principle approval was given to Tata Power Delhi for operating the plant. Thereafter, in 2017, the commission determined the capital cost of the plant at INR 1.98 billion after applying appropriate benchmarking and prudence checks as against Tata Power Delhi's claimed capital cost of INR 3.20 billion. The commission accepted the technical useful life of the plant at 15 years based on expert certification, and restricted the operational and tariff recovery framework to a period of six years. The plant was thus allowed to operate for supply purposes only till March 2018. 

 

In 2019, the regulatory commission allowed depreciation at the rate of 6% per annum in respect of the plant only up to financial year 2017-18 (Apr-Mar), resulting in cumulative depreciation of INR 833.40 million. The remaining capital cost of about INR 945.90 million together with carrying cost, was not allowed to be passed through in tariff, on the grounds that the plant had ceased to supply electricity to the consumers after March 2018. 

 

However, the appellate tribunal held that the regulatory commission itself had fixed the useful life of the plant at 15 years and had computed the capital cost on that basis. Therefore, the depreciation cost couldn't be restricted only to six years, said the appellate tribunal. Challenging the appellate tribunal's order, the regulatory commission moved the apex court.  

 

On Thursday, shares of Tata Power Co. Ltd. ended 0.9% lower at INR 439.25 on the National Stock Exchange.  End

 

Reported by Surya Tripathi

Edited by Avishek Dutta

 

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