Delhi ERC vs Tata Power Delhi Distribution Ltd.

2026 INSC 461 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6388 OF 2025

DELHI ELECTRICITY REGULATORY COMMISSION ... APPELLANT

VERSUS TATA POWER DELHI DISTRIBUTION LIMITED … RESPONDENT

JUDGMENT

ALOK ARADHE, J.

1. This appeal under Section 125 of the Electricity Act, 2003,

(2003 Act) preferred by Delhi Electricity Regulatory Commission

(Commission) challenges the correctness and legality of the

judgment and order dated 10.02.2025 passed by the Appellate

Tribunal for Electricity (APTEL). By the impugned judgment,

APTEL has set aside the order dated 11.11.2019 passed by the

Commission and issued the direction that entire capital cost of

Rithala Combined Cycle Power Plant at Rithala, Delhi (the

Plant) be permitted to be recovered through depreciation over a Signature Not Verified Digitally signed by Jayant Kumar Arora

period of fifteen years notwithstanding the admitted fact that Date: 2026.05.07 17:04:49 IST Reason:

1

the Plant ceased to supply electricity to the consumers from

and after March-2018.

2. The facts giving rise to this litigation though substantially not

in dispute, are required to be set out, in order to appreciate the

competing legal submissions advanced before us.

FACTUAL MATRIX

3. The respondent, Tata Power Delhi Distribution Limited (TPDDL)

is a joint venture entity between the Tata Power Company

Limited and Delhi Power Company Limited. On 11.06.2017,

TPDDL moved a proposal for allotment of land at Rithala for

setting up a temporary 108-megawatts Gas-based Power Plant

with operational tenure expressly limited to 5 to 6 years,

following which the land would revert to the Delhi Development

Authority (DDA). The genesis of the project lay in the pressing

and urgent need to augment power supply in the National

Capital Territory of Delhi in the lead-up to the Commonwealth

Games 2010. The Plant was conceived as a short-term measure

to address peak demand and accordingly, approval was

structured within a limited operational horizon. On

24.07.2007, TPDDL addressed the letter to the DDA seeking

2 change of land use specifically for a short-term 5 to 6 years

operational span of the Plant.

4. On 17.05.2008, TPDDL intimated Commission of its intention

to establish and operate the Plant. The Commission sometime

in April-2009 granted in principle approval for the scheme

based on TPDDL’s proposal submitted in the year 2008. On

27.07.2009, Generation and Distribution divisions of TPDDL

executed an intra company “Terms and conditions for sale and

purchase of power for the Plant”. The TPDDL on 21.08.2009

filed a petition namely, petition no. 11 of 2009, before the

Commission under Section 62 read with Section 86 (1)(b) of the

2003 Act, seeking approval of the said terms and conditions. A

second petition namely, petition no. 7 of 2010, was filed on

26.02.2010, seeking approval for the use of 6 acres land for

setting up 108-megawatts Power Generation Plant at Rithala,

New Delhi. A third petition namely, petition no. 6 of 2013, was

filed by TPDDL on 23.11.2012, seeking determination of the

final generation tariff from the Plant.

5. The Plant achieved commercial operation in open cycle mode on

04.02.2011 and in combined cycle mode on 04.09.2011. The

3 Commission disposed of all the three petitions filed by TPDDL

by a common order dated 31.08.2017, the details of which are

as follows:

(i) The Commission allowed petition no. 11 of 2009 to

the extent of permission granted by Government of

National Capital Territory of Delhi (GNCTD) for a

period of six years from the year of commissioning of

the Plant in combined cycle mode, thereby fixing the

operation and supply period up to March-2018.

(ii) The Commission allowed petition no. 7 of 2010

subject to the condition that any profits from the

Plant would be governed by provisions of DERC

(Treatment of Income from Other Business of

Transmission Licensee and Distribution Licensee)

Regulations, 2005.

(iii) The Commission allowed petition no. 6 of 2013 and

approved the fixed charges and operational

parameters required for computation of energy

charges and directed the TPDDL to file true-up

petitions for finalisation of generation tariff for the

respective years.

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6. The Commission by its order dated 31.08.2017, determined the

capital cost of the Plant at ₹197.70 crores after applying

appropriate benchmarking and prudence checks as against the

TPDDL’s claimed capital cost of ₹320.17 crores. It is noteworthy

that the said capital cost determination was made in the

backdrop of six years operational framework. The Commission

accepted a technical useful life of the Plant of fifteen years

based on experts certification, and it 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. The TPDDL did not challenge the aforesaid order

by way of an appeal and therefore the order dated 31.08.2017

has become final and binding inter-parties.

7. Subsequently, TPDDL filed a petition namely, petition no. 51 of

2017, seeking true-up of expenditure for Financial Years 2010-

2011 to 2016-2017 and the annual requirements for Financial

Year 2017-2018. The Commission, by an order dated

11.11.2019, allowed depreciation at the rate of 6% per annum

in respect of the Plant only up to Financial Year 2017-2018

resulting in cumulative depreciation of ₹83.34 crores. The

remaining capital cost of approximately ₹94.59 crores together

5 with carrying cost, was not allowed to be passed through in

tariff, on the ground that Plant has ceased to supply electricity

to the consumers after March-2018.

8. The aforesaid order of the Commission was challenged by

TPDDL in an appeal. The APTEL by an order dated 10.02.2025

inter alia held that the Commission itself had fixed the useful

life of the Plant at fifteen years and had computed the capital

cost on that basis. Therefore, the depreciation cost cannot be

restricted only to six years. The APTEL further held that

Regulation 6.32 of the DERC (Terms and Conditions for

Determination of Generation Tariff) Regulations, 2011 (2011

Regulations) mandated depreciation over the useful life and did

not admit of any exception. The APTEL, therefore, set aside the

order of the Commission and remanded the matter to it with a

direction to allow recovery of entire capital cost of the Plant by

way of depreciation over the useful life of the Plant for fifteen

years.

9. Aggrieved by the said judgment the Commission has preferred

the present appeal.

SUBMISSIONS

10. Learned senior counsel for the Commission submitted that

APTEL erred in not appreciating that TPDDL cannot recover the

capital cost of the Plant either from the distribution licensee or

6 from the retail consumers of Delhi, in respect of electricity not

supplied and to fasten the liability on the consumers for a

period beyond March-2018 is contrary to Section 61 (d) of the

2003 Act. It is contended that APTEL misapplied Regulation

6.32 of 2011 Regulations and ought to have appreciated that

TPDDL was free to exploit the Plant beyond six years to recover

its capital cost. It is, therefore, submitted that the impugned

order be set aside and the appeal be allowed.

11. Learned senior counsel for the TPDDL, on the other hand,

submitted that TPDDL is entitled to recover depreciation in

terms of Regulation 6.32 of 2011 Regulations, as the same does

not restrict depreciation only to the operational life or the

duration of the Power Purchase Agreement (PPA). It is

contended that TPDDL is only seeking to recover balance

recovery of depreciable capital cost of the Plant. It is urged that

Commission must abide by and implement the directions of

APTEL to secure accountability and disproportionate increase

and long pending regulatory asset depict a regulatory failure

which has serious consequences on all stakeholders and the

ultimate burden is only on the consumer 1. It is urged that the

1 BSES Rajdhani Power Ltd. & Anr. v. Union of India & Ors., 2025 SCC OnLine SC 1637 7 order of the APTEL does not call for any interference in this

appeal.

ISSUES

12. We have considered the rival submissions on both sides and

have perused the record. Section 125 of the 2003 Act provides

for a remedy of appeal to an aggrieved person from the decision

or order of APTEL to this Court, on any one or more of the

grounds specified in Section 100 of the Code of Civil Procedure,

1908.

13. Upon consideration of the pleadings, the record of the

proceedings before the Commission and APTEL, and the

submissions of learned counsel for the parties, following

substantial questions of law arise for determination in this

appeal:

(i) Whether the depreciation under the applicable tariff

regulations must necessarily be allowed over the entire

technical useful life of an asset irrespective of the period

during which the asset is actually utilised for supply of

electricity?

(ii) Whether Regulation 6.32 of 2011 Regulations confers an

absolute right upon the generating utility to recover

entire capital cost over the useful life of the asset, even

8 where the asset ceases to supply electricity to the

consumer?

(iii) Whether the APTEL erred in law in disregarding the

regulatory framework and approval conditions which

limited the operational and recovery period of the Plant

to six years?

STATUTORY FRAMEWORK

14. Before proceeding further, it is useful to set out the statutory

and regulatory provisions that have bearing on the questions

which arise for consideration in this appeal.

15. Section 61 of the 2003 Act governs the determination of tariff.

Section 61(d) specifically provides that in specifying the terms

and conditions for the determination of tariff, the Appropriate

Commission shall be guided, inter alia, by the object of

safeguarding consumers’ interests and at the same time,

recovery of the cost of electricity in a reasonable manner. This

provision establishes consumer welfare not as a peripheral

consideration but as a central and guiding statutory principle in

tariff determination.

16. Section 62 of the 2003 Act empowers the Commission to

determine tariff for supply of electricity by a generating company

9 to a distribution licensee, in accordance with the provisions of the

2003 Act and the Regulations made thereunder.

17. Regulations 6.30 to 6.32 of the DERC (Terms and Conditions

for Determination of Generation Tariff) Regulations, 2011 provides

as follows:

“6.30 Depreciation shall be calculated for each year of the Control Period, on the amount of Capital Cost of the Fixed Assets as admitted by the Commission; Provided that depreciation shall not be allowed on assets funded by any capital subsidy/grant.

6.31 Depreciation for each year of the Contral Period shall be determined based on the methodology as specified in these Regulations along with the rates and other terms specified in Appexdix-1 of these Regulations.

6.32 Depreciation shall be calculated annually, based on the straight line method, over the useful life of the asset. The base value for the purpose of depreciation shall be capital cost of the asset as admitted by the Commission. Provided that, the remaining depreciable value as on 31st March of the year closing after a period of 12 years from the date of commercial operation shall be spread over the balance useful life of the assets.”

18. Regulation 4.1 of the 2011 Regulations mandates that the tariff

for supply of electricity by the generating company to the

distribution licensee shall be in accordance with the PPA or any

other arrangement for such period as may be approved or

10 adopted by the Commission, to the extent of the existing

installed capacity as contained in the PPA.

ANALYSIS AND FINDINGS

Question No. (i)

19. The Commission while computing the capital cost of the Plant

for determination of final generation tariff, by an order dated

31.08.2017, found that useful life of the Plant is fifteen years.

However, the Commission vide order dated 31.08.2017, approved

the PPA which restricted the period of operation and supply up

to March-2018, i.e., for a period of six years. Admittedly, a sum

₹83.34 crores has been approved as depreciation for the

aforesaid period of six years.

20. The tariff determination is not merely a mathematical exercise

but a regulatory balancing act. The object of enabling reasonable

cost recovery for utilities must be weighed against and calibrated

with, paramount obligation to safeguard consumer interest. In

the instant case, admittedly, electricity has not been supplied to

the consumers beyond March-2018. The consumers cannot be

required to pay for a service which they no longer received.

Under the PPA, TPDDL had to supply electricity only for a period

of six years. It is also pertinent to note that the Commission on

04.09.2012, had clarified to the Managing Director of TPDDL

11 that the plant could be treated as a merchant generator which is

free to sell the power anywhere other than to the distribution

utilities in Delhi or outside the State or to captive consumers

within the State. There was no legal impediment to either sale of

the Plant or sale of electricity as a merchant generator.

Therefore, TPDDL cannot be permitted to burden the consumers

with tariff charges beyond March-2018. Therefore, the first

substantial question of law is answered in the negative. Question No. (ii)

21. Regulation 6.32 of 2011 Regulations prescribes the

methodology of calculating depreciation over the useful life of the

asset. It is a settled canon of statutory interpretation that no

provision has to be read in isolation. Regulation 6.32 of 2011

Regulations must be construed harmoniously with Regulation

4.1 of 2011 Regulations, which mandates that the tariff for

supply of electricity by a generating company to a distribution

licensee is to be determined in accordance with PPA or any other

arrangement for such period as may be approved or adopted by

the Commission, to the extent of existing installed capacity

contained in the PPA. Regulation 4.1 of 2011 Regulations

confines tariff entitlement to the period approved in the PPA. The

order dated 31.08.2017 fixed the operational and recovery

12 framework of the plant up to March-2018. The 2011 Regulations

have to be read in conjunction with Section 61(d) of the 2003 Act

which places the consumer interest at the centre of tariff

Regulation. Thus, Regulation 6.32 of the 2011 Regulations does

not, and cannot, override the broader statutory and regulatory

framework and the same does not confer an absolute and

unconditional right upon the generating utility to recover

depreciation from the consumers even for a period when the

asset is free to supply electricity. For the aforementioned

reasons, the substantial question of law no. (ii) is also answered

in the negative.

Question No. (iii)

22. The GNCTD granted permission on a temporary basis for a

period 5 to 6 years. The TPDDL was directed to obtain all

necessary regulatory approvals before commencing generation.

The Commission in its order dated 31.08.2017, which was not

challenged by TPDDL, approved the PPA only for a period of six

years from the date of commercial operation till March-2018. The

APTEL ought to have appreciated that distinction between 15

years technical useful life and 6 years regulatory recovery period

is not merely semantic but the tariff framework drew the

distinction clearly. The APTEL’s approach is inconsistent with the

13 order dated 31.08.2017, which was accepted by TPDDL and had

attained finality. The True-up proceedings are intended to give

effect to tariff framework and not to reopen or reconfigure it. The

APTEL erred, therefore, in disregarding the regulatory framework

and conditions of approval. Therefore, the third substantial

question of law, is answered in the affirmative.

23. For the foregoing reasons, the substantial questions of law

which arise for consideration in this appeal, are answered in

favour of the Commission and against the TPDDL. The impugned

judgment dated 10.02.2025 passed by the APTEL is set aside and

order dated 11.11.2019 passed by the Commission is restored.

24. In the result, appeal is allowed. There shall be no order as to

costs.

.…..………………….………….……….J. [PAMIDIGHANTAM SRI NARASIMHA]

…..…….……………….………….……….J. [ALOK ARADHE]

NEW DELHI;

MAY 7, 2026.

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