Summary
A generating utility cannot recover depreciation from consumers over the full fifteen-year technical life of a plant that was approved to supply electricity, and did supply it, only for six years up to March 2018. Regulation 6.32 of the DERC Generation Tariff Regulations, 2011 must be read with Regulation 4.1 and Section 61(d) of the Electricity Act, 2003. APTEL's judgment was set aside and the Commission's order restored.
Issues
- Whether depreciation must be allowed over the entire technical useful life of an asset regardless of the period during which it actually supplies electricity.
- Whether Regulation 6.32 of the 2011 Regulations gives a generating utility an absolute right to recover the entire capital cost over the useful life even after the asset stops supplying consumers.
- Whether APTEL erred in disregarding the regulatory framework and approval conditions that limited the plant's operational and recovery period to six years.
Provisions considered
- Regulation 6.32 (with Regulations 6.30 and 6.31), DERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2011Prescribes straight-line depreciation over the useful life on the admitted capital cost. The Court held it sets out a method of calculation only and does not override the wider statutory and regulatory framework or give an unconditional right to recover depreciation from consumers. (¶¶ 17, 21)
- Regulation 4.1, DERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2011Tariff for supply by a generating company to a distribution licensee is governed by the PPA or arrangement for the period approved by the Commission; this confined tariff entitlement to the approved six-year period. (¶¶ 18, 21)
- Section 61(d), Electricity Act, 2003Requires tariff terms to safeguard consumers' interests while allowing recovery of the cost of electricity in a reasonable manner; consumer interest is central and the tariff regulations must be read with it. (¶¶ 15, 20, 21)
- Section 125, Electricity Act, 2003An appeal from APTEL lies to the Supreme Court on the grounds in Section 100 CPC; the Court framed and answered substantial questions of law. (¶¶ 12, 13)
Held
- Tariff determination balances reasonable cost recovery against the paramount duty to protect consumers. Consumers cannot be made to pay for a service they did not receive. The plant supplied consumers only up to March 2018 under a PPA approved for six years, and the utility was free to sell the plant or run it as a merchant generator, so tariff charges beyond March 2018 could not be loaded on consumers. (¶¶ 19, 20)
- Regulation 6.32 must be read harmoniously with Regulation 4.1 and Section 61(d). It does not give a generating utility an absolute right to recover the full capital cost through depreciation from consumers over the asset's useful life. (¶ 21)
- The Commission's unchallenged order of 31.08.2017 had become final and drew a clear line between the fifteen-year technical life and the six-year regulatory recovery period. True-up proceedings give effect to that tariff framework and cannot reopen it, so APTEL erred in disregarding the framework and the approval conditions. (¶¶ 6, 22)
Result
Appeal allowed. APTEL's judgment dated 10.02.2025 was set aside and the Commission's order dated 11.11.2019 was restored. No order as to costs.