Case Name: DELHI ELECTRICITY REGULATORY COMMISSION V. TATA POWER DELHI DISTRIBUTION LIMITED
Petition Number: CIVIL APPEAL NO.6388 OF 2025
Neutral Citation: 2026 INSC 461
Date of Judgment: 07.05. 2026
Coram: HON’BLE MR. JUSTICE ALOK ARADHE & HON’BLE JUSTICE MR. PAMIDIGHANTAM SRI NARASIMHA
Relevant Provisions: Section 61 of the Electricity Act, 2003.
INTRODUCTION
The primary question in consideration in this case was whether the consumer could be made to bear power plant depreciation costs for a period for which electricity was not supplied. The Court held in the negative and affirmed that consumers cannot be compelled to bear depreciation costs for a power plant during periods when no electricity was supplied, reaffirming the primacy of consumer interest in tariff determination.
FACTS
This appeal arose from a dispute concerning the recovery of the capital cost of the Rithala Combined Cycle Power Plant established by Tata Power Delhi Distribution Limited (TPDDL). The plant was conceived as a temporary measure to meet Delhi’s electricity demand during the Commonwealth Games and was approved for operation only through March 2018. Although the Delhi Electricity Regulatory Commission (DERC) accepted the plant’s technical useful life as fifteen years, it restricted tariff recovery to the approved six-year operational period. By its order dated 11.11.2019, the Commission allowed depreciation only up to FY 2017–18 and disallowed recovery of the remaining capital cost once the plant stopped supplying electricity after March 2018.
On appeal, the Appellate Tribunal for Electricity (APTEL) held that Regulation 6.32 of the DERC Generation Tariff Regulations, 2011, mandated depreciation over the entire useful life of fifteen years. Since the Commission itself had determined the plant’s useful life at fifteen years while approving the capital cost, APTEL ruled that depreciation could not be curtailed to six years. Accordingly, APTEL set aside the Commission’s order and directed recovery of the entire capital cost through depreciation over fifteen years, leading DERC to challenge the decision before the Supreme Court.
ISSUES
- Whether depreciation under the applicable Tariff Regulations is required to be allowed for the entire technical useful life of an asset, irrespective of the period during which the asset is actually utilised for the supply of electricity?
- Whether Regulation 6.32 of the 2011 Regulations confers an absolute right upon the generating utility to recover the entire capital cost over the useful life of the asset, even where the asset ceases to supply electricity to consumers?
- Whether the APTEL erred in law in disregarding the regulatory framework and the approval conditions that restricted the operational and cost-recovery period of the Plant to six years?
ARGUMENTS OF THE PARTIES
The Commission argued that TPDDL could not recover capital costs from consumers for periods after March 2018, when the plant stopped supplying electricity. It contended that APTEL wrongly applied Regulation 6.32 and ignored Section 61(d) of the Electricity Act protecting consumer interests.
TPDDL contended that Regulation 6.32 entitled it to recover depreciation over the plant’s fifteen-year useful life irrespective of operational duration. It argued that only the unrecovered depreciable capital cost was claimed and that APTEL’s directions ensured regulatory accountability and stakeholder fairness.
JUDGMENT AND ANALYSIS
Addressing the first issue, the Supreme Court held that the tariff framework under the Electricity Act, 2003, must balance the recovery of legitimate costs by utilities with the paramount objective of safeguarding consumer interests under Section 61(d). The Court examined whether TPDDL could recover depreciation over the entire technical useful life of the power plant despite the plant supplying electricity only up to March 2018 under the approved Power Purchase Agreement (PPA).
The Court observed that although the Commission had determined the technical useful life of the plant to be fifteen years, the PPA approved by the Commission on 31.08.2017 permitted operation and supply of electricity only for a period of six years ending in March 2018. During this period, TPDDL had already recovered depreciation amounting to ₹83.34 crores. The Court emphasised that consumers could not be burdened with tariff charges for a period during which they received no electricity supply.
With respect to the second issue, the court interpreted Regulations 6.30 to 6.32 of the DERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2011, harmoniously with Regulation 4.1 and held that depreciation provisions could not be read in isolation. Regulation 4.1 confined tariff entitlement to the duration approved under the PPA. After reiterating that the 2011 Regulations have to be read in conjunction with Section 61(d) of the 2003 Act, the Court emphasized that 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.
The Court further noted that the Commission had clarified that the plant could operate as a merchant generator and was free to sell electricity outside Delhi or to captive consumers. Therefore, there existed no legal impediment preventing TPDDL from commercially utilising the plant after March 2018. In such circumstances, the financial burden could not be shifted to Delhi consumers after cessation of supply under the PPA.
The Court also held that APTEL failed to appreciate the distinction between the fifteen-year technical useful life of the plant and the six-year regulatory recovery period approved by the Commission. Since TPDDL had accepted the Commission’s order dated 31.08.2017 and had not challenged it, the tariff framework had attained finality. The Court observed that true-up proceedings were intended to implement the existing tariff framework and could not be used to reopen or modify it. Accordingly, the Court set aside the judgment of APTEL and restored the Commission’s order.
CONCLUSION
The Supreme Court reaffirmed that tariff recovery must remain linked to actual electricity supply and approved regulatory arrangements. By restoring DERC’s order and setting aside APTEL’s decision, the Court ensured that consumers are not unfairly burdened with depreciation costs beyond the operational period of the plant, thereby strengthening the consumer-protection mandate under Section 61(d) of the Electricity Act, 2003.
