IMPORTANT POINT
With enactment of the Electricity Act, 2003 repealing the Electricity (Supply) Act, 1948, the role and functions of the CEA have been vastly modified.

JUDGMENT

T.S. THAKUR, J.

1. This appeal under Section 125 of the Electricity Act, 2003 calls in question the correctness of a Judgment and Order dated 7th July, 2006 passed by the Appellate Tribunal for Electricity whereby the Tribunal has while partially modifying the Order passed by the Central Electricity Regulatory Commission ('CERC' for short) dismissed Appeal No.36 of 2006 filed by the appellant.

2. The CERC had by the Order impugned before the Tribunal allowed Petition No.139 of 2004 filed by the respondent-Corporation and permitted capitalisation of Rs.4.521 crores over the approved cost for the completion of Feroz Gandhi Unchahar Thermal Power Station Stage-I for the period 1st April, 2001 to 31st March, 2004. While doing so the CERC had in Para 37 of its Order held respondent No.1 entitled to return on equity and interest on loan on the said amount payable along with the tariff for the period 2004- 2009.

What is significant is that both the CERC and the Appellate Tribunal rejected the contention urged on behalf of the appellant-Corporation that the additional capital expenditure incurred by the respondent-Corporation could not be taken into consideration for tariff fixation without the same having been approved by the Central Electricity Authority ("CEA" for short) as required under Regulation 2.5 of the CERC (Terms and Conditions for Determination of Tariff) Regulations, 2001. The primary question that therefore falls for consideration in this appeal is whether the CERC and the Tribunal have correctly interpreted Regulation 2.5 of the said regulations while permitting capitalisation of the additional expenditure for purposes of determining the tariff. That question arises in the following factual backdrop:

3. Feroz Gandhi Unchahar Thermal Power Station Stage-I was taken over by the respondent-National Thermal Power Corporation from the erstwhile U.P. State Electricity Board on 13th February, 1992. The Central Government had approved the takeover cost of Rs.925 crores in terms of a communication dated 2nd May, 1993 issued by the Ministry of Power. By a subsequent letter dated 5th August, 1996 the CEA accorded approval for an additional Rs.2.85 crores for R & M under Environment Action Plan, thereby taking the total approved project cost to Rs.927.85 crores.

4. The CERC (Terms & Conditions for Determination of Tariff) Regulations, 2001 for the period 1st April, 2001 to 31st March, 2004 came to be notified on 26th March, 2001, pursuant whereto the respondent- Corporation filed Petition No.41 of 2001 for approval of tariff for the relevant tariff period in respect of the generating plant in question. By an Order dated 24th October, 2003, the CERC approved the tariff taking into consideration the capital cost at Rs.940.70 crores as on 1st April, 2001 but did not consider the additional capitalisation claimed by the respondent since the latter was based only on an estimated capital expenditure and was unsupported by an auditor's certificate. Respondent- Corporation then moved petition No.139 of 2004 before the CERC on 5th October, 2004 seeking approval of the revised fixed charges in respect of the generating plant for the relevant tariff period taking into account the additional capital expenditure incurred during the said period which was estimated at Rs.6.101 crores. By an order dated 31st March, 2005, the CERC disposed of the said petition approving an amount of Rs.4.521 crores towards capital expenditure while disallowing the rest.

5. The CERC held that the respondent would not be entitled to tariff revision during the relevant period in the light of Regulation 1.10 of the CERC Regulations which prohibited allowance of an additional capital expenditure, if such expenditure happened to be less than 20 per cent of the approved project cost. It all the same held in Para 37 of its Order that the respondent was entitled to relief in the form of return on equity at the rate of 16% and interest on loan on the approved additional c