2025 Supreme(Online)(APTEL) 14

APPELLATE TRIBUNAL FOR ELECTRICITY
Tata Power Delhi Distribution Ltd. VERSUS Delhi Electricity Regulatory Commission
APPEAL No. 168 of 2018 (PDF)

For computing working capital, carrying cost, being a mandatory component of the Annual Revenue Requirement, must be included. 'Receipts' from open access customers are to be treated as actual cash collections, not accrued income.

Headnote:(A) Electricity Act, 2003 - Sections 61 and 82 - Delhi Electricity Reforms Act, 2000 - Section 14 - Tariff determination - True-up exercise - Working capital computation - Carrying cost - Regulatory asset - Non-tariff income - Open access charges - Foreign exchange gain - Principles of regulatory accounting. (Paras 25-32, 55-61, 84-91)

(B) Interpretation of Regulations - The word 'receipts' in the context of netting income from cross-subsidy surcharge and additional surcharge from open access customers is to be construed as actual cash collected, not the accrued amount reflected in audited accounts. The regulatory requirement is for collection-based figures, and the failure of the commission to consider such figures, even if provided late, constitutes an error. (Paras 25-32)

(C) Working capital - Carrying cost, recognized as a mandatory component of the Annual Revenue Requirement (ARR) under Regulation 116, must be included in the working capital base computed under Regulation 84. Excluding it leads to under-compensation and is not prevented by the risk of 'interest on interest,' which is a normal outcome of the financing structure. (Paras 55-61) Facts of the Case: The Appellant, a distribution licensee, appealed a Tariff Order passed by the State Commission, which dealt with the true-up of expenses for FY 2014-15 and FY 2015-16 and the determination of Aggregate Revenue Requirement (ARR) and tariff for FY 2017-18. The appeal raised numerous issues, which were categorized into groups. The Appellant pressed four specific issues for adjudication, including (i) the incorrect consideration of open access charges on an accrual basis instead of an actual collection basis, (ii) the non-inclusion of carrying cost in the working capital computation, (iii) a clerical error in using revenue collected instead of revenue billed for working capital, and (iv) the disallowance of a foreign exchange gain. The remaining issues were either covered by precedent, not pressed, or sub judice.

Issues: The main issues were whether the Commission erred in (1) deducting open access charges on an accrual basis rather than an actual receipt basis; (2) excluding carrying cost from the ARR for computing working capital; (3) using revenue collected instead of revenue billed for working capital computation; and (4) treating a foreign exchange gain from the generation business as non-tariff income for the distribution business.

Findings of Court:
The Tribunal found in favor of the Appellant on issues 1 and 2. It held that 'receipts' in the Regulations mean actual cash collections, not accrued amounts. It also held that carrying cost is a mandatory component of ARR and must be included in the working capital base. On issue 3, the Commission conceded the error. On issue 4, the Tribunal remanded the matter to the Commission for afresh consideration, noting that the generation business was regulated separately and that the Commission had the opportunity to enforce separate accounting requirements.

Ratio Decidendi: The core reasoning is that regulatory terms like 'receipts' must be interpreted based on their ordinary meaning in a regulatory context, favoring actual collections. Further, the mandatory inclusion of carrying cost in the ARR, as per regulations, necessitates its inclusion in the working capital base to ensure fair compensation for the time cost of money. The Commission must provide well-reasoned orders. Result : Appeal allowed in part. The Impugned order was set aside concerning Issues 1 and 4, with directions for adjustments and allowance of carrying cost. Issue 18 was disposed of based on the Commission's assurance to correct the error. Issue 22 was remanded for fresh consideration. The Appellant was granted liberty to raise other issues in future proceedings.

JUDGEMENT

PER HON’BLE MR. AJAY TALEGAONKAR, TECHNICAL MEMBER

1. The present Appeal has been filed by Tata Power Delhi Distribution Limited (“Appellant” or “TPDDL”) challenging Tariff Order dated 31.08.2017 (“Impugned Order”) passed by the Delhi Electricity Regulatory Commission (“Respondent” or “DERC”) in Petition Nos. 17 of 2017 and 24 of 2017.

Description of the Parties

2. The Appellant is a joint venture between Tata Power Company Limited (“TPCL”) and Delhi Power Company Limited (“DPCL”) with 51% of shareholding and management control with TPCL. The balance 49% equity is held by DPCL, being a company wholly owned by the Government of NCT of Delhi (“Delhi Government”). The Appellant is a distribution licensee in terms of the Delhi Electricity Reforms Act, 2000 (“the Reforms Act”) read with Section 14 of the Electricity Act, 2003 (“the Act”) having been issued with the Distribution and Retail Supply License by DERC to undertake distribution and retail supply of electricity in the North and North West Circles of the National Capital Territory of Delhi.

3. The Respondent, i.e. DERC was established under the provisions of the Electricity Regulatory Commission Act, 1998 and continues to exercise jurisdiction as the State Regulatory Commission under Section 82 of the Act.

Factual Matrix of the Case

4. The present Appeal, being Appeal No. 168 of 2018, arises from the Tariff Order dated 31.08.2017 passed by the Delhi Electricity Regulatory Commission in Petition No. 17 of 2017 and Petition No. 24 of 2017 (“ARR Petitions”) filed by the Appellant for determination of Aggregate Revenue Requirement (ARR) and Tariff for FY 2017-18, and for True-up of expenses for FY 2014-15 and FY 2015-16.

5. Being aggrieved by the Impugned Order dated 31.08.2017 passed by the DERC in Petition Nos. 17 of 2017 and 24 of 2017, the Appellant has preferred the present Appeal.

6. The Appellant has prayed for the following relief before us:

“(a) Admit the Appeal;

(b) Set aside the Impugned Order dated 31.08.2017 to the extent challenged in the above paragraphs; and

(c) Allow carrying costs on the claims of the Appellant;

(d) Pass any such other or further orders as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case.”

Summary of the Issues brought out in the Appeal

7. The Appeal broadly raises issues concerning (a) alleged non-compliance with the Tariff Regulations framed by the DERC; (b) alleged non-implementation of directions issued by this Tribunal in earlier proceedings; and (c) alleged disallowances, clerical errors, and deviations from established methodologies and directives.

8. The above issues, as raised in the Appeal, pertain to the treatment of specific cost components, methodological applications, and the implementation of regulatory and judicial directions in the context of true-up and tariff determination undertaken by the DERC for the relevant financial years.

10. In the Revised Brief Submissions dated 30.09.2025 on Categorisation of Issues, the Appellant has classified the aforesaid twenty-nine (29) issues into three (3) broad categories:

Category A: Ten (10) Issues Covered by Judicial Precedents

11. This category comprises issues already adjudicated upon by this Tribunal or the Hon’ble Supreme Court.

(A.1)- Two (2) issues, namely Issue No. 2 (Disallowance of Financing Charges) and Issue No. 20 (Non-consideration of increased Service Tax rate), have already been implemented by the DERC in subsequent True-up Orders in compliance with the Tribunal’s earlier judgment dated 30.09.2019 in TPDDL vs. DERC, 2019 SCC OnLine APTEL 106. Civil Appeal No. 1762 of 2020 preferred by DERC against the said judgment are presently pending before the Hon’ble Supreme Court.

(A.2)- Five (5) issues, namely Issues Nos. 5, 12, 24, 25, and 26 have been decided by this Tribunal in favour of the Appellant in Appeal No. 301 of 2015 and Appeal No. 246 of 2014; however, the same are yet to be implemented by the DERC. Despite the lapse of considerable time, t

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