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No Power, No Payment: Supreme Court Shields Delhi Consumers from 'Ghost' Plant Costs
In a consumer-friendly verdict, the has ruled that electricity users cannot be saddled with depreciation charges for a power plant that stopped delivering juice after its approved tenure. A bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe (who authored the judgment) allowed the Delhi Electricity Regulatory Commission's (DERC) appeal, overturning the 's order that favored . The decision, delivered on , in Delhi Electricity Regulatory Commission vs. Tata Power Delhi Distribution Limited (2026 INSC 461), emphasizes that tariffs must reflect actual service provided.
Games Glory to Gridlock: The Rithala Plant Saga
The roots trace back to Delhi's frantic preparations for the 2010 Commonwealth Games. TPDDL, a joint venture between Tata Power and Delhi Power Company, proposed a temporary 108 MW gas-based Combined Cycle Power Plant at Rithala on land leased from the . TPDDL itself pitched it as a 5-6 year fix for peak demand, after which the land would revert to DDA.
Key milestones: - 2007-2008 : Land use change sought for short-term ops. - 2009-2011 : DERC grants in-principle nod; plant goes commercial in open cycle (Feb 2011) and combined cycle (Sep 2011). - : DERC's pivotal order caps operations and tariff recovery at six years till , admits 15-year technical life but approves capital cost at ₹197.70 crore (pruned from TPDDL's ₹320.17 crore claim), allows ₹83.34 crore depreciation for the period. - Post-2018 : Plant halts supply to Delhi consumers. - : DERC true-up denies remaining ₹94.59 crore recovery. - : APTEL flips it, mandates full 15-year depreciation.
DERC challenged APTEL before the Supreme Court under .
Regulator vs. Generator: Clash Over 'Stranded' Costs
DERC's Pitch : argued consumers can't foot bills for unsupplied power, violating Section 61(d)'s consumer safeguard mandate. TPDDL had options post-2018—like merchant sales or plant disposal—yet seeks to burden Delhi users. isn't absolute; the unchallenged 2017 order fixed a six-year recovery window.
TPDDL's Defense : Represented by , they invoked Regulation 6.32 mandating over useful life (15 years), irrespective of supply duration or PPA term. They sought "balance recovery" of depreciable capital, warning of regulatory failure otherwise, with costs ultimately on consumers (citing BSES Rajdhani Power Ltd. v. UOI , 2025 SCC OnLine SC 1637, for accountability).
Decoding the Balance: Useful Life ≠ Billing Lifeline
The Court framed three core questions: 1. Must depreciation span full technical life, ignoring actual supply? 2. Does Reg. 6.32 grant absolute recovery rights post-cessation? 3. Did APTEL ignore the six-year regulatory cap?
Drawing on —guiding tariffs to protect consumers while allowing reasonable recovery—the bench called tariff-setting a "
,
"not rote math. Reg. 6.32 must harmonize with
(PPA-bound tariffs) and consumer welfare. No"
absolute right" to charge for non-service.
Crucially, DERC's 2012 clarification freed TPDDL for merchant sales outside Delhi or to captives, nixing any "" claim. The 15-year life informed methodology, but recovery tied to approved ops—a distinction APTEL blurred.
As LiveLaw (2026 LiveLaw (SC) 474) noted, this rejects full-life claims even for underutilized infra, impacting future tariff rows.
Key Observations
“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.”
“Tariff determination is not merely a mathematical exercise but a . The object of enabling reasonable cost recovery for utilities must be weighed against... paramount obligation to safeguard consumer interest.”
“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 [ceases to supply].”
“There was no legal impediment to either sale of the Plant or sale of electricity as a . Therefore, TPDDL cannot be permitted to burden the consumers with tariff charges beyond March-2018.”
Victory for the Meter: Restored Order, Broader Ripples
The appeal succeeded: APTEL's judgment set aside; DERC's order restored. No costs ordered.
Practically, Delhi consumers dodge ~₹94 crore pass-through. Precedent-wise, it cements consumer primacy in tariffs, curbing over-recovery for short-term plants. Utilities must now eye alternatives like merchant ops, not default to consumer wallets— a blueprint for resolving stranded assets amid green shifts, as echoed in Jurishour analysis.
