The Supreme Court ruled that DERC cannot re-open the basis of determination of tariff at the stage of ‘Truing Up”.
The Tariff Appeals were filed by the appellants before the APTEL challenging certain findings of the Delhi Electricity Regulatory Commission (‘DERC’) in the Tariff Order for Truing Up of financials for FY 2008-09 and FY 2009-10 and Aggregate Revenue Requirement (‘ARR’) for FY 2011-12. DERC has also filed appeals challenging certain findings in the common impugned order and the said appeals will be heard and decided separately.
Arvind P. Dattar and Dhruv Mehta, senior counsel appearing for the appellants, submitted that the findings of the APTEL on Issue Nos.1, 2, 3 and 5 are contrary to the binding DERC Tariff Regulations.
They argued that the Regulator cannot ‘change the rules of the game after it has begun’ in the ‘truing up exercise’.
They further argued that the tariff order is in the nature of a quasi judicial determination and that in the guise of truing up, the DERC cannot amend a tariff order.
Senior Advocate Nikhil Nayyar, appearing for the respondent DERC, submitted that one of the facets of the tariff determination exercise is the process of ‘truing up’. Since the initial tariff order is prepared by the DERC, based on the projections submitted by the Discoms as its ARR petition, the subsequent tariff order is issued after the financial year pursuant to the ‘truing up’ exercise.
The division bench of Justice S. Abdul Nazeer and Justice Krishna Murari noted that the DERC determines the tariff of the licensee under Section 62 in such a manner as determined by the 2007 MYT Regulations.
It was further noted that DERC determines ARR of the licensee i.e. costs of undertaking the licensed business which are permitted in accordance with the requirement specified by DERC which is to be recovered from the tariff in the year end.
The bench observed that a tariff order is quasi judicial in nature which becomes final and binding on the parties unless it is amended or revoked under Section 64(6) or set aside by the Appellate Authority.
The court viewed that at the stage of ‘truing up’, the DERC cannot change the rules/methodology used in the initial tariff determination by changing the basic principles, premises and issues involved in the initial projection of ARR.
It was opined by the court that ‘truing up’ stage is not an opportunity for the DERC to rethink de novo on the basic principles, premises and issues involved in the initial projections of the revenue requirement of the licensee. ‘Truing up’ exercise cannot be done to retrospectively change the methodology/principles of tariff determination and reopening the original tariff determination order thereby setting the tariff determination process to a naught at ‘trueup’ stage.
The court held that allowing the Financing Costs on LPSC revenue and then deducting it from the LPSC revenue would tantamount to giving by one hand and taking it away by the other. This order of the DERC is contrary to the original MYT determination.
It was further viewed that disallowing interest paid by the appellants towards Consumers Security Deposit held by DPCL in the ARR of the appellants is wholly misconstrued.
The court held that the appellants are entitled to recover interest on Consumers Security Deposit as held by the DPCL and directed the DERC to allow the interest on Consumers Security Deposit held by the DPCL and impact thereof to the appellants.
It was also viewed that the assessed energy has to be considered as supply by the appellants in enforcement cases.
Therefore, the court directed the DERC to consider assessed energy for calculation of enforcement sales and allow the impact of the same along with carrying costs.
Case title: BSES Rajdhani Power Ltd. v/s Delhi Electricity Regulatory Commission
Citation: Civil appeal no(s). 4324 of 2015