The Supreme Court has held that electricity consumers cannot be compelled to bear tariff charges for a power plant after the plant has stopped supplying electricity, restoring the order passed by the Delhi Electricity Regulatory Commission (DERC) against Tata Power Delhi Distribution Limited (TPDDL).
The bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe set aside the judgment of the Appellate Tribunal for Electricity (APTEL), which had permitted TPDDL to recover the entire capital cost of the Rithala Combined Cycle Power Plant through depreciation over a period of fifteen years despite the plant ceasing electricity supply after March 2018.
The dispute arose from the establishment of a temporary 108 MW gas-based power plant at Rithala in Delhi. The project was conceived as an emergency measure to meet peak electricity demand in the lead-up to the Commonwealth Games 2010. TPDDL had itself represented before authorities that the plant would operate only for a short duration of 5 to 6 years, after which the land would revert to the Delhi Development Authority (DDA).
The Court noted that the Delhi Electricity Regulatory Commission had, by its order dated 31 August 2017, approved the operational and supply period of the plant only up to March 2018. Although the Commission accepted that the technical useful life of the plant was fifteen years, the tariff recovery structure and operational approval were consciously restricted to six years.
The Commission had determined the capital cost of the plant at ₹197.70 crore against TPDDL’s claim of ₹320.17 crore. Subsequently, while deciding the true-up petition, DERC allowed depreciation only till FY 2017-18 and refused to pass the remaining unrecovered capital cost of about ₹94.59 crore onto consumers because the plant had stopped supplying electricity after March 2018.
However, APTEL later reversed the Commission’s order and held that Regulation 6.32 of the DERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2011 mandated depreciation recovery over the entire useful life of the asset. APTEL directed DERC to permit depreciation recovery over fifteen years.
Challenging this decision before the Supreme Court, DERC argued that consumers cannot be forced to pay for electricity that was never supplied after March 2018 and that such recovery would violate Section 61(d) of the Electricity Act, which requires safeguarding consumer interests.
Accepting DERC’s submissions, the Supreme Court emphasized that tariff determination is not merely an accounting exercise but a “regulatory balancing act” between utility cost recovery and consumer welfare. The Court categorically observed that consumers cannot be asked to pay for a service they no longer receive.
The bench further noted that TPDDL was not left remediless, as the Commission had earlier clarified that the plant could operate as a merchant generator and sell electricity elsewhere, including outside Delhi or to captive consumers. Therefore, the company could not shift the burden of unrecovered costs onto Delhi consumers beyond the approved operational period.
Interpreting Regulation 6.32 harmoniously with Regulation 4.1 of the 2011 Tariff Regulations, the Court held that depreciation recovery cannot be divorced from the approved Power Purchase Agreement (PPA) period. The Court clarified that Regulation 6.32 does not create an “absolute and unconditional right” to recover depreciation from consumers even after the asset ceases supplying electricity.
The Supreme Court also criticized APTEL for disregarding the distinction between the technical useful life of the plant and the regulatory recovery period approved under the tariff framework. It held that the true-up proceedings could not be used to reopen or alter the tariff structure already finalized in the Commission’s unchallenged 2017 order.
Accordingly, the Supreme Court allowed DERC’s appeal, set aside APTEL’s judgment dated 10 February 2025, and restored DERC’s order dated 11 November 2019.
The judgment is expected to have major implications for electricity tariff regulation and future disputes concerning recovery of stranded or underutilized power infrastructure costs from consumers.
Case Details
Case Title: Delhi Electricity Regulatory Commission Versus Tata Power Delhi Distribution Limited
Citation: JURISHOUR-1153-SC-2026
Case No.: Civil Appeal No. 6388 Of 2025
Date: 07/05/2026
