Supreme Court Holds That Consumers Cannot Be Required To Pay For Depreciation Costs For Power Plants Which Are No Longer Supplying Electricity.

Supreme Court through its judgement dated 07.05.2026 in the matter of Delhi Electricity Regulatory Commission v Tata Power Delhi Distribution Limited¹ has held that consumers cannot be required to pay for depreciation costs for power plants which are no longer supplying electricity.

In the present matter, Tata Power Delhi Distribution Limited (“TPDDL”) filed a petition before Delhi Electricity Regulatory Commission (“DERC”) seeking true-up of expenditure for FY 2010–11 to FY 2017–18 in relation to the Rithala Combined Cycle Power Plant (“RCCPP”). DERC restricted depreciation on RCCPP at the rate of 6% per annum only up to FY 2017–18 and disallowed the running capital cost on the ground that the plant had ceased supplying electricity to consumers after March 2018. Aggrieved by the said order, TPDDL approached the Appellate Tribunal for Electricity (“APTEL”), which held that since DERC itself had determined the useful life of the plant as fifteen years and had computed the capital cost on that basis and observed that the depreciation could not be restricted to merely six years. In addition to this APTEL also observed that Regulation 6.32 of the DERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2011 (“2011 Regulations”) mandated depreciation over the useful life and did not admit of any exception.

The Court observed that tariff determination is not merely a mathematical exercise but a regulatory balancing act. The object of enabling reasonable cost recovery for utilities must be weighed against and calibrated with the paramount obligation to safeguard consumer interest. Since RCCPP had ceased supplying electricity to consumers after March 2018, consumers cannot be burdened with charges for a service that was no longer being rendered. In addition, the Court observed that it is a settled principle of statutory interpretation that no provision can be read in isolation. Accordingly, Regulation 6.32 of the 2011 Regulations must be construed harmoniously with Regulation 4.1 of the 2011 Regulations, which limits tariff entitlement to the period approved under the Power Purchase Agreement (“PPA”). Since the operational and recovery framework of RCCPP was fixed up to March 2018, hence, the 2011 Regulations have to be read in conjunction with Section 61(d) of the Electricity Act, 2003 (“EA Act”) which places the consumer interest at the centre. The Court further observed that Regulation 6.32 of the 2011 Regulations cannot override the broader statutory and regulatory framework and does not confer an absolute or unconditional right upon the generating utility to recover depreciation from the consumers for a period during which the assets was not supplying electricity.

Footnotes

^{1 Civil Appeal 6388 of 2025.}

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.