NORTH EAST TRANSMISSION COMPANY LIMITED vs CENTRAL ELECTRICITY REGULATORY COMMISSION & Ors

Judgement in Appeal Nos. 296 of 2021
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL No. 296 OF 2021
th
Dated: 08 July, 2026
Present: Hon`ble Ms. Seema Gupta, Officiating Chairperson
Hon`ble Mr. Virender Bhat, Judicial Member
IN THE MATTER OF:
NORTH EAST TRANSMISSION COMPANY LIMITED
Registered office:
Village- East Champamura, Bypass Road,
Near Asian Paint Godown, P/O – Old Agartala
Agartala, West Tripura, Tripura -799008
Corporate Office:
rd
2C, 3 Floor, D-21, DMRC Building,
Corporate Park, Dwarka,
Sector – 21, Delhi – 110077. … Appellant(s)
VERSUS
1. CENTRAL ELECTRICITY REGULATORY COMMISSION
Through its Secretary ,
rd th
3 and 4 Floor, Chandralok Building,
36 Janpath, New Delhi – 110001.
2. POWER GRID CORPORATION OF INDIA LIMITED,
Through its Executive Director,
“Saudamini” Plot No.2, Sector – 29,
Gurgaon, Haryana - 122001
3. TRIPURA STATE ELECTRICITY CORPORATION LIMITED
Through its Managing Director,
Bidyut Bhawan, North Banamalipur,
Agartala, Tripura- 799001.
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Judgement in Appeal Nos. 296 of 2021
4. ASSAM ELECTRICITY GRID CORPORATION LIMITED
Through its Managing Director,
Bijulee Bhawan, Paltan Bazar,
Guwahati, Assam-781001
5. MEGHALAYA ENERGY CORPORATION LIMITED
(Previously known as Meghalaya State Electricity Board)
Through its Executive Director,
Lumjingshai, Short Round Road,
Shillong, Meghalaya - 793001
6. DEPARTMENT OF POWER
Government of Nagaland
Through its Chief Engineer
Electricity House, A.G. Colony,
Kohima, Nagaland – 797001.
7. POWER & ELECTRICITY DEPARTMENT
Government of Mizoram,
Through its Engineer in Chief
Kawlphetha Building,
New Secretariat Complex, Khatla,
Aizwal, Mizoram - 796001
8. MANIPUR STATE POWER DISTRIBUTION COMPANY LTD.
(Previously known as Electricity Department Government of Manipur)
Through its Joint Secretary,
rd
3 Floor, New Directorate Building,
nd
Near 2 MR Gate, Imphal Dimapur Road,
Imphal West, Imphal, Manipur – 795001.
9. DEPARTMENT OF POWER
Government of Arunachal Pradesh,
Through its Chief Engineer,
Vidyut Bhawan, O-Point Tinali,
Itanagar, Arunachal Pradesh – 791111.
10. ONGC TRIPURA POWER COMPANY LIMITED
Through its GM Commercial
th
10 floor, Core IV & Central,
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Judgement in Appeal Nos. 296 of 2021
Scope Minar Laxmi Nagar,
Delhi – 110092.
11. NORTH EASTERN REGIONAL POWER COMMITTEE
Through its Secretary,
NERPC Complex, Dong Parmaw, Lapalang
Shillong, Meghalaya – 793006
12. CENTRAL TRANSMISSION UTILITY OF INDIA LIMITED
Through its Chief Operating Officer,
Plot No.2, Sector 29,
Gurgaon, Haryana – 122001. …. Respondent(s)
Counsel on record for the Appellant(s) : Ms. Poorva Saigal
Mr. Shubham Arya
Ms. Tanya Sareen
Mr. Ravi Nair
Ms. Srishti Khindaria
for App. 1
Counsel on record for the Respondent(s) : for Res. 1
JUDGEMENT
PER HON’BLE MRS. SEEMA GUPTA, OFFICIATING CHAIRPERSON
1. The present Appeal has been filed by North East Transmission Company
Limited (“Appellant”) under Section 111 of the Electricity Act, 2003 challenging
the Order dated 27.01.2021 (“impugned order”) passed by Central Electricity
Regulatory Commission (hereinafter referred as “Central Commission/CERC” )
in Petition No.191/MP/2019 , whereby the Central Commission rejected the
Appellant's claim for relaxation of the normative Operation and Maintenance
("O&M") expenses prescribed under the Central Electricity Regulatory
Commission (Terms and Conditions of Tariff) Regulations, 2014.
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Judgement in Appeal Nos. 296 of 2021
FACTUAL MATRIX OF THE CASE:
2. The Appellant-North East Transmission Company Limited ("NETCL") is a
transmission licensee incorporated under the provisions of the Companies Act,
1956 and is engaged in the business of developing, operating and maintaining a
662.8 kms of inter-State transmission system for evacuation of power from the 2
x 363.3 MW Palatana Gas Based Power Project of ONGC Tripura Power
Company Limited (Respondent No. 10) in the North-Eastern Region. The system
comprises five transmission assets commissioned between 01.09.2012 and
22.02.2015.
Asset-I: Palatana–Silchar D/C, 247.39 km, COD 01.09.2012,
Asset-II: Silchar–Byrnihat, 214.41 km, COD 01.03.2013,
Asset-III: Byrnihat–Bongaigaon, 201 km, COD 22.02.2015,
Asset-IV: Silchar–Azara, 256.41 km, COD 27.07.2014, and
Asset-V: Azara–Bongaigaon, 159 km, COD 16.01.2015.
3. The Respondent No.1, i.e. Central Electricity Regulatory Commission is the
statutory body functioning under Section 76 of the Electricity Act, 2003. The
Respondent Nos. 2 to 11 are the concerned transmission utilities, distribution
utilities and other stakeholders/beneficiaries of the Appellant's transmission
system.
4. On 11.09.2015, NETCL filed Petition No. 233/TT/2015 before the CERC
seeking determination of tariff for Asset-I and Asset-II for the Control Period 2009-
14, which was decided by the CERC vide Order dated 29.07.2016. On the same
date, NETCL also filed Petition No. 213/TT/2015 seeking determination of tariff
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Judgement in Appeal Nos. 296 of 2021
for Asset-I to Asset-V under the CERC Tariff Regulations, 2014, which was
subsequently determined by the CERC vide Order dated 16.08.2016.
5. Aggrieved by the inadequacy of the normative O&M expenses specified
under Regulation 29(4) of the Tariff Regulations, 2014, Appellant filed Petition No.
224/MP/2017 before the Central Commission under Regulations 54 and 55 of the
Tariff Regulations, 2014, seeking relaxation of the O&M norms applicable to its
transmission system, inter alia, on the ground that it is a single-project company
operating in the difficult terrain of the North-Eastern Region.
6. By Order dated 16.04.2019 in Petition No. 224/MP/2017, the Central
Commission observed that the Appellant, being a single asset company operating
in the North-Eastern Region, required consideration distinct from transmission
licensees having multiple assets. Accordingly, the Central Commission granted
liberty to the Appellant to file a fresh petition furnishing details regarding actual
O&M expenditure, efforts undertaken to optimize expenditure, and additional
costs incurred towards safety and security of the transmission assets.
7. On 04.07.2019, pursuant to the liberty granted by the Central Commission,
the Appellant filed Petition No. 191/MP/2019 before the Central Commission
providing details as sought under order dated 16.04.2019 and seeking exercise
of the power to relax under Regulation 54 of the Tariff Regulations, 2014, to give
appropriate O&M expenses commensurate with the actual requirements arising
from its unique operational circumstances.
8. By order dated 27.01.2021, CERC passed the order in Petition No.
191/MP/2019, and did not invoke provisions of power to relax to allow higher
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Judgement in Appeal Nos. 296 of 2021
O&M charges to the Appellant for control period 2014-19. Aggrieved by the
rejection of its claim, the Appellant filed Review Petition No. 08/RP/2021 before
the Central Commission seeking review of the Order dated 27.01.2021 on the
ground that there existed errors apparent on the face of the record and that
relevant material facts had not been duly considered.
9. The Central Commission, by Order dated 06.08.2021, dismissed the
Review Petition at the admission stage, holding that the Appellant had failed to
demonstrate any error apparent on the face of the record warranting review of
the earlier order
10. Aggrieved by the Orders dated 27.01.2021 passed in Petition No.
191/MP/2019 and 06.08.2021 passed in Review Petition No. 08/RP/2021, the
Appellant has preferred the present Appeal.
ANALYSIS & DISCUSSION
11. Despite due service of notice, and matter having been listed on several
occasions, none appeared on behalf of the Respondents nor was vakalatnama
filed on behalf of any of the respondents. It appears that Respondents were not
keen to contest the present proceeding before this Tribunal. Accordingly, we
heard Ms. Poorva Saigal, learned counsel appearing for the Appellant, and
perused Impugned Order, written submission filed, and other documents on
record. Appellant has mainly contended that the i) impugned order contradicts
the central commission's own order dated 16.04.2019, ii) the normative O&M
benchmark is structurally inapplicable for a single project company in the North
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Judgement in Appeal Nos. 296 of 2021
Eastern Region (NER), besides making other submissions on the observation
made against the Appellant in the Impugned Order.
12. The Appellant has relied upon the observation made by Central
Commission in its order dated 16.04.2019. The Relevant extract from CERC
Order dated 16.04.2019 passed in Petition No 224/MP/2017, seeking relaxation
in the O&M norms under Tariff Regulation 2014, for the control period 2014-19,
are reproduced below: :
“6. Considering the fact that the Petitioner is a single asset company and is
located in the North-Eastern Region, the Commission is of the view that the
case of the Petitioner needs to be considered differently from the transmission
assets of transmission licensees having multiple number of assets.
Accordingly, we grant liberty to the Petitioner to file a fresh petition containing
the following details:
(a) O&M charges paid for maintenance of the assets.
(b) O&M expenditure incurred by the Petitioner on items other than the
maintenance of the bays.
(c) Efforts made by the Petitioner to optimize the expenditure.
(d) Any additional expenditure incurred by the Petitioner on maintaining the
safety and security of the transmission assets.”
13. In pursuance of the liberty granted, Appellant filed the petition along with
the requisite particulars, culminating in the Impugned Order whereby relaxation
in O&M charges was declined. Upon careful scrutiny, we find substance in the
contention of the Appellant that the Impugned Order does not advert to or
deliberate upon the applicability of normative charges, derived on a pan-India
basis, to the peculiar circumstances of the Appellant, notwithstanding the
Commission’s earlier observation dated 16.04.2019 that special consideration
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Judgement in Appeal Nos. 296 of 2021
may be warranted given the Appellant’s status as a single-project company
operating in the North-Eastern Region.
14. It is, however, trite law that a Regulatory Commission, being a statutory
authority, is not bound in perpetuity by every observation made in its earlier
orders, particularly where such observations are incidental or obiter dicta. The
binding force attaches to the operative directions and conclusions inter se the
parties, unless modified or set aside in appeal. Mere reasoning or incidental
remarks in one order do not create estoppel against the Commission in
subsequent proceedings.
15. Equally, it is well-settled that the judgments and observations of Regulatory
Commissions are not binding upon this Tribunal. The Tribunal’s remit under
Section 111 of the Electricity Act, 2003 is to test the legality, propriety, and
correctness of the impugned order on its own merits, in conformity with the parent
statute and applicable regulations. Accordingly, we shall proceed to decide the
issue on its own merit.
16. It is submitted that the data of Respondent No.2- POWERGRID,
substantially forms the basis of the normative benchmark, which operates
approximately 5,000 circuit kilometres of transmission lines in the North Eastern
Region as against its pan-India transmission network of over 1,53,635 circuit
kilometres, with the NER constituting merely 3.25% of its total network, which
was contended before CERC as well. Consequently, when POWERGRID’s O&M
expenses are aggregated at the national level to derive the normative per circuit
kilometre benchmark, the distinctly higher costs associated with the NER are
diluted within the national average. Appellant provided following data of
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Judgement in Appeal Nos. 296 of 2021
POWERGRID, region-wise O&M expenditure for 2014–15, from the Statement of
Reasons for the Tariff Regulations, 2014, is as under:
Particulars NER Northern
Region
Western
Region
Southern
Region
Eastern
Region
Total O&M Expenses (Rs. lakh) 17,114 81,446 48,668 37,228 39,756
O&M attributable to
transmission lines @ 25% (Rs.
lakh)
4,279 20,361 12,167 9,307 9,939
Total Circuit Kilometres 5,674 35,739 36,601 22,195 16,749
O&M per ckt. km (Rs. lakh) 0.75 0.57 0.33 0.42 0.59
17. It is submitted that though the NER O&M cost per circuit kilometre is higher
by 32 % to 127% as compared to other regions, normative benchmark of Rs.
0.403 lakh per circuit kilometre, derived from the national aggregate, is applied to
the Appellant, which operates entirely in the North Eastern Region having the
highest O&M charges. Even the Central Commission has subsequently taken
cognizance of the difficulties being faced by the Licensees operating in the NER
and hilly region and has applied a factor of 1.5 to the O&M expenses applied for
the other regions. It is, however, submitted that even with the application of 1.5
factor for the control period 2014-19, the Appellant would still be in a deficit as
under (in Rs Lacs):
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Judgement in Appeal Nos. 296 of 2021
Difference
between (B) and
Financial
O&M allowed by
Actual O&M
Expenses (B)
1.5 X O&M allowed
Year
CERC (A)
by CERC (C)
(C)
2014-15 331 817 497 320
2015-16 484 908 727 181
2016-17 500 1,126 751 375
2017-18 517 1,090 775 315
2018-19 534 1,251 801 450
Total 2,367 5,192 3,551 1,641
18. Appellant further submitted that while the Central Commission allowed
O&M expenses at the rate of Rs. 0.403 lakh per circuit kilometre, the
corresponding rates allowed for utilities operating in the North Eastern Region
were Rs. 0.85 lakh per circuit kilometre for AEGCL (Assam) and Rs. 1.09 lakh per
circuit kilometre for MEPTCL (Meghalaya). This clearly establishes that the State
Commissions regulated utilities operating under identical geographical, climatic
and operational conditions in the NER, including difficult terrain, high rainfall,
insurgency-related challenges and workforce constraints, for whom the O&M
norms were independently determined are approximately twice the normative
rates prescribed by the Central Commission.
19. In the Impugned Order, refuting the contention of Appellant, that Norms
were based only on POWERGRID O&M data, it is stated that norms are finalised
based on data collected for actual O&M expenses for all the transmission
licensee. Regarding the contention of Appellant with regard to higher O&M
charges being single project company, Impugned Order after noting the
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Judgement in Appeal Nos. 296 of 2021
Statement of reasons to CERC Tariff Regulation 2014, that such aspect has been
clearly deliberated, following observations is made.
“25. It is observed from the above that the issue of single project companies
and associated expenditure has been raised while finalizing norms for O&M
Expenses during 2009-14 as well as 2014-19 tariff periods. However, the
Commission has not agreed to such suggestions of allowing higher O&M
Expenses and has been of the view that single project companies need to
undertake more efficient measures to contain the O&M expenses within
industry benchmarks.”
20. Though, it may generally be true that single project company, may not enjoy
the economies of scale as other licensee with multiple project, however it is
observed from the record that while finalising the Tariff Regulations, 2014, the
Central Commission undertook detailed deliberation and consideration of the
suggestions advanced by stakeholders, including the plea for a differentiated
methodology or higher normative O&M charges for single-project companies. The
Central Commission, however, consciously decided not to introduce
differentiation on the basis of the number of projects operated by a company.
Instead, the normative framework was anchored on circuit-kilometre (ckt-km)
parameters, which were considered to be a more objective and uniform basis for
determination of O&M charges across the sector for the period under
consideration. Once such Regulations are notified under Section 178/181 of the
Electricity Act, 2003, they acquire the force of subordinate legislation and are
binding upon the Commission itself, the licensees, and all stakeholders, until
modified or struck down by a competent judicial authority. Any departure from
the normative framework prescribed in the Regulations must be justified strictly
within the contours of the enabling provisions, and not on the basis of mere
observations in prior orders.
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Judgement in Appeal Nos. 296 of 2021
21. With regard to statement in the Impugned Order that O&M norms under
tariff Regulation 2014 were based on data of all the Transmission Licensees and
not on POWERGRID alone, we find that it is not discernible from the Impugned
Order that what other transmission licensee data was considered while forming
the norms for FY 2014-19 and percentage share of asset base of these
transmission licensee in the overall inter- State transmission network asset base
operating prior to 2014-19 control period. It is not difficult to reach to the
conclusion as also submitted by Appellant, that no operational data could have
been provided by the Appellant at the time of finalization of the Tariff Regulations,
2014, because the assets had not been commissioned by that time. Equally, we
cannot be oblivious to the fact that prior to Control period 2014-19, POWERGRID,
as the inter-state transmission licensee was operating major portion of the inter-
State Transmission network. In such circumstances, it can be easily assumed
that the overall O&M charges of POWERGRID for the control period prior to 2014-
19 would have had a controlling impact and constituted contributing factor in
arriving at benchmark or normative O&M data for control Period 2014-19.
22. It is observed from the CERC Tariff Regulation 2014, that the normative
operation and maintenance expenses were same Pan India, with no
differentiation for the different terrain i.e, plain, hilly, snowy, difficult etc. In the
Tariff Regulation 2014, the normative O&M charges for substation, is bay wise
based on voltage level whether 765 kV /400 kV /220 kv and so on; higher the
voltage- higher the O&M charges and for transmission lines it is on the basis of
number of conductors used in single circuit or double circuit ; more the number
of conductors – more O&M charges.
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Judgement in Appeal Nos. 296 of 2021
23. Further, from the region-wise POWERGRID data submitted by Appellant
and as noted above, it is evident that the O&M cost per circuit kilometer varies
significantly between different regions, which in our view is primarily attributable
to the type of terrain and topography involved. The data clearly indicates that the
O&M charges per kilometer of transmission line are highest for the North Eastern
Region as compared to other regions. Specifically, the O&M cost per circuit
kilometer in the North Eastern Region (Rs. 0.75 lakh) is 127% higher than the
Western Region, 32% higher than the Northern Region, and 79% higher than the
Southern Region. For a transmission licensee operating on a pan-India basis,
such aberrations in regional O&M costs can be mitigated when evaluated at the
company level, even if uniform normative O&M charges are applied across
regions. However, the same mitigation is not feasible for a licensee whose
operations are confined solely to the North Eastern Region, such as the
Appellant. In such a case, the application of pan-India normative O&M charges,
without relaxation, may result in inequitable treatment and compromise
operational sustainability, given the demonstrably higher costs inherent to the
region’s terrain and topology.
24. Further, the Impugned Order records an observation that the “However, the
Petitioner had failed to submit data regarding O&M expenses while the Central
Commission was engaged in formulating the norms for the control period
2019-24. It is not correct on the part of the Petitioner to suggest that the norms
were finalised based on data of PGCIL only.” This assertion has been strongly
refuted by the Appellant. Upon careful scrutiny, we find substance in the
submissions advanced.
25. From the records placed before us, it appears that the Appellant did, in fact,
submit detailed operational and financial data on 24.01.2019 in response to the
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Judgement in Appeal Nos. 296 of 2021
Central Commission’s Public Notice dated 10.11.2017, which had invited
stakeholder comments on the Draft Tariff Regulations, 2019 for the control period
2019-24. The submission of such data evidences the Appellant’s participation in
the consultative process and contradicts the Commission’s finding that no data
was furnished. We have observed some variation between the data submitted by
the Appellant on 24.01.2019 and the audited data subsequently filed in Petition
No. 191/MP/2019. However, the existence of such variation does not negate the
fact of submission itself.
26. In these circumstances, the observation in the Impugned Order that no data
was submitted by the Appellant for finalising the O&M norms for the control period
2019-24 is contrary to the record and cannot be sustained. The Commission’s
finding on this aspect is accordingly set aside.
27. Appellant has contended the observations in Para 31 of the Impugned
Order, that Appellant was aware of the applicable O&M norms under tariff
regulation and incurring expenditure on both site offices and corporate functions
is not a prudent expenditure, being erroneous in law and on facts. It is submitted
that the expenditure incurred on site offices was unavoidable, as the scope of
the O&M Agreement with POWERGRID specifically excluded several critical
activities, including maintenance of terminal bays, hot-line maintenance, payment
of forest lease rent, liaison with Government authorities, procurement of spares,
payment of crop/tree compensation within the Right of Way corridor, and
emergency coordination with the RLDC; and accordingly these functions
necessarily required dedicated on-site personnel and could not have been
effectively discharged through remote administration. Further, after the O&M
agreement entered between the Appellant and POWERGRID came to an end on
31.07.2021, O&M activities have been carried out by the Appellant itself. The
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Judgement in Appeal Nos. 296 of 2021
maintenance of site offices was therefore not a permanent overhead but an
interim operational necessity during the transition to in-house O&M. This was
specifically placed before the Central Commission but has not been considered
in the Impugned Order. Appellant placed reliance on the Judgment dated
04.05.2026 passed by this Tribunal in “M/s Everest Power Pvt. Ltd. v. Punjab
State Electricity Regulatory Commission” Appeal No. 430 of 2019, to contend
that prudence review must be undertaken with reference to the necessity and
reasonableness of the expenditure in the facts and circumstances of the case.
With regard to high corporate expenses, as observed in the Impugned Order, it
is submitted that the entire corporate expenses of Appellant were divided into
limited number of assets/ single project resulting in higher percentage when
compared with other transmission licensee like POWERGRID which has over 400
assets spread across five regions.
28. Our attention has been drawn to the fact that Central Commission has
subsequently taken cognizance of the difficulties being faced by the Licensees
operating in the NER and hilly region and has applied a factor of 1.5 to the O&M
expenses applied for the other regions and the relevant extracts from the
Explanatory Memorandum to the Draft Tariff Regulations, 2024 reads as under:
Approval of O&M Expenses for North East/Hilly Regions
16.5.23 The Commission, with regard to whether additional O&M expenses
can be given for transmission assets being operated in the North Eastern and
Hilly Regions, based on the actual data submitted, observes that the actual
expenses incurred in the NER region are higher than compared to other
regions and therefore, the Commission acknowledges the elevated costs
associated with transmission projects in hilly terrains. Factors such as
increased logistic, erection, labour, and transportation costs contribute to
higher O&M expenses in these regions compared to mainland projects. The
Commission, therefore, proposes to allow O&M expenses by applying a factor
of 1.5 to the O&M expenses determined under Regulation 36. As the O&M
norms have been worked out considering the actual O&M expenses of all the
regions of PGCIL which includes NE, NER and other hilly regions, therefore
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Judgement in Appeal Nos. 296 of 2021
it is clarified that the factor of 1.50 shall be applicable only to those
transmission licensees whose transmission assets are located solely in NE
Region, States of Uttarakhand and Himachal Pradesh, the Union Territories
of Jammu and Kashmir and Ladakh.
29. The 1.5 factor has been incorporated as a Proviso to Regulation 36(3) of
the Tariff Regulations, 2024 as noted under:
“Provided further that the O&M expenses for Transmission Licensees whose
transmission assets are located solely in NE Regions, State of Uttarakhand
and Himachal Pradesh, the Union Territories of Jammu and Kashmir and
Ladakh shall be worked out by multiplying 1.50 to the normative O&M
expenses prescribed above”.
From the above, it is clear that CERC, appreciating the difficulties faced by
Transmission Licensee in O&M of transmission Assets solely operating in NER
and/or other hilly regions, and involving additional expenditure, a multiplication
factor of 1.5 to the normative O&M has been adopted for such licensees in Tariff
Regulation 2024.
30. We take cognizance of the fact that the transmission corridor operated by
the Appellant is critical for evacuation of power in the North-Eastern Region and
caters to approximately one-third of the power demand of the region, as recorded
in CERC order dated 16.04.2019. It is submitted on behalf of Appellant that it
consistently maintained a transmission system availability in excess of 99.90%,
with an average availability of approximately 99.92% during the relevant tariff
period, despite operating in difficult geographical conditions characterized by hilly
terrain, heavy rainfall, forest areas, river crossings and insurgency-related
challenges.
31. Appellant has made specific contention with regard to Section 5.11(h)(2) of
the Tariff Policy, 2016 – ‘Multi Year Tariff’ which provides as under:
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Judgement in Appeal Nos. 296 of 2021
"In cases where operations have been much below the norms for many
previous years, the initial starting point in determining the revenue
requirement and the improvement trajectories should be recognized at
'relaxed' levels and not the 'desired' levels. Suitable benchmarking
studies may be conducted to establish the 'desired' performance
standards."
Further, the Section 61 of the Electricity Act, 2003 requires that the Appropriate
Commission, while determining terms and conditions for tariff, shall be guided by
principles that safeguard the consumer's interest and ensure recovery of cost of
electricity in a reasonable manner.
32. It is also of relevance to extract para 15 of the Impugned Order, which
details the allowed normative O&M charges for Control period 2014-19 and actual
O&M Charges of the Appellant Company based on audited accounts is extracted
hereunder :
“15 The total O&M expenses incurred by the Petitioner and corresponding O&M
expenses allowed by the Commission on normative basis, for each year of control
period 2014-19 is as under:-
S.No. Financial Year Total O & M
Expenses
Allowed by the
Commission
Actual O & M
Expenses
Incurred
Difference
between O&M
Expenses
Incurred and
Normative
O&M Expenses
1 2014-15 331.21 817.44 486.23
2 2015-16 484.49 908.73 424.24
3 2016-17 500.41 1126.98 626.57
4 2017-18 516.98 1090.22 573.24
5 2018-19 534.20 1251.15 716.95
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33. Admittedly, the O&M expenditure incurred by Appellant for the Control
Period FY 2014-19 were considerably higher, more than double, as compared to
what is allowed to them applying Normative O&M charges for the period. While
turning down the request of Appellant for relaxation in the O&M norms, it is
observed that Commission expects the Petitioner to be more prudent and restricts
its O&M charges within the stipulated norms.
34. It is axiomatic that the Regulatory Commissions, while discharging their
statutory functions, must emphasise efficiency improvement and safeguard
consumer interest. The underlying normative framework is designed to balance
cost recovery with efficiency gains, thereby ensuring that consumer interest is
protected while simultaneously allowing a reasonable return to the licensee.
However, it cannot be gainsaid that every element of extra expenditure incurred
by a utility can be curtailed by efficiency improvement. Equally, relaxation cannot
be granted merely on the basis of actual higher expenditure unless such
expenditure is demonstrably linked to prudence and necessity. A balanced
approach, therefore, requires the Commission to weigh both sides of the
equation. In circumstances where a licensee operates under peculiar
conditions—such as geographical remoteness or region-specific challenges—the
Commission must deliberate whether strict adherence to pan-India norms would
result in inequitable treatment, compromise operational sustainability, or vitiate
the licensee’s viability.
35. Regulation 54 of the Tariff Regulations, 2014 confers upon the Central
Commission the enabling power to relax any provision of the Regulations in
exceptional circumstances, subject to the requirement that reasons for such
relaxation be recorded in writing. This relaxation power is not to be exercised
lightly or in routine manner, but only where the factual matrix discloses
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circumstances of such peculiar nature that strict adherence to the regulatory norm
would result in manifest hardship or inequity. The Electricity Act, 2003, while
mandating the Commission to safeguard the interests of consumers,
simultaneously obliges it to ensure that the cost of electricity is recovered in a
reasonable manner, thereby striking a balance between consumer protection and
viability of regulated entities.
36. In the present case, the Appellant’s operations are confined exclusively to
the North Eastern Region, as also observed by CERC in its earlier order, which
is characterised by hilly terrain, difficult accessibility, and operational challenges
not ordinarily encountered in other regions. The peculiar geographical and
logistical constraints faced by the Appellant, coupled with the fact that it is solely
operating in North Eastern Region, constitute exceptional circumstances within
the meaning of Regulation 54. To insist upon a rigid application of the normative
O&M charges in such a situation would be inequitable and contrary to the
statutory mandate of ensuring reasonable recovery of costs. We accordingly find
merit in the submissions advanced by the Appellant and hold that the case
warrants favourable consideration for relaxation in the norms of O&M charges for
the control period under consideration.
CONCLUSION
37. In view of the foregoing deliberations, the Impugned Order is set aside.
The matter is remanded to the Central Commission with a specific direction to
exercise its power to relax under Regulation 54 of the Tariff Regulations, 2014,
for the limited purpose of working out the O&M charges for the assets of the
Appellant for the control period 2014-19. While undertaking this exercise, the
Commission shall carry out a prudence check of the O&M data submitted by the
Appellant, ensuring that only such expenditure as is demonstrably necessary and
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Judgement in Appeal Nos. 296 of 2021
reasonable is factored into the determination. In doing so, the Commission shall
also take into account the special dispensation accorded in subsequent
regulations for hilly and similarly placed licensees in the North Eastern Region,
so that the peculiar geographical and operational constraints faced by the
Appellant are duly recognised.
Needless to state, the Appellant shall provide any further information or document
as may be required by the Central Commission expeditiously, so as to facilitate
an early determination of the matter. The Commission shall thereafter pass a
reasoned order, recording the grounds for relaxation.
The Captioned Appeal and pending IAs, if any, are disposed of in above terms.
th
PRONOUNCED IN THE OPEN COURT ON THIS 08 DAY OF JULY, 2026.
(Virender Bhat)
Judicial Member
(Seema Gupta)
Officiating Chairperson
REPORTABLE / NON-REPORTABLE
_________________________________________________
Pr/dk/ag/ak
Page 20 of 20