Adjustment of Annual Fixed Charges based on actual energy sales for interest computation constitutes valid rectification of error.

The Appellants, an association of High Tension (HT) industrial consumers, challenged the Annual Performance Review (APR) Order dated 31.03.2025 passed by the West Bengal Electricity Regulatory Commission (WBERC) for FY 2021-22

In a previous APR order dated 08.06.2023 for FY 2014-17, WBERC had provisionally calculated interest on differential Annual Fixed Charges (AFC) payable to consumers by Damodar Valley Corporation (DVC)

In the impugned order, WBERC adopted a revised "empirical formula" which adjusted the AFC determined in the original tariff order by the ratio of actual energy sales to projected sales

The Appellants contended this formula artificially reduced the principal amount on which interest was due, turning a previously determined refund into a liability for consumers

1. Whether the original APR Order for FY 2014-17 had attained finality, precluding the reopening of interest computation.

2. Whether the adoption of the "empirical formula" resulted in an impermissible and artificial reduction of the differential AFC for interest calculation.

3. Whether the State Commission exceeded its jurisdiction by using review/rectification powers to introduce a new methodology.

Section 61(d) of the Electricity Act, 2003, which mandates that tariffs safeguard consumer interests while ensuring recovery of the cost of electricity in a reasonable manner

Regulation 2.5.3(v) of the WBERC (Terms and Conditions of Tariff) Regulations, 2011, which permits the Commission to rectify errors in Tariff or APR orders arising from miscalculation or improper data without such rectification being treated as a "Review"

The principle from UPPCL v. NTPC Ltd. (2009) that tariff determination is a continuous process and res judicata does not strictly apply

The Tribunal found that the original APR Order was explicitly provisional as CERC true-up orders for several DVC stations were pending, thus the issue had not attained finality

Regarding the "empirical formula," the Tribunal reasoned that since AFC recovery from consumers occurs primarily through energy charges (₹/kWh), a significant deviation in actual energy sales versus projected sales creates an "apples-to-oranges" comparison if not normalized

The adjustment ensures DVC is not forced to pay interest on a "notional surplus" that was never actually collected due to lower sales

The Tribunal clarified that while termed "empirical," the formula was a logical computational methodology to implement the principle of cost-reflectivity

Under Regulation 2.5.3(v), the WBERC was found to have the authority to rectify the "improper data" of using unadjusted projected AFC, which was characterized as a mathematical correction rather than a substantive change in law or a review of a settled order

It held that the calculation of interest on differential AFC using the sale-ratio adjustment was mathematically necessary and legally sustainable to prevent unjust enrichment or prejudice in a retail supply context

The Tribunal concluded that the WBERC acted within its regulatory jurisdiction to rectify an error and that the order was sufficiently reasoned. All pending applications were disposed of accordingly.