APTEL Allows Tata Power To Capitalise Ready, Unused IXORA And Parel Assets, Remands To MERC Who Bears Transmission Charges

Tata Power Company Limited (Transmission) challenged MERC’s tariff order dated 30 June 2016 and review order dated 19 July 2017, which disallowed capitalisation of the IXORA sub-station and eight 33 kV bays at Parel, and denied O&M expenses for 91 unutilised bays

The IXORA sub-station had received final charging permission from the Electrical Inspector on 18 February 2015, but remained unused because the SEZ’s distribution network and associated outlets were not ready

The Parel bays were charged, but the downstream systems of the allocated distribution licensees were not ready for use

MERC relied on the proviso to Regulation 27.1 of the MERC MYT Regulations, 2011, which required assets “not put to use or not in use” to be excluded from capital cost

Section 61 of the Electricity Act, 2003 requires tariff determination to be guided both by consumer protection and by reasonable recovery of electricity costs; Section 39 assigns the State Transmission Utility responsibility for intra-State transmission planning and coordination

Regulation 27.1 of the MERC MYT Regulations, 2011 governs project capital cost and excludes assets not put to use or not in use, but the Tribunal found that the Regulations did not address the situation where a transmission asset was ready but could not be used because another entity’s system was incomplete

The Tribunal drew guidance from the CERC Tariff Regulations, 2009, which permit approval of commercial operation before an element enters regular service where it is ready but prevented from providing service for reasons not attributable to the transmission licensee

It also applied the principle that each tariff year gives rise to a fresh cause of action, as recognised in Delhi Transco Ltd. v. Delhi Electricity Regulatory Commission, Appeal No. 133 of 2007

Nuclear Power Corporation of India Ltd. v. CERC, Appeal No. 332 of 2016, and Power Grid Corporation of India Ltd. v. Madhya Pradesh Power Transmission Company Ltd., (2025) 8 SCC 705, were cited in support of allocating transmission-charge liability where another entity’s delay prevents use of a commissioned asset

The Tribunal held that non-utilisation alone could not justify denying capitalisation where an asset was ready for use and its non-use might have resulted from the failure of downstream entities to complete associated works.

MERC had not examined which entities were responsible for the delay or the STU’s coordination role, and therefore had not adequately assessed the circumstances behind non-utilisation

The prior disallowance of IXORA capitalisation for FY 2013–14 did not bar consideration of entitlement for FY 2014–15, a separate tariff year.

For O&M, expenditure attributable to the construction phase is to be capitalised rather than separately recovered as O&M; however, admissible O&M expenses may be recovered once an asset is ready for commercial operation, even if it remains unused for reasons not attributable to the transmission licensee.

MERC was therefore directed to assess responsibility for non-utilisation and determine the resulting transmission-charge liability, including admissible O&M expenses.

MERC’s disallowance of ₹26.54 crore for the IXORA sub-station for FY 2013–14 was upheld, but capitalisation of ₹31.40 crore for FY 2014–15 was allowed from the date final charging permission was granted.

Capitalisation of the eight Parel bays was allowed from their actual charging dates.

The matter was remanded to MERC to determine which entities were responsible for non-utilisation and to fix liability for transmission charges, including admissible O&M expenses.

Admissible transmission charges, including O&M expenses, for the 34 bays already capitalised were also directed to be allowed in accordance with the applicable Regulations.