For Tariff Truing-up, Revenue must be recognized on Billed Basis rather than Accrual Basis to avoid double counting.

The Appellant (TPL), a distribution licensee in Gujarat, filed petitions for the truing-up of FY 2018-19 and determination of tariff for FY 2020-21 for its Surat, Dahej, and Ahmedabad-Gandhinagar circles.

On 31.03.2020, the Respondent (GERC) passed the Impugned Orders, which were later partially modified in a Review Petition on 12.05.2025.

In the truing-up exercise, GERC calculated the revenue gap/surplus using "accrual revenue" as per Ind AS 115 instead of the "billed revenue" typically used in regulatory accounting.

While GERC acknowledged past period gaps and amounts due under previous APTEL judgments, it allowed their recovery in the FY 2020-21 ARR without granting the associated carrying cost.

1. Whether GERC erred in considering provisional/accrual revenue instead of actual billed revenue while determining the Gap/(Surplus) for FY 2018–19 during the true-up exercise.

2. Whether the Appellant is entitled to carrying cost on approved past-period gaps and consequential amounts arising from appellate orders.

Regulation 21 of the GERC (Multi-Year Tariff) Regulations, 2016, which mandates that truing-up must compare the audited performance with approved forecasts based on a prudence check.

The principle that revenue for tariff determination must be based on the Tariff Schedule approved by the Commission (billed revenue), a principle GERC itself adopted in subsequent Review Petitions.

Regulation 21.6(c) of the MYT Regulations, 2016, which provides for carrying cost on a "simple interest basis" at the weighted average SBI Base Rate.

Restoration/restitutionary principles established in Punjab State Power Corporation v. PSERC (2022 SCC OnLine APTEL 46) and Reliance Infrastructure Ltd. v. MERC (2012 SCC OnLine APTEL 154), affirming that carrying cost is compensation for the time value of money.

The Tribunal reasoned that GERC’s shift to accrual accounting for FY 2018-19 was inconsistent with its own past and future methodology, which relies on billed revenue.

Using accrual revenue (which included unrecovered FPPPA claims) led to an artificial inflation of revenue and an impermissible double counting, as those same amounts were already billed and accounted for in the revenue of FY 2019-20.

On the second issue, the Tribunal found that the "doctrine of merger" applies to tariff orders modified by appellate proceedings; thus, amounts quantified via APTEL judgments become integral parts of the approved gap.

Denying carrying cost on these sums fails to neutralize the regulatory lag or account for the financing burden borne by the utility.

The Tribunal rejected the Appellant's claim for compound interest, noting that the express inclusion of "simple interest" in Regulation 21.6(c) precludes the application of general restitutionary principles for compounding.

The Tribunal held that TPL is entitled to carrying cost on the quantified amounts from the date they became due until their adjustment and directed GERC to calculate simple interest in accordance with Regulation 21.6(c) on the amounts where carrying cost was previously ignored in the ARR for FY 2020-21.