GSECL Keeps 13% Return on Extended Power PPAs as APTEL Says Gujarat Regulator Cannot Impose 11% Without a Voluntary Claim

GSECL and GUVNL executed supplementary power purchase agreements (SPPAs) extending procurement from certain transferred generating stations and Wanakbori Thermal Power Station Unit 7 (WTPS-7) until 1 April 2030 or the stations’ useful life, whichever was earlier.

GUVNL sought approval of the SPPAs from the Gujarat Electricity Regulatory Commission (GERC) under Sections 86(1)(b) and 62 of the Electricity Act, 2003.

GERC had previously approved tariffs for the relevant stations for FY 2025–30, applying a 13% base return on equity (RoE) under the GERC MYT Regulations, 2024, and approved capital expenditure for the period.

In its orders approving the SPPAs, GERC restricted RoE during the extended period to 11% and directed GSECL to provide an unconditional undertaking permanently foregoing the difference.

GSECL appealed both orders, contending that the restriction was contrary to the Regulations.

1. Whether GERC could, while approving the SPPAs, impose an 11% RoE despite Regulation 35.2 prescribing a 13% base RoE and without GSECL voluntarily claiming a lower rate.

2. Whether GERC could depart from the 13% RoE applied in its unchallenged MYT tariff order for the same stations by imposing a different rate in the SPPA approval orders.

Sections 61, 62, 86 and 181 of the Electricity Act, 2003 govern tariff determination, procurement approval and the State Commission’s regulation-making authority; regulations made under Section 181 bind the Commission when it exercises its tariff powers.

Regulation 35.2 of the GERC MYT Regulations, 2024 prescribes a base RoE of 13% and permits a lower rate where the relevant licensee or generating company itself makes an unconditional claim, with the reduction permanently foregone; Regulation 35.5 provides for a 1% reduction where specified deficiencies are reported by the SLDC.

Under PTC India Ltd. v. CERC, (2010) 4 SCC 603, tariff orders must conform to applicable regulations and cannot override or amend them.

Regulation 35.2’s lower-RoE mechanism was conditional on a voluntary claim by GSECL; it did not authorise GERC to impose an 11% rate on its own initiative.

The Regulations provided no separate lower RoE for stations operating under extended PPAs or for projects that had completed their useful life, apart from the specified reduction for deficiencies under Regulation 35.5.

GERC had also applied a 13% base RoE to these stations in its MYT tariff order for FY 2025–30, which had not been challenged, and had approved capital expenditure for the same period.

Applying PTC India, the Tribunal held that GERC could not use the SPPA approval orders to depart from the binding Regulations or impose a different RoE by order; any change to the normative rate required amendment of the Regulations through the statutory process.

It set aside the directions capping RoE at 11%, modifying the SPPAs accordingly and requiring GSECL to give an unconditional undertaking.

GSECL was held entitled to the 13% RoE already determined in the MYT tariff order for the relevant stations.