Non-Tariff Income for distribution business is limited to retail supply activities, excluding income from generation and transmission assets.

The Appellant (DVC), a statutory body under the DVC Act, 1948, operates as a vertically integrated utility performing generation, transmission, and distribution functions

While the Central Electricity Regulatory Commission (CERC) determines tariffs for DVC’s generating stations and unified transmission and distribution (T&D) systems, the State Commissions (JSERC and WBERC) determine retail supply tariffs

DVC appealed the JSERC order dated 27.05.2025, which, during the True-up of FY 2023-24 and ARR for FY 2025-26, treated various items of "Other Income" (e.g., interest on employee loans, sale of scrap, rental income) as Non-Tariff Income (NTI) for DVC's distribution business in Jharkhand

DVC contended that since CERC regulates the T&D assets, JSERC lacked jurisdiction to include income from those assets as NTI for distribution

Section 62(2) of the Electricity Act, 2003, which empowers Commissions to require licensees to furnish separate details for generation, transmission, and distribution for tariff determination

Principle established in prior Tribunal judgments (Appeals 845 of 2023 and 332 of 2024) that the authority regulating the tariff for a particular segment is alone competent to determine associated cost and revenue elements, including NTI

Fourth Proviso to Section 14 of the Electricity Act and Sections 33, 45, and 47 of the DVC Act, holding that the DVC Act does not prohibit the segregation of accounts for "electrical energy" into sub-segments for regulatory transparency

The Tribunal reasoned that a "distribution system" consists of the physical infrastructure, while "distribution business" encompasses the commercial aspects of supply

Currently, CERC determines the Annual Fixed Charges (AFC) for DVC’s integrated T&D network, including O&M and human asset costs; therefore, any NTI emanating directly from these physical assets (like sale of scrap or rental of buildings) falls under CERC's regulatory domain

The Tribunal found that JSERC’s inclusion of items linked to employees, contractors, and fixed assets (Items j to y in the Impugned Order) resulted in double regulatory oversight, as these are already factored into the CERC-regulated T&D tariff

Consequently, only the "Delayed Payment Surcharge" (DPS), which arises from the retail supply business regulated by JSERC, qualifies as NTI for the distribution ARR

The Tribunal also rejected DVC’s claim that its statutory accounting under the DVC Act prevents segregation, noting that Section 62(2) of the Electricity Act provides an independent mandate for detailed accounting to ensure cost-reflective tariffs

JSERC was directed to re-compute the tariff considering only DPS as NTI; ordered JSERC to identify DVC's distribution assets in Jharkhand within six months and directed DVC to segregate its accounts into distribution, transmission, and generation with effect from 01.04.2027 in consultation with the CAG