O&M treatment must follow precedent recognizing mandated network augmentation charges as uncontrollable.

Torrent Power Limited, a distribution licensee in Gujarat, challenged the Gujarat Electricity Regulatory Commission’s Tariff Order dated 4 April 2018 concerning the true-up for FY 2016–17 and determination of tariff for FY 2018–19.

The sole challenge concerned the Commission’s treatment of the Appellant’s Operation and Maintenance (“O&M”) expenses as controllable. During the appeal, both the Appellant and the Commission accepted that the matter was covered by the Tribunal’s earlier judgment dated 9 May 2019 in Torrent Power Limited v. Gujarat Electricity Regulatory Commission, Appeal No. 256 of 2016.

Whether the Commission was correct in treating the Appellant’s O&M expenses as controllable while determining the true-up and tariff.

Whether the impugned Tariff Order was required to be set aside and the matter remanded for reconsideration in accordance with the Tribunal’s judgment in Appeal No. 256 of 2016.

The Tribunal applied the principles laid down in its judgment dated 9 May 2019 in Torrent Power Limited v. Gujarat Electricity Regulatory Commission, Appeal No. 256 of 2016. Under that judgment, variation in O&M expenses is ordinarily treated as controllable; however, expenses incurred for network augmentation required by the State Transmission Utility for connectivity may, in appropriate exceptional circumstances, be treated as uncontrollable.

The Tribunal further held that deductions from O&M expenses contrary to the applicable statutory regulations are impermissible and that the Commission must adopt a consistent approach in comparable matters, including matters concerning O&M expenses and technical and commercial losses.

The Tribunal did not independently examine the merits of the Commission’s treatment of the O&M expenses because both the Appellant and the Commission agreed that the controversy was governed by the Tribunal’s earlier decision.

The Commission expressly accepted that it was bound by the principles laid down in Appeal No. 256 of 2016 and requested a fresh determination on that basis. In view of the admitted legal position and the parties’ consensus, the Tribunal held that the appropriate course was to set aside the impugned order and remit the issue to the Commission for reconsideration in accordance with the earlier judgment.

The appeal and the pending interlocutory application were disposed of accordingly.