Project-specific tariff determination requires a comprehensive prudence check of actual capital costs over generic PPA rates.

In 2006, Tarini Infrastructure Ltd ("Tarini") was awarded a concession to develop a 5.6 MW small hydro project in Gujarat on a Build, Operate, and Own basis

A Power Purchase Agreement (PPA) was executed with Gujarat Urja Vikas Nigam Limited ("GUVNL") in 2008 at a generic tariff of Rs. 3.29/kWh based on a 2007 Order

Due to delays and alleged cost overruns (increasing from a DPR estimate of Rs. 31.35 Crore to an actual cost of ~Rs. 62.33 Crore), Tarini sought a project-specific tariff

Following a remand from the Supreme Court (affirming APTEL’s 2012 decision that generic tariffs based on pre-2003 guidelines lack legal force), the Gujarat Electricity Regulatory Commission (GERC) issued an order on 07.05.2018 re-determining the tariff at Rs. 3.61/unit

Both GUVNL and Tarini appealed this order on grounds involving capital cost prudence, Capacity Utilisation Factor (CUF), and carrying costs

1. Whether the State Commission erred by accepting audited balance sheets as the sole basis for capital cost without conducting a "prudence check"

2. Whether the Capacity Utilisation Factor (CUF) should be maintained at the contractually agreed 70% or reduced to the actual achieved 66%

3. Whether Tarini is entitled to Interest During Construction (IDC) and Incidental Expenditure during Construction (IEDC) for the period of delay in commissioning

4. Whether the revised tariff should apply retrospectively from the Commercial Operation Date (COD) and whether carrying costs are payable on differential dues

The Tribunal applied Section 61 of the Electricity Act, 2003, which mandates balancing consumer interests with the recovery of the cost of electricity in a reasonable manner

It relied on the principle from *Dodson-Lindblom Hydro Power Pvt. Ltd. v. MERC*, establishing that a "prudence check" is not limited to verifying expenditure but requires assessing if the cost is justifiable, efficient, and aligned with industry norms

The doctrine of restitution was applied regarding carrying costs, as established in *Bangalore Electricity Supply Co. Ltd. v. Hirehalli Solar Power Project LLP* and *Rosa Power Supply Co. Ltd. v. UPPCL*, holding that carrying cost is a substantive reparatory right even if not specifically pleaded

Furthermore, the Tribunal enforced strict compliance with Force Majeure notice requirements as a condition precedent for relief, citing *Maruti Clean Coal and Power Ltd. v. PGCIL*

The Tribunal found that GERC failed to perform a mandatory prudence check by blindly adopting audited figures, noting that auditors ensure financial accuracy while regulators must ensure economic efficiency

Regarding CUF, the Tribunal held that since Tarini voluntarily committed to a 70% Minimum Guaranteed Offtake in the PPA and subsequently reaffirmed this in a 2014 Supplementary PPA, it could not resile from this norm, especially as data showed 70% was achievable

On the issue of delay, the Tribunal determined Tarini failed to issue a timely Force Majeure notice (waiting 5 months after the event), thus making the delay its own responsibility and disentitling it to IDC/IEDC beyond the original Scheduled COD

Regarding the tariff's effective date, the Tribunal reasoned that since the PPA's original generic tariff was "non-est" in law, the project-specific tariff must apply from the date of commissioning to ensure cost recovery under Section 61

Finally, the Tribunal applied the principle of restitution to grant carrying costs, clarifying that the Supreme Court's order to "bear their own costs" referred only to litigation expenses, not substantive financial dues

(ii) The CUF is set at the PPA-mandated 70%

(iii) IDC and IEDC are disallowed for the period exceeding the original SCOD

(iv) The license fee of Rs. 0.23/unit is upheld as a legitimate pass-through

(v) Interest on loan is upheld at 13.2%, but interest on working capital must be re-calculated based on GERC MYT Regulations 2011

and (vi) Tarini is entitled to the revised tariff from COD plus carrying costs on the differential amount

GERC is directed to pass consequential orders within three months