Regulatory Authorities Cannot Arbitrarily Deviate from Statutory Operational Norms to Deny Efficiency Gains during Tariff Truing-Up

The Appellant (TPCL) operates Units 2 and 3 of the Jojobera Power Plant, supplying electricity to Respondent No. 2 (Tata Steel Ltd).

On 27.12.2019, the Jharkhand State Electricity Regulatory Commission (JSERC) passed a "Truing-up" order for FY 2016-17 and an Annual Performance Review for FY 2017-18.

The Appellant challenged several disallowances made by JSERC, including the reduction of normative Secondary Fuel Oil Consumption (SFOC) from 1 ml/kWh to 0.5 ml/kWh, partial allowance of water charges, disallowance of higher transit loss for washed coal, and the denial of carrying cost due to alleged delays in filing the petition.

1. Whether the State Commission can diverge from the statutory normative parameters for Secondary Fuel Oil Consumption (SFOC) prescribed in the GTR 2015 based on actual lower consumption

2. Whether the Appellant is entitled to actual water charges following the dismissal of a relevant writ petition by the Jharkhand High Court

3. Whether Additional Capitalization (ACE) can be disallowed solely on the ground of lack of prior approval when the MYT order was passed after the expenditure was incurred

4. Whether the denial of carrying cost is justified when the delay in filing the True-up petition was due to the late issuance of the underlying Multi-Year Tariff (MYT) Order

The court primarily applied the JSERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2015 (GTR 2015), specifically Regulation 8.4 regarding operational norms and Regulation 6.18 regarding carrying cost.

It relied on the principle from PTC India Ltd. v. CERC that Regulations are binding delegated legislation that cannot be overridden by a quasi-judicial tariff order.

It also applied the legal maxim generalia specialibus non derogant (special provisions prevail over general) and the principle of lex non cogit ad impossibilia regarding the impossibility of filing a True-up petition without a prior MYT order.

The Tribunal found that JSERC erred by reducing the SFOC norm to 0.5 ml/kWh; since GTR 2015 specifically fixed the norm at 1.0 ml/kWh for Jojobera, the Commission could not use its "power to relax" or "controllable parameters" to retrospectively penalize the Appellant for efficiency.

Regarding Water Charges, since the High Court dismissed the challenge to the water tax, the actual costs became recoverable under Regulation 7.46.

On Additional Capitalization, the Tribunal noted that requiring prior approval for FY 2016-17 was impossible because the MYT Order setting the benchmarks was only issued in 2018.

For transit losses, the Tribunal upheld the Commission's decision because the actual losses (approx. 0.4%) were lower than the 0.8% domestic coal norm.

Finally, the denial of carrying cost was deemed illegal as the "regulatory lag" was not attributable to the Appellant but to the late issuance of the MYT Order by the Commission itself.

The Tribunal partially allowed the appeal. It remanded the issues of Water Charges, Additional Capitalization, Decapitalization methodology, and OM Tax liability to the JSERC for fresh computation in light of the findings. The JSERC was directed to pass consequential orders within three months.

The disallowance of higher transit loss was upheld.