APTEL directs the Central Commission to exercise Power to Relax in relation O&M Norms for Sole North-Eastern Transmission Licensee
In a judgment dated 08.07.2026, the Appellate Tribunal for Electricity (“Appellate Tribunal”) has ruled in favour of North East Transmission Company Limited (“NETCL”), setting aside the Order dated 27.01.2021 passed by the Central Electricity Regulatory Commission (“Central Commission”) in Petition No. 191/MP/2019, whereby the Central Commission had declined to exercise its power to relax the normative Operation and Maintenance (“O&M”) expenses prescribed under the Tariff Regulations, 2014.
By allowing Appeal No. 296 of 2021, the Appellate Tribunal has remanded the matter to the Central Commission with a specific direction to exercise its power to relax under Regulation 54 of the Tariff Regulations, 2014, for the limited purpose of working out the O&M charges for NETCL’s transmission assets for the control period 2014-19.
Brief Background
NETCL, a single-project transmission licensee engaged in evacuating power from the 2 x 363.3 MW Palatana Gas Based Power Project of ONGC Tripura Power Company Limited across five transmission assets in the North-Eastern Region, had relied on the Central Commission’s ownearlier order dated 16.04.2019, wherein the Central Commission had observed that NETCL, being a single asset company operating in the North-Eastern Region, “required consideration distinct from transmission licensees having multiple assets” and had granted liberty to file a fresh petition. NETCL contended that the Impugned Order, passed pursuant to that very liberty, contradicted the Central Commission’s earlier observation.
The Appellate Tribunal in the Appeal has proceeded to decide the issue on merits rather than resting its decision on the earlier order passed by the Central Commission alone.
1. Pan-India Normative Benchmark cannot be considered for Higher O&M costs of the North-East
NETCL demonstrated, relying on POWERGRID’s region-wise O&M data for 2014-15 drawn from the Statement of Reasons to the Tariff Regulations, 2014, that the North-Eastern Regionconstituting merely 3.25% of POWERGRID’s pan-India network of over 1,53,635 circuit kilometres incurred O&M costs of Rs. 0.75 lakh per circuit kilometre, which is 127% higher than the Western Region, 32% higher than the Northern Region and 79% higher than the Southern Region. It was NETCL’s case that when such costs are aggregated at the national level to derive a single normative benchmark of Rs. 0.403 lakh per circuit kilometre, the distinctly higher costs of the North-East get diluted within the national average, even though NETCL operates entirely within that region.
The Appellate Tribunal held that for a transmission licensee operating on a pan-India basis, aberrations in regional O&M costs can be mitigated when evaluated at the company level, but “the same mitigation is not feasible for a licensee whose operations are confined solely to the North Eastern Region, such as the Appellant”. The Appellate Tribunal also took note of NETCL’s submission that the rates independently determined for State Commission-regulated utilities operating under identical conditions in the region Rs. 0.85 lakh per circuit kilometre for AEGCL (Assam) and Rs. 1.09 lakh per circuit kilometre for MEPTCL (Meghalaya) were approximately twice the normative rate applied to NETCL.
2. Finding on Non-Submission of Data
The Impugned Order had recorded that NETCL“failed to submit data regarding O&M expenses while the Central Commission was engaged in formulating the norms for the control period 2019-24”. NETCL disputed this finding, pointing out that it had, in fact, submitted detailed operational and financial data in response to the Central Commission’s Public Notice dated 10.11.2017 inviting stakeholder comments on the Draft Tariff Regulations, 2019.
On scrutiny of the record, the Appellate Tribunal found substance in NETCL’s contention and held that the observation in the Impugned Order that no data was submitted by NETCL for finalising the O&M norms for the control period 2019-24 is contrary to the record and cannot be sustained, and accordingly set aside the Central Commission’s finding on this aspect.
3. Subsequent recognition of the North-East’s Operational challenges in the Central Commission Tariff Regulations
The Appellate Tribunal noted that the Central Commission has taken cognizance of the difficulties faced by licensees operating in the North-Eastern and hilly regions. The Explanatory Memorandum to the Draft Tariff Regulations, 2024 records that “the actual expenses incurred in the NER region are higher than compared to other regions” on account of increased logistic, erection, labour and transportation costs, and proposes a multiplication factor of 1.5 to the O&M expenses for licensees whose transmission assets are located solely in the North-Eastern Region, Uttarakhand, Himachal Pradesh, and the Union Territories of Jammu and Kashmir and Ladakh, a dispensation since incorporated as a proviso to Regulation 36(3) of the Tariff Regulations, 2024.
The Appellate Tribunal directed that while working out the O&M charges for NETCL on remand, the Central Commission shall also take into account this special dispensation accorded in the subsequent regulations for hilly and similarly placed licensees in the North-Eastern Region.
4. Exceptional circumstances justify exercise of the Power to Relax under the Tariff Regulations
The Appellate Tribunal held that Regulation 54 of the Tariff Regulations, 2014 confers on the Central Commission the power to relax any provision of the Regulations in exceptional circumstances, to be exercised not lightly or routinely, but where the factual matrix discloses circumstances of such peculiar nature that strict adherence to the regulatory norm would result in manifest hardship or inequity. Finding that NETCL’s operations are confined exclusively to the North-Eastern Region, characterised by hilly terrain, difficult accessibility and operational challenges not ordinarily encountered elsewhere, the Appellate Tribunal held that these constitute exceptional circumstances within the meaning of Regulation 54, and that “to insist upon a rigid application of the normative O&M charges in such a situation would be inequitable and contrary to the statutory mandate of ensuring reasonable recovery of costs”.
Accordingly, the Impugned Order was set aside and the matter remanded to the Central Commission with a direction to exercise its power to relax under Regulation 54 for working out NETCL’s O&M charges for the control period 2014-19, subject to a prudence check ensuring that only expenditure which is demonstrably necessary and reasonable is factored into the determination.
The judgment reaffirms that normative benchmarks derived on a pan-India basis cannot be mechanically applied to licensees whose operations are confined to regions with demonstrably higher operating costs, and underscores the availability of the power to relax as a corrective mechanism for such licensees operating under peculiar geographical and operational constraints.
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