APTEL Sets Aside APERC’s Deduction of Variable Charges for Monthly Availability Shortfall: Energy Charges Cannot Be Penalised
The Appellate Tribunal for Electricity (“Appellate Tribunal”) in its judgment dated 03.07.2026, has ruled in favour of Hinduja National Power Corporation Limited (“HNPCL”), setting aside the order dated 30.12.2025 passed by the Andhra Pradesh Electricity Regulatory Commission (“APERC”), to the extent it directed deductions from HNPCL’s variable charges on account of shortfall in monthly plant availability.
By allowing Appeal No. 27 of 2026, the Appellate Tribunal has held that under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024, the APERC Regulations of 2008, and the Power Purchase Agreement (“PPA”) dated 16.07.2024 executed between the parties, only fixed/capacity charges are linked to plant availability, while energy charges are strictly linked to the scheduled energy actually supplied and cannot be reduced or penalised for a shortfall in monthly availability.
1. No Statutory or Contractual Basis for Deducting Variable Charges
APERC by way of the Impugned Order had directed the DISCOMs to apply graded deductions from the Variable Cost – 5paise per unit where the shortfall in actual monthly availability was up to 5% below the normative/target level, 10paise where the shortfall was between 5% and 15%, and 15paise where the shortfall exceeded 15%, with liberty to HNPCL to seek release of the withheld amounts by establishing that the underperformance was attributable to uncontrollable factors.
HNPCL contended that neither the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024 (adopted by APERC), nor the APERC Regulations, 2008, nor the PPA provide for any reduction in energy charges on account of a shortfall in availability, and that the deductions were consequently without statutory or contractual authority. HNCPL contended that Rs. 12.26 Crore had already been withheld from HNPCL’s bills for the months of December 2025 to February 2026.
2. Fixed Charges, Not Energy Charges, are Linked to Availability
Examining Regulation 15 and 16 read with Chapter 11 of the CERC Regulations, 2024, Clause 1.2.2 and 1.2.3 of Schedule-F of the PPA, and Regulations 11 to 13 of the APERC Regulations, 2008, the Appellate Tribunal held that the governing framework, whether under the CERC Regulations, the APERC Regulations, or the PPA executed between the parties expressly and unambiguously stipulates that monthly fixed charges are linked to the Plant Availability Factor for the month vis-à-vis the normative annual plant availability, whereas energy charges are linked solely to the fuel cost/energy charge rate applied to the quantum of energy actually supplied during the month, irrespective of the plant availability achieved in that month.
The Appellate Tribunal held that once the Regulations stipulate the manner of recovery of fixed cost and computation of energy charge, APERC has no jurisdiction to interfere with or modify that scheme by way of adjudication or in a tariff order, any departure can only be effected by way of a formal amendment to the Regulations, and not otherwise.
3. APERC cannot invoke Casus Omissus to fill a regulatory gap that does not exist
APERCS had contended that while the PPA and Regulations focus on annual normative availability, they do not preclude monthly adjustments, and that APERC, as a statutory body, is empowered and obligated to fill contractual and regulatory gaps to ensure reliable supply.
The Appellate Tribunal rejected this submission, holding that both the CERC and APERC Regulations clearly stipulate the methodology for recovery of energy charges for a given month, and once such methodology is prescribed, the Commission is bound to apply it in its entirety. The doctrine of casus omissus was held to have no application, since the Regulations are complete in themselves and leave no vacuum for the Commission to legislate by way of adjudication.
4. Parity with other generators cannot justify an unlawful deduction
APERC had sought to justify the deductions by referring to similar reductions applied to other Intra-State generators such as APGENCO. The Appellate Tribunal held that the application of a similar reduction to other generators is of no relevance, since those orders were not under challenge and the Appellate Tribunal was not bound to extend the same treatment to HNPCL merely because it had been applied elsewhere. The doctrine of “negative equality” or parity cannot be invoked to perpetuate an illegality or justify a deviation from the Regulations, and each appeal must be adjudicated on the basis of the statutory framework and the specific impugned order under consideration.
Accordingly, the Appellate Tribunal set aside the Impugned Order on this issue and directed that recovery of energy charges be enforced strictly in accordance with the applicable CERC Regulations and the PPA, with the Respondents directed to refund the amount deducted/withheld from HNPCL’s energy bills along with applicable carrying cost within four weeks from the date of the judgment.
5. Part load compensation, remanded for quantification only
HNPCL had also claimed Part Load Compensation (“PLC”) in terms of Clause 1.2.5 of Schedule-F of the PPA read with Regulation 6.3B of the CERC [Indian Electricity Grid Code(IEGC)] (Fourth Amendment) Regulations, 2016, on which the Impugned Order contained no discussion, analysis or finding, despite APERC having recorded HNPCL’s claim. The DISCOMs admitted that the Revised Consolidated PPA explicitly provides for part load compensation, but contended that no separate determination was required as PLC for the previous Control Period had been claimed as part of the True-Up process on an actual basis.
Finding no dispute with regard to HNPCL’s entitlement to Part Load Compensation, and noting that the controversy, if any, was confined only to quantification and reconciliation, the Appellate Tribunal held that HNPCL is entitled to Part Load Compensation in terms of the PPA and Regulation 6.3B of the IEGC (Fourth Amendment), 2016, and remanded the matter to APERC for determination and finalisation of the amount payable towards PLC.
The judgment reaffirms that in a statutory tariff regime, the mechanism prescribed under the Regulations and the PPA for recovery of fixed and energy charges must be followed strictly. It further clarifies that the doctrine of casus omissus cannot be invoked to fill a gap where none exists, and that parity with the treatment accorded to unrelated generators cannot be used to sustain an otherwise unlawful deduction.
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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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