APTEL restores 13 per cent return on 3,122 MW of GSECL plants: regulator cannot impose 11 per cent by order

Regulation 35.2 of the GERC MYT Regulations, 2024 lets only a generator volunteer a lower return on equity, the Tribunal held, setting aside the 11 per cent cap and permanent undertaking GERC attached to extending the PPAs of 2,912 MW of transferred stations and Wanakbori Unit 7 to 2030.

The Appellate Tribunal for Electricity has restored a 13 per cent return on equity for Gujarat State Electricity Corporation Limited (GSECL) on 2,912 MW of transferred thermal and hydro stations and on the 210 MW Wanakbori Unit 7, setting aside two Gujarat Electricity Regulatory Commission (GERC) orders that had cut the return to 11 per cent as the price of extending their power purchase agreements to 2030. In a common judgment of 23 October 2026, Officiating Chairperson Seema Gupta, writing for herself and Judicial Member Virender Bhat, held that Regulation 35.2 of the GERC Multi Year Tariff Regulations, 2024 fixes a base return of 13 per cent, that only the generator can offer to take less, and that a Commission wanting a lower rate for old plants must amend the regulation under Section 181 of the Electricity Act, 2003 rather than impose it by order.

Two ageing fleets and an extension to 2030

GSECL is the generating successor of the Gujarat Electricity Board. Gujarat Urja Vikas Nigam Limited (GUVNL), the second respondent, buys power in bulk for the State and is the holding and nodal company for the Gujarat distribution utilities. Appeal No. 301 of 2026 concerned the transferred generating stations covered by a PPA of 7 January 2010, effective from 1 April 2010, for an original 3,992 MW over 15 years with provision for extension by mutual agreement. Units totalling 1,080 MW were later retired, leaving 2,912 MW in service: Ukai Units 3 to 5, Gandhinagar Units 3 and 4, Wanakbori Units 1 to 6, KLTPS Unit 3, and the Ukai and Kadana hydro stations. Appeal No. 317 of 2026 concerned Wanakbori Unit 7, a 210 MW unit under a 25-year PPA of 22 January 1997 with the erstwhile Board, also extendable by mutual consent.

On 20 January 2023 the Central Electricity Authority advised utilities not to retire thermal units and instead to take up R&M and life-extension work. GSECL asked for both PPAs to be extended on 28 March 2024. For Wanakbori 7, a supplementary PPA followed on 13 November 2024 and GUVNL filed Petition No. 2434 of 2024 on 11 December 2024. For the transferred stations, the GUVNL board approved the purchase on 29 October 2024, the supplementary PPA was signed on 18 February 2025, and Petition No. 2459 of 2025 was filed on 20 February 2025. Both petitions were brought under Sections 86(1)(b) and 62 of the Electricity Act and sought extension up to 1 April 2030 or the end of each plant's useful life, whichever came first.

While the petitions were pending, GERC passed its tariff order of 31 March 2025 in Case No. 2418 of 2024 for the control period FY 2025-26 to FY 2029-30. It covered these very stations, applied a 13 per cent return on equity under the 2024 Regulations, and approved capital expenditure of ₹3,584 crore on the transferred stations and ₹214.86 crore on Wanakbori 7 up to 31 March 2030. Nobody challenged that order.

The condition GERC attached

On 26 May 2026 GERC approved the supplementary PPA for the transferred stations, and on 17 June 2026 the one for Wanakbori 7. Each approval came with a condition: the return on equity during the extended period would be restricted to 11 per cent. GSECL was to file, within 30 days, an unconditional undertaking to GUVNL that it would claim 11 per cent instead of the normative rate, that the claim was voluntary, and that the reduction was permanently foregone and would not be recouped at mid-term review, true-up or in any later tariff proceeding. The parties were to amend the supplementary PPA accordingly.

The Commission reasoned that the proviso to Regulation 35.2, which lets a generator claim a lower return for a year on unconditional and permanent terms, showed that “normative RoE is not an inflexible figure in every factual situation”. The extension was being granted because the stations still had system value, not because they needed the investment incentive of a new project. Consumers had already paid a regulated return on these assets over the original PPA term, and the extended-period tariff should reflect their aged, lower-risk character. The March 2025 tariff order, GERC said, predated its examination of the extension terms and conferred no indefeasible right to 13 per cent.

GSECL: the regulation says shall, and no one asked for less

Poorva Saigal, for GSECL, took the Tribunal to the text. Regulation 35.2 says a base return of 13 per cent “shall be allowed” on equity determined under Regulation 32. The lower-return mechanism in the proviso is triggered only by a voluntary claim from the generator; it confers no power on the Commission to prescribe a lower rate on its own. Regulations framed under Section 181 bind the Commission, she argued, citing PTC India Ltd v. CERC, (2010) 4 SCC 603, and the 2024 Regulations create no separate category for transferred or old stations. Nor had the Regulations relaxed any operating norm for these plants: heat rate, availability, plant load factor and auxiliary consumption all applied in full.

Section 86(1)(b), she said, lets the Commission regulate a distribution licensee's procurement, including the price, but not rewrite terms the parties had negotiated. GERC had itself recorded that approving a supplementary PPA did not approve every tariff component, which would continue to be governed by the Regulations and tariff orders; having said so, it could not fix a return contrary to Regulation 35.2 in the same order. The March 2025 tariff order had attained finality, leaving the Commission functus officio on the return. No party had pleaded or argued for a reduction, and a quasi-judicial body cannot grant relief on a case never made, GSECL said, relying on Bachhaj Nahar v. Neelima Mandal, (2008) 17 SCC 491. It pointed to GERC's order of 6 July 2024 for GMDC's lignite plant, where the same Section 86(1)(b) approval had raised the return from 13 to 14 per cent because the 2016 Regulations allowed it. On money, GSECL said it had already spent ₹518 crore on R&M for the transferred stations and about ₹50 crore on upgrades at Wanakbori 7, including wagon tipplers, belt feeders and the raw coal stacking system, and put its loss in fixed cost up to March 2030 at about ₹240 crore and ₹25 crore respectively.

Ranjitha Ramachandran, for GUVNL, explained why the extensions had been sought: base-load requirements as renewable capacity grew, and the CEA's guidance against retiring thermal plants until 2030. The supplementary PPAs kept every other term unchanged, so tariff would continue to be determined under Section 62, and the March 2025 order had already fixed the return for the whole extension period.

The regulatory test: one base rate and two provisos

Treating Appeal No. 301 as the lead matter, the Tribunal set out the scheme. Regulation 32 fixes the debt-equity ratio for existing projects, including those completing their useful life on or after 1 April 2025. Regulation 35.2 allows a base return of 13 per cent on that equity. Its first proviso applies where a generating company, transmission licensee, SLDC or distribution licensee itself claims a lower return for a year, and requires the claim to be unconditional; the second makes the reduction permanent. Regulation 35.5 cuts the return by 1 per cent per year at true-up for as long as the SLDC reports a deficiency in governor-mode operation, telemetry, communication or protection systems.

On a plain reading, the Tribunal held, 13 per cent is the prescribed rate. The proviso operates only when the generator itself claims less; it gives the Commission no independent discretion to impose a lower return suo motu. No regulation had been shown that sets a lower return for plants past their useful life, so such plants stay at 13 per cent, subject only to the Regulation 35.5 deficiency cut.

Three admissions sealed the point. The March 2025 tariff order had applied 13 per cent to these stations and had not been challenged. On a query from the bench, the respondents fairly admitted that the order gave these plants no relaxation in O&M norms or operating parameters. And the Commission had approved ₹3,584 crore and ₹214.86 crore of capital expenditure for the control period, as its own Table 5.34 showed, with the heaviest spending on Wanakbori Units 1 to 6. Once the regulator approves capital expenditure, the Tribunal said, the framework presumes an assured reasonable return on it; cutting the normative rate would erode that return and damage the prospects of future capital infusion.

PTC India and what a tariff order cannot do

Regulations under Section 181 have the force of subordinate legislation, and a Commission determining tariff under Sections 61, 62 and 86 must act within their four corners. The Tribunal quoted paragraph 56 of PTC India, where the Supreme Court held that once regulations on the terms and conditions of tariff exist, the terms framed under Section 61 must be in consonance with them. Its ratio is that tariff orders cannot override or amend regulations; any departure is “impermissible legislation by way of an order”.

GERC had correctly applied 13 per cent in March 2025 and then, while approving the supplementary PPAs, reduced the return for the very same stations. Having framed the 2024 Regulations, it was bound by them. The 13 per cent return could be reduced only in the ways the Regulations themselves provide, not by tariff order or administrative direction; specifying a lower rate for old stations amounted to rewriting the regulation. If GERC wants a different return for plants that have completed their useful life, its only lawful course is to amend the Regulations under Section 181, with the consultation and notification the statute requires.

Order

Both impugned orders were set aside to the extent they capped the return on equity at 11 per cent for the stations in Appeal Nos. 301 and 317 of 2026, required the supplementary PPAs to be modified accordingly, and required GSECL to furnish the unconditional undertaking. GSECL is entitled to a 13 per cent return on these stations as already determined in the tariff order of 31 March 2025. The appeals were disposed of in these terms, along with any pending interlocutory applications.