Built, charged, left idle: APTEL lets Tata Power count its Rs 31.40 crore Panvel substation

MERC struck the IXORA substation and eight Parel bays off Tata Power's transmission cost because no one drew power from them. The Appellate Tribunal for Electricity holds that readiness for service, not actual use, is what counts, and sends the question of who should pay for the idle assets back to the State Commission.

The Appellate Tribunal for Electricity (APTEL) has held that a transmission licensee cannot lose tariff recovery on assets it built, got cleared and kept charged, merely because the entities meant to draw power from them never connected.

The judgment of 3 November 2026 partly allows an appeal by The Tata Power Company Ltd (Transmission) against the Maharashtra Electricity Regulatory Commission (MERC). The question of who must pay for the idle assets goes back to MERC.

The ruling covers a Rs 31.40 crore substation at Panvel built for a special economic zone that stalled, eight bays at Parel waiting for cable connections, and Rs 10.66 crore in operation and maintenance (O&M) costs for 91 unused bays.

It was written by Ajay Talegaonkar, Technical Member, for a bench that also included Virender Bhat, Judicial Member.

A substation built for a zone that stalled

Tata Power's transmission arm (TPC-T) holds a MERC licence granted on 14 August 2014 for 25 years. The appeal challenges MERC's tariff order of 30 June 2016 in Case No. 22 of 2016 and its review order of 19 July 2017 in Case No. 110 of 2016.

The first asset is the IXORA sub-station. IXORA Construction, later renamed Nidar Utilities Panvel LLP, was co-developer of a Multi Services Special Economic Zone at Panvel and a deemed distribution licensee. On 23 July 2010 it asked TPC-T for transmission connectivity, indicating a first-phase load of about 45 MW by 2015.

The State Transmission Utility (STU) approved the detailed project report on 14 December 2011. MERC gave in-principle approval on 16 March 2012 at an estimated Rs 34.30 crore.

Then the zone stalled. Development stopped in May 2013 and IXORA never built the distribution network needed to take power out. TPC-T completed construction on 25 March 2014, the installation was tested on 31 March 2014 and inspected on 26 September 2014, and final charging permission came on 18 February 2015.

On 30 May 2016 Hiranandani Communities told TPC-T that the zone project had been acquired under the SARFAESI Act and that power flow was tentatively expected from 1 October 2016.

Eight bays at Parel, waiting for cables

The Parel scheme was cleared by the STU on 27 October 2009 and by MERC in principle on 13 May 2010. TPC-T says it was meant to serve BEST, shifting its 22 kV load to 33 kV through 21 requested outlets.

Eight 33 kV bays costing Rs 1.83 crore were commissioned in 2014-15. On 15 April 2015 the STU allocated two to BEST and six to Tata Power Distribution (TPC-D). The bays stayed charged, TPC-T explained, while the outgoing cable connections were still under execution or yet to be started.

Why MERC struck the assets off

MERC relied on the proviso to Regulation 27.1 of its Multi Year Tariff Regulations, 2011, which says assets forming part of a project that are not put to use, or not in use, must be taken out of the capital cost. It disallowed both the IXORA and Parel assets on that ground.

It also disallowed Rs 10.66 crore of O&M entitlement for 91 unused bays in 2014-15. Of those, 57 had not been capitalised, including 35 at IXORA, and 34 were capitalised but unused by the beneficiaries.

The disputed capitalisation was Rs 26.54 crore for 2013-14 and Rs 4.86 crore for 2014-15 at IXORA, together Rs 31.40 crore, plus Rs 1.83 crore for the Parel bays.

Tata Power: ready and charged is enough

TPC-T, represented by Senior Advocate Sanjay Sen, argued that both projects were built at the request of distribution licensees and with STU and MERC approval. Non-use came from their failure to take outlets, which TPC-T could not control.

It said "put to use" for a transmission asset means charging and commissioning, and that the proviso excludes an uncharged element, not a charged project the downstream licensee has not drawn on.

TPC-T also pointed to the Central Commission's tariff regulations, which allow a commercial operation date where an element is ready but prevented from regular service for reasons not attributable to the licensee. MERC's own later regulations of 2015 recognise such commissioning.

It added that MERC's order of 12 September 2019 had capitalised the IXORA scheme in 2018-19 at a depreciated Rs 29.99 crore against a claim of Rs 36.66 crore, after the power purchase agreement of Nidar Utilities Panvel LLP was approved on 3 August 2018. Five of the eight Parel bays were similarly capitalised later.

It also called MERC's treatment inconsistent, since unused GIS bays were capitalised while AIS bays were not.

MERC: no consumer benefit, no capital cost

MERC, through Pratiti Rungta, argued that its 2005 guidelines set a two-stage process. In-principle clearance came first, and final approval followed at tariff determination, when actual cost and results achieved could be checked. Clearance was not an entitlement to capitalisation.

It said completion of erection could not be equated with being put to use where consumers got no benefit. IXORA was commissioned in 2014-15 against an approved completion in 2013 and had no certain date of use.

MERC also argued that its tariff review order of 26 June 2015 had already disallowed Rs 26.54 crore for IXORA, that TPC-T never challenged it, and that the claim was barred by res judicata. It relied on Haryana Vidyut Prasaran Nigam and PTC India v. CERC.

On the central regulations, it said the relevant provision was permissive, not mandatory, so commercial operation needed scrutiny. On O&M, it said passing through cost with no consumer benefit would push up tariffs, and unused bays beyond immediate need had not been disclosed at the approval stage.

An earlier disallowance does not bind later years

The tribunal framed the first of two issues in these words:

"Whether the State Commission was justified in disallowing capitalisation of the IXORA Sub-station and eight 33 kV AIS bays at Parel on the ground that the assets had not been put to use?" (para 12)

It started with the 2013-14 claim. Final charging approval from the Electrical Inspector came only on 18 February 2015, so the substation could not have been used before 2014-15. MERC was right to refuse the 2013-14 claim, the bench held.

It added that the correct reason was that the substation was not yet ready for use and the money was still capital work in progress, not that it had not been put to use.

On res judicata, the bench noted that MERC's impugned order never used the argument. It cited its own judgment of 13 January 2009 in Delhi Transco Ltd v. Delhi Electricity Regulatory Commission, which held that each year's tariff order gives rise to a fresh cause of action.

The Supreme Court had dismissed the appeals against that judgment on 16 February 2016. TPC-T's failure to challenge the 2013-14 disallowance therefore did not shut out its claim for 2014-15.

A gap in MERC's regulations

The bench said MERC disregarded TPC-T's point that non-use was down to other entities. Then it turned to the rules themselves:

"there is clearly a void in the regulations of MERC" (para 40)

A transmission system may be ready, it observed, yet unused because upstream or downstream systems built by others are not ready. MERC should have tried to fill that gap in fairness, rather than reject the claim on a technical ground.

The bench noted that the Central Commission's 2009 regulations define the commercial operation date of a transmission element and allow it to be approved before regular service where the delay is not the licensee's fault. Section 61 of the Electricity Act, 2003 directs state commissions to be guided by central principles.

Yet MERC's 2011 regulations define the date only for thermal and hydro stations and say nothing about transmission systems, the tribunal said, calling this intriguing.

Fairness pointed the same way. An entity that has finished its work, the bench said, should not lose capitalisation, and with it transmission charges, because others failed at theirs.

It relied on its own 2019 ruling in Nuclear Power Corporation of India v. CERC, Appeal No. 332 of 2016, and later cases, which hold that, for systems built through the TBCB route, the entity causing delay to a commissioned line pays the charges where regulations are silent.

The Supreme Court considered the principle in Power Grid Corporation v. Madhya Pradesh Power Transmission Company, (2025) 8 SCC 705.

The bench also said, prima facie, that the STU appeared not to have coordinated the entities involved, though it is the STU's function under Section 39 to plan and coordinate the intra-state system. MERC, it said, had examined none of this.

Prudence check, not a veto

MERC had argued that the in-principle approval was provisional. The bench was not persuaded. The clearance authorised construction, it said, and final approval at tariff stage was meant to compare actual with approved cost and run a prudence check.

Reading it as a licence to deny the entire cost, the bench said, would undermine regulatory certainty and discourage future investment by transmission licensees.

A later review of whether a scheme's objectives were met may inform future planning, it said, but cannot justify withholding transmission charges for a project the licensee completed as entrusted. Section 61 balances consumer interest with reasonable recovery of cost.

It called MERC's reliance on Haryana Vidyut Prasaran Nigam v. Haryana Electricity Regulatory Commission of 6 September 2013 misplaced, because that case concerned works still in progress, while these assets were complete and ready for charging.

The conclusion on the first issue was that MERC erred in disallowing capitalisation for 2014-15 without analysing how far other entities were responsible for the idle assets.

The Rs 10.66 crore operation question

The second issue was whether MERC could disallow Rs 10.66 crore of O&M for the 91 unused bays. The bench split the answer by stage.

It rejected TPC-T's argument that O&M should be allowed even for assets never capitalised because the 2011 regulations did not forbid it. Spending such as patrolling an unfinished line or guarding a substation under construction belongs to the project cost and must be capitalised, the bench said.

The position changes once assets are ready for charging and under commercial operation. Admissible O&M then forms part of costs recoverable through transmission charges. Where assets are commissioned but unused for reasons not attributable to the licensee, O&M cannot be denied merely because they are not actually used.

The bench found no merit in MERC's argument that it would have cut the excess bays at approval stage had they been disclosed. The test, it said, is whether the bays meet the requirements for capitalisation and O&M recovery, "not whether they were actually being utilized" (para 67).

It also held that MERC's treating other licensees' unused bays the same way was beside the point. TPC-T had challenged its own disallowance, and the appeal succeeded on merits.

Order

The appeal was partly allowed and the orders of 30 June 2016 and 19 July 2017 set aside to the extent indicated. The tribunal upheld the disallowance of Rs 26.54 crore for the IXORA sub-station in 2013-14.

It allowed capitalisation of the entire Rs 31.40 crore for IXORA for 2014-15, with effect from the date the Electrical Inspector gave final charging permission. Capitalisation of the eight Parel bays was allowed from their actual date of charging.

MERC must determine which entities were responsible for non-use of the assets and fix liability for transmission charges, including admissible O&M, after a hearing and by a reasoned order. For the 34 bays already capitalised, admissible transmission charges including O&M are to be allowed under the applicable regulations.