APTEL Sets Aside CERC Tariff Order for Tripura Gas Plant, Bars NEEPCO from Passing BHEL and ONGC Delays to Consumers

APTEL has allowed TSECL's appeal, holding that time and cost overruns attributable to EPC contractor BHEL and gas supplier ONGC cannot be loaded onto consumers through tariff.

The Appellate Tribunal for Electricity has set aside a Central Electricity Regulatory Commission order that had condoned significant delays in commissioning the Tripura Gas Based Power Plant and approved the resulting cost escalation in tariff. In a judgment pronounced on 14 May 2026 in Appeal No. 184 of 2020, the Tribunal held that delays of 8 months attributable to EPC contractor BHEL, and a further 25 months and 36 months attributed to non-supply of gas by ONGC for the Gas Turbine and Steam Turbine respectively, were not grounds to burden the sole beneficiary — Tripura State Electricity Corporation Limited — with additional interest during construction, incidental expenditure during construction, or escalated contract prices. The matter has been remanded to CERC for fresh tariff determination.

The Tripura Gas Based Power Project and the Disputed CERC Order

Respondent No. 1, North Eastern Electric Power Corporation Ltd. (NEEPCO), is a Government of India undertaking that developed the Tripura Gas Based Power Project at Monarchak, Sepahijala District, Tripura. NEEPCO entered into a Power Supply Agreement (PSA) dated 19.03.2008 with the Appellant, Tripura State Electricity Corporation Ltd. (TSECL), for establishment of a 104 MW gas-based power plant against confirmed gas availability of 0.5 MMACMD from ONGC. TSECL was designated the sole off-taker.

The Ministry of Power accorded investment approval on 14.07.2009 at an estimated cost of Rs. 421.01 crore at December 2008 price levels, with a debt-equity ratio of 70:30. A revised investment approval (RCE-I) followed on 23.02.2011 at Rs. 623.44 crore at November 2010 price levels. The EPC contract was awarded to BHEL on 23.07.2010, with commissioning stipulated at 32 months for the Gas Turbine and 36 months for the Steam Turbine.

Actual commissioning ran far behind schedule. The Gas Turbine was synchronised in March 2015 and its Commercial Operation Date (COD) was declared on 24.12.2015. The Steam Turbine was synchronised in January 2016 with COD declared on 31.03.2017. This represented a delay of 33 months for the GT block and 44 months for the ST/combined cycle.

On 08.05.2017, NEEPCO filed Petition No. 128/GT/2017 before CERC seeking tariff approval for the period from COD of the Gas Turbine to 31.03.2019. CERC's order dated 04.04.2019 condoned the delays and approved the capital cost claimed by NEEPCO. TSECL challenged that order before APTEL.

Three Issues Before the Tribunal

The Tribunal framed three issues: whether CERC erred in allowing the 8-month time overrun attributable to BHEL; whether CERC erred in allowing the 25-month and 36-month overruns attributed to ONGC's non-supply of gas; and whether CERC erred in allowing the resulting cost overrun.

TSECL argued that the decision to allow BHEL to offload part of the EPC works to NTPC BHEL Power Projects Private Limited (NBPPL) — a joint venture of NTPC and BHEL — was a post-contractual deviation that materially contributed to delay. NEEPCO had initially resisted the offloading but eventually approved it in May 2011 following a letter from the Ministry of Power dated 26.04.2011. TSECL contended that contractual disputes between a generating company and its vendors are bilateral in nature and their consequences cannot be passed on to consumers.

NEEPCO countered that the EPC contract had been awarded to BHEL through a high-level negotiation process after an international competitive bid failed to attract qualifying offers. It argued that the Ministry of Power's letter constituted an executive instruction binding on NEEPCO, relying on Kusum Ingots and Alloys v. Union of India, (2004) 6 SCC 254. NEEPCO also submitted that CERC had correctly applied the framework from Maharashtra State Power Generation Company Ltd. v. MERC (Appeal No. 72 of 2010) and found no imprudence on its part.

The Tribunal's Reasoning on BHEL-Related Delay

The Tribunal accepted that NEEPCO's selection of BHEL as EPC contractor was not imprudent given the circumstances of the procurement. However, it drew a distinction between selection and execution. The MSPGCL framework, which CERC had relied upon, identifies imprudence “in executing contractual agreements including terms and conditions of the contracts” as a controllable factor. The Tribunal held that the conduct of NEEPCO in permitting BHEL to offload work to NBPPL fell squarely within that category.

The Tribunal identified four unanswered contractual questions: whether the EPC contract permitted full or partial exit; whether it provided for compensation upon such exit; whether NEEPCO enforced or sought to enforce any such compensation; and whether the absence of an effective exit or compensatory mechanism itself indicated weakness in the contractual arrangement. These matters, the Tribunal held, lay entirely within NEEPCO's domain. TSECL had no role in negotiating or enforcing those terms.

On NEEPCO's reliance on the Ministry of Power letter as an executive instruction, the Tribunal was unimpressed. It examined the letter dated 26.04.2011 from the Joint Secretary, Ministry of Power, and found it to be a Demi Official (D.O.) letter — a request, not a direction. The Tribunal cited the Madhya Pradesh High Court's judgment in Suresh Madhukar Ganorkar v. Union of India (W.P. No. 11076/2020) for the proposition that a D.O. letter does not carry statutory force and cannot be implemented as a binding instruction.

The Tribunal also rejected NEEPCO's reliance on Kusum Ingots, holding that the Supreme Court's observations in that case were confined to the question of territorial jurisdiction of a High Court under Article 226(2) of the Constitution and did not lay down any proposition about the binding nature of executive instructions between parties.

Gas Non-Supply by ONGC: Uncontrollable Factor or Foreseeable Risk?

NEEPCO attributed delays of 25 months for the GT and 36 months for the ST to ONGC's failure to supply the contracted quantity of natural gas. The Tribunal examined this claim against Regulation 12 of the CERC (Terms and Conditions of Tariff) Regulations, 2014, which classifies delay in execution attributable to a contractor, supplier or agency of the generating company as a controllable factor.

The Tribunal's analysis on Issue No. 2 concluded that NEEPCO was not entitled to IDC and IEDC for the delays attributed to ONGC. The digest does not set out the full reasoning on this issue beyond the Tribunal's application of Regulation 12 and its conclusion that such delays fell within the controllable category for tariff purposes.

Cost Overrun: RCE-I as the Reference Point

On the capital cost question, the Tribunal found that CERC had treated a letter dated 06.10.2015 from the Director, Central Electricity Authority (CEA), to the Under Secretary, Ministry of Power as a revised approved cost estimate (RCE-II). The Tribunal held that this letter was a recommendation to the Ministry of Power and that CERC erred in treating it as a revised investment approval.

Clause 3.2 of the PSA provided that no time and cost overrun due to reasons attributable to NEEPCO shall be entertained by TSECL, and the Tribunal read this as making the investment approval the ceiling reference. Regulation 10(4) of the CERC Tariff Regulations 2014 reinforces this: where a power purchase agreement provides for a ceiling on capital expenditure, CERC must take that ceiling into account in its prudence check.

The Tribunal held that CERC should have conducted its prudence check with RCE-I as the reference, not the cost figure in the CEA letter of 14.06.2017. Since RCE-I was at November 2010 price levels, the capital cost would need to be brought to the appropriate price level. Additionally, any cost escalation impacting contract prices arising from the disallowed delay periods must also be excluded from capitalisation, in line with Regulation 12.

On NEEPCO's argument that TSECL had signed a reconciliation statement of outstanding dues as on 31.12.2022 incorporating the revised project cost and CERC's tariff order of 26.06.2021, the Tribunal held that since there was no stay on the impugned order, signing the reconciliation merely reflected the legally prevailing position at the time and did not forfeit TSECL's right of appeal.

The Tribunal also addressed two interlocutory applications — IA Nos. 985 and 986 of 2026 — filed by TSECL after judgment was reserved, seeking directions to NEEPCO to withdraw invoices dated 02.03.2026 from the PRAAPTI Portal in view of a trigger date of 17.05.2026. Since the judgment was pronounced before that date, the Tribunal held those IAs had become infructuous and disposed of them accordingly.

Order

Appeal No. 184 of 2020 is allowed. The CERC order dated 04.04.2019 in Petition No. 128/GT/2017 is set aside to the extent it condones the 8-month time overrun attributable to BHEL, condones the 25-month and 36-month overruns attributed to ONGC's gas non-supply for the GT and ST respectively, and allows capitalisation of cost escalation — including escalation impacting contract prices, IDC and IEDC — arising from those delays.

The matter is remanded to CERC for fresh determination of tariff and admissible capital cost. CERC is directed to carry out prudence check of capital cost with reference to RCE-I, brought to the appropriate price level, and not in accordance with the cost in the CEA letter dated 14.06.2017. Any performance guarantee, liquidated damages, penalty or insurance proceeds relating to the disallowed delay period, if received by NEEPCO, shall be retained by NEEPCO.