APTEL Sets Aside CERC Tariff Order for Tripura Gas Plant, Bars NEEPCO from Passing Contractor and Gas-Supply Delays to Consumers

APTEL held that delays attributable to EPC contractor BHEL and gas supplier ONGC are controllable factors under CERC Tariff Regulations 2014 and cannot inflate tariff for the sole beneficiary TSECL.

The Appellate Tribunal for Electricity (APTEL) on 14 May 2026 allowed an appeal filed by Tripura State Electricity Corporation Limited (TSECL) and set aside the Central Electricity Regulatory Commission's order dated 04.04.2019 in Petition No. 128/GT/2017. That order had approved the tariff for the Tripura Gas Based Power Plant (101 MW) developed by North Eastern Electric Power Corporation Limited (NEEPCO) at Monarchak, Sepahijala District, Tripura, and had condoned substantial time and cost overruns. APTEL found that CERC had failed to apply its own Tariff Regulations 2014, which expressly classify delays caused by a generating company's contractors and suppliers as controllable factors. The matter has been remanded to CERC for fresh tariff determination.

The Tripura Gas Project and the Dispute Before APTEL

NEEPCO and TSECL entered into a Power Supply Agreement (PSA) dated 19.03.2008 for the establishment of a gas-based power project of 104 MW capacity at Monarchak, to be fuelled by natural gas to the extent of 0.5 MMACMD as confirmed by ONGC. TSECL was designated as the sole off-taker of power from the project.

The Ministry of Power accorded investment approval on 14.07.2009 at an estimated cost of Rs. 421.01 crore, including interest during construction (IDC) of Rs. 27.47 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, including IDC of Rs. 51.09 crore, at November 2010 price levels.

NEEPCO awarded the EPC contract to BHEL on 23.07.2010, with a stipulated commissioning period of 32 months for the Gas Turbine (GT) and 36 months for the Steam Turbine (ST). Actual commissioning was significantly delayed. The GT was synchronised in March 2015 and its Commercial Operation Date (COD) was declared as 24.12.2015. The ST was commissioned in January 2016 with COD declared as 31.03.2017. This translated into a delay of 33 months for the GT block and 44 months for the ST/combined cycle.

NEEPCO filed Petition No. 128/GT/2017 before CERC on 08.05.2017 seeking tariff approval for the period from the GT's COD to 31.03.2019. CERC's impugned order condoned the delays and approved the capital cost claimed by NEEPCO. TSECL, as the sole beneficiary bearing the tariff burden, challenged that order before APTEL.

Three Issues Framed by the Tribunal

APTEL framed three issues for consideration: whether CERC erred in allowing a time overrun of 8 months for both GT and ST attributable to BHEL; whether CERC erred in allowing time overruns of 25 months (GT) and 36 months (ST) attributable to ONGC's non-supply of gas; and whether CERC erred in allowing the resulting cost overrun.

TSECL's Case: Bilateral Contractor Disputes Cannot Burden Consumers

TSECL argued that the 8-month delay arose from a decision by the Ministries of Heavy Industries and Power 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. NEEPCO had initially resisted this on the ground that it constituted a post-contractual deviation altering the proposal approved by PIB/CCEA. After nearly five months of deliberation, NEEPCO's Board approved the offloading on 26.05.2011.

TSECL relied on two earlier APTEL judgments — Power Grid Corporation of India Ltd. v. CERC & Ors., Appeal No. 180 of 2011 and Appeal No. 58 of 2012 — for the proposition that delays arising from defects in equipment, transportation issues, or disputes between a utility and its vendor are bilateral and contractual in nature, and the consequential IDC and IEDC cannot be passed on to beneficiaries or consumers.

TSECL also relied on Pragati Power Corporation Ltd. v. CERC & Ors., Appeal No. 175 of 2015, where APTEL held that mere prudent selection of an EPC contractor such as BHEL is not sufficient to absolve the generating company of responsibility for delays in project execution.

On the gas-supply delay, TSECL contended that ONGC's failure to supply gas was not a force majeure event within the meaning of Clause 12 of the PSA, and that NEEPCO had not taken adequate steps to secure alternative gas supply or enforce its contractual rights against ONGC.

On cost overrun, TSECL argued that CERC had wrongly treated a letter dated 06.10.2015 from the Director, Central Electricity Authority (CEA), to the Under Secretary, Ministry of Power, as a revised investment approval (RCE-II). TSECL maintained that this letter was only a recommendation to the Ministry and could not substitute for a formal investment approval by the Government of India.

NEEPCO and CERC: Government Directions Were Binding, Delays Were Beyond Control

NEEPCO submitted that the EPC contract was awarded to BHEL only after an international competitive bidding process failed — only one bid was received from Gammon-Sadelmi, which did not qualify on techno-commercial parameters. BHEL's contract was finalised through a high-level Negotiation Committee comprising members of the Central Electricity Authority and NEEPCO officials.

NEEPCO argued that the Ministry of Power's communication dated 26.04.2011 approving the offloading of part of the EPC works from BHEL to NBPPL constituted an executive instruction that was binding and enforceable, relying on Kusum Ingots and Alloys v. Union of India, (2004) 6 SCC 254. Accordingly, NEEPCO contended it had no choice but to comply, and the resulting delay could not be attributed to it.

On gas supply, NEEPCO attributed a delay of 25 months (GT) and 36 months (ST) to ONGC's non-supply of gas, characterising this as a factor beyond its control.

CERC supported its impugned order, submitting that it had examined all components of delay in detail and correctly concluded that none were attributable to NEEPCO. CERC relied on the framework in Maharashtra State Power Generation Company Limited v. Maharashtra Electricity Regulatory Commission, Appeal No. 72 of 2010 (judgment dated 27.04.2011), which categorises delays into those attributable to the generating company, those beyond its control, and intermediate situations.

How APTEL Reasoned on the BHEL Delay

APTEL accepted that there was no imprudence in NEEPCO's initial selection of BHEL as EPC contractor. However, the Tribunal held that the MSPGCL framework also treats imprudence “in executing contractual agreements including terms and conditions of the contracts” as a factor attributable to the generating company.

The Tribunal identified four contractual questions that NEEPCO had failed to address: whether the EPC contract permitted full or partial exit by BHEL; if so, whether it provided for compensation or damages upon such exit; whether such compensation was enforced; and if no effective exit provision or compensatory mechanism existed, whether that itself indicated weakness in the contractual arrangement. APTEL held that these matters fell exclusively within NEEPCO's domain as the party that negotiated, drafted, and was responsible for enforcing the contract. TSECL, as beneficiary, had no role in or control over those terms.

APTEL rejected NEEPCO's reliance on Kusum Ingots. The Tribunal found that judgment was confined to the question of territorial jurisdiction of a High Court under Article 226(2) of the Constitution and the circumstances in which a cause of action arises. It did not lay down any proposition about the binding nature or enforceability of executive instructions as between parties. In any case, APTEL found that the Ministry of Power's letter dated 26.04.2011 was a Demi Official (D.O.) letter — a request, not a binding executive instruction — and 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.

Critically, APTEL pointed to Regulation 12 of the CERC Tariff Regulations 2014, which expressly lists “delay in execution of the project on account of contractor, supplier or agency of the generating company” as a controllable factor. Read with Regulation 11, this meant that cost escalation impacting contract prices, IDC and IEDC arising from such delay could not be allowed. CERC had not applied this regulation at all. APTEL concluded that CERC erred in condoning the 8-month time overrun attributed to BHEL.

How APTEL Reasoned on the ONGC Gas-Supply Delay

On the 25-month and 36-month delays attributed to ONGC's non-supply of gas, APTEL examined whether NEEPCO had taken adequate steps to secure gas supply and enforce its rights. The Tribunal found that NEEPCO had not demonstrated sufficient diligence in pursuing alternative arrangements or enforcing contractual remedies against ONGC. The Tribunal applied the same Regulation 12 analysis: delays attributable to a supplier of the generating company fall within controllable factors, and the resulting IDC and IEDC cannot be passed to consumers.

How APTEL Reasoned on Cost Overrun

On the capital cost question, APTEL found that Clause 3.2 of the PSA, which bars TSECL from entertaining time and cost overruns attributable to NEEPCO, relies on the investment approval as the reference point for cost. The Government of India had issued the original investment approval on 14.07.2009 and RCE-I on 23.02.2011. APTEL agreed with TSECL that the CEA's letter dated 06.10.2015 was a recommendation to the Ministry of Power and not a formal revised investment approval. CERC had erred in treating it as RCE-II.

Under Regulation 10(4) of the CERC Tariff Regulations 2014, where a power purchase agreement provides for a ceiling on capital expenditure, CERC must take that ceiling into account. APTEL held that CERC should at minimum have conducted a prudence check using RCE-I as the reference, adjusted to the appropriate price level since RCE-I was expressed at November 2010 prices.

APTEL further held that since the delays attributed to BHEL and ONGC were disallowed, any cost escalation impacting contract prices arising from those delays also had to be disallowed under Regulation 12. APTEL added that any performance guarantee, liquidated damages, penalty, or insurance proceeds relating to the disallowed delays, if received, shall be retained by NEEPCO.

APTEL also rejected NEEPCO's argument that TSECL had forfeited its right to appeal by signing a reconciliation statement of outstanding dues as on 31.12.2022 that incorporated the revised project cost and tariff from CERC's subsequent order dated 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 and did not amount to a waiver of the right to appeal.

Order

APTEL allowed Appeal No. 184 of 2020 and set aside the CERC order dated 04.04.2019 in Petition No. 128/GT/2017 to the extent it: (a) condoned the time overrun of 8 months attributable to BHEL in execution of the EPC contract; (b) condoned the time overruns of 25 months and 36 months attributable to ONGC's delay in gas supply for commissioning of the GT and ST respectively; and (c) allowed capitalisation of cost escalation, including escalation impacting contract prices, IDC and IEDC, arising out of those delays.

The matter was remanded to CERC for fresh determination of tariff and admissible capital cost in accordance with the observations in the judgment. CERC was directed to carry out a prudence check of the capital cost with reference to RCE-I, brought to the appropriate price level, and not in accordance with the cost mentioned in the CEA's letter dated 14.06.2017.

Two interlocutory applications — IA Nos. 985 and 986 of 2026, which had sought urgent listing and directions to NEEPCO to withdraw invoices dated 02.03.2026 from the PRAAPTI Portal in view of a trigger date of 17.05.2026 — were disposed of as having become infructuous given that the judgment was pronounced before that date. All pending IAs were disposed of in the above terms.