Explained: How SC order on idle power plant helps Delhi's residents

Consumers' bills may reduce after court bars recovery of charges for facility doesn't supply electricity

Delhi residents may no longer have to pay for idle power plants. The Supreme Court has ruled that Tata Power Delhi Distribution Ltd (TPDDL) cannot recover depreciation charges from consumers beyond the operational lifespan of a gas-based plant built for the 2010 Commonwealth Games.

 

The Supreme Court on May 7 restored an earlier order of the Delhi Electricity Regulatory Commission (DERC), which had restricted depreciation recovery for the 108 megawatt (Mw) plant only to the six-year period during which electricity was actually supplied to Delhi consumers. The court set aside a 2025 order of the Appellate Tribunal for Electricity (APTEL) that had favoured TPDDL’s claim for a longer recovery period.

 

 

At the centre of the dispute was whether consumers could continue paying depreciation charges linked to the plant even after it stopped supplying electricity in March 2018.

 

The court ruled that consumers cannot be charged for a service they no longer receive.

 

What was the dispute about?

The gas-based plant was commissioned by TPDDL to meet peak electricity demand during the Commonwealth Games period. DERC had approved the power purchase arrangement only till March 2018, although the plant’s technical life was considered to be 15 years.

 

While the regulator allowed TPDDL to recover depreciation worth Rs 83.34 crore during the six operational years, it disallowed recovery of an additional Rs 94.59 crore after supply ended.

 

TPDDL argued that since the plant’s useful life was 15 years, it should be allowed to recover depreciation over that entire period. The Supreme Court rejected this argument, saying tariff recovery must remain linked to actual supply and consumer benefit.

 

What does ‘depreciation’ mean in electricity bills?

 

Depreciation is essentially the gradual recovery of the capital cost of building a power plant or infrastructure asset. Instead of charging the entire investment upfront, utilities recover the cost over several years through electricity tariffs.

 

“Depreciation in electricity tariff calculations refers to the gradual recovery of the capital investment made in setting up infrastructure such as power plants,” said Alay Razvi, managing partner at law firm Accord Juris.

 

“However, the Supreme Court rightly held that once a plant stopped supplying electricity, consumers could not continue bearing depreciation costs for it,” Razvi added.

 

For ordinary consumers, this cost is not shown as a separate line item on electricity bills. It is embedded within tariff calculations approved by regulators.

 

“Delhi consumers were quietly absorbing depreciation costs of a plant that had stopped serving them, embedded invisibly in their tariff,” said Himesh Thakur, associate partner at PSL Advocates & Solicitors.

 

“That Rs 94.59 crore disallowed by DERC stays out of your electricity bill,” he added.

 

How could consumers have paid for this indirectly?

 

Experts said consumers may never have realised they were paying for an idle asset because such costs are spread across overall tariffs.

 

“For instance, a consumer paying Rs 1,000 a month might unknowingly bear a small embedded charge for an idle plant,” said B Shravanth Shanker, managing partner at B Shanker Advocates LLP.

 

Supriya Majumdar, partner at Elarra Law Offices, said the judgment directly affects the “fixed charges” component of electricity tariffs, where capital expenses are spread over the useful life of a plant.

 

“There will be reduction in this fixed charge for the excess period when no supply is availed of by the consumers,” she said.

 

Why this ruling matters beyond Delhi

 

Legal experts believe the ruling could influence how regulators and courts examine fixed-cost recovery in other infrastructure sectors as well.

 

“The core principle is that users should not be charged fixed costs indefinitely when the service has stopped or become unavailable,” Razvi said.

 

Comparable disputes may arise in toll roads, telecom, gas pipelines and urban utilities where consumers continue paying charges linked to stranded or underutilised infrastructure.

 

Anushkaa Arora, principal and founder of ABA Law Office, said the judgment reinforces a broader regulatory principle that “consumers should not indefinitely finance stranded or non-operational infrastructure without receiving corresponding benefits”.

 

However, experts also cautioned that the ruling does not eliminate fixed charges entirely. Instead, it strengthens scrutiny over whether the charge has a reasonable connection with actual service delivery.

 

What message does the ruling send to regulators?

 

The judgement is expected to push regulators towards tighter tariff scrutiny and more carefully drafted power purchase agreements (PPAs).

 

“The core failure here was a mismatch — a six-year operational approval sitting alongside a fifteen-year depreciation window,” said Thakur.

 

Future PPAs may now need clearer provisions on stranded assets, early closure and post-supply cost recovery.

 

Saloni Paliwal, advocate at the Delhi High Court, said the ruling reinforces that tariff determination is “not merely a mathematical exercise but a regulatory balancing act”.