Appellate Tribunal For Electricity
Shree Ambika Sugars Ltd vs Tamil Nadu Electricity Regulatory ... on 22 December, 2025
Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL NO. 139 OF 2016
&
APPEAL NO. 375 OF 2017
Dated: 22.12.2025
Present: Hon'ble Mr. Virender Bhat, Judicial Member
Hon'ble Mr. Ajay Talegaonkar, Technical Member
APPEAL NO. 139 OF 2016
IN THE MATTER OF:
1. Shree Ambika Sugars Ltd.
112, Uthamar Gandhi Salai, Chennai - 600 034
2. Dharani Sugars & Chemicals Limited
PGP House, 57, Sterling Road, Nungambakkam
Chennai - 600 034.
3. EID Parry (India) Limited
"Sugar Division", Dare House No. 234,
NSC Bose Road, Parry's Corner,
Chennai - 600 001.
4. Kothari Sugars & Chemicals Limited
Kothari Buildings, No.115, Utthamar Gandhi salai
Nungambakkam, Chennai - 600 034.
5. Bannari Amman Sugars Limited
No.1212, Trichy Road, Coimbatore - 641 018.
6. Sakthi Sugars Limited
180, Race Course Road,
PB No. 3775, Coimbotore - 641 018.
7. Rajshree Sugars & Chemicals Ltd.
No. 7, 3rd Street, Ganapthy Colony,
Teynampet, Chennai - 600 018.
Page 1 of 36
Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
8. Terra Energy Ltd.
112, Uthamar Gandhi Salai,
Chennai - 600 034. ....Appellant(s)
Versus
1. Tamil Nadu Electricity Regulatory Commission
No.19A, Rukmini Lakshmipathy Road, (Marshals Road)
Egmore, Chennai - 600 008.
2. Tamil Nadu Generation & Distribution Corporation Ltd.
NPKRR Maaligai, No. 144, Anna Salai,
Chennai - 600 002. ....Respondent(s)
Counsel for the Appellant(s) : Mr. Senthil Jagadeesan
Mr. Rahul Balaji
Mr. Anand K. Ganesan for A-1,2 & 8
Ms. Sonakshi Malhan for A-3 to 7
Counsel for the Respondent(s) : Mr. Sethu Ramalingam for R-1
Ms. Anusha Nagarajan for R-2
APPEAL NO. 375 OF 2017
IN THE MATTER OF:
M/s. Subramaniya Silva Co-Operative Sugar
Mills Ltd., Harur,
Dharmapuri district,
Tamil Nadu. ....Appellant(s)
Versus
1. Tamil Nadu Electricity Regulatory Commission
No.19A, Rukmini Lakshmipathy Road, (Marshals Road)
Egmore, Chennai - 600 008.
2. Tamil Nadu Generation & Distribution Corporation Ltd.
Rep. by the Chief Engineer/ NCES,
Page 2 of 36
Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
144, Anna Salai,
Chennai, Tamil Nadu - 600002. ....Respondent(s)
Counsel for the Appellant(s) : Mr. Rajeev M. Roy
Ms. Meha Agarwal
Ms. Nishtha
Counsel for the Respondent(s) : Ms. Anusha Nagarajan for R-2
JUDGEMENT
PER HON'BLE MR. AJAY TALEGAONKAR, TECHNICAL MEMBER
1. The Appeal No. 139 of 2016 has been filed by several Appellants challenging Order dated 31.03.2016 (Impugned Order) passed by the Tamil Nadu Electricity Regulatory Commission (in short "Respondent No. 1" or "TNERC") in P.P.A.P No. 8 of 2011.
2. The Appeal No. 375 of 2017 has been filed by M/s. Subramaniya Siva Co- Operative Sugar Mills Ltd. (Appellant) also challenging the Impugned Order.
Description of the Parties
3. The Appellants are private sector Sugar Mills in the state of Tamil Nadu which have set up Bagasse based Cogeneration Power Projects (in short "BBCGPP") within Tamil Nadu. They are captive consumers of the electricity generated from their respective BBCGPP and had also entered into Power Purchase Agreements with the then Tamil Nadu Electricity Board (TNEB, predecessor of TANGEDCO) for sale of surplus electricity.
4. The 1st to 7th Appellants are all sugar mills in Tamil Nadu who have established co-generation plants at various times prior to 15.05.2006 (in short Page 3 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 "pre- 2006"), the date on which the first tariff order for renewable generators was issued by TNERC. The 8th Appellant is a generating company which is operating a co-generation plant established by its holding company Thiru Arooran Sugars Ltd. and transferred under a de-merger scheme and continuing to supply steam and electricity to the co-located sugar mill of its holding company Thiru Arooran Sugars Ltd. utilizing the bagasse from the sugar mill.
5. The 3rd Appellant's co-generation plants at Nellikupam and Pudukottai have exited from the PPA with the TANGEDCO on 15.03.2015 and 23.04.2015 respectively. The 6th Appellant's co-generation plant at Saktinagar has exited from the PPA with the TANGEDCO on 25.08.2014. These Appellants are therefore affected by the Impugned Order in respect of their plants till the date of exit from the PPA.
6. The Respondent No. 1 is the Tamil Nadu Electricity Regulatory Commission (TNERC) established under Section 82 of the Electricity Act, 2003.
7. Respondent No. 2 is the Tamil Nadu Generation and Distribution Corporation Limited (in short "TANGEDCO") which acts as a Distribution Licensee in the State of Tamil Nadu.
Factual Matrix of the Case
8. The State Government, with a view to promote co-generation in sugar mills and encourage generation from new and renewable sources, issued G.O. Ms. No. 230 dated 16.06.1993. The Government Order prescribed that electricity supplied by such co-generation units would be paid at the HT-1 consumer tariff, subject to Page 4 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 a 2% deduction towards transmission loss. The Appellants established their co- generation facilities and executed PPAs with the TNEB.
9. Pursuant to the said G.O., the TNEB issued Board Proceedings BP(F.B.) No. 96 dated 31.03.1995 and BP(F.B.) No. 1 dated 11.01.2000. These proceedings provided a tariff escalation mechanism for cogeneration plants. However, from FY 2003-04 onwards, tariff for such plants was capped at ₹3.15 per unit. Further, for FY 2005-06, a cap on off-season tariff at ₹3.01 per unit was imposed.
10. Some Appellants filed writ petition before the Hon'ble High Court of Madras, contending that the tariff fixed by TNEB was contrary to GOM No. 230. The writ petitions were disposed of in the year 2000 and tariff continued to be governed by the above-mentioned Board Proceedings thereafter.
11. On 15.05.2006, the TNERC issued Tariff Order No. 3 of 2006, applicable prospectively to new contracts and agreements for non-conventional energy sources (NCES) projects established in the State. The Commission clarified therein that PPAs signed prior to date of order i.e. for pre- 2006 BBCGPP would continue to remain operative in accordance with their terms. A similar stipulation was reiterated in the Power Procurement from New and Renewable Sources of Energy Regulations, 2008, notified on 08.02.2008, confirming the continuance of such arrangement for pre- 2006 BBCGPP.
12. The PPAs of the 1st and 8th Appellants expired on 31.03.2010. Since no decision was communicated by TNEB on their proposal dated 31.03.2010 for continuation of supply from 01.04.2010, the 1st and 8th Appellants filed P.P.A.P Nos. 2, 3, 4 and 5 of 2010 on 23.08.2010 seeking tariff determination from 01.04.2010. These petitions were later withdrawn and liberty was given to re-approach the Page 5 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 Commission, if negotiations with TNEB did not yield results. As negotiations remained inconclusive, the matter progressed before the TNERC through petitions initiated by the distribution licensee.
13. The TANGEDCO filed P.P.A.P No. 3 of 2011 seeking determination of tariff for biomass and BBCGPP established pre- 2006, effective from 01.04.2010. By order dated 11.07.2011, the Commission directed TANGEDCO to file separate petitions for biomass and BBCGPP and later called for stakeholder comments.
14. The 1st and 8th Appellants furnished their views on 18.08.2011, requesting continuation of the earlier tariff with 5% annual escalation. The South India Sugar Mills Association also filed similar representations. TANGEDCO filed P.P.A.P. No. 8 of 2011 on 21.11.2011, seeking fixation of a two-part tariff by applying the norms of Tariff Order No. 3 of 2009, but excluding interest on term loans for plants older than 11 years and excluding fixed cost for plants beyond 20 years of operation.
15. During the pendency of these proceedings, the Commission issued few tariff orders applicable to NCES plants established after 15.05.2006 (in short "post- 2006"), including Tariff Order No. 3 of 2009, Tariff Order No. 7 of 2012 (subsequently remanded) and Order No. 4 of 2016 (under appeal). These orders determined tariff including variable cost norms for post-2006 projects at different points in time.
16. The Commission passed the Impugned Order dated 31.03.2016 in P.P.A.P No. 8 of 2011, determining tariff for BBCGPP established pre- 2006, with effect from 21.11.2011, i.e., from the date of filing of the petition.
Page 6 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
17. The Appellants, being aggrieved by the Impugned Order have preferred the present Appeal.
18. The Appellants have prayed for the following relief before us:
"a) Allow the Appeal and set aside the impugned Order dated 31.03.2016 passed in P.P.A.P. 8 of 2011 to the extent impugned in this Appeal and in terms of the submissions in the appeal, and to consequently re-determine the fixed cost component of tariff and the variable cost component of tariff for crushing and non-crushing seasons and allied matters with consequential reliefs;
(b) and / or pass such other order as this Hon'ble Tribunal may deem fit and proper so that justice may be done."
19. Since both Appeals raise identical issues, assail the same Impugned Order and seek identical reliefs, they are being considered together for the sake of convenience and to avoid repetition. Appeal No. 139 of 2016 shall be treated as the lead Appeal.
20. The Appellants prayed for the following reliefs in its Written Submissions dated 29.10.2025:
a) Set aside the Impugned Order dated 31.03.2016 to the extent it is challenged herein;
b) Declare and direct that the tariff determined pursuant to the Impugned Order shall be applicable from the start date of the control period, i.e., 01.04.2010;Page 7 of 36
Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
c) Set aside the determination of capital cost at Rs. 2.50 crores/MW and direct the State Commission to re-determine the same at Rs. 3.15 crores/MW;
d) Direct the State Commission to re-determine the fuel cost in accordance with the principles laid down by this Tribunal in the SISMA-2016 Judgment;
e) Declare and direct that the fuel cost as re-determined shall be applicable from the start date of the control period, i.e., 01.04.2010 and that the differential tariff arising therefrom be paid to the Appellants;
f) Set aside the determination of the Station Heat Rate and direct the State Commission to adopt an SHR of 3700 Kcal/kWh for the determination of the variable cost;
g) Allow carrying cost on all arrears payable to the Appellants arising from the re- determination of the tariff components, calculated from the date such amounts originally became due until the date of actual payment; and
h) Pass such other and further orders as this Tribunal may deem fit and proper in the facts and circumstances of the case and in the interest of justice.
21. From the above, we note that following key issues need our consideration in this Appeal:
(i) the date from which the tariff is made applicable;
(ii) the determination of capital cost;
(iii) the determination of critical variable cost components, including fuel cost
and Station Heat Rate; and
(iv) Carrying Cost
Page 8 of 36
Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
22. The Appellants state that the core issues arising in the present Appeal stand fully covered by this Tribunal's judgment in South Indian Sugar Mills Association vs. TNERC & Ors., Appeal No. 200 of 2016 & batch, decided on 03.09.2025 ("SISMA-2016 Judgment").
23. We take up these issues one by one to deal with the submissions of the Appellants and the Respondents followed by our analysis and conclusion.
Issue (i): THE DATE FROM WHICH THE TARIFF IS MADE APPLICABLE Submissions of the Appellants
24. The Appellants submit that the State Commission has committed an error in directing that the revised tariff determined under the Impugned Order shall take effect only from 21.11.2011, i.e., the date of filing of the tariff petition. It is pointed out that this finding, recorded in paragraph 9 of the Impugned Order is legally untenable, arbitrary and unsupported by any rational justification. The Appellants emphasise that the previous control period concluded on 31.03.2010 and the tariff petition filed by the Respondent No. 2 expressly sought tariff determination for the control period commencing 01.04.2010. In such circumstances, postponing the applicability of the tariff to 21.11.2011 is contrary to the statutory scheme and results in severe financial prejudice to the Appellants.
25. The Appellants further submit that this issue has been settled by the SISMA-
2016 Judgment. The Tribunal has laid down the controlling principle that tariff determined for a control period must necessarily apply from the start of that period, Page 9 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 irrespective of when the order is actually issued. In particular, at paragraphs 123- 124 of the said judgment, the Tribunal held that:
"123. It is a settled principle in law that the generator should be allowed reasonable cost as per the tariff order determined, irrespective of the date of such determination, so that the complete reasonable cost recovery is allowed to the generator during the complete control period, and so is the applicability of the tariff determined.
124. Accordingly, we find the Commission's approach to be erroneous, and the tariff order so determined shall be applicable from the start date of the control period..."
26. Applying these principles, the Appellants submit that the tariff determined in the Impugned Order must be made effective from 01.04.2010, being the statutory start date of the relevant control period. Any contrary interpretation would impermissibly penalize the Appellants for delays wholly outside their control, undermine the principle of full cost recovery and violate the binding precedent of this Tribunal. The Appellants accordingly pray that the tariff be given effect from 01.04.2010 in conformity with settled law.
Submission of the Respondent No .1
27. Respondent No. 1 submits that the Appellants' contention that the effective date of the tariff ought to have been retrospectively fixed as 01.04.2010 overlooks the conduct of the Appellants themselves.
28. The Respondent Commission submits that as admitted by the Appellants in paragraph 9.3 of the Appeal, they had voluntarily consented to a negotiated settlement and had accordingly withdrawn their earlier proceedings on 18.01.2011. Having elected to pursue a negotiated path, the Appellants are estopped from challenging or attributing blame for any delay prior to the date of such withdrawal.
Page 10 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 Reliance is placed on page 166 of the Appeal Paper book (internal page No. 46 of the Impugned Order) which inter alia states, "In view of the fact that clause (iv) of the BP(FB)No.1, dt. 11.1.2000, clearly provides that till such review is made and a new rate is finalized, the 10th year rate will be continued to be paid if the company/sugar mill supplies its surplus power to TNEB, ....."
Submissions of the Respondent No. 229. Responent No. 2 submits that the TNERC had held that the Impugned Order will be effective retrospectively from 21.11.2011, that is, the date on which TANGEDCO filed the petition for determination of tariff for the BBCGPP established pre- 2006. The TNERC further gave liberty to the parties of the PPAs to exit PPAs in case the continued operation of those PPAs was considered not workable.
30. Respondent No. 2 further submits that while determination of tariff ordinarily takes effect only prospectively from the date of the tariff order. TNERC, acting fairly, gave retrospective effect to the tariff determined. It points out that the tariff determined by the Board Proceedings continued to be applicable even after 01.04.2010 till the TNERC determined tariff by way of the Impugned Order.
Our Analysis and Conclusion on Issue (i)
31. We note that the TNERC in its order no 3 dated 06.05.2009 on "Comprehensive Tariff Order for Bagasse based Co-generation plants" had held as under:
"9.17 Control period The Order No.3 dated 15-5-2006 of the Commission lays down a control period of three years. The determinants of tariff Page 11 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 underwent radical changes during the control period. In pursuance of that effort the Commission consulted experts on 16-7-2008 and delivered an Order on 19-9-2008 in M.P. Nos. 9, 14 and 23 of 2008 scaling down the control period to two years. Clause 6 of the Power Procurement from New and Renewable Sources of Energy Regulations 2008 of the Commission promulgated on 8-2-2008 specifies that the control period may be ordinarily two years. Taking into account the views of the stakeholders, the Commission decides that the control period of this Order shall extend upto 31-3-2011.
32. Thus, it may be seen that the Control Period for the post- 2006 BBCGPP was to end on 31.03.2011 and new control period would have started on 01.04.2011. It also appears that TNERC orders did not contemplate any "Control Period" in respect of BBCGPP established pre- 2006 simply because they were operating based on pre-exising arragement. Therefore, the contention of the Appellants to the extent that Control Period had expired on 31.03.2010 appears on weak footing.
33. However, we note that PPAs of the two of the Appellants in this Appeal had expired on 31.03.2010. The Appellants have claimed that these two of them had approached TANGEDCO on 31.03.2010 and since no response was forthcoming, they filled petitions before TNERC on 23.08.2010. This claim has not been denied by the Respondents. In view of this, it is unfair on the part of the Respondents to take shelter under the provision of the proceedings of TNEB dated 11.01.2000 that 10th year tariff will continue till review is made. The responsibility of review was on both the parties and not on BBCGPP alone. As may be seen from the next para of this order that negotiations were initiated only after these petitions were filled.
34. In response to the aforesaid petitions for fixation of tariff, the Petitoners (which are two of the Appellants in the present Appeal) were given liberty to Page 12 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 withdraw the petitions and negotiate with TNEB, and to approach TNERC, if these negotiations fail. Hypothetically, if negotions would have been successful, the revised or supplementary PPAs, in any case would have required approval of the TNERC under Section 86(b) of the Electricty Act, 2003. Since existing PPAs of the two of the Appellants had expired on 31.03.2010, it is rational to assume that the revised PPAs or Supplementary PPAs would have required approval of TNERC with effect from 01.04.2010. Based on the foregoing, it was a reasonable expectation on the part of these two Appellants to have revised tariff applicable with effect from 01.04.2010.
35. We also note that the tariff for all the pre-2006 BBCGPP was on the same footing consequent to Tamil Nadu Government's G.O. Ms. No. 230 dated 16.06.1993. Thus, it was also a reasonable expectation that the revised regime would cover all the pre- 2006 BBCGPP, which were not explicitly covered in the order dated 15.05.2006 as well as Regulations of 2009 issued by TNERC due to subsistence of existing PPAs. In fact, this might have been the expectation of TANGEDCO as well, as may be seen from one of the prayers made by it and contention of TANGEDCO recorded in para 3.9 of the Impugned Order:
"1. Prayer of the Petitioner:-
The prayer of the Petitioner is to-
(a) fix power purchase tariff applicable for Bagasse based co-
generation plants commissioned based on Power Purchase Agreements entered prior to 15-05-2006 without considering the ainterest on loan component for the plants completed 11 years service and without considering the fixed cost for theplants completed 20 years service.
(b) ............
(c) ............" (Emphasis supplied) Page 13 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 "3.9. The power purchase tariff applicable for Bagasse based co-generation plants for further period from 01-04-2010 has to be fixed..........." (Emphais supplied)
36. Another factor that weighed with us is that TANGEDCO could well have filed the petition one or two years later. The BBCGPP cannot be denied the revised tariff solely on account of such delay, which hinges on the promptness or otherwise of TANGEDCO in filing the petition. This reinforces our opinion that it is unfair to link the implementation of the revised tariff for these plants to the date of filing of the petition by TANGEDCO.
37. In view of the forgoing analysis, we conclude that it will be just and fair if the tariff resulting from the Impugned Order, including any change consequent to this order, should be applicable from 01.04.2010 and we order accordingly.
Issue (ii) : DETERMINATION OF CAPITAL COST Submissions of the Appellants
38. The Appellants submit that the Commission has fixed the capital cost for pre- 2006 BBCGPP at a low figure of Rs. 2.50 crores/MW, relying solely on an analogy drawn from tariff fixation for wind energy generators. The Commission had proceeded on the basis that in the case of wind power projects, capital cost for older units had been fixed at 90% of the cost applicable to new units and therefore the same approach should be extended to pre-2006 BBCGPP.
Page 14 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
39. It submits that the capital cost for new BBCGPP during the relevant period had been fixed at Rs. 3.50 crores/MW. Therefore, even if the 90% analogy adopted from wind tariff proceedings is assumed to apply, the resultant capital cost for pre- 2006 BBCGPP would necessarily work out to Rs. 3.15 crores/MW (being 90% of Rs. 3.50 crores). The determination of Rs. 2.50 crores/MW, being substantially lower is wholly inconsistent with the Commission's own logic, devoid of any evidentiary basis and is arbitrary.
40. The Appellants further submit that the co-generation units have historically suffered significant financial loss, particularly as they were operating for seven continuous years prior to 2010 under a tariff of Rs. 3.15 per unit, which did not reflect actual costs. In such circumstances, it was incumbent upon the Commission to ensure that the tariff determined for the ensuing control period, at the very least, applied the correct methodology and did not perpetuate earlier under-recovery.
41. In view of the above, the Appellants submit that even on the Commission's own analogy, the capital cost requires correction and must be reasonably fixed at Rs. 3.15 crores/MW, so as to ensure a fair, rational and non-discriminatory determination of fixed cost.
Submissions of the Respondent No. 142. Respondent No. 1 submits that before the Commission, the parties had taken extreme and mutually inconsistent positions; the Appellants proposing significantly higher capital cost figures, while the Respondents had suggested amounts that were substantially lower. After evaluating all submissions, data and material placed before it, the Commission adopted a reasonable via-media approach. In fact, Commission leniently considered Rs.2.50 crores/MW for these Page 15 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 old plants which is quite adequate, while TANGEDCO suggested a Capital Cost of Rs. 1 crore to 1.50 crores only citing the actual capital cost of Cheyyar Co- operative Sugar Mills at Rs.0.83 crores/MW. Hence, it is submitted that the Commission while adopting the capital cost of Rs.2.50 crores/MW for these plants has considered the issue holistically and worked out a reasonable tariff.
43. Responding to the contention of the Appellants - "If the Commission found it fit and proper to consider 90% of the 2006 capital cost for older wind power plants, it ought to have done the same in respect of the bagasse co-generation plants while following the same analogy for wind generation plants", the TNERC submits that that the Appellant's plants are all very old plants, some of them have even completed their life period. Therefore, the capital cost of these plants during such old periods should have been much less.
Submissions of the Respondent No. 244. Respondent No. 2 submits that the TNERC has fixed capital cost at ₹ 2.5 crore/MW by correctly drawing an analogy from its earlier Order No. 3 of 2006 dated 15.05.2006, wherein the Commission addressed a similar issue concerning old wind energy plants. In that order, the Commission fixed the tariff for new wind plants (post 15.05.2006) at ₹2.90/unit based on an assumed capital cost of ₹5 crores/MW and for old wind plants (pre- 2006) at ₹2.75/unit based on a lower capital cost of ₹4.5 crores/MW, notwithstanding variations in vintage and technical configuration. Applying the same principle, TNERC reasonably adopted a capital cost of ₹2.5 crores/MW for pre-2006 BBCGPP contrasted against ₹3.50 crores/MW for post-2006 BBCGPP considered under the 2006 Order.
Page 16 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
45. The Respondent No. 2 mentions that the Appellants have assailed the fixed cost determination primarily on two grounds:
(i) Commission has arbitrarily adopted 71% of the capital cost of ₹3.50 crores/MW applicable to newer plants by merely relying on the 2006 Order; and
(ii) the norms laid down by this Tribunal in Appeal No. 166 of 2011 & batch (Order dated 20.12.2012) for determining fixed cost for BBCGPP ought to have been followed.
46. Respondent No. 2 submits that these objections are misconceived. The useful life of a BBCGPP is around 15 to 20 years and a substantial number of the Appellants units had already completed such useful life at the time of issuance of the Impugned Order. Consequently, the Appellants had already fully recovered their capital cost during their operational tenure. Significantly, the Appellants have not demonstrated that the capital cost adopted results in any under-recovery. In fact, for plants beyond their useful life, no fixed cost is ordinarily payable yet TNERC on equitable considerations and in continuation of its promotional approach towards cogeneration allowed a fixed cost component even for these very old installations.
47. It further submits that the adoption of ₹2.50 crores/MW is both fair and justified within the analogy drawn from the 2006 wind tariff order. The slight divergence in the percentage reduction for bagasse units (as compared to wind plants) is rationally explained by the fact that substantial portions of the machinery in cogeneration systems are common to sugar manufacturing facilities. Steam generated is utilised partly for sugar production (approximately 40%) and partly for power generation (about 60%). TNERC has, after considering the age of the Page 17 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 Appellants units, fairly and generously determined the fixed cost at ₹2.50 crores/MW.
48. As regards the Appellants reliance on this Tribunal's judgment in Appeal No. 160 of 2011 & batch, it submits that such reliance is misplaced. That judgment pertained specifically to BBCGPP in Andhra Pradesh for the 2009-2014 tariff control period, based on project-specific data and parameters. In contrast, in the present case, no plant-specific details or unique parameters of the Appellants units were placed before TNERC, nor are the factual circumstances comparable.
Our analysis and Conclusion on Issue (ii)
49. We are not impressed with the contention of the Appellants that the capital cost should be fixed at Rs 3.15 crore/MW based on the premise that for wind generators commissioned pre- 2006, the TNERC had fixed capital cost as 90% of the Capital cost for wind generators commissioned after this date. We have perused that order dated 15.05.2006 and noted finding of TNERC on the capital cost of wind generators:
"(1) Wind Energy There is a wide variation in the project cost estimated by different agencies / entities for investment in wind power projects. The range is from Rs. 3.5 Crores to Rs. 5.5 Crores per megawatt. The commission have proposed the following capital cost per megawatt for different categories of projects commissioned in different periods.
It is noted from the impugned order that the TANGEDCO (Respondent No 2 in this Appeal) had made following submission before TNERC with regard to Capital Cost of the Bagasse based plants for which PPAs were signed prior to 15.06.2005:
Page 18 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 ."
50. It may be seen that TNERC fixed the capital cost at ₹4.5 crore/ MW for wind generators commissioned prior to the date of the Order, i.e., 15.05.2005, and at ₹5 crore per MW for those commissioned thereafter, based on an analysis of the available data. The fact that the former figure works out to 90% of the latter is merely a mathematical outcome. In other words, the capital cost for projects commissioned prior to the date of the Order was not determined by applying a 90% factor to the capital cost applicable to projects commissioned subsequently.
51. We are equally unimpressed with the contention of the Respondents. Respondent No. 2 TANGEDCO has supported decision of TNERC on the premise that these plants are very old and by allowing Rs 2. 5 crore/MW, TNERC has adopted a promotional arrangement. While contention of the Respondent Commission is that in view of the extreme and mutually inconsistent positions of the parties, it had adopted a reasonable via-media approach. These contentions merely indicate that, in a preference for a simpler solution, a rigorous analysis of capital cost may not have been undertaken.
52. We note from the Impugned Order that the TANGEDCO (the Petitioner before TNERC and Respondent No. 2 in this Appeal) had made following submission before TNERC:
Page 19 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 "5.1. The National Co-operative Development Corporation while sanctioning the loan assistance to M/s.Cheyyar Co-operative Sugar Mills Ltd. for establishment of 7.5 MW sugar mill co-generation plant, has considered estimated cost of Rs.625.14 lakhs i.e. Rs.83.352 lakhs / MW (excluding land cost).
5.2 Taking into consideration of the above capital cost, the following capital cost has been considered for arriving power purchase tariff.
."
53. On the other hand, the BBCGPP (which are Appellants in case before us) had inter-alia submitted following before TNERC:
"6.8. For the purpose of convenience, the bagasse based cogeneration plants are grouped into three categories on the basis of similarity in design configuration as already stated and the cost components in respect of which are arrived on the basis given below:-
(a) Capital Cost:-
On the basis of plant-wise capital cost per MW of installed capacity compiled from the respective books of accounts, the average capital cost per MW works out to:
(i) Back pressure 43/67 - Rs.1.70 crores
(ii) Double Extraction Cum Condensing 43/67 - Rs.3.24 crores
(iii) Double Extraction Cum Condensing 87 - Rs.3.30 crores"
....
....
Page 20 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 "6.10. The capital cost adopted by the Petitioner in their affidavit is based on a small sized incidental co-generation power plant set up by M/s.Cheyyar Co-operative Sugar Mill in 1995-96 and taking this as the basis for estimating the capital cost of power plants set up during the subsequent periods. This approach suffers from a serious inconsistency as it does not relate to a typical bagasse based cogeneration power plant set up by the Respondents herein, comprising of a high efficiency multi-fuel boiler and a Double Extraction Cum Condensing type turbine with a view to optimize the net export of power per unit of bagasse generated. The capital cost figures furnished by the Petitioner should outright be rejected for the above reason."
54. The relevant extract of TNERC's analysis and findings as contained in the Impugned Order is as under:
"9. .............................From these it can be seen that the tariff suggested by TANGEDCO is too low as it was far less than the then existing tariff of Rs. 3.15/unit which they were paying to the Respondents and therefore this is not tenable. Against this the tariff furnished by the respondents is too high which is far more than the then existing tariff at Rs.3.15/unit at which rate they have been supplying power to the petitioner TANGEDCO for quite some years. This may be due to inappropriate allocation of cost to different units of the Sugar mills. Hence, the Commission has decided to explore some other possibility for determination of the tariff for these old plants.
Commission notes that in the case of most of the plants, a substantial portion of the PPA has expired, even taking into account the extended tenure beyond the original period of 15 years and therefore it is not worthy to go into the details of each of the 13 heterogeneous old plants and decide the tariff parameters.
Commission also notes that a similar situation was handled by the Commission in 2006 in Order No. 3 of 2006 dated Page 21 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 15.5.2006 where the tariff of wind energy was determined by the Commission at Rs.2.90/unit for new plants to be commissioned after 15.5.2006 assuming a capital cost of Rs.5 crores per MW and the tariff for the old plants commissioned prior to 15.5.2006 was fixed at a little lower level at Rs.2.75/unit assuming a lesser capital cost of Rs.4.50/MW even though there were huge differences in the vintage, technical configurations etc., across the old plants. On the same analogy, a capital cost of Rs.2.5 crores/MW is proposed to be considered for these old plants against the cost Rs.3.5 crores/MW considered for the proposed plants in Order No. 3 of 2006 dated 15.5.2006 and the tariff determined in the same fashion as was done in the earlier orders of the Commission." (emphasis supplied)
55. We note that the period during which these BBCGPP (which appears to be 13 in number as seen from the Impugned Order) have been commissioned is at most 16 years or may be slightly less, as may be seen from the table of capital cost proposed by TANGEDCO. It is also seen from the submission of the BBCGPP before TNERC that there are at least 3 variants based on design considerations. We also note that the essential purpose of having "Control Period" in the Regulations and detailed orders issued by TNERC for the plants commissioned subsequent to 15.05.2006 is to narrow down variation in capital cost and technology during this period, which is generally of the order of 3 to 5 years, and fix a uniform tariff for the entire PPA period for the plants commissioned during this Control Period. Thus, there is clear recognition that technology and cost may change significantly beyond a narrow period of 3 to 5 years. Therefore, we are not sure if eagerness of TNERC to fix a single capital cost for BBCGPP which were commissioned over a much longer period of time is just and fair to TANGEDCO (and in turn to its retail consumers) and to the BBCGPP.
56. We also note that the BBCGPP in the original proceeding before TNERC had given three capital costs per MW based on design consideration - Rs 1.7 Cr, Page 22 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 Rs 3.24 Cr and 3.30 Cr (the latter two being very close to each other). TNERC has observed that these figures seem to be higher perhaps due to what it called as "inappropriate allocation of cost to different units of the Sugar mills". We are of the view that the TNERC could have explored what the capital cost would have been, had a rational allocation been made among the different units of the sugar mills. If need be, the TNERC could have opted for categorising these plants into two or three categories based on prudent capital cost (based on rational allocation of cost to different units of sugar mills) and/or vintage.
57. In view of the above analysis, we are remanding this issue to the TNERC. TNERC may carry out fresh analysis considering our observations. We are not expressing any opinion about reasonableness of the capital cost fixed by TNERC i.e. Rs 2.5 Cr per MW. We make it clear that our observations are only in the nature of possibilities and are not binding in the fresh analysis to be carried out by the TNERC.
58. The overall objective of the original proceedings was fixation of tariff, comprising fixed and variable charges. We are conscious of the fact that capital cost is just one of the inputs for determination of fixed charge per kWh. It appears from the Impugned Order that TNERC has decided to apply same method for determination of fixed charge for these plants as they have been using for post-2006 plants (this appears to be in their eagerness for a simplified approach as observed by us in para 55 earlier). If so, we give liberty to TNERC to also consider other factors like depreciation, interest on loan etc., which may be appropriate for pre-2006 plants.
Page 23 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 Issue (iii): THE DETERMINATION OF CRITICAL VARIABLE COST COMPONENTS, INCLUDING FUEL COST AND STATION HEAT RATE Submissions of the Appellants A. Fuel Cost
59. The Appellants submit that the methodology adopted by the State Commission for determining fuel cost is unsustainable and stands wholly contrary to the principles laid down by this Tribunal in the SISMA-2016 Judgment. The Tribunal, in paragraphs 72-74 and 76-77 of the said judgment, had set aside the Commission's flawed approach and directed that fuel cost must be recomputed on a comprehensive basis which accounts for:
(i) the equivalent heat value of coal and (ii) the verifiable market value of bagasse.
60. The Appellants adopt the said reasoning in full and submit that the State Commission be directed to re-determine the fuel cost for the control period commencing 01.04.2010 in strict conformity with these settled principles.
B. Fuel Cost- Applicability from the Start of the Control Period
61. The Appellants submit that the TANGEDCO's contention raised during oral submissions that the re-determined fuel cost can only apply prospectively on the basis of an isolated reading of paragraph 75 of the SISMA-2016 Judgment is fundamentally flawed and contrary to the judgment's overall reasoning. The Appellants point out that the controlling principle governing applicability of all tariff components is clearly articulated in paragraphs 123-124 of the SISMA-2016 Judgment.
Page 24 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
62. This Tribunal has declared that tariff determined for a control period must apply from the commencement of that control period in order to secure complete reasonable cost recovery. The Respondent Licensee has misconstrued paragraph 75 which pertains solely to a new forward-looking revision mechanism that the Tribunal directed the Commission to put in place. A careful reading of paragraphs 69-74 shows that the Tribunal identified the need for periodic and transparent revision of fuel cost in the future and paragraph 75 merely clarifies that such newly created dynamic mechanism is to operate prospectively. It does not restrict the retrospective correction of the Commission's substantive errors for the past control period. The Appellants therefore submit that treating fuel cost as an exception to the general rule of retrospective applicability creates an impermissible inconsistency within the tariff framework and runs contrary to the settled principle that a corrected regulatory order must take effect from the date of the original error so as to fully restore the aggrieved party.
63. Accordingly, the Appellants contend that the re-determined fuel cost must apply from 01.04.2010, in line with the SISMA-2016 Judgment.
C. Station Heat Rate (SHR)
64. The Appellants contend that the Commission has erred in the Impugned Order by adopting an unduly low Station Heat Rate (SHR) of 3240 Kcal/kWh for the Appellants' plants, despite the fact that these are older co-generation units and inherently have higher SHR requirements. This issue too stands conclusively governed by the SISMA-2016 Judgment. At paragraphs 78 and 85-86, this Tribunal held that the Commission's modification of the SHR was beyond the scope of the remand proceedings and therefore without jurisdiction.
Page 25 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
65. The Appellants submit that the appropriate SHR for pre-2006 BBCGPP should be not less than 3700 Kcal/kWh and there exists no technical or legal justification to deviate from this benchmark. The Appellants therefore pray that the SHR be duly corrected in accordance with the settled law.
Submissions of the Respondent No. 166. Regarding the contention of the Appellants that this Tribunal's orders for considering equivalent coal cost of Bagasse, was not given effect to in the impugned order, the Respondent No. 1 submits that this contention is totally not relevant for the issue in hand. It further submits that up to the year 2012, three Tariff Orders were issued by the Commission. The first Tariff Order was issued on 15.5.20016 in which fuel cost at Rs.575/MT was adopted.1 This was not contested. The second tariff order was issued on 6.5.2009 in which the fuel cost at Rs. 1000/MT was adopted. This was also not contested. The third Tariff Order was issued on 31.07.2012 in which the fuel cost was adopted at Rs. 1050/MT. This was contested by M/s. SISMA through an appeal in APTEL and APTEL had observed that the fuel cost considered by the CERC was at Rs. 1408/MT and remanded the matter with a direction to the TNERC to consider equivalent coal cost of Bagasse and in any case it shall not be less than the CERC fuel cost at Rs. 1408/MT. Accordingly, TNERC had initiated the remand proceedings in RA 3 of 2014 and after hearing the remand applicant M/s. SISMA, the Commission had fixed the fuel cost at the CERC level of Rs. 1408/MT which is based on equivalent coal cost of Bagasse. This fuel cost, being variable cost, is applicable for new plants commissioned after 31.7.2012. However, Commission has extended this liberal fuel cost to old plants commissioned in earlier periods also from 31.7.2012. Hence, 1 It may be seen that in its reply filed by TNERC in this Appeal, the date of the first tariff order by TNERC is mentioned incorrectly. The correct date of the TNERC's Tariff Order No. 3 is 15.05.2006.
Page 26 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 it can be seen that this enhanced fuel cost is extended to these old plants of the Appellants from 2012 and therefore this contention of the Appellants is not tenable.
67. The Respondent No. 1 also submits the aspects of Variable Cost and Station Heat Ration have been elaborately dealt with in the Impugned Order.
Submissions of the Respondent No. 2A&B. Fuel Cost and date of its Apllicability
68. The Respondednt No. 2 notes the contention of the Appellants that (i) the fuel cost adopted by the TNERC is flawed as it is based on the Commission's earlier order dated 23.02.2016 in RA No. 3 of 2014 which pertained to newer cogeneration plants, and (ii) TNERC, while passing that order, determined bagasse price solely through the equivalent heat value method without considering prevailing market prices, allegedly contrary to the directions of this Tribunal in Appeal No. 199 of 2012 which remanded the matter for reconsideration.
69. Respondent No. 2 submits that these objections overlook the explicit findings of this Tribunal in the remand judgment. In paras 55-56 of the said judgment, this Tribunal clearly held that TNERC must evaluate bagasse price either by the equivalent heat value method or on the basis of market price, depending on reliability of data. Significantly, in para 57, this Tribunal also recorded that the Appellants themselves had admitted that the fuel cost ought not to be fixed below ₹1408 per MT.
70. In compliance with these directions, TNERC, in its order dated 23.02.2016, adopted ₹1408 per MT by applying the CERC Renewable Energy Regulations, 2012 which incorporate the equivalent heat value methodology. Respondent No. 2 further points out that even in later proceedings; specifically in Appeal No. 200 Page 27 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 of 2016 (Order dated 03.09.2025) wherein the TNERC's 23.02.2016 determination was challenged, this Tribunal reiterated that the Commission must consider both methodologies. This Tribunal held:
"65. We wish to reiterate the earlier pronouncement that TNERC must consider both the market price of bagasse, where such data is reliable and representative, and the equivalent heat value approach calibrated to the cost of fuel avoided (primarily coal) by the Distribution Licensee. Either method, or a hybrid of both, may be appropriate depending on State-specific market and operational conditions, but the chosen methodology must be transparently justified."
71. Based on the above, the Respondent No. 2 submits that fuel price cannot be determined exclusively on market price, especially in the absence of reliable, representative bagasse market data, a deficiency that persists in the present proceedings. No credible market data was produced by the Appellants either before TNERC or before this Tribunal and therefore such fuel cost as ultimately determined, must be applied prospectively from the date of the judgment in APL No. 200 of 2016.
C. Station Heat Rate
72. Respondent No. 2 notes the contention of the Appellant that the Station Heat Rate ("SHR") has been determined in the Impugned Order on the basis of the TNERC's order in the remand proceedings RA No. 3 of 2014, as 3240 kCal/ kWh is to be set aside by virtue of the SISMA-2016 judgment . In response to this, the Respondet No 2 submits that the above basis of the Appellants challenge to the SHR in the Impugned Order is erroneous. This Tribunal set aside the finding of the TNERC in the remand proceedings on the basis that the TNERC disturbed the issue of SHR in the remand proceedings, even though it had not been remanded by this Tribunal. The said findings do not apply to the present case, where TNERC Page 28 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 independently and not in a remand proceeding, fixed SHR for the purpose of determining tariff for the Appellants plants.
73. Thus, TNERC was not bound by any directions while fixing SHR for the Appellants plants. As the Appellants have not objected to the rate of SHR on any other ground in the present appeal, Respondent No. 2 submits that the challenge to SHR may be dismissed.
Our Analysis and Conclusion on Issue (iii) A&B. Cost of Bagasse and the date from which such cost should be applicable
74. We note that the cost of bagasse has been a contentious issue for quite some time. First, the cost of bagasse fixed by TNERC was subject matter of Appeal No 199 of 2012 in this Tribunal. This had led to judgment dated 04.09.2013 by this Tribunal.
75. The matter came up again and this Tribunal in the SISMA-2016 Judgment has inter-alia held as under:
"72. Therefore, TNERC shall revisit and recompute the fuel cost for bagasse using a methodology that includes both:
a. The equivalent heat value of coal-based fuels actually avoided as per the generating plants' operational parameters; and, b. The market value of bagasse within Tamil Nadu, based on reliable, verifiable data of actual transactions, adjusting for quality and utility differences. "
73. TNERC shall apply a suitable escalation formula, at least reflecting the normative 5%, but remain open to adjustments based on real indices and market trends during the tariff control period.
Page 29 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
74. TNERC shall establish a predefined mechanism for the timely submission and verification of data relating to bagasse price and fuel cost by generators, ensuring reasonable timelines and stakeholder consultation.
75. This revised determination shall take effect prospectively from the date of this judgment and shall apply to all affected generators under the relevant orders.
76. To sum up, the fuel cost for bagasse as currently fixed by TNERC, solely based on the equivalent heat value approach benchmarked to avoided coal cost, is not fully just and reasonable in the light of Tamil Nadu's market and operational context. We hold that the commercial market price of bagasse within Tamil Nadu must also be duly factored in when determining fuel cost. The escalation rate must be applied flexibly in response to actual cost trends as observed above. "
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123. It is a settled principle in law that the generator should be allowed reasonable cost as per the tariff order determined, irrespective of the date of such determination, so that the complete reasonable cost recovery is allowed to the generator during the complete control period, and so is the applicability of the tariff determined.
124. Accordingly, we find the Commission's approach to be erroneous, and the tariff order so determined shall be applicable from the start date of the control period, i.e., 01.04.2014 and 01.04.2020, corresponding to the respective control periods."Page 30 of 36
Judgement in Appeal Nos. 139 of 2016 & 375 of 2017
76. We note that the Respondent Commission submits that the cost of bagasse determined by it consequent to the remand based on this Tribunal's judgement dated 04.09.2013, has been extended to old plants also with effect from 31.7.2012.
77. However, as seen earlier, this order after remand proceedings was again challenged in this Tribunal, leading to SISMA-2016 judgement dated 03.09.2025. Apparently, the fresh remand proceedings consequent to SISMA-2016 judgement are still underway in the TNERC.
78. We also note that Respondent No. 2 and Appellants have expressed their own interpretation of SISMA-2016 judgement regarding date of effectiveness of freshly determined cost of bagasse. Since, we understand that remand proceedings are still underway, at this stage we would let TNERC interpret the order and we refrain from any observation in this matter.
79. All we can say is that it can be no body's case that the price of Bagasse can be different for old and new plants. Thereafter, we are of the opinion that the cost of Bagasse that has been used for the plants commissioned after 15.06.2006 shall be used for the plants of the Appellants which were commissioned prior to this date. We have already concluded that the tariff for latter category of plants shall be effective from 01.04.2010. Therefore, the cost of bagasse for the plants commissioned post- 2006 as applicable on the aforesaid date and as determined for the period thereafter based on orders of TNERC, including those in response to remand proceedings when they attain finality, shall also be applicable to the plants commissioned pre- 2006.
C. Station Heat Rate (SHR)
80. The cost of fuel (Bagasse), its calorific value and SHR are the three parameters which will have impact on variable cost. We note from the Impugned Page 31 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 Order that the pre- 2006 BBCGPP had proposed different slabs of SHR based on the design configuration. However, it seems that TNERC had not specifically gone into issue of SHR and in para 9 of the Impugned Order concluded as under:
"The variable cost that may be issued by the Commission from time to time may be adopted for their plants also. The capital cost of older plants will be lesser compared to capital cost of plants commissioned in later periods in view of the improved efficiency parameters. Hence in respect of the older plants, the FCC may be less but variable cost will be more. The reverse is true in respect of plants commissioned in later periods. Therefore much difference may not be there if both FCC & Variable Cost is taken together across all these old plants with different vintage and varying configuration. Commission believes this will settle the issue as older plants will gain in FCC and lose in variable cost while the reverse is true for improved plants commissioned in later periods but as a package i.e. total cost will address the issue."
(Emphasis supplied)
81. As we have concluded earlier, the cost of bagasse can not be different for plants commissioned pre- 2006 than those commissioned thereafter. The same is equally applicable for calorific value too. Thus, it is implied from the first sentence of the above extract of the Impugned order that TNERC has assumed same SHR for plants commissioned pre- 2006 as for those commissioned thereafter. The Appellants seem to contend that their plants being much older are not as efficient as newer plants. However, we do not agree to their reliance on SISMA-16 judgement to support their contention on SHR.
82. We are of the opinion that the rationale given by TNERC in the Impugned Order based on interplay of variable cost and fixed cost (directly emanating from capital cost), as may be seen from the latter part of the above extract is not tenable, particularly as we have already remanded the matter of capital cost to TNERC. We Page 32 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 note inconsistency in the submission made by the Appellants before TNERC. The SHR has been mentioned in the range of 4196 to 9049 Kcal/kg, whereas correct unit of SHR is Kcal/kWh.
83. After examining the above analysis, including the divergent submissions on SHR, we find that the TNERC did not prudently evaluate for fixing normative SHR data specific to BBCGPP commissioned pre- 2006, despite SHR being a critical parameter for variable cost determination.
84. We therefore remand the matter to the TNERC to reconsider and determine an appropriate normative SHR for these pre-2006 plants, considering various relevant factors. We are of the view that in no case SHR of pre-2006 plants can be lower than that of post-2006 plants. However, we are mindful that SHR reflects thermal efficiency and can vary due to technological differences and O&M practices. Accordingly, while remanding, we direct the TNERC not to rely solely on actual plant data which may incentivise inefficiency but to prescribe reasonable normative values considering amongst other factors promotion of efficiency and emission reduction.
Issue (iv) : CARRYING COST Submissions of the Appellants
85. The Appellants submit that the cumulative effect of the TNERC's errors namely, its failure to apply the tariff from the commencement of the control period (01.04.2010) and its incorrect determination of several tariff components has resulted in substantial deprivation of timely cost recovery. Such deprivation constitutes a clear denial of the time value of money for which the Appellants are Page 33 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 lawfully entitled to be compensated. The principle governing the grant of carrying cost has been reaffirmed by this Tribunal in the SISMA-2016 Judgment, particularly at paragraphs 104-106. Therein, the Tribunal held that carrying cost must be allowed wherever a generator is denied timely payment of lawful dues and such compensation is intrinsic to ensuring financial neutrality and maintaining regulatory fairness.
86. Thereof, Appellants pray that carrying cost be awarded on all arrears arising out of the re-determination of tariff components computed from the dates the amounts originally became due until their realization.
Submissions of the Respondent No. 187. We observe that though Respondent No. 1, in its written submissions dated 20.05.2025, asserts that the claim for carrying cost on the differential amount stood effectively dealt with in paragraph 5 thereof of its written submissions, a perusal of paragraph 5 shows that the submissions are related to the alleged delay in passing of the Impugned Order and effective date of the order. There is no discussion, analysis or specific denial of the Appellants' claim for carrying cost. It seems that that Respondent No. 1 belives that this Tribunal will not agree to the contention of Appellants to fix date of effectiveness of tariff as 01.04.2010, and therefore the question of carrying cost will not arise.
Submissions of the Respondent No. 288. The Respondent No. 2 submits that this Tribunal in SISMA-2016 judgement has already taken a view that the redetermined tariff will be applicable prospectively. Carrying cost, if so awarded, may be payable to the Appellants only from the prospective date on which redetermined tariff is payable for delay (if any) in payment of such redetermined tariff.
Page 34 of 36Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 Our Analysis and Conclusion on Issue (iv)
89. It is settled position of law that Carrying cost arises when a party is deprived of receiving its lawful dues on time. It is intended to compensate for the delay in payment and to ensure that the generator is able to fully recover its costs without suffering any financial loss or stranded costs. In simple terms, carrying cost represents the time value of money, recognising that money received later is worth less than money received when it was originally due.
90. We have already concluded on issue (i) that the revised tariff will be applicable from 01.04.2010. Therefore, there is no doubt in our mind that carrying cost will be payable on the differential amount i.e. difference between the tariff determined consequent to this judgement and tariff actually paid so far.
ORDER For the foregoing reasons recorded hereinabove, the captioned Appeal No. 139 of 2016 and 375 of 2017 are partly allowed. Accordingly, the Impugned Order is interfered with to the extent and in the manner indicated below:
(i) The date of effectiveness of the tariff for pre-2006 bagasse based co-
generation plants will be 01.04.2010.
(ii) The matter regrading determination of fixed charge and capital cost of the pre-2006 plants is remanded to TNERC in terms of para 57 and 58 of this order.
(iii) The cost of bagasse for the plants commissioned post- 2006 as applicable on 01.04.2010 and as determined for the period thereafter based on orders of TNERC, including those in response to remand Page 35 of 36 Judgement in Appeal Nos. 139 of 2016 & 375 of 2017 proceedings when they attain finality, shall also be applicable to the pre- 2006 plants.
(iv) The matter regarding Station Heat Rate for pre-2006 plants is remanded to TNERC in terms of para 84 of this order.
(v) Carrying cost will be payable to the pre-2006 plants on the differential amount i.e. difference between the tariff determined consequent to this judgement and tariff actually paid so far since 01.04.2010.
The Captioned Appeal and pending IAs, if any, are disposed of in the above terms.
PRONOUNCED IN THE OPEN COURT ON THIS 22nd DAY OF DECEMBER, 2025.
(Ajay Talegaonkar) (Virender Bhat)
Technical Member Judicial Member
REPORTABLE / NON-REPORTABLE
kns/mkj/kks
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