Tariff True-Up Principles: actual fuel cost allowed, while most regulatory claims on heat rate, auxiliary use and expenses were rejected.

The Tribunal addressed tariff true-up disputes over fuel cost, auxiliary consumption, heat rate, working capital interest, income tax, ash disposal and reverse osmosis O&M, as well as refund of revenue surplus. It held that actual fuel cost, including alternate coal procurement necessitated by the absence of fuel supply agreements, had to be recognised to the extent indicated, and the refund had to be reworked accordingly. It rejected retrospective relief on auxiliary consumption and availability, gross station heat rate, working capital interest treatment, income tax computation, and disallowance of ash disposal and reverse osmosis expenses. It also upheld the Commission's jurisdiction to order refund of surplus under the tariff framework.

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Issues: (i) Whether the actual fuel cost incurred for FY 2014-15 and FY 2015-16, including coal procured from alternate sources due to non-execution of fuel supply agreements, could be disallowed in true-up and tariff determination; (ii) Whether auxiliary energy consumption and consequential availability for FY 2014-15 could be fixed at normative levels instead of the actual higher consumption claimed by the generating company; (iii) Whether the gross station heat rate could be relaxed for part-load and stabilization-related operation; (iv) Whether actual interest on working capital could be considered for efficiency-gain computation; (v) Whether income tax was correctly computed on the tariff restatement; (vi) Whether ash disposal expenses and additional O&M expenses for the reverse osmosis plant were rightly disallowed; and (vii) Whether the Commission had jurisdiction to direct refund of the revenue surplus.

Issue (i): Whether the actual fuel cost incurred for FY 2014-15 and FY 2015-16, including coal procured from alternate sources due to non-execution of fuel supply agreements, could be disallowed in true-up and tariff determination.

Analysis: The Commission had approved the power purchase arrangements and provisional tariff on the premise of linkage coal and had repeatedly directed execution of fuel supply agreements. It nevertheless sanctioned the true-up on a notional fuel mix aligned to the original assumptions and refused to pass through the higher cost of alternate procurement. The Tribunal held that the generator had been compelled to source coal from other sources to meet supply obligations and that the actual fuel mix for the period had to be recognized, at least to the extent allowed for the corresponding Unit-II arrangement under the fuel supply agreement.

Conclusion: The disallowance of actual fuel cost was set aside to the extent indicated, and the issue was decided in favour of the appellant.

Issue (ii): Whether auxiliary energy consumption and consequential availability for FY 2014-15 could be fixed at normative levels instead of the actual higher consumption claimed by the generating company.

Analysis: The appellant relied on backing down instructions and stabilization difficulties, but the applicable regulatory framework did not yet give effect to the later amendment on part-load compensation. The certified availability by the system operator remained unchallenged, and the Tribunal declined to import the later amendment retrospectively.

Conclusion: The challenge to normative auxiliary consumption and the related availability computation failed and was decided against the appellant.

Issue (iii): Whether the gross station heat rate could be relaxed for part-load and stabilization-related operation.

Analysis: The Tribunal held that the claimed relaxation was not available under the governing regulations for the relevant period, and the later grid-code amendment on part-load compensation could not be applied retrospectively. The Commission's normative heat-rate determination was therefore sustained.

Conclusion: The issue was decided against the appellant.

Issue (iv): Whether actual interest on working capital could be considered for efficiency-gain computation.

Analysis: The Commission had taken the actual interest on working capital as reflected in the audited accounts for sharing of gains and losses, while the appellant sought a different treatment on the basis of internal accruals. The Tribunal found no infirmity in the Commission's approach on the facts of the case.

Conclusion: The issue was decided against the appellant.

Issue (v): Whether income tax was correctly computed on the tariff restatement.

Analysis: The Commission provisionally approved income tax in accordance with the regulatory framework and provided for final adjustment at true-up. The Tribunal accepted this treatment.

Conclusion: The issue was decided against the appellant.

Issue (vi): Whether ash disposal expenses and additional O&M expenses for the reverse osmosis plant were rightly disallowed.

Analysis: The Tribunal upheld the Commission's view that the ash-dyke design deviation and the claimed reverse osmosis expenses did not justify shifting the burden to consumers, and found no infirmity in the refusal to allow those costs separately.

Conclusion: The issue was decided against the appellant.

Issue (vii): Whether the Commission had jurisdiction to direct refund of the revenue surplus.

Analysis: The Tribunal held that the Commission had jurisdiction under the tariff regulatory framework to determine tariff both upward and downward, including consequential refund where the true-up disclosed a surplus rather than a gap. However, the quantum of refund required reworking in light of the Tribunal's findings on fuel cost.

Conclusion: The jurisdictional challenge failed, but the refund amount was required to be revised.

Final Conclusion: The appeal succeeded only on the fuel-cost issue and consequential reworking of the refund, while the remaining regulatory and tariff challenges were rejected.

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