In a key ruling on May 5, 2025, the Supreme Court of India dismissed the appeal filed by Power Grid Corporation of India Limited (PowerGrid), which sought to recover ₹24 crore through an increase in electricity tariffs for the replacement of damaged transformers. The Court made it clear that such replacements fall under operational expenses and not additional work justifying extra charges for consumers.
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The bench, comprising Justices Abhay S. Oka and Ujjal Bhuyan, was hearing a case stemming from an incident in 2006. During peak summer demand that year, three Inter-Connecting Transformers (ICTs) failed at PowerGrid’s Rihand transmission system. To prevent disruption of power supply, especially to Delhi, PowerGrid immediately diverted transformers from other substations. Later, the company tried to recover the incurred costs through tariff revision under Central Electricity Regulatory Commission (CERC) regulations.
However, the Court did not accept PowerGrid’s argument. The main contention was whether such replacement work could be treated as “additional capital expenditure” under Regulation 53 of the CERC Tariff Regulations. PowerGrid argued that this cost should be included as additional work/service since it was necessary for the efficient functioning of the transmission system.
But the Court disagreed.
“It is evident that Regulation 53 does not include within its scope replacement of ICTs due to damage or failure,” the bench stated.
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Justice Ujjal Bhuyan, authoring the judgment, explained that Regulation 53 only allows extra capital costs for new projects, deferred liabilities, or legal obligations—not for routine replacements or repairs.
The Court highlighted that PowerGrid, being a central transmission utility, is responsible for ensuring the smooth functioning of its transmission system. That includes replacing faulty or damaged parts as part of regular operations and maintenance—not passing the cost to consumers.
“All that the appellant had done was diversion and replacement of ICTs. This cannot be construed as doing any additional work/services,” the Court observed.
PowerGrid’s claim had already been rejected earlier by the CERC and the Appellate Tribunal for Electricity (APTEL). Both regulatory bodies had held that operational risks, like the failure of equipment, must be borne by the utility itself and cannot be shifted to the public through increased tariffs.
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The Supreme Court fully upheld these decisions.
“As a central transmission utility, it was the duty of the appellant to maintain a healthy transmission system; replacement of damaged equipment(s) is part of operation and maintenance,” the Court concluded.
With this ruling, the Supreme Court reinforced the principle that utilities must shoulder the costs of maintaining infrastructure and cannot label such expenses as extraordinary to burden electricity consumers with tariff hikes.
Case Title: POWERGRID CORPORATION OF INDIA LIMITED VERSUS CENTRAL ELECTRICITY REGULATORY COMMISSION & ORS.
Appearance:
For Appellant(s) Ms. Swapna Seshadri, Adv. Mr. Pramod Dayal, AOR Mr. Nikunj Dayal, Adv. Mr. Utkarsh Singh, Adv. Ms. Sneha Singh Baghel, Adv.
For Respondent(s) Mr. Pradeep Misra, AOR Mr. Daleep Dhyani, Adv. Mr. Manoj Kumar Sharma, Adv.
