HSA Advocates Successfully Represented Adani Power
HSA Advocates successfully represented Adani Power Ltd. (formerly Udupi Power Corporation Ltd.) in an appeal filed by Adani Power against an order of the Central Electricity Regulatory Commission (CERC), wherein CERC had disallowed several additional capitalisation claims and applied a de-capitalisation approach that substantially reduced recovery for replaced assets.Adani Power is the owner and operator of a coastal thermal power station at Udupi, Karnataka, with a capacity of 2 × 600 MW. The dispute pertained to multiple additional capitalisation claims arising from project works and replacements — notably the replacement of the seawater return pipeline and other site-specific works such as silt settling chambers, sea-water intake reliability works, over-ground piping for firefighting systems, and sewage treatment facilities. Several of these claims were made in the context of the 2014–19 tariff period and raised questions about admissibility beyond the statutory cut-off date of 31 March 2015. The matter involved environmental directives, asset replacement on account of site conditions, and the accounting treatment applied by the Commission on de-capitalisation.
The central issue in this matter was whether expenditure incurred after the cut-off date could still be admitted under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014, either through specific provisions or by exercise of the Commission’s discretionary powers under Regulations 54 (Power to Relax) and 55 (Power to Remove Difficulties). CERC had earlier denied such claims and further applied a methodology of complete de-capitalisation of original assets when replaced, resulting in substantial disallowances.
APTEL set aside CERC’s order to this extent, holding that the Commission had failed to consider the discretionary framework under Regulations 54 and 55. The Tribunal also held that only the residual/salvage value of replaced assets can be deducted, not the entire original cost, thereby allowing full recognition of the replacement cost of the seawater pipeline. Importantly, APTEL directed CERC to reconsider additional capitalisation claims afresh, with proper application of regulatory discretion.
This judgment sets an important precedent for generating companies, as it affirms that justified expenditure critical for the safe and efficient operation of power projects can be admitted even beyond cut-off dates, provided regulatory powers are exercised prudently.
HSA’s team led the matter at every stage – advising, strategizing, drafting pleadings, and arguing before the Tribunal. The matter was led by Mr. Hemant Sahai (Founding Partner) along with Mr. Nitish Gupta (Partner), Mr. Tushar Srivastava (Associate Partner), and Ms. Varnika Tyagi (Associate).
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