Power company tried to charge consumers twice for same loan — Supreme Court says no

GRIDCO took a loan because its customers didn't pay. Then it tried to make those same customers pay back the loan — again.

On a Delhi afternoon in October 2023, a two-judge bench of the Supreme Court — Justice Sanjay Kishan Kaul and Justice Abhay S. Oka — stared at a simple question buried inside a mountain of regulatory filings: can a power company charge its consumers twice for the same debt? The answer was a flat no. And with that, the Court drew a bright red line around what electricity tariffs can and cannot contain.

When the unpaid bills became a loan

GRIDCO is a government-owned company in Odisha. It buys electricity from power generators and sells it to four distribution companies — the DISCOMS — that actually deliver power to homes and businesses. The Orissa Electricity Regulatory Commission (OERC) sets the prices at each stage: the bulk supply tariff (BST, the price GRIDCO charges the DISCOMS) and the retail supply tariff (RST, the price DISCOMS charge end consumers).

Between 2006 and 2015, the Commission fixed these tariffs year after year. But the DISCOMS kept falling behind on payments to GRIDCO. So GRIDCO took loans from banks to cover the gap. Then, when the next tariff cycle came around, GRIDCO asked the Commission to include its principal loan repayments — the actual money it was paying back to the banks — in the costs that tariffs recover.

The DISCOMS objected. Their argument was simple: the cost of the electricity had already been passed through in the BST, which the DISCOMS had paid. Adding the loan repayment on top meant consumers would pay for the same power twice — once through the BST and once through the loan recovery.

Why the Appellate Tribunal said no

The DISCOMS appealed to the Appellate Tribunal for Electricity, which largely agreed with them. The Tribunal found that GRIDCO's principal loan repayments could not be passed through the tariff because the underlying cost — the power purchase — had already been recovered. It also held that GRIDCO's trading revenue (money it earned by selling surplus power in the open market) had to be counted as income, reducing the amount consumers needed to pay.

GRIDCO and the Commission both appealed to the Supreme Court under Section 125 of the Electricity Act, 2003 (the provision that allows appeals to the Supreme Court only on substantial questions of law). The DISCOMS cross-appealed on some points.

The double-billing problem

The Supreme Court framed the core issue with surgical precision. Under the regulatory framework, GRIDCO's entire cost of buying power was already included in the BST that the DISCOMS paid. The DISCOMS then recovered that cost from end consumers through the RST. When the DISCOMS didn't pay GRIDCO on time, GRIDCO borrowed money. But the principal repayment on that loan, the Court held, was not a new cost — it was the same cost, just financed differently.

"Where the cost of energy supplied has already been passed through in the BST recovered via the RST," the bench observed, "the principal loan amount taken due to non-payment by DISCOMS cannot again be allowed to pass through tariff, as it amounts to passing the same burden twice on consumers."

This was the heart of the judgment. The Court distinguished between the principal amount of the loan — which represented the original cost already recovered — and the interest payable on that loan. Interest, the Court said, was a genuine cost incurred by GRIDCO because it had to borrow money. That interest could be passed through the tariff, apportioned among the DISCOMS in proportion to their outstanding dues. But the principal itself? No.

Why the Commission couldn't appeal its own mistakes

A second issue drew the Court's attention: the Commission itself had appealed against the Appellate Tribunal's order. The Supreme Court found this deeply problematic. A regulatory commission, when it fixes tariffs under Section 62 of the Electricity Act (the provision for tariff determination), acts as a quasi-judicial body — it hears parties, weighs evidence, and passes orders. When the Appellate Tribunal corrects those orders, the Commission cannot turn around and say it is "aggrieved."

The Court held that a quasi-judicial body is bound by the appellate decision. The Commission's role is to implement the Tribunal's directions, not to challenge them. The only exception, the Court noted, would be if the Commission was exercising legislative functions — making rules or regulations of general application — rather than adjudicating a specific dispute. In this case, the tariff determination was quasi-judicial, and the Commission had no standing to appeal.

The Court cited its own decision in PTC India Ltd. v. Central Electricity Regulatory Commission (2010) to underline the limited scope of interference under Section 125. Appeals to the Supreme Court from the Appellate Tribunal lie only on substantial questions of law, not on questions of fact or regulatory discretion. The Court said it would be slow to interfere with the factual findings of expert bodies like the Commission and the Tribunal.

What the trading revenue ruling means

On the trading revenue issue, the Court upheld the Tribunal's finding. When GRIDCO buys power in bulk and sells surplus electricity on the open market, that revenue must be treated as income and set off against its costs. You cannot, the Court said, include the entire power purchase as an expense while excluding the revenue from selling the surplus. That would inflate the tariff artificially.

The Court also dealt with a specific issue on advance against depreciation — a technical accounting matter where the Commission's original order was restored on one point while the Tribunal's findings were upheld on others.

The standing of the DISCOMS

The Commission had argued that the DISCOMS had no right to challenge the BST because they were not the ones paying it — the end consumers were. The Court rejected this argument. The BST directly affects the revenue gap of the DISCOMS, the Court said, because the RST that DISCOMS charge consumers depends on the BST they pay to GRIDCO. If the BST is set too high, the DISCOMS' revenue gap widens, and they become "aggrieved persons" with the right to appeal under Section 111 of the Electricity Act (the provision for appeals to the Appellate Tribunal).

Why this case matters for every power consumer

The judgment is a reminder that tariff regulation is not a blank cheque. Every cost passed through to consumers must be traced to its origin. If a cost has already been recovered, it cannot be recycled through a different label — loan repayment, financing cost, or anything else. The only exception is genuine incremental costs like interest, which arise because someone had to borrow money to cover a shortfall.

For practitioners, the key takeaway is the distinction between principal and interest on regulatory loans. Principal is the original cost, already recovered. Interest is the cost of delay, and it can be passed through — but only if apportioned fairly among the defaulting parties.

THE PLAY: When challenging a tariff order that includes loan repayments, trace the underlying cost: if the same expense has already been recovered through an earlier tariff component, the principal cannot be passed through again — only the incremental interest can.

The Court dismissed most of the appeals, upheld the Tribunal's findings, and sent a clear message: the consumer pays once, not twice.