Calcutta, April 19 :     The Central Electricity Authority (CEA) -- the arbiter in a long-standing dispute between CESC and the West Bengal government - has capped the cost of the 500 MW Budge Budge thermal power plant at Rs 2295 crore. CESC had been demanding that the project cost be revised to over Rs 2500 crore while the West Bengal State Electricity Board wanted it pegged at Rs 1853 crore. The arbitration by CEA was held at the behest of CESC which has been charged by the state government with inflating costs in order to be in a position to demand a higher revision in power tariff. Upset over the verdict, the state government filed an appeal against the CEA order in the Calcutta High Court last week, sources said. CEA's final verdict, which has been communicated to both CESC and WBSEB, has been kept strictly under wraps till now. If the government loses its appeal, CESC customers will have to be prepared to pay higher power bills since CESC will be able to factor in the project cost of Rs 2295 crore for its tariff hike which is to be considered by the West Bengal State Electricity Regulatory Commission. For the 1998 tariff hike, the state power department had reduced the cost of the Budge Budge project by Rs 455 crore. CESC had agreed then to obtain a revision in power tariff, but filed for a CEA arbitration soon after. A utility is allowed a reasonable return (profit allowed to a utility as per the Electricity Act) on its investment. The recovery is allowed as a fixed portion of the power tariff it charges. The result will ensure an adequate return on its investments though not equal to what it had asked for (as its claim has now been allowed by CEA). In 1998, the tariff-setting exercise had factored in a project cost of only Rs 1853 crore. WBSEB's calculations were based on cost data for Budge Budge as of December 1996 and provided to WBSEB in January 1997 which put the final cost of Budge Budge project at Rs 2308 crore. Since then, the Budge Budge project cost has escalated to over Rs 2500 crore. The second unit was synchronised last year. In 1992, CEA had approved a cost of Rs 1638 crore for the Budge Budge power project. The controversy over Budge Budge project's cost came into focus during the Assembly session in late 1998 when the opposition party circulated photocopies of the state power department's notes on which power minister Sankar Sen had made caustic observations about the inflated cost of Budge Budge. Shortly thereafter, the Trinamool Congress launched its political campaign against the RPG group flagship's inflated electricity bills in June. The CEA's verdict is a defeat for the state government. The WBSEB, fighting on the government's behalf, had earlier tried to discredit CEA's arbitration proceedings by questioning whether they were 'at all admissible' under the section 44 of the Electricity Supply Act. It had argued that since it had not held back permission to the project, the CEA ought not to arbitrate on the dispute (refusing permission is the only grounds on which a licensee can resort to arbitration under this section of the Act).