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Hindustan Times
4 days ago
- Business
- Hindustan Times
SC orders nationwide clean-up of ₹1.6L-cr regulatory assets
The Supreme Court on Wednesday directed electricity regulatory commissions (RCs) across the country to prepare a detailed roadmap for liquidating existing regulatory assets (RAs) within the next three years. The court also instructed the Appellate Tribunal for Electricity (APTEL) to ensure strict compliance with this directive by registering a suo motu petition. The court directed that if any new RA is created, it must be liquidated within three years, with the existing regulatory assets cleared within four years starting from April 1, 2024, as per Rule 23 of the Electricity Rules. (HT Archive) The direction came in response to a petition filed by Delhi's three major power distribution companies -- BSES Rajdhani Power Ltd, BSES Yamuna Power Ltd, and Tata Power Delhi Distribution Ltd -- challenging the Delhi Electricity Regulatory Commission's (DERC) approach to electricity tariff determination. The companies argued that DERC's tariff policies over the years led to a massive accumulation of regulatory assets, which as of March 31, 2024, stood at ₹27,200.37 crore across the three discoms, including carrying costs. While examining the issue, the bench of justices PS Narasimha and Sandeep Mehta widened the scope of the case, noted that the problem of increased RA was not a phenomenon limited to Delhi. For instance, Tamil Nadu reported an estimated RA of ₹89,375 crore as of FY 2021–22, while Rajasthan's cumulative RA had crossed ₹47,000 crore by FY 2024–25. In contrast, the electricity regulatory commissions of Andhra Pradesh, Assam, Haryana, Himachal Pradesh, Jharkhand, Madhya Pradesh, Odisha, Punjab, Sikkim, Telangana, and Uttar Pradesh stated that they had never created RAs. The Maharashtra commission confirmed it had not created any regulatory assets since March 2020, in compliance with the National Tariff Policy, 2016, and the Electricity (Amendment) Rules, 2024. The court directed that if any new RA is created, it must be liquidated within three years, with the existing regulatory assets cleared within four years starting from April 1, 2024, as per Rule 23 of the Electricity Rules. Rule 23 prescribes that regulatory assets should not exceed 3% of the Annual Revenue Requirement (ARR). The bench held that each RC must prepare a trajectory and roadmap for the liquidation of its regulatory assets, including provisions to deal with carrying costs. It further ordered a thorough audit to determine why discoms were allowed to accumulate RAs without recovery for extended periods. To monitor and enforce these measures, APTEL was directed to invoke its powers under Section 121 of the Electricity Act and issue orders, instructions, or directions to ensure that the RCs fulfill their duties regarding regulatory assets. APTEL must also register a suo motu petition and continue monitoring until the liquidation timelines conclude. The judgment underlined that while increasing electricity tariffs is a tool to bridge revenue gaps, it may impose a sudden 'tariff shock' on consumers. To avoid this, commissions may opt to recover part of the gap immediately and create a regulatory asset for the remainder—recoverable in subsequent years. However, this should not become a long-term practice. 'The financial health and commercial viability of distribution companies must be ensured by the regulatory commissions,' the bench said. It emphasized that tariffs must be cost-reflective, and that revenue gaps between approved ARR and projected revenue should only arise in exceptional circumstances. Highlighting the consequences of unchecked RA accumulation, the court said, 'Disproportionate increase and long pending regulatory assets depict a regulatory failure. It has serious consequences on all stakeholders, and the ultimate burden is only on the consumer.' The court found that while RCs are meant to be independent authorities having functional autonomy, their decisions give a clear impression of a lack of ability to take 'firm' decisions. 'Instead of taking strong decisions on the basis of the statutory mandate, we see instances where the Regulatory Commissions manage and manoeuvre to arrive at a tariff by creating regulatory assets over and above all permissible limits. This is where the problem lies,' the court observed. The bench reminded the RCs to call for ARR, ensure that tariffs are determined, and that truing up is conducted in a timely manner, by exercising suo motu powers if necessary. 'Ineffective and inefficient functioning of the Regulatory Commissions, coupled with acting under dictation can lead to regulatory failure. The commissions are accountable for their decisions, and they are subject to judicial review,' the bench said.
News18
4 days ago
- Business
- News18
SC fixes 3-year deadline to clear Rs 27,200 cr power dues to Delhi discoms
New Delhi, Aug 6 (PTI) In a significant verdict, the Supreme Court on Wednesday directed that the regulatory assets including carrying costs to the tune of Rs 27,200.37 crore be paid within three years to Delhi's three private discoms. Regulatory assets, essentially deferred revenue gaps to be recovered in future tariffs, have risen sharply, reaching Rs 12,993.53 crore for BSES Rajdhani Power Ltd (BRPL), Rs 8,419.14 crore for BSES Yamuna Power Ltd (BYPL) and Rs 5,787.70 crore for Tata Power Delhi Distribution Ltd (TPDDL) as on March 31, 2024, totalling Rs 27,200.37 crore. The verdict, which may have a significant bearing on Delhi power consumers, was delivered by a bench of Justices P S Narasimha and Sandeep Mehta on the petitions filed by three electricity distribution companies against the Delhi Electricity Regulatory Commission's (DERC) tariff orders over the years that led to the ballooning of regulatory assets. Dealing with the term 'regulatory asset", the bench said, 'In the context of tariff determination for electricity utilities is an intangible asset that is created by the Regulatory Commissions in recognition of an uncovered revenue gap or revenue shortfall when a distribution licensee could not fully recover the costs reasonably incurred by it through revenue from tariff. 'This portion of the revenue requirement is not included while determining the tariff for the particular year. Rather, the distribution company is entitled to receive or recover such revenue in the future, over a period of time." Justice Narasimha, writing an 82-page judgment, examined issues relating to regulatory assets, their position in the regulatory regime for the determination of tariffs and the powers of regulatory commissions. The bench said, 'As a first principle, tariff shall be cost-reflective… and the revenue gap between the approved ARR (Annual Revenue Requirement) and the estimated annual revenue from approved tariff may be in exceptional circumstances." It directed that the regulatory asset should not exceed a reasonable percentage, which percentage can be arrived on the basis of the Electricity Rules that prescribe three per cent of the ARR as the guiding principle. 'If a regulatory asset is created, it must be liquidated within a period of 3 years, taking Rule 23 as the guiding principle… The existing regulatory asset must be liquidated in a maximum of 4 years starting from April 01, 2024, taking Rule 23 as the guiding principle," it directed. According to this direction, the discoms will have to be paid their dues within four years which will be counted from 2024. 'Regulatory Commissions must provide the trajectory and roadmap for liquidation of the existing regulatory asset, which will include a provision for dealing with carrying costs. Regulatory Commissions must also undertake a strict and intensive audit of the circumstances in which the distribution companies have continued without recovery of the regulatory asset," it said. The regulatory commissions shall, in general, follow the principles governing creation, continuation and liquidation of the regulatory asset, as laid down in the judgment, it said. The bench said, 'Electricity is a public good. Its generation, transmission, and distribution are statutorily regulated to ensure access to supply, on a non-rival and non-exclusive basis." It further said, 'The statutory regulators, that is Central and State Regulatory Commissions along with Union and State Governments and other stakeholders are equally bound by the mandate under Part-IV of the Constitution for its equitable distribution." While acknowledging that regulatory assets can help avoid sudden tariff shocks, the court warned that their unchecked growth reflects 'regulatory failure" and disproportionately burdens consumers. It directed that tariffs must be cost-reflective and revenue gaps allowed only in exceptional cases. The bench said that the regulatory assets must not exceed three per cent of the annual revenue requirement, as guided by Rule 23 of the Electricity Rules. It said the regulators must set and publish clear recovery roadmaps, audit causes for delays and account for carrying costs. It also said the Appellate Tribunal for Electricity (APTEL) must monitor compliance using its statutory powers. PTI SJK KSS KSS KSS (This story has not been edited by News18 staff and is published from a syndicated news agency feed - PTI) view comments First Published: August 06, 2025, 23:30 IST News agency-feeds SC fixes 3-year deadline to clear Rs 27,200 cr power dues to Delhi discoms Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
