Latest news with #Electricity(Amendment)Rules
Hindustan Times
2 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.
&w=3840&q=100)
Business Standard
2 days ago
- Business
- Business Standard
Supreme Court pulls up states, discoms; sets April 2028 dues deadline
The Supreme Court ordered on Tuesday that electricity distribution companies must liquidate all their pending 'regulatory assets' by April 1, 2028. A two-judge apex court Bench comprising Justices P S Narasimha and Sandeep Mehta also held that fresh regulatory assets created by distribution companies (discoms) should be liquidated within three years of their creation. 'Regulatory commissions must provide the trajectory and road map for liquidation of the existing regulatory asset, which will include a provision for dealing with carrying costs. Regulatory commissions must also undertake strict and intensive audits of the circumstances in which the discoms have continued without recovery of the regulatory asset,' the apex court said in its judgment. A regulatory asset is an intangible asset created by electricity discoms to account for the gap between the price at which they purchase power and the price at which they sell it to customers, due to discounts or electricity bill waivers provided by the respective state governments. For accounting purposes, discoms treat regulatory assets as receivables from state governments over a future period. This portion of the revenue requirement is not included while determining the electricity tariff for that particular year. The top court was hearing pleas and appeals filed by BSES Rajdhani Power (BRPL), BSES Yamuna Power (BYPL), and Tata Power Delhi Distribution, which had challenged the Delhi Electricity Regulatory Commission's (DERC's) tariff-setting practices. The regulatory asset burden across the three Delhi discoms stood at a staggering ~27,200 crore, including carrying costs, until 2020–21. Regulatory commissions must undertake joint and collaborative efforts with other authorities to enable access to electricity across urban and rural areas and improve affordability through tariff rationalisation, the court said. 'The statutory authorities must work in cohesion towards a common goal of ensuring supply of electricity across regions and terrains, and cheaper and affordable...,' the court said. Regulatory asset not statutory, but permissible The Bench also clarified that while the creation of regulatory assets is not a statutory mandate under the Electricity Act, 2003, it is a recognised regulatory mechanism designed to prevent sudden tariff shocks to consumers. However, it must be exercised sparingly and in strict compliance with the principles laid down under the Electricity Act, the National Tariff Policy of 2006 and 2016, and Rule 23 of the Electricity (Amendment) Rules, 2024, the court said. 'Electricity is a public good,' the court observed, adding that regulatory commissions must balance consumer interests with the financial viability of power discoms. 'A disproportionate increase and long-pending regulatory assets depict a 'regulatory failure'. It has serious consequences for all stakeholders, and the ultimate burden falls on the consumer,' the court observed. Court faults DERC for delay, inaction The court found that DERC failed to comply with multiple statutory guidelines requiring that regulatory assets be created only in exceptional circumstances and recovered within three to seven years. The Commission's road map, submitted in 2014 and promising liquidation of the assets by 2020-21, was never implemented, the court said. Instead, the quantum of regulatory assets kept ballooning, driven by delayed true-ups, unrealistic tariff assumptions, unpaid government subsidies, and rising power purchase costs, the apex court observed. 'This creeping regulatory inaction has undermined investor confidence and the commercial viability of the distribution sector,' the court noted, adding that such prolonged revenue gaps go against the very objective of private sector participation envisioned under the Electricity Act. Other directions issued The Supreme Court also said that DERC should ensure that no further regulatory assets are created, except in extraordinary and clearly defined circumstances. It also asked the electricity regulatory commission to use mechanisms such as the deficit recovery surcharge, fuel adjustment charges, tariff rationalisation, and government subsidies to recover the gap between the amount paid by users and the amount owed to the discoms. Any surplus revenues should first be adjusted against existing regulatory assets, the court said. The court also reminded state governments of their constitutional obligation to ensure equitable electricity access. If states wish to grant subsidies, they must do so upfront and through budgetary allocations — not by forcing distribution companies to bear the burden, the court said. The two-judge Bench further stressed that the Electricity (Amendment) Rules, 2024, particularly Rule 23, must now form the baseline for all regulatory commissions in handling tariff gaps. The court, however, clarified that it was not adjudicating individual liabilities or recoveries in this judgment. Appeals by BRPL and BYPL against earlier orders of the Appellate Tribunal for Electricity (Aptel) remain pending and will be heard separately. However, the court reiterated that orders of the Aptel must be implemented unless stayed.
