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The Hindu
3 days ago
- Business
- The Hindu
Electricity, a ‘public good', must not be vulnerable to ‘undue political posturing', says Supreme Court
The Supreme Court has expressed a lack of confidence on whether Electricity Regulatory Commissions (ERCs) are living up to the independence and autonomy afforded to them under the law. ERCs have the exclusive authority of tariff determination, play a pivotal role in the promotion of competition, and in ensuring reliable power supply across the country. The court said electricity is a 'public good' and a 'material resource', and is especially vulnerable to 'undue political posturing'. The ERCs were meant to serve as a bastion under the Electricity Act of 2003 to ensure that electricity was sold and distributed for the common good, unruffled by the politics of the day, and uninfluenced by the market forces of demand and supply. In an 82-page judgment, a Bench of Justices P.S. Narasimha and Sandeep Mehta has, however, questioned the very 'functional autonomy' of the ERCs, while drawing attention to the 'manage and manoeuvre' tactics employed to arrive at tariffs by creating regulatory assets 'over and above all permissible limits' prescribed by the electricity laws. A regulatory asset is adopted as a measure by the Regulatory Commissions when the gap between the revenue required by a power distribution company to meet its costs and expenditure, and the actual revenue realised through immediate tariff, is so high that it would not only prejudice the consumer but lead to what is called a 'tariff shock'. The court noted that, in recent times, ERCs have allowed power distribution companies' regulatory assets to balloon for decades without liquidating them, much to the detriment of the public, who have to bear the ultimate burden of paying more for electricity. This is despite the emphasis in the Electricity Act that the tariff fixed by ERCs must progressively reflect the cost of supply of electricity, and reduce cross subsidies. 'This is where the problem lies. Though the Electricity Act envisages functional autonomy for Regulatory Commissions, and the statutory scheme is complete in all respects, the decisions taken by the Commissions, many a time, have not inspired confidence of independence and autonomy. The reasons are not difficult to conceive as there is an issue about the appointment process. The assertion of independence, however, comes through individual volition and that is where the mandate of transparency leads to accountability,' Justice Narasimha, who authored the judgment, pointed out. The Act requires ERCs to work in cohesion with the State to ensure the supply of affordable power to all sections of society, across regions and terrains. 'But the adverse effect of an overbearing regulatory asset extended beyond proportion is an anathema to good governance of the Electricity Act… The regulatory asset cannot be permitted to balloon into such proportions or continue for such periods, year after year, that the governance of the sector is set in peril, affecting the rights of the utilities and at the same time jeopardising the consumer interest, who eventually end up bearing the burden,' the court noted. Issuing a series of directions, the apex court ordered that regulatory assets must not exceed the reasonable percentage as envisaged in the Electricity Rules. Existing regulatory assets must be liquidated in a maximum of seven years from April 1, 2024, and those created in future must be liquidated in three years from April 1, 2024. The court directed ERCs to provide the roadmap for liquidation of regulatory assets in future, and also undertake a strict and intensive audit of the circumstances in which distribution companies have continued without recovery of their regulatory assets.
Time of India
5 days ago
- Business
- Time of India
SC delivers key ruling on discom regulatory assets; power bills likely to go up across India
In a ruling that may have huge impact on consumers across the country, the Supreme Court on Wednesday asked all states and Union Territories (UTs) to clear within four years the regulatory assets of the power distribution companies, including BSES companies and Tata Power Delhi Distribution ( TPDDL ), a decision that is likely to increase electricity bills across India. Reliance Infra-backed power distribution utilites BSES Rajdhani Power (BRPL) and BSES Yamuna Power (BYPL) and Tata Power TPDDL had sought amortisation of their 'undisputed' regulatory assets, which according to industry estimates, has exceeded over Rs 1.5 lakh crore across the country. As on March 31, 2024, the regulatory asset including carrying costs for BRPL is Rs 12,993.53 crore, Rs 8419.14 crore for BYPL and Rs 5,787.70 crore for TPDDL, totally amounting to Rs 27,200.37 crore across all three distribution companies in Delhi. Regulatory assets, which are costs incurred by discoms but recovered or recovered over a period of time, have been accumulating for decades. A bench comprising Justices PS Narasimha and Atul S Chandurkar while issuing notice to all states with pending regulatory assets asked their state electricity regulatory commissions to submit a time-bound roadmap for recovery of these regulatory assets, while also tasking the Appellate Tribunal for Electricity to supervise the implementation of its directions. '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 strict and intensive audit of the circumstances in which the distribution companies have continued without recovery of the regulatory asset,' Justice Narasimha, writing the judgment for the Bench. 'In case of non-compliance with these directions, the APTEL has the power and duty to call for an explanation, ensure accountability, and monitor compliance by the Regulatory Commissions. Similarly, the APTEL must exercise its powers under Section 121 to ensure that the legal principles on regulatory asset laid down by us are complied with by the Regulatory Commissions, and it must monitor the same. In case of non-compliance, the APTEL must issue such orders, directions, or instructions to the Commissions as may be necessary to hold them accountable,' the top court said. Existing regulatory asset must be liquidated in a maximum of four years starting from April 1, 2024, it said. "As a first principle, tariff shall be cost-reflective; the revenue gap between the approved ARR (Aggregate Revenue Requirement) and the estimated annual revenue from approved tariff may be in exceptional circumstances; the regulatory asset should not exceed a reasonable percentage, which percentage can be arrived on the basis of Rule 23 of the Electricity Rules that prescribes 3% 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 judgement stated while laying the broader outline for the commissions. Stating that all such dues must be amortised over four years, the top court said that disproportionate increase and long pending regulatory asset depict a 'regulatory failure'. 'It has serious consequences on all stakeholders and the ultimate burden is only on the consumer. 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,' it said. Welcoming the judgment, advocate Shri Venkatesh, appearing for Tata Power Delhi Distribution, told ET that 'the Supreme Court's judgment has decisively unlocked the value chain of electricity regulation while addressing the systemic misuse of the Regulatory Asset mechanism.' 'For decades, tariff deferments were used as a political and regulatory crutch, distorting the true cost of supply and pushing discoms into unsustainable debt. By mandating a time-bound liquidation plan and empowering APTEL to supervise compliance, the court has enforced long-ignored statutory discipline under the Electricity Act. This judgment not only restores financial credibility to discoms but also reinforces the principle that consumer tariffs must be cost-reflective and grounded in transparent regulatory processes,' Venkatesh said. "However, it is possible that the states may not want to pass it down to the consumers as it will raise tariffs. In that case, they may want to take it over. But if that were the case, they could have done it earlier," a central government official said. Vikram V, Vice President & Co-Group Head, ICRA, too termed it as a "positive development for the sector if implemented in the true spirit." He said that "ideally, there should not have been a large build-up of regulatory assets. However, large delays in issuance of tariff orders and lack of tariff revision in line with the cost structure led to this situation. Going forward, avoiding such build-up of regulatory assets would require timely pass through of cost variations by the discoms to the consumers. This will also enable the discoms to become self-sustaining." Commenting on the judgment, counsel Amit Kapur, who appeared for BSES companies, said, 'An accumulated national regulatory asset of over Rs.1.68 lakh crores means a real average tariff shortfall/deferment of virtually Re.1 per unit. A contingent liability forced on unsuspecting consumers of interest (carrying cost) of 15.5% per annum (at times on compounding basis) to be recovered with the regulatory asset over time." "This judgment, if implemented sincerely, can put Indian power sector back on track of creditworthiness and become an attractive destination for investments which will help us achieve our goal of energy transition," the counsel for BSES companies said. The ruling came on a couple of appeals filed by Delhi-based BSES firms and Tata Power seeking a direction to DERC to provide a roadmap for liquidation of the recognised amount of Revenue Gap/Regulatory Asset within a definite time frame and within a period not exceeding three years at the most. Seeking recognition of the Regulatory Asset and amortization of the Regulatory Asset within a period of 3 years, Tata Power Delhi Distribution had alleged that the Commission had consistently deferred the tariff costs legitimately owed to it by creating 'Regulatory Assets.' The discoms had alleged that the DERC's creation of Regulatory Assets was not only without a legal sanction but also in grave violation of the settled scheme of the Act, the policies and directives issued by the Central Government and the Judgments passed by the Aptel. In addition, while the power purchase cost had increased, there had been no corresponding increase in the tariff for the last nine year, they alleged. According to Justice Narsimha, 'Regulatory failure' occurs due to ineffective functioning of the Regulatory Commissions, excessive governmental interference, or 'regulatory capture'. 'We cannot wish away these real and imminent dangers that affect effective functioning of the Regulatory Commissions. These issues could have the effect of completely eclipsing regulatory functions, thereby losing the very purpose and object of restructuring the electricity sector by unbundling the functions of generation, distribution, and transmission and more importantly, establishing independent regulatory institutions and granting them the exclusive jurisdiction over grant of licenses and tariff determination. 'We have affirmed the limits of the creation, continuation and liquidation of the regulatory asset, recognised the obligations of the commissions and directed that they will be accountable and subject to such orders, instructions and directions of the Aptel, and the regulatory regime under the Electricity Act,' the apex court said.
News18
5 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.
Economic Times
5 days ago
- Business
- Economic Times
SC delivers key ruling on discom regulatory assets; power bills likely to go up across India
Synopsis The Supreme Court has directed all states and Union Territories to clear power distribution companies' regulatory assets within four years, potentially raising electricity bills nationwide. This ruling addresses the accumulation of over Rs 1.5 lakh crore in regulatory assets, accumulated by discoms like BSES and Tata Power, mandating a roadmap for their recovery and strict audits by regulatory commissions. Reuters India Power Sector (Image for representation) In a ruling that may have huge impact on consumers across the country, the Supreme Court on Wednesday asked all states and Union Territories (UTs) to clear within four years the regulatory assets of the power distribution companies, including BSES companies and Tata Power Delhi Distribution (TPDDL), a decision that is likely to increase electricity bills across India. Reliance Infra-backed power distribution utilites BSES Rajdhani Power (BRPL) and BSES Yamuna Power (BYPL) and Tata Power TPDDL had sought amortisation of their 'undisputed' regulatory assets, which according to industry estimates, has exceeded over Rs 1.5 lakh crore across the country. As on March 31, 2024, the regulatory asset including carrying costs for BRPL is Rs 12,993.53 crore, Rs 8419.14 crore for BYPL and Rs 5,787.70 crore for TPDDL, totally amounting to Rs 27,200.37 crore across all three distribution companies in Delhi. Regulatory assets, which are costs incurred by discoms but recovered or recovered over a period of time, have been accumulating for decades. A bench comprising Justices PS Narasimha and Atul S Chandurkar while issuing notice to all states with pending regulatory assets asked their state electricity regulatory commissions to submit a time-bound roadmap for recovery of these regulatory assets, while also tasking the Appellate Tribunal for Electricity to supervise the implementation of its directions. '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 strict and intensive audit of the circumstances in which the distribution companies have continued without recovery of the regulatory asset,' Justice Narasimha, writing the judgment for the Bench.'In case of non-compliance with these directions, the APTEL has the power and duty to call for an explanation, ensure accountability, and monitor compliance by the Regulatory Commissions. Similarly, the APTEL must exercise its powers under Section 121 to ensure that the legal principles on regulatory asset laid down by us are complied with by the Regulatory Commissions, and it must monitor the same. In case of non-compliance, the APTEL must issue such orders, directions, or instructions to the Commissions as may be necessary to hold them accountable,' the top court regulatory asset must be liquidated in a maximum of four years starting from April 1, 2024, it said."As a first principle, tariff shall be cost-reflective; the revenue gap between the approved ARR (Aggregate Revenue Requirement) and the estimated annual revenue from approved tariff may be in exceptional circumstances; the regulatory asset should not exceed a reasonable percentage, which percentage can be arrived on the basis of Rule 23 of the Electricity Rules that prescribes 3% 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 judgement stated while laying the broader outline for the that all such dues must be amortised over four years, the top court said that disproportionate increase and long pending regulatory asset depict a 'regulatory failure'. 'It has serious consequences on all stakeholders and the ultimate burden is only on the consumer. 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,' it the judgment, advocate Shri Venkatesh, appearing for Tata Power Delhi Distribution, told ET that 'the Supreme Court's judgment has decisively unlocked the value chain of electricity regulation while addressing the systemic misuse of the Regulatory Asset mechanism.''For decades, tariff deferments were used as a political and regulatory crutch, distorting the true cost of supply and pushing discoms into unsustainable debt. By mandating a time-bound liquidation plan and empowering APTEL to supervise compliance, the court has enforced long-ignored statutory discipline under the Electricity Act. This judgment not only restores financial credibility to discoms but also reinforces the principle that consumer tariffs must be cost-reflective and grounded in transparent regulatory processes,' Venkatesh said."However, it is possible that the states may not want to pass it down to the consumers as it will raise tariffs. In that case, they may want to take it over. But if that were the case, they could have done it earlier," a central government official V, Vice President & Co-Group Head, ICRA, too termed it as a "positive development for the sector if implemented in the true spirit."He said that "ideally, there should not have been a large build-up of regulatory assets. However, large delays in issuance of tariff orders and lack of tariff revision in line with the cost structure led to this situation. Going forward, avoiding such build-up of regulatory assets would require timely pass through of cost variations by the discoms to the consumers. This will also enable the discoms to become self-sustaining."The ruling came on a couple of appeals filed by Delhi-based BSES firms and Tata Power seeking a direction to DERC to provide a roadmap for liquidation of the recognised amount of Revenue Gap/Regulatory Asset within a definite time frame and within a period not exceeding three years at the recognition of the Regulatory Asset and amortization of the Regulatory Asset within a period of 3 years, Tata Power Delhi Distribution had alleged that the Commission had consistently deferred the tariff costs legitimately owed to it by creating 'Regulatory Assets.'The discoms had alleged that the DERC's creation of Regulatory Assets was not only without a legal sanction but also in grave violation of the settled scheme of the Act, the policies and directives issued by the Central Government and the Judgments passed by the addition, while the power purchase cost had increased, there had been no corresponding increase in the tariff for the last nine year, they to Justice Narsimha, 'Regulatory failure' occurs due to ineffective functioning of the Regulatory Commissions, excessive governmental interference, or 'regulatory capture'. 'We cannot wish away these real and imminent dangers that affect effective functioning of the Regulatory Commissions. These issues could have the effect of completely eclipsing regulatory functions, thereby losing the very purpose and object of restructuring the electricity sector by unbundling the functions of generation, distribution, and transmission and more importantly, establishing independent regulatory institutions and granting them the exclusive jurisdiction over grant of licenses and tariff determination.'We have affirmed the limits of the creation, continuation and liquidation of the regulatory asset, recognised the obligations of the commissions and directed that they will be accountable and subject to such orders, instructions and directions of the Aptel, and the regulatory regime under the Electricity Act,' the apex court said.
Time of India
5 days ago
- Business
- Time of India
SC delivers key ruling on discom regulatory assets; power bills likely to go up across India
In a ruling that may have huge impact on consumers across the country, the Supreme Court on Wednesday asked all states and Union Territories (UTs) to clear within four years the regulatory assets of the power distribution companies, including BSES companies and Tata Power Delhi Distribution ( TPDDL ), a decision that is likely to increase electricity bills across India. Reliance Infra-backed power distribution utilites BSES Rajdhani Power (BRPL) and BSES Yamuna Power (BYPL) and Tata Power TPDDL had sought amortisation of their 'undisputed' regulatory assets, which according to industry estimates, has exceeded over Rs 1.5 lakh crore across the country. As on March 31, 2024, the regulatory asset including carrying costs for BRPL is Rs 12,993.53 crore, Rs 8419.14 crore for BYPL and Rs 5,787.70 crore for TPDDL, totally amounting to Rs 27,200.37 crore across all three distribution companies in Delhi. Regulatory assets, which are costs incurred by discoms but recovered or recovered over a period of time, have been accumulating for decades. A bench comprising Justices PS Narasimha and Atul S Chandurkar while issuing notice to all states with pending regulatory assets asked their state electricity regulatory commissions to submit a time-bound roadmap for recovery of these regulatory assets, while also tasking the Appellate Tribunal for Electricity to supervise the implementation of its directions. '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 strict and intensive audit of the circumstances in which the distribution companies have continued without recovery of the regulatory asset,' Justice Narasimha, writing the judgment for the Bench. 'In case of non-compliance with these directions, the APTEL has the power and duty to call for an explanation, ensure accountability, and monitor compliance by the Regulatory Commissions. Similarly, the APTEL must exercise its powers under Section 121 to ensure that the legal principles on regulatory asset laid down by us are complied with by the Regulatory Commissions, and it must monitor the same. In case of non-compliance, the APTEL must issue such orders, directions, or instructions to the Commissions as may be necessary to hold them accountable,' the top court said. Existing regulatory asset must be liquidated in a maximum of four years starting from April 1, 2024, it said. "As a first principle, tariff shall be cost-reflective; the revenue gap between the approved ARR (Aggregate Revenue Requirement) and the estimated annual revenue from approved tariff may be in exceptional circumstances; the regulatory asset should not exceed a reasonable percentage, which percentage can be arrived on the basis of Rule 23 of the Electricity Rules that prescribes 3% 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 judgement stated while laying the broader outline for the commissions. Stating that all such dues must be amortised over four years, the top court said that disproportionate increase and long pending regulatory asset depict a 'regulatory failure'. 'It has serious consequences on all stakeholders and the ultimate burden is only on the consumer. 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,' it said. Welcoming the judgment, advocate Shri Venkatesh, appearing for Tata Power Delhi Distribution, told ET that 'the Supreme Court's judgment has decisively unlocked the value chain of electricity regulation while addressing the systemic misuse of the Regulatory Asset mechanism.' 'For decades, tariff deferments were used as a political and regulatory crutch, distorting the true cost of supply and pushing discoms into unsustainable debt. By mandating a time-bound liquidation plan and empowering APTEL to supervise compliance, the court has enforced long-ignored statutory discipline under the Electricity Act. This judgment not only restores financial credibility to discoms but also reinforces the principle that consumer tariffs must be cost-reflective and grounded in transparent regulatory processes,' Venkatesh said. "However, it is possible that the states may not want to pass it down to the consumers as it will raise tariffs. In that case, they may want to take it over. But if that were the case, they could have done it earlier," a central government official said. Vikram V, Vice President & Co-Group Head, ICRA, too termed it as a "positive development for the sector if implemented in the true spirit." He said that "ideally, there should not have been a large build-up of regulatory assets. However, large delays in issuance of tariff orders and lack of tariff revision in line with the cost structure led to this situation. Going forward, avoiding such build-up of regulatory assets would require timely pass through of cost variations by the discoms to the consumers. This will also enable the discoms to become self-sustaining." The ruling came on a couple of appeals filed by Delhi-based BSES firms and Tata Power seeking a direction to DERC to provide a roadmap for liquidation of the recognised amount of Revenue Gap/Regulatory Asset within a definite time frame and within a period not exceeding three years at the most. Seeking recognition of the Regulatory Asset and amortization of the Regulatory Asset within a period of 3 years, Tata Power Delhi Distribution had alleged that the Commission had consistently deferred the tariff costs legitimately owed to it by creating 'Regulatory Assets.' The discoms had alleged that the DERC's creation of Regulatory Assets was not only without a legal sanction but also in grave violation of the settled scheme of the Act, the policies and directives issued by the Central Government and the Judgments passed by the Aptel. In addition, while the power purchase cost had increased, there had been no corresponding increase in the tariff for the last nine year, they alleged. According to Justice Narsimha, 'Regulatory failure' occurs due to ineffective functioning of the Regulatory Commissions, excessive governmental interference, or 'regulatory capture'. 'We cannot wish away these real and imminent dangers that affect effective functioning of the Regulatory Commissions. These issues could have the effect of completely eclipsing regulatory functions, thereby losing the very purpose and object of restructuring the electricity sector by unbundling the functions of generation, distribution, and transmission and more importantly, establishing independent regulatory institutions and granting them the exclusive jurisdiction over grant of licenses and tariff determination. 'We have affirmed the limits of the creation, continuation and liquidation of the regulatory asset, recognised the obligations of the commissions and directed that they will be accountable and subject to such orders, instructions and directions of the Aptel, and the regulatory regime under the Electricity Act,' the apex court said.
