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Informist, Wednesday, Aug. 6, 2025

 

NEW DELHI – The Supreme Court on Wednesday asked states and union territories to clear their long-pending dues to the tune of over INR 1.5 trillion to power distribution companies within four years, a decision that is expected to raise electricity bills in India. The top court directed that all regulatory commissions must provide a trajectory and roadmap for liquidation of the existing regulatory assets, which will include a provision for dealing with carrying costs. 

 

Regulatory assets refer to costs incurred by power distribution companies that are recoverable from customers in the future through regulated rates or tariffs. These are typically created when a distribution company incurs certain expenses that are considered necessary for the provision of reliable and affordable electricity services to customers, but they are not immediately recoverable through customer bills. These expenses could include investments in infrastructure, such as transmission and distribution systems, or costs associated with complying with regulatory requirements. 

 

The apex court said the 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 assets. A bench of Justices P.S. Narasimha and Atul S. Chandurkar asked the Appellate Tribunal for Electricity to supervise the implementation of its directive. 

 

The apex court observed that a disproportionate increase in long-pending regulatory assets ultimately puts a burden on the consumers. Inefficient and improper functioning of the regulatory commissions and acting under dictation can lead to regulatory failure, the apex court said. 

 

The court said that the regulatory asset should not exceed a reasonable percentage. If a regulatory asset is created, it must be liquidated within a period of three years, taking Rule 23 of the Electricity Rules as the guiding principle. The existing regulatory asset must be liquidated in a maximum of four years starting from Apr. 1, 2024, the court said.

 

In its ruling, the apex court said that the Parliament had vested electricity regulators and appellate tribunals with sufficient authority under the Electricity Act to manage tariffs and payments. However, these bodies have not used their powers effectively. The court acknowledged that tariffs will need to rise but cautioned that the increase in tariff must be reasonable and the regulatory assets should not exceed statutory percentage going forward. The court asked the regulatory commissions to explore the possibility of de-linking the recovery of regulatory assets from tariffs, if feasible, to reduce consumer burden.

 

The apex court was hearing petitions by BSES Rajdhani Power Ltd., BSES Yamuna Power Ltd. and Tata Power Delhi Distribution Ltd. challenging the manner in which the Delhi Electricity Regulatory Commission had determined the tariff for retail supply of electricity over the years, leading to the creation and continuation of a regulatory asset. The companies had sought amortisation of their undisputed regulatory assets. BSES Rajdhani Power and BSES Yamuna Power had regulatory assets of around INR 261.65 billion as on Mar. 31, 2024 and Tata Power had INR 60 billion. Over time, the top court expanded the scope of the petition to include all states that had not paid their long-pending dues to the distribution companies.  End

 

Reported by Surya Tripathi

Edited by Saji George Titus

 

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