In a landmark ruling that reshapes Delhi’s power distribution landscape, the Supreme Court has directed the Delhi Electricity Regulatory Commission (DERC) to recognize long-pending regulatory assets owed to Reliance Infrastructure-backed BSES Rajdhani and BSES Yamuna. The verdict allows the two discoms to recover ₹214.13 billion over the next four years, starting April 2024, marking a decisive end to a years-long dispute over tariff under-approvals and deferred cost recovery.
Key Highlights from the Supreme Court Ruling
- BSES Rajdhani and BSES Yamuna Power Ltd authorized to recover ₹214.13 billion in regulatory assets
- Recovery period set at four years, ending March 2028
- Supreme Court criticizes DERC’s delay as a case of “regulatory failure”
- Appellate Tribunal for Electricity (APTEL) empowered to monitor compliance
- Tariff adjustments expected, potentially impacting consumer bills across Delhi
Understanding Regulatory Assets and the Dispute
Regulatory assets are costs incurred by power distribution companies (discoms) that are deferred for recovery through future tariff hikes. These arise when regulators approve tariffs below actual supply costs, leading to revenue gaps.
- Between 2011 and 2014, DERC under-approved tariffs, creating a backlog of unrecovered costs
- BSES discoms argued that they were denied legitimate recovery, leading to financial stress
- The Supreme Court ruled that such deferments must be time-bound and proportionate
- As of March 2024, BRPL’s regulatory asset stood at ₹12,993.53 crore, BYPL’s at ₹8,419.14 crore
Breakdown of Recovery Plan
The court has mandated a structured recovery roadmap:
- ₹214.13 billion to be recovered through tariff adjustments over four years
- Carrying costs (interest) must be included in the recovery plan
- DERC must conduct a detailed audit and submit a compliance roadmap
- APTEL will oversee enforcement and issue directions under Section 121 of the Electricity Act
Impact on Reliance Infrastructure and BSES
The ruling is a major financial relief for Reliance Infrastructure Ltd, which owns the BSES discoms:
- The recovery will improve cash flows and reduce debt burden
- Enables reinvestment in grid modernization, smart metering, and renewable integration
- Restores investor confidence in regulatory transparency and judicial oversight
Consumer Implications and Tariff Outlook
While the ruling supports financial stability for discoms, it may lead to gradual tariff increases:
- Tariffs will be adjusted to reflect cost recovery, spread over four years
- The court emphasized that electricity tariffs must be cost-reflective, not politically suppressed
- Consumers may see moderate hikes, but sudden spikes are unlikely due to phased recovery
Regulatory Accountability and Future Safeguards
The Supreme Court’s judgment goes beyond financial relief—it sets a precedent for regulatory discipline:
- DERC’s inaction was labeled a “regulatory failure” with consequences for all stakeholders
- Regulatory assets must not exceed 3% of annual revenue requirement going forward
- Future dues must be cleared within three years to avoid accumulation
- APTEL’s oversight ensures that regulators remain accountable and transparent
Conclusion
The Supreme Court’s recognition of ₹214.13 billion in regulatory assets marks a turning point for Delhi’s power sector. For Reliance Infrastructure and its BSES discoms, it’s a long-awaited vindication. For regulators, it’s a wake-up call. And for consumers, it’s a reminder that electricity pricing must balance affordability with sustainability. As the recovery begins, Delhi’s power ecosystem enters a new phase—one shaped by accountability, transparency, and financial realism.
Source: Livemint
