Today, On 6th August, The Supreme Court has directed all states and Union Territories to clear long-pending dues to power distribution companies within four years, warning that a “disproportionate increase in regulatory assets burdens consumers” and may lead to higher electricity bills.
New Delhi: The Supreme Court on Wednesday issued a directive that may lead to higher electricity bills for consumers across India.
This order is expected to impact power tariffs nationwide in the coming months.
The court has ordered all states and Union Territories to settle long-standing dues owed to power distribution companies (DisComs) within a four-year timeframe.
These dues, categorized as “regulatory assets,” have been accumulating for decades, totaling over Rs 1.5 lakh crore nationwide.
A bench comprising Justices PS Narasimha and Atul S Chandurkar issued a comprehensive order requiring State Electricity Regulatory Commissions (SERCs) to provide a timeline for recovering these amounts, while also assigning the Appellate Tribunal for Electricity (APTEL) the task of overseeing the implementation of this directive.
The court expressed strong disapproval of both the regulatory commissions and APTEL for their failure to address the unchecked growth of regulatory assets over the years.
The bench noted,
“Disproportionate increase in long-pending regulatory assets ultimately puts burden on the consumer,”
Also added that,
“Inefficient and improper functioning of the Commission and acting under dictation can lead to regulatory failure.”
Regulatory assets represent the gap between the actual cost of electricity supplied by DisComs and the lower tariffs sanctioned by state regulators. To maintain affordable consumer tariffs, regulators often postpone these payments to DisComs, resulting in a backlog. Over time, these deferred payments accrue interest, leading to escalating liabilities.
Although the case originated from petitions filed by Delhi-based DisComs, the Supreme Court broadened its scope and issued notices to all states with outstanding regulatory assets.
Senior advocate Shri Venkatesh, representing Tata Power Delhi Distribution Ltd, stated to media that,
“For years various commissions and state governments, due to lack of political will, allowed the regulatory assets to grow. The SC has now ordered that all such dues must be amortised over four years.”
The Supreme Court confirmed that Parliament has endowed electricity regulators and APTEL with adequate authority under the Electricity Act to manage tariff and payment structures, but criticized their ineffective use of these powers.
While acknowledging that tariffs will need to rise, the court cautioned that “tariff increase must be reasonable” and that “regulatory assets should not exceed statutory percentage” going forward.
One lawyer involved in the case, who requested anonymity, indicated to media that the ruling could ultimately benefit consumers.
He said,
“This was a ticking time bomb. Now, with a fixed four-year window, the cost will be distributed gradually. It’s not like tariffs will jump overnight from Rs 2 to Rs 4 per unit. The increase will be marginal and shared across all categories domestic, commercial, and industrial,”
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The Supreme Court has also instructed State Commissions to investigate the potential for separating the recovery of regulatory assets from tariffs, if feasible, to lessen the burden on consumers.
The Delhi Electricity Regulatory Commission (DERC) and other state regulators are now required to submit implementation plans, under APTEL’s supervision, as India’s power sector faces one of the most significant billing adjustments in recent years.
Case Title: BSES Rajdhani Power Ltd. & Anr. Versus Union of India and Ors. (and connected matters)
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