Reliance Infrastructure has received a major boost after the Supreme Court allowed its subsidiaries, BSES Yamuna Power and BSES Rajdhani Power, to recover about Rs 28,483 crore in regulatory assets over the next four years.The Delhi Electricity Regulatory Commission (DERC) has approved these assets, with recovery from consumers—likely through higher electricity tariffs—scheduled to begin on April 1, 2024.
The dues arise from past tariff gaps, where regulator-approved electricity prices fell short of covering the full cost of supply.
SC verdict ends 11-year dispute; APTEL tasked with monitoring recovery process
Anil Ambani-led Reliance Infrastructure in its regulatory filing today said that the apex court, in its August 6 verdict, disposed of writ petitions and civil appeals filed by the two BSES distribution companies in 2014. The petitions had challenged non-cost reflective tariffs, the creation of regulatory assets, and delays in their liquidation.
The court has issued ten guiding principles, or “sutras”, to govern how regulatory assets should be handled. It has also set nine clear directions for electricity regulators and the Appellate Tribunal for Electricity (APTEL) to ensure transparency and timely recovery.
SC highlighted ten ‘sutras’ to guide regulatory asset management
According to the judgment, tariffs must reflect actual costs. Any revenue gap between the approved Aggregate Revenue Requirement (ARR) and annual tariff revenue should happen only in exceptional cases.
The court said regulatory assets should not exceed a reasonable percentage, using Rule 23 of the Electricity Rules, 2005—which suggests 3 per cent of ARR—as the guiding principle. If such assets are created, they must be cleared within three years, and existing ones within four years.
SC asks ERCs to conduct strict audit on past delays
The Supreme Court directed ERCs to provide a clear roadmap for liquidating existing regulatory assets, including provisions to deal with carrying costs. It also asked them to conduct strict audits of why recovery was delayed in the past.
APTEL has been instructed to use its powers under Section 121 of the Electricity Act to ensure ERCs comply with these directions. It will also register a suo moto petition to monitor the liquidation process until completion.