The Appellate Tribunal for Electricity (APTEL) has set aside the Delhi Electricity Regulatory Commission’s (DERC) decision to appoint the Comptroller and Auditor General (CAG) to audit Delhi’s power distribution companies (DISCOMs), holding that the move violated statutory provisions under the CAG Act.

The Tribunal also rejected DERC’s request to delay the liquidation of regulatory assets and directed that recovery begin within three weeks.

Background

The order was issued in a suo motu proceeding under Section 121 of the Electricity Act, through which APTEL is monitoring compliance with the Supreme Court’s August 2025 judgment on regulatory assets.

In that judgment, the apex court had flagged the buildup of regulatory assets as a sign of regulatory failure. It directed commissions to conduct a strict, intensive audit of DISCOMs and to ensure that these assets are liquidated within a defined timeline.

Following this, DERC initiated steps to have the Delhi DISCOMs audited by the CAG and sought the Lieutenant Governor of Delhi’s approval. At the same time, it sought an extension to defer the commencement of regulatory asset liquidation, citing the need to complete the true-up for the 2023–24 financial year.

Tribunal’s Analysis

APTEL held that the Supreme Court’s direction to conduct an audit did not mandate that the CAG carry out the exercise. It rejected DERC’s interpretation that a CAG audit was implied, noting that the apex court had not specified any particular auditing authority. It emphasized that regulatory commissions are free to appoint other auditors, including chartered accountants, to undertake such audits.

It found that DERC’s move to entrust the audit to the CAG did not comply with Section 20 of the CAG Act, which governs audits of bodies not otherwise under the CAG’s jurisdiction. It was observed that there was no material on record to demonstrate that the public-interest requirement had been properly assessed before approval was granted. It also noted that the DISCOMs were not allowed to be heard before the decision.

Holding that statutory safeguards had been bypassed, APTEL quashed the approval for the CAG audit and directed DERC to appoint a chartered accountant within one week to complete the audit within three months.

Regarding regulatory asset liquidation, the Tribunal found no justification for delaying the process. It observed that the quantum of regulatory assets, estimated at approximately ₹385.52 billion (~$4.14 billion), was already known and that their recovery was not contingent on the completion of the true-up exercise.

APTEL noted that continued delays would increase the burden on consumers and criticized DERC for failing to adhere to previously committed timelines. It directed the Commission to commence the liquidation process within three weeks, while allowing time until June 30, 2026, to issue the pending true-up order.

The Tribunal also reiterated that its supervisory jurisdiction under Section 121 empowers it to intervene where regulatory commissions fail to comply with statutory provisions, even while implementing Supreme Court directions.

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