The Delhi Electricity Regulatory Commission (DERC) has petitioned the Supreme Court to allow it to liquidate its existing regulatory assets over seven years instead of four years, to mitigate the impact of tariff shock to consumers.

The petition follows a Supreme Court direction to all states to clear the pending dues of ₹1.74 trillion (~$19.72 billion) owed to distribution companies (DISCOMs) within four years. It had also said new dues created after April 1, 2024, must be liquidated within three years.

The court had directed the Appellate Tribunal for Electricity to register a suo motu case under Section 121 of the Electricity Act to monitor the liquidation of regulatory assets nationwide, and issue binding orders and directions to ensure compliance by state commissions.

In an affidavit, DERC submitted that it would be ‘extremely onerous and burdensome’ on the consumers of Delhi if the direction to liquidate these assets were to be implemented in four years.

Moreover, if the liquidation period were to be directed to start retrospectively from April 1, 2024, it would create undue hardship for consumers, as a significant period of almost 18 months has already elapsed. This means that the recovery would have to be compressed within the remaining time, resulting in a huge burden on consumers.

DERC highlighted a discrepancy in its judgment regarding the time period for liquidating the regulatory assets. It said the judgment notes that existing regulatory assets must be liquidated within seven years per amended Rule 23 of the Electricity Rules, 2005.  However, at another place in the order, the period of liquidation is mentioned as four years.

“It is impossible to implement the judgment without the clarifications being sought by the applicant by way of the present application,” it said.

DERC further wanted the Supreme Court to clarify that the assets liquidation exercise must commence from August 6, 2025 (the date on which the judgment was pronounced), instead of April 1, 2024.

The Supreme Court order enforces Rule 23 of the Electricity (Amendment) Rules 2024, which limits regulatory assets to no more than 3% of the approved annual revenue requirement (ARR).

The average cost of supply and ARR gap is a critical metric to evaluate the financial health of DISCOMs, as it directly impacts electricity tariffs.

In the Ministry of Power’s thirteenth annual integrated ratings for 2024, of the 63 DISCOMs and power departments, 21 improved their ratings, 29 retained their ratings, and 13 were downgraded. The total number of DISCOMs graded A+ stayed at 11.