SC directs liquidation of regulatory property owed to discoms over a four-year interval

The Supreme Court on Wednesday (August 6, 2025) gave States and Union Territories a four-year deadline to liquidate long-pending regulatory property or dues owed to energy distribution firms.

The judgment by a Bench headed by Justice P.S. Narasimha was based mostly on petitions filed by three distribution firms supplying electrical energy to customers within the nationwide capital, specifically BSES Rajdhani Power Ltd., BSES Yamuna Power Ltd and Tata Power Delhi Distribution Limited.

They had challenged the way wherein the Delhi Electricity Regulatory Commission had decided the tariff for retail provide of electrical energy through the years, resulting in the creation and continuation of a “regulatory asset”, which has led to liabilities burgeoning over many years.

Regulatory property are prices incurred by energy distribution firms recognised as recoverable from customers in future tariffs, however should not instantly recovered within the present payments.

“Regulatory property are handled as property within the stability sheet and are liquidated over an outlined time frame by way of tariff changes or authorities subsidies. The regulatory asset is a value incurred by the utility that the Regulatory Commission permits to be deferred on the stability sheet as a substitute of being instantly expensed. It allows the distribution firm to utilise the ‘recognition’ of a regulatory asset to acquire bridge funds from bankers and the monetary establishments,” Justice Narasimha defined.

Justice Narasimha directed the liquidation of the present, long-pending dues, marked as regulatory property, in a most of 4 years ranging from April 1 final yr.

The courtroom stated, in future, regulatory property should be liquidated inside a interval of three years.

The judgment directed the State Regulatory Commissions to supply the trajectory and roadmap for liquidation of the present regulatory property.

“Regulatory Commissions should additionally undertake a strict and intensive audit of the circumstances wherein the distribution firms have continued with out restoration of the regulatory asset,” the courtroom ordered.

The Appellate Tribunal of Electricity would register a suo motu case and monitor the liquidation of the regulatory asset until the top of the stipulated interval.