LUCKNOW Power consumers in UP are likely to continue enjoying ‘no tariff hike’ for more years, if the state electricity regulator continues to apply the surplus-based logic it has followed for the past six years. This year marked the sixth consecutive zero-hike tariff order, with the UP Electricity Regulatory Commission (UPERC) again concluding that the discoms were sitting on a substantial revenue surplus, leaving no justification to raise tariffs.
The commission approved a consolidated annual revenue requirement (ARR) of ₹1,10,993.33 crore for the current financial year 2025-26, against which revenue from existing tariffs and government subsidy is expected to be ₹1,03,283.29 crore. This leaves a regulatory gap of ₹7,710.04 crore. But UPERC pointed out that the discoms are carrying a regulatory surplus of ₹18,592.38 crore.
“Even after fully adjusting the current year’s gap, a surplus of more than ₹10,000 crore will remain, and this balance will further rise next year due to carrying cost/interest,” a senior UPERC official said, adding: “This may leave the regulator not to raise tariff for at least three consecutive years more or till the regulatory surplus is fully adjusted.”
This surplus phenomenon began after UPERC’s 2019 tariff regulations sharply tightened norms for allowable expenditure like power purchase, O&M, salaries and capital investment etc. Once these norms were applied, the commission found that UPPCL or five discoms under it were generating more revenue at the approved tariffs than the expenditure they were permitted to incur under regulatory norms.
{{/usCountry}}This surplus phenomenon began after UPERC’s 2019 tariff regulations sharply tightened norms for allowable expenditure like power purchase, O&M, salaries and capital investment etc. Once these norms were applied, the commission found that UPPCL or five discoms under it were generating more revenue at the approved tariffs than the expenditure they were permitted to incur under regulatory norms.
{{/usCountry}}According to officials, in 2020, UPERC discovered an initial surplus of around ₹7,000 crore, which has since grown to ₹18,592.38 crore with carrying cost. This accumulated surplus has been the commission’s central basis for rejecting tariff hikes every year since 2019-20.
More interestingly, this is not the only surplus in play. A far bigger one stems from the Centre’s UDAY bailout scheme under which the UP government took over ₹39,133.76 crore (75%) of discom debt as of September 2015.
The commission treated this takeover as a financial gain accruing to the discoms and calculated a consumer-benefiting surplus of ₹13,377 crore, which with carrying cost, is now estimated to have grown close to ₹33,000 crore. The UPPCL has challenged both this treatment and the regulatory surplus in the Appellate Tribunal for Electricity (APTEL).
The discoms, however, argue that subsequent government communications modified the original UDAY commitments, especially regarding the state’s obligation to bear future losses. They say this alteration has created massive unadjusted regulatory assets of over ₹68,000 crore payable to them.
The Tribunal’s eventual decision will determine whether these amounts must be passed on to consumers. The UPERC, in its latest tariff order, has emphasised that five consecutive tariff orders, FY 2020-21 to FY 2024-25, are already under challenge at the Appellate Tribunal for Electricity (APTEL), and any decision on the discoms’ UDAY-linked claim of ₹68,376.67 crore will depend entirely on APTEL’s final judgment.
For now, the existing over ₹18,592.38 crore regulatory surplus alone appears enough to keep tariffs unchanged for at least the next three years.
“If APTEL ultimately upholds UPERC’s treatment of both the normal surplus and the UDAY-linked adjustments, Uttar Pradesh could eventually reach a stage where annual tariff reductions become unavoidable to return accumulated consumer surplus,” pointed another official.
UP Rajya Vidyut Upbhokta Parishad chairman and CERC Central Advisory Committee member Avadhesh Kumar Verma, who has repeatedly urged UPERC to reduce tariffs annually to adjust the mounting surplus, said UP consumers could remain assured that electricity rates will not rise for many years, and may even decline.
“For the regulator, raising tariffs without adjusting surplus will mean violating its own regulations and contradicting its own findings,” he pointed out.
In its latest tariff order, the UPERC expressed the need for reducing electricity rates by 13% to offset surplus, but avoided doing so keeping discoms’ poor financial health in mind.
“If the remaining net surplus of ₹10,883.34 crore was to be fully adjusted, it would require a tariff reduction of nearly 13%. The commission holds that such a steep cut is not feasible, considering the discoms’ financial condition, as it could seriously affect their financial viability,” it observed in the order.