Delhi: Power bills may rise on ₹20K-cr payout

The matter pertains to how tariffs have been fixed for two private companies — BSES Rajdhani Power Ltd (BRPL) and BSES Yamuna Power Limited (BYPL) — in a dispute stretching back 17-18 years.

Delhi’s residents face an astronomical jump in their electricity bills after the Supreme Court ordered the Capital’s electricity regulator to allow a payment of about ₹20,000 crore in accumulated dues to two private power distribution companies (discoms), at least three state government officials have said, adding that the Delhi Electricity Regulatory Commission (DERC) will soon approach the apex court for a re-examination.

DERC, which lays down the per unit costs, had disallowed certain expenses when setting the power tariff. This was contested by the discoms, who got favourable verdicts.(AFP/ Representative image)

The matter pertains to how tariffs have been fixed for two private companies — BSES Rajdhani Power Ltd (BRPL) and BSES Yamuna Power Limited (BYPL) — in a dispute stretching back 17-18 years. DERC, which lays down the per unit costs, had disallowed certain expenses when setting the power tariff. This was contested by the discoms, who got favourable verdicts.

“If the Supreme Court’s order [dated December 15, 2022] is implemented, it would lead to almost 100% jump in power tariff if the entire amount is paid at one go. But, DERC is convinced that the amount due to the BSES discoms could be far less, hence, it plans to approach the Supreme Court again for relief,” one of the people aware of the matter said, asking not to be named.

This person was referring to the Supreme Court’s verdict of December 15, 2022 in BSES Rajdhani Power Ltd etc versus Delhi Electricity Regulatory Commission and another. “DERC is taking legal advice to approach the court again as the order was passed based on an erroneous reading of other judgements, and oversight of some regulatory norms,” the person added.

A second source, aware of the DERC’s plans, confirmed “the regulator is all set to file a miscellaneous application for clarification in the Supreme Court soon to protect the consumer interest as the entire dues are pass through to consumers”.

Email queries sent to Delhi’s power ministry, DERC and BSES firms — BRPL and BYPL – were not responded to.

BRPL supplies power to south and west Delhi, while BYPL supplies electricity to central and east Delhi. The Delhi government is a minority stakeholder in these companies, with a 49% stake.

Power to the remaining parts of the Capital is supplied by the Tata Power Delhi Distribution Ltd (TPDDL).

A source close to the two private discoms under BSES said: “The regulator has not complied with the directions of the honourable court and is in contempt.”

This, the person added, has meant that the dues have ballooned further because of the accruing interest. “Had the DERC done timely tariff revisions, the interest burden would not have been so high. This delay has caused the interest component to rise to more than 60% [of the total due]. There has been no tariff hike in Delhi for eight years now. Moreover, there has been no tariff announcement for FY2022-23,” this person said, asking not to be named.

The first time the issue went to court was in 2008 and 2009, when BSES discoms had challenged the DERC tariff order in APTEL [Appellate Tribunal for Electricity] on various “disallowances”, including those related to carrying cost, related party transactions and AT&C losses, the person added.

APTEL decided the issues in favour of BSES discoms, but DERC challenged the orders (passed in 2009 and 2011) in the Supreme Court, the source said, adding that the apex court again ruled in the favour of the two discoms.

Tariff fixation is a technical exercise. Usually, a discom submits its tariff petition for a period to the regulator, which determines the Aggregate Revenue Requirement (ARR), or the projected costs, and passes a tariff order — this determines what the consumers pay.

Because ARR and tariff order are based on projections, a ‘truing up’ or verification exercise is undertaken subsequently.

When ARR is not sufficient to cover costs incurred by discoms in supplying power, it results in a revenue gap. These revenue gaps (also called Regulatory Assets of the discom or RAs) are approved by the regulator with an assurance that they will be recovered from consumers in future, by steps lie raising tariff. The additional expense incurred by the discom in the present to fund RAs is called carrying costs. It involves capital costs as well interests.