According to an exchange filing by the company, the Supreme Court has pronounced the judgment in connection with a Writ Petition and Civil Appeals filed by BSES Discoms, BSES Yamuna Power Limited and BSES Rajdhani Power Limited, material subsidiaries of Reliance Infra, in 2014. The discoms had approached SC, raising the issue of non-cost reflective tariff, unlawful creation of Regulatory Asset and non-liquidation of Regulatory Asset.
Also Read | Over 50 mutual fund SIPs give negative returns in 1 year. Should you pause, redeem, or continue?
The apex court has set out ten sutras to examine the issue relating to Regulatory Asset, its position in the regulatory regime for determination of tariff, the duties and accountability of the regulators – the Electricity Regulatory Commission (ERC) and the powers of the Appellate Tribunal for Electricity to avert regulatory failure.
The SC has issued nine directions to ERCs and APTEL in respect of cost-reflective tariff determination, creation and amortisation of Regulatory Asset, and regulatory oversight by APTEL to monitor implementation of directions by ERCs, i.e as a first principle, tariff shall be cost-reflective
The revenue gap between the approved Aggregate Revenue Requirement and the estimated annual revenue from the approved tariff may occur in exceptional circumstances.
The court further said that the regulatory asset should not exceed a reasonable percentage, which percentage can be arrived based on Rule 23 of the Electricity Rules, 2005 that prescribes 3% of the ARR as the guiding principle and if a Regulatory Asset is created, it must be liquidated within three years, taking Rule 23 as the guiding principle.The next direction is that the existing Regulatory Asset must be liquidated in a maximum of four years starting from 01.04.2024, taking Rule 23 as the guiding principle. The ERCs must provide the trajectory and roadmap for liquidation of the existing regulatory asset, which will include a provision for dealing with carrying costs, and the ERCs must also undertake a strict and intensive audit of the circumstances in which the discoms have continued without recovery of the Regulatory Asset, the court said.Also Read | Multi asset mutual funds beat other hybrid funds in 1 & 3 years. Should they be in your portfolio?
ERCs shall, in general, follow the principles governing creation, continuation and liquidation of the regulatory asset, as laid down in paragraph 70 of the Judgment, and also abide by the directions of the APTEL summarised in paragraph 69.8 of the Judgment, the filing said.
It mentioned that APTEL shall invoke its powers under Section 121 and issue such orders, instructions or directions as it may deem fit to the ERCs for performance of their duties concerning Regulatory Asset as enunciated in this judgment and lastly, APTEL shall register a suo moto petition under Section 121 of the Electricity Act to monitor implementation of above directions till the conclusion of the period mentioned therein.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)