New Delhi: The Ministry of Power (MoP) has written to all the SERCs on the issue of non-compliance with the provisions of the Electricity Act, Tariff Policy and directions of APTEL & Supreme Court on the issue of on non cost reflective tariffs and liquidation of the regulatory assets.
As per the Electricity Act, 2003 and the Revised Tariff Policy, 2016, the tariff is required to be cost reflective. It mandates that Regulatory Assets (RA) shall not be created and where it has been created, a trajectory has to be laid down for recovery thereof, along with carrying costs within a specified period.
The letter cites the APTEL order directing the State Commissions that in determination of ARR/tariff, no revenue gaps are to be left and Regulatory Asset(s) should not be created and where it has been created, the recovery of the Regulatory Assets should be a time bound one and within a period not exceeding three years at the most and preferably within the Control Period.
Carrying cost of the Regulatory Asset(s) should be allowed to the utilities in the ARR of the year in which the Regulatory Asset(s) are created to avoid problem of cash flow to the distribution licensee.
Recently, the Hon'ble Supreme Court upheld the above directions of APTEL by dismissing a batch of civil appeals filed by the DERC and observed that the appellant has to comply with the directions issued by the Appellate Authority, namely, Appellate Tribunal for Electricity.
It is observed that large Regulatory Assets have been created by some Commissions, without specifying the mandatory trajectory for recovery of such Regulatory Assets. This is in contravention of the law.
The State Commissions should also ensure that no fresh Regulatory Assets are created. The State Commissions should ensure that the provisions of the Electricity Act and the Tariff Policy, and directions of Hon'ble APTEL and Hon'ble Supreme Court are implemented.
For the financial viability of the Distribution licensees and the whole power sector, it is essential that the Regulatory Assets are liquidated at the earliest. It is requested that the latest status of Regulatory Assets and the plan for liquidation of the same may be submitted to this Ministry within 30 days.
A tariff order is quasi judicial in nature and binding on the parties unless it is revoked or amended under 64 (6) or set aside by the Appellate Authority. And regulators can't change the basic premise of its determination on the pretext of prudence check.
SERCs must comply with provisions of Electricity Act, 2003 and the principles laid down by Hon'ble Supreme Court.