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`DERC has no authority to create assets for discoms'

Staff Reporter

Commission had created assets worth Rs. 350 crores in 2004-05

NEW DELHI: In a development that could result in higher power tariffs in the Capital unless the Delhi Government decides to raise the subsidy given to power consumers, the Appellate Tribunal of Electricity has ruled that the Delhi Electricity Regulatory Commission does not have the authority to create regulatory assets for power distribution companies.

On a petition challenging DERC's decision to create regulatory assets for the three power discoms -- BSES Yamuna, BSES Rajdhani and NDPL -- so as to defer a tariff increase, the tribunal in its judgment ruled that the Commission had no jurisdiction to set up such assets. DERC had created these regulatory assets, which total about Rs. 350 crores, for the three discoms in 2004-05 to manage the revenue gap and avoid a tariff increase.

However, the Tribunal said regulatory assets not only denied cash flows to the discoms and affected their operations, they would also end up in over-burdening consumers with a steep tariff hike subsequently. It said creation of regulatory assets also affected the return on equity of the discoms and deprived the companies of recovering operational costs during the tariff period. A regulatory asset could only be set up if there was a statutory provision, the Tribunal observed.

Special circumstances

The Tribunal said the assets could be created only in exceptional circumstances and tariff increase was not a valid basis for the Commission to set up such assets. There was no justification to expect the discoms to run the business of providing electricity without a reasonable return of profit. Such an element of return is provided if there is a reasonable increase in tariffs even though it may lead to protests from a section of consumers who fail to realise realities, the Tribunal added.

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