The Ministry of Power (MoP) has written to all the State electricity regulatory Commission on  non-compliance of  the provisions of the Electricity Act, Tariff Policy and directions of Appellate Tribunal for electricity ( APTEL)  and  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 problems of cash flow to the distribution licensee.

Recently, the 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.