Power sector at tipping point as SC takes up DERC plea today
Magnitude of the issues in the power sector are huge and as a result India’s power sector is at a tipping point. On August 6, 2025, the Supreme Court delivered a scathing judgment on the functioning of State Electricity Regulatory Commissions (SERCs). The Court found that instead of ensuring fair, cost-based tariffs, many regulators had been deferring tariff hikes by creating Regulatory Assets (RAs) — costs pushed into the future. What began as a tool to avoid a genuine tariff revision has turned into a practice of regulatory failure and regulatory capture, where political considerations outweighed sound regulation.
The Apex Court warned that this cycle cannot continue. Distribution companies cannot survive if their genuine costs remain unrecovered, and consumers ultimately face steeper tariff shocks. It directed that all RAs recognised till March 31, 2024 must be liquidated by March 31, 2028, and that tariffs must be cost-reflective. State commissions, it stressed, must undertake intensive audits to explain how revenue gaps ballooned to such levels. Equally important was the Court’s directive to the Appellate Tribunal for Electricity (APTEL). Apart from hearing appeals, APTEL was told to act as a watchdog under Section 121 of the Electricity Act.
It was mandated to register a suo moto case and monitor liquidation of RAs until the 2028 deadline. Acting on the order, APTEL registered a suo moto petition on September 12 and has already held five hearings. It has ordered state commissions to file affidavits giving details of revenue gaps, liquidation plans and audits. It has warned that non-compliance could invite strict scrutiny, including personal appearances by regulators. The Ministry of Power too has backed the discoms’ plea on Regulatory Assets before the Supreme Court.
The numbers highlight the crisis. Tamil Nadu (?1.38 lakh crore), Rajasthan (?50,000 crore) and Delhi (?38,000 crore) are among the worst-hit. With carrying cost, the dues of the top six states alone add up to nearly ?2.4 lakh crore, while the national figure is estimated to have surged between ?2.5 -?3 lakh crore. Against this backdrop, a Bench of Justices P.S. Narasimha and Atul S. Chandurkar will today hear a clarification plea filed by the Delhi Electricity Regulatory Commission (DERC) — a crucial step toward restoring financial discipline in the power sector.
