SC pulls the plug on CAG audit of Delhi discoms

The Supreme Court on Friday ordered a pause on the Comptroller and Auditor General (CAG) audit of Delhi’s three private electricity distribution companies (discoms) and directed maintenance of status quo, holding that the legality of the Delhi Electricity Regulatory Commission’s (DERC) decision to appoint the constitutional auditor raises an arguable question requiring judicial examinations.

“The present civil appeal concerns directly the issue whether the action of the DERC in initiating the process of audit of the distribution companies by CAG is legally permissible,” the Bench of Justices KV Viswanathan and Shree Chandrashekhar observed while issuing notice. The matter is now listed for further hearing on July 15.

The matter relates to Regulatory Assets (RAs) amounting to nearly Rs 38,552 crore, accumulated by BSES Rajdhani Power Limited, BSES Yamuna Power Limited, and Tata Power Delhi Distribution Limited. RAs represent deferred costs arising from electricity tariffs remaining largely unchanged for over a decade despite increasing supply costs. The amounts are ultimately recoverable from consumers through future tariff revisions.

The matter has been directed to be heard by the same Bench that delivered the SC’s August 6, 2025 judgment concerning the phased liquidation of Delhi’s RAs, subject to approval by the Chief Justice of India. At that time, a bench headed by Justice PS Narasimha had directed that the RAs, worth Rs 27,200 crore, be paid within three years to Delhi’s three private discoms.  The bench then said that the RAs have risen sharply, reaching Rs 12,993 crore for BSES Rajdhani Power Ltd (BRPL), Rs 8,419 crore for BSES Yamuna Power Ltd (BYPL) and Rs 5,787 crore for Tata Power Delhi Distribution Ltd (TPDDL) as on March 31, 2024, totalling Rs 27,200 crore.

The SC was hearing the DERC’s plea against an April ruling of the APTEL, which had held that entrusting the audit to the CAG was contrary to the statutory framework and directed the regulator to appoint an independent chartered accountant for the audit. The 2025 verdict came on the petitions filed by three power distribution companies against the DERC’s tariff orders that led to the ballooning of RAs.

The SC, however, on Friday stayed both APTEL’s direction requiring the appointment of an independent chartered accountant for conducting the audit and the fresh CAG audit initiated by the Delhi Government. “Till further orders, there shall be a stay of the APTEL direction on appointing any chartered accountant for audit. The CAG shall also not proceed with the audit in the meantime,” the Court ordered.