In a setback to the Delhi government, the Supreme Court on Friday stayed the CAG audit of three private power distribution companies (discoms) against the backdrop of a staggering Rs 38,500 crore accumulated over the years as Regulatory Assets (RA) to be recovered from consumers in the national capital.
A Bench of Justice KV Viswanathan and Justice Shree Chandrashekhar ordered a status quo on the CAG audit, saying the legality of the power regulator Delhi Electricity Regulatory Commission’s (DERC) decision to appoint the CAG gave rise to questions which needed a judicial determination.
“Till further orders, there shall be a stay of the Appellate Tribunal for Electricity (APTEL) direction on appointing any chartered accountant for audit. The CAG shall also not proceed with the audit in the meantime,” it ordered.
Issuing notice to the discoms, the Bench posted the matter for hearing on July 15, when the DERC’s petition will be taken up for hearing.
The order came on a petition filed by the DERC challenging an order of the APTEL, which held in April that the CAG audit of discoms was contrary to the statutory framework. The APTEL had directed the DERC to appoint an independent chartered accountant for the audit.
This was the first time the Delhi government ordered an audit of private discoms by the Comptroller and Auditor General (CAG) of India since the privatisation of electricity distribution in the national capital in 2002.
Earlier, a Bench led by Justice PS Narasimha had directed that the regulatory assets, worth Rs 27,200 crore, be paid within three years to Delhi’s three private discoms.
The Regulatory Assets (RAs), essentially deferred revenue gaps to be recovered in future tariffs, 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, it had said.
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 regulatory assets.
On Friday, Solicitor General Tushar Mehta submitted on behalf of the DERC that the LT. Governor had approved the CAG audit in compliance with the procedural requirements identified by APTEL.
The government’s concern was to prevent consumers from being burdened with recovery of the regulatory assets before an audit established how such liabilities had accumulated, he said.
“The direction was to liquidate. Liquidation has been prohibited by the LG yesterday. They want recovery without the audit. Consumers should not be saddled with the cost they will have to pay if they go ahead with the liquidation,” Mehta said.
The Bench sought to know how the issue of liquidation of regulatory assets arose in an appeal confined to the legality of appointing the CAG as auditor.
On behalf of one of the discoms, senior counsel Abhishek Singhvi submitted that issues of audit and recovery of regulatory assets were two different things. Referring to the 2025 judgment, Singhvi said the roadmap for liquidation of RAs had already been settled till 2031, and that the current proceedings were limited to the legality of the CAG’s appointment for audit.
On Thursday, the Delhi Government ordered a CAG audit of power discoms against the backdrop of a staggering Rs 38,500 crore accumulated over the years as RAs.
The government said that the CAG will undertake a “strict and intensive” audit of the circumstances under which the three discoms continued without recovering regulatory assets. It gave CAG three months to complete the audit, with a provision for extension.
