Thiruvananthapuram: Confusion prevails over the Supreme Court verdict directing power distribution companies to recover their revenue deficit, classified as Regulatory Assets, within the next two years. Compliance with the order is expected to result in a power tariff hike of up to ₹1 per unit in Kerala over this period. A consumer with an average electricity bill of ₹1,000 may have to pay an additional ₹200.

According to the Central Electricity Regulatory Commission regulations notified on January 10, 2024, existing Regulatory Assets must be cleared by March 31, 2031. However, the Supreme Court ruling has shortened this period by three years, setting the deadline at March 31, 2028. This change has triggered uncertainty, prompting the State Regulatory Commission to seek legal advice.

The Kerala State Electricity Board's (KSEB) Regulatory Assets were pegged at ₹7,123 crore as of June 2022. It was initially estimated that half this amount could be recovered through tariff hikes between 2022–23 and 2026–27. However, the anticipated revenue recovery did not materialise, and the current figure still stands at ₹6,600 crore. As per unaudited accounts, KSEB posted a profit of ₹632.49 crore in the last financial year, which is expected to bring the Regulatory Assets down to below ₹6,000 crore.

Following the Supreme Court verdict, KSEB will soon apply to the Regulatory Commission for necessary directions. Commission sources indicated that they will examine models adopted by other State Commissions and the Electricity Appellate Tribunal (APTEL) to determine the best approach for recovery.

Huge sums in other states
Other States also face significant challenges in recovering Regulatory Assets. The Supreme Court case was originally filed by Delhi-based power distribution companies. The amounts to be recovered in these states are substantial: Delhi (till 2021) – ₹27,200.37 crore, Tamil Nadu (till 2022) – ₹89,375.09 crore and Rajasthan (till 2025) – ₹47,114 crore.

Regulatory asset
A Regulatory Asset refers to an intangible accounting entry related to the tariff fixation of power distribution companies. Regulatory Commissions create such assets by recognising the revenue deficit of distribution companies when expenses cannot be recovered through the tariff in a given year. The unrecovered portion is excluded from that year’s tariff calculation but can be recovered by the company within a specified period in the future.