In a landmark judgment dated 6 August 2025, the Supreme Court of India, has directed all State and Union Territory electricity regulators to liquidate the existing Regulatory Asset Block (RAB) within four years (starting 1 April 2024) and ensure that any new regulatory assets are cleared within three years.

The ruling arose from petitions by BSES Rajdhani Power Ltd., BSES Yamuna Power Ltd., and Tata Power Delhi Distribution Limited, challenging how the Delhi Electricity Regulatory Commission had set retail tariffs, leading to a swelling RAB and decades of deferred recovery.

What is the Regulatory Asset Block?

The Regulatory Asset Block represents accumulated, recognised costs that a distribution company has incurred but not yet recovered through tariffs. These are recorded as assets on the balance sheet and recovered later via tariff adjustments or government subsidies. While useful as a short-term financing tool, unchecked growth of the RAB distorts tariff signals, delays cost recovery, and burdens consumers with high carrying costs.

Key directions from the Court:
– Tariff discipline – Tariffs must be cost-reflective, with revenue gaps allowed only in exceptional cases.

– Rule 23 reaffirmed – Regulatory assets should not exceed 3% of the Aggregate Revenue Requirement (ARR).

– Strict audits – State Commissions must investigate causes of deferment and publish liquidation roadmaps.

– APTEL oversight – The Appellate Tribunal for Electricity will register suo motu cases and supervise compliance until April 2028.

Delhi’s case in numbers: As on 31 March 2024, the RAB stood at:
BRPL – Rs. 12,993.53 crore
BYPL – Rs. 8,419.14 crore
TPDDL – Rs. 5,787.70 crore
Total – Rs. 27,200.37 crore

Why it matters: For decades, tariff deferments have acted as a political and regulatory crutch, masking the true cost of supply, pushing discoms into unsustainable debt, and shifting the burden onto future consumers through high carrying costs. This judgment enforces statutory discipline, restores transparency, and strengthens the financial credibility of India’s power sector.

Final thought: Regulatory certainty is the foundation of a credible energy sector. This ruling is not just about clearing past dues but about embedding financial discipline into the DNA of electricity regulation in India.