SC Halts Delhi Government’s CAG Audit of Private Power Discoms

New Delhi: The Supreme Court on Friday stayed the CAG audit ordered by the Delhi government of three private discos in the face of a staggering Rs 38,500 crore fund accumulated over the years as Regulatory Assets (RA) to be recovered from consumers.

A partial bench of justices KV Viswanathan and Shree Chandrashekhar ordered maintenance of status quo, saying the legality of electricity regulator Delhi Electricity Regulatory Commission (DERC)’s decision to appoint the CAG raises questions for the judicial order.

Taking a toll on the BJP-led Delhi government, the apex court said, “Till a fresh order, the order of the Appellate Tribunal for Electricity (APTEL) regarding appointment of any chartered accountant for audit will be stayed. The CAG will also not proceed with the audit in the meantime.”

The top court was hearing DERC’s plea against APTEL’s April order, which held that handing over the audit to the CAG was against the legal framework and directed the regulator to appoint an independent chartered accountant for the audit.

While issuing notice to the discos, the bench said: “The present legal challenge is directly related to the question of whether DERC’s action in initiating the process of auditing distribution companies by the CAG is legally permissible.”

The high court said the status quo will be maintained until July 15, when DERC’s plea will be heard by a regular bench that had pronounced the verdict last August.

At that time, a bench headed by Justice PS Narasimha had directed that regulatory assets worth Rs 27,200 billion be paid to three private discos in Delhi within three years.

The board then said that as of March 31, Regulatory Assets (RAs), which are mainly deferred revenue shortfalls to be offset in future tariffs, rose sharply to Rs 12.993 billion for BSES Rajdhani Power Ltd (BRPL), Rs 8.419 billion for BSES Yamuna Power Ltd (BYPL) and Rs 5.787 billion for Tata Power Delhi Distribution Ltd (TPDDL). 2024, total Rs 27,200 crore.

The 2025 decision followed petitions filed by three energy distribution companies challenging DERC’s tariff orders that led to ballooning regulatory assets.

Currently, RAs stand at Rs 38,500 crore.

During Friday’s hearing, Attorney General Tushar Mehta, who appeared on behalf of DERC, stated that the lieutenant governor approved the CAG audit in accordance with the procedural requirements established by APTEL.

He added that the government’s concern is to prevent consumers from being burdened with regulatory asset recovery before an audit determines how such liabilities accumulate.

Mehta said, “It was in the direction of liquidation. Liquidation was banned by the LG yesterday. They want recovery without supervision. Consumers should not bear the cost they will have to pay if they continue with the liquidation.”

The bench asked how the issue of liquidation of regulatory assets arose in a challenge limited to the legality of the CAG’s appointment as auditor.

Senior lawyer Abhishek Singhvi, who attended one of the discos, stated that the issues of audit and recovery of regulatory assets are two different things.

Referring to last year’s judgment, Singhvi stated that the roadmap for dissolution of RAs has been set by 2031 and the current proceedings are limited to the legality of appointing the CAG for audit.

The Delhi government on Thursday ordered a CAG audit of power disputes in a staggering Rs 38,500 crore fund accumulated over the years as RAs.

The government said the Comptroller and Auditor General (CAG) would undertake a “strict and intensive” audit of the circumstances under which the three standoffs continued without bailing out regulatory assets.

The government gave the CAG three months from the date of the order to complete the audit and granted extension.

This is the first time that the government has asked for private discos to be inspected by the CAG since the privatization of electricity distribution in 2002.

In April, APTEL rejected the DERC application for CAG audit and directed the Commission to initiate the liquidation of the pending RAs within three weeks.

On 6 August 2025, when considering the term “regulatory asset”, the panel said: “In the context of tariff fixation for electric services, it is an intangible asset created by the Regulatory Commissions for the purpose of recognizing an unmet revenue shortfall or revenue shortfall where a distribution licensee is unable to fully cover the costs it reasonably incurs through the revenue it receives from the tariff.”