DERC Proposes Monthly Tariff Adjustment To Reduce Discom Dues And Improve Financial Stability In Delhi

The Delhi Electricity Regulatory Commission has started the process of updating important electricity regulations by releasing an Explanatory Memorandum for proposed changes to its tariff determination and business plan regulations for 2025. The main aim of these changes is to modify the system used by distribution companies to recover fluctuating costs related to purchasing power and fuel. At present, these adjustments are handled through the Power Purchase Cost Adjustment Charges, which form part of the Fuel and Power Purchase Adjustment Surcharge.

Under the current 2017 Tariff Regulations, distribution companies are allowed to recover these costs on a quarterly basis. However, the regulator has observed that both the Electricity Act, 2003, and the National Tariff Policy, 2016, stress the need for the timely recovery of all reasonable costs incurred by power utilities. The quarterly system has caused delays, resulting in the build-up of past dues for distribution companies. These unpaid amounts then turn into regulatory assets, which affect the financial health of the utilities. This situation creates pressure on the power companies’ ability to maintain quality service for consumers.

To resolve these issues, the proposed amendments aim to shift the surcharge recovery mechanism to a more frequent cycle. The Commission is considering moving from the existing quarterly recovery to a quicker process, likely on a monthly basis. By doing so, the gaps between the actual cost incurred by the utilities and the amount recovered from consumers would be reduced. This change will require updating the formula used to calculate the surcharge so that consumer tariffs better reflect the recent cost of power.

The draft proposal states that the revised calculation of the Fuel and Power Purchase Adjustment Surcharge will be linked to changes in the tariff of power supplied in the two months prior to the billing month. In this formula, the total amount of electricity procured from all sources in that earlier month will be a key factor in determining the surcharge to be applied. With this structure, the tariff billed to consumers will more closely match the real cost of electricity purchased by the distribution companies.

According to the Commission, moving to a more frequent adjustment cycle will help reduce the buildup of unrecovered costs. This, in turn, is expected to improve cash flow for power distribution companies. Better financial stability will allow utilities to operate more efficiently and reduce the extra burden of interest or carrying costs that often end up being passed on to consumers in later years. The regulator believes that this change will support a more stable and financially healthy electricity sector in the national capital.

The Explanatory Memorandum also invites comments, suggestions, and feedback from stakeholders such as consumers, distribution companies, and sector experts. The Commission intends to use this consultation process to ensure that the final amendments are transparent, practical, and fair. By involving all participants, the regulator hopes to create a balanced framework that strengthens the electricity system while protecting consumer interests.