The Appellate Tribunal for Electricity (APTEL) has set aside the penalties imposed by the Delhi Electricity Regulatory Commission (DERC) on BSES Yamuna Power and BSES Rajdhani Power for failing to meet their renewable purchase obligations (RPO) during the financial years 2012–13, 2013–14, and 2014–15.

The Tribunal held that while the appellants were liable to be penalized for non-compliance, the penalties imposed were wholly disproportionate. Instead of the daily penalties running into crores, APTEL fixed a token penalty of ₹5,000 (~$57) for each of the three financial years in question.

Background

On September 18, 2019, DERC held that the two BSES distribution companies (DISCOM) were in default of their RPO. As a consequence, the Commission imposed penalties that were calculated at the maximum rate provided under the law, ₹5,000 (~$57) per day of continuing default.

The appellants challenged this order before APTEL. They argued that their failure to comply with RPO during those years was not deliberate but the result of severe financial stress. They contended that the tariffs determined by the Commission in those years were not cost-reflective, pushing the DISCOMs into a situation where they could not even meet payment obligations to generators, let alone procure renewable power.

They submitted that they have since overachieved their RPO in 2023–24 and that this surplus should be adjusted against the shortfall of earlier years.

Countering these arguments, DERC maintained that RPOs are mandatory and that financial hardship cannot justify non-compliance. The Commission relied on the Supreme Court’s judgment in Hindustan Zinc v. RERC in 2015, which held that statutory environmental obligations must be fulfilled irrespective of economic considerations. The Commission also referred to an APTEL decision in 2013, which had cautioned regulators against diluting compliance requirements.

Tribunal’s Analysis

APTEL, while acknowledging that RPO compliance is mandatory, pointed out that the maximum penalty must be ₹100,000 (~$1,135) for each contravention and an additional ₹6,000 (~$69)/day for continuing contravention. It does not lay down any minimum penalty.

In APTEL’s view, this meant that the Commission had discretion to determine the quantum of penalty based on the circumstances of the case. It said financial hardship cannot be used as an excuse for non-compliance. Yet it held that such hardship could certainly be considered as a mitigating factor while determining the penalty.

The Tribunal observed that the Commission had failed to take into account its own past statutory advice to the Government of Delhi in 2010 and 2013, where it had admitted that tariffs were not cost-reflective and had resulted in the accumulation of large regulatory assets. These regulatory assets forced the DISCOMs into continuous borrowing and placed them under financial stress.

It noted that, even as late as August 2025, the Supreme Court had criticized regulatory commissions for failing to adopt cost-reflective tariffs and for allowing regulatory assets to grow unchecked. The apex court had directed that such assets must not exceed 3% of the annual revenue requirement and must be liquidated within three years.

The Tribunal held that the financial difficulties of the BSES DISCOMs were not of their own making but were largely attributable to regulatory decisions.

APTEL found it unjustified that the Commission proceeded to impose the maximum penalties without any reasoning or consideration of these extenuating circumstances. Such an approach, in its view, was harsh and amounted to a miscarriage of justice. It held that while the DISCOMs could not escape liability altogether, they should not be burdened with penalties disproportionate to the default.

Setting aside the Commission’s order, it held each of the appellants liable only to a token penalty of ₹5,000 (~$57) for each of the three financial years 2012–13, 2013–14, and 2014–15.

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