Commission Balances Consumer Interest and Financial Sustainability of DISCOMs; Allows Relaxation in Monthly FPPAS Recovery Timeline Under HERC MYT Regulations, 2024
Panchkula: The Haryana Electricity Regulatory Commission (HERC) has allowed the petitions filed by Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL) and Dakshin Haryana Bijli Vitran Nigam Limited (DHBVNL) seeking relaxation in the timeline for recovery of Fuel Power Purchase Adjustment Surcharge (FPPAS) for the financial year 2025-26.
The Commission, through its order dated 28.09.2026 passed in HERC Petition No. 07 of 2026 filed by UHBVNL and HERC Petition No. 18 of 2026 filed by DHBVNL, considered the request of the distribution licensees seeking relaxation under the provisions of the HERC MYT Regulations, 2024. The DISCOMs had sought exemption from the strict monthly recovery mechanism prescribed under the Regulations and requested permission to recover the accumulated FPPAS amount in subsequent financial years along with carrying cost. The Commission examined the regulatory framework, financial implications, consumer impact and submissions made by various stakeholders before passing the order.
Background of the Petitions Filed by UHBVNL and DHBVNL
UHBVNL and DHBVNL approached HERC seeking relaxation/removal of difficulty in implementation of the FPPAS recovery mechanism prescribed under the HERC MYT Regulations, 2024. The petitions were filed under the enabling provisions of the Regulations, particularly Regulations 81, 82 and 84 read with Regulation 68.1(2). The DISCOMs explained that due to the substantial variation in power purchase costs during FY 2025-26, the automatic recovery of FPPAS through monthly adjustments would result in significant tariff impact on consumers.
Accordingly, they requested the Commission to permit deferred recovery so that the financial burden could be spread over subsequent years.
Understanding FPPAS Mechanism Under HERC MYT Regulations, 2024
The Commission examined the concept of FPPAS under the regulatory framework. Under the HERC MYT Regulations, 2024, FPPAS operates as an automatic pass-through mechanism that allows distribution licensees to recover variations in fuel costs and power purchase expenses beyond the approved base tariff. The objective behind the mechanism is to ensure that genuine variations in power procurement costs are passed through without requiring repeated tariff revision proceedings.
The Regulations provide a timeline-based recovery mechanism where eligible variations are required to be recovered within the prescribed period. The Commission considered the provisions relating to:
- Calculation of FPPAS;
- Monthly recovery mechanism;
- Time period for adjustment;
- Treatment of delayed recovery.
Issue Before the Commission
The primary issue before HERC was whether relaxation should be granted to DHBVNL and UHBVNL from the prescribed timeline for recovery of FPPAS for FY 2025-26. The Commission had to examine:
- Whether the circumstances justified exercise of relaxation powers under the Regulations;
- Whether deferred recovery would protect consumer interest;
- Whether financial impact on DISCOMs required regulatory intervention;
- Whether carrying cost should be permitted on deferred recovery.
DISCOMs’ Submissions Before HERC
The DISCOMs submitted that the increase in power purchase cost had resulted in a substantial FPPAS amount becoming recoverable. According to the utilities, immediate recovery through monthly surcharge would create a sudden impact on consumers. The DISCOMs submitted that spreading the recovery over future periods would avoid an abrupt increase in consumer bills while ensuring that the utilities ultimately recover the legitimate expenditure incurred towards power procurement. The utilities highlighted the importance of maintaining a balance between:
- Consumer affordability;
- Financial sustainability of distribution companies;
- Recovery of legitimate power purchase costs.
Earlier Relaxation Granted by HERC
During the proceedings, reference was also made to the earlier relaxation granted by HERC for FY 2024-25. The Commission considered whether similar circumstances existed in the present petitions and whether the same approach should be adopted for FY 2025-26. The Commission examined the difference between routine FPPAS adjustment and extraordinary circumstances requiring regulatory intervention.
Stakeholders Raise Consumer Interest Concerns
During the proceedings, objections and submissions were received from stakeholders. The stakeholders highlighted concerns regarding deferred recovery of power purchase adjustment amounts and its eventual impact on consumers. The objections primarily focused on ensuring transparency, avoiding unnecessary burden on consumers and ensuring that any relaxation granted to DISCOMs should remain within the regulatory framework.
The Commission considered these submissions while deciding the petitions.
Financial Impact: FPPAS Amount of ₹938.86 Crore
One of the important aspects examined by the Commission was the financial implication involved. The DISCOMs placed on record the computation of FPPAS for FY 2025-26. The total amount involved was stated to be approximately ₹938.86 crore. The Commission examined the calculation methodology, including components relating to:
- Power purchase cost variation;
- Transmission-related charges;
- Approved tariff components;
- Adjustment mechanism under the Regulations.
The Commission considered the magnitude of the amount while deciding whether immediate recovery would result in a significant consumer impact.
Proceedings Before HERC
The Commission followed the regulatory process before deciding the petitions. Public notice was issued, objections were invited from stakeholders and hearings were conducted. The DISCOMs and intervenors placed their respective submissions before the Commission. The Commission recorded the submissions made during the hearing proceedings.
Commission’s Analysis: Balancing Consumer Interest and DISCOM Financial Position
While considering the matter, HERC examined the competing interests involved. On one hand, consumers are required to be protected from sudden tariff impact. On the other hand, distribution licensees are entitled to recover legitimate power purchase costs incurred in supplying electricity.
The Commission observed that the FPPAS mechanism itself recognises the principle of automatic adjustment of variations in power purchase costs. However, the Regulations also provide flexibility to address situations where strict application may create practical difficulties. The Commission examined its powers under the relevant relaxation provisions of the MYT Regulations.
HERC Exercises Relaxation Powers
After considering the submissions and circumstances, the Commission decided to exercise its regulatory powers and grant relaxation to the DISCOMs. The Commission permitted deferred recovery of the eligible FPPAS amount for FY 2025-26. The recovery was allowed to be carried out in subsequent years along with applicable carrying cost. The order ensured that while consumers would not face an immediate tariff shock, the legitimate financial entitlement of the DISCOMs would also be protected.
Impact of HERC Order on DISCOMs and Consumers
The order has implications for both distribution companies and electricity consumers. For DHBVNL and UHBVNL, the decision provides regulatory relief by allowing recovery of accumulated FPPAS amounts over a longer period instead of immediate monthly adjustment. For consumers, the order avoids an abrupt increase in electricity bills due to immediate recovery of the entire amount. However, the deferred amount remains recoverable as per the directions issued by the Commission along with carrying cost.
Regulatory Importance of the Decision
The order is significant in the context of electricity tariff regulation because it demonstrates the Commission’s approach towards balancing:
- Automatic pass-through of power purchase costs;
- Consumer tariff stability;
- Financial viability of distribution licensees.
The FPPAS mechanism is designed to ensure that variations in uncontrollable costs are appropriately adjusted. At the same time, regulatory powers of relaxation provide flexibility in exceptional circumstances.
Legal Significance Under HERC MYT Regulations, 2024
The decision also clarifies the manner in which Regulations 81, 82 and 84 of HERC MYT Regulations, 2024 may be invoked. The Commission recognised that while regulatory timelines are important, practical difficulties may require a balanced approach. The order reflects the Commission’s power to remove difficulties and provide suitable directions where strict implementation may cause unintended consequences.
Conclusion
The Haryana Electricity Regulatory Commission’s order dated 28.09.2026 in HERC Petition No. 07 of 2026 and Petition No. 18 of 2026 provides regulatory relief to UHBVNL and DHBVNL by allowing deferred recovery of FPPAS for FY 2025-26. The Commission considered the financial implications of approximately ₹938.86 crore and the potential impact of immediate recovery on consumers. While recognising the entitlement of DISCOMs to recover legitimate power purchase cost variations, HERC also considered the need to avoid sudden tariff impact on electricity consumers. Accordingly, the Commission permitted recovery of the eligible FPPAS amount in subsequent financial years without carrying cost, while exercising its relaxation powers under the HERC MYT Regulations, 2024.
The order highlights the continuing regulatory challenge of maintaining equilibrium between consumer protection and ensuring financial sustainability of electricity distribution companies.
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