Day2: Mr. Pr ray

1. A Decade of Regulations:
Progress or Pitfalls ?
P.Ray
Chairperson, WBERC

2. Statutory Background
• The Indian Electricity Act, 1910
• The Electricity (Supply) Act, 1948
• The Electricity Regulatory Commissions
Act, 1998
• The Electricity Act, 2003
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3. Preamble to the Electricity Act
An Act to consolidate the laws relating to
generation, transmission, distribution, trading
and use of electricity and generally for taking
measures conducive to development of
electricity industry, promoting competition
therein, protecting interest of consumers and
supply of electricity to all areas, rationalization
of electricity tariff, ensuring transparent policies
regarding subsidies, promotion of efficient and
environmentally benign policies, constitution of
CEA, ERCs, APTEL etc.
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4. Some features of the Electricity Act
• Act prescribes formulation of National
Electricity Policy and Tariff Policy
- formulated after a couple of years (Is it equivalent
to executive instructions taking the place of law ?)
• Act discriminates between CERC and SERCs
- number and qualification of members
• GoI makes further distinctions in salary of
members and tax liability of Commissions
• Act prescribes unbundling of State Utilities
- no such prescription for private sector
4

5. Role of Central Government
• Present practice of Central Power Allocation and
Re-allocation highly arbitrary
- leads to regulatory uncertainties (case of Subansiri HEP)
• Over emphasis on Open Access through
advice/legal opinion/ direct pressure
• Differential treatment of State Governments
- unbundling and various other issues
• Inability to force State Governments to toe the
line
- instead, trying to force SERCs through APTEL
- implications thereof ?
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6. Role of Central Government
Contd…
• ≥ 1 MW consumers on open access
- conflicting legal advice
• Failure to bring in regulator for fuels
- several commitments by finance minister
- single biggest source of tariff shock
and regulatory uncertainty
- case of West Bengal as illustrated by tariff
timeline study (next slide)
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7. Average Retail Tariff in West Bengal
in Paisa/ Kwhr
300.00
400.00
500.00
600.00
700.00
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
(Dec 12)
Paisa/Kwh
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8. Role of State Governments
• Still not come to terms with the implications of
distancing decision making through ERCs
• Unduly sensitive about tariff increases
• Disinclination to fill up vacant posts of
regulators including Chairpersons
• Disinclination to create posts in SERCs
• Undue political pressure on regulatory decision
making
• Inability to consult SERC on points having major
regulatory impact
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9. Weakness of SERCs
• Manpower limitations
• Lack of appropriate expertise
• Dependence on consultants
• Dangerous dependence on State Governments
in terms of manning and financial autonomy
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10. Weakness of SERCs
contd……
• Inability to ensure compliance by utilities
• Approval of PPAs
• Investment approvals
- adequate monitoring by SERCs ?
• Regulatory assets and holding costs ?
10

11. Weakness of SERCs
contd……
• MYT ?
• High cross-subsidy surcharge leading to
obstacles for open access
• Public consultation and transparency
• Consumer advocacy
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12. Role of CERC
• Framing of regulations regarding RPO and RECs
- clearly a function of SERCs under Section 86(1) (e) of
the Electricity Act
- legal complications
• POC tariff regime without adequate
consultation
- apparently unfair to Eastern and North-Eastern States
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13. Role of CERC
Contd…..
• Insistence on ring-fencing of SLDCs
• Appointment of NLDC (POSOCO) as
implementing agency of POC tariff
regime, though POSOCO is a subsidiary of
PGCIL
• Involving Central Ministers and Secretaries in
platform of formal meeting with SERCs
- viewed by some as move towards regulatory capture
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14. Role of FOR
• FOR viewed as a co-ordination forum in
terms of Section 166 of the Electricity
Act, 2003
• Clearly an advisory forum since formal
powers are with CERC and SERCs
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15. Role of Utilities
• Disinclination to comply with directions of
SERCs
• 100% metering and 100% village electrification
- illusory goals ?
• Tendency to pad up costs
• Slow to respond to incentives/disincentives
• Regulatory accounts as distinct from utility
accounts
15

16. Role of Utilities
Contd…..
• Little management initiative
• Major decisions on salaries and other service
benefits without regulatory consultation
- automatic pass through ?
• Poor service quality
• Poor grievance redressal and legal recourse to
oppose decisions of Ombudsmen and SERCs
causing delay 16

17. Achievements
• Regulations covering all important aspects
including renewables
- regular consultations and necessary amendments
• MYT framework ( 3 years)
• Tariff regime ensuring adequate returns for
utilities (except DPL, considered for
restructuring)
• MFC/MVC adjustments (subject to yearly true
up)
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18. Achievements
contd……
• Grievance redressal machinery (including
compensation for consumers)
• Tariff regime ensures gain sharing
• TOD tariff
• Additional rebate for high voltage industrial
consumers (≥ 33 KV)
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19. Achievements
contd……
• Pre-paid Tariff scheme
• Special tariff for LED street light
• Directives for safety audit, environmental audit
and audit on occupational health hazards of
Generating companies and sub-stations
• Decline in Gross Station Heat Rate
• Consumer service improvements
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20. Achievements
contd……
• Energy audit and monitoring on a regular basis
• Rapid consumer growth (30% over 2009-10)
• DSM efforts (still under process)
• Improvement of Grid Power quality
• Making progress slowly
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21. The way ahead……
• IPPs making impact but case-I bidding tariff a
failure ?
• Power exchanges playing a minor role
• Separation of carriage and content ?
• Multiple licensees ?
• Further amendments ?
• To regulate or not to regulate ?
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