Discussion on Power Tariff in Delhi Jointly organized by Rajiv Gandhi Institute for Contemporary Studies (RGCIS) & energywatch 6 th May 2003, New Delhi By Sunder Lal energywatch

2 Overview of presentation Regulation of Electricity in India : a background Budding Period Period of fast growth Experience : Independence till pre-reform period Post-reform Period Experience : Post-reform Period (Delhi) Issues : Formulation of Electricity Supply Tariff Mandate of the Acts (Apex Court’s judgment) Suggestions for Power Tariff energywatch

3 Regulation of Electricity in India : a background -I Budding period ( ) Regulation by Indian Electricity Act 1910 Objective : Licensing of Electricity Regulations of rates Protective clauses Important Principles: Bars undue preference to any consumer Advocates Tariff to be based on : load factor; or power factor ; or total consumption of energy during any stated period; or the hours at which the supply of energy is required energywatch

4 Regulation of Electricity in India : a background -II Period of fast growth (1947- upto reforms ) Regulation by Indian Electricity Act 1910 & Electricity (Supply) Act 1948 Objective : Industrial development advent of grid systems Development in semi-urban and rural areas Principles: SEBs formed as autonomous bodies; quasi-commercial to Control generation, grid systems Act as bulk licensees & licensees in areas not served by licensees ‘Act as they deem fit’ to formulate tariff Given un-guided and arbitrary powers energywatch

5 Experience : Independence till pre-reform period- I Achievements: Generating capacity increased from 1712 MW to 1,04,000 Gross generation 515 Billion KWh (2000-1)- 4 th largest in world Transmission lines from 2708 ckm in 1950 to ~ 200,000 ckm 90% village electrified from a negligible figure in 1947 key role in Green Revolution- 63% pump-sets energized energywatch

6 Experience : Independence till pre-reform period  Failures:  SEBs lost the objective  never autonomous  they usurped distributing licensees  the very aim of cheapening of rates only in undeveloped areas lost  loss of important sources of revenue  Arbitrary Tariff formulations influenced by political considerations  Became Cash starved  Infrastructure became fragile for want of overhaul  Alarmed legislators amended Supply Act in 1978 and 1983  SEBs and the Electricity Sector as a whole became unviable energywatch

7 Post-reform Period- I Electricity Regulatory Commissions Act, 1998 State Electricity Regulatory Commission established to regulate & determine Tariff based on: consumers’ interests efficiency economic use of resources performance optimum investment energywatch

8 Post-reform Period- II Delhi Reforms Act 2000 DERC established DVB unbundled into : Generation & Transmission ( Transco) Distribution (BSES & Tata with other licensees) Tariff to be determined by DERC on new principles energywatch

9 Experience : Post-reform Period (Delhi) Old wine in new bottle Change reflected neither in tariff nor in functioning of DVB/ DISCOMS Irrelevant and obsolete provisions that encouraged corruption and theft continued: Sanction of load ( e.g. requirement of MCD Licence) Misuse charges Connected Load Change from LT to HT Normative Charges Minimum Charges Surcharge Billing demand Categorization of consumers (Commercial, residential etc) violative of Reform Act energywatch

10 Issues : Formulation of Electricity Supply Tariff - I Characteristics of Electricity To be generated as used Can’t be stored Peak demand provisions Cost (Running cost & Standing cost) Hopkins Principle Load factor/ Power factor/ manner & quantum of consumption energywatch

11 Issues : Tariff formulation of Electricity - II  Two part Tariff  Block Rate Tariff  Flat Rate Tariff  Power Factor Tariff  KVA Max. Demand  Sliding Scale Power Factor Tariff  KWH and KVArh/ KVAhTariff energywatch

12 Mandate of the Acts (Apex Court’s judgment) No discrimination among consumers; No cross subsidization Tariff formulation is duty of Regulatory Commission Return on investment to be weighed against efficiency parameters While formulating Tariff Commissions should take into account that : Central and State ERCs Commission is not bound by the accounts submitted by utilities Utilities to also bear for inefficiency Losses can’t be transferred entirely to consumers Watch consumer interests energywatch

13 Suggestions for Power Tariff - I Premise Because : The Act bars differentiation on use of electricity supply; Pattern of use changed dramatically; Present categorization no more based on specified electrical characteristics; Continuous measurement of electrical characteristics possible ‘cause of Electronic meters Especially by govt. bodies or SEBs Choice of Consumer to either purchase or hire from utility Generating companies have adopted ‘Availability Based Tariff’ energywatch

14 Suggestions for Power Tariff - II Need to develop tariff : which automatically works out different rates for different characteristics specified in Act irrespective of the present categories. fulfills the requirement of the Law encourages consumers towards better management of their use of energy improve efficiency of the system. energywatch

15 Thank you You are welcome to see details of energywatch’s response on ARR’s of DISCOMS and suggestions forwarded to DERC on Tariff at : energywatch