Electricity Regulatory Commissions in India: Resources, Transparency and Public Participation Shantanu Dixit Prayas, Pune, India Workshop on Electricity Governance in Asia Bangkok, December 2003

Key Attributes of Effective pTAP

TAPing the Electricity Governance: Key institutions, processes and decisions

Importance of Regulatory Commissions Typically RC’s decide /approve – Tariff – Capacity addition plans and power purchase agreements – Performance benchmarks for utilities (generation efficiency, T&D losses etc.) – DSM / RE RC’s role is important even in a ‘competitive’ sector structure – Competitive bidding process – Prevent market dominance – Public benefits – access, environmental concerns (In many countries, for several years, practically small consumers would be under regulated monopoly structure)

MERC and Enron’s Dabhol Project…1 MERC established after Dabhol PPA MSEB’s first tariff revision case – MSEB forced to give critical data such as hour by hour demand and generation from different plants – Based on this data PEG demonstrated that Dabhol’s costly plant was generating electricity even when not required / economical – MERC adopted ‘Merit order dispatch’ principle and directed MSEB to use Dabhol – only when needed

MERC and Enron’s Dabhol Project…2 Prayas – IPP Documents Case before MERC – Enron strongly resisted making contracts public – Finally, over 10,000 pages of IPP’s confidential contracts were made public. These include Financing contracts, construction contracts, O & M agreements, and fuel supply & transportation agreements MERC’s ‘Merit order’ directive exposed high cost of Dabhol power (high of ~15 cents/kWH)  Strong political and public reaction leading to Godbole Committee and subsequent stoppage of the project

History of ERC’s in India 1996 – Orissa State- Under WB Model – Public hearings on PPAs made mandatory 1998 – Central Regulatory Commissions Act – Consumer representatives – ERC’s to function in a transparent manner Currently, ERCs in over 20 states as well as at the central / federal level

ERCs: Important Governance Issues (in addition to TAP) Mandate / Policy directions Autonomy – Selection procedures and fixed tenure – Financial and manpower Authority – Legal (investigation and enforcement) – Substantive (tariff, PPAs etc.)

A Good Beginning but Challenges Galore: PEG study of ERCs in India Study looked at – Resources – Transparency – Public participation – Government response / interference Study process – Covered 13 ERC including Central commission – Questionnaire based survey,Additional information from regulations, annual reports and orders – Panel of Eminent Persons and their independent report – Comments by regulatory commissions – Nearly one year’s process

Issues covered in the study 1. Commission composition and tenures 2. Commission staff and resources 3. Consultants to the commission 4. Petitions, orders and appeals 5. Commission Advisory Committee 6. Transparency 7. Public Participation 8. Role of governments and interactions amongst ERCs, governments and utilities

Key findings of the study ……1 Autonomy and resources – Commissions mainly consists of retired government bureaucrats, judges and utility officers – Nearly 70% members retire before full term – Highly dependent on government for financial as well as manpower resources – Appointments are not timely – Severe shortage of capable manpower

Key findings of the study ……2 Petitions, Review and Appeals – Largely Utility, Industry / business affaire, with limited ‘public interest’ / class benefit cases – ~ 90 % orders on petitions by utility or industry / commercial consumers

Key findings of the study ……3 Transparency – Legal provisions but no effective ‘operationalising’ system No well classified index / library / reading room, Procedure and responsibility for making documents available not fixed, All orders may not be on the web-site – Little pro-proactive efforts Key documents (PPAs etc.) not easily disclosed, no group or ‘service list’ concept implemented

Key findings of the study ……4 Public participation – Largely limited to public hearings in important cases – Except in case of 2/3 commissions no ‘institutional’ mechanism for enhancing participation (e.g. consumer representatives / advocates) – Similarly, local language documents are very limited – Except one commission, none has taken efforts for capability building of civil society

Key findings of the study ……5 Even ERC’s may not follow simple statutory requirements – Annual reports are not published – Less meetings of advisory committee than required by regulations Signs of possible regulatory softening, and subversion already visible

In the nutshell ERCs – A key electricity sector governance institution ‘Good governance’ principles accepted in theory (to a certain extent in legal structure also) but significant efforts needed for – Operationalising TAP – Capability building of civil society – Strong, active intervention by civil society