1 Electricity Tariff Policy – Resolved & Unresolved Issues By T.L SANKAR Presented at the Conference “The New Tariff Policy & its Impact on the Power Sector”(IPPAI)

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1 Electricity Tariff Policy – Resolved & Unresolved Issues By T.L SANKAR Presented at the Conference “The New Tariff Policy & its Impact on the Power Sector”(IPPAI) Bangalore 23 rd February, 2006 ADMINISTRATIVE STAFF COLLEGE OF INDIA Centre for Infrastructure Management & Regulatory Studies Bella Vista :: Hyderabad

2 Tariff Policy Coverage 1. New Electricity Tariff Policy Covers all Issues 2. Re: Tariff Determination, reiterates all future procurements will be through tariff based bidding in the cases, where bidding is not possible, tariff will as per “cost-plus” computation (a) Return on investment (b) Debt-equity ratio (c) Depreciation (d) Operating norms 3. Confusion in re : (a) Multi year tariff (b) Benefits under CDM

3 Generation I. Opens the Window for Special Generating Plants to meet peak load by (a) suggesting that ERCs could fix separate rates be peak load (b) spelling out the competitive procedures for procuring power separately for peak and non peak demand II. Provision for using captive power plants for meeting peak demand not forceful. Why not mandated procurement by inviting bids? III. Allowing ERCs to fix surplus special tariff for renewable is inexplicable. Why not competitive bids for a specific quantity, restricted the renewable technology using power generators ?

4 Transmission NTP adds to the confusion CTUs & STUs can take up transmission lines – on what basis? Norms of capital & operating cost not yet established Non CTU, STU players should take bidding route – but procedures not established Method for allocating transmission loss - Very vague

5 Distribution Emphasis is essentially on multi year tariff (MYT) If it is amenable for yearly revision it will be no different. Why should regulator initiate action, if tariff filing is delayed ? Why not introduce a provision like a cut of 25% of tariff across the Board in the period beyond MYT period? * Suggestion for ATC loss – confusing Collection deficit against bills issued should not be allowed SERC independent scrutiny – wasteful, time consuming, costly Regulatory Asset Treatment -confusing

6 Tariff Policy -Issues unresolved 1. Regulatory Asset 2. Computation of Cross Subsidy Requirement 3. Cross subsidy, Additional Cross Subsidy Computation for open access 4. Trade Margin

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