Regulators and innovative policies : Examples from Maharashtra

1. Regulators and innovative policies : Examples from Maharashtra Prayas (Energy Group) SAFIR Core Course Sri Lanka, March 2013

2. Outline • Role of regulators • Background – increasing demand – supply gap • Innovative approaches to overcome shortages • Load Shedding Protocol • Pune Model • Key takeaways / lessons Prayas Energy Group

3. Monopoly prevention Role of regulators Service quality Investments Reduce political interference ?????? Prayas Energy Group

4. Increasing demand-supply gap Prayas Energy Group

5. Load shedding (LS) protocol …1 • Public hearings on tariff revision petition • Several protests and submissions about load shedding • MERC analysis  no need for load shedding (Or - 4 March 04) • MSEB continued with load shedding • 3 to 6 hrs / day • Consumer organizations (Shri. Hogade) filed petition questioning LS(Dec. 04) • Relied on MERC observations and other data about discrimination in LS and measures to reduce LS Prayas Energy Group

6. Load shedding (LS) protocol …2 • Commission held public hearings and technical validation sessions • MERC concluded (O. 4 March 05) • “This raises the basic issue of ……. principles on which such rationing is to be based… Such rationing has to be fair and equitable, and the principles on which load shedding is undertaken have to be known....” • Directed MSEB to submit, within one month – “… the principles and protocol proposed to be adopted for load shedding, meet the tests of equity, fairness and reasonableness, ..” Prayas Energy Group

7. Load shedding (LS) protocol …3 • Subsequently MERC also ordered (O. 4 May 2005) “the Commission directed that the T & D losses and collection efficiency in different areas need to be taken into account while deciding the load shedding protocol.” • Same order also asked for feasibility of using diesel back-up generators in Pune for removing LS • Parallel process in High Court and Supreme Court (SC). (SC order dt. 12 May 05) • LS to be decided in consultation with MERC Prayas Energy Group

8. Load shedding (LS) protocol …4 • Subsequently MSEB Proposal for LS (May 05) Prayas Energy Group

9. Load shedding (LS) protocol …5 • MERC’s public process • Issued public notice and invited comments / objections • Public hearings at six cities in the state • Around 150 objections / comments • Significant technical analysis, along with consumer representatives Prayas Energy Group

10. Load shedding (LS) protocol …6 • MERC Approved LS Protocol – Basis for LS Hrs. Prayas Energy Group

11. Load shedding (LS) protocol …7 • Change in LS hours as per shortage levels (word file table) • LS schedule given wide publicity • Continuous fine tuning and adjustments (~ 4 major changes / review) • Petitions for non-compliance by consumers • Petitions for changes by DISCOM • Similar public process every time • Emphasis on transparency, feeder wise hourly data made public on website Prayas Energy Group

12. Load shedding (LS) protocol …8 • MERC jurisdiction challenged in Appellate Tribunal for Electricity (ATE) • Consumer representatives actively intervened in the appeal • ATE upheld MERC jurisdiction and directed formation of committee, consisting of consumer representatives and utility for fine tuning LS protocol • Committee gave unanimous report. Prayas Energy Group

13. Pune Model …1 • CII proposed use of captive, back up diesel generators to overcome load shedding in Pune • Industries to generate power from back-up plants during LS hours (fixed through LS protocol) • Utility to pay only marginal variable (fuel) cost to industries • Increased cost recovered through ‘surcharge’ on Pune consumers Prayas Energy Group

14. Pune Model ….2 • Initial reactions • Fear of large surcharge • Fear of utility abdicating responsibility of 24 X 7 supply at normal tariff • Uncertainty about actual benefits • MERC conducted public process • Public Hearings • Significant data and analysis was made available Prayas Energy Group

15. Pune Model …3 • MERC issued ‘Draft Order’ and sought public comments • Estimation of surcharge • Methodology of computation • Addressing uncertainties • Method of protecting small residential consumers • Final order • provision for continuous review and computation of surcharge Prayas Energy Group

16. Pune Model …4 • Continuous review and evolution of model • Excess surcharge refunded to consumers • When diesel generation became costly, additional power from market was purchased • Model extended to all regional headquarters (6 large cities in state, covering over 15% population) Prayas Energy Group

17. Key Takeaways / Lessons • Regulators can facilitate innovative solutions to promote public interest • Need commitment and conviction • Adoption of innovative process (e.g. draft order) • Building credibility • Sharing data • Inclusive process • Making utility and government accountable • Continuous review and adaptation Prayas Energy Group

18. Key Challenge : Accountability of Regulators ! • MERC order case 41/2012, 26 Nov. 2012 “MSEDCL has not filed any Petition in accordance with the requirement of MERC (Conduct of Business) Regulations, 2004 before any deviation could be made with respect to the Orders of the Commission that had laid down PPLS. Considering all the above, the Commission is of the opinion that MSEDCL has violated the Load Shedding Protocol approved by the Commission. The Commission is deeply concerned with the approach of MSEDCL in this regard.” Prayas Energy Group

19. Key Challenge : Accountability of Regulators ! • MERC order case 41/2012, 26 Nov. 2012 “Therefore, the Commission views that MSEDCL has implemented these Circulars with a positive intent though in violation of approved PPLS. Therefore, this instance of violation by MSEDCL is condoned by the Commission, while reiterating that any future violation in this matter may lead to penalties.” Prayas Energy Group

20. Thank you shantanu@prayaspune.org www.prayaspune.org/peg Reference documents: MERC orders: 3 August 2005, 31 March 2008, 28 Nov. 2008, 24 May 2010 The Pune Model: Mitigating Load Shedding in Urban, Industrial Areas, Shantanu Dixit, AshwiniChitnis, Powerline, January 2009 Prayas Energy Group