Discussion on Power Tariff in Delhi

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

2. energywatch 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

3. energywatch Regulation of Electricity in India : a background -I • Budding period ( 1910-1947) • 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

4. energywatch 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

5. energywatch 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)- 4th 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

6. energywatch 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

7. energywatch 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

8. energywatch 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

9. energywatch 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

10. energywatch 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

11. energywatch 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

12. energywatch 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

13. energywatch 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’

14. energywatch Suggestions for Power Tariff - II 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.

15. energywatch 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 : http://www.energywatch.org.in