Electricity Regulatory Commissions in India: Resources, Transparency and Public Participation

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

2. Key Attributes of Effective pTAP

3. TAPing the Electricity Governance: Key institutions, processes and decisions

4. 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)

5. 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

6. 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

7. 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

8. 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.)

9. 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

10. Issues covered in the study • Commission composition and tenures • Commission staff and resources • Consultants to the commission • Petitions, orders and appeals • Commission Advisory Committee • Transparency • Public Participation • Role of governments and interactions amongst ERCs, governments and utilities

12. 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

13. 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

14. 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 email group or ‘service list’ concept implemented

15. 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

16. 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

17. 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