Ignoring Regulators

Written by The Financial Express | Updated: Jan 2 2014, 03:00am hrs
Going by the speed at which the Delhi government has announced the scheme for free water, chances are a decision on halving Delhis electricity rates will also be taken soon. The three electricity distribution companies (discoms) argue that there is no case for cutting tariffs since, in any case, they are not even getting paid for the electricity they buy, and from government-owned power producers at thatin the case of BSES Yamuna Power Ltd (BYPL), the average billing rate is R5.17 per unit as compared to the purchase cost of R6.54 per unit; the same order of magnitude applies to the other two discoms. Indeed, the discoms argue, the electricity regulator has parked R20,000 crore due to them into what are called regulatory assetsif consumers had to be charged R100, the regulator only allowed a R80 charge and said R20 would be a regulatory asset which, over a period of time, would be paid back by the customer. In other words, forget about reducing power prices, prices are likely to rise since the regulatory assets have to be discharged at some point.

Which is why, when the government is keen to cut rates, it has to keep in mind that under the law, this is no longer its prerogative. This is the Delhi Electricity Regulatory Commissions (DERC) job and any hike/cut in tariffs can be done only by approaching DERC and making a case for thisand after that, the decision is the DERC's. If regulators are to be undermined, that will set back all progress made in creating and developing these bodies.