Power Finance Corporation (PFC) has asked the Delhi Electricity Regulatory Commission (DERC) to agree to fairly stiff conditions if it is to give a R14,000 crore loan to the two BSES electricity distribution companies (discoms) in the capital.
The letter, written on June 18, is significant because the DERC has already outlined, to the Supreme Court, its plans to repay the dues — regulatory assets, in jargon — of the two BSES discoms BRPL and BYPL as well as the Tata’s TPDDL. As of FY14 (see graphic), the dues of the BSES firms is R21,704 crore. PFC’s letter means the financial institution is not satisfied with the plan outlined to the Court.
The normal practice of regulators is to ‘true up’ data for the previous financial year—the tariff order which is to be issued next month would normally take into account only the FY13 accounts, but PFC wants DERC to take into account the FY14 data as well. In the case of the BSES firms, this will require the tariff order to cover the repayment of another R3,000-3,500 crore of regulatory assets.
In its letter to the DERC, PFC has also said it wants DERC to be more realistic in its assumptions. In FY12, for instance, the DERC tariff order had assumed a R290 crore surplus for BRPL and a R40-crore gap for BYPL. According to the data submitted by the firms, BRPL had a revenue gap of R1,623 crore and BYPL a gap of R1,285 crore (see graphic). This was largely due to DERC assuming a lower cost of power purchase—in the case of BRPL it assumed a cost of R4.4 per unit when passing the order, while the actual turned out to be R5.20 per unit.
“It is desirable that the recovery plan”, PFC’s letter says, “is based on realistic assumptions”.
Given this, PFC wants the tariff hike assigned to repaying the regulatory assets to be incorporated in the tariff as a specific surcharge, and not as a part of the FY15 tariff order. Which means even if the DERC makes assumptions for the FY15 tariffs that turn out to be incorrect, it will not affect the repayment of the older regulatory assets — for which PFC will be giving a loan.
PFC has also asked that DERC assure it no more regulatory assets will be created. That is, whatever the costs of power