Hasty creation of regulatory tiers tantamounts to putting the cart before the horse. No tier, including CEA, can cope, for example, with the problemfacing Power Finance Corporation. PFC wants a first charge on revenues of SEBs that have borrowed from it. SEBs have been rather free in creating escrow accounts for independent power producers (IPPs). The earmarked revenues will go to the IPPs; this could leave little for PFC. There is also the fear that rapid creation of new power capacity will result in excess power. If that happens, the SEBs will have to back down their own generation (reduce sales) and buy new power; the consequent realisations from sale of power will leave a hole unless power tariffs are revised and restructured. PFC does not want to take any chances; but, in effect, its first charge will slow down new power capacity in many states. It is difficult to visualise how CERC or any SEC can untangle the situation. For the basic issue is one of policy on power tariff reform; and the decision whether SEBs should yield their status as base load stations is a political one, beyond the scope of any regulatory authority.

Even the simple issue ofhiking the rate of return for NTPC from 12 per cent to 16 per cent -- the latter is what private generators are entitled to -- cannot be resolved by CERC. True, if NTPC gets the higher return, it will have more funds (ploughback) for investment. But the states that buy power are unwilling to pay more. The regional electricity board (the power surplus eastern one, in this case) has protested in one voice. Regulatory authorities, CEA, CERC or SECs need a policy to fine tune regulation. Without it, they are toothless.