1. Your electricity bill to fall? Here is what the Narendra Modi government is promising now

Your electricity bill to fall? Here is what the Narendra Modi government is promising now

The Act laid out a period of five years, by 2008, by when large users who consumed up to 1MW would get open access; while it did not lay out a time frame for providing this for smaller users like households, it was always assumed this too would happen.

By: | Published: October 19, 2017 4:51 AM
It never delivered on Electricity Act 2003’s promise of open access, but is promising to make it happen this time. (Reuters)

Since electricity is a natural monopoly, despite the fact that there are regulators to prevent price gouging of users, the best solution to keep tariffs competitive is to, well, introduce competition. So, when the Electricity Act was framed in 2003, it envisaged a situation of ‘open access’ which essentially meant that users would be free to choose who their electricity provider would be, much like the mobile number portability of today. So, your current service provider could be A, but if you preferred B, you could get electricity from it—B would then pay a tariff to A for using its wires that come into a customer’s premises and supply electricity through this. The Act laid out a period of five years, by 2008, by when large users who consumed up to 1MW would get open access; while it did not lay out a time frame for providing this for smaller users like households, it was always assumed this too would happen. Given this, it is odd to see the government promising ‘open access’ all over again, although through a new route.

Under what is planned, no electricity company will both own the wires coming into a consumer’s premises and supply electricity at the same time—they will be separate companies. So, SEB-1 will own all the wires in an area while SEB-2 will supply the electricity. It is not clear what will happen in places like Delhi where BSES and NDPL both own the wires and supply electricity since this separation of carriage and content was not envisaged at the time of the privatisation of the Delhi Vidyut Board.

But whether electricity wires are owned by a company different from the one that supplies the electricity, the fact is that ‘open access’ was promised under the Electricity Act, and this did not happen—there is no reason to believe it will happen now. Given high levels of theft as well as subsidies to households and farmers, any use of ‘open access’ was to be accompanied by a ‘cross-subsidy surcharge’—so that the electricity provider could survive when high-paying customers left. If the UDAY programme is able to lower theft levels and electricity regulators are able to lower subsidies, ‘open access’ has a better chance now since the ‘surcharge’ will reduce. But high ‘surcharges’ are not the only way that ‘open access’ was denied in the past.

Buying electricity from a company across the city or state requires it to be transported across wires—in the past, to prevent ‘open access’, the State Level Dispatch Centres (SLDCs), owned by the government, would simply say their power lines were too choked to carry the electricity. There are ways around this, in that if SLDC loads are made public 24×7, they cannot play this game for too long. But, in a situation, where the government is the sole supplier of electricity in most parts of the country, it is not clear how separation of carriage and content is going to help increase competition or lower tariffs. It makes for nice newspaper headlines, but for meaningful changes, electricity boards across the country need to be broken up and privatised—having two government-owned electricity companies can, theoretically, provide the same degree of competition, but when is the last time IOC, HPCL and BPCL really competed?

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