Regulators evolve mechanism to cut AT&C losses

Written by Sanjay Jog | Mumbai | Updated: Mar 17 2009, 04:20am hrs
Even when the aggregate technical and commercial losses (AT&C) losses in the country ranges between as low as 11% to as high as 78%, the Forum of Regulators (FoR), a representative body of central and state power regulators, has kicked off an exercise for the introduction of incentive/disincentive mechansim relevant for government-owned distribution utilities. The mechanism envisages incentives or disincentives to staff of government-owned distribution utilities to be linked to the reduction in AT&C losses. It was one of the provisions in the National Tariff Policy announced by the Centre in 2006.

FoR has invited quotation from consultants for carrying out a study to evolve an appropriate model of incentive-disincentive mechanism for distribution utilities. The consultant will have to study incentives and disincentives specified by different state electricity regulatory commission (SERCs) for exceeding/non-achievement of norms specified in their multi-year tariff (MYT) orders for distribution licensees.

The National Tariff Policy says, ATC loss reduction should be incentivised by linking returns in a MYT framework to an achievable trajectory. Greater transparency and nurturing of consumer groups would be efficacious. For government owned utilities improving governance to achieve AT&C loss reduction is a more difficult and complex challenge for the SERCs. Prescription of a MYT dispensation with different levels of consumer tariffs in succeeding years linked to different AT&C loss levels aimed at covering full costs could generate the requisite political will for effective action to reduce theft as the alternative would be stiffer tariff increases. The SERCs may also encourage suitable local area based incentive and disincentive scheme for the staff of the utilities linked to reduction in losses.

The consultant will have to develop and recommend appropriate model for implementing the incentive/disincentive mechanism separately for government-owned distribution utilities and private distribution utilities under the MYT framework. The consultant will have to make its suggestions based on study of the multi-year tariff orders issued by different SERCs in the country. Besides, the consultant will have to do comparison of the applicability of state-owned distribution utilities, with further classification into state electricity board (SEBs) and unbundled distribution licensees, and private sector distribution licensees.