Editorial: Goes beyond Delhi

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Published: May 28, 2015 12:41:29 AM

Few electricity regulators are doing their job

Given how power purchase costs in the capital continue to soar and outstrip those in other parts of the country, it is not surprising the Appellate Tribunal for Electricity (Aptel) has rapped the Delhi Electricity Regulatory Commission (DERC) for not giving the 3 electricity discoms their Power Purchase Adjustment Costs (PPAC) for the third and fourth quarters of FY15. Against an all-India average of R3.49 per unit in FY15, Delhi’s electricity distribution companies (discoms) paid R5.47 for the power they purchased—the power costs were R4.84 in FY13. Which is why, while talking of the huge financial crunch faced by the discoms and the large revenue gap, the Aptel has pointed out the PPAC has to ideally be adjusted on a monthly basis. Apart from the PPAC funds, the 3 discoms maintain they are owed over R28,000 crore by Delhi’s customers till FY15. Of this, R13,658 crore has been accepted by the DERC for the period till FY13; DERC is yet to pronounce on the discoms’ claims for the period after this.

Apart from the larger issue of Delhi’s regulatory assets, losses in the overall electricity system across the country are estimated to be upwards of R1 lakh crore annually—and this is despite Aptel orders that state electricity regulators have to ensure tariff orders are filed regularly and that all regulatory assets are cleared over a period of three years; in the case of Delhi, for instance, an 8% surcharge over existing power tariffs has been allowed to take care of the interest costs of servicing the regulatory assets, not repaying the principal. After an average electricity tariff hike of 14% in FY13, the year in which the states with bankrupt SEBs were looking to sign on to the centre’s financial restructuring plan and needed to show they were reforming, the hikes in FY14 were a mere 7% and an even lower 6% in the case of 22 states who hiked tariffs in FY15; and, according to a recent analysis by ICRA Research Services, the situation is even worse in FY16 where, till date, just 15 of 29 states have seen utilities filing for a hike in tariffs. While the tariff hike is 15-26% in states like Bihar and Madhya Pradesh, some perspective needs to be added—Bihar never hiked tariffs in FY15 and even after the 21% hike proposed in FY16, the tariff is R4.85 per unit as compared to the cost of R6.07. States like Tamil Nadu and Rajasthan also have huge regulatory assets—R28,200 crore and R35,300 crore, respectively. Given this, the Aptel needs to prod state electricity regulatory commissions to do their job and, if need be, initiate a suo motu review of the situation in each state.

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