A widening gap between governments and the country’s power regulators on rates and related issues has prompted the Centre to propose a legal amendment so as to facilitate review of the performance of regulators. The power ministry, seeking an update of the Electricity Act, 2003, has mooted the formation of committees both at the central and state level to monitor respectively the performance of the Central Electricity Regulatory Commission (CERC) and state electricity regulatory commissions (SERCs).
The move comes at a time when several distribution utilities had not approached SERCs for rates revision. In some cases, SERCs have on their own, refrained from initiating this exercise to revise rates.
The Forum of Regulators (FoR), a representative body of power regulators, has set up a working group headed by CERC chairman Pramod Deo to make suggestions to the power ministry before carrying out the proposed legislative amendments. The body, which would hold its next meeting on July 11, is currently examining the existing provisions of the Electricity Act, 2003 in the context of mechanisms provided for accountability of the Electricity Regulatory Commissions in terms of performance of their statutory functions. The working group would also analyse the need for more detailed framework, including review of performance of regulators and make suitable recommendations in this regard.
“This is an exercise in introspection,” according to CERC chairman Pramod Deo, who heads the working group on review of the performance of regulators.
“We discussed at length the need for review of performance of regulators in the FoR meeting held at Gangtok (Sikkim),” he said.
“The consensus was that there should be an independent body distant from the government to objectively assess the work done by regulators.”
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The power ministry has proposed the inclusion of a Section 89(6) in the Electricity Act, 2003 so that the regulator’s performance can be reviewed annually by a multi-disciplinary body on the basis of a performance evaluation matrix and report to the appropriate government for necessary action. At the central level, the ministry has proposed the formation of a panel to be chaired by the Planning Commission member (energy) and comprising a technical member of the Appellate Tribunal on Electricity technical besides three experts from outside. The union power secretary would be the convener. The central committee would review the CERC’s performance.
At the state level, the committee would be chaired by the chief secretary. Its members include the Central Electricity Authority chairman and the joint secretary at the union power ministry or its representative besides three experts from outside. It would monitor the SERC’s performance.
Another trigger to the move is the set of observations the VK Shunglu Committee made on the financial problems of state electricity boards. Its report had emphasised the need for regulators to regularly carry out tariff revision exercise. “The problems faced by distribution utilities are sometimes laid at the door of the regulator,” the panel had observed. “Periodic tariff increase to meet ever-increasing costs have not taken place and therefore distribution companies are unable to cover costs from tariff. Alternatively the cost of generation keeps on increasing without there being a concomitant increase in tariffs.