V S Ailawadi: Power reforms - hollow victory

Politics once again scored over the power reforms in Delhi. The recent hike in the electricity rates for the domestic consumers was mired in a blame game. Even resident welfare associations (RWAs), whose anguish was justified, have unconscionably done disservice to the credibility of the regulatory process.

At the time of the privatisation, the government of NCT of Delhi (GNCTD) committed Rs 3,450 crore and cost plus regime under which the DERC was to fix tariffs annually during the five-year period (2002-03 to 2006-07).

A large chunk of this money has gone to compensate TRANSCO for the losses incurred to maintain uniform cost of supply to the three DISCOMS.

Many consumers are not aware that even after paying a tariff increase of 15.55 per cent in the past three years, there is supposed to be a revenue gap for the DISCOMS in the form a "regulatory asset", which is like a deferred tariff increase.

NGOs such as RWAs and other stakeholders are not active in the proceedings of the Delhi Electricity Regulatory Commission (DERC), nor do they fully understand the issues that go into tariff determination.

Although they rightly felt that when the North Delhi Power Ltd and BSES Rajdhani Power Limited over-achieved the AT&C targets, they should be sharing it in terms of price reduction, too. But the benefits of over-achievement were not reflected in the tariffs adequately because of the "Policy Directive" of the GNCTD and the "regulatory asset" created by the DERC. The DERC made a departure from the previous years.

Instead of cushioning present consumers from a further increase in tariffs, it reduced the burden by using Rs 203 crore from over-achievements to reduce the already created "regulatory asset" proportionately among the three DISCOMS.

Some regulatory analysts do not agree with this approach. In the ensuing controversy, the Delhi government should have explained the long-term benefits of this approach and, to some extent, the DERC, too, should have made efforts to educate the consumers through press and media about the rationale of using additional revenues of nearly Rs 200 crore from over-achievements to liquidate a portion of revised regulatory assets of nearly Rs 548 crore.

The protest against the domestic tariff increase is a timely warning to the service providers. But this awareness will be meaningful only if it is sustained and translated into active participation in the public hearings on the annual revenue requirements of the DISCOMS and some form of collaboration on boosting customer confidence.

It is unfortunate that the Delhi government adopted ad hoc-ism by announcing a subsidy of Rs 182 crore under political pressure. Thus, it politicised the entire issue of power sector reforms in Delhi.

The writer is Regulatory Affairs Analyst and former Chairman, ERC-Haryana.