In the UK, the ability to switch power supplier has been there, but the process was so onerous that the government stepped in to make it easier for customers to switch and save money. This was done by asking energy suppliers to make the tariffs clearer, and by funding a helpline for offering switching advice. Energy rate comparison sites often cite accreditation from the local regulator, Ofgem.
Both these examples show how governments and regulators are working to squeeze efficiencies out of a system that was historically considered a natural monopoly. In the rest of the world too, utilities are finding that they need to offer a compelling proposition to keep their customers, and customers are finding a voice.
In India, the option of choosing an electricity supplier is mainly available to the large customer. And the utilities are not too friendly to them either. The latest Economic Survey (February 2016) shared excerpts from the tariff schedule of a typical state in the country. The mishmash of about 100 tariff rates for different categories would test the patience of any user. A recent copy of a residential bill from the Dakshin Haryana Bijli Vitran Nigam shows 15 broad categories subdivided into 40 sub-categories, listing separate tariffs and fixed charges. Paradoxically, there are higher tariffs for disincentivising consumption for one category of clients (domestic users) and incentives for consuming for another category (industrial users).
"There are separate tariffs for poultry farms, pisciculture, wetland farms (above and below a certain size), mushroom and rabbit farms, etc," the Survey noted, and made a case for simplification of tariffs, with no more than two or three categories. Isn't there a bigger case for transparency in the power bill? Wouldn't consumers like to know where the power is procured from, and to what extent it is green?
Japan's Ministry of Economy, Trade and Industry issued guidelines for electricity retailers back in January, which are worthy of emulation. It said that retailers should:
i) clearly disclose annual electricity generation mix and associated emissions;
ii) disclose to the consumer if they are selling electricity procured under the feed-in tariff programme;
iii) disclose their supply plan;
iv) disclose the location of power plants they are buying from;
v) in case of blackouts with known causes, disclose and handle customer queries.
In the UK, two electricity retailers -Good Energy and Ecotricity - are vying for the title of the "greenest energy supplier", in a bid to woo customers.
There would be some consumers in India willing to pay a premium for green power, except that the green power would be cheaper than the diesel-generator power that a section of the population currently uses. Estimates of the capacity of diesel power vary but, assuming that it is 100,000 megawatts, that is a whopping 100,000 megawatts of additional opportunity for renewables.
Perhaps there are lessons to be learnt from the telecom sector, where the regulator was proactive and ensured that tariffs on offer were simplified, and switching suppliers was made easy, leading to millions of users opting for so-called "mobile number portability" every month. The total number of users who sought telecom supplier switching in India crossed the 200 million mark in February.
The author is editor, Global Policy, for Bloomberg New Energy Finance;
vgombar@bloomberg.net
vgombar@bloomberg.net