Charging up a poll battle

Delhi BJP promises to transform power billing in its poll manifesto; a closer look reveals a more complex issue

Electricity rates have become a political issue in the run-up to the elections in Delhi, with the Opposition focus on it, in the hope this would lead to the rout of the Sheila Dikshit-led Congress government.

The previous increase was in July, when rates were raised by five per cent. The Bharatiya Janata Party (BJP) has accused her of "conniving" with electricity distributing companies (discoms). Yet, the Delhi government has maintained the rates here are as cheap as it gets. (POWER POLITICS)

BJP formula
The BJP says it has a "10-point formula", which the party claims will reduce power prices in Delhi by 30 per cent. The party has, however, not stated any time frame for this.

The strategy includes bringing "transparency" in the working of the discoms, by ordering a study by the Comptroller and Auditor General of India, curtailing "unnecessary" power purchases that will lead to reduction of Rs 2 a unit, more autonomy to the Delhi Electricity Regulatory Commission (DERC) by appointing "competent" people, controlling power thefts and conducting an energy audit. However, the BJP's primary argument is that discoms in Delhi have "monopolised" power. And, the solution is introducing open-access.

The system of open-access allows customers to make a choice among different discoms. It was a primary objective of the Electricity Act, 2003, which had envisaged open-access as a system to introduce competition in the sector. Although the facilitative framework was created by the Central Electricity Regulatory Commission, started the system at the inter-state level, no state has provided the option to ordinary customers.

On ground
At present, this is only available in Mumbai, where customers can choose between Reliance Infra and Tata Power. Here, unlike in Delhi, the power rates between the two discoms significantly vary. According to data from the Central Electricity Authority, for the first 200 units, while Tata Power supplies at Rs 2.48 a unit, Reliance Energy is charging Rs 5.34. A study by Prayaas Energy Group, a Pune-based body, says until June 2011, about 160,000 customers (including 83,000 domestic ones) migrated from Reliance to Tata.

Can open-access work in Delhi, too? According to P D Sudhakar, chairman of DERC, this is unlikely. "The Tatas are able to sell cheaper power in Mumbai because they have their power generating plant, which ensures an advantage," he says. He says open-access is available in Delhi for bulk customers (1 Mw and above) but most customers have not migrated.

Debasish Mishra, senior director at Deloitte Touche Tohmatsu, also doubts whether open-access will lead to any significant reduction in prices. "Power tariffs (rates) can be reduced by bringing down power purchase cost and making efficiency gains through reduction in distribution losses," says Mishra.

The cost of power generation has been rising in the country. Companies argue the cost of generation has followed the curve along the rise in prices of coal and gas. In Delhi, 90 per cent of the power is sourced through thermal power stations. Of the thermal stations, 68 per cent are coal-based and the rest are gas-fired.

Purchase
Another key part of the BJP's professed strategy is "curtailing unnecessary purchase of power", to lead to a reduction in price by Rs 2 a unit. The party says "power companies buy electricity more than the requirement of Delhi. As a result, customers pay an additional Rs 2 per unit".

The Delhi government retorts that more power is bought to meet peak demand. An inter-city comparison by Prayaas Energy Group shows this demand in Delhi is much more than in any other city. Delhi's peak demand is around 5,000 Mw, about 57 per cent more than Mumbai's, the second highest. Further, Delhi has a non-uniform demand, with large variations between peak and minimum demand.

Shakti Sinha, a former power secretary to the Delhi government, doubts whether the BJP will be able to cut on the amount of power purchase. "Since Delhi has unique power peaks, the government is forced to buy extra power. If you don't do that, then load shedding will occur. Power companies don't supply at will; extra power is, therefore, needed," he said.

Comparisons
An analysis of the March 2013 report of the Central Electricity Authority (CEA) for the first 200 units of domestic power consumed shows power rates in Delhi are neither too cheap nor very expensive. Mumbai (Tata Power), Chennai and Ahmedabad have lower rates. However, Delhi supplies cheaper power than its neighbouring states of Uttar Pradesh, Haryana, Punjab and Rajasthan. The analysis, however, does not take into account the individual subsidies that states provide.

At present, Delhi has five power discoms. In 2002, the Delhi Vidyut Board was unbundled by the government, citing mounting losses. Private companies were provided licences to distribute power. The northern and north-western parts are supplied by Tata Power Delhi Distribution Limited (TPDDL), a joint venture between Tata Power and the government of Delhi, with the former holding 51 per cent. The rest of the capital, excluding the New Delhi Municipal Council areas and those in the Delhi Cantonment, are supplied by BSES Yamuna Power Ltd and BSES Rajdhani Power Ltd.

BSES is owned by the Reliance Anil Dhirubhai Ambani Group.

According to the Delhi Economic Survey (2013-14), since private discoms were introduced in 2002, the transmission and distribution losses have been brought down from 60 per cent then to 17 per cent now. The fall has come even as consumption has increased from around 20,000 units to 25,300 units.

However, a comparison with other metropolitan cities shows the Delhi discoms can be more efficient. They're less efficient than in Bangalore, Chennai, Hyderabad, Kolkata and Mumbai.

Comparing the March 2012 rates with those of March 2013 reveals prices have increased by 24 per cent in Delhi. In the same period, those in Tripura rose 91 per cent, in Maharashtra by 52 per cent, in West Bengal by 35 per cent and in Kerala by 34 per cent. However, the increase was much less in Mumbai (Tata Power), Gujarat, Bangalore and Kolkata.

On the other hand, rates decreased in Tamil Nadu (five per cent), Ahmedabad (2.2 per cent) and Uttar Pradesh (0.95 per cent) during the period.
POWER POLITICS
BJP'S FORMULA/STATUS

Introduce the system of open access, which allows customers to have a choice among discoms

• At present, open access is available only in Mumbai
• Implementation of open access will not be instant, as issues such as wheeling charges, switchover surcharge and cross-subsidy will need to be sorted

Order CAG audit of discoms

• At present, CAG doesn't audit private discoms
• Delhi High Court is hearing a petition to allow the CAG to audit discoms. In court, Derc has supported the need for CAG's audit

Curtailing unnecessary purchase of power

• Of all the metropolises, Delhi is the biggest buyer of power. The government argues not doing so will lead to scheduled power cuts

Appointing 'competent people' on Derc

• The BJP has not defined "competent people". At present, Derc has a retired bureaucrat as its chairman, and two members who are experienced engineers

Discoms to be brought under RTI Act

• Delhi High Court is also hearing a petition on bringing private discoms under RTI. Derc also wants Discoms under RTI

Power purchase agreements to be made public

• Power purchase agreements signed between power generators and discoms are not available in public domain

Providing separate neutral line to each customer

• Derc has written to discoms to ensure each meter has a separate neutral line. Consumers have complained to Derc that in houses with common neutral lines, meter readings were not correct