'We need to have new tariff norms before March 2009'

Q & A : CERC CHAIRMAN PROMOD DEO

Pramod Deo, the new chairman of the Central Electricity Regulatory Commission (CERC) who was appointed more than a year after the previous incumbent retired, has quite a few tasks to take care of. Since he was chairman of the Maharashtra Electricity Regulatory Commission for six years, he is well aware of the main issues facing the sector, including the urgency of finalising the next five-year tariff regulation (2009-2014), he tells Sudheer Pal Singh and Vandana Gombar.

What are the key issues in the sector which have been awaiting the chairman's decision?

Most cases in the CERC are routine cases of central undertakings related to tariff based on cost-plus approach. These were being handled and there has been no huge pendency of cases. But there are other important issues. We have to come up with a new tariff regulation before March 2009. This is my first priority.

Is there going to be any change in the general philosophy of tariff regulation?

Our philosophy is to work on a cost-plus return. But in that, we must capture all efficiency parameters. So there should be a reward for efficiency gain and a penalty for shortfall. Though the efficiency parameter is in place in the current regulation (2004-2009), we are sharpening it.

What are your other priorities apart from the multi-year tariff regulation?

My second priority is to induce grid discipline, which is not being followed. The question is whether it is enough to penalise the state government for indiscipline or should the official responsible be penalised.

So are we going to have a more proactive regulator now? What is the vision you have come up with?

Our basic objective is to give impetus to the reform process. And the regulator does play a proactive role in that. We will also be working through a body comprising all state power regulators, Forum of Regulators (FOR). That is important because most problems are at the distribution level, which is a state subject. We have realised that we need to have a separate secretariat for FOR.

Is enabling captive power on the grid also a priority?

The role the CERC has to play on this front is to see that inter-state flow of power is not blocked. We have to ensure that transmission charges are reasonable. The role of captive is only in bridging the gap (demand-supply) or in meeting the peaking demand. Most captives are running on liquid fuel and thus the cost goes up.

But getting captive power onto the grid would require open access.

Currently, we are looking at partial open access. Basically, the consumers of open access "" commercial and industrial players "" are looking only for partial open access because of the cost. Open access has meaning if you can get power that is cheaper than the average pool cost. And we'll have cheaper power available only when the ultra mega power plants and merchant plants start generating. There are other problems with open access. Some other state regulators have very high charges for open access, while some other states have not yet unbundled transmission and distribution.

Consumers have shown a willingness to pay more for power, as in Pune. How can this be tapped to ensure increased supply of power?

When we realised that Maharashtra is going to face a huge shortage of more than 5,000 Mw, it was proposed to set up small decentralised power plants which would be owned and run by franchisees. The local people would share the higher cost. This can be applied in other states also. Pune, Thane and Baramati have shown that people are willing to pay more if they are assured that they will not face any load shedding.