As power distribution companies (discoms) are clocking burgeoning losses and some state electricity regulatory commissions (SERCs) are showing laxity in tariff fixation, the Appellate Tribunal of Electricity (ATE) has asked state power regulators to decide tariff by April 1 every year.
Any non-submission of the annual revenue requirement or delay in the tariff proposal by one month beyond the scheduled date of submission would invite the SERCs to face suo motu proceedings for tariff determination. These will be in accordance with Section 64 of the Electricity Act, 2003.
ATE, in its path-breaking judgement, sought regular (“preferably every year”) truing-up exercises. Further, every SERC must have in place a mechanism for fuel and power purchase cost adjustment in terms of section 62(4) of the Electricity Act. Fuel and power purchase cost adjustment should be made on a monthly basis. The time-line should preferably be monthly, but it must not exceed quarterly basis. Those SERCs, who do not have such mechanism in place, would have it within 6 months.
ATE’s judgement comes at a time when the losses of discoms, which were of the order of Rs 75,000 crores in FY09, are expected to reach Rs 1.16 lakh-crore by FY15. The order is an outcome of the intervention by the power ministry. The tribunals has directed SERCs to send the periodical reports by June 1 about the compliance of its directions to the (Forum of Regulators (FoR), who, in turn would send the status report to ATE.
The Central Electricity Regulatory Commission (CERC) said the ATE’s judgment would go a long way in the adoption of model tariff regulations being finalised by the FoRs. These regulations “fairly address” the issues relating to the tariff fixation of distribution companies in the state, according to CERC chairman Pramod Deo.
“The viability of distribution companies, which is critical to sustain development of the power sector and protection of interests of consumers in terms of ensuring quality of supply and its reliability, will be ensured once model tariff regulations are adopted,” he told Business Standard.
According to Deo, since FoR is a recommendatory body, ATE judgment would strengthen state regulator’s hands in the full implementation of model tariff regulations.
Deo informed that the power secretary was also likely to take up this issue of rational tariff setting on a regular basis with the state governments as well as the state regulators.
On its part, AP Transco said power utilities were supposed to file the ARR in time and whatever increase in cost that has to be factored in the ARR. “As per the ATE judgement, mandate falls on SERCs to even initiate suo motu proceedings for tariff determination.
This is essential to sustain the power sector as a whole. This will also make the sector financially viable,” according to its chairman Ajay Jain.
However, the managing director of a distribution company, who did not want to be identified, said all utilities should not be put into one basket. “There are three types of distribution companies. One category is of those distribution companies who are not writing account books nor filing tariff proposals with regulators. The second set of utilities are those where there accounts are update but they do not file tariff revision. The third set of utilities such as Maharashtra and Andhra Pradesh whose accounts are update and file tariff proposals annually with regulators. However, the regulators are not allowing true and workable tariff.”
HSBC in its research report on Indian power sector said although consumer tariff revisions in 14 states over the past six months are positive, “more needs to be done as we expect the long-term power purchase costs of states to increase significantly in the next few years as prices discovered under Case I bidding continue to go up”.
