Power tribunal asks regulators to fix trade margins

Power-starved states such as Delhi and Maharashtra can look forward to cheaper electricity soon, with the Appellate Tribunal of Electricity (ATE) directing all state regulators to fix profit margins on intra-state trading.

The tribunal's far-reaching order came on a petition by noted expert Gajendra Haldea, who had argued that generating and distribution firms in surplus states such as Orissa, West Bengal, Himachal Pradesh and Uttaranchal were selling power at a price much higher than the tariffs fixed by regulators.

"Appropriate commissions all over the country shall fix trading margins for intra-state trading in a reasonable manner, taking into account interests of consumers and keeping in view that trading should also be encouraged," a Bench comprising chairperson Justice Anil Dev Singh and technical member A A Khan said in the judgment delivered on December 22.

"This shall be done in four weeks from the date of receipt of copy of this order," the Bench said. The order comes almost a year after Central Electricity Regulatory Commission (CERC) fixed margins at four paise per unit for inter-state trading to stop traders from profiteering.

Haldea, who is also advisor to Planning Commission Deputy Chairman Montek Singh Ahluwalia, had sought to ensure that all power generating companies and licensees abide by Electricity Act, 2003, for sale and purchase of power at regulated tariffs.

Generating and distribution companies in surplus states have been selling power to traders and other licensees outside the state at tariffs higher than those fixed by regulators.

This escalates the cost for deficit states such as Delhi, Maharashtra, Punjab and Haryana, who sometimes pay as much as Rs 5-7 per unit compared to only Rs 1.50-2 per unit at which the generating company produces electricity.

The tribunal also said the distributors and traders "shall" ensure that they abide by the trading margin fixed by state regulators.

Haldea had contended that such practice by surplus states was incentivising load-shedding by distribution firms within their area, to make profits through inter-state sale at prices significantly higher. Further, these profits were being used to offset the deficit arising from commercial losses, he said.

The Tribunal also ruled that generating firms can sell directly to traders at a mutually agreed price as long as the price is within the ceiling of four per cent in addition to the base price. State regulators would have to fix a limit to the price of such sale, but till then the agreed price would continue, it said.

In its judgment, the Bench also prescribed a methodology for calculating the price at which generator can sell electricity to traders and intermediaries.

The price fixed by regulators for supply of electricity by a generating company to a distribution licensee must be taken as the base price or the lower band.

"The maximum price or the upper band at which the generator can be allowed to sell power to any person other than the distributor shall not be allowed to exceed the base price plus four per cent," it said.

Besides, "the generator will not supply electricity to entities, utilities or persons other than the distributor, unless it fulfills its obligation to supply electricity to the distributor for the consumption of the consumers," the Tribunal added.