I don’t know when you last bought onions, but for most households, they form a far smaller proportion of the household budget than the monthly electricity bill does. So why is it that when the prices of onions go through the roof a government falls, and when electricity bills soar nothing happens? Some part of the hike has to do with fuel prices going up, but in most states this is the result of the governments refusing to allow competition. So, prices of electricity bought in the open market, by say BSES in the case of Delhi, have risen from around Rs 2.3 per unit in 2004-05 to Rs 4.52 in 2007-08 and, just a few weeks ago, trades of Rs 13 a unit have been reported. Right now this comprises just 2-3 per cent of the total, so consumers don’t feel the pinch.
This, of course, is the raison d’être for the Open Access petition reported in these columns two weeks ago — open access allows you to choose who you want to buy your power from and, as in the case of telecom, results in tariffs falling. The problem, as the petition points out, is that if a generating company has excess capacity, the state doesn’t allow it to sell it outside the state — instead, the state government trading company sells it at a huge profit. So, the petitioners have asked the Central Electricity Regulatory Commission (CERC) to intervene to force the states to allow such sales. This may nor may not succeed since there is a doubt as to whether CERC has the jurisdiction over the states.
Let’s assume it does. What it then means is that, say, BSES in Delhi will be able to buy power directly from, say, Tata Power in Mumbai (this power is moved on ‘transmission lines’ on which CERC, according to the petitioners, has jurisdiction); but how do you ensure that the Ansal Plaza mall in south Delhi is able to buy power from the same Tata Power (apart from the transmission lines from Mumbai to Delhi, it needs access to Delhi’s ‘distribution’ lines, on which CERC has no jurisdiction)? These are under the jurisdiction of various State Electricity Regulatory Commissions (SERCs).
This is what the recent Task Force on Measures for Operationalising Open Access(http://www.infrastructure.gov.in/pdf/OpenAccess.pdf), tries to address. Interestingly, the first few pages of the report give you the impression that open access is a reality — 21 of 23 states, it says, have notified their open access regulations, 18 have fixed the cross-subsidy surcharge for customers who wish to move away from the official supplier (the surcharge is to make up for the losses since commercial/industrial consumers are overcharged to subsidise household consumers); 18 have fixed the wheeling charges (the rate for using their facilities); and so on. And yet, the report says, there are no instances of consumers getting open access!
The reasons for this are well known — apart from the states not allowing permission to take power out of the state, few consumers want to take on the state electricity board, or its private sector descendants. So, if I’m, say, Ansal Plaza buying power from Mumbai — if for some reason, the Mumbai power doesn’t come through, I’ll need back-up power from BSES, but BSES won’t give it to me! Plus there are a million other ways for BSES to harass Ansal Plaza, so Ansal Plaza’s unlikely to even ask for open access rights.
Other ways to ensure there’s no open access are to fix very high cross-subsidy surcharges (read the report to see just how high these are and how much they vary across states!) and wheeling charges. Ironically, the problem now is that even in states which are willing to allow open access now, no one wants to buy — since power prices have been driven up so high (Rs 13 per unit in recent cases!), no one can afford to buy power in the open market!
So how did the price go up so much? This is where the spirit of the Electricity Act has been breached. Under the law, most generating companies get prices that are regulated and, if these are to be sold across states, the CERC allows a four paise trading margin per unit — each SERC has to set its own margins. Yet what several states do is to allow very low margins if the electricity is sold within the state and very high margins if it is to be sold outside the state — this subsidises customers within the state but penalises those outside (see www.business-standard.com/india/news/sunil-jain-orissa-for-oriyasso-on/16/36/331725/ for the story of how Orissa does this).
Here’s the irony. RV Shahi, who is one of the petitioners to the CERC, used to be power secretary. As power secretary, he was in charge of giving thousands of crores to state governments under the Accelerated Power Development and Reforms Programme, but he never insisted this kind of unfair trading be halted or that stand-by power be mandatory. The central government has a discretionary quota of power produced by the central PSUs — so it was in the ministry’s power to put in 4,000-5,000 MW of power in an open access pool at the cost price of Rs 2 or less. This would have driven trading prices down. But, you guessed right, the ministry of power did nothing of the sort. Similarly, the SERCs could have mandated that electricity suppliers, like BSES, indicate the charges for the electricity and the wheeling separately — this would ensure those wanting open access would pay the same wheeling charge. The SERCs should have mandated that open access permission was automatically granted — while the head of the Haryana SERC, VS Ailawadi, another petitioner, didn’t do any of this.
In other words, none of those who could have furthered open access (and I’ve mentioned just two by name) did anything while in power. If nothing gets done now, electricity prices will keep shooting up, and the next time around, it won’t be onion prices that’ll see the government voted out.
