REGULATION

Regulate the Regulator

Regulatory mechanism is the result of reform process initiated in the year 1991. In almost all the states, state regulatory commission is in place. Regulator is a deriving force in the system. Though regulator is guided by Government policy directives but implementation is the value addition. As a result of the reforms, consumer look at the value addition in terms of economy and efficiency. Government further set up a Appellate tribunal. The tribunal hear appeals after the regulatory commission. Thus this tribunal acts as a super regulator.

Let us divide the reform process in to four stages for the purpose of its analysis, limiting to NCT of Delhi.

• Institutional Mechanism
• Policy Directives and Evaluation
• Implementation by DISCOMS & regulator
• Consumer’s apprehension

Institutional Mechanism
The Delhi Electricity Regulatory Commission (DERC) was constituted by the government of National Capital territory of Delhi in March 99 and it became operational in December 1999. The major functions assigned to the commission under Delhi Electricity Reform Act-2000 are as follows:

• To determine the tariff for Electricity, wholesale, bulk, grid or retail and for the use of the transmission facilities
• To regulate power purchase, transmission, distribution, sale and supply
• To promote competition, efficiency and economy in the activities of the electricity industry in the National Capital Territory of Delhi
• To aid and advise the Government on Power Policy
• To collect and publish data and forecasts
• To regulate the assets and properties so as to safeguard the public interest
• To issue licenses for transmission, bulk supply, distribution or supply of electricity
• To regulate the Working of the licensees
• To adjudicate upon disputes and differences between licensees

Thus value addition in terms of competition, efficiency and economy in the industry lies with the regulator.

Policy Directives & Evaluation
The Government through the Policy Directions indicated its intent to disinvest majority shareholding in the DISCOMs (Distribution companies) to private investors with the balance 49% remaining with the Govt. The policy Directions identified the Aggregate Technical & Commercial (AT&C) losses as the measure of efficiency of the distribution business. In this regard, the Govt. invited the investors to submit the bids for AT&C LOSSES, which they could reduce each year for the years 2002-03 till 2006-07. However prior to the submission of bids by investors, the commission was required to determine the base AT&C loss levels for each DISCOM for the purpose of bidding. The prescribed level of AT&C for central-East, South-West, and North-North West part of Delhi later named as BSES Yamuna, BSES Rajdhani & NDPL are 57.2%, 48.1% and 48.1% with loss reduction target of 20.75%,19.25% and 19.25% respectively.

Thereafter the investors submitted the bids. After evaluation of the bids, the government awarded 51% of the equity of the DISCOMs to the chosen private investors with final loss targets of 17.25%, 17% and 17%. The transfer scheme was made effective by the government from July 1, 2002.

Further, tariffs are to be determined such that the DISCOMs recover all expenses permitted by the commission and earn a 16% return on equity. Retail tariff to be same for three DISCOMs till 2006-07. In addition, Govt. is to ensure timely payment of electricity dues from Delhi Jal Board and MCD for street lighting. As part of transparency number of parameters needs to be elaborated but we restrict to Regulatory issues. However, it is pertinent to mention that the observations of audit in nut-shell regarding privatization process - it appears from the records that the department of power in a clandestine manner managed to get doctored the legal opinion to regularize it’s malafide act of effecting sweeping changes in the transfer scheme rules, policy directions, bid documents and contractual agreements without the approval of competent authority i.e. Lt. Governor to suit the need of the DISCOMs.

Under the circumstances, it is the regulator to regulate the system and act as pivotal in achieving energy efficiency.

Implementation
In view of past experience while dealing with DVB staff, Consumer took the exercise as a matter of satisfaction. In addition a ray of hope leading to quality of service and improvement in the distribution system. In line with the above parameters, consumer accepted two tariff increase as a result of DISCOMs (ARRs) annual Revenue Requirements approval by the regulator. However, simultaneous process of large scale replacement of working energy meters prompted a mass reaction. Although DISCOMs justified the action in view of loss reduction targets as well as theft, but the argument was unacceptable to the public. Media also played its role by providing information through interviews. Inflated bills added fuel to the fire. Gradual awareness took the shape of protests by Resident Welfare Associations resulting into roll back of previous tariff increase. Internal wiring and meter testing became another bone of contention. Frequent power cuts are back in the business. Ultimately neither DISCOMs nor DERC could satisfy the customer, thereby privatization process appeared as costly affair.

The public account committee appointed by Delhi Govt. recommends that the role of the officers of the core committee be investigated by the CBI, who were involved in the screening of bids effecting change in the transfer schemes and played a pivotal role in final negotiations with the conditional bidders with prior approval of the competent authority. The role of DERC as observed by PAC that the DERC over a period of time seems to have lost its independence, autonomy and creditability. Rather than strengthening the interest of the consumers’ at large, It has acted as a hidden hand of the Govt. and the DISCOMs. Committee further observed that the Govt. was in such a desperate haste to privatize the distribution business that it had no time to fulfill the procedural obligations. The standing committee of the Parliament on energy has also passed severe strictures against the working of the DERC and DISCOMs. Moreover DISCOMs who serve almost every family in Delhi are not covered under Right To Information Act, though it is a joint venture. So how the regulator proposes to ensure transparency regarding operational parameters in DISCOMs to satisfy the consumers?

Hence the ball remains in the court of the regulator, being advisor to the government on power policy.

Consumer’s Apprehension
The face of the consumer is changing, demanding a regulatory mechanism that does not just provide speedy redressal but is also pro-active in preventing any harm to the end-user. In view of unsatisfactory services provided by DISCOMs, the consumer’s initial expectations get shattered. The experience of more than three years with DISCOMs did not satisfy the customer. Further DISCOMs are exempted from Government Audit in spite of 49% Govt. equity in the joint venture, thereby lost control of the distribution business. In addition to the above, the work for street lighting had also been entrusted to DISCOMs though it does not require any specialization. To create competition, it will be more appropriate to have larger involvement by limiting area of operation. Moreover, we are at the threshold of new agreement. Before entering into another term, a study by independent experts as recommended by PAC be carried out. It is essential as the present nominees of the Govt. to the Board of Directors of the DISCOMs do not appear to have done justice to the responsibility entrusted on them. They have failed to put across the views of the Govt. in issues which were going to effect the consumers. It’s compliance will help to rectify bitter issues encountered in the first agreement of June 2002.

Consumer ultimately look at the regulator for improvement and redressal. Let us hope that regulator meets people’s expectations in the privatization process.

Courtesy: B. S. Sachdev, former Executive Director, Power Finance Corporation Ltd., Delhi Tel.: 2718 8617

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