Urgent need for Regulating the Regulator


There is an urgent need for Regulating the Regulator …….. Can India’s electricity regulators successfully play the role that was envisaged for them?

Rajiv Kakria

We the citizens are supposed to be the Eyes and Ears and the Regulators the Voice to Protect Consumer Rights. When electricity regulators were first set up in the early years of the last decade, they were seen as reform agents. Today some of them are becoming a Front ….. a Facade to show to the public that the Government is maintaining Transparency in Tariff Determination and for other Policy Initiatives ……the Ground reality is far from this ….

We the Petitioners on behalf of Power Consumers have a different take on DERCs functioning. We have reasons to believe that over time DERC has been consumed by the bane of the Indian System called Political Interference, DERC has been working for the un-holy nexus of the Government and Private Enterprises to fleece consumers and to give maximum profits to the Private DISCOMS.

The raising of tariffs, and that too in stiff doses over the past ten months, points beyond the tariff hikes, the manner in which DERC has been taking Cues from Delhi Chief Minister’s Statements and throwing reasoned facts placed before it to the wind and increasing Tariffs on arbitrary figures put forth by DISCOMS, points towards corrosion in the regulator’s functioning.

I substantiate my accusations and request you to treat this as a Positive Feedback to put the Regulatory Process back on track, lest this malaise spreads to other Regulatory Bodies and put a Permanent QUESTION MARK on their Credibility.

The Commission should issue directive within the parameters of Section 61 of the Electricity Act, 2003 which stipulates that the Commission shall be guided by the factors which would encourage competition, efficiency, economical usage of resources, grid performance and optimum investment in specifying the terms and conditions for determination of tariff.

Therefore, to ensure proper accounting, audit and efficient performance to optimize resource use, the Commission should look into the following aspects:

1. Credible Auditing Procedures: As electricity business comes under the preview of Electricity Act, 2003, the accounts pertaining to electricity are required to be prepared separately and got audited. The accounts of the licensee need to be prepared on commercial principles. DERC in its admission to Delhi High Court stated that they have no expertise in auditing the Voluminous Data provided by DISCOMS so how did they come to a precise figure of 21.83% tariff Hike in August 2011?

The petitioners on the other hand have placed before DERC Data that the three DISCOMS in Delhi are in Profits after paying taxes, NDPL- Rs. 351cr, BRPL Rajdhani – Rs. 187cr and Yamuna – Rs. 77cr (year 2009-10). In the absence of proper Auditing Guidelines DERC works on whatever is provided by DISCOMS and we all know how Private Auditors handle records, remember SATYAM.

The Petitioners have demanded a CAG Audit, but it is being stalled for obvious reasons, DERC had approached INSTITUTE OF CHARTARD ACCOIUNTANTS on our request, to Audit DISCOM Financials as also verify the Inventory of what all was handed over to DISCOMS when it changed hands from DVB to Private Operators ……… Nothing seems to have come off it.

When Private operators were handed over charge Delhi showed 65% T&D losses today that figure is 16% and falling ……. Not a single paisa of revenue gain has been passed on to the consumer. Instead in the past 10 years Huge Hikes have been allowed, we fear this system may be replicated as an example all over India where ever Vote Banks do not exist ie Metro Cities, to fleece the over burdened Middle Class.

In terms of the Section 61 (g) of the Act, the Appropriate Commission shall be guided by the objective that the tariff progressively reflects the efficient and prudent cost of supply of electricity. Now what Prudence have we seen in the above style of functioning?

2. Ensure DERC Tariff Orders be placed in the Delhi Vidhan Sabha: Electricity Act 2003, Sec 182, clearly states that Tariff order should be placed for 45 working days in the Vidhan Sabha and passed by the house before it is implemented. In the past ten months two Tariff Orders have been passed, by-passing the laid down procedures in the Electricity Act, 2003.

What is the use of Rules, Regulations and further Amendments if the Powers that be, willfully neglect the Act and brazenly challenge the Petitioners to approach the Courts or go back to Regulators who are any ways Political Appointees.

3. Performance Standards: RWAs have been demanding strict Compliance in the Matching of Neutral to the Absolute Earth Potential as per relevant Act/Code. This alone is the main cause of Fluctuations and Spikes, resulting in damaging expensive household appliances like TV, Fridge, AC etc and unnecessary expenditure on Voltage Stabilizers. Performance Standards pertaining to Stable and uninterrupted 24X7 Power was one of the reason why Privatization was done. Consumers should be compensated for the losses due to Fluctuations and Spikes and be a part of Schedule I of Guaranteed Performance Standards. In the absence of any punitive provisions DISCOMS do not find it important to invest in such infrastructure.

Uninterrupted 24X7 Power Supply has remained a dream that was sold to bring in Private Players. Rampant power cuts are keeping the Inverter Industry alive and the consumer foots the bill for charging and maintaining inverters amounting to average Rs. 1200/- per month. Are these the Performance Standards that were envisaged in the Act to be in place on or before 2007?

4. Conduct Energy Audit: Like Air and Water, Power too is essential for existence. This is not a luxury anymore and high use domestic consumers are already paying higher slab rates. Today citizens have to use power for basic living and also for Government’s inefficiency. From motors to draw water to water purifiers …… from inverters to voltage stabilizers …… Mosquito repellents all point to unnecessary power consumption due to Govt. Apathy. Computers, Refrigerators, Televisions are as much a part of daily life as Air and Water and cannot be treated as luxuries.

The energy Audit should Revisit Public Service Entitlement Code, Babus went on an overdrive installing AC’s in Govt. offices throwing the rule book on entitlement to the wind. Gone are the days when Rs. 20,000/- AC’s were needed to protect Rs. 5 lac PC’s. Today PC’s are more robust and very cheap and do not require Air Conditioning to operate. Remove AC’s from offices of those not entitled for the same. Why should the consumer subsidies government officials’ fancy life style? Who decides how much power is needed to keep the Govt. cold to people’s miseries?

The Energy Audit should also look into the Energy Guzzlers in Industry, Commercial Establishment, Street Lighting, Neon Signs, Hoardings etc. The industry and Commercial establishments recover the Energy Component from the consumer in the form of the Final Product Cost.

We see no reason that Energy Guzzlers like Government Departments, Hospitals (both Govt. and Private), Private Schools, Corporate Offices, Malls, Banquets, Farm Houses etc. be allowed to burden the Domestic Consumer by way of eating up the Cheap Power Quota Available from NTPC, SEBs etc.

Delink Power consumed by Domestic consumers and let Power Guzzlers buy power from open Market, right now there is no incentive for them to conserve energy as they recover their life style from the cost of their Product or Service.

5. End Monopoly: Open Access was to have been in place by the year 2009, it has remained a Pipe Dream even in Delhi, with Regulators and Government playing in the hands of Private Players.

What’s more the DERC is making some DISCOMSs permanent fixtures by investing in expensive exercise of Time of Day Metering System and asking these very Private Players to invest and put up equipment to measure Usage Patterns. Once such huge investments are made how will DERC ask them to make way for Open Access Policy?

6. Ensure Transparent Power Purchase Mechanism: The Act provides that the Appropriate Commission may fix the trading margin, if considered necessary. Though there is a need to promote trading in electricity for making the markets competitive, the Appropriate Commission should monitor the trading transactions continuously and ensure that the electricity traders do not indulge in profiteering in situation of power shortages. Fixing of trading margin should be resorted to for achieving this objective.

We have on numerous occasions asked DERC to get DISCOMS to place on the website every fortnight details of Power Purchased, like Quantity, Price, Source etc so that consumers can verify the prevailing competitive costs in the Market. Cartelization has to be stopped and purchases amongst sister concerns have to be discouraged.

7. Fuel Charge Adjustment: This is another head in which Lack of Transparency is working against the Consumers. What is the total component of Fuel Cost in the Production of Power? We believe it is not more than 15%, a little higher in case of inefficient Plants. Now DERC allows 7%-8% as Fuel Charge Adjustment ….. we know now for a Fact that Mr. Manmohan Singh Gifted Coal Blocks for free, we also know that DISCOMS have not been paying their Dues to NTPC and others for the power Purchased (the Govt. had to bail them out with our Rs. 500cr package), so where is the question of Fuel Cost Adjustment and that too, a hefty 50% increase for something they got for free.

8. Fast Running Electronic Meters: It has been noticed the residents are paying 25% to 40% higher bills. Experts have informed us that this is due to the Three Phase with Single Neutral Distribution Transformers, where in the Residual Back Flow gets recorded in the meter reading. The earlier Mechanical Meters did not have the Neutral wire connected to the Meters Recording Mechanism, where as these Electronic Meters have the Neutral attached to the meters Recording Mechanism, which results in recording the Residual Back Flow, therefore INFLATED BILLS.

After three years of sustained efforts this issue was addressed by DERC by inserting an Ad. in news papers in Dec. 2011, putting the onus of correcting the flaw on the consumer. The Supply Code clearly states that it is the Duty of the Service Provider to provide a separate Neutral up to the Metering Point …… no such thing is visible on the Ground and the poorer consumers end up paying inflated bills and DISCOMS earning Huge Unearned Profits.

An Audit/Field Survey by an Independent Institute of Repute involving the Petitioners, should be conducted, transformer wise on Units supplied and billed for the past three years of Peak Load Periods in Winters and Summers. Excess billing if found should be refunded to the consumers and Punitive Penalty imposed on DISCOMS for breach of trust and fleecing the Consumers.

9. Abolish Fixed Charge: The Fixed charge on monthly basis is being levied and recovered from all consumers irrespective of how much Power they consume. We understand that certain fixed costs are involved in bringing electricity to our door step and if some people keep properties locked then a Minimum Charge should be levied. Earlier this was termed as Minimum Charge later very cleverly changed to Fixed Charge and has been increased from Rs. 8/- earlier to Rs.20/- now.

It is to be noted that a consumer is already paying a higher slab rate for higher consumption offsetting the need to charge on the basis of sanctioned load. A One Time Fee for higher load Meters, Wiring and a Security Deposit is already levied. Permitting the DISCOMS to charge Fixed Charge from every consumer on a monthly basis is nothing but charging the consumers twice under two different heads for the same thing.

10. I endorse all the Points Placed by Mr. Hemanta Sharma in his Suggestions.

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