Need reforms in power sector
7 Nov 2013 11:43 PM GMT
No wonder that the latest monetary policy review of the apex bank bemoaned that among the infrastructure industry the power sector was crippled by the ‘poor performance of thermal power, with the plant load factor (PLF) declining continuously to almost early 2000 levels’. This is despite the tall target of new capacity additions in the current plan as against the dismal record in the Eleventh Plan when the gap between target and actual performance was whopping.
Not only fuel supply agreement (FSA) to the extant power plants faulty in design but also as the country is importing more thermal coal, the average price of coal feedstock is escalating. This is in the face of the country’s abundant existing supply of coal getting embroiled in controversy over the allocation of coal blocks and the shenanigans it led to the egregious coalgate. The reform of the country’s power front has been sporadic for over two decades with no substantive steps put in place to tap this important input and energy for keeping the real sectors of the economy moving as also the swathe of consumers and citizens who consume electricity in one way or another across the country.
Though the country has a Central Electricity Regulatory Commission (CERC) and a plethora of State Electricity Regulatory Commission (SERC) with a multiple menu of remit for the former that span from regulating tariff of generating companies owned and controlled by the central government, regulating inter-state transmission of the electricity, issuing licenses to transmission licensees and the electricity traders, specifying grid code to being responsible for and responsive to balancing consumer interest and promoting investments. The list of call of duty for SERC is equally enormous with the result none of the stakeholders and shareholders in the country’s power front are happy over the pathetic state of play in the power sector for far too long.
It is interesting to note that a report of the House Panel, laid in Parliament in the extended monsoon session, had to concede that any regulatory policy adopted by the Commission could translate into benefits to the end consumers only if such policy is followed in a uniform manner pan-India. Since power is a concurrent subject, the State Commissions are independent and the regulatory policy initiatives taken by the Central Commission are not binding on State Commissions! A case in point is the concept of open access which is crucial to effect competition in distribution of power. After de-licensing of generation segment, a generator company can sell its power anywhere in the country. For consumers also, it is advantageous to have an option to procure power from a reliable, cost-efficient source and this could be scored through open access, besides enabling the transmission of power from surplus to deficit areas.
It is germane to note that National Electricity Policy unambiguously notes that non-discriminatory open access should be provided to the competing power generation firms purveying power to licensees. As a direct result, in the last five years the share of private sector in total generation has risen from 11 per cent to 23 per cent and in the last couple of years alone 12,000 mw power generation has been achieved by the private sector. This demonstrates that open access transmission has enabled competitive generation, besides providing choice to distribution companies (discoms) as well as open access consumers. The House panel report admits that the mechanism of open access does not provide any safety to aam aadmi from being squeezed by high tariff of electricity. This is because it is only the power exchanges, electricity traders, generators who have benefitted by the exercise of open access and its achievements so far. Though distribution licensees and discoms are also within the periphery of the open access, the gap between the demand and supply negates the benefits to common man that might have possibly accrued to him due to the presence of multiple distribution licensees. Besides, it is pointed out that the network of distribution licensees wherever they exist are mostly ‘monopolised’.
That the CERC and the SERCs do not work in concert to serve the cause of the power industry and consumers at the market place is by now well known. Recently, open access was thwarted in many cases on account of two reasons. First, State Commissions have issued notifications under Section 11 of the Electricity Act to prohibit generators from selling electricity outside the State citing the ground of paucity of power. Secondly, the state-level discoms are not operating independently and are denying open access on some pretext or the other. Hence the House Panel report underscored the need to make the SLDCs independent so that they could discharge their remit impartially by amending Section 11 to specifically exclude shortage of electricity as the ground for invocation of the power of the State government under the said provision.
It is also unfortunate that most of the former State Electricity Boards (SEBs) notorious for sloth and pile-up of problems had not unbundled their core activities and still double up as generators and distributors of electricity, resulting in glaring distortions in the market for power. ‘Where they had not handed over distribution to private companies, their record of cooperation and helpful policy towards power generating companies is unhelpful and uppity. Recently the Maharashtra State Electricity Distribution Company (MSEDC) has refused to buy electricity from the Ratnagiri Gas and Power Private Ltd (RGPPL) Dhabol Power project as the latter’s price is too high and dropped all its payments! It is time that the regulatory body charged with the remit to oversee market distortions and remove impediments pulled up the socks and delivered the power industry from being the irremediable black hole of infrastructure industry in perpetuit’.
As the power ministry is in the midst of an exercise to move a clutch of amendments to the Electricity Act, 2003, it ought to focus attention on open access, discom companies and a more synergy and harmony in the functioning of the CERC and the SERCs so that the last mile consumer is not left high and dry in darkness!
IPA
Not only fuel supply agreement (FSA) to the extant power plants faulty in design but also as the country is importing more thermal coal, the average price of coal feedstock is escalating. This is in the face of the country’s abundant existing supply of coal getting embroiled in controversy over the allocation of coal blocks and the shenanigans it led to the egregious coalgate. The reform of the country’s power front has been sporadic for over two decades with no substantive steps put in place to tap this important input and energy for keeping the real sectors of the economy moving as also the swathe of consumers and citizens who consume electricity in one way or another across the country.
Though the country has a Central Electricity Regulatory Commission (CERC) and a plethora of State Electricity Regulatory Commission (SERC) with a multiple menu of remit for the former that span from regulating tariff of generating companies owned and controlled by the central government, regulating inter-state transmission of the electricity, issuing licenses to transmission licensees and the electricity traders, specifying grid code to being responsible for and responsive to balancing consumer interest and promoting investments. The list of call of duty for SERC is equally enormous with the result none of the stakeholders and shareholders in the country’s power front are happy over the pathetic state of play in the power sector for far too long.
It is interesting to note that a report of the House Panel, laid in Parliament in the extended monsoon session, had to concede that any regulatory policy adopted by the Commission could translate into benefits to the end consumers only if such policy is followed in a uniform manner pan-India. Since power is a concurrent subject, the State Commissions are independent and the regulatory policy initiatives taken by the Central Commission are not binding on State Commissions! A case in point is the concept of open access which is crucial to effect competition in distribution of power. After de-licensing of generation segment, a generator company can sell its power anywhere in the country. For consumers also, it is advantageous to have an option to procure power from a reliable, cost-efficient source and this could be scored through open access, besides enabling the transmission of power from surplus to deficit areas.
It is germane to note that National Electricity Policy unambiguously notes that non-discriminatory open access should be provided to the competing power generation firms purveying power to licensees. As a direct result, in the last five years the share of private sector in total generation has risen from 11 per cent to 23 per cent and in the last couple of years alone 12,000 mw power generation has been achieved by the private sector. This demonstrates that open access transmission has enabled competitive generation, besides providing choice to distribution companies (discoms) as well as open access consumers. The House panel report admits that the mechanism of open access does not provide any safety to aam aadmi from being squeezed by high tariff of electricity. This is because it is only the power exchanges, electricity traders, generators who have benefitted by the exercise of open access and its achievements so far. Though distribution licensees and discoms are also within the periphery of the open access, the gap between the demand and supply negates the benefits to common man that might have possibly accrued to him due to the presence of multiple distribution licensees. Besides, it is pointed out that the network of distribution licensees wherever they exist are mostly ‘monopolised’.
That the CERC and the SERCs do not work in concert to serve the cause of the power industry and consumers at the market place is by now well known. Recently, open access was thwarted in many cases on account of two reasons. First, State Commissions have issued notifications under Section 11 of the Electricity Act to prohibit generators from selling electricity outside the State citing the ground of paucity of power. Secondly, the state-level discoms are not operating independently and are denying open access on some pretext or the other. Hence the House Panel report underscored the need to make the SLDCs independent so that they could discharge their remit impartially by amending Section 11 to specifically exclude shortage of electricity as the ground for invocation of the power of the State government under the said provision.
It is also unfortunate that most of the former State Electricity Boards (SEBs) notorious for sloth and pile-up of problems had not unbundled their core activities and still double up as generators and distributors of electricity, resulting in glaring distortions in the market for power. ‘Where they had not handed over distribution to private companies, their record of cooperation and helpful policy towards power generating companies is unhelpful and uppity. Recently the Maharashtra State Electricity Distribution Company (MSEDC) has refused to buy electricity from the Ratnagiri Gas and Power Private Ltd (RGPPL) Dhabol Power project as the latter’s price is too high and dropped all its payments! It is time that the regulatory body charged with the remit to oversee market distortions and remove impediments pulled up the socks and delivered the power industry from being the irremediable black hole of infrastructure industry in perpetuit’.
As the power ministry is in the midst of an exercise to move a clutch of amendments to the Electricity Act, 2003, it ought to focus attention on open access, discom companies and a more synergy and harmony in the functioning of the CERC and the SERCs so that the last mile consumer is not left high and dry in darkness!
IPA
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