Power Reforms Hostage to Regulators in India

Dinesh Narayanan
Updated: Aug 13, 2012 06:16:31 PM UTC

One of the first directives that went out of the Power Ministry after Veerappa Moily took charge on August 1 was to the Central Electricity Regulatory Commission (CERC) asking it to free bulk consumers of electricity from the shackles of administered tariffs.

In a letter to the CERC on August 3, just four days after 21 states went dark in the biggest power outage in history, the ministry said that it ``reiterates its direction to the central commission under section 107 of the Electricity Act, 2003, to take all necessary steps, including framing of appropriate regulations to implement the provisions of open access as per Electricity Act, 2003 in pursuance of ministry of power letter dated 30.11.2011''.

It is clear from the letter that the issue is not new. Indeed it is not. The issue of open access has been hanging fire since 2003 when the legislation was first passed. Since then the law was amended because the earlier form had given an option to states to implement open access to those who chose it. In 2007, the changed law mandated it by substituting a crucial `may' with `shall' in the language of the provision. Yet, it continued to be on the backburner, presumably because it would have seriously curbed the regulatory commissions' powers.

Free purchase and sale of power for bulk consumers (read industrial and large commercial buyers), technically known as open access, had been theoretically allowed in 2003 when Parliament passed the Electricity Act. In effect, however, the central and state regulatory commissions, also set up under the Act, continued to control the price that consumers paid for power. That effectively meant that producers were forced to sell at rates that did not reflect what could have been the market price.

The ministry's letter suggests that the regulatory commissions have been going slow on the matter. Quoting a CERC reply to a parliamentary question on its role in promoting open access in the distribution sector, the letter says, ``...it has been stated that CERC as secretariat to the Forum of Regulators has helped analyse the issues at stake in implementation of open access and evolve consensus on the way forward.'' And then the stinker, ``However, it is not clear as to whether CERC secretariat has initiated steps to align the model for regulations on intra-state open access with the interpretation of ministry of law and justice.''

For the past couple of years the issue of open access as provided in the Act had been flung back and forth between the ministry of law, the attorney general, the ministry of power and the CERC for clarifications on what can be done and what cannot. It was unambiguously clarified by all of them that open access has to be implemented for customers who use more than one MW of electricity, which means the regulators have no right to impose tariffs on those who are deemed to be open access customers. The CERC wrote to the ministry in April suggesting that all the regulations had already been made and open access was available to those who wanted it. That is true only in theory.

The Forum of Regulators headed by the CERC chairman and has as its members the chairmen of all state regulators, has framed model regulations. But no state has adoptedĀ  it. If a bulk consumer buys power through the open access route, it is likely to get stuck at the state load dispatch centre, the nodal point for electricity distribution.

What this effectively means is Parliament has passed a law nearly a decade ago, interpretative doubts were cleared by the law ministry and accepted by the power ministry. Yet the reform has not happened.

 

The thoughts and opinions shared here are of the author.

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