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Over the past decade and a half, India has evidenced substantial investments in rural electrification. As per official estimates, 100% village electrification and over 90% household connections have been achieved. But, if this investment is to return rural development dividends, it is important to focus on the issues of affordability, sufficiency, and quality of electricity supply, especially for small consumers. Without this, there is a danger that the new rural infrastructure will fall to disuse, as had happened in states like Bihar and Uttar Pradesh after the first wave of rural electrification. Based on a study of publicly available documents, this article raises some key concerns and makes a case for a shift in policy making and political commitment from universal connections to improvement of quality of supply and services. A version of this article appeared in Economic and Political Weekly on the 17th of November 2018.

Policy makers are pushing for the use of Direct Benefit Transfer for all electricity subsidies. This short article, which appeared in Hindu Business Line on November 23, 2018, makes the case for multiple, large-scale pilots before universal adoption of the mechanism as there are many issues specific to the electricity sector which need to be identified and addressed.

The Ministry of Power published draft amendments to the Electricity Act, 2003 on the 7th of September 2018. Previous to this, a bill to amend the Act was introduced in the Lok Sabha on December 19, 2014. Our commentary on this bill is available here 

The proposed amendments have several provisions to account for the flux in the sector and shed light on the direction of reforms being contemplated by the Ministry of Power. Some of the major changes suggested seem to be:

  • Introducing carriage and content separation
  • Development of markets with greater impetus of open access, captive and market instruments
  • Commitment to supply 24x7 power and ensuring power procurement for the same
  • Increased accountability for institutions especially Electricity Regulatory Commissions
  • Elimination of cross subsidy surcharge and cross subsidies
  • Mandating use of DBT for all electricity subsidies
  • Increasing role of the central government in the concurrent decision making processes in the electricity sector
  • Mandating the National Tariff Policy instead of it being a guiding document

Given uncertain demand, rising cost of supply for utilities, significant pressures on utility finances and the emergence of several alternative options of supply for cross-subsiding consumers, several structural and institutional changes are required. Considering the varied impacts, possible ramifications and disparities in state-level realities, it is important that these changes are consistent and are introduced in a calibrated, planned manner while preserving the concurrent nature of the sector decision making. Our comments and suggestions to help the sector prepare for an uncertain future are written keeping this context in mind.

Electricity Regulatory Commissions (ERCs) are the cornerstone of the power sector reforms. Many of the key sector decisions are made through the regulatory processes and the ERCs play the crucial role of balancing the interests of various stakeholders. The accountability of the ERCs is ensured through, a) the public nature of their functioning as they are required to hold public consultations on many issues, b) the mandate to record their decisions in the form of reasoned orders, and c) their orders being subject to judicial review and appeals before a specialised tribunal viz. the Appellate Tribunal for Electricity (APTEL). Hence, the role of the APTEL becomes crucial in terms of holding the ERCs accountable for their role and mandate, ensuring good governance in the sector and in protecting the interests of consumers and citizens.

In this context, this report takes a first step towards providing information regarding the functioning of the APTEL from a public interest perspective. The findings presented are based on the analysis of 852 judgements issued by the APTEL between April 2013 and March 2017. The report looks at aspects such as the nature of appeals, the type of appellants, the kind of issues raised and geographic spread of appeals. While it is the responsibility of the APTEL to balance the interests of the consumers and the utilities, the analysis indicates that there is very little representation of small consumers and the public interest in the proceedings before it. This is mainly due to prohibitively high fees and the challenges in approaching the APTEL as it is located in Delhi and has non-operational circuit benches. The report also provides suggestions to address these lacunae, such as reduction in fees, appointments of ‘amicus curiae’ to more frequently represent interests of small consumers, effective operationalisation of circuit benches, periodical publication of a compendium of ATPEL judgements and emerging case law, etc.

Given its broad mandate and wide ranging powers, the report argues that the APTEL should strive to be an “amicus populi”, i.e. a friend of the people, and not just an adjudicatory forum, which caters to the needs of the few who can afford access to it.

Prayas (Energy Group) convened a two-day experience sharing workshop on 3rd and 4th September, 2018, at ASCI, Hyderabad. The workshop was a coming together of 58 individuals working in the electricity sector- NGOs, grass-root organisations, policy think tanks, and consumer activists, representing around 12 states in India. A similar workshop was convened last year as well which focused on state level discussions, highlighting relevant issues in the state context.

The idea of this workshop was to share experiences, discuss commonalities, differences, challenges, and strategies used in various states to engage with the sector. However, this year, there were also more in-depth discussions on common issues and themes from the state experiences. With this consideration, this year’s workshop was structured around the following themes: 

  • AT&C losses, agricultural consumption and subsidies 
  • Power Procurement 
  • Quality of Supply and Service 
  • Improving effectiveness of regulatory processes 
  • Future of distribution companies 

A brief summary of the rich and detailed discussions at the workshop are available in the workshop report. As part of the deliberations organised around these themes, participants also came together and signed a joint statement on ‘Urgent Actions for better electricity service delivery’. 

During the proceedings of the workshop, each participant gained more ideas for continuing engagement with the sector in their own areas of work with an informal network for support.  Participants agreed that it would be useful to organise more such events over a period of time.

In the context of the draft amendment of the National Tariff Policy, 2018, the Ministry of Power circulated a draft amendment to Para 8.3A of the National Tariff Policy as outlined in Office Memorandum No.23/02/2018-R&R dated 10th September, 2018. This is enclosed below. The proposal seeks to promote tariff and cross subsidy design across states based on sanctioned load and consumption instead of types of use (e.g- residential, industrial, commercial, agricultural) as is the current practice.

There is significant flux in the electricity sector due to sales migration, increasing cost of supply and reducing room for cross subsidy as highlighted in the recent PEG report, ‘Electricity Distribution Companies in India:Preparing for an uncertain future’. This was also highlighted in PEG’s submission on the proposed amendments to the National Tariff Policy, 2018, dated 18th July 2018. Given this reality, and the need for a change in the business model of the distribution companies, it is important to ensure a phase-wise approach to reduction in cross subsidy. Such a planned approach will reduce the tariff shock on small consumers in the future and ensure a less financial impact on the cash-strapped DISCOMs during the transition.

In this context, the proposal by the Ministry of Power is a welcome step not only towards tariff rationalisation but also towards the reduction of cross subsidy. However, any shift from the current approach should be done:

  • in a phase-wise basis over a five year period,
  • without loss of information captured by the current, established billing frameworks,
  • while minimising the impact on small consumers ,
  • with support from state governments to ensure a smooth transition
  • while ensuring space and time for mid-course corrections and accounting for state specific realities.

Further there is need for clarity on the treatment for unmetered consumers, especially agricultural consumers, the provision of exemptions to certain categories like electric vehicle charging stations and the modalities for providing rebates. Prayas (Energy Group)’s comments and suggestions in this regard are enclosed below.

Currently the distribution companies and major users of the grid depend on deviation and settlement mechanism extensively and the newly introduced ancillary services to meet real-time changes in demand and supply. With the rising quantum of surplus, increasing renewable energy in the system there is also a need for real time market-based settlement mechanisms for optimal resource utilisation. In a welcome step, CERC staff have prepared a consultation paper on redesigning real time markets in India. This is attached below. The CERC staff paper observes the absence of gate closure in India. Thus, DISCOMs can revise their schedules and retain the right to recall till the time of actual delivery of the power. This uncertainty is a major barrier to the utilisation of real time instruments and also to the sale of unrequisitioned power as suggested in the National Tariff Policy. The staff paper identifies ways and means to introduce gate closure and kick start real time markets. Our comments and suggestions with respect to the proposals outlined in the staff paper include:

  • Introducing gate closure as part of the Indian Electricity Grid Code and urging SERCs to include gate closure in State Grid Codes.

  • Gate closure to be for 3 hours prior to delivery, similar to schedules for market instruments in power exchanges, rather than the 1.5 suggested in the paper initially to ensure smooth operation of real-time markets.

  • Need to ensure No Objection Certificates (NoCs) from DISCOMs as PPAs safe-guard the procurers right to recall. Provision of such NoCs can be a pre-requisite to participate in real time markets and DISCOMs can be urged to participate by ensuring utilisation of DSM and ancillary services is disincentivised or discouraged thought various mechanisms.

  • CERC should also define which participants are eligible for real time market transactions to ensure regulatory clarity and smooth operations.

Please find below our comments and suggestions along with the discussion paper.

Prayas (Energy Group) organised a two day experience sharing workshop for civil society organisations, consumer groups and researchers active in the power sector in various states in India. The workshop was held on the 3rd and 4th of September 2018 at Hyderabad.

As part of the deliberations in the workshop, a joint statement was signed by forty eight representatives of consumer groups and researchers from various states.  The statement details urgent actions that are necessary to improve electricity supply and service delivery in Indian states.

The statement has evolved based on discussion on the challenges before the sector, drawing from the lessons and insights from the past engagement by various organisations, groups and individuals keeping in mind age-old challenges, emerging trends, growing aspirations and the need for increase in institutional capacity among power sector agencies.

Maharashtra State Power Generation Company Ltd (MSPGCL) has filed a petition for true up of FY 2015-16 and FY 2016-17, provisional true up for FY 2017-18 and revised projection of ARR for FY 2018-19 and FY 2019-20. The petition along with copy of the public notice can be downloaded from here.

A public hearing in this regard was conducted by the Maharashtra Electricity Regulatory Commission (MERC) on 26th July 2018. Prayas participated in the hearing and made a submission, which is attached below.

The Maharashtra State Electricity Distribution Company Ltd (MSEDCL) has submitted a petition seeking final true up for FY 15-16 & FY 16-17, provisional true up for FY 17-18 and mid-term review for FY 18-19 to FY 19-20 under the case 195 of 2017. The Maharashtra Electricity Regulatory Commission (MERC) vide its tariff order in the case no 48 of 2016 had approved a certain cost and tariff trajectory for MSEDCL for FY 2016-17 to FY 2019-20. The petition in case no 195 of 2017 is a mid-term review of the said tariff order and the directives issued thereunder.

In this petition (case no 195 of 2017), MSEDCL has proposed an increase of Rs. 23,658 crores over and above the tariff that was approved in the Multi-year tariff order in case no 48 of 2016.

A public hearing in this regard was conducted by the MERC in Pune on 9th August 2018. Prayas participated in the hearing and made a submission, which is attached below. The salient features of PEG’s submission are as follows:

  • Highlighting several lacunae in the methodologies proposed by MSEDCL, PEG has demanded that it is the commission’s responsibility to provide an independent, rigorous and credible methodology for estimation of unmetered agricultural sales and hence the distribution losses. It is also submitted that till the time that such an exercise is not undertaken, the agricultural sales and distribution loss trajectory approved by Commission in case no 48 of 2016 should continue to be followed.
  • Suggestions regarding tariff design that can be implemented to protect the interests of small consumers and also for improving the distribution company’s accountability in issues concerning supply and service quality.
  • Comments and suggestions regarding issues such as, determination of cross-subsidy surcharge, applicability for additional surcharge for captive consumers, treatment of rooftop solar and net-metered consumers, separate tariff for electric vehicles, changes in billing demand definition, moving to kVAh based billing, introduction of rebate of Rs. 1/unit for old and new industries etc. are provided.
  • Underlining the need to think of innovative ways to ensure that backed down capacity is available when needed, PEG demanded that the MERC should undertake an independent and analysis of whether the flexibility in coal supply management that is allowed to the generating companies is indeed leading to cost savings. Given the uncertainty in demand and supply, need for better estimation of seasonal and diurnal variation in shortage and surplus using advanced tools and models is also highlighted.
  • Considering the increasing sales migration and shrinking room for increase in cross-subsidy, PEG feels that the current utility business model is at crossroads. There is an urgent need for re-imagining this business model while ensuring a smoother transition for the small consumers. For this purpose, PEG has urged the MERC to come out with a white paper that reimagines the future of the distribution sector and open a fresh debate and discussion in this regard.

The submissions made by Prayas at the Pune public hearing is attached below. PEG submission regarding the original Multi-year tariff petition (case no 48 of 2016) can be seen here.

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