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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.

The Government of Gujarat has set up a high power committee to review financial viability related issues faced by a few thermal power projects in the state. As per the terms of reference issued by the government, the committee is expected to review and establish financial hardship, if any, faced by the concerned projects, especially in light of promulgation of the Indonesian regulation dated September 2010. The committee is also required to undertake stakeholder consultation for this purpose and in this regard it had requested Prayas (Energy Group) to submit its comments and suggestions. This attached submission is in response to such a request of the committee.

Prayas (Energy Group) has been a party to the various proceedings before the different fora in matters concerning some of the projects being reviewed by the present committee. Past submissions by Prayas (Energy Group) in the proceedings before the CERC and the Appellate Tribunal for Electricity (ATE) have made certain suggestions for addressing hardship on account of increase in the price of imported coal. The same are attached as annexures. The present submission is in line with these suggestions.

The submission argues that any solution should adhere to certain basic principles such as, safeguarding sanctity of contracts, ensuring fair and equitable burden sharing between all stakeholders, and that relief, if any, should only be prospective in nature. Additionally, any solution in this regard should only be applicable to projects that are mandated to use imported coal as the primary source of fuel. Keeping in mind the various technical, legal and regulatory issues involved in these matters, it is absolutely essential to undertake due public process before arriving at any decision in this regard. 

Based on these principles, the approach suggested by PEG consists of the following measures:

  • Ensuring that the procurers continue to get supply of power up to 80% PLF / availability as per the PPA tariff and other terms and condition.
  • The procurers forgo their first right of refusal on any additional / optional generation beyond the normative availability of 80%. In lieu of this, the PPA term should be extended by 15 years at tariff as per PPA’s last year capacity charge and variable charge to be determined by regulatory commission subject to prudence. This will ensure that procurers get benefit of low fixed charge generation capacity beyond existing term of the PPA.
  • The developers are allowed to sell the additional generation beyond the normative availability at market rates to offset hardship, if any. The developers also forgo return on equity depending on prevailing coal price and rate of sale of additional power.
  • The lenders agree to restructure loans and/or take the necessary haircut to ensure that project can sustain operations and debt repayment within the revenue that can be generated based on the above measures.

The suggested approach will ensure due accountability of project developers and lenders, while preventing the projects from turning into non-performing assets.

 

 
The National Tariff Policy was amended on 20th January 2016 to account for emerging changes in the sector. The Ministry of Power, seeking to introduce further amendments published draft amendments on 30th May 2018. The proposed amendments have several suggestions to account for the flux in the sector and to direction of reforms being contemplated by the Ministry of Power. 
 
The current draft of the National Tariff Policy amendment has suggestions for many progressive and much needed provisions with regards to information on open access, simplification of tariff categories, and introduction of framework for tariff determination for electric mobility and setting guiding trajectories for AT&C loss reduction. 
 
However, there is lack of clarity in many suggested amendments which could create legal and procedural issues in the future. It is suggested that the Ministry of Power release a statement of reasons or a clarificatory document to ensure informed deliberation. 
 
Many of the amendments seem to be indicating a policy direction which is not keeping with emerging trends and inevitable changes before the sector and may not lead to most efficient outcomes with respect to ensuring the financial viability of DISCOMs. In this context, PEG submissions on provisions related to generation, performance accountability, tariff design, subsidy mechanisms, pre-paid metering, introduction of Direct Benefit Transfer, open access and captive sales migration, tariff rationalisation, accountability of supply and service quality, power procurement and capacity addition planning, renewable energy are detailed in the submission attached below.
 

The Ministry of Power issued letter No. 23/23/2005-R&R(Vol-IV) dated 22nd  May, 2018 seeking comments and suggestions on the draft amendment in the provisions relating to captive generation plants in the Electricity Rules, 2005.  With the proliferation of captive power plants, increase in group captive and renewable energy captive options, the proposed amendments, come at an opportune time to address emerging trends, lack of operational clarity on certain issues and to introduce measures to encourage serious long-term investment in captive options in India. However, there are some issues where more clarity and more detailed processes would be useful to prevent policy and implementation issues and ensure efficient and periodic monitoring of this sector. In this context, some of the comments and suggestions are given in Prayas (Energy Group)'s submission. The draft amendments as well as PEG submission is available below.

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