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Power watchdogs begin to find feet

Anil Sasi

Electricity regulatory commissions in states present a strange picture of second-generation reforms. Even as the regulators in a dozen states have attempted to change the manner of setting tariffs, they have faced obstacles while setting right the lopsided tariff structure.

Despite strong reactions to their orders on tariffs from state administrations, utilities and consumers, the regulators have begun the process of correcting the country's grossly cross-subsided retail power sector.

For example, the Rajasthan Electricity Regulatory Commission's first tariff order on tariff did not find favour with the state's denizens. Protests ensued, leading to police firing outside the Assembly.

But subsequently, the government shied away from filing a tariff petition, anticipating similar outbursts. However, the World Bank responded by blocking loans to the state's power sector.

The regulator in Gujarat issued a tariff order to the state's electricity board in October 2000. There were strong protests by farmers against the increase in agricultural tariffs.

Similarly in Andhra Pradesh, where the regulatory commission was established in March 1999, there were protests from the political class and the public against the regulator's first tariff order for APTransco. The regulator had to revise the order in April 2001.

The Karnataka Electricity Regulatory Commission started functioning in November 2000. It issued an order in December 2000, increasing average tariffs by 17 per cent. The Karnataka High Court stayed the regulatory commission's directive to the transmission company.

However, there is another side to the picture. Some state governments have asked for higher increases to paper their operational inefficiencies.

The regulator in West Bengal, which started work in March 1999, allowed a 5 per cent hike in retail tariffs against the 10 per cent demanded by the state electricity board. Consequently, five state-owned power utilities have gone to court.

Once the regulator is in place, the only option for the state administration is to allow it to set tariffs. However, the administration has the option of continuing with the old tariffs.

For effecting any changes in the tariff structure, the state has to necessarily approach the regulator. With the regulators issuing tariff orders, the method of setting tariffs has also changed.

Political considerations have given way to economic logic.

For instance, before issuing tariff orders, the Maharashtra Electricity Regulatory Commission instructed state electricity board officials to explain to the people the reasons for a tariff hike.

The regulatory commission heard over 250 reactions before it gave the tariff order in April 2000, allowing an average tariff increase of 6.5 per cent.

Similarly, other electricity regulatory commissions have invited response to tariff petitions submitted by state electricity boards. Orders are passed only after due attention has been paid to stakeholders.

Also, the role of the regulators in privatisation has gained prominence. This is particularly true after the failure of such attempts in Orissa and Uttar Pradesh, where the blame was squarely placed on the regulators. In Delhi, the Delhi Electricity Regulatory Commission has earned plaudits from the administration and experts for facilitating the privatisation process.

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