Regulators prevent buyers from finding new suppliers
With losses in the power sector likely to be around R80,000 crore in FY12 (R2 lakh crore in terms of accumulated losses), and peaking power shortages at over 10%, and the government working on yet another bailout scheme that involves RBI funding an SPV which takes over bad debts of SEBs, who is to blame? The question is of vital importance, not just for power producers who added 12,000 MW of fresh capacity last year, but also for banks who have lent R3 lakh crore to state utilities and have recast R75,000 crore of this.
As FE reported on Monday (http://goo.gl/I0RDr), while ‘open access’, or allowing buyers to move to other producers, was supposed to be the centre of the turnaround strategy for the sector, state-level regulators appear to be doing their best to stop this. Under the Electricity Act, when a firm switched from one power supplier to another, it was to pay an open access surcharge to compensate the power supplier for the fact that a good customer was moving away—this surcharge was to take care of the losses suffered due to theft mainly. But with state regulators levying open access charges ranging from R1.20 per unit in Himachal Pradesh to as high as R2.35-2.68 in Tamil Nadu and West Bengal, it becomes cheaper for buyers to stick to the original supplier, making a mockery of the Electricity Act and its mandated provisions for open access. Hopefully, with the central electricity regulator now mandating state regulators have to examine the need to raise tariffs each year and to be more strict with provisions for allowing open access, things will improve—there’s 100 GW of potential new power capacity in the next 5 years at stake.