DERC's halfway house PDF Print E-mail
Wednesday, 12 March 2014 00:00
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Not taken all regulatory assets into account

When it looked as if, some weeks ago, that NTPC would cut off electricity supplies to large parts of the capital due to non-payment of dues by BRPL and BYPL, the then chief minister made it out to be a case of the two BSES firms holding the city to ransom. But, as this newspaper had pointed out, this was not really true since, while the two BSES firms owed various suppliers—not just NTPC —R5,200 crore, they too were owed large sums by Delhi’s customers. While the BSES firms were owed R14,824 crore, NDPL was owed another R4,734 crore. In a situation where the firms were not able to raise money to pay their creditors, they could hardly be blamed. More important, the Delhi Electricity Regulatory Commission (DERC) was being lax in its duty since, according to an order by the Appellate Tribunal for Electricity around two years ago, all regulators were supposed to come up with a schedule to pay off past dues within 3 years—discharge regulatory assets, in power jargon—and ensure that such dues were not accumulated in future. That is, if consumers needed to pay R100 to the electricity companies, they would pay R100; the past practice was to let consumers pay, say R80, and keep away R20 as an overdue or a regulatory asset on which an annual interest would be paid.

The electricity regulator in Maharashtra, for instance, had decided on a schedule to discharge these regulatory assets in 3-6 years for Mumbai—including interest costs, these added up to R11,585 crore—and, as a result, consumers have been asked to pay between 78-109 paise extra for every unit of power they consume in FY15 and FY16. The Delhi regulator, by contrast, has been more conservative and has kept a period of 8 years for these dues to be repaid. More important, it has taken into account only a small proportion of dues. So while the companies claim they are owed R19,558 crore till April 1, 2013, the regulator has just taken into account dues till April 1, 2012. And while R15,204 crore of this was due till FY12 according to the three electricity distribution companies, the regulator has assumed this to be just R11,432 crore—naturally enough, the companies are in dispute at the Appellate Tribunal for electricity. Of even this R11,432 crore, the regulator has put out a schedule to discharge just R8,000 crore. That roughly works out to an additional tariff hike of between 23 and 25 paise per unit. While the regulatory decision is, in that sense, a half-way house, now that the regulator has put out a schedule for repayments, the companies will find it easier to borrow money from banks to tide them over. For the future, it is important that the regulator recognise as many costs at the beginning of the year as that prevents large overdues later—in the past, regulators have made unreasonable assumptions that have led to low tariffs in the year but a pile up in regulatory assets at the end. More important, past dues have to be finalised at the earliest.


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