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Saturday, September 26, 2020

Explained: Why discoms in Delhi want a hike in power tariff

The discoms have been demanding a power tariff hike over the last five years, which has been turned down every time. This, the discoms claim, have led to mounting regulatory assets.

Written by Sourav Roy Barman , Edited by Explained Desk | New Delhi | Updated: August 16, 2020 5:18:35 pm
Delhi has not witnessed a substantial power tariff hike since 2015, when the Aam Aadmi Party took over the reins of the capital.

The Delhi Electricity Regulatory Commission (DERC), which regulates the city’s power sector, is expected to announce the annual tariff order by the end of August, which will determine your electricity bills from September.

The tariff order is generally announced by the start of the financial year, however, a delay of a month of two, and sometimes more, is a yearly fixture. This time the Covid-19 pandemic has pushed it back further. The distribution companies have made a case for tariff hike citing the pandemic and its impact on their income.

Delhi has not witnessed any substantial power tariff hike since 2015, when the AAP took over the reins of the capital. Before coming to power, Arvind Kejriwal had led protests against alleged inflated electricity bills in the capital, which has around 60 lakh power consumers.

Does the DERC come under the Delhi government?

No, the DERC is technically an independent, quasi-judicial body governed by the Electricity Regulatory Commission Act, 1998, and the Delhi Electricity Reform Act, 2000. However, appointments of the chairman and members to its board has always been a politically contentious issue, leading to tussle between the elected government and the Lt Governor and also litigation.

What is the exact role of the DERC?

The DERC not just fixes power tariffs, but also determines the prices at which distribution companies (discoms) utilise the resources of transmission companies, which in turn purchase power from generation companies at rates also monitored by the commission. It also sets and monitors standards to be followed by the companies and seeks to protect the rights of consumers, who can approach it with grievances for hearings.

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How are power tariffs fixed?

Under the laid down process, the discoms petition the DERC with their claims, including surplus or deficit being borne by them. The petitions are filed by February every year, and 2020 has been no exception. Subsequently, the DERC holds public hearings to listen to the demands of consumers and other stakeholders.

However, this year, the hearing, which was scheduled for March 18, could not be held due to the pandemic. Consequently, the commission sought written submissions from people. The discoms were also given a chance to file revised petitions by June 5. The commission had also got the account books of the discoms audited by the CAG in 2017-18 to verify their claims. The prevailing tariffs came into effect on August 1, 2019.

How many discoms are there in Delhi?

Delhi has three major discoms. The Reliance ADAG-run BSES discoms – BSES Rajdhani and BSES Yamuna are the largest suppliers, catering to over 43 lakh consumers. Then comes the Tata Power Delhi Distribution Limited (TPDDL), which is a joint venture between Tata Power and the Delhi government, serving around 18 lakh consumers in north and north-west Delhi. The entire distribution network in Delhi was privatised by the Sheila Dikshit-led Congress government in 2002.

What are their demands this time?

The discoms have been demanding a power tariff hike over the last five years, which has been turned down every time. This, the discoms claim, have led to mounting regulatory assets, which are expenses not taken into account while fixing tariffs.

“This accumulation is the outcome of non-cost reflective tariff determination in past control periods and hence needs to be addressed immediately; as the situation has reached at alarming proportions making the financial condition of the company fragile,” TPDDL has filed. BSES has also shared similar concerns, adding that it was also preventing lenders from extending credit. In fact, in June, the Delhi government backed the three discoms’ demand for loans amounting to Rs 6350 crore from the Centre to pay the power generating companies.

What has been the impact of Covid-19?

The pandemic and the lockdown have had an unprecedented “adverse impact” on the cash flow of the companies, all three discoms have told the DERC. They have cited the closure of industries, commercial units and a dip in the payment capacity of consumers due to job losses among other factors. In their revised petitions, BSES and Tata Power said the companies would collectively face a revenue gap of Rs 6,124 crore in 2020-21 if power tariffs are not hiked. They put the total revenue requirement at Rs 21,528 crore, excluding the past dues, to meet the operational expenses for 2020-21. Both Tata Power and BSES have said that they do not foresee a turnaround before March 2021, and that too if the spread of the virus comes under control. To cite one example, Tata Power earns 55 per cent of its Rs 700 crore monthly earnings from commercial and industrial consumers. It shrinked to Rs 15 per cent of the total revenue earnings of Rs 430 crore in April.

What are discoms saying on the Delhi government’s subsidy scheme?

In August last year, the Kejriwal government made power free for households consuming between 0-200 units while those consuming between 201-400 units get a 50 per cent rebate. Between 2015 and July 2019, 50 per cent rebates were given to those consuming between 0-400 units. It spent around Rs 6196 crore as power subsidy in the course of the five years. The subsidies are transferred to the discoms on a monthly basis, which in turn issue discounted bills to consumers.

However, BSES has petitioned the DERC, requesting that the rebates be transferred to the consumers’ accounts directly, like in case of LPG rebates under the Centre. It also wants such benefits to be withheld for consumers having dues or accused of stealing power. Tata Power has complained that the Delhi government doesn’t pay the subsidy amounts on time, leading to losses of around Rs 21 crore so far.

So, should consumers expect a tariff hike this time?

When The Indian Express reached out to the DERC Chairperson Justice SS Chauhan (retd) on Thursday, he said the commission was taking into account demands and suggestions of all stakeholders. He refused to comment on whether or not a hike was in the offing.

“We invited suggestions from all stakeholders and are taking all written suggestions into consideration. Ample time was given to people since the public hearing could not be held. We must also keep in mind that companies and governments are facing losses due to the unprecedented situation caused by the pandemic. All factors are being taken into consideration and the tariff order is expected to be issued by the end of this month. Whether or not there will be a tariff hike is something I cannot comment on,” the DERC chairman said.

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