Editorial: Electrifying misconception

May 03 2014, 04:24 IST
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SummaryNTPC’s problem is not so much BSES as it is DERC

Given the BSES twins, BRPL and BYPL, have been regularly delaying payments to NTPC—the PSU says it has no other defaulters across the country—it is not surprising the power giant has turned its guns on BSES, even going to the extent of threatening to cut off power supplies to the capital. NTPC’s argument is that if the Tata-owned TPDDL which also operates in the capital has no problems paying on time, why should BRPL and BYPL? After all, their working conditions, and tariffs, are broadly similar. From NTPC’s point of view, the argument is a valid one, and it is a good thing that TPDDL is able to leverage its balance sheet to borrow money to be able to pay suppliers on time—though being much bigger means the BSES twins have more outstanding dues. The real issue, though, is not so much about BSES or TPDDL’s efficiency levels, or even the strength of their respective balance sheets. It is more about the Delhi Electricity Regulatory Commission (DERC) failing to do its job

and the Central Electricity Regulatory Commission (CERC)/Appellate Tribunal for Electricity (ATE) not ensuring this is corrected.

The point is a simple one. The three electricity distribution companies (discoms) have collectively been paid R27,192 crore (see our lead story today) less than they should have over the years. So, if the costs of power are R1 per unit, the DERC fixes tariffs at, say, 65 paise—the balance 35 paise are accounted for as a ‘regulatory asset’. The three discoms took loans from banks to carry on operations, but as the outstandings have risen dramatically, even the banks are hesitant to finance them anymore. When the companies went to ATE to protest and talked of how, in cities like Mumbai, the regulator had come out with a schedule of tariff hikes to pay back these outstandings—‘regulatory assets’, in jargon—ATE asked DERC to deal with the matter; it helped that, in 2011, ATE had passed a judgment outlawing such under-charging and ruled that previous regulatory assets had to be paid off in a short period of time.

In the case of Delhi, however, nothing of the sort happened. While the discoms say they are owed R27,192 crore by Delhi’s electricity consumers, the DERC has not even finalised the accounts for the last two years. As against this, DERC has come up with a schedule to allow firms to recover R8,000 crore—that’s less than

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