SERCs for new rate fixation guidelines

State power regulators, grappling during rate fixation with the widening gap between demand and supply, and the expenses incurred by utilities on power purchases, have welcomed the model guidelines in this regard issued by the Forum of Indian Regulators (FoIR).

The guidelines were issued recently and the FoIR, which comprises the Central Electricity Regulatory Commission (CERC) and the various state electricity regulatory commissions (SERCs), met last week in Delhi to discuss these.

The guidelines, to apply to all distribution licensees, come in the wake of SERCs across the country adopting different mechanisms to estimate parameters critical to determining the average revenue requirement of a distribution licensee for the ensuing year.

There have often been disagreements between distribution licensees and SERCs over estimation methods. This has led to a bar on recognising certain genuine expenses.

FoIR said the guidelines’ objective was to streamline practices across SERCs and enable estimation of critical parameters with insignificant expected variance from the actual. The expectation is of satisfactory addressing of issues pertaining to timeliness of rate determination, allowing legitimate costs, fuel purchase adjustment and untreated gap and regulatory assets.

CERC chairman Pramod Deo, also FoIR's chief, told Business Standard, “There was a consensus to improve the financial health of distribution companies.

SERCs also agreed to adopt model tariff regulations. The (Union) power secretary exchanged ideas and conveyed the government's concerns on improving efficiency and financial performance of discoms.”

A licensee needs to file the rate petition by November 30 every year. SERCs are to issue the rate order within 120 days, after clarifying matters with the licensee. If the application is delayed or not filed or the additional information sought isn’t given, SERCs are to issue a rate order on their own initiative.

Most state regulators felt circle-wise differential rate implementation may not be practical for reduction in distribution losses.

According to FoIR, circle-wise differential rates should be implemented to mobilise support/push from consumers on the distribution licensee. Any circle going beyond a specified loss level may be mandatorily handed to another distribution franchisee.

However, Madhya Pradesh said this proposed provision may not be implementable in the forseeable future, given ground realities and policy directives. Gujarat has sought a clarification on whether the energy assessed due to stopper/slowmeters or theft assessment forms part of the energy billed or not.

Uttar Pradesh said aggregate transmission & commercial (AT&C) loss reduction should be incentivised, by linking the rate framework to this.

Tripura also said circle-wise differential rates may not be feasible — adoption of two or more rates by the same utility may invite consumer grievances.

It supported the call for introduction of incentives for loss reduction. It also wants aggregate transmission & commercial losses to be split into components and these monitored separately to get accountability for better results.