DERC for tariff rationalisation, choice for consumers

Aiming to increase competition in the electricity supply market and give consumers an option to choose their power supplier, the Delhi Electricity Regulatory Commission (DERC) has come out with an approach paper. The commission has placed the approach paper in public domain and sought suggestions from stakeholders on its content. Presently the consumers can not choose their power supplier. Promoting competition will mean consumers would have the option to choose a supplier and new players would enter the market, the paper says. The objective of the approach paper is to examine the existing regulatory framework in electricity retail tariff and develop a strategy for creating competition in this market within the present legal framework of the Electricity Act, 2003. The approach paper also calls for "...creating a level playing field for the existing distribution licensees and the new incumbent players, who want to participate in retail supply of electricity." The tariff rationalisation part of the approach paper envisages recovery of fixed cost from fixed charges and variable cost from energy charges (electricity tariff). The commission has analysed the present cost and revenue component of the distribution licensees in Delhi. It is observed from the annual revenue requirement (ARR) that total fixed cost in the ARR is 45-55 per cent while revenue from fixed charges is only 8-10 per cent. The variable cost component in ARR is 45-55 per cent and revenue from variable charges is 90-92 per cent, the approach paper says. Presently, more than half of the fixed cost load is borne by energy charges leading to increase in power tariff. Rationalisation essentially means that fixed cost should be recovered from fixed charges and variable cost from variable charges.