RoE cannot be adjusted against power subsidy: PSERC

In a significant decision, state power regulator PSERC has disapproved Punjab government's proposed move of "adjusting Return on Equity" against power subsidy, saying it is not in accordance with the law laid down in the Electricity Act, 2003.
Besides, Punjab State Electricity Regulatory Commission (PSERC) also asked the state government to pay subsidy in advance monthly installments.
The PSERC's order came following a petition filed by retired Superintending Engineer Gurnek Singh Brar who had demanded that state government's proposal of adjusting RoE against subsidy be declared illegal and further restrain state government from making similar adjustment in future.
"The GoP (Government of Punjab) proposal dated 28.03.2013 to adjust RoE (Return on Equity) against subsidy for 2012-13 is not in accordance with law as laid down in the Electricity Act, 2003.....

"The GoP shall not make any adjustment of RoE against the subsidy for FY 2012-13 and FY 2013-14 and shall make the advance monthly payment of the subsidy as per tariff order for the year 2013-14 ," said PSERC's order while disposing of the petition.
As per petitioner, the power regulator had worked out power subsidy amounting to Rs 5,607 crore for 2013-14 which was to be paid in advance monthly intallments by the state government.

Punjab government supplies free power to farm sector and up to 200 units per month to SC domestic consumers and Non-SC BPL domestic consumers (with a load of up to 1,000 watts).

The state government was also directed to pay unpaid subsidy of Rs 304.46 crore for 2011-12 and Rs 412.39 crore for 2012-13 by the regulator in its tariff order last year.
Petitioner said that the state government, on March 28, 2013, had proposed that the RoE of Rs 405.73 crore was to be adjusted against subsidy for the financial year 2012-13. It was also submitted that the unpaid subsidy of Rs 412.39 crore for 2012-13 was determined by the PSERC on the basis that RoE was to be retained by power utility Punjab State Power Corporation Ltd (PSPCL).
Power regulator had worked out RoE of Rs 405.73 crore on the equity of Rs 2617 crore for 2012-13 and Rs 942.62 crore on an equity of Rs 6,081 crore for 2013-14 at the rate of 15.5 per cent. RoE refers to the return or income generated from shareholders' equity.

Stating that the state government did not raise the issue of adjustment of RoE against subsidy before the Commission during tariff determination exercise for 2013-14, petitioner submitted that as per Section 65 of the Electricity Act, 2003, the subsidy was required to be paid by state government in advance.