The Electricity Act 2003 envisages that Ministry of Power (GoI) will frame several new policies. The Tariff policy is the first and one of the most important among these. When finalized, all Electricity Regulators will be bound to follow this policy. MoP recently released its preliminary discussion paper on Tariff policy. Comments by Prays on this first draft raise major issues about the process of framing such policies, competition for power purchase by Distribution Companies and information asymmetry, among other thing.
After the 1st draft of Tariff Policy by MoP, there was wide-spread feeling that it was too detailed. Following this, the MoP appointed this high level Task Force to seek advice on range of issues such as Tariff policy, National Electricity Policy, Power for all by 2012 and measures to promote investment. The MoP invited Prayas to make a presentation to the Task Force on 9th Oct 2003.
The E-Act requires implementation of Transmission open access. The CERC published a discussion paper and considered it as a suo moto petition. It invited public comments and held public hearing on two days at Delhi. Prayas gave comments on 2nd Oct 2
The Reliance Energy’s application is one of the major developments in opening the new area of trading. The importance of trading in encouraging or stifling competition is well known. Prayas comments sent to CERC on 20th Oct 2003 point to the what the commissions should look into before giving any such license:
Through this letter dated 25th December 2003, Prayas once again brought to the notice of the Task Force some critical issues such as need for comprehensive database of generation costs and other contracts, and strict requirement that all distribution companies purchase all power only through competitive bidding.
In November 2003, the MoP floated ‘Discussion Paper on Rural Electricity Policy’. This was a part of the process of preparation of various policies to be notified under section 4 and 5 of the E. Act 2003. Prayas has written a note on the paper to communicate the importance of this process and the issues being discussed. The note was widely circulated through email and also informed activists and NGOs about the workshops being planned by MoP to seek comments of civil society on this paper
In continuation of the discussion paper on Open Access, CERC circulated draft regulations and invited comments on the same. In these comments Prayas highlighted issues such need for improved reporting formats.
In December 2003, CERC put up a draft of trading license and sought public comments. Prayas comments point out the urgent need to mandate detailed public disclosure and quote the recent experiences and precedents in the USA. See Summary of FERC order on this topic [see below] and the format of information requirement for utilities and traders[see below]. Prayas has argued that information asymmetry is one the biggest threat to competition and it is CERC’s legal mandate to minimize such threats.
The GoI had set up a high level Task Force (TF) with a wide mandate – suggestions for enhancing investments in sector and suggestions for two important national policies. The policies are important as the E Act expects the RCs to be guided by these policies. Among other things, Prayas comments point out that the radical changes suggested in policies are without sufficient analysis of impacts and these policies could have serious implications especially on the small consumers and the state finances. Prayas has also suggested some desired policy provisions for protecting larger public interest.
One of the important requirements of the Electricity Act 2003 is the notification of National Tariff Policy after consultation with state governments. All state regulatory commissions are to be guided by this policy in tariff determination. Prayas comments on the draft tariff policy (that was circulated to State governments in March 2005) are enclosed here. Apart from suggestions on specific provisions of the draft policy, Prayas comments highlight how the combined framework of E Act 2003 and National Tariff policy is highly unfair to the small consumers (which would be captive to distribution licensee). Due to the unfair cost allocations, these small consumers are likely to face substantial burden while large consumer gaining unfair benefits