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Give us cheap power, Piyushji
Not only have we been told India is a surplus power nation, those on Twitter will see a tweet from power minister, Piyush Goyal, everyday on how much electricity is available on various power exchanges, and at what price. On Thursday, for instance, he tweeted “Afternoon power check: 2,377 MW available at Rs 2.17/unit for states to buy”—a sample of his tweets over the past few weeks have been reproduced here for ready reference.
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If that much electricity is available at so low a price, even after you add on wheeling and other charges, the question is why this power is not available to consumers who are, for instance, paying Rs 7-8 per unit to a BSES or an NDPL in Delhi? That too will happen, Piyush Goyal will tell you, once he is is able to talk to the state governments and also pass necessary amendments in the Electricity Act which will allow for the creation of just a carriage company, which owns the power lines going into the premises of customers and charges a fee for transporting electricity—in jargon, this is called separating carriage from content. In other words, in a city like Delhi, for instance, a BSES will have a power distribution company and also one that owns the electricity lines that go into the homes of consumers. Once this is done, any citizen can buy the power Goyal tweets about, get into an agreement with BSES, to transport the power—BSES will probably have some back-to-back agreement with other transporters like Power Grid—and get the cheaper electricity. Apart from the wheeling and other charges that the Delhi Electricity Regulatory Commission (DERC) will set, there will also be a cross-subsidy surcharge to take care of the fact that higher-paying customers will be leaving BSES—the money is to allow BSES to continue to subsidise other sets of consumers, and the idea is to keep reducing this cross-subsidy surcharge every year.
Apart from the fact that it is not clear by when Goyal will be able to get the amendments to the Electricity Act through, it is also not clear if he is giving a firm deadline to states to implement this. Because, if he isn’t, it’s almost a certainty the states will not implement it. While no one can doubt Goyal’s intentions, what’s not clear is why he needs to reinvent the wheel since most of these provisions are there in the Electricity Act of 2003 itself. Goyal’s new plans, it is true, are a step or two ahead of what the Electricity Act of 2003 had envisaged, but if even this first step has not been taken, where is the question of taking the much bigger ones?
Section 42(2) of the Electricity Act clearly says, “The State Commission shall introduce open access in such phases and subject to such conditions… as may be specified within one year of the appointed date”—that is, this was to be done by 2014. “Open access” is what allows users to buy power from NTPC, in UP, use Power Grid’s wires to transport the power to Delhi, and then BSES’ lines to get it to your residence.
This, you could say, is left pretty much open ended, which is why, another proviso of the same Section 42 says, “Provided also that the State Commission, shall not later than five years from the date of commencement of the Electricity (Amendment) Act, 2003 provide such open access to all consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one megawatt”. In other words, begin with large users such as apartment complexes, shopping malls and industrial units.
Naturally, the state governments and the electricity boards were loathe to give up their power. After all, once consumers start buying power from the exchange, the state electricity board’s ability to buy costly power—and in large quantities—will also be constrained. So, the government never implemented this section of the Act.
With the Planning Commission insisting that all those who consumed more than 1 MW of power had to, by law, be freed from the clutches of the state electricity boards—or their counterparts, the private sector discoms—the matter went to the power ministry and the law ministry in 2010.
The Attorney General GE Vahanvati said that while consumers with the demand of more than 1 MW could be considered “open access” customers—and therefore their tariffs would not be set by the regulatory commission—he said this applied only to those who specifically opted for it. This sounds like a banal distinction, but isn’t because SEBs often arm-twist customers not to leave—we won’t be responsible if the alternative power supply fails, we can’t guarantee there will be a power lines to carry the power you buy from a third party, etc.
The matter went back to the Planning Commission which pleaded its case and again, on March 31, 2011, Vahanvati wrote,“Whether a state regulatory commission can continue to regulate the tariff for supply of electricity to any consumer of 1 MW above—No, for the reasons set out here in above”. After processing, the matter was signed off by the then law minister M Veerappa Moily on April 13, 2011.
In other words, even if, say, a Maruti Udyog chose not to move away from the Haryana utility that supplied it power, the tariff would not be decided by the regulator, but would be bilaterally negotiated—and, in that negotiation, the rates that Goyal tweets about regularly would be factored in.
Naturally, if costs couldn’t be loaded on to a Maruti Udyog, the regulator would have to look at charging other sections more economic rates and force the SEBs/discoms to reduce ATC losses.
In the event, while Goyal’s carriage-and-content plan can go on as scheduled, he simply has to implement the Electricity Act in all seriousness and that includes ensuring open access is allowed for all customers within a few years, but for the for the 1 MW people immediately—once that is done, most suppliers will automatically appear since a consumer will have a choice of buying from BSES/NDPL/Adani Power/NTPC etc.
Getting in more suppliers without open access, on the other hand, is largely a theoretical exercise since electricity lends itself to a natural monopoly. When Narendra Modi was campaigning in 2014 and promised to bring down electricity prices as had been done for telecom, he had this open access model of the Electricity Act, 2003 in mind.
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