Wednesday 10 August 2011

MGP Objections To Electricity Tariff Hike Proposal

Chamundeshwari Electricity Supply Corporation (CESC), which supplies electric power to Mysore has filed an application before the Karnataka Electricity Regulatory Commission (KERC) to increase electricity tariffs for 2012. CESC has called for objections to the rate increase. Mysore Grahakara Parishat is filing the following objections:

1. KERC approved the present tariff in 2010 as a multi-year tariff for the years 2011-13. Sec. 61(f) of the Electricity Act, 2003 (EA) mandates multi-year tariffs. There are two reasons for fixing multi-year tariff rather than annual tariff, to encourage efficiency of supply companies and to reduce regulatory uncertainty. Fixing the tariff once again when there are two years left on the original period of the multi-year tariff defeats the whole purpose of multi-year tariff and violates the Electricity Act.

2. Sec. 61(g) of EA intends that the tariff should reflect the actual cost of power. Since all the electricity supply companies (ESCOMs) in Karnataka have filed for identical tariff increases, it is obvious that the tariff proposed by them in general, and CESC in particular, does not reflect the actual cost of power. For example, the proposed tariffs (energy charges) for LT 2(a)(i) category (domestic AEH) is as follows:      

                     Present rate          Proposed rate     % increase
           
For the first
30 units                 2.1                    2.98                   42
           
31 to 100 units       3.2                    4.08                   28
           
101 to 200 units      4.2                    5.08                   21
           
 > 200 units            5                      5.88                   18

These figures are identical for all the five ESCOMs in Karnataka. Last year also, the five ESCOMs had applied for identical tariff increases. The actual cost of supply of power for all these companies can not be the same to the last decimal place when one takes into account, the different locations, different distances to power sources, different demographics and different costs of living. It is clear that the ESCOMs have not determined the cost of power supply in any scientific manner, but are presenting fictitious numbers. For this reason, the tariff hike proposed by CESC should be rejected. The ESCOMs have been always submitting identical tariffs and MGP has requested KERC to direct them to cease this practice and determine the actual cost of power supplied.

3. Sec. 5.9.4. of the National Electricity Policy emphasizes a more regulatory approach to setting standards for energy conservation. The most obvious regulation to promote energy conservation is to have higher tariffs for higher consumption. Increasing the tariff by the same amount irrespective of consumption goes in the opposite direction. In the table above (Item 2), the tariff has been increased by 0.88 Rs. for all consumers. This works out to 42% increase for consumers who practice energy conservation and just 18% increase for consumers who waste energy. Such a rate increase defeats the aim of the National Electricity Policy. Since Sec. 61(i) of the EA mandates that the National Electricity Policy must be followed in fixing tariffs, the rate increase also violates the law. Rightly, it should have been the other way round, 18% increase for the lowest slab and 42% increase for the highest slab.

4. Rural areas are suffering heavy power cuts in contrast to urban areas. This discrimination by CESC is against both equity and Sec. 5.1 of the National Electricity Policy. Electricity Regulatory Commissions of other states have acted to stop such discrimination. For example, in an order given on 5-5-2006, the Punjab ERC has ruled "The Commission further decides that the (Punjab State Electricity) Board should take adequate steps to minimize discrimination amongst consumers of different categories especially rural and urban domestic consumers as far as possible while imposing power cuts." In another order issued on 18-5-2007, PERC said "The Commission notes that there is disparity in the imposition of power cuts especially in the case of some urban centres and in rest of the State. The Commission observes that this clear discrimination between two sets of the same consumers seems to be iniquitous and without any rational basis. It would, perhaps, be best if power cuts are applied evenly in urban and rural areas of the State. If on the other hand the Board is still of the view that there are overriding compulsions to the contrary then it may draw up fair and transparent criteria that might justify any disparity in the imposition of power cuts." In a 2009 concept paper on power cuts (pdf) the Uttarakhand Electricity Regulatory Commission has observed "If all such feeders are not required to be cut, requisite number of feeders only may be cut but on rotational basis so that all consumers bear the brunt of such power cuts" and then again "The practice of exempting some cities for their perceived importance should be stopped and all urban areas should be treated similarly." These are some persuasive precedents. Karnataka Human Rights Commission has written to the state government on this issue. KERC should order an end to such discrimination.
Maj.Gen. (Rtd.) S.G. Vombatkere, Mysore Grahakara Parishat