Aam Aadmi Party (AAP) commitment to reduce electricity rates by 50% generated some hope for consumers in Delhi who had suffered steep increase in power tariff by nearly 70% since privatization of distribution in 2002.
AAP has been in power for almost 6 weeks and yet hapless consumers have no relief in sight. Government is yet to give effect to a cut of 50% for consumption up to 400 units a month announced on assuming office. Meanwhile, Delhi Electricity Regulatory Commission (DERC) has hiked in power purchase cost adjustment charge (PPAC) by 6-8%.
Even worse, an imminent cut in supply haunts them due to a threat given by NTPC (it supplies around 50% of Delhi’s power need) as power distribution companies (PDCs) have not made payments. The breather enabled by Supreme Court is available till March 26.
PDCs viz., BRPL, BYPL (Reliance Infra) and TPDL (Tata Power) allege that they are in dire financial straits – hence, unable to pay to suppliers – because they were not allowed to increase tariff in tandem with increase in cost of power purchase, transmission and distribution.
The widening gap has led to build-up of ‘regulatory assets (RAs)’ – a euphemism for revenue gap deferred to future. As per a ‘statutory advice’ put out by DERC on February 1, 2013, RAs were Rs 19,500 crores. These include Rs 14,800 crores for BRPL & BYPL and balance Rs 4700 crores for TPDL.
In this backdrop, how will PDCs be able to sustain operations? How will they ensure un-interrupted power supply? How will Mr Kejriwal deliver on 50% tariff cut?
The current tariff structure is Rs 3.9 per kwh (or unit) for consumption up to 200 units a month; Rs 5.8 for 201-400; Rs 6.8 for 401-800 and Rs 7.0 for above 800. That gives a weighted average of about Rs 6.5 per unit. Against this, cost of power purchase is Rs 5.38 per unit.
Clearly, charges payable by consumers are very much in sync with cost. Yet, if there are huge RAs, we need to take a serious view of Mr Kejriwal’s allegation that PDCs indulged in irregularities viz., un-metered sales, inflated O&M expenses and ‘gold plating’ of equipment cost etc (CAG audit is already under way).
Let us look at some facts available in public domain. In 2010-11, then Chief DERC Mr Berjinder Singh on an examination of accounts had found that 3 PDCs had a surplus of Rs 3577 crores. On that basis, he recommended a 23% cut in tariff.
That order remained on paper even as new chief took command of DERC. He took a re-look at accounts and averred that far from any surplus, there was in fact, a shortfall of Rs 3299 crores. In August 2011, DERC attempted to explain as to why the earlier calculation was wrong (Annexure XII of order).
It argued, this was based on a large amount of surplus power of over 20 billion units – from plants expected to be commissioned during 2010-11 – to fetch Rs 5395 crores through sale in open market at premium (Rs 2 per unit) . After making adjustment for certain cost to be allowed to PDC, net surplus was Rs 3577 crores.
But, due to delay in commissioning of many plants, extra power supply was much less at about 5.8 billion units. Even this was not drawn as Central Electricity Regulatory Commission (CERC) had imposed a high penalty for overdrawing/under-drawing from grid; for instance, any dip in frequency below 49.5 Hz would attract a penal rate of Rs 12 per unit. Hence, projected surplus did not materialize!
However, DERC does not explain as to how a deficit of Rs 3299 crores surfaced. Yet, it points towards steep increase in cost of power purchased as a proportion of total revenue billed BRPL: from 83% in 2008-09 to 94% in 2009-10 and 132% in first half of 2010-11; BYPL from 73% to 77% to 135%; TPDL from 76% to 98% to 104%.
The projection of surplus initially, subsequent rebuttal and explanations thereof sound bizarre. Delhi is deficit in power and has to depend on supplies from other states. As per DERC admission, realization from sale of this power can’t recoup money spent on arranging for it.
In this backdrop, the very premise that PDCs would buy a huge 20 billion units cheap and sell in market at a premium of over Rs 2 per unit is fallacious.
What adds to mystery is that RAs of Rs 19,500 crores as on February, 2013 includes Rs 12,581 crores that were added during 2011-12 and 2012-13. These are as per projections of PDCs and are yet to be scrutinized and authenticated by DERC!
Of various irregularities alluded to by Mr Kejriwal, ‘un-accounted/unpaid’ use of electricity merits attention though PDCs claim that losses have declined to as low as 17%. Let us look at following.
Delhi’s requirement for power is 5600 MW (mega watt). 1 watt yields 8760 watt hours (24×365) or 8.76 kilo watt hours (kwh) of energy per annum. 1 MW equals 1,000,000 watts. Hence, 1 MW will yield 8.76 million kwh per annum.
Thus, 5600 MW will generate around 49 billion kwh (units) of energy per annum (5600×8.76). As against this, reported consumption during 2012-13 was 25 billion units. Therefore, power use that went un-accounted was 24 billion units (49-25).
Put differently, nearly 50% of power used in Delhi does not yield any revenue. If, this is paid for that will generate Rs 15,600 crores annually (24×6.5) and RAs will be extinguished in just about 15 months. Thereafter, it should be possible to cut tariff by 50% to Rs 3.3 per unit (25×6.5/49).
The message is loud and clear. If, despite consumers paying through nose, electricity distribution companies in Delhi are losing, it is due to large-scale power theft and other irregularities.
It is hoped that CAG audit and follow up action will help in clearing the power mess and bring some cheer to Delhiites.