Electricity portability not feasible under scarcity conditions

February 21, 2015 11:43 AM

CHANDIGARH : The concept that power consumers in the country would have the option of portability of electricity services as per Electricity (Amendment) bill 2014 is not feasible under power scarcity conditions.

The Governments proposed formula for ensuring lower power tariffs is competition between power companies. It has been claimed that like mobile service operators, if consumers are given the freedom to choose their power distribution company, electricity would become less expensive. The logic is tempting, but over simplistic.

The concept of multiple supply licensees has been proposed in Electricity (Amendment) Act 2014 in the power distribution sector with the regulated tariff based on market principles.
These views have been submitted to standing committee on energy by the spokesperson of All India power Engineers Federation.

The proposal of separation of power supply from distribution was introduced in United Kingdom under ideal conditions and in contrast the conditions are totally different and adverse in the Indian scenario In UK there was surplus of power generation capacity with no transmission constraints. The distribution sector in good financial health, AT&C losses at low levels and all consumers were having electrified households. All these conditions do not exist in India.

The main objective of the amendment seems to be to push the commercialization of electricity, opening up the sector before the profit motive of international corporate houses. The priorities of Government seem to be in favour of high income groups where people want un-interrupted quality power supply without bothering for tariff. The fate of those poor people who do not have power connection will be simply sealed as the power generation in country is much lower than power demand.

Power sector is facing serious challenges such as large scale financial losses, rising tariffs, deteriorating performance of existing plants, fuel availability and quality related concerns and poor quality of supply and service. The proposed amendments aim at making fundamental changes to the sector structure and organization, but it is not clear how these changes will help in tackling the issues mentioned above.

The experience and effect of market power in a scarce market has not been considered in formulating the proposal. As India is energy starved nation, reducing price of power through competition is impractical. The multiple licensee system will help only "cherry picking" and the deterioration of the incumbent public sector licensee, which will be the only responsible for supplying electricity to the unprivileged common man.
This simply means nationalizing the losses and privatizing the profits.
The competition is possible only in a situation of surplus, not scarcity of electricity, which the country was facing. As per census 2011 figures, close to 45% of rural India lack access to electricity. More than 33% of Indian households are still have no access to electricity as they cannot afford power even at existing rates. Therefore giving multiple licenses of supply will lead to chaos, heavy losses of Discoms, endless litigations and sky level tariff hike for common people.

This is an extremely serious issue given the financial dependence of state distribution companies on the revenue from high end consumers.
As per the amendment there is provision for franchising distribution as well as .supply of electricity. Past performance of several input based distribution franchisees suggests the need to bring its functioning and operation under regulatory scrutiny. Performance of the franchisees affects the licensee's financial health and hence the rest of its consumers. There are several cases of franchisees not properly paying their bills to the Discoms for several months, thereby severely straining the Discoms working capital needs.

The proposed system of separating out power supply from distribution business involves a foolproof and dispute free system of energy accounting and loss determination. Energy accounting and loss determination itself would make the proposed system unmanageable and full of disputes. An elaborate and computerized energy accounting and loss accounting systems are nowhere in existence and without these the commercial aspects of energy supply simply cannot be settled.

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