Electricity Regulatory Commissions in India:Resources, Transparency and Public Participation

Shantanu Dixit

Prayas, Pune, IndiaShantanu@prayaspune.orgWorkshop on Electricity

Governance in Asia

Bangkok, December 2003

Key Attributes of Effective pTAP

Effective TAP

TransparencyComplete,MandatoryPublic oriented, Userfriendly,Supported byoperating systems

ParticipationMeaningfulSystemic,Mandatory spaceCSI capabilities

AccountabilityDirectAutonomy and AuthorityMultiple checks andbalances

TAPing the Electricity Governance: Key institutions, processes and decisions

InstitutionsGovernments, Multi / Bilaterals,Regulatory Commissions , Utilitites,Associations & Unions

ProcessessPolicy formulation, Legislation,Rules / Regulations / GuidlinesPlanningExecution and Regulatory oversightElectricity

Governance

DecisionsSetting the objectivesDemand forecast & capacity additionPower purchase / proejct developmentTariff revisionReforms and restructuring decision

Importance of Regulatory Commissions

Typically RC’s decide /approve– Tariff– Capacity addition plans and power purchase agreements – Performance benchmarks for utilities (generation efficiency, T&D losses etc.)– DSM / RE

RC’s role is important even in a ‘competitive’ sector structure– Competitive bidding process– Prevent market dominance– Public benefits – access, environmental concerns

(In many countries, for several years, practically small consumers would be under regulated monopoly structure)

MERC and Enron’s Dabhol Project…1

MERC established after Dabhol PPA MSEB’s first tariff revision case

– MSEB forced to give critical data such as hour by hour demand and generation from different plants

– Based on this data PEG demonstrated that Dabhol’s costly plant was generating electricity even when not required / economical

– MERC adopted ‘Merit order dispatch’ principle and directed MSEB to use Dabhol – only when needed

MERC and Enron’s Dabhol Project…2

Prayas – IPP Documents Case before MERC– Enron strongly resisted making contracts public– Finally, over 10,000 pages of IPP’s confidential contracts were

made public. These include Financing contracts, construction contracts, O & M agreements,

and fuel supply & transportation agreements

MERC’s ‘Merit order’ directive exposed high cost of Dabhol power (high of ~15 cents/kWH)

Strong political and public reaction leading to Godbole Committee and subsequent stoppage of the project

History of ERC’s in India

1996 – Orissa State- Under WB Model– Public hearings on PPAs made mandatory

1998 – Central Regulatory Commissions Act– Consumer representatives– ERC’s to function in a transparent manner

Currently, ERCs in over 20 states as well as at the central / federal level

ERCs: Important Governance Issues (in addition to TAP)

Mandate / Policy directions Autonomy

– Selection procedures and fixed tenure– Financial and manpower

Authority– Legal (investigation and enforcement)– Substantive (tariff, PPAs etc.)

A Good Beginning but Challenges Galore: PEG study of ERCs in India

Study looked at– Resources– Transparency– Public participation– Government response / interference

Study process– Covered 13 ERC including Central commission– Questionnaire based survey,Additional information from regulations,

annual reports and orders– Panel of Eminent Persons and their independent report– Comments by regulatory commissions– Nearly one year’s process

Issues covered in the study

1. Commission composition and tenures2. Commission staff and resources3. Consultants to the commission4. Petitions, orders and appeals5. Commission Advisory Committee6. Transparency7. Public Participation8. Role of governments and interactions amongst ERCs,

governments and utilities

No Parameter / RC KERC

WBERC

RERC

APERC

UPERC

HPERC

1 No. of full financial years of operation (upto March 02)

2 3 2 3 3 1

2 No. of annual reports published 3 ? 2 0 3 0 3 No. of permanent staff in technical, economic/

finance, legal category 0 0 0 8 0 3

4 No. of CAC meetings held is as per required by law/regulations

NA NA

5 No. of agricultural representatives in CAC 2 1 1 1 1 1 6 No. of research body/academic representatives on

the CAC 0 1 2 0 0 3

7 All orders are on the website 8 There is library/reading room with index (of petitions

etc.)

9 RCs Inform public of technical validation sessions, non-public hearing proceedings

10 RCs produced any brochures/information packs for consumer awareness

11 RCs have done any expenditure on consumer education etc.

12 Presence of institutional mechanism such as Consumer Advocate/Representatives

13 RCs have ordered for publication of old PPAs and other key data

14 Documents published in local language # Regulations / Codes Annual reports

Key findings of the study ……1

Autonomy and resources– Commissions mainly consists of retired government

bureaucrats, judges and utility officers– Nearly 70% members retire before full term – Highly dependent on government for financial as

well as manpower resources– Appointments are not timely– Severe shortage of capable manpower

Key findings of the study ……2

Petitions, Review and Appeals– Largely Utility, Industry / business affaire, with

limited ‘public interest’ / class benefit cases– ~ 90 % orders on petitions by utility or industry /

commercial consumers

Key findings of the study ……3

Transparency– Legal provisions but no effective ‘operationalising’

system No well classified index / library / reading room, Procedure and

responsibility for making documents available not fixed, All orders may not be on the web-site

– Little pro-proactive efforts Key documents (PPAs etc.) not easily disclosed, no email

group or ‘service list’ concept implemented

Key findings of the study ……4

Public participation– Largely limited to public hearings in important cases – Except in case of 2/3 commissions no ‘institutional’

mechanism for enhancing participation (e.g. consumer representatives / advocates)

– Similarly, local language documents are very limited– Except one commission, none has taken efforts for

capability building of civil society

Key findings of the study ……5

Even ERC’s may not follow simple statutory requirements – Annual reports are not published– Less meetings of advisory committee than required

by regulations

Signs of possible regulatory softening, and subversion already visible

In the nutshell

ERCs – A key electricity sector governance institution

‘Good governance’ principles accepted in theory (to a certain extent in legal structure also) but significant efforts needed for– Operationalising TAP– Capability building of civil society– Strong, active intervention by civil society