Why DISCOMS in delhi want a hike in power tariff - Burning Issues

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RAISING PRICE

The discoms have been demanding a power tariff hike over the last five years, which has been turned down every time. This, the discoms claim, have led to mounting regulatory assets.

DERC

The Delhi Electricity Regulatory Commission (DERC), which regulates the city’s power sector, is expected to announce the annual tariff order by the end of August, which may determine your electricity bills from September.
The tariff order is usually announced at the start of a financial year.Delhi has not witnessed a substantial power tariff hike since 2015, when the Aam Aadmi Party took over the reins of the capital.

Does the DERC come under the Delhi government?

No, the DERC is technically an independent, quasi-judicial body governed by the Electricity Regulatory Commission Act, 1998 and the Delhi Electricity Reform Act, 2000.
However, appointments of the chairman and members to its board has always been a politically contentious issue, leading to tussle between the elected government and the Lt Governor, and also litigation.

What is the exact role of the DERC?

The DERC’s role is not limited to just deciding power tariffs. It also determines the price at which distribution companies (discoms) utilise resources of transmission companies, which in turn purchase power from generation companies at rates that are monitored by the DERC.
The commission also sets and monitors standards to be followed by companies and seeks to protect the rights of consumers, who can approach it with grievances for hearings.

How are power tariffs fixed?

Under the laid down processes, the discoms petition the DERC with their claims, including surplus or deficit being borne by them.
This year, the hearing, which was scheduled for March 18, could not be held due to the pandemic. Consequently, the commission sought written submissions from people.
The discoms were also given a chance to file revised petitions by June 5.

How many discoms are there in Delhi?

Delhi has three major discoms. The Reliance ADAG-run BSES discoms – BSES Rajdhani and BSES Yamuna are the largest suppliers, catering to over 43 lakh consumers.
Then comes the Tata Power Delhi Distribution Limited (TPDDL), which is a joint venture between Tata Power and the Delhi government serving around 18 lakh consumers in north and north-west Delhi. The entire distribution network in Delhi was privatised by the Sheila Dikshit-led Congress government in 2002.

What are their demands this time?

The discoms have been demanding a power tariff hike over the last five years, which has been turned down every time.
“This accumulation is the outcome of non-cost reflective tariff determination in past control periods and hence needs to be addressed immediately; as the situation has reached at alarming proportions making the financial condition of the company fragile,” TPDDL has said in its filing.

What has been the impact of Covid-19?

The pandemic and the lockdown have had an unprecedented “adverse impact” on the cash flow of the companies, all three discoms have told the DERC. They have cited the closure of industries, commercial units and a dip in the payment capacity of consumers due to job losses among other factors. In their revised petitions, BSES and Tata Power said the companies will collectively face a revenue gap of Rs 6,124 crore in 2020-21 if power tariffs are not hiked. They put the total revenue requirement at Rs 21,528 crore, excluding the past dues, to meet the operational expenses for 2020-21. Both Tata Power and BSES have said they do not foresee a turnaround before March 2021, and that too if the spread of the virus comes under control. To cite one example, Tata Power earns 55 per cent of its Rs 700 crore monthly earnings from commercial and industrial consumers. It shrunk to 15 per cent of the total revenue earnings of Rs 430 crore in April.

What are discoms saying on the Delhi government’s subsidy scheme?

In August last year, the Kejriwal government made electricity supply free for households consuming between 0-200 units while those consuming between 201-400 units get a 50 per cent rebate. Between 2015 and July 2019, 50 per cent rebates were given to those consuming between 0-400 units. It spent around Rs 6196 crore as power subsidy in the course of the five years. The subsidies are transferred to the discoms on a monthly basis, which in turn issue discounted bills to consumers. However, BSES has petitioned the DERC, requesting that the rebates be transferred to the consumers’ accounts directly like in case of LPG rebates under the Centre. It also wants such benefits to be withheld for consumers having dues or accused of stealing power. Tata Power has complained that the Delhi government doesn’t pay the subsidy amounts on time, leading to losses of around Rs 21 crore so far.

So, should consumers expect a tariff hike this time?

When The Indian Express reached out to the DERC Chairperson Justice (retd) SS Chauhan on Thursday, he said the commission was taking into account demands and suggestions of all stakeholders. He refused to comment on whether or not a hike was in the offing. “We invited suggestions from all stakeholders and are taking all written suggestions into consideration. Ample time was given to people since the public hearing could not be held. We must also keep in mind that companies and governments are facing losses due to the unprecedented situation caused by the pandemic. All factors are being taken into consideration and the tariff order is expected to be issued by the end of this month. Whether or not there will be a tariff hike is something I cannot comment on,” the DERC chairperson said.

What has been the impact of Covid-19?

The pandemic and the lockdown have had an unprecedented “adverse impact” on the cash flow of the companies, all three discoms have told the DERC.
They have cited the closure of industries, commercial units and a dip in the payment capacity of consumers due to job losses among other factors. In their revised petitions, BSES and Tata Power said the companies will collectively face a revenue gap of Rs 6,124 crore in 2020-21 if power tariffs are not hiked.

What has been the impact of Covid-19?

They put the total revenue requirement at Rs 21,528 crore, excluding the past dues, to meet the operational expenses for 2020-21.
To cite one example, Tata Power earns 55 per cent of its Rs 700 crore monthly earnings from commercial and industrial consumers. It shrunk to 15 per cent of the total revenue earnings of Rs 430 crore in April.

What are discoms saying on the Delhi government’s subsidy scheme?

In August last year, the Kejriwal government made electricity supply free for households consuming between 0-200 units while those consuming between 201-400 units get a 50 per cent rebate.
Between 2015 and July 2019, 50 per cent rebates were given to those consuming between 0-400 units. It spent around Rs 6196 crore as power subsidy in the course of the five years.

What are discoms saying on the Delhi government’s subsidy scheme?

The subsidies are transferred to the discoms on a monthly basis, which in turn issue discounted bills to consumers.
However, BSES has petitioned the DERC, requesting that the rebates be transferred to the consumers’ accounts directly like in case of LPG rebates under the Centre.
It also wants such benefits to be withheld for consumers having dues or accused of stealing power. Tata Power has complained that the Delhi government doesn’t pay the subsidy amounts on time, leading to losses of around Rs 21 crore so far.

So, should consumers expect a tariff hike this time?

DERC Chairperson Justice (retd) SS Chauhan on Thursday, he said the commission was taking into account demands and suggestions of all stakeholders. He refused to comment on whether or not a hike was in the offing.
“We invited suggestions from all stakeholders and are taking all written suggestions into consideration. Ample time was given to people since the public hearing could not be held. We must also keep in mind that companies and governments are facing losses due to the unprecedented situation caused by the pandemic. All factors are being taken into consideration and the tariff order is expected to be issued by the end of this month. Whether or not there will be a tariff hike is something I cannot comment on,” the DERC chairperson said.