Regulation in Practice: impact of tariff orders on the Indian electricity Sector

Anjali Garg · J. L. Bajaj

ene 2007 · The Energy and Resources Institute (TERI)

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This publication focuses on the impact of tariff orders (distribution) issued by nine SERCs (state electricity regulatory commissions) in India during 2003/04, 2004/05, and 2005/06. The states covered are Andhra Pradesh, Assam, Delhi, Jharkhand, Kerala,Madhya Pradesh, Maharashtra, Uttarakhand, and West Bengal. The analysis has been undertaken based on data and information available up to January 2007. The book assesses whether the orders have resulted in reducing regulatory uncertainty and information asymmetry, and led to better performance of the distribution utilities. Different indicators have been used to assess the impact on consumption and access, efficiency, financial performance, competition, and consumer-related issues in the power sector of these states. In addition, various parameters have been studied to assess whether the regulatory systems follow the principles of good regulation in these nine states. br> The commercial loss (without subsidy) incurred by state power utilities increased from Rs 197 220 million in 2003/04 to Rs 221 290 million in 2004/05. In view of the huge losses being incurred by the utilities, the tariff determination function forms a central part of the reform process. A comprehensive survey of tariff orders issued by these SERCs for the distribution licensees has been undertaken to evaluate the effectiveness of regulatory orders in the electricity sector. It assesses whether the orders have resulted in reducing regulatory uncertainty and information asymmetry and better performance of the distribution utilities. However, tariff orders are only one index of effectiveness of the regulatory commissions. It is recognized that there are many other important functions of the SERCs besides tariff-setting, and some of them have also been covered in this study.In addition, other documents available in the public domain, including the Power Sector Rating Report, prepared by the Ministry of Power, Annual Report on the Regulation in practice: impact of tariff orders on the Indian electricity sector Working of State Electricity Boards and Electricity Departments, 1 and the Report on Restructuring of APDRP (Accelerated Power Development and Reform Programme),2 were also studied.