Electricity Tariff Hike - A Symptom of a Sector in Disarray

Delhi Electricity Regulatory Commission (DERC) announced a 22% hike in electricity tariffs effective September 2011. Was DERC trying to one up South Africa’s 25% hike or were they trying to look better in contrast to Maharashtra’s 100% tariff hike not too long ago?

After all is said and done about the reasons for this tariff hike, here is the bottom line. The revenue requirement for the FY 2011-12 at Rs. 3899.11 Cr. Vs. the revenue gap at existing tariff is Rs 800.21 Cr. DERC has considered removing the cross- subsidization in tariff structure and has also considered the actual cost of service.

As part of the Electricity Act of 2003, an expert Appellate Tribunal for Electricity (ATE) was formed to hear appeals against State and Central Electricity Regulatory Commission orders. This is potentially a great mechanism to provide a grievance redressal but also hopefully, to encourage investor and public activism.

There was a hearing held last month on tariff determination and a few grievances were brought up, including fast meters and distribution companies’ poor response system.

I hope the consumer bodies will be able to influence the hearings and direct the Commissions’ and ATE’s attention to these very pertinent issues.

• Electricity theft and revenue loss
• Effect of tariff hike on overall economic growth
• Distribution companies’ lack of ability to purchase power from private companies, creating a bankruptcy situation inspite of the demand (Case in Point: Monnet Ispat has been forced to sell power for as low as 1c/KwH as demand has plummeted. This has happened despite Indian customers facing power blackouts even after paying more than 10c/KwH for power)
• Overall analysis of financials of distribution companies
• Analysis of distribution companies’ operational efficiency levels

For India’s benefit, this is another reason for the use of renewables and for doing so quickly. Meanwhile, I hope the consumers will be provided some sort of subsidy relief if not an outright reversal of these hikes.