Exclusive: Accountability of State Electricity Regulatory Commissions a challenge: Power Secretary

Capacity addition to ensure energy security, fuel arrangements for the same, transmission network for green energy, and smart metering are tasks that are ongoing projects and we need to keep pushing them, Alok Kumar said.

The role of State Electricity Regulatory Commissions (SERC) in India’s power sector has never been as crucial as now, given that every other state government is offering or promising subsidies in electricity consumption, Alok Kumar, Secretary, Union Ministry of Power, told Moneycontrol.

He said that in case a state government does not pay the subsidy amount to the distribution company (discom) in advance as per the rule, it is the duty of the SERC to pass an order asking the discom to start billing as per the full tariff until the dues are paid.

“But SERCs have hardly ever done that, resulting in mounting losses for the discoms. The state regulators have not lived up to the expectation. Here, the expectation is not of the chief minister, but that of the law and Parliament. So, ensuring accountability of SERCs is the biggest unfinished business in the country’s power sector, according to me,” Kumar said.

Kumar retires from his post on June 30. Pankaj Agrawal will take over as the power secretary, effective July 1.

SERCs are independent, quasi-judicial bodies that have been set up in every state and union territory. These regulatory commissions are responsible for determining power tariffs, as electricity is a state subject as per the Constitution.

Also read: Exclusive | Power ministry has not advised PSU promoters on PTC's regulatory scrutiny, says Secretary

The SERC is responsible for granting and reviewing licenses for discoms, transmission lines, and generation companies (gencos). It is also responsible for coming up with policies and rules regarding the state’s power sector from time to time, apart from resolving disputes between stakeholders.

Kumar said by deferring tariff revisions or issuing tariffs that do not reflect costs, the SERCs are defying the very purpose for which they were set up. “What was the point of setting up SERCs if these institutions remain engaged in politics? The basic expectation was that SERCs will follow the norm of the tariff policy as mandated under the Electricity Act so as to ensure that discoms remain financially viable. But most of the states have completely ignored this legal mandate,” he said.

It is because of such non-compliance that there is an increasing trend of the affected parties (discoms, gencos, and so on) going to the Supreme Court for relief, he added.

At the same time, in May this year, the union government shot a letter to the Central Electricity Regulatory Commission (CERC), a statutory body at the national level with quasi-judicial status, asking it to consult the ministry of power before issuing any regulations henceforth.

When asked what the ministry of power does to ensure effective functioning of the SERCs, Kumar acknowledged it has been one of the toughest tasks given the federal nature of the country. In the draft Electricity (Amendment) Bill, 2022, the union government had proposed the introduction of a common selection committee under its control for the appointment of the chairperson and members of SERCs. This was vehemently opposed by most states as the move would mean SERCs would lose their autonomy, with states having no control over the selection process. The proposed amendment was later withdrawn by the Centre.

“But we did undertake a slew of reforms following a carrot and stick policy. We introduced the Revamped Distribution Sector Scheme (RDSS) which has pre-qualifications to be eligible for smart metering and employee training, some of which require the involvement of SERCs. If that is not done then the grants to the state governments under RDSS get paused,” he said.

Also read: Govt proposes amendments to Electricity Rules, 2005 to make power sector financially sustainable.

“Another important policy has been the introduction of reform-based additional borrowing. If discoms and gencos do not meet the trajectory of reduction in the Aggregate Technical and Commercial (AT&C) losses, and in the Average Cost of Supply and Average Revenue Realisation (ACS-ARR) gap, then their funding is stopped immediately. We also have the late payment surcharge rules. So, we are beginning to see some improvements now,” Kumar said.

From 25.5 percent in FY13, AT&C losses in the country reduced to 16.4 percent in FY 22. Till FY 21, that stood at 22.3 percent. As per provisional data from the power ministry, in FY 23, this further reduced to 13.5 percent.

As for the ACS-ARR gap, it has reduced from 84 paise per kWh in FY13 to 15 paise/kWh in FY22. In FY21, it was 69 paise/kWh.

Post the implementation of the late payment surcharge rules, overdues of gencos have reduced from Rs 1,39,747 crore in June, 2022, to Rs 75,551 crore in June, 2023, data from the power ministry showed.

“Apart from the issue of accountability of SERCs, the rest of the tasks at hand are not of concern as they are work-in-progress and we will have to keep pushing. Some of these ongoing tasks include capacity addition to ensure energy security, fuel arrangements for the same, transmission network for green energy, and smart metering,” he said.