regulatory process and tap for public interest – case studies

Prayas - EGI Workshop, Pune Nov. 2010

Prayas EGI Workshop1

Regulatory process and TAP for public interest – case studies

Prayas - EGI Skill-share workshop for Tajikistan and Kyrgyzstan Delegates

November 16-18, 2010, Pune, India

Prayas Energy Groupwww.prayaspune.org/peg, energy@

prayaspune.org

Prayas - EGI Workshop, Pune Nov. 2010 2

Agenda

Case Studies Transmission and distribution losses Making government accountable Capital expenditure Load shedding Autonomy grievance redressal

mechanism Capacity Addition and Joint declaration

process

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Exposing hidden Transmission and Distribution Losses (T&D loss)…1

Context Agricultural consumption – un-metered

supply Utilities estimate T & D lossGeneration – Metered Sales – Estimated

agricultural consumption = T&D loss Understatement of T&D loss

No transparency about commercial losses, theft etc.


Exposing hidden Transmission and Distribution Losses (T&D loss)…2 1999 – Utility filed application for tariff revision –

claimed T&D loss ~ 18% Prayas filed petition seeking data including

Region-wise sales, basis for estimation of agricultural consumption

During preliminary hearing Established importance of these data – Uncertainty of

costs - ~ Rs. 1900 Cr. v/s/ Tariff increase sought - ~ Rs. 1219 Cr.

Demonstrated that these data were available with utility

RC ordered utility to make public all data



During public hearing Established that utility claims of

agricultural consumption were overstated

Claims not justified based on sample metering data compiled by utility

Claims not justified based on cropping pattern and production


Exposing hidden Transmission and Distribution Losses (T&D loss)…4 Simultaneous advocacy efforts

Media Awareness amongst CSOs

Procedural aspects Substantive issues in the proposal, tariff impact, flaws

in the proposal etc. Need to focus on ‘sectoral’ issues rather than

fight for reducing consumer category wise tariff

Utility forced to accept high level of T&D loss



0%

10%

20%

30%

40%

50%

60%

1975 1980 1985 1990 1995 2000

% o

f E

nerg

y A

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ble

T&D loss Agri. Unmetered Share

Maharashtra Utility: Estimated Theft of US $ 500 Mn p.a.


Exposing hidden Transmission and Distribution Losses (T&D loss)… 6Impacts and Lessons

Forced regulator and utility to initiate remedial measures RC established norms for ‘allowable’ T&D loss Stringent metering and energy audit

processes and administrative drives Increased attention and disclosure of more

information during subsequent tariff processes

T&D losses reduced from ~ 39 % to 25%


Exposing hidden Transmission and Distribution Losses (T&D loss)… 7Impacts and Lessons

Lessons Seek incremental gains – access to

data Innovative analysis Understanding of utility operations,

systems and ‘friends’ Multi- level interventions – RC

intervention and public advocacy


Agenda



process

10


Mumbai Grahak Panchayat - Govt. role in tariffBackground: minister talked about likely tariff,

directed MSEB to waive arrears of some consumers without announcing corresponding reimbursement

Issue: Government / MSEB cannot announce concessions in tariff (without government giving subsidy from budget),

restrain minister, SEB & start contempt process

Order: Government and SEB warned

Result: Government became cautious - some financial discipline, RC’s authority accepted


Government - Seeking permission for subsidyBackground: Government announced subsidy -

but was not disbursing it. Advisory Committee discussed the matter -> suggested RC to start action against Govt.

Issue: Govt. approached RC seeking permission for subsidy disbursement (and made provision in budget)

Order: Proposed disbursement schedule allowed

Result: Govt. financial accountability increased, timely payment being monitored by RC, public


Initial interventions are crucial After public hearings RC announced ‘in

camera’ technical validation sessions Prayas along with others opposed this and

forced RC to make these sessions open Several benefits

Opportunity to directly question utility and expose inefficiencies

Increased interactions with RC Opportunity for earlier intervention

Important precedence: All proceedings, hearings open for public and no ‘in camera’ hearings.


Agenda



process

14


Accountability for capital expenditure …1 Large impact of ‘prudent’ capital expenditure

on consumers – Service and tariff Was not addresses in earlier Regulatory

processes In response to 2003 Act, RC required to re-

formulate tariff regulations Forced RC to form multi-stakeholder

committee to prepare draft regulations Utility and consumer representatives Opportunity to interact with utilities in ‘non-

adversial’ setting


Accountability for capital expenditure …2 Tariff regulations

RC to give in-principle clearance for all capital expenditure schemes above Rs. 10 Cr.

Required RC to prepare ‘Guidelines for in-principle’ clearance for capital expenditure Utilities have to submit detailed project reports,

expected benefits, funding plan etc. Cost allowed in tariff if

‘in-principle’ clearance is granted Achievement of expected benefits – ‘prudence’ check


Accountability for capital expenditure …3 Recent Tariff Order - Consumer Submissions -

“TBIA submitted that a critical review of capital investment to the tune of Rs. 31,000 Crore provided to MSEB Utilities (MSPGCL, MSETCL and MSEDCL) and its impact on the consumers should be conducted.”

“If the projected benefits due to these capital expenditure schemes would have been realised then the tariff would also have been reduced in future years. … They requested the Commission to obtain data on benefits achieved due to each capital expenditure scheme vis-a-vis the benefits projected”


Accountability for capital expenditure …4 Commission decision –

“In the previous APR Order, directed MSEDCL to submit detailed report with established benefits vis-a-vis the benefits projected. Since, MSEDCL has not submitted the detailed report, the Commission has not considered any revision in capitalisation for FY 2007-08.”

“The Commission shall consider the disallowed capitalisation against such DPR schemes, once the benefits of such schemes are established by MSEDCL.”


Accountability for capital expenditure …5

Streamlined procedure for undertaking capital expenditure Certainty for utility Utility required to improve planning

and implementation of capital expenditure schemes

Enhanced accountability for effective capital expenditure


Agenda



process

20


Brief introduction MERC has formulated load shedding protocol

which defines number of load shedding hours for a region based on its distribution losses and collection efficiency

Protocol is defined through public process Utility in 2008 changed the protocol without prior

approval or notice and later filed petition claiming seeking revision of protocol

Separate petition claiming it is not possible to estimate load relief and hence protocol is not implementable was also filed simultaneously


Prayas intervention and commission’s ruling Detail presentation based on analysis

challenging the notion of inability to estimate load relief

Strongly attacked utility’s unwillingness towards being accountable in its load shedding practices

Commission supported views expressed and did not entertain the claims of inability to estimate load relief

Commission through public process issued modified protocol which covered wider option and gave higher flexibility to utility


Appellate Tribunal and load shedding committee

Utility challenged commission’s order before the Appellate tribunal for electricity (ATE) inter-alia questioning commission’s jurisdiction to define such a protocol

Prayas requested to be a party to the proceedings before ATE and made similar analysis based representation supporting the commission’s order

ATE upheld commission’s order as well as jurisdiction in defining such protocol and suggested more consultative process for arriving at the protocol by way of forming a load shedding committee that would comprise of representatives from utility, commission, load dispatch centre and consumer representatives

Prayas is a member of the committee formed in accordance with ATE judgment


Impacts and lessons Ensured commission’s jurisdiction in matters such

as load shedding protocol which are directly related to utility’s accountability

Lot of data was demanded for analysing utility claims. This made the process robust and rational and ensure that any further change in protocol will be based on such data and facts

Lessons: Intervention at all forums (in this case

commission and ATE) is necessary to ensure sanctity of a given judgment/verdict


Agenda



process

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Introduction to the issue As per act forum(s) should be established by each

utility for addressing consumer grievances CGRF comprises of 2 members and chairperson PEG intervened in the process of defining rules for

CGRF demanding autonomy and independence of forum from utility’s influence. not more that one member to be utility

representative and chairperson should not be utility representative

PEG suggestion was accepted and implemented


Impacts and lessons Recently utility filed petition seeking amendment

in regulations allowing ex-utility officers to be appointed as CGRF chairperson

PEG again intervened and opposed such amendment demanding autonomy of the forum

Commission did not make any amendments Lessons:

Need for long term sustained effort Constant vigilance for changes that may erode

effectiveness of consumer interest related provisions


Agenda


mechanism Capacity Addition and Joint

declaration process

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Issue and context Background:

Rising load shedding and pressure for cross-subsidy reduction

Discussion at State advisory committee meeting PEG suggested discussion on capacity addition

planning to understands hurdles that utility’s face and collectively find solutions

Utilities extremely reluctant of discussion Tendency to avoid planning accountability

Issue of capacity addition planning again raised through tariff revision process based on regulatory requirements as per regulations


Tariff revision process Utility was forced to respond as demand was

based on regulations Preliminary capacity addition plan was

shared Meanwhile contradictory statements about

load shedding were made. Lack of clarity and or credible data

Tariff was revised several times the same year on account of various reasons

Consumers dissatisfied and agitated


Intervention Several consumer organizations came

together and formulated a joint statement of demands

Conferences based on joint demand agenda held at all major cities where public hearings were scheduled

Signature campaign undertaken through which around thirty thousand signed applications endorsing joint demands were sent to commission and government


Impacts and lessons RC directed utility to submit

comprehensive details Enhanced accountability while

approving long term agreements Focus on rational capacity addition need Lessons

Sustained public campaign is important Accountability and rational actions on

capacity addition – a long term agenda, sustained efforts needed


Comments and discussion

16 Nov 2010 Prayas EGI Workshop 33

regulatory process and tap for public interest – case studies

Documents

commercial losses

utility rc

government mseb

tariff revision

tariff impact

likely tariff

vs tariff increase

joint declaration process