Interview with Anand Kumar

“Gujarat is one of the few states to have adopted IT in a big way”

The strong financial health of distribution companies, low aggregate technical and commercial (AT&C) losses, and improvement in renewable purchase obligation (RPO) compliance are some of the key achievements of the Gujarat power sector. Recently, the Ministry of Power (MoP) granted an A-plus rating to the three discoms of the state. The Gujarat Electricity Regulatory Commission (GERC) has played a critical role in the attainment of these goals besides other initiatives. Excerpts from a recent interview with Anand Kumar, chairman, GERC…

What have been the key achievements of GERC in the past one year?

A key achievement of our state distribution companies has been the A-plus rating granted by MoP, implying that they are in profits. This rating has been given to only three utilities in the country, all of which are in Gujarat.

One of the reasons for the strong financial health of the state discoms is regulatory clarity. GERC has notified all regulations relevant to smooth operations of utilities. Another reason is the timely filing of petitions by the discoms and the issuance of timely tariff orders by the commission. The third reason is the comfortable cost coverage ratio. The commission analyses costs and provides a cost plus tariff to both private and state discoms at optimum efficiencies.

Moreover, the AT&C losses of the state are less than or within the target fixed by the commission. For Dakshin Gujarat Vij Company Limited, the AT&C loss is 9.3 per cent as againt 11.5 per cent set by the commission, while for Madhya Gujarat Vij Company Limited, the loss is 12.2 per cent against the 12 per cent target, and for Uttar Gujarat Vij Company Limited, it stands at 9.2 per cent against the 12.2 per cent target. Torrent Power, which operates in the Ahmedabad and Surat circles, has faced losses of around 7.3 per cent and 4.1 per cent, against the target of 8.5 per cent and 5 per cent respectively, in the two circles.

In addition, GERC has put in place a power purchase price adjustment mechanism, through which discoms are able to recover the difference in the power purchase price caused by volatility through separate surcharges in the tariff. This is reviewed every quarter.

What are the initiatives taken by GERC to control AT&C losses?

The first initiative that we have taken to control AT&C losses is to make a five-year business plan that lays down the AT&C loss trajectory. Against this trajectory, monitoring is done either on a quarterly basis or on a half-yearly basis. The utilities submit these reports to GERC every quarter and are a part of the regulatory information management system. These reports include the commercial figures related to energy sold, energy purchased, etc.

What is the level of metering in the state? What are the new metering initiatives suggested by GERC?

Gujarat has been able to achieve 100 per cent metering in all consumer categories except agriculture. For the agricultural category, too, metering coverage is improving every year and has reached at 50-70 per cent for the different discoms.

To improve the level of metering in the state, significant emphasis is being laid on distribution transformer metering.

We also lay greater stress on consumer interface. We take the standard of performance from the discoms every quater. From these reports we come to know about the kinds of complaints relating to billing, payments and new connections. We review these reports on a quarterly basis to see if there is anything lacking on the part of the discoms and accordingly issue directives for improvement.

What are the steps taken up by GERC to encourage investment in the renewable sector?

As of March 2016, our installed capacity in the renewable energy sector stood at around 1,105 MW in solar, 3,930 MW in wind and 41 MW in biomass. We are in the process of formulating new tariff guidelines for wind, solar, biomass and small-hydro power to encourage investors to invest in Gujarat.

Another advantage of setting up renewable energy projects in Gujarat is the sound financial health of buyers. If there is any difference in tariffs of two states, investors will prefer to come to Gujarat because they will have the leverage of 100 per cent payment.

Also, there are certain industries that are allowed open access and this encourages them to buy power from renewable energy sources, which can also help them meet their RPO requirements.

What is the current state of RPO compliance in Gujarat?

During 2015-16, the solar RPO target of 1.5 per cent was fully met by the state and private discoms, achieving 1.92 per cent and 1.55 per cent respectively. Meanwhile, as against the non-solar RPO target of 7.5 per cent, the private discoms achieved 7.78 per cent and the state discoms achieved 5.8 per cent.

We have started a mechanism, which brings together the nodal agency and the electrical inspector to monitor the RPO compliance of captive power producers and open access consumers. Through this, we will know the exact amount of power generated by captive power producers in the state as well as the RPO compliance of these producers. These steps will ensure that the RPO compliance in Gujarat is much better in the future.

What is the quantum of open access approvals granted so far? What are the hurdles in the implementation of open access, if any?

For open access, we have had the same regulations in place since 2005, but in 2011 we notified new regulations. Of the total applications received in 2015-16, 87 per cent were approved for open access. The total number of applicants also increased from 230 in 2014-15 to 260 in 2015-16.

However, there are some technical constraints that prevent the grant of open access. For example, if there is congestion in the distribution or transmission network, then the licensee restricts open access. Other challenges in open access include upstream network constraints and non-fulfilment of the minimum requisite capacity for open access.

What is the CSS in the state? What is the commission’s cross subsidy reduction roadmap?

We revised the multi-tariff regulations on March 31, 2016 and the next control period will start from 2017-18. We are also trying to lay a roadmap for the reduction of the cross-subsidy surcharge (CSS). This year, the CSS has increased. This is because of the change in the formula given by the national tariff policy. The other two reasons are that Gujarat is a power surplus state, and that the fixed charges for the cost of generation are to be recovered from industrial users.

What is the current status of ToD tariffs in the state?

The time-of-day (ToD) tariff regime is in place, but these tariffs are not very exorbitant. The state-owned high tension category consumers are paying 35-45 paisa as surcharge for consuming electricity during peak hours in addition to the routine tariff. We have two peak hour periods during the day. For private sector discoms, this surcharge is about 80 paisa per unit. The ToD tariff ranges from 60 paisa to 70 paisa for private discoms and 35 paisa to 85 paisa for state discoms.

What are some of the immediate challenges for GERC?

As a regulator, our role is to make the sector viable. This requires utilities to be financially independent. Second, all state utilities should be operationally superior to their counterparts in other states. This can be achieved by the use of IT. Gujarat is one of the few states that have adopted IT in a big way.

We are also concentrating more on enhancing consumer services and building the consumer-utility relationship with efficient pricing.

The easy transfer of knowledge is also very critical. In major towns, the discoms have launched a mobile and web application wherein consumers can get billing information on their mobile and make payments, and register complaints online, etc. We should work towards the goal of providing similar kinds of apps/services in other parts of the state as well.

Another concern is creating a clean and green energy environment. The discoms should work out a robust mechanism for demand estimation in such a way that the RPOs are met and we get optimum purchase price for our power by revisiting the power purchase portfolio on a periodic basis.

What are the key regulations that the commission is currently working on?

We are going to introduce new regulations/orders for the renewable energy sector. Amendments for open access, and RPO regulations are currently in the pipeline.

We are also planning to introduce waste-to-energy regulations in a month, offering liberalised and rational tariffs for such projects. We are also working on forecasting, scheduling and imbalance handling regulations for renewable energy generating stations and the Grid Code amendment.

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