A strong regulatory framework is the key to attracting and retaining investment in a state. In Telangana, the Telangana State Electricity Regulatory Commission (TSERC) plays a crucial role in making the regulatory framework conducive to the state’s power sector.
Being a relatively new state regulatory commission (established on November 3, 2014, post the bifurcation of Andhra Pradesh), TSERC initially focused on the adoption of the existing regulations of the Andhra Pradesh Electricity Regulatory Commission (APERC) in Telangana. Over the past two years, it has been working proactively to address the emerging issues and challenges in Telangana’s power sector by drafting regulations pertaining to standards of performance, grid connectivity and electricity sale from rooftop solar systems.
In March 2017, TSERC notified the third amendment to the Interim Balancing and Settlement Code for Open Access Transactions Regulations, 2006. The amendment aims to facilitate energy banking by captive generators through a banking agreement. In 2016, the commission notified various regulations including the Distribution License Regulations, the Licensees’ Standards of Performance Regulations and the Net Metering Rooftop Solar Photovoltaic Grid Interactive System Regulations.
TSERC has notified an average tariff hike of 7.5 per cent for the retail supply business for 2016-17, while the tariff revision for 2017-18 is under way. As per the petitions filed with the commission, the distribution licensees have not sought any hike in tariffs. This can be attributed to the benefits that the state’s discoms have received under the Ujwal Discom Assurance Yojana (UDAY). The gap between the average cost of supply and the average revenue realised has declined from Re 0.75 per unit in 2015-16 to Re 0.61 per unit in 2017-18 (as of August) owing to savings in interest cost and power purchase cost, tariff rationalisation, and better billing/collection efficiency. Meanwhile, the power purchase cost declined from Rs 5.07 per unit in 2015-16 to Rs 4.66 per unit in 2016-17.
TSERC is taking initiatives to facilitate open access, reduce cross-subsidy and increase metering in the state. The commission is planning to release roadmap for cross-subsidy surcharge for each control period to facilitate open access in the state. In 2016-17, the cross-subsidy surcharge stood at Rs 1.30 per unit. However, the state discoms have sought an additional surcharge of Rs 1.95 per kVAh for 2017-18 to compensate for the fixed cost incurred on the power purchase agreements signed by them. TSERC’s order in this matter is pending.
The commission has also been focusing on working out realistic estimates of agricultural consumption. The metered sale of electricity stood at 68.28 per cent in 2015-16 and 2016-17 (provisional). The remaining electricity was consumed by the agricultural sector, which is largely unmetered, or wasted due to aggregate technical and commercial (AT&C) losses (about 14 per cent). Telangana has over 2 million agricultural consumers, who get free electricity supply. The present system of calculating electricity consumption by agricultural consumers is based on a method suggested by the Indian Statistical Institute. The commission is in the process of appointing a consultant, who will suggest improvements in the assessment of agricultural consumption.
The way forward
Going forward, TSERC is focusing on introducing regulations to manage the increasing share of renewables in the state grid. Currently, around 3,500 MW of solar power capacity is being developed in the state under the Telangana Solar Policy, 2015. Of this, over 1,400 MW has been commissioned and the balance is likely to be commissioned in the coming months. Maintaining grid stability is crucial given the injection of a large amount of infirm solar power, and the regulator is planning to introduce regulations for the same.
In addition, TSERC is looking into the feasibility of expanding smart metering in the state as mandated by the National Tariff Policy, 2016 and UDAY. The current level of smart metering (for consumption above 500 kWh) is just about 1 per cent. In November 2016, the commission notified the draft smart metering regulations, which proposed the constitution of a smart grid cell by distribution and transmission utilities for undertaking smart grid projects.
Overall, TSERC’s initiatives are expected to help the state meet its targets under various government programmes, expand renewable energy capacity and improve the overall attractiveness of the state as an investment destination.