Consumer Protection Council, Rourkela
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Orissa Electricity Regulatory Commission
- B.VaidyanathanI am indeed privileged to present a paper on the "Consumer Issues in a Regulatory Environment" amongst this august gathering today. The Regulatory Environment is supposed to ensure to the consumers electricity supply of proper quality at a reasonable price and the electricity transmission and distribution companies their due share of revenue so that the electricity sector on the whole becomes healthy and capable of attracting substantial investments.
There are several consumer issues which need to be addressed in a Regulatory Environment. These include:
Of all the consumer issues tariff could rightly be stated as the most sensitive and complicated issue. The on going unrest and violent protests in Andhra Pradesh is an obvious example which can be cited. The challenge before the Regulator is that for quite too long electricity tariff had been subjected to politicisation and ad-hocism, rather than be a product of sound economics or accounting logics. Many sectors which have hitherto been enjoying free supply are bound to feel the pinch when the tariff is increased even marginally. At the same time the socially weaker sections cannot be expected to make increased payments just because the market scenario has changed from government controlled to regulated environment.
One of the major areas of concern to the consumers should be the huge Transmission & Distribution (T&D) losses, which are substantially distorting the fixation of the tariff. The T&D loss in the LT is in the order of 45% to 50%. Which means that the tariff has to be designed in such a manner as to recover the Total Cost along with reasonable rate of return, from 50% of the power distributed. Naturally the Tariff is nearly twice than what it should be. Though technical losses are being kept at less than 10% at the international level, in the Indian context a loss of 15% is the minimum which is possible to be achieved at the present juncture. Consumers would expect that this loss is brought down progressively to less than 10%, within the next 3 years. Theft of electricity is something which needs to be eliminated totally and the political establishment needs to give adequate support for this. Law and Order machinery as well as the judiciary should giving a helping hand, without which the distribution companies will be nowhere near curbing this menace. If required more teeth should be given to the law for speedy trial and punishing the perpetrators of such crime.
As far as the moderation of the tariff is concerned, the State Government has an important role to play as has been provided in the O.E.R. Act. The State Government can advice the Regulatory Commission for giving subsidies or rebate to a particular class or classes of consumers, provided it can make good the revenue losses arising from such recommendations. Protection of the welfare of the citizens, especially those who are socially and economically backward is the responsibility of the state and the Regulators cannot be expected to be a substitute for a government. As long as the government does not feel the pinch of such social welfare measures, it may not be induced to act so as to make the electricity sector healthy.
One of the major objectives of the reform process is to give better service to the consumers. Under the State Electricity Boards, but for some of the states, especially those from the south and the west, there was hardly any service of quality worth mentioning. Especially in Orissa, bills were being prepared once in a year; connected loads were being fixed as per the whims of the employees concerned; and the bills were getting "fixed" as per mutual convenience. The quality of power was almost forgotten. But in the Regulatory Environment consumers, rightfully, after paying much higher charges expect much better service. Connected load has to be decided in a more rational manner. Billing has to be done every two months, based on actual meter reading. Facilities have to be provided for payment of bills in shortest period possible with least inconvenience. Power has to be supplied 24 hrs. and even in case of odd shut down or breakdown the consumer shall have to be informed in advance or immediately thereafter about the duration of such power-cuts. Providing power connection needs to be done within the stipulated period as prescribed by the Regulator. Once a fee is collected for supply of electricity, there should not be indefinite delay in providing the supply. Local cheques should be collected for payment of bills. Regulators shall have to ensure all these and consumers would rightly appreciate the benefits of the Regulatory Mechanism in due course.
REDRESSAL OF GRIEVANCES
Consumers get most aggrieved when there is no one to listen to them or to look into their grievances or to even reply their complaints. When the system was under government control, no one expected much. Things are changing fast. Consumers are being burdened with higher bills for the same consumption. Naturally they expect their grievances to be heard and redressed at the earliest. Consumer Protection Act, though ineffectively implemented at present has raised their awareness and level of expectation. The Regulators do have powers to levy penalties on the distribution companies. Consumer would very much be interested to see that they utilise these powers so that there is a sense of accountability among the distribution companies. The sympathetic consideration and a prompt reply, needless to say, would help in pacifying the aggrieved consumer and to reassure him that the Company is actively trying its best to redress his grievance. It is quite often found that even such formal replies are not coming forth. Herein there is a need for total change in the attitude of all the employees, from top to bottom, towards the consumers who pay for their survival. This is a major challenge before the Distcos. It has also been noticed that invariably the distribution companies tend to justify whatever that has happened. Consumers expect the Regulators to act in a manner so as to catalyse the change in the attitude and work culture of the employees of these Distcos, for the better.
Though the government monopoly in the electricity sector had been broken in Orissa, it has been substituted by the private monopoly. Whether it be Cesco, Nesco, Southco or Wesco, ultimately for the consumer, he does not have any choice. Instead of OSEB or Gridco, say, for the consumers of Western Orissa have to deal with Wesco alone. This monopoly of one distribution Company runs counter to the consumer interests. It will take some time before one can think of the UK model where the customers have the option of purchasing power from any one of an array of Companies. Since monopolies are functioning and are also likely to function in the foreseeable future, Consumers expect the Regulators to be ruthless in dealing with the Distcos which violate the norms and rules and exhibit a tendency to overlook consumer interests.
HEALTHY ELECTRICITY SECTOR
Consumer who does not think about the long term interests of the electricity sector is definitely short-sighted. One cannot talk of less tariff and proper service alone. Unless the electricity sector is healthy, future investments shall never come forth. This is actually one of the major problems the country is facing today. In contrast it is for everyone to notice that for the Telecom Sector there are so many takers because of assured returns, better operating conditions and the prospect for future growth. The Electricity Sector has to be healthy. Tariff has to be commensurate with the cost of production. Pilferage and theft should totally eliminated. Competition has to be introduced, in some form or the other, in future. There should be incentive for better service; lesser political intervention; better government support and responsible consumers.
I am quite confident that the Regulatory Environment can meet the aspirations of the consumers and that alone has the potential to make the Electricity Sector vibrant in the coming years. I extremely thank the organisers of the seminar for giving me an opportunity to present this paper on this important occasion.
(Reproduced below is the contents of the letter written by the Secretary, CPC, Rourkela to one of the leading consumer activists, which will be of interest to the readers. - Editor)
The philosophy behind the electricity Reforms is by and large is not clear to many. Further the outcome of this process is affecting almost everyone adversely, as far as the tariff is concerned and hence the resentment.
Till now, in our system, especially in respect of public utilities like electricity, which are directly or indirectly under government control, the tariffs are not solely fixed based on cost considerations. Rather extraneous considerations have been dictating the principles of fixing the tariff. This added with the inherent inefficiency, lack of accountability and transparency have been making all such sectors uneconomical, unfriendly to the common man, etc. The amount of revenue that is being pumped in by the various governments to sustain such public utilities is mind boggling. For example, the Govt. of Orissa was giving a subsidy or budgetory support, to the tune of Rs. 250-300 crores per year to the then OSEB (Orissa State Electricity Board) until the Reform process was initiated in 1996. But such expenses (subsidies) incurred by the governments do not pinch the consumer directly, instead giving him an impression that the electricity tariff has not been touched and that the government is taking care of him. In fact, the money which could have fruitfully been utilised for developmental and welfare activities get drained to support an inefficient and unaccountable system.
On the contrary, with the reform process in place, when new private players came into the scene and when the government was also in no mood to continue the subsidy, any individual who understands arithmetic will be good enough to appreciate what will happen to the tariff. Tariff is bound to increase. Why blame the poor Regulatory Commission & the Regulatory mechanism. This is not to say that all those who constitute such Regulatory bodies are those with unquestionable virtues, vision and wisdom. But, for that reason only there is a provision for the Commission Advisory Committee and mechanism for Appeals, etc.
I do not know who all at Delhi have given you the impression that the Orissa experience has not been encouraging and that the Regulators have not played their role effectively. One should first of all be clear as to what the Regulators are supposed to do.
Regulators should be competent, unbiased and should try to work out a tariff balancing the interest of the different classes of consumers (domestic, industrial and so on) and that of the generators, while maintaining continuity to the extent possible. The total hike in tariff (cumulative) in the last 5 years is about 47 % only. There has been no hike in the tariff of Kutir Jyoti Yojana (only one light point) meantfor poor people in the last 5 years (Rs. 30/- per month). In this context, please also note that the LT (Low Tension) consumption (less than 440 V), which generates higher system losses, has gone up to nearly 70 % as against 45 % which was prevailing about a decade ago. It is a disturbing fact that the HT consumption (as a % of total) in the State is coming down steadily due to lack of commensurate industrial growth.
In the last 5 years, as many of the consumers of Rourkela point out, the quality of service has improved substantially. The regular power cuts, low voltage problems have almost become a thing of the past. Bills are being served as required. Complaints are being attended to. One should keep in mind all these improvements have been achieved by the existing companies with the same old setup and people.
VCOs whether they are in Orissa or elsewhere should first understand what is the Regulatory Process and how it stands the best chance of benefiting the entire state and the country in the long run, rather than taking sides. They could publicise the benefits of the reforms in the proper perspective and should strive to educate the common man about his rights under the new regime. They could also make efforts to ensure that the governments do not withdraw the subsidies/budgetory support overnight so that the system is not unduly imbalanced, to start with. For example, if Govt. of Orissa was subsidising to the tune of Rs. 250/- crores or so, before the reforms, and had it not withdrawn that subsidy the tariff might have actually come down now. The OER Act (Orissa Electricity Reforms Act) as well as the new Electricity Bill of Govt. of India have provision for the government to intervene and subsidise the tariff of any particular cross-section of consumers, if it desires so, but should make good those losses arising thereof to the Distribution Company. Though Govt. of Orissa withdrew the subsidy since 1996, it has never intervened to protect any cross-section from the tariff hike. Which means that while the individual consumers are paying more, the government has made a recurring saving of Rs. 250/- crores or more.
The reforms in Orissa, if at all it has failed in one area, it is in the area of communication, educating the common man and in creating an awareness among them, as too many who were enjoying the profligacy of the State till recently and have been affected adversely are up against the reforms.
In case you need to get authentic feedback from consumers, you could arrange for a survey, as was done in Delhi and Pondicherry.
Orissa is the first state to adopt the Electricity Reforms. Considering the status of the Electricity sector in the entire country and its utility to the common man, it was indeed a bold step to be a pioneer; an area which has been made inefficient and financially unattractive due to various actions of the past. Introduction of the reforms process cannot on its own ensure its success, unless it is supported and understood by all concerned, especially by the Government.
It is a fact that the Orissa Electricity Regulatory Commission (OERC) was formed under the OER Act to restore the health of the electricity sector in the state. The Regulatory Commission has been envisaged to balance the interests of the supply and distribution companies on the one hand while taking care of the interests of genuine consumers by ensuring quality power supply with commensurate tariff. The Commission cannot perform miracles unless the State Government supports it in an appropriate manner. It is a moot point that the State Government which was giving a subsidy of Rs. 250 crores till 1996 has totally withdrawn that after the reform process started. It is no surprise then that the distribution companies which have to survive on their own funds, find it extremely difficult to make both ends meet with the existing tariff. The LT consumption which directly contribute to T&D losses has increased to a level of 70 % from about 45 % in the last one decade, thereby making their job of minimising the T&D losses with the existing machinery all the more difficult. This trend is not likely to reverse in the foreseeable future as the industrial growth in the state is far from enthusing. In this unenviable scenario for the distribution companies the State Government's indifference is only helping to exacerbate the situation.
During last Commission Advisory Committee meeting held on 28th March, 2001 at Bhubaneswar, Sri N.C.Dash, MD, Southco was pleading vehemently for the intervention of the Commission so that they may get the money sanctioned and released by the World Bank and the RBI through the State Government. It was stated that the Gridco, undertaking for the bulk supply of electricity, has been enhancing the sub-station capacities irrespective of area load growth from the funds that are being made available by the World Bank. Whereas the distribution companies, namely, Southco, Nesco and Wesco were not receiving the funds required for ensuring availability of balancing facilities for distribution of electricity of proper quality to the retail consumers. In fact the reimbursement due for works done in respect of 1500 villages, amounting to around Rs. 34 crore, is yet to be released by the Government, thereby preventing them from taking up further upgrading work.
The State Government, we are sure may not be aware of the counterproductive
activities engaged in by its own machinery. It is time that such activities
are discouraged and those who are trying to do their part for the success
of the reform process are given a helping hand.