Southern States - Karnataka-Bangalore   

Fighting the power consumer's battle

By A. Jayaram

Bangalore June 26. The Karnataka Electricity Regulatory Commission (KERC) has given the lead to the faceless consumer of power who faces the prospect of revisions in power tariff every three months if the State Government goes unchallenged in the path it has chosen for reforming the power sector.

The KERC has strongly opposed the way the Government has proposed to go further in reforming the power sector by privatising the distribution of power. It has entered its caveat to the proposed Bill amending the Karnataka Electricity Reform Act of 1999 to bring about the privatisation of distribution of power. The KERC, which was set up under the 1999 Act, has warned that the Bill will only subserve the interests of private investors at the cost of consumers.

The commission's views cannot be ignored by the Government, which has been making the claim of being in the forefront in power reforms. The time has come for it decide between the consumer of all sections, and the investor, foreign and Indian. There is also the talk that the Government is under pressure from the World Bank through its consultants, who go by the description, "financial and distribution privatisation (FDP) consultants," in the power sector jargon. If the Bill is pushed through the Legislature, the consumers and their organisations will lose even the opportunity of public hearings by the KERC with regard to any proposals regarding tariff from the Karnataka Power Transmission Corporation Ltd.

The noteworthy feature of the comments of the KERC is the manner in which it has come out in support of the consumers: "The commission believes that the overriding objective of the KER Act of 1999 is the protection and promotion of consumer interest in the long term. Protection of the interests of the licensees and investors in the electricity sector is, in the opinion of the commission, not an end in itself. It is only a means to the protection of consumer interest. The commission's comments have been formulated in the context of this view of the Act.''

The KERC has warned that the recommendations of the finance and distribution privatisation consultants will end up in the Government entering into detailed and very complex contracts with the licensees and investors. The contracts will incorporate the distribution margin and the risk allocation approach. "No such approach should be attempted without detailed financial modelling to clearly understand the burdens that consumers and the Government will have to bear. Such modelling has not been done so far."

Experience has shown that such contracts invariably ended in the private party enforcing every right available to it while the public interest has suffered as a result of the Government not being able to enforce the corresponding obligations.

`A long way to go'

Speaking to The Hindu, the Chairman of the KERC, Philipose Matthai, made it plain that what was needed was power sector reforms and not privatisation per se. Karnataka had to traverse longer in the matter of reforms. He commended, to some extent, the reform model adopted in neighbouring Andhra Pradesh, where the consumer was central to any changes. He said the biggest achievement of the commission in the past three years of its founding was the creation of awareness among the public about the power sector, and not merely with regard to tariff revisions. It had helped in bringing about transparency in tariff revisions. That 8,000 petitions had been received by the commission so far was no mean achievement. It had passed three orders on tariff revisions after detailed hearings. Unfortunately, the KPTCL itself had challenged the orders of the KERC in the High Court, he added.

Mr. Matthai noted that the power sector in Karnataka had a mix of hydro and thermal, adding problems in determining tariff. Moreover, socio-economic considerations were involved in fixing the tariff, and there was the daunting problem of shortage of power.

It was on the suggestion of the KERC that the "creamy layer'' concept had been introduced in fixing the tariff for irrigation pumpsets. The huge subsidy of Rs. 2,300 crore on power supply, and downsizing it was also the other issue to be dealt with.

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