With discoms claiming lack of funds and consumers irked at high power bills, Delhi’s power regulator is in a fix

The Capital’s power regulator is in a fix. On the one hand there are three power distribution companies exerting pressure on the regulatory commission to find a way for liquidating their regulatory assets and on the other there are consumers complaining of power charges being revised too frequently.

And now with the power companies threatening that they have no means to raise funds to purchase power for the forthcoming summer, the Delhi Electricity Regulatory Commission is being forced to take a call on who will pay for the mounting regulatory assets of Delhi’s power distribution companies, the consumers or the government?

Regulatory assets are dues that have not been paid to the discoms and can be recovered from consumers by way of tariffs.

Currently, the regulatory assets of the three discoms, TPDDL, BRPL and BYPL, stand at Rs.7,000 crore with the interest on the principle mounting.

“The regulator has been forced to address the issue. They cannot put off the matter any more, because the discoms’ have no money to purchase power for the summer. And because of their poor financial state, they are unable to secure loans from banks. Whatever little money they are able to raise has come from lending agencies on very high interest rates. If the regulatory assets are not liquidated soon, the interest will continue to mount and the financial position will become untenable,” said a source.

Long overdue

The DERC’s predicament now is that it cannot address the issue by allowing a steep raise in tariffs nor can they put off the resolution. “For instance in the case of one discom, the regulatory assets at the end of the financial year 2012-13 will be equivalent to an entire year’s revenue, nearly Rs.5,000 crore. If the DERC wants to clear up this outstanding amount in a reasonable time span it might have to double the current tariff,” the source said.

Sources in the power sector indicate that with elections round the corner, the government can barely afford to upset the consumers with another tariff hike, which means it will have to step up and offer to pay.

“If the regulatory assets have to be addressed in a reasonable time span, then the consumers will have to be asked to pay a little more and the government – either the State or the Central government – will have to dole out some money by way of a subsidy or a grant,” said a former official of the Delhi Government.

While the DERC is weighing its options and considering soliciting advice from experts, the discoms have put forth that they will need a “substantial” reduction in the regulatory assets that will give them the foothold to seek loans.