Transcript Gujarat Power Market Development

Regulatory Issues
Dr. M. K. Iyer,
Member Finance
GUJARAT ELECTRICITY REGULATORY COMMISSION
REGULATORS –Balancing the key Stakeholders
Regulation is the creation and enforcement of rules that
promote the efficiency and public interest
ä Regulation is ...
rule-making to implement
Government policies
 application & enforcement of
rules
 protecting the “public interest”
 ensuring consistency and
transparency on the part of all
parties active in the sector

UTILITIES
GOVERNMENT
& POLICY
MAKERS
CONSUMERS
ERC
PROJECT
INVESTORS
LENDERS
ENERGY
MARKET
PLAYERS
New Avenues in Power Sector
• The Electricity Act, 2003 and Gujarat Electricity
Industries (Reorganisation and Regulation) Act, 2003
envisages various activities for taking conducive
measures to:
 Allow development of power market
 Envisage competition
 Protect interest of consumers and supply of electricity to all
areas
 Rationalize electricity tariff
 Promote efficient and environmentally benign policies
 Open Access in Transmission and Distribution
 Power Trading
 Implement Availability Based Tariff
Making Competitive Power Market
 National Electricity Policy (2005) enjoins upon Appropriate
Commission to undertake development of power market
 Power / Energy Exchanges introduced in India enabling
market to discover a uniform market clearing price and
market clearing volume
 To make electricity market competitive following elements are
necessary:

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
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
Several buyers and sellers
Demand and supply responsiveness to price
Equal access to essential facilities of transmission and distribution
Liquid and efficient market places
Application of Open Access in phased manner
The Regulatory Process – Timeline
Floating of consultation Paper
Draft Regulations
Invitation of Comments
Open Hearings
Final Regulations and Order after
considering comments
Regulatory Approach
• Enabling competition
• Protecting consumer interest
• Orderly development of electricity market – Market Rules and
Surveillance
• Determine tariff determination with transparent &
participatory process
• Regulations enforceable and predictable decisions
Accountability, Transparency and Public
participation
• The transparency, efficiencies and timelines of regulatory
procedures.
• Ethical and procedural obligations.
• All documents and information used for decision making should be
available for public inspection.
• A description and analysis of all evidence taken into consideration
• A clear decision on the underlying issues and rationale.
• Various comments offered by participants during the proceedings are
considered
• Space for Public Participation in the Regulatory process
• Institutional mechanism for representation of interests of weaker
sections / stakeholders
• Participation by civil society in the regulatory process.
Initiatives By Forum Of Regulators (FOR)
'FOR' Constituted Working Groups/Task Force on the
following Issues:
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Code of Ethics
Demand Side Management (DSM) & Energy Efficiency
Loss Reduction Strategies
MYT Framework and distribution margin
Open Access - Theory and practice etc.
Policies on renewable
Protection of consumer interest
Metering Issues
Staffing of Electricity Regulatory Commissions
Standardization of Regulatory Accounts
Task Force for implementation of FOR recommendations
Task Force on Renewable Energy Certificates (RECs)
FOR’s Commendable Contribution
• Adoption of best practices & experiences
• Developed Model Regulations - to be adopted by SERCs
• International Co-operation
• Policy implementation issues
• Legal opinions
• Training
Open Access
Initiatives by GERC:
 Capacity granted for Open Access increased from 551 MW to
750 MW.
 Reduced the cross subsidy charges from Rs. 1.80 per Unit in
2005-06 to Rs. 0.51 per Unit in 2008-09
 Rationalized Transmission and wheeling charges
 Comments on new Draft regulations on Open Access are
invited
Intra-state Availability Based Tariff (ABT)
Mechanism
• ABT – Brought about the effective day ahead scheduling and
frequency sensitive charges for the deviation from the
schedule for efficient real-time balancing
• ABT - Mechanism brings grid discipline and improve
efficiency of the power system
• GERC Initiative:
 GERC is among the first regulators to introduce ABT mechanism
 Implementation of Intra-state ABT with effect from 5th April 2010.
which is applied to generators, distribution licensees, Captive Power
Plants connected with grid.
Promoting Renewable Sources of Energy
 GERC
notified
the
regulation on Procurement
of Energy from Renewable
Sources
 Renewable
Power
obligation
revised
Specified
Minimum
Percentage of the total
consumption
of
its
consumers including T&D
losses during year (for
Distribution Licensees)
Year
Minimum Quantum of Purchase (in %) from renewable
energy sources (in terms of energy in kWh)
Total
Wind
Solar
Biomass, bagasse
and others
2010 - 11
5.00%
4.50%
0.25%
0.25%
2011-12
6.00%
5.00%
0.50%
0.50%
2012-13
7.00%
5.50%
1.00%
0.50%
 Separate RPO for wind, solar and other renewable energy based on the availability
of such sources
 RPO applicable to the Captive and Open Access consumers/users as and when a
separate notification is issued by the Commission.
REC Introduction
 GERC is the First State Regulatory Commission to incorporate Renewable
Energy Certificate in its Regulations of 2010
 Necessary provisions in the Procurement of Energy from Renewable
Sources Regulations, 2010 for Renewable Energy Certificate (REC)
 Sale of Renewable Energy under REC Regime
 Sale of conventional Electricity Component to Local Distribution Licensees
 REC Component to Obligated Entities
 Gujarat Energy Development Agency (GEDA) as the State Nodal Agency
 For accreditation and recommending the renewable energy projects for registration
 Function in accordance with the directions issued by the Commission and
 to act in accordance to the CERC (Terms and conditions for recognition and
issuance of Renewable Energy Certificate for Renewable Energy Generation)
Regulations, 2010
Consumer Grievances Redressal Forum
800
Number of complaints
pending at the
beginning of the year
700
600
Number of complaints
Received during the
year
500
400
Number of complaints
resolved during the year
In favor of consumer
300
200
Number of complaints
resolved during the year
In favor of Licensee
100
Others
0
Year
2005-06
2006-07
2007-08
2008-09
2009-10
Total Eight CGRF in the State
Independent members
appointed by the
Commission
• Growing Awareness
Amongst Consumers
Number of complaints Number of complaints Number of complaints Number of
pending at the beginning Received during the resolved during the complaints resolved
of the year
year
year In favor of
during the year In
consumer
favor of Licensee
0
105
97
42
50
227
278
316
322
740
50
149
212
195
267
35
74
92
62
115
Others
37
63
67
71
63
Electricity Ombudsman
120
Number of
complaints pending at
the beginning of the
year
100
80
Number of
complaints Received
during the year
60
Number of
complaints resolved
during the year In
favor of consumer
40
20
Commission has appointed an
independent State Electricity
Ombudsman.
Effectiveness of the
Ombudsman Mechanism.
Number of
complaints resolved
during the year In
favor of Licensee
0
Others
Year
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Number of
Number of complaints Number of
complaints pending Received during the complaints resolved
at the beginning of
year
during the year In
the year
favor of consumer
0
4
1
8
4
27
8
12
54
51
56
111
17
46
Number of complaints
resolved during the
year In favor of
Licensee
Others
13
45
4
15
47
55
3
30
Projected, Approved and Actual ARR
Comparison
Year 2009-10
Projected
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Utility
DGVCL
MGVCL
PGVCL
UGVCL
DGVCL MGVCL PGVCL
Actual
Approved
3,907
4,448
2,349
2707
5,341
5641
4,107
4498
Approved
Actual
UGVCL
% Difference
13.80%
15.23%
5.60%
9.50%
Regulatory Challenges :Tariff issues
Tariff Determination issues
 Actual Performance Vs Regulatory norms – how far to
mitigate
 Prudence Check – how far useful?
 Consequences for disallowing amount of utilities
 Income Tax as a pass through?
 Delay in filing tariff petitions
 Suo-moto proceedings for tariff process
 Would suo-moto proceedings reduce tariff?
Regulatory Challenges : Competition
 Introducing Parallel Licensees in one area
 Tariff ceilings may be set by regulator
 Encouraging Open Access
 Cross subsidy
 Subsidy to compensate full or partial revenue loss of existing licensee?
 Existence of inter-category and intra-category cross subsidies
 Shortage of Supply
 State-of-the-Art Accounting System
 Retail Business Vs Wire Business
 Competition in Retail and ownership of wire business
 Distributed Generation: Promotion of RE sources
Regulatory Challenges: Regulatory Effectiveness
Has the Regulatory system been effective in service quantity and quality, investment,
productivity growth, costs and prices?
Has it helped foster a commercially viable industry?
Has it encouraged progress toward best-practice regulation and industry reform?
What type of sector outcomes have occurred? Are they consistent with outcomes envisaged
by the Act(example increased access rates, investment, and reduction in budget subsidies)?
Effectiveness of section 142 and sec 146 of EA 03 in ensuring compliance.
Limited regulatory resources (Lack of money, specialized & experienced staff )
Perception of consumers: Affordability vs Profit to Utilities
Some Solutions…
 Harmonization of Regulations across SERCs
 Need for Human Resources Development
 De-regulation to some extent and promoting competition
 No “Micro-management’ of Utility
 Development of Regulatory Services – Cadre Posts
 Financial independence of Regulatory commissions
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