Regulatory Issues

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Regulatory Issues

• Dr. M. K. Iyer,
• Member Finance
• GUJARAT ELECTRICITY REGULATORY COMMISSION

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REGULATORS Balancing the key Stakeholders

• Regulation is the creation and enforcement of
  rules that promote the efficiency and public
  interest

• 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

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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

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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
• 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

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The Regulatory Process Timeline
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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

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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.

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Initiatives By Forum Of Regulators (FOR)

• 'FOR' Constituted Working Groups/Task Force on
  the following Issues
• 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)

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FORs Commendable Contribution

• Adoption of best practices experiences
• Developed Model Regulations - to be adopted by
  SERCs
• International Co-operation
• Policy implementation issues
• Legal opinions
• Training

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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

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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.

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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 TD losses during year
  (for Distribution Licensees)

Year Minimum Quantum of Purchase (in ) from renewable energy sources (in terms of energy in kWh) Minimum Quantum of Purchase (in ) from renewable energy sources (in terms of energy in kWh) Minimum Quantum of Purchase (in ) from renewable energy sources (in terms of energy in kWh) 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.

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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

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Consumer Grievances Redressal Forum

• Total Eight CGRF in the State
• Independent members appointed by the Commission
• Growing Awareness Amongst Consumers

Year Number of complaints pending at the beginning of the year Number of complaints Received during the year Number of complaints resolved during the year In favor of consumer Number of complaints resolved during the year In favor of Licensee Others
2005-06 0 227 50 35 37
2006-07 105 278 149 74 63
2007-08 97 316 212 92 67
2008-09 42 322 195 62 71
2009-10 50 740 267 115 63
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Electricity Ombudsman
Commission has appointed an independent State
Electricity Ombudsman. Effectiveness of the
Ombudsman Mechanism.
Year Number of complaints pending at the beginning of the year Number of complaints Received during the year Number of complaints resolved during the year In favor of consumer Number of complaints resolved during the year In favor of Licensee Others
2005-06 0 8 - - 4
2006-07 4 12 - - 15
2007-08 1 54 - - 47
2008-09 8 51 - - 55
2009-10 4 56 17 13 3
2010-11 27 111 46 45 30
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Projected, Approved and Actual ARR Comparison

• Year 2009-10

Utility Actual Approved Difference
DGVCL 4,448 3,907 13.80
MGVCL 2707 2,349 15.23
PGVCL 5641 5,341 5.60
UGVCL 4498 4,107 9.50
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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?

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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

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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

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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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THANK YOU

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• gerc_at_gercin.org