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Home News Power Sector News Delhi: Govt support discoms and asks DERC not to go for populist measures

Delhi: Govt support discoms and asks DERC not to go for populist measures

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SheilaThe Delhi government has taken up the cudgels on behalf of the three private power distribution companies (Discoms) operating in the state and asked the regulator not to issue orders reducing tariffs till it gets a go-ahead from the government. Amid its ongoing tussle over fixing new power tariff with the DERC, Delhi Government said the regulator should not go for "populist" measures and must consider the overall reform process in the sector while finalising new rates. 

In separate letters to the three discoms—BRPL, NDPL and BYPL—on May 28, the DERC has rebutted the claim that they had faced “cash flow constraints” and was in “precarious financial position”. The regulator noted, citing the discoms’ audited books of accounts, that the each of them had reported “the highest cash profit” in 2009-10.

The government has invoked a provision—Section 180—in the reform-oriented Electricity Act 2003 to restrain the regulator, which the latter promptly contested and secured a favourable legal opinion from the Solicitor General of India, Gopal Subramanium. “The direction contained (in the letter from the state government) not to pass tariff orders unless a go ahead has been given by the state government amounts to placing a fetter on a quasi judicial function. Such a direction is ultra vires and therefore void,” Subramanium opined.

Meanwhile, Delhi Government transferred power secretary Rajendra Kumar, amid its standoff with power regulator DERC over fixing a new tariff structure for the year 2010-11.

Picking hole in DERC's calculation in preparing the new tariff order, the official, who wished not to be named, said the regulator finalised the tariff structure on the basis of discoms' audited accounts for the year 2008-09.

In its May 4 directive to the Delhi Electricity Regulatory Commission (DERC), the government had said a tariff reduction was uncalled for as the quantum of uncontrollable costs of the three discoms were very high in 2009-10. It said under the National Tariff Policy, these costs should be recovered promptly to ensure that future consumers are not burdened with past liabilities.

"The DERC has not taken into consideration the audit report of the three discoms for 2009-10. The discoms bought power at a very high rate last summer and if that cost is not adjusted now then people will have to be burdened with a very hefty hike next year as the interest component will also have to added," he said.

The official said "DERC will not be allowed to take decisions arbitrarily."

The tussle between the DERC and the government began after the power department, exercising a special power under the Delhi Electricity Act, had directed the regulator on May 4 not to announce new tariff structure and asked it to submit a report on the entire issue.

The government move had come after the discoms submitted a representation to the government requesting it to direct the DERC to hike the tariff. The DERC after receiving the government directive had indicated that it had planned to cut down the tariff by 20 to 25 per cent as discoms would have a surplus of around Rs 4,000 crore if the existing tariff was not tinkered with.

Armed with the SG's letter, the DERC has proceeded to place the discoms on the mat even with regard to their stated revenue positions. The discoms have been told to put on record their full audited accounts for the last financial year and the report by rating agency CARE, accusing them of understating their revenue positions in their representation to the commission.

“We had a similar case, with the Mumbai discoms, government and regulators,” CERC chairman Pramod Deo said. In fact, the Forum of Regulators had sought advice from the attorney general of India, Ghoolam Vahanavati in a similar situation. The attorney general's opinion was in favour of the regulator, saying quite clearly that the government's advice is in the form of a “guidance” and not binding on the regulator.

Source- Economic Times

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