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Home News Power Sector News Key audit of Delhi electricity utilities yet to be completed

Key audit of Delhi electricity utilities yet to be completed

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DERCAll eyes are on Delhi Electricity Regulatory Commission (DERC) whose overdue audit of electricity utilities in the capital will be the key to the Aam Aadmi Party (AAP) being able to deliver on its electoral promise of halving power bills. An AAP government is set to be sworn in on Saturday under the leadership of Arvind Kejriwal.
The regulator had appointed Feedback Ventures ( now Feedback Infrastructure Services Pvt. Ltd ) as a consultant in early 2012 for the capital expenditure review and capitalization of assets for distribution utilities such as Tata-owned North Delhi Power Ltd (NDPL), Anil Ambani-owned BSES Yamuna Power Ltd (BYPL) and BSES Rajdhani Power Ltd (BRPL).

In addition, Medhaj Techno Concept Pvt. Ltd (MTCPL) was appointed for government owned Delhi Transco Ltd (DTL), the power transmission company.
With capital expenditure costs estimated to contribute 20% of the electricity tariff charged from the consumer, such an audit would have had helped the regulator ascertain if there had been any dressing up of books. Power purchase costs contribute the balance 80% of the electricity tariff.
According to the tender document reviewed by Mint, the consultant was to review the capital expenditure for the period 2006-07 to 2010-11, capitalization and physical verification of assets of BRPL, BYPL and NDPL. It is the DERC that approves capital expenditures and subsequent capitalization and hence the need for such an audit to verify the utilities claims.
It is estimated that BRPL, BYPL and NDPL have invested more than Rs.8000 crore over a 10-year period since privatization.
P.D. Sudhakar, chairman, DERC confirmed the delay and said: "The review is still going on. The major work has been completed and the report has to be finalized. Both the reviews have been delayed."
"The capex review is very important. DERC has completely failed its job in finalizing the account of the distribution companies for the last 10 years," said Shakti Sinha, Delhi's former finance and power secretary.
AAP has promised to halve power bills and to bring the electricity utilities under the purview of the Right to Information Act.
Feedback was to "examine the procurement and turn-key contracts", and "comment on compliance with the competitive bidding guidelines of the Commission as well as reasonableness of costs at which the equipment have been procured".
The tender condition also stipulated, "The Consultant shall comment on the reasonableness of quantities procured vis-a-vis the quantities in various schemes for which the Commission has granted in-principle approval."
The report was to be submitted within three months from the date of award, subsequently during the pre-bid meeting it was extended to four months, with a provision of further extension of one month. The report is still awaited.
"While procurement for material is done through competitive bidding, some cartelization can't be ruled out," said a former DERC member requesting anonymity due to the sensitive nature of the issue.
These distribution firms have a consumer base of 4.231 million customers, with Delhi's power demand in the region of around 5,000 megawatts (MW). Kejriwal has already said that he would ask for an audit of the distribution utilities once AAP forms the government.
Vinayak Chatterjee, chairman and managing director, Feedback Infrastructure Services in an emailed response didn't answer the specific queries and said, "It is correct that Feedback Infra has been appointed by Delhi Electricity Regulatory Commission as a consultant for Capex Review and Capitalization of Assets for Power Utilities in NCT (national capital territory) of Delhi. The contract has a provision of confidentiality which prevents us from disclosing any further information) in any manner."
Queries emailed to MTCPL and NDPL on late Wednesday evening remained unanswered.
A spokesperson for BSES declined comment.
A DTL spokesperson said, "The consultant was appointed by DERC and we are not aware of any outcome." He requested Mint to contact DERC for information on the same.
Kejriwal has alleged that Delhi residents have been paying twice what they should be for electricity. Similar allegations have been levelled by the Bharatiya Janata Party. Kejriwal has also accused former Delhi chief minister and senior Congress leader Sheila Dikshit of intervening to stop an order in May 2010 that sought to reduce the electricity tariff in Delhi by 23%.
"While the rapid efficiency gains during the period 2002-2010 required negligible or minimal tariff increases during that period, inaccurate demand forecasts, signing of long term power purchase agreements to ensure security of supply, rising power purchase costs (compounded by CERC regulations of 2009-2014) and selling surplus power at a loss in the short term power market—necessitated tariff increases in subsequent years. It was aggravated by issues around lack of capex review and billing database reviews by the regulator, contracts awarded to interrelated parties at inflated costs, and speeding meters,"said Sambitosh Mohapatra, executive director at PricewaterhouseCoopers Pvt. Ltd.
While DTL procured power for Delhi, since 2007 it was the distribution utilities who did the same through Delhi Power Procurement Group comprising representatives of power distribution companies and DTL.
According to PricewaterhouseCoopers, the power purchase cost has spiked since 2009 with the distribution utilities incurring losses in power trading. It is estimated that the utilities suffered a loss of Rs.900 crore in 2011-12 due to inaccuracies in demand forecasting and fall in rate of sale of power in the short-term market nationally.
"All these allude to a greater malaise of lack of trust, oversight and reviews at appropriate time by various stakeholders. Government, regulator and utilities should work transparently to build trust between all stakeholders and not let a PPP (public private partnership) success story go kaput," Mohapatra added.

Source- Mint


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