B.PAC and AAP object to increase in electricity tariff

At the public hearing conducted by Karnataka Electricity Regulatory Commission (KERC) on February 6th, several civic groups objected to BESCOM’s proposed hike for electricity tariff for the financial year 2016. BESCOM had earlier filed an application proposing a tariff hike of 80 paisa per unit across all consumer categories.

B.PAC represented by TV Mohandas Pai, Vice President, Dr Hari Parameshwar, Head of Regulatory affairs and Revathy Ashok, CEO and Managing Trustee, and Aam Aadmi Party – Karnataka (AAP), represented by Ravi Krishna Reddy and Shanthala Damle, submitted their objections to KERC.

Eliminate cross-subsidy variation; government should bear cost for farmers: B.PAC

Cross subsidy level

Electricity Act 2013 recommends that cross subsidies shall be progressively reduced and eliminated and National Tariff Policy recommends that the tariff should be minimum 50% of the cost of electricity and cross subsidy variation should be brought down gradually and to the extent of not more than (+/-) 20% of the cost by FY 2011.

B.PAC urged the Commission to put in place a road map for reducing and eliminating the cross subsidy over the next three to five years.

Agricultural consumption

The 23% unmetered connections for agricultural usage (IP Pump sets) lead to anomalous figures of consumption and possible misuse/inefficient use of power in the sector. Also the tariff fixed is only 30% of the cost of electricity which is reimbursed by the Govt, the remaining 70% is borne by the consumers through cross subsidy.

B.PAC urged that instead of passing on the burden to other consumers, the state Govt should budget it and the cash subsidies to be extended directly to the farmers.

Para 5.4.8 and 5.4.9 of the National Electricity Policy makes the metering mandatory for all consumers. BPAC too recommends that metering to all sectors to be made mandatory.

Power Purchase

Disproportionate volume of long-time and short time purchase leads to higher costs as follows:

BESCOM purchases only 24564.62 million units (MU) of power through long time PPA, against the approved 27364.35 MU. It also purchased 3893.37 MU through short time PP, against the approved 2801.05 MU.

  • The rates paid for the purchases are much higher than approved rates.
  • The average energy cost/unit of all purchases works out to Rs 3.50 compared to the average cost of Rs 3.27 for the approved PP.

B.PAC objected that higher cost of Rs 0.23/unit paid (plus loading on losses and other costs) by BESCOM, as a result of its improper planning and unprofessional approach, shouldn’t be passed on to the consumers.

Medium/short term traders

Since it is well known that the power generation by the state owned power generation companies are insufficient to cater to the actual demand, BESCOM should have entered into long term PPAs with the private players through competitive bidding, instead of continuing with short/medium term PP. This would have considerably reduced the per unit energy charges.

Interest on working capital

  • Receivable equivalent to two months average revenue leads to more borrowings and interest liabilities.
  • For benchmarking the lending rate, base rate instead of prime rate as per RBI guidelines to be used.

Objection: 14.45% interest submitted for approval is higher and not accordance to the RBI guidelines; hence shouldn’t be admitted.

After making submissions Mohandas Pai said, “Why can’t BESCOM enter into long term PPA with private players through competitive bidding, for base load and peak load demands separately?”

Dr Parameshwar added, “If the government can bear the cost of electricity consumed by farmers (instead of 30% by government and 70% through cross-subsidisation, as done today), the need for an increase of tariff itself will not arise.”

Inflated numbers and glaring data gaps by BESCOM: AAP 

AAP brought out the glaring anomalies in the power sector of Karnataka. It was pointed out that BESCOM had been allocated with a whopping sum of Rs 1 crore for the financial year 2014-15 for the Education and Awareness of Electricity Consumers. Both KERC and BESCOM did precious little to create any awareness. Per contra, BESCOM has proposed a shocking increase of electricity tariff, which it has been ritualistically proposing and getting every year, thanks to KERC’s blessings.

It was shown with statistical evidence as to how BESCOM and all other distribution companies have inflated the number of IP set installations. While the Karnataka ESCOMs have shown that there are 21,10,076 IP Sets in the state, the very same ESCOMs have submitted before the Central Electricity Authority (CEA) a figure of 18,85,489. Thus, a deliberate attempt is made to show excess (2,24,587) number of IP Sets and get more subsidy allotment from the Government. Despite receipt of this excess subsidy, ESCOMs have deprived the farmers of Karnataka of their legitimate right to electricity and per contra have proposed tariff hike.

AAP showed the glaring data gaps in the submissions made by BESCOM to KERC as three vital forms were not even filled up. Even then KERC took up the tariff petitions and has initiated the process of tariff hike. AAP also showed how KERC did not due the prudence check and truing up of the so called Audited Accounts. AAP, citing the judgment rendered by Justice Santosh Hegde in West Bengal Electricity Regulatory Commission Vs. CESC’s case showed to the KERC that how an important task like Prudence Check has been given a go by.

AAP also brought out the violation of the directives issued by the Appellate Tribunal for Electricity in so far as now depicting the embedded cost and cost of service to each category of consumers.

AAP has also showed that how ESCOMs are losing crores of rupees of revenue by wrongly illegality treating certain generators incorporated under the Companies Act, 1956, as captive generating plants, based on the consumption of their respective share holders. AAP said that KERC is watching this as mute spectator.

AAP has asked the KERC to direct the GoK to fix a sum of a sum of less than Rs 500 for the farmers / IP Sets consumer who seeking power sanction, irrespective of sanctioned load with retrospective effect from July 31st 2012. The Government has presently fixed an unscientific and illegal sum of Rs 10,000, when it has no such powers as per law.

AAP has asked the KERC to introduce Prepayment meters to all consumers and return their Security Deposit to the consumers as per the Electricity Act, 2003.

Finally, AAP has given a call to the people of Karnataka to stoutly oppose the electricity tariff hike and unitedly agitate against the unscientific and illegal policies of the ESCOMs dictated by both the State and Central Governments.

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