Cerc-serc

Class presentation on

ROLE & FUNCTIONS OF CERC & SERC

Presented by: Saujanya Kumar(R100107063) Venus Lathwal (R100107070)

CONTENTS  Indian power sector in 1990  Need for electricity regulation & regulators  Reforms in power sector  History of CERC & SERC  Central electricity regulatory commission  State electricity regulatory commissions  Gujarat electricity regulatory commission  Problems faced by electricity regulators  The way forward / solution

Indian Power Sector in 1990:

Prior to establishment of regulatory commission  Total installed capacity grew to 75000MW ( in 1990) from 1300 MW (in 1947).  Functional structure of the SEBs was vertically integrated & the control over policy & day to day affairs was basically resting with the energy ministries of the State Governments.  About 13-18 % of share of national economic plan was availed for power sector , but most of the State Electricity Boards (SEBs) in India have been striving under resource crunches and operating at huge commercial losses.  Electricity services provided to the consumers by these SEBs—both in terms of quality and quantity were poor.  Technical performances of these SEBs were not satisfactory , T&D losses recorded during the year 1991 was about 22.90%.

Contd… Scenario of Indian Power Sector, 1990-91

NEED FOR ELECTRICITY REGULATION & REGULATORS 

To ensure consumers benefit from regulation in terms of reduced prices and better services through a competitive market in electricity supply



To encourage competition w.r.t

not only generation, but

also other areas, including distribution of electricity. 

To adjudicate upon disputes involving the Generating companies and transmission utilities in matters relating to tariffs.



To deal with matters relating to the tariffs, generation, transmission, distribution, trading and use of electricity.

REFORMS IN POWER SECTOR  In the year 1991 GOI decided to appropriately restructure the Indian power sector in a phased manner.  The prime objective of the comprehensive reform process was to transit the power sector into a technically efficient and commercially profitable energy— trading sector.  Poor performance on all fronts by the SEBs in general convinced the planners and policy-makers about the need to reorganize the SEBs into smaller, viable, unifunctional Utilities, with clearly defined jurisdictions and tasks, as part of the power sector reforms.  Since the early 1990’s the power sector in India has been going through a process of reforms and restructuring.

1)First Phase of Reform  In 1991, the main focus of government was on the induction of private investment into power generation  Government opened up the Indian power sector by an amendment in the Electricity Supply act 1948 there by promoting the entry of independent power producers.

RESULT  A number of private players showed interest in power generation.  But this attempt at reforming the generation had not achieved the desired results as very few project could come up on grounds.

1)Second Phase of Reform  After the failure of reforms in Generation sector , second phase of reforms came into existence.  Reforming the distribution segment was considered essential to improve the technical

and

financial

performance,

increased

consumer

care,

corporatization of distribution segment and attracting significant private participation in the power sector.  This paved the way for chartering the new policy and in December 1996 CMNAP (Common Minimum National Action Plan) was framed with the primary agenda of wetting up regulatory commissions at the centre and state levels.

Contd…  Besides it has been proposed to restructure and corporatize the SEB’s to allow them greater autonomy and to permit them to operate on commercial lines.  The EA 2003 sets the blue print of power sector reforms in India  The EA 2003 mainly consolidates the laws relating to 1. Generation 2. Transmission 3. Distribution 4. Trading and 5. Uses of electricity

Objectives of reforms 1) To improve the deteriorating conditions of the state electricity boards. 2) To create a financially viable electricity industry structure. 3) To develop an efficient, economic and competitive electricity industry. 4) To provide avenues for private sector investments and reduce the need of government funding of sector. 5) To enhance operational efficiencies and reduce losses. 6) To achieve environmentally sustainable power development. 7) To promote general awareness to achieve consensus on need of reforms. 8) To provide power on demand by 2012.

HISTORY OF CERC & SERC In order to make arrangements for protection and promotion of consumer interest, fair competition, transparency and providing level playing field for all the players in the sector, an independent Central Electricity Regulatory Commissions at the Center and independent State Electricity Regulatory Commission in the States were formed in year 1997, for regulation of the Electricity Services , planning and healthy growth of power sector utilities.

Electricity regulatory commissions bill, 1997 The Electricity Regulatory Commissions Bill, 1997, enabled the Government to set up and independent CERC at the Center and SERC in the States as statutory bodies with well defined functions, responsibility and powers for regulation of the power sector in an effective manner.

The salient features of the Electricity Regulatory Commissions Bill, 1997 are: The CERC consists of a chairperson and four members of which one is Chairman, Central Electricity Authority (CEA) ex-officio and others shall be appointed by the Central Government from persons selected by the Selection Committee constituted for the purpose.

Contd… a) It is provided that the chairperson and members hold the office for a period of five years or until the age of 62 years whichever is earlier and shall not be eligible for reappointment at any time after the expiry of his term of appointment. b) No member of the CERC including Chairperson shall be removed from the office until a sitting Judge of the Supreme Court has carried out an investigation and forwarded a report to the President of India who may remove from office the chairperson or members of CERC. c) The expenses of the Central Commission including salaries, allowances and pensions payable to or in respect of Chairperson and Members shall be charged on the Consolidated Fund of India. d) CERC shall have powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit.

f)

The functions of Central Commission which, inter- alia, shall be: i.

To regulate the tariff of generating companies owned by Central Government in public sector or private sector catering to more than one State

ii. To promote competition, efficiency and economy and safety in the activities of electrical industry iii. To adjudicate upon disputes and differences between the units and undertakings controlled by the Central Government, IPPs and licensees or any other matter referred to it by the Government g)

Any person aggrieved by any decision or order of the Central Commission shall appeal to the High Court

 The SERC consist of maximum of three members to be appointed by the State Government from persons selected by the selection committee constituted for the purpose.  The clause also provides for the conditions for appointment as members of the State Commission.  The chairperson and members shall be persons of adequate knowledge or experience in the fields of law, economics, commerce, finance, accountancy, administration or engineering (relating to generation, transmission or distribution of electricity).

k) The functions of State Commission which, inter-alia, shall be: i.

To regulate the bulk tariff of generating and transmission entities functioning within the State

ii. determination of retail tariffs, including wheeling charges etc., for SEBs and licensees.  It would be decided by SERCs such that a minimum overall 3% rate of return to each utility will be ensured with immediate effect.  Cross subsidization between categories of consumers may be allowed by SERCs  No sector shall, however, pay less than 50% of the average cost of supply.

Contd…  Tariffs for agriculture sector will not be less than 50 paise per Kwh. to be brought to 50% of the average cost in not more than 3 years.  In discharge of its functions the State Commission shall be guided by the decisions and orders passed by the Central Commission.  More functions could be assigned to SERCs subsequently.

.

Central Electricity Regulatory Commission (CERC) The Commission in Brief (CERC)

 CERC is a statutory body functioning under sec-79 of Electricity Act 2003  CERC was initially constituted under the Electricity Regulatory Commissions Act, 1998 on 24th July, 1998  CERC was established to introduce competition, efficiency and economy in the power sector, to safeguard the consumer interest and improve the quality of supply and service.

MISSION STATEMENT The Commission intends to promote competition, efficiency and economy in bulk power markets, improve the quality of supply, promote investments and advise government on the removal of institutional barriers to bridge the demand supply gap and thus foster the interests of consumers.

In pursuit of these objectives or mission the Commission aims to –  Improve the operations and management of the regional transmission systems through Indian Electricity Grid Code (IEGC), Availability Based Tariff (ABT), etc.  Formulate an efficient tariff setting mechanism, which ensures speedy and time bound disposal of tariff petitions, promotes competition, economy and efficiency in the pricing of bulk power and transmission services and ensures least cost investments.  Facilitate open access in inter-state transmission  Facilitate inter-state trading 

Promote development of power market

Contd...  Improve access to information for all stakeholders.  Facilitate technological and institutional changes required for the development of competitive markets in bulk power and transmission services.  Advise on the removal of barriers to entry and exit for capital and management, within the limits of environmental, safety and security concerns and the existing legislative requirements, as the first step to the creation of competitive markets.

ORGANISATION CHART (CERC)

Functions of CERC The Central Commission shall discharge the following functions : a) To regulate the tariff of generating companies owned or controlled by the Central Government b) To regulate the tariff of generating companies other than those owned or controlled by the Central Government specified in clause (a), if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State c) To regulate the inter-State transmission of electricity d) To determine tariff for inter-State transmission of electricity e) To issue licenses to persons to function as transmission licensee and electricity trader with respect to their inter-State operations

Contd... a) To adjudicate upon disputes involving generating companies or transmission licensee in regard to matters connected with clauses (a) to (d) above and to refer any dispute for arbitration; b) To levy fees for the purposes of this Act; c) To specify Grid Code having regard to Grid Standards; d) To specify and enforce the standards with respect to quality, continuity and reliability of service by licensees; e) To fix the trading margin in the inter-State trading of electricity, if considered, necessary; f) To discharge such other functions as may be assigned under this Act

Contd... 1) The Central Commission shall advise the Central Government on all or any of the following matters, namely :Advise the Central Government on all or any of the following matters, namely:i.

Formulation of National electricity Policy and tariff policy

ii. Promotion of competition, efficiency and economy in activities of the electricity industry iii. Promotion of investment in electricity industry iv. Any other matter referred to the Central Commission by that Government

1) The Central Commission shall ensure transparency while exercising its powers and discharging its functions. 2) In discharge of its functions, the Central Commission shall be guided by the National Electricity Policy, National Electricity Plan and tariff policy published under section 3.

Central Advisory Committee It is the committee formed by Central commission , consisting of maximum thirty-one members to represent the interests of commerce, industry, transport, agriculture, labour, consumers, non-governmental organizations and academic and research bodies in the electricity sector.

Objects of Central Advisory Committee The objects of the Central Advisory Committee is to advise the Central Commission on:— iii. Formulation of National electricity Policy and tariff policy iv. Promotion of competition, efficiency and economy in the activities of the electricity industry v. Promotion of investment in electricity industry vi. Any other matter referred to the Central Commission by the Central Government.

State Electricity Regulatory Commissions (SERC) Every State Government shall, within six months from the appointed date, by notification, constitute for the purposes of this Act, a Commission for the State to be known as the (name of the State) Electricity Regulatory Commission 14 of 1998.  The State Commission is a body corporate by the name aforesaid, having perpetual succession and a common seal, with power to acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or be sued.  The State Commission shall consist of not more than three Members, including the Chairperson.  The Chairperson and Members of the State Commission shall be appointed by the State

JOINT COMMISSION A Joint Commission may be constituted by an agreement to be entered into: c) By two or more Governments of States; or d) By the Central Government, in respect of one or more Union territories, and one or more Governments of States, and shall be in force for such period and shall be subject to renewal for each further period, if any, as may be stipulated in the agreement 14 of 1998

Functions of State Commission 1) The State Commission discharges the following functions Determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State. Regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State Facilitate intra-state transmission and wheeling of electricity Issue licenses to persons seeking to act as transmission licensees, distribution licensees and electricity traders with respect to their operations within the State

 Promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licence;  Adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration.  levy fee for the purposes of this Act  Specify State Grid Code consistent with the Grid Code specified under clause (h) of subsection (1) of section 79  Specify or enforce standards with respect to quality, continuity and reliability of service by licensees;

i) Fix the trading margin in the intra-State trading of electricity, if considered, necessary; and b) Discharge such other functions as may be assigned to it under this Act

2) The State Commission can advise the State Government on all or any of

the following matters v. Promotion of competition, efficiency and economy in activities of the electricity industry vi. Promotion of investment in electricity industry; vii. Reorganization and restructuring of electricity industry in the State;

Contd.. i)

Matters concerning generation, transmission , distribution and trading of electricity or any other matter referred to the State Commission by that Government.

3) The State Commission ensure transparency while exercising its powers and discharging its functions.

4) In discharge of its functions the State Commission shall be guided by the National Electricity Policy, National Electricity Plan and tariff policy published under section 3.

State Advisory Committee State Advisory Committee is established by State Commission by making notification and this committee will be effected from the date of notification .

 The State Advisory Committee shall consist of not more than twenty-one members to represent the interests of commerce, industry, transport, agriculture, labour, consumers, non-governmental organizations and academic and research bodies in the electricity sector.

Objects of State Advisory Committee The objects of the State Advisory Committee is to advise the Commission on: Promotion of competition, efficiency and economy in activities of the electricity industry  Promotion of investment in electricity industry  Reorganization and restructuring of electricity industry in the State  Matters

concerning

electricity or any Government.

generation, transmission , other matter referred

distribution

and trading

to the State Commission

of

by that

Status of SERC’s in different states Sl.No.

State

Status

1

Andhra Pradesh

 SERC constituted, functional, two tariff orders issued. Reform Law enacted, SEB unbundled. Distribution privatization strategy being finalized. MOU signed with Government of India

2

Arunachal Pradesh

SERC notified (yet to be constituted)

3

Assam

Chairperson of the SERC appointed and SERC is functional. MOU signed with Government of India

4

Bihar

MOU signed with Government of India. SERC notified (yet to be constituted)

5

Chhattisgarh

MOU with Madhya Pradesh adopted. SERC constituted.

6

Delhi

SERC constituted, functional. Tariff order issued. Reform Law enacted DVB unbundled. Distribution privatized. RFP for Distribution privatization issued.

7

Goa

•MOU signed with Government of India. •SERC constituted.

8

Gujarat

SERC constituted, functional, tariff order issued. Reform Law approved by Government of India and the Assembly. MOU signed with Government of India.

introduced in

9

Haryana

SERC constituted, functional, two Tariff Orders issued. Reform Law enacted, SEB unbundled. MOU signed with Government of India.

10

Himachal Pradesh

One Member HPSERC constituted. Member appointed w.e.f. 6/1/2001. Tariff order issued & implemented w.e.f. 1.11.2001 MOU signed with Government of India.

11

Jammu Kashmir

12

Jharkhand

MOU signed with Government of India.

13

Karnataka

SERC constituted, functional, Tariff Order issued. Reform Law enacted, SEB unbundled. MOU signed with Government of India. Distribution privatization to be completed by December 2001 as per MOA signed with Government of India.

& Reform Bill passed by State Assembly. MOU signed with Government of India

14

Kerala

SERC constituted. MOU signed with Government of India.

15

Madhya Pradesh

SERC constituted, Tariff order issued. Reform Law passed by the Assembly and notified. MOU signed with Government of India

16

Maharashtra

SERC constituted, functional, tariff order issued. MOU signed with Government of India.

17

Orissa

SERC functional, four tariff orders issued. Reform Law enacted, SEB unbundled.  Distribution Privatized. MOU signed with Government of India

18

Punjab

SERC constituted, Chairman, Members appointed. MOU signed with Government of India

19

Rajasthan

SERC constituted, functional, Tariff order issued. Reform Law enacted, SEB unbundled. One generation, one transmission & three Distribution Companies created. MOU signed with Government of India

20

Tamil Nadu

SERC constituted. MOU signed with Government of India

21

Uttar Pradesh

SERC constituted, functional, tariff order issued. Reform Law enacted, SEB unbundled. Distribution privatization strategy to be finalized. MOU signed with Government of India

22

Uttaranchal

MOU signed with Government of India. SERC constituted

23

West Bengal

SERC constituted, tariff order issued. MOU signed with Government of India.

24

Nagaland

25

Meghalaya

26

Mizoram

27

Manipur

28

Tripura

29

Sikkim

Have shown willingness to constitute Joint Electricity Regulatory Commission.

Tariff order issued.

GUJARAT ELECTRICITY REGULATORY COMMISSION (GERC)  GERC was constituted under the ERC Act 1998, commenced it operations from 1st April, 1999, and is functioning as sole regulatory authority in state.  GERC has issued tariff order for GEB.  Commission has attempted to reduce the level of cross-subsidy by ordering a pronounced hike in tariffs for the residential, public lighting and agriculture segments, while at the same time a small increase for the industrial sector.  In 2003 the new EA opened up new authority for the GERC, especially in setting the direction and pace of new captive power generator capacity additions. Longterm planning and fuel policy is still the responsibility of the state power ministry.

Functions of GERC The functions of the Commission as stated under the Section 17 of the Gujarat Electricity Industry (Reorganisation & Regulation) Act, 2003 are as following: c) To regulate purchase, transmission, distribution, supply and utilisation of electricity, the quality of service and the tariff and charges payable for the transmission, distribution or supply of electricity having regard to the interest of both the consumers and other persons availing the services and the utilities; d) To regulate the procedure – For purchase and procurement of electricity from any source for transmission, sale, distribution and supply thereof in the State; and For the determination of the price for such purchase or procurement;

a) To promote efficiency, economy and safety in the use of the electricity in the state b) To determine the tariff for electricity; wholesale bulk, grid or retail in accordance with the provisions of this Act c) To determine the tariff payable for the use of the inter-state transmission facilities in accordance with the provisions of this Act d) To issue licences in accordance with the provisions of this Act and determine the condition to be included in the licences e) To levy fees, charges and fines in accordance with the provisions of this Act and retain the same for its expenses f) To regulate the working of the licensees and to enable that the working of licensees is efficient, economical and equitable;

i)

To require licensees to formulate prospective plans ad schemes in co-ordination with the other person for the promotion of generation, transmission, distribution, supply and use of electricity

b) To require the licensees to collect data and forecast the demand for use of electricity c) To set and enforce standards for the electricity industry in the State including standard relating to safety, quality, continuity and reliability of service d) To promote competitiveness in the electricity industry in the State e) To formulate the standards, codes and practices for operation of the State grid and the power system f)

To promote efficient utilisation and conservation of electricity, reduction of wastes and losses in the use of electricity

a) To give such advise to State Government, as the Commission deems appropriate on the matters concerning generation, transmission, distribution, supply and utilisation of electricity in the State b) To adjudicate upon the disputes and differences between the licensees and to refer the matter for arbitration, if considered necessary in accordance with the provisions of this acts c) To undertake all incidental or ancillary functions that the Commission may consider appropriate

Figure : Gujrat power sector in year 2003.

Fig: Forces in Gujarat Power sector reforms

Complaint Redressal Mechanism under the Electricity Act, 2003 Nature of complaints by consumer Billing.  Estimate for new connection or extension of load.  Non-release of connection.  Disconnection.  Reconnection of service.  Meter related complaints.  Interruption in power supply.  Quality of power supply.  Delay in any service from licensee.  Safety related complaints.  Breach of rules and regulations by licensee

2) Consumer Grievances Redressal Forums If the complaint is not resolved, then he may file a complaint against concerned forum of licensee in the area of consumer.

3) Electricity Ombudsman: If consumer is still not satisfied by the order of forum, then he may file representation before Ombudsman

Step by step legal remedies available to the consumers as per EA 2003 are: 1) Licensee’s internal redressal system: A consumer having any of the above complaints should approach Licensee’s internal redressal system sequentially i.e. on failure or non-response by the lower level, higher level should be approached. I)

Local office of the licensee

II)

Office in-charge of Division

III) Office in-charge of Circle

Utilities  Gujarat state electricity corporation limitedGujarat urja vikas nigam limited  Gujarat energy transmission corporation limited  Madya Gujarat Vij Company Limited  Paschim Gujarat Vij Company Limited  Uttar Gujarat Vij Company Limited  Torrent Power Limited, Surat  Torrent Power AEC Ltd  State Load Dispatch Center

Milestones achieved by Govt.of Gujarat  Setting up of Gujarat Electricity Regulatory Commission (GERC).  Approval of Reform Bill by State Cabinet and submission by GoG to Gol.  Implementation of First Tariff Award of GERC.  Incorporation and Establishment of separate transmission company (GETCO).  In the process of restructuring Gujarat Electricity Board (GEB) , to begin with a separate generating company in the name and style of 'Gujarat State Electricity Corporation Limited (GSECL)" has been formed under the Companies Act. GSECL has already set up two(2) coal based Plants (total capacity of 420 MW) at Gandhinagar & Wanakbori. GSECL is setting up another 110 MW plant at Dhuvaran.

PROBLEMS FACED BY ELECTRICITY REGULATORS  Complicated structure of the Electricity regulators in India due to the subject coming under concurrent jurisdiction of the central and state governments.  There is no proper coordination between CERC/ SERCs on common matters, such as matters of pricing power, accounting principles and norms, depreciation rates, etc.  India’s Regulatory commissions are such that the regulators like top bureaucrats are usually political appointees. Regulators are therefore more accountable to the political party that appointed them, rather than to consumers.  The independence of regulators resulted in a communication gap between regulators, regulated bodies and the authorities.

 Unlike the US electricity system, which is basically in private hands, the Indian electricity system is mostly state-owned. The bureaucracy in India is expected to exist outside politics and to advise ministers objectively, which is clearly not the case always.

 In many case it is the SERC’s that delay in giving their approval to proposals that are either put up by the government or by the state electricity boards.

 Electricity Regulators have not been able to do much when it comes to the tariff situation either. Indian industry today pays amongst the highest retail electricity tariffs in the world while Indian House holds pays the lowest tariffs anywhere in the world.

 Here are no arrangements for proper training and refresher courses for the chairmen and members of the ERCs  The electricity regulators do not always have the power to select their own staff or to undertake studies and hire consultants when required. This hampers their function as independent regulators.  So far only 9 SERCs have actually have issued tariff orders.

THE WAY FORWARD / SOLUTION  To be effective, the ‘independent’ regulator the regulatory body must be capable of understanding the issues and formulating a vision of where the power sector is headed.  Regulator should not only legislate or frame laws but it must always follow and enforce those laws effectively.  Regulators must not be subject to any extraneous influences from the government or other outside sources.  Regulators need to be given more teeth and powers if the they are to confront the serious problems of theft, poor billing, inadequate metering and high and disproportionate tariffs.

THANK YOU