Cap on traded power tariffs is a must to protect consumers: CUTS

October 13, 2008

The Central Electricity Regulatory Commission (CERC) has taken a right step to regulate the tariff of short-term sale of power by putting a cap on the inter-state sale of electricity. This cap will not only help the consumers of the company purchasing this costly power but also help the consumers in areas from where electricity is being exported.

“The rates for the short term (less than one year) transactions of electricity have increased substantially. The weighted average prices (per Kwh) for the period April-June were reported to be Rs. 4.08, 4.64 and 7.24 for the year 2006, 2007 and 2008 respectively. It shows the price has increased by 56 percent during the period: 2007 to 2008. This rate can go up further if no action is taken by the regulator”, said CUTS General Secretary, Mr. Pradeep S. Mehta in a press release.

Most of the states such as West Bengal and Tamil Nadu were selling energy to other states in spite of being unable to ensure un-interrupted power supply to their consumers, especially in rural areas. For example in the FY 2006-07, alone the West Bengal SEB sold about 1865 million Kwh that is about 13 per cent of the total energy traded in the country. “This is very surprising because the status of household electrification in the state is one of the poorest in the country”.

“Though the National Electricity Policy (2005) envisages a healthy competition in the sector to benefit consumers, given the acute capacity shortage, the electricity market is not functioning properly. The peak and energy deficit was reported to be 14.6 per cent and 10.6 per cent respectively for the period April-August 2008. That is why some check on the tariff is justified unless there is some reasonable match between the demand and supply”, Mehta added.

CUTS has further demanded that either CERC or some appropriate agency should conduct a survey to find out whether there was a surplus or it was artificially created by the respective electricity companies to exploit the shortage situation. Ideally, competition should work to reduce the rates in the wholesale market. But, in case of electricity, the rates increased continuously.

“Different caps for the peak and off-peak prices as proposed in the CERC paper would definitely help the power utilities to manage the load effectively in order to reduce the peak demand for power. Ultimately, electricity consumers will be benefited from this move”, he stated.

For further information please contact:

Pradeep S Mehta, psm@cuts.org +91 9829013131
Rajesh Kumar, rk2@cuts.org, +91 9887905287