SC averts Delhi power outage, but crisis not over yet

The Supreme Court today heard the the petitions of Reliance Infrastructure run power distributors – BSES Rajdhani Power Limited (BRPL) and BSES Yamuna Power Limited – who had asked for more time to respond to the National Thermal Power Corporation (NTPC) notice threatening to cut power supply over unpaid dues. The apex court ruled that the firms would have to pay Rs 50 crore to the NTPC for now, and set 26 March as the final date for the hearing. Thanks to the SC’s ruling Delhi won’t face any power cuts till 26 March. The BSES firms supply electricity to south, east and central Delhi and had the SC ruling not come in, Delhi was looking at 10-hour power cuts starting 10 February. Discoms have of course welcomed the order. In a statement, a BSES spokesperson said, “We are extremely grateful to the Hon’ble Supreme Court for its kind intervention on our petition, restraining NTPC from cutting power supplies and that it has prevented unwarranted hardship to millions of our valued customers in Delhi. We look forward to long term resolution of the fundamental underlying issue of past under-recoveries of nearly Rs 20,000 crore and urge  the Delhi government and DERC to engage in a constructive manner so that unnecessary crises of this nature are not precipitated in the future.” But despite having gained relief against the NTPC, the discoms are still facing trouble from the Delhi government. The Delhi Electricity Regulatory Commission (DERC) have given the firms time till Saturday 11.00 am to make their submissions on the issue of license cancellation. From the discoms point of view, the issue is clear-cut. They argue the NTPC dues have not been paid due to overdue payments from the Delhi power department and MCD. [caption id=“attachment_1378699” align=“alignleft” width=“380”] Electricity wires are seen in this file photo. Reuters[/caption] Non-payment of subsidies that were promised by the government, lack of payments from MCD, and the issue of regulatory assets means that this crisis is unlikely to end anytime soon. Regulatory assets are future profits that have not been paid to the discoms by the regulator and can be recovered from consumers by way of future tariffs. In layman terms, regulatory assets are uncollected dues from the consumers because the power body feels that they would have hiked up the tariffs. As this piece in Mint by former delhi power secy Shakti Sinha points out, “the regulator accepts certain expenditure but does not factor it in while determining tariff, and thus leaving it to be adjusted in future tariffs.” On Wednesday, the two discoms wrote a letter to the Delhi government and to the South Delhi Municipal Corporation, which Firstpost has accessed, requesting Delhi Government to release the pending subsidy of Rs 262 Crores and MCD payment of around 200 crore (South MCD Rs 118 cr plus around Rs 80 cr from East MCD) so they can pay off their dues to the NTPC. The letter to the Delhi government reads, “We have been requesting Govt of NCT of Delhi (GoNCTD) through our various letters for release of subsidy due to BRPL (Rs. 166.35 Cr) and BYPL (Rs. 95.79 Cr), which would help us in meeting the dues of NTPC and establishment of requisite payment security mechanism. This would avoid the imminent crisis of regulation of power till such time as a long term solution is found. You will kindly appreciate that this is in consonance with the Section 65 of the electricity Act, 2003 which requires subsidy to be paid in advance.” The letter warns that if subsidies are not paid, that areas where power is supplied by BRPL and BYPL will face 100 percent loading shedding. The two discoms supply electricity to nearly 33 lakh customers in Delhi. Where MCD is concerned, the bills have been due since 2011. But as experts point out, even with the SC stay, the Delhi power crisis is still far from resolved. “The only long-term solution to this crisis is that each party pays what is due. If subsidies are promised to BSES, then they must be given, BSES will have to pay NTPC as well. However as long as as tariffs are not cost reflective, the government will have to pay subsidies to the discoms,” says Ashok Khurana director general of the Association of Power Producers, which represents major companies in the sector. Where subsidies and Delhi government are concerned, it is not a small amount. “Delhi government has promised a subsidy for the consumers. Kejriwal promised subsidy up to 400 units, even Sheila had provided subsidy for consumers within the 200 units per month slab. Earlier the annual subsidy was around Rs 300 cr while the recent increase has meant another Rs 800 crore. The subsidy payable to Discoms has to be released on time too. Also Municipal Corporations and other government agencies have to pay their bills on time. It would ease the pressure on the cash flows" says Sambitosh Mohapatra, Executive director at Pricewaterhouse Coopers. The other issue of contention is that of regulatory assets. “Regulatory assets worth nearly Rs 20,000 crore are sitting on the books of discoms. It is not moved into retail tariffs as it would provide a tariff shock to citizens of Delhi. With such constraints in cash flow and with around 80 percent of their costs as power purchase, discoms are cash strapped. Will any power supplier be ready to take a carrying costs for their bills?” asks Mohapatra. “The Delhi government will have to decide on the issue of regulatory assets as well. All the players, in fact need to huddle up and sit together and sort the issue out. Regulatory assets are adding 60 paise to the tariffs but you don’t want to put it out to consumers. Throwing weight around will not solve the crisis,” points out Khurana. Where the CAG audit is concerned, Mohapatra says, that until the CAG audit proves something, painting these companies as a set of rogues is not appropriate. “Limited suggestion should be for all stakeholders to hold their horses and let the saner and calmer professionals manage it,” he adds. For now, Delhi has managed to avoid the ten-hour power cuts, but unless all players really sit and down decide on living up to their promises, the capital could well be staring at another power crisis in March.