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EC's model code of conduct impinging on regulatory Domain in Power Sector

<p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">In election season, power tariff may be a sensitive subject for politicians to tackle but this time round the time-bound process of new tariff orders has been given a go-bye with the Election Commission issuing a directive stalling any such move. Now, every five years, the April 1 date could be a non-event for the power sector even though new tariffs become applicable across states from that day. Following the Election Commission&#39;s March 29 notification, new tariff orders have been held up in several states including Punjab, Orissa,Karnataka, Andhra Pradesh and Assam.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Though some times, even state regulators come out with tariff awards later than the April 1 deadline, this year, the general elections have held up finalisation of tariff orders. Take the case of Madhya Pradesh, where even a zero tariff hike for 2014-15, has not been notified because of the Election Commission directive.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Even for procurement of solar power in the state,the power regulator had to issue a clarification stating that because of the model code of conduct, a fresh tariff order beyond 31.03.2014 would not be issued and the old tariff order would apply to solar projects in the state. Though the model code of conduct applies to political parties and candidates with special directions for the party in power, it is silent on its applicability to sectoral regulators.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&quot;As new tariff orders are a regular process outside the political scheme of things, there seems to be no rationale for the Election Commission&#39;s action. Moreover, the idea of a model code of conduct is to prevent political mileage from decisions made by the government,&quot; said Manu Srivastava, managing director, MP Power Management Company, the holding company for three power distribution companies in Madhya Pradesh.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">The Election Commission notification asking state regulators not to come out with tariff awards, though they could continue with the process itself, came just three days before the new rates for power tariffs across many states were to become effective.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">In Karnataka, all the five discoms filed petitions before Karnataka Electricity Regulatory Commission (KERC) on December 13, 2013 seeking a hike of 66 paise a unit for all consumer categories, barring irrigation pump sets with a capacity of less than 10 hp and Bhagya/Kutir Jyothi consumers.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">KERC was required to pronounce its decision on the petitions within 120 days by eliciting the views of consumers and experts through public hearings and verification of all documents. The last tariff revision in the state was affected too because of the Assembly elections.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&quot;The sector regulators are independent statutory bodies with a clearly defined timeline for tariff reviews, and there&#39;s no reason not to follow the complete process of filing, public consultations, and finalising the revenue requirement,&quot; said Kameswara Rao, energy, utilities and mining leader,PricewaterhouseCoopers. Rao said the tariff notification alone could be kept on hold as the new government at the state would need to commit subsidy. &quot;But in states, that are not re-electing new governments, the tariff notifications too should ideally proceed as scheduled.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&quot; A similar decision by the Election Commission to disallow the gas producing companies an increase in price from April 1 even though Reliance Industries Ltd had to extend its gas sales purchase agreements that were ending on 31.03.2014, is not looked at with the same perspective by experts.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&quot;There is justification in putting on hold decisions that are solely taken by the government, such as on gas price,which is unlike that of power tariffs determined by independent regulators, that are staffed by technical, legal or administrative professionals and follow a clearly specified and transparent process to make their decisions,&quot; said Rao.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Ridiculing the EC move on tariff orders, a senior state government official said asking power regulators to hold up orders was akin to asking courts not to pronounce judgement till the election process was over. Rao too emphasised the need to uphold the institutional processes. The delays in tariff notification would directly impact the finances of all state distribution companies and state generating companies.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">The central utilities and private generating companies, however, have completed their tariff process and have automated clauses power purchase agreements and suffer no impact. &quot;States that have deferred the filing process are the mostimpacted, while those delaying the final tariff notification will see norevenue increase for three to four months.&quot;The general consensus is that pricing and tariff decisions that are made by independent institutions, outside the government, based on a transparent and established process, should not be interfered with and be allowed to follow their course.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Source-On Request</span></span></span></p>