State Electricity Regulatory Commissions Research Articles

Regulatory institutional reform of the power sector in China

In 2002, China established the State Electricity Regulatory Commission as part of the nation's electricity reform plan. However, this agency existed for only a decade, after which it was incorporated into the National Energy Administration (NEA), a governmental department. Why did the independent regulatory model not survive in China? This paper introduces the historical background of regulatory institutional change in China and evaluates current regulatory governance against the standard of agency independence. The findings indicate that the NEA can hardly be regarded as independent from the government and stakeholders. Subsequently, the paper explains the reason that independent regulatory institutions are not applicable in China from the perspective of institutional supply and demand. From the demand side, as the macroeconomic controller, the National Development and Reform Commission can deliver superior policy output compared to an independent regulator. In addition, public ownership makes it unnecessary for the government to create an independent regulator as a credible commitment mechanism. From the supply side, the traditional administrative arrangement and lack of regulatory economics knowledge contribute to an undersupply of independent regulation.

REVVING UP THE FORTUNES OF KARNATAKA’S ESCOMS

When the power sector reforms were ushered in, many protagonists of the reforms believed that the reforms would break new ground in more ways than one. After all, generation, transmission and distribution of power would be entrusted to dedicated entities and if they failed, they could be held individually accountable and answerable. Even a hike in power tariff would be effected only after taking the stakeholder groups into confidence. But nothing of the sort happened even with the State Electricity Regulatory Commission (SERC) around. The bottom lines of the various electricity supply companies (Escoms) of the state began to turn increasingly red with each passing year. It is high time the Escoms were nursed back to financial health. An investigation undertaken by the researcher after interacting with stakeholder groups like CESCO officers and the farmer-consumers, among others, led him to conclude that a few steps must be taken immediately to arrest the falling bottom lines of the Escoms. To begin with, the government should transfer the subsidy payable to the farmer-consumersdirectly to the bank accounts of the latter. However, if this is to materialise, the IP sets installed by the farmer-consumers should be necessarily metered . This will ensure that the beneficiary does not take the subsidised / free supply of power for granted. Underserving beneficiaries can be easily spotted and kept out of the subsidised power / free power loop. Government should promote drip irrigation to conserve precious water table and power. Even large farmers can be considered for the purpose if they are ready to share the tariff incurred for the purpose, with the government.

Does regulation induce cost efficiency in electricity distribution utilities? Use of stochastic cost frontier analysis for the Indian states

To overcome the macroeconomic crisis of the early 1990s, the Government of India persuaded the state governments to adopt market-oriented reforms for loss-making state public sector undertakings in general and power sector utilities in particular with an aim to limit the overall size of the public sector. This led the state governments to undertake unbundling of their vertically integrated State Electricity Boards (SEBs), establish independent regulatory bodies in the form of State Electricity Regulatory Commissions (SERCs) to regulate the power sector, and allow for an active participation of private sector. Given this backdrop, the present study attempts to examine the effect of establishment of SERCs on the cost-efficiency of electricity distribution in the Indian states. Thereby, it evaluates whether the establishment of SERCs has induced efficiency gains in the electricity distribution. Estimating a Cobb-Douglas stochastic cost frontier function, it finds that the establishment of independent regulators in various states has resulted in significant improvements in the cost-efficiency in the electricity distribution.

Performance evaluation of 12 kWP rooftop grid-connected photovoltaic plant installed under net metering in Delhi, India

This paper presents the performance analysis of 12 kWP rooftop grid-connected photovoltaic (PV) plant installed under net metering Regulation of State Electricity Regulatory Commission in Delhi, India. The analysis is based on the evaluation of various performance parameters such as monthly average reference, array and final yield of PV plant. The highest values of monthly average reference, array and final yield of 4.67, 4.15, and 4.06 h/d, respectively, were recorded for the duration of the analysis. The total annual energy generation for the place is 1147 kWh/kWp. This computes to 13.1% annual average utilisation capacity of the plant. Additionally, the performance ratio of Delhi is observed to be the highest (between 85 and 93%) among other existing PV plant locations.

Analysing Efficiency of Electric Distribution Utilities in India: A Data Envelopment Analysis

Reforms in the Indian power sector mid 90s led to restructuring of the vertically integrated State Electricity Boards (SEBs). Orissa led the march by unbundling, corporatising and privatization of distribution electric utilities. A number of states have embraced regulatory reforms and unbundling of SEBs. This has led to emergence of a number of distribution companies. Regulatory reforms in states have led to setting up of State Electricity Regulatory Commissions (SERCs), which adopted a rate of return regulation regime. Distribution companies continue to be saddled with operational inefficiency and financial losses. Setting the performance benchmarks remains one of the key regulatory challenges. The Electricity Act 2003 further suggests adoption of a multi-year tariff regime. In such an environment, regulators need to be equipped with tools to set performance standards against costs are allowed to distribution companies. Jamasb & Pollitt (2003), Thakur et. al. (2006), Edvardsen and Forsund (2003) and Chen (2002) have measured relative efficiency of distribution companies in national as well as international context.

Regulatory Framework for Long-Term Demand Forecasting and Power Procurement Planning

Electricity supply chain is a capital intense activity requiring a long gestation period for setting up generation, transmission and distribution assets. A robust and stable regulatory and policy framework provides adequate incentive for investment in such capacities. Further, availability of adequate generation and transmission capacities in future needs to be ensured for reliable operation of the power system. A reliable electricity demand projection can not only help the distribution utilities to plan power procurement in advance, but also assist in creation of transmission infrastructure to ensure reliable electricity supply to consumers. Cost of power procurement is the most important element of the Aggregate Revenue Requirement (ARR) of distribution utilities and accounts for about three-fourth of the final consumer tariff. Power procurement plans and contracts typically have a long-term horizon and, therefore, need to be worked out well in advance, based on a reliable and dependable forecast. A national-level exercise for long-term electricity demand estimation is carried out by Central Electricity Authority (CEA), which projects state-wise long-term peak demand for electricity. The Electric Power Survey (EPS), published every five years by CEA, projects electricity demand using partial end use method, which is now supplemented with econometric estimates. Our analysis reveals that there is a deviation of up to 25 percent between the electricity demand projections in the EPS Reports and the actual demand of electricity. This mismatch can be attributed to quality of data as well as methodological shortcomings. Application of a standardised approach across states which vary in terms of economic development, consumption profile, agroclimatic conditions, etc. may also explain the range of deviations in demand projections across states. At the state level, the respective distribution (DISCOMs) and transmission licensees (TRANSCOs) also undertake such an exercise. The objectives, forecast horizon and methodology adopted for such forecasts vary widely. The objectives of some forecasts include transmission capacity planning, power procurement planning and/or regulatory compliance for tariff filings. While licensees in a few states revise their estimates annually, others undertake this activity every five years or more. CEA’s projections are adopted for transmission as well as generation planning in some states. A holistic sectoral approach combining long-term electricity demand forecast with power procurement would not only help utilities economise their overall cost of power procurement but also alleviate supply risks, especially with the growing share of renewable energy sources. We analysed historical demand projections and relevant regulations of selected states – Andhra Pradesh, Assam, Delhi, Gujarat, Madhya Pradesh, Maharashtra, Odisha, Punjab and Uttar Pradesh. Whereas some of the State Electricity Regulatory Commissions (SERCs) have issued specific regulations for demand forecasting and power procurement planning, others have covered only short-term aspects through tariff regulations. The prevailing regulatory framework of the sector across many states does not address the matter of long-term demand forecasting and power procurement planning in an integrated manner. Based on our analysis of different states and some international practices, we identified key aspects that should be considered in formulation of regulations for long-term demand forecasting and power procurement planning. SERCs can consider these key aspects, with appropriate modifications if necessary, while framing model regulations for long-term demand forecasting and power procurement planning.

Transforming China's electricity sector: Politics of institutional change and regulation

The political failure of China's first independent regulator in a strategic industry – the State Electricity Regulatory Commission (SERC), 2002–2013 – provides a natural experiment to uncover fundamental challenges to a gradualist approach to electricity market formation. Taking a political institutional approach, we show that while it was largely predictable that the breakup of the monopolistic power industry in 2002 created bureaucratic and corporate interests that would undercut the institutional role of SERC, subsequent difficulties in reforming electricity pricing, dispatch system, and integrating renewable energy sources strongly suggests that a central regulatory body would be necessary to lead a decisive transition to a market-based electricity market.

New Regulatory Tariff Structure for Green Energy and Electric Vehicles in India

Electricity tariff is the price of electricity to be paid by the electricity consumers. Determination of electricity tariff is major function of the Regulatory Commissions of the concerned states. Tariff is analysed through a rational process including important role of all stakeholders, including electricity users. The regulator follows a set process mentioned in Act and Regulations, conducts public hearings before the tariff is determined. Special tariff rates need to be measured for Green Energy and Electric Vehicles (EVs) because of their sustainability in nature. State Electricity Regulatory Commissions (SERCs) have a major role to play in promoting Green Energy and EVs for providing optimum tariff structure for EV charging. Despite of new draft model regulations availability, progress is very slow. Regulators need to build a new cadre and capacity for making their regulations and policies to cater future needs. Time to implement new technology is less and utilities are only working on pilot projects. SERCs need to come forward to play leadership role for protecting an environment by promoting sustainability. In my paper, I would like to analyse current scenario and based on the global practice on various tariff structures to optimise electricity use and promote sustainability, will recommend new tariff structure.

Role of Energy Efficiency and Conservation Including Demand Side Management for Sustainable Development in India

Energy is used to provide cost-effective services meet the objectives of promoting sustainable development. The importance of Energy Efficiency and Conservation (EE and EC) is to conserve depleting energy resources. Energy efficiency in India has been increasing which has led the Government of India through the Energy Conservation Act (ECA) and the Bureau of Energy Efficiency (BEE) to begin several programs. Demand Side Management (DSM) and Energy Efficiency and Conservation are improving the economic growth of Indian utilities.DSM also aimed at promoting the installation and use of energy efficient equipment that consume less power having good quality of output. Energy efficiency is important for sustainable future. Demand Side Management including Demand Response (DR) Activity is utilized to limit the peak electricity demand. DSM helps grid operators to act as virtual power plants and power the utilities to transmit energy when needed through demand response measures. Demand Response (DR) measures can be adapted for a industrial and commercial facility that includes turning off air conditioning, lighting, pumps, and other non-essential equipment. Demand Response is a Demand Side Management (DSM) method in which the end users of electricity are encouraged to take part in dropping the peak load on the system by altering their normal energy consumption schedule. The basic objective of the Agriculture, Municipal and Industrial Demand Side Management (DSM) programmes are to improve the overall energy efficiency of the SLDC (State Load Dispatch Centre) and Electricity Grids which could lead to substantial savings in the electricity consumption, resulting in cost reduction and savings. The target of energy saving can be achieved by implementing acts and policies which leads to state wise DSM Regulations by Regulatory Commissions to the State Power Utilities. The Role of DSM and Energy Efficiency including conservation can fulfill the dreams projects electricity demand in Smart Cities. The Role of State Electricity Regulatory Commissions and Forum of Regulators are very important to make India’s electricity demand in future.

Training Delivery and Evaluationfor a Government Regulatory Firm (C)

Western State Electricity Regulatory Commission (WSERC) had launched a series of trainings to enhance the managerial capabilities of its employees. This case presents the challenges of designing and conducting trainings for a rapidly expanding small organization. In order to conduct the trainings, training groups were formed and a training plan was made to sequence the trainings based on the objectives and expected outcomes. Training modules incorporated a mix of methods such as lecture, presentation, videos, games, cases, activities, instruments and hand-outs. There were many hindrances to the implementation of the training programme as per the plan. New entrants to the firm were also made a part of the training groups without TNA. There were inordinate delays and interruptions that at times had to be escalated to the senior levels. Over a period of time, the trainings were appreciated but differences and challenges emerged causing roadblocks in the journey of WSERC to become a learning organization. This case focuses on the challenges faced by an organization when the commitment and buy-in from the employees is not sustained. It brings to the fore the role of senior management to have continued focus on any intervention.

Capability Building in a Government Regulatory Firm (A)

Western State Electricity Regulatory Commission (WSERC) was a Government Regulatory Firm in India and worked in the areas of electricity and power. Its scope of work had significantly expanded after a decade of existence and the organization needed to keep pace with the changing requirements. There was a need for agile functioning in a market driven power economy in the areas of power generation, transmission and distribution. The firm needed to transition from being a regulator to being a change agent to support the reforms in the power sector. The firm was operating with a skeletal support staff and key areas of expertise had been outsourced. The case presents the challenges of operating with an outsourced model and the need to move towards self–sufficiency. The firm wanted to now rely on internal expertise instead of depending on external consultants. The change of hiring practice would also need to be supplemented by change in the style of functioning. The case ends with the chairman pondering on how best to enable this change.

Training Needs Analysis in a Government Regulatory Firm (B)

Western State Electricity Regulatory Commission (WSERC) a Government Regulatory Firm in India needed to enhance its human resource capabilities. It was grappling with employees who were either on contract or deputation, and were essentially temporary in nature. The younger staff was lacking in both technical and managerial skills and could not contribute to the organization’s functioning. The senior staff appeared unwilling to transfer their knowledge to the junior staff. In addition, there were various people-related challenges in terms of differences in working styles, hierarchical culture of the firm, conflict across levels and functions and preference to operate in silos. It was decided to address the people related challenges through training to create a climate of trust and sharing before initiating a mentoring intervention. It was decided to undertake customized training to address the unique context and challenges being faced by the firm; therefore, a training needs analysis (TNA) was carried out. Various tools such as the TNA questionnaire, visioning exercise, personal interviews and focused group discussions (FGD) were used to gather data to identify specific training needs of the firm. The case focuses on the process of initiating a TNA in a small firm and some of the associated challenges.

An econometric approach for evaluating the cost efficiency in post reform era: empirical evidence from the Indian electricity supply industry

In Indian electricity supply industry, the state electricity regulatory commissions presently follow rate-of-return regulation for setting the retail tariff for distribution utilities. However, the current approach of tariff determination does not guarantee any incentives to the utilities to reduce their operating costs and often leads to arbitrary decision making. Accordingly, a performance-based regulatory mechanism has been recognised as an alternative approach to the traditional rate-of-return regulation and most of the state electricity regulatory authorities are now in the process of implementing performance-based regulation regime for setting the distribution tariff. This paper analyses the cost efficiency of 58 Indian electricity distribution utilities during the period 2008/09-2011/12. The estimated 'best' practice frontier could be used by Indian state electricity regulatory authorities as a benchmark to control utility's cost and further could be served to provide preliminary base for implementing performance based regulation in Indian electricity supply industry.

Regulating China's Power Sector: Creating an Independent Regulator without Autonomy

AbstractThroughout its period of economic transition, the Chinese state has readjusted its relationship with industry and developed new regulatory schemes. China's first industry-specific independent regulatory agency, the State Electricity Regulatory Commission (SERC), was created in 2003. Its operation does not follow Western practice which adopts the best institutional arrangement for autonomous regulators. This article will examine the failings and regulatory capture of SERC. I argue that because the process of creating a new regulator involves resource reallocation and power redistribution, SERC has suffered both endogenous and exogenous disadvantages since its inception. The compromised institutional design, along with insufficient resources and fragmented authority, has considerably weakened SERC's regulatory capacity. Moreover, SERC was not designed as part of the reform schedule, but rather emerged later as a response to institutional necessities, which also contributes to its vulnerability. As a result, the state has exposed SERC to potential capture by both government entities and regulated enterprises.

Current status of REC mechanism in India and possible policy modifications to way forward

Govt. of India has come up with renewable energy (RE) promotional policies and regulations to tap the abundant renewable energy sources in the country for energy security and to reduce the dependance on fossil fuels. Subsequent to the enactment of the Electricity Act 2003, Renewable purchase obligation (RPO) became mandatory on power distribution companies. Renewable energy certificate (REC) was introduced to help the obligated entities to meet their RPO irrespective of the availability of local RE sources and its trading started in India in March 2011. This paper briefs about the RE promotional policies and regulations of Govt. of India and analyses the RPO announced by various state electricity regulatory commissions (SERCs). A detailed analysis of REC trading at the energy exchanges till February 2013 is presented to show the REC market trend and the share of REC in the total RE requirement of the country. The impact of RE promotional policies and regulations on the RE sector is also analysed. Based on the above analysis, realistic policy modifications are suggested to improve the current status of the RE sector of India.

A comprehensive method to find RPO trajectory and incentive scheme for promotion of renewable energy in India with study of impact of RPO on tariff

Renewable Purchase Obligation (RPO) regime in India started in 2011 with the announcement of benchmark RPO (BRPO) of states for the Financial Year (FY) 2011 by respective State Electricity Regulatory Commissions (SERC), to promote Renewable Energy (RE). The report submitted to Forum of Regulators (FoR) in this regard has recommended uniform rate of increase of BRPO of states and studied the impact of RPO on tariff for FY 2011–2015. However, more rigorous analysis is needed for fixing BRPO in a scientific manner and for fair allocation of incentives to promote RE. This paper attempts to evaluate all states on a common platform to find BRPO, giving due weightage to the state-wise energy demand and RE generation, ensuring minimum change in BRPO of consecutive years and hence less impact of RPO on tariff. To encourage the states to align their actual RPO with BRPO, a financial incentive scheme is proposed giving due weightage to RE consumption, RE capacity addition and RPO compliance of the states. The methods are illustrated for the Indian states using real system data. A study of RPO's impact on electricity tariff of Indian states is also conducted and reported for FY 2011–2015, considering Renewable Energy Certificate (REC).

Directions for Effective Regulation for Renewable Energy: An Analysis of Renewable Energy Certificates

The Electricity Act 2003, the State Electricity Regulatory Commissions (SERCs) have set renewable portfolio obligation (RPO) requiring the obligated entities, namely the distribution companies, captive generators as well as the open access consumers, to purchase a certain quantity of electricity consumption through renewable energy sources. Electricity is procured through such sources at regulated feed-in-tariffs specified by the SERCs. Apart from this, there are favourable conditions for off-take of power, transmission losses as well as transmission charges. The fiscal incentives available to the investors include tax benefits as well as concessions for import of equipment. While there is impressive growth in generation capacity at the national level, the state-wise outcome differs. In spite of favourable conditions the obligated entities in most of the states have not been able to meet the respective RPO target (Annexure 1). This papers briefly evaluates the existing regulatory framework for renewable energy in India and discusses development of a market for Renewable energy Certificates (RECs).

Towards a competitive market for electricity and consumer choice in the Indian power sector

The initial phase of reforms in the Indian power sector was primarily aimed at bringing regulatory reforms and unbundling of the vertically integrated State Electricity Boards (SEBs). Enactment of the Electricity Act 2003 led to deepening of the reform process by dismantling this monopoly in the power sector. Primary issues emerging on account of transition from a single-buyer model to a multi-buyer multi-seller model include, among others, policy and regulatory initiatives related to open access, power exchanges, and transmission allocation and its pricing. The paper provides an overview of the status of competition in various segments of the power sector. It also reviews the phased program for open access outlined by various State Electricity Regulatory Commissions, including their status and impact on competition. The paper highlights a number of residual issues for the wholesale and retail competition, and also discusses the approach to address the same. These include liberalization of fuel markets, market monitoring, unbundling of retail tariffs, universal service obligation, supplier of last resort and demand response.

Regulatory Institution and Regulatory Practice: Issues in Electricity Tariff Determination in Reformed Electricity Industry in India

This paper examines the practice of tariff determination process in a newly created regulatory institutional framework in India. The Indian electricity regulation provides an opportunity to do comparative analysis of the approaches taken by state (provincial) regulators while fixing prices for electricity distribution. I analyse the process of price determination for electricity distributors by the State Electricity Regulatory Commissions (SERCs) in four different states. This covers 12 distribution companies. Impact of regulatory practice on the operating costs of the distributors and consequently on the prices paid by consumers is addressed. The findings suggest that prices for consumers have increased but not in the same proportion as the costs have been allowed to increase. The main reasons for increasing costs in addition to normal inflation rates are substantial distribution loss which are added to power purchase costs and little improvement in the operating and financing costs enforced by the regulators. The regulators limited success to effect significant improvements in two periodic reviews analysed here can be partly attributed to information asymmetry, lack of appropriate databases and regulatory approach resorting to simplistic historical analysis of distributors' cost rather than relying on more sophisticated cost analysis and benchmarking. I argue that limited success is partly attributed to regulators because wider institutional changes in property rights institutions (the industry operators remain in public sector), entrenched subsidies and political interests have not been addressed at state level leaving regulatory commissions with limited real power to influence the behaviour of players. However, a key but limited positive development is stakeholder participation encouraged by regulators.

Regulation in practice: impact of tariff orders on the Indian electricity sector

Independent regulation of the power sector in India started in 1995 in Orissa. Since then, the scope of independent regulation has expanded, and now it covers the entire country. In 1998, a central legislation – the Electricity Regulatory Commission Act – provided the Central Electricity Regulatory Commission the power to deal with the inter-state generation and transmission issues. The same law had enabling provisions for the SERCs (state electricity regulatory commissions), but there was no compulsion for every state to have a regulator. In 2003, the EA 03 (Electricity Act 2003) came into being, which made having independent regulator mandatory for all states. A large number of orders have since been issued by the regulators, both at the centre and in the states. The interesting question is to what extent have the regulators been able to reform the sector and perform the role that was expected from them. This broad question has many components and for convenience sake, they are divided into two – the procedures/processes followed by the regulator and the substantive content/impact of the orders. The book Regulation in practice: impact of tar iff orders on the Indian electr icity sector by A Garg, V Gaba, and J L Bajaj addresses precisely these issues. The analysis in the book is based on the study in nine states (Andhra Pradesh, Assam, Delhi, Jharkhand, Kerala, Madhya Pradesh, Maharashtra, Uttarakhand, and West Bengal) and covers the orders issued during 2003/04, 2004/05, and 2005/06. Book review