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A NEW ERA IN UTILITY REGULATION
Orissa has been a pioneer among States in India in
embarking on a comprehensive reform of the electricity industry of
the State. The aim of the reform is to address the fundamental
issues underlying poor performance of the Orissa State Electricity
Board and restructure the power sector. The objective to make
power supply more efficient, meet the needs of a growing economy
and develop an economically viable power industry which will
enable Orissa to attract private capital while safeguarding the
interests of the consumers.
The reform programme was announced by the Chief
Minister of Orissa in November, 1993, formally approved by the
council of Ministers in April, 1994 and was endorsed by the new
state government which took office in March, 1995. On April 20,
1995, the government issued a formal statement of its power
policy.
A new legislation, namely, the
Orissa
Electricity Reform Act, 1995 (Orissa Act 2 of 1996) was
enacted for the purpose of restructuring the electricity industry,
for taking measures conducive to rationalization of generation,
transmission and supply system, for opening avenues for
participation of private sector entrepreneurs and for
establishment of a Regulatory Commission independent of the state
government and power utilities.
Advance clearance of the legislation by the
central government was issued by the Ministry of Home Affairs in
early November 1995. The legislation was approved by the State
Assembly on November 28, 1995. The President gave his assent in
January 1996 and the Act became effective in April 1996. The
restructuring of the industry became effective from the same date
and the Regulatory Commission became functional on 01.08.1996
after all the three members including the Chairman had taken oath
of office.
HIGHLIGHTS
OF THE ACT
The reform legislation contains several
fundamental building blocks.
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Restructuring - The former
OSEB has been corporatised and is designed to be managed on
commercial principles in its new form GRIDCO. While the newly
formed GRIDCO has been put in charge of transmission and
distribution, the hydro power- generating stations owned by
the government has been taken over by the Orissa Hydro Power
Corporation (OHPC).
-
Unbundling - The reform
structure has incorporated principles of functional unbundling
with regard to generation, transmission and distribution to be
managed by separate corporations/companies.
-
Privatisation - The OER Act,
1995 aims at fostering private sector participation in
generation and gradual privatisation of transmission and
distribution.
-
Regulatory Commission - An
important component is establishment of the Orissa Electricity
Regulatory Commission for ensuring achievement of objectives
given in the Orissa Electricity Reform Act, 1995.
-
Licensing - Government
ownership and direct control has given way to a licensing
system in respect of transmission and distribution activities.
-
Tariff - Determining tariff
which would ensure commercial rate of return for investment in
the electricity industry while protecting rights of all
categories of consumers with respect to cost, efficiency and
quality of service.
The new regulatory supervision is designed to be
qualitatively and structurally different from the command and
control exercised by the government so far as the electricity
industry is concerned. The Orissa government's objective is to
withdraw from the power sector as an operator of utilities and
give way to privately managed utilities operating in a competitive
and appropriately regulated power market. The Commission is
designed to be an autonomous authority responsible for regulation
of the power sector while policy-making power continues to be
retained by the State Government. The Commission is a three member
body with the necessary supporting staff.
Structural Evolution
REGULATORY
MECHANISM
The new regulatory regime is designed to insulate
the electricity industry from short term political decisions and
rigid bureaucratic control. It aims at ensuring that industry
operates on commercial lines so that the scarce resources of the
state are available for development. It has been the experience
that state owned industry is utilised for achieving social and
political ends such as creating avenues for employment, and giving
subsidy to certain categories of consumers. This becomes
detrimental to the industry resulting in non-availability of
resources for maintenance and expansion, lack of accountability in
performance, poor quality of service, financial sickness of the
industry and unwillingness of private sector to invest in any
significant manner.
The new regulatory regime, on the pattern
prevalent in USA and UK, is designed to create clear and
transparent rules and procedures for open hearing by which the
Regulatory Commission can monitor and control the essential
utility industries while the interests of all those who
participate in it and those who are served by it can be balanced
and protected.
As an independent Regulatory OERC
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Issues and enforces licenses
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Determines tariff and charges
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Monitors financial viability of operators
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Sets service standards and monitors compliance
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Arbitrates in disputes between licensees
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Arbitrates in disputes between licensees and
consumers
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Provides information and advice to the
Government
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Handles consumer grievances
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Promotes competition in all sectors of
electricity industry
An independent Regulatory Commission operating in
a transparent manner creates comfort and confidence of investors
from private sector by allaying the apprehension that political
and personal considerations may create an uncertain climate and
that the interests of Govt. or selected persons shall not be
unduly favoured.
Regulatory Structure
FUNCTIONS OF THE
OERC
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to aid and advise, in matters concerning
generation, transmission, distribution and supply of
electricity in the State;
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to regulate the working of licensees and to
promote their working in an efficient, economical and
equitable manner;
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to issue licenses in accordance with the
provisions of the Reform Act and determine the conditions to
be included in the licenses;
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to promote efficiency, economy and safety in
the transmission, distribution and use of electricity in the
State including and in particular in regard to quality,
continuity and reliability of service so as to enable all
reasonable demands for electricity to be met;
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to regulate the purchase, distribution, supply
and utilization of electricity, the quality of service, the
tariff and charges payable keeping in view both the interest
of the consumer as well as the consideration that the supply
and distribution cannot be maintained unless the charges for
the electricity supplied are reasonably levied and duly
collected;
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to promote competitiveness and progressively
involve the participation of the private sector, while
ensuring a fair deal for the customers;
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to collect data and forecast on the demand for
and use of electricity and to require the licensees to collect
such data and make such forecasts;
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to require licensees to formulate perspective
plans and schemes in coordination with others for the
promotion of generation, transmission, distribution and supply
of electricity; and
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to undertake all incidental or ancilliary
things.
The Orissa Electricity Regulatory Commission has
taken up its role earnestly in the aforesaid historical and legal
perspective. The Commission's task is all the more difficult
because there has been no precedent of an independent regulatory
Commission in electricity industry in any of the developing
countries in Asia. The Commission has formulated its rules,
regulation and procedure in a tailor-made manner to suit the
economic and industrial development in general, and need of
electricity sector in particular, in the state of Orissa while
safeguarding the interests of all categories of consumers.
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