Slide 1
Thinking about Regulations in the Power SectorTirthankar Nag
1Concerns Highlighted on Previous Day2Fuel Supply IssuesDemand
side issues also No demandCIL (LoA) Letter of Association over 700
MT annually in 2011 & 2012, while its current production is
around 450 MT.Financial HealthLosses of DISCOMS around 75,000
Crores in FY11-12 - bulk of it is financed through short-term
liabilities from the financial institutions.Bankers critically
evaluating the sectorCompetitive BiddingWinners Curse: Risks in
Post Bid EnvironmentAgenda3Why Regulation?Power SectorIndustry is
moving towards more regulation4The US HistoryTill World War I:
Tight RegulationWorld War I Great Depression: Less Regulation1932
1970: More Regulation1970 2008: Less regulation2008 Onwards: More
Regulation
The Indian HistoryTill 1990: Less regulation, but government
control1990 Onwards: More Regulation, less control
Why are Regulatory Interventions are Required ?5Preventing
Market Failure & Balancing Interests
Objectives of RegulationEconomic efficiencyConsumer protection
Social justiceSecurity of supplyEnvironmental protectionPreventing
Anti Competitive forces Competition Commission?Regulatory Failure
Can Destroy CompaniesCase of Power Sector in California -
20006Rising wholesale pricesInadequate SupplyHigh usageCPUC keeps
low retail prices during shortageAB 1890: Price ControlConsumer
ProtectionCPUC No long term contractsHigh Risk SystemFear of self
dealingDivestiture of GenerationForm Competitive MarketsLow
RainfallGrowing DemandLimited CapacityCostly Emission PermitsNon
PaymentGenerators OfflineUtilities not credit worthyFinancial
Crisis for UtilitiesSCE Near BankruptcyPG&E BankruptcyState
Short Term PurchasesState Revenue BondsState long term
contractsElimination of direct accessRegulatory FailureWhat can be
regulated?7PricingPerformanceLevel of competitionOwnershipSector
DevelopmentRegulatory philosophy has moved from 8Command and
controlSelf-regulationIncentive/benchmark based regulationOther
Formsregulation by contracttrading permitscompetition laws A
Snapshot of Regulatory Concepts9Regulatory InterventionMarket
Driven Non Market DrivenRegulatory Governance
Proceduralist/SubstantivePricing ModelsRegulatory IssuesBalancing
Interests
Agenda10Why Regulation?Power Sector11TrendsSeparation of
carriage and content businessCarriage is mostly natural monopoly
open access requirementsContent is amenable to competitionEmergence
of uniform concession frameworksShift from Command and Control to
setting benchmarked performance based prices Emergence of long term
pricing regimeShift towards participatory regulatory
processEvolution of Policy & Regulatory Landscape
Reforms2003 ActCompetitionAccess12Regulatory Developments13MYT
tariff framework for generation & transmission
projectsCompetitive procurement of powerTransmission TariffTariff
structure for renewable energy projectsShort term open access
operational through inter state transmission lines.Considerable no.
of inter state tarding licensees2 power exchangesInter state grid
operations and imbalance settlementUnscheduled overdrawal by some
statesGaming opportunitiesRegulatory Landscape14MYT tariff
regulations & AmendmentsCompetitive Bidding GuidelinesTariff
regulations for renewable energyIntroduction of Renewable Energy
Certificate (REC)Generation based incentive scheme (GBIs) for wind
projectsGrant of Connectivity: long term and Medium term open
access New transmission tariff mechanismRestructuring of
Unscheduled Interchange MechanismRegulatory Landscape15Congestion
Charge regulationsGrid code regulations Ring fencing of SLDCsNew
Interstate Trading regulationsCERC allows term ahead contractsPower
Market regulationsPrice cap on traded power & fixing of trading
marginsThird power exchange in the countryChanges in Mega Power
PolicyEvolution of Structural ChangesPower
generationTransmissionDistributionRetailState owned monopoliesPre
-1990sPower generationTransmission & System
OperationDistribution & RetailPower TradingVertical industry
disaggregationPost -1990sSelective open accessGrowth of captive
generationNow & Going AheadPower
generationTransmissionDistributionTradingFull Open
accessIndependent System OperatorStrong Market OperatorsGrowth of
captive generationWeak Market
OperatorsRetailFranchiseePowerEERetail Companies16#17Thank
YouDealing with Many Stakeholders18PolicyMinistry of
PowerCentralPlanningRegulations GenerationTransmissionSystem
OperationsDistributionTradingAppealStateCentral Electricity
AuthorityCentral Electricity Regulatory Commission (CERC)Central
Generating StationsCentral Transmission UtilityNational/Regional
Load DispatchInter-state Trading LicenseeAppellate TribunalState
GovernmentState Electricity Regulatory Commission (SERC)State
Generating StationsState Transmission UtilityState Load Dispatch
CentreDistribution LicenseeIntra-state Trading LicenseePrivate/
JointInternal / IPPsInternal / Transmission CompaniesLicensee/
FranchiseesInter/Intra-state Trading LicenseePower exchangesSystem
Control / ALDCFinancingREC / PFCInternal / State FinancesInternalHR
DevelopmentNPTI, UPESInternalInternalInternalIndia, JUSCOUnited
Kingdom, United Utilities: North West Water, NorwebFrance, Suez
Lyonnaise des Eaux: Lyonnaise des Eaux, TractebelGermany, E.ON:
E.ON Energie, GelsenwasserChile, Enersis: Chilektra, Agua Potable
de Lo CastilloAustralia, TXU Australia Holdings: Eastern Energy,
Westar-Kinetik EnergyArgentina, SEMPRA Energy: Empresa
Distribuidora de Energia Atlantica, Camuzzi Gas Pampeana, Camuzzi
Gas del SurIndia, Reliance ADAG. BSES, BSES TeleCom: OrissaBrazil,
Eletropaulo Metropolitana Eletricidade de Sao Paulo:Eletropaulo
TelecomunicacoesEstonia, Eesti Energia: Eesti Energia Televirk
Spain, Endesa: AUNARepublic of Korea, Korea Electric Power
Company:PowercomMalaysia, Tenaga Nasional Berhad: FibrecommIndia,
Reliance ADAGBrazil, Companhia Forca e Luz Cataguazes-Leopoldina:
Energipe, Teleserv, TelecaboMany utilities cover 2 sectorsOnly a
few - Vivendi and Suez Lyonnaise des Eaux cover 4 sectorsSource:
World BankLegend: Country, Parent company: SubsidiariesGlobally
Infrastructure Utilities are Diversifying19
