Competition needed: PM

NEW DELHI: Calling for competition in the power sector, Prime Minister Manmohan Singh on Monday asked the Centre to separate the ownership of the transmission system operation from the ownership of the transmission lines, setting an example for the states to follow.

Transmission system in power comprises the management of the national grid and the load despatch centres, which monitor drawal of power by various agencies. This system is different from the lines — that is, the transmission wires.

“The Centre cannot become a votary of central power utilities and a protector of their interests alone...inter-state transmission needs to be truly opened up to competition and a separate and independent government entity to control the National Load Despatch Centre should be established,” the PM told a conference on the power sector here.

The PM’s suggestion comes at a time when the ministry has been considering separating the two operations of Power Grid. In fact, to this end, the government has already proposed setting up a 100% subsidiary of the Power Grid Corporation to perform the task of an independent system operator (ISO). This subsidiary is expected to be set up by 2008.

At present Power Grid, which is designated as the central transmission utility, runs the transmission system. In other words it owns transmission systems as well as looks into the operation of the system. This arrangement where ownership and operation of grid facilities rests with one entity is known as transmission system operator (TSO). The proposed ISO, will despite being a wholly owned Power Grid subsidiary have an independent board with separate accounts. All stakeholders will be represented on the board. The Power Grid chairman may head the board of the subsidiary but will do so in a non-executive capacity.

The government proposes to hive off the subsidiary into a separate entity by the end of the 11th plan.Last year, the Committee of Secretaries (CoS) examined a proposal by the power ministry to separate the task of operating the grid and managing load despatch centres from the wires business. It had been proposed that a government-owned and controlled corporation could be set up which would perform the functions of an independent system operator. The other option before the committee was to continue with the present arrangement where PowerGrid Corporation, which is designated as the central transmission utility, would continue to be both owner of transmission facilities and the system operator.

The committee took a middle path approach. Even as an ISO is being set up, the committee has asked the government to look into the experience of of other countries that moved from a TSO to ISO system. The US is contemplating moving back to a transmission system operator (TSO), as we have in India, where a corporation is both the owner as well as the operator of the grid, as the ISO has not yielded the desired result. It would seem that world over the experience of large systems with ISOs has not been successful.

For its part the ministry has argued that an ISO would mean greater transparency in system operation. It acknowledges that since PowerGrid took over operating the grid from the Central Electricity Authority in 1994, the performance of the grid has improved. However, the ministry is of the view that an ISO will improve investment, and make open access more credible.