Regulators rap discoms

NEW DELHI: Privatisation of power distribution is once again at the centrestage. Private players in the power distribution industry may need to now on pull up their socks on management of systems as regulators get set to make them more accountable. This follows the Appellate Tribunal appointing special officers in Orissa to take over the day to day running of the three Reliance Energy owned discoms in Orissa.

The Orissa Electricity Regulatory Commission has held that the Reliance-owned discoms “are unable to discharge the functions and perform the duties imposed on them by or under the provisions of the Electricity Act, ‘03”. This led to a show cause notice issued by the state regulator in January. For the time being, the electricity Appellate Tribunal has given a 3-month breather, so that “full particulars and facts through an independent agency” of the situation can be procured.

To this end, the Appellate Tribunal has stayed a show cause notice issued by the Orissa Electricity Regulatory Commission to the three Reliance Energy-owned discoms — NESCO, SOUTHCO, WESCO. Reliance Energy holds 51% equity in these discoms.

Though not out of the woods, for Reliance Energy, the tribunal’s interim order provides a breather. The company claims that it has been doing the best it can in the circumstances, and have not violated the terms of the licencing agreement. In February, the three discoms had in a presentation to the Orissa government said that it had succeeded in improving cash flows, reducing AT&C losses, and were making payments for bulk supply as well.

All this without a tariff revision for seven years. The tribunal has, however, appointed two special officers, in whose power the tribunal has placed, “the entire day to day management affairs, control, finance, manpower”.

The special officers will have the authority to appoint, remove, dismiss, suspend all employees including senior managers of the discoms. They will work with a five-member advisory committee set up for each discom comprising the special officers, a representative of Gridco, REL and consumers.

Sources said that the interim order could prove to be the turning point for privatisation of distribution. “If the special officers do manage to turn the discoms around, it could encourage private players to enter the distribution segment. It would only mean that the discoms weren’t managed very well, with good management private sector participation in distribution can be viable.”

In January, the Orissa Electricity Regulatory Commission issued a show cause order to the three discoms asking why its distribution licences should not be suspended for violating licensing conditions and regulatory commitments.

Late last week, the tribunal passed an interim judgement, “with a view to give quietus to the difference and mutual doubts, with the object of providing un-interrupted supply of electricity to the consumers in the state of Orissa, with the view to get full particulars and facts through an independent agency and at the same time not drive away the appellants who have already invested substantial funds in the three discoms, we have been persuading parties to join together and earn together as joint sector companies in the same spirit with which they joined for”.

The tribunal appointed two special officers to oversee the day-to-day operations of the three companies—NESCO, SOUTHCO, WESCO. After payment towards bulk supply, 10% of the balance will be released for the purpose of maintenance at the written request of the special officers.