Cheap power vs reliable power

How can a system where the cost of supply is more than the cost recovered from its consumers ever succeed? With the commercialisation of such a system, the only option left for utilities is to sell less power to reduce their losses. It is then no surprise that various state electricity boards resort to load shedding. This is absurd and has to be corrected.

Even private utilities are not allowed to recover all their costs from the consumers. They are instead allowed to build a ‘regulatory reserve’. The ‘regulatory reserve’ is nothing but an ‘IOU’ from the consumer, which means the consumer has simply postponed paying what is due to be paid. The inevitable increase is only being delayed. One wonders how will the ‘IOU’ be ever paid for because the price of energy is only going to increase. It follows that in the future, the consumer will have to not.only pay for higher energy costs of the future but also the ‘IOU’ of the past.

Such weak political will at the state level is surprising since a large number of consumers is willing to pay more for reliable electricity. This is also evident from the fact that the alternate arrangements that people make to secure reliable power supply, such as diesel generation sets/inverters, are far more expensive than a modest increase in the electricity price. Further, in some regions like Pune, where a reliability charge was levied to ensure uninterrupted power , was heartily supported by the citizens.

While some states like Gujarat have chosen to provide reliable power to all, though slightly expensive, other states have decided to hold on to the price line and deprive the people of power. The difference in the development of basic indicators, such as literacy, infant mortality, depletion of ground water levels, change in area under cultivation, changes in soil conditions etc, between the two approaches of ‘reliable power’ and ‘cheap power’ is there for all to see. The so-called ‘cheap power’ is meaningless if no power is being supplied! ‘Reliable power’, even at a marginally higher cost, has generated all-round prosperity.

Fortunately, there is still room left to minimise the impact of increasing energy prices by minimising the inefficiencies in the system. The aggregate transmission and commercial losses (AT&C) losses have reduced only marginally from 32.7% in 2007 to 29.9 % in 2009. There is still ample room for improvement and a sizeable 15% to 20% savings can be made by simply reducing these losses. The total under-recovery of revenues, about 30% now, can be reduced to just about 10% by focussing on loss reduction. Here again the political will to privatise distribution is very weak and hence losses continue unabated.