Formulation of tariff regulation

Under the provisions of Section 28 of The Act the Commission has to determine by regulations the terms and conditions for fixation of tariffs. However section 51 of the Act provides that the Central Government may by notification omit sub-section (2) of section 43A of the ES Act. Till this provision is omitted the power to regulate tariffs for generating companies owned by the Central Government remains with the Central Government. Though section 43 A (2) of the ES Act continued in force through the year the Central Government has indicated its intention to omit it subsequent to which the Commission would have full jurisdiction over these matters. In the meantime the Commission has started some preparatory work towards this end. The list of utilities for whom bulk power tariff would be regulated by the Commission (subject to omission of section 43A (2) ES Act is available in Schedule V along with their brief profile. The Commission has initiated the task of formulation of filing requirements and tariff guidelines which would enable utilities to submit petitions for tariff determination. The work is continuing. The Commission has reviewed the existing procedures for tariff determination including the norms prescribed by the Government of India and is currently assessing the existing arrangements against the guiding principles of simplicity efficiency and equity. It is being assisted in this task by consultants provided to the Commission by Canadian International Development Agency (CIDA) representing the Government of Canada under the Energy Infrastructure Services Project-I

Cost norms study

With the intention of reviewing the existing arrangements within utilities for the recording of costs incurred at different stages of the production process and to explore the potential for introduction of Activity Based Costing two separate studies were commissioned. The report on the Vijayawada Plant of Andhra Pradesh State Electricity Board was prepared by Shri A.N. Raman, Director, Cost Technology (Asia) Pvt. Ltd., while the report on the Dadri Plant of National Thermal Power Corporation was prepared by the Cost Accounts Branch of the Department of Expenditure, Ministry of Finance. These studies proved useful for the Commission to understand the existing practices being followed, for the costing of different inputs, the relationship between existing cost norms and actual costs and to assess the potential for adopting alternative methods of cost allocation. No definitive conclusions were reached as a result of these studies except to re-enforce the perception that a review of the cost norms is essential from the view point of efficiency and that considerable effort would be needed within utilities for restructuring the accounting framework so as to enable the proper allocation of costs to activity centers.

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