In a step that may have major implications on the power tariff in the city, Delhi Electricity Regulatory Commission (DERC) has decided to review the capital expenditure, capitalisation of assets and physically verify those assets by the three power discoms in Delhi. The DERC has issued a tender to hire consultants for the job and the process will be completed by August 12.
“The consultant would be required to verify the year-wise capitalisation during financial year (FY) 2004-05 to 2005-06 and FY 2011-12 to 2015-16, reflected in the audited books of discoms,” the tender document said.
It must be noted that the commission had already carried out the work for capital expenditure review and capitalisation of discoms for 2006 to 2011 through consultant. However, the scope of the work covered physical verification of only 25 per cent of Extra High Voltage (EHV) schemes and 10 percent of High Tension/low Tension schemes.
“The commission intends to get the leftover schemes from FY 2006-07 to 2010-11 physically verified through this assignment,” the bid document added.
According to power experts, the step may have serious implications on the power tariff paid by the consumers in the city.
“Although, the ideal and simpler way would have been to have regularly reviewed the capital expenditure and physically verify the assets on an annual basis, but this is a welcome step as well. For years, the DERC took the expenditure stated by the discoms at their face value without verifying if what they claim to have spent on infrastructure has actually been implemented on the ground, and if the expenditure quoted by them is overstated. This led to a swift rise of regulatory assets of the discoms thereby increasing the burden on consumers as those regulatory assets have to be paid by the citizens of Delhi through their power bills,” said the expert.
He added that there is also a clause of assured 17 percent return on investment for the discoms thereby leading to an even faster rise in the regulatory assets. “In what other business can the investor get such a high return irrespective of whether the business makes profit or incur lossesIJ And eventually, the complete cost of investment, as well as the 17 percent annual interest, has to be borne by the consumers. So if this review reveals overstating of expenditure by the discoms, it will lead to reduction in regulatory assets, and thereby lowering of power tariff,” he added.
As per the DERC, the consultant will examine 100 per cent of the documents related to tendering, evaluation, purchase orders, store documents, road restoration receipts, invoice & payments etc. for all the lT, HT & EHV schemes capitalised, and comment on compliance with the competitive bidding guidelines of the commission as well as reasonableness of costs at which the equipment have been procured.
“The consultant will also analyse various components of capitalisation… physically verify 100 per cent of EHV, HT and lT schemes… examine the de-capitalisation of the assets of the discom, based on the information submitted by the discoms. (It will also) comment on the reasonableness of quantities procured/utilised, capitalisation claimed vis-à-vis quantity and estimate ‘in-principle’approved by the commission,” the bid document added.