Commuters wait near the closed gates of a Delhi Metro station during the power outage that suspended the Metro services on Tuesday. (AFP)
On a cold, foggy morning in Delhi just after New Year 2002, the temperature was close to zero. I was the Union power secretary. Around dawn, I got a grim telephone message from the chief of PowerGrid informing me that the northern region has suffered a total grid failure, and that work was on to get it back in order.
It took me a few seconds to comprehend the enormity of the crisis. We immediately assembled at the Regional Load Dispatch Centre (RLDC). What began thereafter was one of the longest days in office, for undertaking disaster management of massive proportions. There was excellent co-operation from many, not so much from others and the occasional customary blame game. The grid was restored by afternoon.
An enquiry was instituted under the Central Electricity Authority. The reasons for the crisis ranged from overdrawal by state utilities, to lack of maintenance of the state grids due to insufficient funds. For me, a lesson had been learnt.
I moved on as chairman, the Central Electricity Regulatory Commission (CERC), a few months later.
Like all commodities, electricity, too, is subjected to the laws of demand and supply. But, unlike other commodities, electricity cannot be stored (except in batteries in minuscule quantities). It is, therefore, imperative for all stakeholders to do everything possible to maintain grid discipline.
The Electricity Act charges the central and state regulators with the responsibility of framing appropriate laws for ensuring this discipline. The CERC frames the All India Grid Code, and the state regulators do likewise in the states.
The RLDC is the responsible agency for maintaining discipline in the grid. To explain in layman’s language, every distribution company is required to inform the RLDC by 12 midnight about its requirement of power for the next day, on a “day ahead” basis.
Similarly, the generators are required to inform the RLDC of the availability of power generation. The RLDC balances the demand and supply, and issues the “day ahead” schedule of generation and distribution.
If all stakeholders play by the rules, there is no problem. But this does not always happen. The state distribution utilities may be required to draw more than the schedule, for reasons which range from oppressive summer, to festivals, political compulsions etc.
To meet this excess demand, the discom (distribution company) buys from the electricity traders or from the Power Exchange. In the last resort, it tries to meet its demand by overdrawal from the grid and by paying “unscheduled interchange” charges fixed by the regulator. The Grid Code stipulates that the frequency in the grid must be maintained between 49.7 and 50.2 Hertz. If the utility overdraws at high frequency it helps to stabilise the frequency, for which it is rewarded. On the other hand, if a utility overdraws at low frequency, it further strains the grid and it is subject to UI charges which may be as high as Rs 9 per unit.
During my tenure in the CERC, I had to even resort to the extreme step of imposing a fine on some state utilities for disturbing the grid and for not maintaining grid discipline.
It is necessary to review the grid failure that occurred this week in the light of these provisions. It must be remembered that there were five separate regional grids with small interconnections when the 2002 grid failure took place. Today, the four regional grids namely northern, western, eastern and northeastern are all interconnected.
The southern grid is, by and large, separate. Therefore, if a grid failure takes place in the integrated regions, the cascading effect would be much more severe, and would go from one region to the other. This is what happened a few days ago.
The Grid Code foresees such a situation and has built in adequate safeguards to prevent it. As soon as overdrawing at low frequency is detected by the load dispatch centre, it has to warn the errant drawer. If the utility still does not respond, the load dispatch centre is at liberty to isolate the state or region, by opening the insulators, to prevent a greater catastrophe. Another effective mechanism is “islanding” of cities and other important utilities from the cascading effect of a grid failure. In fact it was due to this partial islanding that power supply to Calcutta remained by and large undisturbed when the entire Eastern Region was reeling under grid collapse.
The state generation, transmission and distribution utilities often complain of inadequate funds for maintenance and upgradation of their systems and stations. To some extent, this is true. The utilities are required to file tariff petitions before the appropriate regulator for fixation of tariff. While CERC fixes multi-year tariffs for the central utilities with built-in provision for fuel escalation charges, the tariffs for the state utilities are still fixed by the state regulators on a year-to-year basis.
The state governments sometimes instruct the state utilities not to file the tariff applications, since this may lead to increase of tariff, which may not be politically expedient. The Electricity Act empowers the regulators to take suo motu action to reset the tariff even when no applications are made. However, very few regulators have been taking this exceptional step.
The Electricity Acts further stipulates that the utilities have to function on commercial principles, and cover their costs and earn a reasonable return. If the state government wishes to keep the tariff below the reasonable level for political reasons, Section 65 of the Act requires the state government to pay an upfront subsidy to the utility to compensate it for the financial loss. Very few states have been following this provision. To some extent, this is surprising, since the “below poverty line” customers are the beneficiaries of the preferential lower tariff, and the rest of the customers are willing to bear a moderate tariff increase if this results in improved supply and performance by the utilities.
To overcome this dilemma of having to keep the announced tariff at a lower rate, the state regulators have been creating what is known as “regulatory asset”. In effect, this means that, if the actual tariff is, say, Rs 5 per unit, the regulator announces a tariff of, say, Rs 3 per unit, while the remaining Rs 2 per unit is kept as reserve to be encashed by the utility in instalments at a future date. For all practical purposes, the utility is deprived of its economic tariff.
The Electricity Acts lays down that a customer is free to select his source of supply through the “open access” mechanism. However, since, it also means that the customer will leave the inefficient supplier and move to a more efficient source, interested parties and governments have largely hindered its successful implementation.
Power theft has also been a cause of concern. It is estimated that about one-third of the total power supplied by the utilities remains unbilled. Under its accelerated power development and reform programme, the Government of India has been providing funds to the distribution utilities for upgradation of the distribution system, but the funds remain largely unutilised.
It is clear that there is no dearth of laws, regulations, rules, etc to ensure grid discipline and to promote market development. Today, private entry has been allowed in all sectors i.e., generation, transmission, distribution and trading. The act seeks to promote competition and efficiency while protecting consumer interest.
To translate this in to reality, all stakeholders are required to play their assigned role. However, this is not happening. The generation capacity addition programme of the government has fallen short of target in every five-year Plan. Statutory clearances like environment, forest etc are taking inadequately long time. Raw material like coal and gas are in short supply, and immediate remedial measures are required to be taken by the government.
Regulators are sometimes wary of taking decisions which may be in conflict with political requirement of the state governments. Production and supply of equipment by both Indian and foreign manufacturers is sometimes slow, and not in sequence with the requirements of the utilities. The policy of land acquisition and supply to the power utilities is still unclear.
The reality is that the power sector has failed to keep pace with requirements of a modern, fast-growing economy. It is necessary to make all-out effort to enforce the principles and policies governing the sector, ensure that time-lines are met, provide adequate independence to the regulators, invest in new power plants, provide adequate returns to the utilities, ensure supply of raw material, and prevent theft of power. All this is clearly in the realm of possibility.
CERC had an ongoing collaboration agreement with the Federal Energy Regulatory Commission (FERC), US. Soon after the California Grid failure of 2005, I was in the US for discussion on items of common interest. My counterpart in FERC asked me how we could restore power within hours of a grid failure in my country, when it took five days to do so in the US. I resisted the temptation to say that this was because we had outages almost every year, while the US had one after 30 years!
On his request, a delegation led by the PowerGrid chief visited the US to demonstrate how we did it! The business of power is a learning process all the way.
Basu is a former Union power secretary and a former chairman of Central Electricity Regulatory Commission