Electricity costs in Delhi

EPW has an article on the role of deregulation in the increase of power costs in Delhi. The whole article is worth a read, but here are the points which I got from it:

• The privatization has put them outside the ambit of RTI and CAG.[1]
• The higher costs are due to cost of power puchased[2]
• Costs increased due to deregulation in electricity market, because of opaque short-term puchases and discretionary trading of electricity. [3]
• The discoms have no incentive to reduce costs on purchases since it is, by regulation, directly passed through to customers. [4]
• Many of the unregulated merchant traders in electricity have been guaranteed state-granted captive coal blocks. [5]
• Hence, the customer are paying for not only discom's profits but also profits of merchant trading companies. [6]

***********   Notes   *************
 Article is "Pricing Electricity in Delhi" by Kannan Kasturi, EPW, Jan 5, 2013

1. "the utilities have gone to court against attempts to bring them under the ambit of the Right to Information (RTI) Act while the state government itself has been reluctant to recommend a Comptroller and Auditor General (CAG) audit of their accounts despite recommendations from the regulator."
   (Ramachandran, Smriti Kak (2012): “RWAs Want
   CAG Audit of Discoms’ Accounts” ) link 
2. "It appears that DERC raised tariffs both times in response to a single factor deemed to be outside the control of the discoms – the increase in the cost of power purchased by them."
3. "Power was allocated and its cost set by the government; the cost of power was considered a pass-through as far as the operations of the distribution utilities were concerned.  Over the years, significant changes have occurred in the electricity genera- tion and trading business with private producers, traders and exchanges coming into play with merchant power. Trading in electricity has become an important part of the operations of a distribution utility, especially one servicing a metro- politan area, and involves significant discretionary spending and sales. "
4. "...considering that the cost of power is a pass-through cost as far as the utilities are concerned and in no way affects their profits."  
5. A few examples include Jindal Power, GMR and Lanco Infratech. (Noor Mohammed, "Jindal Power ignores coal min directive on merchant sale of power", Financial Express, Jul 30, 2012)
6. "The larger problem however lies in the unregulated electricity market. Delhi’s consumers are paying not only for the regulated guaranteed profits of the state-owned generation and transmis- sion companies and private distribution companies, but also for the unregulated profiteering of the merchant producers and other market players."