Centre's draft NEP will benefit KSEB but hurt domestic consumers

The Central Government's draft National Electricity Policy (NEP), if implemented, will largely hurt Kerala, a state where domestic consumers account for 70 per cent of users, though it will benefit the Kerala State Electricity Board (KSEB). The powers of the electricity regulatory commissions to examine and control power tariffs will be curbed once the policy comes into effect.

The Fuel and Purchase Adjustment Surcharge (FPPAS) will be the main problem. It allows power distribution firms (like the KSEB) to recover variations in power procurement and fuel costs of coal and natural gas from consumers without the regulatory commission's approval.

KSEB's 'fast food policy'
Several power procurement deals of the KSEB are not transparent. The Board doesn't have a clear answer to the regulator's question on the yardstick for power purchases. It is often as impulsive as buying fast food, citing increased power consumption or power generators undergoing maintenance as reasons.

KSEB, despite being a power distribution behemoth, still lacks a Production Planning and Control wing to foresee demand and plan accordingly. The Load Despatch Centre primarily handles this responsibility. I had to backtrack on the decision to audit power purchases by ₹13,000 following opposition from the employees' unions.

It is not uncommon in KSEB to surrender excess power purchased. However, whether the power is used or not, ₹1 to ₹6 per unit should be paid, which could be avoided through planning. However, such planning is not done in KSEB.

The KSEB, with its opaque functioning, could exploit the NEP. Citing the surcharge to hike power tariff without regulation will affect the domestic consumers the most. The low power tariff, despite increased expenses, including workers' salaries, has been attracting industries to Kerala. Any hike in power tariff will also affect the industries.

It is not uncommon for governments in the State to withhold a power tariff increase and later implement it. This often leads to a loss for KSEB. With the NEP in place, the Board can recover the loss by imposing a surcharge on consumers.  

A change for the better
The NEP will help revive the KSEB, but it should not make consumers pay for the Board's inefficiency. The KSEB is neither transparent nor has a human resources policy. Professional agencies should be roped in to audit the KSEB's power purchases and related agreements.

The KSEB has to recover regulatory assets (losses that cannot be recovered through tariffs) of more than ₹6,000 crore from consumers before April 2031. It means that the next government, irrespective of who comes to power, will have to exponentially increase power tariffs soon after the Assembly polls.  

The Board will have to improve efficiency while reducing its operating costs. The KSEB recently implemented its first corporate plan. Currently, it seldom reports vacancies, and even if it does, the PSC will publish a rank list only after 3 to 4 years, and recruits are not trained properly. Hence, recruitment to KSEB should be entrusted to the Public Enterprises Recruitment Board, with each batch comprising 50 to 70 candidates, and a new batch should be appointed the next year.

The salary and pension revision in KSEB is carried out without any liability to the public. It is done solely in the employees' interests. Even the government does not have control over the pay revision process. The public will pay a heavy price if the new government does not reform the KSEB within the next two years.

The Board should reduce the costs of procuring power. It should constitute a Costing Wing comprising experts to identify cheaper power sources and augment domestic power generation.

Another issue dogging KSEB is incomplete projects. Many projects, though rolled out, are still incomplete. Officials in the departments concerned are idling.

The KSEB does not require more than 700 posts in its Civil wing. The posts should be slashed as employees retire. On the other hand, even as KSEB installs smart meters, it lacks a strong IT department.  

Get smart
The Smart Meter plan, launched under the Capex model, requires ₹4,000 crore. There is no clarity on the source from which the required funds will be raised. The plan will not succeed if the KSEB does not reduce the number of meter readers.

The Board pays more than ₹1,200 crore to the Power Grid Corporation to transmit power worth ₹13,000 from outside the State. According to the Vision-2030 document, the Board needs a 3000-4000 megawatt battery storage system (BESS) to cut the costs. A company, like the Cochin International Airport Limited (CIAL), should be formed to attract investment for this purpose.

Currently, Kerala's hydropower generation is only about 2,090 megawatts. If pumped storage systems are implemented in almost all hydroelectric projects in Kerala, the State could generate an additional 1,000 to 1,500 megawatts of power without causing any major environmental concerns. It requires adequate investments.

Minor power plants, wind turbine generators and solar power generation at homes should be encouraged. Additionally, indigenously developed safe nuclear power plants should also be introduced.
(The writer is a former Chairman and Managing Director of KSEB).