The Secretary, DERC,
Viniyamak Bhawan,’C Block'
Shivalik, Malvya Nagar,
New Delhi-110024.
Madam,
Subject: STOP DERC (Power Regulatory Accounting) Regulations 2014.
Ref: Public Notice dated NIL, Ref. NIL issued by Secretary on draft Regulations.
DERC has miserably failed to safeguard the interests of Consumers,be that in Tariff fixation, ensuring Performance Standards or in representing the Consumers in Courts and Tribunals. DERC’s Credibility is at stake because of Public having Political Appointees as members who have allowed DISCOMS and the Ruling Elite to Dictate terms in Detriment to Consumer Interest.
Having admitted in the High Court that DERC lacks the Competence and Infrastructure to Audit DISCOM accounts, we fail to understand why has DERC suddenly woken up to the need of Power Regulatory Accounting Regulation 2014 at an enormous cost to the Consumers and Exchequer, not to mention accommodating more favorites in cozy Post Retirement Berths.
Unfortunately while putting the Draft Regulations for comments by general public at large, DERC has not stated what is the objective of introduction of these Regulations and under which Regulation it has been authorised to introduce such Regulations. Unfortunately DERC has all along violated the provisions of Electricity Act, 2003, National Electricity Policy, 2005 and National Tariff Policy 2006.
It is our apprehension that the DERC shall conveniently use the Regulatory Accounts for fixing Tariffs and wash off its hands. The Commission is yet to respond on our queries and suggestions forwarded on 31-01-2014, wherein we had highlighted that the DISCOMS have furnished different Financial DATA at the time of submitting ARR and the Balance Sheet that was filed with the Registrar of Companies. Therefore, our apprehension is based on the past conduct of the DERC.
We have seen how the Meter Testing IS Codes were framed so that the Cheating due to Fast Running Meters cannot be detected while framing procedures that did not account for RESIDUAL BACK FLOW, explains the Trust Deficit amongst the Consumers.
The existing independent bodies like CAG and others are performing their job and have public faith, therefore I register my protest with the following observations ……
1. It is a matter of surprise to note that the Delhi Govt. issued a notice for CAG audit on the accounts of Private Distribution Company on 07-01-2014 & various forces has been acting against the audit of CAG. One of the actions towards it may be the making of DERC (Power Regulatory Accounting) Regulations 2014. The time of making the Regulations make the suspicion in the minds of stake holders as these Regulations will provide hurdles in CAG Audit to the private DISCOMs. The Regulations will enable the DISCOMs to do away with the Government Audit like CAG, as the CAG will not abide by the terms of references made by the DERC. However when the terms of references by way of the regulations will be made, the audit is to be carried out as per the Regulations only.
2. There are several Indian and International Laws, procedures & principles under which the accounting procedures are guided. Therefore the accounts of the firms or corporations are guided by those principals & laws. Therefore a separate set of accounting procedure Regulations were not necessary on the interest of accounting procedure.
3. The draft regulations have certain shortcomings, such as verification of physical assets for capitalization of asset. Physical verification of capital asset is very important in the capital based tariff. Making “Power Accounting Regulations” shall provide DISCOMs & other companies for coverage of such manipulations under the various provisions of proposed “Power Regulatory Accounts” Regulations. Therefore the draft regulations in the present form is to be repealed.
4. In regard to the capitalization & physical verification of asset, DERC during prudence check for the year 2002-03 to 2006-07, it was found that the private DISCOMs of BSES Rajdhani Power Ltd. (BRPL) & BSES Yamuna Power Ltd (BYPL) both purchase capital goods from their sister concerns M/s REL, more than 68.5% above the market rate and capitalized through the audited accounts. The replies filed by BRPL & BYPL were found by the Commission far from satisfactory. However DERC undertook action of their own & found that BRPL & BYPL could not provide satisfactory answers for escalated capital infusion. The Commission by its own wisdom and prudence check found out that the prices were shown to be escalated which were shown in the Audited financial accounts. Had there been the DERC (Power regulatory Accounting) in this present draft form, the Commission could not be able to go about as they did on this occasion.
5. There are several orders from the Higher Courts, where it opines that statutory Regulations formed by the Appropriate Authority (in this case DERC) is not a executive instruction but it is always by legislature & it desires sanction from legislative power vested in the legislature. DERC a statutory authority frame Regulations & issue notifications could not refuse to follow the Regulations in its application in any given situations. A statutory rule or Regulation or Notification shall be treated for all purposes of construction of objection exactly as if they are the Act & are to be of the same effects as if contained in the Act. Therefore once these Regulations are made for Power regulatory Accounting will supersede all the other accounting rules and procedure as followed in accounting procedure.
6. Tariff regulations are made U/S 61 of the EA 2003. The Principles of Tariff Regulations for determination of Tariff is based on encourage competition, efficiency, and economical usage of resources, good performance and optimum investments. In a private monopoly market environment of distribution of electricity in Delhi where the prices are not determined under competition, the proposed draft “Power Regulatory Accounting” is against the consumer interest as the said draft not in consonance with the existing Tariff Regulations of DERC and defeat the purpose of Tariff determined principles as envisages by the law.
7. Tariff is determined U/S 62 and 64 of the E/A 2003. The truing up of the accounts of the DISCOMs of past period by the Commission with prudence check is another important aspect for determination of tariff with participation of all the stake holders. It is apprehended that by way of making this ‘Power Regulatory Accounting’ all the illegal and manipulated accounts can be legalized by making law to accept the annual audited accounts of DISCOMs. This will defeat the main objective of transparency which is the prime goal of Power Sector Reform.
8. From the earlier experiences and the way the private DISCOMs manipulated their Annual Financial audited accounts, it is apprehended that the proposed draft “Power, Accounting Regulation” shall further provide the approval of the commission for manipulation of their accounts which they have been doing for all the years. The draft Regulations proposes all materials on records and the formats of Tariff are to be submitted as per their annual financial audited statement and therefore there would be very little scope for further prudence check of the formats of the DISCOM to be submitted as per the proposed Regulation. Therefore the proposed draft Regulation would take away the power of prudence check during true up process by the commission.
9. The private DISCOMs has been undergoing CAG audit. CAG while doing their audit is governed and guided by their own laws, rules, and Regulations, independent to any other agencies. The proposed “power Regulatory Accounting” will be another hurdle to carry out CAG audit in the private DISCOMs. CAG carry out their audit according to their own terms of references independent to any other terms, rules, Regulations of any Organizations. Considering the importance and necessity of CAG audit in Private DISCOMs the proposed draft “Power Accounting Regulations” proposed by Hon’ble Commission is to be called back.
10. After repeated demand and prayer by the consumers of Delhi before the Commission the Govt. of Delhi recently agreed an ordered recently for CAG audit for the accounts of the Private DISCOMs and currently the CAG audit is under progress. However private DISCOMs went to the higher courts i.e., High Court of Delhi and the Apex Court to get rid of the CAG audit fearing all their manipulations in their audited accounts will be caught. The private DISCOMs applied for stay order in the CAG audit in different courts. The proposed “Power Accounting Regulations” of DERC will strengthen the hands of Private DISCOMs to avoid CAG audit. The Private DISCOMs who has been very much expert in manipulation of financial accounts will get another opportunity and weapon by way of these Draft Regulations for pleading before the Higher Courts to get relief of the CAG audit. Therefore for the interest of the consumers and the public as a whole the proposed Draft Regulation may be called back by the Hon’ble Commission.
11. It is also surprised to note that these Accounting Regulations” has been proposed by Hon’ble Commission just after the CAG audit was ordered by the Delhi Government into the accounts of Private DISCOMs. The capital based Tariff of the DISCOMs, the physical verification of asset and truing up of capital expenditures is the most important criteria which could not be performed by the Hon’ble Commission since the privatization of erstwhile DVB the reason best known to the Hon’ble Commission. Under the above circumstances the proposed regulations will regularize all illegal and manipulations made into the accounts of Private DISCOMs since 2002-03 onwards. Therefore this is apprehended that certain forces are acting in favour of the DISCOM to derail the process of CAG audit currently undergoing in the private DISCOMs.
12. It is prayed before the Hon’ble Commission that the proposed draft Regulation may be called back for the interest of making the proposed Regulations more effective after getting the necessary input and observation of the CAG audit currently undergoing into the audit of Private DISCOMs. The input provided by CAG for strengthening the accounting system and prudence check of the Private DISCOMs may also be taken care of by incorporating those inputs in the present draft Regulations. This will be for the best interest of the consumers and also to the power sector reform as a whole.
13. Under the above circumstances it is suggested that the Commission to call back the proposed DERC (Power Regulatory Accounting) Regulation 2014 in the interest of the Electricity Consumers of Delhi.
This is without prejudice to any other submission that may be submitted at a later date.
Rajiv Kakria
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