Indian Express 08.12.2009
DERC notice to civic body over expenditure
The Delhi Electricity Regulatory Commission (DERC) has sent a showcause notice to the New Delhi Municipal Council (NDMC) for failing to get its capital expenditure approved by the regulator.
The NDMC, which is a deemed power licensee, is the primary power distributor in the VIP Lutyens’ zone. The municipal body has been asked to provide an explanation at a hearing scheduled for December 10. While DERC officials were tight-lipped about the notice, a senior Power department official explained, “If a discom’s capital expenditure plan exceeds Rs 2 crore, it is required to get it approved by the DERC. This law applies to all discoms and the NDMC, by virtue of being a discom, falls into the DERC’s ambit. A discom’s capital expenditure is extremely important for the regulator to approve because the cap ex is eventually added to the Aggregate Revenue Requirement which is the basis for tariff determination.”
Capital expenditure can be defined as the funds spent on acquiring new equipment or upgrading existing equipment which is important to maintain a healthy power distribution network.
One of the factors that the regulator takes into account while determining tariffs is a discom’s capital expenditure. Sources have confirmed that the NDMC did not seek any approval from the DERC for any capital expenditure over the last two years.
“The NDMC has done this in the past as well. A few years ago, they were warned directly by the DERC commissioner to fall in line and provide details about their expenditure,” the official explained.
The regulator has now asked the municipal body to appear for a hearing on December 10 to explain why they failed to get approvals for their capital expenditure and why a penalty should not be imposed on NDMC for the same. NDMC officials, when contacted, refused to speak on the issue.
