West Bengal serves cease and desist order to state power regulator

Kolkata: The West Bengal government has directed the State Electricity Regulatory Commission not to pass any order on any matter till mid-November on a row between the regulator and Kolkata-based power utility CESC Ltd.

The commission has been directed “not to proceed with issuance/ publication of any draft regulation/ final regulation/ amendment to existing regulation and/ or any other order for a period of 60 days” under section 108 of the Electricity Act 2003, according to the cease-and-desist order dated 17 September passed by the department of power of the West Bengal government.

This interim measure has been taken to facilitate “the process of firming up (the state’s) comments after due consultation with various stakeholders” as “amendments to the Electricity Act have been circulated… and comments sought from the state government”, the power department said in its directive to the commission.

The move raises questions about governance standards in the state, said a former Union power secretary who asked not to be named. At the same time, he expressed doubts about the commission’s neutrality in dealing with CESC’s application for restructuring.

“Even if for a limited time frame, this order clearly means the commission has been divested of all its key powers,” said the former bureaucrat.

The use of section 108 of the Electricity Act to pass such a directive is “highly questionable”, he said. It is a provision of law that allows the state government to intervene only in “specific matters of public interest”, he added.

“The reason cited is also questionable because consultations over the proposed amendments to the Act have not even begun in full earnest,” the former bureaucrat contended.

The commission has been at the centre of a controversy recently because the proposed restructuring of CESC, the flagship firm of the RP-Sanjiv Goenka group, was held up.

After the National Company Law Tribunal (NCLT) approved CESC’s application to split itself into four firms, the commission refused to allow the power utility to split its generation and distribution arms—the two it will continue to regulate even after the restructuring.

NCLT said the two separate arms should conclude a long-term power purchase agreement (PPA) and get it approved by the commission for the proposed demerger to become effective.

However, the commission held that only it, and not the tribunal, had the authority to approve the proposed restructuring that involved “transfer of licence from one entity to another”, said an official at the commission, who, too, asked not to be named.

“CESC has not submitted petition seeking permission for demerger of its business under section 17(3) of the Electricity Act,” Sen said in a text message. “How can there be a PPA without permission for the demerger?”

CESC will for now not pursue the separation of its generation and distribution businesses, in view of the stand taken by the commission, group chairman Sanjiv Goenka said at a recent press conference.

The commission’s stand on CESC’s demerger is “completely flawed”, according to the former Union power secretary cited above. The Electricity Act says regulators should encourage power utilities to separate their generation and distribution arms and such restructuring does not lead to transfer of licence, the bureaucrat said.