To assess cost of service study for various consumer categories for PSPCL
Student name: Mr Arun Kumar
Guide: Dr Kaushik Ranjan Bandyopadhyay
Year of completion: 2012
Host Organisation: The Energy and Resources Institute (TERI)
Supervisor (Host Organisation): Mr Saurabh
Abstract: The Punjab State Electricity Board (PSEB) was a statutory body formed on 1-2-1959 under the Electricity
Supply Act.1948. Subsequently with the re-organization of the erstwhile State of Punjab under the Punjab Reorganization
Act 1966 this form came into existence w.e.f. 1st May, 1967. Starting with the modest installed capacity
of 62 MW, the PSEB grew up by leaps and bounds with generating capacity 6841 MW as on 31-3-2009 from all
sources, including share from Central Sector Projects. The Board's gross generation during the year2008-09 was
38880 Million Units. PSEB operated its own Generation Power Plants and also got power as its share from BBMB.
The PSEB also constructed and maintained its Transmission and Distribution system for providing efficient services
to the various categories of electricity consumers in the state. PSEB proudly serving more than 66.31 lakh
consumers comprising of approximate 54.86 lakh General, 1.12 lakh Industrial and 10.33 lakh Agricultural
connections till 31.3.2009.
The determination of cost of supply of electricity stands as an important issue towards fixing tariff for
different consumer categories, hence, an essential issue for discussion among Electricity Regulatory Commissions
and suppliers of electricity. The tariff for electricity can be ideally decided among different categories of consumers,
only after the cost of providing that service is established. Further, with the introduction of The Electricity Act 2003,
the consideration of capacity to pay is no longer valid for tariff fixation. Section 61(g) of this Act prescribes that the
tariff should progressively reflect the Cost of Supply of Electricity and contains a directive for reducing and
gradually reducing (The word “eliminating†is removed in an amendment in the electricity act 2003) the cross
subsidy within a period to be specified by the SERCs.
The existing tariff structure in the Indian states reveals that the tariffs are below the average cost of supply
for some consumer categories and significantly higher than the average cost for the other categories. In the
compliance with Electricity Act, suitable steps must be taken to reduce the cross subsidy. At the same time there is
an urgent need for recovering the cost of supply from the consumers to ensure the fiscal sustainability of the
Discoms. But in doing so, it should be ensured that the process does not result in tariff shocks to any class of
consumers.
If we compare the calculated per unit Cos with actual tariff rate then we will find that agriculture & domestic
consumers are heavily subsidized. Due to cross subsidization HT consumers like traction & industrial units bearing
extra tariff burden, they are charged more even though they are efficient users with minimum of losses. The main
disadvantage of this subsidization is that we are subsidizing huge loses imposed by agriculture & domestic
consumers by charging extra tariff from the efficient users. Thus according to the Electricity Act 2003 & National
tariff policy tariff should be revived such that it lies between +_ 20% of average cost to supply.
