Karnataka Power Reforms - Structure of the
- The ultimate goal will be to offer maximum choices to
end-users in obtaining electricity services, achieve maximum competetion in al the
segments of the power industry, be it generation transmission or distribution and supply
- In this direction, the distribution and transmission
businesses presently managed by Karnataka Power Transmission Corporation Limited (KPTCL)
will be disaggregated; and separate distribution companies (DISCOS) will be established.
These discos will in turn be privatized.
- Several hydropower stations and one diesel generation, which
belonged to KEB were transferred to a separate company called Vishveswaraya Vidyuth Nigam
Ltd., (VVNL) at the time of its Corporatisation. It is now proposed to transfer all
the hydro stations for strategic and financial reasons to KPTCL. Yelankha thermal power
station will be offered for sale to strategic investors, following a competitive and
transparent solicitation procedure. The preoceeds of the divestment will be credited to
the pension fund, which is proposed to be created to meet pension liabilities in respect
of retired employees of KEB and KPTCL.
- After the power sector is stabilized, the issue of
restructuring KPTCL will also be considered and this may consist of disinvestment, or
formation of separate companies. However for the present, KPCL would play a key role in
power augmentation particularly when IPPs cannot provide the desired quantum of power.
- In the medium to long run, when the basic restructuring
process is completed and the transition to a competitive industry is ensured, the sector's
reform will be further deepened with the progressive segregation of the various functions
that KPTCL has been initially entrusted with ( for example trade and transmission of
power, and system operation).
- During transition period, KPTCL will act as a wholesale
trader, buying power from KPTCL, the central generating stations, IPPs and others, and
selling it to the distribution companies, these will be enabled to purchase bulk power
from any generating company, private or public, the state or outside the state and KPTCL
would collect wheeling charge. Any new power purchase agreement by KPTCL will have to be
concluded after consultation with the distribution companies.
- In the ultimate stage, a consumer need not buy electricity
from the local distribution company, but from any body, but will have to pay wheeling
charges to the transmission licensee/s as also to the distribution companies, associated
with such transaction.
- KPCL an its successors ( in the event of restructuring) will
be able to participate in any competitive solicitation engaged by the distribution
companies, end-users or any other entities authorized to enter into the trade business.
KPCL has been the mainstay of power generation in the State, and the State Government
appreciates the key role KPCL has played in fulfilling the energy needs of the State in an
efficient manner. However, in the competitive environment, which is being envisaged,
KPCL must establish its continued role through being competitive in comparision with other
players. In the past, KPCL was given Government guarantees for its borrowings, but little
protection in the matter of tariff revision and prompt payments from KPTCL. Escrow and
Letter of Credit facilities were given by KPTCL to private generators but not to
KPCL.Government will ensure that KPCL does not face a disadvantage in comparision with
private producers of power. At the same time, KPCL and its successors will not be nifit
from any advantage which distort competition; in particular, after the transition period
of power reforms is crossed, the State Government will not provide nor arrange any
financing (except the equity contribution as owner of KPCL) or guarantee to lenders, which
will be the pilicy applicable to all generating companies. The size and power market of
KPCL and its successors will need to be reviewed in due time with a view of ensuring fair
competition among different industry participants, Until then, KPCL may for augmentation
of capacity have to play a key role in the programme for development for several years
till the power sector is stabilized.
- Government of Karnataka will require that the procurement of
additional power, whether from independent power producers (IPPs), KPCL, central, regional
or other state utilities, would be consistent with the financial capabilities of the
utilities and would be carried out with prudence and efficiency. Government will not
provide any guarantee nor allow provision of any escrow facility to IPPs, barring any
arrangement to ensure adequate liquadity through cash support, as part of the Financial
Restructuring Plan during the transition period.