Power Sector Reform and Pricing of Electricity: The Odisha Experience

Abstract

This paper has studied electricity pricing under a regulated structure during post power sector reform in Odisha, India. It is found that Odisha has adopted the average cost pricing principle for determining electricity price with the rate of return regulation. This process of tariff determination not only takes a long time but also involves huge cost. Further, actual tariffs levied by the Odisha Electricity Regulatory Commission (OERC) are at variance with the broad principles of rational pricing policy. This uneconomic pricing policy has adverse impact on the financial health of the distribution companies. However, the Electricity Act of 2003 has brought about a radical change in the power scenario across the country, including the state of Odisha, by introducing open access and trading of power.