Rajasthan Electricity Regulatory Commission determines CSS for FY 2016-17

Rajasthan Electricity Regulatory Commission (RERC) has calculated the Cross subsidy surcharge to be applicable during FY 16-17. The new CSS will be applicable only for the state of Rajasthan effective till 31st March, 2017.   The new CSS applicable will have significant impact on the open access power market.

The table below depicts the CSS charges defined for year FY 2016-17:

 

The graph below depicts the % change in the CSS over the last four years:

 

The regulation can be accessed here.

Cross-subsidy surcharge continues to rise

A recent article in Business Standard highlighted the disproportionate rise of cross-subsidy surcharge (CSS) in many states. We have been tracking this issue as well and had highlighted the problem in our blog & NL Volume 62.

 

In the past, CSS has been calculated on the basis of the cost of the marginal 5% (in other words the most expensive 5%) of power procured by the state. This results in a bias towards the highest cost paid, resulting in high CSS. The National tariff policy (NTP) has suggested change in this methodology to a weighted average cost model, and also proposed that CSS be restricted to 20% of the tariff. However, recent increases show that states have largely ignored the provisions of the NTP.

 

A big reason for the rise in CSS is also the fact that states continue to shy away from raising tariffs for domestic, agricultural and such categories. According to the Business Standard article, States like Chhattisgarh, UP, Uttarakhand and Bihar have already come up with their tariff orders for the financial year 2016-17, but have not raised retail tariffs. Only Gujarat has allowed a retail tariff increase.

 

With increasing cost of power the burden to foot the bill therefore falls on industrial and commercial consumers. As per the MoP data the below graph depicts change in CSS over the span of 1 year in the major states which varies from 35% to 321%.

 

 

 

 

 

TSERC Determines CSS for FY2016-17

Telangana Electricity Regulatory Commission (TSERC) has calculated the Cross subsidy surcharge to be applicable during FY 16-17. The new CSS will be applicable only for the state of Telangana effective from 1st July, 2016 to 31st March, 2017.  There was no CSS applicable in the state till last FY 14-15. The new CSS applicable will have significant impact on the open access power market.

The Telangana solar and wind policy which was announced recently clearly states that for Solar Power Plant located within the state and selling power to third parties within the state, 100% exemption shall be provided on the cross subsidy surcharge as determined by TSERC for five years from the date of commissioning of the Power Plant.

The table below depicts the CSS charges defined for year FY2015-16 and FY 2016-17:

The regulation can be accessed here.

 

Impact of Andhra Pradesh Reorganization Act, 2014

The Andhra Pradesh Reorganization Act, 2014 came into effect from 2nd June, 2014 and the new states of Andhra Pradesh and Telangana came in to existence from that date.

Reorganization Act 2014, Anantapur and Kurnool Districts which previously fell within the jurisdiction of APCPDCL have been reassigned to APSPDCL.

Before Bifurcation                         After Bifurcation

1.       NPDCL                                    1. TGNPDCL

2.       CPDCL                                    2. TGSPDCL

3.       EPDCL                                    3. APNPDCL

4.       SPDCL                                    4. APSPDCL

1.       Impact of Bifurcation                                                                            

Thus, consequent to the amended AP Reorganization Act 2014, the jurisdiction of the DISCOMs have been altered. Correspondingly,

  • Power purchase quantity of each Discom
  • Power purchase cost of each Discom
  • Aggregate Revenue Requirement of each Discom
  • Subsidizing and subsidized consumers

Included in the filings of each Discom will undergo corresponding changes, along with the volume of power supplied to subsidized consumers. All these changes will feed into the cost of service for each DISCOM, which will impact the level of subsidy to be provided to each DISCOM.

2.       Share of Powers between DISCOM

Following substation will be become Inter Discom Points between APSPDCL and TGSPDCL.

  1. 11 KV feeder originating from TGSPDCL Substation of Mahbubnagar District is feeding power to Kurnul District.
  2. Two 11 KV feeders originating from APSPDCL SS of Kurnul District are feeding power to Mahbubnagar District.
  3. Two 11 KV feeders Originating from Srisailam Right Bank of APGNECO are situated in Kurnool District but serving power to consumers of Mahbubnagar.

Commission has granted permission to avail interstate transaction between APSPDCL and TGSPDCL using existing Infrastructure and energy settlement till March 2015. If power plant is connected at any of these feeders, the contradiction arising out of geographical location has to be resolved.

Further, the respective shares of power allocated between the four Discoms originally fixed in G.O.Ms.No.58, dated 07.06.2005 under the 3rd Transfer scheme has been amended in G.O.Ms.No.20, dated 08.05.2014. As per the GO, the revised share of 46.11% for Seemandhra is higher than the existing allocation of 38.07% (increase of 8.04%), while the new 53.89% allocation for Telangana is lower than the existing 61.93% allocation. Allocation of power to new DISCOMS is another political issue.

4.       Merit Oder Dispatch and Energy Settlement codes: 

A common merit order dispatch month wise for all Discoms. i.e., for entire state has been previously considered by the Commission in its earlier examination of the filings. This merit order dispatch is no longer relevant in the light of the creation of the two new states of Andhra Pradesh and Telangana and the respective DISCOMs have to redraw the merit order dispatch for the two states separately.

Energy settlement codes and polices of old AP may be redefined.

5.       Tariff Order for FY-14-15 :

Thus, the existing tariff filings mentioned in the reference cited, which were a valid base for the Commission to issue a Retail Supply tariff order on 29.03.2014 have now been overtaken by events and the creation of two new states. These filings can no longer be considered by the Commission for the purpose of determining tariffs because the jurisdiction of the four DISCOMs in the two new states has been changed. Significant Policies involving budgetary Support need to be confirmed by newly formed states.

6.       Impact of Subsidy:

Further the DISCOM filing contains zero tariff proposals for certain categories of consumers. This zero tariff was proposed as per then extant policy of the erstwhile Government of Andhra Pradesh which anticipated payment of subsidy to meet the deficit u/s 65 of the Electricity Act, 2003.

In this scenario, subsidies and polices of new state will have impact on Cross Subsidy Surcharge. For the new state it is more likely that subsidies will be announced which will have impact on CSS.

Under this condition it is difficult to predict Impact of Bifurcation on existing PPAs.

Contributed by Nikhil Dhamankar.

Maharashtra hikes cross subsidy surcharge

Maharashtra Electricity Regulatory Commission on 29th October 2013, rolled out an order which raises the cross subsidy surcharge (CSS) to a level which can be detrimental for the growth of power market in the state. This is MERC’s second revision to CSS charges in a single year. Such an increase in CSS is against Electricity Act 2003 and National Tariff Policy.

Recently, the Hon’ble Ministry of Power has also emphasized in an amendment to Electricity Act 2003 (refer) that respective  State commissions have the responsibility to specify a road-map for time bound reduction of cross subsidies. This move by the commission defeats the very purpose of open-access in power markets of India.

The exorbitant rise in CSS is well illustrated by a graphical analysis :

Fig: Graphical analysis of CSS hike

The order can be assessed here.

A relevant media article can be assessed : Business Standard.

 

 

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