Power Tariff peaks a decade-high in the spot Day-Ahead Market

The power tariff on Sunday the 30th of September 2018 touched a decade -high due to low hydro and wind energy production and coal shortage at thermal plants. The spot power price for supply touched 17.61/unit in spot trading on IEX on Sunday. The average spot power price was also high at INR 7.64/unit at the stock exchange on the same day. The power price has seen an upward trend in the day-ahead market (DAM) with 14.09/unit last week. A total of 271 MU (million units) were sold for supply on Monday. In the DAM trading session which concluded on Sunday at IEX, there were buy bids for 306 MU against sell bids for 357 MU.

The average spot price MCP trend for the past week is as below:

The upward trend of the power tariff suggests that the prices discovered on the exchange has taken an uphill and buyers now are residing to other options than exchanges for power purchase.  Notably, there has also been a coal shortage in the power plants and the power minister of the country has asked the state power generators to strengthen their coal mining wing.

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%.

 

 

 

 

 

Three States to Kick Start Power Sector Reforms

A joint statement was released on 21st September 2015, by Goa, Uttarakhand and Meghalaya where these states have signed a joint statement of reforms with the Central Government in order to enable 24×7 power supplies to consumers.

The joint statement highlighted the five-point agenda for these states:

  • An increase in power generation from local energy sources
  • An improvement in the inter-state transmission network,
  • Enhancement of the use of renewable energy and
  • Enhancement of the use of energy-efficient measures.
  • Strong communication, information technology and monitoring division.

Fulfilling these agendas will improvise the quality of life of the consumers and also promote economic developments overall.

The above update has been taken from Business Standard’s article published on 22nd September, 2015 which can be accessed here.

KERC hikes power tariff for FY15

Cost of buying electricity from DISCOMs has become costlier for the Commercial & Industrial consumers in the state of Karnataka. Karnataka Electricity Regulatory Commission (KERC) has approved a new tariff for supply of electricity in FY 2014-15. Average increase in tariff is 32 paisa against the 66 paisa increase sought by ESCOMs, tariff increase is ranging from 10 paise to 50 paise per unit for different categories of consumers and is applicable from 1st May 2014. 

Increase in Industrial Tariff:

Industrial consumers will now have to pay extra 35-40 paise per unit of electricity consumed by them.

 

HT-2(a) Voltage level

Paise/unit

HT level-11 kV/33kV

7

66 kV & above

42

New opportunities have opened up for those industrial consumers availing or seeking open access, as cross subsidy(CSS) has been reduced, which makes the  purchase of power from Independent power producers(IPP, Bilateral contracts) and power exchange(PXs, Bidding for power) more viable option for the consumers giving savings from 20 paise to 50 paise per unit.

Increase in Commercial Tariff:

Commercial consumers comprising of hotels, malls, commercial buildings etc. have to pay extra 40 paisa per unit consumed by them. Commercial consumers are the highest paying consumers and this increase in the tariff is expected to impact them badly.

 

HT-2(b) Voltage level

Paise/unit

HT level-11 kV/33kV

138

66 kV & above

173

Being the highest paying consumers, the saving potential for the commercial consumers is high. Sourcing power under open access from IPPs and PXs seems more viable options after decrease in the CSS. Group captive arrangement will still remain most viable option for the commercial consumers where saving potential is up to Rs 1.00 per unit.

 Open Access Charges:

KERC has also defined open access charges applicable for the FY 2014-15.

Losses:

Wheeling loss 4.04% and transmission loss 3.81% defined for HT consumers

Charges:

Transmission tariff of Rs. 98324/- MW/Month as against the existing tariff of Rs.95442 per MW approved for 2013-14

Wheeling charge:

Wheeling and Banking for Renewable Energy Sources:

RE generators wheeling energy to the consumers in the State have existing Wheeling (5 %) and Banking charges (2 %) which is going to continue up to 30.06.2014 or till further orders from commission.

In a nut-shell –

  1. Hike in tariff will lead to more consumers eying for open access.
  2. With CSS going down, cost of availing OA will come down. Again an added advantage for consumers to opt for OA.

Contributed by – Rahul Tyagi

Gujarat bans sourcing power from other states

Gujarat government has recently banned its state distribution companies from buying power from other states. These discoms will now have to procure power from state power generators.

Power procurement from state power generators means industries will now have to shell out more money from their pockets. The increase of Rs. 2.75 per unit is expected, taking the net power cost per unit touching Rs. 7.

As per an article in Economic Times, industries in Gujarat route around 1000 MW from other states via power exchanges while 2500 MW of state power generation companies are sitting idle.

GETCO; state transmission company has written letters to 125 industries, quoting the following:

“Due to rise in the system load demand, leading to grid constraint in the upstream network, it shall not be feasible to permit short-term open access to consumers as per enclosed list with effect from March 20,”

The decision has also taken into consideration the intent to reduce solar power tariff in the state. The state is said to have tied up for 950 MW at a higher solar tariff as against the requirement of 350 MW under solar obligation.

Aggrieved by the move, which is seriously questioning the viability, the industries association of the state are going to give a presentation to the govt. in the coming days.

An article in Economic Times can be accessed here.

Power Bills to shoot up in Kerala, Karnataka and HP

After a recent power tariff hike by the states of Madhya Pradesh and Andhra Pradesh, it was now time for ERCs of Kerala, Karnataka and HP to come to the rescue of their respective DISCOMs. Time has come when poor financial condition of DISCOMs is getting passed to consumers by increased tariff rates. Kerala and Karnataka increased power tariffs with effect from 1st May 2013 whereas Himachal Pradesh put the same into effect from 1st April 2013.

In Kerala, there has been no hike in tariffs for domestic consumers (using less than 40 units in a month) and agriculture segment. Also in most cases the fixed charges have been kept untouched. For domestic consumers (using more than 40 units in a month) the average hike in tariff is to the tune of 6.94 % (considering slabs as per table below), the table below shows the slab-wise tariff for domestic consumers:

Similarly, for LT Commercial consumers with average tariff hike is 6.89% as can be seen in the table:

For LT Industrial consumers, the approved tariff is Rs. 4.7 per unit; compared to existing tariff of Rs. 4.25 per unit, i.e. an increase 10.58 % whereas for HT Industrial the percentage increase is around 12.5 % (Approved is 4.60 Rs. /unit).

In Karnataka, May 5th 2013 marked the conclusion of elections in the state and an exit poll result predicts change of government. Just after the elections the power consumers were given a power shock. The tariff was hiked by 20 paise for domestic consumers and by 25 paise for commercial consumers. A summary of the retail tariff revision by KERC was published on the website and can be accessed by clicking here.

Himachal Pradesh also revised its power tariff and the highest increase around 16 % was mandated for domestic consumer category. HPERC asserted that though average cost of power purchase per unit is almost same as last year because hydel stations are cheaper, major cost is power purchase and employee cost. Details of approved tariff are as in table below:

Category 2012-13 Tariff 2013-14 Tariff %age increase
Domestic 3.69 4.28 15.99%
Industry 4.76 5.50 15.47%
Street light 4.64 5.05 8.83%
Commercial 5.21 5.95 14.20%
Water Pumping 4.45 5.05 13.48%
Average 4.59 5.20 13.29%

Links to relevant media coverage:

Andhra Pradesh, Madhya Pradesh hike Industrial Tariffs

The retail tariff order for FY 2013-14, rolled out by Hon’able APERC, has brought a major setback for the industries of the state. The hike in tariff was quite significant as it implies that industries dependent on grid power will receive inflated power bills. Evidently, this steep hike has also attracted much of agitation in the form of protests from various organizations.

The tariffs have been hiked for all categories, low tension domestic, commercial and high tension industrial consumers. Industries connected to 33 kV HT line will now be paying 21.2 % more i.e. Rs. 5.30 per unit as compared to Rs. 4.37 per unit for previous fiscal (FY 2012-13). The upward movement of tariff can be seen in the table below:

Though the retail tariff order may seem outrageous to many, in our opinion it is going to be a big push for solar captives in the state, based on the fact that it would just improve the economics as far as having an in-house solar captive power plant is concerned. An attractive solar policy with many incentives on offer in the state of Andhra Pradesh also backs up this assertion to a greater extent.

MPERC also increased tariff for industrial consumers by 3.9 % which though is not as steep as that mandated by APERC, but just goes to show how various states device methods to rescue their cash-strapped DISCOMs.

The APERC retail tariff order for FY 2013-14 can be found here.

Relevant media coverage on the issue can be found in the following links –

Power Tariffs Likely to Increase Signficantly: CERC

In recent days, power projects and tariff have made news in almost every newspaper. There have been reports of power projects being in trouble, state electricity board being denied loans by banks, and tariff increases.

The article on tariff increase cites an interview with CERC chairperson, Dr Pramod Deo. He is quoted as saying that in order to ensure that new capacity continues to be build, consumers should be ready for a 15-20% tariff hike for the next several years.

The article further states:

India’s state electricity distribution companies (discoms) reported an aggregate loss of around 40,000 crore in the year ended March, which is as high as the government’s annual divestment target. The losses are estimated to soar to over 1.16 lakh crore by 2014.

In the year so far, around 12 states have increased power tariffs in the range of 9-34% to ease the burden of distribution companies. States like Rajasthan, Tamil Nadu, Madhya Pradesh, Uttar Pradesh and Bihar account for 70.6% of the power distribution losses in the country. Though states like Maharashtra have been revising tariffs regularly, other states like Tamil Nadu and Rajasthan have not revised them for seven years and four years, respectively.

TNEB was also the subject of an article which mentions that banks are denying further loans due to its financial condition. The article states:

TNEB’s current loss was at Rs 40,659 crore, and it had a debt burden of Rs 42,175 crore. “Its debt is expected to likely to cross Rs 53,000 crore by end of the current fiscal,” she added. Besides, the Board has to pay around Rs 10,000 crore to power producers and contractors

This is in keeping with REConnect’s experience on the ground. Wind and other power projects have delays of upto 8-10 months to realize revenue from sale of power to TNEB. No wonder REC mechanism is the preferred more of new investment in the state – it eases the cash flow of projects substatially.

It all boils down to making the Discom’s independent of political pressures and recapitalizing them. The article on stock market valuations of the power companies points to that, and so does Dr Deo – “Deo said state power regulators need to be independent of political pressure while considering revision of power tariffs”

Tulsi Tanti of Suzlon also echoed this at the recent WEF Summit – “A major concern is that most of the state utilities are in poor financial health. Banks are not interested in financing the power sector,” Tanti said. “The private sector should be allowed a play in the entire value chain.”

See past article on related topics:

Try India’s first RPO calculator here

Go to top