CERC breather for Adani Power to choke profits of Gujarat discoms

It's a double whammy for power consumers in Gujarat

The recent order of the Central Electricity Regulatory Commission (CERC), allowing Adani Power to increase price of power from its imported-coal-based project at Mundra in Gujarat, is likely to put pressure on the profits of four highly-rated and profit making distribution companies (discoms) in the state. This could lead to an increase in power tariffs for consumers.

“Certainly, the order will affect the financial performance of these distribution companies. The consumers will also get affected as the discoms may pass on the burden to them,” said a Gujarat Urja Vikas Nigam Ltd (GUVNL) official, who did not want to be named.

GUVNL is an umbrella organisation of all the four discoms in Gujarat. The discoms include Uttar Gujarat Vij Company Ltd (UGVCL), Madhya Gujarat Vij Company Ltd (MGVCL), Paschim Gujarat Vij Company Ltd (PGVCL) and Dakshin Gujarat Vij Company Ltd (DGVCL). All of them have registered a combined profit of roughly around Rs 140 crore for 2011-12.

Recently, all four discoms bagged the highest credit rating (A+), out of 39 utilities taken up for financial evaluation at the behest of the Union power ministry.

According to insiders, a compensatory tariff in addition to the one in the power purchase agreement (PPA), would increase the cost of power.

“The discoms will not absorb this increase in cost. It will hurt the profits, so we will seek revision in tariffs under the provisions of fuel price adjustment system. Ultimately, the consumers will have to bear the burden of higher tariff,” said a top official of DGVCL, which has posted the highest profit among  the four discoms.

GUVNL officials said the exact impact on the discoms would become clear only after the details of the compensation are worked out.

Agreeing with the DGVCL official, a top official of PGVCL, which supplies power to the Saurashtra and Kutch regions, said, “We are waiting for the final details regarding the tariff from the committee. The compensation as ordered by CERC is going to affect our revenues. But since GUVNL is the parent body of discoms, the policy decision will be taken by them.”

Power consumers are set to get a double blow. According to sources, the discoms have already appealed to the Gujarat Electricity Regulatory Commission (GERC) for a revision in power tariff to the tune of 48 paise per unit for 2013-14 as an annual practice. Given the latest CERC order, if the discoms decide to pass the burden of compensatory tariff to consumers, power bills will increase further.

The state power regulator has already completed the hearing on power tariff hike pleas of these discoms and the order is likely to be pronounced in 10 days.

On Wednesday, CERC ordered the setting up of a committee to work out the exact quantum of “compensation” over the current tariff for Adani Power’s 4,620-megawatt (Mw)  unit at Mundra. The order came after Adani Power filed a petition seeking a revision of tariff due to changes in the Indonesian policies and a sharp rise in imported coal prices.

The petitioner needs to be compensated over and above the tariff discovered through competitive bidding, the order stated. “The compensation package, to be called compensatory tariff, could be variable in nature commensurate with the hardship the petitioner is suffering on account of unforeseen events leading to increased coal price which has affected its performance under the Power Purchase Agreement (PPA),” the CERC order said.

According to the provisional figures tabled in the state Assembly recently, Adani Power, through its Mundra unit-1 and unit-2, has supplied 6,710 million units and 3,324 million units at Rs 2.90 per unit and Rs 2.35 unit respectively during 2012.