Retail power consumers to pay 10 paise more per unit: ICRA

This is impact of central power regulator's new order allowing Tata Power and Adani Power to increase tariff of power sold to distribution companies

The power consumers of Gujarat, Haryana, Maharashtra, Punjab and Rajasthan will have to pay as much as 10 paise per unit more, according to the estimates of rating agency ICRA.

This is the impact of the central power regulator's new order allowing Tata Power and Adani Power to increase the tariff of power sold to distribution companies.

“The average consumer tariff rate charged by the utilities is expected to increase in the range of 0.4% to 1.8% (i.e. 3 to 10 paisa/unit) for supply from Coastal Gujarat Power (Tata's Mundra power plant ) to utilities,” said ICRA in its note.

The two power projects of Adanis and Tatas both located at Mundra, source coal from Indonesia. The country changed its laws, benchmarking the coal sale prices to international levels.

This made the fixed fuel supply contracts of these projects null and void, changing the economics of their predictions. The Central Electricity Regulatory Authority (CERC) has now allowed these projects to pass on their increased coal costs to the consumers.

“ICRA estimates that other imported coal based projects (aggregating capacity of about 7,000 megawatts which are under planning/implementation and having competitively bid based power purchase agreements with fuel price risk exposure) would also be benefitted,” the report said.

 
These tariff hikes would translate into increases in retail power pricing only if the state utilities governments decide to pay more for the power. The utilities are expected to appeal against the order. The utilities in states such as Rajasthan, Maharashtra and Gujarat have given in-principle consent.

“Utilities in state of Haryana have already appealed to Appellate Tribunal of Electricity against CERC’s earlier order in April 2013 for allowing compensatory framework. Utilities in Punjab have opposed to tariff compensatory framework,” said ICRA.