Tata Power's distribution arm bats for tariff revision in Mumbai

Necessitates due to rise in fuel cost, increased wheeling charges and expenses on laying distribution network

Tata Power's distribution arm with a consumer base of 3.30 lakh in Mumbai has approached the Maharashtra Electricity Regulatory Commission (MERC) to increase its present average tariff of Rs 5.97 per unit  to Rs 6.75 per unit for 2013-14, Rs 7.39 per unit for 2014-15 and Rs 8.05 per unit for 2015-16 at a rate of 10.46% annually (CAGR). However, despite the proposed rise in tariff the company in its filing has said there would remain a closing gap/surplus of Rs 971.21 crore.

Apart from Tata Power, other distribution utilities in Greater Mumbai include Reliance Infrastructure (RInfra), BrihanMumbai Electric Supply and Transport (BEST) and MahaVitaran. BEST, RInfra and MahaViataran are soon expected to approach MERC for tariff revision. RInfra’s average tariff is Rs 6.70 per unit while it is Rs 8 per unit for BEST and Rs 6.50 per unit for MahaVitaran.

Tata Power spokesman told Business Standard “The proposed hike in tariffs which is subject to MERC review and approval has been necessitated by significant rise in fuel prices the impact of cost incurred on developing Tata Power’s own last mile Low Tension (LT) network in Mumbai clubbed with continued incurrence of wheeling charges imposed on account of using a third party network and unrecovered costs over the past three years as the Company has not revised its tariffs for the last 3 years. The residential customers at the lower end of the spectrum are least affected as is evident from the mere Rs 1.22 hike proposed.”  The rise in cost of coal has been 82% while it is  41% in gas, 152% in RLNG and 83% in oil during 2010-11 and 2013-14.

Moreover, the company in its petition said that had the fuel prices remained at the same level, the tariff required to meet the annual revenue requirement have been in the range of Rs 6.12 per unit to Rs 6.43 per unit. However, such fuel price rise has contributed to tariff increase by about Rs 1.62 per unit.

Tata Power (distribution) recalled that it had sought an average tariff of Rs 6.11 for 2009-10 though MERC allowed an average tariff of Rs 4.41 per unit. Similarly, against its plea for an average tariff of Rs 5.86 per unit for 2010-11, MERC had approved Rs 5.20 per unit. Therefore, the company argued that such tariff differentials result in under recovery of annual revenue requirement and consequently it results in an unrecovered amount which is due for recovery at a later stage but with an interest cost. “In our humble submission, such deferred recovery is neither in the interest of the consumer nor in the interest of the utility,” the company said.

Tata Power said its changeover LT customers continue to be burdened by wheeling charges on account of being dependent on a Rinfra network. The present wheeling charges determined by MERC are 38 paise per unit for low tension (LT) consumers and 19 paise per unit for high tension (HT) consumers. Wheeling charges by the third party network operator has been proposed to be increased from 88 paise to Rs 1.46  in Business Plan for FY14.This is charged on customers who have exercised their right to move over to a competitive service provider. Building the network and paying for charges to Rinfra is certainly leading to higher cost for low end customers at this stage. This however, has not deterred customers continuing to switch to Tata Power, despite these additional charges.