Tamil Nadu cuts power rates for industrial consumers

Tamil Nadu has reduced electricity tariffs for industrial and commercial consumers. In line with what was suggested in the tariff policy introduced last year, the Tamil Nadu Electricity Regulatory Commission (TNERC) has brought down cross-subsidy surcharges (CSS) to the range of Rs 1.6-2.5 a unit, the lowest among industrial states.
 
The National Tariff Policy 2016 suggested a new formula for determination of CSS and capped it at 20 per cent of the tariff. It also introduced an additional surcharge for these consumers when they shifted to sources other than the state’s distribution companies (discoms).
 
Thus, while states where the industrial rates were low increased tariffs, Tamil Nadu, where commercial consumers were already paying high rates, decided to reduce the burden. CSS is levied by state discoms to recover the cost of supplying subsidised power to a section of the population. In the last financial year, CSS across a dozen states increased 30 per cent to 600 per cent.

 

“CSS determination should not be violated by the Commission at least in this tariff order and the tariff should be designed in such a way that it supports the development of industries in the state,” TNERC said, adding that while per-unit cost for industrial consumers was around Rs 7.48 per unit, CSS was Rs 3.51 a unit, which was burdening the state’s industries. “According to the central LGBR (load generation balance report), the state has surplus power. Thus, the power cost has to be reduced instead of TANGEDCO’s (Tamil Nadu Generation & Distribution Corporation’s) proposal for maintaining the tariffs at the existing level,” said the Commission in its order dated August 11.

 
Citing that the base tariff of Rs 6.35 a unit for the state’s industrial consumers was very high compared to tariffs for other consumers, the Commission said the CSS made it impractical for industrial consumers to buy from power exchanges or generate within the state through the group captive scheme at Rs 5.25 a unit.
 
In a group captive scheme, one party develops a power plant and many commercial consumers benefit from it. The Commission also did not levy any additional surcharge on industry or increase energy and demand charges.
 
It reprimanded TANGEDCO for not availing of the low-cost short-term power available in the power exchanges. “While the majority of power purchase should preferably be from long/medium-term sources, TANGEDCO should assess the opportunities available to meet around 10 per cent of its power requirements from power exchanges in case the landed power purchase rates are lower than the variable cost of power available to TANGEDCO from other sources, with a view to minimise the power purchase cost. TANGEDCO should frequently review the prevailing rates in the power exchanges in order to optimise the power purchase cost,” the order said.

 
With outstanding debt of Rs 30,000 crore, TANGEDCO joined the power distribution restructuring programme of the Centre, the Ujwal Discom Assurance Yojana (UDAY). The state is looking to derive benefits of approximately Rs 11,000 crore through the scheme, by way of savings in interest cost, reduction in AT&C and transmission losses, interventions in energy efficiency, coal reforms, etc.
 
According to the UDAY MoU, the central government would also provide incentives to the state government and the discoms for improving power infrastructure in the state and lowering the cost of power.