CERC compensatory tariff won't burden discoms, consumers: Care

Regulator has directed the states to pay a compensation of Rs 330 crore to Tata Power and Rs 829 crore to Adani Power

The central electricity regulator's order for compensatory tariff to Tata Power and Adani Power has not only provided relief to producers but also ensured that discoms and consumers are not burdened by higher tariff, says a report by rating agency Care.

The Central Electricity Regulatory Commission (CERC) has directed the states to pay a compensation of Rs 329.45 crore to Tata Power and Rs 829 crore to Adani Power for a period from April 1, 2012 to March 31, 2013 for their past losses arising out of higher coal imports.

The CERC has also allowed a gross compensatory tariff of Rs 0.53 per unit for Tata Power, which supplies power to Gujarat, Haryana, Maharashtra, Punjab and Rajasthan, while a provisional gross compensatory tariff of Rs 0.85 per unit for Gujarat and Rs 0.36 for Haryana for Adani Power.

The report further said, "These tariffs still remain within the range of 25-50% of merit order dispatch for all the discoms. Thus, discoms stand to gain even after compensatory tariff hikes as most of recent Case-1 and Case-2 bids are being clinched at higher tariffs Rs 4.5-5 per unit."

Gujarat currently draws 1,805 mw from Tata Power and 1,000 mw from Adani Power, while Haryana gets 380 mw and 1,424 mw, respectively, from both the power producers.

The average increase in tariff for Gujarat discom will be 2.1%, while for Haryana it will be a mere 0.2%, the ratings agency said.

On the other hand, for Maharashtra (760 m), Punjab (475 mw) and Rajasthan (380 mw), the tariffs will increase by 0.3%, 1.6% and 0.6%, respectively.

"The orders have also built a consensus among the stakeholders for providing relief to developers against a sharp rise in Indonesian coal prices through a mechanism of compensatory tariff, which is outside the purview of PPA. The hike, therefore, allows near complete recovery of fuel cost and hence eliminates fuel risk," Care said.

It also noted through the judgement, Cerc has managed to do a fine balancing act of preserving project viability for developers without disturbing sanctity of PPA and creating a mechanism for optimising discom power purchase costs, thereby reducing tariff shock to consumers.

"Contrary to popular belief, even after compensatory tariff hike, the project tariffs still remain fairly competitive for discoms with tariffs at Rs 3.03 per unit for Tata UMPP, Rs 2.90 per unit for Adani Power Phase-III (Gujarat PPA) and Rs 3.03 per unit for Adani Power Phase-IV (Haryana PPA)," the ratings agency said.