Different strokes

Written by Pallavi Ail | Updated: Mar 5 2014, 09:12am hrs
The Central Electricity Regulatory Commission (CERC) last month, issued long-awaited rulings and regulations, which would translate into higher tariffs for distribution companies and reduced incentives for generation companies.

The CERC raised tariffs for Tata Powers Coastal Gujarat Power Ltd and Adani Powers Mundra Thermal Power Project, which had been badly hit by the Indonesian governments decision to align its domestic coal prices with international benchmarked rates.

Tata Power said the regulatory ruling will reduce annual losses at Coastal Gujarat Powerits subsidiary that operates the Mundra ultra mega power projectby R1,100 crore. The regulator allowed past recovery of losses and a gross compensatory tariff to Coastal Gujarat Power.

Tata Power will get a net tariff increase of about R0.40 per kWh along with a lump sum compensation of R 3.3 billion towards losses up to March 2013.

For Adani Power, the regulator allowed a gross compensatory tariff of R0.85 per kWh against the Gujarat power purchase agreement and R0.36 per kWh against Haryanas agreement, along with recovery of past losses of about R8.3 billion.

Analysts said the order addressed Adani Powers biggest concern of its ability to service its debt. The compensatory tariff, along with the recovery of past losses, will allow the Mundra project to service its debt and reduce the burden on the parent balance sheet.

Power tariff in the five states using power sourced from Coastal Gujarat Power and Adanis Mundra project will have to shell out an additional 10 paise per unit, according to an Icra estimate.

Credit rating agency Icra estimated the average consumer tariff rate charged by the utilities in the range of 0.4% to 1.8% or R0.30 to R0.10 per unit for supply from Coastal Gujarat Power while the average power tariff for utilities receiving power from Adani Power will witness a rise of about 1.7% or R0.70 to R0.10 per unit in Gujarat and Haryana.

The CERC also approved tariff regulations for the next control period spanning from FY15 to FY19. Experts say the new tariffs will benefit distribution utilities and consumers and are negative for generation companies and marginally negative for transmission licensees.

The regulator tightened the operating norms for existing and upcoming thermal power projects, which could result in a reduction in tariff by about R0.03 to R0.04 paisa per unit in case of energy charges applicable for central sector utilities, according to Icra.

Plant load factor-linked incentives would be a negative for generation companies as plants may operate at PLFs lower than the availability because of reasons beyond their control. Icra estimated a tariff reduction for thermal plants by about R0.06 paisa per unit due to this amended rule.

In a separate order on February 22, the CERC denied relief to Reliance Power to compensate for higher coal mining costs at its Sasan UMPP, caused by an increase in diesel prices. The company had estimated an impact of about R133 crore annually for the approved peak coal production levels, as on March 1, 2013.

The regulator denied the relief on the grounds that the company knew of the higher diesel prices at the submission of bids in July 2007. The regulator refused to grant the companys claim to treat the mining of coal as an integrated activity with power generation, saying, the petitioner can use the mined coal, for other businesses, independent of generation and sale of electricity.