CERC ruling on Tata Power to lead to retail tariff hike: ICRA

Written by PTI | Mumbai | Updated: Feb 26 2014, 04:05am hrs
Tata PowerThe Central power regulator's order providing relief for Tata Power's Mundra project will result in retail tariffs. Reuters
The Central power regulator's order providing relief for Tata Power's Mundra project will result in retail tariffs for the five beneficiary states moving up by 3-10 paise per unit, rating firm ICRA said today.

Last week, Central Electricity Regulatory Commission (CERC) allowed higher tariff as well as a compensation of Rs 329.45 crore for the private utility's 4,000-MW project in Gujarat operated by its unit Coastal Gujarat Power Ltd (CGPL).

The watchdog has ruled for a compensatory tariff of Rs 0.524 per kWh for the project from the period beyond April 1, 2013, which has to be borne by Maharashtra, Rajasthan, Gujarat, Haryana and Punjab, the States which are procuring electricity from the imported coal-based plant.

"Implementation of CERC's final order on the compensatory tariff will result in upward movement of retail tariff rate in the five states of Gujarat, Haryana, Punjab, Maharashtra and Rajasthan," the agency said.

As per ICRA, post-order the average consumer tariff rate charged by the utilities in these states is expected to rise in the range of 0.4%-1.8% or 3-10 paisa per unit.

In a separate order, CERC granted nearly Rs 830 crore compensation for Adani Power Ltd's (APL) 4,620 MW Mundra plant. Gujarat has to pay Rs 420.24 crore, while Haryana has to shell out Rs 409.51 crore as compensation from the commissioning date till March 31, 2013, the order said.

"The impact of additional tariff compensation associated for APL and CGPL is projected to be highest for utilities in Gujarat," ICRA said in a report.

According to ICRA, average tariff for the utilities is estimated to increase by average 1.7 per cent or 7-10 paise per unit in Gujarat and Haryana.

Timely tariff revision or implementation of FPPCA (fuel and power purchase cost adjustment) framework remains extremely crucial for the distribution utilities, else it could affect their cash flow position, said ICRA.

"CERC's move is not only positive for APL and CGPL, but also for the generation sector as a whole."

ICRA estimated that other imported coal-based projects would also benefit from the ruling.

Utilities in Haryana have already appealed to Appellate Tribunal of Electricity (ATE) against CERC's April 2013 for allowing compensatory framework, while those in Punjab have opposed tariff compensatory framework.