Tata Power says generation companies are charging 50% more than the NTPC’s rate
Even as the Delhi government has proposed to surrender over 2,000 MW of costly power it buys from NTPC and other central PSUs, the state’s own generation companies (gencos) supply power to the discoms in the capital at even higher rates.
For instance, the cost of power procured by one of the privately-run discoms — Tata Power Delhi Distribution (TPDDL) — from the Delhi government’s gencos is Rs 7.12/unit at present, 50% higher than the price charged by NTPC.
TPDDL procures a little over 10% of its power requirement from the state government’s gencos but pays nearly 20% of its total bill to these plants. Also, due to inefficient operation and unavailability of gas, the cost of power from the Delhi gencos’ plants has increased by 46% over the last two years.
“The Delhi government needs to take steps to close down the inefficient and high cost power plants such as Rajghat, GT, Pragati and one stream of Bawana plant so that unnecessary fixed cost for the same are not paid leading to higher costs being charged by the Delhi gencos, which is ultimately being billed to the consumers of Delhi,” Praveer Sinha, CEO, TPDDL said in a letter to Delhi’s power minister.
After privatisation of power distribution companies in Delhi in 2002, the discoms have been procuring power as per the agreement entered into by their predecessor Delhi Vidyut Board (DVB).
TPDDL argues that it should be allowed to relinquish all the power purchase agreements (PPAs) signed by DVB and sign new and less expensive contracts. The company said that it discovered nearly 20% cheaper power compared to its existing agreements in the recently concluded bid for power procurement of 400 MW.
The company says if it is allowed to procure its entire required capacity from these bidders by relinquishing existing contracts, it can not only liquidate its regulatory assets within three years but also lower tariff by 50 paise per unit with immediate effect.
The current average cost of power for TPDDL from various sources, including NTPC and Delhi government-owned gencos, stand at Rs 4.70/unit at the periphery of the distribution region. In the recent bids, the discom has been offered a tariff of Rs 3.70/unit, Sinha told FE.
“The one rupee difference will allow us to pass on at least 50 paise/unit to consumers through reduction in tariff and the company can use the rest for liquidating regulatory assets (RA) accumulated in a decade,” Sinha said. He added that once the RA has been recovered, the tariff can be further cut down by 50 paise per unit.
Although, TPDDL has a regulatory asset of nearly Rs 5,000 crore, the other two discoms operating in Delhi have a combined RA of nearly Rs 20,000 crore. As per an estimate, the electricity regulator in Delhi would need to hike tariff by 10% every year for 5 years to enable the liquidation of RA.
Adding to the cost of power is the demand made by the pension trust, which was set up in 2002 to cater to the retired DVB personnel, for funding as the trust has run out of money due to mismanagement, TPDDL wrote to the government.
“Consumers of Delhi are being asked to pay through tariff for the pension fund obligation of DVB employees which in reality is the responsibility of the Delhi government,” Sinha said.
He said that while TPDDL was plowing back 80% of the revenue that it earned through consultancy provided to more than half a dozen states to its distribution business in Delhi, the cost operations in the state continued to rise owing to government’s inaction.