Here’s what jacks-up power bill 40%

By: | Published: June 22, 2016 6:32 AM

Delhi’s discoms, for instance, could have reduced their fuel costs by as much as 40% if their supplier NTPC used higher grades of coal in its thermal power stations.

clean energy, NTPC, UDAY
Delhi’s discoms, for instance, could have reduced their fuel costs by as much as 40% if their supplier NTPC used higher grades of coal in its thermal power stations. (Reuters)

While power tariff increases have always been a difficult choice, substandard fuel is escalating distribution companies’ (discoms) cost of procurement in many parts of the country by up to a quarter.

Delhi’s discoms, for instance, could have reduced their fuel costs by as much as 40% if their supplier NTPC used higher grades of coal in its thermal power stations.

Variable costs — largely the expenses on fuel — are 30-60% of the Delhi discoms’ purchasing cost of power from NTPC, with its Badarpur unit incurring the highest variable cost. Of course, the fact that NTPC supplies power to Delhi from over-25-year-old, fully depreciated plants adds to the problem. The discoms have petitioned the Union power ministry and the central power regulator CERC, suggesting that they be allowed to discontinue the power purchase agreements (PPAs) with these old plants.

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On its part, NTPC reckons that the issue needs to resolved by CIL, which, despite achieving substantial increase in coal production, is yet to address the issue of low-grade fuel supplies satisfactorily.

“During July-September period, there was slippage (of coal quality) by up to 5 grades. As such NTPC is paying in advance as per the billed grade. The reconciliation and adjustment for the actual grade received is not taking place in line with fuel supply agreement (FSA), on account of dispute raised by CIL subsidiaries,” NTPC wrote to the power ministry late last year, seeking its intervention to resolve the issue.

While even NTPC officials and private power developers admit that the quality of coal delivered at their plants by CIL has improved last fiscal, they say “grade slippages” still occur. The quality improved a bit because of the coal ministry’s monitoring of the situation; however, sources said the proposed third-party sampling system is still to be implemented diligently.

Developers have faced problems in implementing third-party sampling thanks to Coal India’s reluctance to accept the results and grade variation, according to a source. According to NTPC sources, the generator’s appeal to the power ministry for intervention is in the wake of CIL failing to compensate it for fuel quality slippage.

Coal India, however, shrugs off the charges, saying that the third-party sampling had not been implemented so far as a final agreement on the methodology has just been reached between the miner and thermal power companies. “Third-party sampling will come into effect from July 1 and the results of grade slippage, if any, would be out by August 10. This will determine the credit-debit system, whereby gencos will be compensated if quality of coal is lower and vice versa,” SN Prasad, director, marketing of CIL, told FE.

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