Power tariffs: Regulators delay new orders amid rising discom stress

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Published: June 27, 2019 3:16:04 AM

Only 15 states have issued tariff orders so far and that exclude major power consumers.

power traiff, power supplyOnly 17 states had increased their tariffs for FY19, compared with 22 for FY18.

Despite financial losses of state-owned electricity distribution companies (discoms) rising 44% annually to rs 21,658 crore at the end of FY19, electricity regulators of most major states have either delayed or announced meagre tariff hikes that would exacerbate the discoms’ financial woes in FY20.

As it is, limited or no tariffs hike was proposed by most of the discoms when they filed for tariff revision during the run up to the Lok Sabha elections.

Only 15 states have issued tariff orders so far and that exclude major power consumers such as Uttar Pradesh, Maharashtra, Telangana, Tamil Nadu, Rajasthan and Madhya Pradesh.

Even though the state regulators of Jharkhand, Bihar, Chhattisgarh, Andhra Pradesh, Odisha, Haryana and Gujarat have come up with FY20 orders, they have not raised tariffs, potentially widening the gap between the cost of supply and revenue realised against every unit of electricity (ACS-ARR gap).

The regulators’ failure to enforce adequate tariff hikes — repeatedly flagged as one of the main reasons behind weak discoms — is despite the fact that “regulatory assets” have piled up to around Rs 77,000 crore, as estimated by India Ratings. Regulatory assets are recoverable discom expenses which regulators acknowledge as pass through costs, but are not immediately taken into consideration while calculating electricity tariffs. According to government estimate, discoms lose Rs 22,000-crore revenue annually due to the creation of new regulatory assets.

Only 17 states had increased their tariffs for FY19, compared with 22 for FY18.

As pointed out by Icra, the median tariff hike for discoms at all-India level had reduced from 8% for FY15 to 4% for FY16 and FY17 and further to 3% and 1% for FY18 and FY19, respectively.

The research firm had expected tariff hikes to remain subdued for FY20 as well. As per Electricity Act and orders from the Appellate Tribunal For Electricity, discoms are expected to file tariff petition for forthcoming fiscal year by November and a tariff order should be issued by April 1.

Financially-weak discoms trigger a domino effect in the sector, as they are unable to pay power producers on time, who in turn fail to service their debt. While assuming charge of the power ministry in the new government, RK Singh had acknowledged that the Centre’s plan of ensuring 24×7 power for all warrants commercial viability, and thus, “sustainability of the sector would be the next focus area of the government”.

Also read: Govt invites technical bids for 4,000 MW Deoghar UMPP

As FE reported earlier, under the tariff plan approved by the state’s regulator, Bihar discoms will raise `1,401 crore less than what was demanded by those. The electricity boards of Jharkhand and Chhattisgarh will mobilise `1,211 crore and Rs 1,460 crore less, respectively, via tariffs than what they suggested in the petitions filed with the respective regulators.

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