Delhi discoms pitch for tariff hike, say revenue gap ‘huge’

After the Delhi electricity regulator failed to hike energy charges for the third year in sucession, distribution companies (discoms) in the national capital on Friday strongly pitched for tariff revision, saying most other Indian states have raised power rates in the last few years.

As part of its periodic tariff revision, the Delhi Electricity Regulatory Commission (DERC) on Thursday kept usage charges for consumers unchanged but allowed a hike in the “fixed charge” component of the power tariff — between Rs 5 and Rs 75.

As per DERC’s order, while the “fixed charge” will go up for users with sanctioned load between 3kw and 5kw, there is no change in the “energy charge”, or electricity rates, for all categories.

An industry source here pointed out that while states like Bihar, Madhya Pradesh, Chhattisgarh, Karnataka and Uttarakhand had raised tariffs by 10-20 per cent, Delhi has effected no hikes since 2014.

He said the revenue gap for Delhi’s three discoms has reached over Rs 34,000 crore on account of a “non-cost reflective tariff”.

The last tariff hike in Delhi was in July 2014. The 5 per cent hike prescribed in this tariff order was for the financial year 2014-15.

The source pointed out that since privatisation of distribution in Delhi in 2002, there has been an increase of around 300 per cent in the cost of purchasing power from generators.

On the other hand, the retail tariff has increased by only around 90 per cent, according to the source.

He said that while Delhi’s bulk power rate — Rs 5.4 per unit — is only over 30 per cent higher than the national average of Rs 4.08, the cost of purchasing power from Delhi’s state generation plant is astronomically higher than the country average.

Haryana became the latest to raise rates, with the Haryana Electricity Regulatory Commission (HERC) increasing the power tariff for 2017-18 from July 1.

Stakeholders had conveyed their concerns to the regulator at a pre-revision public hearing here held by DERC, which had earlier invited their suggestions in the matter and their tariff petitions.

According to the industry expert, the primary reason behind Delhi getting expensive power is that Delhi discoms are bound by long-term power purchase agreements (PPAs) that run for 25-35 years. These were signed with electricity generators well before privatisation and before April 1, 2007.

“These PPAs are one-sided and completely in favour of the generators,” he said.

From the perspective of the generators, with electricity demand growth in India not keeping pace with the excess capacity addition and with tariffs falling, producers are facing offtake issues on power that they have not already tied up for sale through long-term PPAs.

JSW Energy Chief Executive Prashant Jain told a news channel recently that while the company had tied up for the offtake of about 65 per cent of its power generation through long-term PPAs, it is facing challenges about disposal of its remaining “untied capacity”.

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