Attention Mumbaikars! High possibility of tariff hike by power distribution companies, say experts

While everyone is talking about the coal shortage and its adverse effect on power plants; one vital aspect that is behind the curtains is the possibility of a tariff hike. The coal shortage - one of the reasons is the ongoing Russia-Ukraine war - has increased the cost of procuring coal and other raw materials. Now the power companies are facing the heat who are hinting at a hike in electricity tariffs in the coming days for which permissions from necessary bodies will also be sought.

According to power experts, there is a high possibility that the power distribution companies of Adani Electricity Mumbai Limited (AEML), Tata Power Corporation (TPC) and Brihanmumbai Electrical Supply and Transport (BEST) would rally behind a tariff hike owing to the coal shortage and expensive procurement. If sources are to be believed then the hike proposed by the power companies could be anywhere between 25-50 paise per unit.

However not that such a hike will take place immediately. The power distribution companies will have to make a detailed presentation to the quasi-judicial body of the Maharashtra Electricity Regulatory Commission (MERC) citing the reasons for the hike.

"We will also demand a public hearing," said power expert Ashok Pendse.

Coal-black diamond

Since the war began, the supply of oil, gas, coal and many products used as raw materials are apparently getting expensive. We are already experiencing a hike in fuel costs namely petrol, diesel and CNG over the past few days now.

During Covid induced lockdown, when the economy had taken a hit, people were losing jobs and also saw pay cuts; in a bid to ensure that there is no adverse hike in electricity bills the power companies were asked to create a 'Fuel Adjustment Charge (FAC) Fund'. Here, according to power industry sources, each electric consumer was paying around 18-20 paise per unit or so in fuel charges, which were adjusted in electric bills. If there was an increase in fuel prices then power companies had to bear it. In absolute amount, the Fund kept a lump sum of more than Rs 25-30 crore though the power distribution companies didn't divulge the exact amount that they collected in this FAC Fund.

"All through lockdown we managed to handle the fuel cost and maintain this fund. However, for the past few days, there has been a spurt in the prices of coal and this fund is running negative. We will be forced to recover the hike in coal prices which is used in power plants," said an official from a power distribution company.

When Free Press Journal asked AEML - which distributes power to 30-lakh odd consumers in the suburbs - they agreed that they are seeing depletion in FAC Fund. Sources in the power industry said that AEML, which is dependent majorly on domestic coal for its Dahanu Power Plant, could seek a hike of 25-30 paise per unit. The probable hike sought by TPC could be much higher which generates electricity at Trombay through imported coal and oil. Both the power distributors claimed that they also produce Renewable Energy which contributes to the power supply.

An Adani Electricity Mumbai Ltd (AEML) Spokesperson said, “Adani Electricity has taken concrete steps to provide long-term tariff visibility to our consumers. 100% domestic coal Supply to Dahanu TPP ensures that consumers are not impacted by the alarming increase in imported coal prices. Further, the Commencement of power supply under the 700 MW Renewable Energy PPA has significantly diminished our exposure to merchant power prices. AEML is also in the process to procure an additional 1000 MW of power with the largest portion coming from Renewable Energy sources. Consumers can expect AEML’s tariff structure to be the most economical and sustainable choice”.

On the other hand when Free Press Journal asked Tata Power about the impact on procuring coal and the hike in tariff; they stated that Tata Power sources most of the coal from Indonesia through a long-term fuel supply agreement linked to the local indexation.

"Due to this reason, coal sourcing cost is very much optimised. Apart from this, the supply to Mumbai consumers is a mix of the 180 MW gas-based price which is linked to APM gas, and 440 MW of hydropower which brings down the pool cost of power. In addition to this, Tata Power sources nearly 350 MW of renewable power. The cost of power supply is optimised to avoid any tariff rise on account of FAC to consumers," said a spokesperson for Tata Power which didn't mention anything on FAC Fund and probable paise hike in tariffs.