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KERC orders Jindal to reduce base tariff — KPTCL likely to save Rs 25 cr per annum

Our Bureau

The regulator's tariff order will now mean that the annual billing would come down to around Rs 163 crore. Based on the negotiated tariff, the original billing for the year would have been in the region of Rs 188 crore.

BANGALORE, July 11

THE Karnataka Power Transmission Corporation Ltd (KPTCL) is expected to save at least Rs 25 crore per annum in power purchase costs from the independent power producer, Jindal Thermal Power Company Ltd.

This follows the order of the State Electricity Regulatory Commission asking JTPCL to reduce tariffs to a base of Rs 2.36 per unit. As per the power purchase agreement signed in October 2000 with KPTCL, the base tariff had been fixed at Rs 2.60 a unit for a purchase of 657 million units per year. But for purchases above this level, the base tariff has been fixed at Rs 2.20 a unit. This PPA is valid till the year 2005.

JTPCL operates a 260 MW power plant in the Bellary district in the vicinity of its steel plant. The power plant uses a mixture of both coal and corex, a by-product from the steel plant. The regulator's tariff order will now mean that the annual billing would come down to around Rs 163 crore. Based on the negotiated tariff, the original billing for the year would have been in the region of Rs 188 crore.

JTPCL's Managing Director, Mr S.S. Rao, when contacted, refused to comment. Asked whether the company would appeal against the regulator's order, he replied, " I don't know."

But the reduction in the tariff is expected to have positive impact on KPTCL, which is going through a financial restructuring plan. This was because the tariff order changes the base itself. Sources said that KPTCL would make adjustments on future billings as the base had been reduced. This implies that KPTCL would be making recoveries of the excess payments in future billings. Further, the order prescribes a tariff escalation ceiling of 2.5 per cent. This implies that this year, the power tariff according to the regulator's order will not exceed Rs 2.48 paise a unit, instead of Rs 2.87 paise a unit.

The original tariff was single part. The regulator had sought details on the methodology adopted for tariff fixation. However, neither KPTCL nor JTPCL was able to provide details. However, a subsequent study by CRISIL had indicated that the tariff was on the high side, especially considering the fact that JTPCL's capacity was originally earmarked for the steel plant and fixed costs would have to be shared.

Besides, the single part adopted by JTPCL also did not pass on the benefit of fixed cost recovery to the tariff. The regulator, however, has opted for fixing the base tariff on the same lines as the norms adopted by the Central Electricity Authority. Accordingly, the regulator has ruled that KPTCL can be charged only part of the fixed cost. Moreover, the regulator has also indicated that for purchases in excess of 657 mu, the tariff would be Rs 1.88 a unit.

But KPTCL has already been drawing more than the its fully quota of power from JTPCL. On July 11, the utility has drawn close to 2.3 million units, or equivalent to equivalent to 77 per cent of the plant load factor of the earmarked capacity of 130 MW. This heavy drawal from this plant is being done in view of the continued poor inflows into the hydel reservoirs, particularly Sharavathy Valley. Accordingly, the tariff order has allowed KPTCL to purchase larger quantities of power from the IPP to meet the shortfall. And this appears to be another possible method of adjusting the excess payments made.

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