Financial Daily from THE HINDU group of publications
Tuesday, Jan 13, 2004
Industry & Economy
NTPC, NPC to introduce fixed tariffs
Mumbai , Jan. 12
National Thermal Power Corporation (NTPC) and Nuclear Power Corporation (NPC) have decided to offer power at a fixed tariff in a particular area irrespective of which unit supplies power.
Currently, each generating unit charges a different tariff depending on the age of plant, type of fuel used and transmission costs.
NTPC, for instance, would calculate one uniform fixed cost for all its thermal units by combining costs of all assets across the country, said a senior company official. Similarly, NPC plans to fix the same tariff for all its units in a particular zone consisting two-three States.
The move is considered as a direct fallout of the Electricity Act 2003, which encourages power trading.
The Act has seen State electricity boards (SEBs) demand rationalisation of tariff charged by companies such as NTPC, National Hydro Power Corporation (NHPC) and NPC, that have generation units scattered across the country.
SEBs have questioned the sharp differences in tariff charged by different units of the same company in a State. For instance, the cost of power generated in Nuclear Power Corporation's unit in Tarapur ranges from as low as 95 paise for the oldest plant to as high as 250 paise for the newly-built ones.
According to the merit order dispatch prescribed by electricity regulators, SEBs have to buy power from the cheapest source.
If tariff charged varies from unit to unit, SEBs want to buy power from the cheapest vintage plant.
This could be a dampener for companies investing in new generation units.
According to officials of NTPC and NPC, introducing a pool tariff system would solve this problem.
"Generally, tariff of new plants is higher. As the plant gets older, costs reduce and tariff fall. Averaging out the costs of new and old plants will make us more competitive," Mr S.A. Bohra, Executive Director (Technical) NPC, told Business Line.
Analysts, however, fear that introducing pool tariff could make tariff calculations more opaque. Said a senior analyst: "The new Act demands transparency. Imagine explaining to lay customers the intricacies of pool tariff calculations derived from equations based on averages of fuel costs and unit vintage, etc in their monthly bills."
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