Financial Daily from THE HINDU group of publications
Wednesday, Sep 28, 2005
Industry & Economy
KERC rationalises tariffs
Bangalore , Sept. 27
THE Karnataka State Electricity Regulatory Commission (KERC) has opted for rationalisation of power tariffs instead of the 11 per cent revision proposed by the four State Government-owned distribution companies (DisComs).
The tariff order issued by the State's electricity regulator on Tuesday changed the method of fixing tariffs. The commission has preferred to fix power tariffs on the basis of a 12 per cent return on equity departing from convention. The four distribution companies had fixed tariff on the basis of the prescribed 3 per cent return on net assets in line with convention.
As a result, the average power tariff in Karnataka would come down slightly from Rs 3.62 paise per unit to Rs 3.56. The reduction in the tariff was also facilitated by the improvement in hydel availability, as a result of good monsoons.
The KERC's order said that the hydel inflows would result in a drop in power purchase costs of the distribution companies by Rs 736 crore in September 2005. This would imply a reduction in the revenue deficit of the four companies Bangalore Electricity Supply Company, Hubli Electricity Supply Company, Gulbarga Electricity Supply Company and the Mangalore Electricity Supply Company Ltd.
The regulator has estimated the deficit at Rs 100 crore for the current year. The four DisComs had estimated the revenue gap at Rs 836 crore in their submissions for a tariff hike to the electricity regulator.
However, even for recovery of this small revenue gap, the regulator has introduced a differential tariff for certain designated urban areas. In these areas, the average tariff would be 10 paise higher per unit than those applicable to other areas in the State. In addition, the regulator has also introduced the concept of time of the day metering for certain categories of low- tension commercial and high-tension consumers.
This kind of tariff would imply that the customers would pay high tariffs during peak hours and low tariffs during off-peak hours.
But the regulator has disallowed any of the passing through of Rs 422.77 crore which included increase in fixed charges of power purchases from the liquid fuel generator, Tanir Bavi Power Company, interest on power purchase costs and costs of free lighting and employee bonuses.
The regulator has also tightened the distribution loss allowances. The average allowance permitted for tariff is 26 per cent as against the 28.36 per cent sought by the distribution companies.
Of this, the regulator has fixed a loss of 4.18 per cent for the transmission company, the Karnataka Power Transmission Company Ltd.
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