The implementation of fuel surcharges has been strongly advocated by the Union Government as a measure to alleviate the financial predicament of DISCOMs. In this context, the report studies the various processes, methodologies, and practices across states to determine, levy, and recover fuel surcharges.
Fuel surcharges which are typically levied on a monthly basis and revised every quarter enable timely recovery of costs incurred over and above approved tariffs. Therefore, they ease the working capital woes of the DISCOM. This, in turn, also reduces the burden of carrying cost on consumers.
As the impact on consumers can be significant, any process for its determination and levy should ensure transparency, accountability, and public participation. Considering this, the report covers developments in Assam, Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Uttar Pradesh and West Bengal.
This report highlights common trends and draws lessons for a national framework for implementation of fuel surcharges. Such a framework can ensure timely recovery of prudent costs for DISCOMs while being acceptable to consumers.
On 6th October 2017, the Maharashtra Electricity Regulatory Commission (MERC) vide its order in case no 135 of 2017 allowed the Maharashtra State Electricity Distribution Company Ltd (MSEDCL) to procure around 1000 MW of short-term power at higher cost than the ceiling rate of Rs. 4 per unit that the commission had set for such procurement about a year ago. The reason for this was that MSEDCL claimed that around 6600 MW of its contracted capacity was unavailable due to coal shortage. As a result of this, MSEDCL was also forced to undertake distress load shedding in the state. Out of MSEDCL’s total contracted capacity of 33,496 MW, more than one-third belongs to Maharashtra State Power Generation Company Ltd (MSPGCL) and more than 60% of MSPGCL’s coal based capacity was unavailable during this period. It is important to note that the claims regarding coal shortage made by MSPGCL are contrary to the public statements made by the Ministry of Coal regarding coal availability and the data published by Coal India Ltd (CIL) regarding coal production and supply. Hence, it becomes important to evaluate whether the coal shortage claimed by MSPGCL and some other generators in the state could have been avoided by better planning.
Therefore, in order to bring in more clarity regarding coal procurement and generation planning processes, Prayas (Energy Group) has filed a petition before the MERC seeking a thorough analysis and examination of the reasons leading to sudden fall in availability of MSEDCL’s contracted capacity during September 2017. Prayas has demanded that the MERC should undertake such analysis based on data such as actual indents issued by MSPGCL to the concerned coal companies for coal requisition, coal supplied by CIL against such indents, and the details regarding how MSPGCL is utilising the coal supply contracted for its capacity (4522 MW) that is under planned economic and/or reserve shut down.
Prayas has submitted that the crisis like situation that emerged in September 2017 should be used as an opportunity to thoroughly evlauate generation planning and coal procurement processes in the state. Based on this analysis and to avoid such issues in future, the Commission should consider issuing specific process directions to the concerned companies. The petition is yet to be listed for hearing before the Commission.
Maharashtra State Power Generation Company Limited (MSPGCL) has filed a petition for capital cost and tariff determination of Koradi Units # 8, 9, & 10, Chandrapur Uinits # 8 & 9 and Parli Unit-8. The petition along with copy of the public notice can be downloaded from here. A public hearing in this regard was conducted by the Maharashtra Electricity Regulatory Commission (MERC) on 26th October 2017. Prayas participated in the hearing and made a submission which is attached below.
Prayas (Energy Group) convened a two day experience sharing workshop involving more than 40 civil society actors from 14 states. Decades after the reform process the sector continues to be a in a state of flux with several technological and structural changes adding to the complexity, challenges and uncertainty. Addressing this emerging scenario requires agile, forward looking and innovative approaches by all stakeholders including DISCOMs, Regulatory Commissions and Consumers. In this context, the objective of the workshop was to improve the understanding and engagement of civil society groups in the state electricity sectors through experience sharing.
Through state-level presentations and discussions on key issues such as power procurement, supply and service quality, rural electrification, regulatory governance and ensuring effective consumer participation the participants deliberated key aspects of the emerging scenario and discussed approaches for a way forward.
During the proceedings of the workshop each participant gained more ideas for continuing engagement with the sector in their own areas of work with an informal network for support.
This workshop is expected to be a first step of such interactions, and more such events will be organised over a period of time.
The participants also shared notes and presentations before and during the event. The notes and presentations cover issues in the states of Andhra Pradesh, Bihar, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Telangana, Tamil Nadu, Uttar Pradesh and West Bengal.
A brief context setting presentation by Prayas (Energy Group), report on the proceedings at the workshop (along with a list of participants) and the notes and presentations shared by participants on state level issues are available here.
On September 25, 2017, the Prime Minister announced 'Saubhagya' a new programme to provide connections to all households by December 2018. While welcoming this initiative, Prayas has written this short article to emphasise that electrification challenge today is beyond giving connections. This article appeared in The Wire on September 27, 2017.
The Ministry of Power on the 24th of August 2017 released a consultation paper to discuss issues pertaining to open access. This is a welcome initiative and provides a framework to all actors for a way forward to address issues with sales migration. In this context, Prayas (Energy Group) submitted comments and suggestions to the Ministry. Some comments and suggestions include:
Please find below Ministry of Power's consultation paper and Prayas (Energy Group)'s comments on the same.
NITI Aayog published a Draft National Energy Policy in June 2017 and invited comments. Following are the comments submitted by PEG for the same.
The Government of India announced a new policy called SHAKTI to allocate coal to power sector consumers in May 2017. This article analysing SHAKTI and its impact on the power and coal sectors was published in Business Standard of 25th June 2017. It concludes that, while the policy announcement will bring in short-term relief, it is unlikely to contribute to the long-term goals of the sector which requires efficient thermal generation, competitive markets and flexible contracts. Instead, it could fragment coal and power generation along public and private sector lines, with consumers having to bear the costs of the resultant inefficiencies.
The MERC in its Orders in Case Nos. 103 of 2010, 71 of 2011 and 78 of 2013 had approved 21 upcoming projects with installed capacity of 11320 MW. Out of these, Projects of 2000 MW capacity are operational and 3230 MW capacity Projects have recently achieved COD.
In MYT Order dated 30 August, 2016 in Case No. 46 of 2016 the Commission had directed MSPGCL to review the financial viability of those Generation Projects which are at early stages of planning considering the alternative sources and modalities that may be available to MSEDCL and its demand-supply position, the proposed retirement plan of the old Units and macro-level developments which could have adverse financial implications before pursuing them further.
In view of the above, the Commission has initiated a suo moto proceeding on the determination of Capital Cost and Final Tariff for New Units and cancellation of certain other upcoming Units and their consequent removal from the PPA’s.
In this regard the first hearing was conducted on 20th April 2017. The submission made by Prayas in this context is attached below.
On 19th April 2017 Prayas made a presentation to the energy sector team of NITI Aayog on the challenges and options for reforms in electricity distribution sector.
The presentation can be downloaded using the link below.