CERC order to put Gujarat discoms' profits under pressure - Business Standard

The recent order of Central Electricity Regulatory Commission (CERC) allowing 'compensatory tariff' for Adani Power Limited's  imported-coal-based power project at Mundra in Gujarat is likely to put pressure on the profits of four highly rated and profit making distribution companies (discoms), there by prompting them to revise power tariffs for consumers. It may be mentioned here that recently all the four discoms from Gujarat have bagged the highest credit rating (A+) out of 39 utilities taken up for financial evaluation at the behest of the Union power ministry. These discoms include Uttar Gujarat Vij Company Ltd (UGVCL), Madhya Gujarat Vij Company Ltd (MGVCL), Paschim Gujarat Vij Company Ltd (PGVCL) and Dakshin Gujarat Vij Company Ltd. All of them have registered a combined profit of roughly around Rs 140 crore for the year 2011-12. 'Certainly the order will affect the financial performance of these distribution companies. The consumers will also get affected as the discoms may pass on the burden to them,' said Gujarat Urja Vikas Nigam Ltd (GUVNL) officials, who did not want to be named. GUVNL is an umbrella organization of all the four discoms in Gujarat. According to insiders, a compensatory tariff in addition to the one in the PPA would increase the cost of purchase of power. "The discoms will not absorb this increase in cost. It will hurt the profits, so we will seek revision in tariffs under the provisions of fuel price adjustment system. Ultimately the consumers will have to bear the burden of higher tariff," said a top official of DGVCL, which has posted highest profit among all four discoms. GUVNL officials said that the exact impact on the discoms, however, would become clear only after the details of the compensation are worked out. Agreeing to DGVCL, another top official of PGVCL, which supplies power in Saurashtra and Kutch region, said, 'We are waiting for the final details regarding the tariff from the committee. The compensation as ordered by CERC is going to affect our revenues. But since the GUVNL is the parent body of discoms, the policy decision will be taken by them (GUVNL).' Power consumers, on the other side, are set to face a double blow. As per the sources, the discoms have already appealed to Gujarat Electricity Regulatory Commission (GERC) for a revision in power tariff to the tune of 48 paise per unit for the fiscal 2013-14 as an annual practice. Given the latest CERC order, if the discoms decide to pass the burden of compensatory tariff on consumers, the power bills will increase further. The state power regulator has already completed the hearing on power tariff hike pleas of these discoms and the order is likely to be pronounced in next 10 days. CERC on Wednesday ordered to set up a committee to work out the exact quantum of "compensation" over the current tariff for the Adani Power's 4,620-megawatt (Mw) at Mundra. The order came following a petition filed by Adani Power seeking a revision of tariff due to changes in the Indonesian policies and sharp rise in imported coal prices. The petitioner needs to be compensated over and above the tariff discovered through competitive bidding, the order stated. "The compensation package, to be called compensatory tariff, could be variable in nature commensurate with the hardship the petitioner is suffering on account of unforeseen events leading to increased coal price which has affected its performance under the Power Purchase Agreement (PPA)," CERC said in its 94-page order. As per the provisional figures tabled in the state assembly recently, APL through its Mundra unit-1 and unit-2 has supplied 6710 million units and 3324 million units at the rate of Rs 2.90 per unit and Rs 2.35 unit respectively during the year 2012. via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNFcHobhiXBAcHqTHDO5p2EaAjYh7w&url=http://www.business-standard.com/article/companies/cerc-order-to-put-gujarat-discoms-profits-under-pressure-113040400419_1.html

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