Discoms said they are already under a financial strain and the actual cost of power procured by them was significantly higher than that factored in by the regulator, DERC, in the tariff order. This was due to the higher tariff charged by NTPC, DVC and other stations as well as higher inter- and intra-state transmission charges. "Power purchase and transmission charges cannot be controlled or predicted," said an official.
Discoms expect the new tariff to be announced within a month as the 120-day period from when they submitted their average revenue requirement (ARR) petitions to DERC is due to lapse soon. The Electricity Act recommends that regulators announce new tariff within this period, but there have been cases when tariff has been announced beyond this time frame.
Discoms backed their demand for power purchase adjustment with a direction from the Appellate Tribunal of Electricity. On November 11, 2011, the tribunal had asked all state regulatory commissions to implement power purchase adjustment formulas instead of just the variable (fuel) cost for distribution licensees. While the BSES discoms have asked for implementation of the formula on a monthly basis, Tata Delhi power wants it to be done on a quarterly basis.
From February this year, discoms were allowed fuel cost adjustment, in which variations in fuel cost in the international market would be passed on to the consumers every three months.
The power companies, however, said this was not enough to make up for their losses as this formula was limited to certain generation stations and plants. "We receive all our power supply through long-term power purchases or bilateral purchases. If the fixed cost (capital) goes up, the generation company can pass it on to the discom according to a CERC order. Discoms, meanwhile, can only pass on variable (fuel) cost of select generating stations to consumers," said a BSES official.
Power purchase adjustment is already applicable in Maharashtra, MP, Gujarat, Haryana, Bihar, Jharkhand, Tripura and West Bengal.
"Apart from the APTEL judgment, even the Shunglu Committee recommends recovery of variation in power purchase cost on a regular basis to prevent discoms' finances from taking a hit. This will also insulate consumers from being burdened by future interest. A separate recovery of power purchase variation should be allowed immediately on a monthly basis," said a BSES official.
Power sector officials said it was unlikely that the power purchase adjustment formula will not be implemented by DERC as it was also an appellate direction.