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Madras Chamber of Commerce & Industry and India Energy Forum

Madras Chamber of Commerce & Industry and India Energy Forum. Session on Rationalisation of Electricity Tariff s. Chennai 5 Sep 2014. Anand Madhavan Head – Energy & Urban Infrastructure. Key challenges to financial sustainability.

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Madras Chamber of Commerce & Industry and India Energy Forum

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  1. Madras Chamber of Commerce & Industry andIndia Energy Forum Session on Rationalisation of Electricity Tariffs Chennai 5 Sep 2014 Anand Madhavan Head – Energy & Urban Infrastructure

  2. Key challenges to financial sustainability • Persistent gaps between Average Cost of Supply (ACS) and Average Revenue Realisation (ARR). • Wide band of Cross Subsidies beyond limits stipulated in the National Tariff Policy • High HT tariffs are making Industry (particularly SMEs) vulnerable and render them non-competitive; even as there is continued reluctance to fix / rationalise tariffs in other segments

  3. Trend in ACS Vs ARR gap – Tamil Nadu • Key related provisions of Financial Restructuring Plan (FRP) • Regular redetermination of tariff to cover cost of service OR State Govt to fund the gap • Gradual elimination of gap between ACS and ARR • Operational turnaround by 2015-16

  4. Category wise ARR Vs ACS – Tamil Nadu

  5. Residential Tariffs..1All sub-categories are subsidized • CC I - Consumers who consume from 51 units to 100 units per month • CC II - Consumers who consume from 101 units to 250 units per month • CC III - Consumers who consume 251 units and above per month Average Cost of Service approved by TNERC is 658 paise per kWh for FY 2013-14 CC I CC II CC III

  6. Residential Tariffs..2High consumption category ~ Rs. 1000 crore • Estimated under-recovery from domestic consumers vis-à-vis Avg. Cost to Serve ~ Rs. 6,000 Crore • Subsidy provided by GoTN to the domestic category was Rs 1,888 Crore • Estimated Consumer sub-segment wise underpayment (Rs Crore)

  7. Tariff v/s ACOS (Rs 5.24/kWh) National Tariff Policy – Tariffs within ± 20% of Average Cost of Supply Several categories have tariffs outside the +/- 20% band, actual Source- TANGEDCO Tariff Order dated 20 June 2013

  8. Steep increase in subsidies • Subsidy provided to TANGEDCO was 5.1% of GoTN revenue in FY 2013 • Subsidy > 20% of gross fiscal deficit of GoTN in year 2013 and 2014 (estimated) Rs Cr Rs Cr

  9. Tariff order for 2012-13 estimated an expense of Rs 4.99 / kwH while actual expenses approved later is about Rs 5.58 / kWh Source: Tariff Order for FY 2012-13 dated 30 March 2012

  10. Tariff order for FY 14 estimated an expense of Rs 5.24 / kwH; Actual expenses to be higher Tariff Order for FY 2013-14 dated 20 June 2013 Source: Tariff Order for FY 20123-14 dated 20 June 2013

  11. As a result, TANGEDCO continues to sustain operating losses Annual losses of the utility (Rs Crore)

  12. Bridging gaps in cost recovery central to TN’s Energy security • Align tariffs in line with National Tariff Policy • Bridging ACS-ARR gaps; eliminate phase-out ‘non-merit’ subsidies • Align cross subsidies to a +/- 20% subsidy band • Regular Periodic increases to avoid tariff shocks • Address power procurement and efficiency • Appropriate mix of Case I / Case II and own augmentation • Utility-level Demand Side Management initiatives • Invest in Smart Grids and fix transmission, distribution bottlenecks • Address evacuation bottlenecks • Sharper reduction in AT&C losses • Segregated feeders for Agriculture

  13. Thank You

  14. Disclaimer All information contained in this document has been obtained by IMaCS from public sources and believed to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and IMaCS in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements of opinion, and IMaCS shall not be liable for any losses incurred by users from any use of this document or its contents in any manner. Opinions expressed in this document are not the opinions of our holding company, ICRA Limited (ICRA), and should not be construed as any indication of credit rating or grading of ICRA for any instruments that have been issued or are to be issued by any entity. For any clarifications on this document, please contact: Anand Madhavan Head – Energy and Urban Infrastructure email: anand.m@imacs.in

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