Tata Power seeks regulator nod to raise tariffs and offset fuel cost surge

A spike in coal prices has increased cost of generation

Tata Power has requested the Maharashtra power sector regulator, the Maharashtra Electricity Regulatory Commission (MERC) to relax the ceiling on the fuel-adjustment charges so as to recover the electricity purchase cost.

If MERC agrees, the electricity charges for Tata Power's Mumbai customers will shoot up substantially.

Under the current regulations, Fuel Adjustment Charges (FAC) allow an electricity distribution company to recover any variation in fuel or power purchase costs through monthly electricity bills.

To ensure that a consumer does not face a tariff shock, the recovery of FAC is currently limited to 20 per cent of the existing tariff.

Maharashtra government officials say at the prevailing fuel prices, Tata Power's procurement cost from Trombay thermal power plants is about Rs 10 per kWh, as the firm's plants use foreign coal to generate power. Coal prices have shot up substantially in 2022, forcing the company to seek to an increase in tariff. 

As of now, the regulator's approved power procurement cost from Trombay power generation station is Rs 4.50 per kWh.

To beat the cost of rising coal prices, companies are buying renewable power sources.

Tata Power, which is investing Rs 77,000 crore in the next five years in renewable piers,  has meanwhile sought an extension of its power purchase agreement to buy electricity from Trombay power generation unit till 2030.

In view of the current ceiling  on the FAC, TPC is currently recovering an average Rs 1.20 per unit. The balance is to be recovered through the mid term tariff revision, effective April next year.

If the MERC accedes to Tata Power's request to remove the 20 per cent ceiling on FAC rates, then the company would be able to fully offset its rising fuel costs with immediate effect.

When contacted, a Tata Power spokesperson said the company has requested the  MERC to relax the FAC ceiling limit to recover the power purchase cost for a specified period of time which will enable it to  recover the power purchase cost and reduce impact on future tariff in its MTR petition.

Rising Tariff

• Rising coal prices raises cost of electricity production
• Tata Power seeks to pass on rising costs to customers
• TPL Trombay plant uses imported coal to produce electricity
• MERC to take a call on TPL request