Aperc fixes high cross-subsidy surcharge

Makes migration difficult for high-end consumers of Discoms

Making migration of high-end consumers of the state-owned Discoms under open access regime a difficult proposition, the Andhra Pradesh Electricity Regulatory Commission (Aperc) has fixed a relatively high cross subsidy surcharge ranging up to Rs 2.79 paise per unit.

The cross-subsidy surcharge is leviable on third party sales under the provisions of Section 42 of the Electricity Act 2003 in open access regime, which comes into effect from this month-end. Cross-subsidy surcharge is a compensatory mechanism for the loss of cross-subsidy paid by high-end consumers like industry to domestic and rural sectors in the form of higher tariff.

This cross-subsidy surcharge is payable by the users of open access for supply of power to consumers. The net result is that the higher surcharge would make it difficult for any private player to offer lower tariff to consumers as compared to the tariff collected by Discoms.

Announcing a package of differential surcharge rates for different categories of consumers and also for each of the four Discoms, the regulatory commission has strongly justified its decision maintaining that it followed only the embedded cost methodology, which is followed in tariff-setting.

Aperc's package has four variants, each applicable to a particular Discom with some modification in surcharge range under each category.

HT II-non industrial category and LT II-non-domestic category consumers are served with a maximum level of cross-subsidy surcharge by the commission followed by HT I(A) Industry category.

According to the Aperc orders, industrial consumers under HT1(A) category, who draw power at 132 kv will have to pay Rs 1.49 paise on each unit bought from parties other than the Discoms towards cross-subsidy surcharge in Central Power Distribution Company Limited (CPDCL) jurisdiction, Rs 2.07 in Eastern Power Distribution Company Limited (EPDCL) jurisdiction, Rs 1.29 in Northern Power Distribution Company Limited (NPDCL) jurisdiction, Rs 1.50 in Southern Power Distribution Company Limited (SPDCL) jurisdiction, depending on their location. The same category consumers who draw power at 11 kv will have to shell out more "� Rs 1.62, Rs 2.06, Rs 1.78, and Rs 1.48 respectively.

Similarly HT II category (other than industrial) consumers will have to pay a whopping Rs 2.61, Rs 2.79, Rs 2.62 and Rs 2.42 respectively on each unit if they chose their own sellers of power other than Discoms as allowed under open access provisions of the Act.

Only the HT VI category (residential colonies) and LT VII category (general purpose) are allowed to buy power from open access users at a low cross-subsidy surcharge ranging from Rs 0.11 to Rs 0.51 per unit.

According to observers, the Aperc's move is almost along the lines of Rajasthan's regulator, which is said to have determined the cross-subsidy surcharge to take care of the 90 per cent of the cross-subsidy embedded in the existing tariff rates in that state.

"Cross-subsidy surcharge package announced by the commission will allow only small players such as small hydro power projects, whose generation cost is much lower compared to any other conventional, or the non-conventional power producers who can offer competitive prices despite high surcharge levels," an industry expert told Business Standard.

The other consequence could be that, all those high-end consumers who want to go in for cheaper options may take a nominal shareholding in captive power units, which are exempted from the cross-subsidy surcharge by the Electricity Act-2003.

According to estimates, over 2,200 million units (mu) of power is being utilised by various industries at present and an equal quantity of power is being traded under third party sale category even before the onset of open access system in the state.

The state regulator did not even spare the Indian Railways, which has been at loggerheads with the APTransco for the past few years for charging high tariff on railway traction.

Railways has to pay Rs 1.40 on each unit if it tries to purchase power from others to CPDCL if the purchase is handled in the jurisdiction of CPDCL. Cross-subsidy surcharge of Rs 1.68 is fixed under EPDCL, Rs 1.17 under NPDCL and Rs 1.31 under SPDCL limits for the railway traction.