Electricity to cost more in Maharashtra on coal and gas price hike

State allows all companies to raise power tariffs all across; Maharashtra now joins growing list of States to have allowed higher electricity tariff

With coal and gas prices hitting new highs, the Maharashtra electricity regulator has allowed all companies to raise power tariffs for the entire state. With this, Maharashtra joins a growing list of States which have allowed higher electricity tariff citing the record high fuel prices.

On April 4, Karnataka allowed higher tariff for its customers who will pay an additional 35 paise per unit effective April 1. Telangana raised its tariff by 50 paise per unit after a gap of five year while Andhra Pradesh also raised the power tariff upto Rs 1.57 per unit across six different slabs.

In a circular dated April 5, the Maharashtra Electricity Regulatory Commission said the demand of electricity is increasing and power generating companies are facing shortage of domestic coal. Further, the MERC said, cost of imported coal has also increased many fold since March 2020. “’All these factors have led to increased power purchase expenses of distribution licensees and there is possibility that the surplus maintained so far in the FAC (fuel adjustment charges) stabilisation fund would get exhausted and additional charges would have to be recovered from consumers as per the FAC mechanism,” the MERC said.

In March 2020, the Maharashtra electricity regulator had determined the tariff for customers for five years when Richard Bay coal prices – the global barometer for the fuel -- was hovering at $64-72 a tonne. Since then, the coal prices have gone up by 300 per cent.

The MERC said the fuel adjustment charges payable by each category of consumer will be rounded to nearest 0, 5, 10, and beyond paise per unit. “Thus, if FAC leviable is 1 or 2 paise, then it is rounded to 0 paise and if it is 3 and 4 paise, then it is rounded to 5 paise and likewise,” the MERC said.

Based on rising coal prices, Tata Power, which depends on imported coal to supply power to Mumbai, is likely to raise its electricity tariff by Rs 1.10 a unit while Adani consumers in Mnai are facing a marginal hike of Rs 0.15 to Rs 0.25 a unit, as per industry sources. Both companies will have to apply to MERC for revised tariff for approval.

When contacted, an Adani Electricity spokesperson said the company has ensured long term planning with an objective to provide tariff visibility to its consumers. “Our tariff shall remain most competitive with FAC impact on our consumers being mitigated through 100 per cent domestic coal supply and power supply from renewable energy sources," the Adani Electricity spokesperson said.

A Tata Power official said the MERC directives will be followed, and there will be no FAC in the near future. “We are completely prepared to provide 24*7 power to our customers as we obtain power from a variety of (pooled) energy sources that help us keep our tariffs low. As on date we have one of the lowest tariff rates in Mumbai. The current situation is transient in nature, and we will manage it in the best interests of our customers," the Tata Power spokesperson said.

Rating firm Fitch warned that rising electricity prices will affect the already-weak financial profiles of distribution companies in India which have not been able to pass on the increased costs to customers on a timely basis. “This, in turn, could lead to further build-up of payment delays by distribution companies to power generators, diluting the potential effects from recent court rulings in favour of the generation companies,” Fitch said today.