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Power sector continues to face challenges which include falling thermal plant load factors (PLFs), rising subsidy for state owned distribution utilities & uncertainty over resolution of tariff compensation for the affected private sector independent power producers (IPPs). ICRA in its latest report said thermal PLFs at an all India level have declined to 65.6% during FY14 from 69.9% in FY13, primarily due to backing down of generation units due to low demand from distribution utilities as well as a fall in generation from gas based power plants following stoppage of natural gas availability from KG basin of RIL since March 2013. For gas based power plants, PLF level has declined to 24.9% for FY14 from that of 40.3% in FY13, which itself was significantly lower than the 66.2% observed in FY11.
In case of coal based stations too, PLF levels varied widely and showed a mixed trend across generating stations driven by the cost-competitiveness of power generated, extent of fuel availability and availability of power purchase agreements (PPA), which allows the pass-through of cost in consent with distribution utility. For any sustainable improvement in PLF levels, demand recovery from the industrial consumers & more importantly, improvement in the financial position of state utilities remain critical. Also, on all India basis, the cost coverage ratio for distribution utilities still remain below 0.9 times.
Further, ICRA in its report observed that there have been delays in many states for issuance of tariff orders despite the satisfactory progress in filing of tariff petitions for FY 2015. While tariff petition filing by the distribution utilities for FY 2014-15 have been done by the distribution utilities in most of the states, state electricity regulatory commissions (SERCs) in 16 out of 29 states have issued tariff orders for FY 2014-15 so far. On all India basis, subsidy dependence for the state owned distribution utilities for FY 2014-15 is estimated in the range of Rs 72,000 crrore, which is estimated to have increased at CAGR rate of 16% since FY 2010.
According to ICRA, increasing constraints are being observed for HT consumers who intend to avail open access, as seen recently from disallowance of permission by state utilities in Maharashtra & Gujarat and invocation of Section 11 of the Electricity Act, 2003 by State Government in Karnataka. This coupled with the upward pressure on open access charges (as seen from a sharp rise in cross subsidy surcharge across some of the states as well as levy of additional surcharge as allowed recently by SERCs in few states such as Haryana & Gujarat) remain key challenges for implementation of open access. Thus with increased constraints in the open access, generation capacity having merchant/short term PPAs which require open access consent would be adversely affected.
