Regulator fixes separate tariff for each NCE category

In a major departure from the earlier practice of uniform tariff fixation, the Andhra Pradesh Electricity Regulatory Commission(APERC) today announced a separate tariff structure for purchasing power from each category of non-conventional energy (NCE) from the next financial year. The total exercise is expected to reduce the present purchase cost of NCE power by around Rs 120 crore

In the process, the APERC has considerably reduced the existing tariffs for biomass, bagasse co-generation and mini hydel power purchases. In the current year, the APTransco is estimated to purchase around 1,200 million units (mu) of NCE power which will go up to 1,850 mu, according to the projections made by the power utility.

For the first time, APERC has introduced a two part tariff for biomass and bagasse co-generation power projects on the basis of fixed cost and variable cost as has been in the case of big power projects. While the fixed cost will come down each year, the variable cost goes up each year based on the escalation formula followed by the regulator.

Fixed cost is linked to the year of the commissioning of the plant and it progressively comes down with the age of the plant. The variable cost has been fixed for the next five years with an annual escalation clause based on costs of operation and maintenance and fuel costs. The APERC though has allowed continuation of a five per cent escalation for the projects based on municipal waste.

Taking into consideration that many of the NCE projects in the state were commissioned in 2000-01, which are now in the third year of operation, the unit price for power to be purchased by the APTransco from the biomass power plant would be Rs 2.80 paise against the current uniform rate of Rs 3.48 paise.

Similarly, the price of bagasse-cogeneration power would be Rs 2.65 paise and the price of mini-hydel power would be Rs 2.44 paise. The tariff prescribed for mini-hydel is exclusive of the proposed royalty payable to the government on the usage of water. The average royalty is estimated to be around 39 paise which will be passed on to the consumer.

But as per the tariffs applicable to the plants which are supposed to be in the first year of operation, the new prices would be Rs 2.88 paise for biomass power, Rs 2.74 for the bagasse-based cogeneration power and Rs 2.60 for the mini-hydel power. About 600 mu power is expected to be produced by the new NCE projects from this year onwards.

The APERC has almost kept the present level of tariff with regard to the projects based on municipal waste and also Windfarm projects. The unit price for both the NCE projects would be Rs 3.37 paise per unit in the first year. The regulator has excluded wind farm power tariffs from any escalation for the next five years.

Suryaprakash Rao, secretary of APERC, while addressing a press conference explained that the regulator had arrived at the new tariff figures by adopting a cost-plus approach.

He allayed the concerns of the developers maintaining that the new tariff will not affect the viability of the NCE projects as the commission had gone in to the DPRs (detailed project reports) and project wise cost details before coming to a final conclusion.

"APTransco has proposed the tariff for NCE power based on the uniform tariff whereas the regulator has fixed the tariff taking the true cost of each category of projects into consideration,"Suryaprakash Rao said, explaining the cause for the drastic variation between the two.

This is for the first time that the regulator has issued a separate notification for the NCE power before issuing the main tariff order.

Among the other important features of the APERC order are a fixed cost coverage will now be available up to the threshold levels of PLF (plant load factor) for co-generation, biomass and mini-hydel projects.

The tariff for projects based on industrial waste will be on par with the tariff for biomass-based projects. For projects based on municipal waste and wind, the tariff was arrived at by keeping 1994-95 as the base year when the price was Rs 2.25 per unit. Projects based on municipal waste and wind have an annual escalation clause calculated on a simple rate basis.

These projects would be treated as must-run stations and they will not be subjected to merit-order regime which is in force for the big projects. The control period is five years and the commission will review the tariffs to be applicable from April 2009 onwards.

APTransco has also proposed to purchase 1,070 mu power from biomass projects, 415 mu from bagasse based co-generation plants, 115 mu from mini-hydels, 160 mu from wind power projects and 35 mu from municipal solid waste based projects for the year 2004-05.