The Hindu : Transco proposals may hit consumers

Online edition of India's National Newspaper
Saturday, Apr 12, 2003

Southern States

Southern States - Andhra Pradesh

Transco proposals may hit consumers

By M. Malleswara Rao

Hyderabad April 11. The order issued by the AP Electricity Regulatory Commission approving the AP Transco's Load Forecast and Power Procurement plan for the period 2002-07 has serious implications for the consumer.

The approvals given to different Transco proposals are most likely to place a heavy burden on consumers.

Dealing with a plea some time ago, the APERC fixed "reserve margin'' (idle) capacity to be maintained by the Transco against risks such as breakdowns at 14 per cent. The fresh order increased this to 29 per cent, as sought by the utility citing the need to ensure 24-hour supply in the State, Alamatti impact reducing generation at Srisailam-Nagarjunagsaar by 1,000 million units and technical reasons.

As a chain benefit to the Transco but which will be back-breaking to the consumer, the order determined the additional capacity required to meet this situation at 5,182 MW and gave a blanket clearance for setting up plants for that much capacity. Thus, the decks have been cleared for as many as 12 projects and the Commission's nod for their PPAs is only a natural corollary. As against the cleared 5,182 MW capacity, these projects account for 4,272 MW. There is still a gap of 910 MW to be filled. A boon to Transco. The 12 projects are: BPL Ramagundam, Gowthami, Vemagiri Konaseema, Rayalaseema Thermal Power Station expansion, GVK expansion, BSES, Simhadri, Madras Kalpakkam, Talcher, NTPC Ramagundam expansion and NEDCAP units.

The 5,182 MW-capacity approved by the order will take the grid's total beyond 15,000 MW by 2007.

How does the clearance affect the consumers? Going by the Transco's "business plan,'' the order mentions that the grid will achieve seasonal surplus soon and even after selling 6,600 million units to other States as projected, the utility will still be left with a surplus of 8,000 MU. The invariable option will be to back down some stations.

The million-dollar question is whether the Transco will back down private plants. And if private ones are closed, the Transco will have to pay "fixed charges,'' thanks to the "deemed generation concept'' introduced in PPAs. For a surplus of 8,000, the fixed charges payable to the plants works out to Rs 1,000 crores per year. Wherefrom Transco pays this?

The order gives a veiled indication to the consumers about the burden in the offing on account of increase in gas prices following dismantling of the administered price mechanism soon. It asks the Transco to "be prepared'' for such hike. Who will absorb this extra burden? And the burden will very heavy as, most of the 5,182-MW capacity allowed is being covered by gas-based projects. The Tranco stated before the Commission that such burden would be recovered through "fuel surcharge adjustment.''

Critics say the demand for power was earlier allowed at 6.9 per cent earlier but interestingly, it was increased to 7.68 per cent this time without valid reasons.

Citizen groups which participate in Commission's public hearings are not able to digest the fact that the Commission did not include the Srisailam Left Bank project in the Load Forecast Plan on the ground that station will not be ready for pumping mode operation till 2007. They also question the Transco presumption about Alamatti impact up to 2007, saying if the monsoon behaves well next year, "everything goes well with Srisailam-Nagarjunasagar.''

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