Domestic consumers of electricity may be disappointed if they think that the good news about the financial turnaround of the Tamil Nadu Generation and Distribution Corporation (Tangedco) would mean there will not be a tariff hike soon. Consumers in the State may well have to face a 6% hike in 2018-19, as per the tripartite agreement signed by the State government, Tangedco, and the Union government in January for the Ujwal DISCOM Assurance Yojana (UDAY).
Explaining the reasons for this plan, Tangedco officials say the utility has accumulated losses to the extent of nearly ₹25,000 crore over the years and the losses have been declared by the Tamil Nadu Electricity Regulatory Commission (TNERC) as regulatory assets. In other words, the losses have to be recovered from consumers. The surplus of ₹2,000 crore this year will be set off against these losses, which means that it will take another 10 years of such yearly surpluses to wipe off the accumulated losses. Therefore a hike appears to be a necessity next year.
Officials, however, say consumers can take comfort from the fact that past hikes have been steep. For instance, in 2014-15, when the last hike in tariff was effected, its rate was 15%. In future, the increase is not expected to be that severe.
A perusal of the data regarding the average cost of supply of power (ACS) and the average rate of return (ARR) of the Tangedco in the last few years reveals that while the power utility has been able to bring down the ACS, it has also managed to show a rise in the ARR. Among the factors that have contributed to the increase in the ARR are accurate measurement of electricity consumption following the installation of static meters for domestic consumers. Higher generation by Tangedco’s plants has helped to bring down cost of power purchased and facilitated the fall in the ACS.
