Power deficit year pushes the implementation of multi-year tariff in Karnataka to next FY 

January 21, 2024 05:12 pm | Updated 06:00 pm IST - Bengaluru

Image for representation purpose only.

Image for representation purpose only.

Under MYT, the electricity supply tariff for three years would be predetermined through projections based on previous trends

After announcing in 2023 its intention to implement a multi-year tariff (MYT) system in the State from the Financial Year 2024–2025, the Karnataka Electricity Regulatory Commission (KERC) decided to drop it for this year after many stakeholders expressed their objections to the immediate implementation of the system.

Under MYT, the electricity supply tariff for three years would be predetermined through projections based on previous trends.

The representatives of industries and commercial establishments had expressed their disapproval of the MYT in a public hearing held by KERC in November. “Industries argued that if the data from the current year was used for projections, then it would only show an increasing trend due to the increased power purchase costs this year. In all likelihood, the costs will stabilise in the upcoming financial year, and they want us to wait till then,” said P. Ravikumar, Chairman, KERC. 

He also said that electricity supply companies (escoms) had their own concerns about implementing MYT. “They said that it would be difficult for them to make projections now as the Covid period cannot be considered for projection,” he said.

The escoms have also asked KERC to wait till FY 2025–2026 for the implementation. “For MYT, we need to have projection of power purchase costs for around five years. Especially since this is a power deficit year, the projection of power purchase costs comes with challenges. Since there is power deficit in many parts of the country, we do not know how the situation will play out yet,” said J. Darshan, Director of Finance, Bescom. 

He further said, “With the weather vagaries and coal issues, we are not in a position to effectively predict the rate of power.”

The KERC, for now, is confident of implementing MYT in FY 2025–2026, but industries have argued that with constant revision of Fuel and Power Purchase Cost Adjustment (FPPCA), there would be no concept of tariff certainty that should ideally come with predetermined tariff structure.

“With FPPCA, there will be no tariff certainty. As utilities would have to buy power from various sources, nobody will know for sure what the price they are supposed to pay. It is high time that industrial tariffs which decided the manufacturing costs for industries are stabilised. While MYT looks good as a policy, the implementation, monitoring and course correction should happen concurrently for it to be successful,” said M. G. Prabhakar, former advisory member, KERC and energy advisor to Federation of Karnataka Chambers of Commerce and Industries (FKCCI).

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