Tamil Nadu

Can loss be beneficial: Tamil Nadu Electricity Regulatory Commission tests the waters

Experts weigh in on the losses and benefits that the Tamil Nadu Generation and Distribution Corporation may experience, if third-party sale of electricity is allowed

Loss can even be ‘beneficial.’ This is how some energy experts view the latest application filed by a private firm for intra-State trading of electricity with the Tamil Nadu Electricity Regulatory Commission (TNERC).

These experts are talking about the ‘loss’ and the ‘benefit’ that the Tamil Nadu Generation and Distribution Corporation (Tangedco) may experience, if a third-party sale of electricity is allowed.

Traditionally, the State power utility has been opposed to third-party sale of electricity on the ground that any such move will erode its revenue base. It has been holding on to the position, despite the 2003 Electricity Act allowing the implementation of the concept. Of a total of about 10,230 high-tension (HT) consumers, industrial establishments account for around 8,200.

If the applicant-firm -- Star Eco Energy, a Coimbatore-based company -- is given the licence for trading of 45 million units (MU) of power annually within Tamil Nadu, it is expected take away the some of the Corporation’s customers, which will invariably be HT industrial establishments. The “benefit” that the Tangedco stands to gain is that it can still earn higher revenue through cross subsidy surcharge.

At present, there is only one licensee (R.S. Yarns and Power, a Tiruppur-based private company) for power trading within Tamil Nadu. This operation has been on since November 2012. This company had sought the nod for 150 MU.

The TNERC has called upon stakeholders to provide feedback, till April 12, on the Coimbatore firm’s application. A couple of other similar applications are also being examined, says an official.

The experts, who say that the Tangedco stands to ‘gain’ through third party sale transactions, explain that a HT consumer-firm, ordinarily, has to pay to the Tangedco two charges - energy charges of ₹ 6.35 per unit and demand charges of ₹ 350 per KVA (Kilo Volt Ampere) per month or ₹1.65 per unit. As the latter belongs to the category of fixed charges, it has to be paid by the consumer, irrespective of whether power was drawn Tangedco’s system or not.

Under the given circumstances, clients of a licensee-firm can get electricity at ₹ 5.5 per unit. This rate includes the cost of cross subsidy surcharge of ₹1.67 per unit to be paid to the Corporation and the licensee’s commission of ₹ 0.07 per unit.

It is where the Tangedco, according to the experts, stands to ‘gain.’ Hypothetically, had the clients continued to draw power from the State utility, they would have paid energy charges (₹ 6.35 per unit). As per a thumb rule, the Tangedco’s average pooled cost of power is ₹ 5.5 per unit, which includes the cost of power produced or procured and the monetary value of line loss. This means that the power utility earns ₹ 0.85 additionally for every unit it sells to a HT consumer. But, when a third party sale transaction happens, its income goes up to ₹ 1.67 per unit, which it gets in the form of cross subsidy surcharge.

However, the experts hasten to emphasise that these calculations hold good till the present energy charges (₹ 6.35 per unit) are not hiked. Also, only up to a point, can third-party sale of power be entertained by the Tangedco, they add.

But, another section of experts is of the view that the Tangedco, which is suffering a loss of ₹2.2 per unit of power being sold, cannot afford to lose any customers, more so an industrial establishment. So, these calculations will be, for all practical purposes, of academic value only.

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Printable version | Jun 2, 2020 5:50:48 PM | https://www.thehindu.com/news/national/tamil-nadu/can-loss-be-beneficial-tamil-nadu-electricity-regulatory-commission-tests-the-waters/article31127775.ece

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