Sections of domestic consumers too will have to cross-subsidise cost of power supply to others

A category — domestic common supply (low tension-ID) — has been introduced to cover common facilities at multi-storey apartments

September 14, 2022 12:18 am | Updated 12:18 am IST - CHENNAI

Certain sections of the domestic consumers of electricity, too, will assume the burden of cross-subsidising the cost of power supplied to the poorer sections from the current year. At present, private educational institutions and sections of the industry are among those that cross-subsidise the cost of power supplied to others.

The quantum of burden on the sections of domestic consumers is bound to go up in the next four years, according to the Tamil Nadu Electricity Regulatory Commission’s latest tariff order, which is valid until 2026-27.

This has been made possible with the introduction of a category — domestic common supply (low tension-ID) — which will cover common facilities at multi-storey apartments, apart from the possibility of bringing under its fold additional connections at individual houses.

However, the tariff order has stated that separate portions can be provided additional connections on production of proof like rental agreements between the occupants of such portions and the house owners.

According to the general principle governing the concept of cross-subsidy, plus or minus 20% of the average cost of supply (ACOS) is permitted for all categories of consumers. Consumers below the poverty line who consume below a specified level, as prescribed in the National Electricity Policy, may receive a special support through cross-subsidy, and the tariffs will have to be at least 50% of the ACOS. These norms have been laid down by the Union Power Ministry in its 2016 gazette notification of the Tariff Policy. The State-level regulatory commissions will have to draw up roadmaps for achieving the objective: the tariff progressively reflects the cost of supply.

The TNERC, while treating the cross-subsidy levels approved for the current financial year as the opening level, has acknowledged that “it looks difficult to reduce the cross-subsidy to +20% of the ACOS for all categories within a short span of time”. Consequently, it has formulated the roadmap for reduction of cross-subsidy, considering the time frame of seven years till 2029-30.

What the TNERC has achieved is that the domestic consumers, per se, will enjoy a higher cross subsidy than the permitted 20% up to 2025-26. The cost recovery from them in 2026-27 will be 83% of the ACOS, meaning that the cross-subsidy will be lower than the permitted 20%. On the other hand, those who are charged under the domestic common supply category will pay higher than the ACOS from the first year — 2022-23 — when the cost recovery will be 108%. This will gradually go up in the coming years and touch 125% in 2026-27, which means the cost recovery breaches the permissible level by 5 percentage points.

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