FE: Power play: Discoms to gain as tariffs to soon reflect all costs

1 July 2019: Power regulators in the country may be barred from the practice of not allowing discoms to promptly pass on part of their expenses to consumers. The provision of creating “regulatory assets” — recoverable discom expenses which regulators acknowledge as pass-through costs, but are not immediately built into tariffs — will be scrapped from the tariff policy, official sources said.

While no new regulatory assets will be created, the existing stock — a whopping Rs 1.2 lakh crore at FY19 end — will be cleared over the next 3-5 years through incremental tariff hikes, the sources said.

In a meeting held here on Monday to prepare a “five year vision document” for the electricity sector, power minister RK Singh is learnt to have informed the regulators of the move.

According to an official estimate, discoms lose Rs 22,000-crore revenue annually due to the deferred pass-through of certain expenses.

As FE recently reported, electricity regulators of most major states have either delayed or announced meagre tariff hikes for FY20, despite financial losses of discoms rising 44% annually to Rs 21,658 crore at the end of FY19. As it is, limited or no tariffs hike was proposed by most of the discoms when they filed for tariff revision during the run-up to the Lok Sabha elections. The tariff policy says the facility of regulatory assets “should be done only as a very rare exception in case of natural calamity or force majeure conditions” and no such assets should be created under business as usual conditions.

“Recovery of outstanding Regulatory Assets along with carrying cost of Regulatory Assets should be time-bound and within a period not exceeding seven years,” it adds.

Monday’s decision amounts to making further headway on this front. The other points said to have been discussed in Monday’s meeting were: large scale integration of renewables into the grid, revisiting contractual clauses of existing PPAs and structuring new PPAs to address non-performing asset challenges and financial viability restoration across the electricity value chain. The ministry is also said to have mooted the idea of revisiting contractual clauses of existing PPAs and structuring new PPAs to address the challenge of non-performing assets.

The Financial Express reported

Categories: General News, India Bankruptcy, Indian Earnings

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