After power cuts, tariff hike on the cards in Telangana

The Union Power Ministry’s move allowing Discoms to recover various costs incurred, including power purchase costs, from consumers in the form of charges for supplying power, is likely to allow Discoms to increase the power tariff in the coming financial year (2024-25).

The hike in tariff that could be proposed by Discoms, the response of the State Electricity Regulatory Commission and whether the current State government allows any hike, remains to be seen.

Every year by November, Discoms have to submit estimates of the revenue for the next financial year to the Electricity Regulatory Commission (ERC) and based on these, the ERC examines the revenue requirements of the Discoms. But in November 2023, due to the Assembly elections, the process was delayed and the ERC has asked the Discoms to file the Annual Revenue Requirement (ARR) by January 31. Since the Discoms are running in losses, there is a possibility that they would seek a hike in tariff.

During the previous government, the Telangana State Electricity Regulatory Commission (TSERC) accepted the power tariff hikes proposed by State-run power utilities several times, but the then State government had refused to pass on the burden to the public and allowed very nominal tariff hikes, that too, only twice.

In fact, during the 2023-24 financial year, the State government had decided to take over the distribution and power purchase true-up charges burden from consumers by extending necessary financial support to power utilities over a period of five years along with interest. The measure provided relief to consumers to the tune of Rs.12,718.4 crore, as approved by the ERC against Rs 16,593.87 crore proposed by the Discoms, which otherwise would have been levied on them.

Now, the Ministry of Power has unveiled the Electricity (Amendment) Rules, 2024, which have come into force from January 11. This latest decision will provide flexibility to Discoms to increase electricity charges from time to time.

According to the Union Power Ministry,



some State Regulators have created a large revenue gap leading to financial distress to distribution companies due to the disallowance of various costs incurred including even power purchases costs and to discourage such practice, there was a need to make statutory provisions to ensure that there was no such gap. The new rules ensure that revenue gap was not created except in extraordinary circumstances like natural calamity and to provide for time bound liquidation of the gaps created, if any.

As per the rules incorporated in the latest gazette, henceforth, the tariff should be cost reflective and there should not be any gap between approved Annual Revenue Requirement (ARR) and estimated annual revenue from approved tariff except under natural calamity conditions. Such a gap, if any, should not be more than three percent of the approved ARR.

As per the new norms, if the discoms do not pay the amount due to the power generation companies within the deadline, the late payment surcharge imposed by them and the difference in income can be collected in three equal installments over the next three years. In fact, under the new norms, the income differences and late payment surcharges that existed before the gazette came into force could be collected from the consumers in seven equal installments in the next seven years.

In addition to this, any power generation company/captive power plant/energy storage system was not required to take special license for setting up separate transmission lines for their needs, maintenance and grid connection. But their capacity should not exceed 25 megawatts in the interstate transmission system and 15 megawatts in the intrastate transmission system.

According to Union Power Minister RK Singh, the steps taken by the government had already brought down the losses of the distribution companies from 27 percent in 2014 to 15.41 percent in 2022-23. “These rules will ensure that their losses are further reduced and their viability increases, leading to them being able to provide better services to the consumers,” he said.