TSERC Tariff Hike effect on various consumers categories

From July 1st, 2016, Individuals, Commercial Establishments and Industries are set to receive bills with revised tariff approved by TSERC.

Across LT & HT categories under various heads, the avg increase in tariff comes to around 8%. Below table shows percentage increase in tariff for various consumer categories in detail.

From the above analysis, we can see that middle class families consuming over 200 units have to shell out more for their consumption as a single unit is going to cost them Rs. 5/- for consumption upto 200 units and upwards of Rs. 7/- for anything after 200 units. 

Slabs under the Domestic and Non Domestic categories have been merged with a view to simplifying the tariff structure. New category for Hair cutting salons under the LT-II Non-Domestic for consumption upto 200 units per month, has been introduced. Demand charges for various categories have been raised upto 6% on an average.

Also, Time of Day tariff has been introduced to aid in flattening of the day load curve while incentivizing off-peak hour consumption for eligible customers. The new ToD charges introduced are as follows: 

Until now tariff revision was done on an annual basis, However going forward if Telangana government decides to join UDAY scheme then this revision will take place on a quarterly basis.

Way forward for Solar Manufacturing companies

As per MNRE, the installed capacity of Solar cells and Modules in the country is 1212 MW & 5620 MW respectively. National Solar Mission targets, indigenous manufacturing capacity to the tune of 4-5 GW is to be achieved by the year 2020 in India while globally, china leads the pack with around 70% of the global capacity followed by US, Japan, Malaysia among others. Lets see if this feasible and are in line with our targets to reach 100GW by 2022.

Solar manufacturers in India do not enjoy the luxury of low cost debt (with long period for repayment), capital subsidy for setting up the facilities, suitable land policies, qualitative & cheaper power which helped countries like China and US to capture global markets. 

Recent WTO order comes as a shot in the arm of the Indian governments plan to develop and strengthen indigenous manufacturing facilities. Though PSUs will be able to procure from domestic manufacturers but the capacities envisaged for them are not enough for reaping benefits through economies of scale.

Being capital intensive industry, Govt must provide incentives in the form of loan guarantees for setting up the facilities and exemption of taxes & duties for the import of raw material (Polysilicon, Wafers and Cells). If we see lending interest rates in China and US, it is not more than 7% in the last 5 years whereas in our country it is well above 10% and added to that repayment period is also short compared to them. This is the first and foremost issue which needs to be handled by the GoI.

Energy cost constitutes nearly 30% of the module cost and so there is need to create a separate tariff category free from cross subsidies for solar manufacturers which can bring down manufacturing costs. Also quality reliable power should be ensured to them.

International Solar Alliance is a good step towards bringing nearly 120 countries on the same platform to pursue cooperation in training, building institutions, regulatory issues, common standards, and investment including joint ventures to undertake innovative and concerted efforts for reducing the cost of finance and cost of technology for immediate deployment of competitive solar generation. So far, Around Rs.180 crore was allocated by MNRE for solar R & D and around Rs.100 crore for NISE in the last 4 years, this is a good sign 

These points if addressed effectively, we can see Indian manufacturers competing with Chinese manufacturers in the next 2 - 3 years.

Terms & Conditions of Tariff determination (2014-2019)

Important Changes: 

• Change in payment of Generation Incentives from PAF to PLF
• Tightened station heat rate and auxiliary consumption norms.
• Deprived tax arbitrage, i.e., reimbursements by discoms for the applicable tax paid (20%) rather than normative corporation tax (33%).
• Reduction in threshold PLF for payment of generation incentives from 85% to 83%.
• Relaxation in operational efficiency parameters for aging 200MW units and recovery of water charges.
• Gross calorific value of coal in calculation of tariff is based on coal received rather than coal fired.

Benefits for End Consumers:

• Discoms will have to pay less to the generating companies as incentives are based on PLF and might reduce the tariff for end users.
• Efficiency in the utilization as result of tightened station heat rate.

Benefits for Discoms:

• Reduced burden in paying Generation incentives.
• Savings as a result of changes in tax arbitrage calculation.

Benefits for Generators:

• Increase in incentives from reduced threshold PLF