Home
Council on Energy, Environment and Water Integrated | International | Independent

Retail Tariffs for Electricity Consumers in MaharashtraA Forward Looking Assessment

, ,
June 2018 |

Citation: Kapardhi Bharadwaj, Karthik Ganesan, and Neeraj Kuldeep (2018) 'Retail Tariffs for Electricity Consumers in Maharashtra: A Forward Looking Assessment' May

 

Overview

This report estimates the rise in tariffs for electricity consumers in Mumbai and the rest of Maharashtra, and explores the effects of increasing renewable energy penetration on the tariffs.

Estimating the future cost of electricity requires an understanding of the different components that make up an electricity bill, the regulatory procedures and influences that impact the tariff for each of these components, and the market and political forces that affect these tariffs.

The estimates incorporate two scenarios of renewable energy growth, high renewable energy penetration and low renewable energy penetration, and their impact on the cost of procurement.

Components of cost of supply for Mumbai DISCOMs and MSEDL*

Source: CEEW Analysis

* Consumers of MSEDCL are not levied standby charges; these are applicable on consumers of Mumbai DISCOMs to ensure uninterrupted supply

Key Findings

  • There are four components that influence an electricity bill - power procurement costs, transmission charges, distribution charges, and cross-subsidy charges.
  • Reliability of supply could be at risk with growing demand and limited transmission capacity for importing power into Mumbai.
  • The resolution of the issue of transmission capacity has been long pending, with right-of-way issues delaying augmentation projects aimed at expanding transmission capacity.
  • The consumers of the Mumbai DISCOMs and MSEDL pay significant amounts for the recovery of regulatory assets.

Source: Pixabay

  • Consumers in Mumbai pay some of the highest tariffs for different categories in India. Despite competition in the distribution business in suburban Mumbai, tariffs have not come down.
  • Electricity tariffs for commercial consumers will increase at an average rate of 2 to 3 per cent. For industrial customers, tariffs will increase at an average rate between 3-4 per cent.
Power procurement costs continue to constitute the largest share of the cost of supply.

Sign up for the latest on our pioneering research

Institutional Reforms For Discoms

Reforms within state electricity distribution companies (DISCOMs) are at the centre of India’s power sector transition. A self-sustaining power sector is the key objective of these reforms. The Council’s research contributes to this effort by working with state government entities for a smoother transition.

As a starting point, the team has begun work in the state of Uttar Pradesh. Part of the power sector research team works from The Council’s Lucknow office, set-up to establish a presence in the state. Apart from desk-based research, the team engages with a plethora of stakeholders – state electricity regulators, DISCOM employee unions, sector activists, educational and skill training institutes and consumers.

This work stands apart from rest of the research of the power sector team, as it involves significant on-ground engagement to drive forward reforms.

Contact Our Team

  • Kapardhi Bharadwaj Programme Associate
  • Prateek Aggarwal Programme Associate

Comment

Tariffs & Regulations

The Council’s research on tariffs and regulations focuses on the impact of regulatory interventions on investors, consumers, and the government. The team aims to augment the public’s understanding of the tariff setting procedure and other regulatory decisions which drive market players. The research is aimed at minimising financial burden on public resources, thereby protecting the interests of the consumer.

In Uttar Pradesh, the team is currently engaging with utilities, the Uttar Pradesh Electricity Regulatory Commision (UPERC), and consumer groups to discuss challenges and solutions for the UP power sector. To improve revenue realisation of DISCOMs and design cost-effective procurement strategies, the team will estimate the state’s power requirements for the coming years and evaluate existing Power Purchase Agreements (PPAs) with the Uttar Pradesh Power Corporation Limited (UPPCL).

Contact Our Team

  • Kapardhi Bharadwaj Programme Associate
  • Kanika Balani Research Analyst

Comment

Power Sector

Power Sector

The Power Sector team supports India’s transitions in electricity generation by examining the role of thermal generation in a renewable-rich scenario, economic and environmental impacts of thermal generation assets, and the integration of renewables into power systems. The focus of this research line is on improving data quality and accessibility pertaining to the sector, and the work involves extensive stakeholder engagements with regulatory bodies and civil society groups across India. The team also analyses accountability measures associated with the operation of electricity utilities and supports ongoing regulatory and institutional reforms in the sector.

With researchers based in Lucknow and New Delhi, the team is currently dedicated to shaping an affordable, reliable, and accountable power sector in Uttar Pradesh.

  • 70%

    of a DISCOM’s annual expenses consist of power procurement costs
    Source: CEEW Analysis, 2017
  • 30,000 crore

    Combined losses of electricity utilities in Uttar Pradesh in FY’16.
    Source: PFC, 2017
  • 5%

    Estimated rise in electricity tariffs (CAGR) for industrial customers in Delhi and Bangalore
    Source: CEEW Analysis, 2017
  • Research on retail tariffs for industrial and commercial sector stakeholders has long been ignored. Thisattempt by CEEW is appreciated and well taken.

    Balawant Joshi

    MD, Idam Infrastructure Advisory

Sign up for latest updates on our Power Sector research.

Our Power Sector Team

Comment

Retail Tariffs for Electricity Consumers of DelhiA Forward Looking Assessment

, ,
March 2017 |

Citation: Kapardhi Bharadwaj, Karthik Ganesan, and Neeraj Kuldeep (2017) 'Retail Tariffs for Electricity Consumers in Delhi: A Forward Looking Assessment', March

 

Overview

This report attempts to estimate the rise in tariffs for electricity consumers in Delhi over a period of ten years, and explore the effects of increasing renewable energy penetration on the tariffs.

Estimating the future cost of electricity requires an understanding of the different components that make up an electricity bill, the regulatory procedures and influences that impact the tariff for each of these components, and the market and political forces that affect these tariffs.

The estimates incorporate two scenarios of renewable energy growth (high renewable energy penetration and low renewable energy penetration) and their impact on cost of procurement.

Source: Pixabay

Key Findings

  • There are four component that influence an electricity bill - power procurement costs, transmission charges, distribution charges and cross-subsidy charges, which this report examines in detail.
  • Power procurement costs continue to constitute the largest share of the cost of supply.
  • Transmission charges will rise as per the investments made in the overall network.

Share of cost of supply components

Components of cost of supply for major DISCOMS in Delhi (CEEW Analysis)

  • Electricity costs for commercial customers will rise at an expected CAGR of 4 per cent. For industrial customers, costs will rise at an expected CAGR of 5 per cent.
  • Solar energy will make significant inroads in future energy mix of Delhi, despite the limitations posed by the lack of land.
  • Consumers in Delhi will benefit from the decreasing trend in tariffs associated with renewable energy generation.
  • The decrease will be accentuated by the economies of scale and the expectations of technological breakthroughs that will drive down costs.
Retail electricity tariffs are expected to grow at a rate of about five per cent by 2025.

Sign up for the latest on our pioneering research

Improving efficiency in the power surplus era

Mint, August 2017

Retail Tariffs for Electricity Consumers in BangaloreA Forward Looking Assessment

, ,
October 2017 |

Citation: Kapardhi Bharadwaj, Karthik Ganesan, and Neeraj Kuldeep (2017) 'Retail Tariffs for Electricity Consumers in Bangalore: A Forward Looking Assessment' October

 

Overview

This report estimates the rise in tariffs for electricity consumers in Bangalore over a period of ten years, and explores the effects of increasing renewable energy penetration on the tariffs.

Estimating the future cost of electricity requires an understanding of the different components that make up an electricity bill, the regulatory procedures and influences that impact the tariff for each of these components, and the market and political forces that affect these tariffs. There are four component that influence an electricity bill - power procurement costs, transmission charges, distribution charges and cross-subsidy charges, which this report examines in detail. Power procurement costs continue to constitute the largest share of the cost of supply.

Source: Pixabay

Power procurement costs continue to constitute the largest share of the cost of supply.

The estimates in this report incorporate two scenarios of renewable energy growth – high renewable energy penetration and low renewable energy penetration – and their impact on the cost of procurement.

Key Findings

  • The urban city of Bengaluru consumes 50% of the demand of the utility, BESCOM. Growth in demand for the Bangalore Electricity Supply Company (BESCOM) can be attributed to the booming migrant population in the city.
  • Electricity costs for commercial customers in Bangalore will rise at an expected CAGR of 6 per cent. For industrial customers, costs will rise at an expected CAGR of 5 per cent.
  • The IT-hub of the city is facing problems in augmenting its distribution infrastructure. There is heavy demand for reliable supply to these areas, and the existing distribution infrastructure is inadequate to serve the growing demand. Right-of-way issues have restricted augmentation of supply infrastructure in these areas.
  • Prices paid by consumers in BESCOM areas are not as high as those paid by consumers in Mumbai or Delhi because of low power procurement costs. Cheap power from hydro plants in the state has contributed to these lower costs.
  • BESCOM enjoys a diverse energy mix, with significant contributions from wind, nuclear and hydro plants. However, in dry seasons (or when there is scanty rainfall) low hydro generation affects the supply position of BESCOM. To cover for this shortfall, BESCOM procures costlier power from short-term markets, escalating its power purchase costs.

Assumptions in power procurement costs (CEEW)

Source Assumptions
Coal Energy charges assumed to increase by 9.1% year-on-year
Wind Energy charges assumed to increase by 0.3% year-on-year
Hydro Energy charges assumed to increase by 1.3% year-on-year
Solar Energy charges assumed to decrease by 5% year-on-year

Source: CEEW

Revenue share of categories of consumers

Source: Based on audited accounts of BESCOM FY14

Sign up for the latest on our pioneering research