Report

Retail Tariffs for Electricity Consumers in Maharashtra

A Forward Looking Assessment

Kapardhi Bharadwaj, Karthik Ganesan, Neeraj Kuldeep
June 2018 | Power Markets

Suggested Citation: Bharadwaj, Kapardhi, Karthik Ganesan, and Neeraj Kuldeep. 2018. Retail Tariffs for Electricity Consumers in Maharashtra: A Forward Looking Assessment. New Delhi: Council on Energy, Environment and Water.

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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.