As the power regulator approved Rs2.84/unit on account of monthly Fuel Charges Adjustment (FCA) for March 2024 – this marked 13th straight month of positive adjustment – which has averaged Rs2.84/unit over the last 12 months. On a month-on-month basis, this offers a little respite, as this replaces the previous adjustment of Rs4.92/unit. But on a broader scale, such high monthly adjustments for a prolonged period, at a time when currency has been remarkably stable against the greenback and international energy commodity prices have softened – is an area of great concern.
The key reasons of deviation from reference fuel cost are lower actual generation and less than optimal generation mix than reference, and not the fuel prices themselves. The cumulative power generation for 9MFY24 is a little over 1 percent down year-on-year, but the deviation from reference generation is 7.5 percent. Mind you, power generation does not represent actual demand, as countrywide load shedding continues to up to 12 hours in some cases – in clear violation of the stated rules of the game.
Load shedding when the system has enough capacity to generate and transmit power to cater near peak demand at most times, is counterproductive. Every additional unit that gets distributed lowers the overall tariff for the end consumer, as the capacity and other fixed cost components of the power purchase price are nearly twice that of the fuel cost component. It is therefore a no-brainer to eliminate load shedding.
Yes, it will come with higher incidence of T&D losses, because the so-called improved T&D losses are not necessarily a result of massive improvements in the infrastructure and processes – and are more reflective of high-loss areas punished with lesser power provided.It is not as if discos are not already allowed losses much higher than regional averages – or not as if operation and maintenance component of the tariff does not provide for costs related to infrastructure upgrade to be incorporated in the tariffs.
Mind you, grid code conditions and transmission evacuation constraints due to load center mismatches already cause deviations from optimal generation and transmission. There is also an element of increased domestic roof top solar networks contributing to the affluent paying the subsidized rates for import of electricity – that further reduces the net revenue for discos. Continuing with load shedding, that burdens the honest paying consumers, at atime when tariffs are already breaking the backs – is far from the right approach.
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