If the price of coal increases, electricity will immediately become more expensive. The Union Ministry of Power has come up with rules to ensure that the entire cost of power generation or purchase can be recovered immediately by the distribution companies. The Center has implemented the rule by issuing a notification on December 29. As a result, if the cost of buying electricity increases due to the increase in the price of coal or any other fuel used in electricity production in a month, the electricity distribution company will have to charge the additional cost from the customers in the next two months’ bills. It is clear in the rules that if for some reason the distribution company cannot take it, then they cannot collect it any day later.
India’s power distribution companies, especially those owned by state governments, are in poor financial health as they are unable to absorb the additional cost of power purchase immediately through tariffs, most of the time, according to Delhi. That is why the center has brought this rule. For the past several years, CESC and West Bengal State Electricity Distribution Corporation have not passed on the additional cost in the energy sector immediately to consumers. In the annual performance review submitted to the West Bengal Electricity Regulatory Commission at the end of the year, they showed that cost and requested to recover the charges from the consumers. Once the commission approves the application, they can collect it from the customers.
An expert in the power sector said, “If there is an increase in the cost of electricity in any month due to increase in fuel prices, the State Electricity Distribution Corporation and CESC do not immediately increase the tariff from the consumers. The last time the distribution corporation charged the increase in the cost of electricity purchase was in 2014. CESC is also not immediately recovering the increase in the cost of power purchase for at least the last 5-6 years by increasing the consumer tariff.” However, West Bengal is one of the handful of states in India that have started collecting electricity through consumer charges if the cost of buying electricity increases due to an increase in fuel prices or for any other reason.
According to another expert, “Since the new rules of the Center have come into force, now if the cost of power purchase increases in the energy sector, they will have to immediately increase the tariff and collect it from the consumers. Otherwise, according to the rules, the State Electricity Distribution Corporation and CESC will never be able to recover it later. As a result, Both companies will suffer huge financial losses.”
According to the rules, if a distribution company increases the cost of power purchase in January, the additional cost will be charged to the customers in the March bill two months later. According to sources in the power sector, the state power distribution company has not been able to collect about Rs 3,300 crore from consumers as additional cost of power purchase in the financial year 2020-21. Last year 2021-22 this figure is close to Rs 1,200 crore. According to informed sources, the average electricity tariff will increase by Rs. Now the average tariff of State Electricity Distribution Corporation is Rs 7 12 paise per unit.
In July 2014, the West Bengal Electricity Regulatory Commission had directed distribution companies to immediately collect bills from customers if the cost of power purchase increases due to fuel price hike or any other reason. The Commission could have deferred the order by its own power for so long. But a large part of the experts think that the commission will not be able to do it as the rules have become.
In this regard, an official of the state administration said, “Once any such central rule comes into force, it will immediately apply to the power generation, transmission and distribution companies owned by the central government. In the case of West Bengal state power distribution companies, the regulatory body is the West Bengal Electricity Regulatory Commission. Therefore, the final decision in this regard is The commission will decide.” However, experts fear that legal problems and complications may arise later if central rules are ignored.