Ref: ER/Press/’07/SS/Elec.Tariff.33
CERS Demands Multi-Year Tariff For Electricity

Consumer Education and Research Society (CERS) has represented before the Gujarat Electricity Regulatory Commission (GERC) to implement multi-year tariff (MYT) in Gujarat with effect from 01 April 2008. MYT is performance based tariff which makes electricity companies accountable and directs them to achieve pre-determined targets set by the Commission.

The National Tariff Policy notified by the Central Ministry of Power on 6 January 2006, had directed all State Electricity Regulatory Commissions to implement MYT in their respective States from April 2006. Except a few States like Maharashtra, Karnataka, Andhra Pradesh, Delhi and Rajasthan, which have introduced MYT since April 2007, other States including Gujarat have delayed implementation of MYT due to reasons best known to them.

The multi- year tariff will be initially for three years, which may be extended up to five years after observing its implementation and performance. MYT has the following benefits:-

Reduction in workload of regulatory commissions, electricity companies and stake holders
Provision for a reliable and transparent system of incentives and disincentives
Electricity companies can plan their requirements as per approved budget
Multi- year tariff will have a controlled period of one year and uncontrolled period of two years. The pre-determined technical targets will be fixed by the Commission for the uncontrolled period, where the parameters include - station heat rate, auxiliary consumption, plant load factor, plant availability factor, specific fuel consumption and coal transit loss for generation companies. The technical targets for transmission companies will include transformation losses, transmission losses, transmission system availability and total number of grid failures, and for distribution companies it will include - distribution losses, performance parameters e.g. SAIFI, SAIDI, MAIFI, collection efficiency, amount paid as penalty for violation of rules and regulations and amount paid to consumer as compensation for not achieving the standard of performance.

Once MYT is implemented, the State Commission will have to declare a mechanism for sharing the profit and losses among the consumers and the utilities as per pre-determined targets . In case of a profit, 33% of it will be transferred to consumers by way of a reduction in tariff for the next year, 33% will be kept as special reserve, and 33% will be used for upgrading the system by the electricity companies. In case, pre-determined targets are not achieved by the electricity companies, entire loss will be borne by them and no revision of tariff will be permitted.

In this context, CERS has requested the Gujarat Electricity Regulatory Commission to implement the multi-year tariff from April 2008 and direct all the electricity companies to file their application for Annual Revenue Requirements (ARR) before 30 November 2007 in order to implement MYT after 120 days i.e. April 2008, as per National Tariff Policy.

Date : 02/11/2007

Place : Ahmedabad

Pritee Shah
Senior Director -CERC
Editor, INSIGHT - The Consumer Magazine

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