The Maharashtra Electricity Regulatory Commission (MERC) has approved raising the tariff for commercial and industrial (C&I) consumers for the current financial year (FY 2024). The Commission’s order was in response to the petition filed by the Maharashtra State Electricity Distribution Company (MSEDCL).

The electricity tariff rates for high-tension (HT) connections are as follows:

• The tariff rate for HT I (A) general connections used by industries for FY24 is ₹8.12 (~$0.01)/kWh, a year-over-year (YoY) increase of 18%. The tariff for FY25 is ₹8.36 (~$0.11)/kWh.
• For HT I (B) seasonal connections also used by industries, the tariff rate for FY24 is ₹8.43 (~$0.11)/kWh, an 18% YoY increase. The tariff for FY25 is ₹8.68 (~$0.12)/kWh.
• The tariff rate for HT II connections used by commercial establishments for FY24 is ₹12.83 (~$0.16)/kWh, an increase of 17% YoY. The tariff for FY 2024-25 is ₹13.21 (~$0.17)/kWh.

The revised tariffs will be effective from April 1, 2023. The tariff for FY25 tariffs will be effective from April 1, 2024.

The Commission has tried to balance consumer interest with the recovery of legitimate expenses of the distribution licensee. The Commission has determined the net revenue gap to be recovered over the balance period of the fourth control period, which is FY24 and FY25.

Although there will be a significant increase in the overall average cost of supply, the overall average tariff hike for FY24 is only 2.9%, and for FY 2024-25 is 5.6%, as opposed to MSEDCL’s claim of 14% and 11%, respectively.

Background

The total revenue gap estimated by MSEDCL was ₹676.43 billion (~$8.2 billion), while the Commission has determined a revenue gap of ₹395.67 billion (~$4.8 billion), which will be recovered through a revision in tariff.

The main reasons for contributions towards this revenue gap include an increase in fuel cost due to variations on account of imported fuel costs, the impact of claims due to changes in law and taxes, a shortfall in the availability of renewable power, a shortfall in revenue due to the impact of COVID-19, a shortfall in the accomplishment of targeted reduction in distribution losses, an increase in transmission system costs, the impact of true-up of MSPGCL generating station cost, and the impact of carrying cost.

In the case of the commercial category (HT and LT), the average price of electricity and ARR for these categories would reduce by around 1% during FY24.

The Commission has extended the concept of incremental consumption rebate at the rate of ₹0.75 (~$0.009)/kWh to specified LT categories, which will reduce overall expenses towards electricity for consumers in LT-Industry and LT-Commercial categories. Such incremental consumption rebates would also be available for LT-Public Service consumers.

If an industrial consumer under HT-Industry operates on a single shift, they can avail of a discount on the demand charges. As per the tariff schedule, the applicable demand charges will be charged at a reduced rate of 60%.

The order has several measures aimed at protecting the interests of different categories of consumers and promoting the use of renewable energy sources.

One of the measures is the continuation of the lower tariff benefit of 2.5% in energy charge component for power loom consumers, along with the benefit of incremental consumption rebate of ₹0.75 (~$0.009)/kWh.

Other incentives like the load factor incentive, prompt payment discount, and the night usage rebate in the time of the day mechanism have been retained.

For domestic consumers, the energy charges have been increased. Still, the revision is minimal for consumers with consumption below 100 kW per month, with a marginal increase in fixed charges for all consumers. The Commission has also retained the benefit of telescopic slabs, which will benefit all domestic consumers.

Consumers can now avail of a discount on the billed amount for advance payment/pre-payment of bills, subject to certain conditions.

MERC has introduced new initiatives for agricultural billing and advice. One such initiative is the introduction of a feeder-wise incentive/disincentive for LT- agriculture consumers, which is linked to feeder-level AT&C loss. The agriculture consumers connected to feeders with lower AT&C loss below threshold limits will receive a discount from the approved tariff hike in a graded manner.

Recently, the Ministry of Power announced that it was considering changes in the tariff policy that would allow the state governments to provide subsidies to eligible categories of consumers directly into their bank accounts through direct benefit transfer. The ministry said that the intention behind the proposed move is to ensure that the cross-subsidy surcharge component of the tariff does not keep escalating over time to cover for the higher subsidies being provided to retail consumers.

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