Kerala has conveyed its strong reservations to the Centre regarding a proposal to allow electricity distribution companies (discoms) to automatically recover their additional spending on power purchases on a monthly basis from the consumers. Discoms may ‘‘generate undue advantage’‘ in such a scenario, according to the State.
It would lead to an 'unstable pricing situation' akin to the one in the petroleum sector and subject electricity consumers to frequent price fluctuations, the State government has informed the Union Power Ministry in response to comments invited on the draft Electricity (Amendment) Rules, 2022. The Power Ministry had invited comments from the States after publishing the draft in early August.
In its response, Kerala noted that the ''suggested process of automatic transfer of impact of cost to the consumer may lead to a situation wherein the consumer, being at the receiving end, will be subjected to fluctuations in the price frequently.''
On a monthly basis
The draft seeks to replace the system of computing the thermal fuel surcharge, periodically imposed by licencees (the Kerala State Electricity Board, in Kerala's case) on electricity bills, with a Fuel and Power Purchase Adjustment Surcharge (FPPAS). Rule 14 of the draft says ''the impact in the cost due to variation in price of fuel or power purchase cost'' shall be automatically passed through in the consumer tariffs, on a monthly basis. The truing-up by regulatory commissions needs to be done only on an annual basis.
Regulatory commission’s role
Kerala noted that this provision dilutes the mandatory prudence check now done by the State-level regulatory commissions before such costs are passed on to consumers. At present, the surcharges need the commission's nod. On its part, the commission holds public hearings before taking a decision.
The Power Ministry had given the States time till September 21 to send their comments on the draft Electricity (Amendment) Rules, 2022.
