Year 2014‐15

Delhi Distribution BusinessDelhi Distribution Business

What Determines Electricity TariffWhat Determines Electricity Tariff A perspective…

Contents

Electricity Value Chain

What determines tariff

Power Purchase & Transmission CostPower Purchase & Transmission Cost

Distribution Cost

T iff C iTariff Comparisons

Services / Fuel

With Neighbouring Towns / Metros

Summing Upg p

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Electricity: Value chain (G T D)

Generation CostGeneration Cost• Fixed Cost• Fuel Cost G+T+D COSTS 

GO INTO

GG

Transmission Cost• Charges

GO INTO BUILDING TARIFF• Losses TARIFFAS SEEN BY ENDDD

TT

Distribution Cost• O&M Cost • Financing CostT h i l

SEEN BY END CONSUMER

DD

• Technical •Commercial LossesDomestic Use

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What determines Typical Tariff (80:10:10)

1) Power Purchase (80% of total cost)

Consumer tariff has three main components

Financial & other Cost 1) Power Purchase (80% of total cost)• Generation cost• Transmission costO&M Cost

2) O&M Cost • Repairs & Maintenance cost• Employees cost• Administrative cost

3) Financial Cost • Depreciationp• Interest• TaxPower Cost

As per National Tariff policy (5.3(h)4) “Uncontrollable costs should be recovered speedily to

ensure that future consumers are not burdened with past costs ”

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costs.

4

Who Supplies Bulk Power to Delhi Discoms

Most/all PPAs are inherited from DVB era

100% power is sourced from Govt plants100% power is sourced from Govt plants

All are under long term Power Purchase Agreements (PPA)

Power purchase rates are fixed by the Regulatory Commissions (CERC/ DERC)

Gencos serve month to month increase in theGencos serve month to month increase in the Fuel cost on actual basis

Discoms have “Absolutely No control” over Power  Purchase Cost

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Generation Cost: Significant Increase in recent years

Owing to coal issues, imported coal used

• Extensive Coal blending by NTPC plants • Imported coal is much costly than domestic coal

i hHigher transport cost 

• Coal sourced from longer distance• Continuous Increase in transportation cost• Continuous Increase in transportation cost

Higher fixed cost from new plants

• More than 60% power from new plants • Fixed cost of new plants is much higher than old plants

− Delhi Discoms power purchase cost is ~32%** higher than national average− Some genco’s per unit cost work as high as ~Rs 9 p.u. (for FY 15)

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* Source : PFC report on Utilities Performance for FY11 to FY136

Bulk Power Cost (G+T): Sharp Increase in recent years

Generation Component

Cost in Rs / UnitGeneration Component 

Transmission Component

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Delhi Electricity Tariff Hike

Overall Retail Tariff increase ~ 90% No hike for 5 years between FY5%

12%

21% + 8%

20%Overall Retail Tariff  increase    90%Rs / Unit

No hike for 5 years between FY 

06 to FY11

L d h d

No Hike 

− Led to huge unrecovered cost

Only ~90%  Tariff hike in last ~12 

years against 300% increase in 

the power purchase cost

RST net of E-Tax; * Provisional

Artificially suppressed tariff hike of eight years has made the discoms financially weak 

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y

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Ever increasing revenue gap (upto FY14)

~Rs 21,700 Cr Regulatory Assets for BSES Discoms alone

* Source : DERC Staff paper (http://www.derc.gov.in)

Absence of cost reflective tariff led to huge Unrecovered Cost

Over 27,000 of accumulated Regulatory Assets upto FY 14 (Rs Crs.)

Absence of cost reflective tariff led to huge Unrecovered Cost

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Discoms PerformanceDiscoms Performance

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Loss Reduction achieved

TPDDL BSES57%

51%51%

40%40%

17%11%

FY 02‐03 FY 13‐14*FY 02‐03 FY 13‐14*

*FY 13-14 numbers are provisional & yet to be approved by DERC

Massive loss reduction achieved by all discom by multi pronged approach

Benefits of loss reduction completely passes on to customersBenefits of loss reduction completely passes on to customers

Delhi’s spectacular loss reduction of 40% is Unprecedented

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p p

Huge Savings to Government

• Huge Savings to Delhi GovernmentHuge Savings to Delhi Government

• Rs.54,000 crores till date

• Rs.7,000 Cr annually hereafter which isRs.7,000 Cr annually hereafter which is ~20% of Delhi govt. budget

• Hence, more money available for

• Roads & Infrastructure

• Streetlights

• Schools & Hospitals

• Metro & Buses

Huge savings to GoNCTD to continue

Above figures are estimated basis for all three private Discoms

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Huge savings to GoNCTD to continue E Tax : Electricity Tax

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Stakeholder Benefitted

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Tariff ComparisonsServices / Fuel/

With Neighbouring Towns / Metros

14 14

Power Tariff Vs Essential Services / FuelPower Tariff Vs Essential  Services / Fuel

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How Services’ prices have moved ???

DTC DJB DMRC

Increased by 100%Gone up by 150 % Gone up by 590%

Prices of Services’ has Increased minimum 100%

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Prices of Services  has Increased minimum 100%

How Fuel prices have moved ???

Petrol Diesel LPG Coal

UP b 218 % UP by 277% UP by 333 %UP by 147% UP by 218 % UP by 277% UP by 333 %* Thermal Coal CAPP Price

Prices of Fuel have Increased by avg. 240%

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Prices of Fuel have Increased by avg. 240%

Power Tariff Vs Neighbours / Other MetrosPower Tariff Vs Neighbours / Other Metros

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DELHI power tariff compared to other Neighboring towns

Tariff Cost of alternate Power Delhi power tariff is substantially lower

3.71 3.663.876

789 than its neighboring towns

Delhi  has better power quality• 24X7 supply

8.56 8.46 8.15

4.75 4.90 4.2923456 • 24X7 supply

• Reliability Index of over 99.8%• Stable voltage

P i h i 200% h2.804.29

012

Delhi Noida G'gaon / F'bad

Jaipur 

Power cost in other towns is 200% than what is in Delhi, 

• To compare same quality of 24x7 power

3.00

Note: *08 hrs Load shedding/day impact is taken for NCR townsAlternate power during shed hours taken at Rs 16/unitAll calculations are for 200 units of monthly residential consumption

DELHI customer pays substantially lower (1/2) compared to other towns

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DELHI power tariff compared to Other Metro Cities

Delhi power rates are substantially cheaper than other Metros

Note: Tariff comparison for monthly Domestic usage @ 200 units /2KW load  with FC included.

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Summing upSumming up

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Summing up: Economics of Delhi Electricity Tariff

80% of total cost is Power cost Increased by >300%

Uncontrollable cost

Retail tariff should have gone up by > 300%As  ~300% escalation in 

power cost 

Savings due to Huge efficiency gains 205%40% reduction in AT&C loss 

& O ti t

Reduced tariff hike required due to

Savings due to Huge efficiency gains

95%

205%

Entire gains passed on to 

& Operating cost

Reduced tariff hike required due to huge efficiency gains 

95%g p

Customers & Govt .

Leading to huge underUn recovered Gap in Tariff hike

Leading to huge under recovery of ~ Rs. 22,000 Crs.

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Summing up: Price Increase across the board

Compared to very Bulk Power Cost >300%

steep hike in prices of other items

Dearness Allowance 250%

Fuel 240 %

Delhi Power Tariff 

Fuel 240 %

Services 150%

has gone up by 90%Consumer Price Index 120%

2323

Sustainability Roadmap

Time bound recovery of accumulated Regulatory Assets (RA)

Ti b d & t fl ti t iff i f tTime bound & cost reflective tariff in future

Power Procurement Cost reduction by reallocation of high cost power y g p

by low cost power

Link liquidation of power suppliers to amortization of RA

Dedicated Police & CISF for theft reduction in sensitive pockets

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Thank You

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