APPENDIX - I

Directive on Minimum Charges for Domestic Consumers

 

 

Contents

1            Executive Summary                                                                       1

2            Background                                                                                  2

3            The Licensees View                                                                      3

A           Annexure                                                                                      5

1              Executive Summary

The Hon’ble Commission in the Tariff Order – “Wheeling Tariff for 2009-14 and Retail Supply Tariff for 2009-10” – has directed the licensees to prepare an approach in context of operation of single bulb supply scheme and in context of tariff policy with regard to BPL consumers.

The licensees have analyzed the same by considering the following:

·        Present telescopic tariff structure for this category of consumers

·        Present Minimum charges structure for this category of consumers (based on connected load)

·        National Tariff Policy (NTP)

Firstly, the licensees believe that the present telescopic tariff structure ensures very low tariffs for BPL consumers (in line with what is suggested in NTP) and also provides cushion for higher consumption, i.e. the low tariff of Rs. 1.45 / kWh is extended to first 50 units consumption as compared to an average BPL consumption of 30 units (as mentioned in NTP).

Secondly, the licensees feel that the minimum charges levied from consumers based on their connected load is justified as this differentiates the consumers on the basis of their spending capacities and this approach is also in line with what is suggested in NTP.

Finally, the licensees are sure that the minimum charges being levied from BPL consumers is very reasonable.

2              Background

The Hon’ble Commission has directed the licensees to file an approach paper in context of operation of single bulb supply scheme and in context of tariff policy with regard to BPL consumers. The Hon’ble Commission has directed so because of the following:

“Some consumers and objectors have represented that the minimum charges levied based on connected load are rather arbitrary and leading to unintended outcomes. At present, the consumers with single phase connection are classified into two categories based on connected load, a) up to 250 Watts with a minimum charge of Rs. 25 / month and b) above 250 Watts with a minimum charge of Rs. 50 / month. The objectors have represented that if both consumers consume only say 10 units, the consumer with connected load less than 250 Watts pays only Rs. 25 / - and the consumer with connected load more than 250 Watts pays Rs. 50 / -. The tariff for this category of consumers in the present structure, especially the minimum charge conditions, exists for more than a decade. The single bulb subsidy scheme operated by the Government of Andhra Pradesh is also based on such tariff structure. The Tariff policy announced by the Government of India contemplates special treatment for the consumers below the poverty line.” – Para 439 in Wheeling Tariff for 2009-14 and Retail Supply Tariff for 2009-10.

The licensee has evaluated the above concerns expressed by consumers / objectors in this directive. The licensee’s view on the minimum charges levied on the basis of connected load from below poverty line consumers is as described below.

3              The Licensees View

The National Tariff Policy (NTP) has suggested that consumers who consume less than 30 units per month can be considered as consumers below the poverty line and the tariffs for such consumers should be at least 50 % of the average cost of supply.

At the state level, the Commission approved COS for domestic category has increased by 11.0 % in the three years considered (2007-08 to 2009-10). The table below captures the COS for domestic category (DISCOM – wise) from 2007-08 to 2009-10.

The average cost of supply to domestic category (at the state level) is Rs. 4.32 / kWh in FY 2009-10. Considering the NTP principles, the tariff for such consumers should be at least Rs. 2.16 / kWh (50 % of Rs. 4.32 / kWh). The lowest tariff slab (0 to 50 units) in LT – 1 (Domestic) category is Rs. 1.45 / kWh. The state not only has low telescopic tariffs for lower consumption but also has this low tariff benefit extended to larger quantum of consumption (till 50 units rather than just 30 units, as suggested in NTP). Hence, the tariff in AP for consumers below the poverty line not only adheres to the National tariff policy but also provides greater cushion to consumers in this category. The extent of subsidy and the attractiveness of this telescopic tariff structure shall only increase in years to come. In the present scenario, the licensee doesn’t wish to pass on the increase in cost-to-serve to these consumers. (The licensees have considered the category COS unlike the average COS (as mentioned in NTP) in their analyses. The average COS is Rs. 3.31 / kWh. If the average COS were also to be considered, the tariff for BPL consumers, considering NTP principles, should be at least Rs. 1.65 / kWh (50 % of Rs. 3.31 / kWh))

The distribution licensees have categorized minimum charges on the basis of connected load. The licensees agree with the point raised by the consumers / objectors that consumers having same consumption in a month, but having different connected loads have to pay different minimum charges. The licensees believe that connected load should be the basis for minimum charges, as this differentiates consumers with different spending capacities. The minimum charges structure (based on connected load) is also in line with the special treatment required to be provided for consumers below poverty line as per NTP.

The licensees also believe that the minimum charges levied from below poverty line consumers / single bulb subsidy consumers are very reasonable. The minimum charge levied on these consumers is Rs. 25 / month, which is equivalent to energy charges for the first 17 to 18 units of consumption. The equivalent energy consumption is lower than the average energy consumption (30 unit / month) of a BPL consumer.

Hence, considering the above points, the licensees do not wish to change the present structure of minimum charges, i.e. based on connected load, and believe that minimum charges levied from consumers are reasonable.

 

A            Annexure

LT – 1 (Domestic) Tariff Structure

The tariffs for LT – 1 (Domestic) category in the state of Andhra Pradesh is as follows:

Minimum Charges

The energy charges levied from consumers are subject to monthly minimum charge, which is based on connected load. The minimum charges levied are as mentioned below:

·        Single Phase:

·         Upto 250 W: Rs. 25 / Month

·         Above 250 W: Rs. 50 / Month

·        Three Phase: Rs. 150 / Month

Tariff Policy Principle

The following principle has been suggested for setting tariffs for BPL consumers:

“In accordance with the National Electricity Policy, consumers below poverty line who consume below a specified level, say 30 units per month, may receive a special support through cross subsidy. Tariffs for such designated group of consumers will be at least 50 % of the average cost of supply. This provision will be re-examined after five years.”