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With coal prices hitting new highs and summer demand kicking in, power generating companies are left with little option but to hike consumer electricity tariffs. The additional burden for the consumers comes at a time when the cost of other essentials like petrol, diesel, CNG and cooking gas are also heading north.
Ashok Khurana, Director General, Association of Power Producers, said, “Inability of Coal India to meet the coal requirements of power generators would leave the power producers with no choice but to import and meet the deficit. This would mean an increase in power tariffs.”
Power generation and distribution companies that supply to Mumbai, Tata Power and Adani Power, may have to look at adding fuel adjustment charge (FAC) to the electricity bill very soon. FAC represents the variation in fuel costs borne by the power generating companies which are eventually recovered from the consumers.
Russia-Ukraine war impact
The price of coal in Indonesia, the world’s biggest thermal coal exporter, has seen a significant jump following Russia’s invasion of Ukraine. In early March, the coal prices hit an all-time high with benchmark Newcastle futures hitting $400 a ton.
While Tata Power, one of India’s biggest power generators, states that it is making all efforts to avoid a tariff hike, the company imports most of the coal from Indonesia.
Tata Power supplies electricity to Mumbai from its 66-year old Trombay Power Station
“All efforts are made by Tata Power to optimise the power supply cost by pooling in power from coal, gas, hydro, and renewable power to avoid any tariff rise on account of FAC to consumers. Tata Power sources most of the coal from Indonesia through long-term fuel supply agreements linked to the local indexation. Hence, the coal sourcing cost is very much optimised,” a Tata Power spokesperson said.
Tata Power supplies electricity to Mumbai from its 66-year old Trombay Power Station which uses only imported coal for power generation due to strict environmental norms.
“The supply to Mumbai consumers is a mix of the 180 MW gas-based price that is linked to APM gas, and 440 MW of hydropower that brings down the pool cost of power. In addition to this, Tata Power sources nearly 350 MW of renewable power at very competitive tariffs,” the company added.
Sources say that Tata Power could look to increase electricity tariffs by a little over ₹1 under the FAC.
Adani’s hike options
Adani Electricity Mumbai (AEML), a 100 per cent subsidiary of Adani Transmission, the other big power supplier to Mumbai and its suburbs, will also have to look to pass on the FAC to its consumers. However, the quantum of the hike could be less than one-fourth compared to Tata Power’s.
AEML supplies power to Mumbai from its Dahanu unit which majorly uses domestic coal for generation. The unit uses imported coal only as a substitute when there is a shortfall of domestic coal. The consequent increase in electricity tariff could be ₹0.25 or less.
An AEML spokesperson said, “100 percent domestic coal supply to Dahanu TPP ensures that consumers are not impacted by the alarming increase in imported coal prices. Further, the commencement of power supply under the 700 MW renewable energy PPA has significantly diminished our exposure to merchant power prices. Consumers can expect AEML’s tariff structure to be the most economical and sustainable choice.”
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