By Sumarbin Umdor
There is much consternation in the state regarding the steep increase in power tariffs proposed by the MePDCL. As reported by Shillong Times on 14.03.2014, the Chief Minister has clarified that “the tariff petition by the Meghalaya Power Distribution Company Limited does not indicate a hike of 500 per cent. They have proposed an increase of only 89 per cent”. The tariff petition for 2014-15 includes increase in fixed charges as per load and in the energy rate as per unit consumed across 34 different consumer categories. The hike in fixed charges is between 229 to 500 percent, while the increase in energy rate varies from a low of 1 percent to a high of 257 percent. Since more than three-fourth of consumers of electricity in the state comprise of low tension domestic consumers, we now look at how the proposed tariff hike will affect this category.
MePDCL has proposed to increase the fixed charges for domestic category to Rs. 210 per kW per month from the present rate of Rs. 35. Further, it has also proposed to reduce the tariff structure in this category from three to two tariff blocks along with an increase in per unit energy charges to Rs. 4.16 for first 100 units and thereafter Rs. 5.19 for successive units consumed. The proposed hike in fixed charges is 500 percent while the increase in energy charges is 56 percent for consumption of 300 units. In terms of electricity bill, domestic consumers with a load factor of 3 kW and average consumption of 200 units will see their monthly bill go up from Rs. 665 to Rs. 1565 which translates to an increase of 135 percent.
So how do the proposed tariff hike in the domestic category compare with power tariff prevailing elsewhere in the country? In the neighboring state of Assam the monthly fixed charges is Rs. 30 per kW while in Manipur it is Rs. 60 per kW. In West Bengal and Tripura, states cited by the Chief Minister, domestic consumers have to pay monthly fixed charges of Rs. 30 per kW and Rs. 60 per kW respectively. I find that Haryana levies the highest fixed charges at Rs. 100 per kW for first 2 kW and Rs. 60 for additional kW. So even if only 50 per cent of the proposed hike in fixed charges is finally approved by the Meghalaya State Electricity Regulatory Commission (MSERC), the new fixed charges at Rs. 105 will still be among the highest in the country.
In terms of energy rates, most of the states are following what is known as increasing block tariffs (IBTs) in which per unit energy rate for first 100-120 units consumed is between Rs. 2 to Rs. 3.5 and thereafter the unit price increases in successive tariff blocks. Most of the states in the country have four to six tariff blocks with Andhra Pradesh having ten such blocks where the energy rates progressively increases from Rs. 1.45 per unit for lowest block (upto 50 units) to Rs. 8.38 for highest block (500 units and above). In Assam we have a three block tariff structure where energy charges for first 120 units is Rs. 3.58 per unit with government subsidy. Per unit energy charges beyond this limit increases to Rs. 5.45 for consumption between 21-240 units and Rs. 6.15 for consumption above 240 units. Tripura has a four block tariff structure for urban areas (five for rural consumers) where the energy rate per unit starts at Rs 4.50 for lowest slab of up to 50 units, Rs. 5.60 for next 100 units, Rs. 5.80 for next 150 units and highest rate of Rs. 6.90 for 301 units and above. In most cases, the price difference between the lowest and highest tariff blocks is between Rs. 2 to Rs. 4
IBT is a step pricing model that charges lower rate at the first block called the lifeline block where the consumption of energy is for meeting basic household essential needs. The lower rate is usually subsidised to protect the interest of the low income consumers. Thereafter, the rate increases in successive blocks and consumers have to pay higher rates as their consumption increases thereby encouraging consumers to save energy. This pricing model is said to address both equity and efficiency goals. However, the effectiveness of the pricing model depends on the numbers of blocks and the price in different blocks.
In case of tariff proposal of MePDLC, the new energy pricing structure for domestic consumers has only two only tariff blocks and the price difference between the blocks is only Rs. 1.03. While the state power utility has provided justification for its proposal for sharp increase in fixed charges, there is no such explanation for reducing the tariff blocks to two and also for the small price difference between the blocks. Therefore, some of the issues that MSERC will have to consider while passing the new tariff order for the domestic category for 2014-15 are (i) how much of an increase in fixed charges is justified and whether it should be same for different blocks (ii) what is the rationale for reducing the tariff blocks to two and whether we need to have more tariff blocks and higher energy charges for higher consumption (iii) should state subsidy be limited only up to a certain consumption block. Besides, the Commission will also have to look into other issues concerning proposed tariff hike in the other two important consumer segments under BPL (Kutir Jyoti programme) and commercial categories. In taking a final decision, MSERC will have to strike a balance between the need to ensure the financial viability of power sector in the state while at the same time serving the interests of consumers by ensuring the availability of electricity at reasonable rates.