MERC Clarifies That Green Energy Tariff To Be Treated As Tariff Income In Mumbai

The Maharashtra Electricity Regulatory Commission, has issued an ‘Errata’ order for its earlier order (case 134 of 2020 on March 22) allowing Tata Power company (TPC-D), one of the three Mumbai discoms, to provide ‘green tariff at a 66 paise premium to customers. The new order makes it clear that the premium being charged for providing green tariff to customers who opt for it, will be counted as tariff income, and hence, will be part of the Annual revenue Requirement(ARR). To quote ” Revenue earned through Green Power Tariff shall be treated as tariff income of Supply Business and thereby be fully accounted for reduction in ARR of supply business.”

The clarification is important because of the impression that was gaining that such green tariff would be considered as non-tariff income.

Earlier, Tata Power, while making a case for a Green Energy tariff, had stated that many corporates do not wish to go through this process of sourcing RE because either they are not eligible to avail open access under the current Regulatory framework or they do not have the resources, expertise and the bandwidth required for carrying out this activity. In view of this, these consumers have approached TPC-D to meet their requirement of 100% green energy through the energy sourced from TPC-D. Its petition had alluded to Karnataka, where where Karnataka Electricity Regulatory Commission (KERC) has already approved Green Power Tariff for the Distribution Licensee (BESCOM) since FY 2011-12 in the respective tariff orders.

Pointing out that the green tariff would only be applicable for consumers who wish for it specifically, thus avoiding additional cost on other consumers. Besides also reducing discom hesitancy on sourcing RE due to its high cost in cases.

Now, by making the additional revenue from green tariff as part of tariff income, one wonders if this wouldn’t lead to such RE consumers   actually subsidising other consumers?

After all, TPC-D, in its petition, had stated that “The Green Power Tariff recovered from these consumers for supply of 100% RE will increase the other business income of the distribution business. As per Section 51 of the EA, 2003, a proportion of the revenues derived from such business shall, as may be MERC Order in Case No. 134 of 2020 Page 4 of 21 specified by the concerned State Commission, be utilized for reducing its charges for wheeling. Therefore, these services will further subsidize the Annual Revenue Requirement (ARR) of the distribution business and normal tariff of the consumers may also get proportionately subsidized.”.

Of course, a counter argument  given by the other discoms (BEST and AEML) was on stranded power from conventional sources. “As more consumers opt for 100% green power, the Distribution Licensees will have to back down their conventional sources of power. As the power generated from conventional sources with PPA will reduce, per unit fixed cost of these plants will increase. This increase will go on multiplying as more and more consumers opt for 100% green power. The additional impact of fixed cost will be borne by other consumers of the Distribution Licensee who do not opt for green power”.

Note: MERC finally recommended charging only 50 percent of additional amount for green tariffs, to encourage higher participation from consumers.

Finally, despite pleas by other discoms to limit availability of such option to only HT consumers, the commission, in the interest of fairness, decided to make it available to HT as well as LT consumers.

The plan is to evaluate performance and issues if any, during the mid term review (MTR).