DERC notification proposes automatic, monthly imposition of power purchase adjustment surcharge

New Delhi, Aug 29 (PTI) Delhi's power regulator DERC has issued a draft notification for monthly, automatic imposition of Fuel and Power Purchase Adjustment Surcharge (FPPAS) to recover the increased cost of fuel from consumers, and doing away with regulatory permission needed by discoms.

The Delhi Electricity Regulatory Commission (DERC) has sought feedback from stakeholders by September 24, on the proposed amendments in the DERC (Terms & Conditions for Determination of Tariff) Regulations, 2017.

The draft notification seeks to amend the Regulation 134 of the DERC Regulations 2017. The FPPAS is the change in the cost of power supplied to consumers due to rise in prices of fuel like coal and gas used by generation companies.

According to the proposed amendment in the Regulation 134, FPPAS will now be "calculated and billed to consumers, automatically, without going through regulatory approval process, on a monthly basis, according to the formula prescribed by the Commission..." said the draft notification.

Earlier, the FPPAS was determined by the DERC and charged, on quarterly basis, after its approval to the discoms.

The percentage increase in power cost on account of FPPAS will be applied as a surcharge on total energy charges (units consumed) and fixed charges billed to a consumer. It will be capped at 10 per cent of the total energy charges and fixed charges, said the notification.

Sources in the Delhi discoms welcomed the draft regulation saying monthly recovery of variations in power purchase cost marks a "positive move" towards strengthening the financial stability of distribution companies.

The fluctuations in power purchase cost, the largest part of the annual revenue requirement (ARR) of discoms, directly affects their cash flow, so timely adjustments through monthly recovery will help ease working capital pressures, they said.

However, discom sources also expressed apprehension over 10 per cent cap on the PPAC realisation, claiming the restriction may lead to "underrecovery", specially during periods of sharp power price fluctuations.

The capping, which is intended as a safeguard, would lead to under-recovery, accumulation of regulatory assets, and carrying cost -- all of which ultimately get passed on to consumers, they claimed. PTI VIT VIT RHL TRB