If you are complaining about the 13 paise hike in per unit of power that has come into effect, get ready to also pay the Fuel Cost Adjustment that will be added to your bills once every three months. The Karnataka Electricity Regulatory Commission (KERC) has taken the decision to meet the increasing cost of coal and petroleum products incurred by power generating companies.
The power purchase cost of electric supply companies, or escoms, includes fixed and variable components. The main part of the variable cost is the expense of fuels like coal, diesel, naphtha etc. The price of these fuels varies periodically, and power-generating companies pass on the cost to Escoms, who in turn are supposed to recover it from consumers. “It is going to be an insignificant adjustment and consumers may have to pay just around two to three paise, that too depending on the type of fuel. For instance, in Bengaluru, there is only one diesel-based plant in Yelahanka. Coal prices too fluctuate, but not that significantly,” said a senior Karnataka Power Corporation official.
For the consumers, the fuel adjustment charges (FAC) will come into effect from August. The KERC, however, is still debating whether to pass on the FAC only to industrial and commercial consumers or to include domestic consumers as well. The decision to introduce FAC was taken based on an order by the Appellate Tribunal for Electricity (OP No.1/2011 dated November 11, 2011), which had issued directions to introduce a formula/mechanism for passing on the variation in the cost of power on account of changing fuel prices to consumers.
“The commission will issue a separate order, which will be effective from this year,” KERC Chairman M.R. Srinivasamurthy has stated while passing the order. The new order will hit the industrial users the most, who already have to bear a higher cost of increased power tariff. “We have to accept that fuel prices are going up and that FAC is unavoidable. But the problem is that there is a hike every year and there is also a lot of uncertainty, which is proving disastrous for the industries. Industrial production in the state has slid by 3 per cent.
If there are so many variable expenses, how will the industry be competitive,” asked M.G. Prabhakar, Energy Secretary, Federation of Karnataka Chambers of Commerce & Industry.