CESC brings in variable tariff as coal prices rise

Power utility CESC Ltd has introduced a concept of monthly variable cost adjustment MVCA) for its customers for the first time, raising its tariff by 10% for the month of April, following a steep hike in coal prices, increase in power purchase costs. The move aims to cover imposition of central excise duty of coal, the company said in a notification.

CESC’s average tariff was Rs4.50 a unit before the hike. The company had earlier applied to the state power regulator for a tariff hike, which has now been accepted.

As the name suggests, under the MVCA concept, tariff would be adjusted on a monthly basis based on changes in cost factors giving CESC higher flexibility in tariff determination.

“The monthly variable cost adjustment has been introduced from April 1, as per West Bengal Electricity Regulatory Commission (terms and conditions of tariff) Regulations 2011.

Recovery of MCVA will be effected from all customers of and purchasers of electricity from CESC Ltd under the purview of West Bengal Electricity Regulatory Commission, computed in terms of the fuel surcharge formula contained in the regulations,” the notification said.

CESC vice-chairman Sanjiv Goenka had recently said that the company has suffered a hit of around Rs250 crore due to the 30% hike in coal prices by Coal India, a move which was described by him as steep and arbitrary. Coal India on February 27 increased the prices of A and B grade coal by 150% while prices for grade C and below were raised by 30%.

“As a consequence of sharp increase in coal price together with introduction of central excise duty on coal and increase in power purchase costs, MVCA in accordance with fuel surcharge formula contained in the West Bengal Electricity Regulatory Commission (termsand conditions of tariff) Regulations 2011 works out to 46 paisa per kWh for April 2011,” CESC said in the notification.

CESC’s power purchase costs went up by 43%, going up to Rs140 crore during January-March from Rs98 crore in October-December.

This apart, CESC would also be recovering a part of the 5.15% central excise duty with education cess levied on coal prices with effect from March.