Know Your Electricity Bill Compounded with Fuel Surcharge

 Q.1. What are FPPA charges being levied by B.S.E.B ?

October’11Rs.0.43 per unitAugust’11Rs.0.60 per unit

September’11Rs.0.25 per unitOctober’11Rs.0.43 per unit

October’11Rs.0.43 per unit

Period Rate
Oct’08   –  March’09 Rs.0.69 per unit
April’09 –  Sept’09 Rs.0.69per unit
May’11 Rs.0.45 per unit
Oct’09   –  March’10 Rs.0.78 Per unit to be payable in twelve monthly installments without any delay payment surcharge to all LT consumers and Railways and in twenty four installment to all HT consumers
May’11 Rs.0.45 per unit
June’11 Rs.1.18 per unit
July’11 Rs.0.79 per unit
August’11 Rs.0.60 per unit
September’11 Rs.0.25 per unit
October’11 Rs.0.43 per unit

Q.2 What is Fuel and Power Purchase Cost Adjustment;

The FPPA,or the Fuel and Power Purchase Cost Adjustment is one of the automatic cost recovery mechanisms approved by the Electricity Regulatory  Commission (E RC), for utilities such as B S E B  or other power distributors, to recover costs of power purchased from generators such as the NTPC  (Farakka Talchar, Kahalgaon, KBUNL)  NHPC (Ranjit, Teesta), PTC (Chukka ,Tala)  and own generating units which is not recovered by the basic rate.Fuel and Power purchase cost are uncontrollable in nature and are volatile making it difficult to accurately estimate power purchase costs at the time of annual tariff fixation. The power purchase cost is beyond the control of distribution licensees and dependent upon following factors: (a) Price of Fuel which are highly unpredictable as has been seen from past few years. (b) Availability of Power from New Sources (c) Weather conditions such as extreme harsh summers/ cold which have direct impact on the demand (d) Demand Supply Gap of the power within the country. 

LEGAL PROVISIONS

 The provisions of various Acts, Regulations and Policy documents, which enable the Commission to devise, adopt and implement a power purchase/ fuel price adjustment mechanism are as follows:-

Indian Electricity Act’2003

Section 62 (4)

No tariff or part of any tariff may ordinarily be amended more frequently than once in any financial year, except in respect of any changes expressly permitted under the terms of any fuel surcharge formula as may be specified.”

 (d) National Tariff Policy notified by Ministry of Power, Government of India

 Clause-5 (h-4): Multi Year Tariff

Uncontrollable costs should be recovered speedily to ensure that future consumers are not burdened with past costs. Uncontrollable costs would include (but not limited to) fuel costs, costs on account of inflation, taxes and cess, variation in power purchase unit costs including on account of hydro-thermal mix in case of adverse natural events.

 Clause 8.2.1: Framework for revenue requirements and costs

 The following aspects would need to be considered in determining tariffs:

 (1)…….. Actual level of retail sales should be grossed up by normative level of T&D losses as indicated in MYT trajectory for allowing power purchase cost subject to justifiable power purchase mix variation (for example, more energy may be purchased from thermal generation in the event of poor rainfall) and fuel surcharge adjustment as per regulations of the SERC.

 Tariff Regulations of Bihar Electricity Regularity commission’2007(Terms and condition for determination of Tariff) also states that “The Commission shall allow the recovery or refund; as the case may be, of additional charge for adjustment of tariff on account of change in fuel related costs of electricity generation and purchase of electricity within the period of a notified tariff order of the Commission.” In this regulation, a fuel surcharge formula is specified in order to recover the additional burden:

 Q.2  How FPPA is being charged by BSEB ?

Bihar State Electricity Board submits the FPPA charges to be levied from consumer to regularity Commission every month and charge it after its approval from the Commission.

Q.3 Name of the category of consumers who have to pay FPPCA

To be charged from all category of consumers except Kutir Jyoti/BPL (Rural and Urban) and Pvt. Agriculture consumers ( DS-1 , DS-II, NDS-1 ,NDS-II, NDS-IIA, NDS-III, NDS-IIIA,  LTIS-I, LTIS-II,PWW, Street Light, HTS-I, HTS-II, HTS-III, HTSS)

Q.4. Why are the consumers being charged (FPPA)?

If we can recall during the power crisis, it was the entry of the IPPs that helped augment NPC’s generating capacity, and eventually solve the crisis. NPC contracted these IPPs to augment system capacities, and utilize these capacities, together with NPC, to meet the increasing demand. This combination of NPC generation plus the IPPs’ helped lessen, and eventually eradicate unnecessary brownouts and blackouts, solving the power crisis. But as mentioned before, a lot of factors affect power generation. The contracted price between the Power Generators Like NTPC,NHPC is not enough to cover the costs of generation and purchased power due to rise in fuel and power cost. This means that the basic rates being charged by BSEB to customers do not reflect the true costs of electricity, and is not market-based. To correct this discrepancy, and allow the utilities to recover their costs of generation and purchased power, adjustments through the FPPA had to be applied.

Q.5 Do all utilities charge the FPPA?

No. However, all electric distributors that purchase their power from generating company are allowed by the ERC to charge the FPPA. As a condition these charges must be revenue-neutral. The utilities should not earn any profit from them.

Q.6.Are all the utilities charging the same level of FPPA?

No. The FPPA of the distribution utilities vary depending on when their basic rates were last adjusted, or when its basic rate was last reviewed. It depends on the formula being used by the distribution utility charging the FPPA. Although there are similarities in the formula, they have different basic rates. These depends on when these utilities last filed for a petition to review and adjust their basic rates with the ERC. Utilities whose basic rates have not been adjusted for a long time charges bigger PPAs.

Q.7. How theFuel Surchage is calculated

It is based on the under noted Formula:

FORMULA APPROVED FOR FUEL AND POWER PURCHASE COST ADJUSTMENT

 The approved fuel and power purchase cost adjustment (FPPCA) formula ( BERC)is given below:

   FPPCA (Paise /kWh) = Qc(RC2‐RC1)+Qo(RO2‐RO1)+QPp(Rpp2 ‐Rpp1)     X100

                                       (QPg + QPp) x (1‐L) ‐ PSE

Where,

Qc =Quantity of coal consumed during the adjustment period (in M.T)

(SHR x QPg) (1+TSL)x1000 / GCV

 RC1 = Weighted average rate of coal supplied ex‐power station coal yard as approved by the Commission for the adjustment period in Rs. / M.T

 RC2 = Weighted average rate of the coal supplied ex‐power station coal yard as

per actual for the adjustment period in Rs. / M.T

 Qo =Quantity of oil (in KL) consumed during the adjustment period Generation (in MU) X Specific oil consumption approved by the Commission (ml. / kWh) RO1 = Weighted average rate of oil ex‐power station (in Rs./KL) approved by the Commission for the adjustment period

 RO2 = Weighted average actual rate of oil ex‐power station supplied (in Rs. /KL) during the adjustment period

 QPp = Power purchased from different sources and fed into Board’s system (in MUs)

 Rpp1 = Average rate of power purchase as approved by the Commission(in Rs. / kWh)

 Rpp2 = Average rate of power purchased during the adjustment period (in Rs. / kWh)

 QPg = Board’s own power generation (in MUs) at generator terminal –approved auxiliary consumption

 L = T & D loss as approved by the Commission or actual, whichever is lower.

 PSE = Power sold to exempted categories (agriculture (private) and BPL consumers only)

 SHR = Station Heat Rate as approved by the Commission.

 TSL = Transit and Stacking Loss as approved by the Commission.

 GCV = Weighted average gross calorific value of coal fired at boiler front during the adjustment period (in Kcal / Kg)

 Note:

 1) Amount of variable charges on account of change of cost of unknown factors like water charges, taxes or any other unpredictable and unknown factors not envisaged at the time of tariff fixation subject to prior approval of the Commission.

 2) Adjustment, if any, to be made in the current period to account for any excess / shortfall in recovery of fuel or power purchase cost in the past adjustment period, subject to the approval of the Commission.

 The approved (FPPCA) formula is subject to following conditions:

 (i) The basic nature of FPPCA is ‘adjustment’ i.e. passing on the increase or decrease, as the case may be.

 (ii) The operational parameters / norms fixed by the Commission in this tariff order shall be the basis of calculating FPPCA charges.

 (iii) The FPPCA will be recovered in the form of an incremental energy charge (Rs/kwh) in proportion to the energy consumption and will be forming a part of the energy bill to be served on monthly/bimonthly or any other periodical basis as specified by the Commission.

 (iv) Incremental cost of power purchase due to deviation in (respect of generation mix) power purchase at higher rate, etc. shall be allowed only if it is justified to the satisfaction of the Commission.

 (v) Any cost increase by the Board by way of penalty, interest due to delayed payments, etc. and due to operational inefficiencies shall not be allowed.

 (vi) FPPCA charges shall be levied on all categories of consumers, except agriculture (private) and Kutir Jyoti / BPL consumers.

 (vii) The data in support of FPPCA claims shall be duly authenticated by an officer of the Board, not below the rank of Chief Engineer on affidavit.Supported with the certified copy of energy bills of power purchase ,transmission and RLDC charges, coal and its transportation cost, oil purchase bill and the quantity of coal and oil consumed during the month.

 (viii) Variation of FPPCA charge will be allowed only when it is 5  paise and more per unit.

 (ix) The formula will be applied on monthly basis by BSEB after seeking the regulatory approval. The incremental cost per kWh due to this FPPCA arrived for a month shall be recovered in the subsequent month through energy bills and so on. The BSEB shall, however, be obligated to provide all relevant information to the Commission simultaneously and in any case where the Commission observes any discrepancies, the same will be adjusted during the subsequent month. This mechanism will provide administrative and regulatory simplicity.

 X. The approved is subject to review as the commission may deemed fit.

Q.8 Can the FPPA be abolished?

No. The FPPA is being used by the distribution utilities to recover costs of purchased power. This means that the FPPA is used to pay the generators for the additional expenses incurred in producing electricity not covered by the basic rate or charge. Should the FPPA be abolished, the distribution utilities will not be able to meet payments for purchased power from the generators. This may cause generators to stop operation, which could result to another power crisis.

 Q.9 what is prevalent practice in other states ?

 The Power Purchase/ Fuel Price Cost adjustment mechanism is already in place in many states. The mechanism and frequency of adjustment in some of the States is given in the following Table:

 Sate

Power Purchase Cost Adjustment

Fuel Price Adjustment

Frequency of Adjustment

Kerala

Yes

Yes

Quarterly

Bihar

Yes

Yes

Half Yearly

Chhattisgarh

No

Variable Cost Adjustment

Time to Time

Gujarat

Yes

Yes

Quarterly

Haryana

Yes

Yes

Quarterly

Jharkhand

Yes

Yes

Quarterly

Andhra Pradesh

No

Yes

Quarterly

Punjab

No

Yes

Quarterly

Madhya Pradesh

Yes

Yes

Half Yearly

Tripura

Yes

Yes

Time to Time

West Bengal

Yes

Yes

Yearly

Assam

Yes

Yes

Quarterly

Maharashtra

Yes

Yes

Quarterly

Orissa

Yes

Yes

Quarterly

Uttar Pradesh

Yes

Yes

Quarterly