madras chamber of commerce & industry and india energy forum

Madras Chamber of Commerce & Industry andIndia Energy Forum

Session on

Rationalisation of Electricity Tariffs

Anand MadhavanHead – Energy & Urban Infrastructure

Chennai 5 Sep 2014

© IMaCS 2014Printed 20 Apr 2023

Key challenges to financial sustainability

Persistent gaps between Average Cost of Supply (ACS) and Average

Revenue Realisation (ARR).

Wide band of Cross Subsidies beyond limits stipulated in the National

Tariff Policy

High HT tariffs are making Industry (particularly SMEs) vulnerable and

render them non-competitive; even as there is continued reluctance to fix /

rationalise tariffs in other segments


Trend in ACS Vs ARR gap – Tamil Nadu

Key related provisions of Financial Restructuring Plan (FRP)•Regular redetermination of tariff to cover cost of service OR State Govt to fund the gap•Gradual elimination of gap between ACS and ARR•Operational turnaround by 2015-16


Category wise ARR Vs ACS – Tamil Nadu


Residential Tariffs..1All sub-categories are subsidized

1. CC I - Consumers who consume from 51 units to 100 units per month

2. CC II - Consumers who consume from 101 units to 250 units per month

3. CC III - Consumers who consume 251 units and above per month

CC I CC II CC III

Average Cost of Service approved by TNERC is 658 paise per kWh for FY 2013-14


Residential Tariffs..2High consumption category ~ Rs. 1000 crore

Estimated under-recovery from domestic

consumers vis-à-vis Avg. Cost to Serve ~

Rs. 6,000 Crore

Subsidy provided by GoTN to the

domestic category was Rs 1,888 Crore

Estimated Consumer sub-segment wise

underpayment (Rs Crore)


Tariff v/s ACOS (Rs 5.24/kWh)

Several categories have tariffs outside the +/- 20% band, actual Several categories have tariffs outside the +/- 20% band, actual

Source- TANGEDCO Tariff Order dated 20 June 2013

National Tariff Policy – Tariffs within ± 20% of Average Cost of Supply

CategoryABR (Rs. /kWh)

ABR / ACOS (%)

HT Industries 7.41 141%

HT Railway Traction 6.51 124%

HT Government EducationalInstitution etc.

5.42 104%

HT Pvt. Educational Institutes etc.

6.84 131%

HT Commercial & others 8.61 164%

HT Lift Irrigations and Co-ops

3.50 67%

HT Temporary 10.68 204%

HT Categories 7.39 141%

CategoryABR (Rs. /kWh)

ABR / ACOS (%)

LT –Domestic 3.44 66%

LT –Huts 4.43 85%

LT -Bulk Supply 4.06 77%

LT -Public Lighting and Water works 5.50 105%

LT -Government Educational Institutions 6.03 115%

LT -Pvt. EducationalInstitutions

7.37 141%

LT - Places of Public Worship 5.93 113%

LT-Cottage and Tiny Industries 4.02 77%

LT –Powerloom 5.33 102%

LT-Industries 6.20 118%

LT Agriculture and Govt. Seeds farm 2.61 50%

LT – Commercial and other 7.53 144%

LT Temporary Supply 11.62 222%

LT Categories 4.21 80%


Steep increase in subsidies

Rs Cr

Rs Cr

Subsidy provided to

TANGEDCO was 5.1% of

GoTN revenue in FY 2013

Subsidy > 20% of gross fiscal deficit of

GoTN in year 2013 and 2014 (estimated)


Tariff order for 2012-13 estimated an expense of Rs 4.99 / kwH while actual expenses approved later is about Rs 5.58 / kWh

Category 2010-11 2011-12 2012-13

Sales (MU) 53746 53896 58861

Net Aggregate Revenue requirement (Rs. Cr) 28364 31488 29346

Revenue from existing tariff (Rs. Cr) 18362 18076 21472

Revenue gap at existing tariff (Rs. Cr) 10002 13411 7874

Net Gap from tariff including carrying cost (Rs. Cr) 5422 14149 -

Addnl. revenue for FY 2013 @37% tariff hike (Rs. Cr) - - 7875

Revenue from proposed tariff for FY 2012-13 (Rs. Cr) - - 29347

Source: Tariff Order for FY 2012-13 dated 30 March 2012


Tariff order for FY 14 estimated an expense of Rs 5.24 / kwH; Actual expenses to be higher

Tariff Order for FY 2013-14 dated 20 June 2013

Category 2010-11 2011-12 2012-13 2013-14 Revised Sales (MU) 21277 53938 50695 57199

Net Aggregate Revenue requirement (Rs. Cr) 11898 28953 30472 29946

Revenue from existing tariff (Rs. Cr) 7848 19475 23561 27014

Revenue gap at existing tariff (Rs. Cr) 4050 9478 6911 2932

Cum. Revenue Gap for FY 11-13 20439 -

Addnl. Revenue for FY 2014 @3.5% tariff hike (Rs. Cr) - - 964Revenue from proposed tariff for FY 2013-14 (Rs. Cr) 27978

Source: Tariff Order for FY 20123-14 dated 20 June 2013


As a result, TANGEDCO continues to sustain operating losses

Annual losses of the utility (Rs Crore)


Bridging gaps in cost recovery central to TN’s Energy security

Align tariffs in line with National Tariff Policy

• Bridging ACS-ARR gaps; eliminate phase-out ‘non-merit’ subsidies

• Align cross subsidies to a +/- 20% subsidy band

• Regular Periodic increases to avoid tariff shocks

Address power procurement and efficiency

• Appropriate mix of Case I / Case II and own augmentation

• Utility-level Demand Side Management initiatives

Invest in Smart Grids and fix transmission, distribution bottlenecks

• Address evacuation bottlenecks

• Sharper reduction in AT&C losses

• Segregated feeders for Agriculture


Thank You


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For any clarifications on this document, please contact:Anand MadhavanHead – Energy and Urban Infrastructure

email: [email protected]

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