Tariff revision seen imminent for CESC Kolkata discom

The tariff earned by generators must cover the risk for any curtailment of power by the distribution licensee for reasons other than grid security or transmission constraints. Unless producers are protected, investments will not flow into the sector.

With the conclusion of the assembly elections in West Bengal, analysts feel that power tariffs for CESC electricity consumers in Kolkata will now increase. CESC supplies electricity in its distribution circle in Kolkata at `7.31/unit, and the rate has been stagnant for the last three years due to the absence of any tariff revision.

“With the overhang of West Bengal elections now over, we expect the West Bengal Electricity Regulatory Commission to expedite the issuance of tariff order for CESC’s Kolkata discom, which has been pending for the past three years,” analysts at ICICI Securities noted.

CESC’s profits from the Kolkata business have remained stagnant as the tariff order has been pending for the past three years and has resulted in no growth in the power distribution unit’s regulated equity.

The new tariff order is expected to take into account the capex incurred by the company in the Kolkata distribution area in the past three years. CESC’s Kolkata distribution area spans across 567 square kilometres and comprises about 3.3 million consumers.

CESC also runs licensed power distribution business in Noida, and has distribution franchisees in Kota, Bharatpur, Bikaner and Malegaon. Reminding state electricity regulators to abide by the provisions of the Electricity Act, 2003, the Union power ministry has recently issued directives to ensure timely tariff revisions which will reflect the cost incurred by power distribution companies (discoms) to maintain and upgrade their network and systems.