In a year almost you can expect your electricity bills to come down by 3-5 paise per unit as power distribution companies are now reported to make payments in advance to power generating companies and this is reducing working capital needs for these firms.
The expectation of a reduction in electricity rate has been raised via a letter of the power ministry which has asked to reduce the fixed cost charges allowed to power generating companies due to the reduction in the requirement of working capital.
As per officials, the power generation companies will be able to save more than Rs. 4000 crore in working capital and the regulators are now ascertained to pass on this saving to consumers as reduced tariff.
“It has been observed that in case of advance payment even for a day by the distribution company to generating and transmission company or by the consumer to the distribution company, there may be either no requirement or reduced requirement of working capital by generating company or transmission company or distribution company (in case of prepayment by the consumers). The present system of rebate in case of timely payment does not fully compensate against the reduced requirement of working capital,” the letter from the Ministry of Power to the regulators said.
Last week’s letter said the Appropriate Commission (State or Central) may decide on the reduction of Generation/Transmission Tariff in case of full or part advance payments by Discoms.
“From August 1, the government has come out with an order that all the distribution utilities have to pay in advance to the generation company or furnish a letter of credit. Distribution utilities are paying in advance and even a one-day advance has been allowed by subsequent amendments,” a top official at a private Discom told a leading business daily.
“… Discoms are foregoing the 45-day credit period provided in PPAs and funding payments to Gencos at market rate, based on the strength of their balance sheet. The current rebate mechanism for timely payment does not remunerate the Discom, but the Genco ends up with a reduced working capital requirement,” the official said.