NimmaKarnataka.com

Power from private source costs Karnataka Rs 14 a unit

Wednesday, 11 June 2008

Power from the GMR group-owned Tanir Bavi Power Company Ltd (TBPCL) cost Karnataka distribution companies a whopping Rs 14 a unit in the financial year 2007-08. In 2007-08, Karnataka drew only 521 million units of power from the barge-mounted 220 mega watt naphtha fired project. The reason: Karnataka during most period of the 7-year life of the power purchase agreement (PPA) had backed down the project. But the bill for the year, towards reimbursement of fixed and variable costs, ended up being in excess of Rs 730 crore resulting in the average cost per unit working out to Rs 14. Drawals from the plant were mostly used for meeting emergency situations – meeting peaking demand and for averting grid outages. Despite the best demand management by the State utilities, demand during the peak hours had exerted pressure on the grid, leading to a drop in the quality of electricity supplied to a level that is below the mandated norms. Liquid fuel plants such as the TBPCL were useful in such situations, due to their capacity for being quickly put on stream. Actual generation from TBPCL during most of the PPA life was less than 50 per cent of the 1.6 billion units a year that the plant was capable of producing . Ironically, generation from the project was the highest in 2007-08, when the variable component of the tariff was high. In contrast, during 2001, when TBPCL began feeding into the grid, power tariffs were about Rs 4.60 a unit, inclusive of the variable costs. In 2007-08, the variable costs alone were in excess of Rs 9 a unit. Electricity from hydel sources cost less than 40 paise a unit and coal based about Rs 1.70 a unit, inclusive of both fixed and variable components. According to the PPA, fuel prices were fully passed through into the tariff for power sourced from the plant. Fuel cost in 2001, at the time of project commissioning, was about Rs 14,000 a tonne. In financial year 2008, the terminal year of the PPA, naphtha prices escalated close to about Rs 40,000 a tonne. The fixed component of TBPCL tariff would have been lower if drawals from the power plant were closer to the rated capacity. This was because the fixed charges [which include both return on equity (ROE) and interest service costs] of 4 cents a unit, would have been split over larger generation. According to the PPA, Bangalore Electricity Supply Company (BESCom) and Mangalore Electricity Supply Company (MESCom) were liable to pay fixed charges for a deemed plant load factor of 85 per cent. The effective fixed charge worked out to about Rs 1.84 a unit. Accordingly, the fixed component of the power tariffs alone worked to an expenditure of about $66 million (Rs 264 crore at an exchange rate of Rs 39.97) in FY08. With the two companies bound by the PPA, GMR realised at least a return of about $67 million on its equity of $60 million in the project, during the 7-year PPA period.

 

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