Delhi DERC Proposes Monthly Automatic Imposition of Power Purchase Adjustment Surcharge for Consumers

The Delhi Electricity Regulatory Commission (DERC) has released a draft notification proposing monthly automatic adjustments in the Fuel and Power Purchase Adjustment Surcharge (FPPAS). This change aims to recover increased fuel costs from consumers without needing regulatory approval. Stakeholders have until September 24 to provide feedback on these proposed amendments to the DERC Terms & Conditions for Determination of Tariff Regulations, 2017.

Previously, the FPPAS was determined quarterly by the DERC and required approval before being charged to distribution companies (discoms). The proposed amendment to Regulation 134 will allow FPPAS to be calculated and billed automatically each month, based on a formula set by the Commission. This shift eliminates the need for regulatory permission, streamlining the process.

Impact on Power Costs and Discoms

The FPPAS reflects changes in power supply costs due to rising fuel prices, such as coal and gas used by generation companies. The surcharge will be applied as a percentage increase on total energy charges and fixed charges billed to consumers. However, it will be capped at 10% of these charges, according to the notification.

Sources within Delhi's discoms have welcomed this draft regulation. They believe that monthly recovery of power purchase cost variations will enhance financial stability for distribution companies. Timely adjustments through monthly recovery are expected to ease working capital pressures, as power purchase costs significantly impact discoms' annual revenue requirements.

Concerns Over Capping and Financial Implications

Despite the positive outlook, some discom sources have expressed concerns about the 10% cap on PPAC realisation. They argue that this restriction could lead to under-recovery, especially during periods of significant power price fluctuations. The capping is intended as a safeguard but may result in accumulating regulatory assets and carrying costs, which are eventually passed on to consumers.

The draft notification seeks to amend Regulation 134 of the DERC Regulations 2017. It outlines that FPPAS will now be calculated and billed automatically each month without requiring regulatory approval. This change aims to streamline the process and ensure timely adjustments in response to fluctuating power purchase costs.

Overall, while the proposed changes aim to improve financial stability for discoms, concerns remain about potential under-recovery due to the cap on surcharge realisation. Stakeholders have been invited to provide their feedback on these amendments by September 24.

With inputs from PTI