The Central Electricity Authority (CEA) has proposed a nationwide overhaul of electricity tariffs, recommending a sharp increase in fixed monthly charges paid by consumers. This move comes as power distribution companies (discoms) struggle to recover costs amid rising rooftop solar adoption and migration of industries to captive power.
The proposal could eventually mean consumers paying a larger portion of their bill as a compulsory monthly charge, regardless of actual power consumption. In a report to be placed before the Forum of Regulators for implementation, the CEA stated that discoms recover a large part of their fixed costs through per-unit electricity charges instead of assured monthly payments, making their finances vulnerable whenever demand falls.
Current Cost Structure
Expenditure on transmission, salaries, maintenance of networks, and payments to power generators account for 38% to 56% of a power utility's cost. However, revenue from fixed charges contributes only 9% to 20%, according to the report.
Impact of Rooftop Solar and Captive Power
The CEA noted that industries and affluent households shifting to rooftop solar, open access, and captive power projects sharply reduce electricity purchases from discoms but continue relying on the grid for backup supply. This trend exacerbates the financial strain on discoms.
Recommended Phased Approach
The authority has recommended a calibrated and phased approach for targeted recovery. Key recommendations include:
- Progressively increasing fixed-cost recovery from domestic and agriculture consumers to 25% by 2030.
- Increasing fixed-cost recovery from industrial, commercial, and institutional categories to 100% by 2030.
- Introducing separate tariff structures for rooftop solar and net-metering consumers.
The report suggests that the fixed-cost recovery for domestic and agriculture consumers could be increased incrementally, while industrial and commercial users may face a more rapid transition to full fixed-cost recovery.
This proposal aims to stabilize the financial health of discoms, ensuring they can maintain grid reliability and invest in infrastructure, even as more consumers adopt distributed energy resources.
