TARIFF STRUCTURE OF TNEB

Transcription

1 CHAPTER V TARIFF STRUCTURE OF TNEB

2 5.1 Introduction 5.2 Technical Aspects on Tariff 5.3 Tariff Structure in TNEB 5.4 Procedure for Fixation of Tariff 5.5 Role of TNERC on Tariff 5.6 Analysis of Tariff

3 CHAPTER V TARIFF STRUCTURES OF TNEB 5.1 INTRODUCTION The fifth chapter deals with the tariff structure of TNEB and its impact on the profitability. Tariff is a set of rates designed by the TNEB primarily to raise revenue for the Board through the sale of power It is a vital economical factor which determines the profitability and continuous survival of the TNEB. The power to determine the Tariff to different category of consumers vested with the TNERC (Tamilnadu Electricity Regulatory Commission) 5.2 TECHNICAL ASPECTS ON TARIFF Tariff normally fixed on the basis of considering following technical aspects relating to generation, transmission and distribution of power. (i) Consumer s Load Factor (ii) Consumer's Power Factor (iii) Consumption of Energy in the Specified Period (iv) Geographical Position of any Area (v) Nature of Power Supply and (vi) The Purpose of Power Supply (i) Consumer's Load Factor Consumer's Load Factor over a period of one month or one billing period may be stated as the ratio of energy consumed in units during a particular billing period to the maximum demand in kilowatts reached during the said billing period multiplied by the 200

4 number of hours of the billing period. If the maximum demand is measured in KVA, then it is to be multiplied by power factor to arrive at the corresponding maximum demand in kilowatts. If a consumer avails demand uniformly throughout any billing period, the load factor will be unity. The load factor may vary between 0.1 and 0.9. In the cases where the demand variation is wide the load factor will be much below unity. (ii) Consumer's Power Factor Consumer's power factor depends upon the nature of appliances used in the consumer's load. Unity power factor loads cause minimum losses in the feeding side distribution and transmission lines. Therefore, it is natural that consumers having low power factor are penalized by charging penal charges and consumers with higher power factor are rewarded by the utilities. (iii) Consumption of Energy in Specified Period In any transmission grid there are peak demands during selected peak hours. In Tamil Nadu, the peak hours are 6.00 a.m. to 9.00 a.m. and 6.00 p.m. to 9.00 p.m. The peak demand determines the requirement of generation capacity. From the utility s point of view, if peak demand is reduced, the generation capacity requirements will be less to that extent and as a result reduced investment on generation capacity. It is common to provide disincentives in the tariff rates for availing supply during peak hours and incentives for availing supply during non-peak hours. (iv) Geographical Position of any Area Differential tariff rates can be adopted for Metropolitan, Non-Metropolitan areas, Municipalities and Village Panchayat areas, Rural and Urban areas in Tamilnadu. 201

5 (v) Nature of Power Supp!y The tariff rates may differ according to the voltage at which supply is given to any consumer. Power from various sources is pumped into the grid at EHT and HT voltages. All the power pumped at various voltages are not absorbed fully by the loads at the respective voltages. Normally the cost of supply at higher voltage is less than that at lower voltage. The different tariff rates are fixed for consumers for whom uninterrupted power supply is ensured and for consumers for whom power supply is made available only during particular hours in a day. (vi) The Purpose of Power Supply Different tariff rates can be fixed according to the purpose for which electric supply is used like domestic, commercial, industry and railway traction. It may be seen that the Act permits higher or lower rate for different purposes or categories for which the supply is used. If different rates or incentive or disincentive levies are proposed on account of factors like consumers' load factor, power factor, total consumption, consumption at specified time, geographical position and nature of supply. The reasons for such discrimination is to be spelt out in a transparent and acceptable manner. 5.3 TARIFF STRUCTURE IN TNEB The TNEB has its own tariff structure for various types of consumers in Tamilnadu. The customers are identified as Low Tension (LT) consumers and High Tension (HT) consumers. There are currently 19 broad consumer categories, within the LT and HT voltage groups. On the basis of usage of electricity, further they are classified as residential, commercial, agricultural and industrial category. 202

6 LT category consists of the following consumers: Domestic category for lights, fans and other house holds electrical equipments connected with the power load. Huts in village panchayats Actual places of public worship Public lighting, public water works and public sewerage system Agricultural and government seed farms Cottage and tiny industries Power looms Industries Information technology industries, software training institutes, recognized educational institutions, hostels run by recognized institutions, Government hospitals, research institutes and commercial establishments. Temporary supply of power under Low Tension. Registered factories, tea estates, textiles, fertilizers, steel plants, heavy water plants, caustic soda, railway traction, primary health centers, public libraries, water works, public lighting, places of public worship and supply to Pondicherry State. Under the existing tariff rates, there are six slab rates for domestic tariff. They are three slab rates for tiny industries and power looms. There are two slab rates for LT industries, IT industries and commercial services. Higher tariff rates are adopted for higher levels of consumption in all the categories of consumers. In addition, in the existing tariff structure there is a wide gap in tariff rates between HT and LT categories. For each category of consumers on account of less line loss and less investment for HT 203

7 categories compared to LT categories, normally HT tariff rates should be lesser than LT Tariff rates. In HT tariffs the structure of tariff scheduled as IA, IB, IIA, I1B and III separate energy charges for Chennai Metropolitan. An additional levy of ten paise per unit is being made for Chennai Metropolitan area. Likewise under LT tariffs the tariff classified as I IB, IIC, IIIB, IIIC and V. The ten paise difference is maintained between the rate adopted for Chennai Metropolitan area and that for non-metropolitan area. Under LT tariff II A for Public lighting different rates for Village Panchayats and for Municipality and Corporations are adopted. For High Tension Industrial Consumers 20 per cent extra on the energy charges is being charged for the energy consumed during peak load hours. The new industries in the areas other than the Chennai Metropolitan area running only night shift are given concession of 40 per cent in the energy rate for a period of seven months from July to January for the first five years. This night shift concession will be 20 percent if such industries run one day shift and one night shift. The existing tariff schedule of TNEB is given in the appendices. 5.4 PROCEDURE FOR FIXATION OF TARIFF In Tamilnadu before the enactment of various provisions relating to tariff through TNERC, the tariff for the different category of consumers are normally finalized by the TNEB. But after the formation of TNERC on the basis of advice given by CEA, the authority to fix and revise the tariff is vested with the Committee members of the TNERC. The TNEB is expected to file a petition to TNERC for any tariff revision in the existing tariff or for a new fixation of tariff. The ultimate authority to fix a new tariff or revise the existing tariff vested with the TNERC. Normally, after receiving the request 204

8 from the Board, TNERC circulate the new proposal on tariff to the respective category of consumers in order to get their views and suggestions on the same. Sometimes if necessary, they will hold a public meeting on this respect to finalise the tariff revision. The views and suggestions from the Government of Tamilnadu is also given proper weightage before finalising any matter relating to tariff revision or new tariff fixation. Only after thorough negotiation and consensus, the final tariff is normally approved by the TNERC. Once the tariff is finalised then the TNEB is expected to follow the tariff rates for its power supply to the different categories of consumers in Tamilnadu. The tariff in Tamilnadu was last revised on after a period of nearly two years. There was a backlog of tariff revision. As stated in the present proposal of the TNEB, the existing tariffs, based on the latest estimate of energy sold, would recover only Rs Crores against the total annual revenue requirement during financial year at Rs Crores. The gap of Rs Crores (after adjusting for non-tariff income and tariff compensation) needs to be covered at least partially through the revision in the tariffs. Similarly during financial year, TNEB would recover only Rs. 10, crore based on the estimated energy sold and recoveries from non tariff income and revenue subsidy is estimated at Rs crore and Rs. 250 crore respectively. As against this the total annual revenue requirement is also estimated at Rs. 13, crore. The gap of Rs crore is to be covered through additional revenue from the proposed tariff. 5.5 ROLE OF TNERC ON TARIFF According to the Electricity Regulatory Commissions (ERC), Act 1998 (Central Act No.14 of 1998) the Government of Tamil Nadu constituted Tamil Nadu Electricity 205

9 Regulatory Commission (TNERC) in the year The sub-sections (2) (c), (2) (e), (2) (0 and (3) of sections 29 of ERC Act are particularly important with reference to determination of retail tariff to consumers. The guidelines stipulated in sub-sections (2) (c), (2) (e) and (2) (f) of the Act are: (i) That the tariff progressively reflects the cost of supply of electricity at an adequate and improving level of efficiency, (ii) The interests of the consumers are safeguarded and at the same time, the consumers pay for the use of electricity in a reasonable manner based on the average cost of supply of energy and (iii) The electricity generation, transmission, distribution and supply are conducted on commercial principles. Therefore, it can be said that the guidelines to determine the terms and conditions for fixation of tariff stress that the basis for fixing tariff is the cost of supply of power to different category of consumers in Tamilnadu From the year 1999 onwards the following roles played by the TNERC on tariff fixation and revision. a. To determine the tariff for electricity whole sale, bulk, grid or retail as the case may be in accordance with the provisions in section 29 of the ERC Act, b. To determine the tariff payable for the use of the transmission facilities established by the TNEB c. To regulate power purchase and procurement process of the transmission utilities and distribution utilities including the price at which the power shall be procured from the generating companies, generating stations or from other sources for transmission, sale, distribution and supply in the State; 206

10 d. To promote competition, efficiency and economy in the activities of the electricity industry to achieve the objects and purposes of this Act. 5.6 ANALYSIS OF TARIFF The economical factors relating to tariff like average cost of power supply, average rate of realisation, different categories of consumers, different slab rates, cost recovery through tariff, break-even point, revision in tariff and tariff required to earn expected margin are analysesd by the researcher in order to test its impact on the financial performance of the Board during the period of the study. Table 5.1 CONSUMER CATEGORY-WISE AVERAGE TARIFF Paise / kwh Year Domestic Commercial Agriculture Industrial Railway Traction Outside State Source: Computed from the Annual Reports of TNEB. 207

11 CHART-5.1 CONSUMER CATEGORY- WISE AVERAGE TARIFF Year a

12 The consumer category wise tariff of TNEB is given in Table 5.1. The tariff is separately imposed on domestic, commercial, agriculture, industrial, railway traction and power to outside state. The tariff is shown in paise per kwh of TNEB. There is a slight increase in tariff from the year to From onwards it, suddenly decreased from to paise per kwh. From onwards, again there is an upward trend in tariff upto the year of In the year , it has been the same with the previous period tariff of paise per kwh. The commercial-wise tariff of TNEB shows a continuous increase in the tariff from (341.87) to (601.50). The average commercial tariff of TNEB during the study period is paise per kwh. During the first five years of study, it was above the average and afterwards it was more than an average of paise per kwh. This shows that there has been a continuous increase in the tariff of TNEB during the period of study. The agriculture-wise tariff is fixed only on the basis of amount charged on H.P connected to the pump sets in Tamilnadu. Hence, the tariff is very low when compared with other category of consumers. Actually, from the year onwards there is a Government order to supply free power to farming activities in Tamilnadu. Hence, the agriculture-wise tariff is calculated and given in the Table No During the first three years, it is only 1.12 paise per kwh, in the year , it was 1.31 paise per kwh. From to it is in between and paise per kwh. The industrial-wise average tariff to TNEB during 10 years of study period shows that there has been no abnormal increase or decrease in the tariff except in the year The average of industrial-wise tariff is paise per kwh. The tariff on power 208

13 supply to railway traction has increased from to as to per kwh in TNEB. From onwards it is only 350 paise per kwh during the period of study, and after that there has been no increase or decrease in tariff. The average tariff on power supply to other states is given in Table 5.1 which shows that there is a slight increase in tariff from to From to it is only paise per kwh. There is no increase or decrease in tariff on power supply to outside state during the period of study. Table 5.2 SUMMARY STATISTICS FOR CONSUMER CATEGORY-WISE TARIFF Paise/Kwh Category Min.Val Max.Val Mean SD C.V (%) C.G.R Domestic Commercial Agriculture Industrial Railway Traction Out side state Source: Computed from the Annual Reports of TNEB. (%) The tariff policy of the TNEB ultimately affects the financial performance of TNEB. The growth and further expansion of the selected unit depends upon the tariff policy adopted for different categories of consumers in Tamilnadu. The category wise average tariff rate of TNEB is given in Table 5.2. For the purpose of tariff fixation, TNEB consumers were grouped into like domestic, commercial, agricultural industrial, railway traction and outside state. The domestic wise tariff of TNEB had minimum value of and maximum of 265 paise/kwh. The compound growth rate domestic wise tariff is 2.77 percent. The commercial wise tariff had a minimum value of and 209

14 maximum value of with mean value of percent. The standard deviation of the same is along with growth rate of 7.18 percent. The agriculture wise tariff shows 1.12 and 24 as minimum and maximum value respectively. The growth rate for the same period is 55,34 percent. The industrial wise tariff of TNEB had a growth range of 4.27 along with 314,17 as minimum value and as maximum value during the period of study. The railway traction wise tariff showed a growth rate of 0.02 percent along with minimum and maximum value of and 465 paise/kwh respectively. The outside state wise tariff shows a minimum value of 111,66 and a maximum value of 300 which resulted in the compound growth rate of percent. Table 53 AVERAGE RATE OF REALISATION (CATEGORY-WISE) Paise / kwh Year Domestic Commercial Agriculture Industrial Railway Traction Outside State Source: Computed from the Annual Reports of TNEB. 210

15 a CHART 5.2 AVERAGE RATE OF REALISATION - CATEGORY-WISE l I l l Year OO'O 210a

16 The category-wise average rate of realization of TNEB is given in Table 5.3. It shows a clear cut idea about the practical realization of cash in the form tariff on different category of consumers. In TNEB within the category wise consumers of power, there are a number of slabs on the basis of power consumption in units, but only the average rate of realization is given for the purpose of analysis. In domestic-wise, there is a slight increase and decrease in the rate of realization (from to ). From is suddenly increased upto the year of During the last two years of study, it was on decreasing trend. The comparison of average rate of realization with the domestic-wise average tariff of TNEB shows that only during the year to , the average tariff is practically realized by the TNEB. Further there is a gap between average rate of tariff and average rate of realization of tariff. The commercial-wise average rate of realization on tariff of TNEB shows that there is a slight increase in tariff between and From onwards it increased year by year upto the end of the period of study. The comparison of rate of revision with the average tariff reveals that there is a much gap between tariff and rate of realization during the period of study. Hence, the researcher feels that the more efforts should be taken on tariff policy on commercial-wise category of consumers in TNEB. Table 5.4 SUMMARY STATISTICS FOR RATE OF REALISATION CATEGORY-WISE Paise/Kwh Category Min.Val Max.Val Mean SD C.V C.G.R (%) (%) Domestic Commercial Agriculture Industrial Railway Traction Out side state Source: Computed: rom the Annual Reports of' fneb. 211

17 The average rate realization on category wise of power consumption of TNEB is given in Table 5.4. The minimum and maximum value of domestic wise of realization was 157 and 241 paise/kwh respectively. The commercial wise rate of realization had minimum value of 397 and a maximum value of 603 paise per kwh. The agriculture rate of realization showed minimum value of 1,1 and maximum value of 34 paise/kwh which resulted in co-efficient variation of percent. The industrial wise average rate of realization ranges from 344 to 459 paise/kwh during the period of study. The railway traction shows a minimum and maximum of 233 and 290 respectively. The outside state wise rate of realization varies from to paise per kwh with co efficient variation of percent. The compound growth rate of different categories of consumers of TNEB is given in Table 5.4. It is observed from the table that there is much difference between rate of realization and cost per unit to power supply to different categories of TNEB which also is one of the reasons for the continuous deficit in the TNEB. Table 5.5 PAIRED T -TEST - CATEGORY-WISE AVERAGE TARIFF Category Average Tariff Average rate of realized Mean Difference Std. Error of Mean Difference t -value Sig Domestic ns Commercial ns Agriculture ns Industrial ns Railway Traction ** Sig Outside State ns 212

18 In table 5.5 the researcher applied the paired t test to verity the significance of various category of tariff realisation with the average rate of tariff. Domestic wise tariff shows the mean difference of with table value of 2.06, commercial -wise tariff shows table value of -0.4 with mean difference of and agriculture- wise tariff also shows a with mean difference of The industrial wise tariff shows table value of along with the mean difference of The railway traction shows a table value of 7.38 with the mean difference of The outside state shows that as its table value along with mean difference of from the above table it is clearly understood that there is no much significant between average rate of tariff and rate of realisation in TNEB expect in the category of railway traction. TESTING OF HYPOTHESIS There is no significant difference in the average rate of tariff and average rate of realization in TNEB. Table 5.6 PAIRED t TEST - RELATIONSHIP OF AVERAGE TARIFF AND AVERAGE RATE OF REALISATION Variables Mean SD Rate of Tariff Rate of Tariff realized Mean difference Standard Error T-Value 3.33** D.F. 9 P ** Significant at 1 % level. The Paired f test revealed that there is significant difference in the mean rate of tariff and mean rate of tariff realized and the mean rate of tariff realized is lesser than the mean rate of tariff. Hence the null hypothesis is rejected and the basis of paired f test analysis. 213

19 Table 5.7 TARIFF REVISION IN TNEB o o 85 in in 'O m r m ; I - High Tension m r- O r- Commercial Agriculture Industrial I «n 00 m o m i o m o 165 I Category Industrial II - Low Tension Domestic i. Upto 50 units 1 for 2 months ii. From 51 to 100 units for 2 months iii. From 101 to 200 units for 2 months iv. From 201 to 600 units for 2 months v. above 600 units for 2 months vi. above 1000 units i. Upto 200 units for 2 months ii. Above 200 units for 2 months i. Small farm ers... ii. Others farmers i. Upto 1500 units for 2 months ii. Above 1500 units for 2 months- (Effective rate in Paise per KWH) 214

20 The tariff order given by the TERC from time to time is given in the Table 5.7. In high tension industrial-wise tariff shows a continuous increase throughout the period of study except in the year i.e., 330 paise per kwh. The average is 296 paise per kwh. In low tension, domestic-wise tariff upto 50 units for two months shows an increasing trend upto Afterwards there is decreasing trend till the end of the study period. In between 51 to 100 units, there is shows an increasing trend upto and afterwards there is a sudden decrease in the tariff. From 101 to 200 units the tariff shows an increasing trend upto then there is a sudden decrease in the year but in the year 2007 again it is suddenly increased to 240 paise per kwh. For 201 to 600 units slot there is a continuous increase in the tariff throughout the period of study. From 600 units to 1000 units category, the tariff also an increasing trend upto and afterwards there is a reverse trend upto the end of the study period. From onwards units above 1000 also show an increasing trend upto and afterwards there is a slight decrease in the tariff but in the year it was 349 paise per kwh. The commercial-wise tariff upto 200 units for two months shows a fluctuating trend in the tariff. It was very high (710 paise per kwh ) from to and afterwards there was a 50 percent reduction in the tariff upto , Again the same also increased to 500 paise per kwh in the year At present the tariff is 743 paise per kwh. As per the above 200 units of consumption, the tariff shows a continuous increase in its trend. There is no high or low fluctuation in the tariff throughout the period of study. 215

21 The agriculture-wise tariff is totally free with regard to the supply of power as per the policy of the Government of Tamilnadu. In low tension, industry-wise power tariff upto 1500 units shows a continuous increase in the trend upto the end of the study period. The tariff for power consumption of above 1500 units is also an increasing trend throughout the period of study. Table 5.7 clearly states that there is a low tariff for power supply to heavy industries connected with high tension of power rather than low tension of power supply to small industries. The commercial-wise tariff is comparatively higher than industry-wise tariff. In domestic-wise, the tariff is at the higher level for the consumption of power for more than 200 units. There is no tariff for agricultural sector, as it is totally free but charges are collected on the basis of HP connected with the power supply. Table 5.8 SUMMARY TABLE FOR TARIFF REVISION IN TNEB Paise/Kwh Category Min.Val Max.Val Mean SD C.V C.G.R (%) (%) Industrial HT Industrial LT Upto 1500 units Industrial LT Above 1500 units Commercial Upto 200 units Commercial Above 200 units Domestic i ii iii iv V vi Source: Computed from the Annual Reports of TNEB. 216

22 Since the power tariff is an important factor in the analysis of the financial performance of TNEB, the researcher shows trends in average tariff revision in Table 5.8. The trend is depicted in domestic, commercial, industrial and outside wise consumer category of TNEB. On the domestic side, the average tariff revision shows a minimum value of 128 and maximum value of 285 paise per kwh with mean value of 205 which resulted in compound growth rate of 1.56 percent. In the commercial side, it has a minimum value of 300 and maximum value of 723 paise per kwh with mean value of paise per kwh which resulted in 6.62 percent of growth rate. On the industry side, growth rate is 6.12 percent which has a minimum and maximum value of 326 and 553 paise per kwh respectively. On the outside state wise, the compound growth rate is percent which resulted in mean value of with minimum and maximum value as 110 and 300 paise per kwh respectively. It is observed from the Table 5.8 and 5.5, that the researcher concluded that the average rate of realization with respect to all categories of power tariff is less than average and that is also one of the reasons for continuous deficit in the revenue of TNEB. TESTING OF HYPOTHESIS There is no significant difference in the mean rate of realisation among the different category groups of power consumers. Table 5.9 ANALYSIS OF VARIANCE FOR MEAN RATE OF REALISATION AND CATEGORY-WISE CONSUMERS SOURCE SS DF MS F Between groups Within groups Source: Computed from the Annual Reports of TNEB. * Significant at 5 % level. 217

23 Since the F is significant, the null hypothesis of there is no significant difference in the mean rate of realisation among the different category groups of power consumers are rejected and there is a significant difference in the mean scores among different category of consumers are furnished below: Table 5.10 MEAN RATE OF REALISATION CATEGORY -WISE CONSUMERS (Paise / kwh) Rate of realization Mean rate Industrial HT Commercial HT Public Institution HT Industrial LT Commercial LT Public Utilities LT Domestic Industrial HT Source: Computed from the Annual Reports of TNEB. The Table 5.10 shows the mean rate of realization for various categories of consumers in TNEB. From the table, it is inferred there is a much difference between the average rate of tariff and rate of realization in TNEB. Among the categories of consumers, domestic shows a lowest rate of realisation (226.50) and commercial-wise category shows a highest rate of realization (619.25). 218

24 Table 5.11 TRENDS IN AVERAGE TARIFF REVISION Year Domestic Commercial Agriculture Industrial (Paise/ kwh) Outside State Source: Computed from the Annual Reports of TNEB. The trend in average tariff revisions is given in the Table The different tariff rate of TNEB is summarized in the form of average values so as to ascertain the trends in tariff revision. From the table it is clear that upto , there is continuous increase in the tariff imposed by the TERC. From , it has considerably reduced from 285 to 128 paise per kwh. Again it increased to 175 paise per kwh upto the period of , and afterwards it decreased to 227 paise per kwh. The commercial-wise revision in the tariff shows an increasing trend from 362 to 723 paise per kwh except in the year Since free supply of power is granted to agricultural sector, there is no trend values for the agricultural-wise consumers. The industrial-wise tariff shows a low level of increasing trend between and

25 02. From , it suddenly increased from 376 to 406 paise per kwh and afterwards there is a continuous increase in the tariff till the end of the study period. In outside state category, in first two years it is 110 and 119 paise per kwh respectively. From there is no change in the tariff throughout the period of study. From the above table it is clearly known that there is not much change in the tariff policy imposed by the TERC on the TNEB. Further, it is concluded that even after the policy making on power supply vested with the TERC, there is not much ground to recover the cost of power generation and distribution in the TNEB. Table 5.12 SUMMARY STATISTICS FOR TRENDS IN TARIFF REVISION Category Min.Val Max.Val Mean SD C.V (%) C.G.R Domestic Commercial Industrial Outside state Source: Computed from the Annual Reports of TNEB. Though the Board has ultimate control over the generation and sale of power in the Tamilnadu, the fixation of tariff is vested with the TERC. From time to time, the TERC has passed the tariff orders on power sale by the TNEB. From to till date, the TERC have passed many tariff orders which is given in the Table The tariff on«industrial side (HT) has minimum value of 158 and maximum value of 366 with the growth rate of 7.02 percent during the period of study. In industries side (%) LT consumer up to 1500 units of consumption had a minimum and maximum value of 160 and 547 with mean value of paise per kwh. The power consumption above 220

26 1500 units resulted in minimum and maximum value of 195 and 560 paise per kwh respectively with the growth rate of percent. The commercial power consumption upto 200 units shows a minimum value of 185 and maximum value of 743 paise per kwh with mean value of 434 paise per kwh which resulted in 8.97 growth rate. The commercial consumption above 200 units had a growth rate of percent with minimum and maximum value of 200 and 723 paise per kwh respectively. On the domestic side, the over tariff applied for different categories of consumers resulted in compounded growth rate of 2.40 in first category and 2.29 in second categories of domestic power consumptions. In domestic side, the consumption more than 101 to 200 units had a growth rate of 8.12 percent with minimum and maximum value of 70 and 260 paise per kwh respectively. The consumption more than 201 to 600 (domestic) for two months had a growth rate of per cent which resulted in 90 and 380 paise per kwh respectively. The power consumption more than 600 units had a minimum value of 140 and maximum value of 475 paise per kwh shows a growth rate of 8.42 per cent. The consumption more than 1000 units resulted in minimum value of 305 and a maximum value 450 with the mean value of This resulted in per cent of growth rate. 221

27 Year Table 5.13 RECOVERY OF COST THROUGH TARIFF Cost per kwh (Rs.) Average Tariff per kwh Recovery % on Cost Source: Computed from the Annua Reports of TNEEi. The recovery of cost through tariff is also an appropriate tool employed to test the effectiveness of pricing policy of TERC. Hence, the researcher computed the recovery percentage of cost on tariff in the Table The recovery of cost on tariff shows a minimum percentage of to a maximum of in the year and respectively. Generally, in the initial period from 1998 to 99 to shows an increasing trend except in the year Afterwards, there is a decreasing trend from to except in the year It is observed from the table that is no year, the cost per unit of power supply in TNEB is fully covered in the form of tariff. The average rate of recovery percentage in TNEB is percent. Further, it is concluded that out of 10 years of study, only for five years the rate of return is more than percent. 222

28 = Q oc ll CHART RECOVERY OF COST THROUGH TARIFF Year I 0 SO 222a

29 Table 5.14 RATE OF TARIFF REQUIRED TO ACHIEVE BREAK EVEN POINT AND EXPECTED RATE OF RETURN rpe, Particulars o n IT) O o Average Revenue Expenditure Average Revenue Surplus / Deficit Average Existing Tariff Tariff required for BEP Tariff required for 3% ROR Tariff required for 5% ROR Source: Computed from the Annual Reports of TNEB. Table 5.14 shows the rate of tariff required to achieve BEP and expected rate of return in TNEB during the period of study. In order to calculate tariff required for breakeven point, the factors like average revenue expenditures, average revenue, surplus or deficit and average existing tariff is ascertained by the researcher and presented in the table on the basis of cost per paise kwh. The tariff required for BEP in TNEB ranges from 2.49 to 4.08 paise per kwh with an average of 3.26 per cent. The tariff required for 3 percent and 5 percent ROR given in the table throw light on the fixation of tariff for required level of profit in TNEB. The tariff required for 3 percent ROR ranges from 2.56 to 4.20 per kwh with an average of 3.36 per cent. The tariff at 5 percent was also estimated and started with 2.61 to 4.28 with an average of 3.43 per cent. From the table it is clear that the TNEB is expected to concentrate on pricing policy with regard to power supply in Tamilnadu. 223