How Maharashtra Tariff Cuts Will Impact Tata Power, Adani Transmission 

A power tariff cut by Maharashtra will hurt the revenue of private power distributors Tata Power Company Ltd. and Adani Transmission Ltd. at a time when demand for electricity has fallen as the Covid-19 pandemic has stalled business.

The Maharashtra Electricity Regulatory Commission on March 30 cut electricity tariffs by an average 8 percent for the next five years, according to its statement. The revised pricing is effective April 1.

That will lower tariffs for consumers of Maharashtra State Electricity Distribution, Brihanmumbai Electric Supply and Transport Undertaking and private distribution companies Tata Power and Adani Transmission. That comes when, according to the Central Electrical Authority. India’s energy consumption has fallen 22 percent after three-week the lockdown to check the spread of the new coronavirus started on March 25.

The Maharashtra power regulator also placed under a moratorium the payment of fixed charges by commercial consumers for next three billing cycles since the beginning of the lockdown.

Here’s how the new tariffs will impact the two private discoms:

Tata Power

For consumers of the Tata Group’s power arm, tariff will fall by about an average 19.4 percent to Rs 6.45 per unit for fiscal year 2021, and is expected to remain flat for the remaining four years, according to MERC.

For industrial and commercial users, it will fall 21 - 23.5 percent, while the residential segment will see a reduction of 10.4 percent.

• For Tata Power, residential consumers contribute 28 percent of its revenue while the commercial and industrial categories contribute 31 percent.
• According the company’s latest filings, Mumbai’s distribution operations comprise more than 25 percent of its operating income.

Based on these assumptions, according to BloombergQuint’s calculation, the tariff cut will reduce Tata Power’s total revenue by 4- 6 percent.

In an emailed statement to BloombergQuint, Tata Power said the company appreciates the MERC order despite the adverse situation the country is facing due to Covid-19. The lower tariffs would boost industrial development, it said, adding, “Consumers in Mumbai have gained from “efficiency brought in by Tata Power and other utilities in their system and processes, helping in further tariff reduction.”

Adani Transmission

The Adani Group’s discom would see its tariff fall by an average 17.9 percent to Rs 7.47 per unit for fiscal 2021, and it would remain flat for the remaining four years, according to MERC.

For the industrial and commercial category, tariffs will fall by 21 - 25.5 percent, while they will come down by 12.3 percent for residential consumers for FY21 onwards.

• Residential and commercial users contribute 42 percent each to the revenue of the company; industrial segment accounts for 11 percent, according to MERC.
• Mumbai’s transmission and distribution business contributes 68 percent to the total revenue, according to the company’s filings.

Based on these assumptions, BloombergQuint calculated that tariff cuts will reduce Adani Transmission’s revenue by 10-12 percent in FY21.

Adani Group has yet to respond to BloombergQuint’s emailed queries.