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Enron asked to rework tariffs for Karnataka

C. Shivkumar

BANGALORE, July 16

ENRON has been asked to rework the tariffs for sale of power to Karnataka from the Dabhol Power Company (DPC) as a prerequisite for entering into five-year power purchase agreement.

The sources said that the tariffs quoted by Enron were not acceptable to the Board of directors of the State-owned Karnataka Power Transmission Corporation Ltd. Enron had offered to earmark 50 mega watts of power initially and to be subsequently raised t o 100 MW from DPC. The tariff quoted for the power is Rs. 2.62 per unit in the first year and to be subsequently raised to Rs. 3.21 towards the end of the fifth year on the basis of a plant load factor of 90 per cent.

The sources said that issues relating to capacity charges, which captures the fixed cost element including the 16 per cent return on equity, were still not very clear. In the offer, Enron has sought capacity charges of 90 paise per unit in the first year _ this year _ and to be raised to Rs. 1.66 in 2002 when the regassification plant becomes operational and to Rs. 1.86 by 2005.

The sources said one of the reasons for asking Enron to rework the tariffs was to eliminate dual loading of capacity charges. Capacity charges are already covered in the PPA with the Maharashtra State Electricity Board.

However, the sources said that one of the explanations given by Enron for levying capacity charges was that it would allow them to reduce tariffs for Maharashtra. Enron's tariffs are currently about Rs. 4.5 per unit, which covered both capacity as well a s energy charges for MSEB since DPC is fired by naphtha, which is fully passed on to tariffs and on account of exchange rate depreciation.

For the power sale to Karnataka, Enron had quoted energy charges of Rs. 1.72 in the first year from the DPC one and to reduce to Rs. 1.34, when the plant switches fuel to liquefied natural gas. But these energy charges were only notional, since both were indexed to international prices.

Naphtha is linked to an import parity price and LNG is linked to crude oil prices. These charges have been quoted on the basis of an international naphtha price of $225 per tonne and LNG on the basis $18 a barrel of crude oil. As on date, international p rices for both these commodities are in the region of $265 per tonne and $28 a barrel respectively.

But Enron's offer of sale of power was not restricted to Karnataka alone. A similar offer was extended to the Kerala State Electricity Board as well. However, officials of the Kerala State Government, who attended the recently held Southern Region Power Minister's conference here, said they had not accepted the offer, since the tariffs were far too high for the State, especially since it was still finding ways to bring down the tariffs from the public sector National Thermal Power Corporation's Kayamkul am project.