Consumers be prepared to pay more for Electricity

New Delhi, January 6, 2012 : Due to the recent increase in coal prices end user for electricity will end up paying more on their energy consumption at least by 55 to 60 paisa per unit which translate in to approximately 12-15% increase in their electricity bill. With effect from January 1, 2012 “Coal India” (CIL) switched from the useful heat value (UHV) based coal grading system to gross calorific value (GCV) system for pricing coal. According to CIL migration from the UHV to GCV based system will be revenue neutral, but in reality there will be a huge increase in pricing without any value addition.

Coal Pricing Matrix

Power generating companies typically use grade E and F coal. The basic price of grade E coal will be Rs 880-1,781 a tonne against Rs 730-1,090 under the old pricing system (data based on ‘Final offer document’ of CIL). For grade F coal, the price will be Rs 630-933 against Rs 570- 870 earlier.

Conclusion

Technically GCV is far more better system than UHV because GCV pricing formula is linked to the actual calorific value or quality of the coal instead of UHV-based pricing which is based on empirical formula, but the bottom-line is except supplier neither Power generating companies nor consumers are going to benefit due to this shift.