The present tariff hike is necessitated as there was under-recovery due to a stay on tariff as determined in the MTR (mid-term review) Order for FY 2023-24.

Had there been no stay, the tariff for FY 2024-25 would have resulted in a tariff decrease of 13 per cent than approved by the MERC in the MTR Order.

Tata Power is a licensee for electricity distribution in Mumbai city and suburbs and Mira-Bhayander Municipal Corporation.

Out of its total consumer base of 7.63 lakh, approximately 7.15 lakh (94 per cent) consumers belong to the residential category and around 85 per cent of these residential consumers fall within the 0-300 units slab.

A Tata Power spokesperson said that the MERC has determined the revised tariff for FY 2024-25, resulting in an overall increase due to past approved gaps up to FY 2023-24 to be recovered within FY 2024-25 and remaining within a range of plus and minus 20 per cent of the average cost of supply.

"Despite this, our residential tariff for the 0-100 (units) category remains the lowest, while the 101-300 category is only slightly higher than other private players. Tata Power is committed to supplying reliable and quality power supply to its consumers and is optimising power purchase costs, which could lead to tariff reductions due to negative FAC (fuel adjustment charge),’’ the spokesperson added.

An energy expert observed that as the tariff rise will be seen in the monthly bill of May, a section of Tata Power consumers may shift to the BEST (BrihanMumbai Electric Supply and Transport) or Adani Electricity in the wake of the rise approved by the MERC, due to the major tariff differential between it and the other power distributors.

Besides, if Tata Power witnesses the migration of its consumers, it will still have to continue to draw power under various power purchase agreements, paying a fixed charge despite a fall in the requirement.

The MERC, in its order, said that the tariff rise on account of full recovery of Wires ARR (aggregate revenue requirement) is approved against 50 per cent claimed by Tata Power. The Electricity (Amendment) Rules, 2024, notified by the Ministry of Power on January 10, 2024, does not allow deferment of revenue gap- Impact of Rs 155.99 crore.

Further, the power distribution company has not factored in the refund of the revenue of Rs 346.79 crore which has been considered by the MERC for FY 2023-24 for the period April 2023 to June 2023, due to stay of MTR Order by the Appellate Tribunal for Electricity (APTEL).

The MERC has also considered cash discount likely to be availed by consumers as per past trends and accordingly reduced the revenue for FY 2023-24 and FY 2024-25 by Rs 100.12 crore.