TARIFF PHILOSOPHY PAPER OF M.P.E.R.C.

FUEL COST ADJUSTMENT CHARGES

1. The utility has to procure power and fuel from different sources and their prices are subject to fluctuations over a wide range. The utility should, therefore, be insulated against such fluctuations in prices through provision for periodic adjustments in tariff. The utility could include a base price component of fuel in the tariff and upward or downward revisions in fuel and power prices would be added or deducted, as the case may be, in the tariff, from time to time. The basic purpose of this adjustment is to insulate the utility from the risk of possible changes in a type of cost over which the utility has no control.
2. The Commission believes that the utility should consider extending the scope of application of the adjustment of fuel and power purchase to all the consumer categories.
3. The Commission expects the utility to formulate and submit an appropriate formula for fuel and power purchase adjustment charges for its consideration.