The Ledger Behind the Power Purchase Price: Inside the Rs1.914 Trillion Capacity Charge Hidden Behind Rs27.309 per Unit

When CPPA-G presented its six-scenario report for CY2027 at the Nepra hearing, the first number to surface was the average Power Purchase Price of Rs27.309 per kilowatt-hour. But for someone who has spent forty years reading the numbers scribbled in the margins of scorecards, the real story lay elsewhere. It sat in the fifteenth row of that report—the Rs1.914 trillion capacity charge, which held its ground even under the most optimistic scenario, even when fuel prices fell.

We are outside the playing field. This is not cricket; it is the ledger of electricity pricing. But the method is the same. Just as I sat in the M. Chinnaswamy press box during the 2026-99 Ranji season and logged every delivery by hand—bowler, line, field, outcome—because the printed scorecard hides everything that matters, this tariff report is a scorecard too. Headlines will talk about an eight percent increase, but page eleven is where the purse stops posing and the budget speaks. And that page says: the capacity charge is Rs14.717 per unit, larger even than the base-case fuel cost of Rs10.141 per unit.

Context: A Six-Scenario Report and the Formal Architecture Behind It

CPPA-G, the Central Power Purchasing Agency-Guaranteed, presented six separate scenarios before Nepra, built on projected electricity sales of 130,081 gigawatt-hours. That number is itself a claim—2.6 percent annual demand growth. But the hearing also revealed that the demand forecasts of CPPA-G, ISMO and the distribution companies (Discos) diverge. This is the situation where three different scorers bring three different score sheets to the same match.

Nepra did not merely listen at the hearing; it asked questions. Clarification was sought on RLNG supply, on the exchange rate, on Brent crude prices and, above all, an order was issued to revise KIBOR from 11.70 percent to 12 percent. That order is itself a signal: this projection is not final; it is a document still awaiting its stamp.

The cost structure of the report is clear. In the base case, total power purchase cost is projected at Rs3.552 trillion, comprising Rs1.319 trillion in fuel costs and Rs1.914 trillion in capacity charges. The exchange rate assumption is Rs279 per dollar, with the worst case at Rs290. Inflation, SOFR, transmission charges and system losses—all of it is folded into that single figure of Rs27.309.

Core Analysis: The Pillar That Doesn't Fall When Fuel Falls

Here is the real point to grasp. The scenario spread runs from Rs25.883 to Rs29.255 per unit—roughly a 13 percent gap. Now look at what creates that gap. The ideal case assumes lower fuel costs and a favourable RLNG/gas mix, yet the capacity charge remains pinned at Rs1.914 trillion. In other words, no matter how cheaply you source fuel, that pillar does not move.

A capacity charge is a payment tied not to the quantity of energy but to available capacity—meaning the IPP gets paid whether or not the electricity is generated. That is the biggest truth in this entire ledger, and it is the part headlines read least. When a news item says "electricity prices will rise eight percent," it does not actually say that the largest share of that increase is being paid for capacity that is not even being used.

A hand-coded ledger remembers what the press box forgets. In 2026, when I was retained by RCB for the first IPL auction—a five-million-dollar purse, eight franchises, and no historical database anywhere in the world—I built a matchup matrix from three seasons of domestic T20 ball-by-ball. My report flagged that the squad had no specialist death bowler and would leak at the back end. RCB finished seventh, won four of fourteen, and conceded over nine an over in the last five. The head coach asked why nobody had read page eleven. I had. Nobody else had.

Here too is that page. You can only capture the full benefit of cheaper fuel if the electricity generated is sold—and the sales projection rests on 130,081 GWh, which assumes 2.6 percent growth. But before Nepra itself, a sensitivity scenario was presented assuming growth of only 0.70 percent. If actual sales come in even lower—and industrial representatives are warning that future fuel charges adjustments (FCA) could rise two to three times during winter—then that same fixed capacity charge of Rs1.914 trillion will be spread across fewer units. Meaning the per-unit cost rises of its own accord, however cheap the fuel.

This is the inverted trap of the entire tariff arithmetic: high prices suppress demand, suppressed demand spreads fixed costs over fewer units, and that spread pushes the per-unit price up again. A report that does not model this feedback loop is half a report. And the document presented here has no clear estimate of this loop: no elasticity estimate, no sector-by-sector impact model, no open accounting of the cross-subsidy—who pays and who benefits.

Contrarian Angle: Correlation and Causation Are Not the Same

Now the part where I must be most cautious. The temptation of headlines is: "Electricity is eight percent more expensive." But this figure is proposed, not approved. The very meaning of the Nepra hearing is that CPPA-G's assumptions are being questioned—the KIBOR revision is the latest proof. A report presenting six scenarios is not a guaranteed price but a map of uncertainty. Treating it as the final consumer tariff is the same mistake as determining a three-season trend from a single match.

Second, the correlation between the capacity charge and the high tariff is clear, but before claiming causation, it is necessary to ask why this charge is so large. The answer lies in IPP contracts, capacity-payment reforms and utilisation rates—none detailed in this document. Until the actual ledger of IPP renegotiation and capacity-payment reform is opened, saying "the high tariff is because of high capacity cost" is half the truth.

Industrial opposition should be read the same way. Aamir Sheikh called for the immediate suspension of the incremental package and for FCAs to be applied prospectively. His argument is that the package benefits a limited number of industries and burdens more than 90 percent of consumers. This is a distributional conflict, not a technical failure. And its solution lies in data—disclosure of effects at the beneficiary and payer level—not merely in the tone of protest.

Takeaway: On Which Line Will the Next Chapter Be Written

One thing is certain. When Nepra issues its final determination in September 2026, the real question will not be about "eight percent." The real question will be: did it acknowledge the uncertainty of KIBOR, the exchange rate and RLNG supply, or did it brush that aside the way my page eleven report was brushed aside in 2026?

For me, the watchlist is clear—the rupee-dollar rate holding between 279 and 290, RLNG and Brent prices, actual Disco sales against the 130,081 GWh estimate and, above all, that Rs1.914 trillion pillar of capacity charges, which does not budge even in the optimistic scenario. The day that pillar moves is the day electricity truly becomes cheaper—not when fuel falls.

Until then, every valuation has a margin; the question is who signed it.