The power ministry’s guidelines for short-term procurement of electricity for less than or equal to one year is likely to bring cheer to cash-strapped distribution companies.
The new rules are expected to reduce power cost. The ministry had noted that the guidelines are aimed at promoting competitive procurement by problem-ridden distribution companies, by facilitating transparency and fairness.
Ajoy Mehta, managing director, Maharashtra State Electricity Distribution Company (MahaVitaran), welcomed the ministry’s guidelines and said it would bring in transparency in short-term power procurement. “Even before the issuance of these guidelines, MahaVitaran is procuring short-term power through e-tendering and this has been followed very unscrupulously. However, I strongly believe that financial freedom should not be taken away from distribution companies by regulatory commission during short-term power procurement.”
According to information gathered from distribution companies, the turnover in the short-term power sector works out to Rs 87,000 crore per annum.
The power ministry said in guidelines that there would be no escalation in tariff during the contract period. However, there would be a difference in pricing if bids were invited for different time slots. If power is supplied through alternative sources, the bidders would have to bear additional charges and losses due to cancellation of corridors and booking of new corridor.
Successful bidders would need to furnish contract performance guarantees (CPGs) in the form of bank guarantees within seven days for Rs 3 lakh per MW per month of contract period or part thereof. Non-performance would lead to forfeiture of CPG. The CPG needs to be released within 30 days of completion of the contract period.
On the role of regulatory commission, the ministry said if the quantum of power procured and tariff determined were within the blanket approval granted by the appropriate commission in the annual revenue requirement (ARR) of the respective year, the same would be considered to have been adopted by the appropriate commission.
Welcoming the move, power sector analyst D Radhakrishna said the distribution utilities were resorting to short-term power purchase in a big way during election and buying power no matter what the cost. “Now with guidelines in place, the Central Electricity Regulatory Commission needs to cap price so that undue profits are not taken by surplus states or generators. The tariff of independent power producers and ultra mega plants is around Rs 3- per unit and cost of supply of distribution companies are in range of Rs 3 to Rs 4 per unit. Thus capping of short-term price would restrict making unwarranted profits,” he added.
Last year, Tamil Nadu utility brought power for as high as Rs 15 per unit and its financial situation deteriorated.
The ministry has emphasised that the seller and the procurer would ensure that the scheduling does not deviate by more than 15 per cent of the contracted power, according to the approved open access on monthly basis.
If the deviation exceeds 15 per cent, the procurer would pay compensation at 20 per cent of tariff per unit for the shortfall in excess of the permitted deviation, while continuing to pay open access charges according to the contract.
Similarly, the seller would pay compensation at 20 per cent for the quantum of shortfall to procurer.