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| CERC draft proposes to streamline power pricing |
| Sanjay Jog / Mumbai Feb 13, 2010, 00:12 IST |
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Aims to encourage solar energy, open access.
To facilitate integration of electricity markets, enhance open access and competition by obviating the need for “pancaking of transmission charges”, the Central Electricity Regulatory Commission (CERC) has introduced a new mechanism.
A draft regulation on sharing of inter-state transmission charges and losses proposes to replace the ‘Regional Postage Stamp’ method by ‘Point of Connection (PoC)’ system.
Under the Regional Postage Stamp method, states in a region share the charges and losses of transmission on a pooled basis in the ratio of quantum of power drawn through the inter-state transmission system. A state in the southern region buying power from a state in the eastern region have to pay for the pooled transmission charges and losses of both eastern and southern regions.
Under PoC, transmission charges will be locationally differentiated — the generators will have to take a view both on transmission costs of electricity and transportation costs of fuel.
With many new independent power producers (IPPs) expected to come up in the near future and bulk consumers being allowed to buy power through open access from anywhere in India, even across regions, the change seems relevant.
With the integration of the regional grids, and the objective of the policy and regulatory framework to provide access to sellers and buyers, an appropriate change in the pricing mechanism was required, CERC observed.
Under the current mechanism, transfer of power from any state — Chhattisgarh in western region to Punjab in northern region — requires transacting parties to pay transmission charges in both the regions — a phenomenon referred to as “pancaking of charges”. This makes such transactions artificially expensive and, hence, less competitive and non-reflective of the network utilisation.
PoC, based on a hybrid method, brings together the strengths of both Marginal Participation and Average Participation methods. Under this framework, any generator node is required to pay a single charge based on its location in the grid to gain access to any demand customer located anywhere in the country. Similarly, a demand node will be required to pay a single charge and get access to any generator in the grid. This is based on load flow studies conducted for each node. The same principle holds for transmission losses a generator node or demand node has to bear.
Industry sources told Business Standard that PoC will facilitate closure of transmission investments. Further, the move may give a big push for the development of 14 ultra mega transmission projects with private sector participation and also seven transmission corridors to be developed by Power Grid Corporation of India. These projects will involve an investment of over Rs 70,000 crore.
The draft regulations also facilitate solar-based generation as envisaged in the Jawaharlal Nehru National Solar Mission by allowing zero transmission access charge for use of Inter-State Transmission System (ISTS) and allocating nil transmission-loss charges to solar-based generation.
According to CERC sources, currently cost of energy from solar-based generation works out to be Rs 14-18 per unit. With application of ISTS and transmission-loss charges, it further reduces the acceptability of power generated from solar sources.
PoS framework also aims to facilitate fair and transparent competition for case-1 bids in which power developers will take full responsibility for development, including acquisition of land, availability of water and fuel linkages.
CERC explained that under Regional Postage Stamp method, the case-1 bid processes are severely distorted because of pancaking, and this results in pit head/hydro plants not being competitive for inter-regional bids. The impact of pancaking is further amplified in such bid processes because of application of escalation factors to transmission charges over a 25-year period. PoS is likely to remove such difficulty.
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