Power purchase rules changed

Aims to promote competition and decentralisation of decision making

To promote competition in the power sector, the Centre has amended the guidelines and standard bidding documents for procurement of electricity from thermal power stations on design, build, finance, own and operate (DBFOO) basis.

Further, to decentralise decision-making process, any deviation from the standard bidding documents for Case-I power projects will have to be made by the distribution licencees with the approval of the appropriate commission, instead of the central government. Case-I is an open bid, where the developer has to decide for fuel and location and compete against any other developer in general. The power ministry issued the amended guidelines on May 5 to enable utilities to use the standard bidding documents for inviting tariff-based bids for supply of electricity to those who are being notified.

The ministry had earlier issued  guidelines in January 2005 for the procurement of power by the distribution licencees and they were subsequently amended  in November 2013.

As per the amendments, the existing provision of restriction of maximum seven bidders in model request for qualification (RFQ) has been removed to spur competition. Due to the change in coal policy, wherein concessional coal is available, the contract period for long-term procurement has been changed from the current 25 years to 7 years  and above up to a period of 25 years from the date of commencement of supply of power with provision of extension of five years at the option of either party in  accordance with the power supply agreement.

The Association of Power Producers Director-General Ashok Khurana told Business Standard: ''We are happy that some of the concerns of the private developers have been addressed in the amended guidelines.''

Further, the provision regarding additional generation capacity has been deleted in the DBFOO document to enable developers to install any additional capacity without requiring consent from the procurers. 

According to the power ministry, in DBFOO model, land, water, fuel and other project related clearances are to be obtained by the project developer only. Thereafter, taking prior consent for expansion and creation of additional capacity from all the procurers of different capacities tied up from the same project will be practically very difficult and unnecessary.