CERC proposes congestion charge on states

The proposal comes following reports of northern states reeling under frequent power cuts and rising peak power rates

In an effort to reduce power congestion in real-time operations, the Central Electricity Regulatory Commission (CERC) proposes to impose a congestion charge on states as a commercial measure.

According to its draft regulation, the congestion charge will be paid by a regional entity or entities, causing congestion in the inter-regional link or intra-regional link, to a regional entity or entities relieving congestion.

The proposal comes following reports of northern states reeling under frequent power cuts and rising peak power rates due to increasing congestion in the grid.

The congestion charge would be payable by the overdrawing regional entity in addition to the Unscheduled Interchange (UI) charges.

CERC may, from time to time, specify the rate of congestion charge applicable to the whole or a part of the region.

Before imposing the congestion charge, the National Load Despatch Centre (NLDC) and Regional Load Despatch Centre (RLDC) would issue a warning notice to the defaulting entities.

This would be done when both the organisations arrive at an opinion that the flow of electricity on an inter-regional or intra-regional corridor or link, used for transfer of electricity, has crossed the stipulated corridor or link.

If the flow of electricity on the inter-regional or intra-regional corridor or link exceeds the limit of withdrawing power from the grid, the NLDC or RLDC may decide to apply congestion charge on the defaulting entities from a particular time-block.

The Indian Energy Exchange (IEX) and Power Exchange India (PXI), currently engaged in the transactions of day-ahead and long-term electricity contracts, have welcomed the CERC draft regulation.

They hope this would help in the availability of more power to the deficit states and would also help reduce the electricity prices, which are around Rs 5 per unit in states affected by the congestion, compared to Rs 2.50-Rs 3 in the rest of the country.

The regional entity liable to pay the congestion charge would deposit the amount in the Congestion Charge Account within 10 days of a statement issued by the Regional Power Committee Secretariat.

If the erring entity fails to pay the charge beyond two days from the due date, it would be liable to pay interest at the rate of 0.04 per cent per day.

CERC’s move is considered crucial, as transmission corridors are first allotted to distribution companies (discoms) buying on a long-term basis, followed by short-term buyers purchasing anywhere between a week and 3 months, and then to the day-ahead buyer.

A large portion of the surplus transmission corridor is reserved for long-term purchases and then by power traders who can book the corridor three months in advance. Only the remaining capacity, if any, is left for the day-ahead market of the exchanges. This results in congestion and higher prices for buyers in the northern states and lower prices being received by the sellers in the rest of the country.

Congestion in northern states was severe during the months of June, July and August, occurring on 86 days out of the total 92.