CERC to appoint in house consultants in areas of economic & evolving power market

The Central Electricity Regulatory Commission (CERC), which is responsible for tariff fixation among other things, plans to engage consultants to assist in areas of economic and evolving power market. CERC's move is crucial when the power sector is evolving and the present policy approach mainly aims at moving from cost plus tariff to competitive bidding basis tariff, appropriate regulatory framework for mobilising investments, and developing electricity markets. However, the cost plus tariff will continue to be important as the assets covered by this regime are of large value.

The consultants are expected to do economic analysis and research related to tariffs, markets, fuel availability and open access. They will also have to prepare weekly, monthly, and annual reports on short-term transactions of electricity as part of market monitoring and also write report on functioning of power exchanges and traders and conduct statistical analysis of energy prices. At present, power rates on energy exchanges are ranging between Rs 2 and Rs 2.30 per unit. Further, bid tariff for solar PV projects continue to remain aggressive even below Rs 5 per unit.

Maharashtra Electricity Regulatory Commission's former chairman VP Raja told Business Standard that CERC initiative will hopefully hasten the mindset change that needs to be brought about among all officers/ engineers working in the power sector.

"The Electricity Act 2003 makes a fundemental change with focus on demand. Discoms are to assess demand and make arrangements for procurement of power as per their assessment. Eventually all power is expected to be procured through the competitive bidding route. A vibrant wholesale and retail market will emerge. All these ideas are still work in progress," notes Raja.

On the other hand, Indian Energy Exchange's former MD and CEO Jayant Deo said with the induction of consultants, CERC can monitor benefits of competition passed on to consumers through national market. CERC through Forum of Regulators can monitor periodically and take steps to increase competitive market from 10% to at least 30% in a short span of two years. Section 66 of the Electricity Act, 2003, mandates development of market.

''CERC can also monitor adequate peaking power contracts by utilities. In the absence of peak power contracts, utilities demand additional surcharge on Open Access consumers, as base load power contracts do not provide flexibility of backing down below a certain threshold. Further, it will be a good idea to periodically publish utility/ state-wise report on potential and actual competition in electricity sector along with loss of benefits to consumers, says Deo.