Consider power producers' demand for rate hike: Power ministry tells CERC

There may be some good news for power producers hit by the shortage of domestic coal and seeking a tariff revision. Citing the modified new coal distribution policy (NCDP), the power ministry has advised the electricity regulatory commissions (ERCs) to consider power producers’ request to pass on the additional cost of imported coal to consumers, on a case-to-case basis.

“The higher cost of import/market based e-auction coal be considered for being made a pass-through on a case-to-case basis by the Central Electricity Regulatory Commission (CERC) / state ERC. This will be to the extent of shortfall in the quantity indicated in the letter of assurance (LoA) / fuel supply agreement (FSA) and the Coal India supply of domestic coal, which would be minimum of 65 per cent, 65 per cent, 67 per cent and 75 per cent of LoA for the remaining four years of the 12th Plan for the already-concluded PPAs based on the tariff-based competitive bidding,” coal ministry said in a letter to CERC on July 31.

This is in line with the decision of Cabinet Committee on Economic Affairs (CCEA) and the subsequent notification by the coal ministry on changes in the NCDP.

“The ERCs are advised to consider the request of individual power producers as per due process on a case-to-case basis in public interest. Appropriate Commissions are requested to take immediate steps for the implementation of changes made in the NCDP,” the letter added.

V P Raja, chairman of Maharashtra Electricity Regulatory Commission (MERC), told Business Standard: “The individual power producer will have to file a petition enclosing details on how much extra coal was used, from where it was sourced, how much coal was actually used. Besides, the additional coal procured was not used for trading purpose. We will carry out a detailed due diligence through our staff or by roping in consultants before giving our judgement.”

According to Ashok Khurana, director-general, Association of Power Producers (APP), the power ministry’s move will benefit power projects commissioned since 2009 with generation capacity of 30,000 Mw, projects of 20,000 Mw that are in pipeline and new projects to be developed in future. “We hope that CERC and all ERCs will pass suitable orders so that plants post 2009 start operating at normative level and recover their fixed cost. This will remove uncertainty about coal availability and its pricing.”

Former power secretary R V Shahi hoped it would help mitigate the problems of a number of developers, facing problems owing to excessively costly imported coal. This will provide relief to both developers and lenders. “In addition to this advisory memo, the power ministry will now have to issue necessary amendments to the competitive bidding guidelines. Further, the regulators need to decide the individual cases at the earliest so that the uncertainty is removed.”