Power regulator heralds an era of costlier power

Following pleas by distribution companies, Central Electricity Regulatory Commission upholds pass-through of imported coal cost to consumers

The Central Electricity Regulatory Commission (CERC) seems to have favourably considered the government’s advice to allow pass-through of imported coal cost in electricity rates for consumers.

In a much-awaited order, after the Union Cabinet’s decision in this regard, it has upheld the rise in rates for Odisha consumers due to blending of high cost imported coal in NTPC’s projects.

The landmark ruling signifies the onset of an era of rising power rates, set to burden consumers across the country with an estimated Rs 10,560 crore on account of imported coal use in power plants. The order was passed on Tuesday, on a petition by Odisha’s electricity distributor, Gridco, seeking to get back the extra cost recovered by NTPC from consumers on account of blending of imported coal in 2011-12.

Gridco had also asked CERC for instructions to NTPC to take prior permission from it before importing coal and to issue guidelines for blending. It had said  distribution companies should be allowed to decide if they want to procure high cost power generated using imported coal. Also, instructions for NTPC to opt for e-auction coal rather than imported coal. CERC turned down all the demands.

Tuesday’s order is the third in a series of CERC orders where a pass-through has been allowed. Earlier, it allowed Adani Power and Tata Power to charge a compensatory rate for the higher cost of imported coal. Taking note of the need for import in view of domestic shortage, CERC said, “The averments of the petitioner (Gridco) are of a general nature, that NTPC had been blending imported coal to the extent of 40 per cent at times. We have not arrived at any specific findings of the issue. Therefore, the prayer seeking the direction is not maintainable.” The regulator also laid down that procurement of power generated from imported coal cannot be left on the discretion of the buyer, owing to technical constraints of generation.

The regulator refrained from framing guidelines for blending, arguing there was not enough data available on the technical and financial aspects. It also said due to logistical constraints, NTPC was not able to source spot market coal as a substitute for costly imports. Gridco had argued that NTPC had raised the use of imported coal in its overall consumption from five per cent earlier to 40 per cent currently, without the consent of the buyers. This had resulted in a steep rise, of up to  Rs 4.6 a unit, in the energy charge of the rate.

The Union Cabinet had last month approved the pass-through proposal, which would lead to a general 20p a unit rise in power rates across the country. The decision covers 78,000 Megawatt (Mw) of power capacity, of which 36,000 Mw has come on stream since March 2009.