Power charges: Leeway to be tightened

Centre proposes to have regulators, central or state, keeping to the set policy while setting rates; fuel pass-through to be allowed; however, reactions sought only from state bodies

The central government plans to tighten the regulations for setting power rates, by asking electricity regulators to “necessarily” be guided by the new policy while framing regulations under Section 61 of the Act in question.

State regulators twist the regulations according to their requirement, said a former member of the Central Electricity Regulatory Commission (CERC). “Now, they'd have to remain in the perimeter of the policy. It would be binding on them to take regulatory decisions as per the amended policy and not as per need,” he said.

The draft national policy is proposed to read: “The Act also requires CERC and State Electricity Regulatory Commissions shall necessarily be guided by the tariff (rate) policy in discharging their functions, including framing the regulations under Section 61.”

Section 61 of the Electricity Act empowers regulators to set terms for determination of rates.

The government has also proposed to allow an increase in fuel cost on account of import to be included in the rate structure. “In case of reduced quantity of coal supplied by Coal India, vis-a-vis the assured quantity of 85 per cent, the higher cost of imported/market-based e-auction coal for making up the shortfall shall be considered for being made a pass-through by CERC/SERCs, on a case-to case basis, to the extent of shortfall,” goes an amendment.

Other major components such as foreign exchange fluctuations, cost of land acquisition and other clearances should have been part of the rate but are ignored, said a senior power sector executive. “Projects stuck for these reasons will continue to remain stranded,” he said.

Power generators, however, are to be given the freedom to sell surplus power in the spot market if the beneficiary doesn’t give two days prior notice. It is presently 10 hours.

A major addition to the objective of the policy is promotion of renewable generation sources and theaim to create more competition, efficiency in operations and improvement in quality of power supply.

On recommendations in the policy to incentivise the distribution companies to procure power from renewable sources, the central government may notify, from time to time, an appropriate bid-based rate framework for renewable energy.

The policy has recommended a set of a little more than 30 amendments in the existing rate structure, formed as a continuation of the National Electricity Policy, 2005.

In a first, the draft also underlines norms for ancillary services. The central commission has been given the right to introduce the norms and framework for ancillary services necessary to support the power system or grid operation for maintaining power quality, reliability and security of the grid, including the method of sharing the charges.

Selective consultations

The draft policy uploaded on the ministry of power website last week invites comments from the public, as is the case with major draft regulations. However, when private sector stakeholders tried sending their comments and suggestions, they were told by the ministry of power that comments only from states and state-run utilities have been invited.

“It is surprising to note that the ministry of power has not invited comments from the private sector on the proposed changes. With the increasing share of the private sector, stakeholders’ consultation would be incomplete,” said A K Khurana, director general, Association of Power Producers, the representative body for private power generators.

Privately-owned power generation and transmission companies, associations and consumer rights bodies have all been kept out of the consultation.