Power firms step up war on tariff increase

Presentation tomorrow before CERC against revised regulations on HC direction

A little over a month after the Central Electricity Regulatory Commission (CERC) announced the new rate norms for 2014-19, the power industry is raising a pitch against these.

The Association of Power Producers (APP) — which represents 29 large private generation companies which include Tata, Reliance and Adani — will make a detailed representation to CERC on Wednesday, following directions in this regard by the high court here. The HC is hearing a petition on the issue by NTPC, the largest company in this segment.

According to APP, the final regulations had provisions not mentioned in the draft norms issued for discussion in December. This is a violation of Section 178 of the Electricity Act, requiring the regulator to conduct a public hearing on all provisions before finalising these, APP alleges.

One such provision is regarding the stage at which Gross Calorific Value (GCV) of coal is considered for calculation of the energy charge in the rate. The existing regulations say GCV will be calculated on an as-fired basis, the point at which coal is fed into the plant. While this has been the norm since 1948, the new regulations have converted it into an ‘as received’ basis.

Coal quality deteriorates between the time the fuel is received at the station and the time it is fed into the boiler. This “grade slippage” is a reality that should be taken into account to protect the developers’ return on equity. The power purchasers or regulators may consider the invoices of “as received” coal supply to ascertain GCV, is the contention.

The latter norm for GCV was finalised by CERC, based on a report on power plants’ operational efficiency given by the Central Electricity Authority (CEA) in January. The report said, “difference between the as-received GCV as against as-fired GCV would be very marginal and would be solely on account of marginal loss of heat during the coal storage.” APP, however, does not agree.

Another source of conflict is the tightening of Station Heat Rate (SHR) norms in the new regulations. SHR measures the efficiency of a power plant in converting the chemical energy of coal into electrical energy. A higher SHR signifies low efficiency. In the new regulations, CERC pulled down the normative SHR from 2,500 Kcal per unit to 2,450 Kcal per unit. The reduction was based on Central Electricity Authority recommendations, which considered Plant Load Factor (PLF) data.

A third bone of contention is regarding Auxiliary Consumption (AC), the amount of power used to run a power plant, inversely linked to PLF. In the new norms, CERC has removed the power supplied to housing colonies of power plant staff from the definition of AC. Such colonies form part of AC in the Electricity Act. The regulator has also cut the normative AC from the exiting six per cent to 5.25 per cent, based on past data of higher PLF.

The industry is also contesting the regulator’s move to link incentive payment to PLF, which measures actual generation, as against Plant Availability Factor, which measures the ability of a plant to generate. Under the new norms, generators stand to lose when distribution companies renege on committed supply, is the complaint.