Power Min allows gencos to charge compensatory tariff for importing coal

Power plants constructed had asked the power ministry for pass through of the cost they are incurring due to costlier imported coal cost to the consumers

The Union power ministry has allowed power units to charge a compensation tariff in lieu of importing coal. This would cover both state government-owned and privately owned power generation units (gencos).

"The methodology shall be used by the generating companies supplying power under Section 63 and state governments to calculate the compensation due to blending with imported coal. The mechanism for billing and payment for these plants shall be as per PPA,” the order said.

The direction was issued under Section 11 of the Electricity Act by the power ministry.

'Business Standard' recently reported that state-owned NTPC will see its fuel cost go up to Rs 7-8 per unit by importing coal and final tariff would go up by 50-70 paisa which will be passed on to the consumers.

There are close to 32 GW of power plants constructed under Section 63 of the Electricity Act through competitive bidding. These units, unlike NTPC, which is governed under Section 62, cannot pass on tariff without regulatory approval.

These units had asked the power ministry for pass through of the cost they are incurring due to costlier imported coal cost to the consumers.

The power ministry in its note said, "A methodology has been finalised in consultation with the Central Electricity Authority, which was discussed in the meeting on May 20, 2022, with the stakeholders. Based on the discussion, the methodology has been revised to make it in line with the existing methodology being adopted by the CERC (Central Electricity Regulatory Commission."

The Centre has also directed the power distribution companies (discoms), to ensure adequate cash flow to power plants, payment of minimum 15 per cent of the provisional weekly bill shall be made by the discoms within a week from receipt of bill from these 32 GW plants.

In case of default, the power plants can sell 15 per cent of power tied-up with that discom in power exchange, the ministry said in its note.

Acknowledging that domestic coal stock is not enough to meet the power demand in the country, the Centre last week directed all states and power generating companies (gencos) to import coal before monsoon sets in.

The power ministry warned gencos that the coal blending benchmark would be increased to 15 per cent from the current 10 per cent if they did not import coal by the end of this month. The directive also said that if blending is not started by June 15, domestic coal allocation of the defaulting thermal plant will be reduced by 5 per cent.