Tariff-based bidding mandatory for new transmission services

The ministry of power has made it mandatory to procure transmission services for new projects through a rate-based competitive regime. The objective is to increase private participation in the development of electricity infrastructure.

Till now, eight inter-state transmission projects have been allotted on the basis of competitive bidding at an estimated cost of about Rs 14,000 crore. Intra-state transmission projects will also move towards a rate-based competitive system from January 2013, according to a statement issued by the ministry of power.

To facilitate the shift from a cost-plus to rate-based regime, the ministry has evolved a standard bidding document that has been used by some intra-state transmission projects.

All the same, a viability gap funding (VGF) model has been evolved for intra-state transmission projects. For this, the Planning Commission has developed a model transmission agreement (MTA).

The MTA has the provision of a VGF and evaluation of bids on the basis of minimum grant quoted by the bidders. It also determines the tariff through a transparent process of bidding.

A communication by the ministry has told states and Union territories they could either to use VGF-based MTA document or the Standard Bidding Document for procurement of intra-state transmission services.

For VGF-based bidding, unitary charges will require to be approved by the respective State Electricity Regulatory Commissions prior to bidding. The experience of VGF-based MTA is to be reviewed after three years, the statement added.