CERC proposes payment based on supply to gencos

Coal quality slippage to be paid by coal supplier or railways

In a bid to assist loss-making power distribution companies (discoms), the Central Electricity Regulatory Commission (CERC) has proposed that  payment which they make to power generators would be according to the energy supply to discoms, rather than just plant availability.

The move comes at a time when the plant load factor (PLF) or operating ratio of thermal plants is declining owing to less demand and increasing share of renewable energy, which operates at 20 per cent PLF. 

CERC has proposed a new formula for payment to the generating companies (gencos) in its draft tariff regulations for 2019-24. 

The regulator has suggested that the plants would declare availability of 80 per cent for the year. This would entail payment of 80 per cent of the annual fixed cost to them. Any slippage would lead to reduction in a proportionate manner. For the balance 20 per cent, payment would be based on 95 per cent plant availability during peak demand.

In its earlier tariff policy, the CERC had proposed shifting incentives based on actual purchase of power. This was opposed by NTPC since it amounted to a situation that if power procurers do not purchase power from NTPC and it does not run its plants at 85 per cent capacity, it would not be entitled to incentives. The regulated returns were linked to availability of NTPC's plants. 

The power tariff paid by discom is divided into two parts — fixed cost which is the capital cost of the plant and energy tariff which is the cost of fuel. 

Discoms have to pay the fixed cost to the gencos with which they have signed long-term power purchase agreement, even when there is no supply. 

“In the emerging scenario of slackness in demand, growing penetration of RE, the overall utilisation of generation assets (PLF) has been decreasing. However, in the current circumstances, once the generator declares plant availability at the normative level of 85%, the distribution utilities are required to pay the annual fixed cost in full irrespective of scheduling of energy. The changing circumstances have highlighted the need for a re-think on the approach of fixed cost recovery, based on uniform availability throughout the year,” said the draft regulations.

According to the tariff regulations 2012-17, a generating station has to declare availability on a daily basis. Failure to achieve the target plant availability factor leads to dis-incentive in terms of reduction of the fixed charges on proportionate basis and incentive for actual generation above the target availability factor. The target PAF is 85 per cent. 

State-owned discoms have been reeling under debt and the reform scheme is yet to improve their loss status. 

To compensate the gencos for coal quality, CERC has also proposed a new remedy. Losses arising out of difference in the quality of coal between ‘as billed’ by the supplier and ‘as received’ at the plant’s end would be borne by the coal supplier or the Railways.

 This would come as a huge relief for state-owned NTPC and several state gencos which have filed several cases over coal quality with state-owned Coal India Limited. The ministry of coal had proposed third party sampling and quality check but the billing is still contested by many as the difference in quality is borne by the power plant.

          THE PLAN

• New tariff regulations (2019-2014) propose to compensate gencos for lack of stipulated coal quality
• Coal supplier or Railways to pay for any losses to slippage in coal quality
• Cheer for discoms as the payment to gencos likely to be based as per supply
• NTPC had contested the plant availability-based payment when it was proposed in earlier tariff regulations