MERC cuts captive power plant tariff

Bid to overcome shortages

The Maharashtra Electricity Regulatory Commission (MERC) has slashed the tariff rates for power purchased from fossil fuel-based captive power plants (CPPs) in the state, setting a floor rate of Rs 2.30 per unit.

Although state taxes are outside the MERC jurisdiction, the commission has advised the state government against levying electricity duty on self-consumption of CPP power. It has also recommended against any tax on sale of electricity on CPPs.

The order issued here on Wednesday, which has adopted the principle of availability-based tariff (ABT) has linked the purchase rate of CPP power to the grid frequency prevailing at the time of injection into the licensee's grid.

A distinction has been made between firm power (guaranteed supply) and infirm power. The purchase rate is also subject to a ceiling as well as a floor rate.

The rate of infirm power would be 90 per cent of the applicable firm power rate. As a measure of promotion, the commission has given a rate premium of 10 per cent to co-generation based CPPs, considering their efficient utilisation of energy, as mandated by the Electricity Act.

The MERC order is expected to ease the acute peak time power shortage in the state that witnesses an average load shedding of 1,500 mw in the morning and peak hours.

As of March 2001, there were 46 operational CPPs with a total capacity of 657 mw. MSEB had also sanctioned 33 additional projects with total capacity of 883 mw.

In its order, the MERC states, "Maharashtra has the opportunity to harness the excess saleable capacity of about 270-320 mw with the CPPs during this 5 year plan period. This would translate into Rs 1,200 crore of avoided cost of generation for the state."

Taking into account the definition of a CPP under the Electricity Act 2003, the MERC has allowed sale of power by a CPP upto 49 per cent of its installed capacity to the distribution licensee and any other person or unit.

The commission has also allowed the CPP holder to sell upto 75 per cent in case of unutilised CPP capacity due to low capacity utilisation, shutdown or reduction in activity, or other such reasons for upto 3 years.

In order to ensure that distribution licensees are fairly compensated for providing cross-subsidy in their tariffs while the CPP holders are not overburdened, a surcharge of 25 per cent of the total cross-subsidy of the distribution licensee has been fixed on the sale of CPP power to others. No additional surcharge has been applied. (The current level of cross-subsidy in the case of MSEB is Re 1.00 per unit.)

The commission has provided for banking of CPP power with the distribution licensee on a time of the day (ToD) basis. This will allow the CPP holder to draw the energy banked earlier without any additional cost.

The CPP holder can wheel power over the distribution licensee's grid for self use or for sale to others on ToD basis for 24 hours a day.

In order to provide some certainty to financing institutions, CPP holders as well as the distribution licensees, the commission has decided that energy purchase, wheeling and banking agreements with distribution licensees should be valid for between 3 to 5 years.