Power generators want transmission competitive to bring down power cost

In a first, power generating companies have requested the ministry of power to control the escalating power transmission costs by bidding out all projects. The power producers, in their submission to the government, said the cost-plus projects in transmission should be scrapped and all projects should be awarded contracts through the competitive bidding route.

Reeling under increasing cost of power supply and tepid demand from state utilities, the power producers want competition for setting up new transmission lines. This will bring down the power rates.

“The lower rates obtained through competitive bidding has been clearly documented in many or the tariff adoption orders issued by CERC (Central Electricity Regulatory Commission), wherein the bid evaluation committees have compared the lowest bid received vis-a-vis the tariff computed as per CERC norms,” said the letter written to Piyush Goyal by the Association of Power Producers (APP).
 

In the auction of four transmission lines last month, the winning bid was lower by 10-15 per cent than the second bidder, even lower than what state-owned PowerGrid has bid. It did not win any project.

APP said, “These comparisons have shown that the tariffs discovered through competitive bidding are almost 30-45 per cent lower than regulated tariffs. With this amount of saving in the transmission tariff, there is no rationale for proceeding for any award on nominated basis.”

PowerGrid, however, has maintained that the projects awarded to the company are to be built in a set time schedule and bidding would delay infrastructure development.

In earlier conversations, senior executives of the company said their cost-plus rates are competitive to the tariff that is quoted by other players in bidding. While the transmission sector was opened for private players in 2010, the market share of private sector continues to be around five per cent with majority of projects with PowerGrid.

The projects allotted to PowerGrid on nomination basis are either of strategic importance or to be built under ‘compressed time schedule’. Lately, however, inter-state lines have been allotted to PowerGrid to be built on cost-plus basis, which APP said is costlier option. The advisory committee on coal, power and renewable energy headed by Suresh Prabhu has also suggested that all transmission projects should be awarded on competitive bidding basis. Citing the same, APP has requested for trend to continue with ‘green corridors’ project as well. The Rs 40,000 core project, which will build alternative transmission route for renewable power – a massive tranche has been nominated to PowerGrid.

“Such a large quantum of transmission projects being handed over on cost-plus basis would be a step backwards in the efforts towards bringing more players in the power transmission and reducing transmission tariffs,” said the letter.The second phase of green corridor aiming to connect all the solar parks costing Rs 30,000 crore would also be built on cost-plus basis by PowerGrid.