Regulatory Aspects of CERC

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• Regulatory Aspects of CERC
• By
• S.C.SHRIVASTAVA,
• Joint Chief (Engg)
• CERC, New Delhi

2
Tariff Regulation In India

• Till 1998
• By Govt.
• Since Aug. 1998
• By Central State Regulatory Commissions under
  ERC Act 1998
• Since 2003
• By Central State Regulatory Commissions under
  EA 2003

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Tariff Setting In India

• Prior to 1992-
• Single part Tariff Cost plus on actuals (Schedule
  6 of E(S) Act 1948)
• Since 1992 to 2001-
• For SEBs- Single part Cost plus on actuals
• For CPSUs IPPs- Two part Cost Plus with
  performance based rate making (KP Rao Committee)

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Tariff Setting In India

• Since 2001 to 2003-
• For SEBs- Single part Cost plus on actuals
• For CPSUs IPPs- Availability Based Tariff (ABT)
  Cost Plus with performance based rate making
  (CERC Regulation)
• Since 2003 onward-
• Availability Based Tariff (ABT) Cost Plus with
  performance based rate making
• Competitively Bid Tariff

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Objective- EA 2003

• An Act to consolidate the lawsfor taking
  measures conducive to
• development of electricity industry,
• promoting competition therein,
• protecting interests of consumers
• supply of electricity to all areas

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Statutory Provisions in EA 2003

• Section 3 4
• Regulatory Commissions to be guided by the NEP
  and TP.
• Section 61 Regulatory Commissions to formulate
  Terms and Conditions of Tariff for
  determination of Tariff under Section 62 duly
  considering
• The factors which would encourage competition,
  efficiency, economical use of the resources, good
  performance and optimum investments
• The principles rewarding efficiency in
  performance
• The promotion of co-generation and generation of
  electricity from renewable sources of energy

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Statutory Provisions in EA 2003

• Section 62 Provide for determination of Tariff
  for sale of power from a generating company to
  distribution licensees
• Section 63 Notwithstanding anything contained
  in section 62, the Appropriate Commission shall
  adopt the tariff if such tariff has been
  determined through transparent process of bidding
  in accordance with the guidelines issued by the
  Central Government

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Provisions in Tariff Policy

• All future requirement of power should be
  procured competitively by distribution licensees
• Expansion of existing projects of State
  controlled/owned companies exempted
• Expansion of generating capacity by private
  developers for this purpose restricted to one
  time addition of not more than 50 of the
  existing capacity.
• New projects of State controlled/owned companies
  exempted for five years or more till the
  situation is found ripe to introduce such
  competition by the Regulatory Commissions.

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Provisions in Tariff Policy

• Clarification issued by the MoP on 9.12.2010 on
  Clauses 5.1 and 7.1 exempting following types of
  PSUs/CPSUs projects from competitive bidding
  route
•  Expansion projects of already Commission
  projects
• Projects for which PPA has been sign on or before
  5.1.2011
• No such relaxation for Pvt Sector

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Procurement Options for the Discoms

• From State PSUs/ CPSUs at Cost plus tariff
• Procurement through competitive bidding route
  under case-1 and Case-2
• Procure power from traders and discoms under
  bilateral arrangements though Open access
• Procure Power at the power exchanges through
  collective transactions though Open access(Day
  ahead Market)
• Procure Power though UI (Real time market up to
  grid frequency 49.7 Hz)

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Regulatory Approach in Cost plus Tariff setting

• Cost of Service based on performance linked
  norms
• Balancing the interest of Generators on one hand
  beneficiaries on the other
• Transparency
• Light handed regulation
• Encourage efficiency Economy
• Encourage Investment
• System of incentive and disincentive for
  performance

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Availability Based Tariff

• Annual Fixed Charge (Capacity Charges)- Payment
  Linked to availability
• Energy Charge- Payment linked to scheduled
  generation
• Unscheduled Interchange (UI) Charge- payment
  linked to grid frequency for deviation from the
  schedule
• Incentive- For Ex-bus generation in excess of
  ex-bus generation corresponding to the
  availability Norm

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CERCs Terms and Condition of tariff for 2009-14

• Provided for Pre-Tax Return on Equity
• Tightened efficiency norms for the thermal power
  stations
• For existing 500 MW units Station heat rate norm
  reduced from 2450 kCal/kWh to 2425 kCal/kWH
• For New units operating margin in Station heat
  rate norm reduced from 9 to 6.5 from the design
  heat rate values
• Raised performance norms of availability from 80
  to 85 coupled with incentive linked to
  availability
• Reduced aux energy consumption norm by 0.5 point
  for thermal generating stations.
• Provide for efficiency performance norms for
  super critical technology units
• Provide for sharing of benefit of savings in
  secondary fuel oil consumption

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CERCs Terms and Condition of tariff for 2009-14

• Renovation Modernization of Thermal power
  Plants
• Distinct activity recognized in Tariff Policy
• Aimed at improved efficiency and performance
• Suggesting Phasing out of very old and
  inefficient units
• Special allowance after useful life for
  sustaining efficiency and performance parameters
  in well maintained stations Rs.5lakh.MW/Year with
  effect from 2009-10 escalated every year at 5.72.

9/27/2014
CERC
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ABT-Thermal
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Rationalisation of Performance/Operational Norms

• Reasonable and achievable
• Commensurate with technology, unit size, fuel
  used and operating conditions
• With due regard to industries performance
• Wherever scope for improvement a reasonable time
  to be allowed

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Regulatory Scope Under Competitive bidding Route

• Scope is limited
• Approval of quantum of capacity/Energy to be
  purchased and approval of fuel price in case of
  fuel specific enquiry
• Approval of Deviations from the guidelines
• Notification of escalation indices for evaluation
  and for payment purposes
• Scrutiny of the process to see whether it
  conforms to the competitive bidding guidelines
• Approval of the tariff implications arising out
  of change of law

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Escalation indices for Evaluation
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Escalation indices for payment
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Transmission Charges and Losses Matrix
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CERC Regulated Tariffs
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CERC Regulated Tariffs
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Competitive Bid Tariffs
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Competitive Bid Tariffs
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Price of Electricity in Bilaterals/PXs/UI
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Price of Electricity in Bilaterals/PXs/UI

• Presently the prices in the PXs are going as high
  as Rs. 14 in the southern Region
• The reasons?
• Desperate buying by Tamil Nadu due to
• Increase in Peak Demand by about 10
• No capacity addition
• Unable to over draw from the grid as UI
• Transmission congestion leading to increase in
  prices by Rs. 3 due to congestion charges

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Success of Competitive Bidding

• Conducive Environment
• Uniform bidding guidelines
• Standard bid documents and PPA
• Equitable sharing of risk between procurer and
  generator
• Reasonable penalty and risk mitigation
• Regulatory certainty
• State support in getting land, fuel, water, and
  environment clearances
• Success of bidding process demonstrated in 3 UMPP
  Sasan,Mudra and Krishnapatanam

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Challenges

• Extent of State support in future
• Manner of tackling situations arising out of
  Change of law
• Abnormal fuel price escalations
• Development of transmission corridors
• To early to say that price discovery is
  competitive enough to beat the cost plus prices
• There is need for advance action by the States to
  start the procurement process with regard to
  their demand projections.

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• Thank You
• E-mail scschandra_at_hotmail.com
• CERC Web Site www.cercind.gov.in