Regulatory Aspects of CERC

By

S.C.SHRIVASTAVA, Joint Chief (Engg) CERC, New Delhi

04/20/23 1CERC

• 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

Tariff Regulation In India

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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 laws…for 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 & 4Regulatory 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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• 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)

Procurement Options for the Discoms

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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

Regulatory Approach in Cost plus Tariff setting

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– 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

Availability Based Tariff

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• 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

CERC’s Terms and Condition of tariff for 2009-14

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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%.

CERC’s Terms and Condition of tariff for 2009-14

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ABT-Thermal

Incentive/Disincentive Curve

0102030405060708090

100110120

0 10 20 30 40 50 60 70 80 90 100

Availability

% o

f F

ixe

d C

ha

rge

Old Stations

New Stations

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• 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

Rationalisation of Performance/Operational Norms

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• 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

Regulatory Scope Under Competitive bidding Route

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Escalation indices for EvaluationS.No Description Annual Escalation Rates

for Bid Evaluation

1 Escalation rate for domestic coal 6.16%

2 Escalation rate for domestic gas 0.96%

3 Escalation rates for different escalable sub-components of energy charge for plants based on imported coal

3.1 Escalation Rate for coal sub-component 11.11%

3.2 Escalation Rate for transportation sub-component 19.83%

3.3 Escalation Rate for inland handling sub-component 4.87%

4 Escalation rate for inland transportation charges for coal

4.1 Upto 100 Km distance 2.58%

4.2 Upto 500 Km distance 2.25%

4.3 Upto 1000 Km distance 2.03%

4.4 Upto 2000 Km distance 2.5 1%

4.5 Beyond 2000 Km distance 2.61%

5 Escalation rate for inland transportation charges for gas

3.08%

6 Escalation rates for different escalable sub-components of energy charge for plants based on imported gas

6.1 Escalation Rate for gas sub-component 11.47%

6.2 Escalation Rate for transportation of gas sub-component

19.83%

6.3 Escalation Rate for inland handling sub-component 4.87%

7 Inflation rate to be applied to indexed capacity charge Component

4.87%

8 Inflation rate to be applied to indexed energy charge component in cases of captive fuel source

5.05%

9 Discount rate to be used for bid evaluation 9.35%

10 Dollar-Rupee exchange variation rate 1.17%

11 Escalation for normative transmission charges 4.05%

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Escalation indices for paymentS.No Description Annual Escalation

Rates for Payment

1 Escalation rate for domestic coal 18.00%

2 Escalation rate for domestic gas 46.18%

3 Escalation rates for different escalable sub-components of energy charge for plants based on imported coal

3.1 Escalation Rate for imported coal 42.07%

3.2 Escalation Rate for transportation of imported coal -1.99%

3.3 Escalation Rate for inland handling of imported coal 9.22%

4 Escalation rates for inland transportation charges for coal

4.1 Upto 100 Km distance 0.00%

4.2 Upto 500 Km distance 0.00%

4.3 Upto 1000 Km distance 0.00%

4.4 Upto 2000 Km distance 0.00%

4.5 Beyond 2000 Km distance 0.00%

5 Escalation rates for inland transportation charges for gas -21.52%

6 Escalation rates for different escalable sub-components of energy charge for plants based on imported gas

6.1 Escalation Rate for imported gas 30.50%

6.2 Escalation Rate for transportation of imported gas -1.99%

6.3 Escalation Rate for inland handling of imported gas 9.22%

7 Inflation rate to be applied to indexed capacity charge component.

9.22%

8 Inflation rate to be applied to indexed energy charge component in cases of captive fuel source

8.51%

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Transmission Charges and Losses Matrix

S.No Name of the Region Transmission Charges (Rs/Unit)

Transmission Losses (%)

1 Northern Region 0.16 3.84

2 Western Region 0.15 4.86

3 Eastern Region 0.17 3.30

4 North-Eastern Region 0.35 3.81

5 Southern Region 0.23 3.90

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CERC Regulated TariffsSl. No.

Name of theGenerating Station

Fixed charges

Energy Charges as in January,2010

Total Cost of

Electricity

Coal Based thermal generating Stations of NTPC

A. Pit head Generating Stations

1 Rihand STPS St-I 54 117 171

2 Rihand STPS St-II 81 120 201

3 Singrauli STPS 27 118 145

4 Vindhyachal STPSSt-I

37 129 166

5 Vindhyachal STPSSt-II

62 124 186

6 Vindhyachal STPSSt-III

94 124 218

7 Korba STPS 31 82 113

8 Ramagundam STPS St-I & II

35 160 195

9 Ramagundam STPS St-III

81 147 228

10 Talcher TPS 64 92 156

11 Talcher STPS St-I 61 112 173

12 Talcher STPS St-II 67 112 179

13 Sipat-II 108 95 203

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CERC Regulated TariffsSl. No.

Name of theGenerating Station

Fixed charges

Energy Charges as in January,2010

Total Cost of

Electricity

B. Non-Pit head Generating Stations

14 FGUTPP TPS St-I 53 179 232

15 FGUTPP St-II 66 176 242

16 FGUTPP St-III 111 176 287

17 NCTP Dadri 60 234 294

18 Farrakka STPS 50 231 281

19 Tanda TPS 64 241 305

20 Badarpur TPS 49 265 314

21 Kahalgaon STPS St-I

65 182 247

22 Kahalgaon STPS St-III

80 188 268

23 Simhadri 72 163 235

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Competitive Bid Tariffss. No.

Project Size Status State Developer COD Date: 1* Unit

Levelized Tariff (Rs/kWh) as per Competitive Bidding

1 Talwandi Sabo 3 x 660 MW Tariff Approved

Punjab/Case 2

Sterlite Aug 2012 2.8643

2 Rajpura 2 X 660 MW Tariff Approved

Punjab/Case 2

L&T Jan 2014 2.89

3 Kamalanga 3 X 350 MW Tariff Approved

Haryana, Case 1

PTC/GMR Oct. 2011 2.54, Bus bar#

4 Babandh 4 X 660MW Approved Haryana, Case 1

LANCO July 2012 2.075, Bus bar#

5 Jhajjar 2 X 660 MW Approved Haryana, Case 2

CLP Power Nov-Dec, 2012

2.996

6 Mandva 2 X 660 MW Approved Maharashtra, Casel

LANCO Mahanadi

Oct. 2012 * 2.70

7 TirodaPh.l 2 X 660 MW Approved Maharashtra, Case 1

Adani Maharashtra

Aug. 2012 2.642

8 Chitrangi. Ph 1 3 X 660 MW Petition MP, Case 1 Reliance June, 2012 2.45

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Competitive Bid Tariffs

s. No.

Project Size Status State Developer COD Date: 1" Unit

Levelized Tariff (Rs/kWh) as per Competitive Bidding

9 Mahan 2 X 600 MW Petition MP, Case 1 Essar May, 2011* 2.45 10 Nandgaonpeth 2 X 660MW Petition Maharashtra,

Casel India Bulls Mar. 2014 3.26

11 Tiroda Ph. 2 2 X 660 MW Petition Maharashtra, Case 1

Adani Maharashtra

Power

Sept. 2014 3.28

12 Mahanadi 3 X 600 MW Petition Gujarat KSK Energy Mar. 2015 2.345

13 Prayagraj 3 X 660MW Petition UP, Case 2 JP Associates

July 2014 3.02

14 Sangam 2 X 660 MW Petition UP, Case 2 JP Associates

Jan, 2014 2.97

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Price of Electricity in Bilaterals/PXs/UI

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• 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

Price of Electricity in Bilaterals/PXs/UI

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• 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

Success of Competitive Bidding

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• 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.

Challenges

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Thank You

E-mail: scschandra@hotmail.com

CERC Web Site: www.cercind.gov.in

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