Role of Electricity Regulatory Commissions

ByS C Shrivastava

Joint Chief (Engg)

Central Electricity Regulatory Commission

In this presentation…

• Overview

• Legal/Policy framework

• Regulatory framework

• Regulatory scope/activities

• Market Development - CERC

initiatives & impact

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OVERVIEW

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Sectoral ParametersUnelectrified rural households (2001 Census)

77.8 million(57%)

Power Supply Position during July 2010

- Energy shortages- Peaking deficit

8.3%12.1%

Generating plants – PLF (2009-10) All India

77.53%

Generation performance (2009-10) 771 BUs (7.0 % growth over corresponding period of previous year)

Cumulative High Voltage Transmission links (220 KV and above) (upto April 2010)

2,26,458 ckt km

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Installed Generation Capacity in India (as on 31.01.2011)

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Installed Renewable Generation Capacity in India (end December’10)

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Power Infrastructure in India (as on 31.01.2011)

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Ownership Status of Transmission and Distribution

• Almost 100% of Electricity Transmission

in India is owned by public sector.

• About 13 % of Electricity Distribution in

India is owned by private sector.

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Electricity Requirement 2031 - 32

8% 9%

Total Energy Requirement 3880 4806

Energy Requirement at Bus Bar 3628 4493

592 733

778 960

Billion kWh

Projected Peak Demand (GW)

Installed Capacity Requirement (GW)

GDP Growth Rate

Source: Integrated Energy Policy

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LEGAL/POLICY FRAMEWORK

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Basic Legal Framework

• Electricity – a concurrent subject as per

Constitution of India.

• Both Centre and States can legislate.

• In case of repugnancy, Central

legislation prevails.

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Legal Framework under old laws• Regulatory authorities under IE Act, 1910 and E(S)

Act, 1948• Central Government

• State Government

• CEA

• SEB

• Central Government – Powers to fix capital ceiling for TEC clearance etc.

• State Government – Powers to grant licence etc.

• CEA – TEC of generation projects, technical norms etc.

• SEB – Several powers as main advisor of State Govt.

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Legal Framework Contd…

• Regulatory authorities under ERC Act, 1998 • CERC• SERCs• JERC

• Objective – distancing of Govt./Govt. organization from regulation.

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Legal Framework – Electricity Act, 2003

• Consolidates laws of electricity relating to generation,

transmission, distribution and trading of electricity.

• Creates environment conducive for development of

electricity industry.

• Introduction of competition.

• Constitution of Central and State Regulatory

Commissions to rationalize electricity tariffs.

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Electricity Act 2003 -Key Features

• Open Access to Transmission /Distribution Systems

• De-licensing of power generation

• Trading in electricity permitted

• Liberal provisions for captive power generation

• Rural generation and distribution freed from licensing

• Expanded role for the Regulatory Commissions

• Envisages unbundling of transmission and distribution.

• Regulatory Commissions to develop electricity markets.

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The Electricity Act, 2003……

• Clear demarcation of role and responsibility of

• Government (policy making)

• Independent Regulatory Commission (powers of

regulation)

• Other statutory bodies – like Central Electricity

Authority (as expert body on technical matters)

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Government

• Formulation of

– National Electricity Policy

– Tariff Policy

– National Electricity Policies on rural electrification.

• Powers to issue directions to the Regulatory

Commissions on issues involving public

interest.

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National Electricity Policy • Total village electrification by year 2010

By year 2012 :

• Per capita availability 1000 units.

• Installed capacity over 200,000 MW.

• Spinning reserves 5% .

• Minimum lifeline consumption of 1 unit per household per

day.

• Inter-regional transmission capacity 37,000 MW.

• Energy efficiency/ conservation savings about 15%.

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Tariff Policy• Mandates competitive procurement of power and transmission

services – transitional window of 5 years period given to public

sector companies.

• Encourage efficiency in operations by sharing of gains between

licensees and consumers.

• Promote Multi-Year Tariff (MYT) framework.

• Encourage loss reduction Strategies.

• Tariff design : Linkage of tariffs to cost of service

• gradual reduction in cross subsidy (+/- 20% of average cost of

supply)

• Progressive reduction in Cross-subsidy surcharge for open access.

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REGULATORY FRAMEWORK

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Regulatory Commissions • At the Center – CERC

• Powers to regulate centrally owned generating companies

and companies having composite scheme for generation and

sale of electricity in more than one State.

• To regulate inter-State transmission/Trading.

• In the States – SERCs

• Powers to regulate intra-State generation, transmission and

distribution.

– CERC vis a vis SERCs

• No hierarchical relationship. However, SERCs are to be

guided by the principles of tariff determination specified by

CERC.04/19/23 21CERC

Functions of CERC• to regulate the tariff of inter-state generating companies

• to regulate the inter-State transmission of electricity

• to determine tariff for inter-State transmission of electricity

• to issue licenses for inter state electricity transmission and

trading.

• to adjudicate upon inter-State disputes

• to specify Grid Code

• to specify and enforce the standards with respect to quality,

continuity and reliability of service

• to fix the trading margin

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Functions of CERC…

• Advisory Functions:

– formulation of National electricity Policy and tariff policy;

– promotion of competition, efficiency and economy in the activities of

the electricity industry;

– promotion of investment in electricity industry;

– any other matter referred to the Central Commission by the Central

Government

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Functions of SERCs• determine the tariff for generation, supply, transmission and wheeling

of electricity, wholesale, bulk or retail within the State

• regulate electricity purchase and procurement process of distribution

licensees

• facilitate intra-State transmission and wheeling of electricity

• issue licences for intra state transmission, distribution and trading.

• promote co-generation and generation of electricity from renewable

sources of energy

• adjudicate upon the intra-state disputes

• specify or enforce standards with respect to quality, continuity and

reliability of service by licensees;

• fix the trading margin in the intra-State trading of electricity

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Functions of SERCs…

• Advisory Functions:

– promotion of competition, efficiency and economy in

activities of the electricity industry;

– promotion of investment in electricity industry;

– reorganization and restructuring of electricity industry in

the State;

– matters concerning generation, transmission ,

distribution and trading of electricity or any other matter

referred to the State Commission by that Government.

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Mission Statement-CERC• The Commission promotes competition, efficiency and economy in

power markets, protects the interests of consumers and promotes

investments in power sector. In pursuit of these objectives the

Commission aims to –

• Formulate an efficient tariff setting mechanism which ensures economy and

efficiency in the pricing of bulk power and transmission services and leads to

least cost investments,

• Promote development of power market by creating a market structure, facilitating

open access in inter-State transmission, facilitating interstate trading,

• Improve the operations and management of the inter-State transmission systems

through Indian Electricity Grid Code (IEGC), Availability Based Tariff (ABT),

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Regulatory Commission - a quasi judicial body

• Powers of Civil Court for the purposes of

inquiry or proceedings under the Act.

(Section 94)

• Powers to impose penalty for non-

compliance of direction of Regulatory

Commissions.

• Powers to adjudicate

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Accountability of Regulators

• Annual Report to be laid before the Parliament.

• Accounts of Regulatory Commissions to be

audited by CAG.

• Appeal against the orders of Regulatory

Commissions to lie before the Appellate

Tribunal.

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Procedure for Regulations

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PROCEDURE FOR PETITIONS

PETITIONER RESPONDANTS

ARGUMENTS

ORDERSREVIEW

PROCEEDINGS

Appeal in Appellate Tribunal

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Appellate Tribunal• Constitution of Appellate Tribunal consisting of Chairman,

three Members (Technical and Judicial) and one Member with

specialization in Petroleum Sector.

• Appellate Tribunal to hear appeals against the orders of

CERC/SERC/PNGRB.

• The appeal to Appellate Tribunal should be filed within 45

days of order issued by CERC/SERC/PNGRB.

• Appeal against the orders of Appellate Tribunal to lie before

the Supreme Court within 65 days.

• Appellate Tribunal considered necessary to-

• Reduce litigation and delay in decisions through High Court.

• Provide technical expertise in decision on appeals.04/19/23 31CERC

REGULATORY SCOPE/ACTIVITIES

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Generation

• No requirement of licence.

• Full freedom to captive generation.

• For hydro-generation clearance of CEA is necessary

due to concern of dam safety and inter-State issues.

• Generation from Non-Conventional Sources / Co-

generation to be promoted. Minimum percentage of

purchase of power from renewables may be prescribed

by Regulatory Commissions.

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Transmission

• Transmission Utility at the Center and in the States to

undertake planning/development of transmission

system.

• Regional Load Despatch Centers to ensure integrated

operation of the power system.

• Flexibility regarding keeping Transmission Utility and

load despatch together or separating them.

• The Load Despatch Centre/ Transmission

Utility/Transmission Licensee not to trade in power.

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Trading/ Market development

• Trading distinct activity permitted with licensing.

• Regulatory Commission to specify technical

requirement, capital adequacy requirement and credit

worthiness for a trader.

• Regulatory Commission may fix ceiling on trading

margin to avoid artificial price volatility.

• The Regulatory Commission to promote development

of market including trading.

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Tariff

• Regulatory Commissions to determine tariff for

– Supply by Generating Company to distribution licensee

through long term contract. For short term contracts only

minimum and maximum ceiling of tariff.

– Transmission of electricity.

– Wheeling of electricity

– Retail sale to consumers by Licensee.

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MARKET DEVELOPMENT - CERC INITIATIVES & IMPACT

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Market Development - CERC initiatives

• Regulations on

• Short-term Open Access

• Grant of Connectivity, Long-term Access and Medium-

term Open Access in inter-State Transmission.

• Grant of Regulatory Approval for execution of Inter-State

Transmission Scheme to CTU

• Transmission Pricing

• Power Market

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CERC initiatives…• Special Features of CERC regulations on short-term open

access

• Timelines for concurrence of SLDC in case use of

intra-State system is involved

• Provision of deemed concurrence if SLDC does not

decide within above timelines.

• SLDC to look at only two aspects:

• existence of metering infrastructure, and

• availability of surplus transmission capacity in the

State network.

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CERC initiatives…• Features of CERC regulations on Grant of Connectivity,

Long-term Access and Medium-term Open Access in inter-

State Transmission

• Enabling transmission products of different varieties, standardization of

procedures, defining time lines and ensuring level playing field among

different categories of market players.

• Introduced medium-term Open Access to inter-State grid - for a period

ranging from 3 months to 3 years.

• New regulatory provisions for seeking connectivity to grid.

• Discrimination between public and private sector generators on

connectivity to grid, abolished.

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CERC initiatives…

• Regulations on Grant of Regulatory Approval for execution

of Inter-State Transmission Scheme to Central

Transmission Utility

• This is to facilitate network expansion keeping in view

the anticipated transmission needs without the

requirement of prior agreement with the beneficiaries

• CERC has granted approval for investment (of about Rs.

58000 Cr. ) to CTU for nine high capacity transmission

corridors.

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CERC initiatives…

• Regulations on Sharing of Inter State Transmission

Charges and Losses

• National transmission tariff framework – in line with

vision of tariff policy.

• Sensitive to direction, distance and quantum;

• Addresses short-comings of existing system – like

pan-caking of charges, sharing of charges not

being fully sensitive to distance and direction,

pricing not efficient enough to address emerging

market requirements. 04/19/23 42CERC

CERC initiatives…

• Power Market Regulations

• Provide a road map for development of power

market

• Define roles of various players in the market

and phases of introduction of

products/contracts.

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Volume of Open Access transactions (inter-State transmission)

04/19/23Source: NLDC

Market Development- Impact

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Market Development- Impact…

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Consumer Open Access through Power Exchange - A Snapshot

Details Indian Energy Exchange Ltd

Total Clients 300

Open Access Consumers 160

Nature of Business of these Consumers

Industrial Consumers- Textiles, Spinning mills, Auto Ancillary

Geographical Location of these Consumers

Punjab, Rajasthan , Tamil Nadu, Andhra Pradesh

% of Daily Cleared Volume by OA consumers during Oct 2009 – Feb 2010

25-30 % ( 5-7 MU) of total daily cleared volume of Power Exchange

Nature of purchase Peak , Off Peak

45CERC

• Investment promotion:– CTU has received 225 applications from private

developers for Long Term Open Access amounting to 1,62,898 MW

• Phase 1: 42,108 MW (LTOA granted to 43 applicants )

– Bank guarantee of 875 Cr given by developers and BPTA signed

– Geographical locations

• Pit-head coal Orissa, Chhattisgarh, Jharkhand

• Coastal with port facilities - Andhra Pradesh, Tamil Nadu

• Hydel sites – Sikkim

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Market Development- Impact…

46CERC

Grid discipline - IEGC• IEGC and UI regulations amended to ensure greater grid

discipline .

• Operational frequency band tightened from ‘50.3 Hz

to 49.2 Hz’ to ‘50.2 to 49.5 Hz’.

• This is aimed at ensuring better performance of

generating stations and user appliances.

• All users of inter-State grid including distribution

utilities will also now be directly responsible for grid

discipline and load management, in addition to

SLDCs.

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Grid Discipline - Restructured UI mechanism • UI regulations amended to send a message that UI mechanism should not be

used as a trading tool

• Underdrawls and over injections beyond the permissible quantities,

disincentivised and priced at lower rates

• in order to push more electricity to organized electricity markets and

• to further discourage use of UI mechanism for sale of electricity,

• Additional UI charge of 40% on the normal UI rate (Rs. 8.73 per unit),

applicable at grid frequency below 49.5 Hz instead of 49.2 Hz

• to more effectively curb the tendency of some states to heavily

overdraw

• Additional UI rate has been made 100% on overdrawals when grid

frequency is below 49.2 Hz

• to put further exemplary deterrent on overdrawls

• Improvements in grid frequency profile subsequent to CERC regulation on IEGC

and UI

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Improvement in Grid profile

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Grid discipline - constraints

• Disconnection almost impossible in meshed system

• Centre-State issues

• J&K defaulting in UI payments, difficulties in

disconnection.

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Thank Youwww.cercind.gov.in