Cabinet may take up power tariff policy this week

The amendments to the national tariff policy for electricity are likely to be placed in the Union Cabinet this week. After the announcement of the Ujjwal Discom Assurance Yojana (UDAY), the Centre is likely to tighten regulations to help in the execution of the scheme.

The policy lays down regulations for setting power tariffs by asking electricity regulators to ‘necessarily’ be guided by the new policy while framing regulations under Section 61 of the Act.

Earlier, the state regulators would not abide by regulations and twist it according to their requirement, said a former member of Central Electricity Regulatory Commission (CERC). “Now, the state regulators would have to remain in the perimeter of the policy. It would be binding on them to take regulatory decisions as per the amended policy and not as per need.”

Among the major additions to the objective of the policy are promotion of renewable generation sources and creating more competition, efficiency in operations, and improvement in quality of power supply.

To incentivise distribution companies to procure power from renewable sources of energy, the Centre is likely to notify, from time to time, an appropriate bid-based tariff framework for renewable energy.

The tariff policy has recommended a set of 30 amendments in the existing tariff policy, which was formed as a continuation of the National Electricity Policy, 2005.

In a first, the draft also underlines norms for ancillary services. CERC has been given the right to introduce the norms and framework for ancillary services necessary to support the power system or grid operation for maintaining power quality, reliability and security of the grid, including the method of sharing the charges.

The government has also suggested an increase in fuel cost on account of import to be included in the tariff structure. “In case of reduced quantity of coal supplied by Coal India, vis-à-vis the assured quantity of 85 per cent, the higher cost of imported/market-based e-auction coal for making up the shortfall, shall be considered for being made a pass through by CERC/SERCs (state electricity regulatory commissions), on a case-to case basis, to the extent of shortfall,” said an amendment to the policy.

Other major components such as foreign exchange fluctuations, cost of land acquisition and other clearances should have been part of the tariff calculation, but it has been completely ignored, said a senior power sector executive. “Projects stuck for these reasons will continue to remain stranded.”

Power generators have, however, been given the freedom to sell surplus power in the spot market if the beneficiary doesn’t give two days’ notice. The notice period was 10 hours earlier.