New power tariff regime on table

Energy efficiency, peak power rates, time of the day tariff, renewable energy to be pillar agendas

The Indian power sector is set to witness a sea change with new tariff regulations, which will consider for the first time energy efficiency, peaking power rates and time-of-the-day tariff as key themes. The Central Electricity Regulatory Commission (CERC) will soon commence the exercise to decide the tariff regulations for 2019-24.

On the agenda

• New Tariff regulations for next 5 years to be decided from this year onwards
• Central & state government officials, central & state electricity regulators, industry people and sector experts to be part of the committee
• Meetings to kick-start by this year. First draft in Dec 2018, public hearing with final regulation in Feb 2019
• Sector executives pointed out that amendments to the Electricity Act need to come in force as soon as possible
• Fuel supply dynamics & changing power market scenario to be major goals

Senior officials in the CERC said the regulator was aware of broader changes that the sector was undergoing. “A major shift in trend has been towards the bidding route to award power projects or procure power – long and short term both. Most of the projects borrow to support the low bids they quote. The tariff structure should assist in their debt servicing,” said an official.

In 2014, when the CERC came out with the current tariff regulations (2014-2019), state-owned NTPC dragged it to court for linking the incentives to the plant’s efficiency. 

“That was when the coal supply was in shortage. Now we are surplus. Fuel dynamics would be part of the new tariff regime,” said an official, requesting anonymity. The case is sub-judice in the Delhi high court.

Among broad themes that would be the foundation for discussion on new tariff regulations is energy efficiency gains made by the power producer by adopting efficient technologies. 

With efficiency norms for coal-based power plants being pressed upon, power generators fear they might get little incentive in adopting efficiency measures under the current tariff structure. 

The CERC could mull over the idea of a sharing mechanism between the generator and the consumer for adopting energy efficiency measures, said officials.

Power sector executives said, currently, whoever is adopting energy efficiency is cutting down on their auxiliary power to earn back the benefit that foregoes due to additional capex efficiency measures. Auxiliary power is the offline power which serves as a backup for a power station. 

Advances in the auxillary consumption, ancillary services by the power producer, improved technology would be put on the discussion table for the new tariff regime, said officials.

Representatives from the Union ministry of power, state governments, industry, state electricity regulators are part of the technical committee for drafting the tariff regulations 2019-24. 

The discussion process would commence from this year. The first draft for public comment would come out by December 2018 and final regulations by February 2019 after a public hearing.

As renewable energy capacity addition touches record numbers and conventional energy is slowing down, the CERC said the latter should be a more flexible fleet in the whole power mix. 

“As more renewable is fed in the grid, conventional fleet needs to be flexible to make up for fluctuations, shortages and gaps. At the same time, (it needs to) maintain a technical minimum to earn incentive. The tariff structure would incorporate this impeding paradigm shift,” said an official in the know. 

This, he said, also paves way for time-of-the-day tariff i.e. a dynamic tariff depending on the power source at that particular time. 

Sector executives pointed out that amendments to the Electricity Act need to come in force as soon as possible. The amendments propose similar services and incentives for the same.

The CERC would also consider incentive for “peaking stations” for providing much needed power supply during peak demand periods. “There needs to be different remuneration for those stations which come in when peak demand is to be catered. They need to be incentivised for filling the crucial gap,” said a CERC official.