CERC clarifies on tariff policy

Power distributors involved in projects for which power purchase agreements (PPA) have been signed and approved by the appropriate commission may not have to go in for competitive bidding to procure additional power as stipulated under the tariff policy issued by the government in January.

The Central Electricity Regulatory Commission (CERC) has decided that under some special circumstances, distributors could be allowed to procure their additional requirements without going through the bidding process.

"If the tariff policy in its current form was implemented, then the independent power producers, halfway into their projects, will have to re-enter through competitive bidding," CERC Chairman AK Basu said.

These special circumstances include cases where PPA has been signed and approved by the appropriate commission and even cases where the commission's approval is pending.

Also exempted from competitive bidding are projects where "in-principle" clearance of the project cost and financing plan has been given by the Central Commission, but are subject to approval of the PPA by the appropriate commission. Power projects in which financial closure has been completed will also be exempted from the mandatory clause.

According to a release from the CERC, such cases will be clubbed under "firm procurement" under which energy projects will be excused from Clause 5.1 of the tariff policy which necessitates bidding for procurement of additional power.

The CERC said the exemptions were being granted as there were some private sector projects which have made considerable progress before announcement of the policy. Therefore, it might not be advisable to discard all such projects and start the process of competitive bidding in view of the prevailing shortages in the country, it added.

The developers of a couple of such projects had filed petitions before the Central Commission, the release said.

In its order dated February 10, 2006, on the petition of Torrent Power Generation Limited, Ahmedabad, the Central Commission had highlighted the above interpretation. The Commission had also sought confirmation of this interpretation from the power ministry.