Make power project bids competitive: CERC

The Central Electricity Regulatory Commission (CERC) has advised the government to introduce competitive bidding while awarding contracts for power projects, including those in the public sector. The commission is also contemplating a downward revision in the return on equity accorded to power sector projects.

Speaking at a seminar on regulatory issues here today, CERC Chairman AK Basu said the commission was pushing the Centre to introduce competitive bidding for even public sector projects, including those promoted by state-owned utilities like the National Thermal Power Corporation (NTPC) and National Hydroelectric Power Corporation (NHPC).

The ministry of power is at present working on the guidelines for the introduction of competitive bidding.

Basu said the move would enable the regulatory commissions to move away from the current practice of intrusive regulation, as the process of competition would eliminate the need for the body to examine generation tariffs.

He also said CERC was looking at changing the return on equity norms for power sector projects, currently pegged at 16 per cent. Basu said there had been demands to revise it in line with the Reserve Bank of India rates.

Basu said while RBI rates had been revised downwards several times in the past few years, the return on equity for power projects was constant at 16 per cent.

CERC may also prescribe normative values for fixing the debt-equity ratio and other financial parameters for power sector projects under its "terms and conditions of tariff" for Central utilities and inter-state generation projects.

Basu said the commission would finalise guidelines for handing out power trading licences by the middle of January and had allowed a few players to undertake such activity at their own risk till the guidelines were in place.

Basu also said CERC had started working on setting up a power exchange, but it was 3-4 years away from fructification. He said the exchange would basically be a pooling system where power would be made available by suppliers for consumers to draw.

Basu also set aside demands from various quarters seeking reintroduction of norms contained in previous electricity legislation, which were repealed following the passage of the Electricity Act, 2003.

He said it was not possible to have a uniform approach towards tariff determination as conditions would vary from state to state.

Therefore, it was essential for the forum of regulators to sit together to look at these issues, he added.