Power tariff plan to profit public firms

Public sector power companies can gain under the new tariff policy as it exempts their new transmission and generation projects from competitive tariffs for the first five years. There is no such relaxation for the private sector.

In addition, the policy has said that private developers should not be allowed to expand their generation capacity by more than 50 per cent of their existing capacity in one go.

Further, public sector power companies are proposed to be exempted from a requirement of procuring electricity competitively for one-time capacity expansion projects.

The policy states that all future requirements of power should be procured competitively by distribution licensees, except, in cases of expansion of existing projects or where there is a state-owned company as an identified developer. This means that private players cannot set up projects awarded through the memorandum of understanding (MoU) route.

"CERC had advised the government to have same norms for both the public and private sectors but apparently this has not been accepted. We will look at the implications,: Central Electricity Regulatory Commission (CERC) Chairman AK Basu told Business Standard.

"The PSUs have been exempted because the capital costs in their case have been decided by the government. They are subjected to CAG audit," a power ministry official said.

"There are no agencies to bid at this point of time. After five years or when the regulators are satisfied, there will be a large number of entities that can bid. In such a case, PSUs will then have to bid," the official added.

The policy has also said that the cross-subsidy surcharge should be brought down at a linear rate to a maximum of 20 per cent of its opening level by the year 2010-11.

"There are so many variations from state to state and a uniform formula cannot be applied everywhere," Basu said.

That is why the Electricity Act gives the responsibility of setting the surcharge to respective state regulators. If necessary, we shall approach the government on this issue after examining the impact of the formulation as laid down in the policy," Basu said while commenting on the formula.

Large consumers of 1 Mw and above shall have to put in place the time differentiated tariff in a year. Under this, large consumers shall be able to charge separate tariffs during peak and off-peak periods.

The policy stipulates those below the poverty line consuming a small quantity of electricity should receive special support through cross-subsidised tariffs.

The policy also talks about setting tariffs for agriculture use of power in order to address the concerns about depleting ground water resources.

The policy suggests that third party verification of energy audit results for different localities should be used to impose area-specific surcharge for larger losses.

State Electricity Regulatory Commissions have been asked to undertake independent assessments of baseline data for various parameters for every distribution circle of a licensee. "This exercise should be completed latest by March, 2007," the policy said.

The Forum of Regulators has been asked to decide the basic framework of service standards. Licensees failing to meet the standards shall face penalties.

A minimum percentage of energy, as specified by the regulatory commission, is to be purchased from non-conventional energy sources by April 1, 2006. "Developers of projects shall be given adequate incentive to avail of the benefits of the clean development mechanism," it said.