Electricity Tariff Policy: Discoms object to new plans; Rajasthan opposes penalty for gratuitous load shedding

Electricity Tariff Policy: Discoms object to new plans; Rajasthan opposes penalty for gratuitous load shedding

Stakeholders, including state-owned power distribution companies (discoms) and private power producers, have objected to key amendments to the Electricty Tariff Policy, 2016. This could make it more difficult for the Centre to impart higher efficiency to the activities in the sector and reduce costs.

According to official sources, the Rajasthan government has written to the ministry, opposing the penalty proposed for gratuitous load shedding and arguing against the targets and time-lines set for discoms to have long-term power purchase agreements (PPAs) and comply with renewable purchase obligations.

On their part, private power companies have expressed reservations about the plan to allow state-run power producers like NTPC to charge tariffs on a cost-plus basis even for their under-construction (expansion) projects. The private-sector players feel that the risk-free regime for state-sector generators would encourage their expansion and hit the demand for power to be made available through the competitive bidding route.

“Exemption of any generation entity from competition would be against the provisions of the Electricity Act, as well as the overall objectives of improving efficiency and reducing cost of power,” the Association of Power Producers (APP) said in the letter reviewed by FE.

While welcoming the provisions for 24×7 power supply, restriction of AT&C losses to 15% (losses above the level would not be compensated via tariffs), payment of subsidy through direct benefit transfer, the APP has requested the power ministry to continue the current tariff policy framework of permitting discoms to clinch new PPAs only through competitive bidding.

The power ministry has proposed to make it mandatory for discoms to tie-up long- or medium-term PPAs to meet the annual average power requirement in their areas of supply. As reported by FE earlier, the move may inflate the fixed charges paid by discoms to the tune of `600 crore/annum for new PPA for every 1,000 MW. Discoms have to pay fixed charges even when they do not evacuate electricity from the power plants when electricity demand is low.

The draft amendment also proposes that power consumption from captive generation units of a subsidiary entity can also be considered for consumption by the parent company. Representatives of the energy department of Gujarat have cautioned the power ministry that “such dispensation may lead to mis-utilisation by parent company by resorting to allowing consumption by multiple subsidiaries without any monitoring”. The Odisha government has echoed the same sentiments in their respose to the proposed amendments.

Rajasthan had also said at the power ministers’ conference held earlier this month that “it needs to be ensured that IPPs and third parties don’t take advantage of the rules relating to captive power plants”.
Union power minister RK Singh has pushed for the proposed reforms at the conference of power ministers of all states held in Shimla. “If these reforms are not introduced, discoms, which are the fulcrum of the power chain, would continue to remain in losses,” Singh had said.

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