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New power tariff policy tightens regulator’s role

The tariff policy has more than 30 amendments in the existing tariff policy — the National Electricity Policy, 2005.

By: ENS Economic Bureau | New Delhi |
January 21, 2016 1:52:04 am

The Government on Wednesday cleared amendments to the National Tariff Policy for Electricity, which tightens the discretion currently allowed to regulators while setting power tariffs and makes a strong pitch for the promotion of clean energy.

The tariff policy has more than 30 amendments in the existing tariff policy — the National Electricity Policy, 2005.

The regulations tighten the norms followed by electricity regulators for setting power tariffs by requiring them to “necessarily” be guided by the new policy while framing regulations under section 61 of the Electricity Act 2003.

After the amendments, it would be binding on the regulators to take decisions as per the changed policy.

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A significant addition to the objective of the policy are the promotion of renewable generation sources and aim to create more competition, efficiency in operations and improvement in quality of power supply. One of the recommendations in the policy to incentivise the distribution companies to procure power from renewable sources of energy, for which the central government could notify an appropriate bid-based tariff framework for renewable energy.

On the regulatory side, the tariff policy has incorporated the word ‘necessarily’ in Section 61 of the Electricity Act 2003, which empowers regulators to set terms and conditions for the determination of tariffs at a utility level.

“The Act also requires the Central Electricity Regulatory Commission and State Electricity Regulatory Commissions (SERCs) shall necessarily be guided by the tariff policy in discharging their functions including framing the regulations under section 61 of the Act.”

The policy has also allows increase in fuel cost on account of import to be included in the tariff structure.

“In case of reduced quantity of coal supplied by Coal India, vis-a-vis the assured quantity of 85 per cent, the higher cost of imported or market based e-auction coal for making up the shortfall, shall be considered for being made a pass through by CERC or SERCs, on a case-to case basis, to the extent of shortfall,” according to an amendment to the policy. Generators, however, have been given the freedom to sell surplus power in spot market if the beneficiary does not give prior notice two days ahead. It was earlier 10 hours.

In a first, the policy also specifies norms for ancillary services. The central commission has been given the right to introduce the norms and framework for ancillary service necessary to support the power system or grid operation for maintaining power quality, reliability and security of the grid, including the method of sharing the charges.

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