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Power ministry says coal price pooling can hike electricity cost

Power struggle: 'Complete pass through can push up prices by 50 paise or more per unit'

Written by Priyadarshi Siddhanta | New Delhi | Published: April 21, 2013 1:08:33 am

Electricity consumers across the country may have to pay about 50 paise more for a unit of power if the government allows a complete pass through of the cost of imported coal to be blended with domestic coal for firing the turbines of power plants.

The power ministry has told the finance ministry that pooling prices of imported and domestic coal can jack up the cost of electricity. Accordingly,the Central Electricity Regulatory Commission (CERC) should be tasked with fixing the fuel’s import prices at regular intervals to ensure uniformity in prices,it demanded.

In a note to the finance ministry,the power ministry said the proposal to execute coal price pooling for generating 67,000 MW thermal power essentially entails allowing prices of imported coal to be made a pass through,which has also been accorded in-principle approval by the Union Cabinet. The Cabinet is understood to be preparing to discuss the issue again next week.

Under the existing tariff regime,power utilities of Central and state governments are on a cost plus regime where any increase in fuel cost is automatically a pass through. However,for competitively bid projects the CERC can allow a price increase based on certain conditions like a proven force majeure,or change in law or government policy in tune with the provisions of power purchase agreements.

“The estimated increase in tariff for the bid out projects is likely to be 30-50 paise,” a power ministry official said.

The fuel supply agreements which CIL has inked with the power companies enable them to either import the fuel through CIL or on their own. Even the revised standard bidding document being prepared by the power ministry envisage provisions for fuel cost pass through for the future capacity to be tied up by the discoms. This model of pooling would impact the tariff of only those developers who have signed the PPAs and are looking for pass through mechanism for increased cost and not others.

“Also the developer can procure and further decide to increase the plant load factor of his plant by agreeing to cost reimbursement for increased generation by importing coal beyond CIL’s obligation. Most importantly,the states which have been stiffly opposing the pooling proposal would now have a say in decision making of this pass through exercise which would make it more acceptable,” the official said.

The power ministry has asked North Block to ask the coal ministry to redraft the coal supply policy and notify it stating the reasons for the reduced level of coal supply for a certain period.

Power point

* Ministry says proposal for coal price pooling to generate 67,000 MW thermal power entails allowing prices of imported coal to be made a pass through

* It demands that CERC should fix the fuel’s import prices at regular intervals to ensure uniformity in prices

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