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Amendments In Power Tariff Policy

Power sector provides thrust to the growth and prosperity of a nation. It is the most important input for the industrial sector, agriculture and rural sector. Power affects the way individuals live and contribute to the national development. Even the SDGs (Sustainable Development Goals) have made availability of clean and quality energy as one of the measureable targets. The composition of power sector also reflects the country's commitment to environmental sustainability.

 

 

PRODUCTION

TRANSMISSION

DISTRIBUTION

Electricity for all

Coal washery based projects

Increase capacity

Use of micro grids

Efficiency

Expansion of existing power plant

Competitive bidding for augmenting transmission capacity

Smart metering

Environment sustainability

RGO (renewable generation obligation),

Hydro projects with long term PPAs and exemption from reverse bidding.

No inter- state transmission charges for solar and wind power

 

RPO (renewable purchase obligations),

Bundling of renewable with conventional power,

Thermal power plants to use treated sewage water,

 

Power sector has seen stupendous growth in recent times in terms of generation and transmission trying to match the demand sought by surging Indian economy. At the same time new issues have cropped up related to regulation of liberalized power sector, PPA (Power Purchase Agreements), upgrading of transmission capacities, ensuring availability of quality energy to all and many more. The amendments to the Tariff policy 2006 takes holistic view of the sector and tries to take care of all the issues with the focus on 4 Es: Electricity for all, Efficiency to ensure affordable tariffs, Environment for a sustainable future, Ease of doing business to attract investments and ensure financial viability and achieving the objectives of Ujwal DISCOM Assurance Yojana (UDAY). The following matrix summarize them.

The main highlights of the amendments are:

• Electricity for all to be ensured through micro-grids and power from coal washery based plants.

• Increasing efficiency and reducing cost by expanding the existing capacities of production units, augmenting transmission capacity through competitive bidding of transmission projects, and use of "Time of Day" metering using smart meters.

• Focus on Renewable Power Obligation (RPO) and Renewable Generation Agreements (RGO) to promote renewable energy and energy security. 8% of electricity consumption excluding hydro power, shall be from solar energy by March 2022 and New coal/lignite based thermal plants after specified date to also establish renewable capacity to fulfill their RGO.

• Bundling of renewable power with power from plants, no inter-State transmission charges and losses to be levied for solar and wind power. 

• Procurement of 100% power produced from Waste-to-Energy plants.

• Thermal plants within 50 km of sewage treatment facilities to use treated sewage water to release clean drinking water for cities and reduce pollution of rivers like Ganga.

• Promotion of Hydro projects through long term PPAs (15 years beyond the current 35 years) and exemption from competitive bidding till August 2022. 

• it will help to even out rates as hydro projects have long gestation period and high costs.

• Pass through for impact of any change in domestic duties, levies, cess and taxes in competitive bid projects.

• Clarity on tariff setting authority for multi-State sales. Central Regulator to determine tariff for composite schemes where more than 10% power sold outside State. 

Analysis:

The tariff policy though gives idea of future roadmap of power sector but cannot have the force of legislation. Therefore there is need to bring the amendments in the Electricity Act of 2003.

a. Policy is going to help the power deficit states, augment the spot market and will reduce the price and help trading in power as it allows the selling of PPA tied but non-required power with two days notice. 

b. It will reduce the price of electricity. It will also result into optimal utilization of the generation assets of the states. Increasing transmission capacities will also result into movement towards "one nation, one grid and one rate".

c. But the policy fails to address the issues of prohibitive charges and conditions applied by states like Maharashtra to prevent competitive power through open access. 

d. Because allowing open access will not allow states to cross-subsidize the agriculture and BPL sector by industry and commercial establishments. This issue also needs to be addressed.

e. Regional politics plays great role in determining the prices of the electricity sold and this hampers the financial health of the discoms and prevents them from investing in technology to reduce technical losses. Therefore the success of UDAY scheme depends on many other factors. 

f. The real issue in green energy sector is of implementation of RPO, RGO and bundling provisions. 

g. RPOs has been proposed earlier but failed to take off because of high cost of renewables and financial capacities of discoms. It needs to be seen what will happen in this case. The Bundling provision has also been hotly contested in recent. 

h. The steps like allowing pass through though will help the producers but will affect the interests of the consumers who don't have bargaining power. Government may levy additional tax or levies to increase their kitty at the cost of consumers. Passing on the enhanced costs to discoms and then to consumers will have political costs which many states will eschew. 

Conclusion:

Overall in spite of various layers of governments involved and apprehensions about them accepting the amendments in letter and spirit these amendments will benefit power consumers in multiple ways. They will spur renewable power for a cleaner environment and protect India's energy security. These will ensure financial viability of the sector and attract investments, promote transparency, consistency and predictability in regulatory approaches across jurisdictions. It will further facilitate competition, efficiency in operations and improvement in quality of supply of electricity and thus improving the quality of life on Indians. 

 

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