Recent Regulations/Amendments in Indian Power Sector

Aside Posted on July 29, 2014 Updated on July 29, 2014

A transparent Regulatory Framework is required for making the sector viable for its
growth as well as invoking investor confidence in the sector. To meet the growing
expectations of the manufacturers, investors and consumers, CERC (Central Electricity
Regulatory Commission) has amended key regulations and issued orders that can lead to the
betterment of the power sector. Some of the amendments done by the regulator can be
summarized as follows:
Compensatory tariffs Approved: In Feb14 CERC allowed compensatory tariff hikes for
the two major power sector players namely Tata Powers Mundra UMPP and Adanis 4620
MW Coal Based Power Plant located in Gujarat.
( http://www.cercind.gov.in/2013/Reports/COMREP_CGPL.pdf) In lieu of the change in
regulations of Indonesian Mining (2011)http://www.indonesiamininglaw.com/tag/iup/, the
two players objected of suffering high landed cost of coal and thereby leading to loss on the
exchequers pocket. Since the tariff revision is effective from April 1, 2013, CERC has
directed the concerned DISCOMs to reimburse Rs 3.29 billion to Tata Power and Rs 3.89
billion. Some of the state DISCOMs (Rajasthan,Punjab,Maharashtra) have challenged
CERCs order before the Appellate Tribunal for Electricity (APTEL).Reliance also filed the
petition concerning its Tilaiya UMPP in Madhya Pradesh. Adani has been allocated Lohara
Coal Block for its project which covered around 75% of the coal requirement for the project
but that came under the scanner of Ministry of Environment and Forest thereby leading Adani
to hunt for alternate sources for fuel. This ultimately led to escalation of its levelised tariff as
defined in the PPA.
Tariff Regulations : In feb14 CERC came with the new Tariff regulations 201419,http://www.cercind.gov.in/2014/regulation/reg21.pdf which put forward many changes
leading to strong repulsion from the major players in the market:
o Incentives for players have been linked to Plant Load Factor(PLF) as compared to Plant
availability factor(PAF) as described in the earlier regulations.
o The base RoE(The amount of net income returned as a percentage of shareholders equity.
Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested) has been fixed on 15.5 % but
FGMO,www.srldc.org/var/ftp/FGMO/FGM%20IN%20SR.ppt has been critically linked with
it leading to tough times for Generators.
o Provision of PAT(Perform, Achieve and Trade)http://www.performachievetrade.com/ has
also been included in the guidelines issues.

o Heat rate norms have been made more stringent for existing as well as new power plants.
The factor has been changed to 1.045 from 1.063 (Kcal/KwH)
o The normative annual PAF has been reduced to 83 % from 85 %.
Responding to CERC Tariff Regulations, NTPC moved to courts against CERC mentioning
that the PLF based incentive could hit their profitability.
IEGC Amendment: In Jan14, CERC issued an amendment to IEGC regulations 2010,
further tightening the frequency band to 49.9 Hz 50.05 Hz from the earlier range of 49.7 Hz
-50.2 Hz.http://www.cercind.gov.in/2014/regulation/noti18.pdf In addition to sandwiching the
frequency range, Grid integrations has also been pushed further with the inter-connectivity of
Raichur-Sholapur transmission line. In context with the change in IEGC regulations, Penalty
charges related to deviation mechanism of Unscheduled Interchange (UI) has also been
revised.
Open Access Regulations: Apart from the changes concerning LTOA (Long Tern Open
Access) and MTOA (Medium Term Open Access) in Interstate Transmission Regulations,
2008 , there have been proposed amendments regarding the connectivity of renewable energy
projects of 5 MW 50 MW capacity with the interactive grid.
Power System Development
Fund,http://powermin.nic.in/whats_new/pdf/Operationalization_of_Power_System_Develop
ment_Fund_Jan2014.pdf : CERC issues PSDF regulations 2014 replacing the earlier PSDF
regulations 2010 and intents to push the investments in the transmission sector. The fund will
be maintained through a collection of Congestion charges, deviation settlement charges and
reactive energy charges. Primarily the fund will be used for capacity building in the
transmission sector including installation of shunt capacitors, series compensators, VAR
compensators etc.
PoC Tariff Regulations : In Feb14 CERC issued a draft amendment regarding the sharing
of Inter-state transmission charges and losses regulations, which incorporated the PoC
methodology of determining the cost and losses to be shared by the users of the ISTS(Inter
State Transmission System)
RE Tariff regulations: In Mar14 the first amendment to the Terms and Conditions for
Tariff determination from RE sources regulations were approved by
CERC,http://www.cercind.gov.in/2014/whatsnew/SO354.pdf. The amendment aimed to
address various issues faced by biomass plants.
NPEX Plan Shelved : In April14, CERC passed an order withdrawing its permission for
setting up the National Power Exchange (NPEX)
http://www.pfcindia.com/Content/National_Power_Exchange_Limited.aspx .Promoters of the
Exchange i.e NTPC,NHPC,PFC and TCS voluntarily applied for the closure of the exchange.
In the new future, further key orders are expected that will ultimately (perhaps) helps the
revival of the sector.