The Central Electricity Regulatory Commission (CERC) has amended its tariff regulations, making several key changes that impact power generation and pricing. These changes, effective from April 1, 2024, touch upon various aspects, from interest rates on working capital to adjustments for overburden removal in coal mines.
One significant change involves the definition of “Bank Rate.” The amended regulation now defines it as the one-year Marginal Cost of Lending Rate specified by the State Bank of India, plus 100 basis points. This new definition will be used to calculate interest on working capital for power-generating companies. Consequently, references to the “1-year SBI MCLR plus 100 basis points” have been replaced with “the bank rate” in several sections of the regulations related to interest calculations.
The CERC has also revised the self-insurance premium for certain power plants. It has increased from 0.09% to 0.12%. Furthermore, a crucial addition mandates that this self-insurance premium must be transferred to a separate fund, specifically for meeting claims. The generating company is also required to provide details of the expenditure and utilization of this fund to the Commission whenever requested.
Changes have been made to the process for determining input coal prices. Generating companies can now request an interim input price, which the Commission may allow up to 90% of the claimed amount after the first hearing. The difference between the final determined price and the interim price will be adjusted later. The interest rate applied to these adjustments will now be the “bank rate,” replacing the previous SBI MCLR-based rate.
Regarding coal sourcing, the regulations now clarify the process when coal from the linked mine is unavailable. Generating companies must obtain prior consent from beneficiaries before using alternative coal sources. The price of this alternative coal will be the basis for cost adjustments. The CERC has also defined “alternative coal,” specifying it as the least-cost option available to the generating company in case of a shortage from the linked mine.
A significant amendment addresses the handling of overburden removal in coal mines. The CERC has introduced a new regulation detailing how shortfalls or excesses in overburden removal are to be adjusted. The generating company will be allowed to adjust any shortfall or excess during the remaining years of the tariff period, up until March 31, 2029. Specific formulas are provided to calculate the adjustment amount, depending on whether a Mine Developer and Operator are involved. However, these provisions do not apply to integrated mines allocated through an auction process.
The regulations now clarify that references to the “Ministry of Coal” should be read as “the Central Government.” Corrections have been made to cross-references within the regulations to ensure accuracy. The CERC has also made adjustments to specific plant parameters, including auxiliary consumption for certain power stations.
A new clause has been added concerning compensation for generating stations operating below the normative plant availability factor. Generating stations may receive compensation for increased costs due to operating at lower capacity, including degradation of station heat rate, increased auxiliary energy consumption, and additional secondary fuel oil usage. This compensation will be borne by the entity responsible for the reduced scheduling. The gains from this compensation, exceeding actual energy charges, will be shared equally between the generating station and the beneficiaries. A reconciliation of the compensation will occur at the end of the financial year. Changes in power schedules under the Ancillary Services Regulations will not be considered for this compensation. The National Load Despatch Centre (NLDC) will issue a procedure for calculating this compensation, subject to CERC approval.
Finally, the normative annual plant availability factor (NAPAF) for certain hydroelectric power stations has been revised. These amendments represent a comprehensive update to the CERC’s tariff regulations, impacting various aspects of power generation and pricing. The changes are designed to ensure clarity, address specific industry concerns, and promote efficient and sustainable power generation.
