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The Ministry of Power has proposed amendments to the Late Payment Surcharge Rules, 2021. One of the proposed amendments (Para 6) proposes that:

  • If any payment is delayed for more than seven months, generating companies can sell contracted power to other consumers till payments are cleared.
  • This is provided that DISCOMs are given a notice of 15 days.
  • During this period, the DISCOMs have to continue to pay fixed charges to the generator.

It is our suggestion that the proposed Rule 6 be deleted from the final rules. This is because it is unfair to the procurers and infringes upon the sanctity of the contract signed between the two parties. Further, a similar clause to ensure continued payment of fixed charges already exists in case LC is not maintained.

Implementation of Rule 6 could reduce faith that DISCOMs have in the processes for power contracting. This could lead to increased litigation, place undue burden on DISCOM finances, increase consumer tariffs, raise risk of load shedding and contribute to increase in state-owned capacity addition which could affect private investment in the sector. Some of the issues with implementation of Rule 6 are detailed in our submission

The Ministry of Power released its ‘Draft Electricity (Promoting renewable energy through Green Energy Open Access) Rules 2021’ on 16th August, 2021 inviting comments and suggestions on the same. The draft rules include many provisions intended towards the development of open access RE. Some of these key provisions include reduction in the minimum limit of contracted demand to 100 kW, uniform Renewable Purchase Obligation (RPO) for DISCOMs, OA and Captive consumers, a central nodal agency with a centralised registry for all green OA consumers, no Additional Surcharge on green OA, etc. Although the objective of promoting green energy open access is welcome, many crucial concerns remain.

To truly develop efficient and competitive options for supply, a balanced and sustainable policy framework is needed that boosts investor confidence, protects consumer interests, enhances competition, and compensates utilities adequately for the risk they undertake and the services that they provide. The draft rules need to ensure clarity and certainty in processes, compensation at cost to utilities for services provided, and should provide flexibility and choice to consumers to meet their demand. Our comments focus on –

Need for harmonious changes across legal, policy and regulatory instruments: It is unclear whether the Central Govt rules are the right way to achieve changes as these matters are under the ambit of State ERCs under the Electricity Act, 2003. This risks a long, litigious process impeding decision making.

Extending applicability to all open access and captive, not just RE: Any enabling provision, including centralised registry, reduction of eligibility limit to 100 kW etc should not be restricted to RE alone, but extended to all forms of open access and captive, to provide flexibility and choice for consumers.

Size-based differentiation in processes: There should be separate treatment in regulations for consumers with connected load between 0.1 to 0.5 MW, 0.5 to 1 MW and those with load greater than 1 MW.

Replacement of CSS and AS with a single charge: We propose levy of a single surcharge (in place of CSS and AS) which is delinked from cross-subsidy and backing down, with a ceiling for Rs. 2.5/unit for a period of 5 years.

For more specific comments and detailed suggestions, please read our submission below.

The draft rules were also deliberated in a round table hosted by Prayas (Energy Group), details of which are available here.

A virtual roundtable on ‘Renewables, Open Access and the future of Retail Competition in India’ was organised by Prayas (Energy Group) on September 7, 2021. The landscape of the Indian power sector has undergone a drastic change, driven by a shift towards RE as well as consumers migrating away from the DISCOMs. Presently, the share of sales migration stands at close to one-fifth of the total DISCOM sales in India. This increasing migration is a consequence of rapidly falling RE prices as well as increasing corporate commitments towards RE. While the economics does favour RE and subsequent migration via open access and captive routes; the policy environment in the country is yet not conducive towards an accelerated development of these competitive options. The sector remains mired with administrative hurdles, uncertainty regarding open access charges as well as unclear policy provisions. The participants deliberated upon structural issues of the power sector, the challenges faced in implementation and operationalisation of OA as well as the provisions of the recently released Draft Electricity (Promoting renewable energy through Green Energy Open Access) Rules 2021 by the Ministry of Power. The roundtable had twenty discussants, which included representatives from Distribution Companies (DISCOMs), Regulatory Commissions, Sector Experts, Lawyers, Renewable Energy (RE) project developers and Open Access (OA) consumers.

A summary of the key points raised during the discussion and the context-setting presentation given by PEG at the start of the roundtable can be found below.

Thursday, 01 July 2021 13:20

Comments on MBED discussion paper

Ministry of Power released a discussion paper on Market Based Economic Dispatch (MBED) seeking public comments. Ensuring economic dispatch of capacity at the national level can result in savings when compared to current scheduling practices. However, the existing proposal, to be initiated in a phase-wise manner over the next couple of years will have significant techno-economic, contractual, legal and policy implications on the sector. The discussion draft circulated by the Ministry of Powers raises more questions than it answers and fundamentals of the proposals are not detailed adequately. This is also the case with studies conducted to assess benefits from the scheme and the analysis to show DISCOMs over-schedule in practice.

Assuming muted thermal capacity addition going forward, more ‘backed down’ contracted capacity will  get scheduled with increase in future demand and the savings from MBED will reduce over time. The proposal, its benefits and required long-term changes for implementation should be evaluated in this context.

Some potential implementation challenges  with the current mechanism are detailed below.

  • Impact on working capital of DISCOMs in case there is delay in Bilateral Contract Settlement (BCS) payments by generators in MBED especially as no contractual mechanism to mitigate delay in specified in the proposal
  • If BCS settlements are provided by DISCOMs to thermal generators who bid less than VC and clear in MBED, the risks undertaken during bidding by the generators are hedged by the DISCOMs. This protection could result in risky bidding strategies. This should be avoided by explicitly clarifying that BCS settlements by DISCOMs to generators will not be provided.
  • Implications on MBED participation in case: 
    --adequate Letter of Credit (LC) order is not provided for any capacity (as MoP 2019 order prevents DISCOM participation in power exchanges in case of non-provision of adequate LC for any generator)
    --There is not agreement among multiple beneficiaries of a generator on which exchange to participate in for MBED.

Before MBED is launched, it is suggested that multiple pilots with the aim of economic dispatch at the national level be tried out to evaluate the best design, suited to ground realities. Some of these include:

  • Implementation of MBED at a regional level for a period of 2 months
  • Compulsorily requiring sale of URS power in the DAM if power not scheduled by DISCOMs.
  • Expanding the scope of SCED by mandating it for all generators contracted by DISCOMs and implementing look ahead and unit commitment for a three day ahead demand forecast by SLDC.

For these pilots, participation by DISCOMs and suspension of right to recall can be incentivised. Such approaches will help better understanding of various risks and to develop appropriate mitigation mechanisms.

Our earlier comments on the 2018 CERC discussion paper ‘Market Based Economic Dispatch of Electricity (MBED): Re-designing of Day-Ahead Market (DAM) in India’ are available here.

 

 

The Haryana Electricity Regulatory Commission invited comments for finalization of the Draft Haryana Electricity Regulatory Commission (Prepaid Smart Metering) Regulations, 2021. A few key recommendations provided by Prayas include foremostly the need to consolidate all metering related provisions and regulations in one metering regulations or the SoP. Our submission has also highlighted the need for addressing consumer concerns for application process, grievance redressal and data privacy. We have also suggested finer changes to the draft regulations in order to facilitate easier transition to smart meters for all consumers.

DISCOMs in Uttar Pradesh have filed petitions for true-up for FY 2019-20, Annual Performance Review (APR) for FY 2020-21 and for determination of Aggregate Revenue Requirement (ARR) and tariff for FY 2021-22 before the UPERC. With reference to this, the Commission has issued a public notice dated 08.04.2021 in the matter, seeking comments and suggestions from the public.

Prayas (Energy Group)’s submission highlights several crucial issues and discusses some suggestions that can be implemented in Uttar Pradesh. The submission focuses on making processes more accessible, having accountability for the smart metering program in the state, the need for realistic sales and revenue projections and power purchase planning, and required regulatory scrutiny for information submitted by the DISCOMs.

Ministry of Power (MoP) constituted an Expert Committee to prepare and recommend National Electricity Policy 2021. In letter dated 27th April 2021, MoP solicited suggestions and comments on draft National Electricity Policy. Prayas (Energy Group)’s comments and suggestions on NEP 2021, focus on multiple aspects including the need to:

  • facilitate retail competition and consumer choice;
  • accelerate supply-mix transition away from coal towards renewables;
  • enhance financial viability of sector, especially distribution companies;
  • focus on providing quality, reliable, affordable supply and service;
  • strengthen regulatory governance and;
  • ensure socially and environmentally responsible generation

The draft shared by the Ministry and our detailed suggestions are below. 

On 25th May, Prayas made an additional submission to the committee highlighting the need to further retail competition and review need for RE concessions. The submission also provided more details on the idea of group metering pilots for agricultural consumers as well as virtual net metering for public bodies.

This short article, which appeared in the e-edition of The Indian Express newspaper on 15 June 2021, captures the key points in the Prayas submission to the Ministry of Power on the draft National Electriciy Policy.

The Central Electricity Authority (CEA) has sought public comments on the proposed amendment to the notified regulation of CEA (Installation & Operation of Meters) Regulations, 2006. One key recommendation is that CEA should not mandate installation of prepayment meters. We rather suggest an incentive-based approach which can allow DISCOMs to take a carefully planned approach towards the same. This is important as metering and billing is core to DISCOM's functions and are direct interface with consumers. Additionally, we raise caution on assessing the recommendation of using smart meters for LT OA consumers without furnishing details how these meters can be used for required energy auditing. We also suggest that all feeders and DT’s can be monitored better using AMI systems than AMR.

TNERC invited public comments on its draft amendments to its Tariff Regulations. The proposed revision is being carried out to be consistent with, and account for better norms in the regulations of the central and other state electricity regulatory commissions. Such revision of the regulations is a positive step. PEG submitted some comments and suggestions towards better implementation and clarity of the suggested amendments and toward ensuring a robust power sector in the state. These suggestions include:

  • Ensuring changes in O&M expenses, such that they are linked to inflation calculated based on a composite method instead of current prescribed rates, and encourage improvements in efficiency.
  • Providing clarity on provision of bad and doubtful debts, regarding the change in level of such debt that can be written off and removal of suggested the provision of including subsequent payments as part of non tariff income.
  • The provision allowing compensation to any generating station directed by the SLDC that operates below the target plant availability factor but at/above technical minimum, is a positive step, but should extend to all generators operating in the state. Thus, it maybe better placed in the grid code, and referenced in the tariff regulations of the state.
  • Providing clarity on levy of usage-based wheeling charges.
  • Reporting by the utility must include details on fuel adjustment charges
  • Carrying out a clear seperation of accounts for the generation and distribution functions.
  • Preparing a mandate for annual submission of crucial operational and performance data.
  • Providing a consolidated MYT framework that includes a 5 year MYT period and specifies data formats for submission

TNERC issued a consultative paper to discuss the approach on procurement of solar power by the distribution licensee and the related issues of open access (OA), and invited public comments on the same. Prayas submitted comments and suggestions towards the effective implementation of the procurement mechanism, clarity of process, and towards addressing existing and future concerns to ensure a robust RE sector. The highlights are summarised as follows:

  • A banking framework based on a per-unit banking charge that extended to new solar projects was suggested to ensure RE is encouraged, while reflecting the services provided by the DISCOM.
  • It was proposed that concessions provided to RE, such as those provided for cross subsidy surcharge and OA charges, should come with clear sunset clauses. These waivers should be phased out in a planned manner, so that solar generators have certainty in the medium term, while ensuring the growth of RE is not driven by concessions.
  • A revision in the framework of parallel operation charges and its integration with stand by charges was suggested. It was also suggested that POC be parameterized based on demand charges, to ensure compensation to the DISCOM in the future as well.
  • To ensure a more comprehensive solution to issues pertaining to OA, a revision of the Grid Connectivity and Intra-State Open Access Regulations 2014 was suggested, subject to public consultations.
  • Despite the impact of sale migration on the states power sector, there is little data reporting on this front. To ensure transparencyand a better understanding of trends, the reporting of crucial parameters was suggested. Further, it was suggested that the collected data should be available on the Commission's website.
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