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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.

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.

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 Chhattisgarh Electricity Regulatory Commission (CSERC) issued draft RPO-REC regulations on 26th February, 2021 along with an Explanatory Memorandum and invited public comments on the same. Firstly, we welcome the publication of these draft RPO regulations which remain the bedrock of RE growth in the country.
The important points in our submission are:

  1. RPO should be levied on co-generation from fossil fuel plants
  2. Total consumption for DISCOMs should be redefined as the total procurement of electricity from all sources instead of total sales alone.
  3. CSERC to specify targets of ~25-26% by 2025-26 rather than just rely on GoI to give guidance on this issue.
  4. CSERC should specify one composite RPO and merge solar/non-solar RPOs.
  5. Considering all the economic, social and environmental risks of large hydro-power, it should not be considered as a renewable energy resource for the purpose of the RPO and, hence, should not be made part of the non-solar RPO.
  6. CSERC should notify a much lower price for power (~ Rs 2.5/kWh) under the REC route.

Prayas (Energy Group)’s detailed comments and suggestions are detailed in the submission.

Published in Renewable Energy

The Rajasthan Electricity Regulatory Commission (RERC) issued a discussion paper on ‘Framework for Large Scale Integration of Renewable Energy using Energy Storage Systems and its impact on Tariffs’ in March 2021, and invited public comments on the same to facilitate the requisite regulatory intervention.

Firstly, we welcome this pro-active and timely initiative from RERC given that this topic is extremely critical for the future growth of the RE sector. Further, we fully acknowledge the need for further flexibility in the system as a means of reliably integrating cost-effective renewables and the important role that energy storage can play in this regard. Increasing Battery Storage Systems is a key way of increasing flexibility and in line with the ‘National Mission on Transformative Mobility and Battery Storage’ approved by the Cabinet in March, 2019. Additionally, the price of batteries has fallen sharply, by 87% in real terms in the last decade from $1,100/kWh in 2010 to $137/kWh in 2020. By 2023, prices are predicted to be $100/kWh and $ 61/kWh by 2030. To take advantage of these global developments, it is important to kick start the deployment of large scale batteries and other economic storage solutions and gain valuable experience and reap its multiple reliability and economic benefits.
As noted in the paper, energy storage systems can be located with generation assets or be deployed as Transmission / Distribution elements or even be deployed at the consumer location behind the meter. In all the cases, storage systems can provide a variety of services like energy shifting / peak load management, a host of ancillary services like frequency and reactive power control, black start etc., increase system flexibility to absorb more variable RE and reduce curtailment, improve reliability & resiliency and even defer capital expenditures in certain cases. To further add to the regulatory complexity, storage systems can be set up in a manner that they can provide such multiple services through a single project/asset. Our suggestions to accelerate the deployment of cost-effective storage as detailed in the submission.

Published in Renewable Energy

India’s energy sector is in the early stages of a slow but steady transition. While there are various studies which analyse the potential pace of the transition with a focus on decarbonisation, its required physical infrastructure and associated investments, one relatively neglected dimension is the implication of the energy transition on public finance in general, and energy taxation in particular. The energy sector, and in particular, fossil fuels are a significant contributor to the overall revenue of India’s central and state governments. This revenue predominantly comes from the petroleum (& natural gas) and coal sectors, which contributed about Rs. 6 lakh crore of the total Rs. 6.5 lakh crore revenue from the energy sector in 2019-20. The Centre and states are quite dependent on the energy sector for their taxation revenues, with the Centre’s dependence being as high as 25%.

As the energy sector moves away from fossil fuels and shifts towards a greater share of renewables and greater electrification, these tax revenues will come under strain. While this transformation away from fossil fuels is likely to take place over the next two decades, the attendant reform in the tax regime is also likely to be very complex and involve nuanced political negotiations. Therefore, it is important to anticipate the fiscal challenges that may arise out of the transition and prepare for it. A starting point is to commence discussions on a gradual transformation of the taxation regime, going beyond just the energy sector or even just indirect taxes. In this context, there is a need for a deeper understanding of the role of the energy sector in the country’s public finance, and how this is likely to be impacted with the energy transition. Such an understanding can help to begin a conversation that can help identify suitable fiscal alternatives and taxation regimes to ensure that public revenue streams can be suitably reworked as the structure of the energy sector changes.

The objective of this working paper is to develop such an understanding in order to build a discourse around this important topic, rather than to recommend any specific measures.

An article on this topic was published in The Indian Express on 3rd March 2021.

 

Minor corrections in Table 4 have been made to this version from the one uploaded in February 2021.

Adani Electricity Mumbai Limited-Transmission (AEML-T) and Adani Electricity Mumbai Infra Ltd (AEMIL) have filed a joint Application for grant of Transmission Licence in the name of AEMIL before the Maharashtra Electricity Regulatory Commission. The petition seeks grant of licence to AEMIL for developing a 1000 MW (VSC based) HVDC line between MSETCLs Kudus sub-station and AEML’s Aarey sub-station. While the line might contribute to increase the import capacity and reliability of Mumbai transmission network, it is not clear if this is the most cost-optimal way to address the challenge. The proposed capital cost for this project is about INR 6,700 crores. This single scheme alone could result in an approximate Rs. 0.50/unit tariff increase (or 8% tariff increase) for all consumers in Mumbai annually.

As the scheme is proposed as a cost-plus scheme with uncertainty with respect to procurement of land and obtaining clearances there is a significant possibility of time and cost overruns as well. Given the cost impact and the urgent need to strengthen Mumbai's transmission network, it is vital that the Commission:

  •  Reject the petition for grant of licence to AEMIL
  • Constitute a technical committee to assess potential alternatives to strengthening Mumbai’s transmission network including applications of energy storage
  • Direct STU to consider creating an SPV to facilitate RoW, clearances and land acquisition for the most cost-optimal and viable project to meet Mumbai’s constraints.
  • Direct STU to initiate competitive bidding for the purpose of schemes to ease Mumbai’s transmission constraint.

Maharashtra Regulatory Commission invited comments and suggestions on the application for grant of Transmission Licence to the Kharghar-Vikhroli Transmission Private Limited (KVTPL). KVTPL was selected on the basis of competitive bidding to complete the capital works planned to import power into Mumbai including a 400 kV Receiving Station at Vikhroli and associated incoming 400 kV lines for strengthening of mumbai transmission system. The project has been facing inordinate delays since its initial approval in 2011 when TPC-T was executing the project. The project was subsequently awarded to M/s Adani Transmission Limited on 12th December 2019 based on competitive bidding. The subsidiary of M/s Adani Transmission Limited, Kharghar Vikhroli Transmission Private Limited (KVTPL), has filed this petition for grant of transmission licence.

Completion of the project will benefit consumers in Mumbai as will reducing power procurement cost, increasing reliability and promoting open access and captive consumption for Mumbai consumers. Given the time-sensitive nature of the project and delays faced in the past were associated with acquring land and statutory clearances from various authorities. Based on available documents it seems that the present petition by KVTPL does not clearly outline status of clearances and land acquisition and RoW issues. It also does not outline potential areas for delay and compressed/ revised schedule for delays that have already taken place.

As the project is critical and as the Commission has re-iterated the need for continous monitoring our suggestion is that the petitioner should submit details of :

  • land parcels where issues with land acquisition, sale and right-of-way related disputes are present;
  • statutory clearances that have been obtained and those that are pending;
  • revised / compressed schedule with timelines for associated works and intermediate milestones

Without such details, the Commission should not grant a licence to KVTPL. Such details should also be detailed in the order for transperancy and future reference.

In addition, the Commission should direct the STU and KVTPL to upload the following reports, in a publicly accessible manner, on their website:

  • quarterly progress reports on project execution including time slippage from target timelines with reasons
  • monthly reports on status of all statutory clearances/approvals required and pending land acquisition
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