CERC announces regulations for implementation of Interstate Transmission System in the country

The Central Electricity Regulatory Commission (CERC) recently announced a regulation called the Central Electricity Regulatory Commission (Planning, Coordination and Development of Economic and Efficient Inter-State Transmission System by Central Transmission Utility and other related matters) Regulations, 2018 which came into effect from July 2018. The objectives of the regulation are to:

(1) Lay down the broad principles, procedures, and processes to be followed for planning and development of an efficient, coordinated, reliable and economical system of an inter-State transmission system (ISTS) for smooth flow of electricity from generating stations to the load centers;

(2) Ensure wider participation of stakeholders in the planning process and specify the procedures for stakeholders consultation and participation;

(3) Specify procedures to bring about transparency in the planning process; and

(4) Demarcate the roles and responsibilities of various organizations in line with the Act for meeting the above objectives;

The regulation states responsibilities of the concerned entities like the Central Transmission Utility, Transmission Licensees, Regional Power Committee (RPC), RLDCs, NLDCs & SLDCs respectively and their roles in implementing the above-stated objectives of the regulations. This regulation is in accordance with other CERC regulations like Central Electricity Regulatory Commission (Procedure, Terms, and Conditions for grant of Transmission License and other related matters Regulations), 2009; Central Electricity Regulatory Commission (Grant of Regulatory Approval for execution of Inter-State Transmission Scheme to Central Transmission Utility Regulations), 2010; and the Tariff Regulations issued by the Central Commission from time to time under section 61 of the Act.  

Further, the regulation has mentioned the process for the planning of the inter-state transmission and lastly, there are details provided for the process to be followed by CTUs and transmission licensee for application filing in order to start inter-state transmission.

The regulation has come well in time as there have been recent solar PV auctions with Interstate Transmission System connected solar projects. The regulations have also considered the augmentation of renewable capacity addition and Renewable Purchase Obligation with respect to each state in the country.

Union government proposes to build a National Discom consulting the state discoms

In recent news, the Union Government has planned to set up a national power distribution company that will have a grip on the state discoms in electricity distribution activities and ensure timely implementation of central schemes.

The proposed company is said to compete with the private firms and contractors to bag contracts for appointing franchises or engineer tenders. Currently, there is no national-level distribution company, only small level distribution consultancy wings like Rural Electrification Corporation (REC), Power Grid Corporation and NTPC. The new company will act as a consultancy firm without acquiring a distribution license. This announcements also gives support to the Prime Minister’s wish to of giving power to all till the 2019 elections.

Similar to the National Tariff Policy (NTP) 2016 amendments, the draft Electricity Act is also in the process of being circulated for comments. The proposed amendments suggest separation of distribution infrastructure ownership from power supply licenses and also penalties in income for unexpected load shedding.

According to Deutsche Bank Market Research report, the annual losses of discoms have reduced by 70% to approximately INR 17,350 crore in the past two years.

We feel that with various amendments being proposed in the policies if the implementation is carried out strategically, the state of country’s electrification will see a new sun in the coming years.

TSERC Determines CSS for FY2016-17

Telangana Electricity Regulatory Commission (TSERC) has calculated the Cross subsidy surcharge to be applicable during FY 16-17. The new CSS will be applicable only for the state of Telangana effective from 1st July, 2016 to 31st March, 2017.  There was no CSS applicable in the state till last FY 14-15. The new CSS applicable will have significant impact on the open access power market.

The Telangana solar and wind policy which was announced recently clearly states that for Solar Power Plant located within the state and selling power to third parties within the state, 100% exemption shall be provided on the cross subsidy surcharge as determined by TSERC for five years from the date of commissioning of the Power Plant.

The table below depicts the CSS charges defined for year FY2015-16 and FY 2016-17:

The regulation can be accessed here.

 

Analysis on Draft Renewable Energy Act – 2015

A much awaited The Renewable Energy Act – 2015 (DRAFT) has been announced recently. A brief analysis for the same is presented for your kind reference.

Why is the RE Law needed?

The Electricity Act (Amendment) Bill 2015 (proposed) provides many key provisions for the promotion of renewable energy resources including off-grid / decentralised mode of renewable energy production. However, from the perspective of future energy resource planning, there is a need to create a holistic framework to promote the use of renewable energy and its applications not only in electricity (covered under the E-Act) but also in heat and transport segments. There is also a need for an integrated energy resource mapping and planning with right set of institutional and structural support mechanisms for which the RE Law can be a pivotal legislation.

The RE Law also aims to have strong linkages with various other national objectives like:

  • National Action plan for Climate Change (NAPCC)
  • National Mission on Enhanced Energy Efficiency (NMEEE)
  • National Electric Mobility Mission (NEMM)
  • National Wind & Waste Energy Mission
  • National Manufacturing Policy
  • National Skill Development Program

Hence, the RE Law would bring a macroscopic synergies across various national objectives and hence a much coordinated and robust RE development model.

How the new development framework under RE Law would look like?

The RE Law aims to create an exhaustive framework for the development of renewable energy systems (electrical and non-electrical). Architecturally, it can be represented as per the figure shown below.

Overall, the proposed legislation paves way for a very committed, comprehensive and certain development model for renewable energy in India. Enactment of the legislation will create plethora of opportunities for all the RE stakeholders to exercise their might to contribute towards a greener and cleaner India.

The Draft Renewable Energy Act can be Read here.

The REConnect Analysis Report can be accessed here.

Regards,
Team REConnect

Analysis of the changes proposed in the Electricity Act

Analysis of the changes proposed in the Electricity Act

The Electricity (Amendment) Bill 2014 was tabled in the Parliament recently. Once approved, the amendment will bring sweeping changes in the entire electricity sector. Most aspects of the power industry as it stands today will be touched in some way or another.

We have analyzed the impact of the proposed changes in this article. The changes that we have focused on concern the following areas: Renewable Energy, Open Access, distribution of electricity (ie the role of the Discom), and other changes that have significant impact. There are various other changes as well, but those are outside the purview of this article.

Renewable Energy:

The EA Bill 2014 proposes to include the definition of “Renewable Energy Source” and of “Obligated Entities” in the Act. Further, the bill also states that obligated entities may be mandated to

“procure electricity from or any market instrument representing the renewable energy sources”

These changes are significant as they lay to rest the argument that the obligation to meet RPO is not mandated in the Electricity Act 2003 (‘EA’), particularly for open access and captive generation. This is the premise of on-going cases many states and also in the Supreme Court.

Another objection made to the current regulatory set-up is that RECs have no basis as per the EA. Both these shortcomings will have been addressed with the new Bill.

The Bill also proposes various measures to promote RE generation in the country. The most significant of these is that power procured from RE sources under open access will not attract cross-subsidy. This will give a significant boost to the RE market.

Further, the concept of Renewable Generation Obligation (‘RGO’) has been brought in. The bill requires coal based generators to also set up RE generation,

“…which shall not be less than ten per cent. of the thermal power installed capacity”

This generation will also be allowed to be passed through to the discom as bundled power.

A major shortcoming in the existing act has been the interpretation of the ApTel which leaves co-generation out of the application of RPO regulations. This is now proposed to be changed by mandating RPO to be met only though RE and co-generation from RE. Co-gen from other sources is also required to be promoted, but through sale of power to the licensee only (and not through an RPO).

 

Open Access:

Under the current act, open access has been a failure as most states still do not allow open access, and policies in states are unpredictable. Sweeping changes are now proposed in the open access regime. The Bill proposes that OA will be available to all consumers with load of more than 1 MW by default. Such consumers will be allowed to enter into a bilateral agreement for procurement of power.

 

Change in the role of the Discom:

At present the Discom provides the service of last mile connectivity through the distribution system and also supply of power. This role is proposed to be broken up. A consumer will therefore have the choice to choose his supplier. In a distribution area, more than one supplier will be allowed to operate. The retail tariff set by the SERC will act as the maximum tariff, with suppliers allowed to offer a lower than prescribed tariff.

 

Other significant changes:

Penalty clause: A very important change change is in the penalty clause. Penalty for non-compliance of any provision of the act has been raised to Rs 1 crore. Originally, the penalty was Rs 1 lakh. The bill also proposes a reduced penalty of Rs 10 lakhs for RE generators.

 

Most importantly, the Bill specifically mentions the applicability of penalty in case of non-compliance of RPO or RGO. It says that Sec 142 will be applicable in case:

“…..has not complied with the renewable purchase obligation or renewable generation obligation as specified”

 

Development of market: Another important change has been the mandate to promote forward and futures contracts.

Smart grid and ancillary services: The concept of “smart grid” and “smart meters” have also been incorporated.

“Ancillary services” have also been defined, and all generators will be required to keep a certain portion of generation capacity as “spinning reserve”

 

Conclusion

We believe that these changes will have wide and deep impact in the electricity sector. The promotion of RE and removal of road blocks for development of RE and of open access in the country is a welcome step, and one that was long overdue.

The separation of distribution and supply function also signifies a fundamental shift in the way electricity is distributed in the country. However, this change will take time and strong will to implement. This is evident from the fact that after the EA 2003, the State Electricity Boards were required to be broken up. However, in many states they function in conjunction, and often enjoy the protection of the SERCs and state governments, to the detriment of the industry and consumer.

These changes are bold and welcome. The government will now need to focus on implementation and enforcement. Only then the ambitious plans of “Electricity for All by 2019”, “Make in India” and over 100,000 MW of RE capacity will become a reality.

The Bill would be delayed, as the Standing Committee is yet to give its report on the same.

“The Standing Committee will give its report on the proposed Electricity (Amendment) Bill 2014 by April and then we can introduce it in Parliament,” Power Minister Piyush Goyal

 

The copy of Electricity (amendment) Bill can be accessed here.

Amendment in Electricity Act Presented in Parliament

The amendment to electricity Act 2003 was presented in the parliament on 19th December 2014. It was expected that this amendment will bring about big reforms in the electricity sector.

The Government had earlier expressed its intention of bringing amendment in the Electricity Act 2003 along with the introduction of the Renewable Energy Act.

The amendment of The Electricity Act has been presented in the parliament by the government. The mains highlights of the proposed amendment are as below:

  1. The Concept of multiple distribution licensee will be introduced, meaning that a consumer will be have multiple options with regards to choosing its electricity supplier.
  2. The amendment proposes to separate the content and carriage business. Some companies will own the wire business while the other electricity suppliers or distributors will pay a specified fees to them.
  3. The timely revision of electricity tariff will be made mandatory under the proposed amendment. If the electricity suppliers do not approach the Regulatory commissions seeking revision in tariff, the commission will have the right to do so at its discretion.
  4. The Bill also proposes that a power generator can sell the surplus power generated within a state to entities outside it (Inter-state Open Access).
  5. The amendments proposes that the regulatory commissions can initiate Suo-motu proceedings to determine the rate in case a utility/generating company doesn’t file its petition on time. This will empower the regulatory commissions to take action on tariff determination and revision at the right time.
  6. The amendment also proposes that the central government will have power of imposing penalties of up to Rs. 1 Crore on entities violating norms under the Electricity Act.

The proposed changes will also promote competition, efficiency in operations and improvement in quality of supply of electricity, as private electricity suppliers will focus on bringing efficiency. But such models have already been experienced in some cities like Delhi and Mumbai, without much improvement. Promoting Open Access will induce more competition resulting in higher efficiency and competitive electricity prices, unless the commissions decide otherwise at the state level.

The timely revision of Discom tariffs has been a major area of concern, since losses or gains are linked with it to a greater extent. This amendment proposed to address the issue on a stricter note. Fixing timelines for tariff petitions and tariff revisions will significantly reduce political influence on electricity tariffs, especially when elections are round the corner.

Apart from the points highlighted above, the amendment might entail a lot more reforms to address current issues in the Power sector, not undermining the Renewable sector, which has been a major focus area of the new government. Grid operations, including Scheduling of Renewable Power might find a mention in the amendment.

It is to be seen how the amendments, when they come into force, impact the sector, as all stakeholders would want to foresee the commercial and operational implications in the longer run.

The related news articles can be read in the links below:

Economic Times

Business Standard

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