Draft KERC (Procurement of Energy from Renewable Sources) Fourth Amendment, Regulations 2016

KERC has notified Fourth Amendment to KERC (Procurement of Energy from Renewable Resources) Regulations on October 26th, 2016. The draft of the proposed amendment is available in www.kerc.org. The highlights of the amendment are:

  1. RPO obligation is on captive plant, grid connected plants and open access consumers only .Hence non grid connected captive plants are free from RPO obligation in Karnataka state.
  2. Every distributions licensee, captive consumer and open access consumers may purchase REC or consume electricity generated from its own Renewable Energy Power Plant whether grid connected or otherwise, to meet its RPO either entirely or partly.
  3. The obligation of distribution licensees to purchase electricity from solar energy may be fulfilled by purchase of solar REC’s only.
  4. The capacity of Renewable Energy Power Plant owned by the obligated entity shall not be less than 250Kw.

KERC has invited written comments/views/suggestions on the proposed amendment latest by November 26th 2016 from interested parties.

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

CERC’s 2nd amendment to REC Regulations

Hon’ble CERC through a notification dated 10th July 2013 has come up with its 2nd amendment to its principal REC regulations of 2010. The following are the main highlights:

On the issue of RE contracted though competitive bidding, the commission has mandated as –

“(b) it does not have any power purchase agreement for the capacity related to such generation to sell electricity, with the obligated entity for the purpose of meeting its renewable purchase obligation, at a tariff determined under section 62 or adopted under section 63 of the Act by the Appropriate Commission.”

If a DISCOM is procuring power from a RE generator at a tariff determined by “competitive bidding” method then the particular RE generator will be eligible to participate in REC scheme provided DISCOM doesn’t account the same quantum of energy towards its RPO compliance. This provision is mainly mooted to abrogate the ambiguity where in double accounting was manifested. Moreover the term “preferential tariff” has been substituted by “tariff, for sale of electricity including the environmental attributes, determined under section 62 or adopted under section 63 of the Act by the Appropriate Commission”.

On the issue of issue of procurement of power at APPC, the commission retains the proposed amendment and mandated as –

In sub-clause (c) of clause (1) of Regulation 5 of Principal Regulations, the words “at price not exceeding the pooled cost of the power purchase of such distribution licensee” shall be substituted with the words “at the pooled cost of power purchase of such distribution licensee as determined by the Appropriate Commission”.

Hon’ble CERC also made it amply clear that previous PPAs entered at negotiated rates (i.e at price less than APPC) will not be affected and would continue to avail benefits under REC mechanism.

On the Seasonality issue on self consumption of a bagasse based co-generation project, the commission made the following modification to the proposed amendment –

“Provided that in case of renewable energy sources based co-generation plants, the connected load capacity as assessed / sanctioned by the concerned distribution licensee, shall be considered as the capacity for captive consumption for the purpose of issue of certificates, irrespective of 
the capacity of such plants covered under the Power Purchase Agreement”.

Hon’ble CERC replaced “bagasse” based co-generation by ” renewable energy sources based co-gen plants” to put the wide variety of RE based technologies under the benefits of the mechanism as it also provides that the benefits of the amendment will not be limited to “bagasse” based co-gen plants only.

On the issue of removal of Electricity Duty waiver benefit as one of the disqualification criteria for eligibility for issuance of certificate on self consumption of a Captive generating Plant (CGP) under REC scheme, the commission sticks to the proposed amendment.

Electricity duty waiver in case of self consumption will no more be a deterrent for the CGPs to access the REC regime. This comes in the wake of a case where the state government by itself had relaxed E-Duty for all CGPs in the state. Since the same was the mandate extended by state govt. ,SERC or the CERC (for that matter) had limited jurisdiction. For more details on the case follow ourNewsletter Vol. 29.

On the issue of Eligibility conditions for qualifying self consumption of a CGP and a non CGP, for issuance of Certificates, the commission retains the proposed amendments. i.e to avail participation in REC regime for entire energy generated for self consumption, a RE based CGP has to forgo all promotional benefits in terms of promotional transmission/wheeling charges or promotional banking benefits. The same applies to RE generator who is not a CGP i.e. when it consumes less than 51 percent of energy for self consumption (as per Electricity Rules 2005).

On the issue of extension of time period for applying for issuance of Certificate, the commission has put in place the following –

“(1) the eligible entity shall apply to the Central Agency for certificates within six months from the corresponding generation from eligible renewable energy project: Provided that the application for issuance of certificates may be made on 10th , 20th and last day of the month.”

The issuance application can now be made within a period of 6 months of the corresponding generation from eligible RE projects, instead of previously envisaged 3 months, implying that Generators will now get more time to take care of any unintentional procedural delays from NLDC/SLDCs end, by filling the applications early.

On the issue of sale of electricity to an obligated entity for compliance of its Renewable Purchase obligation (RPO), the commission took the recommendation of the RERC which points a possible case of an involvement of a trade to be included the clause. The clause reads as –

“(d) it does not sell electricity generated from the plant, either directly or through trader, to an obligated entity for compliance of the renewable purchase obligation by such entity.”

Regarding retention of RECs for off setting of RPO by a CGP, the commission has made the following final amendment –

“”(3) A renewable energy generator including captive generating plant shall be permitted to retain the certificates for offsetting its renewable purchase obligation as a consumer subject to certification and verification by the concerned State Agency: 
Provided that the renewable energy generator including captive generating plant shall inform the Central Agency regarding the details of the certificates retained by it for meeting its renewable purchase obligations. 
Provided further that renewable energy generator shall not be permitted to retain the certificates for offsetting renewable purchase obligation of its group companies as a consumer.”

Asserting clearly that the scope extends to non CGP too for its self consumption portion. The RE generator can also retain RECs to meet RPOs of units located in different states.

The commission retains the proposed amendment with regards to extending clarity regarding the date from which the certificates issued to an entity after registration. 

The final clause in place is as –

“(1) Clause (1) of the Regulation 10 of the Principal Regulations shall be substituted as under: After registration, the renewable energy generation plant shall be eligible for issuance of Certificates under these Regulations from the date of commercial operation or from the date of registration of such plant by the Central Agency whichever is later:”

 The “Statement of Reasons” for the regulation can be found here.

The copy of the notification can assessed here.

For our analysis on the draft of second amendment to CERC REC regulations, refer our Newsletter Vol .30.

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