Discoms can enhance connected load of Consumers- APTEL

In a development that could mean a more stable power supply in future, though possibly at a higher cost, the Capital's power companies on 02-02-2011 got the legal go-ahead to enhance the load of those consumers in the habit of using more than what is sanctioned to them. The Appellate Tribunal on Electricity ruled in favour of the companies, who have been fighting the Delhi Electricity Regulatory Commission for the right to enhance load on their own.

Typically, each household has a sanctioned load of 1-2 KW. But nearly all of them use 3-4 KW, due to the use of appliances such as geysers and ACs. This causes overload and breakdown of the grids and transformers, leading to power supply disruptions and faster wear and tear of infrastructure.

"This will help us build a more robust network that sees fewer breakdowns due to overloading and the life of our infrastructure will also improve," said Gopal Saxena, CEO of BSES Rajdhani, Delhi's biggest power company.

But for this to happen, Delhiites may have to pay a slightly fatter power bill.

If your load is enhanced, your security deposit would go up by Rs 600 for every additional kilowatt (KW) of power you consume and you would also have to pay a monthly fixed charge of R12 per KW.

Wednesday's judgement affects almost all power consumers in the city since domestic consumers don't usually get their sanctioned load enhanced to what they actually use, either out of ignorance or to avoid paying a higher security deposit and fixed charges per month.

A consumer using more than the sanctioned load for three months a year will be eligible for automatic load enhancement. It applies only to those who have under-declared their load.

Despite low prices, short-term power deals find few takers

istribution companies reluctant to draw power due to financial problems and selective allowing of open access by states, prices have crashed to Rs 2.50 per unit from Rs 7 per unit at one time. Around five per cent power goes through this route, which has two exchanges. The market was introduced after the Electricity Act of 2003.

Data from state utilities and power exchanges show the number of short-term applications across the country to be 150 in this month, from 400 in December 2009. These applications are received by regional load despatch centres for scheduling of power.

The fall in demand is forcing power generators to sell embedded distribution companies only. Further, distribution companies are reluctant to buy power through traders or merchant power plants, despite their quoting lower rates.

Indian Energy Exchange (IEX) sources said: "There has been an improved power situation, largely due to better hydro generation and water availability. However, a large number of states are not willing to supply power to areas with high distribution losses. State utilities prefer load-shedding and demand cuts due to paucity of funds. More important, open access is not being granted by many states, particularly to industrial consumers, despite shedding load on these categories of consumers." IEX^'s daily turnover is 35,000 Mw-hours and sources saye prices have fallen to Rs 2.50 per unit.

Power Exchange India (PXI), whose daily turnover was 7,000 to 8,000 Mw-hours has a similar story. PXI sources said: "States are not fulfilling the universal service obligation as mandated by the Electricity Act, 2003. A large number prefer to shed load than to procure power. For example, Maharashtra continues to carry out daily load shedding to the tune of 4,000 Mw, despite the availability of power in the short-term market."

Maharashtra State Electricity Distribution Company (MahaVitaran) sources admitted to load shedding instead of procuring power from the short-term market.

D Radhakrishna, sector analyst, says the main reason for the crash in the short-term market is that utilities, which are prime buyers, are showing reluctance in buying costly power and selling the consumers at a rate fixed much lower.

"Actually, this trend is good, as it will avert ‘California Shockâ€^TM, in which there was bulk buying from traders at a high cost and retail consumers refused to pay . The recent tenders invited by Andhra Pradesh, Maharastra and Tamil Nadu for buying power for January on have also received astonishingly low rates of Rs 3.50 per unit. Some states have started arrangements under which they take power now and return it during the June-August months. It is risky as a good rainfall will boost hydel power, as experienced during the current year."

An analyst with a broking firm said: "The message is clear, that power trading must come to its real objective, that consumers will have a choice at a market-driven price and regulators must pave the way for industrial consumers or commercial consumers to opt for the external market at lower price. Issues like cross-subsidy and energy accounting need to be thrashed out."

Gas power projects via tariff-based bids soon

The government proposes to make it mandatory to award gas-based power projects on competitive tariff-based bids.This is aimed at making gas-based projects competitive vis-à-vis coal-run projects once the government ends cost-plus tariff regime in January 2011. Power developers have hailed the move.Beginning, January 5, 2011, all electricity distribution licensees will have to procure electricity based on tariff-based competitive bids. Power generators, private or public, will not be allowed to enter into power purchase agreements on cost-plus, regulator determined tariffs with state distribution companies.

"When cost plus regime makes way, gas-based project developers may find it difficult to sell electricity from their plants as gas is costlier than coal. Power from gas projects costs developers Rs 2 per unit as compared to about Rs 1.5 per unit from coal-fired projects," a power ministry official told media.

Power secretary Uma Shankar confirmed the development. "Once a developer sets up gas-based project, how does he sell power? Earlier they used to sign power purchase agreements with distribution companies. But now they will have to be competitive in pricing," he said.

If competitive bidding is introduced, gas projects will not be required to compete with coal-fired projects, he said. The power ministry is considering both case-I and case-II bidding procedures for determining tariff from gas-based projects.

Under case-I bidding, distribution utility invites tariff-based competitive bids for required capacity but does not play any role in procuring land, fuel and regulatory clearances. This is unlike case-II bidding -- followed for awarding ultra mega power projects, where government assumes the role of a facilitator.

Power ministry officials are likely to deliberate the issue with Central Electricity Authority (CEA) next week.

GMR Energy chief executive officer Raaj Kumar said, "Any kind of tariff-based bidding is welcome for consumers as well as developers. It also reduces risk exposure from fluctuations in gas price and currency. Typically, when gas price is at $ 6 per million metric standard cubic meters per day (mmscmd), power costs around Rs 2.2 per unit to developers as against coal based generation at Rs 1.2 per kWh."

Meanwhile, an official in Lanco Infratech also welcomed the move. The official said that in next five years only 60 mmscmd extra gas was likely to be available from domestic resources that could feed additional generation of about 8,000-mw. Presently, India's demand for natural gas is pegged at 170 mmsmcd of which 142 mmscmd is sourced from domestic fields and rest is imported.

The country's natural gas production from home fields is expected to touch 151 mmscmd by 2011-12 and 186 mmscmd by 2012-13. Reliance Industries Ltd operated D6 block in KG basin is at present producing 55-60 mmscmd. The production is expected to touch only 80 mmscmd by 2012-13. Maharashtra State Power Generation Corporation, Torrent Power, GVK Power, GMR Energy, and Gujarat Powergen Energy Corporation are some of the companies that have submitted request for gas allocation for projects coming in the 3-4 years.

CEA, planning body for the power sector, has rece­ived over 104 applications fr­om government and private project developers seeking gas supply to fuel nearly 1,18,000-mw capacity. The projects would require gas supply of 570 mmscmd at 90 per cent plant load factor. All the projects are proposed to be operational in the 12th pl­an period starting 2013. Co­al and gas linkages to po­wer projects are based on re­c­o­mmendations made by CEA.

The government has decided to weed out non-serious private companies seeking gas for power projects with a stiff grading system in place. As per the proposal, only companies with firm land, water allocation, sound financial background and equipment sourcing contracts would be preferred for gas linkages.

Competitive tariffs may not affect power PSUs

The Ministry of Power's proposal to move out of cost-plus power purchase agreements to competitive tariff bidding for power projects from January may not have an adverse impact on public sector power generation companies in the medium term. Private companies on the other hand, have already proved their capability in competitive bidding in UMPPs, accepting lower return on equity on their projects.

For NTPC, the impact is neutral at least until end of 12 {+t} {+h} five year plan given that it intends to secure a good portion of its capacities through power purchase agreements (PPAs).

According to the NTPC's management, the company had signed cumulative PPAs of 62,000 MW as of September 2010 under regulated tariff mode and had plans of securing around 75,000 MW of power purchase agreements through regulated tariff route before the new regime takes effect. Therefore, the company is protected till end of 12 {+t} {+h} plan and the early part of 13 {+t} {+h} five year plan. With enough projects in hand, NTPC may also not choose to participate in competitive bidding and may choose to protect margins for a while.

As tariff-based bidding is market-determined, tariffs in such bidding are typically lower than cost-based bids. While this is positive for distribution companies, which have weak financials, power players do lose out on returns as has been the case with UMPPs.

However, using low cost power equipment and merchant operations to make up for lost returns on PPAs are some of the strategies that private players have implemented, to keep returns viable with lower tariffs.

In the case of regulated tariff projects, with majority of costs being passed-through, the incentive to save costs has also been low so far. With the regulated tariffs disallowed for future projects of players such as NTPC, Neyveli Lignite Corporation and Power Grid Corporation, these companies may be forced to improve efficiency and save costs to tackle lower returns. NTPC for its part is scouting for coal assets abroad to gain fuel security going forward.

If reports of the company closing in on Indonesian coal (said to be relatively inexpensive) transpires, it may aid the company to participate in competitive tariff bids.

Mumbai - Rinfra demands increase in wheeling charge and cross subsidy surcharge

RInfra has filed a petition for truing up tariff for year 2010-11 (up to March 2011).  RInfra has asked for 31% increase in wheeling charges (charges for using its network by other supplier to connect the switch-over consumers) from 88 paisa to 115 paisa. The company has also demanded a cross-subsidy surcharge varying from Rs 2 to Rs 8 (depending on category) for consumers who shift to Tata.Reliance Infrastructure (RInfra) doesn't want to burden its consumers further, but wants the regulator to approve more charges for those who switch over to other suppliers. The petition was discussed for technical validation at the office of the Maharashtra Electricity Regulatory Commission's (MERC) office on 16-11-2010.

As per MERC directive, the new multi-year tariff will come into force from April 2011. It means there will be no tariff revision every year.

More than 60,000 suburban consumers have shifted to Tata Power in the past year.

Consumer activist Sandeep Ohri, who debated RInfra proposal on, told the Hindustan Times that RInfra's demand would kill any kind of competition. "RInfra has done nothing to procure additional power to bring its own tariff down."

Ohri said there were many discrepancies in the petition. "MERC has asked RInfra to file a fresh petition within 10-12 days."

Centre plans to defer tariff-based bidding in hydel projects for 5 years

The central government is all set to defer mandatory tariff based bidding for hydroelectric power projects by another five years. The deferment will be based on recommendation of a taskforce headed by power minister Sushilkumar Shinde.Major government-ow ned power utilities like NHPC, Satluj Jal Vidyut Nigam (SJVNL) and Tehri Hydro Development Corporation (THDC) stand to gain from such a decision.

A task force headed by Shinde has recommended that cost-plus tariff regime be extended for the sector till January 2016, a power ministry official said. "We are very much in agreement with the task force recommendations. The hydro sector is not mature to handle competition," he said.

The task force has cited high risks and uncertainties inherent to hydropower projects. "Given their location in hilly areas, sites for hydroelectric projects suffer from adverse geological conditions and natural calamities," the official quoted the task force report.

Power minister Sushilkumar Shinde held a meeting with state energy ministers on October 24 to decide on whether to exempt hydel projects from tariff-based competitive bidding beyond January 2011.