Grid failure, fuel supply shortage, and a first of its kind tariff review petition are some of the major issues that the power sector is facing today.

At the centre of all this is the Central Electricity Regulatory Commission (CERC), which is trying to find a solution so that the country has a healthy and competitive power sector.

In an interaction with Business Line , Pramod Deo, Chairperson and Chief Executive of CERC, shares his views on these issues. Excerpts from the interview:

Two private companies – Tata Power and Adani – have approached CERC on the tariff issue. What is the status?

We have heard both the cases. A decision has to be taken on the admissibility of their petitions. CERC has not taken a view till now.

These companies have made interesting arguments.

In case of Tata Power, it is a UMPP (ultra mega power plant). So, there are no doubts about jurisdiction. Their argument is based on ‘change in law.’ According to their counsel, this would cover the change in Indonesian law, too. This is a highly legalistic stand that the Tatas have taken.

We had asked them whether they would have come to us if coal prices had fallen. They said may be they wouldn’t have, but the other parties (buyers) would have come. So, now, CERC has to take a view.

Adani has signed power purchase agreements (PPAs) with Gujarat and Haryana. Their argument is that it has become a joint scheme and that they never went to the buyer.

Rather, it was the discom that called for bids in which they participated. Adani’s bid was selected and the PPA was approved by the respective State Commissions.

But, as a generator, Adani is supplying to more than one State under Section 79-1(B) of the Electricity Act. CERC has jurisdiction in inter-State matters.

If CERC admits their plea and allows tariff revision, what would the process be?

First, we will have to take a decision on the issue of admissibility. Tariff revision would be the next step. They will have to give a formula. They have interests in coal blocks in Indonesia that needs to be factored in, as after changes in Indonesian law, the earnings of the mining company would go up.

What if these companies are not satisfied with your decision?

They can approach the Appellate Tribunal of Electricity.

How would the tariff issue impact new UMPP biddings?

We are talking about case-II bidding, where bidders have a clear option of how much of fuel cost component can be kept as variable or fixed. I do not see any changes as far as that is concerned. There are more issues that relate to domestic coal. How that fuel risk will be shared is to be seen.

If there is competitive bidding, the risk is being shared between buyer and seller. Besides, other things, such as how much burden needs to be passed on to distribution companies and whether consumers need to be shielded also need to be captured in the new bids.

Are you looking to cap merchant power tariffs from captive blocks?

That is completely in the Government’s domain. It is governed by how coal blocks were allotted. It is a policy matter. That is something the Centre has to do.

Is the country ready for varied tariff?

Distribution companies buy power from various sources and then it is pooled. There are some old plants where tariffs are low. But, electricity from new plants is expensive. Now, it is also mandatory for them to buy power from the renewable sector. The higher cost is now passed on to the customer.

The question (that needs tackling) is, solar (pricing). When we did it on cost plus basis, it was very high, up to Rs 17 a unit. Now, it has come down to Rs 7-8 a unit in reverse competitive bidding.

In phase-I of the solar mission, the burden would be high. This will not be possible in phase-II. So, the Centre has to decide on how the subsidy mechanism is worked out till grid parity is attained.

When do you think grid parity will be attained?

I think it will take five years to move towards grid parity. Much also depends on what happens to fossil fuels. Their prices are also going up with no chances of decline likely. China continues to grow, so does India, and both are major buyers. There is a cross-subsidy mechanism that would continue.

What about the possibility of open access?

Unless power is available in abundance and at cheaper rates, open access is not possible. I put the number at Rs 3 a unit or below. And the cross-subsidy, wheeling and stand-by charges would cost another Rs 1.50 a unit. Also, there must be an assurance of supply. But, where is the power available today?

>siddhartha.s@thehindu.co.in

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