The Central Electricity Regulatory Commission (CERC) in a Suo Moto order said that Gencos can blend domestic coal with up to 20 per cent from alternative sources, including imported coal, without taking prior permission from beneficiaries (Discoms).

The regulator, in its order on Tuesday, noted that to maintain adequate fuel stocks, coal from alternative sources is required to be arranged to avoid any power crises in the future. The directions issued by the commission will be applicable till October 31, 2022.

“Provided that in such a case, prior permission from beneficiaries shall not be a precondition for blending up to 20 per cent from alternate sources of fuel supply, including imported coal, subject to technical feasibility, unless otherwise agreed specifically in the power purchase agreement (PPA),” the CERC order said.

It will help to facilitate the availability of adequate coal in thermal power plants (TPPs) for smooth and uninterrupted power generation as well as aid Discoms in meeting their universal supply obligation to consumers.

CERC staff paper

The Power Ministry had issued directions to CERC to allow a higher amount of blending of up to 30 per cent with imported coal, subject to technical feasibility, without the requirement of prior consultation with the beneficiaries up to March 31, 2023, to maintain resource adequacy and a 24x7 supply to consumers.

This was done in reference to the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019, in the public interest.

Subsequently, in June, the CERC published a staff paper on the blending of imported coal with domestic coal to mitigate domestic coal shortages. It sought comments from stakeholders on “to what extent blending of imported coal can be allowed without permission or consultation of beneficiaries and to what extent the increase in energy charge rate (ECR) over and above the base energy charge rate, approved by the Commission for that year, can be allowed upon blending of imported coal.”

Stakeholder suggestions

Responding to the staff paper, Gencos suggested that the restriction on the percentage of blending should be removed until the coal shortage situation is normalised. Alternatively, Gencos can also be allowed to procure imported coal equivalent to the shortfall in quantity as per coal requirement and available under the fuel supply agreement (FSA).

Another suggestion made by the Gencos was that the cost of imported coal should be allowed to be recovered in full as a pass through; there should not be any cap on the ECR; and the clause pertaining to obtaining consent of beneficiaries should be removed.

Another suggestion made was that the percentage increase in ECR on account of imported coal is very high for the plants with lower ECR (pit head stations) compared to plants with higher ECR (non-pit head stations). The import of coal also requires additional working capital, new infrastructure, and certain modifications in plant design, which involve capital expenditure.

Discoms were of the view that the price of imported coal was volatile and would impact the ECR of power supply. The higher blending of imported coal would lead to an excessive increase in the ECR of power supply to discoms and result in a substantial increase in the cost of power for end consumers. The end users have an option of either paying exorbitantly high charges or else facingf load shedding and the same would impact the finances of the discoms.

Discoms also suggested that the percentage of coal blending may be reduced to the minimum possible extent and a cap may be levied for the cost of imported coal and should not be allowed to exceed 10 per cent. An increase in ECR of up to 30 per cent may also be allowed in a smooth manner so that consumers do not feel the tariff shock.