Central Electricity Regulatory Committee's (CERC) New Draft Tariff Criteria

TERMS USED IN THE ARTICLE

⇒ Tax Arbitrage: Trading that takes advantage of a difference in tax rates or tax systems as the basis for profit.

⇒ Plant Available Factor (PAF) refers to whether a thermal plant was available for generation or not. If it was available, it receives incentive irrespective of whether it generates power or not.

⇒ Plant Load Factor (PLF) refers to actual generation from the thermal plant as against its installed capacity.

INTRODUCTION
The Central Electricity Regulatory Committee (CERC), recently declared the draft tariff criteria for the power sector.

Central Electricity Regulatory Committee (CERC)
CERC is a statutory body functioning under sec - 76 of the Electricity Act 2003 (CERC was initially constituted under the Electricity Regulatory Commissions Act, 1998 on 24th July, 1998).

Functions of CERC:
Mandatory Functions:-
⇒ To regulate the tariff of generating companies owned or controlled by the Central Government;.

⇒ To regulate the tariff of generating companies other than those owned or controlled by the Central Government specified in clause (a), if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State;

⇒ To regulate the inter-State transmission of electricity ;

⇒ To determine tariff for inter-State transmission of electricity;

⇒ To issue licences to persons to function as transmission licensee and electricity trader with respect to their inter-State operations;

⇒ Improve access to information for all stakeholders.

⇒ To adjudicate upon disputes involving generating companies or transmission licensee in regard to matters connected with clauses (a) to (d) above and to refer any dispute for arbitration;

⇒ To levy fees for the purposes of the Act;

⇒ To specify Grid Code having regard to Grid Standards;

⇒ To specify and enforce the standards with respect to quality, continuity and reliability of service by licensees;

⇒ To fix the trading margin in the inter-State trading of electricity, if considered, necessary;

⇒ To discharge such other functions as may be assigned under the Act.

Advisory Functions:-
⇒ Formulation of National Electricity Policy and Tariff Policy;

⇒ Promotion of competition, efficiency and economy in the activities of the electricity industry;

⇒ Promotion of investment in electricity industry; any other matter referred to the Central Commission by the Central Government.

CERC’s NEW DRAFT TARIFF CRITERIA
⇒ All the provisions will be applicable from April, 2014.

⇒ Going to remove the tax arbitrage of the electricity companies. (NTPC, a government PSU alone makes a profit of Rs.500 crore a year by way of this tax arbitrage)

⇒ This will significantly lower the power tariffs.

⇒ Have brought about changes in the norms for operating and maintenance (O&M) expenses. It has brought a great relief to the companies.

⇒ Going to tighten the operating norms for power producing and transmission companies. There has been a shift in the policy to the Plant Load Factor from the Plant Available Factor. In short, incentives till now were provided according to the capacity a company could produce. But now it is going to be linked with the actual production of the companies. Previously, even if the company didn’t produce enough electricity due to non-availability of coal, then also, it was getting incentives, but it will not get it.