People stand under a light powered by energy from a solar power microgrid at night in the village of Dharnai in Jehanabad, Bihar, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

CERC Debates On Tariff Structure For Thermal Power Plants

In view of decreasing plant load factor of thermal generating stations, the Central Electricity Regulatory Commission is re-looking at the current two-part tariff structure and seeking feedback from stakeholders to replace it with a three-part tariff structure.

This in turn could encourage signing of long-term power purchase agreements by state-owned power distribution companies as it may lower stress in the power sector for units unable to complete the project or remaining idle due to lack of long-term power demand agreements, a utility company official told PTI.

Due to low demand, coal-based power plants are running at a PLF of around 60 percent. PLF in 2017-18 was at 59.68 percent, down from 77.5 percent in 2009-10, while the government forecasts the same to go lower to 56.50 percent by 2021-22.

The states have not been coming forward for long-term power purchase to avoid fixed cost liability and they have been resorting to short-term power purchase to meet their demand, the CERC said in its latest tariff consultation paper.

The two-part tariff system structure is suitable when demand for power ensures utilisation of capacity or around the target availability, CERC has said in its new ‘2019-2024’ tariff consultation paper. The two-part tariff operates well in power deficit scenario.

Also Read: India’s Coal Import Declines In April Amid Diversion To Thermal Power Plants

The CERC seeks feedback on three-part tariff-fixed charge (for recovery of fixed cost consisting of depreciation for repayment, interest on loan and guaranteed return to the extent of risk-free return and part of operation and maintenance expenses), variable charge (incremental return above guaranteed return and balance operation and maintenance expenses) and energy charges (fuel cost, transportation cost and taxes, duties of fuel).

The recovery of fixed component could be linked to target availability, whereas variable component could be linked to the difference between availability and dispatch. Fuel charges could be linked with dispatch, it said.

CERC consultation paper on ‘2019-2024’ tariff will remain open for comments and suggestions till July 15.

The CERC has also mooted consultation on increasing extension of useful life for very old thermal power plants which is now restricted at 25 years, giving a new lease of life to several power units. “It is to be noted that performance of a unit does not necessarily deteriorate much with age, if proper O&M (operations and maintenance) practices are followed,” the regulator said.

Extension of useful life is one of the options among others like phasing-out, renovation and replacement with super critical plants.

According to Central Electricity Authority of India, the capacity of coal-based thermal power plants more than 25 years old is about 37,453 megawatt, of which around 35,506 MW pertains to state or central sector, as of March 2016.

Also Read: India's Power Capacity Seen Overtaking Japan This Year: Chart

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