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JAN 03 2017

CERC access rate hike plan clouds power market

  • Economic Times, ET Bureau / Hyderabad
  • Created: Tue 03rd JAN 2017

The Central Electricity Regulatory Commission (CERC) has proposed to increase the short—and medium-term transmission corridor charges (STOAs and MTOAs) for open access by 35% and 25%, respectively, from the current levels.

While the regulator says this would compel participants to move towards long-term access (LTA), which is critical for efficient planning of transmission networks, many stakeholders including power exchanges, private transmission companies and generators contend that the move could deal a blow to the thriving short-term electricity market. LTAs, they say, are not happening because states’ power demand hasn’t grown as anticipated.

The CERC invited public comments on the draft regulations and is believed to be working on the final version. Transmission planning in the country is done by the central transmission utility (CTU), Power Grid Corporation. Network planning relies heavily on the generators’ requests for LTA. These applications provide the CTU with critical input on the upcoming generation and demand for the same.

However, in the last few years, the demand for short-term and medium-term power has spiked. The volume of short-term transactions has increased from 24.69 billion units (BUs) in 2008-09 to 63.96 BUs in 2014-15. However, the price of electricity in short-term transactions has come down from about R7.29 per unit to R4.28 per unit over the same period; in May this year, the price was even lower at R2.50 per unit.

“(The volume of short-term transaction could rise further in future). In this scenario, it is likely that generators may not apply for LTA and evacuate power under STOA/MTOA or it is likely that there is less long-term PPAs (power purchase agreements) leading to lack of LTAs, thereby inefficient transmission planning,” the draft regulations said, explaining the rationale behind jacking up charges for STOA and MTOA connections.

Currently, the charges for all types of connection are the same. While the duration for LTA is from 7 to 25 years, MTOA is given for 1-7 years. The STOA is for any duration less than a year but no specific capacity is built to cater to STOA, instead margins available in LTA are used for the same.

While officials from Power Grid and its subsidiary Posoco, which manages the national and regional grids, defended the CERC’s proposal, electricity exchanges, private transmission players and generating companies are critical of the move.

“With more power being contracted on short- and medium-term basis, any increase in charges for open access would be a regressive step. Instead, the CERC should be looking forward to considering access on the basis of general network access (GNA) — with long, medium and short term rolled into one system — from point of injection to point of any drawal, in the true sense of a unified grid,” Ashok Khurana, director general of Association of Power Producers, told FE. GNA is a transmission network planning process whereby the operator doesn’t necessarily need the information about actual generation and demand but can design and build a system through forecasting while ensuring enough redundancy in the system to avoid any congestion.

The proposal, according to industry sources, also contradicts the CERC’s own observations on transmission planning and the Electricity Act, which calls for non-discriminatory open access to be provided to all the consumers. “The CERC has also said that transmission planning was possible without prior knowledge of points of injection and drawal using the GNA especially after 2016-17, once a strong all-India network had emerged but the proposal contradicts the earlier stand,” Purnendu Kumar Chaubey, vice-president, Kalpataru Power Transmission, told FE.

On condition of anonymity, an official from the electricity exchange said that charging a premium for STOA and MTOA was unjustified as there are no separate capacity created for these connections. While transmission corridors are made according to LTA requirements, other connections only use the underutilised capacity, thus generating revenue for the operator. The official added that STOA and MTOA were dominating the connections as most states do not require long-term PPAs. The thriving market for STOA and MTOA is a result of tepid electricity demand. While the Central Electricity Authority had estimated that the power demand would be around 200 GW by 2017, the same has been hovering around 150 GW.

 

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Medium Term Open Access Open Access Power Grid Grid Central Electricity Regulatory Commission Electricity Act Central Electricity Authority Electricity Regulatory Commission Power exchanges Power Electricity India

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