Government has decided to compensate competitive tariff based power projects for operating at full capacity using expensive imported coal.
In a fresh set of directions issued by the power ministry under the provision of Section 11 of the Electricity Act, 2003, it has allowed increase in cost due to mandatory blending of imported coal as a pass through in tariff even for tariff based projects.
This is expected to aid even these power projects to import coal and run plants at full capacity and meet additional power requirements triggered by a sharp increase in electricity demand.
The power ministry had earlier mandated all domestic coal based power projects to import 10 per cent of their requirements through imports to prevent fuel shortages from impacting generation.
Tariff based projects (Section 63 of the Electricity Act) are awarded on the basis of producers quoting a fixed levellised tariff for the life cycle of the project. Normally, in such projects tariff is fixed without any or limited provision for any escalation due to changes in generation cost.
The power ministry has further directed that the mechanism for billing and payment for these plants shall be as per PPA. However, to enable Gencos importing coal with adequate cash flow, the provisional billing has been mandated to be done by the Gencos on weekly basis. Payment of at least 15% of the provisional bill shall be made by the procurers within a week from the date of receipt of bill. This provisional billing and payment shall be subject to reconciliation during final billing and payment on monthly basis as per the PPA.
Power ministry has said that in case discoms default in payment of 15 % of the weekly provisional bill, the generating company shall be free to sell 15 % power in the power exchange.
The fresh direction by the power ministry is for coal imported for blending by such domestic coal-based power plants up to 31.03.2023.
Domestic coal-based power plants, whose tariff has been determined under Section 63 of the Act had earlier raised concerns about the pass through of the increased cost in tariff if imported coal is used and had requested for a suitable methodology to determine the impact on tariff of mandatory blending of imported coal. The ministry examined the request in detail and a methodology was finalised in consultation with Central Electricity Authority (CEA), which was discussed in the meeting held on 20.05.2022 with the stakeholders. Based on the discussion, the methodology has been now been revised to make it in line with the existing methodology being adopted by the CERC for other projects.
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