Interest charge

Power Min allows producers to charge compensatory tariffs for importing coal

The Union Department of Energy has allowed power plants to charge an offset tariff instead of importing coal. This would cover both state government-owned and private (gencos) power generation units.

“The methodology will be used by generation companies supplying electricity under Section 63 and state governments to calculate compensation due to blending with imported coal. The billing and payment mechanism for these plants will be PPA compliant,” the order reads.

The instruction was issued under Section 11 of the Electricity Act by the Department of Energy.

‘Business Standard’ recently reported that the state-owned NTPC would see its fuel cost rise to 7-8 rupees per unit by importing coal and the final tariff would increase by 50-70 paisa which would be passed on to consumers.

There are nearly 32 GW of power plants being built under Section 63 of the Electricity Act through competitive bidding. These units, unlike the NTPC, which is governed by Section 62, cannot pass on tariffs without regulatory approval.

These units had asked the Department of Energy to pass on the cost they incur due to the higher cost of imported coal to consumers.

The Ministry of Energy in its memo said: “A methodology has been finalized in consultation with the Central Electricity Authority, which was discussed at the meeting of May 20, 2022, with stakeholders. On the basis of the discussion, the methodology was revised to do so in accordance with the existing methodology being adopted by the CERC (Central Electricity Regulatory Commission).

The Center also ordered electricity distribution companies (discoms), to ensure adequate cash flow to power plants, payment of at least 15% of the provisional weekly bill must be made by discoms within a week. following receipt of the invoice for these 32 GW of plants.

In the event of a failure, the power plants can sell 15% of the electricity linked to this discom in the electricity exchange, the ministry said in its note.

Recognizing that the national coal stock is not sufficient to meet electricity demand in the country, the Center last week ordered all states and power generation companies (gencos) to import coal before the arrival of the monsoon.

The Department of Energy has warned producers that the coal blend benchmark will be raised to 15% from the current 10% if they do not import coal by the end of the month. The directive also states that if blending is not initiated by June 15, the failing thermal plant’s national coal allocation will be reduced by 5%.

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