Power purchase: Govt to stick to competitive bidding deadline
Shinde to meet State Ministers to decide on shift from ‘cost plus' mode.

Anil Sasi

New Delhi, Sept. 15

The Centre is unlikely to extend the January 2011 deadline for shifting to a tariff-based competitive bidding regime for the procurement of electricity from the market, and disallowing future projects to enter into power purchase agreements on cost-plus, regulator determined tariffs.

Indications are that state-owned generation utilities could, however, be allowed to set up projects through the regulated tariff route for projects where the main plant order has been placed by the cut-off date, which has sparked a rush among utilities such as NTPC Ltd to place orders before the expiry of the deadline. The Union Power Minister, Mr Sushilkumar Shinde, has called a meeting with his counterparts in the States on October 24 to evolve a consensus on the issue.

CERC

The Central Electricity Regulatory Commission (CERC) had in June firmly ruled in favour of shifting to a tariff-based competitive bidding regime for future power projects from January, citing better price discovery and lower retail tariffs through the bidding route.

This came as a blow to NTPC, the country's largest power generator, which has been lobbying hard for an amendment to the Centre's Tariff Policy to permit continuation of the cost-plus tariff structure for public sector undertakings beyond the January deadline. Similar requests had also come in from other State-owned units, including hydro power firms NHPC Ltd and Satluj Jal Vidyut Nigam Ltd.

The CERC, in response to the Power Ministry's request in April seeking the commission's advice on NTPC's request for extending the cost-plus tariff regime, had told the Government that the deadline for the transition to a tariff-based bidding process “should not” be extended. The only exceptions cited by the commission where the continuation of the cost-plus tariff can be allowed are large-size multipurpose storage hydro projects and peaking supply stations.

However, hydro projects, in general, including those having private developers, may have to be exempted, according to the Hydro Policy. Due to the uncertainty in hydro generation, which depends on water availability, it is difficult for hydro projects to compete with thermal generation on long-term basis. They can, however, sell power through the competitive market route on a short-term basis.