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https://economictimes.indiatimes.com/industry/energy/power/govt-invokes-emergency-clause-to-allow-compensation-for-32-gw-domestic-coa...
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Business News›Industry›Energy›Power›Govt invokes emergency clause to allow
compensation for 32 Gw domestic coal based plants

GOVT INVOKES EMERGENCY CLAUSE TO ALLOW COMPENSATION FOR 32 GW DOMESTIC COAL
BASED PLANTS

SECTIONS
Govt invokes emergency clause to allow compensation for 32 Gw domestic coal
based plants
ET BureauLast Updated: May 27, 2022, 12:00 AM IST
Synopsis

POWER PURCHASE AGREEMENTS BETWEEN THESE PLANTS AND THE DISTRIBUTION COMPANIES
HAVE BEEN SIGNED FOR UPTO 25 YEARS BASED ON TARIFF-BASED COMPETITIVE BIDDING
UNDER SECTION 63 OF THE ELECTRICITY ACT AND DO NOT ALLOW HIGHER PRICES.

AgenciesSection 11 of the Electricity Act provides that the government may, in
extraordinary circumstances, ask a generating company to operate and maintain
any station in accordance with its directions.
The government has invoked an emergency clause to allow compensation to 32 Gw
domestic coal-based power projects for higher costs due to blending of imported
coal till March next year.

Power purchase agreements between these plants and the distribution companies
have been signed for upto 25 years based on tariff-based competitive bidding
under Section 63 of the Electricity Act and do not allow higher prices.

The direction issued on Thursday under Section 11 of the Electricity Act said
that coal imports for blending by power plants are not the level mandated by the
government due to lack of clarity on compensation. It said the coal reserves
continue to dip.

“The methodology shall be used by the generating companies supplying power under
Section 63 and state governments to calculate the compensation due to blending
with imported coal. The mechanism for billing and payment for these plants shall
be as per PPA,” the order said.

It said domestic coal based power plants, whose tariff has been determined under
section 63 of the Act have raised concerns about the pass through of the
increased cost in tariff if imported coal is used and have requested for a
suitable methodology to determine the impact of tariff of mandatory blending of
imported coal.

“Their request has been examined in detail and a methodology has been finalised
in consultation with the Central Electricity Authority, which was discussed in
the meeting on May 20, 2022 with the stakeholders. Based on the discussion, the
methodology has been revised to make it in line with the existing methodology
being adopted by the CERC (Central Electricity Regulatory Commission,” it said.

For adequate cash flow to power plants, payment of minimum 15% of the
provisional weekly bill shall be made by the discoms within a week from receipt
of bill from these 32 Gw plants. In case of default, the power plants can sell
15% in power exchange.

Section 11 of the Electricity Act provides that the government may, in
extraordinary circumstances, ask a generating company to operate and maintain
any station in accordance with its directions.

In April, the union power ministry had asked all power plants using domestic
coal to import 10% of their fuel requirement and blend it with local coal.

The power ministry last week said it would increase the coal import target to
15% for power generating plants that were not following its directive to meet
10% of their fuel requirement with imported coal.

The government also invoked Section 107 of the Electricity Act to direct the
central power regulator CERC to allow power plants under its watch to increase
blending up to 30%.

( Originally published on May 26, 2022 )

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