Ministry of Power drafts norms for pass through of higher cost of coal

The Ministry of Power has modified norms for the pass through of higher cost of imported coal used by domestic thermal plants with power supply agreements with discoms under tariff-based bidding.

The ministry said domestic coal-based power plants whose tariffs have been determined under Section 63 of the Electricity Act have raised concerns about the pass through of the increased cost in tariffs if imported coal is used.

They requested a methodology to determine the impact of mandatory blending of imported coal.

The ministry said it has looked at the request in detail and a methodology has been finalised in consultation with the Central Electricity Authority CEA, which was discussed with the stakeholders on May 20, 2022.

According to the discussions, the methodology has been revised to make it in line with the existing methodology adopted by the CERC Central Electricity Regulatory Commission In light of the current circumstances, and in continuation of the directions to import coal for blending, using the powers under Section 63 of the Electricity Act, the ministry has directed that the generating companies that provide power will receive tariff-based bidding, and state governments discoms will calculate the compensation due to blending with imported coal.

The mechanism for billing and payment of these plants will be as per the PPA power purchase agreement. It stated that to enable companies gencos importing coal with adequate cash flow, provisional billing will be done on a weekly basis.

A minimum of 15 per cent of the provisional bill must be made by the procurers within a week of receipt of the bill, it stated.

As per the PPA, this provisional billing and payment will be subject to final billing and payment on a monthly basis.

In case of default of 15 per cent of the weekly provisional bill, the genco will be free to sell 15 per cent power via the power exchange.

The gencos will ensure blending with imported coal and maintain coal stock as per the directions issued by the ministry from time to time, it stated.

The direction is for coal imported for blending by domestic coal-based power plants up to March 31, 2023.

The ministry has issued directions to gencos to use the powers under Section 11 of the Act in light of current circumstances due to a sharp increase in electricity demand.

With soaring power demand and power shortage in some areas, the generation needs to be maximised.

The ministry said that there is still a gap between the demand for domestic coal and supply of coal because of the dry-fuel stocks at the generating stations are depleting at a worrisome rate.

If the orders for import of coal are not placed by the government by May 31, 2022 and the imported coal does not arrive at power plants by June 15, 2022, the defaulter gencos would have to import coal to the extent of 15 per cent in the remaining period up to October 31, 2022, taking note of the fact that blending of imported coal to the extent of 10 per cent is not as stipulated by the ministry.

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