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January 26, 2022
Charis Journal

Power Ministry issues draft rules for change in law to allow quick compensation to power plants

power plant

NEW DELHI: The Union Power Ministry proposes to bring new rules to allow quick compensation to power plants for additional costs arising due to change in law events or modifications in consents or licenses associated with the projects.

The move is aimed at avoiding long drawn regulatory procedures for incontestable cases, adding to stress in the already troubled sector. It also aims to cut down frivolous litigations besides multiple cases over similar claims to enable regulatory commissions focus on genuine disputes.

The rules also propose that renewable power plants, if served curtailment notices by discoms 24 hours in advance, shall mandatorily sell that unscheduled electricity in power exchanges.

An industry official, however, said coercing renewable plants to sell at power exchange is a bad approach there can be bilateral trade opportunities for higher price to bridge the curtailment compensation loss.

Renewable power plants already enjoy must-run status as per the Indian Electricity Grid Code (IEGC) and are exempted from curtailment. In the event of curtailment for technical reasons, they are eligible for compensation as per their power purchase agreements (PPA).

As per the Draft Electricity (Change in Law, Must-run status and Other matters) Rules 2020, on occurrence of a change in law event, the monthly tariff shall be adjusted to restore the power plant to the same economic position as if such change had not happened.

The draft recognises change in law events as – enactment of new legislation or modification of existing one; change in interpretation of law by any court; or change in consents obtained for or licenses available to the project, which results in change in cost or revenue of power generation or transmission plants.

“The pass through will happen in an expeditious manner within a maximum of 30 days of the change in law event,” said the draft. The draft has been circulated for comments after which it is proposed to be notified in official gazette.

It said the bidding document shall lay the formula according to which pass through will be calculated and recovered. In case, it has not been included, the appropriate government may prescribe a formula by notification. The pass through shall be on per unit of electricity basis and shall be recovered along with tariff and shall be a part of tariff, it said.

The draft also proposes to let trading licensees charge a weighted average tariff of all the renewable energy bids.

For agreements signed between trading licensee and discoms before these rules for sale of renewable energy under competitive bidding route, the tariff shall be the weighted average tariff of all the suppliers in same bidding process. The appropriate commission shall adopt such weighted average tariff.

It also said that trading licensee shall be allowed to retain only the trading margin as specified in agreements or regulations or as specified by commissions.

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