With the uncertainty over assured coal supply from domestic sources rising, private power companies have started pushing for changes in existing tariff bidding guidelines so that they can pass on any increase in fuel costs to electricity buyers. Currently, developers cannot pass on any increase in coal prices to electricity buyers in such projects.
The Association of Power Producers (APP), a representative body of private power producers, on Thursday made a presentation in the meeting of Forum of Regulators (FoR) to push for these changes. FoR comprises all state and central electricity commissions. Chairperson of the Central Electricity Regulatory Commission (CERC) is also the chairman of FoR.
The role of FoR is to evolve a consensus on possible changes in the regulatory framework and also to monitor implementation of the CERC regulations. “Pending availability of an adequate domestic coal supply from Coal India Ltd (CIL), the impact of sourcing coal from alternative means on the power pricing should be passed on as the developer has no control over such a situation,” APP said in its presentation made before FoR.
Under the fuel supply agreements (FSAs) signed with private power project developers, CIL has a contractual obligation to meet 50% of the coal requirement of the plant, which can also include imported supplies.
The APP has also pushed for changes in the bidding guidelines to allow developers of power plants based on imported coal to pass on any abnormal increase in fuel costs that might arise due to change in law or political force majeure in the coal exporting country.
“For the projects based on imported coal, the impact of change in law in the country of source coal mine and abnormal changes in the coal prices (which cannot be prudently predicted) should be passed on,” the association has said.
Significantly, Indonesia has recently moved over to a new coal-pricing methodology based on international index. About 40 million tonnes a year of coal is being imported by the Indian power companies from the South-East Asian country.
Following the regulatory change, coal producers are required to sell their coal at prices notified by the Indonesian government. Earlier, coal producers had the freedom to fix their own prices.
All existing coal supply agreements with the Indonesian coal mining companies will have to be modified to comply with the new coal pricing regulations before September 23. As a result of the new pricing formula, the price of Indonesian coal will go up by $30 a tonne and lead to a R0.70 per unit increase in the cost of electricity generated, according to industry experts.
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