Power regulator CERC says bidding will be tariff-based from January 2011

                   NTPC, lobbying for extending cost-plus regime, gets a shock

The Central Electricity Regulatory Commission (CERC) has firmly ruled in favour of shifting to a tariff-based competitive bidding regime for future power projects from January 2011, citing better price discovery and lower retail tariffs through the bidding route.

This comes as a blow to NTPC Ltd, the country's largest power generator, which has been lobbying hard for an amendment of 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 firms, 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, has 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-sized multipurpose storage hydro projects and peaking supply stations.

The Clause 5.1 of the Tariff Policy provides that from January 2011 onwards, all future procurement of power by distribution utilities should be done through tariff-based competitive bidding.

The Commission said it carried out an internal preliminary exercise for comparing the tariffs obtained through competitive route and those being allowed under the current cost-plus tariff structure, which indicated that the tariffs obtained through bidding were lower than the levelised tariff under the current cost-plus regime.

NTPC, which has been a slow starter in bagging projects offered through competitive bidding, had maintained that it was at a disadvantage compared to its private sector competitors due to the need to disclose its project tariff details and problems in quick decision-making.

The CERC has suggested that the Centre should “review the various guidelines and other frameworks applicable to PSUs with a view to give them adequate autonomy and decision taking authority so as to enable them effectively participate in tariff-based competitive bidding”.