Discoms get more freedom in making power purchases

In what may prove to be a major step towards ensuring 24X7 power supply in the country, regulators have agreed to give a free hand to power distribution companies to meet their contingency electricity requirement and recover costs on a quarterly basis.

As of now, the quantum of power that discoms can buy from the free market is decided by the regulator on an annual basis. To buy extra power discoms are required to secure prior approval from the regulator. Moreover, recovery of extra costs incurred by the utilities in purchasing power takes time as discoms are required to submit audited accounts.

According to a decision taken in a recent meeting of electricity regulators, no prior regulatory approval will be needed for discoms to buy power from the short-term market to meet electricity shortages caused by factors beyond control of the utility like delay in commissioning of power projects or generation loss in existing plants due to fuel shortage or unplanned shutdown.

The discom can recover the incremental cost from the fourth month and within the ceiling of 10% of the variable component of tariff. In case of under-recovery or surplus, adjustment will have to be made in the next quarter.

“Discoms have to comply with performance standards on reliable and quality power supply,” Central Electricity Regulatory Commission chairman Pramod Deo, who is ex-officio chairperson of the Forum of Regulators (FOR), told FE.

The move is also expected to provide a major boost to the power trading market which has seen a sharp decline in prices in recent years because of the discoms’ tendency to resort to load shedding rather than buying power from the free market to meet electricity shortfalls.

“There will definitely be a positive impact on the power trading market,” said Charudatta Palekar, principal consultant, PWC.

Key power trading companies like PTC India, NTPC Vidyut Vyapar Nigam, Reliance Energy Trading and Tata Power Trading Company are expected to benefit from the regulatory move.

Under the new tariff dispensation, discoms can revise their tariffs on a quarterly basis to recover costs of extra power purchased by them from the open market without having to secure prior regulatory approval.