Power plants using imported coal to be compensated for supply in times of crisis: CERC

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The Central Electricity Regulatory Commission (CERC) has ordered that plants running on imported coal should be compensated for supplying electricity under emergency circumstances.

Power plants with a combined capacity of about 17 gigawatt (GW) are likely to be benefitted from the move.

The order, issued on the late evening of January 3, was based on a petition filed by Tata Power Company Limited (TPCL) which claimed that the tariff fixed by the ministry of power (MoP) was unjust in the context of the prevailing cost of imported coal.

Tata Power filed the petition soon after the ministry of power had on May 5 issued a directive to all imported coal-based thermal power plants to operate and generate power to their full capacity. Most of the imported-coal-based power plants in India, which are also privately owned, were shut back then due to high fuel prices across the world.

But the power ministry had issued the directive for such plants to open by invoking Section 11 of the Electricity Act, 2003, which is an emergency clause.

The CERC ordered that Tata Power and other such plants should be compensated not just to cover the variable cost, but also a “reasonable profit margin”.

“In order to ensure that the petitioner (Tata Power) maintains and operate its plant to generate power for supply to the procurers in compliance with the directions of the MoP under Section 11(1) of the Act, the Commission under Section 11(2) of the Act is required to compensate the petitioner to cover the cost plus a reasonable margin of profit,” said the order. Moneycontrol has reviewed the order.

The CERC also stated that the rates determined by the power ministry during that period were “interim” and are “subject to determination of adverse financial impact" by the Commission.

“Tata Power welcomes the decision of the CERC of allowing the imported coal based power plant full compensation of coal cost and operating parameters for supplying electricity under emergency supply under section 11 of the Electricity Act,” the company said in a statement.

“The order is also beneficial for the CGPL Mundra Plant as it can now recover the full cost incurred for supplying power in terms of the MoP Section 11 directions. We are thankful to the CERC for granting all prayers in our favour,” it said.