Maharashtra may re-join UDAY for financial benefits; new Cabinet decision likely soon
The Maharashtra government could modify its Cabinet decision to join power distribution companies’ revival scheme UDAY only for operational benefits and may now include financial parameters also, power minister Piyush Goyal today said. Goyal said the state has now shown interested in the financial benefits of the UDAY scheme and could soon pass another Cabinet decision to re-join the discom revival scheme. The minister said while that state did not have any major financial losses, it could still get benefit to the tune of Rs 1500 crore it joins UDAY for financial efficiencies. The UDAY scheme envisages the respective states of loss making dicoms taking over 75 per cent of the SEB debts of Rs 4.3 trillion into their books but will not be calculated as their fiscal deficit. This involves taking over 50 per cent of the short-term liabilities of their respective discoms in FY16 and remaining 25 per cent in FY17. The scheme was launched on November 20 last year to help loss-making power distribution companies in the states to come out of a debt trap of Rs 4.3 lakh crore by March 2016. So far, 19 states have given their approval to join the scheme and 10 states, namely, Rajasthan, Uttar Pradesh, Chattisgarh, Jharkhand, Punjab, Bihar, Haryana, Gujarat, Uttarakhand and Jammu & Kashmir have signed MoUs for the same. Noel Acciari Womens Jersey
Better transmission, generation cuts power cost for South on IEX
With the increased integration of the southern power grid with other regional grids, the cost of electricity on the IEX has hit a low, auguring well for industry and power distribution companies. Also, the gap in price between the southern grid — where the rates have been typically higher — and the other regions has narrowed. On the exchange earlier this month, the prices in the southern grid matched those in other grids. For instance, in the first week of July the Average Clearing Price (ACP) on the IEX for the southern region was ?2.17 a kWh against the Market Clearing Price (MCP) of ?2.14 for the other regions. Between January and July 2016, the ACP was ?2.91 against an MCP of ?2.44. The gap was much higher last year. During January to July 2015, the MCP was as low as ?2.72 a kWh. But the ACP was much higher in the southern region at ?3.90 for Andhra Pradesh, Telangana and Karnataka, and ?5.11 for Tamil Nadu and Kerala. Now, even within the South, the price differential is no longer relevant as the region is well integrated and prices are uniform, sources familiar with the development said. According to industry sources, apart from the improved transmission infrastructure, the lifting of constraints on open access by Tamil Nadu and Karnataka has led to increased availability of power. Producers in both States can now sell outside the State. Though the corridor availability is still restricted, it is better than last year. In May 2016, the West and East to South corridors were available for almost 50 per cent of the time for the exchange market; in June, the corridor availability increased to about 85 per cent, sources said. Open access consumers in the southern States can save up to 30 per cent of their power procurement cost on the IEX platform. Even distribution companies can opt for sourcing power from IEX, rather than go in for short-term deals as prices are at such lows, sources said. T. J. Oshie USA Jersey
UDAY scheme: Jharkhand SEB backslides on dues
Jharkhand’s electricity board had to clear most of its dues to Damodar Valley Corporation (DVC) before it got its loans restructured under the UDAY scheme, but has since accumulated fresh dues to the utility, putting a question mark on the scheme’s ability to salvage the debt-ridden entity. DVC has already started regulating supplies to the state electricity board DVC chairman and MD Andrew WK Langstieh said the SEB had, prior to UDAY, owed about R7,000 crore to DVC, a joint venture of the central, West Bengal and Jharkhand governments. In order to sign up for the UDAY scheme, the SEB had paid the utility Rs 4,770 crore in September 2015, but has since piled up fresh dues of Rs 600 crore. Jammu and Kashmir was the only state other than Jharkhand that had to clear dues (Rs 2,140 crore) to central power utilities before climbing aboard the UDAY bandwagon. So far, 10 states, including those with heavily indebted discoms like Uttar Pradesh, Haryana and Rajasthan, have signed the UDAY MoUs, under which the states, helped by a relaxation of the fiscal road map compliance by the Centre, were to issue bonds to clear half of their respective discom’s debt in 2015-16 and an additional 25% in the current fiscal. To help other states — notably Tamil Nadu — that could not join the scheme due to regulatory issues, the Cabinet last month extended the deadline for joining the debt recast scheme to end-March, 2017. The Jharkhand SEB was unbundled into four different companies as part of the UDAY preparedness in September last year. However, Jharkhand Bijli Vitaran Nigam, now the nodal agency to buy power from DVC, has piled up Rs 600 crore dues in 10 months of operation, a DVC official said on condition of anonymity. Although Jharkhand chief secretary Raj Bala Verma is supposed to hold discussions with the DVC CMD on resuming regular supplies, DVC has already taken a stand that power would be supplied only against payments made. Langstieh said that Jharkhand was making part payment of its bill every month but according to a DVC official even that mode of payment has already started hitting the cash flow of the company. Jharkhand accounts for more than 20% of DVC’s total revenue from power sales and if the latter had continued unregulated supplies, the mismatch between the net sales figure and the actual realisation would have grown. DVC has already offered to sell a 74% stake in the 2×600 MW Raghunathpur thermal power project to Neyveli Lignite because of its balance sheet problems. While Langstieh says that the value of the stake would be determined by the Central Electricity Authority factoring in the tariff realised, another top official felt that DVC might have to sell the stake at a loss. The Raghunathpur plant had cost DVC Rs 8,000 crore at a 72:28 debt equity ratio. But with no power purchase agreement and inadequate return on investment, it is becoming a burden for the firm to carry on with the fixed costs. DVC last year approached the Reserve Bank of India for a Rs 30,000-crore debt restructuring since its debt servicing capacity had come under severe pressure with low returns on investment. Out of its 6,300 MW total capacity, 1,500 MW is lying idle. Bobby Hebert Jersey
NPCIL plans to generate 13,000 MWe power by 2023
The Nuclear Power Corporation of India Limited, which generates 5,780 MWe power through its 21 nuclear power plants, has planned to step up production to 13,000 MWe by 2023, Chairman and Managing Director, NPCIL, S.K. Sharma, has said. Speaking to reporters at Kudankulam after the second 1,000-MWe VVER reactor of Kudankulam Nuclear Power Project attained criticality on Sunday night, Mr. Sharma said the NPCIL, which had a humble beginning, operated 21 nuclear power plants across the country. The KKNPP’s second reactor, on attaining criticality, had become NPCIL’s 22nd reactor, which would add another 1,000 MWe on reaching maximum generation capacity. Four more reactors were under construction — Rajasthan Atomic Power Project reactors 7 and 8 and Kakrapar Atomic Power Project reactors 3 and 4 and the KKNPP 3 and 4 would be completed within next 75 months. Mr. Sharma said site excavation for reactors 3 and 4 of KKNPP had been completed and the NPCIL was scouting for contractors with excellent track record for the construction of Rs. 39,000 crore-worth reactors. “The ‘first pouring of concrete’ for these two reactors will happen in April 2017. While the construction of the 3rd reactor will be completed within 69 months from the ‘first pouring of concrete’, the fourth reactor may consume another six months to become operational,” he informed. Rs. 3,000 cr. revenue He said KKNPP’s first reactor had so far generated 1,006 crore units and ensured a revenue of over Rs. 3,000 crore. “While power from the first reactor is being sold at the rate of Rs. 4 per unit, it will be Rs. 6.30 per unit when the third and fourth reactors become operational,” Mr. Sharma said. Site Director, KKNPP, R.S. Sundar said the second reactor would reach 240 MWe stage before 30 days and the quantum of power generation would be increased in several stages during which mandatory tests would be conducted. “The second reactor will reach its maximum generation capacity in 90 days from now,” Mr. Sundar said. Mike Singletary Jersey
Power tariff hike: FSA of Rs 1.40 per unit likely to be imposed in Haryana
Although, Haryana Discoms have proposed no direct tariff hike this year but consumers will have to pay additional fuel supply adjustment (FSA) charges of about Rs. 1.40 per unit on account of previous years pending dues and recent judgment of APTEL. Haryana Discoms have revised their annual revenue requirement (ARR) petitions after taking into account the implementation of UDAY scheme, which leads to changes in the projections of interest and finance charges for the Discoms, which had an impact on the revenue requirement of the Discoms. First tranche of UDAY bonds against 50 per cent of the debt of Discoms as on September 3, 2015 amounting to Rs 17,300 crore has been issued and the second tranche will be taken over by September end, towards 25 per cent of the debt amounting to Rs 8,650 crore. As per ARR, the total revised cash gap for Haryana Discoms for the year 2016-17 comes out to be Rs 4,106.87 crore. The Discoms have proposed no tariff increase and have submitted that cash gap is proposed to be funded through the operational funding requirements (OFR) allowed under UDAY scheme. However the cumulative gap is estimated at Rs 7,695 crore. APTEL, in its judgment dated 7th April has allowed certain generators like Adani Power, GMR Kamalganga, Sasan Power Ltd and CGPL recoveries on account of force majeure / change in law / date of commercial operation date (COD) etc. The above is expected to have an implication of Rs 1,240.90 crore on account of recovery of arrears pertaining to previous years and needs to be recovered therefore; the total net unrecovered is Rs 1,958.26 (1240.90+717.219) crore. The Discoms propose to recover this amount by the end of financial year at the rate of Rs 1.06 to Rs 1.27 per unit and government would give a relief of 25 paise per unit on this to the consumers. In addition to the above, it is proposed that the fuel supply arrears (FSA) of last two years and the current monthly impact of APTEL’s judgment will be met through the concurrent FSA @40 paise. The net revenue requirement has been projected as Rs 31,156 crore. The major component of this is power purchase. The total power purchase cost has been increased from 21,787 crore to 24,908 crore. The operation and maintenance expenses include employee’s salaries, terminal liability and administrative expenses. Even the loan liabilities of 50 per cent taken over by the state interest component are 2,893 crore. The total revenue receipt has been assessed as Rs 18,637 crore from sale of power at current rates, leaving a gap of Rs 12,518 crore. The government subsidy for cheap power will be Rs 6,800 crore. The net gap remains Rs 5,718 crore. The fuel supply adjustment charges at current rates will be Rs 3,205 crore. The provision of liability under APTEL judgment has been taken as Rs 1,291 crore, thus creating a net gap of Rs 4,106 crore which the Discoms have proposed to be funded through OFR. The proposed loss reduction from 33 per cent plus to 25 per cent plus will be a major challenge before the Discoms, as net power available for sale has been worked out on this assumption. Nicklas Backstrom Jersey
‘Cheaper electricity is not all that easy’
Pramod Deo, former Chairperson, Central Electricity Regulatory Commission (CERC) is direct and forceful. He minces no words to put things in perspective. Business Line recently caught up with Deo on the sidelines of a training programme organised by the IPPAI Regulatory & Policy Research Institute in collaboration with the India Smart Grid Forum. He shared his views on a number of issues. Edited excerpts from the interview. The success of UDAY (Ujwal DISCOM Assurance Yojana) hinges on States undertaking regular tariff hikes, wherever required. But, according to ICRA, the average tariff hike for 2016-17 has been only 5 per cent. Does this suggest that we are off the UDAY track? In 2016-17, Tamil Nadu, Kerala and West Bengal went to the polls. So, you could not have expected them to revise power tariffs. What matters is whether they do it next year. To expect that States would hike tariffs, particularly when they have such an event (elections), is like asking somebody to commit political suicide. For other States, getting their balance sheets in order and following yearly tariff hikes to reflect the full cost of running their business is important. The discoms have to also improve their efficiency, for which they will require network strengthening, which will mean incurring capital expenditure. This will finally add to the tariff in later years because the fixed cost gets built into your tariff. So, to say that tariffs will go down is difficult, unless you are talking only about commercial losses, which can be controlled and do not require any capital expenditure. But, the discoms are government-owned entities and have certain limitations. So, increasing the efficiency dramatically becomes difficult. The employees who are hand in glove with big consumers in pilferage have their own political links. What do you think of UDAY? UDAY gives the discoms an opportunity to clean up their balance sheets. There is talk that people will be getting cheaper electricity. But, that is not easy and it will be a long process because the coal linkages of power plants have to be reassigned. Only then will it be possible. Seventy to eighty per cent of the cost of power comes from fuel cost. What you need to see is the price line of all commodities and how power tariffs have moved relative to that. CRISIL had done a study a few years ago that showed that the price index of power tariffs is actually lagging behind the general price index. Also, certain performance improvement goals have been given to the state discoms. It is now for the State government to see that these goals, even if not fully achieved, are not lost sight of. Tariff hikes are a politically sensitive subject. Do the State Electricity Regulatory Commissions (SERCs) really have the power to take tariff decisions independent of political influence, if they so want to? SERCs are supposed to be independent. But, a lot also depends on how active consumer organisations are. A case will always be made out by the discoms (when they file a tariff petition with the SERC) on how justified their demand for a tariff hike is. But, it has to be critically examined and the consumer organisations can question this. Maharashtra, for instance, has very active and knowledgeable consumer organisations. But many States do not. The tariff petition filed by the discom must undergo proper technical scrutiny. Consumer organisations can play an important role here. Under the law, every regulatory commission has to appoint designated consumer representatives for their respective States. But, training these consumer bodies is a big challenge. So, the discoms have been asking for tariff hikes but the SERCs haven’t been approving them? The discoms make inflated demands knowing that these will be slashed by the SERCs. It should not be like that, it must be based on certain objective principles. The SERCs are under political pressure to not propose tariff increase for certain categories of consumers, such as agriculture, public drinking water schemes. If the State government does not give upfront subsidy committed by it, the regulator should go ahead with the proposed higher tariff. So, the SERCs work out the cost of power and the discoms are allowed to recover it either through tariff or subsidy? Normally, the regulation should be such that the SERC should not have to go to the government to check on whether the latter wants to give subsidy or not. The SERC should declare the tariff and then the government should decide what it wants to do (allow hiked tariffs or provide some subsidy in lieu of tariff hike). But, many States have regulations where the SERCs have to make a reference to the State government on this issue. That gives the government an opportunity to pressurise the regulatory commission. In the Tata Power and the Adani Power compensatory tariff case, the CERC and the Appellate Tribunal for Electricity (APTEL) came out with completely different orders. Doesn’t this undermine their credibility? The regulators come out with speaking orders, that is they have to give the reason for their decision. Now, in the Tata-Adani case, APTEL accepted the plea of ‘force majeure’, whereas CERC’s logic was that there is no force majeure but there is a case for ‘mutually agreed compensatory tariff”. The argument given by APTEL is that nobody could have foreseen such upheaval in Indonesian coal prices (which affected the companies’ cost of power production). But APTEL rejected CERC’s power to grant compensatory tariff. Now, whether the arguments given by CERC or APTEL are correct or not shall only be decided by the Supreme Court. Actually, this should not reduce their credibility. Credibility gets reduced if your order is absurd. What is important is what logic has been used and whether that is plausible. There is a common thread in both the judgements — you cannot run a power plant making monthly losses. The reasons on the basis of which you are compensated can be different. Jason Sanders Jersey
Is India really power surplus?
According to a recent report by the Central Electricity Authority, the country is expected to become ‘power surplus’ in 2016-17. Data too show that the all-India ‘power deficit’ has been easing. From 8.7 per cent in 2012-13, the shortfall was down to 2.1 per cent in 2015-16. While this is good news, it needs to be taken with a pinch of salt. Powerless For, the numbers show the extent to which power supply falls short of the demand by those connected to the grid. ‘Connected’ is the word to watch. With nearly six crore rural households, comprising a third of rural households, not having an electricity connection, the reported numbers under-estimate the country’s real demand for electricity. Many urban households, too, have no electricity connection. Also, the supply of electricity to farmers (which is subsidised or free) is limited to few hours every day. It is these limited hours of supply that are taken into account while calculating the power requirement of agricultural customers to arrive at the overall deficit or surplus. “The deficit is only capturing the unmet demand of the people connected to the grid. However, people who are yet to be connected and those with poor supply quality are not being taken into account,” says Ashwini Chitnis, Senior Research Associate, Prayas (Energy Group), a not-for-profit organisation working in the energy sector. “In an absolute sense, by which I mean the availability of 24×7 power supply to all, we still have a deficit,” says VP Raja, former Chairman, Maharashtra Electricity Regulatory Commission. The true picture is captured by India’s per capita electricity consumption: at 957 kWh (kilowatt hour) in 2013-14, it was less than one-third the world average of 3,104 kWh in 2013. Is there an improvement? The narrowing deficit does point to improving supplies and, therefore, reduced load-shedding for those with electricity connections. On the supply side, additional generation capacity, better availability of domestic coal and stronger transmission network have bumped up power availability. On the other hand, industrial slowdown and the strained finances of Discoms have curtailed demand. It’s still dark But for States where access to electricity is poor, the declining deficit that the Centre is harping about does not mean much. Take, for instance, Odisha, Mizoram and Tripura, which are expected to be power surplus in 2016-17 going by CEA data. But as of May 2016, the percentage of un-electrified rural households varied 22 and 52 per cent, with Odisha at the top end. With these States being largely rural, poor electricity access for rural households implies poor access for households, in general. “Since the potential electricity demand of these people does not get registered on the system, the deficit number is artificially low,” says Balawant Joshi, Founding Director, Idam Infrastructure Advisory, a power sector consultancy firm. It’s even worse for the significantly rural UP, Bihar and Jharkhand. As many as 87 per cent of rural households in Bihar, 70 per cent in UP and 63 per cent in Jharkhand have no electricity connection. Bright spots There are, however, some States such as Gujarat and Maharashtra where the access to power is almost universal and the deficit, according to the CEA, is also close to zero. Tamil Nadu is yet another State with almost universal access and a power deficit of 0.7 per cent in 2015-16. According to Joshi, the commissioning of the Tuticorin thermal power plant and the Kudankulam nuclear power plant in the State has made a difference. Tommylee Lewis Authentic Jersey
Odisha:Ball for Electricity Duty Act tweak starts rolling
The State Government is all set to promulgate an ordinance to amend the Odisha Electricity (Duty) Act, 1961 to bring clarity in certain provisions and revise the duty structure for certain category of consumers. The Energy Department has sent a Cabinet memorandum to the State Government along with a draft of the ordinance for approval. Justifying the need for immediate amendments in the Act, the department said the State Government is incurring huge losses due to the ceiling on electricity duty levied on ad valorem basis (at percentage of energy charges). As per Odisha Electricity Duty (OED) Act, there is a ceiling on electricity duty. As a result, the State Government is losing out on revenue front. “As electricity duty (ED) is now collected on ad valorem basis, the ED for some of the industrial consumers is limited to 40 paise per unit though it comes to around 63 paise per unit,” said the Cabinet memorandum. Stating that the Odisha Electricity Regulatory Commission is amending the power tariff in each financial year which automatically enhances the electricity duty, the memorandum said collection of ED is restricted to 40 paise per unit despite the fact that tax should be higher in view of the enhanced tariff. Besides, the proposed amendment in the OED Act will enable the Energy Department to collect arrear ED which has been estimated to the tune of `2.5 crore. Under the existing Act, there is no provision for levying ED on electricity consumed through open access system by consumers of the State. The tax loss on this account is estimated at `3.33 crore every month. This could be saved after the proposed amendment, sources in the department said. As the existing provisions for recovery of ED through certificate case is very cumbersome, the department proposed a special mode of recovery in line with Section 51 of the Value Added Tax Act, 2004. “It is necessary to take immediate steps for bringing such amendments as the Assembly is not in session,” the memorandum said. Earlier, the State Cabinet had approved the memorandum for amendment of OED Act on September 29, 2015 and March 11, 2016. Accordingly, an amendment Bill was placed in the Assembly during the Budget session. But this could not be passed as the House was prorogued. Chief Minister Naveen Patnaik has also given his consent to bring this proposal to the Cabinet. Tavon Young Womens Jersey
Defaulter firms may be barred from bidding for power generation and transmission projects
Companies that have defaulted in setting up any government infrastructure project are likely to be barred from bidding for power sector generation and transmission projects, a senior government official said. The proposal has been incorporated in the bid documents for ultra mega power projects (UMPPs) that are likely to be taken up for discussion by the Union Cabinet soon. It is also likely to be replicated in the new bidding format for power transmission projects, the official said. The clause that bars companies from securing more than three UMPPs has been retained. An expert committee formed to review bid rules for power transmission projects has recommended insertion of the debarring clause to the power ministry. “There was no debarring clause in the existing bidding framework and standard bidding documents (SBD) with regard to the parties who have earlier defaulted,” says the recommendations of the committee, uploaded on the power ministry’s website. “The committee was of the view that parties who have earlier defaulted on similar projects must not be allowed to participate in further projects. It was also discussed that such a clause has been proposed in the new UMPP document, which has been developed after detailed deliberation and stakeholder consultations by the expert committee constituted for revision of the SBD for location specific power generation projects.” Of all the mega transmission projects for which tariff-based competitive bidding was held, only two projects could not be implemented. The project developer, Reliance Infrastructure, had claimed that regulatory clearances led to delay in implementing the projects secured in 2009. The debarring clause bars those companies from participating in the auction whose managerial personnel have been charge sheeted or convicted on matters relating to security and integrity of the country. Firms convicted by any court or against whom adverse orders have been passed by any regulatory authority casting doubt on their ability to undertake project are also likely to be restrained from bidding. The prospective bidders will have to submit details of all investigations pending against them and their key managerial people. The power ministry and state-run auctioneer MSTC will soon launch a bidding platform to shift from the present manual auction process to determine the lowest bidder for power transmission projects. Jimmy Garoppolo Womens Jersey
Reverse e-auction for power projects in the pipeline
The government plans to invite bids from private and public companies for interstate power transmission projects through reverse electronic auction on build-operate-own (BOO) basis for 35 years. The power ministry and state-run auctioneer MSTC will soon launch a bidding platform to shift from the present manual auction process to determine the lowest bidder. The transparent reverse auction process will enable bidders to revise their bids during the live bidding process, a government official said. The auction process will begin with bid process coordinators – the transmission wings of state-run Rural Electrification Corporation (REC) and Power Finance Corporation(PFC) – to float tenders. The coordinating agencies will call for technical bids and initial price offers, and later prune half of the technically qualified bidders, subject to a minimum of four, for the final reverse eauction. Companies that claim lowest levelised tariffs for electricity transmission will bag the projects. REC Transmission Projects has identified two big transmission projects – transmission system connecting phase-I power generation projects in Arunachal Pradesh and NER system Strengthening Scheme-II and V — for immediate auction on the proposed bidding platform. While a committee is likely to soon determine the estimated project cost of the two transmission projects, industry experts said the projects are expected to cost about.`700 crore each. The power ministry has approached the Union cabinet for separation of central transmission utility function related to transmission planning and grant of open access in the interstate transmission system from state-run Power Grid CorporationBSE 0.86 %. The proposal for separation of planning function from Power Grid was mooted amid rising concerns on conflict of interest and level playing field for private companies as the state-run company is involved in planning the transmission system and participates in the bidding as well. After the separation, an independent non-profit organisation will carry out the transmission planning and also organise bidding process for projects under tariffbased bidding. Eric Berry Womens Jersey