To cut tariff, government wants to link coal bids to lower charges in PPAs
NEW DELHI: In a move aimed at lowering consumer electricity tariffs, the government has proposed to bid coal from state-run Coal India to those power generators that agree to cut the supply charges quoted in their power purchase agreements (PPAs).
PPAs are legal documents signed between power producers and power distribution companies.
“The power ministry is consulting electricity regulators whether the proposal to open PPAs is within the purview of the Electricity Act,” a senior government official said.
About 10,000 MW of power plants have signed PPAs but do not have coal supplies.
Earlier, the government was considering to auction coal to power companies that agree to pay the highest. “The new proposal is in tune with the government’s aim to pass on benefits to consumers and lower electricity tariffs,” another government official said.
The policy also proposes that all future coal tie-ups by CIL will be allotted to state distribution companies that in turn will call tariff-based competitive bids from companies on the lines of ultra mega power projects.
In July last year, the Cabinet Committee on Economic Affairs had deferred decision on the policy for award of CIL contracts to power firms. The government has already finalised a policy for auction of Coal India contracts to unregulated sectors like steel and cement. According to the policy, private steel and cement firms will have to indicate their coal requirement and end-use projects to the coal ministry before bidding for supply from Coal India.
As per the mechanism, approved by the Cabinet Committee on Economic Affairs in February last year, separate bidding will be held for cement, iron & steel, aluminium and fertiliser plants. Coal India will invite bids from companies for supplying a fixed quantity of coal at a floor price. Once the bids are received, the state-run miner will increase the floor price till the demand and supply reach the same level.
However, the current fuel supply contracts of steel and cement companies with Coal India will not be prematurely discontinued.
The government will wait for the contracts to end and then auction them. Most fuel supply contracts of Coal India are set to lapse this year.
PPAs are legal documents signed between power producers and power distribution companies.
“The power ministry is consulting electricity regulators whether the proposal to open PPAs is within the purview of the Electricity Act,” a senior government official said.
About 10,000 MW of power plants have signed PPAs but do not have coal supplies.
Earlier, the government was considering to auction coal to power companies that agree to pay the highest. “The new proposal is in tune with the government’s aim to pass on benefits to consumers and lower electricity tariffs,” another government official said.
The policy also proposes that all future coal tie-ups by CIL will be allotted to state distribution companies that in turn will call tariff-based competitive bids from companies on the lines of ultra mega power projects.
In July last year, the Cabinet Committee on Economic Affairs had deferred decision on the policy for award of CIL contracts to power firms. The government has already finalised a policy for auction of Coal India contracts to unregulated sectors like steel and cement. According to the policy, private steel and cement firms will have to indicate their coal requirement and end-use projects to the coal ministry before bidding for supply from Coal India.
As per the mechanism, approved by the Cabinet Committee on Economic Affairs in February last year, separate bidding will be held for cement, iron & steel, aluminium and fertiliser plants. Coal India will invite bids from companies for supplying a fixed quantity of coal at a floor price. Once the bids are received, the state-run miner will increase the floor price till the demand and supply reach the same level.
However, the current fuel supply contracts of steel and cement companies with Coal India will not be prematurely discontinued.
The government will wait for the contracts to end and then auction them. Most fuel supply contracts of Coal India are set to lapse this year.
