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CERC proposes “deterrent charges” for low coal stocks at power plants

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The Central Electricity Regulatory Commission has mooted the proposal in view of lower than the specified coal quantities at thermal power plants

As coal reserves at thermal power plants (TPPs) in the country slipped to 7.6 days on Friday, the Central Electricity Regulatory Commission (CERC) has proposed imposing a deterrent charge on power generating units as a disincentive for maintaining low stocks.

The regulator on Friday floated a paper on methodology for computing the ‘Deterrent Charges’ and gave time till May 25 for stakeholders to share their suggestions.

Supporting the CERC’s proposal, a senior government official said that amid rising power demand and stretched coal supplies from domestic sources, the Centre has already asked States to import coal at 10 per cent of their requirement for blending. However, many are reluctant to import as prices of the commodity are at record high globally.

“Such a regulation may force these State electricity boards and their gencos to make arrangements for coal for their plants. The common man should not suffer,” he added.

The regulator pointed out that stocks at many coal-based TPPs in recent months were lower than the quantities set by the Central Electricity Authority (CEA). This led to lower availability of coal by gencos, which in turn forced States to purchase power from alternate sources at higher rates.

“Failure of the generating stations to maintain coal stock as per norms thus gets transferred to the consumers in the form of higher cost of procurement of power from alternate sources,” it added.

The issue was also flagged by the Power Ministry with the regulator through a letter on February 22, 2022. Ministry also issued directions to the CERC to make suitable amendments in the relevant regulations to provide disincentives for maintaining lower cost stock by TPPs.

Methodology

CERC said that to recover annual fixed charges (AFCs), it is the gencos’ obligation to arrange sufficient fuel for its generating stations as per norms and maintain availability of the plant according to the relevant regulations.

The AFC of a genco includes return on equity; interest on loan capital; depreciation; interest on working capital; and operation and maintenance (O&M) expenses.

“Therefore, it is proposed that if coal-based generating stations fail to maintain coal stock as per the revised coal stocking norms as specified by the CEA, the AFC of such generating stations is reduced,” the regulator said.

Accordingly, the CERC has proposed adding the computing methodology provision after Regulation 42 (7) of the 2019 Tariff Regulations.

Coal stocking norms

CEA revised the coal stocking norms for TPPs with effect from December 6, 2021. Accordingly, pithead TPPs are required to maintain coal stock in the range of 12-17 days, depending on the month of the year, against the prevailing coal stock norm of 15 days.

Similarly, non-pithead plants are required to maintain coal stock in the range of 20-26 days compared to the prevailing coal stock norms of 20-30 days.

The authority too has suggested disincentives for TPPs if the availability of any coal-based power plant is lower than the normative availability due to lower stock of coal maintained by the power plant as compared to the specified norms.

Coal stocks

On May 13, the coal stocks at domestic coal-based (DCB) power plants, with an installed capacity of 183 gigawatts (GW), had coal reserves for just 7.6 days.

The reserves at imported coal based (ICB) plants, with 17,255 megawatts (MW) installed capacity, is lower at 6.4 days. Besides, there are 84 DCBs plants with critical stocks, while 11 ICB plants have stocks less than 25 per cent of their normative requirement.

Of the total 173 TPPs tracked by the National Power Portal, the actual stocks stood at 31 per cent of their normative requirement. For the 155 non-pithead power plants with an installed capacity of 164 GW, the stocks stood at 24 per cent. In the case of 18 pithead plants with an installed capacity of 39,222 MW, the actual stocks were at 77 per cent of their normative stocks.

Published on May 15, 2022

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