In pursuance of Clause 5 6 vi of Ministry of Power MOP Notification on Guidelines for Determination of Tariff by Bidding Process for Procurement

## Report on Central Electricity Regulatory Commission (CERC) Notification Regarding Escalation Rates for Power Procurement **1. Executive Summary:** This report analyzes a notification issued by the Central Electricity Regulatory Commission (CERC) on August 26, 2022, regarding the monthly escalation rates applicable for August 2022, for power procurement by Distribution Licensees. This notification amends existing guidelines related to long-term power procurement from thermal power stations. The core purpose of the amendment, as inferred from the text, is to update and specify the escalation rates for imported coal, its transportation, and inland handling, for the purpose of payment under existing Power Purchase Agreements (PPAs). Key findings indicate that the amendment provides specific figures for these escalation rates for the month of August 2022. **2. Introduction:** The purpose of this report is to provide an informative overview of the CERC notification dated August 26, 2022, based solely on the information contained within the provided text. The report analyzes the amendment's objectives, key provisions, affected stakeholders, and potential impacts on the power sector. **3. Policy Overview:** * **Amendment:** This notification amends existing guidelines related to long-term power procurement from thermal power stations established on a Design, Build, Finance, Own and Operate (DBFOO) basis and sourcing fuel as provided under Model Bidding Documents, including coal allocation under the SHAKTI scheme. * **Core Objective(s):** The core objective of this amendment is to notify the specific monthly escalation rates for imported coal, transportation of imported coal, and inland handling of imported coal, applicable for the month of August 2022, for the purpose of payments under existing PPAs. **4. Background and Rationale:** * **Reason for Amendment:** The amendment likely addresses the need to update and specify the escalation rates for various components related to imported coal, which are key factors in determining the cost of power generation. These rates are subject to change based on market conditions and other factors, hence the need for periodic updates to ensure accurate payment calculations under PPAs. The mention of existing guidelines and SHAKTI scheme coal allocation suggests a mechanism is already in place and this notification provides necessary monthly updates to key economic variables. **5. Key Provisions / Changes:** This notification introduces specific changes to the calculation of payments related to power procurement from thermal power stations. It provides *specific* monthly escalation rates applicable for August 2022. The following are the key changes: * **Specific Part of Original Policy Being Changed:** The notification implements the provisions of Clause 5.6 vi of the Ministry of Power (MOP) Notification on Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by Distribution Licensees dated 19.01.2005, as amended. It also follows up on MOP communication dated 13.04.2022 and MOP Resolution dated 11.07.2022 on amendment to the Guidelines for long term Procurement of Electricity. * **New Rule/Provision:** The CERC notifies the following monthly escalation rates for August 2022: * Escalation rate for imported coal: 0.91 * Escalation rate for transportation of imported coal: 10.06 * Escalation rate for inland handling of imported coal: 1.50 * **Difference/Effect of the Change:** This change provides specific numerical values for the escalation rates, ensuring that payments made to power generators accurately reflect the prevailing costs associated with imported coal. This reduces ambiguity and potential disputes in payment calculations. **6. Target Audience and Stakeholders:** Based on the text, the primary target audience and stakeholders directly affected by this amendment are: * Distribution Licensees: These entities are responsible for procuring power and making payments to power generators based on the established PPAs. * Thermal Power Stations: Especially those relying on imported coal and operating under DBFOO basis and sourcing fuel under the SHAKTI scheme. These plants receive payments based on the notified escalation rates. * Central Electricity Regulatory Commission (CERC): As the issuing authority, CERC is responsible for overseeing the implementation and compliance with the amended guidelines. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Central Electricity Regulatory Commission (CERC) is the primary responsible body for issuing and overseeing the implementation of this notification. Distribution licensees are responsible for incorporating these escalation rates into their payment calculations. * **Timelines or Procedures:** The notification specifies that these escalation rates are applicable for the month of August 2022. It can be inferred that similar notifications will be issued periodically to update these rates based on market conditions. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of these specific changes is to: * Ensure accurate and timely payments to power generators based on the prevailing costs of imported coal and its associated transportation and handling. * Reduce ambiguity and potential disputes in payment calculations, promoting transparency and efficiency in the power procurement process. * Provide clarity to Distribution Licensees in managing their power procurement costs and ensuring a stable and reliable power supply. **9. Conclusion:** The CERC notification dated August 26, 2022, is a critical amendment to existing guidelines for long-term power procurement. It provides specific monthly escalation rates for imported coal and its associated costs, ensuring accurate payments and promoting transparency in the power sector. While limited in scope to specific economic variables and a single month, it illustrates the ongoing process of refining the rules governing power procurement. Understanding the details of this amendment is essential for stakeholders involved in power generation, distribution, and regulation.

Key Entities Referenced