In pursuance of Clause 5 6 vi of Ministry of Power Notification on Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by Distribution Licensees, dated 19 01 2005, as amended from time to time, and in pursuance of paragrap

## 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 October 1, 2022. This notification establishes annual escalation rates for the purpose of payment for power procurement by distribution licensees. The rates apply to various fuel sources (domestic coal, domestic gas, imported coal, and imported gas) and transportation charges, and indexed energy and capacity charges based on a power purchase agreement entered into guidelines mentioned in the text. The notification appears to be issued in accordance with existing guidelines from the Ministry of Power. The key finding is the detailed schedule of specific escalation rates for a variety of energy sources and transportation distances, likely designed to adjust power procurement costs for inflation and market fluctuations. **2. Introduction:** This report provides an overview and analysis of the CERC notification dated October 1, 2022, concerning escalation rates for power procurement. The analysis is based solely on the content of the provided notification text. The purpose is to inform stakeholders about the specific escalation rates mandated by this notification and the broader context in which they operate. **3. Policy Overview:** This is *not* a new policy in its entirety. Based on the references in the text, this notification serves as an update or amendment to existing guidelines and resolutions from the Ministry of Power (specifically, a notification from 2005 and a resolution from 2020, both related to tariff determination and competitive bidding for power procurement). **Core Objective(s):** The core objective, as inferred from the text, is to establish transparent and predictable escalation rates for different components of power procurement costs. This is intended to facilitate fair pricing and efficient procurement processes for distribution licensees when acquiring power through competitive bidding, especially for "Round The Clock Power from Grid Connected Renewable Energy Power Projects, complemented with Power from Coal Based Thermal Power Projects." **4. Background and Rationale:** This is an update, the likely reason for this specific update is to adjust the escalation rates in line with current market conditions, inflation, and other economic factors. By providing updated rates for fuel (coal and gas, both domestic and imported) and transportation, the notification aims to ensure that power procurement agreements accurately reflect the current costs faced by distribution licensees. The regular updates to these rates allow the energy market to have accurate price adjustments. **5. Key Provisions / Changes:** This notification is *primarily an amendment* setting new values for existing categories rather than introducing fundamentally new categories. It details specific annual escalation rates for the period from 01.10.2022 to 31.03.2023. * **Specific Changes:** The core element is the setting of precise percentage-based escalation rates for: * Domestic coal (0.00) * Domestic gas (193.85) * Imported coal (107.99 for coal itself, 92.25 for transportation, 11.35 for inland handling) * Inland transportation of coal based on distance (ranges from 0.00 to 50.00) * Imported gas (39.43 for gas itself, 92.25 for transportation, 11.35 for inland handling) * Inflation rates for indexed capacity charge (11.35) and energy charge (23.27). * **Effect of Changes:** These changes directly impact the cost of power procurement for distribution licensees. Licensees will use these rates to adjust payments to power generators according to the terms of their Power Purchase Agreements (PPAs). The impact will vary depending on the fuel source and transportation distances involved in each PPA. **6. Target Audience and Stakeholders:** The primary target audience is **distribution licensees** responsible for procuring power. Other stakeholders directly affected include: * **Power Generating Companies:** Especially those selling power under PPAs that include escalation clauses based on the referenced guidelines. * **The Central Electricity Regulatory Commission (CERC):** Responsible for enforcing and overseeing the implementation of these rates. * **Ministry of Power:** The government body that sets the broader policy framework within which this notification operates. **7. Implementation Aspects (Inferred):** * **Responsible Agency:** The Central Electricity Regulatory Commission (CERC) is responsible for notifying and presumably overseeing the implementation of these escalation rates. * **Timelines:** The specified rates are applicable for the period from October 1, 2022, to March 31, 2023. * **Procedures:** The notification is to be applied during the payment process for power procured under PPAs that fall under the scope of the mentioned Ministry of Power guidelines. Distribution licensees must adjust their payments to power generators based on these rates. * **Amendment-Specific Implementation:** Distribution licensees will immediately need to update their payment calculations for PPAs to reflect the new escalation rates effective October 1, 2022. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome is to ensure that power procurement costs are accurately adjusted to reflect current market conditions and inflationary pressures. The high escalation rates of gas may lead to shifts in fuel sourcing, while the adjustments for indexed components will impact the overall cost of long-term power contracts. The changes are designed to maintain financial viability for both distribution licensees and power generators, enabling a stable energy supply. **9. Conclusion:** The CERC notification of October 1, 2022, provides crucial updates to escalation rates for power procurement. These rates will directly impact the financial arrangements between distribution licensees and power generators. Stakeholders, especially distribution licensees, must carefully review and implement these rates to ensure accurate and compliant power procurement practices. The regular updating of these rates demonstrates a commitment to adjusting power procurement costs in response to evolving market dynamics.

Key Entities Referenced