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

## Report on Amendment to Guidelines for Long-Term Procurement of Electricity **1. Executive Summary:** This report analyzes a notification from the Central Electricity Regulatory Commission (CERC) concerning an amendment to the guidelines for the long-term procurement of electricity from thermal power stations. The amendment, specifically addressing the calculation of tariff by bidding process for power procurement by distribution licensees, introduces monthly escalation rates for imported coal, its transportation, and inland handling. These changes are intended to provide clarity and standardization in payment calculations for power purchase agreements. The key finding is the establishment of specific monthly escalation rates for May 2025 related to imported coal costs. **2. Introduction:** This report aims to provide stakeholders with an overview of the recent amendment to the guidelines for long-term procurement of electricity from thermal power stations, as published by the Central Electricity Regulatory Commission (CERC) on May 29, 2025. The analysis is based solely on the provided official notification text. **3. Policy Overview:** * **Original Policy Being Amended:** The amendment pertains to the "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 also refers to the "Guidelines for long term Procurement of Electricity from Thermal Power Stations set up on Design, Build, Finance, Own and Operate DBFOO basis and sourcing fuel as provided under Model Bidding Documents including allocation of coal under B I, BIII and BIV of SHAKTI Scheme for Harnessing and Allocating Koyala Coal Transparently in India Policy dated 6.03.2019." * **Core Objective(s):** The core objective of the original policies is to facilitate the procurement of power by distribution licensees through a bidding process, ensuring transparency and standardization in tariff determination. This specific amendment aims to refine the payment mechanisms by introducing specific escalation rates. **4. Background and Rationale:** The amendment appears to address the need for a more precise and responsive mechanism for adjusting tariffs based on fluctuating imported coal costs. The original guidelines likely required updating to reflect market realities and ensure fair compensation to power generators while protecting the interests of distribution licensees and, ultimately, consumers. The reference to the SHAKTI scheme suggests a connection to the government's efforts to streamline coal allocation and sourcing for power plants. The issue is that a more specific framework is needed to standardize the escalation calculations. **5. Key Provisions / Changes:** This amendment focuses specifically on the **monthly escalation rates** used for payment calculations in Power Purchase Agreements (PPAs) under the mentioned guidelines. * **Specific Part of Original Policy Being Changed:** The amendment alters the way escalation rates related to imported coal costs are determined and applied in PPA calculations. The text indicates it is tied to Clause 5.6 vi of the Ministry of Power's (MOP) 2005 notification and related amendments. * **New Rule/Provision:** The CERC has notified the following **monthly escalation rates applicable for May 2025** for the purpose of payment: * Escalation rate for imported coal: 2.16 * Escalation rate for transportation of imported coal: 3.00 * Escalation rate for inland handling of imported coal: 0.15 * **Difference/Effect of Change:** This amendment introduces specific, fixed monthly escalation rates for imported coal-related costs. Previously, these rates were likely subject to different calculation methods or lacked specific values in the guidelines, creating potential ambiguity and disputes. The new rates will bring more predictability to power purchase agreements. **6. Target Audience and Stakeholders:** Based on the text, the primary target audience and stakeholders include: * **Distribution Licensees:** Entities responsible for procuring power and distributing it to consumers. * **Thermal Power Stations:** Particularly those operating on a Design, Build, Finance, Own and Operate (DBFOO) basis and sourcing fuel, including imported coal. * **Power Generators:** Companies that generate electricity from thermal power plants. * **Ministry of Power (MOP):** The government ministry responsible for energy policy. * **Central Electricity Regulatory Commission (CERC):** The regulatory body responsible for overseeing the electricity sector. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Central Electricity Regulatory Commission (CERC) is the primary body responsible for implementing these changes, as evidenced by the notification. * **Timelines/Procedures:** The amendment specifies that the listed escalation rates are applicable for the month of May 2025. This suggests that the CERC will periodically announce updated escalation rates. No other specific procedures are outlined within the text itself. * **Implementation Aspects of Changes:** The changes will be implemented through the existing framework of Power Purchase Agreements (PPAs) between distribution licensees and power generators. The amendment provides clarity on how to calculate payments based on imported coal costs for May 2025. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of these specific changes is to: * **Reduce ambiguity:** Provide clear and readily available escalation rates for imported coal costs, minimizing disputes and ensuring more efficient payment processes under PPAs. * **Improve predictability:** Offer greater predictability in tariff calculations for both distribution licensees and power generators. * **Streamline Payment Processes:** Simplify the process of calculating payments for power procurement agreements, making it more efficient and transparent. **9. Conclusion:** The CERC's notification represents a specific update to the guidelines governing long-term power procurement. By introducing defined monthly escalation rates for imported coal-related costs, the amendment seeks to enhance clarity, predictability, and efficiency in payment calculations for power purchase agreements. This change is significant because it provides a standardized approach to addressing fluctuating fuel costs, impacting both distribution licensees and power generators. Further updates to these rates are expected in the future, requiring ongoing monitoring by affected parties.

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