In pursuance of Clause 56viof Ministry of Power MOP Notification

## Report on Amendment to Guidelines for Long-Term Procurement of Electricity from Thermal Power Stations **1. Executive Summary:** This report analyzes an amendment to the guidelines for long-term procurement of electricity from thermal power stations, focusing on changes related to escalation rates for imported coal. Based on the provided notification, the amendment revises the monthly escalation rates for imported coal, its transportation, and inland handling, applicable for November 2022. The core purpose of this amendment is to update the compensation paid to power producers to reflect current market conditions, specifically related to imported coal costs, as it impacts power purchase agreements (PPAs). **2. Introduction:** This report aims to provide information and analysis regarding a specific amendment to the guidelines for long-term procurement of electricity from thermal power stations. The analysis is based solely on the provided Government of India notification. **3. Policy Overview:** * This notification amends 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) and the MOP Resolution dated 11.07.2022 on amendment 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 amendment is to revise the escalation rates for imported coal used in electricity generation, for the purpose of payment under existing Power Purchase Agreements (PPAs). The overarching goal is to provide accurate and updated financial terms within these agreements to reflect current market realities related to fuel costs. **4. Background and Rationale:** The amendment likely addresses fluctuations in the global coal market and its impact on the cost of electricity generation. The original guidelines likely included mechanisms for cost adjustments based on fuel prices. This specific amendment appears to be a necessary update to those mechanisms, ensuring fair compensation to power generators using imported coal and reflecting current price levels. Without this adjustment, power producers may face financial strain, and distribution licensees might not have a clear mechanism to reconcile these costs within the agreed PPA framework. **5. Key Provisions / Changes:** This amendment specifically changes the monthly escalation rates applicable for November 2022 concerning imported coal used by thermal power stations involved in long-term power procurement agreements. * **Specific Part of Original Policy Changed:** The amendment modifies the escalation rate calculations used in PPAs between power generators and distribution licensees. The original policy likely contained provisions for adjusting tariffs based on changes in fuel costs. * **New Rule/Provision:** The notification establishes specific monthly escalation rates for November 2022 for imported coal related expenses. The rates are: * Escalation rate for imported coal: 8.98 * Escalation rate for transportation of imported coal: 4.38 * Escalation rate for inland handling of imported coal: 0.25 * **Difference/Effect of Change:** These specific numerical values replace previously existing rates (either a formula, or another fixed rate for an earlier period). The effect is to adjust the payments made to power generators for the month of November 2022 to reflect the actual cost of imported coal, transportation, and handling, at those specific rates. This likely results in either increased or decreased payments compared to the previous period, depending on how these rates compare to prior levels. **6. Target Audience and Stakeholders:** The primary stakeholders directly affected by this amendment are: * **Distribution Licensees:** These entities are responsible for procuring power and will be required to implement the revised escalation rates in their payments to power generators. * **Thermal Power Stations:** Specifically, stations established on a DBFOO basis that source 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. * **Central Electricity Regulatory Commission (CERC):** CERC is the regulatory body overseeing these changes and ensuring compliance. * **Ministry of Power (MOP):** The MOP initiated the underlying policy framework and communicated these changes to the CERC. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Central Electricity Regulatory Commission (CERC) is responsible for notifying and implementing the revised escalation rates. Distribution Licensees are responsible for applying the notified rates when making payments to power generators. * **Timelines/Procedures:** The amendment specifies that the escalation rates are applicable for the month of November 2022. This suggests that distribution licensees need to adjust their payments accordingly for this period. The text provides no further details on procedures. **8. Expected Outcomes / Impact of Changes:** The intended outcome of these specific changes is to provide financial clarity and fair compensation to power generators for the month of November 2022, based on actual imported coal costs. The potential impact includes: * **Adjusted Payments:** Power generators using imported coal will experience a change in their revenue for November 2022, reflecting the revised escalation rates. * **Financial Stability:** The adjustment helps ensure the financial viability of power plants dependent on imported coal by aligning revenue with actual expenses. * **Improved Investor Confidence:** Periodic revisions of tariffs based on market conditions build confidence in the regulatory framework for power procurement. **9. Conclusion:** This report analyzes an amendment to the guidelines for long-term power procurement from thermal power stations, specifically addressing the monthly escalation rates for imported coal. The amendment sets specific rates for November 2022, impacting payments to power generators and requiring action from distribution licensees. This amendment demonstrates the government's efforts to adapt regulations to evolving market conditions and ensure fair compensation within the power sector.

Key Entities Referenced