In pursuance of paragraphs 5.1 and 6.4 of the Resolution of Ministry of Power on Guidelines for Tariff Based Competitive Bidding Process for Procurement

## Policy Analysis Report: Notification Regarding Bid Evaluation Parameters for Power Procurement **1. Executive Summary:** This report analyzes a notification from the Central Electricity Regulatory Commission (CERC) regarding parameters for bid evaluation in the procurement of power from grid-connected renewable energy projects complemented by coal-based thermal power projects. This notification, acting as an amendment, specifies annual escalation rates for various cost components like domestic and imported coal/gas, and their transportation, along with a discount rate for bid evaluation, valid for bid openings up to March 31, 2022. The core purpose is to provide clarity and standardization in the tariff-based competitive bidding process, affecting power producers and procurers. The key findings highlight the specific escalation rates and the discount rate to be applied. **2. Introduction:** This report provides an informative analysis of a notification issued by the Central Electricity Regulatory Commission (CERC) concerning the evaluation of bids for power procurement. The analysis focuses solely on the information provided within the notification text. The report aims to provide clarity on the notification's content, target audience, and potential impact. **3. Policy Overview:** * This notification acts as an amendment to guidelines outlined in the Ministry of Power's Resolution regarding Tariff Based Competitive Bidding Process for Procurement of Round-The-Clock Power from Grid Connected Renewable Energy Power Projects, complemented with Power from Coal Based Thermal Power Projects dated 22.07.2020 read with amendment dated 03.11.2020. * **Core Objective:** The core objective, inferred from the text, is to standardize and provide specific parameters for bid evaluation in power procurement processes, particularly concerning escalation rates for fuel costs and transportation, and a discount rate for bid evaluation. **4. Background and Rationale:** This notification is an amendment designed to provide specific financial parameters for the existing framework for tariff-based competitive bidding. The likely reason for this amendment is to ensure consistency and transparency in bid evaluations by providing clear and updated figures for annual escalation rates related to fuel costs and transportation charges. These specific parameters help in fair comparison and selection of the most economically viable power projects, by providing a set baseline for cost escalation of key components. **5. Key Provisions / Changes:** This notification introduces specific numerical values for key parameters used in bid evaluation. The changes are summarized below: * **Original Policy Aspect Changed:** The notification adds specific, quantifiable values to the process of calculating tariffs for electricity procurement bids. It specifically relates to aspects of bid evaluation outlined in the original guidelines by specifying rates for various escalation factors. * **New Rule/Provision:** The notification provides the following rates: * Escalation rate for domestic coal: 4.21% * Escalation rate for domestic gas: 12.53% * Escalation rates for inland transportation charges for coal (varying with distance) * Escalation rate for inland transportation charges for gas: 0.60% * Escalation rate for imported coal: 1.17% * Escalation rate for transportation of imported coal: 0.01% * Escalation rate for imported gas: 4.83% * Escalation rate for transportation of imported gas: 0.01% * Discount rate for bid evaluation: 9.31% * **Difference/Effect of Change:** These parameters provide a standardized basis for evaluating bids, ensuring that all bidders are evaluated using the same assumptions about cost escalation and discount rates. This aims to create a more level playing field in the bidding process, which ensures fair cost assessment for electricity procurement. **6. Target Audience and Stakeholders:** Based on the text, the primary target audience includes: * **Power Generation Companies:** Specifically, those involved in coal-based thermal power projects and renewable energy projects complemented by thermal power. * **Power Distribution Companies/Procurers:** Entities involved in procuring power through tariff-based competitive bidding processes. * **Central Electricity Regulatory Commission (CERC):** As the regulatory body, CERC uses these parameters for oversight and evaluation. **7. Implementation Aspects (Inferred):** * **Responsible Agency:** The Central Electricity Regulatory Commission (CERC) is responsible for notifying and presumably overseeing the implementation of these parameters. * **Timelines:** The notification specifies that these rates are applicable for bid openings up to March 31, 2022. * **Procedures:** While the document doesn't explicitly describe procedures, it is implied that these rates must be incorporated into the bid evaluation methodology used by procurers and overseen by CERC. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of these specific changes is to: * **Increase Transparency and Standardization:** Ensure a more transparent and standardized approach to bid evaluation by providing specific, publicly available parameters. * **Reduce Uncertainty for Bidders:** Provide greater certainty to bidders regarding the assumptions used in bid evaluation, enabling more accurate and competitive bidding strategies. * **Facilitate Efficient Power Procurement:** By standardizing the evaluation process, the amendment aims to facilitate the procurement of power at the most competitive tariffs. **9. Conclusion:** The CERC notification provides crucial parameters for bid evaluation in power procurement, specifically addressing escalation rates for fuel costs and transportation, as well as the discount rate. By standardizing these parameters, the notification aims to enhance transparency, reduce uncertainty for bidders, and facilitate efficient power procurement through tariff-based competitive bidding. The validity of these parameters is limited to bid openings until March 31, 2022, suggesting a periodic review and update cycle for these values.

Key Entities Referenced