The Union Cabinet approved the ‘National Tariff Policy for Electricity’ aimed at tightening regulations for setting power rates and promotion of clean energy.

The regulations tighten regulations for setting power tariffs by asking electricity regulators to "necessarily" be guided by the new policy while framing regulations under section 61 of the Act.

Earlier, the state regulators would not abide by regulations and twist it according to their requirement, said a former member of CERC. “Now, the state regulators would have to remain in the perimeter of the policy. It would be binding on them to take regulatory decisions as per the amended policy and not as per need,” he said.

According to the national tariff policy adding the word ‘necessarily’ to the legal position of central and state electricity regulators said: “The Act also requires the Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERCs) shall necessarily be guided by the tariff policy in discharging their functions including framing the regulations under section 61 of the Act.”

Section 61 of the Electricity Act empowers regulators to set terms and conditions for determination of tariffs and be guided by the tariff policy.

A major addition to the objective of the policy are promotion of renewable generation sources and aim to create more competition, efficiency in operations and improvement in quality of power supply.

One of the recommendations in the policy to incentivise the distribution companies to procure power from renewable sources of energy, the central government may notify, from time to time, an appropriate bid-based tariff framework for renewable energy.

The policy has also allows increase in fuel cost on account of import to be included in the tariff structure. “In case of reduced quantity of coal supplied by Coal India, vis-a-vis the assured quantity of 85 per cent, the higher cost of imported or market based e-auction coal for making up the shortfall, shall be considered for being made a pass through by CERC or SERCs, on a case-to case basis, to the extent of shortfall,” said an amendment to the policy.

Other major components such as foreign exchange fluctuations, cost of land acquisition and other clearances should have been part of the tariff calculation but it has been completely ignored, said a senior power sector executive. "Projects stuck for these reasons will continue to remain stranded,” he said.

Power generators, however, have been given the freedom to sell surplus power in spot market if the beneficiary doesn’t give prior notice two days ahead. It was earlier 10 hours.

The tariff policy has more than 30 amendments in the existing tariff policy which was formed as a continuation of the National Electricity Policy, 2005.

In a first, the policy also underlines norms for ancillary services. The central commission has been given the right to introduce the norms and framework for ancillary service necessary to support the power system or grid operation for maintaining power quality, reliability and security of the grid, including the method of sharing the charges.



