Role of Electricity Regulatory Commissions By S C Shrivastava Joint Chief (Engg) Central Electricity Regulatory Commission

In this presentation… Overview Legal/Policy framework Regulatory framework Regulatory scope/activities Market Development - CERC initiatives & impact 10/3/20152CERC

OVERVIEW 10/3/20153CERC

Sectoral Parameters Unelectrified rural households (2001 Census) 77.8 million (57%) Power Supply Position during July Energy shortages - Peaking deficit 8.3% 12.1% Generating plants – PLF ( ) All India 77.53% Generation performance ( ) 771 BUs (7.0 % growth over corresponding period of previous year) Cumulative High Voltage Transmission links (220 KV and above) (upto April 2010) 2,26,458 ckt km 10/3/20154CERC

Installed Generation Capacity in India (as on ) Total Installed Capacity (as on ) 10/3/20155 CERC

Installed Renewable Generation Capacity in India (end December’10) 6 Total Installed Capacity (as on ) Contributes 4% of total Electricity Generation 10/3/20156 CERC

Power Infrastructure in India (as on ) Total Installed Capacity (as on ) 10/3/20157 CERC

Ownership Status of Transmission and Distribution Almost 100% of Electricity Transmission in India is owned by public sector. About 13 % of Electricity Distribution in India is owned by private sector. 10/3/20158CERC

Electricity Requirement Source: Integrated Energy Policy 10/3/20159CERC

LEGAL/POLICY FRAMEWORK 10/3/201510CERC

Basic Legal Framework Electricity – a concurrent subject as per Constitution of India. Both Centre and States can legislate. In case of repugnancy, Central legislation prevails. 10/3/201511CERC

Legal Framework under old laws Regulatory authorities under IE Act, 1910 and E(S) Act, 1948 Central Government State Government CEA SEB Central Government – Powers to fix capital ceiling for TEC clearance etc. State Government – Powers to grant licence etc. CEA – TEC of generation projects, technical norms etc. SEB – Several powers as main advisor of State Govt. 10/3/201512CERC

Legal Framework Contd… Regulatory authorities under ERC Act, 1998 CERC SERCs JERC Objective – distancing of Govt./Govt. organization from regulation. 10/3/201513CERC

Legal Framework – Electricity Act, 2003 Consolidates laws of electricity relating to generation, transmission, distribution and trading of electricity. Creates environment conducive for development of electricity industry. Introduction of competition. Constitution of Central and State Regulatory Commissions to rationalize electricity tariffs. 10/3/201514CERC

Electricity Act Key Features Open Access to Transmission /Distribution Systems De-licensing of power generation Trading in electricity permitted Liberal provisions for captive power generation Rural generation and distribution freed from licensing Expanded role for the Regulatory Commissions Envisages unbundling of transmission and distribution. Regulatory Commissions to develop electricity markets. 10/3/201515CERC

The Electricity Act, 2003…… Clear demarcation of role and responsibility of Government (policy making) Independent Regulatory Commission (powers of regulation) Other statutory bodies – like Central Electricity Authority (as expert body on technical matters) 10/3/201516CERC

Government Formulation of – National Electricity Policy – Tariff Policy – National Electricity Policies on rural electrification. Powers to issue directions to the Regulatory Commissions on issues involving public interest. 10/3/201517CERC

National Electricity Policy Total village electrification by year 2010 By year 2012 : Per capita availability 1000 units. Installed capacity over 200,000 MW. Spinning reserves 5%. Minimum lifeline consumption of 1 unit per household per day. Inter-regional transmission capacity 37,000 MW. Energy efficiency/ conservation savings about 15%. 10/3/201518CERC

Tariff Policy Mandates competitive procurement of power and transmission services – transitional window of 5 years period given to public sector companies. Encourage efficiency in operations by sharing of gains between licensees and consumers. Promote Multi-Year Tariff (MYT) framework. Encourage loss reduction Strategies. Tariff design : Linkage of tariffs to cost of service gradual reduction in cross subsidy (+/- 20% of average cost of supply) Progressive reduction in Cross-subsidy surcharge for open access. 10/3/201519CERC

REGULATORY FRAMEWORK 10/3/201520CERC

Regulatory Commissions At the Center – CERC Powers to regulate centrally owned generating companies and companies having composite scheme for generation and sale of electricity in more than one State. To regulate inter-State transmission/Trading. In the States – SERCs Powers to regulate intra-State generation, transmission and distribution. – CERC vis a vis SERCs No hierarchical relationship. However, SERCs are to be guided by the principles of tariff determination specified by CERC. 10/3/201521CERC

Functions of CERC to regulate the tariff of inter-state generating companies to regulate the inter-State transmission of electricity to determine tariff for inter-State transmission of electricity to issue licenses for inter state electricity transmission and trading. to adjudicate upon inter-State disputes to specify Grid Code to specify and enforce the standards with respect to quality, continuity and reliability of service to fix the trading margin 10/3/201522CERC

Functions of CERC… Advisory Functions: – formulation of National electricity Policy and tariff policy; – promotion of competition, efficiency and economy in the activities of the electricity industry; – promotion of investment in electricity industry; – any other matter referred to the Central Commission by the Central Government 10/3/201523CERC

Functions of SERCs determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail within the State regulate electricity purchase and procurement process of distribution licensees facilitate intra-State transmission and wheeling of electricity issue licences for intra state transmission, distribution and trading. promote co-generation and generation of electricity from renewable sources of energy adjudicate upon the intra-state disputes specify or enforce standards with respect to quality, continuity and reliability of service by licensees; fix the trading margin in the intra-State trading of electricity 10/3/ CERC

Functions of SERCs… Advisory Functions: – promotion of competition, efficiency and economy in activities of the electricity industry; – promotion of investment in electricity industry; – reorganization and restructuring of electricity industry in the State; – matters concerning generation, transmission, distribution and trading of electricity or any other matter referred to the State Commission by that Government. 10/3/ CERC

Mission Statement-CERC The Commission promotes competition, efficiency and economy in power markets, protects the interests of consumers and promotes investments in power sector. In pursuit of these objectives the Commission aims to – Formulate an efficient tariff setting mechanism which ensures economy and efficiency in the pricing of bulk power and transmission services and leads to least cost investments, Promote development of power market by creating a market structure, facilitating open access in inter-State transmission, facilitating interstate trading, Improve the operations and management of the inter-State transmission systems through Indian Electricity Grid Code (IEGC), Availability Based Tariff (ABT), 10/3/201526CERC

Regulatory Commission - a quasi judicial body Powers of Civil Court for the purposes of inquiry or proceedings under the Act. (Section 94) Powers to impose penalty for non- compliance of direction of Regulatory Commissions. Powers to adjudicate 10/3/201527CERC

Accountability of Regulators Annual Report to be laid before the Parliament. Accounts of Regulatory Commissions to be audited by CAG. Appeal against the orders of Regulatory Commissions to lie before the Appellate Tribunal. 10/3/201528CERC

Procedure for Regulations 10/3/201529CERC

PROCEDURE FOR PETITIONS PETITIONER RESPONDANTS ARGUMENTS ORDERS REVIEW PROCEEDINGS Appeal in Appellate Tribunal 10/3/201530CERC

Appellate Tribunal Constitution of Appellate Tribunal consisting of Chairman, three Members (Technical and Judicial) and one Member with specialization in Petroleum Sector. Appellate Tribunal to hear appeals against the orders of CERC/SERC/PNGRB. The appeal to Appellate Tribunal should be filed within 45 days of order issued by CERC/SERC/PNGRB. Appeal against the orders of Appellate Tribunal to lie before the Supreme Court within 65 days. Appellate Tribunal considered necessary to- Reduce litigation and delay in decisions through High Court. Provide technical expertise in decision on appeals. 10/3/201531CERC

REGULATORY SCOPE/ACTIVITIES 10/3/201532CERC

Generation No requirement of licence. Full freedom to captive generation. For hydro-generation clearance of CEA is necessary due to concern of dam safety and inter-State issues. Generation from Non-Conventional Sources / Co- generation to be promoted. Minimum percentage of purchase of power from renewables may be prescribed by Regulatory Commissions. 10/3/201533CERC

Transmission Transmission Utility at the Center and in the States to undertake planning/development of transmission system. Regional Load Despatch Centers to ensure integrated operation of the power system. Flexibility regarding keeping Transmission Utility and load despatch together or separating them. The Load Despatch Centre/ Transmission Utility/Transmission Licensee not to trade in power. 10/3/201534CERC

Trading/ Market development Trading distinct activity permitted with licensing. Regulatory Commission to specify technical requirement, capital adequacy requirement and credit worthiness for a trader. Regulatory Commission may fix ceiling on trading margin to avoid artificial price volatility. The Regulatory Commission to promote development of market including trading. 10/3/201535CERC

Tariff Regulatory Commissions to determine tariff for – Supply by Generating Company to distribution licensee through long term contract. For short term contracts only minimum and maximum ceiling of tariff. – Transmission of electricity. – Wheeling of electricity – Retail sale to consumers by Licensee. 10/3/201536CERC

MARKET DEVELOPMENT - CERC INITIATIVES & IMPACT 10/3/201537CERC

Market Development - CERC initiatives Regulations on Short-term Open Access Grant of Connectivity, Long-term Access and Medium- term Open Access in inter-State Transmission. Grant of Regulatory Approval for execution of Inter-State Transmission Scheme to CTU Transmission Pricing Power Market 10/3/201538CERC

CERC initiatives… Special Features of CERC regulations on short-term open access Timelines for concurrence of SLDC in case use of intra-State system is involved Provision of deemed concurrence if SLDC does not decide within above timelines. SLDC to look at only two aspects: existence of metering infrastructure, and availability of surplus transmission capacity in the State network. 10/3/201539CERC

CERC initiatives… Features of CERC regulations on Grant of Connectivity, Long-term Access and Medium-term Open Access in inter- State Transmission Enabling transmission products of different varieties, standardization of procedures, defining time lines and ensuring level playing field among different categories of market players. Introduced medium-term Open Access to inter-State grid - for a period ranging from 3 months to 3 years. New regulatory provisions for seeking connectivity to grid. Discrimination between public and private sector generators on connectivity to grid, abolished. 10/3/201540CERC

CERC initiatives… Regulations on Grant of Regulatory Approval for execution of Inter-State Transmission Scheme to Central Transmission Utility This is to facilitate network expansion keeping in view the anticipated transmission needs without the requirement of prior agreement with the beneficiaries CERC has granted approval for investment (of about Rs Cr. ) to CTU for nine high capacity transmission corridors. 10/3/201541CERC

CERC initiatives… Regulations on Sharing of Inter State Transmission Charges and Losses National transmission tariff framework – in line with vision of tariff policy. Sensitive to direction, distance and quantum; Addresses short-comings of existing system – like pan-caking of charges, sharing of charges not being fully sensitive to distance and direction, pricing not efficient enough to address emerging market requirements. 10/3/201542CERC

CERC initiatives… Power Market Regulations Provide a road map for development of power market Define roles of various players in the market and phases of introduction of products/contracts. 10/3/201543CERC

Volume of Open Access transactions (inter-State transmission) 10/3/2015 Source: NLDC Market Development- Impact 44CERC

Market Development- Impact… 10/3/2015 Consumer Open Access through Power Exchange - A Snapshot DetailsIndian Energy Exchange Ltd Total Clients300 Open Access Consumers160 Nature of Business of these Consumers Industrial Consumers- Textiles, Spinning mills, Auto Ancillary Geographical Location of these Consumers Punjab, Rajasthan, Tamil Nadu, Andhra Pradesh % of Daily Cleared Volume by OA consumers during Oct 2009 – Feb % ( 5-7 MU) of total daily cleared volume of Power Exchange Nature of purchase Peak, Off Peak 45CERC

Investment promotion: – CTU has received 225 applications from private developers for Long Term Open Access amounting to 1,62,898 MW Phase 1: 42,108 MW (LTOA granted to 43 applicants ) – Bank guarantee of 875 Cr given by developers and BPTA signed – Geographical locations Pit-head coal Orissa, Chhattisgarh, Jharkhand Coastal with port facilities - Andhra Pradesh, Tamil Nadu Hydel sites – Sikkim 10/3/2015 Market Development- Impact … 46CERC

Grid discipline - IEGC IEGC and UI regulations amended to ensure greater grid discipline. Operational frequency band tightened from ‘50.3 Hz to 49.2 Hz’ to ‘50.2 to 49.5 Hz’. This is aimed at ensuring better performance of generating stations and user appliances. All users of inter-State grid including distribution utilities will also now be directly responsible for grid discipline and load management, in addition to SLDCs. 10/3/201547CERC

Grid Discipline - Restructured UI mechanism UI regulations amended to send a message that UI mechanism should not be used as a trading tool Underdrawls and over injections beyond the permissible quantities, disincentivised and priced at lower rates in order to push more electricity to organized electricity markets and to further discourage use of UI mechanism for sale of electricity, Additional UI charge of 40% on the normal UI rate (Rs per unit), applicable at grid frequency below 49.5 Hz instead of 49.2 Hz to more effectively curb the tendency of some states to heavily overdraw Additional UI rate has been made 100% on overdrawals when grid frequency is below 49.2 Hz to put further exemplary deterrent on overdrawls Improvements in grid frequency profile subsequent to CERC regulation on IEGC and UI 10/3/201548CERC

Improvement in Grid profile 10/3/201549CERC

Grid discipline - constraints Disconnection almost impossible in meshed system Centre-State issues J&K defaulting in UI payments, difficulties in disconnection. 10/3/201550CERC

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