The Ministry of Power, Govt. of India, notified the Electricity (Promoting Renewable Energy through Green Energy Open Access) Rules, 2022 on 6th June, 2022 applicable on generation, purchase and consumption of green energy including waste-to-energy plants. In adherence to the same, HERC proposed the HERC (Green Energy Open Access) Regulations, 2023. The key highlights of the draft are mentioned below:

Objective: To contribute for the fulfilment of the India’s target of non-fossil energy capacity of 500 GW by 2030, 5 million ton a year green hydrogen capacity by 2030 and Net Zero Carbon Emissions by 2070, HERC has proposed (Green Energy Open Access) Regulations, 2023.

Eligibility criteria for Green Energy Open Access:
a) Consumers having contract demand or sanctioned load of 100 kW and above.
b) Consumer of a distribution licensee who is connected through an independent feeder emanating from a grid sub-station.
c) Group of two or more

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The Union Power Ministry on 8th August, 2022 introduced the “Electricity (Amendment) Bill, 2022” in Lok Sabha.

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The Ministry of Power floated a proposal on High Price Market Segment for Day Ahead Market (HP-DAM) on 1st August, 2022. The key highlights of the document is as below:
The issue of high price in spot market in Power Exchanges was addressed by CERC by introducing Price Cap of Rs 12/ unit in all market segments in April, 2022. The only drawback in it was that the generators having high variable cost are unable to participate in the market. To address this phenomenon, the proposal consists the following points -
❖ Eligibility of seller - having variable cost greater than Rs. 12/kWh .
❖ Minimum bid price: Rs. 0/kWh.
❖ Price Discovery: Double-sided closed auction
❖ Operation parallel to I-DAM
❖ This will enable the high cost power plant to be available during high demand period that was not possible previously. It targets only the buyers who are in deficit and can afford high price payment to participate in this segment. The other buyers will not get affected by operation of this additional segment

CER Opinion -

❖ Price Spike on Power Exchanges and Role of HP-DAM: Price spikes on the power exchanges over the past few months has been a cause for worry for the regulators as well as policy markets. This, along with the fact that some of the sellers would have made significant margins above their marginal cost (MC), may seem to have justified the idea of HP-DAM. However, the fundamental economic and implementation issues create an uncertainty about its long-term impact, while it may seem to result in some short-term benefits.

The fundamental reasons for the recent price behavior needs to be identified and addressed across the electricity supply chain, beginning with coal supply issues . HP-DAM may be a temporary solution  that would likely alter bidding behavior as well as market outcome for DAM market segment itself. This is further explained below.

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These Regulations are proposed to revise the MPERC (Power Purchase and Procurement Process), Regulations, Revision I, 2006 and shall be applicable to all purchases of power from conventional and renewable energy sources of energy made or as proposed to be made by a distribution licensee. In these regulations the Commission has laid down the framework for power procurement planning to be done by the distribution licensee using IT tools from different energy sources, based on the forecasting by methods such as PEUM, econometric analysis, etc.

An emphasis has been done on archiving the information related to power procurement and making it available publicly. As per these regulations, the distribution licensees to constitute dedicated cell for all the power procurement activities including demand forecasting.

CER Opinion -

❖ Need for Long-term Demand Forecasting and Power Procurement Planning: Power procurement cost is a major part of the Aggregate Revenue Requirement of the distribution utilities. Power procurement plans and contracts typically have a long-term horizon and, hence, need to be worked out well in advance, based on reliable and dependable forecast. A reliable electricity demand projection cannot only help the distribution utilities to plan power procurement in advance, but also optimise the cost of the power purchase.

CER, IIT Kanpur carried out a research on the importance of these aspects and published a book on “Regulatory Framework for Long-term Demand Forecasting and Power Procurement Planning”, highlighting the need for a regulatory framework for the same. Given the experience of CER and EAL in carrying out Long-term Demand Forecasting and Power Procurement Planning for the states of Uttar Pradesh and Chhattisgarh, we reinforce the need for a robust regulatory framework for the same. From these studies, it was inferred that significant economic benefits in terms of reduced private and social costs is possible through Long-term Demand Forecasting and Power Procurement Planning.

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WBERC on 12th May, 2022 notified the Draft WBERC (Open Access) Regulations, 2022. The key highlights of the draft are mentioned below,

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GERC on 19th February, 2022 notified the Draft GERC (Security Deposit) (3rd Amd) Regulations, 2022. The key highlights of the draft are mentioned below:

Clause No. 4.11:
The licensee shall pay interest on Security Deposit of consumer other than Security Deposit received from Temporary Consumer for the electricity supplied, at the Bank Rate (as on 1st April of every year) notified by Reserve Bank of India or such higher rate as may be fixed by the Commission from time to time. The interest accrued to the credit of the consumer during the previous year shall be adjusted in electricity bills of May of every year for consumers covered under the monthly billing cycle and in electricity bill of May or June for those covered under bi-monthly billing cycles.

Clause No. 4.14:
The Licensee, on termination of the agreement by either party shall refund Security Deposit after adjustment of dues, if any within 7 days.

CER Opinion -

1. Security Deposit based on Average Billed Amount: Wherever there is a reference to Security deposit, the Regulations only refer the average consumption of number of units. Given the two-part/ multi-part tariff structure, the security deposit should cover energy as well as fixed charges

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GERC on 19th February, 2022 notified the Draft GERC (Licensees' Power to Recover Expenditure incurred in providing Supply and other Miscellaneous Charges) (3rd Amd) Regulations, 2022. The key highlights of the draft are mentioned below:

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MoP has issued the Amendments to Guidelines for short-term Procurement of Power (i.e. for a period of more than one day to one year) by Distribution Licensees through Tariff based bidding process on 22nd December, 2021. The key highlights of the draft are as below:-
The following sub-clauses have been added in the existing Guidelines under Clause No. 6.4 (iv) g;

❖ In case the Seller fails to offer the contracted power as per the Agreement to the Procurer and sells this power without Procurer’s consent to any other party, the Procurer shall be entitled to claim damages from the seller for an amount equal to the higher of:-
a. Twice as per the PPA
b. The entire sale revenue accrued from Third Parties on account of sale of the contracted power.

There will not be any fixed charges liability to the procurers, for the power which was not supplied.

❖ On a complaint to this effect by the Procurer to the concerned load dispatch center, the Seller shall be debarred from participating in power exchanges and scheduling of this power in any short/ medium/ long-term contracts from that generating station for a period of 3 months from the establishment of default, in the complaint. The period of debarment shall increase to 6 months for send default and shall be 1 year for each successive default.

CER Opinion -
1. Name of the document: These Guidelines named as “Draft Amendments to Guidelines for short-term Procurement of Power (i.e. for a period of more than one day to one year) by Distribution Licensees through Tariff based bidding process”, may be renamed as “…for a period of more than one day, and up to one year…” in order to match the name of the term of agreement.
    
2. Clause No. 6.4 (iv) (a): The guidelines now also include a penal structure for ‘deviation’ from contracted capacity that has been granted open access (beyond 15%). It should be clarified if the Contract Performance Guarantee (CPG) would be applicable over and above the penalty for ‘deviation’ provided for in clause 6.4 (iv) (e) with respect to the seller.

3. Contract Performance Guarantee (CPG): The Contract Performance Guarantee (CPG) of Rs. 2 lac per MW per month is an insignificantly amount as compared to the value the seller can derive from non-performance. For e.g. In case the unit price of electricity is assumed to be Rs. 4.00 per kWh, the total amount at stake for, say 1 MW of supply during peak hours (say a 4-hour duration) for 20 working days would be itself be Rs. 80,000.00. The CPB seems insignificant and hence highlights the need for the penalty structure to address incentive to divert power when market prices are high for certain duration during the contract.

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HPERC notified draft amendment to the (Consumer Grievances Redressal Forum and Ombudsman) Regulations, 2021 on 24th Nov, 2021. The key highlights of the same are mentioned below:

1. Prosumer (Regulation 3 ((1) (ia))): Definition of ‘Prosumer’ to be added in the prevailing Regulation.
2. Additional Forum (Regulation 5 (2), (3)): Provision for establishment of at least one additional forum for each of distribution licensee’ operation circles, by the distribution licensee is to be added. The jurisdiction thereof in relation to the consumers under the respective operation circles, will be as follows:

a) For the consumers covered under single-part retail tariff - all types of complaints, whether monetary or non-monetary.
b) For the consumers covered under two-part retail tariff - all types of complaints whether monetary or non-monetary, where the following conditions are met:
❖ the amount of dispute / claim ≤ ₹ 2 Lakh
❖ the standard supply voltage ≤ 22kV

CER Opinion -

1.Definition of Prosumer [Draft Regulation 3 (1) (ia)]: The draft Regulation provides the definition of ‘Prosumer’. However, the term ‘Prosumer’ is not used further in this Regulation. So, it is suggested to append the proposed definition of Prosumer by including a statement just after its definition such that wherever there is a reference to consumer in this Regulation, it should also deem to include prosumers.

The reference to ‘Prosumer’ may increasingly appear in a variety of other Regulations and orders (for example in the case of tariffs, open access, SOPs etc.). Hence, it is suggested that this definition for Prosumer should be a part of the State’s Grid Code. The prosumer may also refer to mobile storage such as electric vehicles (EVs) especially when EVs inject power in vehicle to grid mode (V2G).

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Chhattisgarh State Electricity Regulatory Commission released draft CSERC (Terms and Conditions for determination of tariff according to Multi-Year Tariff principles and Methodology and Procedure for determination of Expected revenue from Tariff and Charges) Regulations, 2021 based on the objections/suggestions/comments received on the Draft MYT Regulations, 2020. The important highlights of this draft regulation are given below:

Financial Principles:

❖  Return on Equity (Regulation 23):
o   14% for Generation, Transmission & SLDC.
o   16% for Distribution
o   Grossed up by MAT rate
o   Rate of pre-tax RoE = Base Rate / (1- MAT Rate)

❖  Depreciation (Regulation 25):
o   Value Base = Capital Cost of the asset
o   Straight Line Method
o   Depreciation on new assets will be charged on day-wise pro-rata basis during the first year of the COD of the asset.

CER Opinion-

We are pleased to note that several inputs given on the previous draft of the regulations have been incorporated in this revised draft. Some important ones are highlighted here along with additional ones for consideration.

❖ Return on Equity (Regulation 23.3):
As Capital Asset Pricing Model (CAPM), often used for calculating return on equity, provides an estimate of post-tax RoE that should not be grossed up by the rate of effective tax. Adoption of such approach across the sector is erroneous, and provides excess return. This places additional burden on tariff paid by the consumers.
A recent study at CER, IITK using CAPM and multi-factor models, using a comprehensive data for over 125 infrastructure companies between 1998-2018, estimates the cost of equity for conventional generation sector to range between 12.86-16.52%, on a post-tax basis, refer Figure 1: Cost of Equity – CAPM and Three-Factor Model.

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Uttarakhand Electricity Regulatory Commission (UERC) reviewed the "Benchmark Capital Cost for Solar PV, Solar Thermal and Grid Interactive Rooftop & Small Solar PV Plants to be applicable for FY 2021-22 and onwards till reviewed/revised by the UERC" on 30^th July, 2021.
Some of the key points are given below:

❖ The normative capital cost for Solar PV, Solar Thermal and Grid Interactive Rooftop & Small Solar PV Plants is inclusive of all capital works including plant and machinery, civil works, erection and commissioning, financing and interest during construction etc., and evacuation infrastructure upto the interconnection point.
❖ The proposed generic tariffs for Solar PV, Solar Thermal and Grid connected Rooftop & Small Solar PV Plants shall be applicable on the projects commissioned on or after 01.04.2021 and shall continue to be applicable till further reviewed by the Commission. Also, the tariffs determined shall be the ceiling tariffs and procurement of power shall be done through competitive bidding route by distribution licensee.

CER Opinion -

❖ High Capital Cost for Improved Operational Parameters: The draft document identified upgradation of technology as one of the reasons for the revised capital cost. If so, the same should be reflected in efficient operational parameters to be considered for determination of tariff as well. The commission should thus consider uprating the efficiency and other parameters (example: CUF, degradation factor etc.) for different Solar PV applications.
❖ Competitive Bid-based Project’s Tariff: Levelised tariff for competitively bid projects show significant decline in the electricity procurement from Solar PV technology. A similar decline is generally not reflected in the benchmark capital cost. A comparative assessment of decline in bid based tariff and that of the benchmark capital cost should enable vetting of the benchmarked capital cost and other cost components.

Highlights:

The Ministry of Power prepared and notified on 9th April, 2021 a draft amendment to the Electricity (Rights of Consumers) Rules, 2021. These rules may be called the Electricity (Rights of Consumers) (Amendment) Rules, 2021.

Key points of the amendment rules are:

1. Definitions of “Gross-metering”, “Net-metering” and “Net-billing or net feed-in” may be added in sub-rule to the Rule 2 of the Electricity (Rights of Consumers) Rules, 2020.
2. The Commission may allow net metering to the prosumer for loads up to 500 kW or up to the sanctioned load, whichever is lower and net-billing or net feed-in for other loads.
   
3. Prosumers are incentivized to install energy storage so that stored solar energy can be utilized by them or fed into the grid during peak hours

CER Opinion:

1. In the definition of “Gross-metering” the phrase ‘appropriate metering arrangements’ needs to be clarified. Gross metering requires more than one metering arrangement and the above phrase conflicts with the definition of prosumer ‘using same point of supply’.
   
2. Rule (3) of the Amendment rules may be reconstructed as “….. for loads up to 500 kW or up to the sanctioned load or contract demand (as the case may be), whichever is lower…..”
3. Commissions should be replaced with ‘Appropriate Commission’.

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JERC (Goa & UTs) issued a draft Generation, Transmission and Distribution Multi-year Tariff Regulation, 2021, and will be applicable to the state of Goa and Union Territories. The key highlights of the regulation are given below:
1. Capital Cost:Any gain or loss resulting from a shift in foreign exchange rates for the loan amount up to the date of commercial operation would be offset only against the foreign debt portion of the capital cost.If actual capital cost is less than approved capital cost then actual capital cost shall be considered.

CER Opinion  -

Foreign Debt Component (Regulation 24.1): The first proviso of the Regulation 24.1 (e) may be reworded as ‘Provided that any gain or loss on account of foreign exchange rate variation pertaining to the loan amount availed up to the Date of Commercial Operation shall be adjusted only against the foreign debt component of the capital cost’.

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CERC has notified a proposal for determination of levellised generic tariff for FY 2021-22 on 18th February, 2021.
These regulations specify the tariff determination for the RE projects (small hydro projects, biomass power projects with Rankine cycle technology, non-fossil fuel-based co-generation projects, biomass gasifier-based power projects and biogas-based power projects) which shall be applicable during the period from 1st April, 2021 till 31st March, 2022.

CER Opinion -

Swiss Challenge for all Cases Involving Project-Specific Tariff: As per current scenario the energy market is mature enough. The solar as well as wind technologies have witnessed a significant competition. The relative success of competitive technologies further encourages the competitiveness in the sector, CERC should leave it to the market forces.

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The WBERC notified draft for the amendment to Cogeneration and Generation of Electricity from Renewable Sources of Energy Regulations, 2013. Highlights are below:

1. Consumer can install rooftop system of 1 kW or above capacity (up to total sanctioned load or contract demand) can claim net-metering/net-billing benefits.
2. DISCOMs are proposed to procure 100% of energy from waste to energy plants in their respective areas.
3. Unmet solar RPO obligation above the 85% of total RPO can be met by non-solar energy, and vice-versa.

CER Opinion -

1. RPO trajectory for the state should be specified in advance so as to provide opportunity to obligated entities to make appropriate investments or plan to procure RE/REC.
2. In case the tariff for RE has been discovered under section 63 of EA, 2003 and has been adopted by the commission, the same should not be subjected to the price cap under regulation 6.0.
3. An RPO compliance framework, supported with penalty in proportion to the shortfall, would help ensure that obligated entities take adequate steps to meet their RPO target including through purchase of RECs.

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MERC released draft State Grid Code Regulations (MEGC, 2020) on 1^st Mar 2020. MEGC, 2020 is applicable to all generators in the state connected to intra-state transmission system (InSTS), transmission licensee in the state including STU, Maharashtra SLDC, distribution licensees including deemed distribution licensees, Indian Railways, OA consumers and EHV consumers connected to InSTS. Major highlights of the proposed regulations are below:

1. STU is to explore and evaluate alternate options if capital expenditure for any new transmission system exceeds threshold limit of ₹100 crore or as declared by the Commission from time to time.

2. SLDC need to maintain the spinning reserve margin equivalent to 3% of the system peak demand and 3% of installed capacity for the generators to manage ramp up.

3. The generating company can de-rate the capacity or can go for repeat trial run. The demonstrated capacity, in case of derating, will be equal to or greater than 105% of de-rated capacity for thermal InSGS and 110% for hydro generating station.

CER Opinion:

1. The investment approval framework should include a cost-benefit analysis considering economic efficacy of the investment and the system security over medium to long-term. Excess investment towards reliable of power supply needs to be controlled to avoid burden on consumers.

2. Clause 30.6 requires 'instantaneous' picking up of the generation to 105/110% in case of ‘sudden fall in system frequency’, which should be specified.

3. Framework for procurement and payment for spinning reserve capacity margin and its recovery from system participation (specially load serving entities) should be specified.

Central Electricity Regulatory Commission (CERC), via notification dated 31^st Mar 2020, proposed to adopt forbearance price and floor price of Renewable Energy Certificates (REC) as given in the table:

CER Opinion:

1. As the proposed REC floor price for solar/non-solar RECs is zero, reference to floor price as a part of REC framework under the principle REC Regulations can be deleted.

2. Given that SERCs are allowing excess solar (non-solar) RPO quantum to be adjusted against non-solar (solar) RPO, fungibility between solar and non-solar RECs is clearly visible and should be institutionalized.

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HERC drafted guidelines for certifying or refusing to certify non-availability to transmission or distribution system for OA consumers. Major highlights of the proposed regulations are below:

1. Surplus capacity to be offered to LTOA, MTOA, and STOA in respective order. In case of system enhancement, the applicant will pay the Distribution Capacity cost for grant of LTOA.
2. Consumers capacities of 10 MW and above will be eligible for connectivity at 33 kV or above, rest at below 33 kV.
3. In case of unnotified outage on account of transmission/distribution system, the licensee will compensate the OA consumer the charges payable by consumer to the generating company or the lowest tariff applicable to the consumer category, whichever will be lower.

CER Opinion:

1. To discourage withholding and to bring competitiveness in allocation of unused transmission/distribution capacity, the unused transmission capacity should automatically be released to the SLDC.
2. In case of refusal of OA application, SLDC should provide alternate slots/lower capacity or a timeline for available capacity in future.
3. In case of failure of power evacuation and compensation for wheeling and transmission charges, a mechanism to pass on the benefit to the buyer should be introduced.

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The Central Electricity Authority (CEA) has proposed amendment to Furnishing of Statistics, Returns and Information Regulations, 2007. The CEA proposes to add four new formats (Format 21A, Format 21B, Format 66 and Format 67) for furnishing of the information in the Regulations.

CER Opinion:

1. Scope for format 21A and 21B should be defined in such a manner that the two tables are mutually exclusive. As per given definition, there would be common CPPs whose data would be reported in both tables.
2. In the format 21A, unit of Electricity Demand should be MVA instead of MW as industrial contract demand is considered in MVA
3. ‘Variable charges’ may be used in place of ‘fuel charges’ in column 16 of the format 66.

Summary -

The GERC notified discussion paper for tariff framework concerning procurement of solar power by DISCOMs and other stakeholders. The discussion paper proposes competitive bidding for all solar projects, including small projects of 5 MW or less capacity. A brief summary is below:

1. For projects below 5 MW capacity, proposal to determine tariff through competitive bidding in different time period of 6 months of the year.

2. Proposes a maximum allowed capacity at 50% of contracted load for captive use, third party sale, and projects under national solar mission.

3. Wheeling and cross subsidy charges between 50% to 100% as applicable to normal OA consumers, are proposed for different category of projects.

CER Opinion

1. Linking tariff determination of small project (below 5 MW) with larger projects is a positive step, but the commission should also consider the significant diseconomies of scale for smaller projects while finalizing tariff.

2. We suggest that the basis for linking of tariff for small project can be pegged at a rate bit higher than the prevailing mark-up.

3. A large number of small scale projects can be bundled together to form a competitive market for smaller PV projects and offering them for bidding. This can address issues related to economies of scale.