The CERC Recommends Restraining Tariffs for Power Stations with Limited Coal Stocks

The Central Electricity Regulatory Commission (CERC) has proposed putting a deterrent penalty on power generating units as a disincentive for maintaining low stockpiles as coal reserves at thermal power plants (TPPs) in the country fell to 7.6 days on Friday. The regulator released a paper on the methodology for calculating Deterrent Charges on Friday, giving stakeholders until May 25 to submit their comments.

A senior government official backed the CERC's request, saying that, due to increased electricity demand and limited coal supply from domestic sources, the Centre has already urged states to import 10% of their coal requirements for blending. However, many people are hesitant to import because commodity prices are at all-time highs.

Such a law could compel these State electricity boards and their gencos to get coal for their power plants. In recent months, several coal-based TPPs' stockpiles were lower than the quantities set by the Central Electricity Authority, according to the regulator (CEA). This resulted in gencos having less coal available, forcing states to acquire power from alternative sources at greater prices.

CERC stated that to recover annual fixed charges (AFCs), gencos must ensure that sufficient fuel is available for their generating stations and that plant availability is maintained in accordance with applicable laws. Return on equity, interest on loan capital, depreciation, interest on working capital, and operation and maintenance (O&M) expenses are all included in a genco's AFC.

As a result, it is proposed that if coal-based generating stations fail to maintain coal stock in accordance with the CEA's updated coal stocking requirements, the AFC of such generating stations be decreased, according to the regulator. The CERC has recommended amending Regulation 42 (7) of the 2019 Tariff Regulations to include a computing methodology clause.

With effect from December 6, 2021, the CEA amended the coal stocking norms for TPPs. Pithead TPPs must keep coal stock in the range of 12-17 days, depending on the month of the year, as opposed to the current coal stock norm of 15 days.

Similarly, non-pithead units must maintain a coal supply of 20-26 days, as opposed to the current coal stock guidelines of 20-30 days. The authority has also proposed disincentives for TPPs if the availability of any coal-based power plant falls below the normative availability due to the power plant's reduced coal stock compared to the established norms.

Domestic coal-based (DCB) power plants with an installed capacity of 183 gigawatts (GW) had only 7.6 days of coal reserves on May 13. The reserves of imported coal-based (ICB) plants, which have a total installed capacity of 17,255 megawatts (MW), are lower, at 6.4 days. In addition, 84 DCB plants have critical stocks, whilst 11 ICB plants have stocks that are less than 25% of their normative requirement.

The actual stocks of the 173 TPPs tracked by the National Power Portal were 31% of their normative need. Stocks were at 24% for the 155 non-pithead power plants with a total installed capacity of 164 GW. The tangible stocks of 18 pithead plants with a total installed capacity of 39,222 MW were 77 percent of their normative stocks.