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

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 OVERVIEW
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 Sectoral Parameters
Unelectrified rural households (2001 77.8 million
Census) (57%)
Power Supply Position during July
2010
- Energy shortages 8.3%
- Peaking deficit 12.1%

Generating plants – PLF (2009-10) All 77.53%

India
Generation performance (2009-10) 771 BUs
(7.0 % growth over
corresponding period of
previous year)

Cumulative High Voltage Transmission 2,26,458 ckt km

links (220 KV and above) (upto April
2010)

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 Installed Generation Capacity in India
(as on 31.01.2011)

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 Installed Renewable Generation Capacity in India
(end December’10)

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6
 Power Infrastructure in India
(as on 31.01.2011)

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 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.

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 Electricity Requirement 2031 - 32

GDP Growth Rate

8% 9%
Total Energy Requirement 3880 4806
Billion kWh
Energy Requirement at Bus Bar 3628 4493
Projected Peak Demand (GW) 592 733
Installed Capacity Requirement (GW) 778 960
Source: Integrated Energy Policy

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 LEGAL/POLICY
FRAMEWORK
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 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.

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 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.

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 Legal Framework Contd…

• Regulatory authorities under ERC Act,

1998
• CERC
• SERCs
• JERC

• Objective – distancing of Govt./Govt.

organization from regulation.

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 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.

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 Electricity Act 2003 -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.

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 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)

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 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.

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 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%.

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 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.

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 REGULATORY FRAMEWORK
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 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
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 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

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 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

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 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

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 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.

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 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),

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 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

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 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.

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 Procedure for Regulations

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 PROCEDURE FOR PETITIONS

PETITIONER RESPONDANTS

ARGUMENTS

Appeal in
REVIEW
ORDERS Appellate
PROCEEDINGS
Tribunal

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 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.

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 REGULATORY
SCOPE/ACTIVITIES
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 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.

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 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.

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 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.

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 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.

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 MARKET DEVELOPMENT
- CERC INITIATIVES & IMPACT
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 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

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 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.

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 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.

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 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.

58000 Cr. ) to CTU for nine high capacity transmission
corridors.

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 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.
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 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.

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 Market Development- Impact
Volume of Open Access transactions
(inter-State transmission)

Source: NLDC
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 Market Development- Impact…
Consumer Open Access through Power Exchange - A
Snapshot
Details Indian Energy Exchange Ltd
Total Clients 300
Open Access Consumers 160
Nature of Business of these Industrial Consumers- Textiles,
Consumers Spinning mills, Auto Ancillary
Geographical Location of Punjab, Rajasthan , Tamil Nadu,
these Consumers Andhra Pradesh

% of Daily Cleared Volume by 25-30 % ( 5-7 MU) of total daily

OA consumers during Oct cleared volume of Power Exchange
2009 – Feb 2010
Nature of purchase Peak , Off Peak

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 Market Development- Impact…
• 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

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 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.

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 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. 8.73 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

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 Improvement in Grid profile

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 Grid discipline - constraints

• Disconnection almost impossible in meshed system

• Centre-State issues
• J&K defaulting in UI payments, difficulties in
disconnection.

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Thank You
www.cercind.gov.in