CERC Proposes Change In Norms Regulating Old Thermal Plants

CERC Proposes Change In Norms Regulating Old Thermal Plants

The Central Electricity Regulatory Commission (CERC), in its latest notification, has proposed a change in a provision of its existing regulations. This provision is related to the older thermal power plants and their powers to tie up with beneficiaries for power supply. 

It has asked the stakeholders and public to send in their comments and objections by October 1, 2023. The proposed norms have been named Draft Central Electricity Regulatory Commission (Terms and Conditions of Tariff) (Fourth Amendment) Regulations, 2023.

The new draft regulation has proposed the omission of Section 17 of the principal regulation, which talks about thermal power plants that have crossed 25 years of operations. The explanatory notes on the same said that the decision was taken as the section had led to several avoidable disputes. 

“As per Regulation 17, post completion of 25 years of useful life, the generating stations and beneficiaries have the option to enter into a mutual agreement to recover capacity charges inter-alia based on scheduled generation. However, clause (2) of Regulation 17 gives the beneficiaries the first right of refusal to such arrangement,” the note said. 

CERC said that the intention for specifying Regulation 17, as indicated in the Statement of Objects and Reasons (SOR) to the Multi-Year Tariff (MYT) Regulations, 2019, was to introduce an optional provision in respect of a thermal generating station that has completed 25 years of operation from the date of commercial operation, where the recovery of both capacity charges and energy charges can be linked to scheduled generation instead of the pre-existing arrangement of separate payment of fixed cost based on availability and energy charge based on schedule if both the beneficiary and the generating company agree.

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“This issue (Regulation 17) pertaining to contractual terms is being raised in different fora and is leading to avoidable legal disputes. It has been argued by stakeholders that irrespective of whether a provision on lines of Regulation 17 exists or not, the contracting parties are free to negotiate on their own after the PPA term is over. Fastening unilateral right on one of the contracting parties, through a regulation creates complications in the negotiation between the two equal parties to the contract and best be avoided. Further, it has been observed that rarely any arrangement has been worked out/agreed between the generator and buyer under Regulation 17,” the explanatory note on the draft proposal said. 

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