Tuesday, January 31, 2012

>POWER SECTOR: Excerpts of Section 62 of Electricity Act, 2003 – Determination of Tariff

Only regulators have the power to cap prices and only for a limited period

  • We see no merit in recent reports claiming there are plans to cap power tariffs for projects with captive mines
  • As per the Electricity Act, only regulators have the power to put a price ceiling in certain circumstances and for short durations to ensure reasonable electricity prices
  • Historically, only once has CERC capped prices and only under short-term trades for 45 days, independent of fuel source

1. The Appropriate Commission shall determine the tariff in accordance with provisions of this Act for

a. supply of electricity by a generating company to a distribution licensee: Provided that the Appropriate Commission may, in case of shortage of supply of electricity, fix the minimum and maximum ceiling of tariff for sale or purchase of electricity in pursuance of an agreement, entered into between a generating company and a licensee or between licensees, for a period not exceeding one year to ensure reasonable prices of electricity;
b. transmission of electricity;
c. wheeling of electricity;
d. retail sale of electricity. Provided that in case of distribution of electricity in the same area by two or more distribution licensees, the Appropriate Commission may, for promoting competition among distribution licensees, fix only maximum ceiling of tariff for retail sale of electricity.

2. The Appropriate Commission may require a licensee or a generating company to furnish separate details, as may be specified in respect of generation, transmission and distribution for determination of tariff.

3. The Appropriate Commission shall not, while determining the tariff under this Act, show undue preference to any consumer of electricity but may differentiate according to the consumer's load factor, power factor, voltage, total consumption of electricity during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required.

4. No tariff or part of any tariff may ordinarily be amended more frequently than once in any financial year, except in respect of any changes expressly permitted under the terms of any fuel surcharge formula as may be specified.

5. The Commission may require a licensee or a generating company to comply with such procedures as may be specified for calculating the expected revenues from the tariff and charges which he or it is permitted to recover.

6. If any licensee or a generating company recovers a price or charge exceeding the tariff determined under this section, the excess amount shall be recoverable by the person who has paid such price or charge along with interest equivalent to the bank rate without prejudice to any other liability incurred by the licensee.

Excerpts of Section 63 of Electricity Act, 2003 – Determination of tariff by bidding process
Notwithstanding anything contained in section 62, the Appropriate Commission shall adopt the tariff if such tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central Government.

To read the full report: POWER SECTOR