Electricity (Third Amendment) Rules, 2023

  • The Ministry of Power (MoP) on September 1, 2023, notified the Electricity (Amendment) Rules, 2023 to amend the Electricity Rules, 2005 (Amendment Rules). The Amendment Rules aims to deal with the issue involving captive power generating plants in India.
  • Key aspects:
    • Rule 3 of the Electricity Rules, 2005 has been amended and has undergone the following modifications:
      • By way of the Amendment Rules the definition of captive consumers has been broadened.
      • In Sub-Rule (1), in Clause (a), in Sub-Clause (i), for the words 'captive user', the words 'captive users; and' has been substituted.
      • Section 3(b) has been amended to include 'Provided further that the consumption by a subsidiary company as defined in Clause (87) of Section 2 of the Companies Act, 2013 (18 of 2013) or the holding company as defined in Clause (46) of Section 2 of the Companies Act, 2013 (18 of 2013), of a company which is a captive user, shall also be admissible as captive consumption by the captive user.';
      • The captive status of such generating plants, where captive generating plant and its captive users are located in more than one state, shall be verified by the Central Electricity Authority as per the procedure issued by the Authority with the approval of the Central Government."

Direction Issued to all GENCOs including for Timely Import of Coal for Blending Purposes and Maximizing Production in Captive Coal Mines

  • The Ministry of Power (MoP) on September 1, 2023, issued directions to all Generating Companies (GENCOs), including Independent Power Producers (IPPs), to Import Coal in timely manner for the purpose of blending and maximizing production in captive coal mines. MoP has issued the said notification in view of the raise in demand to 200 GW practically every day in the month of August, 2023 and reached the highest ever peak demand of 236.6 GW, which is almost 21% more than the peak demand in the month of August, 2022. Since the energy demand does not match coal requirements, the necessity to continue using imported coal for blending has emerged. As a result, the required blending should be reduced to 4% for the remainder of FY 2023-2024.
  • The Central, State GENCOs, and IPPs are required to take the appropriate measures to import coal for blending at a rate of 4% via competitive bidding until March 31, 2024. The deficit in domestic coal supply will be shared on a pro rata basis by all GENCOs.
  • It shall be assured that each respective Pit-Head Stations get 100% of their domestic coal need when determining the share of domestic coal to be supplied to the GENCOs from CIL/SCCL. If domestic coal is readily available, GENCOs should avoid utilizing imported coal at their Pit-Head stations.

Draft Electricity Distribution (Accounting aspects of Specified Items & Additional Disclosure) Rules, 2023

  • The Ministry of Power (MoP) has issued draft Electricity Distribution (Accounting aspects of Specified Items & Additional Disclosures), Rules, 2023 (Rules). These Rules shall be applicable to 'Specified Entity' or 'SE'.
  • The term 'Specified Entity or SE' has been defined to mean the Distribution Licensee excluding:
    • Indian Railways
    • Military Engineering Services
    • Municipal Corporations
    • Ports
    • Captive Power Plants
    • Transport Undertakings
    • Damodar Valley Corporation
    • Entity engaged in distribution of power in Special Economic Zones
    • Any other entity exempted in this regard by the Central Government.

Regulatory deferral account balance

  • SEs which are presently recognizing regulatory deferral account balances in accordance with applicable accounting standard and guidance note on accounting for rate regulated activities in its financial statements shall abide by the directions with respect to measurement and impairment of regulatory deferral account balances.
  • On initial recognition and at the end of each subsequent reporting period, an entity should measure a regulatory asset or regulatory liability at the best estimate of the amount expected to be recovered or refunded or adjusted as future cash flows under the regulatory framework.
  • In addition, an entity should review the estimates of the amount expected to be recovered, refunded, or adjusted at least at the end of each financial year to reflect the current best estimate. Further, SEs shall disclose the basis on which regulatory deferral account balances are measured initially and subsequently, including how regulatory deferral account balances are assessed for recoverability and how impairment loss is allocated.

Disclosure Requirements

  • SEs are obligated to disclose the basis on which regulatory deferral account balances are initially measured and subsequently reevaluated. This includes how these balances are assessed for recoverability and how impairment losses are allocated. These disclosures aim to provide stakeholders with a comprehensive understanding of the financial health and operations of the entity.

Provisioning of Trade Receivables

  • The regulations also introduce a graded approach to provisioning of trade receivables, outlining specific provisioning percentages based on the age of receivables. This approach, which extends to FY 2026 and onwards, allows for more accurate provisioning and management of outstanding payments.

Additional Disclosure Statements (ADS)

  • Furthermore, the regulations require SEs to prepare ADS for each financial year. These statements cover various aspects of financial reporting, including supplementary disclosures to financial statements, power purchase and energy accounting details, ACS-ARR gap, AT&C loss, and a performance summary of the SE. The ADS will form an integral part of the financial statements and will be presented under the 'Additional Disclosure Statements pursuant to Electricity Distribution (Accounting aspects of Specified Items & Additional Disclosure) Rules, 2023.'
  • 'Additional Disclosure Statements pursuant to Electricity Distribution (Accounting aspects of Specified Items & Additional Disclosure) Rules, 2023.'

Guidelines for Tariff-Based Competitive Bidding Process for Procurement Power from Grid Connected Wind Power Projects

  • On July 26, 2023, the MoP issued the Guidelines for the Tariff Based Competitive Bidding Process in the context of Procurement of Power from Grid Connected Wind Power Projects (Guidelines).
  • This initiative has been introduced with the dual objective of promoting the augmentation of renewable energy capacity and establishing an unequivocally transparent, equitable, and standardized framework for the procurement of power produced from wind energy sources.
  • The wind power potential within the country has been evaluated by the National Institute of Wind Energy (NIWE) and is approximated to be 1,164 GW when measured at a height of 150 meters above the ground. The majority of this potential is concentrated in eight specific states: Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, and Telangana.
  • The primary focus of these Guidelines lies in facilitating both inter-state and intra-state transactions involving the sale and purchase of electricity generated through wind energy.
  • The Guidelines have been devised to oversee the efficient procurement of electricity specifically from two categories of grid-connected Wind Power Projects (WPPs): those with a capacity of 10 MW and above, closely integrated with intra-state transmission systems, and those with a larger capacity of 50 MW and above, linked to the expansive inter-state transmission system.
  • Under these Guidelines, the bidder will prepare the bid documents in accordance with these Guidelines. In case there is any deviation the bidder has to take prior approval from the government for such deviations in the draft RfS, draft PPA, or draft PSA.
  • The Guidelines are exhaustive and incorporate and provide uniformity in all bidding for the wind projects.
  • The Guidelines stipulate that the tariff adopted through bidding should apply specifically at the point of delivery. This implies that all associated expenses and outcomes leading up to the delivery point will be the responsibility of the Wind Power Generator (WPG), encompassing potential costs like transmission charges or losses, as well as Demand Side Management (DSM) charges. As a result, any expenses beyond this delivery point will be the obligation of the entity procuring the power.

Furthermore, MoP has also covered various aspects of transmission connectivity, the role to be played by the State Nodal Agency, mechanisms for resolving disputes, charges and losses related to Inter-State Transmission System (ISTS), and other pertinent considerations. These measures aim to facilitate the seamless generation and distribution of power by the generator and its subsequent acquisition by the procurer.

Guidelines for Tariff-Based Competitive Bidding Process for Procurement Power from Grid Connected Wind Solar Hybrid Project

The Ministry of New and Renewable Energy (MNRE) on August 21, 2023, has issued Guidelines for Tariff- Based Competitive Bidding Process for Procurement Power from Grid Connected Wind Solar Hybrid Project (Guidelines) targeted at increasing the integration of wind and solar power sources in order to maximize India's renewable energy potential. The Guidelines highlight the advantages of integrating multiple renewable energy sources to minimize unpredictability, increase production, and make better use of transmission infrastructure and land resources.

  • Key Aspects:
    • These Guidelines are issued under the provisions of Section 63 of the Electricity Act, 2003 for long term procurement of electricity through competitive bidding process, by Procurers, from Hybrid Power Projects having:
      • Bid capacity of 10 MW and above for projects connected to intra-state transmission system; and
      • Bid capacity of 50 MW and above for projects connected to inter-state transmission system, subject to the condition that the rated power capacity of one resource (wind or solar) shall be at least 33% of the total contracted capacity.
    • Preparation for inviting bids, the structure of the bids and project readiness
      • The Power Purchase Agreement (PPA) period shall generally be for a period of 20 years from the date of the Scheduled Commencement of Supply Date (SCSD) or from the rescheduled date of commencement of supply to the extent of extension given by the Procurer on the grounds which are beyond control of the Hybrid Power Generator (HPG).
      • The PPA may, however, also be fixed for a longer period such as 25 years. The duration of the PPA must be mentioned upfront in the (Request for Selection (RfS) document. The developers shall be free to operate their plants after the expiry of the PPA period.
    • Bidding process
      • The bidding process is a two-stage process which consists of e-bidding: a technical bid followed by a financial bid, with the option of an e-reverse auction.
    • Indicative Timeline for Bidding Process
      • A minimum of 22 days must elapse between the issuing of RfS documents and the deadline for bid submission. Evaluation of technical bids will be on the 64th day, valuation of financial bids and conduction of e-Reverse Auction will be on the 99th day, Issuance of Letter of Award (LoA) should be on the 110th day and Signing of PPA and the PSA should be on the 140th day from the issuance of the RFS documents.
      • The HPG shall provide the following bank guarantees/ letters of undertaking to pay to the Procurer in terms of the RfS:
        • The successful bidder, if being a single company, shall ensure that its shareholding in the SPV/project company executing the PPA shall not fall below 51% at any time prior to 1 year from the SCSD, except with the prior approval of the Procurer. In the event the successful bidder is a consortium, then the combined shareholding of the consortium members in the SPV/project company executing the PPA, shall not fall below 51% at any time prior to 1 year from the SCSD, except with the prior approval of the Procurer. However, in case the successful bidder shall be itself executing the PPA, then it shall ensure that its promoters shall not cede control 24 till 1 year from the SCSD, except with the prior approval of the Procurer. In this case it shall also be essential that the successful bidder provide the information about its promoters and their shareholding to the Procurer before signing of the PPA with Procurer.
        • Delay in commencement of supply of power up to 6 months from SCSD, encashment of Performance Bank Guarantee (PBG), or alternate instruments, on per day basis and proportionate to the capacity that has not commenced supply of power.
        • The responsibility of getting Transmission Connectivity to ISTS network under GNA regulation will lie with the Generator and shall be at the cost of Generator.

Any dispute that arises claiming any change in or regarding determination of the tariff or any tariff related matters, or which partly or wholly could result in a change in tariff, shall be adjudicated by the appropriate Commission. All other disputes shall be resolved by arbitration Dispute Resolution Committee set up by the Government, failing which by arbitration under the Indian Arbitration and Conciliation Act, 1996

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