As mentioned in one of the previous posts – Tariff Policy – A guideline for the commissions to follow, power procurement was mandated to be executed in a transparent and competitive manner. To make this smoothly executable, commissions introduced few actions for the stakeholders:

  • It was proposed to adopt two-part tariff structure for all long-term contract to facilitate Merit Order Dispatch.
  • Under the National Electricity Policy, Availability Based Tariff (ABT) was introduced in the nation in 2006.
  • The appropriate commissions (CERC and SERCs) were also empowered to introduce differential rates of fixed charges for peak and off-peak hours, for prudential load management.
  • Power Purchase Agreements (PPAs) were drafted with clear payment mechanism and payment security to the generation companies.
  • For the Coal based power projects, even cost of setting up coal washeries, coal beneficiation system, and dry ash handling and dispose of – were also covered under the plant’s capital cost.

Tariff related regulations were amended of from time-to-time, and today we have the latest Tariff Regulation, 2014 in place. This regulation applies to

  • Coal / Lignite based thermal power station
  • Gas / Liquid fuel based thermal power station
  • AC or DC sub-station
  • Gas insulated sub-station
  • Hydro generating station, including pumped storage hydropower station
  • Transmission line
  • Communication system

Prior we discuss the nitty-gritty let’s discuss few key terms, which are common in practice. Understanding of the below terms would make the further reading easier.

  • Auxiliary Energy Consumption:
    • shows the quantum of energy consumed by auxiliary equipment of the generating station, such as the equipment being used for the purpose of operating plant and machinery including switchyard of the generating station and the transformer losses within the generating station,
    • expressed as a percentage of the sum of gross energy generated at the generator terminals of all the units of the generating station:
    • Provided that auxiliary energy consumption shall not include energy consumed for the supply of power to housing colony and other facilities at the generating station and the power consumed for construction works at the generating station
  • Beneficiary: means a distribution licensee who is purchasing electricity generated at such generating station through a Power Purchase Agreement either directly or through a trading licensee on payment of fixed charges and by scheduling in accordance with the Grid Code; beneficiary shall also include any person who has an allocation in inter-State Generating Stations
  • Communication System: includes
    • Unified Load Dispatch and Communication (ULD&C) scheme,
    • SCADA,
    • Wide Area Measurement System (WAMS),
    • Fibre Optic
    • The communication system, Remote Terminal Unit, Private Automatic Branch Exchange, Radio Communication System and auxiliary power supply system etc. used for managing inter-state transmission of electricity;
  • Force Majeure: the event or circumstance or combination of events or circumstances which partly or fully prevents the generating company or transmission licensee to complete the project within the time specified in the Investment Approval, and only if such events or circumstances are not within the control the generating company; below are some examples:
    • An act of God including lightning, drought, fire and explosion, earthquake, volcanic eruption, landslide, flood, cyclone, typhoon, tornado, geological surprises, or exceptionally adverse weather conditions which are in excess of the statistical measures for the last hundred years; or
    • Any act of war, invasion, armed conflict or act of foreign enemy, blockade, embargo, revolution, riot, insurrection, terrorist or military action; or
    • Industrywide strikes and labor disturbances having a nationwide impact in India;
  • Gross Calorific Value’ or ‘GCV: in relation to a thermal generating station means the heat produced in kCal by complete combustion of one kilogram of solid fuel or one litre of liquid fuel or one standard cubic meter of gaseous fuel
  • Gross Station Heat Rate’ or ‘GHR’: means the heat energy input in kCal required to generate one kWh of electrical energy at generator terminals of a thermal generating station
  • Infirm Power: means electricity injected into the grid prior to the commercial operation of a unit or block of the generating station in accordance with Central Electricity Regulatory Commission
  • Implementation Agreement: means the agreement, contract or memorandum of understanding, or any such covenant, entered into (i) between transmission licensee and generating station or (ii) between transmission licensee and developer of the associated transmission system for the execution of the project in a coordinated manner. Essentially it binds two agencies to perform their duties as committed.
  • Maximum Continuous Rating or ’MCR’: in relation to a generating unit of the thermal generating station means the maximum continuous output at the generator terminals, guaranteed by the manufacturer at rated parameters, and in relation to a block of a combined cycle thermal generating station means the maximum continuous output at the generator terminals, guaranteed by the manufacturer with water or steam injection (if applicable) and corrected to 50 Hz grid frequency and specified site conditions;
  • Plant Availability Factor or ‘PAF‘: in relation to a generating station for any period means the average of the daily declared capacities (DCs) for all the days during the period expressed as a percentage of the installed capacity in MW less the normative auxiliary energy consumption;
  • Plant Load Factor or ‘PLF’: in relation to thermal generating station or unit for a given period means the total sent out energy corresponding to scheduled generation during the period, expressed as a percentage of sent out energy corresponding to installed capacity in that period and shall be computed in accordance with the following formula:

PLF = 10,000 * ∑SGi / {N * IC * (100 – AUXn) %


IC = Installed Capacity of the generating station or unit in MW,

SGi= Scheduled Generation in MW for the ith time block of the period,

N = Number of time blocks during the period, and

AUXn = Normative Auxiliary Energy Consumption as a percentage of gross energy generation;

  • Scheduled Commercial Operation Date or ‘SCOD’ shall mean the date(s) of commercial operation of a generating station or generating unit or block thereof or transmission system or element thereof as indicated in the Investment Approval or as agreed in power purchase agreement or Transmission service agreement as the case may be, whichever is earlier;
  • Scheduled Energy: means the quantum of energy scheduled by the concerned Load Despatch Centre to be injected into the grid by a generating station for a given time period;
  • Useful life: in relation to a unit of a generating station and transmission system from the COD shall mean the following, namely:
    • Coal/Lignite based thermal generating station                                                                        25 years
    • Gas/Liquid fuel based thermal generating station                                                                  25 years
    • AC and DC sub-station                                                                                                                  25 years
    • Gas Insulated Substation (GIS)                                                                                                   25 years
    • Hydro generating station including pumped Storage hydro generating stations             35 years
    • The transmission line (including HVAC & HVDC)                                                                         35 years
    • Communication system                                                                                                                  15 years

In the subsequent posts, we shall discuss further details and meanings of the Tariff Regulation 2014.