While the new bidding norms for power projects allowing pass-through of the additional fuel cost due to unexpected events are expected to infuse certainty in electricity tariffs, the power ministry is now working on a separate procurement framework for peaking power. This will help both the power producers, especially those having gas-based or hydel power plants, and the states and the consumers who are currently facing difficulties due to the power shortages during peak hours.
The peaking power bidding framework will allow the distribution companies to procure electricity at the agreed price for fixed time during the day for the agreed period, as specified in the power purchase agreement. According to the officials working on the guidelines, the framework will be put in place by the end of the year, and if it requires any policy change, that would be done.
The electricity demand during peak hours, termed peaking power, is about 10-11% of the total electricity consumption in a year at present on an all-India basis and this framework will allow handling of the shortages effectively, which are estimated at 10% across the country—it could go up to 12-20% by the end of the 12th five-year-plan (2012-17), if corrective steps are not taken.
The peaking power procurement framework in the making would provide for purchase agreements for a period between 1-5 years to meet requirements. Currently, a provision for extending such an agreement by 6 months has also been made part of it. The reason for keeping the tenure of peaking power purchase agreements short is the present volatility in fuel prices—the power ministry has kept both fixed and variable charge components to take care of the uncertainties.
The peaking power procurement has also been categorised into 6-7 types, based on the fuel-type and sources, for different types of requirements. These options have been provided to the procurers, and depending on their need, they will be able to procure electricity from either one or more sources.
The new bidding framework is based on the suggestions made by the task force set up for this purpose, which was constituted last year. The contours of the framework have been devised keeping in mind the ground realities like different cities and states having different requirements of peaking power. There would be flexibility in signing the power procurement arrangements as per requirements. Gas-based and hydro power have been preferred here as the plants running on these two can