Ministry issues guidelines for power procurement through bidding

Mumbai, Jan 27 | Updated: Jan 28 2005, 05:30am hrs
Power ministry has issued guidelines for tariff determination by bidding process for procurement of power by distribution licensees. The ministry hopes that competitive procurement of electricity by the distribution licensees is expected to reduce the overall cost of procurement of power and facilitate development of much-needed power markets.

The distribution licensees comprising Tata Power Company (TPC), Reliance Energy Ltd (REL), Noida Power, distribution companies floated by TPC and REL for Delhi, Calcutta Electric, Surat Electric Company and Ahmedabad Electric Company are expected to benefit by these duidelines.

These guidelines, which have been issued as per section 63 of the Electricity Act 2003, aim at facilitating transparency and fairness in procurment processes, facilitate reduction of information asymmetries for various bidders, provide flexibility to suppliers on international operations while ensuring certainty on availability of power and tariffs for buyers. The Appropriate Commission would now adopt the tariff in accordance with the power ministrys guidelines.

The approval from the electricity regulatory commission would be necessary if the bid documents are not as per the standard document.

In view of these guidelines the distribution licensees would be able to go in for long-term procurement of electricity for a period of seven years and above and medium-term procurement for a period of upto seven years but exceeding one year. These guidelines would apply for procurement of base load, peak load and seasonal power requirements through competitive bidding. Adequate payment security in the form of letter of credit and letter of credit backed by credible escrow mechanism would be made available to the bidders.

Procurement by more than one distribution licensee through a combined bid process would be permitted. However, the ministry has made it clear that to ensure standardisation in evaluation of bids, the payment security and other commercial terms offered to the bidders by the various procurers would not vary. Moreover, the price offered to the bidders by the bidders would also be the same for the distribution licesees inviting the bid.

For long-term procurement from hydro projects or for projects for which pre-identified sites are used, the procurer, before commencing the bid process, would have to complete site identification, land acquisition, fuel and water linkages, requisite hydrological and necessary data. The project site would have to transferred to the successful bidder at a declared price.