Power PSUs get 5-yr breather for tariff-based bids

New Delhi, Nov 23 | Updated: Nov 24 2005, 06:00am hrs
The committee of secretaries (CoS) has cleared the tariff policy for the power sector with two significant changes. These relate to the ticklish issue of computation of the cross-subsidy surcharge and allowing a five-year transition period to state-owned companies for developing power projects on the basis of competitive bidding.

According to the final recommendations of CoS, While for the private sector, all projects would be developed on the basis of competitive bidding, the tariff of all new generation and transmission public sector projects should be decided on the basis of competitive bidding after a period of five years or when the Regulatory Commission is satisfied that the situation is ripe to introduce such competition.

On cross-subsidy, the CoS said, The maximum level of opening cross-subsidy surcharge, together with all other charges payable for availing open access, should not exceed the difference between the current tariff of the relevant consumer category and the current average cost of supply inclusive of all costs and charges. Thisis expected to benefit open access consumers substantially.

Further, it has been decided that the cross-subsidy surcharge be brought down to a maximum of 20% of its opening level by 2010-11. The cross-subsidy is proposed to be reduced such that by the end of 2010-11, tariffs are within +/- 20% of the average cost of supply.

New Order
Cross-Subsidy Surcharge
Opening surcharge not to exceed difference between current tariff and current average cost of supply
It should be brought down to 20% of its opening level by 2010-11

Tariff-Based Bidding
All private sector projects to be developed on tariff based bidding
In the 5-year transition period, tariffs
for public sector projects to be determined by performance norms
It was felt by the CoS that a consumer would avail of open access only if the payment of all the charges leads to a benefit to him. While the interest of distribution licensee needs to be protected, it would be essential that this provision of the Electricity Act, which requires open access to be introduced in a time-bound manner, is used to bring about competition in the larger interest of consumers.