In what could turn out to be a bonanza for central generating utilities such as NTPC, the government has proposed to let them directly sell 25% of the Centre’s quota of power from their projects in the unregulated market to open-access consumers.
These utilities are currently required to earmark 15% of their output to the Centre, which will then use the same to meet exigencies like acute shortage of power in any part of the country. The proposal is to allow central power utilities to keep a quarter of their share to the quota with themselves for sale in the market where tariff is not regulated.
Around 10,000 MW is the total power available with the Centre for discretionary allocation and 2,500 MW of this would now be at the disposal of the central utilities for sale in the competitive market. Apart from NTPC, other firms to benefit are NHPC, NEEPCO, THDC and Damodar Valley Corporation (DVC).
The move, sources said, would give a boost to the under-developed short-term market for power in the country and help promote private investments in generation, distribution and transmission.
The proposal to allow CPSUs a share in using the Centre’s unallocated quota was mooted in a draft report of a high-level panel on financing infrastructure headed by Deepak Parekh. The committee said the proposal will boost generators’ finances as they would be able to sell power directly to bulk consumers in a competitive market, reducing their reliance on financially unviable discoms. Besides, the discoms could also augment their earnings through wheeling and open access charges.
For NTPC, the move comes at the right time as it is anticipating losses from the recently implemented tariff guidelines by the Central Electricity Regulatory Commission.
?The proposal could mean that about 6 billion units of additional electricity may be available with NTPC for market sale. With average price of electricity trading in short-term market in 2013 being close to Rs 4.3? 4.4 per unit, the total realisation for the company would be in excess of Rs 2,500 crore,? said a power ministry official.
Other central utilities could also realise amounts commensurate with their share to the unallocated quota. Out of the 10,000 MW available in the Centre’s unallocated pool from central generating stations, almost half is from power stations run by NTPC.
The average tariff of country’s largest power generator currently stands at around Rs 3.06 a unit for sale of an average 250 BU of electricity annually in the regulated market.
?Once implemented, the changes could give a boost to short term market of power, which currently accounts for just over 10% (or 100 billion units) of the total electricity generation in the country (about 1000 bu). Even in this, the real market-based transactions (through inter-state traders, bilaterals and exchanges) are just about 60 BU,? said an official in the Planning Commission.
The new electricity tariff order for FY 15- FY19 by CERC, which has linked generation incentives to plant load factor (PLF) from plant availability factor (PAF), made payment of tax reimbursement to it by discoms on actual amount paid instead of normative tax rate, is set to hit generators badly. Fitch Ratings said the new tariff order could result in NTPC taking a hit of 350 basis points on its pre-tax return on equity.
