In a major shift, power companies are allowed to pass costs on to consumers arising out of any changes in taxes, ceases and levies levied on them.
The policy also seeks to “create a win-win between the generator, utilities and consumers” by allowing power generators to sell their surplus power on the power exchange and sharing the proceeds with the state government.
“The amendments are based on four Es—electricity for all, efficiency that will ensure affordable tariffs, the environment, and ease of doing business to attract greater investment in the sector,” Piyush Goyal, Minister of State for Power, Coal and New & Renewable Energy, said in a briefing on the cabinet’s decision on Tuesday.
The amended tariff policy also imposes a renewable energy obligation on new coal or lignite-based thermal plants, requiring them to establish or purchase renewable capacity alongside their own generation units.
“This provision is very important as it will be a big boost for renewable energy.
“But the other side is that it could add to generating companies’ stress.
“There are generating companies that are already stressed as they are not being able to sell the power they generate. Now they will have to purchase renewable power, which will add to their stress,” Kuljit Singh, Partner and Industry Leader – Infrastructure, EY told The Hindu.
No interstate transmission
The new policy also mandates that no inter-state transmission charges will be levied until a time to be specified by the government.
“The signal from such a move towards compulsory generation and procurement of renewable power by coal-based plants is a clear directional shift to renewables.
“So anyone involved in the energy sector has to be prepared for that,” said Arunabha Ghosh, Chief Executive Officer of the Council on Energy, Environment and Water.
He added that firms will also have to take a call on how they procure their renewable obligations. “The costs and business models for different renewable alternatives such as rooftop solar or grid-connected sources are constantly evolving so the decision won’t be top-down any longer,” he said.
To encourage efficiency, the policy allows power producers to expand up to double their capacity through the automatic route, at their existing unit locations.
This automatic approval was earlier limited to 50 per cent capacity expansions.
Commission to fix tariffs
Further, the tariffs for multi-state power projects will be determined by the Central Electricity Regulatory Commission, thereby removing a major point of uncertainty to do with such projects.
Need for action plan
The amended policy also said that the power regulator has to come up with a clear action plan to ensure 24x7 power supply to all consumers by 2021-22 or earlier. Towards the power for all initiative, the policy enables the creation of micro-grids in remote villages as yet unconnected to the grid, and also says that these micro-grids can sell their surplus power to the grid when it reaches those areas.
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