Electricity Regulatory Authority seeks feedback on ‘deterrent fees’ for low coal stockpile at thermal power plants

As the Central Electricity Regulatory Commission (CERC) has sought feedback from stakeholders, thermal power plants may soon have to pay a “deterrent fee” for inconvenience caused by keeping coal stocks below specified.

CERC has solicited feedback from stakeholders on the methodology for calculating this fee through a public notice issued on May 13, 2022. All stakeholders can submit feedback until May 27, 2022.

An amendment to the Tariff Regulations 2019 is proposed to calculate the deterrence fee based on the average stock availability of coal for the past three months (the month in which the capacity fee reduction is calculated and two months prior to that month).

In the working group paper on “Methodology for calculating ‘deterrent fees’ for maintaining lower coal stocks by coal-based thermal power plants,” CERC notes that in recent months, coal stocks in many coal-based thermal power plants have been reported to be less than Coal storage standards set by the Central Electricity Authority (CEA).

He stated that low coal stocks led to a decrease in the stated (energy) availability by generating stations, which in turn forced countries to purchase energy from alternative sources at higher rates.

In order to ensure that sufficient stock of coal is maintained in thermal power plants at all times, CEA has revised coal storage standards for coal-based thermal power plants.

In February 2022, the Department of Energy issued a directive to CERC under Section 107 of the Electricity Act 2003 to make appropriate amendments in relevant regulations to provide disincentives to maintain less expensive stock by thermal power plants by levying deterrent fees for short-term declines in coal stock.

Against this background, CERC has submitted a Staff Paper, To Provide Disincentives for Maintaining Low-Cost Stock by Thermal Power Plants, which proposes a methodology for calculating dissuasive fees for maintaining lower coal stocks.

The paper says that the failure to maintain coal stocks up to standard affects the availability at the plant and the energy supply to beneficiaries, forcing those involved to buy energy from alternative sources, which are often more expensive.

She explained that the failure of power plants to maintain coal stocks according to the norms, is thus transmitted to consumers in the form of a higher cost of purchasing energy from alternative sources.

According to the revised Coal Storage Standards (December 2021), coal-based thermal power plants are required to maintain coal stocks in a range of 12 to 17 days, depending on the month of the year, versus the prevailing rate. Coal stock standard 15 days.

iE Power Plants Away from Mines iE Undrilled master plants are required to maintain coal stock in the 20 to 26 day range compared to prevailing coal stock standards of 20 to 30 days.

The newspaper said that in order to recover the full annual fixed fee (AFC), it is the duty of the generation company to arrange adequate fuel for its generating stations in accordance with the standards and to maintain the availability of the station in accordance with relevant regulations.

It was suggested that if coal-based power plants fail to maintain coal stock in accordance with revised coal storage standards as defined by CEA, the AFC of these power plants would be reduced.

Current regulations already provide for a reduced AFC at the cost of actual plant availability which is lower than the NAPAF (Standard Annual Plant Availability Factor).

(with PTI input)