Quality Check

CERC directs gencos to bill discoms on a coal-received basis

The quality of coal has been a constant matter of discord among coal miners and power generation and distribution companies, since the price of coal in India is determined on the basis of its gross calorific value (GCV). In a major win for discoms, the Central Electricity Regulatory Commission (CERC) has held that gencos must calculate energy charges based on the grade of coal received at the thermal power station (TPS) rather than the grade of coal despatched from the mines.

With this, the commission upheld the petition filed by Tata Power Delhi Distribution Limited (TPDDL) against NTPC Limited and the Damodar Valley Corporation (DVC) on matters pertaining to the measurement of GCV on a coal-received basis, slippage of grade between “coal as billed” and “coal as received”, and sharing of information with the beneficiaries. The order is in line with Clauses (6) and (7) of Regulation 30 of the CERC (Terms and Conditions of Tariff) Regulations, 2014.

Billing practice

In its order, the CERC clearly stated that as per the Tariff Regulations, 2014, energy charges levied by gencos on discoms should be computed based on the GCV calculated at the unloading point at the generating station instead of at the loading point at the mine. In case the genco is blending coal from various sources, it must provide the details of the blending ratio of imported coal and domestic coal, the proportion of e-auction coal and the weighted average GCV of the fuels “as received” separately along with the coal invoices.

However, the commission’s verdict is subject to the outcome of the related writ petitions that are currently pending in the Delhi High Court, wherein NTPC, the Association of Power Producers and Lanco Infratech Limited have challenged Regulation 30(6) of the Tariff Regulations, 2014.

Grade slippage

While addressing the issue of coal grade slippage, the commission stated that one of the challenges in ensuring the delivery of appropriate quality coal to thermal power plants pertains to managing the slippage in quality after it is transported from Coal India Limited’s (CIL) collieries. Since coal prices are based on its grade, slippage in quality means that the end-use industry has to pay more for a lower grade of coal.

In November 2015, the Ministry of Coal approved third-party sampling of coal in order to resolve the disputes between CIL and power producers, wherein it authorised the Central Institute of Mining and Fuel Research to appoint an independent third-party agency through a transparent process for sampling purposes. The CERC, in the current order, has directed gencos to share the results of third-party sampling at the loading end with the commission and post it on their websites.

The CERC further stated that along with sampling at the loading point, there is also a requirement to introduce third-party sampling at the generation end to assess the exact magnitude of grade slippage. The commission has asked gencos to install appropriate facilities for obtaining samples and testing them in laboratories in order to determine the GCV on a received basis. The commission has advised gencos to take up the matter with the concerned ministries and CIL in order to address this issue.

Sharing of information

In its petition, TPDDL had submitted that NTPC and DVC were not sharing the details required as per Clause (7) of Regulation 30 of the Tariff Regulations, 2014, and were not clarifying the pricing methodology being used for determining the cost of primary fuel, which is critical for calculating the variable cost. In addition, the discoms complained about the wide disparity in the price of coal declared by the gencos, which was at times three times higher than that indicated by CIL as per its New Coal Distribution Policy.

The commission agreed that the information related to energy charges is critical because it helps the beneficiaries in taking informed decisions regarding the scheduling of the power from the TPSs. Therefore, all gencos are required to share the necessary information with their respective beneficiaries in accordance with Regulation 30(7) of the Tariff Regulations, 2014. This information should be displayed on the genco’s website for three months and the reason for any missing information must be clearly mentioned. The gencos have also been directed to introduce a help desk to address the concerns of the beneficiaries regarding the energy charges.

Conclusion

Measuring GCV on a coal-received basis along with third-party sampling at the receiving end will lead not only to substantial savings for discoms but also increase generation efficiency owing to the delivery of better quality coal. The verdict also supports increased transparency in the billing system, thereby ensuring fair practices.

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