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CERC notifies regulations for cross-border electricity trade

In March 2019, the Central Electricity Regulatory Commission (CERC) notified the Cross-Border Trade of Electricity (CBTE) Regulations. It specifies the procedure for getting access to the network on the Indian side for cross-border trade along with other modalities.

The regulations follow the revised guidelines for cross-border trading finalised by the Ministry of Power (MoP) in December 2018. The MoP relaxed several clauses of the previous guidelines notified in December 2016. This includes repealing the earlier provision under which only companies fully owned by the governments of the concerned countries or those having at least 51 per cent equity investment of Indian companies could export to the Indian market after obtaining a one-time approval from the designated authority in India. The new guidelines allow mutual agreements between Indian and cross-border entities under the overall framework of country-to-country agreements. It also removed restrictions in terms of contracts or segments in which the participating entities can trade on the Indian power exchanges. This allows trade in the day-ahead market on the exchanges for the first time.

India currently trades electricity with four countries – Bhutan, Bangladesh, Nepal and Myanmar. It imports power from Bhutan while it exports to the other three (see Table 1). The annual quantum of trade is close to 13,000 MUs, with India being a net exporter since 2017-18. The clarity in the policy and regulatory framework further opens up trade prospects for India’s neighbours, such as Nepal and Bhutan, which are developing their hydropower potential with an eye on export markets. Power Line presents the key features of the CERC regulations…

Scope

  • These regulations are applicable to the participating entities in India and neighbouring countries engaged in cross-border electricity trade.
  • Such trade will be allowed through mutual agreements between Indian entities and entities from the neighbouring countries. This will be part of the overall framework of agreements, which covers bilateral agreements between the two countries, the bidding route and mutual agreements between entities.
  • In the case of tripartite agreements, the cross-border trade of electricity across India will be allowed under the overall framework of bilateral agreements signed between the Indian government and the governments of the respective neighbouring countries. Participating entities from neighbouring countries are required to sign the transmission agreement with the Indian central transmission utility (CTU) for obtaining transmission corridor access across India.

Institutional framework

  • The designated authority appointed by the MoP will facilitate the approval process and lay down the procedure for electricity trade. It will coordinate with the authorities nominated by the concerned neighbouring countries for all cross-border electricity trade-related activities.
  • India’s designated authority will be responsible for transmission system planning and will coordinate with its counterparts overseas.
  • The settlement nodal agency (SNA) will be notified by the MoP for each neighbouring country for settling all charges related to grid operations. The SNA will be a member of the deviation pool, reactive energy pool and other regulatory pools, and be responsible for the payment and settlement of the corresponding charges in the pool accounts of the region that has connectivity with any neighbouring country.
  • The National Load Despatch Centre (NLDC) will act as the system operator for such transactions. It will be responsible for the collection and disbursement of transmission charges for short-term open access (STOA) transactions. The CTU will be responsible for granting long-term and medium-term open access for cross-border trade as well as for the collection and disbursement of related transmission charges.

Tariff determination

  • Tariff for the import and export of electricity by Indian entities will be determined through a competitive bidding process or a mutual agreement between the buying and selling entities subject to the payment of applicable charges for electricity transmission through the Indian grid.
  • For the import of electricity from hydro generation projects located in any of the neighbouring countries, the tariff will be determined by the CERC only if the hydropower generator approaches it through the neighbouring country’s government and if it is agreed upon by the buying Indian entities.
  • If the tariff is mutually agreed upon by the governments, it will be final.
  • The tariff for a cross-border transmission link (CBTL) from a pooling station in India to the Indian border will be determined through competitive bidding, or government-to-government negotiations, or by the CERC.

Trade through exchanges

  • Any Indian electricity trading licensee can trade on the Indian power exchanges on behalf of a participating entity from other countries after obtaining approval from the designated authority.

Connectivity rules

  • Participating entities from neighbouring countries have to seek connectivity or open access through separate applications.
  • In the case of connection to the Indian grid through a CBTL, the participating entity need not apply for connectivity. Only if it is seeking connection through a dedicated transmission system, the entity has to apply for connectivity with prescribed additional documents as per the prevailing CERC regulations. On the grant of connectivity, the applicant must sign a connection agreement with the CTU and interstate transmission system (ISTS) licensees (if applicable).

Application fee and ABG

  • The regulations specify the slabs for non-refundable application fees for connectivity, long- and medium-term open access, which varies with capacity. The fee for short-term access is determined as per the provisions under the CERC’s STOA regulations.
  • Applicants seeking long-term access will have to submit an access bank guarantee (ABG) of Rs 500,000 per MW valid for five years from the date of operationalisation.
  • If the grant of long-term access requires augmentation of the transmission system in India, the CTU must intimate the associated costs within 90 days of the submission of the application. The applicant has to furnish a fresh ABG for the entire cost of augmentation.
  • After the operationalisation of long-term access, one fifth of the ABG will be returned to the applicant annually for four years and the remaining amount will be kept until the twelfth year as security towards relinquishment charges.
  • If a customer relinquishes transmission access after the award of contract for execution of the transmission system, the CTU will encash the ABG. Further, the CTU will encash the ABG proportionate to the transmission charges if the generating station is delayed beyond the timeline finalised in the access agreement and long-term access has been operationalised.

Payment of charges

  • The CBTL will not be a part of the ISTS network for the determination of point of connection charges under the CERC’s sharing of interstate transmission charges and losses regulations.
  • The payment of transmission charges and sharing of transmission losses for the delivery of electricity at the pooling station in India will be governed by the CERC sharing regulations.
  • The SNA will be responsible for the collection and payment of all grid-related charges. The cross-border customer will establish the payment settlement mechanism for various grid-related charges.

System operation

  • To ensure system security, all international interconnections will be monitored by the respective system operators with proper coordination.
  • The regulations specify the scheduling, metering, energy accounting and settlement procedures, which will be governed by the Indian Electricity Grid Code and other regulations.
  • The total transfer capability, transmission reliability margins and available transfer capability (ATC) for cross-border trade will be assessed in advance by both system operators and the lower of the two values of ATC assessed by the two countries will be considered for allowing electricity trade.
  • In case of curtailment of the approved schedule by the NLDC, the transmission charges will be payable on a pro rata basis as per the curtailed schedule.

Others

  • Interface meters (main, check and standby meters) will be installed at both ends of the CBTL.
  • Reliable and efficient voice and data communication systems must be provided to facilitate communication, and supervision and control of the grid by load despatch centres.
  • Reactive power compensation must be provided by participating entities connected to the Indian grid as far as possible in low voltage systems close to the load points. This is to avoid the need for the exchange of reactive power with the Indian grid and maintain voltage within the specified range.

The revised guidelines and the new CERC regulations could prove to be a turning point in the creation of a regional electricity market (in South Asia) and robust cross-border electricity infrastructure. It will help attract greater investments in power generation and transmission infrastructure in the region.

Swarna Kesavan

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