Ministry of Power has been analyzing appropriate mechanisms to enhance competition in the power sector with the goal of decreasing the cost of electricity to consumers.
Achieving success in generation capacity additions over the last few years and a well-integrated countrywide electricity grid, the time is appropriate to move towards optimizing the operation of generating plants to deliver benefits of reduced operating costs to the distribution utilities and consumers.
A robust market will also help in transitioning away from the country’s over-dependence on longer-term PPAs to sustainable market-based operations.
Hence broadly identified the next step in reforming electricity market operations is “One Nation, One Grid, One Frequency, One Price” framework is to implement a Market-Based Economic Despatch (MBED) in the day-ahead horizon, initiated by the Central Electricity Regulatory Commission.
MBED is also ensuring that the cheapest generating resources across the country are despatched to meet the overall system demand which can be a win-win for both the distribution companies and the generators in bringing significant annual savings for the electricity consumers.
The Ministry has seen considerable alignment amongst all key stakeholders on a phased approach and the process to be followed for implementing Phase 1 of MBED beginning with the mandatory participation of the Inter-State Generating Stations. On a voluntary basis, Generation plants of others can also participate in Phase 1.
The implementation of Phase 1 of MBED is scheduled to start from 1st April of the next year. Before this CERC will align their regulations and a mock drill will be carried out to ensure that the system runs smoothly.
Guidelines for operationalizing optimum utilization of generating stations
It has been brought to the notice of the Government that some power plants are not generating to their full capacity at any given time and the unutilized capacity remains idle as they are tied up under power purchase agreements. Whereas in the public interest, such power needs to be despatched, where there is a requirement in the grid by the other users or consumers.
Keeping these factors in view and after careful consideration, Power Ministry has issued Guidelines for operationalizing optimum utilization of generating stations as per the requirement in the Electricity Grid.
Under the guidelines, the developer and the procurers having the PPA would share the gains realized from the sale, if any, of such un-requisitioned power in (i) and (ii) above in power exchange in the ratio of 50:50, if not otherwise provided in the PPA. Such gain will be calculated as the difference between the selling price of such power and the Energy Charge Rate (ECR) as determined under section 62 or section 63 of the Electricity Act 2003.
The obligation for the procurer to the fixed charges will remain the same in accordance with the PPA.
The above provisions shall apply both for the power plants whose tariff has been determined under Section-62 of Section-63 of the Electricity Act 2003