Gencos may face action over low coal stock

Power regulator Central Electricity Regulatory Commission (CERC) has proposed a reduction in the tariffs of electricity from plants that do not maintain adequate coal stocks.

The proposal is based on a directive issued by the union power ministry in February under Section 107 of the Electricity Act, for building adequate fuel inventory to avoid any crisis like in last August.

In order to recover full annual fixed charges, it is the obligation of the generating company to arrange sufficient fuel for its generating stations and maintain its availability at the plants as per the relevant regulations, said a CERC staff paper on the methodology for computing 'Deterrent Charges' for maintaining lower coal stock by coal-based generating stations.

"It is proposed that if coal-based generating stations fail to maintain coal stock as per the revised coal stocking norms as specified by the CEA (Central Electricity Authority), the AFC (annual fixed costs) of such generating stations is reduced," the paper said.

Low coal stock at power generating units is a major concern for the government amid projections of record electricity demand leading to high coal consumption. The situation triggers a crisis, particularly during and after the monsoon months when coal stocks are not replenished due to flooding in mines. Power plants often do not build stocks to save costs or due to non-payment of coal bills.

Failure to maintain coal stock as per norms impacts the supply of power to the beneficiaries, thereby forcing them to procure power from alternate sources, often at a higher cost, according to the commission.

"The failure of the generating stations to maintain coal stock as per norms, thus gets transferred to the consumers in the form of higher cost of procurement of power from alternate sources."

The staff paper floated on Friday proposes a methodology to compute the deterrent charges for low coal stock. The CERC has invited stakeholders' comments on the proposal within two weeks.

CERC's existing tariff regulations provide for a reduction in annual fixed costs on account of plant availability being lower than the normative requirement of 85%. The commission proposes to increase the levy in case coal stocks are lower than what should be normal.

The CERC has proposed different formulae for power plants using domestic and imported coal, depending on the fuel's availability.

CEA's coal stocking norms revised in December last year require coal-based pit-head thermal power plants to maintain coal stocks for 12-17 days, depending on the month of the year, as against the previous requirement of 15 days. Power plants away from the mines are required to maintain coal stock for 20-26 days, against the previous rule of 20-30 days. Currently, coal stocks are at 31% of the normative requirement.