Transcript ELECTRCITY ACT, 2003 : AN OVERVIEW Presentation by Dr

Promotion of Clean Energy, Energy
Efficiency & DSM by Maharashtra
Electricity Regulatory Commission
Presentation by Pramod Deo,
Chairman, MERC
Presented at
Forum for Sustainable Energy, Good Governance, and Electricity
Regulation: 16-18 March 2008, Singapore
7/16/2015
Presentation by Pramod Deo
Chairman - MERC
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Outline of Presentation
• Promotion of grid connected renewable energy (RE)
based power generation by MERC
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RE and Electricity Act 2003 (EA 2003)
RE Tariff Orders by MERC
RE Potential and achievement
Tariff determination process & tariff philosophy
• MERC Initiatives for fostering energy efficiency (EE) &
DSM in the State of Maharashtra
– DSM and EA 2003
– EE/DSM Initiatives
– Key Challenges
7/16/2015
Presentation by Pramod Deo
Chairman - MERC
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Background
• Three-Member MERC fully constituted in September 1999
• Erstwhile MSEB unbundled in June 2005 into
– Maha GENCO
– Maha TRANSCO
– Maha DISCOM – supplies power to the entire State of Maharashtra except
the State capital – Mumbai
– MSEB Holding Company.
• Mumbai licensees:
– Reliance Energy Ltd. (REL),
– The Tata Power Company Ltd (TPC) &
– Brihan-Mumbai Electricity Supply and Transport Undertaking (BEST)
• Mula-Pravara Electric Co-operative Society (MPECS) in
Ahmednagar district.
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Presentation by Pramod Deo
Chairman - MERC
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Promotion of grid connected
renewable resource based power
generation by MERC
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Promotion of Grid Connected Renewable Power
Generation by MERC
• Prior to the Electricity Act 2003, no specific
provisions to promote renewable sources of
energy by State Electricity Regulatory
Commissions (SERCs)
• EA 2003 has radically changed the legal and
regulatory framework for the renewable energy
(RE) sector
• EA 2003 places the responsibility for
development of RE on the shoulders of the
SERCs
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Presentation by Pramod Deo
Chairman - MERC
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RE and EA 2003
• Section 61: The Appropriate Commission shall, subject to the provisions
of this Act, specify the terms and conditions for the determination of
tariff, and in doing so, shall be guided by the following, namely:– (h) the promotion of co-generation and generation of electricity from
renewable sources of energy;
• Section 86(1): The State Commission shall discharge the following
functions, namely:
– (e) promote cogeneration and generation of electricity from renewable
sources of energy by providing suitable measures for connectivity with
the grid and sale of electricity to any person, and also specify, for
purchase of electricity from such sources, a percentage of the total
consumption of electricity in the area of a distribution licensee;
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Presentation by Pramod Deo
Chairman - MERC
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EA 2003 – Boon for Renewable Energy
• NEP and NTP to take into account Renewables
– “The Central Government shall, from time to time, prepare the
National Electricity Policy and tariff policy, in consultation with the
State Governments and the Authority for development of the power
system based on optimal utilization of resources such as coal, natural
gas, nuclear substances or materials, hydro and renewable sources of
energy".
• Policy for Stand-alone systems
– “The Central Government shall, after consultation with the State
Governments, prepare and notify a national policy, permitting stand
alone systems (including those based on renewable sources of energy
and non-conventional sources of energy ) for rural areas.”
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Presentation by Pramod Deo
Chairman - MERC
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National Tariff Policy : Harnessing RE
• Clause 6.4 of NTP States:
• (1) Pursuant to provisions of section 86(1)(e) of the Act, the Appropriate
Commission shall fix a minimum percentage for purchase of energy from
such sources taking into account availability of such resources in the region
and its impact on retail tariffs. Such percentage for purchase of energy
should be made applicable for the tariffs to be determined by the SERCs
latest by April 1, 2006.
•
It will take some time before non-conventional technologies can compete
with conventional sources in terms of cost of electricity. Therefore,
procurement by distribution companies shall be done at preferential tariffs
determined by the Appropriate Commission.
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Presentation by Pramod Deo
Chairman - MERC
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Tariffs for RE Technologies
• State Regulators bound to take provisions under Section 61(h)
into account while drafting ‘Terms and Conditions of Tariff’
Regulations
• Accordingly most of the SERC’s have issued Tariff
Regulations to provide preferential treatment to Renewables
• MERC has issued Tariff Orders for various technologies such
as:
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Wind
Small Hydro
Biomass
Co-generation
Municipal Solid Waste
Presentation by Pramod Deo
Chairman - MERC
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RE Tariff Orders by MERC
Renewable Energy Source
Tariff Order date
Target Capacity Addition
Non-fossil fuel (bagasse)
based co-generation
16th August 2002
300 MW
Non-fossil fuel (bagasse)
based Non-Qualifying
Cogeneration
25th May 2005
Incl. above
Wind Energy
24th November
2003
750 MW
Biomass
8th August 2005
250 MW
Small Hydel
9th November 2005
200 MW
Municipal Solid Waste
6th April 2004
Not specified
Above Tariff Orders have been further extended upto 31st March 2010
(To be valid during RPS policy regime)
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Presentation by Pramod Deo
Chairman - MERC
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Maharashtra : Renewable Purchase Obligation
RPO Order (Sep 2004)
RPS Order (Aug 2006)
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•
Around 5 licensees (MSEDCL, TPC,
REL, BEST, MPECS) in Maharashtra
– 3% (FY07), 4% (FY08), 5% (FY09)
and 6% (FY10)
but RE resource concentrated in
MSEDCL area.
•
All utilities to share RE purchase
obligations and share costs.
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Applicable to licensees as well as captive
and open access consumers.
•
Enforcement mechanism introduced for
shortfall in compliance.
•
Enables pro-active action by licensees to
procure/ contract/ own RE generation.
MEDA to act as Nodal Agency for coordination and RPO Pool operations.
Simple RPO Pool under operations for
Trajectory for percentage of RE
procurement obligation stipulated.
2 years.
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Presentation by Pramod Deo
Chairman - MERC
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Maharashtra - RE Potential and Achievement
• Maharashtra bestowed with all types of RE sources
• Regulatory Orders have facilitated RE Capacity Addition
• RE Potential (7852 MW), Achievement (1872 MW as on Sep-07)
5000
4584
4500
4000
Capacity (MW)
3500
3000
2500
2000
1524
1250
1500
1000
781
600
500
207
350
287
125
14
0
2
0
Wind
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Small Hydro
Co-generation
Biomass
Presentation by Pramod Deo
Chairman - MERC
MSW & Liquid
Waste
Industrial Waste
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Tariff Determination Process
• Regulatory Commission is a quasi-judicial authority
• It can not determine feed-in tariff on its own
• Generating Companies or equipment manufacturers will have to
file petitions before the Commission for determination of tariff for
different technologies.
• Regulatory Commission will follow process as specified under
Conduct of Business Regulations of the respective Commission.
• Regulatory process is a consultative process in which all the
stakeholders get opportunity of representation.
• Tariff will be determined on conclusion of due regulatory process.
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Presentation by Pramod Deo
Chairman - MERC
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Tariff Philosophy for RE projects
• Strictly every project is unique in certain characteristics.
• However, it is difficult to set tariff for each RE project on account of:
– Site specific nature of Projects
– Large number of projects exists, with smaller unit size
– Ownership of the ‘Project Entities’ is diverse.
• Tariff determination for each project will be:
– Cumbersome
– Put significant strain on regulatory institutions.
– RE developers tend to perceive ‘Regulatory uncertainty’
• Therefore, all SERCs have opted for determination of tariff on the basis of
representative case though this would lead to some investors earning more than
specified rate of return while others would earn less.
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Presentation by Pramod Deo
Chairman - MERC
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Financing Parameters
•
In the context of tariff determination, SERCs are required to
determine various other capital and finance related parameters
such as:
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Capital cost of the project
Capital subsidies available for the project
Debt – Equity Ratio
Rate of interest including interest rate subsidy
Return on equity
Rate of depreciation
Income tax benefit
Working capital, if any
Concerns of all stake-holders such as investors, lenders, utilities and
consumers, need to be addressed.
– Front ending or back ending of Tariff (e.g. wind)
– PPA tenure (e.g. 13 years in Maharashtra)
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Operating Parameters
•
SERCs are also required to develop norms for
operating parameters such as:
– Operation and Maintenance costs
– Capacity utilization factor
– Auxiliary consumption
– Interconnection arrangements
– Metering and billing related issues
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Presentation by Pramod Deo
Chairman - MERC
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MERC Initiatives for Fostering
Energy Efficiency & DSM in
the State of Maharashtra
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Presentation by Pramod Deo
Chairman - MERC
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Promotion of EE by MERC
• Unlike grid connected renewable energy, EE has no
direct backing of:
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The Electricity Regulatory Commission’s Act 1998, or
Electricity Act 2003, or
National Electricity Policy (NEP)
National Tariff Policy (NTP)
• However, EA 2003 and NEP do mandate need to foster
energy efficiency
• Considering large benefits and prevalent shortage
situation in the State, MERC, under Section 23 of EA,
has directed implementation of several initiatives to
promote adoption of EC through utility demand side
management (DSM) programmes
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Presentation by Pramod Deo
Chairman - MERC
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MERC Initiatives in EE & DSM
• Some of the initiatives undertaken by MERC are
as follows: (Case Study discusses these
initiatives)
– Regulatory Directives to Utilities
– Capacity Building within MERC and also within
Utilities
– Load Management Directives
– Tariff Initiatives
– DSM/EE/EC Activities
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Presentation by Pramod Deo
Chairman - MERC
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Regulatory Directives
to Utilities
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Presentation by Pramod Deo
Chairman - MERC
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Regulatory Directives to Utilities
• Order of March 2005
– Directed MSEB to submit detailed first phase
plan of EC within one month
• April/May 2005
– Directive to BEST, REL and TPC to undertake
DSM programmes
– All the cost incurred on implementation of DSM
initiatives will be allowed as pass through in ARR
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Presentation by Pramod Deo
Chairman - MERC
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Regulatory Directives to Utilities
• Tariff Order of April 2007
– Long Term power procurement plan of Distribution
Utilities to have proposals on energy conservation (EC)
and energy efficiency (EE)
– Directed to take up Load research on a sustained basis
and as an integral part of operations
– Directed to take up EC and EE through appropriate
formulated DSM initiatives on a sustained basis on as
integral part of operations
– Reiterated that all the costs incurred on implementation
of DSM initiatives will be allowed as pass through in ARR
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Presentation by Pramod Deo
Chairman - MERC
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Capacity Building for
promotion of
EE/EC/DSM
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Presentation by Pramod Deo
Chairman - MERC
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Capacity Building Initiatives
• Established a DSM Cell Within MERC: April 2006
• Pending DSM Plan preparation, worked with utilities
to plan and implement on “ad-hoc” basis, EE
pilot/demonstration projects in lighting and water
pumping areas
• Commissioned a study to develop and institutionalise
DSM bidding mechanism so that ESCOs, equipment
vendors, etc. could be contracted by Utilities to
implement DSM projects
• MOU with California Energy commission, California
Public Utilities Commission and Lawrence Berkeley
National Laboratory to develop MERC and Utility
Capacity for load research, DSM and integrated
resource planning
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Presentation by Pramod Deo
Chairman - MERC
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Load Management
Directives
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Presentation by Pramod Deo
Chairman - MERC
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Load Management Directives of MERC
• Load management
worsening power
shedding beyond
possibility of load
directives to curb demand in view of
shortages (could not increase load
what was being resorted to) and
shedding in Mumbai: [basic philosophy:
voluntary load curbing is better than forced load shedding]
• Order of May 2005: BEST, TPC, MSEDCL and REL
– Load management charge of Rs. 1 (2.5 cents) per kWh if
consumption above prescribed limit; and load management rebate
of Rs. 0.5 (1.25 cents) per kWh if consumption below prescribed
limit
– Net amount collected as load management charge to be used for
promotion and implementation of EE, EC DSM
– Collected about US $ 17.5 million. This is being used to run DSM
activities to date
7/16/2015
Presentation by Pramod Deo
Chairman - MERC
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Load Management Directives of MERC
• Tariff Order of October 2006: REL & TPC: Steep Rise in load management
Charge and load management incentive - Load management charge at the rate
of additional 100% of the highest tariff chargeable to the respective category;
load management incentive at the rate of 50% of the normal chargeable rate to
the respective category
– Consumer protests as consumers faced hardships as their bills in some
instances more than doubled.
– Review petitions filed by industries and consumer associations:
• Did not have sufficient time to prepare for the directive, it came as
a shock
• Lack of knowledge and awareness about why, where and how to
reduce consumption
– In response to Review Petitions, Load Management Charge Order
withdrawn in December 2006
– Utilities were asked to design and run a comprehensive consumer
awareness campaign (conducted in March-June 2007
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Presentation by Pramod Deo
Chairman - MERC
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Tariff Initiatives
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Presentation by Pramod Deo
Chairman - MERC
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Tariff Reforms
• Since its inception in August 1999, the
Commission has undertaken several initiatives to
encourage efficient consumption. Some of these
initiatives are:
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Time of Day tariffs for several categories
Power Factor incentives/penalties
Additional Supply Charge
Utilities asked to reduce costly power purchase cost
by 2% through DSM
– Higher tariffs for certain categories of consumers
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Presentation by Pramod Deo
Chairman - MERC
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Time of Day Tariffs: MSEB/ MSEDCL (1/2)
• TOD Tariff for MSEB/MSEDCL since Tariff
Order of May 2000
• Expanded scope of TOD tariffs for all load >
20kW for MSEDCL
• Gradually raised the difference between peak
and off-peak tariff
– Presently, Differential between “peak” and “Offpeak” tariffs at 4.1 cents to 4.34 cents per unit
(Average Tariff: 5.36 cents to 14.29 cents per unit)
• Introduced TOD for Mumbai city since
October 2006
7/16/2015
Presentation by Pramod Deo
Chairman - MERC
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PF and Reactive Power Charges
• Power Factor (Various tariff
MSEB/MSEDCL, TPC, REL/BSES)
orders
for
– Incentive for PF > 0.95
– Penalty for PF < 0.9
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Presentation by Pramod Deo
Chairman - MERC
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Additional Supply Charge
• Tariff Order of October 2006
– Additional Supply Charge introduced to compensate
expenditure on costly power purchase, which was being
utilised to mitigate load shedding for specified categories &
regions
– To foster energy efficiency, reduction in Additional Supply
Charge allowed to the extent of reduction in consumption over
the last year’s consumption in corresponding period
• Tariff Order of April 2007
– To foster energy efficiency, incentive provided to the extent of
reduction in consumption over the reference period of January
to December 2005 and in case of increase in consumption,
entire increase to be billed at Additional Supply Charge
– Utilities directed to reduce costly power purchase cost by
2% through DSM
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Presentation by Pramod Deo
Chairman - MERC
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Higher Tariffs for Certain Categories
• Commission targeted conspicuous consumption categories like
shopping malls, floodlighting at stadiums, hoardings, etc., by
steeply increasing their tariffs, rather than banning consumption
by such consumer categories
• The tariff increase for one of the Mumbai Utilities:
• For Residential consumers consuming:
– >300 units per month ~ 24%
– > 500 units per month ~ 28%
• For Commercial Sector Consumers consuming:
– > 500 units per month ~ 49%
– > 1000 units per month ~ 64-68%
• For Low tension and high tension consumers:
– ~ 33-84% rise in tariff
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Presentation by Pramod Deo
Chairman - MERC
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Key Challenges
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Presentation by Pramod Deo
Chairman - MERC
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Key Challenges
• Immediate challenges:
– Changing Utility mind set (from supply side orientation to
integration of supply and demand side orientation)
– Building utility competencies – institutionalisation of DSM,
IRP and load research
– Developing appropriate incentives for utilities to take up
DSM and EE/EC under cost plus regulatory regime within
the ambit of EA 2003 (which does not have direct mandate
for DSM)
– Unlike US and European utilities, distribution business in
India has many inefficiencies (huge distribution losses,
lower collection efficiencies, etc.), & the challenge is to
integrate DSM with distribution efficiency improvement
strategies.
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Presentation by Pramod Deo
Chairman - MERC
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Key Challenges Contd…..
– Absence of energy efficiency market:
• How to motivate bankers/financiers to lend for energy
efficiency projects
• Delivery of energy efficiency : there are hardly any
ESCOs, consultants, vendors to deliver energy
efficiency (to plan as well as to implement DSM/EE/EC
programmes and projects)
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Presentation by Pramod Deo
Chairman - MERC
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THANK YOU
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Presentation by Pramod Deo
Chairman - MERC
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