Centre banks on states to power electricity sector
- News:The Union government recently approved the much awaited amendments to the National Power Tariff Policy.
- The decision, described as a “bold step” towards initiating reforms in the power sector in the country, is also intended to improve power supply and attract investment in the sector.
- After rolling out Ujwal DISCOM Assurance Yojana (UDAY) to revitalise the struggling state electricity distribution companies, this is another major decision taken by the NDA government in the energy sector.
About tariff policy:
- Tariff policy in the power sector is governed under the Electricity Act.
- The policy is the guiding principle to arrive at power rates, power purchase agreements, sale and purchase of coal and power of both conventional and renewable energy.
- objective of the amended policy
- Includes providing 24X7 electricity for all
- connecting remote villages
- introducing competitive bidding to attract investment in the transmission sector and promoting renewable energy.
- The policy also spells out some of the unique features like setting up small power plants near coal mines to provide power to local residents
- encourage expansion of existing power plants,
- installation of smart meters, using of treated sewage water in th-ermal power plants
- no inter-state transm-ission charges on solar and wind power etc
- The policy also has some out of box ideas, like allowing existing power plants to extend their capacity in their spare land which is expected to help speed up capacity addition in generation without bothering about fresh land acquisitions or environment clearances.
- With power plants having been mandated to use 100% of sewage water from treatment plants located within a 50 km radius in the new policy, a major issue of water has been addressed as, in several places, farmers have expressed anguish over diverting of huge quantity of water from irrigation to thermal power plants.
Need for tariff policy:
- The power sector has been waiting for the policy revision for the past few years due to increasing power generation, corresponding growth of transmission and distribution network and also lack of regulatory reforms to address new issues cropping up in the sector.
- Once the modified policy is implemented, the consumers will be benefited by way of time of the day metering and net metering. In ‘time of the day’ meter system, the electricity tariff will be low in non-peak hours compared to peak hours. This would give consumers flexibility to manage their electricity bills better.
- Net metering”, also called two-way metering, would allow consumers with rooftop solar projects to feed into the grid. A ‘net meter’ tracks both the electricity consumed and the electricity generated by the on-site solar or renewable energy systems. With this system, the consumers can also reduce their monthly energy bill by feeding electricity from their rooftop solar project into the grid when they are not home or are not running any appliance.
- With the policy mandating electricity distribution companies to buy 100% electricity from power plants using municipal waste as fuel, this is expected to encourage more such plants to come up apart from giving solutions to large scale garbage generated in urban areas. The amended policy also said that the power regulator has to come up with a clear action plan to ensure round the clock power supply to all consumers by 2021-22 or earlier.
- Despite the Central government’s effort to revive the power sector, which has been the most neglected segment over the years, ultimately the success of these proposals rests in the hands of the state governments as well as respective state electricity regulatory authority commissions (SERCs).
- While most of the state utilities are unable to procure electricity and supply it to consumers due to their financial mess despite abundant power available in the market, there is a challenge before the Centre to pursue the matter with them. Though the changes are positive, they are not legally binding as the policy serves only as a guiding force.
- For instance, despite the UDAY scheme being well-received, only 16 states have so far shown inclination to implement the scheme while six states have signed tripartite agreement with the Centre and state utility since the launch of the scheme three months ago.
- Some of the amendments like competitive bidding for inter-state transmission projects and renewable energy purchase obligations are not totally new. However, implementation of these proposals has been inconsistent.
- While the inter-state transmission is considered a major bottleneck for the power value, private investment is expected to go up with more private firms participating in it. The policy also emphasises the implementation of periodic tariff revisions as mentioned. It will depend on the SERCs to ensure implementation of these revisions.