Role of Electricity Regulatory

Commissions

By
S C Shrivastava
Joint Chief (Engg)

Central Electricity Regulatory Commission

In this presentation
Overview
Legal/Policy framework
Regulatory framework

Regulatory scope/activities
Market Development - CERC

initiatives & impact

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OVERVIEW
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Sectoral Parameters
Unelectrified rural households (2001
Census)

77.8 million
(57%)

Power Supply Position during July

2010
- Energy shortages
- Peaking deficit

8.3%
12.1%

Generating plants PLF (2009-10) All

India
Generation performance (2009-10)

77.53%
771 BUs
(7.0 % growth over
corresponding period of
previous year)

Cumulative High Voltage Transmission 2,26,458 ckt km

links (220 KV and above) (upto April
2010)
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Installed Generation Capacity in India

(as on 31.01.2011)

Total Installed Capacity

(as on 31.01.2011)
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Installed Renewable Generation Capacity in India

(end December10)
Renewable Energy Installed Capacity (MW)

5%

1%
Wind Power

8%

Small Hydro Power

16%

Biomass Power

70%
Bagasse Cogeneration
Waste to Power
Solar Power (SPV)

Total Installed Capacity

(as on 31.12.2010)
Contributes 4% of total Electricity
Generation
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Power Infrastructure in India

(as on 31.01.2011)
State

CENTRAL SECTOR

PRIVATE SECTOR

21%
48%
31%

Total Installed Capacity

(as on 31.01.2011)

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Ownership Status of Transmission

and Distribution
Almost 100% of Electricity Transmission
in India is owned by public sector.

About 13 % of Electricity Distribution in

India is owned by private sector.

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Electricity Requirement 2031 - 32

GDP Growth Rate
8%

9%

Total Energy Requirement

3880

4806

Energy Requirement at Bus Bar

3628

4493

Projected Peak Demand (GW)

592

733

Installed Capacity Requirement (GW)

778

960

Billion kWh

Source: Integrated Energy Policy

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LEGAL/POLICY
FRAMEWORK
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10

Basic Legal Framework

Electricity a concurrent subject as per
Constitution of India.
Both Centre and States can legislate.
In

case

of

repugnancy,

Central

legislation prevails.
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Legal Framework under old laws

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Regulatory authorities under IE Act, 1910 and E(S)

Act, 1948
Central Government
State Government
CEA
SEB
Central Government Powers to fix capital ceiling for
TEC clearance etc.
State Government Powers to grant licence etc.
CEA TEC of generation projects, technical norms
etc.
SEB Several powers as main advisor of State
Govt.

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Legal Framework

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Contd

Regulatory authorities under ERC Act,

1998
CERC
SERCs
JERC

Objective distancing of Govt./Govt.

organization from regulation.

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13

Legal Framework Electricity Act, 2003

Consolidates laws of electricity relating to generation,

transmission, distribution and trading of electricity.

Creates environment conducive for development of

electricity industry.

Introduction of competition.

Constitution

of

Central

and

State

Regulatory

Commissions to rationalize electricity tariffs.

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Electricity Act 2003 -Key Features

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Open Access to Transmission /Distribution Systems

De-licensing of power generation

Trading in electricity permitted

Liberal provisions for captive power generation

Rural generation and distribution freed from licensing

Expanded role for the Regulatory Commissions

Envisages unbundling of transmission and distribution.

Regulatory Commissions to develop electricity markets.

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The Electricity Act, 2003

Clear demarcation of role and responsibility of

Government (policy making)

Independent Regulatory Commission (powers of

regulation)

Other statutory bodies like Central Electricity

Authority (as expert body on technical matters)

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16

Government

Formulation of

National Electricity Policy

Tariff Policy

National Electricity Policies on rural electrification.

Powers to issue directions to the Regulatory

Commissions

on

issues

involving

public

interest.
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National Electricity Policy

Total village electrification by year 2010

By year 2012 :

Per capita availability 1000 units.

Installed capacity over 200,000 MW.

Spinning reserves 5% .

Minimum lifeline consumption of 1 unit per household per

day.

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Inter-regional transmission capacity 37,000 MW.

Energy efficiency/ conservation savings about 15%.

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18

Tariff Policy

Mandates

competitive

procurement

of

power

and

transmission services transitional window of 5 years period

given to public sector companies.

Encourage efficiency in operations by sharing of gains

between licensees and consumers.

Promote Multi-Year Tariff (MYT) framework.

Encourage loss reduction Strategies.

Tariff design : Linkage of tariffs to cost of service

gradual reduction in cross subsidy (+/- 20% of average cost

of supply)

Progressive reduction in Cross-subsidy surcharge for open

access.

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REGULATORY FRAMEWORK
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Regulatory Commissions

At the Center CERC

Powers to regulate centrally owned generating companies

and companies having composite scheme for generation and
sale of electricity in more than one State.

To regulate inter-State transmission/Trading.

In the States SERCs

Powers to regulate intra-State generation, transmission and

distribution.

CERC vis a vis SERCs

No hierarchical relationship. However, SERCs are to be

guided by the principles of tariff determination specified by

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CERC.

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21

Functions of CERC

to regulate the tariff of inter-state generating companies

to regulate the inter-State transmission of electricity

to

determine

tariff

for inter-State

transmission

of

electricity

to issue licenses for inter state electricity transmission

and trading.

to adjudicate upon inter-State disputes

to specify Grid Code

to specify and enforce the standards with respect to

quality, continuity and reliability of service

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to fix the trading margin

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Functions of CERC

Advisory Functions:

formulation of National electricity Policy and tariff policy;

promotion of competition, efficiency and economy in the activities of

the electricity industry;

promotion of investment in electricity industry;

any other matter referred to the Central Commission by the Central

Government

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Functions of SERCs

determine the tariff for generation, supply, transmission and wheeling

of electricity, wholesale, bulk or retail within the State

regulate electricity purchase and procurement process of distribution

licensees

facilitate intra-State transmission and wheeling of electricity

issue licences for intra state transmission, distribution and trading.

promote co-generation and generation of electricity from renewable

sources of energy

adjudicate upon the intra-state disputes

specify or enforce standards with respect to quality, continuity and

reliability of service by licensees;

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fix the trading margin in the intra-State trading of electricity

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Functions of SERCs

Advisory Functions:

promotion of competition, efficiency and economy in

activities of the electricity industry;

promotion of investment in electricity industry;

reorganization and restructuring of electricity industry in

the State;

matters

concerning

generation,

transmission

distribution and trading of electricity or any other matter

referred to the State Commission by that Government.

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Mission Statement-CERC

The

Commission

promotes

competition,

efficiency

and

economy in power markets, protects the interests of consumers

and promotes investments in power sector. In pursuit of these
objectives the Commission aims to

Formulate an efficient tariff setting mechanism which ensures economy and

efficiency in the pricing of bulk power and transmission services and leads to
least cost investments,

Promote development of power market by creating a market structure,

facilitating open access in inter-State transmission, facilitating interstate
trading,

Improve the operations and management of the inter-State transmission

systems through Indian Electricity Grid Code (IEGC), Availability Based Tariff
(ABT),

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Regulatory Commission - a quasi judicial body

Powers of Civil Court for the purposes of

inquiry or proceedings under the Act.
(Section 94)

Powers

to

compliance

impose
of

penalty

direction

of

for

non-

Regulatory

Commissions.

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Powers to adjudicate
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Accountability of Regulators

Annual Report to be laid before the Parliament.

Accounts of Regulatory Commissions to be

audited by CAG.

Appeal against the orders of Regulatory

Commissions to lie before the Appellate

Tribunal.

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Procedure for Regulations

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PROCEDURE FOR PETITIONS

PETITIONER

RESPONDANTS

ARGUMENTS

REVIEW
PROCEEDINGS

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ORDERS

CERC

Appeal in
Appellate
Tribunal

30

Appellate Tribunal

Constitution of Appellate Tribunal consisting of Chairman,

three Members (Technical and Judicial) and one Member

with specialization in Petroleum Sector.

Appellate Tribunal to hear appeals against the orders of

CERC/SERC/PNGRB.

The appeal to Appellate Tribunal should be filed within 45

days of order issued by CERC/SERC/PNGRB.

Appeal against the orders of Appellate Tribunal to lie before

the Supreme Court within 65 days.

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Appellate Tribunal considered necessary to-

Reduce litigation and delay in decisions through High Court.

Provide technical expertise in decision on appeals.

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REGULATORY
SCOPE/ACTIVITIES
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Generation

No requirement of licence.

Full freedom to captive generation.

For hydro-generation clearance of CEA is necessary

due to concern of dam safety and inter-State issues.

Generation from Non-Conventional Sources / Cogeneration to be promoted. Minimum percentage of

purchase of power from renewables may be prescribed

by Regulatory Commissions.

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Transmission

Transmission Utility at the Center and in the States to

undertake

planning/development

of

transmission

system.

Regional Load Despatch Centers to ensure integrated

operation of the power system.

Flexibility regarding keeping Transmission Utility and

load despatch together or separating them.

The

Load

Despatch

Centre/

Transmission

Utility/Transmission Licensee not to trade in power.

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Trading/ Market development

Trading distinct activity permitted with licensing.

Regulatory

Commission

to

specify

technical

requirement, capital adequacy requirement and credit

worthiness for a trader.

Regulatory Commission may fix ceiling on trading

margin to avoid artificial price volatility.

The Regulatory Commission to promote development

of market including trading.

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Tariff

Regulatory Commissions to determine tariff for

Supply by Generating Company to distribution licensee

through long term contract. For short term contracts only

minimum and maximum ceiling of tariff.

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Transmission of electricity.

Wheeling of electricity

Retail sale to consumers by Licensee.

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MARKET DEVELOPMENT
- CERC INITIATIVES & IMPACT
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Market Development - CERC initiatives

Regulations on

Short-term Open Access

Grant of Connectivity, Long-term Access and Mediumterm Open Access in inter-State Transmission.

Grant of Regulatory Approval for execution of Inter-State

Transmission Scheme to CTU

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Transmission Pricing

Power Market
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CERC initiatives

Special Features of CERC regulations on short-term open

access

Timelines for concurrence of SLDC in case use of

intra-State system is involved

Provision of deemed concurrence if SLDC does not

decide within above timelines.

SLDC to look at only two aspects:

existence of metering infrastructure, and

availability of surplus transmission capacity in the

State network.

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CERC initiatives

Features of CERC regulations on Grant of Connectivity,

Long-term Access and Medium-term Open Access in interState Transmission

Enabling transmission products of different varieties, standardization of

procedures, defining time lines and ensuring level playing field among

different categories of market players.

Introduced medium-term Open Access to inter-State grid - for a period

ranging from 3 months to 3 years.

New regulatory provisions for seeking connectivity to grid.

Discrimination between

public and private sector generators on

connectivity to grid, abolished.

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CERC initiatives

Regulations on Grant of Regulatory Approval for execution

of

Inter-State

Transmission

Scheme

to

Central

Transmission Utility

This is to facilitate network expansion keeping in view

the

anticipated

transmission

needs

without

the

requirement of prior agreement with the beneficiaries

CERC has granted approval for investment (of about Rs.

58000 Cr. ) to CTU for nine high capacity transmission

corridors.

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CERC initiatives

Regulations on Sharing of Inter State Transmission

Charges and Losses

National transmission tariff framework in line with

vision of tariff policy.

Sensitive to direction, distance and quantum;

Addresses short-comings of existing system like

pan-caking of charges, sharing of charges not
being fully sensitive to distance and direction,
pricing not efficient enough to address emerging
market requirements.

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CERC initiatives

Power Market Regulations

Provide a road map for development of power

market

Define roles of various players in the market

and

phases

of

introduction

of

products/contracts.

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Market Development- Impact

Volume of Open Access transactions
(inter-State transmission)
35.00
7.09

30.00

Volume (BUs)

25.00

2.77

20.00
15.00

26.82

10.00
11.85

14.19

15.02

2005-06

2006-07

20.96

21.92

2007-08

2008-09

5.00
0.00
2004-05

Electricity Transacted by Trading Licensees

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Source: NLDC

2009-10

Electricity Transacted by Power Exchanges

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Market Development- Impact

Consumer Open Access through Power Exchange - A Snapshot
Details

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Indian Energy Exchange Ltd

Total Clients

300

Open Access Consumers

160

Nature of Business of these

Consumers

Industrial Consumers- Textiles, Spinning

mills, Auto Ancillary

Geographical Location of these

Consumers

Punjab, Rajasthan , Tamil Nadu, Andhra

Pradesh

% of Daily Cleared Volume by OA

consumers during Oct 2009 Feb
2010

25-30 % ( 5-7 MU) of total daily cleared

volume of Power Exchange

Nature of purchase

Peak , Off Peak

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Market Development- Impact

Investment promotion:

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CTU has received 225

applications
from private
developers for Long Term Open Access amounting to
1,62,898 MW
Phase 1: 42,108 MW (LTOA granted to 43 applicants )
Bank guarantee of 875 Cr
given by developers and
BPTA signed
Geographical locations
Pit-head coal Orissa, Chhattisgarh, Jharkhand
Coastal with port facilities - Andhra Pradesh, Tamil
Nadu
Hydel sites Sikkim

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Grid discipline - IEGC

IEGC and UI regulations amended to ensure greater grid

discipline .

Operational frequency band tightened from 50.3 Hz

to 49.2 Hz to 50.2 to 49.5 Hz.

This is aimed at ensuring better performance of

generating stations and user appliances.

All users of inter-State grid including distribution

utilities will also now be directly responsible for grid
discipline and load management, in addition to
SLDCs.

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Grid Discipline - Restructured UI mechanism

UI regulations amended to send a message that UI mechanism should not be

used as a trading tool

Underdrawls and over injections beyond the permissible quantities,

disincentivised and priced at lower rates

in order to push more electricity to organized electricity markets and

to further discourage use of UI mechanism for sale of electricity,

Additional UI charge of 40% on the normal UI rate (Rs. 8.73 per unit),
applicable at grid frequency below 49.5 Hz instead of 49.2 Hz

to more effectively curb the tendency of some states to heavily

overdraw

Additional UI rate has been made 100% on overdrawals when grid

frequency is below 49.2 Hz

to put further exemplary deterrent on overdrawls

Improvements in grid frequency profile subsequent to CERC regulation on IEGC

and UI

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Improvement in Grid profile

NEW Grid Fequency Profile April 10- May10
100

90

Frequency Profile in June10 ( 49.5-

80

70

Frequency Profile in May10 ( 49.5-50.2)

Percentage

60

50

40

Frequency Profile in April10 ( 49.5-50.3)

30

20

10

Day

0
1

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16

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Grid discipline - constraints

Disconnection almost impossible in meshed system

Centre-State issues

J&K defaulting in UI payments, difficulties in

disconnection.

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Thank You
www.cercind.gov.in