April 2015

April 17, 2015 4:08 am0 commentsViews: 29

PWI_April2015-1PowerWatch April 2015

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There is some good news for the power sector after a long time. The 3960 MW second UMPP in the country has been fully made operational with the commissioning of the last 660 MW unit at Sasan by end March 2015. Thus out of four UMPPs two are now fully commissioned.

On the fuel front, the coal ministry has concluded the first phase of e-auction of 33 coal blocks. Out of 12 blocks for the power sector nine blocks have been allocated. These were among 214 coal blocks canceled by the Supreme Court citing irregularity in their allotment. Bidding was quite aggressive for the coal blocks. These are situated in the states of Chhattisgarh, West Bengal, Odisha and MP. Since the power projects are also located in these states, consumers of these states can expect some relief in the tariff . However, the progress seen in tie-ups of PPAs for additional power procurement on a long-term by stateowned distribution utilities for the past two years remains a concern for power producers.

The Union Cabinet has now approved supply of cheap liquefi ed natural gas (LNG) for power plants to salvage about 14 GW of stranded gas-based power capacity. Earlier the government had decided to pool gas from diff erent sources with imported gas to reduce the cost. The government is now planning to supply imported LNG to gas-based power plants since the price of LNG in the international market has substantially come down. CERC had earlier issued regulations for collection and utilisation of the Power System Regulatory Fund (PSRF). The fund consists of the amount collected from users of the transmission network as congestion charges, congestion amount, deviation settlement charges and reactive energy charges. This fund will be utilised to subsidise gas-based power units for a period of one year. In a reverse bidding method, the plant willing to take the lowest amount of support from the power system development fund and maintain the tariff at Rs 5.50 per unit will be supplied with imported gas. The gas-based plants would get an assured supply of gas so that they can run at 30% plant load factor. This would help gas-based generators to service their debt but they may have to forgo the return on equity. To make the new system viable, GAIL will give concessions in its transportation tariff and margins while LNG terminals will reduce their charges. The government may reduce taxes and customs duty on LNG. This is expected to benefi t gas-based power producers such as GMR, Lanco, Essar, Reliance and GVK Group to service their debt for stranded assets.

Jayant D Kulkarni

Editor

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