The Power Minstry's plans to energise the sector may not be on solid ground. That is the view of the Central Electricity Regulatory Commission. CNBC-TV18 has access to a copy of a letter by the CERC to the Ministry pointing out a couple of loopholes in the Ministry's latest proposals to the terms and conditions linked to power project allocation.
The biggest concern is the develop-build-finance-operate-transfer(DBFOT) model suggested by the Ministry. The CERC letter says this model works for monopoly businesses like transport and power transmission, but not for power generation.
It's objections are three-fold:
1. The DBFOT model may de-motivate the developer from adopting prudent maintenance towards the end of the concession period.
2. There are numerous complexities in the transfer process
3. Financing such a project may be difficult, due to the unsecured nature of the assets.
So, the CERC letter suggests that the build-own-operate model be preferred. Also, the CERC says that efficiency of the project be a bidding parameter, as this will promote the interests of both power utility companies and the end-consumer.
The fuel costs will be determined using the station heat rate at the actual fuel costs. So, any increase or decrease in fuel costs is on account of the procurer and developer is responsible for maintaining the efficiency at the station heat rate. And if he is able to maintain a better station heat rate than specified there are incentives to be shared.
The CERC has also pointed out that the Ministry's proposal to allow generation companies to retain 20 percent of the capacity to cater to their own clients should be dropped, since the priority at this time should be reducing the country's energy shortfall and cutting down on stranded assets.
Source- CNBC TV