CERC allows gencos to blend 20% imported coal without prior permission from discoms

• 'Prior permission from beneficiaries shall not be a precondition for blending up to 20 percent from alternate sources of fuel supply, including imported coal'
• The order said that the directions will remain in place until October 31 this year

New Delhi: In a Suo Moto order, the CERC (Central Electricity Regulatory Commission) has allowed power generating companies to blend 20 percent coal from alternative sources, including imported coal, with domestic coal for power generation without taking prior permission from beneficiaries, like discoms. The order, dated July 26, said that the directions will remain in place until October 31 this year. The regulator noted that in order to maintain fuel stocks, coal from alternative sources is required to be arranged to avoid any power crises in the country.

"Provided that in such a case, prior permission from beneficiaries shall not be a precondition for blending up to 20 percent from alternate sources of fuel supply, including imported coal, subject to technical feasibility, unless otherwise agreed specifically in the power purchase agreement (PPA)," the CERC order said.

Blending of imported coal

Earlier this year, the Power Ministry had issued directions to CERC to allow upto 30 percent blending with imported coal, subject to technical feasibility, without the requirement of prior consultation with beneficiaries up to March 31, 2023, to maintain resource adequacy and a 24×7 supply to consumers.

In June, the CERC published a staff paper on blending of imported coal with domestic coal to mitigate domestic coal shortages. It sought comments from stakeholders on "to what extent blending of imported coal can be allowed without permission or consultation of beneficiaries and to what extent the increase in energy charge rate (ECR) over and above the base energy charge rate, approved by the Commission for that year, can be allowed upon blending of imported coal."

What did stakeholders suggest?

Commenting on the staff paper, gencos suggested that the restriction on the percentage of blending should be removed until the coal shortage situation is normalised. Alternatively, gencos can also be allowed to procure imported coal equivalent to the shortfall in quantity as per coal requirement and available under the fuel supply agreement (FSA).

Power generating companies also suggested that the cost of imported coal should be allowed to be recovered in full as a pass through, there should not be any cap on the ECR, and the clause pertaining to obtaining consent of beneficiaries should be removed.

Discoms, on the other hand, were of the view that the price of imported coal was volatile and would impact the ECR of power supply. The higher blending of imported coal would lead to an excessive increase in the ECR of power supply to discoms and result in a substantial increase in the cost of power for end consumers. The end users have an option of either paying exorbitantly high charges or else face load shedding and the same would impact the finances of discoms.

Discoms also suggested that the percentage of coal blending may be reduced to the minimum possible extent and a cap may be levied for the cost of imported coal and should not be allowed to exceed 10 percent. An increase in ECR of up to 30 percent may also be allowed in a smooth manner so that consumers do not feel the tariff shock.

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