Power plants may sell unallocated output

By admin January 12, 2010 5:20 am IST

The Union Cabinet will shortly take up a proposal for allowing existing power projects to sell a part of their unallocated generation capacity in the open market at market-determined prices. The Planning Commission is giving a final shape to a note prepared by the petroleum ministry on the issue which will be put up before the Cabinet for its approval. 
A government official pointed out that the proposal for allowing open access in the power sector mooted by the Planning Commission earlier this year was put in limbo for some months as the power ministry went slow in preparing the note. It has, however, now completed the note and passed it on to the Planning Commission for its inputs.
The open access system puts in place a transparent power market enabling consumers to source their electricity requirements from any source and from any part of the country without any geographical or regulatory restrictions on such sale. Though it is permitted in the country under the Electricity Act 2003, lack of clarity on pricing and other regulatory impediments has failed expand the new system beyond captive power (CPPs) units.

The issue under discussion is to operationalize open access in the power sector by allowing central power sector utilities such as NTPC to sell up to 50 per cent government’s unallocated quota in new plants to open access consumers. Existing power projects would also be allowed to sell 25 per cent unallocated generation capacity at market determined rates.
At present, the ministry has the flexibility to allocate 15 per cent of the overall power produced by generating utilities owned by the Centre. If a part of this unallocated power is sold in the open market, the power ministry would lose the freedom to determine what to do with it. That is why it initially opposed the proposal.
The task force on open access headed by the Planning Commission member B. K. Chaturvedi had suggested in its report that the price of power sold under open access would be determined by bidding to create a competitive market. States would also be compensated from open access operations as CPSUs would have to share their profits accruing from such sales.