The advice is against the proposal of NTPC to amend the Tariff Policy

The Central Electricity Regulatory Commission (CERC) is likely to ask all power supply companies, including those from the public sector, to switch to competitive bidding for supply of power from January 2011, a move that could lead to lowering of power tariffs for consumers.

The advice by CERC to the Government comes despite a move by NTPC and NHPC to get the Tariff Policy amended to get this deadline postponed. “The tariff based competitive bidding route is a preferred one if it is leading to lower tariffs which obviously is in the interests of consumers,” the CERC has said in its advisory. It has advised the Union Power Ministry against the proposal of NTPC to amend the Tariff Policy to permit the existing cost plus tariff structure for public sector undertakings (PSUs) beyond the present deadline of January 2011.

CERC's advice to the Power Ministry comes after the Ministry had sought its comments on the proposal of NTPC for amendment in the Tariff Policy to permit continuation of the cost plus tariff structure for PSUs beyond the deadline.

At present, PSUs like NTPC and NHPC charge cost plus tariff, a lump sum fee as well as a per-unit charge from the distribution companies or discoms. At present, Tariff Policy 2006 allows PSUs to adopt the cost plus tariff structure and this permission expires in January next year after which they have to compete with the private firms for supplying electricity.

The discoms would ask for quotes from the generating companies and the lowest bidder would supply power. “CERC advises the government that the deadline of January 2011 for completing the transition to procurement of power through tariff based competitive bidding should not be extended any further,” it said.

However, CERC has asked the Power Ministry to relax the deadline in exceptional cases such as for large size multi-purpose storage hydro projects in view of the complexities and construction risks involved, a move likely to benefit NHPC.

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