Coal news and updates

Consumers to get benefit of lower coal prices

Union ministry of power (MoP) has asked the state government to ensure that the benefit of lower coal prices is passed on to consumers. This is to be done by issuing directives to state electricity regulatory commissions (SERCs). In case of Maharashtra, the state government will have to issue directives to MERC under Section 108 of Electricity Act. The ministry has already issued such directives to Central ERC, which decides tariff of NTPC plants and UMPPs.

The coal prices have reduced for many power plants as the generation company concerned has got a coal block in the current round of auctions. In case of power sector, the block was allocated to the company which quoted the lower power generation tariff.

In many cases the generators already have a power purchase agreement (PPA) with a distribution company. Every such PPA has a mechanism to account for change in coal prices. However, the variation is allowed only in a limited range - for example 10% higher than the PPA price or 10% lower.

MoP has asked state governments to consider the allocation of coal blocks as change in law and scrap the price band. This will ensure that the power tariff will go down beyond the band - say 20% instead of 10%.

MoP has made it clear that under no circumstances the price of power should increase than that mentioned in PPA. Only a downward revision is permitted. This condition will remain for the entire tenure of the PPA.

The ministry wants ERCs to consider six things while deciding the power tariff of a generation plant. The first is cost of coal as per allocation or auction. Second is transportation cost along with distance between the plant and the mine. The other factors are - washery charges (if any), crushing charges, royalty, duty or levy, and any other charges.

Scheme for gas power plants

The MoP has come out with a policy to revive the gas-based power plants in the country. The total capacity of these plants is over 27,000 MW of which plants having capacity of 10,000 MW are generating, but not at full load. The ministry wants the power entities to run these plants on imported gas.

IN A NUTSHELL

* Many generation companies have got a coal block in current round of auctions. Hence cost of coal has reduced for many power plants

*Union ministry of power asked state government to ensure benefit of lower coal prices is passed on to consumers

* Mostly, the generators have a power purchase agreement (PPA) with distribution company

* In the PPA there is a mechanism to account for change in coal prices

* Variation is allowed for 10% higher than the PPA price or 10% lower

* Power ministry tells states to consider the allocation of coal blocks as change in law and scrap the price band

* It will ensure power tariff goes down beyond 20%

* Power cost cannot increase but only a downward revision is permitted, warns power ministry

source: http://timesofindia.indiatimes.com