Penal UI charges not to be passed on to consumers

September 17, 2009: The Forum of Regulators, which is chaired by the chairperson of the Central Electricity Regulatory Commission (CERC) and has all the chairpersons of State Electricity Regulatory Commissions as its members, has ruled that the additional unscheduled-interchange (UI) charges imposed on distribution utilities for excessive overdrawal from the grid would not be allowed to be recovered from consumers with effect from August 1, 2009.

The ruling came on the basis of the recommendation of the Parliamentary Standing Committee on Energy that the regulators should evolve such practice that when the Annual Return Rates are being filed, the damages which have been imposed as UI charges should be stated separately and very clearly and those payments which are in the nature of damages should not go to show purchase of power because that really is the inefficiency or incompetence of that particular distribution company or entity.

CERC Secretary Alok Kumar said in a release that the Forum said that the additional UI charges imposed on the utilities under the UI regulations of CERC for overdrawal during the period when grid frequency is below 49.2 Hz should not be permitted in the annual revenue requirement of distribution utilities effective August 1, 2009.

Kumar said CERC had notified the new regulations on March 30, 2009, rationalising the UI mechanism sending unambiguous message that UI mechanism is not meant for trading of electricity and will be mainly an instrument for grid discipline and settling the unintended deviations during the normal course of operations and when the frequency is in normal operating range according to the Indian Electricity Grid Code.

The objectives of this measure were to promote electricity markets for providing certainty to the investors and also to penalize the utilities who indulge in excessive withdrawal from the grid, he said.

After this decision of the Forum of Regulators, the distribution utilities will now be required to forecast their demand more precisely and plan the power purchase in advance. Otherwise, they will have to bear the burden of additional UI charges from their own finances and will not be able to pass this on to the consumers.

Source: Coal Insights