Ministry of Power Addresses Pass Through, Open Access in Amendments to Tariff Policy

In case of any change in domestic duties, a pass-through option will be provided for the change in cost


The Ministry of Power has issued draft amendments to Tariff Policy 2016. The amendments have been proposed keeping in view the changes and dynamic nature of the power sector.

These amendments will help carry out power reforms. The draft is open for comments, and suggestions until June 20, 2018.

Key Amendments

  • After the award of bids, if there is any change in domestic duties, levies, charges, surcharges, cess and taxes which lead to changes in the cost, such a scenario will be treated as “Change in Law” and will be allowed as pass through subject to approval by the appropriate commission.
  • The appropriate commission will lay down the principle and procedure for the same. The commission will also allow and establish a mechanism for the reimbursement of carrying cost for the period from the date of occurrence of Change in Law up to the approval of Change in Law by the commission.
  • All state electricity regulatory commissions (SERCs) must adopt the renewable purchase obligation (RPO) trajectory issued by the central g (But there is no mention of consequence if RPO targets are not met).
  • Applicable base consumption for assessment of the RPO requirement and its compliance will be worked out from the total consumption by deducting the consumption from hydro power.
  • In case the obligated entity is an industry with captive generation, the consumption from captive generation from waste heat gases as a byproduct of the industrial process will also be deducted from the total consumption.
  • In order to ensure that the burden of the inefficiencies of the distribution companies (DISCOMs) are not passed on to the consumers, the SERCs will not consider AT&C losses exceeding 15 percent for the determination of the tariff after March 31, 2019.
  • AT&C loss level for tariff determination may be aligned with targets mentioned in the MoU for UDAY, in case of UDAY signatories. The AT&C losses will be brought down to a level of 10 percent within three years of the date on which AT&C loss level of 15 percent is to be achieved.
  • The appropriate commission will determine the tariff without taking into account any subsidy components. Any subsidy to be given to any category of consumers will be given by way of direct benefit transfer directly into their accounts.
  • In keeping with the principle that the tariff reflects the cost of supply of electricity the appropriate commission will, with effect from April 1, 2019, determine the tariff in such manner that the slabs are brought within +/- 20 percent of the cost of supply.
  • In order to promote electric mobility and for enhancing energy security, SERCs will lay down the appropriate tariff framework for electricity supply from the DISCOM to the charging stations in a manner that the tariff will be less than or equal to the average cost of supply. This will be determined based on an AT&C loss level of 15 percent or actual.
  • There will be a single part tariff for supply to charging stations in the initial three years.
  • The open access customer will be liable to pay a cross subsidy surcharge for a maximum period of one year from the date of opting for open access.
  • Standby charges will be applicable only for the open access customers who have not retained contracted demand with the distribution licensee (DISCOM). In the event open access customer retains contracted demand partly or fully, no standby charges will be levied.
  • Standby charges will be designed to reflect the actual fixed cost and variable cost liability incurred by the DISCOMs to supply back up power to Open Access consumers. Standby charges shall be determined annually by SERCs to reflect the variation in costs over time.

When contacted an official with the ministry of Power said, “These amendments will help the Tariff Policy shed its complexity and loopholes. This is another step towards smart governance and is necessary for providing access to affordable electricity for all households in the next five years.”

The official further added, “We have provided ample time for stakeholders to respond, and the final policy will pave the way for power reforms. We have electrified almost every village in India, which means power demand is now going to multiply. A tariff policy that is in tandem with these changing needs was required, and we have provided that.”

Saumy Prateek Saumy is a senior staff reporter with covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.