New Delhi: The new draft regulation on Market Based Economic Dispatch (MBED) of power proposed by the regulator Central Electricity Regulatory Commission (CERC) will have mixed outcomes and requires clarity on compensatory tariff payments, according to research firm India Ratings.

MBED will help reduce the cost of power purchase across discoms, enable flexibility in grids to facilitate renewable energy generation, and might also improve the payment track record of discoms. However, MBED could have a highly unfavourable impact on expensive thermal plants that lack long-term PPAs, since country-wide merit order dispatch will send strong economic signals for power buyers,” the agency said in a statement.

The discussion paper on MBED floated by CERC proposes that the scheduling of power should be carried out through nation-wide participation in the day-ahead market by both discoms and generators to discover the marginal clearing price based on variable tariff of plants with PPA and quoted tariff of plants selling un-requisitioned surplus or uncontracted power. 

At present, discoms follow self-scheduling within their own tied-up power sources as against the market-based scheduling covering all thermal plants across the country that has been proposed under MBED. Under the new regulation, the fixed charge under PPAs will be paid as in the present mechanism. Clearing of bills for variable tariff will be at the marginal cost of power (MCP), and the surplus received by the generator. 
 

“Thus, discoms will effectively purchase power at the price defined under PPA irrespective of the MCP. Supplementary PPAs approved by the regulator need to be signed to implement the bilateral contract settlement. It is, however, unclear how claims for compensatory tariff, which is generally collected much later than the period for which it is approved, will be addressed,” India Ratings said.

The nation-wide MCP for variable tariff discovered could provide a strong signal to discoms about the competitiveness of their existing power purchase contracts and to gencos about their competitiveness in a country-wide market.

The MBED framework also assumes a ‘must-run’ status for renewable and hydro projects and conventional plants will be scheduled only after using all available renewable resources. Grid curtailment possibilities will reduce significantly if the scheduling is carried out on a nation-wide or region-wide scale compared to the state-wide scheduling that is prevalent currently.