The National Electricity Policy is a major policy instrument having the force of law under the Electricity Act, 2003. The Central and State Electricity Regulatory Commissions are required to follow the policy to discharge their respective functions. Similarly, the Central Electricity Authority (CEA) is required to prepare a National Electricity Plan in accordance with the National Electricity Policy. The policy aims at accelerated development of the power sector, providing supply of electricity to all areas and protecting interests of consumers and other stakeholders. This has to be done keeping in view the availability of energy resources, technology available to exploit these resources, economics of generation using different resources, and energy security issues.
OBJECTIVES OF NEP
• Access to Electricity for all households in the next five years.
• Availability of Power to be ensured to meet the demand by 2012.
Energy and peaking shortages to be overcome and adequate spinning reserve to be available.
• Supply of Reliable and Quality Power of specified standards in an efficient manner and at reasonable rates.
• Per Capita Availability of Electricity to be increased to over 1000 units by 2012.
• Minimum Consumption of 1 unit per household per day as a merit good by year 2012.
• Financial Turnaround and Commercial Viability of Electricity Sector.
• Protection of Consumers’ Interests.
We now briefly discuss some salient features of the policy.
Salient Features of NEP
Access to electricity: The policy not only envisages access to electricity for all but it also emphasizes that all consumers, particularly those who are ready to pay a tariff which reflects efficient costs have the right to get uninterrupted 24 hour supply of power.
OBJECTIVES OF NEP
• Access to Electricity for all households in the next five years.
• Availability of Power to be ensured to meet the demand by 2012.
Energy and peaking shortages to be overcome and adequate spinning reserve to be available.
• Supply of Reliable and Quality Power of specified standards in an efficient manner and at reasonable rates.
• Per Capita Availability of Electricity to be increased to over 1000 units by 2012.
• Minimum Consumption of 1 unit per household per day as a merit good by year 2012.
• Financial Turnaround and Commercial Viability of Electricity Sector.
• Protection of Consumers’ Interests.
We now briefly discuss some salient features of the policy.
Salient Features of NEP
Access to electricity: The policy not only envisages access to electricity for all but it also emphasizes that all consumers, particularly those who are ready to pay a tariff which reflects efficient costs have the right to get uninterrupted 24 hour supply of power.
 |
| No More Power Breakdowns! |
Targeted subsidies: The Policy recognizes the need for ensuring recovery of cost of service; the cost of electricity supplied and related O&M expenses from consumers to make the power sector sustainable. The existing cross- subsidies for other categories of consumers need to be reduced progressively and gradually. This is necessary for achieving the targeted expansion in access to electricity to all the households and for ensuring the commercial viability of the utilities.
However, NEP provides that the consumers below poverty line, who consume below a specified level (about 30 units per month), will receive special support in terms of cross-subsidized tariffs. Such tariffs will be at least 50% of the overall cost of supply. The State Governments would have discretion to give subsidy to any other category of consumers in accordance with the provisions of the Act for which they will have to compensate the power utilities through the State budget.
Overcoming power shortages: NEP aims at meeting both energy and peak demand fully by 2012 along with creating 5% spinning reserves at national level. The policy emphasizes full development of the feasible hydro-potential, which is a clean and renewable source of energy. Harnessing the hydro-potential will also facilitate economic development of our hilly and North-eastern states which have a large hydro-power resource base. NEP emphasizes the need of debt financing of longer tenor for hydro projects to make these projects more viable economically.
The National Electricity Policy realizes that our country will have to depend on thermal generation to a large extent for meeting future electricity demand even after developing the feasible hydro potential. While the choice of fuel would be based on the economics of generation and supply of electricity, coal would necessarily continue to remain the primary fuel in view of the energy securityrequirements. Natural gas could also be promoted as fuel for power generation, depending upon their availability at reasonable prices.
NEP emphasizes the need for harnessing the surplus capacity available from captive generation plants through the grid for overcoming power shortages.This objective is to be achieved through appropriate commercial arrangements between distribution licensees and the captive generators. substantial captive generation capacity has been established over the years and there is reasonable surplus available from this source which needs to be tapped.
Transmission: The policy emphasizes that adequate and timely investment along with efficient and coordinated operation is necessary for developing a robust and integrated power system in the country. There is a need to augment transmission capacity in view of the massive increase planned in generation and also for facilitating development of power markets. NEP visualises that the transmission capacity should be planned and built according to international standards and practices and should cater to both the redundancy levels and margins.
Under the directives of NEP, a national transmission tariff framework will be implemented by CERC for facilitating cost-effective transmission of power across the regions. The tariff mechanism should incorporate distance, direction and the quantum of flow of electricity, and maintain consistency in the transmission pricing framework in inter-state and intra-state systems. Further, the Regulatory Commissions are mandated by NEP to facilitate non- discriminatory open access and determine transmission charges in the given time frame for availing such access. Necessary modernization of the load despatch facilities would be undertaken in a time bound manner to achieve this objective.
Distribution: This has been recognized as the most critical segment of the electricity business. NEP calls for proper restructuring of distribution utilities for achieving efficiency gains in distribution. It lays special emphasis on time bound reduction of transmission and distribution losses and advocates promotion of competition aimed at consumer benefits.
Multi-Year Tariff (MYT), which has been provided in the Electricity Act, 2003,would be an important structural incentive in minimizing risks for utilities and consumers, promoting efficiency and facilitating rapid reduction of system losses.
Role of ERCs: The National Electricity Policy is one of the key instruments for providing policy guidance to the Electricity Regulatory Commissions in discharge of their functions and to the Central Electricity Authority for preparation of the National Electricity Plan.
The Regulatory Commissions have been mandated to regulate utilities on the basis of pre-determined indices on the quality of power supply. Such parameters could be frequency and duration of interruption, time for restoration of supply, percentage defective meters and waiting list of new connections. NEP envisages drawing up a road-map for declaration of Reliability Index (RI) of supply of power to consumers for all cities and towns and also for rural areas. The data of RI will be compiled by CEA for publication. This is expected to set up benchmarks for improvement and bring in competition.
SERCs would be undertaking segregation of technical and commercial losses through energy audits. Energy accounting and publishing the results of such accounting has been made mandatory with a deadline of March, 2007. The SERCs would also specify the standards for reliability and quality of supply so as to bring these in line with international practices by the year 2012. Financing the power sector projects: Massive investment is needed for the targeted expansion of the sector. It has been estimated at Rs. 9 lakh crores in the next 10 years. Since power is the most critical infrastructure, public sector investments both at the central level and state level have to be stepped up.
Public sector investments may not be adequate for meeting the total investment required. Therefore, the policy envisages that a sizeable part of investment would need to be brought in from the private sector. Public investment would be focused on public service obligations like increasing access to electricity and supply to small and marginal farmers.To make the sector viable and also attractive for fresh investments, the policy emphasizes the need of ensuring that the generating companies, transmission and distribution licensees receive payments due to them. For bringing in larger private sector investments, NEP calls for taking steps such as encouraging competition in different segments;procurement of power through competitive bidding; and special mechanisms for encouraging private sector investments in transmission.
NEP also envisages that some part of new generating capacities, about 15%, may be sold outside through long term power purchase agreements for encouraging competition.Energy conservation: NEP envisages a voluntary approach initially for promoting energy conservation with emphasis on labelling of appliances.Gradually as awareness increases, a more regulatory approach for setting
standards would be followed. The agricultural pump sets, motors and drive systems and lighting technology have been identified as key areas for higher energy efficiency. NEP aims at promoting Energy Conservation Companies for effective implementation of energy conservation measures.
Non-conventional sources of energy: The policy seeks full development of hydro-potential. Exploitation of non-conventional energy sources such as small hydro, solar, bio-mass and wind for additional power generation capacity is also envisaged. Development of National Grid is an important feature of the Policy. The policy emphasizes the need to reduce the capital cost of the projects based on such sources of energy and undertaking promotional measures for the development of these technologies. In accordance with theprovisions of the Act, SERCs have been required to specify a minimum percentage of power to be purchased by distribution licensees from such sources at the earliest. Such purchase is envisaged through competitive bidding process allowing an appropriate price differential as compared to conventional sources.
Planned and coordinated development: The CEA would prepare the National Electricity Plan after carefully carrying out the demand forecast in consultation with stakeholders and experts. This would serve as a good reference document for prospective generating companies, transmission utilities and distribution licensees.
Rural electrification: The National Electricity Policy lays down the approach for developing Rural Electrification distribution backbone and village electrification to achieve the target of completing household electrification of the next five years. The policy also envisages financial support in terms of capital subsidy to states and special preference to Dalit Bastis for rural
electrification. Under the Policy, the Central Government has taken measures for setting standards and specifications for equipment and technologies,evolving standard operating procedures for project formulation, execution, monitoring and evaluation, capacity building in states, SEBs/Utilities, initiating R&D Programme for upgrading technology, remote metering and efficient equipments based on the recommendations of Technical Committees of experts in the power sector and financial sector.
However, NEP provides that the consumers below poverty line, who consume below a specified level (about 30 units per month), will receive special support in terms of cross-subsidized tariffs. Such tariffs will be at least 50% of the overall cost of supply. The State Governments would have discretion to give subsidy to any other category of consumers in accordance with the provisions of the Act for which they will have to compensate the power utilities through the State budget.
Overcoming power shortages: NEP aims at meeting both energy and peak demand fully by 2012 along with creating 5% spinning reserves at national level. The policy emphasizes full development of the feasible hydro-potential, which is a clean and renewable source of energy. Harnessing the hydro-potential will also facilitate economic development of our hilly and North-eastern states which have a large hydro-power resource base. NEP emphasizes the need of debt financing of longer tenor for hydro projects to make these projects more viable economically.
The National Electricity Policy realizes that our country will have to depend on thermal generation to a large extent for meeting future electricity demand even after developing the feasible hydro potential. While the choice of fuel would be based on the economics of generation and supply of electricity, coal would necessarily continue to remain the primary fuel in view of the energy securityrequirements. Natural gas could also be promoted as fuel for power generation, depending upon their availability at reasonable prices.
NEP emphasizes the need for harnessing the surplus capacity available from captive generation plants through the grid for overcoming power shortages.This objective is to be achieved through appropriate commercial arrangements between distribution licensees and the captive generators. substantial captive generation capacity has been established over the years and there is reasonable surplus available from this source which needs to be tapped.
Transmission: The policy emphasizes that adequate and timely investment along with efficient and coordinated operation is necessary for developing a robust and integrated power system in the country. There is a need to augment transmission capacity in view of the massive increase planned in generation and also for facilitating development of power markets. NEP visualises that the transmission capacity should be planned and built according to international standards and practices and should cater to both the redundancy levels and margins.
Under the directives of NEP, a national transmission tariff framework will be implemented by CERC for facilitating cost-effective transmission of power across the regions. The tariff mechanism should incorporate distance, direction and the quantum of flow of electricity, and maintain consistency in the transmission pricing framework in inter-state and intra-state systems. Further, the Regulatory Commissions are mandated by NEP to facilitate non- discriminatory open access and determine transmission charges in the given time frame for availing such access. Necessary modernization of the load despatch facilities would be undertaken in a time bound manner to achieve this objective.
Distribution: This has been recognized as the most critical segment of the electricity business. NEP calls for proper restructuring of distribution utilities for achieving efficiency gains in distribution. It lays special emphasis on time bound reduction of transmission and distribution losses and advocates promotion of competition aimed at consumer benefits.
Multi-Year Tariff (MYT), which has been provided in the Electricity Act, 2003,would be an important structural incentive in minimizing risks for utilities and consumers, promoting efficiency and facilitating rapid reduction of system losses.
Role of ERCs: The National Electricity Policy is one of the key instruments for providing policy guidance to the Electricity Regulatory Commissions in discharge of their functions and to the Central Electricity Authority for preparation of the National Electricity Plan.
The Regulatory Commissions have been mandated to regulate utilities on the basis of pre-determined indices on the quality of power supply. Such parameters could be frequency and duration of interruption, time for restoration of supply, percentage defective meters and waiting list of new connections. NEP envisages drawing up a road-map for declaration of Reliability Index (RI) of supply of power to consumers for all cities and towns and also for rural areas. The data of RI will be compiled by CEA for publication. This is expected to set up benchmarks for improvement and bring in competition.
SERCs would be undertaking segregation of technical and commercial losses through energy audits. Energy accounting and publishing the results of such accounting has been made mandatory with a deadline of March, 2007. The SERCs would also specify the standards for reliability and quality of supply so as to bring these in line with international practices by the year 2012. Financing the power sector projects: Massive investment is needed for the targeted expansion of the sector. It has been estimated at Rs. 9 lakh crores in the next 10 years. Since power is the most critical infrastructure, public sector investments both at the central level and state level have to be stepped up.
Public sector investments may not be adequate for meeting the total investment required. Therefore, the policy envisages that a sizeable part of investment would need to be brought in from the private sector. Public investment would be focused on public service obligations like increasing access to electricity and supply to small and marginal farmers.To make the sector viable and also attractive for fresh investments, the policy emphasizes the need of ensuring that the generating companies, transmission and distribution licensees receive payments due to them. For bringing in larger private sector investments, NEP calls for taking steps such as encouraging competition in different segments;procurement of power through competitive bidding; and special mechanisms for encouraging private sector investments in transmission.
NEP also envisages that some part of new generating capacities, about 15%, may be sold outside through long term power purchase agreements for encouraging competition.Energy conservation: NEP envisages a voluntary approach initially for promoting energy conservation with emphasis on labelling of appliances.Gradually as awareness increases, a more regulatory approach for setting
standards would be followed. The agricultural pump sets, motors and drive systems and lighting technology have been identified as key areas for higher energy efficiency. NEP aims at promoting Energy Conservation Companies for effective implementation of energy conservation measures.
Non-conventional sources of energy: The policy seeks full development of hydro-potential. Exploitation of non-conventional energy sources such as small hydro, solar, bio-mass and wind for additional power generation capacity is also envisaged. Development of National Grid is an important feature of the Policy. The policy emphasizes the need to reduce the capital cost of the projects based on such sources of energy and undertaking promotional measures for the development of these technologies. In accordance with theprovisions of the Act, SERCs have been required to specify a minimum percentage of power to be purchased by distribution licensees from such sources at the earliest. Such purchase is envisaged through competitive bidding process allowing an appropriate price differential as compared to conventional sources.
Planned and coordinated development: The CEA would prepare the National Electricity Plan after carefully carrying out the demand forecast in consultation with stakeholders and experts. This would serve as a good reference document for prospective generating companies, transmission utilities and distribution licensees.
Rural electrification: The National Electricity Policy lays down the approach for developing Rural Electrification distribution backbone and village electrification to achieve the target of completing household electrification of the next five years. The policy also envisages financial support in terms of capital subsidy to states and special preference to Dalit Bastis for rural
electrification. Under the Policy, the Central Government has taken measures for setting standards and specifications for equipment and technologies,evolving standard operating procedures for project formulation, execution, monitoring and evaluation, capacity building in states, SEBs/Utilities, initiating R&D Programme for upgrading technology, remote metering and efficient equipments based on the recommendations of Technical Committees of experts in the power sector and financial sector.
No comments:
Post a Comment