Central Electricity Regulatory Commission
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Central Electricity Regulatory Commission (CERC), a key regulator of the power sector in India, is a
statutory body A statutory body or statutory authority is a body set up by law (statute) that is authorised to implement certain legislation on behalf of the relevant country or state, sometimes by being Primary and secondary legislation, empowered or deleg ...
functioning with
quasi-judicial A quasi-judicial body is a non-judicial body which can interpret law. It is an entity such as an arbitration panel or tribunal board, which can be a public administrative agency (not part of the judicial branch of government) but also a contra ...
status under sec – 76 of the Electricity Act 2003. CERC was initially constituted on 24 July 1998 under the Ministry of Power's Electricity Regulatory Commissions Act, 1998 for rationalization of electricity tariffs, transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, and for matters connected Electricity Tariff regulation. CERC was instituted primarily to regulate the tariff of power generating companies owned or controlled by the
Government of India The Government of India (ISO 15919, ISO: Bhārata Sarakāra, legally the Union Government or Union of India or the Central Government) is the national authority of the Republic of India, located in South Asia, consisting of States and union t ...
, and any other generating company which has a composite scheme for power generation and interstate transmission of energy, including tariffs of generating companies.


History

On 2 July 1998, recognizing the needs for reforms in the electricity sector nationwide, the
Government of India The Government of India (ISO 15919, ISO: Bhārata Sarakāra, legally the Union Government or Union of India or the Central Government) is the national authority of the Republic of India, located in South Asia, consisting of States and union t ...
moved forward to enact the Electricity Regulatory Commission Act of 1998, which mandated the creation of the Central Electricity Regulation Commission with the charge of setting the tariff of centrally owned or controlled generation companies. The Ministry of Power, India, has published the Electricity Regulatory Commissions Act, 1998. Apart from CERC, the act also introduced a provision for the states to create the State Electricity Regulation Commissio
(SERC)
along with the power to set the tariffs without having to enact separate state laws. Mr.S.L.Rao was the first Chairman of CERC (1998–2001). During March 2004, Indian Institute of Management Ahmedabad (IIM-A) called for the merger of the Central Electricity Authority (CEA) and Central Electricity Regulatory Commission (CERC) on the grounds that technical and economic regulatory functions need to be carried out in close coordination. Even though the Electricity Act, 2003 envisages separate identity for CERC and CEA, and there is a necessity for separation in the short run, the two regulators should be merged eventually, as there are substantial synergies between them. But Ministry of Power rejected IIM-A's recommendations in this regard and observed that the tariff fixation is in the exclusive domain of electricity regulatory commissions (ERCs), and no other entity or government has any role in this regard. On 1 September 2009, CERC has entered into a Memorandum of Understanding (MoU) with world-renowned USA's
Federal Energy Regulatory Commission The Federal Energy Regulatory Commission (FERC) is an independent agency of the United States government that regulates the interstate transmission and wholesale sale of electricity and natural gas and regulates the prices of interstate transport ...
for Development and regulatory oversight of Power market, Grid Reliability, Energy Efficiency, Transmission and Distribution services in India.


Obligations

* Formulate an efficient tariff setting mechanism, which ensures speedy and time bound disposal of tariff petitions, promotes competition, economy, and efficiency in the pricing of bulk power and transmission services, and ensures minimal cost investments. * The regulation of tariffs of central generating stations. * The regulation of tariffs of electric power generated and sold across states in a composite package. * The regulation of interstate transmission tariffs, and facilitation of open access in interstate transmission. * To issue licences to persons to function as transmission licensees and electricity traders with respect to their interstate operations. * To adjudicate disputes involving generating companies or transmission licensees. * To Improve the operations and management of the regional transmission systems through Indian Electricity Grid Code (IEGC), Availability Based Tariff ( ABT), etc. *To specify and enforce the standards with respect to quality, continuity, and reliability of service by licensees. * To promote the development of the power market & fix the trading margin in the interstate trading of electricity, if considered necessary. *To discharge such other functions as may be assigned under the Act.


Advisory functions

* Formulation of National Electricity Policy and Tariff Policy. * Promotion of competition, efficiency, and economy in the activities of the electricity industry. * Promotion of investment in electricity industry. * Any other matter referred to the Central Commission by the Central Government.


Chairpersons


Members

* Mr. A. R. Ramanathan (August, 1988 to December, 2000) * Mr. D. P. Sinha ( August 1988 to November, 2002) * Mr. G. S. Rajamani (August, 1998 to July, 2003) * Mr. K. N. Sinha (May, 2001 to May, 2006) * Mr Bhanu Bhushan (February, 2004 – February, 2009) * Mr A. H. Jung (February, 2005 to February, 2007) * Mr. R. Krishnamoorthy (May, 2007 to January, 2010) * Mr. S. Jayaraman (September, 2008 to May, 2013) * Mr. V. S. Verma (February, 2009 to February, 2014) * Mr. M. Deena Dayalan (March, 2010 to February, 2015) * Mr. A. K. Singhal (October, 2013 to October, 2018) * Mr. A. S. Bakshi (August, 2014 to July, 2018) * Dr. M. K Iyer (August, 2015 to February, 2020) * Mr. I. S. Jha (January, 2019 to January, 2024) * Mr. Arun Goyal (April, 2020 to August, 2024) * Mr. Pravas Kumar Singh(February, 2021 to May,2024) * Mr. Ramesh Babu V.(May, 2024 to present) * Mr.Harish Dudani (August,2024 to present) * Mr.Ravinder Singh Dhillon (Feb, 2025 to present)


Important advice to government

# Regarding time frame for tariff based
competitive bidding Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual obl ...
(01-06-2010) # Regarding the Open Access (18-05-2010) # Regarding the installation of dedicated
transmission lines In electrical engineering, a transmission line is a specialized cable or other structure designed to conduct electromagnetic waves in a contained manner. The term applies when the conductors are long enough that the wave nature of the transmis ...
(14-05-2010) # Regarding the issues related to regulation of electricity forward contracts and electricity derivatives markets (19-02-2010). # Regarding the matter of proposed amendment to Tariff Policy (14-1-2010) # Regarding the modification in Standard Bidding Document for development of transmission lines through competitive bidding (13-1-2010) # Regarding the issues relating to regulation of electricity forward contracts and electricity derivatives markets (18-11-2009) # Regarding the guidelines and Standard Bidding Documents for tariff based competitive bidding for procuring transmission services (12-11-2009) # Regarding ring-fencing of State Load Despatch Centers (11-08-2009). # Regarding the competitive procurement of transmission Services (06-05-2009) # Regarding order of the various State Governments (27-04-2009) # Regarding the rates of depreciation to be notified under the Companies Act. (20-04-2009) # Regarding designating electricity trader by Central Government for import of electricity from other countries (13-04-2009) # Regarding the order of the Karnataka under Section 11 of the electricity act, 2003(5-02-2009) # Regarding the measures for restricting the pricing of electricity in short-term market (22-12-2008)


Regulatory independence


Evolution of Electricity Tariff & Role of CERC


Single part tariff

A system of single-part tariffs was in vogue in India for pricing of thermal power, prior to 1992. The single-part tariff for a station was calculated to cover both the fixed cost as well as the variable (energy) cost at a certain (normative) generation level. Demerit: # Energy production above the normative generation level yielded additional revenue. i.e., a surplus over the fixed and variable cost of the station. # The incentive and disincentive for power generation got linearly linked to the annual Plant Load Factor (PLF) of the generating station.


Two part tariff for Generation as per K.P. Rao Committee (1992)

Finding that the single-part tariff, particularly for Central generating stations, was conducive neither to economic generation of power as per merit-order, nor to satisfactory operation of the regional grids, the government of India adopted in 1992 a two-part tariff formula for NTPC stations based on the recommendations of the KP Rao Committee. Recognizing that there would be no motivation on the part of NTPC (Central generating stations) to maintain a high level of efficiency and availability if it was paid the full fixed cost irrespective of level of generation and variable cost for the quantum of energy actually generated, the K.P. Rao Committee had recommended a scheme of incentive/disincentive, as a variant of a simple two-part tariff. The scheme provided for linking of incentive and disincentive with ''Plant Load Factor (PLF)'' plus ''deemed generation'', which in effect is '' Plant availability''.


Evolution of Availability Based Tariff (ABT)

The serious problems of regional grid operation however continued even after 1992. This was because the K.P. Rao Committee had been able to tackle only one end; the Central generation side. Overdrawals by some State Electricity Board's during peak-load hours and under-drawals during off-peak hours continued unabated, causing serious frequency excursions and perpetual operational/commercial disputes. In the year 1994, M/s ECC of USA were commissioned under a grant from the
Asian Development Bank The Asian Development Bank (ADB) is a regional development bank to promote social and economic development in Asia. The bank is headquartered in Metro Manila, Philippines and maintains 31 field offices around the world. The bank was establishe ...
to undertake a comprehensive study of the Indian power system and recommend a suitable tariff structure. ECC submitted their report in February, 1994, recommending Availability Tariff for generating stations, which was accepted in principle by GOI in November, 1994. A National Task Force (NTF) was constituted by the Ministry of Power in February, 1995 to oversee the implementation of ECC's recommendations. Based on NTF deliberations between 1995 and 1998, Ministry of Power had crystallized the formulation for the so-called
Availability-based tariff Availability-based tariff (ABT) is a frequency based pricing mechanism applicable in India for unscheduled electric power transactions. The ABT falls under electricity market mechanisms to charge and regulate power to achieve short term and long ...
(ABT). With the spirit of the Electricity Regulatory Commissions Act 1998 and consequent upon transfer of relevant powers vested under section 43 A (2) of the Electricity (Supply) Act 1948 to the CERC with effect from 15 May 1999, GOI forwarded the above draft ABT notification to CERC vide OM dated 31.5.1999 for finalization after due deliberation. The draft notification was then issued through a public notice and comments/objections were invited. The Commission in July 1999 held detailed hearings on the above. The ABT order dated 4 January 2000 of the Commission departs significantly from the draft notification as also from the prevailing tariff design


Standard Tariff Model

Tariff for supply of electricity shall comprise two parts: # Fixed or Capacity Charges (For recovery of Annual Fixed Cost) # Energy or Variable Charges (For recovery of Primary Fuel Cost wherever applicable) The annual fixed cost (AFC) of a generating station or a transmission system shall consist of the following components # Return on equity (RoE); # Interest on loan capital; #
Depreciation In accountancy, depreciation refers to two aspects of the same concept: first, an actual reduction in the fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wears, and second, the allocation i ...
; # Interest on
Working capital Working capital (WC) is a financial metric which represents operating liquidity available to a business, organisation, or other entity, including governmental entities. Along with fixed assets such as plant and equipment, working capital is consi ...
; # Operation and maintenance expenses; # Cost of secondary fuel oil (for Coal-based & Lignite fired generating stations); # Special allowance for renovation and modernisation or separate compensation allowance, wherever applicable. The Energy charge shall cover the primary fuel cost and limestone consumption cost (where applicable), and shall be payable by every beneficiary for the total energy scheduled to be supplied to such beneficiary with fuel and limestone price adjustment


Relation with Other Power Sector Bodies (MoP, CEA, Appellate Tribunal)


Appellate Tribunal and CERC

Appellate Tribunal
for Electricity has been established by Central Government for those who are not satisfied with the Central Electricity Regulatory Commission order or with a state. The Tribunal has the authority to overrule or amend that order, just like the Income-Tax tribunal or the Central Administrative Tribunal. The tribunal has to be approached within 45 days of the aggrieved person from getting the order.


Central Electricity Authority (CEA) and CERC

Since 1 April 1999 CEA has entrusted CERC with the task of regulating power tariffs of central government power utilities, inter-state generating companies, inter-state transmission tariffs. Section −76 of Electricity Act, 2003 stipulates that CERC shall consist of a Chairperson and three other Members. And one of the CERC members (Ex-Officio) has to be Chairman of CEA.
In Indian Power Sector, CEA takes care of: # Planning Regulation where power demand and supply gap has to be regulated. # Construction regulation where Construction of thermal-, hydro-, gas-based power plants and power systems are regulated in the right manner. Whereas CERC take care of third aspect of power sector regulation -
:3.Tariff regulation, a purely economic exercise. National electricity policy is normally formulated in consultation with and taking into account the views of the Central Electricity Regulatory Commission (CERC), Central Electricity Authority (CEA), and state governments.


SERC and CERC

CERC and State Electricity Regulatory Commission (SERC) are the two electricity regulators – one operating at the central level and the other at various state levels. CERC's primary function was to regulate the tariffs of central generating stations as well as for all interstate generation, transmission and supply of power. Whereas SERC's primary function was to determine bulk and retail tariffs to be charged to customers, regulate the operations of intrastate transmission, including those of the State Load Despatch Center (SLDC). During Parliamentary Standing Committee on Energy in the year 2001, SERC being established in states, for formulating standards relating to quality, continuity and reliability of service for the electricity industry have failed in their efforts. There was a proposal of having benches of the Central Electricity Regulatory Commission (CERC) in five to six locations instead of having a SERC in each state, but the Committee that has rejected the proposal stating it was not possible unless states were willing to accept such a proposal.


Ministry of Power and CERC

MoP entrusts CERC for providin
escalation rate
for coal and gas, ''
inflation rate In economics, inflation is an increase in the average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI). When the general price level rises, each unit of curre ...
'' based on '' WPI'' and '' CPI'', ''discount rate'', and ''dollar-rupee exchange variation rate'' for the purpose tariff determination.


Power Exchange Companies and CERC

Central Electricity Regulatory Commission (CERC) has issued the Power Market Regulations, 2010 which will govern transactions related to ‘'Energy trading'’ by companies like Indian Energy Exchang
(IEX)
Power Exchange Indi
(PXI)
National Power Exchang
(NPX)
in various contracts related to electricity. The regulations have been issued by the CERC in exercise of its powers under section 66 of the Electricity Act, 2003, which is aimed at taking measures conducive to development of the electricity industry, promoting competition therein, protecting interest of consumers and enhancing supply of electricity.


Important Regulations / Policy Framework

;1999 # 26-04-99, Conduct of Business Regulation-1999 8/1/99-CERC dt.23-04-99 Notification # 26-11-99, Conduct of Business Regulation-1999 8/1/99-CERC dt.24-11-99 Notification ;2000 # 10-05-00, Conduct of Business Regulation (First Amendment) 8/1(1)/99-CERC dt 28-04-00 Notification # 25-05-00, Filing of Annual Report by Thermal Generating Companies L-7/20(1)/99-CERC dt.28-04-00 # 15-07-00, Filing of Annual Report by Transmission Utility L-7/20(1)/99-CERC dt.10-07-00 ;2001 # 26-03-01, Terms and conditions of Tariff L-25(1)/2001-CERC dt.26-03-01 # 24-09-01, Terms and conditions of Tariff L-25(1)/2001-CERC dt.21-09-01 ;2002 # 11-07-02, Terms and Condition of tariff Regulation-First Amendment-2002 ;2003 # 02-06-03, Terms and Conditions of Tariff (Second Amendment) Regulation-2003 ;2004 # 29-03-04, CERC Notification – CERC (Terms and Conditions of Tariff) Regulations, 2004 # 09-09-04, CERC Notification – CERC (Terms and Conditions of Tariff) (First Amendment) Regulations, 2004 # 06-02-04, CERC Notification – CERC (Open Access in Inter-State Transmission) Regulations, 2004 ;2005 # 11-08-05, CERC Notification – CERC (Terms and Conditions of Tariff)(first Amendment) Regulations, 2005 # 17-11-05, ERC Medical Regulations – Nov 2005 # 23-02-05, CERC Notification – CERC (Open Access in inter-state Transmission)(First Amendment) Regulations, 2005 ;2006 # 01-06-06, CERC Notification – CERC (Terms and Conditions of Tariff)(First Amendment) Regulations, 2006 ;2007 # 13-03-07, CERC Notification – CERC (Terms & Conditions of Tariff)(Amendment) Regulations, 2007 ;2008 # 07-02-08, CERC Notification – CERC (Open Access in inter-State Transmission) Regulations, 2008 ;2009 # 28-05-09, CERC (Conduct of Business) (Amendment) Regulations, 2009 # 02-06-09, ERC (Procedure, Terms & Conditions for grant of Transmission Licence & other related matters) Regulations, 2009. # 20-01-09, Terms and Conditions of Tariff, Regulations for 2009–14 # 10-08-09, CERC Grant of Connectivity, LTOA & MTOA in inter-State Transmission related matters, 2009 # 24-02-09, Procedure, Terms and Conditions for grant of trading licence and other related matters Regulations, 2009 # 26-09-09, Fees and charges of Regional Load Despatch Centre and other related matters Regulations, 2009 # 17-09-09, ERC Tariff Regulations for Renewable Energy Sources Regulations, 2009 # 24-12-09, Measures to relieve congestion in real time operation Regulations, 2009 ;2010 # 26-05-10, Procedure, Terms & Conditions for grant of Transmission License & other related matters (Amendment) Regulations, 2010 # 07-06-10, Procedure, Terms & Conditions for grant of trading license and other related matters (First Amendment) Regulations, 2010. # 28-04-10, Indian Electricity Grid Code Regulations, 2010 # 28-04-10, CERC Unscheduled Interchange charges and related matters (Amendment) Regulations, 2010 # 21-01-10, Fixation of Trading Margin Regulations, 2010 # 21-01-10, Power Market Regulations, 2010 # 16-04-10, Procedures for calculating the expected revenue from tariffs & charges Regulations, 2010 # 31-06-10, Grant of Regulatory Approval for execution of Inter-State Transmission Scheme to CTU Regulations, 2010 # 15-06-10, CERC (Sharing of Inter State Transmission Charges and Losses) Regulations, 2010.


See also

*
Central Electricity Authority (India) The Central Electricity Authority of India (CEA) advises the government on policy matters and formulates plans for the development of electricity systems. It is a statutory organisation constituted under section 3(1) of Electricity Supply Act 19 ...
* Ministry of Power * Electricity Act 2003 *
Energy policy of India The energy policy of India is to increase the locally produced energy in India and reduce energy poverty, with more focus on developing alternative energy, alternative sources of energy, particularly Nuclear power in India, nuclear, solar pow ...
*
Electricity sector in India India is the third largest electricity producer globally. During the fiscal year (FY) 2023–24, the total electricity generation in the country was 1,949 TWh, of which 1,734 TWh was generated by utilities. The gross electricity generation p ...
* Maharashtra Electricity Regulatory Commission


References


External links


Official Website
{{DEFAULTSORT:Electricity Sector in India Regulatory agencies of India Electric power in India Energy regulatory authorities Organisations based in Delhi 1998 establishments in Delhi Government agencies established in 1998