Regulatory Insights - CER Newsletter - Volume 01 Issue 01

It gives me immense pleasure to present the first issue of Regulatory Insights, the quarterly newsletter of Centre for Energy Regulation (CER). Each issue aims to bring insights into key regulatory and policy developments in the power sector, accompanied with analysis based on CER's Regulatory Database. ERC Tracker, comprising regulatory updates and tariff orders, would be a constant feature of the Regulatory Insights. CER Opinion is a special feature of the newsletter as it presents the views of CER on regulatory and policy developments – draft as well as notified. We expect discussions on such developments and other topics of interest to continue on the Online Discussion Forum of the Centre, and hope that these opinions and discussions would serve as useful inputs for regulators and policy makers.Development of offshore wind power generation capacity must be undertaken on a competitive basis and may initially be supported by viability gap funding (VGF), which should also be used as the bidding parameter. With respect to CERC's consultation paper on Terms and Conditions of Tariff Regulations, we suggest replacement of incentive on early completion of projects with penalty for delay, benchmarking of capital cost and operational parameters, and periodical revision of ROE using appropriate risk evaluation approach. Adoption of market prices for frequency deviations under the DSM mechanism needs to be strengthened by setting up of analogous and effective intra-state ABT regime across the country. Further, we suggest adoption of area-specific Market Clearing Price (MCP) in the case of market splitting, and highlight the need for smoothening the transition from existing price vector to a rather steeper price vector.The proposed amendments to the Tariff Policy 2016, being an important policy instrument guiding tariff determination by the ERCs, need to be further evaluated as some of the proposed amendments may have far-reaching implications on competition and efficiency in the sector. Specific suggestions include delinking of operational norms from past performance, adoption of a regulatory framework for demand forecasting and efficient power procurement planning by utilities, and using RECs as an RPO compliance mechanism and strengthening the REC market. The detailed analyses of the issues and the submissions can be accessed on the web portal of CER