Central Electricity Regulatory Commission gets new office premises in World Trade Centre; Power and New & Renewable Energy Minister states that the electricity regulators have a critical role in power sector – EQ

In Short : The Central Electricity Regulatory Commission (CERC) has acquired new office premises in the World Trade Centre. The Power and New & Renewable Energy Minister emphasized the critical role of electricity regulators in the power sector, highlighting the significance of CERC’s function in overseeing and regulating the electricity market.

In Detail : “Nature of electricity is changing; with new players, types of systems and products”: Power and New & Renewable Energy Minister R. K. Singh

“Electricity sector regulations and rules will have to be up to date with the changing landscape”

The Central Electricity Regulatory Commission (CERC) has got new office space situated at World Trade Centre, Nauroji Nagar, Safdarjung Enclave, New Delhi. The inauguration of the new office space has been done by the Union Minister for Power and New & Renewable Energy Shri R. K. Singh, at a function held at the new office premises today, March 7, 2024.

“Regulatory commissions are the fulcrum of the power system; the whole system depends on you”

Addressing the officers and staff of CERC and other power sector stakeholders, the Union Minister underlined the crucial role the regulatory commissions are called upon to play in ensuring the health of the power sector. “Regulatory commissions are the fulcrum of the power system. The CERC and State Electricity Regulatory Commissions (SERCs) determine how the power system will work and how viable the system will be. The whole system depends on you – on the regulations you come out with, on the tariff decisions you take and on the passthroughs you allow or do not allow.”

“Basic challenge is to strike balance between system viability and public interest of affordable power”

The Power Minister explained that fundamental among the many challenges faced by the regulatory commissions is the need to strike a balance between ensuring the viability of the power system and protection of public interest. “The challenges are many, perhaps more for the SERCs than for the CERC, since the SERCs have to function in the more political atmosphere that prevails in the states. Either way, the basic challenge of any regulatory commission is to maintain a balance between two things. One, the viability of the system which it oversees, which is of prime importance, especially for investments to come in; and two, protection of public interest by ensuring affordable electricity tariffs. If you increase tariffs unfairly, it harms people. We have to balance the two.”

“Critical role of CERC and SERCs, given need for expansion in the power system”

The Power and New & Renewable Energy Minister emphasized the critical role of both CERC and SERCs, given the changes and need for expansion in the power system. “The whole system and the whole power sector are changing. We are expanding and we will continue to expand. We have to expand rapidly since the demand is going to double in short order. Peak demand has gone up to 243 GW and may go up to about 370 GW by 2030. We need to expand and strengthen all our systems, whether it is generation, transmission or distribution; that much investment needs to come. If we are to distribute almost 370 GW in 2030 when we were distributing just about 160 GW in 2014 and about 240 GW this year, we can imagine the quantum of increase which we would need in HT lines, LT lines, transformers, substations and in transmission.”

The Minister added that all these tariffs would also need to be decided very quickly, so that there is no lag between the addition of capacity and the determination of tariffs, so that the system does not come under strain. The Minister added that companies engaged in generating, distributing and transmitting electricity need to get a fair margin, so that they remain viable and can maintain the system. Shri R. K. Singh emphasized that the time factor too is important. “If passthroughs are not allowed in time, then it will reduce the viability of the concerned company; any delay in terms of higher fuel or transport costs will lead to financial burden. So, your job is very critical.”

“Significant need for maintenance and replacement; Govt. of India will have to continue financing this”

In addition to the imperative for expansion, the older systems need maintenance and replacement, which would require further investment, said the Minister. “Unfortunately, over the years, our discoms have remained impecunious over the years. They have not been viable and they have not been able to maintain the system. We have been funding discoms to do this, but still, if you go around the country, you will find that thousands of circuit kilometres of LT lines which are frail, many transformers which have been bound 3-4 times, though we added 7.5 lakh transformers.”

The Minister said that all this will require investment and further that the money for this will have to come from the government, mostly from the central government, given the shaky financial condition of most state governments. So, the Government of India will have to continue financing this expansion, he said.

“Need to ensure financial viability of system, so as to attract more investors into power sector”

The Minister brought out the need to ensure financial viability in the system so as to attract private investment as well, given the huge investment which the evolving situation demands. “The happy thing is that central power sector PSUs such as NTPC and POWERGRID are on a sound footing. The other is that the private sector has been investing, though earlier they had stopped investing when there was some stress in the power sector. But we have to make sure that there is financial viability of the system so that we attract more investors, since all this huge investment is not possible by the public sector alone. We have to involve private sector in discoms as well.”

“Nature of electricity is changing; with new players, types of systems and products”

Most of all, the Minister pointed out that the very nature of electricity is changing, which will give birth to new market players, new types of systems and new products in the sector. “We are adding more and more renewable capacity, which is leading to other challenges such as that of stability and storage. Storage capacity will expand and we will have new players, new types of systems and new products.”

“Electricity sector regulations and rules will have to be up to date with the changing landscape”

The Minister told the CERC community that the regulators need to be up-to-date with the changing territory. “The regulations and rules will have to be up to date with the changing landscape of the power sector. Expansion is one thing, but the very landscape is changing and will continue to change. Instead of relying on old systems, you need to keep relooking at them whether they need to be changed, to meet modern requirements.”

“Need to ensure that energy storage is financed and becomes attractive”

The Minister spoke of the need to ensure that power costs are more than fully paid for and that storage too is financed. “Without power, there is no development, so we have to make sure that power is available, sufficient, affordable and investments keep coming. And we need to keep growing so that development happens. But ultimately, there is no getting beyond the fact that the actual cost of power distribution, transmission and generation will have to be paid and that there has to be some reserve left for maintenance. There is no getting around the fact that energy transition will have to happen and that we will need to add storage as well. So, we need to make sure that storage needs to be financed and is attractive.”

“It is a complex world ahead, and Electricity Regulators will be at the centre of it”

Against this backdrop, the Minister explained to the CERC officers and staff that it is a complex world which lies ahead, and that they will be at the centre of it. “We have expanded your personnel strength, but you would need more experts. And the people who serve in your organization will have to be neutral; they have to keep in mind only one thing, that the system remains viable and that they be guardians of the public good.”

Expressing confidence that the organization will handle the challenges well, the Minister said that a time may perhaps come when CERC would need more Members and he expressed the hope that it would be favourably considered. He extended his best wishes to the employees and in the new premises, noting that it is beautiful and right at the centre of the city. “The architecture and the furnishing is good; best wishes and my congratulations to all of you.”

Delivering the welcome address, the Chairperson, CERC, Shri Jishnu Barua informed that the Commission has concluded the public hearing on the most important Draft Tariff Regulations, 2024, and is in the final stages of finalizing the Regulation. He informed the Commission has also recently floated our draft Tariff Regulations for Renewable Energy Resources Regulation 2024 for public review. The Chairperson assured that CERC will finalize the most robust Tariff Regulations for our citizens which will also encourage investment in the sector.

Thanking the Minister for the government’s approval for acquiring the new office premises, the Chairperson informed that the Commission has acquired office space spanning the 6th, 7th and 8th floors, measuring ~54,500 sq. ft of carpet area.

The Central Electricity Regulatory Commission (CERC) was established by the Government of India in 1998, under the provisions of the Electricity Regulatory Commission Act, 1998. CERC is the Central Commission for the purposes of the Electricity Act, 2003, which repealed the ERC Act, 1998. The Commission completed its 25 years on 24th July, 2023.

Major functions of CERC under the Act are, inter-alia, to regulate the tariff of generating companies owned or controlled by the Central Government, to regulate the tariff of other generating companies having a composite scheme for generation and sale of electricity in more than one State, to regulate the inter-State transmission of electricity and to determine tariff for such transmission of electricity, etc. Under the Act, CERC shall also advise the Central Government on formulation of National Electricity Policy and Tariff Policy; promotion of competition, efficiency and economy in activities of electricity industry; promotion of investment in electricity industry; and any other matter referred to the Central Commission by the Government.

The CERC commenced its journey from Janpath Hotel, followed by ICWA building in Lodhi Road and then moved to the Scope Complex on Lodhi Road, New Delhi from 1998, subsequently relocated to a rented office in the Chanderlok Building in New Delhi, owned by NDMC. As its responsibilities swelled and its team expanded over the years, it further expanded its offices to two additional floors in the Chanderlok Building. The Central Government, recognizing the importance of the CERC’s growing responsibilities, facilitated the acquisition of new office space in “World Trade Centre”, constructed by NBCC.

The event was attended by Members of the CERC; Secretary, CERC, Shri H. S. Pruthi; officers and staff of CERC and the Ministry of Power, Ministry of New and Renewable Energy; and CMDs of major PSUs in the power sector.