Tariff, and Section 61(h)

In one line

Nine guiding principles bind the regulator when it sets a price, and one of them, clause (h), is the promotion of co-generation and generation from renewable sources.

Section 61: the nine guides

The Appropriate Commission shall, subject to the Act, specify the terms and conditions for the determination of tariff, and in doing so shall be guided by nine matters. Learn them as a list, because MU can ask for them as one.

(a) The principles and methodologies specified by the Central Commission for tariff applicable to generating companies and transmission licensees.

(b) That generation, transmission, distribution and supply are conducted on commercial principles.

(c) The factors which would encourage competition, efficiency, economical use of the resources, good performance and optimum investments.

(d) Safeguarding of consumers' interest and at the same time recovery of the cost of electricity in a reasonable manner.

(e) The principles rewarding efficiency in performance.

(f) Multi year tariff principles.

(g) That the tariff progressively reflects the cost of supply of electricity and also reduces cross-subsidies in the manner specified by the Appropriate Commission.

(h) The promotion of co-generation and generation of electricity from renewable sources of energy.

(i) The National Electricity Policy and tariff policy.

A proviso continues the old terms and conditions, under the Electricity (Supply) Act, 1948, the Electricity Regulatory Commission Act, 1998, and the enactments in the Schedule, for one year or until terms are specified under this section, whichever is earlier.

Why clause (h) is the hinge of this module

Clause (c) already tells the regulator to encourage the economical use of the resources. That is a resource management instruction addressed to price.

Clause (h) goes further and names an outcome. The Commission must be guided by the promotion of co-generation and generation of electricity from renewable sources of energy when it sets the terms and conditions of tariff.

Three consequences follow, and they are the answer to any question about how Indian law promotes renewable energy.

A preferential tariff has a statutory basis. When a Commission fixes a higher tariff for a wind or solar or bagasse plant than a coal plant would get, it is not making policy in the air. It is being guided by clause (h), and clause (i) ties it to the tariff policy made under section 3.

Co-generation is promoted by name. Section 2(12) defines cogeneration as a process which simultaneously produces two or more forms of useful energy, including electricity. A sugar mill burning bagasse for process steam and electricity, or a refinery using waste heat, is a resource management technique before it is a generation technique: it takes two useful outputs from one unit of fuel. Clause (h) puts it on the same statutory footing as renewables.