Basics of Guidelines for Competitive Power Procurement in India

1. Guidelines for Competitive
Procurement of Power
Compiled by
Shreekant Dhuri

2. Electricity Act 2003
Preamble
• An Act to consolidate the laws relating to generation,
transmission, distribution, trading and use of
electricity and generally for taking measures
conducive to development of electricity industry,
promoting competition therein, protecting interest of
consumers and supply of electricity to all areas,
rationalization of electricity tariff, ensuring
transparent policies regarding subsidies, promotion
of efficient and environmentally benign policies,
constitution of Central Electricity Authority,
Regulatory Commissions and establishment of
Appellate Tribunal and for matters connected
therewith or incidental thereto.
Relevant Sections
Section 61 & 62:
Provide for tariff
regulation and
determination of tariff
of generation,
transmission, wheeling
and retail sale of
electricity by the
Appropriate
Commission.
Section 63:
Notwithstanding
anything contained in
section 62, the
Appropriate
Commission shall adopt
the tariff if such tariff
has been determined
through transparent
process of bidding in
accordance with the
guidelines issued by the
Central Government.

3. Objectives
Promote competitive
procurement of electricity
by distribution licensees
Facilitate transparency and
fairness in procurement
processes
Facilitate reduction of
information asymmetries
for various bidders
Protect consumer interests
by facilitating competitive
conditions in procurement
of electricity
Enhance standardization
and reduce ambiguity and
hence time for
materialization of projects
Provide flexibility to
suppliers on internal
operations while ensuring
certainty on availability of
power and tariffs for buyers

4. Tariff Policy 2006
Provides uniform guidelines to
SERCs for fixation of tariffs for
their respective entities as well as
CERC
Competitive Bidding: Distribution
licensee to procure power solely
through competitive bidding but
central & state owned units were
exempted. Tariff for public sector
projects to be decided through
bidding after a period of 5 years.

5. Scope
Period of Procurement
Long term
> 7 Years
Medium
term
1 to 7
Years
Procurementavailablefor
Base Load
Peak Load
Seasonal Power

6. Bidding Mechanisms
Case 1
• Location, Technology & Fuel
not specified by procurer.
• Bidder responsible for
clearances/ approvals etc.
• More relevant for States with
limited fuel sources
• Higher risk for developer
• Lower risk for state
Case 2
• For Hydro power projects, load
center projects or other
location specific projects with
specific fuel allocation such as
captive mines available, which
the procurer intends to setup
under tariff based bidding
process.
• Land/ Fuel provided by
Procurer
• More applicable for States
where fuel sources are
available or having coastal
areas
• Higher risk for State
• Lower risk for developer
Additional
• Procurement by more than
one distribution licensee
through a combined bid
process permitted through
authorized representative.
• In case distribution licensees
are located in more than one
State, CERC shall be the
Appropriate Commission

7. Preparation for Bid Invitation
Bid documentation
Approval of the
Appropriate
Commission in case
of deviations
Approval of the
Appropriate Commission –
a) quantum of capacity /
energy
b) transfer price of fuel
Project preparatory
activities
completion
Obtaining the
transmission
clearances
PPA and other
required project
agreements
Project
preparatory
activities
Site identification and land acquisition
Environmental clearance for the power
station
Forest Clearance
Fuel Arrangements
Water linkage
Requisite Hydrological, geological,
meteorological and seismological data

8. Tariff Structure
Medium Term
Long Term
One Part Tariff
Two Part Tariff
Capacity Charge Energy Charge
Non Escalable
(Firm Price)
Escalable
(Base Price
with Index)
Base Price (with
Index)
NQHR
Index notified by CERC
Optional

9. Bidding Process
Bid
Process
Two stage process for
Long term procurement:
Request for Qualification
(RFQ)
Request for Proposal
(RFP)
The bidding shall be
necessarily by way of
International
Competitive Bidding
(ICB).
For Medium term
the procurer has an
option to adopt a
single stage tender
process combining
the RFP & RFQ
process.

10. Bidding Process
Preparation of bid
documents and
technical analysis
done by procurer
RFQ invited and
qualified bidders
selected
Creates a common
platform and
removes
conditionality.
Doubt clearance
and feedback
Technical and
financial bids
evaluated
LOI issued PPA
signed

11. Timetable for Bidding Process
Event Elapsed Time from
Zero Date
Publication of RFQ Zero Date
Submission of responses of RFQ 60 days
Shortlisting based on responses &
issuances of RFQ
90 days
Bid clarification, conferences, etc. 150 days
Final clarification and revision of RFP 180 days
Technical and Price bid submission 360 days
Shortlisting of Bidder and issue of LOI 390 days
Signing of agreements 425 days
Event Elapsed Time from
Zero Date
Publication of RFQ Zero Date
Bid clarification,
conferences, etc.
90 days
Technical and Price bid
submission
180 days
Shortlisting of Bidder
and issue of LOI
210 days
Signing of agreements 240 days
(Single Stage Bid Process)
(Two Stage Bid Process)