In January 2006, the Ministry of Power announced the Tariff Policy, in continuation of the National Electricity Policy of 2005. The Tariff Policy included certain provisions regarding renewable energy and cogeneration. The appropriate electricity commission is to fix a minimum percentage for purchase of energy from these sources, taking into account resource availability and impact on tariffs. Percentages for energy purchase were made applicable for tariffs to be determined by the State Electricity Regulatory Commission (SERC) by 1 April 2006. Procurement by distribution companies is to be done at preferential tariffs, determined by the appropriate commission, to encourage non-conventional energy technologies to eventually compete with conventional ones. Such procurement is to be done through a competitive bidding process. In cases where procurement is not through competitive bidding, the Central Commission is to lay down guidelines for pricing non-firm power, particularly from non-conventional sources. Non-firm power refers to power supplied under a commitment having limited or no assured availability.
The new policy was developed in accordance with frameworks established by The Electricity Act 2003 and the National Electricity Policy. In order to attract investment to the sector the policy aims to:
- Ensure availability of the electricity to consumers at a reasonable and competitive rate
- Ensure financial viability of the sector and attract investments
- Promote transparency, consistency, and predictability in regulatory approaches across jurisdictions and minimise perceptions of regulatory risks
- Promote competition efficiency in operations and improvement in quality of supply
In tandem with competition frameworks, the tariff policy hopes to establish performance based costs of service regulation regarding transmission and generation as well as distribution
- Electricity end-uses