Highlights of the draft Central Electricity Regulatory Commission (Terms and Conditions of Exchange of Energy Savings Certificates) Regulations, 2016 issued by the Central Electricity Regulatory Commission

On The Central Electricity Regulatory Commission (CERC) for the purposes of regulation of the Energy Savings Certificates (ESCs) has released the draft Central Electricity Regulatory Commission (Terms and Conditions of Exchange of Energy Savings Certificates) Regulations, 2016 (Draft ESC Regulations) in order to provide a framework of exchange of ESCs on several power exchanges. The Draft ESC Regulations is in furtherance of the objectives of the Perform Achieve and Trade (PAT) Scheme, one of the major initiatives of the Ministry of Power under its National Mission for Enhanced Energy Efficiency for promotion of energy efficiency and sustainable development.

The PAT Scheme was introduced to provide a market based mechanism for promotion of energy efficiency in a cost – effective manner, by the notified designated consumers (DCs) and the meeting of the Specified Energy Consumption (SEC) targets within a specified target period (Cycle Period), in several energy intensive large industries. The Draft ESC Regulations seek to assign roles and responsibilities to various authorities, as under:

  1. The Registry: The Power System Operation Corporation Limited (Registry) has to perform the role of registry of the ESCs, given its prior experience in the same role for Renewable Energy Certificates (RECs). The Registry is required to assist in the registration process of ESCs, empowered to collect fees and charges in this regard, development of methodology for settlement of trades, tracking ownership, handling redemption and maintenance of the books of record. In addition to these responsibilities, the Registry has to coordinate with and disseminate information to the various stakeholders.
  2. The Administrator: The Bureau of Energy Efficiency (Administrator) as set up under the Energy Conservation Act, 2001 has been assigned the role of administrator for exchange of ESCs. The Administrator has to define the procedure for interfacing between the power exchanges and the Registry, the Administrator and the Registry and the Registry and the DCs. It has to assist the CERC in the performance of its functions and ensure that the exchange of ESCs happens in a transparent manner. The Administrator has to issue a detailed procedure for the registration of eligible entities, exchange, transfer, redemption and banking of ESCs with the approval of the CERC to be implemented by the Registry.
  3. The Commission: The CERC has to supervise and approve the procedures as framed by the Administrator from time to time, exercise market oversight over the power markets in consultation with the Administrator and monitor the operations and performance of the power exchanges.

The denomination of the ESCs shall be equal to energy consumed in terms of Metric Tonnes of Oil Equivalent and the market price shall be determined through the process of bidding at the power exchanges. The Draft ECB Regulations provide for issuance of ESCs to those DCs, which have reduced their respective energy consumption within the Cycle Period, in excess of the prescribed SEC targets, and enabling of trading of such ESCs in power exchange markets. Those DCs who have failed to meet their prescribed SEC targets, within the Cycle Period shall have to purchase the ESCs in order to comply with the norms and standards under the Energy Conservation Act, 2001. The power exchanges shall frame the rules and bye – laws for dealing of ESCs including the eligibility criteria, exchange process, price discovery mechanism and process of interaction, with the due approval of CERC.

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