MBED Phase-I to begin from April 2022; 5% reduction in cost of power to consumers expected

The Ministry of Power on Friday said the Market-Based Economic Despatch (MBED) Phase-1 is set to be implemented from April 1, 2022, a move that is proposed to bring down the cost of power for distribution companies and consumers.

"The implementation of Phase 1 of MBED is planned to start with effect from 1st April 2022. Before this CERC will align their regulations and mock drill will be carried out to ensure that the system runs smoothly," a power ministry statement said.

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The MBED will ensure that the cheapest (power) generating resources across the country are despatched (supplied) to meet the overall system demand and will thus be a win-win for both the distribution companies and the generators and ultimately result in significant annual savings for the electricity consumers, the statement said.

The ministry also stated that around 5 per cent reduction in the cost of power to the consumers from MBED is expected.

It stated that an essential next step in reforming electricity market operations and in moving towards "One Nation, One Grid, One Frequency, One Price" framework is to implement MBED in the day-ahead horizon, initiated by the Central Electricity Regulatory Commission (CERC).

Ministry of Power recognized the need for a consensual and phased approach in implementing MBED that will help participants, power exchanges and load despatch centres to adapt gradually to the new regime.

To this effect, a Discussion Note was circulated on June 1, 2021 by the Ministry of Power to all concerned stakeholders for obtaining their inputs and comments.

A consultation workshop covering state governments was convened by the Ministry of Power on July 6, 2021. Several comments were obtained during the workshop which was subsequently deliberated by the Ministry.

Pursuant to that, a second consultative workshop was held with Discoms, Electricity Regulatory Commissions, State Gencos, etc on August 26, 2021, it stated.

Ministry of Power noticed substantial alignment amongst all key stakeholders on a phased approach and the process to be followed for implementing Phase-1 of MBED starting with the mandatory participation of the Inter-State Generating Stations, it stated.

Generation plants of others can also participate in Phase-1 on a voluntary basis, it informed. Ministry of Power has been examining suitable mechanisms to enhance competition in the power sector with the objective of lowering the cost of electricity to consumers, it stated.

With success in generation capacity additions over the past few years and a well-integrated national electricity grid, the time is right to move towards optimising the operation of generating plants in the country to deliver benefits of reduced operating costs to the distribution utilities and end consumers, it said.

A robust day-ahead market will also form the basis for transitioning away from the country's over-dependence on longer-term PPAs (power purchase agreement) to sustainable market-based operations, it added.