ABPS Blogs

CERC – Draft Regulations for Tariff Period 2024-29

ABPS Infra is assisting the Central ERC (CERC) in framing the Tariff Regulations for determination of tariff for Generation and Transmission Business for the Period 2024-2029. In accordance with Section 61(a) of the Electricity Act, 2003, all State Electricity Regulatory Commissions (SERCs) shall be guided by the principles and methodologies specified by the Central Commission, while framing their Tariff Regulations. Thus, the CERC Tariff Regulations provide the basic framework for tariff regulation across the entire country for the next 5 years. 

The CERC published a Staff Paper and invited comments on the proposed framework from interested stakeholders. Subsequently, CERC published the Draft CERC Tariff Regulations 2024-29 and invited comments and suggestions from interested stakeholders. CERC also held a Public Hearing in February 2024 on the comments and suggestions made by the stakeholders. CERC is in the process of finalizing the Tariff Regulations 2024-29, based on the comments and suggestions.

Some salient features of the Draft CERC Tariff Regulations 2024-29 are as under:
  1. Operational Life for Thermal and Hydro Generating Stations specified as 35 Years and 50 Years, respectively.
  2. Interim Tariff to be allowed at 90% of the tariff claimed in case of new Generating Station or unit thereof or Transmission System. In case the final tariff determined by the Commission is lower than the Interim Tariff by more than 10%, the excess amount recovered to be returned with simple interest at 1.20 times of the rate worked out on the basis of 1-year SBI MCLR plus 100 basis points prevailing as on 1st April of the financial year in which such excess recovery was made.
  3. Proviso for allowing Carrying Cost from the Date of COD of Project introduced for New Generating Station and Transmission System, if the Petition for Tariff Determination is filed within the specified timelines.
  4. The provision allowing the Beneficiary the first right of refusal for procuring power from thermal stations that have completed 25 years, has been deleted.
  5. Special Provisions introduced for Determination of Capital Cost of Projects acquired through NCLT Proceedings.
  6. Certain additional provisions introduced for IDC and IEDC.
  7. Following provisions introduced for Additional Capital Expenditure (ACE):
    1. Capital Spares and Additional Capital Expenditure below Rs. 20 Lakh subsumed in O&M Expenses.
    1. New provisions for Biomass co-firing, Flexible Operation, Railway Infrastructure for fuel management and any other capital expenditure, which has become necessary for efficient operations of generating stations or transmission systems.
    1. Provisions introduced to allow expenditure towards development of local infrastructure in the vicinity of the hydro power plant not exceeding Rs. 10 lakh/MW if funding is not provided for under “Budgetary Support for Flood Moderation and for Budgetary Support for enabling infrastructure”.
    1. Renovation & Modernisation provision deleted for Transmission Licensees.
    1. Amount of Special Allowance in lieu of Renovation & Modernisation for Generating Stations increased.
  8. Computation of AFC
    1. Rate of Return on Equity
      1. for hydro projects increased to 16.5%
      1. New Hydro with pondage units to earn 0.5% extra ROE (17%);
      1. New transmission assets to earn 0.5% less ROE (15%);
      1. For ACE beyond original scope, ACE on account of emission control system (FGD), Change in Law, and Force Majeure, to be allowed at 1-year SBI MCLR + 350 bps as compared to earlier proviso of Weighted Average Rate of Interest (WAROI).
    1. Interest on Loan: Rate of interest for new project to be considered for Company as a whole.
    1. Depreciation: Separate Rates of Depreciation for New Projects (considering repayment period of 15 years)
    1. IoWC:
      • Rate of IoWC changed to 1-year SBI MCLR + 325 bps
      • Limestone norms same for pit head and non-pit head Coal/Lignite based stations.
      • Gas stations – Fuel cost proposed as 15 days instead of 30 days
    2. O&M Expenses:
      • Change in Law or Force Majeure impact allowable if overall impact greater than 5% of normative O&M
      • Implementation of wage or pay revision to be allowed at the time of truing up of tariff
      • Capital Spares up to Rs. 20 lakh included in O&M norms.
      • Separate norm for NER and Hilly Region Transmission System at 1.5 times normative O&M expenses.
  9. Computation of Energy Charge and Supplementary Energy Charge
    • GCV as received to be considered. However, in the absence of Third-Party Sampling at receiving end, GCV to be considered on the basis of bills issued by coal supplier with maximum pre-defined GCV loss of 300 kcal and 600 kcal for pit-head and non-pithead plants, respectively.
    • No loss in calorific value between ‘GCV as billed’ and ‘GCV as received’ will be admissible for generating stations procuring coal from Integrated mine or through import of coal
    • Transit Loss for non-pit head multi-modal transportation introduced, at 1%.
  10. Recovery of Capacity Charges and Energy Charges
    • Recovery of Fixed Charge now only linked to Peak & Off-Peak availability.
    • Incentives during Peak Hours increased to 75 paise/unit for Thermal Generating Stations from earlier 65 paise/kWh. (85% PLF – New Stations / 80% PLF – Old Stations)
    • Higher AFC up to 1% of AFC (Thermal) and up to 4% of Capacity Charge (Hydro) in addition to AFC Entitlement, if Primary Frequency Response is provided by the Generating Stations.
    • Fixed Charge recovery delinked from Peak and Off-Peak Tariff for Emission Control System.
    • Coal Blending to be allowed till 6% by weight without consent of beneficiaries.
    • Recovery of shortfall in energy charges with respect to shortfall in saleable scheduled energy vis-à-vis design energy allowed to Hydro stations.
    • Incentive of 50 paisa/kWh for Run-of-River Hydro Stations, in case the saleable scheduled energy during peak hours of the day is in excess of average saleable scheduled energy during the day (24 hours).