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New power tariff regulations

Power industry experts have hailed the new tariff regulations announced by the central electricity regulator for the period between 2019 and 2024, welcoming several new guidelines. They, however, also cautioned against the possibility of a marginal negative impact on generation projects with respect to new operating norms.

The new regulations are set to benefit state-owned utilities including largest generator NTPC Ltd and Power-grid Corporation that transmits around a half of the country’s total electricity through its transmission network.

Return on Equity (RoE)
Under the new regulations, RoE will be computed at the base rate of 15.50 per cent for thermal generating station, transmission system including communication system and run-of-the-river hydro generating stations. For storage-type hydro stations, it will be computed at the base rate of 16.50 per cent.

RoE is a measure of the profitability of a business in relation to the equity and is also known as net assets or assets minus liabilities. The continuation of RoE at 15.5 per cent along with increase in normative operating and maintenance (O&M) cost for coal-based power projects is a positive for generation utilities, according to research and ratings agency ICRA.

Implementation of revised emission standards
The new CERC regulations also state that the assets installed for implementation of the revised emission standards will form a part of the existing generation project and tariff thereof will be determined separately on submission of the completion certificate by the board of the generating company.
The provision of the supplementary tariff, based on the capital expenditure incurred, will incentivize old asset owners or operators to undertake necessary investment for emission compliance.

 

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