NTPC challenges CERC regulations in High Court

India's largest power generator NTPC Ltd has filed a writ petition in the Delhi High Court challenging the latest five-year tariff regulations set by power sector regulator Central Electricity Regulatory Commission (CERC).

"The petition has been filed over the broader issue of inconsistencies in tariff regulations," said a senior NTPC executive who did not wish to be identified.

The details of the grounds for the writ petition were unknown. CERC had announced the new regulations on February 24 that seek to increase operational efficiency of plants but with reduced incentives squeezing regulated returns. The guidelines could dent thecompany's earnings by upto 15%, according to analysts.Among the key provisions was a change in the basis of incentive payment for generation from the current Plant Availability Factor (PAF) to Plant Load factor (PLF).

While PAF denotes the capacity available for generation, PLF refers to the capacity actually being used togenerate. As PLF varies depending on factors including fuel availability and off-take by distribution companies, the shift to PLF could dentearnings for factors beyond the developer's control. Currently, since the power sector is enjoying tax-holidays, generators pay the minimum alternate tax of 20% instead of the corporate tax of 33%.

However, the generators get reimbursement from discoms at the rate of 33%. In the new regime, NTPC and other generators would be deprived of this tax arbitrage too. CERC had also cut station heat rate from the current 2,500 kilocalories a unit to 2,450 kilocalories for 250 Mw sets, besides halving secondary fuel oil consumption to 0.5 ml a unit.

In a relief, however, the new regulations had reduced targetavailability for stations to 83% (from 85%) for recovery of fixed cost. Also, cost of spares has been allowed a pass-through in tariff.