CERC draft tariff norms make it tougher for power PSUs

The Central Electricity Regulatory Commission (CERC) Tuesday announced draft tariff criteria for the power sector which include tightening of operating norms for power producing and transmission companies.

The draft regulations, that will decide power tariffs for the 2014-2019 fiscal period, are likely to result in reduction of electricity rates for consumers and are designed to increase the efficiency of power producers.

The highlight of the draft guidelines is the proposed tightening of operating norms for power producing and transmission companies by shifting incentives to the company's plant load factor (PLF) from plant available factor (PAF). This would link incentives to actual power generated and the PLF, that is, the capacity at which the plant is operating.

While private companies have been given permission to raise tariffs, the proposed change would affect state-run generators like NTPC, whose existing incentives are linked to their available capacity for the state electricity boards (SEBs). Thus even if NTPC's plants could not generate required power for lack of coal, it is still able to avail of benefits.

PLFs of most power generators have fallen below 70 percent in recent times owing to fuel availability problems.

Another key proposal of the draft is to remove a tax arbitrage for NTPC, that allowed the country's biggest generator to earn high return on equity, and would thus impact on its earnings.

The CERC has not proposed any changes in norms for the operating and maintenance (O&M) expenses of companies.

The final regulations will be prepared in early 2014 after getting the relevant industry feedback.