Power units may get special allowance

The new CERC tariff guidelines for 5 years ( 2009-14) recommends of a ‘special allowance’ that can be availed of by any thermal generating station as compensation for meeting the requirement of expenses including renovation and modernisation ( R&M) beyond its useful life for a unit.

The new guidelines have recently been worked out by CERC and are being discussed with different central, state and private power utilities.

The allowance, however, will only be effective for generating stations setting up facilities after April 1 2009 and will not be available for which R&M has already been undertaken and expenditure admitted by the Commission before commencement of latest regulations.

 

As per the guideline a generating company on opting for alternative option shall be allowed to avail of a ‘special allowance’ of Rs 5lakh / MW / year during the tariff period of 2009-14, unit wise from the date of the completion of useful life of respective units of a generating station.

The generating company or the transmission licensee will have to make an application for approval of R&M proposal. This will be granted after due consideration of reasonableness of the cost estimates, financing plan, schedule of completion, interest during construction, use of efficient technology and cost-benefit analysis.

Any expenditure actually incurred or projected after April 1 2009 will be admitted by the Commission as additional expenditure for tariff determination and R&M operations shall be serviced according to the laid down guidelines.

For implementation of R&M operations and special allowance provisions for any thermal generating station, the revised capital cost of the project will not be considered. It is after scrutiny and prudence checks that the capital cost of any project shall form the basis of future tariff determination of a project beyond April 1 2009.

The special allowance package recommended by the Commission shall be final and not allowed to be changed in course of setting up of the generating station.

Moreover, any expenditure will be admitted by the Commission after scrutiny and prudence check based on the estimates of R&M costs and life extension. This will be computed as the basis for future tariff determination after writing off the original amount of the replaced assets and deducting the accumulated depreciation already recovered from the original project cost.

The R&M DPR will have to be submitted before the Commission with elements for scope and justification, cost-benefit analysis, estimated life extension from a reference date, financial package, phasing of expenditure, schedule of completion, reference price level and foreign exchange component.