Draft CERC Tariff Regulations : 2019-24

Corporate
Centre
Return on Equity
Provisions 2014-19 2019-24
 Return on Equity 15.50% 15.50%
 D/E ratio 70:30 70:30
 Additional RoE @ 0.5% for timely a r
commissioning of new projects
 Modified GFA r a
Stations that have completed their useful
life as on or after 01.04.2019, the
depreciation recovered shall be adjusted
against cumulative repayment and balance
shall be used for reduction of equity.

Copyright © 2016 Your Company All Rights Reserved. 2

 O&M Expenses
2014-19 2019-24
O&M Expenses for 2018-19 O&M Expenses for 2019-20
(Rs lakhs per MW) (Rs lakhs per MW)
200 MW - 30.51 200 MW - 30.59
500 MW - 20.43 500 MW - 20.38
600 MW and above – 18.38 600 MW and above - 17.39
Gas- 18.72 800 MW and above - 15.65
TTPS – 55.09 Gas- 16.24
Tanda - 45.80 TTPS - 54.78
Escalation rate of 6.29% Tanda - 45.35
Escalation rate of 3.20%

• Security expenses have been excluded from O&M expenses and shall be
allowed separately as water charges and spares are being allowed presently.

Copyright © 2016 Your Company All Rights Reserved. 3

 O&M Expenses
Key O&M Cost not considered while calculating Norms
 PRP and Exgratia is a component of Salary not considered by CERC
 CSR not considered
 Ash Utilisation Expenses
 Provisions

Additional O&M for FGD

• Additional O&M of 3% of the capital cost for FGD, etc. sought form CERC

Copyright © 2016 Your Company All Rights Reserved. 4

 Top Ten O&M Expenses (Apr- Dec 18)
Major Heads Amount(Rs Cr)
 Employee Cost 3738 One time impact of Pay revision given while fixing O&M
Norms(PRP excluded while fixing norms)
 R&M(Incl. Capital 2536 Expenditure on this head may be reviewed. Non Moving
OverHaul) inventory lying in stores procured for R&M
 Security Exp. 521 Not under direct In Draft Reg 2019-24 same allowed as pass through
control
 Water Charges 409 Not under direct In Reg. 2014-19 same allowed as pass through based on
control consumption and allocation which ever is low and
continued in Draft Reg. 2019-24. Possibility of
surrendering any additional allocation is to be relooked
 CSR Exp 172 Dependent on Statutory Requirement
Profitability
 Travel Expenditure 145 Controllable
 Conveyance Exp. 105
 Insurance 87 Not under direct
control
 Power Charges 83
 Total 7796
Copyright © 2016 Your Company All Rights Reserved. 5
Depreciation
Provisions 2014-19 2019-24
 Depreciation allowed 90% of Capital Cost 95% of Capital Cost
 Salvage value 10% of Capital Cost 5% of Capital Cost
 Life of thermal stations retained
at 25 years and increased for
hydro stations from 35 years to
40 years respectively

Copyright © 2016 Your Company All Rights Reserved. 6

Interest on Loan
Provisions 2014-19 2019-24
Rate of interest on loan shall be based on a
actual loan portfolio a
Interest on Working Capital
Provisions
 Coal cost for IWC computation to be based on actuals of the preceding quarter every
year

 Coal stock for working capital maintained at 15 days in pithead stations and reduced to
20 days in non-pithead stations against 30 Days in 2014-19 regulations.

 Receivables in working capital reduced to 45 days from 60 days

 Bank Rate is MCLR plus 350 point basis

 LPSC reduced from 1.5%/month to 1.25%/month and applicable to payments beyond

45 days.

Copyright © 2016 Your Company All Rights Reserved. 8

Target Availability
Provisions 2014-19 2019-24
 Target 83% for first three 83% for all five years
Availability years and 85% for  To be achieved on quarterly basis.
(TA) last two years  Annual scheduled plant maintenance not to be
To be achieved on considered while computing Quarterly Availability
annual basis

 TA to be achieved in peak & off-peak hours in a day

separately
 Peak hours shall be minimum 4hrs
 Capacity Charge Rate for peak hours shall be 25%
more than off peak
 Loss in fixed charges recovery during off-peak period shall
be offset by gain in peak hours, if any; however loss in
peak hours shall not be offset by gain in off-peak hours.

Copyright © 2016 Your Company All Rights Reserved. 9

Target Availability
Provisions 2014-19 2019-24
Day ahead availability r a
to be declared for each
fuel source separately.
Incentive Incentive @ 50  Incentive @65 paisa/kwh and @50
paise/Kwh on achieving paisa/kwh payable during Peak and
NAPLF of 85%. off-peak hours respectively on
achieving NQPLF of 85%.

Copyright © 2016 Your Company All Rights Reserved. 10

Operating Norms – Heat Rate
2014-19 2019-24
200 MW: 2450 200 MW: 2410

500 MW : 2375 500 MW: 2375

For units commissioned after 2009: For units commissioned after 2009:

• Operating Margin of 4.5% over design • Operating Margin of 5 % over design heat rate.
heat rate

• Boiler Efficiency considered is 86% • Boiler Efficiency considered is 86%

A margin of 85 kcal/kg has been allowed in GCV from ‘as received’ to ‘as fired’
stage in Draft regulation 2019-24 which is not available in 2014-19 Regulations
Copyright © 2016 Your Company All Rights Reserved. 11
Operating Norms – APC, SFC, T&H
Losses 2014-19 2019-24
APC APC
200 MW : 8.5% 200 MW : 8.5%
500 MW % Above : 5.25% 500 MW % Above : 5.75%
Additional APC : Additional APC :
0.5% for IDCT 0.5% for IDCT
0.8% for Tube Type Coal Mills

SFC SFC
0.5 Ml/kwh all stations 0.5 Ml/kwh all stations
Transit & Handling losses: Transit & Handling losses:
• Pit head - 0.2%, • Pit head - 0.2%,
• Non-pithead – 0.8% • Non-pithead –
0.8% (up to 1000 km)
1.2% (Above 1000 km)
Sharing of gains in the ratio of 60:40 Sharing of gains in the ratio of 50:50

Copyright © 2016 Your Company All Rights Reserved. 12

 Capital Cost of New Projects
Provisions 2014-19 2019-24
 For stations where PPAs have been signed before 5.1.2011 r a
but financial closure has not taken place by 31.03.2019,
consent of beneficiaries to be taken afresh for eligibility for
determination of tariff

 Time and cost overrun on account of land acquisition r a

included in uncontrollable factors

 Delay in getting statutory approval to be considered as r a

Force Majeure.

Copyright © 2016 Your Company All Rights Reserved. 13

 Capital Cost of New Projects
Provisions 2014-19 2019-24
 Pro-rata reduction of IDC in case delay in project execution a
is not condoned.
To be
 In case of non condonation of delay (either partly or fully), reduced To be retained.
any LD recovered from Capital
Cost
 Expenditure on Rail Infrastructure to be considered in capital a
cost.

 Expenses in original scope of work incurred after cut-off date to a

be allowed at RoE @ debt rate.

Copyright © 2016 Your Company All Rights Reserved. 14

Additional Capitalization
New Provisions incorporated in Draft Regulation 2019-24
 In-principle approval of capital cost on account of change in law or force-
majeure can be given by CERC if the estimated expenditure exceeds 10% of
admitted capital cost or 100 crore, whichever is lower.

 Add-Cap on replacement of assets having useful life less than 25 years to be

allowed
 Return on the equity component in Add-Cap done after cut-off date to be at
debt rate

Copyright © 2016 Your Company All Rights Reserved. 15

Additional Capitalization - Emission Control System
Provisions Proposal NTPC Concerns
 Equity to be  RoE to be  Lenders may not come forward to fund
serviced at Debt allowed @15.5% such schemes without equity
Rate participation
 May be allowed  Would increase the cost of debt which
 Petition to be on Projected would increase the supplementary tariff
filed after Basis  Determination of such tariff may take
completion of time
ECS.  Remain un-serviced till completion of
the scheme
 Interest liability on the customers

Copyright © 2016 Your Company All Rights Reserved. 16

R&M / Special Allowance
Provisions
Special Allowance (SA)

 Only for stations availed SA in 2009-14 and 2014-19

 
 @9.5 Lakh/MW without escalation

 SA to be transferred to a separate fund for R&M activities

 Special allowance won’t be available for units of Kahalgaon-1, Talcher-1, NCTPP-1 etc
completing 25 years in next tariff period, now to go for actual R&M expenditure (with
NFA).

Copyright © 2016 Your Company All Rights Reserved. 17

Compensation Allowance
Provisions
Compensation Allowance

Provision of Compensation Allowance removed. Expense previously covered by Compensation

Allowance not covered.

In erstwhile Tariff Regulation compensation allowance given for stations/units having expired
life of more than 10 years to meet out capital expenditure in nature of MBOA, minor assets
etc.

Copyright © 2016 Your Company All Rights Reserved. 18

Renovation and Modernization
Provisions in Draft Regulations
Consent of beneficiaries to be
taken for carrying out R&M
NTPC Concerns
 As generator shall be making an application
for R&M wherein all the customers will be
pleaded and heard by the Commission
 Most of the NTPC Stations are multi-
beneficiaries- some beneficiaries may
agree and some may dis-agree: would lead
to dispute and in decision
 May allow sale in market
Key points addressed in Draft Reg 2019-24 Impact on P&L

 GCV continued to be on ‘as received’ basis. Margin of 85

kCal/kg allowed from ‘as received’ to ‘as fired’ stage.  Positive Impact

 On completion of useful life of station, the equity base to  Major Negative Impact
be reduced to 5% of capital cost (NFA)

 Rate of return on equity retained at 15.5%. Additional ROE  No Major Impact

provision of 0.5% deleted.

 Target Availability (TA- 83%.  Positive Impact on account of

 To be achieved on quarterly basis. lesser disincentive subject to
 Annual scheduled plant maintenance not to be better management of coal
considered. during peak period and
 TA to be achieved in peak & off-peak separately. negative impact due to
maintaining DC on quarterly
basis
Key points addressed in Draft Reg 2019-24 Impact on P&L
 Normative Quarterly PLF for incentive to be 85%.
 Capacity charge for peak hours 25% more than that of off-peak  Positive Impact
hours.
 Incentive - 65 paisa/kwh (Peak hours), 50 paisa/kwh (off-peak hours)

 Day ahead availability to be declared for each fuel source

 Station Heat Rate (Existing)
200 MW – 2410 (reduced by 40)  Negative Impact for Units of
500 MW – 2375 (same as existing) 200MW Size.
TTPS – 2830 (reduced by 20)
New stations achieving COD on or after 1.4.2009 - 5% over design
 Positive for New Units
heat rate (Min boiler efficiency of 86%)
APC  Positive Impact for Units size
200 MW - 8.5% (same as existing) 500MW and above
500 MW and above - 5.75% (increase by 0.5%), MDBFP- 8.00%
(increase by 0.25%)
Additional APC of 0.8% for tube type coal mill, 0.5% for IDCT
APC for gas stations increased by 0.25% to 2.75%.
TTPS -10.5%, Tanda- 11.5%
Key points addressed in Draft Reg 2019-24 Impact on P&L
 Sharing of gains on account of better operating  Negative Impact
parameters to be on 50:50 basis. Presently, it is 60:40
(generator: beneficiaries)
 Special Allowance (SA) @ 9.5 lakhs per MW per year.  Negative Impact as no escalation
 SA only available for stations which are presently availin. is given and only allowed for
 Other stations that complete useful life now to go for stations availing the same in Tariff
actual R&M expenditure (with NFA). Period 2014-19
 SA to be transferred to a separate fund for R&M activities.

In respect of a thermal generating station that has completed 25 years of operation from COD, the
generating company and the beneficiary may agree on an arrangement where the total cost
inclusive of the fixed cost and the variable cost for the generating station as determined under these
regulations, shall be payable on scheduled generation instead of the pre-existing arrangement of
separate payment of fixed cost based on availability and energy charge based on schedule
The beneficiary will have the first right of refusal and upon its refusal to enter into an arrangement
as above the generating company shall be free to sell the electricity generated from such station in a
manner as it deems fit