Electricity regulator proposes major change in tariff structure from FY19

India: The Central Electricity Regulatory Commission (CERC), which determines tariffs for plants that sell power at ‘cost-plus’ systems, has proposed to introduce a ‘three-part tariff’ structure from the existing ‘two-part’ regime. The regulator has suggested the changes in the recently launched approach paper for the tariff period between FY19-24. The existing two-part tariff structure for coal-based power plants comprise fixed and energy charges. Fixed charges represent fixed cost components, including debt service obligation and risk-free returns, while energy charges represent the fuel costs, which varies according to the market.

The new proposed design wants to introduce a “variable charge” component, which would provide incremental return above guaranteed return and balance operation and maintenance expenses. The variable component could be linked to the difference between availability of the power plant and the quantum of electricity it has dispatched.

Published in Financial Express, 29th May, 2018