CERC rejects NTPC's plea for power tariff hike
15 July 2014
The Central Electricity Regulatory Commission (CERC) has rejected National Thermal Power Corporation's plea to consider a change in the tariff norms for the 2014-19 period, considering the rising cost of fuel.
The CERC's order could mean a 32 to 82 paise per unit reduction in electricity bills for consumers, depending on the distance from the plant, since the fuel cost will not be passed through by the state-run power producer.
NTPC had approached the CERC seeking a review of the basis of calculating the cost of the fuel (coal) while deciding the tariff.
It also wanted the commission to review incentives linked to plant load factor (PLF), among others.
NTPC had submitted that due to the grossed up 15.5 per cent return on equity and PLF-linked incentive, there would be an aggregate loss of internal resources of Rs14,500 crore during the 2014-19 period.
This works out to annual losses of around Rs2,700 crore, although analysts put annual reduction in NTPC's profit at Rs1,200-1,300 crore.
The power producer had approached the CERC seeking a review of the basis of calculating the cost of the fuel - coal - while deciding the tariff.
NTPC, however, said it would result in lower investments in power sector.
''This would result in lower investment of Rs48,350 crore and lower capacity addition of 9,660 MW,'' it said. The public sector power producer had said that the CERC had deviated from fundamental concepts and methodologies in determining the tariffs, which have been in place for a long time.
Rejecting NTPC's plea, CERC said the tariff regulations provide a reasonable return on equity at the base rate of 15.5 per cent annually.
CERC's order stated that NTPC was given enough time to comment on the pros and cons of gross calorific value (GCV) being calculated on ''as received basis'' as opposed to ''as fired basis'', but the PSU did not respond.
The heat produced from coal is measured in calorific value. ''Fired basis'' is the point at which coal is fed into the boiler, and ''received'' is when the plant receives the coal.
Industry sources said the norm since 1948 has been to calculate Gross Calorific Value on an ''as fired'' basis, which was changed this year.
''GCV as received is in line with the current philosophy of introducing efficiency, transparency and accountability in fuel handling and energy accounting,'' the CERC order said.
On the issue of incentives being based on Plant Load Factor, as opposed to Plant Availability Factor, NTPC had represented that it has no control over scheduling of power.
It further said that it can efficiently maintain and operate power plants if incentives continue to be based on Plant Availability Factor as was the case in 2009-14.
The CERC said that the idea of basing incentives on Plant Availability Factor was to facilitate more generation. But taking into account the difficulties faced by distribution utilities in payment, it has now been linked to PLF.
In power sector parlance, the Plant Availability Factor is the declared capacity or the total generation capacity of the plant, whereas Plant Load Factor is the actual generation, which is based on the demand.
Reacting to the CERC's decision, the Association of Power Producers said, ''The action of the regulator is likely to further harm the investments coming into the sector.''