Draft power tariff regulations tightens norms for producers
10 Dec 2013
The Central Electricity Regulatory Commission (CERC) has drafted new regulations on power tariff and prescribed higher efficiency norms for power producers that could reduce electricity rates for consumers.
The draft new regulations could reduce returns for power producers unless they improve efficiency.
The new regulations are applicable to generating stations or inter-state transmission systems whose tariff has been discovered through tariff based competitive bidding in accordance with the guidelines issued by the central government and generating stations based on renewable sources of energy whose tariff is determined in accordance with the CERC regulations.
These regulations will come into effect from 1 April 2014, and would be applicable for five years till 2019.
These tariff rules would impact all power plants of public sector companies such as NTPC and NHPC and select power stations of private power producers such as Tata Power's Maithon and Lanco's Udupi.
The stocks of power generation companies came under pressure today following the release of the draft rules.
The draft regulations do not allow grossing up of taxes, which would be have a negative impact on NTPC. It also reduces the sharing of financial gains on account of better operating metrics to 3:1.
Thermal power plants would be eligible for incentives only for power generation at 50 paise above 85 per cent plant load factor (PLF).
Also, in order to recover complete fixed costs, the power producers need to show availability of 99 per cent, up from 98 per cent earlier.
For hydro power plants, the normative plant availability factor (PAF) for becoming eligible for incentives been increased by 5 per cent.
''Prima facie negative for thermal generation, slight impact on hydro and negative for transmission (norm for incentive tightened). We estimate 10-15 per cent downward revision in earnings for NTPC, 4 per cent for Power Grid Corporation of India Ltd and 6-7 per cent for SJVN,'' said IDFC Institutional Securities.
Barclays Research also estimated NTPC profits likely to be hit by 7 per cent. Change in incentives, tax impact on return on equity will reduce profitability. Similarly, for PowerGrid, profits are likely to be hit by 2-3 per cent and hike in annual transmission availability factor to impact profits.
Industry experts feel some changes in the final regulations that are expected by January-February 2014.
