Power generation comapnies (gencos) have sought relief from the electricity regulator on many of the regulations that came out in the draft multi-year tariff (MYT) regulations 2014-2019. The final draft is likely to come in a month’s time.
Among those, the power gencos, like NTPC, have asked CERC (Central Electricity Regulatory Commission) to allow them plant-availability-based incentive.
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Earlier, power gencos got incentives over and above the fixed cost charges that they would get in cases when plant was available for power generation. However, under the new draft, CERC has removed these incentives, stating that incentives will only be given if plant is generating the power to distribution companies (discoms).
Thus, the incentives have got generation-linked from being availability-linked. The change of the structure from availability to production puts the onus on generators, which according to experts, have to pay a price due to the inability of the distributors to buy power from them. But the distribution companies have contested this saying that power generation companies get unnecessary advantage, and are seeking for capping these incentives.
Over and above the fixed charges, NTPC alone used to recover Rs 600 crore as incentives annually. The power gencos have also sought for easing the operating and maintenance parameters and reducing the proposed cap for station heat rate as proposed in the draft norms.
Station heat rate (SHR) is fuel required to make one unit of power. And CERC in draft MYT had capped SHR by 2% to 2,375 kcal/kwat hour for 500 MW of power, since according to CERC this would increase their efficiency.
NTPC has also sought for 18% minimum assured return on equity, an increase from what was proposed in the draft where the ROE was capped at 15.5%. One of the key highlights was a proposal in the draft to remove the tax arbitrage for power generation companies like NTPC, which earned around Rs 500 crore yearly as tax arbitrage.
The power gencos have requested CERC to remove this regulation from the draft and continue with the earlier one. Experts say that a pre-tax ROE for companies like NTPC would ensure higher cash flows and a better balance sheet.
Discoms, on the other hand, have presented to the central electricity regulator to use the interest income earned by companies like NTPC, which is as high as Rs 2000 crore, to set off the tariff reduction.
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