Expect changes in final power norms: NTPC

Arup Roy Choudhury, chairman & managing director, NTPC, sought to assuage investors’ concerns after power regulator Central Electricity Regulatory Commission (CERC) put out a draft regulation for power companies recently that was widely believed to be a negative for the firm.

In an interview with CNBC-TV18, Choudhury said the company would be able to meet investors’ expectations and pointed out the regulations were still in the draft stage and that it would communicate its views to the regulator.
Going by past experience, there is a lot of difference between the draft norms and the final version that is released after inputs from power companies, he said, adding that issues relating to the plant-load factor incentive model and other negatives will be discussed with CERC.
Commenting on the draft itself, he said there were several positives for NTPC relating to assured return on equity remaining the same, water charges and annual escalation norms. Here is a verbatim transcript of the interview. Q: What is your first reaction to the Central Electricity Regulatory Commission (CERC) draft guidelines for power tariffs?
A: I am as surprised as you are as to why we were the biggest loser yesterday. I have compared the draft with the one released before the earlier period. (Historically) if you look at the drafts and final orders, there is a lot of difference.
We are confident that we will be able to positively discuss with CERC and sort out these issues.
Also, there are a whole lot of pluses, which investors have missed. The RoE has remained the same which was expected to decrease. The schedule for completion is the same.
There is a special allowance now for operations stations of 7.5 lakh per megawatt for the year against 5 lakh earlier. Water charges have become a pass through. The annual escalation of operation and maintenance (O&M) has become 6.35 percent against 5.72 percent. The late payment charges have increased to 1.5 percent from 1.25 percent.  The previous revision recognized this as pass-through.
So many good things have happened which is important to tell our investors and must be highlighted. Q: Can you tell us the impact of the negatives, the incentives have moved from plant availability factor (PAF) to plant load factor (PLF)?
A: The negatives are still hypothetical. The negative on returns and on taxation is not a negative because it wasn’t there in the draft last time and we got it included later. We are confident that we will be able to engage the CERC to see that they incentivise us.
If you look at the other one which is regarding PLF versus PAF, I am sure that is a mistake. We are here to maintain our machines. The PLF is something which is dependent on the health of state electricity boards (SEBs) and many other factors, so the consumption is dependent on so many factors.
The one or two technical issues have been taken up by CERC especially the heat rate and oil consumption.
(And) these are not for NTPC but the entire power sector in the country. We are operating with Indian coal, which is of low calorific value. So, all these issues will be discussed with CERC. So I do not find a lot of minuses. Q: What do you expect in the final guideline and when are they expected to be released?
A: It will go forward from now. The draft has been put and they will give us several opportunities because this will become final from April 1, 2014. Therefore, from now till that period we have almost three months to discuss with them at various levels. We will put forward our points. They will validate those points and finally, the regulation will come. Q: Although the opportunity will be given, did you get a chance yet to give your perspective to the CERC for the final guidelines because as we have heard historically the draft recommendations are always considered the eventual stakeholders’ call as well?
A: No, I would say there is no consultation held before this becomes a draft. Official consultation now starts. I am very confident not because of this but because of what has happened in earlier regulation - what was the draft and what finally came out in the regulation.