CERC Tariff

Regulations, 2014
Applicability
These regulations shall come into force on
1.4.2014 and shall remain in force for a period of
5 years.
Where a project has been declared under
commercial operation before 31.03.2014, tariff in
respect of such project for the period ending
31.3.2014 shall be determined in accordance with
the CERC (Terms and Conditions of Tariff)
Regulations, 2009.
These regulations shall apply in all cases except
projects based on non-conventional energy
sources.

Procedure for tariff determination
As per Reg 7(3),application under 2014-19 has to bemade within 180
days from the date of the Regulation (21.02.2014 )

As per Reg7(7)and 7(8),any variation above 5% in capital cost is
subject to interest payment at 1.2 times (Base Rate+350) and interest
recovery at .80 times(Base Rate +350 ).
As per Reg 8(13), under /over recovery of AFC is subject to simple
interest at Base rate +350 as on 1 st April of the respective year .
Regulation 8(1),provides for filling interim truing up application in the
FY2016-17 .

Capital Cost
Capital cost for tariff base to include
For existing stations capital cost admitted up to
31.3.2014.
For new stations on actual cash expenditure incurred
plus projected expenditure up to CoD including
IDC , IEDC and financing charges
FERV during construction
Initial Spares - Coal: 4%, Gas: 4%, Hydro: 4% of plant
and machinery cost up to cut off date. (Earlier in
2009-14 period initial spares allowed up to original
project cost.) .P & M cost shall be project cost exclu
Ding IDC ,IEDC,Land cost and cost of civil works .
Plus Estimated Additional Capital Expenditure on cash
basis for the respective years of the tariff period 2014-
19.
Capital Cost
1- As per Reg 9(2), capital cost for new projects shall include increase in cost of
packages only on approval by the commission .
2-As per Reg 9(6) ,proportionate cost of land which is being used for generating
power from generating station based on renewable energy shall be excluded
from capital cost . Assets forming part of the project but not in use ,to be
excluded from capital cost .Decapitalisation of assets to be excluded from
capital cost .
-3As per Reg 11A(1) ,IDC shall be allowed upto scheduled COD ( investment
approval or PPA which ever is earlier ) .
-4 As per Reg 11A(2) ,IDC shall be allowed after SCOD ,if the delay is beyond the
control of the company after due prudence check .
-5 Notional IDC shall be allowed only upto SCOD even if the delay is beyond the
contol of the company .
-6 As per Reg 12(1) , variation in capital expenditure on a/c of time and/or cost
overruns on a/c of land acquisition issues has been considered as cotollable
factor .



Where the capital cost considered in tariff by the commission on the basis of
projected capital cost as on COD or the projected additional capital
expenditure exceed the actual cost incurred on year to year basis by more than
5%, the generating co. shall refund to the beneficiaries, the excess tariff
recovered corresponding to excess capital cost as approved by the
commission along with interest at 1.20 times of the bank rate as prevalent on
1
st
April of respective year.
Where the capital cost considered in tariff by the commission on the basis of
projected capital cost as on COD or the projected additional capital
expenditure falls short of the actual cost incurred on year to year by more than
5%, the generating co. shall be entitled to recover from beneficiaries, the short
fall in tariff corresponding to reduction in capital cost, as approved by
commission along with interest at 0.8 times of bank rate as prevalent on 1
st

April of respective year.

Cut Off Date
Cut-Off Date means 31st March of the year
closing after two years of the year of commercial
operation of the project, and in case the project is
declared under commercial operation in the last
quarter of a year, the cut-off date shall be 31st
March of the year closing after three years of the
year of commercial operation.
Cut- Off Date may be extended by the commission
if it is proved on the basis of documentary evidence
that the capitalization could not be made within
the cut off date for reasons beyond the control of
the developer.
Controllable and uncontrollable
factors
The following shall be considered as controllable and uncontrollable factors
leading to cost escalation contract price, IDC and IEDC of the project:
1) The controllable factors shall include but shall not be limited to the
following:
1) Variations in capital expenditure on account of time and/ or cost over- runs
on account of land acquisition issues;
2) Efficiency in the implementation of the project not involving approved
changes in scope of such project, changes in statutory levies or forces
majeure events; and
3) Delay in execution of the project on account of contractor, supplier or
agency of the generating company or transmission licensee.
2) The uncontrollable factors shall include but shall not be limited to the
following:
i. Force Majeure events; and
ii. Changes in low




Debt:Equity
Debt: Equity for new stations 70:30 or actual
whichever is higher
Existing Stations As allowed by the Commission
for determination of tariff for the period ending
31.3.2014.
70:30 for additional capital expenditure on or after
1.4.2014
Elements of Tariff
Annual Fixed Cost

Variable /Energy charges


Annual Fixed Cost
Return on Equity
Interest on Loan Capital
Depreciation
Interest on Working Capital
Operation and Maintenance Expenses
Compensatory Allowance ( for coal & lignite
based power station )
Special Allowance in lieu of R&M

Return on Equity
Pre-Tax Rate of Return will be 15.5% for existing stations
For new projects it can be 16% if projects is completed with in the
following timeline from investment approval:
200/210/250/300/330 MW - 33 months subsequent
units at 4 months interval
Extension projects - 31 months subsequent
units at 4 months interval
500/600/660 MW - 44 months subsequent
units at 6 months interval
Extenson projects - 42 months subsequent
units at 6 months interval
660/800 MW - 52 months subsequent
units at 6 months interval
Extension projects - 50 month subsequent units
at 6 months interval
Gas Stations >100MW - 30 month subsequent units
at 4 months interval
Extension projects - 28 months subsequent
units at 4 months interval

Return on Equity..Contd.
Pre Tax return will be grossed up with the Effective tax rate of the
respective F.Y.
Rate of pre-tax return on equity = base rate/(1-effective tax
rate )
Effective tax rate shall be calculated at the beginning of each year
based on the estimated profit and tax in line with
The provisions of the relevant FY on prorata basis by excluding the
income of non-generation&tax due thereon.
In case of generating company paying MAT rate including surcharge
and cess thereon.
Generating co to true-up the grossed up rate of return on equity based
on the actual tax paid at the end of FY.
The rate on return of new project shall be reduced by 1% for such
period as may be decided by the Commission, if the generating station
or transmission system is found to be declared under commercial
operations without commissioning of any of the Restricted Governor
Mode Operation (RGMO) / Free governor Mode Operation (FGMO),
data telemetry, communication system up to load dispatch center or
protection system:
Interest on Loan
Calculated on the basis of normative average loan and
weighted average rate of interest for the year taking loan
portfolio at the beginning of the each year.
The normative loan outstanding as on 1.4.2014 shall be
worked out by deducting the cumulative repayment from
the gross normative loan.
Normative Repayment equal to depreciation irrespective
of actual repayment
Generator to attempt re-financing and Net Benefit of
refinancing to be shared in the ratio of 1(genco): 2
(beneficiaries), Refinancing cost is to be borne by the
beneficiaries

Depreciation
Depreciable value 90% (except land);
Depreciable life:
Thermal - 25 years for both coal and gas station
Hydro - 35 years
As per appendix of regulation, rates for Assets based on
schedule XIV of Companies Act for the first 12 years
after commercial operation and balance depreciation
shall be spread over balance life
Interest on Working Capital
Coal Based Stations
1.5 months fuel expenses for pit head and 2 months for non pit head
Secondary fuel oil for 2 months
Maintenance spares @ 20% of O&M
Receivables for 2 months
O&M 1 month
Gas Based Stations note- cost of coal stock will be limited
1 month fuel expenses to coal storage capacity only .
Liquid fuel stock for month
Maintenance spares @ 30% of O&M
Receivables for 2 months
O&M 1 month
Hydro Stations
Maintenance spares @ 15% of O&M
Receivables for 2 months
O&M 1 month

Interest on Working Capital
.Contd.
Cost of fuel w.r.t Price & GCV of preceding 3 months
Rate of interest will be bank rate as on 1.4.2014 (base rate
+ 350 point basis )or 1
st
April of the year in which the
generation station is declared under commercial operation,
which ever is later.
No fuel escalation will be permitted in working capital.
Interest on working capital shall be payable on normative
basis.
O&M Expenses for 2014-19
Coal Based stations: in Rs Lac/MW
200 MW -23.90 Lac/MW
300/330/350 -19.95 Lac/MW
500 MW -16.00 Lac/MW
660 MW -14.00 Lac/MW
TTPS -43.16 Lac/MW
BTPS -35.88 Lac/MW
Tanda -30.88 Lac/MW
Gas Based stations: Rs 14.67 Lac/MW
Annual Escalation @ 6.35% .
Water charges and capital spares for thermal generating stn
Shall be allowed separately .


O&M Expenses .. contd.
Additional units commissioned after 1.4.2014 in the same
station
200/210/250 MW
90% of norms for Unit 5 & 6
85% of norms for 7
th
onwards
300/330/350 MW
90% of norms for Unit 4 & 5
85% of norms for 6
th
onwards
500 MW and above
90% of norms for Unit 3 & 4
85% of norms for 5
th
onwards


CERC has provided following Compensatory
Allowance for meeting expenses on new assets of
capital nature in lieu of any additional Capitalisation
beyond Cut Off Date
Years of
Operation
Compensation Allowance
(in Rs. Lac/MW/yr)
0 10 Nil
11 - 15 0.20
16 20 0.50
21 - 25 1.00
Compensatory Allowance

This element will not be considered for the working capital.
Renovation and Modernization (R&M)
Two options for R&M
Option-I For extension of life beyond the useful life of
generating station or a unit thereof GENCO to make an
application before CERC for approval of R&M proposal with
a DPR giving
Complete scope & justification, Financial package &
phasing of expenditure, cost-benefit analysis, estimated
completion cost ,
Schedule of completion & estimated life extension from a
reference date,
Record of consultation with beneficiaries
No capitalization of R&M is allowed upto 25 years for both
coal and gas based stations/units
Any expenditure towards R&M for life extension will be
allowed by CERC after prudence check and after deducting
the accumulated depreciation already recovered from the
original project cost.
Renovation and Modernization (R&M)
Option-2 Special allowance for coal based station @ Rs. 7.5 lakh / MW /
year can be availed along with annual escalation of 6.35% during the tariff period
2014-19 as compensation for meeting the R&M expenses,
Unit-wise from the respective date of the completion of useful life (25 years)
w.r.t. COD of respective units of the generating station
This shall be in addition to normal O&M which is being allowed,however
This will not be considerd for working capital

Provided further that the special allowance for the generating station which
has already availed special allowance in terms of CERC REG. 2009, shall be
allowed special allowance by escalating the special allowance allowed for
the year 2013-14 @6.35% i.e Rs 6.64lakh/MW/Year for the year 2014-15
ever
In such an event revision of the capital cost shall not be considered
Such option shall not be available for:
Generating station for which R&M has been undertaken and the expenditure
has been admitted by the Commission for life extension before
commencement of these Regulations
Generating stations which is in a depleted condition or operating under
relaxed operational and performance norms.
Recovery of Fixed Charge -Incentive
Fixed Charges payable on monthly basis based on the normative
availability factor of 85%.


INCENTIVE
Incentive to a generating station or unit there off shall be
payable at a flat rate of 0.50p/kwh for ex-bus scheduled
energy corresponding to scheduled energy in excess of ex-
bus energy corresponding to Normative Annual Plant
Load Factor (NAPLF) as specified regulation 36 b.
Operating Norms
Target Availability (NAPAF) for recovery of fixed charges
85% for all stations. However ,keeping un view the shortage of
coal and uncertainty of sustained coal supply on assured basis,
NAPAF for recovery of fixed charges shall be kept as 83% till it
Is reviewed .The review shall be after 3 years .

Auxiliary Energy Consumption
200 MW units: 8.5%;
500 MW units & above:
Steam driven BFP: 5.25%
Electricity Driven BFP: 7.75%
with Induced Draft Cooling Tower: 0.5% extra&1% extra for
direct cooling air cooled condensor with mechanical draft fan
Talcher TPS- 10.5%; Tanda TPS- 12%; Badarpur TPS- 8.5%
CCGT: 2.5%; Open-cycle: 1.0%
Specific Oil -0.5 ml/kwh for NTPC coal based stns.
Specific Oil 0.5 ml/kwh. Savings on this account will be shared
in the ratio of 60;40 between developer generator and
beneficiaries.


Operating Norms Heat Rate
Existing 200/210/250 MW 2425
500 MW Sub critical Units (for EDBFP 40 Kcal less) 2375
BTPS 2750
TTPS 2850
Tanda 2750
Anta,
Dadri
2075/3010
2000/3010
Faridabad,
Kayamkulam
1975/2900
2000/2900
Auriya 2100/3045
Gandhar 2040/2960
kawas 2050/3010
Kcal/kWh
A.
Operating Norms Heat Rate.Cont.
New thermal generating station achieving COD on or after
1/4/2014. the heat rate will be 1.045 into design heat rate ( K
CAL/KWH)
Where the design heat rate of generating unit means the unit
heat rate guaranteed by the supplier at conditions of 100%
MCR, 0% makeup, design coal and design cooling water
temperature/ back pressure.
B.
Financial gains on account of station heat rate ,
Auxiliary consumption and secondary fuel oil
Shall be shared between generating company
And beneficiaries in the ratio of 60:40 on monthly
Basis with annual reconciliation as per following
Formulae :-
NET GAIN =(ECRN-ECRA ) X SCHEDULED GENERA





NOTE:- Financial gains on account of station heat
rate, auxiliary consumption and secondary fuel oil
shall be shared between generating company and
the beneficiaries in the ratio of 60:40
FINANCIAL GAINS ON
CONTROLABLE PARAMETERS
Energy Charge
EC covering primary & secondary fuel cost and lime stone consumption cost ( where
applicable) shall be payable for total ex-bus energy scheduled to be supplied to the
beneficiary during the calendar month, at the specified energy charge rate.
Energy charge rate (ECR) in Rs. per kWh is calculated on ex-power plant basis in
accordance with the following formula:
FOR COAL BASED AND LIGNITE FIRED STATION

ECR ={(GHR-SFC*CVSF)*LPPF/CVFP+SFC*LPSFI+LC*LPL}*100/(100- AUX)

FOR GASS AND LIQUID FUEL BASED STATION
ECR = GHR*LPPF*100/{CVPF*(100-AUX)}

Landed Cost of Coal shall include
Price of coal corresponding to the grade and quality inclusive of royalty, taxes and duties
applicable & transportation cost
Considering normative transit and handling losses :
Pit head stations : 0.2% ;
Non-Pit head stations : 0.8%

Landed cost of the fuel
The landed cost of fuel for the month shall include price of fuel
corresponding to the grade and quality of fuel inclusive of royalty,
taxes and duties as applicable, transportation cost by rail / road or
any other means, and, for the purpose of computation of energy
charges, and in case of coal/lignite shall be arrived at after
considering normative transit and handling losses as percentage of
the quality of coal or lignite dispatch by the coal or lignite supply
during the month as given bellow:
Pithead generating stations : 0.2%
Non-pithead generating stations : 0.8%
Provided that in case of pit head stations if coal or lignite is
procured from sources other than the pit head mines which is
transported to the station through rail, transit loss of 0.8% shall
be applicable:
Provided that further that in case of imported coal, the transit
and handling losses shall be 0.2%

DEVEATION CHARGES
All variations between actual net injection and scheduled net
injection for the generating stations, and all variations between
actual net drawal and scheduled net drawal for the beneficiaries
shall be treated as their respective deviations and charges for
such deviations shall be governed by the Central Electricity
Regulatory Commission ( Deviation settlement and related
matters ) Regulations 2014, as amended from time to time.
Actual net deviation of every inter-State entity shall be metered
on its periphery through special energy meters (SEMs) installed
by the Central Transmission Utility (CTU), and computed in
MWh for each 15-minute time block by the concerned Regional
Load Despatch Centre.

FERV
Hedging
Cost of hedging corresponding to the normative foreign
debt shall be recovered as expense in the period in which it
arises
FERV corresponding to such hedged foreign debt shall
not be allowed.
To the extent the foreign exchange exposure is not hedged, the
FERV towards interest payment and loan repayment
corresponding to the normative foreign currency loan shall be
permissible.
Every generating company and the transmission licensee shall
recover the cost of hedging and foreign exchange rate variation
on year-to-year basis as income or expense in the period in
which it arises.
Miscellaneous Provisions
Tax on Income
Tax on the income streams of company shall not be recovered
from the beneficiaries,
Deferred tax liability, excluding FBT, for the period up to 31st
March, 2009 whenever it materializes, shall be recoverable
directly from the beneficiaries.
Approved CDM projects- proceeds from carbon credits
100% of the gross proceeds to be retained by developer in the
1
st
yr
To be reduced @10% every year for the next 4 yrs
To be shared 50:50 from 6
th
year onwards
Rebate and Surcharge
Rebate
For payment of bills through LC on presentation, a
rebate of 2% shall be allowed.
Where payments are made other than through LC
within a period of one month of presentation of bills, a
rebate of 1% shall be allowed.
Late payment surcharge.
In case the payment of any bill is delayed beyond a
period of 60 days from the date of billing a late
payment surcharge at the rate of 1.5% per month shall
be levied.