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New electricity tariff regulations, win-win for all

business Updated: Jan 21, 2009 22:37 IST
New electricity tariff regulations

The new electricity tariff regulations, announced by the Central power regulator on Tuesday, will go a long way in ensuring power supply to consumers at a reasonable rate. This, however, does not mean that power tariffs would come down.

The new set of regulations, to be effective April 1, 2009, would ensure that the extent of increase in power tariff by developers gets capped. For instance, if power tariffs were to be revised, by say 15-20 per cent on account of increasing input costs, the new regulations would help in capping this increase at 5-7 per cent.

The new regulations are a win-win for both consumers and developers of power, said Pramod Deo, chairman, Central Electricity Regulatory Authority (CERC). Developers of power have been promised higher returns on equity at 15.5 per cent as against the existing 14 per cent. This will be applicable for all the exiting as well as new projects.

Besides, developers completing their projects on time would get an incentive by way of an additional 0.5 percentage point return on their equity, that would take returns to 16 per cent.

Alongside, efficiency standards have been tightened as well. Power developers who were earlier generating power at 80 per cent plant load factor (PLF or the measure of efficiency for a power plant) have now been asked to operate power plants at a PLF of 85 per cent.

“Stricter efficiency norms have been made compulsory for developers to claim their fixed cost returns,” said Alok Kumar, secretary, CERC. “This would bring down the per unit cost of generation, thereby benefiting end consumers.”

The new tariff regulations, which would be applicable for a period of five years (2009-14), would also mean higher profitability for power generating and transmission companies.