The Central Electricity Regulatory Commission (CERC)
released their draft tariff regulations for 2017 to 2020. The public hearing on
the draft will be held on March 15, 2017, and the draft will come into effect on
April 1, 2017.
The tariff determined according to the new regulations for
the renewable energy projects commissioned during the control period
(2017-2020) will continue to be applicable for the entire duration of the
tariff period or the entire duration for which a power purchase agreement has
been signed. CERC also proposed to continue with the debt to equity ratio of
70:30, which is in line with Renewable
Energy Tariff Regulations-2012 for the determination of
renewable energy tariffs.
CERC has recommended a depreciation rate of 5.28 percent per
annum for the first 13 years with the remaining depreciation to be spread out over
the remaining useful life of the projects (considering the salvage value of the
project as 10 percent of project cost). The commission has also proposed a
return on equity of 14 percent post tax.
The tariff period under the new regulations will be
considered from the date of commercial operation of the renewable energy
generating projects. The CERC Draft Regulations
2017 specify the various tariff periods for renewable energy projects such as:
- Renewable energy projects (except in cases of
small hydro projects below 5 MW, solar PV, solar thermal, biomass gasifier and biogas, municipal solid waste and refuse derived fuel based power projects)
will be 13 years.
- For small hydro projects below 5 MW, the tariff
period will be 35 years.
- Solar PV and solar thermal power projects will have
a tariff period of 25 years.
- Biomass gasifier, biogas-based power projects, municipal
solid waste, and refuse derived fuel-based power projects will see 20-year
CERC has regulated that the tariff for renewable energy
technologies will be a single part tariff consisting of the following fixed
- Return on equity
- Interest on loan capital
- Interest on working capital
- Operation and maintenance expenses
For renewable energy technologies with a fuel cost component
(like biomass power projects and non-fossil fuel based cogeneration) CERC has
regulated that a single part tariff with two components (fixed cost component
and fuel cost component) will be determined.
All renewable energy projects (small hydro, solar, wind)
with a minimum of 10 MW capacity will be provided must-run
will not be subject to merit order dispatch.
CERC has also regulated against delays in payment. If the
payment of any bill for charges payable under these regulations is more than 60
days past due, a late payment surcharge at the rate of 1.25 percent/month will
be levied by the generating company.
determined under these regulations will be exclusive of taxes and duties levied
at any given time. CERC expects the regulatory support during the 13-year
tariff period will provide certainty that project developers meet their debt
service obligations. After this period, the competitive procurement of
renewable energy is expected to ensure that power is purchased at competitive
rates with price benefits passed to consumers.