CERC Releases Draft Renewable Energy Tariff Regulations for 2017-2020

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 tariffs.

CERC has regulated that the tariff for renewable energy technologies will be a single part tariff consisting of the following fixed cost components:

  • Return on equity
  • Interest on loan capital
  • Depreciation
  • 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 status and 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.

Tariffs 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.

 

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