New tariff regulations to benefit distribution utilities, consumers: ICRA

New tariff regulations to benefit distribution utilities, consumers: ICRA
The tariff regulations approved by the Central Electricity Regulatory Commission (CERC) for FY15-FY19 will benefit distribution utilities as well as the consumers by way of lower tarrifs, according to the rating agency ICRA, said a PTI news report.

As per the media report, the regulations may, however, negatively impact generation utilities and transmission licensees, ICRA said.  CERC has tightened the normative operating norms for existing as well as upcoming coal/lignite/gas based thermal power projects, and this could result in reduction in tariff by about 3-4 paisa per unit in the case of energy charges applicable for central sector utilities, it said.

The Commission's ruling on linking incentives for a generating station to plant load factor (PLF) against the provision of linking with plant availability factor (PAF) will have a negative impact on generating stations as plants may operate at PLFs lower than the availability because of reasons beyond their control.

ICRA estimates that this would result in a tariff reduction for thermal plants by about 6 paise per unit due to lower incentives, it said. CERC has reduced the provision towards coal/lignite stock for working capital requirement and this would be negative for the generation utilities as it would lead to disallowance of about 2 paise per unit in tariff recovery, which would be equivalent to reduction by 0.7 per cent return on equity (RoE).

For generation utility with multiple assets on the books, ICRA expects overall reduction in the return on equity at about 6-7 per cent on equity.

Dion Global Solutions Ltd.

Read more about: cerc, tariff, electricity, consumers
Story first published: Friday, February 28, 2014, 8:50 [IST]
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