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CERC final tariff regulation for FY-2020

A statement released by Ind-Ra said that the CERC has maintained status quo on two key parameters — return on equity at 15.5 percent and debt:equity at 70:30

CERC final tariff regulation for FY-2020
CERC final tariff regulation for FY-2020

New Delhi: India Rating and Research (Ind-Ra) said that the tariff regulation for FY2020 to FY2024 brought out by the Central Electricity Regulatory Commission (CERC) in December 2018 is largely in line with the draft guidelines and favourable for power generators. A statement released by Ind-Ra said that the CERC has maintained status quo on two key parameters — return on equity at 15.5 percent and debt: equity at 70:30.

Even though a decline in the annual fixed cost (AFC) had been estimated by Ind-Ra in keeping with the draft FY2020 to FY2024 guidelines, the CERC has allowed higher operations and maintenance expenses.

Tighter working capital norms

According to the rating agency, the CERC has tightened the working capital norms by lowering the normative inventory and receivable period allowed by 10 days and 15 days, respectively, in line with the draft guidelines. “Ind-Ra believes the increase in operations and maintenance expenses would offset the negative effect of the tightened working capital norms, leading to no significant change in the AFC. Moreover, the regulator continued with the change in the rate of interest on working capital to the one-year marginal cost of funds based lending rate (MCLR)+350bp as against the SBI base rate +350bp in the FY15-FY19 guidelines,” the statement said.

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Final guidelines would bring relief to generators

The final guidelines would offer relief to generators, as the billable energy charge rate would now be higher by Rs 0.064/kWh as against Rs 0.06/kWh under the draft tariff guidelines. The increase is mainly on account of relaxation in the station heat rate by 15Kcal/kWh to 2,390kcal/kWh for units with a capacity greater than 500 MW. In the final guidelines, CERC has maintained the relaxation of norms, including an increase in the normative auxiliary energy consumption and the allowance of an additional 85kcal/kg gross calorific value loss on account of variations during storage at generating stations.

However, CERC has revised back the increase in the normative allowance in-transit losses to 0.8 percent for non-pithead stations. The overall increase in the billable energy charge rate, along with no impact on AFC, is a positive development for generators, the rating agency said.

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