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TERMS & CONDITIONS OF

TARIFF
A COMPARISON
2009-14

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FIXED CHARGES

COMPONENTS OF Annual Fixed Cost.

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(a) Return on equity;

(b) Interest on loan capital;
(c) Depreciation;
(d) Interest on working capital;
(e) Operation and maintenance expenses;
(f) Cost of secondary fuel oil (for coal-based and
lignite fired generating stations only);
(g) Special allowance in lieu of R&M or separate
compensation allowance, wherever
applicable.

RIHAND

15. Return on Equity. (1) Return on equity

shall be computed in rupee terms, on the
equity base determined in accordance with
regulation 12.
(2) Return on equity shall be computed on pretax basis at the base rate of 15.5% to be
grossed up as per clause (3) of this regulation:
Provided that in case of projects commissioned
on or after 1st April, 2009, an additional
return of 0.5% shall be allowed if such projects
are completed within the timeline specified

Return on Equity:

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It is expected to be a positive for the players in the central

sector as from 2009-10 onwards these players would start
earning a higher return on equity of 15.5 per cent post tax
(from the previous 14 per cent) on the existing capacities. This
when added with the tax at normal rate is expected to give a
pre-tax rate of 23.5 percent. The tax at MAT rate would earn a
pre-tax rate of 17.5 per cent). The completion of new projects
within the stipulated time would result in an incremental
benefit of 0.5 per cent (coal-based 500 MW greenfield plants
need to be commissioned within 44 months to achieve the
extra 0.5 per cent return on equity),
thus new projects stand to gain a return on equity of 16
percent.
SOURCE: CRISIL

RIHAND
Depreciation rate increased to 5.28 per cent, AAD done away
with
The Central Electricity Regulatory Commission (CERC) has done
away with the advance against depreciation (AAD) norm stated in
the CERC Regulation Policy 2004-09 and has increased the
depreciation rate to 5.28 percent for a period of 12 years.
This norm is expected to have a neutral impact. Earlier AAD was
provided in the CERC Regulation 2004-09 in order to balance the
mis-match between tenure of loans (to be paid in 10 years) and
asset life (spread over 25 years). The new CERC regulation
however discontinues the benefit of AAD. In order to compensate
for the same, depreciation rates have been increased to 5.28 per
cent for a period of 12 years and the balance depreciation is spread
equally over the life of the asset.
SOURCE: CRISIL

RIHAND
Long term loans
The generation company or the transmission licensee, as the
case may be, shall make every effort to re-finance the loan as
long as it results in net savings on interest and in that event the
costs associated with such re-financing shall be borne by the
beneficiaries. Also, the net savings shall be shared between the
beneficiaries and the generation company or the transmission
licensee, as the case may be, in the ratio of 2:1. expects this to
be a positive for players. In the past, net savings from any
restructuring activity
had to be completely passed on to the beneficiaries. However,
as per the new regulation, the generation company
would be allowed to retain one-third of the net savings.
SOURCE: CRISIL

RIHAND

Operation and maintenance (O&M) expenses

As per the revised norm (for a 500 MW coal-based power
plant) the incremental O&M expense is increased to 5.72
per cent annually, from the earlier 4 per cent. The O&M
expense increased from Rs 9.3 lakh/MW in 2004-05 to Rs
10.5 lakh/MW in 2008-09 and will now rise from Rs 13
lakh/MW in 2009-10 to Rs 16.2 lakh/MW in 2013-14.
An incremental compensation has been permitted after the
completion of 10 years, 15 years and 20 years of the
useful life of the plant, which translates into Rs 0.15 lakh /
MW . 0.65 lakh / MW. This move is positive but the
impact is neutral for players as the O&M expense forms a
small proportion of the total costs.

RIHAND
Working capital norms
CERC has proposed that henceforth
maintenance spares would be calculated at
20 per cent of the O&M expenses
as compared to the previous norm of
calculating at 1 per cent of the historical
costs.
As per our calculations, we expect the
impact of this change to be insignificant.
SOURCE: CRISIL

RIHAND

Gross station heat-rate

Impact: Negative

CERC norms have tightened the gross station

heat-rate. Typically a 500 MW coal-based power
plant had a normative station heat rate of 2,450
kcal/kwh as per the old norms; this has been
changed to 2,425 kcal/kwh with the new
regulations. We expect this norm to have a
negative impact as the tightening of the gross
station heat rate norms would result in efficient
players retaining lower savings/earnings.

RIHAND
Expenses on secondary fuel oil consumption for coal-based and
lignite-fired
generating station.

Expenses on secondary fuel oil in Rupees shall be

computed
corresponding to normative secondary fuel oil
consumption (SFC) specified in clause (iii) of
regulation 26, in accordance with the following
formula:
= SFC x LPSFi x NAPAF x 24 x NDY x IC x 10
SFC
SFCNormative
NormativeSpecific
SpecificFuel
FuelOil
Oilconsumption
consumptionin
inml/kWh
ml/kWh
LPSFi
LPSFiWeighted
WeightedAverage
AverageLanded
LandedPrice
Priceof
ofSecondary
SecondaryFuel
Fuelin
in
Rs./ml
Rs./mlconsidered
considered
NDY
Number
of
days
in
aayear
initially
NDY
Number
of
days
in
year
initially
NAPAF

Normative
Annual
Plant
IC
NAPAF
Installed

Normative
Capacity
Annual
in
MW.
PlantAvailability
AvailabilityFactor
Factorin
inpercentage
percentage
IC - Installed Capacity in MW.

RIHAND
(2) Initially, the landed cost incurred by the generating
company on secondary fuel oil shall be taken based on
actuals of the weighted average price of the three
preceding months and in the
absence of landed costs for the three preceding months,
latest procurement price for the generating station,
before the start of the year. The secondary fuel oil
expenses shall be subject to fuel price adjustment at the
end of the each year of tariff period as per following
formula:
SFC x NAPAF x 24 x NDY x IC x 10 x (LPSFy LPSFi)
Where,
LPSFy = The weighted average landed price of
secondary fuel oil for the year in Rs. /ml

RIHAND

Incentives
The new CERC regulation states that the incentive would be
based on Plant Availability Factor (PAF) rather than the Plant
Load Factor (PLF), which was the criteria under the previous
regulation. It is expected to be a positive. In the past, players
have suffered due to inadequate fuel supply leading to low
PLFs. Calculation, now based on PAF will provide adequate
incentive to players. The incentive calculation for plants with
less than 10 years of commercial operation would be calculated
as follows:
Annual fixed charges * (NDM/NDY) * (0.5 + 0.5 * Actual
monthly PAF/ Normative PAF)
For plants above 10 years of commercial operation, the
calculation would be as follows:
Annual fixed charges * (NDM/NDY) * (Actual monthly PAF/
Normative PAF)

RIHAND

EXISTING TARIFF
FIXED COST DISTRIBUTED UNIFORMLY
THROUGHOUT THE YEAR.
FORMULA: (n xACCn (n-1) x ACCn-1
INCENTIVE GIVEN SEPARATELY @ 25 PS.
PER KWH FOR EXBUS SCHEDULED
ENERGY CORRESPONDING TO SCHEDULED
GENERATION IN EXCESS OF NORMATIVE
DC.

RIHAND

NEW TARIFF
FIXED COST CEILING REMOVED.
INCENTIVE FORMED AS A PART OF
FIXED COST.
NO DEPENDENCE OF INCENTIVE ON
SCHEDULE

NEW TARIFF

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FORMULA FOR CALCULATION OF FIXED COST:

(i) For generating stations in commercial
operation for more than ten (10) complete
years
(AFC x NDM / NDY) x (PAFM / NAPAF) (in Rs.)
(ii) For generating stations in commercial
operation for ten (10) complete years or less :
(AFC x NDM / NDY) x 0.5 (1.0 + PAFM /
NAPAF) (in Rs.)

AFC
AFC == Annual
Annual fixed
fixed charge
charge computed
computed for
for the
the
NDM
=
Number
days
the
NAPAF=
NDM
=Normative
Number
ofannual
days in
inplant
the month
month
availability
year,
Rupees.
NAPAF=
Normative
annual
plant
availability
year, in
in
Rupees.of
factor
NDY
factor
NDY == Number
Number of
of days
days in
in the
the financial
financial year
year
PAFM
PAFM == Plant
Plant availability
availability factor
factor achieved
achieved during
during

NEW TARIFF

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FORMULA FOR CALCULATION OF FIXED COST:

Provided that in case the plant availability
factor achieved during a year (PAFY) is less
than 70%, the total fixed charge for the year
shall be
restricted to
AFC x (0.5 + 0.35/ NAPAF) x (PAFY /70) (in Rs.)
Where
PAFY = Plant availability factor achieved during
a year, in percent.

RIHAND

The PAFM and PAFY shall be computed in

accordance with the following formula:
N
= 10000 x DCi/{ N x IC x (100-AUX )} %
i=1
DCi
DCi==Average
Averagedeclared
declaredcapacity
capacity(in
(inex-bus
ex-busMW),
MW),for
forthe
theiith
thday
day
of
ofthe
theperiod
periodi.e.
i.e.the
themonth
monthor
orthe
theyear
yearas
asthe
thecase
casemay
maybe,
be,as
as
certified
certifiedby
bythe
theconcerned
concernedload
loaddispatch
dispatchcentre
centreafter
afterthe
theday
dayisis
N
==Number
of
days
during
the
period
i.e.
the
month
or
the
year
N
Number
of
days
during
the
period
i.e.
the
month
or
the
year
over.
over.
as
asthe
thecase
casemay
maybe.
be.
IC
IC==Installed
InstalledCapacity
Capacity(in
(inMW)
MW)of
ofthe
thegenerating
generatingstation
station
AUX
AUX==Normative
Normativeauxiliary
auxiliaryenergy
energyconsumption
consumptionin
inpercentage.
percentage.

RIHAND

(4) In case of fuel shortage in a thermal

generating station, the generating company may
propose to deliver a higher MW during peak-load
hours by saving fuel during off-peak hours.
The concerned Load Despatch Centre may then
specify a pragmatic day-ahead schedule for the
generating station to optimally utilize its MW
and energy capability, in consultation with the

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VARIABLE CHARGES

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EXISTING TARIFF
FORMULA:
=(100*(LPPF*GHR+ LPSF*SFCn))/(100-AUXn)
VCR
VCR == Energy
Energy charge
charge rate,
rate, in
in Rupees
Rupees per
per kWh
kWh sent
sent
out.
out.
GHR
GHR == Gross
Gross station
station heat
heat rate,
rate, in
in kcal
kcal per
per kWh.
kWh.
SFCn
SFCn == Normative
Normative Specific
Specific fuel
fuel oil
oil consumption,
consumption, in
in
ml/kWh
ml/kWh
CVSF
CVSF == Calorific
Calorific value
value of
of secondary
secondary fuel,
fuel, in
in
kCal/ml
kCal/ml
LPPF
LPPF == Landed
Landed price
price of
of primary
primary fuel,
fuel, in
in Rupees
Rupees per
per
kg.
kg. = Gross calorific value of primary fuel, in kCal
CVPF
CVPF = Gross calorific value of primary fuel, in kCal
per
kg.
per
kg.
LPSF
LPSF == Landed
Landed price
price of
of sec
sec fuel,
fuel, in
in Rupees
Rupees per
per kg.
kg.

RIHAND

NEW TARIFF
FORMULA:
VCR = (GHR SFC x CVSF) x LPPF x 100 /
{CVPF x (100 AUX)}
VCR
VCR == Energy
Energy charge
charge rate,
rate, in
in Rupees
Rupees per
per kWh
kWh sent
sent
out.
out.
GHR
GHR == Gross
Gross station
station heat
heat rate,
rate, in
in kcal
kcal per
per kWh.
kWh.
SFC
SFC == Specific
Specific fuel
fuel oil
oil consumption,
consumption, in
in ml/kWh
ml/kWh
CVSF
CVSF == Calorific
Calorific value
value of
of secondary
secondary fuel,
fuel, in
in
kCal/ml
kCal/ml
LPPF
LPPF == Landed
Landed price
price of
of primary
primary fuel,
fuel, in
in Rupees
Rupees per
per
kg.
kg. = Gross calorific value of primary fuel, in kCal
CVPF
CVPF = Gross calorific value of primary fuel, in kCal
per
per kg.
kg.
TRANSIT & HANDLING LOSSES = 0.2%

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NORMS OF OPERATION

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NORMS OF OPERATION OF RIHAND AS PER CERC PROPOSAL FOR 2009-14

DATA FOR 2002-03 TO 200607 FOR RIHAND

PARAME
TER
NORMATIVE
ANNUAL
PLANT
AVAILABILIT
Y FACTOR
(DC) %

HEAT RATE
(KCAL/KWH)
SPECIFIC
OIL
(ML/KWH)

200203

98%

2392
0.22

200304

91%

2385
0.22

200405

90%

2376
0.17

200506

97%

2337
0.25

200607

93%

2360
0.17

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AVERAG
E

OVERALL
RANGE

PROPOSED
BY CERC

PREVIOUS

200207

2004-08

2009-14

2004-09

93%

85-96
%

85%

80%

2358

2430

2385
(MDBFP)
2425
(SDBFP)

2410
(MDBFP)
2450
(SDBFP)

0.2

0.150.68

1.0

2.0

5.62 7.1 %

8.5 %
(NO CT);
6.5 %
(CT)

8.5 %
(NO CT);
7.5 %
(CT)

AUX POWER
CONSUMPTI
ON (APC)
%

8.03% 7.65% 7.98% 7.30% 6.49% 7.26%

RIHAND

Marginal saving on account of oil savings

The savings on account of secondary fuel oil

consumption in relation to norms shall be shared
with beneficiaries in the ratio of 50:50, in
accordance with the following formula at the
end of the year:
(SFC x NAPAF x 24 x NDY x IC x 10 -ACsfoy) x LPSFy x 0.5
SFC
SFCNormative
NormativeSpecific
SpecificFuel
FuelOil
Oilconsumption
consumptionin
inml/kWh
ml/kWh
LPSFy
LPSFy==The
Theweighted
weightedaverage
averagelanded
landedprice
priceof
ofsecondary
secondaryfuel
fueloil
oilfor
for
the
theyear
yearin
inRs.
Rs./ml
/ml
ACsfoy
=
Actual
consumption
of
secondary
fuel
oil
during
the
year
NDY
ACsfoy

Number
=
Actual
of
consumption
days
in
a
year
of
secondary
fuel
oil
during
the
year
NDY

Number
of
days
in
a
year
NAPAF

Normative
Annual
Plant
Availability
Factor
in
percentage
IC
NAPAF
Normative
Capacity
in
Plant
Availability Factor in percentage
in
IC--Installed
Installed
CapacityAnnual
inMW.
MW.
inml
ml

RIHAND

NORMATIVE DC

STAGE I: 915 MW

STAGE II: 935 MW

RIHAND

CERC (UI & Related Matters)

Regulation 2009
Applicable from 01.04.2009
Frequency band has been narrowed
to 50.3 Hz to 49.2 Hz from 50.5 Hz to
49.0 Hz
Ceiling UI rate has been decreased
to 7.35 Rs/KWh from 10.0 Rs/KWh
From 50.3 Hz to 49.5 Hz, UI rate
will increase at 12 paisa per 0.02 Hz
decrease in frequency.
From 49.5 Hz to 49.2 Hz, UI rate
will increase at 17 paisa per 0.02 Hz

RIHAND
CERC (UI & Related Matters) Regulation 2009

RIHAND
CERC (UI & Related Matters) Regulation 2009

Provided that Unscheduled Interchange rate shall

be capped at 408 paise per kWh (hereinafter UI
Cap Rate) for all generating stations using coal or
lignite or gas supplied under Administered Price
Mechanism (APM) as the fuel, in case when actual
generation is higher or lower than the scheduled
generation in the frequency range between 50.3 Hz
and up to 49.2 Hz.
Note: The Unscheduled Interchange charges including
UI Cap rate shall be reviewed by the Commission on
six-monthly basis or earlier, and revised, if necessary,
through separate orders from time to time.

Limits on UI volume and RIHAND

consequences of crossing limits

The under-injection of electricity from the schedule

by a generating station or by a seller during a timeblock shall not exceed 12% of the scheduled injection
of such generating station or seller when frequency is
below 49.5 Hz, and 3% on daily aggregate basis.
In addition to UI Rate corresponding to frequency of
49.2 Hz, as stipulated under regulation 5, an Additional
Unscheduled Interchange Charge at the rate equivalent
to 40% of the UI Rate corresponding to frequency of
49.2 Hz shall be applicable for over-drawal or underinjection of electricity for each time-block when grid
frequency is below 49.2 Hz.

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BREAK EVEN FREQUENCY FOR

RIHAND
LANDED COST OF COAL = 2000 Rs/ton
UI RATE FOR BREAKEVEN = 120 PS/KWH.
BREAK EVEN FREQUENCY = 50.12 Hz.

RIHAND

IMPORTANT
AMENDMENTS IN
INDIAN
ELECTRICITY GRID
CODE

RIHAND
While the ISGS would normally be expected to
generate power according to the daily schedules
advised to them, it would not be mandatory to
follow the schedules tightly. In line with the
flexibility allowed to the States, the ISGS may also
deviate from the given schedules depending on the
plant and system conditions. In particular, they
would be allowed/encouraged to generate beyond
the given schedule under deficit conditions.
Deviations from the ex-power plant generation
schedules shall, however, be appropriately priced
through the UI mechanism.

RIHAND
Provided that when the frequency is higher than 50.3
Hz, the actual net injection shall not exceed the
scheduled dispatch for that time block. Also, while the
frequency is above 50.3 Hz, the ISGS may (at their
discretion) back down without waiting for an advise
from RLDC to restrict the frequency rise. When the
frequency falls below 49.5 Hz, the generation at all
ISGS (except those on peaking duty) shall be
maximized, at least upto the level which can be
sustained, without waiting for an advise from RLDC.

RIHAND

However, notwithstanding the above, the

RLDC may direct the SLDCs/ISGS/other
regional entities to increase/decrease their
drawal/generation in case of contingencies e.g.
overloading of lines/transformers, abnormal
voltages, threat to system security. Such
directions shall immediately be acted upon.

RIHAND

While making or revising its declaration

of capability, the ISGS shall ensure that
the declared capability during peak hours
is not less than that during other hours.
However, exception to this rule shall be
allowed in case of tripping/resynchronisation of units as a result of
forced outage of units.

RIHAND

The ISGS shall be required to demonstrate the

declared capability of its generating station as
and when asked by the Regional Load Despatch
Centre of the region in which the ISGS is
situated. In the event of the ISGS failing to
demonstrate the declared capability, the
capacity charges due to the generator shall be
reduced as a measure of penalty.

RIHAND

The ISGS shall be required to demonstrate the

declared capability of its generating station as
and when asked by the Regional Load Despatch
Centre of the region in which the ISGS is
situated. In the event of the ISGS failing to
demonstrate the declared capability, the
capacity charges due to the generator shall be
reduced as a measure of penalty.

RIHAND

While finalizing the above daily dispatch

schedules for the ISGS, RLDC shall ensure that
the same are operationally reasonable,
particularly in terms of ramping-up/rampingdown rates and the ratio between minimum and
maximum generation levels. A ramping rate of
upto 200 MW per hour should generally be
acceptable for an ISGS and for a regional
constituent (50 MW in NER), except for hydroelectric generating stations which may be able
to ramp up/ramp down at a faster rate.

RIHAND

While finalizing the above daily dispatch

schedules for the ISGS, RLDC shall ensure that
the same are operationally reasonable,
particularly in terms of ramping-up/rampingdown rates and the ratio between minimum and
maximum generation levels. A ramping rate of
upto 200 MW per hour should generally be
acceptable for an ISGS and for a regional
constituent (50 MW in NER), except for hydroelectric generating stations which may be able
to ramp up/ramp down at a faster rate.

RIHAND
Revision of declared capability by the ISGS(s) (except
hydro stations) and requisition by beneficiary(ies) for
the remaining period of the day shall also be permitted
with advance notice. Revised schedules/declared
capability in such cases shall become effective from the
6th time block, counting the time block in which the
request for revision has been received in the RLDC to
be the first one. If, at any point of time, the RLDC
observes that there is need for revision of the schedules
in the interest of better system operation, it may do so
on its own, and in such cases, the revised schedules
shall become effective from the 4th time block,
counting the time block in which the revised schedule is
issued by the RLDC to be the first one.

RIHAND