The Central Electricity Regulatory Commission‘s tariff regulation for FY2020 to FY2024 is largely in line with the draft guidelines, India Rating and Research (Ind-Ra) said Wednesday.
The CERC had brought the draft tariff regulation in the December 2018 for a block period of five years from April 1, 2019 to March 31, 2024.
The final the CERC guidelines for the FY2020 to FY2024 block period are favourable for power generators, as they are largely in line with the draft guidelines, Ind-Ra said in a statement.
The CERC has maintained status quo on two of the key parameters: return on equity at 15.5 per cent and debt:equity at 70:30, it added.
Although Ind-Ra had estimated a decline in the annual fixed cost (AFC) as per the draft FY2020 to FY2024 guidelines, the CERC has allowed higher operations and maintenance expenses in the final guidelines.
The rating agency also said the commission 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 will offset the negative effect of the tightened working capital norms, leading to no significant change in the AFC.
The regulator continued with the change in the interest rate on working capital to one year marginal cost of funds based lending rate (MCLR) + 350bp (basis point) as against the SBI base rate + 350bp in the FY2015 to FY2019 guidelines, the agency said.
The final guidelines will 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.
In the final guidelines, the 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, the CERC has revised back the increase in the normative allowance in transit losses to 0.8 per cent 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, it added.