The Hindu Business Line : Electricity regulator moots risk-based returns on projects

IN a sector plagued by lack of creditworthy consumers, Central Electricity Regulatory Commission (CERC) today mooted different rates of returns for power projects depending on the extent of market risk faced by the project.

In its draft regulations on tariff, the CERC pared the post-tax returns for central power sector undertakings from 16 per cent to 14 per cent. This is in view of the fact that the Central power utilities like National Thermal Power Corporation, now enjoy a gilt-edged payment security mechanism in relation to recovering its payment dues from its consumer, the state electricity boards, that are financially unwell.

In case of private power projects, the returns have been pegged at 16 per cent. However, if the Central Government accords private power projects the same level of payment security as that given to public sector projects, the returns will drop to 14 per cent. Currently, not a single private sector project enjoys this back-up facility.

"We have struck a balance between aligning the returns based on the market risk and the need to promote investments in the sector," the CERC Chairman, Mr A.K. Basu, told Business Line. The norms are likely to be finalised by middle of February and will be applicable from April for a period of five years. The CERC regulates inter-state power projects as well as central sector power projects.

The regulator has set normative terms for the operations of power plants and equipment. For instance, it has mooted a higher level of generation for thermal and hydel units to qualify for incentives. On the other hand, the rate of incentive has been raised.

According to internal estimates of the commission, NTPC would lose around Rs 200 crore per annum if this order is implemented. National Hydroelectric Power Corporation (NHPC) will also lose some money.

The commission has, meanwhile, invited comments on its draft order till January 23 and expects to finalise its order by mid-February.

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