NEW DELHI: Regulated power plants may have to take a tariff haircut on return on equity and fixed costs, as the government is considering a demand from electricity distribution companies to lower costs amid the Covid-19 pandemic. Many distribution companies have declared force majeure, denying or deferring fixed charges for power not being used during the lockdown period.
The move, however, will meet with resistance from power producers. While most regulated power plants whose tariff is fixed by regulatory commissions are with NTPC Ltd, the entire hydro and gas-based generation capacity and some private thermal projects also fall in the category.
A senior government official said the issue was raised by power secretaries of various states during their interaction with Union power and renewable energy minister RK Singh last Thursday. The Centre is working on a loan package for distribution companies to ease liquidity in the sector and the fixed costs – return on equity (RoE) revision may form part of the scheme.
“We are now examining if it is possible to waive or reduce the fixed costs of regulated projects set up under section 62 of the Electricity Act. The legalities are being worked out,” said the official, who did not wish to be identified. “Everybody is suffering losses, so the argument is: why should the power plants be given that rate of return on equity which comes in normal times?”
The Central Electricity Regulatory Commission (CERC) had, on March 7 last year, notified regulations for cost-plusbased tariff determination for April 2019-March 2024 (FY20-24) and fixed the RoE at 15.5%, along with increase in operating and maintenance cost for coal-based power projects by 8-10%.
Power companies said there are no rules which mention reduction of fixed costs or RoE and that legal aspects of such proposals should be well considered.