Private sector power companies, including Reliance Power and Tata Power, have voted in favour of moving towards a normative cost regime for tariff calculation.
In the method, the Central Electricity Regulatory Commission will set the benchmarks for various cost parameters, which the power utilities will have to stick to.
Therefore, they will gain if they improve upon the benchmarks and lose if they fall short.
The CERC, which concluded its discussions with various power sector stakeholders on Wednesday prior to the framing of the "terms and conditions of the tariff order", has been asked by most of the players to retain the return on equity method for the calculation of the rate of return for projects, rather than shifting to the return on capital employed method.
The CERC, which will come out with its new tariff order by December 2003, is likely to revise the tariff regime to 5 years from the present 3 years. This is the majority view among the stakeholders.
Under the present cost-plus method, the utilities calculate their costs and the CERC sets their tariffs after scrutinising the costs furnished by them and incorporating the returns.
According to private players, cost calculation on a normative basis will reduce the amount of regulation and result in more regulatory certainty.
The CERC's present tariff norms expire on March 31, 2004.
In a build-up to the setting up of the new tariff norms for central power utilities, the central regulator had asked various stakeholders, including Central power utilities, SEBs and private companies to gather inputs on the new tariff norms.
The suggestion received would go into the formulation of the "terms and conditions of tariff order" for central utilities and inter-state private project, which would be effective from April 1, 2004.
On the issue of the tariff period, the majority view elicited by the 200-odd stakeholders, who were involved in the interactions with the CERC, was in favour of having a 5-year tariff period.
While the central power utilities want the CERC to revert to the provisions of the erstwhile government of India notification of 1992, the State Electricity Boards want the continuation of the present availability-based tariff norms with tightening of provisions for new project.
On the issue of depreciation, while CPSUs have pitched for reverting to the provision of accelerated depreciation for calculating the tariffs as given in the 1992 notification, the SEBs have asked for the continuation of the straight-line method for calculation of depreciation.
States, however, have objected to the provision of advance against depreciation provided by the CERC in its present tariff order.
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