Using the return on total capital employed to determine power tariffs, instead of treating returns on equity and cost of debt separately, and doing away with the provision of advance against depreciation are among the suggestions provided by stakeholders in the build-up to the setting of new power tariff norms by the Central Electricity Regulatory Commission.
The suggestions will be incorporated in the discussion paper to be floated by CERC shortly and a debate on the points raised will go into the formulation of the "terms and conditions of tariff order" for central utilities from April 1, 2004.
The responses received by the regulator can be broadly classified into two categories. The central power utilities want the CERC to revert to the provisions of the erstwhile Government of India notification of 1992, while the state electricity boards want to continue with the currrent availability-based tariff norms with a tightening of the provisions.
For instance, some power sector players have suggested the option of changing over from the present system of a three-year tariff regime to a four, five or 10-year tariff period. In fact, there is also a response from a stakeholder suggesting the need to have a one-time tariff and index financial parameters like return on investments to the annual inflationary trend.
Some stakeholders have suggested moving away from the current system of allowing separate return on equity and interest on loan while determining the tariffs. Clubbing of both equity and debt and giving just one number as return for capital employed has been suggested so that it is at the utility's discretion to decide on its choice of funds.
On the issue of depreciation, the central power utilities have pitched for reverting to the provision of accelerated depreciation for calculating tariffs as given in the Government of India notification of 1992, while the state electricity boards want to continue with the straight-line method for calculating depreciation.
States have, however, objected to the provision of advance against depreciation provided by the CERC in its current tariff order.
There has also been a wide range of responses on the issue of incentives being provided to generating stations for producing power above a prescribed plant load factor.
While the state electricity boards have called for increasing the benchmarks for incentive norms, some respondents have even called for doing away with the system of providing incentives.