MERC new approach for Wind Tariff determination

MPERC has come up with draft approach paper for determination of wind tariff for the next control period. The norms for wind tariff determination as proposed by MPERC in the draft approach paper are as follows:

Element of the norm CERC Regulations 2012 Existing MPERC Regulation Proposed MPERC Draft Regulations
Control Period 5 years from date of notification 3 years (ending on 31-03-2016) 3 years (upto 31-03-2019)
Capital Cost 5.72 Cr/MW for FY 13 (based on indexation mechanism for subsequent years) 5.96 Cr/MW (inclusive of evacuation cost) 5.00 Cr/MW (inclusive of evacuation cost)
Plant Life 25 years 25 years 25 years
CUF Minimum 20% 20% 20%
Return on Equity 20% Pre Tax- First 10 Years 24% Pre Tax -11th Year Onwards 20% Pre Tax 20% Pre Tax
O&M Expenses 9.0 Lacs/MW and with a simple escalation of 5.72% per annum 1% of the capital cost in the 1st year and thereafter a simple escalation of 5.72% per annum 1% of the capital cost in the 1st year and thereafter a simple escalation of 5.72% per annum
Interest on working capital SBI Base rate + 350 basis points

O&M expense for 1 month + Receivables equivalent to month energy charges + Maintenance spare @15% of O&M expenses

13.25%

O&M expense for 1 month + Receivables equivalent to month energy charges + Maintenance spare @15% of O&M expenses

12.50%

O&M expense for 1 month + Receivables equivalent to month energy charges + Maintenance spare @15% of O&M expenses

Interest on loan SBI Base rate + 300 basis points 12.75% 12.00%
Discounting factor Equivalent to WACC 10.20% 10.20%
Depreciation 5.83% per annum for 1st 12 years and balance spread over remaining useful plant life 7% per annum for the 1st 10 years and remaining 20% spread over remaining useful plant life 7% per annum for the 1st 10 years and remaining 20% spread over remaining useful plant life

Accordingly the expected tariff on the basis of above proposed norms will be Rs. 4.71/kWh for the next control period.

Other key terms are:

  1. Wind electric generators with collective capacity of 10 MW and above connected at 33 kV level and above shall be responsible for forecasting their generation up to accuracy of 85%
  2. Reactive energy charges would also be payable by/to the developer as the case may be
  3. Distribution company in whose area the energy is consumed shall deduct 2% of the energy injected towards wheeling charges in terms of units
  4. Presently, in case of 3rd party sale/captive consumption the CSS is not payable. However, it may be made applicable as and when decided by the Commission
  5. Power drawn during start-up/ shutdown or any other emergencies shall be billed at  temporary rate applicable to HT Industrial category

The draft approach paper is attached for reference and the last date for submission of comments on the same is 28th November 2015 and the date for public hearing is 15th December 2015.

Source and author : NPTI Alumni

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