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CENTRAL ELECTRICITY REGULATORY COMMISSION

(Terms and Conditions for Tariff determination from Renewable Energy Sources) (First Amendment Regulation, 2010

Reference: (1) No L-7/186(201)/2009-CERC Dated 25th February, 2010 and

(2) Order on Petition No. 53/2010 (Suo Motu) dated: 26th April 2010

Sl No.

Description (Regulations number)

Summary of Regulations

1 Short Title Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) (First Amendment) Regulations, 2010)

2. Date of Issue 25th February, 2010 3 Scope of Application All cases where tariff is based on Renewable

sources of generation under Act. 4. Eligibility Criteria (1) Solar PV and Solar

Thermal Projects Based on technologies approved by MNRE.

5 Control Period or Review Period (Regulation 2009)

Three years, of which the first year shall be from the date of notification of these regulations to 31.03.2010. provided : (a) The benchmark capital cost for Solar PV and

Solar thermal to be reviewed annually by the commission.

(b) Tariff determined for projects commissioned during the control period shall continue to be applicable for the entire duration of the Tariff Period

(c) Revision in Regulations for next control period to be undertaken at least six months prior to end of the first control period.

(d) In case regulations for next control period are not notified until commencement of next control period, the tariff norms shall continue to remain applicable until notification of the revised Regulations subject to adjustments as per revised Regulations.

6 Tariff Period 25 years for Solar PV and Solar Thermal Power Projects

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a) Tariff period to be considered from the date of commercial operation of RE generating stations

b) Tariff determined to be applicable only for the duration of the tariff

7. Project Specific Tariff (1) To be determined by the commission on case to case basis. a) The renewable energy projects which

have been commissioned before the notification of these Regulations but for which no power purchase agreement has been signed until the date of notification of these Regulations

b) Solar PV and Solar Thermal projects, if project developer opts for project specific tariff, provided the commission shall be guided by the provisions of these Regulations

c) Hybrid Solar Thermal Power Plants (2) a) Determination of project specific tariff to

be in accordance with terms and conditions of the Commission b) Provided the financial norms of these regulations except for capital cost shall be ceiling norms

8 Petition and proceedings for determination of tariff

(1) Commission to determine the generic tariff on the basis of suo-motu petition at least six months in advance at the beginning of each year of the control period as per norms specified in these Regulations

(2) Notwithstanding anything contained in Regulations 2009 (a)The generic tariff determined for Solar PV projects based on capital costs and other norms applicable for the year 2010- 11 shall also apply for projects during the year 2011-12 and b) for Solar thermal projects for the year 2010-11 shall also apply for such projects during the year 2011-12 and 2012-13, provided :

(i) Power Purchase Agreements (PPA) in respect of the Solar PV projects and

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Solar thermal projects as mentioned in this clause are signed on or before 31st March, 2011, and (ii) the entire capacity covered by the PPA is commissioned on or before 31st March, 2012 in respect of Solar PV projects and on or before 31st March, 2013 in respect of Solar thermal projects.

(3) The petition for determination of project specific tariff shall be accompanied by fee with following information

a) Information in forms 1.1, 1.2, 2.1 and 2.2 (appended in these Regulations) as the case may be.

b) Detailed project report. c) A statement of all applicable terms and

conditions and expected expenditure for the period for which tariff is to be determined.

d) A statement containing full details of calculation of any subsidy and incentive received, due or assumed to be due from the Central Government and/or State Government. This statement shall also include the proposed tariff calculated without consideration of the subsidy and incentive.

9. Tariff Structure (1) Single part tariff consisting of the following Fixed Cost Components:

a) Return on equity b) Interest on loan capital c) Depreciation d) Interest on working capital e) Operation and maintenance expenses

10. Tariff Design (1) The generic tariff shall be determined on levellised basis for the Tariff Period.

For single part tariff with two components, tariff shall be determined on levellised basis considering the year of commissioning of the project for fixed cost component and on year of operation basis for fuel cost component

(2) For levellised tariff computation, the discount

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factor equivalent to weighted average cost of capital shall be considered.

(3) Levellisation shall be carried out for the useful life while tariff shall be specified for the period equivalent to Tariff Period.

11. Despatch principles for electricity generated

All Plants to be treated as “MUST-RUN” power plants and not subjected to merit order despatch principles.

Financial Principles 12 Capital Cost a) All capital works including plant and

machinery, civil works, erection and commissioning, financing, interest during construction and evacuation infrastructure up to inter-connection point.

b) For project specific tariff the generating company shall submit the break-up of capital cost items along with its petition as per “Petition and proceedings for determination of tariff” given at. Sl No. 7 above.

13. Debt Equity Ratio ) For generic tariff based on suo – motu petition it is 70:30.

) For project specific tariff: a) If equity is more than 30% of the capital

cost, equity in excess of 30% shall be treated as normative loan.

b) If equity is less than 30%, actual equity to be considered for determination of tariff.

c) Equity invested in foreign currency be designated in Indian rupees on the date of each investment.

14 Loan and Finance Charges

(1) Loan tenure – 10 years. This loan shall be considered gross normative loan

(2) Interest rate- Calculation for interest to be worked out on gross normative loan

(a) Normative loan outstanding as on 1st April of every year shall be worked out by deducting the cumulative repayment up to March 31st of previous year from the gross normative loan.

(b) For the computation of tariff, the normative interest rate shall be considered as average long term prime lending rate (LTPLR) of

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State Bank of India (SBI) prevalent during the previous year plus 150 basis points.

(c) The payment of loan to commence from 1st year of commercial operation of the project and shall be equal to the annual depreciation allowed.

15 Depreciation (1) Value of depreciation shall be the capital cost and depreciation be allowed up to 90% of capital cost with salvage value 10%

(2) Depreciation per annum to be on “Differential Depreciation Approach” over loan tenure and period beyond loan tenure over useful life computed on “Straight Line Method”

a) Depreciation – 7% per annum for first 10years of tariff period. Remaining depreciation to be spread over the remaining useful life of the project from 11th year onwards.

(3) Depreciation to be charged from the first year. In case commercial operation is for part of the year, depreciation to be charged on pro- rata basis

16 Return on Equity Normative return on equity per annum: Pre-tax 19% for first 10 years and 24% from 11th year onwards.

17 Interest on Working Capital

Working capital requirement shall be computed as follows: (1) Solar PV/ Solar Thermal

a) O&M expenses – for 1 month b) Receivables – 2 months of energy charges

for sale of electricity calculated on the normative CUF.

c) Maintenance spares-15% of O&M expenses

(2) Interest on working capital shall be at interest rate equivalent to average State Bank of India short term PLR during the previous year plus 100 basis points.

18 Operation and Maintenance Expenses

(1) O&M to comprise R&M, establishment including employee expenses, administrative and general expenses

(2) O&M expenses to be for the Tariff Period

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based on normative O&M expenses as specified in these Regulations for the first year of control period.

(3) Normative O&M expenses during first year of control period (F Y 2009-10)to be escalated at the rate of 5.72% per annum over the Tariff Period.

19 Rebate (1) For payment of bills of the generating companies through LC - 2%

(2) Payment other than through LC but within 1 month of presentation of bills by generating companies – 1%

20 Late Payment Surcharge Payment of bills beyond 60 days from the date of billing – 1.25% per month.

21. Sharing of CDM Benefits (1) Proceeds of carbon credit from approved CDM project to be shared between generating company and concerned beneficiaries as follows:

a) 100% by project developer in the first year after the date of commercial operation of the generating station.

b) 2nd year – share of beneficiaries @ 10% to progressively increase by 10% every year up to 50% and than to be shared in equal proportion, by the generating company and the beneficiaries.

22. Subsidy or incentive by the Central/ State Government

To be taken into consideration including accelerated depreciation benefit, if availed, if tariff is determined under these Regulations. For income tax benefit on account of accelerated depreciation, if availed, the following principles to be considered. i. Assessment of benefit shall be based on

normative cost, accelerated depreciation rate as per relevant provision under income tax Act and corporate income tax rate.

ii. Capitalization of RE projects during second half of the fiscal year.

23. Taxes and Duties Tariff determined under these regulations shall be exclusive of taxes and duties as may be levied by the appropriate Government. Provided that the taxes and duties levied by the appropriate Government shall be allowed as pass

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through on actual incurred basis.

Technology Specific Parameters for Solar PV Power Project

24 Technology Aspects (Regulation 2009)

Norms for Solar Photovoltaic (PV) power applicable for grid connected PV system based on the technologies such as crystalline silicon or thin film etc. as may be approved by MNRE

25 Capital Cost (Regulation 2009)

Rs. 1690 Lac/MW for F Y 2010-11 For project specific tariff determination, commission may deviate from above norm in pursuance of Regulations 7 and 8 above

26 Capacity Utilization Factor (Regulation 2009)

19% For project specific tariff determination, commission may deviate from above norm in pursuance of Regulations 7 and 8 above

27 O&M Expenses (1) Rs. 9 .51Lac /MW for FY 2010 - 11 (2) O&M expenses allowed at the

commencement of the control period to be escalated @ 5.72% per annum

28 Useful life 25 years

29 Levellised tariff for F Y 2010 -11 (Rs/kWh)

17.91

30 Accelerated Depreciation benefit (ADB) (if availed) (Rs/kWh)

2.96

31 Net Levellised tariff for F Y 2010 -11 ( adjusting ADB) (Rs/kWh)

14.95

Technology Specific Parameters for Solar Thermal Power Project

32 Technology Aspects (Regulation 2009)

Norms for Solar Thermal Power applicable concentrated solar power ( CSP) technologies i.e. line focusing or point focusing

33 Capital Cost

Rs.1530 Lac per/MW for F Y 2010-11 For project specific tariff determination, commission may deviate from above norm in pursuance of Regulations 7 and 8 above

34 Capacity Utilization Factor (Regulation 2009)

23% For project specific tariff determination, commission may deviate from above norm in pursuance of Regulations 7 and 8 above

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35 O&M Expenses (Regulation 2009)

(1) Rs. 13.74 Lac/MW for F Y 2010-11 (2) O&M expenses allowed at the

commencement of the control period to be escalated @ 5.72% per annum

36 Auxiliary Consumption (Regulation 2009)

10% For project specific tariff determination, commission may deviate from above norm in pursuance of

37 Useful life 25 years

38 Levellised tariff for F Y 2010 -11 (Rs/kWh)

15.31

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Accelerated Depreciation benefit (ADB) (if availed) (Rs/kWh)

2.46

40 Net Levellised tariff for F Y 2010 -11 ( adjusting ADB) (Rs/kWh)

12.85

Miscellaneous 41 Deviation from Norms

(Regulation 2009) Tariff for sale of electricity by the generating company may also be determined in deviation from the norms specified in these regulations subject to the conditions that the levellised tariff over the useful life of the project on the basis of the norms in deviation does not exceed the levellised tariff calculated on the basis of the norms specified in these regulations

42 Power to Relax (Regulation 2009)

The Commission may by general or special order, for reasons to be recorded in writing, and after giving an opportunity of hearing to the parties likely to be affected may relax any of the provisions of these regulations on its own motion or on an application made before it by an interested person.

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CENTRAL ELECTRICITY REGULATORY COMMISSION

Determination of generic levellised generation tariff under Regulation 8 of the CERC (Terms and Conditions for Tariff determination From Renewable Energy Sources) 2009 and Central Electricity Regulatory commission (Terms and Conditions for Tariff determination from Renewable Energy Sources)(First Amendment) Regulations, 2010

Reference: Order on Petition No. 256/2010 (Suo Motu) dated: 15th September 2010

Sl No.

Description (Regulations number)

Summary of Regulations

1 Scope of Application To determine the generic tariff of the RE projects for the third year of control period (i.e. FY 2011 – 12).

2. Date of Issue 15th September 2010 3 Contents of the Proposal i Useful life 25 years for Solar PV and Solar Thermal Power

Projects ii Control Period

a) First year from the date of notification on RE

regulation till 31.3.2010 b) Second year – F Y 2010 -11 c) Third year – F Y 2011 -12.

iii Tariff Period a) 25 years for Solar PV and Solar Thermal Power Projects b) Tariff period to be considered from the date of commercial operation of RE generating stations c) Tariff determined to be applicable only for the duration of the tariff

iv Tariff Structure Single part tariff consisting of the following fixed cost components:

a) Return on equity b) Interest on loan capital c) Depreciation d) Interest on working capital e) Operation and maintenance expenses

v Tariff Design (1) The generic tariff shall be determined on

levellised basis for the Tariff Period provided: For single part tariff with two components,

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tariff shall be determined on levellised basis considering the year of commissioning of the project for fixed cost component and fuel cost component shall be on year of operation basis

(2) For levellised tariff computation, the discount factor equivalent to weighted average cost of capital shall be considered.

(3) Levellisation shall be carried out for the useful life while tariff shall be specified for the period equivalent to Tariff Period.

vi Discount factor a) Solar PV – 15.88% b) Solar Thermal -15.88%

vii Capital cost a) Solar PV – Rs. 1442 Lac/MW for F Y 2011 -12 b) Solar Thermal Rs. 1500 Lac/MW for F Y 2011

-12 viii Debt Equity Ratio &

Normative debt and equity component of capital cost

For generic tariff based on suo – motu petition it is 70:30. Based on the debt equity ratio of 70:30, debt and equity component of the normative capital cost are as under:

a) Solar PV –Debt – Rs.1009.40Lac Equity – Rs. 432.60Lac

b) Solar Thermal –Debt – Rs.1050.00Lac Equity – Rs. 450.00Lac

ix Return on Equity (ROE) Normative return on equity per annum : Pre-tax 19% for first 10 years and 24% from 11th year onwards. Taking value base of equity as 30% of the capital cost the weighted average rate on ROE is as below:

a) Solar PV –22% b) Solar Thermal –22%

x Interest on Loan a) Loan tenure – 10 years. This loan shall be considered gross normative loan

b) Interest rate- Calculation for interest to be worked out on gross normative loan

c) Normative loan outstanding as on 1st April of every year shall be worked out by deducting the cumulative repayment up to March 31st

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of previous year from the gross normative loan.

d) For the computation of tariff, the normative interest rate shall be considered as average long term prime lending rate (LTPLR) of State Bank of India (SBI) prevalent during the previous year plus 150 basis points.

e) The payment of loan to commence from 1st year of commercial operation of the project and shall be equal to the annual depreciation allowed.

f) Weighted average SBI PLR considered for determination tariff – 11.75% and rate of interest as 1 Solar PV –13.25% 2 Solar Thermal –13.25%

xi Depreciation 1 Value of depreciation shall be the capital cost and depreciation be allowed up to 90% of capital cost with salvage value 10%

2 Depreciation per annum to be on “Differential Depreciation Approach” over loan tenure and period beyond loan tenure over useful life computed on “Straight Line Method”

3 Depreciation – 7% per annum for first 10years of tariff period. Remaining depreciation to be spread over the remaining useful life of the project from 11th year onwards.

4 Depreciation to be charged from the first year. In case commercial operation is for part of the year, depreciation to be charged on pro- rata basis

Based on above rate depreciation after 10 years has been taken as 1.33% for the balance useful life of Solar PV and Solar Thermal

xii Interest on Working Capital Working capital requirement shall be computed as follows: Solar PV/ Solar Thermal

a) O&M expenses – for 1 month b) Receivables – 2 months of energy charges

for sale of electricity calculated on the normative CUF.

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c) Maintenance spares-15% of O&M expenses d) Interest on working capital shall be at

interest rate equivalent to average State Bank of India short term PLR during the previous year plus 100 basis points.

Interest on working capital for determination of tariff for Solar PV and Solar Thermal worked out as 12.75%.

xiii Operation and Maintenance Expenses

1 O&M to comprise R&M, establishment including employee expenses, administrative and general expenses

2 O&M expenses to be for the Tariff Period based on normative O&M expenses as specified in these Regulations for the first year of control period.

3 Normative O&M expenses during first year of control period (F Y 2009-10)to be escalated at the rate of 5.72% per annum over the Tariff Period.

O&M Expenses for Power projects for FY 2011-12

(a) Solar PV- Rs. 10.06Lac/MW (b) Solar Thermal - Rs. 14.53 Lac/MW

xiv Capacity Utilization Factor (a) Solar PV- 19% (b) Solar Thermal - 23%

xv Auxiliary Consumption 10% For Solar Thermal xvi Subsidy or incentive by the

Central/ State Government To be taken into consideration including accelerated depreciation benefit, if availed, if tariff is determined under these Regulations. For income tax benefit on account of accelerated depreciation, if availed, the following principles to be considered.

a) Assessment of benefit shall be based on normative cost, accelerated depreciation rate as per relevant provision under income tax Act and corporate income tax rate.

b) Capitalization of RE projects during second half of the fiscal year.

xvii Generic tariff for FY 2011 -12

As per CERC RE Tariff Regulations Norms for FY 2011 -12

 

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4 Other Parameter i) Technology aspects i) Norms for Solar PV power applicable to grid

connected PV system ii) Norms for solar thermal power applicable to

concentrated solar power technology ii) Useful life 25 years

iii) Rebate i) Payment of bills through LC -2%

ii) Other than LC within 1 month -1%

iv) Late payment surcharge Payment of bills beyond 60 days – 1.25% /month

v) Sharing of CDM Benefits 1st year: 100% by project developer. 2nd year- 10% to beneficiaries, to be increased @10% p.a. up to 50%.Thereafter, to be shared on equal basis.

vi) Subsidy or incentive by Central/State Govt.

To be taken into consideration.

vii) Taxes & Duties Tariff determined shall be exclusive of taxes & duties levied by appropriate Govt. provided the same be allowed as pass through on actual basis.

viii) Dispatch principles All solar PV and solar thermal power projects to be treated as Must Run & not subjected to merit order dispatch.

x) Deviation from norms Permitted to conditions that tariff does not exceed on the basis of deviation of norms.

xi) Power to Relax Provision has been made

xii) PPA PPA in respect of the Solar PV projects and Solar thermal projects as mentioned in this regulation are to be signed on or before 31st March ,2011 and the entire capacity covered by the power purchase Agreement is commissioned on or before 31st March 2012 in respect of Solar PV projects and on or before 31st March ,2013 in respect of Solar thermal projects.

 

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Solar Power projects whose PPA signed on or before 31.3.2011. Tariff for FY 2010 -11 applicable during FY 2011 -12

Particular Levellised tariff for (F Y 2010 -11)

Accelerated Depreciation benefit (ADB) (if availed)

Net Levellised tariff for F Y 2010 -11 (adjusting ADB)

(Rs/kWh) (Rs/kWh) (Rs/kWh) Solar PV 17.91 (2.96) 14.95 Solar Thermal

15.31 (2.46) 12.85

Solar Power projects whose PPA signed after 31.3.2011. Tariff for FY 2011 -12 shall be applicable Particular Levellised tariff for

(F Y 2011 -12) Accelerated Depreciation benefit (ADB) (if availed)

Net Levellised tariff for F Y 2011 -12 (adjusting ADB)

(Rs/kWh) (Rs/kWh) (Rs/kWh) Solar PV 15.39 (2.45) 12.94 Solar Thermal

15.04 (2.34) 12.69