The Central Electricity Regulatory Commission (CERC) has issued the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) (First Amendment) Regulations, 2025, effective from April 1, 2024. These amendments introduce several changes impacting power generation tariffs, cost calculations, and operational procedures. This notification was issued on February 4, 2025.
Key Amendments
Bank Rate Definition: A new definition of “Bank Rate” has been added, linking it to the one-year Marginal Cost of Lending Rate (MCLR) specified by the State Bank of India plus 100 basis points. This new definition replaces the previous reference to “1-year SBI MCLR plus 100 basis points” in several regulations.
Interest Rate Adjustments: Regulations 9, 10, 37, and 51 have been amended to replace references to the SBI MCLR-linked rate with the new “bank rate” definition for calculating interest on various charges and payments.
Self-Insurance Premium: Regulation 36 now mandates that self-insurance premiums be transferred to a separate fund, with utilization details to be provided to the Commission as directed. The permissible self-insurance premium has also been increased from 0.09% to 0.12%.
Interim Input Coal Price: Regulation 37 allows generating companies to request an interim input coal price, which the Commission may grant up to 90% of the claimed price after the first hearing. The difference between the final and interim/adopted prices will be adjusted later.
Alternative Coal Sourcing: Regulation 50 now focuses on the “price of alternative coal available” rather than the “notified price of Coal India Limited” for determining coal price adjustments. An explanation has been added to define “alternative coal” as the least-cost option available to the generating station in case of shortages from linked mines.
Overburden Removal Adjustment: Regulation 51 has been significantly revised to detail the methodology for adjusting costs related to shortfall or excess overburden removal during coal mining. It includes formulas for calculating the “OB Adjustment” and clarifies its application in different mining scenarios. The provisions are not applicable to integrated mines allocated through auction.
Auxiliary Consumption at Chandrapur TPS: Regulation 70 has been amended to change the auxiliary consumption value for Chandrapur TPS from 9.50% to 9.80%. A correction has also been made to refer to TPS-II (Expansion) instead of TPS-I (Expansion).
Compensation for Below-Normative PAF Operation: A new clause (G) has been added to Regulation 70 to provide a mechanism for compensating generating stations for operational inefficiencies (degradation of station heat rate, auxiliary energy consumption, and additional secondary fuel oil consumption) due to operating below the normative plant availability factor (PAF). The compensation mechanism includes specific tables outlining permissible degradations at different loading levels and will be shared between the generating station and beneficiaries. The NLDC will issue a procedure for calculating this compensation.
NAPAF Correction: Regulation 71 has been amended to correct the Normative Annual Plant Availability Factor (NAPAF) for Rangit, Dulhasti and Karcham Wangtoo stations from 90% to 87%.
Impact
These amendments are likely to have a far-reaching impact on the power sector, affecting tariff calculations, operational efficiency incentives, and fuel sourcing decisions. The changes regarding overburden removal adjustments and compensation for below-normative PAF operation are particularly notable and could significantly influence the financial performance of generating companies. The shift towards market-based coal pricing and the emphasis on alternative coal sourcing also reflect evolving dynamics in the coal market. Stakeholders in the power sector are advised to carefully review these amendments to understand their implications.
