Little respite for NTPC as Delhi HC refuses stay on CERC tariff norms

Written by Kaushal shroff | New Delhi | Updated: Mar 20 2014, 14:35pm hrs
The Delhi High Court on Wednesday refused to grant a stay sought by state-run NTPC on the Central Electricity Regulatory Commissions (CERC) new five-year tariff regulations, which, the PSU believes, would hit it badly. The court has, however, issued a notice to CERC and directed the regulator to consider any representations made by NTPC against the tariff regulations. For now, the matter has been listed for further hearing on May 19.

The new CERC guidelines will come into effect on April 1 and remain in force till March 31, 2019. The NTPC stock had tanked to a five-year low on February 24, following the regulator's final tariff order.

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During the proceedings, counsel on behalf of NTPC told the High Court that the PSU was challenging the regulations as they were in violation of the Electricity Act, 2003, and unconstitutional.

"I am challenging the validity of the regulations as they are ultra vires the Electricity Act. CERC has acted in an arbitrary manner while fixing tariff norms for the next five years. These regulations give benefits to discoms and the discoms are using them to write off their earlier losses," NTPCs counsel told the High Court, adding that NTPC was suffering a loss of R350 on every tonne of coal consumed by the PSU for electricity generation. NTPC told the court its coal consumption was 70 million tonne per annum, and the losses were running into thousands of crores.

NTPC, in its petition, had sought that the measure of Gross Calorific Value of coal should be on the "as received" basis and not on the "as fired" basis. Additionally, the petition also seeks that a normative station heat rate should be specified in the regulations, along with other specifications on auxiliary energy consumption and oil fuel consumption. The plea also demands that auxiliary energy consumption should be capped at 5.25%.

In a public hearing held by the CERC on draft tariff regulations 2014-19 in January, NTPC had pleaded with the regulator not to go ahead with the proposed changes. The regulator did provide some sops, such as reduction in threshold PLF for payment of generation incentives from 85% to 83%, relaxation in operational efficiency parameters for ageing 200 mw units and recovery of water charges. However, NTPC remained unhappy with the new regulations.

One of the key changes in the new regulations is in respect of the payment of generation incentives to developers from plant availability factor (PAF) to plant load factor (PLF). While PAF means declared capacity availability for generation, PLF stands for actual electricity generation by a plant. While NTPC has control over PAF, PLF could vary, depending on factors like fuel availability and offtake of electricity by discoms.

At a time when coal shortage remains a serious issue, linking incentive payment to PLF could make things difficult for NTPC. The recovery of fixed charges payable to generators, though, will remain linked to PAF. Further, the regulator has also tightened station heat rate and auxiliary power consumption norms.

Under the new rules, discoms will reimburse generators whatever tax may be paid by them on the applicable 16% RoE, instead of the normative corporation tax.

As the power sector is enjoying a tax holiday, it pays the minimum alternate tax of 20% instead of 33% corporate tax. But the generators get reimbursement from discoms at 33%. In the new regime, NTPC and other generators would be deprived of this tax arbitrage.

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