Section 9 in Jammu and Kashmir State Electricity Regulatory Commission (Terms and Conditions for Determination of Multi Year Generation Tariff) Regulations, 2016
9. Guiding Principles for MYT framework.
- 9.1 The Commission in specifying these Regulations shall be guided by the principles contained in Sections 55 and 56 of the Act to encourage competition, efficiency, economical use of resources, good performance and optimum investments.9.2The Multi Year Tariff framework shall be based on the following :-(a)Business Plan of the generating company (plant-wise separately) for the entire Control Period to be submitted to the Commission for approval, prior to the start of the Control Period ;(b)Applicant's forecast of expected tariff for sale of power for each year of the Control Period, based on reasonable assumptions of the underlying financial and operational parameters, as submitted in the Business Plan ;(c)Trajectory for specific parameters stipulated by the Commission, where the performance of the Applicant is sought to be improved through incentives and disincentives ;(d)Annual review of performance which shall be conducted vis-à-vis the approved forecast.Base Year. -9.3The values for the Base Year of the Control Period will be determined based on the audited accounts available, best estimate for the relevant years and other factors considered relevant by the Commission, and after applying the tests for determining the controllable or uncontrollable nature of various items.9.4The Commission will normally not revisit the performance targets even if the targets are fixed on the basis of base values of un-audited accounts.Business Plan. -9.5The generating company shall file for the Commission's approval, a Business Plan approved by the Board of Directors as per the timelines specified in Section 18 of these Regulations. The Business Plan shall be for the entire Control Period and shall, inter alia, contain :(a)Capital Investment Plan : This shall include details of the investments planned by the generating company, along with the corresponding capitalisation schedule and financing plan. This plan shall be commensurate with capacity enhancement and proposed efficiency improvements for various plants of the Company and shall include cost benefit analysis ;(b)Capital Structure : The generating company shall submit plant-wise details of the capital structure and cost of financing (interest on debt) and return on equity, after considering the existing market conditions, terms of the existing loan agreements, risks associated in generation business and creditworthiness ;(c)Operation and Maintenance (O&M) expenses : This shall include the costs estimated for the Base Year, the actual expenses incurred in the previous five years and the projected values for each year of the Control Period based on the proposed norms for O&M cost, including indexation and other appropriate mechanisms ;(d)Depreciation : This shall include details of depreciation based on the fair life of the asset and capitalisation schedules for each year of the Control Period ;(e)Performance Targets : A set of targets proposed for other controllable items such as NAPAF, NAPLF, Station Heat Rate, Secondary Fuel Oil Consumption, and Auxiliary Power Consumption. The targets shall be consistent with the Capital Investment Plan proposed by the generating company ;(f)Power Sale Arrangement : The generating company shall submit the power sale arrangement in respect of new projects. For renovation and modernization schemes and all schemes meant for efficiency gain, cost benefit analysis and expected performance targets shall be required ;(g)Other Information : This shall include any other details considered appropriate by the generating company for consideration during determination of tariff.Capital Investment Plan. -9.6Subject to the provisions of Act, Rules and Policies, the Commission shall approve capital investment plan of the generating company for the Control Period commensurate with generation capacity growth. The investment plan shall also include corresponding capitalisation schedule and financing plan.9.7The Commission shall review the actual capital investment at the end of each year of the Control Period as a part of the Annual Performance Review of the generating company. The generating company shall submit the actual capital expenditure incurred along with the Annual Performance Review Filing. In the normal course, the Commission shall not revisit the approved capital investment plan (capital expenditure and capitalisation schedule) during the Control Period and adjustment to depreciation and financing cost, which includes cost of debt (interest), working capital interest, cost of equity (return) for the actual capital expenditure incurred and capitalisation vis-à-vis approved capital investment plan (capital expenditure and capitalisation) shall be done at the end of Control Period.9.8In case the capital expenditure is required for emergency work which has not been approved in the Capital Investment Plan, the generation company shall submit an application (containing all relevant information along with reasons justifying emergency nature of the proposed work seeking approval by the Commission. The Licensee shall take up the work prior to the approval of the Commission provided that the emergency nature of the scheme has been certified by the Board of Directors :Provided that for the purpose of the Regulation 9.8 above, such approved capital expenditure shall be treated as a part of actual capital expenditure incurred to the generation company as well as the approved capital expenditure by the Commission.Performance Targets. -9.9The Commission shall set targets for each year of the Control Period for the items or parameters that are deemed to be "controllable" and which includes :(a)Gross Station Heat Rate ;(b)Normative Annual Plant Availability Factor/ Normative Annual Plant Load Factor ;(c)Auxiliary Energy Consumption ;(d)Secondary Fuel Oil Consumption ;(e)Operation and Maintenance Expenses;(f)Financing cost which includes cost of debt (interest), cost of equity (return) ; and(g)Depreciation.9.10Any financial loss on account of under performance on targets for parameters specified in Regulation 9.9 (a) to (e) is not recoverable through tariffs. Similarly, any financial gain on account of over-performance with respect to these parameters is to the generating company's benefit and shall not be adjusted in Tariffs.9.11The Commission shall carry out Truing-Up of tariff of generating station based on the performance of following uncontrollable parameters:(a)Force Majeure ;(b)Change in Law ; and(c)Primary Fuel Cost.True-Up during Control Period. -9.12The True-Up across various controllable parameters shall be conducted as per principles stated below :(a)any surplus and deficit on account of O&M expenses shall be to the account of the generating company and shall not be trued up in ARR ; and(b)at the end of the control period-i. The Commission shall review actual capital investment vis-à-vis approved capital investment ;ii. Depreciation and financing cost, which includes cost of debt including working capital (interest), cost of equity (return) shall be trued up on the basis of actual/audited information and prudence check by the Commission.9.13Notwithstanding anything contained in these Regulations, the gains or losses in the controllable items of ARR on account of force majeure factors shall be passed on as an additional charge or rebate in ARR over such period as may be laid down in the order of the Commission.Part-III Application for Determination of Tariff
