Draft CSERC (Terms and Conditions for determination of Multi-Year Tariff) Regulations, 2025 – EQ

Summary:

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## **PART 1: INTRODUCTION & SCOPE**

### **1.1 Legal Basis & Commencement**
* **Enacted under:** Sections 61, 62, 181(2), and 32(3) of the Electricity Act, 2003.
* **Control Period:** April 1, 2026, to March 31, 2030.
* **Applicability:** Extends to the entire state of Chhattisgarh.

### **1.2 Regulated Entities**
The regulations apply to:
* **State Transmission Utility (STU)**
* **Generating Companies** supplying power to state distribution licensees under long-term agreements (excluding those under Central Commission jurisdiction and certain renewable plants).
* **Intra-State Transmission Licensees**
* **Distribution Licensees**
* **State Load Despatch Centre (SLDC)**

### **1.3 Exemptions**
* Stand-alone generators, bulk consumers, and captive users (unless they use SLDC services).
* Projects whose tariffs are determined through transparent competitive bidding under Section 63 of the Act.

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## **PART 2: CORE TARIFF FRAMEWORK & PRINCIPLES**

### **2.1 Multi-Year Tariff (MYT) Structure**
The MYT framework is based on:
* Approval of a **Capital Investment Plan (CIP)** for the Control Period.
* A **Truing-Up** mechanism to reconcile forecasts with actuals.
* **Pass-through** of costs arising from uncontrollable factors.
* **Sharing of gains/losses** from controllable factors.
* Determination of **Aggregate Revenue Requirement (ARR)** and **Expected Revenue from Charges (ERC)** for each year.
* Specific methodology for determining the **input price of coal from integrated mines**.

### **2.2 Key Definitions (Selected)**
* **Control Period:** FY 2026-27 to FY 2029-30.
* **Useful Life:** Varies by asset (e.g., Coal plant: 25 yrs, Hydro: 40 yrs, Transmission line: 35 yrs).
* **Date of Commercial Operation (COD):** Defined separately for thermal plants, hydro plants, transmission systems, distribution systems, and integrated mines.
* **Controllable Factors:** Include capital cost overruns (not due to scope change), plant performance (availability, heat rate), O&M expenses (Maintenance & General), and energy losses.
* **Uncontrollable Factors:** Include Force Majeure, Change in Law, fuel prices, power purchase costs, inflation, taxes, and sales quantum.

### **2.3 Financial Principles & Norms**
* **Debt-Equity Ratio:** **70:30** for new projects. Equity deployed above 30% is treated as a normative loan.
* **Return on Equity (RoE):**
* **Generating Stations, Transmission, Distribution Wires, SLDC: 15.5%**
* **Retail Supply Business: 16.0%**
* **Additional Capitalization (Change in Law, Force Majeure):** SBI 1-year MCLR + 350 bps, capped at **14%**.
* **Depreciation:** Calculated on a **Straight-Line Method**. Different rates are provided for assets commissioned before and after April 1, 2026 (see Appendices).
* **Interest on Working Capital:** Calculated at **SBI 1-year MCLR + 200 bps**.

### **2.4 Truing-Up & Incentive Sharing**
* **Truing-Up:** Performed annually to compare approved forecasts with actual audited performance.
* **Gain/Loss Sharing:**
* **For Gains (over-achievement):** Shared between utility and consumers in a **2:1** ratio (utility:consumer).
* **For Losses (under-achievement):** Shared in a **1:2** ratio (utility:consumer).
* **For state generating stations supplying entirely to state DISCOMs:** Gains/Losses are shared **1:1**.

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## **PART 3: SECTOR-SPECIFIC TARIFF DETERMINATION**

### **3.1 Generation (Chapter 4)**
* **Thermal Stations:** Tariff = **Capacity Charge (Fixed Cost)** + **Energy Charge (Fuel Cost)**.
* **Fixed Cost Components:** RoE, Interest on Loan, Depreciation, Interest on Working Capital, O&M Expenses.
* **Energy Charge Rate (ECR):** Formula-based, considering Station Heat Rate (SHR), fuel cost (Landed Price), Gross Calorific Value (GCV), and Auxiliary Consumption (AUX).
* **Incentive:** Paid for generation above the Normative Annual Plant Load Factor (NAPLF).
* **Hydro Stations:** Tariff comprises a composite capacity and energy charge, with state-owned plants having a single-part tariff. Treated as “must-run.”
* **Norms:** Specific norms are provided for Plant Availability Factor (NAPAF), Station Heat Rate (SHR), Auxiliary Consumption (AUX), Secondary Fuel Oil, and Transit & Handling Losses.
* **Emission Control Systems:** Supplementary tariff allowed for costs related to meeting revised emission standards (e.g., FGD, SCR).

### **3.2 Integrated Coal/Lignite Mines (Chapter 5)**
* **Objective:** Determine the **input price** of coal/lignite from captive/basket mines for use in associated end-use generating stations.
* **Input Price Composition:** **Run of Mine (ROM) Cost** + **Additional Charges** (crushing, transport, handling, washing).
* **ROM Cost Calculation:** Differs for mines allocated via **auction route** (based on quoted price + reserve price) vs. **allotment route** (based on annual extraction cost + mining charge).
* **Key Components for Cost Determination:** Depreciation, Interest on Loan, RoE (capped at 14%), O&M Expenses, Mine Closure Expenses.
* **Adjustments:** Provisions for adjustments due to shortfall in Overburden Removal (OB), lower GCV than declared, and Non-Tariff Income.

### **3.3 Transmission (Chapter 6)**
* **Annual Transmission Charges** recover the ARR, comprising RoE, Interest, Depreciation, O&M, and Working Capital Interest, minus Non-Tariff Income.
* **Tariff Based Competitive Bidding (TBCB):** Intra-state transmission projects costing above **₹250 Crore** must generally be developed through TBCB.
* **Transmission Losses:** Borne by users in proportion to their use of the system.

### **3.4 Distribution (Chapters 7 & 8)**
* **Segregation of Business:** Distribution licensees must segregate or allocate accounts between **Distribution Wires Business** and **Retail Supply Business**.
* **Wheeling Charges (Wires Business):** Recover costs of maintaining the distribution network. ARR components similar to transmission.
* **Retail Supply Tariff (Supply Business):** Recovers power purchase cost, transmission charges, SLDC charges, distribution business O&M, depreciation, RoE, etc.
* **Fuel & Power Purchase Adjustment Surcharge (FPPAS):** An automatic monthly adjustment mechanism to pass through variations in fuel and power purchase costs to consumers. Includes detailed formulas and recovery rules.

### **3.5 State Load Despatch Centre – SLDC (Chapter 9)**
* **Charges:** Comprise **System Operation Charges (SOC)** and **Market Operation Charges (MOC)**.
* **Applicability:** Levied on intra-state entities availing long/medium-term services (excluding short-term open access, renewables, bulk consumers, captive users).
* **Cost Allocation:** 80% of annual charges allocated to SOC, 20% to MOC.
* **SOC Levy:** Shared between Intra-State Sellers (45%), Intra-State Buyers (45%), and other Transmission Licensees (10%).
* **MOC Levy:** Collected equally from all intra-state sellers and buyers.
* **Registration Fees:** One-time fees prescribed for generating companies and licensees registering with SLDC.

### **3.6 Battery Energy Storage Systems – BESS (Chapter 10)**
* **Tariff Structure:** **Capacity Charge** + **Incentive for Cycle Efficiency** above normative level.
* **Key Parameters:**
* **Normative Annual Availability:** 95%
* **Normative Round-Trip Efficiency:** 75%
* **Useful Life:** Battery Pack – 12 years, Balance of System – 25 years.
* **RoE:** 16.0%
* **O&M Allowance:** 1% of capital cost at COD.
* **Incentive:** Paid for energy discharged in excess of 75% of the energy consumed for charging.

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## **PART 4: GENERAL & MISCELLANEOUS PROVISIONS**

* **Capital Investment Plan (CIP):** Entities must file a detailed CIP for approval by **October 31, 2025**.
* **Petition Timeline:** MYT petitions must be filed by **November 30, 2025**.
* **Late Payment Surcharge:** Applied on payments delayed beyond 45 days. Base rate is SBI 1-year MCLR + 5%, increasing by 0.5% per month of delay (capped at +3% over base rate).
* **Subsidy Mechanism:** The State Government must provide subsidies in advance as per Section 65 of the Act. The Commission will monitor and report on subsidy payments.
* **Power to Relax:** The Commission retains the power to relax any provision of these regulations for sufficient reason.
* **Appendices:** Include detailed **Depreciation Schedules**, formats for **Registration with SLDC**, and other prescribed forms.

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