The Bihar Electricity Regulatory Commission (BERC) has issued the BERC (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations 2025, specifying a generic tariff determination structure for renewable energy technologies.

The technologies include biomass with rankine cycle, biomass gasifier, municipal solid waste/refuse-derived fuel, and non-fossil fuel-based cogeneration.

These regulations enable BERC to establish feed-in tariffs for renewable energy projects with a capacity of less than 5 MW, including solar, small hydro, wind, and hybrid renewable energy systems.

Tariffs for such projects will be determined through a competitive bidding process.

Composition of Tariffs

The tariffs will comprise the following components:

• Return on Equity
• Interest on loan
• Depreciation
• Interest on working capital
• Operation and maintenance expenses

Under the regulations, a single part tariff with two components — a fixed cost component and a fuel cost component — will be determined for projects having fuel cost components, such as biomass, biomass gasifier-based power projects, biogas-based power projects, non-fossil fuel-based cogeneration projects, and refuse-derived fuel-based projects.

The generic tariff will be determined for the project’s tariff period on a levelized basis, taking into account its commissioning year.

The regulations also consider renewable energy projects with tariffs comprising two components: fixed costs and fuel costs. In such cases, the fixed costs will be calculated on a levelized basis using the commissioning year. The fuel cost will be calculated separately for each year of operation.

A discount factor based on the post-tax weighted average cost of capital will be used when calculating the levelized tariffs. These principles will also be applied to project-specific tariffs.

Overgeneration

Projects generating energy in excess of their capacity utilization factor (CUF) or plant load factor (PLF) in a year can sell this excess energy in the market through bilateral or collective transactions. The beneficiary will have the first right of refusal for the excess energy.

If the beneficiary purchases it, the tariff for that energy will be the same as the applicable tariff for the year.

Dispatch Principles

The regulations will treat all renewable energy generating facilities, except for biomass plants with a minimum installed capacity of 10 MW, and non-fossil fuel-based cogeneration plants, as ‘must run’ projects. These renewable energy projects will not be subject to the ‘merit order dispatch’ principles.

Biomass power generating stations with an installed capacity of at least 10 MW and all non-fossil fuel-based cogeneration plants will be subject to the scheduling and dispatch code specified under the Bihar Electricity Grid Code (BEGC) and the BERC (Deviation Settlement Mechanism and Related Matters) Regulations.

Solar and wind energy scheduling will be governed according to these provisions.

Capital Costs

Capital costs will include land costs, pre-development expenses, all capital works, such as plant and machinery, civil works, project erection, commissioning, financing costs, interest during construction, and evacuation infrastructure up to the interconnection point.

For project-specific tariff determination, the generating company must submit the capital cost break-up along with its petition.

Debt-Equity Ratio

The debt-equity ratio for determining the generic and project-specific tariff will be 70:30.

If developers invest over 30% of the capital cost, the additional amount will be considered a normative loan. Investments of less than 30% will result in the actual equity being considered for tariff determination.

Equity invested in foreign currency will be converted to Indian rupees based on the exchange rate on the date of investment. Any subsidies or grants to projects will be deducted from the total project cost. The debt-equity calculation will be based on the reduced amount.

Share premiums or internal company funds will be counted as equity only when utilized for project construction. Project developers must provide a board resolution confirming this usage.

Loan Tenure and Interest

A 15-year loan tenure will be used to determine generic and project-specific tariffs.

The loan interest will be calculated on the total loan amount. For project-specific tariffs, the normative loan outstanding as of April 1 of each year will be calculated by deducting cumulative repayments up to March 31 of the previous year from the gross normative loan.

The interest rate is set at 200 basis points (2%) over the SBI one-year marginal cost of funds-based lending rate (MCLR) from the previous six months.

The regulations will consider the loan repayment commencement date from the first year of commercial operation, even for developers receiving a loan moratorium from the bank. The repayments will be linked to the annual depreciation amount allowed for the project.

Depreciation

Depreciation will be calculated on the project’s approved capital cost. The project’s salvage value will be 10%, and the maximum depreciation will be 90% of the project cost.

No depreciation will be allowed to the extent of the grant or capital subsidy received for the project.

The depreciation rate is fixed at 4.67% per year for the first 15 years. After this period, the remaining depreciable value will be spread evenly over the remainder of the project’s useful life.

Depreciation will begin from the first year of commercial operation. If the project commences mid-year, depreciation for that year will be calculated on a pro rata basis based on the number of operational days.

Return on Equity

The normative return on equity will be 14%. It will be grossed up by the latest available notified minimum alternate tax rate for the tariff rate’s first 20 years and by the latest available notified corporate tax rate of the remaining tariff period.

Interest on Working Capital

Under the regulations,  the working capital requirement for solar, floating solar, solar thermal, municipal solid waste/refuse-derived fuel, and storage projects will be calculated using the following factors:

• Operation and maintenance (O&M) expenses for one month
• Receivables of 45 days of tariff for the electricity sale, calculated on the normative CUF
• Maintenance spares worth 15% of the operation and maintenance expenses

For biomass, biomass gasifier, and non-fossil fuel cogeneration projects, the requirement will be calculated considering the following factors:

• Fuel costs for four months equivalent to the normative PLF. However, fuel cost for one month will be considered for non-fossil fuel cogeneration
• O&M expense for one month
• Receivables of 45 days of tariff for the electricity sale, calculated on the PLF
• Maintenance spares worth 15% of the operation and maintenance expenses

Working capital requirement for hybrid projects will be calculated by combining the requirements of each technology in proportion to their capacity.

The interest rate for working capital will be the SBI one-year MCLR from the previous six months, plus 325 basis points (3.25%).

Calculation of CUF and PLF

The regulations set the annual hours used to calculate CUF and PLF at 8,766.

O&M Expenses

O&M expenses will comprise repair and maintenance, establishment, including employee administrative and general expenses.

Such expenses will be determined for the project’s tariff period on normative O&M expenses, specified in the regulations for the first year of the control period.

Normative O&M expenses allowed during the first year of the control period under the regulations (2022 to 2023), will be escalated at 3.84% per annum of the tariff period.

Rebates

Under the regulations, distribution companies will receive a 1.5% rebate on the bill amount if the generating company’s bill is paid within five days of its presentation.

Holidays will not be counted among these five days. If the fifth day falls on a holiday, the payment must be made on the next day. Payments made after five but before 30 days will be eligible for a 1% rebate.

Late Payment Surcharge

Delay of payment of any bills beyond 45 days from the presentation date will attract a late payment surcharge under the Ministry of Power – Electricity (Late Payment Surcharge and Related Matters) Rules, 2022.

Subsidy or Incentive

Any subsidy, grant, or incentive provided by the central or state governments must be factored into the tariff determination process to benefit the consumers.

The following principles will be considered for ascertaining income tax benefits for accelerated depreciation, if availed, for tariff determination:

• Benefit assessment will be based on normative capital costs, accelerated depreciation rate, and corporate income tax rate under the relevant Income Tax Act, 1961 provisions
• Renewable energy project capitalization during the second half of the financial year
• Per unit benefits will be derived on a levelized basis at a discount factor equivalent to the weighted average capital cost

Any grant, subsidy, or incentive not considered during the tariff determination will be deducted by the beneficiary from subsequent bills, in suitable installments or within the Commission’s stipulated periods.

If the central or state governments, or their agencies, provide any generation-based incentive, specifically over and above the tariff, the incentive will neither be considered during tariff determination nor be deducted from the beneficiary’s subsequent bills.

Statutory Charges

Project developers will recover the statutory charges imposed by the state or central governments from the beneficiaries. These would include the water cess and electricity duty, on auxiliary consumption, subject to a maximum of normative auxiliary consumption.

In October this year, BERC set a target of meeting 43.33% of its energy requirements from renewable sources by the financial year 2030.

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