The Gujarat Electricity Regulatory Commission (GERC) has issued the Multi-Year Tariff (MYT) Regulations, 2024, which will be in effect from April 1, 2025, to March 31, 2030.

These regulations provide a detailed framework to determine tariffs for electricity generation, transmission, and distribution in Gujarat.

The MYT regulations provide a transparent and predictable tariff-setting process, encourage efficiency improvements in the electricity sector, establish mechanisms to share gains and losses arising from various factors, and facilitate long-term planning and investment in electricity infrastructure.

These regulations apply to all existing and future generation companies, transmission licensees, distribution licensees, and the State Load Dispatch Centre (SLDC).

They cover the determination of aggregate revenue requirement (ARR), tariffs, and fees and charges for SLDC.

The MYT framework determines tariffs over a five-year control period and involve:

• Filing of MYT Petitions: Entities must submit forecasts of ARR and expected revenue from tariffs for the control period.
• Mid-Term Review: Conducted to assess performance against approved forecasts.
• Annual Truing-Up: Reconciliation of actual performance with approved forecasts to address any deviations.

The regulations outline financial principles to determine capital costs, additional capitalization, return on equity, and interest on loans.

• Capital Cost: Includes expenditure incurred up to the cut-off date, interest during construction, and any gains or losses from foreign exchange rate variations.
• Debt-Equity Ratio: A normative debt-equity ratio of 70:30 is prescribed for new projects.
• Return on Equity: Methodology for calculating return on equity, including adjustments for income tax.

The regulations establish mechanisms for handling gains and losses arising from factors like force majeure events, changes in law, and variations in fuel prices. Gains or losses from these factors are passed through to consumers, and operational efficiencies and cost overruns. A portion of the gains from controllable factors is shared with consumers, while losses are absorbed by the utility.

The regulations address the mechanism to grant subsidies to consumers. The state government must pay the subsidy in advance to the distribution licensee, ensuring that the tariff reflects the actual cost of supply without subsidy adjustments.

The regulations apply to the determination of tariffs for supply of electricity to a distribution licensee from conventional and hydro generating stations exceeding 25 MW.

Generating companies must file petitions for tariff determination in accordance with the regulations.

Detailed plans for capital investment, financing, and physical targets must be submitted for approval.

Components of Tariff: Include capital investment plans, norms for operation, and calculation of Aggregate Revenue Requirement.

Transmission Pricing Framework: Details on sharing of charges for intra-state transmission networks and transmission losses.

Distribution

• Distribution Wires Business: Regulations cover components of ARR, operation and maintenance expenses, and determination of wheeling charges.
• Retail Supply Business: Focuses on tariff components, transmission charges, and operation and maintenance expenses.

By providing a clear framework for tariff determination and addressing both financial and operational aspects, the GERC’s MYT Regulations, 2024, are expected to enhance sector performance and ensure reliable electricity supply to consumers.

Recently, the Commission finalized tariffs for three solar power projects in Gujarat with a cumulative capacity of 1,200 MW and authorized GUVNL to sign the PPAs with the developers.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.