The Haryana Electricity Regulatory Commission (HERC), has announced that it would prepare a consultation paper to revisit the Multi-Year Tariff (MYT) Regulations, 2019. It would place the consultation paper in the public domain inviting suggestions from stakeholders. After holding a public hearing, the Commission would take a final view.

The Association of Power Producers had filed a petition with the Commission seeking amendments to the MYT Regulations, 2019.

Background

The MYT Regulations, 2019 was framed and passed by the Commission on October 31, 2019. The regulations are applicable for the second control period from April 01, 2020, to March 31, 2025.

The Association opposed the provision stating that the generating companies should bear the income tax out of the return on equity. According to the Association, the provisions do not conform to the CERC Tariff Regulations, 2019, and the regulations of a few other states.

The association noted that the regulation would reduce the return on equity to about 10.48%. This would be a deterrent for new investments and the expansion of power-generating projects in the state.

Commission’s analysis

The Commission noted that under the cost-plus determination of tariff, the petitioner asked for providing a minimum of 16% post-tax return to ensure the sustained viability of the generating companies.

The state regulator further added that the effective or even the base return on equity should not be viewed in isolation. It must be aligned with the macro parameters, including risk-free interest rates, term lending interest rates, and the cost of capital.

“It needs to be noted that for the power sector where the regulators have guaranteed return on equity, there is nothing like guaranteed return. Hence, ‘equity’ is also considered risk capital,” the Commission added.

The Commission declined to comment on the case’s merits as it involves amending certain provisions of the MYT Regulations, 2019.

The Commission directed its officers to prepare a consultation paper for revisiting the MYT Regulations, 2019. The paper would analyze issues and place them in the public domain for feedback.

Recently, Mercom reported on developers preferring multi-year tariffs as it provides certainty on the charges and policy. Multi-year tariffs help developers in the long-term planning and development of the projects.

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