The Odisha Electricity Regulatory Commission (OERC) has issued the draft ‘Terms and Conditions for Determination of Transmission Tariff Regulations, 2026,’ establishing the framework for determining transmission tariffs for intrastate transmission systems.

Stakeholders have until May 30, 2026, to provide their feedback.

The proposed regulations apply to all transmission licensees and users, including long-term and open access customers, and provide for tariff determination based on the Aggregate Revenue Requirement (ARR).

The draft regulations specify that cost and time overruns will not be permitted unless justified as beyond the licensee’s control, and that delays attributable to the licensee will be disallowed.

The draft requires transmission licensees to submit detailed business plans at least 120 days prior to the start of the control period. The first control period will be from April 1, 2027, to March 31, 2029.

The tariff design includes a capacity-based charge for long-term and medium-term customers, calculated using the formula based on net ARR and total contracted capacity, while short-term open access tariffs are based on energy handled.

In addition to the transmission tariff, beneficiaries of the transmission system will be liable for grid support charges and reactive energy charges.

The Commission will review the licensee’s capital investment plan. The costs corresponding to a licensee’s approved capital investment plan for a given year will, after a check, form the basis for tariff determination.

Transmission Loss

The commission will examine the transmission licensee’s filing on transmission loss and approve a loss target for each year of the control period, based on opening loss levels, the licensee’s filings, past trends, and stakeholder objections. This approved loss target will be used for computing the estimated energy for transmission in the licensee’s system for that year.

If the actual transmission loss exceeds the approved normative loss level, such excess loss will be to the account of the transmission licensee, and the transmission licensee will be liable for a penalty at the rate of 1% of the allowable Return on Equity (RoE), for every 0.5% variation in actual transmission loss over the approved range of transmission losses for the relevant period.

Interest on Working Capital

Working capital will include:

• Receivables equivalent to one month of net ARR
• Maintenance spares at 15% of operation and maintenance expenses

The rate of interest on working capital will be set on a normative basis at the one-year Marginal Cost of Lending Rate (MCLR) of the State Bank of India, as issued on January 1 of the preceding year for which the tariff is determined, plus 200 basis points.

Return on Equity

The regulations propose a normative financial structure with an 80:20 debt-to-equity ratio and a 13% per annum RoE.

Equity above 20% is treated as a normative loan, while grants and subsidies are excluded from the capital structure. Depreciation is allowed up to 90% of the capital cost, with a 10% salvage value, calculated on a straight-line basis.

Operational performance is central to tariff recovery, with a Normative Annual Transmission System Availability Factor of 99%.

Full recovery of transmission charges is linked to achieving this benchmark, with incentives for higher availability and penalties for deviations.

Incentives are calculated based on ARR, with one-third allocated to the tariff balancing reserve and two-thirds retained by the licensee.

Interest on working capital is pegged to SBI MCLR plus 200 basis points.

Late Payment Surcharge

If a beneficiary delays payment of any bill for charges payable under these regulations by more than 30 days, the transmission licensee should levy a late payment surcharge at the rate of 1.25% per month.

Recently, OERC retained the previous year’s retail power supply tariff structure for FY 27, covering energy charges, demand charges, rebates, and surcharges across consumer categories. However, it made certain revisions to open access charges.

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