Overview of tariff revision
process under Regulatory
Commission
Prayas - EGI Skill-share workshop for Tajikistan and
Kyrgyzstan Delegates
November 16-18, 2010, Pune, India
Prayas Energy Group
www.prayaspune.org/peg, energy@prayaspune.org
Tariff revision
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Prayas EGI Workshop - Pune 2010
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Agenda
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Tariff revision process and principles
Tariff proposal and cost components
Tariff structure
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Procedure
Step 1: Application by
company
• Details of cost
• Proposed tariff structure
Step 2: Preliminary scrutiny
by commission
• Check procedural compliance and completeness of the
application
Step 3: Technical Validation
Session
• Ensure consistency of information demand additional data
if necessary, Consumer representatives participation
Step 4: Public notice and
availability of all documents
• Dissemination of information, all data and application
available at six locations, website, local language summary
Step 5: Public hearings at six
locations
• Commission hears objections and suggestions from
consumers and utility’s response to the same
Step 6:Tariff order issued by
commission
• Company proposal public comments  utility response
to comments  commission’s analysis and ruling
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Tariff principles
Company to recover all reasonable and
efficient costs plus allowed profits
 Revenue requirement = cost + profit
 Reduction of cross-subsidy
 No tariff shock to any consumer category
 Development considerations
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Affordability of small and agriculture
consumers
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Prayas EGI Workshop - Pune 2010
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Tariff proposal and cost
components
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Past performance
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Projections for next year/period
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Sales & revenue
Costs and expenses
Compliance with directives
Performance norms
 Energy losses
 Supply quality
Sales
Revenue at current tariff + Non-tariff income
Costs and revenue gap/surplus
Proposed improvements in performance
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Prayas EGI Workshop - Pune 2010
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Cost components for
distribution business
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Power purchase cost
Transmission charges
Capital expenditure and related costs
 Interest on long term loan
 Depreciation
Operation and maintenance cost
 Employee cost
 Administration costs
 Repair and maintenance
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Prayas EGI Workshop - Pune 2010
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Generation tariff components
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Fixed cost
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Loan repayment
Depreciation
Operations and maintenance cost
Variable costs
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Fuel related expenses
Linked to performance norms such plant
availability, load factor, station heat rates, etc
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Prayas EGI Workshop - Pune 2010
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Basis for cost components
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Tariff regulations
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Normative debt equity ratio of 70:30
Fixed return on equity e.g. 16% for distribution and
14% for generation and transmission
Depreciation schedule for various equipments/assets
In-principle clearance mechanism for capital
expenditure
Normative interest schedules
Performance norms and standards
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Prayas EGI Workshop - Pune 2010
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Tariff structure
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Industry tariffs: fixed and
variable charges
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Other forms of tariff
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Time of day tariff
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Fuel adjustment cost
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Prayas EGI Workshop - Pune 2010
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Tariff determination
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Art and science
Specific objectives to be achieved
 Cost recovery
 Company efficiency
 Investment attractions
 Social considerations: affordability of small and
marginalized groups
Increased consumer confidence and increased
acceptance of tariff order
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Prayas EGI Workshop - Pune 2010
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Questions and comments!
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Prayas EGI Workshop - Pune 2010
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