TAMIL NADU ELECTRICITY REGULATORY COMMISSION. Tariff Order No 1 of 2010 dated

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1 TAMIL NADU ELECTRICITY REGULATORY COMMISSION Tariff Order No 1 of 2010 dated Sl.No Description Summary of Regulations 1 Title Tariff order for projects covered by Jawaharlal Nehru National Solar Mission 2 Date of issue Applicability of the order This Tariff order covers the projects connected at HT level of distribution network (below 33 kv) with installed capacity of 1 MW and up to 3 MW with a total capacity limit of 80 MW. This order would apply to the projects commissioned within Tamil Nadu out of this 80 MW. 4 Control Period and Tariff Period Control period from to Tariff period shall be for 25 years 5 Tariff design Key elements for determining tariff are indicated below: a) capital cost b) Debt -equity ratio c) Return of equity d) Interest on loan capital e) Depreciation & Accelerated depreciation f) Life of plant & machinery g) Operation and maintenance expenses h) Interest on working capital i) Capacity utilization factor (CUF) 6 Tariff design for Solar PV power generation plants i Capital cost Rs crore/mw, including Infrastructure Development Charges (IDC) of Rs lakhs /MW for evacuation of power. ii Useful plant life 25 years iii Return of equity 19.85% pre-tax iv Capacity utilization factor 19% (CUF) v De-rating (%) 1% for every year after 10 years of operation of plant vi Depreciation (% ) 7% ( for the first 10 year) 1.33% (for 11 to 25 years) vii Accelerated Depreciation For projects availing benefits of the accelerated depreciation, income tax 33.99% (30% IT rate, 10% surcharge & 3% Education cess) has been considered. vii Operation and maintenance expenses (% of project cost) viii Interest on loan % per annum. ix Debt equity ratio 70 : 30 Rs lakhs/mw for 1 st year of Control period and shall be escalated at the rate of 5.72% per annum for the remaining periods. 86

2 x Interest on working capital The amount of working capital to be calculated adopting the following norms and interest thereon to be calculated by using interest rate of 12.00% per annum. - Operation & Maintenance expenses for one month - Receivable equivalent to 1 month of energy charges for sale of electricity calculated on normative CUF - Maintenance O&M expenses xi Auxiliary consumption 2.0 % 7. Solar Power Tariff: The cost plus single part livellised tariff for 25 years works out to Rs per kwh and benefit of Accelerated depreciation works out to Rs per kwh. Therefore, net applicable tariff ( upon adjusting for accelerated depreciation benefit, if availed) works out to Rs per kwh, as against the tariff of Rs per kwh determined by CERC. The difference between tariff for Solar power fixed by this order of the Commission and the generation based incentive would be the cost of solar power to the Distribution licensee. 8 Other Issue. i Power purchase Agreement ii Accelerated Depreciation and Consequential Tariff The Distribution licensee would enter into power purchase agreement with those Solar PV generators from Tamil Nadu who are selected by the Govt. of India within over all capacity of 80 MW. For projects availing benefits of accelerated depreciation of the above tariff as determined shall be reduced by Rs.4.11 per unit for Solar power plants. iii Reactive power charges Rates as specified in the Indian Electricity Grid Code shall be applicable. iv Payment mechanism - The generator shall raise bill every month for the net energy sold after deducting charges for start-up / stand by power & reactive power. The distribution licensee shall make payment within 30 days from the date of receipt of the bill. - In case of delay beyond 30 days period, the distribution company is liable for interest at the rate of 1.0% per month. 87

3 v CDM benefits Sharing of CDM Benefits as below: a) 100% to the project developer in the first of commercial operation of the generating station b) From 2 nd year, share of developer to every year till sharing becomes equal (50:50) between developer & the beneficiary in the sixth year, thereafter to be shared in equal proportion by the generating company and the beneficiaries. vi Evacuation facilities All clearances, approvals, certificates, if any, required by SPGs shall be issued within one month time. Interconnection of SPGs to the grid based on system studies shall be established within six months at the latest. STU/ Distribution licensee not liable to pay any compensation to the generator for deemed generation benefits in case STU/ Distribution licensee is unable to evacuate power due to reasons which are beyond his control. The generating company is liable to pay the Infrastructure Development Charges (IDC) of Rs lakhs /MW to TNEB for establishing, operating and maintaining sub-stations for evacuation of power 88

4 TAMIL NADU ELECTRICITY REGULATORY COMMISSION Tariff Order No 2/2010 dated Sl.No Description Summary of Regulations 1 Title Tariff order for projects covered by Jawaharlal Nehru National Solar Mission 2 Date of issue Applicability of the order This Tariff order covers the projects connected at HT level of distribution network (below 33 kv) with installed capacity of 100 kw and up to 2 MW with a total capacity limit of 90 MW at national level. This order would apply to the projects commissioned within Tamil Nadu out of this 90 MW. 4 Control Period and Tariff Period Control period from to Tariff period shall be for 25 years 5 Tariff design Key elements for determining tariff are indicated below: j) capital cost k) Debt -equity ratio l) Return of equity m) Interest on loan capital n) Depreciation & Accelerated depreciation o) Life of plant & machinery p) Operation and maintenance expenses q) Interest on working capital r) Auxiliary consumption s) Capacity utilization factor (CUF) 6 Tariff design for Solar PV power generation plants i Capital cost Rs crore/mw, including Infrastructure Development Charges (IDC) of Rs lakhs /MW for evacuation of Solar power. ii Useful plant life 25 years iii Return of equity 19.85% pre-tax iv Capacity utilization 23 % factor (CUF) v De-rating (%) 1% for every year after 10 years of operation of plant vi Depreciation (% ) 7% ( for the first 10 year) 1.33% (for 11 to 25 years) vii vii Accelerated Depreciation Operation and maintenance expenses (% of project cost) viii Interest on loan 12.0 % per annum. ix Debt equity ratio 70 : 30 x Interest on working capital For projects availing benefits of the accelerated depreciation, income tax 33.99% (30% IT rate, 10% surcharge & 3% Education cess) has been considered. Rs lakhs/mw for 1 st year of Control period and shall be escalated at the rate of 5.72% per annum for the remaining periods. The amount of working capital to be calculated adopting the following components and interest 89

5 thereon to be calculated by using interest rate of 12.0% per annum. - Operation & Maintenance expenses for one month - Receivable equivalent to 1 month of energy charges for sale of electricity calculated on normative CUF - Maintenance O&M expenses xi Auxiliary consumption 10.0 % 7. Solar power Tariff: The cost plus single part livellised tariff for 25 years works out to Rs per kwh and benefit of Accelerated depreciation works out to Rs per kwh. Therefore, net applicable tariff ( upon adjusting for accelerated depreciation benefit, if availed) works out to Rs per kwh, as against the tariff of Rs per kwh determined by CERC. This tariff is subject to outcome of the Civil Appeal No of 2010 filed by Indian Wind Energy Association before the Hon ble Supreme Court of India. The difference between tariff for Solar power fixed by this order of the Commission and the generation based incentive would be the cost of solar power to the Distribution licensee. 8 Other Issues i Power purchase Agreement ii Accelerated Depreciation and Consequential Tariff The Distribution licensee would enter into power purchase agreement with those Solar thermal generators from Tamil Nadu who are selected by the Govt. of India within over capacity. For projects availing benefits of accelerated depreciation of the above tariff as determined shall be reduced by Rs per unit for Solar power plants. iii Reactive power charges Rates as specified in the Indian Electricity Grid Code shall be applicable. iv Billing & Payment security - The generator shall raise bill every month for the net energy sold after deducting charges for startup / stand by power & reactive power. The distribution licensee shall make payment within 30 days from the date of receipt of the bill. - In case of delay beyond 30 days period, the distribution company is liable for interest at the rate of 1% per month. v CDM benefits Sharing of CDM Benefits as below: a) 100% to the project developer in the first of commercial operation of the generating station b) From 2nd year, share of developer to every year till sharing becomes equal (50:50) between developer & the beneficiary in the sixth year. Thereafter, sharing of CDM benefits will remain equal till such time the benefits accrue. 90

6 vi Evacuation facilities All clearances, approvals, certificates, if any, required by SPGs shall be issued within one month time. Interconnection of SPGs to the grid based on system studies shall be established within six months at the latest. Distribution licensee not liable to pay any compensation to the generator for deemed generation benefits in case the Distribution licensee is unable to evacuate power due to reasons which are beyond his control. The generating company is liable to pay the Infrastructure Development Charges (IDC) of Rs lakhs /MW to TNEB for establishing, operating and maintaining sub-stations for evacuation of power The issue of IDC is subject to outcome of the Civil Appeal No of 2010 filed by Indian Wind Energy Association before the Hon ble Supreme Court of India. 91