The Central Electricity Regulatory Commission (CERC) has put out draft tariff norms for the next five years for all conventional power plants (coal, lignite, gas-based and hydel units) that appear to be fairly forward-looking. 

The recovery of fixed (read: capital) costs would be on a quarterly basis, instead of annually earlier, which should reduce the financial burden on power distribution utilities. More important, emission control costs would be specifically taken into account in determining tariffs.

There are a few other tweaks. The incentive for supplying during peak-load hours has been raised to 65 paise/kWh from 50 paise/kWh, and there is provision for penal charges for nondelivery of the coal billed/dispatched.

And, back-to-back, we need time-of-day tariffs for consumers. It makes perfect sense too to have clear-cut guidelines on fuel calorific value. And the norms for working capital have been tightened with receivable days reduced to 45 from 60.

The new norms would not apply to plants that have had competitive bidding for tariff determination, which surely needs reconsidering. We clearly need to install emission control equipment as per the latest norms, never mind cast-iron bids. And those costs will have to be passed on to consumers as higher tariffs.

Further, CERC has allowed operations and maintenance expenses for the smaller plants of 200, 210 and 250 MW that are about 100% more than that for 800 MW plants and 50% higher than for 500 MW units.

It would make better sense to reap scale economies and gain efficiency by scrapping older units and opting for larger plants. Concurrently, political will must be summoned to put paid to reckless populism in power distribution by adopting efficiency tariffs and ending patronage of power theft.

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New Delhi: The Central Electricity Regulatory Commission (CERC) has put out draft tariff norms for the next five years for all conventional power plants (coal, lignite, gas-based and hydel units) that appear to be fairly forward-looking. 

The recovery of fixed (read: capital) costs would be on a quarterly basis, instead of annually earlier, which should reduce the financial burden on power distribution utilities. More important, emission control costs would be specifically taken into account in determining tariffs.

There are a few other tweaks. The incentive for supplying during peak-load hours has been raised to 65 paise/kWh from 50 paise/kWh, and there is provision for penal charges for nondelivery of the coal billed/dispatched.

And, back-to-back, we need time-of-day tariffs for consumers. It makes perfect sense too to have clear-cut guidelines on fuel calorific value. And the norms for working capital have been tightened with receivable days reduced to 45 from 60.

The new norms would not apply to plants that have had competitive bidding for tariff determination, which surely needs reconsidering. We clearly need to install emission control equipment as per the latest norms, never mind cast-iron bids. And those costs will have to be passed on to consumers as higher tariffs.

Further, CERC has allowed operations and maintenance expenses for the smaller plants of 200, 210 and 250 MW that are about 100% more than that for 800 MW plants and 50% higher than for 500 MW units.

It would make better sense to reap scale economies and gain efficiency by scrapping older units and opting for larger plants. Concurrently, political will must be summoned to put paid to reckless populism in power distribution by adopting efficiency tariffs and ending patronage of power theft