Power Sector Check - Tariff Regulation FY24-FY29, A Benign Regime: ICICI Securities

ICICI Securities Report

Central Electricity Regulatory Commission has finalised the tariff regulations for FY24-FY29. The regulator has largely maintained the return on equity for existing thermal, hydro and transmission assets while incentivising new hydro assets with 17% return on equity and reduced the RoE for new transmission assets to 15%. There are no material changes in the final order versus the draft order, except a few:

1. Thermal – incentive of Rs 0.55/unit for off peak (versus 50p/unit for off – peak earlier).

2. Transmission – minor changes in operation and maintenance expenses.

3. Hydro – relaxed normative availability norms for certain plants.

The new regulations are beneficial for thermal gencos owing to higher renovation and maintenance cost, higher incentive for off-peak supply, and hydro gencos for higher RoE on new assets, but slightly negative for NLC TPS-II as normative plant availability factor has been increased to 70% (versus 50% in draft).

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