The Rajasthan Electricity Regulatory Commission (RERC) has issued an order detailing the terms and conditions for determining tariffs in 2025. The Commission drafted these regulations using its authority under the Electricity Act, 2003. A public notice was issued to seek feedback from stakeholders, with comments invited through newspapers and the Commission’s website. The last date for submitting suggestions was December 23, 2024, and a public hearing was held on December 27, 2024, at the Commission’s office in Jaipur.
Various stakeholders emphasized that once the Multi-Year Tariff (MYT) structure is finalized, no significant changes should be introduced during the control period. Some participants also requested that the regulations be published in Hindi for better accessibility.
Several definitions within the regulations were subject to discussion. Stakeholders suggested clarifications regarding additional capital expenditure, auxiliary energy consumption, and availability calculations. There were recommendations to revise the availability formula to account for auxiliary energy consumption related to emission control systems. Concerns were raised about the verification of data by independent agencies rather than solely relying on the State Load Despatch Centre (SLDC).
Another key issue was the inclusion of “Change in Law” provisions to protect consumers from tariff shocks. Stakeholders argued that tariff increases due to changes in the law should be limited to specific waivers rather than broad adjustments. Additionally, comments were made about defining force majeure events to prevent arbitrary tariff hikes.
The regulation on capital structure and cost was also debated. Some stakeholders suggested incorporating a mechanism for allowing non-wires alternatives, such as energy efficiency and demand response, to reduce overall system costs. Others proposed that insurance expenses should be accounted for separately from Operation and Maintenance (O&M) costs.
On tariff determination principles, stakeholders proposed aligning state-level regulations with national goals to encourage clean energy adoption. A revenue decoupling mechanism was suggested to eliminate the disincentive for distribution companies (Discoms) to promote energy efficiency and rooftop solar systems. There were also calls for additional Key Performance Indicators (KPIs) beyond Transmission & Distribution (T&D) losses to evaluate utility performance.
The issue of additional capitalization was extensively discussed, particularly regarding the treatment of minor assets. Some participants requested that expenditures on modernization and emission control be allowed under additional capitalization. Others suggested that any such costs should be pre-approved by the Commission to prevent unnecessary financial burdens on consumers.
Regarding return on equity (ROE), multiple stakeholders suggested maintaining the rate at 15.5% in line with Central Electricity Regulatory Commission (CERC) regulations instead of reducing it to 15%. A two-part ROE structure was also recommended, with a base rate and a performance-based component linked to reliability and efficiency improvements.
Depreciation policies were another area of discussion. Some stakeholders requested changes to the depreciation schedule, particularly for IT equipment and software, arguing that their salvage value should be considered nil. Others suggested revisiting depreciation methods to ensure fair cost recovery over an asset’s useful life.
The proposed regulations also addressed late payment surcharges, with stakeholders requesting uniform treatment for all consumers. Some argued that current consumer surcharge rates were too high compared to those imposed on Discoms under national rules. Suggestions were made to align the consumer surcharge with national policies to ensure fairness.
Non-tariff income provisions were also debated, particularly regarding revenue earned from the sale of ash. Some stakeholders suggested that this revenue should be directed toward an Environmental Remediation Fund rather than being classified as non-tariff income. Others recommended clearer definitions of what constitutes “eco-tourism” income to avoid ambiguity.
Another significant area of discussion was the tariff framework for power generation. Some stakeholders suggested revising plant load factor (PLF) targets based on plant age, technology, and operational efficiency. Others recommended incorporating mechanisms for regulating reagent consumption in desulfurization systems.
Incentive mechanisms for power generation were also scrutinized. Some stakeholders proposed linking incentives to grid demand, providing higher incentives during peak hours and lower ones during off-peak periods. Others suggested introducing more stringent verification measures for declared capacity by generators to prevent misrepresentation.
Transmission tariff regulations were also examined, with requests to align the threshold for competitive bidding with national policies. Some stakeholders proposed increasing the threshold for mandatory competitive bidding from ₹250 crore to ₹1,200 crore, citing the need for flexibility in project execution. Others argued that this matter had already been settled in previous Commission orders and should not be revisited.
The Commission acknowledged the various suggestions and stated that all comments were considered when finalizing the regulations. However, not all suggestions were explicitly addressed in the final order. The finalized regulations aim to balance the interests of all stakeholders while ensuring a fair and transparent tariff determination process in Rajasthan.
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