MUTLIYEAR TARIFF AND PERFORMANCE BASED REGULATION

1
Department of Industrial and Management
Engineering
Indian Institute of Technology Kanpur
2nd Capacity Building Programme for Officers of
Electricity Regulatory Commissions 3 8 August,
2009
MUTLI-YEAR TARIFF AND PERFORMANCE BASED
REGULATION K. Venugopal Member, DERC
Forum of Regulators
2

• Objectives of MYT Regulations
• Continue and improve upon the existing
  incentivisation framework to reward performance
  and promote efficiency
• Provide regulatory certainty to the investors and
  consumers by promoting transparency, consistency
  and predictability of regulatory approaches
• Ensure financial viability of the sector to
  attract investments and safeguard consumers
  interest and
• Develop equitable risk sharing mechanism between
  utility and consumers.

2
3

• Controllable and Uncontrollable parameters
• The Commission has segregated the costs and
  performance elements into controllable and
  uncontrollable based on the ability of the
  licensee to manage each of them

3
4
Capital Investment

• The Commission has undertaken comprehensive
  review of the capital investment plans which has
  been filed along with Business Plan of the
  licensee and generating companies and approve the
  amount of capital investment to be undertaken
  during the Control Period.
• The actual capital expenditure incurred annually
  shall be monitored but no adjustments would be
  made for observed differences on an annual basis.
  Adjustment for the actual capital investment
  vis-à-vis approved capital investment shall be
  done at the end of Control Period.

5
Generation Tariff Norms of Operation
Generation Tariff Norms of Operation

• The Commission has specified norms of operation
  for the generating stations for determination of
  tariffs for each year of the Control Period. The
  norms of operation for existing generating
  stations may be changed considering the expected
  efficiency improvements based on the Business
  Plan of the generating companies

• The Commission has specified norms of operation
  for the generating stations for determination of
  tariffs for each year of the Control Period. The
  norms of operation for existing generating
  stations may be changed considering the expected
  efficiency improvements based on the Business
  Plan of the generating companies

6

• Norms of operation for new generating stations
  have been taken as specified in the tariff
  regulations issued by CERC (2004-09).
• The Commission has also specified the formula for
  fuel price adjustment to be used for calculation
  of any variation in the fuel price from the
  values approved by the Commission in its MYT
  Order. The variation in fuel prices shall be
  adjusted on a monthly basis. The generating
  companies shall separately indicate rate of
  energy charges at base price of primary and
  secondary fuel and the fuel price adjustment.

7
Components of Generation Tariff

• Capacity (Fixed) Charges
• Based on Availability
• Sharing based on Allocated Shares
• Energy (Variable) Charges
• Based on Scheduled Energy after introduction of
  Intra-State ABT w.e.f. 01.04.2007

7
8
Components of annual capacity (fixed) charges

• The annual capacity (fixed) charges consists of
  
• Interest on loan capital
• Depreciation, including Advance Against
  Depreciation
• Return on equity
• Operation and maintenance expenses
• Interest on working capital normative basis,
  whether borrowed or not
• Income Tax

8
9
Transmission Tariff

• The Commission has provided an incentive to the
  Transmission Licensee for achieving a higher
  level of annual transmission system availability
  vis-à-vis the target level specified by the
  Commission. This is in line with the practice
  followed by CERC for determination of
  transmission tariff.

10

• Distribution Tariff Regulation
• Controllable Parameters
• - ATC loss levels, distribution losses,
  collection efficiency.
• - Employee expense, R M expenses, AG
  expenses
• - Return on capital employed
• - Depreciation
• - Quality of supply
• - No truing up of Controllable Parameters
• Contd.

10
11

• Uncontrollable parameters
• - Sales, sales mix, power purchase cost
• - To be trued up on yearly basis
• CAPEX schemes to be approved
• Impact of CAPEX to be trued up at the end of the
  Control Period
• Tariff Stability through Contingency Reserve

11
12

• Features of Distribution Tariff in MYT
  Regulations

• Distribution tariff divided into
• Wheeling Tariff
• Retail Supply Tariff
• Wheeling Tariff, to recover the cost of network
  business - reflects Capital Servicing Costs
  (Depreciation, Interest on Loans, and Return on
  Equity), OM costs (Employee costs, RM costs,
  AG costs), Interest on Working Capital and
  related network business costs (true-ups,
  incentives, penalties).
• Contd.

12
13

• Retail Supply Tariff, to cover the power purchase
  costs, transmission costs, any other costs
  clearly attributable to the supply business,
  distribution losses, and cross subsidies.
• This segregation is required to determine
  non-discriminatory Open Access Charges tariff for
  consumers permitted open access under Section 42
  of the Act.

13
14
ATC Loss reduction targets for the MYT Control
Period

• ATC loss levels have been specified at 17
  percent for NDPL and BRPL, 22 percent for BYPL
  and 10 percent for NDMC at the end of the Control
  Period
• Equal sharing of benefits between the licensee
  and the contingency reserve (which is used for
  consumers benefit), on account of gains arising
  out of better performance vis-à-vis the approved
  ATC loss target
• Licensees to retain all gains accruing out of
  achieving loss levels below 15 percent for NDPL
  and BRPL, 20 percent for BYPL and 9 percent for
  NDMC.

15

• ATC Loss reduction targets for the MYT Control
  Period

• The ATC loss targets have been fixed based on
  the past achievements of loss reduction, capital
  expenditure programs, review of the consumer mix
  of Delhi, metering status, etc.

Contd.
15
16

• ATC Loss targets at the end of Control Period

• - BRPL NDPL 17
• - BYPL 22
• - Equal sharing of benefits between the licensee
  and the contingency reserve (which is used for
  consumers benefit), on account of gains arising
  out of better performance vis-à-vis the approved
  ATC loss target and
• - Licensees (DISCOMs) to retain all gains
  accruing out of achieving loss levels below 15
  percent for NDPL and BRPL, 20 percent for BYPL
  and 9 percent for NDMC.

16
17
Contingency Reserve

• The Commission has also created a Contingency
  Reserve (CR) for each licensee at the start of
  the Control Period for minimising the impact of
  uncontrollable factors on retail tariffs and
  ensure tariff stability across the Control Period.

18
Annual Truing-up mechanism

• The Commission shall review variations in
  approved values of uncontrollable parameters
  through an annual truing up mechanism while there
  shall be no adjustment for variations in
  controllable items. Annual truing-up shall be
  carried out for variations due to sales and power
  purchase costs.

19
MUTLI-YEAR TARIFF AND PERFORMANCE BASED
REGULATION

• Presentation
• by
• K. Venugopal
• Member, DERC
• IIT-Kanpur
• 05th August, 2009

19
20

• Objectives of MYT Regulations
• Continue and improve upon the existing
  incentivisation framework to reward performance
  and promote efficiency
• Provide regulatory certainty to the investors and
  consumers by promoting transparency, consistency
  and predictability of regulatory approaches
• Ensure financial viability of the sector to
  attract investments and safeguard consumers
  interest and
• Develop equitable risk sharing mechanism between
  utility and consumers.

20
21

• Controllable and Uncontrollable parameters
• The Commission has segregated the costs and
  performance elements into controllable and
  uncontrollable based on the ability of the
  licensee to manage each of them

21
22
Capital Investment

• The Commission has undertaken comprehensive
  review of the capital investment plans which has
  been filed along with Business Plan of the
  licensee and generating companies and approve the
  amount of capital investment to be undertaken
  during the Control Period.
• The actual capital expenditure incurred annually
  shall be monitored but no adjustments would be
  made for observed differences on an annual basis.
  Adjustment for the actual capital investment
  vis-à-vis approved capital investment shall be
  done at the end of Control Period.

23
Generation Tariff Norms of Operation
Generation Tariff Norms of Operation

• The Commission has specified norms of operation
  for the generating stations for determination of
  tariffs for each year of the Control Period. The
  norms of operation for existing generating
  stations may be changed considering the expected
  efficiency improvements based on the Business
  Plan of the generating companies

• The Commission has specified norms of operation
  for the generating stations for determination of
  tariffs for each year of the Control Period. The
  norms of operation for existing generating
  stations may be changed considering the expected
  efficiency improvements based on the Business
  Plan of the generating companies

24

• Norms of operation for new generating stations
  have been taken as specified in the tariff
  regulations issued by CERC (2004-09).
• The Commission has also specified the formula for
  fuel price adjustment to be used for calculation
  of any variation in the fuel price from the
  values approved by the Commission in its MYT
  Order. The variation in fuel prices shall be
  adjusted on a monthly basis. The generating
  companies shall separately indicate rate of
  energy charges at base price of primary and
  secondary fuel and the fuel price adjustment.

25
Components of Generation Tariff

• Capacity (Fixed) Charges
• Based on Availability
• Sharing based on Allocated Shares
• Energy (Variable) Charges
• Based on Scheduled Energy after introduction of
  Intra-State ABT w.e.f. 01.04.2007

25
26
Components of annual capacity (fixed) charges

• The annual capacity (fixed) charges consists of
  
• Interest on loan capital
• Depreciation, including Advance Against
  Depreciation
• Return on equity
• Operation and maintenance expenses
• Interest on working capital normative basis,
  whether borrowed or not
• Income Tax

26
27
Transmission Tariff

• The Commission has provided an incentive to the
  Transmission Licensee for achieving a higher
  level of annual transmission system availability
  vis-à-vis the target level specified by the
  Commission. This is in line with the practice
  followed by CERC for determination of
  transmission tariff.

28

• Distribution Tariff Regulation
• Controllable Parameters
• - ATC loss levels, distribution losses,
  collection efficiency.
• - Employee expense, R M expenses, AG
  expenses
• - Return on capital employed
• - Depreciation
• - Quality of supply
• - No truing up of Controllable Parameters
• Contd.

28
29

• Uncontrollable parameters
• - Sales, sales mix, power purchase cost
• - To be trued up on yearly basis
• CAPEX schemes to be approved
• Impact of CAPEX to be trued up at the end of the
  Control Period
• Tariff Stability through Contingency Reserve

29
30

• Features of Distribution Tariff in MYT
  Regulations

• Distribution tariff divided into
• Wheeling Tariff
• Retail Supply Tariff
• Wheeling Tariff, to recover the cost of network
  business - reflects Capital Servicing Costs
  (Depreciation, Interest on Loans, and Return on
  Equity), OM costs (Employee costs, RM costs,
  AG costs), Interest on Working Capital and
  related network business costs (true-ups,
  incentives, penalties).
• Contd.

30
31

• Retail Supply Tariff, to cover the power purchase
  costs, transmission costs, any other costs
  clearly attributable to the supply business,
  distribution losses, and cross subsidies.
• This segregation is required to determine
  non-discriminatory Open Access Charges tariff for
  consumers permitted open access under Section 42
  of the Act.

31
32
ATC Loss reduction targets for the MYT Control
Period

• ATC loss levels have been specified at 17
  percent for NDPL and BRPL, 22 percent for BYPL
  and 10 percent for NDMC at the end of the Control
  Period
• Equal sharing of benefits between the licensee
  and the contingency reserve (which is used for
  consumers benefit), on account of gains arising
  out of better performance vis-à-vis the approved
  ATC loss target
• Licensees to retain all gains accruing out of
  achieving loss levels below 15 percent for NDPL
  and BRPL, 20 percent for BYPL and 9 percent for
  NDMC.

33

• ATC Loss reduction targets for the MYT Control
  Period

• The ATC loss targets have been fixed based on
  the past achievements of loss reduction, capital
  expenditure programs, review of the consumer mix
  of Delhi, metering status, etc.

Contd.
33
34

• ATC Loss targets at the end of Control Period

• - BRPL NDPL 17
• - BYPL 22
• - Equal sharing of benefits between the licensee
  and the contingency reserve (which is used for
  consumers benefit), on account of gains arising
  out of better performance vis-à-vis the approved
  ATC loss target and
• - Licensees (DISCOMs) to retain all gains
  accruing out of achieving loss levels below 15
  percent for NDPL and BRPL, 20 percent for BYPL
  and 9 percent for NDMC.

34
35
Contingency Reserve

• The Commission has also created a Contingency
  Reserve (CR) for each licensee at the start of
  the Control Period for minimising the impact of
  uncontrollable factors on retail tariffs and
  ensure tariff stability across the Control Period.

36
Annual Truing-up mechanism

• The Commission shall review variations in
  approved values of uncontrollable parameters
  through an annual truing up mechanism while there
  shall be no adjustment for variations in
  controllable items. Annual truing-up shall be
  carried out for variations due to sales and power
  purchase costs.

37
Profit Sharing

• The Regulations also contain a profit sharing
  mechanism to provide benefits of better
  performance of the licensee to the consumers (via
  contingency reserve) and to provide incentives to
  licensee for achieving better efficiency than the
  targets set by the Commission.

38

• Supply Margin

• The Commission has designed Supply Margin in such
  manner that there is an incentive for the
  Petitioner to sell the approved quantum of power
  to the consumers and not resort to load shedding
  and that the petitioner is also able to recover
  its expenses and return apportioned to Retail
  Supply Business.

38
39
THANK YOU
39
40
MUTLI-YEAR TARIFF AND PERFORMANCE BASED
REGULATION

• Presentation
• by
• K. Venugopal
• Member, DERC
• IIT-Kanpur
• 05th August, 2009

40
41

• Objectives of MYT Regulations
• Continue and improve upon the existing
  incentivisation framework to reward performance
  and promote efficiency
• Provide regulatory certainty to the investors and
  consumers by promoting transparency, consistency
  and predictability of regulatory approaches
• Ensure financial viability of the sector to
  attract investments and safeguard consumers
  interest and
• Develop equitable risk sharing mechanism between
  utility and consumers.

41
42

• Controllable and Uncontrollable parameters
• The Commission has segregated the costs and
  performance elements into controllable and
  uncontrollable based on the ability of the
  licensee to manage each of them

42
43
Capital Investment

• The Commission has undertaken comprehensive
  review of the capital investment plans which has
  been filed along with Business Plan of the
  licensee and generating companies and approve the
  amount of capital investment to be undertaken
  during the Control Period.
• The actual capital expenditure incurred annually
  shall be monitored but no adjustments would be
  made for observed differences on an annual basis.
  Adjustment for the actual capital investment
  vis-à-vis approved capital investment shall be
  done at the end of Control Period.

44
Generation Tariff Norms of Operation
Generation Tariff Norms of Operation

• The Commission has specified norms of operation
  for the generating stations for determination of
  tariffs for each year of the Control Period. The
  norms of operation for existing generating
  stations may be changed considering the expected
  efficiency improvements based on the Business
  Plan of the generating companies

• The Commission has specified norms of operation
  for the generating stations for determination of
  tariffs for each year of the Control Period. The
  norms of operation for existing generating
  stations may be changed considering the expected
  efficiency improvements based on the Business
  Plan of the generating companies

45

• Norms of operation for new generating stations
  have been taken as specified in the tariff
  regulations issued by CERC (2004-09).
• The Commission has also specified the formula for
  fuel price adjustment to be used for calculation
  of any variation in the fuel price from the
  values approved by the Commission in its MYT
  Order. The variation in fuel prices shall be
  adjusted on a monthly basis. The generating
  companies shall separately indicate rate of
  energy charges at base price of primary and
  secondary fuel and the fuel price adjustment.

46
Components of Generation Tariff

• Capacity (Fixed) Charges
• Based on Availability
• Sharing based on Allocated Shares
• Energy (Variable) Charges
• Based on Scheduled Energy after introduction of
  Intra-State ABT w.e.f. 01.04.2007

46
47
Components of annual capacity (fixed) charges

• The annual capacity (fixed) charges consists of
  
• Interest on loan capital
• Depreciation, including Advance Against
  Depreciation
• Return on equity
• Operation and maintenance expenses
• Interest on working capital normative basis,
  whether borrowed or not
• Income Tax

47
48
Transmission Tariff

• The Commission has provided an incentive to the
  Transmission Licensee for achieving a higher
  level of annual transmission system availability
  vis-à-vis the target level specified by the
  Commission. This is in line with the practice
  followed by CERC for determination of
  transmission tariff.

49

• Distribution Tariff Regulation
• Controllable Parameters
• - ATC loss levels, distribution losses,
  collection efficiency.
• - Employee expense, R M expenses, AG
  expenses
• - Return on capital employed
• - Depreciation
• - Quality of supply
• - No truing up of Controllable Parameters
• Contd.

49
50

• Uncontrollable parameters
• - Sales, sales mix, power purchase cost
• - To be trued up on yearly basis
• CAPEX schemes to be approved
• Impact of CAPEX to be trued up at the end of the
  Control Period
• Tariff Stability through Contingency Reserve

50
51

• Features of Distribution Tariff in MYT
  Regulations

• Distribution tariff divided into
• Wheeling Tariff
• Retail Supply Tariff
• Wheeling Tariff, to recover the cost of network
  business - reflects Capital Servicing Costs
  (Depreciation, Interest on Loans, and Return on
  Equity), OM costs (Employee costs, RM costs,
  AG costs), Interest on Working Capital and
  related network business costs (true-ups,
  incentives, penalties).
• Contd.

51
52

• Retail Supply Tariff, to cover the power purchase
  costs, transmission costs, any other costs
  clearly attributable to the supply business,
  distribution losses, and cross subsidies.
• This segregation is required to determine
  non-discriminatory Open Access Charges tariff for
  consumers permitted open access under Section 42
  of the Act.

52
53
ATC Loss reduction targets for the MYT Control
Period

• ATC loss levels have been specified at 17
  percent for NDPL and BRPL, 22 percent for BYPL
  and 10 percent for NDMC at the end of the Control
  Period
• Equal sharing of benefits between the licensee
  and the contingency reserve (which is used for
  consumers benefit), on account of gains arising
  out of better performance vis-à-vis the approved
  ATC loss target
• Licensees to retain all gains accruing out of
  achieving loss levels below 15 percent for NDPL
  and BRPL, 20 percent for BYPL and 9 percent for
  NDMC.

54

• ATC Loss reduction targets for the MYT Control
  Period

• The ATC loss targets have been fixed based on
  the past achievements of loss reduction, capital
  expenditure programs, review of the consumer mix
  of Delhi, metering status, etc.

Contd.
54
55

• ATC Loss targets at the end of Control Period

• - BRPL NDPL 17
• - BYPL 22
• - Equal sharing of benefits between the licensee
  and the contingency reserve (which is used for
  consumers benefit), on account of gains arising
  out of better performance vis-à-vis the approved
  ATC loss target and
• - Licensees (DISCOMs) to retain all gains
  accruing out of achieving loss levels below 15
  percent for NDPL and BRPL, 20 percent for BYPL
  and 9 percent for NDMC.

55
56
Contingency Reserve

• The Commission has also created a Contingency
  Reserve (CR) for each licensee at the start of
  the Control Period for minimising the impact of
  uncontrollable factors on retail tariffs and
  ensure tariff stability across the Control Period.

57
Annual Truing-up mechanism

• The Commission shall review variations in
  approved values of uncontrollable parameters
  through an annual truing up mechanism while there
  shall be no adjustment for variations in
  controllable items. Annual truing-up shall be
  carried out for variations due to sales and power
  purchase costs.

58
Profit Sharing

• The Regulations also contain a profit sharing
  mechanism to provide benefits of better
  performance of the licensee to the consumers (via
  contingency reserve) and to provide incentives to
  licensee for achieving better efficiency than the
  targets set by the Commission.

59

• Supply Margin

• The Commission has designed Supply Margin in such
  manner that there is an incentive for the
  Petitioner to sell the approved quantum of power
  to the consumers and not resort to load shedding
  and that the petitioner is also able to recover
  its expenses and return apportioned to Retail
  Supply Business.

59
60
THANK YOU
60
61
Profit Sharing

• The Regulations also contain a profit sharing
  mechanism to provide benefits of better
  performance of the licensee to the consumers (via
  contingency reserve) and to provide incentives to
  licensee for achieving better efficiency than the
  targets set by the Commission.

62

• Supply Margin

• The Commission has designed Supply Margin in such
  manner that there is an incentive for the
  Petitioner to sell the approved quantum of power
  to the consumers and not resort to load shedding
  and that the petitioner is also able to recover
  its expenses and return apportioned to Retail
  Supply Business.

62
63
THANK YOU
63
64
MUTLI-YEAR TARIFF AND PERFORMANCE BASED
REGULATION

• Presentation
• by
• K. Venugopal
• Member, DERC
• IIT-Kanpur
• 05th August, 2009

64
65

• Objectives of MYT Regulations
• Continue and improve upon the existing
  incentivisation framework to reward performance
  and promote efficiency
• Provide regulatory certainty to the investors and
  consumers by promoting transparency, consistency
  and predictability of regulatory approaches
• Ensure financial viability of the sector to
  attract investments and safeguard consumers
  interest and
• Develop equitable risk sharing mechanism between
  utility and consumers.

65
66

• Controllable and Uncontrollable parameters
• The Commission has segregated the costs and
  performance elements into controllable and
  uncontrollable based on the ability of the
  licensee to manage each of them

66
67
Capital Investment

• The Commission has undertaken comprehensive
  review of the capital investment plans which has
  been filed along with Business Plan of the
  licensee and generating companies and approve the
  amount of capital investment to be undertaken
  during the Control Period.
• The actual capital expenditure incurred annually
  shall be monitored but no adjustments would be
  made for observed differences on an annual basis.
  Adjustment for the actual capital investment
  vis-à-vis approved capital investment shall be
  done at the end of Control Period.

68
Generation Tariff Norms of Operation
Generation Tariff Norms of Operation

• The Commission has specified norms of operation
  for the generating stations for determination of
  tariffs for each year of the Control Period. The
  norms of operation for existing generating
  stations may be changed considering the expected
  efficiency improvements based on the Business
  Plan of the generating companies

• The Commission has specified norms of operation
  for the generating stations for determination of
  tariffs for each year of the Control Period. The
  norms of operation for existing generating
  stations may be changed considering the expected
  efficiency improvements based on the Business
  Plan of the generating companies

69

• Norms of operation for new generating stations
  have been taken as specified in the tariff
  regulations issued by CERC (2004-09).
• The Commission has also specified the formula for
  fuel price adjustment to be used for calculation
  of any variation in the fuel price from the
  values approved by the Commission in its MYT
  Order. The variation in fuel prices shall be
  adjusted on a monthly basis. The generating
  companies shall separately indicate rate of
  energy charges at base price of primary and
  secondary fuel and the fuel price adjustment.

70
Components of Generation Tariff

• Capacity (Fixed) Charges
• Based on Availability
• Sharing based on Allocated Shares
• Energy (Variable) Charges
• Based on Scheduled Energy after introduction of
  Intra-State ABT w.e.f. 01.04.2007

70
71
Components of annual capacity (fixed) charges

• The annual capacity (fixed) charges consists of
  
• Interest on loan capital
• Depreciation, including Advance Against
  Depreciation
• Return on equity
• Operation and maintenance expenses
• Interest on working capital normative basis,
  whether borrowed or not
• Income Tax

71
72
Transmission Tariff

• The Commission has provided an incentive to the
  Transmission Licensee for achieving a higher
  level of annual transmission system availability
  vis-à-vis the target level specified by the
  Commission. This is in line with the practice
  followed by CERC for determination of
  transmission tariff.

73

• Distribution Tariff Regulation
• Controllable Parameters
• - ATC loss levels, distribution losses,
  collection efficiency.
• - Employee expense, R M expenses, AG
  expenses
• - Return on capital employed
• - Depreciation
• - Quality of supply
• - No truing up of Controllable Parameters
• Contd.

73
74

• Uncontrollable parameters
• - Sales, sales mix, power purchase cost
• - To be trued up on yearly basis
• CAPEX schemes to be approved
• Impact of CAPEX to be trued up at the end of the
  Control Period
• Tariff Stability through Contingency Reserve

74
75

• Features of Distribution Tariff in MYT
  Regulations

• Distribution tariff divided into
• Wheeling Tariff
• Retail Supply Tariff
• Wheeling Tariff, to recover the cost of network
  business - reflects Capital Servicing Costs
  (Depreciation, Interest on Loans, and Return on
  Equity), OM costs (Employee costs, RM costs,
  AG costs), Interest on Working Capital and
  related network business costs (true-ups,
  incentives, penalties).
• Contd.

75
76

• Retail Supply Tariff, to cover the power purchase
  costs, transmission costs, any other costs
  clearly attributable to the supply business,
  distribution losses, and cross subsidies.
• This segregation is required to determine
  non-discriminatory Open Access Charges tariff for
  consumers permitted open access under Section 42
  of the Act.

76
77
ATC Loss reduction targets for the MYT Control
Period

• ATC loss levels have been specified at 17
  percent for NDPL and BRPL, 22 percent for BYPL
  and 10 percent for NDMC at the end of the Control
  Period
• Equal sharing of benefits between the licensee
  and the contingency reserve (which is used for
  consumers benefit), on account of gains arising
  out of better performance vis-à-vis the approved
  ATC loss target
• Licensees to retain all gains accruing out of
  achieving loss levels below 15 percent for NDPL
  and BRPL, 20 percent for BYPL and 9 percent for
  NDMC.

78

• ATC Loss reduction targets for the MYT Control
  Period

• The ATC loss targets have been fixed based on
  the past achievements of loss reduction, capital
  expenditure programs, review of the consumer mix
  of Delhi, metering status, etc.

Contd.
78
79

• ATC Loss targets at the end of Control Period

• - BRPL NDPL 17
• - BYPL 22
• - Equal sharing of benefits between the licensee
  and the contingency reserve (which is used for
  consumers benefit), on account of gains arising
  out of better performance vis-à-vis the approved
  ATC loss target and
• - Licensees (DISCOMs) to retain all gains
  accruing out of achieving loss levels below 15
  percent for NDPL and BRPL, 20 percent for BYPL
  and 9 percent for NDMC.

79
80
Contingency Reserve

• The Commission has also created a Contingency
  Reserve (CR) for each licensee at the start of
  the Control Period for minimising the impact of
  uncontrollable factors on retail tariffs and
  ensure tariff stability across the Control Period.

81
Annual Truing-up mechanism

• The Commission shall review variations in
  approved values of uncontrollable parameters
  through an annual truing up mechanism while there
  shall be no adjustment for variations in
  controllable items. Annual truing-up shall be
  carried out for variations due to sales and power
  purchase costs.

82
Profit Sharing

• The Regulations also contain a profit sharing
  mechanism to provide benefits of better
  performance of the licensee to the consumers (via
  contingency reserve) and to provide incentives to
  licensee for achieving better efficiency than the
  targets set by the Commission.

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• Supply Margin

• The Commission has designed Supply Margin in such
  manner that there is an incentive for the
  Petitioner to sell the approved quantum of power
  to the consumers and not resort to load shedding
  and that the petitioner is also able to recover
  its expenses and return apportioned to Retail
  Supply Business.

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THANK YOU
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