CERC DISCUSSION PAPER ON TERMS AND CERC DISCUSSION PAPER ON TERMS AND CONDITIONS FOR TARIFF FROM 01.04.2004CONDITIONS FOR TARIFF FROM 01.04.2004

WARM WELCOME TO THE WARM WELCOME TO THE PRESENTATION BYPRESENTATION BY

NEYVELI LIGNITE CORPORATION LTD.,NEYVELI LIGNITE CORPORATION LTD.,NEYVELINEYVELI

DATE:10.11.2003 PLACE: NEW DATE:10.11.2003 PLACE: NEW DELHIDELHI

CAPACITY ON HAND & PRESENT STATUS

TPS I TPS I : 6 X 50 MW + 3 X 100 MW : 6 X 50 MW + 3 X 100 MW AFTER LEP, MORE THAN 50% OF AFTER LEP, MORE THAN 50% OF EXTENDED LIFE UTILISED. EXTENDED LIFE UTILISED.

TPS IITPS II : 3 x 210 MW + 4 x 210 MW : 3 x 210 MW + 4 x 210 MW STAGE I – ALL UNITS CROSSED 1,00,000 HOURS STAGE I – ALL UNITS CROSSED 1,00,000 HOURS

OF OPERATION. OF OPERATION. LEP TO BE TAKEN IN THE NEXT FEW LEP TO BE TAKEN IN THE NEXT FEW

YEARS. YEARS. STAGE II – IN SERVICE FOR MORE THAN 10 STAGE II – IN SERVICE FOR MORE THAN 10

YEARS YEARS TPS I Expn. : 2 x 210 MWTPS I Expn. : 2 x 210 MW

NEWLY COMMISSIONED STATIONNEWLY COMMISSIONED STATION

THERMAL CAPACITY ADDITION PROGRAMME OF NLC

S.NO.S.NO. DETAILDETAIL ESTIMATED COSTESTIMATED COST

IN Rs.CRORESIN Rs.CRORES

1.1. TPS II EXPANSION TPS II EXPANSION 2 X 250 MW2 X 250 MW

20802080

2.2. RAJASTHAN RAJASTHAN 2 X 125 MW 2 X 125 MW

11131113

3.3. JOINT VENTURE WITH JOINT VENTURE WITH TNEB COAL BASED TNEB COAL BASED 1000 MW at Tuticorin1000 MW at Tuticorin

40004000

4.4. ORISSA 2000 MWORISSA 2000 MW 80008000

THERMAL PROJECTS UNDER FORMULATIONTHERMAL PROJECTS UNDER FORMULATION

S.NO.S.NO. DETAILDETAIL ESTIMATED COSTESTIMATED COST

IN Rs.CRORESIN Rs.CRORES

1.1. TPS I EXPANSION TPS I EXPANSION PHASE II 1 X 125 MWPHASE II 1 X 125 MW

455455

2.2. THERMAL POWER THERMAL POWER STATION III – 2 X 500 STATION III – 2 X 500 MWMW

39693969

3.3. JOINT VENTURE WITH JOINT VENTURE WITH CPCL – REFINERY CPCL – REFINERY RESIDUE BASED – IN RESIDUE BASED – IN CHENNAI 492 MWCHENNAI 492 MW

28372837

TARIFF SETTING PRIOR TO ERC ACT 1998

SINGLE PART TARIFF SYSTEMSINGLE PART TARIFF SYSTEM

GOI NOTIFICATIONS TAKEN AS GUIDE LINE.GOI NOTIFICATIONS TAKEN AS GUIDE LINE.

SEBs ARE COGNIZANT OF THE TECHNICAL SEBs ARE COGNIZANT OF THE TECHNICAL CONSTRAINTS AND LIMITATIONS OF CONSTRAINTS AND LIMITATIONS OF LIGNITE FIRED STATIONS OF NLC.LIGNITE FIRED STATIONS OF NLC.

FINAL AGREEMENTS THROUGH EXTENSIVE FINAL AGREEMENTS THROUGH EXTENSIVE DISCUSSIONS AND MUTUAL ACCEPTANCE DISCUSSIONS AND MUTUAL ACCEPTANCE OF NORMS AND PARAMETERS.OF NORMS AND PARAMETERS.

TECHNICAL CONSTRAINTS FACED IN TECHNICAL CONSTRAINTS FACED IN OPERATION OF NLC POWER STATIONSOPERATION OF NLC POWER STATIONS

LIGNITE SOURCE FROM ONE TO ONE LINKED MINES - LIGNITE SOURCE FROM ONE TO ONE LINKED MINES - HENCE, PERFORMANCE OF POWER PLANTS DEPENDS HENCE, PERFORMANCE OF POWER PLANTS DEPENDS ON PERFORMANCE OF MINES.ON PERFORMANCE OF MINES.

WIDE VARIATION IN LIGNITE QUALITY AFFECTS WIDE VARIATION IN LIGNITE QUALITY AFFECTS PERFORMANCE OF THERMAL UNITS.PERFORMANCE OF THERMAL UNITS.

CONTAMINANTS IN LIGNITE RESULT IN INCREASED CONTAMINANTS IN LIGNITE RESULT IN INCREASED FORCED OUTAGES AND LOW LOAD OPERATION OF FORCED OUTAGES AND LOW LOAD OPERATION OF THERMAL UNITS.THERMAL UNITS.

SLAGGING PROBLEMS ARE PRONOUNCED - AFFECT SLAGGING PROBLEMS ARE PRONOUNCED - AFFECT FULL LOAD OPERATION - LEAD TO OUTAGES.FULL LOAD OPERATION - LEAD TO OUTAGES.

BEING A LOW CALORIFIC VALUE FUEL, QUANTUM BEING A LOW CALORIFIC VALUE FUEL, QUANTUM HANDLED PER DAY IS VERY HUGE.HANDLED PER DAY IS VERY HUGE.

LIGNITE IS ALREADY A HIGH MOISTURE FUEL; DURING LIGNITE IS ALREADY A HIGH MOISTURE FUEL; DURING RAINY SEASONS, LIGNITE BECOMES SLUSHY AND RAINY SEASONS, LIGNITE BECOMES SLUSHY AND TRANSPORTATION POSES LOT OF PROBLEMS.TRANSPORTATION POSES LOT OF PROBLEMS.

SLUSHY LIGNITE AFFECTS THE FURNACE STABILITY, SLUSHY LIGNITE AFFECTS THE FURNACE STABILITY, WARRANTING USE OF FUEL OIL AND PART LOAD WARRANTING USE OF FUEL OIL AND PART LOAD OPERATION.OPERATION.

FREQUENT LIGNITE MILL CHANGE OVER NECESSARY FREQUENT LIGNITE MILL CHANGE OVER NECESSARY BECAUSE OF WEAR TO MILL PARTS DUE TO BECAUSE OF WEAR TO MILL PARTS DUE TO CONTAMINANTS IN LIGNITE.CONTAMINANTS IN LIGNITE.

SOME OF THE MEASURES TO OVERCOME THE FUEL SOME OF THE MEASURES TO OVERCOME THE FUEL RELATED PROBLEMS RESULT IN LOSS OF EFFICIENCY.RELATED PROBLEMS RESULT IN LOSS OF EFFICIENCY.

TECHNICAL CONSTRAINTS FACED IN TECHNICAL CONSTRAINTS FACED IN OPERATION OF NLC POWER STATIONSOPERATION OF NLC POWER STATIONS

PERFORMANCE LEVELS OF NLC PERFORMANCE LEVELS OF NLC LIGNITE BASED UNITSLIGNITE BASED UNITS

MAXIMUM POSSIBLE PLF LEVEL IS AROUND 80% MAXIMUM POSSIBLE PLF LEVEL IS AROUND 80% ONLY.ONLY.

THE ABOVE WAS ALSO POSSIBLE ONLY IN THE THE ABOVE WAS ALSO POSSIBLE ONLY IN THE LAST TWO YEARS.LAST TWO YEARS.

EVEN IN CASE OF SMALLER SIZED UNITS, THE PLF EVEN IN CASE OF SMALLER SIZED UNITS, THE PLF ACHIEVED COULD NOT BE MORE THAN 80%.ACHIEVED COULD NOT BE MORE THAN 80%.

HIGHER FORCED OUTAGES AND LOWER DAILY HIGHER FORCED OUTAGES AND LOWER DAILY OPERATING LOAD FACTOR (MAINLY BECAUSE OF OPERATING LOAD FACTOR (MAINLY BECAUSE OF FUEL) ARE THE PRIME REASONS.FUEL) ARE THE PRIME REASONS.

COST PLUS APPROACH, AS INDICATED IN THE COST PLUS APPROACH, AS INDICATED IN THE

DISCUSSION PAPER, IS TO BE CONTINUED .DISCUSSION PAPER, IS TO BE CONTINUED .

NORMATIVE VALUES SHOULD BE FIXED IN A SUCH NORMATIVE VALUES SHOULD BE FIXED IN A SUCH A WAY THAT THEY INCENTIVISE THE GENERATOR A WAY THAT THEY INCENTIVISE THE GENERATOR AND ALSO PROVIDE A LEVEL PLAYING FIELD.AND ALSO PROVIDE A LEVEL PLAYING FIELD.

NORMATIVE VALUES FOR TARIFF SHOULD NOT BE NORMATIVE VALUES FOR TARIFF SHOULD NOT BE BENCHMARKED BASED ON BEST PERFORMANCE BENCHMARKED BASED ON BEST PERFORMANCE LEVELS AND THAT TOO COMPARED WITH OTHER LEVELS AND THAT TOO COMPARED WITH OTHER FUELS. FUELS.

THE EFFORTS TAKEN TO IMPROVE EFFICIENCY IS THE EFFORTS TAKEN TO IMPROVE EFFICIENCY IS TO BE REWARDED; IMPROVEMENT OVER NORMS TO BE REWARDED; IMPROVEMENT OVER NORMS BY THE GENERATOR SHOULD NOT BE MADE AN BY THE GENERATOR SHOULD NOT BE MADE AN IMPEDIMENT.IMPEDIMENT.

PRINCIPLES FOR TARIFF SETTINGPRINCIPLES FOR TARIFF SETTING

PRINCIPLES FOR TARIFF SETTINGPRINCIPLES FOR TARIFF SETTING RATE OF INCENTIVE AND RANGE OF PERFORMANCE RATE OF INCENTIVE AND RANGE OF PERFORMANCE

FOR INCENTIVE SHOULD BE BASED ON TYPE OF FUEL / FOR INCENTIVE SHOULD BE BASED ON TYPE OF FUEL / STATION SPECIFIC ISSUES. STATION SPECIFIC ISSUES.

NORMATIVE VALUES SHOULD BE SUCH THAT THE SAME NORMATIVE VALUES SHOULD BE SUCH THAT THE SAME ENABLE INVESTMENT FOR THE DEVELOPMENT OF THE ENABLE INVESTMENT FOR THE DEVELOPMENT OF THE POWER SECTOR.POWER SECTOR.

IN CASE OF NLC, THE UNREQUISITIONING BY THE EBs, IF IN CASE OF NLC, THE UNREQUISITIONING BY THE EBs, IF NOT LIMITED ON AN ANNUAL BASIS, MAY AFFECT THE NOT LIMITED ON AN ANNUAL BASIS, MAY AFFECT THE FINANCIAL VIABILITY OF NLC.FINANCIAL VIABILITY OF NLC.

THE NEW CHALLENGES POSED BY THE THE NEW CHALLENGES POSED BY THE IMPLEMENTATION OF ABT AND THE ELECTRICITY ACT IMPLEMENTATION OF ABT AND THE ELECTRICITY ACT 2003 SHOULD ALSO BE TAKEN INTO CONSIDERATION 2003 SHOULD ALSO BE TAKEN INTO CONSIDERATION WHILE FIXING THE TARIFF OF THE GENERATOR. WHILE FIXING THE TARIFF OF THE GENERATOR.

NLC RECOMMEND FOR CONSIDERATION COST OF NLC RECOMMEND FOR CONSIDERATION COST OF EQUITY APPROACH. EQUITY APPROACH.

AS PER EXISTING PRACTICE, INCOME TAX, FERV, AS PER EXISTING PRACTICE, INCOME TAX, FERV, ROYALTY ETC., TO BE REIMBURSED IN FULL.ROYALTY ETC., TO BE REIMBURSED IN FULL.

DEBT-EQUITY RATIO AS APPROVED AT THE TIME OF DEBT-EQUITY RATIO AS APPROVED AT THE TIME OF GOI SANCTION FOR OLD PROJECTS AND 70:30 FOR GOI SANCTION FOR OLD PROJECTS AND 70:30 FOR NEW PROJECTS.NEW PROJECTS.

ROE TO BE RETAINED AT 16% POST TAX.ROE TO BE RETAINED AT 16% POST TAX.

PLR PLUS SPREAD AS ALLOWED BY SBI TO BE PLR PLUS SPREAD AS ALLOWED BY SBI TO BE ALLOWED FOR DEBT PORTION.ALLOWED FOR DEBT PORTION.

RATE OF RETURNRATE OF RETURN

JUSTIFICATION FOR NLC PROPOSALJUSTIFICATION FOR NLC PROPOSAL

PROJECTS ALREADY SANCTIONED SHOULD NOT PROJECTS ALREADY SANCTIONED SHOULD NOT SUFFER BECAUSE OF POLICY CHANGES.SUFFER BECAUSE OF POLICY CHANGES.

WITH THE LESSER REMAINING LIFE OF OLD WITH THE LESSER REMAINING LIFE OF OLD PROJECTS , THE 16% RETURN MAY NOT BE MUCH PROJECTS , THE 16% RETURN MAY NOT BE MUCH IN ABSOLUTE TERMS; THIS ALSO JUSTIFIES POST IN ABSOLUTE TERMS; THIS ALSO JUSTIFIES POST TAX RETURN. TAX RETURN.

ROE IS PREFERRED SINCE IN ROCE MODEL, ROE IS PREFERRED SINCE IN ROCE MODEL, RESTRICTIONS ON RETURN AS A FIXED %AGE ARE RESTRICTIONS ON RETURN AS A FIXED %AGE ARE IMPOSED, DEVIATING FROM THE COST PLUS IMPOSED, DEVIATING FROM THE COST PLUS APPROACH.APPROACH.

RATE BASERATE BASE

WHILE ARRIVING AT THE RATE BASE, NEW WHILE ARRIVING AT THE RATE BASE, NEW ADDITIONS / REPLACEMENTS SHALL ALSO BE ADDITIONS / REPLACEMENTS SHALL ALSO BE ALLOWED IN FULL.ALLOWED IN FULL.

CEILING FOR INITIAL SPARES TO BE 5% OF CEILING FOR INITIAL SPARES TO BE 5% OF CAPITAL COST. THE PRESENT PROVISION IS CAPITAL COST. THE PRESENT PROVISION IS FOUND INADEQUATE TO ACQUIRE SPARES FOR FOUND INADEQUATE TO ACQUIRE SPARES FOR TURBINE AND GENERATOR ROTORS.TURBINE AND GENERATOR ROTORS.

FOR ADDITIONAL CAPITAL EXPENDITURE, THE FOR ADDITIONAL CAPITAL EXPENDITURE, THE CEILING OF 20% TO BE DISPENSED WITH SINCE CEILING OF 20% TO BE DISPENSED WITH SINCE MANY OF THE SYSTEMS / SERVICES ARE MANY OF THE SYSTEMS / SERVICES ARE NORMALLY COMPLETED AFTER COD ONLY AND NORMALLY COMPLETED AFTER COD ONLY AND LAST 10% PAYMENTS RELEASED ONLY AFTER LAST 10% PAYMENTS RELEASED ONLY AFTER COMMISSIONING.COMMISSIONING.

RATE BASERATE BASE

ALL EXPENDITURE INCURRED DURING PROJECT ALL EXPENDITURE INCURRED DURING PROJECT EXECUTION LIKE WORKS OVER AND ABOVE EXECUTION LIKE WORKS OVER AND ABOVE SCOPE, DEFERRED EXPENDITURE IN ORIGINAL SCOPE, DEFERRED EXPENDITURE IN ORIGINAL SCOPE ETC., ARE TO BE ALLOWED.SCOPE ETC., ARE TO BE ALLOWED.

REIMBURSEMENT OF FERV IS TO BE AT ACTUAL. REIMBURSEMENT OF FERV IS TO BE AT ACTUAL.

LIABILITY SIDE APPROACH MAY BE CONSIDERED LIABILITY SIDE APPROACH MAY BE CONSIDERED FOR ARRIVING AT THE RATE BASE TO ENSURE FOR ARRIVING AT THE RATE BASE TO ENSURE ADEQUATE AVAILABILITY OF RESOURCES, ADEQUATE AVAILABILITY OF RESOURCES, ESPECIALLY UNDER THE FAST CHANGING POWER ESPECIALLY UNDER THE FAST CHANGING POWER SECTOR SCENARIO.SECTOR SCENARIO.

INTEREST ON WORKING CAPITALINTEREST ON WORKING CAPITAL

MARGIN MONEY TO BE PERMITTED AS PER THE MARGIN MONEY TO BE PERMITTED AS PER THE REQUIREMENTS OF BANKING REGULATIONS.REQUIREMENTS OF BANKING REGULATIONS.

O&M EXPENSES TO BE RETAINED IN THE O&M EXPENSES TO BE RETAINED IN THE WORKING CAPITAL AS BEFORE. THIS IS JUSTIFIED WORKING CAPITAL AS BEFORE. THIS IS JUSTIFIED IN VIEW OF THE REBATE AVAILABLE FOR PROMPT IN VIEW OF THE REBATE AVAILABLE FOR PROMPT PAYMENTS IN THE BPSA AND ALSO ADDITIONAL PAYMENTS IN THE BPSA AND ALSO ADDITIONAL REBATES & INCENTIVES PROVIDED FOR IN THE REBATES & INCENTIVES PROVIDED FOR IN THE SECURITISATION SCHEME.SECURITISATION SCHEME.

INCLUSION OF INTEREST ON WORKING CAPITAL INCLUSION OF INTEREST ON WORKING CAPITAL AS A %AGE PROVIDED FOR PASS THROUGH ITEMS AS A %AGE PROVIDED FOR PASS THROUGH ITEMS NOT TO BE CONSIDERED; THIS SEEMS TO BE NOT TO BE CONSIDERED; THIS SEEMS TO BE AGAINST THE COST PLUS APPROACH. AGAINST THE COST PLUS APPROACH.

O&M EXPENSESO&M EXPENSES FOR OLD PLANTS, THE AVG.VAULE IS TO BE FOR OLD PLANTS, THE AVG.VAULE IS TO BE

ESCALLATED BY 2.5 TIMES TO ARRIVE AT BASE ESCALLATED BY 2.5 TIMES TO ARRIVE AT BASE YEAR O&M AS AGAINST 2 TIMES AS PER EARLIER YEAR O&M AS AGAINST 2 TIMES AS PER EARLIER CERC ORDER.CERC ORDER.

THE ESCALATION TO BE @10% INSTEAD OF 6%.THE ESCALATION TO BE @10% INSTEAD OF 6%.

THIS IS NEEDED IN VIEW OF THE EVER ESCALATING THIS IS NEEDED IN VIEW OF THE EVER ESCALATING COSTS OF MAINTENANCE.COSTS OF MAINTENANCE.

THE AGEING OF THE UNITS AND THE INCREASED THE AGEING OF THE UNITS AND THE INCREASED MAINTENANCE REQUIREMENTS ARE ALSO TO BE MAINTENANCE REQUIREMENTS ARE ALSO TO BE TAKEN INTO CONSIDERATION.TAKEN INTO CONSIDERATION.

IN CASE OF NEW PLANTS, 3.5% OF CAPITAL COST IN CASE OF NEW PLANTS, 3.5% OF CAPITAL COST IN VIEW OF FALLING COST OF POWER PLANTSIN VIEW OF FALLING COST OF POWER PLANTS

O&M EXPENSESO&M EXPENSES

BENCH MARKING OF O&M EXPENSES MAY BE BENCH MARKING OF O&M EXPENSES MAY BE DIFFICULT DIFFICULT

(a)(a) DUE TO DIFFERENT TECHNOLOGIESDUE TO DIFFERENT TECHNOLOGIES

(b)(b) DIFFERENT FUEL USAGE, SIZE OF THE UNITDIFFERENT FUEL USAGE, SIZE OF THE UNIT

(c)(c) AGEINGAGEING

(d)(d) EXTENT OF AUTOMATIONEXTENT OF AUTOMATION

(e)(e) MAN POWER AND OTHER FACTORS MAN POWER AND OTHER FACTORS

IT IS RECOMMENDED THAT THE O&M COST FOR IT IS RECOMMENDED THAT THE O&M COST FOR THE NEW POWER STATIONS SHALL CONTINUE TO THE NEW POWER STATIONS SHALL CONTINUE TO BE NORMATIVE PERCENTAGE OF CAPITAL COST. BE NORMATIVE PERCENTAGE OF CAPITAL COST.

DEPRECIATIONDEPRECIATION

DEPRECIATION RATE TO BE MAINTAINED AT DEPRECIATION RATE TO BE MAINTAINED AT 7.84%.7.84%.

THIS IS NECESSARY TO ENSURE ADEQUATE THIS IS NECESSARY TO ENSURE ADEQUATE FUNDS FOR PROMPT DEBT SERVICING AND FUNDS FOR PROMPT DEBT SERVICING AND ADDITIONS / REPLACEMENTS.ADDITIONS / REPLACEMENTS.

RELATING DEPRECIATION TO THE ECONOMIC RELATING DEPRECIATION TO THE ECONOMIC VALUE OF THE ASSET IS CONSIDERED NOT VALUE OF THE ASSET IS CONSIDERED NOT NECESSARY.NECESSARY.

HEAT RATEHEAT RATE

MUST BE ON A NORMATIVE BASIS ONLY.MUST BE ON A NORMATIVE BASIS ONLY.

CORRECTION FACTOR FOR MOISTURE FOR CORRECTION FACTOR FOR MOISTURE FOR LIGNITE, AS ADOPTED BY CEA, SHALL LIGNITE, AS ADOPTED BY CEA, SHALL CONTINUE TO BE FOLLOWED.CONTINUE TO BE FOLLOWED.

THE ALTERNATE REPORT OF EXPERT THE ALTERNATE REPORT OF EXPERT GROUP MAY BE CONSIDERED AS SUCH GROUP MAY BE CONSIDERED AS SUCH FOR ADOPTION. THIS WILL STILL BE FOR ADOPTION. THIS WILL STILL BE RELEVANT.RELEVANT.

SPECIFIC SECONDARY FUEL OIL SPECIFIC SECONDARY FUEL OIL CONSUMPTIONCONSUMPTION

THE NORM SHOULD NOT BE LESS THAN 3.0 ML / THE NORM SHOULD NOT BE LESS THAN 3.0 ML / KWHR BECAUSE OFKWHR BECAUSE OF

1. LIGNITE BEING A HIGH MOISTURE FUEL AND 1. LIGNITE BEING A HIGH MOISTURE FUEL AND MINING BY OPEN CAST METHODOLOGY, USAGE MINING BY OPEN CAST METHODOLOGY, USAGE OF OIL CANNOT BE PREDICTED AND WILL NOT OF OIL CANNOT BE PREDICTED AND WILL NOT REMAIN THE SAME ALWAYS.REMAIN THE SAME ALWAYS.

2. CONSTANT LOAD OPERATION IS NO LONGER 2. CONSTANT LOAD OPERATION IS NO LONGER POSSIBLE UNDER ABT.POSSIBLE UNDER ABT.

AUXILIARY POWER CONSUMPTIONAUXILIARY POWER CONSUMPTION

ON NORMATIVE BASIS ONLY.ON NORMATIVE BASIS ONLY.

SHALL NOT BE LESS THAN 10% FOR THE SHALL NOT BE LESS THAN 10% FOR THE FOLLOWING REASONS:FOLLOWING REASONS:

HIGH MOISTURE CONTENT AND HIGH MOISTURE CONTENT AND ASSOCIATED HIGH VOLUME OF FLUE GASES.ASSOCIATED HIGH VOLUME OF FLUE GASES.

OPERATION BELOW 100% MCR CONDITIONS OPERATION BELOW 100% MCR CONDITIONS FOR MOST OF THE TIME DUE TO TECHNICAL FOR MOST OF THE TIME DUE TO TECHNICAL PROBLEMS, LIGNITE QUALITY ETC.,PROBLEMS, LIGNITE QUALITY ETC.,

INCENTIVE FOR THERMAL GENERATIONINCENTIVE FOR THERMAL GENERATIONFIXATION OF NORMATIVE VALUEFIXATION OF NORMATIVE VALUE

TO BE BASED ON FUEL TYPE.TO BE BASED ON FUEL TYPE.

TO TAKE INTO ACCOUNT THE TECHNICAL PROBLEMS TO TAKE INTO ACCOUNT THE TECHNICAL PROBLEMS FACED.FACED.

TO CONSIDER RANGE OF PERFORMANCE AVAILABLE FOR TO CONSIDER RANGE OF PERFORMANCE AVAILABLE FOR INCENTIVE.INCENTIVE.

THE MAXIMUM PERFORMANCE LEVEL FOR EACH TYPE OF THE MAXIMUM PERFORMANCE LEVEL FOR EACH TYPE OF STATION WILL BE DIFFERENTSTATION WILL BE DIFFERENT

INCENTIVE RANGE GIVEN FOR COAL BASED TPS SHOULD BE INCENTIVE RANGE GIVEN FOR COAL BASED TPS SHOULD BE EXTENED TO LIGNITE BASED TPSEXTENED TO LIGNITE BASED TPS

ALL ABOVE FACTORS SHALL BE CONSIDERED AND ALL ABOVE FACTORS SHALL BE CONSIDERED AND EQUITABLE TO ALL TYPES OF GENERATORS.EQUITABLE TO ALL TYPES OF GENERATORS.

INCENTIVE FOR THERMAL GENERATIONINCENTIVE FOR THERMAL GENERATIONBASED ON AVAILABILITY OR SCHEDULED PLFBASED ON AVAILABILITY OR SCHEDULED PLF AS PER EARLIER CERC NOTIFICATION, THE SAME IS AS PER EARLIER CERC NOTIFICATION, THE SAME IS

BASED ON SCHEDULED PLF.BASED ON SCHEDULED PLF.

PERFORMANCE LEVEL ABOVE SCHEDULED PLF PERFORMANCE LEVEL ABOVE SCHEDULED PLF DEPENDS UPON REQUISITIONING BY EBs.DEPENDS UPON REQUISITIONING BY EBs.

THUS, INCENTIVE TO THE GENERATOR DEPENDS THUS, INCENTIVE TO THE GENERATOR DEPENDS UPON THE SEBs RATHER THAN THE PERFORMANCE UPON THE SEBs RATHER THAN THE PERFORMANCE LEVEL OF THE GENERATOR.LEVEL OF THE GENERATOR.

ONLY APPROPRIATE IF THE INCENTIVE IS BASED ONLY APPROPRIATE IF THE INCENTIVE IS BASED ON AVAILABILITY OR DEEMED SCHEDULED PLF.ON AVAILABILITY OR DEEMED SCHEDULED PLF.

RATE OF INCENTIVE MAY BE SAME FOR ALL FUELS, RATE OF INCENTIVE MAY BE SAME FOR ALL FUELS, PROVIDED DIFFERENT RANGE OF PERFORMANCE PROVIDED DIFFERENT RANGE OF PERFORMANCE LEVELS OF DIFFERENT FUELS ARE CONSIDERED.LEVELS OF DIFFERENT FUELS ARE CONSIDERED.

IN THE BPSAs WITH THE SEBs SO FAR, HIGHER IN THE BPSAs WITH THE SEBs SO FAR, HIGHER RATE OF INCENTIVE FOR LIGNITE STATIONS WAS RATE OF INCENTIVE FOR LIGNITE STATIONS WAS MUTUALLY AGREED. WHILE THERE IS SHARING OF MUTUALLY AGREED. WHILE THERE IS SHARING OF BENEFITS BETWEEN GENERATOR & EB, 100% BENEFITS BETWEEN GENERATOR & EB, 100% FIXED CHARGES PER KWHR IS ADOPTED AS THE FIXED CHARGES PER KWHR IS ADOPTED AS THE RATE OF INCENTIVE. RATE OF INCENTIVE.

IN CASE A FLAT RATE IS CONSIDERED, NLC IN CASE A FLAT RATE IS CONSIDERED, NLC SUGGEST FOR CONSIDERATION 50% OF FIXED SUGGEST FOR CONSIDERATION 50% OF FIXED CHARGES WITHOUT ANY CEILING OR THE UI RATE CHARGES WITHOUT ANY CEILING OR THE UI RATE AT 50 Hz AS THE RATE OF INCENTIVE.AT 50 Hz AS THE RATE OF INCENTIVE.

INCENTIVE FOR THERMAL GENERATIONINCENTIVE FOR THERMAL GENERATIONRATE OF INCENTIVERATE OF INCENTIVE

DEVELOPMENT SURCHARGEDEVELOPMENT SURCHARGE

DEPRECIATION RATE AT 7.84% APPEARS DEPRECIATION RATE AT 7.84% APPEARS TO BE THE RIGHT SOLUTION.TO BE THE RIGHT SOLUTION.

DELETION OF SURCHARGE MAY BE DELETION OF SURCHARGE MAY BE CONSIDERED IN VIEW OF THE STRINGENT CONSIDERED IN VIEW OF THE STRINGENT CONDITIONS STIPULATED FOR ITS USE.CONDITIONS STIPULATED FOR ITS USE.

TARIFF PERIODTARIFF PERIOD

NLC SUGGEST 5 YEAR TARIFF PERIOD FOR THE NLC SUGGEST 5 YEAR TARIFF PERIOD FOR THE FOLLOWING REASONS:FOLLOWING REASONS:

LONGER DURATION WILL ENABLE STUDY OF LONGER DURATION WILL ENABLE STUDY OF EFFECTS OF VARIOUS POLICY DECISIONS FOR EFFECTS OF VARIOUS POLICY DECISIONS FOR SUBSEQUENT FINE TUNING.SUBSEQUENT FINE TUNING.

LONGER DURATION WILL ENSURE STABILITY AND LONGER DURATION WILL ENSURE STABILITY AND ALSO ENABLE THE GENERATOR TO FINALISE THE ALSO ENABLE THE GENERATOR TO FINALISE THE BUSINESS STRATEGY.BUSINESS STRATEGY.

PROCEDURE FOR TARIFF FINALISATION ENTAILS PROCEDURE FOR TARIFF FINALISATION ENTAILS PROTRACTED DISCUSSIONS.PROTRACTED DISCUSSIONS.

REGIONAL TARIFFREGIONAL TARIFF

TARIFF TO BE STATION SPECIFIC.TARIFF TO BE STATION SPECIFIC.

NLC NOT AGREEABLE TO REGIONAL NLC NOT AGREEABLE TO REGIONAL TARIFF.TARIFF.

PEAK AND OFF PEAK TARIFFPEAK AND OFF PEAK TARIFF

NLC SUGGEST CIRCULATION OF A DRAFT NLC SUGGEST CIRCULATION OF A DRAFT PROPOSAL SEPARATELY UNDER THE PROPOSAL SEPARATELY UNDER THE CHANGED SCENARIO WITH OPERATION OF CHANGED SCENARIO WITH OPERATION OF THE GRID UNDER ABT.THE GRID UNDER ABT.

DECLARATION OF CAPACITY DECLARATION OF CAPACITY EXCEEDING INSTALLED CAPACITYEXCEEDING INSTALLED CAPACITY

NLC IS OF THE VIEW THAT THIS CAN BE NLC IS OF THE VIEW THAT THIS CAN BE PERMITTED.PERMITTED.

AUXILIARY CONSUMPTION ALONE CANNOT BE A AUXILIARY CONSUMPTION ALONE CANNOT BE A FACTOR FOR HIGHER INJECTION.FACTOR FOR HIGHER INJECTION.

SO LONG THE ENERGY FED INTO THE GRID IS IN SO LONG THE ENERGY FED INTO THE GRID IS IN AID OF THE SAME, IT SHOULD BE PERMITTED. AID OF THE SAME, IT SHOULD BE PERMITTED.

UI RATE IN STEPS OF 0.01 HzUI RATE IN STEPS OF 0.01 Hz

THIS IS SUGGESTED ASTHIS IS SUGGESTED AS

THE FREQUENCY IS MEASURABLE IN THE FREQUENCY IS MEASURABLE IN STEPS OF 0.01 Hz.STEPS OF 0.01 Hz.

THE ABOVE MEASURE WILL HELP BOTH THE ABOVE MEASURE WILL HELP BOTH THE GENERATOR AND EB.THE GENERATOR AND EB.

TIME FOR REVISION OF FORCED OUTAGETIME FOR REVISION OF FORCED OUTAGE

ANY FORCED OUTAGE IS TOTALLY ANY FORCED OUTAGE IS TOTALLY UNINTENTIONAL AND OUT OF CONTROL.UNINTENTIONAL AND OUT OF CONTROL.

OPERATING FREQUENCY IS GREATLY OPERATING FREQUENCY IS GREATLY INFLUENCED BY THE SEBs ONLY.INFLUENCED BY THE SEBs ONLY.

SO, TOTAL DELETION OF THIS CLAUSE IS SO, TOTAL DELETION OF THIS CLAUSE IS SUGGESTED FOR CONSIDERATION.SUGGESTED FOR CONSIDERATION.

PRESENTLY, REVISION TO TAKE EFFECT FROM 6PRESENTLY, REVISION TO TAKE EFFECT FROM 6THTH TIME BLOCK.TIME BLOCK.

SUGGESTED TO EFFECT REVISION FROM 3SUGGESTED TO EFFECT REVISION FROM 3RDRD TIME TIME BLOCK.BLOCK.

REDUCTION IN TIME POSSIBLE AS ALL HAVE REDUCTION IN TIME POSSIBLE AS ALL HAVE BECOME USED TO THE SCHEDULING BECOME USED TO THE SCHEDULING PROCEDURES AND WITH THE USE OF PROCEDURES AND WITH THE USE OF ELECTRONIC FACILITIES.ELECTRONIC FACILITIES.

TIME FOR REVISION FOR OTHER REASONSTIME FOR REVISION FOR OTHER REASONS

NOTE UNDER “DEMONSTRATION OF NOTE UNDER “DEMONSTRATION OF DECLARED CAPABILITYDECLARED CAPABILITY

IT IS TO BE EXPLICITLY INDICATED THAT THIS IS IT IS TO BE EXPLICITLY INDICATED THAT THIS IS APPLICABLE, IF AND ONLY IF, GAMING IS APPLICABLE, IF AND ONLY IF, GAMING IS ESTABLISHED.ESTABLISHED.

THIS MEASURE ALONE WILL MAKE THE UI SCHEME THIS MEASURE ALONE WILL MAKE THE UI SCHEME JUST AND EQUITABLE.JUST AND EQUITABLE.

TREATING EVEN NORMAL VARIATIONS IN LOAD TREATING EVEN NORMAL VARIATIONS IN LOAD ABOVE DC AS GAMING IS NOT FAIR.ABOVE DC AS GAMING IS NOT FAIR.

THIS NEEDS A CRITICAL REVIEW IN VIEW OF THIS NEEDS A CRITICAL REVIEW IN VIEW OF SEVERE FINANCIAL IMPLICATIONS TO SEVERE FINANCIAL IMPLICATIONS TO GENERATORS.GENERATORS.

Thank YouThank You