Madhya Pradesh Sets New Tariff for Procuring Power from Small Hydro Projects

Small hydro projects to have a common tariff, not project-specific


The Madhya Pradesh Electricity Regulatory Commission (MPERC) has issued a tariff order for the procurement of power from small hydro power projects in the state.

The commission has determined the tariff, the procurement process, and the provisions for the purchase of power by distribution licensees or companies (DISCOMs) in the state from small hydro power projects, including terms and conditions for captive use or third-party sale.

This tariff order will be applicable to all new small hydro power projects in Madhya Pradesh commissioned on or after the date of issue of this order for the sale of electricity in the state. The order is effective from the date of use and will be in effect up to March 31, 2024.

The MPERC has decided to use common tariff for all the small hydro power projects using common benchmarks. The commission has fixed capital cost at ₹65 million (~$0.9 million)/MW for the projects of capacity below 5 MW and ₹63.5 million (~$0.90 million)/MW for the projects of capacity of 5 MW and above.

In its order, the commission also decided to consider a capacity utilization factor of 30 percent for the purpose of determination of the tariff. The MPERC has also fixed 3 percent of the capital cost of the project as operation and maintenance expense in the first year with an escalation of 5.72 percent for each year thereafter.

The useful life of a small hydro project will be 35 years. The MPERC has fixed the depreciation at 7 percent per annum for the first 10 years and balance 20 percent in the next 25 years. The debt to equity ratio will be 70:30, there will be a 11 percent interest on debt and a 12 percent interest on working capital.

The small hydro power projects are presently out of the purview of scheduling and merit order dispatch principles. The state commission has fixed ₹5.97 (~$0.085)/kWh as the first year tariff for small hydro projects below 5 MW capacity and ₹5.83 (~$0.08)/kWh as the tariff for small hydro project with a capacity of 5 MW and above.

The Madhya Pradesh Power Management Company Limited (MPPMCL) will enter 35-year PPAs with the small hydro project developers. It will also deduct 2 percent of the energy injected towards the wheeling charges in terms of units supplied.

Recently, the MPERC dismissed two petitions filed by owners of bagasse-based cogeneration projects against the imposition of cross subsidy surcharge for self-consumption of power.

Mercom previously reported that small hydro projects totaling 4,399.35 MW have been installed in the country.

Image credit: Alterrapower – CC BY-SA 3.0