The Meghalaya State Electricity Regulatory Commission (MSERC) has issued draft Multi-Year Tariff Regulations, 2026, to determine tariffs effective from April 1, 2027.

The draft regulations will apply across Meghalaya to existing and future generating companies, transmission licensees, distribution licensees, the State Load Despatch Centre (SLDC), and their successors.

Renewable energy projects will continue to be governed by separate regulations issued by the Commission.

Stakeholders can submit their feedback by June 15, 2026.

Scope and Applicability

The first control period under the draft regulations will run for three financial years, from April 1, 2027, to March 31, 2030.

The Commission will determine tariffs for generation, intra-state transmission, SLDC charges, wheeling, and retail supply under the multi-year tariff framework.

The draft does not notify exact retail tariffs for consumer categories. Distribution licensees must propose category-wise tariffs through tariff petitions, and the Commission will approve the applicable tariffs through subsequent tariff orders.

Business Plan and Tariff Filing

Utilities must file a business plan three months before the last date for filing the true-up petition for the preceding year. For the first control period, the business plan must cover FY 2028 to FY 2030.

The business plan must include category-wise sales and demand projections, power procurement plans, capital investment plans, financing plans, physical targets, loss reduction trajectories, collection efficiency targets, and performance parameters.

Based on the approved business plan, utilities must submit the aggregate revenue requirement for the entire control period and the tariff proposal for the first year. The Commission will approve the aggregate revenue requirement for the full control period and determine tariffs annually.

The tariff and truing-up petitions must be filed by November 30 every year. If a utility delays filing by more than one month, the Commission may initiate suo motu tariff determination proceedings. Revenue loss and carrying costs resulting from delayed filing will not be allowed.

Truing Up and Cost Treatment

The Commission has proposed separate treatment for controllable and uncontrollable factors.

Controllable factors include cost and time overruns caused by inefficiencies, plant availability, heat rate, auxiliary consumption, transmission and distribution losses, collection efficiency, assessed billing, working capital requirements, bad debts, and O&M cost variations.

Uncontrollable factors include force majeure events, change in law, fuel price, gross calorific value of fuel, power purchase cost, power purchase quantum, inter-state transmission loss, statutory levies, income tax, pension liability, and variation in consumer mix or sales volume, subject to conditions.

Gains from controllable factors will be shared between consumers and utilities. Two-thirds of such gains will be passed on to consumers or beneficiaries as tariff rebate, while the utility may retain one-third.

Losses from controllable factors will be shared in the reverse manner: one-third will be passed on to consumers, and the utility will absorb two-thirds.

Gains or losses from uncontrollable factors will be passed through tariffs over a period specified by the Commission.

Financial Principles

The draft proposes a 70:30 debt-to-equity ratio for projects declared to be in commercial operation on or after April 1, 2027. Equity above 30% of the approved capital cost will be treated as a normative loan, while actual equity below 30% will be considered for tariff determination.

For existing projects, the debt-equity ratio approved by the Commission up to March 31, 2027, will remain in effect. Grants and consumer contributions will be excluded from the capital structure for the calculation of return on equity, interest on loans, and depreciation.

The base return on equity for existing projects has been set at 14%. For new projects achieving commercial operation on or after April 1, 2027, the base return on equity will be 15% for transmission systems and SLDC, 15.5% for thermal generating stations, run-of-river hydro generating stations, and distribution business, and 17% for storage hydro, pumped storage hydro, and run-of-river hydro projects with pondage.

Additional capitalization beyond the original scope, including expenditures due to emission control systems, changes in law, and force majeure events, will earn a return at the one-year State Bank of India marginal cost of funds-based lending rate plus 350 basis points, subject to a ceiling of 14%.

Performance Incentives and Penalties

Thermal generating stations will be eligible for an incentive of ₹0.50 (~$0.005)/kWh for generation above the target plant load factor. Transmission licensees will be eligible for incentives or penalties based on transmission availability.

Distribution licensees will be eligible for performance-linked return on equity based on collection efficiency and assessed billing. Retail supply businesses may achieve a higher return on equity if collection efficiency exceeds 99.50% and assessed billing remains below 1.50%.

The draft provides for penalties where distribution losses exceed the trajectory approved by the Commission. Performance-linked return on equity may also be reduced if collection efficiency falls below prescribed levels or assessed billing exceeds the approved threshold.

Consumer Rebates and Delayed Payment Charges

The draft proposes a 0.50% rebate for payment of retail electricity bills within 7 days of the bill date. Consumers with prepaid meters will receive a 1.50% rebate.

For generation and transmission bills, payment within 7 days qualifies for a 0.50% rebate on the billed amount, excluding taxes, cess, and duties. Payments made within 15 days of the 7-day period will receive a 0.25% rebate.

Delayed payment charges will apply if generation or transmission bills are paid after 15 days. The charge will be based on one-year SBI MCLR plus 5% for the first month of default and will increase by 0.5% for each successive month, subject to a ceiling of 3% above the base rate.

Subsidy Mechanism

The draft states that from April 1, 2027, any subsidy directed by the Meghalaya government for any consumer or class of consumers must be paid in advance to compensate the distribution licensee or affected person.

If the subsidy payment is not made in accordance with the regulations, the subsidy direction will not operate, and the tariff approved by the Commission will apply.

Generation Tariff Framework

For thermal generating stations, the tariff will comprise fixed capacity charges and energy charges.

Fixed costs will include return on equity, interest on loan capital, O&M expenses, interest on working capital, depreciation, income tax, and secondary fuel oil cost for coal and lignite stations.

For hydro generating stations, the tariff will comprise annual capacity charges and energy charges. The annual fixed cost will be split equally, with 50% recovered through capacity charges and 50% through energy charges.

The draft also specifies station-wise O&M norms and normative annual plant availability factors for existing hydro stations in Meghalaya, including Umiam, Myntdu Leshka, New Umtru, Lakroh, Ganol, and Riangdo projects.

Other Provisions

The Commission has proposed a framework for capital cost approval, additional capitalization, de-capitalization, depreciation, working capital, income tax, foreign exchange rate variation, and income from other businesses.

The draft also requires utilities to support capital expenditure claims with documentary evidence and details of assets put to use. Assets funded through grants or consumer contributions will not form part of the capital base for return on equity.

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