The Tamil Nadu Electricity Regulatory Commission (TNERC) has released draft regulations for determining tariffs for the intra-state transmission system in 2026 and has invited comments and suggestions from stakeholders. The proposed regulations are expected to significantly influence the financial and operational framework of Tamil Nadu’s electricity transmission sector over the coming years.
The new regulations will replace the existing statutory guidelines issued in 2005 and 2009 for intra-state transmission utilities. They will apply across Tamil Nadu and cover all existing as well as future transmission licensees, including the State Transmission Utility (STU). The framework introduces a five-year Multi-Year Tariff (MYT) control period beginning in FY 2027-28 and continuing until FY 2031-32.
One of the major changes proposed in the draft is the separation of the State Load Despatch Centre (SLDC) business and accounts from regular transmission operations. This move is aimed at improving transparency and ensuring more accurate regulatory accounting. Transmission licensees will be required to submit detailed tariff petitions that include capital investment plans, financial performance assessments, and true-up calculations for previous financial years.
The regulations adopt a cost-plus methodology for calculating the Aggregate Revenue Requirement (ARR). Under this framework, operational and financial parameters have been classified as controllable and uncontrollable factors. Controllable factors include areas where utilities have direct management control, such as operations and maintenance performance and system availability. Financial gains resulting from improved performance in these areas will be shared, with two-thirds benefiting consumers through reduced tariffs and one-third retained by the utility. In the case of losses, one-third can be passed on to consumers, while the remaining portion must be absorbed by the utility.
Uncontrollable factors such as force majeure events, changes in law, tax revisions, and government-mandated salary adjustments will be fully considered while determining the ARR. This provision is intended to protect utilities from circumstances beyond their control while maintaining financial stability.
The draft regulations also specify key financial norms. A post-tax Return on Equity (RoE) of 15.5 percent has been proposed. In addition, all capital investment projects commissioned after April 1, 2027, will follow a debt-equity ratio of 70:30. Assets created through consumer contributions, government grants, or deposit works will not be considered for debt-equity calculations, depreciation, or RoE benefits. The regulations further clarify that Battery Energy Storage System (BESS) investments will be treated separately to prevent double recovery of fixed costs.
The framework also addresses Tariff-Based Competitive Bidding (TBCB) projects. Although such projects will continue to operate under their own Annual Transmission Service Charges, their costs will be integrated into common transmission cost pools for streamlined billing and cost allocation.
To encourage operational efficiency, TNERC has proposed a Normative Annual Transmission System Availability Factor of 98 percent for AC transmission systems and 95 percent for HVDC systems. Utilities achieving performance above these benchmarks will be eligible for additional financial incentives.
TNERC has asked stakeholders to submit their comments and objections to the Commission before the regulations are finalized and officially notified.
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