The Tamil Nadu Electricity Regulatory Commission (TNERC) has released draft regulations for determining intra-state transmission system tariffs for the next five-year control period from FY 2027-28 to FY 2031-32. The proposed regulations have been issued under the provisions of the Electricity Act, 2003, and are expected to replace the existing tariff regulations introduced in 2005 and 2009. TNERC has invited comments and suggestions from stakeholders before finalizing the framework.
The draft regulations introduce a comprehensive Multi-Year Tariff (MYT) mechanism designed to improve transparency, predictability, and efficiency in the state’s transmission sector. Under the proposed framework, transmission licensees will be required to submit tariff petitions covering a five-year control period. The process will begin with an initial MYT filing, followed by a mid-term review during the third year and a final true-up exercise based on audited financial accounts at the end of the control period.
A key feature of the proposed framework is the distinction between controllable and uncontrollable costs. Expenses arising from factors beyond the control of transmission licensees, such as force majeure events, changes in law, and statutory revisions in employee compensation, will be treated as pass-through costs. On the other hand, variations related to operational efficiency, maintenance practices, and transmission system availability will be categorized as controllable factors. Any financial gains or losses resulting from these controllable parameters will be shared between transmission licensees and consumers.
The draft regulations also provide detailed guidelines for calculating the Aggregate Revenue Requirement (ARR). Transmission licensees will be allowed a post-tax Return on Equity (RoE) of 15.5 percent. The regulations specify the methodology for adjusting this return based on applicable corporate tax rates or Minimum Alternate Tax (MAT). The capital structure will continue to follow a normative debt-equity ratio of 70:30.
Depreciation of transmission assets will be calculated using the Straight-Line Method, with separate rates prescribed for different categories of assets. The regulations also define limits for capital spares and establish norms for calculating interest on working capital using the State Bank of India’s Marginal Cost of Funds-based Lending Rate (MCLR).
Another significant development is the inclusion of Tariff-Based Competitive Bidding (TBCB) projects within the state transmission tariff framework. While transmission charges for these projects will continue to be discovered through competitive bidding, they will be included as separate components within the Total Transmission Cost (TTC). The State Transmission Utility (STU) will administer a common pooling mechanism, eliminating the need for separate agreements between users and individual project developers.
The draft further outlines the methodology for sharing transmission charges among network users. The commission may create separate cost pools based on voltage levels or geographical zones. Monthly transmission charges will be calculated on a Rupees per MW per Month basis according to allocated capacity. The proposal also introduces a payment rebate of 1.5 percent for bills cleared within five days and a late payment surcharge of 1.5 percent per month for delayed payments. Additionally, the Normative Annual Transmission System Availability Factor has been set at 98 percent for AC transmission systems, with incentives available for higher performance levels.
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