Two-part Tariff for Natural Gas–Based Power Plant
Fixed and Variable Components (Illustrative)
Demonstration disclosure:
This interactive model is provided for illustrative purposes only. It is intended to support conceptual understanding of tariff formation and cost sensitivities, not regulatory or commercial tariff determination.
This interactive model is provided for illustrative purposes only. It is intended to support conceptual understanding of tariff formation and cost sensitivities, not regulatory or commercial tariff determination.
Methodology for determining the two-part tariff for natural gas–based power generation is very similar to that used for coal-based power generation.
The tariff comprises an Annual Fixed Cost (AFC), which is capacity-linked, and an Energy Charge Rate (ECR), which represents the variable cost of fuel.
The analytical framework adopted in this model is broadly aligned with cost-based tariff methodologies used in India. However, it is not intended to be a strict, line-by-line replication of regulatory norms. Certain assumptions differ marginally and deliberately, to maintain methodological consistency with the solar, wind, and coal tariff models presented elsewhere on this platform.
Parameters kept fixed in the model
- Plant life: 25 years
- Debt–equity structure: 70% debt and 30% equity
- Long-term loan interest rate: 9% per annum
- Normative post-tax return on equity (ROE): 14%
- Depreciation: 5.83% p.a. for first 12 years and 1.54% thereafter
- Loan repayment aligned with depreciation, with no moratorium
- Interest on working capital: 8% per annum
- Corporate tax 30%, MAT 15%, surcharge 12%, cess 4%
- Receivables: 2 months
- Base-year O&M cost: Rs 24.4 lakhs per MW, escalated at 5.25% p.a.