UPERC Releases Draft 2025 Tariff Regulations To Streamline Transmission Framework In Uttar Pradesh

Posted On - 15 May, 2025 • By - King Stubb & Kasiva

Introduction

Aiming at modernizing and simplifying the state’s transmission system, the Uttar Pradesh Electricity Regulatory Commission (UPERC) has released the draft UPERC (Multi-Year Tariff for Transmission) Regulations, 2025.[1] These rules aim to replace the 2019 guidelines by means of a methodical approach to tariff assessment, so improving operational efficiency, and guaranteeing financial sustainability for transmission licensees. While inviting stakeholder comments until May 14, 2025, following which a public hearing on May 16, 2025, the draft stresses openness, consumer protection, and alignment with national policies.

Explanation (Key Points)

  1. Multi-Year Tariff (MYT) Framework
    • The regulations adopt a five-year control period (2025–2030) for tariff determination, providing stability for transmission utilities and investors.
    • Tariffs will be reviewed annually through True-Up, Annual Performance Review (APR), and Aggregate Revenue Requirement (ARR) petitions, ensuring alignment with actual costs and performance.
  2. Segregation of Transmission and Distribution Regulations
    • Unlike the 2019 framework, which combined both sectors, the 2025 draft adds specific rules for transmission, so addressing special issues including grid dependability, capital-intensive projects, and interstate coordination.
  3. Transparency and Public Participation
    • Stakeholders can submit written suggestions/objections by May 14, 2025. A public hearing on May 16, 2025, will finalize inputs.
    • Licensees must publish tariff petitions in Hindi and English newspapers and upload them on their websites for accessibility.
  4. Financial Principles
    • Capital Expenditure (CapEx): Projects costing more than ₹20 crore need previous approval. Defined are norms for initial spares (1–7% of asset cost) and depreciation schedules (Annexures A and B).
    • Return on Equity (RoE): Fixed at 14.5% post-tax, adjusted for effective tax rates.
    • Interest and Loans: Interest on long-term loans is linked to SBI MCLR rates, while working capital interest includes a 200-basis-point premium.
  5. Operational Guidelines
    • Transmission Availability: For AC systems, targets 98%; for HVDC links, 95%. Charges change according to availability each month.
    • Delay in Commercial Operations: Liability clauses triggered by mismatches in commissioning dates between generators and transmission systems Entities with defaulting shares expenses in line.
  6. Cost Sharing Mechanism
    • Total Transmission System Cost (TTSC): Aggregates ARR of all licensees and competitively bid projects. Costs are shared among users based on their Base Transmission Capacity Rights (average of daily and yearly peak drawals).
    • Open-access users pay per kWh, while distribution licensees pay per MW, ensuring equitable burden-sharing.
  7. Innovations and Reforms
    • Asset Monetization: Licensees have to research revenue sources (such as advertising) and distribute 70% of such income to customers.
    • Controllable vs. Uncontrollable Factors: While operational inefficiencies (controllable) split between licensees and consumers, gains or losses from elements like forex fluctuations (uncontrollable) are fully adjusted in tariffs.
  8. Depreciation and Salvage Value

While newer assets use Annexure-B (e.g., 4.22%), assets capitalized before March 2025 follow Annexure-A rates (e.g., 5.28%). Underground cables and IT systems have no salvage value.

Conclusion

By prioritizing transparency, incentivizing efficiency, and introducing mechanisms like TTSC pooling and liability clauses, UPERC aims to balance consumer interests with the financial viability of transmission utilities.

The emphasis on public consultation and adherence to national policies underscores UPERC’s commitment to fostering a reliable, cost-effective grid. If implemented effectively, these regulations could enhance investor confidence, reduce delays, and ensure sustainable growth in the state’s power sector.

[1] https://www.uperc.org/App_File/DraftTransmissionMYT-pdf421202571224PM.pdf