1. Overview of tariff revision process under Regulatory Commission Prayas - EGI Skill-share workshop for Tajikistan and Kyrgyzstan Delegates November 16-18, 2010, Pune, India Prayas Energy Group www.prayaspune.org/peg, energy@prayaspune.org www.prayaspune.org/pegenergy@prayaspune.org

2. Tariff revision 17 Nov 20102Prayas EGI Workshop - Pune 2010

3. Agenda Tariff revision process and principles Tariff proposal and cost components Tariff structure 17 Nov 2010Prayas EGI Workshop - Pune 20103

4. Procedure Details of cost Proposed tariff structure Step 1: Application by company Check procedural compliance and completeness of the application Step 2: Preliminary scrutiny by commission Ensure consistency of information demand additional data if necessary, Consumer representatives participation Step 3: Technical Validation Session Dissemination of information, all data and application available at six locations, website, local language summary Step 4: Public notice and availability of all documents Commission hears objections and suggestions from consumers and utility’s response to the same Step 5: Public hearings at six locations Company proposal  public comments  utility response to comments  commission’s analysis and ruling Step 6:Tariff order issued by commission 17 Nov 2010Prayas EGI Workshop - Pune 20104

5. Tariff principles Company to recover all reasonable and efficient costs plus allowed profits  Revenue requirement = cost + profit Reduction of cross-subsidy No tariff shock to any consumer category Development considerations Affordability of small and agriculture consumers 17 Nov 2010Prayas EGI Workshop - Pune 20105

6. Tariff proposal and cost components Past performance Sales & revenue Costs and expenses Compliance with directives Performance norms Energy losses Supply quality Projections for next year/period Sales Revenue at current tariff + Non-tariff income Costs and revenue gap/surplus Proposed improvements in performance 17 Nov 2010Prayas EGI Workshop - Pune 20106

7. Cost components for distribution business Power purchase cost Transmission charges Capital expenditure and related costs Interest on long term loan Depreciation Operation and maintenance cost Employee cost Administration costs Repair and maintenance 17 Nov 2010Prayas EGI Workshop - Pune 20107

8. Generation tariff components Fixed cost Loan repayment Depreciation Operations and maintenance cost Variable costs Fuel related expenses Linked to performance norms such plant availability, load factor, station heat rates, etc 17 Nov 2010Prayas EGI Workshop - Pune 20108

9. Basis for cost components Tariff regulations Normative debt equity ratio of 70:30 Fixed return on equity e.g. 16% for distribution and 14% for generation and transmission Depreciation schedule for various equipments/assets In-principle clearance mechanism for capital expenditure Normative interest schedules Performance norms and standards 17 Nov 2010Prayas EGI Workshop - Pune 20109

10. Tariff structure 17 Nov 2010Prayas EGI Workshop - Pune 201010

11. Industry tariffs: fixed and variable charges 17 Nov 2010Prayas EGI Workshop - Pune 201011

12. Other forms of tariff Time of day tariff Fuel adjustment cost 17 Nov 2010Prayas EGI Workshop - Pune 201012

13. Tariff determination Art and science Specific objectives to be achieved Cost recovery Company efficiency Investment attractions Social considerations: affordability of small and marginalized groups Increased consumer confidence and increased acceptance of tariff order 17 Nov 2010Prayas EGI Workshop - Pune 201013

14. Questions and comments! 17 Nov 2010Prayas EGI Workshop - Pune 201014