1. HYDRO TARIFF Commission Tariff Notification 26/03/01 Commission Tariff Notification 26/03/01 Applicable Period 01/04/01 to 31/03/04 Applicable Period 01/04/01 to 31/03/04  Normative Capacity Index- 85 %  Auxiliary Energy Consumption (% Energy generated)  Transformation Losses- 0.5 % of Energy generated (From generation voltage to transmission voltage)  Date of Commercial operation: Not exceeding 15 days from the date synchronization  O&M Expenses – as per actual TypeRotatingExciters Static Excitation system Surface Hydro Gen. Station 0.2%0.5% Underground Gen. Station 0.4%0.7%

2. HYDRO TARIFF contd.. Tariff component  Capacity charge  Energy charge  Unscheduled Interchange (UI) charge  Incentive Capacity charge: (Annual Fixed costs – Primary Energy Charge) When Negative, this amount will be zero. AFC = IOL = Interest on Loan Capital +DEP = Depreciation/Advance +ROE = Return on Equity +O&M = Operation & Maintenance +TOI = Tax on Income +IWC = Interest on working capital

3. ENERGY CHARGES Primary Energy Charges = Primary Saleable Energy (Ex-Bus) x Primary Energy Rate Primary Saleable Energy (Ex-Bus) x Primary Energy Rate (1 - r) (1 - r) Primary Energy Rate = 90% of lowest variable charges of central sector thermal plants of concerned region 90% of lowest variable charges of central sector thermal plants of concerned region r = Free power to home state @ 12 % Secondary Energy Charges = Secondary Saleable Energy(Ex-Bus) x Secondary energy rate (1 – r) Secondary Energy Rate = Per unit cost of primary energy.

4. CAPACITY INDEX Capacity Index = Declared Capacity (MW) x 100% Maximum Available Capacity(MW) Maximum Available Capacity(MW) Annual capacity index is the average of the daily capacity indices Introduced to  To minimize water spillage  To ensure availability of peaking capacity of the hydro station when it is most required by the system

5. ‘Declared Capacity or 'DC' means the capacity in MW to be available from the generating station over the peaking hours of next day, as declared by the generator, taking into account the availability of water, optimum use of water and availability of machines and for this purpose, the peaking hours shall not be less than 3 hours within 24 hour period, in case of pondage and storage-type generating stations and in case of purely run-of–river type generating stations the capacity to be available from the generating station during the next day, as declared by the generating station, taking into account the availability of water, optimum use of water and availability of machines. DECLARED CAPACITY

6. 'Maximum Available Capacity' means the following: (a)Pondage and storage type generating stations The maximum capacity in MW, the generating station can generate with all units running, under the prevailing conditions of water levels, flows and with 100% gate openings, over the peaking hours of next day. Explanation The peaking hours for this purpose shall not be less than 3 hours within a 24 hours period. (b)Purely run-of-river type generating stations The maximum capacity in MW, the generating station can generate with all units running, under the prevailing conditions of water levels, flows and with 100% gate openings over the next day. MAXIMUM AVAILABLE CAPACITY

7. a) Run-of-River type hydro stations Since there is no regulation possible in such stations, these shall be treated as must run stations. The maximum declared capacity, duly taking into account the over load capability, must be equal to or greater than that required to make full use of the available water. There shall be no spillage, unless plant is operating at full plant capacity. b) Diurnal storage & long term Storage hydro stations These type of hydro stations are designed to operate during peak hours to meet system peak demand. The declared capacity shall be equal the maximum available capacity of the plant including overload capacity, wherever applicable. RLDCs shall ensure that generation schedules of such type of stations shall be prepared and the stations dispatched accordingly except in the event of specific system requirements/constraints. CERC Notification No. L-7/25(1)/2001-CERC dated: March, 26th,2001.

8. Incentive = (Annual Fixed Costs – Primary Energy Charge) * (CI-0.85) where CI = Capacity Index where CI = Capacity IndexNote: 1.For Incentive purpose, the Primary energy rate for the first year of tariff period shall remain constant throughout the entire tariff period 2.Incentive shall accrue upto maximum capacity index of 100 % 3.When capacity index is less than 85% generator shall get less payment towards capacity charges. 4.The total incentive payable shall be shared by the various beneficiaries as per their individual allocated capacity. INCENTIVE

9. Capacity Index achieved by various stations of NHPC during 2001-02 to 2003-04 (upto Sept 03) Station Installed Capacity CI (%) 2001-02 2002-03 2003-04 Chamera(P)54094.296.696.5 Bairasiul(P)19896.396.399.3 Tanakpur(R)94.296.199.7100 Uri(R)4809499.2100 Salal(R)69097.095.299.8

10. NEW HYDRO TARIFF Period 01/04/2004 to 31/03/2009 Period 01/04/2004 to 31/03/2009 Normative value of Capacity Index: Normative value of Capacity Index: For purely run of the river type generating stations: 85% during first year and 90% after first year For Pondage and storage type generating stations 80 % during first year and 85 % after first year Note: The relaxed Normative Value of Capacity Index is applicable only for recovery of capacity charges Auxiliary Consumption & Transformation losses- No change Auxiliary Consumption & Transformation losses- No change Date of Commercial Operation: Has been replaced by a new term Date of Commercial Operation: Has been replaced by a new term Scheduled Commercial Operation Date: for own management Scheduled Commercial Operation Date: for own management Actual Commercial Operation Date : means the date declared by the generator after demonstration of Maximum continuous rating(MCR) or Installed Capacity through a successful trial run.

11. Rate of primary energy for all hydro electric power generating stations, except for pumped storage generating stations, shall be equal to lowest variable charges of the central sector thermal power generating stations of the concerned region. Rate of primary energy for all hydro electric power generating stations, except for pumped storage generating stations, shall be equal to lowest variable charges of the central sector thermal power generating stations of the concerned region. Provided that in case the primary energy charge recoverable by applying the above primary energy rate exceeds the Annual Fixed Charge of a generating station, the primary energy rate of such generating station shall be calculated by the following formula: Provided that in case the primary energy charge recoverable by applying the above primary energy rate exceeds the Annual Fixed Charge of a generating station, the primary energy rate of such generating station shall be calculated by the following formula: Primary energy rate = Annual Fixed Charge Primary energy rate = Annual Fixed Charge Saleable Primary Energy Saleable Primary Energy Primary Energy Charge = Saleable Primary Energy x Primary Energy Rate Secondary Energy Rate shall be equal to Primary Energy Rate. Secondary Energy Charge = Saleable Secondary Energy x Secondary Energy Rate. Primary and Secondary Energy charges

12. (1)Incentive shall be payable in case of all the generating stations, including in case of new generating stations in the first year of operation, when the capacity index (CI) exceeds 90% for purely run-of-river power generating stations and 85 % for run-of- river power station with pondage or storage type power generating stations and incentive shall accure up to a max. capacity index of 100 %. (2) Incentive shall be payable to the generating company in accordance with the following formula: Incentive = 0.65 x Annual Fixed Charge x (CI A -CI N )/100 (If incentive is negative, it shall be set to zero) Where, CI A is the capacity index achieved and CI N is the normative capacity index whose values are 90% for purely run of the river hydro stations and 85% for pondage/storage type hydro generating stations. Where, CI A is the capacity index achieved and CI N is the normative capacity index whose values are 90% for purely run of the river hydro stations and 85% for pondage/storage type hydro generating stations.Incentive

13. Purely Run-Of-River Power Stations Since variation of generation in such stations may lead to spillage, these shall be treated as must run stations. The maximum available capacity, duly taking in to account the over load capability, must be equal to or greater than that required to make full use of the available water. Since variation of generation in such stations may lead to spillage, these shall be treated as must run stations. The maximum available capacity, duly taking in to account the over load capability, must be equal to or greater than that required to make full use of the available water. Run-Of-River Power Stations with poundage and storage type power stations These hydro stations are designed to operate during peak hours to meet system peak demand. Maximum available capacity of the station declared for the day shall be equal to the installed capacity including overload capability, minus auxiliry consumption and transformation losses, corrected for the reservoir level. The Regional Load Despatch Centres shall ensure that generation schedules of such type of stations are prepared and stations dispatched for optimum utilization of available hydro energy except in the event of specific system requirements/constraints. These hydro stations are designed to operate during peak hours to meet system peak demand. Maximum available capacity of the station declared for the day shall be equal to the installed capacity including overload capability, minus auxiliry consumption and transformation losses, corrected for the reservoir level. The Regional Load Despatch Centres shall ensure that generation schedules of such type of stations are prepared and stations dispatched for optimum utilization of available hydro energy except in the event of specific system requirements/constraints.

14. HYDRO TARIFF Normative O & M expenses rather than actual O & M expenses Normative O & M expenses rather than actual O & M expenses Rs. 10.5 Lakh/MW ( Base Year 2003-04) Escalation: 4 % per year Year O& M Expenses 2004-0510.92 2005-0611.36 2006-0711.81 2007-0812.28 2008-0912.77

15. TENTATIVE COST FOR NTPC THERMAL STATIONS FOR THE MONTH OF DEC 2003 Station Fixed Cost Rs. Cr/yr (1) Average Fixed Cost Rs. Cr/day (2) Average Fixed Cost P / KWh (3) Variable Base Cost P / KWh (4) Variable FPA P / KWh (5) Total Variable Base Cost P / KWh (6)=(4)+(5) Composite Cost P / KWh (7)=(3)+ (6) Singrauli364.590.99628.2767.987.8675.84 104.11 104.11 Rihand478.741.33065.8334.2944.7078.99137.41 Unchahar – I 195.910.53573.35106.036.74112.77186.12 Anta GPS* 92.920.25847.1360.5584.11144.66139.47 Auraiya GPS* 160.200.44542.1761.9292.88154.80169.73 DadriGPS(G)210.960.57637.2095.140.2495.38132.58 Dadri (T) 416.781.15876.9790.5655.57146.13229.24 Unchahar – II ---------103.286.98110.26--- DadriGPS(L)210.960.57637.20356.3471.21437.55474.75 *Rates for mixed fuel (gas+ liquid fuel, naphtha)

16. Energy Charges (paise/kwh) for Central Sector stations (Dec 2003) Sl. No. Power Station Rate (Paise / KWh) 1.Salal69.47 2.Tanakpur69.47 3.Singrauli75.84 4.Rihand78.99 5. Anta/Auraiya/Dadri GT 95.00 6.Unchahar110.00 7. Dadri (Thermal) 146.00

17. Clause 44 (xix) of draft tariff regulations dated 1.1.2004 (a) Purely run-of-river type hydro stations Since there is no regulation possible in such stations, these shall be treated as must run stations. The maximum declared capacity, duly taking into account the over load capability, must be equal to or greater than that required to make full use of the available water. There shall be no spillage, unless plant is operating at full plant capacity. (b) Pondage & Storage type hydro stations These hydro stations are designed to operate during peak hours to meet system peak demand. The declared capacity shall be equal the maximum available capacity of the plant including overload capacity, wherever applicable. RLDCs shall ensure that generation schedules of such type of stations shall be prepared and the stations dispatched accordingly except in the event of specific system requirements/constraints.

18. ORDER dated 10 th December 2003 para 2. (Petition No. 7/2003) Nathpa Jhakri HEP is run of river project, with pondage type hydro-electric project, located in the State of Himachal Pradesh, and is a joint venture between Central Government and Government of Himachal Pradesh. On commissioning of all the units, Nathpa Jhakri HEP will generate power to the extent of 6951 MUs per annum, in 90% dependabe year and 1500 MW valuable peek power, for supply to the constituents of Northern Region.

19. METHODOLOGY FOR DETERMINING THE UI CHARGES OF HYDRO STATIONS COVERED UNDER ABT (as used by NREB and circulated in 113 th Commercial Committee Meeting)  In case of ROR hydro stations (without pondage) viz Salal, Tanakpur, Uri & NJHEP, the UI charges to the stations for generation beyond Declared Capacity (DC) are allowed subject to the condition that the excess MWh generation over the day is within the tolerance (3%) specified by the CTU. If it is observed that excess MWh generation is beyond the specified tolerance on more than 3 days of the week, then UI payable to the generating station for generation beyond scheduled generation is reduced to zero on 15-minute time-block basis on all days of excess MWh generation, and credit thereof is passed on to the beneficiaries. However, in case of sudden increase / reduction in inflows, the generation schedule of the station is deemed to have been revised as stipulated under para 5.12.5.(i) of CERC’s ABT order dated 4.1.2000, and thus, no UI is payable by/to the station under such conditions. NHPC has to submit a proof from a project upstream (owned by any other utility) regarding sudden release / reduction of inflows, to NREB / NRLDC for post facto modification of generation schedule as per actual generation for such instances.  In case of pondage based hydro stations viz. Bairasiul and Chamera HEPs, the UI charges to the stations for generation beyond schedule but upto DC are allowed subject to the condition that the excess MWh generation over the day is within the tolerance (3%) specified by the CTU on each day of the week. In case of actual generation being in excess of the declared MWh generation over the day, UI payable to the generating station for generation beyond schedule is reduced to zero on 15-minute time-block basis on that day and credit thereof is passed on to the beneficiaries.