MERC Regulations 12Chapter C · Multi-Year Tariff

Section 12 · Multi-year tariff framework

- 12.1 The Commission shall determine the tariff for matters covered under clauses (i), (ii), (iv) and (v) of Regulation 3.1 above under a multi-year tariff framework with effect from April 1, 2006:Provided that the Commission may, either suo motu or upon application made to it by the applicant, exempt the determination of tariff of a Licensee or category of Licensees under the multi-year tariff framework for such period as may be contained in the Order granting such an exemption.

12.2

The multi-year tariff framework shall be based on the following elements, for calculation of aggregate revenue requirement and expected revenue from tariff and charges:

(i)

control period, at the commencement of which a forecast of the aggregate revenue requirement and expected revenue from existing tariffs and charges shall be submitted by the applicant and approved by the Commission;

(ii)

applicant's forecast of aggregate revenue requirement and expected revenue from tariffs and charges during the control period, based on reasonable assumptions relating to the expected behaviour of the underlying financial and operational variables;

(iii)

trajectory for specific variables as may be stipulated by the Commission, where the performance of the applicant is sought to be improved through incentives and disincentives;

(iv)

annual review of performance vis-a-vis the approved forecast and categorization of variations in performance into those that were caused by factors within the control of the applicant (controllable factors) and those caused by factors beyond the control of the applicant (uncontrollable factors);

(v)

mechanism for pass-through of approved gains or losses on account of uncontrollable factors;

(vi)

mechanism for sharing of approved gains or losses arising out of controllable factors;

(vii)

annual determination of tariff for each financial year within the control period, based on the approved forecast and results of the annual performance review.

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