Higher plant load factor (PLF) not only drives incentive income, but also generates efficiency earnings through lower auxiliary and oil consumption, as well as a better station heat rate (SHR). We note that as PLF declines, the operating parameters deteriorate, impacting incentives and leading to under-recovery in fuel cost. Average PLF of coal-based plants declined from ~82% in FY14 to ~79% in FY17. Notably, three plants had PLF of less than 75% in FY14, which increased to five plants in FY17(Exhibit 1). This is due to a confluence of (a) increase in overcapacity in the country and (b) addition of new plants ??? Mouda and Barh -away from coalmines, with relatively uncompetitive fuel cost. The impact of lower PLF was recently quantified in case of Mouda I & II plant. It operated at PLF of ~64% from May to October 2017, which is lower than the design norms, resulting in fuel cost under-recovery of ~INR329m (annualized, it is ~1-2% of the regulated equity of the plant), in addition to the lost opportunity of earning incentives (Exhibit 2).