ORDER
1. In these petitions, the petitioner, Power Grid Corporation of India Limited, had sought approval of tariff in respect of its various transmission assets in Eastern Region for the period from 1.4.2004 to 31.3.2009, based on the Central Electricity Regulatory Commission (Terms & Conditions of Tariff) Regulations 2004 (hereinafter referred to as “the 2004 regulations”). On completion of pleadings and after hearing the parties, final tariff in respect of these assets was awarded by different orders. The details of capital cost, equity considered at the time of award of tariff and the summary of the tariff awarded in each case are given in the Annexures I and II attached. While awarding tariff, the Commission adopted capital cost, loan, equity, etc considered for determination of tariff for the period 1.4.2001 to 31.3.2004. Also, FERV for the period up to 31.3.2004 was capitalized and apportioned between debt and equity in the same ratio as considered for the period 1.4.2001 to 31.3.2004.
2. Tamil Nadu Electricity Board (TNEB) filed Appeal No. 135/2005 in the Appellate Tribunal for Electricity against order dated 30.6.2006 of the Commission in Petition No 40/2002, vide which while fixing transmission tariff in respect of 400 kV D/C Kaiga-Sirsi transmission line along with associated bays for the period 1.4.2001 to 31.3.2004, the methodology similar to that adopted in respect of the various transmission assets was followed as regards apportionment of FERV into debt and equity. TNEB had, inter alia, questioned the methodology of bifurcation of FERV into debt and equity for the purpose of tariff determination. This appeal, as also some other linked appeals were disposed of by the Appellate Tribunal through a common judgment dated 4.10.2006. The Tribunal vide its judgment dated 4.10.2006 held as under:
16. According to Explanation 1 to Clause 4.4 (c), the premium raised by the Transmission Utility while issuing share capital and investment of internal resources created out of free reserve of the existing utility, if any, for the funding of the project, shall also be reckoned as paid up capital for the purpose of computing the return on equity subject to fulfillment of certain conditions. Explanation also makes no provision for increasing the equity beyond 50% of the book value of the transmission system. Once the fixed cost has been agreed to be financed in a certain ratio of debt and equity, the equity can be affected by FERV only if the equity is in foreign exchange. The provision of FERV as a pass through has been kept to ensure that any liability or gain, if any, arising on account of any variation in foreign exchange rates (whether debt or equity) is passed on to the beneficiary. In case there is no FERV liability or gain, as the case may be, there will not be any FERV adjustment. In the instant case the additional liability arising on account of FERV shall have an impact only on the debt liability and not equity capital. In this view of the matter, we hold that FERV adjustment is to be made in respect of debt liability and not in respect of the equity. Accordingly, we hold that the CERC is only to make adjustment in respect of debt liability and not in respect of the equity.
17. In view of the aforesaid discussion, the appeal is partly allowed to the extent indicated above. The Central Electricity Regulatory Commission shall re-calculate the effect of FERV on the debt liability.
3. In terms of judgment dated 4.10.2006 of the Appellate Tribunal in Appeal No 135 of 2005 and other related appeals, addition of notional equity on account of FERV is not to be considered for computation of return on equity. As a consequence, the entire amount of FERV forms part of loan.
4. The above decision was reiterated by the Appellate Tribunal in its judgment dated 22.12.2006 in Appeal No 161 0f 2006 (M.P. State Electricity Board v. Power grid Corporation of India and Ors.) which related to transmission tariff for Vindhyachal Stage – I Additional Transmission System in Western Region for the period 1.4.2001 to 31.3.2004.
5. Further, North Eastern Electric Power Corporation Ltd. (NEEPCO) filed Appeal No. 159 of 2005 before the Appellate Tribunal for Electricity which was disposed of vide judgment dated 31.10.2007. The Appellate Tribunal vide the above judgment held, inter alia, that interest on loan capital should be determined based on normative debt repayment formula. A similar methodology has been decided by the Appellate Tribunal in some of the appeals filed by NTPC Ltd.
6. The above rulings of the Appellate Tribunal, on the question of apportionment of FERV and computation of interest on loan have been considered to be judgments in rem and thereby have been applied in all cases of similar nature to re-calculate the transmission charges.
7. Accordingly, the transmission charges for the period 1.4.2001 to 31.3.2004 for the transmission assets covered in the present order have been revised by order dated 5.1.2008. The revised transmission charges allowed for the said period are also incorporated in the Annexures I and II attached, separately for each asset.
8. In the light of the forgoing discussion, the transmission charges for the transmission assets forming subject-matter of the present order for the period 2004-2009 are also being revised, and the revised transmission charges are summarized in the Annexures. It is to be noted that there is no change in O & M component of the tariff because this was allowed on normative basis for per km line length and per bay. O & M charges already approved, therefore, hold good. Other components of tariff (except depreciation), including Advance Against Depreciation, wherever applicable, already allowed have been recalculated.
9. The petitioner shall adjust the balance amount recoverable/refundable, as the case may be, against the future bills within six months, from the date of this order.
10. It is brought out that but for revision of debt and equity in line with the Appellate Tribunal’s judgments dated 4.10.2006 and 31.10.2007, and computation of interest on loan in accordance with the methodology decided by the Appellate Tribunal in the order dated 31.10.2007 ibid. generally the methodology considered for re-computation of the transmission charges is the same as originally considered.
11. The revision of tariff allowed is subject to decision of the Hon`ble Supreme Court in the appeals filed by the petitioner against the Appellate Tribunal’s judgment dated 4.10.2006.