ORDER
1. This petition has been filed for approval of transmission charges for (i) ICT-I along with associated bays at Meerut sub-station (Asset-I), (ii) 800 kV Tehri-Meerut Ckt-I along with associated bays (Asset-II), (iii) 800 kV Tehri-Meeut Ckt-II and 400 kV S/C Meerut-Muzaffarnagar transmission line along with associated bays (Asset-III), and (iv) ICT at Muzaffarnagar along with one No. 400 kV and one No. 220 kV bay (Asset-IV) under Tehri Transmission System (the transmission system) from the date of commercial operation to 31.3.2009 , based on the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004 (hereinafter referred to as “the 2004 regulations”) after accounting for additional capitalization during 2005-06 and 2006-07. The petitioner has also prayed for reimbursement of expenditure from the beneficiaries incurred towards publishing of notices in newspapers and the petition filing fee.
2. The provisional transmission charges for the transmission assets covered in the present petition were approved by the Commission in its order dated 15.2.2007 in Petition No.150/2006. The dates of commercial operation of the transmission assets are stated to be as under:
S. No.
Name of the assets
Date of commercial operation
1.
Asset-I
1.8.2005
2.
Asset-II
1.4.2006
3.
Asset-III
1.6.2006
4.
Asset-IV
1.2.2007
3. The original investment approval for the transmission system was accorded by the Central Government in Ministry of Power vide letter dated 15.3.1994 at an estimated cost of Rs. 42100 lakh, which included IDC of Rs. 5000 lakh. Subsequently, revised cost estimate for the transmission system was approved by the Ministry vide its letter dated 20.8.2002 at an estimated cost of Rs. 70229 lakh which included IDC of Rs. 13601 lakh. The cost estimate for the transmission system was again revised by the Ministry vide letter dated 9.1.2006 to Rs. 91384 lakh, which includes IDC of Rs. 26916 lakh.
4. The details of the apportioned approved cost, the estimated completion cost, etc. of the transmission assets are as under:
(Rs. in lakh)
Name of the assets
Apportioned approved cost
Capital expenditure as on the date of
commercial operation
Capital Expenditure up to 31.3.2007
Balance Expenditure
Total estimated completion cost
Asset-I
3038.24
2223.60
2391.27
430.40
2821.67
Asset-II
37208.28
35127.95
35168.65
427.91
35596.56
Asset-Ill
41473.41
38913.10
39574.48
762.87
40337.35
Asst-IV
1085.19
1682.19
1682.19
750.00
2432.19
5. The petitioner has claimed the transmission charges as under:
(Rs. in lakh)
Asset-I
Asset-II
Asset-III
Asset-IV
2005-06
(Pro rata)
2006-07
2007-08
2008-09
2006-07
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
Depreciation
44.01
68.91
70.54
70.54
904.66
905.28
905.28
840.22
1017.04
1017.04
10.09
60.56
60.56
Interest
on Loan
72.80
110.83
107.16
101.13
1651.53
1445.53
1246.86
1595.04
1701.95
1469.69
17.04
98.94
93.57
Return
on Equity
61.90
96.37
98.27
98.27
1431.37
1432.22
1432.22
1366.32
1653.47
1653.47
11.76
70.59
70.59
Advance
against Depreciation
0.00
0.00
0.00
0.00
1297.88
1300.90
1172.28
1447.73
1477.74
1229.35
2.66
0.00
0.00
Interest
on Working Capital
6.71
10.51
10.84
11.03
131.29
130.12
126.88
129.16
149.76
144.20
1.28
7.42
7.50
O&M
Expenses
78.00
121.68
126.52
131.60
106.47
110.56
115.14
146.78
182.97
190.49
10.14
63.26
65.80
Total
263.42
408.30
413.32
412.57
5523.20
5324.60
4998.66
5525.26
6182.94
5704.25
52.97
300.77
298.01
6. The details submitted by the petitioner in support of its claim for interest on working capital are given hereunder:
(Rs. in lakh)
Asset-I
Asset-II
Asset-III
Asset-IV
2005-06
(Pro rata)
2006-07
2007-08
2008-09
2006-07
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
Maintenance Spares
22.62
24.37
26.28
27.86
351.48
372.78
395.14
392.44
415.37
440.29
16.82
16.99
18.01
O & M expenses
9.75
10.14
10.54
10.97
8.87
9.21
9.60
14.68
15.25
15.87
5.07
5.27
5.48
Receivables
65.86
68.05
68.89
68.76
920.53
887.43
833.11
1105.05
1030.49
950.71
52.97
50.13
49.67
Total
98.23
102.55
105.71
107.58
1280.89
1269.42
1237.85
1280.89
1461.11
1406.87
74.86
72.39
73.16
Rate of Interest
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
Interest
6.71
10.51
10.84
11.03
131.29
130.12
126.88
131.29
149.76
144.20
7.67
7.42
7.50
7. The reply to the petition has been filed by U.P. Power Corporation Limited (UPPCL). In response to the public notices published by the petitioner in accordance with the procedure specified by the Commission, no comments have been received from the general public.
CAPITAL COST
8. As per Clause (1) of Regulation 52 of the 2004 regulations, subject to prudence check, the actual expenditure incurred on completion of the project shall form the basis for determination of final tariff. The final tariff shall be determined based on the admitted capital expenditure actually incurred up to the date of commercial operation of the transmission system and shall include capitalised initial spares subject to a ceiling norm as 1.5% of original project cost. The regulation is applicable in case of the transmission system declared under commercial operation on or after 1.4.2004.
9. The petitioner has claimed additional capitalization for the year 2005-06 for Asset-I and for the year 2006-07 for Asset-I, Asset-II and Asset-III. The capital expenditure on the date of commercial operation and additional capitalization claimed for tariff purposes are given hereunder:
(Rs. in lakh)
Name of the assets
Capital Expenditure on the date of the commercial
operation
Additional capital expenditure during 2005-06
Additional capital expenditure during 2006-07
Total capital expenditure
Asset-I
2223.60
77.18
90.49
2391.27
Asset-II
35127.95
–
40.70
35168.65
Asset-III
38913.10
–
661.38
39574.48
Additional capitalization
10. Clause (1) of Regulation 53 of the 2004 regulations provides-
(1) The following capital expenditure within the original scope of work actually incurred after the date of commercial operation and up to the cut off date may be admitted by the Commission, subject to prudence check:
(i) Deferred liabilities;
(ii) Works deferred for execution;
(iii) Procurement of initial capital spares in the original scope of works subject to the ceiling norm specified in regulation 52;
(iv) Liabilities to meet award of arbitration or compliance of the order or decree of a court; and
(v) On account of change in law:
Provided that original scope of work along with estimates of expenditure shall be submitted along with the application for provisional tariff:
Provided further that a list of the deferred liabilities and works deferred for execution shall be submitted along with the application for final tariff after the date of commercial operation of the transmission system.
11. The details submitted by the petitioner in support of its claim for additional capital expenditure are given hereunder:
Year
Nature of expenditure
2005-06
Asset-I
Land = Rs. 4.96 lakh
Building and civil works = Rs. 4.0 lakh
Sub-station = Rs. 68.22 lakh
Total = Rs. 77.18 lakh
2006-07
Asset-I
Sub-station = Rs. 90.49 lakh
Asset-II
Transmission line = Rs. 22.77 lakh
Sub-station = Rs. 17.93 lakh
Total = Rs. 40.70 lakh
Asset-III
Transmission line = Rs. 607.86 lakh
Sub-station = Rs. 53.52 lakh
Total = Rs. 661.38 lakh
12. The additional capital expenditure claimed is within the original scope of work and is found to be in order as it was against the committed liability. Accordingly, capitalization of the additional expenditure claimed by the petitioner has been allowed for the transmission assets.
Time Over-run
13. As per the original implementation schedule, construction of the transmission system was linked with implementation of generation project. Since the generation project got delayed, implementation of the transmission system also got delayed. The petitioner has submitted that on account of delay in implementation of the transmission system, RCE-I and RCE-II for Tehri transmission system were prepared and approved by the Central Government. It has been explained that commissioning of the transmission assets has generally kept pace with the commissioning of the generating units of the generation projects.
14. The commissioning of Asset-I is 5 months ahead of schedule and Asset II has been declared under commercial operation in accordance with specified schedule. The petitioner has explained the delay in commercial operation of Asset-III and Asset-IV as follows:
(i) Asset-III was scheduled to be commissioned by March 2006. It was declared under commercial operation on 1.6.2006. There was delay of 3 months in the commissioning. The petitioner has submitted that this may be considered to be in conformity with the commissioning of Tehri generation project which commenced from 17.7.2006. Although anticipated date of start of generation given by Tehri authorities was April, 2006 but actual commissioning happened in July 2006. Construction of Tehri generation project was stretched for a period as long as more than ten years, delay of two months can be attributed to the uncertainties prevailing in the matter of start of Tehri generation. Since the asset was commissioned prior to commissioning of generation project, the delay in the commissioning of transmission line did not have adverse impact. Therefore, the delay in commissioning of line is condoned for the purpose of tariff.
(iv) Asset-IV was scheduled to be commissioned by March 2006. The line was declared under commercial operation on 1.2.2007. There was delay of 11 months in the commissioning. The petitioner has submitted that the erection and commissioning of the asset was executed as a deposit work on cost plus basis by UPPCL. Although the works related to the bay had been completed by UPPCL in time, the delay in commissioning occured due to the delay in supply of transformer from M/s. Emco. The manufacturing facility of M/s. Emco situated in Mumbai came under heavy water logging and flooding following rains in the city of the Mumbai in July, 2005. The manufacturing facilities of M/s. Emco were badly affected and the production was delayed following this. The petitioner has submitted that manufacturing/supply schedule of transformer was further hampered owing to world-wide shortage of CRGO which forms the basic raw material for manufacturing of the transformer core. In response to the Commission’s direction, the petitioner vide affidavit dated 15.2.2008 had placed on record the copy of Vice President (Marketing), EMCO letter dated 31.1.2007 addressed to UPPCL and IEEMA circular regarding shortages in the supply of CRGO in the market. Since floods, heavy rains and shortage of material world wide are akin to force majeure conditions, we have decided to condone the delay in commissioning of Asset-IV as well.
Cost variation
15. The petitioner has submitted the reasons for cost variation for the transmission assets as under:
(i) Asset-I: The petitioner has stated that as against the apportioned approved cost of Rs. 3038.24 lakh, the estimated completion cost is Rs. 2821.67 lakh. The cost variation was stated to be on account of difference in estimated and award price.
(ii) Asset-II: The petitioner has submitted that work on major portion of 800 kV Tehri-Meerut Ckt-I was completed in August 2004 and to prevent theft of conductor and other materials of the completed portion, the partly completed line was charged for anti-theft. In August 2004, a portion of about 600 metre short of gantry was still to be completed. Gantry at switchyard end of Tehri for termination of the line which was to be erected by THDC was not ready by Aug, 2004. THDC had made the gantry ready in September 2005 and petitioner resumed the balance work. In view of considerable rock cutting encountered to maintain safe ground clearance the balance work of the line was completed in March 2006 and consequently the line was test-charged and capitalized. The expenditure incurred on IDC from 20.8.2004 to 24.10.2005 amounting to Rs. 2220.34 lakh due to suspended period of work on account of non-readiness of gantry and other related activities at Tehri end has been charged to revenue as per provisions of AS-16 and accordingly included in the capital cost of the system. As against the apportioned approved cost of Rs. 37208.28 lakh the estimated completion cost is stated to be Rs. 35596.56 lakh. The main reason for cost variation was due to difference in estimated and award price.
(iii) Asset-III: The petitioner has submitted that as against the apportioned approved cost of Rs. 41473.41 lakh, the estimated completion cost is Rs. 40337.35 lakh. The actual award price was less as compared to the approved cost. The petitioner has further submitted that a payment of Rs. 74,19,72,621.00/- was made to the Forest Department for 800 kV Tehri Meerut Ckt – I & II (combined) transmission line.
(iv) Asset-IV: The petitioner has submitted that as against the apportioned approved cost of Rs. 1085.48 lakh the estimated completion cost is stated to be Rs. 2432.19 lakh. The variation between approved and actual cost was due to difference in estimated and MoU cost with UPPCL.
16. In respect of Asset-I, the petitioner has explained that an expenditure incurred on IDC from 20.8.2004 to 24.10.2005 amounting to Rs. 2220.34 lakh due to suspended period of work on account of non-readiness of gantry and other related activities at Tehri end has been charged to revenue as per provisions of AS-16 and accordingly included in the capital cost of the transmission system for the purpose of tariff. The petitioner has done the same as per the accounting procedure and therefore, IDC of Rs. 2220.34 is being included in the capital cost for the purpose of computation of final tariff. In case of Asset-IV, the capital expenditure of Rs. 1682.19 lakh as on 31.3.2007 exceeds the apportioned approved cost of Rs. 1085.48 lakh by 596.71 lakh. However, the actual cost of Rs. 78816.59 lakh as on 31.3.2007 presently being considered for the purpose of approval of tariff of the all assets is less than the approved cost of Rs. 91383.84 lakh. Therefore, increase in cost for Asset-IV is being allowed.
TOTAL CAPITAL EXPENDITURE
17. Based on the above, gross block as given below has been considered for the purpose of tariff for the transmission assets, after allowing additional capitalization on woks as claimed by the petitioner, which is within the limits of apportioned approved cost:
(Rs. in lakh)
Name of the assets
Capital Expenditure on the date of the commercial
operation
Additional capital expenditure up to 31.3.2006
Additional capital expenditure up to 31.3.2007
Total capital expenditure
Asset-I
2223.60
77.18
90.49
2391.27
Asset-II
35127.95
–
40.70
35168.65
Asset-III
38913.10
–
661.38
39574.48
Asst-IV
1682.19
–
0.00
1682.19
DEBT- EQUITY RATIO
18. Clause (1) of Regulation 54 of the 2004 regulations inter alia provides that,-
(1) In case of the existing projects, debt-equity ratio Considered by the Commission for fixation of tariff for the period ending 31.3.2004 shall be considered for determination of tariff with effect from 01.04.2004:
Provided that in cases where the tariff for the period ending 31.3.2004 has not been determined by the Commission, debt-equity ratio shall be as may be decided by the Commission:
Provided further that in case of the existing projects where additional capitalisation has been completed on or after 1.4.2004 and admitted by the Commission under Regulation 53, equity in the additional capitalisation to be considered shall be:
(a) 30% of the additional capital expenditure admitted by the Commission, or
(b) equity approved by the competent authority in the financial package, for additional capitalisation, or
(c) actual equity employed,
whichever is the least:
Provided further that in case of additional expenditure admitted under the second proviso, the Commission may consider equity of more than 30% if the transmission licensee is able to satisfy the Commission that deployment of such equity of more than 30% was in the interest of general public.
19. The Note 1 below Regulations 53 lays down that any expenditure on account of committed liabilities with the original scope of work is to be serviced in the normative debt-equity ratio specified in Regulation 54.
20. The petitioner has considered debt-equity ratio of 70.70:29.30, 70.91:29.09, 70.16:29.84 and 70.03:29.97.72 for Asset-I, Asset-II, Asset-III and Asset-IV respectively, as actually deployed on the date of commercial operation. The petitioner has further considered the amount of additional capitalization in the debt-equity ratio of 70.01:29.99 for the year 2005-06 for Asset-I and 70:30 for the transmission Asset-I, Asset-II and Asset-III. In our calculations, actual debt-equity ratio as on the date of commercial operation has been considered and for the additional capital expenditure approved in the ratio of 70:30 in accordance with the 2004 regulations. Accordingly, for the purpose of tariff, equity considered for the transmission assets is as under:
(Rs. in lakh)
Capital cost as on date of commercial operation
Equity on the date of commercial operation
Additional capital expenditure during 2005-06
Capital cost as on 1.4.2006
Additional capital expenditure during 2006-07
Capital cost as on 1.4.2007
Addition of equity during 2005-06
Equity considered as on 1.4.2006
Addition of equity during 2006-07
Equity considered as on 1.4.2007
Asset- I
223.60
651.60
77.18
728.78
90.49
2391.27
23.15
674.75
27.15
701.90
Asset-II
35127.95
10217.95
0.00
35127.95
40.70
35168.65
0.00
10217.95
12.21
10230.16
Asset-III
38913.10
11612.10
0.00
661.38
39574.48
0.00
198.41
11810.51
Asst-IV
1682.19
504.19
0.00
1682.19
0.00
0.00
504.19
RETURN ON EQUITY
21. As per Clause (iii) of Regulation 56 of the 2004 regulations, return on equity shall be computed on the equity base determined in accordance with regulation 54 @ 14% per annum. Equity invested in foreign currency is to be allowed a return in the same currency and the payment on this account is made in Indian Rupees based on the exchange rate prevailing on the due date of billing.
22. Equity has been considered as given in the table below 23 above. However, tariff has been allowed on average equity. Accordingly, the petitioner shall be entitled to return on equity as under:
(Rs. in lakh)
Name of the asset
Equity as on the date of commercial operation
Addition due to additional capitalization for the period
2005-06
Average equity for 2005-06
Addition due to additional capitalization for the period
2006-07
Average equity 2006-07
Return on equity
2005-06
(Pro rata)
2006-07
(Pro rata)
2007-08
2008-09
Asset- I
651.60
23.15
663.18
27.15
688.33
61.90
96.37
98.27
98.27
Asset- II
10217.95
–
–
12.21
10224.06
–
1431.37
1432.22
1432.22
Asset-III
11612.10
–
–
198.41
11711.31
–
1366.32
1653.47
1653.47
Asset-IV
504.19
–
–
0.00
504.19
–
11.76
70.59
70.59
INTEREST ON LOAN
23. Clause (i) of regulation 56 of the 2004 regulations inter alia provides that,-
(a) Interest on loan capital shall be computed loan wise on the loans arrived at in the manner indicated in regulation 54.
(b) The loan outstanding as on 1.4.2004 shall be worked out as the gross loan in accordance with Regulation 54 minus cumulative repayment as admitted by the Commission or any other authority having power to do so, up to 31.3.2004. The repayment for the period 2004-09 shall be worked out on a normative basis.
(c) The transmission licensee shall make every effort to re-finance the loan as long as it results in net benefit to the beneficiaries. The costs associated with such re-financing shall be borne by the beneficiaries.
(d) The changes to the loan terms and conditions shall be reflected from the date of such re-financing and benefit passed on to the beneficiaries.
(e) In case of dispute, any of the parties may approach the Commission with proper application. However, the beneficiaries shall not withhold any payment ordered by the Commission to the transmission licensee during pendency of any dispute relating to re-financing of loan;
(f) In case any moratorium period is availed of by the transmission licensee, depreciation provided for in the tariff during the years of moratorium shall be treated as repayment during those years and interest on loan capital shall be calculated accordingly.
(g) The transmission licensee shall not make any profit on account of refinancing of loan and interest on loan;
(h) The transmission licensee may, at its discretion, swap loans having floating rate of interest with loans having fixed rate of interest, or vice versa, at its own cost and gains or losses as a result of such swapping shall accrue to the transmission licensee:
Provided that the beneficiaries shall be liable to pay interest for the loans initially contracted, whether on floating or fixed rate of interest.
24. The petitioner has claimed interest on loan in the following manner:
(i) Gross loans opening has been considered from 2005-06 for Asset-I and from 2006-07 for Asst-II, Asset-III and Asset-IV;
(ii) On the basis of actual rate of interest on actual average loan, the weighted average rate of interest on loan is worked out for various years;
(iii) SBI-II loan has been replaced by Bond XIII Option-II in case of Asset-I, Asset-II and Asset-III and IOB short terms bridge loan has been replaced by Bond XVII in case of Asset-I, Canara Bank short term bridge loan has been replaced by Bond XIX in Asset-III;
(iv) Bond XVII has been considered for additional capital expenditure for the year 2005-06 for Asset-I;
(v) To the total gross loan of 2005-06, notional loan corresponding to additional capital expenditure for 2005-06 has been added. This resulting amount has been considered as notional loan and the weighted average rate of interest on loan for respective years as per above has been has been multiplied to arrive at interest on loan, considering (deprecation + AAD) as repayment.
25. In our calculation, the interest on loan has been worked out as detailed below:
(i) Gross amount of loan, repayment of instalments and rate of interest submitted by the petitioner have been used to work out weighted average rate of interest on actual loan.
(ii) Notional loan arising out of additional capitalization from date of commercial operation to 31.3.2007 has been added in loan amount as on date of commercial operation to arrive at total notional loan. This adjusted gross loan has been considered as normative loan for tariff calculations
(iii) Tariff has been worked out considering normative loan and normative repayments. Once the normative loan has been arrived at, it has been considered for all purposes in the tariff. Normative repayment has been worked out by the following formula:
Actual repayment of actual loan during the year
———————————————– X Opening balance of normative
Opening balance of actual loan during the year loan during the year
(iv) Moratorium in repayment of loan has been considered with reference to normative loan and if the normative repayment of loan during the year is less than the depreciation during the year, it has been considered as moratorium and depreciation during the year has been deemed as normative repayment of loan during the year.
(v) Weighted average rate of interest on actual loan worked out as per (i) above has been applied on the average loan during the year to arrive at the interest on loan.
(vi) For Asset-I short term bridge loan from IOB has been replaced by Bond XVII. For calculating the interest for the year 2005-06, weighted average rate of interest based on number of days has been considered.
(vii) Similarly, for Asset-III short term bridge loan from Canara Bank has been replaced by Bond XIX. Therefore, for calculating the interest for the year 2006-07, weighted average rate of interest based on number of days has been considered.
(viii) Some of the loan carry floating rate of interest and existing rate of interest as per the petition have been considered in the calculations, subject to mutual settlement between the parties in case of any change/resetting of the interest rate during the tariff period.
26. Based on the above, the year-wise details of interest worked out are given hereunder:
(Rs. in lakh)
Asset-I
Asset-II
Asset-III
Asset-IV
2005-06
(Pro rata)
2006-07
2007-08
2008-09
2006-07
2007-08
2008-09
2006-07
2007-08
2008-09
2006-07
2007-08
2008-09
Opening Gross Loan
1572.00
1626.03
1689.37
1689.37
24910.00
24938.49
24938.49
27301.00
27763.97
27763.97
1178.00
1178.00
1178.00
Cumulative Repayment
104.27
148.28
217.19
287.74
5437.48
7640.28
9846.72
6271.13
8559.27
11054.16
25.50
38.25
98.81
Net Loan-Opening
1467.73
1477.75
1472.18
1401.63
19472.52
17298.21
15091.77
21029.87
19204.69
16709.81
1152.50
1139.75
1079.19
Additions due to Additional Capitalisation
54.03
63.34
28.49
462.97
0.00
Repayment during the year
44.01
68.91
70.54
70.54
2202.80
2206.44
2077.83
2288.14
2494.88
2246.49
12.75
60.56
60.56
Net Loan-Closing
1477.75
1472.18
1401.63
1331.09
17298.21
15091.77
13013.94
19204.69
16709.81
14463.32
1139.75
1079.19
1018.63
Average Loan
1472.74
1474.96
1436.90
1366.36
18385.36
16194.99
14052.86
20117.28
17957.25
15586.56
1146.13
1109.47
1048.91
Weighted Average Rate of Interest on Loan
7.35%
7.51%
7.46%
7.40%
8.98%
8.93%
8.87%
9.51%
9.48%
9.43%
8.92%
8.92%
8.92%
Interest
72.19
(Pro rata)
110.82
107.15
101.13
1651.52
1445.50
1246.80
1595.13
(Pro rata)
1701.96
1469.69
17.04
(Pro rata)
98.94
93.57
27. The detailed calculations in support of the weighted average rate of interest are contained in Annexure-I, Annexure-II, Annexure-III and Annexure IV attached.
DEPRECIATION
28. Sub-clause (a) of Clause (ii) of Regulation 56 of the 2004 regulations provides for computation of depreciation in the following manner, namely:
(i) The value base for the purpose of depreciation shall be the historical cost of the asset.
(ii) Depreciation shall be calculated annually based on straight line method over the useful life of the asset and at the rates prescribed in Appendix II to these regulations. The residual value of the asset shall be considered as 10% and depreciation shall be allowed up to maximum of 90% of the historical capital cost of the asset. Land is not a depreciable asset and its cost shall be excluded from the capital cost while computing 90% of the historical cost of the asset. The historical capital cost of the asset shall include additional capitalisation on account of Foreign Exchange Rate Variation up to 31.3.2004 already allowed by the Central Government/Commission.
(iii) On repayment of entire loan, the remaining depreciable value shall be spread over the balance useful life of the asset.
(iv) Depreciation shall be chargeable from the first year of operation. In case of operation of the asset for part of the year, depreciation shall be charged on pro rata basis.
29. Depreciation allowed has been worked out as below on average gross block:
(Rs. in lakh)
Asset-I
Asset-II
Asset-III
Asset-IV
Details of Depreciation
2005-06
2006-07
2007-08
2008-09
2006-07
2007-08
2008-09
2006-07
2007-08
2008-09
2006-07
2007-08
2008-09
Gross block as on the date of commercial operation
2223.60
2300.78
2391.27
2391.27
35127.95
35168.65
35168.65
38913.10
39574.48
39574.48
1682.19
1682.19
1682.19
Additional Capitalisation
77.18
90.49
40.70
661.38
0.00
Gross Block at the end of the year
2300.78
2391.27
2391.27
2391.27
35168.65
35168.65
35168.65
39574.48
39574.48
39574.48
1682.19
1682.19
1682.19
Rate of Depreciation
2.9185%
2.9375%
2.9500%
2.9500%
2.5738%
2.5741%
2.5741%
2.5692%
2.5699%
2.5699%
3.6000%
3.6000%
3.6000%
Depreciable Value (90%)
1726.56
1799.78
1840.50
1840.50
31321.83
31340.14
31340.14
34696.13
34993.75
34993.75
1513.97
1513.97
1513.97
Remaining Depreciable Value
1726.56
1755.77
1727.57
1657.03
31321.83
29137.34
26930.90
34696.13
32705.60
30210.72
1513.97
1501.22
1440.66
Depreciation
44.01
(Pro rate)
68.91
70.54
70.54
904.66
905.28
905.28
840.22
(Pro rata)
1017.04
1017.04
10.09
(Pro rata)
60.56
60.56
ADVANCE AGAINST DEPRECIATION
30. As per Sub-clause (b) of Clause (ii) of Regulation 56 of the 2004 regulations, in addition to allowable depreciation, the transmission licensee is entitled to Advance Against Depreciation, computed in the manner given hereunder:
AAD = Loan repayment amount as per regulation 56 (i) subject to a ceiling of 1/10th of loan amount as per regulation 54 minus depreciation as per schedule
31. It is provided that Advance Against Depreciation shall be permitted only if the cumulative repayment up to a particular year exceeds the cumulative depreciation up to that year. It is further provided that Advance Against Depreciation in a year shall be restricted to the extent of difference between cumulative repayment and cumulative depreciation up to that year.
32. The petitioner has claimed advance Against depreciation in the following manner:
(i) 1/10th of gross loan considered for tariff calculations
(ii) Cumulative loan as well as repayment of notional loan considered during the year.
(ii) Depreciation as claimed in the petition.
33. In our calculation Advance Against Depreciation has been worked as under:
(i) 1/10th of gross loan has been worked out from the Gross Notional Loan as per para 26 above.
(ii) Repayment of notional loan during the year has been considered as per para 26 above.
(iii) Depreciation as worked out as per para 29 above has bee taken into account.
34. The petitioner has not claimed Advance Against Depreciation for Asset-I and accordingly, the details of Advance Against Depreciation for Asset-II, Asset-III and Asset-IV allowed is given hereunder:
(Rs. in lakh)
Asset-II
Asset-III
Asset-IV
Details of Depreciation
2006-07
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
1/10th of Gross Loan(s)
2491.00
2493.85
2493.85
2730.10
2776.40
2776.40
117.80
117.80
117.80
Repayment of the Loan
2202.80
2206.44
2077.83
2288.14
2494.88
2246.49
12.75
60.56
60.56
Minimum of the above
2202.80
2206.44
2077.83
2288.14
2494.88
2246.49
12.75
60.56
60.56
Depreciation during the year
904.66
905.28
905.28
840.22
1017.04
1017.04
10.09
60.56
60.56
(A) Difference
1298.14
1301.16
1172.55
1447.92
1477.84
1229.45
2.66
0.00
0.00
Cumulative Repayment of the Loan
7640.28
9846.72
11924.55
8559.27
11054.16
13300.65
38.25
98.81
159.37
Cumulative Depreciation/ Advance against Depreciation
904.66
3108.08
5314.52
840.22
3305.18
5800.07
10.09
73.31
133.87
(B) Difference
6735.62
6738.64
6610.03
7719.05
7748.97
7500.58
28.16
25.50
25.50
Advance against Depreciation Minimum of (A) and (B)
1298.14
1301.16
1172.55
1447.92
1477.84
1229.45
2.66
0.00
0.00
OPERATION & MAINTENANCE EXPENSES
35. In accordance with Clause (iv) of Regulation 56 the 2004 regulations, the following norms are prescribed for O & M expenses
Year
2004-05
2005-06
2006-07
2007-08
2008-09
O&M expenses (Rs. in lakh per ckt-km)
0.227
0.236
0.246
0.255
0.266
O&M expenses (Rs. in lakh per bay)
28.12
29.25
30.42
31.63
32.90
36. The petitioner has claimed O & M expenses for 4 bays for Asset-I, 185.489 ckt.km line length and 2 bays for Asset-II, 221.39 ckt km line length and 4 bays for Asset-III and 2 bays for Asset-IV which have been allowed. Accordingly, the petitioner’s entitlement to O & M expenses has been worked out as given hereunder:
(Rs. in lakh)
Asset-I
Asset-II
Asset-III
Asset-IV
2005-06
2006-07
(Pro ratal
2007-08
2008-09
2006-07
(Pro ratal
2007-08
2008-09
2006-07
(Pro ratal
2007-08
2008-09
2006-07
(Pro ratal
2007-08
2008-09
O&M expenses for zero ckt km line length
0.00
0.00
0.00
0.00
O&M expenses for 185.489 ckt km line length
45.63
47.30
49.34
O&M expenses for 221.39 ckt km line length
45.38
56.45
58.89
O&M expenses for zero ckt km line length
0.00
0.00
0.00
O&M expenses for 4 bays
78
121.68
126.52
131.60
O&M expenses for 2 bays
60.84
63.26
65.80
O&M expenses for 4 bays
101.40
126.52
131.60
O&M expenses for 2 bays
10.14
63.26
65.80
Total
78
121.68
126.52
131.60
Total
106.47
110.56
115.14
Total
146.78
182.97
190.49
Total
10.14
63.26
65.80
37. The petitioner has submitted that the wage revision of its employees is due with effect from 1.1.2007. Therefore, according to the petitioner, O & M expenses should be subject to revision on account of revision of employee cost from that date. In the alternative, it has been prayed that the increase in employee cost due to wage revision be allowed as per actuals for extra cost to be incurred consequent to wage revision. We are not expressing any view, as this issue does not arise for consideration at this stage. The petitioner may approach for a relief in this regard at an appropriate stage in accordance with law.
INTEREST ON WORKING CAPITAL
38. The components of the working capital and the interest thereon are discussed hereunder:
(i) Maintenance spares
Regulation 56(v) (1) (b) of the 2004 regulations provides for maintenance spares @ 1% of the historical cost escalated @ 6% per annum from the date of commercial operation. In the present case, element wise capital expenditure on the date of commercial operation which has been considered as the historical cost for the purpose of the present petition and maintenance spares have been worked out accordingly by escalating 1% of the historical cost @ 6% per annum. In this manner, the value of maintenance spares works out to Rs. 22.24 lakh, Rs. 351.28 lakh, Rs. 389.13 and Rs. 16.82 lakh for Asset-I, Asset-II, Asset-III and Asst-IV respectively as on date of commercial operation. The necessary details are given hereunder:
Transmission assets
Date of Commercial Operation
Capital Expenditure (Rs. in lakh) on the date of
commercial operation
Escalated spares Cost as on 1.4.2004 (Rs. in lakh)
Asset-I
1.8.2005
2223.60
22.24
Asset-II
1.4.2006
35127.95
351.28
Asset-III
1.6.2006
38913.10
389.13
Asset-IV
1.2.2007
1682.19
16.82
(ii) O & M expenses
Regulation 56(v)(1)(a) of the 2004 regulations provides for operation and maintenance expenses for one month as a component of working capital. The petitioner has claimed O&M expenses for 1 month of O&M expenses of the respective year as claimed in the petition. This has been considered in the working capital.
(iii) Receivables
As per Regulation 56(v)(1)(c) of the 2004 regulations, receivables will be equivalent to two months average billing calculated on target availability level. The petitioner has claimed the receivables on the basis 2 months’ transmission charges claimed in the petition. In the tariff being allowed, receivables have been worked out on the basis 2 months’ transmission charges.
(iv) Rate of interest on working capital
As per Regulation 56(v) (2) of the 2004 regulations, rate of interest on working capital shall be on normative basis and shall be equal to the short-term Prime Lending Rate of State Bank of India as on 1.4.2004 or on 1st April of the year in which the project or part thereof (as the case may be) is declared under commercial operation, whichever is later. The interest on working capital is payable on normative basis notwithstanding that the transmission licensee has not taken working capital loan from any outside agency. The petitioner has claimed interest on working capital @ 10.25% based on SBI PLR as on 1.4.2006, which is in accordance with the 2004 regulations and has been allowed.
39. The necessary computations in support of interest on working capital are appended herein below:
(Rs. in lakh)
Asset-I
Asset-II
Asset-III
Asset-IV
2005-06
2006-07
(Pro rata)
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
Maintenance Spares
22.24
23.13
24.51
25.98
351.28
372.36
394.70
389.13
408.59
433.10
16.82
16.99
18.01
O & M expenses
9.75
10.14
10.54
10.97
8.87
9.21
9.60
14.68
15.25
15.87
5.07
5.27
5.48
Receivables
65.69
68.03
68.86
68.73
920.57
887.47
833.14
1105.05
1030.39
950.60
52.97
50.13
49.67
Total
97.68
101.29
103.91
105.68
1,280.73
1,269.04
1,237.43
1,508.86
1,454.23
1,399.58
74.86
72.39
73.16
Rate of Interest
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
10.25%
Interest
6.67
10.38
10.65
10.83
131.27
130.08
126.84
128.88
149.06
143.46
1.28
7.42
7.50
TRANSMISSION CHARGES
40. The transmission charges being allowed for the two transmission assets are summarised below:
(Rs. in lakh)
Asset-I
Asset-II
Asset-III
Asset-IV
2005-06
(Pro rata)
2006-07
2007-08
2008-09
2006-07
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
2006-07
(Pro rata)
2007-08
2008-09
Depreciation
44.01
68.91
70.54
70.54
904.66
905.28
905.28
840.22
1017.04
1017.04
10.09
60.56
60.56
Interest on Loan
72.19
110.82
107.15
101.13
1651.52
1445.50
1246.80
1595.13
1701.96
1469.69
17.04
98.94
93.57
Return on Equity
61.90
96.37
98.27
98.27
1431.37
1432.22
1432.22
1366.32
1653.47
1653.47
11.76
70.59
70.59
Advance against Depreciation
0.00
0.00
0.00
0.00
1298.14
1301.16
1172.55
1447.92
1477.84
1229.45
2.66
0.00
0.00
Interest on Working Capital
6.67
10.38
10.65
10.83
131.27
130.08
126.84
128.88
149.06
143.46
1.28
7.42
7.50
O&M Expenses
78.00
121.68
126.52
131.60
106.47
110.56
115.14
146.78
182.97
190.49
10.14
63.26
65.80
Total
262.78
408.16
413.13
412.37
5523.44
5324.79
4998.82
5525.25
6182.34
5703.60
52.97
300.77
298.01
41. In addition to the transmission charges, the petitioner shall be entitled to other charges like income-tax, incentive, surcharge and other cess and taxes in accordance with the 2004 regulations.
42. The petitioner has sought approval for the reimbursement of expenditure of Rs. 2,48, 695/- incurred on publication of notices in the newspapers. The petitioner shall claim reimbursement of the said expenditure directly from the respondents in one installment in the ratio applicable for sharing of transmission charges. The petitioner has also sought reimbursement of filing fee of Rs. 5 lakh paid. A final view on reimbursement of filing fee is yet to be taken by the Commission for which views of the stakeholder have been called for. The view taken on consideration of the comments received shall apply in the present case as regards reimbursement of filing fee.
43. This order disposes of Petition No. 146/2007.