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 Northern Region for the period from 1.4.2001 to 31.3.2004, based on the Central Electricity Regulatory Commission (Terms & Conditions of Tariff) Regulations 2001 (hereinafter referred to as “the 2001 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 to X attached.
2. Tamil Nadu Electricity Board (TNEB) filed Appeal No. 135/2005 in the Appellate Tribunal for Electricity (the Tribunal) 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 Transmission System was followed. 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 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 recalculate the effect of FERV on the debt liability.
3. The above decision was reiterated by the 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.
4. The ruling of the Tribunal, involving interpretation of the notification dated 16.12.1997 of Ministry of Power, is considered to be judgment in rem and thereby has universal application in all the cases of similar nature. Accordingly, it has been decided to apply the ratio of the judgment in all similar cases and recalculate the tariff in accordance with the judgment of the Tribunal.
5. In terms of judgment dated 4.10.2006 of the 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 shall form part of loan.
6. The 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.
7. While calculating interest on loan, refinancing of various loans with the loans carrying cheaper and fixed rate of interest has been considered from the date of refinancing. However, in the tariff orders for the tariff period 2004-09 pertaining to tariff petitions under consideration, it has been mentioned that benefits of refinancing of loans shall be passed on by the petitioner. If the same has already been passed on to the beneficiaries, the same shall be mutually adjusted and collected along with the tariff as approved by the Commission in the instant orders. The petitioner shall also intimate the Commission about final adjustment.
8. Based on the above decision, the tariff for the period 1.4.2001 to 31.3.2004 has been recalculated. The revised calculations are also incorporated in the annexures attached separately for each petition. It is to be noted that there is no change in the 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. All other components of tariff have been recalculated.
9. In the light of the forgoing, the revised transmission charges have also been summarized in the annexures.
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, in all other respects, the methodology considered for re-computation of the transmission charges is the same as originally considered . However, where any loan has been re-financed, such refinanced loan has been considered for computation of interest on loan, since the general principle is that reimbursement of interest on loan cannot be a source of income. The position has been suitably incorporated in the appropriate Annexure, where applicable.
11. The petitioner shall adjust the entire excess amount collected by it against the future bills within six months, from the date of this order.
12. We also make it clear that as the revision of tariff has arisen consequent to the directions of the Tribunal, and not any commission or omission on the part of the petitioner, it will not incur any liability towards payment of interest on the grounds of excess recovery.
13. The revision of tariff allowed is subject to decision of the Hon`ble Supreme Court in the appeals filed by the petitioner against the Tribunal’s judgment dated 4.10.2006.