This petition has been filed for revision of transmission tariff for additional capital expenditure incurred during 2006-2007 and 2007-2008 in respect of Raipur-Chandrapur (Bhadrawati) 400 kV D/C transmission line, including bay extension at Raipur and Bhadrawati sub-stations (the transmission line) in Western Region for the period from 1.4.2006 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”). The petitioner has also prayed for reimbursement of the petition filing fee and other expenditure in connection with the filing of the petition.
2. The investment approval for the transmission line was accorded by the Board of Directors of the petitioner company as per Memorandum dated 28.3.2003 at an estimated cost of Rs. 24860 lakh, including IDC of Rs. 2488 lakh, based on 4th quarter 2002 price level. Subsequently, the revised cost estimates were approved by the Board of Directors of the petitioner company as per Memorandum dated 17.1.2006 at an estimated cost of Rs. 26995 lakh, including IDC of Rs. 1519 lakh. The transmission line was declared under commercial operation on 1.6.2005
3. The transmission charges for the transmission line were approved by the Commission in its order dated 6.2.2006 in Petition No. 134/2006 for the period 1.6.2005 to 31.3.2009 based on capital cost of Rs. 24113.74 lakh as on the date of commercial operation and Rs. 24777.37 lakh as on 31.3.2006, considering additional capital expenditure of Rs. 663.63 lakh for the period 1.6.2005 to 31.3.2006 Subsequently, the transmission charges for the transmission line were revised by the Commission in its order dated 15.6.2007 in I.A No. 20/2007 in Petition No. 134/2006 as there appeared some clerical errors in calculation of tariff in the order dated 6.2.2006 The summary of the final transmission line approved by the said order dated 15.6.2007 is extracted hereunder:
(Rs. in lakh)
2005-2006 (Pro rata)
2006-2007
2007-2008
2008-2009
Depreciation
546.37
664.33
664.33
664.33
Interest on Loan
1048.80
1258.56
1212.31
1156.86
Return on Equity
715.16
872.12
872.12
872.12
Advance against Depreciation
0.00
0.00
0.00
289.63
Interest on Working Capital
67.19
82.59
83.65
89.73
O & M Expenses
233.42
291.69
302.75
315.43
Total
2610.94
3169.30
3135.18
3388.11
4. The relevant details of the completion cost etc. of the transmission line claimed by the petitioner are as under:
(Rs. in lakh)
Capital expenditure up to 1.6.2005
Additional Capitalization during 2005-2006
Capital expenditure as on 1.4.2006
Additional Capitalization during 2006-2007
Capital expenditure as on 1.4.2007
Additional Capitalization during 2007-2008
Capital expenditure as on 1.4.2008
Balance estimated expenditure
Estimated completion cost
24113.74
663.63
24777.37
472.76
25250.13
56.52
25306.65
248.06
25554.71
5. Based on the above additional capital expenditure, the petitioner has claimed the revised transmission charges for the period 2006-2007 to 2008-2009 as under:
(Rs. in lakh)
2006-2007
2007-2008
2008-2009
Depreciation
671.42
679.48
680.45
Interest on Loan
1273.56
1243.04
1188.65
Return on Equity
882.05
893.17
894.35
Advance against Depreciation
0.00
0.00
268.36
Interest on Working Capital
83.14
84.82
90.58
O & M Expenses
291.69
302.75
315.43
Total
3201.86
3203.26
3437.82
6. The details submitted by the petitioner in support of its claim for interest on working capital are given hereunder:
(Rs. in lakh)
2006-2007
2007-2008
2008-2009
Maintenance Spares
253.19
268.39
284.49
O & M expenses
24.31
25.23
26.29
Receivables
533.64
533.88
572.97
Total
811.14
827.50
883.75
Rate of Interest
10.25%
10.25%
10.25%
Interest
83.14
84.82
90.58
7. The reply to the petition has been filed by M.P Power Trading Company Limited.
CAPITAL COST
8. The details submitted by the petitioner in support of its claim for additional capital expenditure are given hereunder:
Sl. No.
Year
Amount (Rs. in lakh)
Nature and details of expenditure
1.
2006-2007
472.76
Balance payments/Retention payments
2.
2007-2008
56.52
Balance payments/Retention payments
9. It is found that the additional capital expenditure claimed is in respect of retention/final payments. These are part of the deferred liabilities relating to works/services which have materialised, and are within the original scope of work. Therefore, the additional expenditure sought to be capitalised is allowed under clauses (1) and (2) of Regulation 53 of the 2004 regulations.
TOTAL CAPITAL COST
10. Based on the above, capital cost for the purpose of tariff for each of the transmission asset, works out as under, which is within the approved cost estimate:
(Rs. in lakh)
Admitted capital cost as on 1.6.2005
Additional Capitalization during 2005-2006
Capital expenditure as on 1.4.2006
Additional Capitalization during 2006-2007
Capital expenditure as on 1.4.2007
Additional Capitalization during 2007-2008
Capital expenditure as on 1.4.2008
24113.74
663.63
24777.37
472.76
25250.13
56.52
25306.65
DEBT- EQUITY RATIO
11. The petitioner has considered the amount of additional capitalization in the debt-equity ratio of 70:30. This has been found to be in order. Accordingly, for the purpose of tariff, equity considered for the transmission assets is as under:
(Rs. in lakh)
Equity as on 1.6.2005
Notional additional equity up to 31.3.2006
Equity as on 31.3.2006 during 2005-2006
Notional additional equity during 2006-2007
Average equity during 2006-2007
Equity as on 1.4.2006
Notional additional equity during 2007-2008
Average equity for 2007-2008
Equity as on 1.4.2008
6030.37
199.09
6229.46
141.43
6300.37
6371.29
16.96
6379.77
6388.24
RETURN ON EQUITY
12. 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.
13. Equity as given the table under para 11 above has been considered. However, tariff for the years 2006-2007 and 2007-2008 has been allowed on average equity. Accordingly, revised return on equity allowed each year is given as under:
(Rs. in lakh)
Return on equity
2006-2007
2007-2008
2008-2009
882.05
893.17
894.35
INTEREST ON LOAN
14. Clause (1) 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 re-financing 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.”
15. In our calculation the interest on loan has been worked out as detailed below:
(a) Gross amount of loan, repayment of instalments and rate of interest and weighted average rate of interest on actual loan as per earlier order dated 15.6.2007 ibid have been considered. There is addition of actual loan for the years 2006-2007 and 2007-2008 by way of Bond XXII.
(b) Notional loan arising out of additional capital expenditure for the years 2006-2007 and 2007-2008 has been added in loan amount as on 1.4.2006 to arrive at total notional loan. This adjusted gross loan is considered as normative loan for tariff calculations.
(c) Tariff has been worked out considering normative loan and normative repayments. Normative repayments are worked out by the following formula:
(d) Moratorium in repayment of loan is considered with reference to normative loan and if the normative repayment of loan during the year is less than the depreciation including Advance Against Depreciation during the year, then depreciation including Advance Against Depreciation during the year is deemed as normative repayment of loan during the year.
(e) Weighted average rate of interest on actual loan worked out as per (i) above is applied on the notional average loan during the year to arrive at the interest on loan.
16. Based on above, revised year-wise interest on loan has been worked out as under:
(Rs. in lakh)
Details
2006-2007
2007-2008
2008-2009
Gross Normative Loan
18547.91
18878.84
18918.41
Cumulative Repayment up to Previous Year/date of commercial operation
546.37
1217.80
1897.28
Net Loan-Opening
18001.54
17661.05
17021.13
Addition due to Additional Capitalisation
330.93
39.56
—
Repayment during the year
671.42
679.48
948.80
Net Loan-Closing
17661.05
17021.13
16072.33
Average Loan
17831.29
17341.09
16546.73
Weighted Average Rate of Interest on Loan
7.14%
7.168%
7.18%
Interest
1273.56
1243.04
1188.65
17. The detailed calculations in support of the weighted revised average rate of interest are contained in Annexure attached.
DEPRECIATION
18. Sub-clause (a) of clause (ii) of Regulation 56 of the 2004 regulations provides for computation of depreciation in the following manner, namely:
(a) The value base for the purpose of depreciation shall be the historical cost of the asset.
(b) 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.
(c) On repayment of entire loan, the remaining depreciable value shall be spread over the balance useful life of the asset.
(d) 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.
19. Depreciation allowed has been worked out as below:
(Rs. in lakh)
2006-2007
2007-2008
2008-2009
Gross Block (Opening)
24777.37
25250.13
25306.65
Addition due to additional capitalisation
472.76
56.52
—
Gross block (Closing)
25250.13
25306.68
25306.65
Rate of Depreciation
2.6842%
2.6880%
2.6888%
Depreciable Value
22512.38
22750.55
22775.99
Balance Useful life of the asset
—
—
—
Remaining Depreciable Value
21966.00
21532.76
20878.71
Depreciation
671.42
679.48
680.45
Cumulative Depreciation/Advance against Depreciation
1217.80
1897.28
2846.08
ADVANCE AGAINST DEPRECIATION
20. 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
21. 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.
22. The petitioner has claimed Advance Against Depreciation of Rs. 268.35 lakh for the year 2008-2009. As the date of the commercial operation was prior to 6.1.2006 and based on the expenditure on the date of the commercial operation Advance Against Depreciation for the year 2005-2006 has already been allowed.
23. Accordingly, in our calculation the Advance Against Depreciation has been worked as detailed below:
(a) 1/10th of gross loan is worked out from the Gross Notional Loan as per para 16 above.
(b) Repayment of notional loan during the year is considered as per para 16 above.
(c) Depreciation is worked out as per para 19 above.
(d) In the calculation of Advance Against Depreciation, cumulative depreciation/Advance Against Depreciation up to the preceding year along with the depreciation of the current year have been considered for working out the Advance Against Depreciation. Therefore the figure of cumulative depreciation/Advance Against Depreciation is different from the figure appearing under the similar head elsewhere in tariff calculations where Advance Against Depreciation for the current year is also included for 90% restriction of the depreciation.
24. Details of revised Advance Against Depreciation allowed are given hereunder:
(Rs. in lakh)
2006-2007
2007-2008
2008-2009
1/10th of Gross Loan(s)
1854.79
1887.88
1891.84
Repayment of the Loan
671.42
679.48
948.80
Minimum of the above
671.42
679.48
948.80
Depreciation during the year
671.42
679.48
680.45
(A) Difference
0.00
0.00
268.35
Cumulative Repayment of the Loan
1217.80
1897.28
2846.08
Cumulative Depreciation/Advance against Depreciation
1217.80
1897.28
2577.73
(B) Difference
0.00
0.00
268.35
Advance against Depreciation Minimum of (A) and (B)
0.00
0.00
268.35
OPERATION & MAINTENANCE EXPENSES
25. In accordance with clause (iv) of Regulation 56 the 2004 regulations, the following norms are prescribed for O & M expenses:
year
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
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
26. O&M expenses as taken for the tariff calculations as per order dated 6.2.2006 in Petition No. 134/2006 have been considered, since line length and number of bays remain unchanged.
INTEREST ON WORKING CAPITAL
27. 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. The petitioner has claimed maintenance spares after accounting for additional capital expenditure. For the purpose of computation of maintenance spares, the historical cost is being taken as the cost on the date of commercial operation. Maintenance spares on additional capital expenditure are not being considered for the present. Therefore, the petitioner's claim in this regard is not being allowed. Accordingly, maintenance spares have been worked out on the historical cost and providing escalation from the date of commercial operation.
(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. O&M expenses as considered in the order dated 6.2.2006 in Petition No. 134/2006 have been considered.
(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. Accordingly, 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 1.4.2005, which is in accordance with the 2004 regulations and has been allowed.
28. The necessary computations in support of interest revised on working capital, as revised, are appended herein below:
(Rs. in lakh)
2006-2007
2007-2008
2008-2009
Maintenance Spares
253.19
268.39
284.49
O & M expenses
24.31
25.23
26.29
Receivables
533.64
533.88
572.97
Total
811.15
827.49
883.75
Rate of interest
10.25%
10.25%
10.25%
Interest
83.14
84.82
90.58
TRANSMISSION CHARGES
29. The revised transmission charges being allowed for the transmission assets for the period 2006-2007 to 2008-2009 are summarised below:
(Rs. in lakh)
2006-2007
2007-2008
2008-2009
Depreciation
671.42
679.48
680.45
Interest on Loan
1273.56
1243.04
1188.65
Return on Equity
882.05
893.17
894.35
Advance against Depreciation
0.00
0.00
268.35
Interest on Working Capital
83.14
84.82
90.58
O & M Expenses
291.69
302.75
315.43
Total
3201.86
3203.26
3437.83
30. The petitioner shall recover from the beneficiaries the additional transmission charges in three monthly instalments. The petitioner has also sought reimbursement of filing fee paid. The Commission by its separate general order dated 11.9.2008 in Petition No. 129/2005 has decided that the petitioner shall not be allowed reimbursement of the petition filing fee.
31. 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. These transmission charges shall be included in the regional transmission tariff for Western Region and shall be shared by the regional beneficiaries in accordance with the 2004 regulations.
32. This order disposes of Petition No. 50/2009.
Annexure
CALCULATION OF WEIGHTED AVERAGE RATE OF INTEREST ON LOAN
(Rs. in lakh)
Details of Loan
2005-2006
2006-2007
2007-2008
2008-2009
1
Bond XV
Gross Loan opening
6300.00
6300.00
6300.00
6300.00
Cumulative Repayment up to DOCO/previous year
0.00
0.00
0.00
525.00
Net Loan-Opening
6300.00
6300.00
6300.00
5775.00
Additions during the year
0.00
0.00
0.00
0.00
Repayment during the year
0.00
0.00
525.00
525.00
Net Loan-Closing
6300.00
6300.00
5775.00
5250.00
Average Loan
6300.00
6300.00
6037.50
5512.50
Rate of Interest
6.68%
6.68%
6.68%
6.68%
Interest
420.84
420.84
403.31
368.24
Repayment Schedule
12 Annual instalments from 23.2.2008
2
Bond XVI
Gross Loan opening
5176.00
5176.00
5176.00
5176.00
Cumulative Repayment up to DOCO/previous year
0.00
0.00
0.00
0.00
Net Loan-Opening
5176.00
5176.00
5176.00
5176.00
Additions during the year
0.00
0.00
0.00
0.00
Repayment during the year
0.00
0.00
0.00
517.60
Net Loan-Closing
5176.00
5176.00
5176.00
4658.40
Average Loan
5176.00
5176.00
5176.00
4917.20
Rate of Interest
7.10%
7.10%
7.10%
7.10%
Interest
367.50
367.50
367.50
349.12
Repayment Schedule
10 Annual instalments from 18.2.2009
3
Bond XVII (Replacement of IOB Bridge Finance)
Gross Loan opening
6000.00
6000.00
6000.00
6000.00
Cumulative Repayment up to DOCO/previous year
0.00
0.00
0.00
0.00
Net Loan-Opening
6000.00
6000.00
6000.00
6000.00
Additions during the year
0.00
0.00
0.00
0.00
Repayment during the year
0.00
0.00
0.00
0.00
Net Loan-Closing
6000.00
6000.00
6000.00
6000.00
Average Loan
6000.00
6000.00
6000.00
6000.00
Rate of Interest
6.99%
7.39%
7.39%
7.39%
Interest
419.67
443.40
443.40
443.40
Repayment Schedule
10 Annual instalments from 22.2.2009
4
Bond XVIII
Gross Loan opening
607.37
607.37
607.37
607.37
Cumulative Repayment up to DOCO/previous year
0.00
0.00
0.00
0.00
Net Loan-Opening
607.37
607.37
607.37
607.37
Additions during the year
0.00
0.00
0.00
0.00
Repayment during the year
0.00
0.00
0.00
0.00
Net Loan-Closing
607.37
607.37
607.37
607.37
Average Loan
607.37
607.37
607.37
607.37
Rate of Interest
8.15%
8.15%
8.15%
8.15%
Interest
49.50
49.50
49.50
49.50
Repayment Schedule
12 Annual instalments from 9.3.2010
5
Bond XVIII(ADD CAP FOR 2005-2006)
Gross Loan opening
0.00
663.63
663.63
663.63
Cumulative Repayment up to DOCO/previous year
0.00
0.00
0.00
0.00
Net Loan-Opening
0.00
663.63
663.63
663.63
Additions during the year
663.63
0.00
0.00
0.00
Repayment during the year
0.00
0.00
0.00
0.00
Net Loan-Closing
663.63
663.63
663.63
663.63
Average Loan
331.82
663.63
663.63
663.63
Rate of Interest
8.15%
8.15%
8.15%
8.15%
Interest
27.04
54.09
54.09
54.09
Repayment Schedule
12 Annual instalments from 9.3.2010
6
Bond XXII(ADD CAP FOR 2006-2007)
Gross Loan opening
0.00
0.00
472.76
472.76
Cumulative Repayment upto DOCO/previous year
0.00
0.00
0.00
0.00
Net Loan-Opening
0.00
0.00
472.76
472.76
Additions during the year
0.00
472.76
0.00
0.00
Repayment during the year
0.00
0.00
0.00
0.00
Net Loan-Closing
0.00
472.76
472.76
472.76
Average Loan
0.00
236.38
472.76
472.76
Rate of Interest
8.68%
8.68%
8.68%
8.68%
Interest
0.00
20.52
41.04
41.04
Repayment Schedule
12 Annual instalments from 7-12-2010
7
Bond XXII(ADD CAP FOR 2007-2008)
Gross Loan opening
0.00
0.00
0.00
9.01
Cumulative Repayment upto DOCO/previous year
0.00
0.00
0.00
0.00
Net Loan-Opening
0.00
0.00
0.00
9.01
Additions during the year
0.00
0.00
9.01
0.00
Repayment during the year
0.00
0.00
0.00
0.00
Net Loan-Closing
0.00
0.00
9.01
9.01
Average Loan
0.00
0.00
4.51
9.01
Rate of Interest
8.68%
8.68%
8.68%
8.68%
Interest
0.00
0.00
0.39
0.78
Repayment Schedule
12 Annual instalments from 7-12-2010
Gross Loan opening
18083.37
18747.00
19219.76
19228.77
Cumulative Repayment up to DOCO/previous year
0.00
0.00
0.00
525.00
Net Loan-Opening
18083.37
18747.00
19219.76
18703.77
Additions during the year
663.63
472.76
9.01
0.00
Repayment during the year
0.00
0.00
525.00
1042.60
Net Loan-Closing
18747.00
19219.76
18703.77
17661.17
Average Loan
18415.19
18983.38
18961.77
18182.47
Rate of Interest
6.976%
7.142%
7.168%
7.184%
Interest
1284.55
1355.84
1359.21
1306.16