This petition has been filed for approval of transmission tariff for (1) Combined assets of LILO of Ramagundam - Khammam T/L at Warangal S/S, Neyveli - Pugalur-Madurai 400 kV D/C T/L, Udumalpet-Arasur 400 kV D/C line along with 400/220 kV Sub-station at Arasur and associated bays at Udumalpet and LILO of Neyveli - Sriperumbudur 400 kV S/C line at Puducherry S/S with associated bays, (2) Combined assets of LILO of Ramagundam-Khammam T/L at Warangal S/S, Neyveli - Pugalur-Madurai 400 kV D/C T/L, Udumalpet - Arasur 400 kV D/C line along with 400/220 kV Sub-station at Arasur and associated bays at Udumalpet, LILO of Neyveli-Sriperumbudur 400 kV S/C line at Puducherry S/S with associated bays, and 2 nos. of 50 MVAR line reactors at Pugalur 400/220 kV S/S along with associated bays at Pugalur, (3) Combined assets of 2×315 MVA Auto Transformer & 400/220 kV Bays Equipments at Pugalur S/S and 2 nos. 315 MVA ICT's along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV S/S and (4) 2 nos. 400/230 kV 315 MVA ICT's along with associated bays and downstream equipment at 400/230 kV Puducherry sub-station under “Transmission System associated with Neyveli Lignite Corporation-II (NLC-II) Expansion Project” (hereinafter “the transmission assets”) in Southern Region for the period from 1.4.2009 to 31.3.2014, based on the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2009, (hereinafter “the 2009 Tariff Regulations”).

2. The investment approval and expenditure sanction for the transmission project was accorded by the Ministry of Power vide letter dated 11.1.2005 at an estimated cost of Rs. 69183 lakh including IDC of Rs. 4135 lakh (based on 2nd quarter, 2004 price level). Subsequently, approval for the Revised Cost Estimate for the project was accorded by the Board of Directors of the petitioner vide Memorandum No. C/CP/RCE NLC-II, dated 22.3.2010 for a total cost of Rs. 96239 lakh including IDC of Rs. 10732 lakh (based on 3rd quarter 2009 price level). As per the investment approval, the project was scheduled to be completed in 35 months from the date of investment approval, i.e by 1.1.2008

3. The scope of work covered under “Transmission System associated with Neyveli Lignite Corporation-II (NLC-II) Expansion” project in Southern Region as per Memorandum dated 22.3.2010 is as follows:—

Transmission Lines:

(a) 400 kV D/C line between Neyveli TS-II switchyard to Pugalur

(b) Pugalur - Madurai 400 kV D/C line

(c) Udamalpet - Arasur 400 kV D/C line

(d) LILO of Neyveli - Sriperumbudur 400 kV S/C line at Puducherry

(e) LILO of Ramagundum-Khammam 400 kV S/C line at Warangal

Sub-Stations:

(a) Pugalur 400/220 kV Sub-station (New)

(b) Warangal 400/220 kV Sub-station (New)

(c) Arasur 400/220 kV Sub-station (New)

(d) Puducherry 400/220 kV Sub-station (New)

(e) Madurai 400/220 kV Sub-station (Extension)

(f) Udumalpet 400/220 kV Sub-station (Extension).

4. Details of assets under “Transmission System associated with Neyveli Lignite Corporation-II (NLC-II) Expansion Project” are given hereunder:—

Sl. No. Name of the assets Actual DOCO Reference 1 LILO of Ramagundum-Khammam T/L at Warangal S/S 1.8.2009 2 2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Warangal sub-station 1.8.2009 Covered under Petition No. 136/2010 3 Neyveli-Pugalur-Madurai 400 kV D/C T/L 1.9.2009 4 2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Pugalur sub-station 1.9.2009 5 Udumalpet-Arasur 400 kV D/C Line along with 400/220 kV sub-station at Arasur and associated bays at Udumalpet and LILO of Neyveli - Sriperumbudur 400 kV S/C line at Puducherry sub-station with associated bays. 1.8.2010 6 315 MVA ICT-I along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV sub-station 1.8.2010 Covered under the instant petition 7 315 MVA ICT-II along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV S/S 1.9.2010 8 2 Nos. 315 MVA ICT's along with associated bays and 220 kV downstream equipment at Puducherry 400/220 kV sub-station 1.10.2010 9 2 Nos. of 50 MVAR line Reactors at Pugalur 400/220 kV sub-station along with associated bays at Pugalur sub-station 1.10.2010

5. The following are the details of apportioned approved cost, cost as on date of commercial operation and estimated additional capital expenditure projected to be incurred for the assets as claimed by the petitioner in the original petition:—

(Rs. in lakh)

Name of the Asset Apportioned approved FR Cost Apportioned approved Cost (RCE) DOCO Cost Proposed Exp. from Notional DOCO to 31.03.2011 Proposed Exp. from 01.04.2011 to 31.03.2012 Total Estimated Completion Cost Combined Assets of Asset-1, Asset-3 & Asset-5: LILO of Ramagundum-Khammam TL at Warangal S/S, Neyveli-Pagalur-Madurai TL, Udumalpet-Arasur 400 kV D/C Line alongwith Substation at Arasur and associated bays at Udumalpet, LILO of Neyveli-Sriperumbudur 400 kV S/C line at Puducherry S/S with asosociated bays (DOCO:01.08.2010) 56621.30 75600.00 65667.92 4762.79 325.10 70755.81 Combined Assets of Asset-1, Asset-3, Asset-5 & Asset-9: LILO of Ramagundum-Khammam TL at Warangal S/S, Neyveli-Pagalur-Madurai TL, Udumalpet-Arasur 400 kV D/C Line alongwith Substation at Arasur and associated bays at Udumalpet, LILO of Neyveli-Sriperumbudur 400 kV S/C line at Puducherry S/S with asosociated bays and 2 nos of 50 MVAR line reactors at Pugulur S/S alongwith associated bays at Pugulur (DOCO:01.10.2010) 57251.30 77279.00 66915.61 4901.89 345.10 72162.60 Combined Assets of Asset-4, Asset-6 & Asset-7:2×315 MVA Auto Transformer & 400/220 kV Bays Equipments at Pugalur S/S (DOCO:01.09.2009) and 2 nos 315 MVA ICT's alongwith associated bays and 220 kV downstream equipment at Arasur 400/220 kV S/S (DOCO: 01.08.2010) 5387.04 9096.00 8132.46 624.30 29.15 8785.91 Asset-8: 2 nos. of 400/230 kV 315 MVA ICT's alongwith associated bays and downstream equipment at 400/230 kV Puducherry Substation (DOCO:01.10.2010). 2836.00 4929.00 4802.87 65.04 10.00 4877.91

6. During hearing on 7.6.2011, the Commission directed the petitioner to submit separate CA certificate for both the assets from their respective dates of commercial operation along with segregation of additional capital expenditure, if any, from 1.8.2010 to 31.8.2010 and 1.9.2010 to 31.3.2011, for 315 MVA ICT-I at Arasur sub-station. The petitioner, vide affidavit dated 20.8.2011, has submitted separate auditor certificates for ICT-I and ICT-II at Arasur sub-station from their respective dates of commercial operation along with segregation of additional capital expenditure to 31.3.2011 for the 315 MVA ICT-I at Arasur sub-station. Accordingly, tariff has been worked out separately, taking into account the expenditure incurred on the basis of the auditor's certificates submitted along with affidavit dated 20.8.2011 Details of the capital costs, additional capital expenditure and estimated completion cost as per various Auditors certificates submitted by the Petitioner in respect of the above mentioned assets are as under:—

(Rs. in lakh)

Sl. No. Name of the assets Cost as on DOCO Additional Capitalisation Reference DOCO to 31.3.2010 2010–2011 2011–2012 2012–2013 Total Estimated Completion Cost 1 LILO of Ramagundum-Khammam T/L at Warangal S/S 3900.21 315.09 223.99 70.30 - 4509.59 Covered under Petition No. 136/2010 2 2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Warangal sub-station 4453.91 112.85 93.40 25.50 - 4685.66 3 Neyveli-Pugalur-Madurai 400 kV D/C T/L 44292.80 1957.95 401.17 104.80 - 46756.72 4 2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Pugalur sub-station 4246.81 241.85 83.33 14.15 - 4586.14 5 Udumalpet-Arasur 400 kV D/C Line along with 400/220 kV sub-station at Arasur and associated bays at Udumalpet and LILO of Neyveli-Sriperumbudur 400 kV S/C line at Puducherry sub-station with associated bays 17474.91 - 1864.59 150.00 - 19489.50 Covered under present petition (CA certificate dated 18.8.2010) 6 315 MVA ICT-I along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV s/s 1894.63 - - 156.11 - 2050.74 Covered under present petition (CA certificate dated 5.8.2011) 7 315 MVA ICT-II along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV S/S 1925.92 - - 141.11 15.00 2082.03 Covered under present petition (CA certificate dated 5.8.2011) 8 2 Nos. 315 MVA ICT's along with associated bays and 220 kV downstream equipment at Puducherry 400/220 kV sub-station (1.10.2010)* 4802.87 - 65.04 10.00 - 4877.91 Covered under present petition (CA certificate dated 18.8.2010) 9 2 Nos. of 50 MVAR line Reactors at Pugalur 400/220 kV sub-station along with associated bays at Pugalur s/s 1247.69 - 139.10 20.00 - 1406.79 Covered under present petition (CA certificate dated 18.8.2010)

*As per forms submitted by the petitioner

7. Transmission tariff in respect of the first four assets at S. Nos. 1 to 4 has been determined vide order dated 11.1.2012 in Petition No. 136/2010, and revised vide order dated 10.2.2014 In the present petition also, the petitioner has prayed for determination of transmission tariff for the subject cited assets which include the above stated assets from Petition No. 136/2010 except Asset at Sl. No. 2 (2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Warangal S/S). In the light of the above, the details of the assets for which tariff is being determined in this order, together with the period for which the tariff is being determined, are as under:—

Assets Name of the assets DOCO/Notional DOCO Tariff Applicable Period Assets-1, 3 & 5 (hereafter “Combined Asset-A”) Asset-1: LILO of Ramagundum-Khammam Transmission Line at Warangal S/S Asset-3: Neyveli-Pugalur-Madurai 400 kV D/C Transmission Line & Asset-5: Udumalpet-Arasur 400 kV D/C Line along with 400/220 kV sub-station at Arasur and associated bays at Udumalpet and LILO of Neyveli-Sriperumbudur 400 kV S/C line at Puducherry sub-station with associated bays. 1.8.2010 1.8.2010 to 30.9.2010 Assets-1, 3, 5 & 9 (hereafter “Combined Asset-B”) Asset-1: LILO of Ramagundum-Khammam Transmission Line at Warangal S/S Asset-3: Neyveli-Pugalur-Madurai 400 kV D/C Transmission Line & Asset-5: Udumalpet-Arasur 400 kV D/C Line along with 400/220 kV sub-station at Arasur and associated bays at Udumalpet and LILO of Neyveli - Sriperumbudur 400 kV S/C line at Puducherry sub-station with associated bays. Asset-9: 2 Nos. of 50 MVAR line Reactors at Pugalur 400/220 kV sub-station along with associated bays at Pugalur sub-station 1.10.2010 1.10.2010 to 31.3.2014 Assets-4 & 6 (hereafter “Combined Asset-C”) Asset-4: 2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Pugalur sub-station Asset-6: 315 MVA ICT-I along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV sub-station 1.8.2010 1.8.2010 to 31.8.2010 Assets-4, 6 & 7 (hereafter “Combined Asset-D”) Asset-4: 2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Pugalur sub-station Asset-6: 315 MVA ICT-I along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV sub-station Asset-7: 315 MVA ICT-II along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV S/S 1.9.2010 1.9.2010 to 31.3.2014 Asset-8 (hereafter “Single Asset”) Asset-8: 2 Nos. 315 MVA ICT's along with associated bays and 220 kV downstream equipment at Puducherry 400/220 kV sub-station 1.10.2010 1.10.2010 to 31.3.2014

8. Details of the transmission charges claimed by the petitioner are as under:—

(Rs. in lakh)

Combined Asset A 2010–2011 Depreciation 2332.77 Interest on Loan 1477.14 Return on equity 2379.02 Interest on Working Capital 157.19 O & M Expenses 700.15 Total 7046.27

Combined Asset B Combined Asset C 2010–2011 2011–2012 2012–2013 2013–2014 2010–2011 Depreciation 1784.36 3699.95 3708.45 3708.45 297.55 Interest on Loan 1142.02 2228.31 2016.50 1798.46 230.67 Return on equity 1818.89 3775.37 3784.42 3784.42 295.28 Interest on Working Capital 122.61 252.67 252.15 251.35 38.40 O & M Expenses 580.51 1227.48 1297.65 1371.69 457.97 Total 5448.39 11183.78 11059.17 10914.37 1319.87

Combined Asset D 2010–2011 (Pro-rata) 2011–2012 2012–2013 2013–2014 Depreciation 297.55 463.60 464.37 464.37 Interest on Loan 230.67 335.95 304.45 272.11 Return on equity 295.28 460.05 460.82 460.82 Interest on Working Capital 38.40 59.98 61.37 62.83 O & M Expenses 457.97 726.28 767.76 811.68 Total 1319.87 2045.86 2058.77 2071.81

Single Asset 2010–2011 (Pro-rata) 2011–2012 2012–2013 2013–2014 Depreciation 127.72 257.44 257.70 257.70 Interest on Loan 131.07 248.49 227.26 205.62 Return on equity 126.79 255.55 255.81 255.81 Interest on Working Capital 15.93 32.62 33.20 33.82 O & M Expenses 171.74 363.14 383.88 405.84 Total 573.25 1157.24 1157.85 1158.79

9. The details submitted by the petitioner in support of its claim for interest on working capital are given hereunder:

(Rs. in lakh)

Combined Asset A 2010–2011 Maintenance Spares 157.53 O & M expenses 87.52 Receivables 1761.57 Total 2006.62 Rate of Interest 11.75% Interest 157.19

Combined Asset B Combined Asset C 2010–2011 2011–2012 2012–2013 2013–2014 2010–2011 Maintenance Spares 174.15 184.12 194.65 205.75 103.04 O & M expenses 96.75 102.29 108.14 114.31 57.25 Receivables 1816.13 1863.96 1843.20 1819.06 329.97 Total 2087.03 2150.37 2145.99 2139.12 490.26 Rate of Interest 11.75% 11.75% 11.75% 11.75% 11.75% Interest 157.19 252.67 252.15 251.35 57.61

Combined Asset D 2010–2011 (Pro-rata) 2011–2012 2012–2013 2013–2014 Maintenance Spares 103.04 108.94 115.16 121.75 O & M expenses 57.25 60.52 63.98 67.64 Receivables 329.97 340.98 343.13 345.30 Total 490.26 510.44 522.27 534.69 Rate of Interest 11.75% 11.75% 11.75% 11.75% Interest 157.19 59.98 61.37 62.83

Single Asset 2010–2011 (Pro-rata) 2011–2012 2012–2013 2013–2014 Maintenance Spares 51.52 54.47 57.58 60.88 O & M expenses 28.62 30.26 31.99 33.82 Receivables 191.08 192.87 192.98 193.13 Total 271.22 277.60 282.55 287.83 Rate of Interest 11.75% 11.75% 11.75% 11.75% Interest 15.93 32.62 33.20 33.82

10. No comments or suggestions have been received from the general public in response to the notices published by the petitioner under Section 64 of the Electricity Act. None of the respondents has filed reply to the petition.

11. We have heard the representatives of the parties present at the hearing and perused the material on record. We proceed to dispose of the petition.

CAPITAL COST

Regulation 7 of the 2009 Tariff Regulations provides as under:—

“(1) Capital cost for a project shall include:—

(a) The expenditure incurred or projected to be incurred, including interest during construction and financing charges, any gain or loss on account of foreign exchange risk variation during construction on the loan-(i) being equal to 70% of the funds deployed, in the event of the actual equity in excess of 30% of the funds deployed, by treating the excess equity as normative loan, or (ii) being equal to the actual amount of loan in the event of the actual equity less than 30% of the fund deployed, - up to the date of commercial operation of the project, as admitted by the Commission, after prudence check.

(b) capitalised initial spares subject to the ceiling rates specified in regulation 8; and

(c) additional capital expenditure determined under regulation 9:

Provided that the assets forming part of the project, but not in use shall be taken out of the capital cost.

(2) The capital cost admitted by the Commission after prudence check shall form the basis for determination of tariff:

Provided that in case of the thermal generating station and the transmission system, prudence check of capital cost may be carried out based on the benchmark norms to be specified by the Commission from time to time:

Provided further that in cases where benchmark norms have not been specified, prudence check may include scrutiny of the reasonableness of the capital expenditure, financing plan, interest during construction, use of efficient technology, cost over-run and time over-run, and such other matters as may be considered appropriate by the Commission for determination of tariff.”

12. Details of apportioned approved cost, cost as on date of commercial operation and the petition wherein tariff is being determined are as under:—

Asset Capital Cost as on DOCO claimed by PGCIL Details of petitions Asset-1 (1.8.2009) 3900.21 136/2010 Asset-3 (1.9.2009) 44292.80 136/2010 Assets-5 (1.8.2010) 17474.91 Current petition Combined Asset-A (Asset-1, 3 & 5) (Notional DOCO:1.8.2010) 65667.92 Clubbed Asset-9 (1.10.2010) 1247.69 Current petition Combined Asset-B (Asset-1, 3, 5 & 9) (Notional DOCO:1.10.2010) 66915.61 Clubbed Asset-4 (1.9.2009) 4246.81 136/2010 Asset-6 (1.8.2010) 1894.63 Current petition Combined Asset-C (Asset-4 & 6) (Notional DOCO:1.8.2010) 6141.44 Clubbed Asset-7 (1.9.2010) 1925.92 Current Petition Combined Asset-D (Asset-4, 6 & 7) (Notional DOCO:1.9.2010) 8067.36 Clubbed Single Asset (1.10.2010) 4802.87 Current petition

Treatment of IDC and IEDC

13. As per investment approval dated 11.1.2005, the project was scheduled to be commissioned within 35 months from the date of investment approval. The time over-run in the commissioning of the assets mentioned in the instant petition are as follows:—

Asset No. Name of the assets Scheduled DOCO Actual DOCO Delay (in months) 1 LILO of Ramagundum-Khammam Transmission Line at Warangal S/S 1.1.2008 1.8.2009 19 2 2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Warangal sub-station 1.1.2008 1.8.2009 - 3 Neyveli-Pugalur-Madurai 400 kV D/C Transmission Line 1.1.2008 1.9.2009 20 4 2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Pugalur sub-station 1.1.2008 1.9.2009 20 5 (a) Udumalpet-Arasur 400 kV D/C Line along with 400/220 kV sub-station at Arasur and associated bays at Udumalpet 1.1.2008 1.8.2010 31 (b) LILO of Neyveli-Sriperumbudur 400 kV S/C line at Puducherry sub-station with associated bays 1.1.2008 1.8.2010 31 6 315 MVA ICT-I along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV sub-station 1.1.2008 1.8.2010 31 7 315 MVA ICT-II along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV S/S 1.1.2008 1.9.2010 32 8 2 Nos. 315 MVA ICT's along with associated bays and 220 kV downstream equipment at Puducherry 400/220 kV sub-station 1.1.2008 1.10.2010 33 9 2 Nos. of 50 MVAR line Reactors at Pugalur 400/220 kV sub-station along with associated bays at Pugalur sub-station 1.1.2008 1.10.2010 33

14. Asset-1 to Asset-4 have been covered in Petition No. 136/2010 and accordingly not being considered here. There is time over-run of 19-33 months in commissioning of various transmission elements of the project. As regards assets mentioned at S. Nos. 1 and 2, i.e, LILO of Ramagundam-Khammam Transmission line at Warangal Sub-station along with 2 nos. 315 MVA Auto Transformers, delay of thirteen months from January 2008 to January, 2009 was condoned vide Commission's order dated 11.1.2012 in Petition No. 136/2010 on the ground that the first Unit of NLC was commissioned in February, 2009. Detailed reasons in this regard have been recorded in para 14 of the above said order dated 11.1.2012 Delay from February, 2009 to July, 2009 was condoned by the Commission vide its order dated 9.5.2013 in Review Petition No. 7.RP/2012, based on the fact that APTRANSCO in the 9th and 10 SRPC meetings informed that Warangal Sub-station along with LILO of Ramagundam-Khammam line would be ready by July, 2009 and accordingly the Assets-1 & 2 were commissioned on 1.8.2009 Detailed reasons in this regard have been recorded in para 17 of the order dated 9.5.2013 in Review Petition No. 7.RP/2012. Thus, the total delay of 19 months in commissioning of the Assets-1 and 2 has already been condoned.

15. Assets mentioned in S. Nos. 3 and 4, i.e, Neyveli-Pugalur-Madurai 400 kV D/C Transmission Line along and 2 nos. 315 MVA Auto Transformer & 400/220 kV Bays Equipment at Pugalur Sub-station, delay of 13 months from January 2008 to January, 2009 was condoned by the Commission vide order dated 11.1.2012 in Petition No. 136/2010 on the ground that the first Unit of NLC was commissioned in February, 2009. Detailed reasons in this regard have been recorded in para 14 of the above said order dated 11.1.2012 However, further delay of seven months from February, 2009 to August, 2009 was not condoned in the above order as well as the order dated 9.5.2013 in Review Petition No. 7.RP/2012 for the reasons mentioned in para 18 of the above stated order dated 9.5.2013 Consequent revision order dated 10.2.2014 in Petition No. 136/2010 has been made, disallowing this delay of seven months.

16. 2 nos. 50 MVAR line reactors at Pugalur 400/220 kV sub-station along with associated bays at Pugalur sub-station were put under commercial operation on 1.10.2010 However, 400 kV D/C Neyveli-Pugalur-Madurai Transmission Line as well as 2 nos. 315 MVA Auto Transformer and 400/220 kV bays equipment at Pugalur sub-station were put under commercial operation on 1.9.2009 Thus, there is 33 months' delay in the commissioning of 2 nos. of 50 MVAR line reactors at Pugalur 400/220 kV sub-station. The petitioner has submitted, vide affidavit dated 27.5.2011, that the switchable line reactors could not be commissioned along with the main Pugalur sub-station due to the manufacturing defects observed in the reactors during commissioning checks. Subsequently, the reactors were sent back to manufacturing works in December, 2009 and the same were received at site in August, 2010 upon completion of all the checks at factory. After completion of erection works, the reactors were commissioned in September, 2010 and put into commercial operation on 1.10.2010

17. We are of the opinion that the delay in the commissioning of two reactors is a bilateral issue between the petitioner and the supplier and the petitioner is at liberty to claim liquidated damages from the supplier of the reactors. We are, therefore, not inclined to condone the delay of 33 months. Proportionate deductions are accordingly made in IDC and IEDC. Accordingly, the petitioner may also claim IDC and IEDC for 13 months' delay, from NLC In case the liquidated damages received from supplier is more than the actual IDC and IEDC, the excess shall be reimbursed to the beneficiaries.

18. In Udumalpet-Arasur 400 kV D/C line along with 400/220 kV sub-station at Arasur and 2 Nos. of 315 MVA ICT's at Arasur sub-station, the 400 kV D/C Udumalpet-Arasur line along with associated bays was commissioned on 1.8.2010, after a delay of 31 months. The petitioner has attributed the delay to litigations with land owner. The petitioner has submitted vide affidavit dated 8.4.2013 that a land owner in Coimbatur district challenged the construction of the transmission line tower by the petitioner. The District Magistrate, Coimbatur, passed an order dated 9.5.2007 overruling the objections of the land owner and directed the petitioner to proceed with the construction of the transmission line. The said order was challenged by the land owner before Madras High Court in Writ Petition No. 19676 of 2007. Vide order dated 4.4.2008, the Madras High Court directed the authority to examine further if any Porambok land is available for erecting the tower. Further, vide order dated 12.6.2009 in ROC No. 25311/2007.C3, the District Magistrate rejected the objections of land owner. However, vide writ Petition 11070/2009 the above order of District Magistrate was challenged by the land owner and vide order dated 16.12.2009, stay was granted on the District Magistrate order dated 12.6.2009 High court of Madras finally dismissed the writ petition filed by land owner vide its order dated 22.6.2010 in Writ Petition No. 6353/2010. The petitioner has also enclosed copy of judgement dated 22.6.2010 in WP No. 6353 of 2010 of Madras High Court.

19. Based on the above, we hold that there is justification for condoning the delay of 22 months for construction of Udumalpet - Arasur 400 kV D/C line along with 400/220 kV sub-station at Arasur and associated bays at Udumalpet, and also for condoning delay in respect of 2 nos. 315 MVA ICT's along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV sub-station because, before the execution of transmission line, ICT's cannot be charged at Arasur sub-station which is a new sub-station and the ICT's were to be charged along with transmission line.

20. As regards 31 months delay in the commissioning of LILO of Neyveli-Sriperumbudur 400 kV S/C line at Puducherry sub-station with associated bays and 2 Nos. 315 MVA ICT's and 220 kV downstream equipment at Puducherry 400/220 kV sub-station, no justification has been submitted by the petitioner and we, therefore, do not condone the delay.

21. In view of the foregoing, the over-all position regarding the time over-run is as under:—

Asset No. Name of the assets Actual DOCO Delay (in months) Delay condoned (in months) Delay not condoned (in months) Reference 1 LILO of Ramagundum-Khammam Transmission Line at Warangal S/S 1.8.2009 19 19 - Details discussed in Petition No. 136/2010 and in also in 7.RP/2012 2 2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Warangal sub-station 1.8.2009 - - - 3 Neyveli-Pugalur-Madurai 400 kV D/C Transmission Line 1.9.2009 20 13 7 4 2×315 MVA Auto Transformer & 400/220 kV Bays Equipment at Pugalur sub-station 1.9.2009 20 13 7 5 (c) Udumalpet - Arasur 400 kV D/C Line along with 400/220 kV sub-station at Arasur and associated bays at Udumalpet 1.8.2010 31 22 9 Covered under present petition (d) LILO of Neyveli-Sriperumbudur 400 kV S/C line at Puducherry sub-station with associated bays 1.8.2010 31 - 31 6 315 MVA ICT-I along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV sub-station 1.8.2010 31 22 9 7 315 MVA ICT-II along with associated bays and 220 kV downstream equipment at Arasur 400/220 kV S/S 1.9.2010 32 22 10 8 2 Nos. 315 MVA ICT's along with associated bays and 220 kV downstream equipment at Puducherry 400/220 kV sub-station 1.10.2010 33 - 33 9 2 Nos. of 50 MVAR line Reactors at Pugalur 400/220 kV sub-station along with associated bays at Pugalur sub-station 1.10.2010 33 - 33

22. IDC and IEDC has been disallowed in respect of Assets 5, 6, 7, 8 and 9 as per details given hereunder:—

(Rs. in lakh)

Asset 5 Details of IEDC & IDC for Asset-5 as a whole (As per CA Certificate dated 18.08.2010) IEDC & IDC, in proportion of Equipment Cost in Form-5(c), for Asset-5(a) i.e Udumalpet-Arasur line. IEDC & IDC, in proportion of Equipment Cost in Form-5(c), for Asset-5(b) i.e LILO of Neyveli-Sriperrumbudur 400 kV S/C line at Puducherry S/S. Total IEDC & IDC disallowed for the Asset-5 as a whole. IEDC IDC IEDC IDC IEDC IDC From Date of Investment Approval to 31.3.2010 (63 Months) 1174.01 1433.26 852.54 1040.80 321.47 392.46 From 1.4.2010-31.7.2010 (4 Months) 126.80 240.96 92.08 174.98 34.72 65.98 Total IDC and IEDC Claimed (67 Months) 1300.81 1674.22 944.61 1215.78 356.20 458.44 Detail of IDC Disallowed For 9 months For 31 months For 5 months/27 months 67.66 82.60 137.77 168.20 For 4 months 92.08 174.98 34.72 65.98 Total Disallowed IDC 159.74 257.58 172.50 234.18 824.00

Asset 6 Detail of IDC and IEDC as per CA Certificate dated 5.8.2011 IEDC IDC Total From Date of Investment Approval to 31.07.2010 141.96 181.71 323.67 Total IDC and IEDC Claimed (For 67 Months) 141.96 181.71 323.67 Detail of IDC Disallowed for 9 months Pro-rata for 9 Months 19.07 24.41 43.48 Total Disallowed IDC 19.07 24.41 43.48

Asset 7 Detail of IDC and IEDC as per CA Certificate dated 5.8.2011 IEDC IDC Total From Date of Investment Approval to 30.08.2010 145.96 191.49 337.45 Total IDC and IEDC Claimed (For 68 Months) 145.96 191.49 337.45 Detail of IDC Disallowed for 10 months Pro-rata for 10 Months 21.46 28.16 49.63 Total Disallowed IDC 21.46 28.16 49.63

(Rs. in lakh)

Asset 8 Detail of IDC and IEDC as per CA Certificate dated 18.8.2010 IEDC IDC Total From Date of Investment Approval to 31.3.2010 (For 63 Months) 332.84 406.34 739.18 From 1.4.2010-30.9.2010 (For 6 Months) 45.46 102.29 147.75 Total IDC and IEDC claimed (For 69 Months) 378.30 508.63 886.93 Detail of IEDC and IDC Disallowed for 33 months From January 2008 to March 2010 (for 27 months) 142.65 174.15 316.79 From April 2010 to September 2010 (for 6 months) 45.46 102.29 147.75 Total Disallowed IDC (for 33 months) 188.11 276.44 464.54

Asset 9 Details of IDC and IEDC as per CA Certificate dated 18.8.2010 IEDC IDC Total From Date of Investment Approval to 31.3.2010 (For 63 months) 153.44 187.32 340.76 From 1.4.2010-30.9.2010 (For 6 months) 20.96 47.15 68.11 Total IDC and IEDC claimed (For 69 months) 174.40 234.47 408.87 Details of IDC disallowed for 33 months From February 2009 to March 2010 (For 27 months) 65.76 80.28 146.04 From April 2010 to September 2010 (For 6 months) 20.96 47.15 68.11 Total Disallowed IDC (For 33 months) 86.72 127.43 214.15

Treatment for Initial Spares

23. Regulation 8 of 2009 Tariff Regulations provides for capitalization of initial spares as a percentage of the original project cost, subject to following ceiling norms:

Transmission line 0.75% Transmission Sub-station 2.5% Series compensation devices & HVDC Station 3.5%

For Transmission Lines and Substations, the initial spares claimed for all the assets taken together does not cross the ceiling norms. Hence, no adjustment on account of initial spares is required. Based on the detailed calculation of asset wise details, initial spares for the Project as a whole, are worked out as per details given overleaf:—

(Rs. in lakh)

Particulars Cost as on Cut-off date Initial spares claimed Ceiling Limit as per clause 8 work out Excess/Shortfall Transmission Line 51535.75 323.09 0.75% 387.00 -63.90 Sub-station 35863.26 816.48 2.50% 898.64 -82.15

Asset-wise details of initial spares worked out are enclosed in Annexure.

24. Capital cost consequent to the disallowance of time over-run is as under:—

(Rs. in lakh)

Asset Claimed Capital Cost as on DOCO IEDC & IDC, Disallowed, if any Capital Cost after disallowing IEDC/IDC as on DOCO Expenditure during 2009–2010 Capital Cost considered as on DOCO/Notional DOCO Petition reference (a) (b) (c)=(a)−(b) (d) (e)=(c)+(d) (f) Asset-1 (1.8.2009) 3900.21 - 3900.21 315.09 136/2010 Asset-3 (1.9.2009) 44292.80 1289.60 43,003.20 1957.95 136/2010 Assets-5 (1.8.2010) 17474.91 824.00 16650.91 - Current petition Combined Asset-A (Asset-1, 3 & 5) (Notional DOCO:1.8.2010) 65667.92 2113.60 63554.32 2273.04 65827.36 Clubbed Asset-9 (1.10.2010) 1247.69 214.15 1033.54 - Current petition Combined Asset-B (Asset-1, 3, 5 & 9) (Notional DOCO:1.10.2010) 66915.61 2327.75 64587.6 2273.04 66860.90 Clubbed Asset-4 (1.9.2009) 4246.81 160.61 4086.20 241.85 136/2010 Asset-6 (1.8.2010) 1894.63 43.48 1851.15 - Current petition Combined Asset-C (Asset-4 & 6) (Notional DOCO:1.8.2010) 6141.44 204.09 5937.35 241.85 6179.20 Clubbed Asset-7 (1.9.2010) 1925.92 49.63 1876.30 - Current Petition Combined Asset-D (Asset-4, 6 & 7) (Notional DOCO: 1.9.2010) 8067.36 253.72 7813.64 241.85 8055.49 Clubbed Single Asset (1.10.2010) 4802.87 464.54 4338.33 - 4338.33 Current petition

25. In Asset-1 and Asset-5, the expenditure as on 31.3.2010 has been considered for expenditure as on date of commercial operation and entire additional capital expenditure has been considered after date of commercial operation of these assets. This has been done because of non-availability of segregated additional capital expenditure figures during 2010–2011. We direct the petitioner to furnish segregated additional capital expenditure details during 2010–2011 at the time of truing up.

Additional capital expenditure

26. Clause 9(1) of the 2009 Tariff Regulations provides as under:—

“Additional Capitalisation: (1) The capital expenditure incurred or projected to be incurred, on the following counts within the original scope of work, after the date of commercial operation and up to the cut-off date may be admitted by the Commission, subject to prudence check:

(i) Undischarged liabilities;

(ii) Works deferred for execution;

(iii) Procurement of initial capital spares within the original scope of work, subject to the provisions of Regulation 8;

(iv) Liabilities to meet award of arbitration or for compliance of the order or decree of a court; and

(v) Change in Law.”

27. Further, Clause (11) of Regulation 3 of the 2009 Tariff Regulations defines cut-off date as under:—

“cut-off date means 31st march of the year closing after 2 years of the year of commercial operation of the project, and incase of the project is declared under commercial operation in the last quarter of the year, the cut-off date shall be 31 March of the year closing after 3 years of the year of commercial operation”.

28. Details of the additional capital expenditure claimed by the petitioner are as under:—

(Rs. in lakh)

Particulars Add Cap 2010–2011 2011–2012 2012–2013 2013–2014 Combined Asset-A (Asset-1, 3 & 5) (Notional DOCO:1.8.2010) 2489.75 325.10 0.00 0.00 Combined Asset-B (Asset-1, 3, 5 & 9) (Notional DOCO:1.10.2010) 2628.85 345.10 0.00 0.00 Combined Asset-C (Asset-4 & 6) (Notional DOCO:1.8.2010) 83.33 170.26 0.00 0.00 Combined Asset-D (Asset-4, 6 & 7) (Notional DOCO:1.9.2010) 83.33 311.37 15.00 0.00 Asset-8 (1.10.2010) 65.04 10.00 0.00 0.00

29. The above claim of the petitioner falls within cut-off date. Hence, the same has been allowed.

Debt-equity ratio

30. Regulation 12 of the 2009 Tariff Regulations provides as under:—

“12. Debt-Equity Ratio. (1) For a project declared under commercial operation on or after 1.4.2009, if the equity actually deployed is more than 30% of the capital cost, equity in excess of 30% shall be treated as normative loan:

Provided that where equity actually deployed is less than 30% of the capital cost, the actual equity shall be considered for determination of tariff:

Provided further that the equity invested in foreign currency shall be designated in Indian rupees on the date of each investment.

Explanation.- The premium, if any, raised by the generating company or the transmission licensee, as the case may be, while issuing share capital and investment of internal resources created out of its free reserve, for the funding of the project, shall be reckoned as paid up capital for the purpose of computing return on equity, provided such premium amount and internal resources are actually utilised for meeting the capital expenditure of the generating station or the transmission system.

(2) In case of the generating station and the transmission system declared under commercial operation prior to 1.4.2009, debt-equity ratio allowed by the Commission for determination of tariff for the period ending 31.3.2009 shall be considered.

(3) Any expenditure incurred or projected to be incurred on or after 1.4.2009 as may be admitted by the Commission as additional capital expenditure for determination of tariff, and renovation and modernisation expenditure for life extension shall be serviced in the manner specified in clause (1) of this regulation.”

31. Details of debt-equity in respect of the assets comprising the transmission assets as on date of commercial operation are as under:—

(Rs. in lakh)

Capital Cost as on date of commercial operation Combined Asset-A Particulars Amount % Debt 46080.47 70.00 Equity 19746.89 30.00 Total 65827.36 100.00

Combined Asset-B Debt 46803.97 70.00 Equity 20056.93 30.00 Total 66860.90 100.00

Combined Asset-C Debt 4325.44 70.00 Equity 1853.76 30.00 Total 6179.20 100.00

Combined Asset-D Debt 5638.85 70.00 Equity 2416.65 30.00 Total 8055.50 100.00

Single Asset Debt 3036.85 70.00 Equity 1301.48 30.00 Total 4338.33 100.00

32. Details of debt equity ratio as on 31.3.2014 are as under:—

(Rs. in lakh)

Capital Cost as on 31.3.2014 Combined Asset-A Particulars Amount % Debt 48050.87 70.00 Equity 20591.34 30.00 Total 68642.21 100.00

Combined Asset-B Debt 48885.73 70.00 Equity 20949.12 30.00 Total 69834.85 100.00

Combined Asset-C Debt 4502.95 70.00 Equity 1929.84 30.00 Total 6432.79 100.00

Combined Asset-D Debt 5925.64 70.00 Equity 2539.56 30.00 Total 8465.20 100.00

Single Asset Debt 3089.38 70.00 Equity 1323.99 30.00 Total 4413.37 100.00

Return on equity

33. Regulation 15 of the 2009 Tariff Regulations provides as under:—

“15. (1) Return on equity shall be computed in rupee terms, on the equity base determined in accordance with regulation 12.

(2) Return on equity shall be computed on pre-tax basis at the base rate of 15.5% for thermal generating stations, transmission system and run of the river generating station, and 16.5% for the storage type generating stations including pumped storage hydro generating stations and run of river generating station with pondage and shall be grossed up as per clause (3) of this regulation.

Provided that in case of projects commissioned on or after 1st April, 2009, an additional return of 0.5% shall be allowed if such projects are completed within the timeline specified in Appendix-II.

Provided further that the additional return of 0.5% shall not be admissible if the project is not completed within the timeline specified above for reasons whatsoever.

(3) The rate of return on equity shall be computed by grossing up the base rate with the Minimum Alternate/Corporate Income Tax Rate for the year 2008–2009, as per the Income Tax Act, 1961, as applicable to the concerned generating company or the transmission licensee, as the case may be.

(4) Rate of return on equity shall be rounded off to three decimal points and be computed as per the formula given below:

Rate of pre-tax return on equity = Base rate/(1-t)

Where is the applicable tax rate in accordance with clause (3) of this regulation.

(5) The generating company or the transmission licensee as the case may be, shall recover the shortfall or refund the excess Annual Fixed charge on account of Return on Equity due to change in applicable Minimum Alternate/Corporate Income Tax Rate as per the Income Tax Act, 1961 (as amended from time to time) of the respective financial year directly without making any application before the Commission;

Provided further that Annual Fixed charge with respect to the tax rate applicable to the generating company or the transmission licensee, as the case may be, in line with the provisions of the relevant Finance Acts of the respective financial year during the tariff period shall be trued up in accordance with Regulation 6 of these regulations”.

34. The petitioner has claimed Return on Equity on pre-tax basis on 11.33% MAT in accordance with the tax rate applicable for 2008–2009 and has claimed return on equity at the rate of 17.481% in accordance with Regulation 15 of the 2009 Tariff Regulations. RoE allowed for the years 2010–2011, 2011–2012, 2012–2013 and 2013–2014 is given hereunder:—

(Rs. in lakh)

Combined Asset A 2010–2011 Opening Equity 19746.89 Addition due to additional capital expenditure 746.93 Closing Equity 20493.81 Average Equity 20120.35 Return on Equity (Base Rate) 15.50% Tax rate for the year 2008–2009 11.330% Rate of Return on Equity (Pre Tax) 17.481% Return on Equity (Pre Tax) 2344.83

(Rs. in lakh)

Combined Asset B Combined Asset C 2010–2011 2011–2012 2012–2013 2013–2014 2010–2011 Opening Equity 20056.93 20845.59 20949.12 20949.12 1853.76 Addition due to additional capital expenditure 788.66 103.53 0.00 0.00 25.00 Closing Equity 20845.59 20949.12 20949.12 20949.12 1878.76 Average Equity 20451.26 20897.35 20949.12 20949.12 1866.26 Return on Equity (Base Rate) 15.50% 15.50% 15.50% 15.50% 15.50% Tax rate for the year 2008–2009 11.330% 11.330% 11.330% 11.330% 11.330% Rate of Return on Equity (Pre Tax) 17.481% 17.481% 17.481% 17.481% 17.481% Return on Equity (Pre Tax) 1787.54 3653.07 3662.12 3662.12 217.49

(Rs. in lakh)

Combined Asset D 2010–2011 2011–2012 2012–2013 2013–2014 Opening Equity 2416.65 2441.65 2535.06 2539.56 Addition due to additional capital expenditure 25.00 93.41 4.50 0.00 Closing Equity 2441.65 2535.06 2539.56 2539.56 Average Equity 2429.15 2488.35 2537.31 2539.56 Return on Equity (Base Rate) 15.50% 15.50% 15.50% 15.50% Tax rate for the year 2008–2009 11.330% 11.330% 11.330% 11.330% Rate of Return on Equity (Pre Tax) 17.481% 17.481% 17.481% 17.481% Return on Equity (Pre Tax) 247.71 434.99 443.55 443.94

(Rs. in lakh)

Single Asset 2010–2011 2011–2012 2012–2013 2013–2014 Opening Equity 1301.48 1320.99 1323.99 1323.99 Addition due to additional capital expenditure 19.51 3.00 0.00 0.00 Closing Equity 1320.99 1323.99 1323.99 1323.99 Average Equity 1311.24 1322.49 1323.99 1323.99 Return on Equity (Base Rate) 15.50% 15.50% 15.50% 15.50% Tax rate for the year 2008–2009 11.330% 11.330% 11.330% 11.330% Rate of Return on Equity (Pre Tax) 17.481% 17.481% 17.481% 17.481% Return on Equity (Pre Tax) 114.61 231.18 231.45 231.45

Interest on loan

35. Regulation 16 of the 2009 Tariff Regulations provides as under:—

“16. (1) The loans arrived at in the manner indicated in regulation 12 shall be considered as gross normative loan for calculation of interest on loan.

(2) The normative loan outstanding as on 1.4.2009 shall be worked out by deducting the cumulative repayment as admitted by the Commission up to 31.3.2009 from the gross normative loan.

(3) The repayment for the year of the tariff period 2009–14 shall be deemed to be equal to the depreciation allowed for that year:

(4) Notwithstanding any moratorium period availed by the generating company or the transmission licensee, as the case may be the repayment of loan shall be considered from the first year of commercial operation of the project and shall be equal to the annual depreciation allowed,.

(5) The rate of interest shall be the weighted average rate of interest calculated on the basis of the actual loan portfolio at the beginning of each year applicable to the project:

Provided that if there is no actual loan for a particular year but normative loan is still outstanding, the last available weighted average rate of interest shall be considered:

Provided further that if the generating station or the transmission system, as the case may be, does not have actual loan, then the weighted average rate of interest of the generating company or the transmission licensee as a whole shall be considered.

(6) The interest on loan shall be calculated on the normative average loan of the year by applying the weighted average rate of interest.

(7) The generating company or the transmission licensee, as the case may be, shall make every effort to re-finance the loan as long as it results in not savings on interest and in that event the costs associated with such re-financing shall be borne by the beneficiaries and the not savings shall be shared between the beneficiaries and the generating company or the transmission licensee, as the case may be, in the ratio of 2:1.

(8) The changes to the terms and conditions of the loans shall be reflected from the date of such re-financing.

(9) In case of dispute, any of the parties may make an application in accordance with the Central Electricity Regulatory Commission (Conduct of Business) Regulations, 1999, as amended from time to time, including statutory re-enactment thereof for settlement of the dispute:

Provided that the beneficiary or the transmission customers shall not withhold any payment on account of the interest claimed by the generating company or the transmission licensee during the pendency of any dispute arising out of re-financing of loan.”

36. In keeping with the provisions of Regulation 16, the petitioner's entitlement to interest on loan has been worked out on the following basis:—

(a) Gross amount of loan, repayment of instalments and rate of interest on actual loan have been considered as per the petition to work out the weighted average rate of interest;

(b) Tariff is worked out considering normative loan and normative repayments. Depreciation allowed has been taken as normative repayment for the tariff period 2009–14;

(c) For loans with floating interest rates, rates of interest as on 1.4.2009.DOCO have been considered;

(d) Repayment for ADB III loans have been calculated as per the supporting documents attached with the petition.

(e) Weighted average rate of interest on actual loan worked out as above has been applied on the notional average loan during the year to arrive at the interest on loan.

(f) Exchange rates, in case of foreign loans, as on drawal dates has been taken into account for the calculation.

37. There are differences in the weighted average rates of interest as claimed by the petitioner and as allowed in this order. Reasons for the deviations are as under:—

(a) Asset-1 and Asset-3 are two independent assets with different dates of commercial operation which are flowing from Petition No. 136/2010. The petitioner has inadvertently considered same Exchange Rate for the two independent assets whereas different Exchange Rates need to be considered.

(b) Interest rates for ADB-III loan for the Assets flowing from Petition No. 136/2010 have been considered as per that petition in these calculations. Petitioner has considered different interest rates.

(c) In case of Combined Asset-A, the petitioner has inadvertently considered one additional repayment for 2010–2011. This has cumulative effect on opening and closing balances of other years.

(d) As Combined Asset-B includes Combined Asset-A, the above points are applicable to Combined Asset-B also.

(e) The petitioner has submitted separate CA certificates for the two assets of Combined Asset-D (Asset-6 and Asset-7). Two different Exchange Rates for ADB-III loan have been indicated corresponding to the two dates of commercial operation. These have now been considered in these calculations.

(f) Again, in Combined Asset-D, the petitioner vide affidavit dated 20.8.2011 has indicated reduced capital cost vis-à-vis the one submitted in the petition and the actual loan also has reduced. Accordingly, the weighted average interest rate has been considered.

38. Detailed calculation of the weighted average rate of interest has been given in Annexures 1 to 5 to this order.

39. Details of the interest on loan worked on the above basis is as under:—

(Rs. in lakh)

Combined Asset A 2010–2011 Gross Normative Loan 46080.47 Cumulative Repayment upto Previous Year 2346.37 Net Loan-Opening 43734.10 Addition due to additional capital expenditure 1742.83 Repayment during the year 2297.98 Net Loan-Closing 43178.94 Average Loan 43456.52 Weighted Average Rate of Interest on Loan 5.5385% Interest 1604.56

Combined Asset B Combined Asset C 2010–2011 2011–2012 2012–2013 2013–2014 2010–2011 Gross Normative Loan 46803.97 48644.16 48885.73 48885.73 4325.44 Cumulative Repayment upto Previous Year 2920.87 4673.48 8251.93 11838.88 206.66 Net Loan-Opening 43883.10 43970.68 40633.80 37046.85 4118.78 Addition due to additional capital expenditure 1840.20 241.57 0.00 0.00 58.33 Repayment during the year 1752.61 3578.45 3586.95 3586.95 219.18 Net Loan-Closing 43970.68 40633.80 37046.85 33459.89 3957.93 Average Loan 43926.89 42302.24 38840.32 35253.37 4038.36 Weighted Average Rate of Interest on Loan 5.6128% 5.5813% 5.4822% 5.3314% 5.6788% Interest 1232.76 2361.02 2129.32 1879.48 152.89

(Rs. in lakh)

Combined Asset D 2010–2011 2011–2012 2012–2013 2013–2014 Gross Normative Loan 5638.85 5697.18 5915.14 5925.64 Cumulative Repayment upto Previous Year 234.06 483.70 922.09 1369.11 Net Loan-Opening 5404.79 5213.48 4993.05 4556.53 Addition due to additional capital expenditure 58.33 217.96 10.50 0.00 Repayment during the year 249.64 438.39 447.02 447.41 Net Loan-Closing 5213.48 4993.05 4556.53 4109.12 Average Loan 5309.14 5103.27 4774.79 4332.82 Weighted Average Rate of Interest on Loan 6.1978% 6.1734% 6.1055% 6.0205% Interest 191.95 315.05 291.53 260.86

Single Asset 2010–2011 2011–2012 2012–2013 2013–2014 Gross Normative Loan 3036.85 3082.38 3089.38 3089.38 Cumulative Repayment upto Previous Year 0.00 104.36 315.06 526.01 Net Loan-Opening 3036.85 2978.01 2774.32 2563.37 Addition due to additional capital expenditure 45.53 7.00 0.00 0.00 Repayment during the year 104.36 210.69 210.96 210.96 Net Loan-Closing 2978.01 2774.32 2563.37 2352.41 Average Loan 3007.43 2876.17 2668.84 2457.89 Weighted Average Rate of Interest on Loan 7.8940% 7.8772% 7.8354% 7.7806% Interest 118.70 226.56 209.12 191.24

DEPRECIATION

40. Regulation 17 of the 2009 Tariff Regulations provides as under:—

“17. (1) The value base for the purpose of depreciation shall be the capital cost of the asset admitted by the Commission.

(2) The salvage value of the asset shall be considered as 10% and depreciation shall be allowed up to maximum of 90% of the capital cost of the asset.

(3) Land other than the land held under lease and the land for reservoir in case of hydro generating station shall not be a depreciable asset and its cost shall be excluded from the capital cost while computing depreciable value of the asset.

(4) Depreciation shall be calculated annually based on Straight Line Method and at rates specified in Appendix-III to these regulations for the assets of the generating station and transmission system:

Provided that, the remaining depreciable value as on 31st March of the year closing after a period of 12 years from date of commercial operation shall be spread over the balance useful life of the assets.

(5) In case of the existing projects, the balance depreciable value as on 1.4.2009 shall be worked out by deducting the cumulative depreciation as admitted by the Commission up to 31.3.2009 from the gross depreciable value of the assets.

(6) Depreciation shall be chargeable from the first year of commercial operation. In case of commercial operation of the asset for part of the year, depreciation shall be charged on pro rata basis.”

41. The assets were put on commercial operation during the period from 1.8.2009 to 1.10.2010 Accordingly, these assets will complete 12 years beyond 2013–2014 and thus depreciation has been calculated annually based on Straight Line Method and at rates specified in Appendix-III to the 2009 Tariff Regulations, as per details given hereunder:—

(Rs. in lakh)

Combined Asset A 2010–2011 Opening Gross Block 65827.36 Addition during 2009–14 2489.75 Closing Gross Block 68317.11 Average Gross Blcok 67072.23 Rate of Depreciation 5.1392% Depreciable Value 59510.97 Remaining Depreciable Value 57164.60 Depreciation 2297.98

Combined Asset B Combined Asset C 2010–2011 2011–2012 2012–2013 2013–2014 2010–2011 Opening Gross Block 66860.90 69489.75 69834.85 69834.85 6179.20 Addition during 2009–14 2628.85 345.10 0.00 0.00 83.33 Closing Gross Block 69489.75 69834.85 69834.85 69834.85 6262.53 Average Gross Block 68175.32 69662.30 69834.85 69834.85 6220.87 Rate of Depreciation 5.1415% 5.1369% 5.1363% 5.1363% 5.2849% Depreciable Value of Combined Assets 60503.75 61842.03 61997.33 61997.33 5598.78 Remaining Depreciable Value 57582.88 57168.55 53745.40 50158.44 5392.12 Depreciation 1752.61 3578.45 3586.95 3586.95 219.18

(Rs. in lakh)

Combined Asset D 2010–2011 2011–2012 2012–2013 2013–2014 Opening Gross Block 8055.50 8138.83 8450.20 8465.20 Addition during 2009–14 83.33 311.37 15.00 0.00 Closing Gross Block 8138.83 8450.20 8465.20 8465.20 Average Gross Block 8097.16 8294.51 8457.70 8465.20 Rate of Depreciation 5.2852% 5.2853% 5.2854% 5.2853% Depreciable Value 7287.45 7465.06 7611.93 7618.68 Remaining Depreciable Value 7053.39 6981.36 6689.84 6249.57 Depreciation 249.64 438.39 447.02 447.41

Single Asset 2010–2011 2011–2012 2012–2013 2013–2014 Opening Gross Block 4338.33 4403.37 4413.37 4413.37 Addition during 2009–14 65.04 10.00 0.00 0.00 Closing Gross Block 4403.37 4413.37 4413.37 4413.37 Average Gross Block 4370.85 4408.37 4413.37 4413.37 Rate of Depreciation 4.7754% 4.7794% 4.7799% 4.7799% Depreciable Value 3933.76 3967.53 3972.03 3972.03 Remaining Depreciable Value 3933.76 3863.17 3656.98 3446.02 Depreciation 104.36 210.69 210.96 210.96

Operation & maintenance expenses

42. Clause (g) of regulation 19 of the 2009 Tariff Regulations prescribes the norms for operation and maintenance expenses based on the type of sub-station and transmission line. Norms prescribed in respect of the elements covered in the instant petition are as under:—

Elements 2009–2010 2010–2011 2011–2012 2012–2013 2013–2014 Norms for AC lines (Rs. lakh/Km) S/C (Twin & Triple Conductor) 0.358 0.378 0.400 0.423 0.447 D/C (Twin & Triple Conductor) 0.627 0.663 0.701 0.741 0.783 Norms for sub-station (Rs. lakh/per bay) 220 kV 36.68 38.78 41.00 43.34 45.82 400 kV 52.40 55.40 58.57 61.92 65.46

43. Based on the above norms, the petitioner has calculated the following operation and maintenance expenses which is allowed as per details given overleaf:—

(Rs. in lakh)

Combined assets of LILO of Ramagundum-Khammam Transmission Line at Warangal S/S (DOCO:1.8.2009), Neyveli-Pugalur-Madurai 400 kV D/C TL (DOCO:1.9.2009), Udumalpet-Arasur 400 kV D/C Line along with 400/220 kV sub-station at Arasur and associated bays at Udumalpet (DOCO:1.8.2010), LILO of Neyveli-Sriperumbudur 400 kV S/C line at Puducherry sub-station with associated bays (DOCO: 1.8.2010) (Notional DOCO of Combined Asset-I: 1.8.2010) Element 2009–2010 2010–2011 (Pro-rata for 2 months i.e from 1.8.2010 to 30.9.2010) 2011–2012 2012–2013 2013–2014 123.643 km D/C Pugalur-Madurai Transmission Line (Notional DOCO:01.08.2010) 13.66 Nil Nil Nil 198.047 km D/C Neyveli Pugalur Transmission Line (Notional DOCO:01.08.2010) 21.88 Nil Nil Nil 1.624 km S/C Neyveli-Pugalur Transmission Line (Notional DOCO:01.08.2010) 0.10 Nil Nil Nil 13.619 km D/C LILO of Ramagundam-Khammam Transmission Line at Warangal Sub-station (Notional DOCO:01.08.2010) 1.50 Nil Nil Nil 0.558 km S/C LILO of Ramagundam-Khammam Transmission Line at Warangal Sub-station (Notional DOCO:01.08.2010) 0.04 Nil Nil Nil 65.116 km D/C Udumalpet-Arasur 400 kV D/C line (Notional DOCO:01.08.2010) 7.19 Nil Nil Nil 12.543 km LILO of Neyveli-Sriperumbudur at Puducherry (Notional DOCO:01.08.2010) 1.39 Nil Nil Nil 2 No's 400 kV Bays at Neyveli (Notional DOCO:01.08.2010) 18.47 Nil Nil Nil 2 No's 400 kV Bays at Madurai (Notional DOCO:01.08.2010) 18.47 Nil Nil Nil 2 No's 400 kV Bays at Pugalur (Notional DOCO:01.08.2010) 18.47 Nil Nil Nil 2 No's 400 kV Bays at Warangal (Notional DOCO:01.08.2010) 18.47 Nil Nil Nil 2 No's 400 kV Bays at Arasur (Notional DOCO:01.08.2010) 18.47 Nil Nil Nil 2 No's 400 kV Bays at Udumalpet (Notional DOCO:01.08.2010) 18.47 Nil Nil Nil 2 No's 400 kV Bays at Puducherry (Notional DOCO:01.08.2010) 18.47 Nil Nil Nil Total O & M for Combined Asset-A 175.05 Nil Nil Nil Combined Asset-A of instant petition is linked with Asset-I & III of Petition No. 136/2010. Thus, from 1.8.2009 to 1.8.2010, O & M Expenses have been allowed vide order dated 11.1.2012 in Petition No. 136/2010 for LILO of Ramagundum-Khammam Transmission Line and Neyveli-Pugalur-Madurai 400 kV D/C Transmission Line. Combined Asset-A is clubbed with Combined Asset-B. The notional DOCO of Asset-II is 1.10.2010 Thus, O & M for Combined Asset-A in the instant petition is calculated from notional DOCO i.e 1.8.2010 to 30.9.2010 Thus, the O & M in Combined Asset-A is given from 1.8.2010 to 30.9.2010, i.e for two months and for further period it is given in Combined Asset-B.

(Rs. in lakh)

Combined assets of LILO of Ramagundum-Khammam Transmission Line at Warangal S/S (DOCO:01.08.2009), Neyveli-Pugalur-Madurai 400 kV DC TL (DOCO:01.09.2009), Udumalpet - Arasur 400 kV D/C Line along with 400/220 kV substation at Arasur and associated bays at Udumalpet (DOCO:01.08.2010), LILO of Neyveli-Sriperumbudur 400 kV S/C line at Puducherry S/S with associated bays (DOCO: 01.08.2010) and 2 Nos. of 50 MVAR line Reactors at Pugalur 400/220 kV S/S along with associated bays at Pugalur S/S. (Notional DOCO of Combined Asset-II: 1.10.2010) Element 2010–2011 (Pro-rata for 6 months) 2011–2012 2012–2013 2013–2014 123.643 km D/C Pugalur Madurai Transmission Line (Notional DOCO:01.10.2010) 40.99 86.67 91.62 96.81 198.047 km D/C Neyveli Pugalur Transmission Line (Notional DOCO:01.10.2010) 65.65 138.83 146.75 155.07 1.624 km S/C Neyveli Pugalur Transmission Line (Notional DOCO:01.10.2010) 0.31 0.65 0.69 0.73 13.619 km D/C LILO of Ramagundam Khammam Transmission Line at Warangal Sub-station (Notional DOCO:01.10.2010) 4.51 9.55 10.09 10.66 0.558 km S/C LILO of Ramagundam Khammam Transmission Line at Warangal Sub-station (Notional DOCO:01.10.2010) 0.11 0.22 0.24 0.25 65.116 km D/C Udumalpet-Arasur 400 kV D/C line (Notional DOCO:01.10.2010) 21.59 45.65 48.25 50.99 12.543 km LILO of Neyveli-Sriperumbudur at Puducherry (Notional DOCO:01.10.2010) 4.16 8.79 9.29 9.82 2 No's 400 kV Line Reactor Bays at Neyveli (Notional DOCO:01.10.2010) 55.40 117.14 123.84 130.92 2 No's 400 kV Bays at Neyveli (Notional DOCO:01.10.2010) 55.40 117.14 123.84 130.92 2 No's 400 kV Bays at Madurai (Notional DOCO:01.10.2010) 55.40 117.14 123.84 130.92 2 No's 400 kV Bays at Pugalur (Notional DOCO:01.10.2010) 55.40 117.14 123.84 130.92 2 No's 400 kV Bays at Warangal (Notional DOCO:01.10.2010) 55.40 117.14 123.84 130.92 2 No's 400 kV Bays at Arasur (Notional DOCO:01.10.2010) 55.40 117.14 123.84 130.92 2 No's 400 kV Bays at Udumalpet (Notional DOCO:01.10.2010) 55.40 117.14 123.84 130.92 2 No's 400 kV Bays at Puducherry (Notional DOCO:01.10.2010) 55.40 117.14 123.84 130.92 Total O & M for Combined Asset-B 580.51 1227.48 1299.65 1371.69

(Rs. in lakh)

Combined assets of 2×315 MVA Auto Transformer & 400/220kV Bays Equipment at Pugalur S/S (DOCO: 01.09.2009), 315 MVA ICT-I along with associated bays and 220kV downstream equipment at Arasur S/S (DOCO: 1.8.2010), and 315 MVA ICT-II along with associated bays and 220kV downstream equipment at Arasur S/S (DOCO: 1.9.2010) Element 2010–2011 2011–2012 2012–2013 2013–2014 9 No's 220 kV Bays at Arasur and Pugalur (DOCO:01.08.2010) 232.68 (Pro-rata for 8 months) 492.00 520.08 549.84 3 No's 220 kV Bays at Arasur, Palladam and Karmadai (DOCO:01.09.2010) 67.86 (Pro-rata for 7 months) 3 No's 400 kV Bays at Arasur and Pugalur (DOCO:01.08.2010) 110.8 (Pro-rata for 8 months) 234.28 247.68 261.84 1 No. 400 kV Bay at Arasaur (DOCO:01.09.2010) 32.32 (Pro-rata for 7 months) Total O & M for Combined Asset-C and D 443.66 726.28 767.76 811.68 Combined Asset-C and D of instant petition is linked with Asset-IV of Petition 136/2010. Thus, the order in Petition No. 136/2010 is already been issued by the Commission. Thus, from 1.9.2009 to 1.8.2010, the O & M expenses are given vide Order in Petition No. 136/2010 for Asset of 2×315 MVA Auto Transformer & 400/220kV Bays Equipment at Pugalur S/S (DOCO: 01.09.2009). Thus, O & M for Combined Asset-C and D in the instant petition is calculated from DOCO i.e 1.8.2010 to 31.3.2014 and from 1.9.2010 to 31.3.2014 respectively.

(Rs. in lakh)

2 nos. of 400/230kV 315 MVA ICT's along with associated bays and downstream equipment at 400/230kV Puducherry substation (DOCO of Asset-8: 1.10.2010) Element 2010–2011 (Pro-rata for 6 months) 2011–2012 2012–2013 2013–2014 6 No's 220 kV Bays at Puducherry, Thondamantham, Bahoor and Villianur 116.34 246.00 260.04 274.92 2 No's 400 kV Bays at Puducherry 55.40 117.14 123.84 130.92 Total O & M for Asset-8 (Single Asset) 171.74 363.14 383.88 405.84

44. The petitioner has submitted that O & M expenditure for the period 2009–14 had been arrived at on the basis of normalized actual O & M expenses during the period 2003–2004 to 2007–2008. The wage hike of 50% on account of pay revision of the employees of public sector undertaking was also considered while calculating the O & M charges for the tariff period 2009–14. The petitioner has submitted that it would approach the Commission for suitable revision in the norms for O & M expenditure in case the impact of wage hike with effect from 1.1.2007 is more than 50%.

45. While specifying the norms for Operation and Maintenance Expenses, the Commission has in the 2009 Tariff Regulations already factored 50% on account of pay revision of the employees of PSUs after extensive consultation with the stakeholders. At this stage there does not seem to be any justification for deviating from the norms. However, in case the petitioner separately approaches the Commission by making an appropriate application, the same shall be dealt with in accordance with law.

Interest on working capital

46. The petitioner is entitled to claim interest on working capital as per the 2009 Tariff Regulations. The components of the working capital and the petitioner's entitlement to interest thereon are discussed hereunder:—

(i) Receivables

As per Regulation 18(1)(c)(i) of the 2009 Tariff Regulations, receivables as a component of working capital will be equivalent to two months-fixed cost. The petitioner has claimed the receivables on the basis of 2 months' annual transmission charges claimed in the petition. In the tariff being allowed, receivables have been worked out on the basis of 2 months' transmission charges.

(ii) Maintenance spares

Regulation 18(1)(c)(ii) of the 2009 Tariff Regulations provides for maintenance spares @ 15% per annum of the O & M expenses as part of the working capital from 1.4.2009 The value of maintenance spares has accordingly been worked out.

(iii) O & M expenses

Regulation 18(1)(c)(iii) of the 2009 Tariff Regulations provides for operation and maintenance expenses for one month to be included in the working capital. The petitioner has claimed O & M expenses for 1 month of the respective year. This has been considered in the working capital.

(iv) Rate of interest on working capital

In view of the Second Amendment dated 21.6.2011, in the 2009 Tariff Regulations, interest rate of 11.00% (SBI Base Rate 7.50% as on 1.7.2010 plus 350 bps) has been considered for calculating interest on working capital.

47. Necessary computations in support of interest on working capital are given hereunder:—

(Rs. in lakh)

Combined Asset A 2010–2011 Pro-rata for 2 months Maintenance Spares 157.55 39.39 O & M expenses 87.53 21.88 Receivables 1773.91 443.48 Total 2,018.98 504.74 Rate of Interest 11.75% 11.75% Interest 148.06 37.01

(Rs. in lakh)

Combined Asset B Combined Asset C 2010–2011 2011–2012 2012–2013 2013–2014 2010–2011 Tariff for August 2010 Maintenance Spares 174.15 184.12 194.95 205.75 77.28 9.66 O & M expenses 96.75 102.29 108.30 114.31 42.94 5.37 Receivables 1822.86 1842.36 1818.57 1788.70 239.86 29.98 Total 2093.77 2128.78 2121.82 2108.76 360.08 45.01 Rate of Interest 11.00% 11.00% 11.00% 11.00% 11.00% 11.00% Interest 115.16 234.17 233.40 231.96 26.41 3.30

Combined Asset D 2010–2011 2011–2012 2012–2013 2013–2014 Maintenance Spares 103.04 108.94 115.16 121.75 O & M expenses 57.25 60.52 63.98 67.64 Receivables 320.24 328.24 334.39 336.97 Total 480.53 497.71 513.53 526.36 Rate of Interest 11.75% 11.75% 11.75% 11.75% Interest 30.83 54.75 56.49 57.90

Single Asset 2010–2011 2011–2012 2012–2013 2013–2014 Maintenance Spares 51.52 54.47 57.58 60.88 O & M expenses 28.62 30.26 31.99 33.82 Receivables 174.47 176.72 177.46 178.25 Total 254.62 261.46 267.03 272.95 Rate of Interest 11.00% 11.00% 11.00% 11.00% Interest 14.00 28.76 29.37 30.02

Transmission charges

48. The transmission charges being allowed for the transmission assets are summarized below:—

(Rs. in lakh)

Combined Asset A 2010–2011 Pro-rata for 2 months Depreciation 2297.98 574.50 Interest on Loan 1604.56 401.14 Return on equity 2344.83 586.21 Interest on Working Capital 148.06 37.01 O & M Expenses 700.20 175.05 Total 7095.62 1773.91

(Rs. in lakh)

Combined Asset B Combined Asset C 2010–2011 2011–2012 2012–2013 2013–2014 2010–2011 Tariff for August 2010 Depreciation 1752.61 3578.45 3586.95 3586.95 219.18 27.40 Interest on Loan 1232.76 2361.02 2129.32 1879.48 152.89 19.11 Return on equity 1787.54 3653.07 3662.12 3662.12 217.49 27.19 Interest on Working Capital 115.16 234.17 233.40 231.96 26.41 3.30 O & M Expenses 580.51 1227.48 1299.65 1371.69 343.48 42.94 Total 5468.58 11054.19 10911.44 10732.21 959.45 119.93

Combined Asset D 2010–2011 2011–2012 2012–2013 2013–2014 Depreciation 249.64 438.39 447.02 447.41 Interest on Loan 191.95 315.05 291.53 260.86 Return on equity 247.71 434.99 443.55 443.94 Interest on Working Capital 30.83 54.75 56.49 57.90 O & M Expenses 400.73 726.28 767.76 811.68 Total 1120.85 1969.45 2006.34 2021.79

Single Asset 2010–2011 2011–2012 2012–2013 2013–2014 Depreciation 104.36 210.69 210.96 210.96 Interest on Loan 118.70 226.56 209.12 191.24 Return on equity 114.61 231.18 231.45 231.45 Interest on Working Capital 14.00 28.76 29.37 30.02 O & M Expenses 171.74 363.14 383.88 405.84 Total 523.42 1060.34 1064.77 1069.51

Filing fee and publication expenses

49. The petitioner has sought reimbursement of fee paid by it for filing the petition and publication expenses. In accordance with the Commission's order dated 11.1.2010 in Petition No. 109/2009, the petitioner shall be entitled to recover the filing fee directly from the beneficiaries on pro-rata basis. The petitioner shall also be entitled for reimbursement of the publication expenses in connection with the present petition, directly from the beneficiaries on pro-rata basis.

Licence fee

50. The petitioner has submitted that in O & M norms for tariff block 2009–14 the cost associated with licence fees had not been captured and the licence fee may be allowed to be recovered separately from the respondents.

51. The petitioner shall be entitled for reimbursement of licence fee in accordance with Regulation 42A(1)(b) of the 2009 Tariff Regulations.

Service tax

52. The petitioner has made a prayer to be allowed to bill and recover the service tax on transmission charges separately from the respondents, if it is subjected to such service tax in future. We consider petitioner's prayer pre-mature and accordingly this prayer is rejected.

Sharing of transmission charges

53. As regards the sharing of the transmission charges, we direct that prior to 1.7.2011, the transmission charges shall be shared with the respondents in accordance with Regulation 33 of the 2009 Tariff Regulations. From 1.7.2011 onwards, the charges shall be shared in accordance with Central Electricity Regulatory Commission (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2010.

54. This order disposes of Petition No. 332/2010.