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Case Number

Petition No. 141/2008

Attorney(S)

1. Shri U.K Tyagi, PGCIL
2. Shri V.V Sharma, PGCIL
3. Shri A.K Nagpal, PGCIL
4. Shri B.C Pant, PGCIL
5. Shri Harmeet Singh, PGCIL
6. Shri Mohd. Mohsin, PGCIL
7. Shri R.B Sharma, Advocate, BSEB

Judges

Pramod Deo
Chairperson
R. Krishnamoorthy, Member
S. Jayaraman, Member

Acts

2006-2007 12007-2008 2008-2009 60.40 63.38 63.55INTEREST ON LOAN14. Clause (1) of regulation 56
attached.DEPRECIATION19. Sub-clause (a) of clause (ii) of Regulation 56
sub-clause (b) of clause (ii) of Regulation 56
clauses (1) and (2) of Regulation 53

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Smart Summary

Structured Summary of the Opinion — Petition No. 142/2008

Factual and Procedural Background

This petition sought revision of transmission tariff on account of additional capital expenditure (ACE) incurred during 2006-2007 and 2007-2008 in respect of 40% Fixed Series Compensation on the existing 400 kV S/C Rengali–Indravati transmission line associated with augmentation of capacity of the Gazuwaka HVDC back-to-back project in the Eastern Region, under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004 ("the 2004 regulations").

Investment approval for the project was granted by the Ministry of Power by letter dated 22.1.2002 at an estimated cost of Rs. 76,925 lakh (including IDC Rs. 9,612 lakh). A revised commissioning schedule was approved by the Ministry of Power on 6.1.2004, revising the project commissioning to June 2005 and the estimated cost to Rs. 73,927 lakh. The transmission assets were declared under commercial operation on 1.10.2005.

The Commission had earlier approved transmission charges for the transmission assets in an order dated 15.10.2007 in Petition No. 49/2007 for the period 1.10.2005 to 31.3.2009, based on an admitted capital cost of Rs. 1,368.28 lakh as on the date of commercial operation and Rs. 1,458.78 lakh as on 31.3.2006 (after considering additional capitalization of Rs. 90.50 lakh for 1.10.2005 to 31.3.2006).

The petitioner claimed additional capitalization of Rs. 133.39 lakh in 2006-2007 and Rs. 8.35 lakh in 2007-2008 (described as retention/final payments). A reply to the petition was filed by Bihar State Electricity Board (BSEB). The present order disposes Petition No. 142/2008.

Legal Issues Presented

Whether the additional capital expenditure claimed (retention/final payments for 2006-07 and 2007-08) can be capitalised for tariff purposes under clauses (1) and (2) of Regulation 53 of the 2004 regulations.
Determination of the appropriate debt–equity ratio and equity base for computation of Return on Equity in accordance with the 2004 regulations.
How interest on loan is to be computed under clause (1) of Regulation 56 of the 2004 regulations—specifically the treatment of notional loan arising from additional capitalisation, normative loan and normative repayments, and the application of weighted average rates of interest.
Computation of depreciation under sub-clause (a) of clause (ii) of Regulation 56 of the 2004 regulations (straight line method, 90% cap, residual value, pro rata treatment).
Computation and permissibility of Advance Against Depreciation (AAD) under sub-clause (b) of clause (ii) of Regulation 56, including the ceiling (1/10th of gross loan) and the cumulative-repayment vs cumulative-depreciation condition.
Appropriate treatment of operation & maintenance (O&M) expenses and interest on working capital under clause (iv) and clause (v) of Regulation 56, including whether maintenance spares on additional capitalisation are to be included and the applicable rate for working capital interest.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Commission followed the framework and specific provisions of the 2004 regulations in a stepwise manner, applying the statutory formulas and normative treatments specified in those regulations to the facts and figures submitted by the petitioner. The Court's (Commission's) analysis proceeded as follows (as recorded in the opinion):

Treatment of additional capitalisation:
The additional capital expenditure claimed (Rs. 133.39 lakh for 2006-07 and Rs. 8.35 lakh for 2007-08) was identified as retention/final payments which are deferred liabilities in respect of works/services that have materialised and are within the original scope of work. Consequently, the Commission held that these items are allowable as additional capitalisation under clauses (1) and (2) of Regulation 53 of the 2004 regulations.
Total capital cost and admitted capitalization:
On that basis, the admitted capital cost progression for tariff purpose was set out as: admitted capital cost as on 1.10.2005 of Rs. 1,368.28 lakh, additional capitalization Rs. 90.50 lakh (2005-06) making Rs. 1,458.78 lakh as on 1.4.2006; further additional capitalization Rs. 133.39 lakh (2006-07) to Rs. 1,592.17 lakh as on 1.4.2007; and Rs. 8.35 lakh (2007-08) to Rs. 1,600.52 lakh as on 1.4.2008.
Debt–equity ratio and equity base:
The petitioner used a debt–equity ratio of 70:30 for the additional capitalisation. The Commission found this approach to be in order and computed equity figures (including notional additional equity) for the relevant years according to the 70:30 split, and used average equity for computing return on equity where applicable.
Return on Equity (ROE):
ROE was computed as per clause (iii) of Regulation 56 at 14% per annum on the equity base determined under regulation 54. The Commission adopted the equity figures calculated from the 70:30 ratio and allowed the revised return on equity for 2006-07 to 2008-09 as claimed (Rs. 60.40 lakh; Rs. 63.38 lakh; Rs. 63.55 lakh respectively).
Interest on loan — normative loan and repayments:
Applying clause (1) of Regulation 56, the Commission calculated interest on loan by:
- Taking gross loan opening (from previous order figures);
- Adding a notional loan corresponding to the additional capitalisation up to 31.3.2008 to the loan amount as on 1.4.2006 to arrive at a gross notional (normative) loan;
- Applying normative repayments: where moratorium or normative repayment is less than depreciation including AAD, the depreciation including AAD is treated as the normative repayment for the year (i.e., depreciation-as-repayment rule was applied as stated in the regulations);
- Applying the weighted average rate of interest (worked out from actual loans/bonds and their interest rates) to the notional average loan during the year to compute interest on loan.
Using the above approach, the Commission produced year-wise interest on loan figures: Rs. 80.90 lakh (2006-07), Rs. 80.00 lakh (2007-08), and Rs. 75.14 lakh (2008-09).
Depreciation:
Depreciation was computed following sub-clause (a) of clause (ii) of Regulation 56: using the historical cost base, straight-line method, residual value of 10% (depreciation up to 90% of historical cost), and pro rata treatment for part-years. The Commission disclosed the depreciable values and the computed depreciation amounts for the years: Rs. 54.34 lakh (2006-07), Rs. 56.76 lakh (2007-08), Rs. 56.91 lakh (2008-09).
Advance Against Depreciation (AAD):
The Commission applied the formula stated in sub-clause (b) of clause (ii) of Regulation 56: AAD = (loan repayment amount as per regulation 56(i), subject to a ceiling of 1/10th of gross loan) minus scheduled depreciation. Further, AAD is permitted only if cumulative repayment up to a year exceeds cumulative depreciation up to that year, and AAD in a year is limited to the difference between cumulative repayment and cumulative depreciation.

On that basis the petitioner’s claimed AAD for 2008-09 was considered and the Commission allowed AAD of Rs. 15.97 lakh for 2008-09 (the calculation also reconciled cumulative repayment and cumulative depreciation figures and 1/10th gross loan calculations).
Operation & Maintenance (O&M) expenses:
O&M norms from clause (iv) of Regulation 56 were applied. Because line length and number of bays remained unchanged, the Commission retained the O&M expense values used in the earlier order dated 15.10.2007 in Petition No. 49/2007 (Rs. 30.42 lakh; Rs. 31.63 lakh; Rs. 32.90 lakh for 2006-07 to 2008-09 respectively).
Interest on working capital:
The Commission applied Regulation 56(v) components:
- Maintenance spares: regulation prescribes spares @1% of historical cost escalated at 6% p.a. from DOCO; the Commission did not allow maintenance spares on the additional capitalisation for present calculations and therefore computed maintenance spares on historical cost as at date of commercial operation (i.e., ACE excluded from maintenance spares calculation);
- O&M expenses: one month of O&M as a component of working capital, taken as per figures in the earlier order;
- Receivables: equivalent to two months' average billing (two months' transmission charges) as per the regulation;
- Rate of interest: normative basis equal to SBI short-term PLR as on 1.4.2004 or on 1 April of the year of DOCO, whichever is later. The petitioner used SBI PLR as on 1.4.2005 (10.25%), which the Commission accepted and applied.
Using these components, the Commission recalculated interest on working capital and allowed interest of Rs. 5.66 lakh (2006-07), Rs. 5.86 lakh (2007-08) and Rs. 6.19 lakh (2008-09) based on the computed working capital aggregates.
Aggregation into revised transmission charges:
Applying the above components (depreciation, interest on loan, return on equity, AAD, interest on working capital, and O&M expenses), the Commission produced the revised transmission charges for the three years (2006-07 to 2008-09) as set out in the order and summarised in the table in the order.
Recovery and other procedural points:
The Commission directed that the petitioner shall recover the additional transmission charges from the beneficiaries in three monthly instalments. The petitioner had sought reimbursement of the filing fee; the Commission noted a separate general order dated 11.9.2008 in Petition No. 129/2005 which decided that the petitioner shall not be allowed reimbursement of the petition filing fee. The Commission also recorded that the petitioner shall be entitled to other charges like income-tax, incentive, surcharge and other cess and taxes in accordance with the 2004 regulations, and that the transmission charges shall be included in the regional transmission tariff for the Eastern Region and shared by regional beneficiaries per the 2004 regulations.

Holding and Implications

Core Ruling: The Commission allowed the additional capitalisation claimed (retention/final payments) as part of the capital cost under clauses (1) and (2) of Regulation 53 and approved revised transmission charges for the transmission assets for the period 2006-2007 to 2008-2009. The order disposes Petition No. 142/2008.

Specific financial figures allowed (as recorded in the order):

Revised transmission charges (Rs. in lakh): 2006-2007 — Rs. 231.72 lakh; 2007-2008 — Rs. 237.63 lakh; 2008-2009 — Rs. 250.66 lakh.
Return on Equity allowed (Rs. in lakh): 2006-07 — 60.40; 2007-08 — 63.38; 2008-09 — 63.55.
Interest on Loan allowed (Rs. in lakh): 2006-07 — 80.90; 2007-08 — 80.00; 2008-09 — 75.14.
Depreciation allowed (Rs. in lakh): 2006-07 — 54.34; 2007-08 — 56.76; 2008-09 — 56.91.
Advance Against Depreciation allowed for 2008-09: Rs. 15.97 lakh.
Interest on Working Capital allowed (Rs. in lakh): 2006-07 — 5.66; 2007-08 — 5.86; 2008-09 — 6.19.

Direct consequences and implementation instructions:

The petitioner is authorized to recover the additional transmission charges from beneficiaries in three monthly instalments.
The petitioner shall not be reimbursed the petition filing fee in view of a separate general order dated 11.9.2008 in Petition No. 129/2005.
The approved transmission charges will be included in the regional transmission tariff for the Eastern Region and shared by regional beneficiaries in accordance with the 2004 regulations.
The petitioner is entitled to other charges (income-tax, incentive, surcharge, other cess and taxes) as per the 2004 regulations.

Broader implications: The order applies and follows the specific provisions and normative methodology set out in the 2004 regulations for capitalisation, determination of debt–equity, ROE, interest on loan (normative loan and repayments), depreciation, AAD, O&M norms and interest on working capital. The opinion does not purport to establish judicial precedent beyond applying those regulatory provisions to the facts of this petition.

This summary is prepared exclusively from the content contained in the provided opinion text and does not add or infer facts beyond that text.

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Power Grid Corporation Of India Ltd. v. Bihar State Electricity Board

This petition has been filed for revision of transmission tariff on account of additional capital expenditure incurred during 2006-2007 and 2007-2008 in respect of 40% Fixed Series Compensation (hereinafter referred to as “the transmission assets”) on existing 400 kV S/C Rengali-Indravati transmission line associated with augmentation of capacity of Gazuwaka HVDC back-to-back project (hereinafter referred to as “the project”) in Eastern Region, based on the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004, (hereinafter referred to as “the 2004 regulations”).

2. The investment approval for the implementation of the project was accorded by Ministry of Power vide letter dated 22.1.2002 at an estimated cost of Rs. 76925 lakh, which included IDC of Rs. 9612 lakh. Subsequently, Ministry of Power vide its letter dated 6.1.2004 approved the revised commissioning schedule for the project. As per the revised schedule, the project was to be commissioned by June 2005. It was further noted that the cost of the project was estimated to be Rs. 73927 lakh. The transmission assets were declared under commercial operation on 1.10.2005

3. The transmission charges for the transmission assets were approved by the Commission in its order dated 15.10.2007 in Petition No. 49/2007 for the period 1.10.2005 to 31.3.2009 based on capital cost of Rs. 1368 lakh as on the date of commercial operation and Rs. 1458.78 lakh as on 31.3.2006, after considering additional capital expenditure of Rs. 90.50 lakh for the period 1.10.2005 to 31.3.2006 The summary of the transmission charges approved by the said order dated 15.10.2007 is extracted hereunder:

(Rs. in lakh)

2005-2006 (Prorata) 2006-2007 2007-2008 2008-2009 Depreciation 25.33 52.06 52.06 52.06 Interest on Loan 39.11 77.60 73.28 68.19 Return on Equity 27.85 57.60 57.60 57.60 Advance against Depreciation 0.00 0.00 0.00 23.92 Interest on Working Capital 2.70 5.52 5.56 6.02 O & M Expenses 14.63 30.42 31.63 32.90 Total 109.62] 223.20 220.13 240.68

4. The relevant details of the approved apportioned cost, completion cost etc. of the transmission assets claimed by the petitioner are as under:

(Rs. in lakh)

Approved apportioned cost Capital expendit ure up to 1.10.2005 Additional Capitalizati on during 2005-2006 Capital expendit ure 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 2730.00 1368.28 90.50 1458.78 133.39 1592.17 8.35 1600.52 337.16 1937.68

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 54.34 56.76 56.91 Interest on Loan 80.90 80.00 75.14 Return on Equity 60.40 63.38 63.55 Advance against Depreciation 0.00 0.00 15.97 Interest on Working Capital 5.83 6.11 6.45 O & M Expenses 30.42 31.63 32.90 Total 231.89 237.88 250.92

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 15.68 17.33 18.41 O & M expenses 2.54 2.64 2.74 Receivables 38.65 39.65 41.82 Total 56.87 59.62 62.97 Rate of Interest 10.25% 10.25% 10.25% Interest 5.83 6.11 6.45

7. The reply to the petition has been filed by Bihar State Electricity Board (BSEB).

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 133.39 Retention/final payments 2. 2007-2008 8.35 Retention/final 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 since 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 1.7.2005 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 1368.28 90.50 1458.78 133.39 1592.17 8.35 1600.52

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 1.10.2005 (As per order dated 15.10.2007) Notional additional equity up to 31.3.2006 (As per order dated 15.10.2007) Equity as on 1.4.2006 (As per order dated 15.10.2007) Notional additional equity during 2006-2007 Average equity during 2006-2007 Equity as on 1.4.2007 Notional additional equity during 2007-2008 Average equity for 2007-2008 Equity as on 1.4.2008 384.28 27.15 411.43 40.02 431.44 451.45 2.51 452.70 453.95

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. For the reasons already recorded, equity as given the table under para 11 above has been considered. The 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 12007-2008 2008-2009 60.40 63.38 63.55

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. The petitioner has claimed interest on loan in the following manner:

(a) Gross loan opening is from the year 2005-2006.

(b) On the basis of actual rate of interest on actual average loan, the weighted average rate of interest on loan is worked out for various years.

(d) Gross loan have been considered along with the loan utilised after DOCO and the weighted average rate of interest on loan for respective years as per above has been multiplied to arrive at interest on loan, considering depreciation as repayment. Depreciation Advance Against Deprecation has been considered as repayment.

16. 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 15.10.2007 in Petition No. 49/2007 have been considered.

(b) Notional loan arising out of additional capital expenditure up to 31.3.2008 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 has been applied on the notional average loan during the year to arrive at the interest on loan.

17. 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-Opening 1047.35 1140.72 1146.57 Cumulative Repayment up to Previous Year/date of commercial operation 28.00 82.33 139.10 Net Loan-Opening 1019.35 1058.39 1007.47 Addition due to Additional Capitalisation 93.37 5.85 — Repayment during the year 54.34 56.76 72.88 Net Loan-Closing 1058.39 1007.47 934.59 Average Loan 1038.87 1032.93 971.03 Weighted Average Rate of Interest on Loan 7.79% 7.74% 7.74% Interest 80.90 80.00 75.14

18. The detailed calculations in support of the weighted average rate of interest are contained in Annexure attached.

DEPRECIATION

19. 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.

20. Depreciation allowed has been worked out as below:

(Rs. in lakh)

2006-2007 2007-2008 2008-2009 Rate of Depreciation 3.5619% 3.5558% 3.5559% Depreciable Value 1372.93 1436.71 1440.47 Balance Useful life of the asset — — — Remaining Depreciable Value 1347.60 1357.04 1304.04 Depreciation 54.34 56.76 56.91

ADVANCE AGAINST DEPRECIATION

21. 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

22. 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.

23. The petitioner has claimed Advance Against Depreciation of Rs. 99.71 lakh for the year 2008-2009 as the cumulative repayment is higher than Rs. 99.71 as against cumulative depreciation recovered up to 2008-2009. The Commission by its order dated 15.10.2007 in Petition No. 1/2007 had allowed Advance Against Depreciation of Rs. 110.09 lakh for the year 2008-2009.

24. 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 17 above.

(b) Repayment of notional loan during the year is considered as per para 17 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.

25. Details of the Advance Against Depreciation being allowed are given hereunder:

(Rs. in lakh)

2006-2007 2007-2008 2008-2009 1/10th of Gross Loan(s) 104.74 114.07 114.66 Repayment of the Loan 54.34 56.76 72.88 Minimum of the above 54.34 56.76 72.88 Depreciation during the year 54.34 56.76 56.91 (A) Difference 0.00 0.00 15.97 Cumulative Repayment of the Loan 82.33 139.10 211.98 Cumulative Depreciation/Advance against Depreciation 79.67 136.43 193.34 (B) Difference 2.67 2.67 18.64 Advance against Depreciation Minimum of (A) and (B) 0.00 0.00 15.97

OPERATION & MAINTENANCE EXPENSES

26. 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

27. O&M expenses as taken for the tariff calculations as per order dated 15.10.2007 in Petition No. 49/2007 have been considered, since line length and number of bays remain unchanged.

INTEREST ON WORKING CAPITAL

28. 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 15.10.2007 in Petition No. 49/2007 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 1 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.

29. 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 14.09 14.94 15.84 O & M expenses 2.54 2.64 2.74 Receivables 38.62 39.60 41.78 Total 55.25 57.18 60.35 Rate of interest 10.25% 10.25% 10.25% Interest 5.66 5.86 6.19

TRANSMISSION CHARGES

30. The revised transmission charges being allowed for the transmission assets for the period 2005-2006 to 2008-2009 are summarised below:

(Rs. in lakh)

2006-2007 2007-2008 2008-2009 Depreciation 54.34 56.76 56.91 Interest on Loan 80.90 80.00 75.14 Return on Equity 60.40 63.38 63.55 Advance against Depreciation 0.00 0.00 15.97 Interest on Working Capital 5.66 5.86 6.19 O & M Expenses 30.42 31.63 32.90 Total 231.72 237.63 250.66

31. 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.

32. 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 Eastern Region and shall be shared by the regional beneficiaries in accordance with the 2004 regulations.

33. This order disposes of Petition No. 142/2008.

Annexure

CALCULATION OF WEIGHTED AVERAGE RATE OF INTEREST ON LOAN (Rs. in Lakhs) Details of Loan 2005-2006 2006-2007 2007-2008 2008-2009 1 Bond-XII Gross Loan opening 32.00 32.00 32.00 32.00 Cumulative Repayment upto DOCO/previous year 0.00 2.67 5.33 8.00 Net Loan-Opening 32.00 29.33 26.67 24.00 Additions during the year 0.00 0.00 0.00 0.00 Repayment during the year 2.67 2.67 2.67 2.67 Net Loan-Closing 29.33 26.67 24.00 21.33 Average Loan 30.67 28.00 25.33 22.67 Rate of Interest 9.70% 9.70% 9.70% 9.70% Interest 2.97 2.72 2.46 2.20 Repayment Schedule 12 Annual instalments from 28.3.2006 2 Bond-XIII Option-I Gross Loan opening 402.00 402.00 402.00 402.00 Cumulative Repayment upto DOCO/previous year 0.00 0.00 33.50 67.00 Net Loan-Opening 402.00 402.00 368.50 335.00 Additions during the year 0.00 0.00 0.00 0.00 Repayment during the year 0.00 33.50 33.50 33.50 Net Loan-Closing 402.00 368.50 335.00 301.50 Average Loan 402.00 385.25 351.75 318.25 Rate of Interest 8.63% 8.63% 8.63% 8.63% Interest 34.69 33.25 30.36 27.46 Repayment Schedule 12 Annual instalments from 31.7.2006 3 Bond-XV Gross Loan opening 162.00 162.00 162.00 162.00 Cumulative Repayment upto DOCO/previous year 0.00 0.00 0.00 13.50 Net Loan-Opening 162.00 162.00 162.00 148.50 Additions during the year 0.00 0.00 0.00 0.00 Repayment during the year 0.00 0.00 13.50 13.50 Net Loan-Closing 162.00 162.00 148.50 135.00 Average Loan 162.00 162.00 155.25 141.75 Rate of Interest 6.68% 6.68% 6.68% 6.68% Interest 10.82 10.82 10.37 9.47 Repayment Schedule 12 Annual instalments from 23-2-2008 4 Bond-XVI Gross Loan opening 275.00 275.00 275.00 275.00 Cumulative Repayment upto DOCO/previous year 0.00 0.00 0.00 0.00 Net Loan-Opening 275.00 275.00 275.00 275.00 Additions during the year 0.00 0.00 0.00 0.00 Repayment during the year 0.00 0.00 0.00 27.50 Net Loan-Closing 275.00 275.00 275.00 247.50 Average Loan 275.00 275.00 275.00 261.25 Rate of Interest 7.10% 7.10% 7.10% 7.10% Interest 19.53 19.53 19.53 18.55 Repayment Schedule 10 Annual instalments from 18-2-2009 5 Bond-XVII (including loan for ACE 2006-2007) Gross Loan opening 81.00 81.00 214.39 214.39 Cumulative Repayment upto DOCO/previous year 0.00 0.00 0.00 0.00 Net Loan-Opening 81.00 81.00 214.39 214.39 Additions during the year 0.00 133.39 0.00 0.00 Repayment during the year 0.00 0.00 0.00 0.00 Net Loan-Closing 81.00 214.39 214.39 214.39 Average Loan 81.00 147.70 214.39 214.39 Rate of Interest 7.39% 7.39% 7.39% 7.39% Interest 5.99 10.91 15.84 15.84 Repayment Schedule 10 Annual Instalments from 22.9.2009 6 OBC Gross Loan opening 32.00 32.00 32.00 32.00 Cumulative Repayment upto DOCO/previous year 2.67 5.33 8.00 10.67 Net Loan-Opening 29.33 26.67 24.00 21.33 Additions during the year 0.00 0.00 0.00 0.00 Repayment during the year 2.67 2.67 2.67 2.67 Net Loan-Closing 26.67 24.00 21.33 18.67 Average Loan 28.00 25.33 22.67 20.00 Rate of Interest 8.60% 8.60% 8.60% 8.60% Interest 2.41 2.18 1.95 1.72 Repayment Schedule 12 Annual Instalments from 22.3.2005 7 Bond-XVIII (For ACE:2005-2006) Gross Loan opening 0.00 77.00 77.00 77.00 Cumulative Repayment upto DOCO/previous year 0.00 0.00 0.00 0.00 Net Loan-Opening 0.00 77.00 77.00 77.00 Additions during the year 77.00 0.00 0.00 0.00 Repayment during the year 0.00 0.00 0.00 0.00 Net Loan-Closing 77.00 77.00 77.00 77.00 Average Loan 38.50 77.00 77.00 77.00 Rate of Interest 8.15% 8.15% 8.15% 8.15% Interest 3.14 6.28 6.28 6.28 Repayment Schedule 12 annual inatalments from 9.3.2010 9 Bond-XXVII (For ACE 2007-2008) Gross Loan opening 0.00 0.00 0.00 8.35 Cumulative Repayment upto DOCO/previous year 0.00 0.00 0.00 0.00 Net Loan-Opening 0.00 0.00 0.00 8.35 Additions during the year 0.00 0.00 8.35 0.00 Repayment during the year 0.00 0.00 0.00 0.00 Net Loan-Closing 0.00 0.00 8.35 8.35 Average Loan 0.00 0.00 4.18 8.35 Rate of Interest 9.47% 9.47% Interest 0.40 0.79 Repayment Schedule 12 annual inatalments from 31.3.2012 Total Loan Gross Loan opening 984.00 1061.00 1194.39 1202.74 Cumulative Repayment upto DOCO/previous year 2.67 8.00 46.83 99.17 Net Loan-Opening 981.33 1053.00 1147.56 1103.57 Additions during the year 77.00 133.39 8.35 0.00 Repayment during the year 5.33 38.83 52.33 79.83 Net Loan-Closing 1053.00 1147.56 1103.57 1023.74 Average Loan 1017.17 1100.28 1125.57 1063.66 Rate of Interest 7.82% 7.79% 7.74% 7.74% Interest 79.55 85.68 87.17 82.31

Power Grid Corporation Of India Ltd. v. Bihar State Electricity Board

Structured Summary of the Opinion — Petition No. 142/2008

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Power Grid Corporation Of India Ltd. v. Bihar State Electricity Board

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