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Case Number

Petition No. 35/TT/2020

Attorney(S)

Shri A.K. Verma, PGCIL, Shri Mukesh Bhaskar, PGCIL, Shri Amit K. Jain, PGCIL and Shri Amit Yadav, PGCIL, Advocate, ;
Shri Abhishek Vikas, Advocate, BSPHCL, Shri Navin Prakash, Advocate, BSPHCL, Shri Umang Anand, Advocate, BSPHCL and Shri Jagat Bhushan Nidhi, Advocate, BSPHCL, Advocate,

Judges

P.K. Pujari
Chairperson
I.S. Jha, Member

Acts

(%) 7.93 7.92 7.97 8.04 8.03 Interest on Loan 493.50 447.75 403.63 359.99 312.27 Depreciation 95. Clause (1), (2) and (5) of Regulation 33 of the 2019 Tariff Regulations
31.3.2024 10913.24 52.28 10965.52 Page 47 of 58 Order in Petition No. 35/TT/2020 Debt-Equity Ratio 89. Regulation 18 of the 2019 Tariff Regulations
(i) of Regulation Page 37 of 58 Order in Petition No. 35/TT/2020 8(1) of the 2019 Tariff Regulations,
Regulation 24(a) of 2019 Tariff Regulations Total 271.28 Page 44 of 58 Order
SECTION 64 ELECTRICITY ACT 2003
sub-clause (ii) of clause (2) of Regulation 72
Clauses (4) and (3) of Regulation 70
INCOME TAX ACT 1961

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Smart Summary

Structured Summary — Order in Petition No. 35/TT/2020 (Central Electricity Regulatory Commission)

Factual and Procedural Background

The petition was filed by Power Grid Corporation of India Ltd. (the Petitioner) seeking truing up of transmission tariff for five transmission assets belonging to Eastern Region Strengthening Scheme VII (ERSS‑VII) for the 2014‑19 tariff period under the 2014 Tariff Regulations and tariff determination for the 2019‑24 tariff period under the 2019 Tariff Regulations. The assets are described in the petition and include various 400 kV bays and fixed line reactors at Chaibasa, Ranchi, Kharagpur and Purulia substations.

The Petitioner listed specific prayers including approval of trued up transmission tariff for 2014‑19 and tariff for 2019‑24, approval of completion cost and additional capitalisation, allowance for recovery/refund on account of change in applicable tax rates, reimbursement of petition filing and publication expenses, separate billing/recovery of licensee fee and RLDC charges, billing adjustments for changes in floating interest rates, treatment of initial spares and capital spares, recovery of GST if levied in future, and leave to file a separate petition for security expenses.

Procedurally: the petition was served on respondents and published under Section 64 of the Electricity Act, 2003; no comments from the public were received. BSPHCL (Respondent No.1) sought time to file a reply but did not file one within the time allowed. None of the Respondents filed replies. A hearing was held on 26.2.2020. The Commission disposed of the petition in this order.

Legal Issues Presented

Whether to approve the trued up Transmission Tariff for the 2014‑19 block and the transmission tariff for the 2019‑24 block for the assets covered in the petition.
Whether to approve the completion cost and additional capitalisation incurred during 2014‑19 and projected/claimed for 2019‑24.
Whether the Petitioner may recover the shortfall or refund excess Annual Fixed Charges on account of Return on Equity due to change in applicable tax rate (MAT/CIT) directly from beneficiaries.
Whether the Petitioner is entitled to reimbursement of petition filing fee and publication expenses as per Regulation 70 of the 2019 Tariff Regulations.
Whether the Petitioner may bill and recover Licence fee and RLDC fees and charges separately from respondents.
Whether the Petitioner may bill/adjust impact on Interest on Loan due to change in floating interest rate during 2019‑24 period.
Whether the Petitioner’s claims for initial spares and capital spares are allowable and to what extent (including application of the APTEL judgment on initial spares).
Whether transmission charges paid/payable due to COD mismatch with TBCB lines (mismatch/miscellaneous transmission charges) qualify as Additional Capital Expenditure (ACE) for inclusion in capital cost.
Whether GST on transmission, if later levied, can be recovered separately from respondents.

Arguments of the Parties

Petitioner’s Submissions (as recorded)

Prayed for approval of trued up transmission charges for 2014‑19 and tariff for 2019‑24 and for approval of completion cost and additional capitalisation for 2014‑19 and 2019‑24.
Submitted Revised Cost Estimates (RCE) approved by its Board (memorandum dated 7.5.2017) increasing apportioned capital cost from Rs. 7,135 lakh to Rs. 11,964 lakh for the combined assets and argued that the completion cost is within RCE apportioned cost (i.e., no cost over‑run when compared to RCE).
Provided detailed reasons for variation in capital cost including price variation (PV) attributable to inflation and market forces, additions/deletions of items (eg. GIS bus duct, tie bay at Purulia), and procurement of additional items for shunt reactors (online dissolved gas, moisture analyser, oil drying system).
Claimed Interest During Construction (IDC) with auditor certificates; provided calculations and year‑wise IDC discharge details.
Claimed Incidental Expenditure During Construction (IEDC) and submitted that entire IEDC discharged as on COD; claimed initial spares and sought revision in light of APTEL judgment dated 14.9.2019 in Appeal No.74/2017.
Proposed additional capitalisation (ACE) for balance and retention payments and for certain projected items for 2019‑20 (including transmission charges claimed to be payable to a TBCB line for COD mismatch in Asset‑I), and sought that those be admitted under relevant provisions of 2014/2019 Regulations.
Asked for permission to recover filing/publication expenses and to bill licence fee and RLDC fees/charges separately; sought that change in floating interest rate impacts on Interest on Loan be adjusted/recovered from beneficiaries; sought separate petitions for security expenses and capital spares claims at end of tariff block.
Provided detailed forms and computations for IoL, RoE (claimed MAT applicability and effective tax rates), depreciation, O&M, IWC and annual transmission charges for 2014‑19 truing up and proposed amounts for 2019‑24.

Respondents’ Position

BSPHCL (Respondent No.1) prayed for time to file reply during hearing but did not file a reply within the time allowed.
No other Respondent filed replies. Therefore, the opinion records no detailed counter‑arguments from respondents.

Table of Precedents Cited

The table below catalogues authorities and prior Commission/APTEL decisions expressly cited in the opinion and indicates the purpose for which they were cited and how the Commission applied them.

Precedent	Rule or Principle Cited For	Application by the Court
APTEL judgment dated 14.9.2019 in Appeal No. 74 of 2017	Initial spares are to be allowed as a percentage of the project cost as a whole (interpretation of Regulation for initial spares).	The Commission applied this judgment to compute and allow initial spares for the instant assets as a percentage of the project cost as a whole, adjusted claimed amounts, and reduced excess initial spares (Rs.72.68 lakh) from Asset‑V capital cost.
CERC order dated 24.7.2017 in Petition No. 210/TT/2016	Earlier capital cost admission and restrictions on cost over‑run (restriction of capital cost where RCE not submitted); directions to petitioner to justify cost over‑run.	The Commission referred to that order for prior restrictions on capital cost of Assets I–IV, considered the petitioner’s subsequent submission of RCE, and reconsidered the previously disallowed components in light of the RCE, admitting costs within RCE limits.
CERC order dated 3.12.2018 in Petition No. 63/TT/2018	Earlier capital cost and treatment for Asset‑V including time over‑run not condoned.	Used as prior determination for Asset‑V to note that time over‑run of 125 days was not condoned; referenced for treatment of IDC and capitalisation for Asset‑V and for comparing earlier allowed amounts.
CERC order dated 3.4.2018 in Petition No. 110/MP/2016	Direction regarding payment of transmission charges for COD mismatch between line and associated bays.	The Commission recalled this direction when considering the petitioner’s claim to treat mismatch transmission charges as ACE and rejected the claim as ACE (but kept the non‑consideration subject to the outcome of the petitioner’s appeal against that order).
CERC order dated 1.9.2017 in Petition No. 290/TT/2018; CERC order dated 29.3.2019 in Petition No. 290/TT/2018; Review order dated 13.1.2020 on Review Petition No. 8/RP/2019	Treatment of mismatch claims and the Commission's approach to claims for mismatch costs in a prior case (DMTCL). The subsequent orders show the Commission rejecting such claims on review.	The Commission cited this line of decisions as a precedent to demonstrate its consistent position that mismatch cost should be borne by the defaulter and cannot be claimed as transmission charges/ACE; this supported rejection of the petitioner’s claim for Rs.219 lakh as ACE (subject to outcome of the petitioner’s appeal).
CERC order dated 27.4.2020 in Petition No. 274/TT/2019	Determination of effective tax (MAT) rate for grossing up RoE for the petitioner (used for truing up purposes).	The Commission adopted the MAT‑based effective tax rates as used in that order for grossing up RoE for the 2014‑19 truing up exercise and used notified MAT rates for the grossing up in accordance with 2014 Regulations.

Court's Reasoning and Analysis

The Commission's analysis proceeded in structured steps reflecting procedural facts, admitted project approvals, submissions by the petitioner, statutory/regulatory provisions and relevant precedents:

Procedural and scope review: the Commission noted service and publication compliance under Section 64, absence of public comments and absence of respondent replies (BSPHCL sought time but did not file reply). Having heard petitioner representatives and material on record, the Commission proceeded to dispose of the petition.
Project approvals and RCE: The Investment Approval (IA) and original apportioned approved cost (Rs.7,135 lakh) were recorded. The Petitioner submitted a Revised Cost Estimate (RCE) approved by its Board on 7.5.2017 raising apportioned approved capital cost to Rs.11,964 lakh. The Commission compared completion cost including ACE against the RCE apportioned approved cost and found that completion costs were within the RCE apportioned cost; therefore, components earlier disallowed (in earlier orders) could be reconsidered and allowed where covered by RCE.
Cost variation justification: The Petitioner provided itemised explanations for price variation (indices and inflationary trends), additions/deletions of items (e.g., additional GIS bus duct and tie bay at Purulia resulting in extra cost; addition of online DGA/moisture analyzers and oil drying systems), and allocation of PV and additions across assets. The Commission accepted these asset‑wise reasons insofar as the total completion cost fell within RCE apportioned approval.
IDC and IEDC: IDC was claimed with auditor certificates and year‑wise details. The Commission computed admissible IDC on cash basis using the loan information in Form‑9C and the petitioner’s IDC computation sheet. Undischarged IDC as on COD was treated as ACE in the year it was discharged. Additional capitalisation loans were not considered for IDC calculation (IDC calculation restricted to loans up to COD). Certain discrepancies in Asset‑III IDC data led the Commission to rely on submitted IDC calculations and Form‑7 information for that asset. IEDC claimed (within 10.75% of Hard Cost as per Abstract Cost Estimate) was allowed.
Initial spares: The petitioner claimed initial spares and relied on APTEL judgment dated 14.9.2019. The Commission applied that APTEL judgment (which directs initial spares to be allowed as a percentage of project cost as a whole) and Regulation 13(d) of the 2014 Tariff Regulations. It computed allowable initial spares on the project‑wide basis and adjusted excess claimed spares (Rs.72.68 lakh) by reducing Asset‑V capital cost accordingly.
Reapportionment to IT equipment and depreciation: The Petitioner attempted to segregate IT equipment at truing up and claim depreciation at 15% for IT equipment from 1.4.2014. The Commission declined to permit reapportionment/re‑apportionment of already admitted capital expenditure during truing up, noting that Regulation 8(1) of the 2014 Tariff Regulations restricts truing up to capital expenditure already admitted by the Commission after prudence check. Therefore, depreciation for IT equipment as considered earlier (5.28% as part of Sub‑station head) was retained for the 2014‑19 truing up; separate treatment for IT equipment at 15% was allowed prospectively in 2019‑24 in accordance with the 2019 Regulations.
Additional Capital Expenditure (ACE): The petitioner claimed ACE (balance/retention payments and other items) under Regulation 14(1)(i) of the 2014 Tariff Regulations for 2014‑19 and under Regulation 24/25 of the 2019 Tariff Regulations for 2019‑24. The Commission admitted ACE for 2014‑19 where supported and within cut‑off date, subject to prudence check and audit certificate. For 2019‑24 the Commission admitted projected ACE of Rs.52.28 lakh for 2019‑20 (breakup across assets recorded) subject to true up and directed supporting contractual details to be filed at true up.
Treatment of mismatch transmission charges: Petitioner claimed Rs.219 lakh as ACE for transmission charges payable to a TBCB line (mismatch between CODs). The Commission, relying on its prior decisions in related petitions (cited examples involving DMTCL) consistently held mismatch cost should be borne by the defaulter and cannot be claimed as transmission charges/ACE. Accordingly, it rejected the claim for Rs.219 lakh as ACE, while noting the petitioner has an appeal pending against the earlier order and making non‑consideration subject to that appeal's outcome.
Capital cost determination and truing up for 2014‑19: The Commission tabulated allowed apportioned capital cost as on COD, adjustments for disallowed IDC or undischarged IDC, ACE admitted, and arrived at total capital cost as on 31.3.2019 for each asset and the combined asset figure (trued‑up capital cost of Rs. 10,913.24 lakh as admitted on 1.4.2019 for combined assets).
Debt‑Equity and financing: The Commission applied a normative debt:equity ratio of 70:30 for capital cost at COD and for ACE as per Regulation 19 of 2014 Regulations (and continuation under the 2019 Regulations for projects declared COD prior to 1.4.2019). The normative debt/equity amounts for each asset and for combined asset were computed accordingly.
Interest on Loan (IoL): IoL was computed using Regulation 26 of the 2014 Tariff Regulations for 2014‑19 truing up and Regulation 32 of the 2019 Tariff Regulations for 2019‑24. The Commission used weighted average rates of interest derived from actual interest paid on various loans (per the compendium) and used normative methodology (repayment equal to depreciation for the period) and computed IoL year‑wise for assets and for combined asset for 2019‑24.
Return on Equity (RoE) and tax gross‑up: For 2014‑19 the Commission adopted effective MAT rates (as per its earlier order in Petition No.274/TT/2019) to gross up RoE. For 2019‑24 the Commission considered MAT applicability for the petitioner and used the MAT figures for grossing up base RoE (15.50%) to a pre‑tax RoE rate for each year; it noted truing up of grossed‑up RoE would be done at the end of each financial year as per Regulation 31 of 2019 Regulations.
Depreciation: The Commission applied the depreciation methodology in the 2014 Regulations for truing up 2014‑19 and 2019 Regulations for 2019‑24. It rejected the petitioner’s attempt to re‑apportion capital cost to IT equipment for 2014‑19 and to claim higher depreciation retrospectively; it retained depreciation rates previously allowed for IT equipment in the earlier orders for the truing up period and computed depreciation annually on straight‑line basis considering the admitted gross block and remaining life/WAL.
Effective COD (E‑COD) and Weighted Average Life (WAL): The Commission computed an Effective COD for the combined asset (14.1.2017) by weighting the admitted capital cost of each asset and the days from the latest COD. It determined elapsed life as on 1.4.2019 and computed a Weighted Average Life (WAL) of 25 years using element‑wise admitted capital cost and life per 2019 Tariff Regulations; remaining useful life as on 31.3.2019 was determined as 23 years for depreciation calculations for 2019‑24.
O&M, Interest on Working Capital (IWC) and annual charges: O&M expenses were allowed per norms under the respective Tariff Regulations (2014 for 2014‑19 truing up and 2019 Regulations for 2019‑24). IWC was computed as per regulations (components: maintenance spares @15% of O&M; O&M for one month; receivables equivalent to 45 days of annual fixed cost for 2019‑24; rate of interest on working capital considered as normative bank rate/MCLR+350 bps as on relevant date). Using admitted capital cost, RoE, IoL, depreciation, IWC and O&M the Commission determined annual transmission charges after truing up for 2014‑19 by asset and the annual fixed charges for the combined asset for 2019‑24.
Miscellaneous reliefs and directions: The Commission allowed reimbursement of filing fee and publication expenses to the petitioner (to be recovered from beneficiaries on pro‑rata basis in accordance with Regulation 70 of 2019 Regulations). It allowed recovery of licence fee and RLDC fees/charges in terms of Regulation 70 clauses. It considered the petitioner’s GST prayer premature (GST not levied on transmission service at present). Security expenses were not claimed in this petition; the petitioner may file separate petitions for security expenses and consequential IWC and those will be dealt with under 2019 Regulations. Capital spares claims to be dealt with per 2019 Regulations at appropriate time/true up.

Holding and Implications

Holding (core ruling):

THE COMMISSION DISPOSED OF PETITION NO. 35/TT/2020 and approved the trued up capital cost, components of annual fixed charges for the 2014‑19 tariff period and the annual fixed charges (tariff) for the 2019‑24 tariff period for the assets covered in the petition subject to the specific adjustments and conditions recorded in the order.

Direct consequences and orders specific to parties (as recorded in the opinion):

The Commission admitted revised capital costs and additional capitalisation up to 31.3.2019 within the RCE apportioned approved limits and allowed the IDC, IEDC and ACE components subject to the computations and restrictions explained in the order (with detailed tables and numbers provided by asset and year in the order).
Initial spares were allowed in accordance with the APTEL judgment dated 14.9.2019 and excess initial spares of Rs.72.68 lakh were adjusted from Asset‑V capital cost.
The petitioner’s attempt to re‑apportion capital cost to IT equipment for the 2014‑19 truing up and to claim higher depreciation retrospectively was rejected; depreciation earlier allowed (including IT equipment within Sub‑station head at the earlier rate) was retained for truing up of 2014‑19; IT equipment was treated separately for depreciation prospectively in 2019‑24 as per 2019 Regulations.
The petitioner’s claim to treat Rs.219 lakh (transmission charges payable to TBCB line for COD mismatch) as Additional Capital Expenditure was rejected; the non‑consideration is made subject to the outcome of the petitioner’s pending appeal against the earlier order under which the mismatch liability was directed.
The Commission computed and approved year‑wise Annual Transmission Charges after truing up for 2014‑19 (with asset‑wise tables) and approved annual fixed charges for the combined asset for 2019‑24 (detailed year‑wise figures provided in the order).
The petitioner was allowed reimbursement of petition filing fee and publication expenses directly from beneficiaries on pro‑rata basis, and allowed to bill licence fee and RLDC fees and charges in accordance with the relevant regulations.
Security expenses and capital spares claims were to be addressed by separate petitions/claims under the 2019 Tariff Regulations and subject to true up.

Broader legal implications:

The order applies established regulatory principles (as set out in the 2014 and 2019 Tariff Regulations) and affirmative application of the APTEL judgment regarding initial spares. The Commission followed its own prior decisions regarding mismatch costs and earlier capital cost restrictions (subject to reconsideration where petitioner produced RCE). The opinion does not announce a novel precedent beyond the application of these authorities and regulations; it implements regulatory methodology (truing up, RCE reliance, IDC/IEDC/ACE/initial spares treatment, debt:equity norm, RoE gross up for MAT, IoL and IWC calculation) as applied to the facts and data submitted in the petition.

Note: This summary is prepared strictly from the contents of the provided opinion. Numbers, calculations and procedural findings reflect the data, computations and conclusions as set out in the opinion itself.

This order concludes Petition No. 35/TT/2020.

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Power Grid Corporation Of India Limited, Saudamini v. Bihar State Power (Holding) Company Ltd. And Others

The present petition has been filed by Power Grid Corporation of India Ltd. (hereinafter referred to as the Petitioner) for truing up of transmission tariff of Asset I: 2 Nos. of 400 kV bays along with 1 X 63 MVAR (fixed) line reactor at Chaibasa Sub-station, Asset II: 1 X 63 MVAR (fixed) line reactor at Chaibasa Sub-station, Asset III: 2 Nos. of 400 kV line bays along with 2 X 50 MVAR (fixed) line reactor at Ranchi 765/400 kV Sub-station, Asset IV: 2 Nos. of 400 kV line bays at Kharagpur Sub-station, Asset V: 2 Nos. of 400 kV line bays at Purulia Sub-station (hereinafter referred to as transmission assets) under Eastern Region Strengthening Scheme VII (hereinafter referred to as transmission Page 3 of 58 Order in Petition No. 35/TT/2020 Scheme) in Eastern Region for 2014-19 tariff period under Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014 (hereinafter referred to as the 2014 Tariff Regulations) and tariff determination for 2019-24 tariff period under Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019 (hereinafter referred to as the 2019 Tariff Regulations).

2. The Petitioner has made the following prayers in this petition: -

1) Approve the trued up Transmission Tariff for 2014-19 block and transmission tariff for 2019-24 block for the assets covered under this petition, as per para 10.2 and 11.0 above.

2) Approve the Completion cost and additional capitalization incurred during 2014-

19 & 2019-24.

3) Allow the Petitioner to recover the shortfall or refund the excess Annual Fixed Charges, 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 as provided in Tariff Regulation 2014 and Tariff regulations 2019 as per para 10.2 and 11.0 above for respective block.

4) Approve the reimbursement of expenditure by the beneficiaries towards petition filing fee, and expenditure on publishing of notices in newspapers in terms of Regulation 70 (1) Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019, and other expenditure ( if any) in relation to the filing of petition.

5) Allow the Petitioner to bill and recover Licensee fee and RLDC fees and charges, separately from the respondents in terms of Regulation 70 (3) and (4) Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019.

6) Allow the Petitioner to bill and adjust impact on Interest on Loan due to change in Interest rate on account of floating rate of interest applicable during 2019-24 period, if any, from the respondents.

7) Allow the Petitioner to claimed initial spares project as whole.

8) Allow the Petitioner to file a separate petition before Honble Commission for claiming the overall security expenses and consequential IOWC on that security expenses as mentioned at para 11.6 above.

9) Allow the Petitioner to claim the capital spares at the end of tariff block as per actual. Page 4 of 58 Order in Petition No. 35/TT/2020 10) Allow the Petitioner to bill and recover GST on Transmission Charges separately from the respondents, if GST on transmission is levied at any rate in future. Further, any taxes including GST and duties including cess etc. imposed by any statutory/Govt./municipal authorities shall be allowed to be recovered from the beneficiaries. and pass such other relief as the Hon'ble Commission deems fit and appropriate under the circumstances of the case and in the interest of justice

3. The Respondents are the transmission and distribution licensees, who are procuring transmission services from the Petitioner, mainly beneficiaries of Eastern Region. Background

4. The Investment Approval (IA) and expenditure sanction for the transmission project was accorded by the Board of Directors of the Petitioner vide Memorandum reference C/CP/ERSS-IV dated 24.3.2015 at an estimated capital cost of 7135 Lakh including IDC of 396 lakh based on December, 2014 price level.

5. The scope of the project covered under Eastern Region Strengthening Scheme VII is as under:-

(i) 2 Nos. of 400 kV bays along with 1 X 63 MVAR (fixed) line reactor at Chaibasa Sub-station

(ii) 1 X 63 MVAR (fixed) line reactor at Chaibasa Sub-station

(iii) 2 Nos. of 400 kV line bays along with 2 X 50 MVAR (fixed) line reactor at Ranchi 765/400 kV Sub-station

(iv) 2 Nos. of 400 kV line bays at Kharagpur Sub-station

(v) 2 Nos. of 400 kV line bays at Purulia Sub-station Page 5 of 58 Order in Petition No. 35/TT/2020

6. The Petitioner, in the instant petition, has submitted Revised Cost Estimates (RCE) approved by the Board of Directors of the Petitioner vide Memorandum reference C/CP/PA1718070A-RCE001 dated 7.5.2017 at an estimated capital cost of 11964 lakh including IDC of 225 lakh for all the 5 assets. Details of apportioned approved capital cost claimed by the Petitioner is as under: ( in lakh) Asset FR Apportioned Approved Capital Cost Revised apportioned capital cost as per RCE Asset-I 1815.56 2712.91 Asset-II 612.44 1137.53 Asset-III 1892.11 3335.50 Asset-IV 1075.47 1062.13 Asset-V 1739.42 3715.93 Total 7135.00 11964.00

7. The project was scheduled to be put into commercial operation within 24 months from the date of the IA and accordingly the scheduled COD was 23.3.2017.

8. The details of the assets, their COD and the petitions under which the transmission tariff of the assets was determined are as under:- Name of Asset COD Remark Asset I - 2 Nos. of 400 kV bays alongwith 1 X 63 MVAR (fixed) line reactor at Chaibasa Sub-station (POWERGRID) 19.6.2016 Order dated 24.7.2017 in Petition No. 210/TT/2016 Asset II - 1 X 63 MVAR (fixed) line reactor at Chaibasa Sub-station (POWERGRID) 27.10.2016 Asset III 2 Nos. of 400 kV line bays along with 2 X

50 MVAR (fixed) line reactor at Ranchi 765/400 kV Sub-station (POWERGRID) 7.1.2017 Asset IV 2 Nos. of 400 kV line bays at Kharagpur Sub-station (POWERGRID) 14.11.2016 Asset V 2 Nos. of 400 kV line bays at Purulia Sub- station (POWERGRID) 26.07.2017 Order dated 3.12.2018 in Petition No. 63/TT/2018 Page 6 of 58 Order in Petition No. 35/TT/2020

9. There is no time over-run in case of Assets-I, II, III and IV. However, there is time over-run of 125 days in respect of Asset-V which was not condoned by the Commission in the order dated 3.12.2018 in Petition No. 63/TT/2018.

10. The Petitioner has served the petition on the Respondents and notice has also been published in the newspapers in accordance with Section 64 of the Electricity Act, 2003 (hereinafter referred to as the Act). No comments or suggestions have been received from the general public in response to the notices published in the newspapers by the Petitioner. The hearing in this matter was held on 26.2.2020.

11. During the hearing held on 26.2.2020, BSPHCL, Respondent No.1, prayed for some time to file reply to the instant petition and the same was granted. However, no reply has been filed by the BSP(H)CL within the time allowed.

12. None of the Respondents have filed their reply. Having heard the representatives of the Petitioner and having perused the material on record, we proceed to dispose of the petition.

13. The Petitioner has filed the instant petition for truing up of tariff of the 2014-19 tariff period in accordance with Regulation 8 of the 2014 Tariff Regulations.

14. In compliance to the direction issued in earlier order regarding the system study for interim arrangement for Kharagpur-Chaibasa line, the Petitioner has submitted that no specific system study was carried out because the same has already been approved in a CEA meeting dated 29.3.2016, SCM dated Page 7 of 58 Order in Petition No. 35/TT/2020 13.6.2016 and ERPC Meetings dated 24th and 25th June 2016. The interim arrangement at Kharagpur Sub-station was removed on 12.11.2016. Truing-up of Annual Fixed Charges for 2014-19 tariff period

15. The details of the transmission charges claimed by the Petitioner for the aforementioned assets are as under: ( in lakh) Asset-I Particulars 2016-17 (Prorata) 2017-18 2018-19 Depreciation 65.57 117.48 129.89 Interest on Loan 69.88 113.85 114.67 Return on Equity 70.21 127.30 141.56 Interest on working capital 9.76 14.78 15.61 O & M Expenses 100.88 133.02 137.42 Total 316.30 506.43 539.15 ( in lakh) Asset-II Particulars 2016-17 (Prorata) 2017-18 2018-19 Depreciation 16.13 40.42 41.92 Interest on Loan 17.35 40.31 38.21 Return on Equity 18.05 45.25 47.06 Interest on working capital 1.12 2.75 2.77 O & M Expenses 0.00 0.00 0.00 Total 52.65 128.73 129.96 ( in lakh) Asset-III Particulars 2016-17 (Prorata) 2017-18 2018-19 Depreciation 31.15 151.73 167.72 Interest on Loan 32.42 146.84 149.75 Return on Equity 34.23 165.29 183.67 Interest on working capital 3.69 17.07 18.11 O & M Expenses 29.62 133.02 137.42 Total 131.47 613.95 656.67 ( in lakh) Asset-IV Particulars 2016-17 (pro-rata) 2017-18 2018-19 Depreciation 9.63 50.15 54.12 Interest on Loan 10.17 49.90 49.65 Return on Equity 10.78 56.15 60.74 Page 8 of 58 Order in Petition No. 35/TT/2020 Interest on working capital 3.21 10.36 10.78 O & M Expenses 48.67 133.02 137.42 Total 82.46 299.58 312.71 ( in lakh) Asset-V Particulars 2017-18 (Pro-rata) 2018-19 Depreciation 103.23 181.45 Interest on Loan 102.03 170.30 Return on Equity 115.58 203.70 Interest on working capital 10.87 17.93 O & M Expenses 77.55 117.46 Total 409.26 690.87

16. The details of the interest on working capital claimed by the Petitioner are as under:- ( in lakh) Asset Particulars 2016-17 (Pro-rata) 2017-18 2018-19 I Approved Interest on Working Capital (IWC) 9.20 13.23 13.47 Revised IWC based on truing up 9.76 14.78 15.61 II Approved Interest on Working Capital (IWC) 0.94 2.15 2.09 Revised IWC based on truing up 1.12 2.75 2.77 III Approved Interest on Working Capital (IWC) 4.61 13.57 13.62 Revised IWC based on truing up 3.69 17.07 18.11 IV Approved Interest on Working Capital (IWC) 3.27 10.71 11.10 Revised IWC based on truing up 3.21 10.36 10.78 V Approved Interest on Working Capital (IWC) - 10.38 (Pro-rata) 17.30 Revised IWC based on truing up - 10.87 (Pro-rata) 17.96 Capital Cost

17. The Commission vide order dated 24.7.2017 in Petition No. 210/TT/2016 and order dated 3.12.2018 in Petition No. 63/TT/2018 allowed capital cost as on COD and Additional Capital Expenditure in respect of the instant assets as under: Page 9 of 58 Order in Petition No. 35/TT/2020 ( in lakh) Asset Apportioned approved capital cost as per FR Expenditure up to DOCO (as admitted) Additional capitalisation (Admitted) Total capital cost as on 31.3.2019 (Allowed) 2016-17 2017-18 2018-19 Asset-I 1815.56 1028.60 651.51 96.77 0.00 1776.88 Asset-II 612.44 595.64 0.00 0.00 0.00 595.64 Asset-III 1892.11 1835.05 0.00 0.00 0.00 1835.05 Asset IV 1075.47 75.80 847.46 139.84 0.00 1063.10 Asset V 1739.42 2267.82 0.00 799.04 387.24 3454.10 Total 7135.00 5802.91 1498.97 1035.65 387.24 8724.77

18. The details of apportioned approved capital cost, capital cost as on COD and Additional Capital Expenditure incurred up to 31.3.2019 as claimed by the Petitioner for the instant transmission assets are as under: ( in lakh) Asset Approved Capital Cost (Apportione

d) as per FR Revised apportionment of the capital cost in the instant petition as per Capital cost as on COD Additional capitalisation (claimed) Total capital cost as on 31.3.2019 (claimed) 2016-17 2017-18 2018-19 Asset-I 1815.56 2712.91 1059.59 912.44 362.89 106.8 2441.72 Asset-II 612.44 1137.53 675.78 77.67 23.98 33.01 810.44 Asset-III 1892.11 3335.50 2437.66 156.23 404.54 200.5 3198.93 AssetIV 1075.47 1062.13 87.96 788.36 146.84 3.57 1026.73 Asset-V 1739.42 3715.93 2295.45 0.00 1141.08 0.00 3436.53 Total 7135.00 11964.00 6556.44 1934.7 2079.33 343.88 10914.35 Cost Over-run

19. The Commission, in respect of Assets I to IV, vide order dated 24.7.2017 in Petition No 210/TT/2016 held as under:

21. We have considered the submissions of the petitioner regarding cost over-run. The petitioner has not submitted the RCE and has also not submitted any justification for going ahead with such high cost discovered in bids and not going for re-bidding. Accordingly, the capital cost of the instant assets is restricted to the apportioned approved cost of individual assets. The capital cost for Assets-I, II, III and IV have been restricted by `880.63 lakh, `525.09 lakh, `1270.80 lakh and `60.16 lakh respectively. However, the petitioner is directed to submit the detailed reasons for asset wise cost over-run alongwith the approval of cost over-run by the competent authority at the time of truing-up

20. The Petitioner has now submitted the Revised Cost Estimates (RCE) for "Sub-station extension work associated with Eastern Region Strengthening Scheme - VII (ERSS-VII) duly approved by the Board of Directors of Petitioner in Page 10 of 58 Order in Petition No. 35/TT/2020 its 342nd meeting held on 29.6.2017 (Communicated vide memorandum no. C/CP/PA 1718-07-0A-RCE001). The Petitioner has further submitted that there is no cost over-run in case of the instant assets when compared to the RCE apportioned approved capital cost.

21. The Petitioner has submitted reasons for variation in capital cost estimate and the same are as under: Price Variation (PV) (Net increase of Rs. 38.80 crore) There is an increase in the cost of the project by Rs. 38.80 crore on this account, which works out to 54.38 % of the approved cost. In regard to PV from DPR to LOA, it is submitted that the Contracts for various packages under this project were awarded hereunder:

a) Extension of 400/220 kV Chaibasa substation and 400 kV Ranchi substations were awarded by POWERGRID and

b) Extension of 400/220 kV Purulia PSPP GIS (new) and 400/220 kV Kharagpur substations were awarded by WBSETCL on behalf of POWERGRID on deposit work basis. Based on above award, a price variation of Rs. 30.65 crore has been incurred from the time of approval of project till award of various contracts (DPR to LOA) based on prices received as per competitive bidding. Further, it may be submitted that a price variation Rs. 8.15 crore has been incurred/ likely to be incurred under contract on the basis of provision of respective contracts. The reasons for the same is attributable to inflationary trends prevalent during execution of project from March, 2015 (first OBD under the project) to August, 2016 (period of major supplies), as may be seen from the trend of variation in indices of various major raw materials as indicated below: NAME OF INDICES Feb 15 (one month prior to first OBD) March 2015 March 2016 August 2016 % Increase from first CRGO 226000 226050 226050 226050 0.02% Zinc 156900 155600 143900 173300 10.45% Ball Clay 3600 3600 4575 4575 27.08% WPI 175.6 176.1 175.3 183.1 4.27% High Speed Diesel 188.4 203.2 183.3 201.2 6.79% Cement & Lime 174 177.7 175.7 177.1 1.78% CPI 253 254 268 278 9.88% Thus the price variation under the project is attributable to the inflationary trend prevailing during execution of project and also market forces prevailing at the time of bidding process of various packages. Page 11 of 58 Order in Petition No. 35/TT/2020 Addition & deletion of Items (Net Increase of Rs. 15.86 Crore) There is an increase in the cost of the project by Rs. 15.86 crore on this account, which works out to 22.24 % of the approved cost as per the details given hereunder: Additional cost towards GIS bus duct and Tie bay at 400 kV Purulia PSPP (new), WBSETCL: Based on the requirement of West Bengal State Electricity Distribution Company Limited (WBSEDCL), the line take off point for 400 kV D/C Purulia PSPP (West Bengal) Ranchi line was considered as Purulia PSPP, in the DPR, wherein the GIS switchyard was located about 75 meters from GIS building and the total duct length was about 500 meters. Further, WBSEDCL Purulia PSPP GIS switchyard is having double main bus arrangement. Accordingly, cost was worked out in the DPR. Meanwhile termination of 400 kV D/C Ranchi (New) - Purulia PSPP (New) (West Bengal) being implemented under TBCB, was changed from Purulia PSPP (WBSEDCL) switchyard to Purulia PSPP (new) GIS substation of WBSETCL. The space allocated for Ranchi bays at Purulia (WBSETCL) was at a distance of about 250 meters from GIS hall requiring about 1600 meters of bus duct. POWERGRID took up the issue with WBSETCL/CEA for changing the bay location, however CEA has taken a decision not to revise the termination point as considerable time was already elapsed in finalizing the same. Further, Purulia (WBSETCL) substation has a one and half breaker scheme which also required additional tie bay. This has resulted in additional expenditure of about Rs. 13.91 Crore. Addition of the few items in Shunt Reactor Unit: During implementation of the project, online dissolved gas, moisture analyzer and online insulating oil drying system has been procured for reactors which were not envisaged during DPR. This has resulted in additional cost of Rs. 2.35 Crore. Deletion of Civil work: At the time of Preparation of DPR Rs 20 lakhs each for Purulia and Kharagpur substation was envisaged for miscellaneous civil works. However, during execution the same was reviewed and deleted at the time of Revised cost estimate. This has resulted in a decrease of about Rs. 0.40 Crore in the cost of the project. On account of the above reasons, total cost of the project has increased by Rs 15.86 crore.

22. The Petitioner in line with the direction issued in order dated 24.7.2017 in Petition No 210/TT/2016 has submitted reasons for asset wise cost (including that for Asset-V which was covered in order dated 3.12.2018 in Petition No. Page 12 of 58 Order in Petition No. 35/TT/2020 63/TT/2018 and by then RCE was approved by the Board of Directors of the Petitioner) over-run vide affidavit dated 11.3.2020 and the same are as under: It is submitted that as already mentioned in instant petition there is price variation amounting to Rs. 3880.15 Lakh for all subject assets. The Assets wise bifurcation is tabulated below: ( in lakh) Name of Asset From DPR to LOA PV as per contract provision Total Asset-I 677.86 342.21 1020.07 Asset-II 397.00 200.24 597.24 Asset-III 1133.42 257.26 1390.68 Asset-IV 132.63 8.68 141.31 Asset-V 724.09 6.76 730.85 Total 3065.00 815.15 3880.15 Further there is additional of equipment of Rs.1623.02 Lakh and deletion of civil work of Rs. 40.00 Lakh (deletion) asset wise bifurcation is tabulated below: ( in lakh) Name of Asset Addition in scope Deletion in scope Reduction in IDC/IEDC Asset-I 65.00* 0 187.72 Asset-II 70.00* 0 142.15 Asset-III 100.00* 0 47.29 Asset-IV 0.00 20.00@ 134.65 Asset-V 1391.00# 20.00@ 125.39 Total 1626.00 40.00 637.20 *Addition of the few items in Shunt Reactor Unit: During implementation of the project, online dissolved gas, moisture analyser and online insulating oil drying project has been procured for reactors which were not envisaged during DPR. This has resulted in additional cost of 235.00 Lakh. # Additional cost 1391.00 Lakh towards GIS bus duct and Tie bay at 400 kV Purulia PSPP (new), WBSETCL: Based on the requirement of West Bengal State Electricity Distribution Company Limited (WBSEDCL), the line take off point for 400 kV D/C Purulia PSPP (West Bengal) Ranchi line was considered as Purulia PSPP, in the DPR, wherein the GIS switchyard was located about 75 meters from GIS building and the total duct length was about 500 meters. Further, WBSEDCL Purulia PSPP GIS switchyard is having double main bus arrangement. Accordingly, cost was worked out in the DPR. Meanwhile, termination of 400 kV D/C Ranchi (New) - Purulia PSPP (New) (West Bengal) being implemented under TBCB, was changed from Purulia PSPP (WBSEDCL) switchyard to Purulia PSPP (new) GIS Sub-station of WBSETCL. The space allocated for Ranchi bays at Purulia (WBSETCL) was at a distance of about

250 meters from GIS hall requiring about 1600 meters of bus duct. POWERGRID took up the issue with WBSETCL/CEA for changing the bay location, however CEA has taken a decision not to revise the termination point as considerable time was already elapsed in finalizing the same. Further, Purulia (WBSETCL) Sub-station has a one and half breaker scheme which also required additional tie bay. @Deletion of Civil work: At the time of Preparation of DPR 20 lakh each for Purulia and Kharagpur Sub-station was envisaged for miscellaneous civil works. Page 13 of 58 Order in Petition No. 35/TT/2020 However, during execution the same was reviewed and deleted from the RCE. This has resulted in a decrease of about 40 Lakh in the cost of the project.

23. We have considered the submissions of the petitioner. The total apportioned approved cost as per RCE in respect of assets covered under the instant petition as mentioned in the Table in Paragraph 11 above, the completion cost including additional capitalization is within the apportioned approved capital cost as per RCE. Therefore, there is no cost over-run in respect of the instant assets. Accordingly, components earlier disallowed are now allowed for respective assets and dealt with in the succeeding paragraphs of the order. Interest During Construction (IDC)

24. The Petitioner has claimed IDC for the instant assets and has submitted the Auditors Certificates in support of the same. The Petitioner has submitted computation of IDC along with the year-wise details of the IDC discharged.

25. The IDC allowed in the previous order dated 24.7.2017 in Petition No. 210/TT/2016 for Asset-I, Asset-II, Asset-III and Asset-IV was 6.11 lakh, 7.01 lakh, 19.02 lakh and 3.72 lakh respectively which was subject to review at the time of truing up after considering actual discharge of IDC. The IDC allowed in the previous order dated 3.12.2018 in Petition No. 63/TT/2018 for Asset-V was 65.44 lakh.

26. The allowable IDC has been worked out considering the information submitted by the Petitioner for the individual assets separately on cash basis. The loan details submitted in Form-9C for period 2014-19 and the IDC computation sheet have been considered for the purpose of IDC calculation on cash and accrued basis. The undischarged IDC as on COD has been considered Page 14 of 58 Order in Petition No. 35/TT/2020 as ACE (additional capital expenditure) during the year in which it has been discharged.

27. The Petitioner has also included certain Additional Capitalisation loans for calculation of IDC. The loan portfolio of calculation of IDC is restricted to loan value up to COD and additional capitalisation loans have not been considered for IDC calculation.

28. Certain discrepancies still subsist in IDC details submitted by the Petitioner in respect of Asset-III. Accordingly, IDC in respect of Asset-III has been considered based on the information contained in IDC calculation sheet and information provided in Form 7 as furnished by the Petitioner.

29. The IDC worked out based on the submissions of the Petitioner and previous orders is as under: ( in lakh) Asset approved previous orders (A) Claimed Petitioner Admissible allowed as on COD on cash basis Un-discharged IDC as on Discharged in year 2016-17 Discharged in year 2017-18 Asset-I 6.11 13.80 13.74 6.11 0.91 6.72 Asset-II 7.01 16.46 16.32 7.01 0.67 8.64 Asset-III 19.02 47.12 47.12 19.02 1.11 26.99 Asset-IV 3.72 3.93 3.93 3.71 0.20 0.02 Asset-V 65.44 109.49 65.85 47.94 - 17.91 Incidental Expenditure During Construction (IEDC)

30. The Petitioner has claimed IEDC of 37.01 lakh, 23.54 lakh, 113.30 lakh, 0.14 lakh and 0.01 lakh for Asset-I, Asset-II, Asset-III, Asset-IV and Asset-V respectively and submitted Auditors certificate in support of the same. The Petitioner has also submitted that the entire IEDC has been discharged as on COD in respect of the instant assets. The IEDC claimed is within the Page 15 of 58 Order in Petition No. 35/TT/2020 percentage of 10.75% on Hard Cost as indicated in the Abstract Cost Estimate, in respect of the instant assets. Hence, the IEDC claimed has been allowed. Initial spares

31. The Petitioner has claimed the following Initial Spares for the instant assets and prayed to revise the Initial Spares allowed earlier for Asset-I, Asset-II, Asset-III and Asset-IV in order dated 24.7.2017 in Petition No. 210/TT/2016 and Asset-V in order dated 3.12.2018 in Petition No. 63/TT/2018 in light of the judgement of the Appellate Tribunal for Electricity (APTEL) dated 14.9.2019 in Appeal No.74 of 2017. Assets Plant & machinery cost up to cut-off date (excluding IDC and IEDC as per auditor certificate) ( in lakh) Initial Spares Claimed ( in lakh) Ceiling Limit (%) (C) Allowable Initial Spares Worked out D = [(A-B)*C /(100- ( in lakh) Asset-I 2390.91 135.57 6.00 143.96 Asset-II 782.57 40.64 6.00 47.36 Asset-III 3009.28 166.41 6.00 181.46 Asset-IV 1022.66 57.59 6.00 61.60 Asset-V 3482.58 309.39 6.00 202.54 TOTAL 10688.00 709.60 - 636.92

32. The Petitioner has also submitted that the Initial Spares claimed under Sub-station head are 709.60 lakh against which the initial spares worked out is 636.92 lakh. Accordingly, the excess spares of 72.68 lakh may be reduced from the capital cost of Asset-V.

33. We have considered the submissions of the Petitioner. The Initial Spares are allowable subject to ceiling limit specified in Regulation 13(d) of the 2014 Tariff Regulations. As per the APTELs judgement dated 14.9.2019 in Appeal No.

74 of 2017, the Initial Spares are to be allowed as a percentage of the project Page 16 of 58 Order in Petition No. 35/TT/2020 cost as a whole as on the cut-off date. The details of the Initial Spares allowed are as under:- Asset Plant & Machinery Cost upto cut-off date (excluding IDC and IEDC) ( in lakh) Initial Spares claimed (in lakh) Initial Spares allowed in Petition Nos. 63/TT/2018 210/TT/2016 ( in lakh) Norms as per 2014 Tariff Regulations (in %) Initial Spares allowable as per Norms and judgement dated 14.9.2019 ( in lakh) Initial Spares allowed ( in lakh) Asset-I 2390.91 135.57 70.01 6.00 636.92 135.57 Asset-II 782.57 40.64 23.34 6.00 40.64 Asset III 3009.28 166.41 71.54 6.00 166.41 Asset-IV 1022.66 57.59 42.38 6.00 57.59 Asset-V 3482.58 309.39 210.42 6.00 236.71 Total 10688.00 709.60 417.69 6.00 636.92 636.92

34. The excess Initial Spares to the tune of 72.68 lakh are adjusted from capital cost of Asset-V as per the Petitioners submission.

35. The adjustment of excess of Initial Spares from Asset-V as claimed by Petitioner and as considered for tariff calculation is as below: ( in lakh) Period Adjustments as claimed Adjustments as allowed As on COD 41.77 72.68 2017-18 30.91 Total 72.68 72.68 Capital cost as on COD

36. Accordingly, the capital cost allowed as on COD is summarized as under:- ( in lakh) Asset Capital cost claimed as on COD as per Auditors certificate (A) Less: IDC disallowed due computational difference (B) Less: undischarged IDC as on COD Less: Excess Initial Spares Capital cost considered as on COD Asset-I 1067.28 0.06 7.63 - 1059.59 Asset-II 685.23 0.14 9.31 - 675.78 Asset-III 2465.76 0.00 28.10 - 2437.66 Asset-IV 88.17 0.00 0.22 - 87.95 Asset-V 2398.22 43.64 17.91 72.68 2263.99 Page 17 of 58 Order in Petition No. 35/TT/2020 Additional Capital Expenditure (ACE)

37. The Petitioner has claimed the following Additional Capital Expenditure and submitted Auditors Certificate in support of the same in respect of the instant assets:- ( in lakh) Asset Additional capitalisation (claimed) 2016-17 2017-18 2018-19 Asset-I 912.44 362.89 106.8 Asset-II 77.67 23.98 33.01 Asset-III 156.23 404.54 200.5 Asset-IV 788.36 146.84 3.57 Asset-V 0.00 1141.08 0.00 Total 1934.7 2079.33 343.88

38. The Petitioner vide affidavit dated 25.2.2020 has submitted that the Additional Capitalization in the instant assets are mainly on account of balance and retention payments only. The Additional Capitalization for 2015-16, 2016-17, 2017-18 and 2018-19 period for the instant assets has been claimed under Regulation 14(1)(i) (Undischarged liabilities) of the 2014 Tariff Regulations and is within the cut-off the date.

39. The cut-off date for Asset-I, Asset-II and Asset-IV works out to be 31.3.2019 and for Asset III and V, it works out to be 31.3.2020 and thus the claimed additional capitalisation is within the cut-off date.

40. The Petitioner has included the IDC disallowed (to be discharged post COD) in order dated 3.12.2018 in Petition No. 63/TT/2018 as part of additional capitalisation for 2015-16 to 2018-19 period for Asset-V.

41. The Petitioner has claimed Additional Capitalization including the accrual IDC discharged during 2015-16 to 2018-19 period. It is observed that total Page 18 of 58 Order in Petition No. 35/TT/2020 estimated completion cost including Additional Capitalization for 2015-16 to 2018-19 period for Asset-I, Asset-II, Asset-III, Asset-IV and Asset-V is within the approved apportioned cost as per RCE.

42. We have considered the submissions of the Petitioner including asset wise reasons for cost escalation as highlighted in Para 21 along with the RCE submitted with the instant petition. The ACE claimed for the period 2015-16 to 2018-19 is allowed under Regulation 14(1)(i) of the 2014 Tariff Regulations. Accordingly, ACE admitted for tariff calculation in respect of Asset-I, Asset-II, Asset-III and Asset-IV is as under: ( in lakh) Asset Additional capitalization 2016-17 2017-18 2018-19 Asset-I 912.45 362.83 106.80 Asset-II 77.67 23.84 33.01 Asset-III 156.22 404.54 200.50 Asset-IV 788.36 146.85 3.57

43. The ACE claimed for Asset-V and approved is as below: ( in lakh) Description As claimed As approved Remarks Add cap from DOCO to 31.3.18 as per Auditor certificate 1153.71 1153.71 As per Auditor certificate Add: Accrual IDC discharge in 2017 -18 44.61 17.91 As per IDC computation Less: IDC Disallowed due to time over run 26.33 - Less: Disallowed in initial spares 30.91 - Disallowance of initial spares has been considered in DOCO cost as discussed under para 26 Total Add cap in 2017-18 1141.08 1171.62

44. Accordingly, the capital cost considered for the tariff period 2014-19 is as follows:- Page 19 of 58 Order in Petition No. 35/TT/2020 ( in lakh) Asset I: Capital cost as per revised approved apportionment: 2712.91 lakh Asset-I Capital cost as on COD (on cash basis) Additional Capitalization Total capital cost including Additional Capitalization as on 31.3.2019 2016-17 2017-18 2018-19 Allowed earlier in order dated 24.7.2017 in Petition No. 210/TT/2016 1028.60 651.51 96.77 0.00 1776.88 As claimed 1059.59 912.45 362.89 106.80 2441.73 Approved in this order 1059.59 912.45 362.83 106.80 2441.67 ( in lakh) Asset II: Capital cost as per revised approved apportionment: 1137.53 lakh Asset-II Capital cost as on COD (on cash basis) Additional Capitalization Total capital cost including Additional Capitalization as on 31.3.2019 2016-17 2017-18 2018-19 Allowed earlier in order dated 24.7.2017 in Petition No. 210/TT/2016 595.64 0.00 0.00 0.00 595.64 As claimed 675.78 77.67 23.98 33.01 810.44 Approved in this order 675.78 77.67 23.84 33.01 810.30 ( in lakh) Asset III: Capital cost as per revised approved apportionment: 3335.50 lakh Asset-III Capital cost as on COD (on cash basis) Additional Capitalization Total capital cost including Additional Capitalization as on 31.3.2019 2016-17 2017-18 2018-19 Allowed earlier in order dated 24.7.2017 in Petition No. 210/TT/2016 1835.05 0.00 0.00 0.00 1835.05 As claimed 2437.66 156.23 404.54 200.50 3198.93 Approved in this order 2437.66 156.23 404.54 200.50 3198.93 ( in lakh) Asset IV: Capital cost as per revised approved apportionment: 1062.13 lakh Asset-IV Capital cost as on COD (on cash basis) Additional Capitalization Total capital cost including Additional Capitalization as on 31.3.2019 2016-17 2017-18 2018-19 Page 20 of 58 Order in Petition No. 35/TT/2020 Allowed earlier in order dated 24.7.2017 in Petition No. 210/TT/2016 75.80 847.46 139.84 0.00 1063.10 As claimed 87.96 788.36 146.84 3.57 1026.73 Approved in this order 87.96 788.36 146.85 3.57 1026.73 ( in lakh) Asset V: Capital cost as per revised approved apportionment: 3715.93 lakh Asset-V Capital cost as on COD (on cash basis) Additional Capitalization Total capital cost including Additional Capitalization as on 31.3.2019 2016-17 2017-18 2018-19 Allowed earlier in order dated 3.12.2018 in Petition No. 63/TT/2018 2267.82 0.00 799.04 387.24 3454.10 As claimed 2295.45 0.00 1141.08 0.00 3436.53 Approved in this order 2263.99 - 1171.62 - 3435.61

45. The difference between the earlier allowed total capital cost including additional capitalization as on 31.3.2019 and approved in this order is on account of submission of Revised Cost Estimates by the Petitioner. The additional capital expenditure was restricted in previous order due to absence of Revised Cost Estimate. The difference in claimed total capital cost including additional capitalization as on 31.3.2019 and approved in this order is also on account of IDC partly disallowed in the instant order. Debt-Equity Ratio

46. The Petitioner has considered debt-equity ratio as 70:30 as on COD and for ACE. The debt-equity ratio of 70:30 (as claimed by Petitioner in Form 6) has been considered for capital cost as on COD and ACE during 2015-16 to 2018-19 period as provided under Regulation 19 of the 2014 Tariff Regulations. The Page 21 of 58 Order in Petition No. 35/TT/2020 details of the debt-equity as on the COD and 31.3.2019 considered for the purpose of tariff computation for the 2014-19 tariff period is as follows:- Asset-I As on COD As on 31.3.2019 Capital cost (` in lakh) Capital cost (` in lakh) Debt 741.72 70.00 1709.18 70.00 Equity 317.87 30.00 732.49 30.00 Total 1059.59 100.00 2441.67 100.00 Asset-II As on COD As on 31.3.2019 Capital cost (` in lakh) Capital cost (` in lakh) Debt 473.05 70.00 567.21 70.00 Equity 202.73 30.00 243.09 30.00 Total 675.78 100.00 810.30 100.00 Asset-III As on COD As on 31.3.2019 Capital cost (` in lakh) Capital cost (` in lakh) Debt 1706.36 70.00 2239.26 70.00 Equity 731.30 30.00 959.67 30.00 Total 2437.66 100.00 3198.93 100.00 Asset-IV As on COD As on 31.3.2019 Capital cost (` in lakh) Capital cost (` in lakh) Debt 61.57 70.00 718.88 70.02 Equity 26.38 30.00 307.84 29.98 Total 87.95 100.00 1026.73 100.00 Asset-V As on COD As on 31.3.2019 Amount (` in lakh) Amount (` in lakh) Debt 1584.79 70.00 2404.93 70.00 Equity 679.20 30.00 1030.68 30.00 Total 2263.99 100.00 3435.61 100.00 Interest on Loan (IoL)

47. IoL has been worked out in accordance with Regulation 26 of the 2014 Tariff Regulations. The Petitioner has prayed that change in interest rates prevailing as on 1.4.2019 for respective loans shall be applicable and that the Page 22 of 58 Order in Petition No. 35/TT/2020 change in interest rate due to floating rate of interest applicable for the project to be claimed/ adjusted over 5 year period directly from/ with the beneficiaries.

48. We have considered the submissions of the Petitioner. Accordingly, IoL has been worked out based on weighted average rate of interest computed from actual interest paid on various loans as per the compendium.

49. IoL has been worked out as per the considerations as under: -

i. Gross amount of loan, repayment of instalments, rate of interest and weighted average rate of interest on actual average loan have been considered as per the petition.

ii. The repayment for the tariff period 2014-19 has been considered to be equal to the depreciation allowed for that period.

50. IoL has been worked out as follows:- ( in lakh) Asset-I Particular 2016-17 (Pro-rata) 2017-18 2018-19 Gross Normative Loan 741.72 1380.44 1634.42 Cumulative Repayments up to Previous Year 0.00 65.56 183.03 Net Loan-Opening 741.72 1314.88 1451.39 Addition due to Additional Capitalization 638.72 253.98 74.76 Repayment during the year 63.17 114.41 126.81 Net Loan-Closing 1,317.27 1456.84 1404.78 Average Loan 1,029.49 1387.05 1430.81 Weighted Average Rate of Interest on Loan 8.67 8.23 8.05 Interest on Loan 69.96 114.16 115.23 ( in lakh) Asset-II Particular 2016-17 (Pro-rata) 2017-18 2018-19 Gross Normative Loan 473.05 527.42 544.10 Cumulative Repayments up to Previous Year 0.00 16.13 56.54 Net Loan-Opening 473.05 511.29 487.57 Addition due to Additional Capitalization 54.37 16.69 23.11 Repayment during the year 16.13 40.41 41.91 Page 23 of 58 Order in Petition No. 35/TT/2020 Net Loan-Closing 511.29 487.57 468.76 Average Loan 492.17 499.43 478.16 Weighted Average Rate of Interest on Loan 8.24 8.06 7.99 Interest on Loan 17.35 40.30 38.21 ( in lakh) Asset-III Particular 2016-17 (Pro-rata) 2017-18 2018-19 Gross Normative Loan 1706.36 1815.73 2098.91 Cumulative Repayments up to Previous Year - 30.85 179.73 Net Loan-Opening 1706.36 1784.88 1919.18 Addition due to Additional Capitalization 109.37 283.18 140.35 Repayment during the year 30.85 148.87 164.85 Net Loan-Closing 1784.88 1919.18 1894.68 Average Loan 1745.62 1852.03 1906.93 Weighted Average Rate of Interest on Loan 8.07 7.94 7.87 Interest on Loan 32.42 147.00 150.14 ( in lakh) Asset-IV Particular 2016-17 (Pro-rata) 2017-18 2018-19 Gross Normative Loan 61.57 613.42 716.21 Cumulative Repayments up to Previous Year 0.00 9.62 59.77 Net Loan-Opening 61.57 603.80 656.44 Addition due to Additional Capitalization 551.85 102.79 2.67 Repayment during the year 9.62 50.15 54.12 Net Loan-Closing 603.80 656.44 604.99 Average Loan 332.68 630.12 630.72 Weighted Average Rate of Interest on Loan 8.08 7.92 7.87 Interest on Loan 10.17 49.90 49.65 ( in lakh) Asset-V Particular 2017-18 (Pro-rata) 2018-19 Gross Normative Loan 1584.79 2404.93 Cumulative Repayments up to Previous Year 0.00 102.65 Net Loan-Opening 1584.79 2302.28 Addition due to Additional Capitalization 820.13 0.00 Repayment during the year 102.65 181.40 Net Loan-Closing 2302.28 2120.88 Average Loan 1943.54 2211.58 Weighted Average Rate of Interest on Loan 7.65 7.70 Interest on Loan 101.45 170.29 Page 24 of 58 Order in Petition No. 35/TT/2020 Return on Equity (ROE)

51. The Petitioner is entitled for Return on equity for the instant assets in terms of Regulation 24 and 25 of the 2014 Tariff Regulations. The Petitioner has submitted that they are liable to pay income tax at MAT rates and has claimed following effective tax rates for the 2014-19 tariff period: Year Claimed effective tax Grossed up ROE [Base Rate/(1-t)] 2014-15 21.018 19.624 2015-16 21.382 19.715 2016-17 21.338 19.704 2017-18 21.337 19.704 2018-19 21.549 19.757

52. The Commission in order dated 27.4.2020 in Petition No. 274/TT/2019 has arrived at the effective tax rate based on the notified MAT rates for the Petitioner and the same is given in the table below. The same MAT rates are considered for the purpose of grossing up of rate of RoE for truing up of the tariff of the 2014-19 tariff period in terms of the provisions of the 2014 Tariff Regulations. Year MAT Rate (%) Grossed up ROE [Base Rate/(1-t)] (%) 2014-15 20.9605 19.610 2015-16 21.3416 19.705 2016-17 21.3416 19.705 2017-18 21.3416 19.705 2018-19 21.5488 19.758

53. Accordingly, the RoE allowed for the instant assets is as follows:- ( in lakh) Asset-I Particulars 2016-17 (Pro-rata) 2017-18 2018-19 Opening Equity 317.87 591.60 700.45 Addition due to Additional Capitalization 273.73 108.85 32.04 Closing Equity 591.60 700.45 732.49 Average Equity 454.74 646.03 716.47 Page 25 of 58 Order in Petition No. 35/TT/2020 Return on Equity (Base Rate) (%) 15.500 15.500 15.500 MAT rate for the respective Financial year 21.342 21.342 21.549 Rate of Return on Equity (Pre-tax) (%) 19.705 19.705 19.758 Return on Equity (Pre-tax) 70.21 127.30 141.56 ( in lakh) Asset-II Particulars 2016-17 (Pro-rata) 2017-18 2018-19 Opening Equity 202.73 226.03 233.18 Addition due to Additional Capitalization 23.30 7.15 9.90 Closing Equity 226.03 233.18 243.09 Average Equity 214.38 229.61 238.14 Return on Equity (Base Rate) (%) 15.500 15.500 15.500 MAT rate for the respective Financial year (%) 21.342 21.342 21.549 Rate of Return on Equity (Pre-tax) (%) 19.705 19.705 19.758 Return on Equity (Pre-tax) 18.06 45.25 47.05 ( in lakh) Asset-III Particulars 2016-17 (Pro-rata) 2017-18 2018-19 Opening Equity 731.30 778.16 899.52 Addition due to Additional Capitalization 46.86 121.36 60.15 Closing Equity 778.16 899.52 959.67 Average Equity 754.73 838.84 929.60 Return on Equity (Base Rate) (%) 15.500 15.500 15.500 MAT rate for the respective Financial year (%) 21.342 21.342 21.549 Rate of Return on Equity (Pre-tax) (%) 19.705 19.705 19.758 Return on Equity (Pre-tax) 34.23 165.30 183.67 ( in lakh) Asset-IV Particulars 2016-17 (Pro-rata) 2017-18 2018-19 Opening Equity 26.38 262.89 306.94 Addition due to Additional Capitalization 236.51 44.05 0.90 Closing Equity 262.89 306.94 307.84 Average Equity 144.64 284.92 307.39 Return on Equity (Base Rate) (%) 15.500 15.500 15.500 MAT rate for the respective Financial year (%) 21.342 21.342 21.549 Rate of Return on Equity (Pre-tax) (%) 19.705 19.705 19.758 Return on Equity (Pre-tax) 10.78 56.14 60.73 Page 26 of 58 Order in Petition No. 35/TT/2020 ( in lakh) Asset-V Particulars 2017-18 (Pro- rata) 2018-19 Opening Equity 679.20 1030.68 Addition due to Additional Capitalization 351.49 0.00 Closing Equity 1030.68 1030.68 Average Equity 854.94 1030.68 Return on Equity (Base Rate) (%) 15.500 15.500 MAT rate for the respective Financial year (%) 21.342 21.549 Rate of Return on Equity (Pre-tax) (%) 19.705 19.758 Return on Equity (Pre-tax) 114.93 203.64 Depreciation

54. The Petitioners claim towards depreciation in this petition was found to be higher than the depreciation allowed for the Asset-I and Asset-III in order dated 24.7.2017 in Petition No. 210/TT/2016. The Petitioner has neither given any justification for claiming higher depreciation than that was allowed earlier in order nor made any specific prayer for allowing higher depreciation in this petition.

55. Subsequently, it was identified that in Petition No. 210/TT/2016 for tariff determination of the instant assets for 2014-19 tariff block, the Petitioner has submitted capital cost of IT equipment in Sub-station cost and therefore depreciation for IT equipment was allowed @ 5.28% of corresponding capital cost.

56. The Petitioner now at the time of truing up for the 2014-19 period has segregated the IT equipment cost from Sub-station cost and has considered depreciation rate for IT Equipment @ 15% and the salvage value as NIL as per the 2014 Tariff Regulations.

57. We have considered the submissions of the Petitioner. The instant assets were put into commercial operation during the 2014-19 period and the tariff from Page 27 of 58 Order in Petition No. 35/TT/2020 the respective CODs to 31.3.2019 was allowed vide orders dated 24.7.2017 in Petition No. 210/TT/2016 and order dated 3.12.2018 in Petition No. 63/TT/2018. It is pertinent to point out that the Petitioner did not claim any capital expenditure towards IT Equipment in the above said petitions where tariff for the instant assets for the 2014-19 period was allowed even though there was a clear provision in the 2014 Tariff Regulations providing depreciation @ 15% for IT Equipment. Having failed to make a claim as per the 2014 Tariff Regulations, the Petitioner has now, at the time of truing up of the tariff of the 2014-19 period, apportioned a part of the capital expenditure to IT Equipment. The Petitioner has adopted similar methodology not only in this but in some of the other Petitions listed along with the instant Petition on 26.2.2020. It is observed that the Petitioner has for the first time apportioned a part of the capital expenditure towards IT Equipment and has claimed depreciation under the head IT Equipment @ of 15% at the time of truing up of the tariff of the 2014-19 period. Regulation 8(1) of the 2014 Tariff Regulations provides for truing up of the capital expenditure including the additional capital expenditure, incurred upto 31.3.2019, admitted by the Commission after prudence check. We are of the view that scope of truing up exercise is restricted to truing up of the capital expenditure already admitted and apportionment or reapportionment of the capital expenditure cannot be allowed at the time of truing up. Therefore, we are not inclined to consider the Petitioners request for apportionment of capital expenditure towards IT Equipment and allowing depreciation @ 15% from 1.4.2014 onwards. Accordingly, the depreciation @ 5.28% has been considered for IT Equipment as part of the Sub-station upto 31.3.2019 while truing up the capital expenditure for the 2014-19 period. During the 2019-24 tariff period, the IT Equipment has been Page 28 of 58 Order in Petition No. 35/TT/2020 considered separately and depreciation has been allowed @ 15% for the balance depreciable value of IT Equipment in accordance with Regulation 33 read with Sr. No. (p) of the Appendix-I (Depreciation Schedule) of the 2019 Tariff Regulations.

58. The depreciation for 2014-19 period is trued up for the instant assets as per the methodology provided in Regulation 27 of the 2014 Tariff Regulations as follows:- ( in lakh) AssetI Particulars 2016-17 (Prorata) 2017-18 2018-19 Opening Gross Block 1059.59 1972.04 2334.87 Addition during 2014-19 due to Additional Capitalisation 912.45 362.83 106.80 Closing Gross Block 1972.04 2334.87 2441.67 Average Gross Block 1515.82 2153.46 2388.27 Average Gross Block (90% depreciable assets) 1484.45 2121.98 2356.69 Average Gross Block (100% depreciable assets) 31.37 31.48 31.58 Rate of Depreciation (%) 5.32 5.31 5.31 Depreciable Value (excluding IT equipment and software) 1336.01 1909.78 2121.02 Depreciable value of IT equipment and software 31.37 31.48 31.58 Total Depreciable value 1367.37 1941.26 2152.60 Remaining Depreciable Value 1367.37 1878.09 1975.02 Depreciation 63.17 114.41 126.81 ( in lakh) Asset-II Particulars 2016-17 (Pro-rata) 2017-18 2018-19 Opening Gross Block 675.78 753.45 777.29 Addition during 2014-19 due to Additional Capitalisation 77.67 23.84 33.01 Closing Gross Block 753.45 777.29 810.30 Average Gross Block 714.62 765.37 793.80 Average Gross Block (90% depreciable assets) 714.62 765.37 793.80 Average Gross Block (100% depreciable assets) 0.00 0.00 0.00 Page 29 of 58 Order in Petition No. 35/TT/2020 Rate of Depreciation (%) 5.28 5.28 5.28 Depreciable Value (excluding IT equipment and software) 643.15 688.83 714.42 Depreciable value of IT equipment and software 0.00 0.00 0.00 Total Depreciable Value 643.15 688.83 714.42 Remaining Depreciable Value 643.15 672.71 657.88 Depreciation 16.13 40.41 41.91 ( in lakh) Asset-III Particulars 2016-17 (Prorata) 2017-18 2018-19 Opening Gross Block 2437.66 2593.88 2998.43 Addition during 2014-19 due to Additional Capitalisation 156.22 404.55 200.50 Closing Gross Block 2593.88 2998.43 3198.93 Average Gross Block 2515.77 2796.16 3098.68 Average Gross Block (90% depreciable assets) 2486.63 2766.84 3069.20 Average Gross Block (100% depreciable assets) 29.15 29.32 29.48 Rate of Depreciation (%) 5.33 5.32 5.32 Depreciable Value (excluding IT equipment and software) 2237.96 2490.16 2762.28 Depreciable value of IT equipment and software 29.15 29.32 29.48 Total Depreciable value 2267.11 2519.47 2791.76 Remaining Depreciable Value 2267.11 2488.62 2612.03 Depreciation 30.85 148.87 164.85 ( in lakh) Asset-IV Particulars 2016-17 (Pro-rata) 2017-18 2018-19 Opening Gross Block 87.96 876.32 1023.17 Additional Capitalisation Expenditure 788.36 146.85 3.57 Closing Gross Block 876.32 1023.17 1026.74 Average Gross Block 482.14 949.75 1024.96 Average Gross Block (90% depreciable assets) 482.14 949.75 1024.96 Average Gross Block (100% depreciable assets) 0.00 0.00 0.00 Rate of Depreciation (%) 5.28 5.28 5.28 Depreciable Value (excluding IT equipment and software) 433.93 854.77 922.46 Depreciable value of IT equipment and software 0.00 0.00 0.00 Total Depreciable Value 433.93 854.77 922.46 Remaining Depreciable Value 433.93 845.15 862.69 Depreciation 9.62 50.15 54.12 Page 30 of 58 Order in Petition No. 35/TT/2020 ( in lakh) Asset-V Particulars 2017-18 (Pro-rata) 2018-19 Opening Gross Block 2263.98 3435.60 Additional Capitalisation Expenditure 1171.62 0.00 Closing Gross Block 3435.60 3435.60 Average Gross Block 2849.79 3435.60 Average Gross Block (90% depreciable assets) 2849.79 3435.60 Average Gross Block (100% depreciable assets) 0.00 0.00 Rate of Depreciation (%) 5.28 5.28 Depreciable Value (excluding IT equipment and software) 2564.81 3092.04 Depreciable value of IT equipment and software 0.00 0.00 Total Depreciable Value 2564.81 3092.04 Remaining Depreciable Value 2564.81 2989.39 Depreciation 102.65 181.40 Operation & Maintenance Expenses (O&M Expenses)

59. The O&M Expenses as claimed by Petitioner and computed by Commission as per Regulation 29(4)(a) of the 2014 Tariff Regulations for the purpose of tariff are as under: ( in lakh) Asset-I Particulars 2016-17 (Prorata) 2017-18 2018-19 Norm ( lakh/bay)

400 kV Bay (AIS) 64.37 66.51 68.71

400 kV Bay (GIS) 55.02 56.84 58.73 Number of bays

400 kV Bay (AIS) 2 2 2

400 kV Bay (GIS) Total O&M Expense (Claimed) 100.88 133.02 137.42 Total O&M Expense (Approved) 100.88 133.02 137.42 ( in lakh) Asset-II Particulars 2016-17 (Prorata) 2017-18 2018-19 Norm ( lakh/bay)

400 kV Bay (AIS) 64.37 66.51 68.71

400 kV Bay (GIS) 55.02 56.84 58.73 Number of bays

400 kV Bay (AIS) Page 31 of 58 Order in Petition No. 35/TT/2020

400 kV Bay (GIS) Total O&M Expense (Claimed) - - - Total O&M Expense (Approved) - - - ( in lakh) Asset-III Particulars 2016-17 (Prorata) 2017-18 2018-19 Norm ( lakh/bay)

400 kV Bay (AIS) 64.37 66.51 68.71

400 kV Bay (GIS) 55.02 56.84 58.73 Number of bays

400 kV Bay (AIS) 2 2 2

400 kV Bay (GIS) Total O&M Expense (Claimed) 29.63 133.02 137.42 Total O&M Expense (Approved) 29.63 133.02 137.42 ( in lakh) Asset-IV Particulars 2016-17 (Prorata) 2017-18 2018-19 Norm ( lakh/bay)

400 kV Bay (AIS) 64.37 66.51 68.71

400 kV Bay (GIS) 55.02 56.84 58.73 Number of bays

400 kV Bay (AIS) 2 2 2

400 kV Bay (GIS) Total O&M Expense (Claimed) 48.67 133.02 137.42 Total O&M Expense (Approved) 48.67 133.02 137.42 ( in lakh) Asset-V Particulars 2017-18 (Pro-rata) 2018-19 Norm ( lakh/bay)

400 kV Bay (AIS) 66.51 68.71

400 kV Bay (GIS) 56.84 58.73 Number of bays

400 kV Bay (AIS)

400 kV Bay (GIS) 1 1 Total O&M Expense (Claimed) 77.55 117.46 Total O&M Expense (Approved) 77.55 117.46 Page 32 of 58 Order in Petition No. 35/TT/2020 Interest of Working Capital (IWC)

60. The Petitioner is entitled to claim interest on working capital as per Regulation 28(1)(c) of the 2014 Tariff Regulations as under:-

(i) Maintenance spares: Maintenance spares have been worked out based on 15% of Operation and Maintenance Expenses.

(ii) O & M Expenses: O&M Expenses have been considered for one month of the allowed O&M Expenses.

(iii) Receivables: The receivables have been worked out on the basis of 2 months of annual transmission charges as worked out above.

(iv) Rate of interest on working capital: Rate of interest on working capital is considered on normative basis in accordance with Clause (3) of Regulation 28 of the 2014 Tariff Regulations.

61. The Interest on Working Capital allowed for the instant assets is as under:- ( in lakh) Asset-I Particulars 2016-17 (Pro-rata) 2017-18 2018-19 O & M Expenses 10.73 11.09 11.45 Maintenance Spares 19.31 19.95 20.61 Receivables 66.77 83.94 89.43 Total 96.81 114.97 121.49 Rate of Interest on Working Capital (%) 12.80 12.80 12.80 Interest on working capital 9.71 14.72 15.55 Page 33 of 58 Order in Petition No. 35/TT/2020 ( in lakh) Asset-II Particulars 2016-17 (Pro-rata) 2017-18 2018-19 O & M Expenses 0.00 0.00 0.00 Maintenance Spares 0.00 0.00 0.00 Receivables 20.53 21.45 21.66 Total 20.53 21.45 21.66 Rate of Interest on Working Capital (%) 12.80 12.80 12.80 Interest on working capital 1.12 2.75 2.77 ( in lakh) Asset-III Particulars 2016-17 (Pro-rata) 2017-18 2018-19 O & M Expenses 10.73 11.09 11.45 Maintenance Spares 19.31 19.95 20.61 Receivables 94.73 101.87 109.02 Total 124.77 132.91 141.09 Rate of Interest on Working Capital (%) 12.80 12.80 12.80 Interest on working capital 3.68 17.01 18.06 ( in lakh) Asset-IV Particulars 2016-17 (Pro-rata) 2017-18 2018-19 O & M Expenses 10.73 11.09 11.45 Maintenance Spares 19.31 19.95 20.61 Receivables 36.35 49.93 52.12 Total 66.39 80.97 84.18 Rate of Interest on Working Capital (%) 12.80 12.80 12.80 Interest on working capital 3.21 10.36 10.78 ( in lakh) Asset-V Particulars 2017-18 (Pro-rata) 2018-19 O & M Expenses 9.47 9.79 Maintenance Spares 17.05 17.62 Receivables 99.54 115.13 Total 126.62 142.53 Rate of Interest on Working Capital (%) 12.60 12.60 Interest on working capital 10.84 17.96 Annual Transmission Charges 2014-19

62. Accordingly, the annual transmission charges after truing up for the 2014-

19 tariff period are as under:- Page 34 of 58 Order in Petition No. 35/TT/2020 a. Asset-I ( in lakh) Particulars 2016-17 (Pro-rata) 2017-18 2018-19 63.17 114.41 126.81 Interest on Loan 69.96 114.16 115.23 Return on Equity 70.21 127.30 141.56 Interest on Working Capital 9.71 14.72 15.55 O&M Expenses 100.88 133.02 137.42 Total 313.93 503.61 536.57 The annual transmission charges allowed in earlier order for 2014-19 period, claimed in instant petition as true up for 2014 -19 period and allowed after true up of 2014-19 period is as under: ( in lakh) Asset-I Particulars 2016-17 2017-18 2018-19 Allowed earlier in order dated 24.7.2017 in Petition No. 210/TT/2016 290.22 434.03 439.04 As claimed by the Petitioner in instant petition 316.30 506.43 539.15 Allowed after truing Up 313.93 503.61 536.57 b. Asset-II ( in lakh) Particulars 2016-17 (Pro-rata) 2017-18 2018-19 Depreciation 16.13 40.41 41.91 Interest on Loan 17.35 40.30 38.21 Return on Equity 18.06 45.25 47.05 Interest on Working Capital 1.12 2.75 2.77 O&M Expenses 0.00 0.00 0.00 Total 52.65 128.70 129.94 The annual transmission charges allowed in earlier order for 2014-19 period, claimed in instant petition as true up for 2014 -19 period and allowed after true up of 2014-19 period is as under: ( in lakh) Asset-II Particulars 2016-17 2017-18 2018-19 Allowed earlier in order dated 24.7.2017 in Petition No. 210/TT/2016 43.84 100.68 98.02 As claimed by the Petitioner in instant petition 52.65 128.73 129.96 Allowed after truing Up 52.65 128.70 129.94 Page 35 of 58 Order in Petition No. 35/TT/2020 c. Asset-III ( in lakh) Particulars 2016-17 (Pro-rata) 2017-18 2018-19 Depreciation 30.85 148.87 164.85 Interest on Loan 32.42 147.00 150.14 Return on Equity 34.23 165.30 183.67 Interest on Working Capital 3.68 17.01 18.06 O&M Expenses 29.63 133.02 137.42 Total 130.81 611.21 654.14 The annual transmission charges allowed in earlier order for 2014-19 period, claimed in instant petition as true up for 2014 -19 period and allowed after true up of 2014-19 period is as under: ( in lakh) Asset-III Particulars 2016-17 2017-18 2018-19 Allowed earlier in order dated 24.7.2017 in Petition No. 210/TT/2016 174.72 449.65 446.11 As claimed by the Petitioner in instant petition 131.47 613.95 656.67 Allowed after truing Up 130.81 611.21 654.14 d. Asset-IV ( in lakh) Particulars 2016-17 (Pro-rata) 2017-18 2018-19 Depreciation 9.62 50.15 54.12 Interest on Loan 10.17 49.90 49.65 Return on Equity 10.78 56.14 60.73 Interest on Working Capital 3.21 10.36 10.78 O&M Expenses 48.67 133.02 137.42 Total 82.46 299.58 312.70 The annual transmission charges allowed in earlier order for 2014-19 period, claimed in instant petition as true up for 2014 -19 period and allowed after true up of 2014-19 period is as under: ( in lakh) Asset-IV Particulars 2016-17 2017-18 2018-19 Allowed earlier in order dated 24.7.2017 in Petition No. 210/TT/2016 85.11 315.71 327.81 As claimed by the Petitioner in instant petition 82.46 299.58 312.71 Allowed after truing Up 82.46 299.58 312.70 Page 36 of 58 Order in Petition No. 35/TT/2020 e. Asset-V ( in lakh) Particulars 2017-18 (Pro-rata) 2018-19 Depreciation 102.65 181.40 Interest on Loan 101.45 170.29 Return on Equity 114.93 203.64 Interest on Working Capital 10.84 17.96 O&M Expenses 77.55 117.46 Total 407.42 690.75 The annual transmission charges allowed in earlier order for 2014-19 period, claimed in instant petition as true up for 2014 -19 period and allowed after true up of 2014-19 period is as under: ( in lakh) Asset-V Particulars 2017-18 2018-19 Allowed earlier in order dated 3.12.2018 in Petition No. 63/TT/2018 385.91 659.17 As claimed by the Petitioner in instant petition 409.26 690..87 Allowed after truing Up 407.42 690.75

63. The difference between the earlier allowed total capital cost including additional capitalization as on 31.3.2019 and that approved in this order is on account of submission of Revised Cost Estimates by the Petitioner. The additional capital expenditure was restricted in previous order due to non- production of Revised Cost Estimates. The difference in claimed total capital cost including additional capitalization as on 31.3.2019 and approved in this order is also on account of IDC disallowed partly in the instant order. Determination of Annual Fixed Charges for 2019-24 tariff period

64. The Petitioner has submitted the tariff forms combining the Assets-I, Asset-II, Asset-III, Asset-IV and Asset-V wherein the COD has been achieved prior to 1.4.2019, as a single asset. Accordingly, as per proviso (i) of Regulation Page 37 of 58 Order in Petition No. 35/TT/2020 8(1) of the 2019 Tariff Regulations, single tariff for the combined asset has been worked out for the 2019-24 tariff period.

65. The Petitioner has claimed the following transmission charges for 2019-24 tariff period:- ( in lakh) Particulars 2019-20 2020-21 201-22 2022-23 2023-24 Depreciation 591.33 598.49 598.49 598.49 590.76 Interest on Loan 498.17 457.78 412.80 368.31 319.95 Return on Equity 622.62 630.26 630.26 630.26 630.26 Interest on Working Capital 36.28 36.34 36.04 35.76 35.24 Operation and Maintenance 241.64 250.00 258.66 267.61 276.86 Total 1990.04 1972.87 1936.25 1900.43 1853.07

66. The Petitioner has claimed the following 'Interest on Working Capital' for the 2019-24 tariff period:- ( in lakh) Particulars 2019-20 2020-21 201-22 2022-23 2023-24 O&M expenses 20.14 20.83 21.56 22.30 23.07 Maintenance Spares 36.25 37.50 38.80 40.14 41.53 Receivables 244.68 243.23 238.72 234.30 227.84 Total 301.07 301.56 299.08 296.74 292.44 Rate of Interest (%) 12.05 12.05 12.05 12.05 12.05 Interest on Working Capital 36.28 36.34 36.04 35.76 35.24 Effective Date of Commercial Operation (E-COD)

67. The Petitioner has submitted that E-COD of the combined assets works out to 14.1.2017. Based on the trued up admitted capital cost and actual COD of all the assets, the E-COD has been worked out as shown below:- Page 38 of 58 Order in Petition No. 35/TT/2020 Computation of Effective COD Assets Actual Admitted Capital Cost as 31.3.2019 (` in lakh) Weight of the cost (in %) No. of days from last Weighted days Effective COD (latest COD Total weighted days) Asset-I 19.6.2016 2441.67 22.37 402.00 89.94 14.1.2017 Asset-II 27.10.2016 810.30 7.42 272.00 20.20 Asset-III 7.1.2017 3198.92 29.31 200.00 58.62 Asset-IV 14.11.2016 1026.73 9.41 254.00 23.90 Asset-V 26.7.2017 3435.61 31.48 0.00 0.00 Total 10913.24 100

68. The E-COD has been used to determine the lapsed life of the project as a whole, which works out as 2 (two) years as on 1.4.2019 (i.e. the number of completed years as on 1.4.2019 from E-COD). Weighted Average Life (WAL)

69. The life as defined in Regulation 33 of the 2019 Tariff Regulations has been considered for determination of Weighted Average Life.

70. The combined asset may have multiple elements (i.e. Land, Building, Transmission line, Sub-station and PLCC) and each element may have different span of life. Therefore, the concept of Weighted Average Life (WAL) has been used as the useful life of the project as whole.

71. The Weighted Average Life (WAL) has been determined based on the admitted capital cost of individual elements as on 31.3.2019 and their respective life as stipulated in the 2019 Tariff Regulations. The element-wise life as it was defined in the 2014 Tariff Regulations prevailing at the time of actual COD of the individual assets has been ignored for this purpose. The life as defined in the 2019 Tariff Regulations has been considered for determination of WAL. Page 39 of 58 Order in Petition No. 35/TT/2020 Accordingly, the Weighted Average Life (WAL) of the combined asset has been worked out as 25 years as shown below:- Admitted Capital Cost as on 31-03-2019 Particulars Combined capital Cost ( in lakh) Life as per 2019 Regulation (Years) Weight (a) x (b) Land 0.00 0.00 0.00 Building 0.00 25.00 0.00 Transmission Line 0.00 35.00 0.00 Sub Station 1665.87 25.00 266646.78 PLCC 186.31 15.00 2794.65 Leasehold Land 0.00 25.00 0.00 IT Equipment and software 61.06 6.67 407.07 10913.24 269848.49 Total WAL = Total Weight/ Capital cost of the project 25

72. It is assumed that the Weighted Average Life as on 1.4.2019 as determined above is applicable prospectively (i.e. for 2019-24 tariff period onwards) and no retrospective adjustment of depreciation in previous tariff period is required to be done. Accordingly, the WAL has been used to determine the remaining useful life as on 31.3.2019 to be 23 years. Capital Cost

73. Regulation 19(3) and 19(5) of the 2019 Tariff Regulations provide as under: -

19. Additional Capitalization (3) The Capital cost of an existing project shall include the following: (a) Capital cost admitted by the Commission prior to 1.4.2019 duly trued up by excluding liability, if any, as on 1.4.2019; (b) Additional Capitalization and de-capitalization for the respective year of tariff as determined in accordance with these regulations; (c) Capital expenditure on account of renovation and modernisation as admitted by this Commission in accordance with these regulations; Page 40 of 58 Order in Petition No. 35/TT/2020 (d) Capital expenditure on account of ash disposal and utilization including handling and transportation facility; (e) Capital expenditure incurred towards railway infrastructure and its augmentation for transportation of coal upto the receiving end of generating station but does not include the transportation cost and any other appurtenant cost paid to the railway; and (f) Capital cost incurred or projected to be incurred by a thermal generating station, on account of implementation of the norms under Perform, Achieve and Trade (PAT) scheme of Government of India shall be considered by the Commission subject to sharing of benefits accrued under the PAT scheme with the beneficiaries. (5) The following shall be excluded from the capital cost of the existing and new projects: (a) The assets forming part of the project, but not in use, as declared in the tariff petition; (b) De-capitalised Assets after the date of commercial operation on account of replacement or removal on account of obsolescence or shifting from one project to another project: Provided that in case replacement of transmission asset is recommended by Regional Power Committee, such asset shall be de-capitalised only after its redeployment; Provided further that unless shifting of an asset from one project to another is of permanent nature, there shall be no de- capitalization of the concerned assets. (c) In case of hydro generating stations, any expenditure incurred or committed to be incurred by a project developer for getting the project site allotted by the State Government by following a transparent process; (d) Proportionate cost of land of the existing project which is being used for generating power from generating station based on renewable energy; and (e) Any grant received from the Central or State Government or any statutory body or authority for the execution of the project which does not carry any liability of repayment.

74. The Petitioner vide Auditor Certificate has claimed the capital cost of the individual assets which has been added to arrive at the capital cost claimed during 2019-24 period for consolidated assets as per following details: Page 41 of 58 Order in Petition No. 35/TT/2020 ( in lakh) Assets Apportioned Approved capital Cost (RCE) Capital Cost claimed as on 31.3.2019 claimed in 2019-20 Estimated Completion Capital Cost Asset-I 2712.91 2441.72 219.00** 2660.72 Asset-II 1137.53 810.44 12.13 822.57 Asset-III 3335.50 3198.93 0.00 3198.93 Asset-IV 1062.13 1026.73 0.00 1026.73 Asset-V 3715.93 3436.53 40.15 3476.68 Total 11964.00 10914.35 271.28 11185.63 **Represents Transmission charges to be paid to TBCB line of 400 kV D/C Khargapur- Chaibasa TL (Sterlite) Cost over-run

75. Against the overall apportioned approved capital cost (as per RCE) of 11964.00 lakh, the estimated completion capital cost including additional capital expenditure is 11185.63 lakh. The individual capital cost of each asset is also within the respective RCE apportioned cost. Therefore, there is no cost over-run as per RCE.

76. The capital cost has been dealt with in line with clause (3) of Regulation

19 of the 2019 Tariff Regulations. The element wise capital cost (i.e. Land, Building, Transmission Line, Sub-station and PLCC) as admitted by the Commission as on 31.3.2019 for the instant assets are clubbed together and the combined capital cost has been considered as capital cost for combined asset as on 1.4.2019, as per the following details:- ( in lakh) Element Asset-I Asset-II Asset-III Asset-IV Asset-V Free hold Land 0.00 0.00 0.00 0.00 0.00 Leasehold Land 0.00 0.00 0.00 0.00 0.00 Building & Other Civil Works 0.00 0.00 0.00 0.00 0.00 Transmission Line 2342.21 2342.21 3051.02 1026.74 3435.60 Sub-Station Equipment 67.88 0.00 118.43 0.00 0.00 PLCC 0.00 0.00 0.00 0.00 0.00 IT Equipment and Software 31.58 0.00 29.48 0.00 0.00 Total 2441.67 810.30 3198.93 1026.74 3435.60 Page 42 of 58 Order in Petition No. 35/TT/2020 ( in lakh) Particulars Combined capital Cost as on 1.4.2019 Freehold Land 0.00 Leasehold Land 0.00 Building & Other Civil Works 0.00 Transmission Line 10665.87 Sub-Station Equipment 186.31 PLCC 0.00 IT Equipment and Software 61.06 TOTAL 10913.24

77. The trued-up capital cost of 10913.2 lakh for combined asset is considered as admitted capital cost as on 1.4.2019 for working out tariff for 2019-

24 tariff period. Additional Capital Expenditure (ACE)

78. Regulation 24 and 25 of the 2019 Tariff Regulations provides as under: -

24. Additional Capitalization within the original scope and up to the cut-off date (1) The Additional Capital Expenditure in respect of a new project or an existing project 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: (a) Undischarged liabilities recognized to be payable at a future date; (b) Works deferred for execution; (c) Procurement of initial capital spares within the original scope of work, in accordance with the provisions of Regulation 23 of these regulations; (d) Liabilities to meet award of arbitration or for compliance of the directions or order of any statutory authority or order or decree of any court of law; (e) Change in law or compliance of any existing law; and (f) Force Majeure events: Provided that in case of any replacement of the assets, the additional capitalization shall be worked out after adjusting the gross fixed assets and cumulative depreciation of the assets replaced on account of de- capitalization. (2) The generating company or the transmission licensee, as the case may be shall submit the details of works asset wise/work wise included in the original scope of work along with estimates of expenditure, liabilities recognized to be payable at a future date and the works deferred for execution.

25. Additional Capitalisation within the original scope and after the cut-off date: (1) The additional capital expenditure incurred or projected to be incurred in respect of an existing project or a new project on the following counts within the Page 43 of 58 Order in Petition No. 35/TT/2020 original scope of work and after the cut-off date may be admitted by the Commission, subject to prudence check: (a) Liabilities to meet award of arbitration or for compliance of the directions or order of any statutory authority, or order or decree of any court of law; (b) Change in law or compliance of any existing law; (c) Deferred works relating to ash pond or ash handling system in the original scope of work; (d) Liability for works executed prior to the cut-off date; (e) Force Majeure events; (f) Liability for works admitted by the Commission after the cut-off date to the extent of discharge of such liabilities by actual payments; and (g) Raising of ash dyke as a part of ash disposal system. (2) In case of replacement of assets deployed under the original scope of the existing project after cut-off date, the additional capitalization may be admitted by the Commission, after making necessary adjustments in the gross fixed assets and the cumulative depreciation, subject to prudence check on the following grounds: (a) The useful life of the assets is not commensurate with the useful life of the project and such assets have been fully depreciated in accordance with the provisions of these regulations; (b) The replacement of the asset or equipment is necessary on account of change in law or Force Majeure conditions; (c) The replacement of such asset or equipment is necessary on account of obsolescence of technology; and (d) The replacement of such asset or equipment has otherwise been allowed by the Commission.

79. The Petitioner has claimed projected Additional Capital Expenditure of 271.28 lakh for 2019-24 tariff block for the assets covered under the instant petition. The breakup of Additional Capital Expenditure across assets as submitted by the Petitioner is as follows: ( in lakh) Assets Projected Additional capital expenditure (2019-20) Reason for additional capital expenditure Asset-I 219.00 Transmission charges to be paid to TBCB Line of 400 kV DIC Kharagpur- Chaibasa TL (Sterlite) Asset-II 12.13 The expenditure is beyond cut-off and covered under Regulation 25(1)(d) of 2019 Tariff Regulations Asset-III 0.00 AssetIV 0.00 AssetV 40.15 Within the cut-off dated and covered under Regulation 24(a) of 2019 Tariff Regulations Total 271.28 Page 44 of 58 Order in Petition No. 35/TT/2020

80. The Petitioner has submitted the reasons for additional capital expenditure of 219 lakh in respect of Asset-I as under:

1) It is relevant to mention here that corresponding TBCB line bays at Chaibasa Sub- station (POWERGRID) have been put under commercial operation with in time schedule. Thus the line bays were put under commercial operation in its time schedule hence the Petitioner is not liable to pay of such mismatch charges (line along with bays). According, the transmission charges to be paid to TBCB line is claimed as an additional capitalisation FY 2019-20. It is prayed the same may allowed by Honble as the part of IEDC (as part of capital cost).

2) It is further mentioned that APPEAL is filed against Honble commission order 110/MP/2019 and the outcome of same is still pending.

81. We have considered the submissions of the Petitioner with regard to additional capital expenditure in case of Asset-I. The Petitioner was directed to pay the transmission charges to Purulia and Kharagpur Transmission Company Ltd for the period of mismatch between the COD of transmission line of Purulia and Kharagpur Transmission Company Ltd. and the associated Bays executed by the Petitioner, i.e. from 20.5.2017 to 18.6.2017 in order dated 3.4.2018 in Petition No.110/MP/2016. The Petitioner has claimed the transmission charges as additional capital expenditure of 219 lakh in case of Asset-I during 2019-20. In a similar case of mismatch, Dharbhanga Motihari Transmission Company Limited (DMTCL) was directed to pay the Petitioner the cost of mismatch in order dated 1.9.2017 in Petition No.290/TT/2018. DMTCL in Petition No.238/MP/2017 claimed the cost of mismatch that was directed to be paid to PGCIL. The Commission rejected DMTCLs claim vide order dated 29.3.2019 against which DMTCL filed a Review Petition No. 8/RP/2019, which was also rejected vide order dated 13.1.2020. The Commission is of the consistent view that the cost of the mismatch in COD of the assets under its scope has to be borne by the defaulter and it cannot be claimed as part of the transmission charges. Accordingly, the Petitioners claim of the transmission charges paid/payable to Page 45 of 58 Order in Petition No. 35/TT/2020 Purulia and Kharagpur Transmission Company Ltd. as additional capital expenditure during 2019-24 is rejected. During the course of the hearing, the Petitioner has submitted that it has preferred an appeal against the order dated 3.4.2018. Therefore, non-consideration of transmission charges payable to Purulia and Kharagpur Transmission Company Ltd. as additional capital expenditure shall be subject to the outcome of the said appeal.

82. The Petitioner vide its affidavit dated 25.2.2020 has submitted the details of Additional Capital Expenditure of 12.13 lakh in respect of Asset-II as under: ( in lakh) Asset Party name LoA details Package Balance retention amount (2019-20) Asset II Empowertrans Pvt. Ltd. CC-CS/394-ERI/SS- 2484/3/G5/R/CA-I/5353/5354 dt. 30.4.2015 Sub-station supply & service 12.13

83. The Petitioner has submitted the following in respect of Asset-II:

1) Since the contract is not yet closed hence the retention money is not released yet for the same.

2) It is further submitted that current petition having included all the balance and retention payments as on date. There is no balance and retention payments proposed to be made in future other than above mentioned table. It is relevant to mention here that the additional capitalisation and balance and retention payments pertaining to Sub-stations only.

84. The Additional Capital Expenditure has also been captured by the Auditor in its certificate for capital cost for Asset-II.

85. The Additional Capital Expenditure proposed for Asset-II is considered for tariff computation for 2019-24 period subject to true up. The Petitioner is directed to submit details of contract, scope, original liability and undischarged liability as Page 46 of 58 Order in Petition No. 35/TT/2020 on 31.3.2019 with Regulation under which such Additional Capitalization is claimed at the time of true up of 2019-24 period.

86. The Additional Capital Expenditure claimed in respect of Asset-V is within the cut-off date and has also been captured by the auditor in its certificate for capital cost for Asset-V. The same is considered for tariff computation for 2019-

24 period subject to true up. The Petitioner is directed to submit details of contract, scope, original liability and undischarged liability as on 31.3.2019 with Regulation under which such Additional Capitalization is claimed at the time of true up of 2019-24 period.

87. The Additional Capital Expenditure considered for tariff computation (subject to true up) for 2019-24 period is as below: ( in lakh) Assets Admitted additional capital expenditure (2019-20) 0.00 Asset-I 12.13 Asset-II 0.00 Asset-III 0.00 Asset-IV 40.15 Asset-V 52.28 Capital Cost for the 2019-24 Tariff Period

88. Accordingly, the capital cost of the combined asset, considered for the tariff period 2019-24, subject to truing up, is as follows:- ( in lakh) Capital Cost allowed as on 1.4.2019 ACE allowed for the year 2019-20 Total Estimated Completion capital Cost up to 31.3.2024 10913.24 52.28 10965.52 Page 47 of 58 Order in Petition No. 35/TT/2020 Debt-Equity Ratio

89. Regulation 18 of the 2019 Tariff Regulations provides as under: -

18. Debt-Equity Ratio: (3). In case of the generating station and the transmission project including communication, project declared under commercial operation prior to 1.4.2019, debt: equity ratio allowed by the Commission for determination of tariff for the period ending 31.3.2019 shall be considered: Provided that in case of a generating station or a transmission project including communication project which has completed its useful life as on or after 1.4.2019, if the equity actually deployed as on 1.4.2019 is more than 30% of the capital cost, equity in excess of 30%shall not be taken into account for tariff computation; Provided further that in case of projects owned by Damodar Valley Corporation, the debt: equity ratio shall be governed as per sub-clause (ii) of clause (2) of Regulation 72 of these regulations. (4). In case of the generating station and the transmission project including communication project declared under commercial operation prior to 1.4.2019, but where debt: equity ratio has not been determined by the Commission for determination of tariff for the period ending 31.3.2019, the Commission shall approve the debt: equity ratio in accordance with clause (1) of this Regulation. (5). Any expenditure incurred or projected to be incurred on or after 1.4.2019 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.

90. The details of the debt-equity ratio considered for the purpose of computation of tariff for 2019-24 tariff period is as follows: - Combined Asset Capital Cost as on 1.4.2019 ( lakh) Total Capital Cost as on 31.3.2024 ( lakh) Debt 7639.46 70.00 7676.06 70.00 Equity 3273.78 30.00 3289.46 30.00 Total 10913.24 100.00 10965.52 100.00 Return on Equity (RoE)

91. Regulation 30 and 31 of the 2019 Tariff Regulations provide as under:-

30. Return on Equity: (1) Return on equity shall be computed in rupee terms, on the equity base determined in accordance with Regulation 18 of these regulations. (2) Return on equity shall be computed at the base rate of 15.50% for thermal generating station, transmission project including communication project and run- of-river hydro generating station, and at the base rate of 16.50% for the storage Page 48 of 58 Order in Petition No. 35/TT/2020 type hydro generating stations including pumped storage hydro generating stations and run-of-river generating station with pondage: Provided that return on equity in respect of Additional Capitalization after cut-off date beyond the original scope excluding Additional Capitalization due to Change in Law, shall be computed at the weighted average rate of interest on actual loan portfolio of the generating station or the transmission project; Provided further that:

i. In case of a new project, the rate of return on equity shall be reduced by 1.00% for such period as may be decided by the Commission, if the generating station or transmission project is found to be declared under commercial operation without commissioning of any of the Restricted Governor Mode Operation (RGMO) or Free Governor Mode Operation (FGMO), data telemetry, communication project up to load dispatch centre or protection project based on the report submitted by the respective RLDC;

ii. in case of existing generating station, as and when any of the requirements under (i) above of this Regulation are found lacking based on the report submitted by the concerned RLDC, rate of return on equity shall be reduced by 1.00% for the period for which the deficiency continues;

iii. in case of a thermal generating station, with effect from 1.4.2020:

a) rate of return on equity shall be reduced by 0.25% in case of failure to achieve the ramp rate of 1% per minute;

b) an additional rate of return on equity of 0.25% shall be allowed for every incremental ramp rate of 1% per minute achieved over and above the ramp rate of 1% per minute, subject to ceiling of additional rate of return on equity of 1.00%: Provided that the detailed guidelines in this regard shall be issued by National Load Dispatch Centre by 30.6.2019.

31. Tax on Return on Equity: (1) The base rate of return on equity as allowed by the Commission under Regulation 30 of these regulations shall be grossed up with the effective tax rate of the respective financial year. For this purpose, the effective tax rate shall be considered on the basis of actual tax paid in respect of the financial year in line with the provisions of the relevant Finance Acts by the concerned generating company or the transmission licensee, as the case may be. The actual tax paid on income from other businesses including deferred tax liability (i.e. income from business other than business of generation or transmission, as the case may be) shall be excluded for the calculation of effective tax rate. (2) Rate of return on equity shall be rounded off to three decimal places and shall be computed as per the formula given below: Rate of pre-tax return on equity = Base rate / (1-t) Where t is the effective tax rate in accordance with clause (1) of this Regulation and shall be calculated at the beginning of every financial year based on the estimated profit and tax to be paid estimated in line with the provisions of the relevant Finance Act applicable for that financial year to the company on pro-rata basis by excluding the income of non-generation or non-transmission business, as the case may be, and the corresponding tax thereon. In case of generating company or transmission licensee paying Page 49 of 58 Order in Petition No. 35/TT/2020 Minimum Alternate Tax (MAT), t shall be considered as MAT rate including surcharge and cess. (3) The generating company or the transmission licensee, as the case may be, shall true up the grossed up rate of return on equity at the end of every financial year based on actual tax paid together with any additional tax demand including interest thereon, duly adjusted for any refund of tax including interest received from the income tax authorities pertaining to the tariff period 2019-24 on actual gross income of any financial year. However, penalty, if any, arising on account of delay in deposit or short deposit of tax amount shall not be claimed by the generating company or the transmission licensee, as the case may be. Any under-recovery or over-recovery of grossed up rate on return on equity after truing up, shall be recovered or refunded to beneficiaries or the long term customers, as the case may be, on year to year basis.

92. The Petitioner has submitted that MAT rate is applicable to the Petitioner's company. Accordingly, the MAT rate applicable during the 2019-20 has been considered for the purpose of RoE, which shall be trued up with actual tax rate in accordance Clause (3) of Regulation 31 of the 2019 Tariff Regulations. The ROE allowed for the instant transmission assets under Regulation 30 of the 2019 Tariff Regulations is as under:- ( in lakh) Combined Asset Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Opening Equity 3273.78 3289.46 3289.46 3289.46 3289.46 Addition due to Additional Capitalization 15.68 0.00 0.00 0.00 0.00 Closing Equity 3289.46 3289.46 3289.46 3289.46 3289.46 Average Equity 3281.62 3289.46 3289.46 3289.46 3289.46 Return on Equity (Base Rate) (%) 15.500 15.500 15.500 15.500 15.500 Tax Rate applicable (%) 17.472 17.472 17.472 17.472 17.472 Rate of Return on Equity (Pre-tax) (%) 18.782 18.782 18.782 18.782 18.782 Return on Equity (Pre-tax) 616.34 617.81 617.81 617.81 617.81 Interest on Loan (IoL)

93. Regulation 32 of the 2019 Tariff Regulations provides as under: -

32. Interest on loan capital: (1) The loans arrived at in the manner indicated in Regulation 18 of these regulations shall be considered as gross normative loan for calculation of interest on loan. Page 50 of 58 Order in Petition No. 35/TT/2020 (2) The normative loan outstanding as on 1.4.2019 shall be worked out by deducting the cumulative repayment as admitted by the Commission up to 31.3.2019 from the gross normative loan. (3) The repayment for each of the year of the tariff period 2019-24 shall be deemed to be equal to the depreciation allowed for the corresponding year/period. In case of de-capitalization of assets, the repayment shall be adjusted by taking into account cumulative repayment on a pro rata basis and the adjustment should not exceed cumulative depreciation recovered up to the date of de-capitalisation of such asset. (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 depreciation allowed for the year or part of the year. (5) The rate of interest shall be the weighted average rate of interest calculated on the basis of the actual loan portfolio after providing appropriate accounting adjustment for interest capitalized: 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 project, 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 changes to the terms and conditions of the loans shall be reflected from the date of such re-financing.

94. The weighted average rate of IoL has been considered on the basis of the rate prevailing as on 1.4.2019. The Petitioner has prayed that the change in interest rate due to floating rate of interest applicable, if any, during 2019-24 tariff period will be adjusted. Accordingly, the floating rate of interest, if any, shall be considered at the time of true up or next revision of tariff. In view of above, the IoL has been worked out in accordance with Regulation 32 of the 2019 Tariff Regulations. The IoL allowed is follows:- Page 51 of 58 Order in Petition No. 35/TT/2020 ( in lakh) Combined Assets Particular 2019-20 2020-21 2021-22 2022-23 2023-24 Gross Normative Loan 7639.46 7676.05 7676.05 7676.05 7676.05 Cumulative Repayments up to Previous Year 1145.37 1730.86 2317.73 2904.60 3491.47 Net Loan-Opening 6494.10 5945.20 5358.33 4771.46 4184.59 Addition due to Additional Capitalization 36.60 0.00 0.00 0.00 0.00 Repayment during the year 585.49 586.87 586.87 586.87 586.87 Net Loan-Closing 5945.20 5358.33 4771.46 4184.59 3597.72 Average Loan 6219.65 5651.77 5064.90 4478.03 3891.16 Weighted Average Rate of Interest on Loan (%) 7.93 7.92 7.97 8.04 8.03 Interest on Loan 493.50 447.75 403.63 359.99 312.27 Depreciation

95. Clause (1), (2) and (5) of Regulation 33 of the 2019 Tariff Regulations provide as under: -

33. Depreciation: (1) Depreciation shall be computed from the date of commercial operation of a generating station or unit thereof or a transmission project or element thereof including communication project. In case of the tariff of all the units of a generating station or all elements of a transmission project including communication project for which a single tariff needs to be determined, the depreciation shall be computed from the effective date of commercial operation of the generating station or the transmission project taking into consideration the depreciation of individual units: Provided that effective date of commercial operation shall be worked out by considering the actual date of commercial operation and installed capacity of all the units of the generating station or capital cost of all elements of the transmission project, for which single tariff needs to be determined. (2) The value base for the purpose of depreciation shall be the capital cost of the asset admitted by the Commission. In case of multiple units of a generating station or multiple elements of a transmission project, weighted average life for the generating station of the transmission project shall be applied. 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. (5) Depreciation shall be calculated annually based on Straight Line Method and at rates specified in Appendix-I to these regulations for the assets of the generating station and transmission project: Provided that the remaining depreciable value as on 31st March of the year closing after a period of 12 years from the effective date of commercial operation of the station shall be spread over the balance useful life of the assets. Page 52 of 58 Order in Petition No. 35/TT/2020

96. The depreciation has been worked out considering the admitted capital expenditure as on 31.3.2019 and accumulated depreciation up to 31.3.2019. The depreciation allowed for the Combined Asset is as follows:- ( in lakh) Combined Asset Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Opening Gross Block 10913.24 10965.52 10965.52 10965.52 10965.52 Addition during 2019-24 due to Projected Additional Capitalisation 52.28 0.00 0.00 0.00 0.00 Closing Gross Block 10965.52 10965.52 10965.52 10965.52 10965.52 Average Gross Block 10939.38 10965.52 10965.52 10965.52 10965.52 Average Gross Block Other Assets (90% depreciable assets) 10878.32 10904.46 10904.46 10904.46 10904.46 Average Gross Block IT Assets (100% depreciable assets) 61.06 61.06 61.06 61.06 61.06 Rate of Depreciation 5.35% 5.35% 5.35% 5.35% 5.35% Elapsed Life 2 3 4 5 6 Balance Useful life of the asset

23 22 21 20 19 Depreciable Value (excluding IT equipment and software) - 90% 9790.49 9814.02 9814.02 9814.02 9814.02 Depreciable value of IT equipment and software - 100% 61.06 61.06 61.06 61.06 61.06 Depreciation during the year 585.49 586.87 586.87 586.87 586.87 Remaining Depreciable Value Other Assets 8653.27 8094.57 7510.97 6927.36 6343.76 Remaining Depreciable Value IT Assets 52.92 49.65 46.38 43.11 39.85 Remaining Depreciable Value Total 8706.18 8144.22 7557.35 6970.48 6383.61 Operation & Maintenance Expenses (O&M Expenses)

97. Clause (3) of Regulation 35 of the 2019 Tariff Regulations specify the norms for O&M Expenses for the transmission project as (3) Transmission system: (a) The following normative operation and maintenance expenses shall be admissible for the transmission system: Page 53 of 58 Order in Petition No. 35/TT/2020 Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Norms for sub-station Bays (Rs Lakh per bay)

765 kV 45.01 46.60 48.23 49.93 51.68

400 kV 32.15 33.28 34.45 35.66 36.91

220 kV 22.51 23.30 24.12 24.96 25.84

132 kV and below 16.08 16.64 17.23 17.83 18.46 Norms for Transformers (Rs Lakh per MVA)

765 kV 0.491 0.508 0.526 0.545 0.564

400 kV 0.358 0.371 0.384 0.398 0.411

220 kV 0.245 0.254 0.263 0.272 0.282

132 kV and below 0.245 0.254 0.263 0.272 0.282 Norms for AC and HVDC lines (Rs Lakh per km) Single Circuit (Bundled Conductor with six or more sub-conductors) 0.881 0.912 0.944 0.977 1.011 Single Circuit (Bundled conductor with four sub-conductors) 0.755 0.781 0.809 0.837 0.867 Single Circuit (Twin & Triple Conductor) 0.503 0.521 0.539 0.558 0.578 Single Circuit (Single Conductor) 0.252 0.260 0.270 0.279 0.289 Double Circuit (Bundled conductor with four or more sub-conductors) 1.322 1.368 1.416 1.466 1.517 Double Circuit (Twin & Triple Conductor) 0.881 0.912 0.944 0.977 1.011 Double Circuit (Single Conductor) 0.377 0.391 0.404 0.419 0.433 Multi Circuit (Bundled Conductor with four or more sub-conductor) 2.319 2.401 2.485 2.572 2.662 Multi Circuit (Twin & Triple Conductor) 1.544 1.598 1.654 1.713 1.773 Norms for HVDC stations HVDC Back-to-Back stations (Rs Lakh per 500 MW) (Except Gazuwaka BTB)

834 864 894 925 958 Gazuwaka HVDC Back-to-Back station (Rs. Lakh per 500 MW) 1,666 1,725 1,785 1,848 1,913

500 kV Rihand-Dadri HVDC bipole scheme (Rs Lakh) (1500 MW) 2,252 2,331 2,413 2,498 2,586

500 kV Talcher- Kolar HVDC bipole scheme (Rs Lakh) (2000 2,468 2,555 2,645 2,738 2,834

500 kV Bhiwadi-Balia HVDC bipole scheme (Rs Lakh) (2500 1,696 1,756 1,817 1,881 1,947

800 kV, Bishwanath-Agra HVDC bipole scheme (Rs Lakh)(3000 2,563 2,653 2,746 2,842 2,942 Provided that the O&M expenses for the GIS bays shall be allowed as worked out by multiplying 0.70 of the O&M expenses of the normative O&M expenses for bays; (b) The total allowable operation and maintenance expenses for the Page 54 of 58 Order in Petition No. 35/TT/2020 transmission system shall be calculated by multiplying the number of sub-station bays, transformer capacity of the transformer (in MVA) and km of line length with the applicable norms for the operation and maintenance expenses per bay, per MVA and per km respectively. (c) The Security Expenses and Capital Spares for transmission system shall be allowed separately after prudence check: Provided that the transmission licensee shall submit the assessment of the security requirement and estimated security expenses, the details of year- wise actual capital spares consumed at the time of truing up with appropriate justification. (4) Communication system: The operation and maintenance expenses for the communication system shall be worked out at 2.0% of the original project cost related to such communication system. The transmission licensee shall submit the actual operation and maintenance expenses for truing up.

98. The total O&M Expenses claimed and admitted under instant petition are as follows:- ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 O&M expenses (Claimed) 241.64 250.00 258.86 267.61 276.86 O&M expenses (Approved) 241.64 250.00 258.86 267.61 276.86 Interest on Working Capital (IWC)

99. Clause (1)(c), (3) and (4) of Regulation 34 and Regulation 3(7) of the 2019 Tariff Regulations specifies as follows:

34. Interest on Working Capital: (1) The working capital shall cover: (c) For Hydro Generating Station (including Pumped Storage Hydro Generating Station) and Transmission Project:

(i) Receivables equivalent to 45 days of annual fixed cost;

(ii) Maintenance spares @ 15% of operation and maintenance expenses including security expenses; and

(iii) Operation and maintenance expenses, including security expenses for one month. (3) Rate of interest on working capital shall be on normative basis and shall be considered as the bank rate as on 1.4.2019 or as on 1st April of the year during the tariff period 2019-24 in which the generating station or a unit thereof or the transmission project including communication project or element thereof, as the case may be, is declared under commercial operation, whichever is later: Page 55 of 58 Order in Petition No. 35/TT/2020 Provided that in case of truing-up, the rate of interest on working capital shall be considered at bank rate as on 1st April of each of the financial year during the tariff period 2019-24. (4) Interest on working capital shall be payable on normative basis notwithstanding that the generating company or the transmission licensee has not taken loan for working capital from any outside agency.

3. Definition - In these regulations, unless the context otherwise requires: - (7) Bank Rate means the one year marginal cost of lending rate (MCLR) of the State Bank of India issued from time to time plus 350 basis points;

100. The Petitioner has submitted that it has computed interest on working capital for 2019-24 period considering the bank rate as on 1.4.2019. The rate of interest on working capital considered is 12.05%.

101. The interest on working capital is worked out in accordance with Regulation 34 of the 2019 Tariff Regulations. The rate of interest on working capital considered is 12.05%. The components of the working capital and interest thereon have been worked as follows: - ( in lakh) Particulars 2019-20 2020-21 201-22 2022-23 2023-24 O & M Expenses 20.14 20.83 21.55 22.30 23.07 Maintenance Spares 36.25 37.50 38.80 40.14 41.53 Receivables 242.58 238.96 234.56 230.25 224.84 Total 298.96 297.30 294.91 292.69 289.44 Rate of Interest (%) 12.05 12.05 12.05 12.05 12.05 Interest on working capital 36.02 35.82 35.54 35.27 34.88 Annual Fixed Charges for the 2019-24 Tariff Period

102. The detailed computation of the various components of the annual fixed charges for the combined transmission asset for the tariff period 2019-24 is summarized below:- Page 56 of 58 Order in Petition No. 35/TT/2020 ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Depreciation 585.49 586.87 586.87 586.67 586.67 Interest on Loan 493.50 447.75 403.63 359.99 312.27 Return on Equity 616.34 617.81 617.81 617.81 617.81 Interest on Working Capital 36.02 35.82 35.54 35.27 34.88 Operation and Maintenance 241.64 250.00 258.66 267.61 276.86 Total 1972.99 1938.25 1902.51 1867.55 1828.69 Filing Fee and Publication Expenses

103. The Petitioner has sought reimbursement of fee paid by it for filing the petition and publication expenses, in terms of Clause (1) of Regulation 70 of the 2019 Tariff Regulations. The Petitioner shall be entitled for reimbursement of the filing fees and publication expenses in connection with the present petition, directly from the beneficiaries on pro-rata basis in accordance with Clause (1) of Regulation 70 of the 2019 Tariff Regulations. Licence Fee and RLDC Fees and Charges

104. The Petitioner has requested to allow the Petitioner to bill and recover License fee and RLDC fees and charges, separately from the Respondents. The Petitioner shall be entitled for reimbursement of licence fee and RLDC fees and charges in accordance with Clauses (4) and (3) of Regulation 70 respectively of the 2019 Tariff Regulations. Goods and Services Tax

105. The Petitioner has sought to recover GST on transmission charges separately from the Respondents, if at any time GST on transmission is withdrawn from negative list in future. We have considered the submission of the Page 57 of 58 Order in Petition No. 35/TT/2020 Petitioner. GST is not levied on transmission service at present and we are of the view that Petitioners prayer is premature. Security Expenses

106. The Petitioner has submitted that security expenses for the instant assets are not claimed in the instant petition and it would file a separate petition for claiming the overall security expenses and the consequential Interest on Working Capital. The Petitioner has requested to consider the actual security expenses incurred during 2018-19 for claiming estimated security expenses for 2019-20 which shall be subject to true up at the end of the year based on the actuals. The Petitioner has submitted that similar petition for security expenses for 2020-21, 2021-22, 2022-23 and 2023-24 shall be filed on a yearly basis on the basis of the actual expenses of previous year subject to true up at the end of the year on actual expenses. The Petitioner has submitted that the difference, if any, between the estimated security expenses and actual security expenses as per the duly audited accounts may be allowed to be recovered from the beneficiaries on a yearly basis. We have considered the submissions of the Petitioner. Any application filed by the Petitioner in this regard will be dealt with in accordance with the appropriate provisions of the 2019 Tariff Regulations. Capital Spares

107. The Petitioner has sought reimbursement of capital spares at the end of tariff period. The Petitioners claim, if any, shall be dealt with in accordance with the provisions of the 2019 Tariff Regulations. Page 58 of 58 Order in Petition No. 35/TT/2020 Sharing of Transmission Charges

108. The billing, collection and disbursement of the transmission charges approved in this order shall be governed by the provisions of Central Electricity Regulatory Commission (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2010, as amended from time to time as provided in Regulation 43 of 2014 Tariff Regulations for the 2014-19 tariff period and Regulation 57 of the 2019 Tariff Regulations for the 2019-24 tariff period.

109. This order disposes of Petition No. 35/TT/2020. sd/- sd/- (I.S. Jha) (P. K. Pujari) Member Chairperson

Power Grid Corporati... v. Bihar State Power (H...

Structured Summary — Order in Petition No. 35/TT/2020 (Central Electricity Regulatory Commission)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner’s Submissions (as recorded)

Respondents’ Position

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Power Grid Corporation Of India Limited, Saudamini v. Bihar State Power (Holding) Company Ltd. And Others

Comments