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

765 kV Line bays at Jabalpur Pooling Station for 765 kV D/C Gadarwara STPS (NTPC)-Jabalpur Pooling Station TL (hereinafter referred to as transmission asset) under "POWERGRID Works associated with Part A of Transmission system for Gadarwara STPS of NTPC" in Western Region, (hereinafter referred to as the transmission project) 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 of the 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) Allow the addcap for 2014-19 and 2019-24 tariff block as claimed as per Para 5.9 above.

2) 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 8.3 and 9.1 above.

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 Honble Commission as provided in Tariff Regulation 2014 and Tariff regulations 2019 as per para 9.1 and 10.1 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 beneficiaries in terms of Regulation 70 (3) and (4) Central Page 4 of 36 Order in Petition No. 26/TT/2020 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 beneficiaries.

7) 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 9.7 above.

8) Allow the Petitioner to claim the capital spares at the end of tariff block as per actual.

9) Allow the Petitioner to bill and recover GST on Transmission Charges separately from the beneficiaries, if GST on transmission is withdrawn from negative list at any time 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 Honble 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 the Western Region. Background

4. The Investment Approval (IA) for implementation of POWERGRID works associated with Part-A of Transmission System for Gadarwara STPS of NTPC in Western Region was accorded by the Board of Directors of the Petitioner in the 327th meeting held on April 2, 2016 for 4777 lakh including an IDC of 181 lakh based on October, 2015 price level (communicated vide Memorandum No.C/CP/IA/Gadarwara Part-A dated 6.4.2016). The scope of work covered under the "POWERGRID Works associated with Part A of Transmission system for Gadarwara STPS of NTPC" is as under:- Sub-station:

765 kV Jabalpur Pooling Station (Powergrid) extension Page 5 of 36 Order in Petition No. 26/TT/2020 (2 nos. 765 kV Line Bays) (Gadarwara STPS (NTPC)-Jabalpur Pooling Station (PG) 765 kV D/C line - to be implemented through TBCB route)

5. As per the IA dated 2.4.2016, the instant transmission project was scheduled to be put into commercial operation within 14 months, i.e. by 1.6.2017. The instant asset was put into commercial operation on 31.5.2017. Thus, there is no time over-run.

6. The transmission tariff for the instant asset from its COD to 31.3.2019 was allowed vide order dated 10.10.2019 in Petition No. 250/TT/2017 as per the 2014 Tariff Regulations.

7. The Petitioner has served the petition on the Respondents and notice of this petition 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 aforesaid notices published in the newspapers by the Petitioner. M.P. Power Management Company Limited (MPPMCL) and Maharashtra State Electricity Distribution Company Limited (MSEDCL) have filed their reply vide affidavits dated 6.2.2020 and 7.2.2020, respectively. They have raised issues like grossing up of ROE, effect of GST, capital expenditure on PLCC and calculation of interest on loan. The Petitioner, vide its affidavits dated 4.5.2020 and 11.5.2020, has filed rejoinder to the reply of MPPMCL and MSEDCL, respectively. The hearing in this matter was held on 22.5.2020. Having heard the representatives of the Petitioner and perused the material on record, we proceed to dispose of the petition. Page 6 of 36 Order in Petition No. 26/TT/2020 TRUING UP OF ANNUAL FIXED CHARGES FOR THE 2014-19 TARIFF PERIOD

8. The Petitioner has submitted the information required under the 2014 Tariff Regulations for truing up of the annual fixed charges (AFC) in respect of the transmission asset allowed from COD to 31.3.2019 and has prayed for truing of the AFC under Regulation 8 of the 2014 Tariff Regulations. The tariff for the 2014-19 period has been trued up as discussed in the subsequent paragraphs.

9. The details of the transmission charges claimed by the Petitioner are as under: - ( in lakh) Particular 2017-18 (Pro-rata) 2018-19 Depreciation 79.81 123.47 Interest on Loan 73.54 109.06 Return on Equity 87.15 135.79 Interest on Working Capital 13.17 17.81 O&M Expenses 155.61 192.40 Total 409.28 578.53

10. The details of the Interest on Working Capital (IWC) claimed by the Petitioner are as under:- ( in lakh) Particular 2017-18 (Pro-rata) 2018-19 O&M Expenses 15.52 16.03 Maintenance Spares 27.93 28.86 Receivable 81.63 96.42 Total 125.08 141.31 Rate of Interest 12.60 12.60 Interest on Working Capital 13.17 17.81 Capital Cost

10. The Commission vide order dated 10.10.2019 in Petition No. 250/TT/2017 allowed capital cost of 1345.60 lakh as on COD and Additional Capital Page 7 of 36 Order in Petition No. 26/TT/2020 Expenditure (ACE) of 1364.3 lakh from COD to 31.3.2019 in respect of the instant asset.

11. The Petitioner vide Auditors Certificate dated 7.11.2019 has submitted the capital cost incurred up to COD, ACE from COD to 31.3.2019 and estimated ACE during the period from 1.4.2019 to 31.3.2020. The details of approved apportioned capital cost, capital cost as on COD and ACE incurred up to 31.3.2019 as claimed by the Petitioner for the instant transmission asset are as under: ( in lakh) Apportioned approved capital cost as per FR Capital cost as on COD Additional capitalisation (Claimed) Total capital cost as on 31.3.2019 (Claimed) 2017-18 2018-19 4777.00 1376.19 806.85 215.88 2398.92

12. The completion cost including ACE in respect of the instant asset is within the FR approved apportioned capital cost as mentioned in Table under paragraph 11 above. Therefore, there is no cost over-run. Interest During Construction (IDC):

13. The Petitioner has claimed IDC of 30.59 lakh for the instant asset and has submitted the Auditors Certificate in support of the same. The Petitioner has submitted computation of IDC along with the year-wise details of the discharged IDC.

14. The allowable IDC has been worked out considering the information submitted by the Petitioner for the instant asset on cash basis. The loan details submitted in Form-9C for the 2014-19 period and the IDC computation sheet have been considered for the purpose of computation of IDC on cash and Page 8 of 36 Order in Petition No. 26/TT/2020 accrued basis. The undischarged IDC as on COD has been considered as ACE during the year in which it has been discharged.

15. Accordingly, based on the information furnished by the Petitioner, the IDC considered is summarized as under:- ( in lakh) approved in order Dated 10.10.2019 IDC claimed by Petitioner (As per Auditor Certificate) Entitled IDC up to disallowed as on COD due to computation difference Undischarged portion of entitled IDC as on COD allowed on cash basis as on COD A B C= A-B D E=B-D 29.91 30.59 29.91 0.68 29.91 0.00 Incidental Expenditure During Construction (IEDC)

16. The Petitioner has claimed IEDC of 19.04 lakh 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 percentage of 10.75% on Hard Cost as indicated in the Abstract Cost Estimate, in respect of the instant asset. Hence, the IEDC claimed has been allowed. Initial Spares

17. The Petitioner has claimed the following Initial Spares for the instant asset and prayed to allow the Initial Spares as per actuals. Plant & machinery Cost up to cut-off date (excluding IDC and IEDC as per auditor certificate) (A) ( in lakh) Initial Spares Claimed ( in lakh) Ceiling Limit 2397.09 136.86 6.0 Page 9 of 36 Order in Petition No. 26/TT/2020

18. We have considered the submissions of the Petitioner. The instant asset was put into commercial operation on 31.5.2017. Therefore, the cut-off date is 31.3.2020 and the capital cost up to the cut-off date has been considered for computation of Initial Spares. It has been observed that earlier the Petitioner vide Auditors Certificate had claimed Initial Spares to the tune of 192.85 lakh and the same was not fully discharged up to COD whereas in the instant petition, the petitioner has reduced its claim of Initial Spares to 136.86 lakh without providing proper reasons for the difference. The claim of the Initial Spares under the instant petition is allowed. However, the petitioner is required to be more prudent while estimating and claiming expenditure projected to be incurred. The Petitioners claim of Initial Spares for the instant assets is within the norms specified in the applicable Tariff Regulations and it is accordingly allowed as under: Plant & machinery cost up to cut-off date (excluding IDC and IEDC as per Auditor certificate) (A) ( in lakh) Initial Spares claimed ( in lakh) Ceiling Limit (%) (C) Allowable Initial Spares worked Excess Initial Spares ( in lakh) Initial Spares allowed ( in lakh) D = [(A-B)*C /(100- 2305.89 136.86 6.0 138.48 Nil 136.86

19. In order dated 10.10.2019 in Petition No. 250/TT/2017, the Petitioner had submitted that the Initial Spares were not discharged up to COD and not included in the cost as mentioned in the Auditors certificate up to COD. Accordingly, based on the submission of the Petitioner, the discharge of Initial Spares during 2017-18 and 2018-19 were considered. In the instant petition, the Petitioner has claimed the same capital cost as on COD as admitted by the Commission in the order dated 10.10.2019 in Petition No. 250/TT/2017. Thus, it is evident that initial Page 10 of 36 Order in Petition No. 26/TT/2020 Spares have not been discharged up to COD. Accordingly, following discharge position of initial spares have been considered: ( in lakh) Admissible Initial Spares Initial Spares Discharged 2017-18 2018-19 136.68 134.99 1.86 Capital cost as on COD

20. Accordingly, the capital cost allowed as on COD is summarized as under:- ( in lakh) Capital cost as on COD as per Auditor Certificate Less: IDC as on COD due to Capital cost considered as on COD Computation difference discharged 1376.19 0.68 29.91 1345.60 Additional Capital Expenditure (ACE)

21. The Petitioner has claimed ACE of 837.44 lakh, including IDC of 30.59 lakh discharged during 2017-18 and 215.88 lakh during 2018-19 for the instant asset. The Petitioner, vide affidavit dated 19.3.2020, has submitted that the ACE is mainly on account of balance and retention payments. The Additional Capitalization during 2017-18 and 2018-19 period for the instant asset has been claimed under Regulation 14(1)(i) (undischarged liabilities) of the 2014 Tariff Regulations and is within the cut-off the date.

22. The Petitioner has further submitted that ACE up to 31.3.2019 has been considered in the Auditors certificate as per actuals whereas the ACE claimed for the period from 1.4.2019 to 31.3.2020 is on estimated basis and may vary due to final claim/ reconciliation at the time of contract closing.

23. MSEDCL has submitted that the Petitioner has projected an overall expenditure of 92.84 lakh as completion cost for PLCC/communication system. Page 11 of 36 Order in Petition No. 26/TT/2020 This cost should be disallowed as PLCC/communication system is installed for the benefit of the Petitioner to have communication from one end to the other. In response, the Petitioner has submitted that PLCC system is meant for protection and data telemetry purpose which is an integral part of the transmission system under the present scope. The Petitioner has requested to consider the cost incurred against PLCC head in the capital cost and has prayed to allow the tariff as claimed.

24. We have considered the submissions of the Petitioner and MSEDCL. As PLCC/communication system is part of the transmission system under the present project, cost of the same shall be considered as part of the capital cost of the project.

25. The Petitioner has claimed ACE including the accrued IDC discharged during 2017-18 period. It is observed that total estimated completion cost including Additional Capitalization during 2017-18 to 2018-19 period is within the approved apportioned cost. However, as discussed at para 19 above, the Initial Spares discharge of 134.99 lakh and 1.86 lakh during 2017-18 and 2018-19 respectively, have been adjusted from the balance and retention payment allowed for the said period.

26. The ACE claimed by the Petitioner during 2017-18 and 2018-19 for the instant asset is within the cut-off date and the same has been allowed under Regulation 14(1)(i) and Regulation 14(1)(ii) of the 2014 Tariff Regulations as under:- Page 12 of 36 Order in Petition No. 26/TT/2020 ( in lakh) Particulars Additional Capitalisation 2017-18 2018-19 ACE to the extent of Balance & Retention Payments and work deferred for execution other than Initial Spares and IDC 671.86 214.02 Add: Initial Spares Discharged 134.99 1.86 Add: IDC Discharged 29.91 0.00 Total ACE allowed 836.76 215.88

27. Accordingly, the capital cost considered for computation of tariff is as under: ( in lakh) Particular Capital cost as on Additional Capitalization Total capital cost including additional capitalization as on 31.3.2019 2017-18 2018-19 Capital Cost allowed in this order 1345.60 836.76 215.88 2398.24 Debt-Equity Ratio

28. The Petitioner has considered debt-equity ratio as 70:30 as on COD and for Additional Capitalization post-COD. The debt-equity ratio of 70:30 as claimed by Petitioner in Form 6 has been considered for capital cost as on COD and for Additional Capitalization during 2017-18 and 2018-19 as provided under Regulation 19 of the 2014 Tariff Regulations. The details of the debt-equity ratio as on the date of COD and as on 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 Amount ( in lakh) Amount ( in lakh) Debt 941.92 70.00 1678.77 70.00 Equity 403.68 30.00 719.47 30.00 Total 1345.60 100.00 2398.24 100.00 Page 13 of 36 Order in Petition No. 26/TT/2020 Interest on Loan (IOL)

29. The Petitioner has prayed for change in interest rates prevailing as on 1.4.2019 for respective loans. The change in interest rate is due to floating rate of interest applicable for the project to be claimed/adjusted over a 5year period directly from the beneficiaries.

30. MSEDCL has submitted that the Petitioner has considered the rate of interest on loan on annual basis for all the period under consideration which has major burden on the tariff of this control period.

31. We have considered the submissions of the Petitioner and the MSEDCL. The IOL is allowed based on the actual interest rate, in accordance with Regulation 26 of the 2014 Tariff Regulations. The IOL has been worked out as detailed below:

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

32. The details of IOL allowed are as follows:- ( in lakh) Particular 2017-18 (Pro-rata) 2018-19 Gross Normative Loan 941.92 1527.65 Cumulative Repayments up to Previous Year 0.00 78.53 Net Loan-Opening 941.92 1449.13 Additions due to Additional Capitalization 585.73 151.12 Repayment during the year 78.53 121.90 Net Loan-Closing 1449.13 1478.35 Average Loan 1195.52 1463.74 Weighted Average Rate of Interest on Loan (%) 7.36 7.46 Interest on Loan 73.57 109.17 Page 14 of 36 Order in Petition No. 26/TT/2020 ( in lakh) Particular 2017-18 2018-19 Allowed earlier in order dated 10.10.2019 in Petition No. 250/TT/2017 73.83 115.04 As claimed by the Petitioner 73.54 109.06 Approved in this order 73.57 109.17

33. The difference in IOL allowed in order dated 10.10.2019 in Petition No. 250/TT/2017 and that allowed after truing up in this order is on account of lower Additional Capital Expenditure and change in the weighted average rate of interest which is computed based on actual loan portfolio and rate of interest. Return on Equity (ROE)

34. The Petitioner is entitled for ROE for the instant assets in terms of Regulations 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

35. 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. Page 15 of 36 Order in Petition No. 26/TT/2020 Year MAT Rate Grossed up ROE [Base Rate/(1-t)] 2014-15 20.961 19.610 2015-16 21.342 19.705 2016-17 21.342 19.705 2017-18 21.342 19.705 2018-19 21.549 19.758

36. MPPMCL and MSEDCL have submitted that the Petitioner has grossed up ROE on the basis of actual taxes paid during 2016-17 and 2017-18. During 2018- 19, it has been grossed up on the basis of applicable rate of MAT, surcharge and cess. The Petitioner has not placed on record the assessment order for the period 2016-17 and 2017-18. Further, the Petitioner has not claimed grossed up ROE on the basis of actual taxes paid for the year 2018-19. The Respondents have further submitted that the Petitioner has neither submitted copy of assessment order for the 2014-15 and 2015-16 period nor the audited accounts in respect of actual taxes paid during2016-17 and 2017-18. In the absence of these essential documents, it is not possible to scrutinize the claim of the Petitioner in a proper way.

37. In response, the Petitioner has submitted that the income tax assessment order has been issued by the Income Tax Department for 2014-15, 2015-16 and 2016-17 and that the Income Tax returns have been filed with the Income Tax Department for the years 2017-18 and 2018-19. The basis of year-wise effective tax rate has been mentioned in the petition and grossed up ROE has been trued up accordingly for the 2014-19 period. The Petitioner has further submitted that the assessment orders of 2014-15 and 2015-16 have already been submitted in the TV (technical validation) reply in Petition No.20/TT/2020 and has placed on record a copy of the assessment order for the year 2016-17. Page 16 of 36 Order in Petition No. 26/TT/2020

38. We have considered the submissions of the Petitioner and the Respondents. We have also perused the documents available on record. The ROE allowed for the instant assets is as follows: ( in lakh) Particulars 2017-18 (Pro-rata) 2018-19 Opening Equity 403.68 654.71 Addition due to Additional Capitalization 251.03 64.76 Closing Equity 654.71 719.47 Average Equity 529.19 687.09 Return on Equity (Base Rate) (%) 15.5 15.5 Tax Rate applicable (%) 21.34 21.55 Rate of Return on Equity (Pre-tax)(%) 19.705 19.758 Return on Equity (Pre-tax) 87.14 135.75 ( in lakh) Particular 2017-18 (Pro-rata) 2018-19 Allowed earlier in order dated 10.10.2019 in Petition No. 250/TT/2017 89.01 146.65 As claimed by the Petitioner 87.15 135.79 Approved in this order 87.14 135.75 The ROE allowed in the instant order is less than the ROE allowed vide order dated 10.10.2019 in Petition No. 250/TT/2017 due to decrease in equity on account of lower Additional Capitalisation and change in the applicable MAT rate for the purpose of grossing up of base rate of ROE. Depreciation

39. The Petitioner has claimed depreciation considering capital expenditure of 1345.60 lakh on COD and Additional Capitalization of 1052.64 lakh (including IDC discharged during 2017-18).

40. We have considered the submission of the Petitioner. It is observed that in Petition No. 250/TT/2017, where tariff was determined for the instant asset for the 2014-19 tariff block, the Petitioner had submitted capital cost of IT equipment Page 17 of 36 Order in Petition No. 26/TT/2020 in sub-station cost and, therefore, depreciation for IT equipment was allowed @5.28% of corresponding capital cost. The Petitioner now at the time of truing up of tariff of 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 for IT Equipment as NIL as per the 2014 Tariff Regulations. 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 @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 up to 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 prayer for apportionment of capital expenditure towards IT Equipment and allowing depreciation @15% from 1.4.2014 onwards. Accordingly, depreciation @5.28% has been considered for IT Equipment as part of the sub-station up to 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 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.

41. The Gross Block during the tariff period 2014-19 has been depreciated at weighted average of depreciation (WAROD) and working of WAROD is at Page 18 of 36 Order in Petition No. 26/TT/2020 Annexure-I. The weighted average of depreciation (WAROD) has been worked out after taking into account the depreciation rates of assets as prescribed in the 2014 Tariff Regulations and depreciation allowed during 2017-18 and 2018-19 is as under: ( in lakh) Particular 2017-18 (pro-rata) 2018-19 Particular 2017-18 (pro-rata) 2018-19 Opening Gross Block 1345.60 2182.36 Addition during the year 2014-19 due to Additional Capitalisation 836.76 215.88 Closing Gross Block 2182.36 2398.24 Average Gross Block 1763.98 2290.30 Weighted average rate of Depreciation (%) (WAROD) 5.327% 5.323% Balance useful life at the beginning of the year 25 25 Aggregated Depreciable Value 1589.14 2062.84 Combined Depreciation during the year 78.53 121.90 Remaining Aggregated Depreciable Value 1589.14 1984.32 ( in lakh) Particular 2017-18 2018-19 Allowed earlier in order dated 10.10.2019 in Petition No. 250/TT/2017 80.67 132.91 As claimed by the Petitioner 79.81 123.47 Approved in this order 78.53 121.90 The depreciation allowed in the instant order is lower than the depreciation allowed vide order dated 10.10.2019 in Petition No. 250/TT/2017 due to lower Additional Capital Expenditure. Operation & Maintenance Expenses (O&M Expenses)

42. The O&M Expenses claimed by the Petitioner and allowed as per Regulation 29(4)(a) of the 2014 Tariff Regulations for purpose of computation of tariff are the same and are as under: Page 19 of 36 Order in Petition No. 26/TT/2020 ( in lakh) Particulars 2017-18 2018-19 Norm ( lakh/bay)

765 kV Bay 93.11 96.2 Number of bays

765 kV Bay 2 2 Total O&M Expense (Claimed) 155.61 192.4 Total O&M Expense (Approved) 155.61 192.4 Interest on Working Capital (IWC)

43. The Petitioner is entitled to claim IWC 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 IWC: Rate of IWC is considered on normative basis in accordance with Clause (3) of Regulation 28 of the 2014 Tariff Regulations.

44. The IWC allowed for the instant asset is as under:- ( in lakh) Particulars 2017-18 (Pro-rata) 2018-19 O & M Expenses 15.52 16.03 Maintenance Spares 27.93 28.86 Receivables 81.37 96.17 Total Working Capital 124.82 141.06 Rate of Interest (%) 12.60 12.60 Interest of working capital 13.14 17.77 Page 20 of 36 Order in Petition No. 26/TT/2020 Accordingly, the IWC claimed by the Petitioner, allowed and trued up in respect of the instant asset is shown in the table below: ( in lakh) Particulars 2017-18 2018-19 Allowed earlier in order dated 10.10.2019 in Petition No. 250/TT/2017 13.23 18.37 As claimed by the Petitioner in instant petition 13.17 17.81 Allowed after truing-up 13.14 17.77 APPROVED ANNUAL FIXED CHARGES FOR 2014-19 TARIFF PERIOD

45. The annual transmission charges allowed for the 2014-19 tariff period after truing up are as under: ( in lakh) Particulars 2017-18 (Pro-rata) 2018-19 Depreciation 78.53 121.90 Interest on Loan 73.57 109.17 Return on Equity 87.14 135.75 Int. on Working Capital 13.14 17.77 Op. and Maintenance 155.61 192.40 Total 407.98 577.00 The Annual Transmission Charges allowed vide order dated 10.10.2019in Petition No. 250/TT/2017; claimed in the instant petition for the 2014 -19 period; and allowed after true up for the 2014-19 period are as under: ( in lakh) Particulars 2017-18 2018-19 Allowed earlier in order dated 10.10.2019 in Petition No. 250/TT/2017 412.34 605.37 As claimed by the Petitioner in instant petition 409.28 578.53 Allowed after truing-up 407.98 577.00 The difference between the Annual Transmission Charges allowed vide order dated 10.10.2019 in Petition No. 250/TT/2017 and approved in this order is on account of lower actual expenditure by the Petitioner. Page 21 of 36 Order in Petition No. 26/TT/2020 DETERMINATION OF ANNUAL FIXED CHARGES FOR 2019-24 TARIFF PERIOD

46. The Petitioner has claimed the following transmission charges for the instant transmission asset for the 2019-24 tariff period:- ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Depreciation 130.62 132.08 132.08 132.08 132.05 Interest on Loan 107.82 99.18 90.62 83.92 73.20 Return on Equity 136.74 138.32 138.32 138.32 138.32 Interest on Working Capital 9.65 9.72 9.73 9.78 9.75 O & M Expenses 91.88 95.06 98.32 101.72 105.22 Total 476.71 474.36 469.07 465.82 458.54

47. The Petitioner has claimed the following IWC for the 2019-24 tariff period:- ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 O&M Expenses 7.66 7.92 8.19 8.48 8.77 Maintenance Spares 13.78 14.26 14.75 15.26 15.78 Receivables 58.61 58.48 57.83 57.43 56.38 Total 80.05 80.66 80.77 81.17 80.93 Rate of Interest (%) 12.05 12.05 12.05 12.05 12.05 Interest on Working Capital 9.65 9.72 9.73 9.78 9.75 Capital Cost

48. Regulation 19(3) of the 2019 Tariff Regulations provides as follows: -

19. Capital Cost (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; (d) Capital expenditure on account of ash disposal and utilization including handling and transportation facility; (e) Capital expenditure incurred towards railway infrastructure and its Page 22 of 36 Order in Petition No. 26/TT/2020 augmentation for transportation of coal up to 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.

49. The Petitioner vide Auditors Certificate dated 7.11.2019 has claimed the following capital cost including ACE projected to be incurred during the year 2019-20:- ( in lakh) Apportioned capital cost (FR) Capital cost claimed as on 31.3.2019 Additional capitalisation (claimed) Total capital cost as on 31.3.2019 (claimed) 2019-24 4777.00 2398.92 55.89 2454.81

50. Against the overall apportioned approved capital cost (as per FR) of 4777 lakh, the estimated completion cost including ACE is 2454.81 lakh. Therefore, there is no cost over-run.

51. The capital cost has been dealt as per clause (3) of Regulation 19 of the 2019 Tariff Regulations. The admitted capital cost of 2398.24 lakh (i.e. Land, Building, Transmission Line, Sub-station and PLCC) as on 31.3.2019 has been considered as capital cost as on 1.4.2019. The trued-up capital cost of 2398.24 lakh is considered as admitted capital cost as on 1.4.2019 for working out tariff for 2019-24 tariff period. Additional Capital Expenditure

52. Regulation 24 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 Page 23 of 36 Order in Petition No. 26/TT/2020 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.

53. The Petitioner has claimed projected ACE of 55.89 lakh during 2019-24 period and submitted Auditors certificates in support of the same.

54. The Petitioner in the petition and vide affidavit dated 19.3.2020 has submitted that the Additional Capitalization in case of the instant asset is on account of undischarged liability towards final payment/withheld payment due to contractual exigencies for works executed within the cut-off date. The Additional Capitalization during the year 2019-20 for the instant asset has been claimed under Regulation 24(1)(a) of the 2019 Tariff Regulations. The Petitioner has also submitted details of underlying reasons for additional capitalization in Form7.

55. MSEDCL has submitted that the Petitioner has claimed projectedAdditional Capitalization of 55.89 lakh during 2019-20 without giving proper details and justification for the same. Therefore, the same may be considered in the truing up for the 2019-24 period. In response, the Petitioner Page 24 of 36 Order in Petition No. 26/TT/2020 has submitted that estimated Additional Capitalization for 55.89 lakh has been claimed during2019-20 under Regulation 24(1)(a) of the 2019 Tariff Regulations for balance and retention payment and works deferred for execution for Building and Civil works, Sub-station, PLCC and IT equipment. The Petitioner has prayed to allow the same.

56. We have considered the submission of the Petitioner and MSEDCL. Since the Petitioner has claimed 55.89 lakh during 2019-20 under Regulation 24(1)(a) of the 2019 Tariff Regulations towards balance and retention payment and works deferred for execution for Building and Civil works, Sub-station, PLCC and IT equipment, which is within the cut-off date, the same is allowed.

57. It is observed that the projected Additional Capitalization falls within the cut-off date in the instant petition. The Petitioner is directed to submit details of contracts, scope, original liability and undischarged liability as on 31.3.2019 and the regulation under which such Additional Capitalization is claimed at the time of true up of the tariff of the 2019-24 period. The ACE allowed is summarized hereunder, which is subject to true up:- Particulars Regulation Admitted additional capital expenditure (2019-20) ( in lakh) ACE to the extent of Balance & Retention Payments & work deferred for execution before cut-off date Regulation 24(1)(a) of the 2019 Tariff Regulations 55.89 Capital Cost

58. The capital cost of the instant asset considered for determination of the tariff for the 2019-24 period is as under: Page 25 of 36 Order in Petition No. 26/TT/2020 ( in lakh) Capital cost allowed as on 1.4.2019 ACE allowed during the year 2019-20 Total estimated completion cost up to 31.3.2024 2398.24 55.89 2454.13 Debt-Equity Ratio

59. Regulation 18(3), (4) and (5) 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.

60. The details of the debt-equity ratio considered for the purpose of computation of tariff for the 2019-24 tariff period is as follows: - Particulars Capital Cost as on 1.4.2019 ( in lakh) Total Capital Cost as on 31.3.2024 ( in lakh) Page 26 of 36 Order in Petition No. 26/TT/2020 Debt 1678.77 70.00 1717.89 70.00 Equity 719.47 30.00 736.24 30.00 Total 2398.24 100.00 2454.13 100.00 Return on Equity (ROE)

61. Regulation 30 and Regulation 31of 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 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. Page 27 of 36 Order in Petition No. 26/TT/2020

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 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.

62. The Petitioner has submitted that MAT rate is applicable to the Petitioner 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 with Clause (3) of Regulation 31 of the 2019 Tariff Regulations. The ROE allowed for the instant transmission asset under Regulation 30 of the 2019 Tariff Regulations is as under:- ( in lakh) Page 28 of 36 Order in Petition No. 26/TT/2020 Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Opening Equity 719.47 736.23 736.23 736.23 736.23 Addition due to Additional Capitalization 16.77 0.00 0.00 0.00 0.00 Closing Equity 736.23 736.23 736.23 736.23 736.23 Average Equity 727.85 736.23 736.23 736.23 736.23 Return on Equity (Base Rate) (%) 15.50 15.50 15.50 15.50 15.50 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) 136.70 138.28 138.28 138.28 138.28 Interest on Loan (IOL)

63. 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. (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. Page 29 of 36 Order in Petition No. 26/TT/2020 (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.

64. The weighted average rate of IOL has been considered on the basis of 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. 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:- ( in lakh) Particular 2019-20 2020-21 2021-22 2022-23 2023-24 Gross Normative Loan 1678.77 1717.90 1717.90 1717.90 1717.90 Cumulative Repayments up to Previous Year 200.43 331.01 463.05 595.09 727.13 Net Loan-Opening 1478.35 1386.88 1254.85 1122.81 990.77 Addition due to Additional Capitalization 39.12 0.00 0.00 0.00 0.00 Repayment during the year 130.58 132.04 132.04 132.04 132.04 Net Loan-Closing 1386.88 1254.85 1122.81 990.77 858.73 Average Loan 1432.61 1320.87 1188.83 1056.79 924.75 Weighted Average Rate of Interest on Loan (%) 7.539 7.522 7.638 7.960 7.938 Interest on Loan 108.00 99.36 90.81 84.12 73.40 Depreciation

65. Regulation 33(1), (2) and (5) 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 Page 30 of 36 Order in Petition No. 26/TT/2020 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.

66. The IT equipment has been considered as a part of the Gross Block and depreciated using weighted average rate of depreciation (WAROD). The weighted average of depreciation (WAROD) has been worked out (Annexure-II) after taking into account the depreciation rates of IT and non IT assets as prescribed in the 2019 Tariff Regulations. The salvage value of IT equipment has been considered nil, i.e. IT asset has been considered as 100 per cent depreciable. 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 instant asset is as follows:- ( in lakh) Particular 2019-20 2020-21 2021-22 2022-23 2023-24 Opening Gross Block 2398.24 2454.13 2454.13 2454.13 2454.13 Addition during the year 2019-24 due to projected Additional Capitalisation 55.89 0.00 0.00 0.00 0.00 Closing Gross Block 2454.13 2454.13 2454.13 2454.13 2454.13 Average Gross Block 2426.19 2454.13 2454.13 2454.13 2454.13 Weighted average rate of Depreciation (%) (WAROD) 5.38 5.38 5.38 5.38 5.38 Page 31 of 36 Order in Petition No. 26/TT/2020 Particular 2019-20 2020-21 2021-22 2022-23 2023-24 Balance useful life at the beginning of the year 24.00 23.00 22.00 21.00 20.00 Aggregated Depreciable Value 2185.20 2210.41 2210.41 2210.41 2210.41 Combined Depreciation during the year 130.58 132.04 132.04 132.04 132.04 Remaining Aggregated Depreciable Value 1984.77 1879.39 1747.36 1615.32 1483.28 Operation & Maintenance Expenses (O&M Expenses)

67. Regulation 35(3) and (4) of the 2019 Tariff Regulations provides as under:

35 (3) Transmission system: (a) The following normative operation and maintenance expenses shall be admissible for the transmission system: Particulars 2019- 2020- 2021- 2022- 2023- Norms for sub-station Bays ( Lakh per bay)

765 kV 45.01 46.60 48.23 49.93 51.68

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

765 kV 0.491 0.508 0.526 0.545 0.564

132 kV and below 0.245 0.254 0.263 0.272 0.282 Norms for AC and HVDC lines ( 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 Cir uit (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 HVDC Back-to-Back station ( Lakh per 500 MW) 1,666 1,725 1,785 1,848 1,913 Page 32 of 36 Order in Petition No. 26/TT/2020 Particulars 2019- 2020- 2021- 2022- 2023-

500 kV Rihand-Dadri HVDC bipole scheme (Rs Lakh) (1500 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 MW) 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 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.

68. The O&M Expenses claimed and allowed for the instant asset are the same and are as follows:- ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 O&M Expenses claimed 91.88 95.06 98.32 101.72 105.22 O&M Expenses approved 91.88 95.06 98.32 101.72 105.22 Interest on Working Capital (IWC)

69. Regulation 34(1)(c), (3) and (4) and Clause (7) of Regulation 3 of the 2019 Tariff Regulations specify as follows:- Page 33 of 36 Order in Petition No. 26/TT/2020

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: 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;

70. The Petitioner has submitted that it has computed IWC for 2019-24 period considering the bank rate as on 1.4.2019.

71. The IWC is worked out in accordance with Regulation 34 of the 2019 Tariff Regulations. The rate of IWC considered is 12.05%. The components of the working capital and interest thereon have been worked out as follows: - ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023- O & M Expenses 7.66 7.92 8.19 8.48 8.77 Maintenance Spares 13.78 14.26 14.75 15.26 15.78 Receivables 58.62 58.49 57.84 57.44 56.40 Total 80.06 80.67 80.78 81.18 80.95 Rate of Interest (%) 12.05 12.05 12.05 12.05 12.05 Interest of working capital 9.65 9.72 9.73 9.78 9.75 Page 34 of 36 Order in Petition No. 26/TT/2020 Annual Fixed Charges for the 2019-14 Tariff Period

72. The annual fixed charges for the instant asset for the tariff period 2019-24 are summarized below:- ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Depreciation 130.58 132.04 132.04 132.04 132.04 Interest on Loan 108.00 99.36 90.81 84.12 73.40 Return on Equity 136.70 138.28 138.28 138.28 138.28 Interest on Working Capital 9.65 9.72 9.73 9.78 9.75 Operation and Maintenance 91.88 95.06 98.32 101.72 105.22 Total 476.81 474.45 469.17 465.94 458.69 Filing Fee and Publication Expenses

73. 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

74. The Petitioner has requested to allow it 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 Clause (4) and (3) respectively of Regulation 70 of the 2019 Tariff Regulations. Page 35 of 36 Order in Petition No. 26/TT/2020 Goods and Services Tax

75. The Petitioner has sought to recover GST on transmission charges separately from the Respondents, if GST on transmission is withdrawn from negative list in future. MPPMCL and MSEDCL have submitted that the GST is not applicable on transmission and distribution of electricity and hence, this prayer is pre-mature.

76. We have considered the submission of the Petitioner and the Respondents. GST is not levied on transmission service at present and we are of the view that Petitioners prayer is premature and the Petitioner is at liberty to approach the Commission if GST is levied in future. Security Expenses

77. 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 yearly basis. We have considered the submissions of the Petitioner. Any Page 36 of 36 Order in Petition No. 26/TT/2020 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

78. 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. Sharing of Transmission Charges

79. As per the Commissions order dated 10.10.2019 in Petition No. 250/TT/2017, the transmission charges of the instant asset shall be borne by NTPC from its COD, i.e., 31.5.2017 to 31.5.2019. The billing, collection and disbursement of the transmission charges w.e.f. 1.6.2019 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 57 of the 2019 Tariff Regulations.

80. This order disposes of Petition No. 26/TT/2020. sd/- sd/- sd/- (Arun Goyal) (I.S. Jha) (P. K. Pujari) Member Member Chairperson