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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Shri S.S. Raju, PGCIL
  • Shri Nishant Kumar, Advocate, BSPHCL
  • Shri A.K. Verma, PGCIL
  • Shri B. Dash, PGCIL
Judges
  • P.K. Pujari
  • Chairperson
  • I.S. Jha, Member
  • Arun Goyal, Member
Acts
  • 28 of 46 Order in Petition No. 269/TT/2020 Debt-Equity Ratio 62. Regulations 18(3), 18(4) and 18(5) of the 2019 Tariff Regulations
  • Regulation 25(2)(c) of the 2019 Tariff Regulations. Page 24 of 46 Order
  • sub-clause (ii) of clause (2) of Regulation 72
  • SECTION 64 ELECTRICITY ACT 2003
  • Companies Act, 2013 Part-C (1b).
  • INCOME TAX ACT 1961
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Shri S.S. Raju, PGCIL
  • Shri Nishant Kumar, Advocate, BSPHCL
  • Shri A.K. Verma, PGCIL
  • Shri B. Dash, PGCIL
Judges
  • P.K. Pujari
  • Chairperson
  • I.S. Jha, Member
  • Arun Goyal, Member
Acts
  • 28 of 46 Order in Petition No. 269/TT/2020 Debt-Equity Ratio 62. Regulations 18(3), 18(4) and 18(5) of the 2019 Tariff Regulations
  • Regulation 25(2)(c) of the 2019 Tariff Regulations. Page 24 of 46 Order
  • sub-clause (ii) of clause (2) of Regulation 72
  • SECTION 64 ELECTRICITY ACT 2003
  • Companies Act, 2013 Part-C (1b).
  • INCOME TAX ACT 1961
See more information ...
Smart Summary

Structured Summary of the CERC Order in Petition No. 269/TT/2020 (Power Grid Corporation of India Ltd. — Chukka Transmission System)

Factual and Procedural Background

The petition was filed by Power Grid Corporation of India Ltd. (the Petitioner), a deemed transmission licensee, seeking: (a) truing up of transmission tariff for the block 1.4.2014–31.3.2019 under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014 (the 2014 Tariff Regulations); and (b) determination of tariff for 1.4.2019–31.3.2024 under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019 (the 2019 Tariff Regulations) in respect of the Chukka Transmission System in the Eastern Region.

The petition included multiple specific reliefs (approval of trued-up and prospective annual fixed charges, allowance of additional capitalization (ACE) and de-capitalisation, recovery of tax and GST impacts, reimbursement of filing and publication fees, separate billing for licensee fee and RLDC charges, adjustment for floating interest rates, permission to file a separate petition for security expenses, and capital spares claims). The Chukka Transmission System (associated with evacuation of power from Chukka Hydro Project, Bhutan) consists of multiple transmission lines and substations; its notional commercial operation date (COD) is 1.4.1987.

Respondents are distribution licensees and other beneficiaries in the Eastern Region. Notice was published as required under Section 64 of the Electricity Act, 2003. Respondent No.1 (Bihar State Power (Holding) Company Ltd. — BSPHCL) filed a reply raising issues including grossing up of RoE, ACE and GST. The Petitioner filed rejoinders. The matter was heard via video conference on 19.8.2020 and the Commission reserved and later issued the order, considering filings and affidavits up to 24.12.2020.

Legal Issues Presented

  1. Whether the trued-up Annual Fixed Charges (AFC) for the 2014-19 tariff block should be approved as claimed by the Petitioner, and if so, in what amounts.
  2. Whether tariff for the 2019-24 tariff block should be determined as claimed, including treatment of opening capital cost, ACE, de-capitalisation, debt-equity ratio, depreciation, return on equity (RoE) and interest on loan (IoL).
  3. Whether the Petitioner’s claimed Additional Capital Expenditure (ACE) during 2019-24 — particularly (i) ACE towards replacement of critical electrical equipment and (ii) ACE towards building and civil works — should be admitted under the 2019 Tariff Regulations.
  4. How to treat RoE gross-up for tax (including appropriate effective tax/MAT rates) for truing-up and for the 2019-24 period.
  5. Appropriate computation of Interest on Working Capital (IWC) and normative O&M norms under the applicable Tariff Regulations.
  6. Whether the Petitioner can separately claim O&M for PLCC, seek reimbursement of filing/publication fees, recover licensee fee and RLDC charges separately, and claim GST on transmission charges (now or prospectively).
  7. How security expenses and capital spares claims should be addressed procedurally and substantively.

Arguments of the Parties

Petitioner (Power Grid Corporation of India Ltd.)

  • Sought approval of trued-up AFC for 2014-19 and tariff for 2019-24 for the Chukka Transmission System under the relevant Tariff Regulations (2014 and 2019 Regulations respectively).
  • Claimed specific ACE and de-capitalisation amounts for 2014-19 (as per auditor certificates) and projected ACE/de-capitalisation for 2019-24, asserting necessity for replacements due to obsolescence, safety concerns and reliability.
  • Requested allowance to recover shortfall/excess AFC on account of RoE changes due to income tax rate variations directly from beneficiaries without a separate application, per tariff regulations.
  • Prayed for reimbursement of filing fee and publication expenses, separate recovery of licensee fee and RLDC fees, adjustment for floating interest rates, separate petition on security expenses, and ability to claim GST on transmission charges if GST becomes applicable in future.
  • Argued that some ACE items (e.g., civil works and illumination) fall within Regulation 25(2)(a) (replacement within original scope) and that the reference only to Regulation 25(2)(c) in the petition was inadvertent; asserted Regulation 22 (controllable/uncontrollable factors) is not applicable to the ACE claim.
  • Explained that replacement of equipment was required due to product obsolescence, inability to source spares, structural non-compliance with seismic codes for old buildings, and safety concerns; submitted life-extension of five years but acknowledged tests/reports would be filed.

Respondent — BSPHCL (Bihar State Power (Holding) Company Ltd.)

  • Challenged aspects of the Petitioner’s claims: raised issues about grossing up of RoE (tax gross-up), ACE admitted without prior approval, and GST claims.
  • Contended that certain ACE heads (civil works and illumination system) are not covered by Regulation 25(2)(c) and therefore liable to be rejected; relied on the regulatory framework distinguishing allowable ACE items and the list of controllable/uncontrollable factors (Regulation 22 referenced by BSPHCL).
  • Submitted that the Petitioner’s capital cost figures (admitted vs. actual) differ and that the Commission had earlier admitted capital cost; asked for scrutiny on ACE and de-capitalisation claims.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Commission's analysis proceeded by applying the specific provisions of the 2014 Tariff Regulations (for truing-up of 2014-19) and the 2019 Tariff Regulations (for determination of tariff for 2019-24). The order applies the regulations to discrete components (capital cost, ACE, de-capitalisation, debt-equity ratio, depreciation, IoL, RoE, O&M, IWC and other claims). The reasoning and key legal/technical steps are summarized below:

  1. Capital cost and opening figures:
    • The Commission adopted as opening capital cost on 1.4.2014 the amount admitted earlier (14572.65 lakh as on 31.3.2014 in order dated 8.1.2016 in Petition No. 60/TT/2015) for truing up 2014-19, in line with Regulation 9(3) and 9(6) of the 2014 Tariff Regulations. For 2019-24, the admitted capital cost as on 31.3.2019 (15990.70 lakh) was treated as opening capital cost as on 1.4.2019 in accordance with Regulation 19 of the 2019 Tariff Regulations.
  2. Additional Capital Expenditure (ACE) — 2014-19:
    • ACE claimed for 2014-15 and 2015-16 and earlier were considered and allowed where they represented balance payments, replacement of equipment, or similar items falling under the 2014 Regulations (specifically Regulation 14(3)(vii) and (ix)). The admitted capital cost as on 31.3.2019 was computed after allowing ACE and de-capitalisation as per audited certificates and submissions.
  3. Truing up of 2014-19 components:
    • Depreciation: As the asset had completed >12 years before 1.4.2014, depreciation was computed on the remaining depreciable value spread over the balance useful life as required by the 2014 Regulations. The Commission adjusted the Petitioner’s claims and allowed trued-up depreciation amounts (detailed year-wise figures are recorded in the order).
    • Interest on Loan (IoL): Calculated per Regulation 26 of the 2014 Regulations using actual loan portfolio/rates; IoL for 2014-15 and 2015-16 was trued up accordingly.
    • Return on Equity (RoE): The Commission accepted that the Petitioner is liable to pay income tax at MAT rates and adopted effective tax/MAT rates as determined in another order (27.4.2020 in Petition No. 274/TT/2019) to gross up RoE for 2014-19 in accordance with Regulations 24 and 25 of the 2014 Regulations.
    • Operation & Maintenance (O&M): Allowed as per Regulation 29(4)(a) of the 2014 Regulations using normative bay/line/transformer norms; minor numeric adjustments applied on true-up.
    • Interest on Working Capital (IWC): Computed per Regulation 28 of the 2014 Regulations (maintenance spares @15% of O&M, one month O&M, and 2 months receivables; normative interest rate applied), with trued-up IWC allowed.
  4. Approach to 2019-24 Tariff determination and ACE:
    • The Commission applied the 2019 Tariff Regulations to the 2019-24 period. It accepted the admitted opening capital cost as on 1.4.2019 and evaluated projected ACE/de-capitalisation submitted by the Petitioner (auditor certificates and project justification were part of the record).
    • On ACE for 2019-24 the Commission distinguished between (a) 'critical' electrical equipment replacements (CTs, CVTs, CBs, isolators, control & relay panels, cables, etc.) and (b) building and civil works (including quarters and illumination systems). The Commission concluded:
    • - Replacement of critical equipment due to obsolescence/safety/reliability concerns falls within Regulation 25(2) (replacement within original scope, and related grounds such as obsolescence/necessity) and is approved subject to true-up on actuals and submission of sub-station wise details.
    • - ACE for building and civil works (non-critical, substantial works proposed at the fag end of useful life) was not allowed because the Petitioner had not produced beneficiary consent/Respondent consent nor placed materials showing beneficiary approval; the Commission directed the Petitioner to seek RPC approval and file a separate petition for such works. The Commission also warned that substantial ACE proposed at end of useful life requires beneficiary consent in future cases.
  5. Debt–Equity treatment and equity restriction:
    • The debt:equity ratio as on 31.3.2019 was 53.19:46.81. Since the asset completed its useful life (33 years) on 31.3.2020, the first proviso to Regulation 18(3) of the 2019 Tariff Regulations applies — equity in excess of 30% of capital cost shall not be taken into account for tariff computation for assets completing useful life on or after 1.4.2019. Consequently, from 2020-21 onwards equity was restricted to 30% of capital cost; excess equity was disallowed for servicing in tariff computations (numerical adjustments shown in the order).
  6. Depreciation for 2019-24:
    • The Commission applied Regulation 33 of the 2019 Regulations. For the existing asset (which had completed more than 12 years by 1.4.2019), depreciation on the remaining depreciable value up to 90% of gross block was spread over the balance useful life (which ended on 31.3.2020). No depreciation on the existing asset was allowed from 1.4.2021 (since useful life ended). For ACE additions, depreciation was allowed at normative rates specified in the 2019 Regulations.
  7. IoL, RoE and tax treatment for 2019-24:
    • IoL: As gross normative loan had been repaid prior to 1.4.2019, IoL was allowed only on ACE (new additions) in accordance with Regulation 32 of the 2019 Regulations; the weighted average rate of interest was applied and floating-rate changes to be considered at truing-up.
    • RoE: The Commission applied Regulation 30 (base rate 15.50% for transmission systems) and Regulation 31 (gross-up for tax). The Petitioner is treated as paying MAT; MAT rate applicable in 2019-20 was used to compute pre-tax RoE (and the RoE will be trued up with actual tax paid as per Regulation 31(3)). From 2020-21, equity as admitted for tariff was restricted to 30% and RoE was computed on that equity base.
  8. O&M and PLCC:
    • O&M norms for 2019-24 were applied per Regulation 35 using applicable per-bay, per-MVA and per-km norms. The Petitioner had additionally claimed O&M for the PLCC (communication system) @2% of project cost; the Commission rejected a separate PLCC O&M claim based on an earlier conclusion (order dated 24.1.2021 in Petition No.126/TT/2020) that PLCC is part of sub-station and no separate expenditure is allowed under Regulation 35(4).
  9. Interest on Working Capital (IWC):
    • IWC was worked out per Regulation 34: (i) maintenance spares @15% of O&M, (ii) one month O&M, and (iii) receivables (45 days of AFC for 2019-24 per Regulation 34(1)(c) and the definition of bank rate/MCLR). The bank rate basis (SBI one-year MCLR plus 350 bps) was used to compute normative interest rates (12.05% for 2019-20 and 11.25% thereafter) and IWC was allowed accordingly.
  10. Other claims and procedural directions:
    • Filing fee and publication expenses: Petitioner entitled to direct reimbursement from beneficiaries under Regulation 70(1) of the 2019 Regulations.
    • Licensee fee and RLDC fees/charges: Recovery allowed in terms of the 2019 Regulations (Regulation 70(3)/(4)).
    • GST on transmission charges: The Commission considered the claim premature because GST is not levied on transmission service at present; the petitioner's request to recover GST in future, if levied, was held premature and not allowed at this stage.
    • Security expenses: Petitioner has not claimed security expenses in this petition and was directed to pursue a consolidated petition (Petition No. 260/MP/2020) for security expenses; security expenses will be considered in that consolidated petition in accordance with the 2019 Regulations.
    • Capital spares: Any claim to be dealt with as per the 2019 Regulations (to be trued up at the appropriate stage).
    • Sharing of charges and arrears: Liabilities of DICs for arrears to be computed DIC-wise and recovered under Bill 2 in accordance with the 2020 Sharing Regulations (which repealed the previous 2010 Sharing Regulations w.e.f. 1.11.2020), with billing/collection/disbursement following the 2020 Sharing Regulations and Regulation 57 of the 2019 Tariff Regulations.

Holding and Implications

Holding:

The Commission issued an order disposing of Petition No. 269/TT/2020 with the following core outcomes:

  • Truing-up for 2014-19: The Commission approved the trued-up Annual Fixed Charges (AFC) for the Chukka Transmission System for the 2014-19 tariff period. The trued-up AFCs approved (in lakh) are:
    • 2014-15: 3978.80
    • 2015-16: 4222.81
    • 2016-17: 4368.18
    • 2017-18: 4451.63
    • 2018-19: 4622.94
  • Tariff for 2019-24: The Commission determined and approved the Annual Fixed Charges (AFC) for 2019-24 for the transmission asset (figures in lakh):
    • 2019-20: 3731.95
    • 2020-21: 2534.52
    • 2021-22: 2929.83
    • 2022-23: 3302.03
    • 2023-24: 3417.67
  • ACE Treatment: ACE for replacement of critical electrical equipment due to obsolescence/operational threat was approved (subject to true-up on actuals and submission of sub-station wise details). ACE for building and civil works (non-critical and substantial, proposed at the fag end of asset life) was not allowed in this petition; the Petitioner was directed to obtain RPC consent and file a separate petition for such works.
  • Debt–Equity and RoE: Equity in excess of 30% as on 1.4.2020 was disallowed for tariff computation from 2020-21 onwards in accordance with the first proviso to Regulation 18(3) of the 2019 Regulations. RoE was grossed up for tax using MAT/appropriate tax rate (MAT applied where applicable) and will be trued up against actual tax in future true-ups.
  • Other items: Filing fee and publication expenses reimbursement allowed; licensee fee and RLDC fees recoverable as per the 2019 Regulations; GST claim held premature; separate PLCC O&M claim disallowed; security expenses to be dealt with in a separate consolidated petition (Petition No. 260/MP/2020); capital spares claims to be addressed per the 2019 Regulations.
  • Disposition: The order expressly states that Petition No. 269/TT/2020 is disposed of in terms of the discussions and findings set out in the order.

Implications:

  • The direct effect is that the Petitioner’s trued-up AFCs for 2014-19 and the determined AFCs for 2019-24 (numerical figures above) are approved subject to the true-up mechanisms and other regulatory qualifications recorded in the order.
  • The Commission applied and interpreted the 2014 and 2019 Tariff Regulations to allow/reject components (notably ACE items) and to set the framework for future true-ups (IoL floating rate adjustments, tax truing-up of RoE, true-up of ACE on actuals, and separate treatment of security expenses and capital spares).
  • No new judicial precedent was created by this administrative order of the Commission; the decisions are grounded in the cited provisions of the 2014 and 2019 Tariff Regulations and prior Commission orders referenced in the record. The order prescribes procedural directions (e.g., need for beneficiary consent for substantial ACE at end of asset life and separate petitions where appropriate) that will govern the Petitioner’s subsequent filings and recoveries from beneficiaries.

Disposition notation in the order: "This order disposes of Petition No. 269/TT/2020 in terms of the above discussions and findings." Signed by the Members/Chairperson of the Commission (Arun Goyal; I.S. Jha; P.K. Pujari).

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

    The instant petition has been filed by Power Grid Corporation of India Ltd., a deemed transmission licensee, for truing up of transmission tariff from 1.4.2014 to 31.3.2019 under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014 (hereinafter referred to as the 2014 Tariff Regulations) and determination of tariff for the period from 1.4.2019 to 31.3.2024 under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019 (hereinafter referred to as the 2019 Tariff Regulations) in respect of the transmission asset, Chukka Transmission System in Eastern Region.

    2. The Petitioner has made the following prayers in the instant 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 9 and 10 above.

    2) Allow the capital cost including the additional capitalization/ DE-capitalization going to be incurred during 2019-24 period as claimed by petitioner 3(a) 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 9 and 10 above for respective block. Page 3 of 46 Order in Petition No. 269/TT/2020 3(b) It is further submitted that deferred tax liability before 01.04.2009 shall be recoverable from the beneficiaries or long term transmission customers /DICs as the case may be, as and when materialized as per regulation 49 of 2014 and regulation 67 of 2019 tariff regulation. The petitioner may be allowed to recover the deferred tax liability materialized directly without making any application before the commission as provided in the regulation.

    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 file a separate petition before Honble Commission for claiming the overall security expenses and consequential IOWC on that security expenses as mentioned at para 10.5 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 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 Honble Commission deems fit and appropriate under the circumstances of the case and in the interest of justice. Background

    3. The brief facts of the case are as under: (a) The transmission asset, Chukka Transmission System is associated with evacuation of power generated from Chukka Hydroelectric Power Project situated in Bhutan. The Chukka Transmission System was initially implemented by NHPC and was subsequently taken over by the Petitioner. The Central Government in Ministry of Power vide its letter dated 4.9.1998 accorded its approval to the revised cost estimates of 13909 lakh, including IDC of 824 lakh. The scope of the work covered in the transmission asset is as follows: Page 4 of 46 Order in Petition No. 269/TT/2020 Transmission Lines

    (i) Malda-Farakka 400 kV D/C transmission line (Charged to 400 kV on 1.5.2002)

    (ii) Malda-Dalkhola 220 kV D/C transmission line

    (iii) Dalkhola-Purnea 220 kV D/C transmission line

    (iv) Dalkhola-Siliguri 220 kV D/C transmission line

    (v) Siliguri-Birpara 220 kV D/C transmission line

    (vi) Birpara Salakati 220 kV D/C transmission line

    (vii) Birpara-Puntsholing 220 kV D/C transmission line

    (viii) Birpara-Puntsholing-III 220 kV S/C transmission line

    (ix) Salakati-BTPS 220 kV S/C transmission line Sub-stations

    I. 220 kV Birpara Sub-station

    (i) 3 Number of 220 kV bays at Birpara-Chukka-I, II &III bays

    (ii) 2 Number of 220 kV bays at Birpara-Siliguri-I&II

    (iii) 2 Number of 220 kV bays at Birpara -Salakati-I &II

    (iv) 2 Number of 220 kV ICT-I&II bays at Birpara

    (v) 1 Number of 132 kV ICT-II bay at Birpara

    II. 220 kV Dalkhola Sub-station

    (i) 2 Number of 220 kV bays at Dalkhola-Siliguri-I&II

    (ii) 2 Number of 220 kV bays at Dalkhola-Purnea-I&II

    (iii) 2 Number of 220 kV bays at Dalkhola-Malda-I&II

    III. 220 kV Siliguri Sub-station

    (i) 2 Number of 220 kV bays at Silliguri-Baraipada-I&II

    (ii) 2 Number of 220 kV bays at Siliguri-Dalkhola-I&II

    (iii) 1 Number of 220 kV ICT bay at Siliguri

    (iv) 1 Number of 132 kV ICT bay at Siliguri

    IV. 400 kV Farakka Sub-station

    (i) 1 Number of 400 kVbay at Farakka(NTPC)-malda

    (ii) 1 Number of 220 kV ICT bay Farakka(NTPC) Page 5 of 46 Order in Petition No. 269/TT/2020

    V. 400 kV Malda Sub-station

    (i) 2 Number of 400 kV bays at Malda-Farakka-I&II

    (ii) 1 Number of 400 kV ICT-III bay at Malda

    (iii) 2 Number of 220 kV bays at Malda-Dalkhola-I&II

    (iv) 3 Number of 220 kV ICT-I,II and III bays at Malda

    VI. 220 kV Purnea Sub-station

    (i) 2 Number of 220 kV ICT-I&II bays at Purnea

    (ii) 2 Number of 220 kV bays at Purnea-Dalkhola-I&II

    VII. 220 kV Salakati Sub-station

    (i) 2 Number of 220 kV bays at Salakati-Birpara-I&II (b) The notional COD of the transmission asset is considered as 1.4.1987. (c) Initial tariff for the transmission asset was notified by the Ministry of Power vide its notification dated 14.5.1999 at an admitted capital cost of 13874.00 lakh. The tariff notified by Ministry of Power was valid up to 31.3.2002. However, as the terms and conditions for determination of tariff notified by the Commission came into effect on 1.4.2001, the transmission charges approved by Ministry of Power were rendered valid up to 31.3.2001. (d) The transmission tariff for the period 2001-04 in respect of the transmission asset was allowed vide order dated 30.6.2003 in Petition No. 11/2002; the tariff for the 2004-09 tariff period was allowed vide order dated 21.12.2005 in Petition No. 124/2004; the tariff for the 2009-14 tariff period was determined vide order dated 6.8.2013 in Petition No. 331/2010; and tariff for 2009-14 tariff period was trued up and tariff for 2014-19 period was allowed vide order dated 8.1.2016 in Petition No. 60/TT/2015.

    4. The Respondents are distribution licensees, power departments and transmission licensees, who are procuring transmission services from the Petitioner, who are mainly beneficiaries of the Eastern Region. Page 6 of 46 Order in Petition No. 269/TT/2020

    5. The Petitioner has served the petition on the Respondents and notice of this application has also been published in the newspapers in accordance with Section

    64 of the Electricity Act, 2003. No comments or suggestions have been received from the general public in response to the aforesaid notices published in the newspapers by the Petitioner. Bihar State Power (Holding) Company Ltd. (BSPHCL), i.e. Respondent No. 1, has filed its reply dated 28.9.2020 on e-filing portal of the Commission and has raised issues of grossing up of Return on Equity (RoE), Additional Capital Expenditure (ACE) and GST etc. The Petitioner vide affidavit dated 19.11.2020 has filed its rejoinder to the reply of BSPHCL. The issues raised by BSPHCL and the clarifications given by the Petitioner are dealt in the relevant portions of the instant order.

    6. The hearing in this matter was held on 19.8.2020 through video conference and order was reserved. This order is being issued taking into consideration the submissions made by the Petitioner in the petition vide affidavit dated 16.1.2020, Petitioners affidavits dated 7.8.2020, 10.10.2020 and 24.12.2020, reply of BSPHCL dated 28.9.2020 and Petitioners rejoinder thereto.

    7. Having heard the representatives of the Petitioner and perused the material on record, we proceed to dispose of the petition. Truing up of Annual Fixed Charges for 2014-19 Tariff Period

    8. The details of the trued-up annual fixed charges claimed by the Petitioner in respect of the transmission asset for 2014-19 tariff period are as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Depreciation 493.82 609.60 674.69 751.70 746.77 Interest on Loan 8.57 8.30 0.00 0.00 0.00 Page 7 of 46 Order in Petition No. 269/TT/2020 Return on Equity 1422.10 1463.70 1479.77 1477.41 1476.30 Interest on working capital 151.63 158.81 164.18 169.67 173.50 O & M Expenses 1942.89 2007.33 2074.36 2142.60 2214.41 Total 4019.01 4247.74 4393.00 4541.38 4610.98

    9. The details of the trued-up Interest on Working Capital (IWC) claimed by the Petitioner in respect of the transmission asset for 2014-19 tariff period are as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 O&M Expenses 161.91 167.28 172.86 178.55 184.53 Maintenance Spares 291.43 301.10 311.15 321.39 332.16 Receivables 669.84 707.96 732.17 756.90 768.50 Total 1123.18 1176.34 1216.18 1256.84 1285.19 Rate of Interest (%) 13.50 13.50 13.50 13.50 13.50 Interest on Working Capital 151.63 158.81 164.18 169.67 173.50 Capital Cost as on COD

    10. The capital cost of the transmission asset has been calculated in accordance with Regulation 9(3) and Regulation 9(6) of the 2014 Tariff Regulations. The Commission vide order dated 8.1.2016 in Petition No. 60/TT/2015 admitted the capital cost of 14572.65 lakh as on 31.3.2014 for the transmission asset.

    11. The Petitioner projected ACE of 683.26 lakh and 1380.31 lakh for 2014-15 and 2015-16 respectively and de-capitalisation of 216.72 lakh and 159.78 lakh for 2014-15 and 2015-16 respectively at the time of determination of tariff for 2014-19 period and the same was allowed. Accordingly, the capital cost considered vide order dated 8.1.2016 in Petition No. 60/TT/2015 for tariff computation is as follows: ( in lakh) Capital cost admitted as on 31.3.2014 ACE during 2014-19 Total cost as on 31.3.2019 ACE/ De-capitalisation 2014-15 2015-16 14572.65 ACE 683.26 1380.31 16259.72 De-capitalisation 216.72 159.78 Net ACE 466.54 1220.53

    12. The Petitioner vide Auditors Certificates dated 16.1.2020 and 6.8.2020 has submitted capital cost as on 31.3.2014 as well as ACE and de-capitalisation up to Page 8 of 46 Order in Petition No. 269/TT/2020 31.3.2024 in respect of the transmission asset. The details of the capital cost as on 1.4.2014, ACE and de-capitalisation incurred up to 31.3.2019 as claimed by the Petitioner in respect of the transmission asset are as follows: ( in lakh) Capital Cost as 1.4.2014 ACE and De-capitalisation (as per Auditors Certificate) Total Capital Cost as on 31.3.2019 2014-15 2015-16 2016-17 2017-18 2018-19 capita- lisation capita- lisation capita- lisation capita- lisation 14572.65 979.47 100.27 390.43 17.03 196.20 8.71 105.73 158.18 92.60 16052.89

    13. The capital cost allowed by the Commission as on 1.4.2014 vide order dated 8.1.2016 in Petition No. 60/TT/2015 for the transmission asset has been considered as opening capital cost as on 1.4.2014 for determination of tariff, in accordance with Regulation 9(3) of the 2014 Tariff Regulations. Additional Capital Expenditure (ACE)

    14. The details of ACE and de-capitalisation during 2014-19 tariff period as claimed by the Petitioner in respect of the transmission asset are as follows: ( in lakh) ACE and De-capitalisation (as per Auditors Certificate) 2014-15 2015-16 2016-17 2017-18 2018-19 capitalisation capitalisation capitalisation capitalisation 979.47 100.27 390.43 17.03 196.20 8.71 105.73 158.18 92.60

    15. The Commission vide order dated 17.8.2020 in Petition No. 37/TT/2020 held as under: 27.------------ Therefore, the Petitioner is directed to submit all the information required for decapitalisation of the 132 single main and transfer bus scheme at Baripara Sub- station on affidavit with a copy to all the Respondents within seven days from the date of issue of the instant order in Petition No.269/TT/2020. The staff is directed to decapitalise the 132 single main and transfer bus scheme at Baripara Sub-station which is part of the Chukha Transmission System in Petition No.269/TT/2019.

    16. In response, the Petitioner vide affidavit dated 7.8.2020 has submitted that apart from earlier de-capitalisation as shown in the Auditors certificate submitted with the petition, additional de-capitalisation details have been filed. This additional Page 9 of 46 Order in Petition No. 269/TT/2020 decapitalisation pertains to Birpara Sub-station on account of modification of 132 kV bays from AIS to GIS and transfer bus scheme. The details submitted as per Form- 10B are as follows: ( in lakh) Year of decapitalisation Work/Equipment proposed to be de- capitalised Year of capitalisation of asset/ equipment being de- capitalised Original book value of the asset being de- capitalised Cumulative repayment of loan corresponding to decapitalisation Net book value 2017-18 SS Item 1986 62.19 55.97 6.22

    17. BSPHCL has submitted that the Commission has admitted capital cost of 16259.72 lakh as on 31.3.2019 and actual cost claimed by the Petitioner is 16052.89 lakh. BSPHCL has further submitted that the Petitioner has claimed ACE for the years 2016-17, 2017-18 and 2018-19 without prior approval of the Commission.

    18. In response, the Petitioner has submitted that ACE claimed for 2016-17, 2017-

    18 and 2018-19 is spill-over of ACE already approved vide order dated 8.1.2016 in Petition No. 60/TT/2015.

    19. We have considered the submissions of the Petitioner and BSPHCL. The ACE claimed is on account of balance payments towards tower foundation works of the transmission lines, replacement of sub-station equipment and the same is allowed under Regulation 14(3)(vii) and 14(3)(ix) of the 2014 Tariff Regulations. The total capital cost allowed as on 31.3.2019 is as follows: ( in lakh) Capital Cost as on 31.3.2014 ACE and Decapitalisation (as per Auditors Certificate) Total Capital Cost as on 31.3 2019 2014-15 2015-16 2016-17 2017-18 2018-19 Decapitali sation Decapitali sation Decapitali sation Decapitali sation 14572.65 979.47 100.27 390.43 17.03 196.20 8.71 105.73 220.37 92.60 15990.70 Page 10 of 46 Order in Petition No. 269/TT/2020 Debt-Equity Ratio

    20. The Petitioner has claimed debt-equity ratio as on 31.3.2014 approved by the Commission vide order dated 8.1.2016 in Petition No. 60/TT/2015 and the same has been considered as opening debt-equity ratio as on 1.4.2014 as provided under Regulation 19(3) of the 2014 Tariff Regulations. The details of the same are as follows: Particulars Amount ( in lakh) (%) Debt 7442.97 51.07 Equity 7129.68 48.93 Total 14572.65 100.00

    21. The debt-equity ratio of 70:30 has been considered for ACE allowed during 2014-19 tariff period in accordance with Regulation 19(5) of the 2014 Tariff Regulations. The de-capitalisation of the asset in the instant case is carried out in the debt-equity ratio as claimed by the Petitioner in Form 10B.

    22. The details of debt-equity ratio as on 1.4.2014 and 31.3.2019 in respect of the transmission asset considered for the purpose of tariff for 2014-19 tariff period is as follows: Debt-Equity for Capital Cost as on 1.4.2014 Particulars Amount ( in lakh) (%) Debt 7442.97 51.07 Equity 7129.68 48.93 Total 14572.65 100.00 Debt-Equity for ACE and Decapitalisation during 2014-19 ( in lakh) Particulars ACE De-capitalisation ACE De-capitalisation 2014-15 (%) 2014-15 (%)* 2015-16 (%) 2015-16 (%)* Debt 685.63 70.00 50.14 50.00 273.30 70.00 8.52 50.00 Equity 293.84 30.00 50.14 50.00 117.13 30.00 8.52 50.00 Total 979.47 100.00 100.27 100.00 390.43 100.00 17.03 100.00 Particulars ACE De-capitalisation ACE De-capitalisation 2016-17 (%) 2016-17 (%)* 2017-18 (%) 2017-18 (%)* Debt 137.34 70.00 4.36 50.00 74.01 70.00 110.19 50.00 Equity 58.86 30.00 4.36 50.00 31.72 30.00 110.19 50.00 Total 196.20 100.00 8.71 100.00 105.73 100.00 220.37 100.00 Page 11 of 46 Order in Petition No. 269/TT/2020 Particulars 2018-19 (%) Debt 64.82 70.00 Equity 27.78 30.00 Total 92.60 100.00 *as per the Form 10B submitted by the petitioner Debt-Equity for Capital Cost as on 31.3.2019 Particulars Amount ( in lakh) (%) Debt 8504.88* 53.19 Equity 7485.82** 46.81 Total 15990.70 100.00 *Debt as on 1.4.2014 plus debt considered for ACE minus adjustment made in debt on de-capitalisation. ** Equity as on 1.4.2014 plus equity considered for ACE minus adjustment made in equity on de-capitalisation Depreciation

    23. The transmission asset has already completed 12 years before 1.4.2014. Accordingly, depreciation has been calculated based on the remaining depreciable value to be recovered over the balance useful life and trued up depreciation allowed for 2014-19 tariff period is as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Opening Gross Block 14572.65 15451.85 15825.25 16012.74 15898.10 Additional Capitalisation 979.47 390.43 196.20 105.73 92.60 De-capitalisation 100.27 17.03 8.71 220.37 0.00 Closing Gross Block 15451.85 15825.25 16012.74 15898.10 15990.70 Average Gross Block 15012.25 15638.55 15919.00 15955.42 15944.40 Weighted average rate of Depreciation (WAROD) (%) 3.02 3.73 4.09 4.16 4.76 Balance useful life of the asset at the beginning of the year (Year) 6.00 5.00 4.00 3.00 2.00 Elapsed useful life of the asset at the beginning of the year (Year) 27.00 28.00 29.00 30.00 31.00 Depreciable Value 13106.03 13669.70 13922.10 13954.88 13944.96 Depreciation during the year 452.76 583.54 650.48 664.02 758.47 Cumulative depreciation at the end of the year 10751.98 11320.19 11962.83 12428.02 13186.49 Remaining aggregated depreciable value at the end of the year 2263.80 2334.17 1951.43 1328.03 758.47 Page 12 of 46 Order in Petition No. 269/TT/2020

    24. The details of the depreciation allowed in respect of the transmission asset vide order dated 8.1.2016 in Petition No. 60/TT/2015, claimed by the Petitioner in the instant petition and trued up in the instant order are as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Allowed in order dated 8.1.2016 in Petition No. 60/TT/2015 447.82 622.71 760.02 760.02 760.02 Claimed by the Petitioner in the instant petition 493.82 609.60 674.69 751.70 746.77 Allowed after true-up in this order 452.76 583.54 650.48 664.02 758.47 Interest on Loan (IoL)

    25. The Petitioner has claimed IoL for 2014-15 and 2015-16 only. The Petitioner has claimed the weighted average rate of IoL based on its actual loan portfolio and rate of interest.

    26. We have considered the submissions of the Petitioner. IoL is calculated based on the actual interest rate in accordance with Regulation 26 of the 2014 Tariff Regulations. The details of trued-up IoL allowed in respect of the transmission asset for 2014-19 tariff period are as follows: ( in lakh) Particulars 2014-15 2015-16 Gross Normative Loan 7442.97 8078.46 Cumulative Repayments up to Previous Year 7442.97 7845.59 Net Loan-Opening 0.00 232.87 Addition due to ACE 635.49 264.79 Adjustment of cumulative repayment pertaining to the de-capitalised asset 50.14 8.52 Repayment during the year 452.76 506.18 Net Loan-Closing 232.87 0.00 Average Loan 116.44 116.44 Weighted Average Rate of Interest on Loan (%) 8.938 8.649 Interest on Loan 10.41 10.07 Page 13 of 46 Order in Petition No. 269/TT/2020

    27. Accordingly, IoL approved vide order dated 8.1.2016 in Petition No. 60/TT/2015, claimed by the Petitioner in the instant petition and trued up in the instant order are as follows: ( in lakh) Particulars 2014-15 2015-16 Allowed vide order dated 8.1.2016 in Petition No. 60/TT/2015 0.00 9.73 Claimed by the Petitioner in the instant petition 8.57 8.30 Allowed after true-up in this order 10.41 10.07 Return on Equity (RoE)

    28. The Petitioner has claimed RoE for the transmission asset in terms of Regulations 24 and 25 of the 2014 Tariff Regulations. The Petitioner has submitted that it is liable to pay income tax at MAT rates and has claimed the following effective tax rates for 2014-19 tariff period: Year Claimed effective tax (in %) Grossed up RoE [(Base Rate)/(1-t)] (in %) 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

    29. BSPHCL has submitted that the Petitioner is entitled to RoE for the transmission asset in accordance with Regulation 24 and Regulation 25 of the 2014 Tariff Regulations. BSPHCL further submitted that the Commission vide order dated 27.4.2020 in Petition No. 274/TT/2019 has arrived at the effective tax rate for the Petitioner based on the notified MAT rates. BSPHCL has also submitted that effective tax rates based on notified MAT rates may be considered for the purpose of grossing up of rate of return on equity.

    30. In response, the Petitioner has submitted that the transmission tariff have already been trued-up for 2014-19 period by the Commission vide order dated 18.4.2020 in Petition No. 247/TT/2019, order dated 27.4.2020 in Petition No. Page 14 of 46 Order in Petition No. 269/TT/2020 274/TT/2019, order dated 23.4.2020 in Petition No. 245/TT/2019 and order dated 16.4.2020 in Petition No. 307/TT/2019 for transmission assets under the respective petitions. The Petitioner has requested to allow the differential tariff on account of the trued-up ROE based on effective tax rate calculated on completion of Income Tax assessment/ re-assessment for the years 2014-15, 2015-16, 2016-17, 2017-18 and 2018-19 on receipt of the respective assessment orders, directly from the beneficiaries, on year to year basis as provided in the 2014 Tariff Regulations.

    31. We have considered the submissions of the Petitioner and BSPHCL. The Commission vide order dated 27.4.2020 in Petition No. 274/TT/2019 has arrived at the effective tax rate for the Petitioner based on the notified MAT rates.

    32. The MAT rates considered vide order dated 27.4.2020 in Petition No. 274/TT/2019 are considered for the purpose of grossing up of the rate of RoE for truing up of the tariff of 2014-19 tariff period in terms of the provisions of the 2014 Tariff Regulations which are as follows: 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

    33. Accordingly, the trued-up RoE allowed for the transmission asset for 2014-19 period is as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Opening Equity 7129.68 7373.39 7482.00 7536.51 7458.04 Addition due to ACE 293.84 117.13 58.86 31.72 27.78 De-Capitalisation 50.14 8.52 4.36 110.19 0.00 Closing Equity 7373.39 7482.00 7536.51 7458.04 7485.82 Average Equity 7251.53 7427.69 7509.25 7497.27 7471.93 Return on Equity (Base Rate) (%) 15.500 15.500 15.500 15.500 15.500 Page 15 of 46 Order in Petition No. 269/TT/2020 Tax Rate applicable (%) 20.961 21.342 21.342 21.342 21.549 Rate of Return on Equity (Pre-tax) 19.610 19.705 19.705 19.705 19.758 Return on Equity (Pre-tax) 1422.03 1463.63 1479.70 1477.34 1476.30

    34. The details of RoE allowed vide order dated 8.1.2016 in Petition No. 60/TT/2015, claimed by the Petitioner in the instant petition and trued up in the instant order are as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Allowed vide order dated 8.1.2016 in Petition No. 60/TT/2015 1411.89 1461.51 1497.41 1497.41 1497.41 Claimed by the Petitioner in the instant petition 1422.10 1463.70 1479.77 1477.41 1476.30 Allowed after true-up in this order 1422.03 1463.63 1479.70 1477.34 1476.30 Operation & Maintenance Expenses (O&M Expenses)

    35. The details of the O&M Expenses claimed by the Petitioner in respect of the transmission asset and allowed under Regulation 29(4)(a) of the 2014 Tariff Regulations are as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Sub-station Bays (Number)

    400 kV bays 4 4 4 4 4

    220 kV bays 34 34 34 34 34

    132 kV and below 2 2 2 2 2 Norm ( lakh/bay)

    400 kV 60.30 62.30 64.37 66.51 68.71

    220 kV 42.21 43.61 45.06 46.55 48.10

    132 kV and Below 30.15 31.15 32.18 33.25 34.36 Total Sub-station O&M Expenses ( in lakh) 1736.64 1794.24 1853.88 1915.24 1978.96 AC transmission Lines (in KM)

    400 kV Double Circuit Twin Conductor Farakka-Malda CKT I & CKT II

    40 40 40 40 40 220kV Double Circuit Single Conductor Birpara Siliguri CKT I & II

    86 86 86 86 86

    220 kV Double Circuit Single Conductor Chukha-Birpara-I & II

    36 36 36 36 36 Page 16 of 46 Order in Petition No. 269/TT/2020 Particulars 2014-15 2015-16 2016-17 2017-18 2018-19

    220 kV Double Circuit Single Conductor Siliguri-Dalkhola-I & II

    119 119 119 119 119

    220 kV Double Circuit Single Conductor Dalkhola-Malda-I & II

    116 116 116 116 116 220kV Double Circuit Single Conductor Birpara-Salakati I & II

    161 161 161 161 161

    220 kV Double Circuit Single Conductor Dalkhola-Purnea-I & II

    41 41 41 41 41

    220 kV Double Circuit Single Conductor Salakati-BTPS-I & Salakati-BTPS-II

    3 3 3 3 3 220kV Single Circuit Single Conductor

    38 38 38 38 38 Norm ( lakh/KM) Double Circuit Twin/Triple Conductor 0.707 0.731 0.755 0.780 0.806 Double Circuit Single Conductor 0.303 0.313 0.324 0.334 0.346 Single Circuit Single Conductor 0.202 0.209 0.216 0.223 0.230 Total Transmission Line 206.24 213.09 220.50 227.38 235.43 Total O&M Expenses 1942.88 2007.33 2074.38 2142.62 2214.39

    36. The details of the O&M Expenses approved vide order dated 8.1.2016 in Petition No. 60/TT/2015, O&M Expenses claimed by the Petitioner in the instant petition and trued up O&M Expenses allowed in the instant order are as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Allowed vide order dated 8.1.2016 in Petition No. 60/TT/2015 1942.88 2007.33 2074.38 2142.62 2214.39 Claimed by the Petitioner in the instant petition 1942.89 2007.33 2074.36 2142.60 2214.41 Allowed after true-up in this order 1942.88 2007.33 2074.38 2142.62 2214.39 Interest on Working Capital (IWC)

    37. The Petitioner is entitled to claim IWC as per Regulation 28(1) of the 2014 Tariff Regulations as follows: Page 17 of 46 Order in Petition No. 269/TT/2020

    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.

    38. Accordingly, the trued-up IWC allowed for the transmission asset is as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 O & M Expenses (O&M expenses for 1 month) 161.91 167.28 172.86 178.55 184.53 Maintenance Spares (15% of O&M expenses) 291.43 301.10 311.16 321.39 332.16 Receivables (Equivalent to 2 months of annual fixed cost) 663.13 703.80 728.03 741.94 770.49 Total 1116.47 1172.18 1212.05 1241.88 1287.18 Rate of Interest on working capital (%) 13.50 13.50 13.50 13.50 13.50 Interest of working Capital 150.72 158.24 163.63 167.65 173.77

    39. The details of the IWC approved vide order dated 8.1.2016 in Petition No. 60/TT/2015, trued up IWC claimed by the Petitioner and trued up IWC allowed in the instant order are as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Allowed vide order dated 8.1.2016 in Petition No. 60/TT/2015 150.13 159.08 166.55 170.32 174.28 Claimed by the Petitioner in the instant petition 151.63 158.81 164.18 169.67 173.50 Allowed after true-up in this order 150.72 158.24 163.63 167.65 173.77 Page 18 of 46 Order in Petition No. 269/TT/2020 Approved Annual Fixed Charges For 2014-19 Tariff Period

    40. The trued up annual fixed charges approved for the transmission asset for 2014-19 tariff period are as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Depreciation 452.76 583.54 650.48 664.02 758.47 Interest on Loan 10.41 10.07 0.00 0.00 0.00 Return on Equity 1422.03 1463.63 1479.70 1477.34 1476.30 Interest on Working Capital 150.72 158.24 163.63 167.65 173.77 Operation & Maintenance Expenses 1942.88 2007.33 2074.38 2142.62 2214.39 Total 3978.80 4222.81 4368.18 4451.63 4622.94

    41. Accordingly, the annual transmission charges approved in the order dated 8.1.2016 in Petition No. 60/TT/2015, trued up AFC claimed by the Petitioner in the instant petition and trued up AFC allowed in the instant order are as follows: ( in lakh) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Allowed vide order dated 8.1.2016 in Petition No. 60/TT/2015 3952.72 4260.36 4498.36 4570.37 4646.10 Claimed by the Petitioner in the instant petition 4019.01 4247.74 4393.00 4541.38 4610.98 Allowed after true-up in this order 3978.80 4222.81 4368.18 4451.63 4622.94 Determination of Annual Fixed Charges for 2019-24 Tariff Period

    42. The Petitioner has claimed the following transmission charges for the transmission asset for 2019-24 tariff period: ( in lakh) Particulars 2019-20 2020-21 201-22 2022-23 2023-24 Depreciation 788.49 119.34 683.01 1537.41 1818.92 Interest on Loan 0.00 28.22 144.42 211.58 119.92 Return on Equity 1405.99 1431.07 1565.29 1683.42 1706.62 Interest on Working Capital 95.48 88.57 103.10 121.14 126.55 Operation and Maintenance 1433.77 1484.74 1536.46 1590.52 1645.92 Total 3723.73 3151.94 4032.28 5144.07 5417.93

    43. The Petitioner has claimed the following IWC for the transmission asset for 2019-24 tariff period: Page 19 of 46 Order in Petition No. 269/TT/2020 ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 O&M expenses 119.48 123.73 128.04 132.54 137.16 Maintenance Spares 215.07 222.71 230.47 238.58 246.89 Receivables 457.84 388.60 497.13 634.20 666.14 Total 792.39 735.04 855.64 1005.32 1050.19 Rate of Interest (%) 12.05 12.05 12.05 12.05 12.05 Interest on Working Capital 95.48 88.57 103.10 121.14 126.55 Capital Cost

    44. Regulation 19 of the 2019 Tariff Regulations provides as under:

    19 Capital Cost: (1) The Capital cost of the generating station or the transmission system, as the case may be, as determined by the Commission after prudence check in accordance with these regulations shall form the basis for determination of tariff for existing and new projects. (2) The Capital Cost of a new project shall include the following: (a) The expenditure incurred or projected to be incurred up to the date of commercial operation of the project; (b) Interest during construction and financing charges, on the loans (i) being equal to 70% of the funds deployed, in the event of the actual equity in excess of 30% of the funds deployed, by treating the excess equity as normative loan, or (ii) being equal to the actual amount of loan in the event of the actual equity less than 30% of the funds deployed; Any gain or loss on account of foreign exchange risk variation pertaining to the loan amount availed during the construction period; (d) Interest during construction and incidental expenditure during construction as computed in accordance with these regulation(e) Capitalised Initial Spares subject to the ceiling rates in accordance with these regulations; (f) Expenditure on account of additional capitalization and de-capitalisation determined in accordance with these regulations; (g) Adjustment of revenue due to sale of infirm power in excess of fuel cost prior to the date of commercial operation as specified under Regulation 7 of these regulations; (h) Adjustment of revenue earned by the transmission licensee by using the assets before the date of commercial operation;

    (i) Capital expenditure on account of ash disposal and utilization including handling and transportation facility; (j) Capital expenditure incurred towards railway infrastructure and its augmentation for transportation of coal up to the receiving end of the generating station but does not include the transportation cost and any other appurtenant cost paid to the railway; (k) Capital expenditure on account of biomass handling equipment and facilities, for co-firing;

    (l) Capital expenditure on account of emission control system necessary to meet the revised emission standards and sewage treatment plant; (m) Expenditure on account of fulfilment of any conditions for obtaining environment clearance for the project; (n) Expenditure on account of change in law and force majeure events; and (o) Capital cost incurred or projected to be incurred by a thermal generating station, on account of implementation of the norms under Perform, Achieve Page 20 of 46 Order in Petition No. 269/TT/2020 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. (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 regulats; (c) Capital expenditure on account of ash disposal and utilization including handling and transportation facility; (d) Capital expenditure on account of ash disposal and utilization including handling and transportation flity; (e) Capital expenditure incurred towards railway infrastructure and its 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. (4) The capital cost in case of existing or new hydro generating station shall also include: (a) cost of approved rehabilitation and resettlement (R&R) plan of the project in conformity with National R&R Policy and R&R package as approved; and (b) cost of the developers 10% contribution towards Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) and Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) project in the affected area. (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 decapitalised 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 concernassets. (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 renewabenergy; and Page 21 of 46 Order in Petition No. 269/TT/2020 (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.

    45. The admitted capital cost of 15990.70 lakh as on 31.3.2019 for the transmission asset has been considered as opening capital cost as on 1.4.2019 for determination of tariff in accordance with Regulation 19 of the 2019 Tariff Regulations. Additional Capital Expenditure (ACE)

    46. Regulation 24 and Regulation 25 of the 2019 Tariff Regulations provide as follows:

    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; 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 ACE incurred or projected to be incurred in respect of an existing project or a new project on the following counts within the 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; Page 22 of 46 Order in Petition No. 269/TT/2020

    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.

    47. The Petitioner vide Auditors Certificate has projected net ACE of 6113.06 lakh after adjustment of de-capitalisation during 2019-24 tariff period which is as follows: ( in lakh) Particulars Amount ACE in 2019-20 0.18 ACE in 2020-21 1162.12 ACE in 2021-22 3960.28 ACE in 2022-23 1236.73 ACE in 2023-24 542.39 De-capitalisation in 2020-21 (163.65) De-capitalisation in 2021-22 (51.61) De-capitalisation in 2022-23 (550.69) De-capitalisation in 2023-24 (22.69)

    48. The Petitioner has submitted that the sub-station equipment proposed to be replaced for the transmission asset covered in the instant petition was put into commercial operation in 1992. The useful life of sub-station equipment was completed during 2014-19 period. During various routine tests, critical conditions are observed and it was noticed that equipment giving operational problems are threat to the reliability and security of the grid. The Petitioner has submitted that designs have undergone substantial changes over the period since COD and manufacturers have Page 23 of 46 Order in Petition No. 269/TT/2020 discontinued the product models. The suppliers are unable to provide replenish parts required for quick restoration and repairs turned out unviable.

    49. The Petitioner has further submitted that buildings and other civil structures like overhead tanks etc. which have been constructed in the sub-stations have completed the useful life of 30 years in accordance with Schedule-II, Companies Act, 2013 Part-C (1b). The Petitioner has submitted that these buildings and civil structures were constructed in 1987-88 and have been in service for more than 30 years and they do not comply with the earthquake resistant provisions of latest IS codes. The Petitioner has submitted that it is mandatory for all Government-owned buildings and structures to be seismic resistant (Clause 3.2.6.1 of National Disaster Management Authority). Some of these buildings and civil structures are in dilapidated and unsafe condition and need urgent re-construction to avoid any damage/ threat to human life or property. Accordingly, the Petitioner has proposed to demolish these dilapidated and unsafe buildings and structures and construct new buildings and structures during 2019-24 tariff period. Thus, ACE/ de-capitalization proposed under the head of building and civil structures correspond to demolition of such old buildings and construction of new buildings and civil structures. The Petitioner has submitted that the test reports in respect of healthiness of buildings and civil structures shall be submitted shortly. The Petitioner has also mentioned relevant provisions of authenticated documents which recommend for seismic retrofitting, demolishing and reconstruction.

    50. The Petitioner has submitted that the projected ACE has become necessary for efficient and secure operation of the transmission system as envisaged under Regulation 25(2)(c) of the 2019 Tariff Regulations. Page 24 of 46 Order in Petition No. 269/TT/2020

    51. BSPHCL has submitted that the Petitioner has claimed capitalisation and de- capitalisation under Regulation 25(2) of the 2019 Tariff Regulations. However, Regulation 25(2)(c) of the 2019 Tariff Regulations does not cover ACE under the heads of Civil Work and Illumination System and ACE claimed towards the same is liable to be rejected. BSPHCL has further submitted that Regulation 22 of the 2019 Tariff Regulations enlists the controllable and uncontrollable factors.

    52. In response, the Petitioner has submitted that ACE under the heads of Civil Work and Illumination System were in fact claimed under Regulation 25(2)(a) of the 2019 Tariff Regulations. The Petitioner has inadvertently mentioned only Regulation 25(2)(c) of the 2019 Tariff Regulations in the petition. The Petitioner has further submitted that Regulation 25 relates to replacement of old equipment deployed in original project and Regulation 22 is not applicable.

    53. On specific query of the Commission (during hearing of the Petition) with regard to expected life extension of proposed ACE and OEMs recommendation, the Petitioner vide affidavit dated 10.10.2020 has submitted that ACE during 2019-24 period is towards problematic equipment like CT, CVT, CB, isolators, etc. that are proposed to be replaced to ensure system reliability. In addition to equipment like CT, CVT, CB, isolators, transformers, reactors, C&R panels etc., there are many other equipment/ materials like earthing system, tower and gantry structures, cables, which play a very important role in operation of any sub-station. The Petitioner has submitted that it is very difficult to assess the life of the complete project. The equipment is replaced based on condition. The Petitioner has further submitted that balance equipment of the transmission system still remains under service for which replacement may be required in near future. The gross block of old equipment, being Page 25 of 46 Order in Petition No. 269/TT/2020 proposed to be replaced in the instant petition is hardly 7% of the total gross block of the project. However, other equipment of the project remains the same as commissioned with original project. The new equipment can definitely run for more than five years but considering the combination of equipment where majority of items are old and may require replacement in future that cannot be assessed at this stage. The Petitioner has further proposed the life extension of five years for the transmission asset.

    54. In response to another query of the Commission with regard to segregation of proposed ACE towards critical and non-critical works, the Petitioner vide affidavit dated 24.12.2020, has submitted the cost details for ACE/ decapitalisation proposed during 2019-24 under various heads and the same are as follows: ( in lakh) Sl. No. Particulars Projected Projected De-capitalisation Net projected

    1 Projected ACE towards critical equipment 5280.48 700.44 4580.04

    2 Civil works relating to quarters 1621.22 88.20 1533.02

    3 Total 6901.70 788.64 6113.06

    55. We have considered the submissions of the Petitioner and BSPHCL. The Petitioner has proposed ACE at the fag end of the useful life of the transmission asset and has proposed five years extension of life for the transmission asset. The Petitioner did not submit the consent of beneficiaries/ Respondents nor placed any material on record to show that the proposed ACE towards building and civil works had the consent of beneficiaries/ Respondents. The building and civil works are non-critical works in nature. In view of this, we are not inclined to allow ACE claimed by the Petitioner towards building and civil works under Regulation 25(2)(a) of the 2019 Tariff Regulations. However, the Petitioner may obtain approval of RPC and file Page 26 of 46 Order in Petition No. 269/TT/2020 a separate petition for the ACE towards building and civil works for consideration by the Commission.

    56. It is also directed that in future, all the cases where substantial ACE is proposed at the fag end of useful life of any transmission asset, the Petitioner shall submit the consent of beneficiaries/ Respondents..

    57. The remaining proposed ACE is towards replacement of isolators, CTs, Capacitive Voltage Transformers (CVTs), control and relay panels, CB and power and control cables due to obsolescence of technology. In our view, these items are of critical nature and their failure may affect the stability and reliability of the grid. As such, the replacement of these equipment and consequent ACE is approved, subject to true-up on actual basis with details sub-station wise. The sub-station associated with the transmission asset has already completed its useful life.

    58. ACE and de-capitalisation allowed for 2019-24 tariff period are as follows: ( in lakh) Sr. No. Particulars 2019-20 2020-21 2021-22 2022-23 2023-24

    1 ACE 0.18 1000.00 3154.53 830.43 295.34

    2 De-capitalisation 0.00 134.36 30.21 535.87 0.00

    3 Net ACE (3=1-2) 0.18 865.64 3124.32 294.56 295.34

    59. Accordingly, capital cost of the transmission asset as on 31.3.2024 is approved as follows: ( in lakh) Capital Cost as on 1.4.2019 Approved Net ACE Capital Cost as on 31.3.2024 2019-20 2020-21 2021-22 2022-23 2023-24 15990.70 0.18 865.64 3124.32 294.56 295.34 20570.74 Adjustments to Equity

    60. The notional COD of the transmission asset is 1.4.1987. The debt-equity ratio as on COD was 50:50. The Weighted Average Life for the transmission asset is Page 27 of 46 Order in Petition No. 269/TT/2020 determined as 33 years vide order dated 8.1.2016 in Petition No.60/TT/2015. Thus, the transmission asset has completed its useful life on 31.3.2020. First proviso to Regulation 18(3) of the 2019 Tariff Regulations provides that in case of a transmission system including communication system which has completed its useful life on or after 1.4.2019, and if the actual equity actually deployed as on 1.4.2019 is more than 30% of the capital cost, then the equity shall be restricted to 30% of the total equity deployed. Regulation 18(3) of the 2019 Tariff Regulations provides as follows:

    18. Debt-Equity Ratio: (3) In case of the generating station and the transmission system including communication system 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 system including communication system 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;..

    61. The debt-equity ratio as on 31.3.2019 is 53.19:46.81 i.e. the equity deployed is more than 30%. Therefore, as per the first proviso to Regulation 18(3) of the 2019 Tariff Regulations, equity from 2020-21 onwards has been restricted to 30%. The loan has already been repaid prior to 1.4.2019. Accordingly, the capital cost for 2019-

    24 tariff period is allowed as follows: ( in lakh) Particulars Amount Closing equity as on 31.3.2019* 7485.82 Closing equity as on 31.3.2020** (a) 7485.87 Equity in excess of 30% (b) 2688.61 Equity admissible as on 1.4.2020*** (a)-(b) 4797.26 *Represents 46.81% of Gross Block of 15990.70 lakh ** Represents 46.81% of Gross Block of 15990.88 lakh ***Represents 30% of Gross Block of 15990.88 lakh Page 28 of 46 Order in Petition No. 269/TT/2020 Debt-Equity Ratio

    62. Regulations 18(3), 18(4) and 18(5) of the 2019 Tariff Regulations provide as follows:

    18. Debt-Equity Ratio: (1) For new projects, the debt-equity ratio of 70:30 as on date of commercial operation shall be considered. If the equity actually deployed is more than 30% of the capital cost, equity in excess of 30% shall be treated as normative loan: Provided that:

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

    ii. the equity invested in foreign currency shall be designated in Indian rupees on the date of each investment:

    iii. any grant obtained for the execution of the project shall not be considered as a part of capital structure for the purpose of debt: equity ratio. Explanation.-The premium, if any, raised by the generating company or the transmission licensee, as the case may be, while issuing share capital and investment of internal resources created out of its free reserve, for the funding of the project, shall be reckoned as paid up capital for the purpose of computing return on equity, only if such premium amount and internal resources are actually 28tilized for meeting the capital expenditure of the generating station or the transmission system. (4) The generating company or the transmission licensee, as the case may be, shall submit the resolution of the Board of the company or approval of the competent authority in other cases regarding infusion of funds from internal resources in support of the utilization made or proposed to be made to meet the capital expenditure of the generating station or the transmission system including communication system, as the case may be. (5) In case of the generating station and the transmission system including communication system 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 system including communication system 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 system including communication system 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. Page 29 of 46 Order in Petition No. 269/TT/2020 (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.

    63. The transmission asset has completed its useful life in 2019-20 (on 31.3.2020) and de-capitalisation of elements of transmission asset is proposed after the completion of useful life. In accordance with Regulation 18 of the 2019 Tariff Regulations, ACE for 2019-24 period is allowed in the ratio of 70:30. As decided above, the equity from 2020-21 onwards is restricted to 30%. The details of the debt- equity considered for the purpose of computation of tariff for 2019-24 tariff period is as follows: Debt-Equity for Gross Capital Cost as on 1.4.2019 Particulars Amount ( in lakh) Debt 8504.88 53.19 Equity 7485.82 46.81 Total 15990.70 100.00 Debt-Equity for ACE and De-capitalisation during 2019-24 ( in lakh) Particulars capitalisation 2019-20 (%) 2020-21 (%) 2020-21 (%) Debt 0.13 70.00 700.00 70.00 94.05 70.00 Equity 0.05 30.00 300.00 30.00 40.31 30.00 Total 0.18 100.00 1000.00 100.00 134.36 100.00 Particulars capitalisation capitalisation 2021-22 (%) 2021-22 (%) 2022-23 (%) 2022-23 (%) Debt 2208.17 70.00 21.15 70.00 581.30 70.00 375.11 70.00 Equity 946.36 30.00 9.06 30.00 249.13 30.00 160.76 30.00 Total 3154.53 100.00 30.21 100.00 830.43 100.00 535.87 100.00 Particulars 2023-24 (%) Debt 206.74 70.00 Equity 88.60 30.00 Total 295.34 100.00 Page 30 of 46 Order in Petition No. 269/TT/2020 Debt-Equity for Gross Capital Cost as on 31.3.2024 Particulars Amount ( in lakh) (J)=(A)+(B)+(C)-(D)+(E)-(F)+(G)-(H)+(G)+(I) Debt 11710.91 Equity 8859.83**** Total 20570.74 ****Equity to be serviced as on 31.3.2024 is 6171.22 lakh (8859.83 lakh - 2688.61 lakh i.e. Equity in excess of 30% reduced as discussed in Para. 59 above) Depreciation

    64. Regulations 33 of the 2019 Tariff Regulations provides 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 system or element thereof including communication system. In case of the tariff of all the units of a generating station or all elements of a transmission system including communication system 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 system 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 system, for which single tariff needs to be determined. (6) 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 system, weighted average life for the generating station of the transmission system 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. (7) The salvage value of the asset shall be considered as 10% and depreciation shall be allowed up to maximum of 90% of the capital cost of the asset: Provided that the salvage value for IT equipment and software shall be considered as NIL and 100% value of the assets shall be considered depreciable; Provided further that in case of hydro generating stations, the salvage value shall be as provided in the agreement, if any, signed by the developers with the State Government for development of the generating station: Provided also that the capital cost of the assets of the hydro generating station for the purpose of computation of depreciated value shall correspond to the percentage of sale of electricity under long-term power purchase agreement at regulated tariff: Provided also that any depreciation disallowed on account of lower availability of the generating station or unit or transmission system as the case may be, shall not be allowed to be recovered at a later stage during the useful life or the extended life. Page 31 of 46 Order in Petition No. 269/TT/2020 (8) Land other than the land held under lease and the land for reservoir in case of hydro generating station shall not be a depreciable asset and its cost shall be excluded from the capital cost while computing depreciable value of the asset. (9) 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 system: 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. (10) In case of the existing projects, the balance depreciable value as on 1.4.2019 shall be worked out by deducting the cumulative depreciation as admitted by the Commission upto 31.3.2019 from the gross depreciable value of the assets. (11) The generating company or the transmission licensee, as the case may be, shall submit the details of proposed capital expenditure five years before the completion of useful life of the project along with justification and proposed life extension. The Commission based on prudence check of such submissions shall approve the depreciation on capital expenditure. (12) In case of de-capitalization of assets in respect of generating station or unit thereof or transmission system or element thereof, the cumulative depreciation shall be adjusted by taking into account the depreciation recovered in tariff by the de- capitalized asset during its useful services.

    65. The transmission asset has already completed more than 12 years (COD being 1.4.1987, it has completed 32 years as on 1.4.2019) before 1.4.2019. Accordingly, depreciation has been calculated based on the remaining depreciable value (up to 90% of existing gross block of transmission asset) to be recovered over the balance useful life up to 31.3.2020 (since the transmission asset completes useful life of 33 years from notional COD of 1.4.1987) and w.e.f. 1.4.2021, no depreciation is allowed on existing transmission asset. As discussed above, the Petitioner has proposed life extension for the transmission asset by five years, but there is no basis for the same. Hence, depreciation for ACE (new additions) claimed for 2020-21 onwards is allowed at normative rate of depreciation as specified in the 2019 Tariff Regulations. Depreciation allowed for the transmission asset for the 2019-24 period is as under: Page 32 of 46 Order in Petition No. 269/TT/2020 ( in lakh) Existing Assets 2019-20 2020-21 2021-22 2022-23 2023-24 Opening Gross Block 15990.70 15990.70 15856.34 15826.13 15290.26 Addition during the year 2019-24 due to projected ACE 0.00 0.00 0.00 0.00 0.00 De-capitalisation 0.00 134.36 30.21 535.87 0.00 Closing Gross Block 15990.70 15856.34 15826.13 15290.26 15290.26 Average Gross Block 15990.70 15923.52 15841.24 15558.20 15290.26 Weighted average rate of Depreciation (WAROD) (%) 4.77 Balance useful life at the beginning of the year (Year) Elapsed life at the beginning of the year (Year) Depreciable Value 13986.63 13865.71 13838.52 13356.23 13356.23 Cumulative depreciation at the beginning of the year 13186.49 13986.63 13865.71 13838.52 13356.23 Depreciation adjustment on account of de-capitalisation 0.00 120.92 27.19 482.28 0.00 Net cumulative depreciation after de-capitalisation 13186.49 13865.71 13838.52 13356.23 13356.23 Remaining depreciable value at the beginning of the year 800.14 Depreciation during the year 800.14 ( in lakh) New Additions 2019-20 2020-21 2021-22 2022-23 2023-24 Opening Gross Block 0.00 0.18 1000.18 4154.71 4985.14 Addition during the year 2019-24 due to projected ACE 0.18 1000.00 3154.53 830.43 295.34 Closing Gross Block 0.18 1000.18 4154.71 4985.14 5280.48 Average Gross Block 0.09 500.18 2577.45 4569.93 5132.81 Weighted Average rate of Depreciation (WAROD) (%) 5.28 5.28 5.28 5.28 5.28 Depreciable Value 0.08 450.16 2319.70 4112.93 4619.53 Cumulative Depreciation at the beginning of the year 0.00 0.00 26.41 162.50 403.79 Depreciation during the year 0.00 26.41 136.09 241.29 271.01 Cumulative Depreciation at the end of the year 0.00 26.41 162.50 403.79 674.80 Remaining Depreciation recoverable at the end of the year 0.08 423.75 2157.20 3709.14 3944.73 Interest on Loan (IoL)

    66. 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 33 of 46 Order in Petition No. 269/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 system, as the case may be, does not have actual loan, then the weighted average rate of interest of the generating company or the transmission licensee as a whole shall be considered. (6) The interest on loan shall be calculated on the normative average loan of the year by applying the weighted average rate of interest. (7) The changes to the terms and conditions of the loans shall be reflected from the date of such re-financing.

    67. Gross normative loan has already been repaid prior to 1.4.2019 and therefore, IoL has been considered on ACE (new additions). 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 change in interest rate due to floating rate of interest applicable, if any, during 2019-24 tariff period may be adjusted. Accordingly, the floating rate of interest, if any, shall be considered at the time of truing up. Therefore, IoL has been allowed in accordance with Regulation 32 of the 2019 Tariff Regulations. IoL allowed for the transmission asset is as follows: Page 34 of 46 Order in Petition No. 269/TT/2020 ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Gross Normative Loan 8504.88 8505.01 9110.96 11297.98 11504.17 Cumulative Repayments up to Previous Year 8504.88 8504.88 8437.23 8552.16 8418.34 Net Loan-Opening 0.00 0.13 673.73 2745.82 3085.84 Addition due to ACE 0.13 700.00 2208.17 581.30 206.74 Adjustment of gross loan pertaining to de-capitalised asset 0.00 94.05 21.15 375.11 0.00 Repayment during the year 0.00 26.40 136.08 241.28 271.00 Adjustment of cumulative repayment pertaining to de-capitalised asset 0.00 94.05 21.15 375.11 0.00 Net Loan-Closing 0.00 673.73 2745.82 3085.84 3021.57 Average Loan 0.00 336.93 1709.77 2915.83 3053.70 Weighted Average Rate of Interest (WAROI) on Loan (%) 8.17 8.13 8.31 8.64 8.61 Interest on Loan** 0.00 27.39 142.02 252.07 263.06 **Computed by multiplying WAROI into Average Loan raised for additions. Return on Equity (RoE)

    68. Regulations 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 system including communication system 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 system; 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 system 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 system up to load dispatch centre or protection system 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; Page 35 of 46 Order in Petition No. 269/TT/2020

    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 Minimum Alternate Tax (MAT), t shall be considered as MAT rate including surcharge and cess. Illustration-

    (i) In case of a generating company or a transmission licensee paying Minimum Alternate Tax (MAT) @ 21.55% including surcharge and cess: Rate of return on equity = 15.50/(1-0.2155) = 19.758%

    (ii) In case of a generating company or a transmission licensee paying normal corporate tax including surcharge and cess: (a) Estimated Gross Income from generation or transmission business for FY 2019-20 is Rs 1,000 crore; (b) Estimated Advance Tax for the year on above is Rs 240 crore; (c) Effective Tax Rate for the year 2019-20 = Rs 240 Crore/Rs 1000 Crore = 24%; (d) Rate of return on equity = 15.50/ (1-0.24) = 20.395%. (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 Page 36 of 46 Order in Petition No. 269/TT/2020 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.

    69. The Petitioner has submitted that MAT rate is applicable to the Petitioner Company. As observed above, equity from 2021-22 onwards has been restricted to 30% as per first proviso to Regulation 18(3) of the 2019 Tariff Regulations. The MAT rate applicable in 2019-20 has been considered for the purpose of RoE, which shall be trued up with actual tax rate in accordance with Regulation 31(3) of the 2019 Tariff Regulations. RoE allowed for the transmission asset is as follows: ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Opening Equity 7485.82 4797.26 5056.96 5994.25 6082.62 Addition due to ACE 0.05 300.00 946.36 249.13 88.60 Decrease due to de- capitalisation during the period 0.00 40.31 9.06 160.76 0.00 Closing Equity 7485.87 5056.96 5994.25 6082.62 6171.22 Average Equity 7485.85 4927.11 5525.60 6038.44 6126.92 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) 1405.99 925.41 1037.82 1134.14 1150.76 **Equity in excess of 30% removed Operation & Maintenance Expenses (O&M Expenses)

    70. Regulation 35(3)(a) and Regulation 35(4) of the 2019 Tariff Regulations provide as under: 35(3) Transmission system: (a) The following normative operation and maintenance expenses shall be admissible for the transmission system: Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Norms for sub-station Bays ( 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 Page 37 of 46 Order in Petition No. 269/TT/2020 Norms for Transformers ( 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 ( 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 ( 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 MW) 2,468 2,555 2,645 2,738 2,834

    500 kV Bhiwadi-Balia HVDC bipole scheme (Rs Lakh) (2500 MW) 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; Provided further that:

    i. the operation and maintenance expenses for new HVDC bi-pole schemes commissioned after 1.4.2019 for a particular year shall be allowed pro-rata on the basis of normative rate of operation and maintenance expenses of similar HVDC bi-pole scheme for the corresponding year of the tariff period;

    ii. the O&M expenses norms for HVDC bi-pole line shall be considered as Double Circuit quad AC line;

    iii. the O&M expenses of 500 kV Mundra-Mohindergarh HVDC bipole scheme (2000 MW)shall be allowed as worked out by multiplying 0.80 of the normative O&M expenses for 500 kV Talchar-Kolar HVDC bi-pole scheme (2000 MW); Page 38 of 46 Order in Petition No. 269/TT/2020

    iv. the O&M expenses of 800 kV Champa-Kurukshetra HVDC bi-pole scheme (3000 MW) shall be on the basis of the normative O&M expenses for 800 kV, Bishwanath-Agra HVDC bi-pole scheme;

    v. the O&M expenses of 800 kV, Alipurduar-Agra HVDC bi-pole scheme (3000 MW)shall be allowed as worked out by multiplying 0.80 of the normative O&M expenses for 800 kV, Bishwanath-Agra HVDC bi-pole scheme; and

    vi. the O&M expenses of Static Synchronous Compensator and Static Var Compensator shall be worked at 1.5% of original project cost as on commercial operation which shall be escalated at the rate of 3.51% to work out the O&M expenses during the tariff period. The O&M expenses of Static Synchronous Compensator and Static Var Compensator, if required, may be reviewed after three years. (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. (3) 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.

    71. The O&M Expenses claimed by the Petitioner in respect of the transmission asset are as follows: ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Sub-station Bays (Number)

    400 kV bays 4 4 4 4 4

    220 kV bays 34 34 34 34 34

    132 kV and below 2 2 2 2 2 Norm ( lakh/bay)

    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 Total Sub-station O&M Expenses ( in lakh) 926.10 958.60 992.34 1026.94 1063.12 Transformer (MVA)

    400 kV ICT at Malda 315 315 315 315 315

    220 kV ICT at Malda and Birpara

    150 150 150 150 150 Page 39 of 46 Order in Petition No. 269/TT/2020 Particulars 2019-20 2020-21 2021-22 2022-23 2023-24

    220 kV ICTS at Birpara Siliguri & Purnea

    400 400 400 400 400 Norms ( lakh/MVA)

    400 kV 0.358 0.371 0.384 0.398 0.411

    220 kV 0.245 0.254 0.263 0.272 0.282 Total Transformer ( in lakh) 247.52 256.57 265.61 274.97 284.57 AC & HVDC Lines (in km)

    400 kV Double Circuit Twin Conductor Farakka-Malda CKT I & CKT II

    40 40 40 40 40

    220 kV Double Circuit Single Conductor Birpara Siliguri CKT I & II

    86 86 86 86 86

    220 kV Double Circuit Single Conductor Chukha-Birpara-I & II

    36 36 36 36 36

    220 kV Double Circuit Single Conductor Siliguri-Dalkhola-I & II

    119 119 119 119 119

    220 kV Double Circuit Single Conductor Dalkhola-Malda-I & II

    116 116 116 116 116

    220 kV Double Circuit Single Conductor Birpara-Salakati I & II

    161 161 161 161 161

    220 kV Double Circuit Single Conductor Dalkhola-Purnea-I & II

    41 41 41 41 41

    220 kV Double Circuit Single Conductor Salakati-BTPS-I & Salakati-BTPS-II

    3 3 3 3 3

    220 kV Single Circuit Single Conductor

    38 38 38 38 38 Norm ( lakh/KM) 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 Single Circuit Single Conductor 0.252 0.260 0.270 0.279 0.289 Total Transmission Line 256.69 266.10 275.07 285.16 294.77 Communication System PLCC ( in lakh) 173.19 173.19 173.19 173.19 173.19 Norms (%) 2 2 2 2 2 Total Communication System 3.46 3.46 3.46 3.46 3.46 Total O&M Expenses 1433.77 1484.73 1536.48 1590.53 1645.92

    72. The Petitioner has claimed O&M Expenses separately for the PLCC under Regulation 35(4) of the 2019 Tariff Regulations @2% of its original project cost in the instant petition. The Petitioner has made similar claim in other petitions as well. Page 40 of 46 Order in Petition No. 269/TT/2020 Though PLCC is a communication system, it has been considered as part of the sub- station in the 2014 Tariff Regulations and the 2019 Tariff Regulations and the norms for sub-station have been specified accordingly. Accordingly, the Commission vide order dated 24.1.2021 in Petition No.126/TT/2020 has already concluded that no separate O&M Expenses can be allowed for PLCC under Regulation 35(4) of the 2019 Tariff Regulations even though PLCC is a communication system. Therefore, the Petitioners claim for separate O&M Expenses for PLCC @2% is not allowed.

    73. The O&M Expenses allowed for the transmission asset are as follows: ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Sub-station Bays (Number)

    400 kV bays 4 4 4 4 4

    220 kV bays 34 34 34 34 34

    132 kV and below 2 2 2 2 2 Norm ( lakh/bay)

    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 Total Sub-station O&M Expenses ( in lakh) 926.10 958.60 992.34 1026.94 1063.12 Transformer (MVA)

    400 kV ICT at Malda 315 315 315 315 315

    220 kV ICT at Malda and Birpara

    150 150 150 150 150

    220 kV ICTS at Birpara Siliguri & Purnea

    400 400 400 400 400 Norms ( lakh/MVA)

    400 kV 0.358 0.371 0.384 0.398 0.411

    220 kV 0.245 0.254 0.263 0.272 0.282 Total Transformer ( in lakh) 247.52 256.57 265.61 274.97 284.57 AC & HVDC Lines (in km)

    400 kV Double Circuit Twin Conductor Farakka-Malda CKT I & CKT II

    40 40 40 40 40

    220 kV Double Circuit Single Conductor Birpara Siliguri CKT I & II

    86 86 86 86 86

    220 kV Double Circuit Single Conductor Chukha-Birpara-I & II

    36 36 36 36 36

    220 kV Double Circuit Single Conductor Siliguri-Dalkhola-I & II

    119 119 119 119 119 Page 41 of 46 Order in Petition No. 269/TT/2020 Particulars 2019-20 2020-21 2021-22 2022-23 2023-24

    220 kV Double Circuit Single Conductor Dalkhola-Malda-I & II

    116 116 116 116 116

    220 kV Double Circuit Single Conductor Birpara-Salakati I & II

    161 161 161 161 161

    220 kV Double Circuit Single Conductor Dalkhola-Purnea-I & II

    41 41 41 41 41

    220 kV Double Circuit Single Conductor Salakati-BTPS-I & Salakati-BTPS-II

    3 3 3 3 3

    220 kV Single Circuit Single Conductor

    38 38 38 38 38 Norm ( lakh/KM) 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 Single Circuit Single Conductor 0.252 0.260 0.270 0.279 0.289 Total Transmission Line 256.69 266.10 275.07 285.16 294.77 Total O&M Expenses 1430.31 1481.27 1533.02 1587.07 1642.45 Interest on Working Capital (IWC)

    74. Regulations 34(1)I, 34(3) and 34(4) and Regulation 3(7) of the 2019 Tariff Regulations provides as follows:

    34. Interest on Working Capital: (1) The working capital shall cover: (75) c) For Hydro Generating Station (including Pumped Storage Hydro Generating Station) and Transmission System:i) Receivables equivalent to 45 days of annual fixed cost;i) Maintenance spares @ 15% of operation and maintenance expenses including security expenses; andi) 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 system including communication system or element thereof, as the case may be, is declared under commercial operation, whichever is later: (75) 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 2019-244) 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:- Page 42 of 46 Order in Petition No. 269/TT/2020 (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;

    75. The Petitioner has submitted that it has computed the IWC for the 2019-24 tariff period considering the SBI Base Rate plus 350 basis points as on 1.4.2019. The Petitioner has considered the rate of IWC as 12.05%. IWC is worked out in accordance with Regulation 34 of the 2019 Tariff Regulations. The rate of IWC considered is 12.05% (SBI 1 year MCLR applicable as on 1.4.2019 of 8.55% plus

    350 basis points) for 2019-20 and 11.25% (SBI 1 year MCLR applicable as on 1.4.2020 of 7.75% plus 350 basis points) for 2020-24. The components of the working capital and interest allowed thereon is as follows: ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 O & M Expenses (O&M expenses for 1 month) 119.19 123.44 127.75 132.26 136.87 Maintenance Spares (15% of O&M expenses) 214.55 222.19 229.95 238.06 246.37 Receivables (Equivalent to

    45 days of annual transmission charges) 458.86 312.47 361.21 407.10 420.20 Total 792.60 658.10 718.91 777.41 803.44 Rate of Interest (%) 12.05 11.25 11.25 11.25 11.25 Interest of working capital 95.51 74.04 80.88 87.46 90.39 Annual Fixed Charges for the 2019-24 Tariff Period

    76. The transmission charges allowed in respect of the transmission asset for 2019-24 tariff period are as follows: ( in lakh) Particulars 2019-20 2020-21 2021-22 2022-23 2023-24 Depreciation 800.14 26.41 136.09 241.29 271.01 Interest on Loan 0.00 27.39 142.02 252.07 263.06 Return on Equity 1405.99 925.41 1037.82 1134.14 1150.76 Interest on Working Capital 95.51 74.04 80.88 87.46 90.39 Operation and Maintenance 1430.31 1481.27 1533.02 1587.07 1642.45 Total 3731.95 2534.52 2929.83 3302.03 3417.67 Page 43 of 46 Order in Petition No. 269/TT/2020 Filing Fee and Publication Expenses

    77. The Petitioner has sought reimbursement of fee paid by it for filing the petition and publication expenses, in terms of Regulation 70(1) 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 Regulation 70(1) of the 2019 Tariff Regulations. Licence Fee and RLDC Fees and Charges

    78. The Petitioner has prayed for reimbursement of licence fee in accordance with Regulation 70 (4) of the 2019 Tariff Regulations for 2019-24 tariff period. The Petitioner has also prayed for recovery of RLDC fee and charges in accordance with Regulation 70 (3) of the 2019 Tariff Regulations for 2019-24 tariff period. The Petitioner is allowed for reimbursement of licence fee and recovery of RLDC fee and charges in accordance with 2019 Tariff Regulations. Goods and Services Tax

    79. The Petitioner has sought to recover GST on transmission charges separately from the Respondents, if GST on transmission service is withdrawn from negative list in future.

    80. BSPHCL has submitted that the demand of the Petitioner is premature.

    81. In response, the Petitioner has submitted that if GST is levied in future on charges of transmission of electricity at any rate and any point of time, the same shall be borne and additionally paid by the Respondent(s) to the Petitioner and the same shall be charged and billed separately by the Petitioner. Further, the Petitioner has submitted that additional taxes, if any, are to be paid by the Petitioner on account of Page 44 of 46 Order in Petition No. 269/TT/2020 demand from Government/ Statutory Authorities, the same may be allowed to be recovered from the beneficiaries.

    82. We have considered the submissions of the Petitioner and BSPHCL and are of the opinion that GST is not levied on transmission service at present and the Petitioners prayer is premature. Security Expenses

    83. The Petitioner has submitted that security expenses in respect of the transmission asset are not claimed in the instant petition and it would file a separate petition for claiming the overall security expenses and the consequential IWC. 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 will be filed on 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 difference, if any, between the estimated security expenses and actual security expenses as per the audited accounts may be allowed to be recovered from the beneficiaries on a yearly basis.

    84. We have considered the submissions of the Petitioner. We are of the view that the Petitioner should claim security expenses for all the transmission assets in one petition. It is observed that the Petitioner has already filed Petition No. 260/MP/2020 claiming consolidated security expenses on projected basis for 2019-24 tariff period on the basis of actual security expenses incurred in 2018-19. Therefore, security expenses will be dealt with in Petition No. 260/MP/2020 in accordance with the applicable provisions of the 2019 Tariff Regulations. Page 45 of 46 Order in Petition No. 269/TT/2020 Capital Spares

    85. 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

    86. With effect from 1.7.2011, sharing of transmission charges for inter-State transmission systems was governed by the provisions of the 2010 Sharing Regulations. However, with effect from 1.11.2020, the 2010 Sharing Regulations has been repealed and sharing of transmission charges is governed by the provisions of the 2020 Sharing Regulations. Accordingly, the liabilities of DICs for arrears of transmission charges determined through this order shall be computed DIC-wise in accordance with the provisions of respective Tariff Regulations and shall be recovered from the concerned DICs through Bill 2 under Regulation 15(2)(b) of the 2020 Sharing Regulations. Billing, collection and disbursement of transmission charges for subsequent period shall be recovered in terms of provisions of the 2020 Sharing Regulations as provided in Regulation 57 of the 2019 Tariff Regulations.

    87. To summarise: (a) The trued-up Annual Fixed Charges approved for the transmission asset for 2014-19 tariff period are: ( in lakh) Asset 2014-15 2015-16 2016-17 2017-18 2018-19 AFC 3978.80 4222.81 4368.18 4451.63 4622.94 (b) The Annual Fixed Charges allowed in respect of the transmission asset for 2019-24 tariff period are: ( in lakh) Asset 2019-20 2020-21 2021-22 2022-23 2023-24 AFC 3731.95 2534.52 2929.83 3302.03 3417.67 Page 46 of 46 Order in Petition No. 269/TT/2020

    88. This order disposes of Petition No. 269/TT/2020 in terms of the above discussions and findings. sd/- (Arun Goyal) sd/- (I.S. Jha) sd/- (P. K. Pujari) Member Member Chairperson CERC Website S. No. 402/2021

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