Damodar Valley Corporation

Background

3. The Commission vide its order dated 28.9.2017 in Petition No. 224/GT/2015 had approved the capital cost and the annual fixed charges for the period 2016-19 as under:

Capital cost allowed (Rs. in lakh)

Annual fixed charges allowed (Rs. in lakh)

4. Aggrieved by the said order, the Petitioner has filed Appeal No. 7/2018 before the Appellate Tribunal for Electricity (APTEL) on various issues like Pension & Gratuity contribution, Subsidiary activities etc. and the same is pending. The tariff determined by this order, is however, subject to final decision of APTEL in the said appeal.

TRUING-UP OF TARIFF FOR THE PERIOD 2014-19

5. Regulation 8(1) of the 2014 Tariff Regulations provides as follows:

"(1) The Commission shall carry out truing up exercise along with the Tariff petition filed for the next Tariff period, with respect to the capital expenditure including additional capital expenditure incurred up to 31.3.2019, as admitted by the Order in Petition No. 575/GT/2020 Page 3 of 176

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Commission after prudence check at the time of truing up. Provided that the generating company or the transmission licensee, as the case may be, shall make an application for interim truing up of capital expenditure including additional capital expenditure in FY 2016-17."

6. In terms of the above Regulation, the Petitioner, in present petition, has claimed the capital cost (in Form 1(I) and the annual fixed charges for the period 2016-19 as under:

Capital Cost claimed (Rs. in lakh)

Annual fixed charges claimed (as per Form 1) (Rs in lakh)

7. The present petition was filed by the Petitioner/ for truing-up of tariff for the Order in Petition No. 575/GT/2020 Page 4 of 176

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period 2016-19 and for determination of tariff for the period 2019-24 of the generating station vide affidavit dated 21.1.2020. Subsequently, the Petitioner vide affidavit dated 15.11.2021 submitted additional information along with the revised forms for 2016-19 tariff period after correction of certain inadvertent errors in the forms. It is observed that the Petitioner while submitting the information vide affidavit dated 15.11.2021, had submitted certain additional information and has revised the Form-1 and Form- 13B. However, the Petitioner has not made the corresponding revisions in the other applicable forms.

8. The Objector, Damodar Valley Power Consumers Association (DVPCA) has filed its objections vide affidavit dated 19.4.2021 and the Petitioner vide affidavit dated 16.7.2021 has filed its response to the same. The Respondent No.2, PSPCL has filed its reply vide affidavit dated 10.7.2021 and the Petitioner has filed its rejoinder to the said reply. The Respondent No.3, KSEBL has filed its reply vide affidavit dated 18.5.2021 and the Petitioner has filed its rejoinder to the same, vide affidavit dated 16.7.2021. The Petition was heard through video conferencing on 25.5.2021 and the Commission had directed the Petitioner to file certain additional information. The Petitioner, in compliance to the same, has filed the additional information vide affidavit dated 1.7.2021 after serving copies to the Respondents/Objector. The Petition was thereafter heard through video conferencing on 15.3.2022, and the Commission, after directing the Petitioner to file certain additional information, reserved its order in the petition The Petitioner has filed its note of arguments (of the hearing dated 15.3.2022) after serving copy to the Respondents/Objector. The Objector DVPCA has also filed its written note of submissions on 2.5.2022. The Petitioner, in compliance to the directions vide ROP of the hearing dated 15.3.2022, has filed the additional information, vide affidavit dated 19.4.2022 after serving copies on the Order in Petition No. 575/GT/2020 Page 5 of 176

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Respondents/Objector. The Objector, DVPCA has also filed its written note of submissions on 2.5.2022 and the Petitioner has filed its response to the same on 10.5.2022. Considering the submissions of the parties and the documents available on record, we proceed to examine the claims of the Petitioner, in this petition, on prudence check, as stated in the subsequent paragraphs.

Capital Cost

9. Regulation 9(3) of the 2014 Tariff Regulations provides as follows:

"9. Capital Cost:

(3) The Capital cost of an existing project shall include the following:

(a) the capital cost admitted by the Commission prior to 1.4.2014 duly trued up by excluding liability, if any, as on 1.4.2014.

(b) additional capitalization and de-capitalization for the respective year of tariff as determined in accordance with Regulation 14; and

(c) expenditure on account of renovation and modernisation as admitted by this Commission in accordance with Regulation 15.

xxx…"

10. The Commission vide its order dated 28.9.2017 in Petition No. 224/GT/2015 had allowed the closing capital cost of Rs.518014.58 lakh, as on 31.3.2016. However, the Petitioner has sought revision of the opening capital cost, as on 1.4.2016, to Rs.536386.92 lakh (Rs.518014.58 lakh + Rs.3588.32 lakh + Rs.14784.02 lakh) by adding Rs.3588.32 lakh, which is a differential amount between the provisional capital cost of Rs.809390.12 lakh, claimed by the Petitioner in Petition No. 224/GT/2015 and the actual capital cost of Rs.812978.44 lakh, booked in audited accounts. In addition, the Petitioner has prayed for consideration of Rs.14784.02 lakh, which is a difference of notional IDC computed as on station COD of 31.3.2016 and the actual IDC of Rs.287058.32 lakh as per audited accounts.

11. As regards the differential capital cost of Rs.3588.72 lakh claimed, the Respondents KSEBL and PSPCL have submitted that the Petitioner has not furnished any justification including the auditor's certificate for the additional capital cost claimed Order in Petition No. 575/GT/2020 Page 6 of 176

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over and above the approved capital cost. They have also pointed out that the Petitioner has also not provided complete details of works/assets which were included in the original scope of work and despite the direction of the Commission, the Petitioner has also failed to furnish the details of liquidated damages recovered by it from the contractors, without which its claim for additional capital cost, cannot be adjudicated. As regards the Petitioner's claim towards the allowance of notional IDC of Rs. 14784.02 lakh, as per the order dated 6.5.2015 in Petition No. 229/2010 and order dated 29.4.2019 in Petition No. 12/RP/2015, the Respondents have submitted that notional IDC shall not be allowed before the actual drawl of loan and therefore, the notional IDC for the period when there was no actual drawl of loan may be disallowed.

12. The matter has been considered. It is observed that the Petitioner has claimed additional capital cost of Rs.3588.32 lakh, as on COD i.e., 31.3.2016. The Commission, on the prudence check of the audited accounts and respective forms submitted by the Petitioner, as part of the Petition, has verified that the actual capitalized expenditure as on COD of the generating station i.e., 31.3.2016 is Rs.812978.44 lakh. Thus, the claims of the Petitioner towards the additional capital cost of Rs.3588.32 lakh is found to be in order. In this background, the Petitioner's claim for additional capital cost of Rs.3588.32 lakh, is allowed.

13. It is also observed that the Petitioner, in its claim for additional capital expenditure in 2018-19 has adjusted the additional capitalisation by way of rectification entry of (-) Rs.3586.59 lakh towards 'Access Roads'. However, the Petitioner has neither provided any justification for claiming such adjustment nor has linked it to the corresponding positive entry of same amount during the year, previous to the year of rectification entry i.e., 2018-19. In this background, it has been decided Order in Petition No. 575/GT/2020 Page 7 of 176

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to adjust such additional capitalisation in the opening capital cost as on COD i.e.,

31.3.2016.

IDC, IEDC and Finance Charges (FC)

14. As regards the claim for notional IDC of Rs.14784.02 lakh, it is observed that the Petitioner, in Petition No. 224/GT/2015, had not claimed notional IDC. The notional IDC claimed represents the difference between IDC computed, on notional basis, (by considering equity beyond 30% as notional loan) and the actual IDC as per books. The calculations as submitted by the Petitioner towards the claim for notional IDC is found to be in order. However, considering the fact that Commission, vide order dated 28.9.2017 in Petition No. 224/GT/2015, had revised the SCOD of Unit-I and Unit-II as 25.6.2011 and 25.9.2011, respectively after examining at length, the issue of time overrun and accordingly allowed the IDC of Rs.44730.84 lakh up to the revised SCODs as mentioned above. As such, the notional IDC till the revised SCODs can only be allowed as a part of the capital cost, as on station COD. Accordingly, after verifying the computation of IDC, on notional basis, as submitted by the Petitioner, it is observed that, the IDC, including notional IDC, up to the revised SCOD of Unit-I and Unit-II i.e., 25.6.2011 and 25.9.2011, respectively, works out to Rs. 45764.74 lakh, as against the provisionally allowed IDC of Rs.44730.84 lakh, vide order dated 28.9.2017 in Petition No. 224/GT/2015. Accordingly, the additional notional IDC allowed works out to Rs.1033.90 lakh (Rs.45764.74 lakh-Rs.44730.84 lakh) as against the Petitioner's claimed notational IDC of Rs.14784.02 lakh. In this background, the IDC charges of Rs.45764.74 lakh is allowed as against the provisionally allowed IDC of Rs.44730.84 lakh as part of the capital cost.

15. As regards IEDC charges, the Commission vide its order dated 28.9.2017 in Petition No. 224/GT/2015 had provisionally allowed an amount of Rs.14709.41 lakh as Order in Petition No. 575/GT/2020 Page 8 of 176

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against the IEDC of Rs.33356.00 lakh, claimed by Petitioner. However, while examining the IEDC computations, some minor variations have bene observed, wherein, the IEDC charges are worked out as Rs.14721.06 lakh, as against the provisionally allowed IEDC charges of Rs.14709.41 lakh in the said order. In this background, the IEDC charges of Rs.14721.06 lakh is allowed as part of the capital cost.

16. As regards Finance Charges (FC), the Petitioner, had claimed the actual FC of Rs.4553.00 lakh, as part of the capital cost, which was provisionally allowed vide order dated 28.9.2017 in Petition No. 224/GT/2015. The Petitioner was directed to furnish the actual break-up of FC during true up and accordingly the Petitioner has revised the actual FC claims from Rs.4553.00 lakh (provisionally allowed in petition No.224/GT/2015 dated 28.9.2017) to Rs.5879.52 lakh. The Petitioner, in justification of the same, has submitted that the additional charges of Rs.1326.52 lakh (i.e.Rs.5879.52 lakhs- Rs.4553 lakh), pertains to DVC Bonds and though the payments were made in the year 2014-15, it was inadvertently missed while filing the tariff petition for this generating station. The Petitioner has also submitted the auditor certificate as the supporting document for its claim. Against the total IDC claim of Rs.301411.47 lakh upto actual COD, the petitioner has been allowed total IDC of Rs.45764.74 lakh which works out to 15.18% of the IDC claimed amount. On the same lines after verifying the Petitioner's claim, the actual FC has been allowed for Rs.892.72 lakh which is 15.18% of the FC claimed amount of Rs.5879.52 lakh (i.e. the same percentage of IDC allowed vis a vis IDC claimed).

17. Thus, the capital cost, as on COD, allowed for the purpose of truing-up of tariff is as under:

Order in Petition No. 575/GT/2020 Page 9 of 176

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(Rs. in lakh)

Additional Capital Expenditure

18. Regulation 14 of the 2014 Tariff Regulations, provides as under:

"14. Additional Capitalization and De-capitalization:

(1) The capital expenditure in respect of the 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:

(i) Un-discharged liabilities recognized to be payable at a future date;

(ii) Works deferred for execution;

(iii) Procurement of initial capital spares within the original scope of work, in accordance with the provisions of Regulation 13;

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

(v) Change in law or compliance of any existing law:

Provided that 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 shall be submitted along with the application for determination of tariff."

(2) The capital expenditure incurred or projected to be incurred in respect of the new project on the following counts within the original scope of work after the cut-off date may be admitted by the Commission, subject to prudence check:

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

(ii) Change in law or compliance of any existing law;

(iii) Deferred works relating to ash pond or ash handling system in the original scope of work; and

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(iv) Any liability for works executed prior to the cut-off date, after prudence check of the details of such un-discharged liability, total estimated cost of package, reasons for such withholding of payment and release of such payments etc.

(3) The capital expenditure, in respect of existing generating station or the transmission system including communication system, incurred or projected to be incurred on the following counts after the cut-off date, may be admitted by the Commission, subject to prudence check:

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

(ii) Change in law or compliance of any existing law;

(iii) Any expenses to be incurred on account of need for higher security and safety of the plant as advised or directed by appropriate Government Agencies of statutory authorities responsible for national security/internal security;

(iv) Deferred works relating to ash pond or ash handling system in the original scope of work;

(v) Any liability for works executed prior to the cut-off date, after prudence check of the details of such un-discharged liability, total estimated cost of package, reasons for such withholding of payment and release of such payments etc.;

(vi) Any liability for works admitted by the Commission after the cut-off date to the extent of discharge of such liabilities by actual payments;

(vii) Any additional capital expenditure which has become necessary for efficient operation of generating station other than coal / lignite based stations or transmission system as the case may be. The claim shall be substantiated with the technical justification duly supported by the documentary evidence like test results carried out by an independent agency in case of deterioration of assets, report of an independent agency in case of damage caused by natural calamities, obsolescence of technology, up-gradation of capacity for the technical reason such as increase in fault level;

(viii) In case of hydro generating stations, any expenditure which has become necessary on account of damage caused by natural calamities (but not due to flooding of power house attributable to the negligence of the generating company) and due to geological reasons after adjusting the proceeds from any insurance scheme, and expenditure incurred due to any additional work which has become necessary for successful and efficient plant operation;

(ix) In case of transmission system, any additional expenditure on items such as relays, control and instrumentation, computer system, power line carrier communication, DC batteries, replacement due to obsolesce of technology, replacement of switchyard equipment due to increase of fault level, tower strengthening, communication equipment, emergency restoration system, insulators cleaning infrastructure, replacement of porcelain insulator with polymer insulators, replacement of damaged equipment not covered by insurance and any other expenditure which has become necessary for successful and efficient operation of transmission system; and

(x) Any capital expenditure found justified after prudence check necessitated on account of modifications required or done in fuel receiving system arising due to non- materialization of coal supply corresponding to full coal linkage in respect of thermal generating station as result of circumstances not within the control of the generating station:

Provided that any expenditure on acquiring the minor items or the assets including tools and tackles, furniture, air-conditioners, voltage stabilizers, refrigerators, coolers, computers, fans, washing machines, heat convectors, mattresses, carpets etc. brought after the cut-off date shall not be considered for additional capitalization for determination of tariff w.e.f. 1.4.2014:

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Provided further that any capital expenditure other than that of the nature specified above in (i) to (iv) in case of coal / lignite-based station shall be met out of compensation allowance:

Provided also that if any expenditure has been claimed under Renovation and Modernization (R&M), repairs and maintenance under (O&M) expenses and Compensation Allowance, same expenditure cannot be claimed under this regulation."

19. The projected additional capital expenditure allowed vide order dated 28.9.2017 in Petition No. 224/GT/2015 is summarized below:

(Rs. in lakh) 2016-17 2017-18 Cost of Land & Site Development

Land 0.00 0.00 Rehabilitation & Resettlement (R&R) 100.00 2300.00 Preliminary Investigation & Site Development 0.00 430.00 Social Obligation Programme 153.00 45.00 Green Belt 300.00 100.00

Total Land & Site Development 553.00 2875.00 Plant & Equipment (Main Plant Package)- 3976.00 1108.00

EPC

Water System 4681.00 0.00 Coal Handling Plant (System) 347.80 0.00

Total Plant & Equipment excluding taxes & 9004.80 1108.00 Duties

Civil Works

Township & Colony 5000.00 15091.00 Temporary construction & enabling works 761.00 0.00 (Shifting / Modification of 132/220/400 kV Transmission Lines to Facilitate Rail Infrastructure requirement of RTPS)

Road & Drainage (Approach Road from SH-37 6000.00 4485.00 to Plant)

Railway Infrastructure by RITES 20000.00 10506.00

Total Civil works 31761.00 30082.00 Construction & Pre- Commissioning Expenses

Operator's Training 80.00 0.00 Office Furniture's 165.00 0.00 Computerization & Networking 250.00 38.00

Total Construction & Pre- Commissioning 495.00 38.00 Expenses

Overheads

Statutory fees, Regulatory charges etc. 64.93 0.00 Establishment 2400.00 0.00

Contingency 171.00 0.00

RTPS Dispensary/Hospital 16.40 0.00

Total Overheads 2652.33 0.00 Total Capital cost excluding IDC & FC 44466.13 34103.00

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20. The Petitioner, in the present petition, has claimed the actual additional capital expenditure, based on the Revised Cost Estimates (RCE) of Rs.939787 lakh, as per sanction order dated 18.10.2017, which conveys the approval of the Board of DVC. It is pertinent to mention that the Commission had allowed capital cost (excluding notional IDC) of Rs.518014.58 lakh, as on COD, against the capital expenditure of Rs.812978.44 lakh, booked till COD, as per audited accounts. As such, the disallowed cost as on COD of the station i.e., 31.3.2016 stands at Rs.294963.86 lakh, reducing the same from the final RCE of Rs.939787.00 lakh, the maximum allowable capital cost works out as Rs.644823.14 lakh (Rs. 939787.00 lakh - Rs.294963.86 lakh), Further, considering the capital cost allowed till COD, the maximum additional capital expenditure is allowable for assets/works of original scope works out to Rs.126808.56 lakh (Rs.644823.14 lakh - Rs.518014.58 lakh). Accordingly, the additional capital expenditure claimed by the Petitioner, for the period 2016-19, is as under:

(Rs. in lakh)

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21. The Objector, DVPCA has submitted that the Petitioner has not provided appropriate justification and / or documentary evidence in terms of Regulation 14(3) of the 2014 Tariff Regulations. It has also submitted that the Petitioner has claimed certain additional capitalization under Regulation 54 (power to relax) and Regulation 55 (power to remove difficulty) of the 2014 Tariff Regulations, which can be exercised by the Commission in rare cases, but the Petitioner has not presented / cited any extra ordinary circumstance for the same. A comparative table indicating the additional capital expenditure claimed in the petition and the claims that may be allowable, as per DVPCA, is as under:

(Rs. in lakh)

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22. The Respondent, PSPCL has submitted that the Petitioner has merely claimed additional capital expenditure for the said years, without providing any justification for delayed payments of the same in the absence of which the claims of the Petitioner cannot be considered by the Commission. In response, the Petitioner has submitted that the additional capitalization claimed, the liability created and discharged has been duly reconciled with the books of account and audited by the Comptroller & Auditor General (C&AG) of India. It has also submitted that justification against each of the items of additional capital expenditure has been furnished along with documentary evidence, wherever necessary. The Petitioner has further submitted that the additional capital expenditure claimed is for ensuring plant's security and safety, based on recommendations from technical audit report, and for ensuring reliable & efficient operation of the generating station.

23. The matter has been considered. Based on the submissions and documents on the record, RCE dated 18.10.2017 and on prudence check, the claim of the Petitioner for additional capital expenditure claimed for the period 2016-19, is examined and allowed as under:

2016-17

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(Rs in lakh) Asset/Work Amount Regulation Petitioner Reason for Amount Sr.

claimed Submission admissibility allowed No.

2016-17

1 Buildings

Residential 2201.06 14 (1) (i) This expenditure The works pertaining to 2201.06 Building and (ii) is towards the Buildings are allowed

Water Works & 104.25 14 (1) (i) work within the under Regulation 104.25 Water Supply and (ii) original scope 14(1)(ii) of the 2014 Sys (under Sl. No. Tariff Regulations as

Colony Roads 202.98 14 (1) (i) 5(4) of the this expenditure 202.98 and (ii) Sanction Order incurred is towards the

of RTPS dt. works which are within

18.10.2017), as the original scope and

executed and have been executed

capitalized within and capitalized within

the cut-off date the cut-off date.

Total 2508.30 2508.30

2 Road Culverts & Railway Sidings:

Access Roads 251.00 14 (1) (i) This expenditure The works pertaining to 251.00 and (ii) is towards the Road Culverts & Rly.

work within the Sidings are allowed

original scope under Regulation

(under Sl. No. 14(1)(ii) as this

5(4) of the expenditure is towards

Sanction Order the works within the

of RTPS dt. original scope which

18.10.2017), as have been executed

executed and and capitalized within

capitalized within the cut-off date.

the cut-off date.

Total 251.00 251.00

3 Powerhouse Plant & Machinery:

Boiler & 468.69 14 (1) (i) This expenditure The works pertaining to 468.69 Accessory and (ii) is towards the Powerhouse Plant & Equip. RTPS work within the Machinery are allowed

PH I original scope under Regulation

Turbo 788.88 (under Sl. No. 14(1)(ii) as this 788.88 Generation & 3(i) of the expenditure is towards

Accessory- Sanction Order the works within the

RTPS PH I of RTPS dt. original scope which

Electrical 1059.07 18.10.2017), as have been executed 1059.07 Equipment - executed and and capitalized within

RTPS PH I capitalized within the cut-off date.

Accessory 519.24 14 (1) (i) the cut-off date. 519.24 Mechanical and (ii)

Equipment-

RTPS PH I

Instrumentation 191.79 191.79 & Control

Ash Handling 71.57 71.57 Equip.

Oil Equipment 9.16 9.16 Tools and 2.43 2.43

Plants-RTPS

PH I

Misc. Power 1155.33 1155.33 Plant Equip-

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Asset/Work Amount Regulation Petitioner Reason for Amount Sr.

claimed Submission admissibility allowed No.

2016-17

RTPS PH I

Coal Handling 1097.59 1097.59 Plant

Water System - 553.06 553.06

RTPS PH I

Initial Spares embedded in different packages:

Boiler & 733.96 14 (1) (iii) This is under the The Initial Spares are 733.96 Accessory original scope allowed under

Equip. RTPS (under Sl. No. Regulation 14(1)(iii) as

PH I 3(i) of the this expenditure is

Sanction Order towards the initial

of RTPS dt. spares which have

18.10.2017), as been procured and

Coal Handling 71.82 14 (1) (iii) capitalized within capitalized within the 71.82 Plant the cut-off date. cut-off date and within

the ceiling limit as

prescribed in

Regulation 13.

Balance Initial Spares procured separately:

Turbo 81.73 14 (1) (iii) This expenditure Initial Spares are 81.73 Generation & is towards the allowed under

Accessory- work within the Regulation 14(1)(iii) of RTPS PH I original scope the 2014 Tariff

(under Sl. No. Regulations, as the

3(ii) of the expenditure is towards

Sanction Order initial spares which

of RTPS dt. have been procured

18.10.2017), as and capitalized within

executed and the cut-off date and is

capitalized within also within the ceiling

the cut-off date. limit as prescribed in

Regulation 13. Of the

2014 Tariff Regulations

Total 6804.34 6804.34

4 Substation Equipment

Sub St. 4.57 14 (1) (i) This expenditure The works pertaining to 4.57 Equipment and (ii) is towards the substation equipment's work within the are allowed under

original scope Regulation 14(1)(ii) as

(under Sl. No. this expenditure is

3(iii) of the towards the works

Sanction Order within the original

of RTPS dt. scope which have been

18.10.2017), as executed and

executed and capitalized within the

capitalized within cut-off date.

the cut-off date.

Total 4.57 4.57

5 IT Software

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Asset/Work Amount Regulation Petitioner Reason for Amount Sr.

claimed Submission admissibility allowed No.

2016-17

019-Intangible 339.72 14 (1) (i) This expenditure The works pertaining to 339.72 Assets- and (ii) is towards the IT Software are allowed

Engineering work within the under Regulation

Software original scope 14(1)(ii) as this

(under Sl. No. expenditure is towards

5(6) of the the works within the

Sanction Order original scope which

of RTPS dt. have been executed

18.10.2017), as and capitalized within

executed and the cut-off date.

capitalized within

the cut-off date.

Total 339.72 339.72

6 Other Assets

Office 22.44 This expenditure The works pertaining to 22.44 Furniture-Steel is towards the Other Assets are (O/assets) works / materials allowed under Residential 66.32 within the Regulation 14(1)(ii) as 66.32 Furniture. original scope this expenditure is (O/assets) 14 (1) (i) (under Sl. No. towards the works Office 31.81 and (ii) 5(5) of the within the original 31.81 Equipment Sanction Order scope which have been (O/assets) of RTPS dt. executed and

Miscellaneous 1.92 18.10.2017), as capitalized within the 1.92 (O/assets) executed and cut-off date.

capitalized within

the cut-off date.

Total 122.49 122.49 Total amount 10030.41 claimed

Total amount allowed 10030.41 2017-18

(Rs in lakh)

Sr. Asset/Work Amount Regulations Petitioner Reason for Amount No. claimed Submission admissibility allowed 2017-18

1 Buildings

Residential 71.49 14 (1) (i) and This expenditure is The works 71.49 Building (ii) towards the work pertaining to

within the original Buildings are

scope (under Sl. No. allowed under

5(4) of the Sanction Regulation 14(1)(ii)

Order of RTPS dt. as this expenditure

18.10.2017), as is towards the

executed and works within the

capitalized within the original scope

cut-off date. which have been

executed and

capitalized within

the cut-off date.

Total 71.49 71.49

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Sr. Asset/Work Amount Regulations Petitioner Reason for Amount No. claimed Submission admissibility allowed 2017-18

2 Road Culverts & Railway Sidings

Access Roads 237.25 14 (1) (i) and This expenditure is The works 237.25

(ii) towards the work pertaining to Road within the original Culverts & Rly. scope (under Sl. No. Sidings are allowed 5(4) of the Sanction under Regulation Order of RTPS dt. 14(1)(ii) as this 18.10.2017), as expenditure is executed and towards the works capitalized within the within the original cut-off date. scope which have been executed

and capitalized

within the cut-off

date.

Total 237.25 237.25

3 Powerhouse Plant & Machinery

Boiler & 341.24 14 (1) (i) and This expenditure is The works 341.24 Accessory (ii) towards the work pertaining to

Equip RTPS within the original Powerhouse Plant PH I scope (under Sl. No. & Machinery are

Turbo 131.76 3(i) of the Sanction allowed under 131.76 Generation & Order of RTPS dt. Regulation 14(1)(ii) Accessory- 18.10.2017), as as this expenditure

RTPS PH I executed and is towards the

Electrical 165.86 capitalized within the works within the 165.86 Equipment - cut-off date. original scope

RTPS PH I which have been

Accessory (-)355.54 executed and (-)355.54

Mechanical capitalized within

Equipment- the cut-off date.

RTPS PH I

Instrumentation 30.04 30.04 & Control

Ash Handling 134.20 134.20 Equip.

Tools and 0.38 0.38 Plants-RTPS

PH I

Misc. Power 180.93 14 (1) (i) and 180.93 Plant Equip- (ii)

RTPS PH I

Coal Handling 621.06 This expenditure is 621.06 Plant towards the work

within the original

scope (under Sl. No.

3(ii) of the Sanction

Order of RTPS dt.

18.10.2017), as

executed and

capitalized within the

cut-off date.

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Sr. Asset/Work Amount Regulations Petitioner Reason for Amount No. claimed Submission admissibility allowed 2017-18

Water System - 444.61 This expenditure is 444.61 RTPS PH I towards the work

within the original

scope (under Sl. No.

3(iii) of the Sanction

Order of RTPS dt.

18.10.2017), as

executed and

capitalized within the

cut-off date.

Initial Spares embedded in different packages

Boiler & 140.67 14 (1) (iii) This is under the The Initial Spares 140.67 Accessory original scope (under are allowed under

Equip RTPS Sl. No. 3(i) of the Regulation 14(1)(iii) PH I Sanction Order of as this expenditure

RTPS dt. is towards the initial

18.10.2017), as spares which have

capitalized within the been procured

cut-off date. and capitalized

Coal Handling 113.66 This is under the within the cut-off 113.66 Plant original scope (under date and within the

Sl. No. 3(ii) of the ceiling limit as

Sanction Order of prescribed in

RTPS dt. Regulation 13 of

18.10.2017), as the 2014 Tariff

capitalized within the Regulations

cut-off date.

Water System - 8.70 This is under the 8.70

RTPS PH I original scope (under

Sl. No. 3(iii) of the

Sanction Order of

RTPS dt.

18.10.2017), as

capitalized within the

cut-off date.

Balance Initial Spares procured separately

Boiler & 859.92 14 (1) (iii) This is under the The Initial Spares 859.92 Accessory original scope (under are allowed under

Equip RTPS Sl. No. 3(v) of the Regulation 14(1)(iii) PH I Sanction Order of as this expenditure

RTPS dt. is towards the initial

Coal Handling 161.09 18.10.2017), as spares which have 161.09 Plant capitalized within the been procured

cut-off date. and capitalized

within the cut-off

date and within the

ceiling limit as

prescribed in

Regulation 13 of

the 2014 Tariff

Regulations.

Total 2978.57 2978.57

Order in Petition No. 575/GT/2020 Page 21 of 176

21

Sr. Asset/Work Amount Regulations Petitioner Reason for Amount No. claimed Submission admissibility allowed 2017-18

4 Substation Equipment

Sub Station 1.12 14 (1) (i) and This expenditure is The works 1.12 Equipment (ii) towards the work pertaining to

within the original Substation

scope (under Sl. No. Equipment are

3(iii) of the Sanction allowed under

Order of RTPS dt. Regulation 14(1)(ii)

18.10.2017), as as this expenditure

executed and is towards the

capitalized within the works within the

cut-off date. original scope

which have been

executed and

capitalized within

the cut-off date.

Total 1.12 1.12

5 Other Assets

Office 1.37 This expenditure is The works 1.37 Furniture-Steel towards the works / pertaining to Other (O/assets) materials within the Assets are allowed Office 0.70 original scope (under under Regulation 0.70 Furniture-Elec. Sl. No. 5(5) of the 14(1)(ii) as this (O/assets) Sanction Order of expenditure is Office 5.95 RTPS dt. towards the works 5.95 Equipment 18.10.2017), as within the original (O/assets) executed and scope which have Scientific/lab. 435.63 capitalized within the been executed 435.63 Instrument cut-off date. and capitalized

14 (1) (i) and within the cut-off

Weighing 33.54 (ii) This expenditure is date. 33.54 Machine towards the balance

(O/assets) construction works

for two no's of Road

Weigh Bridges for

weighment of coal

transported by road

to the plant. The work

is within the original

scope (under Sl. No.

3(ii) of the Sanction

Order of RTPS dt.

18.10.2017).

Miscellaneous 12.73 14 (1) (i) and Miscellaneous 12.73 (O/assets) (ii) expenditure involves

the expenditure for

various emergency

activities required to

maintain the plant

efficiency and for

purchasing the

equipment /

materials.

Total 489.92 489.92 Total 3778.35 Amount

Order in Petition No. 575/GT/2020 Page 22 of 176

22

Sr. Asset/Work Amount Regulations Petitioner Reason for Amount No. claimed Submission admissibility allowed 2017-18

claimed

Total Amount allowed 3778.35

2018-19

(Rs in lakh)

Sr. Asset/Work Amount Regulations Petitioner Reason for Amount No. claimed Submission Admissibility allowed 2018-19

1 Land & Land Rights

Cost of land 879.53 14 (1) (i) and This The works 879.53

(ii) expenditure is pertaining to Land towards the and Land Rights work within are allowed under the original Regulation 14(1)(ii) scope (under as this expenditure Sl. No. 1 of is towards the the Sanction works within the Order of original scope

RTPS dt. which have been

18.10.2017), executed and

as executed capitalized within and the cut-off date.

capitalized

within the cut-

off date.

Total 879.53 879.53 Buildings

Residential Building 226.77 14 (1) (i) and This The works 226.77

(ii) expenditure is pertaining to Hospital Building 11.44 14 (1) (i) and towards the Buildings are 11.44

(ii) work within allowed under the original Regulation 14(1)(ii) scope (under as this expenditure Sl. No. 5(4) of is towards the the Sanction works within the Order of original scope RTPS dt. which have been 18.10.2017), executed and as executed capitalized within and the cut-off date.

capitalized

within the cut-

off date.

Total 238.21 238.21

2 Road Culverts & Railway Sidings

Access road 4174.98 14 (1) (i) and This The works 4174.98 (0111030101) (ii) expenditure is pertaining to Road towards the Culverts & Rly.

work within Sidings are allowed

the original under Regulation

Order in Petition No. 575/GT/2020 Page 23 of 176

23

Sr. Asset/Work Amount Regulations Petitioner Reason for Amount No. claimed Submission Admissibility allowed 2018-19

scope (under 14(1)(ii) as this Sl. No. 3(iii) expenditure is and Sl. No. towards the works 5(4) of the within the original Sanction scope which have Order of been executed RTPS dt. and capitalized 18.10.2017), within the cut-off as executed date.

and

capitalized

within the cut-

off date.

Access Roads (-)3586.59 Rectification The negative entry 0.00 (0111032106) entry is adjusted with the

opening capital

cost as on COD in

absence of linkage

with corresponding

positive entry

during previous

years

Total 588.39 4174.98

3 Powerhouse Plant & Machinery

Boiler & Accessory 44.51 14 (1) (i) and This The works 44.51 Equip RTPS PH I (ii) expenditure is pertaining to Turbo Generation & 20.45 towards the Powerhouse Plant 20.45 Accessory-RTPS PH I work within & Machinery are the original allowed under

Electrical Equipment - 25.75 25.75

scope (under Regulation 14(1)(ii)

RTPS PH I

Sl. No. 3(i) of as this expenditure Accessory Mechanical 12.55 14 (1) (i) and the Sanction is towards the

12.55

Equipment-RTPS PH I (ii) Order of works within the Instrumentation & 57.33

RTPS dt. original scope

57.33

Control 18.10.2017), which have been Tools and Plants- 0.73

as executed executed and

0.73

RTPS PH I and capitalized within Misc. Power Plant 6.80 capitalized the cut-off date. 6.80 Equip-RTPS PH I within the cut-

off date.

Coal Handling Plant 0.00 This 0.00

expenditure is

towards the

work within

the original

scope (under

Sl. No. 3(ii) of

the Sanction

Order of

RTPS dt.

18.10.2017),

as executed and

capitalized within the cut- off date

Order in Petition No. 575/GT/2020 Page 24 of 176

24

Sr. Asset/Work Amount Regulations Petitioner Reason for Amount No. claimed Submission Admissibility allowed 2018-19

Water System -RTPS 35.24 This 35.24 PH I expenditure is

towards the

work within

the original

scope (under

Sl. No. 3(iii) of

the Sanction

Order of

RTPS dt.

18.10.2017),

as executed and

capitalized within the cut- off date.

Pollution Control 60.31 14 (1) (v) This The works 60.31 Equipment expenditure is pertaining to toward Pollution control

installation of equipment is

one set of allowed under

CAAQMS Regulation 14(1)(v)

device to as this expenditure

comply with is towards the

the pollution asset which has

control statues been procured

/ stipulations. and capitalized for

meeting pollution

norms/stipulations.

Initial Spares embedded in different packages

Misc. Power Plant 4.20 14 (1) (iii) This is under The Initial Spares 4.20 Equip-RTPS PH I the original are allowed under

scope (under Regulation 14(1)(iii)

Sl. No. 3(i) of as this expenditure

the Sanction is towards the initial

Order of spares which

RTPS dt. have been

18.10.2017), procured and

as capitalized capitalized within

within the cut- the cut-off date and

off date. within the ceiling

Coal Handling Plant 37.52 14 (1) (iii) This is under limit as prescribed 37.52 the original in Regulation 13.

scope (under

Sl. No. 3(ii) of

the Sanction

Order of

RTPS dt.

18.10.2017),

as capitalized within the cut- off date.

Balance Initial Spares procured separately: 0.00 Boiler & Accessory 231.03 14 (1) (iii) This is under The Initial Spares 231.03 Equipm RTPS PH I the original are allowed under

Order in Petition No. 575/GT/2020 Page 25 of 176

25

Sr. Asset/Work Amount Regulations Petitioner Reason for Amount No. claimed Submission Admissibility allowed 2018-19

Turbo Generation & 502.76 scope (under Regulation 14(1)(iii) 502.76 Accessory-RTPS PH I Sl. No. 3(v) of as this expenditure Electrical Equipment - 290.82 the Sanction is towards the initial 290.82 RTPS PH I Order of spares which

Accessory Mechanical 141.71 RTPS dt. have been 141.71 Equipment-RTPS PH I 18.10.2017), procured and

as capitalized capitalized within

Misc. Power Plant 334.34

within the cut- the cut-off date and

334.34

Equip-RTPS PH I off date. within the ceiling Coal Handling Plant 305.07 limit as prescribed 305.07 Water System -RTPS 71.96 in Regulation 13. 71.96

PH I

Total 2183.06 2183.06

4 Substation Equipment

Substation - Testing 0.18 14 (1) (i) and This The works 0.18 Lab Equipment (ii) expenditure is pertaining to (0111120121) towards the substation

work within equipment are

the original allowed under

scope (under Regulation 14(1)(ii)

Sl. No. 3(i) of as this expenditure

the Sanction is towards the

Order of works within the

RTPS dt. original scope

18.10.2017), which have been

as executed executed and

and capitalized within

capitalized the cut-off date.

within the cut-

off date.

Total 0.18 0.18

5 Other Assets (FA)

Office Furniture-Steel 18.02 14 (1) (i) and This The works 18.02 (O/assets) (ii) expenditure is pertaining to Other Office Furniture- 8.12 towards the Assets are allowed 8.12 Wooden (O/assets) works / under Regulation

0.58 materials 14(1)(ii) as this Residential Furniture. 0.58 within the expenditure is

(O/assets)

original /scope towards the works

Office Equipment 2.12

(under Sl. No. within the original

2.12

(O/assets) 5(5) of the scope which have Scientific/lab. 8.37 Sanction been executed 8.37 Instrument Order of and capitalized RTPS dt. within the cut-off

18.10.2017), date.

as executed

and

capitalized

within the cut-

off date.

Weighing Machine 11.54 This 11.54

(O/assets) expenditure is

towards the

Order in Petition No. 575/GT/2020 Page 26 of 176

26

Sr. Asset/Work Amount Regulations Petitioner Reason for Amount No. claimed Submission Admissibility allowed

Initial Spares

Order in Petition No. 575/GT/2020 Page 27 of 176

27

25. The Petitioner has submitted that, the Commission vide order dated 28.9.2017 in Petition No. 224/GT/2015 had directed the Petitioner to submit details of the initial spares capitalized under different packages at the time of truing up. The Petitioner has submitted that the total Plant & Machinery cost as per sanction order dated 18.10.2017 is Rs.438198 lakh (Total EPC cost of Rs.472499 lakh - Taxes, Duties, ERV etc. of Rs.30824 lakh - Balance Initial Spares of Rs.3477 lakh). Therefore, the ceiling limit for initial spares can be derived as 4% of the Plant & Machinery cost as per Regulation 13 of the 2014 Tariff Regulations, and the same works out to be Rs. 17528 lakh (4% of Rs. 438198 lakh). The Petitioner has further submitted that the initial spares capitalized up to COD of the generating station is Rs. 9477.07 lakh and up to the cut-off date (i.e., 31.3.2019) is Rs.13568.02 lakh. The actual initial spares capitalized is therefore within the ceiling limit. Hence, the Petitioner has requested to allow the actual capitalization of initial spares up to the cut-off date. The Package-wise break-up of initial spares capitalized up to COD and up to the RTPS cut-off date was submitted along with the Petition.

26. The matter has been considered. It is observed that, the Petitioner has worked out the ceiling limit of its Initial spares as per Regulation 13 of the 2014 Tariff Regulations @ of 4% of Plant & Machinery cost of Rs.438198 lakh excluding Taxes and Duties as per RCE dated 18.10.2017. However, as per the fourth proviso of Regulation 13, the computation for ceiling limit of initial spares shall be based on the Plant and Machinery (P&M) cost approved as on cut-off date and for this purpose P&M cost shall be arrived at by excluding IDC, IEDC, Land Cost and cost of civil works from the project cost as on cut-off date. In this background, for arriving at the ceiling limit of Initial Spares, the Commission has considered the total P&M cost of Rs. 425136.77 lakh by excluding expenditure allowed under IDC, IEDC, Land Cost Order in Petition No. 575/GT/2020 Page 28 of 176

28

and cost of civil works from the project cost approved as on cut-off date, i.e., 31.3.2019. Thus, the ceiling limit of the initial spares up to the cut-off date i.e., 31.3.2019 works out to Rs.17148.70 lakh. Accordingly, the Commission observes that the expenditure on initial spares i.e., Rs.13568.03 lakh as approved by the Commission till cut-off date, is within the ceiling limit of initial spares of Rs.17148.70 lakh. The summary of the Initial spares allowed up to the cut-off date is provided as under:

(Rs. in lakh)

Un-discharged liabilities

27. The total addition of undischarged liabilities furnished by the Petitioner for the period 2016-19 is Rs.2831.95 lakh (Rs.951.26 lakh in 2016-17, Rs.1345.52 lakh in 2017-18, and Rs.535.17 lakh in 2018-19). The Petitioner has submitted that IDC and 'Undischarged liabilities' were consolidated and maintained on year-to-year basis, but was not maintained item-wise and thus the additional capital expenditure claimed for each item, is on accrual basis. The Commission vide order dated 28.9.2017 in petition no. 224/GT/2015 had directed the Petitioner to submit details of the undischarged liability towards the works pending. However, it is observed that the Petitioner has not complied with the directions given by the Commission in this present petition. The Commission while verifying the liability statement observed that, the Petitioner has claimed the opening liability of Rs.29747.42 lakh, which included the undischarged Order in Petition No. 575/GT/2020 Page 29 of 176

29

liability towards the Earnest Money Deposit of Rs.141.68 lakh. Since the Petitioner has not provided any justification for consideration of such Earnest Money Deposit, while knowing the fact that, such booked cost, which are of the nature of refundable deposit cannot form part of the additional capitalisation. In this background, the Commission has not considered discharge of Rs.141.68 lakh against EMD as part of the opening liability. Thus, the Commission allows the opening liability as Rs.29605.75 lakh instead of Petitioner's claimed opening liability of Rs.29747.42 lakh. It is also observed that information submitted by the Petitioner is not in line with the 2014 Tariff Regulations i.e., item-wise details of undischarged/discharged liabilities has not been furnished. In the absence of item-wise availability of undischarged liability, the same is determined on a pro-rata basis, considering the admitted additional capital expenditure against the claimed additional capital expenditure, during each year of the period 2016-19. Accordingly, as against an un-discharged liability of Rs.2831.95 lakh claimed by the Petitioner, a corresponding amount of Rs.2829.86 lakh, has been allowed.

Discharge of liabilities

28. The Petitioner has submitted the year-wise total liability discharged for Rs.7934.40 lakh during the period 2016-19 (Rs.6070.75 lakh in 2016-17; Rs.226.74 lakh in 2017-18; and Rs.1636.91 lakh in 2018-19), instead of the item-wise liability discharges. It is observed that, Petitioner has claimed total of Rs.98.67 lakh discharges towards the Earnest Money Deposit. Since the Petitioner has not provided any justification for consideration of such Earnest Money Deposit, while knowing the fact that, such booked cost, which are of the nature of refundable deposit cannot form part of the additional capitalisation. In this background, the Commission has not considered any discharges towards EMD i.e., of Rs.98.67 lakh during the period 2016- Order in Petition No. 575/GT/2020 Page 30 of 176

30

19. It is also observed that information submitted by the Petitioner does not contain the item-wise discharge of liabilities. In the absence of the item-wise availability of liabilities discharged, the same is determined on a pro-rata basis, considering the admitted additional capital expenditure against the claimed expenditure, during each year of the period 2016-19. Accordingly, the discharge of liabilities, allowed as part of additional capital expenditure, corresponding to the assets allowed, are as under:

(Rs. in lakh)

Additions during the period 2016-19 (corresponding 951.26 1345.52 533.08

to allowed additional capital expenditure) (B)

Discharges during the period 2016-19 5981.55 222.03 1632.02

(corresponding to allowed additional capital

expenditure) (C)

Reversal of Liabilities out of liabilities added during 0.00 0.00 0.00

the period 2016-19 (corresponding to allowed

additional capital expenditure) (D)

Net Provisional Adjustment (E) 140.78 17.11 16.55

Closing Un-discharged liabilities (F) = (A+B-C-D- 24434.67 25541.06 24425.56

E)

Capital cost allowed for the period 2016-19

29. Accordingly, the capital cost approved for the period 2016-19 in respect of the generating station is as under:

(Rs. in lakh)

Debt-Equity Ratio

30. Regulation 19 of the 2014 Tariff Regulations provides as follows:

"19. Debt-Equity Ratio: (1) For a project declared under commercial operation on or after 1.4.2014, the debt-equity ratio would be considered as 70:30 as on COD. If the equity actually deployed is more than 30% of the capital cost, equity in excess of 30% shall be treated as normative loan:

Order in Petition No. 575/GT/2020 Page 31 of 176

31

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 utilised for meeting the capital expenditure of the generating station or the transmission system.

(2) The generating company or the transmission licensee shall submit the resolution of the Board of the company or approval from Cabinet Committee on Economic Affairs (CCEA) regarding infusion of fund 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.

(3) In case of the generating station and the transmission system including communication system declared under commercial operation prior to 1.4.2014, debt:

equity ratio allowed by the Commission for determination of tariff for the period ending 31.3.2014 shall be considered:

(4) In case of the generating station and the transmission system including communication system declared under commercial operation prior to 1.4.2014, but where debt: equity ratio has not been determined by the Commission for determination of tariff for the period ending 31.3.2014, the Commission shall approve the debt: equity ratio based on actual information provided by the generating company or the transmission licensee as the case may be."

31. The gross normative loan and equity amounting to Rs.360781.10 lakh and Rs. 154620.47 lakh allocated in the ratio of 70:30 has been considered based on the revised opening capital cost as on COD, as discussed above. Further, the additional capital expenditure admitted as above, has been allocated in the debt-equity ratio of 70:30. Accordingly, the details of debt-equity ratio, in respect of the generating station, as on 1.4.2016 and as on 31.3.2019, are as follows:

Return on Equity

Order in Petition No. 575/GT/2020 Page 32 of 176

32

32. Regulation 24 of the 2014 Tariff Regulations provides as follows:

"24. Return on Equity: (1) Return on equity shall be computed in rupee terms, on the equity base determined in accordance with regulation 19.

(2) Return on equity shall be computed at the base rate of 15.50% for thermal generating stations, transmission system including communication system and run of the 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:

xxxx"

33. Regulation 25 of the 2014 Tariff Regulations provides as follows:

"25. Tax on Return on Equity:

(1) The base rate of return on equity as allowed by the Commission under Regulation 24 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 the 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 income on other income stream (i.e. income of non-generation or non-transmission business as the case may be) shall not be considered 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 the generating company or the transmission licensee paying Minimum Alternate Tax (MAT) @ 20.96% including surcharge and cess: Rate of return on equity = 15.50/(1-0.2096) = 19.610%

(ii) In case of generating company or the transmission licensee paying normal corporate tax including surcharge and cess:

(a)Estimated Gross Income from generation or transmission business for FY 2014-15 is Rs 1000 crore.

(b)Estimated Advance Tax for the year on above is Rs 240 crore.

(c) Effective Tax Rate for the year 2014-15 = Rs 240 Crore/Rs 1000 Crore = 24%

(d)Rate of return on equity = 15.50/ (1-0.24) = 20.395%

(2) The generating company or the transmission licensee as the case may be shall true up the grossed up rate of return on equity at the end of every financial year based on actual tax paid together with any additional tax demand including interest thereon duly adjusted for any refund of tax including interest received from the income tax authorities pertaining to the tariff period 2014-15 to 2018-19 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 Order in Petition No. 575/GT/2020 Page 33 of 176

33

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 transmission customers/DICs as the case may be on year-to-year basis."

34. The base rate of Return on Equity (ROE), as allowed under Regulation 24 of the 2014 Tariff Regulations, is to be grossed up with the effective tax rate of the respective financial years. Also, in terms of Regulation 25(3) of the 2014 Tariff Regulations, the generating company, shall true up the grossed-up rate of ROE, at the end of every financial year, based on actual tax paid together with any additional tax demand, including interest thereon, duly adjusted, for any refund of tax, including interest received from the income tax authorities, pertaining to the 2016-19 tariff period, on actual gross income of any financial year.

35. The Respondent KSEBL has submitted that ROR for the period may be allowed only after deducting the disallowed capital expenditure. It has also submitted that as per details furnished by the Petitioner, it is observed that, no tax was paid by Petitioner for the period from 2014-15 to 2017-18. The Respondent has further submitted that the tax paid by the Petitioner for 2018-19 is related to the deferred tax for the period 2012-13, which is not admissible as per Regulation 49 of the 2014 Tariff Regulations. The Respondent has also pointed out that the 2014 Tariff Regulations, stipulates that the rate of ROE, shall be reduced by 1.00% for such period as may be decided by the Commission, if the generating station has not implemented Restricted Governor Mode Operation (RGMO) or Free Governor Mode Operation (FGMO), data telemetry, communication system up to load despatch centre or protection system based on the report submitted by the respective RLDC. The Respondent has added that since the Petitioner has not furnished the details of above mandatory requirements, the rate of ROE may be fixed only based on the achievement of the Order in Petition No. 575/GT/2020 Page 34 of 176

34

operation of RGMO/FGMO, data telemetry and communication system. The Objector, DVPCA has submitted that though the Petitioner has considered the effective tax rate of 19.610%, 19.705%, 19.705%, 19.705% and 19.758% for computation of ROE for the period 2016-19, the Audited accounts reveals that the Petitioner has not paid any actual tax during the 2014-18 period. It has stated that for the year 2018-19, it is apparent that the deferred tax liability which gets materialised in the year pertains to the year 2012-13. Referring to Regulation 49 of the 2014 Tariff Regulations, the Respondent, DVPCA has stated that the claim is in contravention to the 2014 Tariff Regulations and ROE is to be allowed at a rate of 15.50% only, without considering any effective tax rate. In response, the Petitioner, has clarified that there is no income tax liability on the Petitioner for the period 2016-19. However, it has sought leave of the Commission, to claim income tax liability, if any, which may arise in future.

36. The matter has been considered. Since the Petitioner has not been paying any income tax in any of the financial year of the period 2016-19, 'Nil' rate has been considered as the effective tax rate for the purpose of grossing up of ROE, in terms of the 2014 Tariff Regulations. Accordingly, ROE has been worked out as under:

(Rs. in lakh)

Interest on Loan

37. Regulation 26 of the 2014 Tariff Regulations provides as follows:

Order in Petition No. 575/GT/2020 Page 35 of 176

35

"26. Interest on loan capital: (1) The loans arrived at in the manner indicated in regulation 19 shall be considered as gross normative loan for calculation of interest on loan.

(2) The normative loan outstanding as on 1.4.2014 shall be worked out by deducting the cumulative repayment as admitted by the Commission up to 31.3.2014 from the gross normative loan.

(3) The repayment for each of the year of the tariff period 2014-19 shall be deemed to be equal to the depreciation allowed for the corresponding year/period. In case of Decapitalization 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-capitalization 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 generating company or the transmission licensee, as the case may be, shall make every effort to re-finance the loan as long as it results in net savings on interest and in that event the costs associated with such refinancing shall be borne by the beneficiaries and the net savings shall be shared between the beneficiaries and the generating company or the transmission licensee, as the case may be, in the ratio of

2:1.

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

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

Provided that the beneficiaries or the long term transmission customers /DICs shall not withhold any payment on account of the interest claimed by the generating company or the transmission licensee during the pendency of any dispute arising out of re-financing of loan."

38. The Respondent KSEBL has submitted that the interest on loan for the period may be allowed, only after deducting the disallowed additional capital expenditure. The Objector DVPCA has submitted that the Petitioner has claimed the Interest on loan for Rs.102161.99 lakh for the period 2016-19. It has also submitted that based on Order in Petition No. 575/GT/2020 Page 36 of 176

36

aforesaid proposed disallowance on additional capitalization, the loan balances have got changed and as a result interest on loan amount has also undergone change. Thus, the Objector DVPCA has prayed to allow interest on loan to the tune of Rs. 94266 lakh only, as against the claim of Rs.102162 lakh claimed by the Petitioner. In response, the Petitioner has submitted that the additional capitalisation for the period 2016-17 to 2018-19 as submitted by DVPCA, is based on their arbitrary assumptions of disallowance which are devoid of any merits and may be rejected by the Commission.

39. Considering the submissions of the parties, Interest on loan has been worked out as under:

a. The gross normative loan of Rs.360781.10 lakh has been considered as on 1.4.2016, in the line with the approved capital cost as on COD as stated above. In addition to this, the loan component towards additional capitalization has been considered as per the approved debt equity ratio.

b. Cumulative repayment of loan has been considered as 'zero' as on 1.4.2016 since the station COD is 31.3.2016.

c. Addition to normative loan on account of additional capital expenditure approved above has been considered on year-to-year basis.

d. Depreciation allowed has been considered as repayment of normative loan during the respective years of the period 2016-19.

e. In line with the Regulations, the weighted average rate of interest (WAROI) has been calculated by applying the actual loan portfolio existing as on 1.4.2016 along with subsequent additions during the period 2016-19, if any, for the generating station. In case of loans carrying floating rate of interest the rate of interest as provided by the petitioner has been considered for the purpose of tariff. The necessary calculation for interest on loan is as follows:

(Rs in lakh)

Order in Petition No. 575/GT/2020 Page 37 of 176

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40. Further, the Petitioner has claimed its share of savings due to loan restructuring (i.e., one-third share) amounting Rs.521.76 lakh, Rs.1601.30 lakh and Rs.1257.31 lakh for the year 2016-17, 2017-18 and 2018-19, respectively, in terms of Regulation 26(7) of the 2014 Tariff Regulations. In this regard, it is observed that the sharing of savings in interest due to re-financing of loan, if any, must be undertaken between the parties, on actual basis, in accordance with the provisions of Regulation 26 (7) of the 2014 Tariff Regulations. However, in case of any dispute, the parties may approach the Commission, in terms of Regulation 26(9) of the 2014 Tariff Regulations.

Depreciation

41. Regulation 27 of the 2014 Tariff Regulations provides as follows:

"27. Depreciation: (1) Depreciation shall be computed from the date of commercial operation of a generating station or unit thereof or a transmission system including communication system or element thereof. 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 or elements thereof.

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.

(2) The value base for the purpose of depreciation shall be the capital cost of the asset admitted by the Commission. In case of multiple units of a generating station or multiple elements of 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.

(3) 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 in case of hydro generating station, the salvage value shall be as provided in the agreement signed by the developers with the State Government for development of the Plant:

Provided further that the capital cost of the assets of the hydro Order in Petition No. 575/GT/2020 Page 38 of 176

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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 generating unit or transmission system as the case may be, shall not be allowed to be recovered at a later stage during the useful life and the extended life.

(4) 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.

(5) Depreciation shall be calculated annually based on Straight Line Method and at rates specified in Appendix-II 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.

(6) In case of the existing projects, the balance depreciable value as on 1.4.2014 shall be worked out by deducting the cumulative depreciation as admitted by the Commission upto 31.3.2014 from the gross depreciable value of the assets.

(7) The generating company or the transmission license, as the case may be, shall submit the details of proposed capital expenditure during the fag end of the project (five years before the useful life) alongwith justification and proposed life extension. The Commission based on prudence check of such submissions shall approve the depreciation on capital expenditure during the fag end of the project.

(8) 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."

42. Regulation 53(2)(iii) of the 2014 Tariff Regulations provides as follows:

"53. Special Provisions relating to Damodar Valley Corporation. (1) Subject to clause (2), these regulations shall apply to determination of tariff of the projects owned by Damodar Valley Corporation (DVC).

(2) The following special provisions shall apply for determination of tariff of the projects owned by DVC:

(i)xx….

(ii)xx

(iii) Depreciation: The depreciation rate stipulated by the Comptroller and Auditor General of India in terms of section 40 of the Damodar Valley Corporation Act, 1948 shall be applied for computation of depreciation of projects of DVC."

43. The cumulative depreciation as on 1.4.2016 is considered as 'zero' as the station COD is 31.3.2016. The weighted average rate of depreciation calculated (as per Annexure-I to this order) in terms of the Regulation 53(2)(iii) read with Regulation 27 Order in Petition No. 575/GT/2020 Page 39 of 176

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of the 2014 Tariff Regulations, has been considered for calculation of depreciation. Accordingly, depreciation is worked out and allowed as under:

(Rs. in lakh)

Operation & Maintenance Expenses

44. Regulation 29(1) (a) of the 2014 Tariff Regulations provides the following O&M norms for the generating station of the Petitioner:

(Rs in lakh/MW) 2016-17 2017-18 2018-19

16.27 17.30 18.38

45. The O&M expenses claimed by the Petitioner are as follows:

(Rs. in lakh) 2016-17 2017-18 2018-19

19524.00 20760.00 22056.00

46. The normative O&M expenses claimed for the period 2016-19 is in terms of Regulation 29(1)(a) of the 2014 Tariff Regulations and hence allowed.

Water Charges

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47. The first proviso to Regulation 29(2) of the 2014 Tariff Regulations provide as follows:

"29 (2) The Water Charges and capital spares for thermal generating stations shall be allowed separately:

Provided that water charges shall be allowed based on water consumption depending upon type of plant, type of cooling water system etc., subject to prudence check. The details regarding the same shall be furnished along with the petition:

48. The water charges claimed by the Petitioner is as under:

(Rs. in lakh) 2016-17 2017-18 2018-19

295.08 334.97 407.12

49. The Petitioner has furnished the detailed break-up of the expenses incurred towards water charges along with justifications for the same. The cumulative Water charges claimed is Rs. 1037.17 lakh for the period 2016-19. The details of the water charges incurred has been duly certified by the auditor in the present case.

50. The matter has been considered. Regulation 29(2) of the 2014 Tariff Regulations, provides for consideration of the actual consumption of water depending upon the type of plant, type of cooling water system etc, subject to prudence check. The Petitioner, has furnished the computation for actual water consumption along with the audited water charges incurred for the period 2016-19. The details of water charges claimed are as under:

Water Use Quantity of Rate of Water Water Charges water water Charges as apportioned as consumed charges per rate (Rs.in per annual

3 3

(M ) (Rs/M ) lakh) accounts (Rs. in lakh)

2016-17 Industrial 5134403 5.70 292.66 295.08 Domestic 210233 1.15 2.42

Total 5344635 295.08

2018-19 Industrial 6799429 5.70 387.57 334.97 Domestic 204494 1.15 2.35

Total 7003923 389.92

2019-20 Industrial 8885956 5.70 506.50 407.12 Domestic 208488 1.15 2.40

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51. It is observed that the water charges determined based on consumption and rate, thereof, are at variance with the apportioned audited water charges. The Petitioner, has however, claimed Water charges for Rs. 1037.17 lakh, as booked in the audited accounts. Accordingly, the audited water charges have been considered. It is also noticed that the water consumption includes domestic water consumption, charges for which are being recovered from its employees. As the water charges for domestic usage are not allowable, the same has been excluded from the audited apportioned water charges. Accordingly, water charges claimed and those allowed are as under:

(Rs. in lakh)

Capital Spares

52. The last proviso to Regulation 29(2) of the 2014 Tariff Regulations provides as follows:

"29(2) The Water Charges and capital spares for thermal generating stations shall be allowed separately:

xxxx

Provided that the generating station shall submit the details of year wise actual capital spares consumed at the time of truing up with appropriate justification for incurring the same and substantiating that the same is not funded through compensatory allowance or special allowance or claimed as a part of additional capitalization or consumption of stores and spares and renovation and modernization."

53. The Petitioner has claimed total actual expenditure of Rs. 345.13 lakh for capital spares consumed during the period 2016-19 ('nil' in 2016-17, Rs. 70.85 lakh in 2017- 18 and Rs. 274.28 lakh in 2018-19) and has prayed that the capital spares replaced / Order in Petition No. 575/GT/2020 Page 42 of 176

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consumed by the generating station during the period 2016-19 may be allowed.

54. The Respondent PSPCL has submitted that the Petitioner may be directed to submit the year-wise details of the actual capital spares consumed with appropriate justification for incurring the same. It has stated that though the Petitioner, in Form-17 has provided the break-up and justification for the use of said spares, it has failed to provide any justification for claiming capital spares for such a new plant within the period of 4-5 years of service, when it has already made a claim for initial spares as well. Accordingly, the Respondent has submitted that the claim of the Petitioner may be subjected to strict scrutiny at the time of prudence check. In response, the Petitioner has clarified that the details of capital spares have been furnished in Form- 17 for the period 2016-19. It has also stated that in order to ensure the reliable and efficient operation of the generating station at all times, the units / equipment's are taken under overhaul / maintenance and is inspected regularly for wear and tear and during such works, spares parts of equipment which become damaged / unserviceable are replaced /consumed, so that the machine continue to perform at expected efficiency, on sustained basis. It has also submitted that it has been confirmed in Form-17, that no part of capital spares has been funded through compensatory allowance or special allowance or claimed as part of additional capitalization or stores and spares.

55. It is pertinent to mention that capital spares comprise of two categories i.e. (i) spares which form part of the capital cost and (ii) spares which do not form part of the capital cost of the project. In respect of capital spares which form part of the capital cost of the project, tariff is being recovered since their procurement and, therefore, the same cannot be allowed as part of additional O&M expenses. Accordingly, only those Order in Petition No. 575/GT/2020 Page 43 of 176

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capital spares, which do not form part of the capital cost of the project, are to be considered. It is pertinent to mention that the term 'capital spares' has not been defined in the 2014 Tariff Regulations. The term capital spares, in our view, is a piece of equipment or a spare part, of significant cost that is maintained in inventory for use in the event that a similar piece of critical equipment fails or must be rebuilt.

56. It is observed that, the cut-off date of the generating station is 31.3.2019 and all spares capitalized till this date, has been allowed as 'Initial spares' in the capital cost as on COD and additional capitalization post COD. As such, we notice that the expenditure on capital spares consumed and claimed as part of O&M expenses by the Petitioner already form part of the capital cost for the purpose of tariff. In this background, since, the Petitioner has already claimed initial spares as part of the capital cost, as on COD and as additional capitalisation, we are not inclined to allow the capital spares claimed by Petitioner, as part of O&M expenses for the respective years. Accordingly, the O&M expenses allowed for the period 2016-19 is tabulated below:

(Rs. in lakh)

O&M Expenses under Regulation 29(1) 16.27 17.30 18.38

(Rs in lakh / MW) (B)

Total O&M Expenses (in Rs. lakh) Claimed 19524.00 20760.00 22056.00

(C) = (A)*(B) Allowed 19524.00 20760.00 22056.00

Water Charges (in Rs. lakh) (D) Claimed 295.08 334.97 407.12

Allowed 292.66 332.62 404.72

Capital Spares consumed (in Rs. lakh) Claimed 0.00 70.85 274.28

(E) Allowed 0.00 0.00 0.00 Total O&M Expenses allowed Claimed 19819.08 21165.82 22737.40

(F) = (C+D+E) Allowed 19816.66 21092.62 22460.72 Operational Norms

57. The operational norms for the generating station as claimed by the Petitioner are as under:

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(a) Normative Annual Plant Availability Factor (NAPAF)

58. Regulation 36 of the 2014 Tariff Regulations provides as follows:

"(A) Normative Annual Plant Availability Factor(a) All Thermal generating stations, except those covered under clauses (b),(c),(d) &(e)- 85%. Provided that in view of the shortage of coal and uncertainty of assured coal supply on sustained basis experienced by the generating stations, the NAPAF for recovery of fixed charges shall be 83% till the same is reviewed.

The above provision shall be reviewed based on actual feedback after 3 years from

1.4.2014.

59. The Petitioner has prayed for consideration of relaxation in NAPAF of the generating station to 60% for the period from 2016-17 to 2018-19, considering the coal shortage scenario, in exercise of the 'power to relax' under Regulation 54 of the 2014 Tariff Regulations.

60. The Objector DVPCA and the Respondent KSEBL have submitted that the arrangement of adequate coal supply, is the sole responsibility of the Petitioner. They have also submitted that since coal supply is being governed by a separate bilateral Fuel Purchase Agreement (FPA) signed between the Petitioner and Coal Supplier, the beneficiaries are in no way responsible for coal shortage and such burden should not be passed on to the beneficiaries for any lapses, which is attributable to the Petitioner / Coal Supplier. In response, the Petitioner has submitted that it has provided the detailed justification, along with documentary evidence for coal shortage and subsequent PAF loss of RTPS since COD.

61. The matter has been considered. Considering the nationwide coal shortage Order in Petition No. 575/GT/2020 Page 45 of 176

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scenario, Regulation 36(A) of 2014 Tariff Regulations, provides for relaxed NAPAF of 83% for first three (3) years i.e., from 2014-15 to 2016-17 and for review of the same thereafter. In line with this, the coal availability was reviewed and it was observed that the availability of coal to the thermal generating stations, in the country, became normal and therefore, the NAPAF of 85% for 2017-18 and 2018- 19 has been adopted by the Commission for all thermal generating stations whose tariff is regulated by this Commission. In our view, the non-availability of coal to the generating station of the Petitioner, is a localised or a plant specific issue and cannot be a factor to reduce NAPAF, particularly, keeping in view that arrangement of coal supply is the sole responsibility of the generator (Petitioner). Thus, the Petitioner's claim for considering the NAPAF at 60% cannot be allowed. Accordingly, the NAPAF of 83% for 2016-17 and 85% for 2017-18 and 2018-19 has been allowed in accordance with the provisions of Regulation 36 (A) of the 2014 Tariff Regulations.

(b) Gross Station Heat Rate

62. The Petitioner has claimed the Gross Station Heat Rate (GSHR) as 2339.78 kCal /kWh. As the Gross Station Heat Rate claimed by the Petitioner is in accordance with the provisions of Regulation 36(C)(b) of the 2014 Tariff Regulations, the same is allowed.

(c) Auxiliary Energy Consumption

63. The Petitioner has claimed Auxiliary Energy Consumption (AEC) of 5.25%. The Regulation 36(E)(a)(ii) of the 2014 Tariff Regulations provides for AEC of 5.25% for coal based generating stations of 500 MW sets and above with Steam driven boiler feed pumps. Since the AEC of 5.25%, is in line with the regulations above, the same is allowed.

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(d) Secondary Fuel Oil Consumption

64. The Petitioner has claimed secondary fuel oil consumption as 0.5 ml / kWh. Regulation 36(D)(a) of the 2014 Tariff Regulations provides for secondary fuel oil consumption of 0.5 ml/kWh, for coal based generating stations. As the secondary fuel oil consumption claimed by the Petitioner is in line with the 2014 Tariff Regulations, the same is allowed.

65. Based on the above, the operational norms allowed are as under:

Interest on Working Capital

66. Regulation 28 of the 2014 Tariff Regulations provides as follows:

"28. Interest on Working Capital:

(1) The working capital shall cover:

(a) Coal-based/lignite-fired thermal generating stations:

(i) Cost of coal or lignite and limestone towards stock if applicable for 15 days for pit-head generating stations and 30 days for non-pit-head generating stations for generation corresponding to the normative annual plant availability factor or the maximum coal / lignite stock storage capacity whichever is lower;

(ii) Cost of coal or lignite and limestone for 30 days for generation corresponding to the normative annual plant availability factor;

(iii) Cost of secondary fuel oil for two months for generation corresponding to the normative annual plant availability factor and in case of use of more than one secondary fuel oil cost of fuel oil stock for the main secondary fuel oil;

(iv) Maintenance spares @ 20% of operation and maintenance expenses specified in regulation 29;

(v) Receivables equivalent to two months of capacity charges and energy charges for sale of electricity calculated on the normative annual plant availability factor; and

(vi) Operation and maintenance expenses for one month.

(2) The cost of fuel in cases covered under sub-clauses (a) and (b) of clause (1) of this regulation shall be based on the landed cost incurred (taking into account normative transit and handling losses) by the generating company and gross calorific value of the fuel as per actual for the three months preceding the first month for which tariff is to be determined and no fuel price escalation shall be provided during the tariff period.

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(3) Rate of interest on working capital shall be on normative basis and shall be considered as the bank rate as on 1.4.2014 or a^s on 1st April of the year during the tariff period 2014-15 to 2018-19 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.

(4) Interest on working capital shall be payable on normative basis notwithstanding that the generating company or the transmission licensee has not taken loan for working capital from any outside agency."

67. The Petitioner has revised its claims for Interest on working capital due to the revision of its P&G contribution claims. Accordingly, the interest on working capital claimed by the Petitioner is as under:

(Rs. in lakh)

(a) Fuel Cost for Working Capital

68. Sub-clauses (i), (ii) and (iii) of Regulation 28(1) of the 2014 Tariff Regulations provides cost of coal towards stock for 30 days, 30 days of cost of coal towards generation and cost of secondary oil for two months respectively, to be considered for computation of working capital and in terms of Regulation 28(2) of the 2014 Tariff Regulations. Further, the computation of cost of fuel is to be based on the landed price and gross calorific value of the fuel, as per actuals, for the period from January, 2014 to March, 2014. Regulation 30 (6) of the 2014 Tariff Regulations provides as follows:

"30. Computation and Payment of Capacity Charge and Energy Charge for Thermal Generating Stations:

(6) Energy charge rate (ECR) in Rupees per kWh on ex-power plant basis shall be Order in Petition No. 575/GT/2020 Page 48 of 176

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determined to three decimal places in accordance with the following formula:

(a) For coal based and lignite fired stations

ECR = {(GHR - SFC x CVSF) x LPPF / CVPF+SFC x LPSFi + LC x LPL} x 100 / (100 - AUX)

(b) xxxxx Where, AUX =Normative auxiliary energy consumption in percentage. CVPF=(a) Weighted Average Gross calorific value of coal as received, in kCal per kg for coal based stations

(b) Weighted Average Gross calorific value of primary fuel as received, in kCal per kg, per litre or per standard cubic meter, as applicable for lignite, gas and liquid fuel based stations.

(c) In case of blending of fuel from different sources, the weighted average Gross calorific value of primary fuel shall be arrived in proportion to blending ratio.

CVSF =Calorific value of secondary fuel, in kCal per ml. ECR = Energy charge rate, in Rupees per kWh sent out.

GHR =Gross station heat rate, in kCal per kWh.

LC = Normative limestone consumption in kg per kWh.

LPL = Weighted average landed price of limestone in Rupees per kg. LPPF =Weighted average landed price of primary fuel, in Rupees per kg, per litre or per standard cubic metre, as applicable, during the month. (In case of blending of fuel from different sources, the weighted average landed price of primary fuel shall be arrived in proportion to blending ratio)

SFC = Normative Specific fuel oil consumption, in ml per kWh. LPSFi=Weighted Average Landed Price of Secondary Fuel in Rs./ml during the month

69. Therefore, in terms of the above Regulations, for determination of working capital, the GCV on 'as received 'basis is to be considered. Further, Regulation 30 (7) of the 2014 Tariff Regulations provides as follows:

"(7) The generating company shall provide to the beneficiaries of the generating station the details of parameters of GCV and price of fuel i.e. domestic coal, imported coal, e-auction coal, lignite, natural gas, RLNG, liquid fuel etc., as per the forms prescribed at Annexure-I to these regulations:

Provided that the details of blending ratio of the imported coal with domestic coal, proportion of e-auction coal and the weighted average GCV of the fuels as received shall also be provided separately, along with the bills of the respective month:

Provided further that copies of the bills and details of parameters of GCV and price of fuel i.e. domestic coal, imported coal, e-auction coal, lignite, natural gas, RLNG, liquid fuel etc., details of blending ratio of the imported coal with domestic coal, proportion of e-auction coal shall also be displayed on the website of the generating company. The details should be available on its website on monthly basis for a period of three months."

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70. The Petitioner has furnished the average GCV of coal as 4020.72 kcal/kg on 'as received' basis for the period from January, 2016 to March, 2016.

71. As stated above, the Petitioner, in Form-15, has considered the average GCV of coal on "as received" basis i.e., from Wagon top, for the period from January 2016 to March 2016, for the purpose of computation of working capital for the period 2016-

19. Accordingly, the cost for fuel components in working capital has been computed considering the fuel details (price and GCV) as per Form-15 A (Coal), which is 4020.72 kCal/kg. It is observed that the transit & handling loss of coal, GCV and price of primary and secondary fuel claimed by the Petitioner are in line with the regulations. Accordingly, the weighted average cost and GCV of primary and secondary fuel for computation of working capital is allowed as under:

72. Based on the operational norms, GCV and price of primary and secondary fuel allowed as above, the cost of fuel components in working capital is worked out and allowed as under:

(Rs. in lakh)

(b) Working capital for Maintenance Spares

73. The Petitioner has claimed maintenance spares in working capital as under:

(Rs. in lakh) 2016-17 2017-18 2018-19

3963.82 4218.99 4492.62

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74. It is noticed that the Petitioner has claimed working capital for maintenance spares by excluding the capital spares. Regulation 28(1)(a)(iv) of the 2014 Tariff Regulations provide for maintenance spares @ 20% of the O&M expense, including water charges and capital spares. Accordingly, the cost of maintenance spares @ 20% of the operation & maintenance expenses including water charges and capital spares, allowed are as follows:

(Rs. in lakh) 2016-17 2017-18 2018-19

3963.33 4218.52 4492.14

(c) Working Capital for O&M Expenses

75. O&M expenses for 1 month claimed by the Petitioner for the purpose of working capital is as follows:

(Rs. in lakh) 2016-17 2017-18 2018-19

1651.59 1757.91 1871.93

76. It is noticed that the Petitioner has claimed working capital for O & M expenses for one month, by excluding capital spares. However, Regulation 28(a)(vi) of the 2014 Tariff Regulations provides for O&M expenses for one month for coal based generating station as a part of working capital, inclusive of water charges and capital spares. Accordingly, the one-month O&M expenses, inclusive of water charges and capital spares, allowed is as under:

(Rs. in lakh) 2016-17 2017-18 2018-19

1651.39 1757.72 1871.73

(d) Energy Charge Rate (ECR) for Working Capital

77. The Petitioner has claimed Energy Charge Rate (ECR) ex-bus of 201.51 Paise/ kWh for the generating station, based on the landed cost of coal, GCV of coal & GCV and price of Oil for the preceding three months of 2016-19 for the generating station. Order in Petition No. 575/GT/2020 Page 51 of 176

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The GCV and price of Coal and Oil as claimed by the Petitioner have been allowed under paragraph 77 above. Accordingly, the ECR allowed is as under:

78. Energy charges for 2 months as a part of working capital have been calculated on the following basis:

a) ECR of Rs. 2.015/kWh as calculated above (rounded off to three places as per Regulation 30(6) of the 2014 Tariff Regulations).

b) Ex-bus energy (two months), corresponding to the installed capacity of 1200 MW, normative availability of 83% for first year and 85% for last two years, and Auxiliary Energy Consumption of 5.25%.

79. The Energy Charges for two months for the purpose of working capital has been worked out as under:

(Rs. in lakh)

(f) Rate of interest on working capital

81. In terms of clause (3) of Regulation 28 of the 2014 Tariff Regulations, the rate of Order in Petition No. 575/GT/2020 Page 52 of 176

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interest on working capital has been considered as 13.50% (Bank rate 10.00% + 350 bps). Accordingly, Interest on working capital has been computed as follows:

(Rs. in lakh)

Additional O&M Expenses

82. The Petitioner has also claimed additional O&M expenses over and above the normative O&M expenses, allowable to the generating station, in accordance with the provisions of the 2014 Tariff Regulations. These expenditure heads include Mega Insurance, Expenses for CISF Security, Impact of GST, Impact of Pay Revision, Share of Pension & Gratuity (P&G) and Share of Subsidiary activities. To examine and decide as to whether the claims of the Petitioner for additional O&M expenses are over and above the normative O&M expenses allowed to the generating station, in terms of the 2014 Tariff Regulations, we rely on the duly audited financial statements of the Petitioner. In the Financial statements, all O&M expenses are covered in Notes to Financial Statements i.e., Note No. 29 under O&M and General administration charges and Note No. 27 of the Annual accounts under Employee Benefit Expenses. Accordingly, we examine the head-wise claims of the Petitioner as detailed in the subsequent paragraphs.

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(A) Mega Insurance Expenses

83. The Petitioner has claimed total amount of Rs. 536.03 lakh (Rs. 129.75 lakh in 2016-17, Rs. 296.91 lakh in 2017-18 and Rs. 109.37 lakh in 2018-19) during the period 2016-19, towards Mega Insurance expenses, as additional O&M expenses for the generating station. In justification of the same, the Petitioner has submitted that the generating station is in high alert security zone and therefore, the Petitioner has to ensure substantial safeguard measures through Mega Insurance, against damage or destruction of the assets. The Petitioner has also submitted that the Commission in its order dated 13.12.2005 in Petition No. 163/2004 (approval of tariff in respect of Tanda TPS) has allowed expenditure on Mega Insurance.

84. The Objector, DVPCA has submitted that the Commission in its earlier orders had disallowed the expenditure on Mega Insurance and the same is to be recovered as part of the normative O&M expenses. It has stated that the actual O&M expenses, including the mega insurance expenses for the period 2016-19, is lower than the normative O&M expenses specified under the 2014 Tariff Regulations, and thus, the normative O&M expenses are sufficient to cover such expenses. Accordingly, the Objector has stated that the claim of the Petitioner may not be considered separately. In response, the Petitioner has submitted that the said expenditure is necessitated due to 'substantial increase in the risk profile of power plants' on account of various issues (including lenders covenants), natural calamities, law and order etc, and it protects the customers from any tariff shock, in the event of any substantial loss, arising out of damage or destruction of the power plant. Accordingly, it has prayed that the expenditure may be allowed as an additional pass-through, over and above, the said norms. The Petitioner has further submitted that the Commission in its various orders (i.e., order dated 13.12.2005 in Petition No. 163/2004, order dated 9.7.2013 in Order in Petition No. 575/GT/2020 Page 54 of 176

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Petition No. 269/GT/2012, order dated 29.7.2016 in Petition No. 465/GT/2014, order dated 7.8.2013 in Petition No. 275/GT/2012 and order dated 29.7.2016 in Petition No. 470/GT/2014) while determining tariff had allowed expenses towards Mega Insurance.

85. The Respondent KSEBL has submitted that the Petitioner may be directed to meet the above expenses from the normative O&M expenses allowed. The Respondent PSPCL submitted that based on the premise that the site-specific norms in case of thermal generating stations may not serve much purpose, as there is a set of advantages and disadvantages associated with every site, which average out, and the proposed norms are also based on multiple stations with wide geographical spread and therefore, such aspects are already factored in the norms. Accordingly, the Respondent has submitted that the claim may not be permitted at the stage of a truing-up of tariff.

86. The matter has been considered. As regards the submission of the Petitioner that the Commission had allowed expenses towards Mega insurance to Mejia 1, 2 & 3, CTPS 1, 2 & 3 etc, over and above the O&M expenses norms, it is noticed that the grant of Mega insurance was for the period prior to the period 2014-19, and in exercise of its Power to Relax. However, the same was not allowed for other projects of the Petitioner. It is pertinent to mention that the Commission, while specifying the O&M norms for the 2014-19 tariff period, had considered insurance expenses as part of the O&M expense calculations and had factored the same in the said norms. Considering the above, we do not find any reason to allow expenses towards Mega Insurance over and above the O&M expense norms. Accordingly, the expenses claimed towards Mega Insurance is not allowed.

(B) CISF Security Expenses

87. The Petitioner has claimed total amount of Rs.6583.19 lakh (Rs. 2107.30 lakh in Order in Petition No. 575/GT/2020 Page 55 of 176

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2016-17, Rs. 2278.29 lakh in 2017-18 and Rs. 2197.61 lakh in 2018-19) during the period 2016-19, towards CISF security expenses, as additional O&M expenses for the generating station. In justification of the same, the Petitioner has made identical submissions:

(a) The generating station is located in high alert security zone and any untoward situation arising due to the terrorist attack or theft, may cause loss of property and prolonged interruption of generation. The concerned Ministry, from time to time has directed the Petitioner, to take appropriate security arrangements at hydro generating stations, dams etc. and to strengthen the physical security of various generating stations and tighten personal security.

(b) The Ministry of Home Affairs, GOI, had granted approval for creation of additional security personnel posts to be stationed at the generating station. Thus, accordingly, the Petitioner has deployed CISF personnel in its plants, to ensure adequate security at the plants, as well as to comply with the directives, on security measures. Accordingly, the Petitioner has been incurring expenses towards CISF security for deployment of CISF personnel and associated CISF activities.

(c) The Commission had allowed the CISF expenses in case of Mejia Thermal Power Station Units-1 to 3 vide order dated 9.7.2013 in Petition No. 269/GT/2012 and order dated 29.7.2016 in Petition No. 465/GT/2014 and for Chandrapura TPS (Units 1 to 3) vide dated 7.8.2013 in Petition No. 275/GT/2012 and order dated 29.7.2016 In Petition No. 470/GT/2014. Accordingly, the Commission may allow the CISF expenses as incurred by and apportioned to the generating station during the period 2014-19 to be recovered in full, in exercise of the 'Power to Relax' under the 2014 Tariff Regulations, similar to the Commission's treatment in the aforesaid orders

88. The Objector, DVPCA has submitted that the actual O&M expenses, including the security expenses, for the period 2016-19 is lower than the normative O&M expenses specified under the 2014 Tariff Regulations. It has further submitted that the provisions of the 2014 Tariff Regulations, does not allow security expenses over and above the O & M norms. The objector has also stated that CISF security expenses was not claimed by Petitioner in previous tariff order in Petition No. 224/GT/2015 which was disposed of vide order dated 28.9. 2017.

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89. The matter has been considered. As regards the submission of the Petitioner that the Commission had allowed expenses towards CISF security in order dated 29.7.2016 in Petition No. 465/GT/2014 and order dated 29.7.2016 in Petition No. 470/GT/2014, it is observed that the CISF expenses, over and above the O&M expenses norms was allowed only for Mejia Therma Power Station (Units 1-3) and Chandrapur Thermal Power Station (Units-1 to 3) projects of the Petitioner during the 2009-14 tariff period in exercise of the power to relax, but was not allowed for other projects of the Petitioner. Further, the Commission while specifying the O&M expense norms for the period 2016-19, had considered security expenses for the generating station, as part of the O&M expenses and had factored the same in the said norms. Considering the above, we do not find any reason to allow additional O&M expenses towards CISF security.

(C) Impact of Goods and Service Tax (GST)

90. The Petitioner has claimed additional O&M expenses of Rs. 59.46 lakh in 2017- 18 and Rs. 170.04 lakh in 2018-19 as impact towards Goods and Service Tax (GST), including the apportioned impact with respect to DVC HQ, during the period 2016-19. The Objector, DVPCA has submitted that the Petitioner's claim is extraneous to the provisions of 2014 Tariff Regulations and various orders of the Commission. In response, the Petitioner has clarified that the Commission in order dated 14.3.2018 in Petition No. 13/SM/2017 and order dated 17.12.2018 in Petition No. 01/SM/2018 had considered the implementation of GST as "change in law".

91. The submissions have been considered. It is observed that the Commission while specifying the O&M expense norms for the period 2014-19 had considered taxes to form part of the O&M expense calculations and accordingly, had factored the Order in Petition No. 575/GT/2020 Page 57 of 176

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same in the said norms. This is evident from paragraph 49.6 of the SOR (Statement of Objects and Reasons) issued with the 2014 Tariff Regulations, which is extracted hereunder:

"49.6 With regards to suggestion received on other taxes to be allowed, the Commission while approving the norms of O&M expenses has considered the taxes as part of O&M expenses while working out the norms and therefore the same has already been factored in..."

92. Further, the escalation rates considered in the O&M expense norms is only after accounting for the variations during the past five years of the period 2016-19, which in our view, takes care of any variation in taxes also. It is pertinent to mention that in case of reduction of taxes or duties, no reimbursement is ordered. In this background, we find no reason to grant additional O&M expenses towards impact of GST.

(D) Share of Subsidiary Activities

93. The Petitioner has claimed total amount of Rs.1810.39 lakh (Rs. 685.27 lakh in 2016-17, Rs. 659.40 lakh in 2017-18 and Rs. 465.72 lakh in 2018-19) during the period 2016-19, towards 'Share of Subsidiary activities' as additional O&M expenses. In justification of the same, the Petitioner has submitted that it has been undertaking various subsidiary activities in terms of Section 12 of the DVC Act, 1948. It has also submitted that in terms of the judgment of APTEL dated 23.11.2007 in Appeal No. 273 of 2006 & batch, the expenses with regard to Subsidiary activities are to be allowed as a pass-through element in tariff. The Petitioner has stated that above judgment of APTEL has been affirmed by the Hon'ble Supreme Court vide its judgment dated 23.7.2018 in Civil Appeal Nos. 971-973 of 2008 along with Civil Appeal Nos. 4289 of 2008 (Bhaskar Shrachi Alloys Ltd. Vs. DVC) referred to in (2018) 8 SCC 281. The Petitioner has further submitted that the expenses toward share of subsidiary activities allowed in case of this generating station vide order dated 9.7.2013 in Petition No. 269/GT/2012 and order dated 29.7.2016 in Petition No. 465/GT/2014 and for Order in Petition No. 575/GT/2020 Page 58 of 176

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Chandrapura TPS, Units-1 to 3 vide order dated 7.8.2013 in Petition No. 275/GT/2012 and order dated 29.7.2016 in Petition No. 470/GT/2014, in relaxation of the provisions of the Tariff Regulations. Accordingly, the Petitioner has prayed that the Commission may allow the expenses toward share of subsidiary activities, as incurred and apportioned to the generating station during the period 2016-19 for recovery in full, in exercise of the power to relax' under the 2014 Tariff Regulations.

94. The Objector, DVPCA has submitted that the Petitioner has also claimed expenses towards subsidiary activities including additional capital, O&M, Return on Equity, Interest on loan and Depreciation. It has submitted that the contribution to subsidiary fund is not allowable as the Return on Equity, Interest on loan and Depreciation, on common assets, have been claimed separately. The Respondent has further submitted that the Commission had dealt with the issue of expenditure of subsidiary activities, while framing the 2014 Tariff Regulations and had specifically disallowed such expenses to be charged as additional O&M expenses, vide order dated 28.09.2017 in Petition No. 224/GT/2015. It has stated that the actual O&M expenses including the share of subsidiary expenses are lower than the normative O&M expenses and thus, there is no requirement of allowing the share of subsidiary expenses additionally. In response, the Petitioner has clarified as under:

(a) DVC has been undertaking multifarious functions in the Damodar Valley area in terms of Section 12 of the DVC Act, 1948 with the obligation to undertake development of Damodar Valley, which falls in the provinces of West Bengal and Jharkhand. The activities of DVC are not restricted to generation and sale/supply of electricity. The functions of the DVC include promotion and operation of schemes for irrigation, water supply and drainage, flood control and improvement of flow conditions in the Hooghly River, navigation in the Damodar River and its tributaries and channels, afforestation and control of soil erosion and promotion of public health and agricultural, industrial, economic and general well-being in the Damodar Valley under its areas of operation. Thus, DVC is engaged in number of activities which are not commercial in nature and where no significant revenue accrues to DVC.

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(b) DVC cannot generate required revenue from the users of service in regard to schemes such as drainage, flood control, improvement in the flow conditions, navigation, afforestation and control of soil erosion or the promotion of public health and general well-being in the Damodar Valley. The main revenue earning activity performed by DVC is generation and sale of power. DVC is undertaking various activities in a comprehensive manner for the betterment of Damodar Valley and using the revenues earned from various sources including generation and sale of electricity for the above varied purposes for which DVC has been established. In the facts and circumstances mentioned herein above, DVC occupies a special position.

(c) The activities of DVC are akin to the activities undertaken by the Governments, Central, State or Municipalities. Therefore, it is critical that the expenses incurred by DVC in undertaking the various subsidiary activities be recovered in suitable manner so as to not create financial burden on DVC.

(d) Section 32 of the DVC Act 1948 allows DVC to incur expenditure on activities other than power, irrigation and flood control. The APTEL's judgment dated 23.11.2007 in Appeal No. 271, 272, 273 and 275 of 2006, had allowed the recovery of these expenses through tariff. The said judgment was upheld by the Hon'ble Supreme Court vide order dated 23.7.2018 in Bhaskar Shrachi Alloys Ltd. vs. Damodar Valley Corporation (2018) 8 SCC 281, whereupon, the Hon'ble Supreme Court has reiterated the fact that the other activities undertaken by DVC are statutory in nature and provided for recovery of related expenses.

95. The submissions have been considered. The expenses of subsidiary activities include multipurpose dams and other heads. In this regard, Regulation 53 of the 2014 Tariff Regulations provides as under:

"53. Special Provisions relating to Damodar Valley Corporation:

(1) Subject to clause (2), this regulation shall apply to determination of tariff of the projects owned by Damodar Valley Corporation (DVC).

(2) The following special provisions shall apply for determination of tariff of the projects owned by DVC:

(i) Capital Cost: The expenditure allocated to the object 'power', in terms of sections 32 and 33 of the Damodar Valley Corporation Act, 1948, to the extent of its apportionment to generation and inter-state transmission, shall form the basis of capital cost for the purpose of determination of tariff:

Provided that the capital expenditure incurred on head office, regional offices, administrative and technical centers of DVC, after due prudence check, shall also form part of the capital cost.

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xxxx

(iv) Funds under section 40 of the Damodar Valley Corporation Act, 1948: The Fund(s) established in terms of section 40 of the Damodar Valley Corporation Act, 1948 shall be considered as items of expenditure to be recovered through tariff.

(3) The provisions in clause (2) of this regulation shall be subject to the decision of the Hon'ble Supreme Court in Civil Appeal No 4289 of 2008 and other related appeals pending in the Hon'ble Court and shall stand modified to the extent they are inconsistent with the decision.

96. It is noticed that the Commission in its various tariff orders in respect of the other generating stations of the Petitioner for the period 2014-19, had observed that as per SOR to the 2014 Tariff Regulations, the site specific norms in case of thermal generating stations may not serve much purpose as there is a set of advantages and disadvantages associated with every site, which average out, and the proposed norms are also based on multiple stations with wide geographical spread and therefore, such aspects are already factored in the norms and accordingly, the additional O&M expenses claimed by the Petitioner, including share of subsidiary activities was not allowed. In this regard the relevant sections of DVC Act 1948 are as follows:

"32. Expenditure on objects other than irrigation, power and flood control: The Corporation shall have power to spend such sums as it thinks fit on objects authorised under this Act other than irrigation, power and flood control and such sums shall be treated as common expenditure payable out of the Fund of the Corporation before allocation under Section

33.

33. Allocation of expenditure chargeable to project on main objects: The total capital expenditure chargeable to a project shall be allocated between the three main objects, namely, irrigation, power and flood control as follows, namely:

1) expenditure solely attributable to any of these objects, including a proportionate share of overhead and general charges, shall be charged to that object, and

2) expenditure common to two or more of the said objects, including a proportionate share of overhead and general charges shall be allocated to each of such objects in proportion to the expenditure which, according to the estimate of the Corporation, would have been incurred in constructing a separate structure solely for that object, less any amount determined under clause (1) in respect of that object.

37. Disposal of profits and deficits. —

(1) Subject to the provisions of sub-section (2) of section 40, the net profit, if any, attributable to each of the three main objects, namely, irrigation, power and flood control, shall be credited to the participating Governments in proportion to their respective shares in the total capital cost attributed to that object.

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(2) The net deficit, if any, in respect of any of the objects shall be made good by the Governments concerned in the proportion specified in sub-section (1):

Provided that the net deficit in respect of flood control shall be made good entirely by the Government of West Bengal and the Central Government shall have no share in such deficit."

97. It is noticed that APTEL vide its judgement dated 23.11.2007 had observed that the expenditure incurred by the Petitioner, on objects other than irrigation, power and flood control, are non-commercial in nature and accrue little or no revenue and is not likely to sub serve the objectives of Section 41 and 51 of the Act and therefore, can be allocated to these three heads as per section 32 and 33 of DVC Act, 1948 and the expenditure so allocated to power object, should be allowed to be recovered through the electricity tariff. Subsequently, the Hon'ble Supreme Court vide its judgment dated 23.7.2018 in Civil Appeal No. 4289 of 2008 and batch thereof, upheld the decision of APTEL as under:

"55. In so far as the issue of allowance of cost relating to 'other activities' of the Corporation to be recovered through tariff on electricity is concerned, we have taken note of the objection(s) raised in this regard which in sum and substance is that Sections 32 and 33 of the Act of 1948 are in direct conflict with Sections 41 and 51 of the 2003 Act and, therefore, recovery of cost incurred in "other works" undertaken by the Corporation through power tariff is wholly untenable. Apart from reiterating the basis on which we have thought it proper to affirm the findings of the learned Appellate Tribunal on the purport and scope of the fourth proviso to Section 14 of the 2003 Act and the continued operation of the provisions of the Act of 1948 which are not inconsistent with the provisions of the 2003 Act, we have also taken note of the specific provisions contained in Sections 41 and 51 of the 2003 Act which, inter alia, require maintenance of separate accounts of the other business undertaken by transmission/distribution licensees so as to ensure that the returns from the transmission/distribution business of electricity do not subsidize any other such business. Not only Sections 41 and 51 of the 2003 Act contemplate prior approval of the Appropriate Commission before a licensee can engage in any other business other than that of a licensee under the 2003 Act, what is contemplated by the aforesaid provisions of the 2003 Act is some return or earning of revenue from such business. In the instant case, the "other activities" of the Corporation are not optional as contemplated under Sections 41/51 of the 2003 Act but are mandatorily cast by the statute i.e. Act of 1948 which, being in the nature of socially beneficial measures, per se, do not entail earning of any revenue so as to require maintenance of separate accounts. The allowance of recovery of cost incurred in connection with "other activities" of the Corporation from the common fund generated by tariff chargeable from the consumers/customers of electricity as contemplated by the provisions of the Act of 1948, therefore, do not collide or is, in any manner, inconsistent.

98. In view of the above, the expenses towards the sharing for subsidiary activity is Order in Petition No. 575/GT/2020 Page 62 of 176

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allowed as claimed by the Petitioner during the period 2016-19.

(E) Impact of Pay Revision and P&G contribution

99. The Petitioner has claimed expenses pertaining to impact of Pay Revision on account of 7th Central Pay Commission and Pension & Gratuity (P&G), over and above, the normative O&M expenses allowable to the generating station. It is noticed that the Petitioner, in its tariff petitions for truing-up of tariff for the period 2009-14 had made additional claims towards P&G liability based on actuarial valuation. This prayer was, however, rejected by the Commission by its various orders, on the ground that the P&G liability formed part of the O&M expense norms specified under the 2009 Tariff Regulations. Aggrieved by this decision, the Petitioner has filed Appeal Nos.268- 275 of 2016 before APTEL and the same is pending. The Petitioner has made similar prayers in tariff petitions for the period 2014-19, which was also rejected by the Commission on the ground that the Petitioner's contribution to P&G fund is required to be met through the normative O&M expenses, allowed to the generating stations. However, the Commission in order dated 20.9.2016 in Petition No.353/GT/2014 (approval of tariff for Panchet Hydel Power Station, Units-I &II for the 014-19 tariff period) granted liberty to the Petitioner to claim the said relief through a separate application along with all relevant details, so that a holistic view can be taken in the matter, in accordance with law. Accordingly, the Petitioner had filed Petition No.197/MP/2016, wherein P&G contribution of Rs.3228.86 crore and impact of pay revision from January, 2016 as Rs.420.27 crore for 2014-19 was claimed over and above the normative O&M expenses specified under Regulation 29 of the 2014 Tariff Regulations. The Commission, vide its order dated 4.9.2019, while holding that the said petition was maintainable, disposed of the same as under:

100. "25……The employee expenses, in general, form a considerable part of O&M expenses and includes all types of employee related expenses like Salary, Order in Petition No. 575/GT/2020 Page 63 of 176

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contribution to CPF, gratuity, pension, etc., However, the submission of the Petitioner that no part of P&G contribution related to power business were factored in the O&M expenses during the base years cannot be appreciated in the absence of any supporting details/data being furnished by the Petitioner. As stated, the normative O&M expenses were specified under Regulation 29 of the 2014 Tariff Regulations after giving due consideration of the requirements of various generating companies. The Petitioner DVC has argued that in so far as the liability of pension for its employees is concerned, it is unique and different from those prevalent in other central generating stations regulated by this Commission since the revision of pension from time to time, is based on the decision of the Central Govt. However, the information/details available on record do not support the aforesaid submission of the Petitioner that it incurs extra expenditure on terminal benefits to the employees over and above the normative O&M expenses under the 2014 Tariff Regulations. In the above background and in the absence of any supporting details/data, the prayer of the Petitioner cannot be granted in this order. However, the Petitioner is at liberty to claim the said relief with all relevant information/ documents including the (a) actuarial valuation; (b)actual data duly audited and certified by the auditor and (c) annual accounts of the pension fund, at the time of truing up of tariff in terms of Regulation 8 of the2014 Tariff Regulations.

26.xxxxx

27. We notice that subsequently, the Petitioner has implemented the recommendations of the 7th Pay Commission for its employees with effect from 1.1.2016. In view of this, the impact of pay revision, after implementation of the 7th Pay Commission, is required to be examined on actual basis, on prudence check of the information/ details to be submitted by the Petitioner. Accordingly, we direct the Petitioner to furnish the actual impact of pay revision based on the recommendations of the 7th CPC, effective from 1.1.2016, along with details of HRA and transport allowance from July, 2017. The aforesaid details/information shall be furnished by the Petitioner at the time of truing up of tariff and the same will be considered in accordance with law."

101. Based on the above, the Petitioner, has submitted its claim for P&G contribution and for impact of pay revision, as additional O&M expenses, for the period 2016-19, which are examined below:

(i) Impact of Pay revision

102. The Petitioner has claimed total amount of Rs. 4584.26 lakh (Rs. 1457.55 lakh in 2016-17, Rs. 1834.53 lakh in 2017-18 and Rs. 1292.18 lakh in 2018-19) towards impact on account of Pay revision during the period 2016-19, due to recommendations of 7^thPay Commission. The Petitioner has also submitted that the Commission, while specifying the 2014 Tariff Regulations, has in the SOR observed that the increase in employee expenses on account of pay revision shall be Order in Petition No. 575/GT/2020 Page 64 of 176

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considered appropriately on case-to-case basis, balancing the interest of generating stations and consumers.

103. In the present case, the Commission vide ROP of the hearing dated 25.5.2021, directed the Petitioner to furnish the following additional information:

"True-up for period 2014-19

"i. Break-up of the actual O&M expenses of the generating station under various subheads (as per Annexure-A enclosed) after including the pay revision impact (employees, CISF and Corporate Centre) and wage revision impact (minimum wages), if applicable. (in both MS Excel and PDF format).

ii. Break-up of the actual O&M expenses of Corporate Centre/other offices including pay revision impact (as per Annexure-B enclosed) for the generating station along with the allocation of the total O&M expenses to the various generating stations under construction, operational stations and any other offices/business activity, along with basis of allocating such expenditure (in both MS Excel and PDF format).

iii. Breakup of the pay revision impact claimed in respect of employees of the Petitioner Company, Security personnel stationed at the generating station and Corporate Centre/other offices employee cost allocated to the generating station. (as per Annexure-C enclosed in both MS Excel and PDF format)."

104. In compliance to the aforesaid directions, the Petitioner vide affidavit dated 1.7.2021, has furnished the information and submitted that additional O&M expenses including P&G liability claimed as elements of Part B of the total annal fixed charges and the same were not considered, while preparing the data as per Annexure-A, i.e., in pay revision. Accordingly, the total O&M expenses claimed by the Petitioner, in respect of the generating station, as per Annexure-A, for the 2016-19 tariff period is as follows:

(Rs. in lakh) 2016-17 2017-18 2018-19

9096.43 13036.18 12488.43

105. The Petitioner has further submitted that in line with the methodology adopted by the Commission, while approving the common office expenditure for the period 1.4.2014 to 31.3.2019 in order dated 27.9.2016 in Petition No.350/GT/2014, the actual O&M expenses of Corporate Centre/ other offices has already been apportioned Order in Petition No. 575/GT/2020 Page 65 of 176

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between O&M expenses of DVC's transmission business & generating stations and is further apportioned to the O&M expenses of various generating stations in operation. The O&M expenses of Corporate Centre / other offices are also apportioned in above manner and considered in Annexure-A. The Petitioner has also stated that it has claimed total Security expenses including the impact of pay revision of the security personnel, however, as per direction of the Commission vide ROP for hearing dated 25.5.2021, the breakup of the impact of pay revision claimed in respect of the Security personnel stationed at the generating station and the apportioned cost of security expenses at Corporate Centre / other offices allocated to the generating station, as per Annexure-C, has been submitted. The Petitioner has further submitted that due to frequent transfer of employees from one generation station to other generating station/ T&D wing, on same post or to the higher post, due to promotion, during the period from 1.1.2016 to 31.3.2019 and due to the delayed implementation of pay revision in DVC, it is difficult to find out the station-wise impact of pay revision. Accordingly, the impact of pay revision of DVC employees has been determined in totality towards Power business and thereafter apportioned to transmission and generation based on the capital cost and further apportioned to various generators, based on their installed capacity, as per methodology adopted by the Commission, while approving the common office expenditure vide order dated 20.9.2016 in Petition No. 352/GT/2014.

106. DVPCA has submitted that the impact of pay revision claimed by the Petitioner may not be allowed, as the same is to be considered to be within the normative O&M expenses and also actual O&M expenses, including pay revision expenses, are well within the limit of normative O&M expenses. DVPCA has compared the overall claimed O&M expenses by the Petitioner, in its various generation tariff petitions with the overall actual O&M expenses and submitted that the actual O&M expenses are Order in Petition No. 575/GT/2020 Page 66 of 176

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lower than the normative O&M expenses and thus, there is no requirement of allowing pay revision expenses additionally.

107. In response, the Petitioner has stated that the recovery of impact of pay revision is to be considered and allowed in line with tariff principles enshrined under Section 61(d) of the Act. It has also mentioned that the norms for O&M expenses under the 2014 Tariff Regulations, were determined on the basis of the actual O&M expenses for the years 2008-09 to 2012-13 and the 2014 Tariff Regulations, were notified by the Commission on 21.2.2014 i.e., prior to the implementation of the pay revision (7th CPC). Accordingly, it has submitted that while arriving at the O&M norms for the period 2014-19, the Commission had no occasion to consider the impact of pay revision w.e.f. 1.1.2016. The Petitioner has further submitted that the Commission while specifying the 2014 Tariff Regulations, was of the view that the increase in employee expenses on account of pay revision, in case of central generating stations and private generating stations are to be considered appropriately and therefore, the Commission decided that the said costs shall be examined on case-to-case basis so that the interest of generating stations and consumers remains balanced. Accordingly, the Commission vide its order dated 4.9.2019 in Petition No. 197/MP/2016 had directed the Petitioner to furnish the actual impact of pay revision at the time of truing up of tariff.

(ii) Share of P&G Contribution

108. The Petitioner has claimed share of P&G Contribution for the 2016-19 tariff period as under:

(Rs. in lakh) 2016-17 2017-18 2018-19

5024.37 11374.93 2149.25

109. The Petitioner, in terms of the directions contained in order dated 4.9.2019 in Order in Petition No. 575/GT/2020 Page 67 of 176

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Petition No.197/MP/2016, has furnished the following data, duly certified by auditor:

a. actuarial valuation of pension and gratuity;

b. actual data as per books of accounts on terminal benefits; and c. annual accounts of pension funds for the period 2014-19.

110. The Petitioner has further submitted that as per recommendations of the 7th Pay Commission, the Cabinet on 12.9.2017, had cleared the Payment of Gratuity (Amendment Bill 2017), wherein, the upper ceiling of gratuity has been enhanced from the present value of Rs.10 lakh to Rs.20 lakh, effective from 1.1.2016. It has submitted, that since the impact due to enhancement of upper ceiling of gratuity has not been considered / factored by the Commission, while fixing the normative O&M expenses for the period 2014-19, the Commission may consider the impact while considering the P&G contribution for the period 2016-19.

111. DVPCA has submitted that the Petitioner has claimed normative O&M expenses, in accordance with the 2014 Tariff Regulations and the same is being allowed, the additional expenses claimed by the Petitioner, over and above the normative O&M expenses, under the heads, P&G, Pay revision, Ash Evacuation expenses, CISF Security expenses, Expenditure for subsidiary activities, Mega Insurance expenses, impact of GST on O&M may be disallowed. In response, the Petitioner in its response has clarified as follows:

a. DVC as a statutory body is required to maintain appropriate scheme for meeting the Terminal Benefits of the employees i.e., Pension (wherever the appointment of employees is on pension basis), Gratuity, Contributory Provident Fund i.e., CPF (wherever the employment of the employees is on Provident Fund contribution basis instead of pension). The CPF scheme being an alternative to the pension scheme, is for those who have not opted or otherwise not eligible for pension scheme and DVC makes contribution to the CPF. In addition to the above, there is also a General Provident Fund (GPF), wherein, fund is contributed only by the employees but not by DVC. Thus, Provident Fund schemes are of two types, namely, the CPF and the

GPF.

b. The article 16 and 17 of Employees Provident Funds and Miscellaneous Provisions Act, 1952 provides for administration of Provident Fund Scheme. Order in Petition No. 575/GT/2020 Page 68 of 176

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Accordingly, DVC is maintaining Provident Fund, both CPF and GPF, in respect of each of the employees with individual account of the employees duly reflecting (a) the contribution apportioned to such employees or the contribution made by DVC, wherever applicable, (b) apportionment to such employees, apportionment of the interest earned on the money invested from the Provident Fund Scheme in approved securities and (c) contribution made by the employees to the GPF. Such contributions are maintained in a separate account of each of the employees as per the applicable scheme. c. The Pension & Gratuity Fund accounts are maintained separately by the Trust. The contributions to the Pension and Gratuity Trust are made based on actuarial valuation undertaken from time to time by actuaries appointed for the purpose. The actuarial valuation is in regard to all the employees and workmen of DVC.

d. No part of the amount related to Pension or Gratuity Fund contribution is used by DVC for its business activities in any of the years commencing from 01.4.2006 i.e., for the period in which the tariff is being determined by this Hon'ble Commission, upon coming into force of the Electricity Act, 2003. The contribution to the Pension & Gratuity Fund made by DVC is considered in the audited accounts of the DVC for the respective financial years.

e. In regard to the Provident Fund, the amount contributed is maintained by DVC but is dedicated to the benefit of DVC's employees and workmen. As in the case of Pension & Gratuity Fund, no part of the Provident Fund amount is to the account of DVC or to be utilised for the business activities of DVC. In line with the Employees Provident Funds and Miscellaneous Act, 1952, DVC is investing CPF and GPF amount in approved securities and the interest thereof is apportioned to employees. This has been reflected in Schedule 27 with two corresponding entries, namely, interest payable and interest recoverable on investment. DVC is required to duly account for all such interest.

f. The amount contributed by DVC to the Pension & Gratuity Fund is invested by the Trust in the name of the trust and not in the name of DVC. The interest accrued on this investment is considered as the income of the Trust. No part of the interest income is realized by DVC or appropriated by DVC in any manner and nowhere it is reflected in the audited accounts of

DVC.

g. In view of the above, there is a difference between the Pension & Gratuity Contribution of DVC as compared to the Contributory Provident Fund.

112. The Petitioner has also submitted that the O&M expenses inclusive of employees cost and Contributory Provident Fund will not cover the revenue requirements of the DVC on account of the P&G contribution on following grounds:

a. The Contributory Provident Fund is in respect of the actual amount of Order in Petition No. 575/GT/2020 Page 69 of 176

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contribution during the relevant year and does not involve adjustments for that year in future years, however, the Pension and Gratuity Contribution is to be constantly adjusted for past period of services also and is dependent on actuary valuation to be undertaken from time to time. The period of past services rendered by the employees of DVC including the deficit amount of contribution in the past in order to meet the pension payment to the employees upon their retirement need to be necessarily considered. Similarly, in case the contribution already made is in excess of the requirement, suitable adjustment is made through actuary valuation. Thus, the contribution to P&G cannot be restricted to current year. b. The amount of Pension & Gratuity contribution in the case of DVC is significantly more in the recent past i.e., from 1.1.2006 onwards, on account of the following factors:

i. Earlier, as there was no fund maintained for receiving the Pension and Gratuity Contribution, the same was being discharged by DVC on revenue basis pay as you go as in the case of any other Government Department. However, as per the mandate of the Comptroller and Auditor General and in accordance with the directions given by the Central Government, now, DVC has to maintain the Pension and Gratuity Fund. Accordingly, the contributions are being made not only for the present year working of the employees but also for all the past years of services including for persons who have retired from DVC in the past;

ii. There has been a substantial increase in Pension and Gratuity payment to the employees on account of wage revision pursuant to the decision taken by the Central Government, firstly, in the year 2006 and secondly in the year 2016. These higher contributions to be made are not confined to the current year but also relates to the payment for the past services including the services rendered by the retired employees;

iii. The liability under Contributory Provident Fund ceases with the year in which it is contributed. There is no actuary valuation or adjustment for upward revision on account of any wage revision etc. however, the pension payment is payable by DVC after the retirement of the employees on a continuous basis along with the revision to the pension from time to time as per the decision of the Central Government applicable to all retired employees; further the pension payment liability continues even after the death of the employee. The family pension needs to be given to the widows and other eligible members under the pension scheme.

c. Thus, the matter relating to Pension & Gratuity Contribution and other aspects of Terminal Benefit liabilities to the employees including the increase in such Pension and Gratuity contribution on account of actuarial valuation undertaken from time to time cannot be inter-mixed with the normative O&M expenditure provided for in the Tariff Regulations. d. The normative O&M expenses determined by the Commission is based on the normalized actual quantum of expenditure incurred by the Utilities in the Order in Petition No. 575/GT/2020 Page 70 of 176

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past period and escalation of thereof on account of inflation and other factors. Such normative expenditure would consider matters such as contribution to the Provident Fund etc. where the amount of contribution is duly factored as a percentage of the salaries and wages paid to the employees and is adopted by Central Power Sector Utilities who do not maintain a Pension scheme such as NTPC, NHPC etc, however, it cannot be ipso facto adopted for DVC, wherein, some of its employees are under Pension Scheme, as admissible to the Government departments. e. The contribution which DVC has to make towards the Pension and Gratuity Fund from time to time based on the actuarial valuation including for increase in the Pension and Gratuity Contribution related to the past period on account of pay revision, is not factored into in the determination of the employees cost as part of the normative O&M cost decided by this Hon'ble Commission from time to time. These are also not part of any specific tariff elements given in the Regulation 21 and 14 of the 2009 and 2014 Tariff Regulations, respectively.

f. APTEL and the Hon'ble Supreme Court in the orders dated 23.11.2007 and 23.7.2018 respectively have directed in favour of full recovery of the P&G contribution. Further, the Commission vide order dated 04.09.2019 in Petition no. 197/MP/2016 granted liberty to DVC to claim the Pension and Gratuity contribution along with relevant details at the time of truing up. g. The principle for apportionment of the contribution towards Pension & Gratuity fund to the different generating stations and T&D system of DVC, based on capital cost and installed capacity has been already approved by the Commission for the 2006- 09 period and the same principle has been followed by DVC in its true-up petitions for the period 2014-19. h. As regards linking the recovery of Pension & Gratuity contribution to Plant Availability Factor (PAF), the APTEL in its judgment dated 23.11.2007 had directed for recovery of the entire amount of the Pension & Gratuity contribution from the consumers through tariff. The said judgment of APTEL dated 23.11.2007 was upheld by the Hon'ble Supreme Court vide its order dated 23.7.2018. The State Commissions of West Bengal and Jharkhand in their different orders, had also allowed the full recovery of the Pension & Gratuity contribution of the Petitioner.

113. Accordingly, the Petitioner has submitted that the contentions of the Objector may be rejected, and the amount claimed towards contribution to Pension & Gratuity for the period 2016-19 may be allowed to be recovered in full, on sharing basis.

Analysis and Decision

114. The submissions have been considered. As regards pay revision, it is noticed that the Petitioner has prayed and claimed the impact of pay revision on account of Order in Petition No. 575/GT/2020 Page 71 of 176

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7th pay commission. However, in respect of P&G, it is noted that the Petitioner has primarily not pleaded for impact of pay revision on P&G but have claimed the actual P&G. It is observed that the normative O&M expenses includes a gratuity and CPF of public sector undertakings. Accordingly, the O&M norms under the regulations account for gratuity and a part of pension pertaining to serving employees of Petitioner. However, the Petitioner has the liability of Pension for retired employees as well. Thus, the actual impact of pension needs to be assessed to examine the additional O&M claim by the Petitioner. It is observed that the Petitioner is maintaining the audited accounts of its entire power vertical, which consists of 15 generating stations, transmission system and distribution system, on consolidated basis. In this regard, the Petitioner has submitted that due to frequent transfer of employees from one generation station to other generating station / T&D wing, on same post, or to the higher post, due to promotion during the period from 1.1.2016 to 31.3.2019, delayed implementation of pay revision etc., the Petitioner has expressed its difficulty to provide the station-wise impact of pay revision separately but determined it in totality for Power business and thereafter, apportioned as per methodology adopted by the Commission, while approving the common office expenditure vide order dated 20.9.2016 in Petition No.352/GT/2014.

115. In view of the above, to assess the impact of pay revision on O&M expenses and P&G contribution, it was decided to adopt a holistic approach i.e., to compare the actual normalised O&M expenses of power vertical of DVC as per audited accounts, with the normative O&M expenses specified under the 2014 Tariff Regulations. In case the normative O&M expenses are in excess of the actual normalised O&M expenses associated with power vertical, the additional expenditure claimed by the Petitioner shall not be allowed and in case of any, under-recovery, if any, to the extent Order in Petition No. 575/GT/2020 Page 72 of 176

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of impact of pay revision and expenses on account of P&G contribution shall be allowed, in relaxation of O&M norms under the 2014 Tariff Regulations.

116. In order to ascertain the justification for additional O&M expenses, over and above the normative O&M expenses allowed, a comparative analysis of the actual O&M expenses, was undertaken, including the additional normalised claims and the normative O&M expenses allowable under the various tariff petitions for truing up filed by the Petitioner. It is observed that during the period 2014-19, the total normative O&M expenses allowed as per the Tariff Regulations for the various tariff petition (both Generation and Transmission) is Rs.1044745.04 lakh. Further, as per audited financial statements water charges for Rs.38226.00 lakh (in terms of Regulation 29(2) of the 2014 Tariff Regulations) and Ash Evacuation expenses of Rs.61182.00 lakh (as change in law) has been incurred by the Petitioner, during the period 2014-19. However in line with the MoEF&CC notification dated 25.1.2016, the ash transportation charges have been allowed from 26.1.2016 to 31.3.2019 which works out to Rs.39334.64 lakh Since the Petitioner maintains separate accounts for each generating station and the Petitioner is granted liberty to claim the ash evacuation expenses separately, the total amount allowable to the Petitioner against O&M, Water charges and allowable Ash Evacuation charges is Rs.1122305.68 lakh (Rs.1044745.04 lakh + Rs.38226.00 lakh+Rs.39334.64 lakh) whereas, the actual O&M expenses, as per DVC Financial statements for the 2014-19 period is Rs.1219786.00 lakh (including subsidiary activities), which indicates that the actual O&M expenses exceeds the normative O&M expenses, by Rs.97480.32 lakh. However, we note that the actual O&M expenses of Rs.1219786 lakh also includes Provisions for Loss, Doubtful claims & Advances, Doubtful debts, and Shortage/Obsolescence in stores etc. amounting to Rs.77573 lakh, and Rebates & Order in Petition No. 575/GT/2020 Page 73 of 176

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Discount allowed to consumers for Rs.49937 lakh, out of which rebate of Rs.40820 lakh pertain to firm consumers (breakup submitted by the Petitioner vide ROP dated 22.4.2022). When the actual O&M expenses are normalised, by excluding the provisions amounting to Rs.77573 lakh (being a non-cash expenditure and Rebates & Discounts for Rs.40820 lakh pertaining to firm consumers, as stated above, the actual O&M expenses work out to Rs.1101392.70 lakh (i.e., Rs.1219786 - Rs.77573 - Rs.40820.30 lakh). The computation of the normalised actual O&M expenses is as under:

(Rs. in lakh) 2014-15 2015-16 2016-17 2017-18 2018-19 TOTAL A. ACTUAL O&M AS PER DVC AUDITED FINANCIAL STATEMENTS

Note No.27- 81960.00 96738.00 126691.00 159010.00 109249.00 573648.00 Employee Benefit Expenses-Power Segment

93447.00 117668.00 132286.00 169568.00 133169.00 646138.00

Note No.29-O&M and General Administration Charges-Power Segment

TOTAL (A) 175407.00 214406.00 258977.00 328578.00 242418.00 1219786.00

B. PROVISIONS-NOTE NO 29-POWER SEGMENT

Provision for Loss on 446.00 191.00 6544.00 4293.00 0.00 11474.00 Fixed Assets

Provision for 4586.00 1308.00 0.00 0.00 0.00 5894.00 Doubtful Claims

and Advances

Provision for 205.00 733.00 9126.00 41657.00 8299.00 60020.00 Doubtful Debts

Provision for 12.00 8.00 13.00 128.00 24.00 185.00 Shortage

/Obsolescence in

Stores

TOTAL (B) 5249.00 2240.00 15683.00 46078.00 8323.00 77573.00

C. REBATE & DISCOUNT ALLOWED TO FIRM CUSTOMERS (as per Petitioner submission)

Rebate & Discount 3821.32 8983.93 8766.85 8393.73 10854.47 40820.30 Allowed

TOTAL (C) 3821.32 8983.93 8766.85 8393.73 10854.47 40820.30

NORMALISED 166336.68 203182.07 234527.15 274106.27 223240.53 1101392.70

ACTUAL O&M AS

PER AUDITED

STATEMENT OF

ACCOUNTS (A-B- C):-

117. A comparison of the normative O&M expenses (including allowable water charges) with the normalized actual O&M expenses in respect of the various truing- up generation and transmission tariff petitions filed by the Petitioner for the period Order in Petition No. 575/GT/2020 Page 74 of 176

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2014-19 and allowed for the period 2014-19 (in this petition) is as under:

(Rs. in lakh)

143. It is evident from the above, that the total normative O&M expenses allowable in respect of all the generation and transmission tariff petitions of the Petitioner for the period 2014-19 is Rs.1044745.04 lakh, in terms of the 2014 Tariff Regulations. Also, considering the actual water charges of Rs.38226.00 lakh and Ash Evacuation Charges w.e.f. 26.1.2016 of Rs. 39334.64 lakh, the total works out to Rs.1122305.68 lakh, which is higher than the normalised actual O&M expenses of Rs.1101392.70 lakh, as per audited financial statements pertaining to Power segment. Further, as per Order in Petition No. 575/GT/2020 Page 75 of 176

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Regulation 29(2) of the 2014 Tariff Regulations, capital spares are allowable separately. Since the normative O&M expenses including the actual Water charges and Ash Evacuation charges allowed separately, are in excess of the actual O&M expenses in the case of the Petitioner, we are not inclined to allow the impact of pay revision and the contribution towards P&G, Mega Insurance, CISF expenditure etc., during the period 2014-19, as sought by the Petitioner, in this petition.

Other Additional Claims

(A) Interest & Contribution on Sinking Fund (As per Section 40, Part IV of DVC Act)

118. The Petitioner has claimed additional expenditure towards Interest & Contribution on Sinking fund as follows:

(Rs. in lakh)

120. In justification of the claim, the Petitioner has submitted that APTEL vide its judgment dated 23.11.2007 in Appeal No. 273 of 2006 & batch, had allowed the recovery of sinking funds and this judgment has also been affirmed by the Hon'ble Supreme Court vide its by judgement dated 23.7.2018 in Civil Appeal Nos. 971-973 of Order in Petition No. 575/GT/2020 Page 76 of 176

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2008 & batch matters.

121. The Objector, DVPCA has also submitted that under the 2014 Tariff Regulations, the Petitioner is allowed all expenses related to energy charges and fixed charges and also allows the funding of approved capital cost and interest/ returns on the debt/ equity components `on actual / normative basis, as the case may be. It has further submitted that the loan repayment is provided through higher depreciation for initial 12 years and interest on working capital is allowed on normative basis. The Objector has stated that the creation of funds, without any specific purpose, cannot be allowed to be recovered as an expenditure in tariff, even if it is mentioned in DVC Act and the 2014 Tariff Regulations. It also submitted that the Commission may seek details on the purpose of borrowing such funds, when all expenses related to capital funding and working capital funding are allowed. Accordingly, the Objector has prayed that the claim of the Petitioner may be disallowed. In response, the Petitioner has reiterated the submissions made in the petition. Further, it has also relied upon the APTEL's judgment dated 17.5.2019 in Appeal No.17/2014 & batch (Maithon Alloys Ltd V CERC & Ors) and submitted that, APTEL while rejecting the submissions, observed that there was no double allowance of bonds. The Petitioner also pointed out that the Objector herein has preferred review (Review Petition No. 4 of 2019) against the judgment dated 17.5.2019, before APTEL and the same is pending and since there is no stay of operation of the said order the same is binding on the parties. Accordingly, the Petitioner has prayed that the submissions of the Objector may be rejected.

122. The matter has been examined. Section 40 of the DVC Act, 1948 provides that the Petitioner shall make provision for depreciation and for reserve and other funds at such rates and on such terms as may be specified by the C&AG in consultation with Order in Petition No. 575/GT/2020 Page 77 of 176

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the Central Government. The APTEL in its judgment dated 23.11.2007 in Appeal No. 271/ 2006 & batch cases, decided as under:

"E.15 As regards sinking funds which is established with the approval of Comptroller and Accountant General of India vide letter dated December 29, 1992 under the provision of Section 40 of the DVC Act is to be taken as an item of expenditure to be recovered through tariff,

123. Regulation 53(2)(iv) of the 2014 Tariff Regulations provides as under:

(iv) Funds under section 40 of the Damodar Valley Corporation Act, 1948: The Fund(s) established in terms of section 40 of the Damodar Valley Corporation Act,1948 shall be considered as items of expenditure to be recovered through tariff.

124. DVPCA has objected to the claim of the Petitioner and has submitted that neither the provisions of the Electricity Act, 2003 nor the 2014 Tariff Regulations sanction the recovery of cost of generation assets twice over, through (a) allowance of Contribution to Sinking Fund; and (b) Depreciation and allowance of Interest on loan, by treating the amount realized through bonds, as normative debt. Per contra, the Petitioner has, however pointed out that in Appeal No.17/2014 (MAL v CERC & ors.) & batch cases, filed by HT consumers before APTEL, similar submissions raised by the appellants therein, were rejected by APTEL vide its judgment dated 17.5.2019. It is noticed from the said judgment dated 17.5.2019 that similar contention of the Objector herein, have been rejected by APTEL vide its judgement dated 17.5.2019 as under:

"8.5 We have carefully considered the submissions of learned counsel for the Appellants and learned counsel for Respondent Nos.1 & 2 and also took note of the various judgments relied upon by the parties. While the main contentions of the learned counsel for the Appellants are against the allowance of contribution to sinking fund to DVC and its utilisation, on the other hand, leaned counsel for the Respondents contend that the Central Commission is allowing the same as per settled position of law and its relevant regulations relating to the subject. Learned counsel for the Appellants contended that this Tribunal did not lay down that DVC could be allowed with both interest on loan as well as contribution to sinking fund which tantamount to a particular cost component being allowed twice to a generating company.

8.6. It is relevant to note that as per Section 40 of DVC Act, 1948, DVC is entitled for provision for depreciation, reserve and other fund. This Tribunal in its judgment dated 23.11.2007 in Appeal No.271 of 2006 & batch has held Order in Petition No. 575/GT/2020 Page 78 of 176

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the admissibility of sinking fund in favour of DVC which has also been upheld by the Hon'ble Supreme Court in its judgment dated 23.7.2018 reported as 2018 (8) SCC 281. Regarding the contention of alleged double counting of learned counsel for the Appellant, we find no such duplication in the considerations and findings of the Central Commission.

8.7 Further, from the Tariff Regulation of the Central Commission, it is noticed that interest on loan and interest on working capital are distinct elements of the tariff and at no point of time, the repayment of loan capital is considered as a tariff element to be serviced in the tariff. The redemption of bonds from contribution to sinking fund is a special tariff element provided for DVC under Section 40 of the DVC Act, 1948 in addition to tariff elements provided in the Tariff Regulations. This aspect has already been upheld by the Apex court vide its judgment dated 23.7.2018 (stated supra). It is also noted from the tariff regulations that depreciation and interest on loan payable are two different aspects while sinking fund contribution is an additional tariff element admissible only to DVC under the DVC Act. We, therefore, find no force in the contentions of the learned counsel for the Appellants that by allowing depreciation, interests on loan and sinking fund altogether, results into double counting and in turn yields into undue burden on consumers.

8.8 In view of above facts, we hold that the Central Commission has passed the impugned order in accordance with settled position of law and its Regulations. Thus, the instant case does not give in any manner rise to substantial question of law requiring our intervention / interference"

125. Though the Objector DVPCA, has filed review against the said judgment before APTEL, no stay of operation of the said judgement. Regulation 53(2)(iv) of the 2014 Tariff Regulations categorically provides that the funds created under Section 40 of the DVC Act, 1948 shall be considered as item of expenditure to be recovered through tariff. It is observed that the sinking funds have been created only for redemption of bonds. Accordingly, the amount claimed by the Petitioner for this generating station is allowed as under:

(Rs. in lakh) 2016-17 2017-18 2018-19

3181.47 827.10 885.00

(B) Share of Common Office Expenditure

126. The Petitioner has submitted that the expenditure pertaining to common offices such as Direction Office, Central Office, Other Offices, Subsidiary activities, IT centre and R&D caters services to all generating stations as well as composite transmission and distribution systems. In this regard, it is noted that the Petitioner vide affidavit Order in Petition No. 575/GT/2020 Page 79 of 176

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dated 9.9.2022 in Petition No. 567/GT/2020 (DTPS 3 & 4) has updated the additional capital expenditure pertaining to common offices. The revised additional capital expenditure claimed by the Petitioner towards various offices under Common offices is summarised as below:

(Rs. in lakh)

127. The head-wise additional capital expenditure claimed by the Petitioner towards common offices is summarised as below:

(Rs. in lakh)

128. The Petitioner has computed the Return on Equity, Interest on Loan and Depreciation on the Common Assets for the period 2014-19 based on the opening capital cost as on 1.4.2014 for different offices and has apportioned them to each generating stations and T&D system in proportion to the capital cost approved as on 31.3.2014. Further, the Petitioner has allocated the cost of common offices among generating stations of the Petitioner on the basis of installed capacity. The annual fixed charges claimed towards assets of common offices are as under:

Order in Petition No. 575/GT/2020 Page 80 of 176

80

(Rs. in lakh)

129. In line with the above, the Petitioner has claimed the apportioned common office expenses for this generating station as under.

(Rs. in lakh)

130. The matter has been considered. It is observed that the Petitioner's claim for common office expenditure is in line with the Commission's methodology and decision in the previous tariff orders in respect of the generating stations of the Petitioner. Accordingly, in order to work out the common office expenditure, to be allowed, we have examined the additional capital expenditure claimed by the Petitioner, as under:

Land and Land Rights

131. The Petitioner has claimed additional capital expenditure of Rs.2.72 lakh in 2014-15 and (-) Rs.550.49 lakh in 2017-18 in R&D Centre; & Rs.1058.82 lakh in 2017- 18 and Rs.70.80 lakh in 2018-19 for Central Office, under this head. However, the Petitioner has not furnished any justification for the same. In response to ROP for the hearing dated 10.8.2022 in Petition No. 567/GT/2020 (DTPS 3 & 4), the Petitioner has submitted that these expenses were incurred for transfer of land from R & D to Order in Petition No. 575/GT/2020 Page 81 of 176

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Central Office as per the Govt. of West Bengal (change in the type of land from educational to business), capitalization of land in Ranchi and Kolkata, decapitalization of asset from R&D etc., considering the nature of expenses, the expenditure claimed as additional capitalization and decapitalization is allowed under the 2014 Tariff Regulations.

Buildings

132. The Petitioner has claimed total additional capital expenditure of Rs.165.38 lakh during 2017-19 (i.e., Rs 34.91 lakh in 2017-18 and Rs.130.47 lakh in 2018-19) for Central Office; Also, an amount of Rs.1.49 lakh in 2014-15 has been claimed for Other Offices [including Central Relay & Instrumentation Testing Laboratory (CRITL), CMFS, Central Relay & Instrumentation Testing Mobile (CRITM), Central Service Organization (CSO) and Central Load Despatch (CLD)]; and Rs.38.31 lakh in 2015-16 for R&D Centre under this head. The Petitioner vide its affidavit dated 9.9.2022 in revised submissions mentioned that Rs.165.38 lakh pertains to transfer of asset from DAM to central office, stamp paper & registration of a property in Delhi: Rs. 38.31 lakh pertains to expansion of R & D building and Rs.1.49 lakh towards extension of Central Testing Laboratory building; Considering the nature of expenses, the claimed expenditure as additional capitalization is allowed under the 2014 Tariff Regulations.

Powerhouse Plant & Machinery

133. The Petitioner has claimed additional capital expenditure of Rs.38.84 lakh in 2016-17 and Rs.5.42 lakh in 2018-19 for Direction Office, towards installation of Rooftop solar power plant at DVC Head Quarters for consumption of solar power for own usage. It is observed that the Petitioner has not justified the need for the work being undertaken and as to how the same would benefit the operations of the Petitioner in general and generating stations in particular. Accordingly, the additional Order in Petition No. 575/GT/2020 Page 82 of 176

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capital expenditure of Rs.38.84 lakh in 2016-17 and Rs.5.42 lakh in 2018-19 for Direction Office is not allowed.

Machinery & Equipment- Workshop

134. The Petitioner has claimed an additional capital expenditure of (-) Rs.0.88 lakh in 2015-16, (-) Rs.0.88 lakh in 2016-17 and (-) Rs. 0.01 lakh in 2017-18 in Other Offices [including Central Relay & Instrumentation Testing Laboratory (CRITL), CMFS, Central Relay & Instrumentation Testing Mobile (CRITM), Central Service Organization (CSO) and Central Load Despatch (CLD)], as rectification entry under this head. In view of this, the claims are allowed.

Sub-Station Equipment

135. The Petitioner has claimed additional capital expenditure of Rs.8.01 lakh in 2015-16, Rs.1.15 lakh in 2016-17, Rs. 431.94 lakh in 2017-18 and Rs. 52.08 lakh in 2018-19 for Other Offices [including Central Relay & Instrumentation Testing Laboratory (CRITL), CMFS, Central Relay & Instrumentation Testing Mobile (CRITM), Central Service Organization (CSO) and Central Load Despatch (CLD)] and (-) Rs.5.70 lakh in 2017-18 for Direction Office under this head. As regards additional capital expenditure pertaining to Other Offices, the Petitioner has submitted that the expenditure was incurred to upgrade and equip the existing relay testing laboratory for accreditation by the National Accreditation Board for Testing and Calibration. As the additional capital expenditure incurred for NABL accreditation is not covered under the provisions of the 2014 Tariff Regulations, the additional capitalization and decapitalization claimed are not allowed.

Tower Poles & Fixatures

136. The Petitioner has claimed additional capital expenditure of (-) Rs.0.28 lakh in Order in Petition No. 575/GT/2020 Page 83 of 176

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2017-18 for Other Offices [including Central Relay & Instrumentation Testing Laboratory (CRITL), CMFS, Central Relay & Instrumentation Testing Mobile (CRITM), Central Service Organization (CSO) and Central Load Despatch (CLD)] under this head as a rectification entry. Accordingly, the same is allowed.

Cyber Security Devices

137. The Petitioner has claimed additional capital expenditure of Rs.97.85 lakh in 2018-19 for IT Cell-HQ towards strengthening the IT Cell to safeguard the IT equipment against any cyber threat, with the overall aim to protect data, and network secrecy to ensure smooth functioning of the system. The Petitioner has submitted that the said work is in compliance to the directives of the Ministry of Power (MOP), Government of India (GOI) dated 12.4.2010 and 2.8.2017, with regard to the steps to be taken to prevent cyber-attacks. As the work is in compliance to the directives of MOP, GOI to prevent cyber-attacks, the additional capital expenditure of Rs.97.85 lakh claimed towards procurement of cyber security devices for the period 2014-19 is allowed.

EBA- Integrated Software

138. The Petitioner has claimed additional capital expenditure of Rs.37.69 lakh in 2014-15 for IT Cell-HQ for supporting system of the integrated software used to facilitate various functions including material management, finance & accounting. It is noticed that the said work is related to ERP implementation at Head Office and hence, the additional capital expenditure claimed under this head is allowed.

Other Assets, Office Furniture and Personal Computers

139. The Petitioner has claimed following additional capital expenditure under the head 'Other Assets', 'Office Furniture' and 'Personal computer' towards procurement Order in Petition No. 575/GT/2020 Page 84 of 176

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of like personal computer, software, hardware, office equipment etc.

(Rs. in lakh)

140. In justification for the same, the Petitioner has submitted that to fulfil the demand of valley area as well as other state utilities and distribution licensees, these items had to be additionally procured for capacity addition during the period 2016-19. The Petitioner has also submitted that the expenditure was essential to cope up with the extra volume of works associated with the huge capacity augmentation program taken up by the Petitioner and for smooth functioning of the offices. Considering the nature of these items, the additional capitalization and decapitalization is not allowed, in terms of first proviso to Regulation 14(3) of the 2014 Tariff Regulations.

Assets Held for Disposal

141. The Petitioner has claimed total amount of Rs. 0.76 lakh (negative entry of Rs.

29.93 lakh in Central office and positive entry of Rs. 30.68 lakh in Direction office) under Asset held for disposal, but has however, not furnished any justification for the same. Accordingly, the additional capitalization and decapitalization under subject head is not allowed.

142. Accordingly, the item-wise additional capital expenditure allowed towards various offices is summarised below:

(Rs. in lakh)

Order in Petition No. 575/GT/2020 Page 85 of 176

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143. Based on the above, the additional capitalization allowed for various offices under common offices during the period 2014-19 is summarised as under:

(Rs. in lakh)

144. It is observed that the Petitioner has worked out ROE by grossing up the rate of ROE with MAT rate. However, as the Petitioner has not been paying any income tax in any of the financial year of period 2014-19, 'Nil' rate has been considered as effective tax rate for respective financial year for the purpose of grossing up of ROE in terms of the provisions of the 2014 Tariff Regulations and the rate of ROE is considered as 15.50% for the period 2014-19. The annual fixed charges for Common offices have been worked out by considering the admitted opening capital cost as on 1.4.2014. The annual fixed charges of Common Offices, as worked out for the period 2014-19, have been apportioned to generating stations / T&D systems, based on the approved capital cost as on 31.3.2014. Accordingly, in line with the decision of the Commission order dated 29.7.2016 in Petition No. 465/GT/2014, the fixed charges have been computed and has been allocated to various generating stations as under:

(Rs. in lakh)

Order in Petition No. 575/GT/2020 Page 86 of 176

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145. As regards the Common office expenditure for the generating station, it is further observed that the Commission vide Order dated 3.10.2016 in Petition No. 207/GT/2015 has observed as under:

"61. The petitioner has claimed the projected expenditure of Rs. 208.76 lakh during 2014-15, Rs. 194.64 lakh during 2015-16, Rs. 248.00 lakh during 2016-17, Rs. 363.90 lakh during 2017-18 and Rs. 412.33 lakh during 2018-19 and apportioned to Mejia 7&8 towards Common Office Expenditure which includes expenditure on Direction Office, Central Office, Other Offices, subsidiary activities, IT and R&D. The apportioned amount of share of Common Office expenditure includes return on equity, depreciation and interest on loan on the Common assets. The generating station is a new 1000 MW station for which normative O&M as specified under the 2014 Tariff Regulation, includes Corporate Office expenses also and under Corporate Office expenses, depreciation and interest on loan has also been included. Accordingly, the normative O&M expense for 500 MW unit size as allowed to the generating station includes the expenditure for Common Offices in respect of depreciation and interest on loan. As per special provisions relating to DVC generating stations specified under the Regulation 53 of 2014 Tariff Regulations and also as per the order of Tribunal dated 27.11.2007 in Appeal no 273/2006, the Common Office expenditure are to be allowed for the purpose of determination of tariff. The petitioner has furnished the details of total "Office Expenditure" in respect of the generating stations and T&D systems are as under:

xxx

The Commission has considered the O&M norms for this generating station as specified for 500 MW units including the expenditure for Common Offices in respect of depreciation and interest on loan. Therefore, only return on equity has been allowed as computed in the above table. Accordingly, return on equity of Rs. 87.01 lakh in 2014-15, Rs. 93.07 lakh in 2015-16, Rs. 115.68 lakh in 2016-17, Rs. 154.82 lakh in 2017-18 and Rs. 175.65 lakh in 2018-19 is allowed as part of share of Common office expenditure and annual fixed charges for the generating station."

146. The Commission has considered the O&M expense norms for this generating station, as specified for 500 MW and above units, including the expenditure for Order in Petition No. 575/GT/2020 Page 87 of 176

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Common offices in respect of depreciation and interest on loan. Therefore, only ROE has been allowed as computed in the above table. Accordingly, Share of Common office expense computed for RTPS (this generating station) is as under:

(Rs. in lakh)

2014-15 2015-16 2016-17 2017-18 2018-19

Total Common Office 1068.68 984.95 915.98 901.90 930.14 Expenditure for generating

stations (A)

Total Common Office 92.17 84.95 79.00 77.79 80.22 Expenditure for T&D (B)

Total Common Office 1160.85 1069.90 994.98 979.69 1010.37 Expenditure for generating

stations and T&D C=(A+B)

Total Depreciation for 471.40 407.64 343.93 348.25 368.72 generating stations and T&D

(D)

Total Interest on loan for 140.86 111.83 99.77 67.56 58.18 generating stations and T&D

(E)

Total Return on equity on for 548.59 550.43 551.28 563.88 583.46 generating stations and T&D

(F)

Total of Depreciation, Interest 1160.85 1069.90 994.98 979.69 1010.37 on Loan and ROE of

Generating Station and T&D

(G)

Return on equity 505.03 506.73 507.51 519.11 537.14 corresponding to the

generating stations only

(A/C) *F (H)

Apportionment of the 0.00 0.00 147.73 145.87 154.23 common office expenditure

as claimed to the generating

station including

depreciation, interest on loan

and ROE.(I)

Apportioned amount of only 0.00 0.00 81.85 83.96 89.06

"Return on Equity"

corresponding to the generating station (I/A)xH (J)

(Rs. in lakh)

Common Office Expenditure 2016-17 2017-18 2018-19

RTPS Phase1 U 1&2

81.85 83.96 89.06

(this generating station)

147. Accordingly, the annual fixed charges approved for the generating station for the period 2016-19 is summarized below:

Order in Petition No. 575/GT/2020 Page 88 of 176

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(Rs. in lakh)

Note: (1) All figures are on annualized basis. (2) All figures under each head have been rounded.

The figure in total column in each year is also rounded. As such the sum of individual items may

not be equal to the arithmetic total of the column

148. The difference between the annual fixed charges already recovered by the Petitioner and the annual fixed charges determined by this order, shall be adjusted in terms of the provisions of Regulation 8(13) of the 2014 Tariff Regulations.

DETERMINATION OF TARIFF FOR PERIOD 2019-24

149. The Petitioner, in this present petition, has also sought the determination of tariff of the generating station for the period 2019-24, in terms of the 2019 Tariff Regulations. Accordingly, the capital cost and the annual fixed charges claimed by the Petitioner for the period 2019-24 are as under:

Capital Cost claimed (Rs. In lakh)

Order in Petition No. 575/GT/2020 Page 89 of 176

89

Annual Fixed Charges claimed (Rs. In

lakh)

Capital Cost

150. Clauses (1), (3) and (5) of Regulation 19 of the 2019 Tariff Regulations provide as under:

"19. Capital Cost:

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(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.

xx

(3) The Capital cost of an existing project shall include the following:

(a) Capital cost admitted by the Commission prior to 1.4.2019 duly trued up by excluding liability, if any, as on 1.4.2019;

(b) Additional capitalization and de-capitalization for the respective year of tariff as determined in accordance with these regulations;

(c) Capital expenditure on account of renovation and modernisation as admitted by this Commission in accordance with these regulations;

(d) Capital expenditure on account of ash disposal and utilization including handling and transportation facility;

(e) Capital expenditure incurred towards railway infrastructure and its augmentation for transportation of coal upto the receiving end of generating station but does not include the transportation cost and any other appurtenant cost paid to the railway; and

(f) Capital cost incurred or projected to be incurred by a thermal generating station, on account of implementation of the norms under Perform, Achieve and Trade (PAT) scheme of Government of India shall be considered by the Commission subject to sharing of benefits accrued under the PAT scheme with the beneficiaries. xx

(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."

151. The opening capital cost claimed by the Petitioner, as on 1.4.2019, is Rs.559251.74 lakh. However, the closing capital cost of Rs.541740.79 lakh, as on 31.3.2019, as approved by the Commission, in this order, for the period 2014-19, is considered as the opening capital cost as on 1.4.2019, for the purpose of determination of tariff for the period 2019-24, in accordance with the 2019 Tariff Regulations.

Additional Capital Expenditure

152. Clauses (1) and (2) of Regulations 25 and Regulation 26 of the 2019 Tariff Regulations, provides as under:

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"25. Additional Capitalisation within the original scope and after the cut-off date:

(1) The additional capital expenditure incurred or projected to be incurred in respect of an existing project or a new project on the following counts within the original scope of work and after the cut-off date may be admitted by the Commission, subject to prudence check:

(a) Liabilities to meet award of arbitration or for compliance of the directions or order of any statutory authority, or order or decree of any court of law;

(b) Change in law or compliance of any existing law;

(c) Deferred works relating to ash pond or ash handling system in the original scope of work;

(d) Liability for works executed prior to the cut-off date;

(e) Force Majeure events;

(f) Liability for works admitted by the Commission after the cut-off date to the extent of discharge of such liabilities by actual payments; and

(g) Raising of ash dyke as a part of ash disposal system.

(2) In case of replacement of assets deployed under the original scope of the existing project after cut-off date, the additional capitalization may be admitted by the Commission, after making necessary adjustments in the gross fixed assets and the cumulative depreciation, subject to prudence check on the following grounds:

(a) The useful life of the assets is not commensurate with the useful life of the project and such assets have been fully depreciated in accordance with the provisions of these regulations;

(b) The replacement of the asset or equipment is necessary on account of change in law or Force Majeure conditions;

(c) The replacement of such asset or equipment is necessary on account of obsolescence of technology; and

(d) The replacement of such asset or equipment has otherwise been allowed by the Commission.

26. Additional Capitalisation beyond the original scope

(1) The capital expenditure, in respect of existing generating station or the transmission system including communication system, incurred or projected to be incurred on the following counts beyond the original scope, may be admitted by the Commission, subject to prudence check:

(a) Liabilities to meet award of arbitration or for compliance of order or directions of any statutory authority, or order or decree of any court of law;

(b) Change in law or compliance of any existing law;

(c) Force Majeure events;

(d) Need for higher security and safety of the plant as advised or directed by appropriate Indian Government Instrumentality or statutory authorities responsible for national or internal security;

(e) Deferred works relating to ash pond or ash handling system in additional to the original scope of work, on case to case basis:

Order in Petition No. 575/GT/2020 Page 92 of 176

92

Provided also that if any expenditure has been claimed under Renovation and Modernisation (R&M) or repairs and maintenance under O&M expenses, the same shall not be claimed under this Regulation;

(f) Usage of water from sewage treatment plant in thermal generating station.

(2) In case of de-capitalisation of assets of a generating company or the transmission licensee, as the case may be, the original cost of such asset as on the date of decapitalisation shall be deducted from the value of gross fixed asset and corresponding loan as well as equity shall be deducted from outstanding loan and the equity respectively in the year such de-capitalisation takes place with corresponding adjustments in cumulative depreciation and cumulative repayment of loan, duly taking into consideration the year in which it was capitalised."

153. The year-wise projected additional capital expenditure claimed by the Petitioner for the period 2019-24 are as under:

(Rs. In lakh)

MAINTENANCE SECTION

Rotor Assembly for ID fan 25 (2) (a) 73.16 0.00 0.00 0.00 0.00 Rotor Assembly for FD fan 82.60 0.00 0.00 0.00 0.00 Rotor Assembly for PA fan 70.80 0.00 0.00 0.00 0.00 Coupling Assembly for ID 19.82 0.00 0.00 0.00 0.00 fan

Coupling Assembly for FD 16.52 0.00 0.00 0.00 0.00 Fan

Coupling Assembly for PA 16.52 0.00 0.00 0.00 0.00 fan

Sky-Climber 76 & 77 63.96 0.00 0.00 0.00 0.00 Cup-Lock Scaffolding 206.50 0.00 0.00 0.00 0.00 Support Bearing 25 (2) (a) 73.16 0.00 0.00 0.00 0.00 Oil Cooler Complete 4.96 0.00 0.00 5.90 0.00 Assembly for ID Fan

Oil Cooler Complete 1.68 0.00 0.00 2.36 0.00 Assembly for FD Fan

Oil Cooler Complete 4.32 0.00 0.00 5.19 0.00 Assembly for PA Fan

Oil Cooler Complete 2.66 0.00 0.00 3.13 0.00 Assembly for Coal Mill

Modified Liner for Coal Mill 25 (2) (c) 27.26 0.00 0.00 0.00 0.00 (4 Sets)

Modified Vane Wheel 40.47 0.00 0.00 0.00 0.00 Assembly for Coal Mill (4

Sets)

Modified Bowl Extension 31.39 0.00 0.00 0.00 0.00 Ring for Coal Mill (4 Sets)

Tube Bending Machine 76 & 77 6.91 0.00 0.00 0.00 0.00 Portable Tube Bevelling & 2.89 0.00 0.00 0.00 0.00 Facing Machine for Boiler

Tube

LRSB complete assembly 25 (2) (a) 0.00 36.58 0.00 0.00 0.00 Order in Petition No. 575/GT/2020 Page 93 of 176

93

Order in Petition No. 575/GT/2020 Page 94 of 176

94

Order in Petition No. 575/GT/2020 Page 95 of 176

95

Order in Petition No. 575/GT/2020 Page 96 of 176

96

Order in Petition No. 575/GT/2020 Page 97 of 176

97

154. The Respondent PSPCL submitted that the claims of the Petitioner are not within the original scope of work and are largely predictive in nature, with no administrative or technical basis to validate them. It has submitted that the generating station is a new station and has been in operation for only 4 years out of its useful life of 25 years. The Respondent has sought the reason for the Petitioner not arranging for sufficient spares for ensuring operational reliability and equipment efficiency to its optimum level during the commissioning of the station. It has pointed out that, in addition, the Petitioner has failed to set out the reasons for claiming additional capitalization claimed under Regulations 76 and 77 of the 2019 Tariff Regulations, and has put the onus on the Commission to decide and undertake the analysis of its claims. The Respondent has stated that it is well settled law that the power to relax and power to remove difficulty, are to be exercised in rare cases and not ordinarily. It has also stated that the Petitioner has not presented /cited any extra-ordinary circumstances or events which have led to incur such additional capitalization and hence, the items claimed under additional capitalization in terms of Regulations 76 and Regulation 77 may be disallowed. The Respondent KSEBL has submitted that the Order in Petition No. 575/GT/2020 Page 98 of 176

98

claim for additional capital expenditure under Regulation 25, 26, 76 and 77 of the 2019 Tariff Regulations, relate to additional capital expenditure after the cut-off date and beyond the original scope, and therefore, the claim of the Petitioner is not in line with the said regulations and also not properly justified. It has also submitted that the Petitioner's claim under Regulation 76 and 77 of the 2019 Tariff Regulations, can only be invoked under the extra-ordinary circumstances and hence, the claim of the Petitioner may be disallowed.

155. The Objector, DVPCA has submitted the following:

a. The Petitioner has made claims of expenditure beyond the cut-off date under Force majeure (FM) without satisfying the condition of Regulation 3 (25) and Regulation 25(1)(e) of the 2019 Tariff Regulations. Force Majeure claims have been made without any documents to establish such impact. The Commission had even examined this issue of delay in previous tariff order dated 28.9.2017 in Petition No. 224/GT/2015 and based on the submissions of Petitioner at that time, had approved additional capitalization. However, it appears that Petitioner has attempted to cover up the delay in execution by claiming under Force Majeure event.

b. The Petitioner has claimed certain expenditure under Replacement of assets (Regulation 25(2)(a)) for RTPS which has achieved COD in 31.03.2016. The Objector has analyzed the de-capitalisation assets and depreciation thereof proposed by Petitioner and submits that the same is not in line with Regulation 25(2)(a). The Petitioner has depreciated only 40% of the asset as against full depreciation to be eligible for replacement of asset. Also, the replacement value of assets is approximately Rs.3500 lakh as against original cost of Rs.1740 lakh. c. The Petitioner has claimed balance expenditure under Power to relax and Power to remove difficulty which cannot be exercised generally to allow additional capitalisation without any detailed technical justification and documentary evidence.

156. In response to the above, the Petitioner has clarified that the additional capital expenditure claimed for the period 2019-24 is on the following grounds:

i. For maintaining the minimum level of defined inventory. Order in Petition No. 575/GT/2020 Page 99 of 176

99

ii. Technology obsolescence and upgradation / Pool spares or critical spares;

iii. Critical Tools for plant to ensure reliable and efficient operation.

157. Accordingly, the Petitioner has submitted that the additional capital expenditure claimed for the generating station is under Regulations 25 and 26 of the 2019 Tariff Regulations. It has stated that detailed justification and supporting documents have been furnished in Form-9 along with the tariff filing forms. The Petitioner has further submitted that all additional capital expenditures proposed by the Petitioner for the generating station are critical to ensure reliable, safe and efficient operation of the station and are therefore unavoidable. Accordingly, the Petitioner has prayed before this Commission to allow the claimed additional capitalization under Regulations 76 and 77 of the 2019 Tariff Regulations, wherever the same could not be claimed under the Regulations 25(2) and 26 of the 2019 Tariff Regulations.

158. The matter has been considered. Based on the submissions of the parties and documents on record, and on prudence check, the claim of the Petitioner for additional capital expenditure claimed for the period 2019-24, is examined and allowed as under:

(Rs. In lakh)

Sr. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2019-20

BOILER AND COAL MILL MAINTENANCE SECTION

1 ROTOR 73.16 25 (2) (a) The The Petitioner has 0.00 ASSEMBLY Petitioner claimed the

FOR ID FAN submitted assets/items under

2 ROTOR 82.60 25 (2) (a) that, such Regulation 25(2)(a) of 0.00 ASSEMBLY claims are the 2019 Tariff

FOR FD FAN due to Regulations,

3 ROTOR 70.80 25 (2) (a) unavailability applicable for the 0.00 ASSEMBLY of Spares. replacement of assets

FOR PA FAN The same is which have fully

4 COUPLING 19.82 25 (2) (a) required for depreciated. As the 0.00 ASSEMBLY ensuring items are still not fully

FOR ID FAN reduction in depreciated, the same

5 COUPLING 16.52 25 (2) (a) downtime cannot be considered 0.00 ASSEMBLY and under Regulations

FOR FD FAN improved 25(2)(a) of 2019 Tariff Order in Petition No. 575/GT/2020 Page 100 of 176

100

Order in Petition No. 575/GT/2020 Page 101 of 176

101

Sr. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2019-20

10 SUPPORT 73.16 25 (2) (a) The The Petitioner has 0.00 BEARING Petitioner claimed the

11 OIL COOLER 4.96 25 (2) (a) submitted assets/items under 0.00 COMPLETE that the Regulation 25(2)(a) of

ASSEMBLY works are the 2019 Tariff

FOR ID FAN claimed due Regulations,

12 OIL COOLER 1.68 25 (2) (a) to applicable for the 0.00 COMPLETE unavailability replacement of assets ASSEMBLY of Spares, which have fully

FOR FD FAN where the depreciated. As the

13 OIL COOLER 4.32 25 (2) (a) existing items are still not fully 0.00 COMPLETE spares are depreciated, the same

ASSEMBLY expected to cannot be considered

FOR PA FAN be consumed under Regulations

14 OIL COOLER 2.66 25 (2) (a) by the time. 25(2)(a) of 2019 Tariff 0.00 COMPLETE Thus, the Regulations. In

ASSEMBLY same is addition, the items

FOR COAL required for claimed are in the

MILL ensuring nature of spares,

reduction in which can be

downtime considered for

and capitalization only

improved after the same are put

operational to use. Accordingly,

reliability the claim of the

Petitioner is not

allowed at this stage.

15 MODIFIED 27.26 25 (2) (c) Technology The Petitioner has 0.00 LINER FOR obsolescenc claimed the

COAL MILL (4 e. They are assets/items under

Sets) modified and Regulation 25(2)(c) of

16 MODIFIED 40.47 25 (2) (c) upgraded the 2019 Tariff 0.00 VANE WHEEL spares as Regulations which are ASSEMBLY per OEM applicable for

FOR COAL recommenda replacement of assets MILL (4 Sets) tion which on the ground of its

17 MODIFIED 31.39 25 (2) (c) will enhance obsolescence. It is 0.00 BOWL the operating noticed that the

EXTENSION performance assets/items claimed

RING FOR of the Coal are in nature of O & M

COAL MILL (4 Mills. and in the nature of

Sets) Accordingly, the

assets/ items claimed

are not allowed at this

stage. However, the

Petitioner may claim

the same along with

supporting document

under relevant

regulations, after the

same are put to use

Order in Petition No. 575/GT/2020 Page 102 of 176

102

Sr. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2019-20

and also to substantiate that it is not part of the O & M expenses.

18 TUBE 6.91 76 & 77 They will be The expenditure 0.00 BENDING required for claimed is in the MACHINE fabrication of nature of tools and

19 Portable Tube 2.89 76 & 77 bends of tackles required for 0.00 Beveling & boiler maintenance of the

Facing pressure plant. Accordingly, we

Machine for parts and for find no reason to

Boiler Tube their edge allow the asset/items

preparation. by invoking the

They are Regulation 76 of the

PMT item 2019 Tariff

which will Regulations. Hence,

help reduce the claim of the

inventory and Petitioner is not

downtime of allowed. . the boiler.

SUB-TOTAL: 745.57 0.00 TG & AUXILIARIES SECTION

20 EH oil 34.70 76 & 77 It will be The assets / items 0.00 conditioning used to clean claimed could have purifier the been part of the

Machine Governing original scope of

Model No EH oil, which works. Also, in the HNP023 will improve absence of these

equipment assets, it is not clear

efficiency as to how the O&M

21 Complete set 32.30 76 & 77 It will be was being carried out 0.00 of Trolley used to clean from the

Mounted Oil the TDBFP commissioning to this

Centrifuge lube oil, date. We therefore,

Model No. which will find no merit in the

MAB 206 S-24 improve claim of the Petitioner.

equipment Also, from the

efficiency submissions of the

Petitioner, we find no

reason to allow the

claim by invocation of

Regulation 76 of the

2019 Tariff

Regulations. In view

of the above, the

claim of the Petitioner

is not allowed

22 MOP of turbine 46.00 25 (2) (a) It will The Petitioner has 0.00 improve the claimed the

shutdown assets/items under

time of Regulation 25(2)(a) of

Order in Petition No. 575/GT/2020 Page 103 of 176

103

Sr. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2019-20

turbine the 2019 Tariff

23 Journal 30.00 25 (2) (a) It will Regulations, 0.00 bearing & improve the applicable for the thrust bearing shutdown replacement of assets assembly of time of BFP which have fully BFP thus APC depreciated. As the

items are still not fully

depreciated, the same

cannot be considered

under Regulations

25(2)(a) of 2019 Tariff

Regulations. In

addition, the items

claimed are in the

nature of spares,

which can be

considered for

capitalization only

after the same are put

to use. Accordingly,

the claim of the

Petitioner is not

allowed at this stage.

SUB-TOTAL: 143.00 0.00

ELECTRICAL

24 Different LT 9.00 25 (2) (a) Replacement The Petitioner has 0.00 Motors for of Chinese claimed the

Boiler Area make motor assets/items under

by Regulation 25(2)(a)

Indigenous of the 2019 Tariff

Regulations,

applicable for the

25 Complete 57.90 25 (2) (a) Replacement replacement of 0.00 Actuator set of Chinese assets which have

for different make fully depreciated. As

Electrical actuators by the items are still not areas Indigenous fully depreciated, the

for easy same cannot be

spares considered under

availability. Regulations 25(2)(a)

of 2019 Tariff

Regulations.

Accordingly, the

claim of the Petitioner

is not allowed at this

stage.

26 Transformer 19.00 76 & 77 New The assets / items 0.00 Oil Filter procurement claimed could have machine as there is no been part of the Transformer original scope of

Order in Petition No. 575/GT/2020 Page 104 of 176

104

Sr. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2019-20

Oil Filter works. Also, in the machine, it is absence of these required for assets, it is not clear proper as to how the O&M

maintenance was being carried out of from the

Transformer. commissioning to this date. We therefore,

find no merit in the

claim of the Petitioner.

Also, from the

submissions of the

Petitioner, we find no

reason to allow the

claim by invocation of

Regulation 76 of the

2019 Tariff

Regulations. In view

of the above, the

claim of the Petitioner

is not allowed

27 400 KV CT 18.00 25 (2) (a) The The Petitioner has 0.00 28 400 KV CVT 5.00 25 (2) (a) Petitioner claimed the 0.00 has assets/items under

submitted Regulation 25(2)(a) of

that, the the 2019 Tariff

claims Regulations,

towards the applicable for the

29 400 KV & 220 14.00 25 (2) (a) works are the replacement of assets 0.00 KV LA Critical which have fully

Spares, depreciated. As the

which is items are still not fully

required for depreciated, the same

ensuring cannot be considered

reduction in under Regulations

downtime 25(2)(a) of 2019 Tariff

and Regulations. In

improved addition, the items

operational claimed are in the

reliability. nature of spares,

which can be

considered for

capitalization only

after the same are put

to use. Accordingly,

the claim of the

Petitioner is not

allowed at this stage.

SUB-TOTAL 122.90

WATER

SYSTEM

Order in Petition No. 575/GT/2020 Page 105 of 176

105

Sr. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2019-20

30 Water System 1108.82 25 (1) (e) The work is Considering the said 1108.82 - Construction within the works, the

of intake well original expenditure claimed is

scope (under allowed under

Sl. No. 3(iii) Regulation 25(1)(e) of

of the the 2019 Tariff

Sanction Regulations,

Order of However, the

RTPS dt. Petitioner is directed

18.10.2017). to furnish the details /

The left-over documents at the time

job of M/s of truing up of tariff,

MBL, the with regard to the

Construction Force Majeure events

of Intake claimed in support of

Well was the same, including

awarded to the steps taken to

GPT Infra- mitigate the same.

projects The Petitioner shall

Limited in also submit the

June 2015 breakup of the actual

with additional capital

completion expenditure, including

period of 24 the price variation,

months and IDC and interest if

further it was any, paid for the delay

extended in payment, at the

upto time of truing up of

28.2.2020, tariff.

Work could

not be

completed

within

original

contractual

period due to

high water

level in

Panchet

Reservoir

(which was

under control

of CWC) and

due to local

unrest.

SUB-TOTAL: 1108.82 1108.82

TOWNSHIP AND MISCELLANEOUS CIVIL WORKS

31 Construction of 17.48 25 (1) (e) The work is Considering the said 17.48 'B' type within the works, the

quarters (13 original expenditure claimed is

blocks) and 'C' scope (under allowed under

Order in Petition No. 575/GT/2020 Page 106 of 176

106

Sr. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2019-20

type (G+1) (2 Sl. No. 5(4) Regulation 25(1)(e) of blocks) for of the the 2019 Tariff CISF Complex Sanction Regulations, at DVC, RTPS Order of However, the

32 Construction of 78.56 25 (1) (e) RTPS dt. Petitioner is directed 78.56 internal road, 18.10.2017). to furnish the details / area Work could documents at the time

development, not be of truing up of tariff,

drain, completed with regard to the

compound within Force Majeure events

wall, and other scheduled claimed in support of

misc works at time due to the same, including

CISF complex, local unrest the steps taken to

DVC, RTPS and land mitigate the same.

33 Construction of 115.21 25 (1) (e) dispute at The Petitioner shall 115.21

11.2 km various also submit the Inspection locations. breakup of the actual Road along The work is additional capital the water within the expenditure, including corridor route original the price variation, from intake scope (under IDC and interest if pump house to Sl. No. 5(4) any, paid for the delay main plant of of the in payment, at the RTPS. Sanction time of truing up of

34 Balance 96.76 25 (1) (e) Order of tariff. 96.76 construction RTPS dt.

work of 18.10.2017).

Security Work could

Boundary wall not complete

at CISF within

complex, DVC, scheduled

RTPS time due to

35 Balance 106.20 25 (1) (e) local unrest. 106.20 construction

work of

5,00,000 ltr

capacity

overhead

water tank,

DVC, RTPS

36 Construction of 28.65 26 (1) (d) For safety Considering the 28.65 perimeter /security of nature of subject

fencing around valuable works, the

Permanent materials at expenditure claimed is

Store, DVC, Permanent allowed under

RTPS Store Regulation 26(1)(d) of

the 2019 Tariff

Regulations.

However, the

Petitioner is directed

to furnish supporting

Order in Petition No. 575/GT/2020 Page 107 of 176

107

Sr. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2019-20

documents justifying the claim, at the time of truing up of tariff.

37 Construction of 132.16 76 & 77 For Considering the 0.00 Mini Market requirement nature of assets, most Complex at of occupants of these could have DVC, RTPS of OD, SD been a part of original

38 Repairing of 11.30 76 & 77 For smooth scope of works and 0.00 Road at Entry movement of others are in the

and Exit of coal dumper nature of O & M

Weigh Bridge due to expenses. In view of

4 & 5 at RTPS, incomplete this, we find no

DVC rail link reason to allow the

39 Construction of 8.40 76 & 77 Incomplete claim by invoking 0.00 Drain from work of TRF Regulation 76 of the

Railways awarded to 2019 Tariff

Sump Pit to other agent Regulations.

PWS Culvert to prevent Therefore, the claims

and Guard water logging are not allowed.

Pond N-Pit to in the CHP

PWS Culvert area

at DVC, RTPS

40 Construction of 102.18 76 & 77 To protect 0.00 Shed (54 m x conveyor belt

25 m) at open from weather

cable yard, effect

RTPS, DVC

41 Procurement 2.56 76 & 77 To provide 0.00 of 2 nos. aqua safe drinking

guard water at

(RO+UV,80 ltr Plant inside

capacity) with canteen and

cooler for Directors

Directors Bungalow

Bungalow and

Plant inside

Canteen, DVC,

RTPS

SUB-TOTAL: 699.46 442.86

CONSTRUCTION OF ROAD

42 Strengthening 350.00 76 & 77 Due to It is noted that the 0.00 and widening incomplete original scope of

of existing coal rail link, works includes rail link transportation frequent to the plant, which is WBM road dumper yet to be completed.

movement In order to improve

needs the coal

strengthenin transportation, the

g and Petitioner has

widening the proposed for widening

existing coal of existing road. In

Order in Petition No. 575/GT/2020 Page 108 of 176

108

Sr. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2019-20

transportatio this regard, we notice n WBM road that the Petitioner has from new not brought out the Weigh Bridge circumstances and to Track reasons due to which Hopper the rail link has not yet been completed. In

this context, it is

noticed that the said

rail link is proposed to

be capitalized in this

year only. After

completion of the

same, the widening of

road would be

redundant and may

not yield its full

potential. Accordingly,

we are not inclined

to allow the additional

capital expenditure on

alternate

infrastructure, by

invoking Regulations

76 or 77 of the 2019

Tariff Regulations.

SUB-TOTAL: 350.00 0.00

LAND

43 Land 467.00 25 (1) (e) This It is observed that the 467.00 expenditure Petitioner has claimed

is towards the expenditure for

the work land acquisition and

within the crop compensation

original under Regulation 25

scope (under (1)(e) of the 2019

Sl. No. 1 of Tariff Regulations, for

the Sanction Force Majeure events.

Order of However, the nature

RTPS dt. of the force majeure

18.10.2017). event/ condition, has

Expenditure not been mentioned /

is for Cost of submitted in

land for justification of the

acquisition/ same. However,

direct considering the nature

purchase/Cro of asset claimed and

p since it forms part of

compensatio original scope of

n. works, the claim is

allowed under Regulation 25 (1) (e) Order in Petition No. 575/GT/2020 Page 109 of 176

109

Order in Petition No. 575/GT/2020 Page 110 of 176

110

Sr. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2019-20

46 Four-Lane 6009.00 25 (1) (e) submitted the asset/item for 6009.00 Road that, the various roads and

47 Road Over 2524.00 25 (1) (e) claimed bridges under 2524.00 Bridge (ROB) works is Regulation 25 (1)(e)

over State within the of the 2019 Tarif

Highway-5 original Regulations, towards.

scope (under Force Majeure events.

Sl. No. 5(10) However, the

of the Petitioner has not

Sanction justified the same

Order of through documentary

RTPS dt. evidence. However,

18.10.2017). considering the nature

Such works of the assets claimed

could not be and since the assets

capitalized form part of the

within the original scope of

cut-off date works, the claim is

due to local allowed under

interest as Regulation 25 (1) (e)

well as non- of the 2019 Tariff

availability of Regulations. The

required land Petitioner is however

from govt of directed to furnish the

WB and details of land

finalization of acquisition and

the scheme communication /

by PWD for documents and the

ROB over steps taken by it to

SH5. mitigate the event The

Petitioner shall also

submit the breakup

details of the actual

additional capital

expenditure including

the price variation,

IDC and interest if

any, paid for delay in

payment, at the time

of truing -up of tariff

SUB-TOTAL: 10470.00 10470.00 Total amount 83131.75 claimed

Total amount 81513.68 allowed

Order in Petition No. 575/GT/2020 Page 111 of 176

111

(Rs. in lakh)

Sl. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2020-21

BOILER AND COAL MILL MAINTENANCE SECTION

1 LRSB 36.58 25 (2) (a) The The Petitioner has 0.00 COMPLETE Petitioner claimed the

ASSEMBLY (2 submitted assets/items under NOS.) that the Regulation 25(2)(a) of

2 ERV 66.32 works are the 2019 Tariff 0.00 ISOLATING claimed due Regulations, which are VALVE (USD) to applicable for

3 PENION FOR 10.86 unavailability replacement of assets 0.00 APH DRIVE of Spares, which have fully

SYSTEM where the depreciated. As the

existing items are still not fully

spares are depreciated, the same

expected to cannot be considered

be consumed under Regulations

by the time. 25(2)(a) of 2019 Tariff

Thus, the Regulations. In

same is addition, the items

required for claimed are in the

ensuring nature of spares, which

reduction in can be considered for

downtime capitalization only after

and improved the same are put to

operational use. Accordingly, the

reliability. claim of the Petitioner

is not allowed at this

stage

4 MODIFIED 81.89 25 (2) (c) Technology The Petitioner has 0.00 LINER FOR obsolescence claimed the

COAL MILL . They are assets/items under

(12 Sets) modified and Regulation 25(2)(c) of upgraded the 2019 Tariff

5 MODIFIED 121.30 25 (2) (c) spares as per Regulations which are 0.00 VANE WHEEL OEM applicable for

ASSEMBLY recommendat replacement of assets

FOR COAL ion which will on the ground of its

MILL (12 Sets) enhance the obsolescence. It is

operating noticed that the

performance assets/items claimed

of the Coal are in nature of O & M

6 MODIFIED 94.40 25 (2) (c) Mills. Accordingly, the assets/ 0.00 BOWL items claimed are not

EXTENSION allowed at this stage. RING FOR However, the Petitioner COAL MILL may claim the same (12 Sets) along with supporting document under

relevant regulations,

after the same are put

to use and also to

Order in Petition No. 575/GT/2020 Page 112 of 176

112

Sl. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2020-21

substantiate that it is not part of the O & M expenses.

7 Boiler Model 8.14 76 & 77 Replication of The claim for 0.00 the boiler of expenditure for

RTPS and to education purpose is

be used as not covered by any

display and provision of the 2019

education Tariff Regulations and

purpose. hence the same shall

be borne by the

Petitioner. We also fine

no reason to allow the

same in exercise of the

powers under

Regulations 76 or 77 to

consider the claim of

the Petitioner. Hence,

the claim of the

Petitioner is not

allowed.

8 APH GEAR 42.48 25 (2) (a) The The Petitioner has BOX Petitioner has claimed the

submitted assets/items under

that, the Regulation 25(2)(a) of

claims the 2019 Tariff

towards the Regulations, which are

works are the applicable for

Critical replacement of assets

Spares, which have fully

which is depreciated. As the

required for items are still not fully ensuring depreciated, the same

reduction in cannot be considered

0.00

downtime under Regulations and improved 25(2)(a) of 2019 Tariff operational Regulations. In reliability. addition, the items claimed are in the

nature of spares, which

can be considered for

capitalization only after the same are put to

use. Accordingly, the

claim of the Petitioner

is not allowed at this

stage.

SUB-TOTAL: 461.97 0.00 TG & AUXILIARIES SECTION

9 CPU Butter Fly 103.00 25 (2) (a) The The Petitioner has 0.00 Valve Petitioner has claimed subject items

Order in Petition No. 575/GT/2020 Page 113 of 176

113

Sl. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2020-21

10 Emergency oil, 50.00 25 (2) (a) submitted under Regulation 0.00 Aux oil, Main that, the 25(2)(a) applicable for oil pump claims the replacement of

assembly of towards the assets which have fully Boiler Feed works are the depreciated. As the

Pump Turbine Critical subject items are still

11 Journal 68.00 25 (2) (a) Spares, not fully depreciated, 0.00 bearings which is the same can't be

assembly, required for considered under

Thrust ensuring Regulations 25(2)(a) of

bearings reduction in 2019, Tariff

assembly with downtime Regulations. In

pads of and improved addition, the claimed

Booster Pump operational items are spares in for Boiler Feed reliability. nature, which can be Pump considered for

12 BUTTERFLY 140.00 25 (2) (a) capitalization only after 0.00 VALVES FOR the same are put to use

PHE only. Accordingly, the

13 TRIM 134.50 25 (2) (a) claim items are not 0.00 ASSEMBLY allowed at this juncture

FOR HP / stage.

BYPASS

VALVES

14 TRIM 395.00 25 (2) (a) 0.00

ASSEMBLY

FOR LP

BYPASS

VALVE

15 Hydraulic Jack 23.60 76 & 77 Reducing downtime 0.00 and Pump set would benefit the

Petitioner by way of

increase in availability

of the project. However,

16 Induction 8.25 76 & 77 0.00 the same may be met

heater

from the incentive so earned. We find no

merit in exercising the powers under

Regulation 76 or 77 of the 2019 Tariff

Regulations, to allow the claim of the

Petitioner and load the expenditure on

consumers.

17 Stator Water 30.10 25 (2) (a) The Petitioner has 0.00 Pump claimed the

Assembly assets/items under

Order in Petition No. 575/GT/2020 Page 114 of 176

114

Sl. Head of Work / Claimed Regulations Justification Reasons for Amount No. Equipment by the admissibility allowed

Petitioner

2020-21