Petition No. 227/2010. Case: Power Grid Corporation of India Limited Vs Bihar State Electricity Board and Ors.. Central Electricity Regulatory Commission
| Case Number | Petition No. 227/2010 |
| Judges | Pramod Deo, Chairperson, S. Jayaraman, V.S. Verma and M. Deena Dayalan, Members |
| Issue | Electricity Law |
| Judgement Date | April 13, 2011 |
| Court | Central Electricity Regulatory Commission |
Order:
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The petition has been filed for approval of tariff for 2nd 315 (3x105) MVA, 400/220 kV transformer at Indravati (OHPC) Switchyard (hereinafter referred to as "the transmission asset") in Eastern Region for the period from 1.4.2009 to 31.3.2014, in accordance with Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2009 (hereinafter referred to as "the 2009 regulations"). The Petitioner has made the following additional prayers:
(a) To invoke the provision of Regulation 44 of the 2009 regulations so that the additional capital expenditure incurred/to be incurred on account of undischarged liabilities after the cut off date is allowed and considered for the fixation of tariff for the period 2009-14;
(b) To invoke the provision of Regulation 44 of the 2009 regulations for relaxation of regulations 15 (3) of the 2009 regulations so that grossing up the base rate of ROE may be allowed considering the tax rates viz, MAT, surcharge, any other cess, charges, levies etc. As per the relevant Finance Act and accordingly consequential impact of tariff on account of truing up be allowed to be billed and settled directly with the beneficiaries every year in the tariff block;
(c) To approve reimbursement of petition filing fee and publication of notices in the newspaper as per the 2009 regulations;
(d) Allow to bill and adjust impact on interest on loan due to floating rate of interest applicable during 2009-14, if any from the Respondents; and
(e) Allow reimbursement of licence fee separately from the Respondents.
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The investment approval of the transmission asset was accorded by the Board of Directors of the Petitioner company vide Memorandum dated 26.2.2003 at an estimated cost of `1905 lakh, which included IDC of `152 lakh.
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The transmission asset was declared under commercial operation w.e.f 1.5.2006. The annual transmission charges for the transmission asset up to 31.3.2009 were approved vide orders dated 29.8.2008 in Petition Nos. 137/2007 and same were subsequently revised vide order dated 26.4.2010 in Petition No. 320/2009 on account of additional capital expenditure incurred during 2007-08 and 2008-09 based on admitted capital cost of ` 1455.67 lakh as on 31.3.2009.
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The Petitioner has claimed the transmission charges as under:
(` in lakh)
2009-10
2010-11
2011-12
2012-13
2013-14
Depreciation
77.43
78.52
79.04
79.04
79.04
Interest on Loan
66.86
62.29
57.02
51.14
45.28
Return on Equity
69.17
70.25
70.77
70.77
70.77
Interest on Working Capital
8.90
9.11
9.29
9.45
9.63
O & M Expenses
89.08
94.18
99.57
105.26
111.28
Total
311.44
314.35
315.69
315.66
316.00
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The details submitted by the Petitioner in support of its claim for interest on working capital are given hereunder:
(` in lakh)
2009-10
2010-11
2011-12
2012-13
2013-14
Maintenance Spares
13.36
14.13
14.94
15.79
16.69
O & M expenses
7.42
7.85
8.30
8.77
9.27
Receivables
51.91
52.39
52.62
52.61
52.67
Total
72.69
74.37
75.86
77.17
78.63
Rate of Interest
12.25%
12.25%
12.25%
12.25%
12.25%
Interest
8.90
9.11
9.29
9.45
9.63
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No comments or suggestions have been received from the general public in response to the notices published by the Petitioner under Section 64 of the Electricity Act, 2003.
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Reply to the petition has been filed by Bihar State Electricity Board (BSEB). BSEB has raised the issues of Petitioners' claim on undischarged liabilities, tax holiday, State Bank of India Advance Rate, reimbursement of filing fee, publication expenses and licence fee and impact on wage revision on O & M norms. The issues have been addressed in relevant paras of this order.
CAPITAL COST
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Last proviso to Clause (2) of Regulation 7 of the 2009 regulations provides as under:
In case of the existing projects, capital cost admitted by the Commission prior to 1.4.2009 and the additional capital expenditure projected to be incurred for the respective year of the tariff period 2009-14 as may be admitted by the Commission, shall form the basis for determination of tariff.
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The capital cost of ` 1455.67 lakh admitted vide order dated 26.4.2010 in Petition No. 320/2009 has been considered for the purpose of tariff.
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The Petitioner has claimed the tariff after accounting for projected additional capital expenditure as under:
(` in lakh)
Admitted capital cost as on 31.3.2009
Capital expenditure projected to be incurred during 2009-10
Capital expenditure projected to be incurred during 2010-11
Total estimated capital expenditure
1455.67
21.50
19.79
1469.96
ADDITIONAL CAPITAL EXPEDNTURE
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Regulation 9 of the 2009 regulations provides as under:
(1) The capital expenditure incurred or projected to be incurred, on the following counts with in 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) Undischarged liabilities;
(ii) Works deferred for execution;
(iii) Procurement of initial capital spares within the original scope of work, subject to the provisions of regulating 8;
(iv) Liabilities to meet award of arbitration or for compliance of the order or decree of a court; and
(v) Change in law;
Provided that the details of works included in the original scope of work along with estimates of expenditure, undischarged liabilities and the works deferred for execution shall be submitted along with the application for determination of the tariff.
(2) The capital expenditure incurred on the following counts after the cut-off date, in its discretion, 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;
(ii) Change in law;
(iii) ******
(iv) *****
(v) 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 of switchyard equipment due to increase of fault level, emergency restoration system, insulators cleaning infrastructure, replacement of damaged equipment not covered by insurance and any other expenditure which has become necessary for successful and efficient operation of the transmission system.
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The details submitted by the Petitioner in support of its claim for projected additional capital expenditure for the transmission asset is given as under:
Years
Nature and details of expenditure
Amount (` in lakh)
2009-10
Sub-station equipments -Balance and retention payments
21.50
2010-11
Sub-station equipments -Balance and retention payments
19.79
Total
41.29
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Respondent No. 1, BSEB in its reply has objected to the claim of additional capital expenditure incurred during 2009-10 and 2010-11 towards balance and retention payments on the ground that such an expenditure is not covered under Regulation 9 (2) of the 2009 regulations. The Petitioner in its rejoinder has submitted that the projected additional capital expenditure may be dealt in accordance with the Regulation 9 (2) (v) of the 2009 regulations.
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The Petitioner vide its affidavit dated 4.11.2009 has submitted that an amount of ` 21.50 lakh has been incurred during the period 2009-10 for final payment of bay extension package at Indravati Switchyard and ` 19.79 lakh is likely to be incurred during the period 2010-11 for rectification works of Remote Operation of OLTC of the ICT supplied and Fire Protection system towards balance and retention payments. The Petitioner has further submitted that the additional capital expenditure of ` 41.29 lakh incurred/projected to be incurred during the periods 2009-10 and 2010-11 is on account of balance and retention payment and is within the original scope of work.
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In regard to admissibility of undischarged liabilities, it is observed that the expenditure pertains to balance and retention payments and has been incurred after the cut-off date. We have decided in our order dated 8.2.2011 in Petition No. 176/2010 to relax Regulation 9 (2) of 2009 regulations to admit the expenditure incurred after the cut-off date, particularly, relating to balance and retention payments. Accordingly, an amount of ` 21.50 lakh and ` 19.79 lakh has been allowed to be capitalized during 2009-10 and 2010-11.
TOTAL CAPITAL COST
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Based on the above, gross block as given below has been considered for the purpose of tariff for the transmission asset, after allowing projected additional capital expenditure on works as claimed by the Petitioner:
(` in lakh)
Admitted capital cost as on 31.3.2009
Capital projectedincurred 10
expenditure to be during 2009-
Capital expenditure projected to be incurred during 2010-11
Total estimated capital expenditure
1455.67
21.50
19.79
1469.96
DEBT- EQUITY RATIO
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Clause (2) of Regulation 12 of the 2009 regulations inter alia provides that,-
(2) In case of the generating station and the transmission system declared under commercial operation prior to 1.4.2009, debt-equity ratio allowed by the Commission for determination of tariff for the period ending 31.3.2009 shall be considered.
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The Petitioner has claimed tariff based on debt-equity ratio of 73.04:26.96 as admitted on 31.3.2009 vide order dated 26.4.2010 in Petition 320/2009. The Petitioner...
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