Petition No. 193/2010. Case: Power Grid Corporation of India Limited Vs Kerala State Electricity Board and Ors.. Central Electricity Regulatory Commission
| Case Number | Petition No. 193/2010 |
| Judges | S. Jayaraman, V.S. Verma and M. Deena Dayalan, Members |
| Issue | Electricity Law |
| Judgement Date | May 05, 2011 |
| Court | Central Electricity Regulatory Commission |
Order:
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The petition has been filed seeking approval of combined assets for (a) 400 kV Ramagundam-Hyderabad D/C transmission line; (b) 400 kV S/C Gooty-Neelmangala transmission line; (c) 400 kV Hyderabad-Kurnool-Gooty transmission line; and (d) 400 kV S/C Khammam-Nagarjunasagar transmission line (hereinafter referred to as 'the transmission assets') along with associated bays and equipment under Ramagundum Stage-III Transmission System (hereinafter referred to as 'the transmission system') in Southern Region for the period 1.4.2009 to 31.3.2014, based on the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2009 (hereinafter referred to as "the 2009 regulations") after accounting for addition capital expenditure incurred during 2012-13. The Petitioner has made the following additional prayers:
(a)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 shall be allowed considering the tax rates viz, MAT, surcharge, any other cess, charges, levies etc. As per the relevant Finance Act and allow consequential impact of tariff on account of truing up for 2009-14 period accordingly;
(b) In case of the assets being combined to calculate the transmission charges, allow to recover full depreciation (90% of the gross block) of the asset during its useful life (25 years for sub-station and 35 years for transmission lines) reckoning from its actual date of the commercial operation and also permit to treat the recovery in accordance with para 11.2 of the petition;
(c)Allow to bill and adjust impact on interest on loan due to change in interest rate on account of floating rate of interest applicable during 2009-14, if any from the Respondents;
(d) To approve reimbursement of petition filing fee and publication of notices in the newspaper as per the 2009 regulations;
(e) Allow to bill and recover the service tax on transmission charges separately from the Respondents, if the Petitioner is subjected to such service tax; and
(f) Allow reimbursement of licence fee separately from the Respondents.
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The Petitioner has submitted that in accordance with the procedure for combining of assets as decided by the Commission in the letter reference No. C-7/189(204)/2009-CERC, dated 23.10.2009, the following elements under Ramagundum Stage-III Transmission system in Southern Region have been clubbed for the purpose of determination of transmission charges:
(` in lakh)
Assets
Name of the asset
Date of commercial operation
Asset-I
400 kV Ramagundam-Hyderabad D/C transmission line.
1.11.2004
Asset-II
400 kV S/C Gooty-Neelmangala transmission line.
1.5.2005
Asset-III
400 kV S/C Hyderabad-Kurnool-Gooty transmission line.
1.3.2005
Asset-IV
400 kV S/C Khammam-Nagarjunasagar transmission line.
1.3.2004
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The Petitioner has submitted that the notional date of commercial operation of the combined assets has been considered as 1.5.2005.
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The revised transmission charges up to 31.3.2009 were decided by the Commission in its order dated 3.2.2009 in Petition No. 113/2008, after accounting for the additional capital expenditure up to 31.3.2009.
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The Petitioner has claimed the transmission charges in respect of the transmission scheme as under:
(` in lakh)
2009-10
2010-11
2011-12
2012-13
2013-14
Depreciation
1578.63
1578.63
1578.63
1596.62
1614.62
Interest on Loan
741.52
674.57
608.16
562.57
515.92
Return on Equity
1137.61
1137.61
1137.61
1155.48
1173.36
Interest on Working Capital
117.33
118.51
119.88
122.57
125.40
O & M Expenses
904.86
956.34
1011.34
1069.25
1130.17
Total
4479.95
4465.66
4455.62
4506.49
4559.47
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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
135.73
143.45
151.70
160.39
169.53
O & M expenses
75.41
79.70
84.28
89.10
94.18
Receivables
746.66
744.28
742.60
751.08
759.91
Total
957.80
967.43
978.58
1000.57
1023.62
Rate of Interest
12.25%
12.25%
12.25%
12.25%
12.25%
Interest on Working Capital
117.33
118.51
119.88
122.57
125.39
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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. Reply to the petition has been filed by Tamil Nadu Electricity Board (TNEB). The main issues rasied by TNEB pertains to the Petitioner`s claim of additional capital expenditure, MAT, reimbursement of filing fee, publication expenses, service tax and licence fee. etc. The issues have been addressed in relevant paras of this order.
CAPITAL COST
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The last proviso to Clause (2) of Regulation 7 of the 2009 regulations provides as under:
Provided that 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 Petitioner has claimed the capital expenditure of `29838.35 lakh, which was admitted vide order dated 3.2.2009 in Petition No. 113/2008.
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-offdate, 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 line is given hereunder:
Years
Nature and details of expenditure
Amount (` in lakh)
Asset-I
2012-13
Transmission line-Tower Strengthening
372.60
Asset-II
2012-13
Transmission line-Tower Strengthening
309.00
Total
681.60
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The Petitioner has claimed additional capital expenditure of ` 681.60 lakh during 2012-13 on account of strengthening of the transmission towers. It has been submitted that a committee consisting of the experts from CEA and Power Grid while investigating the cases of the tower collapse in May and June 2009 observed that these failures occurred due to failure of suspension towers only. A Standing Committee of Experts constituted by Central Electricity Authority in its meeting dated 29.5.2009 also discussed the issue of towers failures. The Committee acknowledged the fact the towers were designed as per IS:802:1977 prevalent at that time and subsequently, wind patterns in the country have changed. The Committee observed that tower failures occurred because of high velocity wind acting on the towers. The Committee advised that action should be taken to provide hip bracing upto bottom cross arm in order to increase the strength of suspension towers. Accordingly, the Petitioner has decided to strengthen the suspension towers up to bottom cross arm level and projected the additional capital expenditure for that purpose during the year 2012-13.
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TNEB in its reply dated 5.10.2010 has submitted that while designing the towers, a factor of safety has been built in to take care of any possible change in the basic parameters considered. Therefore, a factor of safety must be available in the changed situation to ensure safety of the suspension towers in the Southern Region. TNEB has further submitted that if it is considered absolutely necessary to introduce hip bracings upto bottom cross arm of all the suspension towers, then the expenditure can be recovered in three annual instalments after completion of the work instead of treating it as additional capital expenditure and awarding tariff to be recovered till the useful life of the asset.
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We have examined the issue of tower strengthening keeping in view the following two factors:
(i) Design deficiency in transmission line due to prevalent tower design standard at the time of construction; and/or
(ii) Change in wind speed as compared to wind speed considered at the time of construction.
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It is observed that the transmission lines were designed as per design of transmission line (S.N 3 IS-802-1995, with 0% wind in broken wire conditionapplicable from 1995-2001), which has now been modified to 75% wind in BWC with narrow front wind. Due to this, strengthening of...
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