Order in Petition No. 117/TT/2015 Page 1 CENTRAL ELECTRICITY REGULATORY COMMISSION NEW DELHI Petition No. 117TT/2014 Coram: Shri A.S. Bakshi, Member Dr. M.K. Iyer, Member Date of Hearing : 06.04.2016 Date of Order : 26.05.2016 In the matter of: Determination of transmission tariff for Asset 1: 400 kV, 125 MVAR bus reactor at Raipur Sub-station, Asset 2: 400 kV, 125 MVAR bus reactor at Seoni Sub- station, Asset 3: 400 kV, 63 MVAR line reactor at Raipur sub-station under “Installation of Reactors (Part-II) in Western Region” for the 2014-19 tariff period under Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014 and Regulation 86 of Central Electricity Regulatory Commission (Conduct of Business) Regulations, 1999. And in the matter of: Power Grid Corporation of India Ltd. „SAUDAMINI‟, Plot No-2, Sector-29, Gurgaon -122 001 (Haryana). ………Petitioner Versus 1. Madhya Pradesh Power Management Company Limited, Shakti Bhawan, Rampur, Jabalpur- 482008 2. Maharashtra State Electricity Distribution Company Limited, Prakshgad, 4th Floor, Andheri(East), Mumbai-400052 3. Gujarat UrjaVikas Nigam Limited, Sardar Patel Vidhyut Bhawan, Race Course Road, Vadodara- 390007 4. Electricity Department, Government of Goa, Vidhyut Bhawan, Panaji, Near Mandvi Hotel,
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CENTRAL ELECTRICITY REGULATORY COMMISSION NEW DELHI ... · For Petitioner: Shri Rakesh Prasad, PGCIL Shri M. M. Mondal, PGCIL Shri S S Raju, PGCIL Shri Pankaj Sharma, PGCIL Shri Subhash
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Order in Petition No. 117/TT/2015 Page 1
CENTRAL ELECTRICITY REGULATORY COMMISSION
NEW DELHI
Petition No. 117TT/2014
Coram:
Shri A.S. Bakshi, Member Dr. M.K. Iyer, Member
Date of Hearing : 06.04.2016
Date of Order : 26.05.2016
In the matter of:
Determination of transmission tariff for Asset 1: 400 kV, 125 MVAR bus reactor at Raipur Sub-station, Asset 2: 400 kV, 125 MVAR bus reactor at Seoni Sub-station, Asset 3: 400 kV, 63 MVAR line reactor at Raipur sub-station under “Installation of Reactors (Part-II) in Western Region” for the 2014-19 tariff period under Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014 and Regulation 86 of Central Electricity Regulatory Commission (Conduct of Business) Regulations, 1999.
And in the matter of:
Power Grid Corporation of India Ltd. „SAUDAMINI‟, Plot No-2, Sector-29, Gurgaon -122 001 (Haryana). ………Petitioner
Versus
1. Madhya Pradesh Power Management Company Limited, Shakti Bhawan, Rampur, Jabalpur- 482008
2. Maharashtra State Electricity Distribution Company Limited, Prakshgad, 4th Floor, Andheri(East), Mumbai-400052
8. Madhya Pradesh Audhyogik Kendra, Vikas Nigam (Indore) Limited, 3/54, Press Complex, Agra- Bombay Road, Indore- 452008 ….Respondents The following were present:-
For Petitioner: Shri Rakesh Prasad, PGCIL Shri M. M. Mondal, PGCIL Shri S S Raju, PGCIL Shri Pankaj Sharma, PGCIL Shri Subhash C Taneja, PGCIL Shri Piyush Awasthi, PGCIL Shri Mohd. Mohsin, PGCIL Shri A M Pavgi, PGCIL
The present petition has been filed by Power Grid Corporation of India Ltd.
(“the petitioner”) for 01 No. of 400 kV, 125 MVAR bus reactor at Raipur sub-
station(referred as “Asset 1”); 01 No. of 400 kV, 125 MVAR bus reactor at Seoni
Order in Petition No. 117/TT/2015 Page 3
sub-station(referred as “Asset 2”) and 01 No. of 400 kV, 63 MVAR line reactor
at Raipur (referred as “Asset 3”) under “Installation of Reactors (Part-II) in
Western Region” under Central Electricity Regulatory Commission (Terms and
Conditions of Tariff) Regulations, 2014 (hereinafter referred to as “the 2014 Tariff
Regulations”) for the period from date of commercial operation to 31.3.2019 for
the subject assets.
2. The respondents are distribution licensees or electricity departments or
power procurement companies of States, who are procuring transmission service
from the petitioner, mainly beneficiaries of Western Region.
3. The brief facts of the case are as follows:-
(a) The investment approval for the project was accorded by Board of
Directors of the petitioner company vide Memorandum no. C/CP/WR-343
dated 05.04.2013 with an estimated cost of `9283 lakh including IDC of
`502 lakh (based on February 2013 price level). The approved
apportioned cost for the subject Asset1, Asset 2 and Asset 3 is `906.92
lakh, `944.97 lakh and `682.42 lakh respectively.
(b) The scope of works under “Installation of Reactors (Part-II) in Western
Region” is as follows:-
Sub-station
(a) Installation of 400 kV, 125 MVAR bus reactor at:
(i) Damoh (ii) Bachau (iii) Pirana (iv) Itarasi
Order in Petition No. 117/TT/2015 Page 4
(v) Seoni (vi) Paril (vii) Raipur (viii) Gwalior
(b) Installation of 400 kV, 63 MVAR switchable reactor at 400 kV Sub-station
(i) Raipur (one ckt of 400 kV Raipur-Bhadrawati D/C line)
(c) The petitioner has submitted revised tariff forms based on actual COD and
claimed the transmission charges vide its petition dated 20.5.2016 as
under:-
Asset 1 (`in lakh)
Particulars 2014-15
(pro-rata) 2015-16 2016-17 2017-18 2018-19
Depreciation 17.49 43.91 48.54 50.55 50.55
Interest on Loan 21.41 50.75 53.11 51.41 46.72
Return on Equity 19.89 50.28 56.1 58.77 58.77
Interest on Working Capital 3.01 6.78 7.19 7.37 7.39
O&M Expenses 29.99 62.3 64.37 66.51 68.71
Total 91.79 214.02 229.31 234.61 232.14
Asset 2
(`in lakh)
Particulars 2014-15
(pro-rata) 2015-16 2016-17 2017-18 2018-19
Depreciation 7.29 33.43 43.1 44.58 44.58
Interest on Loan 9.06 40.26 49.48 47.46 43.24
Return on Equity 8.19 38.41 50 51.92 51.92
Interest on Working Capital 1.57 6.02 6.84 6.99 7.01
O&M Expenses 18.15 62.30 64.37 66.51 68.71
Total 44.26 180.42 213.79 217.46 215.46
Asset 3
(`in lakh)
Order in Petition No. 117/TT/2015 Page 5
Particulars 2014-15
(pro-rata) 2015-16 2016-17 2017-18 2018-19
Depreciation 13.43 29.29 34.84 38.61 38.61
Interest on Loan 16.48 33.97 38.68 40.28 36.68
Return on Equity 15.32 33.71 40.52 45.12 45.12
Interest on Working Capital 1.04 2.23 2.62 2.85 2.77
O&M Expenses 0 0 0 0 0
Total 46.27 99.2 116.66 126.86 123.18
(d) The details submitted by the petitioner in support of its claim for interest on
working capital are given hereunder:-
Asset 1 (`in lakh)
Particulars 2014-15
(pro-rata) 2015-16 2016-17 2017-18 2018-19
O & M Expenses 5.03 5.19 5.36 5.54 5.73
Maintenance Spares 9.05 9.35 9.66 9.98 10.31
Receivables 30.76 35.67 38.22 39.10 38.69
Total 44.84 50.21 53.24 54.62 54.73
Rate of Interest (%) 13.50 13.50 13.50 13.50 13.50
Interest 3.01 6.78 7.19 7.37 7.39
Asset 2
(`in lakh)
Particulars 2014-15
(pro-rata) 2015-16 2016-17 2017-18 2018-19
O & M Expenses 5.02 5.19 5.36 5.54 5.73
Maintenance Spares 9.04 9.35 9.66 9.98 10.31
Receivables 24.50 30.07 35.63 36.24 35.91
Total 38.56 44.61 50.65 51.76 51.95
Rate of Interest (%) 13.50 13.50 13.50 13.50 13.50
Interest 1.57 6.02 6.84 6.99 7.01
Asset 3
(`in lakh)
Particulars 2014-15 (pro-rata)
2015-16 2016-17 2017-18 2018-19
O & M Expenses - - - - -
Maintenance Spares - - - - -
Receivables 13.10 16.53 19.44 21.14 20.53
Order in Petition No. 117/TT/2015 Page 6
Total 13.10 16.53 19.45 21.15 20.53
Rate of Interest (%) 13.50 13.50 13.50 13.50 13.50
Interest 1.04 2.23 2.63 2.85 2.77
4. The AFC for the instant assets was allowed under Regulation 7(7) of the
2014 Tariff Regulations for inclusion in the PoC charges vide order dated
26.09.2014 based on anticipated COD. The petitioner has submitted the tariff
forms along with the Auditor's certificates for actual COD in additional submission
vide affidavit dated 20.5.2016 and the same has been considered for the
purpose of computation of tariff.
5. The petitioner has served the petition to the respondents and notice of this
application has been published in the newspapers in accordance with Section 64
of the Electricity Act, 2003 (“the Act”). Having heard the representatives of the
petitioner and respondents and perused the material on record, we proceed to
dispose of the petition.
Commercial Operation Date (“COD”)
6. Regulation 4(3) of the 2014 Tariff Regulations provides as follows:-
“4. Date of Commercial Operation: The date of commercial operation of a generating station or unit or block thereof or a transmission system or element thereof shall be determined as under: xxx (3) Date of commercial operation in relation to a transmission system shall mean the date declared by the transmission licensee from 0000 hour of which an element of the transmission system is in regular service after successful trial operation for transmitting electricity and communication signal from sending end to receiving end: xxx xxx”
Order in Petition No. 117/TT/2015 Page 7
7. The petitioner has claimed the date of the commercial operation as
2.10.2014, 13.12.2014 and 30.8.2014 for Asset 1, Asset 2 and Asset 3
respectively. The petitioner has also submitted the letter declaring COD and the
9. Regulation 9 (1) and (2) and 10 (1) of the 2014 Tariff Regulations specify
as follows:-
“9. Capital Cost: (1) The Capital cost as determined by the Commission after prudence check in accordance with this regulation shall form the basis of determination of tariff for existing and new projects. (2) The Capital Cost of a new project shall include the following:
a) the expenditure incurred or projected to be incurred up to the date of commercial operation of the project;
b) Interest during construction and financing charges, on the loans (i) being equal to 70% of the funds deployed, in the event of the actual equity in excess of 30% of the funds deployed, by treating the excess equity as normative loan, or (ii) being equal to the actual amount of loan in the event of the actual equity less than 30% of the funds deployed;
c) Increase in cost in contract packages as approved by the Commission; d) Interest during construction and incidental expenditure during
construction as computed in accordance with Regulation 11 of these regulations;
e) capitalised Initial spares subject to the ceiling rates specified in Regulation 13 of these regulations;
f) expenditure on account of additional capitalization and de-capitalisation determined in accordance with Regulation 14 of these regulations;
g) adjustment of revenue due to sale of infirm power in excess of fuel cost prior to the COD as specified under Regulation 18 of these regulations; and
h) adjustment of any revenue earned by the transmission licensee by using the assets before COD.”
“10. Prudence Check of Capital Expenditure: The following principles shall be adopted for prudence check of capital cost of the existing or new projects: (1) In case of the thermal generating station and the transmission system, prudence check of capital cost may be carried out taking into consideration the benchmark norms specified/to be specified by the Commission from time to time: Provided that in cases where benchmark norms have not been specified, prudence check may include scrutiny of the capital expenditure, financing plan, interest during construction, incidental expenditure during construction for its reasonableness, use of efficient technology, cost over-run and time over-run, competitive bidding for procurement and such other matters as may be considered appropriate by the Commission for determination of tariff:”
10. The Capital Cost claimed by the petitioner is considered for the purpose of
tariff subjected to prudence check as discussed in subsequent paragraphs.
Order in Petition No. 117/TT/2015 Page 9
Cost Overrun
11. As per the Investment approval and the form-5 submitted by the petitioner,
the apportioned approved cost of the transmission asset was `906.92 lakh,
`944.97 lakh and `682.42 lakh for Asset 1,2 and 3 respectively, against which
the estimated completion cost is `994.14 lakh, `878.27 lakh and `763.31 lakh for
Asset 1, 2 and 3 respectively as per Auditor's certificate submitted by the
petitioner vide affidavit dated 20.5.2016. The petitioner has submitted RCE vide
affidavit dated 20.5.2016. Hence there is no cost overrun.
IDC and IEDC
12. The petitioner vide Auditor`s certificate dated 21.10.2014 (for Asset 1),
28.3.2016 (for Asset 2) and 8.9.2014 (for Asset 3) has submitted IDC and IEDC
up to COD on accrual basis is `24.95 lakh and `10.30 lakh for Asset 1, `22.99
lakh and (-)`1.01 lakh for Asset 2, `15.73 lakh and `5.79 lakh for Asset 3
respectively. The petitioner has further submitted the IDC discharged as below:
(` in lakh)
Asset IEDC up to COD IDC up to COD
Asset 1 10.30 24.95
Asset 2 -1.01 22.99
Asset 3 5.79 15.73
13. The petitioner has submitted that entire IEDC has been discharged up to
COD. The IDC discharged on cash basis is as below:
Order in Petition No. 117/TT/2015 Page 10
(` in lakh) Asset IDC discharged
up to COD IDC discharged during
2014-15 IDC discharged during
2015-16
Asset 1 5.48 2.79 16.68
Asset 2 4.22 3.03 15.75
Asset 3 2.69 13.04 -
14. For determination of tariff for the 2014-19 tariff period for the instant
transmission assets we have considered the capital cost as on COD after
adjusting the IDC and IEDC discharged on cash basis.
15. Based on the above submissions of the petitioner, IDC is being capitalised
up to COD for instant assets and IDC discharged during 2014-15 and 2015-16
has been added to the additional capital expenditure during 2014-15 and 2015-
16. Capital Cost after adjustment of IDC is as follows:-
(` in lakh)
Asset Capital Cost as on COD
after adjustment
of IDC
Additional Capital Expenditure after adjustment of IDC
FY 2014-15 FY 2015-16 FY 2016-17
Asset 1 562.05 235.29 106.45 90.35
Asset 2 439.03 47.27 326.97 65.00
Asset 3 351.90 181.01 74.77 155.63
Initial Spares
16. The petitioner has claimed initial spares of `55.25 lakh and `7.16 lakh
pertaining to Sub-station for Asset 1 and 3 respectively up to the cut-off date of
Order in Petition No. 117/TT/2015 Page 11
31.3.2017.The Commission has computed the allowable initial spares based on
the norms in accordance with clause 13 of the Tariff Regulations, as below:
(` in lakh) Asset 1
Particulars (As per Auditor‟s Certificate) Sub-station Transmission Line
Capital Cost up to cut-off date (excluding IDC, IEDC and land and cost of civil works)
861.34 -
Initial spares claimed 55.25 -
Norms (%) 6.00 -
Initial spares as per norms 51.45 -
Excess initial spares 3.80 -
(` in lakh)
Asset 2
Particulars (As per Auditor‟s Certificate) Sub-station Transmission Line
Capital Cost up to cut-off date (excluding IDC, IEDC and land and cost of civil works)
763.56 -
Initial spares claimed 0.00 -
Norms (%) 6.00 -
Initial spares as per norms 7.71 -
Excess initial spares 0.00 -
(` in lakh)
Asset 3
Particulars (As per Auditor‟s Certificate) Sub-station Transmission Line
Capital Cost up to cut-off date (excluding IDC, IEDC and land and cost of civil works)
656.40 -
Initial spares claimed 7.16 -
Norms (%) 6.00 -
Initial spares as per norms 41.44 -
Excess initial spares 0.00 -
17. Thus, the initial spares claimed by the petitioner for Asset 1 with regard to
Sub-station are in excess by `3.80 lakh. Hence, the same is being adjusted in
the capital cost of Asset 1. Initial spares for Asset 2 and 3 are within the
normative limits in accordance with clause 13 of the Tariff Regulations. Thus, the
Order in Petition No. 117/TT/2015 Page 12
same are allowed for computation of tariff. The capital cost as on COD
considered for the purpose of computation of tariff as follows:-
(` in lakh) Particulars Asset 1 Asset 2 Asset 3
Capital cost as on COD (cash basis) 581.52 457.81 364.94
IDC and IEDC disallowed 19.47 18.78 13.04
Excess initial spares 3.80 0.00 0.00
Capital cost as on COD considered for tariff determination
558.25 439.03 351.90
Additional Capital Expenditure
18. Clause (1) of Regulation 14 of the 2014 Tariff Regulations provides as
under:-
“(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) Undischarged 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; (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:”
19. Clause 13 of Regulation 3 of the 2014 Tariff Regulations defines
“Cut - off Date‟ means 31st March of the year closing after two years of the year of commercial operation of whole or part of the project, and in case the whole or part of the project is declared under commercial operation in the last quarter of a year, the cut - off date shall be 31st March of the year closing after three years of the year of commercial operation:”
20. The petitioner has claimed an estimated additional capital expenditure of
`581.52 lakh, `457.81 lakh and `364.94 lakh for Asset 1, 2 and 3 from COD to
31.3.2019 on account of balance and retention payments, covered under
Order in Petition No. 117/TT/2015 Page 13
Regulation 14(1) of Tariff Regulations‟ 2014. Thus the additional capital
expenditure allowed for the 2014-19 tariff period is as follows:
21. Regulation 19 (1) of the 2014 Tariff Regulations specifies as under:-
“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:*
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.”
22. The petitioner has considered debt: equity ratio as 70:30 as on COD. We
have considered debt: equity ratio of 70:30 as on COD and for additional
capitalization during 2014-15, 2015-16 and 2016-17 for instant assets. The
details of the debt: equity as on the date of COD considered for the purpose of
tariff computation for the 2014-19 tariff period are as follows:-
Order in Petition No. 117/TT/2015 Page 14
(₹ in lakh) Asset 1
As on COD
Additional capitalization
during 2014-19 As on 31.3.2019
Amount (%) Amount (%) Amount (%)
Debt 390.78 70.00 302.46 70.00 693.24 70.00
Equity 167.48 30.00 129.63 30.00 297.10 30.00
Total 558.25 100.00 432.09 100.00 990.34 100.00
Asset 2
As on COD
Additional capitalization
during 2014-19 As on 31.3.2019
Amount (%) Amount (%) Amount (%)
Debt 307.32 70.00 307.47 70.00 614.79 70.00
Equity 131.71 30.00 131.77 30.00 263.48 30.00
Total 439.03 100.00 439.24 100.00 878.27 100.00
Asset 3
As on COD
Additional capitalization
during 2014-19 As on 31.3.2019
Amount (%) Amount (%) Amount (%)
Debt 246.33 70.00 123.42 70.00 534.32 70.00
Equity 105.57 30.00 287.99 30.00 228.99 30.00
Total 351.90 100.00 411.41 100.00 763.31 100.00
Interest on Loan (“IOL”)
23. Clause (5) & (6) of Regulation 26 of the 2014 Tariff Regulations provides
as under:-
“(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:
Order in Petition No. 117/TT/2015 Page 15
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.”
24. We have considered the weighted average rate of IOL on the basis of rate
prevailing as on 1.4.2014.Further, the petitioner has prayed to allow it tobill and
adjust impact on interest on loan due to change in interest rate on account of
floating rate of interest applicable during 2014-19 period, if any from the
respondents. The petitioner has also prayed that they will approach the
Commission for suitable revision in the norms of O&M Expenses for claiming the
impact of such increase. The IOL has been worked out in accordance with
Regulation 26 of the 2014 Tariff Regulations. The petitioner‟s prayer to bill and
adjust the impact on interest on loan due to change in interest rate on account of
floating rate of interest applicable during 2014-19 period from the respondents
will be considered at the time of truing up. The details of weighted average rate
of interest are placed at Annexure-I and the IOL has been worked out as
Cumulative Repayment upto previous year 0.00 13.38 42.66 77.49 116.10
Net Loan-Opening 246.33 359.66 382.71 456.82 418.21
Additions during the year 126.71 52.34 108.94 0.00 0.00
Repayment during the year 13.38 29.29 34.83 38.61 38.61
Net Loan-Closing 359.66 382.71 456.82 418.21 379.60
Average Loan 303.00 371.19 419.77 437.52 398.91
Rate of Interest (%) 9.2384 9.1531 9.2169 9.2072 9.1959
Interest 27.99 33.98 38.69 40.28 36.68
Order in Petition No. 117/TT/2015 Page 17
Return on Equity(“ROE”)
25. Clause (1)& (2) of Regulation 24 and Clause (2) of Regulation 25(2) of the
2014 Tariff Regulations specify as under:-
“24. Return on Equity: (1) Return on equity shall be computed inrupee 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: xxx xxx” “25. Tax on Return on Equity: (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.”
26. The petitioner has claimed ROE at the rate of 20.961% after grossing up
the ROE of 15.5% with MAT rate as per the above said Regulation. The
petitioner has further submitted that the grossed up ROE is subject to truing up
based on the actual tax paid along with any additional tax or interest, duly
adjusted for any refund of tax including the interest received from IT authorities,
pertaining to the tariff period 2014-19 on actual gross income of any financial
Order in Petition No. 117/TT/2015 Page 18
year. Any under-recovery or over-recovery of grossed up ROE after truing up
shall be recovered or refunded to the beneficiaries on year to year basis.
27. The petitioner has further submitted that adjustment due to any additional
tax demand including interest duly adjusted for any refund of the tax including
interest received from IT authorities shall be recoverable/adjustable after
completion of income tax assessment of the financial year.
28. We have considered the submissions made by the petitioner. Regulation
24 read with Regulation 25 of the 2014 Tariff Regulations provides for grossing
up of return on equity with the effective tax rate for the purpose of return on
equity. It further provides that in case the generating company or transmission
licensee is paying Minimum Alternative Tax (MAT), the MAT rate including
surcharge and cess will be considered for the grossing up of return on equity.
The petitioner has submitted that MAT rate is applicable to the petitioner's
company. Accordingly, the MAT rate applicable during 2013-14 has been
considered for the purpose of return on equity, which shall be trued up with
actual tax rate in accordance with Regulation 25 (3) of the 2014 Tariff
Regulations. The ROE allowed for the instant transmission assets isgiven below:-
Tax rate for the year (%) 20.961 21.342 21.342 21.342 21.342
Rate of Return on Equity (Pre Tax) (%) 19.610 19.705 19.705 19.705 19.705
Return on Equity (Pre Tax) 26.03 33.71 40.52 45.12 45.12
Depreciation
29. Clause (2), (5) and (6) of Regulation 27 of the 2014 Tariff Regulations
provide as follows:-
Order in Petition No. 117/TT/2015 Page 20
"27. Depreciation: (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” “(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.”
30. Clause (67) of Regulation 3 of the 2014 Tariff Regulations defines useful
life as follows:-
“(67) „Useful life‟ in relation to a unit of a generating station and transmission systemfrom the COD shall mean the following, namely: (a) Coal/Lignite based thermal generating station 25 years (b) Gas/Liquid fuel based thermal generating station 25 years (c) AC and DC sub-station 25 years (d) Gas Insulated Substation (GIS) 25 years (d) Hydro generating station including pumpedStorage hydro generating stations 35 years (e) Transmission line (including HVAC & HVDC) 35 years (f) Communication system 15 years”
31. The depreciation has been worked out considering the admitted capital
cost as on COD and the additional capital expenditure admitted during 2014-19
period. The weighted average useful life for the instant assets has been
considered as 25 years in accordance with the above regulation. The detailed
calculations for depreciation for the transmission asset are worked out and