1 CENTRAL ELECTRICITY REGULATORY COMMISSION NEW DELHI Coram 1. Shri Ashok Basu, Chairman 2. Shri K.N.Sinha, Member Petition No.71/2002 In the matter of Approval of Tariff for Malda-Bongaigaon Transmission Line for the period from 1.4.2001 to 31.3.2004. And in the matter of Power Grid Corporation of India Ltd. …. Petitioner Vs 1. Bihar State Electricity Board, Patna 2. West Bengal State Electricity Board, Kolkata 3. Grid Corporation of Orissa Ltd, Bhubneshwar 4. Damodar Valley Corporation, Kolkata 5. Power Deptt., Govt. of Sikkim, Gangtok 6. Jharkand State Electricity Board, Ranchi …. Respondents The following were present: 1. Shri Prashant Sharma, PGCIL 2. Shri S. S. Sharma, PGCIL 3. Shri U.K. Tyagi, PGCIL 4. Shri Manoj Rastogi, PGCIL 5. Shri A.K. Nagpal, PGCIL 6. Shri S. Mehrotra, Dy. Mgr (F), PGCIL 7. Shri S.K. Jain, Manager (Law), PGCIL 8. Shri J Sridharan, ED(P), PGCIL 9. Shri Mahesh K.R., PGCIL 10. Shri R.K. Vohra, ED (Comml), PGCIL
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CENTRAL ELECTRICITY REGULATORY COMMISSION NEW DELHI
Coram
1. Shri Ashok Basu, Chairman 2. Shri K.N.Sinha, Member
Petition No.71/2002
In the matter of Approval of Tariff for Malda-Bongaigaon Transmission Line for the period from 1.4.2001 to 31.3.2004. And in the matter of Power Grid Corporation of India Ltd. …. Petitioner Vs
1. Bihar State Electricity Board, Patna 2. West Bengal State Electricity Board, Kolkata 3. Grid Corporation of Orissa Ltd, Bhubneshwar 4. Damodar Valley Corporation, Kolkata 5. Power Deptt., Govt. of Sikkim, Gangtok 6. Jharkand State Electricity Board, Ranchi …. Respondents
(i) New 400/220 kV sub-station of 315 MVA each at Misa, Balipara
and Bongaigaon
(ii) Extension of 400 kV sub-station of Power Grid at Malda
(iii) Extension of 220 kV Mariani (ASEB) sub-station by two 220 kV
bays and Tezpur (ASEB) substation by one 220 kV.
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3. When Ministry of Power accorded its administrative approval in February 1995,
the Kathalguri-Mariani transmission line [2(A) (i)] had already been commissioned,
and the remaining lines and sub-stations were to be commissioned during the year
1995-1996. Malda-Bongaigaon transmission line was actually commissioned on 1-4-
2000. Ministry of Power issued a fresh letter on 22.3.2001 granting approval to the
revised cost estimates of the Kathalguri Transmission System for Rs.101010 lakh,
including IDC of Rs.24854 lakh based on fourth quarter 1998 price level. The
apportioned approved cost and completion cost in respect of Malda-Bongaigaon
transmission line [2(A) (v)], the subject matter of the present petition, as submitted by
the petitioner, are as under:
(Rs. in crore) Apportioned Approved
Cost Completion Cost
Capital cost 200.79 208.41IEDC 23.46 26.34IDC 73.18 121.60
Total 297.43 356.35
4. Malda-Bongaigaon transmission line is an inter-regional transmission line
shared by the constituents of Eastern and North-Eastern regions. The petitioner had
filed petition No 48/2000 for approval of tariff for the period from 1.4.2000 to
31.3.2001. The said petition was disposed of by order dated 4.7.2002. The
Commission had decided that 50% of the tariff would be shared by the constituents of
Eastern Region. As regards the North-Eastern Region, it was directed that the
constituents would pay the transmission charges @ 35 paise per kWh under UCPTT
scheme. Accordingly, in the present petition, the petitioner has sought approval of
tariff falling to the share of Eastern regional constituents.
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5. Based on the above-noted facts, the petitioner has sought approval for
transmission charges for the period from 1.4.2001 to 31.3.2004 as under:
(Rs. in lakh)
Transmission Tariff 2001-2002 2002-2003 2003-2004 Interest on Loan
3002.34 2854.23 2657.83
Interest on Working Capital
192.74 182.69 203.09
Depreciation
962.64 963.60 964.57
Advance against Depreciation
583.65 0.00 1014.18
Return on Equity
1912.20 1918.18 1924.17
O & M Expenses
802.36 850.68 899.32
Total 7455.93 6769.38 7663.16
6. The petitioner has furnished the following details in support of its claim for
interest on working capital:
(Rs. in lakh) 2001-2002 2002-2003 2003-2004 Spares 366.48 389.47 413.84O & M expenses 66.86 70.89 74.94Receivables 1242.65 1128.23 1277.19Total 1675.99 1588.59 1765.97Rate of Interest 11.50% 11.50% 11.50%Interest 192.74 182.69 203.09
7. In addition, the petitioner has prayed for approval of other charges like Income
Tax, incentive, Development Surcharge, late payment surcharge, other statutory
taxes, levies, cess, filing fee, etc in terms of the notification dated 26.3.2001.
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CAPITAL COST
8. As laid down in the notification dated 26.3.2001, the project cost as approved
by CEA or an appropriate independent agency, other than Board of Directors of the
transmission company, as the case may be, shall be the basis for computation of
tariff.
9. Tariff for the transmission line was notified by the Commission vide its order
dated 4.7.2002 in petition No 48/2000 by considering cost of Rs. 29743.02 lakh as on
1.4.2000, though the applicant had claimed tariff based on estimated completion cost
of Rs. 35635.00 lakh. The petitioner had filed an application for review of order dated
4.7.2002, being Review Petition No 102/2002 for review of the capital cost considered
in petition No 48/2000. The application for review was dismissed by the Commission
vide its order dated 1.1.2003. Thus, the capital cost of Rs. 29743.02 lakh considered
in the order of 4.7.2002 has acquired finality.
10. According to the petitioner, the actual completion cost of Kathalguri
Transmission System is Rs. 109023.00 lakh and the apportioned cost of Malda-
Bongaigaon transmission line will be Rs. 35635.00 lakh. Therefore, the petitioner in
the present petition has based its claim for tariff on the estimated completion cost of
Rs. 35635.00 lakh.
11. The revised cost estimate of Rs. 109023.00 lakh has not yet been approved by
the competent authority. The last approved capital cost of Kathalguri Transmission
System is Rs. 101010.00 lakh. Out of this the apportioned cost of Malda-Bongaigaon
transmission line is Rs. 29743.00 lakh. Accordingly, for the present petition, we have
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considered the capital cost of Rs. 29743.02 lakh considered by the Commission in its
order of 4.7.2002 in petition No 48/2000.
ADDITIONAL CAPITALISATION
12. Clause 1.10 of the notification dated 26.3.2001 provides that tariff revisions
during the tariff period on account of capital expenditure within the approved project
cost incurred during the tariff period may be entertained by the Commission only if
such expenditure exceeds 20% of the approved cost. In all cases, where such
expenditure is less than 20%, tariff revision shall be considered in the next tariff
period.
13. The petitioner has claimed the additional capital expenditure for the period after
01.04.2001 as below:
(Rs. in lakh)
01.04.2001 to 31.03.2002 0.00 Balance anticipated capital expenditure to be incurred after 31.03.2002
74.81
74.81 Approved cost 35635.25 %age of the approved cost 0.21%
14. As the additional capital expenditure does not exceed 20% of he approved cost
and has also not been approved by the competent authority, the same has not been
considered in the calculation.
Extra Rupee Liability 15. Clause 1.13 (a) of the notification dated 26.3.2001 provides:
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(a) Extra rupee liability towards interest payment and loan repayment actually
incurred, in the relevant year shall be admissible; provided it directly arises
out of foreign exchange rate variation and is not attributable to utility or its
suppliers or contractors. Every utility shall follow the method as per the
Accounting Standard-11 (Eleven) as issued by the Institute of Chartered
Accountants of India to calculate the impact of exchange rate variation on
loan repayment.
Any foreign exchange rate variation to the extent of the dividend paid out
on the permissible equity contributed in foreign currency, subject to the
ceiling of permissible return shall be admissible. This, as and when paid,
may be spread over the twelve-month period in arrears.
16. The petitioner has claimed the Foreign Exchange Rate Variation in accordance
with the following method:
Outstanding loan as on 31.3.2001 (in foreign currency) X (exchange rate as on
31.3.2001 - exchange rate as on the date of commercial operation/1.4.92)
17. The above amount of the Foreign Exchange Rate Variation is added in the
capital cost as on 1.4.2001 (base capital cost for the tariff period) and depreciation is
worked out on the above capital cost.
18. The Commission has decided that the Foreign Exchange Rate Variation to be
capitalised for adding in the gross block as on 01.04.2001 would be arrived at in the
following manner:
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Foreign Loan outstanding as on 31.03.2001 x (Exchange Rate as on
31.03.2001 - Exchange Rate as on the date of commercial
operation/01.04.1992 as given in the petition).
19. The Foreign Exchange Rate Variation amount calculated in the above manner
has been added in the loan and equity as on 01.04.2001 in the debt-equity ratio in
which the last tariff was allowed by the Commission.
20. Therefore, the Foreign Exchange Rate Variation has been considered as per
the above decision of the Commission. In the calculation, however foreign loan
outstanding amount as on 31.03.2001 has been reduced pro rata as per admitted
capital cost at the time of previous tariff setting for working out the Foreign Exchange
Rate Variation. Thus, the following capital expenditure has been considered in the
calculation of tariff:
Rs.in lakhCapital Expenditure upto 31.03.2001 as per previous tariff setting 29743.02Pro rata FERV upto 31.03.2001 113.56Capital Expenditure upto 31.03.2001 29856.58Additional Capital Expenditure after 31.03.2001 0Capital Expenditure considered for determination of Tariff 29856.58
21. The Foreign Exchange Rate Variation allowed is subject to the condition that
the petitioner would furnish a certificate within four weeks of this order that there has
been no drawl of the foreign loan after the date of commercial operation of the Malda-
Bongaigaon transmission line. If petitioner fails to submit the certificate within
stipulated time frame, no amount on account of the Foreign Exchange Rate Variation
would be allowed as “pass through” in tariff of the concerned line.
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SOURCES OF FINANCING. DEBT – EQUITY RATIO
22. As per clause 4.3 of the notification dated 26.3.2001, capital expenditure of the
transmission system shall be financed as per approved financial package set out in
the techno-economic clearance of CEA or as approved by an appropriate independent
agency, as the case may be.
23. The petitioner has claimed tariff on the basis of debt and equity up to
31.03.2001 as was admitted by the Commission in its order dated 4.7.2002 in petition
No 48/2000. The Foreign Exchange Rate Variation amount as claimed has been
added by the petitioner in the loan and equity as on 01.04.2001 in the debt-equity ratio
of 50:50.
24. As the Commission had allowed actual debt and equity (actual debt-equity ratio
of 66.58:33.42 on the basis of gross loan and equity up to 31.03.2001) for
determination of annual transmission charges for the period up to 31.03.2001, the
same has been considered for working out the annual transmission charges in the
present petition. The Foreign Exchange Rate Variation amount as approved in para
20 above has been added to the loan and equity as on 01.04.2001 in the ratio of
66.58: 33.42.
INTEREST ON LOAN
25. As provided in the notification dated 26.3.2001, interest on loan capital is to be
computed on the outstanding loan, duly taking into account the schedule of
repayment, as per the financial package approved by CEA or any independent
agency.
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26. In our calculations, the interest on loan has been worked out in keeping with
the provisions of the notification dated 26.3.2001 in the following manner:
(i) The gross amount of loan, repayment of loan up to 31.03.2001 and net
outstanding loan as on 31.03.2001 as considered by the Commission in
its order dated 4.7.2002 in petition No 48/2000 has been considered.
(ii) The repayments for the year 2001-02 to 2003-04 and rate of interest etc.
of the above loan has been taken as per the loan details submitted by
the petitioner in the affidavits dated 05.02.2003, 26.03.2003 and
30.04.2003.
(iii) Notional loan arising out of the Foreign Exchange Rate Variation has
been worked out in accordance with the principles contained in para 19
above.
(iv) Repayment of the loan during the year has been worked out in
accordance with the following formula or as per the actual repayment
during the year as claimed by the petitioner, whichever is higher:
Actual repayment during the year x normative net loan at the beginning
of the year/ actual net loan at the beginning of the year.
(v) Rate of interest etc. of the above notional loan has been taken of the
respective foreign loan from the loan details submitted by the petitioner
in the affidavits dated 05.02.2003, 26.03.2003 and 30.04.2003.
27. Based on the above methodology, the details of calculation of interest are as
given below:
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Calculation of Interest on loan
(Rs. in lakh) Details of Loan 2001-02 2002-03 2003-04 No. of days in the Year 365 365 366
Bond-I Gross Loan -Opening 535.30 535.30 535.30Cumulative Repayment up to previous Year
259.88 535.30 535.30
Net Loan-Opening 275.42 0.00 0.00Repayment during the year 275.42 0.00 0.00Net Loan-Closing 0.00 0.00 0.00Rate of Interest 9.00% 9.00% 9.00%Interest 23.29 0.00 0.00Repayment Schedule Bullet on 10.03.2002
Bond-III (Issue-II) Gross Loan –Opening 589.09 589.09 589.09Cumulative Repayment up to previous Year
0.00 589.09 589.09
Net Loan-Opening 589.09 0.00 0.00Repayment during the year 589.09 0.00 0.00Net Loan-Closing 0.00 0.00 0.00Rate of Interest 9.75% 9.75% 9.75%Interest 33.05 0.00 0.00Repayment Schedule Bullet on 28.10.2001 Bond-III (Issue-I) Gross Loan -Opening 94.25 94.25 94.25Cumulative Repayment up to Previous Year
0.00 94.25 94.25
Net Loan-Opening 94.25 0.00 0.00Repayment during the year 94.25 0.00 0.00Net Loan-Closing 0.00 0.00 0.00Rate of Interest 13.50% 13.50% 13.50%Interest 11.61 0.00 0.00Repayment Schedule Bullet on 28.02.2002
IOB Loan Gross Loan -Opening 4126.83 4126.83 4126.83Cumulative Repayment up to previous Year
0.00 0.00 0.00
Net Loan-Opening 4126.83 4126.83 4126.83Repayment during the year 0.00 0.00 412.68Net Loan-Closing 4126.83 4126.83 3714.15Rate of Interest 12.50% 12.50% 12.50%Interest 515.85 515.85 508.81Repayment Schedule 10 Annual Installments from 11.02.2004
Grid Bond-VII Gross Loan -Opening 582.98 582.98 582.98Cumulative Repayment up to previous Year
0.00 0.00 0.00
Net Loan-Opening 582.98 582.98 582.98Repayment during the year 0.00 0.00 116.60
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Net Loan-Closing 582.98 582.98 466.38Rate of Interest 13.64% 13.64% 13.64%Interest 79.52 79.52 69.05Repayment Schedule 5 Annual installments from 04.08.2003
Corporation Bank Gross Loan -Opening 291.07 291.07 291.07Cumulative Repayment up to previous Year
0.00 0.00 0.00
Net Loan-Opening 291.07 291.07 291.07Repayment during the year 0.00 0.00 14.55Net Loan-Closing 291.07 291.07 276.52Rate of Interest 12.25% 12.25% 12.25%Interest 35.66 35.66 35.55Repayment Schedule 20 Half yearly installments from10.03.2004
PNB Gross Loan -Opening 582.98 582.98 582.98Cumulative Repayment up to previous Year
0.00 0.00 0.00
Net Loan-Opening 582.98 582.98 582.98Repayment during the year 0.00 0.00 58.30Net Loan-Closing 582.98 582.98 524.68Rate of Interest 12.01% 12.01% 12.01%Interest 70.02 70.02 69.98Repayment Schedule 10 Annual installments from 30.03.2004
SBI-II Gross Loan -Opening 4371.90 4371.90 4371.90Cumulative Repayment up to previous Year
0.00 0.00 0.00
Net Loan-Opening 4371.90 4371.90 4371.90Repayment during the year- 0.00 0.00 728.65Net Loan-Closing 4371.90 4371.90 3643.25Rate of Interest 12.07% 12.07% 12.07%Interest 527.69 527.69 462.09Repayment Schedule 6 Annual installments from 3.7.2003
BOI (Foreign Currency Loan) Gross Loan -Opening 1672.82 1672.82 1672.82Cumulative Repayment up to previous Year
0.00 0.00 0.00
Net Loan-Opening 1672.82 1672.82 1672.82Repayment during the year- 10th June 0.00 0.00 0.00
1672.82 1672.82 1672.82Repayment during the year- 10th December
0.00 0.00 0.00
Net Loan-Closing 1672.82 1672.82 1672.82Rate of Interest 6.31% 6.31% 6.31%Interest 105.55 105.55 105.55Repayment Schedule Equal Half yearly installments from 10.06.2004
GOI Loan
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Gross Loan -Opening 6956.41 6956.41 6956.41Cumulative Repayment up to previous Year
0.00 334.56 826.56
Net Loan-Opening 6956.41 6621.85 6129.85Repayment during the year 334.56 491.99 695.64Net Loan-Closing 6621.85 6129.85 5434.21Rate of Interest Calculated
separately
Interest 1058.93 1004.23 923.26Repayment Schedule-Bullet on calculated
separately
Notional Loan-BOI (Foreign Currency Loan)
Gross Loan -Opening 75.61 75.61 75.61Cumulative Repayment up to previous Year
0.00 0.00 0.00
Net Loan-Opening 75.61 75.61 75.61Repayment during the year- 10th June 0.00 0.00 0.00
75.61 75.61 75.61Repayment during the year- 10th December
0.00 0.00 0.00
Net Loan-Closing 75.61 75.61 75.61Rate of Interest 6.31% 6.31% 6.31%Interest 4.77 4.77 4.77Repayment Schedule Considered same as of BOI (Foreign Currency)loan i.e. Equal
Half yearly from 10.06.2004
Total Loan Gross Loan -Opening 19879.24 19879.24 19879.24Cumulative Repayment up to previous Year
259.88 1553.21 2045.20
Net Loan-Opening 19619.36 18326.04 17834.04Repayment during the year 1293.32 491.99 2026.42Net Loan-Closing 18326.04 17834.04 15807.62Interest 2465.94 2343.29 2179.05 28. The table below gives the year-wise comparative details of interest claimed by
6.3 The differences in NOMLL and NOMBN as calculated by the petitioner and as allowed are mainly on account of certain
expenses disallowed by us as explained in preceding paragraphs. Using these normative values, operation and maintenance charges
have been calculated.
64. In our calculations the escalation factor of 6% per annum has been used. In accordance with the notification, if the escalation
factor computed from the observed data lies in the range of 4.8% to 7.2%, this variation shall be absorbed by the petitioner. In case of
deviation beyond this limit, adjustment shall be made on by applying actual escalation factor arrived at on the basis of weighted price
index of CPI for industrial workers (CPI_IW) and index of selected component of WPI (WPI_TR).
65. The details of operation and maintenance expenses allowed are given hereunder:
2001-02 2002-03 2003-04
Line length in Ckm
No. of bays
O&M expenses
(Rs. in lakh)
Line length in Ckm
No. of bays
O&M expenses
(Rs. in lakh)
Line length in Ckm
No. of bays
O&M expenses (Rs. in lakh)
864 4 757.172 864 4 802.581 864 4 850.765
RETURN ON EQUITY
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66. In accordance with the notification, the petitioner is entitled to return on equity at the rate of 16% per annum.
67. The equity up to 31.03.2001 as considered by the Commission in previous tariff setting along with notional equity arising out of
the Foreign Exchange Rate Variation worked out above has been considered for working out the return on equity. Thus, the following
amount of equity has been considered in the calculation
of return of equity:
Rs. In lakh
Pro rata Equity allowed by the Commission for previoustariff setting 9939.40Notional Equity arising out of FERV 37.95
Total 9977.35
68. On the above basis, the petitioner shall be entitled to return on equity of Rs. 1596.38 lakh each year during the tariff period, by
considering return @ 16%.
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69. The difference in Return on Equity as claimed and as worked out is due to
(i) Pro rata reduction in equity due to reduction in admitted capital cost at the time of previous tariff setting,
(ii) Additional equity corresponding to capital expenditure subsequent to 31.03.2001 considered in the petition which has not
been considered in the present order, and
(iii) Division of the Foreign Exchange Rate Variation into notional loan and equity in the ratio of 50:50 in the petition against
actual debt-equity ratio considered in the calculation.
INTEREST ON WORKING CAPITAL
70. As provided in the notification dated 26.3.2001, the interest on working capital shall cover:
(a) Operation and maintenance expenses (cash) for one month;
(b) Maintenance spares at a normative rate of 1% of the capital cost less 1/5th of the initial capitalised spares. Cost of
maintenance spares for each subsequent year shall be revised at the rate applicable for revision of expenditure on
operation and maintenance of the transmission system; and
(c) Receivables equivalent to two months’ average billing calculated on normative availability level, which is 98%.
71. The petitioner has claimed the maintenance spares on the basis of maintenance spares allowed in the previous tariff setting
escalating the same as per weighted price index taking into account 60% of weightage for WPI & 40% of CPI and @ 6% per annum for
the years 2001-2002 to 2003-2004. The amount of capitalised initial spares has been indicated as Nil in Form-6 of the petition.
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72. In keeping with the above methodology, working capital has been worked out. Amount of spares in working capital calculations
for the tariff period 1.4.2001 to 31.3.2004 have been worked out @ 1% of approved capital cost as on 1.4.1997 and the same has been
subsequently escalated as per WPI/CPI for the respective years upto 31.3.2004 and thereafter escalation @ 6% per annum has been
considered. The value of initial capitalised spares has not been considered as the transmission system is more than 5 years old. The
petitioner has claimed interest on working capital at the rate of 11.5%, based on annual SBI PLR for the year 2001-2002, which has
been allowed separately by the Commission in certain other petitions and, therefore, the same has been allowed here also despite the
objection of some of the respondents. The detailed calculations in support of Interest on Working Capital are as under:
Interest on Working Capital
(Rs. In lakh) Working Capital 2001-02 2002-03 2003-04Escalation for Maintenance Spares 6%Period in 2000-01 0.92On Capital Expenditures upto DOCO 297.43On Capital Expenditures during the year 2000-01