CENTRAL ELECTRICITY REGULATORY COMMISSION NEW DELHI Petition No. 325/2009 Coram: 1. Dr. Pramod Deo, Chairperson 2. Shri S.Jayaraman, Member 3. Shri V.S.Verma, Member 4. Shri M.Deena Dayalan, Member DATE OF HEARING: 11.3.2010 DATE OF ORDER: 26.4.2010 In the matter of Determination of revised transmission tariff due to additional capital expenditure during 1.4.2008 to 31.3.2009 for (i) 315 MVA, 400/220 kV, ICT at Siliguri; (ii) 400 kV D/C Biharshariff-Muzaffarpur line, Biharshariff 400 kV extension and Muzaffarpur 400 kV extension; (iii) 315 MVA, 400/220 kV, ICT-I Subhashgram sub-station (New); and (iv) LILO of one circuit of 400 kV D/C Farakka -Jeerat line at Subhashgram and establishment of 400/220 kV sub- station (New) at Subhashgram including 1X315 MVA, ICT-II under system strengthening Scheme for Eastern Region (formerly part of Tala Supplementary Scheme). And in the matter of Power Grid Corporation of India Limited, Gurgaon ..Petitioner Vs 1. Bihar State Electricity Board, Patna 2. West Bengal State Electricity Board, Kolkata 3. Grid Corporation of Orissa Ltd., Bhubaneswar 4. Damodar Valley Corporation , Kolkata 5. Power Department, Govt. of Sikkim, Gangtok 6. Jharkhand State Electricity Board, Ranchi …. Respondents The following were present: 1. Shri U.K.Tyagi, PGCIL 2. Shri Rakesh Prasad, PGCIL 3. Shri M.M.Mondal, PGCIL 4. Shri R.B.Sharma, Advocate, BSEB ORDER This petition has been filed for revision of transmission tariff due to additional capital expenditure incurred in respect of transmission elements Page 1 of 28 given in the table below together with their dates of commercial operation under System Strengthening Scheme (the transmission scheme) in Eastern Region during the period from 1.4.2008 to 31.3.2009 for Asset-I and Asset-II and 1.4.2007 to 31.3.2009 for Asset-III and Asset-IV, based on the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004 (hereinafter referred to as “the 2004 regulations: S.No. Name of Assets Date of the commercial operation 1. 315 MVA, 400/220 kV, ICT at Siliguri (Asset-I) 1.10.2006 2. 400 kV D/C Biharshariff-Muzaffarpur line, Biharshariff 400 1.11.2006 kV extension and Muzaffarpur 400 kV extension (Asset-II) 3. 315 MVA, 400/220 kV, ICT-I Subhashgram sub-station 1.4.2007 (New) (Asset-III) 4. LILO of one circuit of 400 kV D/C Farakka-Jeerat line at 1.3.2007 Subhashgram and establishment of 400/220 kV sub- station (New) at Subhashgram including 1X315 MVA, ICT- II (Asset-IV) 2. The petitioner has also prayed for reimbursement of the petition filing fee, licence fee and other expenditure in connection with the filing of the petition 3. The investment approval for the transmission scheme was accorded by the Board of Directors of the petitioner company vide letter dated 25.2.2003 at an estimated cost of Rs. 24791 lakh, which included IDC of Rs. 2364 lakh. Subsequently, the revised cost estimate for the transmission scheme was approved by Board of Directors of the petitioner company vide its letter dated 9.7.2007 at an estimated cost of Rs. 33618 lakh, which included an IDC of Rs.1837 lakh. Page 2 of 28 4. The transmission charges approved for the Asset-I and Asset-II vide order dated 6.5.2008 in Petition No. 97/2007 were revised by the Commission vide its order dated 19.8.2009 in Petition No. 68/2009. Transmission charges for Asset-III and Asset-IV were approved vide order dated 1.5.2008 in Petition No. 160/2007. The summary of the transmission charges approved by the said orders dated 19.8.2009 and 1.5.2008 is extracted hereunder: (Rs. in lakh) Asset-I Asset-II 2007-08 2008-09 2007-08 2008-09 Depreciation 34.59 35.67 486.43 496.82 Interest on Loan 48.82 48.28 927.68 917.99 Return on Equity 40.35 41.61 755.15 771.13 Advance against Depreciation 0.00 0.00 0.00 0.00 Interest on Working Capital 4.73 4.88 61.41 63.02 O & M Expenses 63.26 65.80 194.50 202.52 Total 191.76 196.25 2425.16 2451.48 (Rs. in lakh) Asset-III Asset-IV 2006-07 2007-08 2008-09 2007-08 2008-09 (Pro rata) Depreciation 23.29 282.27 282.27 37.33 37.33 Interest on Loan 44.66 529.42 507.52 51.18 47.54 Return on Equity 34.09 412.69 412.69 43.53 43.53 Advance against Depreciation 0.00 0.00 0.00 0.00 27.18 Interest on Working Capital 3.21 38.84 39.36 6.03 6.67 O & M Expenses 22.86 285.13 296.67 63.26 65.80 Total 128.10 1548.35 1538.51 201.33 228.05 5. The relevant details of the capital expenditure of the transmission assets claimed by the petitioner are as under: (Rs. in lakh) Capital cost as Capital expenditure Additional Capital cost Additional Capital cost on the date of from the date of capital as on 1.4.2008 Capital as on 1.4.2009 commercial commercial expenditure Expenditure operation operation to during 2007-08 during 2008-09 31.3.2007 Asset-I 866.38 64.55 59.97 990.90 10.74 1001.64 Asset-II 17432.95 245.91 761.24 18440.10 101.35 18541.45 Asset-III 1036.90 - 0.00 1036.90 49.81 1086.71 Asset-IV 9657.71 171.80 651.26 10480.77 461.51 10942.28 6. The petitioner has claimed the transmission charges as under: Page 3 of 28 (Rs. in lakh) Asset- I Asset-II Asset- III Asset-IV 2008-09 2008-09 2007-08 2008-09 2007-08 2008-09 Depreciation 35.87 498.12 37.33 38.22 291.55 306.96 Interest on Loan 48.63 921.35 51.18 49.24 552.02 566.67 Return on Equity 41.84 773.26 43.53 44.57 426.36 449.73 Advance against Depreciation 0.00 0.00 0.00 26.28 0.00 0.00 Interest on Working Capital 4.90 63.14 6.03 6.73 39.63 41.46 O & M Expenses 65.80 202.52 63.26 65.80 285.13 296.67 Total 197.04 2458.39 201.33 230.84 1594.69 1661.49 7. The details submitted by the petitioner in support of its claim for interest on working capital are given hereunder: (Rs. in lakh) Asset- I Asset-II Asset- III Asst-IV 2008-09 2008-09 2007-08 2008-09 2007-08 2008-09 Maintenance Spares 9.46 189.41 10.37 10.99 97.06 102.88 O & M expenses 5.48 16.88 5.27 5.48 23.76 24.72 Receivables 32.84 409.73 33.56 38.47 265.78 276.92 Total 47.78 616.02 49.20 54.94 386.60 404.52 Rate of Interest 10.25% 10.25% 12.25% 12.25% 10.25% 10.25% Interest 4.90 63.14 6.03 6.73 39.63 41.46 8. BSEB in its reply dated 22.2.2010 has submitted that the additional capital expenditure claimed in the petition are mainly on account of retention/final payments and a confirmation be taken from the petitioner that no part of the claim belongs to any other category not covered by Regulation 53 of the 2004 regulations. The petitioner in its rejoinder has confirmed that the expenditure shown in the petition for the year 2007-08 and 2008-09 has been claimed as per Regulation 53 (2) of the 2004 regulation on account of final/retention payments. In view of the clarification of the petitioner, the objections of BSEB no more survive. BSEB has also objected to considering O & M charges, levies, duties, cess or any other Page 4 of 28 statutory taxes etc., reimbursement of the petition filing fee and licence fee. These concerns have been taken care of in the order. CAPITAL COST 9. The details submitted by the petitioner in support of its claim for additional capital expenditure are given hereunder: (Rs. in lakh) Asset-I Asset-II Asset-III Asset-IV Amount Nature and Amount Nature and Amount Nature and Amount Nature and Year (Rs. in lakh) details of Year (Rs. in lakh) details of Year (Rs. in details of Year (Rs. in lakh) details of expenditure expenditure lakh) expenditure expenditure 2007-08 Building, Balance/ transmission retention line and payments sub-station= Rs. 651.26 lakh 2008- sub-station = retention 2008- Transmission Retention/Fi 2008-09 sub-station Balance 2008-09 Building, Balance/ 09 Rs. 10.74 lakh /Final 09 line= nal = Rs. 49.81 payments transmission retention payments Rs. 101.35 payments lakh line and payments lakh sub-station= Rs. 461.51 lakh Total Rs. 10.74 Rs. 101.35 Rs. 49.81 Total Rs. 1112.77 lakh lakh lakh lakh 10. The petitioner has submitted audited capital cost up 31.2.2009 duly certified by Chartered Accountant. The additional capital expenditure claimed is within the original scope of work and on account of retention/final/balance payments. The additional expenditure sought to be capitalised is allowed under Regulation 53 of the 2004 regulations. Initial spares 11. Clause (1) of the Regulation 52 of the 2004 regulations inter alia provides that,- “(1) Subject to prudence check by the Commission, the actual expenditure incurred on completion of the project shall form the basis for determination of final tariff.