before the maharashtra electricity regulatory commission ... 58 42/order - case no 27 of 2013... ·...
TRANSCRIPT
Order [Case No. 27 of 2013] Page 1 of 61
Before the
MAHARASHTRA ELECTRICITY REGULATORY COMMISSION
World Trade Centre, Centre No.1, 13th
floor, Cuffe Parade, Mumbai 400 005
Tel. No. 022 22163964/65/69 – Fax 022 22163976
E-mail [email protected]
Website: www.mercindia.org.in / www.merc.gov.in
Case No. 27 of 2013
IN THE MATTER OF
Petition filed by the Jaigad Power Transco Limited (JPTL), for Truing up of
Aggregate Revenue Requirement (ARR) for FY 2011-12 and for approval of ARR as
per Multi Year Tariff Principles for second control period from FY 2012-13 to FY
2015-16
Shri V.P. Raja, Chairman
Shri Vijay L. Sonavane, Member
Smt. Chandra Iyengar, Member
Date: 16 August, 2013
ORDER
Upon directions from the Maharashtra Electricity Regulatory Commission (hereinafter
referred as MERC or the Commission), and in accordance with MERC (Terms and
Conditions of Tariff) Regulations, 2005 and MERC (Multi Year Tariff) Regulations, 2011,
M/s Jaigad Power Transco Limited (JPTL), submitted its application on affidavit for Truing
up of Aggregate Revenue Requirement (ARR) for FY 2011-12 and for approval of
Aggregate Revenue Requirement as per MYT Principles for second control period from FY
2012-13 to FY 2015-16. The Commission, in exercise of the powers vested in it under
Section 61 and Section 62 of the Electricity Act, 2003 (EA, 2003) and all other powers
enabling it in this behalf, and after taking into consideration all the submissions made by
JPTL, issues raised during the Public Hearing, if any, and all other relevant material, issues
the following Order.
Order [Case No. 27 of 2013] Page 2 of 61
Table of Contents
1. BACKGROUND & BRIEF HISTORY ......................................................................... 5
1.1 Background .............................................................................................................. 5
1.2 Tariff Regulations .................................................................................................... 5 1.3 MERC Order on approval of Aggregate Revenue Requirement for FY 2010-11 ... 6 1.4 MERC Order on approval of Aggregate Revenue Requirement for FY 2011-12 ... 6 1.5 MERC MYT Regulations ........................................................................................ 6 1.6 MERC Order on approval of MYT business plan for JPTL for the second control
period ....................................................................................................................... 6
1.7 Petition for Truing up of ARR for FY 2011-12 and approval of MYT for FY
2012-13 to FY 2015-16 ........................................................................................... 7 1.8 Admission of Petition and Public Hearing Process ................................................. 7 1.9 Organisation of the Order ........................................................................................ 8
2. TRUING UP OF AGGREGATE REVENUE REQUIREMENT FOR FY 2011-12 . 9
2.1 Operation and Maintenance Expenses for FY 2011-12 .......................................... 9
2.1.1 Employee Expenses ............................................................................................. 9 2.1.2 Administrative & General (A&G) Expenses ..................................................... 10 2.1.3 Repairs and Maintenance (R&M)Expenses ...................................................... 11
2.1.4 O&M Expenses for terminal bays ..................................................................... 11 2.2 Capital Expenditure and Capitalisation ................................................................. 13
2.3 Depreciation .......................................................................................................... 18
2.4 Interest Expenses ................................................................................................... 20
2.5 Interest on Working Capital .................................................................................. 22 2.6 Contribution to Contingency Reserves for FY 2011-12 ........................................ 24
2.7 Return on Equity (RoE) ......................................................................................... 24 2.8 Income Tax ............................................................................................................ 25 2.9 Non-Tariff Income ................................................................................................. 26
2.10 Incentive on Transmission Availability ................................................................. 26
2.11 Carrying cost for delayed recovery of transmission charges ................................. 27 2.12 Sharing of Gains/Losses for FY 2011-12 .............................................................. 28 2.13 Aggregate Revenue Requirement of JPTL for FY 2011-12 .................................. 31 2.14 Revenue Gap after truing up of FY 2011-12 ......................................................... 32
3. AGGREGATE REVENUE REQUIRMENT FOR MYT SECOND CONTROL
PERIOD FROM FY 2012-13 TO FY 2015-16 ........................................................... 33
3.1 Operation and Maintenance Expenses ................................................................... 33 3.2 Capital Expenditure and Capitalisation ................................................................. 36 3.3 Depreciation .......................................................................................................... 40
3.4 Interest on Long-Term loan ................................................................................... 41 3.5 Interest on Working capital ................................................................................... 44
3.6 Contribution to Contingency Reserve ................................................................... 45 3.7 Return on Equity .................................................................................................... 45 3.8 Non tariff income .................................................................................................. 47 3.9 Income Tax ............................................................................................................ 47
3.10 Carrying cost for delayed recovery of transmission charges. ................................ 49
3.11 Performance parameters: Transmission Loss and transmission Availability ........ 52
Order [Case No. 27 of 2013] Page 3 of 61
3.12 Aggregate Revenue Requirement .......................................................................... 52
4. SUMMARY OF DIRECTIVES UNDER MYT BUSINESS PLAN ORDER AND
RESPONSES ................................................................................................................ 55
5. RECOVERY OF TRANSMISSION CHARGES ....................................................... 57
6. APPLICABILITY OF THE ORDER .......................................................................... 59
Order [Case No. 27 of 2013] Page 4 of 61
Abbreviations
A&G Administrative and General
ARR Aggregate Revenue Requirement
CERC Central Electricity Regulatory Commission
Commission/MERC Maharashtra Electricity Regulatory Commission
EA, 2003 The Electricity Act, 2003
EPC Engineering Procurement and Construction
GFA Gross Fixed Assets
IDC Interest During Construction
IT Income Tax
JPTL Jaigad Power Transco Limited
JSWEL JSW Energy Limited
JV Joint Venture
MAT Minimum Alternate Tax
MM Margin Money
MSETCL Maharashtra State Electricity Transmission Company Ltd.
MSLDC Maharashtra State Load Despatch Centre
MW Mega Watt
MYT Multi Year Tariff
O&M Operation and Maintenance
PLR Prime Lending Rate
R&M Repair and Maintenance
ROC Registrar of Companies
RoE Return on Equity
RTL Rupee Term Loans
SBI State Bank of India
TSU Transmission System User
TVS Technical Validation Session
WPI Wholesale Price Index
Order [Case No. 27 of 2013] Page 5 of 61
1. BACKGROUND & BRIEF HISTORY
1.1 Background
M/s Jaigad Power Transco Limited (JPTL) has filed the present Petition for Truing up of the
ARR for FY 2011-12 and for approval of Aggregate Revenue Requirement as per MYT
Principles for the second control period from FY 2012-13 to FY 2015-16. This Order
disposes off the said Petition.
JPTL is a Joint Venture Company between JSW Energy Limited (JSWEL) and Maharashtra
State Electricity Transmission Company Ltd. (MSETCL), set up for the purpose of
developing, operating and maintaining a transmission system, consisting of two
transmission lines along with associated equipment and terminal bays at MSETCL’s New
Koyna and Karad substations.
Table 1.1: Details of Transmission System of JPTL
Name of the line Line length (Revised) &
Capacity District Interface Point
Jaigad-New
Koyna
transmission line
55 km – 400 kV Double
Circuit (Quad)
Transmission Line
Ratnagiri,
Maharashtra
MSETCL
Substation,
New Koyna
Jaigad-Karad
transmission line
110 km – 400 kV Double
Circuit (Quad)
Transmission Line
Ratnagiri
/Satara,
Maharashtra
MSETCL
Substation,
Karad
The Commission had granted a transmission licence to JPTL (License No 1 of 2009) on 8
February, 2009 for a period of 25 years for the aforesaid transmission system.
1.2 Tariff Regulations
The Commission, in exercise of the powers conferred by the Electricity Act, 2003 (EA
2003), notified the Maharashtra Electricity Regulatory Commission (Terms and Conditions
of Tariff) Regulations, 2005, (hereinafter referred as the MERC Tariff Regulations) on 23
August, 2005. These Regulations superseded the MERC (Terms and Conditions of Tariff)
Regulations, 2004.
Order [Case No. 27 of 2013] Page 6 of 61
1.3 MERC Order on approval of Aggregate Revenue Requirement for FY 2010-11
JPTL submitted a Petition for approval of ARR for FY 2010-11 on 1 December, 2010 as per
MERC Tariff Regulations. The Commission issued the Order for provisional approval of
the ARR for FY 2010-11 for JPTL on 25 May, 2011 in Case No. 97 of 2010.
1.4 MERC Order on approval of Aggregate Revenue Requirement for FY 2011-12
JPTL submitted a Petition for approval of ARR for FY 2011-12 on 28 November, 2011 as
per MERC Tariff Regulations. The Commission issued the Order for provisional approval
of the ARR for FY 2011-12 for JPTL on 16 May, 2012 in Case No. 170 of 2011.
1.5 MERC MYT Regulations
The Commission, in exercise of the powers conferred by the EA 2003, notified the
Maharashtra Electricity Regulatory Commission (Multi Year Tariff) Regulations, 2011,
(hereinafter referred as the MERC MYT Regulations) on 4 February, 2011. These
Regulations are applicable for the second control period starting from FY 2012-13 to FY
2015-16 along with its amendment vide notification dated 21 October, 2011 called
Maharashtra Electricity Regulatory Commission (Multi Year Tariff) (First Amendment)
Regulations, 2011.
1.6 MERC Order on approval of MYT business plan for JPTL for the second
control period
Pursuant to notification of MERC MYT Regulations on 4 February, 2011, JPTL submitted
its MYT business plan Petition for the second control period under affidavit on 6 June,
2012. Subsequent to submission of the said MYT business plan Petition, the Commission
held technical validation sessions (TVS) in the matter on 5 July, 2012 and 30 July, 2012.
The Commission, in exercise of the powers vested in it under Section 61 and Section 62 of
the Electricity Act, 2003 and all other powers enabling it in this behalf, and after taking into
consideration all the submissions made by JPTL, issues raised during the public hearing,
and all other relevant material, issued the Order on 20 December, 2012 in the matter of Case
57 of 2012 for approval of MYT business plan for JPTL for the second control period from
FY 2012-13 to FY 2015-16.
Vide the aforesaid Order, the Commission had directed JPTL to submit True up Petition of
ARR for FY 2011-12 based on revised capital cost as per MERC Tariff Regulations along
with the ARR Petition for FY 2012-13 to FY 2015-16 as per MERC MYT Regulations.
Order [Case No. 27 of 2013] Page 7 of 61
1.7 Petition for Truing up of ARR for FY 2011-12 and approval of MYT for FY
2012-13 to FY 2015-16
In compliance with the aforesaid directive of the Commission, JPTL filed the Petition for
Truing up of FY 2011-12 and for approval of ARR for the second control period from FY
2012-13 to FY 2015-16 in accordance with the approved business plan.
The Commission, vide its letter dated 14 March, 2013, forwarded the preliminary data gaps
and information required from JPTL. The Commission scheduled a Technical Validation
Session (TVS) on JPTL’s Petition for approval of Truing up of ARR for FY 2011-12 and
approval of ARR of MYT for FY 2012-13 to FY 2015-16 on 18 March, 2013 in the
presence of Consumer Representatives authorised under Section 94(3) of the EA 2003 to
represent the interest of consumers in the proceedings before the Commission. The list of
individuals, who participated in the TVS held on 18 March, 2013 is provided at Appendix-
1. During the TVS, the Commission directed JPTL to provide additional information and
clarifications on the issues raised during the TVS. The reply to the preliminary data gaps
and the queries raised during the Technical Validation Session (TVS) on 18 March, 2013
were submitted by JPTL on 5 April, 2013. The Commission also directed to submit the
draft Public Notice in English and Marathi in the format prescribed by the Commission.
1.8 Admission of Petition and Public Hearing Process
JPTL submitted its Petition on 18 February, 2013, and the Commission admitted the ARR
Petition of JPTL on 25 April, 2013. In accordance with Section 64 of the EA 2003, the
Commission directed JPTL to publish its Petition in the prescribed abridged form and
manner, to ensure wide public participation. The Commission also directed JPTL to reply
expeditiously to all the suggestions and objections received from stakeholders on its
Petition. JPTL issued the Public Notice in newspapers inviting suggestions and objections
from stakeholders on its ARR Petition. The Public Notice was published in The Times of
India (English), Indian Express (English), Loksatta (Marathi) and Maharashtra Times
(Marathi) newspapers on 30 April, 2013. The copies of JPTL's Petitions and its summary
were made available for inspection/purchase to members of the public at JPTL's offices and
on JPTL's website (www.jsw.in). A copy of the Public Notice and an Executive Summary
of the Petition was made available on the website of the Commission (www.merc.gov.in) in
a downloadable format. The Public Notice stipulated that the suggestions and objections,
either in English or Marathi, may be filed in the form of affidavit along with proof of
service on JPTL.
No written suggestions or objections on the Petition were received by the Commission. The
public hearing was held in Mumbai on 30 May, 2013 at 1100 hours at the office of the
Order [Case No. 27 of 2013] Page 8 of 61
Commission at 13th
Floor, Centre No.1, World Trade Centre, Cuffe Parade, Mumbai 400
005. The list of persons who participated in the public hearing is provided in Appendix- 2.
The Commission has ensured that the due process as contemplated under law to ensure
transparency and public participation, has been followed at every stage meticulously and
adequate opportunity was given to all the persons concerned to file their say in the matter.
1.9 Organisation of the Order
This Order is organised in the following three Sections:
Section 1 of the Order provides a brief history of the quasi-judicial regulatory process
undertaken by the Commission. For the sake of convenience, a list of abbreviations with
their expanded forms has been included.
Section 2 of the Order details the Truing up of expenses of JPTL for FY 2011-12.
Section 3 of the Order details the approval of ARR as per MERC MYT Regulations for
JPTL for the second control period from FY 2012-13 to FY 2015-16.
Section 4 of the Order discusses summary of directives under MYT business plan Order
and JPTL’s responses.
Section 5 indicates the methodology for recovery of Transmission Charges.
Order [Case No. 27 of 2013] Page 9 of 61
2. TRUING UP OF AGGREGATE REVENUE REQUIREMENT FOR
FY 2011-12
JPTL in its Petition submitted that the 55 km 400 kV D/C (quad) Jaigad-New Koyna
transmission line was commissioned on 7 July, 2010 and the 110 km 400kV D/C (quad)
Jaigad-Karad transmission line was commissioned on 2 December, 2011.
In view of the above status, JPTL has sought approval for final Truing up of expenditure
and revenue for FY 2011-12, for the Jaigad-New Koyna transmission line and the Jaigad-
Karad line, based on actual expenditure and revenue as per the audited accounts. JPTL
provided a comparison of the actual expenditure against each head with the expenditure
approved by the Commission, along with reasons for deviations.
Accordingly, the Commission in this Section has analysed all the elements of actual
expenditure for Transmission system of JPTL for FY 2011-12, and has undertaken the
Truing up of expenses after prudence check.
2.1 Operation and Maintenance Expenses for FY 2011-12
Operation and Maintenance (O&M) expenses comprises employee related expenses,
administrative and general (A&G) expenses, and repair and maintenance (R&M) expenses.
JPTL’s submissions on each of these expenses heads and the Commission’s ruling on the
Truing up of the O&M expenses heads for FY 2011-12 are detailed below:
The actual O&M expense for FY 2011-12 as submitted by JPTL is Rs 5.49 crore as
compared to Rs 4.59 crore approved in the APR Order for FY 2011-12. The various
components of O&M expenses are elaborated below:
2.1.1 Employee Expenses
JPTL submitted that the total actual employee related expenses for FY 2011-12 were Rs
0.44 crore for employees working for operation and maintenance of transmission line as
against Rs. 0.96 crore approved by the Commission in the previous Order. Further, in
response to the Commission’s query as regards submission of head wise details of employee
expenses as per the formats specified under MERC Tariff Regulations, JPTL submitted the
head-wise details.
Considering the details of the actual audited employee expenses as submitted by JPTL,
the Commission considers the reduction in Employee expense as a controllable gain
and has allowed the employee expenses as approved for FY 2011-12 in the ARR Order
Order [Case No. 27 of 2013] Page 10 of 61
in Case No. 170 of 2011 under the Truing up exercise. However, considering the details
of the actual audited employee expenses as submitted by JPTL and the employee
expenses approved by the Commission in the ARR Order, the Commission has
considered the impact of sharing of efficiency gains as per MERC Tariff Regulations.
The employee expense for FY 2011-12 allowed after truing up are given below:
Table 2.1: Employee Expenses (Rs crore)
Particular
ARR Order
(Case No.
170 of
2011)
Actuals Allowed after truing up
Employee expenses 0.96 0.44 0.96*
*(Net entitlement by JPTL after sharing of gains and losses has been provided in the
subsequent section of this Order)
2.1.2 Administrative & General (A&G) Expenses
JPTL submitted that the actual A&G expenses for FY 2011-12 were Rs 1.71 crore as
against the Commission approved A&G expenses of Rs 1.56 crore. JPTL submitted that
A&G expenses were mainly on account of licence fee, application fee for Tariff Petition
and advertisement expenses for Public Notice of the Tariff Petition and incurred on
aggregate level for both the lines and hence, the same cannot be segregated between the
individual lines. In reply to the Commission’s query, JPTL further added that increase in
A&G expenses is also on account of cost of manpower working for JPTL for whom JPTL
had to reimburse JSW Energy Limited, as those employees were not on the payroll of JPTL.
Due to the above, the A&G expenses are higher by Rs 22.62 Lakh. JPTL, in response to the
Commission’s query, submitted the detailed head-wise break-up of A&G expenses incurred
in FY 2011-12.
The Commission does not agree with the contentions of JPTL and considers increase
in A&G expense as controllable expenditure. Hence, for purpose of truing-up, the
Commission has considered A&G expense of Rs. 1.56 crore as approved by the
Commission in its Order in Case No. 170 of 2011, for FY 2011-12. The A&G expenses
allowed after truing up is summarised in the below Table:
Table 2.2: A&G Expenses (Rs crore)
Particulars ARR Order (Case
No. 170 of 2011) Actuals Allowed after truing up
A&G expenses 1.56 1.71 1.56*
Order [Case No. 27 of 2013] Page 11 of 61
*(Net entitlement by JPTL after sharing of gains and losses has been provided in the
subsequent section of this Order)
Considering the details of the actual audited A&G expenses as submitted by JPTL and
the A&G expenses approved by the Commission in the ARR Order, the Commission
has considered the impact of sharing of efficiency losses as per MERC Tariff
Regulations.
2.1.3 Repairs and Maintenance (R&M)Expenses
JPTL submitted that it has incurred an actual cost of Rs 0.85 crore towards R&M expenses
in FY 2011-12. In reply to the Commission’s query for a detailed break-up of the R&M
cost, JPTL submitted the head-wise details of the incurred R&M cost. The actual cost
incurred as claimed by JPTL is higher than the approved R&M expense by Rs. 27 Lakh.
The Commission does not agree with the contentions of JPTL and considers increase
in R&M expense as controllable expenditure. Hence, for purpose of truing-up, the
Commission has considered R&M expense of Rs. 0.58 crore as approved by the
Commission in its Order in Case No. 170 of 2011, for FY 2011-12. The following table
depicts the approved R&M expense by the Commission.
Table 2.3: R&M Expenses (Rs crore)
Particulars
ARR
Order
(Case No.
170 of
2011)
Actuals Allowed after truing up
R&M expenses 0.58 0.85 0.58*
*(Net entitlement by JPTL after sharing of gains and losses has been provided in the
subsequent section of this Order)
Considering the details of the actual audited R&M expenses as submitted by JPTL
and the R&M expenses approved by the Commission in the ARR Order, the
Commission has considered the impact of sharing of efficiency losses as per MERC
Tariff Regulations.
2.1.4 O&M Expenses for terminal bays
JPTL submitted that MSETCL would be responsible for maintaining the terminal bays (2
each at MSETCL substations at New Koyna and Karad) as these terminal bays are
Order [Case No. 27 of 2013] Page 12 of 61
interconnected with MSETCL’s existing terminal bays. JPTL further submitted that it has
claimed O&M expense for terminal bays at Rs 2.49 crore on the basis of per bay norms
outlined under MERC MYT Regulations.
Considering that O&M Agreement with MSETCL is finalised and O&M of the terminal
bays are being carried out by MSETCL, the Commission had asked JPTL to revise the
working of O&M cost of terminal bays as per actual expenses incurred. In reply to the
above query JPTL submitted that the O&M expenses towards terminal bays has been agreed
with MSETCL at a significantly lower amount of Rs. 13,15,356 (Rs. 0.13 crore) and the
same has been paid to MSETCL based on the agreement between JPTL and MSETCL
signed on 29 May, 2012.
The Commission under its Order in Case No. 170 of 2011, had provisionally approved Rs. 1.49
crore towards the O&M expense for terminal bays for FY 2011-12 against the claim of JPTL.
However, while giving provisional approval, the Commission had stipulated as following in the
said Order.
“The Commission will undertake the final Truing up of O&M expenses for terminal
bays for FY 2011-12 based on actual O&M expenses based on the commercial
agreement to be executed between JPTL and MSETCL and further subject to
prudence check.”
The Commission observes that the maintenance of the terminal bays at Karad/New-
Koyna is undertaken by MSETCL and the parties were to reach an agreement for the
same, which was executed on 29 May, 2012. Besides, commissioning of Jaigad-Karad
line took place only in Dec-2011 thereby entitlement for O&M expenses for terminal
bays at Karad would be due only for partial year of operation.
In view of the above, the Commission has approved the O&M expenses towards
terminal bays for FY 2011-12 at Rs 0.13 crore as actually incurred as per the aforesaid
commercial agreement and treated the gain compared to the approved O&M for
terminal bays of Rs. 1.49 crore as an un-controllable gain. As regards uncontrollable
gains, the Commission in the MERC Tariff Regulations specifies as following.
“
17.10 Upon completion of the annual performance review, the Commission shall pass an
order recording-
(a) the approved aggregate gain or loss to the Generating Company or Licensee on
account of uncontrollable factors and the mechanism by which the Generating Company
or Licensee shall pass through such gains or losses in accordance with Regulation 18;
Order [Case No. 27 of 2013] Page 13 of 61
(b) the approved aggregate gain or loss to the Generating Company or Licensee on
account of controllable factors and the amount of such gains or such losses that may be
shared in accordance with Regulation 19;
(c) ...
18. Mechanism for pass through of gains or losses on account of uncontrollable factors
18.1 The approved aggregate gain or loss to the Generating Company or Licensee on
account of uncontrollable factors shall be passed through as an adjustment in the tariff of
the Generating Company or Licensee over such period as may be specified in the Order of
the Commission passed under Regulation 17.10:
...”(Emphasis added)
Accordingly, the Commission has allowed the O&M expenses towards terminal bays
as per actual and has not considered the sharing of gains on this count in line with the
MERC Tariff Regulations.
. Table 2.4: Terminal Bay Expenses (Rs crore)
Particular
Provisional
Approval
(Case No.
170 of 2011)
Normative
submitted by
JPTL
Actual
submitted by
JPTL
Allowed after
truing up
Terminal Bay expenses 1.49 2.49 0.13 0.13
Table 2.5: Total O&M cost as approved by Commission (Rs crore)
Particular Actuals Allowed after truing up
Employee expenses 0.44 0.96
A&G expenses 1.71 1.56
R&M expenses 0.85 0.58
Terminal Bay expenses 0.13 0.13
Total 3.13 3.23*
*(Net entitlement by JPTL after sharing of gains and losses has been provided in the
subsequent section of this Order)
2.2 Capital Expenditure and Capitalisation
JPTL had initially estimated a project cost of Rs 580.00 crore, against which the
Commission has accorded an in-principle approval for Rs 576.29 crore. The Commission
has undertaken detailed scrutiny of the capital cost claimed by JPTL with the help of
Order [Case No. 27 of 2013] Page 14 of 61
technical experts M/s ASCI and the observations and findings of the ASCI study are
reproduced hereunder.
"Prudence check has been carried out on the implementation of DPR scheme for
evacuation of power from Jaigad Power Station.
The two 400 kV (QUAD) Double circuit lines – (i) Jaigad to Karad, (ii) Jaigad to
New Koyna are constructed and are duly commissioned. Both the 400 kV lines are
now in regular operation. The two 400 kV lines are maintained by JPTL.
The four 400 kV bays – two at Karad 400 kV SS and two at New Koyna 400 kV SS
have been constructed by MSETCL at the cost of JPTL. These 400 kV bays are
maintained by MSETCL.
The bidding process followed by JPTL has been examined. The various steps taken
by JPTL in the course of fixing up EPC contract have been verified and found to be
in order. JPTL has followed the bidding process in transparent manner to obtain
competitive bids and award contract on lowest bidder.
The books of accounts available in office of General Manager, Finance, Jaigad have
been verified. The total EPC cost of the two 400 kV lines is Rs. 427.19 cr. The cost
of terminal bays at Karad and Koyna is reported to be Rs. 24.30 crore as informed
by MSETCL. The total project cost is Rs. 569.68 crore including interest, operative
and contingencies costs.”
The summary of submissions made by JPTL in terms of the capital cost of the project, and
the Commission’s approval at various stages of the regulatory process till date, are tabulated
below:
Table 2.6: Capital Cost related submissions by JPTL and treatment by the Commission
Item Description
Capital
Cost
Estimate
(Rs. Cr)
Approved
by
Commissi
on (Rs.
Cr)
Remarks
In-Principle Approval (Dated
29 June, 2010)
580 576.29
Petition filed by the Jaigad
Power Transco Limited (JPTL)
for approval of Aggregate
Revenue Requirement for FY
2010-11 (Case No. 97 of 2010)
574.51 (including
margin
money)
570.45 (excluding
margin
money
179.60 Commission considered only
capital cost of Jaigad New
Koyna Line, which was
commissioned. (and excluded
margin money)
Order [Case No. 27 of 2013] Page 15 of 61
Item Description
Capital
Cost
Estimate
(Rs. Cr)
Approved
by
Commissi
on (Rs.
Cr)
Remarks
Petition filed by the Jaigad
Power Transco Limited
(JPTL), for approval of Truing
up of the Aggregate Revenue
Requirement for FY 2010-11
and approval of Aggregate
Revenue Requirement for FY
2011-12 (Case No. 170 of
2011)
569.66 (including
4.06 of
margin
money)
179.60
Capital cost of 2nd
line (Jaigad-
Karad line not considered as
the same had not achieved
COD
Capital cost verification by
M/s ASCI
569.68 (including 4.06 of margin money)
Petition filed by Jaigad Power
Transco Ltd for approval of its
Multi Year Tariff business
plan for the second control
period from FY 2012-13 to FY
2015-16 (Case No. 57 of 2012)
550.23
(excluding
4.06 Cr of
margin
money)
550.23 (excluding
4.06 Cr of
margin
money)
Capital cost as submitted by
JPTL subsequent to final
settlement with its EPC
Contractor.
Capital cost of 550.23 Cr was
certified by auditor vide
certificate dated 22 November,
2012.
However, it was clarified in the
business plan order that the
detailed scrutiny, review and
approval of capital cost subject
to prudence check would be
undertaken separately along
with MYT petition upon
availability of consolidated
audited accounts for JPTL, for
the revised completed capital
cost of Rs 550.23 crore
(excluding margin money)
Petition filed by Jaigad Power
Transco Ltd for truing up of
FY 2011-12 and approval of its
Multi Year Tariff for the
second control period from FY
2012-13 to FY 2015-16 (Case
No. 27 of 2013)
550.23
(Op. GFA
FY13)
554.42
(Op. GFA
FY14)
Present
Petition
Consolidated Audited accounts
for FY 2012-13
546.13 (as
on closing
of FY
Audited
Annual
Accounts
GFA (Gross block) as per
Consolidated audited accounts
for FY 2011-12
Order [Case No. 27 of 2013] Page 16 of 61
Item Description
Capital
Cost
Estimate
(Rs. Cr)
Approved
by
Commissi
on (Rs.
Cr)
Remarks
2011-12)
555.77 Cr
(as on
closing of
FY 2012-
13)
(FY12)
Audited
Annual
Accounts
(FY13)
and
GFA (Gross block) as per FY
2012-13 submitted vide email
dated 20 June 2013
(includes additional cost of
replacement of insulators)
From the above submissions made by JPTL at various point in time, it is observed that the
latest capital cost as on year ending FY 2011-12 is Rs. 546.13 crore, which is as per the
consolidated audited accounts during the period (FY 2011-12, by which all transmission
assets of JPTL are commissioned).
In response to the Commission’s query, JPTL clarified that the GFA of Rs 546.13 Cr
reported under audited accounts for FY 2011-12 excludes the final settlement of the claims
with EPC contractor (L&T) for amount of Rs 4.11 crore, upon accounting of the same the
total capital cost works out to Rs 550.23 crore. The same has been supported with auditor’s
certificate dated 22 November, 2012.
The details of the total project cost as per the aforesaid auditor’s certificate submitted by
JPTL are depicted below:
Table 2.7: Capital Cost as submitted by JPTL (Rs. crore)
Particulars
Approved
(in-
principle)
MYT business plan
(Estimated Cost)
Actual
Total Cost
(Revised)
EPC cost 446.00 427.19 410.84
Non-EPC cost 18.60 54.92 55.93
Sub total I 464.6 482.11 466.77
Preliminary & pre-
operative expenses 23.23 11.71 11.66
Contingencies 18.58 0.00 0.00
Interest during 43.73 47.47 47.49
Order [Case No. 27 of 2013] Page 17 of 61
Particulars
Approved
(in-
principle)
MYT business plan
(Estimated Cost)
Actual
Total Cost
(Revised)
construction (IDC)
Sub total II 85.54 59.18 59.15
Sub total (I+II) 550.14 541.29 525.92
Cost towards
terminal bays 22.08 24.30 24.31
Total project cost* 572.22 565.59 550.23
*Excludes the margin money of Rs 4.06 crore
JPTL further provided the detailed break-up of line-wise capitalised costs for 400 kV (quad)
Jaigad-New Koyna transmission line and for 400 kV (quad) Jaigad-Karad transmission line,
based on the actual amount incurred as given below:
Table 2.8: Capitalised Cost as submitted by JPTL (Rs. crore)
Particulars
New
Koyna
Karad Actual Total
Cost
(Revised)
EPC cost 138.93 271.92 410.84
Non-EPC cost 15.90 40.04 55.93
Sub total I 154.82 311.95 466.77
Preliminary & pre-operative
expenses 3.77 7.89 11.66
Interest during construction (IDC) 10.18 37.31 47.49
Sub total II 13.95 45.20 59.15
Cost towards terminal bays 10.82 13.48 24.31
Total project cost 179.60 370.63 550.23
JPTL, in its MYT petition, also submitted that the above capital cost would be reflected in
its audited accounts for FY 2012-13 and JPTL would submit the same once the audited
accounts for FY 2012-13 are ready.
Order [Case No. 27 of 2013] Page 18 of 61
Table 2.9: Capitalisation of Transmission lines of JPTL (JPTL) (Rs crore)
Line Details Capitalisation Remarks
400 kV (Quad) Jaigad-New Koyna
transmission line 179.60
Capitalised during
FY 2010-11
400 kV (Quad) Jaigad-Karad transmission
line 370.63
Capitalised during
FY 2011-12
Total capitalized expenditure 550.23
JPTL has thus considered a capitalisation of Rs 179.60 crore during FY 2010-11 owing to
the fact that only 400 kV (quad) Jaigad-New Koyna transmission line was commissioned
and was in operation during FY 2010-11. The same has been considered as capitalisation
for FY 2010-11 by the Commission during the truing up of expenses for FY 2010-11 under
Case No. 97 of 2010.
For the purpose of Truing up of ARR for FY 2011-12, the Commission has considered
the capitalisation of Rs 370.63 crore towards the 400 kV (Quad) Jaigad-Karad
transmission line as considered by JPTL, based on the COD of the transmission line
and the subsequent audited accounts provided by JPTL. Accordingly, the approved
capitalisation for FY 2011-12 is summarised in the following table:
Table 2.10: Approved Capitalisation for FY 2011-12 (Rs crore)
Particulars FY 2011-12
JPTL Estimate Approved by
the
Commission
Capitalisation for FY 2011-12
(capitalisation on account of
400kV (Quad) Jaigad-Karad
Line)
370.63 370.63
2.3 Depreciation
JPTL submitted that it has considered the depreciation expenses at the rates specified in
MERC (Terms & Conditions of Tariff) Regulations, 2005. JPTL also submitted that in
addition to depreciation, the transmission licensee is also entitled to advance against
depreciation (AAD), computed in accordance with Clause 48.3 of the said Regulations.
JPTL submitted that it has calculated depreciation considering the approved project cost of
Rs. 550.23 crore and the number of days for which the transmission lines were operational
Order [Case No. 27 of 2013] Page 19 of 61
in FY 2011-12. The depreciation calculated by JPTL works out to Rs 7.77 crore, however, it
had made a repayment of Rs 7.86 crore in FY 2011-12. Hence, JPTL has claimed total
depreciation and AAD of Rs 7.86 crore. JPTL requested the Commission to approve the
excess repayment over the depreciation to be recovered as advance against depreciation, as
submitted by JPTL below:
Table 2.11: Depreciation Expenses as submitted by JPTL for FY 2011-12 (Rs crore)
Particulars Earlier
Estimate
Approved (in
Case No. 170 of
2011)
Actual
GFA (Rs crore) 565.59 565.59 550.23
Allowed depreciation @ 2.57% excluding AAD 7.90 7.90 7.76
Repayment 26.64 7.85 7.86
Advance against depreciation 19.61 0 0.10
Depreciation including AAD 27.51 7.90 7.86
The Commission has computed the depreciation for FY 2011-12 based on the
approved capitalisation, the number of days for which the asset was operational in FY
2011-12 and the depreciation rates specified in the MERC Tariff Regulations. The
Opening GFA for FY 2011-12 has been considered same as the closing GFA approved
for FY 2010-11 under the true up Order for FY 2010-11 (Case No. 170 of 2011).
Further, the Commission has re-computed the interest expenses as elaborated in the
subsequent section on computation of interest expenses for FY 2011-12, and notes that
the repayment of loan in FY 2011-12 works out to Rs 7.69 crore against the repayment
of Rs 7.86 crore submitted by JPTL.
Accordingly, the depreciation expenditure (including advance against depreciation) as
submitted by JPTL and as approved by the Commission for the purpose of Truing up
of FY 2011-12 is summarised in the following Table:
Table 2.12: Depreciation as approved by the Commission for FY 2011-12 (Rs crore)
Particulars JPTL
Submission
Allowed after
truing up
Opening GFA 179.95 179.60
GFA added during the year 370.63 370.63
Closing GFA 550.23 550.23
No of days of operation of asset in the year
based on COD of the asset
90 90
Order [Case No. 27 of 2013] Page 20 of 61
Particulars JPTL
Submission
Allowed after
truing up
Depreciation @ 2.57% excluding AAD 7.76 7.77
Loan repayment 7.86 7.69
Advance against depreciation 0.10 0.0
Depreciation (including AAD) 7.86 7.77
Depreciation rate 2.57% 2.57%
2.4 Interest Expenses
The Commission in its previous Order approved the interest expense of Rs 30.10 crore
including finance charge of Rs 2.30 crore for FY 2011-12 and considering debt equity ratio
of 75:25 on the approved capitalisation amount of Rs 565.59 crore. However, in the present
Petition, JPTL submitted that it has actually incurred total interest and finance charge of Rs
30.34 crore as given in the below Table:
Table 2.13: Interest Expenses for FY 2011-12 submitted by JPTL (Rs. crore)
Particulars Earlier
Estimate
Approved in (Case
No. 170 of 2011)
Actuals
Total Debt 417.29 127.97 127.97
Addition 0.00 289.50 277.98
Repayment 26.64 7.86 7.86
Closing Debt 390.64 409.61 398.09
Interest Rate (%) 12.50% 12.50% 12.50%
Interest on Debt Capital 27.51 27.80 27.01
Finance Charges 2.30 2.30 3.32
Total interest and finance charges 29.81 30.10 30.34
Further, as directed by the Commission, JPTL submitted relevant documentary support for
actual loan drawal schedule, actual repayment schedule and actual interest paid for FY
2011-12.
In reply to the Commission’s query regarding increase in finance charges from Rs 2.30
crore to Rs 3.22 crore, JPTL submitted that it had claimed Rs 2.30 crore towards financing
charges based on actuals incurred upto 30 September, 2011, and that the finance charges
incurred after September 2011 were not taken into consideration earlier. JPTL has
Order [Case No. 27 of 2013] Page 21 of 61
submitted details of such expenditure incurred. JPTL has further submitted that during FY
2011-12, it has refinanced the existing outstanding term loan with the consortium of three
lenders with State Bank of India as the lead banker and Punjab National Bank and Indian
Overseas Bank as the other consortium banks. It stated that refinancing of the term loan has
substantially brought down the effective interest from 14.76% p.a. to 12.50% p.a..
For the purpose of computation of interest expenses, the Commission has considered
the admitted loan during the year as Rs 277.97 crore based on the debt-equity ratio of
75:25 and the approved capitalisation of Rs 370.63 crore, pertaining to capitalisation
of Jaigad Karad transmission line during the year. The opening loan for FY 2011-12
has been considered equal to closing loan trued up for FY 2010-11 under Case No. 170
of 2011. The repayment during the year has been considered based on the repayment
schedule as presented in the amortisation schedule submitted by JPTL as part of
replies to queries raised by the Commission and as per the ‘Credit Sanction Advice’ by
Indian Overseas Bank, dated 15 November, 2012. The repayment during the year has
been further considered based on the terms as specified in the Common Term Loan
Agreement dated 29 April, 2009 executed by JPTL. The Commission has verified the
weighted average interest rate for the entire amount of loan drawn during the FY
2011-12 submitted by JPTL as 12.33% p.a. and the same has been considered for
interest computation during FY 2011-12. Accordingly, the Commission has re-
computed the allowable interest expenses for Jaigad-New Koyna and Jaigad-New
Karad for FY 2011-12 as shown in the Table below:
Table 2.14: Approved Interest Expenses for Jaigad-New Koyna FY 2011-12 (Rs crore)
Particulars
FY 2011-12
Q1 Q2 Q3 Q4 Total
Opening 127.97 127.05 126.13 125.21 127.97
Addition 0 0.00 0.00 0.00 0.00
Repayment* 0.92 0.92 0.92 0.92 3.69
Closing 127.05 126.13 125.21 124.28 124.28
Interest Rate 12.33% 12.33% 12.33% 12.33% 12.33%
No. of Days in Operation 91 92 92 91 366
Interest 3.92 3.94 3.91 3.84 15.60
*(Repayment considered at end of respective quarters as per the terms of the combined loan
agreement)
Order [Case No. 27 of 2013] Page 22 of 61
Table 2.15: Approved Interest Expenses for Jaigad- Karad FY 2011-12 (Rs crore)
Particulars FY 2011-12
Q1 Q2 Q3 Q4 Total Opening 0.00 275.97 0.00 Addition 277.97 0.00 277.97 Repayment 2.00 2.00 4.00 Closing 275.97 273.97 273.97 Interest Rate 12.33% 12.33% 12.33% No. of Days in Operation 30 91 121 Interest 2.81 8.46 11.27
*(Repayment considered at end of respective quarters as per the terms of the combined loan
agreement)
The Commission has thus computed total interest on loan for FY 2011-12 as Rs 26.87
crore. After considering the finance expenses of Rs 3.32 crore, the Commission
approves the total interest and finance charge of Rs 30.19 crore as summarised in the
following table:
Table 2.16: Interest Expenses for FY 2011-12 (Commission) (Rs crore)
Particulars Approved in (Case
No. 170 of 2011)
JPTL
submission
Approved
after Truing
up
Opening balance 127.97 127.97 127.97
Loan addition 289.50 277.98 277.97
Loan repayment (7.86) (7.86) (7.69)
Closing balance 409.61 398.09 398.25
Interest 27.80 27.01 26.87
Overall Interest Rate 12.50% 12.33% 12.33%
Finance Charges 2.30 3.32 3.32
Total Interest and
Finance Charges
30.10 30.34 30.19
2.5 Interest on Working Capital
JPTL, in its Petition, computed interest on working capital of Rs 1.35 crore for FY 2011-12.
JPTL submitted that the interest on working capital for FY 2011-12 has been computed
according to Regulation 50.6.1 of the MERC Tariff Regulations. JPTL estimated the
Interest on Working Capital (IoWC) considering an interest rate of 14.75% p.a., on the
working capital requirement computed as per the components considered in the MERC
Tariff Regulations.
Order [Case No. 27 of 2013] Page 23 of 61
In response to the query raised by the Commission as regards details of actual working
capital requirement for FY 2011-12 and funding arrangement for the same, JPTL submitted
details of the working capital requirement and the funding arrangement. In reply to a query
regarding documentary support for consideration of interest on working capital as 14.75%
p.a., JPTL submitted that interest on working capital is on normative basis and is equal to
short term Prime lending rate of State Bank of India and also submitted the required
documentary proof. JPTL submitted that as per MERC Tariff Regulations, the total working
capital requirement for FY 2011-12 works out to Rs 9.12 crore.
Regulation 50.6.1 of the MERC Tariff Regulations specifies the methodology for
assessment of working capital requirement by a Transmission Licensee. The relevant
Regulation is reproduced as below.
“50.6.1 The Transmission Licensee shall be allowed interest on the estimated level
of working capital for the financial year, computed as follows:
(a) One-twelfth of the amount of operation and maintenance expenses for such
financial year; plus
(b) One-twelfth of the sum of the book value of stores, materials and supplies
including fuel on hand at the end of each month of such financial year; plus
(c) One and a half months equivalent of the expected revenue from transmission
charges at the prevailing tariffs; minus
(d) Amount, if any, held as security deposits from Transmission System Users.”
The Commission has estimated the normative working capital requirement and
interest thereof for FY 2011-12 based on the revised expenses approved in this Order
after Truing up.
Further, the MERC Tariff Regulations stipulate that rate of interest on working
capital shall be considered on normative basis and shall be equal to the short-term
Prime Lending Rate of State Bank of India as on the date on which the application for
determination of Tariff is made. As the short-term Prime Lending Rate of State Bank
of India (SBI) at the time when JPTL filed the Petition for tariff determination for FY
2011-12 was 14.75% p.a., the Commission has considered the interest rate of 14.75%
p.a., for estimating the normative interest on working capital. The approved interest
on working capital for JPTL for FY 2011-12 is given in the following table:
Table 2.17: Interest on Working Capital for FY 2011-12 approved by the Commission (Rs crore)
Order [Case No. 27 of 2013] Page 24 of 61
Particulars Approved in (Case
No. 170 of 2011)
JPTL
submission
Allowed after
Truing up
Interest on working capital 1.17 1.35 1.31
2.6 Contribution to Contingency Reserves for FY 2011-12
JPTL submitted that the contribution to contingency reserves for FY 2011-12 has been
computed at 0.25% of GFA, as Rs. 1.38 crore.
For the purpose of Truing up of FY 2011-12, the Commission, in accordance with
Regulation 50.7.1 of the MERC (Terms and Conditions of Tariff) Regulations, 2005
has considered contribution to contingency reserves as Rs 1.38 crore, computed at
0.25% of GFA approved for FY 2011-12. The approved contribution to contingency
reserves for JPTL for FY 2011-12 is given in the following table:
Table 2.18: Contribution to Contingency Reserves for FY 2011-12 (Rs. crore)
Particulars Approved in (Case
No. 170 of 2011)
JPTL
submission
Allowed after
Truing up
Contribution to Contingency
Reserves 1.41 1.38 1.38
2.7 Return on Equity (RoE)
JPTL, in its Petition, submitted that it has considered revised project cost of Rs 550.23 crore
and has calculated return on equity capital as per Regulation 50.1.2 of MERC (Terms and
conditions of Tariff) Regulations, 2005. JPTL submitted that the rate of return considered is
14% on the equity capital as per Regulation 50.1.1 of MERC Tariff Regulations. The details
of RoE computation as submitted by JPTL is shown in the following table:
Table 2.19: RoE computation submitted by JPTL (Rs crore)
Particulars Earlier
Estimate
Approved in
(Case No.
170 of 2011)
Actual
Equity invested at the commencement
of the FY 2011-12
44.90 44.90 44.90
Equity invested during FY 2011-12 96.50 96.50 92.66
RoE 13.04 10.76 12.77
Order [Case No. 27 of 2013] Page 25 of 61
In reply to a query by the Commission, where it asked JPTL to revise the RoE computation
on the basis of actual date of commissioning, JPTL submitted the calculation of RoE on
proportionate basis, which works out to Rs 10.58 crore.
For the purpose of truing up of FY 2011-12, the Commission has computed RoE for
FY 2011-12 based on the actual COD for Jaigad-Karad line, which achieved its COD
on 2 December, 2011 The Commission has thus computed the RoE on proportionate
basis taking in account the number of days for which it was operational during FY
2011-12. Further, the equity amount has been computed based on a debt-equity ratio
of 75:25 in accordance with the approval granted to JPTL as part of the in-principle
approval of project cost for JPTL. Further, RoE has been computed on 25% of the
approved capitalisation which amounts to Rs 92.66 crore.
The RoE as projected by JPTL and approved by the Commission for FY 2011-12 is
summarised in the following Table:
Table 2.20: Return on Equity as approved by the Commission for FY 2011-12 (Rs crore)
Particulars JPTL
submission
Approved after
Truing up
Regulatory equity at beginning of year 44.90 44.90
Equity portion of capitalisation 92.66 92.66
Regulatory equity at the end of the year 137.56 137.56
Return on regulatory Equity at beginning
of year
6.29 6.29
Return on equity portion of capital
Expenditure capitalised
6.49 4.29
Total return on regulated equity 12.77* 10.57
*(Submission against ROE computation was later revised to Rs. 10.58 by JPTL while
replying to a specific query in the matter)
2.8 Income Tax
JPTL submitted that as per audited financials for FY 2011-12, it has incurred income tax of
Rs. 8.46 crore against the Commission approved income tax of Rs. 2.69 crore. JPTL further
submitted that the transmission income is accounted for on accrual basis for the period of
operation of the Transmission Line based on the Annual Revenue Requirement (ARR)
approved by the Commission. In case where ARR is yet to be approved by the Commission,
Order [Case No. 27 of 2013] Page 26 of 61
transmission income is accounted for on accrual basis based on the petition filed by JPTL
before the Commission for approval of ARR. JPTL requested that shortage/ excess, if any,
may be allowed to be adjusted/ recognised based on ARR approved by the Commission,
during the accounting period in which the ARR is approved.
JPTL submitted that the ARR for FY 2010-11 was approved in FY 2011-12. Hence, the
revenue and the income tax for FY 2010-11 were booked in FY 2011-12. JPTL, therefore,
requested the Hon’ble Commission to kindly approve the income tax on actual basis.
As regards income tax the Commission has considered the actual tax computation
statement of the Petitioner and supporting Returns of Income filed, i.e., the
documentary evidence as submitted by the Petitioner for truing up.
Further, since, the recovery of the Income Tax through the ARR and Tariffs will be
viewed as income by the Income Tax authorities, the Income Tax component has to be
duly grossed up by the applicable tax rate in the year of recovery, in accordance with
the various Judgments issued by the Hon'ble Appellate Tribunal for Electricity in this
regard. Accordingly, the Income Tax amount of Rs. 8.46 crore considered for recovery
for FY 2011-12, has been grossed up by the applicable tax rate of 20.96%. Hence, an
amount of Rs. 10.71 crore is being allowed for recovery, under the truing up exercise
in the next Tariff period when it is actually offered to tax.
2.9 Non-Tariff Income
JPTL submitted that it had earned an income of Rs 0.06 crore from sale of current
investments. The Commission has verified this amount from the audited accounts of
JPTL for FY 2011-12 and hence, approves the same.
Table 2.21: Non-Tariff Income as approved by the Commission for FY 2011-12 (Rs crore)
Particulars JPTL
submission
Approved after
Truing up
Non-Tariff Income 0.06 0.06
2.10 Incentive on Transmission Availability
JPTL has submitted an availability of 98.11% for its transmission system in FY 2011-12
and an SLDC certificate confirming the same. JPTL has further claimed that as per Order
dated 27 June, 2006 in Case No. 58 of 2005, it would be entitled for incentive on
Order [Case No. 27 of 2013] Page 27 of 61
availability greater than 98%. The Commission, in its Order in Case No. 58 of 2005 had
ruled as under:
“2.8.7 Accordingly, the Commission rules that the transmission licensee shall be
entitled to incentive on achieving annual availability beyond the target
availability as stipulated under MERC (Terms and Conditions for Tariff)
Regulations 2005, in accordance with the following formula:
Incentive = Annual Transmission Charges x [Annual availability achieved
– Target Availability] / Target Availability;
Where,
Annual transmission Charges shall correspond to ARR for the particular
transmission licensee within State, as the case may be.
Provided that no incentive shall be payable above the availability of
99.75% for AC system and 98.5% for HVDC system.”
In this context, the system availability of the transmission licensee needs to be certified
by Maharashtra State Load Despatch Centre (MSLDC). JPTL has submitted its
transmission system availability computations for FY 2011-12, duly certified by
MSLDC. Accordingly, the Commission has computed the incentive for transmission
system availability greater than 98% in accordance with the above formula and
considering the approved ARR and the incentive works out to be as following.
Table 2.22: Incentive on higher Transmission Availability for FY 2011-12 ( Rs crore)
Particulars JPTL
submission
Approved
after
Truing up
Annual Transmission Charge 67.58 65.06
Target Availability (%) 98.00% 98.00%
Actual Availability achieved (%) 98.11% 98.11%
Incentive 0.08 0.07
2.11 Carrying cost for delayed recovery of transmission charges
JPTL has computed a carrying cost of Rs. 12.76 crore towards deferred recoveries in the
past under the truing up section of the present Petition. The Commission has dealt with
the detailed submissions of JPTL in this matter along with its rulings under
subsequent sections of this Order under ARR of FY 2013-14, wherein JPTL would
Order [Case No. 27 of 2013] Page 28 of 61
make the actual recovery of such carrying cost and therefore has included the impact
of the same under the MYT section of this Order.
2.12 Sharing of Gains/Losses for FY 2011-12
The relevant provisions under the MERC Tariff Regulations stipulating sharing of
gains/losses due to controllable factors are reproduced below:
“17.6.2 Some illustrative variations or expected variations in the performance of the
applicant which may be attributed by the Commission to controllable factors
include, but are not limited to, the following:
(a) Variations in capital expenditure on account of time and/ or cost
overruns/efficiencies in the implementation of a capital expenditure project not
attributable to an approved change in scope of such project, change in statutory
levies or force majeure events;
(b) Variations in technical and commercial losses, including bad debts;
(c) Variations in the number or mix of consumers or quantities of electricity
supplied to consumers as specified in the first and second proviso to clause (b) of
Regulation 17.6.1;
(d) Variations in working capital requirements;
(e) Failure to meet the standards specified in the Standards of Performance
Regulations, except where exempted in accordance with those Regulations;
(f) Variations in labour productivity;
(g) Variations in any variable other than those stipulated by the Commission under
Regulation 15.6 above, except where reviewed by the Commission under the second
proviso to this Regulation 17.6.
…
19.1 The approved aggregate gain to the Generating Company or Licensee on
account of controllable factors shall be dealt with in the following manner:
(a) One-third of the amount of such gain shall be passed
on as a rebate in tariffs over such period as may be specified in the Order of the
Commission under Regulation 17.10;
(b) In case of a Licensee, one-third of the amount of such gain shall be retained in a
special reserve for the purpose of absorbing the impact of any future losses on
account of controllable factors under clause (b) of Regulation 19.2; and
(c) The balance amount of gain may be utilized at the discretion of the Generating
Company or Licensee.
Order [Case No. 27 of 2013] Page 29 of 61
19.2 The approved aggregate loss to the Generating Company or Licensee on
account of controllable factors shall be dealt with in the following manner:
(a) One-third of the amount of such loss may be passed on as an additional charge
in tariffs over such period as may be specified in the Order of the Commission under
Regulation 17.10; and
(b) The balance amount of loss shall be absorbed by the Generating Company or
Licensee.”
JPTL, in its Petition, had not proposed any sharing of gains/losses for FY 2011-12. In
response to a query raised by the Commission regarding submission of computations on
sharing of gains/losses for FY 2011-12 in accordance with the Regulation 18 and 19 of the
MERC Tariff Regulations, JPTL submitted the following as regards sharing the increase in
O&M cost. The Commission’s ruling on each of these matters has been elaborated
subsequent to the discussion below:
Sharing of gains/losses on account of increase in O&M cost: In reply to a query by
Commission as regards computation for sharing efficiency gains/losses during FY 2011-12 ,
JPTL has submitted the detailed comparison of i) earlier estimates (ii) estimates approved
by Commission (iii) actual expenses incurred with regards to operation and maintenance
expenses. The following table details JPTLs submission.
Table 2.23: Sharing of efficiency gains/losses as submitted by JPTL ( Rs crore )
Particulars Earlier
Estimate
(i)
Approved
(ii)
Actual
(iii)
Variance
approved
vs
actual(ii)-
(iii)
Employee Expense 0.94 0.96 0.44 0.52
Administrative and
General Expense 1.43 1.56 1.71 (0.15)
Repair and Maintenance
Expense 1.16 0.58 0.85 (0.27)
O&M expenses for
terminal bays 2.49 1.49 2.49* (1.00)
Total O&M expenses 6.03 4.59 5.49 (0.90)
* As per revised submission in reply to data gaps, actual O&M expense for terminal
bays incurred was submitted as Rs 0.13 crore
Order [Case No. 27 of 2013] Page 30 of 61
JPTL submitted that actual employee expense incurred for FY 2011-12 is less than the
approved amount mainly on account of manpower cost of Rs 0.22 crore, which is
reimbursed to JSW Energy for employees working for JPTL. JPTL also stated the same
amount has been debited to A&G expenses as these employees were not on the rolls of
JPTL.
As regarding the cost for O&M of terminal bays, JPTL has submitted that O&M agreements
with MSETCL were executed on 29 May, 2012 and the terminal bay expenses has been
agreed at an amount of Rs 0.13 crore and that the same amount has been paid to MSETCL.
For rest of the variations as regarding A&G and R&M, JPTL reiterated the explanations
already detailed under respective sections for A&G and R&M expenses under this section
of the Order.
The Commission has observed all the relevant submissions and is of the view that the
stated variations in O&M expense of JPTL w.r.t that approved in the previous ARR
Order (Case No. 170 of 2011) is controllable in nature (except for O&M expense for
terminal bays which is treated as un-controllable as outlined under section 2.1.4 of this
Order), has decided to share the efficiency gains or losses with the beneficiaries.
Details of the approved amount for each category of Employee expense, A&G, R&M
and terminal Bay is given in the O&M section.
Table 2.24: Summary of Truing up for FY 2011-12 including sharing of efficiency
gains/losses by Commission (Rs crore)
Sr.
No. Particulars
APR
approved
figures
Actuals
Allowed
after Truing
Up
Variation
2/3 rd of
Efficiency
loss borne
by JPTL
2/3 rd of
Efficienc
y Gain
retained
by JPTL
Net
Entitlement
after sharing
of gains and
losses
(1) (2) (3) (4) (5) (6)=(5)-
(4)
(7)=(6)*2/
/3
(8)=(6)*
2/3
(9)=(4)+(8)
in case of
gain &
(9)=(4)+(7)
in case of
loss
A Expenditure
1 O&M
expenses
2 Employee
Expense 0.96 0.44 0.96 0.52 0.35 0.79
3 A&G
Expense 1.56 1.71 1.56 (0.15) (0.10) 1.61
4 R&M
Expense 0.58 0.85 0.58 (0.27) (0.18) 0.67
Total 3.10 3.00 3.10 0.10 3.07
Order [Case No. 27 of 2013] Page 31 of 61
2.13 Aggregate Revenue Requirement of JPTL for FY 2011-12
Based on analysis of each element discussed above, the aggregate revenue requirement
of JPTL for FY 2011-12 as approved by the Commission in this Order is given in the
following table:
Table 2.25: Summary of Truing up for FY 2011-12 (Rs crore)
S.No. Particulars
FY 2011-12
Approved in
Case No. 170 of
2011
Revised
estimate by
JPTL
Approved by
Commission
after Truing-up
1 Operation & maintenance
expenses 4.60 5.49 3.20
1.1 Employee expenses 0.96 0.44 0.79
1.2 Administration & general
expenses 1.56 1.71 1.61
1.3 Repair & maintenance
expenses 0.58 0.85 0.67
1.4 O&M of terminal bays 1.49 2.49 0.13
2
Depreciation, including
advance against
depreciation
7.90 7.86 7.77
3
Interest on long-term loan
capital and finance
charges
30.10 30.34 30.19
4
Interest on working
capital and on consumer
security deposits
1.17 1.35 1.31
5 Other expenses - - -
6 Income tax 2.69 8.46 10.71
7 Contribution to
contingency reserves 1.41 1.38 1.38
8 Total Revenue
Expenditure 47.87 54.87 54.55
9 Return on equity capital 10.75 12.77 10.57
10
Incentive for higher
transmission System
availability
- 0.08 0.07
11 Aggregate Revenue
Requirement 58.62 67.72 65.20
12 Less: non tariff income 0.02 0.06 0.06
13 Less: income from other
business - - -
14 Net Aggregate revenue
requirement* 58.60 67.66 65.14
*(carrying cost included under subsequent section)
Order [Case No. 27 of 2013] Page 32 of 61
The variation in net ARR approved by the Commission after Truing-up for FY 2011-12 as
compared to that claimed by JPTL, because of the following reasons:
a) Reduction in O&M expenses owing to considering O&M expenses towards terminal
bays on actual basis during the period.
b) Reduction in approved ROE as the same was computed on proportionate basis
considering actual COD of Jaigad-Karad line.
c) Increase on account of grossing up of Income Tax, in accordance with the Hon’ble
APTEL’s Judgment on this issue.
2.14 Revenue Gap after truing up of FY 2011-12
After truing up ARR for FY 2011-12, it is observed that the ARR amounts to Rs 65.14
crore against the provisional ARR of Rs 58.60 crore approved by the Commission in
Case No. 170 of 2011. Thus, the revenue gap approved to be recovered by JPTL after
truing up of FY 2011-12 is Rs. 6.53 crore. The recovery of revenue gap has been
considered as part of approved ARR for FY 2013-14 under the MYT section of this
Order.
Order [Case No. 27 of 2013] Page 33 of 61
3. AGGREGATE REVENUE REQUIRMENT FOR MYT SECOND
CONTROL PERIOD FROM FY 2012-13 TO FY 2015-16
The Commission vide the MYT business plan Order (Case No. 57 of 2012 ) directed JPTL
to submit its true up of ARR for FY 2011-12 as per MERC Tariff regulation 2005, and its
ARR Petition for FY 2012-13 to FY 2015-16 as per MERC MYT Regulations. JPTL vide
the present Petition has given details of its expenses under various heads, viz., O&M
expenses, depreciation, interest on loans, interest on working capital, etc. as per the data
formats prescribed by the Commission. The Commission has discussed the allowable
expenditure on each of the expense heads as against that claimed by JPTL for the control
period from FY 2012-13 to FY 2015-16, in the subsequent sections.
According to MERC MYT Regulations, the Aggregate Revenue Requirement shall consist
of the following:
a) Operation and Maintenance Expenses
b) Return of Equity Capital
c) Interest on Loan Capital
d) Depreciation
e) Interest on Working Capital and deposits from Transmission system user
f) Contribution to contingency reserve
g) Non-Tariff Income
h) Income from other businesses
3.1 Operation and Maintenance Expenses
Operation and maintenance (O&M) expenses comprises Employee related costs,
administrative and general (A&G) expenses, and repair and maintenance (R&M)
expenditure.
Regulation 61.5 of the MERC MYT Regulations specifies:
“61.5 Operation and Maintenance expenses
61.5.1 The norms for O&M expenses for existing and new Transmission Licensees
have been stipulated for the control Period on the basis of circuit kilometre of
transmission lines and number of bays in the substation of the Transmission
Licensee, as given below:
...
61.7 O&M norms for New Transmission Licensee
Order [Case No. 27 of 2013] Page 34 of 61
61.7.1 For the new Transmission Licensees, the year-wise O&M norms as stipulated
for MSETCL shall be applicable norms for the transmission assets added by such
new Transmission Licensee(s) for respective year during the third control period.
Provided that same shall not be applicable to those new projects which are awarded
on a competitive bidding basis.
Explanation: The term “ New Transmission Licensee” shall mean the transmission
licensee for which Transmission license is granted by the Commission prior to or
after the date of effectiveness of these Regulations, and whose transmission project
assets are commissioned after March 31, 2010.
JPTL submitted that it has estimated the employee, R&M and A&G expense separately for
its transmission lines in the business plan Petition as there were no specific norms for JPTL.
Further, JPTL claimed the norms specified for MSETCL cannot be made applicable to
JPTL as it operates and maintains very less ckt kms of transmission line compared to
MSETCL. JPTL, in its Petition has compared the historical performance of the existing
transmission utilities in Maharashtra and specified separate O&M norms for individual
utilities. JPTL stated the O&M norms show a wide variation for different utilities, which
according to JPTL is because of the wide variation in the physical configuration of these
utilities and their historical performances. JPTL also submitted a comparison of the physical
configuration of different transmission utilities in Maharashtra. It stated that the physical
assets of JPTL are widely different from that of MSETCL. It further submitted that its two
lines Jaigad-New Koyna and Jaigad-Karad run through hilly terrains and are closer to the
coastal areas, which results in corrosion of lines, treatment of which required hefty R&M
investments. JPTL further submitted that the other overhead expenses like license fee, fees
for tariff Petition, advertisement expenses and other administrative expenses of a smaller
utility like JPTL gets distributed over a much smaller asset base leading to high
transmission O&M cost per ckt km and per bay of substation. Further, JPTL submitted that
the transmission lines of JPTL are 400 kV Double Circuit Quad conductors, for which no
separate norms have been laid down.
JPTL has estimated the employee, R&M and A&G expenses separately for its transmission
lines for FY 2012-13. For the ensuing years JPTL has escalated the employee, R&M, A&G
expenses by 10%, 5% and 5% respectively. For O&M of Transmission Bays, JPTL has
claimed the O&M expenditure based on normative parameter under MERC MYT
Regulations.
The total O&M expenses as submitted by JPTL is detailed below:
Order [Case No. 27 of 2013] Page 35 of 61
Table 3.1 : O&M expense as submitted by JPTL ( Rs crore )
O&M Expenses 2012-13 2013-14 2014-15 2015-16
Employee expense 1.14 1.25 1.38 1.52
A&G expense 1.70 1.79 1.88 1.97
R&M expense 2.50 2.63 2.76 2.89
O&M for Terminal
bays
3.96 4.19 4.43 4.68
Total 9.31 9.86 10.45 11.07
As regards the Petitioner’s claim to approve individual components of O&M expenses
separately, the Commission is of the view that O&M expenses for JPTL under the
MYT control period of FY 2012-13 to FY 2015-16 should be computed in accordance
with applicable O&M norms specified under MERC MYT Regulations. Besides,
revision in the norms stipulated under the MERC MYT Regulations has not been
envisaged under the present regulatory process, which has been initiated for approval
of ARR in line with the conditions outlined under MERC MYT Regulations.
Further, it would be prudent to undertake review of O&M norms for JPTL only after
undertaking detailed exercise by considering its historical performance, its network
topology/configuration, historical growth pattern, etc., which can be initiated upon
availability of sufficient historic data, and such revision in norms, if necessary, could
be taken up at the time of Mid-term Review under MERC MYT Regulations,
following due regulatory process.
Accordingly the Commission, taking into account the transmission network
parameters and the applicable norms, has computed the O&M expenses for JPTL for
FY 2012-13 to FY 2015-16 as summarised in the following Table:
Table 3.2: O&M Expenses approved by the Commission (Rs crore)
O&M Expenses Units 2012-13 2013-14 2014-15 2015-16
Jaigad-New Koyna (400 kV)
Distance of line Ckt.km 110 110 110 110
MERC norms Rs lakh/ckt-
km
0.56 0.56 0.56 0.56
Cost approved (A) Rs crore 0.616 0.649 0.693 0.726
Jaigad-Karad (400 kV)
Dist of line Ckt km 220 220 220 220
MERC norms Rs lakh/ckt-
km
0.56 0.56 0.56 0.56
Cost approved (B) Rs crore 1.232 1.298 1.386 1.452
Total O&M cost of
line(C)= (A)+(B)
Rs crore 1.848 1.947 2.079 2.178
For bay
No of bays No. 4 4 4 4
Order [Case No. 27 of 2013] Page 36 of 61
O&M Expenses Units 2012-13 2013-14 2014-15 2015-16
MERC norm Rs lakh/bay 99.11 104.78 110.78 117.11
Total Cost for Bay (D) Rs crore 3.96 4.19 4.43 4.68
Total O&M
cost(C)+(D)
Rs crore 5.81 6.14 6.51 6.86
3.2 Capital Expenditure and Capitalisation
JPTL submitted the following as regards capital expenditure for the period from FY 2012-
13 to FY 2015-16:
JPTL submitted that after a trouble free period of operation of transmission lines for
around one year from the date of commissioning, intermittent tripping took place on
different transmission circuits. Trippings were predominant during heavy fog
conditions prevailing during late night/ early morning hours in dry seasons between
February to May, which not only affected operations of transmission lines of JPTL
but had also affected other Transmission lines in the region.
In order to prevent such tripping, JPTL stated that it carried out hot and cold line
washing of insulator strings, but it did not yield the desired results. JPTL submitted
that it had considered different preventive measures like application of silicon
grease, silicone coating, replacing the insulators with higher creepage distance and
replacing the existing porcelain strings with higher creepage Polymer long rod
insulators. JPTL presented the following evaluation of available options in the
present petition:
(a) Application of silicon grease was not preferred as it was a short-term
measure and this surface treatment did not prevent flashover of insulators as
flashover occurred at insulator strings where silicon grease was applied.
(b) Silicon coating was not preferred in absence of established precedence or
proven performance/ track record. Moreover, this option was also found to
be very expensive and its sustained long term effectiveness against pollutants
is not confirmed.
(c) Replacement of insulators with higher creepage distance was not preferred
since this would result in increased vertical load and would require tower
strengthening. Moreover, change in the dimensions of insulator string could
also lead to major disturbance to specified ground clearances.
(d) Replacement of existing porcelain insulators with Polymer long rod
insulators had following major benefits:
i) It has property of hydro-phobicity and is more resistant to deposition of
pollutants, salinity and excessive fog conditions.
Order [Case No. 27 of 2013] Page 37 of 61
ii) Long rod polymers insulators can be replaced one to one with existing
porcelain insulators without any major modifications/ changes in
hardware, without causing any additional loading on the tower and
maintaining the required ground clearances.
iii)Long rod polymers insulators do not require frequent washing as required
by porcelain insulators, which results in saving in O&M cost in long run.
iv)Long rod polymers insulators have life span of around 7-10 years
depending on environmental conditions.
After considering various long-term preventive measures and after discussing the
matter with PowerGrid, MSETCL, Power Links Transmission Ltd. and CPRI,
Bangalore, JPTL learnt that Polymer insulators were giving trouble free
performance since its replacement in their respective Transmission Systems. In view
of the overall merits offered by Polymer insulators, JPTL decided to replace
minimum quantity of porcelain insulators with Polymer Long rod insulators at
identified most critical locations.
JPTL stated that it therefore had initially replaced 744 number of porcelain insulator
strings with Polymer long rod insulators at identified most critical locations under
Phase – I during April and May 2012. This was also to ascertain/establish
effectiveness of Polymer Long rod insulators in critical geographical areas along the
Transmission Lines. The total cost incurred on account of supply and replacement of
these insulators is Rs. 3.41 crore including taxes, duties and related incidental
expenses for replacement activity. JPTL observed that corona, chattering sound and
arcing considerably reduced where Polymer long rod insulators were used in place
of porcelain insulators. Further, there was no incident of tripping of Transmission
Lines in these critical fog/humidity/pollution affected areas, where polymer
insulators were installed.
JPTL has further identified certain other critical locations, which needed
replacement of porcelain insulators with Polymer long rod insulators in order to
minimise the tripping incidents on account of insulator failures due to excessive fog/
humidity/ pollutants and would be replacing these porcelain insulator strings with
1254 number of Polymer long rod insulators under Phase – II keeping 48 numbers of
polymer insulator as spares for contingencies/exigencies, during FY 2012-13. The
total cost to be incurred on account of supply and replacement of these insulators
would be around Rs. 5.65 crore including taxes and duties. JPTL submitted that the
gross capital expenditure to be incurred for replacement of new Polymer long rod
insulators under Phase I and II would be around Rs. 9.06 crores.
Order [Case No. 27 of 2013] Page 38 of 61
JPTL further stated that it has written off Rs. 4.88 crore of the net value of such
replaced assets from the original capital cost in accordance with Regulation 27.10 of
MYT Regulations, 2011.
Based on the above, JPTL submitted the revised capital expenditure for the control period
as given below:
Table 3.3: Capital Expenditure for MYT control period (JPTL) (Rs crore)
Particulars FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
Opening GFA 550.23 554.42 554.42 554.42
Additions 9.06
Retirement 4.88
Closing GFA 554.42 554.42 554.42 554.42
In reply to a query where JPTL was asked to submit details of asset retirement of Rs 4.88
crore considered during FY 2012-13, JPTL submitted that during the first phase, JPTL
retired 744 number of porcelain insulators having gross value of Rs 1.83 crore. Further in
phase II JPTL submitted that it proposes to retire 1254 number of porcelain insulators
having gross value of Rs 3.05 crore. The detailed break-up of the asset retirement as
submitted by JPTL is as follows:
Table 3.4: Break-up of the asset retirement as submitted by JPTL (Rs crore)
Particulars Addition Retirement Net addition
Phase I 3.41 1.83 1.57
Phase II 5.66 3.05 2.61
Total 9.06 4.88 4.19
However, in the audited accounts for FY 2012-13 submitted subsequently by JPTL, it was
observed by the Commission that the asset retirement during FY 2012-13 is Rs. 4.92 crore
instead of Rs. 4.88 crore as earlier submitted by JPTL under its Petition.
During the public hearing, the Commission sought clarification, as to why the aspect of use
of polymer rod insulators instead of porcelain insulators was not considered at the
design/planning stage, considering hilly terrain and foggy/humidity conditions prevalent in
the region where Transmission system of JPTL has been established.
In response, JPTL submitted that the replacement of the porcelain insulator with long
polymer rod insulator have been undertaken selectively only in few parts along the
transmission line wherein frequent trippings were observed during few days of operation
during particular season. Besides, these locations were identified after thorough technical
Order [Case No. 27 of 2013] Page 39 of 61
studies, deploying other mitigation measures such as hotline washing/cleaning, etc. Further,
JPTL submitted that capital cost of polymer rod insulators vis-a-vis operating cost of
cleaning was also an important consideration while deciding on type of insulator in
consultation with STU/PGCIL/CPRI and technical experts from Powerlinks Transmission
Co. Ltd.
Further, JPTL made additional submission vide its email dated 25 July 2013. In the said
communication, JPTL submitted that, it has so far undertaken replacement of around 2614
insulator strings out of total population of 16973 insulator strings amounting to replacement
of around 15.4% of insulator strings as on July 2013. JPTL also submitted that with
replacement of existing insulators with polymer long rod insulators in selected locations, the
high chattering noise, formation of Corona, travelling arc & insulator decapping incidence
seen in certain select areas due to excessive fog conditions have substantially reduced.
Detailed statistics of insulator population and selective replacement as submitted by JPTL is
summarised below:
Table 3.4(a): Details of Insulator Replaced as submitted by JPTL (Rs crore)
Total Insulator String Population
Particulars 120 KN Insulator Strings 160 KN Insulator Strings
Jaigad – New Koyna T/L 954 4326
Jaigad – Karad T/L 1475 10218
Total Insulator Strings 16973
Selective Insulator Replacement
Particulars Number of Insulators
Replaced
% of Insulator strings
replaced
June ’12 – on Trial Basis 744 4.38%
March ’13 – 1st Phase 1294 7.62%
Sub-total (trial and first
phase)
2038 12.00%
May ’13 – 2nd
Phase 576 3.39%
Total replacement of
insulator strings
2614 15.39%
However, under MYT petition JPTL has claimed replacement of only 1998 insulators (744
insulators on trial basis + 1254 insulators during phase-I), upto March 2013, which amounts
to replacement of around 12% of the total insulator strings. JPTL had claimed additional
capital cost impact towards such replacement amounting to Rs 9.06 crore and net capital
cost of Rs 4.19 crore considering retirement of existing porcelain insulators at cost of Rs
4.88 crore.
From the above submissions made by JPTL, the Commission observes that JPTL has
continued with insulator replacements in the subsequent period further to FY 2012-
Order [Case No. 27 of 2013] Page 40 of 61
13 as well and the exact requirement of total insulator replacement and the total
capital cost associated with the same has not yet been submitted by JPTL. In view of
above, the Commission is of the view that any additional capital cost incurred
towards the insulator replacement as well as asset retirement pertaining to the same
could be considered, subject to prudence check, during the mid-term performance
review of JPTL. By then the exact quantum of additional cost/benefits could be
firmed up by JPTL and audited figures would also be available for the Commission to
do the necessary prudence check.
Accordingly, the Commission has not allowed the additional expenditure of Rs 9.06
crore during FY 2012-13 towards installation of long polymer rod insulators and
consequently also not allowed the retirement of assets worth Rs 4.92 crore
corresponding to replacement of porcelain insulators as claimed by the petitioner at
this stage. The Commission hereby directs the Petitioner to submit detailed cost-
benefit analysis of replacement of insulators and the same can considered, subject to
prudence check, at the time of mid-term performance review. In view of above, the
closing GFA for FY 2012-13 and Op. GFA for the subsequent years in the control
period approved by the Commission is as given below.
Table 3.5: GFA approved by the Commission (Rs crore)
Particulars FY 2012-
13
FY 2013-
14
FY 2014-
15
FY 2015-
16
Opening GFA 550.23 550.23 550.23 550.23
Additions 0.00 0.00 0.00 0.00
Retirement 0.00 0.00 0.00 0.00
Closing GFA 550.23 550.23 550.23 550.23
3.3 Depreciation
In compliance with the Commission’s directives in the MYT business plan Order, JPTL in
the present Petition has computed asset class-wise depreciation while projecting
depreciation expenditure for the second control period from FY 2012-13 to FY 2015-16.
Further, depreciation has been computed based on the provisions stipulated under
Regulation 31 of MERC MYT Regulations and on consideration of an annual
depreciation rate of 5.28%.
Order [Case No. 27 of 2013] Page 41 of 61
The depreciation expenditure submitted by JPTL for FY 2012-13 to FY 2015-16 has
been summarised in the following table:
Table 3.6: Depreciation as submitted by JPTL (Rs crore)
Depreciation FY 13 FY 14 FY 15 FY 16
Opening 550.23 554.42 554.42 554.42
Additions 9.06
Retirement 4.88
Closing GFA 554.42 554.42 554.42 554.42
Weighted Average
Depreciation rate 5.28% 5.28% 5.28% 5.28%
Depreciation 29.17 29.28 29.28 29.28
As outlined under previous paragraphs, the Commission has not allowed additional
capitalisation/retirement corresponding to replacement of porcelain insulators with
long polymer rod insulators. Accordingly, in the present Order, the Commission has
computed depreciation for the second control period. Depreciation for the second
control period starting from FY 2012-13 as approved by the Commission is shown
below.
Table 3.7: Depreciation approved by the Commission (Rs crore)
Depreciation FY13 FY14 FY15 FY16
Opening Gross Fixed
Assets (GFA) 550.23 550.23 550.23 550.23
Addition of Gross
Fixed Assets 0.00
Retirement of GFA 0.00
Closing Gross Fixed
Assets 550.23 550.23 550.23 550.23
Depreciation 29.05 29.05 29.05 29.05
Weighted Average
Depreciation rate (r) 5.28% 5.28% 5.28% 5.28%
3.4 Interest on Long-Term loan
JPTL submitted that the revised project cost of Rs 550.23 crore would be funded at a debt-
equity ratio of 75:25. It also submitted that the additional capital expenditure for
replacement of insulators is funded through internal accruals. JPTL has considered debt
equity ratio of 70:30 for additional capital expenditure. Further, for retired assets, JPTL
submitted that it has reduced the debt component by 75% of the original cost of the retired
asset in accordance with Regulation 30 of MYT Regulations, 2011. In the JPTL Petition,
Order [Case No. 27 of 2013] Page 42 of 61
the repayment for the control period has been considered equal to the depreciation for that
year as stipulated in Regulation 33.3 of MERC MYT Regulations, which specifies that “
The repayment for the year of the tariff period FY 2011-12 to FY 2015-16 shall be deemed
equal to the depreciation allowed for that year. “
JPTL submitted that it has renegotiated the interest rate considering the reduced risk
associated with the transmission system. JPTL submitted that the consortium of lenders
have agreed to revise the rate of interest. Accordingly, JPTL has computed the weighted
average interest rate of existing loan and outstanding loan during the period April, 2012 to
February, 2013 as 11.75%, and 11.29% p.a. for the period from FY 2013-14 to FY 2015-16.
In reply to the Commission’s query regarding effectiveness of such revised terms of loan,
JPTL submitted that due to reduced risk profile of the project, SBI and Indian Overseas
Bank have reduced the spread to 1.50% over SBI Base Rate on floating basis with effect
from 30 August, 2012. It was submitted that Punjab National Bank has reduced the interest
to 11.50% p.a. from 12.50% p.a. with effect from 30 August, 2012 with fixed rate of
interest for next one year.
In reply to another query by the Commission regarding basis and supporting computations
for considering interest rate of 11.75% p.a. during FY 2012-13 and 11.29% p.a. for FY
2013-14 to FY 2015-16, JPTL submitted the workings for weighted average interest rate of
11.75% p.a. for FY 2012-13 and further submitted that effective rate of 11.29% p.a. as on
February, 2013 been considered for FY 2013-14 to FY 2015-16, as under:
Table 3.8: Weighted Average Interest Rate
Weighted Average Interest Rate April, 2012 to February, 2013
Effective Month Loan amount (Rs. crore) Rate of Interest
April to June 2012 398.19 12.50%
June to Aug 2012 390.65 12.50%
Sep to Sep 2012 390.65 11.50%
Oct to Dec 2012 383.10 11.33%
Jan to Jan 2013 375.56 11.33%
Feb to Feb 2013 375.56 11.29%
Weighted Average April, 2012 to
February, 2013 11.75%
JPTL also submitted the loan statement of term loan in reply to a query by the Commission.
As regards the interest expenses for the balance years, i.e., FY 2013-14 to FY 2015-16,
JPTL submitted that it is based on average of opening and closing balance of the loans for
Order [Case No. 27 of 2013] Page 43 of 61
the respective years considering repayment equivalent to the depreciation computed for the
respective years.
The interest on long-term debt projected by JPTL is summarised in the table below:
Table 3.9: Interest on Long Term Loans submitted by JPTL (Rs crore)
Particulars FY 13 FY 14 FY 15 FY 16
Opening Balance of Loan 398.09 371.61 342.34 313.06
Loan Addition 6.34
Loan Repayment 29.17 29.28 29.28 29.28
Retirement 3.66
Cl. Balance of Loan 371.61 342.34 313.06 283.78
Interest Rate ( % ) 11.75% 11.29% 11.29% 11.29%
Interest Expense 45.22 40.31 37.00 33.70
The Commission has carefully examined all the submissions of JPTL. Regarding
opening balance of the loan for FY 2012-13, Commission has considered the same at
the level approved as closing balance value for FY 2011-12 as covered under truing up
section under previous chapter.
As regards interest on long term loan, the Commission has observed that JPTL has
used weighted average rate of interest to arrive at the final applicable interest rate.
However, the Regulation 33.5 of MERC MYT Regulation, 2011, specifies as under:
“The rate of interest shall be the weighted average rate of interest calculated on
the basis of the actual loan portfolio at the beginning of each year applicable to
the Generating Company or the Transmission Licensee or the Distribution
Licensee..”
In view of above, the Commission has considered the rate of interest for long term
loans for FY 2012-13 as 12.50% p.a. and the rate of interest for the period FY 2013-14
to FY 2015-16 as 11.29% p.a.. Accordingly, for the purpose of MYT approval, the
interest expenses as approved by the Commission over the second control period is
summarised in the table below:
Order [Case No. 27 of 2013] Page 44 of 61
Table 3.10: Interest on Long Term loans approved by the Commission (Rs crore)
Particulars Ensuing Years
FY13 FY14 FY15 FY16
Opening Balance of Loan 398.25 369.20 340.15 311.09
Loan Addition - - - -
Loan Retirement - - - -
Loan Repayment 29.05 29.05 29.05 29.05
Cl. Balance of Loan 369.20 340.15 311.09 282.04
Interest Expense 47.97 40.04 36.76 33.48
Interest Rate (%) 12.50% 11.29% 11.29% 11.29%
3.5 Interest on Working capital
JPTL, in its Petition, submitted that the working capital requirement has been computed on
a normative basis in accordance with the Regulation 35.2 of MERC MYT Regulations,
which specifies the components of working capital of the transmission business. JPTL has
considered the normative interest rate of 14.50% p.a., which is the State Bank Advance Rate
(bench-mark interest rate specified in MERC MYT Regulations) as on date of submission
of the present petition. Further, JPTL has estimated 1% of opening GFA as cost of stores,
materials and supplies as component of working capital for the relevant financial year.
Table 3.11: Interest on Working Capital as per JPTL submission (Rs crore)
Particulars FY 13 FY 14 FY 15 FY 16
O&M expenses 0.78 0.82 0.87 0.92
Stores 0.46 0.46 0.46 0.46
Expected Revenue from
transmission charges
14.25 13.72 13.36 13.00
Interest on Working Capital
@ 14.50% p.a.
2.25 2.18 2.13 2.09
The Commission has determined the total working capital requirement and interest on
working capital thereof, in accordance with the provisions of MERC MYT
Order [Case No. 27 of 2013] Page 45 of 61
Regulations as under. The interest rate has been considered equal to the SBI PLR as
on date of application of the Petition by JPTL.
Table 3.12: Approved Interest on Working Capital (Rs crore)
Particulars FY 13 FY 14 FY 15 FY 16
Interest on Working Capital
@ 14.50% p.a. 2.18 2.04 1.99 1.94
3.6 Contribution to Contingency Reserve
JPTL has projected the contribution to contingency reserves as 0.25% of the GFA in line
with the MERC MYT Regulations, over the control period from FY 2012-13 to FY 2015-
16. The contribution to contingency reserves as projected by JPTL is shown in table below:
Table 3.13: Contribution to Contingency Reserves submitted by JPTL (Rs crore)
Particulars FY 13 FY 14 FY 15 FY 16
GFA ( Rs Cr ) 554.42 554.42 554.42 554.42
Contingency Reserves
@ 0.25% of GFA 1.39 1.39 1.39 1.39
The Commission has allowed contribution to contingency reserves at 0.25 % of the
opening GFA in accordance with the provisions of the MERC MYT Regulations. The
contribution to contingency reserves allowed by the Commission is given in table
below:
Table 3.14: Contribution to Contingency Reserves approved by Commission (Rs crore)
Particulars FY13 FY14 FY15 FY16
Contribution to
Contingency Reserves 1.38 1.38 1.38 1.38
3.7 Return on Equity
JPTL submitted that the capital expenditure scheme for replacement of insulators is funded
through internal accruals, and hence, it has considered debt-equity ratio of 70:30 for
additional expenditure as mentioned earlier. Further, it submitted that for retirement of
assets, JPTL has reduced the equity capital by 25% of the original cost of retired asset.
Order [Case No. 27 of 2013] Page 46 of 61
JPTL submitted that it has projected the Return on Equity (RoE) in accordance with the
MERC MYT Regulations, which stipulates a 15.5% return on equity per annum based on
the capital expenditure and capitalisation and debt:equity norm of 70:30.
Accordingly, RoE as projected by JPTL is shown in the table below:
Table 3.15: Return on Equity submitted by JPTL (Rs crore)
Particulars FY 13 FY 14 FY 15 FY 16
Opening Equity 137.56 139.06 139.06 139.06
Additions to equity towards
capital investments 2.72
Retirement 1.22
Closing balance of Equity 139.06 139.06 139.06 139.06
ROE @ 15.5 % on the average
balance 21.44 21.55 21.55 21.55
The Commission has considered RoE at the rate of 15.5% of the equity, in accordance
with the MERC MYT Regulations, on the opening equity of the year. Further, as
outlined under previous paragraphs, the Commission has not allowed additional
capitalisation/retirement corresponding to replacement of porcelain insulators with
long polymer rod insulators. Accordingly, question of computation of RoE on
addition/retirement on equity portion during FY 2012-13 does not arise. The
computation of RoE as approved by the Commission under the present MYT Order is
shown in the table below:
Table 3.16: Return on Equity approved by the Commission (Rs crore)
Particulars FY13 FY14 FY15 FY16
Regulatory Equity at the
beginning of the year 137.56 137.56 137.56 137.56
Equity portion of the assets
capitalized - - - -
Reduction of Equity Capital on
account of retirement - - - -
Regulatory equity at the end of
the year 137.56 137.56 137.56 137.56
Return on Regulatory Equity at
the beginning of the year 21.32 21.32 21.32 21.32
Return on Equity portion of
Net Assets capitalised - - - -
Total Return on Regulatory
Equity 21.32 21.32 21.32 21.32
Order [Case No. 27 of 2013] Page 47 of 61
3.8 Non tariff income
JPTL submitted that it has projected income from amount apportioned towards contingency
reserve as per Regulation 36 of MERC MYT regulations. As per the Regulations, the
apportioned amount is assumed to be invested within six months from the close of the
financial year. JPTL has projected return on such investment at 8.13% p.a. based on ten
year Government securities.
The non-Tariff income estimated by JPTL is shown in the table below:
Table 3.17: Non-Tariff Income submitted by JPTL (Rs crore)
Particulars FY 13 FY 14 FY 15 FY 16
Non-tariff Income 0.09 0.20 0.32 0.43
The Commission, based on the approved contribution to contingency reserves for
respective years on cumulative basis and based on an interest rate of 8.13% p.a. on
contribution/investment made out of contingency reserves in accordance with MERC
MYT Regulations, has approved the non-Tariff income under the present MYT Order
for the second control period as summarised in the table below:
Table 3.18: Non-Tariff Income approved by Commission (Rs crore)
Particulars FY13 FY14 FY15 FY16
Non-tariff Income 0.20 0.32 0.43 0.54
3.9 Income Tax
JPTL in their Petition submitted that the Hon’ble ATE in its Judgment in Appeal No. 174 of
2009 filed by TPC-T, has explained the methodology to be followed by the Commission for
computation of income tax.
JPTL submitted that it has also considered RoE method for tax computation in accordance
with the methodology specified under the Hon’ble ATE’s Judgment in Appeal No. 174 of
2009 filed by TPC-T. Further, JPTL submitted that the tax rate considered is the Minimum
Alternate Tax (MAT) rate of 20.01%.
Table 3.19: Income Tax submitted by JPTL (Rs crore)
Particulars FY 13 FY 14 FY 15 FY 16
ROE 21.44 21.55 21.55 21.55
Tax @ 20.01% 5.36 5.39 5.39 5.39
As regards computation of Income-Tax for FY 2012-13 to FY 2015-16, the MERC MYT
Regulations specify that the Commission shall provisionally approve Income Tax payable
Order [Case No. 27 of 2013] Page 48 of 61
for each year of the control period based on the actual Income Tax payable as per the latest
audited accounts as allowed by the Commission subject to prudence check, and the
variation between the actual and approved Income Tax shall be reimbursed at the time of
Mid Term Performance Review. The said Regulation is reproduced below for reference:
“34.1 The Commission in its MYT Order shall provisionally approve Income Tax
payable for each year of the Control Period, if any, based on the actual income tax
paid on permissible return as allowed by the Commission relating to electricity
business regulated by the Commission, as per latest Audited Accounts available for
the applicant, subject to prudence check.
...
34.2 Variation between Income Tax actually paid and approved, if any, on the
income stream of the regulated business of Generating companies, Transmission
licensees and Distribution licensees shall be reimbursed to/recovered from the
Generating Companies, Transmission Licensees and Distribution Licensees, based
on the documentary evidence submitted at the time of Mid-term Performance Review
and MYT Order for the third Control Period, subject to prudence check."
In accordance with the above Regulations, the Income Tax for FY 2012-13 to FY 2015-16
will have to be considered at the same level as approved by the Commission for FY 2011-
12, since, this is the latest year for which audited accounts have been submitted and
prudence check has been undertaken by the Commission. However, in particular case of
JPTL, the allowable income tax for the previous year (i.e., Rs 10.71crore for FY 2011-12,
upon grossing up for income tax in the year of recovery) corresponds to the income tax for
the previous two financial years (i.e. FY 2010-11 and FY 2011-12) for the reasons
elaborated under previous chapter at section 2.8 of this Order.
Accordingly, the Commission has considered income tax amount of Rs. 5.35 crore,
which is average of allowed income tax of Rs 10.71 crore corresponding to previous
two financial years, for the purpose of provisional approval of yearly income tax
during the control period from FY 2012-13 to FY 2015-16. Further, the true up based
on actual Income Tax paid by shall be considered at the time of Mid-Term Review by
the Commission.
The income tax as provisionally approved by the Commission for the second control
period from FY 2012-13 to FY 2015-16 is as summarised in the table below:
Order [Case No. 27 of 2013] Page 49 of 61
Table 3.20: Income Tax approved by the Commission (Rs crore)
Particulars FY13 FY14 FY15 FY16
Income Tax 5.35 5.35 5.35 5.35
Further, as per Regulation 34 of the MERC (MYT) Regulations, 2011, the
transmission company is required to bill the income tax under a separate head called
“Income Tax Reimbursement”. However, few of the Utilities have brought to the
notice of the Commission that if income tax is allowed as separate reimbursement, it
may lead to difficulties in claiming expenses with income tax authorities. In view of
this, the Commission in exercise of its powers under Regulation 100 “Power to remove
difficulties” of the MERC (MYT) Regulations, 2011 hereby orders that the difficulty
in implementing Regulation 34 stands removed by allowing the inclusion of income tax
expense during the control period as a part of the Aggregate Revenue Requirement for
respective years.
3.10 Carrying cost for delayed recovery of transmission charges.
JPTL submitted that the Commission while truing up of the ARR for FY 2010-11 has
allowed carrying cost from August, 2010 to March, 2012 due to non-recovery of ARR for
FY 2010-11. JPTL further stated that the actual recovery of ARR on a monthly basis started
only in July, 2012 after the issuance of intra-State transmission order for FY 2012-13.
JPTL submitted that the actual ARR recovered on a monthly basis from July 2012 onwards
has been considered to offset the trued up ARR for FY 2010-11 and the approved ARR for
FY 2011-12 on a proportionate basis. Therefore, considering the net Trued up ARR for FY
2010-11 and approved ARR for FY 2011-12 recoverable on a monthly basis and normative
working capital interest rate at the prevailing SBI PLR (14.75% till September, 2012 and
14.50% after September, 2012) the carrying cost according to JPTL works out to Rs. 12.76
crore.
JPTL further submitted that the Hon’ble ATE had set the guiding principles for award of
carrying cost in its Judgment (dated 15 February, 2011) in Appeal No. 173 of 2009. The
relevant portion of the Judgment of Hon’ble ATE was reproduced by JPTL in its Petition as
given below:
“…the Appellant is entitled to carrying cost on his claim of legitimate expenditure if
the expenditure is:
a) accepted but recovery is deferred, e.g. interest on regulatory assets;
b) claim not approved within a reasonable time; and
Order [Case No. 27 of 2013] Page 50 of 61
c) disallowed by the State Commission but subsequently allowed by the
superior authority.”
JPTL submitted that since the recovery of trued up ARR for FY 2010-11 and the ARR for
FY 2011-12 was deferred, it is entitled to carrying cost on the same. JPTL submitted
detailed calculation for carrying cost for FY 2010-11 and FY 2011-12 along with the
petition. JPTL, therefore, requested to approve the true up of ARR for FY 2011-12 and
allow full recovery of ARR in FY 2012-13 and FY 2013-14 along with the carrying cost.
The computation of JPTL in the matter of carrying cost has been summarised in the
following tables.
Table 3.21: Carrying cost for FY 2010-11 (JPTL) (Rs crore)
Particulars Carrying Cost
Carrying cost for deferred ARR for FY
2010-11, recomputed by JPTL till July
2013
8.93
Carrying cost allowed for FY 2010-11 in
Case 170 of 2011
5.53
Additional carrying cost claimed by
JPTL for FY 2010-11
3.40
Table 3.22: Carrying cost for FY 2011-12 (JPTL) (Rs crore)
Particulars Carrying Cost
Carrying cost for deferred ARR for FY 2011-12 for Jaigad-
New Koyna Line, computed till July 2013
5.92
Carrying cost for deferred ARR for FY 2011-12 for Jaigad-
Karad Line, computed till July 2013
3.44
Carrying Cost claimed for FY 2011-12 9.35
Carrying Cost for deferred recovery of trued up ARR for FY 2010-11
The Commission observes that while truing up ARR for FY 2010-11 vide Case No. 170
of 2011 the Commission had approved a carrying cost of Rs 5.53 crore towards
deferred recovery of ARR for FY 2010-11. However, the said carrying cost was
computed only till March, 2012 while the actual recovery of the deferred ARR for FY
2010-11 started from June, 2012 onwards (vide TTSC Order in Case No. 51 of 2012).
Hence, the Commission vide this Order has recomputed the carrying cost till May,
2012 and hereby allows the additional carrying cost as computed till March 2013.
Also, the recovery period has been considered the same as that approved in respective
TTSC Orders during the period. Further, the interest rate for computing carrying cost
Order [Case No. 27 of 2013] Page 51 of 61
has considered same as SBI PLR prevailing during the period (August 2011 till Sept
2012 – 14.75% p.a. and for period from October 2012 till January 2013 – 14.50% p.a.,
and for period from February, 2013 to March, 2013 – 14.45%). The following table
summarises the computations of carrying cost as approved by the Commission.
Table 3.23: Carrying Cost approved by Commission for FY 2010-11 (Rs crore)
Particulars Carrying Cost
Carrying cost for deferred ARR for FY
2010-11, recomputed till March 2013
8.08
Carrying cost allowed for FY 2010-11 in
Case 170 of 2011
5.53
Additional carrying cost allowed for
FY 2010-11
2.55
Carrying Cost for deferred recovery of ARR of Jaigad-New Koyna Line and ARR of
Jaigad-Karad Line for FY 2011-12
The Commission had approved line-wise ARR on provisional basis for FY 2011-12 in
Case No. 170 of 2011. In this Order, the Commission has undertaken final true-up of
combined ARR for both lines on aggregate basis. For the purpose of carrying cost
computation for FY 2011-12, the Commission has to consider line-wise Trued up ARR
and for the same, line-wise Trued up ARR has been arrived on proportionate basis
considering total trued up ARR and ratio of line-wise ARR as provisionally approved
in Case No. 170 of 2011. Further, the total Trued up ARR for FY 2011-12 considered
for the purpose of carrying cost computation excludes availability incentive since, the
same is due for recovery only after completion of the specified period which is being
approved only vide the Truing up exercise for FY 2011-12 under the present Order.
The Commission has worked out carrying cost till March, 2013. Also, the recovery
period has been considered the same as that approved in respective TTSC Orders
during the period. Further, the interest rate for computing carrying cost has been
considered same as SBI PLR prevailing during the period. The following table
summarises the computations of the carrying cost as approved by the Commission in
the matter.
Table 3.24: Carrying approved by Commission for FY 2011-12 (Rs crore)
Particulars Carrying Cost
Carrying cost for deferred ARR for FY 2011-12 for Jaigad-
New Koyna Line, recomputed till March 2013
5.97
Carrying cost for deferred ARR for FY 2011-12 for Jaigad-
Karad Line, recomputed till March 2013
3.69
Carrying Cost allowed for FY 2011-12 9.66
Order [Case No. 27 of 2013] Page 52 of 61
Table 3.25: Total carrying cost approved to be recovered in FY 2013-14 (Rs crore)
Particulars Carrying Cost
Carrying cost for deferred ARR for FY 2010-11 2.55
Carrying cost for deferred ARR for FY 2011-12 9.66
Total Carrying Cost allowed to be recovered in FY 2013-
14
12.20
3.11 Performance parameters: Transmission Loss and transmission Availability
Transmission Loss Trajectory for second control period:
JPTL in its business plan Petition had proposed that as regards transmission loss trajectory,
JPTL will be bound by the Commission approved pooled transmission loss for the State as
will be determined by the SLDC. In the present MYT Petition JPTL had not made any
submission towards transmission loss trajectory.
Regulation 69 of the MERC MYT Regulations specifies as under:
“...
69 Transmission losses
69.1 The energy losses in the transmission system of the Transmission Licensee, as
determined by the State Load Despatch Centre and approved by the Commission,
shall be borne by the Transmission System Users in proportion to their usage of the
intra-State transmission system:
Provided that the Commission may stipulate a trajectory for transmission losses in
accordance with Regulation 9 as part of the multi-year tariff framework applicable
to the Transmission Licensee.
Provided that any variation between the actual level of transmission losses, as
determined by the State Load Despatch Centre and the approved level shall be
dealt with, as part of the mid-term performance review, in accordance with the
mechanisms provided in Regulation 11.
...”
According to the above referred Regulations, JPTL being an intra-State Transmission
Licensee, shall be bound by the pooled Intra-State transmission loss approved by the
Commission from time to time, over the second control period.
3.12 Aggregate Revenue Requirement
The ARR submitted by JPTL for the second control period is summarised in the following
table. The Commission has considered the carrying cost claim of JPTL also as part of
their claim under ARR of FY 2013-14 for the purpose of correct representation.
Order [Case No. 27 of 2013] Page 53 of 61
Table 3.26: Aggregate Revenue Requirement projected by JPTL (Rs crore)
Sl
No Particulars FY13 FY14 FY15 FY16
1 Operation and maintenance
Expenses 9.31 9.86 10.45 11.07
2 Depreciation 29.17 29.28 29.28 29.28
3 Interest on Long-term Loan
Capital 45.22 40.31 37.00 33.7
4 Interest on Working Capital 2.25 2.18 2.13 2.09
5 Other Expenses
6 Add: Return on Equity Capital 21.44 21.55 21.55 21.55
7 Contribution to Contingency
Reserves 1.39 1.39 1.39 1.39
8 Income Tax 5.36 5.39 5.39 5.39
9 Aggregate Revenue
Requirement 114.13 109.95 107.19 104.46
10 Less: Non tariff Income 0.09 0.20 0.32 0.43
11 Less: Income from other business 0 0 0 0
12 Net Aggregate Revenue
Requirement 114.03 109.75 106.87 104.03
13 Carrying Cost 12.76
14 Net Aggregate Revenue
Requirement including
Carrying Cost
114.03 122.51 106.87 104.03
Based on the analysis detailed in the previous paragraphs, the Commission has
approved the ARR over the second control period for JPTL for the period from FY
2012-13 to FY 2015-16 as summarised in the Table below:
Table 3.27: Aggregate Revenue Requirement approved by Commission (Rs crore)
Sl
No Particulars FY13 FY14 FY15 FY16
1 Operation and maintenance
Expenses 5.81 6.14 6.51 6.86
2 Depreciation 29.05 29.05 29.05 29.05
3 Interest on Long-term Loan
Capital 47.97 40.04 36.76 33.48
4 Interest on Working Capital 2.18 2.04 1.99 1.94
5 Other Expenses 0.00 0.00 0.00 0.00
6 Contribution to Contingency
Reserves 1.38 1.38 1.38 1.38
Order [Case No. 27 of 2013] Page 54 of 61
Sl
No Particulars FY13 FY14 FY15 FY16
7 Income Tax 5.35 5.35 5.35 5.35
8 Total Revenue Expenditure 91.75 84.01 81.05 78.07
9 Add: Return on Equity Capital 21.32 21.32 21.32 21.32
10 Aggregate Revenue
Requirement 113.07 105.33 102.37 99.39
11 Less: Non tariff Income 0.20 0.32 0.43 0.54
12 Less: Income from other business 0 0 0 0
13 Net Aggregate Revenue
Requirement 112.86 105.01 101.94 98.85
14 Truing up revenue gap for FY
2011-12 6.53
15 Carrying cost for delay in
recovery of ARR for FY 2012-13 -
12.20 - -
16
Net yearly ARR to be considered
for Transmission Charge
Recovery under TTSC Order for
the year
112.86 123.75 101.94 98.85
Order [Case No. 27 of 2013] Page 55 of 61
4. SUMMARY OF DIRECTIVES UNDER MYT BUSINESS PLAN
ORDER AND RESPONSES
The Commission in the MYT business plan Order for JPTL had given several directives for
JPTL to comply while filing the MYT Petition and during the second control period. In
pursuance of such directions, JPTL in the present MYT Petition has submitted the
compliance status or responses to such directives of the Commission. The following section
summarises the directives of the Commission and responses thereto as submitted by JPTL.
Wherever necessary, the Commission has provided its findings on the responses of JPTL.
Capital cost prudent check
Directive
JPTL shall submit audited consolidated financial statements, justifying the revised capital
cost of Rs 550.23 crore, at the time of approval/finalisation of the MYT Petition to be filed
by JPTL for the second control period.
Response
JPTL submitted that the revised capital cost of Rs. 550.23 crore is subsequent to final
settlement with EPC contractor. In this regard, JPTL had submitted the certificate dated 22
November, 2012 duly certified by statutory auditor to the Commission. JPTL submitted that
the actual capital cost would be reflected in its audited accounts for FY 2012-13 and would
submit the same once the audited accounts for FY 2012-13 are ready.
Commission’s Observations/Ruling
The Commission notes that JPTL has made necessary submissions in this regard.
True up for FY 2011-12
Directive
JPTL shall submit true-up of ARR for FY 2011-12 based on revised capital cost as per
MERC Tariff Regulations as a separate section in its MYT Petition for FY 2012-13 to FY
2015-16 as per MERC MYT Regulations.
Response
JPTL submitted the True-up of ARR for FY 2011-12 based on the revised capital cost as per
MERC Tariff Regulations under Section-4 of this Petition.
Commission’s Observations/Ruling
Order [Case No. 27 of 2013] Page 56 of 61
JPTL has submitted the required documents as sought by the Commission.
Directive
JPTL shall submit asset class-wise details along with the MYT Petition for the second
control period and compute depreciation asset class-wise in accordance with the
depreciation rates specified in the MERC MYT Regulations.
Response
JPTL submitted that the asset class-wise details and computation of depreciation asset class-
wise in accordance with the depreciation rates specified in the MERC MYT Regulations are
included in Section 5 of its MYT Petition.
Commission’s Observations/Ruling
JPTL has submitted the required details in the desired format as sought by the Commission.
Order [Case No. 27 of 2013] Page 57 of 61
5. RECOVERY OF TRANSMISSION CHARGES
As JPTL forms a part of the InSTS system, the approved ARR along with the provisionally
approved income tax for respective years of the second control period from FY 2012-13 to
FY 2015-16 for JPTL shall be allowed to be recovered through the InSTS Transmission
Tariff Orders which the Commission shall issue for respective years of the second control
period.
In accordance with the Transmission Pricing Framework as specified under the MERC
MYT Regulations, the approved ARR of any transmission licensee for a particular financial
year of the control period should be considered for recovery through the TTSC of the same
financial year. The relevant Regulation of MERC MYT Regulations specifying such
formula for ARR recovery for transmission licensee, is reproduced as under for ready
reference.
“64.1 Determination of Total Transmission System Cost (TTSC)
64.1.1 The aggregate of the yearly revenue requirement for all Transmission
licensees; less the deductions, as approved by the Commission over the Control
Period, shall form the “Total Transmission System Cost" (TTSC) of the Intra-
State transmission system, to be recovered from the Transmission System Users
(TSUs) for the respective year of the Control Period, in accordance with the
following Formula:
Where, TTSC(t) = Pooled Total Transmission System Cost of year (t) of the Control
Period
n = Number of Transmission Licensee(s)
ARRi = Yearly revenue requirement approved by the Commission for ith
Transmission Licensee for the yearly period (t) of the Control Period
NTi = Approved level of non-tariff income for ith Transmission Licensee for the
yearly period (t) of the Control Period
Oi = Approved level of income from other business of the ith Transmission Licensee
for the yearly period (t) of the Control Period
STR(t-1) = Revenue from short term open access charges earned during previous
yearly period (t-1).
...”(Emphasis Added)
However, in the case of ARR recovery of JPTL for FY 2012-13, the InSTS transmission
Tariff Order for FY 2012-13 has already been issued on 21 May, 2012 and at the time of
Order [Case No. 27 of 2013] Page 58 of 61
issuance of the same, there was no ARR approved for JPTL for FY 2012-13. Hence, the
latest approved ARR for JPTL for FY 2010-11 and FY 2011-12 as per Case No. 170 of
2011, was considered as part of TTSC for FY 2012-13. The relevant extract of the same is
reproduced below:
“11 In order to determine the transmission Tariff for FY 2012-13, TTSC has to be
computed based on the approved ARR for FY 2012-13 of the transmission licensees
namely, MSETCL, TPC-T, RInfra-T and JPTL, forming the existing InSTS. However,
as per the present status, the approved ARR for all the above transmission licensees
are not available for FY 2012-13. In this context, the Commission is constrained to
consider the ARR of the latest financial year as approved in the Orders already
issued by the Commission for the respective transmission licensee for the purpose
of determination of TTSC for FY 2012-13 and the transmission Tariff thereof”
(emphasis added)
Further, on 13 May, 2013 Commission issued the InSTS transmission Tariff Order for FY
2013-14 to FY 2015-16 (Case No. 56 of 2013). Since the approved ARR for JPTL from FY
2013-14 to FY 2014-15 was not available, the Commission was constrained to consider the
ARR as computed in the MYT business plan order for JPTL for purpose of determination of
TTSC in the InSTS Order. The relevant extracts of the same is produced below:
“In order to determine the transmission Tariff for FY 2013-14 to FY 2015-16, TTSC
has to be computed based on the approved ARR under respective MYT Orders of the
transmission licensees forming the existing InSTS. However, as per the present
status, MYT Orders have been issued only for TPC-T and APML-T. In this context,
for other Transmission Licensees forming existing InSTS, the Commission is
constrained to consider the ARR as computed in respective Business Plan Orders.
However, it is clarified that upon issuance of MYT Orders for such Transmission
Licensees, the TTSC and the Transmission Tariff as determined under this Order
shall be amended in due course, as may be necessary. The adjustments of over-
recovery/under-recovery, if any, along with interest cost due to difference in ARR
approved for such Transmission Licensees in their respective MYT Orders vis-a-vis
ARR considered as per Business Plan Orders for the purpose of determination of
TTSC under this Order shall be suitably accounted for during such amendment
exercise.”
In view of the above, adjustments of over-recovery/under-recovery, if any, along with
interest cost due to difference in ARR approved for JPTL in this Order vis-a-vis ARR
Order [Case No. 27 of 2013] Page 59 of 61
considered for JPTL in the InSTS Order for FY 2013-14 to FY 2015-16; will be
considered by the Commission at the time of amendment of InSTS Order for FY 2013-
14 to FY 2015-16 as and when such exercise is undertaken by the Commission.
6. APPLICABILITY OF THE ORDER
This Order on truing up of ARR for FY 2011-12 and approval of ARR for the MYT
control period from FY 2012-13 to FY 2015-16 shall come into force with effect from
its date of issuance and shall continue to be in force for the entire MYT control period
till 31 March, 2016. The Commission shall undertake the mid-term review of JPTL’s
performance during the third quarter of FY 2014-15 in accordance with the MERC
(MYT) Regulations, 2011. JPTL is directed to submit its Petition for mid-term review
of its performance during the third quarter of FY 2014-15, with detailed reasons for
deviation in performance, latest by 30 November, 2014.
With the above, JPTL’s Petition in Case No. 27 of 2013 stands disposed of.
Sd/- Sd/- Sd/-
(Chandra Iyengar) (Vijay L. Sonavane) (V. P. Raja)
Member Member Chairman
Order [Case No. 27 of 2013] Page 60 of 61
Appendix-1
List of individuals who attended the Technical Validation held on 18 March, 2013
Sr. No. Name Institution
1 S.Badri JPTL
2 C.P.Tated JPTL
3 Nishant Thote JPTL
4 Abhay Yagnik JPTL
5 Navaraj Singh JPTL
6 S.J.Amberkar MSETCL
7 Chavan R. D. MSETCL
8 S.Prilok Kumar Deloitte
9 Amitabh Saha Deloitte
Order [Case No. 27 of 2013] Page 61 of 61
Appendix-2
List of individuals who attended the Public Hearing held on 30 May, 2013
Sr. No. Name Institution
1 Prithpal singh JPTL
2 S.Badri Narayan JPTL
3 C.P.Tated JPTL
4 Nishant Thote JPTL
5 Amitabh Saha JPTL
6 A.R. Yagnik JSW
7 S.J.Amberkar STU
8 M.C.Walke STU
9 Sanjay Kulkarni STU
10 Chandra Boreddy Deloitte