ANNUAL REVENUE REQUIREMENT - UPPCL Online

ANNUAL REVENUE REQUIREMENT

&

TARIFF APPLICATION

FY 2009-10

Uttar Pradesh Power Transmission Corporation Limited

LUCKNOW

ARR & TARIFF: FY10

Uttar Pradesh Power Transmission Corporation Ltd. i

Table of Contents 1. Introduction.................................................................................................................. 1-1

1.1. U P Power Transmission Corporation Limited (UPPTCL) ................................................. 1-1 1.2. Procedure Envisaged for ARR FY 08 & 09 ....................................................................... 1-1

UP Power Transmission Corporation Limited:............................................................................. 1-3

2. Existing Transmission System- a preview: ............................................................... 2-3 2.1. Interconnections and Northern Region Load Dispatch Centre (NRLDC)........................... 2-4 2.2. Availability of Lines ........................................................................................................... 2-4 2.3. Load Levels ...................................................................................................................... 2-4 2.4. Bulk Transmission System Flows: .................................................................................... 2-5

3. Performance Analysis of ARR FY 08 & FY 09 Filing: .............................................. 3-6 3.1. Review of UPERC FY 08 & FY 09 Tariff Order: ................................................................ 3-6 3.2. Comparison of Estimated Cost and Actual Figures To-Date ............................................. 3-7

3.2.1. Demand Forecast-Tariff Order and Actual FY (2007-08): .............................................. 3-7 3.2.2. Expense items- Approved and Estimated: ..................................................................... 3-7

3.3. Investments: ..................................................................................................................... 3-8 3.3.1. Proposal for Ensuing Year: ............................................................................................ 3-9 3.3.2. Normal Development Works: ......................................................................................... 3-9 3.3.3. Transmission Works in NCR.......................................................................................... 3-9 3.3.4. Renovation and Modernization ...................................................................................... 3-9 3.3.5. Augmentation of Transmission System due to RE works............................................... 3-9

3.4. Compliance of UPERC Directives: .................................................................................. 3-18 4. Power Wheeling & Demand: ..................................................................................... 4-20

4.1. Losses external to UPPTCL system:............................................................................... 4-20 5. Annual Revenue Requirement: FY 2009-10 ............................................................. 5-21

5.1. ARR – FY 2009-10:......................................................................................................... 5-21 5.1.1. Escalation Index/Inflation Rate .................................................................................... 5-22

5.2. Operation & Maintenance Expenses............................................................................... 5-22 5.2.1. Employee Costs: ......................................................................................................... 5-23

5.3. Administration and General (A&G) Expenses: ................................................................ 5-24 5.4. Gross Fixed Assets (GFA) Balances and Capital Formation Assumptions ..................... 5-25 5.5. Repair and Maintenance (R&M) Expenses ..................................................................... 5-27 5.6. Depreciation Expense:.................................................................................................... 5-27 5.7. Interest and Financing costs: .......................................................................................... 5-27 5.8. Other Income: ................................................................................................................. 5-29 5.9. Reasonable return/ Return on Equity: ............................................................................. 5-29 5.10. Service tax: ..................................................................................................................... 5-30 5.11. TransCo ARR: ................................................................................................................ 5-31

6. Proposed Transmission Tariff: ................................................................................. 6-32 6.1. Derivation of Tariff:.......................................................................................................... 6-32

7. SLDC Charges: .......................................................................................................... 7-33

ARR & TARIFF: FY10

Uttar Pradesh Power Transmission Corporation Ltd. ii

List of Tables Table 2-1: Total existing Sub-Stations: ..................................................................................... 2-3 Table 2-2: Total existing Lines (Circuit Km).............................................................................. 2-4 Table 2-3: Yearly System Peak in M.W. ..................................................................................... 2-5 Table 2-4: Monthly System Peak for current Year .................................................................... 2-5 Table 3-1: Approved and Actual FY 2007-08: Energy Demand (MU) ..................................... 3-7 Table 3-2: Approved and Actual FY 2008-09: Energy Demand (MU) ..................................... 3-7 Table 3-3: Estimated and Actual ARR FY 08, Components: ................................................... 3-8 Table 3-4: Estimated and Actual ARR, Components:.............................................................. 3-8 Table 3-5: Proposed Program for Transmission Works (Rs. Cr.)......................................... 3-10 Table 3-6: Detailed Program of Transmission Works for ensuing Year (Augmentation): .. 3-16 Table 3-7: Compliance of UPERC Directives: ......................................................................... 3-18 Table 4-1: Actual & Estimated Energy Profile:....................................................................... 4-20 Table 5-1: Escalation Index ..................................................................................................... 5-22 Table 5-2: Details of Employee Cost: ..................................................................................... 5-23 Table 5-3: A &G Expenses: ..................................................................................................... 5-25 Table 5-4: Transco Investment Plan: (Rs. Cr) ........................................................................ 5-26 Table 5-5: Capital Formation during FY 09 ............................................................................ 5-26 Table 5-6: Capital Formation during FY 10 ............................................................................ 5-26 Table 5-7: R&M Expenses: ...................................................................................................... 5-27 Table 5-8: Details of Interest & Finance Cost: ....................................................................... 5-28 Table 5-9: Interest on Working Capital:................................................................................. 5-29 Table 5-10: Summary of Other Income: ................................................................................... 5-29 Table 5-11: Return on Equity: .................................................................................................. 5-30 Table 5-12: Annual Revenue Requirement: ............................................................................ 5-31 Table 6-1: Derivation of Transmission Tariff: ....................................................................... 6-32 Table 7-1: Break-up of SLDC Charges................................................................................... 7-33

ARR & TARIFF: FY10

Uttar Pradesh Power Transmission Corporation Ltd. iii

Executive Summary:

• In accordance with the Section 62 of the Electricity Act2003 and provisions of the

Transmission Tariff Regulations notified by the Commission, UP Power Transmission Corporation Limited is submitting before UPERC the Aggregate

Revenue Requirement and Tariff petition for FY 2009-10.

• As prescribed in the Regulation, the petitioner is required to file the Aggregate

Revenue requirement complete in all respect along with requisite fee as prescribed in the Commission’s Fee and Fine Regulations each year containing the details of the

estimated expenditure and the expected revenue that it may recover in the ensuing

financial year at the prevailing tariff. Further the petitioner is required to file ARR for

the ensuing financial year indicating the manner in which the gap between the

expenses, which is permitted to recover and expected revenue for ensuing financial year, shall be bridged.

• As per provisions under Electricity Act 2003, separate State Load Despatch Centre (SLDC) is to be established by the state government to ensure integrated operation

of Power system in the State. Further Transmission Regulation provides that till such time the State Govt establishes separate SLDC ,STU shall operate SLDC

function & till complete segregation of accounts between SLDC function & transmission function , STU shall apportion its Cost between (i) SLDC function and

(ii) Transmission Function based on an allocation statement& basis of such apportionment shall be clearly indicated in the ARR petition. Currently the function

of SLDC is being discharged by a separate section within UPPTCL. Expenses of SLDC function & ARR has been worked out on the basis of best estimate available. In

present petition, expenses of SLDC are being charged through UPPTCL ARR however in the a separate section of SLDC ARR has been added for approval of

SLDC charges for other practical purposes such charges being levied to open access consumers.

• The layout of this petition among other things includes background, proposed expenditure plan for the ensuing year ,estimation of the Aggregate Revenue

Requirement , explanatory notes where ever required and status of directive issued by the Hon’ble Commission and other information as mandated in the regulation.

• The objective of the petitioner in this filing has been to contain the expenses to a reasonable level to offset inflationary pressure as prevailing in the market. For the

current year petitioner has endeavoured to limit the expenses with in the approved limit . For ensuing year petitioner has also taken a daunting task to control the

ARR & TARIFF: FY10

Uttar Pradesh Power Transmission Corporation Ltd. iv

expenses to the reasonable level but due to prevailing market condition some time it

is not possible to limit expenses to current level due to uncontrollable factors.

• The petitioner in the current and ensuing year has continued with the execution with

the all major capital investment project as also the must do projects for meeting the demand growth ,creating adequate capacity for reducing the over load of heavy

loaded feeders and transformers. The petitioner has proposed a capital expenditure of Rs 794 Cr for FY2008-09 and Rs 2870 Cr for FY2009-10 .Detail of major capital

investment plan is described in subsequent section with the proposed funding mechanism.

• The petitioner while estimating expenses for current & ensuing year has taken into account the actual expenses incurred in previous years as per its audited /un

audited balance sheet and up to date expenses for current year to drive the expenses at a reasonable level.

• The petitioner has endeavoured to control the employee expenses in the current year to the approved level. While projecting the expenses for ensuing year petitioner has

adopted the same method to contain inflationary pressure but due to announcement of 6th pay commission, it is bound to increase.

• The petitioner while projecting A& G expenses for ensuing year has proposed a

marginal increase in the A&G expenses this is only in order to off-set inflationary pressure. This is in real term can be termed as reduction in expenses as virtually in

nearly same expenses are ensured to be incurred in spite of creation of additional Division & Circle.

• The petitioner has projected R&M expenses for current year taking into account actual trends and for ensuing year R&M expenses has been estimated as per

methodology adopted in previous years. The petitioner is making all round effort to optimize the R&M expenses despite steep rise in metals & fuels costs. The proactive

preventive maintenance initiatives and capital expenditure are done in various improvement schemes which would result in improvement in quality of supply and

reduction in number of overloaded lines &substations.

• The petitioner has projected Rs 0.243 per unit Tariff for FY2009-10.

ARR & TARIFF: FY10

Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 1-1

1. Introduction 1.1. U P Power Transmission Corporation Limited (UPPTCL)

The U P Power Transmission Corporation Limited (hereinafter referred to as TransCo) is the company

incorporated under the Companies Act, 1956 by making amendment in the Object and Name clause of

Uttar Pradesh Vidhyut Vyapar Nigam Ltd and having duly passed Special Resolution on 7th June 2006

in term of Section 21 of the Companies Act, 1956 which was originally incorporated on 31stMay, 2004.

UPPTC started functioning with effect from 26th July 2006 and is entrusted with the business of

transmission of electrical energy to various utilities with the help of its transmission lines and substations

within the geographic area of Uttar Pradesh. Before incorporation of UPPTC, transmission work was

entrusted with UPPCL. Govt of UP in exercise of power under section–30 of the Electricity Act 2003

vide notification No: 122/U.N.N.P/24-07 dated 18 July 2007 notified U P Power Transmission

Corporation Limited as the State Transmission Utility of Uttar Pradesh.The UPPTCL now deal with the

transmission of electricity for catering power requirement of four distribution companies viz

Madhayanchal Vidyut Vitran Nigam Ltd, Dakshinanchal Vidyut Vitran Nigam Ltd, Pashchimanchal

Vidyut Vitran Nigam Ltd and Poorvanchal Vidyut Vitran NigamLtd in addition to two other distribution

companies serving Kanpur (KESCO) and Noida (NPCL).

1.2. Procedure Envisaged for ARR FY 08 & 09 Uttar Pradesh Power Transmission Corporation submitted before U.P. Electricity Regulatory

Commission the Annual Revenue Requirement (ARR) and Tariff proposal for FY 2008-09 on 19th

December, 2007 along with the information/data for FY 2007-08 in accordance with the provisions

of the Transmission Tariff Regulations notified by the Commission on 6th October 2006.These

regulations are applicable for the purpose of ARR Filing and Tariff determination of the transmission

Licensee with in the State of UP.

The Commission vide its order dated 4th January 2008 observed certain deficiencies in the above

petitions, which were clarified by the licensee as under-

• Licensee has submitted that as per requirement of Commission under electricity act 2003 the

UPPTCL is in the process of taking action for obtaining separate licence.

• Draft Transfer Scheme has been formulated and submitted to the GoUP for their consideration

and shall be notified by the GoUP.

• All the new PPAs are being allocated to DisComs and a proposal for allocation of old PPAs to

the DisComs has been submitted to the GoUP.

• With reference to the Intra-State ABT in the state Licensee has submitted that the work of

installation of boundary meters is in progress.

The Commission admitted the petition filed by the Licensee on 25th January 2008 and

directed the Licensees to advertise the salient features of ARR/Tariff petition in the widely

circulated newspapers of the area of supply.

ARR & TARIFF: FY10


Comments of general public including electricity consumers on ARR/Tariff proposals were also

invited. An advertisement in this regard appeared in five leading news papers on 31st January

2008.

The Commission conducted public hearing at Lucknow, Kanpur, Ghaziabad and Gorakhpur

.Various stakeholders, industry associations and consumer forums participated in the public

hearing and submitted their comments.

UPERC issued a Joint Tariff Order for FY 2007-08 & 2008-09 on 15th April 2008 with an

average hike in Retail Tariff of about 14%.

The structure of this submission:

In accordance with the provisions of Transmission Tariff Regulations UPPTCL is filing Annual

Revenue Requirement of the Transmission business including tariff and charges. This ARR

filing includes detailed Tariff proposal for transmission and wheeling of Electricity. The

structure of this submission is as follows

Section 1. Introduction: This contains a brief background and rationale used for the submission; major assumptions used and describe the structure of the submission.

Section 2. UPPTCL, Transmission System- a preview

Section 3. Performance Analysis of ARR FY2008&FY2009 Filing: This includes:

a) A review of the UPERC FY 08&FY09 Tariff Order.

b) Comparison of estimated cost and actual figures to-date;

c) An action plan undertaken by UPPTCL for improvement of Transmission Loss

d) Investment plans.

e) Compliance of UPERC directives.

Section 4. Power Wheeling & Demand: This includes demand forecasts for FY10, also summarised actual FY 08 & FY09.

Section 5. Annual Revenue Requirement: (ARR) for FY 2009-10: This includes the ARR forecast for FY10 for UPPTCL.

Section 6. Proposed Transmission Tariff: This provides the proposed transmission tariff for UPPTCL, which will be a simple “postage stamp” tariff. This tariff would be applied to all DisComs and current Bulk Supply consumers.

Section 7. SLDC-Annual Revenue Requirement (ARR) for FY 2009-10: This includes the ARR forecast for FY10 for SLDC and provides the proposed SLDC charges, for the capacity handled by UP Power Transmission Corporation Ltd.

Notes:

In this petition:

Previous year is defined as financial year FY2007-08.

Current year is defined as financial year FY2008-09

Ensuing year is defined as financial year FY2009-10

ARR & TARIFF: FY10


UP Power Transmission Corporation Limited:

2. Existing Transmission System- a preview:

The transmission system in UP is composed of 400 kV, 220 kV and 132 kV AC lines and substations.

UPPTCL has also built one 765 kV AC single circuit line which connects the Anpara thermal station in

the southern part of UP to Unnao s/s (Unnao District). Presently, this line is being operated at 400 kV.

Majority of the transmission lines & substations in UP are owned and operated by UPPTCL. However,

there are other transmission lines & substations in UP (including a ± 500 kV HVDC line from Rihand to

Dadri) that carry electricity from the central sector plants to the neighbouring states and these are

owned and operated by the Power Grid Corporation of India Limited (PGCIL). In addition, some of the

above transmission facilities are jointly owned by UPPTCL & PGCIL.

Until the 400 kV grid was fully developed, the 132 kV lines were part of the transmission network. Now

the 400 kV and 220 kV network forms the transmission grid while the 132 kV systems can be treated as

a sub transmission system. Over a period of time, some of the 132 kV lines formed local grids while a

majority of them are radial lines.

The total circuit lengths of the existing 765 kV, 400 kV, 220 kV and 132 kV lines are given in Table

2-1 & sub station are given in Table 2-2.

Table 2-1: Total existing Sub-Stations:

Sl. NO. Transmission Area The No. of Sub Centres Capacity (MVA)

400 K.V.1- Transmission Central Area 4 22202- Transmission Eastern Area 4 17503- Transmission Southern Area 2 11104- Transmission Western Area 4 2850

Total 14 7930


Total 54 14730


Total 236 19057

ARR & TARIFF: FY10


Table 2-2: Total existing Lines (Circuit Km)

132 K V L ines

40942606904

11384

Transm ission L ines ckt.km

765K V L ines (charged a t 400 kV )400 K V L ines220 K V L ines

2.1. Interconnections and Northern Region Load Dispatch Centre (NRLDC)

UPPTCL’s existing transmission system is interconnected to the electrical grids of its neighbouring

States, namely, Uttaranchal, Haryana, Rajasthan and the central system of New Delhi. In addition, it

maintains asynchronous ties (i.e. AC-DC-AC) with the electrical grids of Bihar in the east and Madhya

Pradesh in the South.

Until November 2002, there was only one State of UP and one transmission grid for the entire erstwhile

UP. The ownership of lines and substations have changed since division of UP into two States, i.e. UP

& Uttaranchal.

The UPPCL power system is a part of the Northern Regional Grid of India. The Northern Grid is

controlled from a unified regional load dispatch centre at Delhi. The Northern Regional Load Dispatch

Center (NRLDC) is equipped with modern SCADA and Energy Management System Software. The

SCADA system is fully functional as are key applications like State Estimation, Economic Dispatch and

security assessment. The NRLDC modified its economic dispatch software to take into account the

Availability Based Tariff (ABT). UPPTCL has been upgrading its own unified load dispatch centre at its

head office in Lucknow and the four area control centres.

2.2. Availability of Lines

Availability of lines and other equipments of UPPTCL system is positively around 98% and with this

system UPPTCL handles Transmission of energy from different generating units to the Distribution

Licensees (Points) effectively.

2.3. Load Levels

The load centre power demands and their daily, monthly & yearly load levels and associated load power

factors are important factors that influence the planning of the bulk transmission system. UPPTCL loads

are generally scattered throughout the state with heavy demands in Varanasi, Allahabad, Lucknow,

Kanpur, Agra and Meerut areas. The annual peak load generally occurs in summer month. Figure 2-3 &

Figure2-4 typically show the yearly peak demand of previous years & monthly current year peak demand.

ARR & TARIFF: FY10


Table 2-3: Yearly System Peak in M.W.

Month AvailabilityR.D.M. (MW)

Restriction (MW)

UDM (MW)

2003-04 5403 6788 600 73682004-05 5717 6870 1100 79702005-06 6112 7437 1100 85372006-07 7188 7653 1100 87532007-08 7504 8604 1500 101042008-09 8222 8337 2250 10587

Table 2-4: Monthly System Peak for current Year

Month AvailabilityR.D.M. (MW)

Restriction (MW)

UDM (MW)

Apr-08 7130 8045 1500 9545May-08 7617 8417 1500 9917Jun-08 8036 8066 1500 9566Jul-08 7521 8281 1500 9781Aug-08 7725 8115 1500 9615Sep-08 7889 9064 1500 10564Oct-08 8222 8337 2250 10587Nov-08 6466 7946 1500 9446Dec-08 7413 8098 1100 9198Jan-09 7546 7621 2250 9871Feb-09 7555 8040 1500 9540Mar-09 7474 7982 1500 9482

2.4. Bulk Transmission System Flows:

Bulk transmission system flow characteristics are dominated by the coal based thermal generating

plants available in southeast of UP. These plants at Anpara, Obra, Rihand and Singrauli generate

about 6300 MW out of which 4500 to 5000 MW generation flows to the western regions after meeting

Varanasi regional demand. This power transfer level continues through Sultanpur-Allahabad, Lucknow-

Kanpur, Moradabad-Agra interfaces since the available generation in each of the regions almost

matches with its respective demand. In the east, power from the aforementioned plants flows towards

north to supply Varanasi, Azamgarh and Gorakhpur load centers. A small amount of power is imported

from Bihar through a connection at 132 kV level. Power supply to Uttaranchal in the North West is

normally less than 500 MW due to the available hydroelectric generation in the state. In the west, more

than 3000 MW flows to Delhi and Rajasthan through ± 500 kV HVDC bi-pole line and 400 kV

transmission network across the state. The existing bulk transmission system capacity with the current

level of power transfer requirements is well equipped to handle the flow of energy.

ARR & TARIFF: FY10


3. Performance Analysis of ARR FY 08 & FY 09 Filing:

As previously mentioned, this section contains the following:

a) A review of FY 08 & FY 09 UPERC Tariff Order;

b) Comparison of estimated cost and actual figures to-date

c) An action plan undertaken by UPPTCL for improvement of Transmission Loss.

d) Investments plan.

e) Compliance with Commission directives.

3.1. Review of UPERC FY 08 & FY 09 Tariff Order:

The Commission under the statuary obligation to restore regulatory synchronism, directed UP TransCo

on 19th October 2007 to submit the ARR/Tariff application for FY 2008-09 by 30th November, 2007 along

with the data/information for the FY 2007-08.

The Licensee filed their ARR/Tariff petition for FY 2008-09 on 19th December in accordance with the

provisions of the Transmission Tariff Regulations notified by the Commission on 6th October 2006.

The Commission admitted the petition filed by the Licensee on 25th January 2008. U.P. Electricity

Regulatory Commission issued Tariff Order for FY 2007-08 & 2008-09 on 15th April 2008.

The single Order for FY 08 & FY 09 covered all five of the successor companies to the erstwhile

UPPCL. With respect to UPPCL Transco, the salient points of the Order may be summarised as follows:

• The Commission approved a transmission tariff of Rs 0.222 per kWh for FY 2008-09 and Rs 0.190

per kWh for FY 2007-08, compared to an equivalent amount of Rs 0.191 per kWh for FY 09 &

Rs 0.231 per kWh for FY 08 in the Transco tariff petition. Although cost inputs and forecast sales

were revised by the Commission to yield the different result, the basic methodology of dividing total

Transco ARR by energy delivered by TransCo was accepted. The transmission Tariff for FY 08 &

FY 09 thus represents an increase of 12% & 15 % over the Transmission Tariff for FY 2006-07.

• The tariff was designed to meet Transco’s annual revenue requirement; in order to make revenue

gap zero. Additionally, it should be noted that Transco’s annual revenue requirement for FY 2007-

08 was approved to Rs 1025.39 Cr as against Rs 1015.31 filed in the petition. The annual

requirement for FY 2008-09 was approved to 1195.12 as against 1272.09 filed in the petition.

• The Commission in order to encourage the Open Access Transmission in the state facilitated the

customers seeking Open Access, approved transmission charges payable by all Open Access

customer based on the voltage level at which they are connected to the grid .Commission has

approved Open Access transmission charges of Rs 0.22/kWh and Rs 0.05/kWh for long term and

short term in FY 09 for consumers connected at 132 kV voltage level. For consumers connected

above 132 kV voltage, these charges are Rs 0.16/kWh & Rs 0.04/kWh for long term and short term

Open Access.

ARR & TARIFF: FY10


3.2. Comparison of Estimated Cost and Actual Figures To-Date

3.2.1. Demand Forecast-Tariff Order and Actual FY (2007-08):

Table 3-1 provides a summary of UPERC approved demand in Tariff Order FY 08 and actual demand

for FY 08. In Table 3-2 the same values are given for FY 09.

Table 3-1: Approved and Actual FY 2007-08: Energy Demand (MU)

Agra DisCom(Incld. Bulk) 14053 14,246 -1.4%Meerut DisCom(Incld. Bulk) 17751 16,968 4.4%Lucknow DisCom 9426 8,683 7.9%Varanasi DisCom 12377 11,596 6.3%

Total 53607 51,493 3.9%

Licensee (Rs Cr)

Tariff Order FY2007-08

Actual FY2007-08 Diff

Table 3-2: Approved and Actual FY 2008-09: Energy Demand (MU)

Agra DisCom(Incld. Bulk) 14712 14,409 2.1%Meerut DisCom(Incld. Bulk) 18294 17,214 5.9%Lucknow DisCom 9684 8,958 7.5%Varanasi DisCom 12722 12,198 4.1%

Total 55412 52779 4.8%

Licensee (Rs Cr)


Estimated FY2008-09 Diff

3.2.2. Expense items- Approved and Estimated:

Table 3-3 & Table 3-4 provide a summary of the various ARR components of Tariff Order FY08 & FY

09. It is evident from the tables that all expenses are well with in the approved limit.

ARR & TARIFF: FY10


Table 3-3: Estimated and Actual ARR FY 08, Components:

Em ployee cost 286.73 252.49 -12%A&G expenses 29.24 21.52 -26%R&M expenses 60.45 67.89 12%Interest charges 252.73 242.92 -4%Depriciation 270.8 257.38 -5%Gross Expenditure 899.95 842.19 -6%Expenses capitalisationEmployee cost capitalised 83.15 73.22 -12%Interest capitalised 50.49 15.81 -69%A&G expenses capitalised 5.55 6.62 19%Net expenditure 760.76 746.53 -2%Prior period Adjustment 15.30 Total net expenditure w ith provision 760.76 761.83 add: Return on Equity 278.24 293.81 6%Less: Non Tariff Incom e (13.61) (17.17) 26%

Annual Revenue Requirement(ARR) 1,025.39 1,038.47 1%

Expense Items (Rs Cr)


Actual FY2007-08 Diff

Table 3-4: Estimated and Actual ARR, Components:

Employee cost 316.99 285.72 -10%A&G expenses 32.32 31.88 -1%R&M expenses 66.83 101.18 51%Interest charges 305.51 265.77 -13%Depriciation 325.65 280.82 -14%Gross Expenditure 1047.3 965.38 -8%Expenses capitalisationEmployee cost capitalised 91.93 82.86 -10%Interest capitalised 61.74 34.52 -44%A&G expenses capitalised 6.14 6.06 -1%Net expenditure 887.49 841.94 -5%add: Return on Equity 321.96 314.49 -2%Less: Non Tariff Income (14.33) (18.47) 29%

Annual Revenue Requirement(ARR) 1195.12 1,137.96 -5%

Expense Items (Rs Cr)


Estimated FY2008-09 Diff

3.3. Investments:

Investments will be made in key areas with the objective of strengthening the transmission networks,

thus contributing to the reduction of losses and reliability of supply. This work will be conducted with the

help of loans from financial institution and equity from GoUP.

ARR & TARIFF: FY10


3.3.1. Proposal for Ensuing Year:

It will be necessary to execute many works for ensuring reliability, stability and quality of transmission

system but on the basis of experience of the past years, availability of money and other special reasons

the restricted list of transmission works. During FY 2009-10 investments will be made in key areas with

the objective of strengthening the transmission networks, thus contributing to the reduction of losses &

reliability of supply. Most of the works are to be financed by M/s. Power Finance Corporation, New

Delhi, NCR Board, Rural Electrification Corporation, New Delhi and HUDCO loan.

The transmission works have been categorized as follows:-

1. Normal Development Works

2. Transmission works in National Capital Region

3. Renovation and Modernization

4. Transmission works on account of 100% electrification of villages

5. Installation of Capacitors

3.3.2. Normal Development Works:

Due to increase demand of electricity, some of the sub-stations/lines are overloaded. To meet out

this demand it is essential to increase the capacity of the sub-stations and to create new sub-

stations and lines.

3.3.3. Transmission Works in NCR

All the district of Meerut Commissionery is covered in National Capital Region. Industries from

Delhi are to be shifted to National Capital Region for which Electricity Supply position has to be

improved. NCR Board will provide financial aid by way of loan.

3.3.4. Renovation and Modernization

A large number of S/Ss, Transmission lines & communication equipment are around 30 years old

and equipment's like transformer, Circuit breakers, Relay Panels etc. needs replacement for

prolong service as spares for same are not available anymore and more they based on obsolete

technology. Hence, provision has been made for the renovation and modernization of various

equipments.

3.3.5. Augmentation of Transmission System due to RE works

In order to meet increased demand due to electrification of villages in REC scheme and mazras in

Rajiv Gandhi village electrification scheme, various transmission sub-stations and lines are to be

strengthened and new sub-stations and lines are proposed to be constructed.

ARR & TARIFF: FY10


Table 3-5: Proposed Program for Transmission Works (Rs. Cr.)

ARR & TARIFF: FY10


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Table 3-6: Detailed Program of Transmission Works for ensuing Year (Augmentation):

ARR & TARIFF: FY10


ARR & TARIFF: FY10


3.4. Compliance of UPERC Directives:

In compliance with the directive issued by Hon’ble commission in its Tariff Order for financial year 2007-

08 & 2008-09 issued on 15th April 2008 under chapter –9 regarding the compliance of UPERC

directives. It is to submit that directives are under various stage of compilation and will be submitted to

Commission by the Licensees. However partial compliances are submitted as under:-

Table 3-7: Compliance of UPERC Directives:

Sr. No

Ref.

No

Description of Directive for TransCo

Time Period for

compliance Action Taken

1 6.3.6 The Commission directs the transmission licensee to submit voltage wise transmission loss study report for last three years along with the estimation for current and ensuing year

3 Month Voltage wise transmission losses are submitted in the Regulatory Format P1 along with the ARR.

2 6.6.5.5 The Commission directs the licensees to submit the study report on actuarial valuation for the purpose of estimating employer’s contribution towards pension and gratuity.

The licensees are also directed to intimate the Commission on the status of the study within a period of one month from the date of issue of Tariff Order.

6 Months

Status report

within 1 month

Action is being taken as per direction. Status report will be submitted to the Commission.

3

6.6.12.3 The Commission directs the Licensees to carry out a proper cost benefit analysis before taking up any new initiatives and submit the same for the approval to the Commission.

As and when

required

Action is being taken as per the directives.

4

6.7.13 The Commission directs the licensee to submit the investment plan for next year filing strictly in accordance with Transmission Tariff Regulation 2006 failing which no investments would be approved.

Next Year

Filing

TransCo Investment Plan are submitted with ARR.

5 6.7.13 As regards to the investments approved for FY 2007-08 and FY 2008-

2 Months Action is being taken as per directive.

ARR & TARIFF: FY10


Sr. No

Ref.

No

Description of Directive for TransCo

Time Period for

compliance Action Taken

09, the Commission directs the licensee to submit the necessary information required under the Transmission Tariff Regulations approved by the Commission within two month from the issue of this tariff order

6 6.8.6 The Commission directs the licensees to maintain proper and detailed fixed assets registers at field offices to work out the depreciation expense as specified in the UPERC (Terms and Conditions of Transmission Tariff) Regulations, 2006 and directs the Licensees to submit a report to the Commission citing clearly as to how they are

maintaining fixed assets registers for the various assets.

2 Months All units have been directed to take maintain fixed assets register to workout the depreciation expenses. The report will be submitted to the Commission.

7

6.11.3 The Commission directs the licensee to submit the information regarding the basis used for computation of the Opening Equity and the detailed working on a year to year basis and supporting financial statements used for the same.

1 Month Draft Transfer scheme for notification has been submitted to GoUP. As per the draft notification presented on consultation with M/s PWC the opening equity as on 01.04.2007 is Rs.1843 crore and in the year 2007-08 GoUP provided Rs. 365.3652 crore as equity for transmission works through the budget of GoUP. During 2008-09 GoUP provided equity of Rs. 428.55 crore for the transmission work through the budget. The total equity as on 01.04.2009 work out to Rs. 2637 crore.

8

6.13.1 The Commission hereby directs the SLDC that the ARR/budget for SLDC should be submitted separately along with the ARR submission of Transco.

Next Tariff

Filing

Budget for the SLDC is being submitted separately.

9

6.14.7 The Commission directs the Transmission Licensee to formulate the billing procedure for transmission charges and submit the same for approval of the Commission.

1 Month Actions have already been taken and billing is being done as per the directives of the Commission.

ARR & TARIFF: FY10


4. Power Wheeling & Demand:

UPPTCL (Transco) is performing the business of transmission of electricity received at UP periphery

from various central generating station and station out side state as well as energy generated with in the

state. UPPCL is purchasing power from various sources including State and Central Generating stations

and dispatching to the Distribution Licensees as required, using “Transmission system” of UP Transco.

In purchasing/ wheeling of electricity from various generating station out side the state, losses out side

the UP transmission system also come into the picture. Therefore it is prudent to separately analyses

losses internal as well as external to the system so that petitioner should not be accountable for loses

external to the system i.e. losses in PGCIL system.

4.1. Losses external to UPPTCL system:

The petitioner submits that while considering losses to meet the requirement of various distribution

licensees, losses external to UPPTCL system, i.e. in the Northern Region PGCIL system need to be

accounted for. The availability of power from various sources out side the state gets reduced to the

extent of these losses and the petitioner has to bear these losses as commission is approving total

transmission losses irrespective of loses occurring in PGCIL or other lines. NRLDC computes the losses

in the regional transmission system on a weekly basis and the same are used by it in the scheduling

process subsequently. These losses have varied between 3.76% and 5.24% between 5th Jan 2009 and

22nd March 2009. UPPTCL has considered an average level of 4.35% losses in its energy transactions

with the Northern Region for FY2009-10. Here it is to noted that these losses are applicable to only

energy received external to state, therefore petitioner has taken a weighted average of 2.06% for

FY2009-10.

On the basis of Power requirement provided by DisCom a detailed energy balance is summarized for

Distribution Licensees of the state using Transmission system of TransCo for dispatching the energy in

Table 4-1: -

Table 4-1: Actual & Estimated Energy Profile:

L ic e n c s e e F Y 2 0 0 7 - 0 8 F Y 2 0 0 8 - 0 9 F Y 2 0 0 9 - 1 0

M E E R U T (In c ld . B u lk ) 1 8 ,1 2 4 .5 1 1 8 ,3 8 6 .4 0 1 8 ,4 6 9 .1 5 A G R A (In c ld . B u lk ) 1 5 ,2 1 6 .2 2 1 5 ,3 9 1 .0 8 1 6 ,4 5 8 .7 6 L U C K N O W 9 ,2 7 4 .8 8 9 ,5 6 8 .3 5 9 ,7 8 8 .5 6 V A R A N A S I 1 2 ,3 8 6 .0 8 1 3 ,0 2 9 .1 7 1 3 ,0 8 3 .5 2 P u rc h a s e d & B ille d E n e rg y (M U ) 5 5 ,0 0 1 .6 9 5 6 ,3 7 5 .0 0 5 7 ,8 0 0 .0 0

P e rip h e ra l L o ss (U p to in te r co n n e c tio n P o in t) 2 .3 5 % 2 .3 5 % 2 .0 6 %E n e rg y A va ila b le fo r T ra n sm iss io n (M U ) 5 3 ,7 0 8 .3 2 5 5 ,0 4 9 .3 4 5 6 ,6 0 9 .3 2

C o n s o lid a te d D is c o m 5 1 ,4 9 3 .1 0 5 2 ,7 7 8 .8 1 5 4 ,3 4 4 .9 5 M E E R U T (In c ld . B u lk ) 1 6 ,9 6 8 .3 4 1 7 ,2 1 3 .5 2 1 7 ,3 6 5 .1 4 A G R A (In c ld . B u lk ) 1 4 ,2 4 5 .5 7 1 4 ,4 0 9 .2 7 1 5 ,4 7 4 .9 2 L U C K N O W 8 ,6 8 3 .2 3 8 ,9 5 7 .9 8 9 ,2 0 3 .4 4 V A R A N A S I 1 1 ,5 9 5 .9 7 1 2 ,1 9 8 .0 3 1 2 ,3 0 1 .4 4

U P P T C L 4 .1 2 % 4 .1 2 % 4 .0 0 %

Ie n e rg y D e live re d to D is C o m D is C o m (M U )

T ra n s m is s io n L o s s e s

ARR & TARIFF: FY10


5. Annual Revenue Requirement: FY 2009-10

The development of the FY 2009-10 ARR follows the methodology as adopted in the Terms and

Conditions for Determination of Transmission Tariff Regulations, 2006.

5.1. ARR – FY 2009-10:

Hon’ble Commission has issued Transmission Tariff regulation 2006 which require that ARR shall

consist of following items:

1. Operation & Maintenance expenses

• Employee Expenses • Administrative & General Expense. • Repair & Maintenance Expenses

2. Interest expenses

• Loan capital • Working Capital

3. Depreciation Expenses

4. Other Expenses

5. Return on equity

6. Contingency Reserve

7. Taxes on Income

8. Any other relevant expenditure

Further regulation provide that the State Transmission Utility, when also looking after the SLDC

function, shall file segregated costs for SLDC operations and any surplus / deficit in recovery of SLDC

costs vis-à-vis SLDC fee and charges collected by the STU shall form part of its ARR.

This section provide ARR for FY2009-10 in accordance with the Tariff regulation and each component

of ARR as mentioned above is dealt in detail in following section. Further it is to submit that UP

TransCo is also looking after the function of SLDC as such SLDC cost is embedded in TransCo cost.

How ever as prescribed in Tariff Regulation segregated costs for SLDC has also been computed at the

end. The petitioner has estimated ARR for ensuing year based on provisional un-audited account of

FY2007-08 and expenses available till date of FY2008-09. In order to put the various proposed amounts

in proper context, the corresponding figures for actual FY08, estimates for FY09 & forecast for FY10

based on year-to-date experience are also presented for certain account categories. For each such

major account category of expenses, an explanation of the derivation is given, along with the logic for

departing from FY08 values.

Further Tariff regulation provide that O&M expenses and other expense shall be escalated on the

basis of prevailing rate of inflation from base figure & inflation shall be calculated on the basis of indexes

notified by central government .Therefore Petitioner has calculated inflation index in following section:

ARR & TARIFF: FY10


5.1.1. Escalation Index/Inflation Rate

Regulation issued by Hon’ble commission provides that expenses of the base year shall be escalated at

inflation rate notified by central government for different years. The inflation rate for this purpose shall

be weighted average of wholesale Price Index and Consumer Price Index in the ratio of 60:40.

Therefore for the purpose of this ARR petitioner has used this methodology in arriving at Escalation

Index/ Inflation Rate. Calculation as tabulated below:

Inflation Rate=0.6*Inflation based on WPI + 0.4*Inflation based on CPI

Table 5-1: Escalation Index

M onth

2007 2008 2009 2007 2008 2009Jan 208.8 218.1 0 127 134 148Feb 208.9 219.9 0 128 135 148M ar 209.8 225.5 0 127 137Apr 211.5 228.5 0 128 138M ay 212.3 231.1 0 129 139Jun 212.3 237.4 0 130 140Jul 213.6 240 0 132 143Aug 213.8 241.2 0 133 145Sep 215.1 241.5 0 133 146O ct 215.2 239 0 134 148N ov 215.9 234.2 0 134 148D ec 216.4 229.7 0 134 147

In flation 6.15% 9.70%

W eighted Average (C PI 40% :W PI 60% ) 7.57%

W holesale Price Index C onsum er P rice Index

WPI-http://eaindustry.nic.in CPI-http://labourbureau.nic.in/intab.html

5.2. Operation & Maintenance Expenses

Operation & maintenance expenses comprise Employee costs, Administrative & General Expenses and

Repair & Maintenance expenses. The regulation 4.2 of the Transmission Tariff Regulation issued by the

Commission stipulates:

• The O&M expenses for the base year shall be calculated on the basis of historical/audited costs and

past trend during the preceding five years. However, any abnormal variation during the preceding

five years shall be excluded. O & M expenses so calculated for the base year shall then be

escalated on the basis of prevailing rates of inflation for the year as notified by the Central

Government and shall be considered as a weighted average of Wholesale Price Index and

ARR & TARIFF: FY10


Consumer Price Index in the ratio of 60:40. Base year, for these regulations means, the first year of

tariff determination under these regulations.

• However in last tariff order Commission was of the opinion that a suitable norm for allowance of

O&M expenses could be adopted only after undertaking a thorough study of the O&M expenditure

based on the past performances, and the cost drivers of the same, through a separate process.

This study also has to be backed by audited information for the past which needs to be made

available by the licensees. Only then the true picture if the trend in the O&M expenses may emerge.

Till any such norm for O&M expenditure is determined, the Commission emphasised considering

the individual elements of O&M expenditure.

As stated above, in the absence O&M norms petitioner has estimated individual components of O&M

expenses based on methodology described in following section:

5.2.1. Employee Costs:

The projection of employee costs involves a detailed examination of the various components of salary

such as basic pay and dearness allowance for the various grades of employees. It would also involve

an understanding of the extent of retirements as well as the manpower additions planned. Considering

above Petitioner has estimated employee cost for FY2009-10 based on un-audited data of FY2007-08

and data available for FY2008-09 to date. Here it is also to mention that in FY 2009-10 petitioners have

taken impact of increase due to implementation of sixth pay commission. Details of Employee Cost for

FY08 to FY10 are provided in Table 5-2 below.

Table 5-2: Details of Employee Cost:

Details FY 2007-08 FY 2008-09 FY 2009-10

(Rs.Cr) Unaudited Estimated Projected

Basic Salaries 137.06 142.54 240.89Overtim e 0.00 0.00 0.00Dearness Allowance 54.63 74.48 60.22Other allowances 9.72 11.40 19.27Bonus / Ex-gratia 2.96 3.62 5.02Medical expenses re-im bursem ent 7.22 8.00 8.86Leave travel assistance 0.00 0.01 0.02Interim Relief/ Other 1.34 0.00 0.00Earned leave encashm ent 5.22 3.16 17.57Leave Salary contribution 0.00 0.00 0.00Paym ent under workm en's com pensation Act 0.04 0.29 0.48Staff welfare expenses 0.79 0.82 1.39Em ployers Contribution for Pension & Gratuity 33.51 41.41 57.45Employee Costs (before charge to capital) 252.49 285.72 411.18Less expenses capitalized 73.22 82.86 119.24Net employee cost 179.27 202.86 291.93

As mentioned above evolution of sub account of employee cost has been forecasted from base figure of

FY2007-08 balance sheet and actual figure available for FY2008-09 till date. While projecting the

expenses for ensuing year, petitioner has endeavoured to control the employee expenses but cost has

ARR & TARIFF: FY10


increased due to impact of pay commission factor which is totally beyond the control of the petitioner.

Various sub account are estimated as follows:

Basic salary: The petitioner would like to submit that the projected growth in basic salaries

in FY2008-09 due to mainly time bound increment and annual increase in pay. The annual

increase depends on the pay scale of an employee and such increase is mandatory for

employees. Therefore petitioner has estimated basic salaries for FY2008-09 as per actual

cost incurred on this account till date & for FY2009-10 basic salaries has been projected to

increase by 69% from FY2008-09 cost due to implementation of sixth pay commission

recommendation.

Dearness Allowance (DA) is estimated to be 52.25 %( 47% for 3 month&54% for 9 month)

for FY2008-09 and for FY2009-10 DA has been projected 25%.

Other allowance has been forecast to be 8% of basic salary.

Likewise, Medical Expenses have been forecast to increase by inflation index per year from

FY07, taking 3% as contingency.

Pension and Gratuity have been calculated at 16.7% and 2.38% (i.e., 19.08%) of Basic

Salary and Dearness Allowance.

Leave travel Assistance & compensation is assumed to be .01% & 0.2%of Basic Pay

respectively.

Staff welfare ex. Is assumed to in same ratio as actually incurred in FY09.

Employee Expenses Capitalized has been taken 29% as approved by Hon’ble Commission

in last Tariff order.

5.3. Administration and General (A&G) Expenses:

These expenses are incurred by the petitioner for meeting the day-to-day expenses relating to the

administration of its offices, insurance, communication, professional charges, audit fees, advertisement

expenses, freight etc. All these expenses are directly affected by inflation .Therefore A&G expenses

have been projected considering the impact of inflation and need for addition of more substation and

offices.

Forecast A&G expenses for Transco are summarised below in Tables 5-3, beginning with the figures

from the provisional figures for FY08.

ARR & TARIFF: FY10


Table 5-3: A &G Expenses:

Details FY 2007-08 FY 2008-09 FY 2009-10


Rent, Rates & Taxes 0.55 0.59 0.64 Insurance 0.10 0.11 0.11 Telephone,Postage&Telegrams,Telex charges 1.83 1.97 2.12 Legal charges 1.11 1.19 1.28 Audit fees 0.11 0.11 0.12 Consultancy charges 0.26 6.28 6.75 Technical fees and professional charges 0.61 0.66 0.71 Conveyance and traveling 4.80 5.16 5.55 Regulatory expenses - 2.74 2.82 Electricity Charges 2.36 2.54 2.73 Other expenses 9.80 10.54 11.34 Total 21.52 31.88 34.17 Capitalized 6.62 6.06 6.49 Net 14.89 25.82 27.67

It may be noted that licensee is capitalizing a portion of A&G cost .For current submission licensee has

taken capitalization as 19%, approved by commission in its last tariff order.

• As a reflection of the continuing commitment of the Petitioner to keep costs under control,

almost all A&G Expenses are forecast to increase by only inflation index per year across the

board to only offset the effect of inflation.

• In FY2008-09 & FY2009-10 under the head consultancy charges an amount of Rs 6 Cr has

been added for IT related expenses which are urgently required to cope with the present pace

of technological development in Power sector.

• In addition to above regulatory expenses Rs 10 lacs application fees and Rs 500 per MU

energy delivered to distribution licensees as license fees has been added in A&G expenses in

FY2008-09& FY2009-10 which is Rs 2.64& 2.72 crs respectively.

5.4. Gross Fixed Assets (GFA) Balances and Capital Formation Assumptions

The estimate of a number of ARR components is dependent on the FY10 opening balance of GFA, one

of which is R&M in the next section. It is therefore appropriate at this point to provide FY10 GFA

estimates, as well as estimates for other fixed asset accounts. The assumptions used for projecting

GFA and CWIP are as follows:

The opening GFA and CWIP for Lucknow DisCom for FY 2008-09 have been taken as per the

closing figures provisional annual accounts of FY 2007-08.

ARR & TARIFF: FY10


30% the opening CWIP and 30% of investment made during the year, expenses capitalised &

interest capitalised (30% of total investment) has been assumed to get capitalised during the

year.

Investment through “deposit work “has not been taken for capital formation as per policy

adopted by commission in its last tariff Order. Thus investment shown in capital formation table

below table 5.4&4.5 don’t include work funded through deposit work.

Table 5.3 shows Licensee’s investment plan for FY09 and FY10 along with the proposed funding of

each component of the investment plan. The detail of activities carried out in each scheme has

already been explained in section 3.3.

Table 5-4: Transco Investment Plan: (Rs. Cr)

Loan Grant Deposit Equity Total Loan Grant Deposit Equity Total

Equity from GoUP for Transmission Works - - - 428.55 428.55 - - - 891.57 891.57

Loans for Transmission Works - - - - - - - - - -

PFC 88.55 - - - 88.55 826.94 - - - 826.94

REC 52.09 - - - 52.09 826.94 - - - 826.94

NCR - - - - - - - - - -

HUDCO - - - - - - - - - -

Deposit Works - - 225.00 - 225.00 - - 325.00 - 325.00

Total Transmission 140.64 - 225.00 428.55 794.19 1,653.88 - 325.00 891.57 2,870.45

FY 2008-09 FY 2009-10Particulars

Table 5-4 and Table 5-5 shows the forecast evolution of the GFA, Accumulated Depreciation and Work in Progress Accounts under the assumptions noted below the table.

Table 5-5: Capital Formation during FY 09

Table 5-6: Capital Formation during FY 10

Rs crore Balance 31-Mar-09 Invest-ments Cap interest Cap expenses To GFA Depreciation Balance 31-

Mar-10(1) (2) (3) (4) (5)

Gross Fixed Assets 5,598.2 1,220.5 6,818.8 Accumulated Depreciation 2,307.7 327.2 2,634.9 Work in Progress 1,258.1 2,545.5 139.2 125.7 (1,220.5) 2,847.9

Notes: (1) FY08 Balances as per provisional financial statements.

(2) Capitalized interest - see Table 5-8.

(3) Capitalized expenses are from Table 5-2 &5-3.

(4) Depreciation expense for FY09 = 5.27% of average GFA.

ARR & TARIFF: FY10


5.5. Repair and Maintenance (R&M) Expenses

Forecast R&M expenses for TransCo are summarised below in Tables 5-7, beginning with the figures

from the provisional figures for FY08.The forecast R&M Expenses are estimated as 2.0% of the opening

GFA balances. In the last tariff order commission approved Rs 66.83 cr for FY2008-09 while petitioner

has estimated Rs 101.18 cr , This increase is mainly attributed to substantial increase in raw material

and fuel cost. The metal prices have increased phenomenally as compared to past few years. This has

substantially increased the cost burden of the petitioner. Moreover, the petitioner has added a number

of transformers, cables, grid substation, etc for which there has been an increase in the amount of

annual maintenance contracts, this would have translated to a higher R&M expenses in the ensuing

year for the petitioner. The petitioner has estimated Rs 111.96 Cr for ensuing year. The amount so

estimated has been spread out proportionally among the sub-accounts.

Table 5-7: R&M Expenses:

Details FY 2007-08 FY 2008-09 FY 2009-10


Plant & Machinery 54.45 81.15 89.79 Building 7.39 11.01 12.18 Civil works 0.06 0.09 0.10 Other Expenses Lines, Cable Network, etc 5.79 8.62 9.54 Vehicles Furniture & Fixtures 0.01 0.02 0.02 Office equipment 0.20 0.29 0.32 Total 67.89 101.18 111.96

5.6. Depreciation Expense:

FY10 Depreciation Expenses may be estimated with reference to Table 5-6, which has projected the

opening GFA balance for FY10. Applying the rate of 5.27% to average GFA during year petitioner has

projected a Depreciation Expense of Rs 327.2 crores for FY2009-10. This is line with the method used

by commission in recent Tariff order.

5.7. Interest and Financing costs:

The interest and financing costs projected for FY10 are based on the current schedule of long-term

debt, repayments and new debt requirements. The summary of the interest and finance costs is

provided in Table 5-8 below:

ARR & TARIFF: FY10


Table 5-8: Details of Interest & Finance Cost:

FY 2007-08 FY 2008-09 FY 2009-10

U naudited E stim ated Projected

W orld Bank Loan 16.67 14.96 14.96N C R 3.71 3.70 2.87PFC U PPC L 97.44 103.21 94.79I.D .B .I. Loan 0.05 0.12 0.00R EC (UPPCL) 19.90 35.00 32.49R EC R escheduled 15.39 9.55 9.22H udco 37.43 29.96 15.46R EC Transm ission 4.53 10.57 63.82PFC Transm ission 0.95 10.13 62.64G ross Interest Cost 196.06 217.20 296.24ID C 15.81 34 .52 139.19 N et In terest C ost 180.25 182.67 157.06 Finance C hargesFinance Charges/ G uarantee Fees 17.20 16.21 14.29Bank Charges 0.16 3.80 18.73Total F inance Charges 17.37 20.01 33.03

Total Interest and Finance Charges 197.62 202.68 190.09

Particulars (R s C r )

Interest on Working Capital:

1. The Transmission tariff regulations provides for normative interest on working Capital based on

the methodology outlined in the regulations. The petitioner is eligible for interest on working

capital worked out on methodology specified in the regulations.

2. Further Transmission tariff regulations provide following methodology for calculating working

capital

(i) Operation and Maintenance expenses, which includes Employee costs, R&M expenses

and A&G expenses, for one month;

(ii) One-twelfth of the sum of the book value of stores, materials and supplies at the end

of each month of current financial year.

(iii) Receivables equivalent to 60 days average billing of consumers less security deposits

by the beneficiaries

3. Rate of interest on working capital shall be the Bank Rate as specified by Reserve Bank of India

as on 1st April

Based on above methodology petitioner has computed interest on working capital in following table:

ARR & TARIFF: FY10


Table 5-9: Interest on Working Capital:

S r . N o . P r e v i o u s Y e a r C u r r e n t Y e a r E n s u i n g Y e a r

1 2 8 .4 9 3 4 . 9 0 4 6 . 4 4 2 3 4 .3 3 3 . 9 5 1 7 . 6 8

3 1 7 3 .0 8 1 8 9 . 6 6 2 1 9 . 9 8

2 3 5 .9 0 2 2 8 . 5 1 2 8 4 . 1 0 L e s s :

1

2 3 5 .9 0 2 2 8 . 5 1 2 8 4 . 1 0

R a te o f I n te r e s t f o r W o r k in g C a p i ta l 1 2 .5 0 % 1 2 .5 0 % 1 2 .5 0 %I n t e r e s t o n W o r k in g C a p i t a l 2 9 .4 9 2 8 .5 6 3 5 .5 1

O n e - t w e l f t h o f t h e s u m o f t h e b o o k v a l u e o f s t o r e s , m a t e r i a l s a n d s u p p l i e s a t t h e e n d o f e a c h m o n t h o f s u c h f i n a n c i a l y e a r

P a r t i c u l a r s

O n e m o n t h 's O & M E x p e n s e s

R e c e i v a b l e s e q u i v a l e n t t o 6 0 d a y s a v e r a g e b i l l i n g o f B e n e f i c i a r i e sG r o s s T o t a l

S e c u r i t y D e p o s i t s b y t h e b e n e f i c i a r i e s ( i f a n y )N e t W o r k i n g C a p i t a l

5.8. Other Income:

Other Income includes only non-tariff income, which comprises interest on loans and advances to

employees, income from fixed rate investment deposits and interest on loans and advances to

Licensees. It is estimated that other income will increase by inflation index for FY09 from FY08

provisional financial statement & same hike projected for FY10.

Table 5-10: Summary of Other Income:

FY 2007-08 FY 2008-09 FY 2009-10

Unaudited Estimated Projected

Share of Income from the other businesses - - - Interest on loan to Staff 0.31 0.33 0.36 Income from Investments 1.41 1.52 1.63 Revenue from surcharges for late payment - - - Any other Income 15.45 16.62 17.88 Total Non- tariff Income 17.17 18.47 19.87

Details (Rs.Cr)

5.9. Reasonable return/ Return on Equity:

Under provisions of the Regulation licensees are allowed a return of @ 14% on equity base, For equity

base calculation debt equity ratio shall be 70:30.Where equity involves is more than 30%, the amount of

equity for the purpose of tariff shall be limited to 30%.Equity amount more than 30% shall be considered

as loan. In case of actual equity employed is less than 30%, actual debt and equity shall be considered

for determination of tariff. Here it is to submit that GOUP has yet to notify the transfer scheme for

affecting the transfer of assets & liability. Due to this debt: equity process for calculating return is not

practical. ROE is being calculated on the equity inflow from GOUP up to FY2009 and to be received in

FY2009-10.In this ARR petitioner used same methodology for computation of return as adopted by

commission in its last tariff order.

ARR & TARIFF: FY10


Table 5-11: Return on Equity:

FY2007-08 FY2008-09 FY2008-10

1,843 1,948.08 2,109.84 350.37 539.19 1220.55105.11 161.76 366.16

1,948.08 2,109.84 2,476.00

285.66 301.95 327.03 8.15 12.54 28.38

Total return on regulatory equity 293.81 314.49 355.40

Return computation

Return Regulatory equity at the beginningReturnon Equity portion of expenditure on capitalised assets

Equity portion of expenditure on capitalised assets

Regulatoryequity at the end

Particulars

Return on Equity Regulatory equity at the beginningCapitalised assets during the year

5.10. Service tax:

Para 4.9 of UPERC Transmission Regulations provide

“Any cess or duty or royalty or tax imposed by the State Government shall be allowed as pass through

to be recovered from the distribution licensees / long term open access consumers in proportion of their

allotted capacity or quantity of energy delivered, as the case may be.”

Service tax liability is imposed on the service provider which would be UPPTCL in this case. Service tax

would be chargeable on actual energy wheeled during a financial year and at the rates as notified &

amended by the Govt from time to time. The Petitioner seeks allowance of such statutory liability on the

service provider UPPTCL as pass through in tariff.

Also such liability may be imposed on UPPCTL retrospectively like it was done in the case of PGCIL. In

such an event the Petitioner would approach the Commission for allowance of such liability in its ARR

accordingly.

ARR & TARIFF: FY10


5.11. TransCo ARR:

The FY10 ARR for UP Power Transmission Corporation is summarised below in Table 5-12 from the

expenses and allowances described in previous section:

Table 5-12: Annual Revenue Requirement:

Details FY 2007-08 FY 2008-09 FY 2009-10(Rs.Crore)

Unaudited Estimated Projected

Employee Costs (net of capitalization) 179.27 202.86 291.93 A&G Costs 14.89 25.82 27.67 Repair & Maintenance Expense 67.89 101.18 111.96 Depreciation 257.38 280.82 327.19 Interest & Finance Charges 227.10 231.25 225.60 Less Other Income (17.17) (18.47) (19.87)Return on Equity 293.81 314.49 355.40 Debits, Write-offs and any other items 15.30 Annual Revenue Requirement 1,038.47 1,137.96 1,319.90

ARR & TARIFF: FY10


6. Proposed Transmission Tariff:

6.1. Derivation of Tariff:

The proposed transmission tariff is derived in Table 6-1 in accordance with the methodology provided in

Transmission Tariff Regulation. It provides that in case of more than one long-term customers of the

Transmission system (distribution licensee/long term open access customers), utilizing transmission

system, the wheeling charges leveable on such customers shall be computed as per the following

formula:

Transmission /wheeling charges payable by the long term of customer of Transmission system for use

of transmission system for a month

= (Net ARR/12)*(CL/SCL)

CL =Allotted Transmission Capacity in MW of particular long term customer.

SCL=Sum of the Allotted Transmission Capacities (in MW) to all long-term customers.

Presently DisComs have not been allotted transmission capacity as such Transmission tariff has been

calculated on the basis of numbers of units wheeled by the transmission licensee for distribution

licensees. This is based on the same approach adopted by the Commission in its last Tariff Order.

Based on the above mentioned methodology, the transmission charges payable by all the licensees in

the state is computed bellow:

Table 6-1: Derivation of Transmission Tariff:

FY2008-09 FY2009-10

Estimated Proposed

UPPCL Transco ARR (Rs Cr) 1138 1320

Total energy delivered(MU) 52779 54345

Transmission Tariff (Rs/ kWh) 0.216 0.243

Details

ARR & TARIFF: FY10


7. SLDC Charges:

Table 7-1 provides a summary of estimated costs of running UPPTCL central load dispatch centre in

Lucknow and four regional load dispatch centres at Panki, Sahupuri, Modipuram and Moradabad which

are owned and operated by UPPTCL.

Table 7-1: Break-up of SLDC Charges

Details FY2008-09 FY2009-10

(Rs.Crore) Estimated Proposed

Employee Costs 5.02 7.22A&G Costs 0.20 0.22Repair & Maintenance Expense 0.29 0.29Subtotal 5.51 7.73Depreciation 4.69 5.86Interest & Finance Charges 3.86 4.04Less: Other Income (0.31) (0.36)Return on Equity 5.25 6.37 Total SLDC ARR 18.99 23.64

All direct cash expenses in the above estimates, including Employee Costs, A&G and R&M, have been

obtained from central load dispatch centre. However, capital related charges including Interest &

Finance Charges, Depreciation and the Return on equity, could not be separated because SLDS is

functioning as integral part of UP Transco, such the same have been approximated as follows:

Depreciation Expense for Transco is 86% in FY09 of the sum of above cash expenses.

This may be calculated from Table 4-9 in the absence of precise information on the cost of

the SLDC assets; an “adder” of these values has been applied to SLDC cash costs to

account for SLDC Depreciation Expense.

Interest and Finance charges & other Income have been similarly approximated.

Pending a better delineation of capital charges, the above SLDC estimates are the best available.

However, it may also be noted that the estimated SLDC costs comprise only about 1.7 % of total

transmission costs. This means that any major error in the SLDC cost estimate (which is quite likely)

will be very small when compared to total transmission costs.

ARR & TARIFF: FY10


PRAYER:

The petitioner prays that the Commission may be pleased to: a. Admit the accompanying Annual Revenue Requirement and Tariff

Petition.

b. Approve the Annual Revenue Requirement for financial year 2009-10.

c. Allow the petitioner to add/change / alter / modify this application at a

future date.

d. Issue any other relief, order or direction which the commission may

deem fit.

Documents

ANNUAL REVENUE REQUIREMENT - UPPCL Online