Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION ... 58 42/Order - Case No 27 of 2013... · Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION ... Maharashtra Electricity

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.

mailto:[email protected]


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


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


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


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.


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.


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

http://www.jsw.in/

http://www.merc.gov.in/


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.


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


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*




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*



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


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;


(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*



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


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)


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


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


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.


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


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


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


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)


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.


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)



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)


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


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,


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


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


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.


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


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


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)


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.


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


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:


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


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.


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.


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


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-


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%.


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,


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


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:


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)


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


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)


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)


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.


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)


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)


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


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)


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)


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)


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


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:


Table 3.20: Income Tax approved by the Commission (Rs crore)


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


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)


Carrying cost for deferred ARR for FY 2011-12 for Jaigad-

New Koyna Line, computed till July 2013

5.92


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


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)


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)



New Koyna Line, recomputed till March 2013

5.97


Karad Line, recomputed till March 2013

3.69

Carrying Cost allowed for FY 2011-12 9.66


Table 3.25: Total carrying cost approved to be recovered in FY 2013-14 (Rs crore)


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.


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


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


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


Sl


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


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


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.



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.


JPTL has submitted the required details in the desired format as sought by the Commission.


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


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


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


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


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

Documents

Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION ... 58 42/Order - Case No 27 of 2013... · Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION ... Maharashtra Electricity