BEFORE THE UTTAR PRADESH ELECTRICITY ...uperc.org/App_File/UPJVNLTariffOrder26-3-07-Pet-No-401...2 ORDER (Date of hearing 30.11.06, 8.1.07) 1 Background 1.1 Development of Regulatory

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BEFORE THE UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION

LUCKNOW

Petition No. 401/06

IN THE MATTER OF: Approval of ARR and determination of tariff for

FY 2005-06, 2006-07 and 2007-08.

AND

IN THE MATTER OF: UP Jal Vidyut Utpadan Nigam Ltd.

12th Floor, Shakti Bhawan Extn.

14, Ashok Marg,

Lucknow

:Petitioner

Versus

1. U.P. Power Corporation Ltd., 7th Floor, Shakti Bhawan, 14,Ashok Marg,

Lucknow.

2. Madhyanchal Vidyut Vitaran Nigam Ltd., Prag Narain Road, Lucknow.

3. Poorvanchal Vidyut Vitaran Nigam Ltd., 132 KV S/s, Bhikari Vidyut Nagar,

Varanasi.

4. Paschimanchal Vidyut Vitaran Nigam Ltd., Victoria Park, Meerut.

5. Dakshinaanchal Vidyut Vitaran Nigam Ltd.,Vidyut Bhawan, Gailana Road, Agra

6. Kanpur Electric Supply Co. Ltd., KESA House, Kanpur.

7. Noida Power Company Ltd., Commercial Complex, H-Block, Alpha-II, Sector,

Greater Noida City.

:Respondents

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ORDER

(Date of hearing 30.11.06, 8.1.07)

1 Background

1.1 Development of Regulatory Framework in Uttar Pradesh

The reforms in the power sector of Uttar Pradesh started with the enactment of Uttar

Pradesh Electricity Reforms Act, 1999 (UP Act No. 24 of 1999, herein after referred to

as the Reforms Act). Subsequently, Uttar Pradesh Electricity Reforms Transfer

Scheme, 2000 (hereinafter referred to as the Transfer Scheme) was notified according

to the provisions of sub-Sections (1) and (2) of Section 23 of the Reforms Act vide

notification No. 149/P-1/2000-24, Lucknow, January 14, 2000. Uttar Pradesh State

Electricity Board (UPSEB) was unbundled into three different entities, Uttar Pradesh

Power Corporation Limited (UPPCL), Uttar Pradesh Rajya Vidyut Utpadan Nigam

Limited (UPRVUNL) and Uttar Pradesh Jal Vidyut Nigam Limited (UPJVNL).

Uttar Pradesh Power Corporation Limited (UPPCL) was vested with the

responsibility of transmission and distribution of electricity. Uttar Pradesh Rajya

Vidyut Nigam Limited (UPRVUNL) was vested with the responsibility of generation

and sale of electricity from the thermal generating stations acquired by it through

Transfer Scheme. Similarly, Uttar Pradesh Jal Vidyut Nigam Limited (UPJVNL) was

vested with the responsibility of generation and sale of electricity from the hydro

generating assets of erstwhile UPSEB.

The power sector in India went through major change with the enforcement of the

Electricity Act 2003 w.e.f.10th June 2003. This act repealed all the erstwhile Electricity

Acts in the country viz. Indian Electricity Act, 1910 (9 of 1910), The Electricity

(Supply) Act, 1948 (54 of 1948) and the Electricity Regulatory Commissions Act, 1998

(14 of 1998).

Section 61 of EA 2003 requires the State Electricity Regulatory Commission to notify

terms and conditions for determination of tariff for generation, transmission and

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distribution in the state. Section 86 of the Act mandates the Electricity Regulatory

Commission to determine tariff, inter alia, in respect of generating companies.

In exercise of power conferred under Section 181 read with provisions of the Section

61 of EA 2003, UPERC notified the Uttar Pradesh Electricity Regulatory Commission

(Terms and Conditions of Generation Tariff) Regulations, 2004 (hereinafter referred

to as Generation Regulations) effective from 18.6.05, the date of notification, for three

years.

Also under provision of Section 181 read with Section 9, 61, 86(1)(a), 86(1)(b) and

86(1)(e) of EA, 2003, the Commission issued another set of Regulations on 23rd March

2006, namely, Uttar Pradesh Electricity Regulatory Commission (Terms and

Conditions for Supply of Power and Fixation of Tariff for sale of power from Captive

Generating Plants, Co-generation, Renewable Sources of Energy and Other Non-

Conventional Sources of Energy based Plants to a Distribution Licensee) Regulations,

2005. These sets of regulations have been made effective from 28th July 2005 for a

period of five years unless ruled differently by the Commission. In these regulations

small hydro stations were defined as renewable sources of generation.

1.2 Background of Tariff Application by Uttar Pradesh Jal Vidyut Nigam

Limited

Uttar Pradesh Jal Vidyut Nigam Limited, an entity registered under the Indian

Companies Act 1956, is engaged in the business of hydro generation and sale of

electricity.

On 20th April 2005, the Petitioner was directed by the Commission to file a tariff

petition. On request, the Commission allowed the Petitioner to file tariff petition by

31st July 2005 and on subsequent request, further extension was granted till 30th

August 2005. In the meeting of Coordination Forum, held on 20th July 2006, the

Petitioner was again reminded to file tariff petition. This was in spite of the fact that

the Petitioner was under statutory obligation to have filed the petition in compliance

to the Generation Regulation. The Commission again wrote a letter to UPJVNL on

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11th August 2006 and directed it to file its tariff petition. But it preferred to seek

another extension up to 20.9.06. The time was allowed.

After such an inordinate delay UPJVNL filed tariff petition on 06.10.2006, but only

for the FY 2006-07. Whereas UPERC (Terms and Conditions of Generation Tariff)

Regulations, 2004, which came into effect on 18th June 2005, required the Petitioner to

file petition for three years i.e. FY 2005-06 through FY 2007-08. The Commission

noted with dismay that the Petitioner was oblivious to its statutory duty of filing a

complete tariff petition as well as to its commercial interest.

The Commission heard the Petitioner on 30.11.06 and passed an order on 15th

December 2006 directing the Petitioner to submit tariff petition for the financial years

FY 2005-06 and FY 2007-08 in compliance of the provision made in the Generation

Regulations 2004. In this order the Commission also directed UPJVNL to submit

complete details in respect of its fixed assets, depreciation, loan, O&M and equity.

UPJVNL sought extension till 31st January 2007 for compliance of the order. The

matter was heard on 8.1.07 and the Commission, by Order dt. 9.1.07, allowed the

Petitioner to comply with order dt.15.12.06 latest by 24.1.07. Tariff computation for

FY-06 and FY 08 was finally filed on 18.1.07. Other information as sought (in Order

dt.15.12.06) were filed on 23rd January 2007.

Section 64 of EA, 2003, provides that the Commission shall issue a tariff order by

accepting the tariff application with such modifications or such condition as may be

specified in order or reject the application for reasons recorded in writing.

It may be noted that Generation Regulation has been framed by the Commission

after providing due opportunity to all interested parties to express their views and

these regulations are binding on the parties concerned. Under these regulations, the

Commission shall admit the petition for determination of tariff after prudence check.

Therefore, the input data considered by the Petitioner, for tariff proposal, shall be

subject to prudence check as per the provisions of the said regulations, Power

Purchase Agreements (PPA) signed with distribution licensee and past orders passed

by the Commission.

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1.3 Salient Features of the Petition

This petition seeks approval of tariff in respect of the generating stations under the

control of the Petitioner including canal based generating stations. It is stated that

prior to 14-01-2000, the date of reorganization of UPSEB, there was no power

purchase agreement existing for sale of electricity from Petitioner’s generating

stations until MOU dated 14-01-2000 and 08-03-2005 were signed. A supplementary

agreement dated 16-07-2005 has also been signed in consideration of change in

capital structure capturing the effect of the Transfer Scheme 25th Jan 2001.

The petition states that the tariffs, for years FY 2001-02 to 2004-05, have been

determined by the Commission on the petitions filed by UPPCL and the tariff

proposal for the FY 2005-06 was also sent to UPPCL for filing. It is stated that the

tariff proposal for large generating plants are in accordance with UPERC (Terms and

Conditions of Generation Tariff) Regulations, 2004 and the tariff proposal of canal

based plants is based on “Uttar Pradesh Electricity Regulatory Commission (Terms

and Conditions for Supply of Power and Fixation of Tariff for sale of power from

Captive Generating Plants, Co-generation, Renewable Sources of Energy and Other

Non-Conventional Sources of Energy based Plants to a Distribution Licensee)

Regulations, 2005, dated 23-03-2006 (hereinafter referred to as CNCE Regulations).

There is an outstanding receivable of Rs. 799.00 Cr. from UPPCL as on July, 06. The

Petitioner has prayed to approve the tariff proposal and sought direction to

Respondent no.1 to make full payment.

The Petitioner has also brought in an old issue pertaining to tariff determination for

year 2003-04. It is stated that total cost of energy in that year was Rs. 88.61 Crores due

to impact of liability towards pension and GPF assigned to it by GoUP under

Revised Transfer Scheme. It is stated that the Commission approved only Rs. 53.20

Crores based on capital structure made on the basis of provisional Transfer Scheme.

The Petitioner has prayed to allow Rs. 29.84 Crores in the present tariff, the gap left

out as consequence of above.

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Regarding change in equity, the Petitioner has stated that Rs. 352.59 Cr. is the equity

against the work in progress and remaining Rs. 19.59 Cr. against the plants owned by

the Petitioner at present. About interest on loan, it was clarified that the lending rate

was at 15 percent at the time of grant of loan by L.I.C.

1.4 Assets of Uttar Pradesh Jal Vidyut Nigam Limited

UPJVNL, in its application, has provided a description on the evolution of UPJVNL

vis-à-vis the structural changes that occurred in the power sector in the state of Uttar

Pradesh subsequent to unbundling of the erstwhile UPSEB. It had to undergo further

restructuring due to reorganization of the state of Uttar Pradesh into Uttranchal and

rest of the Uttar Pradesh. Prior to this bifurcation, all the assets of hydro generation

were under the control of Uttar Pradesh Jal Vidyut Nigam Limited. On

reorganisation of the State, the generating assets falling under the geographical

domain of Uttaranchal were vested in a new company, the Uttaranchal Jal Vidyut

Nigam Limited with effect from 9.11.01.

Vide the Transfer Scheme, all the hydel generating assets of erstwhile UPSEB were

transferred to UPJVNL with aggregate generating capacity of 1494.35 MW, which

included, abandoned hydro projects – Palra (3 X 0.2 MW) and Sumera (2 X 0.6 MW).

In addition to these power stations, two projects under construction were also

transferred to UPJVNL – Maneri Bhali Stage II (4 X 76 MW) and Lakhwar Vyasi (3 X

100 + 2 X 60 MW) in the form of Capital Works in Progress (CWIP). As on 31.3.1999

the values of assets and liabilities transferred to UPJVNL were:

Gross Fixed Assets Rs. 927.42 Crores

Total Long-Term Debt Rs. 866.04 Crores

Equity Rs. 182.59 Crores

Uttar Pradesh Electricity Reforms Transfer Scheme, 2000 was finalised vide

notification no. 348/P-1/2001-24, Lucknow, dated 25th January 2001, according to

the provisions of Section 23 of Reforms Act (read with clause 9 of the Transfer

Scheme vide dated 14th January 2000) and notification no. 183(2)/P-1/2001-24 dated

13th January 2001 of Govt. of Uttar Pradesh.

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According to the revised and final Transfer Scheme, the assets and liabilities of

UPJVNL, as on 14.1.2000 stood as:


Long-Term Debts Rs. 403.18 Crores


On reorganisation of the State of UP and formation of Uttarnchal, assets, liabilities

and control in respect of hydro generating stations located in Uttranchal were vested

in Uttarnchal Jal Vidyut Nigam Limited (UJVNL) with effect from 9th Nov, 2001. As a

consequence, the Petitioner was left with the following hydro generating assets:

Table 1.4-1 Generating Stations of UPJVNL

Rihand 6 X 50 MW

Obra (Hydro) 3 X 33 MW

Matatila 3 X 10 MW

Large Power Stations

Khara 3 X 24 MW

Nirgazini 2 X 2.5 MW

Chitaura 2 X 1.5 MW

Salawa 2 X 1.5 MW

Upper Ganga Canal

power Stations

Bhola Power Station 4 X 0.375 + 2 X 0.6 MW

Belka 2 X 1.5 MW

Babail 2 X 1.5

Under Construction

Power Stations

Sheetla 3 X 1.2 MW

TOTAL 526.1 MW

Ministry of Power, Govt. of India, vide notification no. 42/7/2000 R&R (Vol – III)

dated 2nd September 2005, has transferred LIC loan liability of Rs. 352.59 crores, taken

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for Maneri Bhali Stage – II project to Uttaranchal. As a consequence of which, the

total loan liability of UPJVNL, which stood at Rs.403.18 Cr. as on 14.1.00, has reduced

to Rs. 50.59 Cr. w.e.f. 2nd Sept, 2005.

2 Annual Revenue Requirement of Uttar Pradesh Jal Vidyut

Nigam Limited

The Jal Vidyut Nigam submitted its first application for tariff on 6th October 2006.

This tariff application was only for the FY 2006-07, whereas the Uttar Pradesh

Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations

2004 required that the Petitioner should submit an application for multi-year tariff

covering the financial years FY 2005-06 through FY 2007-08. Accordingly the

Commission issued an order on 15th December 2006 directing the Petitioner to file its

petition for all the years covered under the multi year tariff (MYT) regulations. After

seeking time extensions, the Petitioner finally submitted their MYT application on

18th January 2007. In this application, the Petitioner has modified the original

application for FY 2006-07 vide affidavit dt.15.1.07.

2.1 Tariff of Large & UGC Power Stations of UPJVNL

The energy charges put up for approval in affidavit dt. 15.1.07 are summarised in the

table below.

Table 2.1-1 Summary of Tariff Application of UPJVNL

All figures in Rs. Crores

Power Station FY 2005-06 FY 2006-07 FY 2007-08

Rihand 16.96 17.76 18.78

Obra (H) 7.94 8.27 8.63

Matatila 3.83 3.85 4.02

Khara 43.01 42.04 41.11

U.G.C. 4.15 4.37 4.64

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Total 75.89 76.29 77.18

As per submissions of the Petitioner:

(i) Assets: All assets of UPSEB have been created through loans or internal

generation of resources. While transferring these assets to successor,

UPJVNL, GoUP determined the value of Gross Fixed Assets (GFA)

comprising of debt and equity in the Transfer Scheme, vide final transfer

order no. 348/p-1/01-04 dt. 25.1.01. NFA values have been arrived at in

the notification by subtracting accumulated depreciation.

(ii) Debt equity ratio of 70:30 of GFA is stated to have been taken as per

UPERC (Terms & Conditions of Generation Tariff) Regulations, 2004. But

for tariff computation only NFA in relation with GFA has been examined

and amount of debt and equity fixed. Since 2.9.05, all financing of

additional capitalization has been stated to be in the ratio of 70:30.

(iii) Loan: MoP, Govt. of India, vide notification no.42/7/2000 R&R (Vol.III)

dt. 2.9.05, transferred loan liability of Rs. 352.59 Cr. out of total loan

liability of Rs.403.18 Cr. to Uttaranchal Vidyut Nigam Ltd. A loan amount

of Rs.99.32 Cr. has been taken for computation for tariff for FY 2005-06,

whereas prior to 2.9.05 the outstanding loans at the end of FY 2003-04 was

Rs.64.56 Cr. (as per audited books of accounts) Rate of interest on loan has

been taken as 14.29%.

(iv) Equity: The Transfer Scheme of GOUP did not allocate any portion of

equity or debt to any project. UPPCL allocated substantial portion of

equity to capital works in progress and Rs.19.59 Cr. distributed as equity

amongst the projects in operation 14.1.2000. The opening equity of Rs.

112.21 Cr. has been considered for FY 2005-06. The rate of return on

equity has been taken as 14%.

(v) Depreciation: The Petitioner has considered depreciation @2.57% for all

its generating stations.

(vi) Working Capital: In the calculation of working capital, maintenance

spares have been taken @1 % of GFA for 2005-06 and escalated @ 4% per

year up to FY-2007-08. The calculation of 2 months receivables has not

been shown. The rate of interest on working capital has been taken at

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15%, same as the rate of surcharge on delayed payment mentioned in

retail tariff.

Noida Power Company Ltd. submitted its comments vide letter, no. P-77X /100

dt.13.2.07, stating that the interest rates on loan for Khara is very high at 14.29% and

the depreciation has been considered by the Petitioner uniformly at the rate of 2.57%

for all of its generating stations without justification. It is also submitted that the

interest on working capital is being charged at a rate of 15% in contradiction to

UPERC Regulations

2.1.1 Gross Fixed Assets and Depreciation of Large & UGC Projects

The Commission directed UPJVNL to furnish details of Gross Fixed Assets and

depreciation since the date of Transfer Scheme, vide order dated 15th December 2006,

in the specified format. The Petitioner has submitted the required data, in the

specified format on an affidavit dt.23.1.07. The Petitioner has not submitted the

following details as required by the order of 15.12.06:

(a) Depreciation as considered by the Commission for determination of tariff for

relevant years:

(b) Details of capital additions in respect to assets commissioned during relevant

years

(c) Detailed financial package; i.e. loan, its interest rate, repayment schedule etc.

(d) Details of equity infusion against the commissioned assets.

(e) Audited data of O&M expenditure

The Commission in its order dated 15.12.2006 observed in respect to cost & cost

structure,

“The UPERC (Terms and Conditions of Generation Tariff) Regulations, 2004 came into force

with effect from 18-06-2005, the date of notification, for three years and accordingly, the

Petitioner was required to file tariff proposal. Therefore, Petitioner is directed to file tariff for

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year 2005-06 & 2007-08. However, for period prior to 18-06-2005, the tariff approved for

year 2004-05 shall continue.

The said Regulations apply in all cases where the tariff is determined based on capital cost. It

may be noted that as per Regulation-33, the actual expenditure incurred on the completion of

project forms the basis for determination of tariff. This Regulation further provides that in

case of existing generating stations, the project cost admitted by the Commission prior to

commencement of this Regulation shall form the basis for determination of tariff. As per

Regulation-36, in all cases, debt equity ratio on the date of commercial operation shall be

70:30 and where employed equity is more than 30 percent, it shall be limited to 30 percent

and rest considered as normative loan, but in case, it is less than 30 percent, actual debt-

equity shall be considered. The asset costs and cost structures of the Petitioner’s plants are

not the historical but are the costs and cost structures made on the basis of total gross fixed

asset, accumulated depreciation, equity and debt assigned to it by Transfer Schemes dated 14-

01-2000 and 25-01-2001. In light of the Regulations 2 (2) read with Regulation-33 and

Regulation-36, the allocation of above cost and associated capital structure among the plants

under control of the Petitioner might be considered as the costs as on 14-01-2000 for the

purpose of tariff determination. Therefore, such gross fixed assets and corresponding cost

structures, associated with plants are not subject to revisions. This means that opening gross

fixed assets of each year shall be traced from Transfer Scheme with due consideration of

capital additions made in preceding years and considered by the Commission for

determination of tariff from year 2000-01 to 2004-05.

Due to Reorganization of State of Uttar Pradesh, the hydro plants located in the State of

Uttaranchal are no longer under the ownership the Petitioner, as such; the gross fixed assets

assigned to such plants, on the basis of the Transfer Schemes, have no relevance to the plants

now left under the control of the Petitioner. Therefore, the Petitioner is directed to submit the

details, in respect to costs and cost structures of its plants, as per the Annexure-1, 2 & 3 to

this order. Besides above, the Petitioner shall also submit audited O&M expenses over the

year for the purpose of calculation of O&M cost and the detailed calculation of working

capital and justification for the claim of interest with the rate of 15% on working capital.

The Petitioner is also directed to submit full facts in respect to Rs. 29.80 Cr. not considered

by the Commission earlier. “

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UPJVNL submitted that the final Transfer Scheme allocated GFA as a whole to the

Petitioner. It did not provide the break-up of the value of assets under each of the

power stations transferred to it. Also at the time of division of Uttar Pradesh into

Uttaranchal and Uttar Pradesh, the values of the assets transferred to UJVNL was

not specified. Thus the determination of assets and liabilities between Uttaranchal

and Uttar Pradesh remained unresolved. The Petitioner further stated that

UPJVNL has assigned values of fixed cost of assets by prorating the total GFA into

the power stations on the basis of their capacities. The Commission accepts the

same for want of any notification from the Government in this regard. The break-

up of assets and depreciation, since the date of final Transfer Scheme, as provided

by the Petitioner on affidavit dt.23.1.07is as below.

Table 2.1-2 GFA and Depreciation, FY 1999-00


Rihand Obra (H) Matatila Khara UGC Total GFA as on 14.01.2000. (As per Final Transfer Scheme)

63.08 24.03 13.87 327.89 10.55 432.49

Accumulated Depreciation (As on 14.01.2000.)

56.77 21.62 10.38 65.82 9.49 157.84

NFA as on 14.01.2000. (As per Final Transfer Scheme)

6.31 2.41 3.49 262.07 1.06 274.65

Additional Capitalisation (during FY 1999-00) (Due to Allocation of HO)

0.01 0.00 0.00 0.00 0.00 0.01

GFA at the end of Year 63.09 24.03 13.87 327.89 10.55 432.50



Rihand Obra (H) Matatila Khara UGC Total GFA at the beginning of the year 63.09 24.03 13.87 327.89 10.55 432.50

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Accumulated Depreciation at the beginning of the year

56.77 21.62 10.38 65.82 9.49 157.84

Additions during the year

Unit 0.00 0.00 0.02 0.00 0.00 0.02 HO 0.39 0.13 0.04 0.09 0.02 0.68

GFA at the end of the year 63.48 24.16 13.93 327.99 10.57 433.20

Depreciation for the year 0.00 0.00 0.33 14.40 0.00 14.73

NFA at the end of the year 6.71 2.54 3.22 247.77 1.08 260.63

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Rihand Obra (H) Matatila Khara UGC Total GFA at the beginning of the year 63.48 24.16 13.93 327.99 3.64

6.93* 433.20


56.77 21.62 10.71 80.22 3.25 6.24* 172.57


Unit 0.13 0.02 0.04 0.00 0.00 0.20 HO 0.15 0.05 0.02 0.04 0.01 0.25




*Assets transferred to Uttaranchal on 9.11.01.



Rihand Obra (H) Matatila Khara UGC Total

GFA at the beginning of the year 63.76 24.23 13.98 328.02 3.65 433.65


56.78 21.62 11.18 91.37 3.25 184.21


Unit 0.15 0.00 0.00 0.01 0.00 0.15

HO 0.02 0.01 0.00 0.00 0.00 0.03




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56.80 21.63 11.66 102.53 3.25 195.87


Unit 0.12 0.16 0.16 0.22 0.01 0.67 HO 0.02 0.01 0.00 0.00 0.00 0.03








56.84 21.64 12.13 113.68 3.25 207.54


Unit 0.58 0.01 0.10 0.12 0.49 1.29 HO 0.00 0.00 0.00 0.00 0.00 0.01




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56.87 21.65 12.50 122.12 3.25 216.38


Unit 0.60 0.08 0.01 0.03 0.00 0.72 HO 0.00 0.00 0.00 0.00 0.00 0.00








56.91 21.66 12.52 130.56 3.26 225.03

Additions during the year 1.17 0.22 0.12 0.32 0.47 2.30




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56.7 21.67 12.53 139.00 3.29 233.57

Additions during the year 2.60 0.36 0.16 0.46 0.62 4.20




The Commission observes that the addition in capital assets has not been detailed

although directed so by order dt.15.12.06, i.e. the Petitioner has not provided details

of the assets that are added and proposed to be added. Also no justification has been

provided for the requirement of such additions. The Petitioner is directed to provide

complete details of the additional capitalization done since the date of Transfer

Scheme and also the proposed additions in future years of the MYT period along

with justification for the same within fifteen days of the date of this tariff order.

The Computation of depreciation for FY 2005-06 has been done considering the

allocation of accumulated depreciation and the subsequent additions in the assets.

The Commission believes that for the FY 2006-07 & FY 2007-08 the depreciation have

been computed applying the same principles and applying the rates of depreciation

specified in the Uttar Pradesh Electricity Regulatory Commission (Terms and

Conditions of Tariff) Regulations 2004. However, the Petitioner has not provided the

details of computation of depreciation.

For the purpose of determination of tariff, the Commission approves the

Petitioner’s projections in respect of cost of assets and depreciation as above.

However UPJVNL shall justify the capitalisations considered.

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The cost of fixed assets and depreciation approved as above shall be the base for

all future consideration, not subject to review, as adequate opportunity was

provided to the Petitioner to submit reliable and collated data. The Commission

has considered the same for determination of tariff.

2.1.2 Long-Term Loans

The final Transfer Scheme describes the following values of assets and liabilities of

UPJVNL, as on 14.1.2000:


Long-Term Debts Rs. 403.18 Crores


Ministry of Power, Govt. of India, vide notification no. 42/7/2000 R&R (Vol – III)

dated 2nd September 2005 transferred partial loan liability of Rs. 352.59 crore, to

Uttaranchal Jal Vidyut Nigam Limited (in respect of Maneri Bhali Stage – II project).

The above decision of Govt. of India has lowered the loan liability of UPJVNL by

Rs.352.59 crores out of total debt of Rs.403.18 crores that stood as on 14.1.00. Thus the

outstanding loan of UPJVNL, as on 2nd Sep 2005 was Rs. 50.59 Crores.

The Commission, in its order dated 15th December 2006, directed the Petitioner to

provide details of loan and equity since the date of Transfer Scheme in respect of

each of the power stations. The Petitioner submitted revised tariff computation on

15.1.07, under affidavit, relying on Annexure-10 of affidavit dt. 30.9.06. Although it

was expected from the Petitioner to have computed tariff on the basis of the data

developed pursuant to order dt.15.12.06, the Petitioner has failed to explain the

manner in which the cost structure of tariff computation has been evolved. It is

relevant to cite the extracts from the Petitioner’s affidavit dt.15.1.07, which will bring

out the point:

“The Equity and Debt Ratio of 30:70 has been maintained as laid down in the UPERC

(Terms and Conditions of Generation tariff) Regulations, 2004 in respect of GFA values but

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while determining the Tariff for the FY concerned the NFA values have only been taken into

consideration due to which ratio is bound to be disturbed even in the second year of operation

where in the loan portion is reduced due to its amortisation out of depreciation portion while

the Equity is maintained till the assets are not depreciated up to 70% of the GFA values.

In the Tariff Proposal the Cost Structure of each project has been maintained as the GFA

values have not been changed except when there were some Additions are Deletions in plant

itself. The Equity and Debt ratio of 30:70 is also maintained in respect of GFA values. Only

the Equity and Debt portions have been changed to match the NFA values according to the

Commissions directives, particularly as it will have no substantial effect on the over all Cost

Structure because if the Equity portion is substituted by the Debts or vice versa the financial

effect would be negligible because the computed over all interest on over due loans is worked

out to 14.29% while the rate of Return on Equity is 14%………. ”

The submission of UPJVNL in this revised petition is not understandable. Neither the

language, nor the content or logic of the submission of the Petitioner is clear. The

directions of the Commission in Order dt. 15.12.06 were explicit, objective and well

intended. The intention of the Commission’s directive was to understand the actual

financing structure of the power stations of the Petitioner. The Petitioner has

preferred to make a convoluted interpretation of the Uttar Pradesh Electricity

Regulatory Commission (Terms and Conditions of Tariff) Regulations 2004 and has

projected a normative debt and equity dividing the GFA into 70:30 ratio in the format

specified by the Commission. The Petitioner has pleaded that the Transfer Scheme

did not allocate any portion of equity or debt to any specific project. To determine

the loan and equity for tariff determination, the Petitioner has first examined if the

NFA of a power station was more than 30% of GFA. If it was, then UPJVNL has

considered 30% of GFA as equity and an amount equivalent to the difference of NFA

and 30% of GFA as outstanding loan. If the NFA fell short of 30% of GFA, then the

entire NFA was considered as equity. This methodology defies logic established by

the Commission in Generation Regulations. It appears that it is just a matter of

convenience to play with numbers of actual cost and financing, as if the Petitioner

is at liberty to shuffle the numbers according to its own suitability. The

Commission cannot accept the logic and interpretation framed by the Petitioner as

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to the intent of the provisions of the Generation Regulations, which are

unambiguous and clear in this respect.

It may, once again, be emphasized that Regulation 36 makes it amply clear that the

original cost of fixed assets would be considered to have been financed at a debt

equity ratio of 70:30 if the actual equity employed was more than 30% of cost of the

fixed asset. Otherwise actual quantum of debt and equity would be considered. Since

the capital and financing structure of UPJVNL was to be traced from the date of

Transfer Scheme, as such, the Commission directed it by order dt.15.12.06 to provide

the relevant details from 14.1.2000. The Petitioner, in its submission, has failed to

capture all information as was intended in the format provided for that purpose.

Further, UPJVNL has also shown additional capitalisation in each year of its

operations, and structure of financing. The financing of all additions till 1st Sep

2005 (i.e. the date prior to the notification of Govt. of India transferring the loan

liability of Rs. 352.59 Crores to Uttaranchal Jal Vidyut Nigam Limited) has been

shown as funded through equity only. Since 2nd September 2005, the financing of

additional capitalisation has been shown at a debt equity ratio of 70:30. The

Petitioner has not provided details of assets so capitalised from such additional

debt and equity. The information presented to the Commission was in bits and

pieces. There are missing links that needs to be explained by the Petitioner to

substantiate its claims with supporting authenticated reports/documents. For

example, it needs to present to the Commission its audited accounting reports since

the date of Transfer Scheme. There is no record placed before the Commission

regarding the performance of the Petitioner for the FY 2004-05 comparing it with the

performance levels approved by the Commission in its tariff order for FY 2004-05.

Also the Petitioner has chosen to project the performance parameters for FY 2005-06

instead of presenting the actual performance though the year has already passed by.

Also it needs to explain all the assumptions, if any, and the details of computation for

each of the derived numbers.

Data calling had to be stopped at some stage so that the matter is decided. The

Commission cannot afford to waste more time in correcting records of the

21

Petitioner and therefore decides to accept the data submitted for period prior to

2.9.05 by it and examine the same under the provisions of the Generation

Regulations.

As pointed out earlier, the outstanding loan as on 2nd Sep 2005, was Rs. 50.59 Crores.

For the additional amount of debts considered since 2nd September 2005, there is no

documentary evidence before the Commission to ascertain that the Petitioner has

actually tied up additional loans for financing its additional capital expenditure.

Further, no documentary evidence has been produced before the Commission to

validate the claims of equity infusion.

The Commission also observed that according to the audited balance sheet of

UPJVNL for FY 2003-04, the outstanding loan at the end of FY 2003-04 was Rs.

64.65 Crores. This date was prior to 2nd Sep 2005, (i.e. the date when GoI

transferred the Loan amount of Rs. 352.59 Crores due to Maneri Bhali Stage II

Project to Uttaranchal). This presents a contradiction with respect to the actual

outstanding loan of UJVNL. The Petitioner has also not explained why it has

considered an outstanding loan amount of 99.32 Crores for computation of tariff

for the FY 2005-06 and what are the sources of such loan.

In absence of any authentic data, the Commission is constrained to consider that the

outstanding loan at the beginning of FY 2004-05 was Rs. 64.65 Crores, (according to

the audited balance sheet of the Petitioner for the FY 2003-04), and the loan amount

outstanding as on 2nd Sep 2005 as Rs. 50.59 Crores for determination of tariff. For the

FY 2005-06 a normative repayment of Rs. 6.645 Crores (1/10th of outstanding amount

at the beginning of the year) has been considered. It may be noted that the loan

liability of the Petitioner has not increased since 2nd September 2005, as the

Petitioner has not indicated any additional loan drawal after this date. The

Commission considers a normative repayment of Rs. 5.059 Crores (equivalent to

1/10th of the outstanding amount) each year subsequent to year 2005-06.

Regarding the allocation of the total outstanding loan to different projects, the

Petitioner has considered loan only in case of Khara project, commissioned during

22

the years 1992 and 1993, which is the newest asset of Petitioner. All other assets are

more than 30 years old. Hence, it is logical to ascribe the outstanding loan to Khara

project. Hence, the Commission considers that the entire outstanding loan is on

Khara Power Station and no outstanding loan for other Generating Stations.

2.1.3 Interest on Long Term Loans

UPJVNL has projected interest rate at 14.29% pa for the MYT period of FY 06

through FY 08. In the tariff order of FY 2004-05,the Commission considered interest

rate @ 11% pa while agreeing with the Petitioner’s estimation of interest rate. In the

same tariff order, the Commission also directed the Petitioner to restructure the loans

to further bring down the interest cost. The Petitioner has neither provided any

compliance report on the same nor provided the loan specific interest rates, as

directed by order dt.15.12.06. The Petitioner has also not shown fresh borrowings. As

such the rise in rate of interest on old debt does not stand to any justification.

On scrutiny of the audited balance sheet of the Petitioner for the FY 2003-04, as

submitted to the Commission, the opening balance and closing balance of loan both

stood at Rs. 64.65 Crores. The interest payment during the year as per in the audited

P/L account was Rs. 7.693 Crores, which translates into an interest rate of 11.90% pa.

On this issue it would be worthwhile to recall Section 38(i) of the Uttar Pradesh

Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations

2004, relating to interest on long-term loans:

“

(a) Interest on loan capital shall be computed loan wise on the loans arrived at in the

manner indicated in regulation 36.

(b) The loan outstanding as on 1st April shall be worked out as the gross loan as per

regulation 36 minus cumulative repayment as admitted by the Commission up to 31st March.

The repayment for the period 2005-08 shall be worked out on a normative basis.

23

(c) The generating company shall make every effort to swap the loan as long as it results

in net benefit to the beneficiaries. The costs associated with such swapping shall be borne by

the beneficiaries.

(d) The changes to the loan terms and conditions shall be reflected from the date of such

swapping and benefit passed on to the beneficiaries.

(e) In case of any dispute, any of the parties may approach the Commission with proper

application. However, the beneficiaries shall not withhold any payment as ordered by the

Commission to the generating company during pendency of any dispute relating to swapping

of loan.

(f) In case any moratorium period is availed of by the generating company, depreciation

provided for in the tariff during the years of moratorium shall be treated as repayment during

those years and the interest on loan capital shall be calculated accordingly.

(g) The generating company shall not make any profit on account of swapping of loan

and interest on loan.

Therefore, in view of the above and for the purpose of determination of tariff, the

Commission considers a rate of interest on loan at 11.00% as considered for the

year 2004-05 earlier. This shall be the rate of interest for 2005-06 onward for all

purposes in respect to existing loans.

Based on the discussion above, the outstanding loan, repayment and interest is

summarised in the table below and the Commission approves the same for the MYT

period of FY 2005-06 through FY 2007-08:

Table 2.1-11 Loans and Interest Approved


Rihand Obra Matatila Khara UGC Total

FY 2005-06

Loan outstanding at the 0.00 0.00 0.00 64.65 0.00 64.65

24


beginning of the year

Loan outstanding as on 02-

09-2005

(According to transfer of

loan to Uttaranchal,

effected by GoI)

0.00 0.00 0.00 50.59 0.00 50.59

Additional Drawal during

the year 0.00 0.00 0.00 0.00 0.00 0.00

Repayment During the

year

(Normative)

0.00 0.00 0.00 6.47 0.00 6.47

Loan outstanding at the

end of the year 0.00 0.00 0.00 50.59 0.00 50.59

Interest @ 11% on average

loan during the year 0.00 0.00 0.00 6.34 0.00 6.34

FY 2006-07


beginning of the year 0.00 0.00 0.00 50.59 0.00 50.59

Additional Drawal during

the year 0.00 0.00 0.00 0.00 0.00 0.00


year 0.00 0.00 0.00 5.06 0.00 5.06


end of the year 0.00 0.00 0.00 45.53 0.00 45.53



FY 2007-08


beginning of the year 0.00 0.00 0.00 45.53 0.00 45.53

Additional Drawal during 0.00 0.00 0.00 0.00 0.00 0.00

25


the year


year 0.00 0.00 0.00 5.06 0.00 5.06


end of the year 0.00 0.00 0.00 40.47 0.00 40.47



2.1.4 Equity

As explained in Para 2.1.2, the Commission’s directive of 15th Dec 2006 was intended

to understand the actual financing structure of the power stations of the Petitioner.

The Petitioner has claimed that the Transfer Scheme did not allocate any portion of

equity or debt to any specific project. To determine the loan and equity to be

considered for tariff determination, UPJVNL has first examined if the NFA of a

power station was more than 30% of GFA. If it was, then it has considered 30% of

GFA as equity and an amount equivalent to the difference of NFA and 30% of GFA

as outstanding loan. If the NFA fell short of 30% of GFA then the entire NFA was

considered as equity. The Commission has already observed that this methodology

defies any logic enshrined in the Generation Regulations. It is just a matter of

convenience that the Petitioner has put itself at liberty to develop a system best

suited to it. This cannot be accepted.

UPJVNL further submitted in Para 7 of affidavit dt.15.1.07, “it was Uttar Pradesh

Power Corporation Limited, which allocated substantial amount of equity to capital works in

progress leaving a small amount of Rs. 19.59 Crores to be distributed among the projects to

determine the tariff of hydro-electric projects wef 15.01.2000 and onwards as per Central

Electricity Authority Guidelines”. The Petitioner also stated that since the UPERC has

framed its own regulations these guidelines are no longer in force and therefore the

tariff proposal as submitted by the Petitioner might be examined on the principles so

determined.

26

In this respect the Commission observes that since the enforcement of the Transfer

Scheme, the tariff of UPJVNL has been determined based on the equity allocation

agreed to by the Petitioner with UPPCL, which is the gross equity for all the hydro

power stations of undivided Uttar Pradesh at Rs. 19.59 Crores. The Commission

accepted this in determination of tariff till FY 2004-05. Presently the Petitioner has

projected equity of Large & UGC Power Stations, as on 1st April 2005, at Rs. 112.21

Crores. The genesis of this number has not been submitted despite the fact that the

Commission, in order dt.15.12.06, directed UPJVNL to explain equity infusion. There

is no actual equity infusion of that extent by the Petitioner for creation of generating

asset since the Commission passed the tariff order dt.10.11.04 for FY 2004-05. The

Commission has provided adequate opportunity to the Petitioner to present the

correct values of equity and debt in respect of its power stations, which the Petitioner

has failed to avail. Regulation 36 of the Generation Regulations is unambiguously

clear in this respect as to how the equity is to be computed. There is no justification

or authentic report/document supporting it. The Commission recognises that the

Transfer Scheme ascribed a gross equity figure of Rs. 372.18 Crores to the hydro

power stations of undivided Uttar Pradesh. But the Petitioner itself, all along the

years since the date of Transfer Scheme (i.e. 14.1.2000), has mentioned equity as

Rs. 19.59 Crores vide schedule-1 (Revised) of Agreement dt. 16.7.05 (Annex-27 of

affidavit dt.30.9.06), It remains with the Petitioner to explain all the ambiguity.

Under the said circumstances the Commission would continue to attach with the

equity values as considered by it in the Tariff order dt.10.11.04 for FY 2004-05.

The Commission, however, accepts the equity addition projected after FY 2004-05

although the Petitioner has failed to explain equity infusions.

Table 2.1-12 Equity as Approved


FY 2005-06 Equity at the beginning of the year 0.26 0.10 0.14 10.71 0.00 11.21

Equity Addition During the Year 0.35 0.04 0.02 0.41

27

Rihand Obra (H) Matatila Khara UGC Total Equity at the end of the year 0.61 0.14 0.14 10.73 0.00 11.62


Equity Addition During the Year 0.35 0.07 0.04 0.10 0.14 0.70

Equity at the end of the year 0.96 0.21 0.18 10.83 0.14 12.32


Equity Addition During the Year 0.78 0.11 0.05 0.14 0.19 1.27

Equity at the end of the year 1.74 0.32 0.23 10.97 0.33 13.59

The Petitioner is directed to ensure that equity infusion beyond 2007-08 are well

reasoned and made for creation of capital assets only.

2.1.5 Return on Equity

The Uttar Pradesh Electricity Regulatory Commission (Terms and Conditions of

Tariff) Regulations 2004 (Regulations 38(iii)) for the MYT period of FY 2005-06

through FY 2007-08 specifies that the return on equity shall be computed @ 14%on

the equity base. Accordingly the RoE for the MYT period is approved as below:

Table 2.1-13 Return on Equity



FY 2005-06 0.06 0.02 0.02 1.50 0.00 1.60

FY 2006-07 0.11 0.02 0.02 1.51 0.01 1.67

FY 2007-08 0.19 0.04 0.03 1.53 0.03 1.82

28

2.1.6 Operation and Maintenance Expenses


Tariff) Regulations 2004 (Regulations 38 (iv)) specify the methodology of computing

O&M Expenses for hydro stations. The regulations are reproduced below:

“(a) The operation and maintenance expenses including insurance, for the existing

generating stations which have been in operation shall be derived on the basis of actual

operation and maintenance expenses for the years 2000-2001 to 2004-05, based on the audited

balance sheets, excluding abnormal operation and maintenance expenses, if any, after

prudence check by the Commission.

The average of such normalised operation and maintenance expenses after prudence

check, for the years 2000-2001 to 2004-05 considered as operation and maintenance expenses

for the year 2002-03 shall be escalated at the rate of 4% per annum to arrive at operation and

maintenance expenses for the base year 2004-05.

The base operation and maintenance expenses for the year 2004-05 shall be escalated further

at the rate of 4% per annum to arrive at permissible operation and maintenance expenses for

the relevant year of tariff period.

(b) In case of the hydro electric generating stations, which have not been in existence for a

period of five years, the operation and maintenance expenses shall be fixed at 1.5% of the

capital cost as admitted by the Commission and shall be escalated at the rate of 4% per annum

from the subsequent year to arrive at operation and maintenance expenses for the base year

2004-05. The base operation and maintenance expenses shall be further escalated at the rate

of 4% per annum to arrive at permissible operation and maintenance expenses for the relevant

year.

(c) In case of the hydro electric generating stations declared under commercial operation on or

after the date of commencement of this regulation, the base operation and maintenance

expenses shall be fixed at 1.5% of the actual capital cost as admitted by the Commission, in

the year of commissioning and shall be subject to an annual escalation of 4% per annum for

the subsequent years till 31.3.2008.”

29

The Petitioner submitted O&M expenses on the basis of actual expenditure in Para

2.14 of affidavit dt. 30.9.06 without support of audited accounts. The Commission

directed the Petitioner in order dt.15.12.06 to submit audited accounts of O&M

expenses. The Petitioner has submitted actual O&M expenses on affidavit

dt.15.1.07 from FY 2001-02 to FY 2004-05. For the purpose of the said regulation,

actual expenditure of 5 years is required. The Petitioner has failed to provide data

for FY 200-01, therefore O&M expenses during FY 2000-01 has been considered at

the level of FY 2001-02. Based on above data, O&M expenses for the year FY 2005-

06, 2006-07 & 2007-08 are summarised in the table below. The Commission

approves the same for tariff determination.

Table 2.1-14 O&M Expenses



Historical Cost

FY 2000-01 11.31 3.92 3.13 4.29 2.57 25.22

FY 2001-02 11.31 3.92 3.13 4.29 2.57 25.22

FY 2002-03 12.06 6.37 2.91 4.54 2.59 28.47

FY 2003-04 14.43 6.54 2.86 4.91 5.63 34.37

FY 2004-05 13.09 6.97 2.63 3.99 2.62 29.30

Average 12.44 5.54 2.93 4.40 3.20 28.51

Projections

FY 2005-06 14.00 6.23 3.30 4.95 3.60 32.08

FY 2006-07 14.56 6.48 3.43 5.15 3.74 33.36

FY 2007-08 15.14 6.74 3.57 5.36 3.89 34.70

Apart from these expenses the Petitioner has additionally claimed tariff petition

fee of Rs. 0.25 Cr. in each of the years under MYT.

The Commission admits one-time application fee of Rs. 0.25 Cr., which is admitted

under the tariff of FY 2005-06 as this amount does not reflect in actual O&M

30

expenses because the petitioner has for the first time approached the Commission

for determination of tariff. The break-up of the application fee as admitted by the

Commission is as under:

Table 2.1-15 Application Fees

Rs. Cr.


FY 2005-06 0.15 0.05 0.01 0.03 0.01 0.25

FY 2006-07 0.00 0.00 0.00 0.00 0.00 0.00

FY 2007-08 0.00 0.00 0.00 0.00 0.00 0.00

2.1.7 Working Capital and Interest on Working Capital


Tariff) Regulations 2004 specify that Working Capital shall cover:

(i) Operation and Maintenance expenses for one month;

(ii) Maintenance spares @ 1% of the historical cost escalated @ 4% per annum from the

date of commercial operation; and

(iii) Receivables equivalent to two months of fixed charges for sale of electricity, calculated

on normative capacity index

The detailed analysis of each of these components is provided below:

2.1.7.1 O&M Expenses

This has been already analysed in the previous Section.

2.1.7.2 Cost of Maintenance Spares

Historical cost from the date of commercial operation is not available for the power

stations. The Petitioner has considered the capital cost as on the date of Transfer

Scheme. As the power stations of UPJVNL are very old (except Khara), it may be

difficult to find out the historical cost. Hence, the Commission also accepts the

31

same. But the Commission directs UPJVNL to provide actual project cost of Khara

on CoD, as this power station is not very old (commissioned during 1992-93). The

Petitioner must provide the data within one week of the date of this order.

In the following table computation of the cost of maintenance spares is shown:

Table 2.1-16 Computation of Cost of Maintenance Spares


Rihand Obra (H) Matatila Khara UGC

Original Cost of Fixed Assets

as on 15-01-2000 63.08 24.03 13.87 327.89 3.62

Date of Commissioning 1962-66 1970-72 1964-66 1992-93 1929-37

Age of the power station as

on 01-04-2005 (years) 39 33 39 12 68

Cost of Maintenance Spares @

1% of historical cost 0.63 0.24 0.14 3.28 0.04

Cost of Maintenance Spares

for FY 2005-06 2.91 0.88 0.65 5.25 0.58


for FY 2006-07 3.03 0.92 0.68 5.46 0.6


for FY 2007-08 3.15 0.96 0.71 5.68 0.62

2.1.7.3 Receivables

Receivables have been considered as 2/12th of the total fixed charges (as computed

by the Commission) for each of the power stations.

32

2.1.7.4 Total Working Capital and Interest on Working Capital


Tariff) Regulations 2004 specify that

“Rate of interest on working capital shall be the short-term Prime Lending Rate of State Bank

of India as on 1.4.2005 or on 1st April of the year in which the generating unit/station is

declared under commercial operation, whichever is later. The interest on working capital shall

be payable on normative basis notwithstanding that the generating company has not taken

working capital loan from any outside agency.”

The PLR of SBI as on 1st April 2005 was 10.25%. Hence the same has been

considered for computation of interest on working capital. The Commission

approves the working capital and the interest on working capital as below for FY

2005-06 through FY 2007-08.

Table 2.1-17 Working Capital and Interest on Working Capital, FY 2005-06


Rihand Obra (H) Matatila Khara UGC Total Operation and Maintenance expenses for one month

1.17 0.52 0.28 0.41 0.30 2.67

Maintenance spares @ 1% of the historical cost escalated @ 4% per annum from the date of commercial operation

2.91 0.88 0.65 5.25 0.58 10.27

Receivables equivalent to two months of fixed charges for sale of electricity, calculated on normative capacity index

2.49 1.10 0.60 3.70 0.63 8.52

Total Working Capital 6.56 2.49 1.53 9.37 1.51 21.46

Interest on Working Capital @ 10.25%

0.67 0.26 0.16 0.96 0.15 2.20

33




1.21 0.54 0.29 0.43 0.31 2.78


3.03 0.92 0.68 5.46 0.60 10.69


2.57 1.13 0.60 3.56 0.66 8.52



0.70 0.27 0.16 0.97 0.16 2.26




1.26 0.56 0.30 0.45 0.32 2.89


3.15 0.96 0.71 5.68 0.62 11.12


2.69 1.18 0.63 3.51 0.69 8.70

34




0.73 0.28 0.17 0.99 0.17 2.34

2.1.8 Total Fixed Cost of Large & UGC Projects of UPJVNL for the MYT Period

Based on the analysis and computation presented in the foregoing Sections, the

total fixed cost of Large & UGC Projects of UPJVNL for the MYT period is

summarised below. The Commission approves the same.

Table 2.1-20 Total Fixed Cost of UPJVNL, FY 2005-06



FY 2005-06

Interest on loan capital 0.00 0.00 0.00 6.34 0.00 6.34

Depreciation,

including Advance

Against Depreciation

0.04 0.01 0.14 8.44 0.01 8.65

Return on equity 0.06 0.02 0.02 1.50 0.00 1.60

Operation and

maintenance expenses

including insurance

and tariff application

fee

14.15 6.28 3.31 4.98 3.61 32.33

Interest on working

capital 0.67 0.26 0.16 0.96 0.15 2.20

Total 14.92 6.57 3.63 22.22 3.77 51.11

FY 2006-07


Depreciation,

including Advance


0.06 0.01 0.01 8.44 0.02 8.54

35


Return on equity 0.11 0.02 0.02 1.51 0.01 1.67

Operation and


including insurance

14.56 6.48 3.43 5.15 3.74 33.36

Interest on working

capital 0.70 0.27 0.16 0.97 0.16 2.26

Total 15.43 6.78 3.62 21.36 3.93 51.12

FY 2007-08


Depreciation,

including Advance


0.08 0.02 0.01 8.45 0.03 8.59

Return on equity 0.19 0.04 0.03 1.53 0.03 1.82

Operation and


including insurance

15.14 6.74 3.57 5.36 3.89 34.70

Interest on working

capital 0.73 0.28 0.17 0.99 0.17 2.34

Total 16.14 7.08 3.78 21.06 4.12 52.18

2.2 Tariff of Mini/Micro Power Stations of UPJVNL

The UPJVNL has prayed in its tariff application for FY 2006-07, dated 6th October,

2006, that the tariff for its mini / micro hydro power stations for FY 2006-07 be

approved according to the “Uttar Pradesh Electricity Regulatory Commission (Terms

and Conditions for Supply of Power and Fixation of Tariff for sale of power from

Captive Generating Plants, Co-generation, Renewable Sources of Energy and other

Non-conventional Sources of Energy based Plants to a Distribution Licensee)

Regulations 2005” made effective from 28.7.05

The above Regulations covers canal based hydro stations with capacity below 25

MW capacity.

36

In order dated 15th December 2006, the Commission directed the Petitioner to bill

respondents as per tariff specified in the said regulation for supplies made from

UGC, Belka and Babail power stations.

The Petitioner, in affidavit dt.15.1.07, has submitted that it would be appropriate to

approve the rates as filed by it in the tariff proposal so that it is binding on the

respondents.

The assets of the UPJVNL includes the following mini/micro canal based hydro

power stations:

(1) Nirgazani 2 X 2.5 MW

(2) Chitaura 2 X 1.5 MW

(3) Salawa 2 X 1.5 MW

(4) Bhola 4 X 0.375 + 2 X 0.6 MW

(5) Belka 2 X 1.5 MW, and

(6) Babail 2 X 1.5

(7) Sheetla 3 X 1.2 MW

In its application dated 6th October 2006, the Petitioner has claimed (Section 2.02) that

Power Purchase Agreement executed with UPPCL on 18.12.2000 covered all the

major hydro power stations including canal based power stations under Upper

Ganga Canal (UGC) projects. The Petitioner further submitted that since the PPA is

still in force, the tariff proposal in respect of UGC power stations has been

incorporated in the tariff proposals for other large hydro power projects. The

Commission accepted the Petitioner’s application for tariff determination according

to Uttar Pradesh Electricity Regulatory Commission (Terms and Conditions of Tariff)

Regulations 2004 and determined the tariff for the UGC projects. The computation

and determination of tariff of UGC power stations have been provided in Section 2.1

of this order. In the paragraph above, the power stations listed in serial no. (1)

through (4) are these UGC power stations.

37

However, the Commission is not aware of any PPA executed between UPJVNL and

UPPCL for the plants Belka and Babail. The Petitioner has submitted that Belka and

Babail projects were commissioned on 29.01.2002 and 02.01.2002 respectively and

thereafter taken on commercial operation w.e.f. 01.01.2003 and 16.07.2002

respectively. The Petitioner did this without signing any PPA and its approval by the

Commission. In this respect, the Commission observed the following in the tariff

order dated 10th June 2003 for FY 2003-04.

“UPJVNL has submitted that its two new small EYC hydel power stations viz Belka (3 MW)

and Babail (3 MW) have been commissioned in district Saharanpur and would together

generate 20 MU of energy as per the discharge available in Yamuna canal. The Commission

has been informed that some power is already being procured from these stations by UPPCL,

without the PPA being submitted to the Commission for approval. The Commission has

taken a serious note of this matter and directs UPPCL to submit its PPA with UPJVNL

for these plants in the next three months in accordance with the Power Procurement

Guidelines issued by the Commission under the “Guidelines for Load Forecast, Resource

Plans and Power Procurement Process”. Till the time UPPCL finalises and submits PPA for

these stations to the Commission, the energy available from these stations will be treated as

in-firm energy and would not be considered for the purpose of the power procurement plan.”

Though, more than two years have passed after the said order but utilities have not

come up to the Commission for approving PPA.

In absence of PPA, the Commission would not have approved tariff for Belka and

Babail even if the Petitioner had made an application. Any power procurement by

the distribution licensees from these projects shall be continued to be treated as

infirm power procurement.

In its tariff application for FY 2004-05, (filed by UPPCL), the Petitioner did not

apply for tariff of Belka and Babail and for that reason, the Commission also did

not deliberate on the same. The Petitioner has submitted on affidavit dt.30.9.06

that it is supplying electricity generated from these generating stations to UPPCL

since the dates of Commissioning at the rate of Rs.2.25/Kwh. It is also informed

that PPA shall be finalized shortly. Therefore, in consideration of above, the

38

Petitioner is directed to file a separate petition for approval of tariff of these

generating stations along with PPA within one month of this order and continue

to bill UPPCL at provisional rate of Rs. 2.25/Kwh and the Respondent shall pay the

same without any demure.

With regard to the Sheetla power station, UPJVNL has mentioned in its petition of 6th

October that the power station has been synchronised and is likely to be put on

commercial operation w.e.f. 01.11.2006. The Commission has not received PPA from

the concerned parties for approval. The Petitioner is directed to submit the

agreement for sale of electricity from Sheetla project signed with the distribution

licensee in whose area it is located at rate specified by the Commission in CNCE

regulation for approval of the Commission.

3 Adjustment in Revenue Requirement for FY 2003-04

UPJVNL has claimed, on affidavit, that due to consideration of Provisional Transfer

Scheme instead of Revised (final) Transfer Scheme for determination of tariff for the

FY 2003-04, it has suffered a shortfall of Rs. 29.84 Crores. The Petitioner has prayed

for settlement along with the determination of tariff for MYT period of FY 2005-06

through FY 2007-08.

The Commission directed the Petitioner in Order dt.15.12.06 to submit full facts in

that regard. The Petitioner in affidavit 23.1.07 has stated that the details regarding

left out cost of Rs.29.84 Cr. in year 2003-04 is enclosed in Annexure-4 to the said

affidavit.

It is noted that Annexure-4 includes letters dt. 6.1.2004 and 5.7.2003 of the Petitioner

addressed to UPPCL with the request to UPPCL to incorporate the matter of left out

cost in ARR for the year FY 2003-04. UPJVNL submitted comments on ARR and tariff

application filed by UPPCL for the year 2003-04 vide letter dt.12.3.03. It is found in

39

this letter that the Petitioner did not raise the issue that UPPCL had omitted the cost

of Rs.29.84 Cr in its ARR application.

Petitioner has put up nothing on record to show if it had filed any petition for

seeking review of the order passed by the Commission in the matter of ARR and

tariff petition of UPPCL for year 03-04. As per Regulation no 150 of UPERC

(Conduct of Business) Regulations, 2004, a review of order might be sought within

90 days of such order. The Petitioner did not approach the Commission for review

of the Order within stipulated time. Hence, no consideration on the prayer of the

Petitioner can be made at such delayed stage.

4 Prayer for eligibility to bill for Taxes, Duties and Others

The Petitioner has prayed for allowing it to bill its consumers for taxes, duties, cess,

levies etc, if any is payable by UPJVNL to concerned authorities.

In this respect the Commission directs the Petitioner to carefully read the Uttar

Pradesh Electricity Regulatory Commission (Terms and Conditions of Generation

Tariff) Regulations 2004. In these regulations Income Tax on Core Business has been

recognised as a pass through component of cost. Regulations (7) & (8) describes the

mechanism of recovery of this cost. Under regulation 38(iv), the operation and

maintenance expenses including insurances shall be derived on the basis of actual

O&M expenses, based on audited accounts. This means, that other duties, cess, levies

etc, if any, except for tax on Income and foreign exchange variation, have been

considered as part of O&M expenses. Hence these expenses have already been taken

care of in tariff determination.

5 Payment of Arrears

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In order dt.15.12.06, the Petitioner was advised to file a separate petition for

consideration of the Commission under Regulation 43 of the Generation Regulation

for recovery of dues from UPPCL. The Petitioner in its affidavit dt.15.1.07 has stated

that it would take up matter with the Government as both the Petitioner and UPPCL

are Undertakings of the same State Govt. In view of submission of the Petitioner, it

is inferred that the Petitioner has no grievance or financial hardship due to huge

receivables owed to it by UPPCL. The Petitioner is advised not to be complacent

with respect to timely payment of bills by sacrificing efficiency in operation,

optimum investments for R&M of old power stations, economical use of resources

by limiting borrowings, good performance and new capacity additions.

6 Billing and Payment

Billing and payment shall be made as per regulation 48 of the Regulation read with

Regulation 43 & 44. Since the capacity charge per unit of salable energy much less

than the lowest variable charges of the thermal generating station of the region as

such Regulation 39 cannot be applied on these generating stations. Therefore, the

rates of primary energy shall be calculated by dividing capacity charges by saleable

design energy subject to annual adjustment at the end of year for under recovery

such that full capacity charges are recovered by the Petitioner, if the generated

energy falls short of saleable energy due to unavailability of water. However, rate of

secondary energy shall be equal to the rate of primary energy. The capacity charges

for year 2005-06 and 2006-07 shall be recovered as per the practice in vogue and

actual availability achieved by the Petitioner. In case, the actual plant availability is

less than the target capacity index specified in the Regulation 32 of the Generation

Regulation, capacity charges shall be prorated. During 2007-08, recovery of capacity

charges shall be linked to capacity index as determined under Regulation 31 (x) in

respect to all generating stations except that of UGC.

The Generation Regulation came into force on 18.6.05 as such the capacity charges for

the period from 1st April, 05 to 17th June, 05 shall be prorated and recovered as per

41

past practice adopted by the Petitioner for recovery of these charges. From 18th June,

05 onward, recovery shall be made as per Regulations 48, read with Regulation 39 of

the Generation Regulations as mentioned in foregoing sub paragraph.

7 Renovation & Modernisation (R&M)

The Petitioner has discussed about R&M of its generating stations in the Petition.

The Petitioner is directed to submit firm financial and execution plan of R&M

works and new capacity additions for approval of the Commission. The Petitioner

is also directed to ensure that all information in respect to new capacity additions,

additional capitalization and R&M works are maintained in the manner as

directed in the Generation Regulations and the precarious situation of

inconsistency and asymmetry faced in this petition is not repeated in the next

tariff filing.

The Petition is hereby disposed of.

(R D Gupta) Member

(Vijoy Kumar) Chairman

Lucknow, dated 26th March, 2007

Documents

BEFORE THE UTTAR PRADESH ELECTRICITY ...uperc.org/App_File/UPJVNLTariffOrder26-3-07-Pet-No-401...2 ORDER (Date of hearing 30.11.06, 8.1.07) 1 Background 1.1 Development of Regulatory