Bihar Electricity Regulatory Commission · BERC Bihar Electricity Regulatory Commission BGCL Bihar Grid Company Limited BSPHCL Bihar State Power (Holding) Company Limited BSPTCL Bihar

Bihar Electricity Regulatory Commission

Case No. 33 of 2017

Tariff Order

Truing up for FY 2016-17,

Annual Performance Review for FY 2017-18 and

Annual Revenue Requirement (ARR) and determination of

Transmission charges for FY 2018-19

for

BIHAR GRID COMPANY LIMITED

(BGCL)

Issued on 7th March, 2018

(With effect from 1st April, 2018)

BGCL Tariff Order for FY 2018-19

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CONTENTS

ORDER ........................................................................................................................................................ 1

1.1 Bihar Electricity Regulatory Commission (BERC) ............................................................................... 4

1.2 Functions of BERC .............................................................................................................................. 4

1.3 Constitution of Bihar Grid Company Limited ..................................................................................... 5

1.4 Profile of BGCL ................................................................................................................................... 6

1.5 Petition submitted by BGCL ............................................................................................................... 6

1.6 Admission of Current Petition and Public Hearing Process ............................................................... 6

1.7 Approach of this Order ...................................................................................................................... 8 1.8 Contents of this order ........................................................................................................................ 9

2. Summary of Petition filed for Truing up for FY 2016-17, Review for FY 2017-18 and Annual Revenue Requirement for FY 2017-18 ........................................................................................................... 10

2.1 Background ...................................................................................................................................... 10

2.2 Request to the Commission ............................................................................................................. 11

3. Stakeholder’s Objections/Suggestions, Petitioner’s Response and Commission’s Observation ........ 12

4. Truing up for FY 2016-17 ..................................................................................................................... 19

4.1 Background ...................................................................................................................................... 19

4.2 Performance of Transmission System ............................................................................................. 20

4.3 Capitalisation ................................................................................................................................... 21

4.4 Gross Fixed Assets............................................................................................................................ 22

4.5 Depreciation .................................................................................................................................... 23

4.6 Interest and Finance Charges .......................................................................................................... 25

4.7 Operation and Maintenance expenses ............................................................................................ 28

4.8 Return on Equity .............................................................................................................................. 29

4.9 Interest on working capital .............................................................................................................. 31

4.10 Income Tax/Minimum Alternate Tax (MAT) .................................................................................... 33

4.11 Non-Tariff Income ............................................................................................................................ 34

4.12 Annual Fixed Charges / Transmission ARR for FY 2016-17 .............................................................. 35

4.13 Revenue Gap / (Surplus) for FY 2016-17.......................................................................................... 36 5. Annual Performance Review (APR) for FY 2017-18 ............................................................................. 38

5.1 Background ...................................................................................................................................... 38

5.2 Performance of Transmission System ............................................................................................. 38

5.2.1Availability of Transmission System ................................................................................................ 38

5.2.2 Transmission Loss ........................................................................................................................... 39

5.3 Capital Investment Plan ................................................................................................................... 39

5.4 Gross Fixed Assets............................................................................................................................ 43

5.5 Depreciation .................................................................................................................................... 44

5.6 Interest on Loans ............................................................................................................................. 46

5.7 Operation and Maintenance (O&M) Expenses ................................................................................ 49

5.7.1 Inflation index / Escalation rate...................................................................................................... 49

5.7.2 Employee Costs .............................................................................................................................. 52

5.7.3 Repairs and Maintenance (R&M) Expenses ................................................................................... 53

5.7.4 Administration and General (A&G) Expenses................................................................................. 55

5.7.5Summary of Operations and Maintenance (O&M) Expenses ......................................................... 56

5.8 Return on Equity .............................................................................................................................. 57


5.10 Non-Tariff Income ............................................................................................................................ 61

5.11 Annual Transmission charges for FY 2017-18 .................................................................................. 62 5.12 Revenue Gap / (Surplus) for FY 2017-18 (RE) .................................................................................. 63

6. Annual Revenue Requirement (ARR) and Transmission charges for FY 2018-19................................ 65


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6.1 Background ........................................................................................................................................ 65

6.2 Transmission Loss ............................................................................................................................ 65

6.3 Capital Investment Plan ................................................................................................................... 66

6.4 Funding of Capitalisation ................................................................................................................. 69

6.5 Gross Fixed Assets............................................................................................................................ 70 6.6 Depreciation .................................................................................................................................... 71

6.7 Interest on Loans ............................................................................................................................. 73

6.8 Operation and Maintenance (O&M) Expenses ................................................................................ 75

6.8.1Employee Costs ............................................................................................................................... 77

6.8.2Repairs and Maintenance (R&M) Expenses .................................................................................... 78

6.8.3Administration and General (A&G) Expenses ................................................................................. 80

6.8.4Summary of Operation and Maintenance (O&M) Expenses ........................................................... 81

6.9 Return on Equity .............................................................................................................................. 82


6.11 Non-Tariff Income ............................................................................................................................ 86 6.12 Annual Fixed charges for FY 2018-19............................................................................................... 87

6.13 Methodology for Recovery of ARR .................................................................................................. 88

7. Compliance of Directives ..................................................................................................................... 90

7.1 Back Ground .................................................................................................................................... 90

7.2 Directives issued and status of compliance .................................................................................... 90

7.2.1Directive 1 : Assets Register ............................................................................................................ 90

7.2.2Directive 2 : Revised Business Plan ................................................................................................. 91

7.2.3Directive 3 : Details of Programmed works ..................................................................................... 91

7.2.4Directive 4: Commissioning of Transmission Network .................................................................... 92

7.2.5Directive 5: Energy audit ................................................................................................................. 92 Annexure – I............................................................................................................................................. 95

Annexure – II.......................................................................................................................................... 101

Annexure-A ............................................................................................................................................ 102


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LIST OF TABLES Table 1.1: Power Transformer Capacity (MVA) ...................................................................................... 6 Table1.2: Transmission Line Length (Ckt.km) ......................................................................................... 6 Table 2.1: True up of ARR projected for FY 2016-17 (Rs. Crore) .......................................................... 10 Table 2.2: Projected Annual Fixed charges/ARR for FY 2017-18 (RE) and for FY 2018-19 ................... 10 Table 2.3: Proposed Recovery of ARR during FY 2018-19 .................................................................... 11 Table 4.1 : Capital expenditure and Capitalisation proposed for FY 2016-17 ...................................... 21 Table 4.2: Capital expenditure approved in truing up for FY 2016-17 ................................................. 22 Table 4.3: Gross Fixed Assets proposed for truing up for FY 2016-17 .................................................. 23 Table 4.4: Gross Fixed Assets approved in truing up for FY 2016-17 ................................................... 23 Table 4.5: Depreciation claimed in true up for FY 2016-17 (Rs. Crore) ............................................... 24 Table 4.6: Depreciation claimed in true up for FY 2016-17 (Rs. Crore) ............................................... 25 Table 4.6: Interest on loans claimed in truing up for FY 2016-17 ......................................................... 25 Table 4.7: Funding of capitalisation considered for FY 2016-17 ........................................................... 27 Table 4.8: Effective rate of interest on loans considered for FY 2016-17 ............................................ 27 Table 4.9: Interest on loans approved in truing up for FY 2016-17 ...................................................... 28 Table 4.10: O&M Expenses claimed for FY 2016-17 ............................................................................. 29 Table 4.11: Total O&M Expenses approved in truing up for FY 2016-17 ............................................. 29 Table 4.12: Return on Equity claimed in truing up for FY 2016-17 ....................................................... 30 Table 4.13: Return on Equity approved in truing up for FY 2016-17 .................................................... 31 Table 4.14: Norms for working capital requirement ............................................................................ 31 Table 4.15: Interest on working capital projected for FY 2016-17 ....................................................... 32 Table 4.16: Interest on working capital approved in truing up for FY 2016-17 .................................... 33 Table 4.17: Annual Fixed Charges claimed for FY 2016-17 ................................................................... 35 Table 4.18: Annual Fixed Charges approved in truing up for FY 2016-17 ............................................ 36 Table 4.19: Revenue Gap approved in truing up for FY 2016-17 .......................................................... 37 Table 5.1 : Summary of Revised capex and capitalization proposed for FY 2016-17 to FY 2018-19 .... 40 Table 5.2: Capex and Capitalisation projected for FY 2017-18 ............................................................. 40 Table 5.3: Capex and Capitalisation provided in Tariff petition for FY 2017-18 ................................... 41 Table 5.4 Revised Capex and Capitalisation proposed for FY 2016-17 to FY 2018-19 ......................... 41 Table 5.5: Capital Investment and capitalisation approved for FY 2016-17 and FY 2018-19 ............... 42 Table 5.6: Capitalisation considered by the Commission for FY 2017-18 ............................................. 42 Table 5.7: Gross Fixed Assets projected for FY 2017-18 ....................................................................... 43 Table 5.8: Gross Fixed Assets approved in review for FY 2017-18 ....................................................... 44 Table 5.9: Projected Depreciation for FY 2017-18 ................................................................................ 44 Table 5.10: Approved Depreciation for FY 2017-18 ............................................................................. 45 Table 5.11: Projected Interest on Loan for FY 2017-18 ........................................................................ 46 Table 5.12: Interest on Loans approved for FY 2017-18 ....................................................................... 49 Table 5.13: Weightage of indexation/inflation factor .......................................................................... 50 Table 5.14: Weightage of indexation/inflation factor .......................................................................... 51 Table 5.15: Employee Cost for FY 2017-18 (RE) projected by the Petitioner ....................................... 52 Table 5.16: Approved Employee Cost for FY 2017-18 .......................................................................... 53 Table 5.17: Projected Repairs and Maintenance expenses for FY 2017-18 ......................................... 53 Table 5.18: Approved R&M expenses for FY 2017-18 .......................................................................... 55 Table 5.19: Proposed Administration and General Expenses for FY 2017-18 ...................................... 55 Table 5.20: Approved Administration & General Expenses for FY 2017-18 ......................................... 56 Table 5.21: Total O&M cost approved for FY 2017-18 (RE) .................................................................. 56 Table 5.22: Projected Return on Equity for FY 2017-18 (RE) ................................................................ 57 Table 5.23: Approved Return on Equity for FY 2017-18 (RE) ................................................................ 59 Table 5.24: Norms for working capital requirement ............................................................................ 60


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Table 5.25: Projected Interest on working capital for FY 2017-18 ....................................................... 60 Table 5.26: Approved Interest on working capital for FY 2017-18 ....................................................... 61 Table 5.27: Projected Annual Fixed Charges/ (ARR) for FY 2017-18 .................................................... 62 Table 5.28: Approved Annual Fixed Charges / ARR for FY 2017-18 ...................................................... 63 Table 5.29: Approved revenue gap / (surplus) for FY 2017-18 ............................................................. 63 Table 6.1: Summary of capex and capitalisation proposed for FY 2016-17 and FY 2018-19................ 66 Table 6.2: Capex and Capitalisation projected for FY 2018-19 ............................................................. 66 Table 6.3: Capital Investment and capitalisation approved for FY 2016-17 and FY 2018-19 ............... 67 Table 6.4: Total Capital Investment and capitalisation approved for project Phase-IV part-1 ............ 68 Table 6.5: Capitalisation considered by the Commission for FY 2018-19 ............................................. 68 Table 6.6: Funding of capitalisation considered for FY 2018-19 ........................................................... 70 Table 6.7: Gross fixed assets projected for FY 2018-19 ........................................................................ 70 Table 6.8: Gross Fixed Assets approved for FY 2018-19 ....................................................................... 70 Table 6.9: Projected Depreciation for FY 2018-19 ................................................................................ 71 Table 6.10: Depreciation approved for FY 2018-19 .............................................................................. 72 Table 6.11: Projected Interest on loans for FY 2018-19 ....................................................................... 73 Table 6.12: Interest on loans approved for FY 2018-19........................................................................ 75 Table 6.13: Employee expenses projected for FY 2018-19 ................................................................... 77 Table 6.14: Employee Cost approved for FY 2018-19 ........................................................................... 78 Table 6.15: Projected R&M expenses for FY 2018-19 .......................................................................... 78 Table 6.16: Repairs & Maintenance Expenses approved for FY 2018-19 ............................................. 80 Table 6.17: Projected Administration & General Expenses for FY 2018-19 ......................................... 80 Table 6.18: Administration & General Expenses approved for FY 2018-19 ......................................... 81 Table 6.19: Total O&M expenses projected for FY 2018-19 ................................................................. 81 Table 6.20: Total O&M cost approved for FY 2018-19 ......................................................................... 81 Table 6.21: Projected Return on Equity for FY 2018-19 ....................................................................... 82 Table 6.22: Debt-Equity Approved for FY 2018-19 ............................................................................... 84 Table 6.23: Approved Return on Equity for FY 2018-19 ....................................................................... 84 Table 6.24: Norms for working capital requirement ............................................................................ 85 Table 6.25: Projected Interest on working capital for FY 2018-19 ....................................................... 85 Table 6.26: Approved Interest on working capital for FY 2018-19 ....................................................... 86 Table 6.27: Projected Annual Fixed charges / ARR for FY 2018-19 ...................................................... 87 Table 6.28: Annual Fixed charges /ARR approved for FY 2018-19 ....................................................... 88 Table 6.29: ARR Recovery proposed by the Petitioner for FY 2018-19 ............................................... 88 Table 6.30: ARR Recovery approved for FY 2018-19 ............................................................................ 89


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ABBREVIATIONS

A&G Administration and General Expenses

ACT Electricity Act. 2003

ARR Annual Revenue Requirement

BERC Bihar Electricity Regulatory Commission BGCL Bihar Grid Company Limited

BSPHCL Bihar State Power (Holding) Company Limited BSPTCL Bihar State Power Transmission Company Limited CAPEX Capital Expenditure CEA Central Electricity Authority CKM Circuit Kilo Meter

CWIP Capital Work in Progress

DISCOM Distribution Company

FY Financial Year

GFA Gross Fixed Asset

IDC Interest During Construction

IEDC Incidental Expenditure During Construction

JV Joint Venture

MVA Mega Volt Ampere

O&M Operation and Maintenance POWERGRD Power Grid Corporation of India Limited

R&M Repair and Maintenance

REC Rural Electrification Corporation

RoE Return on Equity

SAC State Advisory Committee

STU State Transmission Utility

TC Transmission charges

TTSC Total Transmission System Cost


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Bihar Electricity Regulatory Commission Ground floor, Vidyut Bhawan –II

Jawaharlal Nehru Marg, Patna – 800021

Case No: 33 of 2017

In the matter of:

True-up for FY 2016-17, Annual Performance Review for FY 2017-18 and determination of

Annual Revenue Requirement (ARR) and Transmission charges for FY 2018-19 of Bihar Grid

Company Limited (BGCL).

AND Bihar Grid Company Limited ……………………………Petitioner

Present:

Shri S. K. Negi - Chairman Shri Rajeev Amit - Member Shri R. K. Choudhary - Member

ORDER

(Passed on 7th March, 2018)

Bihar Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff )

Regulations, 2007 specify that the Transmission licensees shall file the Petition for Annual

Revenue Requirement (ARR) and Tariff, complete in all respects along-with requisite fee as

specified in the BERC (Fees, Fines and charges) Regulations, 2005 on or before 15th

November of the preceding year.

The Transmission Licence was issued to BGCL vide Letter No. BERC/Case No.7/2013-792-

01-Tr.L. dated 21 June 2013.



BGCL has filed the petition on 14 th November, 2017 for True-up for FY 2016-17, Review

of ARR for FY 2017-18 and determination of ARR and Transmission tariff for FY 2018-19

and the same was admitted on 22.12.2017 for hearing and orders.

In exercise of the powers vested in Bihar Electricity Regulatory Commission under Section

62(1)(b) read with Section 64 (3) of the Electricity Act, 2003 and Bihar Electricity

Regulatory Commission (Terms and conditions for Determination of Tariff) Regulations

2007 (hereinafter referred to as ‘Tariff Regulations’) and other enabling provisions in this

behalf, the Commission has issued this order, determining the ARR and Transmission Tariff

for FY 2018-19 for Bihar Grid Company Limited (BGCL) for Transmission of Electricity in

Bihar State.

As per Regulation 6(5) of the BERC Tariff Regulations, 2007 and for providing adequate

opportunities to all stakeholders and general public for making suggestions/objections on

the petitions as mandated under section 64(3) of the Electricity Act, 2003, the Commission

directed BGCL to publish the petition in abridged form as ‘Public Notice’ in newspapers

having wide circulation in the State inviting suggestions/objections on the tariff petition.

Accordingly, BGCL published the tariff petition in the abridged form as public notice in

various newspapers. The last date of submission of suggestions/objections was fixed as

29.01.2018. The Commission, vide Advertisement No.5/BERC dated 12.02.2018, has

extended the last date up to 20.02.2018 for submission of suggestions/objections by the

stakeholders.

The Commission, in order to ensure transparency in the process of dealing with the above

petition and for providing proper opportunity to all stakeholders and general public for

making suggestions/objections on the tariff petition, decided to hold the public hearing in

its office at Patna and accordingly the Commission held public hearing in the Court Room,

BERC office at Patna on 22.02.2018.

The above petition submitted by BGCL, was also placed before the State Advisory

Committee on 06.02.2018 and the various aspects were discussed by the Committee. The

Commission took the advice of the State Advisory Committee on the petition of BGCL

during the meeting of the Committee.

The Commission took into consideration the facts presented by the BGCL in its petition and



subsequent various filings, objections/suggestions which came up during public hearing and

suggestions of State Advisory Committee and response of the Bihar Grid Company Limited

and has True-up ARR for FY 2016-17, Reviewed ARR for FY 2017-18 (RE) and determined the

ARR and Transmission Charges for FY 2018-19.

BGCL vide letter no. 1828 dated 30.01.2018 has claimed revised Annual Revenue

Requirement (ARR) of Rs.0.83 Crore in True up for FY 2016-17 against which the

Commission has approved Rs.0.65 Crore.

BGCL has estimated ARR of Rs.130.82 Crore for FY 2017-18 in Review against which the

Commission has approved ARR of Rs.115.73 Crore.

BGCL has projected ARR of Rs.293.87 Crore for FY 2018-19 against which the Commission

has for approved ARR of Rs.276.24 Crore including trued up gap of Rs.0.65 crore of FY 2016-

17.

The Commission directs BGCL to bill the transmission charges on monthly basis from

BSP(H)CL in twelve equal monthly instalments. The monthly Transmission charges shall be

fully recovered only if BGCL achieves at least 98% of Transmission system availability, else

recovery of monthly Transmission charges shall be on pro-rata basis in terms of Regulation

68 and 74 of the BERC (Terms and Conditions for Determination of Tariff) Regulations,

2007.

This order shall be effective from 1st April 2018 and shall remain in force till 31st March

2019 or till the next tariff order of the Commission.

This order will be placed on the website of the Commission and copies will be sent to BGCL,

BSPHCL, BSPGCL, BSPTCL, NBPDCL, SBPDCL, Department of Energy of Government of Bihar,

Central Electricity Regulatory Commission and Central Electricity Authority.

Pronounced in the open court on this day of 7th March, 2018.

Sd/- Sd/- Sd/- (R.K.Choudhary) (Rajeev Amit) (S.K.Negi)

Member Member Chairman



1. Introduction

1.1 Bihar Electricity Regulatory Commission (BERC)

The Bihar Electricity Regulatory Commission (hereinafter referred to as

“Commission” or “BERC”) was constituted by the Government of Bihar under

Section 17 of the Electricity Regulatory Commission Act, 1998 vide Government of

Bihar notification No.1284 dated 15th April 2002. The Electricity Regulatory

Commission Act, 1998 along with Indian Electricity Act, 1910 and Electricity

(Supply) Act, 1948 was repealed by Section 185(1) of the Electricity Act, 2003

(hereinafter referred to as the “Act”). The first proviso of Section 82(1) has

envisaged continuity of the Bihar Electricity Regulatory Commission by laying

down that the State Electricity Regulatory Commission established by the State

Government under Section 17 of Electricity Regulatory Commission Act, 1998 and

functioning as such, immediately before the appointed date, shall be the

State Electricity Regulatory Commission for the purpose of the Act.

1.2 Functions of BERC

As per Section 86 of the Electricity Act 2003, the State Commission shall

discharge the following functions, namely:

a) determine the tariff for generation, supply, transmission and wheeling of

electricity, wholesale, bulk or retail, as the case may be, within the State:

b) Provided that where open access has been permitted to a category of

consumers under section 42, the State Commission shall determine only the

wheeling charges and surcharge thereon, if any, for the said category of

consumers;

c) regulate electricity purchase and procurement process of distribution

licensees including the price at which electricity shall be procured from

the generating companies or licensees or from other sources through

agreements for purchase of power for distribution and supply within the

State;

d) facilitate intra-state transmission and wheeling of electricity;



e) issue licenses to persons seeking to act as transmission licensees,

distribution licensees and electricity traders with respect to their operations

within the State;

f) promote co-generation and generation of electricity from renewable

sources of energy by providing suitable measures for connectivity with the

grid and sale of electricity to any person, and also specify, for purchase of

electricity from such sources, a percentage of the total consumption of

electricity in the area of a distribution licensee;

g) adjudicate upon the disputes between the licensees, and generating

companies and to refer any dispute for arbitration;

h) levy fee for the purposes of the Act;

i) specify State Grid Code consistent with the Indian Electricity Grid Code with

regard to grid standards;

j) specify or enforce standards with respect to quality, continuity and

reliability of service by licensees;

k) fix the trading margin in the intra-state trading of electricity, if considered

necessary; and

l) discharge such other functions as may be assigned to it under the Act.

1.3 Constitution of Bihar Grid Company Limited

To develop the Intra-State Transmission System in the State of Bihar, it was

agreed between Bihar State Power (Holding) Company Limited (BSP(H)CL) and

Power Grid Corporation of India Limited (POWER GRID) to form a 50:50 Joint

Venture Company in the name of Bihar Grid Company Limited under the

provisions of the Companies Act,1956. The Company will build, own and operate

the transmission system and it will be a transmission licensee under the Act duly

authorised by the Bihar Electricity Regulatory Commission.

Bihar Grid Company Limited (BGCL) was registered on January 4, 2013 under the

Companies Act, 1956 with the objective of providing transmission facilities to the

State distribution companies and any other transmission system users and

also fulfils the responsibility of planning, developing and coordinating with the



State Transmission Utility (STU) of the State of Bihar.

The Transmission Licence was issued to BGCL on June 21, 2013 vide Letter No.

BERC/Case No.7/2013-792-01-Tr.L.

1.4 Profile of BGCL

BGCL owns and operates the Transmission system at 132 KV and 220 KV voltage

level in Bihar State. The total proposed capacity in Transmission system once all

the projects attain commercial operation is as given below:

Table 1.1: Power Transformer Capacity (MVA)

Substations FY 2017-18 FY 2018-19

220/132 KV 1120 2240

132/33 KV 450 750

Table1.2: Transmission Line Length (Ckt.km)

Substations FY 2017-18 FY 2018-19

220 KV 374.17 438.34

132 KV 243.33 357.10

1.5 Petition submitted by BGCL

BGCL filed the present petition on 14th November, 2017 for Truing up of ARR for FY

2016-17, Review of Annual Revenue Requirement for FY 2017-18, approval of

Annual Revenue Requirement (ARR) for FY 2018-19 and determination of

Transmission Charges for FY 2018-19 under section 62 of Electricity Act, 2003 read

with Bihar Electricity Regulatory Commission (Terms and Conditions for

Determination of Tariff) Regulations, 2007.

1.6 Admission of Current Petition and Public Hearing Process

On preliminary verification of the Petition, the Commission has admitted the

petition as Case No. 33 of 2017 in accordance with section 64 of the Electricity Act,

2003 and sub clause 6 (5) of BERC (Terms and Conditions of Determination of Tariff)

Regulations, 2007. The Commission directed the BGCL to publish the petition in an

abridged form in at least two daily newspapers, one in English and the other in

Hindi, having wide circulation in the State inviting objections and suggestions from

its stakeholders on the ARR and Tariff Petition filed by it.



BGCL was also directed to publish the schedule for Public Hearings along with the

public notice inviting objections/suggestions and also to upload the petition on its

official website.

The public notice was published in the following newspapers as given below:

Sl. No Name of the News Paper

Language

Date of Publication

1 The Times of India English 29.12.2017 2 Dainik Bhaskar Hindi 30.12.2017 3 Hindustan Hindi 30.12.2017 4 The Telegraph English 03.01.2018 5 Sanmarg Hindi 04.01.2018

Copies of the petition along with Annexure were also made available for sale in the

office of the Director (Projects), 2nd Floor, Alankar Place, Boring Road, Patna-800

001. The Commission has also uploaded the Petition on its Website.

The interested parties/stakeholders were asked to file their objections/suggestions

on the Petition on or before 29.01.2018. The Commission, vide Advertisement

No.5/BERC dated 12.02.2018, has extended the last date up to 20.02.2018 for

submission of suggestions/objections by the stakeholders.

The Commission has received three (3) written objections/suggestions from South

Bihar Power Distribution Company Limited (SBPDCL), Patna, Bihar Industries

Association, Patna and Shri Nand Sharma, Patna. The Commission directed the

Petitioner to submit the replies/response to the objections/suggestions to the

objector with a copy to the Commission. The Petitioner has submitted the reply vide

letter no.BGCL/Tariff/1892 dated 27.02.2018.

The proposal of BGCL was also placed before the State Advisory Committee (SAC) at

its meeting held on 06.02.2018 and various aspects of the petition were discussed by

the committee. The Commission took the advice of the State Advisory Committee

on the petition filed by BGCL during the meeting of the Committee. The minutes of

the meeting are given in Annexure-I.



The public hearing was conducted as scheduled in the Court Room of BERC on

22.02.2018. A note on the main issues raised by the objectors in written submissions

and also in the public hearing in respect of the petitions, along with the response of

BGCL and the Commission’s views on the response, are given in Chapter-3.

1.7 Approach of this Order

The BERC (Terms and Conditions for determination of Tariff) Regulations, 2007

provides for determination of ARR for the FY 2018-19 and transmission charges for

FY 2018-19.

The BGCL has now approached the Commission with the present petition for Truing

up for FY 2016-17, Review for FY 2017-18 and for approval of Annual Revenue

Requirement for FY 2017-18 and determination of transmission charges for FY

2018-19.

The Commission has examined the petition and observed that certain additional

data/information and clarifications are required for taking up detailed analysis of

the Petition. The Commission directed Petitioner to submit the additional

data/information and clarifications vide following letter Nos.

1. BERC Case No.33/2017-1417 dated 08.12.2017 2. BERC Case No.33/2017-13 dated 04.01.2018 3. BERC Case No.33/2017-56 dated 12.01.2018

The Petitioner submitted additional information/data/clarifications vide its

following letter Nos.

1. JV/BGCL/Tariff/Directive Compliance/1729 dated 15.12.2017 2. JV/BGCL/Tariff/Directive Compliance/1785 dated 08.01.2018 3. JV/BGCL/Tariff/Directive Compliance/1793 dated 15.01.2018 4. JV/BGCL/Tariff/Directive Compliance/1828 dated 30.01.2018

The Commission has undertaken Truing up for FY 2016-17, Review for FY 2017-18

and determination of Annual Revenue Requirement (ARR) for FY 2018-19 and

transmission charges for FY 2018-19 for BGCL, based on the BERC (Terms and

Conditions for determination of Tariff) Regulations, 2007.



1.8 Contents of this order

The order is divided into Seven (7) Chapters for BGCL as detailed below:

1. The First Chapter provides a background of BGCL, filing of the Petition,

details of public hearing process, and the approach adopted for this order.

2. The Second Chapter contains a summary of Tariff Petition of BGCL.

3. The Third Chapter provides a brief account of the public hearing process,

including the objections raised by stakeholders, Petitioner’s response and

Commission’s views on the same.

4. The Fourth Chapter deals with Truing up for FY 2016-17.

5. The Fifth Chapter deals with the Review of ARR for FY 2017-18.

6. The Sixth Chapter deals with the Annual Revenue Requirement for FY 2018-

19 and transmission charges for FY 2018-19.

7. The Seventh Chapter deals with the Compliance Directives issued in Tariff

Order dated 09.03.2017.



2. Summary of Petition filed for Truing up for FY 2016-17, Review for FY 2017-18 and Annual Revenue Requirement for

FY 2017-18

2.1 Background

The Bihar Grid Company Limited (BGCL) has filed the present petition on 14th

November, 2017 seeking approval for Truing up for FY 2016-17, Review for FY

2017-18 and determination of Annual Revenue Requirement (ARR) and

transmission charges for the FY 2018-19 as given in Tables below:

Table 2.1: True up of ARR projected for FY 2016-17 (Rs. Crore)

Sl. No. Particulars FY 2016-17

1 O&M expenses 0.03

a) Employee Cost 0.02

b) R&M expenses 0.00

c) A&G expenses 0.01

2 Depreciation 0.23

3 Interest on finance charges 0.71

4 Interest on working capital 0.20

5 Return on Equity 0.25

6 Income Tax 0.07

7 Gross Annual Revenue Requirement 1.49

8 Less : Non Tariff Income 0.00

9 Annual Revenue Requirement 1.48

Table 2.2: Projected Annual Fixed charges/ARR for FY 2017-18 (RE) and for FY 2018-19

(Rs. Crore)

Sl. No. Particulars

FY 2017-18

Projected for

FY 2018-19

Approved in Tariff order

dated 09.03.2017

Revised Estimate

(RE)

1 O&M expenses 35.65 22.20 48.92

a) Employee Cost 8.44 7.10 8.49

b) R&M expenses 25.07 12.11 37.33

c) A&G expenses 2.14 2.99 3.11

2 Depreciation 50.09 30.41 69.15

3 Interest on finance charges 82.84 54.75 121.25

4 Interest on working capital 4.79 3.10 8.27

5 Return on Equity 31.08 20.36 46.28

6 Gross Annual Revenue Requirement 204.45 130.82 293.87

7 Less : Non Tariff Income 0.00 0.00 0.00

8 Annual Revenue Requirement 204.45 130.82 293.87



Based on the projected Annual Revenue Requirement for FY 2018-19, BGCL has

proposed to raise bills on BSP(H)CL in 12 equal instalments (every month) as

shown below:

Table 2.3: Proposed Recovery of ARR during FY 2018-19

(Rs. Crore)

Sl. No. Particulars FY2018-19

1

Total Annual Revenue Requirement 293.87

2

Monthly Bill to be raised to BSP(H)CL 24.49

2.2 Request to the Commission

The Petitioner has requested to:

a) Admit this Petition;

b) Examine the proposal submitted by the Petitioner in the enclosed Petition

for a favourable dispensation;

c) Pass suitable orders with respect to the True up for FY 2016-17 for Rs.1.48

Crore, APR for FY 2017-18 for Rs.130.82 Crore and Annual Revenue

Requirement (ARR) for FY 2018-19 and for Rs.293.87 Crore.

d) Condone any in advertent omissions, errors, short comings and permit BGCL

to add/change/modify/alter this filing and make further submissions as may

be required at a future date; and

e) Pass such Order as the Commission may deem fit and appropriate

keeping in view the facts and circumstances of the case.



3. Stakeholder’s Objections/Suggestions, Petitioner’s Response and Commission’s Observation

3.1 Background

In response to the public notice (abridge form of the petition) published by the

petitioner inviting objections / suggestions from the general public / stakeholders on

the Tariff Petition filed by BGCL, no written objections were received before the

stipulated last date i.e. 29th January 2018. The Commission, vide Advertisement

No.5/BERC dated 12.02.2018, has extended the last date up to 20.02.2018 for

submission of suggestions/ objections by the stakeholders.

3.2 Public Hearing

The Commission has also published the ‘Notice’ on 13th February 2018 in three daily

Hindi Newspapers i.e. Dainik Jagran, Dainik Bhaskar, Prabath Kabar and Times of

India (English) intimating that the Commission will hear the case on 22.02.2018 at

10.30 AM in its Court Room of BERC office at Patna and inviting the suggestions/

objections/ comments of the general public/stakeholders on the petition filed by the

BGCL (Case on 33 of 2017).

The public hearing, as scheduled was held in the Court Room of BERC office, Patna

on 22nd February, 2018 wherein the representative of South Bihar Power Distribution

Company Limited, Patna, Bihar Industries Association, Patna and Shri Nand Sharma,

Patna have put forth their comments and suggestions before the Commission in the

presence of the Petitioner, BGCL. The list of participants in the public hearing is

appended to this order as Annexure –II.

BGCL has submitted its response on the comments and suggestion of the

stakeholders vide their letter no. BGCL/TARIFF/1892 dated 27.02.2018. The

Commission has examined the comments/suggestions submitted by the

objectors/stakeholders in response to the ARR petition, the replies given by the

Petitioner and the Commission’s views have been summarized under various sub-

heads as given below.



Name of the Objector/Stakeholders: M/s. South Bihar Power Distribution Company

Limited, Patna

Issue 1: Transmission System availability certificate to be submitted every month

As per Regulations 68 and 74 of BERC (Terms and conditions for determination of

Tariff) Regulations 2007 transmission charges shall be fully recovered from Discoms

only if BGCL achieves at least 98% of the Transmission System Availability, else shall

be on pro-rata basis. The Commission has directed the Petitioner to ensure

submission of the State Transmission System Availability as per guidelines provided

in the CERC Tariff Regulations for 2014-19 in all its future petitions.

It may be made mandatory for BGCL to submit the 98% system availability certificate

from SLDC to Discoms along with the bill every month.

Petitioner’s submission:

BGCL regularly submitted the details of outage of its system for certification to SLDC

in every month. However, the availability certificate has been received in recent

past for period upto December 2017. The same will be submitted to Discoms with

monthly transmission charges bill with the last availability certificate issued by the

SLDC.

Commission’s view:

The Regulation 68 read with Regulation 74 of BERC (Terms and conditions for

determination of Tariff) Regulations 2007 specifies transmission charges shall be

recovered/paid fully if transmission licensee achieves at-least 98% of Transmission

System Availability Factor (TAF), else shall be recovered/paid on pro-rata basis. The

Commission directs the Petitioner to submit the TAF every month along with the

monthly transmission bills invariably.

Name of the Objector/Stakeholders:

1. South Bihar Power Distribution Company Limited, Patna

2. Shri Nand Sharma, Patna

Issue 2: Install appropriate energy meters at all interface points

To Install appropriate energy meters at all interface points to record actual energy

flow through transmission lines (input and output) and energy handled.



A report shall be made available to SLDC and Discoms and SLDC shall verify the

same based on REA data.


Energy meters are provided and are in use at all interface points since the BGCL

system is commissioned. The details of energy meters at interface points have

already submitted vide letter dated 15.12.2017 to the Commission.

It is submitted that the transmission systems are evaluated with their availability

and energy flow is not a guiding factor for accessing its performance. Hence it is

submitted that data regarding flow of energy through different transmission

elements are not of significant relevance.


The Commission has noted the objection and response of the Petitioner. The

Commission directs the Petitioner to provide appropriate energy meters at all

interface points and ensure that they are in working condition and meter readings

recorded and provided to the Commission as and when data is sought for.


1. M/s. Bihar Industries Association, Patna


Issue 3: BGCL as a STU, JV and geographical area of operation

BGCL was granted license on 21.06.2013. BGCL is a Joint Venture (JV) between

BSPHCL and PGCIL, whether BSPHCL was empowered to form JV and notified as

State Transmission Utility (STU) by the State Government and geographical area of

operation is defined to ascertain energy transmitted and to prevent overlap and

double charging.


There is no geographical demarcation with BSPTCL for BGCL system. BGCL system is

also an integral part of the integrated transmission system in Bihar.

It is submitted that BSPHCL were duly empowered by the State Government to form

BGCL.


The Commission had granted transmission licence to the Bihar Grid Company



Limited vide Letter No. BERC/Case No.7/2013-792-01-Tr.L. dated 21 June 2013 and

will function as intra-state transmission utility parallel to BSPTCL in the State of

Bihar. BGCL is a joint venture between BSPHCL and PGCIL with a share holding of

50:50.

The Commission endeavours to corroborate the lines and substations of BGCL and

BSPTCL and the assets are separately maintained by both the utilities. The lines and

substations of BGCL and BSPTCL are interconnected facilities and endeavours to

ensure that there is no overlapping and double charge on assets.

Issue 4: Report under Regulation 4(3) of BERC Tariff Regulations 2007

As per Regulation 4(3) of BERC Tariff Regulations 2007, the STU shall submit a

report on assets mentioned in the application for licensee form part of intra-state

transmission system, completion schedule, technical suitability of assets, etc. The

report may be provided/put on public domain.


The petitioner has not furnished the response.


The Commission has noted the stakeholder’s suggestion.

The Commission has approved the capital investment plan of Rs.1699.36 crore in case

no.20/2013 (Phase-IV Part-1) from FY 2016-17 to FY 2018-19 which was revised and

provisionally approved for Rs.1833.23 crore in Tariff order dated 9.2.2017.

The Commission, further on 28.07.2017 in Case No.5 of 2017 has approved Phase IV Part-II

project amounting to Rs.1688 crore.

The scheme-wise/work-wise details are available in orders which were available on the

official website of the Commission.






Issue 5: Geographical operational area and demarcation of assets of BSPTCL and BGCL. The transmission network in Bihar is owned and operated by BSPTCL and separate

areas of activity and supply of BSPTCL and BGCL must be defined under regulation

16 of BERC (Transmission Licensing) Regulations 2007. The details of transmission

lines and substations have been given, however not mentioned these are new

assets created. The geographical area of operation and demarcation of assets of

two utilities may be ensured to prevent double charge for the same assets.

It may be clarified whether old asset of BSPTCL is taken over by BGCL if so, the value

of old asset shall be reduced.


BGCL system is also an integral part of the integrated transmission system in Bihar.


The Commission had granted transmission licence to the Bihar Grid Company

Limited vide Letter No. BERC/Case No.7/2013-792-01-Tr.L. dated 21 June 2013 and

will function as intra-state transmission utility parallel to BSPTCL in the State of

Bihar. The assets are being maintained separately by the utilities.




Issue 7: Transmission loss

To ensure that the transmission loss is charged only once on the entire power being

transmitted as it appears that transmission loss is being charged in addition to

transmission loss of BSPTCL.


The transmission losses of BGCL and BSPTCL are actually system losses i.e. pertaining

to technical losses of 3.92% and the same has been claimed by BGCL for its



transmission infrastructure and BSPTCL for its transmission network. 3.92% is the

maximum transmission loss which may occur during transmission of power in EHV

system.


The Commission has noted the objection and response of the Petitioner.

The Commission has considered 3.92% as threshold limit for transmission losses in

the transmission network of both the utilities. BGCL has not handled/transmitted

considerable power during FY 2016-17 and the actual system losses could not be

assessed hence, the Commission has considered threshold limit of 3.92% for

processing the tariff order.

The Commission directs the Petitioner to provide appropriate meters at all interface

points and ensure that they are in good working condition and meter readings

recorded for energy accounting and audit and provided to the Commission as and

when data is sought for.




Issue 7: Equity in JV by BSPHCL

BSPHCL and PGCIL have equity investment in the ratio of 50 : 50 in BGCL. It may be

verified whether the equity is reflected in BSPHCL balance sheet and RoE claimed.

Similarly in the books of PGCIL. Further, the assets of BSPTCL do not include the

assets of BGCL.


The petitioner has not furnished its response to the issue.


The Commission has been considering the O&M cost of holding company i.e. BSPHCL

and allocated to the utilities in the share holding ratio of the BSPGCL, BSPTCL,

SBPDCL and NBPDCL. The investment made by BSPHCL in subsidiary companies is

depicted as equity investment in subsidiaries under Investment but not as Equity in

the books of BSPHCL and allowing RoE does not arise.



Name of the Objector/Stakeholders: Shri Nand Sharma, Patna

Issue 8: Employee cost

BGCL is a JV and BSPHCL and PGCCIL has 50 : 50 share and employees of BGCL shall

be deployed in the ratio of 50:50 by BSPHCL and PGCIL. The employee details shall

be incorporated indicating strength of PGCIL and BSPHCL.


The employee details are as follows:

BGCL employees/consultant - 37

Deputation from PGCIL - 22

Deputation from BSPHCL - 1


The objection of the stakeholder and response of the Petitioner are noted. BGCL and

BSPTCL are two separate independent companies.



4. Truing up for FY 2016-17

4.1 Background

At the time of filling of Tariff Petition for determination of ARR for FY 2017-18,

BGCL had also filed for Annual Performance Review for FY 2016-17. However, the

Commission during the hearing dated December 30, 2016, had asked BGCL to file a

Tariff petition for determination of ARR for FY 2017-18 only, as previously no ARR

for FY 2016-17 was determined. Further, the Commission had directed BGCL to

approach the Commission separately seeking methodology for recovery of ARR of

FY 2016-17. In accordance with the direction of Commission, BGCL filed its revised

Tariff petition for determination of ARR for FY 2017-18 on January 13, 2017. BGCL

had also requested the Commission to specify the methodology for recovery of FY

2016-17. The Commission on 7 November, 2017 asked BGCL to file for true up for

FY 2016-17. Accordingly, BGCL has filed for True-up for FY 2016-17 (1 Month i.e. for

the month of March, 2017 only) based on audited accounts along with the Review

for FY 2017-18 and ARR for FY 2018-19 in accordance with BERC (Terms and

Conditions for Determination of Tariff Regulations, 2007 amended from time to

time.

BGCL has submitted the present Tariff petition for FY 2018-19 on 14th November,

2017 for Truing-up for FY 2016-17, Annual performance review for FY 2017-18 and

ARR and determination of transmission tariff for FY 2018-19 along with audited

accounts for FY 2016-17.

The Truing-up for FY 2016-17 is to be done according to the Regulation 22 (1) & 2 of

the BERC (Terms and Conditions for Determination of Tariff) Regulations, 2007

which is reproduced below:

“The Commission shall undertake a review along with next Tariff Order of the

expenses and revenues approved by the Commission in the current year Tariff

Order. While doing so, the Commission shall consider variations between approvals

and revised estimates / pre-actuals of the sale of electricity, income and



expenditure for the relevant year and permit necessary adjustments / changes in

case such variations are for adequate and justifiable reasons. Such an exercise shall

be called Review”.

“After audited accounts of the year are made available, the Commission shall

undertake a similar exercise as in sub-clause (1) above based on the final actual

figures as per the audited accounts. This exercise based on the audited accounts

shall be called ‘Truing-up’. The Truing-up exercise for any year shall not ordinarily be

considered after more than one year gap after “Review”.

Accordingly, the “Truing-up” exercise for FY 2016-17 has been undertaken by the

Commission on the basis of audited annual accounts of BGCL for FY 2016-17 and

BERC (Terms and Conditions for determination of Tariff) Regulations 2007.

4.2 Performance of Transmission System


BGCL has submitted that it has started only part of its operation in March, 2017 and

did not handle any energy in FY 2016-17, hence there is no actual transmission loss

for FY 2016-17.

Commission’s analysis: BGCL has submitted that it started only part of its operation in March 2017 and did

not handle any energy in FY 2016-17. The Petitioner was directed to submit the

reasons of non-handling of energy despite Commercial operation Date (CoD). The

Petitioner vide its letter no.1793 dated 15.01.2018 has replied that power flow has

commenced since CoD. Further the Petitioner vide letter no.1828 dated 30.01.2018

has submitted that the entire GIS SS, Hajipur was commissioned on 28.02.2017 and

energy flow commenced from 01.03.2017 for meeting the load requirement of 3rd

100 MVA transformer of BSPTCL. BGCL has submitted the transformer is the asset

of BSPTCL and energy flow through Hajipur GIS SS during March 2017 was handled

by BSPTCL and not by BGCL. BGCL has submitted that the energy handled by



Hajipur GIS SS during March 2017 is at 23043 MWH. The Commission having due

validation has considered the same.

4.3 Capitalisation

Petitioner’s submission

BGCL has submitted that as per the audited annual accounts for FY 2016-17,

capitalisation is at Rs.48.97 Crore. The Petitioner has furnished the actual capital

expenditure and capitalisation for truing up for FY 2016-17 as shown in the Table

below:

Table 4.1 : Capital expenditure and Capitalisation proposed for FY 2016-17

(Rs. Crore)

Sl. No.

Particulars Reference Claimed by BGCL for FY

2016-17

1 Opening CWIP a 429.85

2 Opening IDC b 6.11

3 Opening IEDC c 59.90

4 Capital investment during the year d 771.00

5 IDC addition during the year e 52.97

6 IEDC addition during the year f 11.11

7 Asset capitalisation without IDC & IEDC g 44.76

8 IDC capitalised h 1.92

9 IEDC capitalised i 2.28

10 Total capitalisation during the year j=g+h+i 48.97

11 Closing CWIP k=a+d-g 1156.09

12 Closing IDC l=b+e-h 57.16

13 Closing IEDC m=c+f-i 68.73

Commission’s analysis:

The Petitioner has submitted that Hajipur Extension GIS was commissioned on

02.03.2017. It is noted that the capital investment of Hajipur GIS of Rs.46.31 crore

is capitalized and being used as per the information submitted by the Petitioner.

As per the audited accounts of FY 2016-17, the addition to assets/capitalisation is

at Rs.48.97 crore. The details of total assets capitalised during FY 2016-17 is as

given below:

Sl. No.

Particulars Amount (Rs. crore)

1 Plant & Machinery (Hajipur Extension GIS) 46.31



2 Land 2.54

3 Furniture & Fixtures 0.04

4 Office equipment (incl. computers) 0.08

5 Total 48.97

The Commission accordingly approves the capitalisation/addition to assets at

Rs.48.97 crore based on the audited accounts for FY 2016-17 in true up. However,

as the value of assets capitalised towards Land, Furniture & Fixtures and Office

equipment are directly charged to assets without routing through CWIP, the

Commission, based on the audited annual accounts of FY 2016-17, has considered

the opening CWIP at Rs.495.86 crore (including IDC and IEDC) and investment in

capital expenditure during FY 2016-17 at Rs.832.43 crore (including IDC and IEDC)

and capitalisation 46.31 crore during FY 2016-17. The details of opening, additions,

capitalisation and closing capex for FY 2016-17 is furnished as given in the Table

below:

Table 4.2: Capital expenditure approved in truing up for FY 2016-17 (Rs. Crore)

Sl. No.

Particulars Claimed by BGCL

for FY 2016-17 Approved in truing up for FY 2016-17

1 Opening CWIP 429.85 429.85

2 Opening IDC 6.11 6.11

3 Opening IEDC 59.90 59.90

4 Total Opening CWIP (1 to 3) 495.86 495.86

Addition during the year

5 CWIP 768.35 768.35

6 IDC 52.97 52.97

7 IEDC 11.11 11.11

8 sub-total (5 to 7) 832.43 832.43

Capitalisation during the year

9 CWIP 42.11 42.11

10 IDC 1.92 1.92

11 IEDC 2.28 2.28

12 sub-total (9 to 11) 46.31 46.31

13 Closing CWIP (1+5-9) 1156.09 1156.09

14 Closing IDC (2+6-10) 57.16 57.16

15 Closing IEDC (3+7-11) 68.73 68.73

16 Total Closing CWIP (13 to 15) 1281.98 1281.98

4.4 Gross Fixed Assets




BGCL has submitted the value of Opening GFA, Additions to GFA and Closing GFA

based on the audited annual accounts for FY 2016-17 as detailed in the Table

below:

Table 4.3: Gross Fixed Assets proposed for truing up for FY 2016-17 (Rs. Crore) SI.

No. Particulars

Claimed by BGCL for FY 2016-17

1 Opening GFA 4.14

2 Add: Additions during the year 48.97

3 Less: Deductions during the year --

4 Closing GFA (1+2-3) 53.11


The Commission has observed from the audited accounts for FY 2016-17, the

opening GFA at Rs.4.14 crore mainly consisting of Land (Rs.4.03 crore), Furniture &

Fixtures (Rs.0.04 crore) and Office equipment (Rs.0.07 crore) and addition to GFA

during FY 2016-17 is at Rs.48.97 crore. The Commission has approved capitalisation

at Rs.48.97 crore for FY 2016-17 based on the audited accounts for FY 2016-17. The

Commission, accordingly considers the opening GFA, additions to GFA during the

year and closing GFA for FY 2016-17 in true up as detailed in the Table below:

Table 4.4: Gross Fixed Assets approved in truing up for FY 2016-17

(Rs. Crore)

SI. No.

Particulars


vide letter no.1828 dated 30.01.2018

Approved in truing up for FY 2016-17

1 Opening GFA 4.14 4.14

2 Add: Net additions during the year 48.97 48.97

3 Closing GFA (1+2) 53.11 53.11

4.5 Depreciation


BGCL has submitted that depreciation as per audited accounts is at Rs.0.23 Crore

for FY 2016-17. Regulation 73(2)(a)(ii) of the BERC (Terms and Conditions for

Determination of Tariff) Regulations 2007 specify that “Land is not a depreciable

asset and its cost shall be excluded from the capital cost” and therefore no



depreciation is considered on land. BGCL has claimed depreciation of Rs.0.23 Crore

in truing up for FY 2016-17.

The Petitioner vide letter no.1828 dated 30.01.2018 has submitted the revised

computation depreciation and claimed depreciation at Rs.0.21 crore for FY 2016-17

as given below:

Table 4.5: Depreciation claimed in true up for FY 2016-17 (Rs. Crore)

SI.No.

Particulars


vide letter no.1828 dated

30.01.2018

1 Opening GFA as on 1.4.2016 --

2 Additions during the year 48.97

3 Closing GFA 48.97

4 Rate of Depreciation 5.28%

5 Depreciation for 30 days [(3*4)/365*30] 0.21


The Commission has examined the computation of depreciation claimed by the

Petitioner in truing up for FY 2016-17. It is observed that the petitioner has claimed

depreciation on assets (Plant & Machinery) capitalised in respect of Hajipur GIS

(commissioned on 02.03.2017) for 30 days of the Month of March 2017.

The value of assets capitalised Rs.48.97 crore during FY 2016-17 also includes value

of land of Rs.2.54 crore. The Regulation 73 (2)(a)(ii) of BERC Tariff Regulations 2007

specify “Land is not a depreciable asset and its cost shall be excluded from the

capital cost”. Accordingly, the Commission has reduced the value of land for

computation of depreciation for FY 2016-17. The rate of depreciation of 5.28% is

adopted as per the CERC Regulations and as specified by the BERC Tariff

Regulations 2007. The Commission, accordingly, has considered the depreciation in

true up for FY 2016-17 as given in the table below:



Table 4.6: Depreciation claimed in true up for FY 2016-17 (Rs. Crore)

SI.No.

Particulars



30.01.2018

Approved in true up

for FY 2016-17

1 Opening GFA as on 1.4.2016 -- --

2 Additions during the year 48.97 48.97

3 Less: Value of land -- 2.54

4 Closing GFA (2-3) 48.97 46.43

5 Rate of Depreciation 5.28% 5.28%

6 Depreciation for 30 days [(4*5)/365*30] 0.21 0.20

The Commission, accordingly, approves depreciation of Rs.0.20 Crore in truing up

for FY 2016-17.

4.6 Interest and Finance Charges


BGCL has submitted that interest and finance charges have been claimed in

accordance with the Regulation 73 of BERC (Terms and Conditions for

Determination of Tariff) Regulations 2007. Actual funding pattern of 80:20 debt

equity is considered as per Regulation 71(1)(i) of BERC (Terms and Conditions for

Determination of Tariff) Regulations 2007. The weighted average rate of interest of

10.83% is considered based on actual loans drawn up to 31.3.2017 and repayment

of loan is considered equal to depreciation. The Petitioner vide letter no.1828

dated 30.01.2018 has furnished the revised computation of interest and financing

charges for FY 2016-17 as given in the Table below:

Table 4.6: Interest on loans claimed in truing up for FY 2016-17 (Rs. Crore)

SI. No.

Particulars

Claimed by BGCL for FY 2016-17 vide

letter no.1828 dated 30.01.2018

1 Opening Loan --


3 Repayments --

4 Closing loan (1+2-3) 39.17

5 Rate of Interest 10.83%

6 Interest on Loan for 30 days (4*5)/365*30) 0.35



Commission’s Analysis:

The Commission has examined the computation of interest on loan claimed by the

Petitioner in truing up for FY 2016-17. The Petitioner vide letter no.1828 dated

30.01.2018 has submitted revised computation of interest on loan for FY 2016-17 as

detailed in the Table above. Accordingly, the Commission considers the revised

submissions made by the Petitioner for claiming interest on loan for FY 2016-17. The

Commission has observed that the petitioner has not considered the normative

repayment i.e. depreciation for the year, in computing the normative interest on

loan in truing up for FY 2016-17.

The Regulation 73 (1) of the BERC Terms and Conditions for Determination of Tariff

Regulations, 2007 specify;

(a) interest on loan capital shall be computed loan-wise, on the loans arrived at in

the manner indicated in Regulation 71.

(b) ……... (c) …………. (d) ………….. (e) …………… (f) In case any moratorium period is availed by the transmission licensee,

depreciation provided for in the tariff during the years of moratorium shall be

treated as repayment during those years and interest on loan capital shall be

calculated accordingly.

The Regulation 71 of BERC Terms and Conditions for Determination of Tariff


“(1) ………..

Provided that;

(i) in case a project, if the actual equity employed is less than 30%. The actual debt

and equity employed shall be taken for determination of tariff.

(ii) ……...”

The Petitioner has submitted that funding of capex is @ 80 : 20 in Debt Equity ratio.



The Petitioner has projected opening loan at Nil, accordingly, for the purpose of

computing interest, the Commission has considered opening loan as Nil for in truing

up FY 2016-17. As per the audited annual accounts for FY 2016-17, the capitalization

amount is Rs.48.97 Crore. The Commission, for the purpose of computation of

interest, has considered loan at 80% of the capitalisation during FY 2016-17 as given

below:

Table 4.7: Funding of capitalisation considered for FY 2016-17

Sl. No. Particulars Amount

(Rs. Crore)

1 Capitalisation during FY 2016-17 48.97

2 Less: Grants --

3 Net capitalisation 48.97

4 Equity considered (@20% of 3) 9.79

5 Debt considered (@80% of 3) 39.17

The Commission, in terms of Regulation 73 (1) (f) of BERC Tariff Regulations 2007,

has considered repayment of loans equivalent to Depreciation allowed in truing up

for year 2016-17.

The Commission has arrived at the effective rate of interest for FY 2016-17 as

detailed hereunder.

Table 4.8: Effective rate of interest on loans considered for FY 2016-17

Date of Loan

drawn

Amount (Rs.)

RoI (%)

No. of days

Interest

1 2 3 4 5

19-02-15 49988447 11.50% 365 5748671

2-3-2015 150000000 11.50% 365 17250000

27-03-15 185000000 11.50% 365 21275000

13-05-15 125000000 11.50% 365 14375000

1-7-2015 291799604 11.10% 365 32389756

16-10-15 510000000 11.10% 365 56610000

30-11-15 205000000 10.75% 365 22037500

13-01-16 280000000 10.75% 365 30100000

17-02-16 203200000 10.75% 365 21844000

7-3-2016 680400000 10.75% 365 73143000

28-03-16 283500000 10.75% 365 30476250

31-03-16 56370883 10.75% 365 6059870



Date of Loan

drawn

Amount (Rs.)

RoI (%)

No. of days

Interest

11-4-2016 204400000 10.75% 355 21371000

25-05-16 435300000 10.75% 311 39871691

17-06-15 340000000 10.75% 288 28839452

18-07-16 60000000 10.75% 257 4541507

18-07-16 440000000 10.75% 257 33304384

12-9-2016 700000000 10.75% 201 41439041

20-10-16 1000000000 10.75% 163 48006849

21-12-16 1270000000 10.75% 101 37778151

31-12-16 167057146 10.75% 91 4477360

14-02-17 330000000 10.75% 46 4470822

31-03-17 208441961 10.75% 1 61390

31-03-17 91558039 10.75% 1 26966

Total 8267016080

595497660

Weighted Average Rate of Interest [(595497660 / 8267016080)x100] 7.20%

The Commission, accordingly, has computed effective rate of interest at 7.20% and

considered for arriving interest on loan in the truing up for FY 2016-17 as detailed

in the Table below:

Table 4.9: Interest on loans approved in truing up for FY 2016-17

(Rs. Crore)

Sl. No.

Particulars



30.01.2018

Approved in truing up for

2016-17

1 Opening loan -- --


3 Normative Repayment -- 0.21

4 Closing Loan (1+2-3) 39.17 38.96

5 Rate of Interest % 10.83% 7.20%

6 Interest on loan (4*5)/365*30 days

0.35 0.23

The Commission, accordingly, approves the interest on loans of Rs.0.23 Crore for

FY 2016-17 in truing up.

4.7 Operation and Maintenance expenses




BGCL has claimed O&M expenses of Rs.0.03 crore consisting of employee expenses

(Rs.0.02 crore) and A&G expenses (Rs.0.01 crore) based on the actual expenses

charged to P&L account as per the audited accounts for FY 2016-17 as detailed in

the Table below:

Table 4.10: O&M Expenses claimed for FY 2016-17

(Rs. Crore)

Sl. No.

Particulars Claimed by BGCL

for FY 2016-17

1 Employee cost 0.02

2 A & G expenses 0.01

3 Total O&M cost 0.03


The Commission, based on the audited accounts, has approved the O&M expenses

for FY 2016-17 in the truing up as detailed in the Table below:

Table 4.11: Total O&M Expenses approved in truing up for FY 2016-17

(Rs. Crore)

Sl. No.

Particulars Claimed by BGCL for FY

2016-17

Approved in truing up for FY

2016-17

1 Employee cost 0.02 0.02

2 A & G expenses 0.01 0.01

3 Total O&M cost 0.03 0.03

The Commission, accordingly, approves total O&M expenses at Rs.0.03 Crore for

FY 2016-17 in the truing up.

4.8 Return on Equity


BGCL has submitted that Debt : Equity ratio of 80:20 is considered in accordance

with the Regulation 71 of BERC (Terms and Conditions for Determination of Tariff)

Regulations 2007. The rate of return on equity is considered at 15.5% and return is

considered on pro-rata basis for March 2017, the month in which Hajipur

substation is capitalised. The Petitioner vide letter no.1828 dated 30.01.2018 has

submitted revised computation of RoE for FY 2016-17 and claimed RoE in truing up

for FY 2016-17 as detailed in the Table below:



Table 4.12: Return on Equity claimed in truing up for FY 2016-17 (Rs. Crore)

Sl. No.

Particulars

Claimed by BGCL for FY 2016-17 vide letter

no.1828 dated 30.01.2018

1 Opening Equity --

2 Addition during the year 9.79

3 Closing Equity (1+2) 9.79

4 Rate of Return on Equity % 15.50%



The Commission has examined the computation of Return on equity claimed by the

Petitioner in truing up for FY 2016-17. The Petitioner vide letter no.1828 dated

30.01.2018 has submitted revised computation of RoE for FY 2016-17 and claimed

RoE at Rs.0.12 crore for 30 days in truing up for FY 2016-17.

The Commission, in view of above, has considered the RoE as under.

The BERC in Gazette Notification dated 26th March 2014 has issued amendment to

Regulation 73 (2) (i) of BERC (Terms and Conditions for Determination of Tariff) (2nd

Amendment) Regulations, 2014 which specify that “Return on equity shall be

computed on the equity base determined in accordance with Regulation 71 and

shall be @15.50% for the projects which are commissioned on and after

01.04.2015”.



“(1) ……….

Provided that;

(i) in case a project, if the actual equity employed is less than 30%. The actual debt




The Commission, in view of the above Regulations, for the purpose of computation

of RoE, has considered the opening equity as Nil as projected by the Petitioner and

equity addition during FY 2016-17 at Rs.9.79 crore as approved in Table 4.7 above.

The rate of return on equity is considered @15.50% in accordance with the BERC

(Terms and Conditions for Determination of Tariff) (2nd Amendment) Regulations,

2014 dated 26.03.2014.

The Commission, accordingly, has considered Return on Equity in true up for FY

2016-17 as detailed in the Table below:

Table 4.13: Return on Equity approved in truing up for FY 2016-17

(Rs. Crore)

Sl. No.

Particulars




1 Opening Equity -- --

2 Addition during the year 9.79 9.79

3 Closing Equity (1+2) 9.79 9.79

4 Rate of Return on Equity % 15.50% 15.50%

5 Return on Equity (3*4)/365*30 days

0.25 0.12

The Commission accordingly approves Return on Equity at Rs.0.12 Crore for FY

2016-17 in the truing up.

4.9 Interest on working capital


BGCL has submitted that it has arrived at the working capital requirement

according to applicable norms for transmission function provided in the BERC

(Terms and Conditions of Tariff) Regulations, 2007 which are reproduced in the

following Table:

Table 4.14: Norms for working capital requirement

Sl. No. Particulars Norm

1 O&M expenses One month

2 Maintenance spares @1% of historical cost of GFA escalated @ 6% per annum

3 Receivables Two months of transmission charges

4 Rate of interest on working capital

Rate of interest on working capital will be computed at 350 basis points over and above the State Bank of India (SBI) Base




Rate. The interest on working capital shall be payable on normative basis notwithstanding that the transmission licensee may not have taken working capital loan from any outside agency or taken at different rates and amounts.

The rate of interest applied on the working capital is SBI Base Rate plus 350 basis

points i.e. 12.80%.

The Petitioner vide letter no.1828 dated 30.01.2018 has submitted the revised

computation of working capital computed as per the above norms for FY 2016-17 as

detailed in the Table below:

Table 4.15: Interest on working capital projected for FY 2016-17

(Rs. Crore)

Sl. No.

Particulars



1 O&M expenses (1 month) 0.03

2 Maintenance spares @1% of opening GFA with 6% escalation

0.04

3 Receivables - 2 months 1.48

4 Total working capital 1.56

5 Rate of interest 12.80%



The Commission has examined the computation of interest on working capital

submitted by the Petitioner.

According to the amended Regulation 73(4)(ii) of the BERC Tariff Regulations, 2007

(amendment notified in the Bihar Gazette dated 27.03.2014) the rate of interest on

working capital will be computed at 350 basis point over and above the Base Rate.

The SBI Base Rate as on 1st April 2016 is at 9.30% and the rate of interest to be

considered for computing interest on working capital shall be 12.80% (i.e.9.30% +

3.50%) for FY 2016-17 in truing up.

Regulation 73(4)(i)(b) of the BERC Tariff Regulations, 2007 specify “maintenance

spares @ 1% of the historical cost escalated at 6% per annum …………..”.



The Commission has considered opening GFA at Rs.4.14 crore approved in Table

4.4 above. The Commission, accordingly considered maintenance spares at 1% of

the historical value of GFA (Rs.4.14 crore) with escalation @6% at Rs.0.04 crore in

true up for FY 2016-17. The expenses considered in the ARR for FY 2016-17 in true

up represent one month expenses only and hence, the entire ARR is considered as

receivable for working capital requirement. The Rate of interest is considered at

12.80% as on 1st April 2016. The interest on working capital is considered for one

month on pro-rata basis as the rate of interest of 12.80% is per annum.

The Commission, in terms of Regulations, has computed the working capital

requirement and interest on working capital based on the approved expenses at an

interest rate of 12.80% as on 1st April 2016 as given in the Table below:

Table 4.16: Interest on working capital approved in truing up for FY 2016-17

(Rs. Crore)

Sl. No.

Particulars




1 O&M expenses (1 month) 0.03 0.03


0.04 0.04

3 Receivables – 2 months 1.48 0.70

4 Total working capital 1.56 0.77

5 Rate of interest 12.80% 12.80%

6 Interest on working capital (4*5)/365*30 days 0.02 0.01

The Commission approves interest on working capital at Rs.0.01 Crore in truing

up for FY 2016-17.

4.10 Income Tax/Minimum Alternate Tax (MAT)


BGCL has submitted that it has made a payment of Rs.0.07 crore as income tax for

FY 2016-17 and requested the Commission to approve the same part of true up for

FY 2016-17.


Regulation 16 of BERC (Terms and Conditions for Determination of Tariff)

Regulations 2007 specify:



“(1) Tax on income of an integrated utility or a generating company or the

transmission licensee or the distribution licensee, as the case may be, from its

core business, shall be computed as an expense and shall be recovered from the

beneficiaries or consumers.

(2) Under – recovery or over – recovery of any amount from the beneficiaries or the

consumers on account of such tax, having been passed on to them shall be

adjusted every year on the basis of income-tax assessment under Income Tax

Act, 1961, as certified by the statutory auditors. An integrated utility or the

generating company or the transmission licensee / distribution licensee, as the

case may be, may make such adjustments directly.

Provided that

(i) tax on any income, other than core business, shall not constitute a pass

through component in tariff and the tax on such other income shall be

borne by the integrated utility or generating company or the transmission /

distribution licensee, as the case may be.

(ii) ….

(iii) the benefit of tax – holiday as applicable in accordance with provisions of

Income Tax Act, 1961 shall be passed on to the beneficiaries.

(iv) …. (v) ….

The Commission observed from the IT Return acknowledgment submitted by the

BGCL that BGCL has paid income tax Rs.0.07 crore towards MAT u/s.194 JB for FY

2016-17. The Commission, in terms of regulation 16 above, provisionally considers

payment of income tax as pass through in the ARR, subject to adjustment based on

final assessment orders as per regulation 16(2) above.

The Commission approves income tax at Rs.0.07 Crore in truing up for FY 2016-17.

4.11 Non-Tariff Income


BGCL has submitted that non tariff income accounted for in the annual accounts for

FY 2016-17 is at Rs.0.005 Crore and accordingly, proposed the non-tariff income for

truing up for FY 2016-17.




The Commission has considered the non-tariff income of Rs.0.005 crore in truing up

based on the audited accounts for FY 2016.17.

The Commission approves the non-tariff income at Rs.0.005 Crore in truing up for

FY 2016-17.

4.12 Annual Fixed Charges / Transmission ARR for FY 2016-17


BGCL has submitted that the annual fixed charges/Transmission charges have been

arrived at by aggregating all the expenses detailed in the previous sections i.e.

Depreciation, Interest on Loan, O&M expenses, RoE and Interest on working

capital. The total expenses less non tariff income are the net Annual Fixed Charges

or Transmission charges. The Petitioner has claimed ARR in true up of FY 2016-17 as


Table 4.17: Annual Fixed Charges claimed for FY 2016-17

(Rs. Crore)

SI. No.

Particulars



1 O&M expenses (a+b+c) 0.03

a Employee Expenses 0.02

b R&M expenses --

c A&G Expenses 0.01

2 Depreciation 0.21

3 Interest and finance charges 0.35


5 Return on equity 0.12

6 Income tax 0.07

7 Gross Annual Revenue Requirement 0.83

8 Less: Non-Tariff Income 0.00

9 Net Revenue Requirement 0.83


Based on the detailed analysis, the annual fixed charges/Transmission charges

considered by the Commission in true up for FY 2016-17 are as detailed in the Table

below:



Table 4.18: Annual Fixed Charges approved in truing up for FY 2016-17

(Rs. Crore)

SI. No.

Particulars



30.01.2018


1 O&M expenses (a+b+c) 0.03 0.03

A Employee Expenses 0.02 0.02

B R&M expenses -- --

C A&G Expenses 0.01 0.01

2 Depreciation 0.21 0.20

3 Interest and finance charges 0.35 0.23

4 Interest on working capital 0.02 0.01

5 Return on equity 0.12 0.12

6 Income tax 0.07 0.07

7 Gross Annual Revenue Requirement (1 to 6) 0.83 0.66

8 Less: Non-Tariff Income 0.00 0.01

9 Net Revenue Requirement (7-8) 0.83 0.65

The Commission approves annual fixed charges/Transmission charges at Rs.0.65

Crore in truing up for FY 2016-17.

4.13 Revenue Gap / (Surplus) for FY 2016-17


The Commission had approved net revenue requirement of Rs.0.65 Crore in true up

for FY 2016-17.

As per the audited accounts for FY 2016-17, the Petitioner has received Rs.0.77

Crore towards transmission charges during FY 2016-17. On a query from the

Commission BGCL submitted vide letter no.1785 dated 08.01.2018 that BGCL has

not issued any bill to beneficiary i.e. BSPHCL/DISCOMs for FY 2016-17. The

computation of transmission charges has been done as per accounting policy of the

Company (Note-1, Para2.15 of the Audited Accounts for FY 2016-17). It is also

submitted that BGCL has requested the Commission for separate one-time

recovery of ARR for FY 2016-17 from BSPHCL as the amount is very small.

The Commission, based on the detailed analysis, has considered the annual fixed

charges/Transmission charges and the net revenue requirement in true up for FY




Table 4.19: Revenue Gap approved in truing up for FY 2016-17

(Rs. Crore)

SI. No.

Particulars Claimed by BGCL for FY

2016-17


1 Net Aggregate Revenue Requirement 0.83 0.65

2 Less: Revenue received from Transmission charges

- -

3 Revenue Gap / (Surplus) for the year (1-2) 0.83 0.65

The Commission approved Revenue Gap at Rs. 0.65 crore for FY 2016-17 in truing up

as detailed in the table above.

The Regulation 22(3) of the BERC Tariff Regulations, 2007, specifies “the revenue gap

of next year shall be adjusted as a result of Review and Truing up exercises”.

Accordingly, the revenue gap of Rs.0.65 crore arising out of the truing up for FY

2016-17 is to be adjusted in the ARR for FY 2018-19.

The Commission has not considered carrying cost as the Petitioner has filed the true

up petition for FY 2016-17 along with the present tariff petition for FY 2018-19 and

there was no earlier approved Tariff Order for FY 2016-17 to compare the approved

projections vis-à-vis actual.



5. Annual Performance Review (APR) for FY 2017-18

5.1 Background

BGCL has filed the present petition for approval of annual revenue requirement and

transmission charges for FY 2018-19 on 14th November, 2017, which includes

Annual Performance Review (APR) for FY 2017-18 also. The Petitioner has

submitted that the APR for entire year FY 2017-18 has been projected based on the

actual expenses of 1st half year i.e. six months from April 2017 to September 2017

in FY 2017-18.

Review for FY 2017-18 is to be done according to the Regulation 22 (1) of BERC

(Terms and Conditions for Determination of Tariff) Regulations, 2007 which is

reproduced below:

“The Commission shall undertake a review along with next Tariff Order of the

expenses and revenues approved by the Commission in the current year Tariff

Order. While doing so, the Commission shall consider variations between approvals

and revised estimates / pre-actuals of the sale of electricity, income and

expenditure for the relevant year and permit necessary adjustments / changes in

case such variations are for adequate and justifiable reasons. Such an exercise shall

be called Review”.

Accordingly, the “Review” exercise for FY 2017-18 has been undertaken by the

Commission on the basis of annual accounts for FY 2016-17, revised estimates for

FY 2017-18 submitted by the Petitioner and as per BERC (Terms and Conditions for

Determination of Tariff) Regulations, 2007.

5.2 Performance of Transmission System

5.2.1 Availability of Transmission System


BGCL has submitted that it is handling the energy on its system from April, 2017

and its system availability is more than 98% for each month from April, 2017 to

October, 2017.



Commission’s analysis: The Commission has noted the submission of the Petitioner. The Commission

retains the target availability of transmission system availability for FY 2017-18 at

98% for full recovery of transmission charges for FY 2017-18 in accordance with the

BERC (Terms and conditions for determination of Tariff) Regulations, 2007.

5.2.2 Transmission Loss


BGCL has submitted that as per the 6 months data from April, 2017 to September,

2017 the transmission losses are within the level of 3.92% approved for FY 2017-18

in Tariff Order dated 09.03.2017 and requested to approve the same losses for FY

2017-18 (RE).

Commission analysis:

The Commission has provisionally approved transmission loss trajectory at 3.92%

for FY 2017-18 in Tariff Order dated 09.03.2017 as no past data was available. The

Petitioner has requested to approve the transmission loss trajectory at 3.92% for FY

2017-18 in Review. Accordingly, the Commission provisionally approves the

transmission loss trajectory at 3.92% for FY 2017-18 (RE), which will be revisited

while truing up for FY 2017-18, based on actuals.

5.3 Capital Investment Plan


BGCL has submitted the revised year-wise capital investment plan (Phase IV, Part-I)

for transmission system development with addition of 400/220 kV and 220/132/33

kV Substations, 220kV and 132 kV lines and other related works as detailed in the

Table below:



Table 5.1 : Summary of Revised capex and capitalization proposed for FY 2016-17 to FY 2018-19

Sl. No.

Name of the Scheme

Cost of the

Scheme

Source of Funding Capital Expenditure Capitalisation

Loan Equity Total upto FY 2016-17

FY 2017-18

FY 2018-19

upto FY 2016-17

FY 2017-18

FY 2018-19

1 Substations 760.00 608.00 152.00 760.00 631.00 91.00 38.00 49.00 478.00 233.00

2 Lines 687.00 550.00 137.00 687.00 574.00 86.00 27.00 0.00 539.00 149.00

3 Contingencies 43.00 -- -- -- -- -- -- -- -- --

Total 1490.00 1158.00 289.00 1447.00 1205.00 177.00 65.00 49.00 1017.00 382.00

The Petitioner has further submitted that the Commission in Case No.5 of 2017 on

28.07.2017 has approved Business Plan for Phase IV Part II Projects (12th Plan)

amounting to Rs.1688 crore.

BGCL has projected capital investment and capitalisation for FY 2017-18 (RE) for

Phase IV, Part-I as given in the Table below:

Table 5.2: Capex and Capitalisation projected for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars Reference

Approved in Tariff Order

dated 09.03.2017

Projected by BGCL for FY 2017-18 (RE)

1 Opening CWIP a 1327.55 1156.09

2 Opening IDC b 70.00 57.16

3 Opening IEDC c 21.63 68.73

4 Capital investment during the year d 89.72 176.69

5 IDC addition during the year e 28.32 54.12

6 IEDC addition during the year f 4.12 11.11

7 Asset capitalisation without IDC & IEDC g 1174.62 1016.09

8 IDC capitalised h 98.32 111.28

9 IEDC capitalised i 25.75 79.84

10 Total capitalisation during the year j=g+h+i 1298.69 1207.21

11 Closing CWIP k=a+d-g 242.66 316.69

12 Closing IDC l=b+e-h 0.00 0.00

13 Closing IEDC m=c+f-i 0.00 0.00




The Petitioner in the Tariff Petition for FY 2017-18 has furnished the capital

investment plan of Rs.1359.21 crore (Phase-IV Part-1) from FY 2016-17 to FY 2018-19

as given in the Table below:

Table 5.3: Capex and Capitalisation provided in Tariff petition for FY 2017-18

(Rs. crore)

Sl. No.

Scheme Cost of

the Scheme



FY 2017-18

FY 2018-19

upto FY 2016-17

FY 2017-18

FY 2018-19

1 Substations 715.40 572.32 143.08 715.40 632.49 49.90 33.00 35.06 597.16 83.17

2 Lines 643.81 515.05 128.76 643.81 577.45 39.82 26.55 0.00 577.45 66.36

3 Contingencies

Total 1359.21 1087.37 271.84 1359.21 1209.94 89.72 59.55 35.06 1174.62 149.54

In the present petition the Petitioner has revised the planned scheme’s cost and

furnished the revised capex for FY 2016-17 to FY 2018-19 as given in the table below:

Table 5.4 Revised Capex and Capitalisation proposed for FY 2016-17 to FY 2018-19

(Rs. crore)

Sl. No.

Scheme Cost of

the Scheme



FY 2017-18

FY 2018-19

upto FY 2016-17

FY 2017-18

FY 2018-19

1 Substations 760.00 608.00 152.00 760.00 631.00 91.00 38.00 49.00 478.00 233.00

2 Lines 687.00 550.00 137.00 687.00 574.00 86.00 27.00 0.00 539.00 149.00

3 Contingencies 43.00 -- -- -- --- -- -- -- -- --

Total 1490.00 1158.00 289.00 1447.00 1205.00 177.00 65.00 49.00 1017.00 382.00

The scheme-wise details of the works provided by the Petitioner are enclosed as

Annexure –A.

The Commission vide order dated 04.01.2014 in case no.20/2013 had approved

capital investment of Rs.1699.36 crore scheduled to be completed and capitalised in

FT 2015-16. The Petitioner has submitted the revised project cost at Rs.1833.23

crore in its tariff petition filed for FY 2017-18. The Commission, in paragraph 4.4 of

Tariff Order dated 09.03.2017, had observed/directed the Petitioner shall file

petition for approval of revised project cost/business plan for Rs.1833.23 crore giving

reasons for enhancement of project and delay in completion of the Project.

However, for the purpose of process of tariff petition has provisionally approved the

revised capital cost of Rs.1833.23 crore in the Tariff Order dated 09.03.2017.



It is submitted by the Petitioner that the revised cost estimates of Phase IV Part-I

was submitted to the Commission vide letter No.JV/BGCL/Tariff/Directive

Compliance/1302 dated 23.05.2017 for approval.

BGCL has further submitted that the Commission on 28.07.2017 in Case No.5 of 2017

has approved Phase IV Part-II project amounting to Rs.1688 crore. However, the

Petitioner has not included the cost of works/schemes relating to Phase-IV Part-II

projects in the investment plan proposed for FY 2016-17 to FY 2018-19 in the

petition. The Petitioner has not furnished the reasons for not considering Phase-IV

Part-II projects in the petition.

The Commission, provisionally, approves the revised capital investment and

capitalisation plan for FY 2016-17 to FY 2018-19 as projected by BGCL as detailed in

the Table below:

Table 5.5: Capital Investment and capitalisation approved for FY 2016-17 and FY 2018-19

(Rs. Crore)

Sl. No.

Scheme

Capital Expenditure Capitalisation

To end of FY

2016-17

FY 2017-18

FY 2018-19

To end of FY

2016-17

FY 2017-18

FY 2018-19

1 Substations 630.65 90.69 38.25 48.74 477.56 233.30

2 Lines 574.17 86.00 26.94 0.00 538.53 148.57

3 Contingency 0.22

0.22 Total 1205.05 176.69 65.19 48.97 1016.09 381.87

The Commission accordingly, has considered capital investment and capitalisation of

capital expenditure/transferred to fixed assets i.e. GFA based on the capital

investment considered by the Commission for FY 2017-18 as given in the Table

below:

Table 5.6: Capitalisation considered by the Commission for FY 2017-18

(Rs. Crore)

Sl. No.



dated 09.03.2017

Projected by BGCL for FY

2017-18 (RE)

Approved in review for FY 2017-18

1 Opening CWIP A 1327.55 1156.09 1156.09

Opening IDC B 70.00 57.16 57.16

Opening IEDC C 21.63 68.73 68.73

2 Capital investment during the year D 89.72 176.69 176.69



Sl. No.



dated 09.03.2017


2017-18 (RE)


3 IDC addition during the year E 28.32 54.12 54.12

4 IEDC addition during the year F 4.12 11.11 11.11

5 Asset capitalisation without IDC & IEDC G 1174.62 1016.09 1016.09

6 IDC capitalised H 98.32 111.28 111.28

7 IEDC capitalised I 25.75 79.84 79.84

Sub-total (total capitalisation) G+H+I 1298.69 1207.21 1207.21

8 Closing CWIP J=A+D-G 242.65 316.69 316.69

9 Closing IDC K=B+E-H -- -- --

10 Closing IEDC L=C+F-I -- -- --



BGCL has projected GFA for FY 2017-18 as detailed in the Table below:

Table 5.7: Gross Fixed Assets projected for FY 2017-18 (Rs. Crore)

Sl. No.

Particulars

Approved for FY 2017-18 in Tariff Order 09.03.2017


1 Opening GFA 35.31 53.11


3 Closing GFA (1+2) 1325.05 1260.32

Commission’s Analysis

The Commission has examined the GFA projected by the Petitioner for FY 2017-18.

The Commission has approved closing GFA at Rs.53.11 crore for FY 2016-17 in true

up and the same is considered as opening GFA for FY 2017-18. Addition to the GFA

during FY 2017-18 is considered based on capitalisation considered in Table 5.6

above.

The Commission, based the capitalisation considered for FY 2017-18 has arrived at

the closing GFA for FY 2017-18 as given in the Table below:



Table 5.8: Gross Fixed Assets approved in review for FY 2017-18 (Rs. Crore)

Sl. No.

Particulars



Approved in review for FY 2017-18 (RE)

1 Opening GFA 35.31 53.11 53.11

2 Additions during the year 1174.62 1016.09 1016.09

3 IDC capitalised 98.32 111.28 111.28

4 IEDC capitalised 25.75 79.84 79.84

5 Less: Income capitalised 8.95 -- --

6 Closing GFA (1+2+3+4-5) 1325.05 1260.32 1260.32

5.5 Depreciation

Petitioner’s Submission BGCL has submitted that depreciation is computed in accordance with the

Regulation 73(2)(a) of the BERC (Terms and Conditions for Determination of Tariff)

Regulations 2007. It is submitted that no consumer contribution/grants/deposits

have been received for capex and the entire assets are being funded through debt

and equity.

BGCL has projected the depreciation for FY 2017-18 (RE) as detailed in the Table

below:

Table 5.9: Projected Depreciation for FY 2017-18 (Rs. Crore)

Sl. No.

Particulars Approved for FY 2017-18 in Tariff Order 09.03.2017


1 Opening GFA (excl. land value) 31.28 46.54


3 Less: Value of land 33.48 149.35

4 Closing GFA (1+2-3) 1287.54 1104.39

5 Average GFA {(1+4)/2} -- 575.47

6 Weighted average rate of depreciation -- 5.29%

7 Depreciation (5*6) 50.09 30.41


The Commission has examined the depreciation computation of the Petitioner.



Regulation 73 (2) (a) (i) of the BERC (Terms and Conditions for Determination of

Tariff) Regulations 2007, specifies that “the value base for the purpose of

depreciation shall be the historical cost of the asset”. Regulation 73 (2) (a) (ii) of the

BERC (Terms and Conditions for Determination of Tariff) Regulations 2007, specifies

that “Land is not a depreciable asset and its cost shall be excluded from the capital

cost”.

The Commission has approved closing value of depreciable GFA at Rs.46.43 Crore

(excluding value of land) in the true up for FY 2016-17. Accordingly, the same is

considered as opening GFA as on 1st April 2017 for computation of depreciation for

FY 2017-18 in review subject to true up based on audited accounts for FY 2017-18.

The Commission has observed that 99.5% of the assets fall under Plant & Machinery

which attract depreciation rate of 5.28% and 0.5% assets attract depreciation rate of

6.33% (Furniture & Fixtures, Office equipment, etc). Hence, the Commission has

considered depreciation rate of 5.28% in review for FY 2017-18.

The opening value of GFA, additions and closing GFA considered by the Commission

for computation of depreciation is given in the Table below:

Table 5.10: Approved Depreciation for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars

Approved for FY 2017-18 in Tariff

Order 09.03.2017


Approved in review

for FY 2017-18

(RE)

1 Opening GFA (excl. land value) 31.28 46.54 46.43


3 Less: Value of land 33.48 149.35 149.35

4 Closing GFA (1+2-3) 1287.54 1104.39 1104.29

5 Average GFA {(1+4)/2} -- 575.47 575.36

6 Weighted average rate of depreciation -- 5.29% 5.28%

7 Depreciation (5*6) 50.09 30.41 30.38

The Commission, accordingly, approves depreciation of Rs.30.38 Crore in review

for FY 2017-18.



5.6 Interest on Loans

Petitioner’s Submission The Petitioner has submitted that interest on loans is projected in accordance with

the Regulation 73 of BERC (Terms and Conditions for Determination of Tariff)

Regulations, 2007. Normative funding pattern of 80:20 Debt : Equity has been

considered as per Regulation 71 of BERC Terms and Conditions for Determination of

Tariff Regulations, 2007.

“71 (1) in case of all projects, the debt - equity ratio as on the date of commercial

operation shall be 70:30 for determination of Tariff, provided that the Commission

may in deserving case consider equity higher than 30% for purpose of determination

of tariff, where the transmission licensee is able to establish to the satisfaction of the

Commission that the deployment of equity more than 30% was in the interest of

general public.

Provided that;

i. in case a project, if the actual equity employed is less than 30%. The actual debt


ii. in case of existing projects the actual debt : equity ratio shall be used for tariff

determination. However, any expansion shall be governed by clause (1) above.”

Further, effective rate of interest has been considered as 10.74% for FY 2017-18 and

FY 2018-19. The Petitioner has considered repayment equivalent to depreciation in

accordance with the Regulations.

BGCL has projected the interest on loans for FY 2017-18 as detailed in the Table

below:

Table 5.11: Projected Interest on Loan for FY 2017-18

(Rs. Crore)

Sl. No.



2017-18 (RE)

1 Opening loan 27.94 42.26


3 Repayment 50.09 30.41

4 Closing Loan (1+2-3) 1009.64 977.61



Sl. No.



2017-18 (RE)

5 Average Loan {(1+4)/2} 509.94

6 Rate of Interest 10.84% 10.74%

7 Interest on loan ( 5*6 ) 82.84 54.75

8 Finance Charges -- --

9 Total interest and finance charges 82.84 54.75


The Commission has examined the computation of interest on loan projected by the

Petitioner for FY 2017-18.

The Regulation 73 (1) of the BERC Terms and Conditions for Determination of Tariff


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


(b) In the case of existing projects, the actual debt-equity shall be used for tariff

determination and any expansion thereto shall be governed as per Regulation 71.

(c) ………….

(d) ………….

(e) …………..

(f) In case any moratorium period is availed by the transmission licensee,






“(1) in case of all projects, the debt - equity ratio as on the date of commercial

operation shall be 70:30 for determination of Tariff, provided that the

Commission may in deserving case consider equity higher than 30% for purpose

of determination of tariff, where the transmission licensee is able to establish to



the satisfaction of the Commission that the deployment of equity more than 30%

was in the interest of general public.

Provided that;





(2) the debt and equity amount arrived at in accordance with clause (1) shall be used

for calculation of interest on loan, Return on Equity, Advance Against Depreciation

and Foreign Exchange Rate Variation”.

The Commission, in view of the above Regulations, for the purpose of computation of

interest, has considered the closing loan Rs.39.17 crore approved in truing up for FY

2016-17 as opening loan for FY 2017-18 and loan addition @80% of the new

investment capitalised during FY 2017-18. The repayment is considered equivalent to

depreciation considered for FY 2017-18 (RE). The capitalisation, equity and debt for

FY 2017-18 is shown hereunder:

Capitalisation

Sl. No.

Particulars 2017-18

1 Capitalisation during the year 1207.21



The Petitioner has considered weighted average rate of interest of 10.74% for FY

2017-18. The Commission, however, has arrived the weighted average rate of

interest at 10.08% for FY 2017-18 as given in the table below:

Sl. No.

Date of Loan Drawn Amount

(Rs.) RoI (%)

No. of days

Interest

A B C D E F=[(CxD)/365]xE

1 Loan at the end of 31.03.2017 8267016080 10.83% 365 895317841

2 29-05-17 700000000 10.50% 307 61820548

3 30-06-17 380335548 10.50% 275 30088189



Sl. No.

Date of Loan Drawn Amount

(Rs.) RoI (%)

No. of days

Interest

4 30-06-17 390000000 10.50% 275 30852740

5 30-06-17 229664452 10.50% 275 18168660

6 6/9/2017 750000000 10.25% 207 43597603

7 Total 10717016080 1079845581

8 Weighted Average Rate of interest (F7/C7)x100 10.08%

The Commission, accordingly, has considered RoI and computed the interest for FY

2017-18 (RE) as detailed in the Table below:

Table 5.12: Interest on Loans approved for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars

Approved for FY 2017-18 in

Tariff Order 09.03.2017


2017-18 (RE)


(RE)

1 Opening loan 27.94 42.26 39.17


3 Repayment 50.09 30.41 30.38

4 Closing Loan (1+2-3) 1009.64 977.61 974.56

5 Average Loan {(1+4)/2} 509.94 506.86

6 Rate of Interest 10.84% 10.74% 10.08%

7 Interest on loan ( 5*6 ) 82.84 54.75 51.09

8 Finance Charges -- -- --

9 Total interest and finance charges 82.84 54.75 51.09

The Commission accordingly, approves the interest & finance charges of Rs.51.09

Crore for FY 2017-18 (RE).

5.7 Operation and Maintenance (O&M) Expenses

5.7.1 Inflation index / Escalation rate Petitioner’s submission:

BSPTCL has submitted that as per Regulation 73(3) of BERC (Terms and Conditions

for Determination of Tariff) Regulations 2007:

“(3) Operation and Maintenance Expenses

Norms for operation and maintenance expenses per ckt km and per bay shall be as

under



(a) The Commission shall, for the purpose of fixing normative rates for operation and

maintenance expenses, study the O&M expenses incurred over the last 4 to 5

years and fix appropriate rates per ckt-km of transmission line and per bay. The

norms so fixed for 2008-09 shall be escalated at 4% per annum.

(b) The total allowable O&M expenses for a transmission licensee shall be calculated

by multiplying the numbers of bays and ckt-km of line length with the applicable

norms for O&M expenses per bay and per ckt-km respectively”.

The Petitioner has submitted that it has followed the inflation index (based on CPI

and WPI) methodology considered in Tariff order dated 9.3.2017. For projection of

Employee expenses and Administration & General expenses for 2nd half year of FY

2017-18 the inflation index on 3.99% is considered over the 1st half year actual

expenses of FY 2017-18. The Petitioner has furnished the computation of indexation

based on CPI and WPI as given in the table below:

Table 5.13: Weightage of indexation/inflation factor

Sl. No.

Particulars WPI CPI Total

1 Weightage 0.45 0.55 1.00

2 Index points for FY 2016-17 183.16 275.92

3 Indexation n (index point * weightage) 82.42 151.75 234.18


5 Indexation n-i (index point * weightage) 79.43 145.76 225.19

6 Combined inflation ( 3-5) / 5) 3.99%


Regulation 73(3) of BERC (Terms and Conditions for Determination of Tariff)


“Norms for operation and maintenance expenses per ckt km and per bay shall be as

under

(c) The Commission shall, for the purpose of fixing normative rates for operation and






(d) The total allowable O&M expenses for a transmission licensee shall be calculated



The Commission in the Tariff Order dated 09.03.2017 had observed that;

“BGCL has filed petition for the first time and the assets are scheduled to be

capitalised during FY 2017-18 and no norms are fixed by the Commission. Hence, the

Commission considers appropriate to follow the methodology adopted for BSPTCL for

determination of O&M expenses may be made applicable for BGCL also as both the

utilities are in transmission business.

The Commission, accordingly, has proposed following inflation index methodology for

for computation of O&M expenses.

INDXn = 0.55*CPIn + 0.45*WPIn

- CPIn is the consumer price index increase for immediate preceding year over

previous year.

- WPIn is the wholesale price index increase for immediate preceding year over

previous year”.

The Commission opines that, since no norm for O&M expenses are fixed, the

methodology adopted in Tariff Order dated 09.03.2017 shall be adopted for FY 2017-

18 (RE) and FY 2018-19 subject to true up based on the audited accounts of the

relevant financial years.

The Commission, accordingly, has followed the inflation index methodology, based

on the available full financial year CPI on the official website labourbureaunew.gov.in

and WPI on the official website eaindustry.nic.in, for computation of employee

expenses and Administration & General expenses for FY 2017-18 and FY 2018-19 as

detailed in the table below:

Table 5.14: Weightage of indexation/inflation factor

Sl. No.


1 Weightage 0.45 0.55 1.00




Sl. No.


3 Indexation n (index point * weightage) 50.23 151.75 201.98


5 Indexation n-i (index point * weightage) 49.37 145.75 195.13

6 Combined inflation ( 3-5) / 5) 3.51%

5.7.2 Employee Costs


BGCL has submitted that the employee cost comprises of salaries, dearness

allowance, bonus, staff welfare, medical benefits, leave travel and earned leave

encashment and the terminal benefits in the form of pension, gratuity, etc.

BGCL has also submitted that employee expenses for FY 2017-18 are based on the

1st half year actual expenses of FY 2017-18 and further projected for 2nd half year of

FY 2017-18 with an increase of 3.99% over the actual expenses of 1st half year of FY


Table 5.15: Employee Cost for FY 2017-18 (RE) projected by the Petitioner

(Rs. Crore)

Sl. No.

Particulars


dated 09.03.2017

FY 2017-18

April’17 to Sept’17 (Actual)

Oct’17 to March’17

(Estimated)

Total (RE)

1 Employee cost 4.08 3.06 3.06 6.17

2 Indexation 2.59% 3.99%

3 Add: Inflationary increase (1*2) 0.11 0.06

4 Addition of Manpower 4.62 --

5 Add: O&M manpower on contract 2.45 --

6 Pay Revision impact -- 0.93

7 Employee cost 8.44 3.06 3.12 7.10 Note: The employee cost approved in TO dated 09.03.2017 is for 9 months only.


The Commission has examined the computation of employee cost by the Petitioner.

The employee cost approved in truing up for FY 2016-17 represents the one month

cost pertaining to part of assets put to use. Major portion of employee cost of FY

2016-17 is charged to CWIP and hence, the employee cost approved in true up of FY

2016-17 cannot be considered as base expenses for projecting cost for FY 2017-18.

Therefore, the Commission has provisionally considered the employee cost as



projected by the petitioner for FY 2017-18 subject to true up based on audited

annual accounts for FY 2017-18 as detailed in the Table below:

Table 5.16: Approved Employee Cost for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars

Approved in Tariff

order dated

09.03.2017

Projected by BGCL for FY 2017-18 Approved in review

for FY 2017-18

(RE)

April,17 to Sept'17

(Actuals)

Oct,17 to March'18

(Estimates)

Total (RE)

1 Employee cost 4.08 3.06 3.06 6.17 6.17



4 Addition of Manpower 4.62 --

5 Add: O&M manpower on contract 2.45 --

6 Pay Revision impact -- 0.93 0.93

7 Employee cost 8.44 3.06 3.12 7.10 7.10

The Commission approves employee cost at Rs.7.10 Crore for FY 2016-17 (RE). 5.7.3 Repairs and Maintenance (R&M) Expenses

Petitioner’s submission: BGCL has submitted that most of the capitalisation is proposed during 2nd half of FY

2017-18 and is expected to incur Rs.12 crore during 2nd half of FY 2017-18. The

Petitioner has projected R&M expenses for FY 2017-18 as given in the Table below:

Table 5.17: Projected Repairs and Maintenance expenses for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars


dated 09.03.2017

Projected for FY 2017-18 (RE)



(Estimated)

Total (RE)

1 Opening GFA 35.31

2 % on GFA 2.50%

3 R&M on opening GFA (1*2) 0.88

4 GFA addition during the year 1289.74

5 R&M on GFA addition 24.18

6 Total R&M expenses 25.07 0.11 12.00 12.11

Commission’s analysis



The Commission has examined the R&M expenses projected by BGCL.

The Commission in Tariff Order dated 09.03.2017 has opined that;

“The Commission has not fixed any norms for O&M expenses for transmission system

i.e. BGCL or BSPTCL. The Petitioner has proposed that R&M expenses may be

considered as a percentage on the opening GFA. Further, the Commission in the draft

BERC (Multi Year Transmission Regulations) 2016 has proposed that R&M expense

shall be calculated as percentage (as per the norm determined) of opening GFA. The

Commission concur with the Petitioner’s submission that some ERCs are considering

R&M expenses on a % basis on the opening GFA.

The Petitioner has considered R&M expenses at 2.50% on opening GFA and also on

the additions to GFA (for 9 months) during FY 2017-18. The Commission, in absence

of R&M norms, provisionally considers 2.50% (as proposed by the Petitioner) for

providing R&M expenses for FY 2017-18 subject to true up based on audited

accounts”.

The Petitioner has reported actual R&M expenses for 1st half of FY 2017-18 at

Rs.0.11 crore and projected Rs.12.00 crore for 2nd half of FY 2017-18 stating that

most of assets are proposed to be capitalised. The Commission opines that the

assets are new and does not require huge R&M expenses and hence, following the

principle of prudence and consistency provisionally considers R&M expenses on a %

basis i.e. at 2.50% on the Opening GFA for FY 2017-18 (RE) in line with the rate

considered in Tariff Order dated 09.03.2017, subject to true up based on audited

accounts for FY 2017-18.

The Commission, accordingly, considered R&M expenses for FY 2017-18 in review as




Table 5.18: Approved R&M expenses for FY 2017-18 (Rs. Crore)

Sl. No.

Particulars

Approved in Tariff

order dated

09.03.2017


for FY 2017-18

(RE)

April,17 to Sept'17

(Actuals)

Oct,17 to March'18

(Estimates)

Total (RE)

1 Opening GFA 35.31

53.11

2 % on GFA 2.50%

2.50%


1.33


--

5 R&M on GFA addition 24.18

--

6 Total R&M expenses 25.07 0.11 12.00 12.11 1.33

The Commission, accordingly, approves R&M expenses at Rs.1.33 Crore in review

for FY 2017-18.

5.7.4 Administration and General (A&G) Expenses

Petitioner’s Submission

BGCL has submitted that the Administration and General expenses mainly comprise

of rents, telephone and other communication expenses, professional charges,

conveyance and traveling expenses etc.

BGCL has submitted that A&G expenses for FY 2017-18 are based on the actual

expenses of the 1st half of FY 2017-18 and further projected for 2nd half of FY 2017-

18 with an increase of 3.99% over the actual expenses of 1st half of FY 2017-18 as


Table 5.19: Proposed Administration and General Expenses for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars


dated 09.03.2017

Projected for FY 2017-18 (RE)



(Estimated)

Total (RE)

1 Base A&G expenses 2.78 1.48 1.48 2.96

2 Inflationary index % 2.59% 3.99%

3 Inflationary increase (1*2) 0.07 0.03 0.03

4 A&G expenses 2.14 1.48 1.51 2.99


The Commission has examined the A&G expenses projected by BGCL.



The A&G expenses approved in truing up for FY 2016-17 represents only one month

cost pertaining to part of assets put to use. Hence, the expenses approved in true up

of FY 2016-17 cannot be considered as base expenses for projecting A&G expenses

for FY 2017-18 (RE). Therefore, the Commission has provisionally considered the

A&G expenses as projected by the petitioner for FY 2017-18 subject to true up based

on audited annual accounts for FY 2017-18 as detailed in the Table below:

Table 5.20: Approved Administration & General Expenses for FY 2017-18

(Rs. Crore)

Sl.

No. Particulars

Approved in Tariff

order dated

09.03.2017


for FY 2017-18

(RE)

April,17 to Sept'17

(Actuals)

Oct,17 to March'18

(Estimates)

Total (RE)

1 Base A&G expenses 2.78 1.48 1.48 2.96 2.96

2 Inflationary index % 2.59%

3.99% 3 Inflationary increase (1*2) 0.07

0.03 0.03 0.03

4 A&G expenses 2.14 1.48 1.51 2.99 2.99

The Commission, accordingly, approves Administration and General Expenses at

Rs.2.99 Crore in review for FY 2017-18 (RE).

5.7.5 Summary of Operations and Maintenance (O&M) Expenses

Table 5.21: Total O&M cost approved for FY 2017-18 (RE)

(Rs. Crore)

Sl. No.

Particulars



2017-18 (RE)

Approved for FY

2017-18 (RE)

1 Employee cost 8.44 7.10 7.10

2 R&M expenses 25.07 12.11 1.33

3 A&G Expenses 2.14 2.99 2.99

4 Net O&M expenses 35.65 22.20 11.41

The Commission approves O&M cost at Rs.11.41 Crore for FY 2017-18 in review.





BGCL has submitted that debt equity 80:20 is considered in accordance with

Regulation 71 of the BERC (Terms and Conditions for Determination of Tariff)

Regulations 2007 and RoE is considered at 15.5% for assets capitalised on or after 1st

April 2015 as amended from time to time.

BGCL has computed the Return on Equity for FY 2017-18 (RE) as detailed in the Table

below:

Table 5.22: Projected Return on Equity for FY 2017-18 (RE)

(Rs. Crore)

BGCL has requested the Commission to consider the RoE as per the computations

furnished in the Table above for FY 2017-18 (RE).


The Commission has examined the computation of Return on Equity (RoE) claimed

by the Petitioner.

The Regulation 73 (2) (c) of the BERC Terms and Conditions for Determination of

Tariff Regulations, 2007 specify;

(i) Return on Equity shall be computed on the equity base determined in accordance with

Regulation 71 and shall be @ 14% per annum.

(ii) …………..

Sl. No.

Particulars




2017-18 (RE)

1 Opening equity 7.06 10.62

2 Addition in FY 2017-18 257.95 241.44

3 Closing Equity (1+2) 265.01 252.06

4 Average equity (1+3)/2 131.34

5 Rate of Return on equity 15.50% 15.50%

6 Return on equity (4*5) 31.08 20.36






computed on the equity base determined in accordance with Regulation 71 and

shall be @15.50% for the projects which are commissioned on and after

01.04.2015”.







the satisfaction of the Commission that the deployment of equity more than

30% was in the interest of general public.

Provided that;

(i) in case a project, if the actual equity employed is less than 30%. The actual

debt and equity employed shall be taken for determination of tariff.

(ii) in case of existing projects the actual debt : equity ratio shall be used for

tariff determination. However, any expansion shall be governed by clause

(1) above.”


for calculation of interest on loan, Return on Equity, Advance Against

Depreciation and Foreign Exchange Rate Variation”.

A conjoint reading of Regulations 73 and 71 explicitly specify that Return on Equity

shall be provided on the actual Equity or 30% of the project cost. The funding of

capital assets is in 80:20 debt equity ratio.

The Commission, in view of the above Regulations, for the purpose of computation

of RoE, has considered the capitalisation, equity and debt for FY 2017-18 (RE) as

shown hereunder:



Capitalisation

Sl. No. Particulars Amount

(Rs. Crore)

1 Capitalisation during the year 1207.21



The Commission has considered the opening equity of Rs.9.79 crore for FY 2017-18

(RE) based on closing equity approved in true up for FY 2016-17 and further updated

based on funding of capitalisation approved in review and arrived at the equity for

FY 2017-18 (RE).

The Commission, in view of the Regulations 73 and 71 of the BERC Tariff Regulations,

2007, for the purpose of computation of Return on Equity, has considered the rate of

return on equity @15.50% as per the BERC Tariff Regulations read with 2nd

amendment dated 26.03.2014.

The Commission, accordingly, has considered Return on Equity for FY 2017-18 in

review as detailed in the Table below:

Table 5.23: Approved Return on Equity for FY 2017-18 (RE)

(Rs. Crore)

The Commission approves Return on Equity at Rs.20.23 Crore for FY 2017-18 (RE).



Sl. No.

Particulars




2017-18 (RE)


1 Opening equity 7.06 10.62 9.79

2 Addition in FY 2017-18 257.95 241.44 241.44

3 Closing Equity (1+2) 265.01 252.06 251.23

4 Average equity (1+3)/2 131.34 130.51

5 Rate of Return on equity 15.50% 15.50% 15.50%

6 Return on equity (4*5) 31.08 20.36 20.23



BGCL has submitted that it has arrived at the working capital requirement according

to applicable norms for transmission function provided in the BERC (Terms and

Conditions of Tariff) Regulations, 2007 which are reproduced in the following Table:




2 Maintenance spares @1% of historical cost of GFA escalated @ 6% per annum


4 Rate of interest on working capital

Base Rate of State Band of India

The rate of interest applied on the proposed working capital is @12.80% as per the

SBI Base Rate plus 350 basis points.

BGCL has projected interest on working for FY 2017-18 on the above norms as


Table 5.25: Projected Interest on working capital for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars




2 Maintenance spares @1% of opening GFA with 6% escalation 0.37 0.56

3 Receivables - 2 months 34.08 21.80







The Commission has considered opening GFA at Rs.53.11 Crore to consider

maintenance spares for the purpose of computing working capital requirement and

interest on working capital. The Commission, accordingly considered maintenance

spares at 1% of the historical cost of GFA (Rs.53.11 crore) with escalation @6% for FY

2017-18.



The Regulation 73(4)(ii) of BERC Tariff Regulations, 2007 specify the rate of interest

on working capital shall be equal to Short terms PLR of SBI on 1st April of the year.

The BERC has issued amendment to the Regulation 73(4)(ii) (amendment notified in

the Bihar Gazette dated 27.03.2014) that the rate of interest on working capital will

be computed at 350 basis points over and above the base rate. The Regulation

(amendment) shall come into force from the date of publication in the Bihar Gazette

i.e. with effect from 27.03.2014.

The SBI Base Rate as on 1st April 2017 is at 9.10%. The rate of interest to be

considered on working capital works out to 12.60% [SBI Base Rate of 9.10% (MCLR) +

3.50% (350 basis points)] for FY 2017-18 (RE).

The Commission has computed the working capital and interest on working capital

as per expenses approved at an interest rate of 12.60% as given in the Table below:

Table 5.26: Approved Interest on working capital for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars




(RE)

1 O&M expenses (1 month) 3.02 1.85 0.95

2 Maintenance spares @1% of opening GFA with 6% escalation 0.37 0.56 0.56

3 Receivables - 2 months 34.08 21.80 19.29

4 Total working capital 37.42 24.22 20.80

5 Rate of interest 12.80% 12.80% 12.60%


The Commission approves interest on working capital at Rs.2.62 Crore in review for

FY 2017-18 (RE).



The Petitioner has not projected any non tariff income for FY 2017-18 and proposed

to present at the time of truing up.




The Commission had considered the submissions made by the Petitioner and no non

tariff income is considered in review for FY 2017-18 subject to true up based on

audited accounts for FY 2017-18.

The Commission, accordingly, considers Non-tariff income as ‘Nil’ for FY 2017-18 in

review.

5.11 Annual Transmission charges for FY 2017-18


BGCL has submitted the annual fixed charges or Transmission charges arrived at by

aggregating all the expenses viz. Depreciation, Interest on Loans, Interest on working

capital, O&M expenses, Return on Equity. The total expenses less non-tariff income

are the net annual fixed charges or transmission charges.

The summary of revised annual fixed charges / ARR projections and ARR approved by

the Commission for FY 2017-18 (RE) are given in the Table below:

Table 5.27: Projected Annual Fixed Charges/ (ARR) for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars



2017-18 (RE)

1 O&M expenses (2+3+4) 35.65 22.20


3 R&M expenses 25.07 12.11

4 A&G Expenses 2.14 2.99

5 Interest and finance charges 82.84 54.75



8 Return on Equity 31.08 20.36

9 Total Aggregate Revenue Requirement (2 to 8) 204.45 130.82

10 Less: Non-tariff income -- --

11 Net Aggregate Revenue Requirement (9-10) 204.45 130.82


Based on the Commission’s detailed analysis, the Aggregate Revenue Requirement/

annual fixed charges/Transmission charges considered by the Commission for FY

2017-18 (RE) are as detailed in the Table below:



Table 5.28: Approved Annual Fixed Charges / ARR for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars



2017-18 (RE)

Approved by Commission in review for FY 2017-18

(RE)

1 O&M expenses (2+3+4) 36.27 22.20 11.42

2 Employee cost 8.44 7.10 7.10

3 R&M expenses 25.07 12.11 1.33

4 A&G Expenses 2.14 2.99 2.99

5 Interest and finance charges 82.84 54.75 51.09


7 Depreciation 50.09 30.41 30.38

8 Return on Equity 31.08 20.36 20.23

9 Total Aggregate Revenue Requirement (2 to 8) 204.45 130.82 115.73

10 Less: Non-tariff income -- -- --

11 Net Aggregate Revenue Requirement (9-10) 204.45 130.82 115.73

5.12 Revenue Gap / (Surplus) for FY 2017-18 (RE)


The Commission, based on the detailed analysis of the projections made by the

Petitioner, has arrived at the ARR for FY 2017-18 (RE) as detailed in the Table below:

Table 5.29: Approved revenue gap / (surplus) for FY 2017-18

(Rs. Crore)

Sl. No.

Particulars





1 Aggregate Revenue Requirement for FY 2017-18 204.45 130.82 115.73

2 Less: Approved Annual Transmission Charges in the Tariff Order dated 09.03.2017 204.45 204.45 204.45

3 Revenue Gap / (Surplus) for FY 2017-18 (1-2) -- (73.63) (88.72)

The Commission thus approves Revenue surplus of 88.72 Crore in Review for FY

2017-18 (RE).



The net Surplus of Rs.88.72 Crore has been worked out in the review for FY 2017-18

(RE).

The deficit / (surplus) ARR of FY 2017-18 will generally be considered in the ARR of FY

2019-20, after truing-up of FY 2017-18 when the audited annual accounts will be

made available by BGCL.

In view of the above, the surplus of Rs.88.72 crore is not considered to be carried

forward in the ARR of FY 2018-19.



6. Annual Revenue Requirement (ARR) and Transmission charges for FY 2018-19

6.1 Background

BGCL has submitted the petition on 14th November, 2017 for approval of True up for

FY 2016-17, Annual Performance Review for FY 2017-18 and Aggregate Revenue

Requirement (ARR) and determination of transmission charges for FY 2018-19.

Determination of Aggregate Revenue Requirement (ARR) for FY 2018-19 of BGCL has

been undertaken by the Commission on the basis of revised estimates for FY 2017-

18 as the true up for FY 2016-17 has been done for only one month of operation and

no actual data is available for the whole year of FY 2017-18 and as per BERC (Terms

and Conditions for Determination of Tariff) Regulations, 2007.

6.2 Transmission Loss


BGCL has requested to approve the transmission loss trajectory at 3.92% for FY

2018-19 at the same level as approved by the Commission for FY 2017-18 in the

Tariff Order dated 09.03.2017.


The Commission has considered the transmission loss trajectory of 3.92% for BSPTCL

for the MYT control period of FY 2016-17 to FY 2018-19 in Tariff Order dated

21.03.2016. Since BGCL is also in the business of transmission of electricity at par

with BSPTCL in the State of Bihar, the Commission had provisionally approved the

transmission loss trajectory for BGCL also at 3.92% for FY 2017-18 as was approved

for BSPTCL for FY 2017-18.

Since adequate past data is not available, the Commission provisionally approves the

transmission loss for BGCL at 3.92% for FY 2018-19, which will be revisited while

reviewing for FY 2018-19 (RE)



6.3 Capital Investment Plan


BGCL has submitted the revised year-wise capital investment plan (Phase IV Part-

I)for transmission system development with addition of 400/220 kV and 220/132/33

kV Substations, 220kV and 132 kV lines and other related works as detailed in the

Tables below:

Table 6.1: Summary of capex and capitalisation proposed for FY 2016-17 and FY 2018-19

Sl. No.

Name of the Scheme

Cost of the

Scheme



FY 2017-18

FY 2018-19

upto FY 2016-17

FY 2017-18

FY 2018-19

1 Substations 760.00 608.00 152.00 760.00 631.00 91.00 38.00 49.00 478.00 233.00

2 Lines 687.00 550.00 137.00 687.00 574.00 86.00 27.00 0.00 539.00 149.00

3 Contingencies 43.00 -- -- -- -- -- -- -- -- --

Total 1490.00 1158.00 289.00 1447.00 1205.00 177.00 65.00 49.00 1017.00 382.00

The Petitioner has further submitted that the Commission in Case No.5 of 2017 on

28.07.2017 has approved Business Plan for Phase IV Part II Projects (12th Plan)

amounting to Rs.1688 crore.

BGCL has projected capital investment and capitalisation for FY 2018-19 for Phase IV

Part I as given in the Table below:

Table 6.2: Capex and Capitalisation projected for FY 2018-19

(Rs. Crore)

Sl. No.

Particulars Reference Projected by BGCL for FY

2018-19

1 Opening CWIP a 316.69

2 Opening IDC b --

3 Opening IEDC c --

4 Capital investment during the year d 65.19

5 IDC addition during the year e 72.48

6 IEDC addition during the year f 11.11

7 Asset capitalisation without IDC & IEDC g 381.87

8 IDC capitalised h 72.48

9 IEDC capitalised i 11.11

10 Total capitalisation during the year j=g+h+i 465.46

11 Closing CWIP k=a+d-g --

12 Closing IDC l=b+e-h --

13 Closing IEDC m=c+f-i --




The Commission, had provisionally considered the revised capital investment and

capitalisation plan for FY 2016-17 to FY 2018-19 in its review for FY 2017-18 (table

5.5) as detailed in the Table below:

Table 6.3: Capital Investment and capitalisation approved for FY 2016-17 and FY 2018-19

(Rs. Crore)

Sl. No.

Scheme

Capital Expenditure Capitalisation

To end of FY

2016-17

FY 2017-18

FY 2018-19

To end of FY

2016-17

FY 2017-18

FY 2018-19

1 Substations 630.65 90.69 38.25 48.74 477.56 233.30

2 Lines 574.17 86.00 26.94 0.00 538.53 148.57

3 Contingency 0.22

0.22 Total 1205.05 176.69 65.19 48.97 1016.09 381.87

The Commission vide order dated 04.01.2014 in case no.20/2013 had approved

capital investment of Rs.1699.36 crore scheduled to be completed and capitalised in

FT 2015-16. The Petitioner has submitted the revised project cost at Rs.1833.23

crore in its tariff petition filed for FY 2017-18. The Commission, in paragraph 4.4 of

Tariff Order dated 09.03.2017, had observed/directed the Petitioner shall file

petition for approval of revised project cost/business plan for Rs.1833.23 crore giving

reasons for enhancement of project and delay in completion of the Project.

However, for the purpose of process of tariff petition has provisionally approved the

revised capital cost of Rs.1833.23 crore in the Tariff Order dated 09.03.2017.

The Commission has approved closing CWIP at Rs.316.69 crore for FY 2017-18 in

review and the same is considered as opening CWIP for FY 2018-19, which is in line

with the projection made by the Petitioner.

The Petitioner has proposed addition to capex at Rs.65.19 crore, IDC at Rs.72.48

crore and IEDC at Rs.11.11 crore for FY 2018-19. The IDC proposed by the Petitioner

is not commensurate with the opening CWIP (Rs.316.69 crore) and capex (Rs.65.19

crore). The IDC is working out to 20.75% on the average of CWIP of Rs.349.28 crore

(316.69+32.59(65.19/2)). The weighted average rate of interest on loan is worked to



10.08% for FY 2018-19. Hence, the IDC is regulated adopting the weighted average

rate of interest of 10.08% for opening CWIP for one year and on addition to capex

for half year. The Commission, accordingly, has computed the IDC at Rs.35.20 crore

(Rs.31.92 crore on opening CWIP and 3.28 crore on Capex during the year for half

year) and the same is considered in capex and capitalisation during FY 2018-19.

The year-wise capex and capitalisation considered and approved by the Commission

to end FY 2018-19 in respect of Phase-IV Part-1 is furnished hereunder for reference:

Table 6.4: Total Capital Investment and capitalisation approved for project Phase-IV part-1

Sl. No.

Year Capital investment Year-wise Capitalisation Year-wise

CWIP IDC IEDC Total CWIP IDC IEDC Total

1 To end of 2015-16 429.85 6.11 59.90 495.86 -- -- -- --

2 2016-17 768.35 52.97 11.11 832.43 42.11 1.92 2.28 46.31

3 2017-18 176.69 54.12 11.11 241.92 1016.09 111.28 79.84 1207.21

4 2018-19 65.19 35.20 11.11 111.50 381.88 35.20 11.11 428.19

5 Total 1440.08 148.40 93.23 1681.71 1440.08 148.40 93.23 1681.71

It can be observed from the table above, the total capex and capitalisation

considered by the Commission is at Rs.1681.71 crore which is within the capital

investment plan approved by the Commission in order dated 04.01.2018 in Case

no.20/2013 for Rs.1699.36 crore.

The Commission accordingly, has considered capital investment including IDC and

IEDC and capitalisation of capital expenditure/transferred to fixed assets i.e. GFA

based on the capital investment approved by the Commission for FY 2018-19 as

given in the Table below:

Table 6.5: Capitalisation considered by the Commission for FY 2018-19

(Rs. Crore)

Sl. No.


2018-19

Approved in review

for FY 2018-19

1 Opening CWIP a 316.69 316.69

2 Opening IDC b -- --

3 Opening IEDC c -- --

4 Capital investment during the year d 65.19 65.19

5 IDC addition during the year e 72.48 35.20



Sl. No.


2018-19

Approved in review

for FY 2018-19

6 IEDC addition during the year f 11.11 11.11

7 Asset capitalisation without IDC & IEDC g 381.87 381.88

8 IDC capitalised h 72.48 35.20

9 IEDC capitalised i 11.11 11.11

10 Total capitalisation during the year j=g+h+i 465.46 428.19

11 Closing CWIP k=a+d-g -- --

12 Closing IDC l=b+e-h -- --

13 Closing IEDC m=c+f-i -- --

6.4 Funding of Capitalisation


The Petitioner has considered funding of the capitalisation in the debt : equity ratio

of 80 : 20 respectively in the petition.


Regulation 71 of the BERC (Terms and Conditions for Determination of Tariff)

Regulations 2007 specify;

(1) In case of all projects, the debt-equity ratio as on the date of commercial operation shall

be 70 : 30 for determination of tariff, provided that the commission may in deserving

case consider equity higher than 30% for purpose of determination of tariff, where the

transmission licensee is able to establish to the satisfaction of the Commission that the

deployment of equity more than 30% was in the interest of general public.

Provided that

(i) in case of a project, if the actual equity employed is less than 30%, the actual debt and

equity employed shall be taken for determination of tariff”.

The Petitioner has considered funding of capitalisation through debt @80% and

through equity @20% for FY 2018-19.

The Commission in terms of Regulation 71(1)(i) as above, considers the funding of

capitalisation through debt @80% and equity @20% for FY 2017-18 as given in the

Table below:



Table 6.6: Funding of capitalisation considered for FY 2018-19 (Rs. Crore)

Sl. No.

Particulars Approved for

FY 2018-19

1 Capitalisation 428.19

Funding of capitalization

2 a. Equity @20% 85.64

3 b. Loans @80% 342.55



BGCL has projected Gross Fixed Asset (GFA) for FY 2018-19 as given in the Table

below:

Table 6.7: Gross fixed assets projected for FY 2018-19

(Rs. Crore)

Sl. No.

Particulars Projected by BGCL

for FY 2018-19

1 Opening GFA 1260.32

2 Additions to GFA during the year 465.46

3 Closing GFA (1+2) 1725.78


The Commission has considered closing GFA at Rs.1260.32 crore in review for FY

2017-18 and the same is considered as opening GFA for FY 2018-19 and further

updated with the additions to GFA based on capitalisation approved for FY 2018-19

in Table 6.5 above. The opening value of GFA, additions and closing GFA for FY 2018-

19 is as given in the Table below:

Table 6.8: Gross Fixed Assets approved for FY 2018-19

(Rs. Crore)

Sl. No.

Particulars Projected by BGCL for FY

2018-19

Approved for FY 2018-19

1 Opening GFA 1260.32 1260.32

2 Additions to GFA during the year (a+b+c-d) 465.46 428.19

a. Additions during the year 381.87 381.88

b. Interest During Construction (IDC) 72.48 35.20

c. Expenses during construction period capitalised (IEDC) 11.11 11.11

3 Closing GFA (1+2) 1725.78 1688.51



6.6 Depreciation


BGCL has submitted that depreciation is computed in accordance with the

Regulation 73 (2) (a) of the BERC (Terms and Conditions for Determination of Tariff)

Regulations, 2007. The asset-wise depreciation has been computed in accordance

with the depreciation schedule specified in CERC (Terms and Conditions of Tariff)

Regulations, 2014.

Regulation 73 (2) (a) (ii) of the BERC (Terms and Conditions for Determination of

Tariff) Regulations 2007, specifies that “Land is not a depreciable asset and its cost

shall be excluded from the capital cost” and accordingly, no depreciation has been

considered on land. BGCL has projected the depreciation for FY 2018-19 as shown in

the Table below:

Table 6.9: Projected Depreciation for FY 2018-19

(Rs. Crore)

Sl. No.


2018-19

1 Opening GFA 1104.40


3 Less: Value of land 57.59

4 Less: Deductions --

5 Closing GFA (1+2-3-4) 1512.27

6 Average GFA (1+5)/2 1308.34

7 Weighted average rate of depreciation 5.29%

8 Depreciation 69.15


BERC (Terms and Conditions for Determination of Tariff) Regulations 2007,

Regulation 73(2)(a) - Depreciation:

For the purpose of tariff, depreciation shall be computed in the following manner;

(i) the value base for the purpose of depreciation shall be the historical cost of

the asset



(ii) depreciation shall be calculated annually, based on straight-line method over

the useful life of the assets and at rates prescribed by the Central Electricity

Regulatory Commission, from time to time ....

The residual value of the asset shall be considered as 10% and the

depreciation shall be allowed up to a maximum of 90% of the historical

capital cost of the asset. Land is not a depreciable asset and its cost shall be

excluded from the capital cost while computing 90% of the historical cost of

the asset. The historical capital cost of the asset shall include additional

capitalisation on account of foreign exchange rate variation as allowed by

the Central Government/Central Electricity Regulatory Commission.

(iii) On repayment of entire loan, the remaining depreciable value shall be spread

over the balance useful life of the asset.

(iv) Depreciation shall be chargeable from the first year of operation of the asset.

For part of the year, depreciation shall be charged on pro rata basis.

The Commission has arrived at the rate of depreciation of 5.28% for FY 2017-18 in

review and the same is adopted provisionally for FY 2018-19 subject to true up based

on the audited accounts for FY 2018-19.

The Commission has considered closing value of depreciable assets at Rs.1104.29

crore in review for FY 2017-18 and the same is considered as opening depreciable

GFA for FY 2018-19. Addition to GFA and value of land during FY 2018-19 is

considered as projected by the Petitioner. The Commission, accordingly, has

considered opening value of GFA, additions to GFA and closing GFA and depreciation

on assets for FY 2018-19 is given in the Table below:

Table 6.10: Depreciation approved for FY 2018-19

(Rs. Crore)

Sl. No.

Particulars Projected

by BGCL for FY 2018-19


1 Opening GFA 1104.39 1104.29


3 Less: Value of land 57.59 57.59

4 Closing GFA (1+2-3) 1512.26 1474.89

5 Average GFA (1+5)/2 1308.34 1289.59



Sl. No.




6 Weighted average rate of depreciation 5.29% 5.28%


The Commission, accordingly, approves Rs.68.09 crore towards depreciation for FY

2018-19.

6.7 Interest on Loans


BGCL has submitted that interest on loans is projected in accordance with Regulation

73 of BERC (Terms and Conditions for Determination of Tariff Regulations), 2007.

Actual funding pattern of 80:20 Debt : Equity is considered as per Regulation 71 (1)(i)

of BERC Terms and Conditions for Determination of Tariff Regulations, 2007.

BGCL has submitted that entire loan for construction of assets has been taken from

REC and weighted average rate of interest is considered at 10.74% based on actual

loans drawn upto September 2017. The repayment of loan is considered equivalent

to Depreciation allowed for FY 2018-19. BGCL has projected interest on loans for FY


Table 6.11: Projected Interest on loans for FY 2018-19

(Rs. Crore)

Sl. No.


2018-19

1 Opening loan 977.61


3 Repayment 69.15

4 Closing Loan (1+2-3) 1280.84

5 Average Loan (1+4)/2 1129.22

6 Rate of Interest 10.74%

7 Interest Charges (5* 6) 121.25

8 Finance charges --

9 Interest & Finance charges (7+8) 121.25


The Commission has examined the computation of interest on loan projected by the

Petitioner for FY 2018-19.



The Regulation 73 (1) of the BERC (Terms and Conditions for Determination of Tariff)


(a) interest on loan capital shall be computed loan-wise, on the loans arrived at in


(b) In the case of existing projects, the actual debt-equity shall be used for tariff

determination and any expansion thereto shall be governed as per Regulation 71.

(c) ………….

(d) ………….

(e) …………..

(f) In case any moratorium period is availed by the transmission licensee,




The Regulation 71 of BERC (Terms and Conditions for Determination of Tariff)






the satisfaction of the Commission that the deployment of equity more than 30%

was in the interest of general public.

Provided that;






for calculation of interest on loan, Return on Equity, Advance Against Depreciation

and Foreign Exchange Rate Variation”.



A conjoint reading of the above Regulations explicitly specifies that interest shall be

provided on the debt @70% of the project cost. Further, the regulations specify that

if actual equity employed is less than 30%, the actual debt and equity employed shall

be taken for determination of tariff. The Petitioner has considered equity @20% and

debt @80% of the project cost.

The Commission, in view of the above Regulations has considered the debt @80% of

the asset addition during FY 2018-19 (as shown in Table 6.6). The opening loan for FY

2018-19 is considered based on the closing loan approved in review for FY 2017-18

and weighted average rate of interest is considered for FY 2018-19 at the same level

as it has been arrived at 10.08% in the review for FY 2017-18.

The Commission, accordingly, has considered interest on loans for FY 2018-19 as


Table 6.12: Interest on loans approved for FY 2018-19

(Rs. Crore)

Sl. No.


2018-19


1 Opening loan 977.61 974.56


3 Repayment 69.15 68.09

4 Closing Loan (1+2-3) 1280.84 1249.02

5 Average Loan (1+4)/2 1129.22 1111.79

6 Rate of Interest 10.74% 10.08%

7 Interest Charges (5* 6) 121.25 112.07

The Commission accordingly, approves interest on loans at Rs.112.07 crore for FY

2018-19 as detailed in the table above.

6.8 Operation and Maintenance (O&M) Expenses


BSPTCL has submitted that the O&M expenses are projected on actual basis as no

norms were determined by the Commission for FY 2018-19.



The Petitioner has further submitted that it has followed the inflation index (based

on CPI and WPI) methodology considered in Tariff order dated 9.3.2017. For

projection of Employee expenses and Administration & General expenses for FY

2018-19, the Petitioner has adopted the Employee expenses and Administration &

General expenses approved for FY 2017-18 in review as base expenses and further

escalated with inflation index at 3.99% (as deliberated in para 5.8 above) for

inflationary increase for FY 2018-19.


Regulation 73(3) of BERC (Terms and Conditions for Determination of Tariff)


“Norms for operation and maintenance expenses per ckt km and per bay shall be as

under

(e) The Commission shall, for the purpose of fixing normative rates for operation and




(f) The total allowable O&M expenses for a transmission licensee shall be calculated



The Commission in the Tariff Order dated 09.03.2017 had observed that;

“BGCL has filed petition for the first time and the assets are scheduled to be

capitalised during FY 2017-18 and no norms are fixed by the Commission. Hence, the

Commission considers appropriate to follow the methodology adopted for BSPTCL for

determination of O&M expenses may be made applicable for BGCL also as both the

utilities are in transmission business.

The Commission, accordingly, has proposed following inflation index methodology for

for computation of O&M expenses.

INDXn = 0.55*CPIn + 0.45*WPIn



- CPIn is the consumer price index increase for immediate preceding year over

previous year.

- WPIn is the wholesale price index increase for immediate preceding year over

previous year”.

The Commission has elaborately discussed the issue of inflationary indices to be

adopted for projecting O&M expenses for FY 2017-18 and FY 2018-19 in Paragraph

5.7.1. Accordingly, the Commission has adopted rate of escalation at 3.51% for

Employee expenses and A&G expenses for FY 2018-19.

6.8.1 Employee Costs


BGCL has submitted that the employee expenses primarily include costs towards

salaries, dearness allowance, bonus, staff welfare, medical benefits, leave travel and

earned leave encashment and the terminal benefits in the form of pension, gratuity,

etc. BGCL has projected the employee expenses for FY 2018-19 based on the

employee expenses of FY 2017-18 (RE) with escalation of 3.99% for inflationary

increase for FY 2018-19. Further, the Petitioner has considered Rs.1.11 crore towards

Pay revision impact for FY 2018-19.

BGCL has projected the Employee Expenses for FY 2018-19 as given in the Table

below:

Table 6.13: Employee expenses projected for FY 2018-19

(Rs. Crore)

Sl. No


2018-19


2 Indexation 3.99%

3 Add: Inflationary increase (1*2) 0.28

4 Pay revision impact 1.11

5 Total Employee cost (1+3+4) 8.49




The Commission considered the employee cost for FY 2018-19 based on the

employee cost of Rs.7.10 crore considered by the Commission for FY 2017-18 (RE)

and further escalated @ 3.51% for inflationary increase.

The Commission has not considered pay revision impact as projected by the

Petitioner for FY 2018-19 as the same has already been factored in during review of

FY 2017-18. The Commission has, accordingly, considered the employee cost for FY

2018-19 as detailed in the Table:

Table 6.14: Employee Cost approved for FY 2018-19 (Rs. Crore)

The Commission, accordingly, approves employee cost at Rs.7.35 Crore for FY

2018-19.

6.8.2 Repairs and Maintenance (R&M) Expenses


The Petitioner has submitted that at present it is incurring less R&M expenses, as

most of the assets are yet to be capitalised. Once assets are capitalised, BGCL will

have to incur considerable expenses on R&M. The Petitioner requested the

Commission to consider R&M expenses as 2.5% of GFA.

BGCL has projected the R&M expenses for FY 2018-19 as given in the table below:

Table 6.15: Projected R&M expenses for FY 2018-19

(Rs. Crore)

Sl. No.



1 Base R&M expenses 1260.32

2 % on GFA 2.50%



5 R&M on GFA addition (4*2) 5.82

6 Total R&M expenses (3+5) 37.33

Sl. No.







4 Pay revision impact 1.11 --

5 Total Employee cost (1+3+4) 8.49 7.35




The Commission has examined the R&M expenses projected by BGCL. The Regulation 73 (3) of the BERC (Terms and Conditions for Determination of Tariff)

Regulations 2007 specify;

Operation & Maintenance Expenses

Norms for operation & maintenance expenses per Ckt-km and per bay shall be as

under:

(a) The Commission shall, for the purpose of fixing normative rates for operation and


years and fix appropriate rates per Ckt-km of transmission line and per bay. The

norms so fixed for ...... shall be escalated at 4% per annum.

The Commission has not fixed any norms for O&M expenses for transmission

system. The Petitioner has proposed that R&M expenses may be considered as a

percentage on the opening GFA. Further, the Commission in the draft BERC (Multi

Year Transmission Regulations) 2016 has proposed that R&M expense shall be

calculated as percentage (as per the norm determined) of opening GFA. The

Commission concur with the Petitioner’s submission that some ERCs are considering

R&M expenses on a % basis on the opening GFA.

The Petitioner has considered R&M expenses at 2.50% on opening GFA and also on

the additions to GFA during FY 2018-19. The Commission, in absence of R&M norms,

provisionally considers at 2.50% on the opening GFA in line with draft transmission

regulations for providing R&M expenses for FY 2018-19 subject to true up based on

audited accounts.

The Commission has approved opening GFA at Rs.1260.32 crore for FY 2018-19 in

Table 6.8. The Commission, accordingly, considers the R&M expenses as a % basis on

the Opening GFA for FY 2018-19 as given below:



Table 6.16: Repairs & Maintenance Expenses approved for FY 2018-19

(Rs. Crore)

Sl. No.


for FY 2018-19 Approved for

FY 2018-19

1 Opening GFA 1260.32 1260.32

2 % on GFA 2.50% 2.50%

3 R&M on opening GFA (1*2) 31.51 31.51

4 GFA addition during the year 465.46 --

5 R&M on GFA addition (4*2) 5.82 --

6 Total R&M expenses (3+5) 37.33 31.51

The Commission, accordingly, considered R&M expenses at Rs.31.51 crore for FY

2018-19.

6.8.3 Administration and General (A&G) Expenses


BGCL has submitted that Administration and General (A&G) expenses mainly

comprise costs towards rent charges, telephone and other communication expenses,

professional charges, conveyance and travelling allowances and other debits. The

A&G expenses for FY 2018-19 are projected based on the actual A&G expenses of FY

2017-18 (RE) escalated by 3.99% for inflationary increase as given in the Table

below:

Table 6.17: Projected Administration & General Expenses for FY 2018-19 (Rs. Crore)

Sl. No. Particulars Projected by BGCL

for FY 2018-19

1 Base A & G Expenses 2.99

2 Inflationary index % 3.99%

3 Add: Inflationary increase 0.12

4 Net A&G expenses 3.11


The Commission has examined the A&G expenses projected by BGCL.

The Commission has considered the A&G expenses of Rs.2.99 crore of FY 2017-18

approved in review as base A&G expenses and further projected with escalation at

3.51% for inflation indexation, subject to true up based on actual expenses reported

in the audited accounts.



The Commission, accordingly, has considered the A&G expenses for FY 2018-19 as


Table 6.18: Administration & General Expenses approved for FY 2018-19 (Rs. Crore)

Sl. No.


2018-19


1 Base A & G Expenses 2.99 2.99

2 Inflationary index % 3.99% 3.51%

3 Add: Inflationary increase 0.12 0.10

4 A&G expenses 3.11 3.09

The Commission, accordingly, approves Administration and General Expenses at

Rs.3.09 crore for FY 2018-19.

6.8.4 Summary of Operation and Maintenance (O&M) Expenses


BGCL has projected the total O&M expenses for FY 2018-19 as given in the table

below:

Table 6.19: Total O&M expenses projected for FY 2018-19

(Rs. Crore)

Sl. No.


for FY 2018-19


2 R&M expenses 37.33

3 A&G Expenses 3.11

4 O&M expenses 48.93


Based on the analysis, the Commission has considered the O&M expenses for FY

2018-19 as detailed in the table below:

Table 6.20: Total O&M cost approved for FY 2018-19 (Rs. Crore)

Sl. No.


2018-19

Approved for FY

2018-19


2 R&M expenses 37.33 31.51

3 A&G Expenses 3.11 3.09

4 O&M expenses (1+2+3) 48.93 41.95





BGCL has submitted that Debt : Equity ratio of 80:20 is considered in accordance

with the Regulation 71 of BERC (Terms and Conditions for Determination of Tariff)

Regulations, 2007. The return on equity has been computed at 15.5% in accordance

with the BERC (Terms and Conditions for Determination of Tariff) (2nd Amendment)

Regulations, 2014 dated 26.03.2014.

BGCL has projected return on equity for FY 2018-19 as given in the Table below:

Table 6.21: Projected Return on Equity for FY 2018-19 (Rs. Crore)

Sl. No.


2018-19 1 Opening Equity 252.06

2 Addition during the year 93.09

3 Closing Equity (1+2) 345.15

4 Average Equity (1+3)/2 298.61

5 Rate of Return on Equity 15.50%



The Regulation 73 (2) (c) of the BERC Terms and Conditions for Determination of

Tariff Regulations, 2007 specify;

(i) Return on Equity shall be computed on the equity base determined in

accordance with Regulation 71 and shall be @ 14% per annum.

(ii) Equity invested in foreign currency shall be allowed a return upto a prescribed

limit in the same currency and the payment on this account shall be made in

Indian Rupee based on the exchange rate prevailing on the due date of billing.

Explanation:

The premium raised by the transmission licensee while issuing share capital

and investment of internal resources created out of free reserve of the

existing transmission licensee, if any, for funding the project, shall also be

reckoned as paid up capital for the purpose of computing return on equity



provided such premium amount and internal resources are actually utilised

for meeting the capital expenditure of the project and forms part of the

approved financial package. The definition of equity thus would involve all net

worth deployed in the capital of the unit. This shall not include any

revaluation of reserves and subsidies”.




computed on the equity base determined in accordance with Regulation 71 and shall

be @ 15.5% for the projects which are commissioned on and after 01.04.2015”.





Commission may in deserving case consider equity higher than 30% for

purpose of determination of tariff, where the transmission licensee is able to

establish to the satisfaction of the Commission that the deployment of equity

more than 30% was in the interest of general public.

Provided that;

(i) in case a project, if the actual equity employed is less than 30%. The actual

debt and equity employed shall be taken for determination of tariff.

(ii) in case of existing projects the actual debt : equity ratio shall be used for tariff


(2) the debt and equity amount arrived at in accordance with clause (1) shall be

used for calculation of interest on loan, Return on Equity, Advance Against

Depreciation and Foreign Exchange Rate Variation”.

A conjoint reading of the above Regulations explicitly specify that Return on Equity

shall be considered @30% of the project cost. Further, the regulations also specify

that if actual equity employed is less than 30%, the actual equity employed shall be



taken for determination of tariff. The Petitioner has considered equity @20% of the

project cost. The Commission has considered debt equity as given hereunder:

Table 6.22: Debt-Equity Approved for FY 2018-19

Sl. No.

Particulars Approved for

FY 2018-19

1 Capitalisation 428.19

Funding of capitalization

2 a. Equity @20% 85.64

3 b. Loans @80% 342.55

The Commission has considered closing equity of Rs.251.23 crore approved in review

of FY 2017-18 as the opening equity for FY 2018-19. The Commission, in terms of

Regulation 71(1)(i) has considered the equity @20% of the project cost and

computed RoE for FY 2018-19 and the rate of return on equity is considered at

15.50% as specified in Regulation 73 (2) (i) of BERC (Terms and Conditions for

Determination of Tariff) (2nd Amendment) Regulations, 2014 Bihar State Gazette

Notification dated 26th March 2014. The Commission has accordingly considered RoE

for FY 2018-19 as detailed in the Table below:

Table 6.23: Approved Return on Equity for FY 2018-19

(Rs. Crore)

Sl. No.



FY 2018-19

1 Opening Equity 252.06 251.23

2 Addition during the year 93.09 85.64

3 Closing Equity Balance (1+2) 345.15 336.87

4 Average equity (1+3)/2 298.61 294.05

5 Rate of Return on Equity 15.50% 15.50%

6 Return on equity (4*5) 46.28 45.58

The Commission approves the Return on Equity at Rs.45.58 Crore for FY 2018-19 as

detailed in the Table above.





BGCL has submitted that it has arrived at the working capital requirement according

to applicable norms for transmission function provided in the BERC (Terms and

Conditions of Tariff) Regulations, 2007 which are reproduced in the following:




2 Maintenance spares @1% of historical cost of GFA escalated @6% per annum


4 Rate of interest on working capital Base Rate of State Bank of India plus 350 basis points

The rate of interest applied on the proposed working capital is @12.45% as per the

SBI Base Rate. BGCL has projected interest on working for FY 2018-19 as detailed in

the Table below:

Table 6.25: Projected Interest on working capital for FY 2018-19

(Rs. Crore)

Sl. No. Particulars Projected by BGCL for FY

2018-19

1 O&M expenses (1 month) 4.08


13.36

3 Receivables - 2 months 48.98

4 Total working capital 66.42

5 Rate of interest 12.45%





The Regulation 73(4)(ii) of BERC Tariff Regulations, 2007 specify the rate of interest

on working capital shall be equal to Short term PLR of SBI on 1st April of the year. The

Commission has issued amendment to the Regulation 73(4)(ii) (amendment notified

in the Bihar Gazette dated 27.03.2014) that the rate of interest on working capital

will be computed at 350 basis point over and above the SBI Base Rate.



The SBI Base Rate (MCLR) as on 1st April 2017 is at 9.10%. The rate of interest on

working capital to be considered shall work out to 12.60% [SBI Base Rate of 9.10% +

3.50% (350 basis points)] for FY 2018-19.

The maintenance spares are considered at 1% of the opening GFA of Rs.1260.32

crore with escalation at 6% (i.e.Rs.13.36 crore) as per working capital norm in terms

of regulations.

The Commission has computed the working capital and interest on working capital

as per expenses approved at an interest rate of 12.60% for FY 2018-19 as given in the

Table below:

Table 6.26: Approved Interest on working capital for FY 2018-19

(Rs. Crore)

Sl. No.



FY 2017-18



13.36 13.36

3 Receivables - 2 months 48.98 45.93




The Commission approves the interest on working capital at Rs.7.91 Crore for FY

2018-19 as given in the above Table.



BGCL has submitted that it has not received any non tariff income and it is difficult to

envisage any non tariff income and the same will be presented at the time of truing

up.


The Commission has considered submissions of the Petitioner and the non tariff

income shall be considered in truing up for FY 2018-19 based on the audited

accounts.



The Commission, accordingly, considers Non tariff income as ‘Nil’ for FY 2018-19

subject to truing up.

6.12 Annual Fixed charges for FY 2018-19


BGCL has submitted the annual fixed charges or transmission charges arrived at by

aggregating all the expenses viz. Depreciation, Interest on Loans, Interest on working

capital, O&M expenses, Return on Equity.

The summary of annual fixed cost / ARR projections for FY 2018-19 are given in the

Table below:

Table 6.27: Projected Annual Fixed charges / ARR for FY 2018-19

(Rs. Crore)

Sl. No.


2018-19

1 O&M expenses (2+3+4) 48.93


3 R&M expenses 37.33

4 A&G Expenses 3.11

5 Depreciation 69.15

6 Interest on loan capital 121.25



9 Total Fixed cost (1+5+6+7+8) 293.87

BGCL has submitted that the various costs have been estimated in accordance with

the regulatory norms, assumptions and detailed justifications provided in the

petition. The Petitioner has requested the Commission to approve the ARR for FY

2018-19 and resultant transmission charges to be recovered.


The Commission, based on the detailed analysis, has considered the Aggregate

Revenue Requirement/annual fixed charges for FY 2018-19 as detailed in the Table

below:



Table 6.28: Annual Fixed charges /ARR approved for FY 2018-19

(Rs. Crore)

Sl. No.


2018-19


1 O&M expenses (a+b+c) 48.93 41.95

a. Employee cost 8.49 7.35

b. R&M expenses 37.33 31.51

c. A&G Expenses 3.11 3.09


3 Interest on loan capital 121.25 112.07


5 Return on Equity 46.28 45.58

Total Fixed cost (1+2+3+4+5) 293.87 275.59

6.13 Methodology for Recovery of ARR


The Petitioner has requested to recover its Annual Revenue Requirement from

BSP(H)CL in 12 equal monthly installments as per the methodology stipulated in

Tariff Order for FY 2017-18 dated 09.03.2017.

Based on the projected Annual Revenue Requirement for FY 2018-19, BGCL has

proposed to raise bills to BSP(H)CL in 12 equal installments (every month) as shown

below:

Table 6.29: ARR Recovery proposed by the Petitioner for FY 2018-19

(Rs. Crore)

Sl. No.

Particulars

Projected by BGCL for FY2018-19

1 Total Annual Revenue Requirement 293.87

2 Monthly Bill to be raised to BSP(H)CL 24.49


The Commission concur with the methodology for recovery of transmission charges

proposed by the Petitioner which is in accordance with the Transmission Services

Agreement as the same was agreed by the constituent companies.

The Commission, based on the above analysis, has arrived at the Annual Revenue

Requirement/Annual Transmission charges for FY 2018-19 which shall be



recovered from the BSP(H)CL in 12 equal monthly installments as shown below:

Table 6.30: ARR Recovery approved for FY 2018-19

(Rs. Crore)

Sl. No.

Particulars Projected by

BGCL for FY2018-19


1 Annual Revenue Requirement for FY 2018-19 293.87 275.59

2 Add: Trued up Gap for FY 2016-17 -- 0.65

3 Total net revenue requirement (1+2) 293.87 276.24

4 Monthly transmission charges bill to be raised on BSP(H)CL 24.49 23.02

The above approved transmission charges are subject to target availability of 98%

(AC system) as specified in Regulation 68 of BERC (Terms and Conditions for

Determination of Tariff) Regulations 2007 and recovery of the above charges below

the level of target availability shall be on pro-rata basis.



7. Compliance of Directives

7.1 Back Ground

The Commission in its previous tariff Order dated 9th March 2017 has issued some

directives to Bihar Grid Company Limited (BGCL).This chapter deals with the

compliance status of directives and Commission’s observations there on as well as

new directives for compliance and implementation by BGCL.

7.2 Directives issued and status of compliance

The directives issued in the tariff order dated 9th March,2017 and their compliance

by BGCL are dealt below.

7.2.1 Directive 1 : Assets Register The Commission directs BGCL to maintain assets / property register, showing the

details of nature of equipment, value of equipment, details of extent of land,

buildings (office residential etc.) and other civil works and to submit the details

along with the tariff petition to be filed from FY 2018-19 onwards.

Compliance status of the directive:

Assets Register / details up to FY 2016-17 are submitted with the instant Tariff

Petition for FY 2018-19 and enclosed at Annexure–II.


The Petitioner has submitted the asset group/classification wise details i.e. Plant &

Machinery in respect of Hajipur GIS. The equipment-wise details i.e. equipments

available at the substation depicting the value i.e. nature of equipment, year of

installation, location of the equipment, cost of equipment, etc. were not furnished.

The property register should contain all the details of the equipment available at

the location i.e. substation, etc. showing the details of nature of equipment, year of

installation, value, rate of depreciation, depreciation (year on year as well as the

accumulated depreciation), residual value, whether the equipment is in working

condition or not, etc. BGCL is directed to submit the asset register with details as

stated above by end of September 2018.



7.2.2 Directive 2 : Revised Business Plan

Bihar Grid Company Limited is directed to file petition before the Commission for

approval of revised project cost / business plan after the approval of its Board with

full justification for cost increase.

Compliance of the Directive:

The Petitioner is in the process of filing the petition before the Commission for

approval of revised project cost / business plan. Further, the approval of Revised

Cost estimate of Phase –IV Part 1 by Board of Directors of Bihar Grid Company

Limited has been submitted to the Commission vide letter No JV/BGCL/Tariff

/Directive Compliance /1302 Dated 23.05.2017.


The reply of BGCL is noted.

7.2.3 Directive 3 : Details of Programmed works

The Commission directs BGCL to submit the details of programmed works during FY

2017-18 and FY 2018-19 and their tentative commissioning dates to the

Commission by the end of April -2017.


Details of programmed works during FY 2017-18 and FY 2018-19 with their

tentative dates of commissioning is submitted in the Tariff Formats attached with

the Tariff petition for FY 2018-19.


The Commission directs BGCL to submit the actual date of Commissioning of each

element of its transmission systems during FY 2016-17 and FY 2017-18 by end of

June 2018.

The Commission on 28.07.2017 in Case No.5 of 2017 has approved Phase IV Part-II

project amounting to Rs.1688 crore. However, the Petitioner has not included the

cost of works/schemes relating to Phase-IV Part-II projects in the investment plan



proposed for FY 2017-18 and FY 2018-19 in the petition. The programme of starting

and commissioning of these works may be furnished.

7.2.4 Directive 4: Commissioning of Transmission Network

The Commission directs BGCL that they shall programme in advance, energisation

of their transmission lines or equipment, in consultation with BSPTCL, DISCOMS

and concerned generating stations, so that the same can be put in to use

immediately after energisation without any mismatch. The dates of commissioning

of each element of network / equipment shall be reported to the Commission.


The Petitioner has communicated BSPTCL and Discoms the tentative dates of

commissioning of New System time to time so that same can be put into use

immediately after energisation. Tentative dates of Commissioning are also

submitted in the tariff Formats with this Petition.

Commission’s view

The reply of BGCL is noted. The Commission reiterate the directive for FY 2018-19

also.

7.2.5 Directive 5: Energy audit

The Commission directs BGCL to provide appropriate energy meters at all the

interface points so that the transfer of energy into BGCL system and out flow from

BGCL system can be accounted for and the transmission loss in the system can be

properly estimated. Details of such energy audit, on monthly basis, shall be

submitted to the Commission.


The Petitioner has provided the energy meters at all the interface points so that the

transfer of energy into BGCL system and outflow from BGCL system can be

accounted for.



Commission’s view

The Commission directs BGCL to submit the monthly computation of transmission

loss in its system during FY 2017-18 by end of June 2018.

New Directives

Certificate of Assets put to use

1. Benefit of depreciation, interest on loan and Return on capital will accrue to the

Petitioner BGCL only when the assets are capitalised and they are put to use. The

Commission has observed that barring the statement of achievement of CoD, no

specific evidence are added before the Commission to show that the assets which

have achieved CoD are really being used for the consumers benefit. The Petitioner is

directed look into it in future and produce supporting evidence at the time of filing

the Tariff petition.

2. As a corollary to above directives the petitioner BGCL is directed to take appropriate

steps to coordinate its activities with a user entities of its infrastructure (Assets) so

that the assets created are optimally used and burden of unused asset are not

passed on the consumers.

3. It being a new company having not many large number of assets, shall maintain

asset register in a prescribed manner, if not being prepared already, and claimed put

forward in the tariff petition, the supported by it.

Transmission availability certificate

4. The Regulation 68 of the BERC (Terms and Conditions for Determination of Tariff)

Regulations 2007 specifies the target availability for recovery of full transmission

charges for AC system at 98%. The Commission directs the petitioner to furnish

transmission system availability certificate with the bill every month from SLDC to

the Discoms.

O & M Norms to be determined for next MYT control period

5. Regulations 73 (3) of the BERC (Terms and Conditions for Determination of Tariff) Regulations 2007 specifies :

Norms for operation and maintenance expenses per ckt.km and per bay shall be as under:



(a) The Commission shall, for the purpose of fixing normative rates for operation &

maintenance expenses, study the O&M expenses incurred over the last 4 to 5 years and fix appropriate rates per CKt - km of transmission line and per bay. The norms so fixed for 2008-09 shall be escalated at 4% per annum.

(b) The total allowable O&M expenses for a transmission licensee shall be calculated by multiplying the numbers of bays and CKt – km of line length with the applicable norms for O&M expenses per bay and per CKt-km respectively.

The Commission, directs the BGCL to ensure filing of the tariff petition for next MYT control

period i.e. from FY 2019-20 to FY 2021-22 proposing the norms for O&M expenses in

accordance with regulation 73 (3).

Auxiliary consumption and Colony consumption

6. The transmission licensees are obligated under the Regulation to take separate

electric connection from Distribution licensee for use of electricity within the Grid

substation and the electricity charges of such connection shall be booked under

Administrative & General Expenses and shall be a pass through in the tariff. Such

expenses shall not contain any electricity charges towards colony consumption.

The BGCL is directed to furnish the details of auxiliary consumption and colony

consumption in the format prescribed hereunder:

Name of the GSS

Whether metered connection taken to

measure auxiliary consumption, if so, provide details with service connection

number

Annual consumption

and electricity charges towards auxiliary

consumption

Whether separate metered connection

taken to measure colony consumption, if so, provide details

with service connection number

Annual consumption

and electricity charges towards colony

consumption

1 2 3 4 5

Sd/- Sd/- Sd/- (R.K.Choudhary) (Rajeev Amit) (S.K.Negi)

Member Member Chairman



Annexure – I

Bihar Electricity Regulatory Commission (BERC)

Vidyut Bhawan-II, J. L. Nehru Marg, Patna 800 021 Time: 11:00 A.M. Dated: 06th February, 2018 Minutes of the meeting of the State Advisory Committee (SAC) constituted under section

87 of the Electricity Act 2003 held on 06.02.2018 in the Conference Room of the

Commission to discuss on the Tariff petition of NBPDCL, SBPDCL, BSPGCL, BSPTCL , SLDC

and BGCL for FY 2018-19.

1. The meeting of the State Advisory Committee (SAC) was held on 06.02.2017 under the

chairmanship of Sri S. K. Negi, IAS (Retd.), Chairman, BERC and SAC. The list of

participants present in the meeting is enclosed with the minutes.

2. The Chairman welcomed all the members and participants of the meeting and explained

that the State Advisory Committee has been constituted under Section 87 of the

Electricity Act 2003. He also stated that the objectives of this committee is to advise the

Commission on measures, questions of policy relating to electricity supply, matters

related to quality, continuity and extent of services provided by the licensees, protection

of consumers interest, overall standard of performance by utilities etc. He said that

ideally this meeting should be convened more frequently, which could not be done. It

shall be the endeavor of the Commission to conduct more meetings in future. Chairman,

BERC shown his concern about the designated members not attending the meeting and

once again urged all the members to attend to such meeting personally. He explained

that although the agenda of this meeting as circulated is related to the tariff petition for

FY 2018-19 submitted by BSPGCL, BSPTCL, SLDC, BGCL, NBPDCL and SBPDCL, the

members are free to put up any policy matters for discussion which comes under the

purview of the State Advisory Committee.

3. The minutes of last State Advisory Committee meeting was approved by the members.

4. It was stated by the Hon’ble Chairman that the NBPDCL and SBPDCL have sought

significant hike in demand /fixed charges for retail sale of electricity during FY 2018-19.

The Chairman also informed the SAC that the Commission have conducted public

hearings at Sherghati, Sasaram & Rajgir, and will conduct Begusarai, Kathihar,



Madhubani, Supaul, Siwan, Mothihari and Patna. Objections/suggestions on the

petitions shall be considered before finalizing the tariff. It was further stated that the

suggestions of SAC shall also be considered in finalization of the tariff for FY 2018-19.

5. The chairman directed the Petitioners to present their petitions before the SAC.

6. The meeting started as per agenda

1. Confirmation of the Minutes of State Advisory Committee meeting held on

16.02.2017

2. Follow up action on the Minutes of Meeting

3. Comments / Suggestion on the Tariff petition filed by Generation, Transmission and

Distribution of the State

4. Renewable Purchase Obligation (RPO)

5. Tariff Rationalization and Reduction of Cross Subsidy

6. Effect Utilization of Tariff Subsidy on targeted categories of consumers and

introduction of Non-telescopic tariff rates

7. Proposed BERC Regulations for Compensation to victims of Electrical accidents

8. Consumer Awareness & Advocacy

9. Involvement of Self Help Groups (SHGs) for Reduction in T&D Loss and improvement

of collection efficiency

10. Defining a framework (including setting a threshold timing) for developing intrastate

transmission project of competitive basis.

7. Presentation by NBPDCL and SBPDCL:

a. After the presentation, members of Bihar Chamber of Commerce (BCC) and Bihar

Industrial Association (BIA) raised that the DISCOMs have not achieved the target

norms of Distribution loss trajectory approved for FY 2016-17. Similarly they pointed

out that norms related to working capital and return on equity have not been

followed in the true up chapter of the petition as per Regulations of Commission.

DISCOMs however, submitted that distribution loss, Interest on working capital,

return on equity and interest on security deposit are shown as per Regulations and

Norms only



b. Shri. Rajesh K. Mediratta of IEX has enquired about compliance of DISCOMs in

respect of RPO for FY 2017-18 and FY 2018-19 . DISCOMs said that they are

purchasing RE power to meet RPO Obligations.

c. During the discussions it was suggested that DISCOMs are generating bills and they

get government subsidy irrespective of the receipt of non subsidized portion of the

bill from the consumers. It was observed that it promotes inefficiency in billing&

collection system of the organization. Therefore, it is opined that in the interest of

billing and collection efficiency, the government subsidy should be reimbursed to the

DISCOM only when the consumers pay their respective portion of the bill to DISCOM.

8. Presentation by Bihar State Power Transmission Co. Ltd.

After the presentation BCC representative raised their concern regarding huge

Infrastructure development and though the infrastructure is being developed but

not being utilized by DISCOMs resulting into increase of retail tariff of the consumer.

In the light of steep increase in Capex of transmission company which will result in

increase in retail tariff of the Transco, the Chairman BERC advised that no

idle/redundant capacity beyond the approved norms be created. Director BSPTCL

has explained that the infrastructure associated with transmission is being

developed as per guidelines and norms only.

Director (P) SBPDCL, also explained that network is improving and improvement of

infrastructure is required for future purpose.

(i) Renewable Purchase Obligation

Chairman and Members, BERC mentioned that instead of buying certificates they

should purchase RE power and plan to put solar plants and other RE plants in the

state although CUF in Bihar is less than the other states. Chief Engineer, SBPDCL

explained that they are buying solar power to meet RPO. Further, Member, BERC

Shri. Rajeev Amit suggested that DISCOMs should verify month-wise sales &

corresponding RPO and if they find any shortfall in meeting the RPO they should



immediately buy the RE Certificates on monthly basis to meet their RPO and to avoid

likely penal action.

(ii) Purchase of Power as per Merit Order

Members of Bihar Chamber of Commerce has raised that the DISCOMs should follow

merit order dispatch principle for purchase of power. Members, BERC mentioned

that as per last tariff order merit order dispatch principle has been mandated for

purchase of power for FY 2017-18 but till FY 2016-17 it was not mandated in the

tariff order, however the Act and Policy envisaged. Director, SBPDCL submitted that

they are following Merit Order Dispatch principle while purchasing power.

(iii) Tariff Schedule

Members of Bihar Chamber of Commerce and Bihar Industry Association has

suggested that the Fixed charges should be removed and only Energy charges should

be charged. Members, BERC mentioned that two part tariff is applicable all over

India.

The members also raised their concern over differential tariff rates for rural and

urban domestic consumers in the scenario of 24x7hrs electricity supply in rural and

urban areas.

Director, SBPDCL requested to continue the differential tariff for urban and rural.

Member of BCC suggested that HT Tariff should be single part tariff.

(iv) Threshold Limit for Tariff based Competitive Bidding (TBC)

BSPTCL opined that TBC route for transmission loss is not pragmatic. It assured that

they would furnish detailed reason for it.

(v) Consumer Awareness and Advocacy

Shri. Rajesh K. Mediratta suggested launching publicity campaign for consumers.

Member of BCC and BIA also supported it and added that time limit of complaint

redressal should be reduced. Member, BERC Shri. R. K. Choudhary mentioned about

that the feedback received from the consumers with respect to installation of meter,

non- billing, overbillings, transformer overloading, fragile network, theft, safety

concern etc. Such types of complaints have increased many times in view of large



number of connections given in recent past therefore registration and addressal of

such large number of complaints through manual system, toll free number (1912), e-

complaint registration through Discom's website are proving to be inadequate. It is

giving rise to unrest among consumers. In order to address this issue, it was

suggested that an additional and separate dedicated E-enabled centralized

consumer grievances redressal and monitoring system with features of uploading

the relevant supporting documents needs to be created. It will facilitate the timely

resolution of the complaints by Discoms. Also keeping in view the consumer profile

in Bihar, it would be worthwhile to introduce consumer advocacy initiative

highlighting all the options for complaint redressal system as stated above.

Member Sri Rajeev Amit pointed out that during hearings at District levels, it was

complained by consumers that in case of default of payment, their service lines are

not physically disconnected but it is shown disconnected in the ledger and FIR being

lodged giving reason of theft of electricity. He suggested to intimate the consumers

through SMS as and when their service line is reported disconnection to handle such

situation. In case of any false reporting of disconnection, the concerned consumer

will automatically lodge a complaint. The Committee also dwelt on other issues like

further reduction of consumer categories/slabs, targeted subsidy to eligible and

deserving categories, feasibility of transfer of subsidy through DBT route promoting

Open Access in the State, proper and accurate energy forecasting and planning

measures to reduce T&D losses through community involvement like SHGs etc.

Due to paucity of time, discussion on proposed BERC Regulations for Compensation

to Victims of Electrical Accidents could not be held and the same was postponed for

next meeting.

Finally, the Chairman thanked all the Members and officials present in the meeting

for attending the meeting and giving valuable suggestions. It was further stated that

the Commission would consider these suggestions while passing the tariff orders of

the Generation, Transmission, SLDC and Distribution companies.

********



List of participants of the meeting of the STATE ADVISORY COMMITTEE (SAC) held on 06/02/2018 at 11.00 AM.

Sl. No.

Name Designation Organisation

Member of the Committee 1. Shri S.K. Negi Chairman BERC

2. Shri Rajeev Amit Member BERC

3. Shri R.K. Choudhary Member BERC

4. Shri Rajesh Kr. Mediratta Member Indian Energy Exc. Delhi

5. Shri Sanjay Bhartiya Member B.C.C.I.

6. Shri K.P.S Keshri Member BIA

7. Shri Sanjay Kanodia Member BIAESC

8. Shri Abhinav Jindal Member KBUNL

9. Shri Surendra Kumar Member EC Rly, Hajipur

10. Shri Umesh Kr. Singh Member Industry Dept.

11. Miss Kusum Member BREDA

Officer of the Utilities 12. Shri S.K.P. Singh Director (Project) NBPDCL

13. Shri BhaskarSharma Director (Project) BSPTCL

14. Shri Arvind Kumar G.M. (Fin.) BSPGCL

15. Shri Vijay Kumar G.M. (Rev.) NBPDCL

16. Shri PradipMajhi G.M. (P&A) SBPDCL

17. Shri PramodTiwari G.M. BSPTCL

18. Shri H. R. Pandey Chief Engineer (S.O) BSPTCL/ BSPHCL

19. Shri Narendra Kumar Chief Engineer (Com.) SBPDCL

20. Shri S. K. Srivastava Chief Engineer (Com.) NBPDCL

21. Shri C.C. Prasad Addl. G.M. BGCL

22. Shri Ravi Prakash AO, BSPTCL BSPTCL

23. Shri Anup Kumar Sr. Manager SBPDCL

24. Shri Ritesh Kumar EEE/Comm. NBPDCL

25. Shri Purushottam Pd. EEE/Comm. SBPDCL

26. Miss Sudhanshu AEE BSPTCL/ BSPHCL

27. Shri Binod Kumar AEE/Comm. SBPDCL

28. Shri Mukesh Kumar AEE/Tel+Interstate cell

BSPTCL

29. Shri Anurag Hingle Consultant SBPDCL

30. Oisik Mishra RM (ER) Indian Energy Exc. Ltd.

Officer of the BERC 31. Shri Parmanand Singh Secretary BERC

32. Shri Nadeem Ahmad Dy. Dir.(Dist. Tariff) BERC

33. Shri Avinash Kr. Dy. Dir.(Gen.) BERC

34. Shri Pawan Kr. Dy. Dir.(Com.) BERC

35. Shri G. Abhinav Reddy Consultant, ASCI BERC



Annexure – II

List of participants who attended the public hearing at Patna on 22.02.2018

Case No. 33 of 2017

Appearance on behalf BGCL

1. Shri. Rajesh Srivastava Director (Projects), BGCL

2. Shri. Rakesh Prasad GM (Comml), PGCIL, Haryana

3. Shri Rakesh ESE/Trg+IS, BSPHCL & BSPTCL

4. Shri Chandrachoor Pd. AGM (O&M/Comm), BGCL

5. Shri. Bholi Jha DGM (F&A), BGCL

6. Shri. Chandra Mukhopadhyay Manager, BGCL

7. Shri. M.K.Agarwal DGM, PGCIL, Patna

8. Shri. Raman Kumar Manager, PGCIL, Patna

9. Shri. Anand Suman AEE/Inter State, BSPHCL

10. Shri Deepak Kumar AEE (Comm), SBPDCL

11. Shri. Sanjeev Kr. Singh Sr. Manager, ABPS Infra, Mumbai

Appearance on behalf of Stakeholders

1. Shri Sanjay Bhartiya Vice President, Bihar Industries Association, Patna

2. Shri Nand Sharama General Public, Purandarpur, Mithapur, Patna

3. Shri Narendra Kumar Chief Engineer (Com) on behalf of SBPDCL & NBPDCL

4. Shri Dev Mani Singh Domestic Consumer Representative, Mohanpur, Punaichak, Patna



Annexure-A Table 1: Scheme-wise details of Transmission Lines (Rs. Crore)

Sl.no. Scheme

Name of

funding Agency

Source of funding Capital Expenditure Capitalisation

Project Cost

Loan Equity Total Exp.upto FY 2016-

17

FY 2017-

18

FY 2018-

19

Capitalisation upto FY 2016-17

FY 2017-

18

FY 2018-

19

1 132 kV D/C Chapra(New)- Chapra (Old) with ACZR Zebra Conductor REC 16 13 3 16 16

2 220 KV D/C Hazipur-Chapra (new) transmission line with ACSR Zebra conductor

REC 40 32 8 40 40

3 132 kV D/C Chapra(New)- Chapra (new)-Siwan Transmission Line with ACSR Panther

REC 27 21 5 27 27

4 220kv LILO Biharsharif-Bodhgaya 220 kV D/C Line at Gaya(New) REC 11 9 2 11 11

5 LILO OF 132 Kv Bodhgaya-Chandauti At GAYA NEW REC 0 0 0 0 0

6 LILO OF 132 Kv Bodhgaya-Wazirganj S/C Line at Gaya REC 13 10 3 13 13

7 132Kv S?C Gaya-Hulasganj Line (on D?C Tower) REC 4 3 1 4 14

8 220 KV D/C Patna-Khagaul transmission line with HTLS Zebra conductor REC 33 26 7 33 16 33

9 LILO of one circuit of 132 Kv D/C Khagaul-Digha at Bihta with ACSR Panther Conducter

REC 11 9 2 11 11

10 220 kV Gaya (PG)-Gaya (Khizirsarai) Line REC 61 49 12 61 61

11 220 Kv D/C (High Capacity) Sekhpura-Nawada(New) REC 54 43 11 54 54

12 220 Kv Nawada-gaya Line with High Capacity Conductor REC 58 46 12 58 58

13 132 kV D/C Nawada (new)-Nawada (old) with ZEBRA Conductor REC 8 7 2 8 8

14 132 kV S/C (on D/C Towers) Sekhpura New-Biharsharif REC 20 16 4 20 20

15 132 kV D/C Sheikhpura (new)-Sheikpura (old) with Zebra Conductor REC 13 11 3 13 13

16 LILO of 220 kV D/C Begusarai-Biharsharif transmission line at Hatidah (new) with ACSR Zebra Conductor

REC 12 12 7 5 0 12

17 132 kV D/C Hatidah (new)-Hatidah (old) Transmission with ACSR Zebra Conductor

REC 55 55 33 22 0 55

18 220 kV D/C (High Capacity) Jamalpur New-Sekhpura New REC 124 124 29 124

19 LILO of 220 kV D/C Sultangunj-Lakhisarai line at Jamalpur (New) with AAAC PANTHER Conductor

REC 25 25 25

20 132 KV D/C Jamalpur (New)-Jamalpur (Old) with ACSR ZEBRA REC 21 21 21

21 132 KV D/C Sabour (new)-Sabour(old) Transmission line with ACSR Zebra conductor

REC 7 7 7

22 LILO of 132 kV D/C Kahalgaon-Sulthanganj at Sabour (New) with AAAC REC 10 10 10



Sl.no. Scheme

Name of

funding Agency


Project Cost

Loan Equity Total Exp.upto FY 2016-

17

FY 2017-

18

FY 2018-

19


FY 2017-

18

FY 2018-

19

Panther Conductor

23 220 kV (High capacity) Sabour (new)-Jamalpur (new) transmission line with HTLS Zebra Conductor

REC 64 64 64

Total 687 550 137 687 574 86 27 0 539 149

Table 2: Scheme wise details of Substations (Rs. Crore)

Sl.no. Scheme

Name of

funding Agency


Project Cost

Loan Equity Consumer

Contribution Grant Total

Exp.upto FY 2016-

17

FY 2017-18

FY 2018-19


FY 2017-

18

FY 2018-

19

1 CHAPRA GIS REC 86 69 17 86 0 86

2 GAYA GIS REC 121 97 24 121 1 112 8

3 SABOUR GIS REC 83 66 17 83 41 1 82

4 JAMALPUR GIS REC 91 72 18 91 1 75 14

5 SEKHPURA GIS REC 84 67 17 84 1 70 13

6 NAWADA GIS REC 91 73 18 91 1 75 15

7 HATIDAH GIS REC 88 71 18 88 50 38 1 87

EXTENSION OF BSPTCL(OLD) SUBSTATION

0 0

1 132/33 kV SIWAN REC 3 3 1 3 3

2 132/33 kV CHAPRA REC 9 8 2 9 9

3 220/132 kV HAZIPUR REC 42 34 8 42 42 42

4 400/200 kV GAYA REC 8 6 2 8 8

5 132/33 Kv HULASGANJ REC 2 1 0 2 2

6 400/200 Kv PATNA REC 7 6 1 7 7

7 200/132 Kv khagaul (GIS) REC 19 15 4 19 19

8 132/33 Kv SABOUR REC 4 3 1 4 4

9 132/33 Kv JAMALPUR REC 4 3 1 4 4

10 132/33 Kv B.SARIF REC 2 2 0 2 2



Sl.no. Scheme

Name of

funding Agency


Project Cost

Loan Equity Consumer

Contribution Grant Total

Exp.upto FY 2016-

17

FY 2017-18

FY 2018-19


FY 2017-

18

FY 2018-

19

11 132/33 Kv SEIKHPURA REC 3 2 1 3 3

12 132/33 Kv NAWADA REC 3 3 1 3 3

13 132/33 Kv HATIDAH REC 4 3 1 4 4

14 220/132/33 Kv BIHTA REC 4 3 1 4 4

Total 760 608 152 0 0 760 631 91 38 49 478 233

Table 3: Summary of Transmission Lines and Sub-Stations (Rs. Crore)

Sl. no.

Scheme

Name of

funding Agency


Project Cost Loan Equity

Exp. upto FY 2016-17

FY 2017-18

FY 2018-19


FY 2017-18

FY 2018-19

1 Transmission Line REC 687.10 549.68 137.42 574.17 86.00 26.94 0.00 538.53 148.57

2 Sub-stations REC 759.60 607.68 151.92 630.65 90.69 38.25 48.74 477.56 233.30

3

Contingency @ 3% of Project cost REC 43.40 0.22 0.22

Total 1,490.10 1,157.36 289.34 1,205.05 176.69 65.19 48.97 1,016.09 381.87



Documents

Bihar Electricity Regulatory Commission · BERC Bihar Electricity Regulatory Commission BGCL Bihar Grid Company Limited BSPHCL Bihar State Power (Holding) Company Limited BSPTCL Bihar