In the matter of Approval of the CERC (Conduct of Business) and (Terms and Conditions of Tariff) Regulations for truing up and determination of transmission tariff for “Combined asset under URI- II HEP Transmission System” in the Northern Region – EQ

Summary:

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### **1. Regulatory Outcome**

* CERC has **approved truing-up of transmission tariff for FY 2019-24** and **determined tariff for FY 2024-29**.
* Applicable to **Combined Asset under URI-II HEP Transmission System** in the **Northern Region**.
* Order dated **5 December 2025**.

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### **2. Project & Asset Overview**

* **Asset Owner:** Power Grid Corporation of India Ltd. (PGCIL)
* **System Covered:** URI-II HEP Transmission System
* **Combined Asset Components:**

* 400 kV S/C Uri-I – Uri-II Interconnector Line
* 400 kV S/C Uri-II – Wagoora Transmission Line
* 400 kV, 80 MVAR Bus Reactor at Kishenpur
* **Effective COD:** January 2012

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### **3. Capital Cost Position**

* **Approved Capital Cost as on 31.03.2019:** ₹268.76 Cr
* **Additional Capitalisation (2019-24):** Nil
* **Approved Capital Cost as on 31.03.2024:** ₹268.76 Cr
* **Approved ACE for 2024-25:** ₹0.21 Cr (spillover of previously approved liability)
* **Projected Capital Cost as on 31.03.2029:** ₹268.97 Cr

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### **4. Capital Structure (Normative)**

* **Debt–Equity Ratio:** 70:30
* **Debt Component (2024-29):** ₹188.28 Cr
* **Equity Component (2024-29):** ₹80.69 Cr
* Structure continued as per previous tariff block regulations.

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### **5. Trued-Up Annual Fixed Charges (FY 2019-24)**

Key cost components approved after prudence check:

* **Depreciation:** ~₹14.03 Cr annually
* **Interest on Loan:** Declining trend from ₹7.34 Cr to ₹2.30 Cr
* **Return on Equity:** ₹15.14 Cr per year
* **O&M Expenses:** Revised downward due to correct asset classification
* **Interest on Working Capital:** Allowed as per SBI MCLR norms

**Total AFC Range:**

* From **₹38.14 Cr (FY20)** to **₹33.18 Cr (FY24)**

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### **6. Key Regulatory Adjustments (2019-24)**

* **O&M Expenses reduced** as one transmission line was reclassified from D/C to S/C.
* **MAT-based RoE allowed** at effective tax rate of **17.472%**.
* **No additional capitalization allowed** during 2019-24.
* Inventory adjustment issue raised by UPPCL was **resolved and accepted**.

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### **7. Approved AFC for FY 2024-29**

* **Annual Fixed Charges decline gradually** due to reduced loan outstanding.
* **AFC Range:**

* ₹22.08 Cr (FY25)
* ₹21.00 Cr (FY29)
* **Major cost drivers:** RoE and depreciation.
* **Interest on loan sharply reduces** over the period.

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### **8. Tax & Return on Equity Treatment**

* RoE allowed at **15.5% base rate**, grossed-up to **18.782%**.
* MAT regime applied consistently across tariff blocks.
* Any future under- or over-recovery to be **adjusted year-wise**.

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### **9. Beneficiary & Billing Implications**

* Charges applicable to **Northern Region beneficiaries** including DISCOMs, Railways, and utilities.
* **GST, RLDC charges, licence fees** allowed to be recovered separately as applicable.
* Tariff recovery strictly under **CERC Tariff Regulations 2019 & 2024**.

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### **10. Strategic & Commercial Significance**

* Ensures **tariff continuity and regulatory certainty** for an ageing but critical transmission asset.
* Confirms **limited future capex exposure**, with stable cash flows.
* Reinforces regulatory discipline on **O&M efficiency and capital prudence**.
* Positive signal for **long-term lenders and system planners**.

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