In the matter of CERC (Conduct of Business) and (Terms and Conditions of Tariff) Regulations at Tuticorin-II GIS in the Southern Region – EQ

Summary:

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**1. Overview of the Petition**
– **Petitioner:** Power Grid Corporation of India Limited (PGCIL).
– **Purpose:**
1. **Truing-up** of Annual Fixed Charges (AFC) for the 2019-24 tariff period (based on 2019 Tariff Regulations).
2. **Determination** of AFC for the 2024-29 tariff period (based on 2024 Tariff Regulations).
– **Asset in Question:**
– **Asset Name:** 01 No. 230 kV line bay at Tuticorin-II GIS Pooling Station.
– **Project:** “Implementation of 1 No. 230 KV Bay at Tuticorin-II GIS PS” in the Southern Region.
– **Date of Commercial Operation (COD):** 19.08.2022 (approved under Regulation 5(2) of the 2019 Tariff Regulations due to delayed generation connectivity).
– **Respondents:** State power distribution companies and electricity departments from Tamil Nadu, Kerala, Goa, Pondicherry, Andhra Pradesh, Telangana, Karnataka, as well as NTPC Limited and NTPC Green Energy Limited (NGEL).

**2. Key Background Facts**
– **Investment Approval:** Granted on 26.10.2021 with an estimated cost of ₹765 lakh (including IDC of ₹17 lakh).
– **Time Overrun:** The asset was commissioned 26 days behind its Scheduled COD (24.07.2022).
– **CERC Finding (from previous order):** The entire 26-day time overrun was **not condoned**. Consequently, the Interest During Construction (IDC) and Incidental Expenditure During Construction (IEDC) for that period were disallowed.
– **Respondent Participation:** None of the respondents filed any reply or comments despite notice.

**3. Truing-up of Tariff for the 2019-24 Period (Looking Backward)**
This section details the final adjustments to the tariff for the previous control period, covering only FY 2022-23 (pro-rata from COD) and FY 2023-24.

– **Capital Cost as on COD:**
– PGCIL claimed a cost of **₹357.95 lakh**.
– After disallowing IDC (₹0.82 lakh) and IEDC (₹4.36 lakh) related to the un-condoned time overrun, and adjusting for undischarged IDC, the approved cost as on COD was **₹357.13 lakh**.
– **Additional Capital Expenditure (ACE):**
– PGCIL claimed ACE of ₹27.95 lakh for 2022-23 and ₹24.01 lakh for 2023-24 for discharging liabilities to the contractor (M/s Linxon India Pvt Ltd).
– **CERC Approval:** The claims were allowed, totaling **₹53.09 lakh** for the period, including a small IDC discharge component.
– **Final Capital Cost (as on 31.3.2024):** The trued-up capital cost at the end of the period was approved as **₹410.22 lakh**.
– **Return on Equity (RoE):**
– PGCIL claimed RoE based on Minimum Alternate Tax (MAT) rates.
– **CERC Decision:** The Commission allowed RoE to be grossed up using the notified MAT rates (17.472%, inclusive of surcharge and cess), resulting in a grossed-up RoE of approximately **18.78%**.
– **Other Components:** Depreciation, Interest on Loan (IoL), O&M Expenses, and Interest on Working Capital (IWC) were approved with minor adjustments based on actuals and normative rates.
– **Final Trued-up AFC:** The approved annual charges for the asset were **₹51.53 lakh** (pro-rata for 225 days in 2022-23) and **₹88.06 lakh** (for 2023-24).

**4. Determination of Tariff for the 2024-29 Period (Looking Forward)**
This section sets the tariff for the next five years.

– **Opening Capital Cost:** Based on the trued-up value, the opening capital cost as on 1.4.2024 was set at **₹410.22 lakh**.
– **Projected Additional Capital Expenditure (ACE):**
– PGCIL projected a significant ACE of **₹272.15 lakh** for FY 2024-25.
– **Justification:** This is for discharging outstanding liabilities to the contractor (M/s Linxon India Pvt Ltd. – ₹222.15 lakh) and for miscellaneous civil works (₹50.00 lakh) for work executed before the cut-off date.
– **CERC Decision:** The claim was **allowed under Regulation 24(1)(a)** of the 2024 Tariff Regulations, but **subject to truing-up** at the end of the period based on actual payments.
– **Revised Capital Cost:** With this ACE, the capital cost is projected to rise to **₹682.37 lakh** by 31.3.2029.
– **Depreciation Calculation:**
– The Weighted Average Rate of Depreciation (WAROD) is applied. The rate declines slightly over the period from 6.20% to 5.58% as the asset ages.
– Approved depreciation ranges from **₹33.86 lakh** in 2024-25 to **₹38.05 lakh** in 2028-29.
– **Return on Equity (RoE):**
– A base rate of **15.50%** was applied, grossed up with the MAT rate of 17.472%, resulting in an allowed pre-tax RoE of approximately **18.78%** for the period.
– Approved RoE is **₹30.78 lakh** in 2024-25, rising to **₹38.45 lakh** for subsequent years due to the large equity infusion from the ACE.
– **O&M Expenses:** These were calculated strictly based on the normative rates prescribed in Regulation 36 of the 2024 Tariff Regulations for a 220 kV GIS bay. Approved O&M increases gradually from **₹14.47 lakh** in 2024-25 to **₹17.75 lakh** in 2028-29.
– **Final Approved AFC:** The total annual transmission charges for the 2024-29 period were approved as follows:
– **2024-25:** ₹105.96 Lakhs
– **2025-26:** ₹125.92 Lakhs
– **2026-27:** ₹124.10 Lakhs
– **2027-28:** ₹122.40 Lakhs
– **2028-29:** ₹117.56 Lakhs

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