In the matter of CERC (Conduct of Business) and (Terms and Conditions of Tariff) Regulations for Truing up and determination of the transmission tariff under “System Strengthening-XXIV” in the Southern Region – EQ

Summary:

—

## **1. Assets Covered (Combined Asset)**

| Asset | Description | COD | Time Overrun (condoned) |
| :— | :— | :— | :— |
| **Asset-A** | LILO of Kurnool–Thiruvalam 765kV D/C line + 765/400kV GIS substation at Cuddapah (2×1500 MVA ICT + 2×240 MVAR bus reactors) | 25.10.2018 | 106 days |
| **Asset-B** | 400kV D/C line from Cuddapah GIS to LILO point of NP Kunta (Cuddapah–Hindupur line) + bays at Cuddapah | 04.08.2018 | 24 days |
| **Asset-C** | 400kV D/C line from LILO point (NP Kunta) to Hindupur substation + 2 bays + 2×80 MVAR switchable line reactors at Hindupur | 12.10.2018 | 93 days |

– **Investment Approval (2016):** ₹1,45,547 lakh (incl. IDC ₹8,850 lakh)
– **All time overruns condoned** by CERC in earlier order (Petition No. 257/TT/2018)

—

## **2. Truing-up for 2019–24 Tariff Period (₹ in lakh)**

### **Approved Trued-up Annual Fixed Charges (AFC)**

| Component | 2019–20 | 2020–21 | 2021–22 | 2022–23 | 2023–24 |
| :— | :— | :— | :— | :— | :— |
| Depreciation | 6,517.65 | 6,657.53 | 6,734.85 | 6,757.30 | 6,761.61 |
| Interest on Loan | 6,307.85 | 5,507.62 | 5,010.93 | 4,759.59 | 4,498.34 |
| Return on Equity (RoE) | 6,995.29 | 7,145.15 | 7,228.29 | 7,252.65 | 7,257.36 |
| O&M Expenses | 2,286.99 | 2,366.52 | 2,450.07 | 2,537.80 | 2,626.35 |
| Interest on Working Capital | 397.73 | 367.88 | 341.79 | 342.44 | 391.27 |
| **Total AFC** | **22,505.51** | **22,044.69** | **21,765.93** | **21,649.78** | **21,534.93** |

### **Key Adjustments vs. Earlier Orders**

– **Opening Capital Cost (1.4.2019):** ₹1,22,559.98 lakh (as per earlier review order)
– **Additional Capital Expenditure (ACE) 2019–24 approved:** ₹6,295.65 lakh (actual payments, not estimates)
– **Closing Capital Cost (31.3.2024):** ₹1,28,855.63 lakh
– **Debt:Equity** maintained at **70:30**
– **RoE grossed up** using MAT rate of **17.472%** → pre-tax RoE **18.782%**
– **O&M** – no material change from earlier approval
– **IWC** – recalculated using SBI 1-year MCLR + 350 bps (ranged 10.5%–12.05%)

> **Difference vs. PGCIL claim:** Minor (₹0.02–0.05 lakh per year) – largely approved as claimed.

—

## **3. Determination for 2024–29 Tariff Period (₹ in lakh)**

### **Approved Annual Fixed Charges (AFC)**

| Component | 2024–25 | 2025–26 | 2026–27 | 2027–28 | 2028–29 |
| :— | :— | :— | :— | :— | :— |
| Depreciation | 6,957.01 | 7,125.32 | 7,125.90 | 7,127.22 | 7,103.26 |
| Interest on Loan | 4,150.18 | 3,768.27 | 3,196.10 | 2,653.56 | 2,120.53 |
| Return on Equity | 7,448.12 | 7,635.74 | 7,636.19 | 7,637.10 | 7,637.55 |
| O&M Expenses | 1,721.25 | 1,812.56 | 1,905.81 | 2,005.34 | 2,114.14 |
| Interest on Working Capital | 350.42 | 364.53 | 359.91 | 355.21 | 352.33 |
| **Total AFC** | **20,626.98** | **20,706.42** | **20,223.91** | **19,778.43** | **19,327.81** |

### **Key Inputs for 2024–29**

– **Opening Capital Cost (1.4.2024):** ₹1,28,855.63 lakh (trued-up from previous period)
– **ACE approved during 2024–29:** ₹6,691.75 lakh (mainly balance payments & SCADA upgrade)
– **Closing Capital Cost (31.3.2029):** ₹1,35,547.38 lakh
– **Debt:Equity** continues at **70:30**
– **RoE base rate:** 15.50% (pre-tax gross-up at 17.472% MAT → 18.782%)
– **O&M norms** as per 2024 Regulations (GIS bays @ 0.7× normal bay rates)
– **IWC rate:** 11.90% (2024–25) and 12.25% (2025–29) = SBI 1-year MCLR + 325 bps
– **SCADA upgrade at Cuddapah** (Windows 7 obsolescence, cyber security compliance) allowed under Regulation 25(2)(a) – ₹16.09 lakh each in FY27 & FY28.

—

## **4. Key Business & Regulatory Decisions**

| **Issue** | **CERC Decision** |
| :— | :— |
| **MAT vs. normal tax for RoE** | MAT rate (17.472%) used for grossing up; annual truing-up on actual tax paid. |
| **SCADA upgradation** | Allowed as additional capitalisation (obsolescence of technology). |
| **CTUIL fees & charges** | PGCIL to bear & recover as additional O&M through **separate petition** (Reg. 99 of 2024). |
| **Security expenses** | Not allowed now; **separate consolidated petition** permitted for 2019–24 & 2024–29. |
| **Insurance expenses** | Not allowed now; separate petition after prudence check. |
| **Capital spares (>₹10 lakh each)** | Separate petition; Petition No. 45/MP/2024 already filed for 2019–24. |
| **License fee & RLDC charges** | Allowed to be recovered directly from beneficiaries. |
| **GST on transmission** | Not allowed now (not levied currently); premature prayer. |
| **Filing fee & publication expenses** | Allowed to be recovered from beneficiaries. |
| **Sharing of charges** | As per 2020 Sharing Regulations; monthly billing. |

—

For more information please see below link: