In the matter of the CERC (Conduct of Business) and (Terms and Conditions of Tariff) Regulations for “Transmission System associated with Vindhyachal-V (500 MW) Project of NTPC (Part A)” in the Western Region – EQ

Summary:

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### 1. Background of the Asset

– **Petitioner:** Power Grid Corporation of India Limited (POWERGRID).
– **Respondents:** Distribution licensees and power departments in the Western Region (beneficiaries), including MPPMCL, MSEDCL, GUVNL, and NTPC Limited.
– **Investment Approval:** Granted by POWERGRID’s Board on February 16, 2015, at an estimated cost of ₹6673.00 lakh (including IDC of ₹406.00 lakh) at October 2014 price levels.
– **Scope of Work:** Installation of 1×1500 MVA, 765/400 kV ICT at Vindhyachal Pooling Station, including associated transformer bays.
– **Previous Orders:** Tariff was previously allowed from COD to 31.3.2019 (Petition No. 85/TT/2017) and trued-up for 2014-19 and determined for 2019-24 (Petition No. 21/TT/2020).

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### 2. Truing-Up of Tariff for the 2019-24 Tariff Period

Truing-up involves adjusting the tariff based on actual expenditure versus the projections made at the beginning of the tariff period.

#### A. Capital Cost and Additional Capital Expenditure (ACE)

| Parameter | Details |
| :— | :— |
| **Opening Capital Cost (as on 1.4.2019)** | ₹5513.37 lakh (adopted from previous order) |
| **ACE Claimed (2019-24)** | ₹150.47 lakh (actuals) |
| **ACE Allowed (2019-24)** | **₹150.47 lakh** (under Reg. 24(1)(a) and 25(1)(d) of 2019 Tariff Regulations) |
| **Closing Capital Cost (as on 31.3.2024)** | **₹5663.84 lakh** |

– **ACE Details:** The expenditure was primarily for discharging liabilities to the contractor (M/s GE T&D) for works executed prior to the cut-off date. The Commission allowed the actual expenditure of ₹150.47 lakh.

#### B. Debt-Equity Ratio (as on 31.3.2024)
– **Debt:** ₹3964.69 lakh (70%)
– **Equity:** ₹1699.15 lakh (30%)

#### C. Annual Fixed Charges (AFC) Approved after Truing-Up (₹ in lakh)

| Particulars | 2019-20 | 2020-21 | 2021-22 | 2022-23 | 2023-24 |
| :— | :— | :— | :— | :— | :— |
| Depreciation | 294.98 | 298.91 | 299.01 | 299.05 | 299.05 |
| Interest on Loan | 250.28 | 222.91 | 199.43 | 181.36 | 163.96 |
| Return on Equity | 314.79 | 318.99 | 319.10 | 319.13 | 319.13 |
| O&M Expenses | 813.66 | 841.88 | 871.68 | 903.09 | 934.59 |
| Interest on Working Capital | 48.39 | 46.08 | 43.79 | 44.75 | 52.27 |
| **Total AFC** | **1722.09** | **1728.77** | **1733.00** | **1747.37** | **1768.99** |

– **Observation:** The approved trued-up AFC is marginally different from the projections made in the 2021 order, primarily due to actual ACE and interest rate variations.

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### 3. Determination of Tariff for the 2024-29 Tariff Period

#### A. Opening Capital Cost (as on 1.4.2024)
– The trued-up capital cost of **₹5663.84 lakh** as on 31.3.2024 is adopted as the opening cost for the new tariff period.
– **ACE for 2024-29:** Claimed as ‘NIL’ and approved as such.

#### B. Debt-Equity Ratio (as on 1.4.2024)
– Maintained at the same level: 70:30 (Debt: ₹3964.69 lakh; Equity: ₹1699.15 lakh).

#### C. Annual Fixed Charges (AFC) Approved for 2024-29 (₹ in lakh)

| Particulars | 2024-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 |
| :— | :— | :— | :— | :— | :— |
| Depreciation | 299.05 | 296.65 | 296.38 | 296.38 | 296.38 |
| Interest on Loan | 141.38 | 118.51 | 95.86 | 74.52 | 56.20 |
| Return on Equity | 319.13 | 319.13 | 319.13 | 319.13 | 319.12 |
| O&M Expenses | 463.87 | 488.59 | 513.50 | 540.13 | 569.96 |
| Interest on Working Capital | 31.29 | 32.93 | 33.69 | 34.49 | 35.58 |
| **Total AFC** | **1254.71** | **1255.82** | **1258.56** | **1264.65** | **1277.25** |

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### 4. Key Financial and Regulatory Determinations

#### A. Return on Equity (RoE)
– **Base Rate:** 15.50% (as per regulations for transmission systems).
– **Tax Rate:** The Petitioner is under the MAT (Minimum Alternate Tax) regime. The effective tax rate considered for grossing up RoE is **17.472%** (inclusive of surcharge and cess) for both tariff periods.
– **Grossed-up RoE:** Calculated as 15.50% / (1 – 0.17472) = **18.782%** .

#### B. Interest on Loan (IoL)
– Calculated based on the actual weighted average rate of interest (WAROI) of POWERGRID’s loan portfolio.
– The Commission allowed the claimed rates, noting that any changes due to floating rates would be adjusted at the time of truing-up.

#### C. Operation & Maintenance (O&M) Expenses
– Allowed strictly as per the normative rates specified in the respective Tariff Regulations (2019 and 2024) for bays, transformers, and lines. No deviations were permitted.

#### D. Interest on Working Capital (IWC)
– Calculated based on normative components (one month’s O&M, 15% of O&M for spares, and 45 days’ receivables).
– Interest rate considered: SBI 1-year MCLR plus 350 bps (for 2019-24) and plus 325 bps (for 2024-29), as per regulations.

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### 5. Other Allowances and Directions

| Claim | Commission’s Decision |
| :— | :— |
| **Filing Fee & Publication Expenses** | Allowed to be recovered directly from beneficiaries as per Regulation 94(1) of the 2024 Tariff Regulations. |
| **CTUIL Fees and Charges** | Permitted POWERGRID to bear these expenses and recover them as additional O&M through a separate petition, as per Regulation 99 of the 2024 Tariff Regulations. |
| **License Fee & RLDC Fees** | Allowed to be recovered separately from beneficiaries. |
| **Security Expenses, Capital Spares (>₹10 lakh), & Insurance** | The Petitioner was allowed to file a **single consolidated petition** for these items on an estimated basis, with actuals to be trued up later (as per Regulation 36(3)(d) of the 2024 Tariff Regulations). |
| **GST on Transmission Charges** | The Commission noted the prayer but did not specifically rule, as it is subject to future government levies. |

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