Petition of the CERC (Conduct of Business) and (Terms and Conditions of Tariff) Regulations for determination of “Northern Region System Strengthening Scheme-III” – EQ

Summary:

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**1. Case Overview**
– **Petitioner:** Power Grid Corporation of India Limited (PGCIL)
– **Purpose:** True-up of transmission tariff for the 2019-24 period (under 2019 Tariff Regulations) and determination of tariff for the 2024-29 period (under 2024 Tariff Regulations).
– **Project:** “Northern Region System Strengthening Scheme-III” (Combined Assets in the Northern Region).
– **Respondents:** 15 beneficiaries including state power utilities (UPPCL, Ajmer VVNL, PSPCL, HVPN, BSES, TPDDL, etc.) and others.

**2. Assets Covered (The “Combined Assets”)**
The petition covers multiple transmission elements consolidated into three main assets:
– **Asset-I:** 50 MVAr Bus Reactor at Hissar; LILO of 400 kV Moga-Hissar Line; ICT-I at Fatehabad; upstream system including Malerkotla-Ludhiana-Jalandhar lines.
– **Asset-II:** ICT-I and ICT-II along with associated bays at Ludhiana Substation.
– **Asset-III:** 315 MVA, 400/220 kV ICT-II at Fatehabad Substation.

**3. Key Financial & Tariff Outcomes**

– **A. Capital Cost:**
– **Opening Cost (as on 1.4.2019):** ₹31,630.64 Lakh (approved in previous order).
– **Additional Capital Expenditure (ACE) 2019-24:** ₹454.19 Lakh (allowed for enhanced land payment at Fatehabad Substation).
– **Closing Cost (as on 31.3.2024):** ₹32,084.83 Lakh.
– **Projected ACE (2024-29):** NIL (no additional capitalization claimed).

– **B. Trued-Up Annual Fixed Charges (AFC) – 2019-24 Period (₹ in Lakh):**
– **2019-20:** ₹5,180.39
– **2020-21:** ₹5,100.44
– **2021-22:** ₹3,968.78
– **2022-23:** ₹3,969.34
– **2023-24:** ₹3,981.53
– *Note: The sharp drop from 2021-22 onwards is due to the assets completing 12 years of life, after which depreciation is spread over the remaining useful life.*

– **C. Determined Annual Fixed Charges (AFC) – 2024-29 Period (₹ in Lakh):**
– **2024-25:** ₹3,632.29
– **2025-26:** ₹3,652.41
– **2026-27:** ₹3,677.07
– **2027-28:** ₹3,705.29
– **2028-29:** ₹3,744.02

**4. Key Allowed Components (Methodology)**

– **Debt-Equity Ratio:** Maintained at **70:30** as per regulations.
– **Depreciation:**
– Calculated via Straight Line Method (SLM).
– Since the assets completed 12 years of life as of 1.4.2021, the remaining depreciable value was spread over the balance useful life.
– **Return on Equity (RoE):**
– Base Rate: **15.50%** .
– Grossed-up Rate (Pre-tax): **18.782%** (considering MAT rate of 17.472%).
– **Interest on Loan (IoL):** Calculated based on the weighted average rate of interest (WAROI) of the actual loan portfolio (ranging from ~8.29% to 9.22%).
– **Operation & Maintenance (O&M) Expenses:** Allowed as per the normative rates specified in the Tariff Regulations for transmission lines, bays, ICTs, and reactors.
– **Interest on Working Capital (IWC):** Calculated at rates based on SBI 1-year MCLR + 350 bps (2019-24) or +325 bps (2024-29).

**5. Important Directions & Future Claims**

– **Recovery of Charges:**
– Tariff to be recovered monthly as per CERC Sharing Regulations (2020).
– **License Fee & RLDC Fees:** Allowed to be recovered separately from beneficiaries.
– **Filing Fee & Publication Expenses:** Reimbursable by beneficiaries.

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