Petition of the CERC (Conduct of Business) and (Terms and Conditions of Tariff) Regulations for Truing up and determination of the transmission tariff with System Strengthening for Western and Northern Region – EQ
Summary:
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#### 1. Purpose of the Petition
This petition was filed by POWERGRID for two primary purposes regarding a set of transmission assets (“the Combined Assets”):
1. **True-up of Tariff (2019-24):** To reconcile the provisional transmission tariffs approved for the 2019-24 period with the actual audited costs incurred by the company.
2. **Determination of Tariff (2024-29):** To set the final transmission tariffs for the upcoming regulatory period (2024-29).
#### 2. Assets Covered
The order covers four specific transmission assets, which are line bays and reactors associated with the system strengthening common for the Western and Northern Regions:
– **Asset 1 & 2:** 765 kV line bays and reactors at the Jabalpur Pooling Substation and Bina Substation for the Jabalpur-Bina line.
– **Asset 3 & 4:** 765 kV line bays and reactors at the Jabalpur and Dharamjaygarh Substations for the Dharamjaygarh-Jabalpur transmission lines.
#### 3. Project Financial Overview
– **Original Investment Approval:** ₹21,378 Lakhs (based on 2011 price levels).
– **Revised Cost Estimate (RCE):** ₹24,341 Lakhs (approved in 2016).
– **Final Trued-up Capital Cost (as on 31.03.2024):** ₹20,469.10 Lakhs.
#### 4. Key Business Outcomes: True-up (2019-24)
The Commission approved the trued-up Annual Fixed Charges (AFC) for the 2019-24 period. These charges represent the revenue POWERGRID is entitled to recover from the beneficiaries. The key components include:
– **Depreciation:** Allowed as per regulatory norms, totaling approximately ₹1,080 Lakhs per year.
– **Interest on Loan (IoL):** Calculated based on the actual weighted average interest rate of POWERGRID’s loan portfolio, decreasing over the period from ₹848.95 Lakhs in 2019-20 to ₹494.88 Lakhs in 2023-24.
– **Return on Equity (RoE):** Grossed up to account for Minimum Alternate Tax (MAT). The allowed pre-tax RoE rate was **18.782%** for all years, based on a base rate of 15.50% and the applicable MAT rate.
– **Operation & Maintenance (O&M) Expenses:** Allowed based on normative rates specified in the regulations (e.g., ₹45.01 Lakh per bay in 2019-20), escalating annually.
– **Total Trued-up AFC:** Ranged from **₹3,551.29 Lakhs** in 2019-20 to **₹3,254.95 Lakhs** in 2023-24, reflecting the repayment of loan principal.
#### 5. Key Business Outcomes: Tariff Determination (2024-29)
The Commission also set the tariffs for the new control period.
– **Capital Cost:** The opening capital cost as of April 1, 2024, was set at the trued-up value of ₹20,469.10 Lakhs. A minor additional capitalization of ₹0.57 Lakh was allowed for the 2024-29 period.
– **Depreciation:** Calculated based on the Straight Line Method. A key change occurs in 2028-29, where the depreciation drops significantly (to ₹394.40 Lakhs) as the asset approaches the end of its 12-year useful life, and the remaining depreciable value is spread over the balance life.
– **Interest on Loan (IoL):** Continues to decrease as the loan is repaid, from ₹403.08 Lakhs in 2024-25 to just ₹75.25 Lakhs in 2028-29.
– **Return on Equity (RoE):** Maintained at the grossed-up rate of **18.782%** for the entire period, based on the MAT rate.
– **Operation & Maintenance (O&M) Expenses:** Allowed based on new normative rates for the 2024-29 period (e.g., ₹41.34 Lakh per bay in 2024-25). For these combined assets, O&M increases from ₹796.50 Lakhs in 2024-25 to ₹978.21 Lakhs in 2028-29.
– **Total Annual Fixed Charges:** Projected to decrease over the period, from **₹3,509.46 Lakhs** in 2024-25 to **₹2,667.54 Lakhs** in 2028-29, primarily due to the reduction in financing costs (IoL and depreciation).
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