DECLARATION - National Power Training Institute koty... · DECLARATION Mr. N.V.Kumar ... (Project...

DECLARATION

Mr. N.V.Kumar DILIP SRIDHAR KOTY

(Project Guide) (Signature of Candidate)

Countersigned

Mr. S. K. Choudhary

(Director/Principal of the Institute)

I, Dilip Sridhar Koty, Roll no -28, student of MBA-Power Management (2012-14) at National

Power Training Institute, Faridabad hereby declare that the Summer Training Report entitled

“OPTIMISATION OF POWER PURCHASE COST AND ANALYSIS OF ANNUAL FIXED

COST” is an original work and the same has not been submitted to any other Institute for the

award of any other degree.

A Seminar presentation of the Training Report was made on September __, 2013 on the same and the suggestions as approved by the faculty were duly incorporated.

ii

ACKNOWLEDGEMENT

The projects done by me under this internship program wouldn’t have been completed, if not for

the active help and guidance of various people.

I express my sincere thanks to Mr. Rajeev Chowdhury, Head (Regulatory Affairs) BRPL

and Mr. Aditya Pyasi, D.G.M (Regulatory Affairs) for giving me a great opportunity to work

in such a dynamic organization and for guiding me in all stages of the project. I am thankful to

Mr. Kanishk Khettarpal (Asst. Manager) for his guidance and support. I have a deep sense of

gratitude and respect for the entire staff of BRPL for sharing their knowledge and for assisting

me. Their help has sparked my interest even more.

I wish to thank Mr. S.K Choudhary, Principal Director, Mrs. Manju Mam (Director) for

providing me an opportunity to do my summer internship at BRPL which was a great learning

for me.

I would also like to thank my Project In-charge Mr.N.V Kumar (Deputy. Director), National

Power Training Institute for his valuable inputs, assistance and support whenever required.

I would like to express my special thanks to my family and friends for their continuous

motivation, encouragement and support.

Dilip Sridhar Koty

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EXECUTIVE SUMMARY

The power purchase cost consist of fixed charges, energy charges, transmission charges,

wheeling charges and many other kind of charges and surcharges. But a significant amount of

power purchase cost consist of the fixed charges. The fixed charges payable by the distribution

companies to the generation station depends upon the annual fixed charges of the station and the

capital cost of the generating station as according to the Tariff Regulation 2009-14 the tariff will

be based on the capital cost admitted by the commission.

The growing need of the economy is the availability of electricity which will be reliable, quality

power and most of all at cheap rates. The electricity whether cheap or costly depends on the

power purchase cost of the electricity.

The various components of the annual fixed charges like the Return on equity, depreciation,

Operation and maintenance expenses, interest on the loan and the interest on the working capital

are fixed or cannot be altered as they are fixed by the commission on normative basis and they

are same for all the generating plants except in the case of O&M expenses which is set by the

commission on a case by case basis.

Keeping in view the above mandate of the Tariff Policy, first proviso to clause (2) of Regulation

7 of the 2009 Tariff Regulations provides as under:

"Provided that in case of the thermal generating station and the transmission system, prudence

check of capital cost may be carried out based on the benchmark norms to be specified by the

Commission from time to time:"

The capital Cost of a Thermal Generation plant or for that matter for any type of generation plant

can be reduced or optimized only when the additional capitalization of the plant is limited to the

extent that both the parties (The generation plant and the beneficiaries) may benefit from it and it

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should not be a burden on any single party.

But it has been observed that if the additional capitalization by a generation plant is allowed to

go unchecked or its prudence check is not done properly, the capital cost will increase

subsequently increasing the annual fixed cost, the beneficiaries like the distribution companies

will end up paying more without actually getting any benefit out of it. The beneficiaries will then

pass on the cost to the customers which will increase the tariff of the unit electricity, which will

defeat the very purpose of the commission allowing additional capitalization for increase in the

efficiency of the plant to reduce the tariff price.

This bring us to the question whether its appropriate for the commission to allow the additional

capitalization if it ultimately ends up increasing the tariff for the common people. The answer to

this question lies in the proper guidelines along which the additional capitalization should be

done and allowed by the commission rather than whimsical increase of the capital cost without

actually deriving any benefit out of such increase in investments.

The guidelines are very clearly stated by the Terms and Conditions of Tariff 2009-14, in which

the regulation number 9(1), 9(2) deals with the guidelines for the additional capitalization.

This report intends to show the framework within which the commission allows or disallows a

claim of additional capitalization which affects the Annual Fixed cost and then subsequently

effects the tariff at which per unit electricity is supplied by the distribution company to the

customer.

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LIST OF FIGURES

Figure 1.1 : Delhi Distribution area divided between 3 Distribution companies

Figure 2.1 : Research Methodology followed

Figure 3.1 : BRPL’s Share & Quantum from NTPC stations

Figure 4.1 : The additional capital expenditure claimed by the company and the additional capital

expenditure approved by the commission for a particular year

Figure 4.2 : The various components of the annual fixed cost of the plant

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LIST OF TABLES

Table 1.1: Shows Consumer Profile of BSES Group (Delhi Division)

Table 3.1 :The energy requirement for BRPL

Table 3.1 : The actual quantum purchased by BRPL

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LIST OF ABBREVIATIONS

Act / EA Electricity Act, 2003

ABR Average Billing Rate AFC Annual Fixed Cost AT&C Aggregate Technical & Commercial

CEA Central Electricity Authority

CERC Central Electricity Regulatory Commission

DERC Delhi Electricity Regulatory Commission

DISCOM Distribution Company

GENCOS Generation Companies

SGS State generating Stations

CGS Central generating Stations

DTL Delhi Transco Limited

SLDC State Load Dispatch Centre

STU State Transmission Utility

T&D Transmission & Distribution

UI Unscheduled Interchange

PPC Power Purchase Cost

ARR Average Revenue Requirement

ECR Energy Charge Rate

CVPF Calorific Value of Primary Fuel

LPPF Landed Price of Primary Fuel

CVSF Calorific Value of Secondary Fuel

LPSF Landed Price of Secondary Fuel

GHR Gross Station Heat rate

AUX Auxiliary Consumption

PPAC Power Purchase Adjustment Cost

1

Contents

CHAPTER-1 INTRODUCTION ............................................................................................................. 3

1.1 History of Electricity in Delhi ............................................................................................................ 3

1.2 Chronology of the Delhi Privatization ................................................................................................ 3

1.3 BSES’s Customer Profile ................................................................................................................... 4

1.4 Problem Statement ............................................................................................................................. 5

1.5 Objectives of Project.......................................................................................................................... 5

1.6 Organization Profile........................................................................................................................... 5

1.6.1 About BSES Group ................................................................................................................. 5

1.6.2 BSES Delhi ............................................................................................................................. 6

1.6.2.1 BSES Yamuna Power Limited (BYPL) ................................................................................ 7

1.6.2.2 BSES Rajdhani Power Limited (BRPL) ................................................................................ 7

CHAPTER-2 LITERATURE SURVEY, POLICIES & RESEARCH METHODOLOGY ............................................. 10

2.1 Literature Review ............................................................................................................................ 10

2.1.1 Policies & Regulation............................................................................................................ 10

2.2 Research Methodology: ................................................................................................................... 14

CHAPTER-3 MYT MODEL & ANNUAL FIXED COST ..................................................................... 15

3.1 MYT Model for Distribution Licensee: ............................................................................................ 15

3.1.1 ATE’s directive to SERCs for timely tariff determination ...................................................... 21

3.2 Power Purchase cost ....................................................................................................................... 21

3.2.1 Fixed Charge ......................................................................................................................... 22

3.2.2 The Variable Charge ............................................................................................................. 23

3.3 Power purchase-BRPL ..................................................................................................................... 24

3.3.1 Power purchase quantum ....................................................................................................... 24

3.3.2 Allocation of Power from Central & State Generating Stations ............................................. 25

3.4 ANNUAL FIXED COST(AFC) ....................................................................................................... 27

3.5 Capital Cost ..................................................................................................................................... 30

3.6 Additional Capitalisation. ................................................................................................................ 31

CHAPTER-4 RESULTS & DISCUSSION ...................................................................................................... 34

4.1- Feroze Gandhi Unchahar Thermal Power Station Stage-I (420 MW) ............................................... 34

2

4.2 Feroze Gandhi Unchahar Thermal Power Station Stage-II (420 MW) .............................................. 37

4.3 Feroze Gandhi Unchahar Thermal Power Station, Stage-III (210 MW) .............................................. 43

4.4 Badarpur Thermal Power Station (705 MW) ................................................................................... 48

4.5 National Capital Thermal Power Station Dadri, Stage-I (840 MW).................................................. 56

4.6 Anta Gas Power Station (419.33 MW) .............................................................................................. 60

4.7 Kahalgaon Super Thermal Power Station Stage-I (840 MW) ............................................................ 67

4.8 Simhadri Thermal Power Station, Stage-I (2 x 500 MW) ................................................................... 72

4.9 Kahalgaon Super Thermal Power Station Stage-II (3X500 MW)........................................................ 76

4.10 Farakka Super Thermal Power Station (1600 MW) ........................................................................ 81

4.11 Singrauli Super Thermal Power Station (2000 MW) ....................................................................... 88

CHAPTER-5 Conclusion ....................................................................................................................... 94

5.1 Conclusion ...................................................................................................................................... 94

5.2 Limitations of the Project ................................................................................................................. 95

REFERENCES...................................................................................................................................... 97

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CHAPTER-1

INTRODUCTION

1.1 History of Electricity in Delhi

The history of electricity in Delhi dates back to 1905 when M/s John Fleming Company was

awarded the license as per Indian Electricity Act, 1903, for generation and Distribution of power

in Delhi. Electricity those days was a luxury and the privilege of the high ranking British

officials and a few rich people. It was a rare and costly commodity with a perception of being

dangerous. In fact, even rich Indian accepted this at a much later stage. M/s John Fleming

Company was replaced by the Delhi Tramway and Lighting Company, which was subsequently

renamed as Delhi Electricity Supply & Traction Company. In 1939, The Delhi Central Electric

Power Authority (DCEPA) was formed to run the services. In 1951, the DCEPA was taken over

by the Delhi State Electricity Board, constituted under Indian Electricity (Supply) Act 1948. In

1958, Delhi Electricity Supply Undertaking came into existence and was once again converted to

Delhi Vidyut Board in 1997. In July 2002, Delhi Vidyut Board unbundled into five Successor

entities – the three distribution companies, a transmission and a holding Company. Two of the

three distribution companies have been handed over to BSES, and third to TATA POWER.

1.2 Chronology of the Delhi Privatization

February 1999

Delhi Government issues strategy paper outlining its intention to unbundled DVB, creates an

independent regulatory entity, and privatizes distribution while protecting employee interests.

May 1999

DERC established, it was initially created under an act of the Central Government and then later

notified under the state reform act.

October 2000

Delhi Electricity Reform Act formalized. In March 2001, the ordinance was given a stronger

legal foundation through conversion into an act. Tri-partite agreement between DVB, its

4

employees and the Delhi government, that protects the employment and pension rights of the

employees.

February 2001

Privatization process began with the Request for Qualification.

November 2001

Delhi Government issues Request for Proposals, issues a Policy Directive and announces the

transfer scheme.

February 2002

DERC issues an order that specifies opening loss levels and the initial Bulk Supply Tariff for

purchases made by the Discom from the Transco.

April 2002

Bids were received. The Cabinet of the Delhi government considers the bids to be unacceptable

“in present form” and creates a “Core Committee to explore alternatives including negotiation.

June 2002

Privatizations documents were signed with BSES and Tata.

July 2002

Date of privatization. June 2003 DERC issues first post-privatization tariff order.

1.3 BSES’s Customer Profile

Category

Domestic 1,465,561

Non-Domestic 244071

Industrial 12694

Agriculture 4259

Railway Traction 1

DMRC 6

Others 6396

Total 1,733,005

Table 1.1: Shows Consumer Profile of BSES Group (Delhi Division)

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1.4 Problem Statement

1. The Annual Fixed cost is a very significant part in the power purchase cost of a distribution

company. So it is essential to analyze the Annual Fixed Cost of the Generating Company from

which the distribution company is purchasing power.

2. To optimize the annual fixed cost is necessary to optimize the capital cost. So its important to

understand the framework under which the Additional Capitalization is accepted or rejected.

3. The average power purchase cost of Delhi discoms has been increasing each year due to

escalation in fuel prices resulting in increase in the Average Revenue Requirement of the

discoms

1.5 Objectives of Project

1. To understand and perceive the concept of Annual Fixed cost of a generation station and its

various components.

2. To understand the proceedings of regulatory department in respect of processing of ARR

filings, True up filing and other related aspects of the commission.

3. To study the framework in which the Additional Capitalization is admitted or Rejected.

1.6 Organization Profile

1.6.1 About BSES Group

BSES is the leading private sector power utility company in the country. BSES Limited is India's

premier utility engaged in the distribution of electricity. Formerly, known as Bombay Suburban

Electric Supply Limited, it was incorporated on 1st October 1929, for the distribution of

electricity in the suburbs of Mumbai, with a pioneering mission to make available

uninterrupted, reliable, and quality power to customers and provide value added services for

the development of the power and infrastructure sectors.

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1. BSES’s total consumer base is over 5 million covering substantial areas of Delhi, Goa, Orissa

and Mumbai.

2. Distribution area spans about 1.24 lakh sq. km covering an estimated population of 45 million.

3. Nearly 16,000 million units of electricity billed to industrial, commercial and residential

consumers with distribution capacity of nearly 6,000 MW.

With 7 decades in the field of power distribution, the Electricity Supply Division of BSES has

achieved the distinction of operating its distribution network with 99.98% on-line reliability and

has a distribution loss of only 11.6%. BSES is amongst the first utilities in India to adopt

computerization in 1967 to meet the increasing workload. With a view to optimally utilize

trained manpower and expertise in the field of power, the company commenced contracting

activities in 1966 by undertaking turnkey electrical contracts, thermal, hydro and gas turbine

installations and commissioning contracts, transmission line projects etc. BSES set up its own

500 MW Thermal Power Plant and the first 2 x 250 MW units of Dahanu Power Station were

synchronized and began commercial operation during 1995- 1996. A dedicated 220 kV double

circuit transmission line network with three 220 /33kV receiving stations have been installed to

evacuate the power to the distribution area of the Company. BSES through international

competitive bidding acquired an equity stake of 51% in three of the four Distribution Companies

of Orissa.

1.6.2 BSES Delhi

Following the privatization of Delhi’s power sector and unbundling of the Delhi Vidyut Board in

July 2002, the business of power distribution was transferred to BSES Yamuna Power Limited

(BYPL) and BSES Rajdhani Power Limited (BRPL). These two of the three successor entities

distribute electricity to 28.34 lakh customers in two thirds of Delhi. The Company acquired

assets, liabilities, proceedings and personnel of the Delhi Vidyut Board as per the terms and

conditions contained in the Transfer Scheme.

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1.6.2.1 BSES Yamuna Power Limited (BYPL)

BYPL distributes power to an area spread over 200 sq. kms with a population density of

5953per sq. km. Its 11.9lakh customers are spread over 14 districts across Central & East are as

including Chandni Chowk, Daryaganj, Paharganj, Shankar Road, Patel Nagar, G T Road,

Karkardooma, Krishna Nagar, Laxmi Nagar, Mayur Vihar, Yamuna Vihar, Nand Nagri and

Karawal Nagar. From a high of 63.1 % AT&C losses in BYPL area the losses have come down

to 19.8% a record reduction around 43.3%.

1.6.2.2 BSES Rajdhani Power Limited (BRPL)

BRPL distributes power to an area spread over 750 sq. km with a population density of 2192 per

sq. km. It’s over 16.44 lakh customers are spread over 19 districts across South and West areas

including Alaknanda, Khanpur, Vasant Kunj, Saket, Nehru Place, Nizamuddin, Sarita Vihar,

Hauz Khas, R.K. Puram, Janakpuri, Najafgarh, Nangloi, Mundka, Punjabi Bagh, Tagore Garden,

Vikas Puri, Palam and Dwarka. Since taking over distribution, BSES‟ singular mission has been

to provide reliable and quality electricity supply. BSES has invested over Rs 4500 crore on

upgrading and augmenting the infrastructure which has resulted in a record reduction of AT&C

losses. In BRPL area AT&C losses have been reduced from 51.2% to 16.8% a reduction of

34.4%.

1.6.2.2.1 Business of the Organization: Delhi Supply Division

Caters to an area of 950 sq. kms

Supply Area covers South Delhi, East Delhi, West Delhi and Central Delhi.

Consumers include houses, residential complexes, high rise buildings, commercial Complex

medium and large industrial houses, government establishment like Airport, Worship

places,Milk Dairy, Mother Dairy and Municipal Hospitals, Sewerage projects etc.

Caters to more than 28 lakh consumers.

8

Provides highly reliable and continuous supply

1.6.2.2.2 Classification of Supply

The Various categories of consumers served by BSES Rajdhani are as follows:-

1. Domestic connection

2. Non Domestic Low Tension

3. Mix Load High Tension

4. Small Industrial Power (SIP)

5. Large Industrial Power (LIP)

6. Agriculture Connection

7. Street Lighting & Signals

8. Delhi Airport Authority India Ltd (DAIL)

9. Delhi Metro Rail Corporation Ltd (DMRC)

10. Delhi Jal Board (DJB)

9

Figure 1.1: Delhi Distribution area divided between 3 Distribution companies

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CHAPTER-2

LITERATURE SURVEY, POLICIES & RESEARCH

METHODOLOGY

2.1 Literature Review

2.1.1 Policies & Regulation

Electricity Act, 2003 confers the power of Policies & Regulation formulation in hands of

regulatory commissions. CERC (Central Electricity Regulatory Commissions) does the same for

central agencies and SERCs (State Electricity Regulatory Commissions) is for entities under

respective state government.

2.1.1.1 MYT Mechanism

Statutory framework

Section 61 of EA 2003 requires the Appropriate Commission to be guided by MYT Principles

while specifying the Terms and Conditions for determination of tariff.

Clause 5.3 (h) of the Tariff Policy stipulates that:

1. “The MYT framework is to be adopted for any tariffs to be determined from April 1, 2006.

The framework should feature a five-year control period. The initial control period may however

be of 3-year duration for transmission and distribution if deemed necessary by the Regulatory

Commission on account of data uncertainties and other practical considerations. In cases of lack

of reliable data, the Appropriate Commission may state assumptions in MYT for first control

period and a fresh control period may be started as and when more reliable data becomes

available

2. In cases where operations have been much below the norms for many previous years the initial

starting point in determining the revenue requirement and the improvement trajectories should be

11

recognized at “relaxed” levels and not the “desired” levels. Suitable benchmarking studies may

be conducted to establish the “desired” performance standards. Separate studies may be required

for each utility to assess the capital expenditure necessary to meet the minimum service

standards.

3. Once the revenue requirements are established at the beginning of the control period, the

Regulatory Commission should focus on regulation of outputs and not the input cost elements.

At

the end of the control period, a comprehensive review of performance may be undertaken

4. Uncontrollable costs should be recovered speedily to ensure that future consumers are not

burdened with past costs. Uncontrollable costs would include (but not limited to) fuel costs, costs

on account of inflation, taxes and cess, variations in power purchase unit costs including on

account of hydro-thermal mix in case of adverse natural events.”

Some states have notified MYT Regulations, and many have also issued MYT Orders, namely

Maharashtra, Delhi, Andhra Pradesh, and West Bengal.

Principles & Objectives of MYT

The Commission through these Tariff Regulations aims to meet the following objectives:

(a) Continue and improve upon the existing incentivisation framework to reward performance

and promote efficiency.

(b) Provide regulatory certainty to the investors and consumers by promoting transparency,

consistency and predictability of regulatory approaches.

(c) Ensure financial viability of the sector to attract investments & safeguard consumer’s interest.

12

(d) Develop equitable risk sharing mechanism between utility and consumers.

Power Purchase cost

This section reviews the legal framework existing , along with the various provisions

of the EA 2003 to understand the legal boundaries within which the regulations would need to be

developed on purchasing cost.

2.1.1.2 According to the Electricity Act 2003

Section 62. (Determination of tariff): The Appropriate Commission shall determine the tariff for

(a) Supply of electricity from a generating company to a distribution licensee

(b) Transmission of electricity

(c) wheeling of electricity

(d) Retail Sale of electricity

2.1.1.3 According to the Tariff Policy

Tariff policy lays down following framework for performance based cost of service regulation in

respect of aspects common to generation, transmission as well as distribution. These shall not

apply to competitively bid projects as referred to in para 6.1 and para 7.1 (6). Sector specific

aspects are dealt with in subsequent sections.

(a) Return on Investment

Balance needs to be maintained between the interests of consumers and the need for investments

while laying down rate of return. Return should attract investments at par with, if not in

preference to, other sectors so that the electricity sector is able to create adequate capacity. The

13

rate of return should be such that it allows generation of reasonable surplus for growth of the

sector.

(b) Equity Norms

For financing of future capital cost of projects, a Debt : Equity ratio of 70:30 should be adopted.

Promoters would be free to have higher quantum of equity investments. The equity in excess of

this norm should be treated as loans advanced at the weighted average rate of interest and for a

weighted average tenor of the long term debt component of the project after ascertaining the

reasonableness of the interest rates and taking into account the effect of debt restructuring done,

if any. In case of equity below the normative level, the actual equity would be used for

determination of Return on Equity in tariff computations.

(c) Depreciation

The Central Commission may notify the rates of depreciation in respect of generation and

ransmission assets. The depreciation rates so notified would also be applicable for distribution

ith appropriate modification as may be evolved by the Forum of Regulators. The rates of

depreciation so notified would be applicable for the purpose of tariffs as well as accounting.

There should be no need for any advance against depreciation

(d) Cost of Debt

Structuring of debt, including its tenure, with a view to reducing the tariff should be encouraged.

Savings in costs on account of subsequent restructuring of debt should be suitably incentivised

by the Regulatory Commissions keeping in view the interests of the consumers.

(e) Cost of Management of Foreign Exchange Risk

Foreign exchange variation risk shall not be a pass through. Appropriate costs of hedging and

swapping to take care of foreign exchange variations should be allowed for debt obtained in

foreign currencies. This provision would be relevant only for the projects where tariff has not

been determined on the basis of competitive bids.

14

For Generation Tariff:

Tariff structuring and associated issues

(1) A two-part tariff structure should be adopted for all long term contracts to facilitate Merit

Order dispatch. According to National Electricity Policy, the Availability Based Tariff (ABT) is

to be introduced at State level by April 2006. This framework would be extended to generating

stations (including grid connected captive plants of capacities as determined by the SERC). The

Appropriate Commission may also introduce differential rates of fixed charges for peak and off

peak hours for better management of load.

(2) Power Purchase Agreement should ensure adequate and bankable payment security

arrangements to the Generating companies. In case of persisting default in spite of the available

payment security mechanisms like letter of credit, escrow of cash flows etc. the generating

companies may sell to other buyers.

2.2 Research Methodology:

Figure 2.1: Research Methodology followed

Study of Regulations

of CERC

Study of NTPC Electricity

Bills

Annual Fixed Cost

Modelling of Power Plants

Study of Tariff order of NTPC

plants

Analysis of Fixed cost of NTPC Plants

Study of Methodology of CERC wrt

ADD-CAP

15

CHAPTER-3

MYT MODEL & ANNUAL FIXED COST

3.1 MYT Model for Distribution Licensee:

Uncontrollable & Controllable parameter

Regulatory Commission has segregated the costs and performance elements into controllable and

uncontrollable based on the ability of the licensee to manage each of them.

Uncontrollable Parameters

Those parameters which are beyond the control of utility, following are some of the

uncontrollable factors

(a) Power purchase expenses due to increase in fuel costs and change in sales quantum.

(b) Sales quantum & sales mix.

(c) Interest expense on long term loan & working capital

(d) Increase in expenses due to force majeure such as fire, war, natural calamities, etc.

Targets for Controllable Parameters

The Commission shall set targets for each year of the Control Period for the parameters that are

deemed to be “controllable” and which include

(a) AT&C Loss, which shall be measured as the difference between the units input into the

distribution system and the units realized (units billed and collected) wherein the units realized

shall be equal to the product of units billed and collection efficiency.

(b) Distribution losses, which shall be measured as the difference between total energy input for

sale to all its consumers and sum of the total energy billed in its License area in the same year.

(c) Collection efficiency, which shall be measured as ratio of total revenue realized to the total

revenue billed for the same year.

(d) Operation and Maintenance Expenditure which includes employee expenses, repairs and

maintenance expenses, administration and general expenses and other miscellaneous expenses

viz. audit fees, rents, legal fees et

(e) Return on Capital Employed.

(f) Depreciation.

16

(g) Quality of Supply.

Operation & Maintenance Expenses (O&M) expenses comprise of costs incurred on a day to

day basis in order to run the business efficiently. These costs include:

Employee Cost

Employee cost shall be computed as per the approved norm escalated by consumer price index

(CPI), adjusted by provisions for expenses beyond the control of the Distribution Licensee and

one time expected expenses, such as recovery/adjustment of terminal benefits, implications of

pay commission, arrears and Interim Relief, governed by the following formula:

EMPn = (EMPb * CPI inflation) + Provision

Where:

EMPn: Employee expense for the year n

EMPb: Employee expense as per the norm

CPI inflation: is the average increase in the Consumer Price Index (CPI) for immediately

preceding three years.

Provision: Provision for expenses beyond control of the Distribution Licensee and expected one-

time expenses as specified above

Repairs and Maintenance Expense

Repairs and Maintenance expense shall be calculated as percentage (as per the norm defined) of

Opening Gross Fixed Assets for the year governed by following formula:

R&Mn = Kb* GFAn

Where:

R&Mn: Repairs & Maintenance expense for nth year

GFAn: Opening Gross Fixed Assets for nth year

Kb: Percentage point as per the norm

Administrative and General Expense

A&G expense shall be computed as per the norm escalated by wholesale price index (WPI) and

adjusted by provisions for confirmed initiatives (IT etc. initiatives as proposed by the

17

Distribution Licensee and validated by the Commission) or other expected one-time expenses,

and shall be governed by following formula:

A&Gn = (A&Gb * WPI inflation) + Provision

A&Gn: A&G expense for the year n

A&Gb: A&G expense as per the norm

WPI inflation: is the average increase in the Wholesale Price Index (WPI) for immediately

preceding three years

Provision: Cost for initiatives or other one-time expenses as proposed by the Distribution

Licensee and validated by the Commission.

Mechanism for sharing of gains or losses on account of controllable factors

The approved aggregate gain to the Distribution Licensee on account of controllable factor of

aggregate technical and commercial (AT&C) losses shall be dealt with in the following manner:

a. One-third of the amount of such gain shall be passed on as a rebate in tariff over such period

as may be stipulated in the Order of the Commission.

b. The balance amount, which will amount to two-third of such gain, may be utilized at the

discretion of the Distribution Licensee.

The approved aggregate loss to the Distribution Licensee on account of controllable factor of

aggregate technical and commercial (AT&C) losses shall be dealt with in the following manner:

a. Two-thirds of the amount of such loss may be passed on as an additional charge in tariff over

such period as may be stipulated in the Order of the Commission.

b. The balance amount of loss shall be absorbed by the Distribution Licensee.

The gain or loss on account of other controllable factors, unless otherwise specifically provided

by the Commission shall be to the account of the Distribution Licensee.

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Annual Truing-up mechanism

The Commission shall review variations in approved values of uncontrollable parameters

through an annual truing up mechanism while there shall be no adjustment for variations in

controllable items. Annual truing-up shall be carried out for variations due to sales and power

purchase costs.

Return

The principle for providing return to the transmission and distribution licensee has been based on

the principle of Return on Capital Employed (RoCE) on a regulated rate base, with the weighted

average cost of capital to be determined independently for each year of the Control Period. In

case of generating companies, the principle for providing return has been based on the Return on

Equity.

Sales forecast

a. The Commission based on the Licensee’s filings, shall examine the forecasts for

reasonableness and consistency, and shall approve the sales forecast for each year of the Control

Period.

b. Sales shall be treated as uncontrollable. The open access transactions shall not form part of

sales. Power purchase quantum and cost for any Financial Year shall be computed on the basis of

AT&C loss targets and the estimated sales.

Capital Investment - The Commission shall approve capital investment plan of the Licensees

for the Control Period commensurate with load growth, distribution loss reduction and quality

improvement proposed in the Business Plan. The investment plan shall also include

corresponding capitalization schedule and financing plan.

Quality of Supply and Customer Service - The quality of supply and the customer service

parameters shall be monitored as per the norms to be prescribed by the Commission separately

from time to time.

a) Voltage fluctuations: Licensee shall maintain voltages at the point of commencement of the

supply to a consumer within the limits stipulated by the commission.

19

b) Meter complaints : The licensee shall perform the following meter related activities subject

to the provisions provided in the Supply Code and other associated regulations and codes

specified by the commission.

Other parameters of quality of supply should be followed as per the instruction by the

commission.

Some of the parameters are listed below:-

1. Operation of call center

2. Restoration of supply

3. Shifting of meters/service lines

4. New connections/additional load

5. Transfer of ownership and change of category

6. Temporary supply of power

7. Consumer bills complaint

8. Disconnection of supply

9. Reconnection of supply following disconnection due to non-payment of bills

10. Street Light faults

Reliability Indices

The Commission shall impose a uniform system of recording and reporting of distribution

system reliability performance. The same reliability indices shall be imposed on all licensees

under that commission. The performance target levels set by the Commission shall be unique to

each licensee to be based initially on the historical performance of licensee.

The licensee shall compute the following distribution reliability indices:-

(a) System Average Interruption Frequency Index (SAIFI) is the average number of sustained

interruptions per consumer during the year. It is the ratio of the annual number of interruptions to

the number of consumers.

SAIFI = Total number of sustained interruptions in a year / Total number of consumers

20

(b) System Average Interruption Duration Index (SAIDI is the average duration of interruptions

per consumers during the year. It is the ratio of the annual duration of interruptions (sustained) to

the number of consumers. If duration is specified in minutes,

SAIDI is given as consumer minutes.

SAIDI = Total duration of sustained interruptions in a year / Total number of consumers

(c) Momentary Average Interruption Frequency Index (MAIFI) is the average number of

momentary (less than 5 minutes) interruptions per consumer during the year. It is the ratio of the

annual number of momentary interruptions to the number of consumers.

MAIFI = Total number of momentary interruptions in a year / Total number of consumers

Contingency Reserve

The Commission has also created a Contingency Reserve (CR) for each licensee at the start of

the Control Period for minimizing the impact of uncontrollable factors on retail tariffs and

ensures tariff stability across the Control Period.

Income Tax

Income Tax, if any, on the Licensed business of the Distribution Licensee shall be treated as

expense and shall be recoverable from consumers through tariff. However, tax on any income

other than that through its Licensed business shall not be a pass through, and it shall be payable

by the Distribution Licensee itself.

The income tax actually payable or paid shall be included in the ARR. The actual assessment of

income tax should take into account benefits of tax holiday, and the credit for carry forward

losses applicable as per the provisions of the IT Act 1961 shall be passed on to the consumers.

Non-Tariff Income

All incomes being incidental to electricity business and derived by the Licensee from sources,

including but not limited to profit derived from disposal of assets, rents, delayed payment

surcharge, meter rent (if any), income from investments other than contingency reserves,

miscellaneous receipts from the consumers and income to Licensed business from the Other

Business of the Distribution Licensee shall constitute Non-Tariff Income of the Licensee.

21

3.1.1 ATE’s directive to SERCs for timely tariff determination

The Appellate Tribunal for Electricity (ATE) issued a judgment in its order dated 11 November

2011 and in its judgment has directed all SERCs to initiate suo-moto proceedings for tariff

determination in case of delays by the utilities in filing their tariff petitions. The key features of

ATE’s directive are mentioned below:

1. It should be the endeavor of every State Commission to ensure that the tariff for the financial

year is decided before 1st April of the tariff year, for which tariff petition should be filed by the

end of November of the previous year. Truing-up should also be an annual exercise.

2. In the event of any delay in filing the ARR, truing-up and Annual Performance Review, one

month beyond the scheduled date of submission of the petition, the State Commission must

initiate suo-moto proceedings for tariff determination.

3. The recovery of the Regulatory Asset (RA) should be time-bound and within a period not

exceeding three years at the most and preferably within the control period. The carrying cost of

the RA should be allowed to the utilities in the ARR of the year in which the RA are created to

avoid the problem of cash flow to the distribution licensee.

4. Fuel and Power Purchase cost is a major expense of the distribution company, which is

uncontrollable. The Fuel and Power Purchase cost adjustment should preferably be on a monthly

basis but in no case exceed a quarter. Any State Commission that does not already have such a

formula/mechanism in place must put in place such a formula/ mechanism within 6 months of

the date of this order.

This is a very positive development on the regulatory front for the power distribut ion sector.

However, the impact of this judgment by ATE on the financial position of the utilities will hinge

upon its implementation by SERCs in an independent manner without any kind of influence from

the state government/utility.

3.2 Power Purchase cost

The power purchase cost for a Distribution licensee like BRPL, BYPL and TPDDL consist of

two components.

1. The Annual Fixed Charge

22

2. The Variable Charge

3.2.1 Fixed Charge-The annual fixed charge also called as Capacity Charge are charged for the

recovery of annual fixed cost of that generation company (E.g. NTPC) from which the discom is

purchasing power. This annual fixed charge is recovered from the discom in the proportion of the

share of power purchased by it.

The Annual fixed charge of a generation company depends on its Annual Fixed cost (AFC).The

Annual Fixed Cost or fixed cost is calculated on annual basis and are recovered from the discoms

on monthly basis.

The Capacity charge payable to the generating company by a discom is calculated on the basis of

formulae which is given in the Regulation 21 and 22 of the CERC Terms and conditions of tariff

regulation 2009-14.

(a) For Thermal Generation station(Regulation 21)

(i) Generating stations in commercial operation for less than ten (10) years on 1st April of the

financial year:

AFC x ( NDM / NDY ) x ( 0.5 + 0.5 x PAFM / NAPAF ) (in Rupees)

Provided that in case the plant availability factor achieved during a financial year (PAFY) is less

than 70%, the total capacity charge for the year shall be restricted to:

AFC x ( 0.5 + 35 / NAPAF ) x ( PAFY / 70 ) (in Rupees).

(ii) For generating stations in commercial operation for ten (10) years or more on 1st April of

the year:

AFC x ( NDM / NDY ) x ( PAFM / NAPAF ) (in Rupees).

Where,

AFC = Annual fixed cost specified for the year, in Rupees.

NAPAF = Normative annual plant availability factor in percentage

NDM = Number of days in the month

NDY = Number of days in the year

23

PAFM = Plant availability factor achieved during the month, in percent:

PAFY = Plant availability factor achieved during the year, in percent

(b) For Hydro Generation Station(Regulation 22)

The formulae for calculating the Capacity Charge payable to the Generating Station for a month

is given as :

AFC x 0.5 x NDM / NDY x ( PAFM / NAPAF ) (in Rupees)

3.2.2 The Variable Charge- The variable charge is charged by the generation station for the

recovery of the cost of primary fuel and the limestone (where applicable) from the discom who

areitsbeneficiaries.

The Variable charge or the energy charge is recovered on the basis of number of units (ex-bus)

scheduled for the beneficiary during a month.

The total Energy charge payable to the Generating company is given by:

Energy charge rate in Rs./kWh x Scheduled energy (ex-bus) for the month in kWh.

The energy charge rate (Rs/kwh) for a generating station is calculated by the formulae which is

given in the Regulation 21 and 22 of the CERC Terms and conditions of tariff regulation 2009-

14.

(a) For coal based and lignite fired stations:

ECR = { (GHR – SFC x CVSF) x LPPF / CVPF + LC x LPL } x 100 / (100 – AUX)

(b) For gas and liquid fuel based stations:

ECR = GHR x LPPF x 100 / {CVPF x (100 – AUX) }

Where

AUX = Normative auxiliary energy consumption in percentage.

CVPF = Gross calorific value of primary fuel as fired, in kCal per kg, per litre or per standard

cubic metre, as applicable.

CVSF = Calorific value of secondary fuel, in kCal per ml.

24

ECR = Energy charge rate, in Rupees per kWh sent out.

GHR = Gross station heat rate, in kCal per kWh.

LC = Normative limestone consumption in kg per kWh.

LPL = Weighted average landed price of limestone in Rupees per kg.

LPPF = Weighted average landed price of primary fuel, in Rupees per kg, per litre or per

standard cubic metre, as applicable, during the month.

SFC = Specific fuel oil consumption, in ml per kWh.

(c) For Hydro Generating stations

For a hydro generating station the energy charge payable will be given by the formulae given in

the regulation 22 as :

(Energy charge rate in Rs. / kWh) x {Scheduled energy (ex-bus) for the month in kWh} x

(100 – FEHS) / 100.

The energy charge rate for a hydro generating station will be given by the formulae given in

regulation 22

ECR = AFC x 0.5 x 10 / { DE x ( 100 – AUX ) x ( 100 – FEHS )}

Where

DE = Annual design energy specified for the hydro generating station

FEHS = Free energy for home State

So the total power purchase cost for a distribution company is equal to the sum of the Capacity

Charge and the Variable charge.

Power Purchase cost=Capacity Charge + Variable Charge

3.3 Power purchase-BRPL

BRPL receives its energy share mainly through long term PPA’s with Central Generating

Stations & State Generating Stations.

3.3.1 Power purchase quantum

The energy requirement for BRPL is being tabulated below in table no. 3.1

25

SOURCE:ARR Petition by BRPL F.Y. 2011-12

Based on projected sales & distribution loss , the quantum of power purchase has been estimated

considering the availability from generating stations within Delhi, Central generating Stations,

new plants to be commissioned , existing short term & bilateral arrangements.

3.3.2 Allocation of Power from Central & State Generating Stations

The actual quantum purchased by BRPL to meet energy requirement during FY2011-12

including short term purchases and sales is given below in Table 3.2

BRPL’s Share & Quantum from NTPC stations

26

SOURCE:ARR Petition by BRPL F.Y. 2011-

12

3.3.3 BRPL’s Share & Quantum from NTPC stations in figure 3.1

SOURCE:ARR Petition by BRPL F.Y. 2011-12

ANTA GAS, 4.58AURAIYA GAS, 4.73

BTPS, 33.37

DADRI GAS, 4.78

FARAKKA, 0.61

KAHALGAON-I, 2.65

NCPP, 33.18

RIHAND-I, 4.36RIHAND-II, 5.49

SINGRAULI, 3.27

UNCHAHAR-I, 2.49

UNCHAHAR-II, 4.88

UNCHAHAR-III, 6.02

KAHALGAON-II, 4.57

TALCHER, 0

DADRI-TPS-II, 32.69

27

3.4 ANNUAL FIXED COST(AFC)

The annual fixed cost of a generating station is the sum of seven different cost namely Return on

equity, Depreciation, Interest on loan, interest on working capital, operation and maintenance

expenses, cost of secondary fuel oil and special allowance in lieu of R&M.

The AFC consist of following components

(a) Return on equity

(b) Interest on loan capital;

(c) Depreciation;

(d) Interest on working capital;

(e) Operation and maintenance expenses;

(f) Cost of secondary fuel oil (for coal-based and lignite fired generating stations only);

(g) Special allowance in lieu of R&M or separate compensation allowance, wherever applicable.

(a)Return on Equity

Return on Equity(ROE) is computed in the rupee terms on the equity base which is determined

On the basis of regulation 12.It is calculated on the pre-tax basis.Also if in the case of projects

commissioned on or after 1st April, 2009, an additional return of 0.5% shall be allowed if such

projects are completed within the timeline.

Rate of return on equity shall be rounded off to three decimal points and be computed as per the

formula given in the regulation 15(4):

Rate of pre-tax return on equity = Base rate / (1-t)

Where t is the applicable tax rate.

(b) Interest on loan capital

For a project declared under commercial operation on or after 1.4.2009, if the equity actually

deployed is more than 30% of the capital cost, equity in excess of 30% shall be treated as

normative loan.

28

The normative loan outstanding as on 1.4.2009 shall be worked out by deducting the cumulative

repayment as admitted by the Commission up to 31.3.2009 from the gross normative loan.

The repayment for the year of the tariff period 2009-14 shall be deemed to be equal to the

depreciation allowed for that year.

The interest on loan shall be calculated on the normative average loan of the year by applying the

weighted average rate of interest.

According to the tariff regulation 2009-14, The generating company or the transmission licensee

shall make every effort to re-finance the loan as long as it results in net savings on interest and in

that event the costs associated with such re-financing shall be borne by the beneficiaries and the

net savings shall be shared between the beneficiaries and the generating company or the

transmission licensee, as the case may be, in the ratio of 2:1.

(c) Depreciation

Depreciation refers to two aspects of the same concept:

1. the decrease in value of assets (fair value depreciation), and

2. the allocation of the cost of assets to periods in which the assets are used.

As given in the tariff regulation 2009-14 The value base for the purpose of depreciation shall be

the capital cost of the asset admitted by the Commission.

It is also given that the salvage value of the asset shall be considered as 10% and depreciation

shall be allowed up to maximum of 90% of the capital cost of the asset.

For the hydro generating stations, the salvage value shall be as provided in the agreement signed

by the developers with the State Government for creation of the site.Also for the hydro

generating station Land other than the land held under lease and the land for reservoir in case of

hydro generating station shall not be a depreciable asset and its cost shall be excluded from the

capital cost while computing depreciable value of the asset.

The depreciation amount shall be calculated by the straight line method.

It is important to note that, the remaining depreciable value as on 31st March of the year closing

after a period of 12 years from date of commercial operation shall be spread over the balance

useful life of the assets.

http://en.wikipedia.org/wiki/Assets

http://en.wikipedia.org/wiki/Fair_value

29

(d) Interest on Working Capital.

The interest on the working capital is based on the amount of the working capital required by the

generating station.The various components of the working capital for different power plants are

given in the tariff regulation 2009-14.

(1) For a Coal-based/lignite-fired thermal generating stations the various component of the

working capital are as follows:

(i) Cost of coal or lignite and limestone, if applicable, for 1½ months for pithead generating

stations and two months for non-pit-head generating stations, for generation corresponding to the

normative annual plant availability factor;

(ii) Cost of secondary fuel oil for two months for generation corresponding to the normative

annual plant availability factor, and in case of use of more than one secondary fuel oil, cost of

fuel oil stock for the main secondary fuel oil.

(iii) Maintenance spares @ 20% of operation and maintenance expenses specified in regulation

19.

(iv) Receivables equivalent to two months of capacity charges and energy charges for sale of

electricity calculated on the normative annual plant availability factor.

(v) Operation and maintenance expenses for one month.

(2) Open-cycle Gas Turbine/Combined Cycle thermal generating stations the various component

of the working capital are as follows:

(i) Fuel cost for one month corresponding to the normative annual plant availability

factor, duly taking into account mode of operation of the generating station on gas fuel and liquid

fuel;

(ii) Liquid fuel stock for ½ month corresponding to the normative annual plant availability

factor, and in case of use of more than one liquid fuel, cost of main liquid fuel.

(iii)Maintenance spares @ 30% of operation and maintenance expenses specified in regulation

19.

(iv) Receivables equivalent to two months of capacity charge and energy charge for sale of

electricity calculated on normative plant availability factor, duly taking into account mode of

operation of the generating station on gas fuel and liquid fuel,

30

(v) Operation and maintenance expenses for one month

(3) in case of hydro generating station and transmission system.

(i) Receivables equivalent to two months of fixed cost.

(ii) Maintenance spares @ 15% of operation and maintenance expenses specified in regulation

19

(iii) Operation and maintenance expenses for one month.

(e)Operation and Maintenance Expenses

The commission through the tariff regulation 2009-14 has decided the normative operation and

maintenance expenses depending on kind of power generating station and also in some cases

depending on the years of operation of the power plants.

The different operation and maintenance expenses are elaborated in the tariff regulation 2009-14

in the regulation 19.

(f) Expenses on secondary fuel oil consumption for coal-based and lignite-fired generating

station.

According to the tariff regulation 2009-14 the expenses on secondary fuel oil in Rupees will be

computed corresponding to normative secondary fuel oil consumption (SFC) decided by the

commission which are duly specified in clause (iii) of regulation 26, in accordance with the

following formula:

SFC x LPSFi x NAPAF x 24 x NDY x IC x 10

Where,

SFC – Normative Specific Fuel Oil consumption in ml/kWh

LPSFi – Weighted Average Landed Price of Secondary Fuel in Rs./ml considered initially

NAPAF – Normative Annual Plant Availability Factor in percentage

NDY – Number of days in a year

IC - Installed Capacity in MW.

3.5 Capital Cost

31

The capital cost of a generating plant are admitted by the commission after a prudence chec. The

capital cost consist of the following:

(a) The expenditure incurred or projected to be incurred, including interest during construction

and financing charges, any gain or loss on account of foreign exchange risk variation during

construction on the loan.

(b) Capitalized initial spares

(c) Additional capital expenditure

The tariff regulation also specifies that all the assets will be taken in account to calculate the

capital cost

Except the assets which are not in use.

It also states that the tariff of a generating station will be calculated on the basis of the admitted

capital cost by the commission.

In the case of the thermal power plant and the transmission system the prudence check will be

carried on the basis of the benchmarks norms which are set by the from commission time to time.

Provided further that in cases where benchmark norms have not been specified, prudence check

may include scrutiny of the reasonableness of the capital expenditure, financing plan, interest

during construction, use of efficient technology, cost over-run and time over-run, and such other

matters as may be considered appropriate by the Commission for determination of tariff.

It has also been stated that the capital cost in case of such hydro generating station shall include:

(a) cost of approved rehabilitation and resettlement (R&R) plan of the project in conformity with

National R&R Policy and R&R package as approved; and

(b) cost of the developer’s 10% contribution towards Rajiv Gandhi Grameen Vidyutikaran

Yojana (RGGVY) project in the affected area.

3.6 Additional Capitalisation.

The additional capitalization is the the capital expenditure incurred or projected to be incurred,

after the date of commercial operation of the project.It is admitted by the commission after

prudence check.It is added to the capital cost of the project.

The additional capitalization by a generating station can be claimed citing the regulation 9,

regulation 5, regulation 6.The commission will be does a prudence check on the requirement of

the additional capitalization claimed by the firm and it also can reduce or increase the amount of

32

additional capitalization in its discretion.

(1) The capital expenditure incurred or projected to be incurred, on the following counts within

the original scope of work, after the date of commercial operation and up to the cut-off date

may be admitted by the Commission, subject to prudence check:

(i) Undischarged liabilities

(ii) Works deferred for execution;

(iii) Procurement of initial capital spares within the original scope of work, subject to the

provisions of regulation 8

(iv) Liabilities to meet award of arbitration or for compliance of the order or decree of a court

(v) Change in law

But the details of works included in the original scope of work along with estimates of

expenditure, undischarged liabilities and the works deferred for execution should be submitted to

the commission.

(2) The capital expenditure incurred on the following counts after the cut-off date may, in its

discretion, be admitted by the Commission, subject to prudence check:

(i) Liabilities to meet award of arbitration or for compliance of the order or decree of a Court

(ii)Change in law

(iii) Deferred works relating to ash pond or ash handling system in the original scope of work

(iv) In case of hydro generating stations, any expenditure which has become necessary on

account of damage caused by natural calamities (but not due to flooding of power house

33

attributable to the negligence of the generating company) including due to geological reasons

after adjusting for proceeds from any insurance scheme, and expenditure incurred due to any

additional work which has become necessary for successful and efficient plant operation.

(v) In case of transmission system any additional expenditure on items such as relays, control

and instrumentation, computer system, power line carrier communication, DC batteries,

replacement of switchyard equipment due to increase of fault level, emergency restoration

system, insulators cleaning infrastructure, replacement of damaged equipment not covered by

insurance and any other expenditure which has become necessary for successful and efficient

operation of transmission system

34

CHAPTER-4

RESULTS & DISCUSSION

4.1- Feroze Gandhi Unchahar Thermal Power Station Stage-I (420 MW)

Actual/Projected Additional Capital Expenditure:

The actual/projected additional expenditure claimed by the petitioner is as under;

component 2009-10 2010-11 2011-12 2012-13 2013-14

Net Additional Capital Expenditure claimed 1860 1116 1225 379 0

The cut-off date for the generating station has expired. Hence, the petitioner’s claim for

additional capital expenditure has to be examined in terms of Regulation 9 (2) of the 2009 Tariff

Regulations.

Expenditure on account of change in law -Regulation 9(2)(ii)

1.

Petitioner’s claim

The petitioner has claimed expenditure of `137.00 lakh during 2012-13 for Installation of

Chlorine leak detection system (serial No.15 of the table above) under the CEA approved R&M

scheme on the ground that installation of the same is mandatory.

Commission’s views

Since, the petitioner has not submitted any documentary evidence in justification of its claim, the

capitalization of the expenditure claimed has not been allowed under this head.

2. Petitioner’s claim

The petitioner has also claimed expenditure of `43.00 lakh during 2011-12 towards On line

monitoring of CO2 in flue gas at stack (serial No.18 of the above table) on the ground that CO2

is to be monitored at stack on continuous basis as per revised environmental norms.

Commission’s view

35

The commission found no reference as regards the statutory requirement for installation of

On-line monitoring of CO2 in flue gas at stack. In view of this, the claim of the petitioner for

capitalization is not allowed under this head.

Expenditure on Other than CEA approved schemes

1.


The petitioner has claimed expenditure of `284.00 lakh during 2012-13 towards new fire-fighting

control & detection system (including stacker re-claimer) on the ground that the existing system

has become obsolete and spares of the old system are not available.

Commissionviews

The commission said that capitalization of expenditure not covered under the provisions of

regulation9(2)isnotpermissible.

Moreover, the petitioner can meet expenses in respect of the said capital asset from the

compensation allowance granted to the generating station under Regulation 19(e) of the 2009

TariffRegulation.

2.


The petitioner has claimed expenditure of `925.00 lakh for 2011-12 towards procurement of

Locomotives, as capital addition scheme.


The justification submitted by the petitioner has been considered. The said asset (WDS-4D

locomotive) has become obsolete and has been phased out by Railways and no spare sare

available at railway workshops. Due to non-availability of spares, the petitioner has sought the

replacement of the said locomotive on account of the difficulty in maintaining the same. Also,

the replacement of the old locomotive is necessary as the said asset has a bearing on the coal

handling system of the plant. Moreover, if one locomotive is under repair/out of order, there

would be difficulty in unloading of rakes, consequent upon which there would be reduction in

the availability of the generating station and corresponding loss of generation. Considering the

36

submissions of the petitioner and the factors in totality, we are of the view that the claim of the

petitioner is justified. Hence, the expenditure of `925.00 lakh is allowed to be capitalized under

Regulation 9(2)(vii) of the 2009 Tariff Regulations, along with the corresponding de-

capitalization of `167.84 lakh (as furnished by the petitioner), which works out to `757.16 lakh

for 2011-12.

Additional Capitalisation Allowed:

2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure allowed 0 0 757.16 0 0

Liabilities discharged 42.92 12.59 0 0 0

total 42.92 12.59 757.16 0 0

The figure 4.1 shows the additional capital expenditure claimed by the company and the additional

capital expenditure approved by the commission for a particular year:

The various components of the annual fixed cost of the Feroze Gandhi Unchahar Thermal Power Station,

Stage-I are as given in the following figure 4.2:

0

500

1000

1500

2000

2500

2009-102010-112011-122012-132013-14

in la

khs

years

Add-cap Claimed/Approved

CLAIMED

APPROVED

02000400060008000

1000012000

In L

akh

s

Control Period

Annual Fixed Cost For 2009-13

Depriciation

Interest on Loan

Return on Equity

Interest on working Capital

O&M Expenses

37

4.2 Feroze Gandhi Unchahar Thermal Power Station Stage-II (420 MW)

Actual / Projected Additional Capital Expenditure during 2009-14

The actual/projected additional expenditure claimed by the petitioner is as under:


additional capital expenditure is required to be considered in terms of Regulation 9 (2) of the

2009 tariff regulations

Change in law- Regulation 9(2)(ii)

1. Ambient air Quality management System (AAQMS)


The petitioner has claimed an expenditure of `100.09 lakh (`2.40 lakh for room for AAQMS and

`97.69 lakh for AAQMS Package) during 2009-10 under Regulation 9(2)(ii), on the ground that

proper monitoring of ambient air quality around the power plant is a legal requirement of the

station.

Respondent, UPPCL Views

It stated that the capitalization of the said item cannot be permitted since the petitioner has not

indicated any change in law which has taken place due to which the add-cap has taken place.

Petitioner Claim

The petitioner vide its affidavit dated 11.5.2010 has clarified that the said expenditure is

required in compliance to the terms and conditions of the Environmental Clearance/NOC issued

by the Uttar Pradesh Pradushan Nigam Board vide letter dated 15.7.1996.

Commission’s Views

On perusal of the terms contained in the letter dated 15.7.1996, it is noticed that apart from other

activities, continuous monitoring systems for measuring stack emission and ambient air quality is

also required to be arranged In view of the above, the expenditure for `100.09 lakh is allowed by

the Commission under Regulation 9(2)(ii) of the 2009 Tariff Regulations.

COMPONENT 2009-10 2010-11 2011-12 2012-13 2013-14

ADD CAP-EX CLAIMED 358.43 2804 0 0 0

38

2.Liquid Waste Treatment Plant


The petitioner has claimed expenditure of `2233.00 lakh during 2010-11 towards or liquid waste

treatment plant in compliance with the terms and conditions of the Environmental

Clearance/NOC issued by the Uttar Pradesh Pradushan Nigam Board vide letter dated 15.7.1996.

Commission’sViews

It is noticed from the terms contained in the said letter that the effluents from the plant should be

properly treated to conform to Pollution Board's standards, prior to discharge from the plant. In

view of this, the expenditure is found justified and the same is allowed under Regulation 9(2)(ii)

of the 2009 Tariff Regulations.

3.Brick Making Machine


The petitioner has claimed expenditure of `30.00 lakh during 2009-10 under Regulation 9(2)(ii)

of the 2009 Tariff Regulations, towards brick making machine on the ground that the said asset

is required for achieving 100% ash utilization targets as per notifications of the Ministry of

Environment & Forests, Government of India and hence it is proposed to procure.

Respondent, UPPCL views

The respondent, UPPCL in its reply has objected to the capitalization of this expenditure on the

ground that the petitioner has not indicated the 'change-in-law' that has necessitated the sad

expenditure. UPPCL has also submitted that the said expenditure is not covered under

Regulation 9(1) or 9(2) of the 2009 Tariff Regulations and hence the expenditure may not be

allowed.

Commission’sViews

39

The commissions stated that it will not be prudent to load the said expenditure on brick making

machine as additional capital expenditure, when such expenditure is neither covered under

change in law nor the income from fly ash utilization is shared with the beneficiaries.


The petitioner has also claimed expenditure for `60.00 lakh towards atomic absorption

spectrophotometer and `15.00 lakh towards energy audit instrument during 2010-11 under

Regulation 9(2)(ii) of the 2009 Tariff Regulations


These are minor assets in the nature of tools and tackles. Since, the generating station is entitled

for compensation allowance under Regulation 19(e) of the 2009 Tariff Regulations to meet the

expenses for minor assets.This claim is not allowed in ADD-CAP.

Deferred works relating to ash pond or ash handling system in the original

scope of work- Regulation 9(2) (iii)

Petitioner’sclaim

The petitioner has claimed an expenditure of `223.98 lakh (`203.98 lakh for Upstream slope

protection of ash dyke, `20.00 lakh for ash dyke modification) during 2009-10 and `159.00 lakh

(50.00 lakh for ash dyke modification, `47.00 lakh for construction of peripheral drains for ash

dyke and `62.00 lakh for construction of ash corridor road) during 2010-11 as these works are

required for proper storage of ash and maintaining the integrity of the ash pond.


These are normal activities done in phases depending upon the requirement with the passage of

time, during the useful life of the plant and is covered under the original scope of work hence

these are allowed

Expenditure on balance works

1.Sewerage system

Petitioner’sclaim

40

The petitioner has claimed expenditure for `143.00 lakh during 2010-11 towards sewerage

system on the ground that these balance works within the original scope of work are required to

be completed to ensure hygiene condition.


Since deferred works after the cut-off date of the generating station is not permitted to be

capitalized in terms of Regulation 9(2) of the 2009 Tariff Regulations, the expenditure claimed

by the petitioner is not allowed by the commission citing the above reason.

2.Erection, Testing & Commissioning of 11 kV circuit line


The petitioner has claimed expenditure of `1.76 lakh towards erection testing & commissioning

of 11 kV circuit line and `2.60 lakh towards filling of area for 11 kV circuit line during 2009-10

on the ground that these are balance works under original scope of work


Since deferred works after the cut-off date of the generating station is not permitted to be

capitalized in terms of Regulation 9(2) of the 2009 Tariff Regulations, the expenditure claimed

by the petitioner cannot be allowed.

Also, the petitioner has not provided the justification for the said work after 9 to 10 years of the

commercial operation of the generating station and has also not indicated as to how the

generating station had been managed without undertaking the said work.

Petitioner’sclaim

The petitioner has also claimed expenditure of `130.00 lakh towards cup lock for boiler

(scaffolding) and `50.00 lakh towards modern tools for boiler during 2010-11 as 'Special tools'

for successful and efficient operation of the generating station.The petitioner has also submitted

that these T&P equipments are required to reduce equipment downtime through improved

practices, speed and quality of repair and maintenance functions.

The petitioner has also claimed expenditure of `14.00 lakh during 2010-11 towards Solar Water

41

heater on the ground that the same is required fo conserving energy.

Respondent NDPL views

It has submitted that the petitioner's claim for expenditure may not be allowed in terms of the

last proviso to Regulation 9(2) of the 2009 Tariff Regulations as these assets do not contribute to

the successful and efficient operation of the generating station and are of regular nature occurring

everyyear.


The expenditure on acquiring minor items/assets in nature of tools and tackles after the cut-off

date is not permissible in terms of Regulation 9(2) of the 2009 Tariff Regulations, the claim of

the petitioner under this head is not allowed citing the reason above.


The figure shows the additional capital expenditure claimed by the company and the additional capital

expenditure approved by the commission for a particular year:


Stage-II are as given in the following figure:

0

500

1000

1500

2000

2500

3000

2009-102010-112011-122012-132013-14

iN L

AK

HS

CONTROL PERIOD

ADD-CAP CLAIMED/APPROVED

CLAIMED

APPROVED

Components 2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure 324.07 2392 0 0 0


TOTAL Additional capital expenditure allowed 332.53 2413.49 0 0 0

42

02000400060008000

1000012000

in la

khs

Years

AFC-COMPONENTS FOR 2009-14

Depriciation

Interest on Loan

Return on Equity


43

4.3 Feroze Gandhi Unchahar Thermal Power Station, Stage-III (210 MW)

Actual/Projected Additional Capital Expenditure

The actual/ projected additional capital expenditure claimed by the petitioner for 2009- 14 is as under:


additional capital expenditure is examined in terms of the provisions of Regulation 9 (2) .

Deferred works relating to Ash pond or Ash handling system in the original scope of

works-Regulation9(2)(iii)

1.

Petitioner’s Claim

The petitioner has claimed the actual/projected expenditure of `81.77 lakh during 2009-10,

`93.64 lakh during 2010-11 and `62.00 lakh during 2012-13 for works relating to Ash pond, Ash

handling system, Piping system for Ash handling system and for dry ash extraction and

transportation system under Regulation 9(2)(iii) of the 2009 Tariff Regulations.


The works relating to Ash handling and Ash disposal system are a normal practice and the said

works form part of the original scope of work and are normally taken up in stages as and when

required.

Expenditure incurred for implementation of scheme for provision of supply of electricity in

5 km area around Central Power plants

1. Petitioner’s Claim

2009-10 2010-11 2011-12 2012-13 2013-14

Additional Capital Expenditure

claimed

1031.01 121.53 1186.00

2506.00 0.00

44

According to the notification dated 27.4.2010 of the Government of India regarding provision of

supply of electricity in 5 km area around Central Power plants, the petitioner is required to create

infrastructure for supply of reliable power to the rural households of the villages within a radius of

5 km of existing and new power stations.The petitioner has submitted that DPR for implementation

of the scheme is under preparation and it was not possible to estimate the projected expenditure at

this stage.


The petitioner is at liberty to approach the Commission through an appropriate application which

would be considered in accordance with law.

Other capital works

1 RCC Paving & CLSM Road


The petitioner has claimed actual expenditure of `117.78 lakh during 2009-10 and 16.42 lakh

during 2010-11 for RCC Paving and CLSM Road. By affidavit dated 14.11.2011, the petitioner

has submitted that the work was in original scope and was awarded on 13.9.2006, before the cut-

off date, to M/s Jay Dee construction (the agency) and the delay in execution of work was due to

poor mobilization of work by the agency and the said agency had left, without completing the

job and is absconding since March, 2010. Pursuant to this, the reconciliation of material issued

and work done by the agency is done at site for short closure of contract .

Respondent NDPL Views

It has submitted that the claims for capitalization in respect of deferred works, are not covered

under the provisions of Regulation 9(2) of the 2009 Tariff Regulations, except for ash

management systems, and the said deferred works should not be allowed to be capitalized.

Commission’sViews

Since the work was awarded prior to the date of commercial operation and the liability for

payment for such work had been incurred by the petitioner prior to the cut-off date, which was

discharged during the years 2009-10 and 2010-11, the case is covered under Regulation 9

(2)(viii) of the 2009 Tariff Regulations.

45

2. Construction of D-Type quarters


The petitioner has claimed total expenditure of Rs. 100.00 lakh during 2011-12 , Rs.250.00 lakh

during 2012-13 for construction of 'D' Type quarters.


The delay in execution of the work is not attributable to the petitioner. Since mediation and

settlement form part of arbitration process, the capitalisation of the said expenditure during 2011-

12 and 2012-13 is allowed, under Regulation 9(2)(i) of the 2009 Tariff Regulations.

3.Sewerage System in Plant


The petitioner has claimed expenditure of `124.00 lakh during 2011-12 for Sewerage system in

plant


The generating station was taken over by the petitioner during 1992. It is observed that there

were difficulties in the restoration of the sewerage pipe lines in the absence of drawings of

underground facilities. However, there appears to be no justification in the execution of sewerage

system after more than three years after the cut-off date, i.e 31.3.2008. In view of this, the

justification submitted by the petitioner is not acceptable and accordingly, the expenditure of

`124.00 lakh during 2011-12 is not allowed to be capitalized.

4. HP/IP Turbine module


The petitioner has claimed the expenditure of `802.62 lakh during 2009-10, `900.00 lakh during

2011-12, for the supply of Rotors of HP and IP turbines

Respondent UPPCL views

It has submitted that the expenditure proposed to be incurred on initial spares, over and above the

ceiling norms, should not be allowed.

46


The date of commercial operation of the generating station is 1.1.2007 and the petitioner is aware

that all works within the original scope of the project need to be completed within the cut-off

date, in terms of the provisions of the 2004 Tariff Regulations. It is observed that the petitioner

had placed orders for spare rotors only after the commercial operation of the generating

station, and it had full knowledge of the frequent delays on the part of M/s BHEL to supply

the power plant equipments, after the placement of the order. This, according to us,

indicates that the petitioner has not taken appropriate monitoring and project

management measures, to complete all the works of the generating station within the cut-

off date. The claim for capitalisation on the ground that orders were placed prior the cut-off date,

but could not be completed due to delays, is not acceptable, considering the fact that no steps

were taken by the petitioner for completion of the said work within the cut-off date. In view of

this, the claim for capitalisation of the said expenditure is not allowed.


Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure allowed 207.1 112.92 162 250 0


total 517.66 228.48 162 250 0



0

500

1000

1500

2000

2500

3000

2009-10 2010-11 2011-12 2012-13 2013-14

iN L

AK

HS

YEARS


Claimed

Allowed

47


Stage-III are as given in the following figure:

01000200030004000500060007000

IN L

AK

HS

YEARS

COMPONENTS OF AFC FOR 09-14

Depriciation

Interest on Loan

Return on Equity


O&M Expenses

48

4.4 Badarpur Thermal Power Station (705 MW)

Actual/Projected Additional Capital Expenditure during 2009-14

CEA approved R&M schemes

1.Main Plant Package


In the petition, out of an expenditure of `42705 lakh (including taxes & duties) projected to be

incurred for R&M of main plant package, an expenditure of 1474lakh during 2009-10, 17081

lakh during 2013-14 and 24150 lakh during 2014-15 has been claimed.


The benefits of R&M would be passed on to the beneficiaries only after completion of R&M of

Main Plant package during the year 2014-15 of the next tariff period, the expenditure of `41231

lakh projected to be incurred for R&M of main plant package could only be considered in the

next tariff period, Similarly, the actual expenditure of `1474 lakh pertaining to R&M of the main

plant package incurred during 2009-10 has also not been allowed by this order.

2.Ambient Air Quality Monitoring system (AAQMS)


The petitioner has claimed an expenditure of `1.11 lakh during 2010-11 towards provision for

Ambient Air Quality Monitoring system (AAQMS) for proper air quality measurement at the

station.


The asset is required for compliance to environmental norms and is statutory in nature the

capitalization of the same is allowed

3.Augmentation of Electro Static Precipitators (ESPs)


The petitioner has claimed expenditure of `3440.00 lakh and `382.00 lakh during the years 2012-

13 and 2013-14 respectively, towards Augmentation of ESPs, which is within the CEA approved

cost of`3823 lakh.

The petitioner has submitted that average emission in Unit-IV is high (around 300-400 mg/Nm3)

compared to the present day emission norms and in Unit-V, the average emission in the range of

49

100-150 mg/Nm3.

As per the latest environmental norms specified in the Air consent given by the Delhi Pollution

Control Committee, CREP action plan and Environmental Pollution (Prevention and Control)

Authority (EPCA), the SPM emission levels are to be less than 50 mg/Nm3


The expenditure for `3822.00 lakh is allowed to be capitalized along with the corresponding de-

capitalization of `382.20 lakh (10%), subject to demonstration of environmental norms being

achieved.

3.R&M works of 220 kV Switchyard


The petitioner has claimed expenditure of `1000.00 lakh during 2011-12 and 272.00 lakh for

2012-13 (totalling `1272.00 lakh) for R&M works of 220 kV Switchyard which is within the

CEA approved cost of `1294.00 lakh..

This is a continuing work which consists of replacement of Current Transformers (CTs), Circuit

Breakers, Surge Arrestors, distance protection and busbar protection etc.


The total expenditure of `1272 lakh for 2011-13 along with the corresponding de-capitalization

of `127.20 lakh (10%) is allowed.

4.Replacement of existing station lighting fixtures


The petitioner has claimed expenditure of `11.97 lakh for 2009-10, `23.00 lakh for 2011-12 and

`30.03 lakh for 2012-13 (totalling `65.00 lakh) towards the replacement of existing station

lighting fixtures, which is as per the CEA approved cost. The petitioner has submitted that the

existing station area lighting fixtures got damaged due to ageing of the reflectors and the lumens

output of the area has reduced considerably. It has also submitted that the operation and

maintenance of the plant components/equipments gets hampered due to insufficient area lighting

of the plant. Moreover, the LT cables, lighting distribution boards, conduiting, wiring,

switchboards are damaged at most of the locations and some are beyond repair.


50

Since these assets are required for safe and efficient operation of the plant, the expenditure of

`65.00 lakh along with the corresponding de-capitalization of `6.50 lakh (10%) is allowed to be

capitalized

5.Replacement of Goods lift (2 nos)


The petitioner has claimed an amount of `37.04 lakh for 2010-11, `90.00 lakh for 2012-13 and

`10.00 lakh for 2012-13 (totaling `137.04 lakh) for replacement of Goods lift No. 2 and 3 against

the CEA approved cost of `88.00 lakh.

The petitioner has submitted that the goods lift (No.2 and 3) are of ECC make, the car bearing,

structure, load pulley, sheave pulley, counter weight, sling are in damaged condition and due to

obsolescence, spares and maintenance support are also not available from the OEM. The non

availability of goods lift hampers easy and timely movement of the equipment and tools to the

required elevation in steam generator thereby causing delay in maintenance activities.


Since the asset is necessary for safe and efficient operation of the plant, the CEA approved

expenditure of `88.00 lakh along with corresponding de-capitalization of `8.80 lakh (10%) is

allowed.

Supply and Installation of In Line Magnetic Separator (ILMS)


The petitioner has claimed expenditure of `61.02 lakh for 2010-11 and `68.00 lakh for 2011-12,

(totalling `129.02 lakh) against the CEA approved cost of `129.00 lakh for Supply and

Installation of ILMS and suspended magnets in CHP.


In view of the justification submitted the expenditure for `129.02 lakh along with corresponding

decapitalization of `12.90 lakh (10%) is allowed for safe and efficient operation of the plant

51

6.Replacement of on-line instrumentation in Water Treatment Plant (WTP)


The petitioner has claimed an expenditure of Rs 17.32 lakh for 2009-10 for replacement of on-

line instruments in water treatment plant.


For the purpose of operational reliability and sustenance of availability, the expenditure of

`17.32 lakh with corresponding de-capitalization of `1.73 lakh (10%) is allowed.

7.Repair and Refurbishment of coal hopper in Coal Handling Plant (CHP)


The petitioner has claimed expenditure of 70.00 for 2012-13 and 30.00 for 2013-14 (totaling

`100.00 lakh) in line with the CEA approved cost towards Repair and refurbishment of coal

hopper in CHP


the expenditure of 100.00 lakh along with corresponding de-capitalization of `10.00 lakh (10%)

for strengthening of coal hoppers in Coal Handling Plant is allowed.

8.Fire detection and protection system package for Unit Control Board (UCB) and Main Control

Board (MCB)

Petitioner’sClaim

The petitioner has claimed an expenditure of `399.00 lakh for the year 2014-15 for fire detection

& protection system package for Unit Control Board (UCB) and Main Control Board (MCB).


The expenditure is not allowed to be capitalized during the period 2009-14 and the same would

be considered in accordance with law during the next tariff period.

Expenditure on Schemes other than CEA approved schemes

1.Plant Works


52

The petitioner has claimed total expenditure of `17691.05 lakh (`17676.05 lakh for 2009-14 in

respect of various items/works like pay loaders (`51.74 lakh), portable environment monitoring

instruments (`17.49 lakh), up-gradation of fire detection and protection system (`50.00 lakh),

installation of flow measuring device (`17.50 lakh) and line monitoring instruments in chimney

(`30.0 lakh), instruments (`49.32 lakh), fire tenders (`55.00 lakh), dual channel vibration analyzer

(`20.00 lakh), passenger lift No.2 (`65.00 lakh), shunting loco (`93.00 lakh), vapor absorption

system (`260.00 lakh), fire-fighting of Stage-II LDO and HSD tank (`25.00 lakh) electrical works

in employees and CISF colony (`55.00 lakh), installation of integrated RO plant for DM plant

(`2200.00 lakh) and `15.00 lakh for 2014-15 towards electrical works in employees and CISF

colony), against the approved cost of `17881.27 lakh.

It is also noticed that the said claims include an expenditure of `13850.00 lakh (`6925.00 lakh

each for 2012-13 and 2013-14) on Integrated Closed Cycle operation of CW system due to

deterioration in the inlet raw water quality including modification in auxiliary cooling system


Against the CEA approved cost of `17.00 lakh for passenger lifts, the petitioner has claimed an

expenditure of `65.00 lakh during 2011-13. However, no justification has been submitted by the

petitioner for the said increase in the expenditure claimed. In view of this, the expenditure is

restricted to the approved cost of `17.00 lakh and the same is allowed.

Out of the total expenditure of `70.00 lakh, the expenditure of `15.00 lakh proposed for 2014-15

towards electrical works in employees and CISF colony has not been allowed and the same

would be considered in accordance with law during the next tariff period.

2.Plant Civil Works


The petitioner has claimed expenditure of `7232.90 lakh (`1020 lakh for 2009-14 and `6212.90

lakh during 2014-15 in respect of works/items like nallah coverage, new services building,

canteen renovation, workshop building, renovation of stores, inter connection of underground

tanks for drinking water supply from DJB mains, construction of rain water harvesting, plant

53

boundary wall, labour rest rooms, strengthening of conveyor structure, 2nd

raising of Ash Dykes,

Phase-I and V against the approved cost of `8121.50 lakh under this scheme.


The expenditure for `6212.90 lakh (`5192 lakh) proposed for capitalization during 2014-15 is not

allowed and the same shall be considered in accordance with law during the next tariff period.

The claim of the petitioner for `45.00 lakh for 2011-12 for inter connection of underground tanks

for drinking water supply from DJB mains is restricted to the approved cost of `40.00 lakh and is

allowed, in the absence of any proper justification for increase in the said expenditure.

The capitalization of an expenditure of `1015.00 lakh for 2009-14 is allowed.

3.Township Civil Works


The petitioner has claimed an expenditure of `1468.00 lakh for 2014-15 under this head and has

furnished the asset-wise justification for the same.


Since, capitalization of this expenditure has been sought for during the next tariff period, the

claim of the petitioner is not allowed during 2009-14.

4.Other works


The petitioner has claimed total expenditure of `3327.06 lakh for 2009-14 against approved cost

of 1959.02 lakh in respect of various assets under the heads boiler, capital civil plant, Ash

handling, Energy conservation etc.

The petitioner has claimed `1106.62 lakh for 2010-12 against the approved cost of `438.80 lakh

for bridges over Gurgaon and Agra canal.


An expenditure of `438.80 lakh was projected to be incurred during 2009-14 and an expenditure

of `640.85 lakh has already been paid to the said departments prior to the filing this petition,

54

thereby indicating the total expenditure for the work as `1106.62 lakh.

The expenditure of `1106.62 lakh is allowed to be capitalized, considering the negligible increase

from the projected cost


The petitioner has also claimed expenditure of `1951.00 lakh for 2011-13 against the approved

cost of `959.18 lakh for dry ash extraction system package under this head.

Against the value to be awarded / to be awarded amount of `1918.00 lakh, an expenditure of

`959.18 lakh is proposed for capitalization during 2009-14 and an expenditure of `1245.00 lakh

had already been paid to the contracting agencies upto 31.3.2009, prior to filing the petition and

the said amount was lying under CWIP.


The amount of `1951 lakh is allowed to be capitalized.


The petitioner's claim for an expenditure of `64.59 lakh for 2009-11 for UPS and `61.30 lakh

during 2009-13 for lab instruments.

Claims in respect of other works/items consisting of `20.00 lakh for 2011-12 for ventilation

system in CHP, `14.75 lakh for 2009-10 for PLC based system in old CHP, `15.70 lakh for 2009-

10 and `17.09 lakh for 2009-11 for raising of Ash dyke (3rd and 1st raising for Phase-II and V

respectively) under Ash handling system.


The claim for lab instruments are restricted to the approved cost of `58.00 lakh and `60.00 lakh

respectively, in the absence of justification for increase in expenditure and the same is allowed to

be capitalized.

The claims in respect of other works/items consisting of under Ash handling system are allowed

as these works are under approved cost.

55


Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Amount allowed on CEA approved schemes (including IDC and FC) 0 0 0 0 0

Other than CEA approved SCEME 0 538.03 3145.55 7966.2 9814.4

Total 0 538.03 3145.55 7966.2 9814.4

Discharges of liabilities 41.36 18.81 0 0 0

Additional capital expenditure ALLOWED 41.36 556.84 3145.55 7966.2 9814.4



The various components of the annual fixed cost of the BadarpurThermal Power Station are as given in the

following figure

05000

1000015000200002500030000

iN L

AK

HS

YEARS


Net projected additional capex claimed

Total Capex Approved

05000

1000015000200002500030000

Axi

s Ti

tle

Axis Title

COMPONENTS OF AFC(09-14)

Depriciation

Interest on Loan

Return on Equity


O&M Expenses

56

4.5 National Capital Thermal Power Station Dadri, Stage-I (840 MW)

Actual/Projected Additional Capital Expenditure during 2010-14

The actual /projected additional capital expenditure claimed by the petitioner is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure 378 136 0 6304 4840

The cut-off date for the generating station had expired. Hence, the petitioner’s claim for

additional capital expenditure needs to be considered in terms of Regulation 9 (2) of the 2009

Tariff Regulations.

Actual Capital Expenditure

1.

Petitioner’sClaim

The petitioner has sought the capitalization of expenditure of `27.00 lakh due to Arbitration

award in respect of the construction of transit camp and Quarters (A,B,C type), `300.00 lakh due

to Arbitration award in respect of NDCT package.

Commissions Views

It is allowed under Regulation 9(2)(i) of the 2009 Tariff Regulations. The expenditure of `12.00

lakh for payment of final bill towards fire detection system for Administrative building has been

allowed in terms of Regulation 9(2)(viii) of the 2009 Tariff Regulations.

2.Ash Handling System


The petitioner has claimed expenditure of `136.00 lakh during 2010-11 towards Ash Storage

modification.

The petitioner vide its affidavit dated 4.1.2012 has submitted that this Ash related work is

proposed for capitalization under Regulation 9(2)(ii) of the 2009 Tariff Regulations, since 100%

ash utilization is required to be undertaken as per notification dated 14.9.1999 and its amendment

dated 3.11.2009, issued by the Ministry of Environment & Forests, Government of India.

Commissions Views

The expenditure of `136.00 lakh is allowed to be capitalized under Regulation 9(2)(ii) of the

2009 Tariff Regulations.

57

CEA approved R&M schemes


The petitioner has claimed expenditure of `6304.00 lakh during 2012-13 and `4840.00 lakh

during 2013-14 (including taxes, duties and insurance etc.) under CEA approved R&M schemes.

The respondent UPPCL:

It has has submitted that the claims of the petitioner for additional capitalization in respect of

CEA approved works may be disallowed since the petitioner has taken the benefit of

compensation allowance under Regulation 19(e) of the 2009 Tariff Regulations.

The respondent BRPL:

It has has submitted that the expenditure on R&M activities cannot be considered during the

period 2009-14 since the petitioner has not complied with the provisions of Regulation 10 of the


It has also submitted that the petitioner should seek the approval of the Commission under

Regulation 10 for the expenditure proposed to be incurred on R&M activities and pursuant to the

approval, the said expenditure would form the basis for determination of tariff as per provisions

of Regulation 10(3) of the 2009 Tariff Regulations.

Petitioner’s Response

In response, the petitioner has submitted that the projected claim is not for life extension of the

plant beyond the useful life of 25 years and hence the same does not fall under Regulation 10.

The respondents NDPL and BYPL:

They have also submitted that the claims of the petitioner for additional capitalization, except for

works related to ash handling, are outside the scope of the 2009 Tariff Regulations and since

compensation allowance is admissible, the additional capitalization of expenditure may be

rejected.

Commissions Views

These assets/works are essentially required for efficient operation of the generating station.

However, there is no provision under Regulation 9(2) of the 2009 Tariff Regulations to consider

the capitalization of these capital assets. As decided by the Commission, the additional capital

expenditure for successful and efficient operation of the generating stations for reasons other

than those provided for under Regulation 9(2) of 2009 Tariff Regulations is not permissible.

Moreover, the generating station has not completed 25 years and hence the question of

58

considering R&M schemes for extension of useful life does not arise.

However Regulation 19(e) of the 2009 Tariff Regulations provides for a separate compensation

allowance to meet the expense on new assets of capital nature including in the nature of minor

assets as laid down therein. Since compensation allowance as per the said regulation is

admissible to the generating station, we are of the view that the expenses for these capital assets

may be met by the petitioner from the said allowance. The petitioner may limit the expenditure

within the compensation allowance, by phasing the expenditure suitably.


Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure allowed -378 136 0 0 0

Liabilities discharged 103.5 0 0 0 0

Additional capital Expenditure allowed -274.5 136 0 0 0

The annual fixed charges for the period 2009-14 in respect of the generating station is summarized as under:

Components 2009-10 2010-11 2011-12 2012-13 2013-14

Depreciation 2445.3 2433.21 2439.26 2439.26 2439.26

Interest on Loan 126.11 0 0 0 0

Return on Equity 20180.52 20175.64 20180.43 20180.43 20180.43

Interest on working Capital 7193.8 7240.85 7309.99 7349.25 7408.71

O&M Expenses 15288 16161.6 17085.6 18068.4 19101.6

Cost of Secondary fuel oil 2457.17 2457.17 2463.9 2457.17 2457.17

Special Allowance 210 252 294 294 357

TOTAL 47690.9 48468.47 49479.18 50494.51 51587.17

59



The various components of the annual fixed cost of the said Thermal Power Station are as given in the

following figure:

0

5000

10000

15000

20000

25000

In L

akh

s

Years

AFC-Components

Depriciation

Interest on Loan

Return on Equity


O&M Expenses

-10000

1000200030004000500060007000

In L

akh

s

Years

Add-Cap Claimed/Approved

Add-Cap Claimed

ADD-Cap Approved

60

4.6 Anta Gas Power Station (419.33 MW)

Projected /Actual Additional Capital Expenditure

The petitioner has claimed the actual/projected additional capital expenditure for the period 2009-14 as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Additional Capital expenditure 11079.6 1391.08 859.4 0 0


additional capital expenditure has to be examined in terms of Regulation 9 (2) of the 2009 Tariff

Regulations.

1.R&M of Gas Turbines (GTs).


The expenditure for `11868.12 lakh (11429.27 +438.25) on R&M of Gas Turbines (GTs) as

furnished by the petitioner. includes expenditure on compressor components, combustion

chamber components, Gas Turbine components, assembly materials, consumables, fasteners and

coupling materials, insulation etc.

Commissions views

Some of these expenditure like expenditure on consumables, insulation and a part of expenditure

on assembly material, fasteners and couplings, part of combustion chambers, and gas turbine

initial stage blades etc are already covered in O&M as part of major overhauls.In view of this the

expenditure on consumables and insulation is not to be capitalized.

The expenditure involved in the replacement of Hot gas path components like vanes, gas Turbine

stator and rotor blades, Inlet segment, entry segment, Tip sealing segment etc. which would be

covered under O&M expenses allowed to the generating station. Hence, the capitalization of

expenditure on replacement of Hot gas path components under R&M would require the

deduction of expenditure towards the cost of hot gas path components covered under O&M

expenditure from the additional capital expenditure to be allowed for R&M

2.Expenditure on Gas Turbine (GT-3) rotor:

61


The petitioner has claimed expenditure of `98.27 lakh for the said asset and the justification

submitted by the petitioner is as under.

“As per OEM, the expected life of the rotor 100000 operation hours and the rotor has exceeded

that life. As per experience of OEM, after 100000 operating hours of running life of rotor there

is chance of failures of welding joints of welded discs and if these welding defects originate, due

to high speed of running etc., the same may lead to catastrophic failure of the rotor and thus the

turbine as a whole. To avoid this, OEM have recommended to recondition the GT rotor at

100000 operating hours so as to further enhance their operation life to 100000 operating hours.

Under reconditioning work the Compressor portion of the Rotor has been reconditioned whereas

the turbine portion has been cut and removed as this portion cannot be reconditioned due to

continuous operation at high temperatures.”


As the expenditure pertains to balance work which was allowed by the Commission during 2008-

09, the same is allowed.

Other Capital additions on R&M activities

1.Installation of Online Compressor cleaning system


The petitioner has claimed an expenditure of `231.00 lakh during 2010-11 towards the

installation of Online Compressor cleaning system.Apart from increase in the availability, on line

compressor cleaning would also improve the performance of GTs.


The benefit of such improvement in performance would be retained by the generator and hence it

may not be appropriate to allow such expenditure, especially in the absence of any commitment

on the part of the petitioner to pass on the benefit of efficiency improvement tothe beneficiaries.

Hence the said claim is not allowed.

2.Installation of Additional CT Pump


62

The petitioner has claimed an expenditure of `240.83 lakh during 2010-11 for installation of

additional CT pump. The justification furnished by the petitioner for such expenditure is that

there are 2 x 50% capacity Cooling Tower Pumps installed in the Cooling Water System and the

failure of one pump affects approximately 50% of generation of the Steam Turbine. For

sustained availability, another pump is required for emergency purpose


Since the expenditure in respect of the asset which is in the nature of spares, the capitalization of

the same is not allowed.

4.Installation of On-line Gas measurement


The petitioner has claimed an expenditure of `145.53 lakh during 2011-12 for installation of on-

line Gas Measurement system for better control of GTs and to validate the information on

generation-vs- gas consumption


Since modernization of GT control contribute to the efficient and successful operation of the

generating station, the expenditure is allowed to be capitalized in terms of Regulation 9(2)(vi) of

the 2009 Tariff Regulations.

5.Up gradation of GT & ST Control System (C&I)


The petitioner has claimed expenditure of `385.70 lakh during 2009-10 and `300 lakh during

2010-11for up-gradation of C&I system. The petitioner has submitted that since the present

control systems were installed and commissioned as part of original main plant C&I package, the

Original Equipment Manufacturer has declared all these systems as obsolete and the spares for

the same are no more available.


The claim of the petitioner is justified and the expenditure is allowed to be capitalized along with

the corresponding de-capitalization of `177.43 lakh during 2009-10 and `138.00 lakh during

2010-11.

6.Installation of Fire Protection & Detection System for cable galleries


The petitioner has claimed expenditure of `31.71 lakh during 2009-10 for installation of fire

fighting system in cable galleries. The petitioner has submitted that the cable galleries have not

63

been provided with a fire fighting system and that there was only one entrance in the cable

gallery. In the present layout it is not feasible to provide additional regular fire exits for the cable

galleries and also there is no clear passage available for movement in cable galleries. In case of

fire it would be extremely difficult as all cables are provided in the basement of building


Since safety of the plant and personnel is an essential requirement for efficient and successful

operation of the generating station, the expenditure claimed is allowed to be capitalized.

7.Replacement of Hot Water Pipeline of Cooling Tower


The petitioner has claimed an expenditure of `157.39 lakh during 2011-12 for the said asset and

has submitted that due to high humidity in the vicinity of cooling tower and raw water media,

external and internal corrosion /erosion of the pipelines was taking place. Due to this the pipe

thickness has reduced and if the problem aggravates, the cooling tower system may be affected

disrupting the generation from Steam Turbine.


The submissions of the petitioner appear reasonable and the capitalization is justified hence

allowed after decapitalization,

8.Replacement of underground fire fighting pipelines


The petitioner has claimed expenditure of `217.33 lakh during 2011-12 in respect of the said

asset and has submitted that the underground fire fighting water pipe lines have got corroded and

eroded with passage of time, which has made the fire fighting system unreliable.

Considering the fact that the life of the generating station is more than 15 years and the

possibility of increase in failure of pipe lines leading to risk of reduced safety, the justification

furnished by the petitioner is accepted keeping in view the overall interest of the safety of the

generating station and its personnel.


The justification furnished by the petitioner is accepted keeping in view the overall interest of the

safety of the generating station and its personnel.

9.Phasing out of Halon system fire fighting system


64

The petitioner has claimed expenditure of `245.15 lakh during 2011-12 for the said asset towards

the replacement of Halon system to protect the ozone layer.


Considering the fact that the expenditure is statutory in nature (under National Fire Protection

Association Standard on Clean Agent Fire Extinguishing system (NFPA-2001), capitalization of

the same is allowed.

10.Augmentation of Raw Water Reservoir Capacity


The canal closure period which was increased by the Irrigation department of Rajasthan

Government has been may be taken as a change in policy of the State Government, which is

beyond the control of the petitioner.


In view of this, we allow the claim of the petitioner for `369.78 lakh during 2009-10 and `82.0

lakhs during 2010-11 under Regulation 9(2)(ii) of the 2009 Tariff Regulations.

11.Increase in WHRB stack height


The petitioner has claimed expenditure of `159.76 lakh during 2010-11 towards increasing the

stack height from +28 M level to +30 M level. According to the petitioner, thesaid expenditure is

necessary for compliance with the provisions of Air Act, 1981, since theRajasthan Pollution

Control Board has issued show cause notice dated 5.5.2009 to thisgenerating station for not

increasing the stack height.


The expenditure is allowed.

12.Welfare Centre Building


The petitioner has claimed expenditure of `16.64 lakh during 2009-10 towards Welfare Centre

Building. The petitioner has submitted that expenditure for construction of welfare Centre

building form part of a statutory requirement, and no welfare Centre building was available in

the plant to fulfill the social needs of the employees of the generating station.


65

The submissionof the petitioner is not justifiable as it does not give any direct benefit to the

beneficiaries. We are not inclined to load this expenditure on the beneficiaries and the

capitalization of the expenditure is not allowed.

The revised additional capital expenditure allowed for the purpose of tariff is as under:

2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure allowed 8606.34 781.25 747.823 0 0

Discharges of iabilities 572.03 396.02 0 0 0

TOTAL 9178.37 1177.27 747.823 0 0

The annual fixed charges for the period 2009-14 in respect of the generating station is summarized as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Depreciation 2117.25 2675.44 2750.85 2799.39 2799.39

Interest on Loan 530.91 396.47 366.3 328.35 286.47

Return on Equity 7462.92 7827.67 7895.47 7921.81 7921.81


O&M Expenses 6206.08 6562.51 6935.72 7334.08 7753.41

Cost of Secondary fuel oil 0 0 0 0 0


TOTAL 18755.38 19941.25 20460.46 20918.99 21324.41




following figure:

02000400060008000

1000012000

in la

khs

Years

Add-Cap Claimed/Approved

Add-cap claimed

Net Add-cap allowed

66

0

2000

4000

6000

8000

10000

IN L

AK

HS

YEARS

AFC-COMPONENTS

Depriciation

Interest on Loan

Return on Equity


O&M Expenses

67

4.7 Kahalgaon Super Thermal Power Station Stage-I (840 MW)

The actual /projected additional capital expenditure claimed by the petitioner is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Add-cap claimed -334.1 5913.8 7761.1 1430.1 341

The cut-off date for the generating station had expired. Hence, the petitioner’s claim for

additional capital expenditure is required to be considered in terms of Regulation 9 (2) of the


Deferred works relating to Ash pond or Ash handling system in the original scope of works

- Regulation 9 (2)(iii)

1.


The petitioner has claimed actual expenditure of `203.80 lakh during 2009-10, and projected

expenditure of `490.90 lakh during 2010-11, `798.50 lakh during 2011-12, `540.00 lakh during

2012-13 and `341 lakh during 2013-14 for Ash dyke raising works and Ash handling system.


These works relating to raising of Ash dykes and Ash disposal system are a normal practice and

the said works forms part of the original scope of work and are normally taken up in stages as

and when required. Since these are normal activities done in phases depending upon the

requirement with the passage of time, during the useful life of the plant and is covered under

original scope of work, the expenditure claimed is allowed to be capitalized under this head..

Environmental System - (Regulation 9(2)(ii))

1.Dry Ash Extraction System and transportation


The petitioner has claimed expenditure of `974.00 lakh during 2011-12 for commissioning of

Dry Ash Extraction System and transportation plant to be used for transporting fly ash from ESP

hoppers of Units-III and IV to the silos. Ash will be extracted from ESP hoppers and collected in

buffer hoppers and would then be transported from buffer hoppers to the silo with the help of

68

transport air blowers. There will be 2 nos of silos each having a storage capacity of 350 MT and

2 nos. of transport blowers each for the Units-III and IV.

The petitioner vide its affidavit dated 16.11.2010 has submitted that in order to achieve the target

for 100% fly ash utilization by all coal based thermal power plants in terms of the Gazette

Notification of the Ministry of Environment and Forests, Government of India dated 3.11.2009,

installation of dry ash system for Units –III and IV including silo is a basic requirement, since

ash is to be collected in dry form.


The expenditure is required for compliance with the guidelines of the Ministry of Environment

and Forests, Government of India notification dated 3.11.2009, the same is allowed to be

capitalized.


The petitioner has claimed expenditure of `95.90 lakh during 2009-10 for installation Ambient

Air Quality Management System (AAQMS). The petitioner vide its affidavit dated 16.11.2010

has submitted that the procurement of the said item was approved by CEA on 6.6.2003 in order

to continuously monitor the quality of ambient air in and around the plant to keep various

environmental related parameters within limits specified by various gazette notifications of the

Government of India from time to time.

Respondents Views

They have objected to the capitalization of the said asset on the ground that the petitioner has not

indicated the recent change in law.

Commissions views

Since the expenditure claimed by the petitioner is a statutory requirement under the notification

dated 18.11.2009, as stated above, the same is allowed to be capitalized under Regulation 9(2)(ii)

of the 2009 Tariff Regulations.

Other capital works-Regulation 9(2)(ii)

1.Wagon Tippler, locomotives, weigh bridge etc.


The petitioner has submitted that this generating station and its coal linkage was envisaged with

a Plant Load Factor (PLF) of 62.8%. However, with the change in the Target Availability (TA)

and PLF from 62.8% to 80% by the Commission for the tariff periods 2001-04 and 2004-09 and

69

with the deterioration of GCV of coal from 3050 kcal/kg to 2800 kcal/kg received from the

linked mines, the increased coal consumption resulted in the need for procuring coal from other

sources and transporting them to the generating station using the railway system to meet the

target availability specified by the Commission.

The respondents

BSEB, JSEB and GRIDCO in their replies have objected to the additional capital expenditure

claimed in respect of Wagon Tippler, locomotives etc and has submitted that change in norms

related to NAPAF do not constitute change in law.

TNEB has submitted that capitalization of the items Wagon Tippler, locomotives etc based on

works approved by CEA cannot constitute change in law.

UPPCL and MSEDCL have submitted that the additional capital expenditure in respect of these

items indicated above, is not on account of change in law and hence may be rejected.

Commissions views

Considering the fact that installation of Wagon tippler would bring about reduction in unloading

time of coal rakes and shall give flexibility in overall movement of rakes which would reduce the

apprehension of diversion of wagons by the railways, the claim of the petitioner is justified.

Also, if the petitioner is unable to arrange coal for generation up to the specified NAPAF of

85%, it would not be able to recover the full fixed charges which include the cost of Wagon

tippler. This, according to us, would adequately take care of the concerns raised by the

respondent beneficiaries. Moreover,the utilities are resorting to blending of imported coal taking

into account the overall shortage of coal in the country.

2.Condenser on-line tube cleaning systems


The petitioner has claimed expenditure of `125.00 lakh during 2011-12 for installation of

condenser on line tube cleaning system which is envisaged for cleaning of condenser tubes even

when the units are in operation.The provision of Regulation 9(2) under which capitalization is

sought for has not been mentioned.

Commissions views

However, there is no provision under Regulation 9(2) of the 2009 Tariff Regulations for

capitalization of this asset after the cut-off date. Since, compensation allowance is admissible to

70

the generating station under Regulation 19(e) of the 2009 Tariff Regulations, the petitioner shall

be able to meet the expenditure on this asset. Hence, capitalization of the expenditure claimed by

the petitioner is not allowed

3.Procurement of new wagons


The petitioner has claimed expenditure for `367.00 lakh during 2010-11 towards the procurement

of 10 nos. of new wagons against replacement of damaged / condemned wagons.

Commissions views

There is no provision under Regulation 9 (2) of the 2009 Tariff Regulations for capitalization of

this asset after the cut-off date. Since, compensation allowance is admissible to the generating

station under Regulation 19(e) of the 2009 Tariff Regulations, the petitioner shall be able to meet

the expenditure on this asset.

The additional capital expenditure approved for the purpose of tariff, is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure allowed -162.3 5546.78 7636.09 1430.1 341

Liabilities discharged 0.67 0 0 0 0

total -161.63 5546.78 7636.09 1430.1 341



-10000

100020003000400050006000700080009000

2009-102010-112011-122012-132013-14

iN L

AK

H

YEARS


Add-cap claimed

Net Add-cap allowed

71

The annual fixed charges for the generating station for 2009-14 is summarized as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Depreciation 3800.27 4046.05 4608.07 5035.28 5128.49

Interest on Loan 41.578399 0 18.913827 15.812511 0

Return on Equity 23880.694 24070.366 24534.686 24854.012 24916.394


O&M Expenses 15288 16161.6 17085.6 18068.4 19101.6



TOTAL 49836.157 51246.752 53347.072 55172.574 56406.609

72

4.8 Simhadri Thermal Power Station, Stage-I (2 x 500 MW)

Actual/Projected additional capital expenditure during 2010-14

The actual/projected additional capital expenditure claimed by the petitioner for 2009-14 is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Add-cap claimed 226.54 6801 6500 7260 3730

The cut-off date of the generating station has expired. Hence, the petitioner‟s claim for

additional capital expenditure for 2009-14 has to be examined in terms of Regulation 9(2) of the


Deferred works relating to ash pond or ash handling system in the original scope of work-

Regulation 9(2) (iii)-Ash dyke and related works

1.


The petitioner has claimed expenditure for `149.43 lakh during 2009-10, `2756.00 lakh during

2010-11, `3000.00 lakh during 2011-12, `3500.00 lakh duirng 2012-13 and `3500.00 lakh during

2013-14 for works of Ash dyke raising consisting of two lagoons i.e.lagoon-1 and lagoon-2 with

an\ area of 80 acres and 113 acres respectively.

The petitioner has submitted that the lagoons for ash dyke for the generating station are to be

raised in a phased manner and the original scope provides for future ash dyke raising. Further

raisings of ash dyke of lagoons 1 & 2 are to be taken up in future years over the entire life of the

power plant..


Considering the submissions of the petitioner and keeping in view that the work which is

covered under the original scope of work of the project, is in compliance with the requirements

of environment rules and regulations, the commission will allow the claim of the petitioner for

capitalization under this head.


The petitioner has claimed expenditure for `40.00 lakh during 2010-11, `125 lakh during 2011-

12, `200 lakh during 2012-13 and `200.00 lakh during 2013-14 towards other capital works in

ash dyke. The petitioner has submitted that the expenditure is required for other infrastructure

73

works at ash dyke such as access roads, RCC drains, dust suppression system and works on

sprinkling system, which are to be taken up.


Keeping in view that these infrastructural works are required to be done on regular basis for ash

handling system and for control of fugitive emission in the ash handling area, the expenditure

claimed is allowed under Regulation 9(2) (iii).

Change in law- Regulation 9(2)(ii)

1.


The petitioner has claimed expenditure for `3530.00 lakh during 2012-13 towards the

augmentation of Dry Ash Evacuation System (DAES) under this head. The petitioner in its

affidavit dated 27.12.2010 has submitted that in terms of the notification of the Ministry of

Environment & Forests (MOE&F) dated 14.9.1999 and its amendments on 27.8.2003 and

3.11.2009 respectively, all thermal power stations in operation before the notification are

required to ensure 90% utilization of fly ash generated within four years and 100% utilization of

fly ash generated within five years of notification. The same has been reiterated by the Andhra

Pradesh Pollution Control Board (APPCB) for implementation of the provisions of the MOE&F

notifications as stated above.


Since these expenditure is required for compliance with the provisions of MOE&F notifications

and the directions of the APPCB, the expenditure claimed by the petitioner is allowed under this

head.

Capitals Addition Schemes

1.Wagon Tippler package and Procurement of locos & accessories


The petitioner has claimed expenditure for `3980.00 lakh during 2010-11 towards capitalization

of Wagon Tippler package.


It is evident that the generating station has been providing a consistent performance of more than

96% PLF and 97% DC for the last three years, without the installation of Wagon Tippler. The

74

number of rakes required for coal generating station of 1000 MW capacity would in the range of

6 to 7 rakes per day and considering 1.1/2 to 2 hours of unloading time for BOBR wagons, 40%

of the coal requirement supplied through BOXN wagons could be managed by the generating

station without Wagon Tippler. Hence, we are of the view that the requirement for installation of

Wagon Tippler for the generating station is not justified.

2.Ambient Air Quality Management System (AAQMS)


The petitioner has claimed expenditure for `92.67 lakh during 2009-10 towards erection work

and trial operation for Ambient Air Quality Management System (AAQMS) in order to comply

with the statutory requirements in terms of the directions of the Andhra Pradesh Pollution

Control Board.\


Since, the expenditure is incurred for compliance with the requirements of environmental norms,

as per statute, the same is allowed to be capitalized


Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure allowed -635.23 2821 3150 7260 3730


total -435 2850.1 3150 7260 3730



-2000

0

2000

4000

6000

8000

IN L

AK

HS

YEARS

ADD-CAP CLAIMED/ALLOWED-SIMHADRI

Add-cap claimed

Add-cap allowed

75

The annual fixed charges for the period 2009-14 in respect of the generating station are summarized as

under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Depriciation 17388.76 17449.43 17600.16 17861.67 18137.75

Interest on Loan 6402.56 5878.58 5385.84 4939.64 4493.22

Return on Equity 24380.35 24465.42 24676.75 25043.4 25430.49


O&M Expenses 13000 13740 14530 15360 16240



TOTAL 69600.52 69996.04 70715.44 71759.55 73063.47


following figure:

05000

1000015000200002500030000

IN L

AK

HS

YEARS

AFC-COMPONENTS-SIMHADRI

Depriciation

Interest on Loan

Return on Equity


O&M Expenses

76

4.9 Kahalgaon Super Thermal Power Station Stage-II (3X500 MW)

The generating station with a capacity of 1500 MW comprises of three units of 500 MW each.

The dates of commercial operation of the different units of the generating station are as under:

Date of commercial operation

Unit-I 1.8.2008

Unit-II 30.12.2008

Unit-III 20.3.2010

CAPITAL COST

The capital cost as on 20.3.2010 (the date of commercial operation of Unit-III/generating station) is

`472306.43 lakh and the same is allowed.

Opening Capital cost 331481.82

liabilities 16808.00

Capital cost on which tariff will be calculated 314673.82

Projected Additional Capital Expenditure

The actual/projected additional capital expenditure claimed by the petitioner is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Add-cap claimed 1406 36584 24850 26464 1000

As stated, the date of commercial operation of the generating station is 20.3.2010. In terms of

Regulation 3(11) of the 2009 Tariff Regulations, the cut-off date of the generating station is

31.3.2013. Hence, the petitioner’s claim for projected additional capital expenditure is required

to be considered in terms of Regulation 9(1) of the 2009 Tariff Regulations.

Works deferred for execution and capitalization of initial spares–Regulations 9(1)(ii) and

(iii)

1.

Petitioners’ claim

77

The petitioner has claimed actual expenditure of `1406.00 lakh during the year 20.3.2010 to

31.3.2010 and projected expenditure of `27876.00 lakh for 2010-11, `17764.00 lakh for 2011-12

and `20555.00 lakh for 2012-13 in respect of works deferred for execution under the original

scope of work and for capitalization of initial spares.

It has also submitted by affidavit dated 11.1.2011 that the cost of initial spares projected in the

capital cost as on the date of commercial operation till the cut-off date of the generating station is

`3518 lakh on 20.3.2010, `5377 lakh on 31.3.2010, 8776 lakh on 31.3.2011, `12201 lakh on

31.3.2012 and `14671 lakh on 31.3.2013.

The respondent views:

GRIDCO in its reply dated 8.9.2011 has submitted that the total expenditure of `44543 lakh

towards the cost of initial spares claimed by the petitioner as above, is beyond the limit of 2.5%

of the original project cost.

Petitioners’ response

In its response dated 3.10.2011, the petitioner has clarified that the cost of initial spares indicated

in the affidavit dated 11.1.2011 are the total actual/projected capitalization against capital spares

as on the indicated dates and not capitalization of spares during the interim period


Accordingly, it has been submitted that the projected capitalization against initial spares as on

31.3.2013 is `14671 lakh and the same is within the limit of 2.5% allowed as per norms specified

by the Commission under Regulation 8 of the 2009 Tariff Regulations.

2.


The petitioner has claimed projected capital expenditure of `2633 lakh, `1730 lakh, `1528 lakh,

and `1000 lakh during the years 2010-11, 2011-12, 2012-13 and 2013-14 respectively, towards

Ash Dyke/Ash handling system, under Regulation 9(1)(ii) and 9(2)(iii).


These works include works like main plant superstructure, chimney, steam generator, coal

handling system switchyard etc, which have been deferred for execution and are within the

original scope of work. As stated, the cut-off date of the generating station is 31.3.2013 and

78

hence the projected capital expenditure till the cut-off date have been considered under “Works

deferred for execution” in terms of Regulation 9(1)(ii) of the 2009 Tariff Regulations and the

said amounts are allowed.

3.


The petitioner has claimed projected expenditure of `1000 lakh for 2013-14 towards Ash-

handling/Ash-dyke works after the cut-off date.


GRIDCO has objected to the above claim and has submitted that the said expenditure is

permissible only when the expenditure is incurred at the discretion of the Commission.

Petitioners’ response

Since, the petitioner has not incurred the said expenditure the claim for capitalization may be

rejected. In response to this, the petitioner has submitted that the claim of the petitioner is in

terms of the Regulation 7(1) (a) and the last proviso to Regulation 7(2) of the 2009 Tariff

Regulations. According to the petitioner, since, the last proviso provides for capital expenditure

to be projected to be incurred as may be admitted by the Commission, the same is admissible.


The commission considered the submissions of the petitioner and GRIDCO. Since the generating

station has achieved the commercial operation on 20.3.2010, it is not covered under the last

proviso to Regulation 7(2) of the 2009 Tariff Regulations. Moreover, the additional capital

expenditure is not covered under Regulation 7(1)(a) of the 2009 Tariff Regulations. The

additional capital expenditure of the generating station shall be considered as per Regulation 9 of

the 2009 Tariff Regulations. Under Regulation 9(2), additional capital expenditure incurred after

the cut-off date can be admitted after it is incurred. The petitioner has claimed projected

additional capital expenditure of `1000 lakh for the ash dyke/ ash handling system during the

year 2013-14. This is in continuation of the work on ash dyke/ash handling system starting from

2010-11.The projected capital expenditure of `1000 lakh for the year 2013-14 towards ash

handling/ash dyke is allowed to be capitalized.

79

The projected additional capital expenditure allowed for the purpose of tariff, is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure allowed 1406 30509 19494 22083 1000

Liabilities discharged 0 8205 5356 4381 0

total 1406 38714 24850 26464 1000



The annual fixed charges for the period 2009-14 in respect of the generating station are summarized as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Depreciation 40486.65 25339.18 26972.48 28291.01 28996.71

Interest on Loan 34207.68 20508.67 21013.57 21398.35 21183.57

Return on Equity 55486.77 34733.29 36972.11 38779.47 39746.79


O&M Expenses 31850 19923 21068.5 22272 23548



TOTAL 182850.71 113757.35 119464.2 124290.63 127127.07

05000

10000150002000025000300003500040000

IN L

AK

HS

YEARS

ADD-CAP CLAIMED/ALLOWED-KAHALGAON-II

Add-cap claimed

Add-cap allowed

80


following figure:

0100002000030000400005000060000

IN L

AK

HS

YEARS

AFC-COMPONENTS-KAHALGAON

Depriciation

Interest on Loan

Return on Equity


O&M Expenses

81

4.10 Farakka Super Thermal Power Station (1600 MW)

The generating station with a total capacity of 1600 MW comprises of three units of 200 MW

each and two units of 500 MW each. The dates of commercial operation of the generating station

are as under:

Capital Cost

Accordingly, in terms of the last proviso to Regulation 7 of the 2009 Tariff Regulations, the

capital cost as on 1.4.2009, after removal of un-discharged liabilities of `2579.17 lakh works out

to `310919.13 lakh, on cash basis.

The liabilities discharged, if any, by the petitioner would be included in the capital base as

additional capital expenditure, in the year of discharge.

Capital cost as on 1.4.2009, as

per books

313498.30

Undischarged liabilities 2579.17

Capital cost which will form the basis for determination of tariff 310919.13

Actual/Projected Additional Capital Expenditure

The actual/ projected additional capital expenditure claimed by the petitioner for 2009-14 is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Add-cap claimed 6024 5761.1 1849 934 30992

Date of Commercial Operation(COD)

Unit-I 1.11.1986

Unit-II 1.10.1987

Unit-III 1.9.1988

Unit-IV 1.7.1996

Unit-V 1.4.1995

82


additional capital expenditure is required to be examined in terms of the provisions of Regulation

9 (2) of the 2009 Tariff Regulations.

Environment systems- Regulation 9(2) (ii)

Petitioners’ Claim

The petitioner has claimed total expenditure of `16125.00 lakh during 2013-14 (`1125.00 lakh

for up-gradation of ESPs for Stage-I, `14000.00 lakh towards Dry Ash Extraction for Stage-I &

II package consisting of supply cum erection and commissioning of (i) Pneumatic conveying

system (ii) Compressor for Stage-I (iii) Air receiver (iv) Vacumn pump for Stage-II (v) Storage

system (vi) Electrical & C&I system including cabling and (vii) Civil & structural work, `500.00

lakh each for construction of road from DAETP to NH-34 and construction of rail line from

DAETP to Tildanga gate).

The petitioner has submitted that upgradation of ESP is as per scheme approved by CEA to meet

stricter environmental norms and the installation of Dry Ash Extraction system, which is a

standard fitment for all new power plants, is towards achievement of 100% ash utilization as per

notification dated 14.9.1999 (amended on 3.11.2009) of the Ministry of Environment & Forests,

Government of India and the installation of the same would help increased utilization of dry fly

ash.

The respondents Views

BSEB, GRIDCO in their replies have submitted that the claim under this head is permissible if

there is change in law and consequent upon that change, investment is required to be made to

fulfill that obligation of change in law. As the petitioner has not mentioned the change in law, the

expenditure is not to be allowed.

UPPCL has submitted that since the additional capital expenditure claimed for 2009-14 is for

both stages of the generating station and the use is inseparable, it is prudent to disallow the claim

of `3680.00 lakh towards special allowance for Units-I & II of the generating station.

NDPL has submitted that claims for additional capital expenditure except work related to ash

handling does not fall under any of the provisions of the 2009 TariffRegulations and should not

be allowed.

83

Deferred works relating to Ash pond or Ash handling system in the original scope of

works-Regulation 9(2)(iii)


The petitioner has claimed actual expenditure of `966.71 lakh during 2010-11 for 1st raising of

Malancha Ash Dyke lagoon and 3rd raising of Nishindra Ash dyke for Stage-II, `693.00 lakh

during 2012-13 for 4th raising of Nishindra Ash dyke lagoon I & II which are yet to be awarded

and `2983.00 lakh during 2013-14 for Starter Ash dyke lagoon-III and drainage channel and 1st

raising of Malancha ash dyke lagoon-II. It is observed that the 1st raising of lagoon-II of

Malancha ash dyke at a cost of `791.00 lakh may not be required by March, 2014


GRIDCO has submitted that the claim under Regulation 9(2)(iii) for the said work stated to have

been incorporated in the original scope of work should be produced by the petitioner.

Moreover, the expenses which are of continuous nature and process shall be met from the huge

O&M expense provided for the generating station.

Regulation 9(2)(iii) of the 2009 Tariff Regulations is limited for deferred works related to ash

pond or ash handling system in the original scope and the left over works for the generating

station cannot be allowed to be pending for such a long time and in case works continue to

remain pending, it should be presumed that the works are not necessary

Commissions’ views

Taking into consideration that the said work covered under the original scope of work is a

normal activity, undertaken in phases depending upon the requirement with the passage of time

during the useful life of the generating station, the expenditure claimed is allowed to be

capitalized.

Other capital works

1.Wagon Tippler (2 nos.), Associated conveying system and procurement of 3 nos. locos, lift

pumps etc


The petitioner has claimed total expenditure of `9658.03 lakh (`5220.29 lakh during 2009-10 and

`4437.74 lakh during 2010-11) for Wagon tipplers in terms of the last proviso to Regulation 7 of

84

the 2009 Tariff Regulations, against the CEA approved cost of `9604.00 lakh vide letter dated

12.8.2005.


It needs to be ensured that the petitioner is able to arrange coal for generation up to NAPAF of

85% and recover the full fixed charges including the impact of cost of wagon tippler. Moreover,

theutilities are also resorting to blending of imported coal taking into account the overall

shortage of coal in the country. Considering the above factors in totality, we allow the

expenditure claimed by the petitioner for Wagon Tippler and its associated works, under

Regulation 9 (2) (vii) of the 2009 Tariff Regulations.

2. Strengthening of MGR track


The petitioner has claimed `4556.00 lakh during 2013-14 for strengthening of MGR track against

the CEA approved cost of `4548.50 lakh.


Since, the expenditure during the year 2013-14 is in the nature of R&M expenses, we are of the

view that the petitioner should meet the said expenditure from the Special allowance admissible

to Units I&II of the generating station in terms of Regulation 10(4) of the 2009 Tariff

Regulations and/or the Compensation allowance admissible under Regulation 19 (e) of the 2009

Tariff Regulations in order to meet the expenses on new assets of capital nature including in the

nature of minor assets

3.Lift pumps


The petitioner has claimed expenditure of `6810.00 lakh during 2013-14 towards lift pumps

against the CEA approved cost of `12840.60 lakh. The petitioner has submitted that the

installation of lift pump is required to augment water supply to the existing cooling water system

which is unable to cater the cooling water requirement of the generating station due to drop in

water level of source feeder canal on account of the revised Indo-Bangla Ganga water sharing

agreement and the scheme agreed to by the Ministry of Power Government of India in its review

meeting on 16.7.2004.


85

BSEB and BRPL have also submitted that the capitalisation under Regulation 9(2) is permissible

only after the expenditure is incurred by the petitioner.


Since the requirement of this work is on account of the treaty of the Government of India, the

expenditure falls under Regulations 9(2)(ii) of the 2009 Tariff Regulations and the same is

admissible.

4.Additional way side station


The petitioner has claimed expenditure of `518.00 lakh during 2013-14 against the CEA

approved cost of `541.00 lakh vide letter dated 20.4.2004..


It is observed that the petitioner has been managing the MGR system of 85 Km since the

commissioning of the generating station without any difficulty. Moreover, in order to enhance

the coal receipt system on account of the increased quantum of coal being received through

Indian railways, Wagon Tippler has been allowed to this generating station. Accordingly, in

commissions’ view, there is no requirement for this work and the petitioner’s claim for the

expenditure on this count is not allowed.

5.Procurement of Wagons (35 nos)


The petitioner has claimed expenditure of `1260.00 lakh during 2011-12 for procurement of 35

nos. new wagons as replacement of wagons declared unserviceable during 2004-09.


The expenditure towards replacement of old wagons by new wagons cannot be considered under

the provisions of Regulation 9 (2) of the 2009 Tariff regulations. Keeping in view that the

generating station is entitled to meet such expenditure from the Compensation allowance

admissible under Regulation 19(e) of the 2009 Tariff Regulations.

6.Ambient Air Quality Monitoring System


The petitioner has claimed expenditure of `93.91 lakh during 2009-10 towards supply of

Ambient Air Quality Monitoring System (AAQMS) for continuous monitoring of air quality at

the generating station.

86


Since the asset is required in compliance with the statutory guidelines of the Central Pollution

Control Board, which mandates the continuous monitoring of various environmental parameters

at the generating station, we allow the claim of the petitioner under Regulation 9 (2) (ii) of the


CEA approved R&M activities

1.


The petitioner has claimed total expenditure of `1584.13 lakh during 2009-13 (`748.46 lakh

during 2009-10, `5.67 lakh during 2010-11, `589.00 lakh during 2011-12 and `241.00 lakh

during 2012-13) for CEA approved R&M activities vide letters dated 19.7.2002, 9.9.2002 and

24.3.2003, which are already under implementation.

The petitioner has submitted that the R&M schemes approved by CEA are for sustaining current

performance and efficiency levels in view of enhanced norms notified by the Commission from

time to time and for meeting other statutory requirements.


The submission of the parties has been considered. The claim of the petitioner for capitalization

of an expenditure of `1584.13 lakh for 2009-13 for successful and efficient operation of the

generating station is not admissible, since the generating station is entitled to a normative

compensation allowance under Regulation 19 (e) of the 2009 Tariff Regulations in order to meet

the expenses on new assets of capital nature including in the nature of minor assets. It is noticed

that the petitioner has also opted for Special allowance under Regulation 10(4) which is

admissible (unit-wise) to the generating station. Keeping all these factors in consideration, the

expenditure towards CEA approved R&M activities as claimed by the petitioner, has not been

allowed.


Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure allowed 5156.2 5400.41 0 693 24002


total 5259.28 5731.4 0 693 24002

87



The annual fixed charges approved in respect of the generating station for the period 2009-14, is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Depreciation 7135.85 7727.18 8043.9 8092.4 10138.95

Interest on Loan 166.22 22.09 0 0 0

Return on Equity 36357.6 36744.71 36946.57 36970.98 37840.78

Interest on working Capital 11177 11273.23 11389.59 11476.91 11658.41

O&M Expenses 23920 25284 26734 28266 29884


Special Allowance 540 640 640 1791.6 2978.38

TOTAL 81597.35 83991.89 86061.04 88898.57 94801.2


following figure:

05000

100001500020000250003000035000

IN L

AK

HS

YEARS

ADD-CAP CLAIMED/ALLOWED FARRAKKA

Add-cap claimed

Add-cap allowed

05000

10000150002000025000300003500040000

IN L

AK

HS

YEARS

AFC COMPONENTS-FARRAKKA

Depriciation

Interest on Loan

Return on Equity


O&M Expenses

88

4.11 Singrauli Super Thermal Power Station (2000 MW)

The generating station with a total capacity of 2000 MW comprises of five units of 200 MW and

two Units of 500 MW each. The dates of commissioning of various units of the generating

station are as under:

Unit-I 1.6.1982

Unit-II 1.2.1983

Unit-III 1.7.1983

Unit-IV 1.1.1984

Unit-V 1.6.1984

Unit-VI 1.7.1987

Unit-VII 1.5.1988

Capital Cost

The annual fixed charges claimed in the petition are based on the opening capital cost of

`127861.82 lakh as on 1.4.2009. The annual fixed charges approved in order dated 15.6.2011 is

based on the capital cost of `127861.82 lakh as on 31.3.2009.

In terms of the last proviso to Regulation 7 of the 2009 Tariff Regulations, the capital cost, after

removal of un-discharged liabilities of `382.35 lakh works out to `127479.47 lakh, on cash basis,

as on 1.4.2009.

The liabilities discharged, if any, by the petitioner would be included in the capital base as

additional capital expenditure, in the year of discharge.

Capital cost as on 1.4.2009, as per books 127861.82

Undischarged liabilities 382.35

Capital cost which will form the basis for determination of tariff 127479.47

Additional Capital Expenditure

The actual/ projected additional capital expenditure claimed by the petitioner for 2009- 14 is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Add-cap claimed 1780.45 1598.12 14258.29 14033.46 6368.94

89


additional capital expenditure is required to be examined in terms of the provisions of Regulation

9 (2) of the 2009 Tariff Regulations.

Environment and Ash utilization- Regulation 9(2)(ii)

1. Ash Brick Plant


The petitioner has claimed expenditure for `29.00 lakh (`25.00 lakh during 2010-11 and `4.00

lakh during 2011-12) towards procurement of ash brick manufacturing machine for the

generating station. From the submissions of the petitioner, it is apparent that the ash brick

making machine is for achieving 100% ash utilization targets as per notifications of the Ministry

of Environment & Forests, Government of India.


Notifications of the Ministry of Environment & Forests, Government of India.does not mandate

the coal or lignite based thermal power stations to manufacture bricks. The petitioner should

utilize the money earned from sale of fly ash or fly ash based product for

procurement/installation of brick making machines. Moreover, the income generated from sale

of fly ash or fly ash based products like bricks are not passed on to the beneficiaries. Hence, we

are of the view that it would not be prudent to load the said expenditure on brick making

machine as additional capital expenditure, when such expenditure is neither covered under

change in law nor the income from fly ash utilization is shared with the beneficiaries

2. Bio-Methanation plant


The petitioner has claimed expenditure for `14.22 lakh during 2011-12 towards procurement of

bio-methanation plant for the generating station in compliance with the environmental guidelines


These are assets of minor nature, and the expenditure can be met from the compensation

allowance admissible to the generating station. Accordingly, the expenditure claimed is not

allowed to be capitalized..

3. Dry Ash Extraction & Transportation system

90


The petitioner has claimed expenditure for `4570.00 lakh (`3200.00 lakh during 2011- 12 and

`1370.00 lakh during 2012-13) towards Dry Ash Extraction & Transportation (DAETP) system

for Stage-II of the generating station on the ground that CEA has approved the proposal for

capital addition.


The expenditure is for achieving 100% ash utilization targets as per notifications of the Ministry

of Environment & Forests, Government of India. In view of this, the expenditure claimed is

allowed for capitalization under this head.

4. Ash Water Recirculation System for S1 dyke


The expenditure of `4200.00 lakh (`2400.00 lakh during 2011-12 and `1800.00 lakh during 2012-

13) has been claimed by the petitioner towards Ash Water Recirculation System (AWRS) for S1

dyke.


The expenditure to be incurred for the said asset is for complete re-circulation of new ash pond

overflow in order to achieve zero discharge of effluents, in compliance with the requirement of

the directions of the Uttar Pradesh Pollution Control Board, the same is allowed for

capitalization under this head

Ash pond or Ash handling system -Regulation 9(2) (iii)

1.


The petitioner has claimed total expenditure towards ash pond and ash handling system for 2009-

13, under this head as detailed under:

2009-10 2010-11 2011-12 2012-13

total 312.31 53.00 7405.00 4385.00

91


Since the units and the generating station as a whole would complete useful life of 25 years

during the tariff period, there would be no remaining deferred work for Ash Pond or Ash

Handling system within the original scope of work. Accordingly, the expenditure incurred /

projected to be incurred for the works related to Ash Pond and Ash handling system is required

to be met from the Special allowance admissible to the generating station towards R&M and life

extension of the units/generating station

R&M and life extension and CEA approved R&M schemes


The petitioner has claimed a total expenditure for `3769.90 lakh (`1332.31 lakh during 2009-10,

`1505.90 lakh during 2010-11, and `931.69 lakh during 2011-12) towards R&M and life

extension.


The petitioner has also claimed a total expenditure of `13300.82 lakh during the period 2011-14

towards R&M schemes approved by CEA vide letter dated 17.4.2007 which includes schemes

like DDC MIS Stage-II, Renovation & Retrofitting of ESP, Energy Management System,

AAQMAS Package and Opacity Monitoring Equipment


UPPCL has submitted that the petitioner had already been granted an expenditure for `5700.18

lakh towards R&M for the period 2006-09 vide order dated 21.1.2011 in Petition No. 189/2009,

and is claiming expenditure on R&M for respective units, the Special allowance cannot be

allowed to the petitioner in terms of the second proviso to Regulation 10(4) of the 2009 Tariff

Regulations.


Since Special allowance is admissible for the units of the generating station which have

completed/to be completed its useful life of 25 years during the tariff period, we are of the view

that the actual / projected capital expenditure incurred / to be incurred for R&M for life extension

of Stage-I Units of the generating station, can be met from the Special allowance allowed for

Stage-I units. Similarly, the expenditure on R&M for Unit-VI of Stage-II can also be met from

the Special allowance allowed for the year 2013-14. Since, Unit-VII of Stage-II shall complete

its useful life of 25 years during 2013-14 only, the capital expenditure for R&M of Unit-VII

92

cannot be allowed as in terms of the provisions of the 2009 Tariff Regulations, the expenditure

on R&M for life extension can be allowed from the next financial year (2014-15) from the date

of completion of useful life of 25 years.

The additional capital expenditure allowed for the purpose of tariff for 2009-14, including liabilities

discharged, is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Additional capital expenditure allowed 0 0 5600 3170 0


total 3.29 53.14 5600 3170 0



The annual fixed charges approved in respect of the generating station for the period 2009-14, is as under:

Column1 2009-10 2010-11 2011-12 2012-13 2013-14

Depreciation 237.25 254.81 195.91 379.37 463.06

Interest on Loan 482.43 361.9 396.07 453.67 453.67

Return on Equity 14331.39 14333.38 14532.49 14841.38 14953.03


O&M Expenses 31200 32980 34870 36870 38980


Special Allowance 4780 5936 6238.36 6558.01 9693.93

TOTAL 61268.2 64216.68 66721.79 69708.69 75337.95

02000400060008000

10000120001400016000

IN L

AK

HS

YEARS

ADD-CAP CLAIMED/ALLOWED SINGRAULI

Add-cap claimed

Add-cap allowed

93


following figure:

0

10000

20000

30000

40000

50000IN

LA

KH

S

YEARS

AFC COMPONENTS-SINGRAULI

Depriciation

Interest on Loan

Return on Equity


O&M Expenses

94

CHAPTER-5

Conclusion

5.1 Conclusion

5.1.1 Capital Cost:

As per Regulation 7 of The tariff regulations 2009-14, the capital cost includes the expenditure

incurred or projected to be incurred up to the COD, initial capitalized spares and additional

capital expenditure incurred or projected to be incurred.

The main problem with the inclusion of the projected additional capitalization being included in

the capital cost is that the beneficiaries which in this case is distribution company has to shell out

out more amount in form of tariff which will be returned after 4 to 5 years if the generation

station fails to invest in the said additional capital, which is a loss to the distribution company as

they will be cash strapped needlessly.

This problem can be solved if true up is done by the commission every year for the generation

company.

5.1.2 Need for prudence check:

1. Sometimes as we noted in the chapter 4, the generation company claims an additional

capitalization but the beneficiary receives the benefits , like reduction the tariff rates , after a long

time like 3 to 4 years. Such kind of claim should be discouraged as puts too much of a pressure

on the distribution company without reason.

2. The additional capitalization claimed by a generating station which offers no benefit to

The beneficiary but only to the said station must be discouraged.

3. The special allowance for the thermal generation plants based on coal must be utilized instead

of keeping the said expenditure for the additional capitalization which will benefit the

beneficiary as they will be charged less and also proper utilization of special allowance will be

done.

4. The assets of the minor nature must be met from the compensation allowance instead to be

capitalized via additional capitalization.

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5.2 Limitations of the Project

1. Tariff orders are collected from commissions site but in general orders prior to FY09 were not

available anywhere.

2. Most of the analysis is done by the normative values set by the commission.

97

REFERENCES

[1] Tariff Order for DISCOMS & GENCOS

[2] “Emerging opportunities & challenges-Power sector”, PWC Consulting, Jan2012, New Delhi

[3] “Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations,

2009, India.

[4] National Tariff Policy, Ministry of Power,India

[5] Annual Report, CERC, 2010-11,India

[6] Approach Paper Tariff Regulation 2014-19,CERC, New Delhi

[7] "The Performance of State Power Utilities for the years 2008-09 to 2010-11", PFC, 2012,

New Delhi

[8] “Benchmark Capital Cost (Hard cost) for Thermal Power Stations with Coal as Fuel”, CERC,

2010, New Delhi

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