Before the
MAHARASHTRA ELECTRICITY REGULATORY COMMISSION
World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai 400005.
Tel. 022 22163964/65/69 Fax 22163976
Email: mercindia@merc.gov.in
Website: www.mercindia.org.in / www.merc.gov.in
Case No. 128 of 2013
In the matter of
Petition filed by Maharashtra Eastern Grid Power Transmission Company Limited
(MEGPTCL) for approval of its Business Plan for the second Control Period from FY
2013-14 to FY 2015-16
Shri Vijay L. Sonavane, Member
Smt. Chandra Iyengar, Member
Order
Date: 15 January, 2014
Upon directions from the Maharashtra Electricity Regulatory Commission
(Commission or MERC), Maharashtra Eastern Grid Power Transmission Company Limited
(MEGPTCL), submitted its Petition under affidavit for approval of its Business Plan for the
second Control Period from FY 2013-14 to FY 2015-16, under affidavit. The Commission, in
exercise of the powers vested in it under Section 61 and Section 62 of the Electricity Act,
2003 (EA 2003) and all other powers enabling it in this behalf, and after taking into
consideration all the submissions made by MEGPTCL, issues raised during the Public
Hearing, and all other relevant material, approves the Business Plan for MEGPTCL for the
second Control Period from FY 2013-14 to FY 2015-16 as under:
Order – Case No. 128 of 2013
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Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
TABLE OF CONTENTS
LIST OF TABLES ................................................................................................................... 4
ABBREVIATIONS .................................................................................................................. 6
1
Background and brief history ......................................................................................... 8
1.1 Evolution of regulatory regime for transmission pricing ............................................ 8
1.2 Private sector participation in transmission projects .................................................. 9
1.3 Incorporation of MEGPTCL and issue of transmission Licence .............................. 10
1.4 Relevant provisions under MERC MYT Regulations for filing of the Business Plan
Petition.............................................................................................................................. 11
1.5 Admission, Public Hearing process and approval of Business Plan Petition ........... 11
1.6 Organisation of the Order ......................................................................................... 13
2
Salient features of the Petition ....................................................................................... 15
2.1 Premise for the Business Plan Petition ..................................................................... 15
2.2 Summary of the Business Plan Petition .................................................................... 17
2.3 Project commissioning status .................................................................................... 19
2.4 Key assumptions made by the Petitioner .................................................................. 25
3
Business Plan Components ............................................................................................ 28
3.1 Capital expenditure plan ........................................................................................... 28
3.2 Financing Plan .......................................................................................................... 33
3.3 Performance Plan ...................................................................................................... 37
3.4 Human resources plan ............................................................................................... 38
3.5 Risk analysis and risk mitigation plan ...................................................................... 40
3.6 Environment policy and corporate social responsibility initiative plan.................... 45
3.7 Future business opportunities plan............................................................................ 47
4
Approval of the ARR components of Business Plan ................................................... 48
4.1 Projections for ARR components ............................................................................. 48
4.2 Operations & Maintenance expenses ........................................................................ 49
4.3 Capital expenditure and capitalisation ...................................................................... 53
4.4 Depreciation .............................................................................................................. 58
Order – Case No. 128 of 2013
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4.5 Interest on long term loan ......................................................................................... 59
4.6 Interest on working capital........................................................................................ 62
4.7 Contribution to contingency reserves ....................................................................... 63
4.8 Return on Equity (ROE) ........................................................................................... 64
4.9 Income Tax ............................................................................................................... 66
4.10 Other expenses .......................................................................................................... 68
4.11 Non-Tariff income .................................................................................................... 69
4.12 Approval of Business Plan scenario ......................................................................... 70
5
Performance targets for the Second Control Period ................................................... 73
5.1 Trajectory for certain variables ................................................................................. 73
5.2 Performance targets – Transmission system availability .......................................... 73
5.3 Performance targets – Transmission loss.................................................................. 74
5.4 Compliance of other performance parameters – Standards of performance............. 75
5.5 Preparedness for evolutionary POC based transmission pricing methodology ........ 76
6
Directions for filing of MYT Petition for the Second Control Period ....................... 78
Appendix – 1 ........................................................................................................................... 80
Appendix – 2 ........................................................................................................................... 81
Order – Case No. 128 of 2013
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LIST OF TABLES
Table 2-1: ARR Projection under three scenarios as submitted by MEGPTCL...................... 19
Table 2-2: Proposed commissioning schedule for transmission infrastructure submitted by
MEGPTCL ............................................................................................................. 20
Table 2-3: Project status submitted by MEGPTCL ................................................................. 23
Table 2-4: Commissioning Schedule considered by Commission .......................................... 24
Table 3-1: Capital expenditure................................................................................................. 28
Table 3-2: Break-up of capital expenditure submitted by MEGPTCL .................................... 29
Table 3-3: Phasing of capital expenditure as submitted by MEGPTCL .................................. 29
Table 3-4: Approved capital cost for Business Plan ................................................................ 32
Table 3-5: Source of funding as submitted by MEGPTCL ..................................................... 34
Table 3-6: Weighted average rate of interest as submitted by MEGPTCL ............................. 35
Table 3-7: Weighted average rate of interest considered for FY 2013-14 – Rupee
denominated loans ................................................................................................. 36
Table 3-8: Weighted average interest rate for FY 2013-14 to FY 2015-16 approved by the
Commission ........................................................................................................... 37
Table 3-9: Risk and Mitigation Plan ........................................................................................ 40
Table 4-1: Commissioning Schedule considered by Commission .......................................... 49
Table 4-2: O&M expenses proposed by MEGPTCL............................................................... 51
Table 4-3: O&M expenses approved by the Commission ....................................................... 52
Table 4-4: Comparison of in-principle approved and revised capital cost .............................. 53
Table 4-5: Set-wise capital cost approved by the Commission ............................................... 56
Table 4-6: Capitalisation proposed by MEGPTCL ................................................................. 57
Table 4-7: Capitalisation approved by the Commission .......................................................... 58
Table 4-8: Depreciation proposed by MEGPTCL ................................................................... 58
Table 4-9: Depreciation approved by Commission ................................................................. 59
Table 4-10: Interest on Long-term Loans proposed by MEGPTCL ........................................ 60
Table 4-11: Interest on Long-term Loans approved by the Commission ................................ 61
Table 4-12: Interest on working capital proposed by MEGPTCL ........................................... 62
Table 4-13: Interest on working capital approved by the Commission ................................... 63
Order – Case No. 128 of 2013
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Table 4-14: Contribution to contingency reserve proposed by MEGPTCL ............................ 63
Table 4-15: Contribution to contingency reserve approved by the Commission .................... 64
Table 4-16: Return on Equity proposed by MEGPTCL .......................................................... 65
Table 4-17: Return on Equity approved by the Commission .................................................. 66
Table 4-18: Income Tax proposed by MEGPTCL .................................................................. 66
Table 4-19: Income Tax approved by the Commission ........................................................... 68
Table 4-20: Other expenses as submitted by MEGPTCL ........................................................ 68
Table 4-21: Other expenses approved by the Commission ..................................................... 69
Table 4-22: Non-Tariff Income as proposed by MEGPTCL ................................................... 69
Table 4-23: Non-Tariff Income as approved by the Commission ........................................... 70
Table 4-24: Base ARR proposed by MEGPTCL..................................................................... 70
Table 4-25: Scenario 1 - Cost Escalation of 2%- Pessimistic scenario - MEGPTCL ............. 71
Table 4-26: Scenario 2 - Cost Reduction of 2%- Optimistic scenario – MEGPTCL .............. 71
Table 4-27: Business Plan projections approved by the Commission ..................................... 72
Order – Case No. 128 of 2013
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ABBREVIATIONS
A&G
Administrative and General
ABT
Availability Based Tariff
ALDC
Area Load Despatch Centre
AMC
Annual Maintenance Charges
APML-T
Adani Power Maharashtra Limited – Transmission Business
APTCL
Amravati Power Transmission Company Limited
APR
Annual Performance Review
ARR
Aggregate Revenue Requirement
BSM
Balancing and Settlement Mechanism
Capex
Capital Expenditure
CEA
Central Electricity Authority
CERC
Central Electricity Regulatory Commission
COD
Date of Commercial Operation
CPD
Co-incident Peak Demand
CPI
Consumer Price Index
CSR
Corporate Social Responsibility
CWIP
Capital Work in Progress
DA
Dearness Allowance
DPR
Detailed Project Report
ED
Excise Duty
FY
Financial Year
FBSM
Final Balancing Settlement Mechanism
GFA
Gross Fixed Assets
GoM
Government of Maharashtra
ICB
International Competitive Bidding
IDC
Interest During Construction
InSTS
Intra-State Transmission System
IPP
Independent Power Producer
IPTC
Independent Private Transmission Company
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IWC
Interest on Working Capital
JPTL
Jaigad Power Transmission Limited
LD
Load Despatch
LIBOR
London Interbank Offered Rate
MAT
Minimum Alternate Tax
MoP
Ministry of Power
MEGPTCL
Maharashtra Eastern Grid Power Transmission Company Limited
MERC
Maharashtra Electricity Regulatory Commission
MSETCL
Maharashtra State Electricity Transmission Company Limited
MSLDC
Maharashtra State Load Despatch Centre
NCPD
Non-coincident Peak Demand
NHAI
National Highways Authority of India
O&M
Operation & Maintenance
PGCIL
Power Grid Corporation of India Limited
PLR
Prime Lending Rate
R&M
Repairs and Maintenance
RoE
Return On Equity
RoW
Right of Way
SBI
State Bank of India
SLDC
State Load Despatch Centre
STU
State Transmission Utility
SWOT
Strengths Weaknesses Opportunities Threats
TTSC
Total Transmission System Cost
TVS
Technical Validation Session
VAT
Value Added Tax
WPI
Wholesale Price Index
Order – Case No. 128 of 2013
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1
Background and brief history
A Petition has been filed by Maharashtra Eastern Grid Power Transmission Company
Limited, a transmission Licensee, for approval of the MYT Business Plan for the second
Control Period from FY 2013-14 to FY 2015-16, under Sections 61 and 62 of the Electricity
Act, 2003 and Regulation 7 and 57 of the MERC (Multi-Year Tariff) Regulations, 2011
(hereinafter referred to as “MERC MYT Regulations”) as amended from time to time.
Maharashtra Eastern Grid Power Transmission Company Limited’s Transmission Business
(hereinafter referred to as “MEGPTCL”) has been granted Transmission Licence No. 1 of
2010 by the Commission vide its Order dated 21 September, 2010. The subsequent
paragraphs outline details of the evolution of the transmission pricing regime in Maharashtra,
private sector participation in transmission projects, the supporting regulatory framework in
the State, the regulatory process adopted and the prayers of the Petitioner in the present
matter.
1.1
Evolution of regulatory regime for transmission pricing
1.1.1
The Commission, in exercise of the powers conferred by the Electricity Act, 2003,
notified the Maharashtra Electricity Regulatory Commission (Terms and Conditions
of Tariff) Regulations, 2005, on 23 August, 2005. Subsequently, the Commission,
considering the requests made by the Utilities, vide its Order dated 20 December,
2005 in the matter of Applicability of Multi Year Tariff framework granted a special
dispensation for all the Utilities in Maharashtra from implementation of MYT
framework for FY 2006-07. The Commission, in the said Order, had stated that it
would determine the Tariff under a Multi-Year Tariff framework with effect from 1
April, 2007 instead of 1 April, 2006 as stipulated in MERC (Terms and Conditions of
Tariff) Regulations, 2005 and accordingly, the first Control Period for MYT
framework shall be the three financial years from 1 April, 2007 to 31 March, 2010.
1.1.2
The Commission, at the start of the first Control Period issued the MYT Order for the
Utilities in the State, approving their Aggregate Revenue Requirement (ARR) for
each year during the Control Period. The Commission subsequently issued the Annual
Performance Review (APR) Orders for the utilities in each year of the Control Period
which included Truing up of the ARR of the past year or (n-1)th year, provisional
Truing up of the ARR of current year or nth year and determination of revised
ARR/Tariff for the ensuing year or (n+1)th year. The transmission utilities for which
such Orders were issued include Maharashtra State Electricity Transmission Co. Ltd
(MSETCL), transmission business of Tata Power Co. Ltd (TPC-T) and Transmission
Business of Reliance Infrastructure Ltd (RInfra-T) that constituted the Intra-State
Transmission System (InSTS) of Maharashtra.
Order – Case No. 128 of 2013
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1.1.3
In addition to the above, the principles of transmission pricing framework in the State
for the first Control Period were stipulated vide the Commission’s Order dated 27
June, 2006 in Case No. 58 of 2005. Accordingly, the Intra-State Transmission Tariffs
were determined for the respective years on the basis of Total Transmission System
Cost (TTSC), which was derived based on pooling of the ARRs of each transmission
utility of the State forming part of the Intra-State Transmission System (InSTS). The
said pooled cost for InSTS within Maharashtra, hereinafter referred to as Total
Transmission System Cost (TTSC) was recovered from the transmission system users
in the State, which mainly constituted the DISCOMs of the State. The Commission
also specified the basis for sharing of these costs amongst the transmission system
users in these Orders. The Commission has issued Orders determining such
transmission Tariff from time to time on an annual basis. The latest Order was issued
in Case No. 56 of 2013 on 13 May, 2013 which determined the transmission Tariff for
the InSTS for FY 2013-14 to FY 2015-16 of the second MYT Control Period with a
subsequent corrigendum issued on 23 May, 2013.
1.1.4
Presently, the following transmission Licensees forms the InSTS for Maharashtra:
(a)
(b)
(c)
(d)
(e)
1.1.5
1.2
1.2.1
Maharashtra State Electricity Transmission Co. Ltd (MSETCL);
Transmission business of The Tata Power Co. Ltd (TPC-T);
Transmission business of Reliance Infrastructure Ltd (RInfra-T);
Transmission business of Jaigad Power Transco Ltd (JPTL);
Transmission business of Adani Power Maharashtra Limited (APML-T).
On achieving commissioning of the project, MEGPTCL shall also be included as part
of the InSTS for Maharashtra after determination of the transmission Tariff by the
Commission and the recovery of the costs will be in accordance with the mechanism
prescribed by the Commission in the Order determining the transmission Tariff for
InSTS in Maharashtra.
Private sector participation in transmission projects
To meet the ever increasing demand for power, many new generating stations are
coming up in the country. However, there is need to have adequate transmission
infrastructure to evacuate power from these upcoming generating stations. In order to
facilitate development of this infrastructure, the Government of India (GoI) issued a
policy encouraging private sector participation in the transmission sector.
Accordingly, private sector participation has been encouraged at both the State and
the National level. At the National level there have been instances of PGCIL forming
Joint Venture (JV) with private sector players to develop various transmission lines.
In Maharashtra also there has been precedence wherein MSETCL has formed JV with
private sector players like JSW Energy (Jaigad Power Transmission Company
Limited) for development of transmission network. Similarly, Licence has also been
Order – Case No. 128 of 2013
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granted to Adani Power Maharashtra Limited for development of 400 kV double
circuit Tiroda - Warora Transmission line. The intent of encouraging private sector
participation was to introduce competition and efficiency in project implementation.
Further, the necessary funding would also be brought in by the private sector partner
who will help the financially strained State power sector utilities in developing the
necessary infrastructure.
1.2.2
With similar objective, MEGPTCL was envisaged to be a JV between Adani
Enterprises Limited (AEL) and MSETCL and was granted transmission licence to
develop the 2 × 765 kV S/C Tiroda – Koradi – Akola – Aurangabad transmission line
and Akola II – Akola – I 400 kV quad D/C line along with associated substations and
bays to evacuate power from the five upcoming power plants in the north-eastern part
of Maharashtra in the districts of Nagpur, Gondia and Amravati with total capacity of
8130 MW by the FY 2013-14.
1.2.3
This project is part of the Intra-State Transmission System in Maharashtra State
planned by the STU based on system studies undertaken in coordination with CEA
and PGCIL to evacuate power from the upcoming generation plants.
1.3
Incorporation of MEGPTCL and issue of transmission Licence
1.3.1
Adani Enterprises Limited (AEL) had proposed to MSETCL to undertake
development of the 765 kV transmission system as outlined in the STU’s transmission
network plan for 2010-11 to 2014-15 in JV arrangement operating on Build, Own and
Operate (BOO) basis with equity participation in the proportion of 74:26 respectively.
Accordingly, MSETCL Board of Directors accorded in-principle approval for
formation of JV.
1.3.2
However, in view of pending approval from Government of Maharashtra (GoM) for
MSETCL’s participation in the JV, AEL secured ‘No Objection’ certificate from
MSETCL vide letter dated 2 July, 2010 to proceed with development of the project, in
the interest of time, with an obligation to arrange for additional 26% equity
contribution by the Petitioner in case of delay or non-receipt of Government of
Maharashtra (GoM) approval for 26% equity investment by MSETCL in JV. The
Commission had noted the same in its Order in Case No. 118 of 2009 issued on 14
September, 2010.
1.3.3
After conducting the due regulatory process, the Commission vide its Order dated 14
September, 2010 granted transmission Licence for a period of 25 years to MEGPTCL,
for the proposed 765 kV Intra-State Transmission System as per the detailed scope in
Para No.2 of the said Order. The Transmission Licence came into effect from 21
September, 2010.
1.3.4
Subsequently, MSETCL informed AEL, with copy to the Commission vide letter No.
MSETCL/CO/C&M/Contracts-V/JV/MEGPTCL/17787 dated 27 December, 2012,
Order – Case No. 128 of 2013
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Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
about its decision to not enter into a JV with AEL in MEGPTCL. However, as per the
‘No Objection’ certificate, AEL proceeded with contributing full equity for
MEGPTCL and accordingly, MEGPTCL became wholly owned subsidiary of AEL.
1.4
Relevant provisions under MERC MYT Regulations for filing of the Business Plan
Petition
1.4.1
The Commission, in exercise of the powers conferred by the EA 2003, notified the
Maharashtra Electricity Regulatory Commission (Multi Year Tariff) Regulations,
2011, (hereinafter referred as the MERC MYT Regulations) on 4 February, 2011.
These Regulations are applicable for the second Control Period starting from FY
2011-12 to FY 2015-16. The said Regulations were amended by Maharashtra
Electricity Regulatory Commission (Multi Year Tariff) (First Amendment)
Regulations, 2011 vide notification dated 21 October, 2011.
1.4.2
The Regulation 7 of the MERC MYT Regulations specifies that the Generating
Company, Transmission Licensee and Distribution Licensee shall file a Business
Plan, for the Control Period of five (5) financial years from 1 April, 2011 to 31
March, 2016. Further, the Regulation 57 specifically mentions that each transmission
Licensee shall submit a Business Plan with full details as stipulated by the
Commission from time to time, in the manner as specified in the Regulations.
Accordingly, the Petition for approval of the Business Plan was filed by MEGPTCL
in accordance with the provisions of the aforesaid mentioned MERC MYT
Regulations.
1.5
Admission, Public Hearing process and approval of Business Plan Petition
1.5.1
Pursuant to notification of MERC MYT Regulations on 4 February, 2011, all
Licensees and generating companies were required to submit their Business Plan and
MYT Petition for the second Control Period from FY 2011-12 to FY 2015-16 in
accordance provisions of the MERC MYT Regulations.
1.5.2
MEGPTCL, complying with the aforementioned requirements under the MERC MYT
Regulations, submitted its Business Plan for the FY 2013-14 to FY 2015-16 of the
second Control Period under affidavit on 23 September, 2013.
1.5.3
Subsequently, the Commission communicated data gaps vide emails dated 24
October, 2013 and 28 October, 2013. MEGPTCL submitted its responses to the said
data gaps on 31 October, 2013. The Technical Validation Session (TVS) was held on
31 October, 2013. The list of persons who participated in the Technical Validation
Session is provided at Appendix-1.
Order – Case No. 128 of 2013
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1.5.4
Thereafter, the further data gaps were communicated to the Petitioner on 7 November,
2013 and the Petitioner submitted its response on 8 November, 2013. Subsequently,
on 8 November, 2013, the Commission issued the Minutes of Meeting (MoM) for the
TVS dated 31 October, 2013 and directed the Petitioner to submit a revised Petition.
1.5.5
Accordingly, the Petitioner submitted a revised Petition for the approval of its
Business Plan for MYT second Control Period from FY 2013-14 to FY 2015-16 on
11 November, 2013 taking into account the various data gaps communicated by the
Commission and the responses of MEGPTCL i.e. the Petitioner thereto under
affidavit with the following prayers.
“
(a) Admit the petition of MEGPTCL for approval of Business Plan for the MYT
Control Period from FY 2013-14 to FY 2015-16 submitted herewith.
(b) Approve the Business Plan for the MYT Control Period from FY 2013-14 to FY
2015-16 along with the relevant operational and financial parameters as
proposed in this petition.
(c) Pass suitable orders with respect to the Business Plan for the MYT Control
Period from FY 2013-14 to FY 2015-16 as proposed by the Petitioner in this
petition along with the relevant operational and financial parameters as
proposed in the petition.
(d) Permit the Petitioner to propose suitable changes to the Business Plan, as may
be required, prior to the final approval by the Hon'ble Commission.
(e) Pass such further orders, as the Hon'ble Commission may deem fit and
appropriate keeping in view the facts and circumstances of the case.
(f) Condone any inadvertent omissions/errors/shortcomings and permit the
Petitioner to add/change/modify/alter this filing and make further submissions
as may be required at a future date.”
1.5.6
Based on the revised submission by the Licensee, the Commission had communicated
additional data gaps vide email dated 11 November, 2013. MEGPTCL submitted its
response against the said data gaps on 16 November, 2013.
1.5.7
Considering the submissions done by the Petitioner, the Commission admitted the
Petition of MEGPTCL on 25 November, 2013. In accordance with Section 64 of the
EA 2003, the Commission directed MEGPTCL to publish its Business Plan Petition
in the prescribed abridged form and manner, to ensure adequate public participation.
The Commission also directed MEGPTCL to reply expeditiously to all the
suggestions and objections received from stakeholders on its Petition. MEGPTCL
issued the Public Notice in newspapers inviting suggestions and objections from
stakeholders on its Business Plan Petition. The Public Notice was published in Indian
Express (English), Lokmat Times Nagpur (English), Loksatta (Marathi) and The
Deshonnati (Marathi) newspapers on 27 November, 2013.
Order – Case No. 128 of 2013
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1.5.8
The copies of MEGPTCL’s Petitions and its summary were made available for
purchase to members of the public at MEGPTCL’s offices and on MEGPTCL’s
website (www.megptcl.com). The copy of the Public Notice and Executive Summary
of the Petition was also available on the website of the Commission
(www.mercindia.org.in / www.merc.gov.in) in downloadable format. The Public
Notice specified that the suggestions and objections, either in English or Marathi, may
be filed in the form of affidavit along with the proof of service on MEGPTCL.
1.5.9
The Commission did not receive any written suggestions or objections on the said
Petition. The Public Hearing was held on 19 December, 2013 at 12:30 hours at the
Commission’s Office. The list of persons who participated in the Public Hearing is
provided in Appendix – 2.
1.5.10 The Petitioner thereafter submitted additional information which was received by the
Commission on 2 January, 2014 supplementing its response to data gaps submitted on
16 November, 2013.
1.5.11 The Commission has ensured that the due process as contemplated under the law to
ensure transparency and public participation was followed at every stage meticulously
and adequate opportunity was given to all the persons concerned to file their say in
the matter.
Organisation of the Order
1.6
This Order is organised in the following six Sections:

Section 1 of the Order provides a brief background of the evolution of the
transmission pricing framework in Maharashtra, private sector participation in
transmission sector, brief history of the quasi-judicial regulatory process undertaken
by the Commission, brief outline of the regulatory framework covering the process
and prayers of the Petitioner in the present matter. For the sake of convenience, a list
of abbreviations with their expanded forms has been included.

Section 2 of the Order summarises the salient features of the Business Plan Petition
filed by MEGPTCL.
Section 3 discusses the Business Plan components, key issues and Commission’s
ruling on the same.


Section 4 of the Order details the approval of projection of ARR components as
submitted by MEGPTCL for the purpose of Business Plan approval.

Section 5 of the Order approves the performance targets for MEGPTCL for the
second Control Period.
Order – Case No. 128 of 2013
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
Section 6 of the Order provides necessary directives to MEGPTCL for filing MYT
Petition for the second Control Period.
Order – Case No. 128 of 2013
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2
Salient features of the Petition
2.1
Premise for the Business Plan Petition
2.1.1
In order to overcome the prevailing power deficit conditions in the State and to cater
to increase in load growth, a generation capacity totalling to 8130 MW is proposed to
be added by FY 2013-14 from coal based thermal generation plants in the northeastern part of Maharashtra in the districts of Nagpur, Gondia and Amravati. To
evacuate power from the generation plants, the STU has planned Intra-State
Transmission System in Maharashtra State based on system studies undertaken in
coordination with CEA and PGCIL. The transmission Licensee, MEGPTCL was
formed for the specific purpose of development of 765 kV Transmission System
which will help evacuate power from the said generation projects in north-eastern
Maharashtra.
2.1.2
The Petitioner had made an application before the Commission on 18 February, 2010
for grant of transmission Licence for construction, operation and maintenance of the
765 kV transmission system identified by the State Transmission Utility in its STU
transmission network plan for years 2010-11 to 2014-15. Considering all the
submissions made by the Petitioner, the Commission granted transmission Licence
(Licence No. 1 of 2010) dated 21 September, 2010 to the Petitioner vide its Order in
the Case No. 118 of 2009 dated 14 September, 2010. The transmission Licence
authorised the Petitioner to establish and operate the following transmission lines,
substations bays and equipment inclusive of related infrastructure.
a. Transmission Lines:
 Tiroda – Koradi-III 765 kV S/C Line-1 (120 km)
 Koradi-III – Akola-II 765 kV S/C Line-1 (270 km)
 Akola-II – Aurangabad 765 kV S/C Line-1 (240 km)
 Tiroda – Koradi-III 765 kV S/C Line-2 (120 km)
 Koradi-III – Akola-II 765 kV S/C Line-2 (270 km)
 Akola-II – Aurangabad 765 kV S/C Line-2 (240 km)
 Akola-II – Akola-I 400 kV Quad D/C Line (30km)
b. Substations:
 Establishment of 765/400 kV switchyard at Tiroda
 Establishment of 765/400 kV substation at Koradi-III
 Establishment of 765/400 kV substation at Akola-II
 Extension of 765 kV Aurangabad substation
2.1.3
As per the directives issued by the Commission and provisions under the MERC
MYT Regulations, MEGPTCL submitted the Business Plan Petition for its
Transmission Business for the second Control Period for FY 2013-14 to FY 2015-16
in accordance with Regulation 7 and Regulation 57 of MERC MYT Regulations on
Order – Case No. 128 of 2013
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23 September, 2013. The relevant provisions of the MERC MYT Regulations are
reproduced below for reference.
“7 Business Plan
7.1 The Generating Company, Transmission licensee and Distribution
Licensee shall file a Business Plan, for the Control Period of five (5) financial
years from April 1, 2011 to March 31, 2016, as directed by the Commission,
which shall comprise but not be limited to detailed category-wise sales and
demand projections, power procurement plan, capital investment plan,
financing plan and physical targets, in accordance with guidelines and
formats, as stipulated by the Commission from time to time.
7.2 The capital investment plan shall show separately, ongoing projects that
will spill into the year under review and new projects (along with
justification) that will commence but may be completed within or beyond the
tariff period. The Commission shall consider and approve the capital
investment plan for which the Generating company and Transmission
Licensee or Distribution Licensee may be required to provide relevant
technical and commercial details………”
“57 Business Plan
57.1 Each Transmission Licensee shall submit a Business Plan with full
details as stipulated by the Commission from time to time, in the manner as
specified in Part B of these Regulations.”
2.1.4
Further, in the current Petition, MEGPTCL also submitted the forecast for Aggregate
Revenue Requirement and expected revenue from Tariff over the Control Period for
multiple scenarios in line with Regulation 8.1 of MERC MYT Regulations. The said
Regulation is reproduced below.
“8.1 The applicant, based on the Business Plan, shall submit the forecast of
Aggregate Revenue Requirement and expected revenue from tariff, for the
control period in such manner, within such time limit thereof, as provided in
Part C of these Regulations and accompanied by such fee payable, as may be
specified under the MERC (Fees and Charges) Regulations, 2004, as
amended from time to time……”
2.1.5
As part of the Business Plan, MEGPTCL has also submitted its Capital Investment
Plan in line with Regulation 58 of MERC MYT Regulations, as reproduced below:
“58.1 The Transmission Licensee shall submit a Capital Investment Plan with
full details of its proposed capital expenditure projects to the Commission for
approval along with the Business Plan:
Order – Case No. 128 of 2013
Page 16 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Provided that the Capital Investment Plan shall be submitted for each year of
the second control period.
58.2 The Capital Investment Plan shall be a least cost plan for undertaking
investments on strengthening and augmentation of intra-state transmission
system of the Transmission Licensee.
58.3 The Capital Investment Plan shall cover all capital expenditure projects
of a value exceeding Rs Ten (10) Crore and shall be in such form as may be
stipulated by the Commission from time to time.
58.4 The Capital Investment Plan shall be accompanied by such
information, particulars and documents as may be required including but
not limited to the information such as number of bays, name, configuration
and location of grid substations, substation capacity (MVA), transmission line
length (ckt-km) showing the need for the proposed investments, alternatives
considered, cost/benefit analysis and other aspects that may have a bearing
on the transmission charges." (Emphasis Added)
2.1.6
2.2
2.2.1
Based on the above, MEGPTCL has proceeded to prepare and submit the current
Business Plan Petition for its Licensed transmission business for the second Control
Period (FY 2013-14 to FY 2015-16).
Summary of the Business Plan Petition
MEGPTCL, in its current Petition has submitted its Business Plan for the second
Control Period broadly under two heads, namely strategic plan and operational plan.
The strategic plan covers aspects such as the company profile, organisation structure,
status of the project related activities, human resource development plan, market
assessment, SWOT analysis, risk analysis and risk mitigation plan and other
environmental and social responsibility initiatives. The capital investment plan and
forecast of ARR components have been presented under the operational plan. A
summarised outline of the various major plans submitted by MEGPTCL in its
submission is given below:
Strategic Plan
2.2.2
Company Profile: MEGPTCL was incorporated under the Companies Act, 1956 on
15 February, 2010 for the specific purpose of undertaking the development of the 765
Order – Case No. 128 of 2013
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Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
kV transmission system which would evacuate power from the upcoming generation
projects in the north-eastern part of Maharashtra. The company was granted
Transmission Licence by the Commission (Licence No. 1 of 2010) dated 21
September, 2010.
2.2.3
Organisation Structure: The Petitioner has prima-facie considered an organization
structure suitable for establishing and operating the transmission system under the
licence. The proposed organization structure has been provided in the Petition.
However, the Petitioner has submitted that they would firm up the organization
structure prior to the commissioning of the transmission system. The Petitioner has
also provided the brief profile of its board of directors who are well experienced and
competent to take care of the business.
2.2.4
Human Resource Development Plan: MEGPTCL has broadly outlined its
recruitment policy, HR development plan and employee reward policy envisaged for
the second Control Period. It has been submitted that MEGPTCL has chalked out
detailed manpower plans based on realistic projection of growth envisaged in its
Transmission business while ensuring optimal utilisation of existing manpower.
2.2.5
Market Assessment: MEGPTCL has outlined the statutory and regulatory
framework in the country and the challenges posed on account of that. MEGPTCL has
also submitted that the major challenge for its transmission business will include
ensuring that all its approved schemes are implemented without any cost and time
overrun owing to multiple clearances required and the delay associated with such
clearances. MEGPTCL has acknowledged that in the present regulatory framework,
its transmission lines may cater to the open access requirements of any future
transmission system user, subject to availability of the transmission capacity.
2.2.6
SWOT Analysis: The Petitioner has also presented the findings of the SWOT
analysis in the context of the existing scenario and future business outlook. Amongst
strengths, the Petitioner has cited the competency of the promoter company AEL as
one of the key strengths apart from experience in implementing transmission and
substation projects through various group companies. Localised presence in
Maharashtra only has been cited as area of weakness. Existence of various growth
opportunities in Maharashtra has been identified as opportunity for the company. The
conditions existing at project sites including political interference, ROW issues, local
issues, etc. have been identified as possible threats for the company in its endeavour
to implement the project.
2.2.7
Risk Analysis and Risk Mitigation Plan: MEGPTCL has identified various types of
risks including construction risks, implementation risks, operational risks, regulatory
risks and financial risks for the coming years. Various risk mitigation plans have been
chalked out by MEGPTCL and the same are detailed in the subsequent sections of this
Order.
Order – Case No. 128 of 2013
Page 18 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
2.2.8
Environmental initiatives and CSR initiatives: As part of this Business Plan,
MEGPTCL has detailed various initiatives it wishes to undertake as part of its
environmental and social responsibility. MEGPTCL mainly wishes to undertake
developmental initiatives in the villages surrounding its transmission project to help
local communities towards better livelihood and their overall development.
2.2.9
In addition to the above, the Petitioner has also provided brief status of the project
activities which have been completed till date and the expected project cost to be
incurred by the Petitioner as against that approved in-principally by the Commission.
The Petitioner has also identified certain future business opportunities as part of the
strategic plan.
Operational Plan
2.2.10 Capital expenditure plan: MEGPTCL has considered revised estimated capital
expenditure as Rs. 5290.92 Crore vis-à-vis the in-principally approved capital
expenditure of Rs. 4721.88 Crore. The Petitioner has attributed this cost escalation
mainly to the variations in the taxes & duties, variations on account of foreign
exchange rate variations and increase in interest during construction on account of
delay in project implementation.
2.2.11 ARR forecast for second Control Period: The Petitioner has forecast the ARR for
the second Control Period under three scenarios, wherein Scenario-1 (base case)
depicts the ARR forecast based on the revised capital cost of Rs. 5290.92 Crore,
Scenario-2 depicts the ARR forecast considering a 2% escalation envisaged in the
revised capital cost and Scenario-3 depicts the ARR forecast considering a 2%
reduction envisaged in the revised capital cost. The ARR projections under all the
three scenarios are summarised below:
Table 2-1: ARR Projection under three scenarios as submitted by MEGPTCL
Particulars
Scenario - 1
Scenario - 2
Scenario - 3
2.3
2.3.1
FY
2013-14
189.88
193.36
186.39
FY
2014-15
979.29
997.23
961.33
Rs. Crore
FY
2015-16
1094.68
1114.60
1074.75
Project commissioning status
As submitted by MEGPTCL, the commissioning of the proposed transmission
infrastructure is expected to take place in various element sets during FY 2013-14 i.e.
Order – Case No. 128 of 2013
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Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
the following proposed transmission infrastructure would be put to use during FY
2013-14 as per the following commissioning schedule.
Table 2-2: Proposed commissioning schedule for transmission infrastructure submitted
by MEGPTCL
Set
No.
SET 1

Particulars
Proposed
Commissioning
Schedule
Akola-II to Akola-I 400 kV Quad D/C line with bays
December, 2013
(Subsequently
revised to January,
2014) #
SET 2
SET 3





Tiroda – Koradi-III 765 kV S/C Line-1
Koradi - III – Akola-II 765 kV S/C Line-1
Akola-II – Aurangabad 765 kV S/C Line-1.
Establishment of 765/400 kV switchyard at Tiroda
Establishment of 765/400 kV Substations at Akola-II





Tiroda – Koradi-III 765 kV S/C Line-2
Koradi-III – Akola-II 765 kV S/C Line-2
Akola-II –Aurangabad 765 kV S/C Line-2.
Establishment of 765/400 kV Substations at Koradi-III
Extension of 765 kV Aurangabad Substation
December, 2013
(Subsequently
revised to January,
2014) #
July, 2014
#
Based on revised project status (as on 31 December, 2013) provided by the Petitioner through
additional submission received by the Commission on 2 January, 2014
2.3.2
The Commission noted that the status of project execution as submitted by the
Petitioner during the Public Hearing has not changed significantly since the filing of
the original Petition in September, 2013 and revised submission in November, 2013.
The Petitioner in its response to the Commission’s queries provided on 31 October,
2013 had outlined the following issues which may affect the commissioning of
various elements of the sets mentioned above:


400 kV D/C Akola II – Akola I Line (December, 2013):
 Entire construction work is completed on 11 April, 2013. However,
charging of the line is dependent on completion of Amravati Power
Transmission Company Limited’s (APTCL) bays at Akola I (MSETCL)
Substation (SS).
765 kV S/C Tiroda – Koradi III – Akola II – Aurangabad (Ckt-1) (December,
2013):
 7 Cases pertaining to 765 kV Tiroda - Koradi Ckt.1 line related to Right of
Way issues and 1 case pertaining to 765 kV Koradi - Akola Ckt. 1 line
Order – Case No. 128 of 2013
Page 20 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16





related to demand for higher compensation are still pending at District
Magistrate (DM) level, which can affect the expected completion schedule.
 One case pertaining to RoW issue for location 73/0 of Akola- Aurangabad
section took around 24 months for resolution and the decision of Sessions
court is still awaited.
 Delay in permission for shutdown of power line crossing, railway crossing.
 Resistance from farmers for execution of work due to standing crops.
 Demand for exorbitantly high compensation for RoW for balance work and
on-going construction work of other agencies.
 Dependence on readiness of 400 kV Thaptitanda (MSETCL) substation by
December, 2013 for charging of the line.
 Dependency on readiness of LILO of 400 kV Waluj-Bhusawal transmission
line.
 M/s Basant Agro Tech has filed Petition before the MERC which has been
dismissed by the Commission on 30 October, 2013.
Tiroda – Koradi III – Akola II – Aurangabad (Ckt-2) (July, 2014):
 Numbers of cases pertaining to RoW / demand for higher compensation, etc.
are still pending at DM level, which may affect the expected completion
schedule.
 Application for Forest clearance for Ckt. 2 was submitted in 11 November,
2011. However, still final approval for the same is awaited.
 Availing shutdown of power line crossing, railway crossing needs to
expedite.
 Festival season and crop can hamper the deployment of manpower.
 Farmers demanding high compensation and on-going construction work of
other agencies.
765/400 kV substation at Tiroda (December, 2013):
 Statutory clearance/approval likely to be delayed due to festivals.
 Electrical Inspector visited on 23 September, 2013. Permission for charging
/ approval is awaited.
765/400 kV substation at Akola-II (December, 2013):
 Entire construction work is completed; however, charging of the 765/400
kV Akola-II SS is dependent on completion of APTCL’s 400 kV bays at
Akola I (MSETCL) substation.
765/400 kV substation at Koradi-III (July, 2014):
 Acquisition of balance land still pending and expected by December, 2013.
Bays at Aurangabad SS (Aurangabad 765 kV SS –March, 2015, Thaptitanda 400
kV SS – December, 2013):
 Depends on completion of 765 kV substation (MSETCL), Aurangabad
being executed by M/s. Alstom.
Order – Case No. 128 of 2013
Page 21 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
 Initially 765 kV S/C Akola- Aurangabad Line will be charged on 400 kV
level.
2.3.3
As evident from the submissions of the Petitioner outlined above, there are many
external dependencies which may delay the commissioning of the present
transmission project elements as against the envisaged timelines.
2.3.4
Subsequently, through additional submissions received on 2 January, 2014,
MEGPTCL has submitted the updated the status of the cases pertaining to the 765 kV
S/C Tiroda – Koradi III – Akola II – Aurangabad (Ckt-1) line. The gist of the
submissions is given below:


7 Cases pertaining to 765 kV Tiroda - Koradi Ckt.1 line related to Right of Way
issues and 1 case pertaining to 765 kV Koradi - Akola Ckt. 1 line related to
demand for higher compensation have been closed and work has been completed
in all the places except one location in Gondia district where the work of stringing
is ongoing.
Hon’ble High Court has dismissed WP No. 6091 on 23 December, 2013
pertaining to 1 RoW case at location 73/0 of Akola - Aurangabad section. The
case is now with the Sessions Court at Deulgaon Raja. In the hearing conducted
on 31 December, 2013, the court gave 4 January, 2014 as the date for the next
hearing. The decision is still awaited.
2.3.5
Commissioning of the MSETCL Thaptitanda 400 kV substation and the Aurangabad
765 kV substation are among the important dependencies for the project. The
termination of the transmission lines at Thaptitanda 400 kV substation has been
proposed as an interim arrangement by MEGPTCL in consultation with MSETCL till
the 765 kV substation is ready at Aurangabad. However, the expected commissioning
of this 400 kV substation may get delayed up to March, 2014 (as against December,
2013 considered by the Petitioner) as per the oral submission done by the MSETCL
representative during the Public Hearing held on 19 December, 2013. Accordingly,
the commissioning of some elements (especially the 765 kV line from Akola to
Aurangabad) of the MEGPTCL project will get delayed on account of the same.
2.3.6
Similarly, the commissioning of the MSETCL’s 765 kV Aurangabad substation has
been envisaged by March, 2015 in the above mentioned response and hence,
commissioning of the 2 no. bays at MSETCL’s 765 kV Aurangabad substation is
unlikely to take place prior to March, 2015.
2.3.7
Further, the Petitioner submitted the updated status of the project as on 31 December,
2013 through additional submission received on 2 January, 2014 which is outlined
below:
Order – Case No. 128 of 2013
Page 22 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 2-3: Project status submitted by MEGPTCL
Sr.
No.
Particulars
Akola I – Akola
II line
765 kV Ckt. 1
line
765 kV Ckt. 2
line
Transmission Lines
1
Foundation
100%
99.87%
86.75%
2
Erection
100%
99.50%
53.71%
3
Stringing
100%
94.86%
2.78%
Ready for
charging
January, 2014
July, 2014
Tiroda
Akola II
Koradi
Tentative
schedule
Commissioning
Substations
Particulars
1
Land acquisition
100%
100%
86%
2
Engineering
100%
100%
98%
3
Supply
100%
100%
95%
4
Civil works
100%
100%
23%
5
Installation
100%
100%
15%
6
Testing and commissioning
100%
99.90%
-
Overall progress
100%
99.90%
52%
Test charged
Ready for
charging
July, 2014
Tentative
schedule
Commissioning
2.3.8
The Petitioner has submitted that the readiness of APTCL’s bays at MSETCL’s
Akola-I substation is also prerequisite for charging of 765 kV Line 1 and 765/400 kV
Akola-II Switchyard. Further, the charging of the line 1 and Akola-II substations is
also delayed due to pending litigation related to RoW issue.
2.3.9
Similarly, the 400 kV D/C Akola-II to Akola-I line is ready for charging, however,
the charging is delayed due to non-readiness of APTCL’s bays at MSETCL’s Akola-I
substation.
2.3.10 The Petitioner has also submitted the copies of the letters (dated 10 April, 2013, 5
December, 2013 and 26 December, 2013) sent to APTCL in the matter pertaining to
delay in completion of bays at MSETCL Akola – I substation by APTCL with a
request to expedite the construction activities. It is observed from the contents of the
letter dated 26 December, 2013 that APTCL had applied for shut-down of 400 kV
Akola busbar for connection of 400 kV APTCL’s bays on 12 December, 2013 which
was not availed due to criticality of the 400 kV system at Akola. APTCL has
Order – Case No. 128 of 2013
Page 23 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
apparently once again requested MSETCL for shut-down on 2 January, 2014,
however, MSETCL denied the permission to provide shut-down on account of the
critical loading of the Akola bus. Instead it was suggested by MSETCL that APTCL
should have hot line connection of busbar and that MSETCL is ready to provide all
the necessary services at cost to APTCL. Accordingly, it is now dependent on APTCL
to initiate the necessary steps to complete the pending activities at the earliest.
2.3.11 In view of above information provided by the Petitioner and in absence of certainty
with regards to the timeline for resolution of the above stated issues, the Commission
has considered that elements in Set 1 and Set 2 may be commissioned (put to use)
only by March, 2014 as against January, 2014 considered by the Licensee in its
additional submission received by the Commission on 2 January, 2014. The likely
commissioning of the 400 kV MSETCL Thaptitanda substation in March, 2014 as per
the information provided by MSETCL during the Public Hearing will also help in
connecting the last stage of the Ckt.1 transmission line from Akola II substation to
400 kV MSETCL Thaptitanda substation.
2.3.12 Similarly, the Commission has considered that part of the elements of the Set 3 other
than the bays at Aurangabad substation will get commissioned by July, 2014 as
envisaged by the Petitioner. The bays at Aurangabad substation are considered to be
commissioned by April, 2015 as the MSETCL 765 kV Aurangabad substation is
likely to be commissioned by March, 2015 as per the submission of the Petitioner
dated 31 October, 2013.
2.3.13 Accordingly, the Commission has considered the following commissioning schedule
for the purpose of approval of the Business Plan:
Table 2-4: Commissioning Schedule considered by Commission
Set No.
Particulars
Expected
commissioning
schedule
SET 1

Akola-II to Akola-I 400 kV Quad D/C line with bays
1, March, 2014
SET 2





Tiroda – Koradi-III 765 kV S/C Line-1
Koradi - III – Akola-II 765 kV S/C Line-1
Akola-II – Aurangabad 765 kV S/C Line-1.
Establishment of 765/400 kV switchyard at Tiroda
Establishment of 765/400 kV Substations at Akola-II
1, March, 2014
SET 3 – A




Tiroda – Koradi-III 765 kV S/C Line-2
Koradi-III – Akola-II 765 kV S/C Line-2
Akola-II –Aurangabad 765 kV S/C Line-2.
Establishment of 765/400 kV Substations at Koradi-III
1, July, 2014
SET 3 - B

Extension of 765 kV Aurangabad Substation
1, April, 2015
Order – Case No. 128 of 2013
Page 24 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
2.3.14 Based on the above, the Commission has reviewed and approved the Business Plan
for the Petitioner for the period FY 2013-14 to FY 2015-16.
2.3.15 The Commission further states that the ARR of MEGPTCL shall only be recoverable
subsequent to the date of commissioning of the proposed transmission project and the
system is actually put to use. The Petitioner shall be required to submit necessary
documentary evidence to substantiate commissioning and demonstrating that the asset
is put to use. The Petitioner shall also submit the dates on which the assets have been
commissioned and put to use along with the MYT Petition. Necessary certification
from the STU and other competent authorities shall also be submitted by Petitioner
along with the MYT Petition.
2.3.16 Accordingly, MEGPTCL will have to file its MYT Petition covering ARR projections
for FY 2013-14 to FY 2015-16, which shall be scrutinised and approved by the
Commission based on prudence check and following the due regulatory process. The
same shall form part of the Total Transmission System Cost (TTSC) of the Intra-State
Transmission System determined by the Commission for FY 2013-14 to FY 2015-16
under the Intra-State Transmission Tariff Order for the respective year after achieving
commercial operations i.e. commissioning of the project and ensuring that the asset is
put to use. Accordingly, the recovery of transmission charges of MEGPTCL for FY
2013-14 to FY 2015-16 may be permitted by the Commission as part of the TTSC for
FY 2013-14 to FY 2015-16 as per mechanism which is outlined by the Commission
and would be applicable in case of MEGPTCL from the month subsequent to the
month in which the transmission system project of MEGPTCL is commissioned and
put to use.
2.4
Key assumptions made by the Petitioner
2.4.1
MEGPTCL submitted that the current Business Plan is being submitted on projections
drawn prior to commissioning of its transmission project and the figures stated in the
Petition are subject to modification at a later date.
2.4.2
The Petitioner has submitted in its Petition for approval of the Business Plan for MYT
Control Period from FY 2013-14 to FY 2015-16 that the commissioning of the
transmission project has been delayed owing to issues of forest and other clearances,
RoW, delay in contractual works post conducting the international competitive
bidding process, modification in metering equipment requirement at MSETCL
switchyard as per the provisions of MERC grid code, etc.
2.4.3
Further, the Petitioner has submitted that the scope of the proposed 765 kV
transmission project consists of several elements. At the time of grant of in-principle
approval, the Petitioner had estimated completion by August, 2012. However owing
to several project related hurdles beyond the control of the Petitioner as outlined
above, more time is required to commission the proposed transmission project.
Order – Case No. 128 of 2013
Page 25 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
However, the Petitioner submitted that he has planned commissioning of various
elements of the transmission system and will put them to use in such a way that it
provides sufficient reliability to the Intra-State Transmission System of Maharashtra
and also facilitate timely evacuation of the power from the large upcoming generation
capacity in north-eastern region of the State. The commissioning schedule is worked
out in such a way that each set of the elements is independently capable of
transmitting power from the date of its commissioning and would become an integral
part of the Intra-State Transmission System.
2.4.4
Consequently, MEGPTCL, in the Business Plan Petition, projected an expected
commissioning schedule for the 400 kV line connecting Akola I and Akola II
substations which is part of Set 1 and 765 kV Transmission system including
transmission lines, substations and associated infrastructure for the Tiroda - Koradi –
Akola - Aurangabad region which is part of Set 2 element covering the 765 kV S/C
Line 1 by December, 2013 and Set 3 covering 765 kV S/C Line 2 by July, 2014.
Thus, MEGPTCL has estimated computations of various components under ARR, i.e.
O&M expenses, depreciation, etc., based on the expected Date of Commercial
Operation (COD) of these lines.
2.4.5
In response to the queries raised by the Commission, the Petitioner has highlighted
factors which may adversely affect the timelines for implementation of the project.
However, the Petitioner has revised the commissioning dates for Set 1 and Set 2 from
1 December, 2013 to 31 December, 2013. However, the commissioning date for Set 3
was retained as 1 July, 2014. Subsequently, as discussed in Section 2.3 of the Order,
the Petitioner through additional submissions, received by the Commission on 2
January, 2014, provided updated status of the project as on 31 December, 2013 which
also highlighted that the project was not commissioned by 31 December, 2013 and is
likely to be commissioned by January, 2014. Accordingly, the Commission
considered all the above submissions while considering the revised commissioning
schedule of the project for the purpose of approval of Business Plan.
2.4.6
In addition to the above, the principles adopted by the Petitioner for projection of
ARR for the second Control Period (FY 2013-14 to FY 2015-16) are outlined below:
(a)
(b)
(c)
(d)
MEGPTCL has computed the Return on Equity at the rate of 15.5 % per annum
in line with the provisions of the MERC MYT Regulations.
The revised estimate of capital expenditure of Rs. 5290.92 Crore has been
considered for the purpose of forecast of the ARR for the second Control Period.
Interest on Long-Term Loans has been projected considering the debt‐equity
ratio of 70:30 as per the provisions of the MERC MYT Regulations and based
on the same the quantum of debt has been estimated at Rs. 3703.64 Crore.
The financing for the project has been considered from two sources:
(i) External Commercial Borrowings (ECB)
: USD 100 Million;
(ii)
Domestic Loan
: Rs. 3253.64 Crore.
Order – Case No. 128 of 2013
Page 26 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
(e)
(f)
(g)
(h)
(i)
(j)
(k)
2.4.7
The interest liability is calculated using the weighted average interest rates of
the combined domestic and foreign loans which work out to 9.67%, 10.91% and
11.07% for FY 2013-14, FY 2014-15 and FY 2015-16 respectively. The
applicable rates considered for the rupee denominated loans are 12.58 % for FY
2013-14 and 12.33% for FY 2014-15 and FY 2015-16 and 4.70% for US Dollar
denominated loan.
Depreciation has been computed as per rate specified in the MERC MYT
Regulations.
The Operations and Maintenance (O&M) expenses have been projected for the
Control Period considering the “per bay norm‟ and the “per circuit kilometre
norm‟ for O&M expenses specified in the MERC MYT Regulations for new
transmission Licensees i.e. same as norms prescribed for MSETCL.
Interest on working capital has been computed on normative basis in line with
the provisions of MERC MYT Regulations.
Contribution to Contingency reserves has been considered as specified in the
MERC MYT Regulations.
Non-Tariff Income has been computed in line with the provisions of the MERC
MYT Regulations.
Tax on Income has been computed at MAT rate of 20.96% which includes
applicable education cess and surcharge.
The above mentioned assumptions are taken into account while preparing the
Business Plan for the Control Period under consideration.
Order – Case No. 128 of 2013
Page 27 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
3
Business Plan Components
3.1
Capital expenditure plan
3.1.1
MEGPTCL estimated a total capital expenditure for the 765 kV transmission system
project at Rs. 5290.92 Crore including IDC component of Rs. 467.58 Crore over the
second Control Period from FY 2013-14 to FY 2015-16. This is higher than the
capital cost in-principally approved by the Commission.
3.1.2
The total estimated capital expenditure submitted by MEGPTCL vis-à-vis in-principle
approved capital expenditure has been summarised in the table below:
Table 3-1: Capital expenditure
Rs. Crore
4.00
Revised
Estimate
submitted by
MEGPTCL
4.00
2210.71
2212.32
1.61
2210.71
2212.32
1.61
1946.88
2001.68
54.80
1895.88
1950.68
54.80
51.00
51.00
0.00
Overheads
317.31
363.76
46.45
4.1
Overheads
166.46
212.91
46.45
4.2
Contingency
124.85
124.85
0.00
26.00
26.00
0.00
32.00
32.00
0.00
210.98
467.58
256.60
-
209.58
209.58
4721.88
5290.92
569.04
Sr. No.
1
Preliminaries
2
Transmission Lines
2.1
3
Tiroda - Koradi - Akola - Aurangabad 765kV
and Akola I - Akola II 400kV
Substation works
3.1
765kV substations at Koradi III, Akola II and
switchyard at Tiroda and extension of
Aurangabad substation
3.2
Land & Compensation
4
4.3
3.1.3
Particulars
Pre-operative Expenses
5
Deposit Work for bays at Aurangabad
substation
6
Financing & IDC
7
Impact on Capital Cost due to foreign
exchange rate variations
8
TOTAL
In- principle
Approval
Difference
0.00
MEGPTCL also submitted a detailed breakup of capital expenditure requirements in
terms of Preliminary expenses, transmission line (supply & service order), substation
works (supply & service order, land cost, taxes/duties, etc.), overhead cost, financing
costs and other related costs. The capital cost breakup provided by MEGPTCL is
summarised below:
Order – Case No. 128 of 2013
Page 28 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 3-2: Break-up of capital expenditure submitted by MEGPTCL
Rs. Crore
Sr. No.
1
Preliminaries
2
Transmission lines
Set-1
Set-2
Set-3
Total
0.08
1.99
1.93
4.00
2.1
Supply Order
61.64
902.63
902.63
1866.89
2.2
Service Order
14.40
165.52
165.52
345.43
3
Substation works
3.1
Supply Order
9.78
886.00
814.13
1709.92
3.2
Service Order
0.11
96.84
105.31
202.26
3.3
Land for S/S
-
29.00
22.00
51.00
Revised Taxes and Duties, BOCW
0.79
19.18
18.53
38.50
4.15
100.35
96.95
201.45
0.24
5.71
5.52
11.46
2.48
60.36
62.01
124.85
0.30
15.06
10.65
26.00
-
32.00
32.00
7.15
173.80
286.62
467.58
4.17
101.31
104.09
209.58
105.30
2557.74
2627.88
5290.92
3.4
4
Overheads
Project Management Consultancy Services
(Lahmeyer Contract)
Other Overheads
4.1
4.2
4.3
Contingency
Pre-operative expenses (PGCIL design cost,
statutory Clearance etc.)
Deposit Work for bays at Aurangabad
substation
Financing & IDC (including Lenders fee,
Bank charges, BG, ocumentation)
Impact on Capital Cost due to foreign
exchange rate variations
Total
4.4
5
6
7
8
3.1.4
Particulars
-
The capital expenditure incurred by MEGPTCL over FY 2010-11 to FY 2014-15 is
summarised in the Table below:
Table 3-3: Phasing of capital expenditure as submitted by MEGPTCL
Rs. Crore
Particulars
3.1.5
FY
2010-11
Phasing of Expenditure
including IDC
0.05
IDC
-
FY
2011-12
FY
2012-13
FY
2013-14
FY
2014-15
Total
1515.42
1405.57
1970.83
399.05
5290.92
47.04
137.98
231.20
51.47
467.58
The Commission has undertaken preliminary scrutiny of the capital investment plan
and deduced certain critical observations in this Order regarding the estimate of
capital cost for the purpose of Business Plan projections with due consideration to
regulatory provisions under MERC MYT Regulations in relation to capital
expenditure and subsequent submissions provided by MEGPTCL during the
regulatory approval process.
Order – Case No. 128 of 2013
Page 29 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
3.1.6
The relevant provisions of MERC MYT Regulations, viz. Regulation 59, Regulation
27 and Regulation 28 are as reproduced below:
“59. Capital Cost: Transmission
59.1 For the purpose of determination of tariff, the Capital Cost for a
Transmission Project and additional capitalisation thereof shall be allowed in
accordance with the provisions outlined under Regulation 27 and Regulation
28 respectively.
27. Capital Cost and Capital Structure
27.1 Capital cost for a project shall include:
(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 on the loan during
construction up to the date of commercial operation of the project,
as admitted by the Commission, after prudence check;
(b) capitalised initial spares subject to the ceiling rates specified in this
Regulation; and
(c) additional capital expenditure determined under Regulation 28:
Provided that the assets forming part of the project but not put to use or
not in use, shall be taken out of the capital cost.
27.2 The capital cost admitted by the Commission after prudence check shall
form the basis for determination of tariff:
Provided that 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.
27.3 The approved Capital Cost shall be considered for determination of
tariff and if sufficient justification is provided for any escalation in the
Project Cost, the same may be considered by the Commission subject to the
prudence check:
Provided that in case the actual capital cost is lower than the approved
capital cost, then the actual capital cost shall be considered for determination
Order – Case No. 128 of 2013
Page 30 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
of tariff of the Generating Company or Transmission Licensee or Distribution
Licensee. (Emphasis added)
.....
.....
28. Additional Capitalisation
28.1 The following capital expenditure, actually 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 the prudence check:
.....
28.2 Impact of additional capitalisation on tariff, if any, shall be considered
during Mid-term Performance Review and tariff determination of third
Control Period starting from April 1, 2016.” (Emphasis added)
3.1.7
In view of the above provisions of MERC MYT Regulations, it is clarified that
the detailed scrutiny, review and approval of capital cost subject to prudence
check would be undertaken separately along with the MYT Petition upon
availability of audited details of completed capital cost of the transmission
project.
3.1.8
Subsequent to the in-principle approval by the Commission, the capital cost for the
project has undergone substantial upward revision primarily on account of issues
pertaining to implementation delays, variation of taxes and duties, increase in the
overheads, increase in the IDC on account of delays in implementation and on
account of foreign exchange rate variations.
3.1.9
The Regulation 27.1 of the MERC MYT Regulations provides that capital cost of the
project will include 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 on the loan during construction up to the date of
commercial operation of the project, as admitted by the Commission, after prudence
check. Accordingly, some of the elements cited in the previous paragraph as reasons
for revision for the capital cost, subject to prudence check, are eligible to be included
in the capital cost as per the provisions of the MERC MYT Regulations.
3.1.10 Further, Regulation 27.2 of the MERC MYT Regulation provides that the capital cost
admitted by the Commission after prudence check shall form the basis for
determination of Tariff. The Commission will undertake detailed scrutiny, review
and approval of capital cost at the time of the approval of MYT Petition to be filed by
the Petitioner.
3.1.11 Considering the time gap between the in-principle approval of the capital cost by the
Commission and the present filing and the relevant provisions of the MERC MYT
Order – Case No. 128 of 2013
Page 31 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Regulations as cited in previous paragraphs, the Commission, subject to the detailed
scrutiny, review and approval of capital cost to be taken up at the time of approval of
the MYT Petition, has considered and approved the capital cost as proposed by the
Petitioner only for the purpose of approval of Business Plan projections.
3.1.12 However, the Commission’s views with regards to the capital cost based on the
preliminary scrutiny of revised estimate of capital cost as submitted by
MEGPTCL in the present Petition are elaborated at paragraph 4.3.1 of this
Order, which should be duly considered by MEGPTCL while making the capital
cost submissions in its MYT Petition.
3.1.13 Accordingly, for the purpose of Business Plan approval, the Commission has
considered the following capital cost:
Table 3-4: Approved capital cost for Business Plan
Rs. Crore
Sr. No.
Particulars
1
Preliminaries
2
Transmission lines
2.1
2.2
3
Set-1
Set-2
Set-3
Total
0.08
1.99
1.93
4.00
Supply Order
61.64
902.63
902.63
1866.89
Service Order
14.40
165.52
165.52
345.43
Substation works
3.1
Supply Order
9.78
886.00
814.13
1709.92
3.2
Service Order
0.11
96.84
105.31
202.26
3.3
Land for S/S
-
29.00
22.00
51.00
Revised Taxes and Duties, BOCW
0.79
19.18
18.53
38.50
4.15
100.35
96.95
201.45
0.24
5.71
5.52
11.46
2.48
60.36
62.01
124.85
0.30
15.06
10.65
26.00
-
32.00
32.00
7.15
173.80
286.62
467.58
4.17
101.31
104.09
209.58
105.30
2557.74
2627.88
5290.92
3.4
4
4.1
4.2
4.3
4.4
5
6
7
8
Overheads
Project Management Consultancy Services
(Lahmeyer Contract)
Other Overheads
Contingency
Pre-operative expenses (PGCIL design cost,
statutory Clearance etc.)
Deposit Work for bays at Aurangabad
substation
Financing & IDC (including Lenders fee,
Bank charges, BG, ocumentation)
Impact on Capital Cost due to foreign
exchange rate variations
Total
-
3.1.14 The capital cost shall be subjected to further prudence check and availability of
audited financial statements for completed capital cost up to COD at the time of
approval/finalisation of the MYT Petition to be filed by MEGPTCL for the
second Control Period.
3.1.15 The Petitioner shall also adhere to the provisions of the capex approval
guidelines issued by the Commission and accordingly submit details pertaining
Order – Case No. 128 of 2013
Page 32 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
to the actual expenditure incurred by the Licensee, as against the amount
considered while granting in-principle clearance with justification for significant
variations, particularly on the higher side. The approval of the capital cost at the
time of the MYT Petition will be subject to the Petitioner adhering to the
relevant requirements specified under various applicable Regulations and the
guidelines for in-principle clearance of the proposed investment schemes issued
by the Commission and as amended from time to time.
3.2
3.2.1
Financing Plan
MEGPTCL, in the Business Plan Petition, submitted that it proposes to fund the
project with a normative debt-equity ratio of 70:30 in line with Regulation 30 of
MERC MYT Regulations which is reproduced below:
“30.1 For a project declared under commercial operation on or after April 1,
2011, if the equity actually deployed is more than 30% of the capital cost,
equity in excess of 30% shall be treated as normative loan for the Generating
Company, Transmission Licensee and Distribution Licensee:
Provided that where equity actually deployed is less than 30% of the capital
cost of the capitalized asset, the actual equity shall be considered for
determination of tariff :
…
30.3 Any expenditure incurred or projected to be incurred on or after April 1,
2011, as may be admitted by the Commission as additional capital
expenditure for determination of tariff, and renovation and modernization
expenditure for life extension, shall be serviced in the manner specified in the
Regulation.”
3.2.2
MEGPTCL has submitted that it has tied up debt financing for a total amount of Rs.
3703.64 Crore including domestic and foreign loans where the weighted average
applicable interest rates for domestic loans is 12.58% for FY 2013-14 and 12.33% for
FY 2014-15 and FY 2015-16 respectively. The applicable rate of interest for foreign
currency loan is 4.70% for FY 2013-14 to FY 2015-16. The terms of financing
availed by MEGPTCL are as summarised below:
Order – Case No. 128 of 2013
Page 33 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 3-5: Source of funding as submitted by MEGPTCL
Particulars
Basis
Hard Cost including contingency
IDC including financing cost
Impact on Capital Cost due to foreign
exchange rate variations
Project Cost including IDC
Equity
Debt
Debt-ECB
Debt-Domestic loan
Interest rate for ECB
30% of project cost
70% of project cost
In USD
In INR
For serving in USD
Interest rate for domestic loan
For serving in INR
Rs. Crore
4613.75
467.58
209.58
5290.92
1587.27
3703.64
100 million
3253.64 Crore
LIBOR + 4.2% p.a.
Base rates of ICICI/SBI
+ 2.5% p.a.
3.2.3
In reply to a specific query raised by the Commission regarding the computation of
weighted average rate of interest for domestic loans, MEGPTCL has submitted
institution wise break-up of loan as well as the applicable interest rates under affidavit
on 18 November, 2013. Further, the loan sanction agreement has also been furnished
by MEGPTCL as documentary proof for considering the weighted average rates of
interest for loans.
3.2.4
The consortium of banks funding the requirements of MEGPTCL includes the
following banks:









3.2.5
ICICI Bank
Canara Bank
SBI
IIFCL
IDFC
PNB
SBM
OBC
Vijaya Bank
The weighted average rate of interest for rupee denominated loans as submitted by the
Petitioner based on the base rate prevailing at the beginning of FY 2013-14 is given
below:
Order – Case No. 128 of 2013
Page 34 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 3-6: Weighted average rate of interest as submitted by MEGPTCL
Bank
ICICI
Canara Bank
Loan Amount Base Rate
(Rs. Crore)
380.24
9.75%
Spread
Total applicable
Interest rate
2.50%
12.25%
Remarks
50.00
9.70%
2.50%
12.20%
SBI
243.80
10.70%
2.50%
IIFCL
250.00
9.75%
2.50%
13.20% 1% penal interest due to noncreation of security due to nonavailability of full land koradi SS
and non-execution of lease deed
with MSETCL for Akola SS as
elaborated in response to earlier
datagaps and during TVS
12.25%
IDFC
150.00
10.50%
2.50%
IDFC
50.00
10.25%
2.50%
Total Loan
1124.04
Weighted Avg. Rate
of Interest
13.00% 0.5% Penal Interest due to
12.75% reasons as sighted above
12.58%
3.2.6
Based on the analysis of the information submitted by MEGPTCL on 18 November,
2013 under affidavit before the Commission, it is observed that MEGPTCL has
considered 1% penal interest on SBI loans due to non-creation of security due to nonavailability of full land for Koradi substation and non-execution of lease deed with
MSETCL for Akola substation. Similarly, MEGPTCL has also considered 0.5% penal
interest on IDFC loans for similar reasons.
3.2.7
The Commission is of the opinion that the penal interests as mentioned above
should not be passed on to the transmission system users of the InSTS in
Maharashtra as they have been levied on account of reasons not attributable to
them. It is the responsibility of the transmission Licensee to ensure adherence to
all the contractual obligations under various agreements and costs incurred on
account to defaults in meeting its obligations should not be passed on to the
transmission system users of the InSTS in Maharashtra. Accordingly, for the
purpose of Business Plan approval, the Commission has not permitted pass
through of this penal interest. Based on the actual loans drawn by the Petitioner
and the discussion above, the weighted average rate of interest on long term
loans for FY 2013-14 works out as given below:
Order – Case No. 128 of 2013
Page 35 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 3-7: Weighted average rate of interest considered for FY 2013-14 – Rupee
denominated loans
Bank
ICICI
Loan Amount Base Rate
(Rs. Crore)
380.24
9.75%
Canara Bank
Spread
Total applicable
Interest rate
2.50%
12.25%
50.00
9.70%
2.50%
12.20%
SBI
243.80
9.70%
2.50%
12.20%
IIFCL
250.00
9.75%
2.50%
12.25%
IDFC
150.00
10.00%
2.50%
12.50%
IDFC
50.00
9.75%
2.50%
12.25%
Weighted Avg. Rate
of Interest
12.27%
Total Loan
1124.04
3.2.8
The Commission has also considered the above interest rate to be applicable for
FY 2014-15 and FY 2015-16 for the purpose of the Business Plan approval
subject to the adjustments discussed in the subsequent paragraphs.
3.2.9
As per the common loan agreement furnished by MEGPTCL, there is a provision for
a reduction of 0.25% interest rate in the applicable spread of 2.5% for the rupee
denominated loans from the project commissioning in case of no event of default by
the Petitioner as per the agreement. The said condition has been mentioned in the
Schedule I: Part A – Details of the Lenders and Rupee Facilities of the Common Loan
Agreement submitted by the Petitioner in response to data gaps on 31 October, 2013.
The Commission is of the view that the Petitioner should ensure no events of defaults
in its obligations towards the lenders and the benefit of reduction of the applicable
interest rate should be passed on to the beneficiaries of this project. The Petitioner has
also factored the same while assuming that the interest rate applicable for FY 2014-15
and FY 2015-16 will be 12.33% i.e. 0.25% reduction over the interest rate applicable
for FY 2013-14 i.e. 12.58% as given in the table 3-6 above.
3.2.10 Accordingly, the Commission has considered the applicable interest rates for
rupee denominated loans after deducting 0.25% from the rate of interest of
12.27% applicable for FY 2013-14 as mentioned in table 3-7 above and the
revised applicable interest rate for rupee loans has been considered at 12.02%
for FY 2014-15 and FY 2015-16.
3.2.11 Further, pursuant to the loan agreement, the interest rates for foreign currency loan
have been considered at 4.7% p.a. for the Control Period from FY 2013-14 to FY
2015-16.
Order – Case No. 128 of 2013
Page 36 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
3.2.12 Thus, based on the loan drawals envisaged by the Petitioner and the rate of
interest considered as discussed above, the Commission, for the purpose of
approval of the Business Plan approves the weighted average interest rate for the
loans as 9.48%, 10.66% and 10.81% for FY 2013-14, FY 2014-15 and FY 201516 respectively as against the submission of MEGPTCL for weighted average
interest rates for the loans as 9.67%, 10.91% and 11.07% for FY 2013-14, FY
2014-15 and FY 2015-16 respectively. The following tables highlights the
calculation of weighted average revised applicable interest rates for rupee
denominated loans for FY 2013-14 and FY 2014-15 & 2015-16 respectively.
Table 3-8: Weighted average interest rate for FY 2013-14 to FY 2015-16 approved by
the Commission
Rs. Crore
S.No.
1
Source of Loan
Projected
Projected
Opening Balance of Loan
1,124.04
2,882.10
Addition during the year
1,799.80
329.80
41.74
136.18
203.90
Closing Balance of Loan
2,882.10
3,075.72
2,871.82
Applicable Interest Rate (%)
12.27%
12.02%
100.00
100.00
3.3
3.3.1
3,075.72
-
12.02%
Loan 2 : ECB USD 100 Million
Opening Balance of Loan
3
Projected
Loan 1: RTL
Loan Repayment during the year
2
FY 2013-14 FY 2014-15 FY 2015-16
92.65
Addition during the year
-
-
-
Loan Repayment during the year
-
7.35
7.35
Closing Balance of Loan
Applicable Interest Rate (%) (LIBOR
@ 0.5% + 4.2% p.a. )
100.00
92.65
85.30
4.70%
4.70%
4.70%
Weighted average interest rate
9.48%
10.66%
10.81%
Performance Plan
As discussed in the previous paragraphs, the transmission system is expected to be
commissioned in parts from FY 2013-14 up to FY 2015-16. The Petitioner has
submitted that in view of the above, the behaviour of the transmission line with
respect to load and voltage profile is not known at this stage. However, the Petitioner
has endeavoured to utilise prudent engineering practices for erection of the
transmission line and shall also deploy standard commissioning procedure to ensure
Order – Case No. 128 of 2013
Page 37 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
that the transmission line will be ready to deliver reliable and efficient transmission
services to its beneficiaries.
3.3.2
Further, the Petitioner has submitted that the Commission will set required
performance targets while assessing the Petitioner’s Business Plan and undertake
Tariff determination.
3.3.3
The Regulation 60.1 of the MERC MYT Regulations provide for performance targets
for the Transmission Licensees. The same is reproduced below:
“60.1 Target availability for full recovery of annual transmission charges
(a) AC System
(b) HVDC bi-pole links
(c) And HVDC back to back stations
: 98 percent
: 92 percent
: 95 percent
….
Note 2: The target availability shall be calculated in accordance with
procedure provided in the Annexure-II of these Regulations and to be
certified by Maharashtra State Load Despatch Centre.”
3.3.4
Further, to achieving the performance targets in terms of transmission availability,
MEGPTCL should also maintain optimum levels of other parameters such as
transmission loss, voltage profile, frequency profile, safety, etc., while operating its
transmission system throughout its useful life.
3.3.5
The performance targets fixed by the Commission for the Petitioner are discussed in
Chapter 5 of this Order.
3.4
Human resources plan
3.4.1
MEGPTCL has submitted that it is a dynamic vertical of Adani Enterprises Limited
which is growing exponentially in the infrastructure sector.
3.4.2
MEGPTCL has chalked out a detailed manpower plan based on realistic projections
of its HR needs. The human resource department of the Petitioner has four main
verticals namely:
(a)
(b)
(c)
(d)
3.4.3
Operations;
Talent Acquisition;
Training and Development;
Business Partner.
The major drivers for the HR function in the organisation will be talent acquisition,
development and retention of the staff. This is envisaged to be achieved through:
Order – Case No. 128 of 2013
Page 38 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
(a)
(b)
(c)
(d)
(e)
Analysis of individual needs;
A strong performance management system;
Training need identification;
Manpower planning backed by competitive recruitment policy;
Performance recognition and reward policy.
3.4.4
As mentioned previously, the manpower planning is based on a detailed need
analysis. The company presently requires manpower at different stages of projects,
commissioning and Operation & Maintenance. Therefore, to meet the corporate
objective and business plan, the Company has chalked out manpower requirement
ensuring optimum utilization of its existing manpower. The systematic projections of
manpower requirements based on realistic projections and standard of performance
has been worked out.
3.4.5
Regarding the recruitment policy, MEGPTCL submitted that the organization has
projected its manpower requirement ensuring optimum utilization of its existing
manpower. In a sector where the talent pool is very scarce and is primarily available
with Central/State and selected private power utilities in the country, the Petitioner
inducts new hires and puts maximum efforts to retain existing talents. This is in sync
with the business requirements of the Petitioner. The innovative and pre-emptive
approach helps the Petitioner meet the requirement of appropriate manpower in time.
3.4.6
The talent acquisition policy of the Petitioner concentrates on manpower budgeting,
recruitment, selection and on-boarding.
3.4.7
Along with recruitment policy, the Petitioner has a human resource development plan
which focuses on individual employee’s professional growth and development. The
process includes the identification, facilitation and monitoring of all behavioural and
technical training requirements within the company. The Petitioner has submitted that
based on the identification of training requirements, its training programs are designed
for the employees and the trainings are conducted internally or through external
agencies/institutes.
3.4.8
The Petitioner has submitted that as per the reward policy of the company, the
performance appraisal system at the Petitioner links compensation rewards directly to
the employee performance. The Petitioner’s value system is supported by an
environment which is rewarding and recognizing the performance of its employees.
3.4.9
Further, MEGPTCL also submitted details of the directors on the board of the
company and also proposed the following organisation structure to undertake this
transmission business and would further firm up the organization structure prior to the
commissioning of the transmission system:
Order – Case No. 128 of 2013
Page 39 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Figure 1: Proposed organisation structure of MEGPTCL
Chief Executive
Officer
(Ahmedabad)
PS to CEO
HR Manager
AGM/DGM
Sr. Officer/
Officer
Regulatory &
Statutory
AGM/DGM
Security
AGM/DGM
F&A
AGM/DGM
Sr. Officer/
Officer
F&A A.O.
3 posts
IT
AGM/DGM
Sr. Eng./
Engineer
O&M
AGM/DGM
SITE OFFICES#
Data Review &
Analysis AM./Sr.
Eng.
Procurement/
Purchase
AM/Sr Eng.
System Policies
AM/Sr. Eng.
#: The Petitioner has also outlined the organisation structure at the individual site offices in the Petition.
3.4.10 The Commission has noted the submissions of MEGPTCL in this regard.
3.5
3.5.1
Risk analysis and risk mitigation plan
MEGPTCL, in its Business Plan, submitted various kinds of risks that it may be
exposed to and the mitigation plans put in place to avert these risks. The submission
by MEGPTCL is summarised in the table below:
Table 3-9: Risk and Mitigation Plan
Risk
Impact
Mitigation Plan
Delay in clearances Delay in clearances may The Petitioner has already submitted
lead to overall project required proposals duly prepared as per
delay
norms, on time. Competent people are
following up with respective authorities on
regular basis.
Land availability
Delay in land acquisition At the commencement of the project,
may lead to overall MSETCL had already acquired land for
project delay
substation at Akola and also agreed to make
it available for the Petitioner's substation.
The Petitioner has been constantly
following up with MSETCL to conclude
Order – Case No. 128 of 2013
Page 40 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Risk
Impact
Construction risks
Risk
of
geological
surprises
or
uneven
terrain which may require
change in route of
transmission lines, change
in tower design.
Implementation
risks
Delay in the performance
on account of the
Petitioner’s contractors
may lead to delay in
project implementation
and also project cost
escalation.
Operational risks exist in
terms of errors or defects
in
transmission
equipment and extreme
weather condition leading
to economic loss due to
interruptions and unavailability of part of the
transmission system.
Operational risks
Order – Case No. 128 of 2013
Mitigation Plan
this procedure; however, delays on this
account are uncontrollable. Further, the
Petitioner has ensured all efforts in
acquisition of land for Koradi substation.
However, political interference and severe
objection of land owners has led to delays.
In order to prevent a deadlock, the Petitioner
shifted the site. Presently, acquisition of
land through experienced consolidators and
in house senior level experienced persons is
in final stages of completion.
A detailed route survey with soil testing has
been undertaken to minimise the risk of
unknown terrain. Further, experienced EPC
contractors engaged for the implementation
for reduction of risk. The Petitioner has also
deployed experienced project management
team to oversee the construction of the lines.
The Petitioner holds regular meetings with
vendors and sub vendors for timely
execution of supplies & works. The
Petitioner ensures that the works are being
executed in two shifts to make up for the
delays.
EPC contract awarded after following
International Competitive Bidding (ICB)
with strict penalties for time overruns. The
Petitioner has placed contracts on firm price
basis for the tenure of the contract. Further,
there are penalties for time overruns if it is
on account of the contractors.
The Petitioner has planned to undertake
appropriate
system
monitoring
and
maintenance management systems along
with effective spare part management
system. The Petitioner has planned for
comprehensive O&M services for upkeep
and maintenance of the transmission lines.
All equipment has been sourced from
industry’s best vendors and hence failure
Page 41 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Risk
Impact
Mitigation Plan
risk is minimal. Spares of all major
equipment would be maintained at site.
Further, the entire system is under one year
warranty by vendor for successful
performance.
Regulatory risks
Enactment
of
new
Regulations may impact
the viability of the
project.
Financial risks
Interest rate variations
may impact cost of debt
and
may
expose
MEGPTCL to interest
rate risk.
To make appropriate representations during
consultative process for any changes in
regulatory framework to ensure adequate
representation on any proposal it sees
adverse to efficient operations of its assets
and to industry as a whole.
The Petitioner has submitted that under the
provisions of Regulations 11, 27 and 33 of
the MERC MYT Regulations, variations in
capital cost due to time and cost overruns
and on account of foreign exchange risk
variation are admissible.
3.5.2
The Commission has noted the submissions of MEGPTCL in this regard. However,
the Commission has few additional observations on the various risks cited above
which are associated with the transmission system being developed by MEGPTCL,
which have been elaborated below.
3.5.3
Implementation Risk:
3.5.3.1 The Petitioner has stated that the work for implementation of the project has been
awarded to EPC contractors awarded after following International Competitive
Bidding (ICB) with strict penalties for time overruns. The Petitioner has placed
contracts on firm price basis for the tenure of the contract. Further, there are
penalties for time overruns if it is on account of the contractors.
3.5.3.2 Accordingly, while submitting the MYT Petition for approval of the transmission
Tariff, the Petitioner should clearly highlight the cost incurred on account of delay
on the part of the contractors, the penalties recovered from them in this regards and
the part of the cost escalation which has been offset based on such recoveries. This
will help the Commission in prudence check for approving the capital cost incurred
by the Petitioner for implementation of the project.
3.5.3.3 Similarly, the Petitioner should clearly highlight any other cost over runs or cost
escalations which are attributable to some other parties who are contractually bound
Order – Case No. 128 of 2013
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Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
with the Petitioner to complete certain activities within specified time frame. The
steps taken by the Petitioner to cure such delays and the contractual steps initiated
by the Petitioner in this regards including recovery of costs / penalties etc. may be
clearly highlighted in the MYT Petition.
3.5.3.4 Another important implementation risk is non-availability of the necessary
infrastructure which is required for commissioning of the transmission project may
delay commissioning and put to use of certain assets or elements of the proposed
transmission system. This would not only lead to delay in recovery of the
transmission costs but also lead to escalation of the capital cost as the transmission
charges can only be recovered for assets which have been put to use.
3.5.3.5 In the present case one such instance is the delay in commissioning of the
Thaptitanda 400 kV and Aurangabad 765 kV substations which will lead to delay in
commissioning of elements of the proposed transmission system.
3.5.3.6 The Petitioner in consultation with MSETCL has proposed an interim arrangement
in order to avoid bottlenecking of power and ensuring that the transmission line
developed is put to use. However, this arrangement would mean creation of
additional infrastructure (populating spare bays at Akola II substation) which would
not be required to be developed under normal circumstances. This will lead to
additional cost burden on the beneficiaries and also lead to creation of certain assets
which may become redundant especially at Akola II substation.
3.5.3.7 The MERC MYT Regulations provide for recovery of costs for assets which are
commissioned and put to use. As discussed in the previous paragraph, on account of
issues cited above, there is a possibility that some of the assets being created by the
Petitioner as part of the project would not be put to use for some period of time due
to unavailability of connecting infrastructure or may become redundant
subsequently after being created as an interim arrangement to tide over issues
pertaining to availability of necessary infrastructure for ensuring complete
commissioning of the project. Such issues will affect the recovery of the cost by the
Petitioner through approved Tariff.
3.5.3.8 While presently the Petitioner has not identified any such redundant infrastructure in
its Business Plan Petition, however, the Petitioner will have to provide details of
such infrastructure (nos. and cost associated), if any, at the time of filing of the MYT
Petition. The Commission will review the same and consider it appropriately at the
time of approving the MYT Petition.
3.5.3.9 As discussed in Section 2.3.15 of the Order, the Petitioner will need to provide
necessary documentary evidence for substantiating commissioning of the assets
along with dates on which the assets were commissioned i.e. put to use.
3.5.3.10 Further, the Petitioner has submitted that the commissioning schedule of the
project is worked out in such a way that each set of the elements is
Order – Case No. 128 of 2013
Page 43 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
independently capable of transmitting power from the date of its
commissioning and would become an integral part of the Intra-State
Transmission System. The Petitioner will have to demonstrate the
commissioning (put to use) of each element of the transmission network at the
time of filing of the MYT Petition so as to enable it to recover the transmission
charges which are only recoverable for assets which are put to use. Also as per
the capex approval guidelines of the Commission, MEGPTCL shall submit the
half yearly progress report of the schemes along with commissioning report.
3.5.4
Financial Risks:
3.5.4.1 The Petitioner has submitted that as per the provisions under Regulations 11, 27 and
33 of the MERC MYT Regulation, any change in capital cost due to time and/or cost
overruns or on account of foreign exchange rate variation is admissible as a part of
ARR/Tariff.
3.5.4.2 The Commission has noted that such change in capital cost due to time and cost
overruns may be considered only subject to prudence check and in line with
provisions of the Regulations 27.1, 27.2 and 27.3 of the MERC MYT Regulations.
3.5.5
The Petitioner has submitted a revised capital cost of Rs. 5290.92 Crore as against the
capital cost in-principally approved by the Commission of Rs. 4721.88 Crore. The
cost escalation has been mainly attributed to the changes in taxes and duties,
variations on account of foreign exchange rate variation and increase in the financing
charges on account of the increase in IDC which is result of delayed implementation
of the project.
3.5.6
The Commission observed that the project has been delayed by a period of more than
2 years and there is still uncertainty as regards to the actual date by which the project
will get commissioned (put to use). This has led to significant increase in the IDC
which led to the capital cost escalation. The Petitioner has provided justification for
the delay in the Petition; however, the prudence check regarding the same will be
undertaken by the Commission at the time of approval of the MYT Petition. The
Petitioner should ensure regular follow-up on the matters which are holding back the
commissioning so as to ensure timely completion of pending activities.
3.5.7
As regards the risks associated with the financing of the project, the Commission
observes that proper due diligence should be exercised while deciding on the means
of finance and ways and means to mitigate risks associated with the means of finance
chosen. The Petitioner has resorted to ECB based financing for part of the project cost
which helps in lowering the financing costs on account of lower interest outgo.
However, such means of finance are exposed to risk on account of foreign exchange
rate variation – both upside and downside risk. As a part of the risk mitigation
strategy, the Petitioner could have minimised this risk by resorting to hedging which
Order – Case No. 128 of 2013
Page 44 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
is typically part of the risk mitigation strategy adopted while opting for foreign
currency loans. However, the Petitioner does not seem to have opted for the same and
thus has been exposed to significant risk on account of change in the rupee - dollar
exchange rate from Rs. 45 / USD at the time of borrowing to Rs. 61.97 / USD which
is average reference rate for the month of December, 2013 as per the information
available on Reserve Bank of India website.
3.5.8
As far as the Rupee denominated loans are concerned, the rate of interest payable is in
the range of 12.2% to 13.2%. It is submitted that the risk associated with the project is
higher in the initial stages and it diminishes as the project reaches commissioning
stage. Accordingly, it has to be continuous endeavour of the Petitioner to explore
means of refinancing of its debt with lower cost debt subject to prudence check. The
Petitioner should submit steps initiated by it in this direction so as to reduce the
interest burden (both foreign currency and rupee denominated loans) on the
beneficiaries of the project along with the MYT Petition.
3.5.9
Further, while the changes in capital cost due to time and cost overruns may be
considered by the Commission pursuant to the relevant provisions of MERC
MYT Regulations 2011, the same will be subject to prudence check by the
Commission at the time of approval of the MYT Petition to be filed by the
Petitioner. The Commission has accordingly considered the capital cost as
proposed by the Petitioner and the interest rates as submitted by MEGPTCL in
its Petition subject to necessary adjustments as discussed in this Order only for
the purpose of approval of the Business Plan. The same will be subject to
prudence check at the time of filing of MYT Petition by MEGPTCL for the
second Control Period and approval of the Transmission Tariff.
3.6
Environment policy and corporate social responsibility initiative plan
3.6.1
MEGPTCL, in its Business Plan Petition, has submitted that during the construction
of its transmission system, it has taken due care so that the transmission line does not
involve any dense vegetation and populated areas. As an environmentally responsible
organisation, the group has adopted the latest available technology for protecting the
environment.
3.6.2
The Petitioner has defined Environmental Management System (EMS) and Safety
Management System (SMS) procedures under ISO 14000 and OHSAS 18000
certifications respectively. The project is developing mechanism for verifying criteria
laid down on standards and practices for effective control on whether these are met or
exceeded, as well as for recording and reporting of results.
3.6.3
The Petitioner’s Environmental & Social Impact Assessment study identified
following priority areas of social mitigation & development for the villages falling
within the transmission line corridor:
Order – Case No. 128 of 2013
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Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
(i)
(ii)
(iii)
(iv)
(v)
3.6.4
Strengthening of drinking water facilities i.e. pipeline water supply system
and additional tube-well/ hand-pump;
Strengthening of road network i.e. strengthening of village approach road
and internal village road;
Strengthening of sanitation i.e. setting up toilets in every household,
strengthening of drainage facilities and setting up of community toilets
followed by strengthening of health facilities i.e. setting up of health
centre/dispensary/clinic and providing ambulance services;
Strengthening of vocational training facilities i.e. assistance for selfemployment/ income generation activities and training to unemployed
youth;
Strengthening of educational facilities i.e. up gradation of existing school
infrastructure, higher educational facilities and playground in school.
Further, the Petitioner has decided to carry out a comprehensive assessment of
community needs in the villages adjacent to the transmission system project. The
different focus areas for community development as highlighted by MEGPTCL are
listed below:
(a)
(b)
(c)
(d)
Education
Community health
Sustainable livelihood development
Rural infrastructure development
3.6.5
MEGPTCL also submitted that successful pilot programs from other project locations
are replicated and scaled up if there is sufficient need and priority. In case of
operational challenges activities are outsourced to trusted partners who are monitored
on a continuous basis by the CSR team of the Petitioner.
3.6.6
As regards contribution towards Corporate Social Responsibility (CSR), the
Commission is of the view that if the Company or the shareholders of the Company
wish to contribute/donate towards charitable causes, the same should be contributed
from return earned out of the business, rather than passing on such costs to the
Utility’s consumers. The Commission also points out that the Companies Act, 2013
also contains sections exclusively dealing with the aspects related to Corporate Social
Responsibility. It has been prescribed that certain part (at least 2%) of the average net
profit of the last three preceding years has to be spent on CSR activities every year.
Accordingly, the Companies Act also envisages that the expenditure towards CSR has
to be funded through the returns earned by the company.
3.6.7
The Commission’s view in the matter has also been upheld by the Hon’ble Appellate
Tribunal in its Order in the matter of Appeal No. 104, 105 and 106 of 2012 dated 28
November, 2013.
3.6.8
Accordingly, for approval of Business Plan for FY 2013-14 to FY 2015-16, the
Commission has not considered the expenses towards CSR, in the form of other
Order – Case No. 128 of 2013
Page 46 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
expenses, as claimed by MEGPTCL. MEGPTCL may incur the same through its
own resources.
3.7
3.7.1
Future business opportunities plan
Regarding prospective business opportunities, MEGPTCL highlighted three broad
categories namely:
(a)
(b)
(c)
3.7.2
Joint Venture (JV): MEGPTCL submitted that it may decide to execute a JV to
build transmission lines in the future.
Power Line Communication: MEGPTCL submitted that in case of demand for
power line communication in Maharashtra it may decide to invest in this
business.
Participate in Independent Private Transmission Company (IPTC) bidding:
MEGPTCL submitted that it may participate in IPTC bidding for transmission
schemes at Central or State sector either on standalone basis or with other joint
venture partners.
The Commission has noted the submissions of MEGPTCL in this regard.
Further, keeping in view the provisions of Section 41 of the EA 2003, the
Commission is of the opinion that all possible options of revenue from other
business should be explored by MEGPTCL so that the same could be used for
reducing the charges for transmission and thus, mitigate the cost burden on the
transmission system users.
Order – Case No. 128 of 2013
Page 47 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
4
Approval of the ARR components of Business Plan
4.1
Projections for ARR components
4.1.1
MEGPTCL, in its Petition, has submitted the details of its operational plan for its
transmission business for FY 2013-14 to FY 2015-16 under various heads, viz. O&M
expenses, depreciation, interest on loans, return on equity etc. as per the data formats
prescribed by the Commission in the MERC MYT Regulations.
4.1.2
As discussed in the Section 2.3 of this Order, the elements of the transmission system
are expected to be put to use in the FY 2013-14 and accordingly, the Commission is
presently approving the ARR projections for the FY 2013-14 to FY 2015-16 as part of
approval of the Business Plan.
4.1.3
The Commission also stated that the ARR of MEGPTCL will be recoverable
subsequent to the date of commissioning of the proposed transmission project and the
system being put to use and subject to Commission’s approval of the same.
4.1.4
Accordingly, MEGPTCL shall have to file its MYT Petition covering ARR
projections for FY 2013-14 to FY 2015-16, which shall be scrutinised and approved
by the Commission after prudence check and following the due regulatory process.
The same shall form part of the Total Transmission System Cost (TTSC) of the IntraState Transmission System determined by the Commission for FY 2013-14 to FY
2015-16 under the Intra-State Transmission Tariff Order for the year after achieving
commercial operations i.e. commissioning of the project and ensuring that the asset is
put to use. Accordingly, the recovery of transmission charges of MEGPTCL for FY
2013-14 to FY 2015-16 may be permitted by the Commission as part of the TTSC for
FY 2013-14 to FY 2015-16 as per mechanism which is outlined by the Commission
and would be applicable in case of MEGPTCL from the month subsequent to the
month in which the transmission system project of MEGPTCL is commissioned and
put to use.
4.1.5
Accordingly, the projection of expenditure under various heads for the FY 2013-14 to
FY 2015-16, as approved by the Commission as part of the Business Plan approval in
the present Order, has been discussed in subsequent sections of the Order.
4.1.6
The Petitioner will be required to submit date wise commissioning details of all
the assets associated with the project along with the MYT Petition to be filed by
the Petitioner. As discussed in Section 2.3.15 of the Order, the Petitioner will
need to provide necessary documentary evidence for substantiating
commissioning of the assets along with dates on which the assets were
commissioned i.e. put to use.
Order – Case No. 128 of 2013
Page 48 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Further, as discussed in Section 2.3 of this Order, the commissioning schedule
considered by the Commission for the purpose of approval of the Business Plan is as
given below:
4.1.7
Table 4-1: Commissioning Schedule considered by Commission
Set No.
Particulars
Commissioning
schedule as per
MEGPTCL#
Commissioning
schedule considered
by Commission
SET 1

Akola-II to Akola-I 400 kV Quad D/C line
with bays
January, 2014
1, March, 2014
SET 2




Tiroda – Koradi-III 765 kV S/C Line-1
Koradi - III – Akola-II 765 kV S/C Line-1
Akola-II – Aurangabad 765 kV S/C Line-1.
Establishment of 765/400 kV switchyard at
Tiroda
Establishment of 765/400 kV Substations at
Akola-II
January, 2014
1, March, 2014

SET 3 – A




Tiroda – Koradi-III 765 kV S/C Line-2
Koradi-III – Akola-II 765 kV S/C Line-2
Akola-II –Aurangabad 765 kV S/C Line-2.
Establishment of 765/400 kV Substations at
Koradi-III
July, 2014
1, July, 2014
SET 3 - B

Extension
Substation
July, 2014
1, April, 2015
of
765
kV
Aurangabad
#
Based on revised project status (as on 31 December, 2013) provided by the Petitioner through additional
submission received by the Commission on 2 January, 2014
4.1.8
4.2
4.2.1
The components of the ARR are approved for the purpose of approval of the Business
Plan considering the above commissioning schedule and in line with the relevant
provisions of the MERC MYT Regulations.
Operations & Maintenance expenses
The norms for Operation and Maintenance (O&M) expenses for existing and new
transmission Licensees for the period from FY 2013-14 to FY 2015-16 have been
stipulated on the basis of circuit kilometre of the transmission lines and number of
bays in the substation of the Transmission Licensee. Regulation 61.5 and 61.7 of the
MERC MYT Regulations specifies:
“61.5 Operation and Maintenance expenses
Order – Case No. 128 of 2013
Page 49 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
61.5.1 The norms for O&M expenses for existing and new Transmission
Licensees have been stipulated for the control Period on the basis of circuit
kilometre of the transmission lines and number bays in the substation of the
Transmission Licensee, as given below:
...
61.7 O&M norms for New Transmission Licensee
61.7.1 For the new Transmission Licensees, the year-wise O&M norms as
stipulated for MSETCL shall be applicable norms for the transmission assets
added by such new Transmission Licensee(s) for respective year during the
third control period.
Provided that same shall not be applicable to those new projects which are
awarded on a competitive bidding basis.
Explanation: The term “New Transmission Licensee” shall mean the
transmission licensee for which Transmission license is granted by the
Commission prior to or after the date of effectiveness of these Regulations,
and whose transmission project assets are commissioned after March 31,
2010.
4.2.2
In accordance with the above provisions of MERC MYT Regulations, MEGPTCL,
being a new Transmission Licensee, (i.e. its transmission assets being commissioned
after 31 March, 2010) has estimated the O&M expenses based on the year-wise O&M
norms as specified for MSETCL, and based on the proposed circuit kilometres and
number of bays for FY 2013-14 to FY 2015-16. The O&M expenses estimated by
MEGPTCL are shown in the table below:
Order – Case No. 128 of 2013
Page 50 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 4-2: O&M expenses proposed by MEGPTCL
S.
No.
1
FY 2013-14
Particular
FY 2014-15
FY 2015-16
Opening
Closing
Average
Opening
Closing
Average
Opening
Closing
Average
-765 kV
0.00
630.00
315.00
630.00
1260.00
945.00
1260.00
1260.00
1260.00
-400 kV
0.00
61.30
30.65
61.30
61.30
61.30
61.30
61.30
61.30
Ckt. Km. Basis
a Ckt km length
b Applicable O&M cost Norm for ckt-km :- Rs Lakh / ckt-km
-765 kV
0.83
0.88
0.93
-400 kV
0.59
0.63
0.66
-765 kV
1.73
9.71
11.72
-400 kV
0.12
0.39
0.40
Sub-total
1.85
10.09
12.12
c O&M Expenses (ckt-km), Rs Crore
A
2
Bay basis
a Number of Bays
-765 kV
0.00
19.00
9.50
19.00
36.00
27.50
36.00
36.00
36.00
-400 kV
0.00
12.00
6.00
12.00
22.00
17.00
22.00
22.00
22.00
b Applicable O&M Cost Norm for Bays (Rs. Lakh / Bay)
-765 kV
146.68
155.07
163.94
-400 kV
104.78
110.78
117.11
-765 kV
9.24
49.25
59.02
-400 kV
4.17
21.61
25.76
Sub-total
13.41
70.86
84.78
15.26
80.95
96.91
c O&M Expense (Bays), Rs. Crore
B
C Total (A+B) (Rs. Crore)
4.2.3
As mentioned above, the commissioning schedule of the project considered by the
Commission for approval of the Business Plan projections is in deviation from the
schedule proposed by MEGPTCL. Accordingly, the O&M expenses approved by the
Commission will vary depending on the commissioning dates considered by the
Commission.
4.2.4
Accordingly, the Commission, after taking into account the years under
consideration for the present Business Plan Order along with the respective
transmission network parameters and the applicable norms, approves the O&M
expenses for FY 2013-14 to FY 2015-16 as given below:
Order – Case No. 128 of 2013
Page 51 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 4-3: O&M expenses approved by the Commission
S.
No.
1
FY 2013-14
Particular
FY 2014-15
FY 2015-16
Opening
Closing
Average
Opening
Closing
Average
Opening
Closing
Average
-765 kV
0.00
630.00
315.00
630.00
1260.00
945.00
1260.00
1260.00
1260.00
-400 kV
0.00
61.30
30.65
61.30
61.30
61.30
61.30
61.30
61.30
Ckt. Km. Basis
a Ckt km length
b Applicable O&M cost Norm for ckt-km :- Rs Lakh / ckt-km
-765 kV
0.83
0.88
0.93
-400 kV
0.59
0.63
0.66
-765 kV
0.44
8.32
11.72
-400 kV
0.03
0.39
0.40
A
Sub-total
0.47
8.70
12.12
2
Bay basis
c O&M Expenses (ckt-km), Rs Crore
a Number of Bays
-765 kV
0.00
19.00
9.50
19.00
34.00
26.50
34.00
36.00
35.00
-400 kV
0.00
12.00
6.00
12.00
22.00
17.00
22.00
22.00
22.00
b Applicable O&M Cost Norm for Bays (Rs. Lakh / Bay)
-765 kV
146.68
155.07
163.94
-400 kV
104.78
110.78
117.11
-765 kV
2.37
41.09
57.38
-400 kV
1.07
18.83
25.76
Sub-total
3.43
59.93
83.14
3.91
68.63
95.27
c O&M Expense (Bays), Rs Crore
B
C Total (A+B) (Rs. Crore)
4.2.5
Further, as mentioned previously, the O&M expenses for FY 2013-14 have been
approved considering the estimated period for which the assets will be
operational during the said year based on the revised COD considered by the
Commission.
4.2.6
For the FY 2014-15 and FY 2015-16, the Commission has approved the O&M
expenditure based on the average of the opening and closing balance of the no. of
bays and ckt. kms of transmission lines for the year. This approach has been
adopted by the Commission considering that the assets will be commissioned on
different dates during the year which is in line with the approach adopted by
Commission for other transmission Licensees.
4.2.7
Accordingly, the O&M expenses approved as part of the Business Plan
projections are Rs. 3.91 Crore, Rs. 68.63 Crore and Rs. 95.27 Crore for FY 201314, FY 2014-15 and FY 2015-16 respectively.
Order – Case No. 128 of 2013
Page 52 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
4.3
4.3.1
Capital expenditure and capitalisation
Capital expenditure
4.3.1.1 MEGPTCL in this revised Petition has estimated a project cost of Rs. 5290.92
Crore, as against the in-principle project cost for Rs. 4721.88 Crore approved by the
Commission.
4.3.1.2 The total revised estimated capital expenditure submitted by MEGPTCL vis-à-vis
in-principle approved capital expenditure has been summarised in the table below:
Table 4-4: Comparison of in-principle approved and revised capital cost
Rs. Crore
4.00
Revised
Estimate
submitted by
MEGPTCL
4.00
2210.71
2212.32
1.61
2210.71
2212.32
1.61
1946.88
2001.68
54.80
1895.88
1950.68
54.80
51.00
51.00
0.00
Overheads
317.31
363.76
46.45
4.1
Overheads
166.46
212.91
46.45
4.2
Contingency
124.85
124.85
0.00
4.3
Pre-operative Expenses
26.00
26.00
0.00
32.00
32.00
0.00
210.98
467.58
256.60
-
209.58
209.58
4721.88
5290.92
569.04
Sr. No.
Particulars
1
Preliminaries
2
Transmission Lines
2.1
3
Tiroda - Koradi - Akola - Aurangabad 765kV
and Akola I - Akola II 400kV
Substation works
3.1
765kV substations at Koradi III, Akola II and
switchyard at Tiroda and extension of
Aurangabad substation
3.2
Land & Compensation
4
5
Deposit Work for bays at Aurangabad
substation
6
Financing & IDC
7
Impact on Capital Cost due to foreign
exchange rate variations
8
TOTAL
In- principle
Approval
Difference
0.00
4.3.1.3 MEGPTCL submitted the following reasons for variations between estimated and
approved project cost.

Implementation delays
As submitted by MEGPTCL, efforts were made to have minimum forest
involvement in the route of the transmission lines. However, approximately
11.64 Hectares of forest in line 1 and 19.67 Hectares of line 2 was involved
which affected 26 km stringing spans and 33 km stringing due to forest
involvement. Further, to get the forest clearance it took more than 2 years.
Order – Case No. 128 of 2013
Page 53 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16



Forest clearance for line 2 is still pending and expected by February, 2014.
Moreover, securing the Right of Way for the transmission lines took almost 15
months at few locations and at some other locations, the same is still pending.
Statutory approvals from railways, power line crossing and National Highways
Authority of India (NHAI) took 16 months. Land acquisition has also been a
major issue which has delayed the project implementation. Need for undertaking
survey multiple times on account of issues pertaining to involvement of Forest
area necessitating line route change to minimize forest area, difficulty of route
alignment near APML’s Tiroda Power Plant due to local agitation, involvement
of Coal belt in Saoner area, etc. also delayed the project implementation. Similar
reasons were cited by the Petitioner in the Petition as reasons for delay in
implementation of the project.
Change in termination substation for 765 kV Akola-Aurangabad line:
Original termination point for the 2 × 765 kV S/C Akola-Aurangabad line was
at the 765 kV Aurangabad substation of PGCIL. As there was substantial delay
in the implementation of the substation from PGCIL, MSETCL decided to
implement 765 kV Aurangabad MSETCL substation for the termination of these
lines and the availability of the same is envisaged in June, 2014. Further, in
order to avoid bottling up of power it was suggested by the Petitioner to initially
charge the 765 kV Akola-Aurangabad line on 400 kV level and shall be
terminated at 400 kV Aurangabad (Thaptitanda) substation of MSETCL which
is under construction and expected to be completed by December, 2013.
Variation in Taxes and Duties:
MEGPTCL has submitted that at the time of award of contract, Excise Duty and
Service Tax was 10.30% each. Pursuant to revision in Union Budget, the Excise
Duty and Service Tax were revised to 12.36% each. The Petitioner has allowed
its contractors to pass through variation on this account and included the same in
capital cost.
Variation on account of foreign exchange rate:
The Petitioner has entered into a foreign currency loan agreement on account of
lower interest rates for an amount of $100 million at the reference rate of Rs.
45.00 per USD on 30 June, 2011. Out of the total debt of Rs. 3,305 Crore, Rs.
450 Crore were envisaged from foreign currency denominated loans. This
amount was disbursed at the RBI remittance rate of Rs. 44.75 per USD on 5
August, 2011. This resulted in a shortfall in the rupee converted ECB loan by
Rs. 2.50 Crore. Moreover, the Petitioner has considered impact of foreign
exchange rate variation on the foreign currency denominated loan portfolio at
the time of capitalising the sets of elements. For the purpose of this business
plan, the Petitioner has considered the exchange rate of Rs. 65.7050 per USD as
on 30 August, 2013 to determine the impact of foreign exchange rate variation
on its foreign currency denominated loans.
Order – Case No. 128 of 2013
Page 54 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
4.3.1.4 Accordingly, the Petitioner has attributed the increase in the capital cost to the
reasons summarised above.
4.3.1.5 The Commission has undertaken the preliminary scrutiny of the revised capital cost
provided by the Petitioner and the reasons for increase stated in the Petition. The
increase in capital cost is quite significant (around 12%) over the in-principle
approved capital cost. Hence, the Commission has the following observations as
regards the revised capital cost submitted by MEGPTCL in the current Petition
which has been summarised below:
(a) Even though MEGPTCL has provided reasons for increase in the estimated
capital cost, the same need to be subjected to further prudence check,
especially in the wake of almost two years delay in the expected
Commissioning of the project. The project which was initially envisaged to be
completed in parts in March, 2012 and August, 2012 was later expected to be
commissioned in December, 2013 and July, 2014 as per the submission made
by the Petitioner under affidavit before the Commission. However,
subsequently, the same was further revised to January, 2014 and July, 2014 as
per the additional submission done by the Petitioner. The revised schedule
considered by the Commission for approval of the Business Plan is March,
2014 (Set 1 and Set 2), July, 2014 (Set 3 A) and April, 2015 (Set 3 B). It is
envisaged that the capital cost may undergo further upward revision on
account increased IDC as the project commissioning is expected to be further
delayed on account of reasons discussed in Section 2.3 of the Order. The
Petitioner should make all necessary efforts to ensure that the project is not
delayed as it will only affect the recovery of costs.
(b) As specified under Regulation 12.2 of the MERC MYT Regulations, the
increase in capital expenditure on account of time and cost overruns in the
implementation of the said infrastructure not attributable to an approved
change in scope of such project, change in statutory levies or force majeure
events shall be treated as a controllable factor. As discussed in Section 3.1 of
the Order, subject to the detailed scrutiny, review and approval of capital cost
at the time of approval of the MYT Petition to be filed by the Petitioner, the
Commission, for the purpose of approval of the Business Plan projection, has
considered the capital cost of Rs. 5,290.92 Crore as proposed by the Petitioner.
(c) The increase in the revised capital cost must be supported by appropriate
justification as in absence of the same, the Commission, subject to prudence
check, may disallow increased expenditure which is deemed to be
unjustifiable. The MYT Petition to be filed by the Petitioner should include all
these justifications so as to enable the Commission to undertake prudence
check and reveal the actual facts.
(d) The delay in project implementation can also be attributable to contractors and
other parties who are contractually bound with MEGPTCL. The implications
of these delays on the contractors and other related parties in terms of levy of
penalties/liquidated damages, etc. should be clearly outlined by the Petitioner
Order – Case No. 128 of 2013
Page 55 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
(e)
in the MYT Petition. The increased capital cost offset by such recoveries
should be clearly identified by the Petitioner. The Commission is of the view
that the inefficiencies of the contractors shall not be passed on to the
transmission system users.
In addition to the above, the issues highlighted by the Commission in chapters
2 and 3 of this Order should be considered by the Petitioner at the time of
filing of the MYT Petition.
4.3.1.6 Accordingly, for the purpose of approval of the projections under the Business
Plan, the Commission has considered the capital cost of Rs. 5290.92 Crore as
proposed by the Petitioner.
4.3.1.7 In accordance with the Regulations 59 read with Regulations 27 and 28 of the
MERC MYT Regulations, the Commission will undertake the detailed scrutiny,
review and approval of the revised capital cost at the time of approval of the
MYT Petition to be filed by the Petitioner.
4.3.1.8 The summary of the set-wise approved capital cost for the purpose of Business
Plan is given in the table below:
Table 4-5: Set-wise capital cost approved by the Commission
Rs. Crore
Sr. No.
Particulars
1
Preliminaries
2
Transmission lines
Set-1
Set-2
Set-3
Total
0.08
1.99
1.93
4.00
2.1
Supply Order
61.64
902.63
902.63
1866.89
2.2
Service Order
14.40
165.52
165.52
345.43
3
Substation works
3.1
Supply Order
9.78
886.00
814.13
1709.92
3.2
Service Order
0.11
96.84
105.31
202.26
3.3
Land for S/S
-
29.00
22.00
51.00
3.4
Revised Taxes and Duties, BOCW
0.79
19.18
18.53
38.50
4.15
100.35
96.95
201.45
0.24
5.71
5.52
11.46
2.48
60.36
62.01
124.85
0.30
15.06
10.65
26.00
-
32.00
32.00
7.15
173.80
286.62
467.58
4.17
101.31
104.09
209.58
105.30
2557.74
2627.88
5290.92
4
4.1
4.2
4.3
4.4
5
6
7
8
Overheads
Project Management Consultancy Services
(Lahmeyer Contract)
Other Overheads
Contingency
Pre-operative expenses (PGCIL design cost,
statutory Clearance etc.)
Deposit Work for bays at Aurangabad
substation
Financing & IDC (including Lenders fee,
Bank charges, BG, ocumentation)
Impact on Capital Cost due to foreign
exchange rate variations
Total
Order – Case No. 128 of 2013
-
Page 56 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
4.3.2
Capitalisation
4.3.2.1 MEGPTCL has proposed total capitalisation amounting to Rs. 5290.92 Crore over
the second Control Period from FY 2013-14 to FY 2015-16. The summary of
capitalisation as proposed by MEGPTCL is presented in the Table below:
Table 4-6: Capitalisation proposed by MEGPTCL
Rs. Crore
FY
2015-16
FY
2014-15
Set 1
FY
2013-14
105.30
Set 2
2,557.74
2,627.88
-
2,627.88
-
Particulars
Set 3
Total
2,663.04
-
-
4.3.2.2 As discussed in the previous Section, the Commission has approved the capital
cost of Rs. 5290.92 Crore as proposed by the Petitioner for the purpose of
approval of the Business Plan. However, as discussed in Section 2.3 and Section
4.1.7 of the Order, based on the information available, the Commission has
considered a different commissioning schedule for the project elements.
Further, it has been envisaged that the extension of the Aurangabad Substation
which forms part of Set 3 will take place in April, 2015 on account of delayed
implementation of the MSETCL’s 765 kV Aurangabad substation.
Accordingly, the capital cost component equivalent to the cost attributable to
this element has been separated out from the total capital cost of Set 3.
4.3.2.3 Based on Petitioner’s submission received by the Commission on 2 January,
2014, the capital cost attributable to elements involved in extension of the
Aurangabad Substation is estimated to be Rs. 32 Crore which is the cost
payable to MSETCL for deposit works for bays at Aurangabad substation. The
Commission has considered the same for the purpose of the approval of the
Business Plan, however, the Petitioner will be required to submit details of the
scope of work for deposit works payable to MSETCL for bays at Aurangabad
substation at the time of filing of the MYT Petition.
4.3.2.4 Based on the above, the capitalisation approved by the Commission is
summarised in the table below:
Order – Case No. 128 of 2013
Page 57 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 4-7: Capitalisation approved by the Commission
Particulars
(in Rs Crs)
Set 1
FY
2013-14
105.30
Set 2
2,557.74
-
Set 3
Total
4.4
2,663.04
FY
2014-15
Rs. Crore
FY
2015-16
-
-
-
-
2,595.88
32.00
2,595.88
32.00
Depreciation
4.4.1
While projecting depreciation expenditure for the second Control Period from FY
2013-14 to FY 2015-16, MEGPTCL submitted that it has computed depreciation
based on the provisions stipulated under Regulation 31 of MERC MYT Regulations
and on consideration of an annual depreciation rate of 5.28%.
4.4.2
The depreciation expenditure submitted by MEGPTCL for FY 2013-14 to FY 201516 has been summarised in the following Table:
Table 4-8: Depreciation proposed by MEGPTCL
Depreciation
GFA –Opening balance
FY
2013-14
-
GFA- Addition
2,663.04
GFA –Closing balance
2,663.04
Total Depreciation
46.11
FY
2014-15
2,663.04
2627.88
5,290.92
242.36
Rs. Crore
FY
2015-16
5,290.92
5,290.92
276.67
4.4.3
MEGPTCL has computed depreciation based on expected date of commissioning of
assets associated with the 765 kV transmission system element set wise i.e. sets 1 and
2 in December, 2013 (121 days) and set 3 in July, 2014 (274 days).
4.4.4
The Commission, based on the revised commissioning schedule considered for the
purpose of approval of the Business Plan, has approved depreciation for the FY 201314 to FY 2015-16 as given in the table below:
Order – Case No. 128 of 2013
Page 58 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 4-9: Depreciation approved by Commission
Depreciation
GFA –Opening balance
FY
2013-14
-
FY
2014-15
Rs. Crore
FY
2015-16
GFA- Addition
2,663.04
2,663.04
2,595.88
GFA –Closing balance
2,663.04
5,258.92
5,290.92
11.81
206.45
275.82
Total Depreciation
5,258.92
32.00
4.4.5
As mentioned previously, the Commission has approved the depreciation for FY
2013-14 taking into consideration the estimated time for which assets are
expected to be operational during the said year based on the revised
commissioning schedule considered by the Commission. Commission has
considered the rate of 5.28% for computation of the approved depreciation.
4.4.6
For the FY 2014-15 and FY 2015-16, the Commission has approved the
depreciation expenditure based on the average value of the opening and closing
balance of gross fixed assets for the year. This approach has been adopted by the
Commission considering that the assets will be commissioned on different dates
during the year which is in line with the approach adopted by Commission for
other transmission Licensees.
4.4.7
The Commission observes that MEGPTCL has computed depreciation of its
assets under a single asset class. However, the Commission directs MEGPTCL to
submit asset class-wise details along with the MYT Petition and compute the
depreciation of asset class-wise in accordance with the depreciation rates
specified in the MERC MYT Regulations.
4.5
4.5.1
Interest on long term loan
MEGPTCL, in the Petition, submitted that the project cost of Rs. 5290.92 Crore is
proposed to be funded at a normative debt-equity ratio of 70:30, which would
comprise of Rs. 3703.64 Crore as the total debt component. The weighted average
interest rate considered by MEGPTCL for funding its debt requirement is 9.67%,
10.91% and 11.07% respectively for FY 2013-14 to FY 2015-16. The interest on
long-term debt projected by MEGPTCL is summarised in the Table below:
Order – Case No. 128 of 2013
Page 59 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 4-10: Interest on Long-term Loans proposed by MEGPTCL
S.No.
Particulars
FY 2013-14
FY 2014-15
Projected
Projected
-
Projected
1
Debt at the beginning of the year
2
Capitalization during the year
2,663.04
2,627.88
-
3
Debt portion of capitalisation during the year
1,864.13
1,839.51
-
4
5
Reduction in Loan Capital on account of retirement /
replacement of assets
Repayment of loan
6
Closing balance of debt
-
1,818.02
Rs. Crore
FY 2015-16
-
3,415.17
-
46.11
242.36
276.67
1,818.02
3,415.17
3,138.50
Interest Computation
7
Weighted average interest rate
9.67%
10.91%
11.07%
8
Total Interest expense
59.04
337.29
362.72
4.5.2
MEGPTCL in its Business Plan Petition has submitted documentary proof i.e. the
loan agreement for both domestic and foreign currency denominated loan for
considering the interest rates as submitted in the Petition. However, as regards the
foreign currency denominated loan is concerned, the Commission has observed that
MEGPTCL has not mitigated risk of foreign exchange variation through hedging or
such other prudent means.
4.5.3
Further, as risk profile for transmission business significantly changes after
commissioning of transmission project, there would be significant scope for renegotiating the interest costs on debt especially the rupee denominated loans. The
Business Plan of MEGPTCL has not factored this change in risk profile upon
commissioning and accordingly there is a need for endeavouring to reduce the interest
costs post commissioning. The Commission has discussed these aspects in Section 3.2
of the Order and the same may be considered by MEGPTCL during filing of the MYT
Petition and reflect such initiatives for possible reduction in interest cost which may
reduce burden on beneficiaries/transmission system users.
4.5.4
The Commission has disallowed the penal interest on the SBI and IDFC loans
considered by the Petitioner as the Commission is of the view that such penal
charges should not be passed on to the transmission system users. This has been
also discussed in detail in Section 3.2 of this Order. Further, as per the loan
agreement furnished by MEGPTCL, there is a provision for a reduction of
0.25% points in the applicable interest rates for the rupee denominated loans on
commissioning of the project in case of no default by the Petitioner. Accordingly,
the Commission has considered the applicable interest rates for rupee
denominated loans after deducting 0.25% from the year-wise applicable rate
submitted by MEGPTCL pursuant to the loan agreement provisions and the
approved applicable interest rates for rupee loans are 12.27%, 12.02% and
12.02% for FY 2013-14, FY 2014-15 and FY 2015-16 respectively. Further,
Order – Case No. 128 of 2013
Page 60 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
pursuant to the loan agreement, the interest rates for foreign loan have been
considered at 4.7% p.a. for the Control Period from FY 2013-14 to FY 2015-16.
4.5.5
Accordingly, for the purpose of approval of the Business Plan, the Commission
has considered the weighted average interest rate of 9.48%, 10.66% and 10.81%
respectively for FY 2013-14 to FY 2015-16. Further, the interest rate and interest
computation for long term debt shall be reviewed by the Commission at the time
of issuance of MYT Order based on actual rate of interest, subject to prudence
check.
4.5.6
The interest expenses on long-term loan as approved by the Commission for the
Business Plan period starting FY 2013-14 based on the approved capitalisation is
summarised in the table below:
Table 4-11: Interest on Long-term Loans approved by the Commission
S.No.
Particulars
FY 2013-14
Projected
-
FY 2014-15
Projected
1,852.32
Rs. Crore
FY 2015-16
Projected
3,462.98
1
Debt at the beginning of the year
2
Capitalization during the year
2,663.04
2,595.88
32.00
3
Debt portion of capitalisation during the year
1,864.13
1,817.11
22.40
4
5
Reduction in Loan Capital on account of retirement /
replacement of assets
Repayment of loan
6
Closing balance of debt
Interest Computation
-
-
-
11.81
206.45
275.82
1,852.32
3,462.98
3,209.56
-
-
-
7
Weighted average interest rate
9.48%
10.66%
10.81%
8
Total Interest expense
14.96
283.34
360.68
4.5.7
As mentioned previously, the Commission has approved the interest on long
term loans for FY 2013-14 taking into consideration the expected period of
operation of the assets in the said year based on the revised schedule of
commissioning considered by the Commission.
4.5.8
For the FY 2014-15 and FY 2015-16, the Commission has approved the interest
on long term loan based on the average value of the opening and closing balance
of the loans for the year. This approach has been adopted by the Commission
considering that the assets will be commissioned on different dates during the
year and accordingly, the normative loans will be considered to be drawn at
different dates during the year. This is in line with the approach adopted by
Commission for approval of the interest on long term loans for other
transmission Licensees.
Order – Case No. 128 of 2013
Page 61 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
4.6
Interest on working capital
4.6.1
MEGPTCL, in its Petition, submitted that the working capital requirement has been
computed on a normative basis in accordance with the MERC MYT Regulations,
which stipulates the components of working capital of the transmission business.
4.6.2
MEGPTCL has considered the normative interest rate of 14.45%, which is the State
Bank Advance Rate (bench-mark interest rate specified in MERC MYT Regulations)
as on 2 February, 2013. MEGPTCL projected interest on working capital of Rs. 3.72
Crore, Rs. 19.22 Crore and Rs. 21.58 Crore, for FY 2013-14, FY 2014-15 and FY
2015-16, respectively.
Table 4-12: Interest on working capital proposed by MEGPTCL
Sl. No.
1
Particulars
FY 2013-14
FY 2014-15
Rs. Crore
FY 2015-16
Computation of Working Capital
1.1
One-twelfth of the amount of Operations and Maintenance
Expenses
3.84
7.64
8.08
1.2
One-twelfth of the sum of the book value of stores,
materials and supplies
2.22
4.41
4.41
1.3
One and a half months of the expected revenue from
transmission charges at the prevailing tariffs
71.60
139.84
136.83
Less:
1.4
a
Amount of Security Deposit
From Transmission System users
Total Working Capital
2
-
-
-
77.65
151.88
149.32
14.45%
14.45%
14.45%
19.22
21.58
Computation of working capital interest
2.1
Rate of Interest (% p.a.)
2.2
Interest on Working Capital
3.72
4.6.3
The Commission has estimated the total working capital requirement in
accordance with the provisions of MERC MYT Regulations considering the
approved O&M expenses and total ARR requirement. The 14.45% has been
considered as the rate of interest for computing the interest on working capital in
line with the provisions of the MERC MYT Regulations. Further, as the
transmission assets have not been commissioned, and the book value of the
stores, materials and supplies is not known presently, the Commission has
considered the same to be 1% of the value of the gross fixed assets at the end of
the year. This is in line with the approach adopted by the Commission for
approval of the Business Plan for other project specific transmission Licensees
like APML and APTCL.
4.6.4
Accordingly, the approved interest on working capital for the respective years for
MEGPTCL is as under:
Order – Case No. 128 of 2013
Page 62 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 4-13: Interest on working capital approved by the Commission
Sl. No
1
1.1
1.2
1.3
1.4
a
Particulars
FY 2013-14
FY 2014-15
Rs. Crore
FY 2015-16
3.84
5.72
7.94
2.22
4.38
4.41
66.89
101.78
134.52
Computation of Working Capital
One-twelfth of the amount of Operations and Maintenance
Expenses
One-twelfth of the sum of the book value of stores,
materials and supplies
One and a half months of the expected revenue from
transmission charges at the prevailing tariffs
Less:
Amount of Security Deposit
-
-
-
From Transmission System users
-
-
-
Total Working Capital
2
4.7
4.7.1
72.94
111.88
146.12
14.45%
14.45%
14.45%
16.17
21.22
Computation of working capital interest
2.1
Rate of Interest (% p.a.)
2.2
Interest on Working Capital
0.90
Contribution to contingency reserves
MEGPTCL has projected the contribution to contingency reserves as 0.5% of the
GFA in line with the MERC MYT Regulations, over the Control Period of FY 201314 to FY 2015-16.
Table 4-14: Contribution to contingency reserve proposed by MEGPTCL
Rs. Crore
Particulars
GFA
4.7.2
FY 2013-14
FY 2014-15
2,663.04
5,290.92
FY 2015-16
5,290.92
Contingency Reserve as a % of fixed assets
0.50%
0.50%
0.50%
Contribution to Contingency Reserve
13.32
26.45
26.45
However, the Commission has allowed contribution to contingency reserves at
0.25 % of the GFA in accordance with the provisions of the MERC MYT
Regulations and based on the capitalisation projected by the Commission during
FY 2013-14 to FY 2015-16. The contribution to contingency reserves as allowed by
the Commission is as given below.
Order – Case No. 128 of 2013
Page 63 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 4-15: Contribution to contingency reserve approved by the Commission
Rs. Crore
Particulars
Opening GFA
FY 2015-16
2,663.04
5,258.92
2,663.04
2,595.88
32.00
Closing GFA
2,663.04
5,258.92
5,290.92
Contribution to Contingency Reserve
4.8
-
FY 2014-15
Additions during the year
Contingency Reserve as a % of fixed assets
4.7.3
FY 2013-14
0.25%
0.25%
0.57
6.66
0.25%
13.15
The contribution to contingency reserve in FY 2013-14 has been approved by the
Commission taking into consideration the expected period of operation of the
assets during the said year based on the revised commissioning schedule
considered by the commission.
Return on Equity (ROE)
4.8.1
MEGPTCL submitted that it has projected the Return on Equity (RoE) in accordance
with the MERC MYT Regulations, which stipulates a 15.5% return on equity per
annum based on the capital expenditure and capitalisation and debt-equity norm of
70:30.
4.8.2
Further, the Petitioner has considered the date of commercial operation and estimated
the RoE on proportionate basis corresponding to the period of commercial operation
for the respective FY 2013-14 and FY 2014-15. Therefore, for the first year of
operation of respective sets of elements, the RoE has been estimated on proportionate
basis corresponding to the actual number of days of operation.
4.8.3
Accordingly, RoE as projected by MEGPTCL is shown in the Table below.
Order – Case No. 128 of 2013
Page 64 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 4-16: Return on Equity proposed by MEGPTCL
Rs. Crore
S.No.
Particulars
FY 2013-14
-
FY 2014-15
798.91
FY 2015-16
1
Regulatory Equity at the beginning of the year
2
Capitalization during the year
1,587.27
3
Equity portion of capitalisation during the year
4
Consumer Contribution and Grants used during the year for
Capitalisation
-
-
-
5
Reduction in Equity Capital on account of retirement /
replacement of assets
-
-
-
6
Regulatory Equity at the end of the year
7
Rate of Return on Equity
8
Return on Regulatory Equity at the beginning of the year
9
Return on Equity portion of capitalization during the year
41.05
91.73
10
Total Return on Regulatory Equity
41.05
215.56
2,663.04
2,627.88
-
798.91
788.36
-
798.91
15.5%
-
1,587.27
1,587.27
15.5%
15.5%
123.83
246.03
246.03
4.8.4
The Commission has considered RoE at the rate of 15.5% of the equity, in accordance
with the MERC MYT Regulations. Further, for purpose of computation of the RoE,
the provisions of the MERC MYT Regulations specifies 15.5% return on the opening
equity for the year and on 50% of the equity portion of the allowable capital cost of
the assets capitalised during the year of the Control Period considering the debt-equity
ratio as 70:30.
4.8.5
However, as the estimated dates of commissioning of the assets in the first year of
operation are known, the Commission, for the purpose of Business Plan, has
approved the return on equity considering 15.5% return on the opening equity
for the year and return on equity portion of the allowable capital cost of the
assets capitalised during the year of the Control Period considering the period
for which the assets are operational in the first year of commissioning i.e. FY
2013-14. This is in line with approach adopted by the Commission for approving
the Business Plan of other project specific transmission Licensees like APML
and APTCL.
4.8.6
The Return on Equity for FY 2014-15 and FY 2015-16 has been approved based
on the methodology discussed in Section 4.8.4 of the Order.
4.8.7
The computation of RoE as approved by the Commission for the years under
consideration under the Business Plan is shown in the table below.
Order – Case No. 128 of 2013
Page 65 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 4-17: Return on Equity approved by the Commission
Rs. Crore
S.No.
4.9
4.9.1
Particulars
FY 2013-14
-
FY 2014-15
FY 2015-16
1
Regulatory Equity at the beginning of the year
2
Capitalization during the year
798.91
1,577.67
2,663.04
2,595.88
32.00
3
Equity portion of capitalisation during the year
798.91
778.76
9.60
4
Consumer Contribution and Grants used during the year for
Capitalisation
-
-
-
5
Reduction in Equity Capital on account of retirement /
replacement of assets
-
-
-
6
Regulatory Equity at the end of the year
7
Rate of Return on Equity
8
Return on Regulatory Equity at the beginning of the year
9
Return on Equity portion of capitalization during the year
10.52
10
Total Return on Regulatory Equity
10.52
798.91
15.5%
-
1,577.67
1,587.27
15.5%
15.5%
123.83
244.54
60.35
0.74
184.19
245.28
Income Tax
The Income Tax estimated by MEGPTCL for the second Control Period is shown in
the Table below:
Table 4-18: Income Tax proposed by MEGPTCL
Rs. Crore
S.No.
4.9.2
Particulars
1
Regulated PBT (Equivalent to ROE)
2
MAT Rate
3
4
FY 2013-14 FY 2014-15 FY 2015-16
41.05
215.56
246.03
20.960%
20.960%
20.960%
Grossed up ROE
51.94
272.73
311.27
Income Tax
10.89
57.17
65.25
As regards computation of Income-Tax for period under consideration, the MERC
MYT Regulations specifies that the Commission may provisionally approve Income
Tax payable for each year of the Control Period based on the actual income tax
payable as per the latest audited accounts and the variation between the actual and
approved Income Tax shall be reimbursed at the time of Mid Term Performance
Review. The said Regulation is reproduced below for reference:
“34.1 The Commission in its MYT Order shall provisionally approve Income
Tax payable for each year of the Control Period, if any, based on the actual
income tax paid on permissible return as allowed by the Commission relating
to electricity business regulated by the Commission, as per latest Audited
Accounts available for the applicant, subject to prudence check
Order – Case No. 128 of 2013
Page 66 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
...
34.2 Variation between Income Tax actually paid and approved, if any, on the
income stream of the regulated business of Generating companies,
Transmission licensees and Distribution licensees shall be reimbursed
to/recovered from the Generating Companies, Transmission Licensees and
Distribution Licensees, based on the documentary evidence submitted at the
time of Mid-term Performance Review and MYT Order for the third Control
Period, subject to prudence check.”
4.9.3
The Commission is of the view that since MEGPTCL is yet to achieve COD and thus,
there is no precedence for payment of income tax. Further, since MEGPTCL is a new
transmission Licensee and yet to achieve COD, the income tax can be best estimated
based on the approved ARR components.
4.9.4
The Commission observes that the Hon’ble Appellate Tribunal for Electricity in its
Judgment in Appeal No. 174 of 2009 filed by TPC-T, has explained the methodology
to be followed by the Commission for computation of income tax. Extract of the
Hon’ble Appellate Tribunal for Electricity Judgment is quoted as under:
“10. In the light of the above submissions, we will now discuss this issue.
11. The issue of income tax relates to the fact that the State Commission deals
with regulatory accounts of each licensed business. The State Commission is
required to adjust the regulatory accounts’ income to the taxation accounts.
This could be done in 2 alternative methods. One by Profit Before Tax
method and second by the method of Return on Equity. Profit Before Tax
method is followed while truing up as details of all the elements are
available by then. The second method is followed while submitting the
details for APR or for tariff determination, as all adjustment details are not
available at the point of submission.”(Emphasis added)
4.9.5
In the above Judgments, the Hon’ble Appellate Tribunal for Electricity has ruled that
the RoE based methodology should be followed while computing the income tax for
APR or estimating the ARR for the future year as the actual data is not available,
while, the method of computation using Profit Before Tax method should be followed
in case of final Truing up as actual income and expenditure details are available.
4.9.6
In accordance with the Hon’ble Appellate Tribunal for Electricity Judgment
stated above, the Commission has considered the Return on Equity method for
computation of income tax for approval of the Business Plan, as the actual data
is not available, for FY 2013-14 to FY 2015-16. Further, the true up based on
actual reimbursement shall be considered at the time of Mid-term Performance
Review by the Commission.
Order – Case No. 128 of 2013
Page 67 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
4.9.7
Further, the Commission has considered income-tax based on MAT Rate of
20.96% as proposed by MEGPTCL. The income-tax as approved by the
Commission for the years under consideration for the Business Plan approval is
as summarised in the table below:
Table 4-19: Income Tax approved by the Commission
Rs. Crore
S.No.
Particulars
1
Regulated PBT (Equivalent to ROE)
2
MAT Rate
3
Grossed up ROE
4
Income Tax
FY 2013-14 FY 2014-15 FY 2015-16
10.52
184.19
245.28
20.96%
20.96%
13.31
233.03
310.33
2.79
48.84
65.04
20.96%
4.10 Other expenses
4.10.1 MEGPTCL submitted that it did not foresee any expenditure towards other expenses
except for expenses towards corporate social responsibility activities. Further, the
Petitioner submitted that any variation in interest rate resulting on account of actual
variation in foreign exchange rate will be submitted for the Commission’s perusal.
The Petitioner submits that such loss or gain on account of foreign exchange rate
variation would be claimed as a part of “Other Expenses”. The Petitioner shall
approach the Commission for approval of such adjustments for the years falling under
the second MYT Control Period. The expenses claimed by the Petitioner towards
other expenses are as given below:
Table 4-20: Other expenses as submitted by MEGPTCL
Rs. Crore
Particulars
FY 2013-14
FY 2014-15
FY 2015-16
Corporate Social Responsibility
0.50
0.75
1.00
Total
0.50
0.75
1.00
4.10.2 The Commission is of the view that these costs are towards MEGPTCL’s
corporate social responsibility and are not necessary for the functioning of any
Utility. The issue has been discussed in Section 3.6 of this Order. Accordingly,
these expenses should not be passed on to the transmission system users who are
beneficiaries of the InSTS as they are not benefiting from the same and thus,
these expenses should be borne by MEGPTCL. MEGPTCL may incur such
expenses from the returns earned out of the business.
Order – Case No. 128 of 2013
Page 68 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
4.10.3 The Commission’s view in the matter has been upheld by the Hon’ble Appellate
Tribunal in its Order in the matter of Appeal No. 104, 105 and 106 of 2012 dated 28
November, 2013. The relevant part of the Order is reproduced below for reference:
“120 Summary of the findings.
…………………….
b) At the outset, it shall be mentioned that the Community Social
Responsibility is the responsibility of the Company. The contention of the
Appellant that the State Commission had approved these expenses in the ARR
petition and that therefore, it cannot change during true up exercise is not
tenable. In fact, the State Commission is duty bound to apply prudency check
while truing up otherwise no purpose would be served in truing up. On going
through the impugned order on this point as well as the submissions made by
the learned Counsel for the State Commission, it is clear that the conclusion
on this point arrived at by the State Commission is valid and the reasons for
such conclusions are justified. The issue is decided as against the Appellant.”
4.10.4 Further, the Commission is of the view that any change in capital cost due to
foreign exchange rate variation shall be dealt in accordance with provisions of
Regulation 27 of MERC MYT Regulations, subject to prudence check.
Accordingly, for the purpose of approval of Business Plan Petition, expenses
under CSR have been disallowed.
Table 4-21: Other expenses approved by the Commission
Particulars
FY 2013-14
FY 2014-15
Rs. Crore
FY 2015-16
Corporate Social Responsibility
-
-
-
Total
-
-
-
4.11 Non-Tariff income
4.11.1 MEGPTCL submitted that it has projected Non-Tariff income based on the interest
that would accrue owing to investment made out of contingency reserves for the
Control Period. The rate of interest considered for the computation of the interest
income is 7.25%.
Table 4-22: Non-Tariff Income as proposed by MEGPTCL
Rs. Crore
Particulars
Non-Tariff Income
Order – Case No. 128 of 2013
FY 2013-14
-
FY 2014-15
FY 2015-16
0.48
1.92
Page 69 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
4.11.2 The Commission, based on the approved contribution to contingency reserves as
stated in the previous paragraphs and an interest rate of 7.25% on
contribution/investment made out of contingency reserves approves the NonTariff Income for the years under consideration as follows:
Table 4-23: Non-Tariff Income as approved by the Commission
Rs. Crore
Particulars
Non-Tariff Income
FY 2013-14
FY 2014-15
FY 2015-16
0.02
0.28
-
4.12 Approval of Business Plan scenario
4.12.1 In the Business Plan Petition, MEGPTCL submitted two scenarios of its Aggregate
Revenue Requirement (ARR) for the second Control Period in addition to the base
ARR. The first scenario has been prepared by projecting ARR considering a 2%
escalation in the revised capital cost and the second one in which the ARR is
projected considering 2% reduction in the revised capital cost . The base ARR and the
two scenarios proposed by MEGPTCL over the second Control Period for FY 201314 to FY 2015-16 are reproduced below:
Table 4-24: Base ARR proposed by MEGPTCL
S.No.
FY 2013-14
FY 2014-15
15.26
80.95
96.91
2
Operation & Maintenance Expenses
Depreciation Expenses
46.11
242.36
276.67
3
Interest on Long-term Loan Capital
59.04
337.29
362.72
4
Interest on Working Capital and on consumer
security deposits
3.72
19.22
21.58
5
Other Expenses
0.50
0.75
1.00
6
10.89
57.17
65.25
7
Income Tax
Contribution to contingency reserves
13.32
26.45
26.45
8
Total Revenue Expenditure
148.82
764.21
850.58
9
Return on Equity Capital
41.05
215.56
246.03
189.88
979.77
1,096.61
1
Particulars
Rs. Crore
FY 2015-16
10
Aggregate Revenue Requirement
11
Less: Non Tariff Income
-
0.48
1.92
12
Less: Income from Other Business
-
-
-
13
Net Aggregate Revenue Requirement
Order – Case No. 128 of 2013
189.88
979.29
1,094.68
Page 70 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Table 4-25: Scenario 1 - Cost Escalation of 2%- Pessimistic scenario - MEGPTCL
Rs. Crore
S.No.
Particulars
FY 2013-14
FY 2014-15
FY 2015-16
1
Operation & Maintenance Expenses
15.26
80.95
96.91
2
Depreciation Expenses
47.04
247.26
282.25
3
Interest on Long-term Loan Capital
60.22
344.04
369.97
4
Interest on Working Capital and on consumer
security deposits
3.78
19.56
21.95
5
Other Expenses
0.50
0.75
1.00
6
Income Tax
11.10
58.31
66.55
7
Contribution to contingency reserves
13.58
26.98
26.98
8
Total Revenue Expenditure
151.48
777.85
865.61
9
Return on Equity Capital
41.87
219.87
250.95
10
Aggregate Revenue Requirement
193.36
997.72
1,116.56
11
Less: Non Tariff Income
-
0.49
1.96
12
Less: Income from Other Business
-
-
-
13
Net Aggregate Revenue Requirement
193.36
997.23
1,114.60
Table 4-26: Scenario 2 - Cost Reduction of 2%- Optimistic scenario – MEGPTCL
Rs. Crore
S.No.
Particulars
FY 2013-14
FY 2014-15
FY 2015-16
1
Operation & Maintenance Expenses
15.26
80.95
96.91
2
Depreciation Expenses
45.17
237.47
271.08
3
Interest on Long-term Loan Capital
57.86
330.55
355.48
3.66
18.88
21.20
0.50
0.75
1.00
5
Interest on Working Capital and on consumer
security deposits
Other Expenses
6
Income Tax
10.67
56.02
63.94
7
Contribution to contingency reserves
13.05
25.93
25.93
8
Total Revenue Expenditure
146.16
750.56
835.53
9
Return on Equity Capital
40.23
211.25
241.11
186.39
961.81
1,076.64
4
10
Aggregate Revenue Requirement
11
Less: Non Tariff Income
-
0.47
1.89
12
Less: Income from Other Business
-
-
-
13
Net Aggregate Revenue Requirement
Order – Case No. 128 of 2013
186.39
961.33
1,074.75
Page 71 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
4.12.2 Based on the detailed analysis in the previous paragraphs, the Commission has
approved the following ARR projections based on the Business Plan scenario
approved by the Commission over the second Control Period for the FY 2013-14 to
FY 2015-16. However, it should be noted that this approval is solely for the purpose
of approving Business Plan of MEGPTCL for the second Control Period, while the
final ARR projections which shall have a bearing on the transmission Tariff during
the second Control Period, shall be approved as part of the MYT Order for the second
Control Period.
4.12.3 The summary of ARR projections approved by the Commission for the purpose of the
present Order is as follows:
Table 4-27: Business Plan projections approved by the Commission
Rs. Crore
S.No.
Particulars
FY 2013-14
FY 2014-15
FY 2015-16
3.91
68.63
95.27
1
Operation & Maintenance Expenses
2
Depreciation Expenses
11.81
206.45
275.82
3
Interest on Long-term Loan Capital
14.96
283.34
360.68
4
Interest on Working Capital and on consumer
security deposits
0.90
16.17
21.22
5
Other Expenses
6
Income Tax
2.79
48.84
65.04
7
Contribution to contingency reserves
0.57
6.66
13.15
8
Total Revenue Expenditure
34.93
630.08
831.18
9
Return on Equity Capital
10.52
184.19
245.28
10
Aggregate Revenue Requirement
45.45
814.27
1,076.46
11
Less: Non Tariff Income
-
0.02
0.28
12
Less: Income from Other Business
-
-
-
13
Net Aggregate Revenue Requirement
Order – Case No. 128 of 2013
-
45.45
-
814.25
-
1,076.18
Page 72 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
5
Performance targets for the Second Control Period
5.1
Trajectory for certain variables
5.1.1
The Regulation 9.1 of the MERC MYT Regulations states that the Commission shall
stipulate a trajectory while approving the Business Plan for certain variables having
regard to the reorganization, restructuring and development of the electricity industry
in the State. It also specified that the variables for which the trajectory may be
stipulated can include but not be limited to O&M expenses, transmission losses,
supply availability, etc.
5.1.2
The Regulation 9.2 further states that the trajectory stipulated by the Commission in
the Order on Business Plan submitted by the Applicant, shall be incorporated by the
Applicant in its forecast of Aggregate Revenue Requirement and/or expected revenue
from Tariff and charges under Regulation 8 of MERC MYT Regulations.
5.1.3
Accordingly, the Commission hereby sets the performance trajectory for transmission
system availability and transmission losses.
5.2
Performance targets – Transmission system availability
5.2.1
MEGPTCL submitted that, since its transmission lines are not yet commissioned, the
behaviour of the transmission line with respect to loading, availability, interruptions
and voltage profile is not known at this stage. However, MEGPTCL stated that it has
endeavoured to follow all prudent engineering practices for erection of the
transmission line and shall also be deploying standard commissioning procedures to
ensure that the transmission line will be ready to deliver reliable and efficient
transmission services to its beneficiaries.
5.2.2
MEGPTCL has also submitted that the Commission will set required performance
targets while assessing the Petitioner’s Business Plan and undertake Tariff
determination.
5.2.3
The Regulation 60.1 of MERC MYT Regulations, 2011 reads as follows:
“60.1 Target availability for full recovery of annual transmission charges
(a)
(b)
(c)
AC System
HVDC bi-pole links
And HVDC back to back stations
: 98 percent
: 92 percent
: 95 percent
….
Note 2: The target availability shall be calculated in accordance with
procedure provided in the Annexure-II of these Regulations and to be
certified by Maharashtra State Load Despatch Centre.”
Order – Case No. 128 of 2013
Page 73 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
5.2.4
As can be seen from the above, Regulation 60.1 of the MERC MYT Regulations
specifies a target availability of 98% for AC system of Transmission Licensee for full
recovery of its annual transmission charges. Accordingly, MEGPTCL has to maintain
its Transmission system availability at least at the levels stipulated in the aforesaid
Regulations, in order to be eligible to recover the full fixed charges, i.e., ARR, as
determined by the Commission.
5.2.5
Any reduction in system availability will lead to pro-rata reduction in recovery of the
ARR. However, the Commission in the present Case observes that MEGPTCL is a
new transmission Licensee and the transmission assets of the Licensee are yet to be
commissioned. Thus, there exists no base year value of transmission availability upon
which a trajectory for improvement of this performance parameter can be specified. In
this context, the Commission finds it appropriate to consider the availability of
MEGPTCL on actual basis over the initial years of the Control Period and shall
approve a trajectory for improvement of the system availability during the mid-term
performance review of the Licensee.
5.3
Performance targets – Transmission loss
5.3.1
During the second Control Period, the Commission has considered a pooled IntraState Transmission Loss of 4.19% for the FY 2013-14 to FY 2015-16 in accordance
with the principles outlined under the transmission pricing framework Order dated 27
June, 2006 and the Order for Transmission Tariff for the InSTS for the FY 2013-14 to
FY 2015-16 in Case No. 56 of 2013 dated 13 May, 2013.
5.3.2
As regards transmission losses for the second Control Period, Regulation 69 of the
MERC MYT Regulations specifies as under:
“...
69 Transmission losses
69.1 The energy losses in the transmission system of the Transmission
Licensee, as determined by the State Load Despatch Centre and approved by
the Commission, shall be borne by the Transmission System Users in
proportion to their usage of the intra-State transmission system:
Provided that the Commission may stipulate a trajectory for transmission
losses in accordance with Regulation 9 as part of the multi-year tariff
framework applicable to the Transmission Licensee.
Provided that any variation between the actual level of transmission losses, as
determined by the State Load Despatch Centre and the approved level shall be
dealt with, as part of the mid-term performance review, in accordance with
the mechanisms provided in Regulation 11.
...”
Order – Case No. 128 of 2013
Page 74 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
5.3.3
5.4
5.4.1
MEGPTCL being an Intra-State Transmission Licensee shall be bound by the pooled
Intra-State Transmission loss approved by the Commission from time to time.
Compliance of other performance parameters – Standards of performance
Compliance with standards of performance parameters
5.4.1.1 In addition to improving the trajectory of performance parameters such as
transmission system availability, MEGPTCL should also ensure maintaining
optimum levels of performance in respect of parameters such as voltage profile,
safety, etc., while operating its transmission system throughout its useful life.
Various SERCs have specified standards of performance to be complied with by the
transmission Licensees in their respective States. Some of the critical performance
parameters pertinent to effective operation of the transmission system by Licensees
identified by States such as Andhra Pradesh, Madhya Pradesh, Rajasthan and
Karnataka in their transmission Licensee's Standards of Performance are listed
below:
a) Voltage Variation Index(VVI): Voltage Variation Index representing the degree
of voltage variation from nominal value (in %) over a specified period of time
shall be computed separately by the State Transmission Utility / transmission
Licensee for higher than nominal system voltage and lower than nominal system
voltage.
b) Safety Standards: IE Rules, 1956 lay down the general safety requirements to be
observed by transmission Licensees for construction, installation, protection,
operation and maintenance of electric supply lines and apparatus.
c) Feeder Availability: The feeder availability gives the percentage of time during
which the feeder remained available for transmission.
d) Substation Availability: The sub-station availability expressed in percentage is
the measure of the extent the power transmission capacity remained available
from a sub-station.
e) Reporting Requirement and Compliance: Transmission Licensee shall maintain
base data like log sheet, complaint registers, and interruption registers and
relevant load flow studies in respect of system security, etc., such that the same
can be furnished for verification and also further shall be used to represent the
compliance of the transmission Licensee to the Standards of Performance. Further,
the Licensee shall also comply with the provisions of the MERC State Grid Code,
2006 as amended from time to time.
5.4.1.2 The Commission has directed the transmission Licensees in the State to exhibit high
performance standards in respect of above performance parameters. In this context,
MEGPTCL being a part of the Intra-State Transmission System should propose its
commitment towards achievement of above listed standards of performance
Order – Case No. 128 of 2013
Page 75 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
parameters during this Control Period and present such proposal under its MYT
Petition for the second Control Period.
5.5
Preparedness for evolutionary POC based transmission pricing methodology
5.5.1.1 The existing framework of transmission pricing of InSTS in Maharashtra is based on
postage stamp method. The mechanism has served the needs of the system well.
However, the National Electricity Policy and Tariff Policy mandate that the National
Transmission Tariff framework should be sensitive to distance, direction and related
to quantum of power flow.
5.5.1.2 CERC, after due consideration of the alternative methodologies for allocation of
transmission charges and the comments received from various stakeholders has
considered implementation of the Point of Connection (PoC) methodology based on
a hybrid method, which brings together the strengths of both the Marginal
Participation and the Average Participation Method. Under this framework, any
generator node is required to pay a single charge based on its location in the grid to
gain access to any demand customer located anywhere in the country. Similarly, any
demand node will also be required to pay just one charge and get access to any
generator in the grid. This is based on load flow studies conducted for each node,
one at a time. The same principle holds for transmission losses that a generator node
or demand node has to bear.
5.5.1.3 The MERC MYT Regulations has necessary enabling provisions for changing the
existing transmission pricing framework and introduce one as followed by CERC,
during an appropriate time of the next Control Period. The relevant Regulation is
reproduced below:
“67 Transmission Pricing Framework
67.1 The Commission may, after conducting a detailed study and due
regulatory process, change the existing transmission pricing framework to
the one adopted at the Central level, during this Control Period, or
afterwards, whenever the Commission may deem appropriate.”
5.5.1.4 The Point of Connection (PoC) method as adopted at the Inter-State level by the
CERC relies mainly on load flow analysis. For implementation of similar approach
at State level, inputs to the proposed transmission pricing model, viz., nodal
generation information, nodal demand information, transmission circuits between
these nodes, technical characteristics of each network branch: resistance, reactance,
line charging and capacity of each network branch, and the associated lengths of
each line will be required to be obtained systematically from each user of the
network and network service provider by the SLDC/STU (or any other agency
designated by the Commission for this purpose) for computing the transmission
usage charges for each season annually.
Order – Case No. 128 of 2013
Page 76 of 81
Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
5.5.1.5 Thus, for adoption of PoC methodology at the State level, several InSTS level
transmission system data inputs are required.
5.5.1.6 The PoC based method of transmission pricing is data intensive and the accuracy of
the transmission charges derived shall depend on the accuracy of the data provided
as input to such transmission pricing model. In view of this, all Intra-State entities
including STU/transmission Licensees should take utmost care in making available
the required data with desired accuracy and within the desired time limits as may be
specified by the Commission at a later point in time, for effective and timely
implementation of such framework at the Intra-State level.
5.5.1.7 MEGPTCL being a transmission Licensee, which is a part of the Maharashtra IntraState Transmission System, should collect and collate necessary technical data so as
to prepare itself to comply with adequate data requirement to be sought by
STU/designated agency to develop PoC based transmission pricing methodology in
Maharashtra.
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Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
6
Directions for filing of MYT Petition for the Second Control Period
Through this Business Plan Order, MEGPTCL is hereby directed to comply with the
following directives while filing the MYT Petition for the second Control Period:
a.
b.
c.
d.
e.
f.
g.
h.
MEGPTCL shall submit the capital cost of the transmission project for
prudence check along with the audited financial statements for completed
capital cost up to COD at the time of filing of the MYT Petition by
MEGPTCL for the second Control Period.
MEGPTCL while filing the MYT Petition for the second Control Period
shall also clearly specify the additional impact on capital cost attributable
to delay caused by contractors and any other parties having contractual
agreements with MEGPTCL, if any.
As regards capital cost components of the Transmission project,
MEGPTCL shall set off the escalation towards completion cost and
contingency cost, which were included in the initial estimates to take care of
the unforeseen increases in the cost, against the actual increase in the
capital cost as a whole.
MEGPTCL shall provide details of the actual date of commissioning of its
transmission project and details of the assets put to use as part of the MYT
Petition. This shall be substantiated based on documentary proof and
necessary certification from STU and other competent authorities.
MEGPTCL shall provide details of the scope of work under deposit work
for extension of Aurangabad substation.
As outlined under paragraph 4.5 of this Order, MEGPTCL shall give due
consideration to change in risk profile of transmission business upon
commissioning of transmission system, which should get reflected in the
interest costs and the same should form basis for projection of interest costs
under its MYT Petition.
Under its MYT Petition, MEGPTCL shall clearly address the observations
made by Commission on some of key risk factors such as implementation
risk, financial risk and such other matters highlighted in the Order and
shall provide adequate justification for its stand for sharing of risks and
passing on costs thereof to transmission system users through its MYT
Petition.
MEGPTCL is directed to submit a detailed plan on the measures and
strategies which it plans to deploy to address the issues pertaining to safety
of assets and human beings during operation of its transmission lines, thus
ensuring safe operations, along with the MYT Petition.
The approved Business Plan of MEGPTCL shall form the basis for framing the MYT Petition
for the second Control Period. Further, MEGPTCL should submit the MYT Petition along
with audited statements and completed cost of the transmission project on COD. MEGPTCL
Order – Case No. 128 of 2013
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Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
shall submit the MYT Petition within 60 days from the date of issuance of this Business Plan
Order.
With the above, MEGPTCL's Petition in Case No. 128 of 2013 stands disposed off.
Sd/-
Sd/-
(Chandra Iyengar)
(Vijay L. Sonavane)
Member
Member
Order – Case No. 128 of 2013
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Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Appendix – 1
List of persons who attended the Technical Validation Session conducted on 31 October,
2013
Sr. No.
Name of the Participant
Institution
1.
Jigar Thakkar
MEGPTCL
2.
Manank Bhatt
MEGPTCL
3.
M. R. Krishna Rao
MEGPTCL
4.
Jignesh Langalia
MEGPTCL
5.
A. Banerjee
PWC
6.
Shyam S.
PWC
Order – Case No. 128 of 2013
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Approval of Business Plan of MEGPTCL for FY 2013-14 to FY 2015-16
Appendix – 2
List of persons who attended the Public Hearing conducted on 19 December, 2013
Sr. No.
Name of the Participant
Institution
1.
Jignesh Langalia
MEGPTCL
2.
Anirban Banerjee
PWC
3.
N. R. Sonkavday
STU
4.
U. S. Bhagat
STU
5.
Majid Khan
MSETCL
6.
Tej Singh
MSETCL
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