Haryana Vidyut Prasaran Nigam
Limited
Executive Summary of
Petition for
True up for 2014-15,
Review of FY 2015-16 and
Revised Aggregate Revenue Requirement for MYT
Control Period
Submitted to
Hon’ble Haryana Electricity
Regulatory Commission
Executive Summary
Background
In line with HERC (Terms and Conditions for Determination of Tariff for Generation, Transmission,
Wheeling and Distribution & Retail Supply under Multi Year Tariff Framework) Regulations, 2012
(hereinafter referred to as “HERC Tariff Regulations, 2012” or “MYT Regulations 2012”) notified on
December 05, 2012, Haryana Vidyut Prasaran Nigam Ltd is hereby filing this petition seeking True up of
FY2014-15 based on the annual audited accounts and Annual Performance Review of FY2015-16 based
on the revised capital expenditure estimated for FY2015-16.
1. True-Up for FY 2014-15
The relevant section (Regulation 8) of MYT regulations 2012 pertaining to MYT approach for baseline
values is reproduced as under:
“The Commission shall determine baseline values for various financial and operational parameters
of ARR for the control period taking into consideration the figures approved by the Commission in
the past, actual average figures of last three years, audited accounts, estimate of the figures for the
relevant year, Industry benchmarks/norms and other factors considered appropriate by the
Commission;”
In view of the above regulations, it is submitted that while passing the True up Order for FY 2013-14, the
Hon’ble Commission has considered the audited annual accounts for most of the elements of ARR.
Therefore, it is humbly prayed that based on the same principle, the true up exercise for FY 2014-15 may
also be undertaken, as the audited annual accounts are truly reflective of the actual costs incurred by the
Petitioner. The summary of various components of ARR and grounds on which true up is sought is
provided as below.
1.1 Operations and Maintenance Cost
The O&M expenditure comprises of Employees’ cost, administration & general expenses and repair &
maintenance expenses. The Hon’ble Commission in its True up Order for FY 2013-14 has considered
annual accounts of FY2013-14 to approve the revised employee cost. It is submitted that the based on
the same principle, the Hon’ble Commission must true up the actual employee cost for FY2014-15. Also it
is requested to true up the repair and maintenance cost incurred by the petitioner on actual basis. Further
as the MYT Regulations 2012 has particularly considered the terminal liability to be uncontrollable
element of ARR, the petitioner seeks true up of the actual expense incurred.
1.2 Return on Equity
In line with the MYT Tariff Order, the Petitioner has proposed the return on equity for the FY 14-15
considering the equity pending allotment. The Petitioner has estimated RoE, completely in line with
the approach adopted by the Hon’ble Commission in its previous True up Order dated 31.03.2015.
1.3 Depreciation
The Hon’ble Commission in its True up Order for FY 2013-14 has provided for depreciation based on
the GFA of FY 2013-14 with certain estimates. In line with the above approach, the Petitioner
requests the Hon’ble Commission to approve the depreciation for the FY 2014-15 on actual basis.
1.4 Interest on working capital
The Petitioner prays to the Hon’ble Commission to kindly approve the actual interest on working
capital incurred by the Petitioner, which is based on the actual audited accounts of FY 2014-15.
1.5 Incentives
As per MYT tariff framework and guiding principles the petitioner is eligible for incentive on account
of actual transmission system availability above target system availability. The Petitioner seeks
incentive for the FY 2014-15 based upon system availability and proposes to pass on the benefit of
incentive to the consumers by reduction of its ARR.
1.6 Reactive Energy Charges
In line with the Regulation 48 of MYT Regulations 2012, the petitioner seeks to recover excess
reactive energy charges incurred over actual expenses recovered from the Discoms.
1.7 Loss due to Foreign Exchange
In line with the Regulation 24.3 of MYT Regulations 2012, the petitioner seeks to recover loss due to
foreign exchange rate variation for the FY 14-15 on actual basis.
In addition to above, the Petitioner would also like to request the Hon’ble Commission to kindly
consider the losses on account of FERV, incurred in the past years, i.e. FY 2011-12 and FY2012-13,
as these are legitimate claim of the Petitioner, based on the audited annual accounts.
It is submitted that the Petitioner has not been able to claim the past FERV losses as the MYT
Regulations 2012 came in effect from December 2012 and there was no provision of true up under
the repealed HERC Tariff Regulations 2008. The Hon’ble Commission has allowed the recovery of
FERV losses for FY 2013-14 in its Order dated 18th August 2015. Therefore, in line with principle
adopted by Hon’ble Commission, it is submitted that the recovery of the past FERV losses may be
allowed.
Based on the above discussed elements of ARR, the ARR approved by the Hon’ble Commission
and revised ARR submitted for True up are summarized below.
ARR - Transmission (In Rs Million)
Approved
Proposed for
True Up
Surplus/(Gap)
Employees’ cost
Terminal benefits
R&M expenses
A & G Expenses
Interest on Capital Expenditure Borrowings
Debenture Interest (PF Bonds)
Debenture Interest (Pension Bonds)
Interest on bonds – Others
Interest on Working Capital/Bank Loans
Depreciation
Return On Equity
Non-Tariff Income
Share of SLDC Charges
Total
Add: True up of interest cost for FY13-14
Add: Reactive energy Charges
Add: Loss Due to Foreign Exchange Add: FERV True up of FY11-12 and FY1213
Total ARR
Add: Incentive based on Transmission
Availability passed on to beneficiary
Total ARR - Including incentive
2,177.09
1,297.62
296.75
168.92
1,476.74
58.01
193.55
983.00
176.10
2,074.80
1,425.00
(240.02)
11.57
10,099.13
10,099.13
10,099.13
2,387.11
1,917.76
386.75
131.42
2,217.61
162.17
673.00
983.00
467.33
2,699.47
1,699.87
(314.38)
11.57
13,422.69
94.98
22.81
(210.02)
(620.14)
(90.00)
37.50
(740.87)
(104.16)
(479.45)
(291.23)
(624.67)
(274.87)
74.36
(3,323.56)
(94.98)
(22.81)
134.36
(134.36)
325.00
(325.00)
13,999.84
(3,900.71)
28.13
(28.13)
14,027.97
(3,928.84)
Based on the above comparison of approved and actual ARR parameters, a revenue gap of Rs. 3,928.84
million is computed for FY 2014-15 which is proposed to be carried forward. The Hon’ble Commission is
requested to approve to same along with carrying cost which is computed in the subsequent chapter.
1.8 ARR of SLDC
The table below provides the details of ARR approved for SLDC business by the Hon’ble Commission in
its Tariff Order for FY 2014-15. However, in line with the revised ARR for Transmission business it is
submitted that the true up for SLDC business may also be considered by the Hon’ble Commission and it
may approve the same.
Approved
Actual
Employees’ cost
A & G Expenses
R&M expenses
Depreciation
Interest & Finance Charges on Capital Expenditure
Interest on Working Capital
32.89
9.18
4.54
45.59
50.91
2.29
31.38
10.13
8.30
23.44
14.59
2.59
Surplus/
(gap)
1.51
(0.95)
(3.76)
22.15
36.32
(0.30)
Total Expenditure (including special appropriation)
145.40
90.42
54.98
SLDC ARR (Rs. Million)
2. Review of Annual Revenue Requirement for FY 2015-16
On 29th May, 2014, the Hon’ble Commission had issued the MYT Order for HVPN for the Control Period
FY 2014-15 to FY 2016-17. HVPN is required to file for Annual Performance Review (APR) in line with
Regulation 11(5) of the MYT Regulations, 2012.
The Petitioner has proposed a review of capital expenditure for the remaining years of the Control Period,
based on the expenditure incurred so far in the current FY 2015-16 and also presently envisaged for the
remaining years of the Control Period.
2.1 Capital Expenditure
Keeping in view the need to cater demand growth and to improve the existing system the petitioner has
revised the capital expenditure estimates for the remaining control period. The details of proposed
schemes have been provided in the annexures. The Hon’ble Commission is requested to revise the
capital expenditure allowed and may approve the same. The capital expenditure incurred during first
quarter of FY 2015-16 and works wise revised capital expenditure for the control period is summarized in
the table below:
Works
Substations
Lines
IT
Land
Misc.
Total
FY 15-16
(Approved)
T.O 31st
March 2015
Actual Up
to Q1
6,316
2,126
170
679
514
9,805
490
338
12
0
0
840
FY 15-16
Envisaged
5,148
1,733
139
553
419
7,991
FY 16-17
(Approved)
FY 16-17
(Envisaged)
4,479
2,175
30
71
427
7,182
6,028
2,927
41
96
574
9,665
2.2 Operations and Maintenance Cost
The O&M expenditure comprises of Employees’ cost, administration & general expenses and repair &
maintenance expenses. For employee cost, actual employee cost of FY 2014-15 exclusive of
capitalization and SLDC employee cost as per audited accounts has been considered. The inflation factor
growth has been considered as 7.43%, as per methodology, approved by the Hon’ble Commission in the
MYT regulations and no further addition in manpower has been considered. The terminal benefits
estimate for the MYT control period is based on the actuarial valuation report, annexed herewith this
petition. Also, the R&M expenses have been revised considering the revised opening GFA for FY 201516. Further, the revision in A&G cost is sought considering A&G cost of FY 2013-14 as the baseline.
2.3 Depreciation
In line with the baseline value of GFA considered by the Petitioner in True up for FY 2014-15, the revised
proposal for the depreciation has been submitted.
2.4 Interest and Finance Charges
The interest cost has been revised based on additional loans which are required to be drawn for
significant capital expenditure planned for the Control Period.
2.5 Interest on Working Capital
The revision of interest on working capital is sought on the basis of base rate prevailing as on 1st April
2015 i.e. 10.0% and adding a margin of 350bps. Thus the interest rate on working capital is estimated to
be 13.5% for calculation on interest on working capital for the control period.
2.6 Return on Equity
The revised return on equity has been estimated based on the expected equity contribution on the new
capex proposed. The rate of return on equity is considered to be line with the MYT Regulations, which
provide for 10% returns.
2.7 Aggregate Revenue Requirement
As per the parameters discussed above, the revised ARR of HVPN for FY 2015-16 and FY 2016-17 as
revised by the Petitioner and earlier approved by the Hon’ble Commission is summarized in the table
below:
Financial Year
Particulars
O&M Cost
Interest on Loan
Interest on Pension Bonds
Interest on PF Bonds
Interest on Bonds (others)
Depreciation
Interest on Working Capital
Return on Equity
Share of SLDC Charges
Non-Tariff Income
True up for FY13-14(Including Holding Cost)
Redemption of Pension Bond
Total ARR
Review of True-Up FY13-14 (Order Dated 18th
August 2015)
Revised ARR(Order Dated 18th August 2015)
FY 15-16 (In Rs
Million)
Approved
as per
Order
Revised
dated 31st Proposed
March
2015
3,777.42
5,709.09
1,706.37
2,512.88
7
673
18.40
162.17
0
0
3,147.64
2,980.76
2,06.73
372.60
1,832.23
1,796.60
9.98
(241.87)
(314.38)
1833.95
1833.95
1397.6
12,287.87 17134.27
FY 16-17 (In Rs
Million)
Approved
as Per
MYT
Order
Revised
Proposed
4,315.21
1,445.93
61.97
983.00
2,854.43
182.86
2,060.62
17.60
(52.14)
5,710.05
3,149.21
572.05
137.85
0
3,588.0
349.85
1,903.24
13.68
(314.38)
11,869.48
15,109.56
381.13
12669.0
The Petitioner requests the Hon’ble Commission to approve the Revised Aggregate Revenue
Requirement of HVPN for FY 2015-16 and FY 2016-17 as estimated in the table above and allow
recovery of the variation in the transmission charges for FY 2014-15 in the revised ARR for FY 2016-17.
2.8 Revenue Gap and Carrying Cost
Based on the true-up of FY 2014-15 and revised ARR for FY 2015-16, the revenue gap for computed for
the respective years are provided in table below:
Financial Year
Approved ARR
Proposed Revised ARR
Revenue Surplus /(Gap)
FY 2014-15
(In Rs Million)
10,099
14,028
(3,929)
FY2015-16
(In Rs Million)
12,288
17,134
(4,846)
The Petitioner requests the Hon’ble Commission to allow recovery of the revenue gap of FY 2014-15 and
gap on account of revision in ARR of FY 2015-16 in the transmission charges to be approved by the
Hon’ble Commission for FY 2016-17 and also allow for carrying cost on the under-recovered amount in
line with HERC MYT Regulations, 2012.
Accordingly, the Petitioner has computed the carrying cost on the revenue gap for FY 2014-15 and FY
2015-16 considering the applicable SBI base rate and appropriate margin rate which is provided in the
table below:
Particulars (In Rs Million)
FY 2014-15
FY 2015-16
-
3,929
Addition
3,929
4,846
Closing Revenue Gap
3,929
8,775
13.20%
13.50%
259
858
Opening Revenue Gap (including carrying cost)
Interest Rate
Carrying Cost
Total
8,775
1,117
HVPN requests the Hon’ble Commission to include the carrying cost of Rs.1,117 Millions in the ARR for
FY 2016-17 for recovery through transmission charges.
2.9 Annual Transmission charges for FY 2016-17
The annual transmission charges shall be determined as stated under Regulation 50 of the MYT
Regulations 2012:
“Transmission licensee shall recover the transmission charges at the normative annual transmission
system availability factor specified for it by the Commission.”
It is submitted that the petitioner has also included the Yearly Transmission Charges for 3 lines operating
as Inter-state Transmission Lines as approved by the Central Electricity Regulatory Commission in its
order dated 17th September 2015. In line with the same methodology applied by the CERC, the petitioner
has also calculated and included Yearly Transmission Charges for FY15-16 & FY16-17 based on
tentative line lengths (ckm) to be added in corresponding years.
The details of the annual transmission charges are summarized in table below:
Amount
(Rs. Million)
Particulars
Aggregate Revenue Requirement for FY 2016-17
15,110
Gap on account of True-up for FY 2014-15
3,929
Gap on account of Review of FY 2015-16
4,846
Carrying Cost on Gap for FY 2014-15 & FY 2015-16
1,117
Adjusted ARR
25,002
Unitary Charges for JKTPL
46
YTC for Lines Operating As ISTS Lines (Till FY14-15)
240.65
YTC for Lines Operating As ISTS Lines (For FY15-16 & FY16-17)
203.51
Total Transmission Charges
25,492
Monthly Transmission Tariff
2,124.31
Ratio of Average Transformation Capacity
UHBVNL
49.62%
DHBVNL
49.64%
TPTCL
0.71%
NTPC Ltd
0.03%
Chanderpur Renewable Power Co. Private Limited (CRPCPL)
0.0042%
Monthly Transmission Tariff - UHBVN (based on ratio of Transmission capacity)
1,054.06
Monthly Transmission Tariff - DHBVN (based on ratio of Transmission capacity)
1,054.55
Monthly Transmission Tariff - TPTCL (based on ratio of Transmission capacity)
15.0
Monthly Transmission Tariff - NTPC (based on ratio of Transmission capacity)
0.6
Monthly Transmission Tariff - CRPCPL (based on ratio of Transmission capacity)
0.09