Regulation No. 5 of 2005
Section 61 of the Electricity Act, 2003, provides that the Appropriate Commission shall, specify the terms and conditions for determination of tariff, while Section 62 of Act empowers the Commission to determine the tariffs, inter alia for transmission of electricity and requires the Licensees to comply with such procedure as may be specified by the Commission for calculating the expected revenue from the tariff and charges which the Licensee is permitted to recover. The Commission formulated a draft Regulation specifying the Terms and Conditions for determination of Transmission Tariff including the procedure for calculating the expected revenue, published the same in A.P. Gazette on 18-10-05 and issued a press release seeking comments / suggestions from all stakeholders and the public at large and also placed it on the website of the Commission. Comments / suggestions were received from one person and the APTRANSCO (licensee). The Commission considered the comments / suggestions and has made modifications, as considered appropriate, and finalised the Regulation.
In exercise of powers conferred under clause (zd), (ze) and (zf) of Section 181 (2) read with Sections 61 and 62 of the Electricity Act 2003 (36 of 2003) and all other enabling powers in that behalf, the Andhra Pradesh Electricity Regulatory Commission hereby makes the following Regulation, namely:
i. This Regulation may be called the Andhra Pradesh Electricity Regulatory Commission (Terms and conditions for determination of Transmission Tariff) Regulation, 2005.
ii. This Regulation shall be applicable to any person engaged in the business of intra -State Transmission of electricity, within the territory of the State of Andhra Pradesh.
iii. This Regulation shall come into force on the date of its publication in the Andhra Pradesh Gazette.
(a) “Act” means the Electricity Act, 2003 (36 of 2003);
(b) “Aggregate Revenue Requirement” (ARR) means the revenue required to meet the costs pertaining to the licensed business, for a financial year, which would be permitted to be recovered through tariffs and charges by the Commission;
(c) “Base Year” means the financial year immediately preceding the first year of the Control Period;
(d) “CERC” means the Central Electricity Regulatory Commission established under Section 76 of the Act;
(e) “Commission” means the Andhra Pradesh Electricity Regulatory Commission;
(f) “Conduct of Business Regulations” means the Andhra Pradesh Electricity Regulatory Commission (Conduct of Business) Regulations in force from time to time
(g) “Consumer / User contributions” means any contributions made by those using or intending to use the Transmission network of a licensee. Any grant received by Licensees would also be treated as Consumer / User contribution;
(h) “Control Period” means a multi-year period fixed by the Commission from time to time, usually 5 years, for which the principles for determination of ARR will be fixed, the first Control Period, however, being of the duration of 3 years;
(i) “Financial year” means the period commencing on 1st April of a calendar year and ending on 31st March of the subsequent calendar year;
(j) “Grid Code’ means the State Grid Code as approved by the Commission;
(k) “Non-Tariff Income” means income relating to the licensed business other than from tariffs for Transmission, and excludes any income from Other Business;
(l) “Licence” means a licence granted under Section 14 of the Act to transmit electricity within the State of Andhra Pradesh;
(m) “Licensee” means a person granted a licence as a Transmission Licensee under Section 14 of the Act for intra-state transmission of electricity within the State of Andhra Pradesh;
(n) “Open Access Agreement” means an agreement entered into under the provisions of the Open Access Regulation between a Transmission licensee and a User to avail of open access to the transmission licensee’s network for transmission of electricity and may also include Distribution Licensee as a party to such agreement;
(o) “Open Access Regulation” means the Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions of Open Access) Regulation, 2005 (No. 2 of 2005);
(p) “Other Business” means any business engaged in by a Transmission Licensee under Section 41 of the Act for optimum utilization of the assets of the transmission business and shall include any business of the Licensee other than the Transmission business;
(q) “ Regulated Rate Base” or “RRB” means the value of the gross fixed assets net of consumer contributions and accumulated depreciation;
(r) “State” means the State of Andhra Pradesh;
(s) “SLDC” or “State Load Dispatech Centre” means the centre established under Section 31 of the Act;
(t) “Transmission Business” means the business of transmitting electricity within the State of Andhra Pradesh;
(u) “User” or “Open Access User” means a person using or intending to use the transmission system of the Transmission Licensee in the State for receiving supply of electricity from a person other than the distribution licensee of his area of supply, and the expression includes a generating company and licensees, including Distribution Licensees for use of transmission system.
The Guidelines already issued by the Commission for computing the Aggregate Revenue Requirement / Expected Revenue from Charges (ARR / ERC) to the extent modified herein would continue to apply for the Transmission Business till such time as fresh Guidelines are issued.
Till such time as there is complete segregation of accounts between SLDC activity and Transmission activity, the Transmission Licensee shall apportion its costs between (i) SLDC activity and (ii)Transmission activity, based on an Allocation Statement that shall also contain the methodology adopted for the apportionment.
a. The Operation and Maintenance (O&M) costs which include employee-related costs, repairs & maintenance costs and administrative & general costs, estimated for the Base Year and the year prior to the Base Year in complete detail, together with the forecast for each year of the Control Period based on the norms proposed by the Transmission Licensee including indexation and other appropriate mechanisms in terms of the principles enunciated in this Regulation for O&M cost allowance;
b. Regulated Rate Base (RRB) for the Base Year and each year of the Control Period, which requires submission of the working capital requirement and a detailed scheme/project-wise Capital Investment Plan with a capitalisation schedule covering each year of the Control Period consistent with the Commission approved Resource Plan;
c. A proposal for appropriate capital structure and its cost of financing (interest cost and return on equity) for the purpose of computing Weighted Average Cost of Capital;
d. Range of Transmission losses (upper and lower) for each year of the Control Period for the purpose of incentive / penalties;
e. Details of depreciation, including Advance against depreciation if any required and capitalisation schedule for each year of the Control Period;
f. Description of external parameters proposed for indexation;
g. Details of taxes on income;
h. Any other relevant expenditure;
i. Proposals for sharing of gains and losses;
j. Proposals for efficiency parameter targets;
k. Proposals for rewarding efficiency in performance; and
l. Any other matters considered appropriate.
i. The Transmission system or network usage forecast for each year of the Control Period consistent with the Resource Plan;
ii. Proposals for computation of tariffs for Transmission of electricity for each of the years of the Control Period, including the losses to be charged in kind and the procedure therefore;
iii. Proposals for Non-Tariff Income with item-wise description and details;
iv. Proposals in respect of income from Other Business; and
v. Expected Revenue from the proposed Transmission Charges, Non-Tariff Income and Income from Other Business (es).
The Transmission Licensee shall for Commission’s approval, file a Resource Plan on 1st April of the year preceding the first year of the Control Period.
Operation & Maintenance expenses
Return on Capital Employed
Taxes on Income
a. Operation and maintenance expenses;
b. Return on capital employed;
d. Taxes on Income;
e. Corrections for “uncontrollable” items and “controllable” items (indexed to external parameters); and
f. Any other relevant expenditure.
O&ML0 = 0.3*O&M0 / LL0
O&MS0 = 0.7* O&M0 / SS0
O&MLn = O&MLn-1*INDX
O&MSn = O&MS n-1* INDX
O&Mn = O&MLn*LLn + O&MSn*SSn
O&ML0 is the O&M cost per ckt-km (circuit-kilometers) of EHT (Extra High Tension) lines for the Base Year of the first Control Period
O&MS0 is the O&M cost per bay of substations for the Base Year of the first Control Period
Note: The O&M cost per ckt-km of lines and per substation bay for the Base Year of second and subsequent Control Periods shall be determined on the basis of actual O&M cost of lines and substations to be filed separately by the Licensee.
O&MLn is O&M cost per ckt-km of EHT lines in nth year
O&MSn is O&M cost per Bay in nth year
LLn is the cumulative length of EHT lines in ckt-kms in nth year
SSn is the number of EHT Substation Bays in nth year
INDX is the Inflation Factor
RoCE = WACC * RRBi
WACC is the Weighted Average Cost of Capital as fixed by the Commission for the Control period and expressed in terms of percentage;
RRB is the Regulated Rate Base (the asset base) approved by the Commission for each year of the Control period on which the Transmission Licensee shall be entitled to earn a return based on the Commission approved Weighted Average Cost of Capital (WACC).
i: ith year of the Control Period, i = 1, 2, 3 for the first Control Period
· The WACC shall be computed in the following manner:
D/E is the Debt to Equity Ratio and shall be determined at the beginning of the Control Period after considering Transmission Licensee’s proposal, previous years’ D/E mix, market conditions and other relevant factors
rd is the Cost of Debt and shall be determined at the beginning of the Control Period after considering Transmission Licensee’s proposals, present cost of debt, market conditions and other relevant factors.
re is the Return on Equity and shall be determined at the beginning of the Control Period after considering CERC norms, Transmission Licensee’s proposals, previous years’ D/E mix, risks associated with distribution & supply business, market conditions and other relevant factors
The Weighted Average Cost of Capital as determined above shall remain unchanged during the Control Period
· The Regulated Rate Base (RRB) for the purposes of computing the RoCE for a year of the Control Period will be computed in the following manner.
RRBi = RRB i-1 +∆ RABi + WCi
RRBi : Regulated Rate Base for the ith year of the Control period
∆RABi: Change in the Rate Base in the ith year of the Control Period. This component would be the average of the value at the beginning and end of the year as the asset creation is spread across a year and is arrived at as follows:
∆RABi = (Invi – Di – CCi)/2
Invi: Investments projected to be capitalised during the ith year of the Control Period and approved.
Di: Amount set aside or written off on account of Depreciation of fixed assets for the ith year of the Control Period.
CCi: User Contributions pertaining to the ∆RABi and capital grants/subsidies received during ith year of the Control Period for construction of service lines or creation of fixed assets.
RRB i-1: Regulated Rate Base for the financial year preceding the ith year of the Control period and shall be determined on the basis of approved Capital Investment Plan referred to in clause 14.1 of this Regulation. For the first year of the Control Period, RRB i-1 will be the Regulated Rate Base for the Base Year i.e. RRBO. The values for the Base Year will be determined based on the latest audited accounts available, best estimates of the actuals pertaining to the relevant years and any other factors considered relevant by the Commission.
RRBO = OCFAO – ADO – CCO ,
OCFAO: Original Cost of Fixed Assets at the end of the Base Year available for use and necessary for the purpose of the licensed business
ADO: Amounts written off or set aside on account of depreciation and advance against depreciation, if any, of fixed assets pertaining to the regulated business at the end of the Base Year
CCO: Total contributions pertaining to the OCFAo, made by the users towards the cost of construction of transmission lines by the Transmission Licensee and also includes the capital grants/subsidies received for this purpose, pertaining to the capitalised assets.
· WCi: Working Capital Requirement in the ith year of the Control Period and shall be considered equivalent of 45 days’ Operations and Maintenance expenses as allowed for that year and the carrying cost of maintaining an appropriate inventory level of O&M stores.
Depreciation shall be computed in the following manner:
Provided that in the event of significant seasonal variations in losses, the Licensee may submit to the Commission the transmission loss levels for corresponding time periods during a year, for approval:
Provided further that the total amount of penalty levied, if any, by the Commission under the above provisions shall not exceed 10% of the Return on Equity .
All income being incidental to transmission business and derived by the Licensee from sources, including but not limited to profit derived from disposal of assets, income from investments , rents, penalties for over/under-utilization of transmission system and any other miscellaneous receipts from Users, shall constitute Non-Tariff Income.
TR = Net ARR/(12*TCC)
TR: Transmission Rate in Rs./kW/month
Net ARR: Net ARR, as determined under clause 8.3.
TCC: Total Contracted Capacity in kW of the Transmission system by all Long-Term Users
To ensure smooth implementation of the Multi-Year Tariff (MYT) Framework, the Commission may undertake periodic reviews of Transmission Licensees’ performance during the Control Period, to address any practical issues, concerns or unexpected outcomes that may arise, and in general to assess the efficacy of Multi Year Tariff Principles.
The Commission may, at any time add, vary, alter, modify, delete or amend any provisions of this Regulation.
(BY ORDER OF THE COMMISSION)
S.SURYA PRAKASA RAO