CERC - Regulations 2009

CERC (Terms and Conditions of Tariff) Regulations, 2009
Statement of Objects and Reasons
1. Introduction
1.1 The Electricity Act, 2003 (hereinafter referred to as “the Act”) assigns the
following functions to the Central Electricity Regulatory Commission
(hereinafter referred to as the “Commission”), among others:
a) to regulate the tariff of generating companies owned or

controlled by the Central Government;
b) to regulate the tariff of generating companies other than those
owned or controlled by the Central Government specified in
Clause(a), if such generating companies enter into or otherwise
have a composite scheme for generation and sale of electricity in
more than one state;
c) to regulate the inter-state transmission of electricity;
d) to determine tariff for inter-state transmission of electricity;
Section 61 of the Act empowers the Commission to specify, by regulations, the terms
and conditions for the determination of tariff in accordance with the provisions of the
said section and the National Electricity Policy and Tariff Policy. In terms of clause (s)
of sub-section (2) of section 178 of the Act, the Commission has been vested with the
powers to make regulations, by notification, on the terms and conditions of tariff under
section 61. As per section 178(3) of the Act, the Commission is required to make
previous publication before finalizing any regulation under the Act. Thus as per the
provisions of the Act, the Central Commission is mandated to specify, through
notification, the terms and conditions of tariff of the generating companies and inter-
State transmission systems covered under clauses (a) ,(b) and (c) of sub-section (1) of
section 79 of the Act after previous publication.
1.2 In exercise of the powers vested under sections 61 and 178 (2)(s) of the Act and
all other enabling powers and in compliance of the requirement under section 178 (3)
of the Act, the Central Commission issued vide public notice no. L-7/145/160/2008-
CERC dated 29th August, 2008 the draft of Central Electricity Regulatory Commission
(Terms and Conditions of Tariff} Regulations, 2008 for the tariff period from 1.4.2009
to 31.3.2014 (hereinafter referred to as the draft regulations} along with explanatory
memorandum for comments/suggestions/objections thereon. Subsequently, public
hearing was held on 3rd and 4th November 2008 to hear views of all the stakeholders
and consumers, if any. A statement indicating in brief the comments received from
various stakeholders is enclosed as Annexure-I. The list of participants in the public
hearing held on 3rd and 4th November 2008 is enclosed as Annexure-II.
2. Consideration of the views of the stakeholders and analysis and findings of

the Commission on important issues
2.1 The Commission considered the comments of the stakeholders on the draft
regulations, views of the participants in the public hearing as well as their written
submissions received during and after the public hearing. The regulations have been
finalized after detailed analysis and due consideration of the various issues raised. The
analysis of the issues and findings of the Commission thereon are discussed in the
subsequent paragraphs.
3. Preliminary Objections to the Regulations
3.1 In response to the draft regulations, UPPCL and MPPTCL have submitted
preliminary objections arguing that before the Commission frames the regulations for
terms & conditions of tariff, it is imperative that the Commission should first specify a
regulation under sub-section (5) of section 62 of the Act providing for the procedure
for calculation of expected revenues from tariff and other charges by the generating
companies and licensees.
2
3.2 UPPCL in its comments has submitted that section 61(d) of the Act enjoins
upon the Commission to safeguard the consumer interests while ensuring recovery of
the cost of electricity in a reasonable manner. Moreover, para 5.3(a) of the Tariff
Policy stipulates that the Commission shall maintain balance between the interests of
consumers and the need for investment while laying down the rate of return. In view of
these statutory requirements, the Commission has a statutory obligation to provide for
tariff determination by Annual Revenue Requirement (ARR) under section 62(5) in
place of norms. It has been urged that as normative cost is higher than the actual, it is
non-incurred and its recovery with the fuel price adjustment is therefore illegal.
UPPCL has suggested that the calculation of the revenue should be based on the
average of revenue of three years under section 62(5) of the Act and the difference
between the tariff based on the norms and the average of the three years calculated
under section 62(5) should be disallowed being in the nature of non-incurred expenses.
3.3 MPPTCL in its comments has submitted that a combined reading of sections 61
and 62 of the Act implies that data/details regarding expected annual revenue
requirement are required to be called from generating companies or licensees.
Thereafter this cost is required to be compared with the tariff determined as per the
regulations framed under section 61. The Commission is thereafter required to invoke
its power of regulation under section 79 to regulate the tariff keeping in view the need
for reasonable return to the generators/licensees and safeguarding the interests of the
consumers. Therefore, without specifying the methodology for computation of ARR as
mandated under section 62(5) read with section 178(2)(u) of the Act, determination of
tariff under section 62 would be a half hearted approach to regulate the tariff under
section 79 of the Act.
3.4 UPPCL has filed Writ Petition No. 11315 of 2008 in the High Court of
Judicature at Allahabad, Lucknow Bench seeking a writ of mandamus or any other
suitable writ to the Commission to disclose and provide procedure regulation as
envisaged under section 62(5) read with section 178(2)(u) of the Act. The main ground
3
taken in the petition is that in the absence of procedure contemplated under section
62(5) of the Act, the tariff is being determined on the normative parameters which
allow recovery of unincurred expenditure by the generating companies and their unjust
enrichment to the tune of thousands of crore at the cost of the beneficiaries.
3.5 The Commission is mandated under Section 61 of the Act to specify the terms
and conditions for determination of tariff in the light of the principles laid down under
clauses (a) to (h) of the said section and National Electricity Policy and Tariff Policy.
The guiding factors for determination of terms and conditions of tariff are as under:
(a) commercial principles

(b) competition, efficiency, economical use of resources, good
performance and optimum investments
(c) balance between consumer interest and recovery of the cost of
electricity in a reasonable manner
(d) reward of efficiency of performance
(e) multi-year tariff principles
(f) tariff progressively reflects cost of generation and reduces cross
subsidies
(g) promotion of cogeneration and generation from renewable resources
(h) National Electricity Policy
(i) Tariff Policy
3.6 The Central Government in exercise of its power under sub-section (1) of section
3 of the Act has notified the National Electricity Policy and Tariff Policy. Para 5.8.5 of
the National Electricity Policy provides as under:
“ 5.8.5 All efforts will have to be made to improve the efficiency of

operations in all the segments of the industry. Suitable performance norms
of operations together with incentives and disincentives will need to be
evolved alongwith appropriate arrangement for sharing the gains of
efficient operations with the consumers. This will ensure protection of
4
consumer interests on the one hand and provide motivation for improving
the efficiency of operations on the other.”
3.7 Further, the Tariff Policy provides framework for performance based service
regulations in respect of generation, transmission and distribution of electricity based
on norms. Para 5.3(f) of the tariff policy dealing with the operating norms provides as
under:
“5.3.(f) Operating norms:
Suitable performance norms of operations together with incentives and

disincentives would need to be evolved alongwith appropriate arrangement of
sharing the gains of efficient operations with the consumers. Except for the
cases referred to in para 5.3.(h)(2), the operating parameters in tariffs should be
at normative levels only and not at lower of normative and actuals.. The norms
should be efficient, relatable to past performance, capable of achievement and
progressively reflecting increased efficiencies and may also take into
consideration the latest technological advancements, fuel, vintage of
equipments, nature of operations and level of service to be provided to
consumers etc. Continued and proven inefficiency must be controlled and
penalized.”.
3.8 It is evident from the foregoing discussion of the provisions of Section 61 of the
Act, the National Electricity Policy and the Tariff Policy that the Central Commission
is mandated to specify the terms and conditions of tariff in respect of the generating
companies covered under clauses (a) and (b) of sub-section (1) of section 79 of the Act
and inter-State transmission of electricity based on norms and not on actuals.
Therefore, the Commission does not agree with the argument of UPPCL that ‘the
normative cost being higher than the actual, it is non-incurred and its recovery with the
fuel price adjustment is therefore illegal’. The Commission also does not subscribe to
the views of MPPTCL that in the absence of a separate regulation under section 62(5),
determination of tariff under section 62 would be a half hearted approach to regulate
5
the tariff under section 79 of the Act. The Commission has all along been following the
Multi-Year Tariff principles based on norms. The norms being specified by the
Commission are aimed at inducing efficiency in operation, are ‘relatable to past
performance’, and do ‘take into consideration the latest technological advancements,
fuel, vintage of equipments’.
3.9 Clause (5) of Section 62 of the Act which is the focus of objection by
MPPTCL and UPPCL reads as under:
“The Commission may require a licensee or generating company to comply

with such procedure as may be specified for calculating the expected revenue
from the tariff and charges which he or it is permitted to recover.”
3.10 The sub-section has two parts: firstly, the Commission may specify a procedure
for calculation of expected revenues from tariff and charges by the generating
companies and licensees which they are permitted under law to recover; secondly, the
Commission may require the generating companies or licensees to comply with such
procedure for calculation of expected revenues.
3.11 The generating companies or the transmission licensees are permitted under law
to charge the tariff on the basis of the provisions of the tariff regulations specified by
the Central Commission. The tariff regulations of 2004 for the control period 2004-09
provide for the detailed procedures for calculation of different elements of tariff. The
generating companies and transmission licensees are required to file the tariff petitions
containing the detailed calculation of different elements of tariff in accordance with the
provisions of the regulations. The Commission in the course of proceedings also calls
for any further information including revised calculations as is considered necessary
for determination of tariff. Such data/information are utilized by the Commission for
prudence check while determining the tariff of the generating companies and
transmission licensees falling within its jurisdiction.
6
3.12 The Commission has considered the provisions of section 62(5) and other
relevant provisions of the Act and the submissions of UPPCL and MPPTCL and is of
the view that the scope of sub-section (5) of section 62 is limited to specifying the
formats for calculating the expected revenue from tariff by the generating company
and the transmission licensee. The Commission has decided to specify regulation in
this regard. As regards sharing of the gains arising out of improved performance vis’-s-
vis’ norms, the Regulation on terms and conditions of tariff issued under section
178(2)(s) of the Act by the Commission already provide for sharing of savings on
account of some norms like secondary fuel oil consumption and refinancing of loan,
etc.
4. Scope and extent of application {Regulation 2}
4.1 In the draft regulations, it was provided that the regulations would be applicable to
all cases where tariff is to be determined by the Commission under section 62 of the
Act read with section 79 thereof. After detailed deliberation during finalization of the
regulations, the Commission noticed that the provisions of regulations, particularly the
operational parameters cannot be applied parri passu in case of the generating stations
or units thereof based on non-conventional energy sources. The Commission has
decided to come out with a separate regulation for determination of tariff based on non-
conventional energy sources. Accordingly, the determination of tariff of generating
station based on non-conventional energy sources has been kept out of the purview of
the present regulations.
5. Definition (Regulation 3)
5.1 Auditor {Regulation 3(5)}
5.1.1 Regulation 3(5) defines auditor as one appointed by the generating company or
transmission licensee in accordance with sections 224 and 619 of the Companies Act,
1956 or any other law for the time being in force. In the draft regulation, a provision
was made for auditors appointed in accordance with provisions of section 233 of the
7
Companies Act. The Commission intended that the cost accountants appointed under
section 233B should be made eligible to certify the various documents required under
these regulations. However, section 233B has been inadvertently left out. This shall be
corrected by following due procedure to reflect the proper intention of the
Commission.
5.2 Expenditure incurred {Regulation 3(2)
5.2.1 Draft Regulation 3(2) defined the word ‘actually incurred’ as any fund i.e. the
equity and/or the debt, actually deployed and paid in cash or cash equivalent, for
creation or acquisition of assets. However, the term ‘actually incurred’ which figured
in the 2004 tariff regulations are being given various interpretations. In order to avoid
ambiguity and assign a proper meaning to the term, the Commission considered it
appropriate to change the term ‘actually incurred’ to ‘expenditure incurred’ and to limit
the allowable expenditure incurred to the extent of actual cash outgo.
5.2.2 Accordingly, the said clause has been rephrased as under:
‘‘expenditure incurred’ means the fund, whether the equity or debt or both,
actually deployed and paid in cash or cash equivalent, for creation or
acquisition of a useful asset and does not include commitments or liabilities for
which no payment has been released;”
5.3 Useful life

5.3.1 The gas/liquid fuel based stations comprise of two main components. One set
of components are the gas turbine and its auxiliaries which are subjected to high
temperatures; and the other set of components namely waste heat recovery boiler,
steam turbine, generator and their auxiliaries etc are not subjected to very high
temperatures.
8
5.3.2 So far, the useful life for the gas turbine is being considered as 15 years and that
of waste heat recovery boilers, steam turbine etc as 25 years. Historically, the gas
turbines were used in aero planes and ships where reliability aspect was very important
from the view point of safety and security of life of passengers and crew members.
Considering the reliability of the gas turbines, life of gas turbines was considered as 15
years. When gas turbines were used in generation of electricity, the same period was
taken as the useful life. However, experience has shown that many of the first
generation gas turbines installed in India have already completed 20 years of operation
and continue to operate with major overhauls undertaken at regular intervals of 50000
EOH. The major overhaul of gas turbine involves complete renovation of hot gas path
which is subjected to very high temperature.
5.3.3 Considering the performance of gas turbines, the Commission has decided that
useful life of gas turbine stations should be fixed as 25 years as in case of coal based
thermal generating stations. Accordingly, for the purpose of R&M useful life of gas
turbines as 25 years has been specified in these regulations.
5.3.4 The Commission has considered 25 years as the useful life in case of the AC and
DC sub-stations and 35 years in case of hydro generating stations and transmission
lines Keeping in view their actual performance in the past.
5.3.5 Accordingly, clause (42) of Regulation 3 has been inserted as under:

“(42) ‘useful life’ in relation to a unit of a generating station and transmission
system from the COD shall mean the following, namely:-
(a) Coal/Lignite based thermal generating station 25 years

(b) Gas/Liquid fuel based thermal generating station 25 years
(c) AC and DC sub-station 25 years
(d) Hydro generating station 35 years
(e) Transmission line 35 years
9
6. Application for determination of Tariff {Regulation 5}
6.1 The Commission, in the draft regulation, under 2nd proviso to Regulation 5(2)
proposed as under:
‘Provided that in case of an existing project, the application shall be based on

admitted capital cost including any additional capitalization already admitted up
to 31.3.2008 and estimated additional capital expenditure for the year 2008-09
and for the respective years of the tariff period 2009-14’
6.2 The Commission has reconsidered this provision. As per Regulation 18(4) of
the CERC (Terms and Conditions of Tariff) Regulations, 2004, the utilities are
permitted to approach the Commission for tariff revision on account of additional
capital expenditure twice during 2004-09. As the capital cost as on 31.03.2009 shall
form the basis for determination of tariff for the control period 2009-14 as per the 2009
tariff regulations, it is imperative that all applications for revision of tariff on account
of additional capital expenditure incurred upto 31.3.2009 are considered and decided as
per the 2004 tariff regulations before taking up the tariff determination for the next
tariff period starting 1.4.2009 . Most of the utilities are in the process of filing their
applications for revision of tariff for the period 2004-09 on account of additional
capital expenditure. The Commission feels that once these applications are disposed of,
the applications for determination of tariff for the next tariff period starting from 1st
April, 2009 should be taken up based on the firmed up capital cost as on 1.4.2009.
6.3 Accordingly, the Commission decided that the first proviso to clause (2) of
Regulation 5 should be modified as under:
“Provided that in case of an existing project, the application shall be based on

admitted capital cost including any additional capitalization already admitted up
10
to 31.3.2009 and estimated additional capital expenditure for the respective
years of the tariff period 2009-14.”
6.4 The Commission expects the generating companies and the transmission
licensees to file their petitions for tariff determination for the period 2009-14 based on
the audited accounts as early as possible,. Till the tariff is determined by the
Commission for the period 2009-14 under these regulations, the tariff as applicable as
on 31.3.2009 shall continue to apply. The difference between the tariff charged during
this period and that which becomes payable as per the tariff determined by the
Commission under these regulations shall be settled at the SBI PLR rate of the 1st April
of the concerned year.
6.5 Accordingly, the Commission decided to add another clause i.e. clause (3) to
Regulation 5 as under:
“In case of the existing projects, the generating company or the transmission
licensee, as the case may be, shall continue to provisionally bill the
beneficiaries or the long-term customers with the tariff approved by the
Commission and applicable as on 31.3.2009 for the period starting from
1.4.2009 till approval of tariff by the Commission in accordance these
regulations:
Provided that where the tariff provisionally billed exceeds or falls short of the
final tariff approved by the Commission under these regulations, the
generating company or the transmission licensee, as the case may be, shall
refund to or recover from the beneficiaries or the transmission customers, as
the case may be, within six months along with simple interest at the rate equal
to short-term Prime Lending Rate of State Bank of India on the 1st April of
the concerned/respective year”.
11
The expression ‘long term customer’ has been used inadvertently in regulation
5(3), as quoted above. The Commission intended to use the expression
‘transmission customer’ in the context. This shall be corrected accordingly.
7. Truing up of Capital Cost(Regulation 6)
7.1 The Commission, in Regulation 6(1) of draft regulations had proposed truing up
exercise of capital cost as under:
‘The Commission shall carry out truing up exercise during the terminal year of
the tariff period, that is during 2013-14, with respect to the capital expenditure
including additional capital expenditure actually incurred up to 31.3.2013 and
revised estimated additional capital expenditure for 2013-14, as admitted by the
Commission after prudence check,”
7.2 Normally the truing up exercise for all the years in a tariff period should be carried
out together. Leaving the truing up exercise of the terminal year (2013-14) to be
carried out separately would tantamount to carrying out the same exercise once again
during the next tariff period, which is avoidable. As such, the Commission is of the
view that instead of carrying out the truing up exercise in the terminal year, the
exercise with respect to the capital expenditure including additional capital expenditure
actually incurred up to 31.03.2014, as admitted by the Commission after prudence
check, should be carried out along with the petition filed for next tariff period.
7.3 Accordingly, the Commission has decided that the clauses (1) to (4) of Regulation
6 should be deleted and in their place clauses (1) to (3) be substituted as under:
“(1)The Commission shall carry out truing up exercise along with the tariff
petition filed for the next tariff period, with respect to the capital expenditure
including additional capital expenditure incurred up to 31.03.2014, as
admitted by the Commission after prudence check at the time of truing up:
12
Provided that the generating company or the transmission licensee, as the case may be,
may in its discretion make an application before the Commission one more time prior
to 2013-14 for revision of tariff.
(2) The generating company or the transmission licensee, as the case may be, shall
make an application, as per Appendix I to these regulations, for carrying out truing up
exercise in respect of the generating station or the units thereof or the transmission
system or the lines or sub-stations thereof by 31.10.2014;
(3)The generating company or the transmission licensee, as the case may be, shall
submit for the purpose of truing up, details of capital expenditure and additional capital
expenditure incurred for the period from 1.4.2009 to 31.3.2014, duly audited and
certified by the auditors.”
8. Capital Cost (Regulation 7)
8.1 Draft Regulation 8(a) provided as under:
“(1) Capital cost for a project shall include:
(a) the expenditure actually incurred or projected to be incurred, including

interest during construction and financing charges, up to the date of
commercial operation of the project, as admitted by the Commission”.
8.2 The capital cost includes interest during construction, financing charges and foreign
exchange risk variation up to the date of commercial operation of the project. The draft
regulation 13 provides that the investors may deploy any amount of equity they want to
invest but the return on equity shall be allowed only to the extent of 30% of the capital
cost or actual amount of equity, whichever is lower. In case the equity invested is more
than 30%, the equity in excess of 30% would be considered as notional loan and it
13
would be serviced at the weighted average rate of interest of the respective utility, as is
calculated under the provision of clause 16(5) of the draft regulation. The interest,
financing charges and foreign exchange rate variation on actual loan is payable even
during the construction period but there being no source of revenue during the
construction period, the same is allowed to be capitalized as interest during
construction period. Now the question arises whether the equity amount considered as
notional loan and deployed during construction period too should be treated in the
same manner as the actual loan. Any investment deployed either in the form of equity
or debt has a cost to be serviced. The investments made in the form of equity are risk
capital carrying higher rate of return and have perpetual flow of return up to the end of
the life of the plant. But the loan capital does not enjoy the aforesaid perpetual and
higher rate of return. As the equity in excess of 30% of capital cost has been considered
as notional loan for the purpose of tariff, the Commission is of the view that the said
capital is also entitled for interest during construction, financing charges and foreign
exchange risk variation up to the date of commercial operation of the project.
Accordingly, the Commission has decided to allow interest during construction,
financing charges and foreign exchange risk variation up to the date of commercial
operation of the project on the normative loan admitted by the Commission.
8.3 The Commission decided to substitute Regulation 8(1)(a) of the draft regulation as
under and renumber as Regulation 7(1)(a):
“7. Capital Cost. (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 during construction on the loan - (i) being
equal to 70% of the funds deployed, in the event of the actual equity in excess
of 30% of the funds deployed, by treating the excess equity as normative loan,
or (ii) being equal to the actual amount of loan in the event of the actual
equity less than 30% of the funds deployed, - up to the date of commercial
14
operation of the project, as admitted by the Commission, after prudence
check;’
9. Initial Spares (Regulation 8)
9.1 Draft Regulation 9 provided for capitalization of initial spares as under:
“9.(1)Initial spares shall be capitalised as a percentage of the original project

cost, subject to following ceiling norms:
(i) Coal-based/lignite-fired thermal generating stations 2.5%
(ii) Gas Turbine/Combined Cycle thermal generating stations 4.0%
(iii) Hydro generating stations 1.5%
(iv) Transmission system
(a) Transmission line 0.75%
(b) Transmission Sub-station 2.5%
(c) Series Compensation devices
and HVDC Station 3.5%”
9.2 In case of thermal generating stations, the same norms for initial spares as
specified in the 2004 tariff regulations were proposed in the draft regulations.
However, the generating companies in their comments have considered the norms as
inadequate and suggested higher norms. NTPC has argued that as availability norms
are proposed to be raised from 80% to 85%, the generator will always be under
pressure to ensure that availability does not go below 85%. Therefore, norms for spares
@2.5% for coal based stations would not be sufficient. NTPC has further submitted
that for 500 MW unit, initial spares should be 4% of original project cost and in case of
gas/liquid based stations, the norm of 7% should be adopted for advanced class
machines. DVC has suggested a norm of 4% for coal based stations whereas NLC
proposed the norm of 6% for the lignite based stations. Torrent Power Limited during
15
the hearing has submitted that the in-principle approval granted by the Commission
under 2004 tariff regulations should be the basis for allowing capital cost including
initial spares.
9.3. The Commission is of the view that actual availability of coal and gas/liquid fuel
based stations is in excess of 85% barring few stations like Farakha and Gandhar etc.,
that too, for certain specific reasons. Moreover, the Commission is not putting any bar
on the generators to keep the sufficient inventory as considered necessary by them. But
for capitalization of initial spares which are provided to take care of mandatory and
insurance spares requirements at the time of commissioning of the project and to
arrange for its financing, we are of the view that the specified norms are sufficient and
do not call for any further increase. Similarly for the hydro generating stations and
transmission systems, the Commission has decided to continue with the existing norms.
10. Capital Cost and Additional Capitalisation (Regulations 7 & 9)
10.1 Projected Capital Cost
10.1.1 As per Regulation 7 of these regulations, capital cost includes the expenditure
incurred or projected to be incurred upto the COD, initial capitalized spares and
additional capital expenditure incurred or projected to be incurred. It is to be noted that
the Commission has adopted a slightly different approach and has allowed generating
companies and transmission licensees to make applications for tariff determination
based on anticipated additional capital expenditure for the tariff period 2009-14 in
order to provide tariff certainty and avoid retrospective tariff revisions and to keep the
impact of tariff revision to the bare minimum.
10.1.2 The beneficiaries like UPPCL and MPPTCL have argued that the projected
additional capital expenditure should not be accounted for in tariff, especially when the
assets have not been put to use. Further, they apprehend that the generating
companies/transmission licensees would submit inflated estimates for the purpose of
16
tariff and beneficiaries would have to shell out more tariff which would be adjusted
after 4 to 5 years. They have suggested for truing up exercise to be carried out every
year. On the other hand, the generating companies like NTPC have expressed concern
that it would be difficult to make estimation of additional capitalisation accurately and
later adjustments would also lead to disputes.
10.1.3 The Commission has carefully examined the issue again and is of the view that
the generating companies/transmission licensees as well as the beneficiaries should
appreciate the regulation in its proper perspective. Apart from meeting the intended
objective of certainty of tariff and minimal retrospective adjustments, the procedure
would have following additional advantages:
(a) From beneficiaries’ perspective, they would be aware of the intended

additional capitalization in advance and be able to voice their concern before the
Commission about the reasonableness and necessity of additional capatilisation before
the actual expenditure is made by the generating companies/transmission licensees. As
regards their concern about the expected expenditure being considered in capital base
without putting assets to use, the Commission would like to clarify that anticipated
expenditure would be considered only after it is found justified and reasonable with the
expectation that asset would be put to use. In the absence of expenditure actually
made, the same would be taken out from the capital cost at the time of truing up
exercise with appropriate refund/adjustment with interest. Further, if the expenditure
indeed materializes, the actual retrospective adjustment is expected to be bare
minimum as a result of truing up exercise.
(b) From the prospective of the generating companies/transmission licensees, they

would be assured of the expenditure to be admitted once accepted by the Commission
in the capital cost before making the expenditure. Moreover, they would be more
careful about the expenditure to be made as it would require to be justified before the
Commission.
17
10.1.4 The Commission is of the view that the approach adopted with regard to
consideration of the expenditure including additional capital expenditure projected to
be incurred for the purpose of determination of capital cost is a win-win situation for
all. The Commission has decided to retain the said provisions with regard to capital
cost including projected additional capital expenditure in Regulations 7 and 9 of these
regulations.
10.2 Admissibility of Additional Capital Expenditure
10.2.1 The draft regulation 10 dealing with the admissibility of additional

capitalization by the Commission for the purpose of tariff provided as under.
“10. Additional Capitalisation.(1) The following capital expenditure within
the original scope of work actually incurred or projected to be incurred,
after the date of commercial operation and up to the cut-off date may be
admitted by the Commission, subject to prudence check:
(i) Deferred liabilities;

(ii) Works deferred for execution;
(iii) Procurement of initial capital spares within the original scope of work,
subject to the provisions of regulation 9;
(iv) Liabilities to meet award of arbitration or for compliance of the order or
decree of a court; and
(v) Change in law:
Provided that the details of works included in the original scope of work
along with estimates of expenditure, deferred liabilities and the works
deferred for execution shall be submitted along with the application for
determination of tariff.
(2) The capital expenditure of the following nature after the cut-off date
may, in its discretion, be admitted by the Commission, subject to prudence
18
check:
(i) Liabilities to meet award of arbitration or for compliance of the order

or decree of a court;
(ii) On account of change in law;
(iii) Deferred works relating to ash pond or ash handling system in the
original scope of work.”
10.2.2 The above provision was on similar lines as in the tariff regulations for 2004-09
except for additional capital expenditure on new assets not in original scope of work
prior to and after cut-off date, and deferred liabilities and works after the cut-off date.
The generating companies in their comments have sought to allow additional
capitalization on new assets not in original scope of work and deferred liabilities and
deferred works within the original scope after cut off date.
10.2.3 The term deferred liability encompasses various liabilities including deferred
credit, liabilities accrued but not due and other contingent liabilities that are likely to be
paid by the utilities in future. The Commission is of the view that terms used in these
regulations should have definite meaning and use and devoid of ambiguity. The
Commission has decided that the phrase ‘deferred liability’ should be substituted by the
phrase ‘undischarged liability’ which would mean that even though the work has been
executed, the liability for payment for that work has not been discharged.
10.2.4 As regards the generators’ demand to allow deferred liabilities and deferred
works executed after the cut-off date, the Commission is of the view that all the works
relating to the project within the original scope including colony etc should be
completed as early as possible, but not later than cut-off date. In fact the cut-off date
has been extended by one more year to take care of the concerns of the generating
companies/transmission licensees. The Commission expects that all liabilities and
deferred works which could not be settled or completed by the COD of the station,
must be settled or completed by the cut-off date. A period of 2 to 3 years is considered
19
reasonable enough to complete all works within the original scope except the works
relating to ash pond and ash handling system. Any liability remaining unsettled or
work remaining unfinished after the cut-off date could only be because of some dispute
or otherwise before arbitration or pending before the court which shall be dealt as per
the regulations dealing with additional capitalisation after cut-off date.
10.2.5 As regards new works not within the original scope and expenditure on
minor assets, a provision has been made in the regulations dealing with O & M
expenses for a compensation allowance starting from 11th year from COD of units
in respect of coal/lignite based stations as discussed elsewhere in this SOR.
10.2.6 The generating companies like NHPC , NEEPCO, THDC and NHDC have
argued for compensation allowance for additional capitalization for hydro generating
stations. NHPC has stated that the additional capitalization is necessary for hydro
stations due to heavy damage of under water parts such as runner assembly, guide
vanes, thrust bearings due to high silt content. Capital expenditure is also required to
be incurred on technological improvements such as computerization, automation,
communication, replacement of switchyard equipment and certain hydro mechanical
items such as bulk head gates, stop log gates, draft tube gates which need replacement
after a particular number of years of service. NHPC has also asked for provision of
special allowance to meet expenses on minor assets. NEEPCO has submitted that
additional capitalization should be allowed for works taken up during useful life of
plant to add to the efficiency in operation and reduction of outages of the plant.
Moreover, with such works being taken up, life of plant is also increased and cost of
R&M works is reduced when taken up after expiry of useful life of plant. THDC has
submitted that to take care of obsolescence in today’s fast developing technological
world, certain modifications may be required to be made in the plant for its efficient
and smooth operation. Therefore, provisions in the 2004 tariff regulations may be
retained. NHDC has also asked to provide for compensation allowance as proposed in
draft regulations.
20
10.2.7 Based on the available data of additional capitalization claimed in respect of
NHPC stations, an exercise was carried out to make provision for compensation
allowance for hydro generating stations. However, it has been observed that additional
capitalization in the form of compensation allowance works out to be very high for
hydro generating stations compared to thermal generating stations. The Commission
has, therefore, decided to add the following provisions towards additional
capitalization for hydro stations:
“ In case of hydro generating stations, any expenditure which has become

necessary on account of damage caused by natural calamities (but not due to
flooding of power house due to negligence of generating company) including
due to geological reasons, after adjusting the proceeds from any insurance
scheme, and expenditure incurred due to any additional work which has become
necessary for efficient and successful plant operations;”
10.2.8 The Commission has also decided to make a similar provision in case of
transmission system as under:
“In case of transmission system any additional expenditure on items such

as relays, control and instrumentation, computer system, power line carrier
communication, DC batteries, replacement of switchyard, equipment due to increase of
fault level, emergency restoration system, insulators cleaning infrastructure,
replacement of damaged equipment not covered by insurance and any other
expenditure which has become necessary for successful and efficient operation of
transmission system:”
10.2.9 The Commission is of the view that any additional expenditure incurred on
acquiring minor items/assets like tools and tackles, furniture, personal computers, air-
conditioners, voltage stabilizers, refrigerators, coolers, fans, washing machines, heat
convectors, mattresses, carpets etc. in respect of the hydro generating stations and
transmission systems brought after the cut off date shall not be considered for
21
additional capitalization for determination of tariff w.e.f. 1.4.2009. Accordingly a
proviso has been added under sub-clauses (iv) and (v) of clause (2) of Regulation 9 of
these regulations as under:
“Provided that in respect sub-clauses (iv) and (v) above, any expenditure on
acquiring the minor items or the assets like tools and tackles, furniture, air-
conditioners, voltage stabilizers, refrigerators, coolers, fans, washing machines, heat
convectors, mattresses, carpets etc. brought after the cut-off date shall not be
considered for additional capitalization for determination of tariff w.e.f. 1.4.2009.”
11. Renovation and Modernisation(Regulation 10)
11.1 Draft Regulation 11(1) dealt with renovation and modernization for the purpose
of the extension of life beyond the useful life of the generating station or a unit thereof
or a transmission system. First proviso to the said clause provided the generators an
alternative option to avail of a “special allowance” as compensation for meeting the
requirement of expenses including expenses on renovation and modernization beyond
the useful life of the generating station or a unit thereof . Clause 4 quantified the
special allowance at the rate of Rs.5 lakh/MW/Year during the tariff period 2009-14
unit-wise from the respective date of completion of the useful life with reference to the
COD of the respective generating station. This option for special allowance was
subject to two conditions. Firstly, there would be no revision of the capital cost.
Secondly, option once exercised will be final and shall not be allowed to be changed.
11.2 NTPC in its comments has submitted that special allowance should be provided
@ Rs.14.5 lakhs/MW with provision for annual escalation. The estimate is based on
40% of current cost of plant and machinery (P&M) of Rs.4.1 to 4.5 crore/MW which
works out to Rs.1.6 crore/MW. It is assumed that a part of capital expenditure i.e.
20%, 10% and 10% will be invested in the initial three years respectively (mainly that
related to Boiler works like tube replacement, APH basket replacement etc.) and
22
considering servicing of the initial capital expenditure as loan (15 year EMI @ 13%)
and spreading the remaining investment over 15 years. NTPC has further submitted
that switchover from normative special allowance option to full scale R&M option
should be permitted. In case, switchover is not permitted, special allowance @ Rs.29
lakh should be allowed. NLC in its comments has argued for switchover to the main
provision of R&M if the situation so demands.
11.3 Amongst the beneficiaries, UPPCL has submitted that such an allowance
should not be provided to the generating companies as they are already earning
exorbitant profit. If at all such allowance is considered necessary, then Rs.1
lakh/MW/Year would be sufficient. TNEB, on the other hand, has not only agreed with
the proposal but has also favoured continuation for such an allowance even beyond the
tariff period 2009-14. MPPTCL has also agreed in principle for grant of such an
allowance but has submitted that the amount should be reasonable and should be
worked out in consultation with CEA. GRIDCO has opposed grant of such allowance.
11.4 The Commission has already stated in the Explanatory Memorandum to the
draft regulations the reasons for providing such an option to generators in case of
coal/lignite based generating stations to facilitate continued operation of well
maintained generating stations and to sustain performance at the existing operational
level. The Commission had observed in the explanatory memorandum to the draft
regulation as follows:
“However, the relevant point in the present discussion is that the plant owner should
not be discouraged (by any regulatory restrictions) from taking the most optimal route.
More specifically, the tariff criteria to be applied should be equitable, and should not
distort the techno-economic evaluation. While it is important that the plant owner is
duly compensated for any fresh investment and risks, it is equally important that the
beneficiaries pay according to benefits, derived from the plant in future years. In
general, it can be said that if a plant is in reasonable shape, it should b e continued in
operation, and the tariff formulation should support it”.
23
11.5 While specifying compensation of Rs.5 Lakh/MW/Year, the Commission had
observed as follows:
“It can be seen that R&M expenditure is phased in 8-10 years period. The CEA’s
R&M guidelines provide a norm of Rs.0.8 to 1.25 Crore/MW for poorly maintained
stations with PLF of less than 40% which translates into Rs.8 to 12.5 lakh/MW over 10
year period. In our opinion for a well maintained station, a compensation of Rs.5
Lakh/MW/Year should be reasonable enough to incetivise the generator to keep the
units running after their useful life. This will have tariff impact of the order of 6
Paise/kWh sent out and there will be no increase in the capital base accounted for
giving returns on equity”.
11.6 The proposal of NTPC for special allowance of Rs.14.5 Lakh/MW/Year with
switchover option and Rs.29 Lakh/MW/Year without switchover option is considered
to be on the higher side. NTPC during the public hearing has however sought for an
allowance of Rs.8 Lakh/MW/Year with annual escalation. The Commission is of the
view that a special compensation allowance of Rs.5 Lakh/MW/Year along with annual
escalation of 5.72% should be reasonable to incentivise the generators to keep the units
running after their useful life. The generators are also given the liberty to come with
the detailed R&M proposal before the Commission if situation so demands. In case of
gas/lignite based stations, such an alternative is not being considered in the absence of
sufficient data in this regard. In any case generating companies have the first
alternative available with them to come up with a detailed R&M proposal as and when
required.
11.7 The Commission, in its draft regulation, under clause 11(3) proposed that:
24
“(3) Any expenditure actually incurred or projected to be incurred as
admitted by the Commission after prudence check based on the estimates of
renovation and modernization expenditure and life extension, and after writing
off the original amount of the replaced assets and deducting the accumulated
depreciation already recovered from the original project cost, shall form the
basis for determination of tariff.”
However, the proviso to draft regulation 7 dealing with capital cost stated as
under:
‘Provided that the assets forming part of the project, but not in use shall be
taken out of the capital cost’.
From the above two provisions, it was noticed that the words “writing off the
original amount of the replaced assets” appearing in draft regulation 11(3)
would be redundant as any asset being replaced will be no longer in use and
will be taken out of the capital cost at the time of such replacement as per the
proviso to draft regulation 7. Accordingly, the words “after writing off the
original amounts of the replaced assets” have been deleted. Clause (3) of the
Regulation 10 of these regulations has been worded as under:
“(3) Any expenditure incurred or projected to be incurred and admitted by the

Commission after prudence check based on the estimates of renovation and
modernization expenditure and life extension, and after deducting the
accumulated depreciation already recovered from the original project cost,
shall form the basis for determination of tariff.”
12. Debt-Equity Ratio ( Regulation 12)
12.1 The draft regulation 13 proposed funding pattern in the debt-equity ratio of 70:30
for new projects. The Commission intended that the investors should be free to invest
fund in the form of equity as per their own investment plans, even beyond 30%. If the
25
equity actually invested in a project was more than 30%, it was proposed that equity in
excess of 30% would be considered as normative loan. However, where equity
deployed was less than 30%, it was proposed to consider actual equity for
determination of tariff. In respect of the existing projects, the Commission proposed to
retain the same debt-equity ratio as was approved by the Commission in tariff
determination as on 31.3.2009. It was further proposed that the expenditure on
additional capital expenditure and renovation and modernization would be serviced in
the ratio of 70:30.
12.2 The proposed debt-equity ratio of 70:30 for new projects has got wide
acceptance. The beneficiaries like MPPTCL, GRIDCO, UPPCL, BSEB and individual
consumers like Er. R. B. Sharma are of the view that debt-equity ratio of existing
projects should also be modified to 70:30. UPPCL, BSES Rajdhani and TNEB have
proposed debt-equity ratio of 80:20 for new projects. KSEB proposed debt-equity ratio
of 70:30 for generation projects and 80:20 for transmission projects. OPTCL has
proposed a high gearing of 90:10 for all new projects. The generating utilities like
THDC and NHDC and the transmission utilities like PGCIL have proposed normative
debt-equity ratio of 70:30.
12.3 The Commission after considering the responses and suggestions is of the view
that so far as the existing projects are concerned, the investors have made investments
in the existing projects on the basis of the provisions of the existing tariff regulations
and any change in the debt-equity ratio of such projects would lead to regulatory
uncertainty and jeopardize the scenario of investment in power sector. As such the
Commission decided not to incorporate any changes in the debt-equity ratio of the
existing projects. In keeping with the requirement of tariff policy, the Commission
considered it appropriate to include a provision to the effect that equity invested in
foreign currency should be designated in Indian rupees on the date of investment. The
purpose is to ensure that the debt equity ratio remains unaffected by the foreign
exchange rate variation and provide regulatory certainty. Accordingly, a second
proviso has been added to clause (1) of Regulation 12 pertaining to debt-equity ratio in
26
these regulations:
“Provided further that the equity invested in foreign currency shall be designated
in Indian rupees on the date of each investment.”
13 Rate of Return on Equity ( Regulation 15)
13.1 It was proposed in the draft regulation 15 that the return on equity would be
determined @ 14% in terms of the equity base determined in accordance with draft
regulation 13. It was also proposed that equity invested in foreign currency should be
designated in rupee terms on the date of investment. The responses to the proposed rate
of return were varied and divergent.
13.2 NTPC in its submission has claimed 21.5% of post-tax rate of return on equity,
supported by a detailed calculation using Capital Assets Pricing Model. For
calculation, NTPC considered a risk-free rate of return of 8.5%, applicable to the 10
years Government securities, market premium of 10% and a beta value of 1.0 for
power sector. It has also considered 3% additional return to compensate return on
equity during construction period. Hydro generators like NHPC, SJVNL, and THDC
proposed a post-tax rate of return on equity of at least 18% with 1% additional return
for hydro projects because of the higher risk perception. NEEPCO has proposed as
high as 30% of post-tax rate of return on equity for north-eastern region. Transmission
companies like PGCIL, Power links, Universal Infratech and other companies like
Energy Infratech have advocated for allowing at least 18% of post-tax rate of return on
equity. CII has also proposed a return of 17% to 18% and consideration of return
during gestation period. Private entities like Power Dodson LHPL, Energy Infratech,
Avanta Power, CESC, Torrent Power, have proposed a post-tax rate of return on equity
of at least 16% considering the financial market scenario. Mr. C. P. Jain has endorsed
the proposal of post-tax rate of return on equity of 16% as SBI PLR was increasing.
27
13.3 On the other hand beneficiaries like GRIDCO, UPPCL, GUVNL, BSEB, KSEB
and individual consumers like Ms. Mallika Sharma Bezbaruah have objected to
providing higher return on equity to the utilities. They are of the opinion that the
Commission should review the entire benefits available to the utilities along with
return on equity and permit recovery of cost of electricity at a reasonable manner.
Some of the consumers have even proposed to reduce the return on equity from 14% to
12%. UPPCL, MPPTCL and Er. Paramjit Singh, consumer have proposed a pre-tax
rate of return of 14% for the new projects and 19% for the existing projects.
13.4 Section 61 (d) of the Electricity Act, 2003 provides that the Commission, while
specifying the terms and conditions for the determination of tariff, shall be guided by
the principle of ‘safeguarding of consumers interest and at the same time, recovery of
cost of electricity in a reasonable manner’. Para 5(3)(a) of the Tariff Policy stipulates
that:
‘Balance needs to be maintained between the interests of consumers and the

need for investments while laying down rate of return. Return should attract
investments at par with, if not in preference to, other sectors so that the
electricity sector is able to create adequate capacity. The rate of return should
be such that it allows generation of reasonable surplus for growth of the sector’
13.5 The Commission has thus the mandate to fix a rate of return for equity that will
not only attract investment and generate sufficient resources for further growth in the
sector but also to take care of the consumers’ interest. The interests of the consumers
are taken care of in real sense only when quality power is made available for twenty
four hours a day throughout the year. This could be achieved only through large
capacity addition which in turn will require huge investment in the power sector.
Considering the investment pattern of 70:30 debt-equity ratio, the utilities are required
to build up sufficient internal accruals so that they are able to meet the target of
investing at least 30% of capital cost in the form of equity. A higher investment in the
28
form of equity also helps the entities in negotiating and availing loan at competitive
terms and conditions.
13.6 The power sector in India during last few years has been able create a lot of
enthusiasm amongst the investors and attract investment. In the last five years, there
have been rapid developments in the equity market and debt market related to power
sector in India. Various CPSUs and private entities working in power sector have
entered into primary market to raise funds. The sector is at the take off stage at present
and there is a need to ensure that the confidence evinced is sustained.
13.7 The rate of return on equity can be fixed by using any of the scientific model like
dividend growth model, price/earning ratio, capital asset pricing model, risk premium
model, etc or by linking to an appropriate benchmark with a mark up. As on date only
few entities working in power sector in India have entered into primary market and that
too, very recently. To calculate the rate of return by using a scientific model, one needs
sufficient volume of related data for calculation of beta value, expected rate of return,
P/E ratio, etc. Except a few companies such as NTPC, Reliance Energy, PGCIL etc,
not many generating companies and transmission licensees particularly in the State
Sector are listed in the Stock Exchange. As sufficient data in regard to the power
sector, particularly scripts traded in the secondary market, are not available, the
Commission does not favour to estimate the rate of return by using any of the scientific
models.
13.8 The Commission also discussed the option of linking rate of return on equity to
an appropriate benchmark with a mark up. The rate of return on equity may be linked
to an appropriate benchmark like RBI Bank Rate, SBI PLR, Average PLR, 10 yr G-
Securities Rate, etc. However, the Commission cannot remain oblivious of the realities
of the debt market, more so of the fluctuations in interest rates as witnessed in recent
past. The debt market in India is not yet stable. The Commission feels that unless the
debt market stabilizes, it may not be feasible to arrive at an appropriate benchmark rate.
This leads to difficulty in linking the rate of return to a benchmark with a mark up.
29
13.9 It may be noted that in the last five years there has been a rise in the interest rate.
The Prime Lending Rate (PLR) of the public sector banks have increased during this
period, as is seen from the table given below:
Year PLR of Public Sector

Banks (%)
March 2004 10.25-11.50
March 2005 10.25-11.25
March 2006 10.25-11.25
March 2007 12.25-12.75
March 2008 12.25-13.50
January 2009 12.00-14.00
The interest rate of 10-year Government securities has also increased from
5.1461% as on March 2004 to 7.1197% as on November 2008.
13.10 The Commission allowed rate of return on equity of 16% and 14% for the tariff
period 2001-04 and 2004-09 respectively. The PLRs of State Bank of India during
2001 and 2004 were 11.50% and 10.25% respectively. But as on 1st January 2009, the
PLR of State Bank of India is 12.25%. After considering the rise in the PLR of the
public sector banks, 10-year G-Sec, etc and also in order to help the entities to build up
sufficient internal accruals for the purpose of investment in capacity addition and to
ensure better cash flow, the Commission considered & deliberated to restore the rate of
return at 16% as was existing prior to 1.4.2004. After consultations & deliberations it
was decided to increase the base rate from 14% to 15.5% and an additional 0.5% for
timely competition as explained below.
13.11 The Commission has taken note of the fallout of time overrun and cost overrun
due to delay in completion of the projects. The consumers are not getting the benefits
of the projects in time. This is a great national loss. As electricity is the prime mover,
30
the nation will be able to achieve the growth rate of GDP of 8% only if the power
sector grows at a rate of about 10%. Non completion of projects in time has a negative
impact on the national growth. Keeping all these factors in mind and in order to
incentivise the timely completion of projects, the Commission has decided to allow an
additional return on equity at the rate of 0.5% to those projects that are completed
within time, as stipulated in Appendix-II of these regulations. If the project is not
completed within the stipulated timeline for any reasons whatsoever, the additional
return of 0.5% shall not be admissible. Accordingly, draft Regulation 15 has been
modified as sub-clauses (1) and (2) of Regulation 15 of these regulations as under:
“ 15. Return on Equity. (1) Return on equity shall be computed in rupee terms, on the
equity base determined in accordance with regulation 12.
(2) Return on equity shall be computed on pre-tax basis at the base rate of 15.5% to be
grossed up as per clause (3) of this regulation:
Provided that in case of projects commissioned on or after 1st April, 2009, an

additional return of 0.5% shall be allowed if such projects are completed within the
timeline specified in Appendix-II:
Provided further that the additional return of 0.5% shall not be admissible if the project
is not completed within the timeline specified above for reasons whatsoever.”
13.12 In case of projects commissioned on or after 1st April, 2009, an additional

return of 0.5% shall be allowed if such projects are completed within the following
timeline decided in consultation with CEA:
1. The completion time schedule shall be reckoned from the date of investment
approval by the Board (of the generating company or the transmission
licensee), or the CCEA clearance as the case may be, up to the date of
31
commercial operation of the units or block or element of transmission project as
applicable.
2. The time schedule has been indicated in months in the following paragraphs
and tables:
A. Thermal Power Projects

Coal/Lignite Power Plant
Unit size 200/210/250/300/330 MW and 125 MW CFBC technology
(a) 33 months for green field projects. Subsequent units at an interval of 4
months each.
(b) 31 months for extension projects. Subsequent units at an interval of 4
months each.
Unit size 250 MW CFBC technology

months each.
months each.
Unit size 500/600 MW

months each.
months each.
Unit size 660/800 MW

months each.
months each.
32
Combined Cycle Power Plant
Gas Turbine size upto 100 MW (ISO rating)
(a) 26 months for first block of green field projects. Subsequent blocks at an
interval of 2 months each.
(b) 24 months for first block of extension projects. Subsequent units at an
Gas Turbine size above 100 MW (ISO rating)

(a) 30 months for first block of green field projects. Subsequent blocks at an
(b) 28 months for first block of extension projects. Subsequent units at an
B. Hydro Electric Projects

The qualifying time schedule for hydro electric projects shall be as stated in the
original concurrence issued by the Central Electricity Authority under section 8
of the Act.
C. Transmission Schemes: Qualifying time schedules in months
S. Category of Transmission Plain Hilly Snowbound area@/

No. Project Area Terrain very difficult
Terrain
A 765 kV S/C Transmission line 30 36 40
B +/-500 KV HVDC 24 30 34
Transmission line
C 400 KV D/C Quard 32 38 42
Transmission line
D 400 KV D/C Triple 30 36 40
Transmission line
33
E 400 KV D/C Twin 28 34 38
Transmission line
f 400 KV S/C Twin 24 30 34
Transmission line
G 220 KV D/C Twin 28 34 38
Transmission line
H 220 KV D/C Transmission line 24 30 34
I 220 KV S/C Transmission line 20 26 30
J New 220 KV AC Sub-Station 18 21 24
K New 400 KV AC Sub-Station 24 27 30
$
L New 765 kV AC Sub-Station 30 34
M HVDC bi-pole terminal 36 38 -
N HVDC back-to-back 26 28 -
@
e.g. Leh, Laddakh
$
No 765 KV sub-Station has been planned in difficult terrain
Notes
(i) In case a scheme having combination of the above mentioned types of
projects, the qualifying time schedule of the activity having maximum time
period shall be considered for the scheme as a whole.
(ii) In case a transmission line falls in plain as well as in hilly terrain/snow
bound area/very difficult terrain, the composite qualifying time schedule shall
be calculated giving proportional weightage to the line length falling in each
area.
13.13 The Commission has noticed that the timelines for the coal/lignite-based
projects do not mention the word first unit before the words “green field projects” and
“extension projects”. This has been noted and shall be corrected.
13.14 The return on equity with respect to the actual tax rate applicable to the
generating company or the transmission licensee, as the case may be, in line with the
provisions of the relevant Finance Acts of the respective years during the tariff period
34
shall be trued up separately for each year of the tariff period along with the tariff
petition filed for the next tariff period.
14. Pre-tax Return {Regulation 15(4)}
14.1 Earlier in the draft regulation, the Commission proposed to retain the post-tax
return on equity and tax on the income streams of the generating company or the
transmission licensee, as the case may be, from its core business excluding net UI
income and incentives was allowed to be recovered from the beneficiaries, or the long-
term transmission customer, as the case may be.
14.2 The issue of allowing post-tax rate of return or pre-tax rate of return was raised
in public hearing as well as written submissions. The generating companies and
transmission licensees are in favor of retaining existing regulation. In other words, they
are of the view that all the risks pertaining to tax on income from core business
including incentive, efficiency gain, income on UI, etc should be passed on to the
beneficiaries. On the other hand, beneficiaries want that income tax burden to the
extent of normal return on equity should only be passed on to the beneficiaries and any
proportion of income tax on account of income other than return on equity, like income
accrued due to efficiency gain, incentive, UI, normative expenditure, etc should be
borne by the utilities themselves.
14.3 Under post-tax rate of return on equity the beneficiaries are paying tax on the
net income of the utilities and the tax burden is calculated by grossing up. Considering
the present tax rate of 33.99% applicable to the company’s form of business, under
grossing up methodology, the tax burden becomes almost 50% of the net income of the
utility. The beneficiaries are not against refunding income tax to the utilities on the
admitted return on equity. The beneficiaries also do not have any objection if the
utilities run their business more efficiently and thereby optimize their annual income
provided no further cost on account of income tax on income other than admitted return
on equity is passed on to them. From the utilities point of view, in a regulated business,
35
the tax burden is reimbursed from the beneficiaries or the consumers on no profit and
no loss basis. Consumers pay for the income tax only when it is actually levied on the
utilities. In case of any refund of income tax, the same is also passed on to the
beneficiaries. Under existing regulation, even the benefit of income tax holiday under
section 80IA of the Income Tax Act, 1961 is passed on to the beneficiaries. This
benefit of income tax holiday is available to the investors only for development of
infra-structure facilities. In case, the passing on the tax burden to the beneficiaries is
restricted only to the return on equity component, there is no logic in passing on the
benefit of income tax holiday under section 80IA of the Income Tax Act, 1961 to the
beneficiaries.
14.4 The Commission, after considering all the views of all stakeholders is of the
view that it will be appropriate to move to the system of pre-tax rate of return on equity
from the existing post-tax rate of return on equity. Accordingly, the Commission has
decided to allow pre-tax rate of return on equity to the utilities. The same shall be
calculated by considering the applicable tax rate for the companies for the year 2008-09
as per the relevant Finance Act, as base rate. To give an example:
(i) In case of a generating company or transmission licensee paying Minimum

Alternate Tax (MAT) @ 11.33% including surcharges and cess:
Rate of pre-tax return on equity = 15.50/ (1-0.1133) = 17.481%
(ii) In case of a generating company or transmission licensee paying normal existing

corporate tax @ 33.99% including surcharge:
Rate of pre-tax return on equity = 15.50/ (1-0.3399) = 23.481%.
14.5 In order to facilitate computation of pre-tax, illustrative examples on the above

lines have been given in clause 4 of Regulation 15 of these regulations.
36
14.6 With this change, the beneficiaries will be required to meet the Income Tax
liability limited to the equity of the project, considered for tariff purposes and not on
other incomes, such as incentive, profit arising out of efficiency improvement, UI
Income and the like.
15. Interest on Loan ( Regulation 16)
15.1 It was proposed in the draft regulations that the loan arrived on the basis of debt-
equity ratio to be determined as per the provision of draft regulation 13 would be
considered as gross normative loan for the purpose of calculation of interest on loan. It
was proposed that the normative loan outstanding as on 1.4.2009 would be worked out
by deducting the cumulative repayment admitted by the Commission upto 31.3.2009.
The repayment for the respective year should be deemed to be equal to depreciation
allowed for that year. The interest on loan would be calculated on the normative
average loan by applying weighted average rate of interest. The weighted average rate
of interest has to be worked out on the basis of actual loan portfolio of the generating
company or transmission licensee. In the absence of actual loan portfolio in a particular
year, the last weighted average rate of interest and in the absence of any loan, the
weighted average rate of interest of the generating company or transmission licensee
would be taken into account. The draft regulation further provided for refinancing of
loan and sharing of benefits with the beneficiaries in the ratio of 2:1.
15.2 Utilities like NTPC, Gujrat SECL have suggested de-linking repayment from
depreciation and provision for a higher rate of depreciation to enable them to meet their
cash outflow on account of loan repayment obligations. NHPC and SJVNL have
proposed additional depreciation in the current tariff period if cumulative repayment is
more than the cumulative depreciation allowed at the beginning of the tariff period. As
regards sharing of net benefit on account of refinancing of loan, companies like
PGCIL, Power links, Universal Infratech advocated sharing in the ratio of 1:1 while
beneficiaries like MPPTCL, KSEB, and OPTCL have proposed that entire benefits be
passed on to the consumers. Bangalore SEDCL has proposed a lower ratio of 3:1 for
37
sharing the benefits between the consumers and the utilities and also suggested that
swapping expenses should be borne by the utilities only. Torrent power has suggested
to consider actual rate of interest instead of benchmarked rate of interest.
15.3 The Commission has considered the views of the utilities and beneficiaries. As
regards linking the repayment of loan to depreciation, the Commission feels that the
provision should continue for the reasons explained in para 11 of the explanatory
memorandum to the draft regulation. As regards the sharing of the benefits, the
Commission is of the view that refinancing should be undertaken only if it is beneficial
to the consumers and major portion of the benefits should be passed on to beneficiaries
while allowing the utilities to retain one-third for the initiative taken by them to
refinance the loan. Any cost incurred in such refinancing will be reimbursed by the
beneficiaries and the net savings will be shared. Moreover, the changes to the terms
and conditions of the loan shall be reckoned from the date of refinancing and will not
have any retrospective operation.
15.4 The Commission, in its draft regulation 16(3) proposed the following:
“Provided that if on 1.4.2009, the cumulative depreciation recovered is more than the
cumulative normative loan repayment, the repayment for the first year of the tariff
period shall be deemed to be equal to the depreciation allowed by the Commission for
that year plus the difference between the cumulative depreciation recovered and
cumulative normative loan repayment as on 1.4.2009.”
The difference in cumulative depreciation and cumulative repayment has occurred

mainly due to the provisions of past regulations specified by the Government of India
or the Commission. The Commission has decided to consider the amount of
depreciation admitted as the amount of repayment for the tariff period 2009-14. If past
provisions are revisited time and again then regulatory uncertainty will be created. As
such the Commission has decided to delete this provision.
38
16. Depreciation (Regulation 17)
16.1 The Commission, in its draft regulation, under clause 17 proposed that:
“17. Depreciation. (1) The value base for the purpose of depreciation
shall be the capital cost of the asset admitted by the Commission.
(2) The residual value of the asset shall be considered as 10% and
depreciation shall be allowed up to maximum of 90% of the capital cost
of the asset.
(3) Land shall not be a depreciable asset and its cost shall be excluded from
the capital cost while computing 90% of the capital cost of the asset.
(4) Depreciation shall be calculated annually, over the useful life of the
asset and at the rates specified in the table below:
Sl No Description of Asset Useful Life Rate for first 15 Rate for

(in years) years (%) remaining
life (%)
1. Thermal generating 25 4.67 2
station
2. AC and DC sub- 25 4.67 2
station
3. Hydro generating 35 4.67 1
station
4. Transmission line 35 4.67 1
Provided that in case of the existing projects already in operation prior to

1.4.2009, depreciation shall be recovered in the following manner, namely-
(a) For generating station and transmission system which are in operation
for less than 15 years, the difference between the cumulative depreciation
recovered and the cumulative depreciation arrived at by applying the
39
depreciation rates specified in this regulation corresponding to 15 years, shall
be spread over the period up to 15 years, and thereafter the depreciation shall be
recovered at the rates specified for the remaining useful life after 15 years.
(b) For the project in operation for more than 15 years, the balance
depreciation to be recovered shall be spread over the remaining useful life.
(5) Depreciation shall be chargeable from the first year of commercial

operation. In case of commercial operation of the asset for part of the year,
depreciation shall be charged on pro rata basis.”
16.2 As per the 2004 regulations, Value Base for the purpose of depreciation is
historical cost of the asset which includes additional capitalization and FERV up to
31.03.2004. Depreciation is calculated by applying the depreciation rates notified by
the Commission using Straight Line Method over the useful life of the asset and
considering Salvage Value of 10%. On repayment of entire loan, the remaining
depreciable value is spread over the balance useful life of the asset. Depreciation is
chargeable from the first year of operation. In case of operation of the asset for part of
the year, depreciation is charged on pro rata basis. To provide cash flow to the utilities
to make them repay their debt, Advance Against Depreciation (AAD) is allowed
subject to certain conditions.
16.3 The word ‘depreciation’ is interpreted differently by different stakeholders and

professionals. From accounting point of view, in line with the Accounting Standard
issued by the Institute of Chartered Accountants of India, ‘Depreciation is a measure of
the wearing out, consumption or other loss of value of a depreciable asset arising from
use, efflux of time or obsolescence through technology and market changes’. It reflects
annual consumption of a capital asset in use. From Investor’s point of view,
depreciation is a non-cash expense which reduces tax burden but generates internal
cash for further investment. From engineering point of view, depreciation means
decline in capability or loss of value in an asset over time of usage. From Economist’s
40
point of view, economic depreciation over a given period is the reduction in the
remaining value of the future services. Under certain circumstances, such as
unanticipated increase in the price of the services generated by an asset, its value may
increase rather than decline. Depreciation is then negative. So far as the Income Tax is
concerned, it is designed in the fiscal policy of the Government to give incentives to
certain category of entities for furtherance of investments. Regulators have two view
points on depreciation. One view is depreciation is the refund of capital subscribed, and
the other view is depreciation is a constant charge against an asset to create a fund for
its replacement.
16.4 While determining the tariff, the Regulators have to ensure that: (i) capital is
refunded to the investors over estimated life of assets, i.e. refund of capital; (ii) capital
invested in the regulated business is allowed sufficient return so that the investors find
the business attractive enough to invest, i.e. return on investment; and (iii) reasonable
amount of operation and maintenance expenses is allowed, i.e. reimbursement of O&M
expenses. And one of the major components of capital deployed is loan. As such it is
important for the Commission to ensure availability of sufficient cash flow in the hands
of the utilities to take care of the loan repayment obligation. For the control period
2004-09, the Commission took care of this cash flow requirement by allowing AAD, in
case normative depreciation amount is not sufficient to meet the loan repayment
obligations.
16.5 The Commission has proposed gearing of 70% investment with 30% equity in
future so that the burden on the consumers on account of cost of capital would be
reduced. From the experience it is found that long tern loans are available for the
power sector for the period 10-15 years. In the absence of AAD, the amount of
depreciation calculated as per the existing methodology will not be enough to meet the
loan repayment obligations.
16.6 The Tariff policy stipulates that the ‘Commission may notify the rates of
41
depreciation in respect of generation and transmission assets. The depreciation rates so
notified would also be applicable for distribution with appropriate modification as may
be evolved by the Forum of Regulators. The rates of depreciation so notified would be
applicable for the purpose of tariffs as well as accounting. There should be no need for
any advance against depreciation. Benefit of reduced tariff after the assets have been
fully depreciated should remain available to the consumers.’ It is also the responsibility
of the Commission to see that sufficient cash flow is available to the generators and
transmission licenses to meet their loan obligations arising due to high gearing.
16.7 In Indian context, loans are available for a term of 10-15 years. In some rare
cases long term loan is extended to 20 years. Loans from multi-lateral agencies like
IBRD, ADB, and JBIC are available for longer period of over 20 years. If loan is
available for 12 years, annual repayment would be around 5.83% of the total
investment taking into consideration 70% debt of the total investment. Whereas refund
of capital in the form of depreciation is available to the extent of 3.60% in case of
thermal stations and 2.57% in case of hydro stations which may not be sufficient to
meet the loan repayment obligations without advances against depreciation.
16.8 Another possibility of meeting loan repayment obligation is going for a roll over
loan i.e. a new loan for meeting the repayment of old loan. But, that will not reduce the
interest burden of the consumers. Providing higher rate depreciation in initial period of
project will give some comfort to the investors towards repayment of their loan. At the
same time it will reduce the interest burden of the consumers and tariff will be reduced
once the loan is repaid on account of reduced depreciation available over the balance
useful life of the plant.
16.9 The Commission has allowed higher rate of recovery beyond the normal rate of
depreciation linked to life during the tariff period 2004-09 for meeting the loan
repayment obligation by way of providing AAD. The AAD was allowed subject to
certain conditional ties like a ceiling of one-tenth of the normative gross loan. It was
noted that in some cases the rate of depreciation plus AAD allowed for tariff purposes
42
exceeded the rate as per Companies Act, 1956 resulting in front loading in tariff.
16.10 The Commission has received number of suggestions from different stakeholders
on treatment and calculation of depreciation for the purpose of tariff against the draft
proposal. Hydro generators like NHPC has proposed to allow depreciation @5.83% for
the first 12 years and spread over the balance depreciable value of the assets over the
balance useful life of the assets @1.09%. SJVNL advocated for 5.28% of depreciation
and also proposed to allow depreciation against the land for reservoir in case of hydro
generating station. Companies like PGCIL, NTPC, Gujrat Industries SEDCL,
Universal Infratech, India Energy Forum and individual like Mr. C. P. Jain, ex-CMD of
NTPC have proposed rates of depreciation as prescribed in the Companies Act, 1956.
Companies like NHDC, NLC, Power Link, GMR, individual like Mr. T. L. Shankar
have proposed even higher rate of depreciation, like 6% to 8% during the initial years
of the project life. However almost all the beneficiaries like TNEB, Kerela SEB,
GRIDCO, MPPTC, UPPCL have objected to the frontloading of tariff and have
proposed to link the depreciation rate with the life of the assets as per the existing
depreciation schedule. Some of the beneficiaries advocated increasing the life of both
the generating plants and transmission system. In view of the past experience that these
assets have been giving service for more than the useful life specified in the existing
schedule of depreciation the beneficiaries proposed to increase the useful life of the
assets by at least 5 years across all assets.
16.11 It is also observed that in case of hydro generating station, the agreement signed
by the developers with the State Government for creation of the site have certain
provisions in regards to the salvage value to be considered and the developers are not
binding themselves under long term power purchase agreement to sale electricity to the
tune of 100% percent capacity.
16.12 As per the Accounting Standards (AS6) issued by Institute of Chartered

Accountants of India, ‘Useful life is the period over which a depreciable asset is
expected to be used by the enterprise’. As per section 205 and 350 of Companies Act,
43
companies are required to provide depreciation in the books of accounts based on the
useful life of asset. However, in power sector the practice of considering depreciation
towards the repayment of loan has been in vogue for quite sometime and has come to
stay. The fact is that AAD allowed over and above the rate arrived at on the basis of
useful life to take care of repayment of loan has not given enough incentive for
generating companies to look forward to long term loans. While on one hand it is
argued that the Indian debt market is not having depth and the availability of long term
loan is limited, it is imperative that the infrastructure companies, particularly power
sector investors, who contract a sizeable amount of funding through loan should be
able to facilitate long term funding with tenure of at least 12 years, if not more to be
made available by the banks and financial institutions. The entities should use their
propensity to avail large amounts of loans with the FIs/banks, and negotiate for long
term low cost funding.
16.13 In a regulatory environment, the Commission has to protect the interest of the
consumers while determining tariff and at the same time it is to be seen that the
investors are having sufficient liquidity and revenue to meet their commercial
commitment. Apart from paying regular dividend to the shareholders the utilities
should have sufficient liquidity to cater to the loan repayment obligation. The
Commission is aware of the burden of repayment of loan that will accrue over the
initial years of the project life. Linking depreciation to the useful life of the assets may
not provide sufficient cash flow to the utilities to meet their loan repayment obligation.
Normally, the projects are having a debt component of 50% to 70% and are repayable
over a period of 12 years. If higher depreciation is allowed over a period of initial 12
years, the debt repayment obligation can easily be met by the utilities. Once the loans
are repaid, the benefit of reduced tariff should go to the consumers.
16.14 Accordingly, the Commission feels that the loan repayment period be treated as
12 years for all normative loans and accordingly this repayment period of 12 years be
linked to depreciation. For 12 years during which the loan capital would be refunded
to the investors in the form of depreciation, the rate of depreciation shall be as
44
specified in appendix-III of the regulation and thereafter the remaining depreciable
value shall be spread over the balance useful life of the assets.
16.15 In regard to the rates of depreciation, it has been stated in the Tariff Policy that
the depreciation rates for the assets shall be specified by the Central Electricity
Regulatory Commission and this rate of depreciation shall be applicable for the
purpose of tariff as well as accounting. In fact some of the countries have prescribed
Uniform System of Accounts (USoA) for the regulatory entities to bring in uniformity
in their system of accounts. Some of the utilities have proposed to adopt the provision
of Schedule XIV of the Companies Act, 1956 directly for tariff calculation. Schedule
XIV does not have specific rate of depreciation that can be applied directly for
generation, transmission and distribution assets used in electricity business. Some of
the generating companies are using the rates specified for plants and machineries under
continuous operation in schedule XIV to their thermal generating assets for the purpose
of accounting whereas hydro generating companies and transmission licensees are
applying the depreciation rates specified by the Commission for the purpose of
accounting as well as tariff. As per the Companies Act, 1956 the revalued cost of the
assets can be the value base for calculation of depreciation whereas for determination
of tariff depreciation is calculated on the capital cost admitted by the Commission and
do not allow the revalued cost of the assets. The Companies Act, 1956 also allows
calculation of depreciation when the asset is ready for use whereas under regulatory
system depreciation is calculated only when the asset is put to use. There are also some
other differences between the Companies Act, 1956 and regulatory system in
calculation of depreciation, like, inclusion of spares in the value base, consideration of
salvage value, etc. As the Companies Act, 1956 does not provide specific rate of
depreciation that can be applied directly for generation, transmission and distribution
assets used in electricity business; it will not be possible to maintain uniformity in
calculation of depreciation amongst the various utilities in electricity business.
16.16 It has been the practice since 1948 to specify rates of depreciation for various
assets used in electricity business separately either by Government of India or the
45
Commission. So, in order to bring an uniformity in the rates of depreciation, while
providing a higher rates of depreciation during the initial years of useful life of the
projects, the Commission decides to specify rates of depreciation for various assets in a
separate schedule. The depreciation rates for different assets have been so assigned as
to arrive at the weighted average rate approximating 5.28%. The depreciation rates as
given in Appendix-III of the regulation have no bearing on the useful life of the
projects as defined in regulation 3(42).
16.17 During hearing some of the developers like NHDC, SJVNL, THDC indicated
that the land which gets submerged and used for reservoir are not capable of being
reclaimed or retrieved and hence cost of such land should be treated as depreciable
asset. Normally land is considered to be a non-depreciable asset for accounting
purposes. However, due to the peculiar nature of hydro project where the land area
gets submerged and land used for reservoir are not available for any other use, the
Commission considered the request to be genuine and accordingly decided that land
other than the land held under lease and the land for reservoir in case of hydro
generating stations shall not be a depreciable asset and its cost shall be excluded from
the capital cost while computing the depreciable value of the assets.
16.18 Accordingly, the Commission decides that the provision for depreciation shall be
as given below:
“17. Depreciation. (1) The value base for the purpose of depreciation shall be the
capital cost of the asset admitted by the Commission.
(2) The salvage value of the asset shall be considered as 10% and depreciation shall be
allowed up to maximum of 90% of the capital cost of the asset.
Provided that in case of hydro generating stations, the salvage value shall be as
provided in the agreement signed by the developers with the State Government for
creation of the site:
46
Provided further that the capital cost of the assets of the hydro generating station for the
purpose of computation of depreciable value shall correspond to the percentage of sale
of electricity under long-term power purchase agreement at regulated tariff.
(3) Land other than the land held under lease and the land for reservoir in case of hydro
generating station shall not be a depreciable asset and its cost shall be excluded from
the capital cost while computing depreciable value of the asset.
(4) Depreciation shall be calculated annually based on Straight Line Method and at
rates specified in Appendix-III to these regulations for the assets of the generating
station and transmission system:
Provided that, the remaining depreciable value as on 31st March of the year closing
after a period of 12 years from date of commercial operation shall be spread over the
balance useful life of the assets.
(5) In case of the existing projects, the balance depreciable value as on 1.4.2009 shall
be worked out by deducting the cumulative depreciation as admitted by the
Commission upto31.3.2009 from the gross depreciable value of the assets.
(6) Depreciation shall be chargeable from the first year of commercial operation. In
case of commercial operation of the asset for part of the year, depreciation shall be
charged on pro rata
basis.”
17. Interest on Working Capital(Regulation 18)
17.1 Draft Regulation 18 dealing with interest on working capital made two significant
departures from the 2004 regulations. Firstly, receivable was reduced from 60 days to
45 days and the provision for O & M expenses for one month was deleted.
17.2 Most of the utilities objected to these changes proposed in the draft regulation.
Utilities like DVC, PGCIL, NEEPCO, THDC, NTPC, NHPC, NHDC, GMR, Gujrat
47
SECL, MahaGenco, Energy Infratech, Avanta power, other organizations like CII,
India Energy Forum, etc and individuals like Mr. C. P. Jain suggested for retention of
existing norms, particularly, receivables for 60 days instead of 45 days to align with the
rate of rebate proposed in the draft regulation, and O&M expenses of one month in
calculation of normative working capital requirement, as otherwise the liquidity
position of the utilities would be impaired.
17.3 On the other hand beneficiaries like GRIDCO, BSEB, and consumers like Er. R.
B. Sharma proposed further reduction of fuel stock to ½ month in case of pit-head
stations and to 1 month in case of non pit-head stations on the ground that in actual
practice, the thermal generating stations do not even maintain coal stock of 7 days .
17.4 The Commission has considered the concerns of the utilities. Draft Regulations
34 and 35 dealing with rebate and surcharge provide that a rebate of 1% will be
admissible if the payment is made within one month and a surcharge of 1.25% will be
levied in case the payment is delayed beyond 60 days. As payments are to be made by
the beneficiaries without surcharge within a period of 60 days, it is imperative that the
generating companies and transmission licensees are made available with working
capital at least for a period of sixty days. In order to bring parity with the provision on
rebate and late payment sur-charge corresponding to the provision of receivables in the
calculation of normative working capital requirement, is the Commission decided to
restore 60 days of receivables in calculation interest on working capital.
17.5 Regarding inclusion of one month of O&M expenses as a part of the working
capital requirement, this provision has been there even prior to the Commission came
into being. Sudden removal of one month of O&M expenses from working capital
requirement may lead to regulatory uncertainty. It may also have impact on the
liquidity position of the utilities. Considering all the facts stated above, the
Commission decided to include one month of O&M expenses as a part of working
capital requirement.
48
18 Maintenance Spares in Working Capital {Regulation 18(a) to (e)}
18.1 In the draft regulation, the Commission had specified norms for maintenance
spares as a percentage of O&M norms to be considered in the computation of interest
on working capital. The norms were based on the data furnished by the CPSUs about
the consumption of spares and the inventory of stores maintained by them for the years
2002-03 to 2006-07. The following norms for maintenance spares were specified:
Coal/Lignite based Generating Stations 20% of O&M norms.

Gas/Liquid based Generating Stations 30% of O&M norms
Hydro Generating Stations 15% of O&M norms.
Transmission System 15% of O&M norms.
18.2 Inadvertently in the explanatory memorandum, the norms were stated to be

arrived based on the inventory of stores alone maintained by the CPSUs. Many of the
beneficiaries have expressed the view that the norms of maintenance spares should be
based on consumption of spares. Some of them have submitted that the norms are on
higher side.
18.3 In this regard, the Commission would like to clarify that the maintenance spares
norms stated in the draft regulations were arrived after considering the consumption of
spares and inventory of stores during the last four years. The details of consumption of
spares by the coal based stations and gas based stations of NTPC for the years 2004-05
to 2007-08 are given below:
Rs.lakh/MW)
Sr. Capacity 2004- 2005- 2007-
Station 2006-07
No. (MW) 05 06 08
1 Dadri (4x210) 840 2.02 2.36 2.45 2.81
2 Kahalgaon (4x210) 840 2.27 3.36 3.74 4.74
49
Unchahar
3 1050 2.12 2.48 2.31 2.52
(2x210+2x210+210)
4 Simhadri (2x500) 1000 2.09 1.21 1.24 1.79
Talchar (2x500 +
5 3000 1.41 1.50 3.30 2.06
4x500)
Rihand (2x500 +
6 2000 2.67 2.54 1.70 2.89
2x500)
7 Korba (3x200+3x500) 2100 1.84 1.97 1.70 2.23
Farrakka
8 1600 0.26 0.34 0.23 3.73
(3x200+2x500)
Singrauli
9 2000 2.63 2.59 3.35 3.51
(5x200+2x500)
Ramagundam
10 2600 1.59 1.86 2.62 2.22
(3x200+3x500+1x500)
Vindhyachal
11 3260 2.10 2.07 2.40 1.56
(6x210+2x500+2x500)
Badarpur (3x95
12 705 2.64 4.78 4.62 4.40
+2x210)
Talchar taken over
13 460 3.90 3.27 3.73 4.50
(4x60+2x110)
14 Tanda (4x110) 440 3.58 2.98 2.74 4.33
Anta
15 419.33 4.73 2.25 5.97 1.40
(3x88.7+1x153.2)
Auraiya
16 663.36 2.41 2.30 2.21 2.26
(4x111.19+2x109.3)
Dadri
17 829.84 1.15 5.17 4.94 9.33
(4x130.19+2x154.51)
Faridabad MW
18 (2X140.827 + 431.586 0.52 0.70 6.07 2.34
1X149.932)
50
KaymkulamMW (GT-
19 2x 116.6 + ST- 359.58 0.75 0.72 0.65 1.74
1x126.38)
Kawas
20 656.2 5.98 2.46 1.60 2.41
(4x106+2x116.1)
Gandhar
21 657.39 1.79 2.80 2.86 6.08
(3x144.3+1x224.49)
18.4 The 4 years average consumption of maintenance spares in the base year 2007-
08 considering annual escalation of 5.26% per annum and then escalating the base
spare consumption of 2007-08 @ of 5.72% per annum to arrive at maintenance spares
consumption in the year 2009-10 for stations having 200/210 MW sets, stations having
500 MW sets and station having mix of 200/210 MW and 500 MW sets are as under:
Sr. Station Capacity 4 yrs. Average 4 yrs. Average O&M Cost % of O&M
No. (MW) at 2007-08 at 2009-10 Norm Cost Norms
price level price level (Rs.lakh/MW)
(Rs.lakh/MW) (Rs.lakh/MW)
1 Dadri (4x210) 840 2.59
2 Kahalgaon (4x210) 840 3.76
3.28 18.20 18.02
3 Unchahar 1050 2.54
(2x210+2x210+210)
4 Simhadri (2x500) 1000 1.72
5 Talchar (2x500 + 3000 2.21
4x500) 2.54 13.00 19.54
6 Rihand (2x500 + 2000 2.65
2x500)
51
7 Korba (3x200+3x500) 2100 2.09
8 Farrakka 1600 1.16
(3x200+2x500)
9 Singrauli 2000 3.24
(5x200+2x500) 2.49 15.01 16.59
10 Ramagundam 2600 2.23
(3x200+3x500+1x500)
11 Vindhyachal 3260 2.21
(6x210+2x500+2x500)
12 Badarpur (3x95 705 4.41
4.93 31.35 15.73
+2x210)
13 Talchar taken over 460 4.15
4.64 32.75 14.17
(4x60+2x110)
14 Tanda (4x110) 440 3.67 4.11 26.25 15.66
15 Anta 419.33 3.92
(3x88.7+1x153.2)
16 Auraiya 663.36 2.48
(4x111.19+2x109.3)
17 Dadri 829.84 5.40
(4x130.19+2x154.51)
18 Faridabad MW 431.586 2.53
(2X140.827 +
3.85 14.8 26.01
1X149.932)
19 KaymkulamMW (GT- 359.58 1.03
2x 116.6 + ST-
1x126.38)
20 Kawas 656.2 3.45
(4x106+2x116.1)
21 Gandhar 657.39 3.57
(3x144.3+1x224.49)
52
18.5 The inventory of stores maintained by NTPC during the year 2004-05 to 2007-
08 is as under:
Sr. Station Capacity 2004-05 2005-06 2006- 2007-08

No. (MW) 07
1 Dadri (4x210) 840 9.79 8.72 8.22 8.53
2 Kahalgaon (4x210) 840 3.89 4.32 5.34 6.61

3 Unchahar 1050 5.73 5.78 6.51 6.92
(2x210+2x210+210
)
4 Simhadri (2x500) 1000 5.53 5.40 5.48 6.53
5 Talchar (2x500 + 3000 5.36 4.62 7.20 5.30
4x500)
6 Rihand (2x500 + 2000 6.47 6.55 5.78 6.53
2x500)
7 Korba 2100 4.09 4.20 4.49 4.18
(3x200+3x500)
8 Farrakka 1600 6.65 7.66 8.72 8.49
(3x200+2x500)
9 Singrauli 2000 5.48 5.41 5.54 6.02
(5x200+2x500)
10 Ramagundam 2600 4.67 4.19 4.25 5.20
(3x200+3x500+1x5
00)
11 Vindhyachal 3260 4.61 4.50 4.80 4.33
(6x210+2x500+2x5
00)
12 Badarpur (3x95 705 8.30 7.92 7.27 7.28
+2x210)
53
13 Talchar taken over 460 8.89 8.63 8.40 8.34
(4x60+2x110)
14 Tanda (4x110) 440 3.20 3.52 4.26 6.63
15 Anta 419.33 6.80 6.93 7.00 6.67

(3x88.7+1x153.2)
16 Auraiya 663.36 3.85 3.72 3.67 4.16
(4x111.19+2x109.3
)
17 Dadri 829.84 1.03 2.26 3.30 2.96
(4x130.19+2x154.5
1)
18 Faridabad MW 431.586 3.05 3.18 3.03 3.46
(2X140.827 +
1X149.932)
19 KaymkulamMW 359.58 5.35 6.02 6.19 6.34
(GT-2x 116.6 + ST-
1x126.38)
20 Kawas 656.2 6.58 6.52 6.37 6.16
(4x106+2x116.1)
21 Gandhar 657.39 6.88 6.83 6.98 7.24
(3x144.3+1x224.49
)
18. 6 The average inventory of stores in different categories of unit sizes in the year
2009-10 has been worked out following the same methodology as in case of
consumption of spares given above and the calculations are as under:
Sr. Station Capacity 4 yrs. Average 4 yrs. Average O&M Cost % of O&M
No. (MW) at 2007-08 at 2009-10 Norm Cost Norms
price level price level (Rs.lakh/MW)
54
(Rs.lakh/MW) (Rs.lakh/MW)
1 Dadri (4x210) 840 9.57 8.03 18.20 44.12
2 Kahalgaon (4x210) 840 5.39

3 Unchahar 1050 6.71
(2x210+2x210+210)
4 Simhadri (2x500) 1000 6.18 7.09 13.00 54.54
5 Talchar (2x500 + 3000 6.06
4x500)
6 Rihand (2x500 + 2000 6.86
2x500)
7 Korba (3x200+3x500) 2100 4.58 6.21 15.01 41.37
8 Farrakka 1600 8.48
(3x200+2x500)
9 Singrauli 2000 6.06
(5x200+2x500)
10 Ramagundam 2600 4.94
(3x200+3x500+1x500)
11 Vindhyachal 3260 4.94
(6x210+2x500+2x500)
12 Badarpur (3x95 705 8.35 9.33 31.35 29.76
+2x210)
13 Talchar taken over 460 9.28 10.37 32.75 31.66
(4x60+2x110)
14 Tanda (4x110) 440 4.68 5.24 26.25 19.98
15 Anta 419.33 7.41 5.92 14.8 40.09

(3x88.7+1x153.2)
16 Auraiya 663.36 4.16
(4x111.19+2x109.3)
55
17 Dadri 829.84 2.53
(4x130.19+2x154.51)
18 Faridabad MW 431.586 3.43
(2X140.827 +
1X149.932)
19 KaymkulamMW (GT- 359.58 6.44
2x 116.6 + ST-
1x126.38)
20 Kawas 656.2 6.94
(4x106+2x116.1)
21 Gandhar 657.39 7.55
(3x144.3+1x224.49)
18.7 It can be seen that average inventory of stores maintained by NTPC stations is
much higher than the consumption of spares. The consumption of spares ranges
amongst 14.16% to 19.54% of the O&M cost norms in various categories of coal based
units. In case of stations having small unit sizes of 100 MW & 60 MW namely
Talcher, Tanda and Badarpur, the consumption of spares is on lower side. In case of
gas base stations, the average consumption of spares is of the order of 26% of the
O&M cost norms. It needs to be appreciated that the generating companies would
require to keep an inventory which should be higher than the actual consumption of
spares. We are not inclined to be guided by the level of inventory maintained by the
NTPC stations. We feel that the margin of about 15-20% over and above the actual
spare consumption should be sufficient and reasonable to arrive at the norms for the
purpose of considering maintenance spares in the working capital computation.
Accordingly, we find that the norms specified by us in the draft regulations are in
order. In case of hydro generating station and transmission system, since the spare
consumption is less than in the case of coal based generating stations, we are inclined
to keep the norms for hydro generating station and transmission system as 15% of the
O&M norms.
56
19. O&M EXPENSES (Regulation 19)
19.1 The draft regulation provided separate sets of norms for the coal/lignite based
stations depending upon unit sizes without distinguishing between new and existing
stations. In respect of some of the coal/lignite based stations of NTPC namely Talcher,
Tanda and Badarpur, DVC namely chandrapura, Bokaro and Durgapurand NLC’s TPS-
I & TPS-II relaxed norms were specified. For Gas/liquid fuel based combined cycle
stations separate norms for small gas turbines and other than small gas turbines were
specified. Relaxed norms for Agartala GPS of NEEPCO were specified. For
transmission system, norms for lines and substations were specified depending upon
voltage level and separate norms for HVDC system.
19.2 The norms were specified after considering actual of thermal generating stations
of Central Utilities and some of the generating stations State Utilities and IPPs for the
period 2004-05 to 2006-07 and factoring in 45% increase (30% increase for
transmission system due to inadvertent mistake instead of 45% increase) in employee
cost due to pay revision and considering annual escalation factor of 5.17%. The annual
escalation factor was based on the average of last last five years.
19.3 NTPC during the hearing as well as through written affidavit has submitted as
under:
(a) Norms should be based on actual for 2005-06 to 2007-08;

(b) Escalation rate should be 7%;
(c) Actual wage hike would be of the order of 64%;
(d) Salary hike should be considered in security expenses also;
(e)Loss in stock, incentive and ex-gracias, prior period adjustment etc should not be
disallowed.
(f)The rationalisation of man power is not possible in Talcher & Badarpur and there
would be escalation in other heads of expenditure other than employee cost.
57
(g)The water charges should be allowed on actual separately
19.4 NLC has submitted that norms for 200 MW sets and 500 MW sets should be
worked out separately and O&M expenses for 2007-08 should also be considered.
They have further submitted that O&M norms for the TPS-I should be worked out
separately. They have further submitted that the wage hike provision should be of the
order of 55 to 60% and that the escalation rate considered is low. DVC has submitted
that the norms specified for DVC stations are very stringent. Regulation should not be
applied to DVC stations.
19.5 Beneficiaries on the other hand submitted that the actual of NTPC stations are
much higher than the stations of States. Provision of wage revision of 45% is high.
Norms for 500 MW are on higher side. It was also submitted that the norms for
200/210/250 MW sets is even higher than the 2.5% of the current cost of the new
stations.
19.6 In the light of submissions and concerns of the stakeholders the norms have
been reviewed. Since the actual of 2007-08 have been made available by the Central
utilities in respect of their stations, there is no problem in considering the actual of
2007-08 also. The actuals and normalized O&M expenses of Central utilities for the
years 2004-05 to 2007-08 considered by the Commission are at Annexure-A. For the
purpose of normalization, incentive & ex-gratia paid to its employees, donations, loss
in stock, prior period adjustments, claims and advances written off, provisions
including provisions of pay revision have been excluded.
19.7 As regards escalation rate, Commission at the draft stage considered the average
annual escalation rate of 5.17% based on CPI and WPI indices for the five years from
2003-04 to 2007-08. This escalation rate was considered for arriving at the base O&M
expenses for the year 2008-09 and the same rate was applied for arriving at norms
during the tariff period 2009-14. Where as, only three year data of 2004-05 to 2006-07
58
was considered for the purpose of norms. The Commission is of the view that the
escalation rate should be average of the period for which O&M expenses are being
considered for arriving at base O&M expenses in 2008-09 where as for future, trend up
to 2008-09 should also be captured.
19.8 In case of thermal generating stations, Commission is considering O&M expenses

for the four year period from 2004-05 to 2007-08 since the existing O&M norms were
specified w.e.f. 1.4.2004. Hence the annual escalation rate for arriving at base O&M
cost at 2007-08 price level has been worked out as 5.26% based on escalation rates for
the year 2004-05 to 2007-08. However, for the transmission system, Commission is
considering O&M expenses for the five year period from 2003-04 to 2007-08 in order
to capture rationalization of manpower. Hence the annual escalation rate for arriving at
base O&M cost in 2007-08 has been worked out as 5.17% based on escalation rates for
the year 2003-04 to 2007-08. The escalation rate for the tariff period has been arrived
at 5.72% after considering the inflation data up to October 2008. The details of
escalation rate for the period 2003-04 to Oct 2008 are as follows:
19.9 The last revision of the scale of pay of below Board level and Board level
executives and non-unionised supervisors, in Central Public Sector Enterprises was
made effective from 1.1.1997. The Government had set up a Pay Revision Committee
(2nd PRC) under the chairmanship of Justice M. Jagannadha Rao, Retd. Judge of
Supreme Court of India, to recommend revision of pay and allowances for above
categories of employees following IDA pattern of pay scales w.e.f. 1.1.2007. The
recommendations of the Committee were before the Government for final decision and
pending such decision Commission had provided for a normative increase of 45% in
the employee cost while arriving at the O&M norms for the thermal and transmission
system in the draft regulations. The Government after due consideration of the
recommendations of 2nd Pay Revision Committee, have decided vide OM No.2(70)/08-
DPE(WC) dated 26.11.2008 on revision of scales and pay w.e.f. 1.1.2007, covering
revised pay scales fitment benefit, rate & increments, allowances, performance related
pay and the like.
59
19.10 The CPSUs regulated by us were asked to make their estimation of hike on
account of revision of scales of pay. The hike on account of revision of scales of pay
estimated by some of the CPSU’s are as follows:
NTPC 56%
Power Grid 70%
NLC 73%
NEEPCO 70%
The estimates submitted by NLC and NEEPCO were not supported by the calculations.
The estimates of NTPC and Power Grid were however, gone into and it was observed
that the increase includes PRP and allowances in excess of 50% of the basic. Further
certain facilities like school; hospital facilities etc. at site were not monetized. On all
these consideration, estimates of CPSU’s appears to be on higher side. Commission
after due consideration of various aspects covered in the implementation of pay
revision has come to a conclusion that a uniform normative increase of 50% in
employee cost would be just and reasonable for all CPSU’s.
19.11 NTPC and NLC have pleaded to allow water charges separately as per actual as
is done in case of taxes and duties as the State Governments have been frequently
enhancing the water charges. The Commission is not inclined to accept that the water
charges should be allowed as a pass through on the similar line as taxes and duties. O
& M expenses of which water charge is a part has been specified on normative basis.
There may be increase in actual expenses in some components and decrease in some
other components of O&M. Therefore, the utilities should manage their expenses on O
& M as admissible on normative basis in accordance with the regulations.
60
19.12 Having discussed the issues common to thermal, Hydro and Transmission
system, now we now proceed to deal with O&M cost norms specific to thermal, hydro
and transmission separately.
20. O&M expenses for Thermal Generating Station {Regulation 19(a) to (e)}
20.1 The Commission had specified following O&M cost norms for the coal/lignite
based thermal generating stations of unit sizes 200 MW and above:
(Rs. in lakh/MW)
Year 200/210/ 250 300/330/350 MW 500 MW 600 MW and

MW sets sets sets above sets
2009-10 15.70 14.00 12.50 11.50
2010-11 16.51 14.72 13.15 12.09
2011-12 17.37 15.49 13.83 12.72
2012-13 18.26 16.29 14.54 13.38
2013-14 19.21 17.13 15.29 14.07
20.2For the generating stations having combination of above sets, the weighted average
value for operation and maintenance expenses were to be adopted. For 200/210 MW
unit size lignite based stations norms were same as that of similar coal based stations.
20.3 The Operation & Maintenance cost for the purpose of tariff covers expenditure
incurred on the employees including gratuity, CPF medical, education allowances etc,
repair and maintenance expenses including stores and consumables, consumption of
capital spares not part of capital cost, security expenses, administrative expenses etc. of
the generating stations, corporate expenses apportioned to each generating stations etc.
but exclude the expenditure on fuel i.e. primary fuel as well as secondary and alternate
fuels.
61
20.4 The above norms were based on actual of stations having either 200/210/250 MW
sets, 500 MW sets and sets having combination of the 200/210/250 MW and 500 MW
sets. The average O&M expenses for the year 2004-05 to 2006-07 were escalated at
5.17% up to 2008-09 and provided with 45% increase in employee cost to arrive at
average of 13.77 Lakh/MW in 2009-10. This was divided into two sets of norms, one
for 200/210/250 MW set and another for the 500 MW set as 15.70 Lakh/MW and
12.50 Lakh/MW. The beneficiaries have pointed out that the O&M norms for 500 MW
sets are higher as compared to actual. As such, we have again reviewed the O&M
norms considering actuals of 2004-05 to 2007-08 in each class.
20.5 The other point raised by the beneficiaries was that the O&M norms for 200/210
MW stations of NTPC are much higher than the O&M expenses of similar plants of
State Utilities. We have already discussed in the explanatory memorandum to the draft
regulations the expenses of Dhahanu and Bhatinda TPS were not comparable because it
did not include the corporate expenses. Further we have examined the tariff orders of
GERC, TNERC and Tariff filing of APGENCO and have found that the O&M
expenses are not comparable with that of NTPC when compared on the basis of
operational, performance and efficiency parameters. The stations of APGENCO whose
performance is comparable with NTPC, elelment wise comparison was not possible
due to difference in salary structure, operation and maintenance practices. In these
circumstances, the Commission has relied on the actual expenses of NTPC and NLC.
In the 200/210/250 MW category, the O&M expenses of Kahalgaon (4x210 MW) are
much higher than the other stations of NTPC and NLC. NTPC has clarified vide their
submission dated 27.10.2008 that the O&M expenses in case of Kahalgaon is high on
account of higher maintenance expenses of coal mills due to poor quality of coal and
additional expenses on chemical treatment of water due to its scaling nature. We have
however noticed that the consumption of stores by NTPC and NLC has suddenly
jumped in the year 2005-06 and repair and maintenance expenses are abnormally high
in 2006-07. Nevertheless, the Commission is of the view that such site specific
conditions should not effect the fixation of norms and as such, consumption pattern of
kahalgaon can not be considered as representative data while arriving at the O&M cost
62
norms for 200/210/250 MW category. Based on these considerations and after making
adequate provision for revision of pay scales, the norms for the 200/210/250 MW
series is worked out as 18.20 Lakh/MW in 2009-10.
20.6 In the 500 MW category, the data is available for three stations of NTPC which
vary widely. The O&M expenses of Rihand STPS are much higher than the Talcher
STPS. O&M expenses of Simhadri STPS are between the two. Considering the data of
all the three stations in this category, O&M expenses in 2009-10 is worked out as 11.80
Lakh/MW. Alternatively, considering data of Rihand STPS and Simhadri STPS while
leaving Talcher STPS (which has very less O&M expenses), the O&M expenses for
2009-10 works out to Rs.14.05 Lakh/MW. When the Commission applied the above
norms of 18.20 Lakh/MW for 200/210/250 MW sets and 11.80 Lakh/MW for 500 MW
sets in case of stations having mix of 200/210 MW and 500 MW sets, the average
expenses fall short of O&M expenses based on actuals. On the other hand, when we
apply the norm of Rs.18.20 Lakh/MW for 200/210/250 MW sets and Rs.14.05
Lakh/MW for 500 MW sets in case of stations having mix of 200/210 MW and 500
MW sets, the average expenses exceed the O&M expenses based on actuals. The
Commission has observed that with a norm of Rs.13.00 Lakh/MW, O&M expenses
based on norms are close to O&M expenses based on actuals. The Commission is
conscious that future thermal generating stations will be dominated by 500 MW and
above sets. The Commission has decided to adopt the O&M norm of Rs.13 Lakh/MW
for the year 2009-10. In respect of lignite-fired stations using CFBC technology and
stations proposed to have 300/330 MW sets, 600/660 MW sets and above, we do not
have any credible data. Therefore, for CFBC based lignite fired stations the
Commission has decided to allow the same norms as that of coal/lignite based stations.
The norms for 300/330 MW sets are between 200/210/250 MW sets and 500 MW set.
The O&M norms for the 600/660 MW and above sets are kept at 10% lower than the
norms for the 500 MW sets considering economy of scale.
20.7 One of the points raised is that in case of 200 MW series the O&M norms are
working out to be more than 2.5% of the current capital cost. The Commission has
63
carefully examined this point. It has been observed that the presumption of O & M
expenses @1.5% of capital cost of hydro generating stations and 2.5% of the capital
cost of thermal generating stations is no longer valid based on the actual ground
realities. It needs to be highlighted that while the capital cost of thermal and hydro
projects over the last decades has varied marginally, O&M expenses which have a high
weightage of man power, repair and maintenance, and consumables have increased
substantially. As discussed in explanatory memorandum of the draft regulation, the
man power for the 200 MW series thermal generating stations depends on the number
of units where as repair & maintenance cost remains the same in absolute terms. Thus
O & M expenses for 200 MW series work out to about 80% to 100% higher than the
norms for 500 MW series in Rs lakh/MW terms.
20.8 In view of the above discussion, the following O&M norms are allowed for the
period 2009-10 to 2013-14:
(Rs. in lakh/MW)
Year 200/210/250 300/330/350 500 MW sets 600 MW and
MW sets MW sets above sets
2009-10 18.20 16.00 13.00 11.70
2010-11 19.24 16.92 13.74 12.37
2011-12 20.34 17.88 14.53 13.08
2012-13 21.51 18.91 15.36 13.82
2013-14 22.74 19.99 16.24 14.62
20.9 For the generating stations having combination of above sets, the weighted
average value for operation and maintenance expenses were to be adopted. It is also felt
that O&M expenses for the extension units of the same type at the same location
should not be of the same order. The above norms capture economy of scale for a
capacity range of 1000 to 1200 MW on an average. Commission is therefore, providing
for following multiplying factors to be applied to the above O&M norms for
64
permissible O&M expenses in respect of future additional units, in respective unit sizes
for the units whose COD occurs on or after 01.04.2009.:
200/210/250 MW Additional 5th & 6th units 0.9

Additional 7th & more units 0.85
300/330/350 MW Additional 4th & 5th units 0.9
th
Additional 6 & more units 0.85
500 MW and above Additional 3rd & 4th units 0.9
Additional 5th & above units 0.85
20.10 To explain the applicability of above provisions, if a 210 MW unit comes into
operation during 2009-10 in a station already having four or more 200/210 MW units,
then the norm for the extension unit would be calculated as 0.90x Rs. 18.20 lakh/MW.
If 500 MW units come up in a station having only 200/210 MW units, then admissible
O&M norm for the extension unit would be Rs.13.00 lakh/MW during 2009-10.
20.11 In respect of other stations of NTPC namely, Badarpur TPS which has 210 MW
units and 95 MW units, Talcher which has 60 MW units and 110 MW units, and Tanda
TPS which has 110 MW units, the Commission had proposed following O&M norms
based on data of 2004-05 to 2006-07:
(Rs. in lakh/MW)
Year Talcher TPS Tanda TPS Badarpur TPS

2009-10 28.50 24.00 27.00
2010-11 28.50 25.24 27.00
2011-12 28.50 26.55 27.00
2012-13 28.50 27.92 27.00
2013-14 28.50 29.36 27.00
65
20.12 The NTPC was expected to rationalize man power in their Talcher TPS and
Badarpur TPS and considering this no escalation was provide during the tariff period.
However, NTPC has submitted that it would not be possible for them to rationalize
man power to this extent and that there would be escalation in other heads of the O&M.
NTPC has indicated rationalization of man power to the extent of 5-8% in case of
Badarpur TPS whereas they have shown their helplessness in case of Talcher TPS. As
such, in case of Badarpur TPS no escalation has been considered on the employee cost
whereas escalation has been provided on other component of O&M cost. Accordingly
following norms have been worked out based on the actual O&M expenses of 2004-05
to 2007-08:
(Rs. in lakh/MW)
Year Talcher TPS Tanda TPS Badarpur TPS
2009-10 32.75 26.25 31.35
2010-11 34.62 27.75 32.25
2011-12 36.60 29.34 33.17
2012-13 38.70 31.02 34.12
2013-14 40.91 32.79 35.09
20.13 As discussed in explanatory memorandum for the draft regulations, the

manpower to MW ratio is very high in case of DVC stations. There is scope for
rationalization of man power. Considering this, Commission is of the view that in case
of Mejia which has 210 MW units O&M norms as applicable to other station of 210
MW units shall apply. However, in case of Bokaro TPS norms as applicable to
Badarpur TPS should apply giving them time to rationalize their man power. In case of
Chandrapura TPs and Durgapur TPS it is considered reasonable to apply norms as
specified above for Tanda TPS and Badarpur TPS of NTPC. On the similar lines,
following O&M norms are allowed for lignite based Generating stations namely TPS-I
of NLC and unit of 125 MW capacity based on CFBC technology:
66
(Rs. in lakh/MW)
Year 125 MW sets TPS-I

using CFBC
technology
2009-10 24.00 27.00
2010-11 25.37 28.54
2011-12 26.82 30.18
2012-13 28.36 31.90
2013-14 29.98 33.73
20.14 Ms Mallilika Sharma Bezbaruah, a consumer from north-east in her submission

has pointed out that the salary and renumeration in O&M claimed by NEEPCO of Rs.
7393.37 Lakh for all projects including corporate office for the year 2004-05 is higher
than the amount of Rs. 4083.94 lakh as per the annual report in profit and loss account.
The issue has been examined by us and it is found that the amount claimed by
NEEPCO in the year 2004-05 on account of salary and remuneration is lower than the
salary and renumeration as per annual accounts for 2004-05 after accounting for the
expenses charged to profit and loss account in the nature of corporate expenses. The
other point raised by Ms Bezbaruah is as to how the incidental expenditure during
construction could be apportioned as corporate expenses in profit and loss accounts.
This has also been examined and is found that the corporate office expenses have not
been booked in any other head. As such, we are relying upon the data furnished by
NEEPCO. As regards, her argument that norms for the Agartala should be lower than
the combined cycle station of Assam is also not acceptable for the reason that the major
67
repair and maintenance cost occurs in gas turbine hot path and weighted average for
CCGT plant comes down.
20.15 For the NTPC and NEEPCO gas/Liquid fuel Based stations considering actual of
2004-05 to 2007-08, following O&M expenses are being allowed
(Rs. in lakh/MW)
Year Gas based Stations other Small Gas turbines Agartala GPS
than small gas turbine combined cycle
combined cycle stations stations
2009-10 14.80 22.90 31.75
2010-11 15.65 24.21 33.57
2011-12 16.54 25.59 35.49
2012-13 17.49 27.06 37.52
2013-14 18.49 28.61 39.66
21. Compensation Allowance (Regulation 19)
21.1 The draft regulations provided for following compensation allowance in

respect of coal/lignite based station.
Years of operation Compensation allowance

(Rs. Lakh/MW)
0-10 Nil
11—15 0.15
15-20 0.35
68
20-25 0.65
21.2 Generating companies like NTPC have submitted that amounts of compensation
allowance are not sufficient to meet the expenditure on new works required for
successful plant operation. NTPC and NLC have sought following compensation
allowance.
Years of operation As per NTPC As per NLC
0-5 0.15 Nil

6—10 0.15 0.1
11--15 0.25 0.2
15-20 0.44 0.35
20-25 0.82 0.65
21.3 NTPC has sought above compensation allowance excluding additional capital
expenditure on buildings, road, spares, batteries etc. citing the expenditure in case of
Singrauli STPS, though the claims have not supported with any details. The
Commission’s decision to introduce compensation allowance was based on available
data on additional capitalisation in the tariff petitions of NTPC stations. For this
purpose expenditure on new assets in the nature of Environment Action Plan (EAP),
arising on account of change of law or dealing with design deficiency etc has not been
considered.
21.4 In view of the above, the compensation allowance as proposed in the draft
regulation has been retained as clause (e) of Regulation 19.
22. O&M EXPENSES OF HYDRO GENERATING STATIONS{Regulation

21(f)}
22.1 At the hearing, the stakeholders raised certain pertinent issues such as actual
69
O&M expenses are much higher than those allowed by the Commission for new
stations, the annual escalation factor is based on last five years average, however,
during last six months, inflation rate has jumped exorbitantly from about 5% to more
than 11%. It has also came to the notice of the Commission that different
methodologies have been adopted by the generating companies while claiming
insurances charges in O&M expenses.
22.2 Almost all the hydro generating companies pleaded for increasing percentage
of normative O&M expenses from the existing 1.5% of the capital cost up to cut off
date, and to consider the cost of rehabilitation and resettlement works in the capital
cost for the purpose of O&M component of tariff for new stations, etc.
The submissions of the hydro generating companies are summarized as under :
(a)NHPC:[i] NHPC in its submission has stated that the value of 1.5% of capital
cost for computation of O&M expenses of hydro stations needs to be increased
because O&M expenses actually incurred are much higher than 1.5%. NHPC has made
studies which show that actual O&M expenses incurred by NHPC for the FY 2007-08
in respect of its new stations such as Chamera-II and Dhauliganga are 49% higher than
normative in case of Chamera-II and 80.7% for Dhauliganga. Also from the data of
normative v/s actual (audited) expenses of existing stations of NHPC, it would be seen
that actual expenses are much higher than those allowed by the Commission and
increase varying from 20% to 95%.
[ii]The Commission has recognized 45% increase in employees cost on account of pay
revision. To give effect to 45% increase in case of new hydro stations which have not
yet completed 5 years of operation, the base percentage of 1.5% is also required to be
increased by 3%. Therefore, regulation should provide that O&M expenses be allowed
@3% of capital cost in case of new hydro projects.
(b)THDC :O&M expenses admissible @ 1.5% of the capital cost as per prevailing
Regulations 2004-09 are not even sufficient to meet actual expenses in light of
70
escalated O&M expenses and increased salaries due to wage revision etc. Also, further
reducing O&M expenses by excluding cost of R&R works does not seem to be
justified. The older projects are proposed to be paid on actual of their average
expenditures plus 45% increase in employee cost on account of pay revision whereas
new projects have been proposed at 1.5% of capital cost, which would be insufficient
to meet the expenses. THDC has further submitted that O&M expenses on storage type
projects are more as these projects require more expenditure on the maintenance of
reservoir as compared to ROR projects. During 2007-08, Tehri HPP incurred actual
O&M expenses amounting to Rs 170.58 crore which works out to 2.45% of final
completion cost excluding R&R cost .
(c)NHDC : [i) The provision of exclusion of R&R cost from capital cost for evaluating
O&M expenses @ 1.5% is irrational for ISP, which is having very high R&R cost
component (Rs. 1878 crore) to the extent of 50% of total project cost including
irrigation component. Actual O&M expenses of ISP is coming even more than that
allowed in the existing tariff while including R&R cost in the total capital cost. In
case R&R cost is excluded then normative rate of O&M expenses needs to be kept at
least @ 3% of capital cost with escalation.
[ii) The escalation factor @5.17% considered in the draft regulation is based on
average escalation during last five years considering 60% weight age for WPI and 40%
for CPI. However, during last six months, inflation rate has jumped exorbitantly from
about 5% to more than 11%. Keeping this into consideration, escalation factor may
either be fixed on normative basis with reasonable escalation but not less than 8% per
annum or it be linked directly with inflation rate at the beginning of each Financial
year.
[iii) Fitment benefit @ 45% increase in employees cost on account of pay revision
has not been considered for generating stations which shall not be completing five
years of operation as on 1.4.2009. This provision needs to be reviewed to allow at par
treatment to all generating stations.
71
(d)SJVNL :R&R cost should be included in the capital cost for O&M purpose as
R&R related activities are a continuous process in the project vicinity.
22.3 Based on the information received from various hydro generating companies,
details of O&M expenses as approved on the basis of normative 1.5% of approved
capital cost on COD and actual O&M expenses incurred after deducting R&R cost, if
any, during 2006-07 & 2007-08, has been worked out for new stations. These are
summarized in the following table:
O&M Expenses of New Hydro Stations
Station COD Capital O&M expenses (Rs. crore)
cost as
on COD 2006-07 2007-08
(Rs
crore)
Actual Actual Actual Actual
Approved (Excl as % Approved (Excl as %
@ 1.5% & of @ 1.5% R&R)# of
of capital R&R)# capital of capital capital
cost cost cost cost
Chamera-
II 31.3.2004 1956.06 31.73 44.22 2.26 33.5 49.27 2.52
Dhauli
Ganga 1.11.2005 1631.39 24.87 42.23 2.59 25.87 45.90 2.81
Indira
Sagar 25.8.2005 1873.07* 45.31$ 41.49# 2.21 47.12$ 47.53# 2.54
Tehri** 8.7.2008 6951.11* 104.2** 170.6# 2.45

* -Cost of power component excluding cost of R&R works
$- O&M expenses approved are based on capital cost (Power component) on COD including
72
R&R cost
#- Actual O&M expenses are based on capital cost (Power component) on COD excluding
R&R cost
** In case of Tehri, O&M cost is provisional as final tariff is yet to be approved
22.4 It would be seen from the above table that actual O&M cost of Chamera-II, Dhauli
Ganga, Indira Sagar and Tehri HEPs varied from 2.45 % to 2.81% in the year 2007-
08. Thus, it would be reasonable to increase O&M expenditure of new hydro stations
to 2% of the capital cost as on the cut-off date,subject to the following conditions:
(a) The capital cost considered shall not include cost of rehabilitation & resettlement
works.
(b) For the purpose of normalization, incentive & ex-gratia paid to its employees,
donations, loss in stock, prior period adjustments, claims and advances written off,
provision for VSR, provisions including provisions of pay revision etc shall be
excluded.
(c) Commission had considered the average annual escalation rate of 5.17% based
on CPI and WPI indexes for the five years from 2003-04 to 2007-08 and 5.72% per
annum for the tariff period 2009-14 which would be taken into account.
22.5 Based on the above discussions, the Commission has decided to make the
following provisions for Operation and Maintenance expenses of the existing and new
hydro generating stations: in clause (f) of Regulation 19 of these regulations:
“(f) Hydro generating station
(i) Operation and maintenance expenses, for the existing generating stations which
73
have been in operation for 5 years or more in the base year of 2007-08, shall be derived
on the basis of actual operation and maintenance expenses for the years 2003-04 to
2007-08, based on the audited balance sheets, excluding abnormal operation and
maintenance expenses, if any, after prudence check by the Commission.
(ii) The normalised operation and maintenance expenses after prudence check, for the
years 2003-04 to 2007-08, shall be escalated at the rate of 5.17% to arrive at the
normalized operation and maintenance expenses at the 2007-08 price level respectively
and then averaged to arrive at normalized average operation and maintenance expenses
for the 2003-04 to 2007-08 at 2007-08 price level. The average normalized operation
and maintenance expenses at 2007-08 price level shall be escalated at the rate of 5.72%
to arrive at the operation and maintenance expenses for year 2009-10:
Provided that operation and maintenance expenses for the year 2009-10 shall be further
rationalized considering 50% increase in employee cost on account of pay revision of
the employees of the Public Sector Undertakings to arrive at the permissible operation
and maintenance expenses for the year 2009-10.
(iii) The operation and maintenance expenses for the year 2009-10 shall be escalated
further at the rate of 5.72% per annum to arrive at permissible operation and
maintenance expenses for the subsequent years of the tariff period.
(iv) In case of the hydro generating stations, which have not been in commercial
operation for a period of five years as on 1.4.2009, operation and maintenance
expenses shall be fixed at 2% of the original project cost (excluding cost of
rehabilitation & resettlement works). Further, in such case, operation and maintenance
expenses in first year of commercial operation shall be escalated @5.17% per annum
up to the year 2007-08 and then averaged to arrive at the O&M expenses at 2007-08
price level. It shall be thereafter escalated @ 5.72% per annum to arrive at operation
and maintenance expenses in respective year of the tariff period.
74
(v) In case of the hydro generating stations declared under commercial operation on or
after 1.4.2009, operation and maintenance expenses shall be fixed at 2% of the original
project cost (excluding cost of rehabilitation & resettlement works) and shall be subject
to annual escalation of 5.72% per annum for the subsequent years.”
22.6 The methodology to work out average normalized O&M expenses at 2007-08
price level and arrive at O&M expenses for the year 2009-10 is illustrated with sample
data of ‘X’ Hydro generating station as follows:
(Rs. lakh)
STATION 2003-04 2004-05 2005-06 2006-07 2007-08
X 2500 2700 3000 3500 4000
O&M expenses of each year is normalized @ 5.17% to arrive at normalized O&M

expenses at the 2007-08 price level as follows:
FY 2003-04= (2500)x (1.0517)4 = Rs. 3058.50 lakh

FY 2004-05= (2700)x (1.0517)3 = Rs. 3140.80 lakh
FY 2005-06= (3000)x (1.0517)2 = Rs. 3318.20 lakh
FY 2006-07= (3500)x (1.0517) = Rs. 3680.95 lakh
FY 2007-08= (4000) = Rs. 4000.00 lakh
Sum = Rs. 17198.45 lakh
Average normalized O&M at 2007-08 price level= 17198.45/ 5

= Rs. 3440 lakh
The Average normalized O&M at 2007-08 price level so obtained shall be escalated @
5.72% to arrive at O&M for the year 2009-10 as follows:
O&M for 2009-10 = (3440)x (1.0572)2 =Rs. 3845 lakh
75
Impact of provision of 50% hike in salary shall be considered as follows:
Assuming contribution of ‘Employee cost’ in the total O&M expenses in the year
2007-08 amounts to 35%,
Employee cost shall be = 3845x0.35= Rs. 1346 lakh
Increase in employee cost after allowing 50% hike due to pay revision shall be =
1346x0.5 = Rs. 673 lakh
Thus, total O&M expenses to be considered for the year 2009-10 shall be = 3845+
673= Rs. 4518 lakh
22.7 The above O&M expenses for the year 2009-10 shall be escalated further @5.72%
per annum to arrive at O&M expenses for subsequent years of the tariff period.
23. O&M Expenses for transmission systems {Regulation 19(g)}
23.1 The methodology for arriving at norms for O&M expenses for
transmission system published as provided in the draft notification regulations
was explained in the explanatory memorandum. Commenting on these norms,
POWERGRID has made following submissions in letter dated 15.10.2008:
(a) In the proposed methodology concept of normalized employee cost was

introduced. POWERGRID has stated that instead of considering minimum of
actual employee cost and normalized employee cost, the Commission should
consider applying normalized employee cost across the board. POWERGRID
has stated that at the time of its formation, due to historical reasons,
POWERGRID had to absorb manpower from different organizations, which
76
was beyond the control of POWERGRID.the utility. Over the years, this excess
manpower could be rationalized by training/retraining and deployment in new
projects. This resulted in optimum manpower deployment over the years as
brought out in the Explanatory Memorandum. This process will continue in
future as well. POWERGRID has prayed that it should be rewarded for
improvement in efficiency rather than getting penalized for the same.
POERGRID has submitted that by applying normalized employee cost,
POWERGRID is not able to recover employee cost for 1129, 849, 615, 312 &
239 employees for the each of the five years considered for the calculation.
During the hearing, CMD, POWERGRID mentioned that during recent years,
POWERGRIDthe company has undertaken works related to RGGVY under
directive from GOI. Considering that these works are for temporary period,
POWERGRIDthe company has deployed some manpower from existing O&M
strength. He mentioned that this has given an impression that due to efficiency
improvement there is reduction in number of employees per km as well as per
bay. He said clarified that as of now, total shortage of manpower is about 400.
He, however, emphasized that even with existing inadequate manpower,
POWERGRID has not compromised with quality and standard of the service.
(b) The concept that O&M cost other than spare cost is proportioned to line
length and not circuit length is not correct. This is applicable for line patrolling
and corridor clearing only. Other activities like PID will take almost double the
time and maintenance activities on double ckt line need for more mobilization
and materials compare to single circuit lines. POWERGRID has recommended
that concept of O&M cost per ckt-km appears more realistic and
straightforward.
(c) POWERGRID has stated that failure of converter transformers is high

all over the world and repair cost of converter transformers will always be high
and in some cases to the tune of Rs 10 Crs. POWERGRID has pointed out that
this type of expenditure has been termed as ‘not normal’ and has been
77
disallowed. It has been requested that either this expenditure should be
considered for deriving norms or one time reimbursement of additional
expenditure may be allowed.
(d) POWEGRID has stated that failure of most of the equipment like ICT,
Reactor etc do not qualify under Self Insurance Policy. POWERGRID has
requested that insurance premium for insurance of such equipment should be
allowed in O&M expenses or alternatively additional capitalization may be
allowed in such eventualities.
(e) POWERGRID has also pointed out few minor errors in calculations for
arriving at norms published in the draft notification.
(f) Subsequently, in December 2008, POWERGRID submitted another

letter stating that total expenditure incurred for repair of defective Converter
transformers under Rihand Transmission system of Northern Region (S No
7476316,6004906, 6004876 and 6004874) is Rs 5238.99 lakhs. Out of Rs
5238.99 lakhs, Rs 3655.00 lakhs has been included in Repair & Maintenance
expenses of Northern Region for 2006-07 and the remaining expenditure of Rs
1583.99 lakhs is included in Repair & Maintenance expenses of Northern
Region for 2007-08. It is further submitted that Rs 48.22 lakhs is balance
anticipated expenditure under this head, which is yet to be incurred
23.2 Powerlinks Transmision Ltd (PTL) has submitted that unlike PTL,
POWERGRID is operating substations along with the transmission lines.
Hence, POWERGRID enjoys benefit of economies of scale in operation and
maintenance of the transmission lines. It has stated that PTL is a single project
company with a project which is unidirectional and spread over 1166 Km and
requires more project offices to maintain the line. PTL has recommended that a
maximum percentage of 1.5% of the Gross Block in case of transmission line
78
and 3% in case of substations subject to actual expenses incurred by the
transmission licensee may be allowed as O&M expenditure. PTL has also
contended that being a single project company, its corporate office expenses
should not be compared with that of the POWERGRID.
23.3 As regards the beneficiaries, Jaipur VVNL has stated that existing norms
for 2008-09 are very much on higher side. By applying these norms allowable
O&M expenses comes out to be almost double that of the amount allowed by
RERC.
23.4 MPPTCL has stated that actual O&M expenditure in WR is much less
than expenditure based on proposed norm and beneficiaries of WR would be
unnecessarily burdened due to adoption of a national norm. In view of this, a
request has been made to prescribe region wise norm based on normalized
expenditure.
23.5 BSEB and ShriEr R.B Sharma, consumer have contended that O&M
expenses for S/C are very high as compared to D/C configuration and on this
premise has requested for continuation of the norm based on ckt-km basis but
have supported differentiation based on voltage.
23.6 The Commission has reconsidered the methodology for arriving at O&M
norms taking into account comments of the stakeholders as enumerated above.
The revised methodology adopted by the Commission for arriving at norms for
O&M expenditure for transmission is described below along with reasons for
departure from the method proposed in the Explanatory Memorandum for draft
notification:
(i) The data of actual O&M expenses submitted by the POWERGRID for
the year 2007-08, which was submitted after publication of draft notification,
has also been taken into account. Accordingly, five year’s actual O&M
79
expenses i.e. for the period 2003-04 to 2007-08 has been considered for arriving
at norms. It may be recalled that in the absence of the average values of number
of bays and line length for a year, values as on 1st April of the next year were
used while arriving at norms published in the draft notification. However, since
now we have information as on 1st April of 2003 to 1St April of 2008, average
value for a year can be calculated by taking average of respective values as on
1st April of two consecutive years. This method has been used for arriving at
average values for all the five financial years i.e. 2002-03 to 2007-08. In the
draft notification, gradation of the norms was done on the basis of voltage and
circuit configuration. While gradation based on circuit configuration has been
retained, instead of gradation based on voltage, we have decided to adopt
number of sub-conductors as parameter for gradation. There is no doubt that
both voltage and no. of sub-conductors impact O&M expenditure for
transmission line but in our opinion, the parameter of no. of sub-conductors
largely covers impact of voltage as well. This is because entire 132 kV and 220
kV line network is with single conductor (except 156 ckt-kms of Kayamkulam-
Edmon D/C line with twin moose conductor). Similarly, entire 765 kV and
HVDC line network is with quad conductor. Further, about 50% of the
POWERGRID network is at 400 kV level. Most of the upcoming transmission
line network will also be at 400 kV and therefore, if only voltage is adopted as
parameter for gradation, it will not be able to capture impact of no. of sub-
conductors for major part of the ISTS. In order to avoid any confusion as to
how bays are to be counted, we would like to lay down following guidelines
based on the current practice in this regard:
• For each AC sub-station, there will be one bay for each circuit
emanating from or terminating into that sub-station. This means that in
case of sub-station having one-and-half breaker scheme, tie breaker will
not be counted as bay. Similarly in case of sub-station with two main
80
and one transfer bus scheme, bus coupler and bus transfer breakers will
not be counted as bays.
• Each transformer will have two bays- one for HT side and other for LT
side.
• Bus reactor will have one bay
• Switchable line reactor will have one bay
• Fixed Series compensation will have one bay
• Variable Series compensation will be considered to have two bays
• Each SVC will be considered to have one bay
Circuit breaker employed for bus sectionalization /extension for each bus will be
counted as one bay
Tables 1 and 2 below give details of the average number of AC sub-station bays
and average ckt-kms of AC & HVDC lines in commercial operation.
Table 1: Average Number of AC sub-station bays in commercial operation

Region 2003-04 2004-05 2005-06 2006-07 2007-08
NR 241.00 248.50 277.50 338.00 407.00
WR 108.00 116.50 138.50 161.50 210.50
SR 131.00 143.50 163.50 188.00 214.00
ER 125.00 150.50 178.50 220.00 260.50
NER 106.5 109 109 109 109
Total 711.50 768.00 867.00 1016.50 1201.00
81
Table 2: Average ckt-km of AC and HVDC lines in commercial operation
Region 2003-04 2004-05 2005-06 2006-07 2007-08
NR 14529.45 14699.01 16061.34 18214.59 20410.71
WR 10316.65 10419.49 10976.52 11899.28 14113.33
SR 11599.97 12413.54 13537.31 14246.80 14884.96
ER 5839.40 6563.06 7343.01 7891.48 9006.20
NER 4971.94 4994.21 4994.21 4994.21 4779.49
Total 47257.42 49089.32 52912.39 57246.35 63194.69
Note: (1) Each pole of an HVDC lines is considered as one circuit for the present purpose.
(2) Average No. of AC sub-station bays and average ckt-km has been calculated by taking
average of the respective figures as on 1st April of the two consecutive years.
(ii) We have decided to prescribe norms on per km basis but with additional
gradation based on circuit configuration. Since, the information based on circuit &
conductor configuration (together) is not available, this information has been
derived indirectly based on line length categorized based voltage & circuit and ckt-
kms based on conductor configuration. It was noticed that while submitting
information, POWERGRID had inadvertently taken 220 kV D/C Kayamkulam-
Edmon line with single conductor. Therefore, necessary correction has been made
in the data submitted by POWERGRID. The indirect method used to arrive at ckt-
kms based on conductor configuration is as under:
S/C quad ckt-km = 765 kV ckt-km

S/C Triple conductor ckt-km = Nil
S/C twin conductor ckt-km = Total twin ckt-km – D/C twin ckt-km
S/C Single conductor ckt-km = 132 kV S/C ckt-km + 220 kV S/C ckt-km
D/C quad ckt-km = Total quad ckt-km – 765 kV ckt-km
D/C Triple conductor ckt-km = Total triple conductor ckt-km
D/C twin conductor ckt-km = Total 400 kV D/C ckt-km – D/C triple conductor ckt-
km – D/C quad ckt-km
D/C Single conductor ckt-km = 132 kV D/C ckt-km + 220 kV D/C ckt-km
Only in case of Southern Region, appropriate change has to be made to take
82
care of the fact that 220 kV D/C Kayamkulam-Edmon line is with twin conductor.
When this method is applied, the total ckt-km matches with ckt-km information
submitted by POWERGRID, except in Southern Region, where there is a mismatch
to the extent of about 65 ckt-km, which is too small and can be neglected.
In case of transmission lines, S/C twin conductor ckt-kms have been used as base
and ckt-kms of all other circuit & conductor configurations have been converted to
equivalent ckt-kms of S/C twin conductor ckt-km. No differentiation has been
made between triple & twin conductor for same circuit configuration, since the
population of triple-conductor lines is comparatively very small. Weightage factor
for conversion have been used based on our estimate of ratio of O&M expenditure
for a particular conductor & circuit configuration vis-à-vis S/C twin conductor. The
weightage factors for a bundled conductor with four or more conductors is taken as
1.5 and that for single conductor it is taken as 0.5. Additionally, ratio between
O&M expenditure of 1 km of D/C line is estimated to be 1.5 time that of 1 km of
S/C line for single conductor and 1.75 time of 1 km of S/C for bundled conductor.
The Commission has decided to adopt voltage as the basis for gradation of norms
for O&M expenditure for sub-station as was proposed in the draft notification.
However, bays at various voltage levels have been converted to equivalent 400 kV
bays. As in case of transmission line, the weightage factors for such conversion are
considered based on our estimate of ratio of O&M expenditure of bay at a voltage
level as compared to O&M expenditure for a bay at 400 kV.
Table 3 and 4 below give details of number of bays and ckt-kms based on the
gradation and equivalent 400 kV bays and equivalent S/C twin conductor ckt-kms.
83
Table 3: Number of AC sub-station bays
Actual average No of bays in commercial operation Weightage Equivalent No of bays (400 kV) in commercial operation
2003-04 2004-05 2005-06 2006-07 2007-08 Factor 2003-04 2004-05 2005-06 2006-07 2007-08
765 kV 0.00 0.00 0.00 0.00 2.50 1.4 0 0 0 0 3.5
400 kV 426.50 455.50 508.00 603.50 729.00 1 426.5 455.5 508 603.5 729
220 kV 209.00 229.50 264.50 310.00 366.50 0.7 146.3 160.65 185.15 217 256.55
Up to 132 kV 76.00 83.00 94.50 103.00 103.00 0.5 38 41.5 47.25 51.5 51.5
Total 711.50 768.00 867.00 1016.50 1201.00 610.80 657.65 740.40 872.00 1040.55
Table 4:Ckt-km of AC and HVDC lines

Actual average ckt-km in commercial operation Weightage Equivalent ckt-km (twin conductor) in commercial operation
2003-04 2004-05 2005-06 2006-07 2007-08 Factor 2003-04 2004-05 2005-06 2006-07 2007-08
S/C Quad 562.50 562.50 655.24 1022.17 1471.67 1.500 843.75 843.75 982.87 1533.25 2207.50
S/C Triple 0.00 0.00 0.00 0.00 0.00 1.000 0.00 0.00 0.00 0.00 0.00
S/C Twin 18513.08 19073.23 19676.66 20005.16 20258.61 1.000 18513.08 19073.23 19676.66 20005.16 20258.61
S/C Single 2753.80 2831.53 2871.90 2886.30 2907.55 0.500 1376.90 1415.77 1435.95 1443.15 1453.77
D/C Quad 4669.85 4669.85 4669.85 4669.86 5862.59 1.313 6129.18 6129.18 6129.18 6129.19 7694.65
D/C Triple 1479.68 1479.68 1522.97 1566.26 1566.26 0.875 1294.72 1294.72 1332.60 1370.47 1370.48
D/C Twin 12755.51 13762.23 16588.76 20113.46 24125.65 0.875 11161.07 12041.95 14515.17 17599.27 21109.95
D/C Single 6523.00 6710.28 6927.01 6983.16 7002.37 0.375 2446.13 2516.36 2597.63 2618.69 2625.89
Total 47257.42 49089.32 52912.39 57246.35 63194.69 41764.82 43314.96 46670.05 50699.18 56720.84
(iii)Normalization of O&M expenditure has been done on the same basis as was
proposed while formulating norms published in the draft notification. The
expenditure that has been actually been incurred by POWERGRID but has been
excluded for the process of normalization are described below:
• Abnormal security expenses in NR and NER as reported by

POWERGRID
• Electricity charges corresponding to colony consumption by applying
ratio of electricity consumption in colony to total electricity
consumption.
• Productivity linked incentive, Ex-gratia
• Spikes in O&M expenditure at Rihand HVDC station in 2007-08 and at
Dadri HVDC station in 2006-07 and 2007-08, mainly due to abnormal
expenditure on repair of converter transformers, have been smoothened
by restricting normalized expenses to 20% more than that in previous
year.
• Expenditure under the head 'Repair & maintenance' have been reduced
in NR to the extent of HVDC O&M expenditure not considered due to
smoothening of spikes. Also, expenditure on repair of ICT at Mandola
S/S amounting to Rs 324 lakhs has not been considered for
84
normalization. We understand that this expenditure was required on
account on burning of transformer and in our opinion such expenditure
has to be met from Self-Insurance reserve. The expenditure on account
of events, which are covered under insurance, can neither be allowed
under O&M nor can be allowed to be capitalized. This expenditure has
to be met from self-insurance reserve.
• Expenditure on petition fee for petitions filed in the Commission
amounting to Rs 317 lakh, Rs 276 lakh, Rs 249 lakh and Rs 149 lakh for
the years 2004-05, 2005-06, 2006-07 and 2007-08 have been excluded
for normalization. It has been decided that during the period 2009-14,
petition fee shall be reimbursed separately by the long-term customers
of the transmission asset in question.
The Commission would like to clarify that spikes in O&M expenses at

Rihand & Dadri HVDC terminals have been smoothened out because in
our opinion, probability of such spikes in future is very remote. Such
abnormal spikes have to be excluded so that norm does not get distorted
due to stray events. However, we clarify that during 2009-14 if it incurs
abnormal O&M expenditure for HVDC stations on account of converter
transformer failures, POWERGRID will have liberty to approach the
Commission with suitable justification for reimbursement of the same.
Table 5, 6 and 7 below give details of the actual regional O&M expenditure,
normalized regional O&M expenditure and normalized regional O&M
expenditure excluding HVDC stations
85
Table 5: Actual Regional O&M expenditure
(Rs Lakh)
Region 2003-04 2004-05 2005-06 2006-07* 2007-08*
NR 11719.44 12333.18 12650.28 18488.59 19597.11
WR 4909.87 4882.07 5156.46 5837.03 7371.53
SR 8784.95 9112.76 10157.71 10685.67 11338.57
ER 5695.70 5924.48 6607.97 7831.04 9250.07
NER 4646.54 4766.77 4730.28 5086.33 5364.70
Total 35756.50 37019.26 39302.70 47928.66 52921.98
* 'Provision' of Rs 1532 lakh in the year 2006-07 and Rs 11003 lakh in the year 2007-
08 towards wage revision in the O&M expenses have not been included in the actual
expenditure. The above 'provision' has been apportioned to various regions and
corporate Office in the ratio of their respective 'salary & wages' and deducted from
the figures submitted by POWERGRID.
.
Table 6: Normalized Regional O&M expenditure

(Rs Lakh)
Region 2003-04 2004-05 2005-06 2006-07 2007-08
NR 10432.30 11497.25 11644.48 13858.22 16430.02
WR 4397.95 4570.37 4873.50 5322.13 6796.95
SR 7748.54 8401.99 9466.56 9629.97 10297.98
ER 4754.24 5436.37 6143.88 7187.54 8298.92
NER 4145.40 4342.53 4367.25 4607.21 4828.82
Total 31478.43 34248.51 36495.66 40605.07 46652.70
Table 7: Normalized Regional O&M expenditure (excluding HVDC stations)

(Rs Lakh)
Region 2003-04 2004-05 2005-06 2006-07 2007-08
NR 9412.71 10073.69 10337.37 12534.41 14821.36
WR 3960.13 4016.94 4140.24 4544.51 5695.80
SR 5630.30 6501.43 7684.66 7923.06 8586.78
ER 4595.25 5168.66 5873.89 6882.25 8036.03
NER 4145.40 4342.53 4367.25 4607.21 4828.82
Total 27743.79 30103.24 32403.42 36491.44 41968.79
(iv) Tables 8 and 9 below give details of the manpower deployment per
equivalent 400 kV bay and per equivalent single circuit twin conductor ckt-km
for the five years.
86
Table 8: Actual Number of employees for AC sub-station O&M
Region 2003-04 2004-05 2005-06 2006-07 2007-08
NR 745 768 755 818 803
WR 199 281 281 334 359
SR 447 431 450 443 429
ER 546 553 576 643 775
NER 559 551 515 496 462
Total 2496 2584 2577 2734 2828
Equivalent (400 kV) No of bays 610.80 657.65 740.40 872.00 1040.55
Employees per Equivalent
(400 kV) bay 4.09 3.93 3.48 3.13 2.72
Table 9: Actual Number of employees for AC and HVDC lines

Region 2003-04 2004-05 2005-06 2006-07 2007-08
NR 456 354 320 365 402
WR 160 162 174 187 168
SR 198 207 217 213 224
ER 158 146 116 178 230
NER 174 158 161 158 148
Total 1146 1027 988 1101 1172
Equivalent (single ckt- twin
conductor) ckt-km 41764.82 43314.96 46670.05 50699.18 56720.84
Employees per Equivalent
(single ckt-twin conductor)
100 ckt-km 2.74 2.37 2.12 2.17 2.07
(v) In the Explanatory Memorandum, rationalization in employee cost was

proposed based on trend of reduction in manpower per bay and per km of line
length. However, we have taken note of the submission by POWERGRID that
over the last few years, there has been depletion in the manpower deployment,
which has given an impression of efficiency improvement in manpower
deployment. Accordingly, we have decided that O&M expenditure considered
for formulating norms shall be arrived at from the normalized O&M
expenditure by uplifting the employees cost for the years 2004-05 to 2007-08
by keeping manpower per ckt-km and per bay at the same level as in 2003-04.
While formulating norms published in the draft notification, direct segregation
of normalized O&M expenditure into sub-station and transmission lines was not
warranted as norms per bay and per km of line length were obtained by
regression analysis with total normalized O&M expenses as dependent variable
87
and line length and number of bays as independent variables. Now we have
decided that for the purpose of arriving at norms, total O&M expenses will be
apportioned between sub-stations and transmission lines (AC and HVDC lines)
in the ratio of 70:30. Table 10 below shows process of arriving at average
O&M expenditure per equivalent 400 kV bay and average O&M expenditure
per equivalent ckt-km of S/C twin line at 2007-08 price level. These average
values serve as the base norm at 2007-08 price level.
Table 10: O&M expenses per equivalent (400 kV) bay and per equivalent (single ckt-twin conductor) ckt-km at 2007-08 price level
(Rs Lakh)
2003-04 2004-05 2005-06 2006-07 2007-08 Average
A. Total Normalized O&M expenses (From Table 9) 27743.79 30103.24 32403.42 36491.44 41968.79
B. Normalized O&M expenses allocated to S/S (70 % of A) 19420.65 21072.27 22682.39 25544.01 29378.15
C Employee Cost included in B * 9645.25 10287.18 11561.23 11706.16 13720.12
D. Compensation factor for staff depletion ** 0.00 0.04 0.18 0.31 0.50
E. O&M expenditure considered for S/S(B+C xD) 19420.65 21491.09 24708.93 29134.39 36288.65
F O&M expenditure escalated to 2007-08 level (escalation 5.17%) 23759.17 24999.65 27329.88 30640.64 36288.65
G Equivalent No. of sub-station bays( From Table 3) 610.80 657.65 740.40 872.00 1040.55
H O&M expenditure per equivalent (400 kV) AC bay 38.90 38.01 36.91 35.14 34.87 36.77
Normalized O&M expenses allocated to AC and HVDC lines (30 % of

I A) 8323.14 9030.97 9721.02 10947.43 12590.64
J Employee cost included in I* 4428.47 4088.60 4432.48 4715.01 5685.99
K Compensation factor for staff depletion ** 0.00 0.16 0.29 0.26 0.32
L O&M expenditure considered for AC and HVDC lines (I + J x K) 8323.14 9669.28 11017.32 12185.94 14431.03
M O&M expenditure escalated to 2007-08 level (escalation 5.17%) 10182.50 11247.85 12185.95 12815.95 14431.03
N Equivalent (400 kV) bays From Table 4) 41764.82 43314.96 46670.05 50699.18 56720.84
O O&M expenditure per equivalent (S/C - twin conductor) ckt-km 0.244 0.260 0.261 0.253 0.254 0.254
* Excluding corporate employee cost; allocated pro-rata to number of employees

** Compensation factor for staff depletion for a year has been calculated as (No of employees per equivalent bay or ckt-km for that year/ No of
employees per equivalent bay or ckt-km for 2003-04 - 1)
(vi) We have noted that O&M expense per 500 MW capacity of HVDC
BTB stations are in close range so a uniform norm has been prescribed for
HVDC BTB stations. However, in case of HVDC bipole projects namely
Rihand-Dadri and Talcher-Kolar, separate stand alone norms have been
prescribed because their expenditure per MW capacity were not in close range.
The norms for O&M expenses for HVDC BTB stations will be on the basis of
per 500 MW capacity as basis as compared to per 100 MW basis as proposed in
the draft notification. Normalized O&M expenditure for HVDC stations have
been obtained by applying ratio of regional normalized expenditure to regional
actual expenditure of the relevant region. However, an exception has been made
for Rihand HVDC station in 2007-08 and at Dadri HVDC station in 2006-07
88
and 2007-08, where normalized O&M expenditure has been restricted to 20%
more than value for previous year in order to smoothen out spikes. Correction
for employee depletion has been applied in the same manner as in case of AC
sub-station and transmission lines. The process of arriving base norm for
HVDC stations is captured in the tables 11 to 13 below:
Table 11: Actual O&M expenditure at HVDC stations

(Rs Lakh)
HVDC Terminal 2003-04 2004-05 2005-06 2006-07 2007-08
Rihand 341.35 541.39 481.44 522.19 1002.81
Dadri 545.93 690.24 561.49 3567.40 2274.08
Vindhayachal BTB 258.11 295.43 377.08 416.50 470.80
Bhadrawati BTB 488.78 591.18 775.83 852.85 1194.24
Talcher 959.07 860.17 551.16 503.74 699.17
Kolar 959.07 602.41 476.41 322.82 537.44
Gazuwaka BTB 483.43 598.76 884.42 1063.55 647.50
Sasaaram BTB 190.47 291.75 290.38 332.62 293.02
Total 4226.21 4471.33 4398.21 7581.67 7119.06
Table 12: Computation of base norm at 2007-08 price level for HVDC Bipole schemes (Rs Lakh)
Normalized O&M expenditure Escalated to 2007-08 level @5.17% Average at 2007-08 level
For the
HVDC Station 2003-04 2004-05 2005-06 2006-07 2007-08 2003-04 2004-05 2005-06 2006-07 2007-08 Station wise scheme
Rihand-Dadri Scheme
Rihand 303.86 504.69 443.16 391.41 469.69 371.74 587.09 490.17 411.65 469.69 466.07
Dadri 485.97 643.46 516.85 620.22 744.26 594.54 748.50 571.67 652.28 744.26 662.25 1128
Talchaer-Kolar Scheme
Talcher 845.92 793.08 513.66 457.51 635.00 1034.90 922.56 568.14 481.16 635.00 728.35
Kolar 845.92 555.42 443.99 290.93 488.12 1034.90 646.10 491.09 305.97 488.12 593.23 1322
Table 13: Computation of base norm at 2007-08 price level for HVDC Back-To-back Schemes
(Rs Lakh)
Normalized O&M expenditure Escalated to 2007-08 level @5.17% Average at 2007-08 level
per 500
HVDC Station 2003-04 2004-05 2005-06 2006-07 2007-08 2003-04 2004-05 2005-06 2006-07 2007-08 Station wise MW
Vindhayachal BTB 229.76 275.41 347.10 312.19 394.71 281.09 320.37 383.92 328.33 394.71 341.68 341.68
Bhadrawati BTB 437.82 553.44 733.26 777.62 1101.15 535.63 643.79 811.03 817.82 1101.15 781.88 390.94
Gazuwaka BTB 426.40 552.06 824.24 958.48 588.08 521.65 642.19 911.67 1008.03 588.08 734.32 367.16
Sasaaram BTB 158.99 267.71 269.99 305.29 262.89 194.50 311.42 298.62 321.07 262.89 277.70 277.70
Average 344.37
(vii) The base norm at 2007-08 price level is escalated at 5.72% per annum to
reach to 2009-10 price level. It is estimated that 55% of the sub-station O&M
expenditure, 52% of the line O&M expenditure and 30% of the HVDC station
O&M expenditure is on account of employee cost. Wage hike of 50% has been
applied accordingly in the norms for O&M expenditure. This is shown in the
table 16 below:
89
Table 14: Base Norms for O&M expenditure at 2009-10 price level
(Rs Lakh)
Norm for O&M expenditure (without considering impact of wage Norms for 2009-
revision) (Escalation Rate= 5.72%) 10 after
accounting for
impact of wage
2007-08 2008-09 2009-10 revision
O&M expenditure per equivalent (400 kV) AC bay 36.77 38.87 41.09 52.40
O&M expenditure per equivalent (twin conductor) ckt-km 0.254 0.269 0.284 0.358
O&M expenditure per 500 MW of HVDC BTB capacity 344 364 385 443
O&M expenditure for Rihand-Dadri HVDC bipole scheme 1128 1193 1261 1450
O&M expenditure for Talcher-Kolar HVDC bipole scheme 1322 1398 1478 1699
(viii) The norms for AC sub-station and transmission lines (AC and HVDC) for
equivalent 400 kV bay and for equivalent S/C twin conductor ckt-km so arrived
are then converted to various voltage levels (for sub-stations) and various
circuit and conductor configuration (for transmission liners) by applying
weightage factors as contained in table 3 and 4. Escalation rate of 5.72% is
applied to the norms to arrive at norms for each year of the tariff period 2009-
14. Finally, the values obtained for D/C lines have been converted from ckt-km
to km basis by doubling them.
23.7 In view of the above discussion, the following provisions have been made in
clause (g) of Regulation 19 of these regulations with regard to O&M expenses of the
transmission system:
“(g) Transmission system

(i) Norms for operation and maintenance expenses shall be as under:
90
Table 15 :Norms for O&M expenditure for Transmission System
2009-10 2009-11 2009-12 2009-13 2009-14

Norms for sub-station (Rs Lakh per bay)
765 kV 73.36 77.56 81.99 86.68 91.64
400 kV 52.40 55.40 58.57 61.92 65.46
220 kV 36.68 38.78 41.00 43.34 45.82
132 kV and below 26.20 27.70 29.28 30.96 32.73
Norms for AC and HVDC lines (Rs Lakh per km)
Single Circuit (Bundled conductor with four or more
sub-conductors) 0.537 0.568 0.600 0.635 0.671
Single Circuit (Twin & Triple Conductor) 0.358 0.378 0.400 0.423 0.447
Single Circuit (Single Conductor) 0.179 0.189 0.200 0.212 0.224
Double Circuit (Bundled conductor with four or more
sub-conductors) 0.940 0.994 1.051 1.111 1.174
Double Circuit Circuit (Twin & Triple Conductor) 0.627 0.663 0.701 0.741 0.783
Double Circuit Circuit (Single Conductor) 0.269 0.284 0.301 0.318 0.336
Norm for HVDC Stations
HVDC Back-to-back stations (Rs lakh per 500 MW) 443 468 495 523 553
Rihand-Dadri HVDC bipole scheme (Rs Lakh) 1450 1533 1621 1713 1811
Talcher-Kolar HVDC bipole scheme (Rs Lakh) 1699 1796 1899 2008 2122
23.8 We have already covered issue regarding failure of converter transformer raised
by POWERGRID. With regard to issue of change in self-insurance policy raised by
POWERGRID, we would like to state that the coverage of the self-insurance policy has
been decided by the POWERGRID itself and we would not like to micro-manage the
same. We are only interpreting this policy whenever an issue of capitalization or repair
and maintenance of any asset is brought before us. The suggestion of PTL regarding
linking O&M expenditure to capital cost has not been found acceptable in the previous
tariff period 2001-04 and 2004-09. Reasons for de-linking have also been discussed in
detail while finalizing norms for earlier tariff periods. We would not like to revisit the
same issue again. With regard to statement of Jaipur VVNL that norms fixed by State
Commission is much lower than the norms proposed for ISTS, we can only say that
two transmission systems are not straightway comparable. Intra-State system
predominantly contains network of 132kV and even lower voltages with mostly single
conductor configuration. The issue of regional norm was raised by MPSEB during the
last tariff period as well because if framed separately, norm for Western Region would
be much lower. This was also settled in the last tariff period and we would not like to
revisit the same.
91
24. Reasons for linking generation incentive to plant availability and for shifting
secondary oil cost to capacity charge (Regulation 21)
24.1 A primary objective of specifying a two-part tariff for thermal generating stations
is to ensure that they may be scheduled to generate as per "merit-order", without
causing commercial conflicts in a multi-ownership scenario. Scheduling as per "merit-
order" basically means that when some generating stations or units have to be backed
down during off-peak hours (due to system load coming down during those hours
below the total available generating capacity in the system, as should normally be the
case) the generating stations/units of a higher variable costs should be given a
decreased schedule (or should be shut down) while those with lower variable costs
should continue with schedules matching their full available capacity.
24.2 For ensuring optimal "merit-order" operation of the whole system, the load
dispatch centre needs to know the actual variable costs of all thermal stations for which
it is responsible for scheduling. While this would normally be the case in a bundled
utility (i.e. where the generating stations and load dispatch centers are owned by the
same entity, e.g. a State government), it may not be so in a multi-ownership scenario.
In any case, the generating stations would be getting paid as per the specified capacity
charge and energy charge rates. Therefore for optimum scheduling from the angle of
beneficiaries, scheduling decisions of a load dispatch centre shall have to be based on
energy charge rates of the generating stations belonging to other entities. In case the specified
energy charge rates differ from the actual variable costs of the respective generating stations,
the scheduling decisions would be deviating from the real “merit-order” to that extent. Put
another way, the energy charge rate for the different thermal stations should be as close
as possible to the actual variable costs of the stations, for optimal operation of the
whole system.
24.3 Besides, if the energy charge rate (x paisa/kWh) of a generating station is more
than its variable/incremental cost of generation (y paisa/kWh), any reduction of
92
schedule below the declared capacity would cause a financial loss of (x-y) paisa to the
generating company for every kWh of the resultant backing down. Since the schedule
reduction is for attaining overall economy for the beneficiaries, it would be grossly
unfair to expect such financial loss to be absorbed by the generating company (which is
in no way responsible for consumers' load profile). The generating company would
therefore be justified in protesting against any schedule reduction, even if it is
according to "merit-order". The above problem can be easily addressed by making x
equal to y.
24.4 The present tariff regulations (2004-2009) are deficient in the above aspect on
two counts. One is the provision regarding linkage of incentive with scheduled PLF,
and the second is on account of inclusion of secondary oil cost in energy charge rate.
These are discussed further herein.
24.5 The present regulations provide for an incentive for the thermal generating stations
@25 paisa per kWh for scheduled generation during a year over that corresponding to the
normative PLF. In case the schedule is lower than the declared capability, the generating
station stands to lose the incentive @ 25 paisa per kWh of schedule reduction for none of its
fault. Naturally, the generating company would protest against any such schedule
reduction, while it should be readily accepted in case it is according to "merit-order". In
effect, the incentive acts like a supplementary energy charge, which inflates the
difference between the effective energy charge rate and the actual variable cost, and
thereby aggravates the problem described earlier.
24.6 Secondary oil is required to be fired in coal/lignite-fired boilers during start up

and shut down of a generating unit, as also for flame stabilization during operation at
part load and/or wet-fuel conditions. When a generating unit is operating at a load
above about 70%, secondary oil is normally not required to be fired. The coal/lignite-
fired thermal units are normally scheduled to operate at full capability, and may be
scheduled to back down by 20-30% during off-peak hours, depending on their position
in "merit-order" and the system load profile. They are generally not given a schedule
93
which would call for secondary oil firing. As such, as long as a generating unit operates
in 70-100% range, its variable cost comprises of only the coal/lignite cost. However, in
the present tariff regulations, energy charge rate includes the normative cost of
secondary oil as well. As a consequence, the energy charge rate exceeds the actual
variable cost by a few paise per kWh. This again has the potential of leading to the
problem described earlier.
24.7 The above deficiencies have not caused a serious problem so far because the
generating stations to which the present tariff regulations apply have generally been
scheduled to their full capability round the clock. Most of the inter-State generating
stations falling in the Commission's jurisdiction are pit-head stations, and therefore
have comparatively much lower variable costs. Even with the above distortions, their
effective energy charge rates are lower than the variable/incremental costs of the load-
centre generating stations of the beneficiaries. Even the load-centre stations covered by
the present regulations have comparatively lower energy charge rates (due to higher
efficiency), and are not required to back down in the present power-deficient scenario.
In other words, the problem has remained dormant, but this should not make us
complacent about it.
24.8 There are two reasons why the Commission proposes to address these deficiencies
in the 2009-2014 regulations. One is that these regulations would be a guiding factor
for the State Commissions, who would be specifying the tariffs for intra-State
generating stations. The latter being mostly load-centre stations (and consequently
having higher variable costs) would have to be regularly backed down. With diverse
ownership, commercial disputes and operational dissentions would arise between intra-
State entities if the required preventive measures are not taken in advance. By
addressing these problems in the 2000-14 regulations, the Commission would be
providing the necessary guidance for the State Commissions.
24.9 Secondly, the new regulations have to be forward-looking. They have to be

able to cater to a scenario wherein we would have a generation capacity even if not
94
sufficient for meeting the full peak-hour demand, sufficiently higher than the off-peak
demand. In such a situation, at least some inter-State generating stations would be
scheduled for backing down during off-peak hours. The above described problem
would then no longer be dormant and could become very contentious. The Commission
would certainly not like to be specifying parameters which have the potential for
leading to commercial disputes and operational dissention between entities in its
jurisdiction.
24.10 In their written comments and in the oral presentations on 3-4 November 2008,
many of the respondents have opposed the Commission's proposals in the above
respect. It appears that they have missed the point made in the foregoing explanation,
which supplements the explanation under para 25.1 -25.17 in the Explanatory
Memorandum issued with the draft tariff regulation on 29.8.2008. Most of the
arguments submitted by the respondents with regard to availability based incentive are
on the same lines which were submitted by them in response to the discussion paper
circulated by the Commission on its website. These arguments have been extensively
dealt within the explanatory memorandum to the draft regulations.
24.11 Some respondents appeared to be keener to keep the profits made by Central
PSUs under check than to maximize the benefits that could be derived from the
capabilities of the Central PSU. The Commission aims to focus on the letter by introducing focused
incentives. Further, it is most important that there are no commercial deterrent for any utility to do
what it is supposed to do in the larger interest. For example, a generating station backing down as per
merit order during off-peak hours must not suffer a commercial loss. It is primarily for
this reason that the Commission has decided to move away from PLF-link incentive
by adopting availability linked incentive for the thermal generating stations and to shift
the secondary oil cost from energy charge to the capacity charge.
24.12 As regards the incentive and dis-incentive rate Commission has observed as
follows in para 25.19 of the explanatory memorandum to the draft regulations:
95
“25.19 With regard to incentive/disincentive rate to be adopted, we are of the view that
following aspects are important in this regard:
If the disincentive could be in the form of denial of normative fixed charge for
availability lower than the normative then the incentive could be in the form of
additional fixed charge for availability in higher than the normative.
As such, recovery of fixed charge shall be on monthly basis and shall be inclusive of
any incentive and disincentive depending upon the availability achieved during the
month. This is a departure from the earlier practice of recovery of fixed charges linked
to cumulative availability. This would allow the beneficiaries to meet any shortfall in
availability (due to station being out partially or full) be met from sourcing supplies
from alternate sources or over drawal from the grid at UI rates.
It would be easier for the new generating station to achieve the availability above
normative whereas as the station become old it would be more credit worthy for the
station to achieve availability above the normative. As such, rate of incentive should be
more for stations which are in operation for more than 10 year from the COD in terms
of normative fixed charge as compared to new stations which are in operation for 10
year or less from the COD.
The incentive and disincentive should be symmetrical in the normal operating range.
For a thermal generating station normal operating range could be considered as station
availability of 70% and above. However, availability of less than 70% should not be
acceptable and should be accompanied with denial of fixed charges on pro-rata basis.
Since the recovery of fixed charges is based on monthly availability actual picture
would become clear only at the end of the year and hence correction of incentive at the
end of year in case annual availability achieved is lower than 70% is being allowed.”
24.13 Accordingly, following provisions were provided in the draft regulations:
96
(1) The fixed charge for a thermal generating station shall be computed on annual
basis and recovered on monthly basis based on the norms of operation as provided the
regulations.
(2) The fixed charges (inclusive of incentive) payable to a thermal generating

station for a calendar month shall be as per the following formulae:
For generating stations in commercial operation for less than ten (10) complete
financial years :
(AFC x NDM / NDY) (0.5 + 0.5 x PAFM / NAPAF)
Provided that in case the plant availability factor achieved during a financial year
(PAFY) is less than 70%, then the total fixed charges for the year shall be restricted to
AFC x (0.5 + 35/ NAPAF) x (PAFY /70)
For generating stations in commercial operation for ten (10) complete financial years
and more :
(AFC x NDM / NDY) x (PAFM / NAPAF)
Where,
AFC= Annual fixed charges computed for the financial year, in Rupees.
NDM = Number of days in the month
NDY = Number of days in the financial year
PAFY = Plant availability factor achieved during a financial year, in percent.
NAPAF= Normative annual plant availability factor
PAFM= Plant availability factor achieved during the month, in
97
percent:
24.14 Many of the beneficiaries and state utilities have argued that recovery of
incentive as per above formula lead to different incentive for each stations for the same
generation level and such distinction between new and old station would lead to tariff
shock for the beneficiaries in the 11th year. In this regard, it is clarified that for the
reasons stated above in para 1.12 we are providing for such a distinction consciously in
over all interest of everyone.
24.15 In view of the forgoing discussion, we are not inclined to make any change in the
manner of recovery of fixed charges inclusive of incentive.
24.16 Further as provided in the draft tariff regulation, the above tariff structure may
also be adopted by the Department of Atomic Energy, Government of India for nuclear
generating stations under their control and they may specify annual fixed charge
(AFC), normative annual plant availability factor (NAPAF), installed capacity (IC),
auxiliary power consumption and energy charge rate (ECR) for such stations.
25. Transit and Handling losses {Regulation 21(7)}
25.1 The Commission proposed the norms for the transit and handling losses of
coal/lignite in the draft regulation as under:
1. Pit Head Station - 0.2%

2. Non Pit Head Station - 0.6%
25.2 Most of the beneficiaries and state utilities have submitted during the hearing
and in their written submissions that the above norms of transit and handling losses are
98
too stringent and cannot be achieved by them. They have further, submitted that the
transit and handling losses in respect of their stations are in excess of 2%. They have
serious concerns that the norms as per CERC if adopted by the SERCs would lead to
irreparable losses for them. They sought to specify norms for the state utilities as well
as in this regard.
25.3 It needs to be appreciated that the CERC is specifying norms based on the data
of NTPC stations available with them. The actual transit and handling losses for the
year 2004-05 and 2007-08 of NTPC stations are as follows:
4 yrs.
Sr. Capacity COD of 2004- 2005- 2006-
Station 2007-08 average
No. (MW) last unit 05 06 07
(%)
Non Pit-Head Stations
1 Dadri (4x210) 840 1.12.1995 0.52 0.66 0.60 0.78 0.64
Unchahar
2 1050 1.1.2007 0.60 0.60 0.60 0.64
(2x210+2x210+210) 0.61
3 Simhadri (2x500) 1000 1.3.2003 0.17 0.54 0.72 0.71 0.54
4 Badarpur (3x95 +2x210) 705 1.4.1982 0.56 0.57 0.69 0.77 0.65
5 Tanda (4x110) 440 20.2.1998 0.49 0.52 0.40 0.25 0.42
6 Kahalgaon (4x210) 840 1.8.1996 0.15 0.21 0.26 0.25 0.22
7 Farrakka (3x200+2x500) 1600 1.7.1996 0.33 0.34 0.28 0.20 0.29
Average 0.48
Pit-Head Stations
1 Talchar (2x500 + 4x500) 3000 1.8.2005 0.02 0.07 0.12 0.20 0.10
2 Rihand (2x500 + 2x500) 2000 1.4.2006 0.08 0.05 0.18 0.25 0.14
3 Korba (3x200+3x500) 2100 1.6.1990 0.02 0.12 0.28 0.23 0.16
Singrauli
4 2000 1.5.1998 0.09 0.10 0.10 0.10
(5x200+2x500) 0.10
99
Ramagundam
5 2600 25.3.2005 0.21 0.23 0.23 0.24
(3x200+3x500+1x500) 0.23
Vindhyachal
6 3260 15.7.2007
(6x210+2x500+2x500) 0.18 0.15 0.22 0.23 0.19
Talchar taken over
7 460 3.6.1995 0.16 0.26 0.24 0.25
(4x60+2x110) 0.23
Average 0.16
25.4 It can be seen that average transit and handling losses of pit head stations are of
the order of 0.16%. In case of non pit head stations, namely Dadri, Unchahar,
Simhadri and Badarpur, the transit and handling losses are of the order of 0.54% in
Simhadari to 0.6% in Badarpur. In case of Tanda, Kahalgaon, Farakka, these are much
less than other non-pit stations. In case of Kahalgaon & Farakka, the reason for low
losses is that these are supplied coal through MGR system but a substantial quantity is
also supplied through distant mines. As such, it would not be reasonable to treat these
stations at non-pit head stations. The transit and handling losses for non-pit stations like
Dadri, Unchahar, Simhadri, and Badarpur in the year 2007-08 ranges between 0.64%
to 0.78%.
25.5 In view of this, we are of the opinion that the norms of 0.6% for non pit head
station would not suffice and hence we are retaining the existing norm of 0.8%. In
respect of pit head stations, norms of 0.2% appear to be in order.
25.6 As regards norms for the state sector projects, the Commission expects the State
Commissions to specify suitable norms after due regard to the actual situation and
distance involved in the transportation of coal in respect of stations being regulated by
them.
26. Compensation for loss of generation from hydro generating station

(Regulation 22(6)
100
26.1 The draft regulation had done away with capacity index and introduced the
concept of normative annual plant availability factor (NAPAF). The new formulation
also provided for bifurcating fixed charges into capacity and energy charge. However,
the provision relating to any shortfall in energy charge due to hydrology failure
resulting in actual energy available being less than design energy was not made
passthrough.
26.2 The generating companies, namely, NTPC, NHPC, NEEPCO, SJVNL, THDC,
etc have submitted that if the hydrological risk is passed on to the generator, it would
adversely affect the development of hydro project. It was also argued that any
possibility of occurrence of hydrological failure during the initial years would act as
deterrent in financial closure of the hydro projects.
26.3 Commission is conscious to the fact that the country needs increased share of
hydro capacity from the point of view of meeting peaking capacity as well as on
environmental consideration of reducing GHG emissission. As such, commission is
providing .for compensating the hydro developers in the first 10 years for hydrological
failures in the following manner on a rolling basis:-
(i) In case the energy shortfall occurs within ten years from the date of
commercial operation of a generating station, the ECR for the year following the year
of energy shortfall shall be computed based on the formula specified in clause (5) with
the modification that the design energy for the year shall be considered as equal to the
actual energy generated during the year of the shortfall , till the energy charge shortfall
of the previous year has been made up, after which normal ECR shall be applicable;
This is explained by following example:
101
Dhauli Ganga HE station (4x70 MW) of NHPC was commissioned in the year 2005-
06. Suppose there is shortfall in annual energy generation during 2009-10 vis-à-vis
annual design energy.
AFC during 2009-10= Rs. 265 crore

Annual design energy= 1135 MU
Actual generation = 1000 MU
ECR for 2009-10= 265x105 x0.5/ {1135 x (100-1.2)x (100-12)}

= Rs. 1.343 /kWh
Energy charge corresponding to 1135 MU= Rs. 132.5 crore

Energy charge corresponding to 1000 MU= Rs. 116.74 crore
To compensate for energy charge shortfall of Rs. 15.76 crore (corresponding to less
generation of 135 MU), ECR for 2010-11 shall be as follows:
AFC during 2010-11= Rs. 250 crore (assumed)

Design energy to be considered for 2010-11= 1000 MU
ECR for 2010-11= 250x105 x0.5/ {1000 x (100-1.2)x (100-12)}
= Rs. 1.438 /kWh
Energy charge for 2010-11 shall be payable at this modified ECR till Rs.(125+15.76)
crore has been recovered as energy charge during the year. The energy charge rate for
the remaining period of 2010-11 would be Rs.1.267/kWh. Normal ECR shall be
applicable from the year 2011-12 if there is no energy shortfall in 2010-11; otherwise
similar procedure would follow in 2011-12.
(ii) In case the energy shortfall occurs after ten years from the date of commercial
operation of a generating station, the following shall apply:
102
Suppose the specified annual design energy for the station is DE MWh, and the
actual energy generated during the concerned (first) and the following (second)
financial years is A1 and A2 MWh respectively, A1 being less than DE. Then, the
design energy to be considered in the formula in clause (5) of this Regulation for
calculating the ECR for the third financial year shall be moderated as (A1 + A2 – DE)
MWh, subject to a maximum of DE MWh and a minimum of A1 MWh. Actual energy
generated (e.g. A1, A2) shall be arrived at by multiplying the net metered energy sent
out from the station by 100 / (100-AUX).
Consider the case of Chamera-I HE station of NHPC:

Annual design energy = 1665 MU
Suppose the actual generation (A1) during 2009-10 is 1500 MU & actual generation
(A2) in 2010-11 is 1700 MU
Thus, design energy to be considered in the formula in clause (5) of the Regulation for
calculating ECR for the FY 2011-12 shall be moderated as (1500+ 1700-1665)= 1535
MU, to compensate for energy charge shortfall corresponding to less generation of
165 MU in the year 2009-10.
26.4 Further, Commission has provided for recovery of capacity charges as a

function of NAPAF. NAPAF is set by the Commission with due regard to the
operating conditions of each station like variation in FRL, MDDL and silt level. In
case of new stations also, Commission has provided for due consideration of factors
like MDDL and rated head. As such the chances of short recovery of fixed charges on
account of factors beyond the control of the generating company are remote. Apart
from above, a generator can earn extra revenue as capacity charge for declaring
availability more than the NAPAF during peak hours. As such, generator is encouraged
to provide more peaking support. In order to give comfort to developers for new hydro
electric projects, the Commission has given the option of approaching the Commission
in advance for fixation of NAPAF.
103
27. Norms of Operation ( Regulations 25)
27.1 The Commission had started the process of finalizing terms and conditions of
tariff in Jan 2008 directing the central utilities under its control to furnish the actual
operational data from the year 2002-03 to 2006-07 in the specified formats. The
Commission intended to review the existing norms for the new and existing stations
including specifying of norms for the coal based plants on super critical boiler
technology and for the Lignite Based Plants based on Circulating fluidized bed
combustion (CFBC) boiler technology . The Commission vide letter dated 3.4.2008
requested CEA to recommend suitable operational norms for the thermal generating
stations by July 2008. CEA could make their recommendations only in Sept 2008. In
the meanwhile, Commission had come out with draft regulation in Aug 2008
specifying terms and condition of tariff for a five year period 2009-14 including norms
for operation on its own in the absence of CEA recommendations.
27.2 The Commission’s approach has been so far to prescribe single value norms
depending upon unit sizes and type of fuel and technology. In specific cases relaxed
norms have also been prescribed when situation so demanded. In the meantime, CEA
made its recommendations on operational norms for the thermal generating stations in
September 2008. On the request of beneficiaries the operational data submitted by the
CPSU’s and the CEA recommendations on operational norms were made public on
CERC web site.
27.3 The beneficiaries like MPPTCL, UPPCL, RRVUNL, GUVNL; etc have sought
for fixing more stringent norms. One of the stakeholders has sought the average of
actual should be the norm. On the other hand generators namely NTPC, NLC,
NEEPCO and DVC had sought for continuation of the existing norms or relaxed norms
in specific cases. Some State generators have sought for more relaxed norms.
According to them, norms based on high performing stations when adopted by the
SERCs would lead to innumerable losses for them.
104
27.4 Before dealing with the concerns of the stakeholders, we would like to discuss
some of the provisions of the tariff policy notified by Govt of India on 6.1.2006. Some
of the provisions are extracted as under:
(a) The Para 1.3 and 1.4 of the tariff policy reads as follows:
“1.3. It is therefore essential to attract adequate investments in the power sector by

providing appropriate return on investment as budgetary resources of the Central and
State Governments are incapable of providing the requisite funds. It is equally
necessary to ensure availability of electricity to different categories of consumers at
reasonable rates for achieving the objectives of rapid economic development of the
country and improvement in the living standards of the people.
1.4. Balancing the requirement of attracting adequate investments to the sector and
that of ensuring reasonability of user charges for the consumers is the critical
challenge for the regulatory process. Accelerated development of the power sector and
its ability to attract necessary investments calls for, inter alia, consistent regulatory
approach across the country. Consistency in approach becomes all the more necessary
considering the large number of States and the diversities involved.”
Thus, the objectives of tariff policy are to:
(i) Ensure availability of electricity to consumers at reasonable and competitive rates;

(ii) Ensure financial viability of the sector and attract investments;
(iii) Promote transparency, consistency and predictability in regulatory approaches
across jurisdictions and minimise perceptions of regulatory risks;
(iv) Promote competition, efficiency in operations and improvement in quality of
supply.
(b) The tariff policy in para 5.1 also provides as follows:
105
“All future requirement of power should be procured competitively by distribution
licensees except in cases of expansion of existing projects or where there is a State
controlled/owned company as an identified developer and where regulators will need
to resort to tariff determination based on norms provided that expansion of generating
capacity by private developers for this purpose would be restricted to one time addition
of not more than 50% of the existing capacity.
Even for the Public Sector projects, tariff of all new generation and transmission
projects should be decided on the basis of competitive bidding after a period of five
years or when the Regulatory Commission is satisfied that the situation is ripe to
introduce such competition.”
Thus tariff policy has laid down a framework for performance based cost of
service regulation in respect of aspects common to generation, transmission as well as
distribution.
(c) With regards to operational norms, tariff policy provide as follows:
“Suitable performance norms of operations together with incentives and dis-

incentives would need to be evolved along with appropriate arrangement for
sharing the gains of efficient operations with the consumers. Except for the
cases referred to in para 5.3 (h)(2), the operating parameters in tariffs should
be at “normative levels” only and not at “lower of normative and actuals”.
This is essential to encourage better operating performance. The norms should
be efficient, relatable to past performance, capable of achievement and
progressively reflecting increased efficiencies and may also take into
consideration the latest technological advancements, fuel, vintage of
equipments, nature of operations, level of service to be provided to consumers
etc. Continued and proven inefficiency must be controlled and penalized.
106
The Central Commission would, in consultation with the Central Electricity
Authority, notify operating norms from time to time for generation and
transmission. The SERC would adopt these norms. In cases where operations
have been much below the norms for many previous years, the SERCs may fix
relaxed norms suitably and draw a transition path over the time for achieving
the norms notified by the Central Commission.
(d) The para 5.3 (h)(2)of the tariff policy provide as follows:
“In cases where operations have been much below the norms for many previous
years the initial starting point in determining the revenue requirement and the
improvement trajectories should be recognized at “relaxed” levels and not the
“desired” levels. Suitable benchmarking studies may be conducted to establish
the “desired” performance standards. Separate studies may be required for
each utility to assess the capital expenditure necessary to meet the minimum
service standards.”
27.5 In the light of above provisions of tariff policy, the Commission’s endeavor is to
specify just and fair norms balancing the interest of the beneficiaries as well as the
generators to the extent practicable and possible. The Commission is neither in favour
of specifying stringent operational norms nor in favour of giving relaxed norms unless
conditions warrant such relaxation. Commission is also conscious of the fact that the
future procurement of power by the licenceese shall be through competitive bidding.
Nevertheless, regulated prices are expected to give price signals for the investors to
invest in the Indian power sector. The Commission’s approach is to have distinct
operational norms depending upon type of technology and fuel, relatable to past
performance in case of existing stations duly taking into consideration actual
performance level, age of stations, providing for sufficient operational flexibility with
system of built in incentive and disincentive mechanism. In respect of new station
107
which would be achieving COD on or after 1.4.2009 operational norms intend to
capture the new technological advancements.
27.6 The Commission doesn’t consider it right approach to specify actual performance
to be made the norms. This would not incentivize the generator to sustain the
performance and improved efficiency levels.
27.7 The actual average based on past performance of stations during 2004-05 to 2007-
08 has acted as guide for the commission to specify reasonable norms after passing on
gains in efficiency over these years to the beneficiaries in the form of improved
efficiency and performance norms of aux energy consumption for the next tariff period
wherever deemed fit. It is because the SHR and the aux energy consumption of a
station are dependent on the PLF of the station. Higher the PLF lower the SHR and
Aux. energy consumption signifying more electricity available to the beneficiary in the
form of additional generation. This additional generation which requires lot of efforts
on the part of generator is at nominal cost by way of incentive and energy charges and
effectively reduces the unit cost of electricity to the beneficiaries. Thus passes on the
benefit of efficient operation to the beneficiaries directly.
27.8 The Commission is of the view that unlike SHR and Aux energy consumption
norm, the specific fuel oil consumption norm is on a different footing. The use of
specific fuel oil is necessary for the stable operation of units and the grid. It has been
observed in the past that generator is saving much due to improved performance of the
station beyond 70%. Whereas, commission does not want to sacrifice the grid stability
and unit stability but at the same time would like the savings in specific fuel oil
consumption as against norm be shared with the beneficiaries on year to year basis.
27.9 The actual operational parameters for the 2007-08 have also been submitted by
the CPSUs. The station wise existing operational norms, actual operational
parameters for 2004-05 to 2007-08, average performance parameters, Norms as per
draft and norms as recommended by CEA are tabulated in Annexure-B. Various
108
operational norms are discussed below in the light of CEA recommendations,
submissions of the stakeholders and considering the operational data of 2007-08:
Norms of Operation of Thermal Generating Stations:
28. Normative Annual Plant Availability Factor (Regulation 26)
28.1 The Commission in the draft regulations had raised the Normative Annual plant
availability factor (target availability) for the full recovery of fixed charges from 80%
to 85% in general for existing as well as new thermal generating stations.In the draft
regulations for tariff period 2009-14, Normative Annual Plant Availability Factor
(NAPAF) for recovery of fixed charge and for incentive were specified as follow:
(a) All thermal generating stations, except those

covered under clauses (b), (c), (d), (e) & (f) - 85%
(b) Thermal generating stations of NTPC Ltd
Talcher TPS 82%

Tanda TPS 82%
Badarpur TPS 82%
(c) Thermal generating stations of Neyveli Lignite Corporation Ltd
TPS-I 72%
TPS-II Stage-I & II 75%
TPS-I (Expansion) 80%
109
(d) Thermal generating stations of Damodar Valley Corporation (DVC):
Bokaro TPS 75%

Chandrapura TPS 60%
Durgapur TPS 74%
(e) Assam Gas Based Station of NEEPCO :
Assam GPS 70%
(f) Lignite-based generating stations using Circulatory

Fluidized Bed Combustion (CFBC) Technology – 80%
28.2 The CEA has recommended the continuation of existing norms for the thermal
generating stations. Beneficiaries have sought a norm of 90%. On the other hand NTPC
has sought to continue with existing norm of 80% citing problems in coal supply for its
generating stations and dwindling coal stock position.
28.3 The Commission had proposed the above norms having due regard to the actual
performance of the coal/lignite based stations for the period 2004-05 to 2006-07. The
availability of these stations of NTPC and NLC has further improved in 2007-08
except in case of Farakka TPS of NTPC and TPS-I station of NLC. The average
availability of stations for the period 2004-05 to 2007-08 having 200 MW sets and
above is in the range of around 86 to 97% except Farrakka TPS. These stations are
performing at commendable high performance levels consistently for all these years.
Problem of coal supply in case of one station at Farakka TPS and specific problem at
TPS-I station cannot be a ground for lower norm. At the same time, we are also
conscious of the fact that these stations are amongst the best performing stations and
setting norm close to such high performance level will not leave them scope for
operational flexibility in case of poor supply of fuel, any operational contingency,
110
deterioration in the fuel quality etc. A very high performance norm may also
discourage the new investment in the sector as in the regulated regime it may be
difficult for them to mitigate any risk for not achieving the specified high performance
level. Commission is therefore, convinced that norm of 85% for these stations is just,
reasonable and equitable.
28.4 The beneficiaries have sought for higher availability norm for Badarpur, Tanda
and Talcher TPS of NTPC. The commission had kept the lower availability norm for
these stations having regard to their vintage. However, Tanda is performing at fairly
high level consistently above 90% for the last two years and has still not completed its
useful life. As such, we are inclined to set a norm for Tanda TPS at 85%. But in case,
of Talcher TPS and Badarpur TPS, we intend to keep the norm same as provided in the
draft regulations at 82% for the reasons specified in draft regulation.
28.5 In respect of DVC stations we do not find any reason to set a different availability
norm except Mejia TPS 1 to 4. Mejia unit 1 to 4 has improved upon its performance
and has achieved a PLF of 90% in 2007-08 but only one year performance is not
sufficient to justify the same availability norms as set for other good performing
stations which are consistently performing at level above the availability norm of 85%.
As such, we are fixing a norm of 82% for the Mejia unit 1 to 4 based on their
performance for the year 2006-07 and 2007-08. Other stations namely Bokaro,
Chandrapura and Durgapur despite improved performance than the previous years are
still short of norms specified by CERC for the year 2008-09 and as such availability
norms as specified in draft regulations are being adopted in the final regulation for
these DVC stations.
28.6 Similarly in case of lignite based stations of NLC we don’t find that there is a case
for review of norms for these stations. In case of lignite stations of NLC, TPS-I
(Expansion) is consistently achieving availability and actual PLF level of more than
80%. TPS-II stage-I & II has also been able to achieve availability of more than 75% in
2007-08. But in case of TPS-I Station availability levels has gone further down to 70%
111
in 2007-08 (Actual PLF). The NLC during the hearing has informed that they have
decided to phase out TPS-I units one by one in a phased manner. But the average
availability is of the order of 76% and hence we are keeping the availability norm as
72%. With regard to lignite fired stations using CFBC technology are concerned, we
found that the availability in initial years was of the order of 76% in case of surat
lignite fired station and gradually picked up thereafter. In view of this we are
providing for a norm of 75% during first three years of COD and thereafter, retaining a
norm of 80%. In respect of the new lignite power stations with PF Boilers, availability
norms have been combined with the coal power fire stations at 85%. NLC has
expressed that difference in the availability norms of 5% between coal and lignite
power stations should be maintained as in the previous Tariff Orders for the period
2004-2009 in view of the difficulties faced in lignite fired boilers. However, it has
been decided to retain the draft and specific difficulties if any brought out by NLC
could be looked into for suitable modifications.
28.7 As regards target plant load factor for the payment of incentive is concerned, it is
not relevant now when the Commission has decided to go for the availability based
incentive scheme for the thermal generating stations as provided in draft regulations.
This has been discussed separately. In coal/lignite based stations we intend to keep the
target availability for payment of incentive as the same as that of target availability for
the recovery of full fixed charges.
28.8 The availability of the various Gas/Liquid fuel based generating stations NTPC in
the last 4 years i.e. 2004-05 to 2007-08 is as follows:
NTPC’s gas based 2004-05 2005-06 2006-07 2007-08 Average

station
Auraiya 82% 91% 90% 81% 86%
Anta 86% 91% 88% 85% 88%
Dadri 89% 90% 85% 84% 87%
112
Kawas 91% 93% 95% 87% 91%
Jhanor Gandhar 71% 81% 82% 78% 78%
Faridabad 98% 95% 89% 83% 91%
Kayamkulam
85% 96% 93% 93% 92%
( RGCCP)
28.9 It can be seen that despite lower performance level in 2007-08, all the above
plants of NTPC are maintaining average availability in the range of 86% to 91% except
in case of Jhanor Gandhar GPS. The actual PLFs which were much lower than the
respective availability during the last 4 years due to the fact that liquid fuel based
capacity was not being dispatched by the beneficiaries due to very high cost of liquid
fuel namely Naphtha and HSD and high spot prices of RLNG. But due to steep fall in
crude prices we expect that this trend will no longer continue in the next tariff period.
With the improvement in the despatches on liquid fuel from Kawas station of NTPC,
we feel that more gas could be diverted to Gandhar GPS. Further, reduction in prices of
spot gas will also enable despatches of capacity on RLNG so that generator like NTPC
could arrange for Gas with some certainty. Nevertheless, in case of gas shortage, we
have already provided that the generating co. may propose to deliver a higher MW
during peak-load hours by saving fuel during off-peak hours. The nodal load dispatch
centre may then specify a pragmatic day-ahead schedule for the generating station to
optimally utilize its MW and energy capability, in consultation with the beneficiaries.
In such a case the DCi shall be taken to be equal to the maximum peak-hour ex-power
plant MW schedule specified by the nodal load dispatch centre for that day.
28.10 As such, we are fixing availability norm of 85% for all existing as well as new
gas/liquid fuel based stations.
28.11 The actual availability for the period 2004-05 to 2007-08 as achieved by Small
Gas turbine stations of NEEPCO is as below:
113
Average
Station 2004-05 2005-06 2006-07 2007-08
Assam GPS 78% 72% 72% 69% 73%
Agartala
GPS 83% 97% 94% 93% 92%
28.12 It is observed that the Target Availability of 80% could not be achieved by the
Assam GPS from 2004-05 to 2007-08. It is because the station is not getting required
quantity of gas for availability declaration of 80%. Further, as brought out in our
explanatory memorandum with draft regulation that the allocation of 1.0 MCMD of gas
on firm basis and 0.4 MCMD on fall back basis is sufficient for sustaining a generation
level of the order of 70% only. Arranging of spot gas or any other alternate fuel in the
remote north-eastern region is also not a feasible option. In this back drop, Commission
is of the view that there is a case for relaxation of target availability norm for the
Assam GPS station. However, the average availability of the station is about 73% for
the years 2004-05 to 2007-08 despite availability of 70% (Actual PLF) in the year
2007-08. As regards, provision regarding conserving gas during off peak hours and
using it during off-peak hours in consultation with beneficiaries due to gas shortage
may be a difficult option for Assam GPS due to supply of gas from scattered wells,
through short pipelines which do not have any capacity for gas storage (line pack),
Considering all these aspect, a target availability norm of 72% is allowed for the tariff
period 2009-14 as against 70% provided in the draft regulation.
28.13 In case of Agartala GPS, the station is able to achieve an average availability of
92% in last three years i.e. 2005-06 to 2007-08 and there is no gas supply problem. As
such, a target availability norm of 85% is allowed for the Agartala GPS.
28.14 For the new small gas turbine stations, the target availability norm for the full
recovery of fixed charges and payment of incentive shall also be 85%. Accordingly,
following availability norms are specified:
114
“ (i) Normative Annual Plant Availability Factor (NAPAF) for
recovery of fixed charge and for Incentive
(a) All thermal generating stations, except those

covered under clauses (b), (c), (d), (e) & (f) - 85%
(b) Thermal generating stations of NTPC Ltd
Talcher TPS 82%

Badarpur TPS 82%
(c) Thermal generating stations of Neyveli Lignite Corporation Ltd
TPS-I 72%
TPS-II Stage-I & II 75%
TPS-I (Expansion) 80%
(d) Thermal generating stations of Damodar Valley Corporation

(DVC):
Mejia TPS Unit-I to IV 82%

Bokaro TPS 75%
Chandrapura TPS 60%
Durgapur TPS 74%
(e) Gas Based Station of NEEPCO :
Assam GPS 72%
115
(f) Lignite-fired Generating Stations using Circulatory Fluidized Bed
Combustion (CFBC) Technology –
1. First three years from COD – 75%
2. From next year after completion of 3 years of COD – 80%.”
29. Gross Station Heat Rate {Regulation 26(ii)}
29.1 Coal/Lignite based thermal generating stations :CERC had tightened the Gross
station heat rate norm in the draft regulation for existing as well as new 500 MW units
from 2450 kCal/kWh to 2400 kCal/kWh. The SHR norm for lignite based stations
continued to be linked to SHR norm of coal based station with correction factor for
moisture content. Separate norms were specified for 600 MW and above sets based on
super critical boiler technology and lignite based stations based on CFBC technology.
29.2 So far as existing stations commissioned before 1.4.2004 are concerned, CEA has
recommended continuation of existing norms. In respect of new generating stations
commissioned after 1.4.2004, CEA has departed from earlier practice of specifying
single value norms according to the unit sizes and class of turbines in case of gas based
stations. CEA has recommended for specifying Station heat rate norms with a
multiplying factor of 6% over the design heat rate in respect of coal/lignite fired
stations and 5% over the design heat rate in respect of gas based stations and 2% over
the SHR norm of gas based stations for liquid fuel firing.
29.3 It may be appreciated that CERC had specified Operational norms having regard
to the actual of 2004-05 to 2006-07 in the absence of CEA recommendations. CEA
before making its recommendations has gone in to operational performance of not only
CPSUs but has also considered operational performance of generating stations of State
Utilities as well. CEA has also deliberated upon various operational aspects and
operation margins. The CEA recommendation that design heat rates quoted by the
116
manufacturer or based on the quotations of manufactures are more representative
numbers taking in to account all site specific conditions; quality of coal, etc definitely
has a merit. The operating margin of 6% for the coal based stations and 5% for the gas
based stations over the design heat rate are after due consideration of actual of a class
of best performing stations including stations of State Utilities . However, to safeguard
against the misquoting of design heat rate, CEA has also recommended following
ceiling design turbine cycle heat rate and boiler efficiency depending upon domestic or
imported coal as fuel:
Steam parameters at Turbine Maximum Turbine cycle heat

inlet rate
Pressure MST/RST (Deg

(kcal/kWh)
Kg/cm2 C)
150 535/535 1955
1910 (with MD-BFP ),

170 537/537
1950 (with TD-BFP)
1895(with MD-BFP ),
170 537/565
1935(with TD-BFP)
1860(with MD-BFP ),
247 537/565
1900(with TD-BFP)
1810(with MD-BFP ),
247 565/593
1850(with TD-BFP)
Fuel Minimum Boiler Efficiency (%)
Sub -bituminous Indian coals 85%
Bituminous Imported coal 89%
117
29.4 In view of this we are accepting CEA recommendations with following
modifications as discussed below:
(a) In respect of existing units, CEA has recommended that existing norms
may be allowed to continue. NTPC has also submitted SHR data of its 500 MW
units in the stations having mix of 200/210 MW and 500 MW units which
averages to 2405 kCal/kWh. However, having regard to actual heat rate data
and actual PLF data of NTPC stations for 2004-05 to 2007-08, Commission is
of the view that improvement in SHR norm is on account of improved in PLF
in year to year basis except few stations. CEA has also recognized that the
NTPC units are operating near 100% of their MW rating. Such a performance
consistently is really very credit worthy and beneficiaries has gained
tremendously with extra generation at nominal incentive plus energy charges
effectively reducing their per unit cost. However, sustaining of such high
performance level may not be sustained always thus calling for providing
some margin for operational flexibility. The present margin for operational
flexibility is of the order of 2-3% in respect of coal based stations. As for as 500
MW sets (including those commissioned between 1.4.2004 to 31.3.2009) are
concerned, these units are relatively new and are expected to maintain current
performance levels, and as such, for these stations there is scope for tightening
of SHR norm for 500 MW unit by about 25 kCal/kWh still giving them
operational flexibility to deal with variation in fuel quality and fuel supply
constraints etc. As such, we are fixing a SHR norm of 2425 kCal/kWh (instead
of 2400 kCal/kWh as proposed in draft) for the existing 500 MW units and
passing on the benefit of efficiency gain to the benficiaries. In respect of
200/210/250 MW sets, which are relatively old and near completion of their
useful life, the performance level is expected to be lower due to R&M activities,
a point made by the NTPC. As such, in respect of 200/210/250 MW sets we are
retaining the norms as 2500 kCal/kWh.
118
(b) In respect of NTPC stations namely Tanda TPS and Talcher TPS, it is
felt that there is further scope of reduction of heat rate norm by about 25
kCal/kWh having regard to their actual heat rate data for the period 2004-05 to
2007-08. In respect of Gandhar GPS, NTPC has sought for relaxation of norm
to 2080 kCal/kWh due to water injection to control NOx. However, considering
actual performance we feel that a norm of 2040 kCal/kWh would be sufficient.
Similarly, in case of Assam GPS due to non availability of gas, we are relaxing
the SHR norm to 2400 kCal/kWh as provide in the draft regulations based on
actual performance data as it is not possible for the NEEPCO in NE region to
arrange gas from any other alternate source. In respect of Agartala GPS, we are
providing for tightening of SHR norm to 3500 kCal/kWh from the present 3580
kCal/kWh considering its actual performance. With regard to DVC existing
stations as provide in the draft regulation, we are specifying same norms as
applicable in 2008-09 as these stations are yet to achieve norms specified for
2008-09. However, Commission would be taking stock of the actual
performance of these stations and would review the DVC norms as and when
considered necessary.
(c) In respect of new coal/lignite based thermal generating units, Commission

is of the view that the SHR norms could not be set based on the actual
performance of high performing units leaving them no scope for operational
flexibility. As such, Commission is providing for a 0.5% additional margin over
the design heat rate and accordingly, providing for a margin of 6.5% above the
design heat rate as the SHR norm for the new coal/lignite based stations.
Further, to safeguard against the misquoting of design heat rate, as suggested by
CEA we are providing that the design heat rate should not exceed the following
values in respect of units depending upon their temperature and pressure
ratings:
119
Pressure Rating 150 170 170 247 247
(Kg/cm2)
SHT/RHT (0C) 535/535 537/537 537/565 537/565 565/593
Type of BFP Electrical Turbine Turbine Turbine Turbine
Driven driven driven driven driven
Max Turbine Cycle
Heat rate 1955 1950 1935 1900 1850
(kCal/kWh)
Min.Boiler Efficiency
Sub-Bituminous
Indian Coal 0.85 0.85 0.85 0.85 0.85
Bituminous 0.89 0.89 0.89 0.89 0.89
Imported Coal
Max Design Unit Heat rate (kCal/kWh)
Sub-Bituminous 2300 2294 2276 2235 2176
Indian Coal
Bituminous 2197 2191 2174 2135 2079
Imported Coal
(d) It can be seen that the CEA had provided for ceiling of minimum boiler
efficiency for imported coal as well. All the existing stations were designed for
domestic sub -bituminous Indian coals. But due to deteriorating quality and
shortage of coal, NTPC has started blending imported coal with domestic coal
in some of its power stations. This is with a view to move towards design coal.
As such, there should not be any confusion regarding use of imported coal for
the blending with domestic coal in the existing stations. Since such, blending is
unlikely to improve the guaranteed boiler efficiency which is given for a
designed coal. We shall therefore, be guided by the design coal for which
guarantees have been given by the supplier while adopting the efficiency
parameters for the domestic coal or the imported coal as the case may be.
120
(e) It may also be possible that the manufacturers may offer a machine whose
pressure and temperature ratings may not exactly match with the pressure and
temperature ratings specified above. In such a situation, the ceiling design heat
rate of the nearest class shall be taken for determining the norm.
(f) It may also be possible that unit heat rate has not been guaranteed but
turbine cycle heat rate and boiler efficiency are guaranteed separately by the
same supplier or different suppliers. In such a situation, the unit design heat rate
shall be arrived at by using guaranteed turbine cycle heat rate and boiler
efficiency.
(g) It may also be possible that one or more units of a station achieve COD
prior to 1.4.2009 and other units may achieve COD on or after 1.4.2009. The
units achieving COD prior to 1.4.2009 then shall be called existing units. Then
a question may arise whether the units of same type could have different norms.
In order to deal with such a situation, it is provided that in such a situation, the
heat rate norm for units achieving COD prior to 1.4.2009 as well as units
achieving COD on or after 1.4.2009 for the tariff period shall be lower of the
heat rate norms arrived at by above methodology and the norms for the existing
units.
(h) In case of lignite fired stations, ceiling design heat rates shall be up graded
using factor for moisture content.
(i) In respect of units where the boiler feed pumps are electrically operated, the
design heat rate shall be 40 kCal/kWh lower than the design heat rate specified
above with turbine driven BFP.
(j) As regards gas/liquid fuel based stations are concerned, margin specified by
CEA of 5% of design heat rate for gas based stations and 2% above it for liquid
fuel firing (7.1% of design heat rate) already provide for sufficient operational
121
flexibility.
29.5 Accordingly following operational norms are specified in clause (ii) of Regulation
26 of these regulations for the thermal generating stations:
“(ii) Gross Station Heat Rate
A. Existing Thermal Generating Station
(a) Existing Coal-based thermal generating unit(s), other than those covered under
clauses (b) and (c) below
200/210/250 MW Sets 500 MW Sets (Sub-critical)

2500 KCal/kWh 2425 kCal/kWh
Note 1
In respect of 500 MW and above units where the boiler feed pumps are
electrically operated, the gross station heat rate shall be 40 kCal/kWh
lower than the gross station heat rate specified above.
Note 2
For the generating stations having combination of 200/210/250 MW sets
and 500 MW and above sets, the normative gross station heat rate shall
be the weighted average gross station heat rate.
(b) Thermal generating stations of NTPC Ltd.:
Badarpur TPS 2825 kCal/kWh
122
Talcher TPS 2950 kCal/kWh
Tanda TPS 2825 kCal/kWh
(c) Thermal generating stations of Damodar Valley Corporation

(DVC):
Bokaro TPS 2700kCal/kWh

Chandrapura TPS 3100 kCal/kWh
Durgapur TPS 2820 kCal/kWh
(d) Lignite-based thermal generating stations
(1) For lignite-based thermal generating stations, except for TPS-I

and TPS-II (Stage I & II) of Neyveli Lignite Corporation Ltd, the
gross station heat rates specified under sub-clause (a) above for
coal-based thermal generating stations shall be applied with
correction, using multiplying factors as given below:
(i) For lignite having 50% moisture: 1.10

(ii) For lignite having 40% moisture: 1.07
(iii) For lignite having 30% moisture: 1.04
(iv) For other values of moisture content, multiplying factor
shall be pro-rated for moisture content between 30-40
and 40-50 depending upon the rated values of
multiplying factor for the respective range given under
sub-clauses (i) to (iii) above.
(2) TPS-I and TPS-II (Stage I & II) of Neyveli Lignite Corporation
Ltd
123
TPS-I 4000 kCal/kWh
TPS-II 2900 kCal/kWh
(e) Open Cycle Gas Turbine/Combined Cycle generating stations
(i) Existing generating stations of NTPC Ltd and NEEPCO

Name of generating station Combined cycle Open cycle
(kCal/kWh) (kCal/kWh)
Gandhar GPS 2040 2960
Kawas GPS 2075 3010
Anta GPS 2075 3010
Dadri GPS 2075 3010
Auraiya GPS 2100 3045
Faridabad GPS 2000 2900
Kayamkulam GPS 2000 2900
Assam GPS 2400 3440
Agartala GPS 3500
B. New Thermal Generating Station
(a) Coal based and lignite based thermal generating unit(s)

= 1.065 X Design Heat Rate of the unit(s) (kCal/kWh)
Where the Design Heat Rate of a unit means the unit heat rate
guaranteed by the supplier at conditions of 100% MCR, zero percent make up,
design coal and design cooling water temperature/back pressure.
Provided that the design heat rate shall not exceed the following design
heat rates depending upon the pressure and temperature ratings of the units:
124
Pressure Rating 150 170 170 247 247
(Kg/cm2)
SHT/RHT (0C) 535/535 537/537 537/565 537/565 565/593
Type of BFP Electrical Turbine Turbine Turbine Turbine
Driven driven driven driven driven
Max Turbine Cycle Heat 1955 1950 1935 1900 1850
rate (kCal/kWh)
Min.Boiler Efficiency
Sub-Bituminous Indian
Coal 0.85 0.85 0.85 0.85 0.85
Bituminous Imported 0.89 0.89 0.89 0.89 0.89
Coal
Max Design Unit Heat
rate (kCal/kWh)
Sub-Bituminous Indian 2300 2294 2276 2235 2176
Coal
Bituminous Imported 2197 2191 2174 2135 2079
Coal
Provided further that in case pressure and temperature parameters are different
from above ratings, the ceiling design heat rate of the nearest class shall be taken:
Provided also that where unit heat rate has not been guaranteed but turbine
cycle heat rate and boiler efficiency are guaranteed separately by the same supplier or
different suppliers, the unit design heat rate shall be arrived at by using guaranteed
turbine cycle heat rate and boiler efficiency.
Provided also that if one or more units achieve COD prior to 1.4.2009 then the
heat rate norm for those units as well as units achieving COD on or after 1.4.2009 for
125
the tariff period shall be lower of the heat rate norms arrived at by above methodology
and the norms as per the regulation 29 (ii) A (a).
Provided also that in case of lignite fired stations, ceiling design heat rates shall
be up graded using factor for moisture content given in sub clause (1) of clause (ii)
A(d) of this regulation.
Note: In respect of units where the boiler feed pumps are electrically operated, the
design heat rate shall be 40 kCal/kWh lower than the design heat rate specified above
with turbine driven BFP.
(b) Gas / Liquid based thermal generating unit(s)/ block(s)
= 1.05 X Design Heat Rate of the unit/block for Natural Gas and RLNG (kCal/kWh)
= 1.071 X Design Heat Rate of the unit/block for Liquid Fuel (kCal/kWh)
Where the Design Heat Rate of a unit shall mean the guaranteed heat rate for a
unit at 100% MCR and at site ambient conditions; and the Design Heat Rate of a block
shall mean the guaranteed heat rate for a block at 100% MCR, site ambient conditions,
zero percent make up, design cooling water temperature/back pressure.”
30. Secondary fuel oil consumption {Regulation 26(iii)}
30.1 Specific fuel oil consumption norm was reduced by the Commission from 2.0
ml/kWh to 1.00 ml/kWh for the coal based stations and 1.5 ml/kWh for lignite based
stations whether new or existing, having 200MW sets and above in clause (iii) of
Regulation 26 of draft Regulations. Relaxed norms were specified for some of the
generating stations of NTPC, DVC, NLC and NEEPCO.
30.2 While MPPTCL and UPPCL have urged for reducing the secondary fuel oil
126
consumption to 0.4 ml/kWh and 0.5ml/kWh respectively, TNEB and Energy Infratech
Pvt Limited have pitched for retention of the existing norms. NTPC has argued for 1.5
ml/kWh for 500 MW sets, 2 ml/kWh for 200/210 MW sets. NLC has asked for 3
ml/kWh for TPS-I(Expansion), TPS-II(Expansion) and Barsinghar CFBC. DVC has
asked for 2 ml/kWh for Mejia TPS. Concerns have also been shown by the
RLDCs/NLDC that reduced norms should not come in the way of optimal grid
operation for fear of more oil consumption.
30.3 CEA has recommended a Specific fuel oil consumption norm of 0.75 ml/kWh in
respect of existing coal fired generating stations and 1.25 ml/kWh for lignite fired
generating stations. It has been seen that the specific fuel oil consumption in respect of
NTPC coal based stations has been much lower than 0.75 ml/kWh recommended by
CEA except in case of Farakka TPS.
30.4 The Commission is of the view that the generators should not be discouraged to
take oil support when necessary which is important from the boiler safety and grid
security point of view. Commission is, therefore, providing for a norm of 1.0 ml/kWh
but with a provision for sharing of savings with the beneficiaries on account of actual
consumption being lower than the norms in the ratio of 50:50. Similarly in respect of
lignite based stations we are providing for a norm of 2.0 ml/kWh and relaxed norm of
3.5 ml/kWh for TPS 1 station of NLC. In case of lignite fired generating stations, CEA
has recommended a norm of 1.25 ml/kWh. CEA is of the view that CFBC boiler does
not require oil support at low load operations. As such, we are accepting CEA’s
recommendations in this regard. In case of DVC also relaxed norms of 2008-09 are
being allowed. The savings in oil consumption shall also be shared by these stations
with the beneficiaries in the 50:50 ratios. Accordingly, following specific fuel oil
norms are provided in clause (iii) of Regulation 26:
“ (iii) Secondary fuel oil consumption

(a) Coal-based generating stations other than at (c) below
: 1.0 ml/kWh
127
(b) (i) Lignite-fired generating stations except stations based on CFBC technology
and TPS-I : 2.0 ml/kWh
(ii) TPS-I : 3.5 ml/kWh
(iii) Lignite-fired generating stations based on CFBC technology

: 1.25ml/kWh
(c) Coal-based generating stations of DVC”
Mejia TPS Unit I to IV 2.0 ml/kWh

Bokaro TPS 2.0ml/kWh
Chandrapura TPS 3.0 ml/kWh
Durgapur TPS 2.4 ml/kWh
31. Auxiliary Energy Consumption {Regulation 26(iv)}
31.1 In respect of aux. energy consumption norms, CEA has recommended norms
depending upon type of cooling tower i.e. induced draft cooling towers and natural
draft cooling towers and open cycle cooling. Moreover, for steam driven BFP, CEA
has recommended norms with reduction of 2.5%. In respect of gas /liquid fuel fired
generating stations CEA has recommended continuation of same norm of 3% for
combined cycle operation and 1% for open cycle operation. For lignite fired stations
based on CFBC technology, CEA has recommended a norm of 10.5% with induced
draft cooling towers and 10% for natural draft cooling towers and open cycle operation.
We find that CEA norms are conforming to the actual consumption of CPSUs
generating stations. As such, we are accepting CEA recommendations in this regard.
128
However, in case of Barsingsar lignite fired stations of NLC based on CFBC
technology, CEA has reviewed the norm and has recommended a norm of 11.50%.
Considering the actual of Surat lignite station and additional pumping of water required
for Barsinghsar station, we have accepted the norm of 11.5%.
31.2 In view of the above discussion, the Commission has specified the following
norms for auxiliary energy consumption clause (iv) of Regulation 26 of these
regulations:
“(iv) Auxiliary Energy Consumption
(a) Coal-based generating stations except at (b) below:
With Natural Draft cooling tower or Without

cooling Tower
(i) 200 MW series 8.5%
(ii) 500 MW & above
Steam driven boiler feed pumps 6.0%
Electrically driven boiler feed 8.5%
pumps
Provided further that for induced draft cooling towers, above norms shall further be
increased by 0.5% point.
(b) Other Coal-based generating stations:
(i) Talcher TPS 10.5%

(ii) Tanda TPS 12.0%
(v) Badarpur TPS 9.5%
129
(vi) Bokaro TPS 10.25%
(vii) Chandrapura TPS 11.50%
(viii) Durgapur TPS 10.50%
(c) Gas Turbine/Combined Cycle generating stations:
(i) Combined cycle 3.0%

(ii) Open cycle 1.0%
(d) Lignite-fired thermal generating stations:
(i) All generating stations with 200 MW sets and above:
The auxiliary energy consumption norms shall be 0.5

percentage point more than the auxiliary energy consumption
norms of coal-based generating stations at (iv) (a) (i) & (ii)
above. For lignite based stations based on CFBC technology,
auxiliary energy consumption norms shall be 1.5 percentage
point more than the auxiliary energy consumption norms of coal-
based generating stations at (iv) (a) (i) & (ii) above.
(ii) Generating stations up to 125 MW sets using CFBC technology:

11.50%
(iii) TPS-I, TPS-II Stage-I&II and TPS-I (Expansion) of Neyveli

Lignite Corporation Ltd.:
TPS-I 12.0%
TPS-II 10.0%
TPS-I (Expansion) 9.50%
130
32. Lime stone Consumption Norm for lignite fired station of NLC using CFBC
technology
32.1 In so far as lime stone consumption for lignite-based generating station using
CFBC technology is concerned, the Commission had specified a norm of 0.05 kg/kWh
based on RERC order and had provided for factoring in this in the fixed cost. CEA on
the Commission’s request has gone into the quality of lignite to be fired in the up
coming stations of Barsingsar & TPS-II (Expansion) of NLC and has recommended
specific norms depending upon the sulpher content in lignite to be fired. On this
consideration, the Commission has decided to provide for specific norm rather than a
general norm which may vary depending upon sulphur content in the lignite.
Accordingly, following norms of lime consumption in respect of following stations of
NLC using CFBC technology have been adopted:
Barsinghsar : 0.056 kg/kWh.
TPS-II (Expansion) : 0.046 kg/kWh
33.0 Norms of Operation of Hydro Generating Stations
33.1 Normative Annual Plant Availability Factor(Regulation 27)
33.1.1 The generating companies namely, National Hydro-electric Power Corporation

Limited, Satluj Jal Vidyut Nigam Limited, Tehri Hydro Development Corporation
Limited, North-Eastern Electric Power Corporation Limited, Narmada Hydro electric
Development Corporation and Damodar Valley Corporation were directed to furnish
the information in respect of each of its hydro-electric generating station presently in
operation, to enable the Commission to take a view on the determination of values of
Normative Annual Plant Availability Factor. On the basis of performance data made
131
available by various hydro generating companies for the period 2003-04 to 2007-08,
actual plant availability of each station has been assessed. Chamera-I and Chamera-II
stations of NHPC which had consistent performance in terms of providing peaking
capability during last 4-5 years and where plant availability is not affected by silt are
considered as benchmark stations. Normative plant availability factor (NAPAF) of
these stations has been considered at 90%.
33.1.2 Normative annual plant availability factor (NAPAF) of various hydro

generating stations shall be determined based on following criteria /guidelines:
(i) Storage and pondage type plants with head variation between Full
Reservoir Level (FRL) and Minimum Draw Down Level (MDDL) of up to 8%
and where plant availability is not affected by silt : 90%
(ii) In case of Storage and pondage type plants with head variation between
Full Reservoir Level and Minimum Draw Down Level of more than 8% and
where plant availability is not affected by silt, the month wise peaking
capability as provided by the project authorities in the DPR (approved by CEA
or the State Govt.), shall form basis of fixation of NAPAF.
This has been explained with the following example of Tehri HE project of
THDC, as per submission of the generating company.
Installed capacity : 4x250 MW
Month Expected Avg. of daily 3-hour

peaking capacity
April 701
May 448
132
June 497
July 544
August 990
September 1000
October 1000
November 1000
December 1000
January 1000
February 693
March 605
Weighted average of expected daily peaking capability= 790 MW
Peaking capacity is based on the assumption that one unit shall be under annual
maintenance during month of May, July, February and March.
Considering 2% allowance on plant capacity on account of forced outages

during the year, expected average peaking capacity= 770 MW
Thus, NAPAF= 770/1000= 77%
(iii) Pondage type plants where plant availability is significantly affected by

silt, a margin of 5% has been allowed and NAPAF shall be 85%
(iv) In case of purely Run-of-river type plants, NAPAF shall be determined

plant wise, based on its 90% dependable 10-daily inflows pattern as approved
in the DPR of the project.
(v) A further allowance may be made by the Commission while

determining the NAPAF under special circumstances i.e. abnormal silt problem
or other operating conditions and known plant limitations.
133
(vi) Keeping in view the difficulties faced in North East Region, a further
allowance of 5% may be allowed for plants already in operation or likely to be
commissioned in N.E. region.
(vii) When head variation between FRL and MDDL is more than 8%,
following multiplying factors shall be applied:
Multiplying factor for

head variation = (Head at MDDL/Rated Head) x 0.5+ 0.52
33.1.3 NEEPCO brought to the notice of the Commission following inherent

operational problems faced in respect of Kopili-I, Khandong, Kopili-II and
Doyang HE projects:
(i) Installed capacities of Kopili (200 MW), Khandong (50 MW) & Kopili-II (25
MW) could never be achieved due to more than expected head loss in HRT.
Practically, maximum generation from Kopili-I, Khandong, Kopili-II stations
are 196 MW, 44 MW and 22 MW respectively with all units running during
high hydro period, whereas due to wide variation of head, the output of
these stations are much below the rated output during lean season.
(ii) In case of Doyang the design FRL is EL 333 M. However, local population
have been objecting to raise the reservoir level beyond EL 325 M, thus
practically achievable FRL is 325 M resulting in loss of maximum power
output.
(iii) Keeping in view the above practical difficulties faced by NEEPCO, the NAPAF of
the above stations has been arrived at in the following manner and also considering the
134
multiplying factor when head variation between FRL & MDDL is more than 8%.
a) KOPILI HEP (4 x 50 MW) has an FRL of 609.6 m, MDDL of 592.85 m,

TWL of 267.0 m and a rated head of 326.5 m. However, due to increased head
loss in the head race tunnel (HRT), the net head available at FRL is only 302.91
m (92.8% of the rated head). It would be reasonable to allow for this in
NAPAF for the generating station, since it constitutes a permanent operational
limitation. The station has no silt problem, and its head variation from FRL to
MDDL is only 5.5%, for which the bench mark NAPAF is 90% (considering
normal machine outages and operating conditions). With an allowance of 5%
for the difficulties faced in NER, the NAPAF for this generating station may be
specified as 90 x 0.928 x 0.95 = 79.34% ( rounded off to 79% ).
b) KHANDONG HEP ( 2 x 25 MW ) has an FRL of 719.3 m, MDDL of 704.3

m, TWL of 611.0 m and a rated head of 99.0 m. One 25 MW unit has been
installed under Kopili – Stage II to operate in parallel with the Khandong HEP,
due to which the HRT head loss has substantially increased, and net head
available at FRL (when all three units are operating) is only 85.38 m (86.2% of
the rated head ). This is a permanent operational limitation, and needs to be
allowed in NAPAF determination. Further, the head variation from FRL to
MDDL is 17.6%, much in excess of the head variation considered in bench
mark NAPAF of 90%, and a margin of 6.8% need be allowed for the same.
Taking these factors into account and allowing 5% for difficulties faced in
NER, the NAPAF for this generating station would work out to 90 x 0.862 x
0.932 x 0.95 = 68.7% (rounded off to 69%). This would also be applicable for
Kopili – Stage II ( 1 x 25 MW ).
c) DOYANG HEP ( 3 x 25 MW ) has a design FRL of 333.0 m, MDDL of

306.0 m, TWL of 252.5 m and rated head of 67.0 m. However, due to
objections of local population, the reservoir level is being restricted to 325.0 m,
at which the net head available is 65.59 m ( 98% of rated head ). Further, the
135
head variation from restricted FRL to MDDL is 29%, for which an allowance of
12.5% should be made in NAPAF. Considering these factors and allowing 5%
margin for difficulties faced in NER, the NAPAF for this generating station
would work out to
0.90 x 0.98 x 0.875 x 0.95 = 73.3% ( rounded off to 73.0% )
33.1.4 Based on the above, the Normative Annual Plant Availably Factor (NAPAF) of
the hydro generating stations shall be as follows :
Station Type of Plant Plant Capacity (MW) NAPAF (%)

NHPC
Chamera -I Pondage 3x180 90
Baira siul Pondage 3x60 85
Loktak Storage 3x35 85
Chamera-II Pondage 3x100 90
Rangit Pondage 3x20 85
Dhauliganga Pondage 4x70 85
Teesta-V Pondage 3x170 85
Dulhasti Pondage 3x130 90
Salal ROR 6x115 60
Uri ROR 4x120 60
Tanakpur ROR 3x31.4 55
NHDC
Indira sagar Storage 8x125 85
136
Omkareshwar Pondage 8x65 90
THDC
Tehri Stg-I Storage 4x250 77
SJVNL
Nathpa Jhakri Pondage 6x250 82
NEEPCO
Kopili Stg - I Storage 4x50 79
Khandong &
Kopili stg-2 Storage 3x25 69
Doyang Storage 3x25 73
Ranganadi Pondage 3x135 85
DVC
Panchet Storage 2x40 80
Tilaiya Storage 2x2 80
Maithon Storage 3x20 80
33.1.5 Based on the submission of the stakeholders, Commission has decided that
recovery of capacity and energy charges shall be on 50:50 basis for all hydro plants.
Hence there is no need to specify the Capacity Charge Apportionment Factor (CCAF).
34. CALCULATION OF TRANSMISSION SYSTEM AVAILABILITY
34.1 In the tariff regulations for 2004-2009, the availability of a transmission

system (for payment of transmission charges and incentive) is required to be worked
out through formulae in which
137
(i) A transmission line circuit has a weightage proportional to its length and
surge impedance loading (SIL), for working out the weighted average
availability of transmission lines.
(ii) A transformer / bus reactor has a weightage proportional to its MVA /
MVAR rating, for working out the weighted average availability of
transformers / bus reactors.
(iii) Transmission line circuits, transformers and bus reactors have
weightages proportional to their respective numbers in a transmission system,
in computation of the system’s overall availability.
34.2 While the same procedure for transmission system availability calculation had
been proposed in the draft tariff regulations for 2009-2014, the Commission has
observed two drawbacks in the above scheme, as discussed below.
(a) SIL has no direct relationship with the power carrying capability of a
transmission line. For example, SIL of a 400 kV line with twin Moose
conductors is 515 MW, and a 400 kV line with quad Bersimis conductor has an
SIL of 691 MW (1.34 times of the former), whereas the latter can easily carry
twice the amount of power. Further, SIL loses its significance totally in case a
line has a shunt reactor or series compensation. SIL is therefore not a suitable
criterion for weightage in line availability.
(b) In the overall availability determination for a transmission system, line

lengths, SIL and transformer/ bus reactor ratings do not figure, and the three
groups get a weightage only according to their numbers. In other words, a
transformer or a reactor ultimately has the same weight as a line circuit,
irrespective of their size or length.
34.3 To overcome the above drawbacks, a new formula has been specified in
Appendix –IV for calculation of transmission system availability in a composite
138
manner. Factors have been applied such that a 315 MVA transformer would have the
same weightage as a 200 km long D/C line with twin conductors, and a 50 MVAR
switched reactor would have one-fourth the weightage of a 315 MVA transformer. The
transmission lines shall have a weightage proportional to their circuit – km and number
of sub-conductors (to which the current carrying capacity is directly proportional).
Voltage has been omitted by design for the present, to deliberately enhance the
weightage for 220 kV and 132 kV lines (as they are critical for supply to beneficiaries),
and to suppress the weightage for 765 kV lines (since they presently carry power much
below their capability). The Commission may review and modify the formula when
the situation changes in future.
34.4 We are conscious of the fact that clause 6 of the procedure for calculation of
availability prescribed in Appendix-IV requires that in case of acts of god as also in
case of grid disturbance not attributable to the transmission licensee, the outage hours
attributable to these events have to be subtracted from the total outage duration as well
total hours during the month for the affected elements, yet the formulae in clauses 3
and 4 envisage total hours to be same for all elements. Since such events are rare, it
was thought that the basic formula can be simplified for normal application. If in any
month certain elements are affected by aforesaid events, Member Secretary of the RPC
concerned shall subtract from the denominator, outage hours attributable to the
aforesaid events multiplied by weightage factor for that element. For example if due to
an act of god (such as cyclone) one 300 km D/C quad conductor line is under outage
for 40 hours, not only these outage hours will not be counted in outage hours for that
element appearing in the numerator, from the denominator (as calculated based on
prescribed formula) figure equal to 600 x 4 x 40 i.e. 96000 will be deducted. It is
needless to mention that if an element is kept under operation using ERS, this element
will be considered available.
34.5 We recognize that there are many other aspects of transmission system
operation which also have an impact on the system reliability, but which are not
included in the computation of transmission system availability, to keep the latter
139
simple. Some of these are :
i) Outages of individual equipment which can be bypassed through

provisions in the scheme design, e.g. circuit breakers, and which can be
isolated without restricting power flows, e.g. shunt reactors, series
capacitors, sub-station busbars.
ii) Outage of individual equipment for which a stand-by has been provided
as a prudent practice, e.g. protective relays, a spare single-phase
transformer for a 3-phase bank.
iii) Restoration of a line on emergency restoration system (ERS).
34.6 In all these cases, redundancies provided for enhancing system security get
encroached upon, and it is expected that the transmission licensee would exercise due
diligence in the matter on his own, i.e. without having to be induced through a
commercial incentive to minimize the outage period.
34.7 Frequency of tripping of a transmission element, more so if the tripping is

caused by relay mal-operation, etc., also has an adverse impact on system security.
The Commission may consider incorporation of tripping frequency ( in number of
trippings in a year ) in the formula for calculating transmission system availability,
after a detailed exercise in due course.
Availability of HVDC System

34.8 A uniform availability norm of 95% was specified for all HVDC schemes
whether bipole or back-to-back, in the tariff regulations for 2004-2009, and was also
proposed in the draft for 2009-2014. PGCIL has represented that such a norm is too
high, and would be difficult to achieve on a sustained basis. The matter has therefore
been reviewed. It has been observed that the back-to-back HVDC stations have
generally achieved on annual availability of well over 95%. The average availability
achieved for the four-year period from 2004-05 to 2007-08 is 96.34% for Sasaram ( 1
x 500 MW ), 98.20% for Gazuwaka ( 2 x 500 MW ), 97.42% for Bhadrawati ( 2 x 500
140
MW ) and 98.64% for Vindhyachal ( 2 x 250 MW ). An availability norm of 95.0%
for these is therefore reasonable. On the other hand, the two bipole HVDC schemes,
Rihand – Dadri ( 2 x 750 MW ) and Talcher – Kolar (2 x 1000 MW ) have experienced
longer outages, and have achieved average availability of only 91.71% and 95.81%
respectively, over the same four year period. It would therefore be reasonable to
specify an availability norm of 92.0% for these, which would also allow the required
time for cleaning of line insulators ( not applicable in back-to-back HVDC ).
35. FERV(Regulation 40)
35.1 Generation and transmission utilities are of the opinion that both the cost of
hedging and impact of FERV should be allowed as a pass through without imposing
any condition of attributability. NTPC proposed that FERV prior to date of commercial
operation should be allowed to be capitalized. They also proposed amendment of para
14(3) of the proposed regulation as ‘… to the extent…..has not hedged the foreign
exchange exposure….’ instead of ‘…is not able to hedge….’.
35.2 On the other hand beneficiaries like TNEB, JVVNL, and AVVNL have suggested
that FERV or the cost of hedging is to be allowed to the extent of actual foreign
currency loans only. TNEB also suggested that, in line with Tariff Policy, FERV
should not be allowed. KSEB apprehended that hedging of foreign loan may not be
advantageous to the beneficiaries. CESC proposed that decision to going for hedging or
not should be left to the utilities; as hedging may not always be beneficial and depends
upon the market vagaries. Reliance energy has suggested that the Commission should
specify the circumstances under which FERV would not be attributable to the utilities.
35.3 The Commission has decided that the provisions on FERV as given in the draft
regulations does not call for any revision or modification.
141
36. Special Provision relating to DVC (Regulation 43)
36.1 Damodar Valley Corporation in its comments to the draft terms & conditions of
tariff regulation has submitted that the Corporation is a statutory body constituted
under the Damodar Valley Corporation Act, 1948. The Corporation is governed by the
provisions of section 79(1)(a) to (d) of the Electricity Act, 2003 in so far as activities of
generation and transmission of electricity are concerned. It has been submitted that
following special provisions may be made in the regulations in view of the special
status of DVC:
The power systems of DVC involving generation, transmission and distribution

activities are integrated and cannot be viewed independently for separate determination
of the annual revenue requirements of each of the generating stations and transmission
and distribution systems. Moreover, DVC is following an integrated manner of finance,
budget and accounts as per the provisions of the DVC Act, 1948. The format and other
details required under the tariff regulation should be allowed to be given to DVC with
the necessary modifications based on integrated finance, budget and accounts
maintained by DVC and further entire operation of generation, transmission and
distribution systems.
The Appellate Tribunal for Electricity in its judgement dated 23.11.2007 in Appeal No.
273 of 2007 and other related appeals has held that Part-IV, section 27 to 47 of the
DVC Act will have continued application and therefore the said provisions of the Act
should be given effect to while framing the regulations for terms and conditions of
tariff. DVC has suggested that a proviso should be inserted to Regulation 1 of the draft
regulations in order to ensure that provisions of DVC Act and the Electricity Act are
read in a consistent manner as per the decision of the Appellate Tribunal for Electricity.
“Provided further that these Regulations in so far as Damodar Valley Corporation

constituted under the Damodar Valley Corporation Act, 1948 (Act XIV of 1948) is
concerned will be applied with such modification as may be required to give effect to
142
the provisions of Part IV, Sections 27 to 47 of the said Damodar Valley Corporation
Act, 1948 and as per the decision of the Appellate tribunal for Electricity dated
23.11.2007 in Case No. 273 of 2006 and the provisions of these Regulations which are
inconsistent with the provisions of the above Part IV of the Damodar Valley
Corporation Act, 1948 shall not be given effect to.”
36.2 On the first issue that the tariff of the DVC for generation, transmission and
distribution should be determined in an integrated manner, the Commission is of the
view that it is only concerned with determination of tariff for generation and inter-state
transmission of electricity in terms of section 79(1)(a) to (d) read with section
62(1)(a)&(b) of the Electricity Act, 2003. Distribution of electricity completely falls
under the domain of the respect State Commissions. This has been made amply clear in
the Commission’s order dated 3rd October, 2006 determining the tariff for DVC for the
period 2004-06. With regard to the submission of information in an integrated manner
for determination of tariff, we are of the view that even though DVC is maintaining
accounts in an integrated manner, it is not difficult to segregate the accounts in respect
of electrical energy into generation, transmission and distribution. Section 62(2) of the
Electricity Act requires that the Appropriate Commission may require a licensee or a
generating company to furnish separate details as may be specified in respect of
generation, transmission and distribution for determination of tariff. The terms and
conditions of tariff regulation provides for separate formats for submission of
information in respect of generation and interstate transmission of electricity.
Therefore, DVC should submit the required information in terms of the regulations
separately for generation and interstate transmission of electricity and no special
dispensation can be allowed to DVC on this account.
36.3 The Appellate Tribunal for Electricity in its judgement dated 23.11.2007 has
interpreted the fourth proviso to section 14 of the Act. The said proviso reads as under :
“Provided also that the Damodar Valley Corporation, established under sub-section (1)
of section 3 of the Damodar Valley Corporation Act, 1948, shall be deemed to be a
143
licensee under this Act but shall not be required to obtain a licence under this Act and
the provisions of the Damodar Valley Corporation Act, 1948, in so far as they are not
inconsistent with the provisions of this Act, shall continue to apply to that
Corporation:”
36.4 The Tribunal after detailed examination of the provisions of the Electricity Act
and the DVC Act has come to the conclusion that the fourth proviso to section 14
clearly implies that only such of the provisions of the DVC Act which are inconsistent
with the Electricity Act shall not apply. The Central Commission cannot frame
regulations for determination of tariff of DVC which are inconsistent with the
provisions of the DVC Act that do not collide with the Electricity Act. In other words,
the Commission is required to frame terms and conditions of tariff regulation which
will accommodate such of the provisions of the DVC Act which are not inconsistent
with the Electricity Act, 2003.
36.5 The Tribunal in para 89 of the judgement has stated that the Legislature,
expected that the Central Commission while framing regulations under the Electricity
Act, 2003 will take care of such provisions of the DVC Act not inconsistent with the
Act. The provisions of the DVC Act which are not inconsistent with the Act shall
continue to apply. In para 91 of the judgment held that the regulations under the Act are
to be read in addition to and not in derogation of any other law (i.e. provisions of Part
IV of DVC Act) for the time being in force that means the Regulations, 2004
formulated by the Central Commission need to be read along with the provisions of
Part IV of DVC that relate to the power-object of DVC. Relevant provisions of Part IV
are quoted in the following sections:
“SECTION 30: Liabilities of participating Governments to provide Capital to the

Corporation:
144
The Participating Government shall, as hereinafter specified, provide the entire capital
required by the Corporation for the completion of any project undertaken by it.
SECTION 31: Payment by participating Government on specified date:
Participating Government shall provide its share of the capital on the dates specified by
the Corporation and if any Government fails to provide such share on such dates the
Corporation may raise loan to make up the deficit at the cost of the Government
concerned.
SECTION 32: Expenditure on objects other than irrigation, power and flood control:
The Corporation shall have power to spend such sums as it thinks fit on objects
authorized under this Act other than irrigation, power and flood control and such sums
shall be treated as common expenditure payable out of the Fund of the Corporation
before allocation under Section 33
SECTION 33: Allocation of expenditure chargeable to project on main objects:
The total expenditure chargeable to a project shall be allocated between the three main
objects, namely, irrigation, power and flood control as follows, namely:
i. Expenditure solely attributable to any of these objects, including a proportionate

share of overhead and general charges, shall be charged to that object, and
ii. Expenditure common to two or more of the said objects, including a proportionate
share of overhead and general charges, shall be allocated to each of such objects in
proportion to the expenditure which, according to the estimate of the corporation,
would have been incurred in constructing a separate structure solely for that objects
less any amount determined under clause (1) in respect of that object.
145
SECTION 34: Capital allocated to irrigation:
The total amount of capital allocated to irrigation shall be shared between the
Provincial Governments as follows, namely:
i. The Government concerned shall be responsible for the capital cost of the works
constructed exclusively for irrigation in its Province; and
ii. The balance of capital cost under irrigation for both the Provinces of Bihar and West
Bengal shall be shared by the Provincial Governments in the proportion to their
guaranteed annual off-takes of water for agricultural purposes:
Provided that the divisible capital cost under this clause shall be provisionally shared
between them in accordance with their previously declared intentions regarding their
respective guaranteed off-takes and any payments made accordingly shall be adjusted
after the determination of the guaranteed off-takes.
SECTION 35: Capital allocated to power:
The total amount of capital allocated to power shall be shared equally between the
three Participating Governments.
SECTION 36. Capital Allocated to flood control:
The total amount of capital up to fourteen crores of rupees allocated to flood control
shall be shared equally between the Central Government and the Government of West
Bengal and any amount in excess thereof shall be the liability of the Government of
West Bengal.”
SECTION 37: Disposal of profits and deficits:
146
(1) Subject to the provision of sub-section (2) of Section 40, the net profit, if any,
attributable to each of the three main objects, namely, irrigation, power and flood
control, shall be credited to the participating Governments in proportion to their
respective shares in the total capital cost attributed to that object.
(2) The net deficit, if any, in respect of any of the objects shall be made good by the
Governments concerned in the proportion specified in sub-section(1):
Provided that the net deficit in respect of flood control shall be made good entirely by
the Government of West Bengal and the Central Government shall have no share in
such deficit.
SECTION 38: Payment of interest:
The Corporation shall pay interest on the amount of the capital provided by each
Participating Government at such rate as may, from time to time, be fixed by the
Central government and such interest shall be deem to be part of the expenditure of the
Corporation.
SECTION 40: Provision for depreciation and reserve and other funds:
(1) The Corporation shall make provision for depreciation and for reserve and other
funds at such rates and on such terms as may be specified by the Auditor General of
India in consultation with the Central Government.
(2) The net profit for the purpose of section 37 shall be determined after such provision
has been made.
36.6 The Tribunal has discussed in detail the provisions of the DVC Act which are
both consistent and inconsistent with the Electricity Act and has come to the
conclusion that the provisions of the DVC Act that are not in conflict with the
Electricity Act, 2003, particularly sections 38, 39 and 40 of the DVC Act which have
147
tariff implications have to be given effect.
36.7 On specific grounds of appeal, the Tribunal has given the following directions:
a) Debt-Equity Ratio: The DVC Act is silent about adopting any specific
Debt Equity Ratio for financing of projects. In the interest of equity and
fairness, all old projects of DVC commissioned prior to 1992 be assigned debt-
equity ratio of 50:50 and the recent projects be assigned debt-equity ratio of
70:30 as specified in the 2004 regulations. [Para A-8 of the Judgement]
b) The capital infused by the participating Governments is in the nature of

equity capital and for the purpose of determination of tariff, the same should be
eligible for return on equity. [Para A-14 of the Judgement]
c) The DVC Act envisages the projects to be built only on capital

contributed by the participating Governments and any deficit in the capital
amount is to be made good by taking loan on behalf of the participating
Government. The debt taken will attract interest. The average interest rate of
repayment payable during the tariff year is to be applied on 50:50 normative
debt capital for tariff purposes. The excess of equity over the normative debt-
equity ratio shall be considered as interest bearing debt and serviced
accordingly. [Para A-16 of the Judgement]
d) The Central Commission has worked out a sum of Rs.1534.49 crore to

create Pension and Gratuity Contribution Fund with the stipulation that 60%
thereof shall be recovered through the tariff and the remaining 40% to be
contributed by the DVC. The decision of the Commission is not backed by any
justification and the entire cost is allowed to be recovered through tariff.
However, the recovery should be staggered in a manner that it does not create
148
tariff-shock to consumers. [Para D-1 of the Judgement]
e) The expenditure incurred by DVC on objects other than irrigation,

power and flood control be allocated to these three heads as per sections 32 and
33 of DVC Act and expenditure so allocated to power object, should be allowed
to be recovered through the electricity tariff. [Para E-12 of the Judgement]
f) Sinking funds established with the approval of Comptroller and

Accountant General of India vide letter dated December 29, 1992 under the
provision of Section 40 of the DVC Act is to be taken as an item of expenditure
to be recovered through tariff. [Para E-15 of the Judgement]
g) Depreciation – The Electricity Act does not make any provision for
factoring rate of depreciation in tariff determination. Accordingly, DVC Act in
so far as depreciation is concerned, not inconsistent with the Act and shall
continue to apply to the Corporation. The Central Commission is directed to
adopt rate of depreciation as prescribed by Comptroller and Accountant General
of India for computation of tariff for the assets based on the principles outlined
in Para F-3 of the Judgement. [Para F-2 and F-4 of the Judgement]
h) Operation and Maintenance expenses – The Tariff Regulations, 2004

notified by the Commission generally provide for a 4% increase in O&M
expenses annually. The same shall be adopted in case of DVC also to offset
additional burden on the Appellant due to inflationary measures. [Para GH.5 of
the Judgement]
i) Expenditure incurred on repair, renovation and modernization aimed at

extending the useful life of the assets would be eligible, subject to prudence
check, for capitalization and would be eligible for recovery through tariff once
the assets are again put to use. [Para J.2 of the Judgement]
36.8 Keeping in view the provisions of the DVC Act and the judgement of
149
the Appellate Tribunal for Electricity, the following special provisions have
been made:
a) Capital cost – The expenditure allocated to object power in terms of

sections 32 and 33 of the DVC Act to the extent of its apportionment to
generation and interstate transmission shall form the basis of capital cost for the
performance of determination of tariff. As investment on head office, regional
office, administrative and technical centres of DVC have been allowed to be
capitalized, the same has also been considered in case of DVC.
b) Debt-equity ratio of the projects of DVC commissioned prior to 1992

has been kept as 50:50 and the projects commissioned thereafter has been kept
as 70:30.
c) The rate of depreciation as stipulated by Comptroller and Accountant

General of India in terms of section 40 of the DVC Act have been adopted for
computation of depreciation of generating station and interstate transmission
system of DVC.
d) The sinking fund established under section 40 of the DVC Act has been
considered as item of expenditure to be recovered through tariff. However, it is
seen that DVC has not reflected the sinking fund as an item of expenditure in its
annual report. Keeping in view the spirit of the judgement, the sinking fund
shall qualify for recovery through tariff, only if it is considered as an item of
expenditure.
36.9 Other directions of the Tribunal are consistent with the general provisions of the
regulations and therefore no specific provision has been made in respect of DVC. The
Commission has filed an appeal before the Supreme Court challenging the judgement
of the Appellate Tribunal for Electricity which is still pending. Therefore, the special
provision related to DVC shall be subject to the outcome of the similar appeals filed in
150
the Supreme Court
36.10 Accordingly, the Commission has made special provisions for DVC in
Regulation 43 as under:
“43. Special Provisions relating to Damodar Valley Corporation. (1)

Subject to clause (2), these regulations shall apply to determination of tariff of
the projects owned by Damodar Valley Corporation (DVC).
(2) The following special provisions shall apply for determination of tariff of
the projects owned by DVC:
(i) Capital Cost: The expenditure allocated to the object ‘power’, in terms of
sections 32 and 33 of the Damodar Valley Corporation Act, 1948, to the
extent of its apportionment to generation and inter-state transmission, shall
form the basis of capital cost for the purpose of determination of tariff:
Provided that the capital expenditure incurred on head office, regional

offices, administrative and technical centers of DVC, after due prudence
check, shall also form part of the capital cost.
(ii) Debt Equity Ratio: The debt equity ratio of all projects of DVC
commissioned prior to 01.01.1992 shall be 50:50 and that of the projects
commissioned thereafter shall be 70:30.
(iii) Depreciation: The depreciation rate stipulated by the Comptroller and

Auditor General of India in terms of section 40 of the Damodar Valley
Corporation Act, 1948 shall be applied for computation of depreciation of
projects of DVC.
(iv) Funds under section 40 of the Damodar Valley Corporation Act, 1948: The
Fund(s) established in terms of section 40 of the Damodar Valley Corporation
151
Act, 1948 shall be considered as items of expenditure to be recovered through
tariff.
(3) The provisions in clause (2) of this regulation shall be subject to the
decision of the Hon’ble Supreme Court in Civil Appeal No 4289 of 2008 and
other related appeals pending in the Hon’ble Court and shall stand modified
to the extent they are inconsistent with the decision.”
37. Sharing of Transmission Charges
37.1 The draft Regulation 33 has been redrafted but the basic philosophy remains
more or less same. This philosophy is generally in line with Commission’s order dated
28.03.08 in petition 85/2007 (in the matter of sharing of charges and losses for ISTS)
and proposals contained in the staff paper on “Arranging Transmission for New
Generating Stations, Captive Power Plants and Buyers of Electricity”. Based on the
latter, the Commission intends to come out with draft regulations on the issue of
connectivity, and long-term and medium term access in due course. Commission has
also undertaken a separate study on sharing of transmission charges with the assistance
of a consulting agency. Conclusions derived from this study along with final
regulations on connectivity and long-term and medium term access may necessitate
amendment to these regulations.
37.2 The Commission has also noticed that an inadvertent error has crept in the sub-
clause (a) of clause(1) of Regulation 33. In the second sentence of the said sub-clause,
the word “no” has to be replaced by the words “at least one”. This shall be corrected.
152
37.3 The Commission has also decided that the income from the open access
customers shall be disbursed directly to the long-term customers rather than reducing it
from transmission charges payable by long-term customers. As such, existing
provision relating to this has been deleted.
Sd/- Sd/- Sd/- Sd/- Sd/-

(S.JAYARAMAN) (R.KRISHNAMOORTHY) (BHANU BHUSHAN) (RAKESH NATH) (DR.PRAMOD DEO)
MEMBER MEMBER MEMBER MEMBER (EO) CHAIRPERSON
Dated:- 3rd February, 2009
153
Annexure-A
Actual and Normalised O&M expenses for the thermal generating stations of NTPC, NLC
and NEEPCO
Raw data as Claimed/as furnished Data after Normalisation
2004- 2005- 2006- 2007- 2004- 2005- 2006- 2007-
Station 05 06 07 08 05 06 07 08
200/210/250 MW
Sets
Dadri Coal(4x210) 10896 12262 12713 16780 10204 11280 11259 13544
Rs. Lakh/MW 12.97 14.60 15.13 19.98 12.15 13.43 13.40 16.12
Unchahar 11800 12196 12215 18587 10992 11214 10658 15324
(2x210+2x210+1x2
10)
Rs. Lakh/MW 14.05 14.52 13.70 17.70 13.09 13.35 11.95 14.59
Kahalgaon (4x210) 11648 13263 15063 19325 11554 13171 14279 16618
Rs. Lakh/MW 13.87 15.79 17.93 23.01 13.75 15.68 17.00 19.78
NLC TPS-I
expension (2x210) 3176 3582 4280 5186 3090 3470 4201 4506
Rs. Lakh/MW 7.56 8.53 10.19 12.35 7.36 8.26 10.00 10.73
NLC TPS-II stage-I
(3x210) 7180 6998 7285 9985 6917 6673 7062 8115
Rs. Lakh/MW 11.40 11.11 11.56 15.85 10.98 10.59 11.21 12.88
NLC TPS-II stage-
II (4x210) 9573 9330 9713 13311 9221 8897 9417 10818
Rs. Lakh/MW 11.40 11.11 11.56 15.85 10.98 10.59 11.21 12.88
500 MW Sets
Rihand St- 11671 15694 17678 25934 10914 14158 16010 21584
I&II(4x500)
154
Rs. Lakh/MW 11.67 11.95 8.84 12.97 10.91 10.78 8.01 10.79
Simhadri (2x500) 8191 8875 9518 13144 7582 8240 8402 10673
Rs. Lakh/MW 8.19 8.87 9.52 13.14 7.58 8.24 8.40 10.67
Talcher 14200 19198 21630 27254 13232 17689 19134 21934
(2x500+4x500)
Rs. Lakh/MW 6.43 6.78 7.21 9.08 6.00 6.24 6.38 7.31
Mix of 200/210/250
MW & 500 Sets
Vindhyachal 19260 19894 23256 33811 18316 18556 21001 27715
(6x210+4x500)
Rs. Lakh/MW 8.52 8.80 9.59 10.85 8.10 8.21 8.66 8.89
Korba 19094 21203 23210 28592 18149 19975 21090 23291
(3X200+3X500)
Rs. Lakh/MW 9.09 10.10 11.05 13.62 8.64 9.51 10.04 11.09
Farakka 20413 22902 23681 28980 18980 21143 20833 23318
(3x200+2x500)
Rs. Lakh/MW 12.76 14.31 14.80 18.11 11.86 13.21 13.02 14.57
Singrauli 19834 21380 24664 30130 18420 19735 22393
(5x200+2x500) 25,307
Rs. Lakh/MW 9.92 10.69 12.33 15.07 9.21 9.87 11.20 12.65
Ramagundam 19221 23295 27960 33684 18208 22053 25396 27452
(3x200+3x500+1x5
00)
Rs. Lakh/MW 9.11 8.96 10.75 12.96 8.63 8.48 9.77 10.56
Badarpur(3x95+2x2 18573 17606 22255 23094 11165 15532 14946 20145

10)
Rs. Lakh/MW 26.34 24.97 31.57 32.76 15.84 22.03 21.20 28.58
Tanda (4x110 MW) 7632 8128 8641 11162 7169 7487 7851 9064
Rs. Lakh/MW 17.35 18.47 19.64 25.37 16.29 17.01 17.84 20.60
155
Talcher 10959 10539 12053 14743 8863 9374 10196 11221
takenover(4x60+2x
110)
Rs. Lakh/MW 23.82 22.91 26.20 32.05 19.27 20.38 22.16 24.39
NLC TPS-I
(6x50+3x100) 9901 10085 10415 14059 9467 9583 10063 11292
Rs. Lakh/MW 16.50 16.81 17.36 23.43 15.78 15.97 16.77 18.82
Gas/Naptha
Anta
6810 5678 5065 5287 6484 5399
(3x88.7+1x153.2) 4546 3645
Rs. Lakh/MW 16.24 13.54 12.08 12.61 15.46 12.88 10.84 8.69
Auraiya 5823 5926
(4x111.19+2x109.3 6012 6179 6118 7142
) 5617 6022
Rs. Lakh/MW 9.06 9.32 9.22 10.77 8.78 8.93 8.47 9.08
Dadri
(4x130.19+2x154.5 5697 8896 9558 15087 5425 8627
1) 9103 10836
Rs. Lakh/MW 6.87 10.72 11.52 18.18 6.54 10.40 10.97 13.06
Faridabad 2831 3097
(2X140.827+1X149 2977 3265 6279 5606
.932) 5989 4709
Rs. Lakh/MW 6.90 7.56 14.55 12.99 6.56 7.18 13.88 10.91
Kawas
8975 7504 7124 10714 8749 7159
(4x106+2x116.1) 6505 8127
Rs. Lakh/MW 13.68 11.44 10.86 16.33 13.33 10.91 9.91 12.38
Gandhar 4752 6316
(3x144.3+1x224.49 4910 6573 6510 10876
) 6092 9732
Rs. Lakh/MW 7.47 10.00 9.90 16.54 7.23 9.61 9.27 14.80
156
Kaymkulam (2x
3237 2950 3462 6072 3176 2880 3199 4960
116.6+ 1x126.38)
Rs. Lakh/MW 9.00 8.20 9.63 16.89 8.83 8.01 8.90 13.79
NEEPCO
Assam 4628 4101 5358 8583 4281 3970 4540 5685
(6x30+3x37)
Rs. Lakh/MW 15.90 14.09 18.41 29.50 14.71 13.64 15.60 19.54
Agartala (4x21) 1329 1968 2288 2877 1202 1945 2213 1757
Rs. Lakh/MW 15.83 23.43 27.24 34.25 14.31 23.15 26.34 20.92
157
Thermal generating stations Annexure-B
Avaibility: Existing norms and New norm
Station COD Present 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Average Norm in Norm recommended New Norm
norm Draft by CEA
Dadri Coal(4x210) 1.12.1995 80% 92% 93% 96% 95% 98% 100% 97% 85% 80% 85%
Kahalgaon(4x210 MW) 1.8.1996 80% 72% 84% 84% 92% 92% 91% 90% 85% 80% 85%
Unchahar (2x210+2x210+1x210)
1.1.2007 80%
72% 71% 73% 77% 96% 99% 86% 85% 80% 85%
Rihand St-I&II(4x500) 1.4.2006 80% 98% 91% 90% 97% 93% 104% 96% 85% 80% 85%
Talcher (2x500+4x500) 1.8.2005 80% 74% 82% 82% 87% 92% 96% 89% 85% 80% 85%
Simhadri (2x500) 1.3.2003 80% NA 94% 95% 94% 94% 91% 94% 85% 80% 85%
Singrauli (5x200+2x500) 1.5.1988 80% 92% 90% 91% 89% 84% 92% 89% 85% 80% 85%
Korba (3X200+3X500) 1.6.1990 80% 91% 90% 93% 88% 91% 97% 92% 85% 80% 85%
Farakka (3x200+2x500) 1.7.1996 80% NA 70% 71% 85% 85% 84% 81% 85% 80% 85%
Ramagundam
25.3.2005 80%
(3x200+3x500+1x500) 92% 90% 94% 92% 92% 93% 93% 85% 80% 85%
Vindhyachal Super Thermal
15.7.2007 80% 87% 85% 91% 94% 94% 99%
Power Sation (6x210+4x500) 94% 85% 80% 85%
Badarpur(3x95+2x210) 1.4.1982 75% NA NA NA 91% 90% 92% 91% 82% 80% 82%
Talcher takenover(4x60+2x110) 3.6.1995 80% 56% 68% 80% 88% 88% 86% 86% 82% 80% 82%
Tanda (4x110 MW) 20.2.1998 80% NA NA NA NA 91% 94% 92% 82% 80% 85%
NLC TPS-I (6x 50 +3x100) 21.2.1970 75% N.A. N.A. N.A. N.A. N.A. 63% 63% 72% 75% 72%
NLC TPS-I ( Expansion) 2x210 5.9.2003 75% 70% 88% 96% 101% 100% 96% 80% 80% 80%
NLC TPS-II ( Stage-I) 3x210 23.4.1988 75% 83% 74% 71% 72% 53% 77% 68% 75% 75% 75%
NLC TPS-II ( Stage-II) 4x210 9.4.1994 75%

80% 81% 73% 75% 69% 78% 74% 75% 75% 75%
Mejia (3x210+210)
80% with progressive
12.10.2004
improvement
80% NA NA NA NA NA NA NA 85% 85%
75%
August,1993
improvement
Bokaro (3x210) NA NA NA NA NA NA NA 75% 75%
60%
March,1979
improvement
Chandrapur (3x130+3x120) NA NA NA NA NA NA NA 60% 60%
74%
Sep.,1979
improvement
Durgapur TPS (1x210+1x140) NA NA NA NA NA NA NA 74% 74%
Actual PLF
Present
Station COD norm 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Average
Dadri Coal(4x210) 1.12.1995 80% 82% 84% 93% 92% 96% 98% 95%
Kahalgaon(4x210 MW) 1.8.1996 80% 68% 81% 83% 89% 89% 92% 88%
Unchahar (2x210+2x210+1x210)
1.1.2007 80%
67% 70% 74% 77% 96% 98% 86%
Rihand St-I&II(4x500) 1.4.2006 80% 88% 91% 91% 85% 92% 92% 90%
Talcher (2x500+4x500) 1.8.2005 80% 73% 82% 82% 84% 90% 94% 88%
Simhadri (2x500) 1.3.2003 80% NA 88% 93% 88% 92% 89% 91%
Singrauli (5x200+2x500) 1.5.1988 80% 92% 89% 90% 88% 84% 92% 89%
Korba (3X200+3X500) 1.6.1990 80% 89% 89% 93% 87% 90% 96% 91%
Farakka (3x200+2x500) 1.7.1996 80% 64% 68% 69% 82% 81% 84% 79%
Ramagundam
25.3.2005 80%
(3x200+3x500+1x500) 92% 89% 91% 86% 89% 90% 89%
15.7.2007 80% 86% 82% 90% 92% 93% 93%
Power Sation (6x210+4x500) 92%
Badarpur(3x95+2x210) 1.4.1982 75% 85% 88% 88% 87% 86% 86% 87%
Talcher takenover(4x60+2x110) 3.6.1995 80% 73% 82% 82% 84% 90% 86% 86%
Tanda (4x110 MW) 20.2.1998 80% 58% 75% 86% 86% 91% 92% 89%
NLC TPS-I (6x 50 +3x100) 21.2.1970 75% 83% 84% 81% 76% 76% 70% 76%
NLC TPS-I ( Expansion) 2x210 5.9.2003 75% 54% 88% 84% 89% 89% 87%
NLC TPS-II ( Stage-I) 3x210 23.4.1988 75% 83% 74% 72% 70% 57% 82% 70%
NLC TPS-II ( Stage-II) 4x210 9.4.1994 75% 80% 80% 72% 72% 73% 81% 75%
Mejia (3x210+210) 12.10.2004 80% 60% 73% 73% 80% 85% 90% 82%
75%
August,1993
Bokaro (3x210) 56% 49% 45% 48% 60% 71% 56%
Chandrapur (3x130+3x120) March,1979 60% 17% 20% 29% 31% 33% 36% 32%
Durgapur TPS (1x210+1x140) Sep.,1979 74% 36% 54% 48% 59% 67% 54% 57%
GHR: Existing norms and New norm
Present Norm in Norm recommended

Station COD norm 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Average Draft by CEA New Norm
Dadri Coal(4x210) 1.12.1995 2500 2465 2462 2434 2421 2414 2393 2416 2500 2500 2500
Kahalgaon(4x210 MW) 1.8.1996 2500 2480 2460 2453 2444 2433 2420 2437 2500 2500 2500
Unchahar (2x210+2x210+1x210)
1.1.2007 2500
2459 2458 2451 2430 2410 2394 2421 2500 2500 2500
Rihand St-I&II(4x500) COD before 2004-
2430 and after 2004-
1.4.2006 2430
6% over design heat
2392 2385 2376 2337 2360 2352 2356 2380 rate 2405
Talcher (2x500+4x500) COD before 2004-
2450 and after 2004-
1.8.2005 2450
6% over design heat
2406 2414 2400 2376 2368 2322 2367 2400 rate 2425
Simhadri (2x500) 1.3.2003 2450 2438 2404 2375 2361 2355 2358 2362 2400 2450 2425
Singrauli (5x200+2x500) 1.5.1988 2475 2410 2410 2413 2401 2401 2397 2403 2450 2475 2462.5
Korba (3X200+3X500) 1.6.1990 2464 2412 2419 2402 2379 2372 2375 2382 2429 2464 2457
Farakka (3x200+2x500) 1.7.1996 2469 2474 2478 2530 2442 2434 2419 2456 2438 2469 2453
Ramagundam
(3x200+3x500+1x500) 500 MW:COD before
25.3.2005 2462 2004-2450 and after
2004-6% over design
2441 2442 2425 2406 2378 2375 2396 2423 heat rate 2442
500 MW:COD before

15.7.2007 2476 2004-2450 and after
Power Sation (6x210+4x500)
2004-6% over design
2456 2458 2430 2400 2393 2382 2401 2439 heat rate 2454
Badarpur(3x95+2x210) 1.4.1982 2885 2803 2789 2788 2765 2751 2750 2763 2825 2885 2825
Talcher takenover(4x60+2x110) 3.6.1995 2975 3144 3000 2924 2914 2904 2886 2907 2975 2975 2950
Tanda (4x110 MW) 20.2.1998 2850 3137 2846 2758 2753 2749 2740 2750 2850 2850 2825
NLC TPS-I (6x 50 +3x100) 21.2.1970 3900 3925 3933 3981 3992 3920 3917 3953 4000 3900 4000
NLC TPS-I ( Expansion) 2x210 5.9.2003 2750 3000 2848 2769 2751 2751 2780 2750 2750 2750
relax norm may
NLC TPS-II ( Stage-I) 3x210 23.4.1988 consider
2850 3031 3011 2886 2884 2895 2881 2887 2900 2900
NLC TPS-II ( Stage-II) 4x210 9.4.1994

2850 2879 2883 2860 2874 2891 2867 2873 2900 ------ Do----- 2900
Mejia (3x210+210)
2500 with progressive
12.10.2004
improvement
2500 3217 3285 2969 2575 2514 2509 2642 2500 2500

August,1993
improvement
Bokaro (3x210) 2700 3651 3703 3744 3366 3290 3202 3401 2700 2700

March,1979
improvement
Chandrapur (3x130+3x120) 3100 4479 3595 3378 3324 3228 3142 3268 3100 3100

Sep.,1979
improvement
Durgapur TPS (1x210+1x140) 2820 3556 3569 3491 3169 3069 2953 3170 2820 2820
Auxilary Power Consumption: Existing norms and New norm
Present Norm in Norm recommended New Norm

Station COD norm 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Average Draft by CEA (station wise)
Dadri Coal(4x210) 1.12.1995 9% 8.00% 8.05% 7.35% 7.39% 7.45% 7.26% 7.36% 8.50% 8.50% 8.50%
Kahalgaon(4x210 MW) 1.8.1996 9% 9.56% 9.64% 8.88% 8.51% 8.58% 9.28% 8.81% 8.50% 9.00% 9.00%
Unchahar (2x210+2x210+1x210)
1.1.2007 9% 8.76% 8.93% 8.58% 8.37% 8.18% 8.05% 8.30% 8.50% 9.00% 9.00%
Rihand St-I&II(4x500) 1.4.2006 8.00% 8.03% 7.65% 7.98% 7.30% 6.49% 6.57% 7.08% 7.50% 7.50% 7.50%
Talcher (2x500+4x500) 1.8.2005 7.50% 7.11% 7.49% 6.82% 5.75% 5.39% 5.20% 5.79% 7% 6.50% 6.50%
Simhadri (2x500) 1.3.2003 7.50% 6.01% 6.18% 5.65% 5.65% 5.56% 5.85% 5.68% 7% 6.00% 6.00%
Singrauli (5x200+2x500) 1.5.1988 7.75% 6.86% 6.92% 6.96% 7.11% 7.24% 6.96% 7.07% 7.25% 7.25% 7.25%
Korba (3X200+3X500) 1.6.1990 7.93% 6.15% 6.68% 6.59% 6.52% 6.11% 6.06% 6.32% 7.43% 7.21% 7.21%
Farakka (3x200+2x500) 1.7.1996 7.56% 8.02% 8.16% 8.50% 7.00% 6.67% 6.83% 7.25% 7.06% 6.94% 6.94%
Ramagundam
25.3.2005 7.85% 6.50% 6.63% 6.89% 6.40% 6.21% 6.16% 6.41% 7.35% 7.08% 7.08%
(3x200+3x500+1x500)
15.7.2007 8.28% 7.00% 7.19% 7.01% 7.06% 7.13% 6.40% 6.90% 7.58% 7.47% 7.47%
Power Sation (6x210+4x500)
Badarpur(3x95+2x210) 1.4.1982 11% 9.15% 9.68% 9.04% 8.84% 8.05% 7.91% 8.46% 9.50% 11.00% 9.50%
Talcher takenover(4x60+2x110) 3.6.1995 10.50% 11.47% 10.73% 10.58% 10.07% 10.19% 10.15% 10.25% 10.50% 10.50% 10.50%
Tanda (4x110 MW) 20.2.1998 12% 13.84% 12.88% 12.00% 11.92% 11.34% 11.11% 11.59% 12% 12.00% 12%
relax norm may
21.2.1970 12% 11.57 11.51 11.41% 11.27% 11.55% 13.48% 11.93% 12% consider 12%
NLC TPS-I (6x 50 +3x100)
NLC TPS-I ( Expansion) 2x210 5.9.2003 9.50% 9.78 9.05% 9.08% 8.47% 9.14% 8.93% 9% 9.5 9.50%
relax norm may
NLC TPS-II ( Stage-I) 3x210 23.4.1988 10.00% 9.70 9.69 9.85% 9.68% 9.40% 10.87% 9.95% 10% 10%
consider
relax norm may
NLC TPS-II ( Stage-II) 4x210 9.4.1994 10.00% 9.63 9.40 9.74% 9.75% 9.73% 10.86% 10.02% 10% 10%
consider
Mejia (3x210+210) 9% with progressive
12.10.2004 9% 12.81% 10.94% 11.02% 10.58% 10.47% 10.22% 10.57% 9% 9%
improvement
August,1993 10.00% 11.54% 11.80% 11.48% 11.34% 11.11% 10.95% 11.22% 10.00% improvement 10.00%
Bokaro (3x210)
11.5% with
March,1979 11.50% 18.56% 15.75% 12.23% 11.54% 11.22% 10.76% 11.44% 11.50% progressive 11.50%
Chandrapur (3x130+3x120) improvement
10.55% with
Sep.,1979 10.55% 14.26% 11.95% 12.82% 11.67% 11.05% 11.46% 11.75% 10.55% progressive 10.55%
Durgapur TPS (1x210+1x140) improvement
SFC: Existing norms CEA and New norm

Dadri Coal(4x210) 1.12.1995 2 0.44 0.17 0.16 0.21 0.11 0.11 0.15 1 0.75 1
Kahalgaon(4x210 MW) 1.8.1996 2 0.63 0.54 0.53 0.41 0.61 0.18 0.43 1 0.75 1
Unchahar (2x210+2x210+1x210)
1.1.2007 2
0.64 0.50 0.43 0.36 0.27 0.24 0.33 1 0.75 1
Rihand St-I&II(4x500) 1.4.2006 2 0.22 0.22 0.17 0.25 0.17 0.10 0.17 1 0.75 1
Talcher (2x500+4x500) 1.8.2005 2 0.46 0.83 0.65 0.50 0.27 0.23 0.41 1 0.75 1
Simhadri (2x500) 1.3.2003 2 NA 0.66 0.23 0.19 0.19 0.27 0.22 1 0.75 1
Singrauli (5x200+2x500) 1.5.1988 2 0.18 0.23 0.30 0.31 0.44 0.26 0.33 1 0.75 1
Korba (3X200+3X500) 1.6.1990 2 0.24 0.21 0.11 0.11 0.10 0.11 0.11 1 0.75 1
Farakka (3x200+2x500) 1.7.1996 2 1.78 1.94 2.42 0.94 0.90 0.88 1.28 1 0.75 1
Ramagundam
25.3.2005 2
(3x200+3x500+1x500) 0.21 0.23 0.17 0.24 0.19 0.22 0.20 1 0.75 1
15.7.2007 2
Power Sation (6x210+4x500) 0.21 0.18 0.16 0.15 0.14 0.18 0.16 1 0.75 1
Badarpur(3x95+2x210) 1.4.1982 2.6 0.42 0.30 0.33 0.34 0.42 0.40 0.37 1 0.75 1
Talcher takenover(4x60+2x110) 3.6.1995 2 1.60 1.55 0.78 0.40 0.44 0.48 0.52 1 1.25 1
Tanda (4x110 MW) 20.2.1998 2 2.12 0.99 0.74 0.62 0.40 0.44 0.55 1 1.25 1
NLC TPS-I (6x 50 +3x100) 21.2.1970 3 3.62 1.42 3.03 3.46 3.43 3.68 3.40 3.5 3 3.5
NLC TPS-I ( Expansion) 2x210 5.9.2003 3 5.42 1.57 1.38 1.07 0.92 1.23 2 1.25 2
NLC TPS-II ( Stage-I) 3x210 23.4.1988 3 3.66 0.79 1.21 0.92 1.53 1.07 1.18 2 2 2
NLC TPS-II ( Stage-II) 4x210 9.4.1994 3 2.73 0.41 1.05 1.08 0.89 1.00 1.01 2 2 2
Mejia (3x210+210) 2 with progressive
12.10.2004
2 6.29 5.20 4.85 3.25 3.92 2.72 3.69 2 improvement 2
2 with progressive
August,1993
Bokaro (3x210) 2 5.93 4.01 3.59 3.14 2.39 1.18 2.58 2 improvement 2
3 with progressive
March,1979
improvement
Chandrapur (3x130+3x120) 3 0.35 4.94 2.61 0.95 1.83 2.09 1.87 2 2
2.4 with progressive

Sep.,1979
improvement
Durgapur TPS (1x210+1x140) 2.4 13.19 9.57 7.29 3.36 3.15 4.83 4.66 3 2.4
Gas/Naptha
Avaibility: Existing norms and New norm

Anta (3x88.7+1x153.2) 1.3.1990 80% 88% 87% 86% 91% 88% 85% 88% 85% 80% 85%
Auraiya (4x111.19+2x109.3) 1.6.1990 80% 87% 89% 82% 91% 90% 81% 86% 85% 80% 85%
Dadri (4x130.19+2x154.51) 1.3.1994 80% 83% 88% 89% 90% 85% 84% 87% 85% 80% 85%
Faridabad
1.1.2001
(2X140.827+1X149.932) 80% 79% 96% 98% 95% 89% 83% 91% 85% 80% 85%
Kawas (4x106+2x116.1) 1.9.1993 80% 82% 88% 91% 93% 95% 87% 91% 85% 80% 85%
Gandhar (3x144.3+1x224.49) 1.11.1995 80% 64% 58% 71% 81% 82% 78% 78% 85% 80% 85%
Kaymkulam (2x 116.6+ 1x126.38) 1.3.2000
80% 85% 96% 93% 93% 92% 85% 80% 85%
Assam CCGT (6x30+3x37.3) 1.4.1999 80% 66% 77% 78% 72% 72% 69% 73% 70% 80% 70%
Agartala open cycle (4x21) 1.8.1998 80% NA 91% 83% 97% 94% 93% 92% 85% 80% 85%
Actual PLF
Present
Station COD norm 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Average
Anta (3x88.7+1x153.2) 1.3.1990 80% 75 75 76 76 80 73 76
Auraiya (4x111.19+2x109.3) 1.6.1990 80% 73% 73% 71% 74% 79% 68% 73%
Dadri (4x130.19+2x154.51) 1.3.1994 80% 72 70 75 74 77 70 74
Faridabad
1.1.2001
(2X140.827+1X149.932) 80% 71 74 84 78 75 68 76
Kawas (4x106+2x116.1) 1.9.1993 80% 73 68 49 50 63 63 56
Gandhar (3x144.3+1x224.49) 1.11.1995 80% 47 56 70 78 79 68 74
Kaymkulam (2x 116.6+ 1x126.38) 1.3.2000
80% 67 67 20 11 36 53 30
Assam CCGT (6x30+3x37.3) 1.4.1999 80% 40% 62% 63% 68% 71% 66% 67%
Agartala open cycle (4x21) 1.8.1998 80% 77% 77% 78% 87% 89% 88% 85%
GHR: Existing norms and New norm

Anta (3x88.7+1x153.2) 1.3.1990 2075 2017 2085 2058 2067 2032 2067 2056 2075 2075 2075
Auraiya (4x111.19+2x109.3) 1.6.1990 2100 2072 2096 2079 2089 2068 2206 2110 2100 2100 2100
Dadri (4x130.19+2x154.51) 1.3.1994 2075 1970 1998 1982 1967 1947 2003 1975 2075 2075 2075
Faridabad
1.1.2001 2000
(2X140.827+1X149.932) 1935 1909 1875 1885 1904 1926 1897 2000 2000 2000
Kawas (4x106+2x116.1) 1.9.1993 2075 1996 2017 1998 2008 1987 2017 2002 2075 2075 2075
Gandhar (3x144.3+1x224.49) 1.11.1995 2000 1934 1958 1997 2018 2026 2049 2022 2000 2000 2040
Kaymkulam (2x 116.6+ 1x126.38) 1.3.2000
2000 1977 1980 1972 1986 1960 1959 1969 2000 2000 2000
Assam CCGT (6x30+3x37.3) 1.4.1999 2250 2736 2329 2417 2322 2376 2400 2379 2400 2400 2400
Agartala open cycle (4x21) 1.8.1998 3580 3637 3582 3437 3370 3463 3366 3409 3500 3500 3500
Auxilary Power Consumption: Existing norms and New norm

Anta (3x88.7+1x153.2) 1.3.1990 3% 2.87 2.56 2.73 2.52 2.13 1.91 2.32 3% 3% 3%
Auraiya (4x111.19+2x109.3) 1.6.1990 3% 1.89 1.91 1.81 1.80 1.80 2.08 1.87 3% 3% 3%
Dadri (4x130.19+2x154.51) 1.3.1994 3% 2.72 2.57 2.52 2.32 2.20 2.24 2.32 3% 3% 3%
Faridabad
1.1.2001
(2X140.827+1X149.932) 3% 2.11 2.19 1.97 2.31 2.27 2.45 2.25 3% 3% 3%
Kawas (4x106+2x116.1) 1.9.1993 3% 1.76 2.22 2.40 2.19 1.74 1.62 1.99 3% 3% 3%
Gandhar (3x144.3+1x224.49) 1.11.1995 3% 2.22 2.33 2.03 1.95 1.95 2.09 2.01 3% 3% 3%
Kaymkulam (2x 116.6+ 1x126.38) 1.3.2000
3% 2.16 2.3 4.03 6.18 2.6 2.36 3.79 3% 3% 3%
Assam CCGT (6x30+3x37.3) 1.4.1999 3% 3.23% 2.83% 2.94% 2.88% 2.86% 2.67% 2.84% 3% 3% 3%
Agartala open cycle (4x21) 1.8.1998 1% 1.77% 1.42% 0.89% 0.40% 0.58% 1.99% 0.97% 1% 1% 1%

CERC - Regulations 2009

Uploaded by

Copyright:

Available Formats

CERC - Regulations 2009

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CERC - Regulations 2009

Uploaded by

Copyright:

Available Formats

CERC (Terms and Conditions of Tariff) Regulations, 2009

Statement of Objects and Reasons

a) to regulate the tariff of generating companies owned or

2. Consideration of the views of the stakeholders and analysis and findings of

3. Preliminary Objections to the Regulations

(a) commercial principles

“ 5.8.5 All efforts will have to be made to improve the efficiency of

“5.3.(f) Operating norms:

Suitable performance norms of operations together with incentives and

“The Commission may require a licensee or generating company to comply

4. Scope and extent of application {Regulation 2}

5.2 Expenditure incurred {Regulation 3(2)

5.2.2 Accordingly, the said clause has been rephrased as under:

5.3 Useful life

5.3.5 Accordingly, clause (42) of Regulation 3 has been inserted as under:

(a) Coal/Lignite based thermal generating station 25 years

‘Provided that in case of an existing project, the application shall be based on

“Provided that in case of an existing project, the application shall be based on

7. Truing up of Capital Cost(Regulation 6)

8. Capital Cost (Regulation 7)

8.1 Draft Regulation 8(a) provided as under:

“(1) Capital cost for a project shall include:

(a) the expenditure actually incurred or projected to be incurred, including

9. Initial Spares (Regulation 8)

9.1 Draft Regulation 9 provided for capitalization of initial spares as under:

“9.(1)Initial spares shall be capitalised as a percentage of the original project

10. Capital Cost and Additional Capitalisation (Regulations 7 & 9)

10.1 Projected Capital Cost

(a) From beneficiaries’ perspective, they would be aware of the intended

(b) From the prospective of the generating companies/transmission licensees, they

10.2 Admissibility of Additional Capital Expenditure

10.2.1 The draft regulation 10 dealing with the admissibility of additional

(i) Deferred liabilities;

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

“ In case of hydro generating stations, any expenditure which has become

“In case of transmission system any additional expenditure on items such

11. Renovation and Modernisation(Regulation 10)

“(3) Any expenditure incurred or projected to be incurred and admitted by the

12. Debt-Equity Ratio ( Regulation 12)

13 Rate of Return on Equity ( Regulation 15)

‘Balance needs to be maintained between the interests of consumers and the

Year PLR of Public Sector

Provided that in case of projects commissioned on or after 1st April, 2009, an

13.12 In case of projects commissioned on or after 1st April, 2009, an additional

A. Thermal Power Projects

Unit size 250 MW CFBC technology

Unit size 500/600 MW

Unit size 660/800 MW

Gas Turbine size above 100 MW (ISO rating)

B. Hydro Electric Projects

C. Transmission Schemes: Qualifying time schedules in months

S. Category of Transmission Plain Hilly Snowbound area@/

14. Pre-tax Return {Regulation 15(4)}

(i) In case of a generating company or transmission licensee paying Minimum

Rate of pre-tax return on equity = 15.50/ (1-0.1133) = 17.481%

(ii) In case of a generating company or transmission licensee paying normal existing

Rate of pre-tax return on equity = 15.50/ (1-0.3399) = 23.481%.

14.5 In order to facilitate computation of pre-tax, illustrative examples on the above

15. Interest on Loan ( Regulation 16)