OBRA B TPS MYT PETITION FOR DETERMINATION OF TARIFF FOR FY TO

Transcription

1 2009 OBRA B TPS MYT PETITION FOR DETERMINATION OF TARIFF FOR FY TO UP RAJYA VIDYUT UTPADAN NIGAM LTD OBRA B _MYT Petition for Determination of Tariff

2 FORM 1 (See Regulation 30) BEFORE THE HON BLE UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION, KISAN MANDI BHAWAN, GOMITNAGAR, LUCKNOW IN THE MATTER OF Receipt Register No.: Petition No.: MULTI YEAR TARIFF PETITION FOR APPROVAL OF ANNUAL REVENUE REQUIREMENT AND DETERMINATION OF TARIFF FOR FY TO FY IN RESPECT OF OBRA B THERMAL POWER STATION OF UTTAR PRADESH RAJYA VIDYUT UTPADAN NIGAM LIMITED (UPRVUNL), SHAKTI BHAWAN, 14 ASHOK MARG LUCKNOW AND IN THE MATTER OF OBRA B THERMAL POWER STATION OF UTTAR PRADESH RAJYA VIDYUT UTPADAN NIGAM LIMITED (UPRVUNL), SHAKTI BHAWAN, 14 ASHOK MARG, LUCKNOW. APPLICANT V/s UTTAR PRADESH POWER CORPORATION LIMITED (UPPCL), SHAKTI BHAWAN, 14 ASHOK MARG, LUCKNOW. MADHYANCHAL VIDYUT VITRAN NIGAM LTD. PN ROAD, LUCKNOW. POORVANCHAL VIDYUT VITRAN NIGAM LTD. 132 KV S/S BHIKARI VIDYUT NAGAR, VARANASI PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD. VICTORIA PARK, MEERUT RESPONDENTS DAKSHINACHAL VIDYUT VITRAN NIGAM LTD. GALINA ROAD AGRA. KANPUR ELECTRICITY SUPPLY CO. LTD. KESA HOUSE, KANPUR NOIDA POWER CO. LTD. COMMERCIAL COMPLEX, H BLOCK, ALPHA II SECTOR GREATER NOIDA CITY

3 The applicant, Obra B TPS of Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited, a Company incorporated under the provisions of the Companies Act, 1956 having its registered office at Shakti Bhawan, 14 Ashok Marg, Lucknow is making this affidavit in the matter of application for Determination of Multi Year Tariff for the Control Period of FY to FY Facts of the Case: The Obra B TPS of Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (Petitioner) is submitting this Multi Year Tariff Petition for Determination of Tariff for the Five Year Control Period of FY to FY as per Para 5 of the UPERC (Terms and Conditions of Generation Tariff) Regulations, 2009 & as per Para 17 of UPRVUNL Tariff Order for FY Submissions The Obra B TPS of UPRVUNL is filing this Petition under the provisions of Section 61 & 62 of Electricity Act, 2003 and the UPERC (Terms and Conditions of Generation Tariff) Regulations, 2009 and its Appendices and the prescribed tariff filing format as annexed with the report.

4 EXECUTIVE SUMMARY The performance parameters and other cost elements have been duly elaborated in the enclosure to the Petition. Based on these, the cost of generation has been determined under three heads. Fixed Costs (Annual Capacity Charges) Energy charges Taxes and Govt Levies The Cost for the control period as proposed in the tariff Petition is as under: Fixed Costs The fixed charges are contracted capacity charges payable to generating company by the consumer irrespective of actual generation from the plants. However as the tariff regulations provide for recovery of fixed costs based on achievement of target availability, the fixed costs would be claimed based on achievement of target availability. The overall fixed charges in respect of Obra B thermal power station is elaborated in the table below Table: Total Annual Capacity (Fixed) Charges (All Figures in Rs Crs) SUMMARY OF ANNUAL CAPACITY (FIXED) CHARGES Particulars (Rs Crs) FY 10 FY 11 FY 12 FY 13 FY 14 Depreciation Interest on Loan Return on Equity Advance against Depreciation Interest on Working Capital O & M Expenses Compensation Allowance Total Fixed Cost Energy Sent Out (MU) Fixed Cost per Unit (Rs/kwh) The Petitioner would suitably approach the Hon ble Commission for true up of fixed costs based on audited accounts

5 Variable Charges These are the expenses, taken place directly in proportion to the generation of power and primarily consist of fuel costs of generation. These are dependent on the quantity of generation and hence recovery is proposed on per unit or net generation. The cost of energy charges for the Petitioner for the control period for Obra B thermal power station is as under: Table: Summary of Energy (Variable) Charges SUMMARY OF VARIABLE CHARGES Particulars FY 10 FY 11 FY 12 FY 13 FY 14 Coal Cost Oil Cost Total Variable Cost Energy Sent Out (MU) Variable Cost per Unit (Rs/kwh) Taxes and Govt Levies These are the amounts recovered on behalf of the government and paid as taxes. In fact the amount does not depend upon the performance of the company but are determined by government policies. The Petitioner has sought recovery of such expenses as separate pass through basis. Expenses which have been claimed as pass through are Pollution Cess liabilities, Water Cess, rates & taxes, regulatory fee payable to UPERC, etc. Other Significant Issues There are few issues which have been separately raised in this Petition which are: Arrears of Pollution Cess Liabilities Automatic pass through approval sought based on actual payments Finance & Bank Charges Sought as Separate pass through based on actual payment basis

6 Prayer The Petitioner respectfully prays that the Hon ble Commission may Accept this Petition Accept the tariff rates as elaborated in the Petition Permit recovery of expenses understated/ not considered in this Petition e.g. depreciation etc at a later stage, if required Allow the Petitioner to apply the tariff provided by the Hon ble Commission from the beginning of FY Allow true up of uncontrollable expenses in the control period based on the audited accounts and normative parameters as applicable for various heads of expenditures. Condone any inadvertent omissions / errors / short comings and permit the applicant to add /change /modify / alter this Petition and make further submissions as may be required at later stages Pass such orders as Hon ble Commission may deem fit and proper and necessary in the facts and circumstances of the case, to grant relief to the petitioner.

7 FORM-2 (See Regulation 31) BEFORE THE HON BLE UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION, KISAN MANDI BHAWAN, GOMITNAGAR, LUCKNOW IN THE MATTER OF Receipt Register No.: Petition No.: MULTI YEAR TARIFF PETITION FOR APPROVAL OF ANNUAL REVENUE REQUIREMENT AND DETERMINATION OF TARIFF FOR FY TO FY IN RESPECT OF OBRA B THERMAL POWER STATION OF UTTAR PRADESH RAJYA VIDYUT UTPADAN NIGAM LIMITED (UPRVUNL), SHAKTI BHAWAN, 14 ASHOK MARG LUCKNOW AND IN THE MATTER OF OBRA B THERMAL POWER STATION OF UTTAR PRADESH RAJYA VIDYUT UTPADAN NIGAM LIMITED (UPRVUNL), SHAKTI BHAWAN, 14 ASHOK MARG, LUCKNOW. APPLICANT VS

8 UTTAR PRADESH POWER CORPORATION LIMITED (UPPCL), SHAKTI BHAWAN, 14 ASHOK MARG, LUCKNOW. MADHYANCHAL VIDYUT VITRAN NIGAM LTD. PN ROAD, LUCKNOW. POORVANCHAL VIDYUT VITRAN NIGAM LTD. 132 KV S/S BHIKARI VIDYUT NAGAR, VARANASI PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD. VICTORIA PARK, MEERUT DAKSHINACHAL VIDYUT VITRAN NIGAM LTD. GALINA ROAD AGRA. KANPUR ELECTRICITY SUPPLY CO. LTD. KESA HOUSE, KANPUR NOIDA POWER CO. LTD. COMMERCIAL COMPLEX, H BLOCK, ALPHA II SECTOR GREATER NOIDA CITY AFFIDAVIT I, Mahendra Kumar, Son of Shri Parshu Ram aged about 45 years, resident of 80, Hydel officers colony, Chandralok, Aliganj, Lucknow, do hereby solemnly affirm and state as under: 1. I say that I am Chief Engineer, Commercial UPRVUNL, the Applicant in the above matter and am duly authorized by the said Applicant to swear the present affidavit. 2. I say that I have read the contents of the above Petition filed by the Petitioner (applicant) and I have understood the contents of the same. 3. That the contents of the Petition filed by the Applicant are based on the information available with the Applicant in the normal course of business and believed by me to be true. 4. I say that the Text, Appendices and Annexure to the Petition are the true and correct copies of their original. DEPONENT VERIFICATION I, the deponent above named, do hereby verify the contents of the above affidavit to be true to the best of my knowledge, no part of it is false and nothing material has been concealed therefrom. Verified at Lucknow on the, 2010 DEPONENT

9 CONTENTS 1. INTRODUCTION Rationale UPRVUNL Installed Capacity of the Petitioner Capacity Addition Plans of UPRVUNL R&M, Refurbishment & Up rating Programme Refurbishment Schemes of 5x200 MW units of Obra B TPS Arrears of Pollution Cess Liabilities Annual Payment of Statutory Charges like Water Cess, Payment to Pollution Control Board, Regulatory Fee, etc Finance & Bank Charges Payment of Service Tax on CISF Services Expenses towards implementation of ABT Imported Coal Usage Incentive Taxes on Income Milestones achieved in FY ANNUAL REVENUE REQUIREMENT & MULTI-YEAR TARIFF PETITION OF OBRA B TPS Annual Capacity (Fixed Charges) Charges Gross Fixed Assets Interest on Loan Capital Depreciation including Advance Against Depreciation Depreciation Advance against depreciation (AAD) Return on Equity Operation & Maintenance Expenses Base O&M Expenses OBRA B _MYT Petition for Determination of Tariff Page 8

10 Impact of Pay Revision Projected O&M Expenses Compensation Allowance Interest on Working Capital Summary of Annual Capacity (Fixed) Charges Energy Charges Fuel Cost Adjustment LIST OF EXHIBITS EXHIBIT A Documentary evidence of SBI PLR EXHIBIT B Audited Accounts for FY OBRA B _MYT Petition for Determination of Tariff Page 9

11 1. INTRODUCTION 1.1 Rationale The Electricity Act, 2003 (Act 36 of 2003) came into force with effect from and the previous Acts governing the electricity supply in the country viz. The Indian Electricity Act, 1910 (9 of 1910), the Electricity (Supply) Act, 1948 (54 of 1948), and the Electricity Regulatory Commissions Act, 1998 have been repealed. The provisions of the UP Electricity Reform Act, 1999 (Uttar Pradesh Act 24 of 1999) to the extent not inconsistent with the provisions of the Electricity Act, 2003, however, continue to apply to Uttar Pradesh. As per Section 10 (2) of the Electricity Act, 2003 (hereinafter referred to as the Act), UPRVUNL shall supply electricity to the Licensees (UPPCL or its successors). Section 61 of the Electricity Act, 2003 deals with Tariff Regulations Section 62 (1) of the Act provides that the Appropriate Commission shall determine the tariff in accordance with the provisions of the Act, inter alia, for supply of electricity by a generating company to a distribution licensee. Further, in accordance with Section 86 (1) (a) of the Act, UPERC shall determine the tariff of generation of power at stations owned by the UPRVUNL. Section 86 (1) (b) further mandates UPERC to regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees. Accordingly this petition is being submitted by the state generating utility s Obra B TPS for determination of tariff. 1.2 UPRVUNL Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL), is a company incorporated on 25 th August 1980 with the principal object of generating electricity. Petitioner implemented commissioning of 2x210 MW thermal power stations at Unchahar. In February 1992 this power station was transferred to NTPC. Consequent to the implementation of power sector reforms in the State where under, amongst others, the activities of generation, transmission, distribution and retail supply of electricity carried out by UPSEB have been restructured and UPSEB was unbundled into Uttar Pradesh Power Corporation Limited (UPPCL), Uttar Pradesh Jal Vidyut Nigam Limited OBRA B _MYT Petition for Determination of Tariff Page 10

12 (UPJVNL) and UP Rajya Vidyut Utpadan Nigam Limited vide the Uttar Pradesh Electricity Reforms Transfer Scheme, 2000 notification No 149/P 1/ , Lucknow dated January 14 th, As part of the scheme all thermal generating stations as set out in Schedule A to the transfer scheme were transferred to and vested in the Petitioner The Transfer Scheme assigned a value of Rs crs (Prov) to gross fixed assets as on March 31, The Scheme determined the equity capital as Rs crs. As part of the Scheme certain liabilities (listed in Schedule D to the Scheme) were retained by GoUP The provisional Scheme was modified by GoUP vide notification no. 348/P 1/ dated 25 January 2001, which made the Transfer Scheme of the year 2000 effective from 14 January The modified Scheme provided that value of gross fixed assets as Rs crs and increased the equity amount to Rs crs. In pursuance of GOUP notification no., 2740/P 1/ P/2003 dated 12th August 2003, UPPCL was further divided into five successor companies, with UPPCL as Transco and four successor distribution companies (hereinafter referred to as licensees ), which are as follows: Paschhimanchal Vidyut Vitran Nigam Limited, Meerut (Meerut DisCom) Dakshinanchal Vidyut Vitran Nigam Limited, Agra (Agra DisCom) Madhyanchal Vidyut Vitran Nigam Limited, Lucknow (Lucknow DisCom) Poorvanchal Vidyut Vitran Nigam Limited, Varanasi (Varanasi DisCom) 1.3 Installed Capacity of the Petitioner The details of Installed Capacity of the generating station Obra B is listed in table below: S No 1 Table: Generation Capacities of the UPRVUNL Thermal Power Station Unit No. Installed Capacity Derated Capacity Date of Commercial Operation MW 200 MW 15 Mar MW 200 MW 06 Mar 79 3 Obra B MW 200 MW 14 Mar MW 200 MW 29 May MW 200 MW 29 Jul Total MW MW OBRA B _MYT Petition for Determination of Tariff Page 11

13 1.4 Capacity Addition Plans of UPRVUNL The demand for electricity is increasing continuously. Due to increasing gap in the demand and availability of electricity, the productivity of agricultural, industrial and other fields is adversely affected. For improvement in the availability of power, the Petitioner has undertaken several capacity addition schemes which are under various stages of development. The following table lists the Power Stations with the expected dates of commissioning of their units. Table: Generation Capacity Addition Plan of UPRVUNL Name of Project Parichha Extn (2x250 MW) Harduaganj Extn (2x250 MW) Capacity (MW) 500 MW 500 MW Likely Commissioning Dates U#5 in April 2010 U#6 in June 2010 U#5 in April 2010 U#6 in June 2010 Anpara D (2x500 MW) 1000 MW Obra C (2x660 MW) 1320 MW 12th Plan Meja (2x660 MW) (In JV with NTPC) 1320 MW 12th Plan Anpara E (2x660 MW) 1320 MW 12th Plan Fatehpur (In JV with Neyvile Lignite) 2000 MW 12th Plan OBRA B _MYT Petition for Determination of Tariff Page 12

14 1.5 R&M, Refurbishment & Up rating Programme Normal life of any thermal power station is around 25 years. During this life span also, the performance of the plants gradually goes down until unless required maintenance is carried out regularly. After completion of normal life, the plants are either to be retired or major Renovation and Modernization is to be done to bring their performance back to a reasonable level. The graph below elaborates the average age of thermal generating units of UPRVUNL plants as on 1 st April Table 2: Average Age of Power Stations Anpara A Anpara B Obra A Obra B Harduaganj Panki Parichha Parichha Extn 2 Average Age of TPS It may be seen that the average age of the thermal generating units of the Petitioner is around 27 years (excluding Parichha Extn). The creeping effect of vintage coupled with irregular maintenance on account of the persistent power deficit in the state (which resulted in the deferment of planned maintenance of the units for a number of times), has further affected the performance of the generating units. However, UPRVUNL has planned a Comprehensive R&M, Refurbishment & Up rating plans for its power stations which are under various stages of implementation OBRA B _MYT Petition for Determination of Tariff Page 13

15 A snapshot is presented below of the various Completed / Ongoing & Proposed R&M / Refurbishment & Up rating Schemes: Table 3: Snapshot of R&M / Refurbishment & Up rating Schemes Completed R&M / Refurbishment & Up rating Schemes Name of the scheme Nature of Scheme Capacity Agency Project Cost (Rs Benefits from the scheme Obra A (U#1 & U#2) Increase in PLF LE by 15 yrs Increase in Gen Capacity 1x10+1x50 Obra U#6 R&M 94 MW BHEL Increase in PLF Harduaganj U#7 & U#5 Name of the scheme Refurbish ment R&M 165 MW BHEL Increase in PLF Nature of Scheme 100 MW Ongoing R&M / Refurbishment & Up rating Schemes Capacity M/s Techno Prome Exports (TPE) Russia & others Agency Project Cost (Rs Benefits from the scheme Increase in PLF Obra B (5x200 MW) Refurbish ment 1000 MW BHEL LE by 15 years Increase in Gen Capacity 5x16 MW Anpara A (3x210) Refurbish ment 630 MW BHEL To keep PLF stable Harduaganj U#7 Up rating 120 MW BHEL Improve PLF, LE by 15 years, Increase in capacity by 1x10MW Obra A U#7 & U#8 R&M 188 MW BHEL Increase in PLF Proposed R&M / Refurbishment & Up rating Schemes Name of the scheme Nature of Scheme Capacity Agency Project Cost (Rs Parichha U#1 & U#2 Refurbish ment 220 MW BHEL Panki U#3 & U#4 Up rating 240 MW BHEL Benefits from the scheme Increase in PLF, LE by 15 years Increase in PLF, LE by 15 years, Increase in capacity by 2x10MW Anpara B (2x500MW) R&M 1000 MW BHEL Stabilise PLF The Petitioner, Obra B TPS has implemented a refurbishment scheme, whose broad features has been discussed in the following chapter: OBRA B _MYT Petition for Determination of Tariff Page 14

16 1.5.1 Refurbishment Schemes of 5x200 MW units of Obra B TPS The Refurbishment work on 5x200 MW units of Obra B TPS has been awarded to M/s BHEL in May It is proposed to provide rotor of high class design for the turbine of these units which would result in increasing the capacity of these units (each) from 200MW to 216MW. This would also reduce the heat rate of these units which would result in saving of fuel. The contract agreement between UPRVUNL and M/s BHEL for the above work has been signed on A snapshot of the scheme along with the shut down period is as per table below Table 4: Details of Refurbishment Scheme of Obra B (5x200 MW) Name of the scheme Obra B (5x200 MW) Nature of Scheme Refurbishment Capacity Agency Project Cost (Rs Cr) Benefits from the scheme Shut down period Increase in PLF U# 9 4/09 to 11/09 U# 10 12/09 to 6/ MW BHEL LE by 15 years U# 11 7/10 to 1/11 Increase in Gen U# 12 2/11 to 8/11 Capacity 5x16 MW U# 13 9/11 to 3/12 The project Cost of the Scheme is Rs 1,635 crs. The scheme is funded in the ratio of 80:20 Debt to Equity ratio. GoUP has committed to provide Rs 327 cr of equity support for this scheme. Rs 317 cr have already been received under this scheme upto FY and the rest Rs 10 crs have been provided in the Budget by GoUP. The Debt support of Rs 1,308 crs has been tied up with PFC. The following table lists the actual loan drawls upto June 30, 2009 and equity support upto FY , and the proposed loan & equity drawls under the scheme for future years. OBRA B _MYT Petition for Determination of Tariff Page 15

17 Table 5: Investment Plan for Refurbishment of Obra B (5x200 MW) Particulars FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Equity Drawl Loan Drawl Total Based on the proposed expenditure pattern and the unit wise Commissioning dates the proposed capitalization, Interest on Loan, Return on equity, Depreciation & Advance against depreciation is calculated in the table below: Table 6: Capitalization details of Obra B (5x200 MW) Refurbishment Scheme Particulars FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 Opening Loan , , Drawls Repayment Closing Loan , , Intt on loan (Revenue) Capitalisation Loan including IDC Equity Return on Equity Depreciation AAD Arrears of Pollution Cess Liabilities The Petitioner in the tariff petition for FY had sought recovery of duties, taxes payable to Government or local authorities (like Pollution Cess, rates and taxes including Fringe Benefit Tax, Forest Cess) and fees payable to UPERC as separate pass through in tariff as these are payments being statutory in nature and imposed by law. OBRA B _MYT Petition for Determination of Tariff Page 16

18 The Hon ble Commission had allowed recovery of Pollution Cess liabilities, rates and fees payable to the Commission on actual basis The basis of charge of the Pollution Cess is a provision in Section 3 of the Water (Prevention and Control of Pollution) Cess Act, 1977 through which thermal generating stations across the country have to pay such cess at the prescribed rates. The Petitioner s principal liabilities of such cess is shown in table below: Table: Principal Liabilities of Pollution Cess towards UP Pollution Control Board Power Station Cess Amount (Rs Crs) Payment (Rs Crs) Balance (Rs Crs) Obra 'B' Total UPRVUNL Note: The Petitioner submits that the above charges are towards cess charges and not in violation of any environmental norms. Such liabilities do not include any interest or penalty. Based on the submissions of the Petitioner in Pet No/228/2205 the Hon ble Commission in an order dated August 20, 2007 had allowed a recovery of Rs. 32 crs to the Petitioner. The Petitioner has in all paid Rs crs towards Pollution Cess as on FY The Petitioner requests the Hon ble Commission to allow the additional crs ( ) to be recovered as pass through. The Petitioner is also planning to repay its arrears of cess dues in a phased manner. The Petitioner humbly requests the Hon ble Commission to grant automatic approval of recovery of such charges as these are pass through in nature. 1.7 Annual Payment of Statutory Charges like Water Cess, Payment to Pollution Control Board, Regulatory Fee, etc In the tariff Petition for FY , the Petitioner had sought recovery of duties, taxes payable to Government or local authorities (like Pollution Cess, rates and taxes including OBRA B _MYT Petition for Determination of Tariff Page 17

19 Fringe Benefit Tax, Forest Cess) and fees payable to UPERC as separate pass through in tariff as these are payments being statutory in nature and imposed by law The Hon ble Commission in Para of FY Tariff Order had allowed such items The Commission allows recovery of Pollution Cess liabilities, rates and taxes and fees payable to the Commission on actual basis and same shall be recovered as additional O&M Also the Hon ble Commission in Para 21 (iv) (d) of UPERC (Terms & Conditions of Generation Tariff) Regulations 2009 has allowed such items The expenses on regulatory fee, payment to pollution control board, fringe benefit tax, impact of pay revision, cost of water and water cess shall be paid additionally at actuals Thus the Petitioner seeks recovery of such items as separate pass through basis as and when they are incurred and paid. 1.8 Finance & Bank Charges The Finance charges, guarantee fees and bank charges remain un recovered as the regulations do not provide for them explicitly. These costs are incidental with raising of debt. The Hon ble Commission had allowed such expenses in the Tariff Order for FY The Petitioner cannot project such expenses as the likely impact & incidence of charges varies from situation to situation. For example, in the past the GoUP has levied guarantee fees on some loans guaranteed by it, however in other cases it has also given a waiver on guarantee fees The Petitioner requests the Hon ble Commission to allow such charges as separate pass through in tariff based on actual payment. 1.9 Payment of Service Tax on CISF Services The power stations of the Petitioner are important assets which need to be manned and protected. The responsibility of such safety and security has been entrusted to premier OBRA B _MYT Petition for Determination of Tariff Page 18

20 defence organization CISF. The annual liability of the Petitioner for the last four years is shown in table below: Table Annual Liabilities towards CISF Power Station FY (Audited) FY (Audited) FY (Audited) FY (Prov) Total Obra 'B' Consequent upon replacement of Commercial Concern in definition of various taxable services by a Person through the changes made in the Finance Bill 2006, CISF services provided against consideration have been covered under the category of Security Agency Service as defined under Section 65(94) read with Section 65 (105) (w) of the Finance Act, 1994 for payment of Service Tax w.e.f However since CISF provides its services to PSUs and other client organizations under the directions of Ministry of Home Affairs and cost of deployment is also recovered from the user PSUs/client organizations in such a manner as the Central Government may from time to time specify, in accordance with the provisions contained in Rule 73 of the CISF Rule 2001 In this regard CISF and Ministry of Home Affairs had moved an application with Ministry of Finance for Exemption from Service tax on the security services provided by it. After examination in consultation with Ministry of Finance, Department of Revenue it has now been decided by Ministry of Home Affairs that Service Tax is payable by CISF w.e.f. from 1 st April Service tax is to be paid by the service provider (CISF) who in turn would bill the service receiver (Petitioner in this case) for the service tax amount. The current service tax rate is 10.3% and the annual impact of service tax would be considerable. The Petitioner requests the Hon ble Commission to allow recovery of such service tax (additionally other than from O&M) as separate pass through as service tax is a statutory liability. OBRA B _MYT Petition for Determination of Tariff Page 19

21 1.10 Expenses towards implementation of ABT The Hon ble Commission has recommended for implementation of Availability Based Tariff (ABT) regime in the state. Accordingly UPRVUNL has geared up to prepare the necessary requisite infrastructure for its adoption and its smooth running. In this regard it has made significant investments are given in table below: Table: Capital Expenditure on ABT Implementation Power Station Material supply Installation & AMC Total (Rs Crs) Obra 'B' The Hon ble Commission in Para 18 (6) of the UPERC (Terms & Conditions of Generation Tariff) Regulations 2009 has stated: Cost on implementation of ABT shall be allowed as additional capital expenditure in tariff Accordingly the Petitioner s requests the Hon ble Commission to allow capitalization of such expenditure in FY Imported Coal Usage The Petitioner submits that as per the correspondence received from the Ministry of Power which submits that the complete coal requirement of the Petitioner cannot be materialized from Coal India Limited. Also the quality of indigenous coal received by the Petitioner has been declining over the years. As a consequence the Petitioner has entered into an agreement with MMTC Ltd (a Government of India Enterprise) for the supply of imported coal to the tune of 3.36 lac MT. The scope of such agreement with MMTC Ltd includes import coal to Mundra/other west coast Indian port, arranging vessels, stevedoring, handling, and storage, port clearances, arranging Railway rakes, loading, transportation and delivery at UPRVUNL power stations. All other activities for clearing and forwarding of the consignments like customs clearance, coordination with Port, Railways and any statutory authorities shall also be the OBRA B _MYT Petition for Determination of Tariff Page 20

22 responsibility of MMTC Ltd. Unloading of coal at Power Stations end from Railway Wagons shall be arranged by the Petitioner. The price of Coal to be supplied shall comprise Coal price arrived at based on the concept and formulae for re fixation of price for supply of imported coal to UPRVUNL, linking the FOB prices and Ocean freight with CERCs methodology of indexation, fixed component and Actual cost as given below: A. Coal Price C&F price of US$ (firm US Dollar rate per Metric Tonne (PMT) converted into Indian Rupees on the basis of applicable exchange rate. B. Fixed Component Stevedoring, Handling, Clearing & Forwarding charges & MMTC Ltd s Service Rs 35/ per Metric Tonne C. As per Actuals Customs Duty, Railway Freight, Insurance Charges, Sales tax/vat and other statutory duties & Port charges The technical specifications of imported coal as per agreement are given below: Table: Technical Specifications of Imported Coal Parameter Unit Acceptable Range Total Moisture % max Ash % 8 20' Fixed Carbon % typical Volatile Matter % Sulphur % Max Gross Calorific Value kcal/kg HGI Size mm 0 50 The price basis of imported coal is as follows Gross Calorific Value 6300 kcal/kg Total Moisture 16% Ash 10% Sulphur 0.8% It may be appreciated that imported coal although has a better GCV than domestic coal, however, the price of imported coal and its calorific value vis à vis the price and GCV of domestic coal are not linearly proportional. The same effectively means that usage of OBRA B _MYT Petition for Determination of Tariff Page 21

23 imported coal will essentially lead to increase in cost of generation of the plant. The decision for usage of imported coal is not based on the cost benefit analysis but is rather an outcome of the limitations of choice which is purely beyond the control of the Petitioner 1.12 Incentive The Petitioner would be raising bills for recovery of incentive for which it is entitled to in terms of the Tariff regulations of the Commission for the control period of FY to FY Accordingly, for the same the Petitioner is not making any specific submission 1.13 Taxes on Income The tariff regulations issued by the Commission provides that tax on the income streams of the generating company from its core business shall be computed as an expense and shall be permitted to be recovered. The income tax shall be recovered through the mechanism of tax escrow account Milestones achieved in FY The Petitioner has tried to improve its performance with overall concerted efforts. There have been some significant milestones achieved in FY which the Petitioner has presented in the table below: S. No. Particulars Milestone Achieved Date 1 Highest ever generation on a single day MU 21 st Feb Highest ever PLF on a single day 79.10% 21 st Feb Highest ever peak Load 3257 MW 22 nd Feb hrs 4 Highest ever monthly generation MU Jan 09 5 Highest ever monthly PLF 73.16% Jan Highest ever monthly generation achieved by 3X210 MW Anpara A TPS Highest ever monthly PLF achieved by 3X210 MW Anpara A TPS MU Jan % Jan 09 OBRA B _MYT Petition for Determination of Tariff Page 22

24 2. ANNUAL REVENUE REQUIREMENT & MULTI YEAR TARIFF PETITION OF OBRA B TPS The following sections detail the Annual Revenue Requirement and Tariff Petition of Obra BTPS for the five year control period of FY to FY Annual Capacity (Fixed Charges) Charges As per tariff regulations the annual capacity (fixed) charges consist of a. Interest on Loan Capital b. Depreciation including Advance against Depreciation c. Return on Equity d. Operation and maintenance expenses including insurance and e. Interest on Working Capital f. Compensation Allowance Gross Fixed Assets In the Tariff Petition for FY , the Petitioner had submitted detailed asset wise list of its fixed assets upto FY Further in the course of finalization of tariff order for FY , additional submissions were made by the Petitioner whereby it had provided the Provisional Gross fixed assets value for FY The statutory audit of the financial statements of the Petitioner for FY was completed on July 21, Based on such audited financial statements upto FY & the provisional financial statements for FY , the summary of year wise Gross Fixed Asset values is as per table below OBRA B _MYT Petition for Determination of Tariff Page 23

25 Table: Gross Fixed Assets Summary FY 2004 FY2009 (Rs in Crs) (All figures in Rs Crs) Power Station FY 04 Audited FY 05 Audited FY 06 Audited FY 07 Audited FY 08 Audited FY 09 Provisional Anpara 'A' Anpara 'B' Obra 'A' Obra 'B' Harduaganj Panki Parichha Parichha Extn Total For the purpose of this MYT Petition, the Petitioner has considered the opening Gross Fixed Assets for FY on the basis of Provisional Accounts of FY and Audited Accounts for FY Further, Gross Fixed Assets for each of the plants is projected based on the capitalization plan for the control period of FY to FY The details of such capitalization have been shown in the specific formats annexed to this petition. The R&M/Refurbishment & Up rating schemes have been discussed in the foregoing sections. Table: Obra B TPS Gross Fixed Assets Summary FY to FY (All figures in Rs Crs) Power Station FY 10 FY 11 FY 12 FY 13 FY 14 Opening GFA , , , Captalisation during the Year Closing GFA , , , , OBRA B _MYT Petition for Determination of Tariff Page 24

26 Interest on Loan Capital GoUP vide transfer scheme notification dated 25 th January 2001 had transferred the following loans to the Petitioner Table: Loans Received in Transfer Scheme Generic Loans Rs Crs Public Bonds IDBI Deferred Credit LIC Loan PFC Loans CEA GoI Loan Foreign Currency Loan Total (Note: Out of the above Bonds and one PFC Loan of Obra Crash are still due) In the month of March 2008, the Petitioner has settled its LIC loan liability. In a One time Settlement, LIC has accepted Rs 500 crores to liquidate its long standing debt. PFC has provided financing of this amount at monthly repayment of Rs crore over 120 installments. This has substantially optimized the interest cost of the Petitioner. Further a Hudco Loan (Generic) totalling Rs 100 crs was also added in FY & FY The Opening Balance of Generic Loans as on April 1, 2009 is as per table below: Table : Station wise Opening Balances of Generic Loans as on April 1, 2009 Financial Institution Anpara A Anpara B Obra A Obra B Harduaganj (All figures in Rs Crs) Panki Parichha Total Public Bonds HUDCO PFC LIC OTS UP Govt. Loan Total OBRA B _MYT Petition for Determination of Tariff Page 25

27 The Petitioner reiterates that it had inherited a portfolio of loans from erstwhile UPSEB and station/project wise allocation of loans was not provided in the transfer scheme. Considering the above, the loans have been allocated to various projects considering the following principles The loans which are clearly identifiable with the project have been assigned to the project only The loans which are not identifiable directly with the project have been allocated among plants in the ratio of their GFA balance All loans except the loans from PFC are corporate loans and are not associated with any plant. Loan balances along with interest cost of these loans have been allocated among existing plants in the ratio of their GFA balances. There is one PFC loan No (Obra Crash) which was received in transfer scheme. The same has been allocated among Obra A and Obra B based on their GFA balances. None of the corporate loans have been allocated to Parichha Extn (2x210 MW). The PFC loan of Rs 500 cr (LIC OTS) and its interest cost has been allocated among all existing plants except Parichha Extn in the ratio of GFA balances, as this loan has been taken to extinguish a prior debt. The petitioner has continued with this approach for allocation of interest expenses for such common loans for the control period. The Petitioner takes Project Loans from PFC to fund its capacity addition & R&M scheme loans. Loans from PFC are project specific and these loans have been added to the allocation of the corporate loans to arrive at the total loans as well as interest cost for each plant. Actuals loan drawls upto June 2009 have been taken into account for the Interest calculations. For computation of interest charges the Petitioner has considered the actual interest rate wherever the rate of interest is fixed as per loan agreement & in cases where the interest rate is flexible the SBI PLR as on of 12.25% has been considered The plant wise details of all the existing and new scheme loans are provided in the relevant forms prescribed by the Commission. However a summary of the generic and corporate loan balances, drawls and repayments along with Interest cost is summarized in Table below OBRA B _MYT Petition for Determination of Tariff Page 26

28 Table: Obra B TPS Summary of Interest on Loan for the Control Period (All figures in Rs Crs) Particulars FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 Generic Loans HUDCO Opening Balance Less: Repayment Closing Balance 0.94 Interest Public Bonds Opening Balance Less: Repayment Closing Balance Interest UP Govt. Loan Loan Balance Interest PFC LIC OTS Opening Balance Less: Repayment Closing Balance Interest Project Specfic PFC Loan No R&M (5x200 MW) Opening Loan , , Add: Drawal Less: Repayment Closing Balance , , Interest Loan No (Crash) Opening Loan Less: Repayment Closing Balance 3.39 Interest Summary Total Loans Opening Loan , , , Add: Drawals Less: Repayment Closing Balance , , , Interest OBRA B _MYT Petition for Determination of Tariff Page 27

29 Depreciation including Advance Against Depreciation Depreciation It is noteworthy to mention that the Hon ble Commission had considered Average Rate of 3.54% for Obra A, Obra B, Harduaganj & Panki and 3.56% for Obra B, Anpara B & Parichha Extn in the MYT order for to At that time the asset wise break up of gross fixed assets was not provided by the Petitioner. However in the tariff petition for FY the Petitioner had provided detailed asset wise list of Gross Fixed Asset for each plant. Even though such list was submitted, the Hon ble Commission considered average rate of depreciation at 3.54% & 3.56% in the Tariff order for the Petitioner of FY The Petitioner reiterates that the detailed asset wise list is now available with the Hon ble Commission. Such values are in accordance with the audited financial statements of the Petitioner. The rates of depreciation prescribed by the Hon ble Commission in Appendix 2 of the Generation Tariff Regulations prescribe different depreciation rates for different assets. In such circumstances it would only be fit to consider station wise depreciation calculated at the rates prescribed in Appendix 2 for different asset classes and not at the average rate. The value of Gross Fixed Assets has been discussed in foregoing sections. The Petitioner has calculated station wise depreciation, on the Gross Fixed Asset (GFA) value of all the plants owned by it, at the rates specified in the Appendix 2 of Generation Tariff Regulations OBRA B _MYT Petition for Determination of Tariff Page 28

30 Table: Obra B TPS Depreciation Summary for the Control Period (All figures in Rs Crs) Particulars Dep. FY 10 FY 11 FY 12 FY 13 FY 14 Rate GFA Dep GFA Dep GFA Dep GFA Dep GFA Dep Land & Land Rights 0.00% Land Owned Under Full Title 0.00% Land Heled Under Lease 0.00% Buldings 3.60% Bldgs Thermao Elect.Gene.Plant 3.60% Office Buldings 3.60% Residential Coloney For Staff 3.60% Other Building 3.60% Hydraulic Workes 3.60% Other Civil Work 3.60% Plant & Machinery 3.60% , , , Boiler Plant & Equipment 3.60% Turbine Gen. Steam Pwr Gene. 3.60% Auxilaries In Steam Pwr Plant 3.60% Coal Handling Plant & Handlg Eqpt 3.60% Plt Foundtn Hydel Pwr Gene Plt 3.60% Trans Plt Tranfs Rating 100Kva 3.60% Materials Handlg Eqpt Earth Hover 3.60% Switch Gear Incdg Cable Connts 3.60% Batteries Inclu. Charg Eqpt 3.60% Commu. Eqpt Teleph. & Tele 3.60% Tools & Tackles 3.60% Other Misc. Eqpt. 3.60% Lines Cable Network Etc. 3.60% Vehicles 0.00% Vehicles 18.00% Heavy Vehicles 18.00% Jeeps & Moter Cars 18.00% Others Vehicles 18.00% Furnitures & Fixtures 0.00% Furnitures & Fixtures 6.00% Furnitures & Fixtures Used In Hotel Restrnt. Bording House, Scol., Coll., Lib. & Meeting Hall 6.00% Office Eqpt 0.00% Office Eqpt. 6.00% Photostat Mach. 6.00% Computer 6.00% Other 6.00% Capital Spares Genrating Stations (95%) 3.60% Total , , , , OBRA B _MYT Petition for Determination of Tariff Page 29

31 Advance against depreciation (AAD) Depreciation is provided as replacement cost of assets. Advance against Depreciation is provided to generator to ensure that he has enough cash resources to meet the loan repayment liability. CERC in its CERC (Terms and Conditions of Tariff) Regulations 2009 have withdrawn the concept of Advance Against Depreciation and have increased the depreciation rates as per Appendix III to the notified regulations. The rates of depreciation for the first 12 years of a plant from the date of commercial operation would be 5.28% and 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. UPERC in the Draft generation regulations have retained the concept of Advance Against Depreciation. Para 21 (ii) (b) of the Generation Tariff Regulations 2009 provide for Advance Against Depreciation In addition to allowable depreciation, the generating company shall be entitled to Advance Against Depreciation, computed in the manner given hereunder: AAD = Loan repayment amount as per regulation 21 (i) subject to a ceiling of 1/10th of loan amount as per regulation 20 minus depreciation as per schedule Provided that Advance Against Depreciation shall be permitted only if the cumulative repayment up to a particular year exceeds the cumulative depreciation up to that year; Provided further that Advance Against Depreciation in a year shall be restricted to the extent of difference between cumulative repayment and cumulative depreciation up to that year Advance Against Depreciation makes available funds to meet loan repayment in the years where normative depreciation is lower than loan repayment. The funding pattern of the Petitioner s loans for capacity additions & R&M schemes is 70:30 debt to equity (in some cases it varies upto 80:20 also) which is in line with the prescribed debt equity ratio in tariff regulations. However, the tenure of loan which the Petitioner has tied up, ranges from 10 to 12 years. As against this, the depreciation allowed is at an amortization rate which OBRA B _MYT Petition for Determination of Tariff Page 30

32 assumes a life cycle of a plant of 25 years. This brings consequential matching difference between loan repayment liability & depreciation allowed in the initial years. The following table highlights the matching difference between the allowable depreciation and repayment schedule Particulars Value to be amortized No of years Annual Value Depreciation Loan 90% (balance 10% residual value) 70% (Normative Debt) 25 years (useful life) 10 years (loan repayment 90%/25 = 3.60% 70%/10 = 7.00% The First Generation Tariff Regulations were implemented from FY As such the cumulative depreciation claimed in tariff before FY could not be determined. The Petitioner has inherited many generic loans from the erstwhile UPSEB and hence the cumulative repayments also cannot be determined. Hence Advance Against Depreciation is not being claimed by the Petitioner against any old loans. The Petitioner has many new capacity addition plans and implementing various R&M / Refurbishment & Up rating schemes for its power stations which are under various stages of development. For such schemes it has contracted loans from PFC to fund such schemes. The loan repayment tenure of such loans varies from years whereas depreciation available against such capitalizations in only around 3.60%. In the following table the Petitioner has provided the calculation of advance against depreciation for the power station. AAD has been calculated as per the prescription of generation tariff regulations w.r.t. to the depreciation related to capitalization of new project loans/ additional capitalization of R&M scheme and repayment related to such new project loan/ R&M scheme loan only OBRA B _MYT Petition for Determination of Tariff Page 31

33 Table: Obra B TPS Advance Against Depreciation for the Control Period (All figures in Rs Crs) Particulars FY 10 FY 11 FY 12 FY 13 FY 14 Capital Cost , , , Gross Loan Amount 1, , , , , /10th of Loan Repayment Dep. Charged Cum. Repayment Cum. Depreciation AAD Return on Equity At the time of transfer scheme the equity which stood in the books of UPRVUNL was Rs crores. GoUP vide transfer scheme notification dated 25th January 2001 had provided equity of Rs 1, crores to the Petitioner. The equity received in transfer scheme of Rs 1, and Rs crores equity pertaining to UPRVUNL equity as on has been allocated among existing plants except Parichha Extn in the ratio of their GFA balances. Table: Allocation of Common Equity (All figures in Rs Crs) Power Station FY 00 FY 01 Anpara 'A' Anpara 'B' Obra 'A' Obra 'B' Harduaganj Panki Parichha Total OBRA B _MYT Petition for Determination of Tariff Page 32

34 The year wise plant wise total equity employed is given in the table below: Table Year wise Equity Employed (All figures in Rs. Crores) Heads FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 UPRVUNL Own Equity Equity received in Transfer Scheme 1,511 1,511 1,511 1,511 1,511 1,511 1,511 1,511 1,511 1,511 1,511 1,511 1,511 1,511 Anpara 'A' Anpara 'B' Obra 'A' Obra 'B' Harduaganj Panki Parichha Parichha Extn (2x210 MW) Parichha Extn (2x250MW) Harduaganj Extn (2x250MW) Anpara D ,020 1,020 1,020 1,020 1,020 ESP Installation (CREP works) Obra C Panki Extn Harduaganj Extn Fatehpur Anpara C Equity for Coal Dues Total 253 1,764 1,764 1,797 1,797 2,133 2,495 2,931 3,937 4,645 6,167 6,817 6,833 6,833 6,833 (Note: The equity additions in control period for plants under development stage like Anpara D, Obra C, Fatehpur, Panki Extn, Harduaganj Extn etc have not been projected for the purpose of above table. However upto FY the actual equity employed has been taken into account) OBRA B _MYT Petition for Determination of Tariff Page 33