ANNUAL REVENUE REQUIREMENT & FY

Transcription

1 ANNUAL REVENUE REQUIREMENT & TARIFF APPLICATION FY Uttar Pradesh Power Transmission Corporation Limited LUCKNOW

2 Table of Contents 1. Introduction U P Power Transmission Corporation Limited (UPPTCL) Procedure Envisaged for ARR FY 08 & UP Power Transmission Corporation Limited: Existing Transmission System- a preview: Interconnections and Northern Region Load Dispatch Centre (NRLDC) Availability of Lines Load Levels Bulk Transmission System Flows: Performance Analysis of ARR FY 08 & FY 09 Filing: Review of UPERC FY 08 & FY 09 Tariff Order: Comparison of Estimated Cost and Actual Figures To-Date Demand Forecast-Tariff Order and Actual FY ( ): Expense items- Approved and Estimated: Investments: Proposal for Ensuing Year: Normal Development Works: Transmission Works in NCR Renovation and Modernization Augmentation of Transmission System due to RE works Compliance of UPERC Directives: Power Wheeling & Demand: Losses external to UPPTCL system: Annual Revenue Requirement: FY ARR FY : Escalation Index/Inflation Rate Operation & Maintenance Expenses Employee Costs: Administration and General (A&G) Expenses: Gross Fixed Assets (GFA) Balances and Capital Formation Assumptions Repair and Maintenance (R&M) Expenses Depreciation Expense: Interest and Financing costs: Other Income: Reasonable return/ Return on Equity: Service tax: TransCo ARR: Proposed Transmission Tariff: Derivation of Tariff: SLDC Charges: Uttar Pradesh Power Transmission Corporation Ltd. i

3 List of Tables Table 2-1: Total existing Sub-Stations: Table 2-2: Total existing Lines (Circuit Km) Table 2-3: Yearly System Peak in M.W Table 2-4: Monthly System Peak for current Year Table 3-1: Approved and Actual FY : Energy Demand (MU) Table 3-2: Approved and Actual FY : Energy Demand (MU) Table 3-3: Estimated and Actual ARR FY 08, Components: Table 3-4: Estimated and Actual ARR, Components: Table 3-5: Proposed Program for Transmission Works (Rs. Cr.) Table 3-6: Detailed Program of Transmission Works for ensuing Year (Augmentation): Table 3-7: Compliance of UPERC Directives: Table 4-1: Actual & Estimated Energy Profile: Table 5-1: Escalation Index Table 5-2: Details of Employee Cost: Table 5-3: A &G Expenses: Table 5-4: Transco Investment Plan: (Rs. Cr) Table 5-5: Capital Formation during FY Table 5-6: Capital Formation during FY Table 5-7: R&M Expenses: Table 5-8: Details of Interest & Finance Cost: Table 5-9: Interest on Working Capital: Table 5-10: Summary of Other Income: Table 5-11: Return on Equity: Table 5-12: Annual Revenue Requirement: Table 6-1: Derivation of Transmission Tariff: Table 7-1: Break-up of SLDC Charges Uttar Pradesh Power Transmission Corporation Ltd. ii

4 Executive Summary: In accordance with the Section 62 of the Electricity Act2003 and provisions of the Transmission Tariff Regulations notified by the Commission, UP Power Transmission Corporation Limited is submitting before UPERC the Aggregate Revenue Requirement and Tariff petition for FY As prescribed in the Regulation, the petitioner is required to file the Aggregate Revenue requirement complete in all respect along with requisite fee as prescribed in the Commission s Fee and Fine Regulations each year containing the details of the estimated expenditure and the expected revenue that it may recover in the ensuing financial year at the prevailing tariff. Further the petitioner is required to file ARR for the ensuing financial year indicating the manner in which the gap between the expenses, which is permitted to recover and expected revenue for ensuing financial year, shall be bridged. As per provisions under Electricity Act 2003, separate State Load Despatch Centre (SLDC) is to be established by the state government to ensure integrated operation of Power system in the State. Further Transmission Regulation provides that till such time the State Govt establishes separate SLDC,STU shall operate SLDC function & till complete segregation of accounts between SLDC function & transmission function, STU shall apportion its Cost between (i) SLDC function and (ii) Transmission Function based on an allocation statement& basis of such apportionment shall be clearly indicated in the ARR petition. Currently the function of SLDC is being discharged by a separate section within UPPTCL. Expenses of SLDC function & ARR has been worked out on the basis of best estimate available. In present petition, expenses of SLDC are being charged through UPPTCL ARR however in the a separate section of SLDC ARR has been added for approval of SLDC charges for other practical purposes such charges being levied to open access consumers. The layout of this petition among other things includes background, proposed expenditure plan for the ensuing year,estimation of the Aggregate Revenue Requirement, explanatory notes where ever required and status of directive issued by the Hon ble Commission and other information as mandated in the regulation. The objective of the petitioner in this filing has been to contain the expenses to a reasonable level to offset inflationary pressure as prevailing in the market. For the current year petitioner has endeavoured to limit the expenses with in the approved limit. For ensuing year petitioner has also taken a daunting task to control the Uttar Pradesh Power Transmission Corporation Ltd. iii

5 expenses to the reasonable level but due to prevailing market condition some time it is not possible to limit expenses to current level due to uncontrollable factors. The petitioner in the current and ensuing year has continued with the execution with the all major capital investment project as also the must do projects for meeting the demand growth,creating adequate capacity for reducing the over load of heavy loaded feeders and transformers. The petitioner has proposed a capital expenditure of Rs 794 Cr for FY and Rs 2870 Cr for FY Detail of major capital investment plan is described in subsequent section with the proposed funding mechanism. The petitioner while estimating expenses for current & ensuing year has taken into account the actual expenses incurred in previous years as per its audited /un audited balance sheet and up to date expenses for current year to drive the expenses at a reasonable level. The petitioner has endeavoured to control the employee expenses in the current year to the approved level. While projecting the expenses for ensuing year petitioner has adopted the same method to contain inflationary pressure but due to announcement of 6th pay commission, it is bound to increase. The petitioner while projecting A& G expenses for ensuing year has proposed a marginal increase in the A&G expenses this is only in order to off-set inflationary pressure. This is in real term can be termed as reduction in expenses as virtually in nearly same expenses are ensured to be incurred in spite of creation of additional Division & Circle. The petitioner has projected R&M expenses for current year taking into account actual trends and for ensuing year R&M expenses has been estimated as per methodology adopted in previous years. The petitioner is making all round effort to optimize the R&M expenses despite steep rise in metals & fuels costs. The proactive preventive maintenance initiatives and capital expenditure are done in various improvement schemes which would result in improvement in quality of supply and reduction in number of overloaded lines &substations. The petitioner has projected Rs per unit Tariff for FY Uttar Pradesh Power Transmission Corporation Ltd. iv

6 1. Introduction 1.1. U P Power Transmission Corporation Limited (UPPTCL) The U P Power Transmission Corporation Limited (hereinafter referred to as TransCo) is the company incorporated under the Companies Act, 1956 by making amendment in the Object and Name clause of Uttar Pradesh Vidhyut Vyapar Nigam Ltd and having duly passed Special Resolution on 7th June 2006 in term of Section 21 of the Companies Act, 1956 which was originally incorporated on 31 st May, UPPTC started functioning with effect from 26 th July 2006 and is entrusted with the business of transmission of electrical energy to various utilities with the help of its transmission lines and substations within the geographic area of Uttar Pradesh. Before incorporation of UPPTC, transmission work was entrusted with UPPCL. Govt of UP in exercise of power under section 30 of the Electricity Act 2003 vide notification No: 122/U.N.N.P/24-07 dated 18 July 2007 notified U P Power Transmission Corporation Limited as the State Transmission Utility of Uttar Pradesh.The UPPTCL now deal with the transmission of electricity for catering power requirement of four distribution companies viz Madhayanchal Vidyut Vitran Nigam Ltd, Dakshinanchal Vidyut Vitran Nigam Ltd, Pashchimanchal Vidyut Vitran Nigam Ltd and Poorvanchal Vidyut Vitran NigamLtd in addition to two other distribution companies serving Kanpur (KESCO) and Noida (NPCL) Procedure Envisaged for ARR FY 08 & 09 Uttar Pradesh Power Transmission Corporation submitted before U.P. Electricity Regulatory Commission the Annual Revenue Requirement (ARR) and Tariff proposal for FY on 19 th December, 2007 along with the information/data for FY in accordance with the provisions of the Transmission Tariff Regulations notified by the Commission on 6 th October 2006.These regulations are applicable for the purpose of ARR Filing and Tariff determination of the transmission Licensee with in the State of UP. The Commission vide its order dated 4 th January 2008 observed certain deficiencies in the above petitions, which were clarified by the licensee as under- Licensee has submitted that as per requirement of Commission under electricity act 2003 the UPPTCL is in the process of taking action for obtaining separate licence. Draft Transfer Scheme has been formulated and submitted to the GoUP for their consideration and shall be notified by the GoUP. All the new PPAs are being allocated to DisComs and a proposal for allocation of old PPAs to the DisComs has been submitted to the GoUP. With reference to the Intra-State ABT in the state Licensee has submitted that the work of installation of boundary meters is in progress. The Commission admitted the petition filed by the Licensee on 25th January 2008 and directed the Licensees to advertise the salient features of ARR/Tariff petition in the widely circulated newspapers of the area of supply. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 1-1

7 Comments of general public including electricity consumers on ARR/Tariff proposals were also invited. An advertisement in this regard appeared in five leading news papers on 31st January The Commission conducted public hearing at Lucknow, Kanpur, Ghaziabad and Gorakhpur.Various stakeholders, industry associations and consumer forums participated in the public hearing and submitted their comments. UPERC issued a Joint Tariff Order for FY & on 15 th average hike in Retail Tariff of about 14%. April 2008 with an The structure of this submission: In accordance with the provisions of Transmission Tariff Regulations UPPTCL is filing Annual Revenue Requirement of the Transmission business including tariff and charges. This ARR filing includes detailed Tariff proposal for transmission and wheeling of Electricity. The structure of this submission is as follows Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Notes: Introduction: This contains a brief background and rationale used for the submission; major assumptions used and describe the structure of the submission. UPPTCL, Transmission System- a preview Performance Analysis of ARR FY2008&FY2009 Filing: This includes: a) A review of the UPERC FY 08&FY09 Tariff Order. b) Comparison of estimated cost and actual figures to-date; c) An action plan undertaken by UPPTCL for improvement of Transmission Loss d) Investment plans. e) Compliance of UPERC directives. Power Wheeling & Demand: This includes demand forecasts for FY10, also summarised actual FY 08 & FY09. Annual Revenue Requirement: (ARR) for FY : This includes the ARR forecast for FY10 for UPPTCL. Proposed Transmission Tariff: This provides the proposed transmission tariff for UPPTCL, which will be a simple postage stamp tariff. This tariff would be applied to all DisComs and current Bulk Supply consumers. SLDC-Annual Revenue Requirement (ARR) for FY : This includes the ARR forecast for FY10 for SLDC and provides the proposed SLDC charges, for the capacity handled by UP Power Transmission Corporation Ltd. In this petition: Previous year is defined as financial year FY Current year is defined as financial year FY Ensuing year is defined as financial year FY Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 1-2

8 UP Power Transmission Corporation Limited: 2. Existing Transmission System- a preview: The transmission system in UP is composed of 400 kv, 220 kv and 132 kv AC lines and substations. UPPTCL has also built one 765 kv AC single circuit line which connects the Anpara thermal station in the southern part of UP to Unnao s/s (Unnao District). Presently, this line is being operated at 400 kv. Majority of the transmission lines & substations in UP are owned and operated by UPPTCL. However, there are other transmission lines & substations in UP (including a ± 500 kv HVDC line from Rihand to Dadri) that carry electricity from the central sector plants to the neighbouring states and these are owned and operated by the Power Grid Corporation of India Limited (PGCIL). In addition, some of the above transmission facilities are jointly owned by UPPTCL & PGCIL. Until the 400 kv grid was fully developed, the 132 kv lines were part of the transmission network. Now the 400 kv and 220 kv network forms the transmission grid while the 132 kv systems can be treated as a sub transmission system. Over a period of time, some of the 132 kv lines formed local grids while a majority of them are radial lines. The total circuit lengths of the existing 765 kv, 400 kv, 220 kv and 132 kv lines are given in Table 2-1 & sub station are given in Table 2-2. Table 2-1: Total existing Sub-Stations: Sl. NO. Transmission Area The No. of Sub Centres Capacity (MVA) 400 K.V. 1- Transmission Central Area Transmission Eastern Area Transmission Southern Area Transmission Western Area Total K.V. 1- Transmission Central Area Transmission Eastern Area Transmission Southern Area Transmission Western Area Total K.V. 1- Transmission Central Area Transmission Eastern Area Transmission Southern Area Transmission Western Area Total Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 2-3

9 Table 2-2: Total existing Lines (Circuit Km) Transmission Lines ckt.km 765KV Lines (charged at 400 kv) 400 KV Lines 220 KV Lines 132 KV Lines Interconnections and Northern Region Load Dispatch Centre (NRLDC) UPPTCL s existing transmission system is interconnected to the electrical grids of its neighbouring States, namely, Uttaranchal, Haryana, Rajasthan and the central system of New Delhi. In addition, it maintains asynchronous ties (i.e. AC-DC-AC) with the electrical grids of Bihar in the east and Madhya Pradesh in the South. Until November 2002, there was only one State of UP and one transmission grid for the entire erstwhile UP. The ownership of lines and substations have changed since division of UP into two States, i.e. UP & Uttaranchal. The UPPCL power system is a part of the Northern Regional Grid of India. The Northern Grid is controlled from a unified regional load dispatch centre at Delhi. The Northern Regional Load Dispatch Center (NRLDC) is equipped with modern SCADA and Energy Management System Software. The SCADA system is fully functional as are key applications like State Estimation, Economic Dispatch and security assessment. The NRLDC modified its economic dispatch software to take into account the Availability Based Tariff (ABT). UPPTCL has been upgrading its own unified load dispatch centre at its head office in Lucknow and the four area control centres Availability of Lines Availability of lines and other equipments of UPPTCL system is positively around 98% and with this system UPPTCL handles Transmission of energy from different generating units to the Distribution Licensees (Points) effectively Load Levels The load centre power demands and their daily, monthly & yearly load levels and associated load power factors are important factors that influence the planning of the bulk transmission system. UPPTCL loads are generally scattered throughout the state with heavy demands in Varanasi, Allahabad, Lucknow, Kanpur, Agra and Meerut areas. The annual peak load generally occurs in summer month. Figure 2-3 & Figure2-4 typically show the yearly peak demand of previous years & monthly current year peak demand. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 2-4

10 Table 2-3: Yearly System Peak in M.W. Month Availability R.D.M. Restriction UDM (MW) (MW) (MW) Table 2-4: Monthly System Peak for current Year Month Availability R.D.M. Restriction UDM (MW) (MW) (MW) Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Bulk Transmission System Flows: Bulk transmission system flow characteristics are dominated by the coal based thermal generating plants available in southeast of UP. These plants at Anpara, Obra, Rihand and Singrauli generate about 6300 MW out of which 4500 to 5000 MW generation flows to the western regions after meeting Varanasi regional demand. This power transfer level continues through Sultanpur-Allahabad, Lucknow- Kanpur, Moradabad-Agra interfaces since the available generation in each of the regions almost matches with its respective demand. In the east, power from the aforementioned plants flows towards north to supply Varanasi, Azamgarh and Gorakhpur load centers. A small amount of power is imported from Bihar through a connection at 132 kv level. Power supply to Uttaranchal in the North West is normally less than 500 MW due to the available hydroelectric generation in the state. In the west, more than 3000 MW flows to Delhi and Rajasthan through ± 500 kv HVDC bi-pole line and 400 kv transmission network across the state. The existing bulk transmission system capacity with the current level of power transfer requirements is well equipped to handle the flow of energy. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 2-5

11 3. Performance Analysis of ARR FY 08 & FY 09 Filing: As previously mentioned, this section contains the following: a) A review of FY 08 & FY 09 UPERC Tariff Order; b) Comparison of estimated cost and actual figures to-date c) An action plan undertaken by UPPTCL for improvement of Transmission Loss. d) Investments plan. e) Compliance with Commission directives Review of UPERC FY 08 & FY 09 Tariff Order: The Commission under the statuary obligation to restore regulatory synchronism, directed UP TransCo on 19 th October 2007 to submit the ARR/Tariff application for FY by 30 th November, 2007 along with the data/information for the FY The Licensee filed their ARR/Tariff petition for FY on 19 th December in accordance with the provisions of the Transmission Tariff Regulations notified by the Commission on 6 th October The Commission admitted the petition filed by the Licensee on 25 th January U.P. Electricity Regulatory Commission issued Tariff Order for FY & on 15 th April The single Order for FY 08 & FY 09 covered all five of the successor companies to the erstwhile UPPCL. With respect to UPPCL Transco, the salient points of the Order may be summarised as follows: The Commission approved a transmission tariff of Rs per kwh for FY and Rs per kwh for FY , compared to an equivalent amount of Rs per kwh for FY 09 & Rs per kwh for FY 08 in the Transco tariff petition. Although cost inputs and forecast sales were revised by the Commission to yield the different result, the basic methodology of dividing total Transco ARR by energy delivered by TransCo was accepted. The transmission Tariff for FY 08 & FY 09 thus represents an increase of 12% & 15 % over the Transmission Tariff for FY The tariff was designed to meet Transco s annual revenue requirement; in order to make revenue gap zero. Additionally, it should be noted that Transco s annual revenue requirement for FY was approved to Rs Cr as against Rs filed in the petition. The annual requirement for FY was approved to as against filed in the petition. The Commission in order to encourage the Open Access Transmission in the state facilitated the customers seeking Open Access, approved transmission charges payable by all Open Access customer based on the voltage level at which they are connected to the grid.commission has approved Open Access transmission charges of Rs 0.22/kWh and Rs 0.05/kWh for long term and short term in FY 09 for consumers connected at 132 kv voltage level. For consumers connected above 132 kv voltage, these charges are Rs 0.16/kWh & Rs 0.04/kWh for long term and short term Open Access. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-6

12 3.2. Comparison of Estimated Cost and Actual Figures To-Date Demand Forecast-Tariff Order and Actual FY ( ): Table 3-1 provides a summary of UPERC approved demand in Tariff Order FY 08 and actual demand for FY 08. In Table 3-2 the same values are given for FY 09. Table 3-1: Approved and Actual FY : Energy Demand (MU) Licensee (Rs Cr) Tariff Order FY Actual FY Diff Agra DisCom(Incld. Bulk) , % Meerut DisCom(Incld. Bulk) , % Lucknow DisCom , % Varanasi DisCom , % Total , % Table 3-2: Approved and Actual FY : Energy Demand (MU) Licensee (Rs Cr) Tariff Order FY Estimated FY Diff Agra DisCom(Incld. Bulk) , % Meerut DisCom(Incld. Bulk) , % Lucknow DisCom , % Varanasi DisCom , % Total % Expense items- Approved and Estimated: Table 3-3 & Table 3-4 provide a summary of the various ARR components of Tariff Order FY08 & FY 09. It is evident from the tables that all expenses are well with in the approved limit. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-7

13 Table 3-3: Estimated and Actual ARR FY 08, Components: Expense Items Tariff Order Actual (Rs Cr) FY FY Diff Employee cost % A&G expenses % R&M expenses % Interest charges % Depriciation % Gross Expenditure % Expenses capitalisation Employee cost capitalised % Interest capitalised % A&G expenses capitalised % Net expenditure % Prior period Adjustment Total net expenditure with provision add: Return on Equity % Less: Non Tariff Income (13.61) (17.17) 26% Annual Revenue Requirement(ARR) 1, , % Table 3-4: Estimated and Actual ARR, Components: Expense Items Tariff Order Estimated (Rs Cr) FY FY Diff Employee cost % A&G expenses % R&M expenses % Interest charges % Depriciation % Gross Expenditure % Expenses capitalisation Employee cost capitalised % Interest capitalised % A&G expenses capitalised % Net expenditure % add: Return on Equity % Less: Non Tariff Income (14.33) (18.47) 29% Annual Revenue Requirement(ARR) , % 3.3. Investments: Investments will be made in key areas with the objective of strengthening the transmission networks, thus contributing to the reduction of losses and reliability of supply. This work will be conducted with the help of loans from financial institution and equity from GoUP. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-8

14 Proposal for Ensuing Year: It will be necessary to execute many works for ensuring reliability, stability and quality of transmission system but on the basis of experience of the past years, availability of money and other special reasons the restricted list of transmission works. During FY investments will be made in key areas with the objective of strengthening the transmission networks, thus contributing to the reduction of losses & reliability of supply. Most of the works are to be financed by M/s. Power Finance Corporation, New Delhi, NCR Board, Rural Electrification Corporation, New Delhi and HUDCO loan. The transmission works have been categorized as follows:- 1. Normal Development Works 2. Transmission works in National Capital Region 3. Renovation and Modernization 4. Transmission works on account of 100% electrification of villages 5. Installation of Capacitors Normal Development Works: Due to increase demand of electricity, some of the sub-stations/lines are overloaded. To meet out this demand it is essential to increase the capacity of the sub-stations and to create new substations and lines Transmission Works in NCR All the district of Meerut Commissionery is covered in National Capital Region. Industries from Delhi are to be shifted to National Capital Region for which Electricity Supply position has to be improved. NCR Board will provide financial aid by way of loan Renovation and Modernization A large number of S/Ss, Transmission lines & communication equipment are around 30 years old and equipment's like transformer, Circuit breakers, Relay Panels etc. needs replacement for prolong service as spares for same are not available anymore and more they based on obsolete technology. Hence, provision has been made for the renovation and modernization of various equipments Augmentation of Transmission System due to RE works In order to meet increased demand due to electrification of villages in REC scheme and mazras in Rajiv Gandhi village electrification scheme, various transmission sub-stations and lines are to be strengthened and new sub-stations and lines are proposed to be constructed. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-9

15 Table 3-5: Proposed Program for Transmission Works (Rs. Cr.) Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-10

16 Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-11

17 Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-12

18 Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-13

19 Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-14

20 Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-15

21 Table 3-6: Detailed Program of Transmission Works for ensuing Year (Augmentation): Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-16

22 Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-17

23 3.4. Compliance of UPERC Directives: In compliance with the directive issued by Hon ble commission in its Tariff Order for financial year & issued on 15th April 2008 under chapter 9 regarding the compliance of UPERC directives. It is to submit that directives are under various stage of compilation and will be submitted to Commission by the Licensees. However partial compliances are submitted as under:- Table 3-7: Compliance of UPERC Directives: Sr. No Ref. No Description of Directive for TransCo Time Period for compliance Action Taken The Commission directs the transmission licensee to submit voltage wise transmission loss study report for last three years along with the estimation for current and ensuing year 3 Month Voltage wise transmission losses are submitted in the Regulatory Format P1 along with the ARR The Commission directs the licensees to submit the study report on actuarial valuation for the purpose of estimating employer s contribution towards pension and gratuity. The licensees are also directed to intimate the Commission on the status of the study within a period of one month from the date of issue of Tariff Order The Commission directs the Licensees to carry out a proper cost benefit analysis before taking up any new initiatives and submit the same for the approval to the Commission The Commission directs the licensee to submit the investment plan for next year filing strictly in accordance with Transmission Tariff Regulation 2006 failing which no investments would be approved. 6 Months Status report within 1 month As and when required Next Year Filing Action is being taken as per direction. Status report will be submitted to the Commission. Action is being taken as per the directives. TransCo Investment Plan are submitted with ARR As regards to the investments approved for FY and FY Months Action is being taken as per directive. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-18

24 Sr. No Ref. No Description of Directive for TransCo Time Period for compliance Action Taken 09, the Commission directs the licensee to submit the necessary information required under the Transmission Tariff Regulations approved by the Commission within two month from the issue of this tariff order The Commission directs the licensees to maintain proper and detailed fixed assets registers at field offices to work out the depreciation expense as specified in the UPERC (Terms and Conditions of Transmission Tariff) Regulations, 2006 and directs the Licensees to submit a report to the Commission citing clearly as to how they are 2 Months All units have been directed to take maintain fixed assets register to workout the depreciation expenses. The report will be submitted to the Commission. maintaining fixed assets registers for the various assets The Commission directs the licensee to submit the information regarding the basis used for computation of the Opening Equity and the detailed working on a year to year basis and supporting financial statements used for the same. 1 Month Draft Transfer scheme for notification has been submitted to GoUP. As per the draft notification presented on consultation with M/s PWC the opening equity as on is Rs.1843 crore and in the year GoUP provided Rs crore as equity for transmission works through the budget of GoUP. During GoUP provided equity of Rs crore for the transmission work through the budget. The total equity as on work out to Rs crore The Commission hereby directs the SLDC that the ARR/budget for SLDC should be submitted separately along with the ARR submission of Transco. Next Tariff Filing Budget for the SLDC is being submitted separately The Commission directs the Transmission Licensee to formulate the billing procedure for transmission charges and submit the same for approval of the Commission. 1 Month Actions have already been taken and billing is being done as per the directives of the Commission. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 3-19

25 4. Power Wheeling & Demand: UPPTCL (Transco) is performing the business of transmission of electricity received at UP periphery from various central generating station and station out side state as well as energy generated with in the state. UPPCL is purchasing power from various sources including State and Central Generating stations and dispatching to the Distribution Licensees as required, using Transmission system of UP Transco. In purchasing/ wheeling of electricity from various generating station out side the state, losses out side the UP transmission system also come into the picture. Therefore it is prudent to separately analyses losses internal as well as external to the system so that petitioner should not be accountable for loses external to the system i.e. losses in PGCIL system Losses external to UPPTCL system: The petitioner submits that while considering losses to meet the requirement of various distribution licensees, losses external to UPPTCL system, i.e. in the Northern Region PGCIL system need to be accounted for. The availability of power from various sources out side the state gets reduced to the extent of these losses and the petitioner has to bear these losses as commission is approving total transmission losses irrespective of loses occurring in PGCIL or other lines. NRLDC computes the losses in the regional transmission system on a weekly basis and the same are used by it in the scheduling process subsequently. These losses have varied between 3.76% and 5.24% between 5 th Jan 2009 and 22nd March UPPTCL has considered an average level of 4.35% losses in its energy transactions with the Northern Region for FY Here it is to noted that these losses are applicable to only energy received external to state, therefore petitioner has taken a weighted average of 2.06% for FY On the basis of Power requirement provided by DisCom a detailed energy balance is summarized for Distribution Licensees of the state using Transmission system of TransCo for dispatching the energy in Table 4-1: - Table 4-1: Actual & Estimated Energy Profile: Licencsee FY FY FY MEERUT (Incld. Bulk) 18, , , AGRA (Incld. Bulk) 15, , , LUCKNOW 9, , , VARANASI 12, , , Purchased & Billed Energy (MU) 55, , , Peripheral Loss (Upto inter connection Point) 2.35% 2.35% 2.06% Energy Available for Transmission(MU) 53, , , Ienergy Delivered to DisCom DisCom(MU) Consolidated Discom 51, , , MEERUT (Incld. Bulk) 16, , , AGRA (Incld. Bulk) 14, , , LUCKNOW 8, , , VARANASI 11, , , Transmission Losses UPPTCL 4.12% 4.12% 4.00% Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 4-20

26 5. Annual Revenue Requirement: FY The development of the FY ARR follows the methodology as adopted in the Terms and Conditions for Determination of Transmission Tariff Regulations, ARR FY : Hon ble Commission has issued Transmission Tariff regulation 2006 which require that ARR shall consist of following items: 1. Operation & Maintenance expenses Employee Expenses Administrative & General Expense. Repair & Maintenance Expenses 2. Interest expenses Loan capital Working Capital 3. Depreciation Expenses 4. Other Expenses 5. Return on equity 6. Contingency Reserve 7. Taxes on Income 8. Any other relevant expenditure Further regulation provide that the State Transmission Utility, when also looking after the SLDC function, shall file segregated costs for SLDC operations and any surplus / deficit in recovery of SLDC costs vis-à-vis SLDC fee and charges collected by the STU shall form part of its ARR. This section provide ARR for FY in accordance with the Tariff regulation and each component of ARR as mentioned above is dealt in detail in following section. Further it is to submit that UP TransCo is also looking after the function of SLDC as such SLDC cost is embedded in TransCo cost. How ever as prescribed in Tariff Regulation segregated costs for SLDC has also been computed at the end. The petitioner has estimated ARR for ensuing year based on provisional un-audited account of FY and expenses available till date of FY In order to put the various proposed amounts in proper context, the corresponding figures for actual FY08, estimates for FY09 & forecast for FY10 based on year-to-date experience are also presented for certain account categories. For each such major account category of expenses, an explanation of the derivation is given, along with the logic for departing from FY08 values. Further Tariff regulation provide that O&M expenses and other expense shall be escalated on the basis of prevailing rate of inflation from base figure & inflation shall be calculated on the basis of indexes notified by central government.therefore Petitioner has calculated inflation index in following section: Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 5-21

27 Escalation Index/Inflation Rate Regulation issued by Hon ble commission provides that expenses of the base year shall be escalated at inflation rate notified by central government for different years. The inflation rate for this purpose shall be weighted average of wholesale Price Index and Consumer Price Index in the ratio of 60:40. Therefore for the purpose of this ARR petitioner has used this methodology in arriving at Escalation Index/ Inflation Rate. Calculation as tabulated below: Inflation Rate=0.6*Inflation based on WPI + 0.4*Inflation based on CPI Table 5-1: Escalation Index Month Wholesale Price Index Consumer Price Index Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Inflation 6.15% 9.70% Weighted Average (CPI 40%:WPI 60%) 7.57% WPI- CPI Operation & Maintenance Expenses Operation & maintenance expenses comprise Employee costs, Administrative & General Expenses and Repair & Maintenance expenses. The regulation 4.2 of the Transmission Tariff Regulation issued by the Commission stipulates: The O&M expenses for the base year shall be calculated on the basis of historical/audited costs and past trend during the preceding five years. However, any abnormal variation during the preceding five years shall be excluded. O & M expenses so calculated for the base year shall then be escalated on the basis of prevailing rates of inflation for the year as notified by the Central Government and shall be considered as a weighted average of Wholesale Price Index and Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 5-22

28 Consumer Price Index in the ratio of 60:40. Base year, for these regulations means, the first year of tariff determination under these regulations. However in last tariff order Commission was of the opinion that a suitable norm for allowance of O&M expenses could be adopted only after undertaking a thorough study of the O&M expenditure based on the past performances, and the cost drivers of the same, through a separate process. This study also has to be backed by audited information for the past which needs to be made available by the licensees. Only then the true picture if the trend in the O&M expenses may emerge. Till any such norm for O&M expenditure is determined, the Commission emphasised considering the individual elements of O&M expenditure. As stated above, in the absence O&M norms petitioner has estimated individual components of O&M expenses based on methodology described in following section: Employee Costs: The projection of employee costs involves a detailed examination of the various components of salary such as basic pay and dearness allowance for the various grades of employees. It would also involve an understanding of the extent of retirements as well as the manpower additions planned. Considering above Petitioner has estimated employee cost for FY based on un-audited data of FY and data available for FY to date. Here it is also to mention that in FY petitioners have taken impact of increase due to implementation of sixth pay commission. Details of Employee Cost for FY08 to FY10 are provided in Table 5-2 below. Table 5-2: Details of Employee Cost: Details FY FY FY (Rs.Cr) Unaudited Estimated Projected Basic Salaries Overtime Dearness Allowance Other allowances Bonus / Ex-gratia Medical expenses re-imbursement Leave travel assistance Interim Relief/ Other Earned leave encashment Leave Salary contribution Payment under workmen's compensation Act Staff welfare expenses Employers Contribution for Pension & Gratuity Employee Costs (before charge to capital) Less expenses capitalized Net employee cost As mentioned above evolution of sub account of employee cost has been forecasted from base figure of FY balance sheet and actual figure available for FY till date. While projecting the expenses for ensuing year, petitioner has endeavoured to control the employee expenses but cost has Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 5-23

29 increased due to impact of pay commission factor which is totally beyond the control of the petitioner. Various sub account are estimated as follows: Basic salary: The petitioner would like to submit that the projected growth in basic salaries in FY due to mainly time bound increment and annual increase in pay. The annual increase depends on the pay scale of an employee and such increase is mandatory for employees. Therefore petitioner has estimated basic salaries for FY as per actual cost incurred on this account till date & for FY basic salaries has been projected to increase by 69% from FY cost due to implementation of sixth pay commission recommendation. Dearness Allowance (DA) is estimated to be %( 47% for 3 month&54% for 9 month) for FY and for FY DA has been projected 25%. Other allowance has been forecast to be 8% of basic salary. Likewise, Medical Expenses have been forecast to increase by inflation index per year from FY07, taking 3% as contingency. Pension and Gratuity have been calculated at 16.7% and 2.38% (i.e., 19.08%) of Basic Salary and Dearness Allowance. Leave travel Assistance & compensation is assumed to be.01% & 0.2%of Basic Pay respectively. Staff welfare ex. Is assumed to in same ratio as actually incurred in FY09. Employee Expenses Capitalized has been taken 29% as approved by Hon ble Commission in last Tariff order Administration and General (A&G) Expenses: These expenses are incurred by the petitioner for meeting the day-to-day expenses relating to the administration of its offices, insurance, communication, professional charges, audit fees, advertisement expenses, freight etc. All these expenses are directly affected by inflation.therefore A&G expenses have been projected considering the impact of inflation and need for addition of more substation and offices. Forecast A&G expenses for Transco are summarised below in Tables 5-3, beginning with the figures from the provisional figures for FY08. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 5-24

30 Table 5-3: A &G Expenses: Details FY FY FY (Rs.Cr) Unaudited Estimated Projected Rent, Rates & Taxes Insurance Telephone,Postage&Telegrams,Telex charges Legal charges Audit fees Consultancy charges Technical fees and professional charges Conveyance and traveling Regulatory expenses Electricity Charges Other expenses Total Capitalized Net It may be noted that licensee is capitalizing a portion of A&G cost.for current submission licensee has taken capitalization as 19%, approved by commission in its last tariff order. As a reflection of the continuing commitment of the Petitioner to keep costs under control, almost all A&G Expenses are forecast to increase by only inflation index per year across the board to only offset the effect of inflation. In FY & FY under the head consultancy charges an amount of Rs 6 Cr has been added for IT related expenses which are urgently required to cope with the present pace of technological development in Power sector. In addition to above regulatory expenses Rs 10 lacs application fees and Rs 500 per MU energy delivered to distribution licensees as license fees has been added in A&G expenses in FY & FY which is Rs 2.64& 2.72 crs respectively Gross Fixed Assets (GFA) Balances and Capital Formation Assumptions The estimate of a number of ARR components is dependent on the FY10 opening balance of GFA, one of which is R&M in the next section. It is therefore appropriate at this point to provide FY10 GFA estimates, as well as estimates for other fixed asset accounts. The assumptions used for projecting GFA and CWIP are as follows: The opening GFA and CWIP for Lucknow DisCom for FY have been taken as per the closing figures provisional annual accounts of FY Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 5-25

31 30% the opening CWIP and 30% of investment made during the year, expenses capitalised & interest capitalised (30% of total investment) has been assumed to get capitalised during the year. Investment through deposit work has not been taken for capital formation as per policy adopted by commission in its last tariff Order. Thus investment shown in capital formation table below table 5.4&4.5 don t include work funded through deposit work. Table 5.3 shows Licensee s investment plan for FY09 and FY10 along with the proposed funding of each component of the investment plan. The detail of activities carried out in each scheme has already been explained in section 3.3. Table 5-4: Transco Investment Plan: (Rs. Cr) Particulars FY FY Loan Grant Deposit Equity Total Loan Grant Deposit Equity Total Equity from GoUP for Transmission Works Loans for Transmission Works PFC REC NCR HUDCO Deposit Works Total Transmission , , Table 5-4 and Table 5-5 shows the forecast evolution of the GFA, Accumulated Depreciation and Work in Progress Accounts under the assumptions noted below the table. Table 5-5: Capital Formation during FY 09 Table 5-6: Capital Formation during FY 10 Balance 31- Balance 31- Rs crore Invest-ments Cap interest Cap expenses To GFA Depreciation Mar-09 Mar-10 (1) (2) (3) (4) (5) Gross Fixed Assets 5, , ,818.8 Accumulated Depreciation 2, ,634.9 Work in Progress 1, , (1,220.5) 2,847.9 Notes: (1) FY08 Balances as per provisional financial statements. (2) Capitalized interest - see Table 5-8. (3) Capitalized expenses are from Table 5-2 &5-3. (4) Depreciation expense for FY09 = 5.27% of average GFA. Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 5-26

32 5.5. Repair and Maintenance (R&M) Expenses Forecast R&M expenses for TransCo are summarised below in Tables 5-7, beginning with the figures from the provisional figures for FY08.The forecast R&M Expenses are estimated as 2.0% of the opening GFA balances. In the last tariff order commission approved Rs cr for FY while petitioner has estimated Rs cr, This increase is mainly attributed to substantial increase in raw material and fuel cost. The metal prices have increased phenomenally as compared to past few years. This has substantially increased the cost burden of the petitioner. Moreover, the petitioner has added a number of transformers, cables, grid substation, etc for which there has been an increase in the amount of annual maintenance contracts, this would have translated to a higher R&M expenses in the ensuing year for the petitioner. The petitioner has estimated Rs Cr for ensuing year. The amount so estimated has been spread out proportionally among the sub-accounts. Table 5-7: R&M Expenses: Details FY FY FY (Rs.Cr) Unaudited Estimated Projected Plant & Machinery Building Civil works Other Expenses Lines, Cable Network, etc Vehicles Furniture & Fixtures Office equipment Total Depreciation Expense: FY10 Depreciation Expenses may be estimated with reference to Table 5-6, which has projected the opening GFA balance for FY10. Applying the rate of 5.27% to average GFA during year petitioner has projected a Depreciation Expense of Rs crores for FY This is line with the method used by commission in recent Tariff order Interest and Financing costs: The interest and financing costs projected for FY10 are based on the current schedule of long-term debt, repayments and new debt requirements. The summary of the interest and finance costs is provided in Table 5-8 below: Uttar Pradesh Power Corporation Ltd. UPPCL TransCo 5-27