Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai 400 005 Tel. 22163964/ 65/ 69 Fax 22163976 Email: mercindia@merc.gov.in Website: www.mercindia.org.in/www.merc.gov.in CASE No. 13 of 2016 In the matter of Petition of Reliance Infrastructure Ltd. (Transmission Business) for Truing-up of ARR for FY 2014-15, Provisional Truing-up of FY 2015-16 and approval of ARR for the MYT Third Control Period from FY 2016-17 to FY 2019-20 Coram Shri Azeez M. Khan, Member Shri Deepak Lad, Member ORDER Date: 22 June, 2016 Reliance Infrastructure Ltd. s Transmission Business (RInfra-T), Devidas Lane, Off SVP Road, Borivali Mumbai has filed a Petition on 28 January, 2016 for Truing-up for FY 2014-15, provisional Truing-up of FY 2015-16 and approval of Aggregate Revenue Requirement (ARR) for the 3 rd MYT Control Period from FY 2016-17 to FY 2019-20 under the MERC (Multi Year Tariff) Regulations ( MYT Regulations ), 2015. Thereafter, a revised Petition was filed on 8 March, 2016. The Commission, in exercise of the powers vested in it under Sections 61 and 62 of the Electricity Act (EA), 2003 and all other powers enabling it in this behalf, and after taking into consideration the submissions made during these proceedings and the public consultation process, and all other relevant material, has approved the Truing-up for FY 2014-15, provisional Truing-up for FY 2015-16 and, ARR for FY 2016-17 to FY 2019-20 in this Order.
TABLE OF CONTENTS 1 BACKGROUND AND BRIEF HISTORY... 11 1.1 Background...11 1.2 Regulatory Regime for Transmission Pricing...11 1.3 MERC (Multi Year Tariff) Regulations, 2011...12 1.4 MERC (MYT) (First Amendment) Regulations, 2011...13 1.5 Order on ARR of RInfra-T for FY 2011-12...13 1.6 Order on Business Plan of RInfra-T for 2 nd Control Period...13 1.7 Order on RInfra-T s Petition for Truing-up of FY 2010-11 and FY 2011-12...13 1.8 Order on approval of ARR for 2 nd Control Period FY 2012-13 to FY 2015-16...13 1.9 MTR Order for FY 2012-13 to FY 2015-16...14 1.10 MERC (Multi Year Tariff) Regulations, 2015...14 1.11 Truing-up of ARR for FY 2014-15, provisional Truing-up of FY 2015-16 and ARR approval for 3 rd Control Period from FY 2016-17 to FY 2019-20...14 1.12 Admission of Petition and Public Consultation Process...15 1.13 Organization of the Order...15 2 SUGGESSIONS/OBJECTIONS RECEIVED, RINFRA-T S RESPONSE AND COMMISSION S VIEW... 17 3 IMPACT OF ATE JUDGMENTS... 18 3.1 RInfra-T s Appeal against MTR Order dated 26 June, 2015 in Case No. 221 of 2014...18 4 TRUE-UP OF ARR FOR FY 2014-15... 19 4.1 Background...19 4.2 Capital Expenditure and Capitalisation...19 4.3 Unutilised Bays...26 4.4 Interest on Long Term Loans...30 4.5 Depreciation...32 4.6 Return on Equity...33 MERC Order - Case No. 13 of 2016 Page 2 of 118
4.7 Operation and Maintenance Expenses...34 4.8 Interest on Working Capital...38 4.9 Contribution to Contingency Reserves...40 4.10 Income Tax...42 4.11 Revenue from Transmission Charges...43 4.12 Non-Tariff Income...44 4.13 Income from Other Business...45 4.14 Incentive on Availability of RInfra-T Network...46 4.15 Sharing of Gains and Losses for FY 2014-15...47 4.16 Revenue Gap/Surplus for FY 2014-15...50 5 PROVISIONAL TRUE-UP OF ARR FOR FY 2015-16... 54 5.1 Background...54 5.2 Capital Expenditure and Capitalisation...54 5.3 Interest on Long Term Loans...57 5.4 Depreciation...59 5.5 Return on Equity...61 5.6 Operation and Maintenance Expenses...62 5.7 Interest on Working Capital...66 5.8 Contribution to Contingency Reserves...68 5.9 Income Tax...69 5.10 Revenue from Transmission Charges...70 5.11 Non-Tariff Income...71 5.12 Income from Other Business...73 5.13 Provisional Revenue Gap/ Surplus for FY 2015-16...73 6 MULTI YEAR TARIFF FOR FY 2016-17 TO FY 2019-20... 76 6.1 Background...76 6.2 Capital Expenditure and Capitalisation...76 6.3 Interest on Long Term Loans...84 MERC Order - Case No. 13 of 2016 Page 3 of 118
6.4 Depreciation...88 6.5 Return on Equity...90 6.6 Operation and Maintenance Expenses...93 6.7 Interest on Working Capital...98 6.8 Contribution to Contingency Reserves...100 6.9 Income Tax...101 6.10 Non-Tariff Income...102 6.11 Income from Other Business...103 6.12 Carrying/ Holding Cost on Revenue Gap / Surplus for FY 2014-15...104 6.13 ARR for FY 2016-17 to FY 2019-20...106 7 DIRECTIVES IN MTR ORDER, AND COMPLIANCE STATUS... 109 7.1 Background...109 7.2 Timely Completion of Project...109 8 SUMMARY OF COMMISSION RULING... 111 8.1 Impact of ATE Judgment...111 8.2 True-up for FY 2014-15...111 8.3 Provisional True-up for FY 2015-16...112 8.4 Multi Year Tariff for FY 2016-17 to FY 2019-20...113 9 RECOVERY OF TRANSMISSION CHARGES... 115 10 APPLICABILITY OF THE ORDER... 116 11 APPENDIX-1: LIST OF PERSONS AT THE TVS HELD ON 24 FEBRUARY, 2016... 117 12 APPENDIX-2: LIST OF PERSONS AT THE PUBLIC HEARING HELD ON 13 APRIL, 2016... 118 MERC Order - Case No. 13 of 2016 Page 4 of 118
List of Tables Table 1: Capitalisation for FY 2014-15, as submitted by RInfra-T... 19 Table 2: Reasons for Time Over-run provided by RInfra-T... 21 Table 3: Scheme-wise DPR Cost and Actual Cost including and excluding IDC, with completion reports... 23 Table 4: Scheme-wise DPR Cost and Actual Cost, including and excluding IDC, pending for completion reports... 24 Table 5: Capitalisation claimed by RInfra-T and approved by Commission for FY 2014-15... 26 Table 6: Unutilised Bays in Transmission System of RInfra-T... 27 Table 7: Impact of Unutilised Bays on Opening Balance of FY 2014-15... 29 Table 8: Interest on Long Term Loans for FY 2014-15, as submitted by RInfra-T... 30 Table 9: Interest on Long Term Loans for FY 2014-15, as approved by Commission... 31 Table 10: Depreciation for FY 2014-15, as submitted by RInfra-T... 32 Table 11: Depreciation Cost for FY 2014-15, as approved by Commission... 33 Table 12: Return on Equity for FY 2014-15, as submitted by RInfra-T... 33 Table 13: Return on Equity for FY 2014-15, as approved by Commission... 34 Table 14: Summary of O&M Expenses for FY 2014-15, as submitted by RInfra-T... 35 Table 15: O&M Expenses for FY 2014-15, as approved by Commission... 38 Table 16: Interest on Working Capital for FY 2014-15, as submitted by RInfra-T... 39 Table 17: Interest on Working Capital for FY 2014-15, as approved by Commission... 40 Table 18: Contribution to Contingency Reserves for FY 2014-15, as submitted by RInfra-T... 40 Table 19: Contribution to Contingency Reserves for FY 2014-15, as approved by Commission 41 Table 20: Income Tax for FY 2014-15, as submitted by RInfra-T... 42 Table 21: Income Tax for FY 2014-15, as approved by Commission... 43 Table 22: Revenue from Transmission Charges for FY 2014-15, as approved by Commission. 44 Table 23: Non-Tariff Income for FY 2014-15, as submitted by RInfra-T... 44 Table 24: Non-Tariff Income for FY 2014-15, as approved by Commission... 45 Table 25: Income from Other Business for FY 2014-15, as submitted by RInfra-T... 45 Table 26: Income from Other Business for FY 2014-15, as approved by Commission... 46 Table 27: Incentive on Availability for FY 2014-15, as approved by Commission... 47 Table 28: Normative O&M Expenses for FY 2014-15, as submitted by RInfra-T... 48 Table 29: Sharing of Efficiency Gain for O&M Expenses for FY 2014-15, as submitted by RInfra-T... 48 Table 30: Normative O&M Expenses for FY 2014-15, approved by Commission... 48 Table 31: Net Entitlement of O&M Expenses for FY 2014-15, as approved by Commission... 49 Table 32: Summary of True-up for FY 2014-15, including sharing of efficiency gains/losses, as submitted by RInfra-T... 50 Table 33: Summary of True-up for FY 2014-15, including sharing of efficiency gains/losses, as approved by Commission... 51 Table 34: Scheme-wise Capitalisation for FY 2015-16, as submitted by RInfra-T... 55 MERC Order - Case No. 13 of 2016 Page 5 of 118
Table 35: Capitalisation for FY 2015-16, as submitted by RInfra-T... 55 Table 36: Capitalisation for FY 2015-16, as approved by Commission... 57 Table 37: Interest on Long Term Loans for FY 2015-16, as submitted by RInfra-T... 58 Table 38: Interest on Long Term Loans for FY 2015-16, as approved by Commission... 58 Table 39: Depreciation for FY 2015-16, as submitted by RInfra-T... 59 Table 40: Depreciation Expenses for FY 2015-16, as approved by Commission... 60 Table 41: Return on Equity for FY 2015-16, as submitted by RInfra-T... 61 Table 42: Return on Equity for FY 2015-16, as approved by Commission... 62 Table 43: Summary of O&M Expenses for FY 2015-16, as submitted by RInfra-T... 63 Table 44: Normative O&M Expenses for FY 2015-16, as approved by Commission... 63 Table 45: O&M Expenses for FY 2015-16, as approved by Commission... 66 Table 46: Interest on Working Capital for FY 2015-16, as submitted by RInfra-T... 67 Table 47: Interest on Working Capital for FY 2015-16, as approved by Commission... 67 Table 48: Contribution to Contingency Reserves for FY 2015-16, as submitted by RInfra-T... 68 Table 49: Contribution to Contingency Reserves for FY 2015-16, as approved by Commission 69 Table 50: Income Tax for FY 2015-16, as submitted by RInfra-T... 69 Table 51: Income Tax for FY 2015-16, as approved by Commission... 70 Table 52: Revenue from Transmission Charges for FY 2015-16, as approved by Commission. 70 Table 53: Non-Tariff Income for FY 2015-16, as submitted by RInfra-T... 71 Table 54: Non-Tariff Income for FY 2015-16, as approved by Commission... 72 Table 55: Income from Other Business for FY 2015-16, as approved by Commission... 73 Table 56: Summary of provisional True-up for FY 2015-16, as submitted by RInfra-T... 73 Table 57: Summary of provisional True-up for FY 2015-16, as approved by Commission... 74 Table 58: Capitalisation for FY 2016-17 to FY 2019-20, as projected by RInfra-T... 77 Table 59: Capitalisation for FY 2012-13 to FY 2015-16, as approved by Commission in last MYT Order... 78 Table 60: Comparison of Capitalisation approved for FY 2012-13 to FY 2015-16 Original visà-vis revised approval... 79 Table 61: Methodology for approving Capitalisation for FY 2016-17 to FY 2019-20... 79 Table 62: Capitalisation for FY 2016-17 to FY 2019-20, approved by Commission... 84 Table 63: Interest on Long Term Loans for FY 2016-17 to FY 2019-20, as submitted by RInfra- T... 85 Table 64: Opening and closing Loan Balance for FY 2015-16, as submitted by RInfra-T... 86 Table 65: Weighted Average Interest Rate for FY 2016-17 to FY 2019-20, as approved by Commission... 87 Table 66: Interest on Long Term Loans for FY 2016-17 to FY 2019-20, as approved by Commission... 88 Table 67: Depreciation for FY 2016-17 to FY 2019-20, as submitted by RInfra-T... 89 Table 68: Depreciation for FY 2016-17 to FY 2019-20, as approved by Commission... 90 Table 69: Return on Equity for FY 2016-17 to FY 2019-20, as submitted by RInfra-T... 91 MERC Order - Case No. 13 of 2016 Page 6 of 118
Table 70: Return on Equity for FY 2016-17 to FY 2019-20, as approved by Commission... 92 Table 71: Summary of O&M Expenses for FY 2016-17 to FY 2019-20, as submitted by RInfra-T... 93 Table 72: Summary of O&M Expense norms in Draft MYT Regulations, 2015... 94 Table 73: Summary of O&M Expense norms for FY 2016-17 to FY 2019-20... 95 Table 74: List of Ckt. Km. of Lines and number of Bays to be added in FY 2016-17 to FY 2019-20, as submitted by RInfra-T and as approved by Commission... 95 Table 75: O&M Expenses for FY 2016-17 to FY 2019-20 approved by Commission... 97 Table 76: Interest on Working Capital for FY 2016-17 to FY 2019-20, as submitted by RInfra-T... 98 Table 77: Interest on Working Capital for FY 2016-17 to FY 2019-20, as approved by Commission... 99 Table 78: Contribution to Contingency Reserves for FY 2016-17 to FY 2019-20, as submitted by RInfra-T... 100 Table 79: Contribution to Contingency Reserves for FY 2016-17 to FY 2019-20, as approved by Commission... 101 Table 80: Income Tax for FY 2016-17 to FY 2019-20 3 rd Control Period, as submitted by RInfra- T... 101 Table 81: Income Tax for FY 2016-17 to FY 2019-20, as approved by Commission... 102 Table 82: Non-Tariff Income for FY 2016-17 to FY 2019-20, as submitted by RInfra-T... 103 Table 83: Non-Tariff Income for FY 2016-17 to FY 2019-20, as approved by Commission... 103 Table 84: Income from Other Business for FY 2016-17 to FY 2019-20, as approved by Commission... 104 Table 85: Carrying Cost on Gap of FY 2014-15, as submitted by RInfra-T... 105 Table 86: Holding Cost on Revenue Surplus of FY 2014-15, as approved by Commission... 106 Table 87: ARR for FY 2016-17 to FY 2019-20, as submitted by RInfra-T... 107 Table 88: ARR for FY 2016-17 to FY 2019-20, as approved by Commission... 108 Table 89: Total recovery approved by Commission for MYT 3rd Control Period through Transmission Charges (Rs Crore)... 114 MERC Order - Case No. 13 of 2016 Page 7 of 118
List of Abbreviations AC A&G APR ARR ATE CERC CFO COD Commission/MERC Capex CWIP DISCOM DPR DTPS Alternating Current Administrative and General Annual Performance Review Aggregate Revenue Requirement Appellate Tribunal for Electricity Central Electricity Regulatory Commission Chief Fire Office Commercial Operation Date Maharashtra Electricity Regulatory Commission Capital Expenditure Capital Works In Progress Distribution Company Detailed Project Report Dahanu Thermal Power Station EA, 2003 Electricity Act, 2003 EHV GFA GIS HVDC InSTS ISTS Extra High Voltage Gross Fixed Assets Gas Insulated Sub-station High Voltage Direct Current Intra-State Transmission System Inter State Transmission System MERC Order - Case No. 13 of 2016 Page 8 of 118
kv LILO MBMC MCGM MMR MSEDCL MSETCL MSLDC MVA MYT O&M PLR R&M REL RInfra RInfra-D RInfra-T RoE ROW SBI SCADA SERC Kilo Volt Line In Line Out Mira Bhayander Municipal Corporation Municipal Corporation of Greater Mumbai Mumbai Metropolitan Region Maharashtra State Electricity Distribution Company Limited Maharashtra State Electricity Transmission Company Limited Maharashtra State Load Dispatch Centre Mega Volt Amperes Multi Year Tariff Operation & Maintenance Prime Lending Rate Repair & Maintenance Reliance Energy Limited Reliance Infrastructure Limited Reliance Infrastructure Limited - Distribution Business Reliance Infrastructure Limited - Transmission Business Return on Equity Right of Way State Bank of India Supervisory Control and Data Acquisition State Electricity Regulatory Commission MERC Order - Case No. 13 of 2016 Page 9 of 118
SLDC STU SWOT TPC-T TSU TTSC TVS State Load Despatch Centre State Transmission Utility Strength Weakness Opportunity and Threat Tata Power Company Limited Transmission Business Transmission System Users Total Transmission System Cost Technical Validation Session MERC Order - Case No. 13 of 2016 Page 10 of 118
1 BACKGROUND AND BRIEF HISTORY 1.1 Background 1.1.1 RInfra is a vertically integrated Utility undertaking, inter alia, the generation, transmission, wheeling and distribution of electricity in the suburbs of Mumbai. Its Transmission Network consists of 538.66 circuit-kilometres (ckt.km) of 220 kv overhead Lines and underground cables, including Transmission Lines for evacuation of power from its Dahanu Thermal Power Station (DTPS) located outside Mumbai, and connectivity between the EHV Sub-stations, directly with each other or through LILO arrangements. It also has eight 220 kv EHV Sub-stations with firm transformation capacity of 3000 MVA and associated infrastructure at Aarey, Goregaon, Gorai, Ghodbunder, Saki, Versova, Chembur and Borivali. 1.1.2 RInfra-T has been granted Transmission Licence No. 1 of 2011 vide Order dated 11 August, 2011 in Case No. 70 of 2011, under Alternative 2 as per the MERC (Transmission Licence Conditions) Regulations, 2004 as amended in 2006 ( Transmission Licence Regulations ), for 25 years from 16 August, 2011. 1.1.3 RInfra-T had applied on 2 February, 2015 under Section 18 of the EA, 2003 and the Transmission Licence Regulations for amendment of its Transmission Licence to include the following Transmission Network: 220 kv RInfra Saki - TPC 1 Transmission Line from RInfra-T s 220 kv Saki Sub-station to Tata Power Co. Ltd. (TPC) s 220 kv Saki Sub-station~1.5 km length 220 kv RInfra Saki - TPC 2 Transmission Line from RInfra-T s 220 kv Saki Sub-station to TPC-T s 220 kv Saki Sub-station~1.5kmlength 1.1.4 Vide Order dated 14 March, 2016 in Case No. 24 of 2015, the Commission amended the Transmission Licence to include the above. 1.2 Regulatory Regime for Transmission Pricing 1.2.1 The Commission notified the MERC (Terms and Conditions of Tariff) Regulations, 2005 ( the Tariff Regulations ) in August, 2005. Considering requests made by various Utilities, in December, 2005, the Commission provided a dispensation to the effect that it would determine the Tariff under the MYT framework from April, 2007 instead of from April, 2006 as had been stipulated in the Tariff Regulations. Accordingly, the 1 st Control Period for the MYT framework would be the 3 financial years from FY 2007-08. MERC Order - Case No. 13 of 2016 Page 11 of 118
1.2.2 At the start of the 1 st Control Period, the Commission issued the MYT Orders for the Utilities in the State, approving their ARR for each year of the Control Period. The Commission thereafter issued Annual Performance Review (APR) Orders, which included Truing-up of the ARR of the past year, provisional Truing-up of the ARR of the current year, and determination of revised ARR/ Tariff for the ensuing year. The Transmission Licensees for which such Orders were issued constituted the Intra-State Transmission System (InSTS) of Maharashtra. 1.2.3 The principles of Transmission Pricing Framework for Maharashtra for the First Control Period were stipulated in the Commission s Order dated 27 June, 2006 in Case No. 58 of 2005. Accordingly, the Intra-State Transmission Tariffs were determined for the respective years on the basis of Total Transmission System Cost (TTSC), which was derived by pooling the ARRs of each Transmission Licensee forming part of the InSTS. This pooled TTSC was recovered from the Transmission System Users (TSUs) in the State, mainly the Distribution Licensees. The Commission also specified the basis for sharing of these costs between the TSUs. The Commission has issued Orders determining Transmission Tariff from time to time on an annual basis. The last Order was issued on 26 June, 2015 in Case No. 57 of 2015, which determined the InSTS Tariff for FY 2015-16. 1.3 MERC (Multi Year Tariff) Regulations, 2011 1.3.1 The MYT Regulations, 2011 were applicable for the 2 nd Control Period from FY 2011-12 to FY 2015-16. 1.3.2 In Case No. 45 of 2011, RInfra sought deferment of the MYT framework by a year for the following reasons:- (a) Uncertainties in RInfra (Distribution Business) (RInfra-D) s area of supply on account of possibility of the following: i. Parallel Distribution Licensees; ii. Redefining Licence area boundaries post 15 August, 2011; iii. Uncertainty on recovery of lost cross-subsidy and regulatory assets; iv. New framework of operation for Parallel Licensees and v. Non-approval of Power Purchase Agreements (PPAs) executed by RInfra- D for the medium and long-term. (b) Operational difficulties due to certain provisions in the MYT Regulations, 2011. MERC Order - Case No. 13 of 2016 Page 12 of 118
1.3.3 Vide Order dated 2 September, 2011, the Commission exempted RInfra from determination of Tariff under the MYT framework till 31 March, 2012 (i.e., for one year) by invoking the provisions of Regulation 4.1 of the MYT Regulations, 2011. 1.4 MERC (MYT) (First Amendment) Regulations, 2011 The MYT Regulations, 2011 were amended in October, 2011. The amended Regulations specified that, if an exemption is given under Regulation 4.1, the Utility shall file its Petition for approval of ARR for the period of such exemption as per the Tariff Regulations, 2005. 1.5 Order on ARR of RInfra-T for FY 2011-12 RInfra-T had filed a Petition for approval of ARR for FY 2011-12 in accordance with the Tariff Regulations, 2005. The Commission s Order dated 17 May, 2012 in Case No. 167 of 2011 was challenged by RInfra-T on issues of interest on long term loan and Income Tax before the Appellate Tribunal for Electricity (ATE) (Appeal No.139 of 2012). ATE allowed the Appeal on 2 December, 2013, and the impact of its Judgment has been considered in the Mid-Term Review (MTR) Order dated 26 June, 2016. 1.6 Order on Business Plan of RInfra-T for 2 nd Control Period As per the MYT Regulations, 2011, RInfra-T filed its Petition in Case No. 159 of 2011 for approval of its Business Plan for the 2 nd Control Period from FY 2012-13 to FY 2015-16. The Commission s Order dated 23 October, 2012 was challenged by RInfra-T on issues of interest on long term loan and Income Tax before the ATE (Appeal No.3 of 2013). The ATE allowed the Appeal on 8 April, 2015. 1.7 Order on RInfra-T s Petition for Truing-up of FY 2010-11 and FY 2011-12 1.7.1 RInfra-T had filed a Petition for approval of True-up for FY 2010-11 and FY 2011-12 in accordance with the Tariff Regulations, 2005 in Case No. 123 of 2012, which the Commission decided vide Order dated 2 April, 2013. 1.7.2 Since the ATE has allowed Appeal No. 139 of 2012 on issues of Income Tax and interest on long term loan, the impact of its Judgment was considered in the MTR Order dated 26 June, 2015. 1.8 Order on approval of ARR for 2 nd Control Period FY 2012-13 to FY 2015-16 Pursuant to approval of its Business Plan, RInfra-T had filed a Petition for approval of ARR for FY 2012-13 to FY 2015-16, which was disposed by the Commission on 13 June, 2013 in Case No. 141 of 2012. MERC Order - Case No. 13 of 2016 Page 13 of 118
1.9 MTR Order for FY 2012-13 to FY 2015-16 RInfra-T had filed a Petition for MTR, including Truing-up of FY 2012-13 and FY 2013-14 and revised ARR for FY 2014-15 and FY 2015-16. The Commission issued the MTR Order on 26 June, 2015 in Case No. 221 of 2014. 1.10 MERC (Multi Year Tariff) Regulations, 2015 The Commission notified the MYT Regulations, 2015 in December, 2015, applicable for the 3 rd Control Period from FY 2016-17 to FY 2019-20. 1.11 Truing-up of ARR for FY 2014-15, provisional Truing-up of FY 2015-16 and ARR approval for 3 rd Control Period from FY 2016-17 to FY 2019-20 1.11.1 In accordance with Regulation 5.1 (a) of the MYT Regulations, 2015, RInfra-T has filed the present Petition for Truing-up of ARR for FY 2014-15, provisional Truing-up of FY 2015-16 and approval of ARR for the 3 rd Control Period from FY 2016-17 to FY 2019-20 on 28 January, 2016. 1.11.2 Vide letters dated 11 and 22 February, 2016, the Commission raised certain data gaps. RInfra-T responded to these data gaps on 18, 23 and 29 February 2016. The Technical Validation Session (TVS) was held on 24 February, 2016. The list of persons who attended the TVS is at Appendix-1. The Commission raised a third set of data gaps on 25 February, 2016 based on the discussions during the TVS. RInfra-T responded to the gaps on 4 March, 2016 and subsequently filed a revised MYT Petition on 8 March, 2016. 1.11.3 RInfra-T s prayers in the revised Petition are as follows: Admit this Petition as submitted herewith; Approve the actual revenue gap/surplus arising on account of Truing-up for FY 2014-15 along with the carrying cost as worked out in this Petition; Approve the provisional revenue gap/surplus for FY 2015-16 as worked out in this Petition; Approve the ARR for FY 2016-17 to FY 2019-20, as projected in this Petition; Allow additions /alterations /modifications /changes to the Petition at a future date; Allow any other relief, Order or direction, which the Hon ble Commission deems fit to be issued; MERC Order - Case No. 13 of 2016 Page 14 of 118
Condone any inadvertent errors/inconsistencies/omissions/rounding off differences, etc. as may be there in Petition. 1.12 Admission of Petition and Public Consultation Process 1.12.1 The Commission admitted the Petition on 10 March, 2016 and directed RInfra-T to publish a Public Notice in accordance with Section 64 of the EA, 2003, in the prescribed abridged form and manner, and to reply expeditiously to any suggestions and objections received. 1.12.2 RInfra-T published a Public Notice inviting suggestions and objections on its Petition. The Public Notice was published in English in Hindustan Times and The Indian Express, and in Marathi in Loksatta and Saamna, all daily newspapers, on 15 March, 2016. The Petition and its summary were made available for inspection/purchase at RInfra-T s offices and website (www.rinfra.com). The Public Notice and Executive Summary of the Petition were also made available on the websites of the Commission (www.mercindia.org.in, www.merc.gov.in) in downloadable format. 1.12.3 The Commission did not receive any written suggestions or objections on the Petition. A Public Hearing was held on 13 April, 2016 at which RInfra-T made a presentation on its Petition. No oral submissions were made at the Public Hearing either in response to the Public Notice. The list of persons who attended the Public Hearing is at Appendix 2. 1.12.4 The Commission has ensured that the due process contemplated under law to ensure transparency and public participation was followed at every stage and adequate opportunity was given to all concerned to express their views. 1.13 Organization of the Order 1.13.1 The Order is organized in the following Sections: Section 1 of the Order provides a brief history and the quasi-judicial regulatory process undertaken by the Commission. A list of abbreviations with their expanded forms has been included. Section2 sets out the suggestions and objections received, the responses of RInfra-T and the Commission s views. Section 3 deals with the impact of ATE Judgments on Appeals filed by RInfra-T challenging earlier Orders of the Commission. Section 4 deals with the approval of Truing-up for FY 2014-15. Section 5 deals with the provisional Truing-up for FY 2015-16. Section 6 deals with the ARR for FY 2016-17 to FY 2019-20 MERC Order - Case No. 13 of 2016 Page 15 of 118
Section 7 summarises the directives given by the Commission in its MTR Order, their compliance and the Commission view s thereon. Section 8 summarises the rulings of the Commission Section 9 deals with recovery of Transmission Charges Section 10 deals with the applicability of the present Order. MERC Order - Case No. 13 of 2016 Page 16 of 118
2 SUGGESSIONS/OBJECTIONS RECEIVED, RINFRA-T S RESPONSE AND COMMISSION S VIEW No written or oral suggestions or objections were received on the Petition during the public consultation process in response to the Public Notice. MERC Order - Case No. 13 of 2016 Page 17 of 118
3 IMPACT OF ATE JUDGMENTS 3.1 RInfra-T s Appeal against MTR Order dated 26 June, 2015 in Case No. 221 of 2014 3.1.1 RInfra-T has filed an Appeal No. 223 of 2015 before the ATE against the Commission s Order dated 26 June, 2015 in Case No. 221 of 2014. ATE has admitted the Appeal and the matter was posted for hearing on 2 March, 2016. The issue-wise potential impact as submitted by RInfra-T is discussed in the following paragraphs. RInfra-T s Submission 3.1.2 The MTR Order dated 26 June, 2015 had disallowed carrying cost on Income Tax, which was earlier disallowed by the Commission but subsequently allowed by the ATE for the period FY 2009-10 to FY 2011-12. The impact on account of this is approximately Rs. 0.41 Crore. 3.1.3 The MTR Order had disallowed levy of carrying cost on compounded interest basis with respect to the interest on loan and Revenue Gap, and allowed it on simple interest basis. The impact is approximately Rs. 4.99 Crore. 3.1.4 The MTR Order had wrongly treated the Delayed Payment Charge (DPC) as Non-Tariff Income (NTI). The impact is Rs. 35.02 Crore. In its present Petition, RInfra-T has not considered this amount as NTI. 3.1.5 The Commission had not considered the Income Tax as part of ARR for computing Availability incentive for FY 2013-14. The impact is approximately Rs. 0.02 Crore. 3.1.6 The total impact of the above components of the MTR Order dated 26 June, 2015, till the end of FY 2015-16, is Rs. 5.42 Crore, excluding the DPC amount of Rs. 35.02 Crore which has been treated as NTI by the Commission. In the event of ATE ruling in favor of RInfra-T, the impact of the same would be considered in a subsequent Petition or through the Z OUC factor of FAC, as per the MYT Regulations, 2015.There would also be an incremental carrying cost beyond FY 2015-16 till the time of recovery. Commission s Analysis and Ruling 3.1.7 The Commission has not considered the potential impact of ATE Appeal No. 223 of 2015 at this stage as submitted by RInfra-T since the Appeal has yet to be decided. MERC Order - Case No. 13 of 2016 Page 18 of 118
4 TRUE-UP OF ARR FOR FY 2014-15 4.1 Background 4.1.1 RInfra-T has sought final Truing-up of FY 2014-15 based on the actual expenditure and revenue as per the audited annual accounts. It has also presented the comparison of expenditure and revenues approved by the Commission vide the MTR Order in Case No. 221 of 2014 vis-à-vis the audited performance. 4.1.2 The detailed analysis for approval of Truing-up for FY 2014-15 by the Commission is set out below. 4.2 Capital Expenditure and Capitalisation RInfra-T s submission 4.2.1 RInfra-T has incurred Rs. 37.42 Crore towards capital expenditure and Rs. 34.60 Crore has been capitalized. The capitalisation includes interest and expenses capitalized. The total capitalization includes Detailed Project Report (DPR) schemes approved inprinciple by the Commission and Non-DPR schemes. 4.2.2 Comparison of capitalisation as approved by the Commission in the MTR Order and as submitted by RInfra-T in the present Petition is as below. Table 1: Capitalisation for FY 2014-15, as submitted by RInfra-T Particulars (Rs. Crore) MTR Order Actual Capitalisation DPR 24.26 29.65 Non-DPR 2.19 4.94 Total 26.45 34.60 Commission s Analysis and Ruling 4.2.3 The Commission had approved capitalisation of Rs. 242.61 Crore for FY 2014-15 in the MYT Order dated 13 June, 2013 in Case No. 141 of 2012. The Commission had scrutinized all the capital expenditure schemes submitted by RInfra-T in its MYT Petition along with the DPR schemes, and approved the capitalisation as submitted considering that all the schemes would again be reviewed at the time of MTR. 4.2.4 During the MTR proceedings, the Commission observed that most of the schemes approved in the MYT Order were not capitalized as per the time schedule proposed by RInfra-T. MERC Order - Case No. 13 of 2016 Page 19 of 118
4.2.5 In the MTR Order, the Commission had analyzed the capitalisation schedule as submitted by RInfra-T in the light of the MYT Order and the details provided in the MTR Petition. The Commission observed that there was significant under-capitalisation in most of the schemes. 4.2.6 While analyzing the schemes in the MTR Order, it was held view that, in order to consider the capitalisation as submitted by RInfra-T, the Commission needs to be convinced that the time over-run was on account of factors which were not within its reasonable control. 4.2.7 The relevant extracts of the MTR Order dated 26 June, 2015 in Case No. 221 of 2014 are as follows: In order that the Commission can consider the capitalization as submitted by RInfra-T, the Commission needs to be convinced that the time over-run is on account of factors which are not within the reasonable control of RInfra-T. 6.2.10. For this purpose, RInfra-T is directed to submit documentary evidence to support the claim of uncontrollability. These may include but not be limited to applications to statutory authorities, key correspondence, approvals received, etc. The supporting documents should be submitted for each scheme where significant time over-run has been reported on an aggregate basis over the MYT period, and show uncontrollability. These directions are elaborated in Section 9 of this Order. 4.2.8 The Commission had asked RInfra-T to submit documentary proof in support of its claim of uncontrollability and explain why the Commission should admit any capitalisation beyond the cut-off date. 4.2.9 The Commission had provisionally approved capitalization of Rs. 26.45 Crore subject to prudence check to be carried out during the Truing-up of FY 2014-15, and thereby disallowed Rs. 6.33 Crore against DPR schemes as submitted by RInfra-T in its Petition. 4.2.10 In compliance with the directives of the Commission, RInfra-T has submitted a detailed review report vide letters dated 30 September, 2015 and 5 April, 2016. The report sets out the reasons for delay in execution of the schemes along with efforts made by RInfra-T for their completion, along with relevant documents. RInfra-T stated that there is no cost over-run in any of the schemes, and that the time over-run is due to extraneous factors. A summary of the report was also provided with the present Petition. The reasons for delay cited by RInfra-T are summarized in the Table below. MERC Order - Case No. 13 of 2016 Page 20 of 118
Name of Scheme 220 kv Borivali EHV Sub-station 220 kv Goregaon EHV Sub-station 220 kv Saki EHV Sub-station 220 kv Chembur EHV Sub-station 220 kv Gorai EHV Sub-station Refurbishment of 220 kv Transmission Lines Security improvement of220 kv EHV Sub-station Table 2: Reasons for Time Over-run provided by RInfra-T Reasons for delay in commissioning provided by RInfra-T Delay in statutory approvals from Municipal Corporation of Greater Mumbai (MCGM), Chief Fire Office (CFO), and Forest Department for cable laying. Delay in bus bar strengthening work at MSETCL Borivali Substation and outage permissions from MSLDC. Delay in relocation of RInfra-D assets before and after commissioning for space optimization. Delay in statutory approvals from MCGM. Delay in relocation of RInfra-D assets before and after commissioning for space optimization. Delay in statutory approvals from MCGM, change in civil contractor resulting in a dispute, which is under arbitration. Space constraints for construction activities. Delay in relocation of RInfra-D assets before and after commissioning for space optimization. Delay in statutory approvals from MCGM for Sub-station building and cable route approval of Tata Power Company (TPC), Hindustan Petroleum Corporation Limited (HPCL), Rashtriya Chemicals & Fertilizers Ltd. (RCF), Mumbai Metropolitan Region Development Authority (MMRDA), etc. Delay in construction of compound wall due to hindrances from adjacent plot owners. Space constraints for construction activities. Setting up of Unified Control Room at MSETCL. Delay in relocation of RInfra-D assets before and after commissioning for space optimization. Delay in statutory approvals from Forest Department for cable connectivity. Space constraints for construction activities. High water table of the plot due to nearby creek. Delay in outage approval for bus bar strengthening at MSETCL, Borivali Sub-station Uncontrollable factors of water logging, paddy cultivation and delayed monsoon making it difficult to approach the towers. Further, hot line activities could be carried out in rainy season only and this also caused delay in scheme completion. Delayed permissions received from Maharashtra Housing and Development Authority (MHADA), Aarey Colony, Forest Department, Mira Bhayander Municipal Corporation (MBMC) and MCGM authorities for construction of compound wall. Procurement of Equipment was not required initially as it was made available from MERC Order - Case No. 13 of 2016 Page 21 of 118
Name of Scheme Tools and Plants for EHV Substations Reasons for delay in commissioning provided by RInfra-T vendors. Subsequently, after vendors removed the equipment provided by them, RInfra-T collated information and optimization specifications were floated for their procurement. 4.2.11 After detailed scrutiny, the Commission observes that most of the schemes have been delayed due to statutory approvals from various authorities like MBMC, MHADA, MCGM, MMRDA, Forest Department, etc. 4.2.12 The Commission also sought the detailed scope of work approved under the DPR for each scheme as against the actual scope of work executed by RInfra-T. The Commission observed that RInfra-T has executed the works as approved by the Commission in the DPR with minor modifications as per the technical requirements of the system. 4.2.13 However, the Commission also observed that RInfra-T has commissioned 2 power Transformers as against the approved scope of 3 Transformers at the 220 kv Borivali Sub-station. While this is a significant deviation from the approved scope of work, the Commission is allowing it as it does not lead to any extra cost as compared to the approved DPR. 4.2.14 RInfra-T has submitted scheme completion reports for the 220 kv GIS EHV Sub-station at Saki, 220 kv GIS EHV Sub-station at Chembur, 220 kv GIS EHV Sub-station at Goregaon, Refurbishment of 220 kv Transmission Line, Security Improvement of 220 kv EHV Sub-station and Procurement of Tools and Plants for EHV Sub-stations. 4.2.15 The Commission has analyzed the scheme-wise project costs as approved in the DPRs and the cumulative capitalisation claimed by RInfra-T till the closure of the schemes. The following Table shows the scheme-wise approved DPR cost and the actual cost, including and excluding Interest during Construction (IDC), incurred by RInfra-T till the commissioning/completion of the schemes. MERC Order - Case No. 13 of 2016 Page 22 of 118
Table 3: Scheme-wise DPR Cost and Actual Cost including and excluding IDC, with completion reports Sr. No. 1. 2. 3. 4. 5. 6. Name of Scheme Installation of 220 kv GIS EHV Substation at Chembur 220 kv GIS at Saki EHV Substation 220 kv GIS Goregaon EHV Station Refurbishment of 220 kv Transmission Line Procurement of Tools and Plants for EHV Substations Security improvements at 220 kv Aarey, Versova DPR Approved Cost without IDC (Rs. Crore) Actual Cumulative Capitalisation up to Completion of Scheme excluding IDC (Rs. Crore) Actual Cumulative Capitalisation up to Completion of Scheme including IDC (Rs. Crore) 220.00 206.22 226.41 186.41 158.04 163.50 107.44 89.64 93.11 27.48 21.78 22.19 11.57 10.63 10.80 7.91 7.07 7.35 Status of Scheme Scheme commissioned and closed. Completion report submitted vide letter dated 15 January 2016 Scheme commissioned and closed. Completion report submitted vide letter dated 14 January, 2016 Scheme commissioned and closed. Completion report submitted vide letter dated 14 January, 2016 Scheme commissioned and closed. Completion report submitted vide letter dated 10 September, 2015 Scheme commissioned and closed in March 2016. Completion report submitted vide letter dated 21 May, 2016 Scheme commissioned and closed in March 2016. Completion MERC Order - Case No. 13 of 2016 Page 23 of 118
Sr. No. Name of Scheme and Ghodbunder EHV Substations DPR Approved Cost without IDC (Rs. Crore) Actual Cumulative Capitalisation up to Completion of Scheme excluding IDC (Rs. Crore) Actual Cumulative Capitalisation up to Completion of Scheme including IDC (Rs. Crore) Status of Scheme report submitted vide letter dated 20 May, 2016 4.2.16 RInfra-T has submitted the completion reports for all the above schemes along with the cost benefit analysis. The Commission accepts the actual cumulative capitalisation for these schemes as shown in the Table above, and considers these schemes as completed and closed. Hence, no further capitalisation will be allowed against these schemes. 4.2.17 In order to assess the increase in Interest during Construction (IDC) because of time overrun of the schemes vis-à-vis the actual IDC claimed, the Commission has worked out a normative IDC on the DPRs cost and capital expenditure phasing as approved by the Commission. It is observed that, although there is a time over-run in all the schemes, the actual IDC claimed by RInfra-T is less than the normative IDC had the projects been completed within the time approved by the Commission. 4.2.18 The actual IDC claimed by RInfra-T for the 220 kv Chembur Sub-station is less than the normative IDC, and hence the Commission approves the capital cost as claimed by RInfra-T. 4.2.19 The following Table shows the schemes which are commissioned but yet to be closed (the completion reports of which are awaited). Table 4: Scheme-wise DPR Cost and Actual Cost, including and excluding IDC, pending for completion reports Sr. No. 1. Name of Scheme 220 kv GIS Borivali EHV DPR Approved Cost without IDC (Rs. Crore) Actual Cumulative Capitalisation up to Completion of Scheme excluding IDC (Rs. Crore) Actual Cumulative Capitalisation up to Completion of Scheme including IDC (Rs. Crore) 179.53 135.25 143.63 Status of Scheme Scheme commissioned in MERC Order - Case No. 13 of 2016 Page 24 of 118
Sr. No. 2. 3. Name of Scheme DPR Approved Cost without IDC (Rs. Crore) Actual Cumulative Capitalisation up to Completion of Scheme excluding IDC (Rs. Crore) Actual Cumulative Capitalisation up to Completion of Scheme including IDC (Rs. Crore) Status of Scheme Scheme March 2016. Completion report awaited from RInfra-T. Scheme commissioned in 220 kv GIS March 2016. Gorai EHV 262.36 214.27 238.17 Completion report Sub-station awaited from RInfra-T. Relocation / Scheme Modification of commissioned in 220 kv Line & March 2016. 14.10* 12.43 14.38 tower in Completion report MBMC Area awaited from *DPR Cost approved including IDC RInfra-T. 4.2.20 The approved DPR costs are exclusive of IDC, and hence a comparison of actual cost has been made after excluding the actual IDC claimed by RInfra-T. 4.2.21 The Commission observed that, in the case of the 220 kv GIS Borivali EHV and 220 kv GIS Gorai EHV Sub-stations, there is no cost over-run in the actual cumulative capitalisation as compared to the approved DPR cost. The Commission accepts the capitalisation claimed by RInfra-T for these schemes. 4.2.22 With regards to Relocation / Modification of 220 kv Line and tower in the MBMC Area, the approved DPR cost included IDC and there is a marginal escalation in actual cumulative capitalisation as submitted by RInfra-T. Some amount of capitalization has also been proposed in FY 2016-17. The Commission considers the capitalisation claimed by RInfra-T under this scheme and will take a final view once the completion report is received. 4.2.23 Considering the reasons for delay in execution set out above, the fact of no cost over-run and the lower IDC claim, the Commission approves the scheme-wise capitalisation as below. MERC Order - Case No. 13 of 2016 Page 25 of 118
Table 5: Capitalisation claimed by RInfra-T and approved by Commission for FY 2014-15 Name of Scheme Capitalisation as submitted by RInfra-T (Rs. Crore) Capitalisation as approved by Commission (Rs. Crore) 220 kv GIS Borivali 9.02 9.02 220 kv GIS EHV Sub-station Goregaon 0.05 0.05 220 kv GIS EHV Sub-station Saki 5.76 5.76 220 kv GIS EHV Sub-station Chembur 4.58 4.58 220 kv GIS EHV Sub-station Gorai 5.66 5.66 Refurbishment of 220 kv Transmission Line 0.54 0.54 Security improvements 2.73 2.73 T&P procurement 1.31 1.31 Non-DPR schemes 4.94 4.94 Total Capitalisation 34.60 34.60 4.2.24 From the report and the supporting documents, the Commission is of the view that the over-run in each of these schemes is largely not attributable to RInfra-T. Accordingly, the actual Capitalisation of Rs. 34.60 Crore is approved for FY 2014-15, as submitted by RInfra-T. 4.2.25 The Commission expects RInfra-T to expedite the remaining works under the schemes, to follow up the approvals pending with the concerned authorities and diligently address the other factors affecting their timely commissioning. 4.2.26 RInfra-T needs to submit the closure reports for schemes commissioned but not closed because minor works are pending. The closure reports should include details of the scope of work approved by the Commission and that actually executed, with reasons for any difference. 4.3 Unutilised Bays 4.3.1 The Commission had asked for details of unutilised Bays, their capital cost and year of commissioning. RInfra-T submitted that there are 11 x 220 kv Bays and 5 x 33 kv Bays which are commissioned but currently unutilised. MERC Order - Case No. 13 of 2016 Page 26 of 118
4.3.2 RInfra-T also stated that an assessment of schemes was carried out by the State Transmission Utility (STU). Accordingly, the scope of work was decided considering a 5-year time horizon. 4.3.3 RInfra-T submitted the following reasons for erection of additional 220 kv GIS Bays at the outset, even though they might be required only in future: a) If additional 220 kv GIS Bays are installed later, 220 kv GIS Bus needs to be extended through adaptor which would require additional floor space; b) Design and engineering of an adaptor is critical as it involves matching of old GIS bus configuration with the new proposed 220 kv GIS; c) Manufacturers are reluctant to take up such GIS extension work later due to difficulty in matching of inter-connection of 220 kv bus because of the need for OEM proprietary data of the existing GIS switchgear; d) Ensuring civil structural stability because of the addition of Bays in future will be a challenge due to the requirement of additional cut-out in RCC slab; e) Due to rapid changes in technology, availability of compatible GIS switchgear would be difficult in future; f) HV side acceptance test for integrated existing and additional 220 kv GIS system cannot be conducted; g) Additional spares are required to be maintained, if the extension of Bays is of a different make; and h) For future installation, long outage of the entire EHV system would be required, which is difficult to obtain 4.3.4 The information in respect of unutilised Bays submitted by RInfra-T in response to the data gaps is as shown in the Table below: EHV/ HV Substation Table 6: Unutilised Bays in Transmission System of RInfra-T No. of Bays Capital Cost per Bay (Rs. Crore) Total Cost (Rs. Crore) Year of Commissioning Tentative year of put-to-use MSETCL Borivali 2 1.44 2.88 FY 2011-12 FY 2017-18 Aarey 2 1.42 2.84 FY 2011-12 FY 2017-18 Saki 2 1.44 2.88 FY 2010-11 FY 2016-17 Goregaon 1 1.45 1.45 FY 2010-11 FY 2017-18 MERC Order - Case No. 13 of 2016 Page 27 of 118
EHV/ HV Substation No. of Bays Capital Cost per Bay (Rs. Crore) Total Cost (Rs. Crore) Year of Commissioning Tentative year of put-to-use Borivali 1 1.42 1.42 FY 2011-12 FY 2018-19 Gorai 1 1.39 1.39 FY 2011-12 FY 2020-21 Chembur 2 1.45 2.90 FY 2012-13 FY 2018-19 Total 220 kv 11 15.76 Ghodbunder 1 0.03 0.03 FY 1994-95 FY 2017-18 Versova 4 0.03 0.10 FY 1994-95 FY 2017-18 Total 33 kv 5 0.13 Total 16 15.89 4.3.5 The Commission notes that the 33 kv Bays at 220 kv Ghodbunder and Versova Substations have been idle since the commissioning of the 220 kv Gorai (FY 2011-12), 220 kv Borivali (FY 2011-12) and 220 kv Goregaon (FY 2010-11) Sub-stations, as RInfra-T rearranged its 33 kv network for load management. However, the 220 kv Bays at the 220 kv Aarey, Saki, Goregaon, Borivali, Gorai and Chembur Sub-stations have been idle since their commissioning. 4.3.6 In this context, the stand taken by the Commission in its Order dated 18 May, 2012 in Case No. 169 of 2011 in respect of the Maharashtra State Electricity Transmission Co. Ltd. (MSETCL) is relevant: 5.1.2. The Commission feels that the above reasons do not justify the non-utilization of assets commissioned by the utilities, as these have associated costs which are borne by the consumers through Tariff. It is also true that the utilities undertaking the electricity business need to do forward planning. Investments in assets need to be planned keeping in mind the long term requirement, for example a horizon of 5-10 years, instead of short term requirements. This need is greater for transmission utilities which has to plan for huge network expansion arising out of the generation evacuation and supply to the load centres. However, it is necessary to create a balance between long term planned investments and burdening the consumers with the associated cost of that planning. The consumer doesn t get benefit out of these unutilised bays/ assets, though they are required to pay for it. The Commission had accordingly disallowed capitalization of unutilised Bays in MSETCL s MTR Order in Case No. 207 of 2014. The Commission has been of the view that, when the addition of unutilised assets financially burdens consumers without any assured benefit to them in a reasonable time, capitalisation of such assets should generally not be considered. MERC Order - Case No. 13 of 2016 Page 28 of 118
4.3.7 The Commission is aware that, due to the Right of Way (RoW) and land constraints in Mumbai, GIS Sub-stations are installed by the Licensees. Installation of GIS units is technically feasible and economically viable due to the space constraints and the future requirement of Bays. 4.3.8 RInfra-T has installed/commissioned GIS Bays for all 220 kv Sub-stations as planned, but these Bays are unutilised because of delay in commissioning of the Transmission Lines for which they were proposed. 4.3.9 The Commission notes the reasons cited by RInfra-T in para. 4.3.3 for erection of additional Bays at the beginning of execution of the GIS Sub-station. They include the difficulties that may arise later in the availability of matching configurations of GIS bus and inter-connection of 220 kv bus, compatibility of GIS switchgear, structural stability of additional Bays, additional spares of the same make, etc. Hence, the Commission is not disallowing the capitalisation against these 220 kv GIS Bays. However, these constraints do not apply to Air Insulated Sub-station (AIS) Bays, including 33 kv Bays, and an appropriate treatment is given to them accordingly. 4.3.10 5 x 33 kv AIS Bays were commissioned/ capitalized in FY 1994-95 and are more than 20 years old. Hence, the capital cost of these Bays would have already depreciated and there would be no outstanding loan corresponding to them in FY 2014-15. Based on this assessment, the Commission has not given any treatment for these Bays in the opening gross block and opening loan balances for FY 2014-15. However, the equity portion of these Bays needs to be removed from the opening balance of equity while computing the Return on Equity (RoE). 4.3.11 The following Table shows the revised opening balances of Gross Fixed Assets (GFA), loan and equity worked out by the Commission on account of unutilised Bays for Truingup of FY 2014-15. Particulars (Rs. Crore) Table 7: Impact of Unutilised Bays on Opening Balance of FY 2014-15 Approved as per MTR Order Adjustment on account of unutilised Bays Opening GFA 1399.88-1399.88 Opening loan balance 635.59-635.59 Opening equity Balance 461.23 0.04 461.20 Approved in this Order 4.3.12 The revised opening balances as derived in the above Table are considered for Truing-up of FY 2014-15. MERC Order - Case No. 13 of 2016 Page 29 of 118