In exercise of powers conferred by
clauses (zd), (ze) and (zf) of sub-section (2) of section 181, read with
sections 61, 62 and 86, of the Electricity Act 2003 (36 of 2003) and all powers
enabling it in that behalf, the Himachal Pradesh Electricity Regulatory
Commission, after previous publication, hereby proposes to make the following
regulations namely:- PART- I PRELIMINARY (1)
These regulations shall be called the
Himachal Pradesh Electricity Regulatory Commission (Terms and Conditions for
Determination of Wheeling Tariff and Retail Supply Tariff) Regulations, 2007. (2)
These regulations shall come into force from
the date of their publication in the Rajpatra, Himachal Pradesh. (1)
These regulations shall be applicable where
the capital cost based tariff is determined by the Commission. (2)
Where tariff has been determined through the
transparent process of bidding in accordance with the guidelines issued by the
Central Government, the Commission shall adopt such tariff in accordance with
the provisions of the Act. (3)
These regulations shall extend to the whole
of the State of Himachal Pradesh. (1)
In these regulations, unless the context
otherwise requires,- (a)
"Act" means the Electricity Act,
2003 (36 of 2003); (b)
"Aggregate Revenue Requirement" or
ARR means the costs pertaining to the licensed business which are permitted, in
accordance with these regulations, to be recovered from the tariffs and charges
determined by the Commission; (c)
"Allocation Statement" means for
each financial year, a statement in respect of each of the businesses
(wheeling, retail supply, other business) of the licensee, showing the amounts
of any revenue, cost, asset, liability, reserve or provision etc, which has
been either, - (i)
determined by apportionment or allocation
between different businesses of the licensee including the licensed business,
together with a description of the basis of the apportionment or allocation; or (ii)
charged from or to each such other business
together with a description of the basis of that charge; (d)
"Appendix" means the appendix of
these regulations; (e)
"Base Year" means the financial
year immediately preceding first year of the control period and used for the
purposes of these regulations; (f)
"Commission" means the Himachal
Pradesh Electricity Regulatory Commission; (g)
"Conduct of Business Regulations"
means the Himachal Pradesh Electricity Regulatory Commission (Conduct of
Business) Regulations, 2005, (h)
"Control Period" means a multi-year
period fixed, by the Commission, from time to time, usually 5 years for which
the principles of determination of revenue requirement and tariff will be
fixed. However, the first control period shall be of the duration of 3 years; (i)
"Distribution Business" means
authorized business of a distribution licensee to operate and maintain a
distribution system for supplying electricity to the consumers in an area of
supply; (j)
"Financial Year" means a period
commencing on 1st April of a calendar year and ending on 31st March of the
subsequent calendar year; (k)
"Licence" means a licence granted
under section 14 of the Act; (l)
"Licensed Business" means the
functions and activities, which the licensee is required to undertake in terms
of the licence granted by the Commission or being a deemed licensee under the
Act; (m)
"Licensee" means a person who has
been granted a licence and shall include a deemed licensee; (n)
"Non-Tariff Income" means income
relating to the licensed business other than from tariff (wheeling and retail
supply), and excluding any income from other business, cross-subsidy surcharge
and additional surcharge; (o)
"Other Business" means any business
of the distribution licensee other than the licensed business; (p)
"Retail Supply Business" means the
business of sale of electricity by a distribution licensee to the consumers
within the area of supply in accordance with the terms of the licence for
distribution and retail supply of electricity; (q)
"Retail Supply Tariff" means the
rate charged by the distribution licensee for supply to Non-open access
Customers and includes charges for wheeling and retail supply; (r)
"State" means the State of Himachal
Pradesh; (s)
"Trading Business" means the
authorised business of an electricity trader in the area of operation allowed
under the trading licence granted; (t)
"Trading Licence" means the licence
granted under section 14 of the Act to undertake trading in electricity; (u)
"Wheeling" means the operation
whereby the distribution system and associated facilities of a distribution
licensee are used by another person for the conveyance of electricity on
payment of charges to be determined under section 62; (v)
"Wheeling Business" means the
business of operating and maintaining a distribution system for conveyance of
electricity in the area of supply of the distribution licensee. (2)
The words and expressions used and not
defined in these regulation, but defined in the Act, shall have the meanings
respectively assigned to them in the Act. PART-II GUIDING PRINCIPLES (1)
In accordance with the principles laid in
these regulations, the Commission shall determine the tariff for - (a)
wheeling of electricity, i.e. wheeling
tariff; (b)
retail sale of electricity, i.e. retail
supply tariff: Provided that in case of distribution
of electricity in the same area by two or more distribution licensees, the
Commission may, for promoting competition amongst distribution licensees, fix
only maximum ceiling of tariff for retail sale of electricity: Provided further that where the
Commission has permitted open access to any category of consumers under section
42 of the Act, the Commission shall determine the wheeling tariff,
cross-subsidy surcharge, additional surcharge and other open access related
charges in accordance with these regulations and Himachal Pradesh Electricity
Regulatory Commission (Cross Subsidy Surcharge, Additional Surcharge and
Phasing of Cross Subsidy) Regulations, 2006. (2)
In accordance with the principles laid in
these regulations, the Commission shall determine the aggregate revenue
requirement (ARR) and tariff for - (a)
wheeling business; and (b)
retail supply business. (3)
The aggregate revenue requirement (ARR)
determined for the wheeling business shall be used in fixation of the wheeling
tariff. (4)
The aggregate revenue requirement (ARR)
determined for retail supply business shall be used in fixation of the retail
supply tariff for retail sale of electricity. (5)
Tariff determined by the Commission and the
directions given in the tariff order made by the Commission shall be the quid
pro quo and mutually inclusive. The tariff determined shall, within the period
specified by it, be subject to the compliance of the directions to the
satisfaction of the Commission and their non-compliance shall lead to such
amendment, revocation, variations and alterations of the tariff, as may be
ordered by the Commission. (6)
The tariff order shall, unless amended or
revoked, continue to be in force for such period as may be specified in the
tariff order. In the event of failure on the part of the licensee to file the
aggregate revenue requirement (ARR) under Part-IV, the tariff determined by the
Commission shall cease to operate, unless allowed to be continued for a further
period with such variations, or modifications, as may be ordered by the
Commission. The Commission shall adopt multi year
tariff framework for approval of ARR and expected revenue from tariffs and
charges for the first control period. The multi year tariff framework shall be
based on the following: - (a)
Business plan of the distribution licensee for
the entire control period to be submitted to the Commission for approval, prior
to the beginning of the control period; (b)
Applicant's forecast of expected wheeling
tariff and retail supply tariff for each year of the control period, based on
reasonable assumptions of the underlying financial and operational parameters,
as submitted in the business plan; (c)
Trajectory for specific parameters shall be
stipulated by the Commission, where the performance of the applicant is sought
to be improved through incentives and disincentives; (d)
Annual review of performance shall be
conducted vis-?-vis the approved forecast and categorization
of variations in performance into controllable factors and uncontrollable
factors; (e)
Profit sharing shall be applied on the
profits arising from the distribution licensee's better performance vis-?-vis
distribution loss targets specified by the Commission; (f)
Variation in revenue/cost on account of
uncontrollable factors like sales and power purchase shall be trued up. (1)
The distribution licensee shall segregate the
accounts of the licenced business into wheeling business and retail supply
business. The ARR for wheeling business shall be used to determine wheeling
charges and the ARR for retail supply business to determine retail supply
tariff. (2)
Till such time there is complete segregation
of accounts, the licensees shall prepare an allocation statement to apportion
costs and revenues to respective business. The allocation statement, approved
by the board of directors/whole time members of the licensee, shall be
accompanied with an explanation of the methodology which should be consistent
over the control period. The baseline values (operating and
cost parameters) for the control period shall be determined by the Commission
and shall be based on the approved values by the Commission, the latest audited
accounts, estimate of the actuals for the relevant year, prudence check and
other factors considered appropriate by the Commission. (1)
The Commission shall set targets for each
year of the control period for the items or parameters that are deemed to be
"controllable" and which will include;- (a)
Distribution losses, which shall be measured
as the difference between total energy input for sale to all its consumers and
sum of the total energy billed in its licence area in the same year; (b)
Operation and Maintenance Expenditure which
includes employee expenses, repairs and maintenance expenses, administration
and general expenses and other miscellaneous expenses viz. audit fees, rents,
legal fees etc; (c)
Financing cost which includes cost of debt
including working capital (interest), cost of equity (return); (d)
Depreciation; (e)
Quality of Supply. (2)
The Commission shall normally not revisit the
performance targets, once determined even if the targets are fixed on the basis
of un-audited accounts. (3)
The target distribution loss levels for the
State to be achieved by the distribution licensees at the end of the first
control period shall be 14.5%: Provided that the year-wise loss
reduction trajectory for the control period shall be fixed for the distribution
licensee in the multi year tariff order: Provided further that profits arising
from achieving loss level better than specified in the loss reduction
trajectory shall be shared in the ratio of 2/3rd with the licensee and 1/3rd in
the contingency reserve for the first control period. (4)
Any financial loss on account of under
performance with respect to distribution loss targets shall be to the
licensee's account. (1)
The Commission based on the licensee's
filings, shall examine the forecasts for reasonableness and consistency, and
shall approve the sales forecast for each year of the control period. (2)
Sales shall be treated as uncontrollable. The
open access transactions shall not form part of sales. (3)
Power purchase quantum and cost for any
financial year shall be computed on the basis of distribution loss targets and
the estimated sales. The quality of supply and the customer
service parameters shall be monitored as per the norms to be laid down by the
Commission separately from time to time. For certain parameters as mentioned in
regulation 36 of these regulations, the Commission shall monitor licensee's
performance with respect to the targets specified. The true up across various
controllable and uncontrollable parameters shall be conducted as per principles
stated below: - (1)
Variation in revenue/expenditure on account
of uncontrollable sales and power purchase shall be trued up every year; (2)
For controllable parameters, (a)
any surplus or deficit on account of O&M
expenses shall be to the account of the licensee and shall not be trued up in
ARR; and (b)
at the end of the control period - (i)
the Commission shall review actual capital
investment vis-?-vis approved capital
investment. (ii)
depreciation and financing cost, which includes
cost of debt including working capital (interest), cost of equity (return)
shall be trued up on the basis of actual/audited information and prudence check
by the Commission. (1)
For maintaining tariff stability and passing
the benefits achieved to the consumers under the multi year tariff framework
via contingency reserve, the licensee shall create a contingency reserve at the
beginning of the control period and the revenue surplus, if any, generated by
licensee in and up to FY 2007-08 shall be transferred to contingency reserves
at the beginning of the control period. (2)
The licensee shall maintain separate accounts
in their books and reflect the balance in the contingency reserve account in
the balance sheet. There shall be yearly additions and drawls to/from these
contingency reserve account based on the annual review and performance of the
licensee. (3)
Fund under contingency reserve shall be kept
in a separate bank account and shall be effectively invested and managed to
earn returns based on market conditions ensuring adequate liquidity. This fund
shall not be utilized for speculative purposes. The use of these funds in any
other manner shall be only with the prior approval of the Commission. PART-III PRINCIPLES FOR DETERMINATION OF AGGREGATE
REVENUE REQUIREMENT (ARR) The aggregate revenue requirement of
the distribution licensees for each year of the control period, shall contain
the following items: - (a)
cost of power procurement; (b)
transmission and load dispatch charges; (c)
operation and maintenance expenses; (d)
financing cost which includes cost of debt
including working capital (interest), cost of equity (return); (e)
depreciation; (f)
income tax; (g)
non-tariff income; and (h)
income from other business. (1)
The licensee shall forecast sales for each
customer category and sub-categories for all years of the control period in
their business plan filings, for the Commission's review and approval. The approved
category-wise sales forecast shall be applied along with distribution loss
trajectory for estimating the licensees' power procurement requirement for each
year of the control period. (2)
The distribution licensee shall be allowed to
recover the cost of power it procures from sources approved by the Commission,
viz. intra-State and inter-State trading licensees, bilateral purchases, bulk
suppliers, State generators, independent power producers, Central generating
stations, renewable and co-generation sources, generation business of the
distribution licensee and others, for supply to consumers of retail supply
business: Provided that the distribution
licensee shall propose the cost of power procurement taking into account the
fuel adjustment formula specified for the generating stations and net revenues
through bilateral exchanges and unscheduled interchange (UI) transactions: Provided further that where the
licensee utilises a part of the power purchase approved or bulk supply
allocated or contracted for the retail supply business for its trading
business, the distribution licensee shall provide an allocation statement
clearly specifying the cost of power purchase that is attributable to such
trading activity. (1)
The licensee shall propose circle-wise
baseline distribution loss levels and loss reduction trajectory for each year
of the control period, based on targets specified in regulation 8(3) of made by
the licensee for the distribution loss trajectory for each year of the control
period and approve the same with modification as it may consider necessary. (2)
The distribution licensee shall also propose
voltage-wise losses for each year of the control period for the determination
of voltage-wise cost of supply and determination of voltage-wise wheeling
tariff. The Commission shall examine the filings made by the licensee for the
distribution loss trajectory for each year of the control period and approve
the same with modification as it may consider necessary. (3)
In case the actual distribution loss is worse
than the loss level approved by the Commission, the licensee has to absorb the
financial loss arising from such performance. The distribution licensee shall be
allowed to recover transmission and load despatch charges payable to the
transmission licensees (Central Transmission Utility, State Transmission
Utility etc.) and system operators (Regional Load Despatch Centre, State Load
Despatch Centre etc.) for access to and use of the inter-State transmission
system, intra-State transmission system and availing load despatch services in
accordance with the tariffs approved, from time to time, by the Central
Electricity Regulatory Commission and the appropriate State Commissions, as the
case may be. (1)
Operation and Maintenance (O&M) expenses
shall include: - (a)
salaries, wages, pension contribution and
other employee costs; (b)
administrative and general expenses; (c)
repairs and maintenance expenses; and (d)
other miscellaneous expenses, statutory
levies and taxes (except corporate income tax). (2)
The distribution licensee shall submit the
O&M expenses for the control period as laid down in the multi year tariff
filing procedure. The O&M expenses for the base year shall be approved by
the Commission taking into account the latest available audited accounts,
business plan filed by the distribution licensee, estimates of the actuals for
the base year, prudence check and any other factors considered appropriate by
the Commission. (3)
The O&M expenses for the nth year of the
control period shall be approved based on the formula given below:- O&Mn = (R&Mn + EMPn +
A&Gn)* (1-Xn) Where - (a)
R&Mn = K*GFAn-1 and; (b)
EMPn + A&Gn = (EMPn-1 +
A&Gn-1)*(INDXn/INDXn-1) Where - 'K' is a constant (could be expressed
in %) governing the relationship between O&M costs and gross fixed assets
(GFA) for the nth year. The value of K shall be given in the MYT Order of the
Commission; INDXn - inflation factor to be used
for indexing and shall be taken as a combination of the consumer price index
(CPI), the wholesale price index (WPI) and any other relevant factor; EMPn - employee costs of the
transmission licensee for the nth year; A&Gn - administrative and general
costs of the transmission licensee for the nth year; R&Mn - repair and maintenance
costs of the transmission licensee for the nth year; Xn is an efficiency factor for nth
year. Value of Xn shall be determined by the Commission in the MYT tariff order
based on licensee's filings, benchmarking, approved cost by the Commission in
past and any other factor that the Commission feels appropriate. (1)
The Commission shall determine the asset base
for each year of the control period at the beginning of the control period,
which shall be: - Sum of: The asset base of the base year as
determined by the Commission, considering the most recent audited accounts,
estimates of actuals during the base year checked for prudence and any other
factors considered appropriate by the Commission, and Proposed capitalization during the
year, checked for prudence covering- (a)
schemes for which Commission's approval has
been granted, (b)
schemes which have been submitted for
Commission's approval, and (c)
schemes not requiring Commission's approval. Less: Assets proposed to be retired during
the year. (2)
The interest on loan capital and return on
equity shall be computed on the financing of the cost of the schemes included
in the asset base. For the purpose of determination of
tariff, the equity and outstanding debt shall be determined for the base year
by the Commission taking into consideration the licensee's proposals, previous
years debt-equity details and other relevant factors. However, for any fresh
capitalization of assets, the Commission shall apply a debt-equity ratio of
70:30 on the capitalized amount as approved by the Commission for each year of
the control period: Provided that where equity employed is
in excess of 30%, the amount of equity for the purpose of tariff shall be
limited to 30% and the balance amount shall be considered as loan. The interest
rate applicable on the equity in excess of 30% treated as loan has been
specified in regulation 21. Where actual equity employed is less than 30%, the
actual equity shall be considered. (1)
Return on equity for the distribution
licensee (sum of return on equity for wheeling business and return on retail
supply business) shall be computed on the paid up equity capital determined in
accordance with regulation 19 and shall be 16% per annum (post tax): Provided that return on equity
invested in work in progress shall be allowed from the date of commercial
operation. (2)
The premium raised by the licensee while
issuing share capital and investment of internal resources created out of free
reserve, if any, shall also be reckoned as equity for the purpose of computing
return on equity, provided such premium amount and internal resources are
actually utilized for meeting capital expenditure. For the purposes of
calculation of computation of return, the portion of free reserves utilized for
meeting the capital expenditure shall be considered from the date the asset
created is productively deployed in the distribution business. (3)
Equity invested in foreign currency shall be
allowed a return upto the prescribed limit in the same currency and the payment
on this account shall be made in Indian rupees based on the exchange rate
prevailing on the due date of billing. (1)
Interest and finance charges on loan capital
shall be computed on the outstanding loans, duly taking into account the
schedule of repayment, and the interest rate, in accordance with the terms and
conditions of relevant agreements of loan, bond or non-convertible debentures.
Exception can be made for the existing or past loans which may have different
terms as per the agreements already executed if the Commission is satisfied
that the loan has been contracted for and applied to identifiable and approved
projects. For the purpose of tariff determination, the outstanding debt at the
end of each year of the control period shall be taken as:- Outstanding debt at the end of nth
year = Outstanding debt at the end of (n-1)th year + (plus) sum of amount of
debt related to assets capitalized under each investment scheme during nth year
- (minus) debt repaid during nth year; For the first year of the control
period, (n-1)th year shall be the base year; Amount of debt related to assets
capitalized under an investment scheme during nth year = (70% or actual,
whichever is higher) X (multiply) (amount of capitalization approved by the
Commission for such scheme in nth year); Provided that all loans considered for
this purpose shall be identified with the assets created: Provided further that the interest and
finance charges of re-negotiated loan agreements shall not be considered, if
they result in higher charges: Provided further that the interest and
finance charges on works in progress shall be excluded and shall be considered
as part of the capital cost: Provided further that neither penal
interest nor overdue interest shall be allowed for computation of aggregate
revenue requirement. (2)
The interest rate on the amount of equity in
excess of 30% treated as notional loan shall be the weighted average rate of
the loans of the respective years and shall be further limited to the rate of
return on equity specified in these regulations. (3)
In case any moratorium period is availed of
in any loan, depreciation provided for in the tariff during the years of
moratorium shall be treated, as repayment during those years and interest on
loan capital shall be calculated accordingly. (4)
The distribution licensee shall make every
effort to refinancing the loan as long as it results in net benefit to the
consumers. The cost associated with such refinancing shall be borne by the
consumers and any benefit on account of refinancing of loan and interest on
loan shall be shared in the ratio of 1/3rd with the licensee and 2/3rd in the
contingency reserve. The licensee shall submit the calculation of such benefit
to the Commission for its approval. (5)
In respect of foreign currency loans,
variation in rupee liability due to foreign exchange rate variation, towards
interest payment and loan repayment actually incurred, in the relevant year
shall be admissible; provided it directly arises out of such foreign exchange
rate variation and is not attributable to the licensee or its suppliers or
contractors. Rate of interest on working capital to
be computed as provided hereinafter in these regulations shall be on normative
basis and shall be equal to the short-term prime lending rate of the State Bank
of India as on April 1 of the relevant year. The interest on working capital
shall be payable on normative basis notwithstanding that the licensee has not
taken working capital loan from any outside agency or has exceeded the working
capital loan based on the normative figures. The Commission shall calculate
working capital requirement for wheeling business as mentioned in regulation 30
and retail supply business as mentioned in regulation 32 to arrive at working
capital requirement of distribution licensee. (1)
Depreciation shall be calculated for each
year of the control period, on the amount of original cost of the fixed assets
of the corresponding year: Provided that depreciation shall not
be allowed on assets funded by any capital subsidy/grant. (2)
Depreciation for each year of the control
period shall be determined based on the methodology as specified in these
regulations along with the rates and other terms specified in appendix-1 of
these regulations. (3)
Depreciation shall be calculated annually,
based on the straight line method, over the useful life of the asset. The base
value for the purpose of depreciation shall be original cost of the asset. (4)
The residual value of assets shall be
considered as 10% and depreciation shall be allowed to a maximum of 90% of the
original cost of the asset. Land is not a depreciable asset and its cost shall
be excluded while computing 90% of the original cost of the asset. (5)
Depreciation shall be charged from the first
year of operation of the asset. In case, the operation of the asset is for a
part of the year, depreciation shall be charged on a pro rata basis. (6)
In addition to allowable depreciation, the
distribution licensee shall be entitled to advance against depreciation (AAD),
computed in the manner given hereunder:- AAD = Loan (raised for capital
expenditure) repayment amount based on loan repayment tenure, subject to a
ceiling of 1/10th of loan amount minus depreciation as calculated on the basis
of these regulations: Provided that advance against
depreciation shall be permitted only if the cumulative repayment upto a
particular year exceeds the cumulative depreciation upto that year: Provided further that advance against
depreciation in a year shall be restricted to the extent of difference between
cumulative repayment and cumulative depreciation upto that year: (7)
On repayment of entire loan, the remaining
depreciable value shall be spread over the balance useful life of the asset. (1)
Income tax, if any, on the licensed business
of the distribution licensee shall be treated as expense and shall be
recoverable from consumers through tariff. However, tax on any income other
than that through its licensed business shall not be a pass through, and it
shall be payable by the distribution licensee itself. (2)
Any under-recoveries or over-recoveries of
tax on income shall be adjusted every year on the basis of income-tax
assessment, under the Income Tax Act, 1961, as certified by the statutory
auditors: Provided further that the benefits of
tax-holiday as applicable in accordance with the provisions of the Income Tax
Act, 1961 shall be passed on to the consumers; (3)
The income tax actually payable or paid shall
be included in the ARR. The actual assessment of income tax should take into
account benefits of tax holiday, and the credit for carry forward losses
applicable as per the provisions of the Income Tax Act, 1961 shall be passed on
to the consumers. (4)
Tax on income, if any, liable to be paid
shall be limited to tax on return on equity. However, any tax liability on
incentives due to improved performance shall not be considered. (1)
All incomes being incidental to electricity
business and derived by the licensee from sources, including but not limited to
profit derived from disposal of assets, rents, delayed payment surcharge, meter
rent (if any), income from investments other than contingency reserves,
miscellaneous receipts from the consumers excluding income to licensed business
from the other business of the distribution licensee shall constitute
non-tariff income of the licensee. (2)
The amount received by the licensee on
account of non-tariff income shall be deducted from the aggregate revenue
requirement in calculating the net revenue requirement of such licensee. Where the licensee is engaged in any
other business, the income from such business will be calculated in accordance
with the Himachal Pradesh Electricity Regulatory Commission (Treatment of
Income of Other Businesses of Transmission Licensees and Distribution
Licensees) Regulations, 2005 and shall be deducted from the aggregate revenue
requirement in calculating the revenue requirement of the licensee: Provided that the licensee shall
follow a reasonable basis for allocation of all joint and common costs between
the distribution business and the other business and shall submit the
allocation statement, as approved by the board of directors, to the Commission along
with his application for determination of tariff: Provided further that where the sum
total of the direct and indirect costs of such other business exceeds the
revenues from such other business or for any other reason, no amount shall be
allowed to be added to the aggregate revenue requirement of the licensee on
account of such other business. (1)
The net aggregate revenue requirement of the
licensee eligible for recovery during each year of the control period shall be
determined after deducting from the aggregate revenue requirement, the
non-tariff income and other income. (2)
For determination of wheeling charges for
open access customers, the ARR for the distribution licensee shall be
segregated into ARR for wheeling business and ARR for retail supply business. The ARR for the wheeling business of
distribution licensees for each year of the control period, shall contain the
following items:- (a)
operation and maintenance expenses; (b)
financing cost which includes cost of debt
including working capital (interest), cost of equity (return); (c)
depreciation; (d)
income tax; (e)
non-tariff income; and (f)
income from other business. (1)
Return on equity shall be computed on the
paid up equity capital determined in accordance with regulation 19 and shall be
14% per annum (post tax): Provided that return on equity,
invested in work in progress, shall be allowed from the date of commercial operation. (2)
The premium raised by the licensee while
issuing share capital and investment of internal resources created out of free
reserve, if any, shall also be reckoned as equity for the purpose of computing
return on equity, provided such premium amount and internal resources are
actually utilized for meeting capital expenditure. For the purposes of
calculation of computation of return, the portion of free reserves utilized for
meeting the capital expenditure shall be considered from the date the asset created
is productively deployed in the distribution business. (3)
Equity invested in foreign currency shall be
allowed a return upto the prescribed limit in the same currency and the payment
on this account shall be made in Indian rupees based on the exchange rate
prevailing on the due date of billing. The Commission shall calculate the
working capital requirement for the wheeling business containing the following
components:- (a)
O&M expenses for one month; (b)
receivables for two months of the wheeling
charges received; (c)
maintenance spares @ 40% of the R&M -
expense for one month; and (d)
less: consumer security deposit, if any. The ARR for the retail supply business
of the distribution licensee, for each year of the control period, shall
contain the following items; (a)
cost of power procurement; (b)
transmission and load dispatch charges; (c)
interest on working capital; and (d)
supply margin. Working capital for retail supply of
electricity shall consist of - (a)
O&M expenses for one month; (b)
receivables for two months of revenue from
sale of electricity; (c)
maintenance spares @ 40% of the R&M
expense for one month; (d)
less: consumer security deposit, if any; (e)
less: power purchase costs for one month. (1)
The Commission shall lay down a retail supply
margin for the retail supply business in MYT order based on the allocation statement
provided by the distribution licensee. The costs allocated to retail supply
business as per allocation statement shall be considered while determining
supply margin after exercising prudence check. (2)
The Commission shall lay down the retail
supply margin in such manner that the total return from the wheeling business
and retail supply business shall not exceed 16% of paid up equity capital
determined in accordance with regulation 19 of these regulations. (1)
Notwithstanding anything contained in these
regulations, the gains or losses in the controllable items of ARR on account of
force majeure factors shall be passed on as an additional charge or rebate in
ARR over such period as may be specified in the order of the Commission. (2)
Variations on account of uncontrollable items
like energy sales and power purchase cost shall be trued up. Truing-up shall be
carried out for each year based on the actual/audited information and prudence
check by the Commission: Provided that if such variations are
large, and it is not feasible to recover in one year alone, the Commission may
take a view to create a regulatory asset, as per the guidelines provided in
clause 8.2.2 of the National Tariff Policy. (3)
The Contingency Reserve (CR) shall be created
at the beginning of the control period in the ARR. The licensee shall be
permitted to use funds from such provision, with the prior approval of the
Commission, to compensate the uncontrollable variations instead of tariff
adjustments and thereby ensuring tariff stability in the control period. (4)
The Commission, to ensure tariff stability,
may include the trued-up costs in the subsequent control period's ARR instead
of including in the year succeeding the relevant year of the control period. (1)
The amount received or to be received by the
licensee on account of cross-subsidy surcharge and additional surcharge, as
approved by the Commission from time to time in accordance with the Himachal
Pradesh Electricity Regulatory Commission (Cross Subsidy Surcharge, Additional
Surcharge and Phasing of Cross Subsidy) Regulations, 2006 shall be shown
separately against the consumer category that is permitted open access as per
the phasing plan. (2)
Cross-subsidy surcharge and additional
surcharge shall be shown as revenue from tariff from the consumer categories
permitted open access in accordance with the Himachal Pradesh Electricity
Regulatory Commission (Cross Subsidy Surcharge, Additional Surcharge and
Phasing of Cross Subsidy) Regulations, 2006 and such amount shall be utilized
to meet the cross-subsidy requirements of subsidized categories and fixed costs
of the licensee arising out of his obligation to supply. The licensee shall
provide such details in its annual filings. (1)
The quality of supply and the customer
service parameters shall be monitored as per the norms specified by the
Commission from time to time. (2)
The licensee shall propose baseline and
performance trajectory for all quality parameters as specified in the Himachal
Pradesh Electricity Regulatory Commission (Distribution Licensees' Standards of
Performance) Regulations, 2005. (3)
The Commission shall make an assessment on
reliability of baseline data and may prescribe the performance trajectory for
each identified parameter for the control period. The Commission shall develop
a performance framework to encourage licensees to improve quality of supply and
services. (4)
The licensee shall submit the performance on
each parameter in the form and manner directed by the Commission and the
Commission shall conduct periodic reviews on the performance of the licensee
with respect to quality parameters. PART- IV MULTI YEAR TARIFF FILING PROCEDURE (1)
The multi year tariff filing shall be in such
form and in such manner as has been specified by the Commission in these
regulations and also as per the provisions of the conduct of business
regulations. (2)
The licensee shall also submit the multi year
tariff filing in electronic format to the Commission. The distribution licensee shall file,
for the Commission's approval, on or before 30th November of the year,
preceding the first year of the control period, or any other date as may be
directed by the Commission, a business plan approved by its board of directors/whole
time members. The business plan shall be for the entire control period and
shall, interalia, contain:- (a)
sales/demand forecast for each customer
category and sub-categories for each year of the control period; (b)
distribution loss reduction trajectory for
each year of the control period; (c)
collection efficiency for each year of the
control period; (d)
power procurement plan based on the sales
forecast and distribution loss trajectory for each year of the business plan
period; the power procurement plan should also include energy efficiency and
demand side management measures; (e)
capital investment plan: This shall take into
account the sales/demand forecast, power procurement plan, distribution loss
trajectory, targets for quality of supply, etc. The capital investment plan
shall be consistent with the perspective plan drawn by the State Transmission
Utility (STU), and shall include the corresponding capitalization schedule and
financing plan. The Commission shall approve capital investment plan of the
licensees for the control period commensurate with load growth, distribution
loss reduction and quality improvement proposed in the business plan; (f)
the appropriate capital structure of each
scheme proposed and cost of financing (interest on debt and return on equity),
terms of the existing loan agreements, etc; (g)
the Operation and Maintenance (O&M) costs
estimated for the base year and two years prior to the base year with complete
details, together with the forecast for each year of the control period based
on the proposed efficiency in operating costs, norms for O&M cost allowance
including indexation and other appropriate mechanism; (h)
details of depreciation based on the fair
life of the asset and capitalisation schedules for each year of the control
period; (i)
a set of targets proposed for other items
such as collection efficiency, bad debts, working capital, quality of supply
targets, etc. The targets shall be consistent with the capital investment plan
proposed by the licensee; (j)
proposals for other items such as external
parameters used for indexation (inflation, etc); (k)
other information: This shall include any
other details considered appropriate by the distribution licensee for
consideration during determination of tariff; and (l)
the filings in addition to the control period,
shall also contain the data for the cost and revenue parameters for the last
two years. (1)
The distribution licensee shall file an
application for approval of wheeling tariff and retail supply tariff for each
year of the control period, not less than 120 days before the commencement of
the first year or subsequent year of the control period or such other date as
may be directed by the Commission. (2)
The wheeling tariff shall be determined for
each year of the control period at the beginning of the control period. The
licensee shall propose capacity based wheeling tariff. The licensee shall also
indicate the distribution losses voltage-wise to provide for adjustment of
losses in the system. (3)
The filings for wheeling tariff shall contain
the following: - (a)
the distribution system or network usage
forecast for each year of the control period, consistent with the business
plan; (b)
proposals for computation of tariffs for
wheeling of electricity for each of the years of the control period, including
the losses and the procedure thereof; (c)
proposals for non-tariff income, with
item-wise description and details; (d)
proposals in respect of income from other
businesses like consultancy services, convergence, training facilities, etc; (e)
proposed wheeling tariff (voltage-wise); (f)
expected revenue from the proposed wheeling
tariff, including additional surcharge etc. (4)
The filings for retail supply tariff shall
contain the following:- (a)
the licensee's proposal for retail sale of
electricity for the consumers pertaining to retail supply business, which shall
include tariffs for each consumer category, slab-wise and voltage-wise. The proposed
tariff may also be based on energy charges, demand charges, minimum charges,
etc along with the tariff rationalization measures; (b)
proposals for non-tariff income with
item-wise description and details; (c)
proposals in respect of income from other
businesses like consultancy services, convergence, training facilities, etc; (d)
expected revenue from the proposed retail
supply tariff, and other matters considered appropriate by the distribution
licensee, including incentive schemes to consumers, cross-subsidy surcharge,
etc. (5)
Each tariff proposal submitted by the
distribution licensee shall - (i)
be supported with a cost-of-service model
allocating the costs of the licensed business to each category of consumers
based on voltage-wise costs and losses, and (ii)
demonstrate that the tariffs are
progressively reflecting the cost of supply (6)
The licensee shall furnish to the Commission,
such additional information, particulars and documents as the Commission may
require from time to time after such filing of revenue calculations and tariff
proposals. (7)
The licensee shall publish, for the
information of the public, the contents of the application in an abridged form
in such manner as the Commission may direct and shall host the complete copy of
the filing on its website and shall also provide copies of the documents filed
with the Commission to any person at a price not exceeding normal photocopying
charges. (1)
The distribution licensee shall submit
information as part of annual review on actual performance vis-?-vis
performance targets approved by the Commission at the beginning of the control
period. (2)
The distribution licensee shall submit the
revised ARR and corresponding tariff adjustments 120 days before the
commencement of the financial year. The revised estimates shall be required
because of trued-up costs on account of uncontrollable variations, profit
sharing mechanism for exceeding the targets, and implementation of performance
framework for quality of supply targets. (1)
Towards the end of the control period, the
Commission shall review if the implementation of the principles laid down in
these regulations have achieved their intended objectives. While doing this, the
Commission shall take into account, among other things, the industry structure,
sector requirements, consumer and other stakeholder expectations and the
licensee's requirements at that point in time. Depending on the requirements of
the sector to meet the objects of the Act, the Commission may revise the
principles for the second control period. (2)
The end of the first control period shall be
the beginning of the second control period and the licensee shall follow the
same procedure, unless required otherwise by the Commission. The Commission
shall analyze the performance of the licensee with respect to the targets set
out at the beginning of the first control period and based on the actual
performance, expected efficiency improvements and other factors prevalent,
determine the initial values for the next control period. (1)
The Commission shall process the filings made
by the distribution licensee in accordance with these regulations and the
conduct of business regulations. (2)
Based on the distribution licensees' filings,
objections/suggestions from public and other stakeholders, the Commission may,
within 120 days of the receipt of the application, complete in all respects,
and after considering all suggestions and objections from public and other
stakeholders, - (a)
issue a tariff order with such modifications
and/or such conditions, as may be deemed just and appropriate, containing inter
alia targets for controllable items and the approved ARR for the wheeling
business and the ARR for the retail supply business along with the wheeling
charges and retail supply tariff for each year of the control period; or (b)
reject the application for reasons to be
recorded in writing if such application is not in accordance with the provisions
of the Act and the rules and regulations made thereunder or the provisions of
any other law for the time being in force. (1)
To ensure smooth implementation of the multi
year tariff (MYT) framework, the Commission may undertake periodic reviews of
licensees' performance during the control period, to address any practical
issues, concerns or unexpected outcomes that may arise. (2)
The distribution licensee shall submit
information as part of annual review on actual performance to assess the
performance vis-?-vis the targets
approved by the Commission at the beginning of the control period. This shall
include annual statements of its performance and accounts including the latest
available audited/actual accounts and the tariff worked out in accordance with
these regulations. (3)
The licensee shall submit the revised
aggregate revenue requirement and corresponding tariff adjustments 120 days
before the commencement of the financial year. (4)
The Commission may also lay down any modifications
to the forecast of the distribution licensee for the remainder of the control
period, with detailed reasons for the same. PART-V SUBSIDY (1)
The State Government may, at any time as it
considers to be appropriate, propose any subsidy to any class or classes of
consumers in the tariff determined by the Commission and upon receiving such
proposal, the Commission shall determine the amount to be paid as subsidy and
the terms and conditions of such payment including the manner of payment of
subsidy amounts by the State Government to the person affected by the decision
of the subsidy. (2)
While determining the tariff, the Commission
shall take into account any subsidies, which the State Government had agreed to
give to any class or classes of consumers. (3)
The tariff determined by the Commission shall
be published duly taking into account such subsidy offered by the State
Government as on the date of the decision of the Commission. (4)
Notwithstanding anything contained in these
regulations, no direction of the State Government shall be operative if the
payment is not made by the State Government in accordance with the provisions
of section 65 of the act. In the event of such directions being not operative
the amount of subsidy to be made by the State Government shall be added in the
tariff to be charged by the licensee to the concerned class or classes of
consumers. (5)
The consequential orders which the Commission
may issue to give effect to the subsidy that the Sate Government may provide
shall not be construed as amendment of tariff notified. The licensee shall,
however, give appropriate adjustments in the bills to be raised on the
consumers for the subsidy amount in the manner the Commission may direct. (6)
The bills to the consumers shall
distinctively display the per unit cost of supply of electricity to the class
of consumer as determined by the Commission, the subsidy, if any, given by the
State Government applicable to such class of consumers and per unit amount of
such subsidy, the bill amount payable by the consumer and the cross
subsidization of the class of the consumer in the tariff made applicable
without taking into account of subsidy from the Sate Government. (7)
The licensee shall be required to furnish
documents to the satisfaction of the Commission that the subsidy amount
received by the licensee from the State Government is duly accounted for and
utilized for the purpose for which the subsidy is given. PART- VI MISCELLANEOUS The distribution licensee shall
publish the tariff approved by the Commission in the newspapers, having
circulation in the area of supply, as the Commission may direct. The
publication shall, besides such other things as the Commission may require,
include a general description of the tariff changes and its effect on the
classes of the consumers. (1)
Subject to the provision of the Act and these
regulations, the Commission may, from time to time, issue orders and practice
directions, prescribe formats in regard to the implementation of these
regulations and procedure to be followed on various matters, which the
Commission has been empowered by these regulations to direct, and matters
incidental or ancillary thereto. (2)
Notwithstanding anything contained in these
regulations, the Commission shall have the authority, either suo motu or on a
petition filed by any interested or affected person, to determine the tariff of
any licensee. In case of any difficulty in giving
effect to any of the provisions of these regulations, the Commission may,
either suo motu or on an application made to it, do or undertake to do things,
or by general or special order direct the licensee to take suitable action, not
being inconsistent with the Act, which appears to the Commission to be
necessary or expedient for the purpose of removing the difficulty. The Commission may, in public interest
and for reasons to be recorded in writing, relax any of the provisions of these
regulations. All issues arising in relation to the
interpretation of these regulations shall be determined by the Commission and
the decision of the Commission on such issues shall be final. Nothing contained in these regulations
shall limit or otherwise affect the inherent powers of the Commission from
adopting a procedure, which is at variance with any of the provisions of these
regulations, if the Commission, in view of the special circumstances of the
matter or class of matters and for reasons to be recorded in writing, deems it
necessary or expedient to depart from the procedure specified in these regulations. All enquiries, investigations and
adjudications under these regulations shall be done by the Commission through
the proceedings in accordance with the provisions of the conduct of business
regulations. The Commission, for reasons to be
recorded in writing, may at any time amend, vary, alter or modify any of the
provisions of these regulations. (1)
The Himachal Pradesh Electricity Regulatory
Commission (Terms and Conditions for Determination of Tariff) Regulations, 2004
are hereby repealed. (2)
Notwithstanding such repeal, anything done or
any action already taken under the repealed regulations, shall, in so far as it
is not inconsistent with these regulations, be deemed to have been done or
taken under the corresponding provisions of these regulations. Depreciation Schedule (see regulation 23(2)) S. No Asset
Class Useful
Life (Years) Rate (%) 1 Land owned
under full title Infinity 0 2 Land held
under lease (A) For
investment in land Period of
lease or the period remaining unexpired on the assignment of the lease 0 (B) For cost
of clearing site Period of
lease remaining unexpired at the date of clearing the site 0 3 Assets
Purchased New (A) Plant and
machinery in generating stations including plant foundations (i) Hydro-electric 35 2.57 (ii) Steam-electric
NHRS & Waste Heat Recovery Boilers/Plants 25 3.60 (iii) Diesel
electric & gas plant 15 6.00 (B) Cooling
towers and circulating water systems 25 3.60 (C) Hydraulic
works forming part of hydro-electric system including: (i) Dams,
spillways weirs, canals, reinforced concrete flumes & siphons 50 1.80 (ii) Reinforced
concrete pipelines and surge tanks, steel pipelines, sluice gates, steel
surge (tanks) hydraulic control valves and other hydraulic works 35 2.57 (D) Buildings
and civil engineering works of a permanent character, not mentioned above: (i) Offices
& showrooms 50 1.80 (ii) Containing
thermo-electric generating plant 25 3.60 (iii) Containing
hydro-electric generating plant 35 2.57 (iv) Temporary
erection such as wooden structures 5 18.00 (v) Roads
other than kutcha roads 50 1.80 (vi) Others 50 1.80 (E) Transformers,
transformer (kiosk) sub-station equipment & other fixed apparatus
(including plant foundations) (i) Transformers
(including foundations) having a rating of 100 kilo volt amperes and over 25 3.60 (ii) Others 25 3.60 (F) Switchgear,
including cable connections 25 3.60 (G) Lightning
arrestors: (i) Station
type 25 3.60 (ii) Pole type 15 6.00 (iii) Synchronous
condenser 35 2.57 (H) Batteries 5 18.00 (I) Underground
cable including joint boxes and disconnected boxes 35 2.57 (J) Cable duct
system 50 1.80 (K) Overhead
lines including supports: (i) Lines on
fabricated steel operating at nominal voltages higher than 66 kV 35 2.57 (ii) Lines on
steel supports operating at nominal voltages higher than 13.2 kV but not
exceeding 66 kV 25 3.60 (iii) Lines on
steel or reinforced concrete supports 25 3.60 (iv) Lines on
treated wood supports 25 3.60 (L) Meters 15 6.00 (M) Self
propelled vehicles 5 18.00 (N) Air
conditioning plants: (i) Static 15 6.00 (ii) Portable 5 18.00 (O) (i) Office
furniture and fittings 15 6.00 (ii) Office
equipments 15 6.00 (iii) Internal
wirings including fittings and apparatus 15 6.00 (iv) Street
Light fittings 15 6.00 (P) Apparatus
let on hire: (i) Other than
motors 5 18.00 (ii) Motors 15 6.00 (Q) Communication
equipment (i) Radio and
higher frequency carrier systems 15 6.00 (ii) Telephone
lines and telephones 15 6.00 (R) Assets
purchased in second hand and assets not otherwise provided for in the
schedule such
reasonable period as the Commission determines in each case having regard to
the nature, age and conditions of assets at the time of its acquisition by
the owner HIMACHAL PRADESH ELECTRICITY REGULATORY COMMISSION (TERMS AND
CONDITIONS FOR DETERMINATION OF WHEELING TARIFF AND RETAIL SUPPLY TARIFF)
REGULATIONS, 2007
PREAMBLE