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HIMACHAL PRADESH ELECTRICITY REGULATORY COMMISSION

SHIMLA

NOTIFICATION

Shimla, the 4th March, 2011

No. HPERC/Trans/479.—Whereas section 61 of the Electricity Act, 2003, provides that

the Appropriate Commission shall specify the terms and conditions for the determination of tariff,

and in doing so, shall be guided by the principles and methodologies specified by the Central

Commission for determination of tariff applicable to transmission licensees and also by the

National Tariff Policy formulated under the said Act;

251&jkti=@2011&7&3&2011

¼9353½

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And Whereas the Himachal Pradesh Electricity Regulatory Commission has framed the

HPERC (Terms and Conditions for Determination of Transmission Tariff) Regulations, 2007;

And Whereas the Central Commission has subsequently framed Central Electricity

Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2009 specifying the

principles and methodologies to be followed for determination of tariff applicable to transmission

systems of the licensee(s) and various changes have also been made in the National Tariff Policy;

And Whereas the Himachal Pradesh Electricity Regulatory Commission is making an

exercise to determine the tariff for transmission system of the licensees for the next control period

starting from 1st April, 2011 and keeping in view the National Tariff Policy and methodologies of

Central Commission amongst others, it has become necessary to amend/ modify the existing

regulations;

Now, therefore, in exercise of the powers conferred by clauses (zd), (ze) and (zf) of

sub-section (2) of section 181, read with sections 61, 62 and 86, of the of the Electricity Act, 2003

(36 of 2003) and all other powers enabling it in this behalf, the Himachal Pradesh Electricity

Regulatory Commission proposes to make the following regulations for determination of

transmission tariff and hereby publishes the proposed draft regulations, as required by sub-section

(3) of section 181 of the said Act, read with rule 3 of the Electricity (Procedure for Previous

Publication) Rules, 2005, for the information of all the persons likely to be affected thereby; and

notice is hereby given that the said draft regulations will be taken into consideration, after the

expiry of 21 days from the date of their publication in the Rajpatra, Himachal Pradesh, together

with any objections or suggestions which may within the aforesaid period be received in respect

thereto.

The objections or suggestions in this behalf should be addressed to the Secretary, Himachal

Pradesh Electricity Regulatory Commission, Keonthal Commercial Complex, Khalini, Shimla-

171002.

DRAFT REGULATIONS

PART-I

PRELIMINARY

Short title, extent and Commencement.—(1) These regulations shall be called the

Himachal Pradesh Electricity Regulatory Commission (Terms and Conditions for Determination of

Transmission Tariff) Regulations, 2011.

(2) These regulations shall extend to the whole of the State of Himachal Pradesh

(3) These regulations shall come into force with effect from 1st April 2011.

Scope and application.—(1) These regulations shall be applicable where the capital

cost based tariff for the transmission system is determined by the Commission under section 62 of

the Act, read with section 86 thereof.

(2) Where tariff has been determined through 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.

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Definitions.—In these regulations, unless the context otherwise requires, -

(1) “Act” means the Electricity Act, 2003 (36 of 2003);

(2) “additional capitalisation” means the capital expenditure incurred or projected to be

incurred, after the date of commercial operation of the project and admitted by the

Commission after prudence check, subject to provisions of regulation 16;

(3) “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;

(4) “allotted transmission capacity” means and includes the power transfer in MW

between the specified point(s) of injection and point(s) of drawal allowed to a long-

term customer on the intra-State transmission system under the normal circumstances

and allotted transmission capacity to a long-term transmission customer shall be sum

of the generating capacities allocated to the long-term transmission customer from the

State generating stations and inter-State generating stations and the expression

"allotment of capacity" shall be construed accordingly;

(5) “allocation statement” means for each financial year, a statement in respect of each

of the businesses (transmission and SLDC business) of the licensee, showing the

amounts of any revenue, cost, asset, liability, reserve or provision etc, which has been

either-

(a) 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

(b) charged from or to each such other business together with a description of the

basis of that charge;

(6) “Appendix” means the appendix to these regulations;

(7) “applicant” means a transmission licensee who has made an application for

determination of transmission charge in accordance with these regulations and

includes a transmission licensee whose tariff is the subject of a review by the

Commission;

(8) “availability” in relation to a transmission system for a given period means the time

in hours during that period in which the transmission system is capable to transmit

electricity at its rated voltage and shall be expressed in percentage of total hours in the

given period;

(9) “base year” means the financial year immediately preceding first year of the control

period and used for the purposes of these regulations;

(10) “ capital cost” means the capital cost as defined in regulation 14;

(11) “Central Commission” means Central Electricity Regulatory Commission, as

referred to in sub-section (1) of section 76 of the Act;

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(12) “change in law” means occurrence of any of the following events-

(a) the enactment, bringing into effect, adoption, promulgation, amendment,

modification or repeal of any law, or

(b) change in interpretation of any law by a competent court, Tribunal or Indian

Governmental Instrumentality which is the final authority under law for such

interpretation, or

available or obtained for the project;

(13) “Commission” means the Himachal Pradesh Electricity Regulatory Commission, as

referred to in sub-section(1) of section 82 of the Act;

(14) “Conduct of Business Regulations” means the Conduct of Business Regulations

specified by the Commission under sub-section (1) of section 92 of Act;

(15) “control period” means a multi-year period fixed, by the Commission, from time to

time, for which the principles of determination of revenue requirement and tariff will

be laid;

(16) “cut-off date” means 31st March of the year closing after two years of the year of

commercial operation of the project, and in case the project is declared under

commercial operation in the last quarter of a year, the cut-off date shall be 31st March

of the year closing after three years of the year of commercial operation;

(17) “date of commercial operation” or “COD” means the date declared by the

transmission licensee from 0000 hour of which an element of the transmission system

is in regular service after successful charging and trial operation:

Provided that the date shall be the first day of a calendar month and transmission

charge for the element shall be payable and its availability shall be accounted for,

from that date:

Provided further that in case an element of the transmission system is ready for regular

service but is prevented from providing such service for reasons not attributable to the

transmission licensee, its suppliers or contractors, the Commission may approve the

date of commercial operation prior to the element coming into regular service;

(18) “day” means the 24 hour period starting at 0000 hour;

(19) “distribution licensee” means a licensee authorized to operate and maintain a

distribution system for supplying electricity to the consumers in his area of supply;

(20) “existing project” means a project declared under commercial operation from a date

prior to 01.04.2011;

(21) “financial year” means a period commencing on 1st April of a calendar year and

ending on 31st March of the subsequent calendar year;

(22) “intra-State transmission system” means any system for conveyance of electricity

by transmission lines within the area of the State and includes all transmission lines,

sub-stations and associated equipment of transmission Licensees in the State:

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9357

Provided that the definition of point of separation between a transmission system and

distribution system and between a generating station and transmission system shall be

guided by the provisions of the Regulations notified by the Authority under clause (b) of

Section 73 of the Act;

(23) “licence” means a licence granted by the Commission under Section 14 of the Act;

(24) “licensed business” means the functions and activities, which the licensee is required

to undertake in terms of the licence granted by the Commission or as a deemed

licensee under the Act;

(25) “licensee” means a person who has been granted a licence and shall include a deemed

licensee;

(26) “long term transmission customer” means a person availing or intending to avail

access to the intra-State transmission system for a period of twelve years or more and

less than twenty five years;

(27) “medium term transmission customer” means a person availing or intending to

avail access to the intra-state transmission system for a period of three months or more

and less than three years;

(28) “non-tariff income” means income relating to the licensed business other than from

tariff (intra-state transmission of electricity), and excluding any income from other

business;

(29) “original project cost” means the capital expenditure incurred by the transmission

licensee within the original scope of the project up to the cut-off date as admitted by

the Commission;

(30) “other business” means any business of the transmission licensee other than the

licensed business;

(31) “project” means the transmission system;

(32) “rated voltage” means the voltage at which the transmission system is designed to

operate or such lower voltage at which the line is charged, for the time being, in

consultation with long-term transmission customers;

(33) “short term transmission customer” means a person availing or intending to avail

access to the intra-State transmission system for a period up to 1 month;

(34) “State” means the State of Himachal Pradesh;

(35) “transmission business” means the authorised business of a transmission licensee to

transmit electricity, whether for its own account or for that of any other person,

through any system owned and/ or operated by such licensee;

(36) “transmission licensee” means the entity, which has been granted a transmission

licence or is a deemed licensee under the first, second, third or fifth provisos to section

14 of the Act;

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(37) “transmission service agreement” means and includes the agreement, contract,

memorandum of understanding, or any such other covenants, entered into between the

transmission licensee and the beneficiaries;

(38) “transmission system” means the system consisting mainly of extra high voltage

electric lines having design voltage of above 33 kV, owned or controlled by the

transmission licensee, and used for the purposes of the conveyance of electricity

between the switchyards of two generating sets or from the switchyard of a generating

set to a substation, or between substations, or to or from any external interconnection

and includes all bays/equipment upto the interconnection with the distribution system,

and any plant, apparatus and meters owned or used in connection with the

transmission of electricity, but shall not include any part of a distribution system;

(39) “user” means the distribution licensee or open access customer, as the case may be,

who uses the intra–State transmission network for the purpose of selling/procuring

electricity;

(40) ‘useful life’ in relation to a unit of a transmission system from the COD shall mean

the following, namely:-

(a) AC and DC sub-station - 25 years

(b) Transmission line - 35 years;

(41) “year” means a financial year; and

(42) The words and expressions used respectively and not defined in these regulations but

defined in the Act shall have the meanings respectively assigned to them in the Act.

PART-II

GUIDING PRINCIPLES

General Approach.—(1) In accordance with the principles laid in these regulations,

the Commission shall determine the aggregate revenue requirement (ARR) for the transmission

business.

(2) 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 noncompliance shall lead to such amendment, revocation, variation and

alteration of the tariff, as may be ordered by the Commission.

(3) 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 and V, 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.

Multi Year Tariff (MYT) Framework.—(1) The Commission shall adopt multi year

tariff framework for approval of ARR and expected revenue from tariffs and charges. The ARR and

tariffs will be determined for the control period.

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(2) The multi year tariff framework shall be based on the following: -

(a) Business plan of the transmission licensee for the entire control period to be

submitted to the Commission for approval, prior to the beginning of the control

period;

(b) 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.

Determination of Baseline.—The baseline values (operating and cost parameters) for

the base year of 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. The

Commission may re-determine the baseline values for the base year based upon the actual audited

accounts of the base year.

Capital Investment Plan.—(1) The Commission shall approve the system

augmentation plan submitted by the transmission licensee, based on the load growth forecast during

the control period. The same would be considered for computation of ARR, wherein the amount of

electricity transmitted by the transmission system shall be projected considering the estimated

growth plan of transmission customer and any plans of new transmission system, based on network

expansion plans within the State.

(2) Capital investment plan submitted by the licensee shall also provide details of ongoing

projects that will spill into the control period and new projects that will commence during the

control period but may extend beyond the control period.

(3) The capital investment plan shall be in conformity with the plans made by the

CEA/CTU/STU. The investment plan shall be scheme-wise and each scheme shall include-

(a) purpose of investment (i.e. replacement of existing assets, meeting load growth,

technical loss reduction, meeting reactive energy requirements, improvement in

quality and reliability of supply, etc) ;

(b) Capital Structure;

(d) Financing Plan;

(e) Cost-benefit analysis;

(f) improvement in operational efficiency envisaged in the control period;

(4) The Commission shall review the actual capital expenditure incurred and

capitalisation at the end of each year of the control period vis-à-vis the approved capital

expenditure and capitalisation schedule. In the normal course, the Commission shall not revisit the

approved capital investment plan (capital expenditure and capitalisation schedule) during the

control period and adjustment to depreciation, interest on capital loan and return on equity for the

actual capital expenditure incurred and capitalisation vis-à-vis approved capital investment plan

(capital expenditure and capitalisation) shall be done at the end of control period.

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(5) In case the capital expenditure is required for emergency work which has not been

approved in the Capital Investment Plan, the licensee shall submit an application (containing all

relevant information along with reasons justifying emergency nature of the proposed work seeking

approval by the Commission. The licensee shall take up the work prior to the approval of the

Commission provided that the emergency nature of the scheme has been certified by its Board of

Directors.

Renovation and Modernisation.—(1) The transmission licensee for meeting the

expenditure on renovation and modernization (R&M) for the purpose of extension of life beyond

the useful life of the transmission system, shall make an application before the Commission for

approval of the proposal with a detailed project report giving complete scope, justification, cost-

benefit analysis, estimated life extension from a reference date, financial package, phasing of

expenditure, schedule of completion, reference price level, estimated completion cost including

foreign exchange component, if any, consent of beneficiaries and any other information considered

to be relevant by the transmission licensee.

(2) Where the transmission licensee makes an application for approval of R&M proposal,

the approval shall be granted after due consideration of reasonableness of the cost estimates,

financing plan, schedule of completion, interest during construction, use of efficient technology,

cost-benefit analysis, and such other factors as may be considered relevant by the Commission.

(3) Any expenditure incurred or projected to be incurred as admitted by the Commission

after prudent check based on the estimates of renovation and modernisation expenditure and life

extension, and after writing off the original amount of the replaced assets and deducting the

accumulated depreciation including advance against depreciation already recovered from the

Original project cost, shall form the basis for determination of tariff.

Controllable Parameters.—The Commission will set targets for the items or

parameters that are deemed to be “controllable” and which will include -

(a) Availability of the transmission system;

(b) Operation and Maintenance Expenses which includes employee expenses, repairs and

maintenance expenses, administration and general expenses and other miscellaneous

expenses viz. audit fees, rents, legal fees etc;

equity (return);

(d) Depreciation.

10. True Up.—(1) The true up across various controllable parameters shall be conducted

as per principles stated below: -

(a) any surplus and deficit on account of O&M expenses shall be to the account of the

transmission 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-à-vis approved capital

investment;

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9361

(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.

(2) 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 laid down in the order of the Commission.

11. Operational Norms.—Normative Annual Transmission System Availability Factor

(NATAF) .—The target availability for recovery of full transmission charges during the control

period shall be as under: -

(a) the alternating current (AC) System: 98%

(b) the high voltage direct current (HVDC) bi-pole links: 92%

PART-III

PRINCIPLES FOR DETERMINATION OF AGGREGATE REVENUE

REQUIREMENT (ARR)

12. ARR for Transmission Licensee.—(1) Tariff in respect of the transmission system

may be determined for the whole of the transmission system or the transmission line or sub-station.

(2) The aggregate revenue requirement for the transmission business 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);

(d) income tax;

(e)

non-tariff income ; and

Less-

income from other business.

13. Operation and Maintenance (O&M) Expenses.—(1) Operation and Maintenance

(O&M) expenses shall comprise of the following:-

(a) salaries, wages, pension contribution and other employee costs;

(b) administrative and general expenses;

(d) other miscellaneous expenses, statutory levies and taxes (except corporate income

tax).

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(2) The transmission 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 will be

approved by the Commission taking into account the latest available audited accounts, business

plan filed by the transmission 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 -

EMPn = (EMPn-1)* (1+Gn) * (CPIinflation)

A&Gn = (A&Gn-1)*(WPIinflation)

‘K’ is a constant (could be expressed in %). Value of K for each year of the control period

shall be determined by the Commission in the MYT Tariff order based on licensee’s filing,

benchmarking of R&M Expenses, approved R&M Expenses vis-à-vis GFA approved by the

Commission in past and any other factor considered appropriate by the Commission;

CPIinflation – is the average increase in the Consumer Price Index (CPI) for immediately

preceding five years before the base year;

WPIinflation – is the average increase in the Wholesale Price Index (CPI) for immediately

preceding five years before the base year;

EMPn – employee’s cost of the transmission licensee for the n^th year;

A&Gn – administrative and general costs of the transmission licensee for the n^thyear;

R&Mn – repair and maintenance costs of the transmission licensee for the n^thyear;

GFAn-1 – Gross Fixed Asset of the transmission licensee for n-1th year;

Gn is a growth factor for nth year. Value of Gn shall be determined by the Commission in

the MYT tariff order for meeting the additional manpower requirement based on licensee’s

filings, benchmarking, approved cost by the Commission in past and any other factor that

the Commission feels appropriate:

Provided that R&M expenses determined shall be utilised towards R&M works only.

14. Capital cost of the project.—(1) capital cost for a project shall include-

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

construction and financing charges, any gain or loss on account of foreign

exchange risk variation during construction on the loan - (i) being equal to 70%

of the funds deployed, in the event of the actual equity in excess of 30% of the

funds deployed, by treating the excess equity as normative loan, or (ii) being

equal to the actual amount of loan in the event of the actual equity less than 30%

of the funds deployed, - up to the date of commercial operation of the project, as

admitted by the Commission, after prudence check;

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9363

(b) capitalised initial spares subject to the ceiling norms as per regulation 15;

Provided that the assets forming part of the project, but not in use shall be taken out of the

capital cost.

(2) The capital cost admitted by the Commission, after prudence check, shall form the

basis for determination of tariff:

Provided that the prudence check of capital cost may be carried out based on the benchmark

norms to be specified by the Commission from time to time:

Provided further that in cases where benchmark norms have not been specified, prudence

check may include scrutiny of the reasonableness of the capital expenditure, financing plan, interest

during construction, use of efficient technology, cost over-run and time over-run, and such other

matters as may be considered appropriate by the Commission for determination of tariff:

Provided further that where the implementation agreement and the transmission service

agreement entered into between the transmission licensee and the longterm transmission customer

provides for ceiling of actual expenditure, the capital expenditure admitted by the Commission

shall take into consideration such ceiling for determination of tariff:

Provided further that in case of the existing projects, the capital cost admitted by the

Commission prior to 01.04.2011 and the additional capital expenditure projected to be incurred for

the respective years of the control period, as may be admitted by the Commission, shall form the

basis for determination of tariff.

15. Initial Spares.—Initial spares shall be capitalised as a percentage of the original

project cost, subject to following ceiling norms:-

(a) Transmission line - 0.75%

(b) Transmission Sub-station - 2.5%

16. Additional Capitalisation.—(1) The capital expenditure incurred or projected to be

incurred, on the following counts within the original scope of work, after the date of commercial

operation and up to the cut-off date may be admitted by the Commission, subject to prudence

check-

(a) undischarged liabilities;

(b) works deferred for execution;

provisions of regulation 15;

(d) liabilities to meet award of arbitration or for compliance of the order or decree of a

court; and

(e) change in law:

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Provided that the details of works included in the original scope of work, along with

estimates of expenditure, undischarged liabilities and the works deferred for

execution, shall be submitted along with the application for determination of tariff.

(2) The capital expenditure incurred on the following counts after the cut off date may, in

its discretion, be admitted by the Commission, subject to prudence check:-

(a)

liabilities to meet award of arbitration or for compliance of the order or decree of a

court;

(b) change in law;

(c)

In case of transmission system any additional expenditure on items such as relays,

control and instrumentation, computer system, power line carrier communication, DC

batteries, replacement of switchyard equipment due to increase of fault level,

emergency restoration system, insulators cleaning infrastructure, replacement of

damaged equipment not covered by insurance and any other expenditure which has

become necessary for successful and efficient operation of transmission system:

Provided that any expenditure on acquiring the minor items or the assets like tools and

tackles, furniture, air-conditioners, voltage stabilizers, refrigerators, coolers, fans,

washing machines, heat convectors, mattresses, carpets etc. brought after the cut-off

date shall not be considered for additional capitalization for determination of tariff

w.e.f. 1.4.2011.

17. Asset Base.— (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-

(a) 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

(b) Proposed capitalisation during the year, checked for prudence covering-

(i)

schemes for which Commission’s approval has been granted,

(ii) schemes which have been submitted for Commission’s approval, and

(iii) 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.

18. Debt-equity ratio.—For the purpose of determination of tariff, the equity and

outstanding debt as determined for the base year by the Commission shall be considered as given.

However, for any fresh capitalization of assets, the Commission shall apply a debtequity ratio of

70:30 on the capitalised amount as approved by the Commission for each year of the control

period:

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9365

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 20. Where actual equity employed is less than 30%, the actual equity shall be

considered.

19. Return on Equity.—(1) Return on equity shall be computed on the equity determined

in accordance with regulation 18 and on pre-tax basis at the base rate of 15.5% to be grossed up as

per sub-regulation (3) of this regulation:

(2) The rate of return on equity shall be computed by grossing up the base rate with the

normal tax rate for the year 2010-11 applicable to the concerned transmission licensee company:

Provided that return on equity with respect to the actual tax rate applicable to the

transmission licensee in line with the provisions of the relevant Finance Acts of the respective year

during the tariff period shall be trued up separately for each year of the tariff period along with the

tariff petition filed for the next tariff period.

(3) Rate of return on equity shall be rounded off to three decimal points and be computed

as per the formula given below:

(a) Rate of pre-tax return on equity = Base rate / (1-t)

(b) Where t is the applicable tax rate in accordance with sub-regulation (2) of this

regulation.

Illustration:-

(i)

In case of the transmission licensee paying Minimum Alternate Tax (MAT) @

19.93% including surcharge and cess:

Rate of return on equity = 15.50/ (1-0.1993) = 19.358%

(ii) In case of transmission licensee company paying normal corporate tax @

33.22% including surcharge and cess:

Rate of return on equity = 15.50/ (1-0.3322) = 23.210%

20. Interest and Finance Charges.—(1) Interest and finance charges on loan capital

shall be computed on the outstanding loans, duly taking into account the schedule of repayment 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.

(2) The rate of interest shall be the weighted average rate of interest calculated on the

basis of the actual loan portfolio at the beginning of each year applicable to the project:

Provided that if there is no actual loan for a particular year but normative loan is still

outstanding, the last available weighted average rate of interest shall be considered:

Provided further that if the transmission licensee does not have actual loan then the

weighted average rate of interest of the transmission licensee as a whole shall be considered.

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(3) 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:

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 tariff.

(4) 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 notional repayment of loan during

those years and interest on loan capital shall be calculated accordingly.

(5) The transmission licensee shall make every effort to refinance the loan as long as it

results in net benefit to the beneficiaries. The costs associated with such refinancing shall be borne

by the transmission customers and any benefit on account of refinancing of loan and interest on

loan shall be passed on to the transmission customers. Refinancing may also include restructuring

of debt.

(6) 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 transmission licensee or its suppliers or contractors.

21. Working Capital.—The Commission shall calculate the working capital requirement

for the transmission licensee containing the following components: -

(a) O&M expenses for 1 month;

(b) maintenance spare @ 40% of R&M Expenses for one month; and

22. Interest Charges on Working Capital.—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.

23. Depreciation.—(1) The value base for the purpose of depreciation shall be the capital

cost of the asset admitted by the Commission.

(2) The salvage value of the asset shall be considered as 10% and depreciation shall be

allowed up to maximum of 90% of the capital cost of the asset.

(3) Depreciation shall be calculated annually based on Straight Line Method and at rates

specified in Appendix-I to these regulations for the assets of the transmission system:

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9367

Provided that, the remaining depreciable value as on 31st March of the year closing after a

period of 12 years from date of commercial operation shall be spread over the balance useful life of

the asset.

(4) For transmission project which are in operation for less than 12 years, the difference

between the cumulative depreciation recovered and the cumulative depreciation arrived at by

applying the depreciation rates specified in this regulation corresponding to 12 years, shall be

spread over the period up to 12 years, and the remaining depreciable value as on 31st March of the

year closing after a period of 12 years from date of commercial operation shall be spread over the

balance useful life of the asset.

(5) For the project in operation for more than 12 years, the balance depreciation to be

recovered shall be spread over the remaining useful life.

(6) Depreciation shall be chargeable from the first year of commercial operation. In case

of commercial operation of the asset for part of the year, depreciation shall be charged on pro rata

basis.

24. Non-tariff Income.—(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, income from investments, and miscellaneous receipts

from the transmission customers excluding income to licensed business from the other business of

the transmission licensee shall constitute non-tariff income of the licensee.

(2) The amount projected by the licensee on account of non-tariff income shall be

deducted from the aggregate revenue requirement in calculating the net revenue requirement of the

licensee.

25. Other Income of the Transmission Licensee.—Where the transmission 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

transmission licensee:

Provided that the transmission licensee shall follow a reasonable basis for allocation of all

joint and common costs between the transmission business and the other business and shall submit

the allocation statement, as approved by its 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 transmission licensee on account

of such other business.

26. Refund of excess amount.—The licensee shall recover the charges as determined by

the Commission. Where any licensee recovers charges exceeding those determined by the

Commission, the excess amount shall be refunded to the person who has paid such excess charges,

alongwith interest equal to the prevalent Short Term Prime Lending rate of the State Bank of India

without prejudice to any other liability incurred by such licensee.

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27. Late Payment Surcharge.—In case the payment of bills of transmission charges is

delayed beyond a period of one month from the date of billing, the transmission licensee may levy

a late payment surcharge at the rate of 1.25% per month.

28. Rebate.—For payment of bills of transmission charges through a letter of credit on

presentation, a rebate of 2% shall be allowed. If the payment is made by any other mode but within

a period of one month of presentation of bills by the transmission licensee, a rebate of 1% shall be

allowed.

29. Quality of Supply.—(1) The Commission shall monitor the following quality of

supply parameters during the control period: -

(a) transmission system availability;

(b) transformer failure, across various capacities which represents the number of

transformer failures as a percentage of the total number of transformers in that

specified capacity within the transmission system, over a specified period of time.

(2) The transmission licensee in its business plan filings shall submit and propose the

trajectory for the achievement of quality targets. The Commission will lay down the

targets for each parameter in the MYT order. The transmission licensee shall submit

its performance on each parameter in the form and manner laid down by the

Commission.

30. Safety Standards.—The transmission licensee shall develop a safety manual and

follow procedures to maintain atleast minimum safety standards during construction, operation, etc.

in line with provisions of section 53 of the Act.

PART-IV

PRINCIPLES FOR DETERMINATION OF TRANSMISSION

TARIFF/ CHARGES

31. Transmission Tariff/Charges.—(1) The transmission charges payable by the

transmission customers of the transmission system shall be designed to recover the aggregate

revenue requirement computed as annual transmission charges by the Commission for each year of

the control period.

(2) In addition to transmission charges, charges for reactive energy, as may be determined

by the Commission in the MYT order, shall also be payable by all the transmission customers of

the system.

32. Annual Transmission Service Charge.—(1) The fixed cost of the transmission

system shall be computed on annual basis, in accordance with norms contained in these regulations,

aggregated as appropriate, and recovered on monthly basis as transmission charge from the users.

(2) The transmission charge (inclusive of incentive) payable for a calendar month for a

transmission system or part thereof shall be-

AFC x ( NDM / NDY ) x ( TAFM / NATAF )

Where,

AFC = Annual fixed cost specified for the year, in Rupees;

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NATAF = Normative annual transmission availability factor, in per cent specified in

regulation 11;

NDM = Number of days in the month;

NDY = Number of days in the year; and

TAFM = Transmission system availability factor for the month, in percent, computed in

accordance with Appendix-II to these Regulations.

(3) The transmission licensee shall raise the bill for the transmission charge (inclusive of

incentive) for a month based on its estimate of TAFM. Adjustments, if any, shall be made on the

basis of the TAFM to be certified by the SLDC within 30 days from the last day of the relevant

month:

Provided that wherever it is necessary or expedient to incentivise the open access, the

Commission may, by order, cap the transmission charges calculated under this sub-regulation.

33. Allocation of Transmission Service Charge.—(1) The Annual Transmission Service

Charge (ATSC) shall be shared between the long and medium term customers of the transmission

system on monthly basis based on the allotted transmission capacity or contracted capacity, as the

case may be.

(2) No distinction in charges shall exist in terms of long term, medium term or short term

access to the intra-State transmission system. Provided that, the transactions for long term and

medium term shall be denominated in Rs/kW/month or any suitable denomination as may be

stipulated by the Commission.

(3) For short term bilateral transactions and short term collective transactions through

power exchanges, the transmission tariff shall be denominated in Rs/kWh/hr.

(4) 25% of the charges collected from the short term open access customer shall be

retained by the transmission licensee and the balance 75% shall be considered as non-tariff income

and adjusted towards reduction in the transmission service charges payable by the long term and

medium term users.

(5) Notwithstanding anything contained in these regulations, the Commission after

conducting study and due regulatory process may notify the revised sharing and recovery of annual

transmission service charge of the transmission licensee.

34. Charges for intervening transmission facilities.—(1) The rates and charges for

intervening transmission facilities, if any, provided by the licensee shall be as mutually agreed upon

between the licensee and the users of such facilities:

Provided that the rates and charges agreed upon shall be fair and reasonable and may be

allocated in proportion to the use of the transmission facilities.

(2) Mutual agreement on these matters would be in the best interest of the parties. In case,

such agreement cannot be reached within a reasonable period of time, either party shall be entitled

to approach the Commission for determination under the proviso to sub-section (1) of section 36 of

the Act and the Commission would expect evidence that negotiations were held in good faith and

all reasonable efforts were made to arrive at a mutual agreement.

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(3) The parties shall be at liberty to approach the Commission in case of any dispute

regarding the extent of surplus capacity available, as provided for in section 35 of the Act.

(4) An application shall be made to the Commission for an order requiring any other

licensee owning or operating intervening transmission facilities to provide their use to the extent of

surplus capacity available with it.

(5) After an order is passed under sub-regulation (4) of regulation 34, read with section 35

of the act, the concerned licensee shall provide his intervening transmission facilities at rates,

charges and on terms and conditions as may be mutually agreed upon, under section 36 of the Act.

35. Compliance with the directions by Transmission Licensee.—(1) Subject to the

directions issued by the National Load Despatch Centre or the Regional Load Despatch Centre, the

State Load Despatch Centre (SLDC) may, under sub-section (2) of section 32 and sub-section (1)

of section 33, read with clause (b) of section 40 of the Act, give such directions as it may consider

appropriate, for maintaining the availability of the transmission system and the transmission

licensee shall duly comply with all such directions.

(2) The Commission, on an application filed by the State Load Despatch Centre (SLDC)

and after hearing the transmission licensee, if satisfied that the transmission licensee has

persistently failed to maintain the availability of the transmission system, may issue such directions

to the State Load Despatch Centre (SLDC) to take control of the operations of the transmission

system of such transmission licensee, for such period and on such terms, as the Commission may

decide.

(3) The directions under sub-regulations (1) and (2) of regulation 35 shall be without

prejudice to any action which may be taken against the transmission licensee under other provisions

of the Act.

PART-V

MULTI YEAR TARIFF FILING PROCEDURE

36. Multi-Year Filings for the Control Period.—(1) The multi year tariff filing shall be

in such form and in such manner as may be specified by the Commission in these regulations and

also as per the provisions of the Conduct of Business Regulations.

(2) The transmission licensee shall also submit the multi year tariff filing in electronic

format to the Commission.

37. Beginning of the Control Period - Business Plan Filings.—The transmission

licensee shall file for the Commission’s approval, on 1st April 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 the Board of Directors / Whole Time Members. The business plan shall be for the

entire control period and shall, interalia, contain -

(a) Capital Investment Plan.—This should be commensurate with load growth and

quality improvement proposed in the business plan. The investment plan should also

include corresponding capitalisation schedule and financing plan; The Commission

shall approve the system augmentation/ expansion plan submitted by the transmission

licensee, based on the load growth forecast/generation evacuation requirement during

the control period. The capital investment plan shall be in conformity with the plans

made by the CEA/ CTU/STU/ distribution licensee.

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(b) Capital Structure.—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;

estimated for the base year, the actual expenses incurred in the previous two years and

the projected values for each year of the control period based on the proposed norms

for O&M cost, including indexation and other appropriate mechanism;

(d) Depreciation.—Based on the on the useful life of the asset and capitalization

schedules for each year of the control period;

(e) Performance Targets.—A set of targets proposed for controllable items such as,

availability of transmission system, transformer failure rate, and any other parameters

for quality of supply for each year of the control period for the purpose of incentive/

penalties. The targets shall be consistent with the capital investment plan proposed by

the transmission licensee;

(f) Proposals for Non-tariff Income with item-wise description and details;

(g) Proposals in respect of income from Other Business;

(h) Other Information: This shall include any other details considered appropriate by the

transmission licensee for consideration during determination of tariff; and

38. Annual Filings during the Control Period – ARR and Tariff Filings.—(1) The

transmission licensee shall file an application for approval of transmission tariff for each year of the

control period, not less than 120 days before the commencement of the first year of the control

period or such other date as may be directed by the Commission.

(2) The transmission 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 transmission losses voltagewise to provide for adjustment of losses

in the system.

(3) The filings for transmission tariff shall contain the following: -

(a) the transmission system or network usage forecast for each year of the control

period, consistent with the business plan;

(b) proposals for transmission tariff design for each year of the control period,

including the losses to be charged and the procedure thereof;

supported by adequate justification;

(d) proposal for reactive energy charges; and

(e) expected revenue from the licensed business, non-tariff income and income from

other business and other matters considered appropriate by the transmission

licensee.

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(4) 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.

(5) 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.

39. Review at the end of the Control Period.— (1) Towards the end of the control

period, the Commission shall review if the implementation of the principles laid down in these

regulations has 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 next control period.

(2) The end of the control period shall be the beginning of the next control period and the

licensee shall follow the same procedure, unless required otherwise by the Commission. The

Commission shall analyse the performance of the licensee with respect to the targets set out at the

beginning of the control period and based on the actual performance, expected efficiency

improvements and other factors prevalent, determine the initial values for the next control period.

40. Disposal of Application.—(1) The Commission will process the filings made by the

transmission licensee in accordance with these regulations and the Conduct of Business regulations.

(2) Based on the transmission licensee’s 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 transmission tariffs 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.

41. Publication.—The transmission 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.

PART-VI

MISCELLANEOUS

42. Sharing of Clean Development Mechanism (CDM) Benefits.—The proceeds of

carbon credit from approved CDM project shall be shared in the following manner, namely-

(a) 100% of the gross proceeds on account of CDM to be retained by the project

developer in the first year (12 months) after the date of commercial operation of the transmission

system;

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(b)

in the second year, the share of the beneficiaries shall be 10% which shall be

progressively increased by 10% every year till it reaches 50%, whereafter the proceeds shall be

shared in equal proportion, by the transmission licensee and the users.

43. Tax on Income.—In view of pre tax return on equity, tax on the income streams of

the transmission licensee shall not be recovered from the beneficiaries:

Provided that the deferred tax liability, excluding Fringe Benefit Tax, for the period up to

31st March, 2011 whenever it materialises, shall be recoverable directly from the beneficiaries and

the long-term customers.

44. Foreign Exchange Rate Variation.—(1) The transmission licensee may hedge

foreign exchange exposure in respect of the interest on foreign currency loan and repayment of

foreign loan acquired for the transmission system in part or full in the discretion of the transmission

licensee.

(2) Every transmission licensee shall recover the cost of hedging of foreign exchange rate

variation corresponding to the normative foreign debt, in the relevant year on year-to-year basis as

expense in the period in which it arises and extra rupee liability corresponding to such foreign

exchange rate variation shall not be allowed against the hedged foreign debt.

(3) To the extent the transmission licensee is not able to hedge the foreign exchange

exposure, the extra rupee liability towards interest payment and loan repayment corresponding to

the normative foreign currency loan in the relevant year shall be permissible provided it is not

attributable to the transmission licensee or its suppliers or contractors.

(4)

Every transmission licensee shall recover the cost of hedging and foreign exchange

rate variation on year-to-year basis as income or expense in the period in which it arises.

45. Recovery of cost of hedging Foreign Exchange Rate Variation.—Recovery of cost

of hedging and foreign exchange rate variation shall be made directly by the transmission licensee

from the users without making any application before the Commission:

Provided that in case of any objections by the users to the amounts claimed on account of

cost of hedging or foreign exchange rate variation, the transmission licensee make an appropriate

application before the Commission for its decision.

46. Transitory provisions.—Notwithstanding anything to the contrary contained in these

regulations –

(a)

the tariff order issued by the Commission for the control period ending on the 31st

March, 2011 shall continue to operate; and

(b) the proceedings (including review petition) for amendments, revocation, variation or

alteration of the said tariff order shall continue to be filed and dealt with as if the

repealed regulations in respect of the said tariff determination continue to be inforce,

and the provisions of these regulations shall not apply.

47. Issue of Orders and Practice Directions.—(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.

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(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 applicant.

48. Powers to remove difficulties.—If any difficulty arises in giving effect to any of the

provisions of these regulations, the Commission may, by a general or special order, not being

inconsistent with the provisions of these regulations or the Act, do or undertake to do things or

direct the transmission licensee to do or undertake such things which appear to be necessary or

expedient for the purpose of removing the difficulties.

49. Power of Relaxation.—The Commission may, in public interest and for reasons to be

recorded in writing, relax any of the provision of these regulations.

50. Interpretation.—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.

51. Saving of Inherent Powers of the Commission.—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.

52. Enquiry and Investigation.—All enquiries, investigations and adjudications under

these regulations shall be done by the Commission in accordance with the provisions of the

Conduct of Business regulations.

53. Repeal and Savings.—(1) The Himachal Pradesh Electricity Regulatory Commission

(Terms and Conditions for Determination of Transmission Tariff) Regulations, 2007 are hereby

repealed.

(2) Notwithstanding such repeal-

(a) anything done or any action taken or purported to have been done or taken under

the repealed regulations shall, in so far as it is not inconsistent with the provisions of these

regulations, be deemed to have been done or taken under the corresponding provisions of these

regulations;

(b) the provisions concerning the tariff order made for the control period ending on

the 31st March, 2011 and the provisions for conduct of the proceedings (including review petitions)

for its revocations, variation or alternation as, stood before such repeal, shall continue to be in

force.

(c)

the provisions relating to State Load Despatch Centre (SLDC) Fees and Charges, as

contained in Part-V of the repealed regulations shall continue to apply till Commission notifies

separate regulations covering the said aspects

By order of the Commission,

Sd/-

Secretary.

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Appendix I: Depreciation Schedule (see Regulation 23)

Depreciation Rate

No.NN

oo.

Aaaaaaaa Asset Particulars

Depreciation Rate

(Salvage Value=10%)

Land under full ownership

0.00%

Land under lease

(a)

For investment in land

3.34%

(b)

For cost of clearing the site

3.34%

Assets purchased new

(i)

Buildings and civil engineering works of a permanent character, not

mentioned above:

(ii)

Offices & showrooms

3.34%

(iii)

Temporary erection such as wooden structures

100.00%

(iv)

Roads other than kutcha roads

3.34%

(v)

Others

3.34%

(D)

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

5.28%

(ii)

Others

5.28%

Switchgear, including cable connections

5.28%

Lightning arrestors:

5.28%

(i)

Station type

5.28%

(ii)

Pole type

5.28%

(iii)

Synchronous condenser

5.28%

Batteries

5.28%

(i)

Underground cable including joint boxes and disconnected boxes

5.28%

(ii)

Cable duct system

5.28%

Overhead lines including supports:

(i)

Lines on fabricated steel operating at nominal voltages higher than

66 kV

5.28%

(ii)

Lines on steel supports operating at nominal voltages higher than

13.2 kV but not exceeding 66 kV

5.28%

(iii)

Lines on steel or reinforced concrete supports

5.28%

(iv)

Lines on treated wood supports

5.28%

Meters

5.28%

Self propelled vehicles

9.50%

Air conditioning plants:

(i)

Static

5.28%

(ii)

Portable

9.50%

m(i)

Office furniture and fittings

6.33%

(ii)

Office equipments

6.33%

(iii)

Internal wirings including fittings and apparatus

6.33%

(iv)

Street Light fittings

5.28%

Apparatus let on hire:

(i)

Other than motors

9.50%

(ii)

Motors

6.33%

Communication equipment

(i)

Radio and higher frequency carrier systems

6.33%

(ii)

Telephone lines and telephones

6.33%

I.T Equipment

15.00%

Any other assets not covered above

5.28%

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Appendix II - Procedure for Calculation of Transmission System Availability Factor

for a Month (See Regulation 32(2))

Transmission System Availability Factor for a calendar month (TAFM) shall be

calculated by the Transmission Licensee, got verified and certified by the SLDC and separately for

each AC transmission system and grouped according to sharing of transmission charges.

TAFM, in percent, shall be equal to (100 – 100 x NAFM), where NAFM is the non-

availability factor in per unit for the month, for the transmission system/subsystem.

NAFM for A.C. systems/sub-systems shall be calculated as follows:

NAFM =

[l=1 Σ^L (OH l x Ckt. km l x NSC l) + t=1 Σ^T (OH t x MVA t x 2.5) +

r=1^Σ^R^{(OH r x MVAR r x 4)] ⁄ THM x [}l=1^Σ^L^{(Ckt. km l x NSC l )+}

t=1^Σ^T^{(MVA t x 2.5) +}r=1^Σ^R^{(MVAR r x 4)]}

Where,

l identifies a transmission line circuit;

t identifies a transformer / Inter connecting transformer (ICT);

r identifies a bus reactor, switchable line reactor or Static VAR Compensation (SVC);

L = total number of line circuits;

T = total number of transformers and ICTs;

R = total number of bus reactors, switchable line reactors and SVCs;

OH = Outage hours or hours of non-availability in the month, excluding the duration of

outages not attributable to the Transmission Licensee, if any, as per clause 5;

Ckt. km = Length of a transmission line circuit in km;

NSC = Number of sub-conductors per phase;

MVA = MVA rating of a transformer / ICT;

MVAR = MVAR rating of a bus reactor, switchable line reactor or an SVC (in which case it

would be the sum of inductive and capacitive capabilities);

THM = Total hours in the month;

The transmission elements under outage due to following reasons shall be deemed to

be available:

(1) Shut down availed for maintenance or construction of elements of another

transmission scheme. If the other transmission scheme belongs to the Transmission

Licensee, the SLDC may restrict the deemed availability period to that considered

reasonable by him for the work involved.

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(2) Switching off of a transmission line to restrict over voltage and manual tripping of

switched reactors as per the directions of SLDC.

Outage time of transmission elements for the following contingencies shall be

excluded from the total time of the element under period of consideration.

(1) Outage of elements due to acts of God and force majeure events beyond the control of

the Transmission Licensee. However, onus of satisfying the SLDC that element

outage was due to aforesaid events and not due to design failure shall rest with the

Transmission Licensee. A reasonable restoration time for the element shall be

considered by SLDC and any additional time taken by the Transmission Licensee for

restoration of the element beyond the reasonable time shall be treated as outage time

attributable to the Transmission Licensee. SLDC may consult the Transmission

Licensee or any expert for estimation of reasonable restoration time. Circuits restored

through ERS (Emergency Restoration System) shall be considered as available.

(2) Outage caused by grid incident/disturbance not attributable to the Transmission

Licensee, e.g. faults in substation or bays owned by other agency causing outage of

the Transmission Licensee’s elements, and tripping of lines, ICTs, etc. due to grid

disturbance. However, if the element is not restored on receipt of direction from

SLDC while normalizing the system following grid incident/disturbance within

reasonable time, the element will be considered not available for the period of outage

after issuance of SLDC’s direction for restoration.

&&&&&&&&

HIMACHAL PRADESH ELECTRICITY REGULATORY COMMISSION SHIMLA

NOTIFICATION

Shimla, the 4th March, 2011

No. HPERC/Gen/479.—Whereas section 61 of the Electricity Act, 2003, provides that the

Appropriate Commission shall specify the terms and conditions for the determination of tariff, and

in doing so, shall be guided by the principles and methodologies specified by the Central

Commission for determination of tariff applicable to generating companies and also the National

Tariff Policy formulated under the said Act;

And Whereas the Himachal Pradesh Electricity Regulatory Commission has framed the

HPERC (Terms and Conditions for Determination of Hydro Generation Tariff) Regulations, 2007;

And Whereas the Central Commission has subsequently framed Central Electricity

Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2009 specifying the

principles and methodologies to be followed for determination of tariff applicable to generating

companies and various changes have also been made in the National Tariff Policy;

And Whereas the Himachal Pradesh Electricity Regulatory Commission is making an

exercise to determine the tariff for generating companies for the next control period starting from

1st April, 2011 and keeping in view National Tariff Policy and the methodologies of Central

Commission amongst others it has become necessary to amend/modify the existing regulations;

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Now, therefore, in exercise of the powers conferred by clauses (zd), (ze) and (zf) of sub-

section (2) of section 181 read with sections 61, 62 and 86, of the of the Electricity Act, 2003 (36 of

2003) and all other powers enabling it in this behalf, the Himachal Pradesh Electricity Regulatory

Commission proposes to make the following regulations for determination of generation tariff and

hereby publishes the proposed draft regulations, as required by sub-section (3) of section 181 of the

said Act, read with rule 3 of the Electricity (Procedure for Previous Publication) Rules, 2005, for

the information of all the persons likely to be affected thereby; and notice is hereby given that the

said draft regulations will be taken into consideration, after the expiry of 21 days from the date of

their publication in the Rajpatra, Himachal Pradesh, together with any objections or suggestions

which may within the aforesaid period be received in respect thereto.

The objections or suggestions in this behalf should be addressed to the Secretary, Himachal

Pradesh Electricity Regulatory Commission, Keonthal Commercial Complex, Khalini,

Shimla-171002.

DRAFT REGULATIONS

PART-I

PRELIMINARY

1. Short title, extent and commencement.—(1) These regulations shall be called the

Himachal Pradesh Electricity Regulatory Commission (Terms and Conditions for Determination of

Hydro Generation Tariff) Regulations, 2011.

(2) These regulations shall extend to the whole of the State of Himachal Pradesh.

(3) These regulations shall come into force with effect from 1st April 2011.

2. Scope and application.—(1) These regulations shall apply in all cases where tariff for a

generating station or a unit thereof is to be determined by the Commission under section 62 of the

Act read with section 86 thereof.

(2) Where power purchase agreement has been executed between the generating company

and the utility before existence of the Commission, the Commission shall determine such tariff in

accordance with the terms and conditions of such power purchase agreement.

(3) Where power purchase agreement has been executed between the generating company

and the utility after existence of the Commission and the power purchase agreement has been

approved by the Commission, the Commission shall determine such tariff in accordance with the

terms and conditions of such approved power purchase agreement.

(4) Where tariff has been determined through 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. Definitions.—In these regulations, unless the context otherwise requires, -

(1) “Act” means the Electricity Act, 2003 (36 of 2003);

(2) “additional capitalisation” means the capital expenditure incurred or projected to be

incurred, after the date of commercial operation of the project and admitted by the Commission

after prudence check, subject to the provisions of regulation 13;

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(3) “Appendix” means the appendix to these regulations;

(4) “applicant” means a generating company who has made an application for

determination of tariff or an application for annual performance review in accordance with the Act

and under these regulations and includes a generating company whose tariff is the subject of a

review by the Commission either suo motu or on a petition filed by any interested or affected

person or as part of an annual performance review;

(5) “auxiliary energy consumption” or “AUX” in relation to a period means the quantum

of energy consumed by auxiliary equipment of the generating station, and transformer losses within

the generating station, expressed as a percentage of the sum of gross energy generated at the

generator terminals of all the units of the generating station;

(6) “base year” means the financial year immediately preceding the first year of the control

period;

(7) “beneficiary” in relation to a generating station means the person purchasing electricity

generated at such a generating station whose tariff is determined under these regulations;

(8) “capital cost” means the capital cost as defined in regulation 11;

(9) “Central Commission” means Central Electricity Regulatory Commission as referred

to in sub-section(1) of section 76 of the Act;

(10) “change in law” means occurrence of any of the following events.—(a) the enactment,

bringing into effect, adoption, promulgation, amendment, modification or repeal of any law, or

(b) change in interpretation of any law by a competent court, Tribunal or Indian

Governmental Instrumentality which is the final authority under law for such interpretation, or

available or obtained for the project;

(11) “Commission” means the Himachal Pradesh Electricity Regulatory Commission as

referred to in sub-section(1) of section 82 of the Act;

(12) “conduct of business regulations” means the Conduct of Business Regulations

specified by the Commission under sub-section (1) of section 92 of Act;

(13) “control period” means a multi-year period fixed, by the Commission, from time to

time, for which the principles of determination of revenue requirement and tariff will be laid down;

(14) “cut-off date” means 31st March of the year closing after two years of the year of

commercial operation of the project, and in case the project is declared under commercial operation

in the last quarter of a year, the cut-off date shall be 31st March of the year closing after three years

of the year of commercial operation;

(15) “date of commercial operation” or “COD” means in relation to a unit of hydro

generating station, the date declared by the generating company from 0000 hour of which, after

notice to the beneficiaries, scheduling process in accordance with the Indian Electricity Grid Code

and/or the Himachal Pradesh Electricity Grid Code is fully implemented, and in relation to the

generating station as a whole, the date declared by the generating company after demonstrating

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peaking capability corresponding to installed capacity of the generating station through a successful

trial run, after notice to the beneficiaries:

Note.—1. In case the hydro generating station, with pondage or storage, is not able to demonstrate

peaking capability corresponding to the installed capacity for the reasons of insufficient reservoir or

pond level, the date of commercial operation of the last unit of the generating station shall be

considered as the date of commercial operation of the generating station as a whole, provided that it

will be mandatory for such hydro generating station to demonstrate peaking capability equivalent to

the installed capacity of the generating unit or the generating station as and when such reservoir

/pond level is achieved.

2. In case of purely run-of-river hydro generating station if the unit or the generating

station is declared under commercial operation during lean inflows period when the water is not

sufficient for such demonstration, it shall be mandatory for such hydro generating station or unit to

demonstrate peaking capability equivalent to the installed capacity as and when sufficient inflow is

available.

(16) “day” means the 24 hour period starting at 0000 hour;

(17) “declared capacity” or “DC' in relation to a generating station means, the capability

to deliver ex-bus electricity in MW declared by such generating station in relation to any time-

block of the day or whole of the day, duly taking into account the availability of water, and subject

to further qualification in the relevant regulation;

(18) “design energy” means the quantum of energy which could be generated in a 90%

dependable year with 95% installed capacity of the hydro generating station;

(19) “existing station” means a hydro generating station declared under commercial

operation from a date prior to 01.04.2011;

(20) “existing project” means a project declared under commercial operation from a date

prior to 01.04.2011;

(21) “financial year” means a period commencing on 1st April of a calendar year and

ending on 31st March of the subsequent calendar year;

(22) “infirm power” means electricity generated prior to commercial operation of the unit

of a hydro generating station;

(23) “installed capacity” or “IC” means the summation of the name plate capacities of all

the units of the generating station or the capacity of the generating station (reckoned at the

generator terminals) as approved by the Commission from time to time;

(24) “new station” means a hydro generating station declared under commercial operation

on or after 01.04.2011;

(25) “Normative Annual Plant Availability Factor” or “NAPAF” in relation to a

generating station means the availability factor specified in clause (a) of subregulation (1) of

regulation 23 for hydro generating station;

(26) “original project cost” means the capital expenditure incurred by the generating

company within the original scope of the project up to the cut-off date as admitted by the

Commission;

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(27) “Plant Availability Factor (PAF)” in relation to a generating station for any period

means the average of the daily declared capacities (DCs) for all the days during that period

expressed as a percentage of the installed capacity in MW reduced by the normative auxiliary

energy consumption;

(28) “project” means a hydro generating station and includes the complete hydro power

generating facility covering all components such as dam, intake, water conductor system, power

generating station and generating units of the scheme as apportioned to power generation;

(29) “run-of-river power station” means a hydro electric power generating station which

does not have upstream pondage;

(30) “run-of-river power station with pondage” means a hydro electric power generating

station with sufficient pondage for meeting the diurnal variation in power demand;

(31) “scheduled energy” means the quantum of energy scheduled by the State Load

Despatch Centre to be injected into the grid by a generating station over a day;

(32) “scheduled generation” or “SG” at any time or for any period or time-block means

schedule of generation in MW or MWh ex-bus, given by the concerned Load Despatch Centre;

(33) “storage type power station” means a hydro electric power generating station

associated with large storage capacity to enable variation of generation of power according to

demand;

(34) “State” means the State of Himachal Pradesh;

(35) “unit” in relation to a hydro generating station means turbine-generator and its

auxiliaries;

(36) “useful life” in relation to a unit of a hydro generating station shall be 40 years from

the COD;

(37) “year” means a financial year;

(38) the words and expressions used and not defined in these regulations but defined in the

Act shall have the meanings respectively assigned to them in the Act.

PART-II

GUIDING PRINCIPLES

4. General Approach.—(1) 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 noncompliance shall lead to such

amendment, revocation, variations and alterations of the tariff, as may be ordered by the

Commission.

(2) 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 generating

company to file the aggregate revenue requirement (ARR) under Part-V, the tariff determined by

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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.

5. Multi Year Tariff (MYT) Framework.—(1) The Commission shall adopt multi year

tariff framework for determination of tariff for each year of the control period.

(2) The multi year tariff framework shall be based on the following:—

(a) Business plan (with plant-wise details) for the entire control period, which the

applicant shall submit to the Commission for approval, prior to the beginning of

the control period;

(b) Forecast of expected tariff for sale of power which shall be submitted by the

generating company (plant-wise) for each year of the control period, based on

reasonable assumptions of the underlying financial and operational parameters, as

submitted in the business plan;

performance of the applicant is sought to be improved through incentives and

disincentives;

6. Determination of Baseline.—(1) The baseline values (operating and cost parameters)

for the control period shall be determined by the Commission, based on previously approved

values, the latest audited accounts, estimate of the actuals for the relevant year, prudence check and

other factors considered appropriate by the Commission.

(2) The Commission shall normally not revisit the performance targets even if the targets

are fixed on the basis of un-audited accounts.

7. Capital Investment.—Subject to the provisions of the Act, and the rules and policies

made thereunder, the Commission shall approve the capital investment plan of a generating

company for the control period commensurate with generation capacity growth. The investment

plan shall also include a capitalisation schedule and financing plan for the planned investment.

Adjustment for the actual capital investment vis-à-vis approved capital investment shall be done at

the end of the control period.

8. Performance Targets.—(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) Normative Annual Plant Availability Factor;

(b) Auxiliary energy consumption;

and maintenance expenses, administration and general expenses and other

miscellaneous expenses viz. audit fees, rents, legal fees etc;

(d) Financing cost which includes cost of debt including working capital (interest), cost

of equity (return); and

(e) Depreciation.

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(2) The Commission will normally not revisit the performance targets, once determined

even if the targets are fixed on the basis of un-audited accounts.

9. True Up.—(1) The true up across various controllable parameters shall be conducted as

per principles stated below.—

(a) any surplus and deficit on account of O&M expenses shall be to the account of the

generating company 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-à-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.

(2) 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 laid down in the order of the Commission.

10. Refund of excess amount.—If a generating company recovers the charges exceeding

the tariff determined by the Commission, the excess amount shall be refunded to beneficiaries, who

have paid such excess charges, alongwith interest equal to the prevalent Short Term Prime Lending

Rate of the State Bank of India, without prejudice to any other liability incurred by such licensee.

PART-III

PRINCIPLES FOR DETERMINATION OF HYDRO GENERATION TARIFF

11. Capital cost of project.—(1) Capital cost for a project shall include-

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

construction and financing charges, any gain or loss on account of foreign exchange

risk variation during construction on the loan - (i) being equal to 70% of the funds

deployed, in the event of the actual equity in excess of 30% of the funds deployed, by

treating the excess equity as normative loan, or (ii) being equal to the actual amount of

loan in the event of the actual equity less than 30% of the funds deployed, - up to the

date of commercial operation of the project, as admitted by the Commission, after

prudence check;

(b) capitalised initial spares subject to the ceiling norms as per regulation 12 of 1.5% of

original project cost for hydro plants;

Provided that the assets forming part of the project, but not in use, shall be taken out of the

capital cost.

(2) The capital cost admitted by the Commission, after prudence check, shall form the

basis for determination of tariff:

Provided that in cases where benchmark norms have not been specified, prudence check

may include scrutiny of the reasonableness of the capital expenditure, financing plan, interest

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during construction, use of efficient technology, cost over-run and time over-run, and such other

matters as may be considered appropriate by the Commission for determination of tariff:

Provided further that the Commission may issue guidelines for vetting of capital cost of

hydro-electric projects by independent agency or expert and in that event the capital cost as vetted

by such agency or expert may also be considered by the Commission while determining the tariff

for the hydro generating station:

Provided further that the Commission may issue guidelines for scrutiny and approval of

commissioning schedule of the hydro-electric projects of a developer (not being a State controlled

or owned company) as envisaged in the tariff policy:

Provided further that in case the site of a hydro generating station is awarded to a developer

(not being a State controlled or owned company) by the State Government by following a two stage

transparent process of bidding, any expenditure incurred or committed to be incurred by the project

developer for getting the project site allotted shall not be included in the capital cost:

Provided further that the capital cost in case of such hydro generating station shall include -

(a) cost of approved rehabilitation and resettlement (R&R) plan of the project in con-

formity with R&R Policy and R&R package as approved by State Government; and

(b) cost of the developer’s 10% contribution towards Rajiv Gandhi Grameen Vidyutikaran

Yojana (RGGVY) project in the affected area:

Provided further that where the power purchase agreement entered into between the

generating company and the beneficiaries provide for ceiling of actual expenditure, the capital

expenditure admitted by the Commission shall take into consideration such ceiling for

determination of tariff:

Provided further that in case of the existing projects, the capital cost admitted by the

Commission prior to 01.04.2011 and the additional capital expenditure projected to be incurred for

the respective years of the control period, as may be admitted by the Commission, shall form the

basis for determination of tariff.

12.

Initial Spares.—For hydro generating stations, initial spares shall be capitalised as a

percentage of the original project cost, subject to the ceiling norm of 1.5%:

13.

Additional Capitalisation.—(1) The capital expenditure incurred or projected to be

incurred, on the following counts within the original scope of work, after the date of commercial

operation and up to the cut-off date, may be admitted by the Commission, subject to prudence

check:—

(a) Undischarged liabilities;

(b) Works deferred for execution;

provisions of regulation 12;

(d) Liabilities to meet award of arbitration or for compliance of the order or decree of a

court; and

(e) Change in law:

Provided that the details of works included in the original scope of work, along with

estimates of expenditure, undischarged liabilities and the works deferred for execution, shall be

submitted along with the application for determination of tariff.

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(2) The capital expenditure incurred on the following counts after the cut off date may, in

its discretion, be admitted by the Commission, subject to prudence

check,:-

(a) liabilities to meet award of arbitration or for compliance of the order or decree

of a court;

(b) change in law;

natural calamities (but not due to flooding of power house attributable to the

negligence of the generating company) including due to geological reasons after

adjusting for proceeds from any insurance scheme, and expenditure incurred due

to any additional work which has become necessary for successful and efficient

plant operation:

Provided that in any expenditure on acquiring the minor items or the assets like tools and

tackles, furniture, air-conditioners, voltage stabilizers, refrigerators, coolers, fans, washing

machines, heat convectors, mattresses, carpets etc. brought after the cut-off date shall not be

considered for additional capitalization for determination of tariff w.e.f. 1.4.2011.

14. Renovation and Modernisation.—(1) The generating company for meeting the

expenditure on renovation and modernization (R&M) for the purpose of extension of life beyond

the useful life of the generating station or a unit thereof shall make an application before the

Commission for approval of the proposal with a Detailed Project Report giving complete scope,

justification, cost-benefit analysis, estimated life extension from a reference date, financial

package, phasing of expenditure, schedule of completion, reference price level, estimated

completion cost including foreign exchange component, if any, record of consultation with

beneficiaries and any other information considered to be relevant by the generating company.

(2) Where the generating company makes an application for approval of its proposal for

renovation and modernisation, the approval shall be granted after due consideration of

reasonableness of the cost estimates, financing plan, schedule of completion, interest during

construction, use of efficient technology, cost-benefit analysis, and such other factors as may be

considered relevant by the Commission.

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

after prudence check based on the estimates of renovation and modernization expenditure and life

extension, and after deducting the accumulated depreciation already recovered from the original

project cost, shall form the basis for determination of tariff.

15. Sale of Infirm Power.—Supply of infirm power shall be accounted as Unscheduled

Interchange (UI) and paid for from the regional or State UI pool account at the applicable

frequency-linked UI rate:

Provided that any revenue earned by the generating company from sale of infirm power

shall be applied for reduction in capital cost.

16. Debt-Equity Ratio.—(1) Existing Stations:

(a) For existing generating stations the amount of loan capital shall be equal to the

sum of the outstanding balance of all long term loans taken to finance the gene-

rating station, at the commencement of the financial year for which tariff is to

be determined, as reflected in the tariff orders of the Commission.

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(b) The equity capital shall be taken as specified by the generating company, subject to

prudence check by the Commission.

only after prior approval by the Commission, and would have a debt-equity ratio of 70:30.

(2) New Stations:

(a) For new stations, the normative debt-equity ratio shall be considered to be 70:30 for

determination of tariff.

(b) In case of a generating station where equity employed is more than 30%, the amount

of equity for determination of tariff shall be limited to 30% and the balance amount

shall be considered as the normative loan.

actual debt and equity shall be considered for determination of tariff:

Provided that the equity invested in foreign currency shall be designated in Indian rupees on

the date of each investment.

(3) Renovation and Modernisation.—Any approved capital expenditure incurred on

renovation, modernisation, replacement or extension of life of existing generating assets shall be

considered to be financed at a normative debt-equity ratio of 70:30. In case the amount of equity is

less than 30%, the actual debt-equity ratio shall be considered.

(4) The debt and equity amounts arrived at in accordance this regulation shall be used for

calculating interest on loan, return on equity, advance against depreciation and foreign exchange

rate variation.

17. Interest and Finance Charges.—(1) Interest and finance charges on loan capital