The B

PUBLI

(NO.PATNA 298) PA

BIHAR ELEC

No. Case No. B

conferred under section

all other powers enab

Regulatory Commission

SHORT TITLE, C

1.1

This Regulation s

Commission (Pow

1.2

These Regulations

1.3

These Regulation

publication in the

APPLICABILITY O

These Regulations

operating in Bih

Generating Comp

also undertakes b

application for det

application for an

Regulations notifi

DEFINITIONSAND

3.1

In these Regulatio

REGISTERED

Bihar Gazett

XTRA ORDINARY

SHED BY AUTHORITY

13 CHAITRA 1940(S)

ATNA, TUESDAY, 3RD APRIL 20

CTRICITY REGULATORY COMMISSION

————

NOTIFICATION

The 2^nd April 2018

BERC/SMP-31/2017-05––In exercise

n 181 of the Electricity Act 2003 (36 of

bling it in this behalf, the Bihar

n makes the following Regulations.

CHAPTER-I

COMMENCEMENT AND EXTENT

shall be called the ‘Bihar Electricity R

wer Regulatory Accounting) Regulatio

s shall extend to the whole state of Biha

ns shall come into force from the d

e Official Gazette of the Government of B

OF THE REGULATIONS

s shall be applicable to all the regulat

har and include Licensees, deemed

panies, their successors and where an

business of generation of electricity an

termination of tariff under section 64 of

nnual performance review under applic

ed by the Commission.

D INTERPRETATION

ons, unless the context otherwise requir

NO. PT.-40

tetetete

018

of powers

2003) and

Electricity

Regulatory

ons, 2018;

ar;

date of its

Bihar;

ted entities

licensees,

ny Licensee

nd submits

f the Act or

cable Tariff

res-

BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

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

amendments thereto;

“Accounting Statement/Annual Accounts” means for

each financial year:

(i)

The Balance sheet, prepared in accordance with the

form contained in Part I of Schedule III to The

Companies

Act,

2013

and

its

predecessors

successors in case of Company incorporated under

Companies Act; and in other case form contained in

Electricity Act, 2003 or rules made or referred therein in

this regard.

(ii) Cash flow statement, prepared in accordance with the

Accounting Standard on Cash Flow Statement as

notified

the

Central

Government

within

the

provisions of section 133 of The Companies Act, 2013

and its predecessors or successors.

(iii) Cost Accounting Records prescribed by the Central

Government under section 148 of The Companies Act,

2013 and its predecessors or successors.

(iv) Notes on accounts thereto, and such other

supporting statements and information forming part

of financial statements or as the Commission may direct

from time to time.

(v) Statement of Profit and loss or Revenue Account,

complying with the requirements contained in Part II of

Schedule III to The Companies Act, 2013 and its

predecessors or successors in case of Company

incorporated under Companies Act; and in other case

form contained in Electricity Act, 2003 or rules made or

refereed therein in this regard..

(vi) Report of the statutory auditors and Comptroller and

Auditor General, including any annexure and appendix

thereto.

(vii) Any or all the formats as notified by the Commission

under these regulations for Tariff Regulation including

Multi Year Tariff Regulations pertinent to the relevant

year. Provided that in case of any local authority

engaged in the business of distribution of electricity, the

Accounting Statement shall mean the items, as

mentioned

above,

prepared

and

maintained

accordance with the relevant Acts and Statutes as

applicable to such local authority;

“Appropriate Government” means,-

(i)

The Central Government :-

a. In

respect

provisions

relating

The

Companies Act, 2013 (18 of 2013) as amended

from time to time and includes its successors.

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

b. In terms of the meaning provided in The Electricity

Act, 2003 (36 of 2003) as amended from time to time

and includes its successors.

(ii) In any other case, the Government of Bihar having

jurisdiction under the Act.

4) “Audit/Auditor” means every Entity, to which these

Regulations apply, shall arrange to conduct Audit and

appoint an auditor who is qualified for appointment as an

auditor under sections 139 and 148 of The Companies Act,

2013 and its predecessors or successors. The Auditor under

these regulations shall include any Auditor appointed by

Comptroller and Auditor General of India.

“Authority” means "Central Electricity Authority”, referred

to in subsection (1) of section 70 of the Act.

“Commission”

means

Bihar

Electricity

Regulatory

Commission, established under sub-section (1) of section 82

of the Act.

“Central Commission” means Central Electricity Regulatory

Commission established referred to sub-section (1) of Section

76 of the Act.

“Comptroller and Auditor General” means “Comptroller

and Auditor General of India” under article 148 of the

Constitution of India.

“Entity” means and includes a Utility, Undertaking,

Enterprise, Company including a Government Company in

terms of section 2(45) of The Companies Act,2013,local

authority or an organisation, etc. to which these regulations

are applicable.

10) “Financial Year” means the period coinciding with the

financial year for the Purpose of determination of tariff, i.e.,

presently the period commencing on first day of April of a

calendar year and ending on last day of the March of the

subsequent calendar year.

11) “MYT Regulations” means the Multi Year Tariff Regulations

including Tariff Regulations as notified by the Commission

pertinent to the relevant year which shall

form

part

Annexure/Appendixes for these Regulations.

12) “Licence” means a licence granted under Section 14 of

the Act to undertake Transmission, Distribution and/or

Trading of Electricity in the concerned area of Bihar. 13)

“Licensee” or “License Holder” means a person licensed

under section 14 of the Act and includes “deemed licensee”

under section 12 of the Act.

14) “Licensed Business” means the function and activities,

which the Licensee is required to undertake in terms of the

Licence granted or being a deemed Licensee under the Act.

15) “Regulations” means these regulations;

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

16) “Regulatory Accounts” means the regulatory accounts duly

audited by the auditor within the meaning of sub-clause 4

of clause 3 of these regulations, of the Licensee/Entity that

contain all the financial and non-financial information

including

the

filled

formats

appended

these

Regulations and cover the activities which include without

limitation

the

Statutory

Accounts

prepared

under

Companies Act, 2013 or any other law applicable to the

Entity.

17) “Regulated Business” means the business regulated by the

Commission within the provisions of Act.

18) “Officer” means an Officer of the Commission.

19) “Other Business” has the meaning in terms of Section 41

and 51of the Act.

3.2 Words and expressions used and not defined in these Regulations

but defined in the Electricity Act, 2003 or in The Companies Act,

2013 (18 of 2013) or in or any other law relevant to these

regulations as amended from time to time or respective successors

of these Acts, shall have the meanings respectively assigned to

them in these Acts. In case of any inconsistency in meaning of

words and expressions in any of acts, the meaning and expression

within the Electricity Act, 2003 shall prevail over others.

3.3

These regulations shall be interpreted and implemented in

accordance with, and not at variance from, the provisions of the

Electricity Act, 2003 and its amendments thereof read with

regulations in this regard made by the Central Commission and/or

Authority;

CHAPTER-II

ACCOUNTING MANUAL AND ACCOUNTING TREATMENT

PREPARATION OF ACCOUNTING MANUAL

4.1

Every Entity shall make a manual containing the following :-

(i)

Definition of terms used in the manual.

(ii)

Introduction of the Entity.

(iii)

An overview of the organizational structure of Entity.

(iv)

A clear categorization of the regulated and unregulated

activities of the Entity with further segregation of regulated

activities

covered

under

than

one

Regulatory

Commission.

(v)

A list of the entities within the Group, relationship of the

Entity with other Group Companies or Subsidiaries or

related parties in terms of common resources, etc.;

(vi) An overview of the financial accounting system, which may

include policies relating to treating an expense item as major

or minor, capitalization, depreciation, return on equity,

various deposits including security deposits, provision for

bad and doubtful debts, apportionment of common assets,

common liabilities, common expenses and common revenue,

etc., with respect to the regulatory accounts;

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

(vii) Description of the treatment of related party transactions,

allocation of common expenses and allocation of jointly used

assets;

(viii) Products, services or geographical areas which shall be

treated as separate segments while preparing regulatory

accounts;

(ix)

Segmentation of regulated business

Generation – Hydro, Thermal, Gas, Renewable, Nuclear

or any other.

Transmission

State Load Despatch Centre (SLDC)

Distribution – Wheeling & Retail Supply business and

Trading

Further, in case any of the above Regulated business is

carried out in more than one State and/or Union

Territory (U.T.), State/ U.T. wise segmentation of the

Regulated businesses shall be provided. Further, in

case Transmission and/or Distribution of electricity is

carried out under separate Transmission, Distribution

and/or Trading Licence within the same State/ U.T,

Licence

wise

segmentation

Transmission,

Distribution, Wheeling and/or Trading Business shall

be provided.

(x)

Account heads for every type of regulated entity to be given

in the manual.

(xi)

Accounting System followed for each segment of the

regulated business, report in serial number (ix) above, and

recording of the accounting separation information and

reports, including list of cost and profit centres, linkages of

financial heads to cost and profit centres;

(xii) Description of studies, surveys and model employed in cost

apportionment and allocation process;

(xiii) Procedure for maintenance and updating manual.

4.2 The copy of the manual shall be filed before the Commission

within the prescribed time frame from the date of publication of

Regulations in this regard by the Commission.

All subsequent changes in the manual, together with the reasons

thereof shall be submitted to the Commission.

PERIODICITY OF SUBMISSION OF REGULATORY ACCOUNTS-

5.1 The Licensee or the Generation Company shall submit the

Regulatory Audited Accounts (including the accounting manual)

every year within seven months of the end of Financial Accounting

year to the Commission in accordance with the formats as defined

under

Accounting

Statement/Annual

Accounts

and

MYT

Regulations as provided in Section 3 of these regulations.

5.2

The periodicity of submission of Regulatory Accounts for certain

specific formats shall be as per the frequency mentioned on the

format.

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

5.3

The Reports referred to shall be submitted in hard copy and in soft

copy in Spreadsheet/relevant format along with its formulae and

linkage.

5.4 The accounting year shall be same as followed by the entity for

preparation of the annual financial accounts under section 2(45) of

The Companies Act, 2013 and its amendments thereof.

Provided that, if accounting year exceeds fifteen calendar

months, the entity shall submit the reports in two parts – one part

comprising report of twelve months and the second part

comprising of balance period.

AUDIT

6.1

Every entity, to which these Regulations apply, shall arrange to

conduct audit and appoint an auditor who is qualified for

appointment as an auditor under sections 139 and 148 of The

Companies Act, 2013 to audit the reports prepared by the Entity

under these regulations and obtain an Audit Report from the

Auditor, including the Auditor appointed by Comptroller and

Auditor General of India.

6.2

The Auditor shall audit the Reports defined under Accounting

Statement/Annual Accounts of Section 3 of these Regulations and

others, if any prepared by the Entity under these regulations.

6.3

The Auditor in his report shall express an opinion as to whether

the Regulatory Accounts have been prepared in accordance with

these Regulations and the applicable Tariff Regulations and he has

received all information and explanation necessary for the purpose

of audit as per format as at Appendix - I to these regulations.

6.4

Auditor shall in particular report the following:

Allocation of manpower cost to capitalised assets in Balance

sheet and its exclusion from Operations & Maintenance

expenses in Profit & Loss Account.

Schedule of asset wise capitalisation.

Schedule of asset wise depreciation.

Asset

wise

break-up

all

fixed

assets

(Annexure)

(separately for all tariff categories)

All items where Commission seeks breakups for Tariff

order/auditors’ certificates on periodic basis.

Breakup of assets/expenses for wheeling/supply.

Breakup of capital cost/expense for various voltages.

Break up of assets/expenses for various categories of

consumers.

Break up of Power Purchase Cost, Power/fuel Purchase

Adjustment Cost, etc.

Break up of any surcharge as determined by the

Commission.

Statement on source of financing and amortization of

Regulatory Asset created through revenue Gap, Loan

utilisation certificate for all the loans availed by the licensee

during the relevant year duly reconciled with statutory books

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

of accounts. Purpose of loan may broadly be classified into

four major categories:-

Loan availed for CAPEX, which has been capitalized during

the same year.

Loan availed for CAPEX and included in WIP.

Working Capital Loan

Any other loan except the above three categories – Specify.

6.5 The Commission may at any time, conduct audits of regulated

entities in accordance with the Act, Rules, Regulations made

thereunder, orders and directions issued by the Commission.

MAINTENANCE OF INFORMATION

7.1

Every Licensee or Generation Company shall maintain segregated

financial, operational and accounting with supporting vouchers

and journal entries including Allocation Statement based on actual

in respect of the Regulated Business and Other Business.

Explanation 1.— The accounting and reporting arrangements shall be

maintained in such a manner that they can be verified at final accounts

level. Data maintained in the formats as specified by the Commission

shall provide information in the most understandable manner, without

sacrificing relevance or reliability.

Explanation 2.— For normative figures in Regulatory Accounts, such as

Interest on Working Capital, Interest on Normative Loans, if any,

Depreciation, Operation and Maintenance Expenses, etc. the information

as specified in the formats shall be maintained separately.

7.2

Notwithstanding the above, the Commission may direct that more

detailed information may be required to be maintained by every

Licensee or Generating Company for their Licensed/ Regulated

businesses.

BASIS OF PREPARATION

8.1 Every Licensee or Generation Company shall prepare the

Regulatory Accounts under the Historical Cost Convention in

accordance with the provisions of the Act and the Regulations

notified by the Commission from time to time, Generally Accepted

Accounting Principles in India, applicable Accounting Standards as

notified by the Central Government within the provisions of section

133 and other relevant provisions of the Companies Act, 2013 and

its amendments thereof as well as rules made or refereed under

the Act in this regard, wherever applicable. Where there is an

inconsistency between the above mentioned principles, etc.

and/the Act or the Regulation notified by the Commission,

treatment of items in the Regulatory Accounts shall be given as per

these Regulations notified by the Commission.

8.2 The Licensee or Generation Company shall follow the Accounting

Policies for Regulatory Accounts while preparing the Regulatory

Accounts in specified formats. In case the Statement of Profit &

Loss or Revenue Account, the Balance Sheet and Cash Flow

Statement do not comply with any of the Accounting Standards

and these regulations, a disclosure to the effect shall be made in

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

notes to accounts, including the deviation from the Accounting

Standard and these regulations, reasons for such deviation and

the financial effect of the same.

ACCOUNTING POLICIES FOR REGULATORY ACCOUNTS

9.1

Fixed Assets :-

Value of Fixed Assets shall be stated at cost or as per

Government Transfer Scheme pursuance to unbundling of

erstwhile BSEB or its predecessors and successors subject

to adoption by the Commission for the purpose of Tariff

determination.

ii.

In case of transfer of one entity to another, Fixed Assets

shall be carried at Historic Cost/cost allowed by the

Commission.

iii.

Addition to the fixed assets shall be stated at cost of

acquisition or construction including any cost attributable

to bringing the assets to their working condition for their

intended use and actually put to use for the benefit of

consumers (subject to certain exceptions like machine

spares, etc.), as allowed by the Commission. The date on

which the asset is put to use shall be the Commercial

Operation Date (COD) of the last Unit of the Generating

Station

for

Generation

Company

the

date

commissioning of the asset/ synchronisation of the asset

with the rest of the network for an Entity.

iv.

The Entity Licensee shall separately indicate the addition of

fixed assets in respect of renovation and modernization of

fixed assets resulting in increase in life and/or efficiency of

existing assets

Provided that, where any special allowance has been

claimed for renovation and modernization of any fixed

asset, in accordance with any Regulations notified by the

Commission, the Entity shall separately indicate the addition

of fixed assets in respect of renovation and modernization of

such fixed assets.

vi.

All Grants received from Central Government or any State

Government including Government of Bihar or any other

source and Consumer Contribution received from consumers

for capital expenditure shall be classified as Grant which has

already been utilized for creation of Fixed Assets, Capital

Work in Progress and Balance amount of Grant to be

utilized; and Grant which has already been utilised for

creation of Fixed Assets shall further be classified assets

wise separately in the same line in which schedule of Fixed

Assets is maintained namely Gross Amount, Accumulated

Amortization and Net Amount. In case grants from Central

Government or State Government or any other source are

received for capital expenditure with conditions incidental

thereto, which require the generation company or the

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

Licensee to achieve certain milestones, such grants shall be

classified as Grant which has already been utilized for

creation of Fixed Assets, Capital Work in Progress and

Balance amount of Grant to be utilized; and Grant which

has already been utilised for creation of Fixed Assets shall

further be classified assets wise separately in the same line

in which schedule of Fixed Assets is maintained namely

Gross Amount, Accumulated Amortization and Net Amount

after achieving the milestones. Till that time, the amount

received shall be shown under separate head in the

Regulatory Accounts. Further, if the Commission directs, the

Entity shall also be required to provide the asset wise break

up of cost (consisting of base cost, interest during

construction, incidental expenditure during construction

and other cost, if any), asset wise liability incurred, asset

wise accumulated depreciation charged till date, and asset

wise depreciation charged in the Financial Accounting Year

for the purpose of Regulatory Accounts.

via. All Grants received from Central Government or any State

Government including Government of Bihar or any other

source for Liquidation of Loans or Liabilities whatever in

nature used or to be used for creation of capital assets,

firstly be classified the amount of Loans and Liabilities which

has been utilized for creation of Fixed Assets, Capital Work

in Progress, Balance amount in hand to be utilized and

treatment of Grant received for Liquidation of Loans or

Liabilities shall be done as per 9.1(vi) above.

vii.

Fixed assets which do not have the approval of the

Commission shall be shown separately in the fixed assets

schedule. Appropriate justification for necessity of such fixed

assets shall be given in the Notes to the Regulatory

Accounts. The Entity shall capitalise assets to be charged, at

any voltage including high voltage or extra high voltage after

getting the certificate from the Electrical Inspector in

accordance with Rule 63 of the Indian Electricity Rules,

1956.

viii. Where the Commission has given year wise approval for

capitalization in the beginning of MYT Control Period, such

amount shall be shown separately in the notes to the

Regulatory Accounts.

ix.

Amount of spares capitalized & its percentage in the cost of

fixed assets shall be shown separately in the notes to the

Regulatory Accounts.

Un-discharged liability shall be shown in the Fixed Asset

schedule.

xi.

Variance analysis between actual capitalisation as claimed

by entity and the capitalization approved by the Commission

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

shall be shown in separate schedule/notes to schedule along

with reasoning justifying the variance.

xii.

In case of generation utilities, income from sale of

infirm power prior to the date of commissioning, after

accounting for the fuel charges (both primary fuel charges

and secondary fuel charges) shall be reduced from fixed

assets and the adjustment shall be shown in the fixed assets

schedule.

xiii. Amount of capitalisation carried out in pursuance to

arbitration, court order, and change in law shall be shown

separately in notes to the fixed assets schedule.

xiv. Details such as gross block, depreciation for the year,

accumulated depreciation and net block shall be provided for

each of the above mentioned items.

xv.

Fixed assets common to more than one Business of the

Licensee or generation company shall be apportioned

between the different Businesses based on the Allocation

Principles as appended to the Regulations.

xvi. Any

expenditure

replacement,

renovation

and

modernization or extension of life of old fixed assets shall be

considered after writing off the gross value of such

replaced/de-capitalised fixed assets from the original capital

cost, except for the assets that have been entirely funded out

of grants or consumer contribution, where the original asset

would be shown at zero value. Specific debt, if any,

outstanding corresponding to the replaced old asset shall be

deducted from the debt outstanding in the Regulatory

Accounts, to the extent set off by sale of old replaced asset as

scrap.

xvii. Any revaluation of fixed assets shall be classified assets wise

separately in the same line in which schedule of Fixed Assets

is maintained namely Gross Appreciated Value, Accumulated

Depreciation on Appreciated Value and Net Appreciated

Value.

9.2

Capital work in Progress:- The Capital Work in progress

shall be stated at cost inclusive of all direct and proportionate

overhead costs incurred.

9.3

Depreciation :-

Depreciation on fixed assets in the Regulatory Accounts shall

be charged as per the Tariff Regulations notified by the

Commission.

ii.

All Fixed assets, except land, which is a non-depreciable

asset, shall be depreciated up to 90% of the original cost, on

straight line method, at rates prescribed under Tariff

Regulations notified by the Commission for the relevant

year.

iii.

In case of the fixed assets added during the year, pro-rata

depreciation shall be allowed for the first year.

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

iv.

Depreciation shall continue only till writing off of 90% of the

original cost of the fixed asset or till the asset is permanently

ceases to be in use, whichever is earlier.

In case of replacement of an old asset, the accumulated

depreciation corresponding to the asset shall also be

deducted from the total accumulated depreciation.

9.4 Advance against Depreciation :- Advance against Depreciation,

shall not be allowed. However, if any amount is allowed, it shall be

shown in Regulatory Accounts in accordance with the appropriate

provisions of Tariff Regulations issued by Commission for the

relevant year.

9.5

Expenditure on Project Identification, Survey and Feasibility

Studies :-

Expenditure incurred on identification, survey and feasibility

studies

project,

having

prior

approval

the

Commission, before the project is considered for sanction or

rejection shall be accumulated in an account provided for

this purpose. Prior approval of Commission shall be taken

for any specific project identification.

ii.

If the project is found infeasible, the full amount of

expenditure shall be charged to revenue as in-fructuous

capital expenditure in the year in which the project is

rejected.

iii.

If the project is found feasible, it shall be submitted to the

Commission for approval. Upon approval of the Commission,

the expenditure shall be charged to Capital Work-in-progress

account for that project. Any expenditure incurred on

detailed feasibility studies etc. after a project is sanctioned

shall also be charged to the Capital work-in-progress

account for that project.

iv.

The aggregate of the expenditure incurred before and after

the sanction of the project shall be allocated to the assets

capitalized under the project based on appropriate cost

driver.

9.6 Expenses chargeable to capital works:- All the expenses, such as

Employee Expenses, Administration & General Expenses, Interest

Expenses, etc. in respect of construction of fixed asset shall be

fully charged to the cost of fixed assets. At Operational and

Maintenance cum capital location (where both capital and

Operational & Maintenance work is being carried out) only the

following expenses shall be capitalized:

Insurance on assets under construction.

ii.

Legal charges and stamp fees in connection with agreement

with capital suppliers/contractors.

iii.

Fees payable to foreign technician for capital project.

iv.

Expenses incurred for foreign technician for capital project.

Technician documentation and design charges.

vi.

Other consultancy charges directly related with project

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

vii.

Power consumed for construction.

viii.

Cost of hiring vehicles and equipments for the project.

ix.

Other costs directly related to the project, as approved by the

Commission. No part of any other administration and

general expenses, which is related to Operation and

Maintenance of existing assets, shall be charged to capital

works.

9.7

Capitalisation of Depreciation :- Depreciation on fixed assets

used for construction of other assets (e.g. depreciation on vehicles

transferred to a project, depreciation on building, furniture &

fixtures, vehicles and office equipment at the construction division

or construction circles) shall be charged to capital works.

9.8

No capitalization of losses :-

The losses incurred such as irrecoverable advances to

contractors, loss of assets or damage to assets at

construction

stage,

shortage

observed

upon

physical

verification of stores at construction division, etc, during the

construction of the fixed asset shall not be charged to the

cost of fixed assets.

ii.

Such losses shall be charged to the Statement of Profit and

Loss or Revenue Account for the year in which such losses

are incurred.

9.9

Land and Land Rights.— All expenses incurred for bringing

the land to a usable condition shall be charged to the cost of

land. An indicative list of such expenses is as follows:

Purchase price of land

ii.

Compensation for trees and crops on the acquired land

iii..

Land charges, stamp duty, etc. incurred in order to secure

effective title

iv.

Land revenue and other taxes paid during the stage of land

development

Site preparation cost such as cost of levelling of land.

vi.

Cost of demolishing as unwanted structure if the land is

acquired with structure.

vii.

Specify any other items.

Cost of land improvement having a limited life such as cost of

landscaping gardens, sidewall, fences and digging shall be

added to cost of land as “cost of land development”.

9.10 Buildings :-

All expenses incurred for bringing the building to usable

condition shall be charged to the cost of building. An

indicative list of such expenses is as follows:

a. Purchase price

b. Expenses such as legal charges, stamps duty, etc.,

incurred for securing an effective title,

c. Repairs, alteration and improvements to put building in

usable condition

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

d. Architectural

fees

for

the

building,

remodeling,

alteration, improvement before the building is first put

to use,

e. Cost of obtaining permits, sanctioned plans occupation

certificates from municipal or other bodies.

Insurance on uncompleted structure.

g. Specify any other item.

ii.

Cost of constructed building shall include the following

items:

a. Cost of construction comprising of materials, labour

charges and depreciation on construction machinery

b. Surveying

c. Cost of obtaining permits, sanctioned plans occupation

certificates from municipal or other bodies

d. Architectural fees

e. Insurance on uncompleted structure

Cost of excavation

g. Specify any other item.

9.11 Repair before commissioning of assets.— All expenses incurred

on repairs or rehabilitation of fixed assets (second hand or new)

before capitalization shall be charged to the cost of fixed assets.

9.12 Rearrangements.—All expenses on rearrangement (of plan layout,

office layout etc.) shall be charged to revenue in the year in which

the expenses are incurred.

9.13 Replacements.—Replacement can be defined as ‘substitution of

one fixed asset by another, particularly of old assets by new assets,

or of an old part by a new part.’

Expenses related to minor replacements shall be charged to

revenue as Repair and Maintenance Expenses.

ii.

Expenses related to major replacement shall be capitalized.

iii. The original cost of the replaced asset shall be

withdrawn from the cost of total assets in Regulatory

Accounts.

iv. For the purpose of Regulatory Accounts, the Generation

Company or the Licensee shall follow the same criterion for

distinguishing between major and minor replacement as

followed in the Statutory Accounts.

9.14 Piecemeal Rebuilding.—If an asset is rebuilt by replacement of its

component over a period of time instead of at one time, the criteria

fixed for ‘minor’ and ‘major’ replacements shall in such cases be

applied to the aggregate of expenditure on replacement in an asset

and accounted for accordingly.

9.15 Full write off of small and low value items :-

Full cost of all small and low value assets each costing Rs.

5,000 (Rupees five thousand only) or less shall be fully

charged to revenue in the year in which the assets are put to

use. In case of Company incorporated under Companies Act

full cost of all small and low value assets shall be fully

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

charged to revenue in the year in which the assets are put to

use as per their accounting policies applicable on statutory

accounts.

ii.

No part of the cost of such item shall therefore be included in

the cost of fixed assets nor shall any depreciation be charged

thereon.

iii.

The policy for full write-off stated shall not apply to items

included under the classification ‘furniture & fixtures’ and

‘office equipment’ exceeding Rs. 5000/- (Rupees Five

thousand only).

iv.

The accounting policy for write-off of small and low value

assets shall not apply to cost of granting each service

connection.

9.16 Piecemeal Building of Assets .—Assets may be completely built

over a considerable period of the time rather than at one time. The

cut off criteria for write-off shall in such cases be applied to the

aggregate of such expenditures and be accounted for.

9.17 Commissioning of Assets :-

All capital expenditure shall be accounted for through capital

work-in-progress accounts.

ii.

On commissioning of the assets, the expenditure shall be

transferred to appropriate fixed assets account, subject to

fulfillment of the conditions of the Commission, and/or

necessary approvals required (certificate from Electrical

Inspector in case of assets charged at high voltage or extra-

high voltage in accordance with Rule 63 of the Indian

Electricity Rules, 1956) and/or other conditions in respect of

expenditure and financing etc.; as the case may be.

9.18 Capitalization when assets are first put to use.—Assets shall be

capitalized when they are first put to use. The date on which the

asset is put to use can be the Commercial Operation Date (COD) of

the last Unit of the Generation Station for a Generation Company

or the date of the synchronisation with the rest of network for a

Transmission Licensee or a Distribution Licensee.

Assets which are ‘Commissionable’ but not actually

commissioned:

a. An asset which is installed/ constructed and is in

‘commissionable’ state, but is ‘not commissioned/put to

use’ shall not be capitalized until it is actually put to use

for the benefit of consumers, except in case of initial

spares.

b. All costs incurred on capital assets (including costs

incurred on maintaining the assets which are ready but

waiting the actual commissioning) shall be charged to

the cost of the assets.

ii.

No waiting for finishing touches:

a. Cost of an asset incurred up to the stage of

commissioning of the asset shall be capitalized when it is

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

put to use for the benefit of consumers without waiting

for any finishing touches which may not be significant in

work and value.

b. Cost of such finishing touches when completed shall be

accounted for and added to the cost of the assets

capitalized

earlier,

subject

specific

clauses

additional

capitalization

the

relevant

Tariff

Regulations of the Bihar State Regulatory Commission.

iii.

Capitalization regardless of Disputes with Contractors

a. Capitalisation shall be considered based on expenses

incurred on capital assets that have been put to use,

either on accrual basis or on cash basis, in accordance

with the Tariff Regulations of the Commission.

b. Disputes

with

contractors/suppliers

regarding

the

fulfilment of the terms and conditions of contract with

them shall not be permitted to withhold or defer

capitalization of assets concerned, provided the asset is

put to use for the benefit of consumers.

c. Cost of the assets determined on the basis of the

contract shall be capitalized by making necessary

provision by the Licensee or the Generation Company,

subject to specific clauses of additional capitalization in

the relevant Tariff Regulations of the Commission.

iv.

Escalation Claim.—Cost escalation claim made by suppliers

and contractors shall be provided to the extent the claim is

acknowledged by the Utility and cost of assets inclusive of

such provision shall be capitalized, subject to approval by

the Commission, when the asset is first put to use.

Capitalization of spare unit/service unit.—Assets which

are to be classified asspare units or service units, as

approved by the Commission shall be capitalized when they

are ‘put into usable condition’ regardless of whether they are

actually used or not.

vi.

Date/value of Acquisition not known:-

a. In case of asset scrapped or destroyed or sold for which

the date of acquisition is not known, it shall be

assumed, for the purpose of withdrawal of cost of asset

and depreciation, that the asset concerned was the

oldest asset of that type in use at that accounting unit.

b. In case of asset scrapped or destroyed or sold for which

the value of acquisition is not known, it shall be

assumed, for the purpose of withdrawal of cost of asset

and depreciation, that the salvage value of the

Scrapped or destroyed or sold shall be equal to the

salvage value of a similar asset at that accounting unit

at the time of scrapping the asset. Provided further the

licensee shall be free to produce a certificate from an

approved

“Valuer”

within

the

meaning

The

¹⁶

BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

Companies Act, 2013 or their respective successors, for

valuation of assets in this regard.

vii.

Loss of Assets: In the event of loss or destruction of assets,

the cost of such assets and the accumulated depreciation

attributable to such assets shall be withdrawn from the

value of total fixed assets and total accumulated depreciation

respectively. Liability towards the asset shall also be

adjusted.

viii. Write-off of Loss: Excess of the written down value of the

lost or destroyed assets over the amount of insurance claim

granted shall be charged to revenue in the year in which the

insurance claim is settled.

ix.

Capital spares at generating station:-

a. The capital spares at generating stations to the extent

allowed in the Tariff Regulations notified by the

Commission shall be treated as capital assets.

b. No accounting shall be done at the time of issue of

such spares for replacement in the generating plant.

However, depreciation shall be charged on the total cost

of spares.

d. Deprecation on such spares shall be charged as per the

Tariff Regulations of the Commission.

Spare Units/Service Units:-

a. Depreciation on spare unit, installed with the

approval of the Commission shall be charged in

normal course as charged for the same type of assets

which are in use.

b. When the original units are removed for repairs or

maintenance and the spare units are installed, no

accounting adjustments shall be done.

Expense on repairs or maintenance on the removed units

shall be charged to revenue.

d. No accounting entry shall be done either:

- When the removed units is put back into usable

condition or

- When it is actually used again in the place of some

other units removed for repair or maintenance or

- The repaired unit is installed back in its place and the

spare unit installed earlier is removed and brought

back to stores. Provided when the removed unit is

considered irreparable, it shall be considered to be a

retired asset (if the estimated life is over) or scraped

assets (if estimated life is not over) and accordingly the

subsequent accounting for retirement, scrapping and

sale shall be done.

Simultaneously with retirement/scrapping of the original

unit, the cost and accumulated depreciation on the spare unit

shall be transferred to fixed assets account.

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

9.19 Treatment

income

from

investments:-

Income

from

investment shall be credited to the revenue account for the year in

which the income has accrued. Provided if the investments are held

as earmarked investments against any fund such as pension fund,

gratuity fund etc., the income from such investments shall be

credited directly to the respective fund.

10.

TIMING OF ACCOUNTING FOR REVENUE

10.1 Revenue from sale of power shall be accounted for on accrual

basis.

10.2 In case there is any departure from the method mentioned at 10.1,

the entities shall report accordingly along with its financial effect.

10.3 Reconciliation of actual collection, sales, and debtors shall be

provided in the notes to the accounts.

10.4 Where the sale of energy prior to the end of a Financial Accounting

Year has not been billed, a provision for such unbilled revenue

shall be made at the end of Financial Accounting Year so as to

treat the amount as revenue in the Financial Accounting Year in

which supply of power is made.

11.

DISPUTED CLAIMS UNDER WARRANTY FOR REPAIRS

11.1 Claims made for repair of capital equipment’s by Licensee or

Generation Company to the suppliers or contractor of capital

equipment for reimbursement of expenditure, if disputed, shall be

fully charged to revenue account in the financial accounting year

in which the expenditure is incurred.

11.2 Reimbursement when granted by the supplier or contractor of

such capital equipment shall be credited to revenue account in the

Financial Accounting Year in which the receipt of reimbursed

amount is made.

12.

CASH DISCOUNT.—Cash discounts earned by the Licensee or the

Generation Company on making timely or early payments to

supplier/contractor shall be reduced from the cost of the

assets/purchase value.

13.

INTANGIBLE ASSETS.—Cost of Goodwill etc. shall not be

considered for tariff determination in regulatory Accounts.

14.

INVESTMENTS

14.1 Investment and income there from made out of retained return on

investment shall not be considered in the regulatory accounts,

unless they are reinvested in the regulated business.

14.2 Income from Investments made against approved Contingency

Reserve and from investments made out of Regulated Business

shall be considered as Non-Tariff Income in Regulatory Accounts.

15.

EQUITY

15.1 Where the actual equity including the retained profit invested in

the Regulated Business is less than normative equity as per Tariff

Regulations, actual equity shall be considered in the Regulatory

Accounts.

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

15.2 Where the actual equity including the retained profit invested in

the business is more than normative equity as per Tariff

Regulations, the difference between actual and normative equity

shall be treated as normative loan and interest shall be allowed on

the normative loan as per the Tariff Regulations of the

Commission.

15.3 Reconciliation of actual equity and equity as per regulatory account

showing complete description like Revaluation, normative loans etc

shall be provided in the notes to the accounts.

16.

RETURN ON EQUITY OR CAPITAL EMPLOYED

16.1 Return on Equity/Capital Employed (RoE/ RoCE) shall be shown

in the Regulatory Accounts as per the appropriate provisions of

Tariff Regulations.

16.2 Provided that where Return on Capital Employed is allowed by the

Commission, interest on loans shall not be shown in Regulatory

Accounts.

17.

TAXES ON INCOME

17.1 In case the RoE/ RoCE is allowed on post-tax basis:

Income Tax paid or payable by the Licensee or the

Generation Company, at actual, on the income stream from

the Regulated Business shall be considered in Regulatory

Accounts; and

ii.

Income Tax on the amount of efficiency gains or incentives

shall be considered in Regulatory Accounts.

17.2 In case the RoE/ RoCE is allowed on pre-tax basis:

Income Tax shall be shown as a part of RoE or RoCE in the

Regulatory Accounts and shall not be shown separately.

18.

OPERATION AND MAINTENANCE EXPENSES.—Operation and

Maintenance Expenses shall be shown in Regulatory Accounts in

accordance with the appropriate provisions of these Regulations.

19.

LEASEHOLD LAND

19.1 Leasehold land is depreciated over the period of lease as per the

terms and conditions of the Lease Agreement.

19.2 Lease rental shall be charged to Statement of Profit & Loss or

Revenue Account under Administrative & General Expenses as

payable, for the actual life of the Project.

20.

POWER PURCHASE COST.—Power Purchase Cost shall be

included separately based on actual amount paid to procure the

Power, in addition to billing in a year, on the basis of Balance

confirmation certificates issued by the entities supplying power to

the Distribution licensees. Any payment in this regard in addition

to payment for the year under reporting/prior period shall be

shown additionally by the licensee.

21.

LOANS / BORROWINGS

21.1 The amount of loan approval shall depend upon the funding

pattern approved by the Commission, subject to the Debt-Equity

norm, which is further determined by the capital expenditure

approval by the Commission. Where the actual details of loan are

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

not available, the Commission allows the loans on normative basis

including the period of loan and the repayment schedule which is

matched with the depreciation of the fixed asset for which the loan

is availed. When there are variations in the actual terms of loan as

against the norms approved by the Commission including floating

rate of interest, moratorium period of repayment, etc. the actual

figures shall be submitted by the regulated entity supported by due

certificate by Auditor.

21.2 Capitalization of Interest Expenses on loans shall be limited to the

amount approved by the Commission.

21.3 All Interest Expenses prior to capitalization of assets shall be

considered as Interest during Construction (IDC) and shall be

transferred to Capital Work in Progress (CWIP) corresponding to

respective assets for capitalisation.

21.4 Reconciliation of actual Loan and Loan as per regulatory account

showing complete description like normative loans, normative

repayment, actual repayment etc shall be provided in the notes to

the accounts.

22.

FOREIGN EXCHANGE RATE VARIATION

22.1 Foreign Exchange Rate Variation shall be in accordance with the

notified Tariff Regulations as issued by the Commission.

22.2 In the absence of any specific provision in this regard in the Tariff

Regulations, till it is notified by the Commission, the following

approach shall be followed:

The Licensee or the Generating Company may hedge foreign

exchange exposure in respect of the interest on foreign

currency loan and repayment of foreign loan acquired for the

licensed business or the generation business, in part or full

in the discretion of the Licensee or the Generating Company.

ii.

Every Licensee or the Generating Company shall recover the

cost

hedging

foreign

exchange

rate

variation

corresponding to the 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.

iii.

To the extent the Licensee or the Generating Company is not

able to hedge the foreign exchange exposure, the extra rupee

liability towards interest payment and loan repayment

corresponding to the foreign currency loan in the relevant

year shall be permissible provided it is not attributable to the

Licensee or the Generating Company or its suppliers or

contractors.

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

23.

WORKING

CAPITAL

LOANS

AND

INTEREST

WORKINGCAPITAL

23.1 Working Capital Loans shall be shown in Regulatory Accounts in

accordance with the appropriate provisions of Tariff Regulations.

23.2 Interest on Working Capital shall be shown in the Regulatory

Accounts as per the appropriate provisions of Tariff Regulations.

23.3 Reconciliation of actual Interest on Working Capital and Interest

on Working Capital as per regulatory account showing complete

description shall be provided in the notes to the accounts.

24.

INTEREST ON SECURITY DEPOSIT.—Interest on Security

Deposit shall be computed and shown in appropriate provisions of

Tariff Regulations notified by the Commission. The details of

computation shall be shown in Notes to Accounts.

25.

CONTRIBUTION TO CONTINGENCY RESERVE.—Contribution to

Contingency Reserve shall be shown in Regulatory Accounts in

accordance with the appropriate provisions of Tariff Regulations.

26.

INCENTIVE/DISINCENTIVE FOR PERFORMANCE PARAMETERS

AND EFFICIENCY GAINS/(LOSSES)

26.1 Incentive and Disincentives for Performance Parameters such as

Plant Availability Factor or Plant Load Factor (PLF) for Generation

Companies,

Availability

for

Transmission

Licensees,

Wires

Availability and Supply Availability for Distribution Licensees shall

be shown in Regulatory Accounts in accordance with the

appropriate provisions of Tariff Regulations.

26.2 Incentive

and

Disincentives

for

Efficiency

Gains/

(Losses)

attributable to factors like O&M Expenses, Distribution Losses,

etc. shall also be shown in Regulatory Accounts in accordance with

the appropriate provisions of Tariff Regulations.

27.

DEEMED GENERATION.—This shall be in accordance with the

notified Tariff Regulations of the Commission.

28.

TRUING UP.—Where the Commission has provided for truing up

in its Tariff Regulations, the corresponding year-wise amount

accrued up to the date of accounts will be shown in the notes to

accounts.

29.

SALES FOR THE YEAR

29.1 Generation: Million Units (MU) sold and revenue there from shall

be provided in sales schedule for each generating station.

29.2 Transmission.— The Section/Licence area wise MU wheeled and

income there from shall be given separately.

29.3 Distribution.— Category wise units sold as per the relevant tariff

order by the Commission and revenue there from shall be shown

separately in the sales schedule for each licensee/licence area.

Units sold under banking arrangement, if any, and income

considered there from shall also be shown separately. Income in

the form of penalty from consumers for pilferage of electricity and

the assessed units of pilferage based on which the penalty has

been charged shall be shown separately. Amount received from the

consumers under Fuel Purchase Adjustment Charge/Power

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

Purchase Adjustment Cost as determined by the Commission from

time to time, shall be shown separately. Any other surcharge as

determined by the Commission for recovery from the consumers

may also be shown separately.

30.

NON-TARIFF INCOME.—Non-Tariff Income, attributable to the

Regulated Business, shall be considered for reduction in Annual

Revenue Requirement of the Licensee or the Generation Company

in the Regulatory Accounts.

31.

OTHER BUSINESS INCOME.—Other Income shall be considered

for reduction in ARR of the Licensee in the Regulatory Accounts, as

per the appropriate provisions of Tariff Regulations.

32.

PRIOR PERIOD ITEMS AND OTHER EXPENSES

32.1 Prior Period Income and Prior Period Expenses shall be shown

separately in Regulatory Accounts

32.2 Other expenses/ exceptional items/ extra-ordinary items of

expense shall be shown Regulatory Accounts, as approved by the

Commission.

33.

REGULATORY ASSETS AND CARRYING COST

33.1 Regulatory Assets shall be in conformity with the Tariff Regulations

notified by the Commission.

33.2 In the absence of any specific provisions in the Tariff Regulations

notified by the Commission, the following approach shall be

adopted:

The total amount of outstanding Regulatory Asset at the end

of the year shall be shown, as a separate entry, under the

Assets side of the Accounts.

ii.

The period of amortisation of the Regulatory Asset and the

carrying cost of the Regulatory Asset (if stipulated by the

Commission in the Tariff Order or any other Order in this

regard) shall be explained under the Notes to the Accounts.

iii.

For every year of amortisation, the amount of Regulatory

Asset amortised during the year as approved by the

Commission

and

the

carrying

cost

allowed

the

Commission on the balance Regulatory Asset shall be shown

under the Revenue side, once the Utility is allowed to bill the

same to the consumers.

33.3 Carrying Cost shall be shown in Regulatory Accounts, as approved

by the Commission.

34.

PROFIT SHARING.—This shall be in accordance with the

applicable sharing mechanism specified in the unbundling/ re-

bundling scheme of the Government of Bihar/ Tariff Regulations of

the Commission and shall be reflected in the notes to the

accounts.

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

35.

TREATMENT

REVENUE

SUBSIDY

BYCENTRAL

GOVERNMENT OR ANY STATE GOVERNMENT INCLUDING

GOVERNMENT OF BIHAR AGAINST SALE OF POWER, POWER

PURCHASE ETC.—Any Subsidy given by the Government of Bihar

to any consumer or class of consumers under Section 65 of the Act

shall be considered as revenue to the extent of the billing done to

the consumer. Reconciliation of subsidy received from the

Government of Bihar and actual subsidy disbursed by the utility

shall be provided in the notes to the accounts. Any Grants given by

Central

Government

any

State

Government

including

Government of Bihar for Liquidation of Loans or Liabilities has

been utilized or has to be utilized for any purposes except for

creation of capital assets shall also be considered as revenue.

36.

BANKING ARRANGEMENT.—Power banking transactions shall be

recorded at the rate as per prevailing directives of the Commission.

Where there are no specific directions from the Commission, these

power banking transactions shall be recorded as per the terms of

the agreement among the relevant parties.

37.

ITEMS TREATED ON CASH BASIS.—Items like late payment

surcharge, revenue from penalty, theft detected, enforcement, etc.,

which are generally accounted for on cash/realization basis, shall

be clearly mentioned in notes to accounts by Utility.

38.

PROVISIONS MADE AGAINST BAD & DOUBTFUL DEBTS.—

Accounting for Bad and Doubtful debts shall be in accordance with

the applicable Tariff Regulations/directives of the Commission.

Actual bad debts written off as per audited accounts shall be

deducted from the amount of provisioning.

39.

INVENTORY.—Unless otherwise provided by the Commission,

100% provisioning shall be made for the non¾-moving stock lying

for more than 3 years and 50% provisioning shall be made for the

non-moving stock lying for more than 2 years.

40.

RETAIL AND WHEELING BUSINESS.—Bifurcation of the accounts

including Schedules between retail and wheeling business shall be

shown separately with basis of bifurcation for each item in line

with

the

applicable

Tariff

Regulations/

directives

the

Commission.

41.

REGULATED RATE BASE.—Shall be the value established for an

Entity by the Commission on which Entity is allowed to earn a rate

of return as approved by the Commission. The regulated rate base

shall include the operating and other costs as approved by the

Commission the cost of constructing new facilities, unless

approved by the Commission shall be excluded from the Regulated

Rate Base.

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

42.

ALLOCATION PRINCIPLES FOR ASSETS, LIABILITIES, INCOME

AND EXPENSES

42.1 Fixed Assets or Property, Plant & Equipment

(a)

Plant and Machinery including Generating Station,

Transmission Network and Distribution Network.—

Apportionment on the basis of technical parameters

(contracted

capacity

for

Generating

Stations

and

Transmission

Networks,

and

connected

load

consumption in Million Units for Distribution Networks) will

be most suitable and objective in nature. These parameters

for the previous year may be used for apportionment of

common assets in ensuing year.

(b)

Land, Buildings

and

Civil

Structures

including

Furniture & Fixtures, Office Equipment and Vehicles.—

Apportion such common assets on the basis of proportion of

number of employees belonging to distinct business

segments and utilising the common assets. It will be easy to

identify the number of employees engaged with the current

assets. The number of employees which do not belong to

distinct business segments, but are engaged with the

common asset should be excluded, and only the proportion

of employees belonging to distinct businesses, engaged with

the common assets should be considered for computing the

proportion.

(c)

Other Fixed Assets.— Apportion such common assets

based on the proportion of value of fixed assets directly

attributable to different business activities of the Utility.

Apportionment on the basis of revenue will be more

subjective, as revenues from different businesses are

dependent upon the type of business activity.

42.2 Current Assets

(a)

Stores and Spares.—Apportion value of stores and spares

on the basis of proportion in which that common asset is

being apportioned. In case it is not identifiable with a

specific common asset, then apportionment may be done in

proportion of value of total common assets allocated to

different business activities. Apportionment on the basis of

revenue will be more subjective, as revenues from different

businesses are dependent upon the type of business

activity.

(b)

Other Common Current Assets.—Apportion value of such

common current assets on the basis of proportion of value

of total common assets allocated to different business

activities. Apportionment on the basis of revenue will be

more subjective, as revenues from different businesses are

dependent upon the type of business activity.

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

(c)

Receivables.—Apportion of receivables is on the basis of

revenue though the type of business activity and its

collection cycle may have a bearing on the amount of

receivables.

(d)

Investments.—Apportion investments on the basis of

revenue as apportionment on the basis of cash accruals will

be more difficult and subjective as it may involve application

of apportionment principles in several heads.

42.3 Liabilities

(a)

Long term loans and equity.—In case the common liability

is identifiable with a common asset, the same should be

apportioned on the basis of which the common asset has

been apportioned. In case the common liability is not

identifiable with a common asset, it should be apportioned

on the basis of which the total common assets have been

apportioned.

(b)

Interest on long term loans accrued but unpaid.—In case

the interest is identifiable with a common long term loan,

the same should be apportioned on the basis of which the

common long term loan has been apportioned. In case the

interest is not identifiable with a common long term loan, it

should be apportioned on the basis of which the total

common long term loans have been apportioned.

(c)

Current

liabilities

and

provisions.—Apportion

such

common current liabilities in the proportion of revenue

generated by the business activity as these have direct

relation with the level of operations of the business activity.

(d)

Revenue

Income

from

Common

Assets.—Although

realisation of revenue from a business depends on the type

of business, it is preferable to apportion common revenue on

the basis of direct revenues from different businesses.

Apportionment of common fixed assets will be done on the

basis of proportion of fixed assets directly attributable to

different assets. Therefore, apportionment of common

revenue on the basis of common fixed assets will not be

representative.

42.4 Expenses

(a) Generation Expenses and Power Purchase Costs.—

Apportion fixed charges and variable charges separately.

Contracted

allocated

capacity

will

used

for

apportioning capacity charges, and power procurement in

MU will be used for apportioning variable charges.

Apportionment on the basis of average generation expenses

or average power purchase costs does not reflect the actual

capacity charges payable, which is based on the allocated

capacity.

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

(b) Transmission,

SLDC

and

Distribution

Expenses.—

Apportionment

on the basis of allocated capacity will be

most suitable, as there would be less subjectivity involved.

These parameters for the previous year may be used for

apportionment of common expenses in ensuing year.

should be done on the basis of some measurable parameter.

For operating staff, the basis of apportionment should be on

the basis of man-hours devoted to different business

activities, which can be derived from time sheets. If time

devoted by any employee is not specific to any particular

business, that should not be considered and only the

proportion of time devoted by employees to specific

businesses should be considered for apportionment of entire

common employee expenses for operational staff. For other

support activities, expenses should be apportioned based on

some measurable parameters, e.g. common employee

expenses related to procurement department may be

apportioned on the basis of value of procurement for

different businesses, common employee expenses related to

IT department may be apportioned on the basis of number of

computers used for different departments etc. Common

expenses related to senior employees, like Chairman,

Managing Director etc. may be apportioned on the basis of

number

direct

employees

belonging

different

businesses.

(d)

Repair and Maintenance Expenses.—Apportion of common

Repair and Maintenance expenses should be done on the

basis of apportionment of total common fixed assets as it is

not always possible in most of the cases to identify the

common Repair and Maintenance expenses with a specific

common fixed asset.

(e) Administration and General Expenses.—It is preferable to

apportion the common Administration and General expenses

in proportion of number of direct employees related to

different businesses. Apportioning on the basis of floor space

or revenues or any other method will be more difficult and

subjective than apportioning on the basis of proportion of

number of direct employees.

(f)

Depreciation.—Apportion of common depreciation expenses

should be done on the basis of apportionment of total

common fixed assets to different business activities, as

identification of depreciation with a particular common asset

is not always feasible.

42.5 Replacement of a part of asset: If any part of an asset is replaced

at any stage of the useful life of the asset, then the method of

charging depreciation for the purpose of regulatory accounts on

the asset requires deliberation. Replacement of the old part with a

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BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

new one may extend the life of the asset. However, depreciation

should be charged only for the useful life of the asset and the

useful life of the asset should not increase, although the actual life

may increase by replacement of the part. The asset value will

increase at the time of replacement of the part to the extent of

value of new part and will decrease to the extent of value of old

part. Residual depreciation corresponding to the revised asset

value should be charged at depreciation rates as per applicable

Tariff Regulations for the residual life of the asset.

42.6 Interest and Finance Charges: Apportion of common Interest and

Finance Charges should be done on the basis of apportionment of

total common liabilities to different business activities, as

identification of interest and finance charges with a particular

common liability is not always feasible.

42.7 Return on Equity/Capital Employed Identifiable with Common

Asset (for the Regulated Businesses): Apportioning of RoE/RoCE

identifiable for common assets should be done on the basis of

apportionment of common fixed assets to different business

activities.

42.8 Income Tax: Income tax should be apportioned on the basis of

proportion of RoE of different regulated businesses of the Utility.

However, if there are any un-regulated business of the Utility, then

income tax should be apportioned on the basis of Profit Before Tax

(PBT) of the different businesses.

42.9 It may be noted here that if RoE is provided on Pre-Tax basis, then

there is no requirement of separate apportionment of Income Tax.

Here income tax forms a part of Pre-Tax RoE, and it will get

apportioned along with RoE on the basis of principles discussed in

preceding section for RoE.

43.

SEGREGATION OF DISTRIBUTION BUSINESS ARR INTO WIRES

BUSINESS AND SUPPLY BUSINESS

43.1 Wires Business is the business of owning and operating of the

distribution system, while Retail Supply Business is the

business of procuring the requisite power through long-term,

medium-term, and short-term power purchase contracts for

supplying to its consumers.

43.2 In case the Commission has specified the basis of allocation of

expenses between Wires Business and Retail Supply Business in

the

Bihar

Electricity

Regulatory

Commission

(Multi

Year

Distribution Tariff) Regulations, 2015 and as amended from time

to time, the same shall be considered for allocation of the expenses

of the Distribution Licensee.

43.3 In case the above mentioned regulations do not specify any basis

for allocation of expenses between Wires Business and Retail

Supply Business, the Distribution Licensees shall follow a

consistent basis of allocation ratios for apportionment of different

components of Distribution ARR into Wires Business and Supply

Business, after approval of the same by the Commission.

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

43.4 The allocation ratios on which the different components of

Distribution ARR shall be apportioned are mentioned herein below.

These allocation ratios are subject to review and customisation,

depending on the cost structure of the respective Distribution

Licensee, as approved by the Commission.

Power Purchase/Transmission/SLDC Expenses.—All these

expenses related to the Supply Business shall be allocated to

Supply Business ARR.

ii.

Employee Expenses.—Direct employees for Wires Business

and Supply Business shall be identified first and Employee

Expenses related to these direct employees shall be allocated

to respective businesses. Thereafter, all common Employee

Expenses relating to employees working for both the

businesses can be apportioned between Wires Business and

Supply Business using the allocation principles discussed

for apportionment of common Employee Expenses. However,

till the time the segregation is complete, the Distribution

Licensee may apportion the Employee Expenses between

Wires Business and Supply Business using an appropriate

ratio. Since more employees are employed for Wires

Business and the employees who work for Supply Business

are lower as compared to Wires Business, the proportion of

employee cost allocated to Wires business shall be higher

than the proportion allocated to Supply business and should

be considered in 60:40 ratio.

iii.

Repair and Maintenance Expenses.—Cost of spares, fuel

etc. and cost of services related to wires business and supply

business shall be separately recorded. All direct Repair and

Maintenance (R&M) Expenses related to Wires Business and

Supply Business shall be allocated to the respective

businesses. Thereafter all common R & M expenses can be

apportioned between Wires Business and Supply Business

using the allocation principles discussed for apportionment

of common R & M Expenses. However, till the time the

segregation is complete, the Distribution Licensee may

apportion the R&M Expenses between Wires Business and

Supply Business in the ratio 90:10.

iv.

Administration and General Expenses.—All expenses like

rents, electricity charges, water charges, internet charges,

office upkeep, insurance charges etc. relating to offices for

distribution business

shall

allocated

Supply

Business,

while

that

relating

distribution

sub-

stations/receiving stations shall be allocated to Wires

Business. Rates and taxes, Freight, and other purchase

related expenses need to be allocated based on the goods

purchased – whether for Wires Business or for Supply

Business. All other A&G expenses, which are common to

both Wires Business and Supply Business, shall be

²⁸

BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

apportioned

using

the

allocation

principles

for

apportionment of common A&G Expenses. However, till the

time the segregation is complete, the Distribution Licensee

may apportion the A&G Expenses using the ratio 50:50.

iv.

Depreciation.—Major Portion of assets of Distribution

Licensee relates to Wire Business, as sub-stations, HT and

LT lines are for wheeling of electricity. Only the service

connections and consumer meters, which are in the books of

Distribution Licensee, shall be allocated to Supply Business.

If asset class wise break up of assets relating to Wires

Business

and

Supply

Business

are

available,

then

depreciation relating to direct assets of Wires Business and

direct assets of Supply Business shall be allocated to

respective businesses. Depreciation on any common asset, if

any can be apportioned between Wires Business and Supply

Business using the allocation principles discussed for

apportionment of common depreciation. However, if only the

overall asset break-up between Wires business and Supply

business is available, then the depreciation shall be

apportioned in the same ratio. Till the time the segregation is

complete,

the

Distribution

Licensee

may

apportion

depreciation for distribution business in the ratio 90:10.

Interest on Loans.—All new loans availed by the Licensee

shall be separate for Wires Business and Supply Business,

based on the funding of the assets for Wires Business and

Supply Business. In this way, interest on loans for Wires

Business and Supply Business will be clearly identifiable

and these shall be allocated to respective businesses. Other

interest charges, which are common to both Wires Business

and Supply Business shall be apportioned using the

allocation principles discussed for apportionment of common

interest and Finance Expenses. However, till the time the

segregation is complete, the Distribution Licensee may

apportion interest on loans between Wires Business and

Supply Business in the ratio 90:10.

vi.

Interest on Working Capital.—All new Working Capital

loans availed by the Distribution Licensee shall be separate

for Wires Business and Supply Business. In this way,

interest on Working Capital loans for Wires Business and

Supply Business will be clearly identifiable and these shall

be allocated to respective businesses. Other interest on

Working Capital which is common to both Wires Business

and supply Business can be apportioned using the ratio

10:90, as major portion of Working Capital loans belongs to

supply business.

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

vii.

Interest on Security Deposit.—Security deposits are

collected by Distribution Licensees from the consumers for

supplying electricity to them, the interest on Security

Deposits shall be allocated entirely to the Supply Business.

viii. Provision for Bad Debts.—Major part of bad debts relates to

supply business. However, as it is not exactly possible to

separate the bad debts between Wires Business and Supply

Business, these expenses, if any, can be apportioned

between Wires Business and Supply Business using the

ratio 10:90.

ix.

Return on Equity.—RoE for both the businesses shall be

allowed based on the Equity invested separately for both the

functions. Common RoE, if any shall be apportioned between

Wires Business and Supply Business using the allocation

principles discussed for apportionment of common RoE. In

case equity invested for both the functions cannot be

segregated clearly or till the time the segregation is complete,

RoE can be apportioned between Wires Business and Supply

Business using the proportion of GFA between Wires

Business and Supply Business using the ratio 90:10.

Income Tax.—Tax shall be apportioned on the basis of RoE/

RoCE related to Wires Business and Supply Business,

provided for apportionment of Income Tax. Non- Tariff

Income- Non Tariff Income resulting from meter rent, delayed

payment charges, service connection charges etc. shall be

allocated to Supply Business, while income resulting from

sale of scrap etc. shall be allocated to Wires Business. Other

common items of Non-tariff Income, if any can be

apportioned using the allocation principles discussed for

apportionment of revenues. However, till the time the

segregation is complete, the Distribution Licensee may

apportion Non- Tariff Income between Wires Business and

Supply business using ratio 10:90.

xi.

Licence fee.—Licence fee payable by the eligible licensees,

including deemed licensees shall be as per the provisions

contained in the Bihar Electricity Regulatory Commission

(Conduct of Business) Regulations, 2005 and as amended

from time to time notified by the Commission. Every

Licensee shall disclose the actual amount payable/paid

based on the audit certificate duly supported by the affidavit

in this regard.

Apportionment of license fee between Wires Business and

Supply Business shall be in the ratio 10:90.

³⁰

BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

CHAPTER-III

MISCELLANEOUS

44.

APPLICABILITY

REGULATORY

ACCOUNTS

ELECTRICITY

DEPARTMENTS/

COMPANIES

WHICH

AUDITED ACCOUNTS ARE BEING MAINTAINED ON SINGLE

ENTRY SYSTEM.—There shall not be any exemption applicable to

Entities for preparation and submission of Regulatory Accounts as

per these Regulations, however, the applicability shall be from the

date of notification by the Commission.

45.

POWER TO REMOVE DIFFICULTIES.—If any difficulty arises in

giving effect to any of the provisions of these regulations, the

Commission may in public interest and for reasons to be recorded

in writing by general or special order, do anything, not inconsistent

with the provisions of the Electricity Act, 2003 and amendments

thereof which it considers necessary or expedient for the purpose

of removing the difficulties.

46.

INTERPRETATION.—If

question

arises

relating

the

interpretation of any provision of these Regulations, the decision of

the Commission shall be final and binding on all the concerned

parties.

47.

ENQUIRY AND INVESTIGATION.—All enquiries and adjudications

under these Regulations shall be done by the Commission through

the proceedings in accordance with the provisions of the Bihar

Electricity

Regulatory

Commission

(Conduct

Business)

Regulations, 2005 and amendment thereto.

48.

PENALTY.—Subject to the provisions of the Act, the Commission

may impose penalty on any of the licensees or generating

companies for violation of any of the provisions of these

regulations, as it deemed fit.

49.

GENERAL.—Subject to the provisions of the Electricity Act, 2003

and amendments thereof and these Regulations, the Commission

may from time to time, issue orders and directions 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.

50.

Power to Amend.—Subject to the provisions of the Electricity Act,

2003 the Commission may, at any time add, vary, alter, modify or amend

any of the provisions of these regulations.

By the order of the Commission,

PARMANAND SINGH,

Secretary.

BIHAR GAZETTE (EXTRA), 3RD APRIL 2018

APPENDIX – I

(See Regulation 6.3)

FORM OF AUDIT REPORT OF THE REPORTING SYSTEM

I/We,

having

been

appointed

the

Auditor(s)

under

the

requirements laid down in the BERC (Power Regulatory Accounting)

Regulations, 2018 (here in after referred to as the Regulations) notified

by the Bihar Electricity Regulatory Commission by (mention name of the

Entity) having its registered office at (mention registered office address of

the entity), have audited the attached Regulatory Accounts covering

(mention name of the service/geographical area) for the year ended

(mentioned the accounting Year) of the Entity.

1. The Entity is responsible for preparation of the Regulatory

Accounting Reports. My/our responsibility is to audit the

Regulatory Accounting Reports in accordance with the Reporting

System and generally accepted Auditing standards in India.

2. Further to my/our comments/observations given in the enclosed

Annexure

(Annexure

required

case

there

are

comments/observations on Regulatory Accounting Reports), I/We

report that:

I/we have received all the information and explanations,

which to the best of my/our knowledge and belief were

necessary for the purpose of my/our audit.

In my/our opinion proper books of account have been kept

by the Entity so far as appears from my/our examination of

those books to enable the preparation of complete and

proper Regulatory Accounting Reports in accordance with

the Regulations.

The Regulatory Accounting Reports for the year ended are in

the agreement with the books of accounts and have been

properly drawn up in accordance with the Regulations and

the methods and basis laid down in the Manual of the

Entity prescribed under the Regulations.

In my/our opinion, and to the best of my/our information

and according to the explanations given to me/us, the

Regulatory Accounting Reports for the year ended provide

the information as per the requirement of the Regulations

and represent a true and fair view in conformity with the

framework as per the Regulations.

3. I/We also report that all changes to the Manual prescribed under

the Regulations that materially affect the Regulatory Accounting

Reports for the year ended have been filed with the Bihar

Electricity Regulatory Commission by the Entity.

Dated:

Signature

Name of Proprietor/Partner

Place:

Membership No.

Name of the Firm with Stamp (Seal):

³²

BIHAR GAZETTE (EXTRA) 3RD APRIL 2018

ANNEXURE

[(See Regulation 6.4(d)]

The Reporting System

Asset wise breakup of Gross Fixed Assets

————

PUBLISHED AND PRINTED BY THE SUPERINTENDENT,

BIHAR SECRETARIAT PRESS, PATNA.

Bihar Gazette (Extra) 298—571+400—Egazette

Website: http://egazette.bih.nic.in

Sl. No.

Asset Particulars (to be provided asset-wise)

Asset Code

Opening Asset value

Cumulative Depreciation in Opening Asset

value

Additions during the year

Deletions

during the year

Closing Asset Value

Cumulative Depreciation at the end of year

Undischarged liabilities

Base cost

IDC

IEDC

FERV

Pre-commissioning expenses

Survey expenses

Capital squares

Total Additions

Depreciation

Asset Value

Depreciation

Corresponding Equity to be

deducted

Opening

Additions

Discharged during the year

Reversal/adjusted during the year

Closing