- (1.) IN this petition, the petitioner, Power Grid Corporation of INdia Limited, had sought approval of tariff in respect of 400 kV Jeypore-Gazuwaka transmission line along with associated bays and 500 MW HVDC back to back station at Gazuwaka ( the transmission system) between Southern Region and Eastern Region for the period from 1.4.2004 to 31.3.2009, based on the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004 (hereinafter referred to as "the 2004 regulations").
(2.) On completion of pleadings and after hearing the parties, final tariff in respect of the transmission system was awarded vide the Commission's order dated 16.2.2006 read with order dated 7.6.2006. While awarding tariff, the Commission adopted capital cost, loan, equity etc. considered for determination of tariff for the period 1.4.2001 to 31.3.2004. Also, FERV for the period up to 31.3.2004 was capitalized and apportioned between debt and equity in the same ratio as considered for the period 1.4.2001 to 31.3.2004. The details of capital cost, equity considered at the time of award of tariff and the summary of the tariff awarded are given hereunder. (a) Computation of capital cost JUDGEMENT_335_TLET0_20080.htm (b) Computation of equity JUDGEMENT_335_TLET0_20081.htm (c) Computation of interest on loan JUDGEMENT_335_TLET0_20082.htm (d) Summary of the tariff awarded: JUDGEMENT_335_TLET0_20083.htm ' Tamil Nadu Electricity Board (TNEB) filed Appeal No. 135/2005 in the Appellate Tribunal for Electricity against order dated 30.6.2006 of the Commission in Petition No 40/2002, vide which while fixing transmission tariff in respect of 400 kV D/C Kaiga-Sirsi transmission line along with associated bays for the period 1.4.2001 to 31.3.2004, the methodology similar to that adopted in respect of the various transmission assets was followed as regards apportioned of FERV into debt and equity. TNEB had, inter alia, questioned the methodology of bifurcation of FERV into debt and equity for the purpose of tariff determination. This appeal, as also some other linked appeals were disposed of by the Appellate Tribunal through a common judgment dated 4.10.2006. The Tribunal vide its judgment dated 4.10.2006 held as under: 16. According to Explanation 1 to Clause 4.4 (c), the premium raised by the Transmission Utility while issuing share capital and investment of internal resources created out of free reserve of the existing utility, if any, for the funding of the project, shall also be reckoned as paid up capital for the purpose of computing the return on equity subject to fulfillment of certain conditions. Explanation also makes no provision for increasing the equity beyond 50% of the book value of the transmission system. Once the fixed cost has been agreed to be financed in a certain ratio of debt and equity, the equity can be affected by FERV only if the equity is in foreign exchange. The provision of FERV as a pass through has been kept to ensure that any liability or gain, if any, arising on account of any variation in foreign exchange rates (whether debt or equity) is passed on to the beneficiary. In case there is no FERV liability or gain, as the case may be, there will not be any FERV adjustment. In the instant case the additional liability arising on account of FERV shall have an impact only on the debt liability and not equity capital. In this view of the matter, we hold that FERV adjustment is to be made in respect of debt liability and not in respect of the equity. Accordingly, we hold that the CERC is only to make adjustment in respect of debt liability and not in respect of the equity. 17. In view of the aforesaid discussion, the appeal is partly allowed to the extent indicated above. The Central Electricity Regulatory Commission shall re-calculate the effect of FERV on the debt liability.
(3.) IN terms of judgment dated 4.10.2006 of the Appellate Tribunal in Appeal No 135 of 2005 and other related appeals, addition of notional equity on account of FERV is not to be considered for computation of return on equity. As a consequence, the entire amount of FERV forms part of loan.;