CENTRAL ELECTRICITY REGULATORY COMMISSION
NEW DELHI
Record of Proceedings
I.A.19/2009 in Petition No.66/2005
Subject: Determination of generation and inter-State transmission tariff for
Damodar Valley Corporation in terms of the judgment dated 23.11.2007
of the Appellate Tribunal for Electricity in Appeal No. 273/2006.
Coram: Dr. Pramod Deo, Chairperson
Shri R.Krishnamoorthy, Member
Shri S.Jayaraman, Member
Shri V.S.Verma, Member
Date of Hearing: 16.6.2009
Petitioner: Damodar Valley Corporation, Kolkatta
Respondents: State of West Bengal, State of Jharkhand, WBSEDCL, JSEB and Ministry
of Power, Govt. of India.
Parties present: Shri M.G.Ramachandran, Advocate, DVC
Shri T.K.Gupta, DVC
Shri D.K.Majumdar, DVC
Shri P.K.Choudhuri, DVC
Shri A.Biswas, DVC
Shri D.K.Aich, DVC
Shri P.Bhattacharya, DVC
Shri R.Goswami, DVC
Shri G.Bhunia, DVC
Shri G.Chaudhury, DVC
Shri Shyamal Sarkar, Advocate, BSAL
Shri Gautam Shroff, Advocate, BSAL
Shri K.P.Roy, BSAL
Shri R.R.Dubey, Advocate, JSEB
This interlocutory application has been filed by the petitioner, Damodar Valley
Corporation, to consider certain additional information for re-determination of generation
and inter-State transmission tariff for the period from 1.4.2006 to 31.3.2009 in Petition
No. 66/2005, stated to be in terms of the judgment dated 23.11.2007 of the Appellate
Tribunal for Electricity in Appeal No. 273/2006. The additional information submitted by
the petitioner has been taken on record and will be considered to the extent found
relevant.
2. Learned counsel for the petitioner submitted that in terms of the directions
contained in the judgment of the Appellate Tribunal dated 23.11.2007 in Appeal
No.273/2006, it had submitted the estimated revenue requirements for its generation,
transmission and distribution networks, for the period 1.4.2006 to 31.3.2009 in
Annexure-I, at Page 199 of the interlocutory application. Learned counsel for the
petitioner also submitted that the estimated revenue requirements submitted included
audited capital expenditure for the period 2004-08 and the provisional accounts for the
year 2008-09, additional capital expenditure incurred for the period 2006-09, additional
expenditure incurred towards employee cost on account of revision of pay, pension and
gratuity contribution (as per actuarial valuation) pursuant to the implementation of the
sixth pay commission, additional O&M expenses incurred (at actual) on old units and on
account of compliances towards environmental laws. Learned counsel for the petitioner
while justifying the expenditure incurred on old units, submitted that it could not afford to
shut down the old units of the generating station for comprehensive refurbishment
activities in the interest of its consumers in the command area and hence the old units
whose uselife had already expired and have no comparable benchmark with other
plants in the country were being operated and maintained. Learned counsel for the
petitioner further submitted that in the absence of economic viability of major R&M of
the old units, the O&M expenses to arrest capacity de-rating had considerably
increased as a result of which it had become difficult for the petitioner to operate and
maintain the units within the norms specified by the Commission in the Central
Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004
(hereinafter referred to as “the 2004 regulations”).Learned counsel for the petitioner
accordingly prayed that the Commission may relax the norms for O&M expenses in
respect of the old generating stations, while re-determining the tariff.
3. Learned counsel for Bhaskar Shrachi Alloys Ltd (in short “BSAL”), one of the
consumer of the petitioner, submitted affidavit containing preliminary submissions to the
interlocutory application and pointed out that the petitioner had widened the scope of
determination of tariff in Petition No.66/2005 vis-a-vis the directions contained in the
judgment of the Appellate Tribunal by including additional capital expenditure incurred
for the years 2006-07 and 2007-08, additional O&M expenses and liabilities towards
employees cost on account of revision of pay, pension and gratuity contributions and
prayed that the Commission may re-determine the tariff only in accordance with the
directions contained in the judgment of the Appellate Tribunal. Learned counsel referred
to Annexure– E at Page 191 of the interlocutory application and submitted that the
normative debt-equity ratio of 70:30 may be considered for Unit-3 of Bokaro Thermal
Power Station, as it had been commissioned during the year 1993. Learned counsel
also submitted that the Appellate Tribunal while confirming that the Commission had
allowed O&M expenses after prudence check in order dated 3.10.2006, in Petition
No.66/2005, had only allowed an increase of 4% per year towards O&M expenses, for
the period 2006-09 and hence additional O&M expenses as claimed by the petitioner
may not be considered. Summing up, learned counsel further submitted that the prayers
of the petitioner which were not allowed by the Appellate Tribunal shall be deemed to
have been rejected and may not be considered by the Commission while re-determining
the tariff for the generating stations of the petitioner.
4. In response, the learned counsel for the petitioner objected to the contentions
raised by the counsel for BSAL and submitted that the directions contained in the
judgment of the Appellate Tribunal on the various issues shall have to be read and
interpreted in toto while re-determining tariff. Learned counsel for the petitioner referred
to paras A-5 and A-6 of the said judgment and submitted that even though commercial
operation of Unit-3 of Bokaro Thermal Power Station commenced during the year 1993,
the said project had been approved by the Govt. of India prior to 1992 and hence the
debt-equity ratio of 50:50 may be considered by the Commission. As regards additional
expenditure incurred towards employee cost on account of revision of pay, pension
liability etc, the learned counsel referred to Commission’s order dated 7.4.2005 in
Petition No.31/2001 and submitted that additional expenditure incurred towards
employee cost be considered in the re-determination of tariff. Learned counsel for the
petitioner also submitted that additional liabilities towards contribution and interest
payments for sinking fund may be allowed as an item of expenditure to be recovered
through tariff as mandated under section 40 of the DVC Act, 1948 and in terms of the
directions contained in the judgment dated 23.11.2007. Learned counsel for the
petitioner further submitted that IDC on loans deployed during the period prior to the
date of commercial operation of the generating station may be considered by the
Commission in the light of the judgment of the Appellate Tribunal dated 10.12.2008 in
Appeal Nos.151 and 152/2007.
5. Learned counsel for BSAL submitted that the claims submitted by the petitioner
may be considered in terms of the directions contained in the judgment of the Appellate
Tribunal dated 23.11.2007 subject to the final outcome of the appeals against the said
judgment, pending before the Supreme Court.
6. Learned counsel for the respondent, JSEB, adopted the submissions made by
the learned counsel for BSAL.
7. The petitioner in compliance with the directions of the Commission during the
hearing on 28.4.2009 had submitted additional information containing details of the
additional capital expenditure incurred during the years 2004-05 and 2005-06 vide
affidavit dated 11.6.2009.It is noticed that the petitioner had claimed capitalization of
certain assets on account of replacement of old assets which had outlived their useful
life and had become unserviceable. However, the details of corresponding decapitalisation
of the old assets for the year 2004-05 had not been submitted. As
capitalization of assets under replacement can only be allowed after de-capitaisation of
the old assets under replacement for the purpose of tariff, the petitioner was directed to
submit the following information, in respect of the assets under replacement category:
(a) Gross value of the old asset (original);
(b) Year in which the asset was put to use; and
(c) Depreciation recovered in tariff during the service of the old asset.
8. The information may be submitted by the petitioner by 5.7.2009.
9. Subject to the above, order in the petition was reserved.
Sd/-
K.S. Dhingra
Chief (Legal)
