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APPENDIX“C”

ASSUMPTIONS FOR TARIFF FORMULATION
(Used for filling the formats)

1.1 Capacity Charge: Capital Cost & Depreciation

1.1.1 Power Stations and T & D Infrastructure

1.1.1.1 The capital cost on the entire power stations as on March
2004, has been taken as the base. The capital cost incurred on
commissioning of such non-operating units (units which are under
shutdown) has been combined with the capital cost of other units in
the same station. The capital cost of the Gas Turbine Station has been
combined with the capital cost of the thermal stations. As has been
mentioned earlier, most of the generating units being old, the
Corporation has taken up R&M of such units, which have not been
operating / are under shutdown. The R&M Programme shall be
completed in the year 2007-08, by when these plants shall deliver
improved operating plant performance.
The details of the R&M programme of such units are placed at
Appendix – ‘F’ to the petition.

1.1.1.2 The depreciation for the year 2004-05 for the individual
items in the stations have been taken as per CERC norms, and, the
actual depreciation in that year has been limited to the allowable
depreciation left to be claimed, after deducting the cumulative
depreciation upto 2003-04.

1.1.1.3 The capital cost of T&D infrastructure as on March 2004 has
been taken as the base. The ratio of estimated capital cost on the
Sub-station, Transformers and Transmission Lines installed at 220KV
and 132KV level, considered on the Transmission side, vis-a-vis the
estimated expenditure on similar infrastructure at 33KV, considered
on the Distribution side, (details given at Appendix –‘G’ ) is used to
make the necessary allocation. The normative ratio, thus, arrived for
T& D is 87:13.

1.1.1.4 Depreciation in case of T&D infrastructure has been worked
out separately for various components within the T & D infrastructure.
Depreciation has been calculated for one stage (i.e. the infrastructure
created during a certain phase). The weighted average depreciation,
so computed for this stage, is applied to other stages (i.e. the

1. Similar approach has been taken for the c omponents of the Main Division.2. Subsidiary Activities and Central Offices. The capital cost in respect of power is.2 Capacity Charge: Return on Equity 1. their allocation to the individual hydel station has been made in the ratio of the direct capital cost of the station. been no contribution by participating Govts.72 crores. There has.4 Multi-Purpose Dams 1. 1. the entire capital requirement of the Corporation is to be provided by the participating Govts. Further. The total loan capital provided by the participating Govts. the loan capital contributed by the participating Govts. to meet the capital cost of the project has been treated as DVC’s own resources. has been depreciated at the rate of weighted average depreciation on the capital cost for the individual station / T&D infrastructure.1. as mentioned earlier. allocated to the individual stations and T & D infrastructure in the ratio of their direct capital costs.infrastructure created during different phases).2 The capital cost in respect of the Konar dam has been allocated to the individual hydel stations in the ratio of the direct capital cost of the station. 1.1 The capital cost in respect of the multi-purpose dams has been taken against hydel stations only. 1.1. Further. as allocated to individual station and T&D infrastructure. further.3 Subsidiary Activities The capital cost in respect of the subsidiary activities is shared amongst the main objects. however. till 1968-69 amounted to Rs. 1.1. The Corporation has been ploughing back power surplus and retained interest each year. 1.1.214.1. . after 1968-69.4.1.5 The capital cost in respect of Multi-purpose Dams.4.2 Direction Offices and Other Offices The capital cost in respect of the above offices has been allocated in the ratio of the direct capital cost of the generating station and T&D infrastructure.1 According to the Section 30 of the DVC Act 1948.

46 crores. DVC’s net worth from power related activities was Rs. . The normative loan outstanding for individual station. CERC debt equity norms of 70:30 shall be applicable. as on March 2004.2004.1 Majority of the loans raised by the Corporation are not project specific.2.3 Capacity Charge: Interest on Long Term Borrowings 1.2. the market borrowings to the extent availed in the past years have since been mostly repaid. DVC’s debt equity is more of statutory nature than a management issue in respect of its existing thermal plants & assets whose debt equity mix has come to the present shape as a natural flow emanating from the provisions of the DVC Act on which management of DVC has little control. 3844. The capital base and debt equity ratio as on 31st March. therefore. has been computed by applying the normative debt equity structure of 15:85 (as mentioned above at Para 1. The outstanding market borrowings / loans stood at Rs. Since DVC is operating for about six decades.3. 1. used as the basis for arriving at the equity capital for the individual station corresponding to its capital cost. Hon’ble Commission is requested to allow the debt equity and the capital base as per actuals as on 31.2004 for the purpose of tariff fixation in respect of its existing plants.2 In respect of majority of DVC’s assets. and. are continuing to generate power with periodical additional capital expenditure required for maintaining their health and being considered for R&M after RLA Study during the Xth Plan Period. DVC has.679. Due to this fact. these assets which have either fully completed its technical project life or are on the verge of completion.4 As on March 2004.2) to the capital cost of the station.2.2.3 In the above backdrop. 1. However.1. 1.3. This capital structure has been assumed as a normative one. claimed return and interest in respect of its existing plants based on actual debt equity ratio as on 31. 2004 has therefore been considered for the purpose of ascertainment of allocation of return and interest recoverable through tariff on actual basis. it is not possible to ascertain the project-wise debt equity structure at the time of COD in respect of these vintage Plants. However for any future new projects. resulting in debt equity ratio of 15:85. the depreciation reserves have been mostly invested in continuous Life Extension and Improvement (E&I) of these vintage assets over the past years.3.09 crores.

3 The O&M cost in respect of Transmission & Distribution infrastructure. based on the Audited Accounts. 1. have been computed as follows: 1.4 Capacity Charge: O&M Cost 1. for the period 1998 to 2003. Its further allocation to Transmission and Distribution is separately made in the ratio of their estimated capital cost. the yearly repayment in the subsequent years against the normative loan outstanding for individual station is computed on a pro -rata basis to the actual yearly repayment against the loans outstanding as on March 2004.3.1 The O&M cost in respect of the individual stations has been tabulated.) to use the actual O & M expenses as a reference to project the O&M expenses for the subsequent years.1 above.4. these expenses have been increased by 4% on year-year basis to arrive at the O&M expenses for the base year 2003-04.3 The weighted average interest rate on the outstanding market borrowings / loans has been taken as the normative interest rate to arrive at the interest cost on long-term loans.3.2. The average of O&M expenses over these 5 years is taken as a reference amount for the base year as 2000 -01. 1.3. as per Para 5.2 As has been mentioned earlier. therefore.2 The yearly repayment against the normative loan outstanding for individual station calculated.1. around 50% of the total installed capacity has been commissioned more than 25 years back. . 1.3.3. it is.1 above. 1.4.1 The cumulative repayment till March 2004 against the normative loan outstanding for individual station is initially computed on a pro -rata basis to the actual cumulative repayment till March 2004 against the gross loan corresponding to the loans outstanding as on March 2004. as per the CERC norms. computed at Para 5.2 Thereafter. submitted similar norms to the stations of DVC may be allowed.2. for individual stations.4. has been arrived in the similar manner as done for generating stations. too. Further. 1.3. Considering the fact that the Hon’ble Commission has allowed the plants of NTPC at Talcher and Tanda (which was commissioned about 25 years and 16 years back resp.

Such expenses in the case of power sector related activities have been allocated to the individual stations and T&D infrastructure in proportion to their direct O&M costs. the fuel consumption has been arrived at. which are much older than NTPC’s Talcher and Tanda plants.6. . irrigation and flood control.e.2 Further.6.5 Capacity Charge: Interest on Working Capital The interest on working capital has been arrived at based on the norms specified by the CERC. As the CERC has allowed deviation from its norms in the case of these power plants of NTPC. 1.6 Energy Charge: Fuel Consumption 1.6. 1.4. the O&M expenses are shared amongst the main objects i. The coal transit loss. has been based as per actuals. 1. power.1. Since 45% of the installed capacity of thermal plants of DVC are below 210 MW. it is submitted that the CERC may allow DVC to follow the actual operating parameters. 1.4 In respect of the subsidiary activities.1 Around 50% of DVC’s generation comes from the plants. it may be mentioned that the CERC norms for SHR have not been defined for plants with capacity below 210 MW. based on the actual operating parameters. at Talcher and Tanda. too.3 All the thermal stations of DVC are non-pit head stations.