58

Asset Management Philosophy

Deploying
assets

Management
Operating
Asset assets
Maintaining In a cost
assets effective way

Replacing
assets
Upgrading
assets
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Major innovations in Asset Deployment

Transmission Lines Substations

Innovation in Tower
GIS Substations
Designs Use of Improved Technology

-> Optimised Manpower -> Reduced

Process Bus Employee Expenses
HTLS Conductors
(Digital Substations)
-> Reduced Failure -> Reduced
R&M Cost
Polymer Insulators -> Improved Availability -> Higher
RIP Bushings O&M Tariff
in Coastal Areas

Ester and GTL in

transformers
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Major Technological Innovations in
O&M of Assets

Transmission Lines Substations

Improvement in Predictive
Latest diagnostic Maintenance
Aerial Patrolling of
tests like FRA, FDS,
Transmission Lines THRC, DCRM etc. -> Optimised Manpower -> Reduced
Employee Expenses -> Reduced
Admin. Charges
Insulated Bucket Asset Health
Trucks Indexing -> Reduced Failure -> Reduced
R&M Cost
-> Improved Availability -> Higher
Use of Controlled O&M Tariff
Use of TLAs
Switching Devices
 Strategies for Asset Replacement &
61

Upgradation

Additional Capitalisation
(Add-Cap)

Renovation &
Modernisation (R&M)

Through O&M expenses

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Add-Cap
» ‘Additional Capital expenditure' means the capital
expenditure incurred, or projected to be incurred after the date
of commercial operation of the project.
» Capital Cost of the project changes
» Two Types
» Construction Add-Cap
» O&M Add-Cap
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Construction Add-Cap
» For new project or an existing project, expenditure incurred or projected to be
incurred within the original scope of work after the DOCO and upto the cut-off
date may be admitted subject to prudence check

» Cut-Off date: last day of the calendar month after thirty six months from the
date of commercial operation of the project

» In case of any force majeure conditions, or for works carried out due to
change in law, or for compliance of any of its order, CERC may grant
Additional Capitalisation within the original scope and after the cut-off date
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O&M Add-Cap
» In case of replacement of assets deployed under the original scope of
the existing project after cut-off date, the Add-Cap may be admitted
by CERC, after making necessary adjustments in the gross fixed
assets and the cumulative depreciation, subject to prudence check
on the following grounds:
» The useful life of the assets is not commensurate with the useful
life of the project and such assets have been fully depreciated
» On account of change in law or Force Majeure conditions
» Obsolescence of technology
» Replacement of such asset has otherwise been allowed by CERC
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O&M Add-Cap: Things to Consider

» Capital Cost of the project Changes – Think for the impact on RoE

» Only change of critical equipments is allowed – asset is not

decapitalized

» O&M Add-Cap is granted with aim to complete project within a

defined timeline
» If not done within pre-defined timeline, Add-Cap amount needs
to be returned with accrued interest
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R&M
» Renovation and Modernization (R&M) - Expenditure incurred or projected to
be incurred and admitted by the CERC after prudence check, and after
deducting the accumulated depreciation already recovered from the
admitted project cost
» Need to obtain consent of beneficiaries or the long term customers, as the
case may be, before submission of proposal to CERC.
» Things to Consider
» Usually done after Completion of useful life – asset is fully depreciated-
think of the impact on capital cost and RoE
» R&M involves complete modernization of the project – Existing asset is
decapitalized
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Asset Retirement
Recently, BoD has approved a policy for retirement of equipments from
service vide Office order no. 102 dt. 16.10.20
Scenarios under which assets are retired from service
» Deterioration of condition monitoring results
» Obsolescence in technology/ Non-availability of Spare and Service
Support
» High Repair / Maintenance Cost
» Replacement of the equipment due to Augmentation in capacity
» Replacement of Equipment/ system under O&M ADD CAP
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Strategies for Asset Retirement

Retirement on account of improving system
performance / extend useful life after approval of CERC
» As per CERC regulations, the equipment can be
replaced under O&M ADD-CAP after cutoff date on
account of following reasons:
» Obsolescence in technology.
» Useful life of the asset is not commensurate with
the useful life of the project.
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Strategies for Asset Retirement

Retirement of equipment/ system on account of failure
before completion of useful life
In case the original cost of the failed high value equipment/ system is
more than Rs 1 Crore, decision for retirement of equipment/ system,
before completion of useful life, shall be taken based on following
aspects:
» Age of the failed equipment/ system.
» Past performance.
» Test reports.
» Cost of repair vis-à-vis cost of new equipment/ system.
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Strategies for Asset Retirement

Retirement on completion of useful life of equipment/
system
After completion of useful life, the equipment/ system which is not
providing desired service/ uneconomical to maintain/failed/ not
required from system point of view have to be taken out of service
and accordingly be retired
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THINK
» Which equipments are soon completing useful life in your
region/ substation/ transmission line/ profit centre ? How are
their performance parameters ?

» Does any asset under your supervision qualify for retiring

from service ? Is replacement needed for such asset ?

» How will you raise the claim for retiring any asset from
service under your jurisdiction ?