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State of Andhra Pradesh - Section

Section 15 in Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff for Wheeling and Retail Sale of Electricity) Regulation, 2005

15. Return on Capital Employed.

- 15.1 Return on Capital Employed (RoCE) for the RRB for the year T shall be computed in the following manner:ROCE = WACC * RRBWhere,WACC is the Weighted Average Cost of Capital as fixed by the Commission for the Control period and expressed in terms of percentage:RPB is the Regulated Rate Base (the asset base) approved by the Commission for each year of the Control period on which the Distribution Licensee shall be entitled to earn a return based on the Commission approved Weighted Average Cost of Capital (WACC).i: ith year of the Control Period, i =1,2,3 for the first Control Period• The WACC shall be computed in the following manner;
WACC =| [| D/E1+D/E| ]| * rd+| [| 11+D/E| ]| re
WhereD/E is the Debt to Equity Ratio and shall be determined at the beginning of the Control Period after considering Distribution Licensee's proposal, previous years' D/E mix, market conditions and other relevant factorsrd is the Cost of Debt and shall be determined at the beginning of the Control Period after considering Distribution Licensee's proposals, present cost of debt, market conditions and other relevant factors.re is the Return on Equity and shall be determined at the beginning of the Control Period after considering CERC norms. Distribution Licensee's proposals, previous years' D/E mix, risks associated with distribution & supply business, market conditions and other relevant factors.The Weighted Average Cost of Capital as determined above shall remain unchanged during the Control PeriodThe Regulated Rate Base (RRB) for the purposes of computing the RoCE for a year of the Control Period will be computed in the following manner.RRBi = RRBi-i + ARAB1 + WCiWhere,RRBi : Regulated Rate Base for the 1th year of the Control period ARABi: Change in the Rate Base in the ith year of the Control Period. This component would be the average of the value at the beginning and end of the year as the asset creation is spread across a year and is arrived at as follows: ARABi = (Invi - Di- CCi)/2 Where,Invi - Investments projected to be capitalised during the 1th year of the Control Period and approved.Di :- Amount set aside or written off on account of Depreciation of fixed assets for the 1th year of the Control Period.CCi: User Contributions pertaining to the ARABi and capital grants/subsidies received during 1th year of the Control Period for construction of service lines or creation of fixed assets.RRBi-1 : Regulated Rate Base for the financial year preceding the ith year of the Control period and shall be determined on the basis of approved Capital Investment Plan referred to in clause 16.1 of this Regulation. For the first year of the Control period, RRB i-1 will be the Regulated Rate Base for the Base Year i.e. RRBo. The values for the Base Year will be determined based on the latest audited accounts available, best estimates of the actuals pertaining to the relevant years and any other factors considered relevant by the Commission.RRBo = OCFAo - ADo - CCo,whereOCFAo: Original Cost of Fixed Assets at the end of the Base Year available for use and necessary for the purpose of the licensed businessADo: Amounts written off or set aside on account of depreciation and advance against depreciation if any, of fixed assets pertaining to the regulated business at the end of the Base YearCCo: Total contributions pertaining to the OCFAo, made by the users towards the cost of construction of distribution/ service lines by the Distribution Licensee and also includes the capital grants/ subsidies received for this purpose.WCi: Working Capital Requirement in the 1th year of the Control Period and shall be considered as being equal to one twelfth of the Operations and Maintenance expenses as allowed for that year.