Section 5(5) in The West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2011
5.1- The Commission shall be guided by the following principles to compute the cost and return.(i)Investments made prior to the notification of these regulations by the generating company and licensees shall be accepted on the basis of audited accounts, subject to prudence check.(ii)Wherever Power Purchase Agreement or Agreement for transmission / wheeling provides for a ceiling of capital cost, the capital cost to be considered shall not exceed such ceiling.(iii)Capital cost for licensee to be considered as below :(a)The capital expenditure incurred by a licensee or a generating company in any financial year, being a part of a capital building project spanning a number of financial years, shall be, subject to prudence check by the Commission, considered in terms of the instant regulations :Provided that the aforesaid stipulations shall apply to such capital building projects that have been initiated on, or after these regulations have come into force :Provided also that only such capital expenditures that have resulted in both building and full operationalisation of one or more capital asset(s) which is/are components of the total capital building project referred to above shall qualify to be considered for this purpose.Provided also that investment approval for such capital expenditure is being allowed for the improvement of the norms of the operational parameter, then the norms associated with such parameter shall be revised after the effect of such capital expenditure take place subject to condition that such investment approval shall specifically mention the targeted norms.(b)For each capital expenditure project, the sum total of annual allowable capital cost from the date of commencement of such project till the date of commissioning shall be the original cost of such project, subject to its approval in accordance with these regulations wherever applicable.Provided that the Commission may permit reasonable additional costs, which are in the nature of capital expenditure, to be included in the original project cost beyond the date of commissioning upon application for the same made by the licensee or generating company within one year from the date of commissioning.(c)Where the actual cost incurred on a capital expenditure project exceeds or is likely to exceed the estimate of original project cost, then the licensee or generating company shall apply to the Commission for approval for variation in the estimate of original project cost with supporting documents and proper justification of variation of cost.(d)Where the actual cost incurred on a capital expenditure project is lower than the approved original project cost, the Commission shall, after due scrutiny, permit the resultant savings in interest on loan capital during the construction period of such project to be dealt with in the manner specified in these regulations. Scrutiny of the original project cost shall be limited to the reasonableness of the capital cost, financing plan, interest during construction stage, use of efficient technology, economic use of resources, need to optimize investment and such other matters for determination of tariff.(e)Notwithstanding anything contained in these regulations, for any capital expenditure project approved by the authority concerned before notification of these regulations, the actual cost as recorded in the books of account of the licensee or generating company shall be considered as the original cost of project, subject to its approval by the then statutory authority concerned wherever applicable and also subject to prudence check by the Commission,(f)The amount of any contributions made by users of transmission system or distribution system towards works for access to the intra-State transmission system or distribution system of the licensee or generating company shall be deducted from the original cost for such project for the purpose of calculating the amount of loan capital and equity capital under these regulations.Provided that for the purpose of depreciation under these regulations, the original project cost before deduction of any such contribution shall be taken into account.(iv)Prudent accounting practice shall apply, to the extent not inconsistent with these regulations, in determining the original project cost of capital expenditure and / or original cost of fixed assets capitalized.(v)The resultant Foreign Exchange variations on account of repayment are to be dealt as specified in these regulations.(vi)The capital cost may include capitalized initial spares as follows :(a)Up to 2.5% of original capital cost in case of coal based / lignite fired Generating Stations;(b)Up to 4.0% of original capital cost in case of Gas Turbine / Combined Cycle Generating Stations;(c)Up to 1.5% of original capital cost in case of Hydro-Generating Stations;(d)Up to 2.0% of original capital costs for distribution projects;(e)Up to 1.0% of approved original capital costs for transmission projects;(vii)Restructuring of capital cost in terms of relative share of equity and loan shall be permitted during the tariff period provided such restructuring is cost effective. Any savings in costs on account of subsequent restructuring shall be dealt with in accordance with these regulations.(viii)Any new generating station or any project of any licensee which is planned to be implemented and whose tariff is to be determined by WBERC, shall get its investment plan approved by the Commission before the construction starts. The project, which is already under construction on the date of publication of these regulations, shall get its investment plan approved in accordance with regulation 2.8.3 by the Commission prior to filing its tariff application for the project.(ix)For any new generating station for which tenders for supply of plants and equipments have been invited after 15.10.2007 and whose project cost is not determined / approved under these regulations, the concerned generating station shall submit all the information as required under regulation 2.8.1.4 to the Commission and obtain approval of the Commission before electricity is supplied by that generating station. to the distribution licensee at a tariff determined under section 62 of the Act.(x)If the tariff of any generation station of a generating company or licensee is adopted under section 63 of the Act and subsequently the generating company or licensee, as the case may be, intends to have the tariff determined for that generating station under section 62 of the Act, then the licensee/generating company shall submit all information as required under regulation 2.8.1.4 to the Commission and obtain the investment approval of the Commission before electricity is supplied by that generating station to the distribution licensee at a tariff determined under section 62 of the Act.
