Section 9 in Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014
9. Capital Cost.
(1)The Capital cost as determined by the Commission after prudence check in accordance with this regulation shall form the basis of determination of tariff for existing and new projects.(2)The Capital Cost of a new project shall include the following:(a)the expenditure incurred or projected to be incurred up to the date of commercial operation of the project;(b)Interest during construction and financing charges, on the loans (i) being equal to 70% of the funds deployed, in the event of the actual equity in excess of 30% of the funds deployed, by treating the excess equity as normative loan, or (ii) being equal to the actual amount of loan in the event of the actual equity less than 30% of the funds deployed;(c)Increase in cost in contract packages as approved by the Commission;(d)Interest during construction and incidental expenditure during construction as computed in accordance with Regulation 11 of these regulations;(e)capitalised Initial spares subject to the ceiling rates specified in Regulation 13 of these regulations;(f)expenditure on account of additional capitalization and de-capitalisation determined in accordance with Regulation 14 of these regulations;(g)adjustment of revenue due to sale of infirm power in excess of fuel cost prior to the COD as specified under Regulation 18 of these regulations; and(h)adjustment of any revenue earned by the transmission licensee by using the assets before COD.(3)The Capital cost of an existing project shall include the following:(a)the capital cost admitted by the Commission prior to 1.4.2014 duly trued up by excluding liability, if any, as on 1.4.2014;(b)additional capitalization and de-capitalization for the respective year of tariff as determined in accordance with Regulation 14; and(c)expenditure on account of renovation and modernisation as admitted by this Commission in accordance with Regulation 15.(4)The capital cost in case of existing/new hydro generating station shall also include:(a)cost of approved rehabilitation and resettlement (R&R) plan of the project in conformity with National R&R Policy and R&R package as approved; and(b)cost of the developer's 10% contribution towards Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) project in the affected area.(5)The capital cost with respect to thermal generating station, incurred or projected to be incurred on account of the Perform, Achieve and Trade (PAT) scheme of Government of India will be considered by the Commission on case to case basis and shall include:(a)cost of plan proposed by developer in conformity with norms of PAT Scheme; and(b)sharing of the benefits accrued on account of PAT Scheme.(6)The following shall be excluded or removed from the capital cost of the existing and new project:(a)The assets forming part of the project, but not in use;(b)Decapitalisation of Asset;(c)In case of hydro generating station any expenditure incurred or committed to be incurred by a project developer for getting the project site allotted by the State government by following a two stage transparent process of bidding; and(d)the proportionate cost of land which is being used for generating power from generating station based on renewable energy:Provided that any grant received from the Central or State Government or any statutory body or authority for the execution of the project which does not carry any liability of repayment shall be excluded from the Capital Cost for the purpose of computation of interest on loan, return on equity and depreciation;
