Section 18 in Tamil Nadu Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff) Regulations, 2005
18. Capital Cost.
(1)Accurate computation of cost of service including return on investment is essential for determination of cost plus tariff. The Commission shall be guided by the following principles to compute the cost and return.(2)Investments made prior to the notification of these Regulations by the Generating Company and licensees shall be accepted on the basis of audited accounts.(3)The actual capital expenditure on the date of commercial operation for the original scope of work based on audited accounts of the Company / licensee limited to original cost may be considered subject to prudence check by the Commission.(4)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.(5)The capital cost shall include capitalised initial spares subject to the following ceiling norms:(i)In case of coal based / lignite fired Generating Stations - 2.5% of original project cost as on the cut off date;(ii)In case of Gas Turbine / Combined cycle Generating Stations -4.0% of original project cost as on the cut off date.;(iii)In case of Hydro generating stations - 1.5% of the original project cost as on the cut off date;(iv)In case of Transmission and Distribution licensees - 1.5% of original project cost as on the cut off date.(6)Scrutiny of the project cost estimates by the Commission shall be limited to the reasonableness of the capital cost, financing plan, interest during construction stage, use of efficient technology and such other matters, for determination of tariff. In respect of capital cost based projects, a 50% of potential savings, if any, in interest during construction, due to completion of project ahead of schedule, may be allowed to be retained by the Generating Company / licensee and the balance 50% passed on as a lower tariff.(7)Swapping of foreign Debt and Equity shall be permitted, provided the benefit accruing from such swapping is passed on to consumers / beneficiaries in the year following the year of such swapping.(8)Restructuring of capital cost in terms of relative share of equity and loan shall be permitted during the tariff period provided it does not affect tariff adversely. Any savings in costs on account of subsequent restructuring shall be shared between the developers / licensees and the beneficiaries / consumers.[Provided that any person intending to establish, operate and maintain a generating station may make an application before the Commission for 'in principle' acceptance of the project capital cost and financing plan before taking up the project through a petition in accordance with the Tamil Nadu Electricity Regulatory Commission (Conduct of Business) Regulations 2004. The petition shall contain information regarding salient features of the project including capacity, location, site specific features, fuel, beneficiaries, break up of capital cost estimates, financial package, schedule of commissioning, reference price level, estimated completion cost including foreign exchange component, if any, consent of beneficiary / licensee to whom the electricity is proposed to be sold etc.,] [[Inserted by Commission's Notification No.TNERC/TR-5/2-3 dated 8-09-2007 (w.e.f. 03-10-2007)'Provided further that where the Commission has given 'in principle' acceptance to the estimates of project capital cost and financing plan, the same shall be the guiding factor for applying prudence check on the actual capital expenditure.']]
