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State of Andhra Pradesh - Section

Section 10 in Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff for Wheeling and Retail Sale of Electricity) Regulation, 2005

10. Multi-Year Tariff Framework and Approach.

- 10.1 The multi-year tariff framework shall be based on the following approach, for calculation of aggregate revenue requirement and expected revenue from tariff and charges.
10.2Base Year. - Values for the Base Year of the Control Period will be determined based on the audited accounts available, best estimate for the relevant years and other factors considered appropriate by the Commission, and after applying the tests for determining the controllable or uncontrollable nature of various items. The Commission will normally not revisit the performance targets even if the targets are fixed on the basis of base values of un-audited accounts.
10.3Targets. - Targets will be set for items that are deemed by the Commission as "controllable" which constitute operation & maintenance costs, financing costs, and for distribution losses duly adhering to the Licensees' Standards of Performance Regulation. Trajectory for specific variables may be stipulated by the Commission where the performance of the applicant is sought to be improved upon through incentives and disincentives;
10.4Controllable and Uncontrollable items of ARR: - The expenditure of the Distribution Licensee considered as "controllable" and "uncontrollable" shall be as follows:
Distribution Business
ARR Item " Controllable " / "Uncontrollable
Operation & Maintenance ExpensesReturn on Capital EmployedDepreciationTaxes on IncomeNon-tariff income ControllableControllableControllableUncontrollableControllable
In addition to the above items the retail supply business shall include the following:
Retail SupplyBusiness
ARR Item "Controllable"/"Uncontrollable"
Cost of powerpurchase Uncontrollable
10.5Pass-through of gains and losses on variations in "uncontrollable" items of ARR: - The Distribution Licensee shall be eligible to claim variations in "uncontrollable" items in the ARR for the year succeeding the relevant year of the Control Period depending on the availability of data as per actuals with respect to effect of uncontrollable items:Provided that the Commission shall allow the financing cost on account of the time gap between the time when the true-up becomes due and when it is actually allowed and the corrections shall not be normally revisited.
10.6Sharing of gains and losses on variations in "controllable" items of ARR: - The Distribution Licensee in its annual filings during the Control Period shall present gains and losses for each controllable item of the Aggregate Revenue Requirement. A statement of gain and loss against each controllable item will be presented after adjusting for any variations on account of uncontrollable factors.
10.7For the purpose of sharing gains and losses with the consumers, only aggregate gains or losses for the Control Period as a whole will be considered. The Commission will review the gains and losses for each item of the ARR and make appropriate adjustments, wherever required:Provided that for the first Control Period, insofar as the gains and losses from the Retail Supply Business of the Distribution Licensee are concerned, these will be shared with the consumers on yearly basis.
10.8Notwithstanding anything contained in this Regulation, the gains or losses in the controllable items of ARR on account of factors that are beyond the control of the Distribution Licensee - force majeure - shall be passed on as an additional charge or rebate in ARR over such period as may be specified in the Order of the Commission.Part -III Principles for Computation of Aggregate Revenue Requirement