Section 20 in Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019
20. Prudence Check of Capital Cost.
- The following principles shall be adopted for prudence check of capital cost of the existing or new projects:(1)In case of the thermal generating station and the transmission system, prudence check of capital cost shall include scrutiny of the capital expenditure, in the light of capital cost of similar projects based on past historical data, wherever available, reasonableness of financing plan, interest during construction, incidental expenditure during construction, use of efficient technology, cost over-run and time over-run, procurement of equipment and materials through competitive bidding and such other matters as may be considered appropriate by the Commission:Provided that, while carrying out the prudence check, the Commission shall also examine whether the generating company or transmission licensee, as the case may be, has been careful in its judgments and decisions in execution of the project.(2)The Commission may, for the purpose of vetting of capital cost of hydro generating stations, appoint an independent agency or an expert body:Provided that the Designated Independent Agency already appointed under the guidelines issued by the Commission under Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2009 shall continue till completion of the assigned project.(3)Where the power purchase agreement entered into between the generating company and the beneficiaries provides for ceiling of actual capital expenditure, the Commission shall take into consideration such ceiling for prudence check.(4)The generating company or the transmission licensee, as the case may be, shall furnish the capital cost for execution of the existing and new projects as per Annexure-I to these regulations along with tariff petition for the purpose of creating a database of benchmark capital cost of various components.
