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WIND 2016-17 Page 1 of 21 RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPUR In the matter of determination of generic tariff for sale of electricity to Distribution Licensee from Wind Power Plants getting commissioned in the State during FY 2016-17. Coram: 1. Shri Vishvanath Hiremath, Chairman 2. Shri Vinod Pandya, Member 3. Shri Raghuvendra Singh, Member Date of Order: 25.05.2016 Order 1. Government of India (GoI), in its National Tariff Policy notified on 28.01.2016 at para 6.4(2), has provided that States shall endeavour to procure power from the renewable energy sources through competitive bidding, except in the case of purchase of power from the waste to energy plants, to keep the tariff low. Procurement of power by Distribution Licensees from RE sources for the notified capacity shall be done through competitive bidding process from the date to be notified by the Central Government. However, till such notification, any such procurement of power from the renewable energy sources may be done under Section 62 of the Electricity Act, 2003. Therefore, Commission in exercise of its power conferred under Section 62 read with Section 64 of the Electricity Act, 2003 and the RERC RE Tariff Regulations, 2014 proposes to determine the generic tariff of Wind Power Plants getting commissioned during FY 2016-17. 2. The Commission has notified the RERC (Terms and Conditions for Determination of Tariff for Renewable Energy Sources - Wind and Solar Energy) Regulations, 2014 on 24.02.2014 (hereinafter called as the RERC RE Tariff Regulations, 2014). As per Regulation 7(1) of the RERC RE Tariff Regulations, 2014, the Commission may determine generic tariff on

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Page 1: RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPURrerc.rajasthan.gov.in/TariffOrders/Order239.pdf · RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPUR ... Rajasthan Patrika : 18.02.2016

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RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPUR

In the matter of determination of generic tariff for sale of electricity to

Distribution Licensee from Wind Power Plants getting commissioned in the

State during FY 2016-17.

Coram:

1. Shri Vishvanath Hiremath, Chairman

2. Shri Vinod Pandya, Member

3. Shri Raghuvendra Singh, Member

Date of Order: 25.05.2016

Order

1. Government of India (GoI), in its National Tariff Policy notified on

28.01.2016 at para 6.4(2), has provided that States shall endeavour to

procure power from the renewable energy sources through

competitive bidding, except in the case of purchase of power from the

waste to energy plants, to keep the tariff low. Procurement of power by

Distribution Licensees from RE sources for the notified capacity shall be

done through competitive bidding process from the date to be notified

by the Central Government. However, till such notification, any such

procurement of power from the renewable energy sources may be

done under Section 62 of the Electricity Act, 2003. Therefore,

Commission in exercise of its power conferred under Section 62 read

with Section 64 of the Electricity Act, 2003 and the RERC RE Tariff

Regulations, 2014 proposes to determine the generic tariff of Wind

Power Plants getting commissioned during FY 2016-17.

2. The Commission has notified the RERC (Terms and Conditions for

Determination of Tariff for Renewable Energy Sources - Wind and Solar

Energy) Regulations, 2014 on 24.02.2014 (hereinafter called as the RERC

RE Tariff Regulations, 2014). As per Regulation 7(1) of the RERC RE Tariff

Regulations, 2014, the Commission may determine generic tariff on

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Suo-Motu basis at the beginning of each year of the control period for

Wind Power Plants for which principles and norms have been specified

under the said Regulations.

3. The Commission, based on the capital cost indexation mechanism and

performance parameters contained in the RERC RE Tariff Regulations,

2014, had prepared the draft order to determine the generic tariff for

the Wind Power Plants getting commissioned during FY 2016-17.

4. Public notices were published in the following newspapers on the dates

mentioned against each inviting comments/suggestions from the

stakeholders on the draft order:

Rajasthan Patrika : 18.02.2016

Rashtradoot : 18.02.2016

The Times of India : 19.02.2016

5. Public notices along with the draft order were also placed on the

Commission’s website. The last date for submission of

comments/suggestions by the Stakeholders/Public was kept as

08.03.2016.

6. The Stakeholders who offered their suggestions/comments are

mentioned at Annexure-I.

7. Commission, through this order, is determining the tariff for Wind Power

Plants on Suo-Motu basis based on the parameters specified in the

RERC RE Tariff Regulations, 2014 and duly taking note of the

suggestions/comments received from the stakeholders on the draft

order circulated.

8. The present regulatory exercise is limited to determination of generic

tariff based on the parameters contained in RERC RE Tariff Regulations,

2014. Several comments/suggestions of the Stakeholders were received

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on parameters such as O&M Expenses, interest on long term loan and

working capital and deration. The abovementioned

parameters/provisions are already incorporated in the RERC RE Tariff

Regulations, 2014 and this order has to follow the provisions of

Regulations in respect of above mentioned parameters. Apart from the

above, other suggestions have also been received seeking clarification

whether option of exercise of terminating PPA after ten operational

years is available to all wind energy generators for which tariff is

determined under the State Policy or by the Commission. It is further

requested by the Stakeholders that after ten operational years, above

wind energy generator may also be allowed to supply the energy

generated to open access consumers, captive power station or other

licensees or traders within or outside the State irrespective of the

default of payments from Licensees. It is observed that the above

comments/suggestions are not relevant to the present regulatory

exercise, therefore, these have not been dealt with.

9. The issues raised by the Stakeholders in their comments/suggestions

have broadly been grouped and summarized as under:

(1) Capital cost;

(2) Accelerated Depreciation (AD) benefit;

(3) Rate of Surcharge on MAT/Income Tax ;

(4) Discount Rate; and

(5) Competitive bidding.

10. The above issues and Commission’s analysis/decision thereon are

presented in the following paras:

(1) Capital Cost

Commission’s Proposal

11. Based on the capital indexation mechanism specified under

Regulation 23 of the RERC RE Tariff Regulations, 2014, a capital cost of `

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579.84 Lakh/MW has been proposed in the draft order for wind power

plants getting commissioned during FY 2016-17.

Comments/Suggestions received

12. The following comments have been received from the Stakeholders:

(a) CERC, vide order dated 5.01.2016, has made it mandatory for all

wind turbines to be fitted with LVRT system. The prevalent capital

cost indexation mechanism does not consider this additional

burden to be incurred per MW, which is approx. ` 25 to 30 Lakh.

Further, for compliance with F&S requirements, wind generators

would incur additional expenditure of ` 10-15 Lakh per MW to

install necessary data telemetry equipment, system and servers

and other associated infrastructure for data collection,

processing and exchange. The capital cost may be set at least

at par with CERC, i.e., ` 620 Lakh/MW to take care of

technological up-gradation and to comply with the mandatory

requirement as above.

(b) Capital cost arrived at using indexation mechanism is not

reflective of the trend shown in recent projects which is minimum

of ` 6.5 to 7 Cr/MW. This should be considered.

(c) To achieve minimum PLF of 20%, higher hub height turbines with

larger rotor diameters are to be deployed. The Capital cost for 80

meter height turbine is atleast ` 80 to 100 Lakh/MW more than

the turbines of lower hub height. An additional capital cost of

`100 Lakh/ MW may be considered to achieve the minimum CUF

of 20% as all high/middle hub height wind sites have already

been exploited.

(d) Capital cost specified in the draft order is very low as the

balance of plant cost is quite high in Rajasthan owing to

requirement of a heavier transformers and long evacuation lines.

Capital cost should be in the range of ` 750 to 800 Lakh/MW. The

draft order does not take into account the cost of forecasting &

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scheduling equipment mandated under draft RERC F& S

Regulations, 2016. Hence, a cost of ` 1 Lakh/MW per year

towards above may be included in Tariff calculations. Also, the

deviation charges for inaccuracies in scheduling should be

incorporated in the tariff order.

Commission’s views/decision

13. It is observed that Stakeholders have requested for increase in the

capital cost on account of market trends. Some have requested to

increase the capital cost on account of increase in hub height. Some

have requested for increase due to requirement of higher cost of

balance of plant, i.e., heavier transformers and long evacuation lines.

The Commission has specified the capital cost indexation mechanism

at Regulation 23 of the RERC RE Tariff Regulations, 2014 where the

effect of change of WPI steel index and WPI Electrical Machinery with

respect to the WPI of respective indices prevalent during the base year

has been captured. Thus, latest trends in capital cost are taken care of

by the mechanism specified in the Regulations and suggestion for

increase in the capital cost on account of above is not acceptable.

14. Requests from Stakeholders for increase in capital cost on account of

implementation of provisions of the draft RERC F&S Regulations, 2016

have also been received. It is felt that as per the Draft F&S Regulation,

the Forecasting and Scheduling of the wind energy generators is

envisaged at the pooling station or at the QCA level and cost on this

account shall be shared amongst number of WEGs connected

together as aforesaid. This is not expected to have material impact on

individual generators. Therefore, request of increasing capital cost on

account of above is not accepted.

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15. As regards the request for inclusion of cost of LVRT system in the capital

cost for WTG based on CERC Order dated 05.01.2016, the Commission

has considered the said Order of CERC. It is observed that as submitted

during the proceedings before CERC, CEA is still in the process of issuing

clarification in regard to the voltage level above which LVRT provision

would be mandatory. After issue of necessary regulations/clarifications

by CEA in this regard, the same requirement shall be applicable even

in case of WTG installed prior to 15.04.2014. In light of the above,

Commission decides that the suggestion of inclusion of LVRT system in

capital cost does not deserve consideration in this Order.

(2) Accelerated Depreciation Benefit

Commission’s Proposal

16. In the draft order, for determining accelerated depreciation (AD)

benefit, the depreciation rate of 80% of the written down value (WDV)

as per the Income Tax Act, 1961 has been compared with the

depreciation rate specified under the RERC RE Tariff Regulations, 2014,

i.e., 5.83% of the capital cost per annum on Straight Line Method (SLM)

basis for 12 years and the remaining depreciable value has been

spread over the remaining useful life of the project from the 13th Year

onwards.

Comments/Suggestions received

17. The following comments/suggestions have been received from the

Stakeholders:

(a) As per the Union Budget proposal for FY 2016-17, AD rate

provided under the Income Tax Act will be limited to maximum

40% from 1.04.2017. The new rate is applicable to all assets

(whether old or new) falling in the relevant block of assets. Thus,

the AD at the rate of 100%/80% will not be available from FY

2017-18 and onwards and accordingly, depreciation at the rate

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of 40% of written down value (WDV or operating balance) may

be considered for FY 2017-18 (i.e., 2nd year) and onwards in

determination of AD benefit.

(b) Since the announcement of reduction in AD rate made in the

Union Budget which impacts the overall AD benefit, the same

may be reworked.

(c) The tariff may be determined in line with the latest general

budget announcements and Finance Bill for FY 2017.

Commission’s views/decision

18. Commission has considered the GoI Notification

No.43/2014/F.No.152/1/2013-TPL S.O. 2399(E) dated 16.09.2014 and for

the purpose of assessing levellised AD benefit and the depreciation

rate of 80% has been considered in the draft order. The announcement

of limiting the maximum depreciation rate to 40% made in the Union

Budget-2016 is yet to be notified as an Amendment in the Income Tax

Act. Further, the proposed changes are to be applicable from FY 2017-

18, which may undergo further changes at a later date for which no

true up is available in the levellised generic tariff determination. CERC

has also considered AD rate of 80% in their draft RE Tariff order dated

30.03.2016. In consideration of the above, the Commission decides to

proceed with determination of AD benefit with the prevailing rate of

depreciation of 80% as per the Income Tax Act and

suggestions/comments in this respect are not accepted.

(3) Surcharge on MAT/Income Tax Rate

Commission’s Proposal

19. The Commission, in the draft order, for the purpose of grossing up the

base rate of RoE provided under Regulation 15(3) of the RERC RE Tariff

Regulations, 2014, has considered the MAT rate of 20.39% (= 18.50%

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MAT rate+7% surcharge + 3% cess) for first year and a MAT rate of

19.06% (= 18.5% MAT rate + 3% cess) for remaining nine years of the first

ten years. For remaining fifteen years of plant life (also equal to useful

life), the normal tax rate of 30.90% (= 30% tax rate + 3% cess) has been

applied. Similarly, for determination of levellised AD benefit also, a tax

rate of 33.06% (=30% tax rate+7% surcharge+3% cess) for the first year

and 30.90% (= 30% tax rate+ 3% cess) has been considered for

subsequent years.

Comments/Suggestions received

20. The following comments/suggestion have been received from the

Stakeholders:

(a) In the Union Budgets/Finance Acts subsequent to Amendment in

Income Tax Act announced in Union Budget for FY 2009-10,

surcharge/MAT has not been abolished and 12% surcharge has

been specified/retained for the Assessment Year 2016-17. There is

no guarantee that the Government would abolish surcharge in

future years. Therefore, surcharge of 12% on MAT/Income Tax

and Education Cess and Secondary & Higher Education cess of

3% may be considered. Accordingly, effective Income Tax rate

of 34.61% (30% + Surcharge 12% + Cess 3%) and effective MAT

Rate of 21.34% (18.5% + Surcharge 12% + Cess 3%) may be

considered for all the years, not just for first year only.

(b) Since Union Budget 2009-10, six years have passed, but

surcharge on Income Tax/MAT has not been abolished and

surcharge at the rate of twelve percent has been

specified/retained as reflected in Memorandum of Finance Bill-

2016. The surcharge at the rate of 12% will apply to wind power

generating companies who are having income above ` 10 Cr

and Income Tax may be considered for all years as under:

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Particulars MAT Income Tax

Base Rate 18.5% 30%

Surcharge 12% 12%

Education Cess and Secondary &

Higher Education Cess

3% 3%

Overall rate 21.34% 34.61%

(c) Surcharge has been considered for the first year only, ignoring

surcharge from year 2 to 25 based on APTEL Order dated

30.05.2011. The said APTEL Order, passed five years ago, had

estimated that Surcharge may be discontinued in future and

therefore, may not be applicable from year 2 to 25. However,

the surcharge has not only continued but has increased with

time. Commission has considered the lower rate of surcharge on

the basis that ‘most of the projects in the State are small’.

However, based on the investor wise data available on

commissioned wind capacity on the RRECL’s website, more than

60% of the installed capacity is not ‘small’ and therefore, would

be subject to higher rate of surcharge. Therefore, higher rate of

surcharge may be considered for all 25 years of the wind energy

generators for calculating the effective rate of Income Tax in

grossing up the RoE.

Commission’s views/decision

21. As regards suggestion of considering higher rate of surcharge of 12%, it

is observed that as per the Union Budget 2016, the rate of the

surcharge is 7% and is applicable in case of total income being more

than ` 1Cr but less than ` 10 Cr for a domestic company for FY 2016-17.

Further, it has been proposed that rate of surcharge of 12% is

applicable in case total income is more than ` 10 Cr. It is noticed from

the data received from RREC, that maximum number of the wind

power plants, set up during FY 2015-16 and supplying power to the

Distribution Licensee are of smaller individual capacity such that total

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annual income of such plants relevant for levellised tariff would be

lesser than ` 10 Cr. Therefore, these companies would not be subject to

surcharge rate of 12%. Further, it would not be prudent to consider a

higher rate of surcharge for a specific category in a generic tariff order.

Hence, suggestion of taking higher rate of surcharge is not accepted

and surcharge at the rate of 7% has been considered in the

computations of generic tariff.

22. As regards the suggestion of considering the surcharge at the effective

rate of MAT and Income tax for entire project life, the same has been

dealt in detail in the Tariff Order dated 16.07.2014. In the said order

Commission has relied upon the Hon’ble APTEL judgement in the

matter of M/s Enercon (India) Limited and Indian Wind Power Association

(Rajasthan State Council) vs. Rajasthan Electricity Regulatory Commission,

Jaipur and Ors. reported in 2011 ELR (APTEL) 0987 wherein APTEL had

upheld the methodology of not considering surcharge on MAT for

second to tenth year and on corporate tax for eleventh to twentieth

year. Therefore, the Commission considers it appropriate that no

change is required as far as levy of surcharge is concerned.

Considering above points, the Commission in the present order has also

determined the levellised tariff based on the methodology hitherto

followed.

(4) Discount Factor

Commission’s Proposal

23. Commission in the draft order has computed discount factor

considering the normative debt equity ratio and weighted average of

the post tax rates for interest and equity components. In the

computation, for loan component (i.e., 70%) of the capital cost, the

post tax interest rate of 13% multiplied by factor (1-Tax rate) has been

considered. For equity component (i.e.30%), post tax rate of return of

16% has been considered. In this manner, the discount factor has been

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computed as 10.78% [=70% * 12.76% * (1-33.06%) + 30% *16%] and

considered in computations of the levellised tariff.

Comments/Suggestions received

24. The following comments/suggestions have been received from the

Stakeholders:

(a) Instead of Income Tax Rate of 33.06% proposed in the draft

order, a Tax rate of 30.90%(30% tax + 3% education cess) may be

considered while computing discount factor as under:

DF =((IR*DC*(1-IT))+(RoE*EC)

=((12.76*0.70*(1-30.90%))+(16*0.30)

=10.97%

(b) The debt itself is paid off in the first 10-12 years and assuming a

lower post-tax cost of debt is counter intuitive. Discounting is

weighted average cost of capital, the post-tax cost of debt

during first ten years should be preferred over that thereafter. The

cost in the first 10-12 years affects the project viability the most

due to time value of money. Commission may consider WACC

based on post-MAT cost of debt, not post-Corporate tax cost of

debt.

Commission’s views/decision

25. The Commission has made the first Amendment in the RERC RE Tariff

Regulations, 2014 based on the provisions of CERC RE Tariff Regulations,

2012. It is stated that as per Income Tax Act, cost of debt is a tax

deductible expense and results in a tax shield by taking an allowable

deduction from taxable income. A project developer who if takes a

loan and pays interest on it, he ends up in paying less in the business

taxes by creation of a tax shield. Due to this tax shield, the effective

cost of capital of project reduces to the extent of the project

developers overall tax rate. Accordingly, a tax rate of 33.06% has been

considered in computation of discount rate. CERC also follows the

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same methodology of computation of Discount Rate. In Appeal

number 225 of 2013, Moser Baer Clean Energy Ltd vs. CERC, the

methodology of working of discount rate by CERC has been upheld by

Hon’ble APTEL. In consideration of this, Commission decides to retain

the income tax rate of 33.06% in computations of discount factor and

comments/suggestions in this regard are not accepted.

Competitive bidding

Commission’s Proposal

26. Government of India (GoI), in its National Tariff Policy notified on

28.01.2016 at para 6.4(2), provides that, except in the case of purchase

of power from the waste to energy plants States shall endeavour to

procure power from the renewable energy sources through

competitive bidding to keep the tariff low. Procurement of power by

Distribution Licensee from RE sources shall be done through

competitive bidding process from the date to be notified by the

Central Government. However, till such notification, any such

procurement of power from the renewable energy sources may be

done under Section 62 of the Electricity Act, 2003. Therefore, the

Commission in exercise of its power conferred under Section 62 read

with Section 64 of the Electricity Act, 2003 and the RERC RE Tariff

Regulations, 2014, proposed to determine the generic tariff of Wind

Power Plants getting commissioned during FY 2016-17.

Comments/Suggestions received

27. The following comments/suggestions have been received:

(a) In the absence of availability of standard documents, it may be

clarified whether the Distribution Licensees can prepare their

own tender documents and get them approved by the

Commission?

(b) The guidelines for procurement of RE power through competitive

bidding are yet to be notified by the Central Government under

Section 63 of the Electricity Act, 2003. Even Draft ‘Guidelines for

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Tariff Based Competitive Bidding Process of Grid Connected

Power projects based on Renewable Energy Sources’ as

prepared by MNRE does not include wind power. Therefore

under the circumstances, all power from wind energy plants

commissioned in FY 2016-17 ought to be purchased by

Distribution Companies on the basis of generic tariff to be

determined by the Commission on cost plus basis only.

Commission’s views/decision

28. It is stated that RERC RE Tariff Regulations, 2014 contain the enabling

provision for adopting tariff if such tariff has been determined through

a process of competitive bidding in accordance with the guidelines

issued by the Central Government as envisaged under Section 63 of

the Electricity Act, 2003. It is noticed that guidelines for procurement of

RE power through competitive bidding are yet to be notified by the

Central Government under Section 63 of the Electricity Act, 2003. On

notification only, these Guidelines would be legally enforceable.

Therefore, the Commission in exercise of its power conferred under

Section 62 read with Section 64 of the Electricity Act, 2003 and the

RERC RE Tariff Regulations, 2014, has determined the generic tariff of

Wind Power Plants to be commissioned during FY 2016-17.

The levellised generic tariff for wind power plants to be commissioned during

FY 2016-17.

29. The levellised generic tariff for wind power plants to be commissioned

during FY 2016-17 has been discussed below:

Useful Life

30. The Regulation 2(22) of RERC RE Tariff Regulations, 2014 provides for a

useful life of 25 years for wind power plants and accordingly, for

computation of generic tariff, a useful life of 25 years has been

considered.

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Tariff Period

31. The RERC RE Tariff Regulations, 2014 at Regulation 5 specify that the

tariff determined for the wind power plants getting commissioned

during the control period shall continue to be applicable for entire

duration of the tariff period as stipulated in Regulation 6 of the said

Regulations, which is 25 years for wind power plants.

Tariff Structure, Tariff Design and Levellised Tariff

32. As per Regulation 8 of the RERC RE Tariff Regulations, 2014, the tariff for

wind power plants shall be a single part tariff consisting of following

fixed cost components:

(a) Operation and Maintenance (O&M) Expenses;

(b) Depreciation;

(c) Interest on long-term loans;

(d) Interest on Working Capital; and

(e) Return on Equity.

33. As per Regulation 9 of the RERC RE Tariff Regulations, 2014, the generic

tariff for wind power plants shall be determined on levellised basis for

the tariff period. For the purpose of levellised tariff determination, the

discount factor has been considered as per RERC (Terms and

Conditions for Determination of Tariff for Renewable Energy Sources-

Wind and Solar Energy) (First Amendment) Regulations, 2015.

Accordingly, the discount factor of 10.78 % has been considered. The

calculations for discount factor are available at Annexure-II.

Capital Cost

34. The Commission at Regulation 22(2) of the RERC RE Tariff Regulations,

2014 has specified a normative capital cost of ` 565 Lakh/MW for FY

2014-15 inclusive of ` 25 Lakh/MW towards the cost of transmission

system including pooling station upto the interconnection point, and

this ` 25 Lakh/MW also includes ` 2 Lakh/MW for grid connectivity

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charges payable to Transmission licensee. The Capital cost for FY 2014-

15 has been escalated for FY 2016-17 at the rate of 2.635 % as per

Indexation Mechanism outlined under Regulation 23 of the RERC RE

Tariff Regulations, 2014, and accordingly, the capital cost for FY 2016-17

has been derived as ` 579.84 Lakh/MW inclusive of the cost of

transmission system including pooling station upto the interconnection

point, which also includes ` 2.00 Lakh/MW for grid connectivity charges

payable to Transmission Licensee for the FY 2016-17. The detailed

calculations for escalation for FY 2016-17 are available at Annexure-III.

Debt-Equity Ratio

35. The Debt-Equity ratio of 70:30 as envisaged at Regulation 15 of the

RERC RE Tariff Regulations, 2014 has been taken for working out the

debt and equity components of normative capital cost for

determination of levellised generic tariff.

Capacity Utilisation Factor (CUF) & de-ration in CUF

36. Regulation 24(1) of the RERC RE Tariff Regulations, 2014 provides for

CUF of 21% for Jaisalmer, Jodhpur and Barmer districts and 20% for

other districts. Further, Regulation 24(2) of the said Regulations also

stipulates a de-ration of 1.25% from 6th, 10th, 14th & 18th year in the

above CUFs. Accordingly, CUFs along with de-ration have been taken.

Operation & Maintenance (O&M) Expenses

37. Normative O&M expenses have been specified as ` 7.87 Lakh/MW for

wind power plants for FY 2014-15 in accordance with regulation 25(1)

of the RERC RE Tariff regulations 2014 and same have been escalated

at the rate of 5.85% per annum for FY 2016-17 and calculated as ` 8.82

Lakh/MW. The O&M Expenses have been escalated @ 5.85% over the

tariff period for computation of the levellised tariff for the plants to be

commissioned in FY 2016-17 as per the Regulation 25(2) of the RERC RE

Tariff Regulations, 2014.

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WIND 2016-17 Page 16 of 21

Depreciation

38. In accordance with Regulation 14 of the RERC RE Tariff Regulations,

2014, the rate of depreciation for the first 12 years has been considered

as 5.83% of the capital cost per annum and from 13th year onwards,

the remaining depreciable value has been spread over the balance

useful life of the wind power plant and transmission system.

Interest rate on long term loan

39. In accordance with sub-regulation (1) of Regulation 13 of the RERC RE

Tariff Regulations, 2014, the loan tenure of 12 years has been

considered for the purpose of determination of generic tariff for wind

power plants. Sub-regulation (2) of Regulation 13 of the said

Regulations further provides for the interest rate on long term loans as

300 basis points higher than the average State Bank of India (SBI) base

rate prevalent during first six months of the year previous to the relevant

year.

40. Accordingly, the average SBI base rate obtained from official website

of SBI prevalent during first six months of the year FY 2015-16 has been

considered for computation of applicable interest rate as shown in the

table below:

Table-1: Average SBI Base rate during first six months of FY 2015-16

Period from Period to Base rate No. of days

01.04.2015 09.04.2015 10.00% 9

10.04.2015 07.06.2015 9.85% 59

08.06.2015 30.09.2015 9.70% 115

Average SBI Base Rate 9.76% 183

41. In terms of the above, the interest rate of 12.76% (=9.76%+3.00%) has

been used for computation of interest on long term loan in generic

tariff computations, treating loan as 70% of the capital cost.

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WIND 2016-17 Page 17 of 21

Interest on working capital requirement

42. For the purpose of working capital requirement, the composition of

working capital has been taken as per regulation 16(1) of the RERC RE

Tariff Regulations, 2014.

43. In accordance with Regulation 16(2) of the RERC RE Tariff Regulations,

2014, the interest rate on working capital for wind power plants has

been taken as 250 basis points higher than the average of SBI Base rate

prevalent during first six months of FY 2015-16, which works out to be

12.26% (=9.76%+2.50%). Accordingly, a rate of 12.26% has been taken

as interest rate on working capital requirements.

Return on Equity

44. Regulation 15(2) of the RERC RE Tariff Regulations, 2014 provides for RoE

of 16% on equity base of 30% determined in accordance with

Regulation 12 of the said Regulations. As per Regulation 15(3) of the

RERC RE Tariff Regulations, 2014, RoE has been computed by grossing

up the base rate of 16% with tax rate equivalent to Minimum Alternate

Tax (MAT) for first 10 years from COD and normal tax rate for remaining

years of the project life. In line with the practice followed during the

previous control period, the MAT rate of 20.39% (= 18.5% MAT rate + 7%

surcharge + 3% education cess) has been considered for first year and

a MAT rate of 19.06% ( = 18.5% MAT rate + 3% education cess) has been

considered for remaining 9 years of the first 10 years. For remaining 15

years of plant life (also equal to useful life), the normal tax rate of

30.90% (= 30% tax rate + 3% education cess) has been applied for

grossing up of the base rate of Return on Equity.

Subsidy or incentive by the Central Government, including Accelerated

Depreciation

45. As per the Regulation 21 of the RERC RE Tariff Regulations, 2014, the

Commission shall take into consideration any incentive or subsidy or

benefit available from Central or State Government, including

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WIND 2016-17 Page 18 of 21

accelerated depreciation (AD) benefit, if availed by a generating

company, for the renewable energy power plants while determining

the tariff under these Regulations. Further, the Generation Based

Incentive/Tariff Subsidy, if allowed by the Central/ State Govt. would be

governed by the terms and conditions of such scheme.

46. For the purpose of determining the AD benefit, as dealt earlier, the

depreciation as per the Regulations (5.83% for 12 years and 2.50% for

the remaining useful life)( as also allowed under the Companies Act,

2013) has been compared with depreciation rate as per Income Tax

Act, i.e., 80% of the written down value vide GoI Notification

No.43/2014/F.No.152/1/2013-TPL S.O. 239(E) dated 16.09.2014. However,

in addition to this, an additional depreciation of 20% has been allowed

to the Wind Power Projects during the first year in an amendment in the

Finance Act, 2012. In this computation, the capitalization has been

considered during the second half of the fiscal year, as provided at

Regulation 21 of the RERC RE Tariff Regulations, 2014. The energy

available in the second half of the year has been taken as 30% of

annual generation as the energy availability from wind power plant in

the second half of the year is much lower than the first half, i.e., during

April to September 70% and 30% in the second half of the year. The

levellised generic tariff has been worked out considering both the

situations, viz., if AD benefit is availed and if not availed. The

computation sheets for AD benefit are available at Annexure-IV & V.

Levellised Tariff

47. The levellised tariff has been determined for the useful life of the wind

power plants, i.e., for 25 years. Therefore, PPA shall be for 25 years.

48. In light of the above position, the levellised generic tariff for wind power

plants to be commissioned during FY 2016-17 has been determined as

under:

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WIND 2016-17 Page 19 of 21

Table-2: Tariff for wind power plants to be commissioned during FY 16-17

S.

No. Particulars

Tariff (`/kWh) if

AD benefit is

not availed

Tariff (`/kWh) if

AD benefit is

availed

1 2 3 4

1 Wind Power Plants located

in Jaisalmer, Jodhpur &

Barmer districts

5.76 5.16

2 Wind Power Plants located

in districts other than

Jaisalmer, Jodhpur &

Barmer districts.

6.04 5.42

49. For wind power plants claiming the higher tariff worked out as above

for projects not availing higher depreciation benefit, the Commission

considers it appropriate to lay down modalities as under:

(1) The PPA shall include an undertaking of the wind power generator

that AD benefit would not be availed for the generating

plant/unit.

(2) The first bill raised by the wind power generator shall be

accompanied by an undertaking that AD benefit shall not be

claimed. Based on this, the applicable tariff would be allowed.

(3) The claims of energy charges as per applicable tariff may be

entertained based on the said undertaking upto the due date of

filing of Income Tax Return of the relevant financial year. This

would mean 30th September, 2017 for payment for the financial

year 16-17 and for the first six months (upto 30th September) of

financial year 17-18 and so on.

(4) After filing of Income Tax Return, a certificate from a Chartered

Accountant (CA) that AD benefit has not been claimed shall have

to be submitted or in the alternative a copy of Income Tax Return

filed with Income Tax Department wherein AD benefit has not

been claimed along with verification of Tax Consultant may be

furnished.

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WIND 2016-17 Page 20 of 21

(5) As Income Tax Return is required to be filed in the next year, the

payment of amount corresponding to non-availment of AD

benefit in respect of energy supplied in the month of October

onwards of the financial year following the financial year of

commissioning of the plant would be made only after the said

certificate/copy of Income Tax Return is furnished.

(6) For the energy supplied in the months of October onwards, the

methodology as given in sub-paras (4) & (5) above shall be

followed.

50. Commission also considers it appropriate that the undertaking of the

wind power generator in PPA stating that benefit of AD would not be

claimed shall also include an undertaking that in case it is found that

benefit of AD benefit has been claimed, as per third proviso to

regulation 21 of the RERC RE Tariff Regulations, 2014, the Distribution

Licensee shall be entitled to recover the amount wrongly claimed by

power generator along with penal charges @ 1.50% per month

calculated on daily basis.

51. Similarly, annual undertaking shall need to be furnished if CDM benefit

is not availed. However, if CDM benefit is availed, it shall be shared

between the Distribution Licensee and Generating Company as

envisaged in Regulation 20 of the RERC RE Tariff Regulations, 2014.

52. The metering arrangement shall be as per regulation 37 of the RERC RE

Tariff Regulations, 2014.

53. The Commission, in exercise of its power conferred under Section 62

read with Section 64 of the Electricity Act, 2003 and the RERC RE Tariff

Regulations, 2014, determines the generic tariff of Wind Power Plants as

detailed in Annexure-IV and Annexure-V. The above Tariff is applicable

for the Wind Power Plants commissioned on or after 1.04.2016 and till

31.03.2017.

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WIND 2016-17 Page 21 of 21

54. Copy of this order may be sent to the State Government, Central

Electricity Authority (CEA), Rajasthan Renewable Energy Corporation

Ltd (RREC), Distribution Licensees and all Stakeholders.

(Raghuvendra Singh)

Member

(Vinod Pandya)

Member

(Vishvanath Hiremath)

Chairman

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Annexure-I

List of Stakeholders, who submitted their suggestions/comments:

S.

No.

Name of Stakeholder

1. M/s InWEA

2. M/s ReGen infrastructure and Services Private Ltd.

3. M/s Rudraksh Energy

4. M/s Wind World (India) Ltd.

5. M/s Indian Wind Power Association

6. M/s Tanot Wind Power Ventures Pvt. Ltd.

7. M/s Mahindra Susten Pvt. Ltd.

8. M/s Inox Renewables Ltd.

9. M/s Sri Karthikeya Spinning & Weaving Mills Pvt. Ltd.

10. M/s Leap Green Energy Pvt. Ltd.

11. M/s General Electric (Late Received)

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Annexure-II

Calculation of Discount Factor for FY 2016-17 as per the RERC (Terms and

Conditions for Determination of Tariff for Renewable Energy Sources - Wind

and Solar Energy) (First Amendment) Regulations, 2015:

DF = ((IR * DC * (1-IT)) + (ROE * EC)

= ((12.76 * 0.70 * (1- 33.06%)) + (16 * 0.30)

= 10.78%

Where,

DF = Discount Factor,

IR = Interest rate in percentage,

DC = Debt Component,

IT = Income tax rate,

ROE = Return on Equity in percentage,

EC = Equity Component

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Annexure-III

Capital Cost Indexation for Wind Power Projects (FY 2016-17)

Indexation Formulation

CC(n) = P&M(n)*[1+F1+F2+F3]

d(n) = (a*(SI(n-1)/ SI(0))-1)+b*( EI(n-1)/ EI(0))-1))/(a+b)

= (0.60*(130.04/126.2)-1)+0.40*(138.36/135.62)-1))/(0.6+0.4)

= 0.02635= 2.635%

P&M(n) = P&M(0)*(1+d(n))

= 450.40 * (1+0.02635) = 462.27

Variable Description Value

a Weightage for Steel Index 0.60

b Weightage for Electrical Machinery Index 0.40

F1 Factor for land and civil work 0.08

F2 Factor for Erection and Commissioning 0.07

F3 Factor for IDC and Financing 0.10

Month/Year Electrical Machinery Steel

2015 2013 2015 2013

January 139.0 133.9 129.4 126.2

February 139.0 133.8 130.1 126.2

March 138.2 134.1 130.1 126.2

April 137.9 134.5 130.1 126.2

May 137.9 135.5 130.1 126.2

June 138.2 135.6 130.1 126.2

July 138.3 135.6 130.1 126.2

August 138.4 135.7 130.1 126.2

September 138.4 136.3 130.1 126.2

October 138.3 137.1 130.1 126.2

November 138.3 137.5 130.1 126.2

December 138.4 137.8 130.1 126.2

Average 138.36 135.62 130.04 126.2

Parameters Description Value

CC(0) (` L/MW) Capital Cost for the base year 565

P&M(0) (` L/MW) Plant and Machinery cost for the base year 450.40

d(n) Capital Cost Escalation Factor 2.635%

P&M(n) (` L/MW) Plant and Machinery cost for the nth year

(FY 2016-17)

462.27

CC(n) (` L/MW) Capital Cost for the nth year (FY 2016-17) 579.84

Source of WPI (Steel and Electrical Machinery): Office of Economic Advisor,

Ministry of Commerce and Industry (www.eaindustry.nic.in)

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TARIFF FOR WIND POWER PLANTS LOCATED IN JAISALMER,BARMER & JODHPUR DISTRICTS FY 2016-17

Annexure-IV

5.7552

5.76

0.5925

5.1627

5.16

Case Select Option 1

2

S. No.Assumption

HeadSub-Head Sub-Head (2) Unit Base Case

1 Power Generation

Capacity

Installed Power Generation Capacity MW 1

CUF % 21%

Deration factor % 1.25

Life of Transmission system Years 35

Life of Power Plant Years 25

2 Project CostCapital Cost/MW inc Land,Trans &Connectivity charges (Rs 2 Lacs)Rs Lakh/MW 579.84

Project Cost Power Plant Cost + Transmission charges Rs Lakh/MW 577.84

Conectivity charges Rs Lakh/MW 2.00

3 Sources of Funds

Debt: Equity

Debt % 70%

Equity % 30%

Total Debt Amount Rs Lakh 405.88

Total Equity Amout Rs Lakh 174

Funding Options-1 (Domestic Loan Source-1)

Loan Amount Rs Lakh 405.88

Moratorium Period years 0

Interest Rate % 12.76%

Loan repayment per annum Rs Lakh 33.82

Funding Options-2 ( Equity Finance )

Equity amount Rs Lakh 174

Return on Equity % p.a 16.00%

Discount Rate 10.78%

4 Financial Assumptions

Fiscal Assumptions

Income Tax (for yr-11 to yr-25) % 30.90%

MAT Rate (for yr-1) % 20.39%

MAT Rate (for yr-2 to yr-10) % 19.06%

80 IA benefits Yes/No Yes

Accelerated Depreciation benefit Rs/kWh 0.59

Depreciation

Depreciation Rate % 5.83%

Years for 5.83% rate Years 12

5 Working Capital Requirement

O&M Charges Months 1

Maintenance Spare (% of O&M expenses) % 15%

Receivables for Debtors Months 1.5

Interest On Working Capital % 12.26%

6 Operation & Maintenance Expenses (2015-16)

Total O&M Expenses Rs Lakh/MW Rs Lakh/MW 8.82

Total O & M Expenses Escalation % 5.85%

Months of Operations Months 12

Working Hours/Day Hrs 24

No. of Days Days 365

Total No. of Hours Hrs 8760

Levelised Tariff (Rs/kWh) without AD

Accelerated Depreciation benefit (Rs/kWh)

Levelised Tariff (Rs/kWh) with AD

Levelised Tariff (Rs/kWh) with AD (Rounding off)

Levelised Tariff (Rs/kWh) without AD (Rounding off)

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TARIFF FOR WIND POWER PLANTS LOCATED IN JAISALMER,BARMER & JODHPUR DISTRICTS FY 2016-17 Annexure-IV contd…

Units Generation Unit Year---> 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Deration in capacity % 0% 0% 0% 0% 0% 1.25% 1.25% 1.25% 1.25% 2.50% 2.50% 2.50% 2.50% 3.75% 3.75% 3.75% 3.75% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%

Installed Capacity MW 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Generation MU 1.84 1.84 1.84 1.84 1.84 1.82 1.82 1.82 1.82 1.79 1.79 1.79 1.79 1.77 1.77 1.77 1.77 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75

Cost of generation Unit Year---> 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

O&M Expenses Rs Lakh 8.82 9.33 9.88 10.46 11.07 11.72 12.40 13.13 13.90 14.71 15.57 16.48 17.44 18.46 19.54 20.69 21.90 23.18 24.54 25.97 27.49 29.10 30.80 32.60 34.51

Depreciation Rs Lakh 33.82 33.82 33.82 33.82 33.82 33.82 33.82 33.82 33.82 33.82 33.82 33.82 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92

Interest on term loan Rs Lakh 49.65 45.33 41.01 36.69 32.38 28.06 23.74 19.43 15.11 10.79 6.48 2.16 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Interest on working Capital Rs Lakh 2.24 2.18 2.14 2.10 2.06 2.02 1.98 1.95 1.92 1.89 1.95 1.92 1.54 1.59 1.64 1.69 1.74 1.80 1.86 1.92 1.99 2.06 2.14 2.22 2.31

Return on Equity Rs Lakh 34.96 34.38 34.38 34.38 34.38 34.38 34.38 34.38 34.38 34.38 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28

Total Cost of generation Rs Lakh 129.48 125.05 121.24 117.46 113.71 110.01 106.34 102.71 99.13 95.60 98.10 94.66 68.19 69.25 70.38 71.58 72.84 74.18 75.59 77.09 78.68 80.36 82.14 84.02 86.01

Per unit Cost of generation Rs/kWh 7.04 6.80 6.59 6.39 6.18 6.06 5.85 5.65 5.46 5.33 5.47 5.28 3.80 3.91 3.97 4.04 4.11 4.24 4.33 4.41 4.50 4.60 4.70 4.81 4.92

Levellised Tariff (Rs/kWh) 5.76 25 years

Note(s):

1.Levelised tariff has been worked out by carrying out levelisation over 25 years and with normative debt equity ratio (70:30).

2. Figures may not tally exactly on account of rounding of .

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Determination of Higher Depreciation Benefit for Wind Power Projects

Depreciation amount 90% Annexure-IV contd...

Book Depreciation rate 5.83%

Tax Depreciation rate 80%

Additional depreciation rate

applicable during first year

20%

Income Tax 33.06% 30.90% (yr-2 onwards)

Capital Cost 579.84 Rs Lakh/MW

Year(s)--> Unit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Depreciation % 2.92% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54%

Depreciation Rs Lacs 16.90 33.80 33.80 33.80 33.80 33.80 33.80 33.80 33.80 33.80 33.80 33.80 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94

Higher Depreciation Benefit

Opening balance % 100.00% 50.00% 5.00% 1.00% 0.20% 0.04% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Allowed during the year % 50.00% 45.00% 4.00% 0.80% 0.16% 0.03% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Closing % 50.00% 5.00% 1.00% 0.20% 0.04% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Higher depreciation Rs Lacs 289.92 260.93 23.19 4.64 0.93 0.19 0.04 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Net depreciation benefit Rs Lacs 273.02 227.12 (10.61) (29.17) (32.88) (33.62) (33.77) (33.80) (33.80) (33.80) (33.80) (33.80) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94)

Tax Benefit Rs Lacs 90.27 70.18 (3.28) (9.01) (10.16) (10.39) (10.43) (10.44) (10.45) (10.45) (10.45) (10.45) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76)

Discounted Tax Benefit Rs Lacs 90.27 66.77 (2.82) (6.99) (7.11) (6.56) (5.95) (5.38) (4.85) (4.38) (3.95) (3.57) (0.85) (0.77) (0.69) (0.63) (0.57) (0.51) (0.46) (0.42) (0.38) (0.34) (0.31) (0.28) (0.25)

Levelised tax benefit Rs Lacs 9.96

Energy Generation MU 0.55 1.84 1.84 1.84 1.84 1.82 1.82 1.82 1.82 1.79 1.79 1.79 1.79 1.77 1.77 1.77 1.77 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75

Discounted Generation MU 0.55 1.75 1.58 1.43 1.29 1.15 1.04 0.94 0.84 0.75 0.68 0.61 0.55 0.49 0.45 0.40 0.36 0.32 0.29 0.26 0.24 0.21 0.19 0.17 0.16

Levelised generation MU 1.68

Per Unit Benefit Rs/kWh 16.36 3.81 (0.18) (0.49) (0.55) (0.57) (0.57) (0.57) (0.57) (0.58) (0.58) (0.58) (0.15) (0.16) (0.16) (0.16) (0.16) (0.16) (0.16) (0.16) (0.16) (0.16) (0.16) (0.16) (0.16)

Discount Factor 1.00 0.90 0.81 0.74 0.66 0.60 0.54 0.49 0.44 0.40 0.36 0.32 0.29 0.26 0.24 0.22 0.19 0.18 0.16 0.14 0.13 0.12 0.11 0.09 0.09

Applicable Discount Factor 1.00 0.95 0.86 0.78 0.70 0.63 0.57 0.51 0.46 0.42 0.38 0.34 0.31 0.28 0.25 0.23 0.20 0.18 0.17 0.15 0.14 0.12 0.11 0.10 0.09

Levelised ITAX benefit Rs/kWh

0.5925

Note(s):

1.In the above calculations, depreciation for the first year has been considered as 50%(= 50% of (80%+20%)) as per CERC methodology

3. For working out Tax benefit, income tax rate for the first year has been considered as 33.06% and 30.90% has been considered for remaining useful life.

TARIFF FOR WIND POWER PLANTS LOCATED IN JAISALMER,BARMER & JODHPUR DISTRICTS FY 2016-17

4. Figures may not tally exactly on account of rounding off.

2. Generation for the first year has been considered as 30% of the normative generation for the second half of the financial year.

Page 28: RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPURrerc.rajasthan.gov.in/TariffOrders/Order239.pdf · RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPUR ... Rajasthan Patrika : 18.02.2016

TARIFF FOR WIND POWER PLANTS LOCATED IN DISTRICTS OTHER THAN JAISALMER,BARMER & JODHPUR FY 2016-17

Annexure-V

6.0430

6.04

0.6221

5.4209

5.42

Case Select Option 2

2

S. No.Assumption

HeadSub-Head Sub-Head (2) Unit Base Case

1 Power Generation

Capacity

Installed Power Generation Capacity MW 1

CUF % 20%

Deration factor % 1.25

Life of Transmission system Years 35

Life of Power Plant Years 25

2 Project CostCapital Cost/MW inc Land,Trans &Connectivity charges (Rs 2 Lacs)Rs Lakh/MW 579.84

Project Cost Power Plant Cost + Transmission charges Rs Lakh/MW 577.84

Conectivity charges Rs Lakh/MW 2.00

3 Sources of Funds

Debt: Equity

Debt % 70%

Equity % 30%

Total Debt Amount Rs Lakh 405.88

Total Equity Amout Rs Lakh 174

Funding Options-1 (Domestic Loan Source-1)

Loan Amount Rs Lakh 405.88

Moratorium Period years 0

Interest Rate % 12.76%

Loan repayment per annum Rs Lakh 33.82

Funding Options-2 ( Equity Finance )

Equity amount Rs Lakh 174

Return on Equity % p.a 16.00%

Discount Rate 10.78%

4 Financial Assumptions

Fiscal Assumptions

Income Tax (for yr-11 to yr-25) % 30.90%

MAT Rate (for yr-1) % 20.39%

MAT Rate (for yr-2 to yr-10) % 19.06%

80 IA benefits Yes/No Yes

Accelerated Depreciation benefit Rs/kWh 0.62

Depreciation

Depreciation Rate % 5.83%

Years for 5.83% rate Years 12

5 Working Capital Requirement

O&M Charges Months 1

Maintenance Spare (% of O&M expenses) % 15%

Receivables for Debtors Months 1.5

Interest On Working Capital % 12.26%

6 Operation & Maintenance Expenses (2015-16)

Total O&M Expenses Rs Lakh/MW Rs Lakh/MW 8.82

Total O & M Expenses Escalation % 5.85%

Months of Operations Months 12

Working Hours/Day Hrs 24

No. of Days Days 365

Total No. of Hours Hrs 8760

Levelised Tariff (Rs/kWh) without AD

Accelerated Depreciation benefit (Rs/kWh)

Levelised Tariff (Rs/kWh) with AD

Levelised Tariff (Rs/kWh) with AD (Rounding off)

Levelised Tariff (Rs/kWh) without AD (Rounding off)

Page 29: RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPURrerc.rajasthan.gov.in/TariffOrders/Order239.pdf · RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPUR ... Rajasthan Patrika : 18.02.2016

TARIFF FOR WIND POWER PLANTS LOCATED IN DISTRICTS OTHER THAN JAISALMER,BARMER & JODHPUR FY 2016-17 Annexure-V contd…

Units Generation Unit Year---> 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Deration in capacity % 0% 0% 0% 0% 0% 1.25% 1.25% 1.25% 1.25% 2.50% 2.50% 2.50% 2.50% 3.75% 3.75% 3.75% 3.75% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%

Installed Capacity MW 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Generation MU 1.75 1.75 1.75 1.75 1.75 1.73 1.73 1.73 1.73 1.71 1.71 1.71 1.71 1.69 1.69 1.69 1.69 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66

Cost of generation Unit Year---> 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

O&M Expenses Rs Lakh 8.82 9.33 9.88 10.46 11.07 11.72 12.40 13.13 13.90 14.71 15.57 16.48 17.44 18.46 19.54 20.69 21.90 23.18 24.54 25.97 27.49 29.10 30.80 32.60 34.51

Depreciation Rs Lakh 33.82 33.82 33.82 33.82 33.82 33.82 33.82 33.82 33.82 33.82 33.82 33.82 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92 8.92

Interest on term loan Rs Lakh 49.65 45.33 41.01 36.69 32.38 28.06 23.74 19.43 15.11 10.79 6.48 2.16 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Interest on working Capital Rs Lakh 2.24 2.18 2.14 2.10 2.06 2.02 1.98 1.95 1.92 1.89 1.95 1.92 1.54 1.59 1.64 1.69 1.74 1.80 1.86 1.92 1.99 2.06 2.14 2.22 2.31

Return on Equity Rs Lakh 34.96 34.38 34.38 34.38 34.38 34.38 34.38 34.38 34.38 34.38 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28 40.28

Total Cost of generation Rs Lakh 129.48 125.05 121.24 117.46 113.71 110.01 106.34 102.71 99.13 95.60 98.10 94.66 68.19 69.25 70.38 71.58 72.84 74.18 75.59 77.09 78.68 80.36 82.14 84.02 86.01

Per unit Cost of generation Rs/kWh 7.39 7.14 6.92 6.70 6.49 6.36 6.15 5.94 5.73 5.60 5.74 5.54 3.99 4.11 4.17 4.24 4.32 4.46 4.54 4.63 4.73 4.83 4.94 5.05 5.17

Levellised Tariff (Rs/kWh) 6.04 25 years

Note(s):

1.Levelised tariff has been worked out by carrying out levelisation over 25 years and with normative debt equity ratio (70:30).

2. Figures may not tally exactly on account of rounding of .

Page 30: RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPURrerc.rajasthan.gov.in/TariffOrders/Order239.pdf · RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPUR ... Rajasthan Patrika : 18.02.2016

Determination of Higher Depreciation Benefit for Wind Power Projects

Depreciation amount 90% Annexure-V contd...

Book Depreciation rate 5.83%

Tax Depreciation rate 80%

Additional depreciation rate

applicable during first year

20%

Income Tax 33.06% 30.90% (yr-2 onwards)

Capital Cost 579.84 Rs Lakh/MW

Year(s)--> Unit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Depreciation % 2.92% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 5.83% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54% 1.54%

Depreciation Rs Lacs 16.90 33.80 33.80 33.80 33.80 33.80 33.80 33.80 33.80 33.80 33.80 33.80 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94 8.94

Higher Depreciation Benefit

Opening balance % 100.00% 50.00% 5.00% 1.00% 0.20% 0.04% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Allowed during the year % 50.00% 45.00% 4.00% 0.80% 0.16% 0.03% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Closing % 50.00% 5.00% 1.00% 0.20% 0.04% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Higher depreciation Rs Lacs 289.92 260.93 23.19 4.64 0.93 0.19 0.04 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Net depreciation benefit Rs Lacs 273.02 227.12 (10.61) (29.17) (32.88) (33.62) (33.77) (33.80) (33.80) (33.80) (33.80) (33.80) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94) (8.94)

Tax Benefit Rs Lacs 90.27 70.18 (3.28) (9.01) (10.16) (10.39) (10.43) (10.44) (10.45) (10.45) (10.45) (10.45) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76) (2.76)

Discounted Tax Benefit Rs Lacs 90.27 66.77 (2.82) (6.99) (7.11) (6.56) (5.95) (5.38) (4.85) (4.38) (3.95) (3.57) (0.85) (0.77) (0.69) (0.63) (0.57) (0.51) (0.46) (0.42) (0.38) (0.34) (0.31) (0.28) (0.25)

Levelised tax benefit Rs Lacs 9.96

Energy Generation MU 0.53 1.75 1.75 1.75 1.75 1.73 1.73 1.73 1.73 1.71 1.71 1.71 1.71 1.69 1.69 1.69 1.69 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66

Discounted Generation MU 0.53 1.67 1.50 1.36 1.23 1.09 0.99 0.89 0.80 0.72 0.65 0.58 0.53 0.47 0.42 0.38 0.35 0.31 0.28 0.25 0.23 0.20 0.18 0.17 0.15

Levelised generation MU 1.60

Per Unit Benefit Rs/kWh 17.17 4.01 (0.19) (0.51) (0.58) (0.60) (0.60) (0.60) (0.60) (0.61) (0.61) (0.61) (0.16) (0.16) (0.16) (0.16) (0.16) (0.17) (0.17) (0.17) (0.17) (0.17) (0.17) (0.17) (0.17)

Discount Factor 1.00 0.90 0.81 0.74 0.66 0.60 0.54 0.49 0.44 0.40 0.36 0.32 0.29 0.26 0.24 0.22 0.19 0.18 0.16 0.14 0.13 0.12 0.11 0.09 0.09

Applicable Discount Factor 1.00 0.95 0.86 0.78 0.70 0.63 0.57 0.51 0.46 0.42 0.38 0.34 0.31 0.28 0.25 0.23 0.20 0.18 0.17 0.15 0.14 0.12 0.11 0.10 0.09

Levelised ITAX benefit Rs/kWh

0.6221

Note(s):

1.In the above calculations, depreciation for the first year has been considered as 50%(= 50% of (80%+20%)) as per CERC methodology

3. For working out Tax benefit, income tax rate for the first year has been considered as 33.06% and 30.90% has been considered for remaining useful life.

TARIFF FOR WIND POWER PLANTS LOCATED IN DISTRICTS OTHER THAN JAISALMER,BARMER & JODHPUR FY 2016-17

4. Figures may not tally exactly on account of rounding off.

2. Generation for the first year has been considered as 30% of the normative generation for the second half of the financial year.