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COMPONENETS OF TRANSMISSION TARIFF & SAMPLE CALCULATION OF TARIFF

COMPONENETS OF TRANSMISSION TARIFF & SAMPLE CALCULATION OF TARIFF. MAY 15 TH , 2009. PRESENTED BY SH. S.S.RAJU Ch Manager (COMMERCIAL). TARIFF COMPONENTS ( As per 2009-14 period) RETURN ON EQUITY (ROE) DEPRECIATION (DEP) INTEREST ON LOAN (IOL) OPERATION & MAINTENANCE (O&M)

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COMPONENETS OF TRANSMISSION TARIFF & SAMPLE CALCULATION OF TARIFF

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  1. COMPONENETS OF TRANSMISSION TARIFF &SAMPLE CALCULATION OF TARIFF MAY 15TH , 2009 PRESENTED BY SH. S.S.RAJU Ch Manager (COMMERCIAL)

  2. TARIFF COMPONENTS ( As per 2009-14 period) • RETURN ON EQUITY (ROE) • DEPRECIATION (DEP) • INTEREST ON LOAN (IOL) • OPERATION & MAINTENANCE (O&M) • INTEREST ON WORKING CAPITAL (IOWC) • 1 MONTH O&M • 2 MONTHS RECEIVABLE • Maintenance spares @ 15% of O&M Exp

  3. CALCULATION OF TARIFF : • Capital Cost of the Project : Rs 100 Crs • Loan : Rs 70 Crs • Equity : Rs 30 Crs • Rate of Interest (IOL) : 9.5% PA • Repayment of loan : 12 yrs • IOWC : 12.25% • DOCO : 1St April’2001 • O&M ( Line & Bay details) : Bay – 2 no 400 kV Bays Line – 400 kV D/C 135 Kms ( Twin conductor) • Actual availability : 99.5%

  4. Thank you

  5. Computation and payment of transmission charges • The transmission charges (inclusive of incentive ) payable for a calendar month for a transmission system or part thereof shall be • = AFC x( NDM/NDY) x (TAFM/NATAF) • Where, • AFC = annual fixed cost specified for the year, in Rs • NATAF = Normative annual transmission availability factor, in per cent • NDM = number of days in the month • NDY = number of days in the year • TAFM = transmission system availability factor for the month, in per cent, computed in accordance with appendix IV -; • (3) The transmission charges hall be calculated separately for part of the transmission system having different NATAF, and aggregated thereafter, according to their sharing by their beneficiaries.

  6. Incentive • = Equity x (Annual availability achieved- Target Availability) • Target Availability • Where Normative Availability for • AC system = 98% • HVDC system= 95% • In case of Annual Availability is below Normative Availability the prorata tariff shall be charged.

  7. Cost of equity calculated using CAPM ke= Rf + b (Rm – Rf) • Risk Free rate (Rf): 7.58% • 10 year Government bond yield as on date • Market Premium : 16.9%-17.67 % • Scenario 1: CAGR between Jan 1991 and average of daily closing of last one year (1st Oct 07 to 30th Sep 08) • Scenario 2: CAGR between Jan 1991 and average of daily closing of last six months (1st April 08 to 30th Sep 08) • Industry levered beta – 1.09 • RoE – • Scenario 1 – [7.58% + 1.09 * (10.09%)] = 18.58% • Scenario 2 – [7.58% + 1.09 * (9.32%)] = 17.74% ke = Cost of equity Rf = Risk free rate of return b = equity beta Rm = Return on the market Levered Beta : Unlevered Beta*[1+ (Industry average DE ratio)* (1-Average effective tax rate)] : 0.80*[1+ (0.46)*(1-20%)] = 1.09

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