GERC Regulations 9Chapter 9 · Chapter 9

Section 9 · Annual review of performance

- 9.1 Where the aggregate revenue requirement and expected revenue from tariff and charges of a Generating Company or Licensee is covered under a multi-year tariff framework, then such Generating Company or Licensee, as the case may be, shall be subject to an annual performance review during the control period in accordance with this Regulation.

9.2

The Licensee or Generating Company shall make an application for annual performance review within the following time:

(a)

The application for determination of tariff for any financial year shall be made not less than one hundred and twenty (120) days before the commencement of such financial year;

(b)

The application for annual performance review during any financial year of the control period shall be made not less than one hundred and twenty (120) days before the close of such financial year:

Provided that the Licensee or Generating Company, as the case may be, submit to the Commission information in such form as may be stipulated by the Commission from time to time, together with the Accounting Statements, extracts of books of account and such other details as the Commission may require to assess the reasons for and extent of any variation in financial performance from the approved forecast of aggregate revenue requirement and expected revenue from tariff and charges:

9.3The scope of the annual performance review shall be a comparison of the performance of the Generating Company or Licensee with the approved forecast of aggregate revenue requirement and expected revenue from tariff and charges and shall comprise the following:

(a)A comparison of the audited performance of the applicant for the previous financial year with the approved forecast for such previous financial year;and

(b)A comparison of the performance of the applicant for the first half of the current financial year with the approved forecast for the current financial year and

(c)Any other relevant details, if any

9.4The applicant shall submit the information required for the annual performance review in such form as may be stipulated by the Commission from time to time.

9.5For the variables stipulated by the Commission under Regulation 7.7, the Commission shall carry out a detailed review of performance of the applicant vis-a-vis the approved forecast, as part of the annual performance review.

9.6Upon completion of the review under Regulation 9.5 above, the Commission shall attribute any variations or expected variations in performance, for variables stipulated under Regulation 7.7 above, to factors within the control of the applicant (controllable factors) or to factors beyond the control of the applicant (uncontrollable factors):Explanation. - For the purpose of these Regulations, the term uncontrollable factors shall include the following factors which were beyond the control of, and could not be mitigated by, the applicant, as determined by the Commission-

(a)Force Majeure Events;

(b)Changes in law, judicial pronouncements and Orders of the Central Government, State Government or Commission;

(c)Economy-wide influences, such as unforeseen changes in inflation rate, market-interest rates, taxes and statutory levies.

9.6.1Some illustrative variations or expected variations in the performance of the applicant which may be attributed by the Commission to uncontrollable factors include, but are not limited to, the following:

(a)Variation in the price of fuel and/ or price of power purchase according to the FCA/FPPPA formula approved by the Commission from time to time;

(b)Variation in the number or mix of consumers or quantities of electricity supplied to consumers;

(c)Expenses on account of Inflation;

(d)Taxes on Income.

Provided that where there is more than one Distribution Licensee within the area of supply of the applicant, then any variation in the number or mix of consumers or in the quantities of electricity supplied to consumers within the area served by two or more such Distribution Licensees shall be attributable to controllable factors:Provided further that where any consumer or category of consumers within the area of supply of the applicant is eligible for open access under sub-section (3) of Section 42 of the Act, then any variation in the number or mix of such consumers or quantities of electricity supplied to such eligible consumers shall be attributable to controllable factors;

9.6.2Some illustrative variations or expected variations in the performance of the applicant which may be attributed by the Commission to controllable factors include, but are not limited to, the following:

(a)Variations in capital expenditure on account of time and/ or cost overruns / efficiencies in the implementation of a capital expenditure project not attributable to an approved change in scope of such project, change in statutory levies or force majeure events;

(b)Variations in technical and commercial losses, including bad debts;

(c)Variations in the number or mix of consumers or quantities of electricity supplied to consumers as specified in the first and second proviso to clause

(b)of Regulation 9.6.1;

(d)Variations in working capital requirements;

(e)Variation in expenses like: (i) Operation & Maintenance expanses , (ii) Employee Cost, (iii) Admn. & General expenses, (iv) Interest & Finance Charges, (v) Return on Equity, Depreciation, (vi) Non-tariff income;

However, expenses at (i), (ii) & (iii) are relatable to relevant Inflation Indices and/or any pay revision agreement in the economy and expenses like (iv) & (v) are relatable to applicable interest rates;

(f)Failure to meet the standards specified in the Standards of Performance Regulations, except where exempted in accordance with those Regulations;

(g)Variations in labour productivity;

(h)Variations in any variable other than those stipulated by the Commission under Regulation 9.6 above.

9.7Upon completion of the annual performance review, the Commission shall pass an order recording:

(a)the approved aggregate gain or loss to the Generating Company or Licensee on account of uncontrollable factors and the mechanism by which the Generating Company or Licensee shall pass through such gains or losses in accordance with Regulation 10;

(b)the approved aggregate gain or loss to the Generating Company or Licensee on account of controllable factors and the amount of such gains or such losses that may be shared in accordance with Regulation 11;

(c)the approved modifications to the forecast of the Generating Company or Licensee for the remainder of the control period, if any, under Regulation 9.5.

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