The Appellate Tribunal for Elecricity (ATE) has allowed the Karnataka Power Transmission Corporation Limited (KPTCL) to include the interest and finance charges in the revenue requirements proposed for the tariff period 2007-08 to 2009-10 for undertaking modernisation of transmission systems of KPTCL.

In its order dated December 4, the ATE has observed that as interest and finance charges are merely provisional payments, the KERC need not discontinue its decade-old practice of allowing the interest and finance charges to the licensee till the capitalization of the assets.

The KPTCL had proposed the following interest and finance charges in the revenue requirements proposed for  2007-08= Rs. 495.85 crores. 2008-09= Rs. 617.14 crores and 2009-10= Rs. 757.26 crores
But in its order dated July 6, 2007 the KERC rejected the KPTCL’s plea on the ground that  the interest and finance charges related to investment in transmission system proposed cannot be allowed till the investment is capitalized. Subsequently the KPTCL challenged the KERC’s order before the ATE.

Further the ATE has agreed with the contention of the appellant ie KPTCL that the issue regarding remittance of Rs. 620.58 crores to the distribution companies, being a subject matter of proceedings in the High Court, cannot be decided at this stage. “We, therefore, order accordingly”, it has said.

In its judgment dated May 23, 2007 in the Poddar Alloys v/s Uttaranchal Electricity Regulatory Commission, it  has held that the truing up exercise should be taken up in two stages: firstly on the basis of the available data and information and secondly and subsequently when Audited Accounts are available.

“We order accordingly. The KERC is directed to immediately take up the truing up exercise and decide tariff which should form the base line for the Multi Year Tariff”.

Regarding KERC’s decision not to allow an expenditure of Rs. 220.23 crores ( which is the interest on belated power purchase payment on the premise that KPTCL is responsible for the delayed payment), the ATE has observed “we do not find any justification for not allowing the interest charges to KPTCL; KPTCL was merely a bulk power buyer and seller and not repository of revenue stream. In view of this ground reality we direct the KERC to allow the interest on delayed payment and give effect to the adjustments in the distribution tariff for the periods 2007-08 to 2009-10 along with the carrying cost as per the principles laid down by the KERC”.