(1) Depreciation shall be calculated for each year of the control period, on the amount of original cost of the fixed assets of the corresponding year:
Provided that depreciation shall not be allowed on assets funded by capital subsidies/grants 1 [and consumer contributions:]
Provided further that provision for replacement of such assets shall be made in the capital investment plan.
(2) Depreciation for each year of the control period shall be determined based on the methodology as specified in these regulations alongwith the rates and other terms specified in the Appendix to these regulations.
(3) Depreciation shall be calculated annually, based on the Straight Line Method, over the useful life of the asset. The base value for the purpose of depreciation shall be original cost of the asset.
(4) The residual value of assets shall be considered as 10% and depreciation shall be allowed to a maximum of 90% of the original cost of the asset. Land is not a depreciable asset and its cost shall be excluded while computing 90% of the original cost of the asset.
2 [(4-a) The salvage value for IT equipment and software shall be considered as NIL and 100% value of the assets shall be considered depreciable.]
(5) Depreciation shall be charged from the first year of operation of the asset. In case, the operation of the asset is for a part of the year, depreciation shall be charged on a pro rata basis.
(6) In addition to allowable depreciation, the distribution licensee shall be entitled to advance against depreciation (AAD), computed in the manner given hereunder: - AAD = Loan (raised for capital expenditure) repayment amount based on loan repayment tenure, subject to a ceiling of 1/10th of loan amount minus depreciation as calculated on the basis of these regulations:
Provided that advance against depreciation shall be permitted only if the cumulative repayment upto a particular year exceeds the cumulative depreciation upto that year:
payable on normative basis notwithstanding that the licensee has not taken working capital loan from any outside agency or has exceeded the working capital loan based on the normative figures. The Commission shall calculate working capital requirement for wheeling and retail supply business in accordance with these regulations to arrive at working capital requirement of distribution licensee.” 1 Ins. vide HPERC/Dis/479 dated 30 th March, 2012 published in the R H.P. dated 2 nd April, 2012 at p.02-07.
2 Ins. vide Not. HPERC-F(1)-1/2018 dated 22 nd November, 2018 published in R.H.P. dated 27 th November, 2018 at p. 6265-6277.
28 Compendium of HPERC Regulations, March 2021
Provided further that advance against depreciation in a year shall be restricted to the extent of difference between cumulative repayment and cumulative depreciation upto that year:
(7) On repayment of entire loan, the remaining depreciable value shall be spread over the balance useful life of the asset.