(1) Operation and Maintenance (O&M) expenses shall comprise of the following:-
(a) salaries, wages, pension contribution and other employee costs;
(b) administrative and general expenses including insurance charges if any;
(c) repairs and maintenance expenses;
other miscellaneous expenses, statutory levies and taxes (except corporate income tax).
1 [(1-a) O&M Norms -
(i) The transmission licensee shall propose separate trajectories of norms for each of the components of O&M expenses viz., employee cost, R&M expense and A&G expense;
(ii) Norms shall be defined in terms of combination of number of personnel per long/ medium term consumer, number of personnel per MW of capacity handled for long/ medium term consumers or number of personnel per transmission circuit kilometer line length and number of substations along with annual expenses per personnel for Employee expenses, combination of A&G expense per personnel and A&G expense per long/ medium term consumer (or per MW of capacity handled) for A&G expenses and R&M expense as percentage of gross fixed assets for estimation of R&M expenses;
(iii) One-time expenses such as expense due to change in accounting policy, arrears paid due to pay commissions and interim relief etc., shall be excluded from the norms in the trajectory;
(iv) The expenses beyond the control of the transmission licensee such as dearness allowance, pension liabilities and terminal benefits in Employee cost etc., shall be excluded from the norms in the trajectory;
(v) The One-time expenses and the expenses beyond the control of the transmission licensee as per sub-regulations (iii) and (iv) above shall be allowed by the Commission over and above normative Operation & Maintenance Expenses after prudence check;
(vi) The norms in the trajectory shall be proposed over the control period with due consideration to productivity improvements and commercial viability;
(vii) The norms shall be proposed at constant prices of base year and escalation on account of inflation shall be over and above the baseline;
(viii) Based on the proposal submitted by the transmission licensee, the Commission shall fix the norms for the said purposes which shall be taken into account for determining the trajectories for various components of O&M expenses for the remaining years of the control period;
(ix) Till such time the norms are fixed by the Commission, the trajectories of various components of O&M expenses shall be submitted by the transmission licensee and determined by the Commission on the basis of 1 Ins. vide Not. No. HPERC/F(5)(3)(1)(Trans) dated 1 st November,2013 published in the R H.P. dated 4 th November, 2013 at p . 4608 - 4616.
Compendium of HPERC Regulations, March 2021 13 the actual costs for the previous years in accordance with the provisions of these regulations;]
(2) The transmission licensee shall submit the O&M expenses for the control period as laid down in the multiyear tariff filing procedure. The O&M expenses for the base year will be approved by the Commission taking into account the latest available audited accounts, business plan filed by the transmission licensee, estimates of the actuals for the base year, prudence check and any other factors considered appropriate by the Commission.
1 [(3) The O&M expenses for the n th year of the control period shall be approved based on the formula given below:- O&Mn = R&Mn + EMPn + A&Gn :
Where – ‘EMPn’ = [(EMPn-1) x (1+Gn) x (CPIinflation)] + Provision(Emp) ;
‘A&Gn’ = [(A&Gn-1) x (WPIinflation)] + Provision(A&G) ;
‘R&Mn’ = K x (GFA n-1 ) x (WPIinflation) ;
‘K’ - is a constant (could be expressed in %). Value of K for each year of the control period shall be determined by the Commission in the MYT Tariff order based on licensee’s filing, benchmarking of repair and maintenance expenses, approved repair and maintenance expenses vis-à-vis GFA approved by the Commission in past and any other factor considered appropriate by the Commission;
‘CPIinflation’ – is the average increase in the Consumer Price Index (CPI) for immediately preceding three years before the base year;
1 Subs. vide Not. no. HPERC/F(5)(3)(1)(Trans) dated 1 st November,2013 published in the R.H..P.
dated 4 th November, 2013 at p. 4608 to 4616. Before its substitution sub-reg. (3) read as under:
“(3) The O&M expenses for the n th year of the control period shall be approved based on the formula given below:- O&Mn = R&Mn + EMPn + A&Gn Where - EMPn = (EMPn-1)* (1+Gn) * (CPIinflation) A&Gn = (A&Gn-1)*(WPIinflation) ‘K’ is a constant (could be expressed in %). Value of K for each year of the control period shall be determined by the Commission in the MYT Tariff order based on licensee’s filing, benchmarking of repair and maintenance expenses, approved repair and maintenance expenses vis-à-vis GFA approved by the Commission in past and any other factor considered appropriate by the Commission;
CPIinflation – is the average increase in the Consumer Price Index (CPI) for immediately preceding three years before the base year;
WPIinflation – is the average increase in the Wholesale Price Index (CPI) for immediately preceding three years before the base year;
EMPn – employee’s cost of the transmission licensee for the nth year;
A&Gn – administrative and general costs of the transmission licensee for the nth year;
R&Mn – repair and maintenance costs of the transmission licensee for the nth year;
GFAn-1 – Gross Fixed Asset of the transmission licensee for the n-1th year;
Gn is a growth factor for the nth year. Value of Gn shall be determined by the Commission in the MYT tariff order for meeting the additional manpower requirement based on licensee’s filings, benchmarking, approved cost by the Commission in past and any other factor that the Commission feels appropriate:
Provided that repair and maintenance expenses determined shall be utilised towards repair and maintenance works only.” 14 Compendium of HPERC Regulations, March 2021 ‘WPIinflation’ – is the average increase in the Wholesale Price Index (WPI) for immediately preceding three years before the base year;
‘EMPn’ – employee’s cost of the transmission licensee for the nth year (employee cost for the base year would be adjusted for provisions for expenses beyond the control of the licensee and one time expected expenses, such as recovery/ adjustment of terminal benefits, implication of pay revisions, arrears and interim relief.);
‘Provision(Emp)’- Provision corresponding to clauses (iii), (iv) and (v) of subregulation (1-a) of regulation 13, duly projected for relevant year for expenses beyond control of the Transmission Licensee and expected one-time expenses as specified above;
‘A&Gn’ – administrative and general costs of the transmission licensee for the nth year;
‘Provision (A&G)’-Cost for initiatives or other one-time expenses as proposed by the Transmission licensee and approved by the Commission after prudence check;” ‘R&Mn’ – Repair and Maintenance costs of the transmission licensee for the nth year;
‘GFAn-1’ – Gross Fixed Asset of the transmission licensee for the n-1th year;
‘Gn’ - is a growth factor for the nth year. Value of Gn shall be determined by the Commission in the MYT tariff order for meeting the additional manpower requirement based on licensee’s filings, benchmarking, approved cost by the Commission in past and any other factor that the Commission feels appropriate;
Provided that, repair and maintenance expenses determined shall be utilised towards repair and maintenance works only;
Provided further that, the impact of pay revision (including arrears) shall be allowed on actual during the mid-term performance review or at the end of the control period as per actual/ audited accounts, subject to prudence check and any other factor considered appropriate by the Commission.]