TARIFF METHODOLOGY. Public Utilities Commission of Sri Lanka. December 2011

Transcription

1 TRI METHODOLOGY Public Uiliies Commission of Sri Lanka December 2011 Decision Documen on Tariff Mehodolog 1-1

2 TBLE O CONTENTS 1 CHPTER I: COMPONENTS O THE TRI CHPTER II: TRNSMISSION ND GENERTION COSTS - BULK SUPPLY TRIS RTIONLE GENERTION COSTS Srucure Power Purchase greemens (PPs) PPs wih IPPs and SPPs PPs wih CEB Generaion Licensee CEB Thermal Generaion CEB Hdroelecric Generaion PPs wih SPPs iling and roval of CEB Generaion PPs Indexaion Cenral Desach cual Oeraion TRNSMISSION LLOWED REVENUES Te of Tariff Mehodolog Transmission Base llowed Revenue Iniial Regulaor sse Base Dereciaion llowance Reurn on sses Caial Exendiure (CPEX) llowance Treamen of Differences Beween orecas CPEX and cual CPEX Oeraing Exendiure (OPEX) Taxes djusmens o Transmission Base llowed Revenues Revenue Conrol ormula Large Infrasrucure Develomen (LID) llowances Technical Losses llocaion Mehodolog Reacive Power Tariffs LLOWED REVENUES OR BULK SUPPLY ND OPERTIONS BUSINESS llowed Revenue Required for Oeraion of he Bulk Sul and Oeraions Business Bulk Sul Transacions ccoun Working Caial llowance for he Bulk Sul Transacions ccoun Transmission Licensee Limied Liabili DETERMINTION O BULK SUPPLY TRI Srucure orecas Bulk Sul Tariffs orecas Generaion Coss orecas Generaion Caaci Cos orecas Generaion Energ Coss orecas Transmission Tariff orecas Transmission Caaci Tariff orecas Transmission Loss acor orecas Bulk Sul and Oeraions Business ariff cual Bulk Sul Tariffs cual Generaion Coss cual Generaion Caaci Coss cual Generaion Energ Coss cual Transmission Tariff cual Transmission Caaci Tariff cual Transmission Loss acor cual Bulk Sul and oeraions business ariff Resuling cual Bulk Sul Tariffs Resuling orecas Bulk Sul Tariffs SETTLEMENT Transacions wih Generaion Licensees Transacions wih Disribuion Licensees and Transmission Cusomers Transacions wih he Transmission Licensee Transacion wih he Transmission Licensee (Bulk Sul Oeraions Business) Decision Documen on Tariff Mehodolog 1-2

3 3 CHPTER III: DISTRIBUTION ND RETIL TRIS DISTRIBUTION LLOWED REVENUES Te of Tariff Mehodolog Disribuion llowed Revenue Iniial Regulaor sse Base Dereciaion llowance Reurn on sses Caial Exendiure (CPEX) llowance Treamen of Differences Beween orecas CPEX and cual CPEX Oeraing Exendiure (OPEX) Taxes djusmens o Disribuion llowed Revenues llocaion Crieria for Disribuion Revenues Tariff iling RETIL SUPPLY TRI Reail Service Tariff Bulk Sul Pass-hrough Tariff Crieria for ling Bulk Sul Pass-Through Tariff o Reail Cusomers CRITERI OR DEINING THE TRI STRUCTURE CHPTER IV: TRNSITIONL PROVISIONS DDENDUM TO TRI METHODOLOGY: TRNSITION PROVISIONS OR IMPLEMENTTION IN THE IRST TRI PERIOD IMPLEMENTTION O GOSL POLICY OR THE IRST TRI PERIOD UNIORM NTIONL TRI ND COMPENSTION Ex-ane adjusmen of orecas BST orecas verage BST based on Cos of Sul orecas djused average BST based on orecas Sales Revenue Scaling o adjus BST in each TOU inerval Ex-os Calculaion of Comensaion Revision o orecas BST on accoun of Comensaion for UNT Susension of incenives/disincenives in Revenue Conrol ormulae TRI SCHEDULE OR THE IRST TRI PERIOD EXTRORDINRY ILING PROCESS OR RE-SETTING TRIS MIN DEINITIONS OR THE IRST TRI PERIOD RTES OR POWER TRNSER SERVICES OR LECO BOUNDRY METERING Decision Documen on Tariff Mehodolog 1-3

4 TRI METHODOLOGY 1 CHPTER I: COMPONENTS O THE TRI This Tariff Mehodolog is aroved b he Public Uiliies Commission of Sri Lanka (Commission) in erms of Secion 30 of he Sri Lanka Elecrici c, No. 20 of In his mehodolog he comonens are groued as follows: The Bulk Sul Tariffs, ha include he comonen of he ariff relaing o he use of he Transmission Ssem and comonen of he ariff relaed o elecrici generaion, as secified in Chaer II. The Disribuion Tariff, ha includes he comonen of he ariff relaing o he use of he licensee s Disribuion Ssem, as secified in Chaer III. The Reail Sul Tariff, ha includes he comonen of he ariff relaing o sul of elecrici as secified in Chaer III. Transmission cusomers will onl a he bulk sul ariff, while oher cusomers will a a ariff comrising all four comonens. 2 CHPTER II: TRNSMISSION ND GENERTION COSTS - BULK SUPPLY TRIS 2.1 RTIONLE The Bulk Sul Tariffs shall be calculaed b he Elecrici Transmission & Bulk Sul Licensee (hereinafer he Transmission Licensee ), erforming he funcion of "Bulk Sul and Oeraions Business" as saed in he Secion 3 of he relevan Licence, in accordance wih he mehodolog saed in his Tariff Mehodolog. The Transmission Licensee ("Bulk Sul and Oeraions Business") shall erform 3 differen aciviies: 1. The "Bulk Sul and Oeraions Business" shall urchase elecrici roduced b he Generaion Licensees erforming is sub-funcion (i) he single buer of elecrici generaed b generaion licensees (hereinafer he Single Buer ) 2. The "Bulk Sul and Oeraions Business" shall disach he available generaion according o he oeraional crieria esablished b he Elecrici Transmission & Bulk Sul Licence Condiion 30, Cenral Desach and meri order, erforming is sub-funcion (iii) of he ssem oeraor in resec of he Transmission Ssem (hereinafer he Ssem Oeraor ). 3. The "Bulk Sul and Oeraions Business" shall sul cusomers in bulk hrough Power Sales greemens as esablished in Condiion 33 of he Elecrici Transmission & Bulk Sul Licence, erforming is sub-funcion (ii) of he sulier of elecrici in bulk o Disribuion Licensees for re-sale and o Bulk Sul Cusomers (hereinafer he Bulk Sulier ). Thus, an and all he following erms: Single Buer, Ssem Oeraor and Bulk Sulier mus be undersood as he Transmission Licensee ("Bulk Sul and Oeraions Business") and hese erms are used wih he onl urose of idenifing he differen funcions of he Bulk Sul and Oeraions Business, he Transmission Licensee has o erform, as esablished in his Tariff Mehodolog. The Bulk Sulier, ursuan o Condiion 32 (2) (e) (ii) (a), (b) and (c) of he Transmission License, shall deermine he Bulk Sul Tariffs b comuing he generaion coss, he ransmission coss and he sul coss according o he mehodolog herein esablished, and submi hem o he Commission for aroval. 2.2 GENERTION COSTS STRUCTURE Elecrici roducion is a resonsibili of he Generaion Licensees (hereinafer he Generaors ), licensed b he Commission. The energ and caaci roduced b he Generaors, shall be urchased b he Single Buer. Prices for Caaci and Energ sold b he Generaors and urchased b he Single Buer are defined in he Power Purchase greemens (PPs), esablishing commercial condiions for such sales and urchases. Decision Documen on Tariff Mehodolog 2-4

5 Based on he rices esablished in he PPs and he quaniies generaed b each Generaor arising from he economic disach erformed b he Ssem Oeraor, he Single Buer shall deermine he generaion coss ha shall be used o calculae he Bulk Sul Tariffs. The economic disach erformed b he Ssem Oeraor shall be subjec o he Meri Order Disach Mehodolog esablished b he Commission POWER PURCHSE GREEMENTS (PPS) There shall be four es of PPs: 1. PPs beween Indeenden Power Producers (IPPs) (exising or o be commissioned in he fuure) and he Transmission Licensee 2. PPs beween hermal ower lans belonging o Celon Elecrici Board (CEB) Generaion Licensee and he Transmission Licensee 3. PPs beween hdroelecric ower lans belonging o CEB Generaion Licensee and he Transmission Licensee 4. PPs wih Small Power Producers (SPP), also known as Small Power Purchase greemens (SPPs) (exising or o be commissioned in he fuure) and he Transmission Licensee PPS WITH IPPS ND SPPS The PPs wih IPPs and SPPs shall be he agreemens signed beween such IPPs or SPPs and he Transmission Licensee PPS WITH CEB GENERTION LICENSEE Power Purchase greemens (PPs) shall be esablished beween he CEB Generaion Licensee and he Transmission Licensee (hereinafer CEB Generaion PPs), on he following basis: CEB Thermal Generaion or CEB Thermal Generaion, he CEB Generaion Licensee shall esablish, for each generaion uni in each Generaion Plan included in he Generaion License, a PP wih a minimum duraion of five (5) ears. The rice formula in such a PP shall be a wo-ar ariff, comrising: 1. a caaci rice, aimed a recovering fixed coss associaed wih each generaing uni, namel: a. deb service b. efficien O&M fixed coss c. coss of services rovided b CEB Generaion Headquarers 2. energ rice, aimed a recovering: a. fuel coss (including no load hea rae and incremenal hea rae) b. efficien variable O&M coss c. sar u coss d. ohers as ma deem needed CEB Hdroelecric Generaion or CEB hdroelecric generaion, he CEB Generaion Licensee shall esablish, for each Generaion Plan included in he Generaion License, a PP wih a minimum duraion of five (5) ears. The rice formula shall be a one ar caaci rice, comrising: a. deb service b. efficien fixed O&M coss including an resource coss c. coss of services rovided b CEB Generaion Headquarers PPs wih SPPs The PPs wih SPPs shall be he agreemens signed beween he SPPs and he Transmission Licensee, limied o he commimens of he Transmission Licensee o a all or a orion of he ariffs aable on each SPP. Decision Documen on Tariff Mehodolog 2-5

6 iling and roval of CEB Generaion PPs Caaci and energ rices for each CEB Generaion PP, shall be reared b he CEB Generaion Licensee, and submied o he Commission b he Transmission Licensee for aroval according o he filing rocedure esablished b he Commission. The crieria o be used for rearing hese rices, shall be based on he following rinciles: 1. orecas deb service coss shall be consisen wih he same conces included in he audied accouns of he las financial ear of he Generaion Licensee. In cases where he coss are no divided beween each Generaing Uni, roorional allocaion in relaion o insalled caaci shall be used. 2. orecas efficien fixed O&M coss shall be consisen wih he same conces associaed wih he Generaing Uni or Generaing Plan (or allocaed o each uni/lan) included in he audied accouns of he las financial ear of he Generaion Licensee. I shall be accomanied b a cos reducion lan aimed a achieving a reducion in fixed O&M coss over he eriod of he PP. The Commission shall have he righ of using indeenden exer oinion o arove or amend he roosed coss. 3. CEB Generaion Headquarers coss. uel coss shall be deermined based on: a. cual hea rae of each Generaing Uni, deermined hrough ess conduced b a cerified echnical audior b. uel rices as ublished b he Celon Peroleum Cororaion, or oher eni wih which he CEB Generaion Licensee has enered ino a uel Sul greemen (S) 4. orecas efficien variable O&M coss shall be consisen wih he same conces in he audied accouns of he las financial ear of he Generaion Licensee for each Generaing Uni or Generaing Plan (or allocaed o each uni/lan). The Commission will have he righ of using indeenden exer oinion o arove or amend he roosed coss. 5. Exraordinar mainenance coss no included in he fixed or variable O&M coss, have o be submied o he Commission for aroval in a secial filing rocess, iniiaed b he Generaion Licensee. In case he Commission aroves he cos and he need for he invesmen, he Commission will recalculae he caaci rice for he remaining duraion of he corresonding CEB Generaion PP. 6. Re-owering or refurbishmen coss of exising Generaing Unis or Generaing Plans have o be submied o he Commission for aroval in a secial filing rocess, iniiaed b he Generaion Licensee. In case he Commission aroves he cos and he aroriaeness of he invesmen, he Commission will recalculae he caaci rice for he remaining duraion of he corresonding CEB Generaion PP. 7. Sar u coss shall be in accordance wih he PP Indexaion Caaci rices saed in each CEB Generaion PP shall be indexed ever six monhs, if relevan, considering a baske of indices affecing he deb orfolio associaed wih each Generaion Uni (hermal) and Generaion Plan (hdroelecric), and is oeraion and mainenance coss. uel rices saed in each CEB Generaion PP shall be indexed o fuel rices based on he uel Sul greemen CENTRL DESPTCH The Ssem Oeraor shall desach he available generaion following he condiions esablished in Condiion 30 of he Transmission Licence. The Ssem Oeraor, following he Meri Order Desach Mehodolog aroved b he Commission, shall underake oeraional lanning and he real ime oeraion, ursuing he oimizaion arges as esablished in he Transmission Licence. The Ssem Oeraor shall roduce he following oeraing lans: a. nnual Oeraing Plan (ear ahead lan, revised once ever six-monhs, b he beginning of Januar and beginning of Jul resecivel) b. Monhl Oeraing Plan (monh ahead lan) Decision Documen on Tariff Mehodolog 2-6

7 c. Weekl Oeraing Plan (week ahead lan) d. Da-ahead Oeraing Plan CTUL OPERTION The Ssem Oeraor shall kee a record of he acual hourl caaci and energ delivered b each Generaing Uni o he Transmission Ssem as recorded b he meering ssem, and, shall also kee a record of he oal aggregae caaci and energ delivered b all Generaing Unis o he Transmission Ssem. Similarl he Ssem Oeraor shall kee records of he acual hourl caaci and energ sulied o each Disribuion Licensee and Bulk Sul Cusomers, and on aggregae, he oal caaci and energ sulied from he Transmission Ssem. 2.3 TRNSMISSION LLOWED REVENUES This secion of he Tariff Mehodolog deals onl wih he Transmission Business coss, revenues and ariffs. Bulk Sul and Oeraions Business coss, revenues and Tariffs are esablished in a subsequen secion. This secion of he mehodolog defines: 1. e of Tariff Mehodolog for he Transmission Business 2. he mehodolog o deermine he Transmission Ssem llowed Revenue 3. he allocaion mehodolog secifing how he Transmission Ssem llowed Revenue is charged o he users of he Transmission Ssem (hereinafer Transmission Users ) TYPE O TRI METHODOLOGY The Transmission Ssem llowed Revenue is he revenue ha he Transmission Licensee is allowed o collec from he Transmission Users for he use of he Transmission Ssem, excluding connecion charges 1. The Transmission Ssem llowed Revenue shall be he sum of wo comonens: The Base llowed Revenue and The Large Infrasrucure Develomen (hereinafer LID ) allowances. Transmission Base llowed Revenue shall be calculaed based on a Muli Year Tariff Ssem wih a limiaion (a revenue ca ) imosed b he Commission on overall revenues (he Transmission Ssem llowed Revenues) during he Tariff Period regardless of he number of Transmission Users, energ ransmied, ec. The Tariff Period shall be five (5) ears. Transmission Ssem llowed Revenue shall be annuall adjused considering he facors conained in he Revenue Conrol ormula. The Transmission Licensee shall make a Tariff iling o he Commission based on he Tariff Mehodolog esablished in his secion. 1. The Tariff iling shall be done before he commencemen of he Tariff Period and i shall include he aroved cos comonens and he Revenue Conrol ormula. 2. Once ever ear afer he iniial Tariff iling, a simlified filing shall be done o demonsrae ha he revenue conrol formulae are roerl alied. LID allowances shall be comued as defined in Uon commissioning of each LID, he Transmission Licensee shall make a Tariff iling o he Commission for he corresonding LID allowance, based on he mehodolog esablished in Connecion coss will be direcl negoiaed beween he Transmission Licensee (Transmission Business) and he Transmission Users on a case b case basis. Decision Documen on Tariff Mehodolog 2-7

8 2.3.2 TRNSMISSION BSE LLOWED REVENUE The base allowed revenue shall be deermined for a Tariff Period. The Transmission Ssem llowed Revenue shall be calculaed based on a forecas cash flow for firm 2 discouned a he llowed Rae of Reurn on Caial for he Tariff Period, considering: Iniial Regulaor sse Base (RB) (he value of he asses belonging o he Licensee o rovide he ransmission service, excluding connecion asses). Rolling forward of he iniial RB, considering minor Caial Exendiure (CPEX) for he eriod Dereciaion of exising non-dereciaed asses Reurn on caial Efficien oeraional exendiure (OPEX) Taxes INITIL REGULTORY SSET BSE To comue he asses and heir valuaion, he ne book value of he non-curren asses on he audied accouns of he Licensee for he las financial ear shall be used. CPEX ha ma have been incurred afer closing he annual accouns shall no be considered unil a new ariff is aroved for he subsequen Tariff Period. The allowed working caial for he Licensee o manage he Transmission Business (ha will be ar of he asse base) shall be an amoun equal o 1/12 of Transmission Base llowed Revenue of he revious ear DEPRECITION LLOWNCE Dereciaion shall be calculaed on he sraigh line mehod and he dereciaion raes shall be hose ha are currenl used in he sauor accouns. Once an asse is full dereciaed, i shall be removed from he gross value of he asses RETURN ON SSETS The calculaion of he Transmission Ssem llowed Revenue shall include a reurn on invesed caial. This reurn shall reflec he acual cos of deb of he Licensee and a osiive reurn on equi based on he cos of he long-erm deb of he Governmen of Sri Lanka. The rae of reurn on equi will be defined b he Commission for each Tariff Period. The rae of reurn on asses shall be calculaed considering a weighed average of he cos of deb and equi emloing he acual deb o asse raio. The rae of reurn on asses shall be defined b he Commission for each Tariff Period CPITL EXPENDITURE (CPEX) LLOWNCE RB shall be deermined for ever ear of he Tariff Period. The closing value (value a he end of one ear) of he RB is se equal o he oening value of he RB lus he CPEX during he ear, minus regulaor dereciaion during he ear. The orecas CPEX rogram for he Transmission Licensee shall be he Long-erm Transmission Develomen Plan (LTTDP) aroved b Commission for he nex 5 ears. The CPEX rogram shall include boh load-relaed CPEX and non load-relaed CPEX. Invesmens saed in he LTTDP shall be searaed ino Minor CPEX and Large CPEX where, Minor CPEX means all relacemen, reinforcemen and quali-driven invesmens aroved b he Commission. The Transmission Licensee shall resen is Minor CPEX develomen lan and he crieria followed in esablishing he Minor CPEX develomen lan. Non-load relaed CPEX shall be included in minor CPEX. Large CPEX, including all he invesmens relaed o he exansion of Transmission Ssem. Onl Minor CPEX shall be included in he rolling forward of he RB according o he CPEX rogram develoed b Transmission Licensee and aroved b he Commission. 2 The free cash flow each ear under a cash flow for firm is calculaed as EBITD (earning before ineres, axes, dereciaion and amorizaion) minus axes and CPEX. Decision Documen on Tariff Mehodolog 2-8

9 TRETMENT O DIERENCES BETWEEN ORECST CPEX ND CTUL CPEX Ever ear during he Tariff Period, he Commission will conduc an ex-os analsis, checking wha minor CPEX has acuall been incurred. in case of underinvesmen in relaion o he forecas CPEX included in he filing for he Transmission llowed Revenue, he difference will be full clawed-back including he ime value of mone a a rae defined b he Commission, and ransferred o cusomers hrough ariffs in he following ear of he Tariff Period. in case he acual CPEX is higher han he forecas, he Commission will reques for all he relevan informaion o deermine wheher he addiional invesmen has been ruden and efficien, and he difference will be allowed, including he ime value of mone a a rae defined b he Commission, and ransferred o cusomers hrough ariffs in he following ear of he Tariff Period OPERTING EXPENDITURE (OPEX) The OPEX o be included in he calculaion of he Transmission Base llowed Revenue shall be he OPEX forecas for he ariff eriod b he Transmission Licensee. The Licensee shall jusif he OPEX forecas based on he forecas demand increase and he acual OPEX of he audied accouns of he las financial ear. This OPEX shall include he exendiure on License requiremens (levies, insurance, ec) and he efficien cos of oeraing he Transmission Ssem. The OPEX comonen of he Transmission Base llowed Revenue shall be adjused a a rae defined b an Efficienc facor (OPEXX) er ear during he Tariff Period. OPEXX (%) will be fixed b he Commission before he commencemen of he Tariff Period. or successive Tariff Periods, he Commission ma revise he mehodolog for comuing he efficien OPEX o be included in he Transmission Base llowed Revenue TXES ll axes alicable o he Transmission Business and imosed b he relevan Tax Laws and Regulaions shall be included in he ariff filing, ogeher wih he roosed adjusmen mechanisms in case he ax scheme changes during he Tariff Period DJUSTMENTS TO TRNSMISSION BSE LLOWED REVENUES The adjusmen mechanisms are inended o adjus he Transmission Base llowed Revenue wihin he Tariff Period, o accoun for inflaion and exchange rae variaions. The adjusmen shall be based on wo indices: (i) Sri Lanka Consumer Price Index (SLCPI) and (ii) foreign exchange (LKR:USD) rae and foreign inflaion. Weighs o be used for each one of hem shall be roosed b he Transmission Licensee for aroval as a ar of he ariff filing, considering he share of coss ha are esseniall local (and hus indexed o SLCPI) and he share of cos relaed o imored goods. djusmens shall be done on an annual basis. However, when unexeced significan evens occur, requess for exraordinar reviews ma be enerained b he Commission. The Transmission Licensee will be allowed o al for an exraordinar review if he accumulaed change in he indexaion formula for an ear in he Tariff Period exceeds 15% b 30 h June of such ear, and he adjusmens o be effecive as earl as ossible hereafer. Oherwise, if an exraordinar review is filed afer 30 h June, he adjusmen shall be effecive from he nex ear of he Tariff Period REVENUE CONTROL ORMUL Based on he revious definiions, he following conrol formula will be alied o he ransmission base allowed revenue: where: R R -1 a SLCPI -1 X /X -1 PPIUS X R = R 1 ( 1 X ) a ( 1 + SLCPI 1) + ( 1 a) + PPIUS X 1 1 llowed Base Revenue in ear (LKR) llowed Base Revenue in ear -1 (LKR) Share of local coss in oal coss of he Transmission Licensee o be aroved b he Commission based on he filing b Transmission Licensee. ccumulaed change in Sri Lanka Consumer Price Index (%) during ear -1 verage change in he LKR:USD exchange rae during las quarer of ear -1 ccumulaed change in he Producer Price Index of US (%) during ear -1 X OPEX Efficienc facor (%) Decision Documen on Tariff Mehodolog 2-9

10 The Commission ma adjus his formula in case a ca on oal ransmission losses is imosed as described in ll asecs requiring deailed rocedures for imlemenaion of his formula wih regard o availabili and sources of indices shall be roosed b he Transmission Licensee along wih he ariff filling, and would be subjec o Commission aroval LRGE INRSTRUCTURE DEVELOPMENT (LID) LLOWNCES Revenue wih regard o CPEX classified as LID in he LTTDP and aroved b he Commission will be colleced from Transmission Ssem users b adding an allowance o he Transmission Base llowed Revenue from ime o ime. or each LID, uon submission of a communicaion o he Commission afer commissioning of such asses, he Commission will comue an annual allowance o be colleced from cusomers, considering he deb service rofile, a reurn on equi and he dereciaion over a reasonable useful life, based on an invesmen cos aroved b he Commission. n LID allowance will be added o he Transmission Base llowed Revenue in he ear immediael afer he new asses in a aricular LID have been commissioned. LID allowances will be indexed hrough an indexaion formula defined b he Commission on a case-bcase basis TECHNICL LOSSES Technical losses in he Transmission Ssem will be allowed o be he assed-hrough o Bulk Sul Tariffs. The forecas ransmission losses shall be calculaed b he Ssem Oeraor as a ar of he nnual Oeraing Plan, and he acual ransmission losses shall be measured hrough he meering ssem. In case he meering ssem is no available, he Commission ma allow he Transmission Licensee o use forecas ransmission losses for deermining he Bulk Sul Tariffs. The Commission ma esablish a ca for he maximum losses in he Transmission Ssem LLOCTION METHODOLOGY Transmission Ssem llowed Revenue shall be colleced in he form of a Transmission Tariff, onl from Disribuion Licensees and Transmission Cusomers. The Transmission Tariff shall be deermined using he Posage Sam Mehodolog in which he Transmission Ssem llowed Revenue is allocaed among Disribuion Licensees and Transmission (Bulk Sul) Cusomers in roorion o heir demand a he ime of he Ssem Monhl Peak Demand (Coinciden Peak). This shall be a comonen of he Bulk Sul Tariff (Caaci). Deails for is calculaion are included in he Bulk Sul Tariff Secion RECTIVE POWER TRIS The Commission ma esablish a comensaion mechanism for reacive ower hrough a Reacive Power Tariff, if deemed necessar. 2.4 LLOWED REVENUES OR BULK SUPPLY ND OPERTIONS BUSINESS This secion esablishes he allowed revenues for he Transmission Licensee (Bulk Sul and Oeraions Business) required for erforming he duies of he Single Buer, he Ssem Oeraor and he Bulk Sulier, as siulaed in he Transmission License. The allowed revenue for he Bulk Sul and Oeraions Business shall include he following wo main comonens: The allowed revenue required for oeraion of he Bulk Sul and Oeraions Business The working caial allowance for he Bulk Sul Transacions ccoun Decision Documen on Tariff Mehodolog 2-10

11 2.4.1 LLOWED REVENUE REQUIRED OR OPERTION O THE BULK SUPPLY ND OPERTIONS BUSINESS The allowed revenue required for oeraion of he Bulk Sul and Oeraions Business is he revenue ha he Transmission Licensee is allowed o collec from he Transmission Ssem users for carring ou he Bulk Sul and Oeraions Business. llowed revenue required for oeraion of he Bulk Sul and Oeraions Business shall be calculaed based on a Muli Year Tariff Ssem wih a ca on overall revenues during he Tariff Period regardless of he number of ransmission users, energ ransmied, ec. The Tariff Period shall be five (5) ears. The llowed Revenue required for oeraion of he Bulk Sul and Oeraions Business shall be adjused annuall considering he SLCPI. The Transmission Licensee shall make a ariff filing o he Commission based on he mehodolog esablished in his secion, before he beginning of he Tariff Period. ddiionall once a ear afer he iniial filing, a simlified filing for adjusing he revenue based on SLCPI should also be develoed. The allowed revenue shall include a forecas of he efficien Oeraional exendiure required o erform he oeraion of he business. Exising asses and caial exendiure ha ma be needed shall be included in he llowed Revenue for he Transmission Business and no in he llowed Revenue for he Bulk Sul and Oeraions Business BULK SUPPLY TRNSCTIONS CCOUNT The Bulk Sul Transacions ccoun will be used o sele ransacions beween he Transmission Licensee (Transmission) and he following aries. Transmission Licensee (Bulk Sul Oeraions Business) Generaion Licensees Disribuion Licensees an Transmission Cusomers. In his accoun, he following ransacions shall ake lace: 1. Pamens made b Disribuion Licensees and Transmission Cusomers for he urchase of Bulk Sul Elecrici (including generaion, ransmission and bulk sul services), according o he relevan Power Sale greemens (PSs) 2. Pamens o he Transmission Licensee (Transmission and Bulk Sul Oeraions Business) 3. Pamens o Generaion Licensees for selling of generaion according o he PPs and SPPs. 4. Oher ransacions as direced b he Commission WORKING CPITL LLOWNCE OR THE BULK SUPPLY TRNSCTIONS CCOUNT The Bulk Sul Transacions ccoun requires working caial in form of coningen cash, as here is a high robabili ha he forecas Bulk Sul Tariff o be differen from acual in Sri Lanka s hdrohermal ower ssem. The allowed Bulk Sul Oeraions Business Working Caial shall be used as liquid caial o make effecive he amens o he Crediors when needed. The accumulaed deviaion a he end of each six monh eriod shall be comensaed as defined in 2.5.4, Neverheless, he Single Buer ma require cash o fulfil is commimens during he six-monh eriod. Hence, he Transmission Licensee in coordinaion wih he Governmen of Sri Lanka (GOSL) should ensure ha he working caial is adequae o mee such siuaions. The Single Buer ma file for addiional financial coss no considered in his mehodolog if required o ensure he availabili of his working caial. The single buer ma file for addiional financial cos if needed o ensure he liquidi in he Bulk Sul Transacions ccoun. Secificall he Single Buer has he righ o file for he working caial required o cover he oenial ga on he basis of forecas amen schedules TRNSMISSION LICENSEE LIMITED LIBILITY The Transmission Licensee (Bulk Sul Oeraions Business) shall make amens from he funds available in he Bulk Sul Transacions ccoun. In siuaions of cash shorfalls, he Transmission Decision Documen on Tariff Mehodolog 2-11

12 Licensee s (Bulk Sul Oeraions Business) liabili shall be limied o he funds available in he Bulk Sul Transacions ccoun. The managemen of his accoun will be esablished b he Commission hrough Bulk Sul Transacions ccoun Managemen Guidelines. 2.5 DETERMINTION O BULK SUPPLY TRI STRUCTURE Bulk Sul Tariffs shall be he sum of hree comonens: a. Generaion ariff b. Transmission ariff c. Bulk Sul and Oeraions Business ariff Each comonen shall be deermined following he rules esablished in his mehodolog for heir deerminaion. Bulk Sul Tariffs shall be of wo ars: a. caaci charge b. energ charge The energ charge shall var according o he ime inervals as follows: a. Inerval 1, from 5:30 M o 6:30 PM b. Inerval 2, from 6:30 PM o 10:30 PM c. Inerval 3, from 10:30 PM o 5:30 M ORECST BULK SUPPLY TRIS The orecas Bulk Sul Tariffs will be used o deermine he end use cusomer ariffs. The orecas Bulk Sul Tariffs will be assed hrough o he end use cusomer ariffs according o he mehodolog defined in The orecas Bulk Sul Tariffs are calculaed and filed once ever six monhs b he Transmission Licensee, following he rocedure defined in his mehodolog. The orecas Bulk Sul Tariffs include he forecas for he corresonding six-monh eriod and an adjusmen facor o comensae he differences beween he forecas and acual Bulk Sul Tariffs. In he orecas Bulk Sul Tariffs, he comonens shall be deermined as defined in ORECST GENERTION COSTS Generaion Coss, shall have wo comonens: a. Caaci Coss b. Energ Coss orecas Generaion Caaci Cos The orecas Generaion Caaci Cos shall be deermined once in ever six-monh eriod and shall be equal o he sum of he forecas caaci amens o Generaors, based on a monhl simulaion of caaci amens under each PP. The orecas Generaion Caaci Tariff for he eriod shall be equal o he orecas Generaion Caaci Cos divided b he orecas Ssem Coinciden Peak Demand (MW) for he six-monh eriod. GC, CP ; P, n GC : orecas Generaion Caaci Tariff N CP ; ; n [ LKR ] n = MW P, ; : orecas caaci amen for ear, six monh eriod and generaor n : orecas Ssem Peak Demand for ear, six monh eriod meered a each oin of deliver o Disribuion Licensees and Transmission Cusomers. : orecas N : ll generaors Decision Documen on Tariff Mehodolog 2-12

13 orecas Generaion Energ Coss The Bulk Sulier shall deermine he forecas oal coss, b adding he forecas energ amen o all Generaion Licensees according o heir forecas energ delivered in all hours and he energ rices saed in PPs and he SPPs. This forecas shall consider: The forecas fuel rices rovided b Celon Peroleum Cororaion or oher suliers and he uel Sul greemens generaion disach schedule develoed for he urose of seing he Bulk Sul Tariff. This disach should be based on an nnual Oeraing Plan for a eriod of 12-monhs ahead, considering a robabili of occurrence of 70%, and he bes available informaion abou he sorage level of reservoirs and lanned mainenance of Generaing Plans. monhl simulaion of he energ-relaed amens under each PP and SPP. This oal orecas Generaion Energ Coss divided b he oal forecas energ urchased b disribuion licensees and ransmission cusomers during he six monh eriod, will rovide he forecas average energ ariff. N EG ; n; EP ; ; n; n = 1 ; = N [ LKR ] MWh EG ; n; GE 6 6 n = 1 Where, GE ; EG ; ; n EP ; : orecas Generaion Energ ariff for he six-monh eriod, : orecas Energ Generaed for he six monh eriod b Generaor n during monh ; n ; : orecas Energ ariff according o he PP or SPP for he Generaor n in he monh of he six-monh eriod. : orecas N : ll Generaors : Monh ORECST TRNSMISSION TRI The orecas Transmission ariff shall have wo comonens: a. orecas Transmission Caaci Tariff b. orecas Transmission Loss acor orecas Transmission Caaci Tariff The Bulk Sulier shall deermine he orecas Transmission Caaci ariff er monh for each ear of he Tariff Period b dividing he Transmission Ssem llowed Revenues b he forecas Ssem Peak Demand (MW) for he eriod according o he nnual Oeraing Plan, in accordance wih he equaion given below, assuming ha he oal ransmission revenues are evenl recovered in each monh. Where, TR ; TR ; 1 12 TSR = [ LKR ] P : orecas Transmission Caaci ariff er monh for ear, six monh eriod TSR : Transmission Ssem llowed Revenues ear MW Decision Documen on Tariff Mehodolog 2-13

14 P, : orecas Ssem Peak Demand for ear, six monh eriod meered a deliver oins o Disribuion Licensees and Transmission Cusomers orecas Transmission Loss acor The Bulk Sulier shall deermine he orecas Transmission Loss acor for each Time Inerval according o he following mehodolog: a. Based on he disach simulaion described in , he Bulk Sulier shall calculae he forecas oal losses for each Time Inerval, b subracing from he oal energ received b he Transmission Ssem, he oal energ sulied from he Transmission Ssem o he Disribuion Licensees and Bulk Sul Cusomers. b. The orecas Transmission Loss acor shall be deermined for each Time Inerval b dividing he orecas Toal Losses er Time Inerval b he orecas Energ Sulied er Time Inerval Where TL, h TL = M ES m,, h ; m; h TL, TL, h h, : orecas Transmission Loss acor, for ear, six monh eriod and Time Inerval h, : orecas Toal Transmission Losses for Time Inerval h, for ear, six monh eriod M m ES ; ; m h, : Toal orecas Energ Sulied in ear, six monh eriod o Disribuion Licensee or Bulk Sul Cusomer m in Time Inerval h M : all Disribuion Licensees and Bulk Sul Cusomers h : Time Inervals 1, 2 or ORECST BULK SUPPLY ND OPERTIONS BUSINESS TRI The Bulk Sulier shall deermine he orecas Bulk Sul and Oeraions Business ariff for each monh for he eriod, in accordance wih he equaion given below, b dividing he Transmission Licensee "Bulk Sul and Oeraions Business" llowed Revenues b he forecas Ssem Peak Demand (MW) according o he nnual Oeraing Plan, resuming ha he oal Bulk Sul and Oeraions Business revenues are evenl recovered in each monh. BSS 1 12 BSOB = [ LKR ] P MW Where, BSS, : orecas Bulk Sul and Oeraions Business ariff for six-monh eriod of ear BSOB : Transmission Licensee "Bulk Sul and Oeraions Business" llowed Revenue for ear P, : orecas Ssem Peak Demand for ear, six monh eriod meered a deliver oins o Disribuion Licensees and Transmission Cusomers CTUL BULK SUPPLY TRIS The cual Bulk Sul Tariffs will no be assed hrough o he end-user ariffs each monh. However i will be used o comensae a he end of each six-monh eriod, for deviaions beween orecas and cual Bulk Sul Tariffs, according o he mehodolog defined in In he cual Bulk Sul Tariffs, he comonens shall be deermined as defined in Decision Documen on Tariff Mehodolog 2-14

15 CTUL GENERTION COSTS Generaion Coss, as defined in revious secion, shall have wo comonens: a. Caaci Coss b. Energ Coss cual Generaion Caaci Coss The cual Generaion Caaci Cos shall be deermined monhl and his shall be equal o he addiion of he acual caaci amens o Generaors based on he oucomes of he acual oeraion regisered during he monh b he Ssem Oeraor. In cases when liquidaed damages al his amoun shall be discouned from he cual Generaion Caaci Coss. The cual Generaion Caaci ariff for he eriod, shall be equal o he cual Generaion Caaci Cos divided b he cual Ssem Coinciden Peak Demand (MW) for he monh. GC = N n CP P, n [ LKR ] MW GC : cual Generaion Caaci ariff for monh CP, n : cual Caaci amen for Generaor n in monh P : cual Ssem Monhl Peak Demand in monh meered a deliver oins o Disribuion Licensees and Transmission Cusomers. : cual N : ll Generaors : cual monh cual Generaion Energ Coss Based on he acual oeraion regisered b he Ssem Oeraor, he Bulk Sulier shall deermine he acual oal monhl energ coss for each Time Inerval, b adding he acual energ amens o all IPPs, SPPs and Generaing Unis in his monh, according o heir acual energ delivered in each Time Inerval and he energ rices saed in PPs and SPPs. This oal monhl acual Generaion Energ Coss divided b he oal acual energ delivered in each Time Inerval during he monh, will give he cual Energ ariff for each Time Inerval. Where, N 18: 30 EG; n; h n h= 5: 30 GE1 = N 18: 30 EG; n; h n h= 5: 30 EP N 22: 30 EG; n; h n h= 18: 30 GE2 = N 22: 30 EG; n; h n h= 18: 30 N 5: 30 EG; n; h n h= 22: 30 GE3 = N 5: 30 EG; n; h n h= 22: 30 ; n EP EP ; n ; n [ LKR ] MWh [ LKR ] MWh [ LKR ] MWh GE1 : cual Generaion Energ ariff for Time Inerval 1 Decision Documen on Tariff Mehodolog 2-15

16 GE2 : cual Generaion Energ ariff for Time Inerval 2 GE3 : cual Generaion Energ ariff for Time Inerval 3 EG ; EP ; n h n ; : cual Energ Generaed b Generaor n during hours h of monh : cual : cual Energ ariff according o he PP, for Generaor n of monh N : ll Generaors h : Hours from o : cual monh CTUL TRNSMISSION TRI The cual Transmission ariff shall have wo comonens: a. cual Transmission Caaci ariff b. cual Transmission Losses acor cual Transmission Caaci Tariff The Bulk Sulier shall deermine he cual Transmission ariff for he eriod b dividing he Transmission Ssem llowed Revenues b he cual Ssem Peak Demand (MW) regisered b he Ssem Oeraor for he monh, and divided b welve, assuming he oal Transmission Caaci Coss are evenl recovered in each monh. Where, TR 1 12 TSR = [ LKR ] TR : cual Transmission Caaci ariff for monh TSR : Transmission Ssem llowed Revenues ear P : cual Ssem Coinciden Peak Demand for monh, meered a deliver oins o Disribuion Licensees and Transmission Cusomers. P MW cual Transmission Loss acor The Bulk Sulier shall deermine he cual Transmission Loss acor for each one of he Time Inervals according he following mehodolog: a. Toal ransmission losses er Time Inerval shall be calculaed b subracing he oal energ delivered o he Disribuion Licensees and Transmission Cusomers from he cual Toal Energ sulied o he Transmission Ssem. b. The cual Transmission Losses acor shall be deermined for each Time Inerval b dividing he cual Toal losses er Time Inerval b he cual Energ Sulied er Time Inerval where TL, h h TL, = M ES m ; m; h TL ; TL, h h : cual Transmission Losses acor, for monh, Time Inerval h : cual Toal Transmission Losses for monh, Time Inerval h Decision Documen on Tariff Mehodolog 2-16

17 M m ES ; ; m h : Toal cual Energ Sulied o he Disribuion Licensee or Transmission Cusomer m during monh and Time Inerval h M : all Disribuion Licensees or Transmission Cusomers h : Time Inervals 1, 2 or 3 : cual monh CTUL BULK SUPPLY ND OPERTIONS BUSINESS TRI The Bulk Sulier shall deermine he cual Bulk Sul and Oeraions Business Tariff for he eriod according o he following equaion. b dividing he Transmission Licensee "Bulk Sul and Oeraions Business" llowed Revenue b he cual Coinciden Ssem Peak Demand (MW). 1 BSOB BSS = 12 P [ LKR ] MW Where, BSS : cual Bulk Sul and oeraion business ariff for monh BSOB : Transmission Licensee "Bulk Sul and Oeraions Business" llowed Revenue for ear P : cual Ssem Coinciden Peak Demand for monh, meered a deliver oins o Disribuion Licensees and Transmission Cusomers. : cual monh RESULTING CTUL BULK SUPPLY TRIS The wo-ars, hree- inerval cual Bulk Sul Tariffs shall be: Where, ( C) = GC + TR BSS [ LKR ] BST + MW ( E1) = ( 1 + TL, 1 ) GE [ LKR ] BST 1 MWh ( E2) = ( 1+ TL, 2 ) GE [ LKR ] BST 2 MWh ( E3) = ( 1+ TL, 3) GE [ LKR ] BST 3 BST ( C) : cual Bulk Sul Tariff (Caaci) for monh BST ( E1) : cual Bulk Sul Tariff (Energ in Time Inerval 1) for monh BST ( E2) : cual Bulk Sul Tariff (Energ in Time Inerval 2) for monh ( E3) BST cual Bulk Sul Tariff (Energ in Time Inerval 3) for monh MWh TL, 1 ; h TL, 2 ; h TL, 3 : Transmission Loss acor for Time Inervals 1, 2 and 3 for monh h : cual monh Decision Documen on Tariff Mehodolog 2-17

18 2.5.4 RESULTING ORECST BULK SUPPLY TRIS The wo-ar, hree-inerval orecas Bulk Sul Tariffs for an given six-monh eriod shall be: Where, ( C) BST 6 = 1 BST 6 = 1 BST 6 = 1 BST 6 = 1 P ( C) = GC + TR ; + BSS ; ( BST ( C) BST ( C) ) (1 r ), P, ( E1) = ( 1+ TL ) EG,1 GE k ( BST ( E1) BST ( E1) ) (1 r ),1, EG1, ( E2) = ( 1+ TL ) EG,2 GE k ( BST ( E2) BST ( E2) ) (1 r ),2, EG2, ( E3) = ( 1+ TL ) EG,3 GE k ( BST ( E3) BST ( E3) ) (1 r ),3, EG3, BST : orecas Bulk Sul Tariff (Caaci) ( ) BST, E1 : orecas Bulk Sul Tariff (energ ime inerval 1) ( ) BST, E2 : orecas Bulk Sul Tariff (energ ime inerval 2) ( ) BST, E3 orecas Bulk Sul Tariff (energ ime inerval 3) 1 [ LKR ] MW [ LKR ] MWh [ LKR ] MWh [ LKR ] MWh k1, k2, k3: Raio of oal energ urchased ime inervals 1, 2, 3. These facors shall be filed b he Transmission licensee ever six monhs under he guidelines aroved b he Commission. r -1 EG, 1, ; 1, 2, 3. verage reference Ineres rae of six monh eriod -1 o be defined b he Commission EG, 2, ; EG 3,, : orecas energ generaed for ear, six monh eriod in ime inerval ll oher arameers have been reviousl defined. 2.6 SETTLEMENT TRNSCTIONS WITH GENERTION LICENSEES Generaion Licensees shall send monhl invoices o he Single Buer, discriminaing Caaci Coss and Energ Coss, according o he rovisions of he PPs and SPPs. The invoices shall indicae energ delivered o he Transmission Ssem b he generaing uni, hourl discriminaed and based on measuremens obained hrough he meering ssem aroved in comliance wih he meering code, number of sar-us, hours of no load cos, hours of incremened hea rae, ec., according o official records acceed b he Ssem Oeraor. Decision Documen on Tariff Mehodolog 2-18

19 On he amen due dae, he Single Buer shall roceed o make he amen ou of he Bulk Sul Transacions ccoun according o he Bulk Sul Transacions ccoun Managemen Rules TRNSCTIONS WITH DISTRIBUTION LICENSEES ND TRNSMISSION CUSTOMERS he due dae esablished in he Power Sale greemens, he Bulk Sulier shall invoice he Disribuion Licensees and Transmission Cusomers based on he hsical informaion and he forecas Bulk Sul Tariffs for he corresonding monh. he due dae esablished in he Power Sale greemens for amen, he Disribuion Licensees and Transmission Cusomers shall deosi he due amouns in he Bulk Sul Transacions ccoun. Uon crediing of he funds in he accoun, he Bulk Sulier shall remi he corresonding recei TRNSCTIONS WITH THE TRNSMISSION LICENSEE On he secific dae esablished b he Commission, he Transmission Licensee shall invoice he Single Buer he due amoun alicable for ha monh, consising of one welfh of he Transmission Ssem llowed Revenues for he ear ( TSR ). On he due dae esablished b he Commission, he Single Buer shall a he due amoun o he Transmission Licensee ou of he Bulk Sul Transacions ccoun. Uon receiving he amens, he Transmission Licensee shall remi he corresonding recei TRNSCTION WITH THE TRNSMISSION LICENSEE (BULK SUPPLY OPERTIONS BUSINESS) On he secific dae aroved b he Commission, he Transmission Licensee (Bulk Sul Oeraions Business) shall ener is invoice wih he due amoun alicable for ha monh, consising of one welfh of he Transmission Licensee "Bulk Sul and Oeraions Business" llowed Cos ino he Bulk Sul Transacions ccoun. On a secific dae aroved b he Commission, he Single Buer shall ransfer ou of he Bulk Sul Transacions ccoun he corresonding amoun o he Bulk Sul Oeraions Business Inernal ccoun. Uon receiving he amens, he Transmission Licensee (Bulk Sul Oeraions Business) shall remi he corresonding recei. 3 CHPTER III: DISTRIBUTION ND RETIL TRIS The Elecrici Disribuion and Sul License defines wo main businesses for he Disribuion Licensee: Disribuion Business Reail Sul Disribuion Tariff mehodolog is resened in 3.1. This secion of he mehodolog defines: e of ariff mehodolog he mehodolog o deermine he disribuion llowed Revenue he allocaion mehodolog ha is how he disribuion llowed Revenue is charged o he disribuion users. Mehodolog o calculae he Reail Services Tariffs is resened in 3.2 and includes he mehodolog o esimae boh he reail service ariffs and he bulk sul ass-hrough ariffs. 3.1 DISTRIBUTION LLOWED REVENUES TYPE O TRI METHODOLOGY The Disribuion llowed Revenue is he revenue ha a Disribuion and Sul Licensee is allowed o collec from he disribuion users due o he use of he disribuion ssem (wire business), excluding llowed Charges (connecion, reconnecion, meer esing, ec) ha are searael regulaed. Disribuion llowed Revenue shall be calculaed based on a Muli Year Tariff Ssem in which a ca on overall revenues shall be imosed during he ariff eriod. This ca will be adjused for: Decision Documen on Tariff Mehodolog 3-19

20 Changes in he number of disribuion users and energ disribued as rescribed b he Revenue Conrol ormula Changes in he indices conained in he Revenue Conrol ormula. Each Disribuion and Sul Licensee shall make a ariff filing o he Commission based on he mehodolog esablished in his secion, in he following wa: before he beginning of he Tariff Period, he filing shall be comlee, including aroval of cos comonens and Revenue Conrol ormulae. once a ear afer he iniial filing, during he Tariff Period, a simlified filing wih he urose of demonsraing ha he Revenue Conrol ormulae are roerl alied DISTRIBUTION LLOWED REVENUE or each Disribuion and Sul Licensee, he Disribuion llowed Revenue shall be calculaed based on a forecas cash flow for firm for he ariff eriod, considering: Iniial Regulaor sse Base (RB) (he value of he asses belonging o he Licensee o rovide he disribuion service). Rolling forward of he iniial regulaor asse base, considering he forecas CPEX for he eriod Dereciaion of exising non-dereciaed asses Reurn on caial Efficien oeraional exendiure (OPEX) Taxes Calculaion of llowed Revenues shall ake ino accoun he non-regulaed revenues ha ma exis INITIL REGULTORY SSET BSE To comue he asses and heir valuaion, he ne book value of he non-curren asses in he audied accouns of las financial ear of he Licensee shall be used. Caial Exendiure (CPEX) ha ma be incurred afer closing he annual accouns and unil he new ariff is aroved will no be considered. The asse base shall include he working caial required o run he business. Working caial needs shall be filed b he Licensees and aroved b he Commission DEPRECITION LLOWNCE The dereciaion mehod o be used shall be he sraigh line mehod and he dereciaion raes shall be hose raes currenl emloed in he sauor accouns. Once an asse is full dereciaed, i should be removed from he gross value of he asses RETURN ON SSETS The calculaion of he disribuion llowed Revenue shall include a reurn on invesed caial. This reurn should include he acual cos of deb of he Licensee and a osiive reurn on equi based on he cos of he long-erm deb of he Governmen of Sri Lanka. The rae of reurn on equi will be defined for each ariff eriod b he Commission. The rae of reurn on asses shall be calculaed considering a weighed average of he cos of deb and equi emloing he acual deb o asse raio. The rae of reurn on asses will be defined b he Commission for each ariff eriod CPITL EXPENDITURE (CPEX) LLOWNCE RB is deermined for ever ear of he ariff eriod. The closing value (value a he end of one ear) of he RB is se equal o he oening value (which is equal o he value a he end of he revious ear) of he RB lus caial exendiure (CPEX) minus regulaor dereciaion. The forecas CPEX rogram for he Disribuion and Sul Licensee should be based on he load-relaed caial exendiure in he Medium-erm Disribuion Develomen Plan (MTDDP) aroved b Commission as saed in he Planning Guidelines, and oher caial invesmens no relaed o load, such as for refurbishmens, informaion echnolog and vehicles, for he nex 5 ears. Decision Documen on Tariff Mehodolog 3-20

21 TRETMENT O DIERENCES BETWEEN ORECST CPEX ND CTUL CPEX Ever ear, he Commission will conduc an ex-os analsis, checking wha CPEX has been develoed and commissioned. in case of underinvesmen in relaion o he forecas CPEX included in he filing for he allowed revenue, he difference will be full clawed-back including ime value of mone a a rae defined b he Commission and ransferred o cusomers hrough ariffs in he following ariff eriod. in case he acual CPEX is higher han he forecas, he Commission will ask for all relevan informaion o be able o judge if he addiional invesmen has been ruden and efficien OPERTING EXPENDITURE (OPEX) The OPEX o be included in he calculaion of he disribuion llowed Revenue shall be he forecas OPEX for he ariff eriod b he Licensee. The Licensee should jusif he forecas based on he forecas demand increase and he acual OPEX in he audied accouns of he las financial ear. The OPEX comonen of he base allowed revenue will be adjused a a rae defined b an Efficienc acor (OPEXX) er ear during he following ears unil he end of he ariff eriod. OPEXX (%) will be fixed b he Commission before he sar of he ariff eriod. In successive Tariff Periods, he Commission ma revise he mehodolog for comuing he efficien OPEX o be included in he disribuion llowed Revenue TXES ll axes alicable o he disribuion business and imosed b he Tax code should be included b he Disribuion and Sul Licensee when filing he revenue requiremen DJUSTMENTS TO DISTRIBUTION LLOWED REVENUES The adjusmen mechanisms are inended o adjus he Disribuion llowed Revenue wihin he Tariff Period for inflaion and exchange rae variaions. The adjusmen shall be based on wo indices: (i) Sri Lanka Consumer Price Index (SLCPI) and (ii) foreign exchange (LKR:USD) rae and foreign inflaion. Weighs o be used for each one of hem shall be roosed b he Disribuion and Sul Licensees as ar of he ariff filing rocess, considering he shares of coss ha are esseniall local and hus indexed o SLCPI, and he share of cos relaed o imored goods. Based on he filed shares b he differen Disribuion Licensees, he Commission will arove he share o be emloed in he revenue conrol formula. djusmens will be done on an annual basis. I is foreseen he ossibili of exraordinar reviews when unexeced significan evens occur. The Disribuion and Sul Licensee will be allowed o al for an exraordinar review in case he accumulaed change in he indexaion formula during an ear surasses 15%. Such alicaions for an exraordinar review shall be made before 30 h June each ear, for immediae review and aroval b he Commission. n alicaion for review afer his dae shall be considered for imlemenaion on 1 s of Januar in he succeeding ear. Revenue Conrol ormula Based on he revious definiions, he following conrol formula shall be alied o he Disribuion llowed Revenue: R = R 1 X ( 1 X ) a ( 1 + SLCPI ) + ( 1 a) X [ b ( 1 + Dcus) + c ( 1 + DkWh) + d ] Diff 1 + PPIUS... where: Diff [ REV ( L CL )) R ] ( r ) R R -1 a SLCPI -1 = 2 ( X /X -1 PPIUS X llowed base revenue in ear (LKR) llowed base revenue in ear -1 (LKR) share of local coss in oal coss of TL o be aroved b he Commission based on he filing b TL. accumulaed change in Sri Lanka Consumer Price Index (%) of ear -1 verage change in he LKR:USD exchange rae of ear -1 ccumulaed change in he Producer Price Index of US (%) of ear -1 Efficienc facor (%) is he ranslaion of OPEXX in erms of oal revenues Decision Documen on Tariff Mehodolog 3-21