Electricity Company Accounts

The Indian Electricity Act, 1910 and the Electricity (Supply) Act of 1948 consist of the special legislations governing electricity companies. Electricity is a basic infrastructure industry which is of great importance to the public.

Accounting Provisions:

• Depreciation: The straight line method of depreciation is to be followed and the
• Central Government has been given the power to prescribe, by notification, the life of various types of assets.
• Reasonable Return: The law defines the reasonable return in following terms in order to avoid electricity undertakings from earning too high a profit.
• A yield at the standard rate, which is the Reserve Bank rate plus two per cent on the capital base.
• Income derived from investments except investments made against Contingencies Reserve.
• An amount equal to 1/2 per cent on loans advanced by the Electricity Board;
• An amount equal to 1/2 per cent on the balance of Development Reserve; and
• An amount equal to 1/2 percent received on Debentures.
• An amount equal to 1/2 percent on amounts approved from approved institutions.

Capital Base means : (a) the original cost of fixed assets available for use and necessary for the purpose of the undertakings less contribution, if any, made by the consumers for construction of service lines and also amounts written off; (b) the cost of intangible assets; (c) the original cost of works in progress; (d) the amount of investments made compulsorily against Contingencies Reserve; and (e) the monthly average of the stores, materials, supplies and cash and bank balances held at the end of each month,

Less:

• The amounts written off or set aside on account depreciation of fixed assets and amounts written off in respect of intangible assets in the books of the undertaking;
• Loans advanced by the Board
• Debentures;
• Security deposits of consumers held in cash;
• The amount standing to the credit of the Tariff and Dividends Control Reserve;
• The amount set apart for the Development Reserve; and