CASE NO. 19 of 1998
Shri S.C. Mahalik, Chairman
In the matter of an application for revision of the Distribution & Retail Supply Tariff by Gridco.
Dates of argument : 14.10.98 to 17.10.98
M/s. Grid Corporation of Orissa Limited (Gridco, for short), the holder of the "The Distribution & Retail Supply Licence, 1997 (No.1/97)" have applied for approval of its calculation of revenue requirement and charges to be recovered for sale of electricity to consumers during 1998-99.
1.2 The said licensee, Gridco has recently implemented a restructuring programme, creating four separate distribution zones to be managed by four subsidiary companies which have already been incorporated. As on date, Gridco is the only licensee covering the entire State of Orissa as its area of supply.
1.3 The proposal under sub-section (4) of Section 26 of the Reform Act, 1995 was submitted by Gridco on August 17, 1998 giving details of calculation of estimated revenue requirement for 1998-99 and charges proposed to be levied.
1.4 Upon Gridco meeting the clarifications sought for by the Commission office and complying with the procedural formalities, a notice was published by the Commission in several local newspapers on two consecutive days outlining the tariff proposal and calling for objections from interested persons. The objectors were required to submit their objections in quadruplicate to the Commission with the fifth copy of the said objection to be served on Gridco. The notice called on the interested parties to peruse further details of the proposal in the corporate office of Gridco so also at the head offices of the four distribution zones so as to enable them to submit their objections within thirty days from the date of publication of the notice in the daily newspapers. It also stipulated that objectors, if they so wished, could indicate their desire to be heard in person. A total of eighty eight objections were received against Gridco's proposal for Distribution & Retail Supply Tariff within the date line fixed i.e. 7th October, 1998. Out of the said eighty eight objections, fifty one objectors who fulfilled the stipulated conditions were admitted for personal hearing. Objections not admitted for personal hearing were also taken into consideration by the Commission.
1.5 Commission, after receiving the objections and admitting them for personal hearing as indicated above, published a notice in a number of English & Oriya dailies for two consecutive days informing the objectors as well as the public in general that the hearing on the proposal of Gridco for Distribution & Retail Supply Tariff would take place from 14th to 17th October, 1998.
1.6 As notified, the public hearing on the tariff proposal took place on the specified dates in the office of the Commission. The Reform Act, 1995 does not require the Commission to hold public hearing on tariff application. The Commission on its own however adopted the procedure of inviting objections from the interested persons and called for a hearing with a view to ascertain the views of a wide section of consumers and to ensure transparency, objectivity and public participation. During the hearing, Gridco as well as objectors were requested to confine themselves to issues relevant to the tariff proceedings so that the Commission could arrive at a just and proper decision.
1.7 At the outset of the hearing, Mr. K.N. Jena, Advocate appearing on behalf of M/s Orissa Consumers' Association, Cuttack raised certain preliminary objections and sought the Commission's orders before proceeding with the hearing.
1.8 Mr. Jena, raised the preliminary objections on the following grounds, praying, inter alia, rejection of the proposal of the Gridco for revision of the tariff structure:
1.9 The first objection refers to Section 57-A of Electricity (Supply) Act, 1948 and holds that the present charges of electricity effective from 01.04.97 should be in operation for 3 years. Mr. Jena in his oral submission referred to the provisions of sub-clause (c) and (e) of sub-section (1) of Section 57-A of Electricity (Supply) Act, 1948. These provisions are applicable only to charges for electricity recommended by a Rating Committee and approved by the State Govt. as per Section 57-A of Electricity (Supply) Act, 1948 and stipulate that such charges for supply of electricity shall be in operation for such period not exceeding three years as the State Govt. may specify in the order. Sub-section (7) of Section 26 of the Reform Act, 1995 annuls the constitution of a Rating Committee, making the above provisions of the Electricity (Supply) Act, 1948 inapplicable in this case. We hold that this preliminary objection by the learned counsel that the revision of tariff now proposed by the licensee is without authority of law is not correct.
1.10 The second objection raised by the learned counsel relates to premature submission of bulk supply tariff when persons other than Gridco or other entrepreneurs have not been granted licence. The Commission has carefully considered this issue. The Commission observes that the mandate of the Reform Act, 1995 is to provide for avenues for participation of private sector entrepreneurs in the electricity industry. Gridco, the holder of the Distribution & Retail Supply Licence, has already constituted four distribution zones and has incorporated four subsidiary companies corresponding to these zones with Gridco as the holding company. Further, the Gridco as the licensee for Distribution & Retail Supply has initiated action proposing the divestment of the shares of these subsidiary companies to private companies. Gridco's action in this regard is consistent with the Reform Act, 1995. Further, Gridco, the holder of Transmission & Bulk Supply Licence, has applied for a bulk supply tariff to coincide with the aforesaid action related to hiving off its distribution & retail supply business to different companies. As action taken by Gridco with regard to restructuring and functional unbundling are in pursuance of the objectives of the Act, 1995, Gridco cannot be faulted on these accounts. Further, these have no material bearing on Gridco's application for tariff amendment in respect of supply of energy to consumers and related charges. Whether the licensee distributes and supplies electricity directly or through four subsidiary companies, the revenue requirement and the tariff need scrutiny and approval of the Commission. Therefore, it is perfectly in order for Gridco, holding the licence for Distribution & Retail Supply, to file the revenue requirement and charges for supply of energy.
1.11 The third objection has not been amplified by the learned counsel. As there has been no tariff revision since 01.04.97 till date, the objection is devoid of any merit.
1.12 The fourth preliminary objection raised by the learned counsel relates to debarring the licensee from revising the tariff until and unless they fulfill the conditions of the licence and comply with the order of the Commission. The Commission observes that non-compliance of the licence conditions or inadequate compliance, if any, is a totally separate issue relating to monitoring of compliance of licence conditions by the Commission. It may have a bearing on the charges to be levied but as long as the licensee has obligation to serve, it has to realise charges. Elaborate provisions exist in the Reform Act, 1995 to deal with non-compliance or violation of licence conditions. The filing of revenue requirement is a statutory requirement of the licensee as provided in sub-section (4) of Section 26 of the Reform Act, 1995 and, therefore, this function must not be mixed up with other issues. On these grounds the Commission did not admit any of the preliminary objections raised by the learned counsel and ordered the proceeding to continue.
1.13 Before examining the Gridco's proposal one more procedural objection raised in the hearing may be examined by us at this stage. Mr. Indrajit Mohanty, Advocate, appearing on behalf of M/s Nalco raised a procedural objection. Quoting section 28 and 29 of the Act, 1995 he argued that the Commission should not only proceed under Section 26 of the Act, but after obtaining consultation under the said section it has to issue a proposed order on which reaction has to obtained and then only final order can be passed.
1.14 We have carefully considered the objection. We find that Section 29 of the Reform Act, 1995 is in Chapter IX of the Act under the title "Commission's Power to Pass Orders And Enforce Decisions". The provisions of the Sections under this Chapter form an interconnected group and the scope of those provisions is defined by Sec.28(1). It runs as follows :
"Where the Commission is satisfied that a licensee is contravening, or is likely to contravene any relevant conditions or requirement of its licence, it shall by final order under section 29 and , if it thinks it appropriate in accordance with sub-section (2) by interim order under this section, issue such directions as it deems proper for securing compliance".
The orders contemplated under Section 29 or Sub-section (2) of Section 28 relate to contravention or likely contravention of any relevant conditions or requirement of the license and not to any other type of orders. An order setting tariff is not an order relating to contravention of a condition or requirement of a license. Section 29 is sequential to Section 28 and the words "final order" therein has the same denotation as the words "final order" in Section 28(1) - that is, an order in respect of contravention of a condition or requirement of a license.
1.15 Section 29 (1) (b) itself states that notice of the proposed "final order" shall set out information referred to in Sec.28(3)(b), namely, the relevant conditions or requirements (evidently of the license) with which the proposed order is intended to compliance; the acts or omissions which, in the opinion of the Commission, constitute contravention of that condition or requirement; other facts which would justify the proposed order and the effects of the proposed order. This conclusively suggests that the "final order" contemplated in Sec.29 is an order in respect of contravention of a license condition or requirement.
1.16 An order u/s 26 setting tariff is a regulatory order in discharge of the Commission's function under Sec.11(1) (e). The tariff-setting power under Chapter VIII is one form of regulation and license-enforcing power under Chapter IX is another form of regulation. They are distinct fields of regulation. The methods employed in each field are distinct. The Act deals with them in distinct Chapters. It is not permissible to take one provision out of its context from one Chapter and apply it in another Chapter dealing with a different form of regulation.
2.1 The application filed by Gridco has given elaborate calculation of its revenue requirements and upward revision of the tariff approved by the Commission in its Order No.009 dated 12th March, 1997. The amendment to tariff is stated to be necessitated due to following reasons :
2.2 Gridco have proposed uniform retail tariff for all four zones, calculating the revenue requirement on the basis of embedded costs in accordance with the provision of the Sixth Schedule to the Electricity (Supply) Act, 1948.
2.3 The revenue requirement for the year 1997-98 has been estimated as Rs.2615 crores (including previous accumulated loss of Rs.543.1 crores). The revenue from existing tariff without the proposed revision is estimated as Rs.1646.2 crores. Gridco's estimate of revenue during 1997-98 on the basis of the existing tariff applicable for 8 months and revised tariff for 4 months (from 01.12.97) is Rs.1715.9 crores. The estimated revenue on the basis of the proposed revised tariff for a full year is estimated as Rs.1855.5 crores. During a full year, Gridco's proposal leaves a gap of Rs.216.5 crores. It is stated by Gridco that the gap is substantially accounted for by its outstanding subsidy claim of Rs.198.1 crores on the Govt. of Orissa.
2.4 Gridco have estimated the accumulated loss till the end of 1997-98 as Rs.543.1 crores, but have not proposed to cover this amount in the tariff revision proposals, as they have approached Govt. of Orissa to allow a "Special Appropriation" to cover the amount, as provided in the Sixth Schedule of the Electricity (Supply) Act, 1948.
2.5 Gridco estimate the cost of power purchase for 1998-99 as Rs.1276.2 crores, operational expenses as Rs.635.88 crores and return on Capital Base at Standard Rate of (10.5+5)% as Rs.159.87 crores. Power purchase from different sources is estimated at 10,814.97 MU corresponding to a sale of 6380 MU at an overall T & D loss level of 41%.
2.6 Gridco have proposed that the transmission charge of 40 paise per unit in the existing tariff may be retained for the use of its transmission system within the State. A composite Bulk Supply & Transmission tariff to be applied to the distribution licensees has been proposed as Rs.300 per KVA of recorded maximum demand per month plus 81.70 paise per Kwh of energy delivered.
2.7 Gridco have not proposed any change in categorisation of retail consumers. It has been proposed to introduce an optional tariff for power-intensive industries to provide incentive for such industries to avail Gridco supplies in preference to setting up their own Captive Power Plants.
2.8 The proposal also provides for several significant departures in the structure of tariff. Charges to all categories of consumers are proposed to be unbundled into;
2.9 It is proposed by Gridco to discontinue the existing provision of Monthly Minimum Energy Charge with the introduction of a demand charge and a separate customer charge to recover the portion of fixed cost associated with providing supply. With provision of tariff across voltage levels, the provision of surcharge for supply at voltage other than that at which tariff is specified is proposed to be withdrawn. It is proposed to allow without penalty overdrawal beyond contract demand during off-peak hours upto 20% for EHT industries where TOU meters are provided. This facility is to be extended to HT industries once TOU meters are provided for them.
2.10 It is further proposed to provide an incentive at one fourth of the rate of penalty when power factor is maintained above 0.92. The existing provision of a separate rent for meters provided by the licensee is proposed to be withdrawn as costs associated with this are proposed to be recovered through the customer service charge. Consumers providing their own meters are proposed to be given an appropriate reduction in the customer service charge.
2.11 It has been stated that Gridco have carried out a survey through Revenue Improvement Action Plan (RIAP). The survey indicates that load factor billing for defective meters and unmetered supply constitute a substantial proportion of LT supply, and that actual load factors in such cases are substantially higher than those prescribed in the present tariff. This provides an incentive for consumers not to have their defective meters rectified. Gridco have urged the Commission to approve adoption of load factors higher than those specified in the present tariff and much higher than the findings in the survey to provide correct incentives for adoption of metering by consumers.
2.12 Gridco have submitted a formula for fuel and power purchase cost adjustment.
2.13 Consultation with the
Commission Advisory Committee :
3.1 As stated earlier fiftyone objectors were admitted for personal hearing. The objectors have raised vital issues and have enlightened the Commission with many useful suggestions in various areas of concern. At the same time, it is noted that several objections raised are not relevant to the tariff proceedings.
3.2 Commission has taken note of the almost universal complaint regarding poor quality of supply and poor consumer services. While it is not possible to deal with these concerns effectively while dealing with tariff revision proposals under Section 26 of the Reform Act, 1995, Commission takes note of them for evolving effective methods for encouraging Gridco to move more rapidly towards functioning in an efficient, economic and competitive manner.
3.4 As had been observed in Commission Order No.009 of the 12th March'97, (on Gridco's tariff application for 1997-98), objections with regard to the reform, restructuring and privatisation programme, various aspects of revaluation of assets on transfer to Gridco & OHPC are beyond the scope of this Commission since they hinge on public policy and legislation.
3.5 Many of the issues raised by the objectors such as classification of consumer categories, security deposits, interest on security deposits, etc. although related to tariff, are more relevant to the Distribution (Conditions of Supply) Code whose modification and amendment have to be considered separately. We do not, therefore, intend to deal with them in this order.
3.6 Objections have been raised by industries which are sick or potentially sick or covered by BIFR awards, or which seek protection, concessions and special treatment. This was also dealt in Commission's order on Gridco's proposal for 1997-98 tariff amendments. Gridco as an independent corporate entity is neither expected nor is capable of taking care of socio-economic policies and programms of the Govt. except with regard to electricity. It is mandated to be run with efficiency and economy to deliver safe, reliable and economic power supply. It is bound by law to arrange its affairs so as to realise cost of supply and earn reasonable return. It cannot take care of the financial interests of the users. The objectors have to address the issues of concession and protection etc. to the Govt. who may issue policy directives in accordance with its socio-economic objectives. Hence we do not consider it necessary to deal with objections pleading for concession, special treatment and subsidy by Gridco.
3.7 Other important issues raised in the objections may be indicated below before our observations and findings are given on the same.
3.7.1 Revenue Requirement :
3.7.2 Non - industrial (LT) category,
220.127.116.11 LT Industries : (Small/Medium)
18.104.22.168 HT/EHT Industries
3.7.5 Industries with CPPs
On merits of tariff proposal, all the objectors pointed out that the rate of back-up power for CPPs is discriminatory and is unreasonably high. Further common points of objections were that only incremental cost should be charged for emergency power supply and that there should be no power factor penalty during periods of high system voltage.
Mr. Indrajit Mohanty, learned advocate, representing of M/s Nalco stated that M/s Gridco was not justified in ignoring the increased cost of fuel and pay only 77 paise per unit towards cost of CPP power. It was urged that M/s Gridco should be asked to honour the special agreement of June'94 which provided that while emergency supplies are to be charged by M/s Gridco at three times of M/s Nalco's supply rate, there would be no further charge towards wheeling, transmission loss, demand charges etc.
Mr. S. K. Tamotia, Chairman-cum-Managing Director of M/s Aditya Aluminium raised some general issues as well as issues on tariff for CPPs, special treatment for construction industry, transmission charges and domestic rates. The main objections relevant for the present proceeding raised by Mr. Tamotia relate to adverse impact of high power cost in general and on CPP owners in particular on capital cost of industries and on the industrial climate of the state. He suggested settlement between Gridco and CPP on net exchange basis, non-discriminatory energy charge for CPPs, lower demand charge and single part tariff for construction industry.
3.7.6 Railway Traction
4.1 Mr. B.C. Jena, Chairman-cum-Managing Director, Gridco replied to the various issues raised by the objectors. He categorised the objections broadly as follows :-
4.2 Statutory Compliance
4.3 Revenue Requirement
4.4 Assessment of Revenue
4.5 Tariff Design
5.1 In order to determine the revenue
requirement of the licensee on the basis of which the Retail Supply Tariff is to be
approved, the Commission has analysed the components of the licensee's costs. These are
Gridco, in its tariff proposal for the year 1997-98, had estimated a purchase of 11000 million units from the various sources, but as per the actuals for the year 1997-98 the total purchase was 10357 million units. This was 643 million unit less than what was projected by Gridco. The current year's projection by Gridco is 10814 million units at a loss level of 41%. Taking into account the estimates and the actuals for the year 1997-98, the Commission considers the estimates of purchase for the current year as an over estimation. The purchase of power may, therefore, be limited to 10093 million units, inclusive of the power requirement of the 100% export oriented units. This is summarized as follows :-
Performance of Gridco for 1997-98
5.1.2 Gridco has proposed a total sale volume of
6380 million units for the year 1998-99. If the sale to 100% EOU estimated at the previous
year level of 194 million units is deducted then the sale figure of Gridco will be
modified to (6380-194) 6186 million units. As against this Commission has approved a sale
of 6430 million units excluding 100% EOU.
6.1 Cost of Purchase of Power : The Distribution & Retail Supply Licensee has to procure 9495.73 MU from the bulk supplier at the Commission's approved rate of Rs.200/KVA/month + 85.5 paise per unit. The total cost of power purchase works out to Rs.1282.47 crores. It is clarified that even though supply of NTPC power to the EOUs shall be routed through the distribution companies, revenue received from the same shall be payable to Transmission and Bulk Supply Licensee.
6.2 Expenditure on distribution and supply : The expenditure of distribution and retail supply may be considered under following heads :
These are discussed below :
6.3 Interest on loans borrowed from approved institutions : Gridco had originally proposed an amount of Rs.108.95 crores towards payment of interest on long term loans which was subsequently revised to Rs.100.66 crores after discussion and rectifications of some discrepancies. This needs to be further revised to Rs.100.51 crores. This amount excludes Rs.57.53 crores charged towards interest during construction. No penal interest has been assumed in interest calculation. The average interest rate works out to 13.23% which is within the limit of Commercial Bank rate. This interest does not include interest on Bond issued if any to Pension Trust Fund. On the basis of the loan allocated to distribution and retail supply, the impact of interest on distribution and retail supply works out at Rs.48.83 crores .
6.4 Bad Debt : Gridco have proposed an amount of Rs.19.25 crores. The assumption underlying such projection has not been given. No basis could be found either in the audited account or from Notes on Accounts for 1996-97 the last year for which audit has been completed.
However, in the OSEB period, provision of reserve for bad and doubtful debts was calculated at 10% of book debt against regular consumers and at the rate of 100% of book debts against permanently disconnected consumers. Since the amount due from permanently disconnected consumers was written off under the transfer scheme, Gridco started with a clean slate. Therefore, it is presumed that all Book Debts shown in Audited Accounts of Gridco are in respect of regular consumers. It may be reasonable to keep a provision of upto 15% of differential between Gross book debt as on 31.3.98 & 31.3.99 as calculated below. This assumption of 15% is due to higher level of sales, a figure which was considered reasonable for the tariff of 1997-98.
The entire amount of bad debt amounting Rs.19.25 crores is allocated to retail supply as there is remote chance of there being any bad debt at transmission end.
6.5 Depreciation : Gridco have proposed an amount of Rs.148.56 crores towards depreciation in their tariff application for both transmission and retail supply. This has been calculated as per principles contained in Ministry of Power (Deptt. of Power) Notification No.265 (E) dt.29.03.94. Asset wise classification and depreciation applicable there on have been given. The fixed asset details given upto 31.03.97 in tariff filing are in agreement with the audited accounts for 1996-97. For other years i.e. 97-98 & 98-99 amount of fixed assets given in RT.9 are in agreement with the figures shown in capital expenditure details (RTCL-11).
After detailed examination, the Commission accepts Rs.147.58 crores towards depreciation out of which Rs.77.50 crores is allocated to Distribution and Retail Supply.
6.6 Contribution to Contingency Reserve : Gridco have provided Rs.8.1 crores towards contribution to contingency reserve under Para-IV of the Schedule-VI of Electricity (Supply) Act 1948. As per provision of Para-IV of the Schedule-VI such contingency reserve should have a minimum value of one quarter of one percent and maximum value of one half of one percentum of the asset value. Applying this principle on the asset value of Rs.1024.17 crores allocated for distribution and retail supply, the Contingency Reserve of Rs.3.84 crores claimed by Gridco within the maximum and minimum limit is considered reasonable and, therefore, accepted.
6.7 Based on the above observations and keeping in view of the requirements of the Electricity (Supply) Act, 1948 and section 26(4) of the OER Act, 1995, the expenditure requirement of the licensee in respect of Retail Supply work out to Rs.1693.67 crores as tabulated in Annex-A.
7.1 Calculation of Capital Base : On examining the Capital Base calculation of Gridco, we find it necessary to indicate our findings only on important items and items in which Commission is adopting a different figure than projected by Gridco.
7.2 Original cost of fixed assets : The cost of fixed assets finds its origin from Transfer Scheme Resolution dt. 01.04.96 shown at Rs.1975.70 crores. Information on block capital is shown in appendix RT-6. The figure as on 31.3.97 amounting Rs.2064.99 crores is in agreement with the balance as shown in the audited balance sheet of 1996-97. Gridco have estimated capital addition of Rs.96.32 crores for the year 1997-98 and Rs.425.31 crores for the 1998-99. Accordingly, original cost of fixed assets as on 31.3.98 and 31.3.99 has been projected as Rs.2161.32 crores and Rs.2586.63 crores respectively. As segregated by the licensee, asset value of Rs.1124.81 crores has been allocated to Distribution and Retail Supply business. Commission accepts the amount for the purpose of calculation of capital base.
7.3 Original cost of work-in-progress : Original cost of the work-in-progress has been taken from the project wise capital expenditure statement (RT-7) submitted by Gridco and is accepted. This includes a portion of interest capitalised pertaining to the period of construction. Out of Rs.399.45 crores, an amount of Rs.154.18 crores belongs to Retail Supply business.
7.4 Investment in "Contingencies Reserve" Account : 'Capital base' should include the amount of investment compulsorily made under para IV of Schedule VI. No investment has been made in this account and even the amount of Rs.7.5 crores permitted in last tariff order has not been invested. Hence there shall be no such component in the capital base.
7.5 Working Capital :
11.1 Over the years, a tariff structure has developed keeping in view the nature and purpose of supply as mentioned in Section 49 of the Electricity (Supply) Act, 1948. The endeavour of the government to accommodate many socio-political objectives of the state in the tariff design and utility mangement has led to inefficiency, inequity and sickness of the utility. In the process, certain categories of consumers have been paying a small part of the cost of their supply and enjoying a high degree of subsidy. On the other hand, some other consumer categories have been charged at a rate higher than the cost of supply. Cross-subsidy within the electrical utility without balancing the overall revenue-cost of the utility has often led to a revenue deficit and sapping of the generation of investible resources. With the reform of electricity industry, an attempt is being made now to gradually change over to a cost-based tariff to promote end-use efficiency and make the utility economically viable.
11.2 During the tariff hearing, many HT/EHT industries pleaded for a tariff structure which would reflect the cost of supply and reduce the burden of cross-subsidy they carry so as to make their products competitive in the market. They also pointed out that the policy of charging them much in excess of their cost of supply makes it economical for them to switch over to captive power plants.
11.3 It was a universal demand on the part of domestic consumers that the tariff in respect of domestic consumers should not be fixed at a high rate as they were not in a position to bear any additional burden on their consumption and they were not able to pass on the additional burden to others like the industrial and commercial consumers. The Small & Medium Industries pleaded for a tariff lower than the cost of supply to retain themselves in the business. Their submission was that without cross-subsidy, they would go out of business. The investors on the other hand want a tariff structure that ensures for them a reasonable return on their investment.
11.4 The Commission has the difficult task of balancing the needs of various user-groups with conflicting interests. The Commission has to keep in view the objective of the Reform Act that it should lead to the development and management of the electricity industry in the State in an efficient, economic and competitive manner.
11.5 Taking into account all aspects of licensees tariff filing and the representations and submissions made by the objectors during the proceeding as also the views expressed in the meeting of the Commission Advisory Committee we find it appropriate to redetermine tariff and the charges to be realised by Gridco. Charges and treatment for various categories are given in the succeeding paragraphs of this order. We direct that these are made effective from 1st December, 1998 after publication in accordance with Section 26(5) of the Reform Act, 1995.
11.6 The proposal of Gridco contains
suggestion for unbundling of the tariff to distinguish between the various functions
undertaken by the utility. Separate charges have been proposed for separate activities :
(ii) Demand charge to meet a component of the fixed cost incurred in the system for meeting the consumers' load.
(iii) Energy charge reflecting the variable cost of power purchase.
11.7 Customer Charge
11.8 There is convincing logic in the proposal to realise the fixed monthly minimum charge from all types of consumers to cover fixed cost of the licensee other than those covered under demand and energy charges. The cost component of items covered as suggested by Gridco have been looked into and it is considered desirable to exclude meter rent. This is due to the fact that the consumer has the option to supply his own meter, in which case he shall not be liable to pay meter rent. The Commission accepts the proposal of Gridco to have charges on all categories of consumers based on (a) demand (b) energy (c) a fixed monthly minimum charges, & (d) meter rent. However, in case of consumers with contract demand of less than 110 KVA, the monthly minimum fixed charge will cover the demand as well as the monthly customer charge.
11.9 However, customer charge may be levied in respect of consumers with connected load of 110 KVA and above as in the following table :
11.10 Customer Charge for Consumers with connected load 110 KVA or above:
11.11 Demand Charge
for Consumers with contract demand of less than 110 KVA:
11.12 Demand Charge for
Consumer with Contract Demand of 110 KVA and above :
11.13 Keeping all these factors in view, the Commission has decided not to change the present level of Demand Charge of Rs.200/ KVA per month for all consumers with contract demand of 110 KVA and above.
11.14 Consumers with contract demand 110 KVA and above are required to pay a demand charge on the basis of maximum demand recorded or 80% of contract demand whichever is higher. The revenue from consumers with contract demand of 110 KVA and above has been calculated by Gridco by multiplying the proposed rate by 82% of the contract demand expressed in KVA. The factor of 82% has been arrived at by Gridco on the basis of recorded maximum demand and contract demand for the period of Oct'97 to Mar'98 as given at page 4/10 of the clarification on retail tariff application 98-99, for consumer categories of General Purpose, Large Industry, Heavy Industry, Mini Steel Plant, Public Water Works, Power Intensive Industry and Railway Traction.
11.15 The Commission has examined the billing details of consumers liable to pay demand charge. Apart from the categories of consumers mentioned above there are consumers belonging to other categories also with contact demand of 110 KVA and above, who also pay demand charge. These have also been taken into consideration.
11.16 Where the recorded demand is less than 80% of the contact demand, the revenue from demand charge is calculated on the basis of the demand charge realization of at least 80% and in case where the recorded maximum demand is more then 80%, the demand charge is calculated on the basis of actual demand recorded. Month wise contract demand, recorded maximum demand and evaluated billing demand are indicated in the table, below for the period of six months from 10/97 to 3/98 as furnished by Gridco :-
11.17 Analysis of the figures indicates that the billing demand is on an average 90% of the contract demand. This factor has been accepted by the Commission as reasonable and the proposed factor of 82% for the calculation of revenue from demand charge by Gridco is an under estimation of revenue. The Commission expects that in subsequent tariff proposals Gridco will work out the factor for a period of 12 months to assess the demand charges accurately for these categories of consumers, when this factor may be reviewed.
11.18 Revenue likely to be earned on account of levy of demand charge has been shown separately in the calculation of expected revenue from charges for the year 98-99.
11.19 As per the provisions of the Regulation all consumers covered under two part tariff shall pay a penalty in case actual maximum demand exceeds the contract demand. No distinction is made between the customers who exceed the contract demand at off peak hours and those who over burden the system by exceeding the contract demand at peak hours. Gridco have accordingly proposed that as the customers exceeding the contract demand outside the peak hours actually help the system by leveling the load shape, no penalty should be levied on overdrawal outside the peak hours up to a level of 120% of contract demand. Beyond this level, Gridco propose that a reduced penalty of 1/4 (one fourth) of the existing penalty rate will apply. The existing rate of penalty will continue for overdrawal at peak hours. The facility is proposed to be extended only to industries drawing power in EHT system since TOD meters are in place for this category at this time. Once TOD meters are put in place for industrial consumers at HT, this facility will also be extended to them.
11.20 During the course of the hearing, some of the objectors suggested that the overdrawal limit without penalty during off peak hours may be totally removed or kept at 150% of contract demand without penalty. Allowing an overdrawal limit during off peak hours to 150% of the contract demand may create technical problems of over-loading of equipment. The overdrawal load limits of many of the equipments being 20% Commission considers it reasonable to allow off peak drawal of power to 120% of contract demand without penalty. Penalty at full rate shall apply for overdrawals beyond this rate during off-peak hours.
11.21 Some objectors have questioned the levy of demand charge at a minimum of 80% of Contract Demand. It has been suggested by some objectors that demand charge should be levied on the average actual demand of the consumer. The basis of levying demand charge subject to a minimum of 80% of the contract demand is to ensure the recovery of minimum fixed costs for the installed facility. Commission therefore does not consider it appropriate to make any change in the present system of levying a demand charge at a minimum of 80% of the contract demand.
11.22 Energy Charge :
11.23 There is a practice of imposing a surcharge/ rebate for supply at a voltage other than the voltage for which tariff was fixed. With the introduction of tariff related to voltage of supply, it is not necessary to continue with the levy of surcharge for different voltage levels. The Commission has decided to adopt the following tariff structure for all loads of 110 KVA and above :-
However, H.T. & E.H.T. consumers will be charged at the rate of 200 paise/unit & 180 paise/unit respectively towards energy charge for all consumptions in excess of 60% load factor calculated on contract demand.
11.24 The Commission has made several exceptions to the above uniform tariff structure to insulate consumers from a steep rise in tariffs. Tariff for consumers in the Domestic Category has been kept well below the normative level. The same consideration has been adopted for Small Scale Industries, Street Lighting and Public Institutions. Mini Steel Plant consumers will pay energy charge of 240 paise/unit both at H.T. and E.H.T. supply with incentive as aforesaid for consumption in excess of 60% load factor calculated on contract demand. Similarly, Public Institutions comprising schools, colleges and hospitals will pay less than what would have been payable by them according to the voltage of supply.
11.25 INCENTIVE FOR H.T. &
E.H.T. CONSUMERS :
11.26 In order to provide adequate incentive to the Power Intensive industries not to switch over from the GRIDCO's system in favour of captive power plants, GRIDCO have proposed an incentive tariff to be made applicable only to a selected group of power intensive industries. The proposed tariff is lower than the tariff applicable to other industries in the same category as well as other EHT consumers.
11.27 In the Tariff Concept Paper, the Commission had stated that tariff should gradually be based on voltage of supply rather than on the nature and purpose of supply. Further the Commission appreciates the desirability of retaining industries as consumers and encourage new industries to become consumers of the Distribution Licensee.
11.28 The Commission, therefore, decides that incentive tariff may not only be introduced but such incentive should also be available to industries other than the Power Intensive Industries. Those consumers who are availing power supply at HT or EHT and are maintaining load factor above 60% should be given incentive in the form of lower energy charges in respect of consumption beyond 60% load factor. Accordingly the Commission has decided that the HT industries maintaining a load factor above 60% calculated on the contract demand will be charged at the rate of 200 paise per unit for all consumption in excess of the consumption beyond the load factor of 60%. Similarly EHT consumers attaining a load factor above 60% calculated on the contract demand will be charged at the rate of 180 paise/unit for all consumption in excess of load factor of 60%. This tariff shall be applicable for the power consumed from GRIDCO source only.
11.29 Adoption of load factor for
consumers with defective meter and without meter :
11.30 The Commission is seriously concerned about the high commercial loss of Gridco and the imperative need to tackle the problems of theft, abstraction and unauthorised consumption of energy. At the same time load factor billing cannot continue as the sole instrument to meet Gridco's target of energy sale. Rectification of defective meters and installation of meters in place of unmetered supply has to be the central focus of Gridco's commercial strategy.
11.31 In addition, loss occurring in
the system due to theft of electricity directly from overhead distribution lines is also
causing commercial loss in the system. Priority should be given for replacement of meters
of consumers with three phase supply, consumers in the commercial category & other
large loads with single phase supply. The Commission directs Gridco to submit at the end
of each quarter the following information :
11.32 At present assessment of consumption in respect of domestic consumers is being done assuming the load factor of 15%. Similarly, for commercial consumers 20% load factor is used. Consumers covered under small industries category are billed at a load factor of 15%. In case of irrigation category for the period of June to October, a load factor of 8% is used and for the month of November to May, a load factor of 15% is used.
11.33 The proposal of Gridco for
increase in the load factor for unmetered supply or defective meter is given below :
11.34 Field studies conducted by Gridco reveal that energy consumed or physically drawn by consumers is substantially more than that estimated through load factor criterion of 15% and 20% presently in use for domestic and commercial consumers respectively. The Commission have decided to raise the load factor in respect of Domestic category from 15% to 20% and for Commercial category from 20% to 30%. The Commission also examined the present load factor of consumers in Small Industries, and Irrigation and have decided that the present level of load factor should continue.
11.35 The Commission's approval of enhanced load factor will be reviewed from time to time. If the Commission comes to the conclusion that the Distribution and Retail Supply Licensee has not taken effective steps in metering and has sought to depend on load factor billing to increase sale of energy, it will consider revising the load factor downwards.
12.1 Domestic :
(a) The existing tariff for Domestic category for supply at 230/400 V is given below:
(b) The Commission examined the existing tariff structure for this category with particular reference to Gridco's proposal to have a uniform rate instead of the existing slab rate. On balance of consideration to gradually decrease subsidy and yet facilitate use of electricity by small consumers, the Commission has decided to retain the slab system but rationalise it. The revised energy charge for supply at 230/400 V shall be as under.
(b) The Commission reviewed the existing tariff structure and decided the following:-
12.3 Small Industry
12.5 The rate of tariff as determined above is reflected in Annex-D.
13.1 Demand Charge : The monthly demand charge will be calculated on recorded/evaluated maximum demand or 80% of contract demand whichever is higher.
13.2 Monthly Minimum Energy Charge : The monthly minimum energy charge for categories of consumers for whom it is applicable will be discontinued with effect from the date the new tariff comes into force.
13.3 Metering on LT side of Consumers Transformer : Transformer loss computed as given below to be added to the consumption as per meter reading.
13.4 Surcharge for supply at voltage other than specified voltage shall not be applicable.
13.5 Delayed payment surcharge : The Commission approves levy of delayed payment surcharge at the rate of 2% per month and shall be levied prorata for the period of delay counted from the due date of payment indicated on the bill in respect of the following categories of consumers.
13.6 Power Factor Penalty : The Commission approves the following :
A power factor penalty shall be added as a percentage of monthly demand charges and energy charges as given below and shall be applicable to the following categories of consumers.
Rate of P.F. penalty :
ii) 1% for every percentage fall below 60% upto and including 30%
iii) 2% for every 1% fall below 30%.
13.7 Penalty for overdrawal of power above the contract demand : For maximum demand in excess of contract demand in a month, a penalty at the prescribed rate of demand charge shall be imposed. However, in case of EHT industries, no penalty would be imposed on overdrawal outside the peak hours upto the level of 120% of the contract demand of the consumer. Beyond this level of 120% of contract demand during off-peak hours, a penalty at the prescribed rate of demand charge shall be added.
13.8 The existing rates of penalty will continue for overdrawal at peak hours i.e. for maximum demand in excess of contract demand, a penalty at the prescribed rate of demand charge shall be added.
13.10 Re-connection Charge :
13.11 Temporary connection charges : The existing practice should continue without any change.
13.12 New connection charges for LT : Since the existing system of preparation of estimates causes delay in new connections for prospective small consumers, for new connections upto and including 3 KW load, there will be a flat charge of Rs.500/-. The existing practice of preparation of estimate and payment of charge based on the estimated amount shall continue without any change for connections above 3 KW load.
13.13 While the Commission finds it logical to allow charges under a fuel surcharge formula, we have to indicate that the formula shall be separately notified in the regulations.
13.14 Meter Rent : Monthly meter rent shall be charged from consumers to whom meter has been supplied by the licensee according to the following scale:
13.15 The revenue requirement for 1998-99 submitted by the Gridco is modified to the extent indicated in this order. It is estimated on the basis of tariff approved by us that the licensee shall realise a total revenue of Rs.1725.95 crores for a full year implying a clear profit of Rs.28.44 crores and "reasonable return" amounting to Rs.28.25 crores. Since the new tariff shall be effective from 1st December, 1998. Gridco shall not be able to earn clear profit during the current financial year.
13.16 For the financial year 1998-99, it is estimated that Gridco is likely to incur a loss. This has partly arisen due to delay in filing the tariff application. However, the actual loss to be incurred can be assessed only on close of the financial year and Gridco may submit its claim in the revenue requirement during the next tariff filing.
13.17 Gridco had submitted consolidated as well as dis-aggregated revenue requirement in respect of all the four zones to which it has restructured itself. While the Commission has noted the dis-aggregated figures as given by Gridco, it is not in a position to confirm the dis-aggregated revenue requirements. The capital base and the clear profit for the zones cannot be determined before decision is taken on the licence applications filed by the four zonal distribution companies.
The Commission orders that Gridco takes appropriate action in pursuance of this order.
EXPENDITURE FOR THE FINANCIAL YEAR 1998-99
CALCULATION OF CAPITAL BASE AND REASONABLE RETURN FOR FINANCIAL YEAR 1998-99
CALCULATION OF CLEAR PROFIT FOR A PERIOD OF TWELVE MONTH
TARIFF EFFECTIVE FROM 1st DECEMBER, 1998
COMPARISON OF SALES PROPOSED BY GRIDCO AND APPROVED BY THE