4.0

OBJECTIONS DURING HEARING
The Commission admitted twenty objections against Retail Supply Tariff application, 2001-02 and four objections against the Revenue Requirement application, 2002-03 for personal hearing. Some of the objections were of general nature and others were specific to the tariff filing of 2001-02 and Revenue Requirement of the licensee for 2002-03. Summary of these objections based on issues raised are presented below:

4.1

The Commission considered the objection raised by the various objectors. Based on their nature and type, these objections may be categorised broadly as under:-

4.2

Period of implementation of the tariff

4.2.1

Some of the objectors suggested that tariff revision proposed for the year 2001-02 and revenue requirement for 2002-03 should be taken up together.

4.2.2

It was also pointed out by some of the objector that recommendation of the “Report of Committee on Power Sector Reform” in Orissa, October, 2001 should be decided first by State Government before making any decision on tariff revision proposal by the Commission.

4.2.3

Some of objectors also pointed out that tariff shall not be fixed or amended in quick succession as it is not tenable under law and opposed to OER Act. Tariff shall not be amended within a period of three years.

4.2.4

For an industry, long term tariff for a reasonable period of 5 years be fixed.

4.3

Audited Accounts
Some of the objectors have stated the following on audited accounts:-

4.3.1

Licensee’s account has not been audited and account are not maintained properly.

4.3.2

The latest audited accounts for the year upto March, 2001 have not been furnished.

4.3.3

WESCO has not submitted the latest Audit report.

4.4

Transmission and Distribution Loss

4.4.1

Majority of the objectors strongly objected to high T&D loss assumed by WESCO and gave the following comments:-

4.4.1.1

In absence of adequate metering installation, applicant is overstating the distribution loss figure to claim higher requirement and consequent increase on tariff.

4.4.1.2

Number of unmetered consumers has increased much and reduction of consumers with defective meters is negligible.

4.4.1.3

No studies were conducted to asses the actual losses nor suitable meter installed at 11 KV & LT to measure technical loss.

4.4.1.4

Distribution loss projected by WESCO is 43% in 2000-01 and 38% in 2001-02, whereas actual loss on Rajgangpur, Rourkela 33 KV feeder is 3% only.

4.4.1.5

WESCO is not consistent in projecting its distribution losses and has never been able to meet its targeted loss.

4.4.1.6

WESCO has conducted energy audit and loss audit of Bargarh Division where the total loss is 58.5% to 65.48% out of which technical loss has been shown 13.98% to 14.43%.

4.4.1.7

Some objectors suggested the following measures for reduction of T&D loss.

- WESCO should give priority for supply of meters and replacement of defective meters.
- Sub contracting through village Committee/other agencies may be introduced for the purpose of domestic collection and billing to minimise commercial losses and improving collection.
- Tariff rationalisation, load factor incentive should be introduced to minimise commercial loss.
- Effective maintenance of transformer, jumper, conductor.

4.5

Employees Cost, Material Cost and A& G Expenses
Many objectors have pointed out that the cost of employees, material cost, A&G expenses are quite high and should be increased 6% over Commission’s approved figure of 2000-01

4.6

Collection efficiency and provision for bad and doubtful debt
Regarding collection efficiency some of the objectors have pointed out that collection efficiency of WESCO in LT is only 45% and the projected increase in bad debt manifests its non-accountability and poor collection. The collection efficiency of WESCO should be minimum 90%. Some objectors stated that collection made out of huge outstanding arrears which is presently 5.40 months of sale are not shown. Shri R.P. Mohapatra specifically raised during public hearing that list of debts written off is not available nor the arrears have been deleted from the ledger. He pointed out that arrear revenue relating to pre privatisation period collected by the licensee is not shown as revenue, nor 50% of arrear collection is given to GRIDCO, which is their legitimate revenue. Therefore Commission should only make a token provision of bad debt. Allowing 15% of incremental arrears as bad debt is a premium for inefficiency. Mr. G. Pujari representing Sundargarh Dist. Employees Association stated that Bad debt may be permitted to the extent of 1% on HT and 5% on LT sales.

4.7

Depreciation
Objectors like Shri R.P. Mohapatra, Shri Kulamani Acharya and Shri G. Pujari suggested modification in calculation of depreciation. Shri R.P. Mohapatra suggested that rate of depreciation based on MoP, GoI notification of 1994 are meant for assets purchased new. It is thus applicable to assets purchased on or after 01.04.1994. Rate of depreciation on other assets is to be determined by Government, Commission may allow depreciation for assets created before 3/94 at old rates pending revised notification by GoO.

Shri Acharya has stated that pre-1992 rate of depreciation should be applied.

Shri Pujari has stated to calculate depreciation on original cost of asset and not on revalued cost.

4.8

Rationalisation of Tariff
Many objectors suggested the following for rationalisation of tariff :-
- Increased consumption by consumers should be rewarded and present restriction on special tariff on 100 MVA with 80% load factor should be rationalised and the same should be available to HT and EHT consumers having contract demand of 300 KVA and above.
- Present restriction on special tariff for 50 MVA to be reviewed. The same should be available to HT, EHT consumers having a contract demand of 200 KVA.
- Existing provision of load factor incentive and over drawal penalty should be reviewed.
- Maintaining power factor above 97% is rare. This needs revision. Power factor incentive may be allowed starting from 90% PLF as was allowed in the earlier tariff orders.
- Tariff for commercial consumers of LT category should be reduced.
- Proposal to increase colony consumption from Rs.2.30 per unit to Rs.2.60 per unit is highly unjustified. For colony consumption ceiling limit of 10% of total units consumed should be waived and the rate applicable to domestic consumer should be applicable.
- Allowing prompt payment rebate within 48 hours of payment of the bill is arbitrary.

4.9

Cross Subsidy
Some of the objectors stated that EHT, HT consumers are charged more than cost of energy. Therefore cross subsidy should be reduced and their tariff should be considered for reasonable reduction. Objectors proposed the following measures for reduction in cross subsidy.
-    Government of Orissa may reimburse electricity duty to fund part of subsidy
-    Irrigation and Kutirjyoti subsidy should be funded by State Government
-    Substantial growth in HT and EHT consumes may be planned so that more subsidies available to low voltage class of consumers.
-    WESCO has to improve its efficiency by reducing Distribution loss.

4.10

Calculation of Reasonable Return and Capital Base
Some of the objectors have pointed out that for the purpose of calculation of capital base “Original Cost of Fixed Asset” is to be taken in to consideration. Capital base should be taken from audited balance sheet. Regarding reasonable return objectors suggested that inefficient, loss making company with negative capital base should not be permitted reasonable return.

4.11

Provision of previous loss shown in special appropriation
WESCO’s proposal on showing the previous loss as special appropriation is objected by some of the objectors. They stated that provision of previous losses should not be included in tariff.

4.12

Interest
M/s. INDAL and UCCI, Cuttack have stated that WESCO’s claim for Power Bond interest should not be allowed as consumers are not responsible for non-payment of energy bills to DISTCOs.

Some of the objectors stated that WESCO should arrange working capital fund from bank to reduce interest burden and avoid paying DPS.

4.13

Interruption, Low Voltage and Unreliable Supply
Due to poor maintenance of feeders there are frequent power failures for which production in industry is seriously affected. Therefore quality of power should be improved.

4.14

Clarification from WESCO by DIRECTOR (TARIFF)
During hearing Director(Tariff), OERC sought certain clarification from WESCO on following issues :

4.14.1

In the RR application T&D loss proposed for the year 2002-03 is 41.09% whereas for the same year it is shown as 39% in the business plan. Similarly for 2001-02 in the tariff application T&D loss is proposed at 38.01%. But in the business plan it is shown at 41.08%. Reason for the discrepancy may be provided.

4.14.2

In the RST proposal for 2001-02 the distribution loss is shown at 38.01% whereas the same for the year 2001-02 in the ARR application of 2002-03 is shown at 45.06%. This may be clarified.

4.14.3

Details of loss reduction programme (Form P-14) may be furnished.

4.14.4

Under the head "interest on working capital" a sum of Rs.21.73 crore for the FY 2001-02 and a sum of Rs.48.50 crore for the FY 2002-03 is shown for payment of DPS to GRIDCO. WESCO may clarify why this DPS should be allowed for recovery through tariff when it estimates receivables at Rs.511.29 crore as on 31.03.2002 and Rs.631.41 crore as on 31.03.2003.

4.14.5

WESCO has proposed Rs.1.28 crore for the financial year 2001-02 and Rs.1.00 crore for the FY 2002-03 towards organisational development mainly to be spent for microprivatisation. The cost benefit analysis of this investment may be given.

4.14.6

For the FY 1999-00 miscellaneous receipt was Rs.4.36 crore but in spite of installation of large number of meters, WESCO has shown a lower figure of miscellaneous receipt towards meter rent as Rs.3.27 crore in 2001-02 and Rs.3.80 crore in 2002-03. Lower projection of miscellaneous receipt may be clarified.

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