Case No.12 of 1999 Present : Shri S.C. Mahalik, Chairman Date of Argument : 29.11.99 IN THE MATTER OF : Revenue requirement and determination of tariff for bulk-supply and for transmission for 1999-2000. O R D E R |
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Grid Corporation of Orissa Ltd., Janpath, Bhubaneswar (GRIDCO, for short), the holder of licence for carrying on the business of Transmission & Bulk Supply of electricity in the State of Orissa, submitted an application on 17.08.99 u/s 26 of the Orissa Electricity Reform Act, 1995 (Reform Act, 1995, for short) in respect of tariff for bulk supply of electricity to Distribution & Retail Supply Licensees in Orissa and transmission tariff for use of transmission services. |
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2.0 |
The application of GRIDCO is in two volumes (Vol.1 containing the main text & annexures and Vol. 2 containing evidential documents). The Commission’s staff, after preliminary scrutiny of the application, raised a number of comments/queries thereon. The Commission forwarded the comments/queries to GRIDCO and asked for additional information from GRIDCO in order to enable the Commission to decide whether the filing would be treated as complete for the purpose of proceeding u/s 26 of the Reform Act, 1995. |
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2.1 |
GRIDCO provided clarifications to the comments/queries in two volumes (Vol.-1 containing the main text & annexures and Vol. 2 containing evidential documents) on 6th October, 1999. In the light of the clarifications to the comments/queries and additional information received from it, the filing appeared to be generally in order. Accordingly the filing was treated as complete and by Order No.2 dt.08.10.99, the application in question was admitted and issue of public notice inviting objections to GRIDCO’s application was ordered. |
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2.1.1 |
Notice was published, as approved by the Commission, in several local newspapers on two consecutive days in terms of Clause 39 r/w sub-clause (1) of Clause-126 of the Orissa Electricity Regulatory Commission (Conduct of Business) Regulations, 1996 (Regulations, 1996, for short) outlining the broad features of the Transmission & Bulk Supply Licensee’s proposed tariff and the rates & charges in a Schedule appended to the notice and inviting objections from interested persons. The public notice required the interested persons to file their objections and such documents as they seek to rely upon, supported by an affidavit, in six copies and to indicate also if they would like to be heard in person by the Commission in terms of Clause 43 of the Regulations, 1996. The notice further required the interested persons to serve a copy of the reply/objection along with the documents relied upon on the petitioner/applicant and to file proof of such service before the Commission at the time of filing of the reply/objection in terms of Clause 44 of the Regulations, 1996. |
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2.1.2 |
The above public notice also called upon the interested persons/objectors to inspect/peruse GRIDCO’s application and take note thereof during office hours within 15 days of the publication of the notice. The public notice also permitted the interested persons to obtain the salient features of the application on payment of Rs.20/- towards photocopying charges from Director (Comm.), GRIDCO Hqrs., Bhubaneswar and all Superintending Engineers in charge of EHT (Maint.) Circles of GRIDCO at Cuttack, Burla, Berhampur and Jajpur Road. They were also permitted to obtain a full set of the application together with supporting materials (in 4 volumes) on payment of Rs.250/- towards photocopying charges. |
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2.1.3 |
The last date of filing of objection complying with the terms & conditions of the public notice was initially fixed as 05.11.99. The date fixed for filing of objection was extended to 15.11.99 because of the super cyclone which hit Orissa on 29th and 30th November, 1999. A notice in print media such as "Samaya" (dtd. 05.11.99) and "New Indian Express" (dtd. 03.11.99) was published extending the date of filing of objection with regard to GRIDCO’s application as well as the Retail Supply Tariff (RST) applications of the Distribution and Retail Supply Licensees for the information of the general public and interested persons. The notice regarding extension of the date of filing of the objection was also displayed on the office Notice Board. |
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2.2 |
The Commission received 18 objections against GRIDCO’s application out of which one was rejected for non-compliance of the terms & conditions as laid down in the public notice while 17 objections were admitted according permission to the objectors for participating in the hearing. The objectors whose objections were admitted for hearing are (1) Managing Director, WESCO, At/P.O. Burla, Dist. Sambalpur. (2) Managing Director, NESCO, At/P.O. Januganj, Dist. Balasore. (3) Managing Director, SOUTHCO, At/P.O. Courtpeta, Berhampur (4) M/s Indian Aluminium Company (INDAL), At/P.O. Hirakud, Dist. Sambalpur. (5) M/s Nava Bharat Ferro Alloys Ltd., At/P.O. Khadgaprasad (Near Meramundali Rly. Station) Dist. Dhenkanal. (6) M/s Utkal Chamber of Commerce & Industry Ltd., Barabati Stadium, Cuttack. (7) Shri K.N. Jena, General Secretary, Orissa Consumers’ Association, Biswanath Lane, Cuttack. (8) Shri K. Acharya, President, Orissa Grahak Mohasangha, B-4, Pallaspali, Bhubaneswar. (9) Dr. S.K. Tamotia, President, Aditya Aluminium, 9th Floor, IDCO Towers, Bhubaneswar. (10) Shri N. Jena, Secretary, Nayapalli Community Care Association, N-2/100 IRC Village, BBSR. (11) M/s Indian Charge Chrome Ltd. (ICCL), At. Bomikhal, P.O. Rasulgarh, Bhubaneswar. (12) M/s NALCO, P/1, Nayapalli, Bhubaneswar. (13) Shri R.C. Padhi, Retd. Chief Engineer, MIG A/24, Brit Colony, Nayapalli, Bhubaneswar (14) Managing Director, CESCO, 18, Forest Park, Bhubaneswar. (15) Shri S.K. Nanda, Convenor, Energy Panel, Confederation of Indian Industry (CII), Eastern Region, 8, Forest Park, Bhubaneswar. (16) Shri Dhaneswar Dhal, A-39, Sahidnagar, Bhubaneswar . (17) Shri R.C. Mehta, B-204, Madhukunj Enclave, Rasulgarh, Bhubaneswar. |
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2.3 |
After receipt of the objections and scrutiny thereof, the Commission published a notice in two Oriya dailies and one English daily on 17th & 18th November, 1999 whereunder the list of valid objections with regard to GRIDCO’s application and the date of hearing (29.11.99) were notified for the information of the general public. |
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2.3.1 |
In terms of clause-45 of the Regulations, 1996, the Commission permitted the applicant to file a rejoinder to all the objections/reply filed by the objectors. |
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2.4 |
As notified, the hearing of the BST application commenced on 29.11.99. None of the parties present made any prayer to adduce oral or documentary evidence in course of the proceedings except those that were filed supported by affidavit, in response to the public notice. |
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2.5 |
Apart from the substantive objections, the following legal objections were raised by different objectors as preliminary objections on the maintainability of the tariff proceeding. The Commission heard the views of GRIDCO on such objections. While one of the preliminary objections was disposed of by Order dtd.29.11.99, it was decided with the consent of the respective objectors that all other preliminary objections would be dealt with by the Commission in the final order. |
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2.5.1 |
The preliminary objections are as follows :- |
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2.5.1.1 |
Miscellaneous Appeal No.41 of 99 has been filed in the Hon’ble High Court of Orissa being aggrieved with the decision of the Commission in Case Nos.18/98 (BST) and 19/98 (RST) and, therefore, the present BST application should be rejected by the Commission as an appeal is pending against the BST determined by the Commission in its Order dated 21.11.98. (Orissa Grahak Mohasangha Para-1) |
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2.5.1.2 |
The BST application is neither a new tariff nor an amendment to the existing tariff. It is only a revision of the existing tariff. Therefore it is not permitted under law. (Orissa Grahak Mohasangha Para-1) |
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2.5.1.3 |
The BST fixed by the Commission by its Order dt.21.11.98 in Case No.18/98 which has come into force from 01.12.98 cannot be revised or amended within a period of 3 years as envisaged u/s 57-A (1)(e) of the Electricity (Supply) Act, 1948 (the Act, 1948, for short) and therefore the BST application is not maintainable and liable to be rejected outright. (O.C.A. Para-1& 28) |
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2.5.1.4 |
The BST so fixed by the Commission (in Case No.18/98) cannot be amended within one financial year unless warranted for adjustment of Fuel Surcharge. (O.C.A. Para-2) |
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2.5.1.5 |
OERC has not framed any regulation by notification in official gazette for fixation of tariff u/s 29 of the Electricity Regulatory Commission Act, 1998 (the Commission Act, 1998, for short) and sub-section (2) of Section 26 of the Reform Act, 1995 and as such it lacks authority and power to consider the application of the licensee, be it for fixing a new tariff or revising or amending the existing one. (O.C.A. Para-2&4) |
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2.5.1.6 |
OERC has not yet specified the methodology and procedure for calculating expected revenue from the charges and therefore, it cannot consider the application of the licensee which is based on imaginary, vague, and manipulated statement of facts and accounts in the absence of statutory audit reports for the year 1997-98 and 1998-99. (O.C.A. Para-5,6,&7) |
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2.5.1.7 |
Licensee has failed to comply with the conditions of the Licence to improve its efficiency, standard of service and reduce its losses and as such, it should not be allowed to make good the losses attributable to mal-administration, inefficiency, corruption, mismanagement, and unwarranted expenses by way of penalising the consumers in the form of a tariff hike. (O.C.A. Para-8&13) |
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2.5.1.8 |
The BST application not having been filed prior to the commencement of the FY 1999-00 and the said application having been made in the middle of the aforesaid FY cannot be entertained for setting a tariff for the balance or remaining part of the FY. (O.C.A. Para-9) |
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2.5.1.9 |
As the OERC has not consulted Commission Advisory Committee (CAC, for short) prior to the admission of the tariff application and issue of public notice, it would not be legal and proper to proceed with the case. (O.C.A. Para-16) |
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2.5.1.10 |
As the Commission, at present, is only a two member Commission instead of three and the member of the Commission who shall be an electrical engineer having experience of generation, transmission & distribution or supply of electricity in terms of Section- 5 (1)(a) of the Reform Act, 1995 having not been appointed as yet, the Commission now comprising two members lacks quorum to undertake and dispose of the tariff proceeding because of the bar created u/s 9(4) of the Reform Act, 1995. |
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2.6 |
We now deal with the first objection raised by Orissa Grahak Mohasangha. Though M.A. No.41/99 has been filed in the Hon’ble High Court of Orissa against the final order in BST (Case No.18/98) and RST (Case No.19/98), it is not the case of the objector that the orders of the Commission in those two cases have been stayed by the Hon’ble Court. As the final orders in Case No.18/98 and 19/98 have not been stayed by the Hon’ble Court, the plea of the objector that the present application for BST should be rejected out of hand because of the pendency of the M.A. bearing No.41/99 cannot be considered as a valid objection. |
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2.7 |
Regarding the second objection raised by Orissa Grahak Mohasangha, it may be mentioned that nowhere in the BST application, the applicant has sought for revision. On the other hand, the applicant has described the BST application as one for amendment of Transmission & Bulk Supply Tariff u/s 26 of the Reform Act, 1995. Similarly, in para-B at page 5 of the BST application, it has been described as an application u/s 26 of the Reform Act, 1995 r/w Condition 21.3 of the Orissa Transmission & Bulk Supply Licence for amendment of the Transmission & Bulk Supply Tariff approved by the Commission vide its Order dtd. November 21, 1998 in Case No.18/98. |
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2.7.1 |
Apparently there is some misunderstanding about Section 26 of the Reform Act, 1995 which is relevant to the determination of tariff by the Commission. We would like to clarify that in this section of the Reform Act, 1995, the procedure for determination of a fresh tariff or amendment of tariff is the same. There is no vacuum or even interregnum in operation of a tariff which has been defined as a schedule of standard prices or charges. This has been amply made clear in Clause 116 of Regulation, 1996. Depending on the gap between estimated revenue requirement and the aggregate revenue which a licensee is permitted to recover by the tariff in operation, the Commission may approve modification to the tariff or any part of tariff. Whether the resultant determination is called a tariff or an amendment of tariff is not of any consequence. The Commission cannot refuse to entertain an application if the Commission finds that the licensee’s filing of revenue requirement and expected revenue from charges is reasonably complete. It has to process it and take a decision within ninety days of the complete filing. Sub-sec. (6) of Section 26 of the Reform Act, 1995 lays down that except in terms of fuel surcharge formula, no tariff or part of tariff can be amended more than once in any financial year. The natural corollary is that tariff or part of any tariff can be legitimately amended once in a financial year. The current BST was set in November, 1998 within the financial year 1998-99. Therefore an amendment to BST during financial year 1999-00 if found justified cannot be termed as illegal. |
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2.8 |
The third objection raised by Orissa Consumers’ Association in paras 1 & 28 of its written objection is that when the provisions of Sec.57-A of the Act, 1948 r/w the provisions of the Reform Act, 1995 contemplate that charges for the supply of electricity, once fixed, shall be in operation for three years, revision of tariff within one year would be without the authority of law. |
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2.8.1 |
The objection is purportedly based on Section 57-A of The Act, 1948. We have considered the provision of Section 57-A of the Act, 1948 and particularly sub-clauses (c) and (e) of sub-section (1) of Section 57-A quoted by Shri Jena. We find that these provisions are applicable to charges for electricity recommended by a Rating Committee and approved by the State Govt. and stipulate that such charges recommended by a Rating Committee 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 repeals the constitution of a Rating Committee making the provisions of the The Act, 1948 quoted by Shri Jena inapplicable in this case. We hold that the preliminary objection by the learned counsel citing the provisions of Section 57-A of the Act, 1948 is without merit as the said provision is inapplicable in tariff proceeding under Section 26 of the Reform Act, 1995. |
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2.9 |
The fourth objection that the BST determined in Commission’s Order dated 21.11.98 (in Case No.18/98) cannot be amended within one financial year unless warranted for adjustment of fuel surcharge is already dealt with by us in para 2.7 above. |
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2.10 |
The fifth objection of the Orissa Consumers’ Association relates to lack of authority and power of the Commission to consider the present application of the Licensee, be it for fixing a new tariff or revising or amending an existing one on the ground that the Commission has not framed any regulation for fixation of tariff u/s 29 of the Commission Act, 1998 and under sub-sec. (2) of Sec. 26 of the Reform Act, 1995, by notification in the official gazette. |
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2.10.1 |
In fact, this objection of the Orissa Consumers’ Association has two parts. The first part of the objection is that OERC has not framed any regulation for determination of tariff u/s 29 of the Commission Act, 1998 and as such, it lacks authority and power to consider the application of the licensee. In view of the above objection, the point for consideration is if Sec. 29 of the Commission Act, 1998 is applicable to determination of tariff in the State of Orissa. |
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2.10.2 |
We understand that Shri K.N. Jena, General Secretary of the Orissa Consumers’ Association has, in OJC No.6999/99, challenged the procedure adopted by the State Govt. for appointment of a member of the Commission which has fallen vacant on the ground that the State Govt. has not followed procedure provided under the Commission Act, 1998 for such purpose. The aforesaid writ application is yet to be disposed of laying down the law on the issues involved. |
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2.10.3 |
Meanwhile, we are of the opinion that the Reform Act, 1995 holds good in all matters provided therein for OERC including determination of tariff by the Commission in view of the special provision relating to the Reform Act, 1995 and Haryana Electricity Reform Act, 1997 contemplated u/s 41 of the Commission Act, 1998. Sec. 41 of the Commission Act, 1998 clearly provides that the provisions of the said Act, in so far they relate to the State Commissions, shall not apply to the Commissions established under the Reform Act, 1995 or the Haryana State Electricity Reform Act, 1997. |
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2.10.4 |
The subject "electricity" is in the Concurrent List of the Constitution of India. Therefore, the State of Orissa has a right to enact law on electricity as it did in the Reform Act, 1995. The Reform Act, 1995 has been assented to by the President of India on the 3rd January, 1996. Further, Sec.41 of the Commission Act, 1998 is in the nature of a built-in provision to safeguard the State Acts enacted earlier from the overriding effect of a Central Act enacted later than the State Acts on the same subject of "Electricity" and in the same field of establishing Electricity Regulatory Commission. To sum up, we hold that the Commission Act, 1998 in so far as it relates to State Commissions is not applicable to OERC. |
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2.10.5 |
The second part of the objection is that the OERC has not framed any Regulation by notification in the official gazette for determination of tariff under sub-section (2) of Sec.26 of the Reform Act, 1995 and therefore it has no authority or power to consider the application of the Licensee whether it is for a new tariff or revision or amendment of the existing one. Before we deal with the factual aspect of this objection, we may point out that while Shri Jena has stated in the first part of his objection that tariff should be determined by OERC in accordance with the provisions of Sec. 29 of the Commission Act, 1998, he has also contended in the second part of his objection that OERC has not framed regulations for fixation of tariff u/s 26(2) of the Reform Act, 1995 and, therefore, OERC has no authority or power to consider the said application of the Licensee. It appears to us that Shri Jena is challenging the Reform Act, 1995 in so far as it relates to the OERC and at the same time relying on the same Reform Act, 1995 to challenge the alleged omission on the part of OERC. |
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2.10.6 |
The plea taken by Shri Jena that OERC has not framed any regulation to determine tariff u/s 26(2) of the Reform Act, 1995 has no basis in fact. Chapter-V of the Regulations, 1996 deals with regulations on tariff as envisaged in Chapter-VIII of the Reform Act, 1995. The provisions contained in Chapter-V of the Regulations, 1996 has conferred upon the Commission a measure of discretion in the matter of evolving its working procedure so long as these procedures conform to the principles of natural justice. Accordingly, we are of the opinion that there is no merit in this objection. |
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2.11 |
With regard to the sixth objection of the Orissa Consumers’ Association, it may be pointed out that upon filing of the application for BST by M/s GRIDCO on August 17, 1999, the Commission in its letter No.2364 dt.30.08.99 pointed out certain omissions to be supplied by the applicant and raised certain queries for clarification. The applicant supplied the omissions and filed clarification to the queries on its application in two volumes on 6.10.99. After scrutiny of all the filings including a large number of documentary evidence (Vol.2 of the filing dtd.17.8.99 and Vol.2 of the clarification to the queries dtd.06.10.99), the Commission treated the filings to be generally in order and the tariff application in question was treated as complete. |
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2.11.1 |
It may be stated here that regulatory proceeding cannot be treated at par with proceedings before common law Courts. The Commission is empowered under clause-111 (Chapter-V) of the Regulations, 1996 to lay down methodologies and procedures for calculating the expected revenue from charges and for determining the tariffs from time to time with the further enabling provisions to add, amend, alter, revise, substitute or otherwise change such methodologies and procedures at any time the Commission desires. Clause 113 of the said Regulation further provides that the Commission may issue orders from time to time giving details of the manner in which licensee’s revenue and tariff will be determined consistent with the provisions of the Act and Regulations framed for the purpose. Even, where no Regulation has been framed to deal with any matter or exercise any power under this Act, the Commission is free to deal with such matters, powers and functions in the manner it thinks fit. |
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2.11.2 |
We would also like to emphasise that in accordance with Section 10(5) of the Reform Act, 1995, this Commission, in discharge of its function, shall be entitled to and may consult to the extent it considers appropriate from time to time such persons or group of persons who may be affected or likely to be affected by the decisions of the Commission. This provision read with Sec. 26 of the Reform Act makes it clear that the Commission has wide discretion to evolve its own methodology, procedures and mechanism, subject, however, to the fact that they are just and reasonable and to carry on its activities in cases where there is no provision in the Reform Act, 1995 or Regulations framed thereunder. |
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2.11.3 |
We have examined the objection that the filing should not have been admitted in the absence of audited accounts for 1998-99. It may be mentioned that the licensee has filed audited accounts for the year 1997-98 along with the application. The audited accounts for the year 1998-99 have not been filed. In the normal course, the revenue requirement for 1999-00 along with request for amendment of tariff if any should have been filed in December, 1998. If the application would have been filed by the prescribed date, the licensee was in a position to file only the audited account for 1997-98. It appears that in view of the unsettling effects of transition involving formation of new distribution companies, disinvestment of government shares and issue of fresh license etc. the revenue requirements were not filed in December, 1998 which ought to have been the case. This was filed in August, 1999 when audited accounts for 1998-99 were not yet due . |
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2.12 |
Therefore, we are unable to agree with Shri Jena that the tariff application of the Transmission & Bulk Supply Licensee is defective, incomplete and not maintainable. |
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2.13 |
The seventh preliminary objection raised by the learned counsel, Shri Jena, relates to debarring the licensee from revising the tariff until and unless it fulfilled the conditions of Transmission & Bulk Supply Licence as amended from time to time and complied with the order of the Commission. |
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2.13.1 |
Non-compliance or inadequate compliance of the licence conditions, if any, is a separate issue which cannot hold up the process of determination of tariff. The Commission is bound by law as in Section 26 (6) of the Reform Act, 1995 to determine the tariff within 90 days from the date the application was treated by the Commission as complete. Elaborate provisions exist in the Reform Act, 1995 to deal with non-compliance or violations of licence conditions. Filing of the revenue requirement and expected revenue from charges is a statutory duty of the licensee as provided in s/s (4) of Sec.26 of the Reform Act, 1995 and therefore this function must not be mixed up with other issues like non-compliance or inadequate compliance of the licence conditions. The Commission is, therefore, of the opinion that this objection has no merit and is accordingly overruled. |
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2.14 |
The eighth objection raised by Shri Jena for Orissa Consumers’ Association that the application cannot be entertained in the middle of the financial year 1999-00 has no basis in law. The Commission would have liked strict adherence to the due date of filing of the revenue requirement i.e. by 31st December, 1998 but the Commission is persuaded to accept the delay caused due to the transitional problems. The Commission has also noted that there is no statutory time schedule for application for tariff and hence the Commission cannot refuse to consider the application if it is otherwise in order. |
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2.15 |
The ninth objection raised by Shri Jena, General Secretary of the Orissa Consumers’ Association is that the Commission Advisory Committee was not consulted by the Commission before admitting the application. Sub-section (6) of Sec.26 prescribes; "If the Commission considers that the proposed tariff or amended tariff of a licensee does not satisfy any of the provisions of sub-section (5), it shall, within 90 days of the date of receipt of all information which it required, and after consultation with the Commission Advisory Committee constituted u/s 32 and the licensee, notify the licensee the proposed tariff or amended tariff." It is clear from the language employed in sub-sec. (6) that the question of consultation arises only before the Commission actually seeks to notify the licensee the proposed tariff or amended tariff. Consultation with the Commission Advisory Committee, therefore, is not a pre-requisite for admission of the licensee’s application. It may be further mentioned that the Commission had already scheduled the meeting of the CAC by the time the public hearing was taken up. |
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2.16 |
In order to dispose of the last objection, we may point out that Sec.9(4) of the Reform Act, 1995 stipulates a quorum for review of any previous decision taken by the Commission. This stipulation for quorum is applicable only if there is an explicit prayer for review of any previous decision of the Commission. We have already stated while dealing with objection No.2.5.1.2 (vide para 2.7) that the present application is not a prayer for review of the BST. It is an application u/s Section 26(6) of the Reform Act, 1995. We, therefore, hold that there is no bar to or infirmity in the Commission proceeding to determine the BST as prayed for by the applicant. |
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2.17 |
In the light of our observations in the above paragraphs, we have to hold that there is no validity in any of the preliminary objections, most of which were due to inadequate appreciation of regulatory procedure. We, therefore, proceed to examine Gridco’s proposal and give our findings on the same. |
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3.0 |
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3.1 |
GRIDCO has proposed to purchase 10229.90 MU (BS-2 revised) of power at an average unit cost of 117.59 paise from the various generating stations inside and outside the State to meet the demand of the four distribution companies during the year 1999-00. On the assumption of an estimated transmission loss of 5.3%, GRIDCO estimates to sell 9666.71 MU to the four distribution companies. The financial implication of the GRIDCO’s proposal at a glance is at Table : 1 and Table : 2. Table : 1
Table : 2
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3.1.1 |
In a nutshell, GRIDCO estimates that against the total revenue requirement of Rs.1680.25 crores for the year 1999-00, the expected revenue for the year 1999-00 at the current BST will be Rs.1254.89 crores. |
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3.2 |
GRIDCO has submitted that the current tariff is inadequate to meet the current cost and is not even sufficient to meet the fixed cost of generation and transmission as GRIDCO is obliged to pay these costs irrespective of the actual demand in accordance with the existing PPAs. GRIDCO has stated that its accumulated loss of Rs.900.30 crores including the loss on account of Distribution business upto 31.3.99 has completely eroded the net worth of the company. Market funding has been difficult due to erosion of its net worth. Therefore, GRIDCO has requested that it may be allowed to recover the full costs through a fresh bulk supply tariff as well as transmission tariff for which proposals have been given by it. |
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3.3 |
Bulk Supply Tariff (BST) |
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3.3.1 |
GRIDCO proposes to set the BST to recover the full-embedded cost of supply including the transmission cost over a period of 12 months. The proposed BST comprises Demand charge and Energy charge. |
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3.3.2 |
Demand charge is proposed to be levied on the simultaneous maximum demand over the billing month based on the summation of simultaneously recorded half-hourly demand at all contracted points of supply. GRIDCO proposes that this demand charge may be levied on 90% of the contract demand or the simultaneous maximum demand whichever is higher for the month with a provision of penalty at the current demand charges for any demand in excess of the contract demand. |
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3.3.3 |
GRIDCO has submitted that only 34% of its fixed cost can be met from its existing demand charge and the balance will have to be recovered through energy charge. If the existing demand charge is not enhanced, it will create a problem of under-recovery of its fixed costs. [Ref : Para 1.3.1(1) of Main Text dt. 17.8.99] |
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3.3.4 |
According to GRIDCO, if the demand charge is enhanced to Rs.348.98/KVA/month, the full cost of transmission and 35% of fixed cost of power purchase can be recovered in line with the principle in OERC order dated 21.11.98 in Case No. 18 of 1998. Energy charge is proposed at 96.49 paise/unit to cover 65% of fixed cost and the entire variable cost of generation. |
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3.3.5 |
GRIDCO has submitted that, alternatively, if the demand charge is structured to cover the full cost of transmission and the entire fixed cost of power purchase, the demand charge may have to be enhanced to Rs.566.1/KVA/month and the corresponding energy charge will be only 48.38 paise/unit. In this scenario, energy charge is proposed to cover only variable cost of generation. |
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3.3.6 |
Out of the two alternatives, GRIDCO proposes that the demand charge may be fixed at Rs.348.98/KVA/month and for the incremental maximum demand exceeding the contracted value with the distribution companies, demand charge may be levied at the current rate of demand charge. Energy charge may be levied at 96.49 paise/unit. |
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3.3.7 |
GRIDCO has claimed that the cost of power has been calculated on the least cost combination of power procurement. |
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3.3.8 |
GRIDCO has proposed that since additional expenses are to be incurred on account of DISTCOs’ drawal in excess of the energy requisitioned by them, an additional charge termed as over-drawal charge @ 16.23 paise/unit may be levied on the incremental energy drawn by DISTCOs. |
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3.3.9 |
GRIDCO has also proposed that power purchase pooled cost adjustment formula should be made applicable on account of increase in power purchase cost due to change in power purchase mix for reasons beyond the control of GRIDCO. |
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3.3.10 |
GRIDCO has proposed levying delayed payment surcharge @ 2% per month pro-rata from the 31st day of the bill on the amount remaining unpaid excluding arrears on account of delayed payment surcharge. |
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3.3.11 |
Corresponding to the delayed payment surcharge, GRIDCO has also proposed a rebate of 2% of the amount of the monthly bill excluding arrears if payment is made within 48 hours of the presentation of the bill, 1.5% rebate if a minimum of 85% out of billed amount is paid within 48 hours and 1% rebate on the balance amount if paid in full within 15 days of the presentation of the bill. |
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3.4 |
Transmission Tariff |
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3.4.1 |
GRIDCO has estimated that the cost of transmission including the reasonable return for the year 1999-00 is Rs.506.48 crores. Charges for transmission have been calculated considering a sale of 9666.71 MU to the distribution companies and wheeling of 300 MU of power. Therefore, GRIDCO has suggested that the existing rate of 35 paise/unit during off-peak hours and 40 paise/unit in the peak hours may be raised to 50.82 paise/unit as wheeling charge for transmission of power at 220/132 KV. GRIDCO states that since its current costing system is not amenable to determination of marginal costs, the method of average costs has been used to estimate transmission tariff. |
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3.5 |
Transmission Loss |
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3.5.1 |
GRIDCO has proposed that out of energy supplied to Transmission & Bulk Supply Licensee for transmission, 5.3% of the energy may be deducted towards transmission loss and balance energy is liable to be delivered at 220/132 KV. |
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3.6 |
Impact on GRIDCO’s Finances |
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3.6.1 |
By the proposed enhancement of demand charge and energy charge, GRIDCO expects to meet its full revenue requirement and earn a reasonable return of Rs.85.86 crores on its capital base of Rs.597.76 crores over a period of 12 months. |
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3.6.2 |
If the tariff proposed by GRIDCO is made applicable from 01.12.99, GRIDCO will not be able to collect revenue at the enhanced tariff for a full year leading to a deficit of Rs.176.00 crores at the end of the current financial year. GRIDCO’s projections in this regard are in Table : 3. Table : 3
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3.7 |
Summary |
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3.7.1 |
To summarise, GRIDCO has requested OERC to approve the following :- |
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3.7.1.1 |
Bulk supply tariff as proposed (Paras 3.3.4 and 3.3.8) |
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3.7.1.2 |
Change of the existing fuel surcharge adjustment to power purchase pooled cost adjustment (Para 3.3.9) |
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3.7.1.3 |
Delayed payment surcharge and corresponding rebate for timely payment (Para 3.3.10 and para 3.3.11) |
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3.7.1.4 |
Transmission tariff as proposed (Para 3.4.1) |
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3.7.1.5 |
Transmission loss for wheeling of power (Para 3.5.1) |
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3.7.1.6 |
Proposed transmission and bulk supply tariff to be made applicable from December 1, 1999. |
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4.0 |
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4.1 |
The objections of Shri N.D. Chawla, M.D., Wesco, Sambalpur are outlined in following paras :- |
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4.1.1 |
The formula proposed by GRIDCO for mid-year adjustments due to variations in fuel cost and for other reasons goes against principle of maintaining certainty in tariff during the year. He requested OERC not to permit PPPCAF as suggested by GRIDCO. |
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4.1.2 |
GRIDCO has proposed levy of overdrawal charge for demand and energy drawal beyond their requisition. The levy of overdrawal charge should not be approved because in Eastern Grid is surplus in power, and overdrawal results in better frequency. He also questioned to the concept of maximum demand as proposed by GRIDCO as changes in demand of consumers is a risk which cannot be estimated with certainty. |
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4.1.3 |
The methodology for determination of least cost power purchase adopted by GRIDCO should be clarified. |
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4.1.4 |
In Employee Costs, A&G and R&M expenses, there is wide variation between audited accounts of 1997-98, GRIDCO's estimate for 1998-99 and amount approved by OERC in its BST order for 1998-99 and the amount applied for in 1999-00. According to him amount of Rs. one crore in VRS, Rs.0.5 crore in unforeseen expenses and deferred revenue expenditure of Rs.4.7 crores and R&M expenses of Rs.48 crores, are on the high side. |
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4.1.5 |
He objected to the interest of Rs.111 crores claimed on bonds issued to generators due to inability of GRIDCO to honour its obligations towards them. Loading cost arising out of GRIDCO’s past action goes against principles of reform programme as the losses prior to March, 1999 and past losses should not be passed on to the distribution business according to the transfer scheme. He opined that if GRIDCO has any shortfall because of losses of previous years he should look towards Government for equity. |
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4.1.6 |
He objected to amount claimed for interest on working capital raised through market bonds and stated that GRIDCO could earn this through delayed payment surcharge which would be sufficient to compensate for financing its debtors FY 1999-00. |
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4.1.7 |
He requested OERC to disallow bad debts as GRIDCO has only DISTCOs as consumers. Any provision towards bad debts on account of supply to Captive Power Plants is totally against the principle of distribution licence. |
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4.1.8 |
He objected to the proposed massive capital expenditure as interest burden would have to be passed on to consumers without any apparent tangible benefit to improvement of system reliability. |
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4.1.9 |
He further objected to the proposed amount of stores and spares. In his opinion capital stores at site should be treated as capital work in progress. |
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4.1.10 |
It is unlikely that GRIDCO would receive payment within 48 hours and therefore assuming a rebate of 2% for four months is not prudent and this should be disallowed. |
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4.1.11 |
He urged not to increase BST as it is not justified. Any increase in BST would lead to steep increase in retail tariff and jeopardise privatisation. |
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4.2 |
Shri M.N. Joglekar, Managing Director represented NESCO, Balasore during the hearing. While he reiterated the same objections as raised by Mr. N.D. Chawla, M.D., Wesco, he additionally highlighted his objection to concept of power purchase adjustment formula, levy of overdrawal charge, excess provision of bad debts and employee cost, A&G expenses, R&M expenses, Stores and Spares. He claimed that the bulk supply tariff proposal was padded up with costs and hence should not be allowed by the Commission. |
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4.3 |
Shri N.C. Dash, Managing Director representing SOUTHCO, Berhampur during the hearing reiterated similar objections as the representatives of Wesco and Nesco. Further, he highlighted on objection to concept of power purchase adjustment formula, levy of overdrawal charge, excess provision of bad debts and employee cost, A&G expenses, R&M expenses, Stores and Spares. According to him the VRS scheme has been discontinued in GRIDCO and hence providing Rs. one crore is not justified. He urged that the bulk supply tariff should not be increased. |
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4.4 |
Shri B.N. Dash represented Indian Aluminium Company Ltd., Sambalpur during the hearing. He raised a number of objections. |
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4.4.1 |
The rate of transmission loss has been settled by OERC at 4% and in view of subsequent investment in EHT system, a norm of 3.5% EHT loss should be adopted by OERC for 1999-00. |
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4.4.2 |
With 9666.71 MU projection by Distribution Companies, the procurement of energy would be 10017.31 MU taking 3.5% loss. He supported GRIDCO’s proposal for levy of overdrawal penalty if the maximum demand went beyond the contract demand. |
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4.4.3 |
Shri Dash suggested power procurement from different stations as below keeping in view the need of maximising hydro generation :-
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4.4.3.1 |
He suggested that while unit cost of power from different power stations may be taken as approved by the Commission last year for the new power station like Indravati, unit cost may be taken as proposed by GRIDCO. He proposed that the average unit cost be taken at 96.3 paise/unit with the total cost of Rs.964.70 crores. |
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4.4.4 |
He objected to GRIDCO’s proposal of 127% rise in employees cost over approved figures of 1998-99. Only 3% increase should be allowed. On A&G expenses increase of only 3% should be allowed as against 87% suggested by GRIDCO. R&M expenses proposed are 176% more over OERC approved figures of 1998-99. He argued that the same OERC norm of last year should be taken in line with PGCL i.e., 1.5% on asset value which comes to Rs.20.54 crores. |
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4.4.5 |
There is 326% rise in interest over 1998-99 approved figure which is abnormal. The abnormal increase of interest is due to conversion of arrear energy dues of GRIDCO into bonds which should not be taken into calculation of revenue requirement for purpose of tariff. The loans have been incurred in acquisition of assets for which return and dividend are payable. He suggested that the total interest component should be Rs.62.34 crores as against Rs.168.43 crores claimed by GRIDCO. |
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4.4.6 |
He found fault in charging depreciation on the revalued asset cost taken during the time of transfer of assets to the distribution companies. According to him most of the assets have been fully depreciated in view of higher depreciation rate given by Government of India. He blamed GRIDCO for not opposing uplift of the asset value at the time of transfer and consequently doing disservice to the consumer. Taking increase of assets to be Rs.69.98 crores from 1998-99 to 1999-00 and assuming 50% expenditure on EHT and 50% on sub-stations the increase in depreciation would be Rs.crores = Rs 5.59 crores. Total depreciation allowed should be Rs.75.62 crores as against claim of Rs.79.42 crores. |
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4.4.7 |
He opposed any provision for bad debts as GRIDCO was a bulk supply agency and had only four customers. He objected to quantum of reasonable return and to inclusion of rebate for prompt payment in the revenue requirement. |
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4.4.8 |
Shri Dash gave his own projection of revenue requirement as follows :-
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4.4.9 |
Revenue Receipt as estimated by him is Rs.1284.90 crores leaving a surplus of Rs.90.85 crores with GRIDCO and hence BST should be reduced and the gains passed on to the consumers of the State. He suggested Rs.160/KVA as demand charge and 85.5 paise/unit as energy charge for BST 1999-00. |
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4.4.10 |
He supported power purchase pool cost adjustment formula instead of fuel price adjustment as GRIDCO has to purchase power from generators. |
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4.4.11 |
GRIDCO is charging Transmission Tariff of 17.5 paise for wheeling to Andhra Pradesh & Madhya Pradesh and PGCIL is charging 11 paise towards transmission charges. He argued that the transmission tariff 1999-00 should be calculated on embedded cost basis which would according to his calculation would be 28.79 paise/unit and there should be no discrimination between wheeling to consumers outside the state and within the state. During the course of hearing he suggested that GRIDCO should trade power with neighbouring states because there was surplus power in Orissa. |
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4.5 |
Shri A.K. Parida represented Nava Bharat Ferro Alloys Ltd., Dhenkanal during the hearing. He urged that BST should be first determined before revision of RST and that full potential of hydro power of OHPC and State thermal power should be utilised. |
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4.5.1 |
He objected to abnormal increase in Employment, A&G and R&M and urged that the Commission should allow only prudent increase in expenditure by observing certain norms. |
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4.5.2 |
Shri Parida urged that interest on loans which do not increase the value of assets should not be taken into consideration and that transmission losses should be reduced to 3.5% in view of large investment in EHT system. He urged that transmission charges should be calculated on embedded cost basis and that there should be reduction of BST and Transmission tariff from present level. |
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4.6 |
Shri M.V. Rao, Chairman Power Committee represented Utkal Chamber of Commerce and Industry, Cuttack during the hearing. He raised several objections. |
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4.6.1 |
At the outset he reiterated the objections of Indian Aluminium Company and said that BST should be reduced to Rs.160/KVA as demand charge and 85.5 paise/unit as energy charge. He reminded Commission to keep in mind the interest of the consumers in terms of Section 26 of the Reform Act, 1995. The demand charge of the industrial tariff has been kept unchanged for the last two years by the Commission so as to keep up the commitment to give cost based tariff to industries. The proposed increase in demand charge would lead to increase in Retail Supply Tariff which would burden the industrial consumers. |
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4.6.2 |
GRIDCO should maximise energy drawal from the dedicated power stations and the Captive Power Plants to reduce the average cost of power purchase. |
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4.6.3 |
He objected to the claim of transmission loss to be fixed at 5.3% as the Commission had settled this point in 1998-99. |
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4.6.4 |
He requested the Commission to go into details of asset formation, A&G expenses, employee cost and T&D losses. He urged lowering of industrial tariff as consumption of industrial sector is not increasing as the tariff is not conducive for setting up new industries. |
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4.7 |
Shri K.N. Jena spoke on behalf of Orissa Consumers Association, Cuttack during the hearing. He claimed that since the Licensee has not improved its efficiency by reducing losses as directed by Commission, the licence should be revoked and application rejected. He further stated that charges are arbitrary without any basis and quality of supply is very poor and there is no justification of tariff increase. |
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4.7.1 |
Meters being installed are not properly tested and checked, tampering of meters are not checked, cheaper sources of power are not utilised, consumer services have not improved and so consumers can't be burdened more. The reform process has totally failed and in the name of reform there is only tariff increase and no increase in efficiency. |
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4.7.2 |
The T&D loss of 35% fixed by Commission is higher than the all India average of 20%. The licensee has not shown any increase in efficiency and as such Commission should not allow the high T&D loss. |
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4.7.3 |
Law does not allow for fixation of tariff for Transmission separately inside the state and so the application should be rejected. |
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4.7.4 |
Energy bills are not served in time and due to this consumers are not able to get rebate. |
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4.8 |
Shri K. Acharya spoke on behalf of Orissa Grahak Mohasangha, Bhubaneswar during the hearing. The objections are highlighted as follows :- |
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4.8.1 |
The Mohasangha has no knowledge whether Commission has specified methodology and procedure for calculating the expected revenue from charges and determining the tariff. In the absence of information, it objects to any revision of tariff. |
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4.8.2 |
The Commission in its conceptual paper has stated that if the purpose of the Reform Act, 1995 and objectives of the Commission would be achieved by departure from the base line set up in the Sixth Schedule and Sec.57, 57A of the Act, 1948, the Commission has a duty to make such departures. Since there has been no noticeable development in electricity reforms, the Commission is urged not to depart from the base line. |
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4.8.3 |
The objector drew attention of the Commission to license clause 16.1 and 16.2 and discussed the power availability position of the State. Since the demand requirement is on decrease, the power drawal should be cost effective by fully exploiting Hydro capacity. The central sector power estimated at 880.32 MU should be dispensed with, so that purchase of power becomes cheaper. |
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4.8.4 |
The demand estimation is not accurate as the sale of DISTCOs has gone down. The objector believes that the actual power requirement would be much less. |
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4.8.5 |
That Commission's order 21.10.98 dealt with computation of Transmission losses and Transmission Tariff at length. As GRIDCO has metered all intake points of power flow the actual losses should be computed. The objector objects to computation loss done on net-input basis. They are unable to understand why GRIDCO has not undertaken any systematic study to find out the reasons behind the transmission loss. The objector urges the Commission to bring down transmission losses below 4% and to reject claim for increase in Transmission Tariff as well as BST. |
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4.8.6 |
Shri Acharya stated that the revenue requirement and capital base have been unreasonably inflated and that Govt. should bear the responsibility of giving subsidy to the licensee. Any further increase in tariff would retard the reform process and there was no justification in burdening consumers. |
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4.8.7 |
The objector prays to the Commission to direct the licensee to withdraw tariff application for increasing tariff at close of the millennium and to take positive steps towards more efficiency. He urged the Commission to make comparative study since 1995-96 of benchmarks and actual and then propose tariff. |
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4.9 |
In the written objections of Aditya Aluminium Project several issues were raised. |
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4.9.1 |
It has been urged that manifold increase in tariff by GRIDCO on an annual basis will demotivate industrial houses. The aluminium industry will specifically suffer which will be a national loss and that increase in tariff will defeat the Government policy of promoting growth of industry. |
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4.9.2 |
It was claimed that the proposed average increase in Transmission Tariff by about 40% was unwarranted. It was argued that transmission loss and wheeling charges have relationship with distance and voltage of transmission and that the charges should not be revised from year to year. |
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4.9.3 |
It is understood that the wheeling charge paid by GRIDCO to PGCIL is 10 paise/unit and hence wheeling charges should be fixed by GRIDCO in line with the same. It was urged that only inflation element could be taken into account for increase of charges. |
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4.10 |
Shri B.N. Dash representing Nayapalli Community Care Association, Bhubaneswar, highlighted on a number of objections in addition to reiterating objections made earlier by Indian Aluminium Company and Utkal Chamber of Commerce and Industry. |
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4.10.1 |
During the course of hearing he emphasized that the hydro generation from OHPC and Indravati should be maximised to avail of low cost power and that the cost of power should be based on cost as approved by the Commission last year. He said that incentive should be given to OHPC for generating more so that the drawal from OHPC is maximised. He also opined that the long term PPAs with the generators should be reviewed by GRIDCO and that the inefficiency of generators and the licensees should not be allowed to be passed on to the consumers. |
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4.11 |
Ms Anuradha Dutta, counsel for Indian Charge Chrome Ltd., Bomikhal, Bhubaneswar objected to transmission charges proposed by GRIDCO for the year 1999-00. During the course of hearing ICCL counsel argued that as a Captive Power Plant, ICCL injects power into the state grid by which the grid gets low cost power. Further, due to this injection of power at load center at Talcher the frequency and voltage improve. The transmission loss is also reduced due to the injection of power by ICCL which has been proved by a computer study. Therefore ICCL should be treated as a separate category of consumer which is permissible under the Act. |
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4.11.1 |
She also objected to the method of calculating transmission on embedded cost basis instead of marginal cost. ICCL objects to transmission charges being included for transmission tariff as these are recoverable under BST. |
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4.11.2 |
The counsel for ICCL reiterated objections made by others with regard to Employees’ Cost, A&G Expenses, R&M Expenses, revaluation of assets and cost of conversion of arrear to loan bonds. |
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4.11.3 |
She added that GRIDCO in its transmission tariff has not taken into account the revenue from wheeling of power to other States. In its transmission tariff design, it has not taken into consideration the wheeling charges of 2330 MU shown as wheeled to Andhra Pradesh. |
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4.11.4 |
GRIDCO had entered into agreement with APTRANSCO for supply of electricity @ 205 paise/unit (inclusive of cost of power and wheeling charges) According to her, price of 205 paise/unit is a subsidised price. It was proper that on least cost method cheapest power should be made available to consumers within state of Orissa and costlier power must be given to outside consumers. As per filing, NTPC power is 235 paise/unit + transmission charges payable to PGCIL. The said agreement is therefore detrimental to the consumers of Orissa. |
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4.11.5 |
She also argued that GRIDCO is charging 17.5 paise for wheeling of power to Andhra Pradesh and therefore it should not be different for consumers of Orissa. |
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4.11.6 |
According to Ms Dutta, the gross method of computation of loss is more appropriate and that the losses should not be more than 4%. She argued that transmission tariff has been proposed at an arbitrary rate and is much higher than the CEA approved rate of 10 paise/unit. |
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4.12 |
Shri Indrajeet Mohanty represented NALCO, Bhubaneswar during the hearing. |
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4.12.1 |
He submitted that NALCO is a party to a bilateral agreement (dtd. 01.6.94) with former OSEB and is a special category of consumer because it injects power to the State grid. GRIDCO is levying wheeling charges as per OERC Order dtd. 21.11.98 against which NALCO had objected before the Commission and has appealed to High Court. NALCO would like to be governed by MOU of 25.01.91. |
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4.12.2 |
NALCO objected to proposed loss of 5.3% and Transmission tariff of 50.82 paise/unit. It was claimed that NALCO could not be equated with other consumers as NALCO supplies 1000 MU to state grid. Shri Mohanty submitted that NALCO should be levied only 5% wheeling charges on power drawn at Damanjodi and not on entire surplus power fed to state grid. Transmission charges of 50.82 paise/unit should not be levied for power drawn at Damanjodi NALCO. |
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4.12.3 |
NALCO has represented that the energy consumption at NALCO, Bhubaneswar and its NALCO Colony should be deducted from the export of energy it makes from its CPP at Angul. |
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4.12.4 |
In terms of the agreement of 01.06.94 between NALCO, the erstwhile OSEB and Govt. of Orissa, GRIDCO was supposed to pay fuel purchase adjustment charges. However till date it has not paid anything towards FPA. NALCO was happy to note that GRIDCO has proposed to the Commission to consider the FPA for NALCO. They have requested the Commission to consider the proposal favourably. |
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4.12.5 |
The counsel submitted that as GRIDCO in its tariff application has said that it may not require that much power from NALCO it should be allowed to sell power to third parties. |
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4.13 |
Shri R.C.Padhi, Retd. Chief Engineer objected to GRIDCO’s proposal on various grounds. He claimed that the application was premature as it is not based on audited figures of 1998-99. |
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4.13.1 |
He submitted that estimated maximum demand cannot be sum of individual maximum demand. According to him transmission loss should not be more than 4% as calculated by OERC last year. If new and strengthened transmission lines do not contribute to reducing the losses then the investment is not justified and cost of same should not be considered for tariff purpose. |
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4.13.2 |
Shri Padhi aruged that GRIDCO should recalculate the hydro generation on the basis of reservoir level as on 01.11.99 as the current year is a good rainfall year. Orissa should not need costly central sector power. |
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4.13.3 |
According to him, the claim of employment cost and A&G expenses is unacceptable. Only reasonable increases based on norms should be allowed. |
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4.13.4 |
GRIDCO does not have any asset register and has no records for depreciation. Consequently depreciation could be collected more than the admissible amount. |
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4.13.5 |
No bad debt should be allowed as GRIDCO has only limited consumers. |
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4.13.6 |
The bond values are not to be added to capital base or for depreciation and interest on bonds should not be payable by consumers. |
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4.13.7 |
Return should be given only if it is reasonable. According to him, it should not be more than Rs.57.56 crores. |
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4.13.8 |
Contingency reserve is for utilising such funds in contingency and should not be included in capital base. |
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4.13.9 |
Shri Padhi supported the introduction of force majeure clause in Power Purchase Agreements and Bulk Supply Agreement. |
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4.13.10 |
It is stated that sale of power to APSEB by GRIDCO is devoid of commercial principle as GRIDCO is over using water resources at Balimela which has to be replenished through purchase of power in summer months from NTPC at higher rate. |
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4.13.11 |
The logic of not charging normal rate of transmission for sale outside the State is commercially unsound. Any sale of power from Balimela, if necessary, should be held in reserve with PGCIL or NTPC to be drawn at the request of GRIDCO in any part the year and OERC should ensure the economy of such a transaction. |
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4.14 |
Shri Subrata Das, Director Finance of CESCO presented objections on behalf of CESCO, Bhubaneswar. |
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4.14.1 |
He claimed that generation of energy at OHPC should be 3878 MU. |
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4.14.2 |
He objected to the excessive amounts claimed for Employee Cost, A&G Expenses, R&M Expenses and Interest Expenses. |
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4.14.3 |
He argued for a force majeure clause to be introduced in the Bulk Supply Agreement. |
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4.15 |
The Confederation of Indian Industry was represented by Shri S.K.Nanda, Convenor of its Energy Panel. |
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4.15.1 |
Shri Nanda referred to the conceptual issues and to provision of the Reform Act to claim that tariff should take into account power quality standards, reliability, voltage stability etc. and that it should promote economic efficiency. It is stated that the licensee has not followed efficiency guidelines of the Commission and there is need of penalty to be levied. |
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4.15.2 |
He objected to costing of assets on transfer value for tariff purpose. He referred to issue 6 of Conceptual Issues on Tariff issued by the Commission to claim that it would be worthwhile to use revalued fair price of assets to avail of short and long term loans while tariff will be based on depreciated book value as set out in transfer scheme adjusted for subsequent addition. |
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4.15.3 |
EHT Consumers are directly connected to GRIDCO’s EHT system and should be treated as bulk consumers of GRIDCO and charged at BST rather than treated as consumers of retail supply licensees. |
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4.15.4 |
GRIDCO has unduly reverted to net method though Commission had settled the method. According to him the losses should have come down as a result of fresh investment and system improvement. |
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4.15.5 |
He requested to adopt loss of 3.5% and demand requirement of 10017.31 MU and proposed a procurement plan by maximizing hydro generation and without any drawal from Central Sector. |
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4.15.6 |
He requested the Commission to analyze the base year figures of 1997-98 which is questionable. Only 3% increase should be allowed for Employees’ Cost and A&G expenses and R&M 1.5% should be allowed on average net fixed assets based on PGCIL norm. |
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4.15.7 |
Based on a revenue requirement of Rs.1187.92 crores and revenue receipt of Rs.1284.89 crores, CII has proposed that the demand charge should be Rs.160/KVA and energy charge should be 85 paise/unit and transmission tariff of 23.32 paise/unit. |
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4.15.8 |
Reduction of power loss is a function of proper management and judicious and prudent investment. He requested the Commission to examine the prudence of expenditure. |
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4.15.9 |
According to the Reform Act, 1995, the Commission can depart from Sixth Schedule if required and hence the Commission could consider the method of ‘Revenue Cap’ regulation as in U.K., so as to maintain tariff certainty over a period of time. |
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4.15.10 |
Industrial consumers bear the brunt of cross subsidy. He requested the Commission to consider paying capacity of industry as high tariff will encourage CPP growth. |
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4.15.11 |
He argued for uniform retail tariff and a differing Bulk Supply Tariff, based on the logic that uniformity should be maintained for the industrial tariff all over the state. GRIDCO would not loose in total revenue if there was a differing bulk supply for the DISTCOs and this would enable the Commission to have a uniform Retail Supply Tariff. |
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4.15.12 |
Government subsidy which is to be received by the licensee should be accounted for in tariff calculation. |
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4.16 |
Shri R.P. Mohapatra spoke on behalf of Shri Dhaneswar Dhal, A-39, Sahidnagar, Bhubaneswar during the course of hearing. |
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4.16.1 |
It was stated that tariff revision, if any, should be effective from Ist April so that hydro potential can be assessed for ensuring year from reservoir levels as on 1st November and the applications can be based on audited accounts. Both BST and RST licensee have applied for tariff simultaneously. In his opinion BST should be decided first and thereafter RST. Revised BST and RST should be applicable from 01.4.2000. Tariff revision should not be an annual affair as the cost of regulation is very high. |
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4.16.2 |
The super cyclone which hit Orissa has crippled the economy of the state and imposed financial burden. Therefore, the tariff should be revised from 01.4.2000 only. |
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4.16.3 |
Section 5(1)(a) of the Reform Act, 1995 provides that at least one of the members of Commission shall be an electrical engineer with experience of generation, transmission & distribution. As there is no third Member Commission should postpone proceedings. |
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4.16.4 |
GRIDCO is furnishing figures in millions of rupees while in all financial statements in the country figures are in lakhs. The consumers should not get a culture shock in addition to rate shock. |
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4.16.5 |
GRIDCO has furnished a loss figure of Rs.900.3 crores upto 1998-99. The loss is due to inability of GRIDCO to operate efficiently according to parameters laid down by Commission, and hence loss can't be passed on to consumers. |
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4.16.6 |
According to Shri Mohapatra, the water levels in the reservoirs of OHPC are at the maximum level, so hydro generation should be maximised and water should not be allowed to be wasted. GRIDCO is not having aggressive commercial practices as it is accepting all the inefficiencies of OHPC and trying to pass it to the consumers. |
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4.16.7 |
If the State Government does not agree to subsidize the losses, GRIDCO or DISTCOs are not bound by law to execute non-remunerative works. The notional external subsidy due should be deducted. |
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4.16.8 |
The loss percentage was rightly decided at 4% by Commission GRIDCO has invested a lot in transmission sector. It is ironical that instead of reducing transmission loss to 3% they are asking for an increase. The reasonable level of T&D loss should be 3.5%. |
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4.16.9 |
In place of average maximum demand of DISTCOs concept of simultaneous maximum demand or 90% of contract demand whichever is high may be adopted with provision for penalty on overdrawal. |
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4.16.10 |
GRIDCO may table a petition against introduction of availability based tariff. Off peak supply of NTPC power to EOU's was a concession to Ferro Alloy units. Special off peak tariff will increase average cost of power as costlier central sector power will have to be purchased. |
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4.16.11 |
On Power Procurement Cost Shri Mohapatra stated on behalf of Shri Dhal that depreciated book value of OHPC should be taken as fixed cost as on 01.4.96, rate of depreciation of Govt. of India of March, 1994 is applicable only to new assets made after 01.4.94 and that total depreciation should not exceed 90% of original purchase price and fixed charges should be paid only if utility fully utilises water in reservoir. |
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4.16.11.1 |
Secondary generation should increase after renovation but this is not reflected in the proposed PPA. GRIDCO should investigate into shortfall of generation. |
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4.16.11.2 |
The TTPS PPA has been drawn in haste and is faulty and should be reviewed and all technical parameters should be changed. Actual bills of TTPS from January - August, 1999 show that GCV of oil is between 8800-9300 K.Cal. instead of 10,000 K.Cal. which shows probable contamination of oil. |
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4.16.11.3 |
The extra consumption of Rs.1.293 crores proposed for backing down OPGC is on account of tripping of Budhipadar-Korba line and not payable by Orissa consumers. The incentive claim of Rs.12.811 crores also should not be paid. |
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4.16.12 |
The base year figure of 1997-98 itself is high and so the proposed cost in employees cost, A&G and R&M expenses is unmeasurably high. Only reasonable expenditure should be allowed. |
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4.16.13 |
GRIDCO has issued loan bonds of Rs.440 crores carrying interest of 15% in addition to outstanding loans of REC & PFC. GRIDCO has taken loans due to its inefficiency and so additional interest burden cost can't passed to consumers. GRIDCO wants conversion of zero coupon bonds to equity which mean an additional Rs.64 crores return on capital base, which should not be allowed. |
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4.16.14 |
In spite of orders of Supreme Court no action was taken against ICCL, when it defaulted payment. No bad debt should be allowed as there are limited consumers of GRIDCO. |
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4.16.15 |
Value of fixed assets at time of transfer on 01.4.96 should be on book value for tariff calculation in accordance with the Act, 1948. |
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4.16.16 |
In its calculation of gross receipts GRIDCO has assumed a rebate of 2% which shall be availed by DISTCO's every month. GRIDCO has collected only 56% of billed amount for which delayed payment surcharge is due. Therefore, no deduction should be made from gross revenue as rebate and delayed payment surcharge will balance each other. |
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4.16.17 |
Shri Mohapatra has also objected to the transmission tariff. According to him transmission cost should be calculated on embedded cost methodology rather than marginal cost. |
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4.17 |
Shri R.C.Mehta, Madhukunj Enclave, Rasulgarh, Bhubaneswar presented his objection on various counts. He pointed out the discrepancy of cost of OHPC power which has been shown at 51.75 paise/unit by OHPC while GRIDCO reflects it at 53.01 paise/unit. |
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4.17.1 |
Perusal of bills of TTPS reveals the fixed cost at Rs.11.57 crores and variable charges at 58.14 per unit. Details of actual power drawn shows that drawal has been higher than the planned procurement which would have brought down the average per unit cost. |
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4.17.2 |
As per letter No. CEA dt.7.8.96 filed with the application the rates of Farakka STPS which is applicable upto 31.3.2000 fixed charges are 71.94 paise/unit and variable cost are 32.17 paise + FPA. He wanted the Commission to scrutinise bills of Farakka & other central stations from January, 1999 to September, 1999, in order to get the point clarified. |
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4.17.3 |
Unit cost for OPGC January, 1999 to August, 1999 is calculated at 139 paise/unit against 172.90 paise projected by GRIDCO and, therefore, he requested for reconsideration. |
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4.17.4 |
The demand charges should not be increased as this would hamper industrialisation in Orissa. |
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4.17.5 |
According to him the transmission costs are disproportionate, the base of 1997-98 is questionable and should not be considered for fixing costs for 1999-00. |
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4.17.6 |
He objected to the method of calculating simultaneous maximum demand. Technically demand should be defined as vectorial summation and not arithmetic summation as the later would show much higher demand. OERC is requested to satisfy itself with the methodology. |
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4.17.7 |
He prays that it was desirable to encourage industrial growth which would create job opportunities. He pleaded for no increase in bulk supply tariff as this would increase retail supply tariff and privatisation would be blamed. |
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4.18 |
During hearing Director (Tariff), OERC sought clarification from GRIDCO on the following issues. |
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4.18.1 |
The revised generation plan of OHPC. |
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4.18.2 |
Reservoir levels of OHPC as on 01.11.98 & 01.11.99. |
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4.18.3 |
The actual energy sent out of Central Thermal Stations as shown in generation plan is much higher than what is estimated by GRIDCO and taken into consideration of its fixed cost. What are the reasons of difference. |
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4.18.4 |
Details of export of power to Andhra Pradesh. |
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4.18.5 |
Definition of contract demand in bulk supply agreement. |
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4.18.6 |
Methodology of measurement of simultaneous maximum demand and whether any metering is in position to record the coincidental peak of the DISTCO’s. |
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5.0 |
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5.1 |
Employees Costs, Administration & General Expenses and Repair & Maintenance Expenses |
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5.1.1 |
The projection for employees cost, R&M expenses, A&G expenses have been based on audited accounts of 1997-98 and in consideration of requirements for the year 1999-00. All divisional trial balances were grouped into five businesses to arrive at consolidated trial balances of five business. All Head Office entries were analysed and allocated to the five businesses. |
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5.1.2 |
Amounts projected under Voluntary Retirement Scheme for FY 2000 are estimates based on expenses incurred in previous years. GRIDCO is not in a position to extend the date of VRS due to want of fund. |
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5.1.3 |
The deferred revenue expenditure written-off for FY 2000 pertains substantially to one time expenses related to issue of bonds in FY 1998 and FY 1999 which are amortised over tenure of bonds raised to finance past losses of GRIDCO and losses of distribution companies upto March 1999. |
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5.1.4 |
Details of expenses in A&G have been provided in the application and the proposed expenditure of Rs.48 crores is a reasonable estimate. |
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5.2 |
Liabilities and Interest Cost |
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5.2.1 |
GRIDCO had not applied for appropriation of past losses in 1998-99 and hence OERC had not approved the same. According to the transfer scheme of November, 1998 made under the provision of the Reform Act, 1995 assets and liabilities to DISTCOs were transferred on 26.11.98. At that time GRIDCO has not transferred the past losses to DISTCO |