CASE NO. 4 of 1997
Shri D.K.Roy, Member ORDER UNDER SECTION 26 OF OER ACT. 1995
This order relates to application filed by The Grid Corporation of Orissa Limited (GRIDCO, for short) with regard to determination of revenue requirements for the financial year 1997-98 and fixation of tariff.
2.2 A proposal under Sub-section 4 of Section 26 of the OER Act, 1995 was received on 26.12.96 from Grid Corporation of Orissa Limited giving details of calculation of estimated revenue requirements for 1997-98 and charges proposed to be collected from various categories of Consumers of Electricity. Subsequently some additional information were also furnished by Gridco. After preliminary examination of the aforesaid papers certain clarifications and additional information was called for from Gridco who were specifically informed that the Commission would take up the tariff proposal for final processing only after all the information was furnished. The Gridco sent a revised proposal through letter dated 28.01.97 from the Director (Transmission and Distribution).
2.3 A notice was published by the Commission in three 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 4 copies to the Commission with the 5th copy of the said objection to be served on Sri B.P. Rekhani, S.E. (Commerce) of GRIDCO. The notice called on the interested parties to peruse further details of the proposal in the office of the Gridco so as to enable them to submit their objections by 18th February, 1997. It also stipulated that objectors, if they so wish, should indicate their desire to be heard in person. All 41 objectors who expressed desire for personal hearing by stipulated date were admitted for hearing. In addition to the said 41 admitted for personal hearing, written objections were received from 22 persons by the stipulated date.
2.4 Commission in its Order No. 352 dt. 03.02.97 published a notice informing that a hearing on the proposal of tariff would take place on 21st February'97. The notice also stated that the subsequent dates of hearing would be declared by the Commission in course of the hearing on 21st February.
2.5 The public hearing was held on 21st February in the office of the Commission. At the outset, the unique and unprecedented nature of a hearing with regard to a public utility matter was outlined. It was explained that the hearing had been fixed for the purpose of consultation with consumer groups in accordance with Section 10 (5) of the Act. The Gridco as well as objectors were requested to confine themselves only to issues relevant for tariff proceeding so that the Commission would be able to arrive at a just and proper decision on the tariff proposal. Some preliminary objections were raised mainly on the grounds that sufficient opportunity had not been granted to objectors and full details have not been furnished by the Gridco. The objectors demanded that all papers, calculations and evidence given to the Commission by Gridco should be furnished to them and sufficient time should be allowed thereafter so that objectors could place all the facts.
2.6 The Commission heard the learned Advocates, Mr. K.N. Jena, Mr. L. Pangari and Mr. Rajat Kumar Rath who claimed that the Commission could not go ahead with the hearing. After listening to the submission made by these objectors, the Commission declared that it would deliver its judgment on the preliminary objection in the afternoon of the same day.
2.7 When the Commission met in the afternoon, an order of the Commission was read over holding that there was no substance in the objections made by the aforesaid three distinguished representatives and that the hearing would have to be taken up. The said order read as under:
"At the initial stage of hearing today with reference to the tariff application, preliminary objections were raised by three objectors who expressed the desire that the formal order of the Commission on these issues should be delivered before the Commission proceeds with the hearing on the merits of the tariff application. The Commission heard Mr. K.N. Jena, speaking on behalf of Orissa Consumers Association, Sri L. Pangari representative of IPI Steel Limited and Sri Rajat Kumar Rath, Advocate representing Orissa Sponge Iron Ltd. These objections had also been indicated in the written submissions submitted in response to the public notice of the hearing. These have, therefore, received the attention of the Commission. Further, the arguments and objections advanced before us have been heard. These have been carefully considered. The issues raised and orders of the Commission on them are as follows.
The first objection is that Commission has not been properly constituted. In support of this objection, it was stated that the Commission is presently composed of two members and is without a Chairman and therefore, it is not a full-fledged Commission. It was argued that in the absence of the Chairman, the Commission was not entitled to conduct its proceedings.
The Commission is unable to find any validity in this objection in view of clear and specific provisions of the law at sub-sections (4) and (5) of Section 3 which are as under :
Sub-section (4) of Section 3: When the Chairman of the Commission is unable to discharge the functions owing to absence, illness or any other cause, the senior most member of the Commission shall discharge the functions of the Chairman, until the day on which the Chairman assumes the charge of his functions.
Sub-section (5) of Section 3: No act or proceedings of the Commission shall be invalid by reason only of the existence of any vacancy among its members or any defect in the constitution thereof.
It is also noted by the Commission that sub-section (4) of Section 9 stipulates that quorum for the meeting of the Commission shall be two. In view of these provisions, the Commission considers that there is no bar for holding proceedings of the Commission with two members including the senior member Sri A.R.Mohanty acting as Chairman and discharging the functions as the Chairman under sub-sections (3) and (4) of Section 3 of the OER Act, 1995.
The second objection was that sufficient notice has not been given to the affected parties and therefore, the proceedings should not be continued. In this connection, it was argued that giving only seven days time to peruse the papers and making it obligatory to come to Gridco's office for perusal of the application was a hindrance for the affected parties to get sufficient notice. It was also argued that all papers, documents, statistics and references in respect of the tariff proposal were not made available and therefore the affected parties did not get sufficient opportunity. Two weeks time for submitting objections was also stated to be not sufficient.
The Commission has carefully considered all aspects regarding granting of sufficient opportunity for all the affected parties. The Commission is bound by the statute to confirm to certain time limit. In this particular tariff proceeding for the Financial Year 1997-98 all the legal requirements, proper scrutiny and analysis have to be completed and decision of the Commission has to be conveyed to the Gridco well in time, so as to enable it to give a public notice of tariff seven days before the end of current Financial Year. Keeping these statutory requirements and other activities of the Commission in view, total time of sixteen days allowed for perusal and submission of the objection is considered adequate.
The third preliminary objection is with regard to infirmity of the proceeding due to non-notification of the Regulation for conduct of proceeding and for laying down the parameters for tariff proposal. In this connection, it was claimed that the Commission has not discharged its function in framing Regulations for conduct of its proceedings and discharge of its functions as required by sub-section (2) of Section 9 read with Section 54 of the OER Act, 1995. It was also claimed that the tariff proceeding is illegal because the Commission has not yet prescribed the terms and conditions for determination of the licensee's revenues and tariff as required under sub-section (2) of Section 26 of the OER Act, 1995.
The Commission finds no validity in this objection in view of the fact that the Orissa Electricity Regulatory Commission (Conduct of Business) Regulation, 1996 has been framed, notified on 28th November, 1996 and has been published in the Orissa Gazette No. 1413 dated December 30, 1996. The said Regulation includes the methodology of tariff proposal.
The next objection relates to the locus standi of Gridco and the validity of its application for tariff.
On the basis of sub-section (4) of Section 14 of the OER Act, 1995, the Gridco had been issued a provisional license by the Govt. of Orissa vide letter dated 31.03.96. For all purposes, therefore, Gridco is a licensee under the OER Act, 1995. Further, the Commission observes that it is not only that Gridco has to be considered a licensee but, Gridco is bound by law under Section 26 (4) to submit details of calculation for the ensuing Financial Year regarding revenue and tariff. This provision of the law enables Gridco to submit the tariff proposal for 1997-98 and obliges the Commission to consider the same for taking its decision.
Another objection raised was that Gridco is not entitled to submit proposal of tariff within one year.
The Commission has noted that the present tariff proposal relates to Financial Year 1997-98 and therefore, the proposal is in order. The provisions of law refer to Financial Year and does not refer to a period of twelve months.
Objections were raised with regard to consultations with the Commission Advisory Committee on tariff matters.
The Commission Advisory Committee has been duly constituted as required under Section 32 of the OER Act, 1995 and the Commission has already initiated the process of consultation with the Commission Advisory Committee.
Another issue raised by the objectors is with regard to the status of the Commission. It was stated that the Commission was a Court in view of the provisions of OER Act, 1995 and therefore the Commission has to observe all the formalities and obliged to grant unlimited time to objectors for presenting the facts before it. In this connection, it was also claimed that copy of Gridco's application and all details should have been served on the parties and in this view of procedure, the objector could not be asked to peruse files and collect the information from the GRIDCO.
The Commission cannot agree with the above interpretation of the law. Under Section 10 (1) of the Act, the Commission has been given powers of a Civil Court under the code of Civil Procedure, 1908 only with regard to six specified areas. Similarly under the provision of Section 52, the proceeding of the Commission shall be deemed to be judicial proceeding only for specified provisions of the Code of Criminal Procedure. The Commission has no doubt in its mind that it is a quasi-judicial body which is obliged to observe the procedure and formalities of legal procedure so as to the afford reasonable opportunity and to make final finding of facts and at the same time it has the authority to lay down its own procedure so as to avoid needless legal trappings. The legislature in its wisdom has constituted a Commission which is designed to have certain trapping of the Court and yet the flexibility of a quasi-judicial body so that it can get into all relevant issues and take a decision on legal, technical and accounting issues in an objective manner without delay but keeping in mind the interest of the Consumers, the Electricity Industry and the overall interest of the State. The Commission has accordingly prescribed its own procedure for which it has been authorized by the Act to do so. The essential distinction between a Civil Court as a part of regular hierarchy of judiciary and quasi-judicial tribunal entrusted with adjudicatory function outside that hierarchy emphasized in a number of pronouncement of the apex court has not to be lost sight of.
Objection has been raised with regard to adequacy of information supplied. It has been claimed by learned objector Sri K.N. Jena that the proceeding should not be continued without supplying the documents listed by him.
The Commission has gone through the elaborate list and finds that it is neither practicable nor essential for GRIDCO to make all the listed documents available to the Objectors. The Commission will go through all relevant documents and accounts as considered necessary. The Commission is aware of its responsibility in this regard. The objection cannot be admitted.
The Commission, therefore, does not admit any of the above preliminary objections raised by the objectors and the Commission orders that the proceeding should continue."
2.8 The above said decision was also challenged and the Commission was called upon to grant permission to file appeal to the Hon'ble High Court and to stay the proceedings for a reasonable period giving a chance to the objectors to move the Hon'ble High Court. The Members of the Commission considered the request and could not accede to the request for adjournment of the hearing. The Commission felt that the objectors had not been able to appreciate the nature and scope of the proceeding and were wrongly presuming it to be a case of adversarial nature. Hearing was neither a pre-requisite nor was it contemplated in the OER Act, 1995. The Act at Section 10 (5) enabled the Commission to consult affected groups "to the extent the Commission considers appropriate" and it is in this perspective that the hearing had been arranged. The time bound nature of Commission's task with regard to fixation of tariff did not permit the Commission to postpone and to have prolonged elaborate hearings before passing its order on the tariff application. For emphasis we may rely on the following statements of law in A.S. de Smith, Judicial Review of Administrative Action, as quoted with approval by Hon'ble Justice Bhagwati in (Smt.) Maneka Gandhi V. Union of India AIR 1978 SC 597:
" .Since the life of the law is not logic but experience and every legal proposition must, in the ultimate analysis, be tested on the touchstone of pragmatic realism, the audi alteram partem rule would, by the experimental test, be excluded, if importing the right to be heard has the effect of paralyzing the administrative process demands.....What opportunity may be regarded as reasonable would necessarily depend on the practical necessities of the situation. It may be a sophisticated full-fledged hearing or it may be a hearing which is very brief and minimal: it may be a hearing prior to the decision or it may even be post-decisional remedial hearing. The audi al teram partem rule is sufficiently flexible to permit modifications and variations to suit the exigencies of myriad kinds of situations which may arise.........".
In this perspective the Commission clarified that because of the special nature of the proceedings and the time bound nature of the proceeding, it was not considered desirable to postpone the hearing. The Commission declared that a formal order to this effect would be delivered next morning and that, in the meanwhile, the proceeding had to continue.
2.9 The substative part of the hearing was taken up thereafter and continued in the same afternoon and on the next day, the 22nd, as well as in the forenoon of 24th when it was concluded. Before going over to the substative part, it is appropriate to mention the text of the order mentioned at pare 2.8 which was formally read over during the course of hearing on the next day:
"This order is with reference to three applications filed asking for time to go in appeal against the order passed by the Commission on 21st February rejecting the preliminary objections. Two identical applications have been moved by Sri K.N. Jena on behalf of Orissa Consumer Association and Sri Naba Kishore Mohapatra representing for the Trust for Research and Public Aid. Another application as a sequel to his oral submission was made by Sri Rajat Kumar Rath, Advocate representing, Orissa Sponge Iron Limited.
The Petitioners have stated that they were not satisfied with order of the Commission rejecting the preliminary objections and, therefore, they intend to go in appeal before the Hon'ble High Court for which time should be granted. It has been claimed by two of the objectors that with pre-judged mind the Commission is bent upon adjudicating on the application of the licensee with prejudice and hence they would not like to participate in the proceedings.
The Commission has carefully considered the facts stated in the application as well as oral submissions made for grant of time for appeal and for deferring the hearing of tariff application. The Commission has considered each one of the preliminary objections and has given its finding to the effect that there is no validity in any of the objections raised. The Commission feels that the objections have no solid basis and therefore there is no justification to adjourn the hearing and thereby put the tariff proceeding on the back burner. The postponement of tariff proceeding at this stage for the financial year 1997-98 will create insurmountable problem for implementation of the provisions of the OER Act, 1995 and will jeopardize the management of the electricity industry in the state in an efficient, economic and competitive manner which is one of the main aims of the Act.
The Commission is bound by provisions of Chapter VIII of the OER Act, 1995 to conclude the tariff proceedings for financial 1997-98 and convey its decision on the tariff proposal well in time to enable the Gridco to submit calculation in conformity with the order passed by the Commission. The said calculation has to be examined by the Commission and after the decision of the Commission on the same it has to be published in the newspapers at least one week before the end of current financial year. If the hearing is postponed the tariff cannot be finalised for 1997-98 in time.
The existing tariff for 1996-97 will remain valid till 31.03.97 because it is a part of the provisional licence which expires on 31.03.97. Therefore if the tariff for financial 1997-98 cannot be finalised as per schedule drawn up by the Commission, there will be no legal basis for any tariff for the sale of electricity on and from 1.4.97.
Section 26 of the OER Act, 1995 lays down detailed procedure for the tariff proceeding for the ensuing financial year. GRIDCO's proposal for tariff have been filed in procedural conformity with the methodology laid down by the Commission and hence the Commission is bound to consider the application and take a decision on the same. In terms of Section 26(4) of OER Act, 1995 the Commission has to examine, deliberate upon and take a decision whether to accept reject or modify and if so to what extent. Keeping in view the time available to the Commission and its schedule for the remaining part of the current financial year, the Commission has granted as much reasonable opportunity as in possible for finalizing the tariff. The Commission is keenly conscious of the parameters laid down in Sub-section 2 of Section 26 of the Act which enjoins on the Commission to give due importance to all the three factors namely the financial principles in the Electricity Supply Act, the factors which would encourage efficiency, economic use of the resources, etc. and the interest of the Consumers. The Commission feels that the special nature of a proceeding relating to a public utility must be appreciated and it has to be ensured that objections are not admitted which will affect not only the financial and economic factors but also the overall interest of the Consumers. It is felt by the Commission that though the objection has been raised by on behalf of some consumers association, admitting the same objection would adversely affect overall interest of the consumers and will affect supply and distribution of an essential public utility service like electricity.
The Commission would also like to note that in accordance with Section 10(5) of the OER Act, 1995, the Commission is required to consult to the extent the Commission considers appropriate from time to time such persons or groups of person who may be affected or likely to be affected by the decisions of the Commission. The Commission has carefully considered the extent to which it is appropriate and practicable to extend the process of consultation for finalizing decisions as a quasi-judicial authority. Reasonable opportunity has been granted to as many interested parties as possible and no objection has been summarily brushed aside. The validity of all objections have been carefully considered and orders passed.
3.0 GRIDCO'S PROPOSAL:
3.2 At the outset of the hearing the Commission called upon Gridco to substantiate its projections, calculations and proposal for tariff for 1997-98, Mr. B.C. Jena, Director (Transmission & Distribution) presented the proposal. He reiterated the facts and figures given in GRIDCO's proposal and highlighted the essential features. He also dwelt on the objections, copies of which had been sent to GRIDCO.
3.3 The GRIDCO has not proposed any change in the categorization of consumers. No significant change has been proposed in other aspects also. But, the proposed tariff is at a higher level than existing at present. On an average the increase is higher by 19.53% over the present level. GRIDCO's proposal has a lesser financial impact on heavy industry, power intensive industry, railway traction and large industries with a contract demand of 110 KVA and above ostensibly because the existing level of tariff in these categories is comparatively high. The GRIDCO explained that efforts are being made as far as possible to have the same tariff rates at the same voltage of supply irrespective of the categories of consumers except in case of domestic and irrigation categories. It was noted by the Commission that there was an uncovered gap of about Rs.407 crores.
3.4 According to GRIDCO, the need for a tariff revision with effect from 01.04.97 arose primarily out of the steep rise in the purchase cost of power. This stood at Rs.354.94 crores in 94-95 but went upto almost double that amount viz. Rs.659.64 crores in 95-96. In the current year 96-97 the cost of power is anticipated to be Rs.954 crores and it is likely to go upto about Rs.1225 crores in 1997-98. Even after the tariff revision of May, 1996, GRIDCO sustained a loss on every unit of energy sold on account of the difference between the cost of energy supplied and the revenue realised. Mr. Jena stated that it was very important that the situation is rectified at the earliest. He stated that rising costs have compelled almost all Electricity Boards and Utilities to go in for tariff revision in the last few months. These include Utter Pradesh, Karnataka, Andhra Pradesh, Maharashtra, Madhya Pradesh, Haryana, Rajasthan, CESC and West Bengal.
3.5 Mr. Jena dwelt at length on the objection that there was unduly high T&D loss due to GRIDCO's inefficiency and hence the cost of inefficiency should not be borne by consumers. He said that the T&D loss per se had never been precisely calculated either by OSEB or GRIDCO though the reports published periodically by the Central Electricity Authority have put such losses for Orissa at around 23% to 24%. Similar figures also appear against "system losses" in the various Administration Reports of GRIDCO. The Audited Accounts of OSEB, however, went into this matter in some detail. Audit has commented at the end of the Statement of Accounts for 1990-91 that the transmission & distribution losses are 45.3% though in the relevant Statements in the Report the figure was put at 23.93%. Similarly Audit has commented in the Reports for 1991-92 and 1992-93 that the total losses are 44.8% and 45.01% respectively. The corresponding figure for the Audited Statement of Accounts for 1994-95 is 46.54%. The statutory power restrictions which were in force for several years were finally lifted in July, 1994 and thereafter the quantum of energy available in the system went up and along with it, the system losses as well as commercial losses. A substantial injection of funds into the system by way of systems improvement schemes could have reduced the losses but though the agreement with the World Bank was signed in April/May, 1996, till date no World Bank funds have been made available. Hence the total loss in the system including technical and commercial losses and unaccounted for energy is expected to remain at the same level at the end of 1996-97 as it was in 1995-96, namely 47%.
3.6 He stated that GRIDCO has now taken effective steps in addressing these problems despite serious financial and other constraints. These were outlined below :
(i) System Loss(Technical)
One of the significant reasons for high system losses is the small proportion of transmission lines of the category 66KV and above as different from the sub-transmission and distribution system comprising the network of 33KV and below. It is found that for the last three or four years, the total length of transmission lines (of 66KV and above) constitute only 6% to 7% of the total length of the electricity network (transmission + sub-transmission + LT/distribution). With the rapid increase of rural electrification as part of the State Government's Programme, this distortion is only likely to get more pronounced. System Improvement measures, construction of new Grid S/S, 33/11KV S/S and strengthening of lines are practical steps which GRIDCO have taken up or are in the process of implementing to correct the situation. In the last 12 months the following important Grid S/Ss have been commissioned.
The following important Grid S/Ss are likely to be commissioned in the next six months.
The upgradation of transformers in the existing GRIDCO Sub-Stations have been done or is being done in the if following cases :
System improvement works have just been completed or are in different stages of progress in the following places.
The system losses will go down as a result and we aim to bring down such losses from the current level of 47X to 42X by the end of 1997-98. Simultaneously, there will also be improvement in the quality of power.
(ii) Commercial Losses
Proper energy accounting is the key in tackling this problem. Having realised this, GRIDCO has completed the first phase of fixing meters at all inter-circle transfer points. These meters along with the meters in Grid S/Ss enable GRIDCO to compute precisely the quantum of energy available for consumption in all the ten distribution circles of the State. Meters are being installed in inter-divisional transfer points and it is expected that in early 1997-98 this exercise will be completed. This will lead to effective and accurate energy accounting at the divisional level.
Major consumers with contract demand of 100 KW and above are already being metered and conventional meters in their premises are being replaced by Trivector tamper proof electronic meters which record consumption and other data with greater accuracy. Along with the metering in the premises of such consumers, GRIDCO has already placed orders for 15,000 electronic meters of various capacities to be funded by World Bank loans out of which about 4,500 meters have been installed in the consumers' premises in the last few months. The remaining meters are proposed to be installed before the end of the financial year 1997-98.
In addition to the 15,000 meters mentioned above, about 39,000 meters financed by OSEB/GRIDCO with/without assistance from PFC/ADB are also being installed and the installation programme is being regularly monitored. About 3,518 meters out of these have been installed in the consumers premises.
The collection of revenue is monitored regularly and recently GRIDCO has introduced a system of monitoring the collection work on a Sub-Divisional basis every day. This will enable GRIDCO to take corrective action on a daily basis whenever such action is warranted. GRIDCO cash collection drives were conducted during 4 consecutive holidays (from 8.2.97 to 11.2.97) and after finding its successful, we have decided to keep the cash counters open on several holidays in March'97. Apart from this, special drives for installing meters, undertaking load surveys and effecting disconnection of wilful defaulters is in progress in several parts of the State to ensure that our dues are collected promptly. There is also a generous incentive scheme to encourage good collection."
3.7 With regard to complaint on poor quality of service GRIDCO submitted that it had started giving this area the highest priority. Mr. Jena stated : "Complaint Cells will be opened in a few Metropolitan Centres immediately and will be extended to other places in a phased manner. Field officers have been told categorically that in the event they are penalised by Consumer Courts for deficiency in service, the Costs penalties will be recoverable from them. GRIDCO proposes to have special customer-orientation courses for officers and staff who have dealings with the public to sensitize them to the needs of customers. We are also hopeful of improving the distribution infrastructure through construction/upgradation of distribution sub-stations. A scheme funded by ADB covering 863 individual schemes is under progress and till date about 447 schemes have been completed."
3.8 Further, GRIDCO gave following reason and perspective to justify tariff increase : "The Electricity Reform Movement has been accepted by the Central Government and the State Governments after prolonged and intensive discussions over the last several months. The Common Minimum National Action Plan for Power was accepted by the Central and State Government in December '96. This plan is based on the premise that electricity costs money and the cost is to be recovered from the users. The Electricity Utilities are expected to conduct their business in a manner which will earn them a reasonable return without any Government subsidy so that private investments will be attracted towards Power Sector which requires substantial outlay of funds for generation, transmission and distribution. While some cross-subsidisation between categories of consumers may be permissible, no Sector shall pay less than 50X of the average cost of supply namely, the cost of generation + transmission + distribution. Our tariff proposals for 1997-98 have kept in mind these principles.
There are several categories of consumers in the existing tariff. It is the aim of GRIDCO to reduce these categories and to rationalize the tariff structure. The proposed tariff structure for 1997-98 contemplates the same tariff for several categories so that at a subsequent stage, the various categories can be merged into smaller and more rationally structured consumers groups.
One of the basic purposes underlining the Electricity Reform Movement is that the sector should be able to attract substantial non-governmental funding. This will be possible only if investors in the Power Sector are assured of returns which are comparable to returns from other sectors. Keeping this in view, the State Government had permitted GRIDCO to revise the tariff by a weighted average of 17% in the provisional licence issued to GRIDCO with effect from 01.04.96. The World Bank Appraisal Report dated 19th April, 1996 prepared at the time of the final round of negotiations with the World Bank loan of 350 Million US Dollars has envisaged a 18.1% increase in the tariff for the financial year 1997-98. At the time of the preparation of this document, it was argued on behalf of GRIDCO and the State Government that tariff is a matter which is to be decided by an independent autonomous Electricity Regulatory Commission. World Bank, on their part, took the stand that the Electricity Sector in Orissa is one of the several contenders for World Bank assistance and World Bank would not be willing to sanction funds for any Sector Programme unless the Bank is assured of certain cash flows. This is one of the compulsions of GRIDCO which we wish to place before the Orissa Electricity Regulatory Commission."
3.9 The GRIDCO urged on the Commission to approve the rate of tariff as proposed so as to enable itself to cover the costs and establish itself as a viable entity to achieve the aims and objects contemplated in the Orissa Electricity Reform Act, 1995.
IN COURSE OF PERSONAL HEARING:
4.1.1 Mr. Gobind Prasad Aggarwalla, Advocate, appearing for Tarini Cold Storage, Rairangpur pleaded that Cold Storages should have been categorized as agro-based industry and not as commercial enterprises and that there should have been no increase in the rate of tariff. He also alleged that Cold Storage at Pipili in Puri district and those under electrical divisions of Baripada, Sambalpur and Cuttack district were being charged at industrial rate of tariff as against the Cold Storages under Rairangpur electrical division which are being charged at commercial rate which is higher. It was further pleaded that incentive and concessional rate should be given to Cold Storages as in West Bengal.
4.1.2 Mr. G. C. Misra, President, Madhusudan Nagar Committee, Bhubaneswar, stated that there should be no increase in tariff in view of unjustified high loss of 42% and in view of recent increases in tariff on 16.7.94, 5.11.95 and 21.5.96. It was further claimed that there is no justification for increase in burden on domestic consumption which constitutes a small portion of total consumption of electricity in the State. Sri Misra also objected to Gridco's proposal for tariff on the ground that actual expenditure on production of electricity had not been exhibited so as to justify enhancement of tariff.
4.1.3 Mr. Gobind Prasad Aggarwalla, Advocate, appearing on behalf of M/s Ambika Cold Storage, Mayurbhanj, reiterated similar objections as in case of M/s Tarini Cold Storage. He made out two additional grounds. It was stated that more than 90% of total connected load was related to motor load (motive power) and hence it was logical to categorise Cold Storages as industrial consumer. Secondly, Cold Storages having been registered as small scale industry and having been given the status of industry in the Industrial Policy Resolution (IPR) there was no justification for treating it as "commercial" for the purpose of electricity charges.
4.1.4 Mr. D. K. Pattnaik, Bhubaneswar in his knowledgeable testimony
objected to the high tariff and commented on various aspects of the proposal of Gridco. He
appreciated the time constraint of the Commission in view of statutory limit regarding
finalisation of tariff for the year 1997-98 and suggested that his objection could be
taken into account to the extent possible in the current proceedings while the Commission
should call for improved proposals from Gridco for subsequent years. He doubted the
purchase cost of power as projected by the Gridco and suggested to the Commission to
scrutinise and insist on most economical purchase. He suggested a scrutiny of the
transmission and distribution cost of Rs.743.45 crores.
4.1.5 Mr. Gobind Prasad Aggarwalla, Advocate, also appeared for M/s Kichakeswari Cold & Ice Store and reiterated his objections as in case of two other Cold Storages referred earlier.
4.1.6 Prof. Banikanta Misra appeared on behalf of Sri B. Bisoi, a domestic consumer, and objected to the tariff proposal on various grounds. Before outlining the objections he suggested to the Commission to limit the number of objections as in US Public Utility Commission so that more fruitful and meaningful proceeding could be conducted. He claimed that the proposal for tariff hike was defective as Gridco had not discharged its onus of giving sufficient justification for rise and had not indicated the norms, bench mark and standards against which the performance was to be judged and tariff was to be charged. He objected to the absence of energy audit and to the excessive high T&D loss compared to national average. Prof. Mishra pleaded that Gridco should not be allowed to burden the consumers the cost due to its inefficient management, excessive wage bill, high T & D loss and uneconomic power purchase. He also objected to the lack of clarity in the classification of consumers and absence of break up in the percentage of loss in different categories.
4.1.7 Mr. Khirod Pattnaik appeared on behalf of M/s United Hatchery Private Limited, Bhubaneswar and challenged the proposal on following grounds:
4.1.8 Mr. P. K. Das appeared on behalf of M/s Tata Iron and Steel Company Limited, Bhubaneswar and objected on the following grounds:
4.1.9 Sri R. N. Sarkar, General Secretary appeared on behalf of the objector, M/s Orissa Young Entrepreneurs Association, Cuttack. His objections were on the following grounds:
4.1.10 Mr. L. Pangari, Advocate, appeared on behalf of M/s IPISTEEL Limited, Cuttack. In his elaborate arguments he called for special and concessional dispensation in electricity tariff on the ground that mini steel plants are supposed to be encouraged by the State Govt. in accordance with Industrial Policy Resolution (IPR). He objected to the normal rate of tariff for the mini steel plants in view of special status of the industry as a joint sector project under BIFR coverage and in view of its tremendous export potential.
4.1.11 The main objection of M/s Ipitata Refractories Limited was on the ground that the industry was already sick and any additional tariff would further cripple the same.
4.1.12 Mr. R. K. Rath, Advocate, appeared on behalf of the objector,
M/s Orissa Sponge Iron Limited. Mr. Rath raised some preliminary objection to the effect
that sufficient opportunity was not granted to prove the inadequacy of Gridco's proposal
and that under a fiscal statute/taxing statute there could not be additional burden
without quid pro quo benefit which was missing in Gridco's proposal. He stated that
further details should have been filed by Gridco and all papers filed by Gridco should
have been given to the objectors. He stated that application and statements by Gridco
should not be admitted unless proved with supporting evidence.
4.1.13 Sri S. Praharaj appeared on behalf of the objector, M/s Neelachal Ispat Nigam Limited, Bhubaneswar. He objected to the proposal of Gridco on the following grounds.
4.1.14 Sri D. S. Nanda appeared on behalf of the Nayapalli Community Care Association, Bhubaneswar and objected to increase of tariff mainly on the following grounds:
4.1.15 Sri R.C. Pattnaik, Unit-IV, Bhubaneswar complained that there was no consumer service at all by GRIDCO and huge arrears of energy charges due from medium and heavy industries were not been collected by GRIDCO. He gave certain suggestions and requested that the Commission should ask the GRIDCO to improve service and should desist from causing undue hardship to domestic consumers by revising tariff.
4.1.16 Sri B. N. Das, Chief Electrical Inspector (Rtd.) Bhubaneswar in his well argued testimony objected to the tariff on the following grounds:
4.1.17 Mr. M. V. Rao appeared on behalf of The Utkal Chamber of Commerce & Industry Ltd., Cuttack and strongly objected to the tariff proposal. He made out the following main points:
4.1.18 Mr. T.M. Srinivas, representative of Ballapur Industries Limited, Jeypore reiterated the facts mentioned in the written petition and stated that poor quality of service and the lack of reliability in power had been causing considerable production and financial loss to the consumers and hence there was absolutely no justification for increase in tariff. He gave an example of interruption of power as many as 18 times in a day and stated that production loss of 12 1/2 days amounted to Rs. 72 lakhs and loss on account of poor quality of power resulting in poor quality product amounts to 86 lakhs. He claimed that as many as 42 motors have been burnt out during a year due to defective power supply. He urged the Commission to direct Gridco to improve quality of power before asking for increase in tariff. He also stated that as a sick industry increased power tariff will have disastrous effect.
4.1.19 Mr. Damodar Das, Manager (Commercial) appeared on behalf of M/s Aska Spinning Mill & Baripada Spinning Mill and urged that there should be special consideration for employment-oriented sick industry for which any further increase in tariff will cause intolerable financial burden. It was requested that the fixation of minimum charge should be waived in case of sick industries.
4.1.20 Mr. B. S. Bhasin, President of Mini Cement Plant Association of Orissa, Rajgangpur reiterated general issues made out by Sri D. K. Pattnaik and Prof. Banikanta Misra before dwelling at length on issues stated in his own written representation. His objections were mainly on the following grounds:
4.1.21 Mr. S. K. Nanda appeared on behalf of the Confederation of Indian Industry and objected to the increase in tariff mainly on the following grounds:
4.1.22 Mr. Smrutidhar Das, General Secretary, Confederation of Citizens Association, Bhubaneswar objected to the gap of Rs.423.58 crores the high cost of power purchase, high T&D losses, administrative failure of Gridco, preferential charges for colony consumption of industries, etc. He stated that the proposed increase was unjustifiably high for domestic and industrial consumers as against the industrial sector. He urged the Commission to disallow the proposal of Gridco to increase the rate of tariff.
4.1.23 Mr. Prakash Rao appeared on behalf of M/s FACOR and stated that the Charge Chrome industries in Orissa were under financial crisis due to recession in the international market and were losing heavily on every tonne of Charge Chrome manufactured and exported. The rise in tariff in recent years have come to an unacceptably high level and hence, there should be no further increase in tariff. He explained that on account of tariff and demand charges taken together there has been 300% increase in the total liability within a span of 5 years. He highlighted the predicament of the power intensive industries who were being deprived of ability to compete in the international market. He gave some concrete suggestions so as to enable the power intensive industries to survive. In this connection he suggested variable tariffs for peak and non-peak hour. He further suggested as below:
4.1.24 Mr. M. S. Pattnaik appeared on behalf of M/s Bhima Ice Factory & Cold Storage. The objector is a partnership from whose ice factory has already been closed and who is being charged monthly energy bill at commercial rate. It was pleaded that the tariff proposal was unreasonable, unjustified, and would not contribute to promote economic efficiency. He emphasized on the special nature and social role of a cold storage with regard to agriculture development and pleaded for lower tariff.
4.1.25 Dr. Nabakishore Mohapatra, an objector represented the Trust for Research and Public Aids. He reiterated the facts stated in his written petition dt.18.2.97 filed before the Commission. The first part of his objection was with regard to publication of notice in English language, lack of sufficient opportunity to the objectors and poor consumer service by Gridco. In the 2nd part of his argument, he stated that, Gridco had not satisfied the conditions regarding economic use of resources and good performance and therefore, the Commission should take recourse to provision of Section 26 of the OER Act, 1995 so as to reject the tariff proposal and to decide upon an alternative calculation of the aggregate revenue requirements as well as tariff. In the 3rd part of his objection Mr. Mohapatra objected to the recent practice of Gridco to insist on purchase of meter by the consumer. In the 4th part it was claimed that there should be only two rates Wholesale and retail as against thirty five rates. According to him the categorization should be done after taking public opinion. He referred to certain other aspects of unsatisfactory service of Gridco and the effect of tariff rise on the common man. Mr. Mohapatra strongly pleaded for focusing the attention of the Commission on common man and his financial problems so as to bring down the electricity charges to a lower level. He suggested certain economic measures and demand side management, and objected to the privatization policy which according to him was the cause of tariff rise.
4.1.26 Mr. N. C. Nayak appeared on behalf of M/s J. K. Corporation Limited and referred to the disastrous impact of tariff rise on the consumer which had a large industry of manufacturing synthetics. It was claimed that from 1988 till today there has never been a delay in payment of electricity dues by the company whereas on the other side due to non-maintenance of quality and voltage stability in the power supplied by Gridco, there is substantial loss from time to time on quantity and quality of production. The burden of security deposit without interest and the need for purchase of D.G. sets was causing avoidable burden on the consumer. It was suggested that the Commission should direct Gridco to be satisfied with bank guarantee and not insist on security deposit from big power intensive industries on whom the high security deposit amount was a great financial burden. Mr. Nayak requested the Commission not to allow any raise in tariff.
5. OTHER OBJECTION:
5.2 Sri Bimal Kishore Kar, Secretary, Baragada Dist. Consumer Forum objected to the tariff proposal on the grounds that the proposal was arbitrary and excessive, the financial burden was being created due to mix-management and internal subversion, dues were not being collected from different commercial undertakings, and industrial houses etc.
5.3 Sri K.N. Jena, General Secretary, Orissa Consumers Association had sent a petition enlisting a number of objections. The first part of the objection related to legal grounds. It was claimed that GRIDCO as a provisional licensee was not entitled to ask for an increase in tariff. Regulations on tariff methodology and procedure have not been prescribed by the Commission, publication of notice has not been properly done, copies of the application have not been supplied to the objectors and rating committee has not been constituted. He further took the ground that the proposed tariff was excessive and unreasonable necessiated due to inefficiency and uneconomic working of the GRIDCO. It was submitted by the objector that practically nothing was right with the GRIDCO and hence the application for tariff should not be entertained.
5.4 Sri Debabrata Jena, General Secretary, Federation of Consumer Organisation mainly referred to the adverse economic impact on various aspects of the proposal made by GRIDCO and claimed that the corrupt practices, inefficiency and wrong methods adopted by GRIDCO should be stopped and GRIDCO should not be allowed to increase electricity tariff which will result in price hike in every sphere and in suffering of consumers.
5.5 In a petition from Balasore Chamber of Commerce and Industry, objection was raised on the grounds that the tariff would have adverse effect on industry. There has been frequent increase in tariff, the quality of electricity supply had been extremely poor, causing financial losses to the consumers. The transmission loss projected by GRIDCO was too high and GRIDCO had shown artificial and exaggerated cost of assets etc.
5.6 In a letter from Tata Refractories Limited, Mr. D.K. Singh, Director (Operations) objected to the revision of electricity tariff on the ground that it would create additional financial burden which will further cripple the loss making industry. He suggested that the consumption of electricity in the industrial colonies should be calculated as per the actuals and tariff should not be revised for at least three (3) years.
5.7 M/s Utkal Polymer Limited, Balasore objected on the ground that the earlier rise of electricity is pending before the Hon'ble High Court and that in the background of high T & D loss, poor quality of supply, adverse impact on the industry and artificially high cost on investment, GRIDCO should not be allowed to revise the tariff.
5.8 The Orissa Small Scale Industries Association in their letter dated 18.02.97 objected on various grounds. It was stated that the relevant accounting figures had not been provided by GRIDCO and the value of assets and the depreciation amount have been artificially increased. Meter rent should not be charged, monthly minimum charges should not levied, security deposit for old customer should not have been increased and the quality of power supply has not been improved.
5.9 Mr. Sarat Kumar Pattnaik, Advocate, Khurda objected on many grounds. The gross capital cost was inflected, the depreciation was claimed on a higher amount, the reasonable return on base capital was unduly large at 17%, cost of power has been inflated, T & D loss have not been limited to desired level, the quality of power was extremely poor and no improvement had been effected by GRIDCO. He also referred to the adverse impact on the LT consumers and the proposal for fixation of tariff on transmission etc. He requested that the defective deficit tariff budget on inflated capital base should not be admitted and GRIDCO should not be allowed to enhance the tariff without considering public interest.
5.10 Sri B.S. Mohanty, General Secretary, Acharya Bihar Parishad referred to high T & D loss and the recent increase in tariff and suggested that there should be no increase in tariff on the domestic consumers.
5.11 Sri Dhaneswar Dhal, Sahid Nagar assailed the GRIDCO's proposal on various grounds such as uneconomic power purchase, unduly high operating cost, unusually high level of T & D loss and non provision of subsidy from State Govt. etc.. He has given a number of suggestions relating to calculation of the cost of GRIDCO.
6.1 Objections of those who were not admitted for personal hearing either because they did not request for personal hearing or because they had not complied with the formalities for the same were scanned by the Commission mainly to identify relevant points as might not have been covered specifically in course of personal hearing. The objections looked into were from Ipitata Sponge Iron Limited, Orient Paper Mills, Rourkela Steel Plant, Mr. S.K. Misra, M/s Ferochrome Plant of IDC Limited, Magnetic (India) Limited, Mr. Birabhadra Misra, M/s Birla Tyres, Balasore District Small Scale Industries Association! Mayurbhani District Small Scale Association, Hotel Association of Puri, Oriclen Private Limited, M/s Jayashree Chemical Limited M/s Sea Food Exporters Association Limited. Dr. Chakradhar Das, M/s Jagdish Mines and Metals(P) Ltd., M/s Tisco and Shiva Agree gates Pvt. Limited.
6.2 One of the objectors suggested that the tariff proceedings should be kept pending till Hon'ble High Court issues orders on the earlier tariff. Rourkela Steel Plant objected on the ground of adverse impact on cost of production and claimed that concession should have been given as in Madhya Pradesh and West Bengal. M/s Ferochrome Plant of IDC Ltd. claimed that further hike in power tariff will increase the production cost and would make its product uncompetitive in international market.
6.3 M/s Magnetic (India) Limited considered the proposal of GRIDCO as a monopolistic exploitation of the consumers. He referred to the lack of care and action with regard to theft, transmission loss, cross-subsidisation, over head burden of operating expenditure and poor maintenance etc. According to the objector, there was no justification for GRIDCO to pass on the