CASE NO. 4 of 1997
DATED BHUBANESWAR THE 12th MARCH, 1997
ORDER NO. 009, DATED 12th MARCH, 1997

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.

2.0 PROCEDURAL HISTORY:
2.1 Chapter VIII of the Orissa Electricity Reform Act, 1995 deals with tariff. Section 26 in the said Chapter not only lays down a fairly elaborate procedure but also outlines the parameters within which the licensee will have to calculate its expected aggregate revenue from charges for the ensuing financial year. Gridco is the only licensee and hence guidelines for calculation of tariff for financial year 1997-98 were issued from the office of the Commission to Gridco by a letter dt. 23.11.96. The guideline included formats for filing tariff proposal. These formats interalia related to important financial parameters like O&M expenses, establishment expenses, administrative and general expenses, working capital, depreciation, interest on borrowing, capital base as per the sixth schedule of Electricity Supply Act, 1948. The Commission also notified on 28th November '96 the Orissa Electricity Regulatory Commission (Conduct of Business) Regulation in which procedure regarding tariffs were incorporated at Clauses 111 to 117. The Regulation was subsequently published in the Orissa Gazette No. 1413 dated December 30, 1996. The Commission had also issued a procedural guideline to the Gridco. The said guideline indicated methodology and procedure as well as prescribed the terms and conditions for determination of the licensee's revenues and tariffs.

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 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 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 next objection relates to the locus standi of Gridco and the validity of its application for tariff.

Another objection raised was that Gridco is not entitled to submit proposal of tariff within one year.

Objections were raised with regard to consultations with the Commission Advisory Committee on tariff matters.

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.

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, 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.

In the circumstances, the Commission finds no justification to delay or defer the hearing which is ordered to be resumed."

3.0 GRIDCO'S PROPOSAL:
3.1 The GRIDCO's proposal envisages sale of 6380 MUs of electricity during 1997-98. In order to meet this demand GRIDCO proposes to purchase 11000 MUs on the assumption that the total Transmission and Distribution losses will be restricted to 42% (as against present level of loss of about 47%). The financial implications were as under (in crores of rupees):

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 :

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.

4.0 OBJECTIONS IN COURSE OF PERSONAL HEARING:
OBJECTIONS IN COURSE OF PERSONAL HEARING:
4.1 Out of 41 (forty one) persons admitted for personal hearing, only 24 (twenty four) appeared either personally or through their representatives. The essential issues made out by these objectors may be indicated in the following few paragraphs.

5. OTHER OBJECTION:
5.1 Before analysing the substance of the GRIDCO's proposal and the validity of the objections, it will be appropriate to outline the essential objections contained in the written submission of those who had been admitted for personal hearing but did not attend for some reason or other.

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.

5.12 In a petition from Orichem Limited, objection was made on the ground of recent increase, adverse impact on industries, poor quality of supply, voltage fluctuation etc.

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 burden to non-subsidised consumers and to give undue preference to some particular categories of consumers. The Company also suggested incentive to consumers.

6.4 M/s Hotel Association of Puri and Sea Food Exports Association of India have claimed in identical petitions that power failure has continued as before and privatisation has not been a success. They claimed that Orissa should emulate Punjab in granting relief in electricity tariff and that the State should have special consideration for industries which are bound to go sick, if there was further increase in tariff.

6.5 M/s Jayshree Chemicals Limited has furnished facts and figures to claim that the cost of power was unduly high for industrial consumers, the transmission loss was too high and the cost of power procurement is unduly high. It was stated that the cost of tariff is quite high compared to other countries and pleaded that the power intensive industry should be given special consideration in order to make the industries financially viable and competitive in the international contest.

6.6 M/s Jagdish Mines and Metals Pvt. Ltd. stated that some tariff increase could be allowed only after obtaining assurance of better service. But, the increase could be accepted after prior approval of the Govt. in the Assembly and in any case the practices of billing on minimum energy charges should be abolished permanently.

7.0 GRIDCO'S REPLY TO THE OBJECTIONS :
GRIDCO'S REPLY TO THE OBJECTIONS :
7.1 Availing the opportunity of right of reply, Mr. B.C. Jena, Director (Transmission & Distribution) of Gridco replied to the various points raised by the objectors. He denied most of the allegations, gave explanations for some issues, admitted deficiencies in some and in the end urged the Commission to approve the tariff proposal in the best interest of the people and electricity industry of the state. He assured that Gridco was doing its best to achieve the objectives laid down in the OER Act, 1995.

8.0 VALIDITY OF OBJECTIONS:
8.1 Commission considered the objections in the light of facts stated in Gridco's proposal, the replies given by Gridco and Commission's own analysis. The objectors have raised extremely vital issues and enlightened the Commission with some useful suggestions on the basis of which the tariff proposal has to be examined. At the same time Commission has noted that many objections are not directly relevant to the tariff proceeding and even though some may have impact on tariff they have to be put aside for appropriate proceeding. Issues which are directly relevant to tariff fixation have to be specifically dealt at length by the Commission in its own analysis and judgement in this order.

8.2 Those issues which are not relevant and those which have some impact but do not arise out of Gridco's proposal may be briefly mentioned. While doing so, the Commission is aware that most objections were raised because in an unprecedented public nearing of this nature the interested parties were not aware of the exact nature and scope of the proceeding. So far, tariff fixation has been a confidential and internal matter between SEBs and Government. The opinion and consultation with the public was not considered necessary. This Commission has thrown the issue open to public scrutiny in the true spirit of OER Act, 1995. On the first available opportunity of a public hearing, many consumer organisations and representatives have taken the opportunity of ventilating all their grievances, objection and suggestions in the matter of electricity supply. While the Commission has benefitted from many of them, it has noted that even with a most liberal expansion of the scope of the current proceeding it is neither permissible nor practicable to deal with issues not directly relevant to the present examination of the validity of Gridco's proposed schedule of tariff.

8.3 Objections with regard to poor quality of supply, poor maintenance and poor consumer service are considered relevant by the Commission only for purpose of bench marking and putting the Gridco in a path to function in an efficient, economic and competitive manner. It is not possible to deal with these aspects effectively while approving, disapproving or modifying. tariff proposal under Section 26 of OER Act, 1995.

8.4 Objections with regard to reform, restructuring and steps for privatisation programme, and various facets of transfer scheme, revaluation of assets, etc. are beyond the scope of this Commission as these have been done either in consequence or through an Act of the legislature of which the Commission is a creature. Moreover, some of these issues as well as the issue of tariff revision of May'96 are before Hon'ble High Court and hence should not have been raised before the Commission.

8.5 The objections by three cold storages were looked into. No evidence was given to support the allegation of discrimination and Gridco has denied that any cold storage in the state was categorised as industrial consumer It is understood that a suit in the Hon'ble High Court of Orissa by M/s. Ambika Cold Storage on the issue of classification has been dismissed. The Commission does not approve the suppression of such a relevant fact in the testimony of the objector before the Commission. Even otherwise, the objections raised by the Cold Storages are not relevant to the general issues of tariff proposal of Gridco under examination by the Commission.

8.6 Issues such as classification of consumers, minimum charges, demand charges, security deposits and interest on security deposit, etc. are either related to tariff or have impact on tariff. As Gridco has not suggested any change of the existing practice or rate the Commission does not consider it necessary to now deal with these issues.

8.7 The objections by industries which are sick or potentially sick, the objections by the export oriented industries, the Hotel Associations, Sea Foods Association, the small scale sector and of all those who have sought for protection, concession, special treatment, etc. have received not only careful but anxious consideration of the Commission. These objections have been raised on the assumption that Gridco has to implement Govt. policy regarding industrial and economic development of the State and has to give concessions in fixing tariff considering the socio-economic perspective of the Government and the ability of various types of consumers to pay. The Commission is not competent nor is Gridco entitled to go beyond the OER Act, 1995 which is more or less a self-contained statute regulating the electricity industry in the State of Orissa. In the matter of tariff the Commission is entitled to examine whether and to what extent Gridco, which is a licensee, has complied with the provisions of the Act. Gridco is an independent corporate entity and therefore, has no obligation for socio-economic objectives and government policy except those which are issued within the scope and in harmony with the OER Act, 1995. The Government shall be entitled to issue policy directives under Section 12 of the OER Act, 1995. No such directive has yet been issued. Section 26(5) outlines the essential attributes of tariff and Section 26(2) makes it obligatory for the OERC to be bound by the three parameters within which terms and conditions for determination of revenue and tariffs have to be considered. Seen in this light, the Commission has to hold that many objections fall outside the purview of this proceeding. The sooner it is realised by all concerned that OER Act, 1995 has dramatically changed the legal and socio-economic basis of electricity industry in the State, it is better. The Commission in the later part of this order will give its findings on Gridco's proposal against parameters enshrined in Section 26 and shall accordingly deal with those objections which are relevant for present purpose of tariff setting. To allay misgivings, Commission makes it clear that "the interest of the consumers' is one of the prime considerations which are weighing its mind but the interest has to be the overall interest such as the maximum good for maximum people and not interest of individuals classes or specific categories of consumers.

8.8 The Commission has taken note of all relevant objections and have analysed Gridco's proposal in the light of these objections. The issues emerging from Gridco's application and the public hearing was placed before the Commission Advisory Committee in its meeting on 25th February'97. The salient issues were discussed and the members of the Committee raised similar sentiments and opinion as in the public hearings. In the process of consultation the consensus that emerged was that decision on tariff should be related to Gridco's performance.

9.0 COMMISSION'S ANALYSIS AND DECISION ON GRIDCO'S PROPOSAL9.0 COMMISSION'S ANALYSIS AND DECISION ON GRIDCO'S PROPOSAL:
9.1 Gridco's proposal has to be analysed in detail. As this is first time Gridco has submitted a proposal to the Commission, there are certain deficiency with regard to the formalities and presentation of the facts and figures. However, it has been possible for the Commission to collect all the relevant facts and to recast them for examination against parameters set forth in Section 26 of the OER Act, 1995. The macro picture of the financial implications of the Gridco's proposal is as under :

As against this minimum revenue requirement without taking into account the return on equity Gridco has proposed to collect a revenue of Rs.1562.00 crores by way of tariff and meter rent from all consumers. The implications of this figure are that the expenditure exceeds income by Rs.283.63 crores which remains an uncovered gap. Thus, the Gridco is not in a position to earn any return, what to speak of reasonable return, on capital. The financial condition of Gridco due to historical causes is in such a state that in its tariff proposal it has not even made an effort to realise the cost of supply. The situation is understandable because to realise the average cost Gridco has to set the tariff at a level which will be unacceptable to the consumers. The apparent strategy of Gridco is to improve the performance on the one hand and ask for increase of tariff in subsequent years so a s to close the gap and to evolve as an efficient, viable entity. Though Gridco has made mention of reasonable return at Rs.122.80 crores, this is only for presentation purpose and does not have any meaning when on their own admission an uncovered gap of Rs.400.00 crores is left hanging.

9.2 COST OF POWER:

9.2.4 O & M EXPENSES:
(a) Employees cost: Gridco have estimated the employees cost to be Rs.214 crores. While originally details were not furnished, Gridco have in their letter dated 20.2.97 furnished the basis of calculation. Gridco have taken the base year figure of 1995-96 from the unaudited accounts of OSEB and have adjusted these figures towards normal annual increment of 2.5% and annual inflation. No additional man power has been proposed. The basis and the figure proposed by Gridco are found reasonable and are accepted by the Commission.
(b) Material cost: Gridco has estimated its material cost amounting to Rs.72 crores The basis for adopting these figures has been furnished by Gridco in their letter dated 20.2.97 assuming material cost at 5% of the gross asset value as on 1.4.97. The impact of the revaluation of asset has not been considered by Gridco in working out the material cost and therefore, the Commission found this figure acceptable. The material cost of OSEB for earlier years were in the order of 3.5 to 4X of the asset value. The material cost provided in previous years are apparently not adequate in view of present run down condition of the installation and therefore, present proposal of 5% is allowed by the Commission.
(c) Administration and General Expenses: Gridco have estimated the annual Administration and General Expenses amounting to Rs.17.40 crores and have furnished the basis of calculation in their letter dated 20.2.97. They have adopted the base year figure of 1995-96 from the unaudited accounts of the OSEB for the year and reflected annual inflation. Therefore, the basis adopted by Gridco and figure proposed are reasonable and accepted by the Commission.

9.2.5 Depreciation : Gridco had proposed an amount of Rs.150.53 crores towards depreciation in their tariff application. This was based on a rate of 6.55% on EHT assets, 7.84% on HT assets and 7.84% on LT assets as on 1.4.96. The asset wise classification and depreciation applicable thereon has not been furnished and in the absence of this the Commission does not find this acceptable. In the unaudited accounts of OSEB for the year 1995-96 OSEB have worked out the detailed calculation of depreciation based on Ministry of Power Notification No. SO-266 (E) dt. 29.03.94. Though, this notification refers to the State Electricity Boards and a Notification 265 (E) dt.27.3.94 is intended for licensees, the percentage of depreciation are same in both the cases. In this annual account the percentage of depreciation for EHT installation works out to 5.32% and that for the distribution installation works out to 6.94%. The Commission have applied this percentages to the asset base as on 1.4.97 and have worked out the amounts of depreciation for 1997-98 as Rs.57.43 crores for EHT and Rs.70.59 crores for HT and LT works. Thus, the total depreciation works out to Rs.128.02 crores. Calculation of depreciation as estimated by the Commission is as follows:

CALCULATION OF DEPRECIATION FOR 1997-98

		Gen.	Trans.	Dist.	Others	Rs. in crores Total
1	Total amount for the year 95-96 & arrear for 94-95, Source: Prov Account 95-96	18.67	32.67	52.65	2.16	106.15
2	Arrear depreciation for 1994-95	3.75	6.88	13.26	2.16	24.47
3	Depreciation for the year 1995-96	14.92	25.79	39.39	0.58	81.68
4	Gross Fixed Asset in use as on 01.04.1995	413.03	485.01	567.87	1.58	1507.05
5	Percentage of depr. to GFA (Item 3 as % of Item 4)		5.32%	6.94%	41.14%
6	Asset in use as on 01.04.1997 Source: Gridco Tariff filling		1080.00	1017.70	3.84	2097.70
7	Amount of depr. for 1997-98		57.43	70.59		128.02

9.2.6 Interest on loans: Gridco have proposed an amount of Rs.114.30 crores towards interest on loans. The provision in their OSEB unaudited accounts for the year 1995-96 was Rs.127.95 crores. Out of this interest on account of State Govt. loan allocable to Hydro Generating Station amounts to Rs.24.00 crores The net interest on loans for 1995-96, therefore, is of the order of Rs.103.00 crores which corresponds to T&D investment. Considering an investment of Rs.140.00 crores by Gridco during 1996-97, Commission found the proposal of Rs.114.30 crores acceptable.

9.2.7 Bad debts: Gridco has proposed an amount of 45 crores towards bad and doubtful debts for the year 1997-98. This has been worked out as 3% of the revenue from sale of power for the year. The Commission feels that this provision is on the higher side. In OSEB, the principle followed for providing reserve towards bad and doubtful debts was calculated at 10% of book debt against regular consumers and at the rate of 100% of the book debts against the permanently disconnected consumers. Govt. of Orissa have transferred the book debt of Rs.146.80 crores as against the gross book debt of 588.7 crores as on 31.3.96. Thus, the amount of Rs.438.9 crores has been written off as bad debt. It is presumed that this provision of Rs.146.8 crores is towards bad debts are against regular consumers. The provision of 15% on the differential of book debt as on 1.4.97 and 1.4.98 as calculated below is considered appropriate by the Commission.

(Rs. in crores)

1. Amount of Gross Book Debt as on 01.04.97 202.00

2. Amount of Gross Book Debt as on 01.04.98 286.00

3. Increase in Book Debt during 1997-98 (2-1) 84.00

4. Provision @ 15% (15% on Item 3) 12.60

Therefore, the provision for 1997-98 towards bad debts should be 12.60 crores.

9.2.8 Contribution to Contingency Reserve: Gridco has accorded a provision of 7.5 crores towards the contribution to contingency reserve under Para IV of Schedule VI of Supply Act, 1948. As per the provision of Para IV of the Schedule VI such contingency reserve should have a minimum value of one quarter of 1% of the asset value which works out to 5.25 crores and a maximum value of half of 1% of asset value which works out to 10.50 crores, taking into account the asset value of 2097 crores. As the provision proposed by Gridco of 7.5 crores is within the limit, it is considered reasonable and admissible.

Based on the above observation, the expenditure to be incurred by Gridco in accordance with sixth schedule for assessing the revenue requirement as per Section 26(4) of the OER Act, 1995 is indicated below:

Expenditure Para XVII Clause-2 (b)		Rs. in crores
I	Generation and purchase of Energy	833.98
II	Distribution & Sale of Energy (a) Employees cost 214.34 (b) Material cost 67.35 (c) Admn. & General Expenses 17.41	299.10
III	Rent, rates and taxes other than all taxed income & profits	(included in A&G expenses)
IV	Interest on loans advanced by Gridco Interest on loan borrowed from organisation Interest on debenture issued by licensee	114.30 --
V	Interest on security deposit	--
VI	Legal charges	(included in A&G expenses)
VII	Bad debt	12.60
VIII	Auditor's fees	(included in A&G expenses)
IX	Management including managing agents remuneration	5.00
X	Depreciation	128.02
XI	Other expenses	--
XII	Contribution to P.F., Staff pension, Gratuity Expenses on training & other training scheme Bonus	(included in employees cost) (included in employees cost) (included in employees cost)
	Total expenses I to XII	1443.00

Special appropriation to cover

Para XVII Clause 2(c)		Rs. in crores
I	Previous loss	Nil
II	All taxes on income & profits	Nil
III	Instalments of written down account in respect of intangible assets and new capital issue expenses	Nil
IV	Contribution to contingency reserve	7.50
V	Contribution towards arrear depreciation Contribution to development reserve Debt reduction and obligation	Nil Nil Nil
VI	Other special appropriation permitted by State Govt.	Nil
	Total of (C)	7.50
	Total (B + C)	1450.50

Rs. 1451 crores is considered adequate to cover all expenses including the obligation of interest payment and also depreciation.

9.3 Para I of sixth schedule states that the licensee shall so adjust his charges for the sale of electricity whether by enhancing or reducing them that his clear profit in any year of account shall not, as far as possible, exceed the amount of reasonable return. In other words, licensee is entitled to earn clear profit not exceeding a stipulated percentage over reasonable return. Section 26 (2) (a),(b),(c) of the OER Act, 1995 stipulates that the Commission shall be bound by the parameters of the financial principles and their applications provided in Section 57 of Indian Supply Act, 1948 and in the sixth schedule thereto as well as factors which would encourage efficiency, economic use of resources, good performance, optimum investment and finally interest of consumers. Commission has carefully examined the factors specified in the sixth schedule in the background of the licensee's performance in the matter of high system loss. The views expressed before the Commission by the objectors in the hearing brought out the unanimous complaint about Gridco's poor performance in not providing the meters resulting in huge losses. Commission is of the view that Gridco has to reduce its T&D losses and strengthen its revenue collection system by repair and replacement of meters. An excessive system loss which includes a large amount of commercial losses, is a burden on the consumer as this increases the purchase power bill requiring to be paid by the limited consumers existing under the net of revenue collection system. Commission is also aware of a large number of unauthorised consumers enjoying free electricity burdening the paying consumers and creating losses to Gridco. In fact, this phenomenon is of such a serious significance that the whole process of tariff making gets vitiated. Another factor of loss creeping into the revenue collection system is the non-functioning or non-existence of meters to a large extent among the consumers. In the present practice of Gridco, a consumer is charged at various load factors applicable to different category of consumer where the meters are not working. But, such a levy of charges based on load factor leads to unrestricted drawal of energy burdening the power system both operationally as well as financially. Therefore, it is of paramount importance that meters at the consumer's premises must be repaired or replaced at the earliest as a first step in the attempt to gain revenue. Until T & D loss is brought down to an acceptable level the Commission does not consider it appropriate in the interest of consumers to allow expenditure on purchase of power mentioned at Para VII Clause 2 (b) (i) in the SIXTH SCHEDULE to the extent proposed by GRIDCO. The Commission has, therefore, decided to depart from the above said factors specified in the SIXTH SCHEDULE to the extent of limiting expenditure on power purchase. The comparative position of GRIDCO's proposal and that approved by the Commission is given below:

9.4 The tariff setting to raise a revenue of Rs. 1451 crores has to keep in view the cost of supply at various voltage levels, their load factor, power factor, quantum of consumption and the prevailing tariff of other utilities in the country.

9.5 Consumers on High Tension (HT) and Extra High Tension (EMT) voltage levels requested to eliminate cross subsidisation and fixation of tariff appropriate to their cost levels. Consumers on the low voltage level, specifically the domestic consumers expressed their views that there should not be any rise in tariff for this category as unlike industrial consumers they have no scope to pass on the additional burden to somebody else. Some of them have expressed their views that the power purchase from the cheaper sources should be allocated exclusively for this domestic category of consumers so that they can remain at the lower level of tariff.

9.6 As stated earlier the industrial consumers availing power supply at low voltage level expressed their apprehension that tariff rise would make their products less competitive in the market. So the Commission has a complex task of balancing the interest of various consumer groups on the one hand and the financial health of the licensee on the other. It may also be highlighted that the present run down condition of the installation of Gridco needs investment for improving service and bringing down the technical losses of the system. Commission has considered very carefully the tariff proposal of Gridco proposing an overall increase of 19.53% at T & D losses at a level of 42%, leaving deficit of Rs.407 crores. To achieve this overall rise of 19.53% Gridco has proposed a raise varying from 13.22% to 52.16% on the existing level of tariff. The Commission, therefore, examined all levels of the existing tariff structure and decided to rationalise to the extent possible and fix a tariff which would impose the minimum burden.

9.7 Commission has elaborately examined the case of supply at different voltage levels to assess the impact of revision. In this regard the Commission has come to the conclusion that the present levy of additional charges on account of supply at a voltage other than the declared voltage of tariff need revision. Citing an example for illustration : A consumer at contract demand of 5000 KVA or above availing power supply at 33 KV is required to pay an additional charge of 7.5% over and above tariff rate payable by the consumer of same category availing power supply at the tariff voltage of 132 KV. But the cost of supply at 33 KV compared to the cost of 132 KV works out much higher than the present additional levy of 7.5%. Conversely, a consumer is entitled to reduction of charges if power is availed at higher voltage level than the declared tariff voltage level. Therefore, there is a provision of incentive and disincentive for the consumer to avail power supply at a higher or lower voltage. Complete rationalisation is not possible at one stroke. The Commission decided to increase the present level of additional charges by a margin of 2.5% for all voltage levels.

9.8 REVENUE ASSESSMENT FROM DEMAND CHARGES:

9.9 Cross-subsidy: Commission is aware that the burden of intra-class subsidy falls heavily on the large industry groups. Several such industries are finding it economical to set up Captive Power Plants of their own. It is in the interest of customers paying tariff below the cost of supply that large industries group do not migrate from Gridco's power supply due to heavy tariff burden. The Commission has attempted to reduce the intra-class subsidy keeping in view the life line rates for the very small consumers. Increase in tariff rates has been higher for customer classes who are paying smaller portion of the average cost of supply. A beginning has been made in this order for reduction of cross-subsidy.

9.10 Irrigation: As in other states of India, the tariff rates for agriculture is very much below the average cost of supply. The agriculture load generally comes up during off-peak hours and would not add significantly to the peak demand of Gridco. Further, rate increase has to be gradual. Commission has, decided on an increase in the rate keeping all these aspects in view.

9.11 Domestic: A large majority of consumers, more than a million, estimated to consume around 30% of the total sale projected are being levied at a much lower level of tariff, compared to their cost of supply. This pattern of consumption brings in an additional load, particularly during the peak load hours, where cost of power purchase is the highest, leaving apart the additional operational system problem for meeting larger peak. But, considering the interest of very small consumers for whom small amount of electricity is essential, Commission has proposed no rise in respect of consumers whose monthly consumption is less than 30 units per month. In respect of other volumes of domestic consumption, the Commission has approved a progressively higher rate of increase.

9.12 Industrial colonies: Power supply to industrial colonies, when drawn together with the industrial supply through a common meter under two part tariff, has in effect a demand charge component levied. Therefore, the energy charges for such type of consumption has been kept lower than that for supply to other residential colonies.

9.13 Subsidy: It is understood that OSEB was claiming revenue subsidy under the following heads:

1. Rural electrification operation.

2. Industrial policy resolution.

GRIDCO have not shown any such subsidy in their tariff application. The Commission, has therefore, not provided for any subsidy in working out the revenue requirement of GRIDCO and presume that any loss of revenue sustained by the GRIDCO in complying with Government policy directions shall be claimed separately by GRIDCO under intimation to the Commission and the subsidy when received shall be passed on to the concerned consumer groups. GRIDCO have provided a lower rate for domestic consumers when such consumption does not exceed 30 unit per month. It is not clear, if consumption in this category includes Kutir Joyti connection numbering about 95,000 Nos. by the year 1996. In case GRIDCO is incurring any revenue loss on account of such policy direction of the State Government, the loss could be quantified and subsidy claimed from the State Government. The Commission have not considered this in approving the tariff.

10.0 The Commission has had a difficult task and hard choices in finalizing the tariff. The transitional problems associated with the conversion of a protected industry fully under control of the Government to a competitive environment are enormous. The most important part of the regulatory control is tariff design which has a crucial link with investment incentive. The Commission is aware that the Regulators are required to approve a tariff design which must permit utilities to operate prudently and economically and to generate enough revenue to cover reasonable operational costs, taxes, amortization and a rate of return. But as in case of transitional phase in all developing countries, raising the price to even the cost level brings wide-spread discontentment and suspicion of the consumers. This discontentment is encouraged and enhanced by vested interests who have been benefitting from an inefficient and loss-making utility. The big task before the Commission is to convey the message that the price increase reflects the costs previously suppressed and subsidized by the Government. A short-term populist decision to defer any increase in price will bring in further deterioration in maintenance and services of electricity and will jeopardise not only industrial development of the State but also the supply of continuous and reliable power to existing customers. The Commission has therefore decided to balance on the one hand the interest of electricity industry in getting reimbursed for the increased cost of production and supply and on the other hand the financial impact on the consumers of all categories as would not be intolerable. Gridco has to realize that any increase in tariff has to be linked to performance and the consumers have to realise that the cost of supply of electricity like that of any other produced goods are liable to economic factors of increased cost and inflation. These compulsions as enshrined in the parameters set forth in Section 26(2) of the OER Act, 1995 have guided the Commission in setting a tariff design to be effective from 01.04.97. We have linked the increase of tariff to efficient performance of Gridco and heave restricted the raising of price to the minimum level we consider reasonable and inevitable in the interest of consumers.

11.0 FIXATION OF TARIFF:

11.1 The Commission would like to conclude that it does not approve either Gridco's calculation of revenue requirement for 1997-98 or the tariffs proposed for different categories of consumers. The determination of licensee's revenue as considered reasonable by the Commission have been indicated in the earlier part of this order.

11.2 The Commission orders that tariff for supply of electricity for each category of consumers within GRIDCO's licensed area of supply, shall be as given in the table below with effect from 01.04.1997.

* DPS as applicable

11.3 The Commission also authorises levy of other charges as given below:

OTHER CHARGES EFFECTIVE FROM 01.04.97

1. DEMAND CHARGEThe monthly Demand Charge will be calculated on recorded/evaluated Maximum Demand or 80% Contract Demand whichever is higher.

2. MONTHLY MINIMUMThe Monthly Minimum Energy Charges

ENERGY CHARGES for different category of consumers will be calculated on UNITS calculated as given:

CATEGORY UNITS FOR MONTHLY MINIMUM ENERGY CHARGES

Domestic 22 units per half KW of contract demand

Commercial 23 units per half KW of contract demand

Irrigation 31 units per BHP of contract demand for the months of June, July, August, September & October. 62 units per BHP for rest seven months.

Street Light 30 units per half KW of contract demand

Small Industry 56 units per KW or 42 units per BHP of contract demand

Medium Industry 56 units per KW or 42 units per BHP of contract demand

Public Institution 18 units per half KW of contract demand

General Purpose P.F. of 0.9, L.F. of 0.2 on the contract demand. For the air conditioned cinemas for the months of November to March P.F. of 0.9, L.F. of 0.1 on the contract demand

Public Water Works CD => 110KVA P.F. of 0.9, L.F. of 0.2 on the contract demand

Public Water Works CD < 110KVA 62 units per KW or 47 units per BHP of contract demand

Large Industry P.F. of 0.9, L.F. of 0.2 on the contract demand

Railway Traction P.F. of 0.9, L.F. of 0.2 on the contract demand

Heavy Industry P.F. of 0.9 L.F. of 0.4 on the contract demand

Power Intensive Industry P.F. of 0.9, L.F. of 0.4 on the contract demand

Mini Steel Plant P.F. of 0.9, L.F. of 0.2 on the contract demand

Emergency Supply to CPP Nil

3. METERING ON LT SIDE OF CONSUMER'S TRANSFORMER.

Transformer loss computed as given below to be added to the consumption as per meter reading.

Energy Loss = 730 X KVA rating of transformer/100

Loss in Demand = One percent of the rating of transformer. (For Two part tariff)

4. SUPPLY AT VOLTAGE OTHER THAN SPECIFIED VOLTAGE

Category of Consumer	Contract Demand	Specified Voltage	Increase in the rate of Demand Charges & Energy Charges in % of Supply Voltage
			LT	11KV	33KV	132 / 220KV
Domestic Bulk Supply	All	1KV/33KV	+15	---	---	---
Public Institution	All	33KV	+15	+5	---	---
Power Intensive Industry	2000KVA and above	132/220KV	---	+10	+7.5	---
Mini Steel Plant	4444KVA and above	132/220KV	---	+10	+7.5	---
Emergency PS to CPP	All	132/220KV	---	+10	+7.5	---
Heavy Industry	25000 KVA and above	132/220KV	---	+10	+7.5	---
Railway Traction	All	132/220KV	---	---	+7.5 (25kv)	---
Large Industry & Gen. Purpose	110KVA and above but <555KVA	11KV/33KV	+15	---	---	-7.5
	555 KVA and above but 132<5000KVA	33KV	+15	+5	---	-7.5
	5000KVA and above	132/220/400 KV	---	+10	+7.5	---
Small Industry	Less than 22 KVA	LT	---	-7.5	---	---
Public Water Works	110 KVA and above	1KV/33KV	+15	---	---	---

DELAYED PAYMENT For Large Industry, Medium Industry,

SURCHARGE Public Water Works, Railway Traction, Street Light, Power Intensive Industry, Heavy Industry, General Purpose Supply, Public Institution, Mini Steel Plant, Emergency Supply to CPP, a DPS @ 2% per month shall be levied prorata for the period of delay from the due date i.e. from the 16th day of the bill, on the amount remaining unpaid, if the bills are not paid within 15 days of the bill.

PENALTY FOR For Maximum Demand in excess of

OVERDRAWAL Contract Demand in a month, a penalty at the rate for Demand charges together with charges for supply at a voltage other than prescribed voltage shall be added.

POWER FACTOR For Large Industry, Medium Industry,

PENALTY Public Water Works, Railway Traction, Power Intensive Industry, Heavy Industry, General Purpose Supply, Public Institution, Ministeel Plant, & Emergency Supply to CPP, a Power Factor Penalty shall be added as a percentage of monthly demand charges & energy charges as given below :

1. 0.5% for every one % fall from 90% upto and including 60%

Plus

2. 1% for every one % fall below 60 upto and including 30%

Plus

3. 2% for every one % fall below 30%.

EMERGENCY POWER The Demand charges shall be levied on

SUPPLY TO CPP. recorded Maximum Demand. The existing provision of levy of Demand Charges on MD recorded over 25% of the rated capacity of the largest unit of the CPP shall be discontinued.

TRANSMISSION TARIFF The Transmission Tariff for Transmission of power at 132KV/220 KV shall be as follows.

1. Out of Energy supplied to GRIDCO for transmission, 7.5% of the energy shall be deducted towards Transmission Loss and balance energy delivered at the delivery point at 132 KV/220 KV.

2. A Transmission charge @ 40 paise/ unit on the energy received for transmission.

5. LOAD FACTOR For unmetered supply or defective meter, billing shall continue to be at prevailing percentage of connected load.

6. MONTHLY METER RENT

METER RENT IN RUPEES

1 Single phase electro-magnetic KWH meter 15.00

2 Three phase electro-magnetic KWH meter 30.00

3 Three phase electro-magnetic Trivector meter 500.00

4 Trivector meter for Railway Traction 750.00

5 Single phase Static KWH meter 50.00

6 Three phase Static KWH meter 100.00

7 Three phase Static Trivector meter 1200.00

8 Three phase Static Bivector meter 1200.00

9 A set of LT Current Transformer 75.00

10 11 KV Metering Unit without meter 600.00

11 33 KV Metering Unit without meter 900.00

12 EHT Metering arrangement without meter 2000.00

7. RECONNECTION CHARGES

1 Single Phase Domestic consumer 30.00

2 Single Phase Other consumer 50.00

3 Three Phase LT consumer 100.00

4 HT and EHT consumer 500.00

8. Transmission Tariff: GRIDCO's application proposes a transmission tariff of 30 paise per unit after allowing the loss of 7.5% for the extra high voltage system. It is estimated that the marginal cost of EHT service excluding loss during the financial year 97-98 shall be about 37 paise per unit. The charge based upon marginal cost will promote efficiency in the use of the system and existing new users on transmission service should pay a charge equal to at least the marginal cost of providing the service. In addition, all users of GRIDCO system should make some contribution to the cost of non-technical losses on the system until these losses are brought under control. Based upon these considerations, the Commission have decided to set the transmission tariff at 40 paise/kWh which is slightly more than the marginal cost of providing the service loss of 7.5% as applied for.

9. Gridco is directed to take appropriate action in pursuance of this order.

-Sd/-
(A.R.MOHANTY)
MEMBER

-Sd/-
(D.K.ROY)
MEMBER

ANNEXURE - A

Calculation of capital base and reasonable return for 1997-98 [in accordance with para XVII of Schedule VI of Electricity (Supply) Act, 1948].