CESCO has submitted calculation of expected revenue from charges and its revenue requirement for the year 2000-01 along with a proposal for new tariff stating that the existing tariff and charges in force since 01.02.2000 was inadequate to meet revenue requirement of FY 2000-01.


CESCO estimated that it would draw around 3940.164 MU of power from GRIDCO. It estimated sale of 2259.32 MU, an increase of 13.52% over the billed units for the year 1999-00. The Licensee’s estimate of power purchase for the year 2000-01 was Rs.527.98 crores and the average cost per unit was estimated at 134 paise/unit.


The cost of distribution and sale of energy for the year 2000-01 was estimated at Rs.231.49 crores which comprised employees cost, cost of materials, administrative and general expenses, interest on loans borrowed from organisations, bad debts and depreciation (less capitalization on account of interest) and legal expenses. There was a proposal for special appropriation of Rs.15.18 crores. CESCO estimated to earn a reasonable return of Rs.18.17 crores on its capital base of Rs.113.532 crores.


The revenue requirement for FY 2000-01 estimated by CESCO is in Table : 1.

Table : 1
Revenue Requirement for 2000-01

(Rs. in Crores)

Purchase of energy


Distribution & sale of energy


Special appropriation


Reasonable return






To summarise CESCO has stated that the estimated revenue requirement for the year 2000-01 is Rs.792.82 crores and it would face a deficit of Rs.242.82 crores during the year if the existing tariff is allowed to continue . It has further stated that any postponement of tariff, given CESCO’s poor consumer mix and the expenses incurred due to the super-cyclone, would perforce require the licensee to be referred to the BIFR and possible liquidation. The revenue projection made by CESCO for 2000-01 is in Table : 2.

Table : 2
Estimated Revenue from charges for 2000-01

(Rs. in Crores)




For FY 2001 based on existing tariff



For FY 2001 based on tariff proposed in the application for full year





CESCO has stated that the system suffered from an adverse sales mix skewed towards LT consumers. The LT sale was projected at 67.64%, HT 16.0% and EHT 16.36% of the total sale in 2000-01. The losses projected for each category of consumption were LT 42.84%, HT 15%, and EHT 0%. CESCO has further stated that its massive distribution losses were due to the above skewed consumption pattern. The licensee therefore requested the Commission to consider voltage-wise loss level for tariff calculation. CESCO has pleaded that international experience had shown that regulators elsewhere followed non-homogeneous performance benchmark for loss stipulation. Even after privatization the licensees’ loss reduction drive had been slow in the initial years of reform.


CESCO proposed a loss figure of 42.65% for 2000-01. The licensee has claimed to have embarked upon a massive loss reduction programme and proposed to achieve the same by implementing several measures. The devastation and the consequent expenses incurred due to super cyclone had proved to be a major setback to the licensee.


Main Features of CESCO’s Proposal


CESCO has proposed a tariff to reduce the gap between revenue requirement and expected revenue from existing tariff and charges for the FY 2000-01. Based on the concept of rationalisation of tariff structure of the previous years, it proposed changes in the tariff structure which would yield additional revenue. The licensee has proposed increase in demand charges for some HT and EHT consumers and energy charges for all categories of consumers keeping in mind the OERC’s objective of reduction of cross-subsidization. CESCO wished to carry out the rationale of a uniform rate for all categories of consumers using electricity from the same voltage of supply. The licensee proposed to recover 14% of the total fixed cost from fixed charges which was far below the stipulation of the Commission at 33%. CESCO has pleaded that its calculation of revenue requirement for 2000-01 included Rs.12.1 crores on account of differential in the power purchase cost as calculated by the Commission due to 10 months of deferment of new Bulk Supply Tariff. Further an amount of Rs.1.48 crores which was not allowed in the last tariff order was included in the revenue requirement for 2000-01. CESCO has further stated that it needed to enhance tariff by 39.61% to reduce its own deficit and cross-subsidization and to make substantial investments in the areas of system improvement and metering.


Main features of tariff proposal of CESCO were as follows

  • Demand charge is proposed at Rs.250/KVA for all consumers except for the following categories :-

  • Domestic, Commercial, Small Industry, Medium Industry, Irrigation, Street Lighting, Public Institution, PWW <100 KW.

  • Demand charge for Street Lighting, Small Industry, PWW<100 KW, Public Institution, Commercial and Medium Industry was proposed at Rs.100 per KVA.

  • No change proposed in the existing customer service charge.

  • Energy charge in respect of EHT consumers except Power Intensive Industry, Colony Consumption and Emergency Supply to CPPs was proposed at 320 paise per unit.

  • Energy charge for all HT categories except Irrigation, Bulk Supply-Domestic, Commercial and Colony consumption was proposed at 350 paise/unit.

  • Energy charge for all LT categories except Domestic, Irrigation and Commercial has been proposed at uniform rate of 400 paise/unit.

  • Commercial Tariff for consumption less than 100 units was proposed at 400 paise/unit.

  • The proposal in respect of domestic tariff for consumption less than 100 < units was 220 paise/unit, for 100 to 200 units of consumption the rate proposed was 325 paise/unit.

  • In respect of EOUs CESCO proposed energy charge at 205 paise/unit for consumption till 50% of the load factor and 180 paise/unit above that load factor primarily with the objective of retaining industrial consumers under the grid and help other consumers.

  • A 300% rise was proposed in the Rebate subject to the approval of the proposed Retail Tariff by the Commission.

  • Reconnection charges were proposed at Rs.60 for single-phase domestic consumer, Rs.100 for single-phase other consumers, Rs.200 for three phase line and Rs.1000 for HT and EHT line.

  • Power Factor Penalty was proposed to be reintroduced for Medium Industries.


Institution of Purchased Power Price Adjustment Clause (PPPAC)
CESCO has stated that its power purchase costs were directly affected by GRIDCO’s proposed bulk supply tariff as approved by OERC. Since these costs were beyond the control of CESCO, the proposal was to insulate CESCO from such risk through institution of a Purchased Power Price Adjustment Clause (PPPAC). The proposed formula does not provide an automatic pass through of cost. The change in retail tariff would need the Commission’s approval. Therefore a simple interest at the rate of 16% per annum would be made applicable to the delay between the new BST coming into effect and the adjustment coming into force.


CESCO’s Prayer
CESCO has made the following prayers to the Commission :-

  • Approve the Retail Supply Tariff and Charges as proposed.

  • Confirm revenue requirements, calculation of capital base and calculation of clear profits for the year 2000-01

  • Approve previous year’s deficit of Rs.1.48 crores to be recovered through special appropriation in 2000-01.

  • Allow a voltage-wise loss stipulation for computing revenue requirement and for special category of capital.

  • Institute PPPAC to cover all changes in the cost of power purchase.

  • Approve the proposed tariff to be effective from 1st January, 2001.


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