4.0

OBJECTIONS DURING HEARING
The Commission has considered all the objections raised by various objectors. Some of the objections were found to be of general nature whereas others were specific to the proposed tariff filing for the financial year 2000-01. Based on their nature and type, these objections may be categorised broadly as indicated below :-

4.1

Demand estimation

4.1.1

Energy Requirement
Some of the objectors have objected to the method of calculation of energy requirement followed by GRIDCO in its proposal. According to them energy requirement for GRIDCO should be based on the consumption figures given by DISTCOs along with the normative loss of 32%.

4.1.2

Simultaneous Maximum Demand, Contract Demand & Billing Demand
All the DISTCOs, have objected to GRIDCO's proposal for calculating contract demand at various grid supply points. Instead, they have suggested that contract demand should be specified by each DISTCOs for their area of supply. Further the concept of contract demand should not be considered for DISTCOs and demand charges should be levied on the basis of total maximum demand recorded as DISTCOs have no control over the level of demand in the area and consumption pattern of the consumers. Demand variation is a risk that is borne by the licensee but the DISTCOs should not be penalised for this variation. They have also objected to the method of calculation of simultaneous maximum demand done by GRIDCO and have said that GRIDCO should be directed to install appropriate meters so that simultaneous maximum demand for DISTCOs as a whole can be measured as a vectorial summation of demands at all the interface points.

4.1.3

Levy of Overdrawal charge
The DISTCOs have also requested OERC to reject the proposal of GRIDCO for overdrawal charges as GRIDCO does not pay any penalty to generators for overdrawal of power. For overdrawal of energy any cost escalation due to excess drawal by all the four DISTCOs pooled together, could be included in revenue requirement for the next year. Shri R.P. Mohapatra, Ex-Chief Engineer and Shri S.K. Nanda of CII however opined that for ensuring Grid discipline the distribution licensee should contract their quantum of demand and energy. Overdrawal penalty and minimal drawal guarantee should be enforced.

4.1.4

Supply to EOUs
On the issue of EOU sales to be included as part of energy requirement of GRIDCO and sold as part of bulk supply to distribution licensees, there was divided opinion among the objectors. Shri M.V. Rao of UCCI and CII have said that EOU sale during off-peak period should be included as part of energy requirement of GRIDCO and sold by DISTCOs as this should be in accordance with the licensees condition of supply.

4.1.4.1

On this issue Shri R.P. Mohapara and Shri R.C. Padhi have suggested that inclusion of EOU consumption within total power purchase of GRIDCO should be accepted only if the EOUs accept the normal tariff applicable to the Power Intensive Industries including incentive tariff for load factor more than 50%.

4.1.4.2

NESCO in its objection has submitted that GRIDCO has been billing separately for EOU supply to NESCO at NTPC rates. They have requested to OERC to direct GRIDCO to revise bills according to OERC’s order in Case No. 12/2000 without NTPC arrangement for EOU.

4.1.5

Transmission losses
Most of the objectors have stated that the figures given by GRIDCO in its various statements are different. Further, as a lot of investment has been made to strengthen the transmission system in the State the losses that are incurred in the transmission lines should have been reduced. For 2000-01 not more than 3-3.5% should be accepted as transmission losses by OERC.

4.1.6

Power procurement : Least cost drawal
Many of the objectors have objected to assessment of low hydro drawal based on one hydrology year and instead have suggested to take either design availability or an average of 8 years estimation of hydro drawal. The DISTCOs have requested the Commission to exclude impact of lower hydro power generation from tariff computations of the ensuing year and allow it as year end adjustment. Allegation has also been made by Shri K. Acharya of Orissa Grakah Mahasangha that hydro power was low because of non-payment of dues to OHPC. Many of the objectors have also said that in view of low hydro generation, drawal from CPP and OPGC should have been proposed for maximisation. The counsel for Orissa Small Scale Industries has objected to low evacuation from Indravati. He said that as directed by Commission in order dt.30.12.99 GRIDCO should have taken steps to set up the transmission line for full evacuation of Indravati power. If orders of Commission were flouted by the licensee then the imputed benefit of full evacuation of power from Indravati should be deducted from the total cost of power.

4.1.7

Power Procurement Costs
The DISTCOs have submitted to OERC to review the fixed cost as proposed by GRIDCO for generating stations. They have requested OERC to seek for a review of the methodology for allocation of income tax payable by the central thermal generators. Most of the objectors have calculated the cost of power based on the approved rates of cost of power for 1999-00. Some of the objectors have questioned the rates of OHPC and TTPS as proposed by GRIDCO as they were not based according to the respective PPAs.

4.2

Transmission Costs

4.2.1

Employee Cost, A&G, R&M Expenses
Most of the objectors have pointed out that the licensee has been wasteful in its expenditure related to employee, A&G and R&M expenses which needed to be carefully scrutinised by OERC. As GRIDCO had not submitted the audited accounts of 1999-00 it was difficult on part of the objectors to point out the reasonableness of expenditure incurred by the licensee in 1999-00. The approved figures of 1999-00 should form the basis of fixing the benchmark for 2000-01 by the Commission. Some of them have also demanded scrutiny of the retirement benefits proposed on Actuarial Valuation made by GRIDCO. OERC has been, therefore, requested to look into the prudence of expenditure proposed by GRIDCO.

4.2.2

Expenditure for restoring cyclone damages
Some of the objectors have suggested that the provision for expenditure on restoration of cyclone damages should not be passed on in the bulk supply tariff as Govt. of India and Govt. of Orissa have given grants for the same. Further it has been pointed out that the provision of Rs.4.42 crores made for cyclone damages should in any case be charged to capital account.

4.2.3

Depreciation
On the issue of depreciation it has been stated that due to revaluation of assets during transfer, the provision for depreciation has been unreasonably inflated. In spite of OERC’s direction the licensee has not taken steps to create an asset register for all its assets. Shri R.P. Mohapara has stated that depreciation should be calculated on the basis of the Notification of the Ministry of Power dt. March, 1994 and that the rates thereon are applicable to ‘assets purchased new’ i.e. brought after 01.4.94. The older assets being second hand, the rate of depreciation based on nature, age and condition of assets at time of acquisition. As no asset register has been created depreciation should be allowed for 60% of assets created before 3/94 at earlier rates. Shri B.N. Das and Shri R.C. Padhi have stressed that the depreciation amount recovered till 31.3.96 should be identified on different blocks of assets so that recovery of depreciation must stop once 90% of original cost is recovered.

4..2.4

Interest on long term liabilities
Interest should be recalculated based on the following decisions taken in OERC’s last year's order, namely :-

Interest on bonds issued to settle arrear energy dues was not payable by consumers in tariff, as they had paid the energy charges earlier

Interest on loans towards arrear energy dues not payable by consumers in tariff, as they had paid the energy charges earlier.

4.2.4.1

Some of the DISTCOs have pointed out that GRIDCO had included certain loans from PFC which were not related to transmission network and hence those loan amounts which have been specified by the DISTCOs should be excluded from interest computation. Further they have questioned the reasonableness of the compound interest proposed for LIC loans.

4.2.5

Appropriation to Contingency Reserve
Most of the objectors have suggested that contribution to contingency reserve should be kept at last year’s approved level.

4.3

Capital Base

4.3.1

Original Cost of fixed assets
In this context Shri R.P. Mohapatra has submitted that irrespective of purchase value, the "original cost of the fixed assets" should be the depreciated book value, as per the definition given in paragraph XVII (6) of the Sixth Schedule and paragraphs I (b) and II of the Fourth Schedule.

4.3.2

Capital expenditure
It has been pointed out that GRIDCO has not provided the prudency of huge investments of about Rs.919.40 crores in capital expenditure over the last three years. The licensee needed to explain the tangible benefits in terms of reduction of transmission losses and improvement in system reliability due to the said expenditure. The financial impact in terms of cost reduction needs to be shown as otherwise servicing the capital cost would be a burden on the end consumers. Further, GRIDCO has not been able to execute projects of huge magnitude in the past and, therefore, only prudent investment should be allowed to be included in the capital base.

4.3.3

Stores
The amount of stores to be included in capital base should be kept at a reasonable level.

4.3.4

Calculation of capital base
Allegations have been made that GRIDCO has not contributed any funds from its own resources. It has been also stated that the Zero Coupon Bonds of Rs.400 crores issued to Govt. of Orissa should be excluded from capital base as was done last year.

4.3.5

Reasonable Return
As GRIDCO has not shown any efficiency improvements, reasonable return should be restricted to last year’s approved level.

4.3.6

Miscellaneous Receipts
Miscellaneous receipt should have been deducted from the revenue requirement.

4.3.7

Rebate
Objections have been made for the provision made on rebate to DISTCOs in the revenue requirement of GRIDCO. It has been pointed out that DISTCOs never made timely payments to GRIDCO which has been reflected in the huge arrears pending against the DISTCOs. Therefore, no provision for rebate should be allowed to be included in the revenue requirement. The DISTCOs have also stated that they do not agree to the rebate scheme proposed by GRIDCO and instead have suggested that an alternate rebate scheme should be made to cater to payments made by DISTCOs on a weekly basis.

4.4

Transmission Tariffs

4.4.1

CII and ICCL have suggested that while calculating the transmission charges, the quantum of energy sold to A.P. and M.P. should be considered as this energy is deemed to have been wheeled through Orissa Power System though it may have been supplied by displacement. They have said that the principle of postage stamp was not relevant to calculation of transmission charges for CPP wheeling as there was no physical transmission. Further the revenue received on account of wheeling to M.P. should be deducted from transmission cost to arrive at transmission charges. CII has suggested that wheeling charges would be around 17 paise/unit and UCCI has said that transmission tariff would be 32 paise/unit.

4.4.2

Aditya Aluminium has pointed out that the transmission loss and wheeling charges have relationship with the distance and voltage of transmission and, therefore, the same should be calculated accordingly.

4.4.3

ICCL and Nalco have claimed special status due to the reason that they inject power to the Grid and help in reducing transmission loss. Nalco has further submitted that its part transaction with GRIDCO should be governed as per bi-lateral agreement with former OSEB. It has also submitted that GRIDCO was not willing to pay the landed cost of coal and fuel as agreed in the tri-partite meeting between OSEB, State Govt. and Nalco. It has also prayed that its consumption made at Nalco Bhawan, Nalco Nagar at Bhubaneswar and Damanjodi should be adjusted against surplus power fed to Grid at TED, Chainpal, Angul. Finally, according to Nalco, transmission charges and losses thereon should not be claimed in respect of the quantum of energy injected into grid by Nalco CPP. It should be best applicable for the quantum of energy deemed to have been transmitted from Nalco CPP to Nalco Damanjodi through GRIDCO network.

4.4.4

Legal sanctity of transmission tariff
It has been pointed out that there is no legal sanctity of transmission tariff in the Reform Act, 1995.

4.6

Other Issues

4.6.1

The Counsel for Orissa Small Scale Industries Shri S.K. Padhi argued that Commission is vested with duty to regulate working of licensee and to promote efficiency in their working to ensure availability of supply of power in an equitable manner. The licensee was to provide the Commission with full details of calculations. It would be more appropriate if the Commission followed the methodology whereby results of scrutiny of work performance made by technical staff of Commission was made public and they should also participate in the hearing and place their objections in order to make the hearing more efficacious and transparent.

4.6.2

It was pleaded that the interest of consumers should be given due importance by the Commission while determining tariff.

4.6.3

Orissa Consumer Association submitted that the application was not tenable under provisions of law. Though rating committee no longer existing as per law the stipulation for rating committee was not substituted by the Reform Act, 1995. The Commission would, therefore, be bound by the three years stipulation as provided in Sec.57 (A) of the Act, 1948.

4.6.4

WESCO has objected to the application on the ground that Bulk Supply Tariff order of 30.12.99 had been contested by WESCO and appealed to the appellate court i.e. the Hon’ble High Court which has been stayed.

4.6.5

The Commission Advisory Committee should have been consulted prior to admission of the application.

4.6.6

Most of the associations for industries have argued that there should be multi-year tariff.

4.6.7

Some of the objectors have said that losses from inter-state sales should not become a burden to consumers of Orissa. ICCL pointed out that new contract has been signed with Andhra Pradesh for sale with effect from 11.10.2000 @ 228 paise/unit inclusive of cost of power and wheeling charges which is a subsidised price as cost of NTPC power itself is 232 paise + 10 paise + 3.5% wheeling losses of PGCIL. The said agreement was, therefore, detrimental to consumers of GRIDCO.

4.6.8

The Commission has not notified by Regulation the methodology and terms & conditions for tariff fixation and hence the Commission cannot proceed under law.

4.6.9

There has been major complaints and allegations regarding metering, interruptions, supply of non-standard power to consumer and non-reliability of power supply. As the licensee has not shown any increase in efficiency no tariff rise should be granted. Most of the objectors have prayed for a reduction in the energy charges of Bulk Supply Tariff.

4.6.10

The tariff for 2000-01 should be made effective from 1^{stApril, 2001 as major part of the Financial Year 2000-01 has elapsed, and that the Audited Accounts would be available for determination of tariff consequently.}

4.6.11

GRIDCO should try to capitalise on the peak support being given to other constituents of EREB and to negotiate bilateral sales with other states deficient in power, so that there is no problem when availability tariff is introduced.

4.6.12

Most of the objectors except the DISTCOs pleaded for differential Bulk Supply Tariff and uniform retail tariff throughout the State for economic and social reasons.