6.4

Revaluation of Assets OHPC/GRIDCO

a) OHPC : As per Dept. of Energy, Government of Orissa order dt.1 April 1996 issued under Section 23 of the OER Act, 1995 (Act 2 of 1996) and Rule 5 of the Orissa Electricity Reform (Transfer Undertaking Asset, Liability, Proceeding & Personnel) Scheme Rule, 1996, the generation undertakings of erstwhile OSEB and of the State Government were transferred and vested in OHPC, the value of which was fixed at Rs.1848.50 Crore as on 1st April, 1996, the original cost of fixed assets was Rs.356.60 Crore and the work in progress was Rs.644.30 Crore. The elements of the revalued assets were as follows :-

6.4.1

As per the said Government notification, capital structure of OHPC is as follows.

6.4.2

The consideration amount to be adjusted in favour of State Government was subject to the following.

(i) Loan of Rs.683.50 Crore divided into two parts

Part A - Rs.39.20 Crore, to be repaid in 15 years after a moratorium of 5 years which would carry an interest at the rate of 9.8% per annum.

Part B - Rs.644.30 Crore which will not carry any interest up to the completion of Upper Indravati HEP and Potteru HEP. The interest accrued on the above loan during the year up to commissioning of Upper Indravati shall be capitalized. After commissioning of Upper Indravati, Rs.500.00 Crore out of the above loan, along with the interest accrued thereon and capitalized shall be converted to equity. The balance of the above amount should be treated as a loan carrying an interest at the rate of 13% per annum. This loan will be repaid over a period of 15 years after a moratorium of five years.

(ii) An initial equity of Rs.300 Crore. On completion of Upper Indravati HEP expected in financial year 2000, State Government shall convert Rs.500 Crore of loan under item (i) above as equity. (Dividend, payable if any, for the first four years to be ploughed back in shape of fresh loans).

(iii) Convertible bonds worth Rs.766.20 Crore was to be issued to the State Government by OHPC. This bond was not to carry any interest for the first 5 years. These bonds shall consist of two parts.

Part A - Rs.383.10 Crore to be converted into equity at the option of the State Government in three equal installments in the 6, 8 and 10 year.

Part B - i.e. balance Rs.383.10 Crore (i.e. Rs.766.20-383.10) was to remain as debenture attracting interest @ 13% per annum until redemption.

b) GRIDCO : In terms of the above transfer scheme notification, the aggregate value of the undertaking to be transferred and vested in GRIDCO was fixed at Rs.2395.8 Crore as on April 1, 1996 which consisted of the following components.

6.4.3

Thus, the asset value of GRIDCO increased from Rs.971.70 Crore to Rs.2395.80 Crore.

6.4.4

The consideration amount to be adjusted in favour of the State Government shall be subject to the following.

- The equity of Rs.326.2 Crore (Dividends payable if any, by GRIDCO, for the first four years to be ploughed back in shape of fresh loans);
- GRIDCO shall issue a Bond to State Government for an amount of Rs.400 Crore. The bond shall not carry any interest for the first five years. This bond will comprise two parts :-

i) Part A, comprising an amount of Rs.200 Crore to be converted to equity at the option of the State Government in three equal instalments in the 6th, 8th and 10th years.

ii) Part B, for an amount of Rs.200 Crore which shall remain as debenture and shall carry interest at the rate of 13 per cent per annum until redemption. The debenture shall be redeemable over 15 (fifteen) years with a moratorium period of 5 (five) years.

6.4.5

Partially convertible bond amounting to Rs.150 Crore will be issued to Pension Trust Fund meant for the employees of OHPC and GRIDCO transferred from the OSEB.

6.4.6

The initial equity of Rs.326.20 Crore consists of GOO loan of Rs.73.2 Crore and an additional amount of Rs.253 Crore on account of part of revaluation of assets (Annex 2.5 attachment 3 of 5) of the Staff Appraisal Report on Orissa Power Sector Restructuring Project of the World Bank dated 19th April, 1996.

6.4.7

It is an undisputed fact that the revaluation of assets of OHPC/GRIDCO has substantially raised cost of power of OHPC which, in turn, resulted in enhancement of GRIDCO's cost of power procurement and the revenue requirement of the transmission and distribution business of GRIDCO and DISTCOs. At para 8.4 of order No.009 dt.12.03.1997 in case No.4 of 1997, revaluation of asset was dealt which is quoted below :-

"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."

6.4.8

The Conceptual Issues of Electricity Tariff issued by OERC in August, 1998 in consultation with GRIDCO and with economists, industry association, power professionals and consumer groups on asset valuation and its treatment are reproduced as below :-

"If the overall revenue requirements are to be set using accounting costs, then what measure of plant value should be included in the rate base component used in the determination.

There are four possible measures of plant value for the calculation of the rate base viz. original cost less depreciation, reproduction or replacement cost less depreciation, the value assigned by the Government when it was transferred to GRIDCO and the certified values being produced by GRIDCO for privatization under the Companies Act. The Commission first encountered this issue in the last GRIDCO tariff proceeding when it had faced with a decision on whether to value GRIDCO's investment in plant at the original cost at the time the property was put in service or at the value assigned to the investment by the Government when it was transferred to GRIDCO. As new values are being developed for the four distribution entities, this issue will surely come up again as potential purchasers of the GRIDCO system consider the level of their offers.

While arguments can be made for the use of other measures of plant value for rate base, the Commission has no choice but to accept the plant values certified by Government for GRIDCO at the time of transfer of assets plus any prudent capital additions made by the licensees at original cost less depreciation. The value set by Government under the scheme to transfer assets from the erstwhile OSEB to GRIDCO formed the basis of the calculations in the last consideration and the Commission will continue to use the transfer value until it is demonstrated before it that regulatory principles or public interest requires a change to be made. Such changes will not be made lightly as the Commission places substantial weight on the principle of predictable and stable tariffs and tariff methods.

While GRIDCO agrees with the Commission that the total value of the zonal assets should not exceed the total value of the distribution assets as set out in the Transfer Scheme as adjusted for subsequent additions and depreciation, it may be worthwhile to use the revalued fair price of the assets to avail of short- and long-term loan from financial institutions. The latter will enhance creditworthiness of the licensee while tariff will be based on depreciated book value as set out in the Transfer scheme adjusted for subsequent addition & depreciation."

6.4.9

In accordance with the policy guidelines set out in the conceptual issues, the Commission used the transfer value for the purpose of determination of tariff till 2000-01 but as stated earlier, the following projections as per SAR (Staff Appraisal Report) of the World Bank did not materialize viz.

1. Projected load growth

2. Reduction of transmission and distribution loss

3. Efficiency in billing and collection

6.4.10

The Commission makes it abundantly clear that it proposes not to disturb the revaluation of the asset which definitely enhances the creditworthiness of the licensee including the privatised distribution utilities. But the Commission has also to place substantial weight on the principle of predictable and stable tariff affordable by the consumers. It has, therefore, become imperative in the public interest to keep in abeyance the effect of the revaluation for the purpose of determination of tariff until the sector turns around.

6.4.11

Hence, the Commission in exercise of its power under Section 11 of the OER Act, 1995 advises the Government of Orissa to take necessary actions to make suitable amendment to the transfer notification issued by the Dept. of Energy, Government of Orissa order dt.1.4.96 so as to provide necessary support for the success of the power sector reform in Orissa as per the details given hereafter.

6.4.12

As per para 5 (iii) of the transfer scheme (SRO No.256/96) dated 01.4.1996 issued by Government of Orissa, the convertible bond of Rs.766.20 Crore issued to the State Government by OHPC was not to bear any interest for a period of five years. Since these bonds were issued as an adjustment against the revalued assets, the Government may consider not claiming any interest for a further period of five years or more depending on the sectoral turn around and make suitable amendments to the relevant clause in the aforesaid notification.

6.4.13

Referring to the para 5(i) part-B of transfer scheme, Rs.644.3 Crore meant for completion of Upper Indravati Hydro Electric Project was not to bear any interest upto the completion of Upper Indravati HEP and Potteru HEP. The interest accrued on the above loan during the year upto the commissioning of Upper Indravati HEP should have to be capitalised. As per the aforesaid Government notification, the work in progress of Upper Indravati HEP was shown as loan against OHPC by the Government of Orissa.

6.4.14

In the PPA signed between OHPC and GRIDCO in Annex-1 for the said PPA for the purpose of tariff calculation of UIHEP the provision capital cost of the project has been fixed at Rs.1195.42 Crore including Rs.131.685 Crore towards Dam cost as interest free loan from the Government of Orissa. This Rs.1195.41 Crore comprises of Rs.895.561 Crore i.e. 75% treated as the debt component of the project cost and rest 25% Rs.298.845 Crore has been taken as equity.

6.4.15

The loan repayment schedule forming part of the PPA shows the break up of the debt component of Rs.896.561 Crore as having been financed from two sources. It shows Rs.320 Crore as loan from PFC carrying an interest of 17.34% including a Government guarantee Commission of 0.5% and balance as Government loan of Rs.576.561 Crore carrying an interest rate of 13%.

6.4.16

As indicated in para 6.4.2, the loan of Rs.644.3 Crore given to OHPC at the time of transfer of undertakings on 1 April 1996 has gone up due to interest during construction. It is therefore necessary that Government may make suitable amendments to para 5(i) part (B) of the notification stating that the sum of Rs.576.561 Crore of debt to OHPC will not carry any interest till the sectoral turn around. The notification also may clarify that as against the proposal of conversion of Rs.500 Crore out of the Government loan along with the interest accrued thereon after capitalization instead of being converted to equity only Rs.298.85 corre will be treated as equity.

6.4.17

Thus, 5(i) para (B) and (ii) of the said notification should be replaced to state clearly that the break up of the provisional project cost of Rs.1195.42 Crore of UIHEP will be as under.

1. Rs.320 Crore as loan from PFC

2. Rs.576.561 Crore as Government debt carrying no interest from 1 April 2000 onwards till a sectoral turn around.

3. Rs.298.85 Crore as Government equtiy

6.4.18

These measures will go a long way in bringing down the cost of OHPC power.

6.4.19

The Zero Coupon Bonds issued to the State Government for Rs.400 Crore by GRIDCO against revaluation of assets was not to carry any interest for a period of five years. Suitable amendments may be made to the relevant provisions of the transfer scheme notification allowing zero coupon bond to continue for a further period of five years or more depending on sectoral turn around.

6.4.20

The Commission on its part would like to take the following decisions in the matter of approval of PPA between OHPC and GRIDCO in the public interest to bring down the cost of OHPC power and the cost of transmission and distribution by allowing no return on equity of Rs.300.00 Crore created on account of asset revaluation of old OHPC station until sectoral turn around.

6.4.21

However, the Commission will allow appropriate rate of return on OHPC's own investment in R&M equity of Rs.22.56 Crore and on the equity of Rs.298.70 Crore of UIHEP. Dividends if any payable for the first four years should be ploughed back as fresh loan to OHPC by Government of Orissa.

6.5

Treatment of Depreciation

6.5.1

As per Section 75-A sub-section 3 of the Supply Act, 1948 for the purpose of preparation of the statement of accounts, the depreciation is to be calculated at such rate as may be specified by the Central Government by notification in the official Gazette in accordance with the provision of Sec. 43(A).

6.5.2

The Government of India, Ministry of Power in their notification dt.22.3.99 has notified that "In exercise of the powers conferred by Section 51 of the Electricity Regulatory Commissions Act, 1998 (14 of 1998), the Central Government hereby appoints in respect of the generating companies referred to in clause (a) or clause (b) of Section 13 of the said Act and the States of Orissa and Haryana, the 15 day of May, 1999 as the date on which sub-section (2) of Section 43A of the Electricity (Supply) Act, 1948 (54 of 1948) shall be omitted."

6.5.3

The Government of India has stated in their letter No.25/24/98-R&R dt.01.6.99 that "CERC and SERCs in the States like Orissa and Haryana where Section 43A(2) has been dis-applied will, however, be entitled to deviate from such tariff notification issued by the Government. In case of such deviation, reasons will be recorded by the Commission. The Commission will adopt the principles contained in the notification and modify them as the circumstances require. However, the discretion has to be left to the CERC and SERC to follow the norms as they, in exercise of quasi-judicial power, consider just and proper. In doing so, the norms of operation and PLF laid down by the CEA will be a guiding factor and not a binding factor".

6.5.4

Further, it was clarified in the said letter that the power to determine the tariff includes the power to apply rate on depreciation and other concepts such as reasonable return. When Section 43A sub-section 2 is deleted, it will not be assumed that the Central Government looses power to fix depreciation principles for SEB. It merely means that Central Government will have no authority to fix depreciation for the generating company dedicated to sell power to the State Electricity Board or utility. Further, if the circumstances so warrant CERC or SERC may for the purpose of determination of tariff allow a different rate of depreciation. However, they will have to justify the same with reason.

6.5.5

Depreciation is an important component of annual operating cost of the generating companies and it may constitute 20 to 25% of the annual expenditure, as compared to other elements of annual operating costs. This expenditure is not a cash outgo for the companies but an adjustment affording a higher rate of tariff for the generating companies for replacement of capital assets. In the instant case, the capital assets have been revalued nearly 3 times than its historical costs in case of OHPC. Hitherto the Commission has been calculating depreciation on prevalent norms i.e. post'94 rate which has substantially raised the revenue requirement due to the upfront-loading.

6.5.6

The Commission concurs with the principle of recovery of 90% of the revalued asset of OHPC. The fact is that due to acceptance of post'94 rate of depreciation the tariff of OHPC has gone up from 22 paise/unit to 49 paise/unit in 1996-97 and likely to mount to 72 paise unit as proposed by GRIDCO for the year 2001-02 onwards. The predicament is such that due to the higher tariff, GRIDCO has not been able to pay its dues to OHPC. At this juncture, the Commission deems it prudent in the public interest to adopt a lower rate of depreciation as per the provision explained in para 6.5.1 to 6.5.5 without jeopardizing the liquidity problem of OHPC. Commission shall be determining the tariff of OHPC by calculating depreciation equal to loan repayment to PFC alone. For the purpose of calculation of depreciation, the principal payment on account of outstanding loan from the Government will not be considered.

6.6

Depreciation of GRIDCO & DISTCOs

6.6.1

As stated earlier, the objective of revaluation for GRIDCO was to help the sector to provide more self-financing for new investment with higher depreciation, which the owner could recover through tariff. The provisions of the Sixth Schedule of the Supply Act, 1948 para VI(a) states "The licensee shall provide each year for depreciation such sum calculated in accordance with the principles as the Central Government may, after consultation with the Authority, by notification in the Official Gazette, lay down from time to time".

6.6.2

In the instant case, depreciation is being calculated at post'94 rate (accelerated rate) as prescribed by the Government of India on the asset base that was revalued on 01.4.96 which has substantially raised the revenue requirement of the transmission and distribution business. The Government of India notification on depreciation issued in pre-1992 links the rate of depreciation to the age of the asset. The Commission in the public interest decides that the licensees will be allowed to recover 90% of the asset value within the life period of the asset as determined in the Government of India notification of 1992. This will avoid front loading of the tariff, but at the same time will ensure necessary cash flow for the licensee over a longer period of time. Accordingly, the Commission directs that the depreciation of the assets should be limited to 90% of the revalued cost of the assets. The depreciation should be calculated from 01.04.2001 onwards after taking into account the extent of higher depreciation already recovered during 01.04.1996 to 31.3.2001 at pre-92 rate.

6.7

Securitisation of Power Purchase dues

6.7.1

In the ARR application form No.TRF-3, GRIDCO has claimed an interest of Rs.114.19 Crore for the FY 2001-02 and Rs.111.90 Crore for the FY 2002-03 calculated at the rate of 15% on power bond of Rs.776.39 Crore as on 31.03.2002 as well as 31.03.2003.

6.7.2

The Commission in para 6.14.6 of the BST order dated 19.01.2001 had observed that "Bonds amounting to Rs.667.56 Crore and the Government loan of Rs.120.00 Crore for payment of OPGC dues are not meant for creation of assets or improvement of efficiency or for expenses in respect of its licensed activity for the current year. Notwithstanding the fact that the petition of the licensee for securitisation of dues is pending before the Commission, it is decided that the interest attributable to conversion of bonds and interest on loan against overdues of power purchase payables are disallowed for the purpose of calculation of revenue requirement for the FY 2001".

6.7.3

In OERC Order No. Case No.29 & 30/2000 dtd.16.03.2001 on FRP and securitisation, the Commission observed in the concluding remarks that "the Commission grants in principle approval of the Financial Restructuring Plan indicated in paras 12 and 13 of this order and plan for rescheduling of loans as contained in their application dtd.19.09.2000 vide Case No.30/2000 dtd.30.09.2000 and 29/2000 dtd.19.09.2000 respectively. GRIDCO with the support of Government of Orissa must plead with the Government of India and the funding agencies for one time settlement, waiver of dues and fresh loans and after taking the results into account, implement the financial restructuring plan to revive GRIDCO so as to put it on recovery path towards viability".

6.7.4

Further, the Commission has observed, "the retail tariff levels as proposed in the FRP is based on the BST calculation. The projection are not taken into account the debt service due to the tax free bonds to be issued by GRIDCO. On the other hand, they have proposed additional borrowing to the tune of Rs.929 Crore in the year 2001 and further Rs.631 Crore in the year 2002. This will definitely impact the BST as well as the retail tariff thus upsetting some of the crucial FRP assumptions. We are not in a position to give clearance and commitment for future tariff, as these will be dealt separately on a year to year basis in accordance to the OER Act".

6.7.5

A submission was made on behalf of GRIDCO during the course of the public hearing that GRIDCO has not been able to pay the dues on generators due to non-payment by the DISTCOs to GRIDCO. The power purchase payables as on 28 of February 2001 is given in Table : 10.

Table : 10
(Rs. in Crore)

6.7.6

GRIDCO pleaded that NTPC has been regulating power supply to Orissa due to non-payment of dues and in accordance with the CERC order dated 11 January, 2002 a utility will be required to bear the fixed cost of the generators in proportion to the share allocation during the period of energy regulation by the central generators. In this situation, the liability of GRIDCO will further increase. if the Commission does not reconsider its own decision of not allowing the interests on account of securitisation of power purchase liabilities. In view of the regulation of power by NTPC, it has become extremely urgent on the part of GRIDCO to create special purpose vehicle for securitising power purchase liability of NTPC through issue of bonds and the Commission may permit the interest on bond as a pass through in the revenue requirement for the year 2001-02 and 2002-03. As indicated in para above, the Commission being concerned about the mounting liabilities of GRIDCO accepts securitisation of current liabilities as on 28.2.2001 payable to CPSUs like NTPC and NALCO through issue of new bonds. In addition to this, the Commission also accepts the interest liability of the past bonds issued by GRIDCO which was earlier disallowed.

6.7.7

The financial position of GRIDCO is such that the liability on account of power purchase is on the rise as already indicated earlier due to non-payment of BST bills by the distribution companies creating a debt trap both for GRIDCO as well as for the generators. At the time of passing of the FRP order indicated in paras 6.7.3 & 6.7.4 above the issue of pass through of the burden of interest on power bonds on account of non-payment of power dues is required to be addressed in this tariff order. The Commission has come to a conscious decision that unless the power purchase liabilities are allowed to be securitised in full, the problem of liquidity cannot be addressed. In any case, this has to be a one time settlement in accordance with the policy followed at the national level where the GOI has very categorically accepted the ground realities and allowed securitisation of power dues as well as other dues payable to the GOI organisations by the SEBs. The case of Orissa is no different except that it has taken an advance step of reforming its own power sector for which SEB has been replaced by the GRIDCO and the DISTCOs. Accordingly, this principle should be applicable mutatis mutandis to GRIDCO which is purchasing bulk power from generators.

6.7.8

This will have the advantage of retiring high cost debts carrying surcharge as high as 24% per annum, (DPS @ 2% p.m.) for the central generators. Securitisation of these dues will reduce the interest burden to 8.5% as recommended by the Ahluwalia Committee in its report for one time settlement for CPSU dues and accepted by the Government of India. The Commission would further expect that the dues of CPSUs like NALCO and State PSUs line OPGC, OHPC should also be securitised by GRIDCO in a similar manner.

6.7.9

As far as the recovery of interest from DISTCOs is concerned, the analogy as applied for GRIDCO shall apply in this case, since there is a back to back arrangement between GRIDCO and DISTCOs for recovery of the institutional loans handed over at the time of separation of distribution business from GRIDCO. Interest shall be calculated during the year 2002-03 on the loans and bonds securatised carrying a lower rate of interest of 8.5%.

6.8

Reasonable Return

With regard to reasonable return it is clarified that the same has to be calculated on the basis of the capital base arrived at in accordance with the provision of Sixth Schedule to the Supply Act, 1948.

6.9

Treatment of Working Capital

6.9.1

The Commission believes that the companies must commit themselves to a higher level of efficiency, bring loan to meet the working capital needs so that the transmission utility and the generators are not starved of funds. There is a gap between the revenue billed and the revenue realised due to inefficiency on the part of the licensees for failing to take appropriate and expeditious steps like disconnection in time or initiation of civil suits to realise the arrear dues. Domestic, irrigation and agricultural consumers are not required to pay any DPS for delay in payment, whereas small and medium industries and other categories only pay one time DPS. This is a disincentive for revenue collection especially when the licensees are not capable of realising the dues after the due date of payment is over.

6.9.2

The distribution companies have failed to bring required working capital to ensure cash balance in the system to meet all expenses. The licensee can get rebate on prompt payment from GRIDCO @2% per month, which will reduce its power purchase liability. In a sense if the licensee arranges working capital from the commercial and financial institutions they can save not only the DPS but will earn a rebate from the GRIDCO that will compensate the interest on working capital and may accrue some revenue in the form of rebate.

6.10

Method of determination of Power Purchase

6.10.1

The power purchase by the DISTCOs are metered at various grid sub-station's end and the DISTCOs are billed according to the meter reading at these points. Actual figures of billing raised by GRIDCO to the DISTCOs for the past 10 months of the year 2001-02 are already available. By prorating the average meter readings of the past 10 months, a very correct estimate of power requirement can be made for the FY 2001-02. This will totally eliminate the estimate of sale and adoption of T&D loss percentage for determination of power purchase by various DISTCOs from GRIDCO for the FY 2001-02. Therefore, instead of going for any other method of energy assessment, the Commission decides to adopt the principle of actual cost of power purchase from the transmission company by taking into consideration ten months actual reading as the base for determination of the cost of power purchase for the year 2001-02.

6.10.2

As far as the FY 2002-03 is concerned, the Commission will go by the growth rate projected for the various classes of consumers by the DISTCOs at different voltage level viz. LT, HT & EHT and calculate the incremental power requirement over and above the FY 2001-02 applying the approved loss level.

6.11

Quantum of power purchase

6.11.1

In its proposal submitted in December 2001 GRIDCO had proposed to sale 11439.58 MU to the different DISTCOs as per the energy requirement provided by them. The transmission loss had been estimated at 551.59 MU (4.6%). The total purchase from the generators as proposed by GRIDCO was 11991.17 MU for supplying power to DISTCOs. This requirement did not include the projections for power supply or sale to outside states and CPP. In its latest submission to the Commission dated 30 March 2002 GRIDCO in its projection for power purchase has shown the details of actual power purchase made upto February 2002 and projections for March 2002 which includes the power sale to outside state and CPPs. The total estimated power purchase is 12359.82 MU for the FY 2001-02.

6.11.2

GRIDCO purchased 12327.71 MU of energy from different sources, which included 894.76 MU for export to AP Transco and sale to CPPs during FY 2000-01.

6.11.3

During April 2001 to January 2002, GRIDCO has purchased 10287.56 MU (based on the bills served on GRIDCO by the generators) to meet the demand within the State as well as for the purpose of export. It is estimated that with this rate of drawl the total power purchase during the FY 2001-02 may be around 12345.07 MU that will include an estimated export of 848.81 MU outside the State and sale to CPP's.

6.11.4

During the corresponding period, the DISTCOs have purchased 9105.92 MU in 10 months (April 2001 to January 2002) as per the BST bills which is expected to be around 10927.10 MU for 12 months. The approved quantum of power for the DISTCOs is given in Table : 11.

Table : 11
Purchase of Power by DISTCOs for 2001-02
(Figures in MU)

FY 2002-03

6.11.5

The requirement of energy for the financial year 2002-03 furnished by GRIDCO in para 2.1 of their RR application in respect of various DISTCOs has been compared with that of the submission made by the DISTCOs in their retail supply tariff application which is reflected in Table : 12.

Table : 12
(Figures in MU)

6.11.6 

During the course of the public hearing, GRIDCO was asked to clarify that in form No.DF-2 they have projected a rise in energy sale by 29.46% and in demand by 27% in respect of NESCO over the year 2001-02. They were asked to clarify about the reason of such abnormal rise. GRIDCO in their reply dtd.30 March 2002 has given the following submissions about NESCO.

Item	NESCO letter No. 9002 dt.05.12.01	NESCO letter No.1852 dt.21.3.02	NESCO letter No.1959 dt.26.3.02
Energy (MU)	252 MU Av/month or 3024 MU annual	215.682 MU/month or 2588.185 MU annual	2291.203 MU annual
Demand (MVA)	457.695	378.854	--

6.11.7

Accordingly, the Commission takes into the latest estimate made by NESCO and approves the figure of 2291.203 MU for the year 2002-03.

6.11.8

Similarly as far as SOUTHCO is concerned the estimated power purchase for the year 2001-02 computed on the basis of the energy billing of the past ten months is only 1525.07 MU. SOUTHCO in its application has not indicated about additional load to Railway Traction availing supply at EHT. The distribution loss level is also abnormally high at 41%. Thus the scope of purchase of additional power to meet additional load on LT should not arise. Rather SOUTHCO must take steps to convert the lost units to billing units and provide metered connection for the new ones and limit the quantum of power purchase to the quantum as proposed by itself. GRIDCO in its rejoinder dtd.30 March, 2002 has stated that SOUTHCO had not submitted their load projection for the FY 2002-03 during December, 2001. GRIDCO had projected 1713.711 MU considering 9% increase over projected drawal for 2001-02 which is being disputed by SOUTHCO. In the mean time, SOUTHCO vide their letter No.173. dtd.08.01.2002 has submitted their projection as 1682.39 MU and demand as 275.40 KVA. As indicated in Table : 11, the expected drawal by SOUTHCO during 2001-02 may be 1525.07 MU. The estimated projection is around 10% more than the expected drawal in 2001-02 which possibly may be on account of additional drawal by Railway Traction. In view of this the Commission approves the figure of 1682.39 MU as the energy requirement by SOUTHCO for the year 2002-03.

6.11.9

As far as WESCO is concerned the Commission approves the estimate made by WESCO. GRIDCO has raised the issue of additional drawal by INDAL to the extent of 255 MU on account of signing of special agreement with INDAL for supply of 50 MW of power from September, 2002 onwards. It is verified from the revenue requirement submission that the same has been included while calculating the revenue requirement by WESCO. As such, the apprehension by GRIDCO regarding this additional drawal over and above the estimate made by WESCO is unfounded.

6.11.10

Likewise there is similarity of estimated figures between GRIDCO and CESCO for which the figure proposed by CESCO is approved by the Commission for the year 2002-03.

6.11.11

The proposals accepted above became necessary as the application for revenue requirement is being taken up at the fag end of the FY 2001-02 due to failure of the licensees to submit this application in complete shape and at this point of time making a projection or estimate for the year 2001-02 is unnecessary in view of the availability of actual figures for a large part of the year. The Commission has taken into consideration the actual billing figures of generators for the past ten months to arrive at the estimated requirement for the FY 2001-02 and thereafter has estimated the requirement for the FY 2002-03 based on the estimates submitted by the DISTCOs and GRIDCO.

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