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|
Western
Electricity Supply Company of Orissa Ltd., (WESCO, for short) Burla, Sambalpur, the
holder of licence for carrying on the business of Distribution & Retail Supply of
electricity in electrical circles of Burla, Bolangir and Rourkela submitted an application
on 27.09.99 u/s 26 of the Orissa Electricity Reform Act,
1995 (Reform Act, 1995, for short) in respect of tariff for retail supply of
electricity to different categories of consumers.
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2.0
|
WESCO and its two
other sister concerns, namely, NESCO and SOUTHCO, jointly filed an application for Retail
Supply Tariff (RST, for short) on 30.07.99. The Commission’s staff, after preliminary
scrutiny of the application, raised a number of comments/queries thereon. The Commission
forwarded the comments/queries to WESCO vide letter No.2268 dt.13.08.99 and asked for
additional information from WESCO in order to enable the Commission to decide whether the
filing would be treated as complete for the purpose of proceeding u/s 26 of the Reform Act, 1995.
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2.1
|
WESCO submitted a
fresh application with clarifications to the comments/queries of the Commission in two
volumes on 27th September, 1999. In the light of the clarifications to the
comments/queries and additional information received from it, the filing appeared to be
generally in order. Accordingly the filing was treated as complete and by Order No.2
dt.04.10.99 (Vol. I), the application in question was admitted and issue of public notice
inviting objections to WESCO’s application was ordered.
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2.1.1
|
Notice was
published, as approved by the Commission, in several local newspapers on two consecutive
days in terms of Clause 39 r/w sub-clause (1) of Clause-126 of the Orissa Electricity
Regulatory Commission (Conduct of Business) Regulations, 1996 (Regulations, 1996, for
short) outlining the broad features of the Distribution & Retail Supply
Licensee’s proposed tariff and the rates & charges in a Schedule appended to the
notice and inviting objections from interested persons. The public notice required the
interested persons to file their objections and such documents as they seek to rely upon,
supported by an affidavit, in six copies and to indicate also if they would like to be
heard in person by the Commission in terms of Clause 43 of
the Regulations, 1996. The notice further required the interested persons to serve a
copy of the reply/objection alongwith the documents relied upon on the
petitioner/applicant and to file proof of such service before the Commission at the time
of filing of the reply/objection in terms of Clause 44 of the
Regulations, 1996.
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2.1.2
|
The above public
notice also called upon the interested persons/objectors to inspect/peruse WESCO’s
application and take note thereof during office hours within 15 days of the publication of
the notice. The public notice also permitted the interested persons to obtain the salient
features of the application on payment of Rs.20/- towards photocopying charges from
Managing Director, WESCO, Burla and all Executive Engineers in charge of Distribution
Divisions such as Sambalpur Electrical Division, Sambalpur, Bargarh Electrical Division,
Bargarh, Jharsuguda Electrical Division, Jharsuguda, Deogarh Electrical Division, Deogarh,
Bolangir Electrical Division, Bolangir, Titlagarh Electrical Division Titlagarh, Kalahandi
West Electrical Division, Bhawanipatna, Kalahandi East Electrical Division, Bhawanipatna,
Rajgangpur Electrical Division, Rajgangpur, Rourkela Electrical Division, Rourkela,
Sundargarh Electrical Division, Sundargarh. They were also permitted to obtain a full set
of the application together with supporting materials on payment of Rs.100/- towards
photocopying charges.
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2.1.3
|
The last date of
filing of objection complying with the terms & conditions of the public notice was
initially fixed as 31.10.99. The date fixed for filing of objection was extended to
15.11.99 because of the super cyclone which hit Orissa on 29th and 30th
October’99. A notice in print media such as "Samaya" (dt.05.11.99) and
"New Indian Express" (dt.3.11.99) was published extending the date of filing of
objection with regard to the Retail Supply Tariff (RST) applications of the Distribution
and Retail Supply Licensees for the information of the general public and interested
persons. The notice regarding extension of the date of filing of the objection was also
displayed on the office Notice Board.
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2.2
|
The Commission
received 17 objections against WESCO’s application out of which five were rejected
for non-compliance of the terms & conditions as laid down in the public notice while
12 objections were admitted according permission to the objectors for participating in the
hearing. The objectors whose objections were admitted for hearing are (1) Chief Electrical
Engineer, S.E. Railway, Garden Reach, Calcutta. (2) Prof. (Dr.) S. Misra & 3 others,
Q-4, Civil Township, Rourkela-769004 (3) Shri J. Kumar, Jt. General Manager, Larsen &
Toubro Ltd., At/P.O. Kansbahal, Dist. Sundargarh (4) M/s Indian Aluminium Company (INDAL),
At/P.O. Hirakud, Dist. Sambalpur. (5) Ib Valley Metal Forming (P) Ltd., P.O. Belpahar,
Dist. Jharsuguda. (6) M/s GKW Ltd., Wakefield House, Sprott Road, Ballard Estate,
Mumbai-400 038 (7) M/s OCL India Ltd., At/P.O. Rajgangpur, Dist. Sundargarh. (8) Shri K.N.
Jena, General Secretary, Orissa Consumers’ Association, Biswanath lane, Cuttack. (9)
M/s Utkal Chamber of Commerce & Industry Ltd., Barabati Stadium, Cuttack. (10) Shri K.
Acharya, President, Orissa Grahak Mohasangha, B-4, Pallaspali, Bhubaneswar. (11) Dr. S.K.
Tamotia, President, Aditya Aluminium, 9th Floor, IDCO Tower, Bhubaneswar. (12)
Sri Gobardhan Pujari, General Secretary, Sundargarh District Employers’ Association,
Rourkela.
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2.3
|
After receipt of
the objections and scrutiny thereof, the Commission published a notice in two Oriya
dailies and one English daily on 17th & 18th November’99
whereunder the list of valid objections with regard to WESCO’s application and the
date of hearing (04.12.99) were notified for the information of the general public.
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2.3.1
|
In terms of Clause-45 of the Regulations, 1996, the Commission permitted
the applicant to file a rejoinder to all the objections/reply filed by the objectors.
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2.4
|
As notified, the
hearing of the RST application commenced on 04.12.99. None of the parties present made any
prayer to adduce oral or documentary evidence in course of the proceedings except those
that were filed supported by affidavit, in response to the public notice.
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2.5
|
Apart from the
substantive objections, legal objections were raised by three objectors as preliminary
objections on the maintainability of the tariff proceeding. The Commission heard the views
of WESCO on such objections. The preliminary objections raised by Shri Gobardhan Pujari,
General Secretary of Objector No.12 were overruled by the Commission by Order No.1
dt.4.12.99 (Vol.II). In regard to the other preliminary objections, it was decided with
the consent of the respective objectors that they would be dealt with by the Commission in
the final order.
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2.5.1
|
The preliminary objections raised by the General Secretary,
Orissa Consumer’s Association, Cuttack and President, Orissa Grahak Mohasangha,
Bhubaneswar are as follows :-
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2.5.1.1
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The RST determined
by the Commission by its Order dt.21.11.98 in Case No.19/98
which has come into force from 01.12.98 cannot be revised or amended within a period of 3
years as envisaged u/s 57-A (1)(e) of the Electricity (Supply) Act, 1948 (the Act, 1948,
for short) and therefore the present application for RST is not maintainable and liable to
be rejected outright.
(O.C.A.) |
|
2.5.1.2
|
The
RST determined by the Commission (in Case No.19/98) cannot be amended within one financial
year unless warranted for adjustment of Fuel Surcharge.
(O.C.A.) |
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2.5.1.3
|
OERC has not framed
any regulation by notification in official gazette for determination of tariff u/s 29 of
the Electricity Regulatory Commission Act, 1998 (the Commission Act, 1998, for short) and sub-section (2) of Section 26 of the Reform Act, 1995
and as such it lacks authority and power to consider the application of the licensee, be
it for determining a new tariff or revising or amending the existing one.
(O.C.A.) |
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2.5.1.4
|
OERC
has not yet specified the methodology and procedure for calculating expected revenue from
the charges and therefore, it cannot consider the application of the licensee which is
based on imaginary, vague, and manipulated statement of facts and accounts in the absence
of statutory audit reports for the years 1997-98 and 1998-99.
(O.C.A.) |
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2.5.1.5
|
Licensee
has failed to comply with the conditions of the Licence to improve its efficiency,
standard of service and reduce its losses and as such, it should not be allowed to make
good the losses attributable to mal-administration, inefficiency, corruption,
mismanagement, and unwarranted expenses by way of penalising the consumers in the form of
a tariff hike.
(O.C.A.) |
|
2.5.1.6
|
Since
the application for RST has not been filed prior to the commencement of the FY 1999-00 and
has been filed in the middle of the aforesaid FY, it cannot be entertained for setting a
tariff for the balance or remaining part of the FY.
(O.C.A.) |
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2.5.1.7
|
As
the OERC has not consulted Commission Advisory Committee (CAC, for short) prior to the
admission of the tariff application and issue of public notice, it would not be legal and
proper to proceed with the case.
(O.C.A.) |
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2.5.1.8
|
As
the Commission, at present, is only a two member Commission instead of three and the
member of the Commission who shall be an electrical engineer having experience of
generation, transmission & distribution or supply of electricity in terms of Section 5 (1)(a) of the Reform Act, 1995 having not been
appointed as yet, the Commission now comprising two members lacks quorum to undertake and
dispose of the tariff proceeding because of the bar created u/s 9(4) of the Reform Act, 1995.
(O.C.A.) |
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2.5.1.9
|
Miscellaneous
Appeal No.41 of 99 has been filed in the Hon’ble High Court of Orissa being aggrieved
with the decision of the Commission in Case Nos.18/98 (BST) and 19/98 (RST) and therefore
the present RST application should be rejected by the Commission as an appeal is pending
against the RST determined by the Commission in its Order dt.21.11.98.
(Orissa Grahak Mohasangha) |
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2.5.1.10
|
The RST application
is neither a new tariff nor an amendment to the existing tariff. It is only a revision of
the existing tariff. Therefore it is not permitted under law.
(Orissa Grahak Mohasangha) |
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2.6
|
The first objection
raised by Shri K.N. Jena, General Secretary of the Orissa Consumers’ Association,
Cuttack is that when the provisions of Sec.57-A of the Act, 1948 r/w the provisions of the
Reform Act, 1995 contemplate that charges for the supply of
electricity, once fixed, shall be in operation for three years, revision of tariff within
one year would be without the authority of law.
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2.6.1
|
The objection is
purportedly based on Section 57-A of the Act, 1948. We have considered the provision of
Section 57-A of the Act, 1948 and particularly sub-clauses (c) and (e) of sub-section (1)
of Section 57-A quoted by Shri Jena. We find that these provisions are applicable to
charges for electricity recommended by a Rating Committee and approved by the State Govt.
and stipulate that such charges recommended by a Rating Committee for supply of
electricity shall be in operation for such period not exceeding three years as the State
Govt. may specify in the order. Sub-section (7) of
Section 26 of the Reform Act, 1995 repeals the constitution of a Rating Committee
making the provisions of the Act, 1948 quoted Shri Jena inapplicable in this case. We hold
that the preliminary objection by the learned counsel citing the provisions of Section
57-A of the Act, 1948 is without merit as the said provision is inapplicable in tariff
proceeding under Section 26 of the Reform Act, 1995.
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2.7
|
With regard to the
second objection that the RST determined in Commission’s Order dated 21.11.98 (in
Case No.19/98) cannot be amended within one financial year unless warranted for adjustment
of fuel surcharge, we would like to say that apparently there is some misunderstanding
about Section 26 of the Reform Act, 1995 which is
relevant to the determination of tariff by the Commission. We would like to clarify that
in this section of the Reform Act, 1995, the procedure for determination of a fresh tariff
or amendment of tariff is the same. There is no vaccum or even interregnum in operation of
a tariff which has been defined as a schedule of standard prices or charges. This has been
amply made clear in Clause 116 of Regulation, 1996.
Depending on the gap between estimated revenue requirement and the aggregate revenue which
a licensee is permitted to recover by the tariff in operation, the Commission may approve
modification to the tariff or any part of tariff. Whether the resultant determination is
called a tariff or an amendment of tariff is not of any consequence. The Commission cannot
refuse to entertain an application if the Commission finds that the licensee’s filing
of revenue requirement and expected revenue from charges is reasonably complete. It has to
process it and take a decision within ninety days of the complete filing. Sub-sec. (6) of Section 26 of the Reform Act, 1995
lays down that except in terms of fuel surcharge formula, no tariff or part of tariff can
be amended more than once in any financial year. The natural corollary is that tariff or
part of any tariff can be legitimately amended once in a financial year. The current RST
was set in November’98 within the financial year 1998-99. Therefore an amendment to
RST during financial year 1999-00, if found justified, cannot be termed as illegal.
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2.8
|
The third objection
relates to lack of authority and power of the Commission to consider the present
application of the Licensee, be it for fixing a new tariff or revising or amending an
existing one on the ground that the Commission has not framed any regulation for fixation
of tariff u/s 29 of the Commission Act, 1998 and under sub-sec. (2) of Sec. 26 of the Reform Act, 1995, by
notification in the official gazette.
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2.8.1
|
In fact, this
objection has two parts. The first part of the objection is that OERC has not framed any
regulation for determination of tariff u/s 29 of the Commission Act, 1998 and as such, it
lacks authority and power to consider the application of the licensee. In view of the
above objection, the point for consideration is if Sec. 29 of the Commission Act, 1998 is
applicable to determination of tariff in the State of Orissa.
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2.8.2
|
We understand that
Shri K.N. Jena, General Secretary of the Orissa Consumers’ Association has, in OJC
No.6999/99, challenged the procedure adopted by the State Govt. for appointment of a
member of the Commission which has fallen vacant on the ground that the State Govt. has
not followed procedure provided under the Commission Act, 1998 for such purpose. The
aforesaid writ application is yet to be disposed of laying down the law on the issues
involved.
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2.8.3
|
Meanwhile, we are
of the opinion that the Reform Act, 1995 holds good in all matters
provided therein for OERC including determination of tariff by the Commission in view of
the special provision relating to the Orissa Electricity Reform Act,
1995 and Haryana Electricity Reform Act, 1997 contemplated u/s 41 of the Commission
Act, 1998. Sec. 41 of the Commission Act, 1998 clearly provides that the provisions of the
said Act, in so far they relate to the State Commissions, shall not apply to the
Commissions established under the Orissa Electricity Reform Act, 1995
or the Haryana State Electricity Reform Act, 1997.
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2.8.4
|
The subject
"electricity" is in the Concurrent List of the Constitution of India. Therefore,
the State of Orissa has a right to enact law on electricity as it did in the Reform Act, 1995. The Reform Act, 1995 has been assented to by the
President of India on the 3rd January, 1996. Further, Sec.41 of the Commission
Act, 1998 is in the nature of a built-in provision to safeguard the State Acts enacted
earlier from the overriding effect of a Central Act enacted later than the State Acts on
the same subject of "Electricity" and in the same field of establishing
Electricity Regulatory Commission. To sum up, we hold that the Commission Act, 1998 in so
far as it relates to State Commissions is not applicable to OERC.
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2.8.5
|
The second part of
the objection is that the OERC has not framed any Regulation by notification in the
official gazette for determination of tariff under sub-section
(2) of Sec.26 of the Reform Act, 1995 and therefore it has no authority or power to
consider the application of the Licensee whether it is for a new tariff or revision or
amendment of the existing one. Before we deal with the factual aspect of this objection,
we may point out that while it is stated in the first part of the objection that tariff
should be determined by OERC in accordance with the provisions of Sec. 29 of the
Commission Act, 1998, it is also contended in the second part of the objection that OERC
has not framed regulations for fixation of tariff u/s
26(2) of the Reform Act, 1995 and, therefore, OERC has no authority or power to
consider the said application of the Licensee. It appears to us that Shri Jena is
challenging the Reform Act, 1995 in so far as it relates to the OERC and at the same time
he is relying on the same Reform Act, 1995 to challenge the alleged
omission on the part of OERC.
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2.8.6
|
The plea taken by
Shri Jena that OERC has not framed any regulation to determine tariff u/s 26(2) of the Reform Act, 1995 has no basis in
fact. Chapter-V of the
Regulations, 1996 deals with regulations on tariff as envisaged in Chapter-VIII of the Reform Act, 1995. The provisions contained in Chapter-V of the Regulations,
1996 has conferred upon the Commission a measure of discretion in the matter of
evolving its working procedure so long as these procedures conform to the principles of
natural justice. Accordingly, we are of the opinion that there is no merit in this
objection.
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2.9
|
With regard to the
fourth objection, it may be pointed out that upon filing of the application for RST by
WESCO on July 30, 1999, the Commission in its letter No.2268 dt.13.08.99 pointed out
certain omissions to be supplied by the applicant and raised certain queries for
clarification. The applicant filed a fresh application and supplied the omissions and
clarifications to the queries on 27.09.99 raised by the Commission in its letter
dt.13.08.99. After scrutiny of all the filings including a large number of documentary
evidence, the Commission treated the filings to be generally in order and the tariff
application in question was treated as complete.
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2.9.1
|
It may be stated
here that regulatory proceeding cannot be treated at par with proceedings before common
law courts. The Commission is empowered under Clause-111 (Chapter-V) of the
Regulations, 1996 to lay down methodologies and procedures for calculating the
expected revenue from charges and for determining the tariffs from time to time with the
further enabling provisions to add, amend, alter, revise, substitute or otherwise change
such methodologies and procedures at any time the Commission desires. Clause 113 of the said Regulation further provides that the
Commission may issue orders from time to time giving details of the manner in which
licensee’s revenue and tariff will be determined consistent with the provisions of
the Act and Regulations framed for the purpose. Even, where no Regulation has been framed
to deal with any matter or exercise any power under this Act, the Commission is free to
deal with such matters, powers and functions in the manner it thinks fit.
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2.9.2
|
We would also like
to emphasise that in accordance with Section 10(5) of
the Reform Act, 1995, this Commission, in discharge of its function, shall be entitled
to and may consult to the extent it considers appropriate from time to time such persons
or group of persons who may be affected or likely to be affected by the decisions of the
Commission. This provision read with Sec. 26 of the
Reform Act makes it clear that the Commission has wide discretion to evolve its own
methodology, procedures and mechanism, subject, however, to the fact that they are just
and reasonable and to carry on its activities in cases where there is no provision in the Reform Act, 1995 or Regulations framed
thereunder.
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2.9.3
|
We have examined
the objection that the filing should not have been admitted in the absence of audited
accounts for 1998-99. It may be mentioned that the licensee has filed audited accounts for
the year 1997-98 alongwith the application. The audited accounts for the year 1998-99 have
not been filed. In the normal course, the revenue requirement for 1999-00 alongwith
request for amendment of tariff if any should have been filed in December, 1998. If the
application would have been filed by the prescribed date, the licensee was in a position
to file only the audited account for 1997-98. It appears that in view of the unsettling
effects of transition involving formation of new distribution companies, disinvestment of
government shares and issue of fresh license etc. the revenue requirements were not filed
in December, 1998 which ought to have been the case. This was filed in August’99 when
audited accounts for 1998-99 were not yet due .
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2.10
|
Therefore, we are
unable to agree that the tariff application of the Distribution & Retail Supply
Licensee is defective, incomplete and not maintainable.
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2.11
|
The fifth
preliminary objection relates to debarring the licensee from revising the tariff until and
unless it fulfilled the conditions of Distribution & Retail Supply Licence as amended
from time to time and complied with the order of the Commission.
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|
2.11.1
|
Non compliance or
inadequate compliance of the licence conditions, if any, is a separate issue which cannot
hold up the process of determination of tariff. The Commission is bound by law as in Section 26 (6) of the Reform Act, 1995 to determine
the tariff within 90 days from the date the application was treated by the Commission as
complete. Elaborate provisions exist in the Reform Act, 1995 to deal
with non-compliance or violations of licence conditions. Filing of the revenue requirement
and expected revenue from charges is a statutory duty of the licensee as provided in s/s (4) of Sec.26 of the Reform Act, 1995 and
therefore this function must not be mixed up with other issues like non-compliance or
inadequate compliance of the licence conditions. The Commission is, therefore, of the
opinion that this objection has no merit and is accordingly overruled.
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2.12
|
The sixth objection
that the application cannot be entertained in the middle of the financial year 1999-00 has
no basis in law. The Commission would have liked strict adherence to the due date of
filing of the revenue requirement i.e. by 31st December, 1998 but the
Commission is persuaded to accept the delay caused due to the transitional problems. The
Commission has also noted that there is no statutory time schedule for application for
tariff and hence the Commission cannot refuse to consider the application if it is
otherwise in order.
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2.13
|
The seventh
objection is that the Commission Advisory Committee was not consulted by the Commission
before admitting the application. Sub-section (6) of
Sec.26 prescribes; "If the Commission considers that the proposed tariff or
amended tariff of a licensee does not satisfy any of the provisions of sub-section (5), it
shall, within 90 days of the date of receipt of all information which it required, and
after consultation with the Commission Advisory Committee constituted u/s 32 and the
licensee, notify the licensee the proposed tariff or amended tariff." It is clear
from the language employed in sub-sec. (6) that the question of consultation arises only
before the Commission actually seeks to notify the licensee the proposed tariff or amended
tariff. Consultation with the Commission Advisory Committee, therefore, is not a
pre-requisite for admission of the licensee’s application. It may be further
mentioned that the Commission had already scheduled the meeting of the CAC by the time the
public hearing was taken up.
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2.14
|
In order to dispose
of the eighth objection, we may point out that Sec.9(4)
of the Reform Act, 1995 stipulates a quorum for review of any previous decision taken
by the Commission. This stipulation for quorum is applicable only if there is an explicit
prayer for review of any previous decision of the Commission. We have already stated
earlier that the present application is not a prayer for review of the RST. It is an
application u/s 26(6) of the Act. We therefore
hold that there is no bar to or infirmity in the Commission proceeding to determine the
RST as prayed for by the applicant.
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2.15
|
We now deal with
the penultimate objection raised by Orissa Grahak Mohasangha. Though M.A. No.41/99 has
been filed in the Hon’ble High Court of Orissa against the final order in BST (Case No.18/98) and RST (Case No.19/98),
it is not the case of the objector that the orders of the Commission in those two cases
have been stayed by the Hon’ble Court. As the final orders in Case
No.18/98 and 19/98 have not been stayed by the Hon’ble
Court, the plea of the objector that the present application for RST should be rejected
out of hand because of the pendency of the M.A. bearing No.41/99 cannot be considered as a
valid objection.
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2.16
|
Regarding the last
objection raised by Orissa Grahak Mohasangha, it may be mentioned that nowhere in the RST
application, the applicant has sought for revision. On the other hand, the
applicant has described the RST application as one for amendment of Distribution &
Retail Supply Tariff u/s 26 of the Reform Act, 1995.
Similarly, in para 6 at page 22 of the RST application, the licensee has prayed for
amendment of the existing retail tariffs and charges as determined in Order dt.21st
November, 1998 in Case No.19/98.
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2.16.1
|
We have extensively
discussed the issue in dealing with the second objection in para 2.7 above.
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2.17
|
In the light of our
observations in the above paragraphs, we have to hold that there is no validity in any of
the preliminary objections, most of which were due to inadequate appreciation of
regulatory procedure. We, therefore, proceed to examine WESCO’s proposal and give our
findings on the same.
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3.0
|
WESCO’s Proposal
|
|
3.1
|
The Western
Electricity Supply Company of Orissa Limited (WESCO) has submitted calculation of its
expected revenue from charges & revenue requirement for the year 1999-00 along with a
proposal for amendment of the existing tariff.
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|
3.2
|
Considerations
requiring amendment of the existing tariff which have been advanced by WESCO are given
below :-
Revenue from the existing tariff is
insufficient to meet the estimated cost for the financial year 1999-00 and therefore,
there is a need to increase tariff in line with the revenue requirement proposal to
preserve the financial viability of WESCO.
-
It is necessary to generate surplus equivalent to the
losses of NESCO and SOUTHCO by maintaining a uniform tariff structure across all the
regions under the management of BSES so that the existing consumers are not surprised by
sudden and significant discontinuity in their tariff and a uniform tariff could provide a
lower tariff increase for NESCO and SOUTHCO.
-
Insufficient tariff increase of the previous tariff order
has resulted in a higher requirement for the financial year 1999-00 and the energy sale
assumed in the retail tariff application of 1998-99 and approved by OERC was in excess of
the actuals.
-
The tariff structure inherited by WESCO is a distorted one
with high dose of subsidy to certain groups of consumers which continues inspite of the
rationalisation of tariff structure by OERC and GRIDCO. This requires a higher tariff
increase for the subsidised categories to achieve a rational tariff level.
Revenues must be sufficient to cover all
costs in order to ensure viability of WESCO and to enable it to raise funds critical for
system improvement.
-
WESCO has pointed out that OSEB and its successor GRIDCO
being state owned undertaking had the benefit of getting subsidy from the State Govt which
is not available to the applicant company making it necessary to recover the same from the
consumers.
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3.3
|
WESCO has
considered the following main inputs for the calculation of revenue requirement :
-
Power Purchase Expenses
-
Employees cost
-
Administration & General Expenses
-
Repair & Maintenance Expenses
-
Bad Debt
-
Depreciation
-
Interest on loan
-
.Interest on working capital
-
Statutory appropriation
-
Cost of stores & spares
-
Reasonable Return on Capital Base
|
|
3.4
|
WESCO estimates
power purchase of 2454 million units with an average of monthly maximum demand 450 MVA
during 1999-00. Demand has been estimated on the basis of power purchase bills of April,
May & June, 1999. WESCO for the year 1999-00 estimates energy sale of 1473 million
units. WESCO has stated that the Distribution loss as worked out from the management
information system is 46% for the year 1998-99 & feels that a loss reduction of 2% to
3% in the year 1999-00 would be realistically achievable. It has targeted to reduce the
energy loss to 40% during 1999-00.
|
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3.5
|
Total
expenditure including power purchase cost for the year 1999-00 is estimated at Rs.475.85
crores which comprises employee cost, cost of materials, administrative and general
expenses, interest on loans borrowed from different organisations, bad debts, depreciation
less capitalisation on account of interest expenses. There is a proposal for special
appropriation of Rs.1.00 Crores to cover contribution to contingency reserve. WESCO
estimates to earn reasonable return of Rs.9.87 Crores on its capital base of Rs.56.39
crores. The revenue requirement and estimated reasonable return for the financial year
1999-200 proposed by WESCO are at Table-1
Table-1
Revenue Requirement for 1999-00
Item |
(Rupees in
crores)
|
Purchase of
Energy : |
317.85
|
Distribution
and sale of energy : |
158.00
|
Special
Appropriations : |
1.00
|
Sub Total : |
476.85
|
Reasonable
return : |
9.87
|
TOTAL : |
486.72
|
|
|
3.5.1
|
The
financial projection made by WESCO is given at Table-2 :
Table –2
Estimated Revenue from Charges for 1999-00 (Rs.in Crs.)
|
|
Revenue |
Surplus /
Deficit |
|
For FY 1999-00 based on existing
tariff & miscellaneous revenue
|
415.93 |
-70.79 |
|
For FY 1999-00 based on tariff
proposed in the application for full year & miscellaneous revenue
|
550.21 |
63.49 |
|
For FY 1999-00 based on tariff
proposed in the Application applied for 4 months
|
460.69 |
-26.03 |
|
|
3.5.2
|
WESCO has stated
that the existing tariff is inadequate to meet the estimated total revenue requirement of
Rs.486.72 crores for the financial year 1999-00.
|
|
3.5.3
|
WESCO has stated
that if shortfall in revenue requirement is to be met, it requires revision of tariff by
16.30%. However WESCO has proposed an average rise of 32.47%.
|
|
3.6
|
WESCO has stated
that while a differential tariff based on cost differences for different zones would be
more efficient, a sudden shifting across the region would create significant discontinuity
in their tariffs for which
WESCO suggests the principle of uniform
tariff for the three zones under the management of BSES.
Additional revenue earned by WESCO may
be transferred to NESCO and SOUTHCO through a special appropriation with permission of the
OERC.
|
|
3.7
|
The tariff proposal
does not envisage any subsidy from the Govt of Orissa or any other source. It has adopted
the principle of cross subsidization and a self balancing mechanism within various classes
of consumers.
|
|
3.8
|
WESCO has stated
that in case OERC or Govt. of Orissa desire to further subsidise any consumer category,
the difference between the proposed revenue and the subsidised tariff should be provided
to WESCO either by consequent increase to other consumers or in the form subsidy from
Govt. of Orissa d by a monthly letter of credit or a combination of both.
|
|
3.9
|
WESCO’s
proposed tariff is based on the following principles :-
-
Lower tariff for consumers supplied at higher voltage level
-
Reduction in cross subsidy
Reduction in multiple rates for
consumers at the same voltage level.
|
|
3.10
|
In the tariff
proposed by WESCO, no consumer is to pay less than 50% of the cost of supply requiring
significant increase for domestic and irrigation at LT consumers. At the same time, no
consumer should pay more than 150% of the cost of supply.
|
|
3.11
|
As an incentive for
HT and EHT consumers, consumption beyond a load factor of 60%, a discount of 10% on the
energy charge may be given for the applicable category.
|
|
3.12
|
As a number of
aluminum manufacturing industries plan to set up CPPs, WESCO proposes that consumers with
a contract load of 100 MVA and above and a guarranted monthly load factor of 80% would
qualify for a special tariff with no demand charge but would have a consolidated energy
charge and back to back arrangement with bulk supplier.
|
|
3.13
|
WESCO intends
phasing out of cross subsidies while proposing amendment to the tariff.
|
|
3.14
|
WESCO has stated
that about 33% of its power purchase bill is fixed while less than 20% of its revenue can
be earned through demand charge. WESCO proposes to increase demand charge so that the
through the demand charge a higher level of fixed cost would be recovered.
|
|
3.15
|
To
summarise WESCO requests approval of :
-
The proposed amendment to the existing retail tariff and
charges.
-
Revenue requirement for 1999-00.
|
|
3.16
|
The expected
revenue from charges for 1999-00.
|
|
3.17
|
The mechanism
proposed for cash flow to NESCO and SOUTHCO from WESCO
|
|
3.18
|
The proposal that
addition of captive generation be not permitted for a period of three years and reviewed
thereafter.
|
|
4.0
|
OBJECTIONS Twelve objectors were admitted for personal hearing. Important
issues raised by the objectors during hearing are indicated below: |
|
4.1
|
Chief Electrical
Engineer, S.E. Railway, Calcutta
|
|
4.1.1
|
Shri Madhukar
Mishra, Chief Electrical Engineer (Distribution) appeared on behalf of C.E.E., S.E.
Railway. He stated that the proposed hikes in the Demand and Energy charges of
Rs.250/KVA/month and Rs.3.20/KWH respectively for HT and EHT supply is abnormally high and
may cause severe financial burden on the Railways. Hence the Demand and Energy charges may
be maintained at the existing level.
|
|
4.1.2
|
Shri Mishra pleaded
that railway’s load fluctuation is due to exogenous factors like accidents and public
agitation etc. and hence the proposed penalty on overdrawal may be withdrawn.
Alternatively, penalty may be lived for overdrawal during peak period only. He also
submitted that Monthly Minimum Fixed Charge (MMFC) should be deleted as the fixed charges
are already in-built in the two-part tariff for Railways.
|
|
4.1.3
|
It was argued that
traction tariff should have some relationship with cost of power purchased from NTPC/NHPC.
NTPC sells power at Rs.1.92/Kwh whereas Railways pay Rs.3.79/Kwh to the DISTCOs. Such
distortions should be rectified. Shri Mishra requested that a rebate of 2% of the total
bill may be allowed to the Railways for timely payment of bills and that along the line of
a penalty on low power factor, a rebate may be granted in the event of power factor over
90%.
|
|
4.1.4
|
Power supply
interruption and unreliable supply cause lots of hardship to the Railways in the form of
additional operational expenditure for train services and hence compensation should be
paid to Railways in case of power supply interruptions or poor quality of power supply by
the licensee.
|
|
4.1.5
|
It was further
submitted that traction tariff should be reasonable for developmental projects and that
TOD meters should be provided at the traction substations. He further pleaded that in case
of defective meters, average of last three months consumption should be taken for billing.
|
|
4.2
|
Prof. (Dr.) S.K.
Mishra and others, Rourkela
|
|
4.2.1
|
Dr. S.K. Mishra in
his written objection has submitted that domestic and commercial consumers would be hard
hit by frequent tariff revision and uncertain tariff hikes. He said that distribution
companies have applied for retail tariff revision within one year making the intention
clear that they would come up with fresh application next year and it would be an annual
exercise. As such commercial/industrial organisation would find it difficult to plan their
financial commitment and industrial activities.
|
|
4.2.2
|
The transmission
and distribution loss has increased from 40% to 46% in the year 1999. Failure to decrease
T&D losses defeats the purpose of reform. It was regrettable that Distribution
companies are not able to meet the target set by the Commission in their order of
25.11.98.
|
|
4.2.3
|
Proposal for
transferring revenue from WESCO to other companies contradicts the objective of
independently managed private power companies as a part of reform programme.
|
|
4.2.4
|
WESCO’s
proposal to write off 7.5% of inherited debt within three years is strongly objected. OERC
should direct the DISTCO and GRIDCO for collecting the arrear outstanding dues and not to
load the same on the consumers through tariff.
|
|
4.2.5
|
WESCO proposed to
recover the outstanding pension liabilities not transferred by GRIDCO through tariff
enhancement. This is strongly objected.
|
|
4.2.6
|
It is stated that
the proportion of unmetered consumers is very high and theft of electricity in various
ways is rampant. Poor maintenance of electrical equipments through contractors is one of
the causes for the loss. Lastly it was observed that the T&D loss is very high
compared to any standard and should be curbed.
|
|
4.3
|
Larsen &
Toubro Ltd.,
|
|
4.3.1
|
Shri Jagannth Das,
Advocate representing Larsen & Toubro Ltd. submitted that the proposed hikes in the
Demand and Energy charges of Rs.250/KVA/month and Rs.3.20/KWH respectively for HT and EHT
supply is abnormally high. The demand charge of Rs.250/KVA/Month is unjustified because
WESCO does not pay more than Rs.200/KVA/Month to GRIDCO. Similarly there is no
justification to enhance the energy charges to Rs.3.40/KWH when WESCO pays only Rs.85.50
paise/KWH to GRIDCO.
|
|
4.3.2
|
The proposed
enhancement of tariff from Rs.1.62 to Rs.2.65 in case of colony consumption is not
justified. Earmarking only 10% of the total consumption of HT industry for domestic use is
arbitrary. Considering the climatic changes the limit of 10% should be raised to 20% or
actual consumption.
|
|
4.3.3
|
He stated that
enhancement of security deposit by WESCO by an extra amount of Rs.47 lakhs is not
justified. This is due to wrong assumption of the load factor of 70%. But in reality the
load factor varies from 34% to 41%. Applicant therefore submitted to the Commission for
directing the licensee to refund the extra amount of Rs.47 lakhs.
|
|
4.3.4
|
He stated that the
proposal given by WESCO for transfer of its surplus to finance the loss of NESCO and
SOUTHCO is not justified. The rate proposed by CESCO for industrial consumers is much less
in comparison to the proposal given by WESCO.
|
|
4.3.5
|
Estimated T&D
loss of 46% is on higher side compared to 40% of 1996-97. He stated that there can be
hardly any technical and commercial loss in the 10 km. HT line connected directly from
GRIDCO sub-station at Rajgangpur to L&T.
|
|
4.3.6
|
He stated that
WESCO is not spending substantially anything to maintain the distribution system of power
supply to L&T. Therefore, L&T may be allowed to give the purchase price of power
plus wheeling charges to WESCO and not more than that.
|
|
4.3.7
|
He also stated that
the electricity consumed by the water treatment plant should not be billed at industrial
rate because water pump serves only the residence of industrial colony.
|
|
4.3.8
|
In his opinion
incentive to the consumer should be given for maintaining power factor beyond 90%. Also as
a corollary to delayed payment surcharge provision of rebate for prompt payment of bills
should be there.
|
|
4.4
|
M/s INDIAN
ALUMINIUM COMPANY
|
|
4.4.1
|
Shri B.N. Das,
Retd. Chief Engineer represented M/s Indian Aluminium Company. He stated that proposal of
26% of rise in power tariff given by WESCO is unjustified because the applicant cannot
pass on the extra cost to its customers.
|
|
4.4.2
|
He stated that
Orissa power cost should be cheaper than other states because of High Hydro Potential
(about 45%) and thermal stations of states located at pit heads. Evaluation of results of
reform in Orissa is a must and the cost should be compared with other states.
|
|
4.4.3
|
He also stated that
the application made by WESCO objecting to setting up of CPPs is not relevant for tariff
revision purpose. Permission for CPPs should be given on consideration of merit on each
case.
|
|
4.4.4
|
He stated that the
cost of power of WESCO should come down from Rs.317.82 to 295.34 crores. Overall
distribution loss should be limited to 28% for tariff purpose.
|
|
4.4.5
|
He estimated
Rs.420.04 crores as Revenue Requirement against Rs.486.62 crores proposed by
WESCO.
|
|
4.4.6
|
He further stated
that Bad Debts are measure of inefficiency and as such consumers should not be penalised
for inefficient management of GRIDCO.
|
|
4.4.7
|
He submitted that
EHT Tariff is much more as Licensee is loading entire cost to EHT consumers. Only cost to
EHT plus reasonable return should be considered. Distribution licensee do not contribute
towards Operation & Maintenance expense at EHT. Thus cost of power at EHT should not
exceed 130 paise/unit.
|
|
4.4.8
|
He finally stated
that consumers of WESCO should only pay the reasonable return of WESCO and not more than
that which is proposed to be passed as loan to NESCO and other sister concern of
WESCO.
|
|
4.5
|
M/s Ib Valley
Metal Forming(P) Ltd.
|
|
4.5.1
|
Shri Deepak
Srivastav represented Ib Valley Metal Forming (P) Ltd. He stated that regional disparity
in fixation of tariff should be avoided. Already there exists differential industrial
growth in different parts of the state. He stated that tariff to consumers in different
zones are not cost based because of inter Distco's linkage. Issue of tariff comparisons
need to be discussed elaborately.
|
|
4.5.2
|
He stated that
tariff linkage with regard to fund flow, Policy, Costing & Revenue needs to be
debated. Tariff fluctuation benefit of one zone should be passed to other zones only after
debate. Basis of estimation of T&D loss as high as 40% to 46% should be explained to
the consumers. Issue requires open house discussion. Cross subsidies to be eliminated.
Issue of subsidy should come from state govt. to the company in terms of policy and
financial resource input.
|
|
4.5.3
|
He stated that two
major issues have to be kept in mind i.e. energy conservation and resource conservation.
The power being generated and is utilised are basically from conventional sources. Issue
of renewable and non-conventional energies vis-a-vis CPP appears to have been absolutely
overlooked.
|
|
4.5.4
|
He stated that both
demand charges and monthly fixed charges cannot be levied simultaneously for
H.T., E.H.T.
consumers.
|
|
4.5.6
|
One subsidiary
company should not financially support another at the cost of raising tariff. There should
be an opportunity for third party sale in the new regime.
|
|
4.6
|
M/s GKW Ltd.,
Mumbai
|
|
4.6.1
|
Shri P.R. Bapat,
Corporate Adviser of GKW Ltd. M/s GKW Ltd. stated that the basic energy rate at the time
of commencement of commercial production in 1992 was Rs.0.70/unit, whereas presently in
September 1999 it is Rs.2.40/Kwh.
|
|
4.6.2
|
He submitted to the
Commission to advise WESCO for giving a portion of NTPC power as is given to Ferro Alloys
units in order to enable the industry to sustain in international market. Proposed
increase in tariff will make the cost of high speed steel uncompetitive in international
market. Proposed hike of 33 % in energy charges and 60% increase in colony consumption
will put additional burden of Rs.8.00 crores per month. Objector has given a comparative
chart of tariff of 28 SEBs & utilities.
|
|
4.7
|
M/s OCL India
Ltd. Rajgangpur, Sundargarh
|
|
4.7.1
|
Shri Rajeswar
Pandey, G.M. (Engg) represented M/s OCL India Ltd., Rajgangpur. He stated that cement
industry should be treated as a special category and also tariff applicable should be
separate. They propose Maximum Demand charges as Rs.1.5 lakhs per/MVA, Unit charge Rs.2
per/Kwh during peak period and Rs.0.50 per/unit higher than bulk tariff and Rs.0.2
per/unit higher than bulk tariff in off-peak period.
|
|
4.7.2
|
He stated that
there has been negative growth of 22.4% in EHT category, because Distco's power is costly.
Therefore to attract EHT consumers, the tariff should be lower than CPP generation cost.
EHT consumers are to be given incentive, since the distribution loss is minimum. They
suggested lower tariff of 20 paise + Bulk supply cost during off peak hour, M.D. charges
of Rs.1.5 lakhs per month and over drawl penalty of Rs.1.00 lakh per MVA.
|
|
4.7.3
|
He stated that
installation of CPPs and third party sale of power should be encouraged and Distco's
proposal objecting to the above should be disallowed. He pleaded for giving incentive to
HT and EHT consumer.
|
|
4.8
|
Shri K.N. Jena,
General Secretary, Orissa Consumers Association
|
|
4.8.1
|
Shri K.N. Jena,
General Secretary represented Orissa Consumers Association. He objected on a variety of
ground as detailed below.
|
|
4.8.2
|
Application for
amendment/revision of tariff is not permissible/tenable under the provisions of
Electricity (Supply) Act, 1948.
|
|
4.8.3
|
Tariff should not
be amended within a financial year once except for fuel surcharge adjustment.
|
|
4.8.4
|
Application filed
by the licensee is not bonafide.
|
|
4.8.5
|
Terms and
conditions for fixation of tariff has not been determined by Commission.
|
|
4.8.6
|
Commission has not
yet specified the methodology and procedure for calculating the expected revenue from
charges.
|
|
4.8.7
|
Accounts of
licensee has not been audited and there is no availability of its yearly account to judge
standard of performance.
|
|
4.8.8
|
Licensee has not
improved its efficiency and standard of service.
|
|
4.8.9
|
Application cannot
be entertained for tariff revision during 1999-00 with retrospective effect.
|
|
4.8.10
|
There is no
correlation between purchase of power and sale of units.
|
|
4.8.11
|
Licensee has failed
to provide the details required under Chapter-V of regulation.
|
|
4.8.12
|
Licensee has not
taken steps for reduce transmission and distribution loss.
|
|
4.8.13
|
Licensee's claim of
demand charge and energy charge and customer charge is excessive.
|
|
4.8.14
|
Commission Advisory
Committee has not been consulted prior to admission of the tariff application.
|
|
4.8.15
|
Rural and Urban
consumers are getting power for few hours and voltage is low. As such they should not be
burdened.
|
|
4.8.16
|
Subsidies from
Govt. has not been taken into consideration. Efforts to reduce cost of power of Distcos,
OHPC, GRIDCO, OPGC are not transparent.
|
|
4.8.17
|
Meters installed by
licensee have not been properly checked and tested.
|
|
4.8.18
|
Because of
bi-monthly billing, licensee is incurring loss by paying interest to financing agencies.
|
|
4.8.19
|
Expenditure
incurred by the licensee on power purchase is not prudently done. Instead of purchasing
low cost power they are going to purchase high cost power.
|
|
4.8.20
|
Law does not
provide for separate transmission tariff.
|
|
4.8.21
|
Consumers are
deprived of getting rebate as bills are not submitted in time.
|
|
4.9
|
M/s. Utkal
Chamber of Commerce
|
|
4.9.1
|
Shri M.V. Rao
representing Utkal Chamber of Commerce strongly objected to tariff increase on various
grounds. He stated that the statement made by WESCO that the last tariff is insufficient
is not correct. He objected to WESCO’s application for disallowing CPP for a period
of 3 years.
|
|
4.9.2
|
He stated that
Estimation of quantum of power purchased from GRIDCO may change and may reduce if there is
reduction in BST. Projection of T&D loss of 46% is on higher side. It should be at
best 31%. Since lot of investment has been made the T&D loss should be at least
reduced to 28%.
|
|
4.9.3
|
He stated that
employees cost projected by WESCO is on higher side. The rise should not be more than 3%
per annum. Recovery of shortfall in Pension Trust from consumers proposed by WESCO is
illegal. Rise in A&G expenses should not be more than 3% per annum. He agreed for
Repair & Maintenance expenses proposed by WESCO. He submitted that Bad Debt should not
be more than Rs.4.81 crores.
|
|
4.9.4
|
He stated that
there is absolutely no competition which is a mandate of reform. Low cost power is not
availed in full. Rather high cost of power is procured. Power should be cheaper because of
high Hydro potential (nearly 45%) & pit head thermal stations.
|
|
4.9.5
|
Finally he
submitted that tariff should be kept unchanged for a period of 5 years and the power
purchase adjustment should be allowed annually.
|
|
4.10
|
Orissa Grahak
Mohasangha
|
|
4.10.1
|
Shri Kulamani
Acharya represented Orissa Grahak Mohasangha. He stated that the tariff filed by WESCO
should be rejected since previous tariff order of Commission I18 & 19 of 1999) is
subjudice. He stated that methodology and procedure of calculating expected revenue from
charges have not been prescribed by Commission. The data submitted by WESCO is inacurate
since WESCO’s proposed surplus is equivalent to loss sustained by NESCO &
SOUTHCO.
|
|
4.10.2
|
He stated that
computation of T&D loss of 46% as per "Information Memorandum" is not
correct. He objected to the monopoly attitude of licensee asking for withholding
permission for three years to install CPP. He pleaded that Orissa consumers should not be
made accountable for losses on unmetered supply.
|
|
4.10.3
|
He stated that
computation of T&D loss of 46% as per "Information Memorandum" is not
correct. He objected to the monopoly attitude of licensee asking for withholding
permission for three years to install CPP. He pleaded that Orissa consumers should not be
made accountable for losses on unmetered supply. He further objected to the variable
tariff structure in various zones. He suggested that there should be financial investment
by private entrepreneurs to develop the system and management.
|
|
4.11
|
Dr. S.K.
Tamotia, President, Aditya Aluminium
|
|
4.11.1
|
Dr. S.K. Tamotia,
President, Aditya Aluminium in his written objection stated the following.
|
|
4.11.2
|
Industries owning
captive power plant should be allowed to enter into a fair and equitable power purchase
agreement with GRIDCO/WESCO to utilise surplus generation & supply emergency
assistance to CPP.
|
|
4.11.3
|
Proposal by the
licensee to withhold permission for installing CPP for 3 years should not be agreed to.
|
|
4.11.4
|
Tariff of Aditya
Aluminium is to be fixed on net drawal basis. Alternatively Energy charge for emergency
assistance to CPP should be same as that of supply rate of surplus power.
|
|
4.11.5
|
Construction power
has to be classified separately and no demand charge should be levied.
|
|
4.11.6
|
Tariff for all
categories has to be fixed for at least a period of 5 years. Annual changes should be made
in respect of variable cost only.
|
|
4.12
|
Sundargarh Dist.
Employers Association
|
|
4.12.1
|
Shri Gobardhan
Pujari represented Sundargarh District Employers Association. He strongly objected to
tariff increase on various grounds.
|
|
4.12.2
|
Maintenance of
accounts by the Licensee is mandatory under Companies Act., Income Tax Act and Electricity
(Supply) Act. They are bound to complete the accounts within six months of the close of
the year. Therefore making a submission that Audited Accounts are not available is a
deliberate attempt to hide the fact.
|
|
4.12.3
|
Under Electricity
Supply Annual Account Rule 1985 higher valuation of asset is not permissible and as such
asset should be shown at historical cost and not on revalued cost.
|
|
4.12.4
|
Basis of allocation
of expenditure on the cost of EHT, HT, LT supply has not been given. Therefore it is not
possible to decide the average cost of supply in respect of different categories of
consumers. Also present tariff system does not provide incentive for HT/EHT consumers.
WESCO has not furnished details of Bad Debt which is written off. Further WESCO has not
disclosed the steps taken to realise the debt and also not shown the particular of debts
which has been considered to be bad.
|
|
4.12.5
|
WESCO in their
calculation of revenue earned in the current year as well as in the ensuing year has not
shown separately the revenue from demand charge and energy charge. He pleaded that the
principle of demand charge to be applied to distribution company should be on similar line
with generating companies. WESCO has not given any indication about the steps taken to
optimise capacity utilisation and to reduce T&D loss.
|
|
4.12.6
|
Proposal given by
WESCO to compensate the loss of NESCO and SOUTHCO is against the principle of natural
justice. WESCO’s objection for not allowing to instal of CPP for a period of three
years is unjustified. His logic for setting of CPP is that there will be real competition
and the benefit will be reaped by consumers.
|
|
4.12.7
|
WESCO should inject
some amount of equity capital in the business to minimise the interest burden.
Depreciation should be calculated as per the standard accounting procedure.
|
|
4.12.8
|
Consumer security
deposits should be deducted for calculating the Capital Base but this has not been taken
into consideration by WESCO.
|
|
4.12.9
|
WESCO is not
entitled to transfer its profit to other companies. Instead of asking for subsidy
directly, WESCO has proposed rise in tariff to cover its own inefficiency.
|
|
4.12.10
|
WESCO is paying a
sum of rupees 1.29/units to GRIDCO and is proposing the sale the same at an average price
of rupees 4.30/unit to HT and EHT consumers. This is not justified. WESCO has not given
any plan for cost reduction.
|
|
5.0
|
WESCO’s
REPLY TO THE OBJECTIONS The Managing
Director of WESCO replied to the various issues raised by the objectors. |
|
5.1
|
In its
rejoinder to the above objections WESCO stated that the proposed increase in tariff is
based on a reasonably accurate estimate of the revenue requirement of 1999-00 and would be
applicable only for a part of the year resulting in a huge loss for the DISTCOs. For
maintaining the viability of the power sector a balance need be struck between the
interest of the licensee and the interest of the consumers. The proposal of the licensee
aims at that. WESCO’s application has been submitted basing on the present BST tariff
and the question of the licensee resorting to high cost power does not arise.
|
|
5.2
|
T&D loss
as reflected in the management information system of the previous financial year indicates
a higher level of loss than what has been projected by GRIDCO. WESCO is carrying massive
metering plan and adopting other measures for reduction of losses like installation of LT
less transformers and strengthening the distribution system. The benefits of loss
reduction measures now being undertaken will take time to fructify. WESCO is committed to
reduce distribution losses and has targeted at 40% during 1999-00.
|
|
5.3
|
A large
number of LT Consumers continue to pay tariffs significantly lower than their cost of
supply. Elimination of cross subsidy would be essential to undertake substantial measures
towards further tariff reforms where tariff could be differentiated on the basis of time
of use, extent of use, and manner of use. For avoiding sharp increases in tariff, OERC
recognises the gradual process of elimination of cross subsidy over a period of time.
Hence cross subsidy would have to continue till such time and that licensee will not be in
a position to bring down cost for HT and EHT consumers.
|
|
5.4
|
It is stated
that the calculations made by the UCCI regarding revenue requirements of WESCO are not
based on facts and, therefore, are not correct. WESCO's application has been submitted
basing on the present BST tariff and the question of the licensee resorting to high cost
power does not arise. Employee Cost and Administration & General Expenses have been
computed based on the company's actual for the early months of the fiscal year. With
regard to Bad Debts, it is submitted that the arrears from the State Government
Departments and undertakings as on 31.03.99 have been transferred to GRIDCO and have not
been transferred to WESCO's account. The remaining opening debtors as on 01.04.99 have
been inherited from GRIDCO. A large chunk of arrear appears to be doubtful. It is proposed
to write off such bad and doubtful debts during a period of three years. The interest
component of the total expenses is estimated correctly and the provision of contingencies
reserve has been made as per the Electricity Supply Act, 1948.
|
|
5.5
|
With
reference to objections of some industrial consumers, WESCO in its rejoinder said that
several measures were being taken to improve the supply system after taking over the
charge and the benefits of the same shall be visible over a period of time. Load surveys
are being made and steps have been taken to provide meters to all classes of consumers.
WESCO has continued the incentive for consumption beyond 60% load factor by proposing a
discount of 10% on such consumption.
|
|
5.6
|
WESCO in its
rejoinder to the objections raised by Railways stated that it purchased power from GRIDCO
who in turn purchases the same from different generators including NTPC. The selling price
of power to the ultimate consumers like railway is bound to be higher than the NTPC rate
due to additional cost of transmission.
|
|
5.6.1
|
Over drawal
by a consumer places additional financial burden on the system as the incremental power
purchase cost is always high. It puts additional burden on system stability and
reliability and thereby affects other consumers apart from disturbing the power
procurement planning. Thus the levy of over drawal charge is justified. Regarding
defective meters, WESCO stated that the rules and procedure prescribed in the OERC
Distribution Code, 1998 has to be implemented and those issues cannot be settled in a
tariff proceeding.
|
|
5.6.2
|
Referring to
the structure of tariff, WESCO said that consumers having more than 100 KW connected load
were charged on the basis of a two-part tariff consisting of demand and energy charges.
The demand charge is being charged on 80% of the contract demand or recorded demand
whichever is higher and energy charge is being charged on the actual consumption. The
Monthly Minimum Fixed Charge is being charged in respect of consumers having contract
demand of less than 100 KW/110 KVA. WESCO further clarified that there was no such
proposal for a MMFC in respect of the Railways. The retail tariff order of 1998-99 permits
either a rebate for timely payment or the levy of delayed payment surcharge and not both
for a particular consumer category and the same has been followed by WESCO in its tariff
proposal.
|
|
5.6.3
|
There is no
proposal to bring in changes in the existing tariff with regard to power factor penalty or
introducing incentive for improved power factor.
|
|
5.6.4
|
The Railways
avail supply at HT voltage where the interruptions are negligible. Besides the frequency
and voltage of supply depends upon the system voltage and frequency and the retail
licensee has no control over the same.
|
|
5.7
|
As regards
the EOUs MD, WESCO stated that at present no EOUs exist in WESCO zone and as such no
separate category has been indicated in tariff structure for such type of consumers.
|
|
5.8
|
WESCO’s
rejoinder covered a number of other issues. As regards transfer of pension liabilities as
on 31.03.99 it was stated that GRIDCO has agreed to transfer of pension liabilities to
WESCO and as such there is no proposal to include the pension liabilities as on 31.03.99
into tariff proposal.
|
|
5.9
|
Tariff order
of 1998-99 permits either a rebate for timely payment or a levy of delayed payment
surcharge and not both for a particular consumer category. WESCO's proposal continues with
this principle.
|
|
5.10
|
As stated by WESCO
the matter relating to improvement in supply condition is to be considered separately from
the tariff application.
|
|
5.11
|
The monthly minimum
fixed charge (MMFC) is being levied in respect of consumers having contract demand of less
than 100 KW/110 KVA in line with the levy of demand and energy charges on consumer having
connected load having more than 100 KW/110 KVA.
|
|
5.12
|
The procedure of
allowing only 10% of the total consumption by a HT industry as housing colony consumption
at a reduced tariff is a liberal concession. The proposed colony consumption tariff is
still lower than the proposed tariff charges for consumption during peak hours by EOUs.
|
|
5.13
|
As regards the
issue of refund of the excess security deposit WESCO in its rejoinder stated that the
excess security deposit as claim by the objector bears no relation to the case under
consideration.
|
|
5.14
|
In its rejoinder
WESCO also clarified its stance on Captive Power Plants. WESCO advocates that industry is
inclined to set up CPPs due to the prevailing distorted tariff structure where the
industrial consumer subsidises the domestic consumer. The GoO had given a boost to CPPs by
permitting third party sale of power under Section 28(1) of the Indian Electricity Act,
1910. This has resulted in a reduction in consumption of Grid power by the industrial
consumers and a corresponding increase in the burden of tariff on the consumers who
continue under the grid. The OERC has discussed the issue of captive generation and of
third party sale on various occasions. Third party sale would be allowed if the permission
had been obtained from the GoO under the said section before the enactment of OER Act.
After the enactment of OER Act, third party sale is not permitted. Orissa is a power
surplus state and therefore does not require installation of additional capacity at this
time. Obviously large power plants are economical compared to CPPs. Thus allowing CPPs
would mean uneconomical allocation of scarce resources. What is therefore needed is a
necessary correction in the distorted price structure which would be more difficult if
further addition is made to captive capacity. If CPPs are allowed, it would mean lower
generation from the large power plants which would increase the average cost of
generation. The IPPs already have take-or-pay conditions in the PPAs and the introduction
of availability based tariff is currently under consideration which would result in higher
cost/unit.
|
|
5.15
|
While certain
industrial consumers have the option to set up captive generators a large number of
consumers do not enjoy that choice. Therefore encouragement of captive generation would
adversely affect consumers like households, small industries, public lighting and public
water works etc.
|
|
5.16
|
WESCO replied to
the issues raised by Director (Tariff), OERC and submitted that the company is undertaking
Rural Electrification Works to the tune of Rs. 18.95 crores in the year 1999-00 as per the
direction of the Govt. of Orissa. They have submitted a request to the Govt. of Orissa for
grant of revenue subsidy and have not received any response as yet. They have also sought
for specific approval from OERC.
|
|
5.17
|
Regarding meter,
orders were placed by GRIDCO prior to 1.4.99. Orders of investment were finalised by World
Bank Loan programme at GRIDCO level prior to 1.4.99. The material are being received now
and implementation is being done. WESCO is only executing the earlier scheme.
|
|
5.18
|
Maximum demand of
WESCO is calculated by GRIDCO on simultaneous arithmetic sum of demand recorded every half
an hour.
|
|
5.19
|
HT feeders are
supplying to HT and LT consumers and hence estimating HT loss is not possible.
|
|
5.20
|
Regarding status of
HT and EHT metering, the Licensee stated that quarterly report regarding installation of
meters is regularly submitted to OERC.
|
|
6.0
|
COMMISSION’S OBSERVATION
|
|
6.1
|
We have noted that
vital issues have been raised by the objectors and the Commission had the benefit of many
useful suggestions. We have given careful consideration to each one of the issues raised
by the objectors and have analysed the submissions made by the licensee in the light of
these issues. However, we must note that some of the objections raised during the hearing
were not relevant to the present tariff proceeding.
|
|
6.1.1
|
As has been
observed in the Commission’s Order No.19 of 1998 the issues like reform,
restructuring, privatisation, revaluation of assets on transfer to GRIDCO and OHPC are not
within the scope of this Commission since such issues are matters of public policy and
legislation. Hence these aspects need not be dealt in this Order on tariff. Similarly
recurring complaints on consumer service has to be dealt in appropriate proceedings. The
Commission is monitoring the performance of licensees as required under law. Therefore,
such issues are not being dealt with by the Commission while examining the present tariff
proposal.
|
|
6.1.2
|
We do not find it
necessary to specifically comment on each one of the objections. The objections with
regard to financial aspects and with regard to tariff design as well as various
suggestions on these aspects shall be dealt by us in the later part of the order while
dealing with the revenue requirement and while determining tariff. However, we may record
out observations specifically on a few issues which do not conveniently fit into the
module of either revenue requirement or tariff.
|
|
6.1.3
|
The licensee has
suggested uniform tariff for the three utilities under the management of BSES like WESCO,
NESCO and SOUTHCO. In view of substantial difference in consumer composition, distance
from the generating stations, levels of efficiency and other factors, the financial
viability will have to be widely different in case of these three companies. In this
background, WESCO has suggested that additional revenue earned by the licensee may be
transferred to NESCO and SOUTHCO through a Special Appropriation under Section XVII(c)(vi)
of the Sixth Schedule of ESA with the permission of OERC.
|
|
6.1.4
|
This request by the
Licensee has wider implication. The Commission after careful consideration and has come to
a decision that while differential tariff for different companies will be eventually
inevitable at the present stage of transition it is desirable to have uniform tariff for
all the four distribution companies in Orissa. However, we are unable to accept the
request of any adjustment and financial flow between different companies through
innovative method such as special category capital or revenue subsidy. Each company’s
finance and tariff has to be examined independently in accordance with Sixth Schedule and
other provisions of the Act, 1948. The Commission does not approve of inter-linkings in
financial matters between different companies. Therefore, the request of WESCO in this
regard cannot be acceded to.
|
|
6.1.5
|
With regard to the
Licensee’s request that captive generation should not be permitted for a period of
three years, we have noted the rationale of the request as given in the tariff application
as well as in the rejoinder. We have also noted that representatives of industry and
others have vehemently opposed to the request mainly on the ground that any prohibition in
setting up captive power plant will retard industrial progress and that it will result in
monopolistic environment not compatible with the aims and objectives of the Reform Act. We
would like to note that determination of tariff has to be in the background of existing
regulatory environment and that tariff proceeding is not the appropriate occasion for
taking a decision in this matter for which the views of all concerned as well as Govt.
policy have to be taken into account.
|
|
6.1.6
|
In course of the
hearing, consumers of different categories have highlighted the impact of tariff with
reference to financial viability, commercial consideration and ability to pay. While we
have taken into account the overall interest of the consumers we have also given equal
consideration to the financial viability of the Licensee and the necessity of the State
for fostering a healthy electricity industry. Ability to pay, lack of funds or
competitiveness of any particular industry either in the domestic or in international
market cannot be the guiding consideration in designing tariff. The Commission does not
find it desirable to move beyond the considerations incorporated in Section 26(2) and
Section 26(5) of the Reform Act.
|
|
6.1.7
|
The Reform Act,
1995 envisages a tariff structure that would bring about efficiency and economy in the
supply and consumption of electricity. The Reform Act, 1995, also aims at a tariff that
would reflect cost, would be linked to efficiency and would eliminate inter-class and
intra-class subsidies.
|
|
6.1.8
|
The Commission is
also deeply aware of its role in balancing the conflicting interest of various
stakeholders, bringing about efficiency and economy in the use of electricity and
designing a tariff structure that should be just, fair and reasonable. The low voltage
consumers expect a tariff that is affordable and the high and extra high voltage consumers
are pleading for a tariff that should reduce their burden of cross-subsidy. While taking
note of these factors, we have also to go by the mandate in law to allow reasonable return
to the investors in the electricity industry in the State.
|
|
6.1.9
|
During the course
of hearing, some of the objectors made a strong plea that since the super cyclone has
completely destroyed the agricultural and industrial infrastructure of the State and has
affected large number of consumers, there should be no increase in tariff and the proposal
should be kept on hold. The Commission is not only aware of but deeply sensitive to the
ground conditions in the State in the aftermath of the super cyclone. Much as the
Commission would have liked to do the contrary, it would not be reasonable for the
Commission to deny any increase whatsoever in tariff because such denial would impinge not
only on the financial viability of the Licensee but would also affect its operational
efficiency.
|
|
6.1.10
|
We, therefore,
proceed to examine the revenue requirement and expected aggregate revenue from charges of
WESCO for 1999-00 and subsequently to examine the tariff proposed by WESCO to give our
findings and orders thereon in accordance with the extant law.
|
|
7.0
|
REVENUE REQUIREMENT
|
|
7.1
|
After its formation
and obtaining licence for distribution and retail supply, WESCO has submitted its revenue
requirement for the year 1999-00 for which no comparative figure for the last Financial
Year is available. The Commission has for the purpose of analysing the revenue requirement
relied on the disaggregated audited accounts submitted by GRIDCO for the Financial Year
1997-98 and the data & records presented to the Commission by WESCO as well as the
facts and arguments placed by the objectors before it.
|
|
7.2
|
Quantum of Power Purchase
|
|
7.2.1
|
The volume of power
purchase is dependent on the quantum of energy sold to the consumers and the transmission
and system loss. While estimating energy sale for 1999-00, WESCO has analysed the pattern
of consumption of various groups of consumers for 1997-98 and 1998-99 and projected this
figures for the financial year 1999-00 in the format prescribed by OERC. According to the
analysis of energy sale mix between LT, HT, EHT consumers for the FY 99, LT consumption
accounted for 35.82% while HT & EHT consumption accounted for 23.94% and 40.23%
respectively. WESCO has reported that for the purpose of estimation of sale of energy for
FY 1999-00, it has evaluated the past billing information for each category, compared the
consumption for the first quarter of 1999-00 with the corresponding period of the
financial year 1998-99, studied the loss reduction initiatives and their impact on
billing, analysed energy off-take of consumers in HT & EHT category and used realistic
assumptions and current economic situation.
|
|
7.2.2
|
The Commission has
analysed the consumption of various groups of consumers and has studied the consumption of
all HT & EHT consumers. A detailed analysis of the billed units of the LT consumers
particularly the domestic and commercial consumers without meters or with defective meters
was also carried out. Consumers with correct meters are billed on the basis of actual
meter reading whereas others with defective meters or no meters at all are billed on the
basis of a load factor. The Commission has prescribed detailed formats to determine the
consumption for all such consumers. WESCO has requested the Commission to accept data on
consumption of LT consumers based on the meter readings for the months of April and May 99
in respect of Domestic, Commercial, Irrigation and Small Industries categories of
consumers throughout WESCO. Treating the meter reading of April and May 99 as sample,
consumption for a period of 12 moths for WESCO as a whole has been estimated through a
computer model. While accepting, in the absence of complete data, this method of sampling
for the purpose of the present application, the Commission enjoins upon WESCO that for
future applications it must maintain the required information for calculation of
consumption by various classes of consumers in the format prescribed by OERC.
|
|
7.2.3
|
For
the year 1999-00, the break up of energy sale forecast by WESCO is as follows :-
|
LT
|
620.52 Units
|
|
HT
|
346.14 Units
|
|
EHT
|
506.00Units
|
|
Total
|
1472.66 Units
|
|
|
7.2.4
|
This
is a decrease of about 0.5% compared to the sale in FY 1999. A comparative picture of the
consumption of the previous two years along with projection of 1999-00 is in Table : 3.
Table : 3
Consumption in MU
|
|
1997-98
|
1998-99
|
1999-00
|
|
LT
|
535.08
|
530.4
|
620.52
|
|
HT
|
349
|
354.5
|
346.14
|
|
EHT
|
706.76
|
595.8
|
506.00
|
|
Total
|
1591.77
|
1480.74
|
1472.66
|
|
|
7.2.5
|
WESCO has reported
that there has been decline in consumption by large industries on HT and heavy industries
availing power at EHT during the first quarter of 1999-00 when compared with the
corresponding period of the year 1998-99. There has also been a substantial decrease in
consumption by consumers in the power intensive category. Increase in consumption during
the first quarter of the year by the consumers covered under general purpose tariff and
large industries on EHT has, however, been observed. The Commission on examination of the
above figures of WESCO approves the forecast of energy sale by WESCO in para 7.2.3.
|
|
7.3
|
Transmission & Distribution Loss
|
|
7.3.1
|
WESCO has estimated
T&D loss as 40% in 1999-00. WESCO has stated that as per MIS figure for the year
1998-99, the indicated loss figure is 46%.
|
|
7.3.2
|
WESCO’s
estimation of the overall loss percentage as 40% does not include the loss at EHT which is
being recovered by the Transmission and Bulk Supply Licensee i.e. GRIDCO, through the Bulk
Supply Tariff. In effect, therefore, the end-use consumers of WESCO would have to bear the
EHT loss passed through in the BST in addition to 40% loss proposed by WESCO. A large
majority of the objectors have questioned the high percentage of system loss proposed by
WESCO and have suggested bringing it down to 28%. Most of the objectors were unanimous in
their opinion that this high level of T&D loss has remained uncontrolled during the
past three years and no tangible achievement has taken place in this area of loss
reduction and the consumers are again being burdened with this high loss. The objectors
are of the opinion that the change from OSEB to GRIDCO and subsequently to separate
distribution licensees as a part of the reform process for rendering efficient and
economic service to the consumers have been totally belied. Unauthorised use of
electricity by dishonest persons is largely responsible for T&D loss which is proposed
to be passed on to the honest consumers. Similar is the case of replacement of defective
meters or installation of new meters which should have encouraged correct recording of
energy consumption and consequent billing to the consumers. They have stated that during
the last three financial years while there is a progressive rise in the quantum of
purchase, there is no commensurate growth in sales. Increase in billed revenue is largely
attributable to the higher load factor billing approved by the Commission. One of the
objectors pointed out that load factor billing is misutilised by many consumers with
defective meters who pay a fixed amount but consume far in excess including selling it to
third parties covertly. Many objectors drew pointed attention to the mismanagement and
complete negation of the Commission’s direction on loss reduction and insisted that
the Commission should not allow the high percentage of system loss proposed by the
Distribution Licensee. They said that under no circumstances, the percentage of T&D
loss should not be allowed at a level higher than 28%.
|
|
7.3.3
|
WESCO has stated
that recognising the energy losses at 35% compared to actual losses of 43% to 46% is a
wide departure from the sixth schedule to the Act, 1948.
|
|
7.3.4
|
Since the present
loss level has been inherited by WESCO from GRIDCO, they have requested, to reconsider the
benchmark of 35% fixed by OERC and consider Distribution loss of 40% as a reasonable
target for the year 1999-00.
|
|
7.3.5
|
WESCO, in its
rejoinder during hearing for Retail Supply Tariff, explained that they are committed to
reduce distribution losses. WESCO has already embarked on a massive metering plan the
progress of which is being reported to OERC. Additionally, several other projects are
being undertaken to strengthen the distribution system. However, the benefit of all the
above initiatives would accrue only over a period of time the distribution loss during the
financial year 1999-00. WESCO has requested OERC to propose a mechanism of sharing the
revenue loss between other constituents (i.e. GRIDCO, Govt, of Orissa and other sectors)
so that the extent of loss shared is in consonance with the party’s ability to bear
the loss and the consumers are insulated from a sharp increase in tariff.
|
|
7.3.6
|
WESCO stated that a
significant portion of electricity consumed in Orissa is not metered making it difficult
to accurately establish the extent of energy loss. The most reliable data for the actual
energy loss is the energy audit carried out in 1996 as a part of reform programme. The
information memorandum circulated at the time of inviting bids for privatisation the
distribution energy loss for 1996-97 for WESCO was shown as 40%. The memorandum also
projected very ambitious loss reduction targets. Contrary to the expectations of the
information memorandum the distribution loss for the year 1998-99 based on the MIS figure
of GRIDCO shows a loss figure of 46% which WESCO believes is a comparative estimates.
|
|
7.3.7
|
WESCO has stated
that based on their experience a loss reduction of 2% to 3% will be possible for 1999-00.
Accordingly it has targeted to reduce the loss to 40%.
|
|
7.3.8
|
The Commission has
very carefully considered the position stated by WESCO about its very short period of
operation in the business of distribution since 01.4.99 which is inadequate to show
significant result in the area of loss reduction. The Commission has noted the loss
reduction measures proposed by WESCO and would like to be apprised of the progress
achieved in implementing them at the end of each quarter. The Commission has also taken
note of the objections to WESCO assuming a T&D loss of 40% almost three years after
the Commission determined the benchmark of 35%. While WESCO insists on the T&D loss of
40% in addition to the transmission loss of 4% in GRIDCO’s system, the objectors want
this loss to be as low as 28%. WESCO has not presented any detailed data to the Commission
justifying its claim of a T&D loss as high as 40%. We must make it clear that data
furnished by the Licensee to claim revision of benchmark of T&D loss is without solid
basis. It has not completed a year of operation and, therefore, has made its analysis and
projections on the basis of data handed down by GRIDCO whose accounts for 1998-99 have not
been audited yet. The additional sampling of two months does not reflect a reliable
picture mainly because the figures are also based on load factor. We also agree with the
objectors that no perceptible steps have been taken for checking pilferage and other
illegal abstraction of energy. In the circumstances, particularly in the absence of any
credible evidential data, the Commission does not find it desirable to revise its
benchmark of 35% of T&D loss for tariff determination.
|
|
7.3.9
|
Since
WESCO proposes to sell 1472.66 MU, power to be purchased by GRIDCO for WESCO from the
generators applying a loss of 35% is determined as 2265.63 MU (1472.66/0.65). Therefore,
WESCO’s purchase from GRIDCO should be limited to 4% less (being the approved
transmission loss in EHT) than what is purchased by GRIDCO for WESCO. Accordingly, for the
purpose of revenue requirement, WESCO is expected to purchase only 2175.00 MU to meet its
sale requirement of 1472.66 MU for the year 1999-00. The system loss in WESCO is 2175.00
MU – 1472.66- MU =702.34 MU. The loss of 702.34 MU in WESCO’s system expressed
as a percentage of units purchased for WESCO by GRIDCO is (702.34/2265.63) or 31%.
Therefore, out of the energy purchased for WESCO by GRIDCO, 4% is deemed to have been lost
in EHT system of GRIDCO and 31% is lost in the Distribution system of WESCO. Thus the end
use consumer pays for a total of 35% of the energy purchased for supply. This loss of
702.34 MU expressed as a percentage of input to the WESCO system is (702.34/2175.00)
32.29%. Therefore, the distribution loss allowed for WESCO for the purpose of revenue
requirement is fixed at 32.29%.This is presented in table : 4.
Table : 4
|
Sale projected by WESCO
|
1472.66 MU
|
|
Power to be purchased by GRIDCO
for WESCO applying a loss level of 35%
|
1472.66/0.65 = 2265.63 MU
|
|
Power to be purchased by WESCO
from GRIDCO less loss of 4% at EHT
|
2265.63 x 0.96 = 2175.00 MU
|
|
Energy loss in WESCO’s
system
|
2175.00–1472.66=702.34 MU
|
|
Distribution loss of
WESCO’s system
|
702.34/2175.00 = 32.29%
|
|
|
7.4
|
Cost of Power
|
|
7.4.1
|
WESCO has
to purchase 2175.00 MU from GRIDCO at the Commission’s approved rate of
Rs.200/KVA/month + 99.20 paise/unit. The Commission has examined the power purchase bills
of WESCO for April, 1999 to July, 1999. The bill details have been supplied by WESCO in
its clarification submitted to the Commission in Table : 7 of the clarification on Retail
Supply Tariff of 1999-00. The average cost per unit of power purchased from GRIDCO for the
months of April, 1999 to October, 1999 is 127.16 paise/unit. Since there would be an
enhancement in the energy charge by 13.7 paise/unit according to the BST determined by the
Commission now, the rate/unit payable by WESCO would be 140.86 paise/unit. The cost of
power @ 140.86 paise/unit for purchase of 2175..0 MU would, therefore, be Rs.306.37
crores.
|
|
7.5
|
Operating Expenses
|
|
7.5.1
|
The operating
expenses for distribution and retail supply may be considered under the following heads:-
Employees Cost
Administration & General Expenses
Repair and Maintenance Expenses
Less expenses capitalized
|
|
7.6
|
Employees Cost
|
|
7.6.1
|
WESCO
has proposed Rs.48.86 crores for the FY 1999-00 towards Employees Cost. The claim is said
to be based on audited accounts for 1997-98 and revised budget estimates for 1998-99. It
is seen that this does not include other employee related expenses such as Rs.4.68 crores
towards contribution to Provident Fund, Staff Pension and Gratuity and Rs.0.10 crores
towards training which have been shown separately. Employees Cost for WESCO in the
disaggregated and audited accounts for the year 1997-98 was Rs.43.04 crores which included
salaries, wages, allowances, benefits, staff welfare expenses and terminal benefits.
WESCO, in response to the Commission’s query, has submitted comparative itemwise
details for the FY 1997-98 (audited accounts), estimated figure for FY 1998-99 and
projected amount for FY 1999-00. The number of employees on roll as on 01.09.19 is in
Table : 5.
Table : 5
|
|
Technical |
Non-Technical |
Total |
Executive |
226 |
14 |
240 |
Non-executive |
4508 |
811 |
5319 |
Total |
4734 |
825 |
5559 |
|
|
7.6.2
|
We
have examined the data furnished by the Licensee. The Commission considers it reasonable
to adopt a 3% annual increase on account of normal increment in salaries & house rent
allowance and a 6% annual increase in order to factor in inflation for other expenses
(including dearness allowance) on base figure of FY 1997-98 as reasonable. However, in
regard to staff welfare expenses the base has been taken at a reduced figure of Rs.0.24
crores allocated on the basis of percentage of employees allotted to WESCO from the
undivided GRIDCO. Accordingly, the total estimated expenses under this head is approved at
Rs.48.62 crores. The Employees cost proposed by the Licensee and the Commission’s
decision on Employees Cost are indicated in Table : 6.
Table : 6
(Rs. in crores)
Sl.
No |
|
Disaggre-
gated account of 1997-98 |
Estt.
by Licensee 1998-99 |
Projected
by Licensee 1999-00 |
Approved
By Commission |
1 |
Salaries |
18.52 |
27.88 |
28.44 |
19.65 |
2 |
Over time |
0.03 |
0.00 |
0.00 |
0.00 |
3 |
Dearness
Allowance |
13.94 |
6.41 |
10.52 |
16.62 |
4 |
Other
Allowance |
0.42 |
0.55 |
0.60 |
0.47 |
5 |
Bonus |
0.55 |
0.00 |
0.00 |
0.00 |
6 |
Total
Emoluments
(1 to 5) |
33.46 |
34.84 |
39.56 |
36.74 |
|
|
Other
Staff Cost |
|
|
|
|
7 |
Reimbursement
of Medical Expenses |
0.48 |
0.83 |
0.93 |
0.54 |
8 |
Leave Travel
Concession |
0.03 |
0.06 |
0.08 |
0.08 |
9 |
Reimbursement
of H.R. |
2.52 |
4.12 |
4.53 |
2.67 |
10 |
Interim
Relief of Staff |
0.03 |
- |
- |
- |
11 |
Encashment of
earned leave |
0.06 |
1.43 |
1.62 |
1.51 |
12 |
Honorarium |
- |
- |
- |
- |
13 |
Payments
under Workmens Compensation Act |
0.01 |
0.09 |
0.10 |
0.10 |
14 |
Ex-gratia |
0.01 |
- |
- |
- |
15 |
Other cost |
0.01 |
- |
- |
- |
16 |
Total Other
Staff Cost (7 to 15) |
3.14 |
6.53 |
7.26 |
4.90 |
17 |
Staff Welfare
Expenses |
0.44 |
0.45 |
0.45 |
0.27 |
18 |
Terminal
Benefits |
6.01 |
6.00 |
5.87 |
6.71 |
19 |
Total
(6+16+17+18) |
43.04 |
67.82 |
53.14 |
48.62 |
|
|
7.7
|
Administration
& General Expenses
|
|
7.7.1
|
WESCO has proposed
A&G expenses for 1999-00 as Rs.5.06 crores. These expenses include expenses on
communication, travel, training and other charges. WESCO has also separately proposed of
Rs.0.20 crores, Rs.0.08 crores and Rs.0.05 crores towards rent, rates, taxes, legal
charges and audit fees, respectively. For the year 1999-00, WESCO expects a significant
increase in A&G expenses on account of increase in infrastructure and consumable
requirement.
|
|
7.7.2
|
The Commission has
examined the Licensee’s proposal on A&G Expenses. A&G expenses as per the
disaggregated accounts of GRIDCO for 1997-98 was Rs.2.48 crores excluding Bad Debt. This
included Legal expenses, Rent, Rate, Taxes and Audit Fees. The Commission considers it
reasonable to allow an annual increase of 6% over audited figure of 1997-98 to factor in
inflation. Accordingly, A&G Expenses for 1999-00 is approved as Rs.2.79 crores as
against Rs.5.39 proposed projected by WESCO.
|
|
7.8
|
Repair and
Maintenance Expenses
|
|
7.8.1
|
The R&M
expenses proposed by WESCO is Rs.14.43 crores for the FY 1999-00. This has been calculated
as 5.4% of the gross fixed assets at the beginning of the year indicated in the transfer
notification dtd. 25.11.98. The Commission considers the proposal reasonable and approves
Rs.14.43 crores as R & M expenses for the FY 1999-00.
|
|
7.9
|
Interest on Loan
|
|
7.9.1
|
WESCO has proposed
an amount of Rs.20.23 crores to be charged to revenue on account of interest including a
sum of Rs.1.12 crores towards interest on working capital. It is seen that interest
amounting to Rs.19.11 crores is attributable to loan of Rs.145.66 crores allocated to
WESCO and does not relate to any fresh loan taken by WESCO. Out of this interest amount of
Rs.19.11 crores, Rs.15.38 crores is on account of subsidiary loan from GRIDCO (based on
the transfer notification dtd.25.11.98) on an outstanding loan of Rs.116.96 crores as on
01.04.99 and Rs.3.73 crores on the World Bank Loan of Rs.28.70 crores as on 01.04.99.
Hence the interest amount of Rs.19.11 has been allowed.
|
|
7.9.2
|
The
Commission also finds the interest of Rs.1.12 crores towards working capital projected by
the Licensee as reasonable and hence chargeable to revenue for the FY 1999-00. Thus the
total expenses on interest chargeable to revenue is as follows :-
|
Interest on long-term loans
|
Rs.19.11 crores
|
|
Interest of working capital
|
Rs. 1.12 crores
|
|
|
-------------------
|
|
Total
|
Rs.20.23 crores
|
|
|
7.10
|
Depreciation
|
|
7.10.1
|
WESCO has proposed
depreciation of Rs.20.62 crores calculated on the basis of Government of India
notification. The Commission accepts the figure of Rs.20.62 crores on account of
depreciation for the year 1999-00.
|
|
7.11
|
Bad and Doubtful
Debt
|
|
7.11.1
|
WESCO has proposed
Rs.44.10 crores as Bad & Doubtful Debt during 1999-00. In the audited accounts of
GRIDCO for 1997-98, WESCO has been allocated Rs.10.13 crores on this account.
|
|
7.11.2
|
In order to
estimate the provisioning towards bad debts WESCO has categorised the debtors into two
categories (a) Debtors on account of sales made during the ensuing year (b) Opening
debtors for the ensuing year. For the debtors created on account of sales made during the
ensuing year the provisioning towards bad debts has been considered to be equal to 3% of
sales for the ensuing year. In case of the opening debtors for the ensuing year, it has
estimated that at least 75% of these would be bad or doubtful. This in its opinion is due
to overestimation of gross receivables. In order to phase out the impact on tariffs, it
has proposed to provide for accumulated debts over a period of three years.
|
|
7.11.3
|
Many objectors have
questioned the provision for Rs.44.10 crores on account of Bad and Doubtful debt. Dr. S.
K. Mishra, Rourkela, Indian Aluminium Company, Hirakud, Utkal Chamber of Commerce and
Industry, Cuttack and Sundergarh Dist. Employees’ Association have strongly objected
to provision of such high amount towards Bad and Doubtful Debt. They said that the bad and
doubtful debt was an indication of inefficiency of operation and in fact should decrease
every year. It has also been stated that Licensee has not disclosed the list of debtors,
has given no basis of arriving at the conclusion on irrecoverablity of the debts and has
not disclosed steps taken for realising them.
|
|
7.11.4
|
The Commission is
of the view that allowing bad debt as a percentage of outstandings as on the last day of
the year when the outstanding are galloping from year to year without handling more energy
would be putting a premium on inefficiency in realisation of dues. The Commission endorses
the view that the Licensee must improve its billing and collection efficiency so that
provision for bad and doubtful debt is reduced from year to year. The Commission does not
consider it appropriate to allow 1/3rd of 75% of the opening debtors for passing on to
tariff. In the tariff order of 1998-99 a reasonable assumption of 15% of the differential
between gross book debt as on 31.03.98 and 31.03.99 was assumed as bad and doubtful debts.
In the absence of even provisional figures for FY 1998-99, it will be too much of a
conjecture to arrive at a base figure for calculating provision for bad debt on lines
similar to last year. Hence provision for Bad and Doubtful Debt may be made as 15% of
total outstanding as on 31.03.2000 on the assumption that two months dues shall be
receivable on that date. Two months of the total sale as receivables at the end of the
financial year has been calculated as 16.66% of the total sale. 15% of 16.66% (16.66% x
15%) = 2.49% (of 2.5%) of the gross annual sale can be assumed to be Bad and Doubtful Debt
for being charging to revenue against 3% claimed by the Licensee. On this basis, the
Commission approves Rs.10.60 crores as Bad and Doubtful Debt.
|
|
7.12
|
Contribution to
Contingency Reserve
|
|
7.12.1
|
WESCO has provided
Rs.1.00 crores towards Contribution to Contingency Reserve. It is within the limit
prescribed in the Sixth Schedule to the Act, 1948 and is accepted in full.
|
|
7.13
|
Capital Base
|
|
7.13.1
|
Original Cost of
Fixed Assets
|
|
7.13.1.1
|
WESCO has projected
its original cost of fixed assets at Rs.328.31 crores as on 31.03.2000. As the Licensee
has not completed a full financial year of its operation, the only data available are -
figures shown in transfer scheme and provisional figures supplied by the Licensee. In the
absence of audited accounts, the Commission considers it reasonable to accept the figure
given by the Licensee as it appears in the transfer scheme.
|
|
7.13.1.2
|
Original cost of
fixed assets as on 31.03.1999 and 31.03.2000 are Rs.267.16 crores and Rs.328.31 crores
respectively revealing asset addition of Rs.61.15 crores during 1999-00. This includes
investment of Rs.12.00 crores and interest capitalized thereon amounting to Rs.1.35 crores
on account of rural electrification works.
|
|
7.13.1.3
|
No proposal for
investment in rural electrification work has yet been approved by the Commission.
Investment on rural electrification has to be planned only when subsidy is available to
bridge the gap between the cost of investment and revenue recoverable. The Licensee should
not take up investment on uneconomic projects which will burden the consumers. Therefore,
without firm commitment of subsidy from the government and without approval of the
Commission for the investment, the capital addition on account of rural electrification
work cannot be allowed to be included in the capital base for earning return. The
Commission has decided to retrench Rs.13.35 crores (capital expenditure of Rs.12.00 crores
and interest during construction thereon of Rs.1.35 crores) from Rs.328.31 crores. Thus,
fixed assets as on 31.03.2000 approved by the Commission would be Rs.314.96 crores as
against Rs.328.31 crores projected by the Licensee.
|
|
7.14
|
Receipts against
Consumers Contribution
|
|
7.14.1
|
The aggregated
receipts against consumers contribution at Rs.50.78 crores has been rightly deducted from
fixed asset while calculating of capital base.
|
|
7.15
|
Original cost of
Work In Progress
|
|
7.15.1
|
For the purpose of
Capital Base calculation, WESCO has projected Rs.25.47 crores towards original cost of
work in progress. This includes a sum of Rs.8.00 crores towards rural electrification
works for which no approval from the competent authority has been taken. As we are
adopting cost-based tariff, it is essential to see that each and every project undertaken
by the Licensee is commercially viable. So far social projects are concerned they should
be duly subsidized by the Government through budgetary support so that the cost of any
uneconomic project is not borne by the consumers.
|
|
7.15.2
|
As observed earlier
at para 6.1.2 the Commission considers it unreasonable to include rural electrification
projects in the Capital Base unless these projects are proved to be commercially viable or
the Govt. of Orissa supports these schemes by providing subsidies. Accordingly, a sum of
Rs.8.00 crores has been deleted from the original cost of work in progress which should
now be Rs.17.47 crores.
|
|
7.16
|
Compulsory
Investment under Para IV
|
|
7.16.1
|
WESCO has projected
Rs.1.00 crores against Compulsory Investment to form a part of the Capital Base. It has to
be noted that amount of investment compulsorily made in accordance with para IV(2)
of the Sixth Schedule of the Act, 1948, can only be included in the Capital Base. No
investment has yet been made and hence the amount is not included now. This can be allowed
to be included if and when evidence of investment out of appropriation towards contingency
reserves is produced.
|
|
7.17
|
Working Capital
|
|
7.17.1
|
Average Cost of
Stores
|
|
7.17.1.1
|
According to para
XVII(e)(i) of the Sixth Schedule of the Act, 1948, a sum equal to one-twelfth of the sum
of book cost of stores, materials and supplies including fuel on hand at the end of each
month of the year of account should be taken into account as working capital for
calculating the Capital Base. WESCO has proposed Rs.3.61 crores towards average cost of
stores in the working capital estimated on the basis of 3 months consumption of materials
(R&M expenses). Assuming on a lead-time of 3 months for procurement of materials.
|
|
7.17.1.2
|
A stock of three
months’ consumption of materials at any particular point of time can be considered
reasonable. Accordingly the Commission approves one-forth of the total annual consumption
of materials i.e. Rs.3.61 crores as reasonable for the purpose of working capital for
stores to be included in the Capital Base.
|
|
7.17.2
|
Average Cash and
Bank Balance
|
|
7.17.2.1
|
WESCO has proposed
Rs.9.75 crores constituting two month’s of Employees Cost and Administration &
General Expenses towards working capital requirement in the form of cash and bank balance.
As stated in para XVII(1)(e)(ii) of the Sixth Schedule of the Act, 1948, an amount equal
to 1/12th of the sum of cash & bank balances and call and short term
deposits at the end of each month of the year of account, not exceeding the sum specified
therein can be included in the Capital Base.
|
|
7.17.2.2
|
As cash and bank
balance at the end of each month of the year of account for 1999-00 cannot be predicted
now, a sum equal to two months payment of Employees cost and A&G Expenses is
considered reasonable ceiling for cash and bank balance to be included in the Capital
Base. We, therefore, approve a sum of Rs.8.49 crores as cash and bank balance for meeting
working capital requirements.
|
|
7.18
|
Accumulated
Depreciation
|
|
7.18.1
|
WESCO has proposed
a sum of Rs.75.96 crores towards amounts written off or set aside on account of
depreciation as on 31.03.2000. The Commission accepts the amount of Rs.75.96 crores as a
deduction for the purpose of Capital Base.
|
|
7.19
|
Loans and Bonds
|
|
7.19.1
|
WESCO has stated
that the loans and bonds for its distribution and retail supply business as per the
transfer scheme notification for the period ending 31.3.99 amounted to Rs.145.66 crores.
During the year 1999-00, WESCO proposes to raise fresh loans amounting to Rs.47.65 crores.
At the end of FY 1999-00, the amount of loans and bonds will reach a figure of Rs.185.01
crores taking the due repayments during the year into consideration.
|
|
7.19.2
|
As discussed in
para 6.4.1.3 above, capital expenditure for the purpose of rural electrification during
1999-00 has not been considered as either authorised or prudent. The Commission,
therefore, has to exclude the loan taken for rural electrification. The Commission’s
revised estimate is in Table : Table
: 7
(Rs. in crores)
Loans and
bonds |
185.01 |
Less : fresh
REC loan for the year 1999-00 Including interest during construction |
21.35 |
Balance |
163.66 |
|
|
7.20
|
Consumers’
Security Deposit
|
|
7.20.1
|
WESCO has stated
that consumers’ security deposit has not been considered as a long-term source of
funds. It has stated that the same has not been utilised for creation of fixed assets and
the amount of consumers’ security deposit has been shown as a current liability and
not as a long term liability in the provisional balance sheet given in the transfer
scheme. WESCO has, therefore, pleaded that it would be incorrect to deduct the amount
corresponding to the consumers’ security deposit in the computation of Capital Base.
|
|
7.20.2
|
The position taken
by WESCO is not tenable under law. Firstly, the Licensee itself has shown the amount as
deductible in the calculation of Capital Base for 1998-99. Secondly, the amount deposited
in cash with the Licensee by the consumers as security is clearly deductible for the
purpose of determination of Capital Base as per provision of para XVII of the Sixth
Schedule of the Act, 1948. Accordingly, an amount of Rs.48.83 crores appearing in the
working capital schedule is deducted in the computation of Capital Base.
|
|
7.20.3
|
Based on the
forgoing observations, the Commission finds that Capital Base for 1999-00 for the purpose
of Sixth Schedule has to be taken at Rs.5.30 crores (vide Annexure to this order) as
against Rs.56.39 crores proposed by WESCO.
|
|
7.21
|
Reasonable
Return
|
|
7.21.1
|
WESCO has
calculated the reasonable return by multiplying the standard rate of 16% to the Capital
Base of Rs.56.39 crores in addition to 0.5% on loans approved by the State Govt. Thus,
WESCO has proposed an amount of Rs.9.87 crores towards reasonable return. We are unable to
accept this figure as we have not approved the base figure of capital base. Reasonable
return calculated in accordance with Govt. of India, Ministry of Power notification dated
5th May, 1999 would be Rs.1.51 crores on a Capital Base of Rs.5.30 crores as in Table : 8. Table : 8
(Rs. in crores)
Source |
Proposed by WESCO |
Commission’s
calculation |
|
|
1998-99
|
1999-00
|
1999-00
|
|
Capital base
|
15.02 |
56.39 |
5.30
|
|
Reasonable return 16% on
investment made after 31.3.99
|
|
|
|
|
13% on investment made upto
31.3.99
|
|
|
0.69
|
|
0.5% of loan outstanding as at
the end of year 1999-00
|
|
|
0.82
|
|
Total
|
|
9.87 |
1.51
|
|
|
17.22
|
Miscellaneous
Receipt
|
|
17.22.1
|
The licensee has
rightly proposed an amount of Rs.0.17 crores as miscellaneous receipt from interest on
investment for the year 1999-00. This figure excludes meter rent of Rs.2.25 crores for the
year 1999-00.
|
|
17.23
|
Revenue Requirement,
Reasonable Return and Clear Profit
|
|
7.23.1
|
In the light of
above decisions and calculation, the Commission approves expenditure for the purpose of
revenue requirement for the year 1999-00 at Rs.423.66 crores as against Rs.475.86 crores
proposed by WESCO. At para 7.12 above special appropriation of Rs.1.00 crores has been
approved on account of contribution to contingency reserve as proposed by WESCO.
Reasonable return has been approved in para (7.21.1) at Rs.1.51 crores against Rs.9.87
crores proposed by WESCO. The calculation of expenditure for revenue requirement,
reasonable return and clear profit as approved have been reflected in Annexe A, B
& C respectively.
|
|
7.23.2
|
The total revenue
requirement of WESCO including special appropriation and reasonable return has been
reduced by Rs.60.55 crores from Rs.486.72 crores proposed by the Licensee, to Rs.426.17
crores. Inspite of the reduced revenue requirement, there will a deficit for WESCO on the
basis of the existing tariff.
|
|
8.0
|
DETERMINATION OF TARIFF
|
|
8.1
|
Taking all aspects
of the tariff filing made by the Licensee and the representation of the objectors, both
written and oral, and after consulting the Commission Advisory Committee, the Commission
has determined the tariff and charges to be realised by the Licensee. The Commission has
been taking steps for rationalisation of tariff i.e. bringing about a uniform rate for all
consumer categories using electricity on the same voltage of supply which is a good
measure of the cost of supply. The same concept of rationalisation is being followed for
determination of the tariff in this order. The Commission considers it reasonable to
determine tariff and charges as in the following paragraphs.
|
|
8.2
|
Customer charge
for consumers with connected load of 110 KVA or above
|
|
8.2.1
|
Customer
charge is payable by a consumer for the purpose of its connection to the power system of
the licensee and is independent of the level of consumption of the consumer. It is
intended to cover
-
The cost of meter reading
-
Preparation of bills
-
Delivery of bills
-
Collection of revenue
-
Maintenance of customer accounts
|
|
8.2.2
|
The
Commission has examined the proposal of the Licensee in regard to customer charge. The
existing rate of customer charge will continue for the following categories of consumers
except with regard to colony consumption for which there shall be no customer charge.
Table : 9
Category |
Voltage Of Supply
|
Public Water
Works |
LT |
General
Purpose |
LT |
Large
Industry |
LT |
Bulk Supply
(Domestic) |
HT |
Irrigation |
HT |
Public
Institution |
HT |
Commercial |
HT |
Medium
Industry |
HT |
General
Purpose |
HT |
Public Water
Works |
HT |
Large
Industry |
HT |
Power
Intensive |
HT |
Mini Steel
Plant |
HT |
Railway
Traction |
HT |
General
Purpose |
EHT |
Large
Industry |
EHT |
Railway
Traction |
EHT |
Heavy
Industry |
EHT |
Power
Intensive Industry |
EHT |
Mini Steel
Plant |
EHT |
Emergency
Supply to CPPs |
EHT |
|
|
8.3
|
Monthly minimum
fixed charge for consumers with contract demand of less than 110 KVA
|
|
8.3.1
|
The Licensee has
stated that 33% of the power purchase cost is fixed in nature whereas less than 20% of its
revenue is being realised through fixed charge. The Licensee proposes to remove the
anomaly by realising a higher proportion of fixed cost by increasing the monthly fixed
charge.
|
|
8.3.1.1
|
The usual mode of
recovery of fixed charges from the consumer by a utility is through recorded maximum
demand in the meter which reflects the capacity utilisation by a consumer. At present,
consumers with connected load of less than 110 KVA have been provided with simple energy
meters that only records energy consumption and not the maximum demand. The Supply
Regulation provides that the contract demand for a connected load below 100 KW shall be
the same as the connected load. Therefore connected load forms the basis for levy of fixed
charge for these classes of consumers. Application of the concept of segregation of fixed
cost and variable cost is useful as the consumer should be made aware that a component of
the fixed cost is being incurred for supplying power to him. The Commission, therefore,
considers it appropriate to continue with the existing system of monthly minimum fixed
charge in lieu of both demand charge and customer charge payable by the consumers covered
under the two part tariff.
|
|
8.3.1.2
|
The monthly minimum
fixed charge is thus a combination of the demand charge and customer charge payable by the
consumers with contract demand of less than 110 KVA. The Commission does not agree with
the proposal of the Licensee for enhancement of the monthly minimum fixed charge and
decides that the existing rate of monthly minimum fixed charge should continue.
Accordingly, the rates applicable to all such customers shall be as given below at Table :
10. Table : 10
|
Sl. No
|
Category of Consumers
|
Monthly
Minimum Fixed Charge for first KW or part(Rs.) |
Monthly Fixed
Charge for any additional KW or part(Rs.) |
|
LT Category
|
1 |
Kutir Jyoti |
30 |
|
2 |
Domestic |
20 |
10 |
3 |
Commercial |
30 |
20 |
4 |
Irrigation |
20 |
10 |
5 |
Street
Lighting |
20 |
10 |
6 |
Small
Industry |
40 |
30 |
7 |
Medium
Industry |
80 |
50 |
8 |
Public
Institution |
80 |
50 |
9 |
Public Water
Works <100 KW |
80 |
50 |
|
|
8.4
|
Demand charge
for consumer with contract demand of 110 KVA and above
|
|
8.4.1
|
The
Licensee has proposed an increase in the demand charge of consumers from Rs.200/KVA/month
to Rs.250/KVA/month in respect of certain categories of consumers availing power supply at
LT, HT and EHT, which are listed below.
LT Category
Public Water Works
General Purpose
Large Industry
HT Category
General Purpose
Public Water Works
Large Industry
Power Intensive Industry
Mini Steel Plant
Railway Traction
EHT Category
General Purpose
Large Industry
Railway Traction
Heavy Industry
Power Intensive Industry
Mini Steel Plant |
|
8.4.2
|
In this connection,
the Commission also examined the prevailing demand charge for such categories of consumers
elsewhere in the country. An increase of demand charge may force the large consumers to
set up their own captive power plants, which is detrimental to both the interests of the
Licensee as well as the small consumers. The Commission decides that the rate of demand
charge for consumers with contract demand of 110 KVA and above shall be Rs.200/KVA/month.
|
|
8.4.3
|
The Commission
further directs that the demand charge shall be payable by these consumers on the basis of
actual meter reading subject to a minimum of 80% of the contract demand to ensure recovery
of a part of the fixed cost of the installed capacity. Where the actual recorded maximum
demand is less than 80% of the contract demand, the consumer is liable to pay at 80% of
the contract demand or the actually recorded maximum demand whichever is higher. The
method of billing of demand charge in case of consumers without a meter or with a
defective meter shall be in accordance with the procedure prescribed in OERC (Conditions
of Supply) Code, 1998.
|
|
8.4.4
|
Categories
of consumers other than those listed in para 8.4.1 like domestic, irrigation, public
institution, commercial and medium industry but availing power supply at HT are presently
liable to pay the demand charge as indicated below :-
|
(Rs./KW/Rs./KVA)
|
|
Domestic
|
10
|
|
Irrigation
|
30
|
|
Public Institution
|
50
|
|
Commercial
|
50
|
|
Medium Industry
|
50
|
|
|
8.4.5
|
The Licensee has
proposed increase of demand charge in respect of the above categories of consumers. The
Commission has carefully considered the proposal of the Licensee and has decided not to
raise the demand charge after considering the comparable charges in other States and
internal relativity of the impact of tariff among the consumers. Accordingly, bills should
be raised for these categories of consumers on the basis of their contract
demand/connected load calculated in KW.
|
|
8.5
|
Energy Charge
|
|
8.5.1
|
Energy charge paid
by the consumer is directly proportional to the quantum of actual consumption. The
Commission, in keeping with its aim of rationalisation of tariff structure by progressive
introduction of a cost-based tariff, has related the energy charge at different voltage
levels to reflect the cost of supply. While determining energy charge, the principle of a
higher rate for supply at a low voltage and a gradually reduced rate as the voltage level
goes up has been adopted. The following tariff structure has been adopted for all loads of
110 KVA and above.
|
Voltage of supply
|
Demand Charge
|
Energy Charge
|
|
LT
|
Rs.200/- per KVA
|
280 paise/unit
|
|
HT
|
Rs.200/- per KVA
|
270 paise/unit
|
|
EHT
|
Rs.200/- per KVA
|
260 paise/unit
|
|
|
8.5.2
|
H.T.
Supply for Domestic (Bulk) and Irrigation : With a view to avoid steep rise in tariff
in respect of domestic (bulk supply) and irrigation availing power at HT, the energy
charge is fixed at @ 200 paise/unit and @ 80 paise/unit respectively.
|
|
8.5.3
|
Industrial
Colony Consumption : The Commission further directs that the units consumed for the
colony shall be separately metered and the total consumption shall be deducted from the
main meter reading and billed at the flat rate of 200 paise/unit. Energy consumed in
colony in excess of 10% of the total consumption shall be billed at energy charges
applicable to the appropriate class of industry.
|
|
8.5.4
|
Incentive Tariff
for HT and EHT Category of Consumers
|
|
8.5.4.1
|
The Licensee has
proposed an incentive tariff for HT and EHT consumers i.e. giving a discount of 10% for
consumption beyond a load factor of 60% except for the power intensive industries which
are classified as export-oriented industries. In the rationalisation of tariff structure,
the Commission is entitled to differentiate the consumers on the basis of consumers’
load factor or power factor and the consumers’ total consumption of energy during any
specified period. The nature and purpose of use becomes less important if a consumer is
able to maintain a high load factor and helps the licensee through better utilisation of
the system. Since the demand charge is same for all HT & EHT categories of consumers,
a higher consumption means a higher plant utilisation and results in a reduced fixed
cost/unit. The Commission is also conscious of the fact that the revenue requirement of
the licensee should reasonably be met while designing a tariff structure that incentives
the consumers for a higher consumption of the Licensee’s purchased power and
dissuades them from switching over to captive generation. With the above objective, the
Commission decides as follows:-
|
|
8.5.4.2
|
HT and EHT
industries who do not reduce their contract demand during the next three years will be
allowed the benefit of incentive tariff in the form of relief in energy charges if the
load factor in a month exceeds 50% of the contract demand.
|
|
8.5.4.3
|
All consumption in
excess of 50% load factor shall be payable @ 180 paise/unit for consumers availing power
at EHT.
|
|
8.5.4.4
|
All consumption in
excess of 50% load factor shall be payable @ 200 paise/unit for consumers availing power
factor at HT.
|
|
8.6
|
Special Tariff
for Industries with Contract Demand of 100 MVA and above
|
|
8.6.1
|
The Commission also
considers that industries with a load of 100 MVA and above and load factor of 80% should
qualify for a special tariff. The special tariff should have no explicit demand charge and
would have a consolidated energy charge with a similar back to back arrangement with the
bulk supplies. This has been suggested in order to give an encouraging signal to the
prospective large consumers and to ensure that such large industries do not set up captive
power plants but avail power supply from the Licensee. The Commission has therefore,
approved a rate of 200 paise/unit for consumption by industries with a contract demand of
100 MVA and above and maintaining a guaranteed monthly load factor of 80%. These consumers
will not pay a monthly demand charge and shall pay only a consolidated energy charge. They
will have to restrict their maximum demand within the contracted capacity. In case the
maximum demand exceeds the contracted capacity, demand charge as applicable to the
relevant consumer category will be payable only on the maximum demand in excess of the
contract demand.
|
|
8.7
|
Tariff for
consumers with connected load less than 110 KVA
|
|
8.7.1
|
Domestic
: It is observed that 84% of the electricity consumers including Kutir Jyoti consumers
(life-line rates) in Orissa belong to the domestic category. The Commission has examined
the tariff for the Domestic category with particular reference to the Licensee’s
proposal. In consonance with the policy to gradually decrease subsidy for all categories
of consumers and yet facilitate use of electricity by small consumers, the Commission has
decided to retain the slab system. The Commission has in another step to protect small
consumers decided that consumption upto and including 100 units/month will be exempt from
any tariff rise. Keeping this in view, energy charge for supply at 230/400 V shall be as
under :-
i) Kutir Jyoti Consumers - Rs.30.00 per
month.
ii) In case of other Domestic consumers, on the total
monthly consumption:-
First 100 Units - 120 paise per unit
Next 100 units - 190 paise per unit
Balance units of consumption - 280 paise per unit
|
|
8.7.1.1
|
The Commission has
decided to continue the monthly minimum fixed charge at the rate of Rs.20 for the first KW
of contract load or part thereof. This charge will be enhanced at the rate of Rs.10 per KW
per month for each additional KW or part thereof above the first KW of contract load.
|
|
8.7.1.2
|
In case of
unmetered supply or defective meter, the energy consumption shall be assessed and billed
using a load factor of 20% on the contract demand. For this purpose, the connected load of
less than 0.5 KW shall be treated as 0.5 KW.
|
|
8.7.1.3
|
For supply at 11/33
KV the energy charge shall be payable at the rate of 200 paise/unit. The monthly demand
charge for domestic consumers availing power supply at HT shall be at the rate of Rs.10
per Kw per month.
|
|
8.7.1.4
|
HT customers will
pay a customer service charge of Rs.250 per customer per month.
|
|
8.7.1.5
|
The practice of
prompt payment rebate of 10 paise/unit shall continue.
|
|
8.7.2
|
Commercial
: The Commission has examined the existing tariff structure of commercial category and
has decided the following :- |
|
8.7.2.1
|
For the total
monthly consumption :-
|
First 100 units
|
280 paise/unit
|
|
Next 200 units
|
370 paise/unit
|
|
Balance units
|
410 paise/unit
|
|
|
8.7.2.2
|
For supply at HT,
the energy charge shall be 270 paise/unit.
|
|
8.7.2.3
|
In case of
unmetered supply or defective meter energy consumption shall be assessed and billed using
the load factor of 30% on the contract demand. For this purpose the connected load of less
than 0.5 KW shall be treated as 0.5 KW. The present practice of prompt payment rebate
shall continue.
|
|
8.7.2.4
|
Monthly minimum
fixed charge of Rs.30 per month for the first KW of contract demand per month shall be
payable. This charge will go up at the rate of Rs.20/- per month for each KW of contract
demand or part there of over the first KW of contract load.
|
|
8.7.3
|
Small Industry :
In this category energy charge will be 280 paise/unit in place of the existing rate of 245
paise/unit. The load factor shall continue to be calculated @ 15% on the connected load in
respect of these consumers with defective meter and unmetered supplies for the purpose of
assessment of consumption and billing.
|
|
8.7.4
|
Irrigation :
Considering the wide-spread damage caused to agriculture by two cyclones in the coastal
districts of Orissa, the Commission has decided to exempt Irrigation category of consumers
availing power from LT from any tariff rise. Consumers in the Irrigation category availing
power supply at HT will also be exempt from any increase of the present energy charge. In
respect of Irrigation consumers for the months of June to October, a load factor of 8% and
for the month of November to May, a load factor 15% shall be considered for assessment of
consumption and billing.
|
|
8.7.5
|
The rate of tariff
as determined above is reflected in Annex-D.
|
|
8.8
|
Other
Charges : The Commission also authorises levy of other charges as given below :- |
|
8.8.1
|
Demand Charge
|
|
8.8.1.1
|
The monthly demand
charge will be calculated on recorded/evaluated maximum demand or 80% of contract demand
whichever is higher.
|
|
8.8.1.2
|
Penalty for
overdrawal of power above the contract demand : OERC (Condition of Supply) Code, 1998
provides that consumers covered under two-part tariff shall pay a penalty in case actual
maximum demand exceeds the contract demand. The Commission is of the opinion that
flattening of the load curve is absolutely necessary for better utilisation of the system
capacity. Consumers exceeding the contract demand outside the peak hours actually help the
system by flattening of the load curve in a surplus generation situation prevailing now.
The Commission, therefore, decides that there will be no penalty for overdrawal outside
the peak hours upto 120% of the contract demand. This facility is now available to
industries drawing power at EHT with time of day (TOD) metering. The Commission has now
decided to extend this benefit to HT industries provided with TOD meters. . The existing
rate of penalty will continue for overdrawal during peak hours. For this purpose,
‘the peak hours’ is defined as 0700 hours to 1000 hours and 1800 hours to 2200
hours.
|
|
8.8.2
|
Metering
on LT side of Consumers Transformer : Transformer loss computed as given below
to be added to the consumption as per meter reading.
Energy loss = 730 X KVA reading of the
transformer/100.
Loss in demand = 1% of the reading of the
transformer (for two part tariff) |
|
8.8.3
|
Incentive for
Timely Payment : The Commission has decided to introduce incentive for prompt payment
by grant of a rebate @1% for payments made within the due date of payment indicated in the
bill.
|
|
8.8.4
|
Delayed
Payment Surcharge : The Commission has decided that there shall be no change in the
existing practice of levying delayed payment surcharge at the rate of 2% per month which
will be prorated for the period of delay counted from the due date of payment indicated on
the bill in respect of the following categories of consumers :-
i) Large Industries
ii) Medium Industries
iii) Public Water Works
iv) Railway Traction
v) Street lighting
vi) Power intensive Industries
vii) Heavy Industries
viii) General Purpose Supply
ix) Public Institutions
x) Mini Steel Plants
xi) Emergency supply to CPP |
|
8.8.5
|
Incentive for
improvement in power factor : The Commission considers it desirable to introduce an
incentive to encourage improvement in power factor.
|
|
8.8.5.1
|
Incentive for
maintenance of high power factor shall be given as a percentage of the monthly demand
charge and energy charge and shall be applicable to the categories of consumers who are
liable to pay power factor penalty. The rate of this incentive will be 0.5% for every 1%
rise above 90% upto and including 100% on the monthly demand charge and energy charge.
|
|
8.8.6
|
Power
Factor Penalty : The Commission also orders for continuance of the power factor
penalty as a percentage of monthly demand charge and energy charge as given below to the
following categories of consumers :
i) Large Industries
ii) Public Water Works (110 KVA and above)
iii) Railway Traction
iv) Power Intensive Industries
v) Heavy Industries
vi) General Purpose Supply
vii) Public Institutions (110 KVA and above)
viii) Mini Steel Plants
ix) Emergency supply to CPP
Rate of P.F. penalty :-
i) 0.5 for every 1% fall from 90% upto and
including 60% plus
ii) 1% for every 1% fall below 60% upto and including 30% plus
iii) 2% for every 1% fall below 30% |
|
8.8.7
|
Adoption of load
factor for consumers with defective meter and without meter : Taking into account the
metering programme and other measures for tackling commercial/non-technical loss, the
Commission orders for continuance of the existing method of load factor billing subject to
review from time to time. If at any time the Commission comes to the conclusion that
effective loss reduction measures are not been taken up by the Licensee the Commission
will have no option but to revise the load factor downwards.
|
|
8.8.7.1
|
The present
practice of submitting information on the status of metering and on measures taken for
eradication of unauthorised tapping from the distribution mains has to continue. The
Licensee has to submit the information at the end of each quarter for information and
review of the Commission.
|
|
8.8.8
|
Customer Charge
: As indicated in paragraph 8.2 above and also Annex-D
there shall be no change in customer charge except with regard to industrial colony
consumption for which the customer charge is abolished.
|
|
8.8.9
|
Re-connection
Charge : The existing rates of reconnection charge as below shall continue :-
|
Single Phase
Domestic Consumer
|
Rs.30/-
|
|
Single Phase other
consumer
|
Rs.50/-
|
|
3 Phase line
|
Rs.100/-
|
|
HT & EHT line
|
Rs.500/-
|
|
|
8.8.10
|
Rounding off a
consumer billed amount to nearest rupee : The Commission directs for rounding off of
the electricity bill to the nearest rupee and at the same time direct that the money
actually collected should be receipted and accounted for.
|
|
8.8.11
|
Temporary
Connection Charges : The tariff for the period of temporary connection shall be at the
rate applicable to the relevant consumer category.
|
|
8.8.12
|
New Connection
Charges for LT : For prospective small consumers requiring new connections upto and
including 3 KW load, there will be a flat charge of Rs.500/-. The existing practice of
preparation of estimate and payment of charge based on the estimated amount shall continue
without any change for connections above 3 KW load.
|
|
8.8.13
|
Fuel Surcharge
Adjustment Formula : The Commission has already prescribed a fuel surcharge adjustment
formula for the distribution licensee which shall continue to be valid.
|
|
8.8.14
|
Meter
Rent : Monthly meter rent as per the existing rate shall be charged from the consumers
to whom meter has been supplied by the licensee except for the three phase static KW
meters. Rent for three phase static KW meters is fixed at Rs.100/month from the effective
date of this tariff. Thus the scale of meter rent applicable to various classes of
consumers is given below :-
Meter Rent in Rupees
|
1. Single phase
electro-magnetic Kwh meter
|
15/-
|
|
2. Three phase
electro-magnetic Kwh meter
|
30/-
|
|
3. Three phase
electro-magnetic trivector meter
|
800/-
|
|
4. Trivector meter
for Railway Traction
|
800/-
|
|
5. Single phase
Static Kwh meter
|
35/-
|
|
6. Three Phase
Static Kwh meter
|
100/-
|
|
7. Three phase
Static Trivector meter
|
800/-
|
|
8. Three phase
Static Bivector meter
|
800/-
|
|
|
8.9
|
The
Commission has approved WESCO’s revenue requirement for the year 1999-00 as Rs.426.17
crores. The expected revenue from charges approved by the Commission over a 12 months
period is estimated as Rs.424.01 crores. The Licensee will get Rs.2.42 crores on account
of miscellaneous receipts and meter rent over a 12 months period. The revenue requirement
and expected revenue of WESCO, approved by the Commission for the FY 1999-00, are given
below :-
(Rs. in crores)
|
Total Revenue
Requirement
|
426.17
|
|
Less Miscellaneous
Revenue
|
2.42
|
|
Net Revenue
Requirement
|
423.75
|
|
Expected Revenue
|
424.01
|
|
Surplus
|
0.26
|
|
|
9.0
|
In the light of our
findings, the Commission Orders as follows with reference
to the prayers of the applicant :
-
While the Commission does not approve the amendments
suggested by NESCO for tariffs and charges it directs that the Licensee implements the
tariff and charges as determined by the Commission in this Order effective from 1st
February, 2000.
-
The revenue requirement for 1999-00 as projected by the
Licensee does not meet with the approval of the Commission. The Licensee is directed to
adopt the revenue requirement figures for 1999-00 as calculated by the Commission.
-
The proposal for cash flow from WESCO to NESCO and SOUTHCO
does not meet with the approval of the Commission.
-
The tariff proceeding is not the appropriate occasion for
decision on the proposal for moratorium on addition of captive generation.
The application of M/s WESCO is disposed of accordingly.
|
Sd
|
Sd
|
|
D.K.Roy
Member
|
S.C.Mahalik
Chairman
|
|
|