Transcript Analysis of ARR & Tariff Proposal of SOUTHCO for FY 2010-11

Analysis of ARR & Tariff
Proposal of
WESCO for FY 2011-12
February 07, 2011
World Institute of Sustainable Energy
(Consumer Counsel)
ARR submission and
Proposal of WESCO
ARR submission of WESCO
In Rs. Cr.
ARR
Power purchase cost
Employee Cost
A&G Cost
R&M Cost
Depreciation
Bad Debts
Interest & Finance charges
Reasonable return
Amortization of Regulatory Asset
Truing up of Revenue Gap ( FY 2010-11)
Contingency Reserve
Total ARR
Sale of Power at existing tariff
Other non tariff Revenue
Total Revenue Relisation
Revenue Gap with existing Tariff
2011-12 Projected
1414.86
362.7
38.4
50.21
33.27
47.16
62.34
7.78
48.67
182.05
3.49
2250.93
1557.93
20.58
1557.93
672.42
Prayer of WESCO
The licensee requests the Hon’ble Commission
to accept the proposal of ARR and bridge the
revenue gap through combination of
– grant/subsidy from the state govt.,
– reduction in BST and/or
– increase in RST in appropriate manner.
Proposed Tariff Rationalisation Measures
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Provision of 120% of CD for industry should be withdrawn
Delayed payment surcharge
KVAH billing for three phase LT & HT industrial consumers
Demand charges for consumers having contract demand more
than 70KVA through HT supply
Payment of demand charges for CPPs
Discontinuance of load factor incentive in Energy Charges
Fixed charges for LT industrial (S & M), specified public purpose
and public water works
Tariff for Medium Industries Consumers
Monthly Minimum Fixed Charges for consumers with contract
demand < 110 kVA
Security deposit for providing meter and metering installations
Demand charges and monthly minimum fixed charges
Inspection fees of lines and substations
Billing of lift irrigation points
Analysis of
ARR by Consumer
Counsel
Cost components of ARR
0%
2%
0%
2%
2%
2%
2%
Power purchase cost
8%
Employee Cost
3%
A&G Cost
R&M Cost
Depreciation
Bad Debts
Interest & Finance charges
16%
63%
Reasonable return
Amortization of Regulatory Asset
Truing up of Revenue Gap for FY
2010-11
Contingency Reserve
Revenue GAP of WESCO for FY 2011-12 (in Rs Cr)
Revenue Collection / Shortfall for Proposed ARR (Rs 2250 cr)
Sale of Power at existing
tariff
672.42, 30%
Other Revenue
Proposed Revenue Gap
20.58, 1%
1557.93, 69%
Annual Revenue Requirement WESCO ( Cr)
ARR
Power purchase cost
2010-11
Approved
2011-12 % Change
Projected
1359.18
1414.86
4.10
166.73
362.7
117.54
A&G Cost
24.79
38.4
54.90
R&M Cost
34.77
50.21
44.41
Depreciation
19.72
33.27
68.71
Bad Debts
20.85
47.16
126.19
Interest & Finance charges
33.77
62.34
84.60
7.78
7.78
0.00
0
48.67
0
-2.52
182.05
0
3.49
1665.07
2250.93
Employee Cost
Reasonable return
Amortization of Regulatory Asset
Truing up of Revenue Gap for FY 2010-11
Less Expenses Capitalized
Contingency Reserve
Total ARR
Observation:
WESCO has proposed 35.19% hike in ARR for 2011-12
35.19
Computation of ACS of WESCO
Particulars
Energy Purchase
Unit
MU
Licensee projection
for FY 2011-12
6500.00
Distribution loss
%
31.30
Collection Efficiency
%
98
Salable unit
MU
4466.18
Average cost of supply
Paisa /
kWh
499.39
(at BSP 194 P/U)
* As per data submitted by the licesee in the ARR
Submission on Cost Components of ARR
Power Purchase Cost
Analysis Important Factors:
1. Utilization of proposed power
2. Demand forecasts
3. Distribution Loss
4. Collection Efficiency
5. AT & C Loss
Utilization of Purchased Power (FY 11-12)
WESCOs Power Sale/Distribution Loss ( MU)
26%
31%
Power sale to LT Consumers
Power sale to HT Consumers
Power sale to EHT Consumers
Distribution Loss
21%
22%
Observation:
HT & EHT sale contribution is 43%
Distribution loss ( 31%) is more than total LT sale (26%)
Demand Forecasting
FY 2010-11 (MU)
Sale/ Purchase
Projected in Revised Estimates ( % Change
Projected)
actual data of Six months)
ARR
(over
FY 2011-12
Projection in
ARR
(MU)
LT
HT
EHT
1584
1563
1504
1333
1400
1383
-15.85
-10.43
-8.05
1697
1350
1419
Total Sale
4651
4116
-11.50
4466
Total Purchase
6500
6244
-3.94
6500
Observation: Utilities demand forecast need to be checked . During FY 2011-12 ,
total 11.53 lakh LT consumers are suppose to be added , still the reported total sale
/ purchase of power is nearly same. Incorrect estimation of energy will affect the drawl
schedule of licensee as well as force GRIDCO for purchase costly power.
projected dis loss , FY 2010-11 : 34.08% , 11-12 : 31.30
(
Distribution Loss (%)
Distribution Loss(%)
45
40
35
% Loss
30
25
20
15
10
5
0
2002-03
2003-04
2004-05
2005-06
Approved in BP
2006-07
2007-08
2008-09
ARR
2009-10
2010-11
2011-12
Actual
Approve
d in ARR
Approve
d in BP
2007-08
25
25
36.1
(11.1)
2008-09
25
25
33.6
( 8.6 )
2009-10
22.5
22.5
2010-11
19.93
19.83
33.8
34.08 (p)
( 11.3)
?
19.7
31.29 (p)
?
2011-12
Actual Audited /
projected
Performance
Below BP
Observation:
• There is huge gap in projected
(31.29%) and approved (19.7%)
distribution loss.
• Further, trend of actual
distribution loss is increasing.
• Licensee has made provision of
Rs .10.40 Cr for SI in ARR as
against the approval in BP of Rs.
12.50 Cr.
Submission:
• Loss of revenue realization /
higher energy purchase due to
(11.59%, 753.35 MU, 163.95 Cr)
higher distribution loss should
not be allowed to passed on to
consumer.
Collection Efficiency (%)
Observation:
Collection Efficiency (%)
• Collection efficiency proposed is
lower by 1 % than that of
approved in BP.
110
Collection Efficiency in %
100
90
• Gap between the approved and
actual collection efficiency is
widening . Utility need to take
effective steps to further improve
the collection efficiency.
80
70
60
50
40
2002-03
2003-04
2004-05
2005-06
2006-07
Approved in BP
Approved
in ARR
2007-08
2008-09
2009-10
2010-11
2011-12
Approved
in BP
2007-08
2008-09
ARR
2009-10
2010-11
2011-12
Actual
Actual Audited
/ proposed
Performance
96
96
92.9
--3.1
96.6
96.6
93.9
- 2.7
98
98
96
-2
98
98
99
?
98
?
Submission:
• Loss of revenue realization due to
1% lesser collection efficiency
(than that of approved in
BP)should not be passed on to
consumer
.
AT & C Loss (%)
Observations:
• Licensee has proposed 32.60%
AT&C Loss.
• 96% Metering covered till Sept
2009.
• Low Agriculture
Consumption.
AT & C Loss (%)
50
45
AT & C Loss in %
40
35
30
25
20
Possible reason for high AT &C
Loss may be examined
15
10
5
0
2002-03
2003-04
2004-05
2005-06
2006-07
Approved in BP
Approved
in ARR
2007-08
2008-09
2009-10
2010-11
2011-12
Approved in
BP
2007-08
ARR
2008-09
2009-10
2010-11
2011-12
Actual
Actual Audited /
proposed
Performance
28
28
40.7
+12.7
27.5
27.55
37.6
+ 10.1
24
24.05
36.4
+ 12.4
29.27
?
21.53
20.5
32.60
?
1) Lower HT to LT ratio.
2) Poor Power factor
3) Aged transmission lines
and poor jointing
4) Less energy Audits
5) Faulty meters and metering
6) Higher thefts
One energy police stations is
functioning out of proposed
Nine. ( 3.81 cr prop in ARR)
Distribution Loss excluding EHT consumption
FY 200910 Actual
FY2010-11
Proposed
FY 2010-11
Revised
Estimates
FY 2011-12
Proposed
Overall Distribution Loss
35.09%
28.45%
34.08%
31.29%
Distribution Loss Excluding
EHT consumption
46.90%
37.01%
43.78%
40.03%
Distribution Loss Approved
in BP
22.5%
19.83%
LT Distribution Loss
Approved in ARR
19.7%
29.4%
Observation: Distribution loss in HT and LT level is much higher than the overall distribution loss
(taking together LT, HT and EHT consumption) and approved distribution loss in BP.
Submission: Utility needs to explore various measures to reduce LT and HT distribution loss. Further,
faulty metering and power theft needs to be drastically reduced with the help of dedicated flying
squad and energy police stations. Such energy police stations directly controlled by senior police
officer attached to energy department could improve the efficiency.
ARR cost component – Employee Cost
Observation:
The utility has proposed the Employee cost of Rs 362.7
Cr in ARR with 117.54% hike from the earlier FY 2010-11
% Rise in
FY 11-12 over
FY 08-09 (App) FY 09-10 (App) FY 10-11 (App) FY 11-12 (Prop)
FY 08-09
Employee Cost per unit of Energy Purchase (Paise/Unit)
CESU
30.79
32.23
34.83
41.34
34.27
SOUTHCO
47.04
45.62
56.57
99.12
110.72
NESCO
21.96
26.67
28.81
59.88
172.72
WESCO
19.36
21.60
26.70
55.80
188.21
ARR cost component – A&G Cost
Observation:
• Utility has proposed A&G expenses of Rs. 38.4 Cr for FY 2011-12 which are 54.9% higher
than that of approved expenses for FY 2010-11.
A&G Cost (Paise/Unit)
FY 08-09 (App)FY 09-10 (App) FY 10-11 (App) FY 11-12 (Prop)
CESU
4.96
4.77
5.59
7.69
SOUTHCO
6.51
6.84
7.58
13.79
NESCO
3.12
3.68
3.34
7.11
WESCO
3.68
3.55
3.97
5.91
% Rise in
FY 11-12 over
FY 08-09
55.04
111.94
128.08
60.48
Submission:
The Commission has approved A&G expenses of Rs 24.79 Cr in ARR for FY 2010-11 . As per
the LTTS order since it is a controllable cost , 7% escalation may be allowed on the approved
value of 2010-11 . In case of additional A&G cost claimed towards 9 energy police stations
may be allowed
ARR cost component – R&M
Observation:
Utility has proposed Rs. 50.21 Cr as R&M expenses.
These expenses were projected as 5.4% of the opening
GFA of Rs. 929.77 Cr. at the beginning of FY-2011-12
Submission:
Utilities GFA approved by commission as on 31.03.2010
were 551.36 Cr. Utility has projected the GFA as Rs.
929.77 Cr. at the beginning of ensuring year. Which
seems to be on higher side. Therefore Hon. Commission
should scrutinize the new additional GFA (during Fy
10-11) and equivalent R&M be allowed to pass through
in the ARR.
Truing up for 2010-11
Observation :
 Licensee has projected the uncovered revenue gap of (- 37.36 Cr) as
on FY 2009-10 based on audited accounts with licensee
 Further based on the actual data of first half of the current year &
estimate of second half (FY 10-11), the licensee has arrived at an
uncovered gap of (- 182.05 Cr) for FY 10-11 & same is claimed &
requested for truing up in the ARR of FY 2011-12
Submission
 Hon Commission has carried out the updated truing up exercise
(provisional) up to FY 2008-09 in the ARR of FY 2010-11 based on
the audited accounts of WESCO and the performance standard
outline in the Business Plan. At the end of FY 2008-09 the licensee
has surplus gap 587.15 Cr.
 Amount claim for truing up may not allowed to be pass through
in the ARR before final truing up.
ARR cost component – Provision for Bad Debt
Observation:
Utility has proposed Rs 47.16 Cr as provision for Bad Debt by
considering 98% collection efficiency as against 99% approved
in BP.
Submission:
Provision of bad dept 1% (due to the 1% lower collection
efficiency) should not be allowed to be passed on to
consumer through ARR which accounts to Rs. 23.58 Cr.
ARR cost component-RoE
Observation:
As proposed equity capital is constant for the current and
ensuring year. There is no equity capital infusion. Hence the
Return on Equity should remain same as that of approved for
FY 2010-11.
Submission:
Proposed RoE (Rs. 7.78 Cr) may be allowed to pass through in
the ARR.
Per Unit Distribution Cost
Per Unit Distribution Cost (Paise /Unit)
% Rise in
% Rise in
FY 10-11 over FY 11-12 over
FY 09-10 (App) FY 10-11 (App) FY 11-12 (Prop)
FY 09-10
FY10-11
CESU
61.99
66.07
83.95
6.58
27.06
SOUTHCO
80.11
93.11
165.65
16.23
77.92
NESCO
53.25
53.31
108.74
0.11
103.98
WESCO
41.77
48.99
92.59
17.30
89.01
Tariff proposal – Other Issues
Impact of BPL consumers
Number of Consumers
Consumer Position on Position as
Addition in
category (01.04.2010 )
on
FY 2010-11
01.04.2011
LT Domestic
Kutir Jyoti
<=30 kWh
Total LT
domestic
% Increase
(1/4/10 to
1/4/11)
Proposed
Addition
during FY
2011-12
% Increase
496936
507112
10176
2.05
361630
71%
9492
114298
104806
1104.15
791676
692%
506428
621410
114982
22.70
1153306
185.60
Observation:
 The growth of BPL consumers is increasing due to GoI / GoO rural electrification schemes : growth in FY
2010-11 ( 1104%) & anticipated in FY 2011-12 ( 692% ) as per submission in ARR.
 It is predicted that the cumulative BPL consumer in Orissa will raise to 40 lakh by end of 2011-12 ,
accordingly the BPL consumers in WESCOS area will further increase .
Submission:
 In above situation , it will be difficult to maintain the EHT , HT & LT tariff so as to keep the cross subsidy
within (+ / - ) 20% of average cost of supply. .
 The OERC may recommend GoO to give upfront subsidy to DISCOM to cater the BPL consumer in the state.
Submission of Consumer Counsel
Submission
• The Hon Commission may consider to create new LT category and
impose higher tariff for applicability of Electricity used for the purpose
of advertisements, hoardings and other noticeable consumption such as
external flood light, displays, neon signs at departmental stores, malls,
multiplexes, theatres, clubs, hotels and other such entertainment/leisure
establishment
Benefits.
• Improve the cash flow of DISCOM to some extent
• Help to adopt Energy conservation measures, the electricity
otherwise wasted in unproductive purposes
• May opt for roof top SPV installation
Example
• LT VIII category in MH , Fixed charge Rs 400 / month , Energy
charge : Rs 16 /kWh
Submission of Consumer Counsel
•
Energy demand projected by WESCO need to assessed once again based on projected growth of LT
consumer
•
Loss of revenue realization due to 1% lesser collection efficiency should not be allowed to pass through in
ARR. Nominal DPS to LT consumers if allowed could help to improve the collection efficiency.
•
The Utility has not taken any step to reduce distribution loss in the line of recommendations of the
Kanungo Committee and OERC.. Utility needs to explore various measures to reduce LT and HT
distribution loss. Faulty metering and power theft needs to be drastically reduced with the help of
dedicated flying squad and energy police stations. Such energy police stations if directly controlled by
senior police officer attached to energy department could improve the efficiency.
•
Higher A&G expenses should not be allowed to pass through in the ARR.
•
Higher R&M should not be allowed to pass through in the ARR.
•
Rs. 23.58 Cr higher provision for bad debt should not be allowed to pass through in the ARR..
•
Licensee should make effort to collect arrears in order to reduce deficit.
•
ARR can be reduced by increasing collection efficiency, reducing losses and measures suggested by
consumer counsel in the submission..
•
Hon. Commission may kindly consider all above facts and decide the retail tariff in the best interest of all
category of consumers.