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

Analysis of ARR & Tariff Proposal of
SOUTHCO for FY 2011-12
February 10, 2011
By
World Institute of Sustainable Energy
(Consumer Counsel)
ARR submission and Proposal of
SOUTHCO
ARR submission of SOUTHCO
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 for FY 2009-10
Contingency Reserve
Total ARR
Sale of Power at existing tariff
Other Revenue
Total Revenue Relisation
Revenue Gap with existing Tariff
In Rs. Cr.
2011-12 Projected
325.03
283.49
39.43
50.13
20.25
10.35
62.01
8.11
144.54
123.11
2.1
1068.55
517.44
6.5
523.94
544.51
Tariff Proposal of SOUTHCO
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
–
Computation of Over drawl penalty
–
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
–
Over Drawl Penalty for Drawl over and above OERC approved Quantum (MU) & (MVA)
–
Back to back DPS adjustment between GRIDCO, GOO and Licensee
–
Initiatives to increase collection efficiency through Jan Seva Kendra in DISCOMS
–
Power factor penalty
–
Fuel price adjustment
–
Rebate on prompt payment
Analysis of
ARR by Consumer
Counsel
Cost components of ARR
0%
Power purchase cost
11%
Employee Cost
A&G Cost
30%
R&M Cost
13%
Depreciation
Bad Debts
1%
Interest & Finance charges
6%
Reasonable return
1%
2%
Amortization of Regulatory Asset
5%
4%
27%
Truing up of Revenue Gap for FY
2009-10
Contingency Reserve
Observation:
44.33% is the distribution cost of proposed ARR
Revenue GAP of SOUTHCO for FY 2011-12(in Rs Cr)
Revenue Collection / Shortfall of Proposed ARR
48%
Sale of Power at existing tariff
Other Revenue
51%
Proposed Revenue Gap
1%
Annual Revenue Requirement SOUTHCO
ARR
2010-11
2011-12 % Change
Approved Projected
Power purchase cost
269.19
325.03 20.74371
Employee Cost
133.96
283.49 111.6229
A&G Cost
17.96
39.43 119.5434
R&M Cost
26.11
50.13
91.9954
Depreciation
14.12
20.25
43.4136
6.98
10.35
48.2808
15.41
62.01
302.401
6.03
8.11
34.4942
Amortization of Regulatory Asset
0
144.54
Truing up of Revenue Gap for FY 2009-10
0
123.11
Contingency Reserve
0
2.1
Bad Debts
Interest & Finance charges
Reasonable return
Total ARR
Observation:
-SOUTHCO has proposed 118% hike in ARR for 2011-12
489.76
1068.55 118.1783
ARR cost component-Power Purchase Cost
Issues:
1. Utilization of proposed power
2. Higher demand forecasts
3. Higher Distribution Loss
4. Lower Collection Efficiency
5. Higher AT & C Loss
6. Higher loss in LT and HT network
Utilization of Proposed Purchased Power
SOUTHCOs Power Sale/Distribution Loss
36%
43%
Power sale to LT Consumers
Power sale to HT Consumers
Power sale to EHT Consumers
Distribution Loss
8%
13%
Observation:
- 43% power purchased is loss and actual sale is 57%
Demand Forecasting (In MU)
FY 2010-11
FY 2011- % Change Number of Consumers
Sale/
over
12
Purchase Projection Revised
%
As on As on
%
2010-11
Projection
in ARR
Estimates Change
Revised 1/4/2010 1/4/2011 Change
in ARR
(Based on actual
(Rev Est.
in
Estimates
data of Six
months)
over Projection)
LT
923.99
849.39
-8.07 1028.89
HT
234.13
225.79
-3.5
219.79
EHT
290.15
283.61
-2.25
390.89
Total Sale
1448.29
1358.80
-6.17 1639.59
Total Purchase
2530
2545.00
0.59 2860.00
21.13 622,824 856,597
-2.65
539
569
37.82
12
12
20.66
38%
6%
0%
12.38
Observation: Utilities demand forecast is on higher side and also have some discrepancies in
terms of % rise in Consumption Vs % rise in number consumers in EHT category. This will
result in higher power purchase cost in ARR and corresponding impact on consumers
Submission: Excess power purchase cost is mainly due to excess loss at LT level. Utilities
should be directed to drastically reduce the LT loss level.
Distribution Loss (%)
Observation:
-There is huge gap in projected
(42.62%) and approved (26.5%)
distribution loss. -Trend of
actual distribution loss is
increasing.
-There is no financial provision
for SI in ARR and in BP.
Distribution Loss(%)
60
50
% Loss
40
30
20
10
0
2002-03
2003-04
2004-05
2005-06
2006-07
Approved in BP
2007-08
2008-09
2009-10
2010-11
2011-12
2007-08
2008-09
ARR
2009-10
2010-11
2011-12
Actual
Approved
in ARR
Approved
in BP
30.4
30
45.5
+15.5
30.4
30.42
47.8
+ 17.38
27.9
27.92
48.02
+ 20.15
27.82
27.82
26.5
Actual Audited
Performance
?
?
Submission:
-Loss of revenue realization /
higher energy purchase due to
(16.17 %, 462.5 MU, 53.62Cr )
higher distribution loss should
not be allowed to passed on to
consumer.
Collection Efficiency (%)
Collection Efficiency (%)
110
Collection Efficiency in %
100
90
80
70
60
50
40
2002-03
2003-04
2004-05
2005-06
Approved in BP
2006-07
2007-08
ARR
2008-09
2009-10
2010-11
2011-12
Actual
Approved
in ARR
Approved
in BP
2007-08
94
94
2008-09
94
94
2009-10
95
98
2010-11
97
98
?
99
?
2011-12
Observation:
-Collection efficiency proposed is
lower by 1 % than that of
approved in BP.
-LT collection efficiency up to Sept
09 (Actual) is 83.96%. Which
clearly shows the reason for lower
overall collection efficiency.
-Further the gap between the
approved and actual collection
efficiency is increasing from 200910 which indicates that measures
taken by the utility are not
effective to that extend.
Actual Audited
Performance
94.1
+ 0.1
94.2
+ 0.2
95.98
- 2.2
Submission:
-Loss of revenue realization due to
1% lesser collection efficiency
(than that of approved in
BP)should not be passed on to
consumer
-Nominal DPS to LT consumers if
allowed could help to improve the
collection efficiency.
AT & C Loss (%)
AT & C Loss (%)
60
AT & C Loss in %
50
40
30
20
10
0
2002-03
2003-04
2004-05
2005-06
2006-07
Approved in BP
2007-08
2008-09
2009-10
2010-11
2011-12
2007-08
ARR
2008-09
2009-10
2010-11
2011-12
Actual
Approved
in ARR
Approved
in BP
34.6
34.2
48.7
+14.5
34.6
34.59
50.8
+ 16.21
29.4
29.36
50.16
+ 20.8
29.27
29.26
27.24
Actual Audited
Performance
?
?
Observation:
-Licensee has proposed 43.82%
AT&C Loss.
-93% Metering covered till Sept
2009.
-Low Agriculture Consumption.
-This implies that the reason for
higher AT&C loses could be
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
-
Six energy police stations
are functioning out of
proposed Nine.
Distribution Loss excluding EHT Consumption
FY 2009-10 FY2010-11
Actual
Proposed
FY 2010-11
Revised
Estimates
FY 201112
Proposed
Overall Distribution
Loss
48.02%
42.76%
46.61%
42.67%
Distribution Loss
Excluding EHT
consumption
53.56%
48.29%
52.45%
49.43%
Distribution Loss
Approved in BP
27.83%
26.50%
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 find out reasons for high losses in HT and LT level. Faulty metering , meter
tampering , power theft needs to be drastically reduced with the help of regular inspection, dedicated
flying squad and energy police stations. Such energy police stations should be directly controlled by
senior police officer attached to energy department.
ARR cost component – Employee Cost
• Observation:
The utility has proposed the Employee cost of Rs 283.49
Cr in ARR with 111.62% 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. 39.43 Cr for FY 2011-12 which are 119.54%
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:
Most of the A&G expenses projected by the utility are based on 7% hike from the current year in
line with LTTS order. Further, utility has proposed higher expenses under the heads Franchise
expenses, Training Expenses, Special police stations, organizational development expenses,
additional expenses etc without any detailed supporting plan and breakup of cost components.
These expenses shall not be allowed to pass through in the ARR.
ARR cost component – R&M
Observation:
Utility has proposed Rs. 50.13 Cr as R&M expenses. These expenses
were projected as 5.4% of the opening GFA. (Rs. 928.36 Cr. at the
beginning of FY-2011-12)
Submission:
Utilities GFA approved by commission as on 31.03.2010 were 390.96
Cr. Utility has projected the GFA as Rs. 928.36 Cr. at the beginning
of ensuring year. Which seems to be on higher side. Therefore Hon.
Commission should consider the new additional GFA (during FY
10-11) over and above approved GFA of Rs. 390.96 and equivalent
R&M be allowed to pass through in the ARR.
ARR cost component–Interest & financial charges
Observation:
Utility has proposed Rs 62.01 Cr as net interest charges in the ARR.
This includes the major component of Rs. 30.68 Cr towards
differential interest payment of power bond.
Submission:
Rs. 30.68 Cr towards differential interest payment of power bond
should not be allowed to pass through in ARR.
ARR cost component – Provision for Bad Debt
Observation:
Utility has proposed Rs 10.35 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. 5.175 Cr.
ARR cost component-RoE
Observation:
As proposed equity capital is constant for the current and ensuring
year. There is no new equity capital infusion from DISCOM. Hence
the Return on Equity should remain same as that of approved for FY
2010-11.
Submission:
Proposed higher RoE (Rs. 8.11 – Rs 6.03 Cr)should not be allowed to
pass through in 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
Growth in LT consumers
Consumer
category
Total LT
consumers
Total HT
consumers
Total EHT
consumers
Grand Total
Number of Consumers
FY
FY
% Increase in
2010-11 2011-12 Difference Consumers
622,824 856,597
233,773
38%
569
30
6%
12
12
623,375 857,178
0
233,803
0%
38%
539
Percentage Energy Sale FY 11-12
24%
13%
Total LT Sale
63%
Total HT Sale
Total EHT Sale
Observation:
-About 63 % of energy is proposed to be sold to LT consumers.
- Year on Year growth in LT consumers is 38%
-Minor change in LT tariff has considerable impact on ARR.
-As the LT consumer base is increasing there is likely possibility of further reduction of collection efficiency
-This will increase pressure of cross subsidy on HT and EHT consumers.
Growth in Kutir Jyoti / BPL consumers
Number of Consumers
Proposed
Position Position as Addition % Increase
Addition
% Increase
Consumer
as on
on
in FY (1/4/10 to
during FY
(1/4/11 to
category 01.04.2010 01.04.2011 2010-11 1/4/11)
2011-12
1/4/12)
LT
Domestic
537,541
587,541
50,000
9%
50,000
8.51%
Kutir Jyoti
<=30 kWh
22,823
202,897 180,074
789%
4,00,000
197.14%
Total LT
domestic
560,364
790,438 230,074
41%
4,50,000
56.93%
Observation:
 The growth of BPL consumers is increasing due to GoI / GoO rural electrification schemes : growth
in FY 2010-11 ( 789%) & anticipated in FY 2011-12 ( 197% ) 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 SOUTCO 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 subsidized BPL tariff should be strictly made applicable to the consumer having monthly energy
consumption of 30 units .
 The OERC may recommend GoO to give upfront subsidy to DISCOM to cater the BPL consumer in
the state.
Submission of Consumer Counsel
•
SOUTHCO’s projection of purchase forecasts are on higher side due to higher losses at HT and LT level.
Cost of power of Rs 53.62 Cr due to higher distribution loss should not be allowed to pass through in ARR.
•
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. 30.68 Cr towards differential interest payment of power bond should not be allowed to pass through
in ARR.
•
Rs. 5.175 Cr higher provision for bad debt should not be allowed to pass through in the ARR..
•
Rs 2.08 Cr of Proposed higher RoE of Rs (Rs. 8.11 – Rs 6.03 Cr)should not be allowed to pass through in
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
27 of all
category of consumers.