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

Analysis of ARR & Tariff Proposal of
NESCO for FY 2011-12
February 09, 2011
By
World Institute of Sustainable Energy
(Consumer Counsel)
ARR submission and Proposal of
NESCO
ARR submission of NESCO
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
1243.26
340.49
40.41
76.66
51.16
27.19
70.19
12.23
21.11
261.42
5.32
2149.53
1359.38
24.31
1383.69
765.84
Tariff Proposal of NESCO
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 Component of ARR
0%
12%
1% 1%
3%
1%
Power purchase cost
Employee Cost
2%
A&G Cost
R&M Cost
4%
Depreciation
Bad Debts
2%
Interest & Finance charges
Reasonable return
58%
Amortization of Regulatory Asset
Truing up of Revenue Gap for FY 2009-10
Contingency Reserve
16%
Observation:
28.6% is the distribution cost of proposed ARR
Revenue GAP of NESCO for FY 2011-12 (in Rs Cr)
Revenue Collection / Shortfall for Proposed ARR
765.84, 36%
Sale of Power at existing tariff
Other Revenue
Proposed Revenue Gap
1359.38, 63%
24.31, 1%
Annual Revenue Requirement NESCO
ARR
Power purchase cost
2010-11
2011-12 % Change
Approved Projected
1120.07
1243.26
11.00
147.58
340.49
130.72
A&G Cost
17.11
40.41
136.18
R&M Cost
37.22
76.66
105.96
Depreciation
21.45
51.16
138.51
Bad Debts
13.14
27.19
106.93
Interest & Finance charges
26.57
70.19
164.17
Reasonable return
10.55
12.23
15.92
0
21.11
0
-0.56
261.42
0
5.32
1393.13
2149.44
Employee Cost
Amortization of Regulatory Asset
Truing up of Revenue Gap for FY 2009-10
Less Expenses Capitalized
Contingency Reserve
Total ARR
Observation:
-NESCO has proposed 54% hike in ARR for 2011-12
54.29
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
NESCOs Power Sale/Distribution Loss
28%
30%
Power sale to LT Consumers
Power sale to HT Consumers
Power sale to EHT Consumers
10%
32%
Observation:
- 28% power purchased is loss and actual sale is 57%
Distribution Loss
Demand Forecasting (In MU)
Sale/
Purchase
FY 2011- % Change Number of Consumers
over
12
Projection Revised
%
%
Projection 2010-11 As on As on
in ARR
Estimates Change in ARR Revised 1/4/2010 1/4/2011 Change
(Based on actual
Estimates
in (Rev Est.
data of Six
FY 2010-11
months)
over Projection)
LT
1451
1300
-10.41
1717
HT
750
546
-27.20
578
EHT
1795
1757
-2.10
Total Sale
3996
3603
Total
Purchase
5573
1818
-9.83 4113.15
32.02 694680 959752 38.16%
5.92
355
365 2.82%
3.49
24
31 29.17%
14.15
-8.19 5686.15
11.12
5117
Observation : Utilities demand forecast is on higher side. 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 (%)
Distribution Loss(%)
50
45
40
% Loss
35
30
25
20
15
10
5
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
26
29
31.2
+ 2.2
25.5
25.5
33.6
+ 8.1
22.5
23
33.8
+ 10.8
18.46
18.46
18.4
Observation:
-There is huge gap in projected
(26.66%) and approved (18.4%)
distribution loss.
-Trend of actual distribution
loss is increasing.
-Licensee has made provision
of Rs .24.72 Cr for SI in ARR as
against the approval in BP of
Rs. 50.0 Cr.
Actual Audited
Performance
?
?
Submission:
-Loss of revenue realization /
higher energy purchase due to
(9.26 %, 526.5 MU, 102.67 Cr)
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
2007-08
2008-09
2009-10
2010-11
2011-12
2006-07
2007-08
ARR
2008-09
2009-10
2010-11
2011-12
Actual
Approved
in ARR
Approved
in BP
94
94
93.2
--0.8
95
95
92.5
- 2.5
98
98
90.5
- 7.5
98
98
99
Actual Audited
Performance
?
?
Observation:
-Collection efficiency proposed is
lower by 1 % than that of
approved in BP.
-LT collection efficiency up to
Sept 09 (Actual) is 60%. Which
clearly shows the reason for lower
overall collection efficiency.
-Further the difference between
the approved and actual
collection efficiency is showing
increasing trend. The measures
taken by the utility are not
effective to that extend.
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
30.4
33.3
35.9
+5.5
29.2
29.23
39.5
+ 10.3
24.5
24.54
38.6
+ 14.1
20.09
20.09
19.22
Actual Audited
Performance
?
?
Observation:
-Licensee has proposed 29.11%
AT&C loss
-92% Metering covered till Sept
2010 out of which 67% meters
are in working condition. .
-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
-
Three energy police stations
are functioning out of
proposed five.
Distribution Loss excluding EHT consumption
FY 2009-10 FY2010-11
Actual
Proposed
FY 2010-11
Revised
Estimates
FY 201112
Proposed
Overall Distribution
Loss
33.80%
42.76%
46.61%
27.66%
Distribution Loss
Excluding EHT
consumption
48.25%
41.74%
45.06%
40.67%
Distribution Loss
Approved in BP
18.46%
18.40%
Issue: 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 340.49 Cr in ARR
with 130.72% 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. 40.41 Cr for FY 2011-12 which are 136.18%
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 Insurance,
legal expenses, consultancy charges, travelling expenses, Watch & ward anti theft security,
miscellaneous 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. 76.66 Cr as R&M expenses. These expenses
were projected as 5.4% of the opening GFA. (Rs. 1419.58 Cr. at the
beginning of FY-2011-12)
Submission:
Utilities GFA approved by commission as on 31.03.2010 were 596.73
Cr. Utility has projected the GFA as Rs. 1419.58 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. 596.73 and equivalent
R&M be allowed to pass through in the ARR.
ARR cost component-Interest & Financial Charges
Observation:
Utility has proposed Rs 70.19 Cr as net interest charges in the ARR. This
includes the major component of power bond – differential amount of Rs.
32.79.
Submission:
Rs. 32.79 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 27.19 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. 13.59 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 higher RoE (Rs. 12.23 – Rs 10.55 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
% Increase in
FY 10
FY 11 Difference Consumers
694,680 959,752
355
365
265,072
38.16
10
2.82
Percentage Energy Sale FY2011-12
42%
44%
14%
24
31
695,059 960,148
7
265,089
29.17
38.14
Total LT Sale
Total HT Sale
Total EHT Sale
Observation:
-About 42% 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.
Impact of BPL consumers
Consumer
category
LT
Domestic
Kutir Jyoti
<=30 kWh
Total LT
domestic
Number of Consumers
Position as Position
% Increase
on
as on
(1/4/10 to
01.04.2010 01.04.2011 Difference
1/4/11)
Addition
during FY
2011-12
% Increase
(1/4/11 to
1/4/12)
580,252
718,310
1,38,058
23.79
1,55,760
21.68
46,370
168,450
1,22,080
263.27
1,27,440
75.65
626,622
886,750
2,60,128
41.51
1,169,950
31.94
Observation:
 The growth of BPL consumers is increasing due to GoI / GoO rural electrification schemes : growth in FY
2010-11 ( 263.27%) & anticipated in FY 2011-12 ( 75% ) 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 NESCOs area will further increase .
Submission:
-Benefits of lower tariff to BPL / Kutir Jyoti consumers need to be extended to the consumers having monthly
consumption of 30 kWh only.
-BPL / Kutir Jyoti consumers having higher consumption should be treated as general LT domestic consumers.
-In view of increasing BST, BPL category consumers tariff needs to be increased suitably or equivalent upfront
energy should be sought from state Govt.
Submission of Consumer Counsel
•
NESCO’s projection of purchase forecasts are on higher side due to higher losses at HT and LT level. Cost
of power of Rs 102.76 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. 32.79 Cr towards differential interest payment of power bond should not be allowed to pass through
in ARR.
•
Rs. 13.59 Cr higher provision for bad debt should not be allowed to pass through in the ARR..
•
Rs 1.68 Cr of Proposed higher RoE of Rs (Rs. 12.23 – Rs 10.55 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.