Transcript Comment on ARR & Tariff Proposal of OHPC for FY 2007

A
A
Presentation
Presentation
on
on
ARR & Tariff Proposal of NESCO for
ARR & Tariff Proposal of NESCO for
FY 2008-09
FY 2008-09
Analysis/Objections/Suggestions
Analysis/Objections/Suggestions
February 4, 2008
By
By
Dr. Shibalal Meher
Dr. Shibalal Meher
(Consumer Counsel)
(Consumer Counsel)
Nabakrushna Choudhury Centre for Development Studies,
Nabakrushna Choudhury Centre for Development Studies,
Bhubaneswar
Bhubaneswar
1
TARIFF FILING BY LICENSEE BEFORE THE COMMISSION (FY 2008-09)
ITEMS
NESCO
Rev. Req. (Rs.Cr.) ( Including Reasonable Return)
897.59
Power Purchase (MU)
4659.50
Anticipated Sale (MU)
3374.04
LT
1078.43
HT
678.10
EHT
1617.51
Distribution Loss (%)
27.59
Collection Efficiency (%)
95.0
AT&C LOSS (%)
31.21
Exp. Rev.at Exist. Tariff (Net) (Rs.Cr.)
924.28
(Exp. Rev+Misc.Rev.) at Exist. Tariff (Net) (Rs.Cr.)
928.78
Revenue Surplus (Rs. Cr. )
31.19
Previous Losses (Rs. Cr. )
202.20
Revenue Gap (Rs. Cr. ) including past losses at Existing Tariff
171.01
Exist.Overall Average Tariff (Net) (p/u)
281
Exist.LT Average Tariff (Net) (p/u)
217
Exist.HT Average Tariff (Net) (p/u)
335
Exist.EHT Average Tariff (Net) (p/u)
300
2
Annual Revenue Requirement (Rs Crore)
Purchase of Energy
Employee Cost
R&M Expenses
A&G Expenses
Interest & financial charges
Bad Debt
Depreciation
Reasonable return
Other expenses
Total Annual Revenue Requirement
556.48
139.79
32.70
27.25
60.61
46.21
21.73
10.55
2.27
897.59
3
Tariff Proposal
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.
4
Tariff Rationalisation Measures
•
•
•
•
•
Surcharge on delayed payment
KVAK billing for LT industrial consumers
Raising of service connection charges
Raising of reconnection charges
Rebate on prompt payment
5
ANALYSIS OF PROPOSAL
BY
CONSUMER COUNSEL
6
Revenue Gap of NESCO during 2008-09
(Rs in Crore)
Revenue Requirement including
897.59
reasonable return during 2008-09
Revenue from Tariff & Others during 928.78
2008-09
Revenue Surplus during 2008-09
31.19
Past Losses
202.20
Total Revenue Gap
171.01
7
Deficit Reduction
• Non transfer of past losses (Rs
202.20 Crore)
• Reduction in distribution loss
• Increase in collection efficiency
• Non transfer of past differential
interests on NTPC Bond
8
Deficit Reduction (Contd…)
• Non allowing of reasonable return (Rs
10.55 Crore)
• Reduction of bad & doubtful debts (Rs
46.21Crore)
• Collection of outstanding arrears
9
Sale of Power and Distribution Loss
of NESCO (In MU)
2006-07
2007-08
% Change
2008-09
% Change
LT
757.78
891.40
17.63
1078.43
20.98
HT
581.11
679.24
16.89
678.10
-0.17
EHT
1331.28
1585.73
19.11
1617.51
2.00
Total sale
2670.18
3156.37
18.21
3374.04
6.90
Total
Purchase
3998.69
4508.20
12.74
4659.50
3.36
Distribution
loss
1328.36
1351.83
1.77
1285.46
-4.91
% Loss
33.22
29.99
-3.23
27.59
-2.40
10
Distribution Loss of NESCO from
FY 2005-06 to FY 2008-09
2005-06
Distribution
loss including
sale at EHT
(%)
37.08
Distribution
loss excluding
sale at EHT
(%)
51.33
Distribution
loss as per
business
plan (%)
35.00
2006-07
33.22
49.80
32.00
2007-08
29.99
(Estimated)
2008-09
27.59
(Projected)
52.42
29.00
42.26
Distribution Loss of NESCO from
FY 2003-04 to FY 2008-09
Distribution loss (%)
Business Plan
2003-04
43.66
Actual/
Estimated
43.66
2004-05
38.0
39.4
2005-06
35.0
37.08
2006-07
32.0
33.22
2007-08 (estimated)
29.0
29.99
2008-09 (projected)
27.59
12
Collection Efficiency (%)
Year
Approved
Actual/Estimated
2006-07
94.00
92.00
2007-08
94.00
94.00
2008-09
95.00
13
AT & C Loss (%)
Year
Approved
Actual/Estimated
2006-07
36.08
40.91
2007-08
33.26
34.19
2008-09
31.21
14
Distribution Cost of NESCO
(Rs in Crore)
2007-08
Approved Estimated %
Change
2008-09
Estimated
%
Change
27.06
(67.67)
18.74
(33.85)
103.51
(112.39)
32.32
(65.58)
Employee 83.37
Cost
110.02
31.97
139.79
R&M
Cost
24.43
27.54
12.73
32.70
A&G
Cost
12.83
13.39
4.36
27.25
150.95
25.13
199.74
Distributi 120.63
on Cost
15
Distribution Cost per Unit Sale of Energy by
NESCO During 2007-08 & 2008-09
(Paise/Unit)
2007-08
(Estimated)
26
2008-09
(Projected)
41
08
10
A & G Cost
04
08
Distribution
Cost
38
59
Employee
Cost
R & M Cost
Interest and Financial Charges
(Rs Crore)
2007-08
2008-09
Difference
Interest on 13.28
loan/bond
51.23
Interest on 7.70
security
deposit
Total
20.98
9.38
37.95 (32.80 as
differential interest
on power bond)
1.68
60.61
39.63
17
BROAD TARIFF RELATED
ISSUES RAISED BY
OBJECTORS
(To be addressed by NESCO)
18
Issues emerge from the objections/
suggestions submitted by the Objectors
• Legal
The ARR application filed by the licensee is not tenable
under law due to the following defects:
– The licensee has not produced the audited accounts for FY 200506 and FY 2006-07.
– The licensee has filed the application to confuse the consumers
without disclosing the purpose of such filing.
– The interested persons are being kept in dark and not able to file
effective objection and as such the purpose of such exercise has
been frustrated and contrary to law and principle of natural justice.
– The procedure/method so adopted by the Commission be simple
and inexpensive.
– The licensee has failed to provide details as required under
regulations to the Commission for consideration of his application
as such the application may be rejected.
19
Issues emerge from the objections (Contd..)
• Distribution Loss
– The licensee has failed to arrest the high distribution
loss on account of unauthorized use of power.
– The distribution losses should be calculated by
excluding EHT sale to consumers.
– The declared loss by the licensee is unrealistic as a
large chunk of consumers are still unmetered and
having defective meters.
– It is a common practice of the licensee to raise bogus
bills at the year-end to show lower distribution loss.
Collection Efficiency
– Licensee should exhibit the collection separately for
current and arrears.
20
Issues emerge from the objections (Contd..)
• Pass through of Past Losses
– The truing up should not be allowed for inability to meet the
distribution loss and collection efficiency targets.
– Amortization of regulatory assets may be disallowed since it is a
reflection of inefficient management of the licensee.
• Arrear Collection
– There is huge amount of outstanding arrears, but the licensee has
not disconnected the electric lines of the defaulters due to the
willful negligence.
– Adjustment of dues of the Govt. Depts. & Govt. Undertakings
against the Power Bonds are not permissible as it is not the
responsibility of the GRIDCO to address the liability towards the
arrear dues.
21
Issues emerge from the objections (Contd..)
• Provision of Bad and Doubtful Debt
– Truing up for bad & doubtful debts should be made to
take into account only such dues which are not
collectable and have been written off from the books of
licensee, based on audited accounts.
• Power Factor Incentive/ Power Factor Penalty
– Increase of the normal power factor to 0.95 will result
in heavy additional investment by the consumers and is
uncalled for.
– The practice of permitting computation of power factor
incentive above 90% should continue.
22
Issues emerge from the objections (Contd..)
• Cross Subsidy
– The Hon’ble Commission may reduce the cross subsidy
from year to year between the subsidized and
subsidizing categories.
• Quality of Services
– The supply of electricity is most irregular, and the low
voltage of electricity, poor maintenance of electric line,
undeclared power cuts, and frequent tripping of
electricity have become the order of the day. It is moral
as well as legal obligation of the licensee to maintain
the feeders properly to improve the quality of power
supply.
23
Issues emerge from the objections (Contd..)
• Consumer Classification
– Lowering of load factor for plastic industries and
similar continuous process industries from 50% to 35%
to be eligible for discounted tariff.
• Financial Issues
– In the absence of unaudited balance sheet and report of
the auditors it is not possible for the objectors to make
proper observation on financial matters.
• Interest towards Securitisation
– The interest charges towards securitization as well as
capital of securitisation should not be passed on to the
revenue requirement for tariff purposes.
24
Issues emerge from the objections (Contd..)
• Computation of Load Factor
– A lower load factor up to 50% may be
prescribed for the period of annual
maintenance, which will be jointly decided by
the licensee and the consumers.
– The guaranteed load factor of 80% should be
determined on an annual basis.
– If the load factor is maintained at a level of
more than 30%, the licensee may be directed to
allow the concession.
25
Issues emerge from the objections (Contd..)
• Tariff Issues
– For determination of average cost of supply, the bulk
supply price should be considered on the basis of
average cost of power procurement from different
sources plus a trading margin as determined by the
CERC.
– The Orders of the Hon’ble Commission determining the
incentive tariff for HT & EHT consumers has resulted
in increase the Cross Subsidy, which is contrary to the
principle annunciated in the OERC (Terms &
Conditions of Determination of Tariff) Regulations,
2004 and the National Tariff Policy.
– For the purpose of incentive calculation, the demands
recorded in hours other than off peak hours shall be the
basis for calculation of incentive.
26
Issues emerge from the objections (Contd..)
– The Hon’ble Commission may revert to the system of
two-part tariff while approving the Bulk Supply
purchase by different Distribution Licensees.
– The Licensee should submit to the Bulk Supplier the
monthly demand and energy requirement. Penalty
should be imposed for over drawl. The minimum
demand charges should be based on 80% projected
demand by the Licensee in a particular month.
– Every interruption should be considered as an
interruption for a period of 30 minutes and all such
periods be deleted from the total hours in a month.
27
Issues emerge from the objections (Contd..)
– The demand charges may be calculated prorata if the
total of such periods (causing loss of production due to
interruptions) and pre-arranged shut downs availed on
intimation, or statutory power cuts, exceeds 60 hours in
a month.
– There is no justification of increase in the connection
and reconnection charges.
– Additional levy by way of DPS is unnecessary and
unreasonable. The present practice of DPS and rebate
should be continued.
– To impose Demand Charges on the CPPs/ Generating
Stations for emergency drawl without any back up data
leads to unknown increase in SD.
28
Issues emerge from the objections (Contd..)
– There is no justification to accept the prayers of the licensee
regarding demand charges @200/KVA for consumers having CD
more than 70 KVA through HT supply, fixed charges for LT
Industrial and Public Water works, increase in connection charges,
tariff for medium industry, MMFC for consumers with CD less
than 110 KVA, KVAH billing for LT industrial consumers.
– In case the meter rent is withdrawn on the ground that no sales tax
is applicable to the consumer, if there is no change in ownership,
the licensee will have no obligation to replace the meter in time
which leads to incorrect readings of the energy consumption by the
use of old meters.
– The Licensee is still continuing realizing meter rent even after the
recovery of the cost of meter. The Licensee be directed to return
such excess cost realization.
29
Issues emerge from the objections (Contd..)
• Demand Charges
– Increase in demand charges for industries are very
much burdensome to consumers without increasing the
reliability or quality of supply in any manner.
– It would be prudent to encourage medium industries to
graduate to large industries by retaining the present
demand charges.
• Railways
– Hon’ble Commission may consider suitable reduction
in the proposed demand and energy charges for railway
traction.
– Penalty provision on account of over drawl may be
withdrawn in case of railway traction.
30
Issues emerge from the objections (Contd..)
– Hon’ble Commission may allow to take power supply for
traction sub-station directly from GRIDCO through
OPTCL as per the tariff applicable to DISTCOs.
– Single part tariff for railway traction may be considered.
– Proposal to record simultaneous maximum demand for
railway traction supply may be considered.
– Railway may be exempted from payment of security
deposit.
– Stipulation of power factor in case if it goes below 0.85 as
against existing 0.90.
– Restoration of incentive for improvement in power factor
above 0.85.
– Grant of relief to railways for power supply interruption as
well as poor quality of supply.
31
Issues emerge from the objections (Contd..)
• General Issues
– The licensee is required to notify the consumers 24
hours before the scheduled power cut by print,
electronic media and public address system.
– It is requested to operate Camp Courts at Balasore at
least 6 times in a year to lessen the burden of the
consumers.
– It is neither possible nor desirable that the consumers be
made to finance the licensee to meet its obligations. The
Hon’ble Commission may direct the licensee to infuse
additional funds as may be required to turn around the
sector.
32
Issues emerge from the objections (Contd..)
– There is ample scope for the licensee to earn
substantial miscellaneous revenue through
advertisements and communication, which will
go a long way in reducing the burden on the
consumers.
– The Hon’ble Commission may reject the prayer
of the Applicant to allow higher ARR or
increase in the RST for the year 2008-09. On
the other hand, reduce the RST based on the
lower distribution loss.
33
34