SUMMER INTERNSHIP-REPORT On ANALYSIS OF FINANCIAL VIABILITY OF DISTRIBUTION TARIFF ORDER Under the guidance of, Mr. Chandra Prakash Deputy Chief (Engineering) Central Electricity Regulatory Commission Submitted by Rahul Saini Roll no- 64 MBA-POWER MANAGEMENT 2012-14 August 2013 CENTRE FOR ADVANCED MANAGEMENT & POWER STUDIES NATIONAL POWER TRAINING INSTITUTE, FARIDABAD (Under the Ministry of Power, Government of India) Affiliated to 1 DECLARATION I am Rahul Saini ( Roll No. 64), MBA (Power Management), Batch 2012-14 of the National Power Training Institute, Faridabad, hereby declare that the summer training report entitled “Analysis Of Financial Viability Of Distribution Tariff order” is an original work and the same has not been submitted to any other institute for the award of any other degree. A Seminar presentation of the Training Report was made on 26th Aug, 2013 and the suggestions as approved by the faculty were duly incorporated. Presentation Incharge Signature of the Candidate Amit Mishra Rahul Saini Asst. Director CAMPS,NPTI Countersigned Director/Principal of the Institute 2 CERTIFICATE 3 ACKNOWLEDGEMENT I am first thank to my Project Convener Mr. Chandra Prakash Deputy Chief (Engineering), CERC without his help and interest it would have been difficult to finish this work. I would also like to acknowledge Mr. Tanmay Vyas ,Senior Research Officer, CERC for his valuable support and guidance throughout this project. Special thanks go to all the staff members of CENTRAL ELECTRICITY REGULATORY COMMISSION specially Mr. Amit Paul Ekka ,Research Associate, CERC Without their insights and helpful thoughts, I would not have gained as much information as we have. Their help has sparked our interest even more! Thanks! I also thank Mr. S.K Chaudhary (Principle Director, NPTI), Ms. Manju Mam (Director, CAMPS), Ms. Indu Maheswari, (Dy. Director, NPTI), & Dr. Rohit Verma, (Dy. Director, NPTI), and Ms. Farida Khan for arranging my summer internship program with Central Electricity Regulatory Commission and providing assistance and support whenever required. I would like to extend our gratitude to Ms. Sughandha Aggarwal, (Mentor) for their continuous help and motivation during summer internship. Last but not the least; I would like to thank my family members without the efforts & moral support of whom i would never have been able to accomplish all the achievements in our life. Rahul Saini 4 LIST OF ABBREVIATIONS AERC Assam Electricity Regulatory Commission A&G Administrative and General Expenses ASEB Assam State Electricity Board ARR Aggregate Revenue Requirement BERC Bihar Electricity Regulatory Commission BPL Below Poverty Line BSEB Bihar State Electricity Board BST Bulk Supply Tariff CA Commission Approval CERC Central Electricity Regulatory Commission CAGR Compound Annual Growth Rate CAPEX Capital Expenditure CEA Central Electricity Authority CGS Central Generating Station COD Commercial Date of Operation CoS Cost of Supply CoS Cost of Service CPI Consumer Price Index CWIP Capital Work in Progress DERC Delhi Electricity Regulatory Commission DISCOMS Distribution Companies DS Domestic Supply 5 EA Electricity Act ED Electricity Duty FSA Fuel Surcharge Adjustment FY Financial Year GFA Gross Fixed Asset GoP Government of Punjab HERC Haryana Electricity Regulatory Commission HT High Tension IPP Independent power Plant MoP Ministry of Power MPERC Madhya Pradesh Electricity Regulatory Commission MU Million Units MW Megawatt MYT Multi year Tariff NEP National Electricity Policy NTI Non Tariff Income NTP National Tariff Policy O&M Operating and Maintenance PGCIL PLEC Power Grid Corporation of India Limited Plant load Exemption Charges PLF Plant Load Factor PPA Power purchase Agreement 6 PPC Power Purchase Cost PS Petition Submission PSEB Punjab State Electricity Board PSERC Punjab State Electricity Regulatory Commission PSL R&M Public Street Lighting Repair and Maintenance charges ROCE Return on Capital Employed ROE Return on Equity ROR Rate of Return RST Retail Supply Tariff SBI State Bank of India SEB State Electricity Board SERC State Electricity Regulatory Commission SLDC State load dispatch Center TANGEDCO Tamil Nadu Generation and Distribution Corporation TNEB Tamil Nadu Electricity Board TNERC Tamil Nadu Electricity Regulatory Commission TOD Time of Day WPI Whole Price Index 7 TABLE OF CONTENTS Declaration………………………………………………………………………………….. Certificate.............................................................................................................................. Acknowledgement…………………………………………………………………………….. List of Abbreviations……………………………………………………………………….. Executive Summary…………………………………………………………………………. About the Organisation…………………………………………………………………….. Objective of the project…………………………………………………………………… Significance of the project……………………………………………………………………. Research Methodology………………………………………………………………………. Guiding Policies for Determining Tariff…………………………………………………. Introduction to ARR methodology and Tariff Order…………………………………… MADHYA PRADESH………………………………………………………………………. Approaches adopted by Commission to determine ARR Components………………………. Petitioner Submission vs Commission Approval……………………………………………. Reason for Difference………………………………………………………………………….. Highlights of the order…………………………………………………………………………. HARYANA…………………………………………………………………………………. Approaches adopted by Commission to determine ARR Components……………………….. Petitioner Submission vs Commission Approval…………………………………………… Reason for Difference……………………………………………………………………….. Highlights of the order……………………………………………………………………… PUNJAB……………………………………………………………………………………. Approaches adopted by Commission to determine ARR Components………………………... Petitioner Submission vs Commission Approval…………………………………………….. Reason for Difference………………………………………………………………………… Highlights of the order………………………………………………………………………. BIHAR………………………………………………………………………………………… Page no 2 3 4 5 12 14 17 18 19 20 23 32 33 38 39 39 40 44 48 49 49 51 52 56 57 57 58 8 Approaches adopted by Commission to determine ARR Components………………………. Petitioner Submission vs Commission Approval……………………………………………. Reason for Difference………………………………………………………………………… Highlights of the order………………………………………………………………………………………….. ASSAM……………………………………………………………………………………….. Approaches adopted by Commission to determine ARR Components……………………… Petitioner Submission vs Commission Approval……………………………………………. Reason for Difference……………………………………………………………………….. Highlights of the order………………………………………………………………………. DELHI………………………………………………………………………………….…… Approaches adopted by Commission to determine ARR Components……………………… Petitioner Submission vs Commission Approval…………………………………………….. Reason for Difference………………………………………………………………………… Highlights of the order……………………………………………………………………….. CONCLUSION………………………………………………………………………………. RECOMMENDATIONS……………………………………………………………………. REFRENCES…………………………………………………………………………………. 61 64 65 66 67 68 71 72 72 73 76 80 81 81 82 85 88 9 LIST OF TABLES Table no 1 Consumer Category wise sales approved by MPERC……………………………… 32 Table no 2 Methodology for computation of ROE (FY14)………………………………….. 37 Table no 3 Diff in amount of ARR Components by Petitioner & approved by Commission…………………………………………………………………………………. 38 Table no 4 Consumer Category wise sales approved by HERC…………………………… 43 Table no 5 Diff in amount of ARR Components by Petitioner & approved by Commission…………………………………………………………………………………. 48 Table no 6 Consumer Category wise sales approved by PSERC…………………………… 51 Table no 7 Diff in amount of ARR Components by Petitioner & approved by Commission…. 56 Table no 8 Consumer Category wise sales approved by BERC………………........................ 59 Table no 9 Diff in amount of ARR Components by Petitioner & approved by Commission….…………………………………………………………………………… 64 Table no 10 Consumer Category wise sales approved by AERC…………………………..... 68 Table no 11 Diff in amount of ARR Components by Petitioner & approved by Commision… 71 Table no 12 Consumer Category wise sales approved by DERC…………………………… 74 Table no 13 Consumer Category wise sales(NDMC) approved by DERC………………… 75 Table no 14 Consumer Category wise sales(NDMC FY13) approved by DERC………….. 75 Table no 15 Diff in amount of ARR Components by Petitioner & approved by Commision…………………………………………………………………………...…… 80 10 List of Figures Fig 1 Trend of PPC over three years………………………………………………………… 34 Fig 2 Trend of O&M Cost over three years……………………………………………… 35 Fig 3 Trend of Depreciation over three years………………………………............................ 36 Fig 4 Trend of PPC over three years………………………………………………………… 45 Fig 5 Trend of O&M Cost over three years……………………………………………… 46 Fig 6 Trend of Depreciation over three years………………………………………………. 47 Fig 7 Trend of PPC over three years……………………………………………………… 52 Fig 8 Trend of O&M Cost over three years………………………………………………… 53 Fig 9 Trend of Depreciation over three years……………………………………………… 54 Fig 10 Trend of PPC over three years……………………………………………………. 61 Fig 11 Trend of O&M Cost over three years………………………………………………. 62 Fig 12 Trend of Depreciation over three years…………………………………………… 63 Fig 13 Trend of PPC over three years……………………………………………………… 77 Fig 14 Trend of O&M Cost over three years………………………….…………………...... 78 Fig 15 Trend of Depreciation over three years…………………………………………… 79 11 EXECUTIVE SUMMARY The electricity sector in India has been operating under a monolithic structure. With the growing requirements for improvement in the sector, various models to bring in improvements and investments into the sector have been contemplated. Unbundling of the state electricity boards into functional companies is already a reality. but even after these reforms , huge debt and financial losses are burden on DISCOM’s and the whole power sector. In order to bring in accelerated improvements, further restructuring of the distribution segment is being contemplated. As a student of National Power Training Institute (NPTI), Faridabad and doing my MBA in Power Management, we got this opportunity of working as a summer trainee with Central Electricity Regulatory Commission (CERC) for a period of two months from June 10, 2013 to August 10, 2013. As a part of summer training we got an opportunity to work on the issues related to ARR filing by the distribution utilities and the approval of it by the SERCs after some normative modifications if required. One major concern regarding the poor financial condition of DISCOM’s is that cost of ARR components approved by regulatory commissions is so often less than petitioner’s demand and in few states tariff has not been revised for years .as a result petitioner is not able to recover its cost of supply resulting in huge debt and creation of regulatory assets which has become a regular practice today. Thus this project is carried out to understand the different approaches adopted by the State Electricity Regulatory Commissions (SERCs) of 10 States while analyzing & approving the ARR Components like Power Purchase Cost, Operating and Maintaining Cost (O&M Cost) ,Depreciation, Interest on Working Capital, Interest and Finance charges, Return on equity, Non Tariff Income and annual tariff determination approach for fixing the Retail tariff for DISCOMs under their jurisdiction. For the treatment of revenue gap/surplus in each of the tariff order, ERC’s approach has varied as per the requirement. In case when revenue gap is large, the Commission had used a mix of options to bridge the revenue gap through increase in tariff of certain categories and creation of regulatory assets. In case when gap is meager, Commission had hiked the tariff of all categories to meet the revenue gap and the surplus come are utilized for the purpose of amortization of regulatory asset. The Average cost of Supply (in Rs/unit) of ten States in each FY has also calculated in the Excel sheet. 12 The enactment of Electricity Act 2003 has provided the legal framework to bring the reforms in electricity sector. The Act has also empowered & given the responsibilities to the SERCs to deal with the operational matters related to Distribution of electricity. The Section 61 (Tariff Regulations) & Section 62 (Determination of Tariff) of Electricity Act 2003, notifies the function ial viability ofof SERCs to determine the tariff for Generation, Transmission, supply & wheeling charges for electricity, wholesale, bulk or retail tariff as in the case may be, within their area of jurisdiction. SERCs have issued Tariff Orders for the DISCOMs after analyzing & approving the Aggregate Revenue Requirement (ARR) of the DISCOMs. This Project is an attempt to study the approaches adopted by SERCs & their effect on DISCOMs performance. This Project has analyzed the Distribution ARR & Tariff Orders issued by the Six SERCs of States namely Madhya Pradesh, Haryana, Bihar, Punjab, Delhi, Assam, during the three years i.e. from FY 2011-12 to FY 2013-14.The objectives of the project are as follows: Thorough study of the tariff orders to understand their design & structure Understanding of the approaches adopted by the SERCs on Annual Revenue Requirement Components Comparing the Petitioner Submission and Commission Approval Find out the Reasons for Differences Highlights of the Tariff order 13 ABOUT THE ORGANISATION Central Electricity Regulatory Commission (CERC), a key regulator of power sector in India, is a statutory body functioning with quasi-judicial status under sec - 76 of the Electricity Act 2003. CERC was initially constituted on 24 July 1998 under the Ministry of Power’s Electricity Regulatory Commissions Act, 1998 for rationalization of electricity tariffs, transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, and for matters connected Electricity Tariff regulation. CERC was instituted primarily to regulate the tariff of Power Generating companies owned or controlled by the government of India, and any other generating company which has a composite scheme for power generation and interstate transmission of energy, including tariffs of generating companies. FORMULATION The conceptualization of independent Regulatory Commission for the electricity sector dates back to early 1990s, when the National Development Council (NDC) Committee on Power headed by Shri Sharad Pawar, the then Chief Minister of Maharashtra recommended in 1994, constitution of “independent professional Tariff Boards at the regional level for regulating the tariff policies of the public and private utilities”. The Committee reiterated that “the Tariff Boards will be able to bring along with them a high degree of professionalism in the matter of evolving electricity tariffs appropriate to each region and each State”. The need for constitution of the Regulatory Commission was further reiterated in the Chief Minister’s Conference held in 1996. The Common Minimum National Action Plan for Power evolved in the Conference inter-alia “agreed that reforms and restructuring of the State Electricity Boards are urgent and must be carried out in definite time frame; and identified creation of Regulatory Commissions as a step in this direction” Thus was enacted the Electricity Regulatory Commissions Act, 1998 paving way for creation of the Regulatory Commissions at the Centre and in the States. The 1998 Act was enacted with the objective of distancing Government from the tariff regulation. The Act provided for Electricity Regulatory Commissions at the Center and in the States for rationalization of electricity tariff, transparent policies regarding subsidies etc. Under the provisions of this Act, the Central Government constituted the Central Electricity Regulatory Commission (CERC) in July, 1998. The ERC Act, 1998 has since been replaced by the Electricity Act, 2003. The CERC created under the provisions of the ERC Act, 1998 has been recognized as the Central Electricity Regulatory Commission under the Electricity Act, 2003. The Electricity Act, 2003 has significantly enlarged the spectrum of responsibility of CERC. Under the ERC Act, 1998 only the tariff fixation powers were vested in CERC. The new law of 2003 has entrusted on the CERC several other responsibilities in addition to the tariff fixation powers, for instance, the powers to grant license for inter- 14 State transmission, inter-State trading and consequently to amend, suspend and revoke the license, the powers to regulate the licensees by setting performance standards and ensuring their compliance, etc. MISSION STATEMENT The Commission intends to promote competition, efficiency and economy in bulk power markets, improve the quality of supply, promote investments and advise government on the removal of institutional barriers to bridge the demand supply gap and thus foster the interests of consumers. In pursuit of these objectives the Commission aims to – Improve the operations and management of the regional transmission systems through Indian Electricity Grid Code (IEGC), Availability Based Tariff (ABT), etc. Formulate an efficient tariff setting mechanism, which ensures speedy and time bound disposal of tariff petitions, promotes competition, economy and efficiency in the pricing of bulk power and transmission services and ensures least cost investments. Facilitate open access in inter-state transmission Facilitate inter-state trading Promote development of power market Improve access to information for all stakeholders. Facilitate technological and institutional changes required for the development of competitive markets in bulk power and transmission services. Advise on the removal of barriers to entry and exit for capital and management, within the limits of environmental, safety and security concerns and the existing legislative requirements, as the first step to the creation of competitive markets. ORGANISATION STRUCTURE The Central Commission consists of a Chairman and three full time Members and the Chairman of Central Electricity Authority (CEA) as the Member, Exofficio. The Commission is having a right mix of persons having adequate knowledge and experience in engineering, law, economics, commerce, finance and management. The Qualifications of Chairman and Members are also prescribed in Section 77 of the Electricity Act 2003. The Chairman and Members are appointed by the President of India on the recommendations of a selection committee constituted by the Central Government as prescribed under the 15 Act. The Section 91 of the Act also provides for the appointment of a Secretary of the Commission whose powers and duties are defined by the Commission Section 79 of the Electricity Act, 2003. FUNCTIONS Mandatory Functions: To regulate the tariff of generating companies owned or controlled by the Central Government; To regulate the tariff of generating companies other than those owned or controlled by the Central Government specified in clause (a), if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State; To regulate the inter-State transmission of electricity ; To determine tariff for inter-State transmission of electricity; To issue licenses to persons to function as transmission licensee and electricity trader with respect to their inter-State operations; Improve access to information for all stakeholders. To adjudicate upon disputes involving generating companies or transmission licensee in regard to matters connected with clauses (a) to (d) above and to refer any dispute for arbitration; To levy fees for the purposes of the Act; To specify Grid Code having regard to Grid Standards; To specify and enforce the standards with respect to quality, continuity and reliability of service by licensees; To fix the trading margin in the inter-State trading of electricity, if considered, necessary; To discharge such other functions as may be assigned under the Act. Advisory Functions: formulation of National Electricity Policy and Tariff Policy; promotion of competition, efficiency and economy in the activities of the electricity industry; promotion of investment in electricity industry; Any other matter referred to the Central Commission by the Central Government. 16 OBJECTIVE OF PROJECT This Project has analyzed the Distribution ARR & Tariff Orders issued by State Electricity Regulatory Commission (SERCs) of the Six States during the three years i.e. from FY 2011-12 to FY 2013-14.In the early 2000s, the Govt. of India introduced a number of reform measures for the power sector. These included the passing of the Electricity Act 2003, National Electricity Policy & the National Tariff Policy. These initiatives aimed to create a competitive marketplace & ensure availability of power at affordable price. They also aimed to ensure commercial viability of the state utilities & promote transparency, predictability & consistency as well as competition among the supplier. This project has also carried out with the aim whether these policies have resulted in achievement of above said objectives as well as tariff rationalization & a reduction in cross subsidy levels. Under this study, a comprehensive survey of tariff orders issued by SERCs was undertaken and the findings were compiled in a uniform format for all the states. In particular, the study had attempted to bring out the following: Comparison of approaches followed by SERCs towards different elements of annual revenue requirement (ARR). Compliance attained by the regulated utility with the costs approved and the directives issued by SERCs. Highlights of the order. 17 SIGNIFICANCE OF PROJECT This project is important in a way to study the role of Regulatory Commission in the post reform period & aftermaths of the enactment of Electricity Act 2003. The enactment of Electricity Act 2003 has brought radical changes in electricity sector by empowering the Electricity Regulatory Commissions (CERC & SERC) to deal with most of the operational functions related to generation, Transmission & distribution of electricity previously carried out by Govt. The State Electricity Regulatory Commission (SERC) determines the tariff for Distribution Licensees. The guidelines framed by the SERCs for Revenue and Tariff filings of licenses which seeks it’s calculations related to ARR of each licenses for the ensuing financial year regarding (i) its expected aggregate revenue from proposed sale under its existing approved tariff; (ii) its expected cost of service and (iii) its expected revenue gap (if any) and a general explanation on how it proposes to deal with the revenue gap. The Commission then analyses the data filed in ARR with previous year’s trend under the reference of Tariff regulations issued by SERC with reference to NEP and NTP guidelines as notified under section 3 of Electricity Act 2003. The energy business is a concurrent business. Being a quasi-judicial autonomous body the approaches held by SERCs regarding approval of ARR differs. This Project aims to analyze different approaches held by respective SERCs to approve the required ARR Components like O&M Expenses, Depreciation, Interest on Working Capital etc. 18 RESEARCH METHODOLOGY The report has been compiled on the basis of secondary data sources. Data on units sold, power purchase, power procurement cost, distribution losses, transmission losses, connected load, sales mix, O&M cost, depreciation, capital expenditure, GFA, interests on loans, non tariff incomes, etc. have been collected from the information available on the internet validated from various recognized websites like Ministry of Power (India), CERC, CEA & other Electricity Regulatory Commissions. Besides this, data has been collected from the faculty of the institute and other officials of the mentioned distribution utilities & state electricity boards and state electricity regulatory commissions. Steps followed for the project work are as under: 1) Selection of the project title 2) Selecting the states & utilities for the purpose of study and analysis 3) Downloading of all available ARR petitions and Tariff Orders of all the utilities in the states undertaken for analysis 4) Understanding the design, structure and contents included in ARR petitions and Tariff Orders 5) Thorough study of all ARR petitions and Tariff Orders to understand the viewpoints of licensee and commission and issues of contradiction between the two 6) Scrutinizing the data & Collecting the relevant data from the available documents and literatures 7) Arranging the data year and utility wise on excel sheet in a lucid manner 8) Comparison of data 9) Calculating the values of various important empirical & derived parameters for all utilities 10) Developing models on excel sheets 11) Plotting the trends for different parameter 12) Drawing of inferences and conclusions 13) Giving suggestions & recommendations 14) Drafting of report 15) Submission of report to the mentor for review, suggestions and modifications 16) Final draft of report incorporating suggested modifications 17) Final submission to the external and internal guides for evaluation The above mentioned steps were followed for the successful accomplishment of the project work. 19 GUIDING POLICIES FOR DETERMINING TARIFF The Commissions are guided by the Electricity Act 2003 (the Act) and its own Regulations i.e. SERC (Terms and Conditions for Determination of Tariff) Regulations. The Commission is also guided by the National Electricity Policy and the National Tariff Policy in the determination of tariffs. The Commission also proposes to take into account the issues raised in the Draft Report of the Expert Committee on Integrated Energy Policy published by the Planning Commission, Government of India. Electricity Act 2003 Main features of Electricity Act 2003 related to distribution and tariff determination are listed below: Distribution to be licensed by SERCs Distribution licensee free to take up generation & Generating co. free to take up distribution license. This would facilitate private sector participation without Government guarantee/ Escrow. (Sections 7, 12). Retail tariff to be determined by the Regulatory Commission (Section 62) Metering made mandatory. (Section 55) Provision for suspension/revocation of licence by Regulatory Commission as it is an essential service which can not be allowed to collapse. (Sections 19, 24) Open access in distribution to be allowed by SERC in phases. (Section 42) In addition to the wheeling charges provision for surcharge if open access is allowed before elimination of cross subsidies, to take care of current level of cross subsidy Licensee’s obligation to supply. (Section 42) 15 This would give choice to customer. Regulatory Commission to determine tariff for supply of electricity by generating co. on long/medium term contracts. (Section 62) No tariff fixation by regulatory commission if tariff is determined through competitive bidding or where consumers, on being allowed open access enter into agreement with generators/traders. Consumer tariff should progressively reduce cross subsidies and move towards actual cost of supply. (Section 61 (g), (h)) State Government may provide subsidy in advance through the budget for specified target groups if it requires the tariff to be lower than that determined by the Regulatory Commission. (Section 65) 20 Regulatory Commissions may undertake regulation including determination of multi-year tariff principles, which rewards efficiency and is based on commercial principles. (Section 61 (e), (f)) National Electricity Policy The Government of India has issued the National Electricity Policy in accordance with Section 3 of the Electricity Act 2003 which aims at laying guidelines for accelerated development of the power sector, providing supply of electricity to all areas, and protecting interests of consumers and other stakeholders. National Electricity policy lays down that the amount of cross subsidy & the additional surcharge to be levied from consumers who are permitted open access should not be so onerous that it eliminates competition which is intended to be fostered in generation & supply of power directly to the consumers through open access. Open access consumers need to pay generator’s charges, transmission usage charges, and wheeling charges plus cross subsidy surcharge to compensate the distribution licensee. Sections 42(distribution licensee & open access) of the Electricity Act, 2003, which permit open access, enjoin upon Commissions to fix the surcharge which shall be utilized to meet the current level of cross-subsidy. The Commissions under study have issued open access regulations & the charges based on voltage wise cost to serve & T&D losses. Cross subsidy surcharge formula used by SERCs is as follows: S=T-[C (1+L/100) +D] Where S is the surcharge T is the tariff payable by the relevant category of consumers; C is the weighted average cost power purchase of top 5% at the margin excluding liquid fuel based generation & renewable power. D is the wheeling charges. L is the system losses for the applicable voltage level, expressed as a percentage. The open access is allowed for HT consumers having contract demand more than1MVA Open access is aimed to bring competition in retail business. National Tariff Policy The Government of India has issued the National Tariff Policy in accordance with Section 3 of the Electricity Act 2003 which aims at Ensure availability of electricity to consumers at reasonable and competitive rates, Ensure financial viability of the sector and attract investments, Promote transparency, 21 consistency and predictability in regulatory approaches across jurisdictions and minimise perceptions of regulatory risks and Promote competition, efficiency in operations and improvement in quality of supply. Based on the guiding principles of the National Tariff Policy, Commission proposes to adopt certain measures for tariff determination as stated below: Commission will institute a system and undertake independent scrutiny of financial, commercial and technical data submitted by the licensees. The above exercise is envisaged to be completed by March, 2008 for every distribution circle of the licensee Commission would develop a policy for treatment of bad debts based on the proposed methodology of the utility – during the course of the deliberations with the licensee during the process of tariff determination for the ensuing year. While allowing the total capital cost of generation projects, the Commission would ensure that these are reasonable and to achieve this objective. The Commission would evolve requisite benchmarks on capital costs. Commission would like to promote projects under Clean Development Mechanism (CDM). Tariff fixation for all electricity projects (generation, transmission and distribution) that result in lower Green House Gas (GHG) emissions than the relevant base line would take into account the benefits obtained from the CDM so as to provide adequate incentive to project developers. INTEGRATED ENERGY POLICY The broad vision behind the Integrated Energy Policy is to reliably meet the demand for energy services of all sectors including the lifeline energy needs of vulnerable households, in all parts of the country, with safe and convenient energy at the least cost in a technically efficient, economically viable and environmentally sustainable manner. 22 CONCEPTUALIZATION Introduction to ARR and Tariff orders An ARR petition is a request to regulatory body made by a utility/licensee for approval of all its annual expenses to be recovered from consumers through tariff. It also includes a normative profit (ROE) for the utility. Through an ARR file the licensee shows its various expenses & costs in detail along with the details of number of consumers, quantum of power purchase & sale, losses, ROE, etc. The respective regulatory commission of a state studies the ARR petition filed by the Petitioner to check that whether the projections of costs are in accordance with the terms & conditions of tariff or not and to what extent these are meeting the norms of Regulations. After going through the ARR file, the commission approves the expenses of a licensee after some corrections, suggestions and modifications, if felt necessary for Meeting the regulatory norms. This document of approved ARR petition is sent back to the licensee as an order from the Commission and it is commonly known as the tariff order. The honorary commission may issue tariff order every year based on the ARR petition filed by the licensee or on suo moto basis. The Commission of all states in exercise of the powers vested in it under section 62(1)(d) read with Section 62(3) and Section 64 (3)(a) of the Electricity Act, 2003 and Electricity Regulatory Commission’s (Terms and Conditions for Determination of Tariff) Regulations and other enabling provisions in this behalf, issues the tariff order, determining the Aggregate Revenue Requirement (ARR) and the Distribution Tariff of Financial Year for supply of electricity. The Tariff Regulations specify that the Distribution Licensee shall file Aggregate Revenue Requirement (ARR) and the Tariff Petition complete in all respect along with requisite fee as prescribed in the Commission’s Fees, Fines and charges, Regulation on or before 15th November of the preceding year.It means if Licensee want to file for FY 2011-12 then he should have filed the ARR and Tariff Petition on or before 15th November, 2010. The ARR report shall contain the following information: The licensee‘s demand forecast by consumer class for the succeeding twelve month period ensuing financial year and the derivation of the forecast; A calculation of expected aggregate revenue that would result from the above demand during the same period under the currently approved tariff by consumer class; A calculation of the licensee‘s estimated costs of providing the service required by the level of demand for each consumer class during the same period calculated in accordance with the financial 23 principles and their applications in the Sixth Schedule to the Electricity (Supply) Act, 1948 or such other principles the Commission may prescribe from time to time; The licensee shall furnish to the Commission when required such information, particulars, and documents as the Commission may require from time to time for the purpose of validating the report submitted Once the licensee has provided all the requisite information, particulars, and comments required by the Commission, the Commission shall notify the licensee of its decision within the time set forth in the Act. If the Commission determines that a licensee‘s expected revenues differ significantly from the revenue it is permitted to recover under its licence, it may order the licensee to file an application again within the specified time to amend its tariffs appropriately. Within 7 days after the Commission has notified the licensee that it has received all necessary information, the licensee shall arrange for publication of a notice of its tariff application and send copies to the Commission Advisory Committee and relevant local authorities in accordance with the Conduct of Business Regulations. The notice shall include a general description of the tariff amendment being applied for and its effect on the typical residential consumer‘s bill, and an invitation to submit written comments and objections to the tariff application to the Commission within 30 days. The licensee shall also post the notification in each of its offices. After receiving all the comments and objections commission should organize the public hearing process. The time and venue of the hearing will be advertised by the licensees. In the public hearing licensee will respond to all the objections raised by the stakeholders. And commission will take the note of all the objections and responses given by licensees depending on whether it‘s satisfied or not. After the public hearing process, commission should hold a meeting with state advisory committee. After considering all the conclusions in this meeting commission should come out with the final tariff order. Structure of tariff orders In a broad sense a Tariff Order consists of following items in sequence:1. Background & features i. Functions of the commission ii. Regulations iii. Advices iv. Procedural background v. Salient features of the order 2. Public hearing process i. Objections and issues raised by consumers during public hearing 24 ii. Response of licensee over the issues raised iii. Commission’s ruling on the issues 3. True up of year preceding to the preceding year of ensuing year 4. Annual performance review for the preceding year 5. Determination of ARR for the ensuing year i. Components of ARR ii. Summary 6. Tariff philosophy and design i. MYT framework ii. TOD tariff iii. Subsidy schemes iv. Incentives/disincentives 7. Tariff schedule i. Category wise fixed/demand charges ii. Category wise energy charges iii. Scheme for rebates/penalties 8. Other issues related to tariff determination The above mentioned 8 basic elements of a TO explain the design and structure of any tariff order (TO). As my project is based on determination of ARR so our basic focus area will be components of ARR. POWER PURCHASE COST Cost of power is the most important item of expenditure for the licensees. Every Commission examines the projected availability of power from different sources in details & the requirement of sales. In the ARR power purchase are reckoned only from those sources which have long term contracts with the DISCOMs. The rates of power purchases from individual generators are on the basis of their respective agreements. As 25 regards energy costs for DISCOMs, the methodology adopted is to take the total energy cost, commonly known as Bulk Supply Tariff (BST), comprising: 1. Energy costs; 2. Transmission costs; 3. SLDC charges. While approving the cost of power procurement, the Commission determines the quantum of electricity to be procured, consistent with power procurement plan, from various sources of supply in accordance with the principle of merit order scheduling and dispatch, based on a ranking of all approved sources of supply in the order of their respective variable costs, with certain exceptions, as in the case of Non-Conventional Energy (NCE) projects, Nuclear projects & some hydro projects accorded by various general and specific orders of the Commission the status of ‘must-run’ projects. In order to arrive at the quantum and cost of power procurement, the Commissions had adopted the Sales Forecast, the Transmission & Distribution loss trajectory. The power purchase cost is an uncontrollable expenditure item & is trued up through Fuel Surcharge Adjustment (FSA) mechanism. The relevant clause of National Tariff Policy (Clause 5.3 (h) (4) and Clause 8.2.1 (1)) says: “Uncontrollable costs should be recovered speedily to ensure that future consumers are not burdened with past costs. Uncontrollable costs would include (but not limited to) fuel costs, costs on account of inflation, taxes and cess, variations in power purchase unit costs including on account of hydro-thermal mix in case of adverse natural events.” And “All power purchase costs need to be considered legitimate unless it is established that the merit order principle has been violated or power has been purchased at unreasonable rates.” Variations in power purchase costs for the purpose of true-up will rarely occur as the Fuel Surcharge Adjustment (FSA) formula issued by the Commission attempts to capture both the price variance and the fuel variance during the course of the year itself. Any further variations would arise mainly on account of purchases exceeding the limits approved in the Tariff Order. All extra purchases of power do not automatically qualify for true-up. If the purchases are for categories where the Commission has fixed a ceiling or quota as in the case of agriculture in Andhra Pradesh whose consumption is controllable by proper monitoring and vigilance, extra purchases will not qualify for true-up. 26 OPERATION & MAINTAINANCE EXPENSES: The O&M expenses have three components. 1. Employee expenses 2. A&G expenses 3. R& M expenses The employee expenses includes following components. Salaries Overtime Dearness allowance Other allowance Bonus Medical expenses Earned leave encashment Payment under workmen compensation Act Payment to helpers/Employees of storm & monsoon gang Staff Welfare expenses Terminal Benefits Increase in employee cost on account of pay revision The A&G expenses includes following components. Rent rates & taxes Security arrangement Telephone, Electricity, Water & Postage charges Legal, audit, consultancy & other professional charges Travelling, Conveyance & vehicle charges Vehicle license & registration charges Books, periodical, computer stationary & printing stationary Staff expenses Freight The A&G expenses also include licensee & Expected Revenue Charges (ERC) filing fees & other purchase related expenses. 27 The R&M expenses include expenses on maintenance of T&D network. It includes Repairs and maintenance of plant machinery vehicles, furniture and fixtures, office equipment, line materials and cables, Transformers and related equipment, meters and metering equipment etc. R & M also stands for Renovation & Modernization expenses which is beyond my scope of analysis. DEPRECIATION Depreciation is directly related to the capital assets. The Original Cost of Fixed Assets (OCFA) and capitalization of capital works form the basis of the Fixed Assets. For Electricity industry, the depreciation rates are the rates, notified by the Ministry of Power, Government of India(rates specified in 1992 & 1994), rates specified by the CERC which are generally accepted by the SERCs & are issued in their tariff regulations. Depreciation is applied on the opening balances of the Fixed Assets for the ensuing year at specific rates applicable to particular assets subject to a limit of 90% of the Fixed Asset value (the balance being treated as scrap value). In this regard, the crucial factor that varies the computations is the additions to the Fixed Assets which are entirely dependent on the capitalization of the Capital Works-in-progress during the year. From an accounting perspective, Depreciation is a charge to the Profit and Loss account and represents a measure of the wearing out, consumption or other loss in value of an asset arising from use, efflux of time or obsolescence through technology and market changes4. From a regulatory perspective, depreciation is a small amount of the original cost of the capital assets, built into the tariff computation every year with a view to providing the utility a source of funding to repay installments of debt capital. From the investor’s point of view, depreciation is a non cash expense which reduces tax burden but generates internal cash for investments. The regulators have two view points on depreciation. One view is depreciation is the refund of capital & the other view is a constant charge against an asset to create a fund for its replacement. As the asset is used over its operational life, Depreciation is proportionately charged over the useful life of the asset. Advance against depreciation (AAD)5 is required in certain conditions like if the debt redemption obligation is not matching with the existing depreciation allowed. It is necessary that all the SERCs should follow same depreciation rate to bring uniform approach in tariff orders. INTEREST ON WORKING CAPITAL Working capital is required to maintain cash flow liquid. Usually the SERCs have taken working capital as a % of O&M expenses, average cost of store & average cash & bank balance etc. The interest rate for working capital is the short term Prime Lending Rate of State Bank of India. 28 Working capital shall be computed as provided in these Regulations and Rate of interest on working capital shall be equal to the State Bank of India Advance Rate as on April 1 of the relevant Year. The interest on working capital shall be payable on normative basis notwithstanding that the Licensee has not taken working capital loan from any outside agency or has borrowed in excess of the working capital loan computed on normative basis. INTEREST AND FINANCE CHARGES Approved interest on loans is directly related to the loans taken into the Capital Base computations. The loans drawn for CAPEX and interest thereon are a pass-through in the tariffs. The interest rates are computed on the basis of the rates on loans filed by the Licensees for the current year and the ensuing year. Lease rentals and other finance charges are also included under this heading. Other finance charges include discounts to consumers, such as, incentive, etc. The weighted average rate of interest & normative repayments so worked out is taken to the ARR. The SERCs analyses the source wise break up of loan & interest thereon. All the Commissions had considered actual loan portfolio & interest to be paid for such project. Capital projects are being funded from loan, consumer contribution, depreciation (internal accruals) & Govt. grant & loans etc. It is necessary to consider the difference between the capitalization schedule and the new borrowings considered for interest expenditure and rules that the SERCs shall not consider borrowings due to revenue / cash deficit, unapproved investments and capital work in progress for determination of interest expenditure. Further, the SERCs shall only consider loans borrowed for use and useful assets (assets capitalized) and any other loans borrowed / swapped for reducing the interest cost on such loans. The interest amount is subject to claw-back as the interest being allowed is for the capital works, and any variations in the capital expenditure program (under spending or overspending) have to be adjusted if Capital Work In Progress (CWIP) remains in the Capital Base computations as per the Sixth Schedule to the Electricity (Supply) Act, 1948. In Indian context, loans are available for 10-15 years. In some rare cases long term loan is extended for a longer period of over 20 years. If loan is available for 15 years annual repayment would be around 4.67% of the total investments taking into consideration 70% of debt of the total investment. Approved interest on loans is directly related to the loans taken into the Capital Base computations. The loans drawn for CAPEX and interest thereon are a pass-through in the tariffs. The interest on loans drawn for other than the regulated 29 business or for meeting the working capital requirements over and above what has been allowed in the capital base, shall not be allowed in the tariffs. However, the loans drawn for meeting Debt Redemption Obligation for which approval has been granted by the Commission shall be allowed to figure in the Capital Base and the interest thereon shall be allowed in the tariffs. The interest amount is subject to claw-back as the interest being allowed is for the capital works, and any variations in the capital expenditure programmed (under spending or overspending) have to be adjusted if CWIP remains in the Capital Base computations as per the Sixth Schedule to the Electricity (Supply) Act, 1948. RATE OF RETURN (ROE or ROCE) The ROCE is allowed on the Net Capital base (Asset base or regulated rate base) for the ensuing year. The Capital Base of the Licensees is divided into two parts - the positive part and the negative part, to derive the net capital base on which a return is provided. The positive part consists of the original cost of fixed assets (OCFA) excluding consumer contributions; intangible assets; the original cost of Capital Works-in-Progress (CWIP); compulsory investments, and working capital. On the negative side are depicted, the matching financials of the assets created, like Accumulated depreciation, loans from Government and other approved institutions, consumer deposits by way of security and amounts outstanding in the Tariffs and Dividends Control Reserve and Development Reserve at the close of the year. The ROE is allowed on the average of opening& closing equity & free reserves for the ensuing year. The total capital is normatively divided in the ratio of 70:30 & the equity component is calculated to derive Return on Equity to be allowed. One of the Key issues related to approach for rate of return-the issue posed was which approach should be adopted return on capital employed (ROCE) approach or the existing return on equity (ROE) approach. There are different approaches towards rate of return. The CERC in its T&C of tariff regulations 2009-14 has preferred ROE approach. Some States like Delhi used ROCE Approach but mostly states like Haryana,Punjab ,MP used ROE Approach. In case of both the ROCE & ROE approach the ROE is estimated one. The Cost of Debt (CoD) in case of ROCE approach is estimated whereas in case of ROE approach CoD is actual .so is the case of Debt –equity mix. The ROCE approach is consistent with the performance based regulations. The ROCE approach has strong base in economics too.However the ROCE approach sounds theoretical perfect. In Indian context the cost of debt for PSU is lower compared to cost of debt raised by Private companies from capital market. So, Normative COD will not work for all companies. 30 CAPITAL STRUCTURE Capital Structure includes Debt component & equity component. The utility is allowed to get reasonable return on the capital investment done. The normative Debt equity ratio is 70:30. NON TARIFF INCOME Non tariff income shall be the revenue in excess of the revenue collected on account of tariffs as approved by the Commission, and shall include such items as Delayed Payment Surcharge (DPS) and Meter rent. So, NTI (Non Tariff Income) consists of: DPS shall be estimated taking into account the uncollected amount and the prevailing bank rate The meter rent shall be based on the amount being charged on this account and the number of metered consumers Supervision charges 31 MADHYA PRADESH INTRODUCTION The Madhya Pradesh Electricity Regulatory Commission (MPERC) was Constituted by Govt of Madhya Pradesh under 20th August 1998 under Electricity Regulatory Commission Act, 1998.The Electricity Act 2003 enacted by the parliament came into the force wef 10th June 2003 and the Commission is now deemed to have been constituted and functioning under the Provisions of Electricity Act 2003. The Government of Madhya Pradesh (GoMP) on 31st May, 2005 restructured the functions and undertakings of Generation, Transmission, Distribution and Retail supply of electricity earlier being carried out by Madhya Pradesh State Electricity Board (MPSEB) and transferred the same to five following companies: a) M.P Power Generating Company Ltd , Jabalpur (MPPGCL) b) M.P Power Transmission Company Ltd , Jabalpur (MPPTCL) c) M.P Poorv Kshetra Vidyut Vitran Company Ltd , Jabalpur (MPPKVVCL) d) M.P Madhya Kshetra Vidyut Vitran Company Ltd, Bhopal (MPMKVVCL) e) M.P Paschim Kshetra Vidyut Vitran Company Ltd , Indore (MPPKVVCL) With effect from 1st June 2005 the Operation and Management Agreement that existed between MPSEB and the five companies came to an end and three Distribution Companies started functioning independently as distribution licensees in their respective area of license. Appropriate estimation of category wise energy sales is essential to arrive at the quantum of power to be purchased and the likely revenue by sale of energy which shows its importance. The consumer’s categorywise energy sales Approved by Commission shown below: FY 2011-12 Consumer Categories MU’s 2012-13 MU’s 2013-14 % of total %of total %of total 2011-12 2012-13 2013-14 MU’s LT LV-1: Domestic Consumers 7790 7899.2 15413.26 28.10 24.70 35.85 LV-2: Non Domestic 1622 2057.2 2283.91 5.85 6.43 5.31 LV-3: PWW and Street Light 641 877.4 1118.19 2.31 2.74 2.60 LV-4: Industrial 867 1067.6 1243.35 3.12 3.33 2.89 LV-5.1: Irrigation Pumps 7526 9834.1 11889.31 27.14 30.75 27.65 LV-5.2 Agriculture related use 32 .11 0.03 0.02 11.6 12.33 32 LT Units (MU) 18479 21747 31960.35 66.65 68 74.34 HV-1: Railway Traction 1685 1731.9 1896.32 6.07 5.41 4.41 HV-2: Coal Mines 548 531.1 529.25 1.97 1.66 1.23 HV-3.1: Industrial 5076 6599.6 6483.27 18.31 20.63 15.08 HV-3.2: Non Industrial 831 HV-4:Seasonal 14 16.8 19.69 .05 0.05 0.04 HV-5: Irrigation, PWW & Others 355 596.3 520.73 1.28 1.86 1.21 HV-6: Bulk Residential Users 527 584.9 588.63 1.90 1.82 1.36 HV-7: Bulk Supply to Exempted 206 0 0.53 0 HT Units(MU) 9243 10231 11027.31 33.34 31.99 25.65 Total LT + HT Units (MU) 27722 31978 42987.66 100 100 100 HT 988.72 .74 170.5 2.99 2.30 Table 1 Consumer Category wise Energy sales Approved by MPERC The above table clearly shows the sales are increasing year by year. The % of total Sales shows the consumer wise sales however here the portion of agriculture sales is small as compare to other states. The Approaches followed by the Commission to determine the key components of ARR are explained in detailed manner as below: POWER PURCHASE COST The power purchase cost has two elements i.e. fixed cost and the variable cost. For Central Generating Stations and State generating stations the Commission has considered latest available tariff order issued by CERC for individual station for determination of fixed cost. The rate provided in these orders for purchase of power from Captive Power Plants is the maximum ceiling rate for firm power during normal time. Purchase of power from Captive Power Plants should be done as per procedure prescribed in MPERC (Power purchase and other matters with respect to conventional fuel based Captive Power Plants) Regulations (Revision – 1) 2009 dated 31st January, 2009. For MP Genco stations (FY 13 & 14) the Fixed Cost has been taken from MYT Tariff order of FY 2011-12. These fixed costs have been adjusted based on availability considered from the Generating Stations in the order and as per Recovery of Annual Capacity (fixed) charges provided in the Madhya Pradesh Electricity Regulatory Commission (Terms and Conditions for Determination of Generation Tariff) (Revision –I) Regulations, 2009. The Variable Energy Charges as computed on the basis of the availability considered for purchase after applying the principle of merit order dispatch at Ex-Bus. 33 Interstate transmission charges- The Commission has projected inter-state transmission charges as per the actual bills of FY 2010-11 for the tariff period FY 12 & 13.For FY 14 the Commission has reviewed interstate transmission charges as per the actual bills available for FY 2012-13 up to Dec, 2012. Intrastate transmission charges-The Commission had determined the annual transmission charges payable by each Discom to MPPTCL vide Transmission Tariff Order for FY 2009-10 to FY 2011-12.For FY 14 Commission considered Transmission tariff order of previous year and some allowance for expected increase for FY 14. SLDC Charges-Commission determined as per SLDC Tariff order. PPC 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 17077.8 13091.04 10014.31 PPC FY12 FY13 FY14 Fig 1 Trend of PPC over three years O&M COST EXPENSES The Commission’s Regulations on Terms and Conditions for Determination of Tariff for Supply and Wheeling of Electricity and methods and Principles for Fixation of Charges) Regulations, 2009 define the norms of O&M Expenses of each licensee.There are three components of o&m expenses which are explained as below-: Employee expenses- have been taken as provided in the Regulations. For first financial year of the control period, the impact of implementation of 6th Pay Commission recommendations has been considered in employees cost, which has been escalated @ 6.14% in subsequent years. R&M expenses-shall be allowed on the opening GFA of the financial year @ 2% for East Discom, 2% for West Discom and 2.3% for Central Discom for FY 12 &13.In FY 14 allowed % is 2.3% for each discom. A&G expenses-Commission apply escalation rate of 6.14% on previous A&G expenses as per Tariff regulations. 34 Total O&M Cost FY 2011-12 TOTAL O&M COST 2012-13 1708.16 2013-14 1824.08 2391.95 TOTAL O&M COST 3000 2500 2391.95 2000 1500 1824.08 1708.16 TOTAL O&M COST 1000 500 0 2011-12 2012-13 2013-14 Fig-2 Trend of O&M Cost over three years DEPRECIATION-As per MPERC (Terms and Conditions for Determination of Tariff for Supply and Wheeling of Electricity and Methods and Principles for Fixation of Charges) Regulations,2009, depreciation is to be calculated annually based on straight line method‖ and at the rates specified in Annexure III to these Regulations for the assets of the Distribution System declared in commercial operation after 31/03/2010, provided that, the remaining depreciable value as on 31st March of the Year closing after a period of 12 Years from Date of Commercial Operation shall be spread over the balance useful life of the assets. Commission computed depreciation taking assets base as closing balance of assets existing as on 31st March 2010 plus the Average of Addition in GFA in last three years of audited balance sheet for FY 11 plus half of average addition in GFA in last three year for FY12. For FY13 closing balance of assets of FY12 plus half of average addition in GFA in last three years for FY13. The GFA has been considered for allowing depreciation for FY 14 on the basis of opening GFA of FY 2013-14 plus half of the average addition during FY 2012-13 after netting off consumer contribution. FY DEPRECIATION 2011-12 185.19 2012-13 183.40 2013-14 240.37 35 DEPRECIATION 300 250 200 240.37 185.19 183.4 150 100 DEPRECIATION 50 0 2011-12 2012-13 2013-14 Fig-3 Trend of Depreciation amount over three years INTEREST ON WORKING CAPITAL-The MPERC (Terms and Conditions for Determination of Tariff for Supply and Wheeling of Electricity and methods and Principles for Fixation of Charges) Regulations, 2009 provides that the Working capital shall consist of expenses that are required for supply activity and wheeling activity. The method used by Commission in the Tariff order to find working capital of wheeling activity is addition of 2 month inventory and 1 month of O&M Cost then apply Interest rate on this working capital. Same is for Retail activity and net interest amount on working capital is the addition of wheeling and retail activity. The Interest rates of FY 12, 13 &14 are 11.75%, 14% and 13.50% respectively. INTEREST & FINANCE CHARGES-The MPERC (Terms and Conditions for Determination of Tariff for Supply and Wheeling of Electricity and methods and Principles for Fixation of Charges) Regulations, 2009 allows interest charges only for those loans to be a pass through in the ARR for which the associated capital works have been completed and put to use. The Commission takes the following steps to calculate Interest and Finance charges of FY14a) Debt identified with GFA as on 1st April, 2013 b) 70% of addition to net GFA considered as funded through loan net of consumer contribution. c) Debt Repayment d) Total debt associated with GFA as on 31st march, 2013 e) Average of loan balance for FY 2012-13 f) Weighted average rate of interest (%) g) Interest Charges h) Other Charges i) Interest and Finance Charges on Project loans 36 The Commission is aware that the Licensees may have completed some capital works during the course of previous FY and shall complete some work during present FY, which shall be capitalized and added to the asset base. The Licensees’ past performance with respect to actual capitalization of assets is far less than the projections of assets addition that the Licensee has made. The Commission thus finds it appropriate not to consider the estimated capitalization that is projected for all three FY.But to consider the interest expenses attributable to such assets only when such assets are actually added to the asset base. This shall also serve as an incentive for the Licensee to expedite the completion of works and improve its accounting practices to ensure quick and efficient transfer of assets from CWIP to GFA. There is a increase of 56% from FY12 to FY 13 and 68% increase from FY13 to FY14 in Interest and Finance Charges. This is the 1.7% of net ARR Approved in FY14 which is highest among all 3FY’s. RETURN ON EQUITY-The MPERC (Terms and Conditions for Determination of Tariff for Supply and Wheeling of Electricity and methods and Principles for Fixation of Charges) Regulations, 2009 provides that Return on Equity shall be computed on pre tax basis @16%. The methodology used by Commission to compute ROE is explained belowSuppose we want to find ROE of FY14, the methodology is: FY 2013-14 DISCOM 30% of addition to net GFA considered as funded through equity net of consumer contribution Total Equity identified with GFA as on 31st March, 2014 ROE @ 16% Table no-2 Methodology for Computation of Return on Equity( FY14) The Petitioner claimed Rs 455 Crore and Commission approved Rs 314 Crore in FY12.In FY13 and 14 the petitioner claimed more ROE as compare to previous FY which is Rs 561 Crore and Rs 682 Crore and Commission approved Rs 360 Crore and Rs 509 Crore respectively. 37 The key components of Annual Revenue Requirement filed by Petitioner and approved by MPERC are as follows: Rs Crore FY 2011-12 CA ARR COMPONENT PS PPC O&M COST DEPRECIATION INTEREST & FINANCE CHARGES INTEREST ON WC ROE 11399 2303.8 412.01 10014.31 1708.16 185.19 385 ARR NON TARIFF & OTHER INCOME NET ARR* DIFF PS 2012-13 CA 1384.7 595.64 226.82 % of net ARR Approved 80.4 13.7 1.48 17642.1 2756.2 470.99 13091.1 1824.1 183.24 138.59 246.41 1.1 524.52 59.29 38.84 20.45 .31 455 17537.8 314.21 11851.64 140.79 5686.16 2.5 200 17337.8 300 12444.28 -100 4893.52 DIFF PS 2013-14 CA 4551.03 932.13 287.75 %of net ARR Approved 83.5 11.6 1.16 DIFF 19095 3047.6 559.13 17077.8 2391.95 240.37 2017.2 655.6 318.7 %of net ARR Approved 82.9 3.1 1.16 216.99 307.53 1.38 634.05 365.92 268.1 1.7 105.83 0.32 105.51 .002 15.26 0 15.26 0 561.75 26323.3 360.35 14916.8 201.4 11406.5 2.3 682.26 24399.4 509.82 19874.2 172.44 4525.2 2.47 317.17 26323.3 450 15666.6 -132.83 10656 179.72 24219.7 725.35 20599.2 -545.6 3530.4 *Sardar Sarovar order diff. and MP Genco FY 07-08 true up *FY 2013-14 Impact on a/c of true up/final orders of Transco/Genco stations Table No-3 Diff in amount of ARR Components filed by Petioner and approved by the Commission 38 REASON FOR DIFFERENCES (filed vs. approval) FY 2011-12 to 2013-14 1) Power Purchase Cost-Petitioner approach is not given in the tariff order therefore; the reason for such huge difference can’t be explained. However sales approved is less as proposed by petitioner which may one of the reasons for difference. 2) Interest on working capital-The petitioners has stated that the working capital requirement has been estimated based on the norms as per the Regulations. The Commission considered interest rate which is different from discoms considerations. The Approach used by Commission to compute interest is discussed earlier. HIGHLIGHTS OF THE ORDER FY 2011-12 New power intensive consumer category under HV tariff. Revision in structure of load factor incentive. Reduction in minimum consumption charges. FY 2012-13 Commission allows billing for rural areas unmetered domestic consumers @ of 42units/connection. The trading margin is yet to be determined by the commission hence has not been consider in this order. Change of slabs in domestic category. FY 2013-14 Removal of HV-7: Bulk supply to exempted Change in Tariff category for hostels run by Tribal welfare dept,GoMP Separate Tariff Schedule for Synchronization and start up power for generators connected to the grid. Modification in the load Calculation Formula 39 HARYANA INTRODUCTION Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL) and Dakshin Haryana Bijli Vitran Nigam Limited (DHBVNL) are the two State Government owned distribution companies, registered under the companies Act, 1956, engaged in the business of distribution and retail supply of electricity in the state of Haryana. UHBVNL hold the Distribution and Retail Supply License No. DRS-1 of 2004 to cater distribution and retail supply of electricity in the North Zone of Haryana and DHBVNL hold Distribution and Retail Supply License No. DRS-2 of 2004 to cater distribution and retail supply of electricity in the South Zone of Haryana. These two electricity distribution companies (Discoms) were formed upon corporatisation / restructuring of erstwhile Haryana State Electrical Board (HSEB) carried out by the State Govt. in its pursuit to revamp the power sector and implement comprehensive power reforms in the State of Haryana under the aegis of Haryana Electricity Reforms Act (HERA). The corporatisation / restructuring of erstwhile HSEB was carried out through two statutory Transfer Schemes notified by the State Govt. under the provisions of HERA. Through the first Transfer Scheme, titled ‘Haryana Electricity Reform (Transfer of undertakings, Assets, Liabilities, Proceedings and personnel) Scheme Rules, 1998’, the Generation business (undertakings, assets, liabilities, proceedings and personnel) was separated from Transmission and Distribution business and vested in a separate State Govt. owned company, namely Haryana Power Generation Corporation Ltd. (HPGCL) while Transmission and Distribution business was vested in another State Govt. owned company, namely Haryana Vidyut Prasaran Nigam Limited (HVPNL).Through the second Transfer Scheme, titled ‘Haryana Electricity Reform (Transfer of Distribution Undertakings from Haryana Vidyut Prasaran Nigam Limited to Distribution Companies) Rules, 1999’, the Transmission undertakings and business was separated from Distribution undertakings and business. While the transmission business was retained by HVPNL, the Distribution business was segregated into two successor Distribution companies namely UHBVNL and DHBVNL After restructuring of erstwhile HSEB, the Distribution and Retail Supply licence was initially granted to HVPNL by the Commission vide its licensing order dated 04.02.1999 permitting it to carry out the distribution and Retail supply business in the entire state of Haryana. Subsequently, after the implementation of second transfer scheme, the Commission permitted HVPNL to continue with the Distribution and Retail Supply business through its newly formed subsidiaries namely UHBVNL & DHBVNL vide its order dated 21.04.1999. Thereafter, on an application filed by HVPNL, the Commission accepted the surrender of Distribution and Retail Supply (DRS) license vide its order dated 4th 40 November, 2004 and granted the DRS license no. DRS-1 of 2004 to UHBVNL and DRS license No. DRS-2 of 2004 to DHBVNL to conduct Distribution and Retail Supply business in the Northern and Southern circles of Haryana respectively. The rights relating to procurement and bulk supply of electricity or trading of electricity were initially vested with the HVPNL at the time of restructuring of erstwhile HSEB. However, in view of HVPNL having been declared State Transmission Utility (STU) vide State Govt. notification dated 9.12.2003 and in view of sections 31 (2), 39 (1) and 41 of Electricity Act, 2003 which prohibit the STU from engaging in the business of trading in electricity, the Govt. of Haryana vide its notification no. 1/6/2005-1/Power dated 9th June, 2005, transferred the rights relating to procurement and bulk supply of electricity or trading of electricity from HVPNL to HPGCL. Subsequently, vide notification dated 11th April 2008 (No. 1/1/2008-1 Power), the Govt. of Haryana transferred the rights relating to procurement of electricity / UI drawls / dispatches or trading of electricity from HPGCL to UHBVNL and DHBVNL w.e.f 15/04/2008. Further with effect from 1st April 2008, the rights and obligations under agreements and contracts relating to procurement and bulk supply of electricity or trading of electricity to which HSEB / HVPNL / HPGCL was originally a party, were transferred and vested to Transferee companies i.e. UHBVNL and DHBVNL in 1:1 ratio. Firm allocations in each of the Central Sector Generating Stations along with any allocations from the unallocated quota, as determined by the Government of India for Haryana, was also reallocated to UHBVNL and DHBVNL in 50:50 ratio. The power sold by HVPNL from its shared projects i.e. IP Station (Delhi) and Bhakra Beas Management Board (BBMB) to the extent of share owned by it was also allocated to UHBVNL and DHBVNL for a period of five years w.e.f. 1st April 2008 in 1:1 ratio. The notification also provided that the day to day procurement of power and related issues shall be the responsibility of Haryana Power Purchase Centre (HPPC). The Haryana Electricity Regulatory Commission (HERC) was established in August 1998 to regulate power sector in the state of Haryana, under the provisions of Haryana Electricity Reforms Act 1997(Act 10 of 1998) which was enacted by the Government of Haryana in 1997 and came into force on 14th August, 1998 after presidential assent on 20th February,1998 . The Electricity Act, 2003 (EA,2003) was enacted by the Govt. of India in June, 2003. However, the Government of Haryana, in exercise of the powers conferred by clause (d) of section 172 of the Electricity Act, 2003 , vide its notification no. 1/4/2003 -1 Power dated 8/09/2003 notified that all the provisions of the Act except section 121, which had not been enforced by the Central Government vide notification no. S.O 699 (E) dated 10/6/2003 ,shall not apply in the State of Haryana for a period of six months from the appointed date i.e. 10/6/2003. Resultantly, EA, 2003 came into force in the State of Haryana w.e.f. 10/12/2003. However, as the Haryana Electricity Reforms Act, 1997 (HERA, 1997) is a saved Act under sub 41 – section (3) of section 185 of the Electricity Act, 2003 (EA, 2003), the provisions of HERA, 1997 not inconsistent with EA, 2003 continue to be applicable. Appropriate estimation of category wise energy sales is essential to arrive at the quantum of power to be purchased and the likely revenue by sale of energy which shows its importance. The consumer’s categorywise energy sales Approved by Commission shown below: 42 Consumer Category 2011-12 UHBVNL Metered Sales Domestic Non Domestic HT Industry LT Industry MITC Lift Irrigation Railway Traction Bulk Supply Street Light PWW Metro DMRC SUB TOTAL AP Sales Agri Metered Agri Unmetered SUB TOTAL TOTAL 2012-13 2013-14 DHBVNL %of Total Sales In MU’s % of Total Sales % of Total Sales DHBVNL UHBVNL UHBVNL DHBVNL UHBVNL DHBVNL UHBVNL DHBVNL UHBVNL DHBVNL 2480 855 3003 778 4 34 3470 1216 5713 792 0 173 2995 965 2646 804 8 98 3840 2751 4477 815 0 160 3530 1031 2862 872 6 62 3968 2302 5457 867 2466 177 20.99 7.23 25.41 6.58 0.03 0.28 21.26 7.45 35 4.85 0 1.06 23.77 7.65 21 6.38 0.06 0.77 23.52 16.85 27.43 4.99 0 0.98 25.59 7.47 20.74 6.32 0.04 0.44 19.78 11.48 27.21 4.32 12.19 0.88 148 266 49 349 0 203 1307 37 445 26 120 309 40 486 0 135 344 48 447 210 115 341 44 534 0 140 502 56 383 21 1.25 2.25 0.41 2.95 0 0.12 8 0.22 2.72 0.15 0.95 2.45 0.31 3.85 0 0.82 2.1 0.29 2.73 1.28 0.83 2.47 0.31 3.87 0 0.69 2.5 0.02 1.91 0.1 7965 13382 8471 12927 9397 16339 67.41 82 67.24 79.2 68.12 81.48 1620 1832 1810 2281 2085 2466 13.71 11.22 14.36 13.97 15.11 12.29 2230 1105 2317 1112 2312 1246 18.87 6.77 18.39 6.81 16.76 6.21 3846 11815 2937 16319 4127 12598 3393 16320 4397 13794 3712 20051 32.55 100 17.99 100 32.75 100 20.79 100 31.87 100 18.51 100 Table no-4 Consumer Category wise Energy Sales Approved by HERC 43 The above table clearly indicate that sales mix in Haryana constitute 32.55%(UHBVNL) and 17.99%(DHBVNL) of AP Sales in FY2011-12 which has greater as compared to next FY.The contribution of DHBVNL has more than UHBVNL in total sales of the State. It is very difficult to determine the Sales of unmetered AP consumers. The Commission had to rely on the load factor of the metered sales to AP consumers to assess the consumption of the un – metered AP consumers. However Commission clearly directed that no new unmetered connection should be released. The Approaches followed by the Commission to determine the key components of ARR are explained in detailed manner as below: POWER PURCHASE COST-. The Commission had laid down the following approach for determination of power purchase cost in its orders: "Where a PPAs / MOUs exist, cost should be determined accordingly". "In case of CPSUs or other generators, who are supplying power to more than one state, where payments are governed as per generation tariffs as approved by CERC, the cost should be taken based on CERC tariffs & the methodology adopted therein". "Where neither PPA nor CERC Tariff or Notifications are available for any reason, projections can be made based on the latest available rates as per invoices". "Estimation should be made for various components separately and a reasonable level of escalation in costs should be assumed for those elements that are expected to undergo change". The Commission feels that the most appropriate basis for estimation of power purchase cost would be the actual annual average cost of power from various generating / trading sources in previous FY and as per the tariff as applicable as per the approved PPA / generation tariff order in the relevant cases including renewable sources of power. There is a increase in the PPC of 23.60% from FY12 TO FY13,an increase of 13.50% from FY13 to FY14.The PPC constitute 81% of the net ARR approved in FY14 which is highest among all three FY’s. 44 PPC 16000 14000 12000 10000 8000 6000 4000 2000 0 14451.53 12728.92 10298.15 PPC FY12 FY13 FY14 Fig-4 Trend of PPC over three years O&M Expenses-comprises of Employees cost, Repair & Maintenance expenses and Administration & General expenses which are analyzed under this sub-head. Employee Expenses-Employees' cost includes cost incurred for the employees presently licensees. The cost of working employees includes salary, dearness allowance and other allowances such as HRA, CCA, LTC, medical reimbursement etc. While In the case of retired employees and those who would retire during the year, the Licensee have to discharge financial liabilities towards pension, gratuity, leave encashment benefit etc and the same has been taken into account while estimating employees cost in all three FY. There is a continuous decrement of employee cost of 2.45% from 2011-12 to 2012-13 and 1.40% from 2012-13 to 2013-14. R&M expenses-For maintaining the distribution system in a proper working condition Repair and maintenance (R&M) cost is incurred by the distribution licensees. The Commission, in order to evolve a scientific basis for calculating R&M expenditure had directed the distribution licensees to prepare R&M norms for the equipments used in the distribution and retail supply business. As per report submitted to the Commission, the normative expenses worked out to 1.65% of GFA. The expense of Rs 158 Crore, Rs 151Crore and Rs 184Crore are approved by the Commission in FY12, 13 & 14 respectively. A&G expenses-The Commission believes that A&G expenses do get impacted with the general level of prices in the economy. Thus considering the inflationary impact at 10% YOY, the Commission allows Rs. 99.58 Crore to be recovered in the ARR in FY 2011-12.The same approach is followed in FY 2012-13 also. The Commission approves Rs 57.60 Crore as A&G expenses for FY 2013-14 for UHBVNL and Rs. 52.83 Crore for DHBVNL after accounting for 4% increase per annum over the audited expenses of FY 2011-12 in line with the MYT regulations. The O&M expenses constitute of 10% of net ARR approved in FY 2011-12 which is highest among all three FY’s. 45 FY TOTAL O&M COST 2011-12 2012-13 1393.69 1405.4 2013-14 1419.79 TOTAL O&M COST 1430 1420 1419.79 1410 1405.4 TOTAL O&M COST 1400 1393.69 1390 1380 2011-12 2012-13 2013-14 Fig-5 Trend of O&M Cost over three years DEPRECIATION-In FY 2011-12 UHBVNL has claimed depreciation on an opening balance of GFA which works out to 3.43% of GFA at the beginning of the year. The commission applies the same depreciation rate 3.43%.DHBVNL has claimed depreciation on the opening balance of GFA of which works out to an average of 5.07% of opening GFA. The rate of depreciation proposed by DHBVNL is much higher than the depreciation rate of 2.74%(adopted by Commission) as per audited accounts for FY 2009-10. Therefore the Commission has based its calculation for depreciation on the average rate of depreciation as per the last available audited accounts. In FY 2012-13 The Commission, based on the depreciation rate of 3.45% as per audited accounts for FY 2010-11, has approved depreciation on its estimation of opening balance of GFA for UHBVNL. The Commission has based its calculation for depreciation on the average rate of depreciation (3.58%) as per the last available audited accounts for DHBVNL. In FY 2013-14 The Commission has revised the applicable rates of depreciation vide the MYT and the licensees were to file the depreciation costs accordingly but have expressed their inability to do so for the ensuing year. The Commission, therefore, allows the depreciation rates claimed by the licensees, as per audited accounts for FY 2011-12 and the same shall be allowed to be trued up based on the audited cost as per the revised depreciation rates. 46 The Depreciation amount increased from Rs 204 Crore in FY12 to Rs 294 Crore i.e; 44% but very small increase from Rs294 Crore to Rs 304 Crore i.e; 3.5% in FY 14. FY DEPRECIATION 2011-12 204.8 2012-13 294.2 2013-14 304.15 DEPRECIATION 350 300 304.15 294.2 250 200 204.8 DEPRECIATION 150 100 50 0 2011-12 2012-13 2013-14 Fig-6 Trend of Depreciation amount over three years (Approved) INTEREST ON WORKING CAPITAL -The Commission has allowed interest on borrowings for working capital equivalent to one month of ARR in accordance with the orders of the Hon’ble Appellate Tribunal for Electricity. The interest rate of 12.25% has been applied on amount of working capital in FY 12 and 12% in FY13. The Commission has allowed interest rate of 12% on borrowings for working capital in accordance with the MYT regulations for FY 14. INTEREST AND FINANCE CHARGES- The Commission followed the following approach to compute interest and finance charges-: Net Interest on capex loans ,Interest on working capital , Interest on consumer deposits and Interest on financing regulatory gap are added together to get the net Interest expenses. Discoms has not separately provided details of interest on consumer security deposit and Interest on financing regulatory gap therefore the detailed approach for computing Interest and finance charges can’t be explained. RETURN ON EQUITY-The accumulated losses of the two distribution Licensees i.e. UHBVNL and DHBVNL have completely eroded their entire net worth.. the Commission does not consider it appropriate to allow any return on equity in the all three FY’s, 47 The key components of Annual Revenue Requirement filed by petitioner and approved by HERC are as follows: In Rs Crore FY ARR COMPONENTS PPC O&M COST DEPRECIATION INTEREST & FINANCE CHARGES INTEREST ON WC ROE ARR NON TARIFF & OTHER INCOME NET ARR PS 2011-12 CA DIFF 11666.82 10298.15 1368.6 %of net ARR Approved 72.5 1696.39 390.6 1484.59 204.8 211.8 185.8 10.4 1.4 662.5 516.97 145.53 1467.58 457.23 18579.71 148.75 NO 14708.98 1318.8 457.23 3870.7 501.1 18502.09 501.1 14207.87 0 4294.2 Table no-5 2012-13 PS CA 12728.92 4741.2 %of net ARR Approved 81.7 363.9 1405.4 294.2 285.07 69.7 9.02 1.9 3.6 539.10 736.27 -197.17 4.7 180 315 -135 1.83 1.04 557.46 423.49 24504.38 158.5 NO 15941.99 398.96 423.49 8562.4 2790.5 541.5 25941.8 261.24 NO 17404.7 2529.27 541.5 85371 1.5 367 24594.59 363.14 15578.85 3.86 9015.7 227.50 26255.8 227.48 17177.2 .02 9078.58 17470.19 1690.471 DIFF 2013-14 PS CA 1.01 DIFF 19046 14451.53 4594.47 %of net ARR Approved 84.1 1669.5 309.6 1419.8 304.15 249.71 5.45 8.2 1.77 Diff in amount of ARR Components filed by Petioner and approved by the Commission 48 REASON FOR DIFFERENCE (filed vs approval) 1) Interest on Working Capital-The Petitioner has proposed huge amount of working capital but Commission has not approved such huge amount and as a result interest on WC (approved by Commission) is small figure as compare to proposed amount. The approach for computing amount of working capital is not given in the Tariff order In FY 2013-14 UHBVNL has not furnished the details of Interest on WC. 2) Interest and Finance Charges- In FY 2011-12 DHBVNL has not furnished the data of Interest on financing Regulatory Gap. In FY 2012-13 Both Discoms has not filed any data of Interest on financing Regulatory Gap. In FY 2013-14 Both Discoms have proposed high interest capitalized and commission reject it. 3) O&M Cost-While working out expenditure under employee cost, the Commission has not allowed expenditure on account of new recruitments as proposed by the distribution licensees for all three FY. HIGHLIGHTS OF THE ORDER FY 2011-12 Increase in sales in 2011-12 in case of UHBVNL 13% and 15% by DHBVNL. Commission has revise the Tariff in Independent Hoarding/Decorative Lightning category from Rs 5.95/KwH to Rs 6.50/Kw The Commission allow the Distribution companies to take borrowings from approved institutions to the extent required but not exceeding the uncovered revenue deficit as estimated by the Commission FY 2012-13 For DS consumers’ commission has reduced MM (Rs70 to Rs50 per month per KW of connected load. Commission has introduced a separate category of Tariff for existing NDS consumers with load above 50KW up to 70KW. Commission has revised the tariff for the public water, lift irrigation, MITC & street light supply consumers with cost causation principle 49 FY 2013-14 DHBVNL have not submitted any Tariff proposal to bridge the revenue deficit at the current Tariff of DS consumers. Commission has considered discom proposal and allows a recovery of about 45% of regulatory asset and Balance amount shall be recovered in the next two years. 50 PUNJAB INTRODUCTION The Punjab State Electricity Board (PSEB) was a statutory body formed on 1-2-1959 under the Electricity Supply Act.1948. Subsequently with the re-organization of the erstwhile State of Punjab under the Punjab Re-organization Act 1966 this form came into existence w.e.f. 1st May, 1967. Starting with the modest installed capacity of 62 MW, the PSEB grew up by leaps and bounds with generating capacity 6841 MW as on 31-3-2009 from all sources, including share from Central Sector Projects. The Board's gross generation during the year2008-09 was 38880 Million Units. PSEB operated its own Generation Power Plants and also got power as its share from BBMB. The PSEB also constructed and maintained its Transmission and Distribution system for providing efficient services to the various categoriesof electricity consumers in the state. Punjab State Power Corporation Limited (PSPCL) is the electricity generating company of the Government of Punjab state in India. PSPCL has submitted that it is one of the „Successor Entities‟ of the erstwhile Board duly constituted under the Companies Act, 1956, on 16.04.2010 after unbundling of the Board by Government of Punjab vide notification no.1/9/08-EB(PR)/196 dated 16.04.2010, under the “Punjab Power Sector Reforms Transfer Scheme” (Transfer Scheme). . The consumer’s category-wise energy sales Approved by Commission shown below: Consumer Category Domestic Non Residential Small Power Medium Supply Large Supply Public Lighting Bulk Supply Railway Traction Total Metered Sales AP Consumption Common Pool Outside State Sale Total Sales Sales Approved(MU’s) % of the Total Sales 2011-12 2012-13 2013-14 2011-12 2012-13 2013-14 25.09 27.37 26.77 8954 9642 10452 7.35 8.05 8.24 2623 2838 3218 2.34 2.52 2.48 835 891 972 4.91 5.15 5 1755 1815 1953 26.92 22.30 25.50 9607 7856 9957 0.38 0.38 0.36 137 135 143 1.51 1.56 1.59 539 552 623 0.50 0.52 0.36 181 184 143 68.76 67.89 70.34 24531 23913 27461 30.39 31.23 28.74 10843 11003 11221 0.84 0.86 0.77 302 305 304 0 0 0 0 0 53 100 100 100 35676 35221 39039 Table no-6 Consumer Category wise Sales Approved by the PSERC 51 The Approaches followed by the Commission to determine the key components of ARR are explained in detailed manner as below: POWER PURCHASE COST-For PPC of Central Generating Stations the Commission notes that the Terms and Conditions of Tariff Regulations issued by CERC in January 2009 are applicable for all Central Generating Stations from April 1, 2009 onwards. However, CERC is yet to issue Tariff Orders for individual Central Generating Stations. All the Central Generating Stations are provisionally raising the bills at the tariff approved by CERC for FY 2008-09. In this Order, therefore, the Commission has decided to consider fixed charges as per bills for September, 2010. These fixed charges will be reviewed in the subsequent Orders of the Commission once the CERC issues Tariff Orders for the Central Generating Stations based on the new Tariff Regulations. In FY 2012-13 The Commission has decided to consider fixed charges as per respective Tariff Orders issued by the CERC, and in cases where Tariff Order has not been issued, fixed charges have been taken as per bills for September 2011, and where bills for September 2011 are also not available, fixed charges have been taken as projected by the PSPCL in the ARR. The variable charges have been considered as per bills for September 2011, and where bills for September 2011 are not available, variable charges as projected by PSPCL in the ARR for FY 2012-13 have been considered by the Commission. In FY 2013-14 The Commission has decided to consider fixed charges as per respective Tariff Orders issued by CERC, and in cases where Tariff Order has not been issued, fixed charges have been taken as per bills for September 2012, and where bills for September 2012 are also not available, fixed charges have been taken as projected by PSPCL in the ARR. The variable charges have been considered as per bills for September 2012, and where bills for September 2012 are not available, variable charges as projected by PSPCL in the ARR for FY 2013-14 have been considered by the Commission. Trend of PPC over three years shown below- PPC 10000 8000 6000 7818.98 5751.26 5717.04 PPC 4000 2000 0 FY12 FY13 FY14 Fig 7 Trend of PPC over three years 52 O&M Expenses-Comprises of Employee cost, R&M expenses and A&G expenses which are explained below: Employee Cost- The provisions of the PSERC Tariff Regulations provide for determination of Employee cost in two parts: Terminal benefits including BBMB share on actual basis. Increase in other employee expenses limited to average increase in Wholesale Price Index. Regulation 28(8) also provides for consideration of any exceptional increase in employee cost on account of pay revision. .The employee cost is increasing year by year. There is a increment of 14.5% from FY12 to FY13 and 13.6% from FY13 to FY14. R&M expenses- The Commission has been approving the R&M expenses in accordance with the provisions of Regulation 28 (8) of PSERC Tariff Regulations by adjusting the base R&M expenses in proportion to the increase in WPI. The Commission approved Rs 595 Crore in FY14 which is 54% more as compare to FY14. A&G expenses- The Commission has been approving the A&G expenses in accordance with provisions of the amended Regulation 28 (2)(b) of PSERC Tariff Regulations by adjusting the base A&G expenses in proportion to the increase in WPI. The Commission approved Rs 87.9 Crore, Rs 101.4 Crore and Rs 136.8 Crore in FY12, 13 and FY14 respectively. There is a increase of 15% and 34.8% in last two years. FY TOTAL O&M COST 2011-12 3381.15 2012-13 3899.88 2013-14 4530.13 TOTAL O&M COST 5000 4530.13 4000 3000 3899.88 3381.15 TOTAL O&M COST 2000 1000 0 2011-12 2012-13 2013-14 Fig 8 Trend of O&M Cost over three years DEPRECIATION- The Commission has applied the average percentage rates of depreciation (net) for FY 2011-12, which are derived from the audited accounts of FY 2009-10. The Commission apply 3.72% 53 depreciation rate on the asset value as on 1 April 2012 for FY 2012-13 and dep. comes out to be Rs 290 Crore. Same approach is followed in FY 2013-14 and dep. comes out to be Rs 307 Crore. FY DEPRECIATION 2011-12 405.29 2012-13 290.10 2013-14 307.18 DEPRECIATION 450 400 350 300 250 200 150 100 50 0 405.29 290.1 307.18 DEPRECIATION 2011-12 2012-13 2013-14 Fig 9 Trend of Depreciation amount over three years INTEREST ON WORKING CAPITAL- The Commission has determined the working capital requirement of Rs. 1,866.23 Crore, as per PSERC Tariff Regulations. By applying the State Bank Advance Rate of 11.75% as on April 01, 2010, the interest thereon works out to Rs. 219.28 Crore for FY 2011-12. The Commission has determined the Working Capital requirement of Rs. 2023.77 Crore as per PSERC Tariff Regulations. By applying the State Bank Advance Rate of 13% as on April 1, 2011, the interest thereon is worked out to be Rs 263 Crore for FY 2012-13. The Commission has determined the Working Capital requirement of ₹3540.91 Crore as per PSERC Tariff Regulations. By applying an average rate of 11.24% per annum payable by PSPCL to the financial institutions for short term and mid-term loans as considered in the Review for FY 2012-13, the interest on working capital is worked out to be Rs 397 Crore. INTEREST AND FINANCE CHARGES-There are various components which constitute the net Interest and Finance Charges are as follows: Interest on Institutional loans Interest on GOP Interest on GPF Lease rentals Interest to consumers Interest on WC Loans Discount to consumers for advance payment 54 Finance charges for loans Less:capatilalization Net Interest and Finance charges The Interest and Finance charges are Rs 1066 Crore, Rs 1580 Crore and Rs 1767 Crore for FY 12,13 and 14 respectively. RETURN ON EQUITY- The Commission observes that at present, PSPCL has not been able to show requisite improvement in the critical parameters like employee cost. Thus, the Commission retains the ROE rate @ 14% and works out the ROE at Rs. 366.47 Crore on the total equity of Rs. 2,617.61 Crore in FY 2011-12. The Commission allows ROE @ 15.5% on equity of Rs. 2617.61 Crore which works out to Rs. 405.73 Crore in FY2012-13. The Commission considers it appropriate to allow RoE of Rs 942.62 Crore @ 15.5% on the equity of Rs 6081.43 Crore in FY 2013-14. 55 The key components of Annual Revenue Requirement filed by petitioner and approved by PSERC are as follows: In Rs Crore FY ARR COMPONENTS PPC O&M COST DEPRECIATION INTEREST & FINANCE CHARGES INTEREST ON WC ROE ARR* NON TARIFF & OTHER INCOME NET ARR PS 2011-12 CA 2012-13 DIFF 6349.74 4164.44 NOT GIVEN 5751.26 3381.15 598.48 783.29 2236.27 1066.86 1169.4 938.47 598.86 18950.40 219.28 366.47 15504.1 719.19 232.39 3446.2 502.77 18447.62 579.11 14925 -76.34 3522.6 405.29 %of net ARR Approved 38.5 22.6 PS CA DIFF 7207.38 4508.32 NOT GIVEN 5717.04 3899.39 7.14 2571.68 1580.35 991.33 1.46 2.45 1358.45 607.55 20415.5 263.09 405.73 17035.85 1095.36 201.82 3379.68 700.07 19715.5 1068.72 15967.13 -368.65 3748.33 2.71 1490.34 608.93 %of net ARR Approved 35.8 24.4 PS 2013-14 CA DIFF 8680.57 4884.8 NOT GIVEN 7818.98 4530.13 9.9 2656.86 1767.18 1.6 2.5 1356.19 1411.50 23589.60 397.99 958.2 942.45 469.05 21592.45 1997.15 906.36 22683.24 779.57 20812.98 290.10 1.8 861.59 354.67 %of net ARR Approved 37.5 21.7 307.18 1.5 889.68 8.5 1.9 4.5 126.79 1870.26 * It includes Fuel cost Table no-7 Diff in amount of ARR Components filed by Petioner and approved by the Commission 56 REASON FOR DIFFERENCE (filed vs approval) 1) Depreciation- PSPCL has projected depreciation charges which included Generation , transmission and Distribution.PSPCL has not projected depreciation of Distribution separately but Commission approved separately of each function. 2) Interest on Working Capital-For all 3 FY’s PSPCL has not projected its working capital on the basis of norms as per PSERC Tariff Regulations but Commission has determined the working capital requirement as per PSERC Tariff Regulations which creates a difference in the amount of interest. HIGHLIGHTS OF THE ORDER FY 2011-12 DS/NRS/LS consumer catered at 400 volts against specified voltage of 11 kV is levied surcharge at the rate of 15%. DS/NRS/BS/LS consumers catered at 33/66 kV against specified voltage of 132/220 kV be levied surcharge at the rate of 5%. SC and non SC BPL, Domestic consumers with connected load up to 1000 watts will be given 100units of free power per month in view of Govt subsidy. FY 2012-13 Levy of 10 paisa/unit on prorate basis, on continuous process industries, shall commence with effect from November 01, 2012. The remaining Regulatory Asset of Rs 1325.75 along with carrying cost is now considering for amortization in this tariff order. FY 2013-14 Commission approves an increase of 50% of the existing Peak Load Exemption Charges. Rebate of 25 paisa/unit to all consumers getting supply at 220/132 Kv. Commission approves proposal of PSPCL for introduction of TOD for six months (oct-march) of the year. 57 BIHAR INTRODUCTION The Bihar State Electricity Board (hereinafter referred to as erstwhile BSEB) was constituted under section 5 of Electricity (Supply) Act, 1948 on 1st April, 1958. It was a deemed licensee in terms of Section 14 of the Electricity Act, 2003. Bihar State Electricity Board was engaged in the business of generation, transmission and distribution of electricity in the State of Bihar. In terms of Section 172 of the Act, the Board constituted under the repealed laws is to be deemed as the State Transmission Utility and a licensee under the provisions of the Act for a period of one year from 10th June, 2003 i.e. the appointed date. Subsequently it has been mutually agreed by the Central Government and the Government of Bihar to authorize the Board to continue to function as a State Transmission Utility and Licensee. The Government of Bihar unbundled and restructured the Bihar State Electricity Board with effect from 1st November, 2012. The Generation, Transmission and Distribution Businesses of the erstwhile Bihar State Electricity Board are transferred to four successor companies. The four successor companies are listed below: Generation: Bihar State Power Generation Company Limited Transmission: Bihar State Power Transmission Company Limited Distribution: (i) North Bihar Power Distribution Company Limited (ii) South Bihar Power Distribution Company Limited Bihar State Power (Holding) Company Limited (BSPHCL), a holding company is responsible for purchase of electricity from various sources and supply of electricity to Distribution companies and other activities including trading of electricity. 58 Appropriate estimation of category wise energy sales is essential to arrive at the quantum of power to be purchased and the likely revenue by sale of energy which shows its importance. The consumer’s category-wise energy sales Approved by Commission shown below: Category 2011-12 Category MU’s Kutir Jyoti 263 D.S-I 886 D.S-II 1424 D.S Total 2012-13 Category MU’s Category 2013-14 MU’s 2012-13 Kutir Jyoti MU’s Rural 365 Kutir Jyoti (R) 456 Urban 67 2573 Kutir Jyoti (U) 1 Sub total 432 NDS-I 29 D.S-I 1048 Domestic Services NDS-II 575 D.S-II 1425 Domestic-I 689 NDS-III 7 D.S-III 1 Domestic-II 1867 NDS Total 610 D.S Total 2474 Domestic-III 1 Irrigation IAS 398 NDS-I 22 Sub total 2557 Irrigation total 398 NDS-II 582 Non Domestic Service LT Industrial L.T.I.S-I 204 NDS-III 18 Non Domestic-I 19 LT Industrial L.T.I.S-II 73 NDS Total 622 Non Domestic-II 870 LT Industrial total 277 IAS-I 272 Non Domestic-III 3 PWW 143 IAS-II 317 Sub total 892 Street Light-I(Metered) 4 LT Industrial L.T.I.S-I 197 Industrial(LT)Services Street Light-I(Unmetered) 34 LT Industrial L.T.I.S-II 127 LTIS-I 172 Street Light Total 38 PWW 160 LTIS-II 116 H.T.S-I 962 Street Light-I(Metered) 7 Sub total 288 H.T.S-II 289 Street Light-II(Unmetered) 33 H.T.S-III 110 Street Light-III 2 Streetlight-I 8 H.T.S.S 930 Street Light Total 42 Streetlight-II 45 HT Total 2291 H.T.S-I 967 Sub total 53 R.T.S-25Kv/132Kv 496 H.T.S-II 426 PWW 57 Street Light(Public lighting) 59 BSEB Total 6828 H.T.S-III 221 Irrigation & Agriculture Service H.T.S.S 447 IAS-I 336 RTS 785 LT Total 4810 BSEB Total 7512 HT Consumers HT industrial HTS-I 747 HTS-II 219 HTS-III 193 HTSS 523 Sub Total 1682 Railway Trac. 551 Total HT 2233 Nepal 550 Grand Total 7593 Table no-8 Consumer Category wise Sales Approved by the BERC 60 The Approaches followed by the Commission to determine the key components of ARR are explained in detailed manner as below: POWER PURCHASE COST- Commission determined the ppc for FY 12 by using the information of cost data of FY 11 provided by BSEB. The PPC of FY14 has been determined by the Commission, considered for NTPC stations, 5% increase per annum over the actual rates of April to September 2012, to cover likely increase in the cost of coal and transportation charges. NHPC has revised power purchase price of Rangit HPS, and it has built in bills claimed from April to September 2012. The Commission has also considered 5% increase in power purchase from Tala and Chukka projects in Bhutan. For the power purchased from Adani and other IPPs, the cost as provided in the PPA are considered and for power from other sources (now and existing) the cost as claimed by BSPHCL is approved. The PPC has increased from FY12 to FY13 by 60% which lead to the increased ARR in FY13. Trend of PPC over last three years shown below PPC 6000 5571 5000 4694 4000 3000 2916 PPC 2000 1000 0 FY12 FY13 FY14 Fig 10 Trend of PPC over three years O&M Cost-The O&M Cost comprises of Employee expenses, R&M expenses and A&G expenses which are explained below: Employee Cost-. The Commission in current economic situation considers escalation rate of 10% appropriate for determining employee cost for FY2011‐12 and 9.56% for FY 2012-13.The Commission considers the Consumer Price Index (CPI) at 8.63% per annum as on March, 2012 for determining the employee cost for the FY 2013-14. R&M Cost- The Commission agrees to approve higher R&M cost with an expectation that this will help BSEB in improving operational efficiency which is same as previous year Rs 67 Crore. The Commission in current economic situation considers escalation rate of 9.56% appropriate for determining R&M cost for FY2012-13. An increase of 7.69% per annum for the FY 2013-14 on the actual expenses of FY 2011-12. 61 .A&G expenses-The Commission has analyzed past trend of increase in A&G cost and the present levels. The Commission has found that growth in A&G cost over the period FY 08 to FY 10 to be around 8%. Therefore the Commission finds the consideration of 8% escalation rate on actual cost of FY 2009‐10 to determine A&G expenses for FY 2010‐11 & FY 2011‐12 and 9.56% for FY 2012-13.The Commission has considered the increase in A&G at an increase of 7.69% over the 2012-13 (RE) for determining FY 14. Total O&M Cost FY TOTAL O&M COST 2011-12 776 2012-13 754 2013-14 530.15 TOTAL O&M COST 1000 800 776 754 600 530.15 400 TOTAL O&M COST 200 0 2011-12 2012-13 2013-14 Fig 11 Trend of O&M Cost over three years DEPRECIATION-Based on approved GFA and capitalization considered during FY 2010‐11 & FY 2011‐12, the Commission approves depreciation of Rs 76 Crore for FY2011‐12. The Commission has considered closing balance GFA as achieved in FY 2011-12 as per the annual accounts of that year. The Commission has thereafter considered asset additions of Rs. 1810.7 Crores and by applying weighted average rate of depreciation (same as used in FY 2010-11) on average GFA the amount comes out to be Rs 118 Crore. For FY 2013-14 Commission follow the same method with average rate of depreciation is 5.21%. FY DEPRECIATION 2011-12 76.20 2012-13 118.24 2013-14 77.6 62 DEPRECIATION 140 120 118.24 100 80 77.6 76.2 DEPRECIATION 60 40 20 0 2011-12 2012-13 2013-14 Fig 12 Trend of Depreciation amount over three years INTEREST ON WORKING CAPITAL-Interest on working capital is computed on normative basis as per BERC (Terms and conditions for determination of Tariff) Regulations, 2007. SBI PLR rate of 13% as on 1st April, 2011 has been considered for calculation of interest for funding working requirement .However for FY 12 &13 same rate of interest has applied and there is a huge increase in the amount of interest from Rs 75 Crore to Rs 140 Crore i.e, increase of 86%.For FY 2013-14 same procedure has followed with an interest rate of 14.45%. INTEREST AND FINANCE CHARGES-Based on opening GFA and capitalization approved the interest rate of 13% has been applied and interest & finance charges(Generation ,transmission and distribution combine) comes out to be Rs 149 Crore, Rs 191 Crore and Rs 211 Crore for FY 12,13 and 14 respectively. RETURN ON EQUITY-Return is admissible only on equity actually deployed for the creation of assets.Since, BSEB has not been corporatized; it does not have any equity. The Commission has considered entire assets base funded through loan and accordingly interest has been allowed ,therefore no return is allowed for FY2011-12 and 2012-13.After unbundling the Commission has computed the return on the equity as per opening balance sheet as on 1st April, 2011 and there is no equity addition during FY 2011-12 and FY 2012-13, the return on equity is computed on the equity capital as on 1st April, 2011 @ of 14% which comes out to be Rs 123 Crore for FY 2013-14. 63 The key components of Annual Revenue Requirement filed by petitioner and approved by BERC are as follows: In Rs Crore FY ARR COMPONENTS PS 2011-12 CA DIFF %of net ARR Approved 2012-13 PS CA DIFF %of net ARR Approved 2013-14 PS CA DIFF %of net ARR Approved PPC O&M COST DEPRECIATION INTEREST & FINANCE CHARGES INTEREST ON WC ROE ARR NON TARIFF & OTHER INCOME NET ARR 3395 2916 479 64.2 5139 4694.6 444.38 61.9 6508 1115.07 776.13 338.94 17.1 900.5 756.03 144.47 11.5 533.14 72.93 76.20 -3.27 1.67 169.63 118.24 51.39 1.8 216 118.38 149 75.16 67 43.22 3.28 1.65 423.48 166.07 121.37 140.27 302.11 25.8 1.85 2.13 174 5296* NO 4706* 174 590* 282 7898.13 NO 6703.6 282 1194.5 148.16 5148 168.23 4538 -20.07 610 55 7843.02 127.16 6576.4 -72.16 1266.6 5571.92 936.08 83.6 530.15 2.99 7.9 133.13 77.6 55.53 1.16 237 188 211.28 123.16 25.72 64.84 3.17 1.85 123.1 7285.6 123.1 6850.21 0 435.4 1.85 110.68 7174.9 186.50 -75.82 6663.71 511.22 *It includes fuel cost Table no-9 Diff in amount of ARR Components filed by Petioner and approved by the Commission 64 REASON FOR DIFFERENCE (filed vs approval) FY 2011-12 1) O&M Cost-For projecting employee cost for FY 2011‐12, BSEB has considered a further escalation of 15% over the revised estimates of employee cost for FY 2010‐ 11 but Commission in current economic situation considers escalation rate of 10% appropriate for determining employee cost for FY2011‐12 Commission approved half of the A&G Expenses as proposed by the BSEB. BSEB has proposed a substantial increase in A&G expenses for FY 2011‐12 as compared to the actual incurred in FY 2009‐10. 2) ARR-Commission has not included Return on Equity and Interest on Working Capital but BSEB include it during filing. FY 2012-13 1) Interest & Finance Charges- For calculation of Interest and Finance charges for FY 2011-12 & FY 2012-13, BSEB has considered the closing balance of loans of FY 2010-11 but Commission has considered the closing balance of loan for FY 2011-12 (as per review Order for FY 2011-12) as the opening loan for FY 2012-13 and has computed the interest on loan for FY 2012-13. 2) Return on Equity-Commission has not approved return on equity. FY 2013-14 1) Depreciation-The Petitioner has computed the depreciation based on closing GFA,but Commission computed on average GFA during the year. 2) Power Purchase Cost-BSPHCL has considered the power purchase cost for the FY 2013-14 by applying CAGR of 5 years on the trends of unit power purchase cost from FY 2008-09 to FY 201213 on the actual rates paid for power from various generating companies during April 2012 to September, 2012. The Commission does not approve the methodology considered by BSPHCL in arriving at the power purchase cost for the this year. For NTPC stations, the Commission has considered 5% increase per annum over the actual rates of April to September 2012, to cover likely increase in the cost of coal and transportation charges. NHPC has revised power purchase price of 65 Rangit HPS, and it has built in bills claimed from April to September 2012. The Commission has also considered 5% increase in power purchase from Tala and Chukka projects in Bhutan. For the power purchased from Adani and other IPPs, the cost as provided in the PPA are considered and for power from other sources (now and existing) the cost as claimed by BSPHCL is approved. HIGHLIGHTS OF THE ORDER FY 2011-12 Levy of Delay payment surcharge (DPS) @ 1.5% per month. Commission has reduced the Cross Subsidy surcharge by 50% in this Tariff order. Removal of Load factor rebate. FY 2012-13 Change in the nomenclature of demand based tariff category from sub category name (A) to sub category name (B). Introduction of rebate for RTS tariff for availing supply at voltages higher than 132 Kv. FY 2013-14 BSEB is restructured on functional basis wef; 1 Nov 2012 and this petition is filled by BSPHCL on the behalf of two distribution companies. Unrecovered gap is considered as Regulatory Asset to be amortized in subsequent three years. 66 ASSAM INTRODUCTION The Government of Assam notified Vide Memo No PEL151/2003/Pt./165 dated 10th Dec’2004 to restructure the Assam state Electricity Board (ASEB) into five entities namely; Assam Electricity Grid Corporation Limited (AEGCL) to carry out function as State Transmission Utility (STU). Assam Power Generation Corporation Limited (APGCL) to carry out function of generation of electricity in the State of Assam. Three Electricity Distribution Companies, namely Lower, Central and Upper Assam Distribution Company Limited respectively to carry out functions of distribution and retail sale of electricity In the districts covered under each company area. All companies are duly incorporated with the Registrar of Companies as per the Companies Act. Further in exercise of power under Section 172 of the Electricity Act 2003, the State Government authorized ASEB to continue its trading functions by periodic notification till Sept 2009. In May 2009, as per GOA notification No PEL.41/2006/199 dated 13th May’09, in accordance with the Assam State Reform (Transfer and merger of Distribution Functions and undertakings) scheme, 2009, CAEDCL & UAEDCL distribution companies merged with the LAEDCL, thereby forming one distribution company for the state. The name of the company is changed from LAEDCL to Assam Power Distribution Company Limited (APDCL) vide certificate of incorporation dated 23rd October 2009. The Commission notified the AERC (Terms and Conditions for Determination of Tariff) Regulations, 2006 vide No. AERC.2005/19 dt 28th April 2006, which was published in the Assam Gazette on 24th May, 2006. It was stated that it shall come into force from the date of their publication in the Official Gazette of the Government of Assam. The Assam Electricity Regulatory Commission (hereinafter referred to as the AERC or the Commission) was established under the Electricity Regulatory Commissions Act, 1998 (14 of 1998) on February 28, 2001. The AERC came into existence in August 2001 as a one-man Commission. Considering the multidisciplinary requirements of the Commission, it was made a Multi Member Commission constituting three Members (including Chairperson) from 27th January 2006. The Commission has started functioning as Multi Member Commission on joining of two Members from 1st of February 2006. As per Assam Electricity Regulatory Commission (AERC), Terms and Conditions of Tariff Regulations 2006, the APDCL is required to file the proposal for determination of Annual Revenue Requirement and Tariff with the Commission. 67 The Category wise consumer Sales are given below: SI NO ENERGY SALES (APPROVED ) CONSUMER CATEGORY 1 2 3 4 5 6 7 8 9 Jeeban Dhara Domestic A Domestic B Commercial General Load Public Lightning Agricultural Small Scale Industries-Rural Small Scale Industries-Urban 2012-13 MU’s 298 1370 151 479 61 8 42 69 28 10 11 12 13 14 15 16 17 18 19 20 Total LT HT Domestic HT Commercial PWW Bulk supply-Govt educational Institutions Bulk supply-others HT small industry upto 50Kw HT industry I 50Kw to 150Kw HT industry II above 150Kw Tea, coffee and rubber Oil and Coal HT Irrigation above 7.5HP 2506 33 304 84 60 339 25 59 832 432 92 30 Total HT TOTAL HT+ LT %of total sales 6.21 28.56 3.14 9.98 1.27 .01 0.87 1.43 0.58 52.25 2290 0.68 6.33 1.75 1.25 7.06 0.52 1.23 17.34 9 1.91 0.62 47.74 4796 100 Table no-10 Consumer Category wise Energy Sales approved by AERC The Petitioner didn’t filed Revised ARR and Distribution tariff for FY 2011-12 and ARR for FY2013-14 are not come yet therefore we can’t compared the Sales of FY 2012-13. The Approaches followed by the Commission to determine the key components of ARR are explained in detailed manner as below: POWER PURCHASE COST- The average per unit rate for energy purchase from central generating station and others during 2009-10 is adopted for arriving at power purchase costs for the FY 2012-13. For new stations from which energy availability is projected for 2012-13, the per unit rate as given by APDCL is considered. Transmission Cost- The transmission costs include the costs to be paid to AEGCL for intra-state transmission to PGCIL for regional transmission of power, and SLDC charges. 68 PGCIL Cost- are approved by CERC and to be paid by APDCL on the basis of calculation in the Regional Energy Accounting of NERLDC ASEB Cost- The Government of Assam has continued ASEB for the purpose of implementation of various schemes. The normal expenditure of ASEB has been added to the power purchase cost. The expenditure is allowed till alternate arrangements are made by the State Government. O&M COST- include employee expenses, repair and maintenance (R&M) expenses and administrative and general (A&G) expenses explained below: Employee expenses- Commission takes into consideration the submission of the APDCL to consider the impact of 6th Pay Commission recommendation and provisionally approves 30% increase in FY 2010-11 over the actual of FY 2009-10 and 8% per annum for the years 2011-12 and 2012-13.The employee expenses comes out to be Rs 542 Crore. R&M expenses- This is a controllable item on which the expenses have to be restricted normally about 6% escalation per annum. In view of the vintage of the assets and the need to maintain quality of supply to the consumers, it is considered to allow 10% increase per annum on the base expenses of previous year and this expense comes to be Rs 32 Crore. A&G expenses-follow the same approach as mentioned above. FY TOTAL O&M COST 2011-12 Not Filed Revised ARR 2012-13 587.42 2013-14 Not Come yet DEPRECIATION- Commission has computed the depreciation based on the depreciation rates approved in Annexure I of AERC (Terms and Conditions for determination of tariff) Regulations 2006. However commission apply 3.74% weighted average rate of depreciation and adopted same methodology as other SERC’s used. FY DEPRECIATION 2011-12 Not Filed Revised ARR 2012-13 34.38 2013-14 Not Come Yet INTEREST ON WORKING CAPITAL- As per the AERC Regulations 2006, the Interest on working capital shall consist of a) O & M Expenses for one month b) Maintenance spares at 1% of the historical cost of fixed assets. c) Receivables equivalent to 60 days Average billing of consumers less security deposits of the consumers. 69 Rate of interest on working capital to computed at the PLR rate of SBI as on the 1st April of the financial year The amount of interest is Rs 50 Crore. INTEREST AND FINANCE CHARGES-The Commission considered ASE Loans with interest rate of 10% ,ADB Loans with interest rate of 10% comes to be Rs 1.10 Crore and New Loans with an interest rate of 10% comes out to be Rs 16.60 Crore.The Total Interest and Finance charges approved 17.70 Crore for FY 2012-13. RETURN ON EQUITY- As per the AERC Regulations 2006 Return on Equity shall be computed on the Equity capital Employed in the business, as per the opening balance sheet notified under transfer scheme subject to a maximum of 30%. The return on equity has come out Rs 22.79 Crore. 70 The key components of Annual Revenue Requirement filed by petitioner and approved by AERC are as follows: In Rs Crore FY ARR COMPONENTS PPC O&M COST DEPRECIATION INTEREST & FINANCE CHARGES INTEREST ON WC ROE ARR NON TARIFF & OTHER INCOME NET ARR 2011-12 PS C DIFF A 2012-13 PS CA 1758.37 630.69 69.90 NOT FILED REVISED ARR AND DISTRIBUTION 45.58 TARIFF 61.38 37.76 3766.59 1256 2510.59 DIFF 1654.24 589.97 34.38 104.13 40.72 35.52 17.70 50.27 22.79 2712.56 27.88 11.11 34.97 1054.03 462.47 2250.09 793.53 260.5 %of net ARR Approved 73.5 26.2 1.5 .78 2.2 1 2013-14 PS CA DIFF NOT COME YET Table no-11 Diff in amount of ARR Components filed by Petioner and approved by the Commission 71 REASON FOR DIFFERENCES 1) O&M Cost-Utility proposed an escalation 12% per annum considering the vintage of the assets in R&M expenses but Commission considered only 6% escalation per annum. 2) Interest on Working Capital-The petitioner proposed a Receivable equivalent to 60 days on higher side but Commission approved less amount. HIGHLIGHTS OF THE ORDER FY 2012-13 APDCL has not filed petition for determination of revised ARR and revised Tariff for FY 2012-13. The commission has taken up this case on Suo Motu for determination of revised tariff for FY 201213. No Revision in Tariff for FY 2012-13. 72 DELHI INTRODUCTION Prior to the year 2001, Delhi Vidyut Board (hereinafter referred to as „DVB‟) was the sole entity handling all functions of generation, transmission and distribution of electricity in the National Capital Territory of Delhi (hereinafter referred to as „Delhi‟). The Government of National Capital Territory of Delhi (hereinafter referred to as „GoNCTD‟), however, notified the Delhi Electricity Reform (Transfer Scheme) Rules, 2001 (hereinafter referred to as „Transfer Scheme‟) on November 20, 2001 and provided for unbundling the functions of DVB into different entities handling generation, transmission and distribution of electricity. The Transfer Scheme provided for unbundling of DVB and the transfer of existing distribution assets of DVB to BRPL (formerly known as South West Delhi Distribution Company Limited) , BYPL (formerly known as Central East Delhi Distribution Company Limited) , NDMC and TPDDL.All the Four distribution companies shall hereinafter are collectively referred to as „DISCOMs. BRPL-is a company incorporated under the Companies Act, 1956 and is entrusted with the business of distribution and retail supply of electricity in the specified area of South West of Delhi in the NCT of Delhi (as specified in the Transfer Scheme). BYPL-is a company incorporated under the Companies Act, 1956 and is entrusted with the business of distribution and retail supply of electricity in the specified area of Central East and East of Delhi in the NCT of Delhi (as specified in the Transfer Scheme). NDMC-is a Municipal Council entrusted with the distribution of electricity to the consumers in the New Delhi area under Section 195 to 201 of the New Delhi Municipal Council Act 1994. The NDMC has the obligations of a Licensee under the Indian Electricity Act 1910 in respect of the New Delhi Area. TPDDL-is a company incorporated under the Companies Act, 1956 and is engaged in the business of distribution and retail supply of electricity in the specified area of North and North West of Delhi in the NCT of Delhi (as specified in the Transfer Scheme). . 73 The consumerwise category Sales are shown below: CATEGORY WISE SALES BRPL BYPL TPDDL BRPL 2011-12 Domestic Non Domestic* Industrial Public Lighting Irrigation & agriculture Railway Traction DMRC Sales MU's 5025.73 2888.58 586.5 160.38 15.29 24.27 200 Others* Total 483.3 9384.05 Sales MU’s 2718.64 1585.84 448.76 112.06 0.56 0 130 224.01 5219.88 BYPL TPDDL 2012-13 Sales MU’s 2997.96 1196.48 2064.45 96.41 15.89 61.51 190 310.25 6932.95 Sales MU’s 5223.97 2886.46 510.64 136.4 15.16 24.77 280 544.83 9622.43 Sales MU’s 2710.05 1627.97 429.33 114.45 0.36 0 150 211.99 5244.14 Sales MU’s 3182.85 1302.30 2102.37 103.36 17.91 67.85 190 302.25 7268.89 BRPL % of total Sales BYPL %of total Sales TPDDL % of total Sales 2011-12 53.55 30.78 6.24 1.70 0.16 0.25 2.13 5.15 100 52.08 30.38 8.59 2.14 .01 0 2.49 4.29 100 43.24 17.25 29.77 1.39 0.22 0.88 2.74 4.47 100 BRPL %of total Sales BYPL %of total Sales TPDDL %of total Sales 2012-13 54.28 0.29 5.30 1.41 0.15 2.57 2.90 5.66 100 51.67 31.04 8.18 2.18 0.006 0 2.86 4.04 100 43.78 17.91 28.92 1.42 0.24 0.93 2.61 4.15 100 *Excluding DJB #Including DJB Table no-12 Consumer Category wise Energy Sales approved by DERC 74 NDMC-have different consumer categories which are shown below: CATEGORIES Domestic Single delivery point separate delivery point upto 100 KW Domestic power upto 100 KW Non Domestic upto 5 KW more than 5 KW and less than 100 KW Mixed Load Supply at 11 KV (HT) Supply on LT where supply is given from NDMC substation Supply on LT where applicant provides built up space for substation Small Industrial Power Public Lighting Others DMRC Total Sales MU's 258.88 94.34 145.87 18.66 254.89 50.1 204.8 726.17 514.96 3.72 %of total Sales 7.29 11.27 1.44 3.87 15.83 39.80 .28 207.48 16.03 0.31 8.81 8.66 36 1293.72 .02 .68 .66 2.78 100 Table no-13 Consumer Category wise Energy Sales (NDMC) approved by DERC In FY 2012-13 the Commission has replaced the two sub categories under NDLT from “Up to < 5 kW” and “More than 5 kW and less than and up to 100 kW/108 kVA” to “Up to < 10 kW” and “More than 10 kW and less than and up to 100 kW/108 kVA” respectively.: CATEGORIES Domestic 0-100 UNITS 101-200 UNITS 201-400 UNITS ABOVE 400 UNITS Non Domestic(Low tension)(NDLT)upto 100KW/108KVA upto 5 KW more than 5 KW and less than 100 KW More than 100 KW Supply on LT where applicant provides NDMC substation Supply on LT where applicant provides built up space for substation Non domestic high Tension(NDHT) Supply at 11 KV Small Industrial Power Sales MU’s 239.06 26.72 45.26 73.9 93.17 422.98 42.02 177.42 203.53 3.53 200.01 536.32 0.32 %of total sales 19.07 2.21 3.61 5.89 7.43 33.74 3.35 14.15 16.23 0.28 15.95 42.78 0.02 75 Public Lighting Others DMRC Total 14.81 9.94 30 1253.43 1.18 0.79 2.39 100 Tableno-14 Consumer Category wise Energy Sales (NDMC FY13) approved by DERC The Approaches followed by the Commission to determine the key components of ARR are explained in detailed manner as below: POWER PURCHASE COST- For existing stations the Commission has projected the variable cost for NTPC stations based on the average of the variable cost and FPA submitted by BRPL, BYPL and NDPL for FY 2010-11 as additional information. The fixed charges for NTPC has been taken from the provisional Tariff Orders issued by CERC. The fixed and variable cost for state generating stations has been considered as per the Tariff Order issued by the Commission for FY 2011-12.For other existing stations Commission approved as filed by petitioner. For new Generating stations -In case of Maithon TPS, the Commission has considered the power purchase cost as Rs 3.58 per unit as per information provided by the Petitioner. For NHPC hydro plants, Rs. 3.50 per unit has been assumed for computing the power purchase cost for FY 2011-12. In case of NTPC Jhajhar plant, Unit-II (Aravali Power Corporation Ltd.), the Commission has considered the annual fixed cost based on the Tariff Petition filed by APCL before CERC and the variable cost as approved by the Commission for APCL,Unit-I (under existing stations). Other Sources- Commission has considered that there will be no requirement of power purchase for meeting the seasonal demand in the Petitioners area of operation through intra-state purchase. For FY 2012-13 existing stations the Commission has projected the variable cost for NTPC stations based onthe average of the variable cost and FPA, submitted by BYPL and TPDDL for March 2012 as additional information, and an escalation of 5% during each year. The fixed charges for NTPC stations have been taken from the latest Tariff Orders issued by CERC up to June 15, 2012. The fixed and variable cost for state generating stations has been considered as per the MYT Order issued by the Commission for the Control Period. .For other existing stations Commission approved as filed by petitioner For new Generating stations-In case of Pragati-III, the Commission has considered the power purchase rate as Rs 4.50/kWh. For NHPC hydro plants, Rs. 4.50/kWh has been assumed for computing the power purchase cost. Other Sources- same as for FY2011-12. 76 PPC10870 11000 10500 10000 9251 9500 9000 PPC 8500 8000 FY12 FY13 Fig 13 Trend of PPC over last three years O&M COST-Comprises of employee cost, R&M expenses and A&G expenses which are explained below: Employee Cost- The Commission has determined the employee expenses of the Petitioner for the Control Period using the methodology detailed in the MYT Regulations, 2007. As per the MYT Regulations; “EMPn + A&Gn = (EMPn-1 + A&Gn-1)*(INDXn/ INDXn-1)” Hence, the employee expenses for the nth year (FY 2011-12) of the Control Period (EMPn) shall be determined using the employee expenses for the (n-1)th year (FY 2010-11) (EMPn-1) and the applicable escalation factor. For FY 2012-13 Commission has determined employee expenses of the Petitioner for the Control Period in line with the formula specified in the MYT Regulations 2011 – EMPn + A&Gn = (EMPn-1 + A&Gn-1) * (INDX); Where, INDX = 0.55 * CPI + 0.45 * WPI; EMPn – Employee Costs of the Licensee for the nth year; INDX - Inflation Factor to be used for indexing. Value of INDX shall be a combination of the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) for immediately preceding five years before the base year.” R&M expenses- As per the MYT Regulation, 2007, the Repairs and Maintenance (R&M) expenses of the Petitioner for the Control Period has to be determined based on the following formula: R&Mn = K * GFA n-1 Where, R&Mn is Repair and Maintenance Costs of the Licensee for the nth year; „K‟ is a constant (could be expressed in %). 77 Value of K for each year of the Control Period shall be determined by the Commission in the MYT Tariff order based on Applicant’s filing, benchmarking, approved cost by the Commission in past and any other factor considered appropriate by the Commission. . The Commission had determined the value of „K‟ for the Control Period(2007-8 to 2011-12) as 3.55% and for next control period (2012-13-2014-15) value is 2.53%.The Commission has determined the R&M expenses considering the opening level of GFA as approved by the Commission. The R&M expenses comes out to be Rs 360 Crore for all Discoms in FY 2011-12 and Rs 312 Crore in FY 2012-13. A&G Expenses-Commission has approved A&G expenses for the Control Period (FY 2007-08 to FY 201112) by considering the approved A&G Expenses of the base year (FY 2006-07) and after escalating the same as per the revised escalation factor using the same methodology as specified in the MYT Regulations, 2007.The A&G expenses come out to be Rs 178 Crore. For FY 2012-13 same approaches has been followed and expense come out to be Rs 219 Crore. FY TOTAL O&M COST 2011-12 2012-13 664.69 808.59 2013-14 Not Come yet TOTAL O&M COST 900 808.59 800 700 664.69 600 500 TOTAL O&M COST 400 300 200 100 0 2011-12 2012-13 Fig 14 Trend of O&M Cost over three years DEPRECIATION- The Commission has considered asset addition during FY 2011-12 and FY 2012-12 as per the Petitioner’s submission. Based on the average of opening and closing value of assets approved, net of Consumer Contribution Grants (average of Opening and Closing balance) during the FY 2011-12 and FY 78 2012-13 and the rates of depreciation, specified in the MYT Regulations, 2007 and MYT Regulations 2011 the depreciation comes out to be Rs 371.85 Crore and Rs 407.75 Crore respectively. FY 2011-12 2012-13 DEPRECIATION 371.85 407.75 2013-14 Not Come yet DEPRECIATION 420 407.75 410 400 390 380 DEPRECIATION 371.85 370 360 350 2011-12 2012-13 Fig 15 Trend of Depreciation over three years INTEREST ON WORKING CAPITAL-The Commission considered the following components- (a) Receivables for two months towards tariffs & charges; and (b) Operation and Maintenance expenses for one month. (c) Less Power Purchase Expenses for one month The Total amount of working capital is Rs 1369 Crore and interest rate has considered 9.5% in FY 2011-12 and Rs 1417 Crore with an interest rate of 11.62% in FY 2012-12.However in the Tariff order the inerest on WC has not given clearly. INTEREST AND FINANCE CHARGES- Not given clearly in the Tariff order. 79 The key components of Annual Revenue Requirement filed by petitioner and approved by DERC are as follows: In Rs Crore FY ARR COMPONENTS PPC O&M COST DEPRECIATION INTEREST & FINANCE CHARGES INTEREST ON WC ROE ARR NON TARIFF & OTHER INCOME NET ARR PS 2011-12 CA DIFF 11672.4 8 1621.75 452.43* 9251.47 1203.52 371.85** NOT CLEAR NOT GIVEN 74.15^ 914.36 16647.8 6 208.04 16626.8 6 %of net ARR Approved PS 2012-13 CA DIFF %of net ARR Approve d 2421.01 421.23 80.58 69 9 2.7 14279.15 1803.86 410.23 10866.85 1340.67 407.75 3412.3 463.19 2.48 75.18 9.27 2.82 130.2^ 847.9 -56.05^ 66.46 .98 6.4 153.83 1230.75 164.82 958.77 -10.99 271.98 1.14 6.63 13423.89 3224.03 17174.21 15192.63 1981.58 145.15 62.89 193.95 298.65 -104.7 13268.74 3358.12 16980.26 14452.83 2527.43 PS 2013-14 CA DIFF %of net ARR Approved NOT COME YET * Including AAD ** Excluding AAD ^ Exclude interest on new loans (WC Table no 15 Diff in amount of ARR Components filed by Petioner and approved by the Commission 80 REASON FOR DIFFERENCE (filed vs approval) 1) Depreciation-In all 2 FY’s the discoms filed the depreciation amount including AAD but commission approved the amount excluding AAD. 2) Interest & Finance Charges-In this tariff order this component is not clearly given. It is very difficult to segregate the amount of interest & finance charges from given information. 3) Interest on Working Capital-It is seen that almost in all states the petitioner filed for the large amount of working capital but Commission always reject the high amount. It is always directed by Commission to carefully work out on WC but discoms don’t take any step in this matter. HIGHLIGHTS OF THE ORDER FY 2011-12 The commission abolishes the two categories MLHT and NDLT II and creates new MDHT Category. In this Order, the Commission has abolished this sub-category on the grounds that DISCOMs were directed to install meters for all un-metered consumers (except NDMC). The Commission shall endeavor to cover the revenue gap approved till FY 2009-10 and unrecovered revenue gap for FY 2011-12 in the course of forthcoming MYT Period. The Commission did not receive any comments from the stakeholders in the NDMC area. FY 2012-13 The Commission, in this tariff Order has revised the slab structure of the domestic consumers. The Commission has decided to increase the applicable Energy charges for DMRC to meet the cost of supply in this tariff order. The Commission has added DJB supply under LT also in this category. The commission in this tariff order has created a separate category to cover the consumption for the advertisements and Hoardings. . 81 CONCLUSION The electricity Act 2003 has become the landmark in the power sector. The SERCs have played a positive role in the after reform period. Their functions especially related to tariff fixation has brought a positive change in the power sector. SERCs have initiated more public participation & transparencies in the proceeding. The increased no of objections filed by consumers, NGOs & several associations proves the increased participation. SERCs have up loaded all their proceedings, orders discussion paper on their respective websites which are open to discussion to public. If we want to get the clear picture of the aftermaths of restructuring & effects of regulatory governance the overall improvement is seen in following areas in states under consideration; Positive Trend towards reduction in distribution losses. Increased & more focused investment Capacity additions & system strengthening of the power systems Localization & reduction in efficiencies. Improved customer care. Progress in metering, billing, & revenue collection. Increased accountability in DISCOMs. The SERCs tariff setting approach is well established & understood by Utilities So a well understanding & coordination trend has established in tariff fixing. The SERCs are reviewing the Utilities performance with the benchmarked one regularly. The Conclusion about the ARR components in brief are given below: In case of sale forecasting or demand estimation the historical trend method has proved to be reasonably accurate and a well accepted method to estimate the number of consumers, the connected load and the energy consumption where the past data is fairly accurate and the trends are well established. Mostly SERCs have adopted merit order dispatch approach for power purchase and some followed the method of appropriate escalation to actual cost data of previous year for determining Power Purchase Cost. 82 Prior to reforms, there were minimum efforts to scientifically assess the T&D losses that Were often masked in unmetered (primarily agricultural) consumption. The approaches & Measures taken by SERCs are different. There is no uniform method for measuring & Setting targets for T&D losses. In cost based regulation capital cost is the most important parameter. The SERCs have Carefully studied the past assets capitalizations to approve CAPEX. From a regulatory perspective, depreciation is considered as a small amount of the original cost of the capital assets, built into the tariff computation every year with a view to providing the utility a source of funding to repay installments of debt capital. The refund of capital view is mainly adopted by SERCs. Advance against depreciation (AAD) is allowed in certain conditions like where the debt redemption obligation is not matching with the existing depreciation allowed. The SERCs differs on the ROCE or ROE approach The ROCE approach is consistent with the performance based regulations. Normative CoD will not work for all companies in India. Approved interest on loans is directly related to the loans taken into the Capital Base computations. The loans drawn for CAPEX and interest thereon are a pass-through in the tariffs. For the purpose of tariff fixation & identification of cross subsidy the CTS model proves to be an important tool. The basic objective of the Commission to use the CTS with regard to tariff design in the Tariff Orders was to build a road map to move towards cost reflective tariffs. The subsidy given by state government limits SERC from adopting progressive Cost to Serve model. Due to subsidy SERC cannot increase tariff for subsidized consumers like Domestic & Agricultural. The State Government gives subsidy to fill the revenue gap for its state utilities. The main reason for giving subsidy has political & economical background rather than the differentiation expected in electricity Act 2003, National electricity policy & National tariff Policy. The clauses & provisions itself in policy & act looks contradictory. In Indian power sector, the expensive peak hours with the cheap off peak hours are sold at one average price. Electricity prices for the consumers are always been bundled- as per quantity used, but not by when the electricity is used. TOD tariff is applied to mainly HT industrial & non industrial consumers. 83 An area of concern is that even after a decade of reform is that realistic valuation of losses is still lagging. Indeed the improvement in feeder metering & DTC metering is significant, the large portion of unmetered agricultural consumption still makes actual losses unknown. Somehow the estimated unmetered consumption is masking the distribution losses. 84 RECOMMENDATIONS PRIVATE INVESTMENT The essential conditions for encouraging private investment in a sector are that investors should be confident that they would get adequate returns. This crucially depends in the viability of the distribution sector. In Electricity Act 2003 emphasis is given to increasing competition and enhancing private sector investment, yet power sector is not completely conducive for private sector investment. Although some regulations e.g. Multi Year Tariff and Open Access provide some certainty to investors, yet its proper implementation is very crucial. INDEPENDENT FUNCTIONING OF REGULATORY COMMISSIONS Regulators have been given the key role in reforming the sector. Electricity Act 2003 gives them wide ranging powers. The functions and powers given to regulators in electricity sector compare favorably with the best. However, the regulators face the challenge of unfavorable initial conditions. These include the challenge of dealing with state owned utilities, which have overwhelming presence in generation and monopoly in distribution and transmission. In most states these vertically integrated utilities have been unbundled and converted into corporations. But this has not brought about any change in their management style or incentive system. They continue to function as administrative bodies that are not responsive to economic incentives and —for them the concept of cost does not apply. Their concept of rationality involves following procedures (particularly based on paper work) rather than taking cost benefit based decisions. They also do not consider themselves directly responsible to the shareholders (i.e. tax payers) nor to the consumers but only to the State Government. In fact in a number of states the Secretary Department of Power is also the Chairperson of the Power Corporations. Thus, the role of the government as policy maker and that of the corporation as implementing agency is devolved in the same person. It is thus not a surprise that the accounts in most cases have not been finalized nor was the tariff petitions filed on time. Despite the change to corporate structure, the provisions of company law relating to prudent accounting practices and publication of quarterly accounts and finalization of balance sheets have been given a miss. The structural reforms as envisaged by the Government of India and enforced by States do not lead to any substantial change either of the organization or of the administrative nature of the SEB’s. 85 TIMELINESS OF TARIFF ORDER All SERCs should issue tariff orders in time so that tariff structure could be improved and approved tariff could be implemented without delay. EFFICIENT MANAGEMENT OF FUNDS The financial institutions that have increased fund flows for generation projects as well as distribution reform schemes like APDRP and Rajiv Gandhi Grameen Vidyutikaran Yojna have not insisted on funds releases being conditional or following the company law provisions or principles of good governance. They are mostly satisfied by the State Governments tendering a guarantee, despite the fact, that over the years, such guarantees have not ensured timely payment. LOAD FORECASTING The sale/demand forecasting should be Time of Day (TOD) based so that peak hour demand, off peak hour demand & the supply for the respective time can be managed in better ways. Also the methodology adopted for forecasting should be a standard one, and should not vary through the years. CAPITAL EXPENDITURE OR INVESTMENT The capital work proposed by DISCOMs needs to be scrutinized by independent agencies or consultancies so that the base line data will be corrected, the technical feasibility will be evaluated correctly & the only useful investment will be done. Also in capital work execution consultancy expertise needs to be utilized. DEPRECIATION It is necessary that all the SERCs should follow same depreciation rate to bring uniform approach for all tariff orders & DISCOMs. 86 TOD TARIFF The TOD tariff is based on conservation by price response. TOD tariff is applied to mainly HT industrial & non industrial consumers. It should be given priority to extend MYT to LT industrial, commercial & high consumption Residential consumers.However the hourly metering should be cost effective. It should be implemented in the case of: o The customer is large electricity user o The customer’s price responsiveness (elasticity of demand) is high or o The difference between the hourly prices ( due to short term & ABT ) & the averaged price is large. 87 REFERENCES TARIFF ORDERS Issued by RERC,BERC, MPERC,HERC,PSERC,AERC,DERC, from FY 2011-12 to FY 2013-14. TARIFF REGULATIONS Issued by RERC,BERC, MPERC,HERC,PSERC,AERC,DERC, from FY 2011-12 to FY 2013-14. WEBSITES www.berc.co.in www.mperc.gov.in www.herc.gov.in www.pserc.nic.in www.aerc.nic.in www.derc.gov.in www.cerc.gov.in REPORT TERI, “Analysis & compilation of tariff orders”, TERI report no 2006RP23 May 2007 final report. Study on “Analysis of Tariff Orders and Other order of State Electricity Regulatory Commission’’ Crisil Risk and Infrastructure Solutions Ltd. 88 89