REVISED BUSINESS PLAN FOR MYT CONTROL PERIOD FY TO FY

Transcription

1 REVISED BUSINESS PLAN FOR MYT CONTROL PERIOD FY TO FY Submitted to HIMACHAL PRADESH ELECTRICITY REGULATORY COMMISSION, SHIMLA By HIMACHAL PRADESH STATE ELECTRICITY BOARD LIMITED, SHIMLA February, 2014

2 HPSEBL Business Plan MYT Control Period: FY to FY TABLE OF CONTENTS TABLE OF CONTENTS... ii LIST OF TABLES... iv LIST OF FIGURES... v LIST OF ABBREVIATIONS INTRODUCTION Background Objective of Business Plan BRIEF ABOUT HPSEBL Mission of HPSEBL Area served Organisation structure: Roles & Responsibilities Human resources IT & Other Initiatives Activities related to Consumer Service Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) R-APDRP (Part-B) Financial Restructuring Plan SWOT ANALYSIS SALES Load Growth Consumer Growth Energy Sales Growth OWN GENERATION Generation from own generating stations of HPSEBL POWER PURCHASE PLAN Quantum of Power Purchase Power purchase from other generating stations Power Purchase Projection Methodology T & D LOSS TRAJECTORIES & ENERGY BALANCE Transmission and Distribution Losses TRANSMISSION CHARGES... 38

3 HPSEBL Business Plan MYT Control Period: FY to FY CAPITAL INVESTMENT PLAN Capital Investment plan for Distribution schemes Capital investment plan for Generation Schemes Phasing of capital expenditure ESTIMATION OF ARR Operation & Maintenance Expenses Depreciation Interest & Finance Charges Provision for bad and doubtful debts Non tariff income Return on equity ARR summary... 57

4 HPSEBL Business Plan MYT Control Period: FY to FY LIST OF TABLES Table 1: Hydro generating plants of HPSEBL... 6 Table 2: SWOT Analysis Table 3: Past years load growth Table 4: Projected load growth during Control Period (FY to FY ) Table 5: Past years consumer growth Table 6: Projected consumer growth during Control Period (FY to FY ) Table 7: Past years growth energy sales growth (MUs) Table 8: CAGR for past years Table 9: Projected energy sales growth during Control Period (FY to FY ) 20 Table 10: Past years net generation from own plants Table 11: Projected own generation during Control Period (FY to FY ) Table 12: Total Power Purchase Cost from Own Generation Table 13: Power Purchase from Other Key Generating Stations Table 14: Power Procurement from GoHP (Free Power Allocation of GoHP in MUs) Table 15: Total Power Purchase Cost from GoHP Table 16: Power procurement from NTPC owned plants Table 17: Total Power Purchase Cost from NTPC Stations Table 18: Power procurement from NPCIL plants Table 19: Total Power Purchase Cost from NPCIL Stations Table 20: Power Procurement from NHPC plants Table 21: Total Power Purchase Cost from NHPC Stations Table 22: Power procurement from THDC plants Table 23: Total Power Purchase Cost from THDC Stations Table 24: Power procurement from SJVN Stations Table 25: Total Power Purchase Cost from SJVN Table 26: Power procurement from shared stations Table 27: Total Power Purchase Cost from Other CGS and shared stations Table 28: Additional Solar Power Requirement Table 29: Power procurement from other stations Table 30: Total power purchase cost from other stations Table 31: Power Purchase (MUs) from other sources Table 32: Total Power Purchase Cost from other sources Table 33: Overall Power Purchase (MUs) Table 34: Total Power Purchase Cost Table 35: Average Cost of Power Procurement (INR/ Unit) Table 36: Proposed T&D Loss Trajectory Table 37: Energy Balance Table 38: Summary of Transmission Charges (INR Cr) Table 39: Scheme Wise CAPEX Plan... 44

5 HPSEBL Business Plan MYT Control Period: FY to FY Table 40: CAPEX summary Table 41: Funding summary Table 42: K factor calculation Table 43: WPI Table 44: R&M Expenses Table 45: CPI Table 46: Growth factor for employee costs Table 47: Employee Expenses for 3rd Control Period (Rs. Crs) Table 48: A&G norms Table 49: Projections for applying A&G norms Table 50: A&G Expenses for 3rd Control Period (Rs. Crs) Table 51: Asset details for depreciation calculations Table 52: Depreciation for 3rd Control Period (Rs. Crs) Table 53: Interest on new & existing loans Table 54: Interest on working capital Table 55: Total interest and finance charges Table 56: Provision for Bad and Doubtful Debt for last 3 years (Rs. Crs) Table 57: Provision for Bad and Doubtful Debt for 3rd Control Period (Rs. Crs) Table 58: Non Tariff Income for 3rd Control Period (Rs. Crs) Table 59: Return on equity Table 60: Annual Revenue Requirement for 3 rd Control Period (Rs. Crs) Table 61: Wheeling ARR for 3 rd Control Period (Rs. Crs) Table 62: Retail Supply ARR for 3rd Control Period (Rs. Crs) LIST OF FIGURES Figure 1: District map of HP... 5 Figure 2: Organisation structure of HPSEBL... 7

6 HPSEBL Business Plan MYT Control Period: FY to FY LIST OF ABBREVIATIONS Sr. No Abbreviations Descriptions 1. A&G Administrative and General 2. AC Auxiliary Consumption 3. APR Annual Performance Review 4. ARR Aggregate Revenue Requirement 5. AS Accounting Standard 6. CAGR Compound Annual Growth Rate 7. CAPEX Capital Expenditure 8. CERC Central Electricity Regulatory Commission 9. CGS Central Generating Station 10. CoS Cost of Supply/ Service 11. CPPs Captive Power Plants 12. Crs Crores 13. CWIP Capital Work in Progress 14. DF Distribution Franchisee 15. Discom Distribution Companies 16. DPS Delayed Payment Surcharge 17. DS Domestic Service 18. DSM Demand Side Management 19. DTC Distribution Transformer 20. EA/The Act The Electricity Act F&A Finance & Accounts 22. FY Financial Year 23. GFA Gross Fixed Assets 24. G.O. Government Order 25. GoI Government of India 26. GoHP Government of Himachal Pradesh 27. HP Himachal Pradesh 28. HR Human Resource 29. HRA House Rent Allowance 30. HT High Tension 31. HEP Hydro Electric Power 32. IPP Independent Power Producers 33. KV Kilo Volt 34. kva Kilo Volt Ampere 35. kvah Kilo Volt Ampere Hour 36. kw Kilo Watt

7 HPSEBL Business Plan MYT Control Period: FY to FY Sr. No Abbreviations 37. kwh Kilo Watt Hour 38. LF Load Factor 39. LT Low Tension 40. MD Maximum Demand 41. MOD Merit Order Despatch 42. MoP Ministry of Power 43. MOU Memorandum of Understanding 44. MU Million Units (Million kwh) 45. MVA Mega Volt Ampere 46. MW Mega Watt 47. MYT Multi Year Tariff 48. NEP National Electricity Policy 49. NTP National Tariff Policy Descriptions 50. NTPC National Thermal Power Corporation 51. O&M Operation & Maintenance 52. PAF Plant Availability Factor 53. PF Provident Fund 54. PFC Power finance Corporation 55. PLF Plant Load Factor 56. PLR Prime Lending Rate 57. PPA Power Purchase Agreement 58. PSD Power Service Division 59. REC Rural Electrification Corporation 60. R&M Repair and Maintenance 61. ROE Return on Equity 62. RPO Renewable Purchase Obligation 63. Rs Rupees 64. SBI State Bank of India 65. SLM Straight Line Method 66. SHR Station Heat Rate 67. T&D Transmission and Distribution 68. HPSEBL Himachal Pradesh State Electricity Board Limited 69. HPERC Himachal Pradesh Electricity Regulatory Commission 70. w.e.f With effect from 71. Y-o-Y Year on Year

8 HPSEBL Business Plan MYT Control Period: FY to FY INTRODUCTION 1.1. Background Himachal Pradesh is a mountainous state having altitudes ranging from 350 mtrs to 6,975 mtrs with climate conditions varying from semi-tropical to semi-arctic. The total population of Himachal Pradesh as per 2011 census was 68,56,509 with population density being 123 persons per sq. km. Focused work for putting together a strong electrical network in the state began in August, 1953 under the Public Works Department, when the first electrical division was established. Subsequently a department of M.P.P & Power was formed in April, The Himachal Pradesh State Electricity Board was constituted on 1 st September, 1971 in accordance with the provisions of Electricity Supply Act (1948). It functioned as Distribution, Generation as well as Transmission licensee for the state of Himachal Pradesh up to 10th June, 2010, when the Government of Himachal Pradesh, in exercise of the power conferred to it, by Section 131 (2), 132, 133 and other applicable provisions of the Electricity Act 2003, vide the Himachal Pradesh Power Sector Reforms transfer Scheme, 2010 transferred the functions of generation, distribution and trading of electricity to Himachal Pradesh State Electricity Board Limited (HPSEBL) Himachal Pradesh State Electricity Board Limited (HPSEBL), having its registered office at Vidyut Bhawan, Shimla, is responsible for supply of uninterrupted & quality power to all categories of consumers in Himachal Pradesh at the most seconomical rates The key duties being discharged by HPSEBL are: Laying and operating of such electric line, sub-station and electrical plant that is primarily maintained for the purpose of distributing electricity in the area of supply of HPSEB Ltd., notwithstanding that such line, sub-station or electrical plant are high pressure cables or overhead lines or associated with such high pressure cables or overhead lines; or used incidentally for the purpose of transmitting electricity for others, in accordance with Electricity Act or the Rules framed there under. Operating and maintaining the existing generating stations and shall establish, operate and maintain generating stations, tie-lines, sub-stations and dedicated transmission lines connected there with as per the provisions of the Act and the Rules framed there under Arranging, in-coordination with the Generating Company(ies) operating in or

9 HPSEBL Business Plan MYT Control Period: FY to FY outside the State, for the supply of electricity required within the State and for the distribution of the same in the most economical and efficient manner; Supplying electricity, as soon as practicable to any person requiring such supply, within its competency to do so under the said Act; Preparing and carrying out schemes for distribution and generally for promoting the use of electricity within the State Objective of Business Plan The Himachal Pradesh Electricity Regulatory Commission (HPERC), in exercise of the powers conferred on it by section 181 of the Electricity Act 2003 (Act 36 of 2003) and all other powers, has issued HPERC (Terms and Conditions for Determination of Wheeling Tariff and Retail Supply Tariff) Regulations, 2011 along with Amendment 1, 2012 and Amendment 2, 2013, and HPERC (Terms and Conditions for Determination of Hydro Generation Tariff) Regulations, 2011 along with Amendment 1, 2011 and Amendment 2, 2013, hereinafter referred to as MYT Regulations As per the Regulations, Business plan comprising of Generation business (with plant-wise details) for the entire control period and Distribution business containing details regarding sales/ demand forecast, T&D loss reduction trajectory, power procurement plan, capital investment plan, financing structure, O&M cost estimates, etc. for the control period is required to be filed before the Hon ble Commission as part of the Tariff Filing before the beginning of the Control Period Accordingly, HPSEBL had filed the MYT Petition and Business Plan along with the requisite fee on 30/11/2013 bearing No. 141/2013. However, in response to Commission s letter No. HPERC/ MYT3/ HPSEBL/ , dated 05/12/2013, HPSEBL is hereby filing the revised Business Plan for 3rd Control Period (FY to FY ) based on the available data for the FY and provisional data of previous 3 years HPSEBL has prepared the Business Plan taking cognizance of the existing internal factors and external business environment affecting the business. HPSEBL submits that the Business plan being a dynamic document may need to be updated at periodic intervals taking into account the changes in the internal and external environment and these changes would be intimated to the Hon ble Commission from time to time.

10 HPSEBL Business Plan MYT Control Period: FY to FY BRIEF ABOUT HPSEBL 2.1. Mission of HPSEBL Uninterrupted, Reliable and Quality Power Supply to all our Consumers on competitive rates 2.2. Area served The total area of Himachal Pradesh state is 55,673 Sq. Km. HPSEBL is the sole distribution licensee of the state and caters to entire HP. It serves its consumers in one of the most difficult and varying terrains when compared to other states of India HPSEBL s distribution operations are divided into three operations zones viz. North, South and Central for ensuring efficient customer services and improved management. The zones are further divided into 12 operation circles which cover the 12 districts of the state. Figure 1: District map of HP Courtesy:

11 HPSEBL Business Plan MYT Control Period: FY to FY Generation In addition to supply of electricity to the end consumers of the state, HPSEBL also generates hydro electricity via its 21 plants of varying MW capacity. The total installed capacity of these plants in FY is MW The following table gives the list of the 21 hydro-generating stations being operated by HPSEBL along with their installed capacities Name of Station Table 1: Hydro generating plants of HPSEBL Installed Capacity (MW) Year of commissioning Giri Andhra Gumma Bhaba Nogli Ghanvi Bhaba Aug Chaba Bassi Binwa Gaj Baner Khauli Rukti Rong-Tong Chamba Sal-II Killar Holi Thirot Larji Total capacity Organisation structure: Roles & Responsibilities The Chairman of HPSEBL is the official head of HPSEBL, while day to day management is handled by the Managing Director. The Managing Director is supported by five Directors Civil, Technical, Operations, Personnel and F&A, along with one Executive Director Personnel and one Chief engineer Planning & Monitoring.

12 HPSEBL Business Plan MYT Control Period: FY to FY The Directors are in turn supported by an efficient team of Chief Engineers, Superintending Engineers, Executive Engineers, and so on. Chairman Managing Director Director (Civil) Director (Technical) Director (Operations) Director (F&A) Director (Personnel) CE (P&M) CE (PCA) CE (SO&P) CE (OP/South) CAO ED (Personnel) SE (P&M) Civil CE (I & P) CE (Generation) CE (OP/North) SE (P&M) Electrical CE (ES) CE (OP/Central) CE (Comm) CE (MM) 2.4. Human resources Figure 2: Organisation structure of HPSEBL HR Department of HPSEBL focuses on work in the areas of manpower management, customer relations and skills development. It strongly believes in training employees for better development of employees and thereby prepared structural need based training calendar for its employees The total sanctioned strength for was out of which 20,861 was the on-ground employee strength. There has been a growth in the employee strength for HPSEBL in and the total strength now stands at 21,367 which include the sanctioned new recruitment of 616 posts There is a need to ascertain the training of the existing human resource and to identify their core competencies with an aim to enhance their skills and finally

13 HPSEBL Business Plan MYT Control Period: FY to FY place them in appropriate job positions. HPSEBL endeavours to conduct training at periodic intervals for capacity building of its manpower Recruitment Policy: For the purpose of recruitment, HPSEBL follows a broad classification of Services into Technical and Non-Technical Staff. The Technical Staff comprises of engineers, supervisors and technicians. The rest of the staff forms the Non-Technical staff, viz. accounts, HR, security etc The appointment for a post, it is either made by promotion or by direct recruitment. HPSEBL has chalked out its future manpower requirements for expansion projected and it is proposed that recruitments to the tune of 616 posts across technical and non-technical categories shall be carried out during and The future projections for recruitment are under consideration Health and Safety Management: HPSEBL is of the firm belief that the health and safety of the employees is of paramount importance. HPSEBLis committed to identifying and assessing all types of occupational health and safety risk and takes proactive steps to reduce the significant risk in turn to reduce the occurrences of accidents. The measures taken are listed under: One well established dispensary is situated in the campus of HPSEBL Head office, Shimla for the employees of HPSEBL. Efforts are being made to create awareness of occupational health and safety in all employees, contractors and contract labour and training them adequately for safe working practices IT & Other Initiatives At the utility level, many IT initiatives are under implementation in HPSEBL which focus on consumer service and better governance. Various processes are identified for which IT applications are developed and automation of the process is undertaken. The automated processes are deployed in modular form as and when the system is tested and stabilized. The various IT initiatives are discussed in the following paras In-house Activities

14 HPSEBL Business Plan MYT Control Period: FY to FY Official Website of HPSEBL The HPSEBL has hosted its official website ( and most of the important information relating to public and official use has been put on the site. The some of the important information are as under: Application Forms for new connections. Current tariff rates of all categories of Consumers. Link for Online Bill Payment of bills. Toll free number for registering of complaints. Tenders notifications. Material Specifications. Statistical Data. Contact numbers of officers. Beside these, other useful information pertaining to consumers, employees & suppliers are also hosted on the website Employee Information System Web based system is in place for displaying the Personal, Posting, Promotion Information of Gazetted Employees. The link for the same is available in the Employees Corner of the website of HPSEBL Outsourced Activities: R-APDRP (Part-A): The Ministry of Power has sanctioned DPR s for 14 eligible towns under Part- A of the R-APDRP scheme for HPSEBL. The objective of the program is reduction of Aggregate Technical and Commercial (AT&C) losses to 15% in project areas. The total project cost for Part-A under R-APDRP is Rs Cr.: a) Meter Data Acquisition System (MDAS); b) Energy Audit(EA); c) Identity & Access Management System is proposed at data centre level; d) Management Information System (MIS) containing DW & BI tools is proposed at data centre level; e) Enterprise Management System (EMS) and Network Management System (NMS) which is part of hardware, is proposed at data center level; Data Center at Shimla is functional. Modems in 14 towns are already installed. Integration of Legacy Application i.e. GIS, Computerized Billing etc. with R-APDRP modules has been completed. 13 towns namely Bilaspur, Kullu, Sundernagar, Chamba, Hamirpur, Una, Solan, Yol, Paonta, Dharamshala,Baddi and Mandi have been declared Go-Live. Shimla is planned to be declared during December 2013.

15 HPSEBL Business Plan MYT Control Period: FY to FY ERP/SAP The work of implementation of ERP (SAP) was allotted to M/s TCS In this project; the following modules of ERP (SAP) are to be implemented in HPSEBL. 1. Financial Management and Accounting 2. Human Resource Management including payroll 3. Project Management 4. Materials Management 5. Maintenance Management 6. Availability Based Tariff and A Dash Board for Senior Management for MIS purpose shall also be available. The total cost of the project is approximately Rs Cr. 1st Phase covering Head Office and Operation Circle Shimla except Theog and Sunni Electrical Divisions have been declared Go Live in the month of March, nd Phase covers the entire Board and left out modules, which is expected to go live in a phased manner till March, Computerized Billing and Energy Accounting Package Computerized Billing and Energy Accounting Package (IT Package) was implemented under the Accelerated Power Development and Reform Program (APDRP) launched by Ministry of Power (MOP). Under this project, the activities of the operation sub-divisions are computerized through functionalities such as Pre-billing Activities, Billing Activities, Post Billing Activities, Legal & Vigilance Activities, Store Management at sub-division level, Customer Relationship Management, Electrical Network Management & Energy Accounting/Auditing and Management Information System (MIS). The award was placed on M/S HCL Infosystems, Noida for an amount Rs Cr. The project has been implemented in 132 subdivisions of 27 divisions and 12 circles covering more than 12 lakh consumers. Centralized data center and call center has also been established at Vidyut Bhawan, Shimla GIS/GPS Based asset Mapping including Consumer Indexing and Valuation of Assets of HPSEB Ltd. HPSEBL has decided to carry out GIS/GPS based asset mapping including consumer indexing and valuation of assets for the whole HPSEB, which will be used as the base for computerization of billing, energy accounting, electrical network management and to create fixed assets registers with its present value for its three wings namely Generation, Transmission and Distribution after proper reconciliation with latest balance sheet of the Board. Pilot project has since been completed for operation circle Shimla. For remaining 11 circles, field related

16 HPSEBL Business Plan MYT Control Period: FY to FY activities of the project have been completed and approval of data by HPSEBL is in progress. Valuation report for all circles shall be finalized by March Updation of GIS/GPS data in 14 R-APDRP towns has been awarded for next five years as per the requirement of R-APDRP project New IT Initiatives: Smart Grid Pilot project at Kala Amb in Himachal Pradesh HPSEB Ltd. has prepared a pilot project worth Rs. 27 Crores. The Govt. of India has approved the DPR for Rs Crores out of which Ministry of Power shall bear Rs Crores and the balance funding has to be arranged by HPSEB Ltd. through financial institutions like REC. HPSEBL proposes to implement Smart Grid Pilot in Kala Amb with a payback period of 3 years by deployment of Smart Grid Technologies to improve the system performance by reduction in peak power by 6 MVA, reduce outages, improve consumer engagement and satisfaction and improve HPSEBL s overall financial performance by implementing AMI, DSM and GIS based outage management system Wi-Fi facility in Vidyut Bhawan Campus Wi-Fi facility is proposed to be installed in the Vidyut Bhawan Campus during to resolve the network connectivity issues in the campus being faced in implementation of various IT initiatives Expansion of AMR It is proposed to cover all the consumers above 50 KW which comes to 32,000 consumers under the AMR in a phased manner across the state utilizing the existing infrastructure developed under R-APDRP Expansion of Computerized billing It is proposed to start computerized billing in 61 subdivisions using standard platform during After stabilization and analyzing the performance it is proposed to shift the billing of 132 subdivisions where computerized billing has already been implemented to this platform in a phased manner GIS/GPS data updation in Non R-APDRP area Updation of GIS/GPS data in non R-APDRP area of the state is proposed to be done and utilize the same in various electrical network applications SCADA/DMS A pilot project for the control and monitoring of all un-manned 33kV and above Substations being commissioned in the State is envisaged to be setup at the DR Center Poanta.

17 HPSEBL Business Plan MYT Control Period: FY to FY R-APDRP next phase The MoP is considering extension of R-APDRP program to towns with population greater than 5000 in the next phase of this program under which 16 new towns are proposed to be covered commencing from onwards 2.6. Activities related to Consumer Service HPSEBL has established a customer care centre for telephonic booking of customer complaints. It is 24x7 call centre and works for the following objectives: improving consumer services; minimizing the fault detection and rectification time by monitoring the occurrence; improving performance of service by analyzing outage data and computing reliability of network; achieving Service Level Guarantees, improving Service Level Performance and fulfilling Service Level Expectations of the customer HPSEBL has also been maintaining the Standards of Performance as per HPERC (Distribution Performance Standards) Regulations ensuring complete satisfaction to the consumer Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) Against the sanctioned amount of Rs crores, the Govt. of India has released an amount of Rs crores and HPSEB Ltd. has incurred an expenditure of about Rs. 296 crores. Only 5% work is remaining in remote and tribal areas of the state. In all other areas the work is complete RGGVY schemes envisaged under 12 th Plan coverage of villages and habitations with population above 50 are being considered. Hence it is pertinent to bring out that in Himachal Pradesh number of villages as per 2011 census are out of which villages have population above 100 and there are 4474 villages which are having population below 100. HP being a special category State, the condition of coverage for villages and habitations has been relaxed which are having population above 50. The position of electrification of villages under RGGVY is as under: Un-electrified villages to be taken for 91 electrification Total Villages electrified upto October, Total Villages to be electrified under RGGVY 8 Programme

18 HPSEBL Business Plan MYT Control Period: FY to FY R-APDRP (Part-B) R-APDRP (Part B) scheme has been sanctioned for 14 towns in HP, having population 10,000 and above as per 2001 census, for an amount of Rs crores. An expenditure of Rs Crores has been incurred in the 14 towns of HP as on The works are progressing well Financial Restructuring Plan The Ministry of Power, Government of India vide notification dated 5 th Oct, 2012 has notified Financial Restructuring Scheme for DISCOMs. The State DISCOM i.e HPSEB Ltd. has prepared draft Financial Restructuring Plan in consultation with State Bank of India, the nodal bank on the basis of GoI notification and submitted the Plan to Himachal Pradesh State Electricity Regulatory Commission and Government of Himachal Pradesh. The HPERC has given In-Principle approval to the draft Plan of HPSEB Ltd As per Scheme, the eligible amount is Rs Crore plus Rs cr. (Liability for Purchase of Power as on 31/03/2012). HPSEB Limited will float the bonds amounting to Rs Crore and balance is to be serviced through Financial Restructuring Plan (FRP) submitted to nodal bank.

19 HPSEBL Business Plan MYT Control Period: FY to FY SWOT ANALYSIS As part of the development of a strategic plan for any organization, it is necessary to understand the inherent competitive advantage of the company as well as the risk surrounding its business environment. Like any other businesses, it is very important for HPSEBL to evaluate the environment both internal and external while charting out its growth path. The aim of a SWOT analysis is to identify the key internal and external factors that are important for achieving the objectives of the company The SWOT analysis is a strategic planning technique used to assess the internal and external environment in which the company operates and competes. These come from within the company's unique value chain. The information being used for the SWOT analysis is grouped into two main categories: Internal factors The strengths and weaknesses internal to the organization; External factors The opportunities and threats presented by the external environment to the organization; This section provides the analysis of the strengths, weaknesses, opportunities and threats as perceived by HPSEBL. These are summarized in the following table: Table 2: SWOT Analysis Helpful In achieving the objective Harmful In achieving the objective Internal Attributes of the Organisation External Attributes of the Environment STRENGTHS Quality Power Supply Lower Losses Efficient Customer Service Setting up of CGRF OPPORTUNITIES Business Growth due to Improved Life Style WEAKNESS Ageing Distribution Network Uncertainties of Hydro generation Ageing Manpower THREATS Increase in Coal Prices Increasing Avg CoS ARR Gap

20 HPSEBL Business Plan MYT Control Period: FY to FY Strengths: Quality Power Supply: HPSEBL has been providing quality and reliable power supply to its consumers with low voltage fluctuations and power supplied at a stable frequency. Lower Losses: HPSEBL has been very proficient in reducing the Distribution losses to 13.43% up to over the last few years. HPSEBL has been and shall always be committed towards taking the best possible measures to minimise distribution losses by adopting pro-active approach and adopting best practices prevalent in the distribution sector in India. Efficient Customer Service: HPSEBL has been providing efficient services to its consumers and has also initiated 24 x 7 Call Centres ensuring better services to its consumers round the clock. Setting up of Forum for Redressal of Consumer Grievances HPSEBL has constituted Forum for Redressal of Grievances of consumers of electricity having jurisdiction to entertain complaints within the area of its distribution licensee, under section 42 of the Electricity Act 2003 at Shimla. Weakness: Ageing Distribution Network: HPSEBL has been supplying electricity for a very long time and has also been maintaining its network. However, with passage of time the Distribution Network has started showing signs of ageing and this shall lead to deterioration in performance of HPSEBL, if adequate and timely steps are not taken. Uncertainties of Hydro Generation: The own generation of HPSEBL is essentially Hydro. This involves many uncertainties such as the vintage of hydro stations, dependency on the quantum of rainfall which leads to uncertainty of generation on a year on year basis. However, prudent steps taken to ascertain demand for power and proper scheduling for purchase of power with due consideration to own generation quantum would help mitigate the uncertainty of hydro power generation. Ageing Manpower: The Board faces a major challenge in term of ageing manpower across technical and non-technical category. In order to mitigate this challenge the board has done proper planning to recruit adequate manpower timely and ensure proper succession planning in all departments. Opportunity: Business growth due to improved lifestyle: Over the last few years, the state has been experiencing a surge in the population as well as tourism activities. Also due to

21 HPSEBL Business Plan MYT Control Period: FY to FY the improved lifestyle in the area of distribution licencee of a similar kind of trend shall continue to follow in the near future. As such, HPSEBL foresees an expansion of Customer base and load growth in its license area. Increased focus on hydro-generation: Many IPPs are in various stages of commissioning hydro-generating plants in the state. This increased focus on utilizing the available hydro-potential by various power sector players is likely to further improve long term power availability. Threats Increase in Coal Prices: It is a well known fact that the recent increase in imported Coal prices is causing some serious strains to the power utilities. As a result of this, generators at the central level are seeking increase in tariffs. If such increase in tariff is allowed in the near future, this increase will have to be borne by the consumers. HPSEBL feels that this shall cause hardship on its consumers. Further, the capital cost of newer hydro power plants has gone up substantially resulting in higher power tariff from new generating units, both under central sector as well as private power generating companies. Increasing ACS-ARR Gap: Average Cost of Supply (CoS) of energy at consumer doorstep has been increasing over the years owing to impact of inflation on various cost heads, however corresponding increase in Average Rate of Realisation (ARR) from all category of consumers is not commensurate. As of FY12, the ACS-ARR gap has reached to 0.61 Rs./unit (ACS=5.28 Rs./unit and ARR=4.67 Rs./unit) Open Access: With increased focus on providing open access to large consumers, it is likely that HPSEBL might lose out on these economically attractive consumers. Hence, it would need to ensure that quality of service to these consumers is sustained and an economical tariff is levied from them, ensuring customer stickiness.

22 HPSEBL Business Plan MYT Control Period: FY to FY SALES 4.1. Load Growth Table 9 below summarizes the growth in sanctioned load over the past 6 years. The highest growth of 11.2% has been seen in the Large Industrial category. Overall growth for the state has been 6.3%. Table 3: Past years load growth Consumer Category (MW) FY 8 FY 9 FY 10 FY 11 FY 12 FY 13 5 Year Actual Actual Actual Actual Actual Actual CAGR Domestic (Including Antodaya) % Non Domestic Non Commercial % Commercial % Temporary % Small & Medium Industrial Power Supply 3.66% Large Industrial Power Supply % LT/HT % EHT % Govt., Irrigation & Water Supply % Public Lighting % Agricultural % Bulk Supply % Total % The y-o-y growth in the load for each category has been projected for the control period based on the past 5 years CAGR. Table 4: Projected load growth during Control Period (FY to FY ) Consumer Category (MW) FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 RE Proj. Proj. Proj. Proj. Proj. Domestic (Including Antodaya) Non Domestic Non Commercial Commercial Temporary Small & Medium Industrial Power Supply Large Industrial Power Supply LT/HT EHT Govt., Irrigation & Water Supply Public Lighting Agricultural Bulk Supply Total

23 HPSEBL Business Plan MYT Control Period: FY to FY Consumer Growth HP has witnessed a steady rise in the number of consumers due to natural growth of population. The rural electrification within the state as on stands at 99.9% (as per CEA report) The Table 7 below summarizes category wise growth in consumers over the past 6 years. As can be seen in the table, overall average consumer growth has been around 2.5% p.a. Table 5: Past years consumer growth FY 8 FY 9 FY 10 FY 11 FY 12 FY 13 Consumer Category 5 year Actual Actual Actual Actual Actual Actual CAGR Domestic (Including Antodaya) 2.5% Non Domestic Non Commercial 7.3% Commercial % Temporary % Small & Medium Industrial Power Supply 0.3% Large Industrial Power Supply 9.0% LT/HT % EHT % Govt., Irrigation & Water Supply 7.9% Public Lighting % Agricultural % Bulk Supply % Total % Annual Growth in the number of consumers for the 3rd MYT Control Period is projected on the basis of the y-o-y growth in the consumers in past 5 years across different categories. The overall CAGR for these 5 years comes out to be 2.5% as mentioned above

24 HPSEBL Business Plan MYT Control Period: FY to FY Table 6: Projected consumer growth during Control Period (FY to FY ) Consumer Category FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 RE Proj. Proj. Proj. Proj. Proj. Domestic (Including Antodaya) Non Domestic Non Commercial Commercial Temporary Small & Medium Industrial Power Supply Large Industrial Power Supply LT/HT EHT Govt., Irrigation & Water Supply Public Lighting Agricultural Bulk Supply Total Energy Sales Growth Table 11 below presents the category-wise energy sales for the past 5 years. The overall growth in sales has been 7.9% p.a., mainly contributed by increase Large Supply and Commercial Category. Table 7: Past years growth energy sales growth (MUs) Consumer Category FY 8 FY 9 FY 10 FY 11 FY 12 FY 13 5 Year MUs Actual Actual Actual Actual Actual Actual CAGR Domestic (Including Antodaya) % Non Domestic Non Commercial % Commercial % Temporary % Small & Medium Industrial Power Supply 3.57% Small Industrial Power Supply % Medium Industrial Power Supply % Large Industrial Power Supply % LT/HT % EHT % Govt., Irrigation & Water Supply % Public Lighting % Agricultural % Bulk Supply % Total % For the 3 rd MYT control period (FY to FY ) the load growth projections have been made on the basis of category-wise historical CAGRs. The historical category wise CAGRs are as follows:

25 HPSEBL Business Plan MYT Control Period: FY to FY Table 8: CAGR for past years CAGR CAGR CAGR Considered for projections 3 years 5 years Domestic (Including Antodaya) 8.00% 13.32% 8.87% Non Domestic Non Commercial 6.00% 5.92% 6.67% Commercial 7.00% 10.17% 10.49% Temporary 2.05% -1.45% 2.05% Small & Medium Industrial Power Supply 3.57% 5.51% 3.57% Small Industrial Power Supply 2.00% 3.17% -0.05% Medium Industrial Power Supply 5.34% 6.56% 5.34% Large Industrial Power Supply 0.00% 6.85% 7.35% LT/HT 3.50% 6.96% 6.87% EHT 6.00% 6.70% 7.96% Govt., Irrigation & Water Supply 5.00% 3.05% 6.27% Public Lighting 2.00% 3.53% 1.98% Agricultural 8.00% 8.38% 11.83% Bulk Supply 2.00% -8.10% 2.99% The growth in energy sales has been calculated on a monthly basis since the energy requirement varies a lot during the various seasons of the year in HP. The MUs sold are identified for each month and for each consumer category. The increase in the MUs for the particular month is noted for the last 3 years and the same has been projected in the following years of the control period in order to get the energy sales for the whole year. Table 12 summarizes the projections of category wise increase in energy sales over the control period (FY to FY ), comparing them to the approved sales in the 2 nd APR order of FY for the 2 nd Control Period. Table 9: Projected energy sales growth during Control Period (FY to FY ) Consumer Category FY 14 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 MUs Approved RE Proj Proj Proj Proj Proj Domestic (Including Antodaya) Non Domestic Non Commercial Commercial Temporary Small & Medium Industrial Power Supply Small Industrial Power Supply Medium Industrial Power Supply Large Industrial Power Supply LT/HT EHT Govt., Irrigation & Water Supply Public Lighting Agricultural Bulk Supply Total

26 HPSEBL Business Plan MYT Control Period: FY to FY OWN GENERATION 5.1. Generation from own generating stations of HPSEBL The performance trajectories such as Annual Fixed Cost, Auxiliary consumption are based on the current condition of the existing plant, the age of the plant, water availability etc. HPSEBL would like to submit that so far as the performance of Hydro plants is concerned, they are dependent on the quantum of rainfall received in the catchment areas as well as the quantum of actual water release from the connected dams. Hence, they tend to vary over the years The following table gives the historical energy generation at HPSEBL s own generating plants Table 10: Past years net generation from own plants Yearly Power Availability (MUs) Power Availability (MUs) from HPSEBL Stations Actual Actual Actual RE Stations FY FY FY FY Bhaba Bassi Giri Andhra Ghanvi Baner Gaj Larji Khauli Binwa Thirot Gumma Holi Bhaba Aug Nogli Rongtong Sal-II Chaba Rukti Chamba Killar Uhl III - BVPCL Ghanvi II Total

27 HPSEBL Business Plan MYT Control Period: FY to FY The MUs generated by each plant have been projected while keeping their actual generation for the last years in mind. Out of the above mentioned plants, GoHP has a share of 12% in Ghanvi, Baner, Gaj, Larji, Uhl III and Ghanvi II. Hence, HPSEBL receives 88% of the overall generation from all of these plants. Rest 12% is also received by the HPSEBL system through GoHP. The design and energy of the plants varies a lot during the winters and summers. Hence, monthly projections of the MUs are done so as to get a better idea of the requirement and generation Based on the above operational parameters, the capacity of the power plant and the average generation for the past 3 years, the revised estimates for and projections for the control period of the net generation is given in the following table: Table 11: Projected own generation during Control Period (FY to FY ) Yearly Power Availability (MUs) Power Availability (MUs) from HPSEBL Stations Proj. Proj. Proj. Proj. Proj. Stations FY FY FY FY FY Bhaba Bassi Giri Andhra Ghanvi Baner Gaj Larji Khauli Binwa Thirot Gumma Holi Bhaba Aug Nogli Rongtong Sal-II Chaba Rukti Chamba Killar Uhl III - BVPCL Ghanvi II Total

28 HPSEBL Business Plan MYT Control Period: FY to FY A new plant Ghanvi-II, with installed capacity of 10 MW, is scheduled to be commissioned in March Based on the price per unit rates of the cost of power for the plants, the total power purchase cost from Own generation for HPSEBL is as follows: Table 12: Total Power Purchase Cost from Own Generation Stations FY FY FY FY FY FY INR Cr RE Proj. Proj. Proj. Proj. Proj. Bhaba Bassi Giri Andhra Ghanvi Baner Gaj Larji Khauli Binwa Thirot Gumma Holi Bhaba Aug Nogli Rongtong Sal-II Chaba Rukti Chamba Killar Uhl III - BVPCL Ghanvi II Total

29 The petitioner has to arrange the power requirement of its distribution license area. In the previous sections, the projected sales and the demand requirement for the license area has been arrived at and based on the same, the power requirement for the control period has been discussed in this section. Apart from the own generation of HPSEBL plants (as discussed in previous sections), HPSEBL also currently purchases power from various other sources. The main categories of the generation plants are as follows: Central Generating Stations (NTPC, NHPC, NJPC and NPC) HP Quota of BBMB Independent Power Producers (IPP) Bilateral Purchase from other states Purchase of Power from GoHP (Free Power Quota of GoHP under qualified projects) Equity power from Nathpa Jhakri Hydro Power Station Short term contingency purchases from power exchanges 6.2. Power purchase from other generating stations In Chapter 4, the own generation of HPSEBL was discussed. In addition to self generation, HPSEBL also procures energy from various other generating stations that are present in HP or in other surrounded states. Below mentioned are the various categories of these generating stations: Category GoHP Free Power NTPC Plants UMPP Orissa Table 13: Power Purchase from Other Key Generating Stations Description HPSEBL receives the power from GoHP for the plants that are deemed to provide 12% of their power generated to the Government of HP. GoHP sells this power to HPSEBL at a commission determined rate HPSEBL receives power from the NPTC thermal power plants throughout the year as per allocated quota. The total allocated capacity from NTPC owned plants ~ 1283 units (FY 14) increasing on yoy basis up to 3207(FY 19) The power procurement from the UMPP Orissa has been tied up and this shall be of the order of some 700 MUs yearly. However, given the current status of the

30 NHPC THDC Other CGS and shared stations SJVNL SHEPs Currently, HPSEBL receives around 300 MUs of energy from various NHPC plants present in HP and in Uttarakhand. With the upcoming hydro plants, it is envisaged that the power procurement from NHPC plants shall increase to 850 MUs by FY HPSEBL receives around 135 MUs from Tehri Hydro Plant and Koteshwar under SOR These include Bhakra Nangal and other share stations such as Shanan, Dehar and Pong. Overall drawal from these stations is somewhere around 1150 MUs yearly. HPSEBL procures ~ 169 MUs of power from Nathpa Jhakri station under SoR quota power. In addition, HPSEBL currently also procures 12% power (Allocated to GoHP against free power) at commission determined price. However, from December 2013 onwards, HPSEBL will surrender its right on 12% free power. However, it will start procuring 22% (GoHP equity power) from December 2013 onwards till the end of the control period. Rampur Power Station is expected to be commissioned by end of FY 14 and is expected to provide ~ 50 MUs of energy annually till the end of the control period. There are various small hydro power plants of various capacities. These are generally divided into less than 5 MW plants, 5 MW to 25 MW plants and greater than 25 MW plants. Overall these plants provide more than 1000 MUs of energy yearly to HPSEBL 6.3. Power Purchase Projection Methodology Power Procurement from GoHP (Free Power Allocation of GoHP) HPSEBL has procured power from GoHP, (12 % free power share of GoHP) from CGS stations as well as own stations and IPPs directly connected to HPSEBL network upto October However, from December 2013 onwards, significant quantum of free power (12 % free power share of GoHP) in will be swapped with the Equity power of GoHP ( 22% Equity power of Govt of HP) from Nathpa Jhakri HEP for the rest of the base year and control period. Under this swapping arrangement, the free power share of GoHP shall be withdrawn from all central generating stations except from Chamera-I, II, III and Baira Sul. There will be no impact on power flow from generating stations which are owned by HSEBL or directly connected with HSEBL network. Table 14: Power Procurement from GoHP (Free Power Allocation of GoHP in MUs) Plant Stations Share

31 Shanan Share 0.5 Fixed Ranjeet Sagar Dam Share 600 5% Malana 86 15% Baspa (Primary & Sec.) % Nathpa Jhakri HEP % Ghanvi % Baner 12 12% Gaj % Larji % Khauli 12 12% Budhil 70 12% Allian Duhangan % Kol Dam % Parbati-II % Parbati-III % Rampur project % Karcham Wangtoo % Sawra Kuddu % Uhl-III % Ghanvi II 10 12% Malana II % Kashang I, II, III % Kashang IV 48 12% Sainj % Tidong 60 12% Song tong Karcham % Chirgaon Majgaon 42 12% Renuka Dam 40 12% SHEP Allocated Varies Varies Total The total power procurement cost for the above mentioned plants is as follows: Table 15: Total Power Purchase Cost from GoHP Stations FY FY FY FY FY FY INR Cr RE Proj. Proj. Proj. Proj. Proj. Baira Siul Chamera-I Chamera-II Chamera-III Shanan Share Ranjeet Sagar Dam Share Malana Baspa (Primary & Sec.)

32 Budhil Allian Duhangan Kol Dam Parbati-II Parbati-III Rampur project Karcham Wangtoo Sawra Kuddu Uhl-III Ghanvi II Malana II Kashang I, II, III Kashang IV Sainj Tidong Song tong Karcham Chirgaon Majgaon Renuka Dam SHEP Allocated Total NTPC Plants: The quantum of power purchase from NTPC plants for is based on actual monthly actual monthly quantum upto October 2013 and the balance six months (Nov 13- Dec 13) base year projection as well as the control period FY to FY is based on the average PLF of the individual plants and the allocated share of HPSEBL from these plants. Table 16: Power procurement from NTPC owned plants Stations Plant 13- Share capacity MUs MW % Actual RE Proj. Proj. Proj. Proj. Proj. Anta (G) % Anta (L) % Anta (LNG) % Auriya (G) % Auriya (L) % Auriya (LNG) % Dadri (G) % Dadri (L) % Dadri (LNG) % Unchahar-I %

33 Rihand-3 Units-1, % Dadri-II TPS % Jhajjar TPS % Singrauli Solar % Kol dam HEP % North Karanpura % Meja % Lata Tapowan HEP % Rupsia Bagar HEP % Singrauli III % Tanda II % Tapovan Vishnugarh HEP % Gider Baha % Unchahar IV % Bilhaur % Total The total power procurement cost for the above mentioned plants is as follows: Table 17: Total Power Purchase Cost from NTPC Stations Stations FY FY FY FY FY FY INR Cr RE Proj. Proj. Proj. Proj. Proj. Anta (G) Anta (L) Anta (LNG) Auriya (G) Auriya (L) Auriya (LNG) Dadri (G) Dadri (L) Dadri (LNG) Unchahar-I Unchahar-II Unchahar-III Rihand-1 STPS Rihand-2 STPS Singrauli STPS Kahalgaon - II Rihand-3 Units-1, Dadri-II TPS Jhajjar TPS Singrauli Solar Kol dam HEP North Karanpura

34 Gider Baha Unchahar IV Bilhaur Total NPCIL Plants: HPSEBL procures power from NPCIL stations NAPP and RAPP Units 5 & 6 based on allocated share of HPSEBL from these plants. The monthly power purchase quantum from these plants for FY is based on actual purchase from these plants upto October 2013 and based on the monthly average quantum procured from these plants during the past 3 years for the remaining months. The same methodology of monthly average of past 3 years is used for projections of power purchase quantum for the control period from FY to FY Units VII and VIII are under construction and expected to get commissioned by end of March Table 18: Power procurement from NPCIL plants Stations Plant Share capacity MUs MW % Actual RE Proj. Proj. Proj. Proj. Proj. NAPP % RAPP (V & VI) % RAPP (VII & VIII) % Total The total power procurement cost for the above mentioned plants is as follows: Table 19: Total Power Purchase Cost from NPCIL Stations Stations FY FY FY FY FY FY INR Cr RE Proj. Proj. Proj. Proj. Proj. NAPP RAPP (V & VI) RAPP (VII & VIII) Total NHPC Plants:

35 control period is also based on the average monthly power purchase quantum for the past 3 years. Table 20: Power Procurement from NHPC plants Stations Plant capacity Share MUs MW % Actual RE Proj. Proj. Proj. Proj. Proj. Salal % Tanakpur % Chamera I % Chamera II % Chamera III % Uri % Dhauliganga % Dulhasti 380 UA Sewa 120 UA Parbati II % Parbati III % Kotli Behal % Total The total power procurement cost for the above mentioned plants is as follows: Table 21: Total Power Purchase Cost from NHPC Stations Stations FY FY FY FY FY FY INR Cr RE Proj. Proj. Proj. Proj. Proj. Salal Tanakpur Chamera I Chamera II Chamera III Uri Dhauliganga Dulhasti Sewa Parbati II Parbati III Kotli Behal Total THDC Plants:

36 Table 22: Power procurement from THDC plants Stations Plant capacity Share MUs MW % Actual RE Proj. Proj. Proj. Proj. Proj. Tehri % Koteshwar % Total The total power procurement cost for the above mentioned plants is as follows: Table 23: Total Power Purchase Cost from THDC Stations Stations FY FY FY FY FY FY INR Cr RE Proj. Proj. Proj. Proj. Proj. Tehri Koteshwar Total SJVN Stations: The power availability from Nathpa Jhakri for FY is based on the actual quantum upto October 2013 and for the remaining months based on the average quantum for past three years. The projections for the control period from Nathpa Jhakri are also based on the same mechanism. Projections for the upcoming Rampur HEP under SJVNL are based on the allocated share of HPSEBL from the station and the monthly design energy. HPSEBL shall also procure 22% equity power from Nathpa Jhakri from December 2013 onwards for FY and further for the entire control period. The quantum is calculated based on the allocated share of HPSEBL for the equity power and the design energy. Table 24: Power procurement from SJVN Stations Stations Plant capacity Share MUs MW % Actual RE Proj. Proj. Proj. Proj. Proj. Nathpa Jhakri SOR % Nathpa Jhakri Equity % Rampur % Luhri % Total

37 INR Cr RE Proj. Proj. Proj. Proj. Proj. Nathpa Jhakri SOR Nathpa Jhakri Equity Rampur Luhri Total Other CGS and shared stations: The power purchase quantum from BBMB Old is based on fixed share of 1.2 Lakh units of HPSEBL from this plant. The power purchase quantum for BBMB New, Dehar and Pong is based on actual quantum purchased from these stations upto October 2013 for FY The projections for the control period i.e. FY to FY are based on the allocation of HPSEBL from these plants and the projected quantum for FY Shanan and Shanan Extension has fixed share to HPSEBL and based on this, projections are made for these stations. Energy availability from Yamuna (UJVNL) and Khara has been considered at actual upto October 2013 for FY and for remaining months based on average generation level of last three years. Projections for the control period from these plants are also based on the same methodology. Table 26: Power procurement from shared stations Stations Plant capacity Share MUs MW % Actual RE Proj. Proj. Proj. Proj. Proj. BBMB Old 0 Fixed 1.2LU/day BBMB New % Dehar % Pong % Shanan 60 Fixed 1MW Shanan Ext 50 Fixed 45 MU Yamuna % Khara % Total The total power procurement cost for the above mentioned plants is as follows: Table 27: Total Power Purchase Cost from Other CGS and shared stations Stations FY FY FY FY FY FY 18-19

38 Shanan Ext Yamuna Khara Total RPO Obligations HPSEBL has abundant procurement of non-solar renewable power to meet its RPO obligations. In case of solar RPO obligations, it is expected that HPSEBL shall procure more solar power from other stations apart from Singrauli to meet its RPO obligations. The additional requirement is estimated as follows: Table 28: Additional Solar Power Requirement FY FY FY FY FY FY Solar RPO Obligation 0.25% 0.25% 0.25% 0.25% 0.50% 0.75% Requirement in MUs Additional required as per July 2013 order of HPERC Availability from Singrauli Additional Solar Power Required Small Hydro (SHEPs): The power availability from SHEPs for FY is based on three month actual from these plants. For remaining months, the monthly average availability from SHEPs for is used for projections. For the control period, the projections for the quantum are based on estimated escalation of 1% for SHEPs below and upto 5MW, 5% for plants above 5 MW and upto 25 MW and 2% for plants under REC tariff. The power availability from Baspa II (Primary energy) for FY is at actual upto October 2013 and for the remaining months; it is calculated as the average of the remaining months for FY For Baspa II secondary energy, similar methodology is used. For projections for the control period for FY to FY , the average generation of past three years is used for projections. Table 29: Power procurement from other stations Stations Share

39 Total The total power procurement cost for the above mentioned plants is as follows: Table 30: Total power purchase cost from other stations Stations FY FY FY FY FY FY INR Cr RE Proj. Proj. Proj. Proj. Proj. Small HEP/ Private Micro Small HEP/ Private Micro REC Baspa II Additional Solar Power Total Unallocated power from other sources HPSEBL also envisages procuring 350 MUs annually from various CGS, especially in the winter months to cater to its high demand during this period. The following table gives the projection of power procurement from these sources: Table 31: Power Purchase (MUs) from other sources Stations MUs Actual RE Proj. Proj. Proj. Proj. Proj. Unallocated share from CGS UI Banking availed at gen bus Contingency Power purchase at periphery Total Note: Unallocated Allocation for winter month to HPSEBL is already included in actual power purchase of FY and RE of FY The following table gives the projection of total power procurement cost from these sources: Table 32: Total Power Purchase Cost from other sources Stations FY FY FY FY FY FY INR Cr RE Proj. Proj. Proj. Proj. Proj. Unallocated share from CGS UI

40 Table 33: Overall Power Purchase (MUs) Stations/ Sources FY FY FY FY FY FY FY MUs Actual RE Proj. Proj. Proj. Proj. Proj. Own generation Free power NTPC NPCIL NHPC THDC SJVN Stations Other sources Shared Stations Other Stations Total Table 34: Total Power Purchase Cost Stations FY FY FY FY FY FY INR Cr RE Proj. Proj. Proj. Proj. Proj. Own generation Free power NTPC NPCIL NHPC THDC SJVN Stations Other sources Shared Stations Other Stations Total Table 35: Average Cost of Power Procurement (INR/ Unit) INR/ Unit Average Cost of Power Procurement

41 7.1. Transmission and Distribution Losses For the 2nd Control Period, the Commission had considered the T&D loss reduction trajectory of 0.11%, 0.15% and 0.40% in FY12, FY13 and FY14, respectively, to reach a level of 12.00% by the end of the Control Period Further, HPSEBL had proposed a revised trajectory with loss levels of 13.43%, 13.03% & 12.73% for FY12, FY13 & FY14 respectively, in the 2 nd APR petition for the 2 nd MYT control period HPSEBL has submitted that the actual loss level achieved in FY12 was 13.43% and in FY13 is 13.62%. The same is expected to be 13.3% for FY This increase in T&D loss has been a result of three factors First, industrial consumers that are supplied power at higher voltages result in lower losses for this category. However, recently their growth has tapered down when compared to other consumer categories with higher loss numbers, resulting in an overall increase in T&D losses. Second, there has been wide-spread rural electrification under the RGGVY schemes leading to an increase in the HT:LT ratio, which has resulted in overall increase in T&D losses. As the losses for RGGVY consumers are high, it has resulted in an overall increase in T&D losses. Third, there is an increasing trend of many bulk consumers opting for Open Access and this trend is expected to grow in coming years. These bulk consumers are connected at HT level where the T&D losses are low. Due to the moving out of bulk consumers connected at high voltage, the overall T&D loss have increased The current loss level is far lesser than the loss levels prevalent in HP s neighbouring states. Further, the T&D loss level of the HPSEBL should be set at a realistic level keeping in view the following factors: a. Inherent disadvantage of the State due to scattered population, difficult terrain, low load density and long sub-transmission & distribution lines. b. Other utilities have advantage of underground cabling, which is not realistic in the case in HP The proposed T&D Loss trajectory for the 3 rd MYT Control Period is as follows:

42 Loss Reduction 0.30% 0.25% 0.25% 0.25% 0.25% HPSEBL requests the Commission to revisit and revise the T&D loss reduction trajectory in a realistic manner based on the actual T&D loss for the past years and considering the above mentioned factors so that HPSEBL can meet the T&D loss reduction trajectory Based on the proposed loss levels and projected energy requirement and availability within the state, the Energy Balance is presented in the following table: Table 37: Energy Balance MUs FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Power Procurement Own sources Others - Interstate, Banking, etc Transmission losses Total availability at HPSEBL periphery Sales - within the state T&D losses 13.62% 13.29% 13.00% 12.75% 12.5% 12.25% 12.00% Power required at HPSEBL periphery for intra state sales Banking sale / return at discom periphery Interstate sales at periphery Total power required at HPSEBL periphery

43 components along with the methodology for the calculation of their charges are given below: PGCIL Charges: These are paid to PGCIL for the transmission of power procured by HPSEBL from inter-state sources. These are charged per MW per month for the total power being transferred through the PGCIL transmission lines. For FY 14, the PGCIL charges considered are INR 1,76,560 per MW per month. An annual escalation of 10% in the same has been assumed for the control period. As HPSEBL also pays PGCIL for the power transmitted by the later for GoHP, their subsequent recoveries from GoHP have been netted out of the total charges paid to PGCIL. HPPTCL Charges: Calculated based on the expected increase in the ARR of HPPTCL for the control period. The same are subject to the final approval of ARR of HPPTCL by the Hon ble Commission. ULDC Charges: ULDC charge are paid to PGCIL for the Unified Load Dispatch and Communication scheme in the form of state and central sector equipment cost and central sector O&M cost. HPSEBL pays the ULDC I scheme equipment cost share of 25 Crores over a tenure of 15 years which is to be completed by FY ULDC II HPSEBL share cost is 5 Crore which HPSEBL will start paying after the commissioning of scheme in FY O&M cost are raised monthly by NRLDC to the board in form System operation charges and Market operation charges. O&M cost is calculated considering 5% year on year escalation on annual O&M cost paid by HPSEBL for FY STOA: These are paid to PGCIL and state transmission utilities in the form of withdrawal charges, STU charges and RLDC and SLDC fees for power procured from Banking and Day Ahead Market sources. HPSEBL also pay these charges in form of Injection charges, STU charges and RLDC and SLDC fees for interstate and banking power sale. The injection and drawl charges (Paisa/ Unit) are calculated considering 8 % year on year escalation on Fy Q4 notified Zonal PoC slab rates. STU charges are calculated considering 8% year on year escalation on current STU charge of 2 Paisa/ unit. The Fees and charges including application fees, RLDC and SLDC fees are calculated considering 3% year on year escalation on current fees. Description Table 38: Summary of Transmission Charges (INR Cr) (Est) (Proj.) (Proj.) (Proj.) (Proj.) (Proj.)

44 Total

45 An outlay of Rs Cr. has proposed for construction of 22 KV main line from Pooh to Kaza on 66KV Towers (in sliding zone) under BADP-13 th Finance As has been discussed, HPSEBL is engaged in the activities of (i) generation from power houses under operation (ii) distribution of electricity in its area of supply i.e. HP (iii) trading of electricity (iv) operation & maintenance of all existing generating plants, evacuation lines & EHV, HV, LV Distribution Network and (v) completion of existing generating stations & execution of Hydro Projects as allocated by GoHP along with associated EHV network Based upon the above mandate the CAPEX Plan proposals (scheme wise) for FY to FY under 3 nd MYT Control Period FY have been formulated by HPSEB Ltd. under following major heads in order to effect better planning, budgeting and monitoring at macro & micro levels: 1. EHV DISTRIBUTION SCHEMES (66KV AND ABOVE) 2. ALDC, SYSTEM OPERATION, COMMUNICATION SYSTEMS ETC. 3. HV, LV DISTRIBUTION SCHEMES (33KV AND BELOW) 4. I.T. SCHEMES EHV Distribution Schemes (66 kv and above) Himachal Pradesh being predominantly Hydro State has surplus power during summer/monsoon months but faces acute shortage of power during winter months and HPSEBL have to depend upon power flows from outside the State. Taking this available power from periphery to load centers for further distribution to consumers and industrial areas like Baddi, Barotiwala, Kala Amb, Paonta etc., HPSEBL has meticulously planned its EHV Distribution Network for intra substation transfer of power. A 220kV ring interconnecting all the seven 220kV sub stations in the HP system in a phased manner is proposed alongwith construction of 400kV transmission line from Nalagarh (PGCIL s sub-station to link Nalagarh) to Kunihar with 400/220kV sub-station at Nalagarh. This 220kV ring along with 400kV system will strengthen the existing power delivery system in a big way to the extent of 500 MW from one corver to another corner in the State within minimum lines EHV Distribution Schemes (66kV & above) - BADP-13 th FINANCE COMMISSIION GRANTS:

46 following manner: A. Rural electrification and RE & system Improvement Plans: The focus is to cover remaining areas including all villages, households and hemlets and strengthening of existing unwieldy lengthy HV/LV network. RE & System Improvement plans emphasis shall be given on strengthening the Sub-Transmission and Distribution System for mitigating the low voltage problem through various schemes like: a) 33kV new Substations and its associated lines b) Augmentation of 33kV Sub Stations c) Renovation & Modernization of 33/22/11kV Substations equipment d) HVDS, replacement of meters, poles, GI Wire etc. a) RGGVY Schemes RGGVY was launched in April, 2005 with the aim to electrify all unelectrified villages/habitations & provide access to electricity in every households having provision of 90% capital subsidy & 10% loan. HPSEBL formulated District-wise electrification schemes under RGGVY as per guidelines of REC. Implementation of these schemes would ensure reliable and quality power supply to rural households including BPL households to be provided access to electricity free of cost. These schemes also envisage strengthening of Distribution System in rural areas of all the 12 Districts by providing 2092 new Distribution Sub B. Consumer Service and Electrification (Circle-wise): For consumer services & intensive electrification in the areas falling under the respective Operation Circles, following activities are proposed to be undertaken during the Control Period a) 11/22kV new lines augmentation & re-organization. b) New DTRs 11/.4kV 22/.4kV & 33kV augmentation& new capacitor banks etc. c) New LT, augmentation, re-organization/conversion of LT to HT d) New Service connection. e) Replacement, augmentation, re-organization or services f) Metering of LT & HT g) Any major T&P C. Centrally Sponsored Schemes (RGGVY & APDRP Part-B): At present, two such flagship schemes sponsored by Govt. of India are underway in HPSEB Ltd., which are described briefly hereunder:

47 71 blocks are complete and in remaining 6 blocks works shall be completed by December, b. ALDC, System Operation, Communication System Minor Capital Works: For minor capital works to be undertaken under exigent conditions a lump-sum b) R-APDRP Part-B Schemes Under R-APDRP scheme launched by GOI, the Towns of Himachal Pradesh with population more than has been covered for improvement of power delivery infrastructure. The major works proposed are new 66kV, 33kV, 22kV, 11kV lines and 66/11kV, 66/33kV, 66/22kV, 33/11kV Sub-stations. The Power transformers having loading more than 70% has been proposed to be augmented; the lengthy HT/LT lines has been proposed to be reduced by installing new DTRs. To facilitate spotting of faults Provision of Fault passage Indicators (FPIs) has been made for easy identification of faulty phase. For HP, 14 towns namely, Nahan, Paonta Sahib, Shimla, Baddi, Bilaspur, Chamba, Dharamshala, Hamirpur, Kullu, Mandi, Sundernagar, Una & Yol have qualified the criteria laid down and schemes worth Rs Cr. have been approved by GoI. 90% of the outlays, which shall be available as a loan in the first instance, shall be converted into grant, if HPSEB Ltd. is able to adhere to time lines specified for the purpose. Now the schemes have been revised to Rs Cr. An outlay of Rs Cr. has been proposed for FY D. GOHP Schemes: a) Tribal Area Sub Plan: An outlay of Rs Cr. has been kept as token provision under this Tribal Sub Plan for FY 13-14, which is 100% aided by GoHP. b) Scheduled Cast Sub Plan: An outlay of Rs. 4 Cr. has been kept as token provision under this plan for FY subject to actual grant by GoHP ALDC, system operation, communication systems etc: a. ALDC, System Operation, Communication System Major Capital Works: An outlay of Rs Cr. has been proposed for up- gradation & establishment of ALDC, System Operations & Communication System for FY

48 For minor capital works, lump-sum indivisible provisions (outlays) are proposed for which block funding shall be arranged Circle-wise in a consolidated. Accordingly, an outlay of Rs 4.00 Cr has been proposed in EHV works and of Rs. 8 Cr. has been proposed for distribution works below 33 kv for FY New Buildings: HPSEB Ltd. is facing great difficulty in the absence of its own buildings both residential as well as non-residential. This problem has further aggravated in view of the increased activities of the Board. For the last many years outlay have been very less. Housing has assumed importance at the National level. In order to provide proper accommodation to the staff of the Board at all places as also the office accommodation it is necessary that liberal provision of funds should be made under this head. However, keeping in view the financial constraints as HPSEB Ltd. has to depend only upon borrowing for the purpose, an outlay of Rs.5.00 Cr. has been proposed for this purpose during the FY IT PROJECTS: HPSEBL has undertaken main IT initiatives to improve efficiency and bring about greater transparency in its operations. HPSEBL has successfully implemented several projects and proposes to build on the backbone already established to implement new and innovative technologies to provide quality power and services, while simultaneously taking steps to improve revenue buoyancy and higher collection efficiency. To fund the existing programs as well as new initiatives HPSEBL has proposed the following capex for 3 rd MYT control period The summary of the planned capex investment for above schemes could be found in the following table. The proposed investment in the FY 18 and FY 19 has been tentatively proposed as the HPSEBL is currently under process for detailed schemewise capex preparation Capital investment plan for Generation Schemes Generation Schemes Provision for Completed Projects.

49 major works in respect of electromechanical components or the civil structure of these projects. Accordingly, the works on the following projects are slated to be undertaken during FY and completion of these works during the MYT Control Period FY is proposed. (i) Larji (ix) Bassi (ii) Khauli-I (x) Binwa (iii) Thirot (xi) Gaj (iv) Bhaba (xii) Andhra (v) Ghanvi-I (xiii) RongTong (vi) Rukti (xvi) Chaba (vii) Gumma An outlay of Rs Cr. is proposed for such works during FY Generation Schemes Renovation & Modernization: Renovation & Modernization LE works on 6 No. Power Houses under operation namely (i) Bhabha, (ii) Bhabha Aug, (iii) Rong Tong, (iv) Rukti, (v) Giri and (vi) Gaj are under way or shall be taken for extensively RM &LE during the MYT Control Period FY An outlay of Rs Cr. has been proposed for FY for the purpose Generation Schemes under Tribal Area Sub Plan 13 th Finance Commission Grants for R&M HPSEBL is carrying out R&M works on two of the projects located in Tribal Area namely (i) Rongtong (2MW) and (ii) Rukti (1.5MW) under Grant from Tribal Department, GoHP. Accordingly, outlay worth Rs Cr. is proposed for FY to carryout R&M works of these projects subject to actual by GoHP Below mentioned is the scheme wise CAPEX plan to be done by HPSEBL for the 3 rd Control Period: Table 39: Scheme Wise CAPEX Plan Heads FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 EHV Works

50 OP South Consumer Services & Electrification Schemes Centrally Sponsored Schemes IT Works GoHP Schemes New Buildings Minor works ALDC Works Total CAPEX Phasing of capital expenditure While the generation schemes have been captured in the calculation of the AFC of the generation plants, the following table gives the plan for distribution capex. This shall subsequently become a part of the ARR for HPSEBL. Table 40: CAPEX summary Capex details (Rs. Cr.) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Opening CWIP Addition during the year Capitalized during the year (incl IDC) Closing CWIP Opening GFA Addition during the year, incl IDC Closing GFA Opening GFA Addition during the year, incl IDC (excl grants) Closing GFA

51 Opening debt Addition during the year Debt repayment Closing debt Interest IDC Opening Equity Addition during the year Closing Equity Opening Grant Addition during the year Closing grant

52 Period (FY to FY ) considering the actual provisions performance in previous 3 years, provisional latest available information for FY projected for balance period of FY and projections for FY to FY and Provisions of HPERC MYT Regulations, The components for the calculation of total expenses for the ARR Petition for the 3 rd Control Period are as follow: Power Purchase Cost Operation & Maintenance Cost Interest on Loan and Financial Charges Interest on Working Capital Provision for Bad Debts Return on Equity Non Tariff Income Operation & Maintenance Expenses Operations and Maintenance (O&M) Expenses of HPSEBL consists of the following elements: Repairs and Maintenance Costs Employee Expenses Administrative and General Expenses Repairs and Maintenance Cost These expenses include expenses on repairs and maintenance of Plant and Machinery, Transformers, Building, Other Civil Works, Hydraulic works, Lines, cable network etc., Vehicles, Furniture & fixtures, Office equipment, etc. As per the HPERC (Terms and Conditions for Determination of Wheeling Tariff and Retail Supply Tariff) Regulations, 2011 along with Amendment 1, 2012 and Amendment 2, 2013, the R&M cost has to be calculated as: R&M n = K x GFA n-1 x WPI inflation

53 Opening GFA Closing GFA Average GFA GFA added during the year R&M Costs as % of GFA 1.14% 1.09% 0.92% K factor 1.05% WPI inflation is the average increase in the Wholesale Price Index (WPI) for immediately preceding three years before the base year; The same has been calculated below: Table 43: WPI FY WPI Index Growth (WPI) Average 8.61 Source: R&M n Repair and Maintenance costs of the transmission licensee for the nth year; GFA n-1 Gross Fixed Asset of the transmission licensee for the n-1 th year; For calculating the R&M cost of the nth year, the GFA addition of that year has also been considered and the same has been multiplied with the K factor (excluding inflation, as it is assumed the GFA addition of that year is on current year prices) Using the above mentioned methodology, the R&M expenses for the control period are given in the table below: Table 44: R&M Expenses Particulars FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rs Cr. RE Proj. Proj. Proj. Proj. Proj. Plant & Machinery Buildings Civil Works Hydraulic Works Lines, Cables Networks Vehicles

54 Expenses Less: Cost Reallocated to Depreciation & Recovery of cost of vehicle from O&M and other units Overall R&M Expenses Employee Cost As per the Tariff regulations, the employees expenses have been calculated as per the following formulae Where: EMP n = [(EMP n-1 ) x (1+G n ) x (CPI inflation )] + Provision (Emp) CPI inflation is the average increase in the Consumer Price Index (CPI) for immediately preceding three years before the base year; The CPI inflation rate is calculated as per the following table Table 45: CPI FY CPI Index Growth in CPI % % % Average 9.76% Source: EMP n-1 employee s cost of the transmission licensee for the (n-1)th year. Provision (Emp) - Provisions and expected one-time expenses as specified above; Gn - is a growth factor for the nth year. Value of Gn shall be determined by the Commission in the MYT tariff order for meeting the additional manpower requirement based on licensee s filings, benchmarking, approved cost by the Commission in past and any other factor that the Commission feels appropriate; The growth rate in employees has been calculated based on the number of consumers handled per employee within the state. It is assumed that the number of consumers handled per employee shall increase at a rate of 3% annually during the MYT period. Accordingly, the growth (G n ) in number of employees has been

55 Number of Employees Growth (G) % in Employees on Account of Consumer connections 2.89% -0.42% -0.41% -0.40% -0.39% -0.38% As per the projected values of G n and CPI inflation, the employee expenses calculated for the 3 rd Control Period for HPSEB are as follows:. Table 47: Employee Expenses for 3rd Control Period (Rs. Crs) Particulars FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rs Cr. RE Proj. Proj. Proj. Proj. Proj. Salaries (Basic) Grade pay DA Arrears of previous years Other Allowances Overtime Bonus Total Salaries Other Staff Cost Incentives/Awards Incentives/Awards Earned Leave Encashment Medical Expense Re-Imbursement Leave Salary Contribution Payment Under Workman s Compensation And Gratuity Staff Welfare Expenses Gross Other Staff Cost Terminal Benefits Gross Employee Cost Chargeable To Construction Works Net Employee Cost Administrative and General Expenses A&G Expenses during the 3rd Control Period have been projected on the basis of the methodology as per MYT Regulations of the Commission. In the Second Amendment to the MYT tariff regulations of 2013, the norms for A&G

56 Table 48: A&G norms Norms FY 13 Actuals No. of employees A&G cost (Rs Cr.) 41.5 A&G / employee (Rs'000/ employee) 21.4 No. of consumers 2,087,604 A&G cost (Rs. Cr.) 41.5 A&G / 1000 consumers (Rs'000/ 1000 consumers) The projections for number of employees and consumers are presented in the following table. These projections, along with the WPI inflation as calculated in the previous section would be used to estimate the A&G costs during the Control Period Table 49: Projections for applying A&G norms FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Proj. Proj. Proj. Proj. Proj. Proj. No. of employees 19,917 19,833 19,752 19,673 19,597 19,523 No. of consumers 2,140,983 2,195,939 2,252,542 2,310,858 2,370,959 2,432,922 Weightage of A&G/ Employee 50.00% Weightage of A&G/ 1000 Consumers 50% WPI 8.61% Based on the methodology discussed above, A&G Expenses for the 3 rd Control period have been projected as below: Table 50: A&G Expenses for 3rd Control Period (Rs. Crs) Particulars FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rs Cr. RE Proj. Proj. Proj. Proj. Proj. Rent, Rates & Taxes Telephone, Postage & Telegrams Consultancy Charges Conveyance & Travel Regulatory Expenses Income Tax Updating Charges Consumer Redressal Forum & Ombudsman Insurance Purchase Related Expenses & Other Charges Administration Charges - Total Other Charges Fees & Subscriptions, Books & Periodicals

57 Legal Charges Audit Fee/Statutory Audit Fee Freight Material related Expenses Entertainment Charges Training to Staff Public Interaction Program Public Expenses / Other professional charges GIS / GPS expenses related to High level Committee Expense for providing cost free CFL bulbs to domestic consumers Fee for SSA Examination A&G Total Less: Capitalization Net A&G Costs Depreciation Depreciation has been calculated taking into consideration the opening balance of assets in the beginning of the year and the projected capitalization. Assets funded through grants have been excluded in the calculation of depreciation. The Depreciation rates used as per the HPERC MYT Tariff regulations. The estimated depreciation for the 3 rd Control Period is shown in the following tables: Table 51: Asset details for depreciation calculations Particulars FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rate of Rs Cr. RE Proj. Proj. Proj. Proj. Proj. Dep Land & Land Rights % Building & civil works % Hydraulic Works % Towers, Poles, Fixture, overhead, conductors devices % Switchgears, control gears & protection % Plants & Machinery % Vehicles % Furniture Fixture % Office equipments incl intangibles % Assets not belonging to the Board

58 Table 52: Depreciation for 3rd Control Period (Rs. Crs) Particulars FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rs Cr. Proj. Proj. Proj. Proj. Proj. Proj. Depreciation Interest & Finance Charges Interest on new and existing loans Based on the capital investment plan, the interest charges for the new and existing loans to be taken are calculated in the table below: Table 53: Interest on new & existing loans Details of Loan/ interest Payments FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 RE Proj Proj Proj Proj Proj Opening Balance 2, , , , , ,299.7 Addition Repayment Closing Balance 2, , , , , ,372.6 Interest & Financing Charges Less: Interest Capitalization Net: Interest & Financing Charges Interest on working capital The interest on working capital has been calculated as per HPERC (Terms and Conditions for Determination of Wheeling Tariff and Retail Supply Tariff) Regulations, 2011 along with Amendment 1, 2012 and Amendment 2, As per the above, working capital for the retail supply business is calculated as below: a. O&M expenses for one month; b. receivables for two months of the wheeling charges; c. maintenance 40% of R&M Expenses for one month; and Less d. consumer security deposit, if any. As per Amendment 2 of 2013, the working capital interest rate shall be equal to - the average base rate of the last six months prior to the filing of the MYT petition plus 350 basis points. The average base rate of SBI for the past 6 months is 9.8%. Adding 350

59 INR Cr RE Proj. Proj. Proj. Proj. Proj. O&M expenses R&M expenses A&G expenses Employee expenses O&M expenses for 1 month Annual revenues from tariffs and charges Receivables equivalent to 2 months average billing Maintenance Spares (40% of R&M Expense of 1 Month) Less: Consumer Security Deposit (CSD) Total Working Capital Interest on Working Capital Overall interest and finance charges In addition to the above interest charges, the interest and finance costs for existing loans, etc have been projected based on historical trends. The overall interest and finance charges for the Control Period have been projected in the following table: Table 55: Total interest and finance charges INR Cr Proj. Proj. Proj. Proj. Proj. Proj. RGGVY LIC REC - Existing loans as on 31 march PFC Short Term Bank Loans as per FRP Restructuring Plan Non SLR Bonds Other Negotiated Loan Cost of Raising Finances Interest on Consumer Deposits Interest on new CAPEX loans Interest on WC Borrowings Interest & Finance Charges - Total

60 HPSEBL Business Plan MYT Control Period: FY to FY Provision for bad and doubtful debts Certain amount of receivables for HPSEBL remains unpaid. Hence, to account for such cases, HPSEBL has made a provision for bad and doubtful debts. The average provision of the pending receivables for HPSEBL has been 0.7%. The same has been used for forecasting the provision for bad and doubtful debts for the Control Period. Table 56: Provision for Bad and Doubtful Debt for last 3 years (Rs. Crs) Particulars PY PY PY Actual Actual Actual Receivables % of provision 0.48% 0.29% 1.33% Average of % for bad debts 0.70% Based on the projected receivables from live and permanently disconnected consumers and the percentage provision as calculated above, the following table gives the provision for bad and doubtful debt during the Control Period. Table 57: Provision for Bad and Doubtful Debt for 3rd Control Period (Rs. Crs) Particulars FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rs Cr. RE Proj. Proj. Proj. Proj. Proj. Receivable from customers as at the beginning of the year Revenue billed for the year Collection for the year Against current dues Against arrears upto previous year Gross receivable from customers as at the end of the year Receivables against permanently disconnected consumers Receivables % of provision 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% Provision for bad and doubtful debts Non tariff income Non tariff income for HPSEBL accrues essentially from meter rent, miscellaneous recoveries from consumers including delayed payment surcharge, recovery of

61 HPSEBL Business Plan MYT Control Period: FY to FY wheeling charges, O&M charges recoverable from HPPTCL for the maintenance of their transmission lines, etc. For all the items in the non-tariff income, an annual inflation of 5% is assumed. In addition, the rationale for projections of various non-tariff items is as follows: a) Income from meter rent has been projected to grow at the same rate as the number of consumers b) Recovery of theft, Wheeling Charges and Miscellaneous Charges have been projected to grow at the same rate as the growth in unit sales of electricity c) Interest on staff loan has been assumed to increase at the rate of employee growth rate d) Delayed payment charges have been assumed to grow at a rate equal to the revenue growth e) Interest on advances to suppliers has been projected to grow in proportion to the capital investment f) Income from trading has been assumed to grow at a rate equal to the growth in MU sales g) PLVC charges are proposed to be abolished and hence no income has been considered for the same h) O&M Charges recovery from HPPTCL is based on the CERC guidelines and the inflation rate of 5.72%; this is because the payment from HPPTCL is calculated on CERC norms i) Miscellaneous Receipts have been assumed to remain constant at current levels in view of no concrete basis of projections. The following table presents the projected non-tariff income for HPSEBL Table 58: Non Tariff Income for 3rd Control Period (Rs. Crs) Particulars FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rs Cr. Actuals Actuals Actuals RE Proj. Proj. Proj. Proj. Proj. Meter Rent/Service Line Rentals Recovery for theft of Power / Malpractices Wheeling Charges Recovery Miscellaneous Charges from Consumers Non Tariff Income - Total Other Income Interest on Staff loans & Advances Income from Investments

62 HPSEBL Business Plan MYT Control Period: FY to FY Delayed Payment Charges from Consumers Interest on Advances to Suppliers / Contractors Income from Trading Miscellaneous Receipts O&M Charges Recovery from HPPTCL PLVC charges Gain on sale of fixed assets Other Income - Total Total Non Tariff Income & Other Income Return on equity As per HPERC (Terms and Conditions for Determination of Wheeling Tariff and Retail Supply Tariff) Regulations, 2011 read along with Amendment 1, 2011 and Amendment 2, 2013, the Return on equity for the distribution licensee (sum of return on equity for wheeling business and return on retail supply business) shall be computed on the paid up equity capital and shall be 16% per annum (post tax): For the control period, the same has been calculated on the average equity during a year at 16% post-tax ROE. This 16% pre-tax equity ROE rate becomes 24.24% pre-tax. The return on equity is shown in the table below: Table 59: Return on equity Particulars FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rs Cr. RE Proj. Proj. Proj. Proj. Proj. Opening Equity Equity Infusion Closing Equity Rate of Return on Equity 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% Return on Equity ARR summary Based on the discussion in the above chapters of the parameters constituting the ARR of HPSEBL, the following table gives the ARR summary:

63 HPSEBL Business Plan MYT Control Period: FY to FY Table 60: Annual Revenue Requirement for 3 rd Control Period (Rs. Crs) Particulars FY 14 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rs Cr. Approved RE Proj. Proj. Proj. Proj. Proj. Purchase of Power from Own Stations Purchase of Power from Other Sources (Including UI) Transmission Charges R&M Expense Employee Expenses A&G Expense Depreciation Interest & Finance Charges Less: Interest & other expenses capitalized Other Debits (incl. Prov for Bad debts) Extraordinary Items ( True Up / carrying cost for FY 13) Total Reasonable Return Other Income Annual Revenue Requirement Revenue from existing tariffs Surplus / (Gap) ARR for Wheeling and Retail Supply Business Based on the approved segregation mechanism of the HPERC, the overall ARR has been divided into Wheeling and Retail Supply in the following tables: Table 61: Wheeling ARR for 3 rd Control Period (Rs. Crs) Wheeling ARR FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rs Cr. RE Proj. Proj. Proj. Proj. Proj. Power Purchase Expenses Transmission Charges Employee Expenses R&M Expenses A&G Expenses Interest & Financing Charges (other than interest on working capital) Less : Interest & Other Expenses Capitalized Interest on Working Capital

64 HPSEBL Business Plan MYT Control Period: FY to FY Depreciation Other Debits (incl. Prov for Bad debts) Return on Equity on Wheeling Business Public Interaction Program Non Tariff Income (excluding wheeling charges received from other states) Wheeling charges received from other states Addition items (Prior period / true up, etc) ARR Requirement Table 62: Retail Supply ARR for 3rd Control Period (Rs. Crs) Retail supply ARR FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 Rs Cr. RE Proj. Proj. Proj. Proj. Proj. Power Purchase Expenses Transmission Charges Employee Expenses R&M Expenses A&G Expenses Interest & Financing Charges (other than interest on working capital) Less : Interest & Other Expenses Capitalized Interest on Working Capital Depreciation Other Debits (incl. Prov for Bad debts) Return on Equity on Wheeling Business Public Interaction Program Non Tariff Income (excluding wheeling charges received from other states) Wheeling charges received from other states Addition items (Prior period / true up, etc) ARR Requirement