ASSAM ELECTRICITY REGULATORY COMMISSION (AERC) Assam Power Distribution Company Limited (APDCL) TARIFF ORDER FY to

Transcription

1 ASSAM ELECTRICITY REGULATORY COMMISSION (AERC) Assam Power Distribution Company Limited (APDCL) TARIFF ORDER FY to Petition No. 6/2010 ASSAM ELECTRICITY REGULATORY COMMISSION A.S.E.B. Campus, Dwarandhar, G. S. Road, Sixth Mile, Guwahati Website: aerc_ghy@hotmail.com i

2 FOREWORD This is the seventh Tariff Order issued by the Commission. Since the last Tariff Order passed by the Commission, demand for electrical energy has increased considerably in the state and this demand is expected to grow in tune with the projected growth of the economy. Therefore, power will continue to be a crucial input for sustained development of the state economy. Importantly, power is vital for meeting the growing demands of industry and agriculture, as well as the domestic and service sectors. The quality and sufficient availability of power are areas which need urgent attention. The Commission hopes that investment in Generation and Transmission sectors are taken up and executed judiciously by the respective authorities. The Commission has issued directives for improvement of generation and transmission functions in the respective Tariff Orders for compliance. With over 10 years of service and a full fledged (3 member) Commission since February, 2005, the AERC has attained a level of maturity. However, much remains to be done to bring the power sector to the level of expectation of all sections of society. The Tariff Policy (TP) notified by the Government of India in January, 2006, provides the framework to balance the important objectives of attracting investments to ensure availability of quality power and protecting the interest of consumers by ensuring that the electricity tariffs are affordable even for the weaker sections of society. The Electricity Act, 2003, provides for multiple players in transmission and distribution of electricity and this is likely to exert pressure on the incumbent utilities to prepare themselves to meet the competition. The Commission issued regulations for according open access to consumers in 2005 and provision of different charges for open access has also been made in the Tariff Order. The Multi Year Tariff (MYT) regime will be of benefit to consumers as well to the utilities, enabling them to plan for the long term, without any apprehension of regulatory uncertainty. The utilities filed their Tariff Petitions for the control period of 3 years for FY as specified in the Regulations. As the audited Annual Financial Statements for and and Provisional Accounts for have been received, the Commission has adopted MYT for the entire control period and ARR projections filed by the utilities for to have now been computed and approved. ii

3 The Commission continues with its initiative of progressive reduction of cross subsidy in terms of Electricity Act and National Tariff Policy. The Commission has tried to rationalize the tariff with an objective to avoid any adverse impact on any stakeholder in the process, especially on the larger segments of consumers of electricity to the extent possible. The State Government can give subsidy to the extent they consider appropriate as per provisions of Section 65 of the Electricity Act 2003 to minimize the discomforts that might be experienced by economically weaker sections of the public. The Commission emphasizes on consumer education and awareness in matters of grievance redressal and has issued directions in this regard. The Commission is also concerned about the high distribution loss which has resulted in high average cost of supply. The Commission has directed the Discoms for carrying out energy audit and to constitute task forces in different zones of the licensee to detect pilferage and initiate penal action against the guilty. Further, the Commission fixes the loss reduction of 1% per year for the years , and as a roadmap towards achieving the objective of R-APDRP. The Commission has stressed upon energy conservation and Demand Side Management initiatives by the distribution company. It also issues directions to the Distribution Licensee to install prepaid meters in some domestic consumers as a pilot project to observe the benefits of such meters and subsequently the licensee may install prepaid meters in Government consumers to ensure better revenue collection. The Commission after careful consideration and due deliberations undertook the exercises as envisaged in the Electricity Act 2003, concerned Regulations of the Commission in passing this Tariff Order. iii

4 Contents ORDER... X 1. INTRODUCTION CONSTITUTION OF THE COMMISSION TARIFF RELATED FUNCTIONS OF THE COMMISSION BACKGROUND PROCEDURAL HISTORY Admission of Petition and Public Hearing Process STATE ADVISORY COMMITTEE MEETING SUMMARY OF ARR AND TARIFF PETITION ANNUAL REVENUE REQUIREMENT (ARR) SUMMARY OF THE PETITION REQUEST OF APDCL TRUING UP FOR THE YEARS AND METHODOLOGY FOR TRUING UP BACKGROUND TRUING UP FOR FY Energy Sales Distribution Losses Energy Requirement Power Purchase Power Purchase Cost Repairs and Maintenance (R&M) expenses Administration & General (A&G) expenses Interest and Finance charges Interest on working capital Interest on Security Deposit Depreciation Provision for bad and doubtful debts Other debits Net prior period expenses Return on Equity Provision for taxes Miscellaneous receipts / other income Revenue with approved tariff TRUING UP FOR FY Energy Sales Distribution Losses Energy Requirement Power Purchase Power purchase cost Employee cost Repairs and Maintenance (R&M) expenses Administration and General (A&G) expenses Interest and Finance charges Interest on working capital Interest on security deposit Provision for bad and doubtful debts Other debits Net prior period expenses Return on equity Provision for taxes iv

5 Miscellaneous receipts / other income Revenue with approved tariff True up of ARR for BRIEF SUMMARY OF OBJECTIONS RAISED, RESPONSE OF APDCL AND COMMISSION S COMMENTS ANALYSIS AND DETERMINATION OF ANNUAL REVENUE REQUIREMENT FOR FY TO ENERGY SALES CONSUMER CATEGORIES Overall Approach to Sales Projection CATEGORY-WISE PROJECTED ENERGY SALES DETAILED ANALYSIS OF ENERGY SALES PROJECTED Jeeban Dhara Domestic - A Domestic - B Commercial (Above 0.5 to 20 KW) General load Public lighting Agriculture upto 7.5 HP Small industries - Rural upto 20 kw Small Industries Urban HT Domestic (20 kw and above) HT Commercial 20 kw and above Public Water Works Bulk Supply (20 kw and above) Bulk Supply (20 kw and above others) HT Small Industries Upto 50 kw HT industries-i (50 kw to 150 kw) HT Industries-II (above 150 kw) Tea, Coffee and Rubber Industry Oil and Coal HT Irrigation (above 7.5 HP) TOTAL ENERGY SALES DISTRIBUTION LOSSES ENERGY REQUIREMENT ENERGY BALANCE ENERGY AVAILABILITY TO APDCL ENERGY BALANCE REVENUE REQUIREMENT , AND EXPENSES PROJECTED BY APDCL AND DECISIONS OF THE COMMISSION POWER PURCHASE Energy to be purchased Allocation of Capacities Transmission Charges ASEB cost SLDC charges Commission s Analysis and Decision TOTAL POWER PURCHASE COST OPERATION AND MAINTENANCE (O&M) EXPENSES Employee Cost Repair and Maintenance (R&M) Expenses CAPITAL INVESTMENT CAPITAL EXPENDITURE AND SOURCES OF FUNDING INTEREST ON WORKING CAPITAL DEPRECIATION INTEREST ON CONSUMER S SECURITY DEPOSIT PROVISION FOR BAD AND DOUBTFUL DEBTS v

6 5.21 RETURN ON EQUITY PROVISION FOR TAX PROVISION FOR FBT NON TARIFF INCOME OTHER INCOME REVENUE AT EXISTING TARIFF ANNUAL REVENUE REQUIREMENT (ARR) TARIFF PRINCIPLES AND DESIGN TARIFF PRINCIPLES TARIFF DESIGN CROSS SUBSIDY FUEL PRICE AND POWER PURCHASE ADJUSTMENT CHARGES (FPPPA) COMPLIANCE OF DIRECTIVES BY APDCL AND NEW DIRECTIVES COMPLIANCE OF DIRECTIVES ISSUED BY THE COMMISSION NEW DIRECTIVES POWER SECTOR IN ASSAM A WAY FORWARD A BRIEF OVERVIEW DISTRIBUTION LOSSES & ENERGY AUDIT ENERGY AUDIT CONSUMER METERING HIGH VOLTAGE DISTRIBUTION SYSTEM SCADA CAPITAL INVESTMENT EMPLOYEE COST FRANCHISING TRANSMISSION, WHEELING CHARGES AND OPEN ACCESS CHARGES SCHEDULE OF TARIFF vi

7 Tables Table 2.1 : ARR for FY to FY Table 3.1 : Energy Sales FY Table 3.2 : Distribution Losses FY Table 3.3 : Energy Requirement FY Table 3.4 : Power Purchase - FY Table 3.5 : Interest on working capital approved in True up for Table 3.6 : Depreciation for the FY Table 3.7 : Aggregate Revenue Requirement for Truing up Table 3.8 : Energy Sales FY Table 3.9 : Distribution Loss FY Table 3.10 : Energy Requirement for Table 3.11 : Power Purchase FY Table 3.12 : Interest on working capital approved in Truing up for Table 3.13 : Approved Depreciation for the Truing up FY Table 3.14 : Aggregate Revenue Requirement in Truing up for FY Table 5.1: Historical trend in category wise energy sales Table 5.2 : Category-wise Growth Rates of Energy Table 5.3 : Category-wise Number of Consumers Table 5.4 : Category wise growth rate of number of consumers Table 5.5 : Category wise connected load Table 5.6 : Category wise growth rate of connected load Table 5.7 : Projected energy sales by APDCL for the control period Table 5.8 : Total Energy Sales for FY to Table 5.9 : Distribution Loss Table 5.11(A) : Summary of Energy Balance Projected by APDCL Table 5.11(B) : Input into Transmission System Table 5.12 : Power Purchase Projected by APDCL for to Table 5.13 : APGCL Generation Table 5.14: Power Purchase Projected by APDCL and Approved for to Table 5.15 : Energy Balance Table 5.16 : ARR Projected by APDCL FY to Table 5.17 : Energy to be Purchased Table 5.18 : Power Purchase Projected by APDCL Table 5.19 : Projected Transmission charges Table 5.20 : Power Purchase Cost FY (excluding APGCL) Table 5.21 : Power Purchase Cost Approved for to Table 5.22 : Transmission Charges Table 5.23 : Total Power Purchase Costs during the Control Period Table 5.24 : Capital Investment Plan to Table 5.25 : Scheme wise Funding of Capex Break-up Table 5.26 : Capex Funding Table 5.27 : Capital expenditure plan for the MYT control period Table 5.28 : Projected CWIP, new capex and capitalization for FY to FY Table 5.29 : Approved capital expenditure and capitalization for FY to FY Table 5.30: GFA (Rs. crore) Table 5.31 :Proposed Loans Schedule (Capex Funding) Table 5.32 : Proposed loan drawal during the control period FY to Table 5.33 : Approved Loan Schedule vii

8 Table 5.34 : Approved Interest and Finance Charges for the Control Period FY to Table 5.35 : Projected Interest on Working Capital Table 5.36 : Approved Interest on working Capital for the Control period FY to Table: 5.37 : Approved Depreciation for FY Table: 5.38 : Approved Depreciation for FY Table: 5.39: Approved Depreciation for FY Table 5.40 : Return on Equity calculated below Table 5.41 : Approved Provision for Tax Table 5.42 : Non Tariff income projected by APDCL Table 5.43 : ARR for MYT Period FY to Annexure Annexure viii

9 Abbreviations ABT ADB AEGCL AERC APDCL APDRP APGCL ARR ASEB BST CSGS CV CWIP FY GFA GoA GoI KLHEP KV KVA KW KWH LTPS MMSCMD MU MYT NEC NERLDC NTPS PAF PGCIL PLF RGGVY R&M Rs. SLDC T&D UCPTT Wt. Av. Availability Based Tariff Asian Development Bank Assam Electricity Grid Corporation Limited Assam Electricity Regulatory Commission Assam Power Distribution Company Limited Accelerated Power Development and Reforms Programme Assam Power Generation Corporation Limited Annual Revenue Requirement Assam State Electricity Board Bulk Supply Tariff Central Sector Generating Stations Calorific Value Capital Works In Progress Financial Year Gross Fixed Assets Government of Assam Government of India Karbi Langpi Hydro Electric Project Kilo Volt Kilo Volt Ampere Kilo Watt Kilo Watt Hour Lakwa Thermal Power Station Million Metric Standard Cubic Meter per day Million Unit Multi-Year-Tariff North Eastern Council North Eastern Regional Load Despatch Centre Namrup Thermal Power Station Plant Availability Factor Power Grid Corporation of India Limited Plant Load Factor Rajeev Gandhi Grameen Vidyuthikaran Yojna Repairs and Maintenance Rupees State Load Despatch Centre Transmission and Distribution Unified Common Pool Transmission Tariff Weighted Average ix

10 ASSAM ELECTRICITY REGULATORY COMMISSION Guwahati Present Shri Jayanta Barkakati, Chairperson Dr. Rajani Kanta Gogoi, Member Shri Tapan Chatterjee, Member Petition No. 6 of 2010 Assam Power Distribution Company Limited (APDCL) Petitioner ORDER (Passed on : 16/05/2011) (1) The Assam Power Distribution Company Limited (APDCL) filed petition for approval of the Annual Revenue Requirement (hereinafter called as ARR ) for the period FY to FY , True up for the period FY & FY and determination of tariff for the FY on 01/02/2010 under Section 62 of the Electricity Act, (2) The Commission on preliminary scrutiny found that the above petition filed by APDCL was incomplete in some material particulars. Therefore, additional data and clarifications on the petition were sought from APDCL from time to time and replies received. Although, additional information and clarifications continued to be submitted, the Commission in larger interest of the consumers as well as licensees and abiding by the statutory obligation of tariff determination admitted the petition on 21/08/2010. (3) After the petition was admitted, in accordance with Section 64 of the Electricity Act 2003, the Commission directed APDCL to publish a summary of the ARR and Tariff filings in local dailies to ensure public participation. Copy of the petition was also made available in website of Commission and APDCL. (4) Accordingly, a Public Notice was issued by APDCL inviting objections / suggestions from stakeholders on or before 30/10/2010. The notice was published in 6 newspapers on 24/09/2010 and again in 3 different newspapers on 30/09/2010. Meanwhile the Commission received requests for extending the time limit for filing objections / suggestions from some consumers / consumer organizations. With a view to giving some more time for obtaining views of stakeholders, the Commission positively considered the request and extended the time limit upto 15/11/2010. x

11 APDCL was asked to give public notice to this effect, which was published in 2 newspapers on 30/10/2010 and another newspaper on 31/10/2010. (5) The Commission received 17 objection petitions on the petition filed by AEGCL and sent communication to the objectors to take part in the public hearing to be held at the Assam Administrative Staff College, Guwahati on 08/12/2010 and on 13/12/2010 at Circuit House, K.B. Road, Jorhat. In addition to these 17 objectors, 3 more objectors took part in the Public Hearing at Jorhat and made verbal submissions. The details are discussed in the relevant section of this Tariff Order. The MYT Petition was also discussed in the meeting of the State Advisory Committee (constituted under Section 87 of the Electricity Act, 2003) convened on 23/11/2010. (6) Although, the Petition from APDCL was admitted on 21/08/2010, the Commission continued to receive additional data and clarifications from APDCL on various aspects as late as April, (7) The Commission, now in exercise of its powers vested under Section 61 and 62 of the Electricity Act, 2003 and all other powers enabling on its behalf and taking into consideration the submissions made by the petitioners, objections and suggestions received from stakeholders and all other relevant materials on record, determined the ARR for APDCL for , carried out True up for FY & FY and Tariff for 01/04/2010 to 31/03/2011 and issued order accordingly making the new tariff effective from (8) The Commission further directs the utilities to publish a Public Notice of 7 days before the implementation of the order. (9) Before parting, it would be worth mentioning that while passing the Tariff Order some delay could not be avoided and the factors attributed for the same have been stated herein before. Sd/- (T. Chatterjee) Member, AERC Sd/- (R. K. Gogoi) Member, AERC Sd/- (J. Barkakati) Chairperson, AERC xi

12 1. Introduction 1.1 CONSTITUTION OF THE COMMISSION 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, 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 27 th January The Commission has started functioning as Multi Member Commission on joining of two Members from 1st of February The Commission is mandated to exercise the powers and functions conferred under Section 181 of the Electricity Act 2003 (36 of 2003) (hereinafter referred to as the Act) and to exercise the functions conferred to it under Section 86 of the Act from 10th June TARIFF RELATED FUNCTIONS OF THE COMMISSION Under Section 86 of the Act, the Commission has the following tariff related functions: (a) To determine the tariff for electricity, wholesale, bulk, grid or retail, as the case may be; (b) To regulate power purchase and procurement process of the transmission utilities and distribution utilities including the price at which the power shall be procured from the generating companies, generating stations or from other sources for transmission, sale, distribution and supply in the State; (c) To promote competition, efficiency and economy in the activities of the electricity industry to achieve the objects and purposes of this Act Under Section 61 of the Act in the determination of tariffs, the Commission is to be guided by the following: (a) The principles and methodologies specified by the Central Commission for determination of the tariff applicable to generating companies and transmission licensees; 1

13 (b) That the electricity generation, transmission, distribution and supply are conducted on commercial principles; (c) The factors which would encourage efficiency, economical use of the resources, good performance, optimum investments, and other matters which the State commission considers appropriate for the purpose of this Act, (d) The interests of the consumers are safeguarded and at the same time, the consumers pay for the use of electricity in a reasonable manner, (e) That the tariff progressively reflects the cost of supply of electricity at an adequate and improving level of efficiency and also gradually reduces cross subsidies, (f) The National Power Plans formulated by the Central Government including the National Electricity Policy and Tariff Policy; In accordance with the Act, the Commission will not show undue preference to any consumer of electricity in determining the tariff, but may differentiate according to the consumers load factor, power factor, voltage, total consumption of energy during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required (Section 62 of the Act) If the State Government requires the grant of any subsidy to any consumer or class of consumers in the tariff determined by the Commission, the State Government shall pay the amount to compensate the person affected by the grant of subsidy in the manner the Commission may direct as a condition for the license or any other person concerned to implement the subsidy provided for by the State Government (Section 65 of the Act). 1.3 BACKGROUND 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. 2

14 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 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 23 rd October The Commission notified the AERC (Terms and Conditions for Determination of Tariff) Regulations, 2006 vide No. AERC.2005/19 dt 28 th April 2006, which was published in the Assam Gazette on 24th May, It was stated that it shall come into force from the date of their publication in the Official Gazette of the Government of Assam In accordance with the clause 5.3 of the regulations, the multi year tariff principle, the tariff will be determined on the basis of the principles enunciated for a period of three years commencing from 1 st April 2006 for distribution. The Discoms filed tariff petition in MYT format for first control period FY to FY in April After thorough scrutiny of the petitions submitted by Utilities the Commission decided to adopt the principle of MYT in a cautious manner due to non availability of reliable data and therefore recalculated the ARR for in that Tariff Order and decided to take up the matter of ARR for and in due course on receipt of authenticate records like Audited Annual Financial Statements of relevant years, Asset Registers etc from the Utilities. 3

15 1.3.9 The Commission on disposal of the petition issued tariff order by approving ARR and tariff for FY on 12 th September Tariff Order for FY and FY was issued on 24 th July 2009 making it effective from 1 August APDCL filed tariff petition for the second control period i.e., for FY to FY on 15 th February PROCEDURAL HISTORY 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. The APDCL has filed the petition for approval of ARR and Tariff for the second control period to under AERC Tariff Regulations, 2006 on 15 th February, Admission of Petition and Public Hearing Process The Commission conducted preliminary analysis of the petition submitted by APDCL on 01/02/2010 and found that the petition was incomplete in material particulars. Although Volume I and Volume III of the petition were submitted, the petition was not accompanied by Volume II. Volume II of the petition was submitted on 15/02/2010. Few additional data and clarifications on the tariff petitions were sought from APDCL on 12/04/2010 and reply to these were submitted on 12/05/2010. Another set of additional data/clarifications were sought from APDCL on 31/05/2010 which were submitted by them on 08/06/2010. A letter addressed to CGM (Commercial), APDCL was sent asking for a report on the position of revenue arrears and revenue collected against temporary connections on 17/06/2010 which was submitted by them on 02/07/2010. Few more clarifications on arrear dues to be paid by different consumer groups were sought from APDCL on 23/07/2010 which was submitted by them on 13/08/2010. The Commission then admitted the petition of APDCL on for the control period as Petition No 6 of In accordance with Section 64 of the Electricity Act 2003, the Commission directed APDCL to publish its application in the abridged form and manner to ensure public participation. 4

16 Copy of the petition was also made available in website of Commission and APDCL. A Public Notice was issued by APDCL inviting objections / suggestions from stakeholders on or before 30/10/2010 which was published in the following 9 newspapers on 24/09/2010 and 30/09/2010. Date Name of newspaper Language 24/09/2010 The Sentinel English The Times of India English Dainik Agradoot Assamese Dainik Janambhoomi Assamese Dainik Jugasankha Bengali Pratah Khabar Hindi 30/09/2010 The Assam Tribune English Amar Asom Assamese Pratidin Assamese Mean while the Commission received requests for extending the time limit for filing objections / suggestions from some consumers/consumer organizations. The Commission positively considered the request and extended the time limit upto 15/11/2010. The APDCL was asked to give public notice to this effect, which was published in 3 newspapers on 30/10/2010 and 31/10/2010 as stated below. Date Name of newspaper Language 30/10/2010 Amar Asom Assamese Pratidin Assamese 31/10/2010 The Assam Tribune English The Commission has received 17 Nos. of objections / suggestions to the petition filed by APDCL. The list of objectors is given below: 1 North Eastern Small Scale Industries Association (NESSIA), Guwahati 2 Assam Branch, Indian Tea Association (ABITA), Guwahati 3 Grahak Suraksha Sanstha, Guwahati 4 All Assam SSI Association, Guwahati 5 Upabhokta Surakshya Samiti, Jorhat 6 Assam Tea Planters Association, Jorhat 7 The All India Manufacturers Organisations, Tinsukia 8 Niyomeeya Bidyut Yogan Dabee Komity (NBYDK), Bokakhat. 9 Sodou Asom Lekhika Somaroh Somity (SALSS), Bokakhat 10 Sadou Asom Madhya Ingrajee Sikshok Sangstha (SAMISS), Bokakhat 11 National Chamber of Commerce, Tinsukia 12 Consumers Legal Protection Forum, Guwahati 5

17 13 Federation of Industry and Commerce, NE Region, Guwahati 14 Shri J.N. Khataniar, Guwahati 15 Ahom Royal Council, Asom, Sivasagar 16 Grahak Suraksha Samiti, Bokakhat 17 Brihattar Asomiya Yuva Manch, Missamora, Golaghat APDCL has responded on the objections / suggestions from the stakeholders. The Commission considered the objections received and sent communication to the objectors to take part in public hearing process by presenting their views in person before the Commission. The Consumers / representatives of the organizations presented their views at public hearing on 08/12/2010 at Guwahati and on 13/12/2010 at Jorhat. The list of persons / consumer organization etc. participated in the public hearings is given below: Participants in the Public Hearing held in Guwahati.1 North Eastern Small Scale Industries Association (NESSIA), Guwahati 2 Assam Branch, Indian Tea Association (ABITA), Guwahati 3 Grahak Suraksha Sanstha, Guwahati 4 All Assam SSI Association, Guwahati 5 Consumers Legal Protection Forum, Guwahati 6 Federation of Industry and Commerce, NE Region, Guwahati 7 Shri J.N. Khataniar, Guwahati Participants in the Public Hearing held at Jorhat 1. Assam Tea Planters Association (ATPA), Jorhat 2 Niyomeeya Bidyut Yogan Dabee Komity (NBYDK), Bokakhat. 3 Sodou Asom Lekhika Somaroh Somity (SALSS), Bokakhat 4 Sadou Asom Madhya Ingrajee Sikshok Sangstha (SAMISS), Bokakhat 5 Grahak Suraksha Samiti, Bokakhat 6. Ahom Royal Council, Asom, Sivasagar 7 North Eastern Small Scale Industries Association (NESSIA), Jorhat Branch 8 Grahok Suraksha Samity (GSS), Sivasagar. 9 Micro and Rural Industries Development Council (MRIDC)(N.E), Jorhat 10 Senior Citizen Sanstha of Jorhat (SCSJ). It may be noted here that Grahok Suraksha Samity (GSS), Sivasagar, Micro and Rural Industries Development Council (MRIDC)(N.E), Jorhat, Senior Citizen Sanstha of Jorhat (SCSJ) and the North Eastern Small Scale Industries Association (NESSIA), Jorhat Branch had not submitted written objection petitions before. However, they were permitted by the Commission to make verbal submissions on the date of hearing at Jorhat on request to the Commission by these parties. 6

18 A short note on the main issues raised by the objectors in response to the notification and at the public hearings in respect of the petition along with response of APDCL is briefly given in Chapter-4. The Commission obtained further information and clarifications from APDCL which are listed below: i) APDCL submitted Annual Report and Audited Accounts for FY for LAEDCL, CAEDCL and UAEDCL on 09/11/2010. ii) iii) iv) APDCL submitted additional data/ clarifications against letter No. AERC 335/2010/A/178 dated 16/11/2010 vide letter No. CGM(Com)/Tariff Petition/ /39 dated 01/12/2010. APDCL submitted additional data/ clarifications and Audited Annual Accounts of APDCL for FY vide letter No. CGM(Com)/Tariff Petition/ /41 dated 21/12/2010 as agreed to in the meeting held on in the office of the Commission. APDCL submitted Provisional P&L Statement for FY vide letter No. APDCL/CGM(F&A)/MYT/ /1 against the Commission s letter No. AERC/335/2010/A/278 dated asking for submission of Accounts (provisional, if unaudited) for FY v) APDCL submitted clarifications against letter No. AERC 335/2010/A/273 dated 18/01/2011 vide letter No. CGM(Com)/Tariff Petition/ /43 dated 20/01/2011. vi) APDCL submitted additional data against letter No. AERC 335/2010/A/Pt I/94 dated 08/04/2011 vide letter No. GM(Com)/FPPPA/2010/10 dated 23/04/ STATE ADVISORY COMMITTEE MEETING A meeting of State Advisory Committee (Constituted under Section 67 of the Electricity Act, 2003) was convened on 23/11/2010 and members were briefed on the MYT Petition of APDCL. The minutes of the meeting are appended to this order as Annexure

19 2. Summary of ARR and Tariff Petition 2.1 ANNUAL REVENUE REQUIREMENT (ARR) The Assam Power Distribution Company Ltd (APDCL) submitted the petition on 1 st February, 2010 seeking approval of Annual Revenue Requirement and Determination of distribution tariff for the control period to APDCL has projected the revenue requirement of Rs lakhs for the year , Rs lakhs for the year and Rs lakhs for the year SUMMARY OF THE PETITION The Commission has noted that APDCL has not bestowed required attention while furnishing the numerical figures in various tables in the petition. Even the approved figures in the Tariff Order for the year and are wrongly reproduced. The Commission adopted the approved figures of earlier Tariff Orders in this order. Summary of the petition filed by APDCL for FY , to FY is given below in Table 2.1. Table 2.1 : ARR for FY to FY (Rs. Lakhs) S.No Particulars Proposed Proposed Proposed 1 Cost of Power Purchase Operation & Maintenance Expenses Employee Cost Repair & Maintenance Administrative & General Expenses Depreciation Interest and Finance Charge Interest on Working Capital Other Debits Interest on Consumer security deposit Provision for Bad Debt Net prior period expenses Other expenses Capitalized Sub total (1+2+(3to10) Return on Equity Provision for tax/tax paid Income Tax 11.33% on ROE FBT 0.5% on Employee s Cost Total Expenditure (11 to 13) Less Non Tariff Income Annual Revenue Requirement ( ) 17 Revenue with approved Tariff

20 S.No Particulars Proposed Proposed Proposed 18 Other Income (Consumer Related) Total Revenue Before Subsidy (17+18) Agriculture Subsidy Other Subsidy Total Revenue after subsidy Gap (-) / Surplus (+) Summary of Table 2.1 is given below: (Rs. lakhs) S.No Estimated Revenue from Sale of energy to retail consumers at existing tariff 2 Estimated Non Tariff Income Other Consumer Related Miscellaneous Income 4 Total Earning Estimated ARR Revenue Gap Truing up for FY & REQUEST OF APDCL APDCL requested the Commission, (i) To admit this petition seeking Annual Truing up claims for FY and FY and determination of ARR/Tariff for FY to (ii) To approve the Truing up for FY and FY and allow recoup of losses as per the AERC Tariff Regulations, (iii) To approve Annual Revenue Requirement of FY to based on results of Truing up as requested in this petition and to allow its recovery. (iv) To allow recovery of Revenue Gap for FY to as given in the petition. (v) To approve the actual capital expenditure for the FY & FY and revised capital expenditure plan for FY to (vi) To consider approved parameters/arr of APGCL, AEGCL and SLDC while finalizing tariff of APDCL. (vii) To grant any other relief as the Commission may consider appropriate. (viii) Pass any other order as the Commission may deem fit and appropriate under the circumstances of the case and in the interest of justice. 9

21 3. Truing up for the years and METHODOLOGY FOR TRUING UP The Commission approves the cost parameters through approval of the Annual Revenue Requirement at the beginning of the year keeping in view the data available at that point of time. The cost approvals for each of the items are based on projection of expenses and revenue before the beginning of the year and hence the projections might vary over the course of the year The actual cost / values for certain elements / parameters may vary as against the approved cost during the year due to various controllable and uncontrollable reasons on the part of the Distribution Licensee. The Distribution Licensee may end up with higher or lower expenditure, as the case may be, at the end of the year as against the approved cost. In case of actual expenditure being higher than that of the approved expenditure, there is no mechanism during the year to recover the additional expenditure over and above the approved expenditure as the tariff for Distribution Licensee cannot be amended more than once in a year as per section 5.1 of the Terms and Conditions for Determination of Tariff Regulations 2006 of AERC, the abstract of which is provided below: No tariff or part of any tariff may ordinarily be amended, more frequently than once in any financial year, except in respect of any changes expressly permitted under the terms of any fuel surcharge formula as may be specified in terms of subsection (4) of section 62 of the Act specified in Regulation 9 of these Regulations In the case of a Generation Company and Distribution Licensee, the Regulation 9 of AERC Regulations provides for recovery of additional cost for fuel and power purchase than the cost approved by AERC on a quarterly basis through the formulae to be approved by the Commission. 10

22 Meanwhile, the Commission approved the Fuel and Power Purchase Price Adjustment Formula (FPPPA) and the same has been notified by the Government of Assam on 28 th December, 2010 as AERC (FPPPA Formula) Regulations, A copy of the same is appended to this order as Annexure 1.2. While disposing the miscellaneous petition for power purchase cost adjustment (PPCA) for FY the AERC had allowed vide order dated fuel SURCHARGE of 13 paise per unit w.e.f. 1 st July 2010 applicable to all consumers till Rs crore is recovered by APDCL. In the approved FPPPA formula for gas based stations (NTPS and LTPS), there is a component (VF) for price adjustment on account of differential cost for fuels for generation by different power stations of the APGCL. Although in the above order the Commission directed that APDCL shall continue to realize 13 Ps/unit till next MYT order is issued, the same shall not be applicable now as the fuel cost adjustment amount of Rs crore was only for the period of FY Therefore, the imposition of FPPPA charge by the APDCL shall not effect discontinuance of 13 Ps./unit as ordered on The Commission noted that so far APDCL has collected Rs crore as on January-February 2011 which includes a part of fuel surcharge of APGCL also In the truing up mechanism, the Distribution Licensee analyses the difference of actual expenditure / revenue in comparison with the approved expenditure / revenue by the Commission The Commission analyses the actual expenditure for the previous year / years based on the Annual Audited Financial Statement of the Licensee and allows / disallows the recovery of the actual expenditure through the present year tariff, subject to prudence checking. 3.2 BACKGROUND The Commission has approved the ARR and Tariffs for the year in its Tariff Order dated 12 th September 2007 and for the years & in its Tariff Order dated 24 th July The approval was based on the estimates presented by the Discoms for costs to be incurred and revenues likely to be generated during the years , and after due scrutiny APDCL in its petition for Annual Revenue Requirement for FY to FY and Truing up petition for FY and has provided the comparison 11

23 of expenditure and revenue against each head as per the audited accounts, with the expenditure and revenue approved by the Commission along with reasons for deviation The Commission has analyzed the components of actual expenses and revenue for FY and FY and has estimated gains / losses in line with the Regulations. 3.3 TRUING UP FOR FY Energy Sales APDCL submitted category-wise energy sales in the present petition and stated that the revised estimated sales for FY are about 204 MU (7%) less than the sales approved by the Commission. The consumer categories whose consumption have been lower than the approved consumption include almost all categories, except in LT Domestic-A category and in HT Industries, Tea, Coffee & Rubber and Oil & Coal categories which are as given in Table 3.1 below. The energy sales of Jeeban Dhara category was only about 40% of the approved sales for The Commission noted that electrification of households under RGGVY is predominantly in hilly rural regions where transportation of material such as pole and conductor is difficult the targeted programme could not be achieved as scheduled. The sales as per actual as furnished by APDCL and approved by the Commission are given in Table 3.1 below. Table 3.1 : Energy Sales FY Sl. No Categories Approved by the Commission in Tariff Order FY Revised estimate submitted for FY (MU) Approved in Truing up for LT Group 1 Jeeban Dhara 0.5 kw & 1 kwh/day Domestic: A above 0.5 kw to 5 kw Domestic: B above 5 kw to 20 kw Commercial load above 0.5 to 20 KW General Load upto 20 KW Public Lighting Agriculture upto 7.5 hp Small Industries Rural upto 20 KW Small Industries Urban LT Total HT Group 11 HT Domestic 20 kw and above HT Commercial 20 kw and above Public water works

24 Sl. No Categories Approved by the Commission in Tariff Order FY Revised estimate submitted for FY Approved in Truing up for Bulk supply 20 kw and above Government Educational Institutions Others HT Small Industries upto 50 KW HT Industries-I 50 KW to 150 KW HT Industries-II above 150 KW Tea & Coffee and Rubber Oil & Coal HT Irrigation load above 7.5 HP HT Total All Total It is submitted by APDCL that Jeevan Dhara (House hold connections to BPL families) under RGGVY program have not come up as anticipated. The Commission approves the energy sales in Truing up for FY at MU as against MU approved in the Tariff Order dated 12 th September, Distribution Losses In the Petition, APDCL has submitted that the Distribution losses during was 27.32% against 25.05% approved by the Commission. Thus, the APDCL has not been able to reduce the loss to the level approved by the commission in its Tariff Order Table 3.2 : Distribution Losses FY S. No Discom Approved in Tariff Order (%) Revised estimate submitted by APDCL for Truing up of (%) Approved by Commission in Truing up (%) 1 LAZ CAZ UAZ APDCL Total The Commission approves the Distribution loss level at % in Truing up for FY and directs the APDCL to make efforts to reduce distribution losses to the level as given in the trajectory by the Commission. 13

25 3.3.3 Energy Requirement APDCL has submitted the energy requirement for FY based on actual sales, distribution loss and transmission loss and PGCIL losses as given in Table 3.3. Table 3.3 : Energy Requirement FY Sl. No. Particulars Unit Approved in Tariff Order Actual as submitted by APDCL for Now approved for Truing up for FY Energy Sales MU Distribution Loss MU % Energy Requirement MU Transmission loss MU % Total Energy Input to Transmission MU system 6 Trading Sales MU Energy Requirement including Trading sales 8 Pool loss in PGCIL system MU % All Total (Power Purchase) MU The Commission approves the energy requirement on distribution loss level at 25.05% which resulted power purchase of MU Power Purchase The Power Purchase approved by the Commission for FY in its Tariff Order dated 12 th September, 2007 and revised power purchase now claimed by APDCL are as given in Table 3.4 below. Table 3.4 : Power Purchase - FY Sl. Sources Energy (MU) Amount (Rs Lakh) No. Approved Actual Approved Actual 1 Central Sector Generators APGCL DLF (IPP) MeSEB Trader Total Loss in PGCIL% on(1) MU Loss Energy Available Trading Sale Energy Available to Discoms Past period cost Total

26 Sl. No. Particulars Approved in Tariff Order (Rs. lakhs) Actual now claimed 1 Power purchase Cost Transmission Costs AEGCL Cost SLDC Charge PGCIL Cost Special Charge on BST for Terminal Benefit Total ASEB Cost Total PP & Transmission Charges (1+3+4) APDCL has claimed special charge as BST for Terminal benefit at Rs lakhs separately, but this is already included in AEGCL charges. Hence not covered by Annual Accounts Power Purchase Cost The Commission had approved the cost of power purchase at Rs crore in the Tariff Order for including transmission, SLDC charges etc. APDCL has submitted revised claim at Rs crore for the Truing up of The cost of power purchase as per Audited Annual Accounts is Rs crore for the year This amount is reduced on pro-rata basis with the approved energy purchase commensurate with the approved distribution loss. The power purchase cost is reduced by Rs crore towards excess purchase of MU due to not achieving the approved distribution loss level. The Commission approves the power purchase cost at Rs crore in the Truing up of Employee cost The Commission had approved the employee cost at Rs crore for the years in the Tariff Order. 15

27 The APDCL has submitted a revised claim for Rs crore in the truing up for in the ARR and Tariff Petition for the control period to The employee cost as per the Audited Annual Accounts for is Rs crore. The Commission approves the employee cost at Rs crore as per the Audited Annual Accounts in the truing up for Repairs and Maintenance (R&M) expenses The Commission had approved the R&M expenses at Rs crore for in the Tariff Order. APDCL has submitted revised claim for Rs crore for based on the Audited Annual Accounts. Since R&M expense is a controllable item, the Commission retains the R&M expenses at Rs crore in the Truing up for as approved in the Tariff Order Administration & General (A&G) expenses The Commission had approved the A&G expenses at Rs crore in the Tariff Order for APDCL has submitted revised claim for Rs crore for against the actual of Rs crore as per Accounts. Since A&G expense is a controllable item, the Commission retains the A&G expenses at Rs crore in Truing up for as approved in the Tariff Order Interest and Finance charges The Commission had approved the interest and finance charges at Rs.1.59 crore for in the Tariff Order. APDCL has submitted revised claim for Rs crore in the truing up for

28 The interest and finance charges as per the Audited Annual Accounts are Rs crore for The Commission has examined the component wise interest charges as per the accounts and allow these charges on bonds, ADB loans and bank charges, discount to consumers for timely payment of bills, bank commission etc.interest on the State Government loans is not considered for calculating interest and finance charges as the utility has not submitted the documentary evidence establishing that the Govt. loans were utilized for creation of assets. The Commission approves the interest and finance charges at Rs crore in the truing up for based on the Audited Annual Accounts Interest on working capital The Commission had approved the interest on working capital at Rs crore in the Tariff Order for APDCL has submitted revised claim at Rs crore for based on Annual Accounts. Table 3.5 : Interest on working capital approved in True up for S.N Particulars Amount ( Rs. crore) 1. One month O&M cost % of GFA Receivable 60 days Working capital Rate of interest 9.50% 6. Interest on working capital The Commission approves the interest on working capital at Rs crore in the truing up for Interest on Security Deposit The Commission had approved the interest on security deposit at Rs crore in the Tariff Order for APDCL has submitted revised claim for Rs crore in the true up for as per Audited Annual Accounts. The Commission, approves the interest on security deposit at Rs crore in the true up for as per the Audited Annual Accounts. 17