Order on. True up for FY , Annual Performance Review for FY & ARR for FY For Uttarakhand Power Corporation Ltd.

Transcription

1 Order on True up for FY , Annual Performance Review for FY & ARR for FY For Uttarakhand Power Corporation Ltd. March 21, 2018 UTTARAKHAND ELECTRICITY REGULATORY COMMISSION Vidyut Niyamak Bhawan, Near I.S.B.T., P.O. Majra, Dehradun

2 Table of Contents 1. Background and Procedural History Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views General Overall Tariff Increase Domestic Tariff Non-Domestic Tariff Tariff Hike Agricultural Tariff Agriculture Allied Activities Industrial Tariff Tariff Hike Time of Day Tariff Load Factor based Tariff Fuel Charge Adjustment Minimum Consumption Guarantee (MCG) Rebate and Incentives Energy Sale Forecast Cost of Supply and Cross Subsidy Continuous Supply Components on ARR and Revenue Power Purchase Cost Return on Equity Operation & Maintenance Expenses Interest and Finance Charges Depreciation Non Tariff Income Consumer Security Deposit Sharing of Gains & Losses Provision for Bad and Doubtful Debts Capital Expenditure Truing-up for Past Years i

3 2.19 Distribution Losses Departmental Employees Tariff for Cane Crushers Metering and Billing Temporary Connections KCC Data Quality of Power Railway Traction Open Access Collection Efficiency Promotion of Renewable Energy Miscellaneous Comments Terms and Conditions for Seasonal Industries (RTS-7) Views of State Advisory Committee: Petitioners s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Impact of Change in Financing from FY to FY Truing-up for FY Sales Distribution Losses Power Purchase Expenses (Including Transmission Charges) Operation and Maintenance (O&M) Expenses Cost of Assets and Financing Capital cost of Original Assets Financing of Capital Cost Provisions for Bad and Doubtful Debts Interest on Working Capital (IoWC) Return on Equity Non Tariff Income Tariff Revenue Sharing of Gains and Losses ARR and Revenue for FY ii

4 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Background Sales Distribution Loss Trajectory Aggregate Revenue Requirement Power Purchase Cost Power Purchase from UJVN Ltd Power Purchase from NHPC Ltd Power Purchase from THDC India Ltd Power Purchase from NTPC Ltd Power Purchase from SJVN Ltd Power Purchase from NPCIL Stations Power Purchase from existing Renewable Energy Sources Power Purchase from Vishnu Prayag HEP and GVK Srinagar (State Royalty Power) Power Purchase from Sasan UMPP Power purchase from State Gas Generating Station Power purchase from Greenko Budhil Hydro Power purchase from upcoming generating stations Energy available from Firm Sources Power Purchase for fulfilling RPO Deficit/ (Surplus) energy Cost of power purchase Cost of Meeting RPO Target Transmission Charges Inter-State Transmission Charges payable to PGCIL Intra-State Transmission Charges payable to PTCUL Transmission Charges SLDC Charges GFA and Additional Capitalisation GFA base for FY and FY Means of Finance Interest and Finance Charges Depreciation iii

5 Operation and Maintenance expenses Employee Expenses R&M Expenses A&G Expenses O&M Expenses Interest on Working Capital Capital required to finance shortfall in collection of current dues Adjustment for security deposits and credit by power suppliers Return on Equity Income Tax Provision for Bad and doubtful debts Non-Tariff Income Adjustment of revenue from Free Power Treatment of past year adjustments Revenue Requirement for FY Revenue at Existing Tariff Revenue Gap for FY at existing Tariff Tariff Rationalisation, Tariff Design and Related Issues Tariff Rationalisation and Tariff Design for FY General Petitioner s Proposals Commission s Views on Tariff Rationalisation Measures Treatment of Revenue Gap Cross Subsidy Category-wise Tariff Design RTS-2: Non-Domestic Tariff RTS-3: Government Public Utilities RTS-4: Private Tube Wells/Pump Setsand Agriculture Allied Activities RTS-5: Industry RTS-6: Mixed Load RTS-7: Railway Traction Revenue for FY Cross Subsidy Open Access Charges iv

6 6. Review of Commercial Performance of UPCL General Consumer Mix during FY & FY Consumption Pattern during FY & FY Revenue Pattern during FY & FY Commission s Analysis and Directions on Commercial Performance Metering Billing Billing and Bill Collection System Energy Audit AT&C Losses Commission s Analysis and Directions on Financial Performance Liquidity Ratio Solvency Ratio Profitability Ratio Operating or Activity Ratio Efficiency Ratio Conclusion Commission s Directives Compliance to the Directives Issued in Tariff Order for FY dated March 29, Performance Report Sales Load Shedding AT&C Losses Power Purchase Quantum and Cost Fixed Assets Register Depreciation Return on Equity Employee Expenses Bad &Doubtful Debts Reliability Indices Voltage wise Cost of Supply Demand Side Management Measures v

7 Issues raised by the Petitioner again despite Commission s ruling in previous Tariff Orders Metering of unmetered connections Interest on GPF Trust Power Purchase Expenses (Including Transmission Charges) Deficit/Surplus Power Status of NA/NR, IDF/ADF/RDF Replacement of Improper, Non-Functional, Stop/Stuck up defective or IDF Meters Replacement of Mechanical Meters Ghost/Fictitious Consumers NB & SB Cases Outstanding Arrears Status of KCC Consumers Status of Revenue realisation per unit sold Billing and Collection System Energy Audit Transfer of Distribution Business from UJVN Ltd. to UPCL (Reference Para of Tariff Order dated ) Departmental Employees Location of Installation of Meters Transfer of Petitioner s Personnel Water Tax Open Access Charges Tariff Hike Collection Efficiency Metering & Billing Construction of 33/11 kv Sub-station LED Distribution Defective Metering Correction Online Load Survey Reports Delay in Fault Rectification Proof of Ownership Tariff Revenue Distribution Loss Trajectory Impact of Seventh Pay Commission vi

8 Prepaid Metering Current Ratio Repair & Maintenance to Inventory Ratio Average Collection Period Fresh Directives Departmental Employees Billing Temporary Connection Collection Efficiency Views of State Advisory Committee Cost of Free Power Depreciation Bad Debt Distribution Loss Impact of VII Pay Commission Additional A&G Expenses Adjustment of Free Power Consumer Mix Conductor Augmentation Inventory Management Collection Efficiency Conclusion Annexures Annexure 1: Rate Schedule Effective from Annexure 2: Schedule of Miscellaneous Charges Annexure 3: Public Notice Annexure 4: List of Respondents Annexure 5: List of Participants in Public Hearings vii

9 List of Tables Table 1.1: Publication of Notice... 5 Table 1.2: Schedule of Hearing... 5 Table 2.1: Details of year wise capital expenditure and improvement in collection (productivity) submitted by the Petitioner Table 2.2: Revised Level of Distribution Loss proposed by the Petitioner Table 3.1: Revised Means of Finance of additional capitalization from FY to FY as claimed by the Petitioner (Rs. Crore) Table 3.2: Impact of change in funding of additional capitalisation from FY to FY as claimed by the Petitioner (Rs. Crore) Table 3.3: Impact of change in funding of additional capitalisation from FY to FY approved by the Commission (Rs. Crore) Table 3.4: Break up of Sales submitted by the Petitioner for FY (MU) Table 3.5: Findings of the Sales audit for FY Table 3.6: Re-casted Sales for Domestic Category for FY (MU) Table 3.7: Departmental Employees of UPCL, PTCUL and UJVN Ltd. as on and as per Commercial Diary Table 3.8: Consumption Pattern of Departmental Employees Table 3.9: Re-casted sales for Other Categories for FY (MU) Table 3.10: Category-wise Sales for FY (MU) Table 3.11: Assessed Distribution losses for FY (MU) Table 3.12: Power Purchase Cost approved in the Tariff Order Vs Actual Power Purchase Cost for FY (Rs. Crore) Table 3.13: Cost of UI Overdrawal approved by the Commission Table 3.14: Details of Cost of Free Power (Rs. Crore) Table 3.15: Power Purchase Cost claimed by UPCL and approved by the Commission for FY (Rs. Crore) Table 3.16: Power Purchase Cost claimed by UPCL and approved by the Commission for FY (Rs. Crore) Table 3.17: Revised Employee Expenses as claimed by the Petitioner (Rs. Crore) Table 3.18: Approved Employee Expenses for FY (Rs. Crore) viii

10 Table 3.19: Approved R&M Expenses for FY (Rs. Crore)...95 Table 3.20: Additional A&G Expenses as claimed by the Petitioner (Rs. Crore)...96 Table 3.21: Operational Cost towards maintenance of Data Centre as submitted by the Petitioner (Rs. Crore)...97 Table 3.22: Additional Cost of A&G Expenses as submitted by the Petitioner (Rs.)...97 Table 3.23: Approved A&G expenses for FY (Rs. Crore)...98 Table 3.24: Approved O&M Expenses for FY (Rs. Crore)...99 Table 3.25: Assets base approved by the Commission (Rs. Crore) Table 3.26: Assets base approved by the Commission for FY (Rs. Crore) Table 3.27: Means of Finance for FY as submitted by the Petitioner (Rs. Crore) Table 3.28: Means of Finance as approved by the Commission for FY (Rs. Crore) Table 3.29: Guarantee Fee claimed by the Petitioner in FY (Rs. Crore) Table 3.30: Basis of computing provisions on account of Guarantee Fee (Rs. Crore) Table 3.31: Interest and Finance Charges for FY (Rs. Crore) Table 3.32: Depreciation approved for FY (Rs. Crore) Table 3.33: Provision for Bad and Doubtful Debts and Actual Write off (Rs. Crore) Table 3.34: Interest on Working Capital for FY (Rs. Crore) Table 3.35: Return on Equity approved by the Commission for FY (Rs. Crore) Table 3.36: Non-tariff Income approved by the Commission for FY (Rs. Crore) Table 3.37: Revenue for FY Corresponding to Assessed Sales Table 3.38: Revenue from Sale of Power for FY (Rs. Crore) Table 3.39: Additional Revenue from Sale due to inefficiency for FY (Rs. Crore) Table 3.40: Sharing of Gains and Losses for FY claimed by the Petitioner (Rs. Crore) Table 3.41: Sharing of Gains on Account of Controllable Factors approved by the Commission for FY (Rs. Crore) Table 3.42: O&M Expenses as Trued up by the Commission for FY (Rs. Crore) Table 3.43: Summary of true up for FY approved by the Commission (Rs. Crore) Table 4.1: Actual Energy sales for consumer categories during FY to FY (MU) Table 4.2: CAGR calculated for Energy Sales to each consumer category Table 4.3: Sales projected by the Petitioner for FY (MU) Table 4.4: Consumer Category wise sales approved by the Commission for FY (MU) ix

11 Table 4.5: Distribution Loss Trajectory approved by the Commission for the second Control Period from FY to FY Table 4.6: Distribution Loss for FY to FY Table 4.7: High Distribution Loss divisions as on Table 4.8: AT&C Loss Target as per UDAY Table 4.9: Distribution Losses for FY Table 4.10: Energy Input requirement approved by the Commission for FY Table 4.11: Power Purchase from UJVN Ltd Table 4.12: Summary of Energy Availability from UJVNL for FY (MU) Table 4.13: Power Purchase from NHPC Ltd Table 4.14: Energy Availability from NHPC Ltd. for FY (MU) Table 4.15: Power Purchase from THDC India Ltd Table 4.16: Energy Availability at State periphery from THDC Ltd. for FY (MU) Table 4.17: Power Purchase from NTPC Ltd Table 4.18: Energy Availability from NTPC Ltd. at State periphery for FY (MU) Table 4.19: Power Purchase from SJVN Ltd Table 4.20: Energy Availability from SJVN Ltd. at State periphery for FY (MU) Table 4.21: Energy Availability from NPCIL at State periphery for FY (MU) Table 4.22: Energy Availability from existing Renewable Energy Sources for FY (MU) Table 4.23: Energy Availability from Vishnu Prayag HEP at State Periphery (State Royalty Power) for FY (MU) Table 4.24: Energy Availability from Sasan UMPP at State periphery for FY (MU) Table 4.25: Energy Availability from State Gas Generating Stations at State periphery for FY (MU) Table 4.26: Energy Availability from Greenko Budhil Hydro at State periphery for FY (MU) Table 4.27: Energy Availability from Upcoming Stations at State periphery for FY (MU). 144 Table 4.28: Energy Availability from Firm Sources at State periphery for FY (MU) Table 4.29: Additional Purchase for fulfilling RPO as claimed for FY Table 4.30: Additional Purchase for fulfilling RPO Table 4.31: Approach of the Commission in estimating the Cost of Power Purchase x

12 Table 4.32: Summary of Free Power Rate for FY Table 4.33: Summary of power purchase cost for FY Table 4.34: Quarterly Power Purchase approved by the Commission for FY Table 4.35: Energy Charges of Thermal Generating Stations for FY Table 4.36: Transmission Charges for FY (Rs. Crore) Table 4.37: Proposed Capital Expenditure and Capitalisation for FY and FY (Rs. Crore) Table 4.38: Actual GFA addition of UPCL (Rs. Crore) Table 4.39: GFA base approved by the Commission for FY (Rs. Crore) Table 4.40: Means of Finance approved by the Commission (Rs. Crore) Table 4.41: Interest on Loan approved by the Commission for FY (Rs. Crore) Table 4.42: Depreciation approved for FY (Rs. Crore) Table 4.43: Status of recruitment as submitted by the Petitioner for FY and FY Table 4.44: Employee Expenses approved by the Commission for FY (Rs. Crore) Table 4.45: R&M Expenses approved by the Commission for FY (Rs. Crore) Table 4.46: Additional Provisioning for Data Centre (Rs. Crore) Table 4.47: A&G Expenses approved by the Commission for FY (Rs. Crore) Table 4.48: O&M Expenses as approved by the Commission for FY (Rs. Crore) Table 4.49: Capital required to finance the shortfall in collection of current dues approved by the Commission Table 4.50: Return on Equity approved by the Commission for FY (Rs. Crore) Table 4.51: Past Year Adjustment approved for FY (Rs. Crore) Table 4.52: Revenue Requirement approved by the Commission for FY (Rs. Crore) Table 4.53: Revenue for FY at existing Tariff (Rs. Crore) Table 4.54: Revenue Gap for FY (Rs. Crore) Table 5.1: Effective Tariff & Cross-subsidy for HT Industry having contracted load 1 kva Table 5.2: Tariff for Domestic Consumers Table 5.3: Concessional Tariff for Snowbound Areas Table 5.4: Tariff for Non-domestic consumers Table 5.5: Tariff for Public Lamps Table 5.6: Tariff for Government Irrigation System xi

13 Table 5.7: Tariff for Public Water Works Table 5.8: Tariff for Private tube Wells/ Pump Sets Table 5.9: Tariff for LT Industries Table 5.10: Existing and Proposed Tariff for HT Industries Table 5.11: Approved Tariff for HT Industry Table 5.12: Tariff for Mixed Load Table 5.13: Tariff for Railway Traction Table 5.14: Summary of Category Wise Projected Revenue Table 5.15: Cross Subsidy at Average Cost of Supply Table 5.16: Cross Subsidy at Approved Tariffs in FY and FY Table 5.17: Wheeling Charges approved for FY Table 6.1: Detail of Substations (S/s) maintained by UPCL as on Table 6.2: Detail of Lines maintained by UPCL as on Table 6.3: Increase in Assets of UPCL in last one year ( to ) Table 6.4: Quantum of Power Traded through Open Access Table 6.5: Revised Formats prescribed by the Commission vide letter dated Table 6.6: Status of Provisional Billing viz. NA/NR/IDF/ADF/RDF Table 6.7: Status of Defective Meters Table 6.8: Status of Unmetered Consumers Table 6.9: Status of Mechanical Meters Table 6.10: Status of Ghost/Fictitious Consumers Table 6.11: Status of NB & SB Cases Table 6.12: Status of Outstanding Arrears Table 6.13: Comparison of Outstanding Arrears (Rs. Crore) Table 6.14: Status of KCC Consumers Table 6.15: Status of Revenue Realisation per unit sold Table 6.16: Status of AT&C Losses of UPCL Table 7.1: Findings of UPCL s Consultant on Sales Audit for FY Table 7.2: Power Purchase for 1 st Quarter of FY as submitted by the Petitioner Table 7.3: Recruitment Status as submitted by the Petitioner Table 7.4: Posts Under-Process as submitted by the Petitioner xii

14 Table 7.5: Posts Under-Process as submitted by the Petitioner Table 7.6: Details of SAIFI, SAIDI & MAIFI for the month of August, Table 7.7: Division-wise Progress of Metering at 33 kv Table 7.8: Status of Distribution of Energy Efficient Equipments Table 7.9: Details of Banking Arrangement done in FY Table 7.10: Details of Advance Banking Table 7.11: Status of Creation of facilities at the collection centers Table 7.12: Division wise Progress of Energy Auditing Table 7.13: Accounting Heads for booking Revenue received under Open Access Table 7.14: Details of payment collected through the Bill Collection Agencies Table 7.15: Status of Distribution of Energy Efficient Equipments Table 7.16: Status of Prepaid Meter installed on monthly basis xiii

15 Before UTTARAKHAND ELECTRICITY REGULATORY COMMISSION Petition No. 49 of 2017 In the Matter of: Petition filed by Uttarakhand Power Corporation Limited for True up for FY , Annual Performance Review for FY and Aggregate Revenue Requirement of FY AND In the Matter of: Uttarakhand Power Corporation Limited Urja Bhawan, Kanwali Road, Dehradun Petitioner Coram Shri Subhash Kumar Chairman Date of Order: March 21, 2018 Section 64(1) read with Section 61 and 62 of the Electricity Act, 2003 (hereinafter referred to as the Act ) requires the Generating Companies and the Licensees to file an application for determination of tariff before the Appropriate Commission in such manner and along with such fee as may be specified by the Appropriate Commission through Regulations. In accordance with the relevant provisions of the Act, the Commission had notified Uttarakhand Electricity Regulatory Commission (Terms and Conditions for Determination of Multi Year Tariff) Regulations, 2015 (hereinafter referred to as UERC Tariff Regulations, 2015 ) for the second Control Period from FY to FY specifying therein terms, conditions and norms of operation for licensees, generating companies and SLDC. The Commission had issued the Uttarakhand Electricity Regulatory Commission 1

16 Order on True-up for FY , APR for FY & ARR for FY Order on approval of Business Plan and Multi Year Tariff dated April 5, 2016 for the Control Period FY to FY In accordance with the provisions of the UERC Tariff Regulations, 2015, the Commission had carried out the Annual Performance Review for FY vide its Order dated March 29, As per the provisions of Regulation 12 of the UERC Tariff Regulations, 2015, UPCL filed a Petition (Petition No. 49 of 2017 and hereinafter referred to as the Petition ), giving details of its revised projections of Aggregate Revenue Requirement (ARR) for FY , based on the true up for FY and Annual Performance Review for FY on November 29, The Petition filed by UPCL had certain infirmities/deficiencies. The Commission, accordingly, vide its letter no. UERC/6/TF-429/17-18/2017/1422 dated December 7, 2017 directed UPCL to rectify these infirmities/deficiencies and to submit certain additional information necessary for admission of the MYT Petition. UPCL vide its letter no. 5033/UPCL/RM/B-19 dated December 15, 2017 submitted most of the information sought by the Commission. Based on the submission dated December 15, 2017 by UPCL, the Commission vide its Order dated December 21, 2017 provisionally admitted the APR Petition, with the condition that UPCL shall furnish any further information/clarifications as deemed necessary by the Commission during the processing of the Petition within the time frame, as may be stipulated by the Commission, failing which the Commission may proceed to dispose of the matter as deemed fit by it based on the information available with it. This Order, accordingly, relates to APR Petition filed by UPCL for true up of FY , APR of FY and ARR of FY and is based on the original as well as all the subsequent submissions made by UPCL during the course of the proceedings. Tariff determination being the most vital function of the Commission, it has been the practice of the Commission to elaborate in detail the procedure and to explain the underlying principles in determination of tariffs. Accordingly, in the present Order also, in line with the past practices, the Commission has tried to detail the procedure and principles followed by it in determining the ARR of the licensee. For the sake of convenience and clarity, this Order has further been divided into following Chapters: 2 Uttarakhand Electricity Regulatory Commission

17 Chapter 1 - Chapter 2 - Chapter 3 - Chapter 4 - Chapter 5 Chapter 6 - Chapter 7 - Background and Procedural History Stakeholders Objections/suggestions, Petitioner s Responses & Commission s Views Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing up for FY Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Tariff Rationalisation, Tariff Design and Related Issues Review of Commercial Performance of UPCL Commission s Directives Uttarakhand Electricity Regulatory Commission 3

18 1. Background and Procedural History In accordance with the provisions of the Uttar Pradesh Reorganization Act, 2000 (Act 29 of 2000), enacted by the Parliament of India on August 25, 2000, the State of Uttaranchal came into existence on November 9, Section 63(4) of the above Reorganization Act allowed the Government of Uttaranchal (hereinafter referred to as GoU or State Government ) to constitute a State Power Corporation at any time after the creation of the State. GoU, accordingly, established the Uttaranchal Power Corporation Limited (UPCL) under the Companies Act, 1956, on February 12, 2001 and entrusted it with the business of transmission and distribution in the State. Subsequently, from April 1, 2001, all works pertaining to the transmission, distribution and retail supply of electricity in the area of Uttaranchal were transferred from UPPCL to UPCL, in accordance with the Memorandum of Understanding dated March 13, 2001, signed between the Governments of Uttaranchal and Uttar Pradesh. On May 31, 2004, GoU first vested all the interests, rights and liabilities related to Power Transmission and Load Despatch of Uttaranchal Power Corporation Limited into itself and, thereafter, re-vested them into a new company, i.e. Power Transmission Corporation of Uttaranchal Limited, now renamed as Power Transmission Corporation of Uttarakhand Limited after change of name of the State. Since then Uttarakhand Power Corporation Ltd. (UPCL) a company wholly owned by the Government of Uttarakhand became the sole distribution licensee engaged in the business of distribution and retail supply of power in the State of Uttarakhand. The Commission vide its Order dated April 05, 2016 issued the Order on approval of Business Plan for UPCL for the second Control Period FY to FY and Tariff for FY Further, the Commission had issued the Tariff Order for FY vide its Order dated March 29, As mentioned earlier also, in accordance with the provisions of the Electricity Act, 2003 and Regulation 12 of the UERC Tariff Regulations, 2015, UPCL was required to submit the APR Petition for determination of its ARR by November 30, UPCL in compliance to the Regulations submitted the APR Petition for True up for FY , Annual Performance Review for FY and Aggregate Revenue Requirement for FY on November 29, The APR Petition was provisionally admitted by the Commission vide its Order dated Uttarakhand Electricity Regulatory Commission 4

19 1. Background and Procedural History December 21, The Commission, through its above Admittance Order dated December 21, 2017, to provide transparency to the process of tariff determination and give all stakeholders an opportunity to submit their objections/suggestions/comments on the proposals of the Distribution Licensee, also directed UPCL to publish the salient features of its proposals in the leading newspapers. The salient features of the proposal were published by the Petitioner in the following newspapers: Table 1.1: Publication of Notice S.No. Newspaper Name Date Of Publication 1. Amar Ujala Dainik Jagran Hindustan Rashtriya Sahara Times of India Hindustan Times Indian Express Through above notice, the stakeholders were requested to submit their objections/suggestions/comments latest by 31 st January, 2018 (copy of the notice is enclosed as Annexure-3). The Commission received in all 41 objections/suggestions/comments in writing on the Petition filed by UPCL. The list of stakeholders who have submitted their objections/suggestions/comments in writing is enclosed as Annexure-4. Further, for direct interaction with all the stakeholders and public at large, the Commission also held public hearings on the proposals filed by the Petitioner at the following places in the State of Uttarakhand. Table 1.2: Schedule of Hearing S. No Place Date 1. Bageshwar February 20, Rudrapur February 21, Rudraprayag February 27, Dehradun February 28, 2018 The list of participants who attended the Public Hearing is enclosed at Annexure-5. The Commission also sent the copies of salient features of tariff petitions to the Members of the State Advisory Committee and the State Government. The salient features of the APR Petition submitted by UPCL were also made available on the website of the Commission, i.e. The Commission also held a meeting with the Members of the Advisory Uttarakhand Electricity Regulatory Commission 5

20 Order on True-up for FY , APR for FY & ARR for FY Committee on March 5, 2018, wherein, detailed deliberations were held with the Members of the Advisory Committee on the various issues linked with the Petition filed by UPCL. The objections/suggestions/comments, as received from the stakeholders through mail/post as well as during the course of public hearing were sent to the Petitioner for its response. All the issues raised by the stakeholders and Petitioner s response and Commission s views thereon are detailed in Chapter 2 of this Order. In this context, it is also to underline that while finalizing this Order, the Commission has, as far as possible, tried to address the issues raised by the stakeholders. Meanwhile, based on the scrutiny of the Petition submitted by UPCL, the Commission vide its letter no. UERC/6/TF-429/17-18/2017/1422 dated December 7, 2017, pointed out certain data gaps in the Petitions and sought following additional information/clarifications from the Petitioner: Audited accounts for FY along with Statutory Auditor s and AG s Audit Report. Submission of duly filled excel formats along with the break-up of actual for H1 (April -September) and estimated for H2 (October March) of FY Details of Bad Debts written off by it. Category-wise revenue billed during FY Actual sales data for FY till September, Status of capital expenditure (both physical and financial) which has been proposed in FY and FY Actual number of new employees employed, employees promoted and employees retired in FY , FY and FY along with the preparedness for the proposed recruitments. Segregated additions of fixed assets into HT and LT works and clearance from the Electrical Inspector for capitalization of various HT/EHT schemes for FY Rationale and necessary government approval behind adjustment of Government revenue from free power to reduce cross subsidy. Category wise load shedding data for FY and FY Existing and proposed category wise cross subsidy. 6 Uttarakhand Electricity Regulatory Commission

21 1. Background and Procedural History Actual interest on Consumer Security Deposit paid to consumers/adjusted in Consumer s bills in FY Basis of considering expected COD for new generating stations. Scheme wise additional capitalisation details matching the same with investment approval accorded by the Commission. Power Purchase Bills for FY and recent bills for FY MTB s till September So as to have better clarity on the data filed by the Petitioner and also to remove inconsistency in the data, a Technical Validation Session (TVS) was also held with the Petitioner s Officers on January 5, 2018, for further deliberations on certain issues related to the Petition filed by UPCL. Minutes of above Technical Validation Session were sent to the Petitioner vide Commission s letter no. UERC/6/TF-429/17-18/2017/1565 dated January 05, 2018, for its response. The Petitioner submitted the replies to the data gaps and clarifications sought during TVS vide its letter no. 5033/UPCL/RM/B-19 dated December 15, 2017, letter no. 189/UPCL/RM/B-19 dated , letter no. 434/UPCL/RM/B-19 dated January 31, The submissions made by UPCL in the Petition as well as additional submissions have been discussed by the Commission at appropriate places in the Tariff Order along with the Commission s views on the same. Uttarakhand Electricity Regulatory Commission 7

22 2. Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views The Commission has received suggestions and objections on UPCL s Petition for True-up for FY , Annual Performance Review of FY and Determination of Annual Revenue Requirement for FY The Commission also obtained responses from UPCL on the comments received from the stakeholders. Since, several issues are common and have been raised by more than one Respondent all the comments have been clubbed issue-wise and summarized below. 2.1 General Stakeholder s Comments Shri Pawan Agarwal of Uttarakhand Steel Manufacturers Association submitted that instead of determining annual tariff, tariffs should be fixed for a period of 3-4 years to increase investment and reduce expenditure in the State. He further submitted that considering the difficult geographical conditions in Uttarakhand, there should be special exemptions for industries operating in the State. Shri Ram Kumar of Mussoorie Hotels Association submitted that the exercise of determining annual tariff is unjust and the tariff should be revised atleast after 5 years. Dr. V.K. Garg submitted that the summary of UPCL, UJVN Ltd., PTCUL and SLDC ARR for FY does not seem consistent with the Capital Expenditure, Cost of Capital, RoE and Rates of Interest being paid on Debt separately for Capital expenditure and Working Capital on Cost side. Shri Amit Joshi submitted that prudence check of each and every component of ARR should be done so that the inefficiencies of UPCL do not pass on to the consumers of the State. Shri Sudhir Goyal submitted that the Petitioner has been subject to a recurring penalty imposed on it by the Commission and this shows the inefficiency of the Petitioner. In this regard, he suggested that the losses incurred because of the inefficiency of UPCL should not be passed on to the consumers. Uttarakhand Electricity Regulatory Commission 8

23 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Petitioner s Reply The Petitioner submitted that the Commission vide its Tariff Order dated approved the ARR excluding power purchase cost for the Control Period FY to FY However, annual tariff determination is necessary in order to estimate the price closer to the actual cost of supply. Further, the Petitioner submitted that in annual Tariff Petitions it has provided a detailed section on revenue from sale of power, actual/proposed capital expenditure, capitalization, depreciation and RoE in line with the UERC Tariff Regulations, Further with regard to penalty imposed on UPCL by the Commission, the Petitioner submitted that no penalty of UPCL has been passed on to the consumers. However, sharing of gains & losses computed as per actual performance as compared to targeted performance are being passed on to the consumers as per provisions of the Regulations Commission s Views As per the provisions of UERC (Terms and Conditions for Determination of Multi Year Tariff) Regulations, 2015, the tariff for the ensuing year is determined every year based on the true up of the ARR of the previous year for which latest audited accounts available and the latest power purchase costs. Further, the tariff is determined on the basis of normative parameters and expenses are only allowed after carrying out due prudence check. 2.2 Overall Tariff Increase Stakeholder s Comments Shri R.K. Singh of Tata Motors Ltd., Shri Munish Talwar of Asahi India Glass Ltd., Shri Pawan Agarwal of Uttarakhand Steel Manufacturers Association, Shri Pankaj Singh Bora of Galwalia Ispat Udyog Pvt. Ltd., Smt. Rashmi Agrawal, Shri Pramod Singh Tomar of PSR Innovations LLP, Shri Shiv Narayan Baluni and Shri Shakeel A Siddiqui submitted that an increase proposed by UPCL in categories like Domestic, Public Water Works, LT & HT Industry and Mixed load along with the hikes proposed by UJVN Ltd. and PTCUL are exorbitant and unjustified. Uttarakhand Electricity Regulatory Commission 9

24 Order on True-up for FY , APR for FY & ARR for FY M/s Hero MotoCorp Ltd. submitted that there has been a hike of 21.2% in power tariff in the last 2.5 years and the Petitioner in the instant Tariff Petition has proposed a further tariff hike of 13.44%, which should not be allowed. Shri Jatinder Kumar of Air Liquide India submitted that the tariff increase for the Industry sector is too steep and shall discourage the industrial sector of the State. He suggested that the revenue gap of Rs. 420 Crore should not be passed on to the consumers immediately to avoid tariff shocks. Shri Naval Duseja of Flex Foods Limited submitted that tariff increase proposed by UPCL for industrial consumers is exorbitant and unjustified. He further submitted that it is not viable to run industry due to tough competition with the tariff hike, and, therefore, any tariff hike would put the industry into further hardships. Shri Sudhir Goyal submitted that UPCL should check for proper solutions to recover its losses instead of increasing tariff every year. He also submitted that UPCL should focus on the issues like distribution losses, electricity theft, unmetered supply of electricity, free power to BPL category, departmental expenses etc Petitioner s Reply The Petitioner submitted that Uttarakhand has the lowest tariff in India and average tariff hike during last four years has been only 5.48%. It further submitted that UPCL is a commercial organization and is required to meet its Annual Revenue Requirement out of the revenue realized from the consumers through electricity tariffs. The revenue deficit for FY has been estimated at Rs Crore for which a tariff hike of 13.44% is required. Further, the Petitioner submitted that it has proposed a tariff hike of 15.63% for domestic category, 12.11% for HT category to meet the revenue gap in FY Commission s Views The Commission is of the view that the overall tariff increase is a function of projected Annual Revenue Requirement for the ensuing year (including impact of truing up of expenses and revenue for previous year) and projected revenue at existing tariffs. The Commission has carried out the detailed scrutiny of ARR for FY and truing up for FY in accordance with the provisions of the relevant Regulations as discussed in subsequent Chapters of the Order. Based on 10 Uttarakhand Electricity Regulatory Commission

25 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views the approved ARR for FY including impact of truing up for FY , the Commission has marginally increased the tariff with respect to tariff for FY approved vide Tariff Order dated to meet the projected revenue gap as discussed in detail in Chapter 5 of the Order. However, as the consumers are currently paying Additional Energy Charge which is effective till 31 st March, 2018, there is no tariff increase if the tariff approved in this Order is compared with the existing tariff approved by the Commission in its Order dated 29 March, 2017 plus AEC being paid by the consumers. 2.3 Domestic Tariff Stakeholder s Comments Shri Vijay Singh Verma of Kisan club requested that UPCL should mention the basis of charging additional electricity surcharge and fixed surcharge on Domestic consumer. He also submitted that in RTS-I category, the energy charges may be enhanced in proper ratio and the fixed charges should be kept same. Shri Joga Singh Mehta submitted that the Petitioner should improve the quality of power instead of hike in tariff. He also submitted that UPCL should charge different tariff for urban and rural people. M/s Shiv Shakti Electricals submitted that the Fixed Charges should only be applicable for consumers whose premises are locked for certain period of time and not on all the consumers. Shri Sudhir Goyal submitted that UPCL should remove the components of fixed and fuel charges from the electricity bills as these components are not applicable to the consumers Petitioner s Reply With regard to the levy of Fixed Charges, the Petitioner submitted that Section 45(3) of the Electricity Act, 2003 mandates for imposition of Fixed Charge in addition to the Energy Charge for electricity supplied. The Petitioner further submitted that total costs of UPCL may be segregated into power purchase cost and other costs. The other cost is about 10% to 15% of the total cost is and fixed in nature. This cost has necessarily to be incurred by UPCL and is not related to the energy consumed, but is related to the contracted load of the consumers. Thus, this cost needs to be recovered through Fixed/Demand Charges. Uttarakhand Electricity Regulatory Commission 11

26 Order on True-up for FY , APR for FY & ARR for FY As regards additional energy surcharge, the Petitioner submitted that Additional Energy Charges (AEC) were imposed in order to meet the additional revenue gap allowed by the Commission in its Review Order dated as pass-through in tariff for FY Commission s Views The Commission appreciates the views expressed by some of the stakeholders. As discussed earlier, based on the projected ARR for FY including the impact of truing up for FY , the Commission has marginally increased the tariff with respect to tariff for FY approved vide Tariff Order dated to meet the projected revenue gap as discussed in detail in Chapter 5 of the Order. However, as the consumers are currently paying Additional Energy Charge which is effective till 31 st March, 2018, there is no tariff increase if the tariff approved in this Order is compared with the existing tariff approved by the Commission in its Order dated 29 March, 2017 plus AEC being paid by the consumers. Further, the Commission has deliberated in detail on the issue of levy of Fixed Charges in Chapter 5 of the Order. Further, continuing with the approach adopted in the previous years, the Commission has attempted to reduce the cross-subsidy while designing the tariffs for various categories as elaborated in Chapter 5 of the Order. 2.4 Non-Domestic Tariff Tariff Hike Stakeholder s Comments Shri Ram Kumar of Mussoorie Hotels Association submitted that the proposed increase in RTS-2 category for consumers having contracted demand above 25 kw from Rs. 5.15/kVAh to Rs. 6.15/kVAh is exorbitant and the consumers should not be burdened for inefficiency of UPCL Petitioner s Reply The Petitioner in response submitted that UPCL is a commercial organization and is required to meet its Annual Revenue Requirement out of the revenue realized from the consumers 12 Uttarakhand Electricity Regulatory Commission

27 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views through electricity tariffs. The revenue deficit for FY has been estimated at Rs Crore for which tariff hike of 13.44% is required Commission s Views As discussed earlier, based on the APR for FY , Revised ARR for FY including impact of truing up for FY , the Commission has marginally increased the tariff with respect to tariff for FY approved vide Tariff Order dated to meet the projected revenue gap as discussed in detail in Chapter 5 of the Order. However, as the consumers are currently paying Additional Energy Charge (AEC) which is effective till 31 st March, 2018, there is no tariff increase if the tariff approved in this Order is compared with the existing tariff approved by the Commission in its Order dated 29 March, 2017 plus AEC being paid by the consumers. Further, continuing with the approach adopted in the previous years, the Commission has attempted to reduce the cross-subsidy while designing the tariffs for various categories as elaborated in Chapter 5 of the Order. 2.5 Agricultural Tariff Stakeholder s Comments Shri Teeka Singh Saini, Shri Kuldeep Singh and some stakeholders submitted that the tariff hike proposed by UPCL is very high and it shall affect the livelihood of farmers and other poor population of the State. They requested the Commission not to allow the hike in tariffs. Shri Vijay Singh Verma submitted that PTW connections supplied power through L.T. networks should either be connected through ABC cable or through HVDS (High Voltage Direct Supply) system. He further submitted that the reading of PTW connection should be taken on monthly basis and billing should be done quarterly. He also submitted that Late Payment Surcharge should be charged after 6 months in case of PTW connections. He further requested the Petitioner to provide the accountability of revenue in case of RDF (Defective Reading) /NA (Not Accessible), NR (Meter Not Read)/IDF (Defective Meter) for PTW connections. Shri Katar Singh, President, Kisan club submitted that UPCL claims to have 100% metering in case of PTW connections, however, timely meter reading, replacement of defective meters and Uttarakhand Electricity Regulatory Commission 13

28 Order on True-up for FY , APR for FY & ARR for FY redressal of grievances is not being done. He further requested the Commission not to increase the tariff for PTW consumers. Shri Jagdish Singh of Bhartiya Kisan Sangh and Shri Sukha Singh, Shri Bulkar Singh Fauji and other stakeholder submitted that the agricultural tariff is already on the higher side and should not be increased. They further submitted that HT poles/lines passing through their agricultural fields are tilted and damage their crops and hence, requested the Commission to insulate the HT lines passing through their fields. They further submitted that no connections below 7.5 HP have been provided by UPCL Petitioner s Reply The Petitioner submitted that all the PTW connections are metered now and field officers have been directed to ensure timely meter reading of such connections as well as replacement of defective meters. The Petitioner further submitted that UPCL is a commercial organization and is required to meet its Annual Revenue Requirement out of the revenue realized from the consumers through electricity tariffs, and, accordingly, it has proposed a tariff hike of 16.85% for PTW category in FY Regarding the issue of no connections below 7.5 HP being released, the Petitioner submitted that it has provided connections as per requirement Commission s Views As discussed earlier, based on APR for FY and Revised ARR for FY including impact of truing up for FY , the Commission has marginally increased the tariff with respect to tariff for FY approved vide Tariff Order dated to meet the projected revenue gap as discussed in detail in Chapter 5 of the Order. However, as the consumers are currently paying Additional Energy Charge (AEC) which is effective till 31 st March, 2018, there is no tariff increase if the tariff approved in this Order is compared with the existing tariff approved by the Commission in its Order dated 29 March, 2017 plus AEC being paid by the consumers. Further, continuing with the approach adopted in previous years, the Commission has attempted to reduce the cross subsidy while designing the tariffs for various categories as 14 Uttarakhand Electricity Regulatory Commission

29 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views elaborated in Chapter 5 of this Order. With regard to meter reading the Commission has issued suitable directions to the Petitioner to reduce provisional billing on the basis of RDF/NA/NR/IDF. 2.6 Agriculture Allied Activities Stakeholder s Comments Shri G. S. Sandhu of Tarai Farm Lands private limited submitted that the farmers involved in fisheries are not getting the benefits of electricity tariff under RTS-4A so far. Therefore, in the interest of promoting fishery activities in Uttarakhand, Shri G. S. Sandhu requested the Commission to include Fishery activity under Agriculture Allied Activities RST-4(A). He further requested the Commission to incorporate aeration, recirculation and storage under the Fishery activity. Dr. Harendra Singh Rawat, Chairman, progressive Dairy Farmer Association has submitted that in Uttarakhand the demand for Milk is higher than that of the current production. The production can only be increased by reducing the expenses. He further submitted that Dairy farming should be included under Agriculture Allied Activities RTS-4(A) in place of Commercial Activity. Dr. R. P. Singh, Tarai foods Limited submitted that Tariff for Mushroom cultivation should not be increased Petitioner s Reply As regards tariff for Fishery activity and dairy farming, the Petitioner submitted that as per the Tariff Order dated April 11, 2015, Rate Schedule RTS-4 pertains to Private Tube Wells/Pumping Sets and such category currently applies for irrigation purposes and for incidental agricultural processes confined to chaff cutter, thrasher, cane crusher and rice huller only. Also Rate Schedule RTS-4A pertains to Agriculture Allied Activities and such category currently applies to supply of power for use in nurseries growing plants/ saplings, polyhouses growing flowers/vegetables and fruits including Mushroom cultivation which doesn t involve any kind of processing of product except for storing and preservation. Therefore, this RTS-4A is not applicable for fishery activities. The Petitioner further submitted that in accordance with Section 61(g) of the Electricity Act, 2003, the tariff should progressively reflect the cost of supply of electricity and also reduce cross Uttarakhand Electricity Regulatory Commission 15

30 Order on True-up for FY , APR for FY & ARR for FY subsidies. As per the existing Tariff Order the Fishery activity and dairy farming is covered under Rate Schedule RTS 7 (Industry) which is the cross-subsidizing category whereas Rate Schedule RTS 4A is cross-subsidized category. In case, fishery activity or dairy farming is covered under Rate Schedule RTS 4A, it will be transferred from cross-subsidizing category to cross-subsidized category which is against the provisions of Electricity Act, Commission s Views The Commission with regard to inclusion of fishery and dairy farming in RTS-4A category is of the view that these activities cannot be included in RTS-4A as RTS-4A is a subsidised category applicable for supply of power for use in nurseries growing plants/saplings, polyhouses growing flowers/vegetables and fruits including Mushroom cultivation which doesn t involve any kind of processing of product except for storing and preservation. In this regard, the Commission would, however, like to clarify as follows: a) As per the current practice, if the domestic consumer has kept any cattles such as cow or buffalo in its residential premises and the milk given by that animal is utilized for self consumption, the tariff applicable for RTS-1 Domestic Category shall be applicable. b) If the small consumers are engaged in dairy farming at their residences and part of the milk given by animals is being sold, then, for such consumers, as per Rate schedule (RTS-1), Domestic Tariff is applicable, provided such consumers have contracted load upto 2 kw and consumption upto 200 kwh/month and who are using some portion of their premises for non domestic purposes. 2.7 Industrial Tariff Tariff Hike Stakeholder s Comments M/s Hero Motocorp. Ltd. submitted that demand charges should not be increased further as it is already high. Shri Munish Talwar of Asahi India Glass Ltd. submitted that it is not viable to run industry due to high cost of doing business and any tariff hike would put the industry into further 16 Uttarakhand Electricity Regulatory Commission

31 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views hardships. He also submitted that the inefficiencies of UPCL should not be passed on as tariff hikes to the consumers. Shri Man Singh of Alps Industries Ltd. submitted that the recent tariff hikes have affected the operation of the textile sector and as the sector is in overall downfall, he has requested to ease their tariff burden with a rebate of Rs 1.00/ unit and 100% exemption from electricity duty for the next 7 years in accordance with Point 9(v) of the Order No. 791/VII-1/40-SIIDCUL/2014 dated December 11, Shri Pramod Singh Tomar of PSR Innovations LLP has submitted that Billing Demand should be 75% of the contracted load. Shri Pawan Agarwal of Uttarakhand Steel Manufacturers Association submitted that the Electricity duty should be completely abolished at least from RTS-7 category consumer. Shri Pawan Agarwal of Uttarakhand Steel Manufacturers Association submitted that the green energy cess levied at Rs. 0.10/unit is an additional burden to electricity duty and should be removed. Shri Sudhir Goyal submitted that after GST implementation, recovery of electricity duty and surcharge is against the Law and creates additional burden on consumers specially when GST on electricity is nill Petitioner s Reply The Petitioner submitted that UPCL is a commercial organization and is required to meet its Annual Revenue Requirement out of the revenue realized from the consumers through electricity tariffs. The revenue deficit for FY has been estimated at Rs Crore for which tariff hike of 13.44% is required. However, it has proposed a tariff hike of 12.11% for HT Industries. As regards 100% electricity duty exemption for textile sector, the Petitioner submitted that in accordance with Section 3 of Uttar Pradesh Electricity (Duty) Act (Uttarakhand adaptation and modification) Order 2001, State Government is empowered to fix the rates of Electricity Duty to be charged from various categories of consumers. Government of Uttarakhand vide its Notification no. 79/I/ (3)/01/2003, dated has fixed these rates applicable w.e.f and accordingly, electricity duty is charged from consumers. As the electricity duty charged from Uttarakhand Electricity Regulatory Commission 17

32 Order on True-up for FY , APR for FY & ARR for FY consumers is payable by the Petitioner to Government of Uttarakhand, therefore, the matter may be taken up with GoU. The Petitioner further submitted that the total cost of UPCL may be segregated into power purchase cost and other cost. The other cost is about 10% to 15% of the total cost and are fixed in nature. For recovery of this fixed cost, billable demand has been decided by the Commission as 80% of the contracted load or actual recorded demand during the month, whichever is higher. Reduction in billable demand from 80% to 75% would reduce the recovery of fixed charges. The Petitioner further submitted that in case demand charges are reduced, the energy charges will have to be increased in order to have the composite tariff equivalent to the cost of supply plus required level of cross subsidy. As regards the transfer of industrial connections, the Petitioner submitted that in case of transfer of electricity connection, the old connection is permanently disconnected and a new connection is released at the new place after depositing connection charges including cost of works required and security deposits Commission s Views As discussed earlier, based on the APR for FY and Revised ARR for FY including impact of truing up for FY , the Commission has marginally increased the tariff with respect to tariff for FY approved vide Tariff Order dated to meet the projected revenue gap as discussed in detail in Chapter 5 of the Order. However, as the consumers are currently paying Additional Energy Charge (AEC) which is effective till 31 st March, 2018, there is no tariff increase if the tariff approved in this Order is compared with the existing tariff approved by the Commission in its Order dated 29 March, 2017 plus AEC being paid by the consumers. Further, continuing with the approach adopted in previous years, the Commission has attempted to reduce the cross subsidy while designing the tariffs for various categories as elaborated in Chapter 5 of the Order. The issue related to Green Cess and Electricity Duty does not fall under the purview of this Commission and may be taken up by the consumers with the State Government. 18 Uttarakhand Electricity Regulatory Commission

33 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views 2.8 Time of Day Tariff Stakeholder s Comments Shri Sanjay Adlakha of Ambashakti Glass India Pvt. Ltd. submitted that the rates to be charged for off peak hours to the peak hours should be of the same ratio. Shri Pawan Agarwal of Uttarakhand Steel Manufacturers Association submitted that the overall peak hours per day is five in case of summer and eight in case of winter. He submitted that all the other States have peak hours of only 4 hours per day charged at 20% higher than the normal tariff, while UPCL charges 50% higher during peak hours. This has led to purchase of economical power through open access during morning peak hours and the power of UPCL is sold at UI market at lower prices. He further submitted that if peak hours are abolished then more industries will buy power from UPCL which in turn will increase the revenue of UPCL Petitioner s Reply The Petitioner submitted that the morning peak hours have been kept only in the winter season, i.e. from October to March of the financial year. The timings of morning peak hours are from 06:00 hrs to 09:30 hrs. Morning peak hours have been imposed due to heating load and reduced generation in winter season, whereas the Air Conditioning load during summer season in the State of Uttarakhand from 06:00 hrs to 09:30 hrs is negligible. Therefore, morning peak hours in winter are required to be continued. The Petitioner further submitted that the objective of introduction of ToD tariff is to minimize the gap between maximum (peak) demand and minimum demand and to bring the peak demand as closer to the average demand as possible. On every reduction of this gap, the generation cost, transmission cost, distribution cost and power cuts will be reduced and the higher demand can be catered from the available capacity. In other words, ToD tariff is very effective tool of demand side management which make possible the optimum utilization of the available capacity of Generation, Transmission and Distribution, resulting in reduction of costs. The benefit of such reduction in cost is passed on to the consumers. With a view to effectively implement the ToD tariff, substantial increase in tariff is required for consumption during peak hours. Uttarakhand Electricity Regulatory Commission 19

34 Order on True-up for FY , APR for FY & ARR for FY The Petitioner further submitted that keeping in view the situation as mentioned above, peak hour charges have been kept at a rate higher than the rate of rebate during off peak hours so that the load during peak hours may be shifted to off peak hours and normal hours. Further, the gap of demand between normal hours and off peak hours is not too high, and therefore, keeping in view the level of this gap, this rebate should not be increased Commission s Views The Commission has analysed the actual daily hourly load curves in the State of Uttarakhand and has found that apparent morning peak demand exist in the State during winter months which exceeds the demand in evening peak. The Commission feels the need for Demand Side Management (DSM) and having ToD tariff as a measure for ensuring curtailment of morning as well as evening peaks. The Commission in the present Order is continuing with the same Peak, Normal and Off-peak hour duration for ToD metering slots. However, as detailed in Chapter 5 of the Order, the Commission has increased the off-peak hour rebate from existing level of 10% to 15% in energy charges Load Factor based Tariff Stakeholder s Comments Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. submitted that in Uttarakhand, HT industries consumes more than 53% of electricity. Most of the prominent industrial active States have defined tariff slab load wise, the cost of service to HT consumer connected at high voltage is much less than the average cost of supply, since the distribution losses are very much less in comparison to low voltage consumers. He proposed that tariff rates should be reversed with lower tariffs for consumption above 40% load factor to promote energy consumption by HT industries who are the maximum contributor of revenue to UPCL. Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry submitted that the existing load factor based tariff, applicable for industries is not rational and deprives the consumer from using power upto his contracted demand at the basic energy rate. The existing load factor based tariff penalizes the industry with incremental consumption within its contracted demand by way of high energy rates on whole of the consumption for load factor below 40% and further higher 20 Uttarakhand Electricity Regulatory Commission

35 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views energy rates for load factor above 40%. Such approach completely ignores the interest of the consumers. He also submitted that the basic calculation for load factor has to be corrected as it takes the billed maximum demand instead of contracted demand. This anomaly can be rectified by revising the formula for calculation of load factor as follows: M/s. BST Textile Mills Pvt. Ltd. submitted that load factor based tariff should be abolished. Shri Pankaj Singh Bora of Galwalia Ispat Udyog Pvt. Ltd. submitted that the Load factor will be calculated on the basis of payable demand in place of demand consumed and tariff should include power factor incentive. Shri RS Yadav of India Glycols Ltd. submitted that the Central Government has recommended lower tariffs for heavy users to encourage electricity consumption as the country is moving from power deficit to power surplus situation, while load factor based tariff was designed for power shortage scenario. They requested the Commission to change this framework. Shri Pawan Agarwal of Uttarakhand Steel Manufacturers Association submitted that the load factor based tariff should be levied till 40% at the lower rate and the costlier tariff should be levied only for the units consumed at load factor greater than 40%. He also submitted that the 40% limit should be increased to 70% to encourage more power consumption by the industrial consumers. If the load factor cannot be increased to 70% then the tariff for higher load factor should be decided based on Telescopic Technique. Shri R. K. Singh of Tata Motors Limited also requested that for HT industries, load factor based tariff limit should be increased to 44% instead of 40% Petitioner s Reply The Petitioner submitted that as per section 62(3) of the Electricity Act, 2003 tariff may be differentiated on the basis of consumers load factor. The Petitioner further submitted that higher energy charges are levied for higher consumption due to the fact that procurement of additional Uttarakhand Electricity Regulatory Commission 21

36 Order on True-up for FY , APR for FY & ARR for FY firm power (marginal power) has higher cost. At higher load factor, demand charges per unit is reduced which is the incentive to the consumer for having higher load factor and average tariff per unit for the consumers having load factor upto 40% and above 40% is maintained at the same level. In case telescopic energy charges are imposed, the rate of higher load factor shall increase accordingly with a view to have a uniform average effective tariff at both the levels of load factors. The Petitioner further submitted that all field officers have been directed to comply with the provisions of the Tariff Orders regarding computation of load factor for open access consumers. The Petitioner also submitted that load factor formula is based on the actual requirement of load of the consumer. In case maximum demand is lower than the contracted load, then maximum demand (actual requirement) is considered. In case maximum demand is higher than the contracted load, contracted load is considered because the consumer has contracted this capacity. As regards RTS-7 HT industry category load factor, the Petitioner submitted that the overall Load Factor of HT Industry is 40% and, therefore, load factor based tariff limit of 40% is logical Commission s Views This issue had been dealt in detail by the Commission in the in-house paper issued during the MYT Order for the second Control Period. Since the marginal cost of power is higher than the average cost of power, therefore, to have cost reflective tariffs, the energy charges should increase with load factor. Further, the Commission has deliberated on this issue in detail in Chapter 5 of the Order. 2.9 Fuel Charge Adjustment Stakeholder s Comments Shri R. K. Singh of Tata Motors Limited submitted that UPCL brings office memo of fuel charges adjustment and additional energy charges in between the months instead of beginning of quarter impacting the power purchase planning and due to this consumers have to pay FCA charges to UPCL that are not planned at the beginning of the month. He further submitted that this results in additional tariff hike of 2.24%. M/s Shiv Shakti Electricals submitted that the fuel Charges should not be charged to the consumers and should be pre-included in the tariff. 22 Uttarakhand Electricity Regulatory Commission

37 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Petitioner s Reply As regards imposition of fuel charge the Petitioner submitted that Section 62(4) of the Electricity Act, 2003 mandates the imposition of Fuel Charge Adjustment for recovery of additional power purchase cost over and above the approved power purchase cost. Accordingly, FCA is being charged by the Petitioner only when the actual power purchase cost in any quarter is more than the approved/considered power purchase cost for that quarter in the Tariff Order Commission s Views The Commission during the tariff proceedings projects the cost of power purchase on the basis of past year variable charges which in turn depends upon the fuel cost. The Commission carries out due diligence while approving the rate of power purchase, however, due to several unforeseen reasons like fuel price increase, change in royalty and tax structure governing fuel prices the variable charges of fuel increases which needs to be passed on to the Petitioner as per the mechanism specified under UERC Tariff Regulations, 2015 in accordance with the provisions of the Act and numerous Judgments of Hon ble ATE in the matter. The Commission in this Order has taken due care that the impact of such increase is mitigated to a large extent by taking suitable rate of increase in variable (fuel) cost Minimum Consumption Guarantee (MCG) Stakeholder s Comments Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry submitted that the Commission in its Tariff Order for FY had abolished MCG from consumers. In the tariff order dated , the Commission had again introduced monthly minimum consumption charge over and above the fixed charges/demand charges for the industrial consumers. This clearly indicates that the industrial consumers are being burdened with an additional charge to compensate the inefficiency of UPCL in ensuring proper meter reading and billing of its consumers. In this regard, he requested the Commission to safeguard the interest of the consumers and not pass on the inefficiencies of the distribution utility to the consumers. He further submitted that the Commission has been increasing fixed charge/demand charge also almost in every tariff order and additionally continuing with the provision of minimum consumption guarantee in the tariff to the Uttarakhand Electricity Regulatory Commission 23

38 Order on True-up for FY , APR for FY & ARR for FY industries on the plea of recovery of fixed cost of the licensee which burdens the consumers and is not justified. Accordingly, he suggested that the Petitioner should be directed to improve its internal mechanisms to ensure prompt meter reading, billing and diligent recovery of the bills. Shri Pankaj Gupta of Industries Association of Uttarakhand submitted that UPCL has not projected revenue receipt on account of MCG. As per the past data, this amount is very low and it causes heavy burden on the consumers paying MCG. In respect of Cross Subsidy to be within the range of target latest by the end of year , tariffs are within ± 20% of the average cost of supply. In case of LT, the Tariff is as high as 100% in some cases being subjected to MCG. MCG would result in wastage of power as the consumer is left with no incentive to save power. As most of the LT industries are paying MCG, this is resulting in unnecessary extra burden on them. It requested that the MCG be removed in the current Tariff fixation Petitioner s Reply The Petitioner submitted that the total cost of UPCL may be segregated into power purchase cost and other costs. The other cost is about 10% to 15% of total cost and fixed in nature. This cost should be recovered through fixed/demand charges. About 40% of total Power Purchase Cost of UPCL is also fixed cost and is borne by UPCL whether or not it draws the power from the respective generating station. UPCL has made its arrangement to supply sufficient power to the consumers but in case the consumer does not consume power, UPCL is required not to draw some power having fixed cost. This fixed cost needs to be recovered from the consumers through Minimum Consumption Guarantee Charges. Minimum Consumption Guarantee has been proposed at very low level of consumption, i.e. at 6.85% load factor for non-domestic category and LT industry category and at 13.70% for HT industry category. In case during certain months, actual consumption is less than MCG, MCG is charged in those months. Any excess of billed consumption over actual consumption or minimum consumption, whichever is higher is adjusted at the end of the financial year Commission s Views The Commission has revisited the issue of levy of MCG in this Tariff Order. For reasons as discussed in Chapter 5 of this Order, the Commission has abolished MCG and the same shall not be applicable to any consumer category from April 01, 2018 onwards. 24 Uttarakhand Electricity Regulatory Commission

39 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views 2.11 Rebate and Incentives Stakeholder s Comments Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. submitted that since many HT consumers are required to pay their monthly bill in advance every month, an incentive of 1% per month on the amount which remains with the licensee at the end of calendar month (excluding security deposit) may be credited to the account of the consumer after adjusting any amount payable to the licensee. He also requested that an incentive for prompt payment at 0.25% of bill amount (excluding arrears, security deposit, meter rent and Government levies, viz. Electricity Duty and Cess) may be given in case the payment is made at least 7 days in advance of the due date of payment where the current month billing amount is equal to or greater than Rs. One Lakh. Shri Pankaj Singh Bora of Galwalia Ispat Udyog Pvt. Ltd. submitted that high voltage rebate should be given on power purchase through Open Access. He further proposed to either increase the voltage rebate from 2.5% to 5% for supply at 33 kv and from 7.5% to 10% for supply at 132 kv as there are minimum losses at such high voltages. Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. suggested that either a separate tariff slab should be defined for HT consumers connected at high voltage or the rebate should be allowed to compensate the tariff cost. He further suggested to increase the voltage rebate to 7.5% for supply at 33 kv and 12% for supply at 132 kv and above. He further suggested that cross subsidies should be eliminated in phased manner instead of being increased every year. Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. submitted that most SERCs provide incentives on higher load factor to HT consumers. If the consumer draws maximum power in the same contract demand, licensee s average power purchase cost and consumer s average tariff will automatically get reduced and therefore the gain on account of reduction on average power purchase cost can be passed on to the consumer through load factor incentive. Higher load factors also result in maximum utilization of transmission and distribution assets, thus resulting in average lower costs for the license. He therefore proposed for a rebate of 5% on normal energy charge for monthly load factor between 65-70% and rebate of 10% on normal energy charge for monthly load factor of 70% and above. Uttarakhand Electricity Regulatory Commission 25

40 Order on True-up for FY , APR for FY & ARR for FY Shri R.S. Yadav of India Glycols Ltd. submitted that the current high voltage rebate for 132 kv should be increased from 7.5% to 13.5% as the line losses in these categories are not more than 2% when compared to the average losses of 15.50%. He further suggested that open access consumers at high voltage should be charged only transmission loss of 2% in place of average distribution loss. M/s BST Textile Mills Pvt. Ltd., submitted that the voltage rebate proposed for 33 kv customers should be increased to 5% from the current rebate of 2.5%. Shri Pramod Singh Tomar of PSR Innovations LLP has submitted that UPCL should also provide rebate to 11 kv connections also. Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry submitted that tariff to the consumers is fixed at average billing rate which consists of demand and energy charges while, rebate is being allowed presently for energy charges only. A few years back, the Commission had been allowing HV rebates in the tariff on rate of charge, i.e. demand and energy charge. In line with the same, he requested to consider the mechanism for allowing HV rebate on rate of charge, i.e. on demand and energy charges in the tariff order. Shri Jatinder Kumar of Air Liquide India submitted that based on the projections of Industrial growth at 1.3% in the State as submitted by the Petitioner, the rebate should be increased by 10% to stimulate Industrial growth Petitioner s Reply The Petitioner submitted that presently, no consumer is required to make advance payment of his electricity dues. The Petitioner also submitted that the rebate for prompt payment may be considered by the Commission at the rate of 0.19% of bill amount (10% annual rate/365 days x 7 days). The Petitioner further submitted that there is no correlation of distribution losses with contracted load and demand charges and, therefore, voltage rebate should not be admissible on demand charges. As regards industrial growth rate, the Petitioner submitted that the reduced growth rate for FY in industrial category has been largely been due to external reasons, i.e. Central Government policies and decisions. Additionally, during first six months of FY , data for 26 Uttarakhand Electricity Regulatory Commission

41 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views energy sales shows revival in sales with an average increase of 4.5% in the current year as compared to six months sale of FY The Petitioner is already making efforts to boost industrial sales. As regards high voltage rebate on open access energy, the Petitioner further submitted that high voltage rebate is admissible on the Energy Charges and no energy charges is payable on the open access energy. In the absence of voltage wise losses, which is a mix of Technical Losses and Commercial Losses, the Distribution Losses are required to be charged on average basis from all categories of consumers as well as open access consumers. The Petitioner further submitted that the tariff of HT consumers (above 75 kw) is determined at base voltage level of 11 kv. In Tariff Order dated April 10, 2014 the high voltage rebate was revised from 1.5% to 2.5% for supply at 33 kv and 5% to 7.5% for supply at 132 kv and above respectively. Accordingly, voltage rebate is admissible for supply at 33 kv level and above Commission s Views The Commission in its Order dated April 10, 2014 considering the requests made by various stakeholders and UPCL s response on the same had modified the provisions of voltage rebate and the Commission feels that the provisions of the prevalent voltage rebate are appropriate. As regards the suggestion for incentive for timely payment, the Commission has already dealt with the matter in its Tariff Order for FY which is being reproduced as under: The Commission finds that consumers already enjoy sufficiently long credit for the supplies made to them. Petitioner has intimated the Commission that even for consumers being billed on monthly basis the time lag between the first day of supply and actual payment is about two months, resulting in interest free credit for an average period of 45 days for the entire billed amount. For consumers being billed once in two months, the interest free credit period works out to around two months. This existing arrangement itself is quite generous and no further concessions seem called for. Allowing consumers rebate for timely payment and booking the cost of it on tariff through expenses incurred, gives no real advantage to consumers and is only an exercise of smart packaging. The Commission has therefore decided to do away with the system of rebate for timely payment of the bills by consumers. The above views of the Commission are relevant even in today s context. Besides, levy of Delayed Payment Surcharge is a mechanism to induce the consumers to pay the bills on time failing which they would be liable to pay surcharges. Uttarakhand Electricity Regulatory Commission 27

42 Order on True-up for FY , APR for FY & ARR for FY As regards the voltage rebate for open access, the Commission agrees with the Petitioner s views that as no energy charges are payable by open access consumers to UPCL and hence, the issue of rebate is not applicable. As regards load factor based tariff for HT industry consumers, the Commission has dealt with this issue in detail in Chapter-5 of the Order Energy Sale Forecast Stakeholder s Comments Shri Amit Joshi submitted that the Petitioner has not clarified whether the sales of MUs made to HT Industrial category has been adjusted for power consumed by the same through open access. He further submitted that percentage growth rate in industrial sales of UPCL have decreased from 6.48% in FY to 1.55% in FY and, therefore, prudent steps should be taken by UPCL to increase sale to industrial consumers for commercial viability of the company. Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry submitted that the Compound Annual Growth Rate (CAGR) over the past 5 years has been considered by UPCL and this may not be a good approach for energy sales during FY and FY due to recent demonetization and consequent recession in the market. He further submitted that UPCL has adopted the similar approach for projection of category-wise connected load and no. of consumers, i.e. adjusted trend analysis method. The assumed growth rate in load of HT industries as 5.83%, LT as 13.09% and for non-domestic as 9.47% for FY cannot be achieved due to recent demonetisation factor Petitioner s Reply As regards the decrease in industrial sales, the Petitioner submitted that decrease in growth rate of industrial sales during FY is mainly due to demonetization factor. It has further submitted that in FY (April to October) the percentage growth in sales to industrial category is 4.11% (from MU in FY to MU in FY ) The Petitioner further submitted that the impact of demonetization was for short term and will not affect the economy in future. In this connection, the Petitioner submitted that the extract of Economic Survey which is as under: 28 Uttarakhand Electricity Regulatory Commission

43 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views We expect real GDP growth to be in the 6.75 to 7.5 percent range in FY Even under this forecast, India would remain the fastest growing major economy in the world. The Petitioner submitted that it has used the adjusted trend analysis method for projecting the category-wise connected load and number of consumers in line with the approach followed by the Commission. In case of HT industries, it has considered a 1% load growth (4 month growth in FY ) over FY Further for LT category, it has considered a 5.85% load growth (3 year CAGR), while for non-domestic category, it has considered a nominal increase of 1% over FY for projecting the load in FY and FY The Petitioner further submitted that for the purpose of projecting the sales for FY and FY , it has also considered a mix of long and medium term trend in energy consumption in conjunction with the growth in connected load and number of consumers along with any recent trend (first four months of FY which show revival in sales for few categories) to estimate future consumption across the consumer categories. Further, the Petitioner in Tariff Petition has also provided detailed explanation for considering the respective growth rates in each category. For RTS-5 (GIS), 10% growth rate has been considered based on the consistently increasing load along with historical trends for sales. Similarly, for LT industry, the growth rate has been considered based on the increase in connected load and y- o-y growth in sales. The Petitioner further submitted that in case of HT, it was observed that although the sales during FY was on the lower side due to recent government policies, the category showed revival during first four months of FY and, hence, a growth rate of 4.5% has been considered Commission s Views The Commission has duly scrutinised and analysed the sales projected by the Petitioner and has approved the category-wise sales based on past trends including recent trends and considering the other factors submitted by the Petitioner and other stakeholders as elaborated in Chapter 4 of this Order. It has been found that the Petitioner has duly adjusted the power drawn under open access by industry consumers while projecting the sales in the said category. The Commission is of the view that for planning purposes, the sales projections should be based on unrestricted sales and, accordingly, the Commission had projected the unrestricted sales. Uttarakhand Electricity Regulatory Commission 29

44 Order on True-up for FY , APR for FY & ARR for FY Cost of Supply and Cross Subsidy Stakeholder s Comments Shri Jatinder Kumar of Air Liquide India submitted that the Cross Subsidy surcharge should be retained at Rs per unit against the proposed hike of Rs per unit Petitioner s Reply The Petitioner submitted that in accordance with Section 42(2) of the Electricity Act, 2003, open access may be allowed only on payment of existing level of cross subsidy by the Consumer. This cross subsidy is derived by reducing the average tariff from the tariff of the subsidizing category. The Petitioner submitted that presently, voltage wise / category wise losses are not available and Category wise Tariff has been calculated on the basis of average cost of supply and permissible level of cross subsidy, which is as per Regulation 91 of the UERC Tariff Regulations, Commission s Views The issue of cross-subsidy surcharge applicable on open access consumers is in accordance with the Electricity Act, 2003 and the Open Access Regulations of the Commission and has been deliberated in Chapter 5 of the Order Continuous Supply Stakeholder s Comments Shri R.S. Yadav of India Glycols Ltd. submitted that the 15% surcharge for continuous supply is very high and should be reduced to 5% as adequate power is available in the State. No other State charges any additional amount for continuous supply except Punjab which charges 10 paise per unit. Accordingly, he suggested that the Petitioner should reduce surcharge so that more consumers may opt for continuous power supply which may result in increase in revenue realization by UPCL. Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. and Shri V.K. Aggarwal of Balaji Action Buildwell submitted that the industries availing continuous power supply are 30 Uttarakhand Electricity Regulatory Commission

45 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views beneficial for the licensee as the utility may enter into a long-term PPA with a power producer. This leads to better power purchase planning and reduction in cost of power purchased for such consumers. Charging premium for continuous power is unjustifiable on account of poor power purchase planning by the utility and, therefore, it was requested to completely remove or reduce the continuous supply charge from the existing level of 15% to 5%. They further submitted that continuous supply surcharge should be made free to the consumers having their connection on 132 kva and connected load of 10 MVA and above. Shri Pravin Ahire of Finolex Cable Limited and Shri Anuj Garg of M/s Carborundum Universal Limited submitted that charging premium for continuous power is unjustifiable and, therefore, it was requested to completely remove continuous supply charge from the existing level of 15%, as adequate power was available in the State. Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. further submitted that in case of power surplus scenario in the State, continuous power 15% needs to be removed and instead UPCL should be penalized for non-delivery of 24 x 7 power to its consumers. Shri Mahesh Sharma of Uttarakhand Industrial Welfare Association submitted that option of continuous supply should be discontinued and if provided should be given with a surcharge of 15%. Shri Jatinder Kumar of Air Liquide India and submitted that the continuous supply charge should be reduced from 15% to 5% Petitioner s Reply As regards continuous power supply surcharge, the Petitioner submitted that Para-8.2.1(1) of Tariff Policy provides that the consumers willing to avail continuous and quality power supply are required to pay a tariff which reflects efficient costs. This is an additional charge (premium) payable by the consumer to have the facility of getting continuous supply of power. These consumers are exempted from load shedding during scheduled/unscheduled power cuts and during restricted hours of the period of restriction of usages approved by the Commission from time to time. However, load shedding required due to emergency break-down / shut-down is imposed on these consumers as and when the situation arises. For the purpose of ensuring continuous supply, the Petitioner is required to incur extra infrastructure cost as well as Uttarakhand Electricity Regulatory Commission 31

46 Order on True-up for FY , APR for FY & ARR for FY arrangement of energy availability at higher cost which cannot be kept below 15% of energy charges. Therefore, the Petitioner submitted that such extra cost is required to be recovered from the consumers availing continuous power supply. The Petitioner further submitted that for the purpose of ensuring continuous supply, UPCL is required to incur extra infrastructure cost as well as arrangement of energy availability at higher cost. Even in case the consumer purchases power through Open Access, UPCL is required to incur this cost and, therefore, recovery of the same is also required on the Open Access Energy consumed. The Petitioner further submitted that continuous supply consumers are exempted from load shedding during scheduled/unscheduled power cuts and during restricted hours of the period of restriction of usages approved by the Commission from time to time. However, load shedding required due to emergency break-down / shut-down is imposed on these consumers as and when the situation arises. Further, UPCL has been making consistent efforts to reduce load shedding. The Petitioner further submitted that load shedding during FY has been less than 1% of the overall energy demand at the State periphery. The load shedding for FY upto February is only MU, which is about 0.25% of overall demand Commission s Views The Commission appreciates genuine suggestions on reduction of continuous supply surcharge rather than complete abolishment as the State is still facing deficit. As discussed in detail in Chapter 5 of this Order, the deficit has reduced as compared to previous years especially in winter months and, therefore, the Commission has decided to reduce the continuous supply surcharge from 15% of energy charges to 10% of energy charges. The Commission will review the same once the aforesaid deficit in UPCL s requirement is completely wiped off Components on ARR and Revenue Power Purchase Cost Stakeholder s Comments Shri Amit Joshi submitted that the power purchase cost has increased due to the cost of Rs Crore towards banking of power returned. In this regard, he further suggested tha tupcl should provide the detail of this amount along with the station-wise quantum. He further 32 Uttarakhand Electricity Regulatory Commission

47 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views submitted that the Petitioner should provide the clarification regarding the compliance of directive for including the amount of Rs Crore as directed by the Commission in Para of the Tariff Order for FY He further submitted that the Petitioner in its main Petition has not provided the station-wise quantum purchase during FY though it is provided in the formats. In this regard, he suggested that the Petitioner should provide such details of station-wise quantum purchase in the main petition of the subsequent filing. With regard to the power purchase projections for FY , Shri Amit Joshi submitted that the Petitioner has projected availability form NTPC plants on the basis of average generation of last 3 years. In this regard, he suggested that projections from NTPC thermal stations should be calculated on the normative PLF as the same depends upon the demand. He further submitted that the Petitioner has projected availability from Koldam HEP on the basis of average generation of FY and FY As the Koldam HEP has been commissioned on July 18, 2015, he suggested that availability from Koldam HEP should be projected on the basis of the design energy. Shri Amit Joshi further submitted that average power purchase cost of UPCL is Rs. 3.60/kWh which seems to be on a higher side even after purchasing major portion from Hydro projects. In this regard, he suggested that UPCL should lower its average purchase cost by measures like deallocating power from costly stations like Gas plants, THDC, Solar, etc. Shri Pawan Agarwal of Uttarakhand Steel Manufacturers Association submitted that the power purchase cost has been proposed high at Rs Crore in FY which is approximately an increase of 10.71% over the power purchase cost in FY This is despite considering the impact of cess and royalty in FY He further submitted that the power procured from co-generation and gas based stations is around Rs. 5.48/unit which seems to be too high considering that cheaper options are available. Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry submitted that there have been instances of allegations in the past on UPCL for purchase of power from outside at higher rates with mutual discussion. Shri Munish Talwar of Asahi India Glass Ltd. submitted that long term contracts/ agreements should be finalized with corporations such as NTPC, NHPC, THDC, UJVNL and SJVNL to control the power purchase cost with the rise of power demand within the State. Uttarakhand Electricity Regulatory Commission 33

48 Order on True-up for FY , APR for FY & ARR for FY Shri Jatinder Kumar of Air Liquide India submitted that UPCL has projected power purchase cost of Rs Crore which is higher by Rs Crore in comparison to FY He further suggested that UPCL should follow merit order dispatch for reducing the Power purchase cost. Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. submitted that UPCL is purchasing electricity at a higher cost and then passing it on to the consumers in the form of higher tariff Petitioner s Reply The Petitioner submitted that variation in power purchase cost is an uncontrollable factor and the UERC Tariff Regulations, 2015 allows for pass-through of impact of uncontrollable factors. The Petitioner s claim of Rs Crore is the actual power purchase cost incurred in FY Therefore, the Petitioner requests the Commission to allow the power purchase cost for FY The Petitioner submitted that the energy requirement for FY is projected as MU. Also, it has made firm power arrangement of MU from Central Sector, MU from UJVN Ltd. and MU from State IPPs. In order to provide quality and uninterrupted power supply to the consumers of the State, it has executed power purchase agreement for 428 MW from gas based generating stations situated in the State. The power of these generating stations is available round the year and no PGCIL charges and losses are payable on this energy. Therefore, the cost of this power is not more than the cost of power as procured from outside the State. Also, the Petitioner further submitted that it has executed a power purchase agreement for 70 MW from hydro generating station situated in Himachal. Keeping in view the surplus power during summer months from the above generating sources, the Petitioner has made an arrangement of banking of 1063 MU. This surplus power shall be given in summer months and will be taken back during winter months. As regards the amount returned in banking of power, the Petitioner submitted that it had procured energy through banking in FY amounting to Rs Crore and made the provision in the Accounts for FY for the same and was not claimed in the ARR for FY The Petitioner further submitted that this energy was returned in FY and, therefore, the cost provided in the Accounts for FY has been claimed in the ARR for FY Uttarakhand Electricity Regulatory Commission

49 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views The Petitioner further submitted that the energy received through banking during FY for Rs Crore were returned during FY and, therefore, there was an increase of Rs Crore towards provision for power purchase during FY The Petitioner further submitted that it had not claimed this provision in the ARR for FY , however, the Commission in its Tariff Order had reduced such amount of Rs Crore from Petitioner s claim and thereafter, in its Order dated allowed the same. The Petitioner further submitted that no claim of power purchase for FY has been made in the ARR and Tariff Petition for FY and, therefore, there was no need to mention the same in the main Petition. As regards the power availability from Koldam HEP, the Petitioner submitted that it has projected the gross units for FY on the basis of average generation of last 3 years in line with the methodology followed by the Commission in Tariff Order for FY In case of Koldam HEP, since the plant was commissioned on July 18, 2015, it has considered the average monthly generation of last 2 years during which the plant was operational. The Petitioner further submitted that it has been making continuous efforts to reduce its overall power purchase cost, and, therefore, all the power purchases are made with the approval of the Commission. The Hydro Power of the State includes cess, royalty and water tax imposed by the State Government. As regards the higher power purchase cost, the Petitioner submitted that the average power purchase cost for FY and FY has been estimated/proposed at Rs. 3.93/kWh and Rs. 4.12/kWh, respectively. Thus, there is an increase of only of 4.83%. In this regard, the Petitioner further submitted that the average rate projected for FY is higher mainly on account of considering the revised tariffs for central generating stations, additional impact of cess and royalty for MB-II and provisional tariffs for upcoming stations. Further, as regards the higher cost of power procurement from co-generating plants, the Petitioner submitted that the power procurement from co-generating plants are considered in order fulfil its RPO obligation. As regards comment on costly power from gas based plant, the Petitioner further submitted that power of these generating stations is available round the year and no PGCIL charges and losses are payable on this energy. Therefore, the cost of this power is not more than the cost of power as procured from outside the State. Uttarakhand Electricity Regulatory Commission 35

50 Order on True-up for FY , APR for FY & ARR for FY The Petitioner further submitted that it follows merit order dispatch for power procurement planning. It saves money on power purchase cost from the data forecasting being done through expert consultant M/s Quenext. The benefit from real-time monitoring of power purchase is being passed onto the consumers in the form of savings in net overall power purchase cost. The Petitioner submitted that all the power purchases are made through a transparent process as specified in the Act, Regulations and Orders approved by the Commission. The Petitioner further submitted that the overall rate of power from NTPC for FY was Rs. 3.19/unit whereas the same rate of FY (upto December) is Rs. 3.38/unit. The Petitioner submitted that there is no reduction in the power purchase rate of NTPC. The Petitioner also submitted that it is very important for a distribution utility to have a right mix of short and long term power. There may be a period when the rate of power from short term market is higher than firm sources. There is no guarantee that the rate in short term market always remains lower as compared to the rate of firm sources. Furthermore, there may be instances when short term power may not be available during certain period. At that time, firm sources of power are the best option. It is always advisable for a Discom to keep more and more power available from firm sources in order to keep the power purchase cost minimal and for the purpose of energy security. The Petitioner further submitted that while taking assumptions for projecting the power purchase cost from new stations, UPCL has tried to be as realistic as possible Commission s Views The issues related to source wise power purchase quantum and costs have been deliberated by the Commission in Chapter 3 and 4 of this Order Return on Equity Stakeholder s Comments Shri Munish Talwar of Asahi India Glass Ltd. submitted that the evaluation criteria to compute calculations of Return on Equity has to be explained as the difference in the values of FY and FY is coming around Rs. 20 Crore. 36 Uttarakhand Electricity Regulatory Commission

51 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Shri Pankaj Gupta of Industries Association of Uttarakhand submitted that UPCL always comes out with new methodologies for calculating Return on Equity inspite of the clear approach provided by the Commission, and, therefore, UPCL has claimed additional RoE of Rs. 28 Crore for the past years. He further requested to calculate Return on Equity in line with the earlier approach of the Commission Petitioner s Reply The Petitioner submitted that return on equity has been calculated in accordance with the UERC Tariff Regulations, The opening equity for FY has been considered based on the closing equity for FY , i.e. Rs Crore. The addition in equity during FY has been considered based on the proposed funding of capitalization in the respective year. Therefore, the opening equity for FY being higher than the opening equity of FY , the RoE computed for FY is higher by approx. Rs. 20 Crore. The Commission for computation of equity invested in creation of capital assets, first considers the amount of loan and grants and thereafter 30% of the balance as equity and remaining amount as normative loan. In this regard, the Petitioner opined that such approach is not correct as there are 30% equity invested in the assets financed through 70% REC Loan/ District and State Plan Loans which is not being considered by the Commission. The Petitioner further submitted that as against approved opening equity of Rs Crore for FY , it has submitted the revised computation of equity as Rs Crore and claimed Rs Crore differential for the period from FY to FY The Commission in its Order dated had directed the Petitioner to reconcile the figures submitted in the previous tariff proceedings with that claimed in the review Petition and submit the same in the next tariff proceedings. In compliance to the directive, the Petitioner submitted break-up of revised financing from FY onwards in the instant Tariff Petition. Accordingly, the Petitioner has requested the Commission to approve the revised submission and approve the return on equity thereby submitted Commission s Views The issue of Return on Equity has been deliberated by the Commission in Chapter 3 and 4 of this Order. Uttarakhand Electricity Regulatory Commission 37

52 Order on True-up for FY , APR for FY & ARR for FY Operation & Maintenance Expenses Stakeholder s Comments Shri Amit Joshi submitted that the Petitioner has claimed an amount of Rs Crore in FY and Rs Crore for FY in A&G expenses towards services of M/s Quenext. In this regard, he submitted that the Petitioner should meet such type of expenses from its reserve & surplus. He further submitted that the average WPI of preceding three years from FY to FY is 0.93% in place of 1.83% and requested to consider the same. He also submitted that the average WPI of preceding three years from FY to FY is (-)0.22% in place of 1.07% and requested the Commission to consider the same for tariff determination for FY Shri Munish Talwar of Asahi India Glass Ltd. submitted that the Repair and Maintenance Cost is escalated by almost 18% with respect to the previous year, which is very high compared to the present market scenario and inflation index. Shri Vikas Jindal of Kumaun Gharwal Chamber of Commerce and Industry has submitted that the Petitioner in its revised submissions for FY has claimed O&M expenses of Rs Crore against actual audited O&M expenses of Rs Crore and this amounts to hike of Rs Crore. Therefore, the basis of such claims and quantum should be thoroughly scrutinized Petitioner s Reply The Petitioner submitted that since the tariff for UPCL is determined on a cost-plus basis, any additional expenditure for improved power procurement planning has to be recovered through tariff. The Petitioner has been able to make significant savings on power purchase cost from data forecasting being done by M/S Quenext, the benefit of which is being passed onto the consumers. As regards the average WPI, the Petitioner submitted that it has considered the average growth in WPI as per the series (FY as base). Further, it has proposed R&M expenses in accordance with Regulation 84(3) of the UERC Tariff Regulations, The Petitioner further submitted that in accordance with the UERC Tariff Regulations, 2015, variation in O&M expenses are controllable factors and, therefore, O&M expenses are allowed on a normative basis and not on actuals. The Petitioner has been able to reduce its actual O&M expenses 38 Uttarakhand Electricity Regulatory Commission

53 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views as against the normative O&M charges allowed to the Petitioner. Such gain has been passed onto the consumers after sharing it as per the methodology laid down in the UERC Tariff Regulations, 2015, thereby reducing the net O&M charges by Rs Crore Commission s Views this Order. The issue of O&M expenses has been deliberated by the Commission in Chapter 3 and 4 of Interest and Finance Charges Stakeholder s Comments Shri Amit Joshi requested the Commission to not allow interest on GPF as part of interest expenses as the same is a statutory liability of the Petitioner. Shri Pawan Agarwal of Uttarakhand Steel Manufacturers Association submitted that inspite of the fact that interest rates in the country are declining every year, UPCL has proposed Rs Crore in FY , Rs Crore in FY and Rs Crore in FY as interest and financing charges. He further submitted that the average rate of interest has been considered as 12.22% which is too high Petitioner s Reply The Petitioner submitted that the Government of Uttarakhand (GOU) in the past has refused to provide support to UPCL on account of interest on GPF. In this regard, the Petitioner requested the Commission to issue suitable advisory to the GOU. Therefore, the Petitioner has requested the Commission to allow interest on GPF since this is a statutory liability of the Petitioner. As regards the higher interest and financing charges, the Petitioner submitted that the rate of interest on new loans is in the range of 11.5%-12.00%. Even though the interest rates in India have declined, there are certain old loans on which the rate of interest are comparatively higher. The weighted average rate of interest at 12.22% considered by the Petitioner is based on the actual interest being paid in FY Uttarakhand Electricity Regulatory Commission 39

54 Order on True-up for FY , APR for FY & ARR for FY Commission s Views The issue of interest charges has been deliberated by the Commission in Chapter 3 and 4 of this Order Depreciation Stakeholder s Comments Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry submitted that UPCL has calculated depreciation on opening and closing values of gross fixed assets (GFA) for FY as Rs Crore against approved depreciation of Rs Crore by the Commission thereby saving Rs Crore over approved Depreciation Petitioner s Reply The Petitioner submitted that it has claimed depreciation in line with the provisions of UERC Tariff Regulations, It has considered the closing GFA for FY as approved by the Commission in Tariff Order dated The rate of depreciation as per audited accounts has been applied on the opening assets for FY after reducing the value of grants and consumer contribution / deposit works Commission s Views The issue of depreciation has been deliberated by the Commission in Chapter 3 and 4 of the Order Non Tariff Income Stakeholder s Comments Shri Amit Joshi has submitted that Petitioner has not considered full rebate/incentive of Rs Crore as shown in the audited accounts. Further, the Commission in its previous Orders had already clarified that full amount of rebate should be considered under NTI in accordance with the ATE Judgment dated May 18, Shri Amit Joshi on the ARR Petition submitted that in non tariff income for FY the Petitioner has not considered delayed payment surcharge by citing the reason of certainty. He further suggested that the same may be considered on the basis of average of last 2-3 years. 40 Uttarakhand Electricity Regulatory Commission

55 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Petitioner s Reply The Petitioner has considered the full amount of rebate/incentive under the non-tariff income after adjusting for the interest on overdraft amount as per the audited accounts in FY The Petitioner further submitted that this has been done as UERC allows interest on working capital on normative basis and amount towards overdraft facility is primarily utilized for the purpose of availing the maximum rebate from the generators, which is working capital management of the Petitioner. Further, the Petitioner submitted that it has not considered delayed payment surcharge since the collection from delayed payment cannot be ascertained for the future with certainty. Further, the Petitioner in Tariff Petition has also provided detailed justification for additional expenditure due to delay in payment by the consumer as under: Additionally, the Petitioner has prayed to the Hon ble Commission not to include delayed payment surcharge as the Working Capital is approved on normative basis as per the normal billing and collection cycle. Therefore, any delay in payment of the electricity bill by the consumer results in additional working capital requirement for the Petitioner. In view of the fact that this additional working capital is deployed by the Petitioner from its internal resources / short-term loans, there is an additional cost which is required to be borne by the Petitioner which is not allowed as per the current regulations. Therefore, the Petitioner has already requested the Hon ble Commission to devise a suitable mechanism for considering the delayed payment surcharge after accounting for the addition financial burden on UPCL on account of the addition in working capital requirement Commission s Views this Order. The issue of non-tariff income has been deliberated by the Commission in Chapter 3 and 4 of 2.16 Consumer Security Deposit Stakeholder s Comments Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. submitted that for HT consumers the security amount is provided by obtaining credit facilities from the banks which are around 11.5% to 12.5% whereas UPCL provides interest on security deposit at a much lesser rates. Uttarakhand Electricity Regulatory Commission 41

56 Order on True-up for FY , APR for FY & ARR for FY UCPL in the ARR has itself shown rate of interest on loans as 11.86%. He further requested to increase the rate of interest on consumer security deposit from 8.5% to 11.5%. M/s. BST Textile Mills Pvt. Ltd. submitted that the rule of security deposit of two months should be changed to maximum of one and a half months at least for consumers paying bills on time. Shri V.K. Aggarwal of Balaji Action Buildwell submitted that the security deposit of two months for industries should be allowed to be furnished by way of bank guarantee to avoid Cash Flow Problems. Shri Mahesh Sharma, Uttarakhand Industrial Welfare Association submitted that although provisions have been made to transfer annual interest on consumer security deposit, no interest is currently being paid. Shri G.D. Madhok submitted that security deposit fee for new connection should be equal to the cost of the meter of about Rs. 350/-, however, UPCL charge the security deposit of Rs. 1000/- to Rs. 1500/-, which is not justified Petitioner s Reply The Petitioner submitted that interest on security deposit is being paid in accordance with the provision of section 47(4) of the Electricity Act, The rate of Interest for FY is 7.75 % p.a. While computing the working capital requirement of the Petitioner, the consumer security deposit is reduced. The Petitioner further submitted that security deposits are received from the consumers to securitize the credit sales made by the DISCOM. In case a consumer defaults in making the payment of his electricity bills, the recovery of such electricity dues may be adjusted from the security deposit of the consumer. Further, the Petitioner submitted that initial security deposit at the time of release of new connection is specified in UERC (Release of new LT Connections, Enhancement and Reduction of Loads) Regulations, 2013, as follows: BPL (Domestic) Consumers : Rs. 100/kW Other Domestic Consumers : Rs. 400/kW Non Domestic Consumers : Rs. 1000/kW 42 Uttarakhand Electricity Regulatory Commission

57 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Industrial Consumers : Rs. 1000/kW Thus, the rate of interest on loans and working capital cannot be compared with interest on security deposits. The Petitioner further submitted that once the supply is drawn by a consumer, the bill is generated after a one month period. In 15 days, the bill is received by the consumer and again 15 days time period is given for payment of bills. Thus, a 2 month period is justifiable and is also in accordance with the UERC Supply Code, As regards the interest on security deposit, the Petitioner further submitted that interest is regularly being paid to the consumers either through adjustment towards additional security deposit or through adjustment towards electricity dues. This interest is paid every year in the month of May and June Commission s Views The Commission agrees with the replies submitted by the Petitioner in this regard Sharing of Gains & Losses Stakeholder s Comments Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry submitted that UPCL has claimed loss-sharing against under-achievement of target for distribution losses as revenue from Consumers. He further requested the Commission to allow the sharing strictly for controllable factors for which the trajectory has been provided by the Commission in line with the Regulations Petitioner s Reply The Petitioner in this regard has already requested the Commission to pass on the net impact of sharing of gains/losses on account of such parameters in the ARR of FY in line with the UERC Tariff Regulations, Commission s Views The issue of the sharing of gains and losses have been deliberated by the Commission in Chapter 3 of the Order while carrying out the truing up for FY Uttarakhand Electricity Regulatory Commission 43

58 Order on True-up for FY , APR for FY & ARR for FY Provision for Bad and Doubtful Debts Stakeholder s Comments Shri Pankaj Gupta of Industries Association of Uttarakhand submitted the following: a. The Commission has not fixed any norm for bad and doubtful debts. b. UPCL has not identified and actually written off bad debts according to a transparent policy approved by the Commission. c. UPCL is trying to move in its own direction without taking into consideration the observations of the Commission on bad and doubtful debts. d. The earlier stand taken by the Commission for bad and doubtful debts should hold good for this year also. Shri Vikas Jindal of Kumaun Gharwal Chamber of Commerce and Industry submitted that the Commission in previous Tariff Orders had disallowed provisioning for bad and doubtful debts claimed by UPCL due to non-utilization and submission of accounts of previously allowed provisions to UPCL and had directed the Petitioner for formulation of policy for identifying and writing off such debts. Further, the Petitioner has claimed bad debts written off of Rs Crore, however, it has not declared any policy so far. He further submitted that claimed amount of Rs Crore is the amount of late payment surcharge waived off by the Petitioner and such write off of late payment surcharge cannot be termed as bad debt. In this regard, he requested the Commission to disallow such claim of Rs Crore and further direct the Petitioner to notify the policy drafted by the Petitioner, if any, for general information of the consumers Petitioner s Reply The Petitioner submitted that Regulation 31 of the UERC Tariff Regulations, 2015 provides that the Commission may allow a provision for Bad and Doubtful Debts at 1% of the estimated Annual Revenue subject to the (i) actual writing off of Bad Debts in previous years (ii) the total amount of such provisioning allowed in the previous years should not exceed 5% of the receivables at the beginning of the year. UPCL at the time of transfer of Assets and Liabilities got a provision for Bad and Doubtful Debts amounting to Rs Crore. UPCL started its functioning w.e.f. November 9, 2011 and the 44 Uttarakhand Electricity Regulatory Commission

59 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Commission so far allowed a provision for Bad and Doubtful Debts of Rs Crore to UPCL for the period upto FY Thus, a total provision allowed by UERC is Rs Crore. The bad debts actually written off amounts to Rs Crore till FY and the balance provision available is Rs Crore Rs Crore = Rs Crore, which is more than 5% of receivables of FY Accordingly, no provision for Bad Debts has been included in the ARR of FY and However, keeping in view the actual Bad Debts Written Off amounting to Rs Crore, UPCL has requested the Commission to allow the Bad Debts Written Off. Further, the Petitioner submitted that it has not claimed the bad debts written off of Rs Crore in the ARR for FY Additionally, as per Commission s directive, the Petitioner has drafted a Policy for provisioning & writing off of Bad and Doubtful Debts which was also enclosed along with the Petition. Accordingly, the Petitioner has requested the Commission to approve this scheme and also authorize it to write off the receivables received under the transfer scheme as per the provisions of the said policy Commission s Views The issue of the provision for Bad & Doubtful debts has been deliberated by the Commission in Chapter 3 and 4 of the Order Capital Expenditure Stakeholder s Comments Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd., Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry submitted that UPCL in its filing of Tariff Petitions proposes capital expenditure on various measures for controlling losses, but it does not provide the target and actual work executed. These measures directly affect the consumers, in way of capital expenditure (loans thereon and interest payment). Accordingly, they requested that comparison of such work undertaken and accomplishment figures be shared with consumers. Shri Munish Talwar of Asahi India Glass Ltd. submitted that capital expenditure during FY is projected to be Rs. 630 Crore and it is proposed to be Rs. 986 Crore during FY Such increase of Rs. 336 Crore in one year is not viable from any aspect. He further submitted that Uttarakhand Electricity Regulatory Commission 45

60 Order on True-up for FY , APR for FY & ARR for FY interstate and intra state transmission charges for FY have been projected to the tune of Rs Crore, which is very high Petitioner s Reply As regards the higher capital expenditure, the Petitioner submitted that it has provided details of scheme-wise capital expenditure proposed to be carried out in the remaining months of FY and FY Since Central Govt. schemes such as R-APDRP, DDUGVY etc. are expected to be completed by the end of FY , therefore, the capitalization in FY is on the higher side. The Petitioner further submitted that the capital expenditure has been proposed to cater continuous and quality supply to the existing and prospective consumers of the State. As regards the higher transmission charges, the Petitioner submitted that transmission charges of Rs Crore for FY is projected on the basis of ARR approved by the Commission for PTCUL and SLDC in MYT Orders dated The Petitioner further submitted that the details of year wise capital expenditure and improvement in collection (productivity) is mentioned herein below: Table 2.1: Details of year wise capital expenditure and improvement in collection (productivity) submitted by the Petitioner Cumulative Capital Increase in per Improvement in Rate of Input Energy Year Investments unit Collection Productivity Return Rs. Crore Rs. MU Rs. Crore % A B C D (B*C) E (D/A) , % , % , % , , % , , % , , % , , % , , % , , % Total % Average Rate of Return on Investments / = 29.77% The Petitioner also submitted that it is clear from the above details that UPCL has earned a healthy return of 29.77% on its investments. The benefit of all the improvement as mentioned herein above has been passed on to the consumers of the State. 46 Uttarakhand Electricity Regulatory Commission

61 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Commission s Views The Commission has duly scrutinised the actual and proposed capitalisation and each and every cost element of APR for FY and Revised ARR for FY in accordance with the provisions of UERC Tariff Regulations, 2015 and the same has been discussed in Chapter 3 and 4 of the Order Truing-up for Past Years Stakeholder s Comments Shri Pankaj Gupta of Industries Association of Uttarakhand submitted that the shortfall in revenue as against the revenue projected by the Commission is mainly due to load shedding on industrial consumers. Industrial consumers pay the highest tariff and they are subject to maximum rostering resulting in shortfall in revenue for UPCL. In other States, rostering of industrial consumers is done as the last measure to maintain grid balance Petitioner s Reply As regards the shortfall in revenue, the Petitioner submitted that the deficit for FY is mainly on account of the fact that expenditure were allowed less than the actual expenditure incurred for the year. Similarly the tariff revenue was considered more than the actual revenue earned by UPCL. The Petitioner further submitted that the deficit of revenue amounting to Rs Crore has been computed and claimed by UPCL. Further, the Petitioner has been making consistent efforts to reduce load shedding. The load shedding during FY has been less than 1% of the overall energy demand at the State periphery. Therefore, during FY the Petitioner has been able to cater to the total energy requirement in the State with a marginal demand-supply gap. The Petitioner submitted that all the information with respect to power purchase cost for FY as specified in the Regulations and as desired by the Commission during this tariff determination exercise has been/is being provided to the Commission for examination at their level. Uttarakhand Electricity Regulatory Commission 47

62 Order on True-up for FY , APR for FY & ARR for FY Commission s Views The Commission has duly scrutinised each and every element of Truing up for FY in accordance with the provisions of UERC (Terms and Conditions for Determination of Tariff) Regulations, 2015 and the same has been discussed in Chapter 3 of this Order Distribution Losses Stakeholder s Comments Shri R.S. Yadav of India Glycols Ltd. submitted that the voltage-wise losses to be arrived at the HT tariff have not been furnished by UPCL till date even after the repeated directions by UERC for the past four years. Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry, Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd., submitted that in almost in all Tariff Orders, the Commission had been directing the licensee to workout the actual voltage- wise, category- wise losses and cost of supply for fixation of category-wise tariffs. However, UPCL has failed to comply with the direction. On this account in the Tariff Orders issued so far, the Commission had been assuming losses at HT level to arrive at the cost of power purchase at HT level for each category getting supply at HT based on the pooled average system losses of the licensee approved by the Commission for the concerned financial year. They requested the Commission to take a serious note of such non-compliance on the part of the UPCL on a repeated basis and fix the tariff for consumer taking HT level losses on a rational basis. Shri Pawan Agarwal of Uttarakhand Steel Manufacturers Association submitted that the reduction of 0.5% proposed by UPCL in distribution losses in FY is too less with new and better technology available to utilities. Shri Munish Talwar of Asahi India Glass Ltd. submitted that open access charges, transmission and distribution Loss charges should not be applicable to consumers connected to High voltage end (132 kv) as losses in EHT Line (132 kv and above) remains negligible. Shri Munish Talwar of Asahi India Glass Ltd. submitted that UPCL should develop more cohesive methods to improve billing, metering and collection efficiency thereby decreasing Distribution losses to much higher values than mentioned. In this regard, he has suggested measure 48 Uttarakhand Electricity Regulatory Commission

63 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views like replacement of mechanical meters with Electronic meters, R-APDRP scheme etc. that will yield positive results. Shri Pankaj Gupta of Industries Association of Uttarakhand submitted that UPCL should be directed to carry out energy audit at Sub-station level and also at the different voltage levels separately so that actual reason of losses can be ascertained. Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry submitted that the Commission had specified a trajectory of loss reduction every year for the utility, but the Petitioner has failed to achieve the targets on year to year basis. Any under-achievement by the distribution utility cannot be passed on to the consumers in tariff. Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. submitted that the distribution losses projected by UPCL are 16.68% against the Commission approved 15%. He requested the Commission to fix the target of 14.50% distribution losses and a meagre 2% loss reduction for the coming year. He further suggested that distribution losses shall be determined for different category consumers separately. Shri R. K. Singh of Tata Motors Limited and Dr. Vijay Dhasmana, Chairman, CII Uttarakhand State council submitted that the distribution losses achieved by UPCL are 16.68% as against 15.00% approved by the Commission. In this regard, he requested the Commission to not allow any tariff hike and direct the Petitioner to improve performance with stringent targets. M/s Hero Motocorp Ltd has submitted that currently the Petitioner imposes distribution loss of 14.75% on the 66 kv and above voltage level to open access consumers connected to PTCUL Transmission System. It has further submitted that as other States do not impose distribution losses in EHT category, the Petitioner in instant Tariff Petition has proposed to increase the distribution loss level to 15.50%. Further, it was submitted that for most of the industries in Uttarakhand tax benefit period is also nearing to end in March, 2018 and the proposed increase will burden the consumer and hence, it requested the Commission to avoid the proposed Tariff hike. M/s Shiv Shakti Electricals submitted that a vigilance team should be made in order to prevent electricity theft. Further, Shri Shiv Narain Baluni of Nehru Colony Residents Welfare Society submitted that the distribution losses / electricity theft should be reduced. Uttarakhand Electricity Regulatory Commission 49

64 Order on True-up for FY , APR for FY & ARR for FY Shri Vijay Singh Verma of Kisan club submitted that UPCL should install meters with modem at line junctions in order to reduce line loss in rural areas. He also submitted that UPCL can save Rs. 100 Crore approximately by reducing its distribution losses by 1%. Also, the industries and agriculture in the State accounts for 60% load and 5% load of electricity, respectively, and, therefore, losses in the State should be minimum. He also suggested that distribution and commercial losses should be submitted separately. Shri Pankaj Gupta of Industries Association of Uttarakhand submitted the following: a. UPCL had been claiming in its Petitions that the Distribution Loss trajectory specified by the Commission is unachievable and unrealistic. The whole focus of the Electricity Act, 2003 was on efficient use of resources and reduction of Distribution Losses which was the most important goal envisaged in the Act. b. In Uttarakhand, the sale of energy to industrial consumers has increased from 28% in FY to 55% in FY Therefore, the loss level should be much lower. It is generally accepted that the losses incurred in the distribution to these industrial consumers cannot be more than 3%-4%. With such lower loss levels of industrial consumers, the overall losses should be much lower than the target level. If the losses at all levels other than industrial consumers are seen, then these losses are actually increasing. c. The Commission had fixed the loss reduction target and directed UPCL to carry out Energy Audit to which UPCL has not complied. UPCL should be directed to carry out Energy Audit at S/s level and also at different voltage levels separately so that the actual reason for losses can be ascertained and action be taken to bring down the losses to target level. d. The Commission should appoint an agency for carrying out the investigation of losses and energy audit. If the HT consumers are consuming more than 50%, whose losses should not be more than 5%-6%, the losses in other categories are more than 45%. This is enough reason for proper investigation under Section 128 of the Electricity Act, e. UPCL should convert their S/s into profit cost centres and any S/s found to be losing money should be subjected to penalties. 50 Uttarakhand Electricity Regulatory Commission

65 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Petitioner s Reply The Petitioner submitted that presently, voltage wise/category wise losses are not available and in accordance with Regulation 91 of the UERC Tariff Regulations, 2015 category wise tariff has been calculated on the basis of average cost of supply and permissible level of cross subsidy. Further, the Petitioner submitted that it is in the process to calculate the voltage wise cost of supply as per the directive of the Commission. Further, in absence of availability of voltage wise losses, which is a mix of technical losses and commercial losses, the distribution losses are required to be charged on average basis from all category of consumers as well as open access consumers. The Petitioner submitted in compliance to the direction of the Commission, the Petitioner had appointed an independent consultant to undertake the energy audit of UPCL and to determine the distribution and AT&C losses for FY As per the report of consultant, the distribution losses are 18.33% for FY as against the 18.01% recorded in the Petitioner s Commercial diary. This is indicative of the actual distribution losses of UPCL for FY The Petitioner submitted that the trajectory of distribution losses fixed by the Commission (for FY :15%, : 14.75% and : 14.50%) is not based on any study and the Commission in its Tariff Order dated had observed as follows: and more so in the absence of any energy audit study and considering the ground realities, the Commission decides not to modify the opening loss for FY Further, the Petitioner conducted energy audit for FY through a consultant that found the distribution losses as 18.33% as against the actual recorded losses of 18.01%. As the recorded distribution losses of UPCL were found very near to actual in the study of energy audit, UPCL requested the Commission to approve/revise the level of Distribution Losses as follows: Table 2.2: Revised Level of Distribution Loss proposed by the Petitioner Years (Actual) Distribution Loss 16.68% 16.00% 15.50% The Petitioner further submitted that it has been consistently making efforts to reduce its distribution losses in the last few years. The distribution losses have been brought down from 18.01% in FY to 16.68% in FY Since reduction below 20% distribution loss levels is extremely difficult, it has proposed a realistic level of Distribution Losses at 16% and 15.50% for FY and FY respectively, considering 0.5% reduction in losses. Uttarakhand Electricity Regulatory Commission 51

66 Order on True-up for FY , APR for FY & ARR for FY The Petitioner further submitted that it has taken following measures in order to reduce losses/curb theft of energy: Vigilance Raids are being conducted and cases are being registered under Section 126 and 135 of Electricity Act, Legal proceedings are being initiated against the person(s) who is found indulging in theft of electricity. Mechanical meters are being replaced by electronic meters. All defective meters are being replaced. AB cable is being laid in theft prone areas. The Petitioner also submitted that it is true that the Commission has fixed Distribution Losses at 14.75% for FY but, these losses have not been fixed keeping in view the existing level of distribution losses of the company. The actual distribution losses for FY are 18.39%, hence, it is practically not possible to achieve the loss level of 14.75% in FY and, therefore, UPCL proposed a realistic level of distribution losses at 16.39% for FY considering 1% reduction in losses in each year Commission s Views The Commission has taken note of the concerns raised by the stakeholders and the initiatives taken by UPCL for reducing the losses. The Commission would like to clarify that though the actual distribution losses are higher, the Commission for the tariff purposes have been considering the distribution loss at the target level approved by the Commission and the same approach has been continued while approving the true-up for FY as discussed in Chapter 3 of the Order. Further, the Commission had considered the loss reduction target for FY as approved in MYT Order dated April 05, 2016 while approving the Revised ARR for FY Departmental Employees Stakeholder s Comments M/s Shiv Shakti Electricals suggested that all departmental employees should be provided with only one electricity connection at anyone place and that connection should be online. 52 Uttarakhand Electricity Regulatory Commission

67 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Shri Vijay Singh Verma of Kisan Club and Shri G.D. Madhok submitted that electricity is given at free of cost to the departmental employees of UPCL, UJVNL, and PTCUL, even to the retired employees, while this rule is not applicable in other departments Petitioner s Reply The Petitioner submitted that employees of UPCL are being given the facility of departmental electricity connection since U.P. State Electricity Board was in existence. Under this facility, a fixed lump-sum amount is charged from the employees according to their designation towards electricity charges for electricity supplied to them. Erstwhile UPSEB was unbundled under the provisions of Uttar Pradesh Electricity Reforms Act, 1999 and Section 23(7) of the said Act provides terms and conditions of service of the personnel shall not be less favourable to the terms and condition which were applicable to them before the transfer. The same spirit has been echoed under first proviso of section 133(2) of the Electricity Act, The benefits for employees/pensioners as provided in section 12(b)(ii) of the Uttar Pradesh Reform Transfer Scheme, 2000 include concessional rate of electricity, which means concession in rate of electricity to the extent it is not inferior to what was existing before 14th January, The rates and charges indicated above for this category are strictly in adherence of the above statutory provisions. As UPCL is the successor entity of UPPCL (formed as a result of unbundling of UPSEB), the above legal provisions are also applicable on it (UPCL). The Petitioner further submitted that as per the prevailing orders, the employees and pensioners of UPCL can have only one departmental electricity connection in their name at the place of posting Commission s Views The Commission has taken note of the submissions of the stakeholders and the Petitioner. The Commission would like to clarify that in the previous Tariff Orders the Commission had not been allowing the impact of concessional supply to departmental consumers including pensioners of UPCL, UJVN Ltd. and PTCUL and has been considering revenue corresponding to the ABR of domestic consumers. The Commission further to streamline the accounting of departmental employee consumers directs the Petitioner to bill all departmental employees consumers on the basis of rates approved for the RTS-1 Domestic Category from April 01, 2018.The Petitioner shall Uttarakhand Electricity Regulatory Commission 53

68 Order on True-up for FY , APR for FY & ARR for FY include the consumption and revenue details of these consumers at the Domestic Tariff Rate in the monthly CS-3 and CS-4 statements. As regards the concession provided to these consumers, the Petitioner is directed to show the same separately as expenses in its accounts Tariff for Cane Crushers Stakeholder s Comments Shri Vijay Singh Verma of Kisan Club requested the Commission to direct UPCL to provide the details of the category under which cane crusher consumers are placed Petitioner s Reply The Petitioner submitted that cane crushers are covered under Rate Schedule RTS-4, if they fulfill the conditions specified in the applicability clause of this Rate Schedule Commission s Views The cane crushers are covered under Rate Schedule RTS-4 as per the terms and conditions provided in the Rate Schedule Metering and Billing Stakeholder s Comments M/s BST Textile Mills suggested to allow atleast 15 days time for online payments after bill generation. He further submitted that UPCL is not providing net bills after adjusting open access refunds. Shri Shiv Narayan Baluni of Nehru Colony Residents Welfare Society requested the Petitioner to provide electricity bills on monthly basis instead of 2 months for domestic consumers as this leads to higher tariff slabs and taxes. He further added that inefficiency of UPCL should not be passed on to the Consumers. M/s Shiv Shakti Electricals submitted that the domestic supply is being utilised for the nondomestic purposes. He further submitted that UPCL should check the IDF/NA meters which are not present at site but their billing is still continued. He also submitted that replacement of defective meter should be done within 7 days. Further, UPCL should take action on government and non- 54 Uttarakhand Electricity Regulatory Commission

69 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views government organizations for default in payment within one or two months, instead of waiting for long. He further submitted that strict action is not being taken against consumers, who do not pay their dues regularly. M/s Shiv Shakti Electricals submitted that cables are not provided by UPCL for new meter connections. In this regard, he requested the Commission to direct the Petitioner to provide list of consumers to whom cables are provided by UPCL. He further suggested that UPCL should increase collection centres with cash counters open till 4 PM for collecting electricity bills and should provide security guard at cash counter and premises of every office well equipped with CCTV cameras. He further submitted that the Petitioner does not properly maintain its electric poles. Shri Vijay Singh Verma of Kisan Club requested the Petitioner to provide the clarification regarding levy of any prepaid meter cost in case of replacement of meter to prepaid meter, even though the security deposit fee for electricity connection is already paid to UPCL. He further suggested that the seal used in meters should be made of reserve metal. Shri Rajesh Singh Makkad and other stakeholders submitted that bills should be presented to consumer after taking proper reading. Further, UPCL should simplify the procedure for transfer of connections. Shri G.D. Madhok requested the Commission to direct UPCL to provide safety measures in order to avoid accidents from short circuits. Also, UPCL should take preventive measures like cutting of trees which are nearby HT and LT lines. Shri Vinay Kumar Saini submitted that due to higher monthly bills for the electricity connections to tube-well and over-head tanks by UPCL, the consumers are not able to pay their bills which leads to disconnection of their supply by UPCL. He further submitted that rural consumers are not even benefitted from various Schemes of GoI and have to drink contaminated water. He further requested the Commission that same tariff should be implemented on the tubewell / over-head connections under National Rural Drinking Water Programme as applicable to the Private Tube wells/ Pumpsets. Shri Ashok Goswami of Shetra Mai Jeevani Ram Sukhdevi Ram Trust submitted that connection no. 374 of his Ashram caters to students, old age persons and females and the same has Uttarakhand Electricity Regulatory Commission 55

70 Order on True-up for FY , APR for FY & ARR for FY remained disconnected for the past 7 years despite paying dues. He further requested the Petitioner to install meters outside the premises of Ashram for connection nos. 375 and 376 of his Ashram. Shri Zail singh Rana,Chairman, Village Danpur and Shri Joga singh Mehta submitted that overhead lines and poles are not firmly erected by UPCL in their village and this may result in accidents Petitioner s Reply As regards additional time for bill payment, the Petitioner submitted that 15 days grace period is being allowed after due date and no delayed payment surcharge is payable if the bill is paid upto the last date of grace period. As regards tariff for drinking water connections, the Petitioner submitted that presently connections released to Swajal Scheme are billed under Rate Schedule RTS 6 (Public Water Works). The tariff of this category is determined very near to the average cost of supply whereas the tariff of PTW category is determined at about 37% of cost of supply. In case Swajal Scheme are covered under Rate Schedule RTS 4 (PTW), then this category will be subsidized which is against the provisions of the Electricity Act, As regards the penalty for delay in payments, the Petitioner submitted that action is being taken against the consumers who are not paying their electricity dues in time. The connections of defaulters are being disconnected and action is being taken against them as per the provisions of the Uttarakhand (U.P. Government Electricity Undertakings (Dues Recovery) Act, 1958) Adaptation and Modification Order, Further, with regards to misuse of domestic connections, the Petitioner submitted that vigilance raids are being conducted by field units as well as vigilance cell and action is taken against such consumers. As regards maintenance of meters, the Petitioner further submitted that UPCL is taking suitable action against such complaints received from the consumers. Such connections are being identified and fictitious arrears are being written off after preparation of final account of the consumer. The release of new connections is being done as per the provisions of the Regulations. As regards collection centres, the Petitioner submitted that UPCL is making efforts to increase the number of collection centres and has also made arrangements for online payments for 56 Uttarakhand Electricity Regulatory Commission

71 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views consumers. The Petitioner has also made arrangement with M/s CSC to accept the payment of electricity bills at their counters located at various locations of the State. Further, officers at various levels have been authorized to sanction the payment in instalments. With regards to collection of dues from government organizations, the Petitioner submitted that in such cases arrears are regularly being recovered from government organisations. In this regard, the Petitioner further submitted that it has recovered Rs Crore and Rs Crore in FY and FY , respectively from such government organisations. Also, prepaid metering has been made mandatory for new temporary/government connections upto 25 kw. Further, the Petitioner has considered the suggestion of billing to domestic consumers on monthly basis. With regard to the contention raised by Ashram, the Petitioner submitted that Ashram should contact the Executive Engineer, Electricity Distribution Division, Rishikesh for redressal of the specified grievance Commission s Views The Commission has taken note of various suggestions received from the stakeholders regarding improvement in metering and billing and the Commission directs UPCL to consider the suggestions given by the stakeholders to improve its metering and billing system. Further, with regard to the suggestion to provide electricity bills on monthly basis instead of 2 months for domestic consumers, UPCL is directed to explore this option atleast in urban areas which will not only improve its financial position but also will aid in proper identifying cases of NA/NR/IDF/ADF etc. and will provide relief to the consumers also and submit its report in the matter within 3 months of the date of the Order. With regard to the comment seeking agricultural tariff to tubewells/over-head connections under National Rural Drinking Water Programme, the Commission is of the view that agricultural tariff (RTS-4 and RTS-4A) is for irrigation purposes and not for drinking water which is covered under RTS-6 of the existing Rate Schedule. It will also not be logical to compare two different categories where purpose of use of electricity is entirely different. It will also be difficult for the Commision to design the tariff so as to address the individual needs of each and every consumer. Tariff is designed based on the nature and purpose for which the supply of electricity is required. Uttarakhand Electricity Regulatory Commission 57

72 Order on True-up for FY , APR for FY & ARR for FY Temporary Connections Stakeholder s Comment Shri Ashok Goswami of Shetra Mai Jeevani Ram Sukhdevi Ram Trust suggested that UPCL should impose a penalty of Rs. 10,000/- for not taking temporary connections for functions like marriage ceremony etc. M/s Shiv Shakti Electricals submitted that the temporary connections issued for functions like marriages, ceremonies and other similar purposes are not issued properly and are sometimes irregular connections. He further suggested that that there should be proper reading on monthly basis for Temporary connections Petitioner s Reply With regard to misuse of domestic connections, the Petitioner submitted that vigilance raids are being conducted by field units as well as vigilance cell and action is taken against such consumers Commission s Views The Commission directs the Petitioner to issue instructions to its field/ distribution division officers to issue the proper temporary connections with prepaid meters for functions like marriages, ceremonies and other similar purposes and should not provide any illegal connection KCC Data Stakeholder s Comments Shri Pankaj Gupta of Industries Association of Uttarakhand submitted that although UPCL has done good job in compiling data in KCC cell, enough benefit is not being derived from scrutiny of this data. He suggested that the Commission may set up one cell either in its office or in UPCL for scrutiny of this data. This cell should be independent and should not be reporting to UPCL. The formation of this cell would help in proper diagnostics of UPCL at division level. 58 Uttarakhand Electricity Regulatory Commission

73 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Petitioner s Reply The Petitioner submitted that it has covered all the industrial consumers having load above 5 kw and non-domestic consumers having load above 10 kw under KCC billing. The MRI report and billing of the HT consumers are being checked at Corporate Office on regular basis. Corrective actions are being taken on the irregularities found in the checking of the metering system and billing of these consumers Commission s Views As regards the suggestion for scrutiny of KCC data, the Commission directs UPCL to constitute a cell in its commercial wing for analysis and monitoring of KCC data including low load factor cases, meter tamper cases etc. The Commission directs UPCL to submit the report on analysis and monitoring of KCC data on monthly basis by 15th of every month Quality of Power Stakeholder s Comments M/s. BST Textile Mills Pvt. Ltd. and Shri Mahesh Sharma of Uttarakhand Industrial Welfare Association submitted that night shift power breakdowns should be attended in night itself in minimum possible time. Shri Pankaj Gupta of Industries Association of Uttarakhand submitted that the issues like voltage variations amongst different phases, low voltage, high voltage, frequent breakdowns etc. have become a common practice. The Commission should give clear directions to UPCL for improvement in quality of supply. Shri Zail Singh Rana, Chairman Danpur village submitted that there is no power supply in Vacham village, but only poles and sub-station are installed. Also, he submitted that officers of UPCL have denied giving receipts of the payment made towards electricity bills in other villages of District Bageshwar. Shri Pratap Singh Garia submitted that many electronic equipment gets damaged because of faults at high voltage due to negligence of UPCL. Uttarakhand Electricity Regulatory Commission 59

74 Order on True-up for FY , APR for FY & ARR for FY Petitioner s Reply The Petitioner submitted that efforts are regularly made by UPCL for improvement in quality of power. The demand of electricity has increased to about four times from the date of creation of the State and UPCL is meeting the demand of electricity to the satisfaction of the consumers. In the whole State, average supply of electricity in a day is between hours Commission s Views The Commission has taken note of concerns raised by the stakeholders and directs UPCL to take adequate steps to improve the quality of supply. In this regard, the Commission would like to clarify that UPCL s complaint handling procedures have been approved by the Commission and are available on the website of the UPCL/Commission which, interalia, provides computerised logging of complaints followed by status feedback to the complainant in his mobile/phone. If the complaints are not resolved by UPCL internally, the consumers can also lodge their complaints with the Consumer Grievance Redressal Forum functional in the respective Garhwal and Kumaon Zones of Uttarakhand Railway Traction Stakeholder s Comments Shri Sudhanshu Krishna Dubey, Chief Electrical Distribution Engineer of Northern Railways submitted that the tariff increase proposed by UPCL is the highest among all the consumers of UPCL, even more than HT Consumers. He further submitted that Railways have been making timely payment, drawing uninterrupted uniform supply day and night, contributing negligible technical and commercial losses, etc. and hence, the tariff for Railways should not be increased and should be commensurate with the average cost of supply. He further submitted that the overall revenue gap estimated by UPCL for FY is Rs Crore and, accordingly, average tariff hike of 13.44% has been proposed to cover this revenue gap. In this regard, he suggested that this revenue gap should be supported by Government subsidy, not by FCA (Fuel Consumption) and tariff of railways should not be increased. 60 Uttarakhand Electricity Regulatory Commission

75 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views He also submitted that UPCL should work out category wise cost of supply and then link the tariff with that cost of supply and should gradually reduce the cross subsidy as per provision of National Tariff Policy. He further submitted that in Rajasthan, Railways is exempted from payment of ACD/ Security Deposit. In West Bengal, there is no provision for ACD/Security Deposit. He further submitted that in Uttar Pradesh, UPPCL has agreed for payment of ACD/Consumption Security through Bank Guarantee above Rs. 30 Lakh. Further, in Maharashtra, Railways is depositing Security Deposit in the shape of letter of guarantee from RBI instead of cash to DISCOM. Accordingly, he suggested that Railways may be exempted from payment of ACD/security deposit and if not then Railways may be allowed the payment in form of Letter of assurance from RBI. He also submitted that in case of incoming supply failures, Railway have to extend the feed of Roorkee/TSS being fed by UPCL in the feeding zone of failed TSS being fed by HVPN/UPPCL and have to pay load violation charges for exceeding the sanctioned contract demand for the circumstances, whenever there is supply failure from HVPN/UPPCL till such time the supply failure persists. Further, he submitted that railways take supply from UPCL for traction purpose at 220 kv at Roorkee/TSS. Railways have to pay load violation charges on exceeding the sanctioned contracted demand. As regards metering, he submitted that as per Regulation 7(b)-I of the Central Electricity Authority (Installation and Operation of Meters) Regulation 2006, the consumer meter shall be installed by the licensee either at consumer premises or outside the consumer premises. In case of railway traction consumer premises is Railway traction sub-station. Therefore, meters should be installed on the railway traction sub-station instead of grid sub-station of UPCL. He also requested to consider the provision of simultaneous maximum demand of all adjacent metering points and also of making single agreement for all adjacent supply points for future Railway Traction substations in Uttarakhand. He suggested that for Demand Charges, the Billing Demand should be 65% of the contract demand or recorded demand during the month, whichever is higher for traction load as in Uttar Pradesh. He further suggested that some incentives on timely payment, online payment etc. may be considered for Railways. Also, for leading power factor load the energy charges are taken on kw Uttarakhand Electricity Regulatory Commission 61

76 Order on True-up for FY , APR for FY & ARR for FY and not on kva. He also requested rebate for availing supply at Voltage higher/lower that base voltage should be given on sale of Power instead of Energy Charges on Railway Traction Category. Further, Northern railways for domestic consumers suggested that minimum time should be fixed for Release/ Enhancement of the Connections. He further suggested that no meter testing charge should be levied on New Connections or the Enhancement of the Connections. The proposed Tariff increase may be kept minimum for Railways, Domestic and Non-Domestic category of consumers Petitioner s Reply The Petitioner submitted that UPCL is a commercial organization and is required to meet its Annual Revenue Requirement out of the revenue realized from the consumers through electricity tariffs. To recover the revenue deficit of Rs Crore for FY , the Petitioner has proposed 16.77% increase in the Tariff for Railway Traction. The Petitioner submitted that presently, voltage wise / category wise losses are not available and category wise tariff has been calculated on the basis of average cost of supply and permissible level of cross subsidy, which is as per Regulation 91 of the UERC Tariff Regulations, Further the Petitioner has submitted that UPCL is in process to calculate the voltage wise cost of supply as per directive of the Commission. As regards the Cross-subsidy, the Petitioner, in this Tariff Petition has proposed the tariffs so that the cross-subsidy for subsidized categories can be phased out gradually to reduce the burden on subsidizing categories such as railways in the long run. As regards the billing demand to be kept at 65%, the Petitioner submitted that about 80% of UPCL s cost is fixed in nature while recovery from fixed charges is about 15% and, therefore, reduction in billable demand from 80% to 65% would further reduce the recovery of fixed charges which should be avoided in a mandate of two part tariff. Further, in case demand charges are reduced, the energy charges will have to be increased in order to have the composite tariff equivalent to the cost of supply plus required level of cross subsidy. Regarding installation of meters, the Petitioner submitted that Regulation 2(2)(a) of the Central Electricity Authority (Installation and Operation of Meters) Amendment Regulations, 2010 provides that the consumer meter shall be installed by the distribution licensee either at the 62 Uttarakhand Electricity Regulatory Commission

77 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views consumer premises or outside the consumer premises. UPCL has installed the consumer meter at Grid substation, i.e. outside the consumer premises. This is as per the provisions of Law. The Petitioner further submitted that as per the existing Rate Schedule, in case of consumers where electronic meters with MDI have been installed, if the maximum demand recorded in any month exceeds the contracted load/demand, such excess load/demand shall be levied twice the normal rate of fixed/demand charge as applicable. Further, the load violation charges are based on the fact that UPCL is also required to pay UI Charges for drawing power more than scheduled power. These UI Charges are normally higher than the average cost of power. As regards incentives of timely payment, the Petitioner submitted that it is required to recover its cost of supply through tariff, i.e. energy charges and demand charges. In case, timely payment rebate is given, there will be increase in tariff. Further, the Petitioner submitted that since UPCL has separate contract agreements for supply for traction purpose at 220 kv and 132 kv at Roorkee and Jwalaur/TSS, metering of simultaneous maximum demand is not feasible. Further, since peak load violation affects the UPCL s ability to supply to nearby area, therefore, a single agreement for all adjacent supply points is also not feasible. On the issue of Security deposits, the Petitioner submitted that the Security deposit received from the consumers is to securitize the credit sales made by the DISCOM. In case a consumer defaults in making the payment of his electricity bills, the recovery of such electricity dues may be made by adjusting the security deposit of the consumer. As per Section 47(4) of the Electricity Act, 2003, the Distribution Licensee is required to pay interest on the security deposit. Interest on security deposit cannot be paid on the money held with UPCL as Bank Guarantee / Letter of Credit, hence, the security deposits should only be in the form of cash / bank draft. The Petitioner further submitted that the tariff is determined at a certain voltage level and the consumers connected at higher voltage level contribute less distribution losses and, therefore, are entitled for voltage rebate. As there is no relation of distribution losses with contracted load and demand charges, voltage rebate should not be admissible on demand charges and it should be admissible only on energy charges. The apparent power is the power which is supplied from the source whereas the real power is consumed by the Load. In both the cases of leading power factor Uttarakhand Electricity Regulatory Commission 63

78 Order on True-up for FY , APR for FY & ARR for FY and lagging power factor less than 1, the real power is less than the apparent power and the apparent power should be charged from the consumers depending upon the nature and use of load. The Petitioner with regard to general electric supply submitted that as per the existing Tariff Order no meter testing charges are payable for new connections. Further, the Petitioner submitted that the procedure and conditions for enhancement of load is specified in the UERC (Release of New HT & EHT Connections, Enhancement and Reduction of Loads) Regulations, Commission s Views The reply of the Petitioner on cross-subsidy, security deposit etc. is in accordance with the provisions of the Act, CEA Regulations, and Orders of the Commission. However, with respect to tariff hike as discussed earlier, based on the approved ARR for FY including impact of truing up for FY , the Commission has marginally increased the tariff with respect to tariff for FY approved vide Tariff Order dated to meet the projected revenue gap as discussed in detail in Chapter 5 of the Order. However, as the consumers are currently paying Additional Energy Charge (AEC) which is effective till 31 st March, 2018, there is no tariff increase if the tariff approved in this Order is compared with the existing tariff approved by the Commission in its Order dated 29 March, 2017 plus AEC being paid by the consumers. Further, continuing with the approach adopted in previous years, the Commission has attempted to reduce the cross-subsidy while designing the tariffs for various categories as elaborated in Chapter 5 of the Order. As regards the reduction in billing demand for levying the demand charges, the Commission find the current provision of billing demand as 80% of the contract demand or recorded demand during the month, whichever is higher, as appropriate and does not find any reason to modify the same Open Access Stakeholder s Comments Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. and Shri Munish Talwar of Asahi India Glass Ltd. submitted that in spite of demand exceeding supply of power in Uttarakhand, the open access power purchase is not supported in the State. Open Access consumers are heavily charged with 15% distribution losses and 15% additional surcharge for continuous 64 Uttarakhand Electricity Regulatory Commission

79 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views power. The overall charges applicable for open access make it unviable to purchase power under open access. Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. also submitted that there is no system for adjustments of open access units consumed at the time of billing. Consumers have to follow up for rectification of the same. Also, there are no clear cut guidelines to the staff for adjustment of the same which creates the confusion. He further submitted that compensation is allowed by UERC in case of open access is not availed due to breakdowns, however, the consumers do not get compensation inspite of repetitive reminders on account of UPCL. Shri Shakeel A Siddiqui of Kashi Vishwanath Textile Mill Pvt. Ltd. further submitted that SLDC normally gives NOC on last date to procure open access power. In this regard, there needs to be a schedule by which NOC is to be given eg. latest by 10 th of every month. He further submitted that load survey reports should be available to all HT consumers by 5 th of next month so that they are able to monitor their consumption of electricity slab wise. He further requested to reduce the cross subsidy surcharge by 25%, transmission losses by 25% and distribution losses by 75% since line losses in HT consumers is hardly 1-2%. Shri R. K Singh of Tata Motors Ltd. and Dr. Vijay Dhasmana, Chairman, CII Uttarakhand State council has submitted that Open access consumers have to obtain No Objection Certificate (NOC) from SLDC every month. In this regard, they requested the Commission to review it and allow consumer to obtain NoC on quarterly basis. This will reduce processing time of NOC issuance and encourage consumers to avail power from open market. M/s. BST Textile Mills Pvt. Ltd. submitted that wheeling charges on power purchased from open access should be removed as it is already paying the demand charges. It also submitted that the adjustment of power purchased through open access is done manually by UPCL in the monthly bill. Shri R.S. Yadav of India Glycols Ltd., Ms. Shruti Bhatia of India Energy Exchange Limited, Shri Jatinder Kumar of Air Liquide India and Shri Pankaj Singh Bora of Galwalia Ispat Udyog Private Limited submitted that UPCL has proposed additional surcharge of Rs. 1.42/kVAh on Open Access in order to increase its profitability and discourage Open Access, and, therefore, the same is unjustified. They further submitted that UPCL has not given any justification for the stranded/unutilized power through Open Access. They further suggested that as only few States Uttarakhand Electricity Regulatory Commission 65

80 Order on True-up for FY , APR for FY & ARR for FY impose additional surcharge and most of the States do not have provision for the same, therefore, additional surcharge should not be imposed. Shri Pramod Singh Tomar of PSR Innovations LLP has submitted that the Additional Energy charge is levied only to recover the revenue loss of UPCL for FY He further requested the Commission not to charge any further AEC. Shri Jatinder Kumar of Air Liquide India submitted that levying additional surcharge by UPCL is unjustified. He further suggested that additional surcharge may be considered only when UPCL have demonstrated surplus situation for two years continuously Petitioner s Reply The Petitioner in its Tariff Petition for FY has proposed a low tariff hike for industrial consumers to gradually phase out the cross subsidy. Further, the Petitioner has considered intra-state transmission losses as that approved by the Commission for the respective years. In case of inter-state transmission losses, the Petitioner has compiled station-wise actual losses in FY and considered the same for its projections. The Petitioner submitted that Wheeling Charges is the sum of all expenses of UPCL other than power purchase expenses and Transmission charges. As the demand charges has been kept less than the required wheeling charges, the differential of required wheeling charges and demand charges is also payable as wheeling charges by the embedded open access consumers. The Petitioner submitted that the current open access consumers with UPCL are of embedded nature, who buys power from UPCL as well as through open access as per their financial suitability. However, in case these open access consumers choose to buy power from UPCL in place of open access, then the Petitioner is required to supply power to them as per their contracted capacity with it. Accordingly, the Petitioner is required to have an arrangement of power sufficient to meet the requirement of these open access Consumers including the quantum which they were buying earlier through open access. In case any Consumer goes for open access, then the Power Purchase commitments of the Petitioner becomes stranded and, therefore, the open access consumers are required to bear fixed component of power purchase cost of the Petitioner. The Petitioner further submitted that absence of suitable additional surcharge levied to the open access consumer would result in undue burdening on the other consumers of the licensee. Further, cross 66 Uttarakhand Electricity Regulatory Commission

81 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views subsidy surcharge has been proposed equivalent to the difference of tariff of this category and average tariff. The Petitioner submitted that presently open access energy is being adjusted manually by the distribution divisions in the next month of the transactions. However, the Petitioner is in process to update its billing software to adjust the Open Access Energy in the consumer bill and this shall be implemented in due course of time. The Petitioner further submitted that all the field officers have been instructed to comply with the provisions of the UERC Regulations, 2015, however, in case of dispute on any subject, they are required to take up the case with appropriate Forum/ Court. The Petitioner further submitted that load survey data is a bulky data and providing such data on web platform will heavily load the UPCL portal. Therefore, load survey report may be provided to the Consumers on payment of charges as specified in the Tariff Order. The Petitioner submitted that presently, voltage wise/category wise losses are not available and distribution loss for all the consumers including open access consumers is considered at the same level. The Petitioner further submitted that UPCL is in process to calculate the voltage wise cost of supply. The Petitioner also submitted that in accordance with Regulation 29(2) of the UERC (Terms and Conditions of Intra-State Open Access) Regulations, 2015, issued on , system distribution losses shall be as determined by the Commission in the Tariff Order for the open access customers. The Petitioner further submitted that the Commission in its Tariff Order for FY approved the pooled average system distribution losses of 15% for FY in accordance with the UERC Tariff Regulations, The Petitioner also submitted that in accordance with Section 42(2) of the Electricity Act, 2003, open access may be allowed only on payment of existing level of cross subsidy by the Consumer Commission s Views Some of the stakeholders have raised the issues related to Open Access such as renewal of open access, etc, which are governed by Uttarakhand Electricity Regulatory Commission (Terms and Conditions of Intra State Open Access) Regulations, The principles for calculating Transmission/Wheeling charges, cross-subsidy surcharges & losses have already been specified in the Regulations and are therefore worked out on the principle specified. On the issues raised that no wheeling charge should be levied on open access consumers as demand charges are already being Uttarakhand Electricity Regulatory Commission 67

82 Order on True-up for FY , APR for FY & ARR for FY paid by them, the Commission clarifies that wheeling charges recovered by embedded open access consumers is net off demand charges applicable to such consumers in accordance with the provisions of the Regulations Collection Efficiency Stakeholder s Comments Shri R.K. Singh of Tata Motors Ltd. and Dr. Vijay Dhasmana, Chairman, CII Uttarakhand State council requested the Commission to direct UPCL for keeping its target of collection efficiency to 100% Petitioner s Reply The Petitioner submitted that the collection efficiency of % for FY has been computed based on the recovery of past arrears along with the collection made in the FY The Petitioner further submitted that it has retained the trajectory laid down by the Commission for proposing collection efficiency in FY and FY Further, the Petitioner is making continuous efforts to increase its collection efficiency Commission s Views The Commission directs UPCL to make efforts to achieve the collection efficiency targets approved by the Commission Promotion of Renewable Energy Stakeholder s Comments Shri R.K. Singh of Tata Motors Ltd. submitted that the solar power costs have been reduced to Rs. 2.97/unit, therefore, he suggested that the Petitioner should be encouraged for power purchase from solar power generating infrastructures to reduce its power purchase cost. Shri Amit Joshi submitted that the Petitioner has considered power purchase cost from solar plants at the rate more than Rs 5.00 /kwh, which is not a good practice in current scenario. He further suggested that the Petitioner should be directed to consider solar purchase from alternative cheaper options otherwise it would be an extra burden on the consumer of the state. 68 Uttarakhand Electricity Regulatory Commission

83 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views Regarding renewable energy power for FY , Shri Amit Joshi further submitted that the Petitioner in Table 84 of the Petition has determined MUs as unmet target of solar power to be met with solar REC 3500/MWh. In this regard, he further submitted that in accordance with the CERC Order current Solar REC price is 1000/MWh and the same should be considered, even though the matter is sub-judice in the Hon ble Supreme court Petitioner s Reply As regards the higher power purchase cost from solar plant, the Petitioner submitted that the tariff has been considered in accordance with the tariff bid by the developers for already commissioned solar power projects. For upcoming solar projects, tariff has been considered in accordance with the generic tariff determined by the Commission in Order dated for grid interactive rooftop and small solar PV plants. The Petitioner further submitted that since the matter of Solar REC price of Rs. 1000/MWh is sub-judice in the Hon ble Supreme Court, it has considered the floor Rs. 3500/MWh. The Petitioner further submitted that it is making consistent efforts to reduce the power purchase cost from all sources and is well aware of the declining costs of solar power. The Petitioner has been in discussion with NTPC (Bundled) and private developers to procure solar power at cheaper rates. However, the generic tariff for private IPPs and rooftops is still in the range of Rs. 7.8/unit to Rs. 5.2/unit due to smaller capacities and higher financing costs. Therefore, the Petitioner has been cautiously expanding the energy portfolio to ensure that the average power purchase cost remains at market competitive rates Commission s Views UPCL is required to buy energy from renewable energy sources to meet the RPO Target. The State Nodal Agency UREDA is actively pursuing development of Solar energy in the State under MNRE/State Government policies in this regard. Uttarakhand Electricity Regulatory Commission 69

84 Order on True-up for FY , APR for FY & ARR for FY Miscellaneous Comments Terms and Conditions for Seasonal Industries (RTS-7) Stakeholder s Comments Shri Vikas Jindal of Kumaun Garhwal Chamber of Commerce & Industry submitted that there is a condition in RTS-7 for seasonal industries that if during the off-season period, the actual demand of a consumer exceeds 30% of the contracted demand, the consumer will be denied benefit of reduced contracted demand for that season and an additional surcharge of 10% of demand charge is levied for the entire off-season months on the billable demand. He further submitted that this condition is too harsh in penalizing the industry and requested for relief to casual unintentional increase in demand beyond 30% in any one month of the season. Dr. Vijay Dhasmana, Chairman, CII Uttarakhand State council submitted that tourism units should be treated as seasonal industry and should be provided with some benefits during the offseason Petitioner s Reply The Petitioner submitted that with a view to provide the benefit of the seasonal industry in right manner, the terms & conditions specified by the Commission may be complied with completely. As regards considering tourism as seasonal industry, the Petitioner submitted that industries are those establishments where any production/ processing activity is performed. No production/processing activity is performed in tourism and, therefore, it should not be treated as industry / seasonal industry Commission s Views As regards addition of new conditions proposed by the Petitioner for seasonal industries, the Commission is of the view that the existing provisions of Rate Schedule regarding Seasonal Industries are amply clear and no change is warranted in the same. 70 Uttarakhand Electricity Regulatory Commission

85 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views 2.31 Views of State Advisory Committee: During the Advisory Committee meeting held on March 5, 2018, the Members made the following suggestions on the APR Petitions for FY a) UPCL has raised the issues on distribution loss reduction trajectory approved by the Commission and has claimed higher distribution loss. This aspect needs to be examined by the Commission. b) The Commission should check whether the revenue from sale of power claimed by UPCL is on actual basis or based on the bills raised by UPCL as the bills raised by UPCL also includes the sales and revenue based on provisional billing which is different from actual sales and revenue. c) A Consultation Forum should be made including officers of Utilities, Regulatory Commission, representative of industries and representative of other stakeholders to discuss the issues related to Uttarakhand power sector. d) Availability and quality of power from UPCL has improved substantially. UPCL should attend night shift breakdown in night itself. e) MCG should be abolished for Micro small industries in the current Tariff fixation. f) UPCL should convert their Sub-station into profit cost centres and any Sub-station found to be losing money should be subjected to penalties. UPCL should convert at least one Sub-station into profit centre on sample basis at the earliest. g) There is a need for improvement of existing system of UPCL. The Commission should allow separate funds to UPCL for the improvement of the system and further allow them to charge the same in the Tariff. h) Consumers are being charged extra towards the payments made through online transfers. The Commission should resolve the issues related to online payment of bills. i) Morning Peak hours should be shifted from 6 am to 8 am instead of 6 am to 9:30 am. Uttarakhand Electricity Regulatory Commission 71

86 Order on True-up for FY , APR for FY & ARR for FY j) UPCL should clarify as to why the sales of Non-Domestic is not increasing at envisaged growth rate despite new commercial loads getting added into the system needs to be examined. k) UPCL s proposal with respect to violation of contract demand in excess of 110% for consecutive 3 months is the issue related to Supply Code and not the tariff. Hence, the Commission should not approve the UPCL proposal as part of Tariff. l) UPCL during truing up for FY has claimed higher power purchase cost with respect to approved figures and on other side actual revenue from sale of power has been reduced with respect to approved revenue. This aspect needs to be critically examined. m) The lower growth in Non-Domestic and Industrial sales needs to be critically examined considering the GDP growth rate. n) There is a huge difference between the tariff hike claimed by UPCL and the CPI increase (Consumer Price Index). This huge mismatch between the two figures needs greater balance. o) The industry and tourism will get affected with substantial increase in tariffs and, hence, the Commission may approve the reasonable increase in tariff. p) The Commission should categorise Hotels as part of Tourism Industry and industrial tariff shall be applicable for hotels. q) Tourism industry is a seasonal industry and it should not be penalized by levy of MCG charges during off peak season Petitioner s Reply The Petitioner submitted the following replies: a) UPCL submitted that they have proposed an additional surcharge of Rs per kwh based on the average fixed cost of the total power purchase and it will examine the additional surcharge approved in other States and, accordingly, modify its proposal. 72 Uttarakhand Electricity Regulatory Commission

87 2. Summary of Stakeholders Objections/Suggestions, Petitioner s Responses and Commission s Views b) UPCL submitted that it had proposed a disconnection of any industrial consumer who violates the contract demand for more than 110% for consecutive 3 months. c) UPCL requested the Commission to revise the distribution loss targets by considering the base equivalent to UDAY scheme of GoI Observations of Principal Secretary, Energy, Government of Uttarakhand: a) She adviced UPCL not to charge anything extra to the consumers who make the online payment of bills through electronic transfer. As per GoI directive, an incentive needs to be provided to the consumers who are making online payment of bills through electronic transfer. b) She also suggested that the Commission may modify the slab of Lifeline consumers (BPL consumers) from the existing level of 30 units/month to 100 units/month Commission s Views The Commission suggested the utilities to make appropriate arrangements for supply of power to consumers on long term basis. The Commission directs UPCL to address the concerns raised by the Members of the Advisory Committee and submit an Action Taken Report within one month of the date of Order. Regarding payment of bills using payment gateway, the Commission is of the view that it will assist UPCL in getting payments credited to its accounts quickly and it also saves it towards holding and carrying cost of cash. Hence, UPCL is directed not to charge any service charges from the consumers on payment of bills using its payment gateway & submit the compliance on the same to the Commission within one month of the date of the Order. The Commission is of the view that the overall tariff increase is a function of projected Annual Revenue Requirement for the ensuing year (including impact of truing up of expenses and revenue for previous year) and projected revenue at existing tariffs. The Commission has carried out the detailed scrutiny of APR for FY , Revised ARR for FY and truing up for FY in accordance with the provisions of the relevant Regulations as discussed in the subsequent Chapters of the Order. Based on the ARR for FY including impact of truing up for FY , the Commission has marginally increased the tariff with respect to tariff for FY Uttarakhand Electricity Regulatory Commission 73

88 Order on True-up for FY , APR for FY & ARR for FY approved vide Tariff Order dated to meet the projected revenue gap as discussed in detail in Chapter 5 of the Order. However, as the consumers are currently paying Additional Energy Charge (AEC) which is effective till 31 st March, 2018, there is no tariff increase if the tariff approved in this Order is compared with the existing tariff approved by the Commission in its Order dated 29 March, 2017 plus AEC being paid by the consumers. 74 Uttarakhand Electricity Regulatory Commission

89 3. Petitioners s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Impact of Change in Financing from FY to FY The Petitioner in its Review Petition dated May 09, 2017 filed against the Tariff Order for FY dated March 29, 2017, had brought to the notice of the Commission that the assets created under REC funded schemes involved an equity portion of 30% to be invested by the Petitioner. In this regard, the Petitioner also submitted that REC grants loan to the Petitioner on the condition that the Petitioner Company shall invest 30% in the project. To substantiate the same, the Petitioner submitted a copy of the REC letter dated The Petitioner further stated that as per the letter, REC has been sanctioning the loan against the project with a provision of 30% equity to be invested by the Petitioner. The Commission while disposing the Review Petition stated as follows: Further, the claims made by UPCL now in this Petition suggests that UPCL during the truing up proceedings had been camouflaging the entire equity utilised in creation of assets in the internal resources to derive maximum returns in the form of RoE. Besides, considering the equity claimed by UPCL in this Petition would change the entire financing approved by the Commission and also the interest on loans and return on equity thereon. Thus, it appears that there is no error apparent on the face of the record and therefore, the issue does not qualify for review, hence the same is rejected. However, the Petitioner is directed to reconcile the figures submitted in the previous tariff proceedings with that claimed in the review Petition and submit the same in the next tariff proceedings. The Commission will take a view on the same thereupon. However, since the same is due to laxity of UPCL, the Commission holds that no carrying cost on the same would be admissible to UPCL. (Emphasis added) The Petitioner in compliance to the above, in the current tariff proceedings has submitted the revised means of finance for the asset additions from FY onwards which is as shown below: Uttarakhand Electricity Regulatory Commission 75

90 Order on True-up for FY , APR for FY & ARR for FY Table 3.1: Revised Means of Finance of additional capitalization from FY to FY as claimed by the Petitioner (Rs. Crore) FY FY FY FY Particulars Earlier Approved Revised Claim Earlier Approved Revised Claim Earlier Approved Revised Claim Earlier Approved Revised Claim RGGVY State/ District Plan R-APDRP Part A REC Loan Deposit Works / Grants Internal resources Total On the basis of the above, the Petitioner has sought the impact on account of increase in RoE and has submitted the computation as follows: Table 3.2: Impact of change in funding of additional capitalisation from FY to FY as claimed by the Petitioner (Rs. Crore) Particulars Opening Closing RoE RoE Differential RoE to Addition Equity Equity Claimed Allowed be allowed FY FY FY FY Total The Petitioner has claimed the above additional RoE along with the carrying cost to be recovered in FY The Commission has gone through the submissions of the Petitioner. The Commission had carried out the truing up for FY in its Order dated April 11, 2015 for FY to FY and the truing up for FY and for FY in its Order dated April 05, 2016 and March 29, 2017 respectively as per the means of finance submitted by the Petitioner from time to time. The Petitioner, however, after two years since the final truing up of FY has raised this issue through its Review Petition dated May 09, Though considerable time has lapsed, however, since the claim is legitimate and has been appropriately substantiated by the Petitioner, the Commission is of the considered view to revise the funding as per the submissions made by the Petitioner. However, as also held by the Commission in the Review Order dated August 03, 2017, 76 Uttarakhand Electricity Regulatory Commission

91 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY since the same is on account of laxity on the part of the Petitioner, no carrying cost is being allowed on the impact of change in means of finance for previous years. The Commission in order to compute the impact has reduced the corresponding amount from the internal resources equivalent to equity infused for projects financed by REC and the same has been considered as equity portion for REC Scheme. The revision in funding shall result in reduction in normative loan and interest thereon and higher overall equity and RoE thereon vis-àvis that trued up earlier. Further, the change in funding will have no impact on the truing up of FY as the capitalization of assets added during the year is done on the last day of the financial year by the Petitioner. Therefore, the impact of the same has been computed from FY onwards. The net impact of the revision in funding is as shown in the Table below: Table 3.3: Impact of change in funding of additional capitalisation from FY to FY approved by the Commission (Rs. Crore) Particulars FY FY FY Total Interest on Loan Approved Earlier Interest on Loan Approved Now Excess (A) RoE Approved Earlier RoE Approved Now Shortfall (B) Net Excess/(Shortfall) (A-B) The Commission, therefore, allows an amount of Rs Crore to be recovered by the Petitioner in FY without carrying cost. 3.2 Truing-up for FY Regulation 12(3) of the UERC (Terms and Conditions for Determination of Tariff) Regulations, 2015 specifies as under: (3) The scope of the Annual Performance Review shall be a comparison of the actual performance of the Applicant with the approved forecast of Aggregate Revenue Requirement and expected revenue from tariff and charges and shall comprise of following: a) A comparison of the audited performance of the applicant for the previous financial year with the approved forecast for such previous financial year and truing up of expenses and revenue subject to prudence check including pass through of impact of uncontrollable factors; Uttarakhand Electricity Regulatory Commission 77

92 Order on True-up for FY , APR for FY & ARR for FY b) Categorisation of variations in performance with reference to approved forecast into factors within the control of the applicant (controllable factors) and those caused by factors beyond the control of the applicant (un-controllable factors). c) Revision of estimates for the ensuing financial year, if required, based on audited financial results for the previous financial year; d) Computation of the sharing of gains and losses on account of controllable factors for the previous year. The Petitioner submitted that the Commission vide its MYT Order dated April 05, 2016 had approved the expenses and revenues of the Petitioner for FY based on the UERC Tariff Regulations, 2015, the historical trends and the revised projections of the Petitioner. The Commission has analysed the head-wise elements of ARR and revenue for FY in the succeeding paragraphs. The head-wise details of variations in expenses and revenues are enumerated below Sales The Commission had approved the energy sales for FY in the Tariff Order dated April 05, 2016 as MU. The Petitioner in the current Petition has submitted the actual sales for FY as MU and further submitted the actual re-casted sales of MU. The Commission continuing with its approach adopted in its Tariff Order for FY directed the Petitioner to submit the breakup of sales for all the consumer categories into three parts, i.e. sales based on actual meter reading, unmetered sales and sales billed on provisional/assessment basis for FY during the current proceedings. In reply to the Commission s direction, the Petitioner submitted the following: 78 Uttarakhand Electricity Regulatory Commission

93 Number of Consumers Connected Load (KW) Sales (MU) Number of consumers Connected Load (KW) Sales (MU) Number of Consumers Connected Load (KW) Sales (MU) Number of Consumers Connected Load (KW) Sales (MU) 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Table 3.4: Break up of Sales submitted by the Petitioner for FY (MU) Based on Actual Meter Reading Based on Assessment Unmetered Total S. No. Sub-Category (i) BPL and Kutir Jyoti (ii) Other Domestic Consumers (iii) UPCL Employees and Pensioners (iv) UJVNL Employees and Pensioners (v) PTCUL Employees and Pensioners (vi) Single Point Bulk Supply Domestic Non-domestic PTW LT Industry Public Lamps Govt. Irrigation System Public Water Works HT Industry Mixed Load Railway Traction n Other State Supply Total The Commission observed that the Petitioner in its above submission submitted the sales of 1.17 MU under the unmetered category. The Commission sought reply from the Petitioner for unmetered sales being booked even after the directions of the Commission and the details of tariff at which billing of such unmetered sales has been done. The Petitioner in its reply submitted that the same was checked with the billing details under R-APDRP billing module and it was found that no bill was generated during FY at unmetered tariff. The Commission in its Tariff Order dated March 29, 2017 had analysed division wise commercial statement for FY and observed that like previous years, the average billing rate (ABR) in some divisions were even less than the energy charge approved for that category and had directed the Petitioner as follows: The Commission re-iterates its direction and provides final opportunity to UPCL to rectify such errors and, accordingly, directs UPCL to rectify such anomalies else the Commission would examine the matter and if required necessary corrections to this extent would be made in the subsequent years. Further, the Zonal Chiefs, the Circle Chiefs and the concerned Executive Engineers are hereby directed to examine the data with reference to their Divisions for FY and for FY and submit the justification to the Commission within 45 days of the date of Order on the above discrepancies failing which action may be initiated against them individually by the Commission under Section 142 of the Electricity Act, 2003 and also against the Directors of the Petitioner Company. Uttarakhand Electricity Regulatory Commission 79

94 Order on True-up for FY , APR for FY & ARR for FY The Commission further directs UPCL to submit the findings of the study being carried out on sales, average load factor, average billing rate for FY within six months from the date of this Order along with the detailed action plan to rectify such errors. The Petitioner in compliance to the above directions submitted that the matter was discussed with the field officers by Director (Operation) and during discussion it was observed that the discrepancies in the commercial data was mainly due to the reason that at the time of revision of bills pertaining to prior period, amount is reduced from the assessment but the corresponding consumption is not reduced from the billed units and in this connection necessary directions have been issued. The Petitioner also submitted the report prepared by its consultants on the findings of the study for FY as follows. Table 3.5: Findings of the Sales audit for FY Particulars As per Consultant s Report As per Commercial Diary Billing Efficiency 81.67% 81.99% Collection Efficiency % % AT&C Loss 12.94% 12.85% The Commission during the current tariff proceedings while analysing the ABR of various consumer categories observed that the ABR of PTW consumer category was Rs. 1.41/kWh which was substantially lower than the approved Energy charge of Rs. 1.55/kWh. The Commission, therefore, directed the Petitioner to submit necessary justification for such anomaly. The Petitioner in response to lower ABR recorded for PTW consumers submitted that the matter was being discussed with field officers and prima-facie it was found that the average billing rate of some divisions of PTW Category was low because of the reason that the previous billing was withdrawn. The category wise sales of UPCL for FY are being discussed hereunder: a) Domestic Consumers Based on the detailed analysis of the breakup of sales data submitted by the Petitioner for FY , it is observed that for the Departmental Employees of PTCUL and UPCL, the load factor (sales/kw of connected load) for consumers whose consumption was recorded on assessment basis was substantially higher than the load factor for consumers whose consumption was recorded on the basis of actual meter reading. The distribution licensee did not substantiate the basis of recording assessed sales. Further, it was observed from the data submitted by UPCL that around 73 consumers were still unmetered for which tariff had already been discontinued. The Petitioner was 80 Uttarakhand Electricity Regulatory Commission

95 Number of Consumers Connected Load (KW) Sales MU) Sales/kW/ Month Number of Consumers Connected Load (KW) Sales (MU) Sales/kW/ Month Re-casted Sales (MU) Number of Consumers Connected Load (KW) Sales (MU) Recasted Sales (MU) 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY directed to submit the reasons behind existence of unmetered connections, the Petitioner in response after cross checking with billing database submitted that no bill was generated during FY for unmetered consumers and as of today no unmetered consumers exists in UPCL. The Commission in its previous Tariff Orders has been recasting the unmetered sales and assessed sales based on the load factor of metered consumers. However, for FY it was observed that except for Departmental Employees and Public Lamps category, the consumption on assessment basis for other categories was almost equal to that billed on the basis of metered sales and, therefore, re-casting of sales has not been done on this account. The Commission has, however, recasted the sales of departmental employees on the basis of the load factor of the other metered domestic consumers as the load factor for these employees are substantially higher than the load factor of other domestic consumers which indicates that though as per the submission of UPCL, these consumers have been metered, recording of consumption of these consumers is either not on the basis of actual consumption as the departmental employees are availing electricity on a fixed charge basis or excess consumption of electricity is being done by the employees as the same is almost free to the employees which clearly is a wastage of electricity and cannot be allowed at the cost of other consumers. Accordingly, based on the above, the total re-casted sales for Domestic Category for FY works out to 2466 MU against 2486 MU submitted by UPCL and the same is summarised in the Table below: Table 3.6: Re-casted Sales for Domestic Category for FY (MU) Based on Actual Meter Reading Based on Assessment Unmetered Total Sub-Category BPL and Kutir Jyoti Other Domestic Consumers UPCL Employees and Pensioners UJVNL Employees and Pensioners PTCUL Employees and Pensioners Single Point Bulk Supply Domestic Uttarakhand Electricity Regulatory Commission 81

96 Order on True-up for FY , APR for FY & ARR for FY The Commission also examined the data of departmental employees of UPCL, PTCUL and UJVN Ltd. which is given in the Table hereunder: S. No. Table 3.7: Departmental Employees of UPCL, PTCUL and UJVN Ltd. as on and as per Commercial Diary Particulars Nos. As on As on Load Consumption Load Consumption Nos. (kw) (MU) (kw) (MU) 1. UPCL employees a. Serving Employees 4,263 14, ,132 14, b. Pensioners 2,813 8, ,419 8, c. Family Pensioners 866 2, , UJVN Ltd. employees and 788 1, , Pensioners 3. PTCUL employees and Pensioners 378 1, , Total 9,108 28, ,665 28, From the Table above, it is surprising to note that the number of serving employees of UPCL has reduced by 131, pensioners of UPCL has reduced by 394 and the number of family pensioners by 45 from to UPCL in its commercial diary has shown its serving employees as on as 4,132, however, for calculation of its employee expenses it has shown the existing employees as on as 3201, i.e. in commercial diary it is showing 931 employees more which is unacceptable. It is all the more surprising that the number of pensioners has reduced by 394 during to , however, the load has merely reduced by 26 kw. Hence, it appears that the commercial diary is not reliable, which is also evident not only from the reduction in 500 number of employees/pensioners/family pensioner of UPCL but also from the sudden reduction in consumption pattern of the departmental employees given in the Table below: Table 3.8: Consumption Pattern of Departmental Employees S. As on As on Particulars No. (Units/consumer/month) (Units/consumer/month) 1. UPCL Employees a. Serving Employees 1, b. Pensioners c. Family Pensioners UJVN Ltd. Employees and Pensioners PTCUL Employees and Pensioners Uttarakhand Electricity Regulatory Commission

97 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY As can be seen from the Table above, except for family pensioners of UPCL and PTCUL s employees and pensioners, the specific consumption of all other categories of employees has reduced, more so in case of UPCL s serving employees the reduction is to the extent of almost half. Thus, this aspect needs investigation. Accordingly, UPCL is directed to submit the bills of all the departmental employees for FY within 2 months of the date of the Order before the Commission. UPCL is also directed to reconcile the figures of departmental employees in the commercial data as well as that claimed for calculation of employee expenses and submit the same to the Commission within 2 months of the date of the Order. b) PTW Category: Based on the detailed analysis of the breakup of sales data submitted for FY and the commercial diary, it is observed that though the load factor of consumers billed on assessment basis was almost similar to the load factor of the consumers whose consumption was recorded on the basis of actual meter reading, however, it was observed that the ABR for the category was Rs. 1.41/kWh as against the energy charge of Rs. 1.55/kWh approved by the Commission. The Commission directed the Petitioner to submit the justification for such variation. The Petitioner in response submitted that the matter was discussed with the field officers and prima-facie it was found that the average billing rate in some divisions for PTW Category was low because of the reason that the previous billing was withdrawn. Since the Petitioner submitted that the reason of lower ABR was due to the fact that the previous billing was withdrawn for some of the consumers, however, sales for them was not withdrawn, accordingly, the Commission does not find any reason to include such sales for which the billing was withdrawn. Accordingly, the Commission has, therefore, adjusted the sales of PTW consumers considering the approved energy charge of Rs. 1.55/kWh. However, the Petitioner is directed to instruct its field offices to carry out the corresponding corrections in sales also in cases where billing is withdrawn. In future if such instance comes to the knowledge of the Commission, punitive action under Section 142 of the Electricity Act, 2003 may be taken against the errant officers of UPCL. Accordingly, based on the above, the total re-casted sales for PTW Category for FY works out to MU as against MU submitted by UPCL. Uttarakhand Electricity Regulatory Commission 83

98 Number of Consumers (No) Connected Load (KW) Sales (MU) Sales/kW/Month Number of Consumers (No) Connected Load (KW) Sales (MU) Sales/kW/Month Re-casted Sales (MU) Number of Consumers (No) Connected Load (KW) Sales (MU) Re-casted Sales (MU) Order on True-up for FY , APR for FY & ARR for FY c) Other Categories: For some other categories, i.e. Non-Domestic, PWW, GIS, Public Lamps and LT Industries, based on the analysis of the breakup of sales data submitted for FY , it is observed that only for public lamp category, the load factor of consumers whose consumption was recorded on assessment basis was marginally higher than the load factor of those consumers whose consumption was recorded on the basis of actual meter reading. The Commission in its previous Tariff Orders has been recasting the assessed sales based on the load factor of the metered consumers. For recasting sales for the category, the Commission has considered the load factor of the metered consumers as the basis for deriving the sales of consumers billed on assessment basis. Table 3.9: Re-casted sales for Other Categories for FY (MU) Based on Actual Meter Reading Based on Assessment Unmetered Total Sub-Category Non-domestic LT Industry Public Lamps GIS PWW d) HT Industry The Petitioner submitted the sales to HT Industry of MU for FY The Commission in this regard sought clarification from UPCL whether the sales made to HT Industrial category has been adjusted for power consumed by HT Industrial consumers through open access. The Petitioner in its reply submitted that the energy availed through open access energy by HT Industrial consumers has been adjusted from the consumption units recorded in respect of HT Industries. As the Petitioner has correctly submitted the sales for this category by excluding the energy consumed by HT Industries through open access, the Commission has approved the sales for HT Industries as submitted by the Petitioner. Based on the above analysis, the category wise sale for FY as re-worked by the Commission is as shown in the Table below: 84 Uttarakhand Electricity Regulatory Commission

99 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Table 3.10: Category-wise Sales for FY (MU) Categories Approved in the Tariff Order dated Claimed in the Petition Approved after Truing Up Domestic (RTS - 1) 2, , , Non-domestic, incl. Commercial (RTS - 2) 1, , , Public Lamps (RTS - 3) Private Tubewell/Pump Sets (RTS - 4) Government Irrigation System (RTS - 5) Public Water Works (RTS - 6) Industrial Consumers (RTS - 7) 6, , , Mixed Load (RTS - 8) Railway Traction (RTS - 9) Total Distribution Losses The Petitioner in its Petition has submitted its distribution losses for FY as 16.68%. The Commission for FY had approved the distribution losses of 15.00% based on the loss reduction trajectory approved in the MYT Order for the Control Period from FY to FY However, as per the actual data submitted by the Petitioner and the sales approved by the Commission, the actual distribution losses for FY works out to 17.10%. The Commission, in accordance with the approach adopted in its previous Orders, has allowed the actual quantum of power purchase made by the Petitioner. Considering the actual energy input of 12, MU at distribution periphery (T&D interface) for FY and applying the approved loss level of 15.00% for the year, the Commission re-estimated the sales of MU for FY As against this sale of MU, the actual re-casted sales approved by the Commission for FY is MU. Therefore, there is a loss of sales to the tune of MU on account of commercial inefficiencies of the Petitioner resulting from its failure to achieve distribution losses target approved by the Commission. The Commission has worked out the average billing rate of Rs. 4.56/kWh on the approved re-casted sales of MU. The Commission has also adjusted the revenue from sales of power of Rs Crore submitted by UPCL for FY , by reducing the revenue corresponding to the sales reduced for PTCUL and UJVN Ltd. employees as on re-casted sales since their Average billing rate was much higher than the ABR of other domestic consumers and whereas by adding the revenue for UPCL s departmental employees as on re-casted sales the ABR was working less than the ABR of other domestic Uttarakhand Electricity Regulatory Commission 85

100 Order on True-up for FY , APR for FY & ARR for FY consumers. Accordingly, the adjusted revenue for FY works out to Rs Crore. Accordingly, the Commission has computed the additional revenue on account of loss in sales due to higher distribution loss of Rs Crore for FY The following Table shows actual distribution loss and approved distribution loss along with efficiency loss for FY as explained above. Table 3.11: Assessed Distribution losses for FY (MU) Particulars Approved in the Approved Revised Tariff Order after Truing Claim dated Up Actual Energy Input at T-D Interface / Power Purchase Requirement (MU) Actual/ Recasted Sales (MU) Actual Distribution Loss (MU) Distribution Loss Level (%) 15.00% 16.68% 17.10% Commercial Loss Reduction (%) 0.00% 0.00% 0.00% (Loss)/Gain of sales due to inefficiency/efficiency (MU) (Normative (266.20) Sales-Actual Re-casted Sales) Approved Distribution Loss (%) 15.00% 15.00% 15.00% Total Normative Sales (MU) Further, since distribution loss is a controllable parameter, the Commission has carried out the sharing of the impact of excess distribution loss in accordance with the provisions of UERC Tariff Regulations, Power Purchase Expenses (Including Transmission Charges) The comparison of source wise power purchase quantum and cost as approved by the Commission in the Tariff Order for FY and actual as claimed by UPCL for FY is as shown in the Table below: 86 Uttarakhand Electricity Regulatory Commission

101 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Table 3.12: Power Purchase Cost approved in the Tariff Order Vs Actual Power Purchase Cost for FY (Rs. Crore) Approved in the Tariff Order Claimed by UPCL Source Quantum Total cost Rate Quantum Total cost Rate (MU) (Rs. Crore) (Rs./kWh) (MU) (Rs. Crore) (Rs./kWh) UJVN Ltd.* * 2.42 NHPC THDC NTPC NPCIL Vishnu Prayag SJVNL Other IPPs Deficit Purchase including UI Banking Received/(Paid) (955.27) (350.26) 3.67 RPO PTCUL PGCIL Total *Including recovery of past arrears of Rs Crore. The Commission with regard to the power purchase cost submitted by the Petitioner sought the following information from the Petitioner: a) Justification for the rate of UI drawal in the month of May, 2016 (Rs /kWh) and December, 2016 (Rs. 6.55/kWh) being very high. b) Basis of computing cost of banked energy returned submitted as Rs Crore and source to meet the same and whether any provisions have been made in the cost of power purchase claimed for FY c) Details of cost of free power provided for in the accounts and the cost paid to the State Government in this regard from FY to FY The Petitioner in its reply with regard to increase in cost of UI overdrawals submitted that Over Drawl and Under Drawl is a continuous process and under ABT regime the same is integrated at every 15 minutes time interval, i.e. in 96 slots during the day. The average frequency in each time block determines the UI rate which is applicable on the Over Drawl /Under Drawl quantum of energy. The Petitioner further submitted that the net UI during the month of May, 2016 was actually under drawl of MU and net amount paid for UI during the month was actually Rs Crore Uttarakhand Electricity Regulatory Commission 87

102 Order on True-up for FY , APR for FY & ARR for FY with credit adjustment amount of Rs Crore. Similarly net UI during the month of December, 2016 was actually over drawl of MU and net amount paid for UI during the month was actually Rs Crore with debit adjustment amount of Rs Crore. UPCL further submitted that certain adjustments e.g. adjustments for equalizing total deviation charges payable and receivable, adjustments made on account of Nuclear Station being exempted from paying deviation charges are also included in the net UI charges paid during the month. The Petitioner further submitted that for reasons stated above the net UI and amount during the month cannot be the basis for calculation of per unit charges. The Commission does not agree with the justification forwarded by the Petitioner and has observed that the Petitioner has availed professional services of M/s Quenext Decision Sciences Pvt. Ltd. w.e.f. April, 2016 to leverage real time opportunities including URS to reduce the cost of meeting the load of the end customer, merit order to integrate market and reduce imbalances and has claimed the cost of Rs Crore additionally in A&G expenses. In view of the same, the Commission in the interest of the consumers cannot allow to pass on the impact of overdrawal at such higher rates. The Commission in its Order dated April 11, 2015 had already directed the Petitioner to restrict the net drawal from the grid within its drawal schedules whenever the system frequency is below Hz in order to ensure grid discipline which in the present case has not been followed. The Commission further observes, that the charges for deviation at Hz as per Regulation 5 of CERC (Deviation Settlement Mechanism and related matters), Regulations 2014 is Rs. 4.07/kWh. The Commission to protect consumer interest and to ensure grid discipline has, therefore, curtailed any overdrawal above the rate of Rs. 4.07/kWh in FY The Commission has, therefore, disallowed Rs Crore on account of overdrawal at the rate higher than Rs. 4.07/kWh as shown in the Table below: 88 Uttarakhand Electricity Regulatory Commission

103 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Month Table 3.13: Cost of UI Overdrawal approved by the Commission MU Cost Claimed (Rs. Cr.) Actual rate of Drawal Rs/kWh Approved Rate of Drawal (Rs./kWh) Approved Cost (Rs. Cr.) Cost Disallowed (Rs. Cr) (A) (B) C= (Bx10/A) D= Min (C, 4.07) E=DxA/10 F=(B-E) April May June July August September October November December January February March Total for the year With regard to the cost of banked energy booked by the Petitioner, the Petitioner submitted that as per agreement dated September 09, 2016 and LOI no.1275 dated April 30, 2016 against tender specification No. 01/16-17, MU and MU of power was returned to M/s HPPC (M/s Haryana Power Purchase Committee) through M/s TPTCL in the month of August 2016 and September 2016 respectively. The rate of purchase of power was Rs per kwh and Rs per kwh for the month of August 2016 and September 2016 respectively at Regional Periphery. The Petitioner further submitted that the transmission losses up to Haryana State periphery were borne by UPCL and the agreement was approved by the Commission vide Order dated June 21, As per agreement dated September 16, 2016 and LOI No dated July 04, 2016 against Tender Specification No. 03/16-17, MU, MU and MU of power was returned to M/s HPPC (M/s Haryana Power Purchase Committee) through M/s Manikaran Power Ltd. in the month of July 2016, August 2016 and September 2016 respectively. The rate of purchase of Power was Rs per kwh at Haryana State Periphery. The Petitioner submitted that the agreement was approved by the Commission vide Order dated September 06, The Petitioner further submitted that the remaining MU power was returned by UPCL from its pool of Power Purchase. The Petitioner further submitted the copies of above mentioned agreements alongwith details of power procured. The Petitioner also submitted that the power purchase cost of FY does not include any provisions made on account of Banking of Power. However, power was returned under banking arrangement in FY for power Uttarakhand Electricity Regulatory Commission 89

104 Order on True-up for FY , APR for FY & ARR for FY received under such arrangement in FY Therefore, a sum of Rs Crore duly provided in FY was reversed in FY and shown as reduction in Power Purchase expenses in FY and all the bills of Power Purchase suppliers for the period up to March 2017 were recorded in FY The Petitioner further submitted that no other provisions were made in Power Purchase cost in FY The Commission has gone through the submissions of the Petitioner and finds the same in order and, therefore, the Commission approves the cost of banked energy as claimed by the Petitioner. In the past, the Petitioner has been seeking truing up of free power rate which the Commission has been allowing. The Commission, however, observed from the audited accounts of the Petitioner that the Petitioner instead of remitting the trued up amount on account of revision of free power rate to GoU or creating equivalent liability in the accounts has been booking the same as its revenues. The Petitioner in its current Petition submitted that the rate of free power approved for FY was Rs. 1.62/kWh on the basis of which the Petitioner has raised bills in FY The Petitioner in the current Petition has revised the rate of free power on the basis of actual power purchase from hydro generating stations as Rs. 2.57/kWh. The Petitioner has, accordingly, sought cost of free power as Rs Crore at the rate of Rs. 2.57/kWh as against Rs Crore booked at the rate of Rs. 1.62/kWh in the audited accounts of FY The year wise details of cost of free power as booked in the accounts, cost of free power trued up by the Commission and the amount remitted to GoU by the Petitioner in this regard from FY to FY is shown as follows: Year Cost of free power as per Audited Accounts Table 3.14: Details of Cost of Free Power (Rs. Crore) Cost of free power actually paid to GoU Cost of free power trued up (Rs. Crore) Excess cost of free power allowed by the Commission (Rs. Crore) FY FY FY FY FY FY Total , Uttarakhand Electricity Regulatory Commission

105 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY As given in the Table above, it is observed that the Petitioner has not even remitted the complete amount that has been booked in the accounts. Further, amount recovered on account of revision of free power rate from FY to FY has also not been booked in the subsequent years audited accounts and has been considered by the Petitioner as its revenues. The Commission takes strong exception to the same and is of the view that the Petitioner cannot be allowed to retain the dues that do not belong to it by burdening the consumers. The Commission is also of the view that while carrying out the truing up for the ensuing years, cost of free power shall be considered as that provided in the audited accounts by the Petitioner subject to the ceiling limit of weighted average cost of power available to UPCL from the hydro generating stations. Accordingly, the Commission has, therefore, not carried out truing up of free power rate for FY Further, the Commission has also adjusted the excess cost of free power of Rs Crore allowed to it as evident from the Table above from FY to FY The Commission has, accordingly, adjusted the said amount of Rs Crore towards excess cost of free power allowed to UPCL from the ARR of FY as detailed in Chapter 4 of this Order. Further, the Petitioner is also directed to submit the details of cost of free power as booked in the accounts, cost of free power trued up by the Commission and the amount remitted to GoU by the Petitioner in this regard from FY to FY within 3 months of the date of the Order. The expenses towards free power as claimed by the Petitioner and that allowed by the Commission for FY is as shown in the Table below: Table 3.15: Power Purchase Cost claimed by UPCL and approved by the Commission for FY (Rs. Crore) As per Audited Claimed by the Approved by the Particulars Accounts Petitioner Commission Cost of Free Power Accordingly, the power purchase cost approved by the Commission on truing up for FY is as shown in the Table below: Table 3.16: Power Purchase Cost claimed by UPCL and approved by the Commission for FY (Rs. Crore) Particulars Claimed by UPCL Approved by the Commission Power Purchase Expenses UJVN Ltd. Arrear Transmission Charges-PGCIL Transmission Charges- PTCUL Total Power Purchase Cost Uttarakhand Electricity Regulatory Commission 91

106 Order on True-up for FY , APR for FY & ARR for FY Operation and Maintenance (O&M) Expenses O&M expenses comprises of Employee Expenses, A&G Expenses and R&M Expenses, i.e. expenditure on staff, administration and general expenses and repairs and maintenance etc. For estimating the O&M expenses for the second Control Period, Regulation 62 of UERC Tariff Regulations, 2015 specifies as under: (1) The O&M expenses for the first year of the Control Period will be approved by the Commission taking into account the actual O&M expenses for last five years till Base Year subject to prudence check and any other factors considered appropriate by the Commission. (2) The O&M expenses for the nth year and also for the year immediately preceding the Control Period, i.e. FY , shall be approved based on the formula given below:- O&Mn = R&Mn + EMPn + A&Gn Where O&Mn Operation and Maintenance expense for the nth year; EMPn Employee Costs for the nth year; R&Mn Repair and Maintenance Costs for the nth year; A&Gn Administrative and General Costs for the nth year; (3) The above components shall be computed in the manner specified below: EMPn = (EMPn-1) x (1+Gn) x (1+CPIinflation) R&Mn = K x (GFAn-1) x (1+WPIinflation) and A&Gn = (A&Gn-1) x (1+WPIinflation) + Provision Where - EMPn-1 Employee Costs for the (n-1)th year; A&G n-1 Administrative and General Costs for the (n-1)th year; Provision: Cost for initiatives or other one-time expenses as proposed by the Transmission Licensee and approved by the Commission after prudence check. 92 Uttarakhand Electricity Regulatory Commission

107 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY K is a constant specified by the Commission in %. Value of K for each year of the control period shall be determined by the Commission in the MYT Tariff order based on Transmission Licensee s filing, benchmarking of repair and maintenance expenses, approved repair and maintenance expenses vis-à-vis GFA approved by the Commission in past and any other factor considered appropriate by the Commission; CPI inflation is the average increase in the Consumer Price Index (CPI) forimmediately preceding three years; WPI Inflation - is the average increase in the Wholesale Price Index (CPI) for immediately preceding three years; GFAn-1 Gross Fixed Asset of the Transmission Licensee for the n-1th year; 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 Transmission Licensee s filings, benchmarking and any other factor that the Commission feels appropriate: Provided that in case of a transmission licensee is governed by Government pay structure, the Commission may consider allowing a separate provision in Employee expenses towards the impact of VIIth Pay Commission. Provided that repair and maintenance expenses determined shall be utilised towards repair and maintenance works only Employee Expenses The Petitioner submitted that the normative employee expenses for FY has been arrived at as per the methodology adopted by the Commission in its Tariff Order dated March 29, 2017 in accordance with UERC Tariff Regulations, The Petitioner submitted that it had to bear the responsibility of paying enhanced pension which was on account of pay revision in third time scale with effect from due to which pension and family pension was revised for the employees who retired between and The Petitioner further submitted that since the enhanced pension was not included in the base employee expenses and is a statutory liability for the Petitioner, the same has been claimed additionally in FY Uttarakhand Electricity Regulatory Commission 93

108 Order on True-up for FY , APR for FY & ARR for FY The Petitioner submitted that the actual impact of enhanced pension for FY was Rs Crore. The Petitioner further submitted that the number of employees has reduced to 3201 by the end of on account of retirements, therefore, the growth factor has been considered as zero. Further, actual capitalization rate as per the audited accounts have been considered for arriving at the normative employee cost. The Petitioner has claimed the normative employee expenses for FY of Rs Crore as shown in the Table below: Table 3.17: Revised Employee Expenses as claimed by the Petitioner (Rs. Crore) Particulars FY Emp n Inflation Factor 7.21% Growth Factor 0.00% Gross Employee Expenses Capitalisation Rate 15.63% Less: Employee Expenses Capitalised Net Employee Expenses Impact of enhanced pension 8.84 Employee Expenses The Commission in its Order dated March 29, 2017 had re-worked the normative employee expenses for the second Control Period in accordance with UERC Tariff Regulations, The Commission in the said Order had considered the gross normative employee expenses approved in the true up for FY for projecting the employee expense for FY and FY The Commission had further revised the impact of VII pay commission from 20% considered in its MYT Order to 15% in its Order dated March 29, The Commission had approved the trued up normative gross employee expenses of Rs Crore for FY Considering the same as the base and in accordance with the UERC Tariff Regulations, 2015 the Commission has computed the normative employee expenses for FY Regarding the growth factor, the Commission observed that the number of employees of UPCL has reduced from FY to FY as the number of retirement of employees outpaced the recruitment of employees during the year. The Commission has, therefore, considered Gn as zero. The employee expenses so computed have then been escalated by the same CPI inflation of 7.21%. The Commission has considered the capitalisation of expenses in the same proportion of actual capitalisation of expenses to the actual gross expenses. Further, in line with the approach 94 Uttarakhand Electricity Regulatory Commission

109 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY adopted by the Commission in the true up for FY , the Commission has considered the impact of enhanced pension as claimed by UPCL considering the statutory liability of the Petitioner. However, the Commission would again like to caution the Petitioner that any further allowance or incentives or benefits granted to its employees will have to be borne by UPCL from its own resources or through increased efficiency. The normative employee expense approved by the Commission for FY is as shown in the Table below: Table 3.18: Approved Employee Expenses for FY (Rs. Crore) Approved in Actual as Normative Particulars the Tariff per Audited Claimed by Approved Order Accounts UPCL Employee expenses Repair and Maintenance The Commission had approved the R&M expenses of Rs Crore for FY in its MYT Order dated April 05, As against the same, the actual R&M expenses for FY as per the audited accounts are Rs Crore. The Petitioner has claimed the normative R&M expenses of Rs Crore. The Commission in its MYT Order had considered the K factor of 2.67% for computation of the normative R&M expenses for FY in accordance with the UERC Tariff Regulations, The Commission for truing up of FY has considered the same K factor and has reworked the R&M expenses considering the Opening GFA for FY The Commission has considered the inflation factor of 1.83% which is the average of WPI inflation for the preceding three years of FY The normative R&M expenses trued up by the Commission for FY is as shown in the Table below: Table 3.19: Approved R&M Expenses for FY (Rs. Crore) Approved in Actual as Normative Particulars the Tariff per Audited Claimed by Approved Order Accounts UPCL R&M Expenses A&G Expenses The Commission had approved the A&G expenses of Rs Crore for FY in its Tariff Order dated April 05, As against the same, the actual A&G expenses for FY as Uttarakhand Electricity Regulatory Commission 95

110 Order on True-up for FY , APR for FY & ARR for FY per the audited accounts were Rs Crore. The Petitioner has claimed the normative A&G expenses of Rs Crore for FY The Petitioner submitted that the actual A&G expenses of Rs Crore excluded an amount of Rs Crore paid against the penalty imposed by the Commission on account of delay in releasing new LT connections. The Commission in its Order dated March 29, 2017 had re-worked the normative A&G expenses for the second Control Period in accordance with UERC Tariff Regulations, The Commission had considered the normative A&G expenses approved in the true up for FY for projecting the A&G expense for FY and FY The Commission in this Order has considered the same approach for computing A&G expenses for FY The Commission had considered WPI inflation of 1.83% which is the average of WPI Inflation for the preceding three years of FY The Commission has considered the capitalisation of expenses in the same proportion of actual capitalisation of expenses to the actual gross A&G expenses. In addition to the above, the Petitioner in its Petition has submitted that a provision of Rs Crore against cost of data centre and other expenses relating to R-APDRP projects have been included. The Petitioner further submitted that these expenses are primarily towards bandwidth charges for data centre, annual maintenance charges for the software and hardware installed under the various R-APDRP works, etc. The Petitioner further submitted the details of additional A&G expenses claimed as follows: Table 3.20: Additional A&G Expenses as claimed by the Petitioner (Rs. Crore) Particulars Amount Expenditure on SMS Gateway 0.01 Network Bandwidth Service Provider (M/s Tata tele Services) 1.11 Expenditure for Executives for Data Centre (CC-Staffing) 0.52 Bandwidth charges paid to BSNL 0.92 Idea Cellular Ltd., Dehradun 0.26 Disaster Recovery Center - Haldwani (M/s Wipro Ltd.) 1.21 M/s Nikom Infrasolution Pvt. Ltd. Delhi 0.34 AMC Cost for installed Hardware at Data Center Dehradun consists of various server and storage. (Redington India Ltd.) 0.82 IBM software License Cost for the installed IBM Tivoli and IBM Network management software (M/s Sify Technologies Ltd.) 1.00 Microsoft License Cost 0.98 Red Hat Operating System license cost 1.18 Misc. Expenses 0.25 Total Additional A&G expense Uttarakhand Electricity Regulatory Commission

111 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY The Petitioner was directed to submit whether the cost of data centre and cost associated with R-APDRP projects claimed for FY has already been incurred or merely provisions have been made. The Petitioner was also required to submit the operational cost towards maintenance of data centre under R-APDRP Project since the creation of the Data Centre in the year along with contracts of AMC. The Petitioner in response submitted that the cost of Rs Crore has already been incurred and the same are not provisions. The Petitioner also submitted the operation cost towards maintenance of data centre as follows: Table 3.21: Operational Cost towards maintenance of Data Centre as submitted by the Petitioner (Rs. Crore) Financial Year Expenditure (upto December) The Commission observed that the Petitioner has submitted operational cost of Rs Crore towards maintenance of data centre in FY , however, the same has been claimed as Rs Crore in the Petition. The Commission, accordingly, sought reconciliation of both the figures. The Petitioner in response revised its submission of additional cost of A&G expenses as per audited accounts as follows: Table 3.22: Additional Cost of A&G Expenses as submitted by the Petitioner (Rs.) S. No. GL Code Description FY R&M-Other Transmissions Plant & Equipment 13,77, R&M-Batteries including charging equipment 18,04, R&M-Other Misc. Exp. 1,21,03, R&M-Computers 1,24,63, A&G-Insurance of other assets 1,21, A&G-Telephone & Trunk Calls 11,55, A&G-Bandwidth Charges 1,99,35, A&G-Other Professional Charges 34, A&G- Electricity Charges 44,11, A&G-PurvaSainik Kalyan Nigam Ltd. 48,38, A&G- Facility Management Services (FMS) 29,98, A&G- Misc. Expenses 500 Total Expenses 6,12,43,821 Uttarakhand Electricity Regulatory Commission 97

112 Order on True-up for FY , APR for FY & ARR for FY The Commission has gone through the submissions of the Petitioner and observes that the expenses booked under Sr. No. 1 to 4 in the Table above amounting to Rs Crore pertains to R&M expenses which has already been allowed to the Petitioner as R&M expenses and, therefore, the same doesn t qualify as additional A&G Expenses. The Commission has, therefore, not considered the same. The Commission has allowed the balance additional A&G Expenses of Rs Crore towards maintenance of Data Centre. The Petitioner further submitted that it has also availed services of Quenext Decisions Sciences Pvt. Ltd. for data forecasting which has helped UPCL in planning its power purchase. The services of M/s Quenext included the following: a. In integrating MARKET as part of MERIT ORDER with increased degree of confidence and leverage every market opportunity to reduce the cost of power. b. Leverage real time opportunities including URS to reduce the cost of meeting end customer load. c. Reduced incidences of imbalances by more than 30% leveraging real time foresights. The Commission has gone through the submissions of the Petitioner and observes that the Petitioner has utilised professional service for cost effective power procurement. The Commission has considered the additional cost on this account, however, since professional services have been availed therefore, the Commission directs the Petitioner that it should neither overdraw power at frequency below Hz nor resort to load shedding due to improper procurement planning. Further, any drawal below Hz shall not be allowed by the Commission. The Commission has further considered License fees of Rs Crore paid by the Petitioner in FY However, the Commission would like to caution the Petitioner to control its A&G expenses and exercise proper prudence in incurring the same. Table below: The normative A&G expense approved by the Commission for FY is as shown in the Table 3.23: Approved A&G expenses for FY (Rs. Crore) Approved in Actual as Normative Particulars the Tariff per Audited Claimed by Approved Order Accounts UPCL A&G expenses Accordingly, the Commission has allowed net O&M Expenses as shown in the Table below: 98 Uttarakhand Electricity Regulatory Commission

113 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Table 3.24: Approved O&M Expenses for FY (Rs. Crore) Approved in Actual as per Normative S. Particulars the Tariff Audited Claimed by No. Approved Order Accounts UPCL 1. Employee expenses R&M expenses A&G expenses Total The Commission has further carried out sharing on account of actual and normative O&M expenses in the subsequent section of this Order. 3.3 Cost of Assets and Financing Capital cost of Original Assets As regards the capital cost of original assets, the Commission vide its Order dated April 11, 2015 held as under: Capital Cost of Original Assets The Commission observed that the issue of original value of fixed assets for the Petitioner examined in detail in Paras and of the Order dated April 25, For reasons provided in the said Order, the original value of GFA as on November 09, 2001 was fixed at Rs. 508 Crore for the Petitioner, instead of the value of Rs Crore assigned in the Provisional Transfer Scheme. The Commission had already recorded the reasons for the same in its previous Tariff Orders. Since, there is no change in the factual position and the matter is pending before the Hon ble ATE, the Commission decides to maintain Status-quo ante. In this regard, Hon ble ATE in its Judgment dated May 18, 2015 in Appeal No. 180 of 2013 ruled as under: 25. We feel that since it is matter of transfer scheme and apportioning of value of assets between two States after reorganization, the Appellant should take up the matter with State Government for issuance of notification on transfer of assets to Uttarakhand from UP. Accordingly decided. In light of the Judgment of the Hon ble ATE, the Commission in its Tariff Order dated April 05, 2016 did not find the need to revise the capital cost of original assets from the earlier approved value of Rs. 508 Crore for the Petitioner. The Commission vide its Order dated April 05, 2016 and March 29, 2017 has already carried Uttarakhand Electricity Regulatory Commission 99

114 Order on True-up for FY , APR for FY & ARR for FY out the truing up till FY The year wise GFA addition allowed by the Commission till FY is as shown below: Table 3.25: Assets base approved by the Commission (Rs. Crore) Particulars FY FY FY FY FY FY FY FY FY Opening Balance Net additions Closing Balance With regard to FY , the Petitioner has claimed a net capitalisation of Rs Crore. The Petitioner was directed to submit the addition of fixed assets into HT and LT works and to submit the Electrical Inspector clearance for HT works. The Petitioner did not submit the required details. The Petitioner submitted the Electrical Inspector clearance certificate for only Rs Crore as against total additional capitalisation of Rs Crore in FY The Commission observes that the Petitioner has capitalised assets amounting to Rs Crore towards Furniture & Fixtures, Vehicles and office equipment for which Electrical Inspector s Certificate is not required. The Commission has, therefore, approved additional capitalisation of Rs Crore and Rs Crore amounting to Rs Crore. The Commission has also considered the Decapitalisation of assets of Rs Crore in FY The Commission has not allowed a capitalisation of Rs Crore in the absence of clearance by Electrical Inspector as required under the Rules & also as details of segregation of assets into HT/EHT & LT works in line with the approach taken by the Commission in its previous Orders. The Commission has, therefore, approved net additional capitalisation of Rs Crore for FY as follows: Table 3.26: Assets base approved by the Commission for FY (Rs. Crore) Particulars FY Opening Balance Net additions Closing Balance Uttarakhand Electricity Regulatory Commission

115 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Financing of Capital Cost Truing Up of Capital Related Expenses for FY The Petitioner has claimed GFA addition of Rs Crore for FY The means of finance submitted by the Petitioner is shown in the Table below: Table 3.27: Means of Finance for FY as submitted by the Petitioner (Rs. Crore) Particulars FY RGGVY Loan 0.00 R-APDRP Part A Loan 0.00 REC Loan Deposit Works Grant Internal resources Total As discussed above, the Commission has approved additional capitalisation of Rs Crore. The means of finance as approved by the Commission is as follows: Table 3.28: Means of Finance as approved by the Commission for FY (Rs. Crore) Particulars FY RGGVY Loan 0.00 R-APDRP Part A Loan 0.00 REC Loan Deposit Works Grant Internal resources Total The Commission has worked out the means of finance of the capitalisation considered by it in the same proportions of actual capitalisation submitted by the Petitioner Interest and Finance Charges The Petitioner has claimed Interest and Finance Charges of Rs Crore for FY against the amount of Rs Crore approved by the Commission in the Tariff Order dated April 05, The Petitioner submitted that it has claimed interest expenses as per the audited accounts after considering the following adjustments: Uttarakhand Electricity Regulatory Commission 101

116 Order on True-up for FY , APR for FY & ARR for FY a) The Petitioner has computed the revised opening of the normative loans in view of the revision in means of finance from FY onwards. b) Actual interest accrued during the year has been claimed which is net off capitalisation. c) Government Guarantee fees has been considered on actual basis. d) The Petitioner has not considered the interest on GPF. However, the Petitioner requested the Commission to allow interest on GPF as part of interest expense as this is the statutory liability of the Petitioner. The Petitioner submitted that the Government of Uttarakhand (GoU) has in the past refused to provide support on account of Interest on GPF. The Petitioner added that GoU is already bearing the terminal liability of the old employees unlike other States. The Petitioner, further, requested the Commission that in case the interest on GPF has to be borne by the State Government, the Commission should issue suitable directions to GoU in this regard. e) No interest on short-term funding through overdraft facility has been considered. f) Interest on REC (Old) loans has been considered in accordance with the re-schedulement package of REC (Old) loans determined by the Commission in its Tariff Order dated 23 rd October, 2009 for FY g) Interest on consumer security deposit has been claimed as per the actual interest paid. h) Provision for interest on PFC loans towards R-APDRP Part A and Part B has been excluded as these loans shall be converted to grants after successful implementation of the works. i) Other financial and bank charges have been considered after reducing the overdraft amount. The Petitioner has again claimed interest on AREP loans which has not been allowed by the Commission in its previous Tariff Orders for reasons given in the respective Orders. The Petitioner has ignored the fact that the AREP loan were interest free loan and interest was payable in case of default by the borrower and the costs associated with any default cannot be allowed to be pass through in tariffs. Hence, the Commission again disallows the interest claimed on AREP loans. The Commission has also not considered interest on R-APDRP loans in line with the approach adopted by the Commission in the previous Tariff Order. 102 Uttarakhand Electricity Regulatory Commission

117 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY As discussed in preceding paras, the Commission has revised the funding of additional capitalisation from FY onwards. The Commission has, accordingly, considered the revised closing loans for FY as the opening loan for FY Regulation 27 of the UERC Tariff Regulations, 2015 stipulates the methodology for computation of interest expenses. The Commission in accordance with the above Regulation has worked out the Interest and Finance Charges for FY considering the loan amounts corresponding to the assets capitalised in the year based on the approved means of finance, and the interest rate of 9.24% has been computed on the basis of weighted average interest rate on the actual loan portfolio at the beginning of each year. The Petitioner has again requested the Commission to allow interest on GPF as part of interest expenses as the same is a statutory liability of the Petitioner. The Commission in the past has not allowed such expenses for reasons given in the respective Orders. Hence, the Commission again disallows the interest claimed on GPF. The Petitioner has claimed interest liability on consumers security deposits (CSD) for FY as Rs Crore which has actually been paid. The Commission has approved the interest on CSD for FY as Rs Crore. Further, the interest on REC Old Loan has been allowed as claimed by UPCL. The Commission observed that the Petitioner has claimed substantially higher guarantee fee of Rs Crore as compared to Rs Crore approved in the Tariff Order for FY The Commission, accordingly, directed the Petitioner to submit the details of the guarantee fees paid. The Petitioner in response submitted the breakup of guarantee fees claimed by it which is as shown in the Table below: Table 3.29: Guarantee Fee claimed by the Petitioner in FY (Rs. Crore) Particulars Amount Provision for Guarantee fees for FY Provision for penalty due to non-payment of 5.65 Guarantee fees for FY Total The Commission further sought details of how provisions of Rs Crore has been worked out and details of guarantee fee booked in accounts and that actually paid to State Government Uttarakhand Electricity Regulatory Commission 103

118 Order on True-up for FY , APR for FY & ARR for FY from FY to FY The Petitioner in its reply submitted the computation of provisions of Rs Crore as shown in the Table below: Table 3.30: Basis of computing provisions on account of Guarantee Fee (Rs. Crore) Outstanding Loan Penalty Amount due to Guarantee S. Guarantee Loan Amount as on non-payment of Fees + No. Fees Guarantee Fees Penalty 1. Old REC Loan R-APDRP (Part A)-PFC RAPDRP-PART A (SCADA)-PFC RAPDRP-PART B PFC Total The Petitioner further submitted that the Guarantee fees at the rate of 1% and penalty at the rate of 1% on outstanding loan was wrongly calculated on Rs Crore instead of Rs Crore. Thus, guarantee fee was computed on extra Rs Crore (i.e. Rs Crore less Rs Crore) in FY The Petitioner in this regard submitted that it is already making efforts in seeking the additional Rs Crore paid to PFC. Further, the entry of Guarantee fees along with applicable penalty was earlier passed on the full amount, i.e. Rs Crore. The entry could not be rectified in FY due to which there is an excess provision for Rs Crore in FY The Petitioner submitted that the same shall be rectified in the current year, i.e. FY The Commission has only considered the guarantee fee of Rs Crore due for FY and has not considered the excess provision made by UPCL as well as provisions made for payment of penalty on non-payment of guarantee fee as the Commission has been allowing guarantee fee to UPCL in its previous Tariff Orders. Further, the Commission has not reduced the amount of interest capitalised as the Commission has considered the loans corresponding to the assets capitalised and not the total loans as considered by the Petitioner. The Commission has worked out the Interest and Finance Charges for FY considering the loan amounts corresponding to the assets capitalised in the year based on the approved means of finance, as shown in the Table below: 104 Uttarakhand Electricity Regulatory Commission

119 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Table 3.31: Interest and Finance Charges for FY (Rs. Crore) Particulars Tariff Claimed by Order UPCL Approved Interest on Loan corresponding to assets capitalised REC Old Loan Guarantee Fee & Financing Charges Financing Charges Interest on Security Deposit Net Interest and Finance Charges Depreciation The Petitioner in its Petition has submitted that it has calculated depreciation considering the opening and closing GFA for FY on an average basis. Further, the rate of depreciation considered by it was as specified in UERC Tariff Regulations, The Petitioner has computed depreciation at the rate of 5.21% for FY The Petitioner has, accordingly, claimed total depreciation of Rs Crore as against Rs Crore approved by the Commission in the Tariff Order for FY The Commission has allowed depreciation at a weighted average rate of 5.21% based on the audited balance sheet for FY Further, the Commission has been allowing depreciation on the value of opening GFA keeping in line with the practice being followed by the Petitioner of capitalising the asset in its accounts on the last day of the financial year. The Tariff Regulations of the Commission provides for depreciation on pro-rata basis, however, the Petitioner in its accounts calculates depreciation on the opening GFA as is evident from its Notes to Accounts. Therefore, the Commission finds no justification to depart from the practice adopted in the previous Tariff Orders of allowing depreciation on the opening balance of GFA. The Commission directs the Petitioner to claim depreciation in line with its practice followed in the accounts. The Commission in its data gaps sent to the Petitioner required it to confirm that the depreciation claimed is not in excess of 90% of its assets. The Petitioner in its reply confirmed that depreciation in FY has been less than 90% of GFA for all assets in accordance with the UERC Tariff Regulations, below: The depreciation approved by the Commission for FY is as shown in the Table Uttarakhand Electricity Regulatory Commission 105

120 Order on True-up for FY , APR for FY & ARR for FY Table 3.32: Depreciation approved for FY (Rs. Crore) Particulars Tariff Order Claimed by UPCL Approved Opening GFA Grants Depreciable opening GFA Net addition during the year * Closing GFA Depreciation Rate 5.21% 5.21% 5.21% Depreciation *Additions less grants Provisions for Bad and Doubtful Debts The Petitioner in its Petition has submitted that the Commission in the MYT Order dated April 05, 2016 did not allow any provisioning of bad debts for earlier years. The Petitioner submitted that annual provision towards bad & doubtful debts is an accepted method of accounting and considering the peculiarity of retail supply business, the same has also been recognized by other SERCs. The Petitioner added that the amount, if any, written off towards bad debts is only adjusted against the accumulated provisions in the books, irrespective of the actual amount of bad debts during any particular financial year. The Petitioner requested the Commission to allow provision for bad and doubtful debts on actual basis after considering the geographical spread of the large consumer base across the State including a large part of the same prevailing in the difficult terrain and hilly region and the problem of realizing energy dues from retail consumers. The Petitioner further submitted that in line with the approach followed by the Commission in the previous Tariff Orders, the Petitioner has not included any amount on account of provisioning of bad debts in the ARR but has calculated the same and has requested the Commission for its approval. The Petitioner further submitted that as per the directions of the Commission, the process of writing off bad debts has already been initiated. The Petitioner in its Petition has requested the Commission to approve Rs Crore which is the actual write off of bad debts in FY Regulation 31 of the UERC Tariff Regulations, 2015 specifies as follows: (1) The Commission may allow a provision for bad and doubtful debts upto one percent (1%) of the estimated annual revenue of the distribution licensee, subject to actual writing off of bad debts by it "in the previous years. 106 Uttarakhand Electricity Regulatory Commission

121 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Provided further that where the total amount of such provisioning allowed in previous years for bad and doubtful debts exceeds five (5) per cent of the receivables at the beginning of the year, no such appropriation shall be allowed which would have the effect of increasing the provisioning beyond the said maximum. As regards the bad and doubtful debts, the Commission sought the following clarification from UPCL: Nature of bad debt written off. Consumer Category wise bad debt written off Division wise bad debt written off and consumer category wise bad debt written off. UPCL in response to the above queries has submitted that the bad debt pertains to write off of fictitious arrears which were created due to wrong or excess billing and further submitted the category wise and division wise details of the bad debts written off. It is observed that the provision for bad and doubtful debts as on November 9, 2001 as per the Transfer Scheme of Assets and Liabilities executed between UPPCL and UPCL was Rs Crore. The details of provision for bad debts allowed by the Commission and actual bad debts written off by the Petitioner are as shown in the Table below: Table 3.33: Provision for Bad and Doubtful Debts and Actual Write off (Rs. Crore) Year Provision allowed by the Commission Actual written off FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY Total Uttarakhand Electricity Regulatory Commission 107

122 Order on True-up for FY , APR for FY & ARR for FY The Commission in its MYT Order dated April 05, 2016 with regard to writing off bad debt had held as under: With respect to the amount written off by the Petitioner during FY and FY , the Petitioner in the previous proceedings had submitted that the wrong billing made in the earlier period were corrected by the distribution divisions and the value of excess billing had been written off in FY and FY Since the write offs were basically the rectification of wrong billing and, accordingly, the Commission had held that such corrections cannot be treated as writing off of bad debts. This clearly indicates lack of proper policy framework for identification, recognition and management of provision for bad and doubtful debt. Further, it is surprising that despite categorical directions issued by the Commission in its previous Tariff Orders, to frame a transparent policy for identifying, recognising and writing off the bad debts, the Petitioner in its reply has yet again submitted that it is in the process to finalise the bad debts write off policy of the company. The Petitioner is directed to finalise the Policy within three month from the date of Order and submit the same for approval of the Commission. The Commission observed that the Petitioner is yet to finalise its bad debt write off policy as per the above directions. The Commission directed the Petitioner to submit the current status towards compliance of the said directions. The Petitioner in response in the current Petition has submitted Bad Debt Policy which it intends to implement from FY onwards. The Commission in this regard has discussed the same in Chapter 4 of this Order. The Commission has already allowed the Petitioner a total provision of Rs Crore till FY which also includes the opening balance of the provision inherited from UPPCL. Even considering the actual write off debt of Rs Crore till FY , the Petitioner is still left with a provision of about Rs Crore. The closing debtors of UPCL as on were to the tune of Rs. 1, Crore as per the Commercial Diary of UPCL. Hence, the provision available with UPCL is to the extent of 5.77% for FY of the existing debtors and any additional provision is not allowable in accordance with the Regulations as referred above. In this regard, UPCL is again directed to refrain itself from treating rectification of wrong billing made in the earlier period as writing off the bad debts Interest on Working Capital (IoWC) The Petitioner has submitted that it has computed interest on working capital as per UERC 108 Uttarakhand Electricity Regulatory Commission

123 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY Tariff Regulations, However, as per the computation submitted by the Petitioner the net working capital is submitted as Rs Crore. The Petitioner has submitted that it has not claimed any IoWC. The Petitioner has submitted that the actual interest on working capital is nil as the amount towards overdraft facility is primarily utilized for the purpose of availing the maximum rebate from the generators. However, the Petitioner has requested the Commission to consider the interest on overdraft against the rebate earned from generators as detailed under non-tariff income. The computation of interest on working capital as submitted by the Petitioner is detailed in the Table below: Table 3.34: Interest on Working Capital for FY (Rs. Crore) Particulars Amount Operation and Maintenance Expenses (one month) Maintenance 15% of O&M Expenses Receivables (2 months) Capital required to finance such shortfall in collection of current dues Sub-total Less: Adjustment for security deposits & Credit available for Power Purchase Net working capital Interest on working capital 0.00 The Commission has computed the working capital requirement as per UERC Tariff Regulations, Similar to the Petitioner s submission, the net working capital as worked out based on the approved expenses is negative, therefore, the Commission is not approving any IoWC for FY In this regard, the Petitioner s request to adjust it against the revenue towards rebate earned cannot be accepted as the interest on overdraft facility and revenue earned through rebate are two different elements. Further, as per the norms specified in the Regulations the Petitioner does not require any working capital if it would have carried out its operations efficiently. The requirement of overdraft arose as the Petitioner could not recover its dues from the consumers on time. However, actual interest on overdraft facility availed, which is a working capital facility has been considered as loss and sharing of the loss has been done in accordance with UERC MYT Regulations, Return on Equity The Petitioner submitted that it has computed Return on Equity (RoE) for FY based on actual equity invested in the business. The Petitioner further submitted that it has calculated RoE on the basis of the following. Uttarakhand Electricity Regulatory Commission 109

124 Order on True-up for FY , APR for FY & ARR for FY Revised opening equity has been considered for FY depending upon the finalisation of transfer scheme. Revised closing equity for FY has been arrived upon in the following manner. i. Opening equity balance as approved by the Commission for FY has been considered. ii. Year wise addition of equity as per the funding of each scheme has been considered. The capitalisation for FY excluding the grants and deposit works has been considered to be funded in the debt equity ratio of 70:30. Return on equity has been computed on the average equity at the rate of return of 16.50%. The Petitioner has computed RoE on opening equity, however, it has requested the Commission to allow RoE on the basis of average equity. The Commission as already discussed has revised the funding of additional capitalisation from FY onwards. The Commission in view of the same has considered the revised closing equity for FY as the opening equity for FY With respect to UPCL s request to allow RoE on average equity, the Commission is not allowing the same for two reasons. Firstly, UPCL s policy of capitalisation of assets in its accounts is to capitalise the asset on the last day of the Financial Year and hence, the asset cannot be expected to generate income till it is put to use and capitalised in the accounts. Further, the Regulations allows RoE on the opening equity only. Accordingly, the Commission has approved the Return on Equity at the rate of 16.50% on the opening equity in accordance with the Regulations. The Return on Equity approved by the Commission for FY is as shown in the Table below: Table 3.35: Return on Equity approved by the Commission for FY (Rs. Crore) Approved in the Particulars Claimed by UPCL Approved Tariff Order Return on Equity Non Tariff Income The Petitioner submitted that the Non-Tariff Income includes income from non-tariff sources 110 Uttarakhand Electricity Regulatory Commission

125 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY such as income from investments, delayed payment surcharge, etc. The Petitioner, in its Petition, has claimed non-tariff income as Rs Crore as against the actual Non-Tariff Income as per the audited accounts of Rs Crore. The Petitioner submitted that since UERC MYT Regulations, 2015 allows normative working capital only, any additional rebate earned by the Petitioner by making early payment should be allowed to be retained by the Petitioner. The Petitioner further submitted that it has been making consistent and earnest efforts to avoid additional burden on the consumer by following the practice of making timely payments of the power purchase invoices. Therefore, the Petitioner has requested the Commission to approve the cost of overdraft facility availed by it by adjusting the same in the total benefit availed from the rebate. Accordingly, the Petitioner has adjusted the rebate of Rs Crore with the interest on overdraft of Rs Crore made in FY The Commission does not accept the contention put forward by the Petitioner. The Commission in the past has also considered the total rebate earned by the Petitioner as non-tariff income. The Petitioner in the past have pleaded to only pass on 1% of the rebate earned by it which was contrary to the Judgment dated May 18, 2015 of Hon ble APTEL in the appeal filed by the Petitioner and, therefore, was not allowed by the Commission. In the current Petition, the Petitioner intends to adjust the cost of overdraft facility which it uses to manage its working capital requirement inherent to the operations of its business and the same cannot be passed on to the consumer as the Commission has been separately allowing IoWC as per the prevalent Regulations and for reasons discussed in Section above, the Petitioner intends to seek additional expenses over and above IoWC allowed by the Commission under the guise of cost towards maintaining overdraft facility which is not as per the UERC Tariff Regulations, Therefore, the same has not been considered by the Commission. The Petitioner with regard to material cost variance submitted that out of the total Rs Crore, contribution from grants (Rs Crore) has been deducted from the overall claim in line with the methodology adopted by the Commission in the Tariff Order dated March 29, The Petitioner further submitted that it has adjusted the prior period income/expense of Rs Crore for non-allowable prior period income /expenses and has considered income and expenses towards power purchase liabilities written back, prior period expenses and assessment of prior period income as per audited accounts for consideration in non-tariff income. The Commission agrees with the submissions made by the Petitioner in this regard as the Uttarakhand Electricity Regulatory Commission 111

126 Order on True-up for FY , APR for FY & ARR for FY Commission also had not allowed the material cost variance on the value of grants and also with the submissions made with regard to adjustment of prior period income and expenses. Accordingly, the non-tariff income claimed by the Petitioner and that approved by the Commission for the purpose of truing up for FY is as given in the Table below: Table 3.36: Non-tariff Income approved by the Commission for FY (Rs. Crore) Particulars Approved in Claimed the Tariff Order by UPCL Approved Interest on deposits Income from staff welfare activities Rebate/Incentive Miscellaneous receipts Material Cost Variance Delayed Payment Surcharge Sale of Surplus Power Wheeling Charge, Cross Subsidy Surcharge and Additional Surcharge Prior Period Income Total Tariff Revenue The Petitioner submitted the revenue at existing tariff as Rs Crore as against the revenue of Rs Crore approved by the Commission in the Tariff Order for FY However, on totalling the category wise revenue, the total revenue worked out to Rs Crore against Rs Crore submitted by UPCL. The Petitioner submitted that the Commission in its MYT Order dated April 05, 2016 had approved distribution loss of 15.00%. The Petitioner further submitted that while approving the distribution loss, the Commission had reiterated the need for conducting an independent energy audit study. In addition, clause 79(4) of the UERC Tariff Regulations, 2015 also states that the Commission may require the Distribution Licensee to conduct proper and reliable energy audit to substantiate distribution loss calculations. The Petitioner submitted that in pursuance of Commission s directive, the Petitioner appointed a consultant for independent verification of billing parameters (input energy, energy billed, billed amount and collected amount) and for deriving the billing efficiency, collection efficiency and AT&C losses of UPCL for FY As per the report 112 Uttarakhand Electricity Regulatory Commission

127 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY submitted by the consultant the actual distribution losses are 18.33% for FY which was broadly in line with the claim of the Petitioner. The Petitioner further submitted that the actual distribution loss for FY were substantially higher than the baseline value of 15.00% considered by the Commission for FY and subsequent years resulting in non-achievement of target distribution loss by the Petitioner for FY in spite of the improvement to 16.68% over the past year actual loss level of 18.33%. The Petitioner further submitted that it is able to achieve the loss reduction in spite of operating in a difficult geographical terrain where very small load clusters are distributed over a larger area resulting in higher distribution losses. Also, with the implementation of Central Government schemes like RGGVY and DDUGJY where the Petitioner is required to connect rural population spread across the state, it is difficult to maintain the same loss level. In view of the above challenges, which also result in counterbalancing the initiatives undertaken by the Petitioner for loss reduction and findings of an independent energy audit, the Petitioner requested that the Commission may re-determine the targets for the Second Control Period based on the actual base year values of 18.33% in FY For FY , the Petitioner has achieved distribution loss of 16.68% which it has requested the Commission to approve as loss target for FY and further, reduce the trajectory in line with the target approved for FY onwards. The Petitioner further submitted that the Commission in its previous Tariff Orders has also been computing additional deemed revenue earned by the utility for non-achievement of loss targets as adjustment in the revenue gap based on the gain/ loss sharing mechanism. This has led to huge revenue loss for the Petitioner in the past years even after having achieved year-on-year reduction in distribution loss. The Petitioner further requested not to consider any additional revenue on account of not meeting the norms and revisit and adjust the revenue that have been considered in the past. The Commission has considered the distribution loss for FY as approved by it in its MYT Order and, accordingly, has computed the loss of sales as MU due to commercial inefficiencies of UPCL. It is observed that despite huge capitalisation carried out by the Petitioner, its losses at LT levels are not reducing. Further, no concrete steps have been carried out by the Petitioner to reduce its losses. The meter exceptions of the Petitioner though have reduced but are still on a higher side. This issue has also been settled by Hon ble ATE in its Judgment dated May 18, 2015 on the Appeal filed by the Petitioner. The relevant extracts of the Judgment are reproduced Uttarakhand Electricity Regulatory Commission 113

128 Order on True-up for FY , APR for FY & ARR for FY hereunder:...it is clear from the submissions made by State Commission that the Appellant has not been taking action on the directions given by the State Commission on defective meter and meter not read which remained above 20% of total consumers more than five years in each billing cycle. The State Commission UPCL has not taken action for energy audit. We do not find any infirmity in fixing up of loss reduction targets by the State Commission. The Appellant has not given any instances where funds for capital works for strengthening of distribution system have been denied by the State Commission in ARR... Thus, the Commission finds no reason to revisit the loss reduction trajectory fixed by it. While approving the category wise sales for FY , the Commission has recasted the sales of Domestic, Private Tubewells and Public Lamps from the sales submitted by the Petitioner. Since, the sale has been reduced, the Commission has, accordingly, adjusted the revenue corresponding to the assessed sales from the total revenue submitted by the Petitioner based on the re-casted ABR of that category which has been worked out based on the actual revenue and recasted sales. With regards the revenue from departmental employees, both in service and retired, it is observed that based on the re-casted sales for departmental employees, the ABR of UPCL s departmental employees is less than the average ABR of other domestic consumers, while the ABR of UJVN Ltd. and PTCUL s employees is exceeding the average billing rate of other domestic consumers and, accordingly, adjustment on this account has been carried out towards the revenue for FY based on the ABR of other domestic consumers. The revenue corresponding to the assessed sale is shown in the Table below: Table 3.37: Revenue for FY Corresponding to Assessed Sales Actual Actual Actual Recasted ABR on ABR of Revenue Particulars Sales recasted the (Rs. (MU) sales category Crore) (Rs./kWh) (Rs./kWh) Revenue Corresponding to re-casted sales (Rs. Crore) UPCL Employees and Pensioners PTCUL Employees and Pensioners (1.37) UJVNL Employees and Pensioners (0.06) Public Lamps (0.01) Total 2.72 It is imperative to mention that the impact of concessional/subsidised electricity provided 114 Uttarakhand Electricity Regulatory Commission

129 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY by UPCL to its employees works out to about Rs Crore (20.30 MU excess consumption disallowed or loss of sales and considered as ABR of Rs per unit which yields a revenue of Rs Crore and additional revenue of about Rs Crore due to lower ABR than that of other domestic consumers). The Corporation will have to bear this impact as the average consumption of the employees is much higher than the consumption of other domestic consumers and, moreover, the charges which are recovered from the employees towards the use of electricity is not commensurate with the price charged from other domestic consumers. Hence, the same cannot be allowed to be passed on to the consumers in the State and the Corporation will have to bear this burden. Based on the above, the revenue from the sale of power, as worked out by the Commission is shown in the Table below: Table 3.38: Revenue from Sale of Power for FY (Rs. Crore) Particulars Amount Actual Revenue Add: Revenue corresponding to recasted Sales 2.72 Total Revenue Crore. The Commission for the computation of ABR has considered the revenue of Rs Further, as discussed above there is a loss of MU on account of commercial inefficiencies of the Petitioner failing to achieve target distribution loss approved by the Commission. The Commission has considered the revenue of Rs Crore at an average billing rate of Rs kwh for this additional loss of sale on account of higher distribution losses while truing up the ARR for FY as shown in the Table below: Table 3.39: Additional Revenue from Sale due to inefficiency for FY (Rs. Crore) Sr. No. Particulars Claimed by UPCL Approved 1. Actual/ Re-casted Sales (MU) Approved Distribution Loss Level (%) 15.00% 3. Actual Energy Input at T-D Interface (MU) Sales at Actual Energy Input with 15.00% Loss (MU) Loss of Sales due to Inefficiency (MU) NIL 6. Revenue at existing Tariff (Rs. Crore) ABR (Rs./kWh) Additional Revenue due to higher distribution losses (Rs. Crore) Losses to borne by Petitioner Rs Crore) (2/3 rd of (8)) Uttarakhand Electricity Regulatory Commission 115

130 Order on True-up for FY , APR for FY & ARR for FY Accordingly, the Commission has considered tariff revenue of Rs Crore including Rs Crore as deemed revenue on account of excess loss for FY as against total revenue of Rs Crore claimed by the Petitioner. 3.5 Sharing of Gains and Losses The Petitioner submitted that it has achieved better performance against the targets specified on the performance parameters, i.e. employee expenses and A&G expenses. Table below: The sharing of gains and losses claimed by the Petitioner for FY is as shown in the Table 3.40: Sharing of Gains and Losses for FY claimed by the Petitioner (Rs. Crore) Particulars Amount Consumer Share UPCL Share A. Gain 1/3 rd 2/3 rd Employee Expenses A&G Expenses R&M Expenses (0.07) (0.07) (0.14) (Loss)/ profit Share Regulation 12 of the UERC Tariff Regulations, 2015 specifies as under: 12. Annual Performance Review (5) The uncontrollable factors shall include such of the factors which are beyond the control of, the applicant, as determined by the Commission. Some examples of uncontrollable factors are as follows: c) Economy wide influences such as unforeseen changes in inflation rate, market interest rates, taxes and statutory levies; (6) Some illustrative variations or expected variations in the performance of the applicant which may be attributed by the Commission to controllable factors shall include, but shall not be limited to, the following: 116 Uttarakhand Electricity Regulatory Commission

131 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY f) Variations in working capital requirements; j) Variation in operation & maintenance expenses (10) Upon completion of the Annual Performance Review, the Commission shall pass on an order recordinga) The approved aggregate gain or loss to the Applicant on account of uncontrollable factors and the mechanism by which the Applicant shall be allowed such gains or losses in accordance with Regulation 13; b) The approved aggregate gain or loss to the Applicant on account of controllable factors and sharing of such gains or such losses that may be shared in accordance with Regulation 14; c) The approved modifications to the forecast of the Applicant for the ensuing year, if any; The surplus/deficit determined by the Commission in accordance with these Regulations on account of truing up of the ARR of the Applicant shall be carried forward to the ensuing financial year. Regulation 13 of the UERC Tariff Regulations, 2015 specifies as under: 13. Sharing of Gains and Losses on account of Uncontrollable factors (1) The approved aggregate gain or loss to the Applicant on account of uncontrollable factors shall be allowed as an adjustment in the tariff/charges of the Applicant over such period as may be specified in the Order of the Commission; Regulation 14 of the UERC Tariff Regulations, 2015 specifies as under: 14. Sharing of Gains and Losses on account of Controllable factors (1) The approved aggregate gain and loss to the Applicant on account of controllable factors shall be dealt with in the following manner: Uttarakhand Electricity Regulatory Commission 117

132 Order on True-up for FY , APR for FY & ARR for FY a) 1/3 rd of such gain shall be passed on as a rebate or allowed to be recovered in tariff over such period as may be specified in the Order of the Commission; b) The balance amount of gain may be utilized or absorbed by the Applicant. Hence, in accordance with UERC Tariff Regulations, 2015, the O&M expenses, IoWC and Distribution losses are controllable factors and any gain or loss on account of the controllable factors is to be dealt in accordance with the provisions of Regulation 14 of the above mentioned Regulations. The Petitioner with regard to interest on working capital has submitted that IoWC as per accounts and actually incurred are zero and, therefore, no sharing of the same has been claimed. The Commission, however, observes that the Petitioner has incurred cost of Rs Crore towards interest on overdraft facility for working capital management. The Commission has, therefore, carried out sharing of IoWC. The sharing of gains on account of controllable factors approved by the Commission for FY is as shown in the Table given below: Table 3.41: Sharing of Gains on Account of Controllable Factors approved by the Commission for FY (Rs. Crore) Particulars Normative as Aggregate Consumer s Petitioner s Share Actual Trued up gain/(loss) Share of Gain/(Loss) Gain: D=1/3 x C A B C=B-A E=C-D Loss D=1/3 x C O&M expenses * * Distribution Loss 17.10% 15.00% (121.31) (40.43) (80.88) IoWC (27.06) (9.02) (18.04) Total ( ) (45.33) (90.69) * Excluding provisions towards date centre costs and costs paid to Que Next of Rs Crore. The trued O&M Expenses is as shown below: Table 3.42: O&M Expenses as Trued up by the Commission for FY (Rs. Crore) Actual O&M Petitioner s Share of A&G Trued up O&M Particulars Expense Gain/(Loss) Provision Expense O&M Expenses 118 Uttarakhand Electricity Regulatory Commission

133 3. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Truing-up for FY ARR and Revenue for FY The Commission in its Tariff Order dated April 06, 2016 had approved the Net Revenue Requirement for FY as Rs Crore. The Petitioner has now claimed an ARR of Rs Crore for FY However, based on the various elements of the ARR as discussed above and approved by the Commission, the summary of final Truing up for FY is given in the Table below: Table 3.43: Summary of true up for FY approved by the Commission (Rs. Crore) Approved in S. Claimed by Particulars Tariff Order No. UPCL dated Approved 1. Total Power Purchase Cost Interest on Loan & Financing Charges Depreciation O&M expenses after sharing of gains and losses Interest on Working Capital Impact of IoWC sharing Return on Equity Impact of Previous Year Funding adj Aggregate Revenue Requirement 5, , , Less: Non-Tariff Income Gap/(Surplus) of previous year (175.10) (175.10) (175.10) 12. Past Year s Adjustments (122.01) (122.01) (122.01) 13. Net ARR 5, , , Revenue 15. Revenue at Existing Tariff 5, , , Revenue from Addl. Sales. (after sharing) Total Revenue 5, , , Adjusted Revenue (Surplus)/Gap (0.95) The Petitioner in its Petition had requested the Commission to approve the gap of Rs Crore. However, the Commission has approved a gap of Rs Crore for FY The gap for FY with carrying cost works out to Rs Crore which has been considered by the Commission in the ARR of FY Uttarakhand Electricity Regulatory Commission 119

134 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Background With regard to the MYT Framework and determination of ARR, UERC Tariff Regulations, 2015 specifies as follows: 4. Multi-year Framework The Multiyear tariff framework shall be based on the following:- a) Business plan submitted by the applicant for the entire control period for the approval of the Commission prior to the beginning of the control period; b) Applicant s forecast of expected ARR for each year of the control period, based on reasonable assumptions and financial & operational principles/parameters laid down under these Regulations submitted alongwith the MYT petition for determination of Aggregate Revenue Requirement and Tariffs for first year of the control period; c) Review of control period ending on shall also be taken up alongwith the ARR/Tariff petition for the first year of ensuing control period. d) Trajectory for specific parameters as may be stipulated by the Commission based on submissions made by the Licensee, actual performance data of the Applicants and performance achieved by similarly placed utilities; e) Annual review of performance shall be conducted vis-à-vis the approved forecast and categorization of variations in performance into controllable factors and uncontrollable factors; f) Sharing of excess profit or loss due to controllable and uncontrollable factors as per provisions of these Regulations. 7. Determination of Baseline The baseline values (operating and cost parameters) for the base year of the control period shall be determined by the Commission and shall be based on the approved values by the Commission, the latest audited accounts, estimates for the relevant year, prudence check and Uttarakhand Electricity Regulatory Commission 120

135 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY other factors considered by the Commission. The Commission may re-determine the baseline values for the base year based on the actual audited accounts of the base year. In accordance with the above provisions of the Regulations, the Commission had approved the Aggregate Revenue Requirement of the Petitioner for all the years of the second Control Period, i.e. from FY to FY excluding the power purchase cost for FY and FY vide its MYT Order dated April 05, As regards the Annual Performance Review, Regulations 12(3) of the UERC (Terms and Conditions for Determination of Tariff) Regulations, 2015 specifies as follows: The scope of the Annual Performance Review shall be a comparison of the actual performance of the Applicant with the approved forecast of Aggregate Revenue Requirement and expected revenue from tariff and charges and shall comprise of following: a) A comparison of the audited performance of the applicant for the previous financial year with the approved forecast for such previous financial year and truing up of expenses and revenue subject to prudence check including pass through of impact of uncontrollable factors; b) Categorisation of variations in performance with reference to approved forecast into factors within the control of the applicant (controllable factors) and those caused by factors beyond the control of the applicant (un-controllable factors). c) Revision of estimates for the ensuing financial year, if required, based on audited financial results for the previous financial year; d) Computation of the sharing of gains and losses on account of controllable factors for the previous year. In terms of above, the Commission issued APR Order for FY and determined ARR and Retail Tariff for FY The Petitioner in the present APR Petition has requested the Commission to approve the revised estimates for FY based on the truing up of actuals for FY and revised submissions in the APR Petition. The Commission had already approved most of the ARR components for the Control Period FY to FY after detailed analysis, scrutiny and prudence check of the Petitioner s submission vide its MYT Order dated April 05, 2016 and APR Order dated March 29, As the Commission had not approved the power purchase cost for FY in its MYT Order dated April 05, 2016, hence, in the present Order the Commission has approved the power purchase quantum and cost associated therewith based on the analysis and scrutiny of Petitioner s projections in the Petition and considering the Uttarakhand Electricity Regulatory Commission 121

136 Order on True-up for FY , APR for FY & ARR for FY actual expenses allowed for FY in this Order. As discussed in the previous Chapter, the Commission in this Order has carried out the Truing up for FY in accordance with the UERC Tariff Regulations, 2015 wherein the Commission has allowed capitalisation of assets for FY and has revised the funding of additional capitalization from FY to FY In accordance with Regulation 12(3) of the UERC Tariff Regulations, 2015 the scope of annual performance review is limited to the revision of estimates for the ensuing year, if required, based on the audited financial results for the previous year and give resultant effect on this account in the estimates of the said current year. 4.2 Sales The Petitioner in its Petition submitted that in the MYT Order dated April 5, 2016, the Commission had undertaken a detailed review of the sales, connected load and number of consumers for the Control Period of FY to FY The Petitioner submitted that the actual sales for FY has been 10,572 MU which is lower than the approved sales of 11,188 MUs by 616 MU. The Petitioner further submitted that in view of the actual sales available for FY and four months of FY , it has proposed revision in sales for FY as per Regulations 12(3)(c) of the UERC Tariff Regulations, The Petitioner also submitted that based on the approved sales by the Commission, it is evident that the State energy consumption has witnessed 5.51% Compounded Annual Growth Rate (CAGR) over the past five years, i.e. from FY to FY as shown in the Table below: Table 4.1: Actual Energy sales for consumer categories during FY to FY (MU) Consumer Category RTS-1: Domestic RTS-2: Non-Domestic RTS-3: Public Lamps RTS-4: Private Tube-wells/Pumping sets RTS-5: Government Irrigation System RTS-6: Public Water Works RTS-7: LT & HT Industry Total LT Total HT RTS-8: Mixed Load RTS-9: Railway Traction Total Uttarakhand Electricity Regulatory Commission

137 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY The Petitioner submitted that growth in sales during FY has been lower, however, the data for first four months of FY for energy sales shows an increase in the current year as compared with the four month sales of FY Therefore, for the purpose of projecting the sales for FY , the Petitioner submitted that it has considered a mix of long to medium term trend in energy consumption along with any recent trend having an impact on future consumption across the consumer categories. The Petitioner further submitted that for FY , the Petitioner has been able to reduce the load shedding to less than 1% of the actual energy requirement. Therefore, the sales during FY can be considered equivalent to unrestricted sales and has, therefore, been used for the purpose of projection of sales for FY The Petitioner further submitted that it has considered the Adjusted Trend Analysis Method in line with the approach followed by the Commission in the MYT Order dated April 05, Projection of Energy Sales Adjusted Trend Analysis (CAGR) Method The Petitioner submitted that for projecting the category-wise energy sales, it has considered past growth trends in each consumer category, as explained below: a) The Petitioner has adopted an Adjusted Trend Analysis Method for projecting the sales for all consumer categories. The Petitioner submitted that this method assumes that the underlying factors which drive the demand for electricity are expected to follow the same trend as in the past, however, this approach also discounts any outlier (relative to the trend) observed in the growth rates over the period of 5 years and excludes them while projecting energy sales for FY b) The Petitioner submitted that this method makes use of a statistical tool, namely the Compound Annual Growth Rate (CAGR) and, accordingly, Compounded Annual Growth Rates (CAGRs) were calculated from the past figures for each category, corresponding to different lengths of time in the past five years, along with the year on year growth rates from FY to FY and growth during first four months of FY with respect to the corresponding months in FY and after considering the seasonality effect on consumption while selecting the growth rate. c) CAGR has been computed for each consumer category for the past 5-year period Uttarakhand Electricity Regulatory Commission 123

138 Order on True-up for FY , APR for FY & ARR for FY from FY to FY , the 4-year period from FY to FY , the 3-year period from FY to FY , and the 2-year period from FY to FY , along with the 1-year growth rate of FY over FY , as summarised in the Table below: Table 4.2: CAGR calculated for Energy Sales to each consumer category S. 4 Month Consumer Category 5 year 4 year 3 year 2 year 1 year No. FY RTS-1: Domestic 9.60% 9.41% 7.56% 5.23% 6.14% 7.93% 2. RTS-2: Non-Domestic 5.88% 5.42% 5.83% 5.04% 5.11% 3.93% 3. RTS-3: Public Lamps -6.27% -8.76% 7.47% 6.27% 12.62% 12.30% 4. RTS-4: Private Tube-wells/ Pumping sets 20.88% 18.06% 20.29% 14.50% 23.59% -4.47% 5. RTS-5: Government Irrigation System 1.22% 2.74% 11.74% 16.11% 2.97% 21.17% 6. RTS-6: Public Water Works 1.99% 4.29% 8.41% 6.46% 3.30% 3.14% 7. RTS-7: LT & HT Industry 3.90% 4.94% 4.48% 3.99% 1.55% 4.71% 8. Total LT % -0.76% 6.36% 3.13% 9. Total HT % 4.27% 1.30% 4.79% 10. RTS-8: Mixed Load 2.13% 1.54% 0.02% -2.06% -4.64% 0.41% 11. RTS-9: Railway Traction 18.04% 25.18% 20.46% 14.37% 35.80% 56.36% Total 5.51% 6.12% 5.91% 4.84% 3.68% 5.45% The Petitioner further submitted the methodology adopted for projecting the category wise sales for FY as stated below: (i) (ii) (iii) RTS-1: Domestic: Considering the increase in growth during first four months of FY and expected increase in domestic consumers due to implementation of DDUGJY scheme, the Petitioner has considered the CAGR of five years, i.e. 9.60% for projecting the sales for this category for FY and FY RTS-2: Non-Domestic: Since the sales growth in this category has been range bound (5-6%) as per the CAGR computed for various time intervals. Therefore, the Petitioner has considered the 3 year CAGR of 5.8% for projecting sales for this category for FY and FY RTS-3: Public Lamps: The sale for this category has been projected by the Petitioner based on 3 year CAGR, i.e. 7.5%. (iv) RTS 4: Private Tube Wells/Pumpsets (including RTS-4A): The Petitioner has projected sales for this category based on the growth rate of 7% in FY and 8% in FY owing to the increasing sales in the RTS-4A sub-category. 124 Uttarakhand Electricity Regulatory Commission

139 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY (v) RTS-5: Government Irrigation System: The Petitioner submitted that no specific pattern has been observed in the sales. The Petitioner submitted that in view of the consistently increasing load, the Petitioner has considered a growth rate of 10% and 7% for FY and FY respectively which is also supported by the increase in sales during the first four months of FY (vi) RTS-6: Public Water Works: The Petitioner submitted that the load in this category has increased by 9% during FY and 4% during first four months of FY Therefore, the Petitioner has projected the sales for this category for FY and FY based on 7% growth rate each year considering the growth in FY to be non-reflective of the medium term growth of sales in this category. (vii) RTS-7: LT & HT Industries: Sales to LT Industries have been projected based on the Y-o-Y increase in sales in FY and for HT Industries, the Petitioner submitted that the growth in sales during FY was 1.3% as compared with the 2-3 year growth of 4.3%-4.7%. Also, for the four months of FY , the average increase over past four months is 4.8%. Accordingly, the Petitioner has considered a growth rate of 4.5% for projecting the sales in this category for FY and FY (viii) RTS-8: Mixed Load: The Petitioner has projected sales for this category at a growth rate of 2% for FY and FY (ix) RTS-9: Railway Traction: The Petitioner submitted that based on increase in monthwise sales in first four months of FY mainly due to significant load enhancement by railways during FY and first four months of FY , a growth of 10% has been considered for FY in view of the full year impact of the advanced load of the railways. The Petitioner has considered the base year as FY for projecting the sales for FY The Petitioner has, accordingly, projected the energy sales for FY as shown in the Table below: Uttarakhand Electricity Regulatory Commission 125

140 Order on True-up for FY , APR for FY & ARR for FY Table 4.3: Sales projected by the Petitioner for FY (MU) S. No. Category Wise Sales FY (Re-Casted) Growth Rate Method Adopted FY RTS-1: Domestic % 5 year CAGR 2, RTS-2: Non-Domestic % 3 year CAGR 1, RTS-3: Public Lamps % 3 year CAGR RTS-4: Private Tube-wells / 7.00% (FY ) Pumping sets 8.00% (FY ) Subjective Rate RTS-5: Government Irrigation 10.00% (FY ) System 7.00%(FY ) Subjective Rate RTS-6: Public Water Works % Subjective Rate RTS-7: LT & HT Industry , Total LT % (FY ) 6.40% (FY ) Subjective Rate Total HT % Subjective Rate 6, RTS-8: Mixed Load % 5 year CAGR RTS-9: Railway Traction % Subjective Rate Total , The Commission observed that though the Petitioner has submitted that it is projecting unrestricted sales, however, the Petitioner has projected restricted sales instead of unrestricted sales. The Commission has gone through the submissions of the Petitioner. The Commission observes that the sales of MU projected by the Petitioner is less than MU projected by the Commission in MYT Order for FY primarily due to reduction in the growth rate especially in the Domestic and Industrial categories. As discussed in Chapter 3, the Commission has carried out the truing up of sales for FY Considering the actual re-casted sales as trued up sales in Chapter 3, the Commission has re-worked the sales of FY as discussed below. (i) Base year has been considered as FY as the actual sales data are available. The Commission has considered the re-casted sales for FY and has added the category wise load shedding carried out during FY as submitted by the Petitioner to derive the un-restricted sales for FY (ii) The Commission has applied the same growth rate as considered in the business plan for PTW, GIS, PWW and LT Industry. (iii) With regard to the Domestic and Non-Domestic Categories the Commission has considered 5 Year CAGR. (iv) For Public Lamps 3 Year CAGR has been considered. 126 Uttarakhand Electricity Regulatory Commission

141 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY (v) For the remaining categories the Commission has considered the growth rates as projected by the Petitioner taking into cognisance demand trend in the first four months of FY On the basis of the above, the total sales works out to MU which is lower than the sales of MU approved in the MYT Order dated by 701 MU. The Commission observes that there is a considerable difference in the sales approved in the MYT Order and that projected on the basis of re-casted sales of FY The Commission has, therefore, revised the sales considering the revised growth rates as discussed above for FY and the same is as shown below: Table 4.4: Consumer Category wise sales approved by the Commission for FY (MU) S.No. Category Claimed Approved 1. Domestic 2, Non Domestic 1, Public Lamps Private Tube Wells (PTW) Government Irrigation System (GIS) Public Water Works (PWW) Industrial Consumers LT Industries HT Industries 6, Total 6, Mixed Load Railway Traction GRAND TOTAL 11, Distribution Loss Trajectory The Commission had approved the Distribution Loss Trajectory for the second Control Period from FY to FY in its MYT Order dated The distribution loss trajectory approved by the Commission for the second Control Period from FY to FY is as shown in the Table given below: Table 4.5: Distribution Loss Trajectory approved by the Commission for the second Control Period from FY to FY Particulars FY FY FY Distribution Losses 15.00% 14.75% 14.50% The Petitioner in its Petition has submitted that the distribution loss level achieved by the Petitioner in FY was 16.68%. The Petitioner further submitted that the Commission while Uttarakhand Electricity Regulatory Commission 127

142 Order on True-up for FY , APR for FY & ARR for FY determining the ARR and Tariffs of UPCL has considered the deemed revenue due to nonachievement of unrealistic trajectory of distribution losses determined by the Commission. The Petitioner submitted that despite several efforts to reduce the distribution losses and significant improvement in FY , it has been challenging for the Petitioner to bring the losses at par with the targets set by the Commission. The Petitioner also submitted that below 20% distribution loss level, reduction of distribution losses is extremely difficult and slows down considerably. The Petitioner further submitted that inspite of a significant reduction of distribution loss by 1.71% during FY , the Petitioner would have to bear a huge financial loss in each year of the Control Period in case the loss trajectory is not re-determined based on the actual loss for FY (base year). The Petitioner also submitted that the following initiatives have been taken for loss reduction. a) Implementation of R-APDRP Part A scheme b) Implementation of R-APDRP Part B scheme c) Installation of Double metering in selected 11 kv & 33 kv consumers d) Implementation of AMR e) Replacement of Mechanical Meters with Electronic Meters and Installation of Electronic meters in un-metered connections f) Laying of LT ABC g) Replacement of defective meters h) Procurement of High value consumer management system (HVCMS) The Petitioner has, accordingly, proposed the following distribution loss trajectory. Table 4.6: Distribution Loss for FY to FY FY FY FY FY Year (Re-casted) (Re-casted) (Projected) (Projected) Distribution Loss 18.83% 16.68% 16.00% 15.00% As regards the distribution loss trajectory of UPCL, the Commission has already dealt with the issue in detail in its Order dated April 05, 2016 on Approval of Business Plan and Multi Year Tariff of UPCL for FY to FY and finds no reason to revisit the same again. However, 128 Uttarakhand Electricity Regulatory Commission

143 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY in this regard the Commission would like to point out towards the loss reduction initiatives proposed by UPCL. UPCL has been proposing the same initiatives over the years whose results should have started accruing by now. However, from the submissions of the Petitioner as given in the Table below it emerges that there are 7 distribution divisons of UPCL which have the distribution loss in excess of 30% which also includes EDD (U), Roorkee which has a distribution loss of 36.43% which is unacceptable considering the fact that it is a urban division covered under R-APDRP Scheme. Table 4.7: High Distribution Loss divisions as on S. No. Distribution Division Loss (%) 1. EDD, Narayanbagar 48.64% 2. EDD, Rudraprayag 32.75% 3. EDD (U), Roorkee 36.43% 4. EDD, Bageshwar 31.76% 5. EDD Vikasnagar 33.45% 6. EDD, Uttarkashi 36.69% 7. EDD, Dharchula 30.20% The Commission in its Order dated March 29, 2017 had also observed that there were seven divisions which had a loss level of more than 30% in FY As is evident from above, there are still seven divisions where the losses are still above 30%. Further, it is to be noted that in case of Roorkee Urban Division, the losses have marginally increased from 36.28% in FY to 36.43% in FY Same is also observed in case of Vikasnagar where losses have increased from 32.66% in FY to 33.45% in FY The only inference that could be drawn here is that the Petitioner has not made any serious and focussed efforts in reducing division wise losses despite being pointed out by the Commission in its previous Orders. The Commission directs the Petitioner to submit division wise action plan to reduce the losses in the above divisions to below 20% within one month from the date of issuance of this Order. As has been held by the Commission in its Tariff Order dated March 29, 2017, losses in other categories of consumers (excluding HT Consumers) as on March 31, 2016 were about 30.90%. Moreover, the Commission in the said Order had also held that for past 3 years virtually there had been no reduction in losses of other category of consumers which clearly suggested that the Petitioner did not put in serious efforts in reducing the losses for other categories, thereby, failing to bring these losses within acceptable limits. Further, to reduce the distribution losses at LT level and to achieve loss level within acceptable limits, the Petitioner was required to take up the certain Uttarakhand Electricity Regulatory Commission 129

144 Order on True-up for FY , APR for FY & ARR for FY works, like replacement of all mechanical meters in a time-bound manner in all the divisions, removal of all ghost/fictitious/non-existent consumers from its billing database, ensuring that all the meters of the consumers are read and their bills prepared and distributed within time and also that no provisional bills namely NA/NR are issued for more than two billing cycles in accordance with the provision of Electricity Supply Code Regulation, 2007, etc. However, UPCL is yet to achieve its target in ensuring compliances. Moreover, the Petitioner is also a signatory of the GoI Ujwal Discom Assurance Yojana (UDAY) wherein keeping in view the overall position, i.e. the actual losses of the Company, investment is to be made to improve the operational performance, consumer habits and the administrative situations. Further, the level of AT&C Losses of the Petitioner Company was fixed as follows under UDAY. Table 4.8: AT&C Loss Target as per UDAY Year Level of AT&C Loss % % % % Further, the Petitioner also submitted that during the meeting of State Advisory Committee held on in the office of the Commission to consider the request of the Petitioner of revisiting the distribution loss levels and targets. The Petitioner requested the Commission to specify the loss reduction trajectory in accordance with the target of distribution losses as fixed under UDAY. However, it needs to be understood that the targets fixed under UDAY Scheme are for AT&C losses and not distribution losses. The tariffs are fixed by the Commission based on the approved distribution losses in accordance with the MYT Regulations. The Commission had approved a distribution loss level of 15% for FY , however, the distribution losses required to match up with the targets set in the UDAY scheme will be much lower than that approved by the Commission. UPCL in its Tariff Petition for FY has itself projected a collection efficiency of 98.75% and 99% for FY and FY respectively. Thus, to reach at the targets set under UDAY at the proposed collection efficiency, the distribution losses of UPCL for the two financial years have to be 13.92% and 13.64% respectively against the targets set by the Commission of 14.75% and 14.50%. 130 Uttarakhand Electricity Regulatory Commission

145 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Further, as already dealt by the Commission in Chapter 3 of this Order, Hon ble ATE in its Judgment dated May 18, 2015 in Appeal no. 180 of 2013 has also held that it did not find any infirmity in fixing up of loss reduction targets by the State Commission as no instances were produced where funds for capital works for strengthening of distribution system had been denied by the State Commission in the ARR. Hence, the issue was decided against UPCL by Hon ble ATE. Hence, based on the above discussions and considering the ground realities, the Commission decides not to revise the loss trajectory for FY UPCL s inaction and continuous high level of inefficiency does not allow it to seek revision of the loss trajectory approved by the Commission, which if allowed would defeat the intent of the MYT framework. Accordingly, the Commission decides to retain the distribution loss for FY at 14.50% and the Petitioner is directed to abstain from seeking relaxation in this regard in every ensuing Tariff Petition once the issue has been settled by the Commission. The distribution loss trajectory proposed by the Petitioner and approved by the Commission for FY is shown in the Table below: Table 4.9: Distribution Losses for FY Particulars Proposed Approved Distribution Losses 15.00% 14.50% In line with the approach adopted by the Commission in its MYT Order, the Commission has considered the entire distribution loss reduction target for each year of the Control Period as reduction in commercial losses of the Petitioner and has, therefore, considered the impact of distribution loss reduction in terms of increase in sales due to efficiency improvement. Accordingly, the estimated energy requirement at distribution periphery, State periphery and approved loss level for FY is given in the Table below: Uttarakhand Electricity Regulatory Commission 131

146 Order on True-up for FY , APR for FY & ARR for FY Table 4.10: Energy Input requirement approved by the Commission for FY Particulars Quantum Distribution Sales (MU) 11, Loss level for Energy Input (MU) 14.75% Energy Input required at T-D interface (MU) 13, Commercial Loss reduction (%) 0.25% Commercial Loss reduction (Additional sales due to efficiency improvement) (MU) Total sales with efficiency improvement (MU) 11, Overall Distribution Loss (%) 14.50% PTCUL Loss (%) 1.55% Energy Input at State periphery (MU) 14, Aggregate Revenue Requirement Regulation 69 of the UERC Tariff Regulations, 2015 specifies as follows: 69. Aggregate Revenue Requirement for each Financial Year of the Control Period (1) The total annual expenses and return on equity of the Distribution Licensee for each financial year of the Control Period shall be worked out on the basis of expenses and return allowed in terms of these Regulations. (2) The retail supply tariff of a Distribution Licensee for each financial year of the Control Period shall provide for recovery of Aggregate Revenue Requirement of the Distribution Licensee for each financial year of the Control Period, as reduced by the amount of non-tariff income, income from wheeling in respect of open access customers, income from Other Business and receipts on account of crosssubsidy surcharge and additional surcharge for the relevant financial year, as approved by the Commission, and subsidy from the State Government for the financial year, if any, and shall comprise the following: (a) Cost of power purchase; (b) Transmission charges; (c) System Operation Charges i.e. Fee and Charges paid to NLDC/RLDC/SLDC (d) Interest and Finance charges on Loan Capital and on consumer security deposit; (e) Depreciation, including and amortisation of intangible assets; (f) Lease Charges 132 Uttarakhand Electricity Regulatory Commission

147 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY (g) Operation and Maintenance expenses; (h) Interest on working capital; and (i) Return on equity capital; (j) Income-tax; (k) Provision for Bad and doubtful debts (3) Net Revenue Requirement from sale of electricity = Aggregate Revenue Requirement, as above, minus: (a) Non-Tariff Income; (b) Income from wheeling charges recovered from open access customers; (c) Income from Other Business, to the extent specified in these Regulations; (d) Receipts from cross-subsidy surcharge from open access consumers; and (e) Receipts from additional surcharge on charges of wheeling from open access consumers. (f) Any revenue subsidy or grant received from the State Government other than the subsidy under Section 65 of Electricity Act, The Commission in this Order has determined the Net Revenue Requirement for FY as detailed in the subsequent Paras of this Chapter. 4.5 Power Purchase Cost The energy requirement of UPCL is met from various sources which includes the following generating stations: State Generating Stations of UJVN Ltd. NTPC Ltd. NHPC Ltd. NPCIL SJVN Ltd. THDC Ltd. Independent Power Producers (IPPs) State Gas Generating Stations Uttarakhand Electricity Regulatory Commission 133

148 Order on True-up for FY , APR for FY & ARR for FY SHPs and Solar Power Generators Deficit in power purchases met through Banking arrangements, open market purchases etc. The Petitioner in its Petition submitted the source wise power purchase from various sources along with the cost of power purchase. For projecting the availability of power for FY , the Petitioner has considered the average of the actual monthly energy generation during the past 3 years including FY The Petitioner has considered actual generation for the period till April to August and has estimated the power availability during the remaining months of FY (September-March) based on the average of actual monthly energy generation (ex-bus) during the past 3 years (FY , FY , FY ). The Petitioner further submitted that in case of aberration in generation from a generating station during any year or month due to nonfunctioning or maintenance, shut-down, etc., the same has been excluded for the purpose of projections. For the stations which have not been operational for complete 3 years, the average of the actual monthly generation during the years in which such stations have been fully operational has been considered. For new and upcoming stations, the Petitioner has considered Uttarakhand s expected entitlement from each station using the normative technical norms. The energy availability from various sources has been projected by the Petitioner based on the following: UJVN Ltd. For 10 LHPs and SHPs, the average of actual and estimated monthly energy generation during the past 3 years, i.e. FY to FY has been considered. However, in case of Khatima average for last two years has been considered due to intermittent availability of power during FY from the plant. NTPC For all the stations of NTPC except for Koldam, the average of actual and estimated monthly energy generation during the past 3 years from FY to FY has been considered. For Koldam HPS, the energy availability for FY has been considered on the basis of average of actual and estimated monthly generation for the past two years from FY to FY Further, the share in monthly generation has been considered by considering the total allocation from each station to Uttarakhand. NHPC The Petitioner has considered the average of actual and estimated monthly energy generation during the past 3 years from FY to FY The same has 134 Uttarakhand Electricity Regulatory Commission

149 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY also been considered for projecting free power share from Dhauliganga, Tanakpur stations. Further, the share in monthly generation has been considered by considering the total allocation from each station to Uttarakhand. NPCIL For NAPP and RAPP, the average of actual and estimated monthly generation during the past 3 years from FY to FY has been considered. SJVNL For Nathpa Jhakri, the average of actual and estimated monthly generation during the past 2 years from FY to FY has been considered. For Rampur HPS, the energy availability has been projected based on the average of actual and estimated monthly generation during the past 3 years from FY to FY THDC For Tehri and Koteshwar, the average of actual and estimated monthly energy generation during the past 3 years from FY to FY has been considered. The same has also been considered for projecting free power share from these stations. Vishnu Prayag HEP and GVK Srinagar For Vishnu Prayag HEP, the average of actual and estimated monthly energy generation during FY to FY has been considered. For GVK Srinagar the Petitioner has estimated the monthly availability for the remaining seven months of FY based on 2 years monthly generation from FY and FY and 2 years average from FY and FY for the entire year FY as the plant was not operational during FY and first few months of FY due to floods. UREDA stations and IPPs The Petitioner has estimated the monthly availability from UREDA and IPP stations (except for Sasan, Greenko Budhil, Sarju II and III, Tanga, Badiyar, solar roof top, Gama, Beta & Shravanti) based on previous three years average of monthly generation. The availability from Sasan UMPP has been calculated considering 3 years average generation from FY to FY Monthly estimation from Greenko Budhil Station has been considered by the Petitioner on the basis of Design Energy, auxiliary consumption & Uttarakhand s share in power generated. Monthly estimation for Sarju II Station has been estimated by the Petitioner on the basis of actual monthly generation in FY and first six months of FY For Sarju-III the Petitioner has considered 3 year average of actual and estimated Uttarakhand Electricity Regulatory Commission 135

150 Order on True-up for FY , APR for FY & ARR for FY monthly generation of FY to FY For Co-generation plants the Petitioner has considered the average of actual and estimated generation for three years from FY to FY The availability from solar rooftop generators and Small Solar IPP that have been commissioned recently has been estimated by the Petitioner on the basis of 15% CUF, while for older solar stations the availability has been projected on the basis of actual generation till August State Gas Stations: The availability from Gama & Shravanti Gas Plant has been calculated considering 85% PLF and normative auxiliary consumption for FY Upcoming stations The energy availability from stations expected to be commissioned by FY has been projected considering the likely COD of such generating stations from various sources such as CEA reports, PPA signed and as per the information made available by the generators. Power availability has been computed considering the normative performance parameters and share allocation to UPCL. With regard to Beta Station energy availability has been considered from the contracted 107 MW considering 85% PLF and normative auxiliary consumption. Forward banking of power The Petitioner has proposed a forward banking of 1069 MU in FY during the months of May to September 2018 which shall be returned from October 2018 to March 2019 to meet the projected deficit of 1055 MU. The balance energy has been proposed to be carried forward for the next financial year. Transmission Losses The Petitioner has considered the POC losses of 4.55% and intra- State transmission losses of 1.60%. The Petitioner has proposed the total power purchase of MU in FY The Commission has gone through the submissions of the Petitioner. The Commission for projection purposes has considered the energy availability from various generating stations on the basis of three years month-wise energy availability from all the generating stations. On the basis of monthly energy availability and estimated energy requirement, the Commission has computed the deficit/surplus quantum of power which the Petitioner would be required to purchase/bank depending on its requirement. The Commission for projecting power purchase has considered both existing generating stations and upcoming stations to be commissioned by FY in which UPCL has firm allocation. The detailed approach for approving the power 136 Uttarakhand Electricity Regulatory Commission

151 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY purchase quantum has been discussed below. For projecting the energy availability quantum from various new sources, the Commission sought the following information from the Petitioner: Likely COD of the upcoming generating stations along with source on which the Petitioner has relied upon. In reply, UPCL submitted the following: Copies of PPAs of the upcoming generating stations. Likely COD of the upcoming generating stations along with the source data. The Commission while projecting the quantum of energy available from various sources for FY has made the assumptions as detailed below Power Purchase from UJVN Ltd. under: The Commission has considered the availability from generating stations of UJVN Ltd. as Stations of UJVN Ltd. UJVN Ltd. (9 LHPs) Maneri Bhali-II SHPs, viz. Pathri, Mohammadpur & Galogi Table 4.11: Power Purchase from UJVN Ltd. Basis Average of actual month wise gross generation in FY , FY & FY (actual for 9 months, projections for 3 months); Average of actual month wise gross generation in FY , FY & FY (actual for 9 months, projections for 3 months); For Pathri and Mohammadpur energy availability considered as actual generation in FY from April to December and for Jan to March on the basis of three months actual generation in FY For Galogi, average of actual month wise gross generation in FY to FY (actual for 9 months, projections for 3 months) Rationale Three Year s Average as per the Commission s earlier approach Actual generation has been considered after completion of RMU works. The Commission has estimated the energy availability from these generating stations to UPCL at State Periphery after considering the normative auxiliary consumption and excluding the share allocation to Himachal Pradesh. The summary of energy availability from UJVN Ltd. for FY as estimated by the Petitioner and the Commission is shown in the Table below: Uttarakhand Electricity Regulatory Commission 137

152 Order on True-up for FY , APR for FY & ARR for FY Table 4.12: Summary of Energy Availability from UJVNL for FY (MU) Particulars Claimed Approved UJVN Ltd.-Main Stations Maneri Bhali-II Small Hydro Pathri Mohammadpur Galogi 6.02 Total Power Purchase from NHPC Ltd. under: The Commission has considered the availability from generating stations of NHPC Ltd. as Stations of NHPC Salal Chamera I Chamera II Chamera III Uri Dulhasti Sewa II Uri II Prabati III Tanakpur Dhauliganga Table 4.13: Power Purchase from NHPC Ltd. Basis Average of actual month wise gross generation in FY , FY & FY (actual for 9 months, projections for 3 months) Rationale Three Year s Average as per the Commission s earlier approach The Commission has estimated the energy availability from these generating stations to UPCL at State Periphery after considering the normative auxiliary consumption, station wise POC losses approved for the quarter January, 2018 to March, 2018 and considering share allocation to Uttarakhand. The summary of energy availability from NHPC Ltd. for FY as estimated by the Petitioner and the Commission is shown in the Table below: 138 Uttarakhand Electricity Regulatory Commission

153 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Table 4.14: Energy Availability from NHPC Ltd. for FY (MU) Station Estimated by UPCL Approved Salal Tanakpur Chamera I Chamera II Chamera III Uri Dhauliganga Dulhasti Sewa II Uri II Parbati III Free Power-Tanakpur Free Power-Dhauliganga Total Power Purchase from THDC India Ltd. under: The Commission has considered the availability from generating stations of THDC Ltd. as Stations of THDCIL Table 4.15: Power Purchase from THDC India Ltd. Basis Tehri HEP Average of actual month wise gross generation in FY , FY & FY Koteshwar HEP (actual for 9 months, projections for 3 months) Rationale Three year average considered as per the standard approach followed by the Commission in past. The Commission has estimated the energy availability from these generating stations to UPCL at State Periphery after considering the normative auxiliary consumption, station wise POC losses approved for the quarter January, 2018 to March, 2018 and considering the share allocation to Uttarakhand. The summary of energy availability from THDC Ltd. for FY at State periphery as estimated by the Petitioner and the Commission is shown in the Table below: Table 4.16: Energy Availability at State periphery from THDC Ltd. for FY (MU) State Estimated by UPCL Approved Tehri HEP Free Power-Tehri HEP Koteshwar HEP Free Power-Koteshwar HEP Total Uttarakhand Electricity Regulatory Commission 139

154 Order on True-up for FY , APR for FY & ARR for FY Power Purchase from NTPC Ltd. under: The Commission has considered the availability from generating stations of NTPC Ltd. as Table 4.17: Power Purchase from NTPC Ltd. Stations of NTPC Basis Rationale Singrauli STPS Rihand STPS Rihand I Rihand II Rihand III Unchahar TPS Unchahar I Unchahar II Unchahar III Anta CCPP Auraiya CCPP Dadri CCPP Dadri (NCTPP) Jhajjar Kahalgaon TPS Koldam Average of actual month wise gross generation in FY , FY & FY (actual for 9 months, projections for 3 months) Actual monthly generation of past 3 years as per the standard approach followed by the Commission The Commission has estimated the energy availability from these generating stations to UPCL at State Periphery after considering the normative auxiliary consumption station wise POC losses approved for the quarter January, 2018 to March, 2018 and considering the share allocation to Uttarakhand. The summary of energy availability from NTPC Ltd. for FY at State periphery as estimated by the Petitioner and the Commission is shown in the Table below: Table 4.18: Energy Availability from NTPC Ltd. at State periphery for FY (MU) Station Estimated by UPCL Approved Singrauli STPS Rihand STPS Rihand I Rihand II Rihand III Unchahar TPS Unchahar I Unchahar II Unchahar III Anta CCPP Auraiya CCPP Dadri CCPP Dadri (NCTPP) Jhajjar Kahalgaon TPS Koldam Total Uttarakhand Electricity Regulatory Commission

155 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Power Purchase from SJVN Ltd. under: Stations of SJVNL Nathpa Jhakri HEP Rampur HPS The Commission has considered the availability from generating stations of SJVN Ltd. as Table 4.19: Power Purchase from SJVN Ltd. Basis Average of actual month wise gross generation in FY , FY & FY (actual for 9 months, projections for 3 months) Rationale Actual monthly generation of past 3 years as per the standard approach followed by the Commission The Commission has estimated the energy availability from these generating stations to UPCL at State Periphery after considering the normative auxiliary consumption, station wise POC losses approved for the quarter January, 2018 to March, 2018 and considering the share allocation to Uttarakhand. The summary of energy availability from SJVN Ltd. for FY as estimated by the Commission is shown in the Table below: Table 4.20: Energy Availability from SJVN Ltd. at State periphery for FY (MU) Station Estimated by UPCL Approved Nathpa Jhakri HEP Rampur HPS Total Power Purchase from NPCIL Stations For estimating the energy availability from these stations the Commission has considered the monthly average generation for the last three years, i.e. FY to FY ( 9 months actual and 3 months projection). The Commission has estimated the energy availability from these generating stations to UPCL at State Periphery after considering the normative auxiliary consumption, station wise POC losses approved for the quarter January, 2018 to March, 2018 and considering the share allocation to Uttarakhand. The summary of energy availability from NPCIL for FY as estimated by the Commission is shown in the Table below: Table 4.21: Energy Availability from NPCIL at State periphery for FY (MU) Station Estimated by UPCL Approved NAPP RAPP Total Uttarakhand Electricity Regulatory Commission 141

156 Order on True-up for FY , APR for FY & ARR for FY Power Purchase from existing Renewable Energy Sources The existing renewable energy sources include the hydro power stations of UREDA, IPPs, co-generation plants, and existing as well as upcoming solar power plants within the State and solar power to be received from outside the State. The Commission has considered the energy availability at State periphery for renewable energy sources as projected by UPCL. The summary of energy availability from existing renewable energy sources for FY as estimated by the Petitioner and the Commission is shown in the Table below: Table 4.22: Energy Availability from existing Renewable Energy Sources for FY (MU) Station Estimated by UPCL Approved Existing renewable energy sources Power Purchase from Vishnu Prayag HEP and GVK Srinagar (State Royalty Power) For estimating the State Royalty power from Vishnu Prayag HEP, the Commission has considered the average of actual monthly generation for the years FY , FY and FY (actual for 9 months, projections for 3 months). With regard to GVK Srinagar, the Commission has considered the actual energy received in FY as submitted by the Petitioner. The Commission has estimated the energy availability from these generating stations to UPCL at State Periphery after considering the normative auxiliary consumption, actual POC losses in March 2018 and considering the free power share of 12% to Uttarakhand. The summary of energy availability from these stations as estimated by the Petitioner and the Commission is shown in the Table below: Table 4.23: Energy Availability from Vishnu Prayag HEP at State Periphery (State Royalty Power) for FY (MU) Station Estimated by Estimated by UPCL Commission Vishnu Prayag HEP (State Royalty Power) GVK Srinagar Power Purchase from Sasan UMPP For estimating the energy availability from Sasan UMPP, the Commission has considered the actual monthly generation of FY to FY The Commission has estimated the energy available from Sasan UMPP to UPCL at State Periphery after considering the normative 142 Uttarakhand Electricity Regulatory Commission

157 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY auxiliary consumption, station wise POC losses approved for the quarter January, 2018 to March, 2018 and considering share allocation to Uttarakhand. The summary of energy availability from Sasan UMPP for FY as estimated by the Petitioner and the Commission is shown in the Table below: Table 4.24: Energy Availability from Sasan UMPP at State periphery for FY (MU) Station Estimated by UPCL Approved Sasan UMPP Power purchase from State Gas Generating Station The Commission vide its Order dated February 8, 2016 approved the PPA between UPCL and Gama Infrapop (P) Ltd. (Kashipur CCPP), for sale of power corresponding to 107 MW (gross capacity) to UPCL. Further, the Commission vide Order dated July 20, 2016 had approved the PPA between UPCL and Sravanthi Energy Pvt. Ltd. for sale of power corresponding to 214 MW (gross capacity) to UPCL. Further, the Commission has also approved the PPA between UPCL and Beta Infrapop (P) Ltd. for sale of power corresponding to 107 MW (gross capacity) to UPCL. Considering the present status of Beta station, the Commission has considered energy availability for the station from the month of October The Commission has considered the energy availability from these stations considering the normative performance parameters in accordance with the Regulations. The summary of energy availability from these stations for FY as estimated by the Commission is shown in the Table below: Table 4.25: Energy Availability from State Gas Generating Stations at State periphery for FY (MU) Station Estimated by UPCL Estimated by Commission Kashipur CCPP Sravanthi Energy Beta CCPP Total Power purchase from Greenko Budhil Hydro The Commission vide its Order dated December 26, 2016 had approved the PPA between UPCL and Greenko Budhil Hydro for sale of power corresponding to 70 MW (gross capacity). The Commission, accordingly, has considered the energy availability from the generating station based on the month wise Design Energy. The Commission has estimated the energy available from the Uttarakhand Electricity Regulatory Commission 143

158 Order on True-up for FY , APR for FY & ARR for FY generating station to UPCL at State Periphery after considering the normative auxiliary consumption, POC losses approved for the quarter January, 2018 to March, 2018 and also excluding the free share of Himachal Pradesh. The summary of energy availability from Greenko Budhil Hydro for FY as estimated by the Commission is shown in the Table below: Table 4.26: Energy Availability from Greenko Budhil Hydro at State periphery for FY (MU) Station Estimated by UPCL Approved Greenko Budhil Hydro Power purchase from upcoming generating stations The upcoming generating stations include upcoming solar generating stations, Unchahar IV, Meja Thermal and Kishanganga Hydro Stations. The upcoming solar generating stations have already been considered in the energy projections from renewable sources as discussed earlier in this Section. With regard to Bhyunder ganga the Commission is of the view that the station will not come in FY With regard to Unchahar IV station, it is already commissioned and, therefore, power availability has been considered from April With regard to Meja Thermal, as per CEA it is expected that the first unit shall begin supply from April 2018 whereas the second unit shall begin supply from August With regard to Kishanganga station, the Commission has considered the projections of the Petitioner. The Commission has estimated the energy available from the generating station to UPCL at State Periphery after considering the normative auxiliary consumption, station wise POC losses approved for the quarter January, 2018 to March, 2018 and allocation as submitted by the Petitioner. The summary of energy availability from upcoming generating stations expected to achieve COD by FY as estimated by the Petitioner and the Commission is shown in the Table below: Table 4.27: Energy Availability from Upcoming Stations at State periphery for FY (MU) Station Estimated by UPCL Approved Bhyunder Ganga Unchahar IV Meja Thermal * Kishanganga Total * The Petitioner has considered commencement of supply from December Uttarakhand Electricity Regulatory Commission

159 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Energy available from Firm Sources The total energy available from firm sources estimated by the Petitioner and approved by the Commission is as shown in the Table given below: Table 4.28: Energy Availability from Firm Sources at State periphery for FY (MU) Generating Stations UPCL Approved UJVN Ltd NHPC^ THDC NTPC* NPCIL SJVNL Other Renewable Free Power-Vishnu Prayag Sasan UMPP Kashipur CCPP Shravanti gas plant Beta gas plant Bhyunder Ganga Meja Power Plant Greenko Budhil Hydro GVK Srinagar Total Firm Sources ^Includes Kishanganga *Includes Unchahar IV Power Purchase for fulfilling RPO UPCL in its Petition has submitted that as per amendment to Regulation 9(1) of the UERC (Tariff and Other Terms for Supply of Electricity from Renewable Energy Sources and non-fossil fuel based Co-Generating Stations) Regulations, 2013 (Principal Regulations) made vide the UERC (Tariff and Other Terms for Supply of Electricity from Renewable Energy Sources and non-fossil fuel based Co-Generating Stations) Regulations, 2013 (Sixth Amendment) Regulations, 2017, the Petitioner is required to purchase a minimum percentage of its total electricity requirement for own consumption excluding consumption met from hydro sources of power from renewable energy sources under renewable purchase obligation during each financial year. In accordance with the above, the Petitioner has claimed expenses towards meeting RPO obligations as shown in the Table below: Uttarakhand Electricity Regulatory Commission 145

160 Order on True-up for FY , APR for FY & ARR for FY Table 4.29: Additional Purchase for fulfilling RPO as claimed for FY S.No. Particulars Non-Solar Solar 1. Total Power Purchase at State Periphery excluding Hydro (MU) RPO Target (%) 10.25% 6.75% 3. RPO Target (MU) Total Power Purchase to meet RPO Target Unmet Target Past Unmet brought forward Total Unmet Target The Commission notified UERC (Tariff and Other Terms for Supply of Electricity from Renewable Energy Sources and non fossil fuel based Co-generation Stations) (Sixth Amendment), Regulations, 2017 dated September 08, 2017 wherein it had specified the RPO for FY as 6.75% for Solar & 10.25% for Non-Solar to be determined on the basis of own consumption excluding consumption met from hydro sources of power from renewable energy sources. Based on the estimated power purchase from renewable energy sources, the status of fulfillment of RPO and additional renewable purchase required is as shown in the Table below. Table 4.30: Additional Purchase for fulfilling RPO Particulars Units FY Total Power Purchase at State Periphery MU Less: Hydro MU Energy Excluding Hydro Energy MU RPO Solar % 6.75% Non-Solar % 10.25% RPO Solar MU Non-Solar MU Total MU Purchase from Renewable Sources Solar MU Non-Solar MU Total MU Additional Energy to be purchased for fulfilment of RPO Solar MU Non-Solar MU Total MU Uttarakhand Electricity Regulatory Commission

161 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Hence, the additional energy to be purchased from Solar and Non-Solar renewable energy sources, over and above the energy sources listed above, for fulfilling the RPO targets for FY is MU for FY Deficit/ (Surplus) energy The Petitioner in its Petition has proposed forward banking, i.e. advance banking of 1069 MU power in FY from the month of May 2018 to September 2018 and has proposed to withdraw 1055 MU in April 2018 and from the month of October 2018 to March 2019 through return banking. In addition to the above, the Petitioner has estimated 14 MU to be carried forward to meet the deficit of next financial year. However, as per the Commission s projection as against the energy requirement of MU during FY , the total estimated energy available from firm sources is MU leaving an overall surplus of MU. However, as per month wise requirement and energy availability the monthly deficit during winter months works out to MU and monthly surplus during summer and monsoon month works out to MU. The Commission directs the Petitioner to bank the surplus energy during the month of May 2018 to September 2018 and withdraw the same in the month of October 2018 to March The balance MU of power can be banked for the next financial year FY The Petitioner should put its sincere efforts to suffice its need during deficit period from the surplus energy available during the monsoon period through appropriate banking Cost of power purchase The Petitioner submitted that the cost of power purchase has been projected based on the following assumptions. UJVN Ltd. - For the procurement of power from 10 LHPs and SHPs of UJVN Ltd., the Petitioner has considered the Net AFC and Energy charges for UJVN Ltd. s Large stations and MB II as approved in its MYT Order dated April 05, For small SHPs, the Petitioner has considered the cost as per the AFC approved by the Commission in its MYT Order dated April 05, Uttarakhand Electricity Regulatory Commission 147

162 Order on True-up for FY , APR for FY & ARR for FY NTPC: The annual fixed charges and variable charges have been derived (in proportion to UPCL s share) from the tariff order approved by CERC for each station. The Variable charge for the generating stations for the first four months of FY has been increased by 4% for FY For Koldam Station, since an interim tariff has been determined by CERC for FY , a 3% increase has been considered to arrive upon the AFC of FY as per the approach followed by the Commission. The energy charges for Koldam HEP has been calculated by dividing the 50% of the AFC by design energy and normative auxiliary consumption of the plant. The net charges payable has been derived after deducting the state royalty share of power. NHPC: Annual fixed charges (AFC) for Salal, Tanakpur, Chamera I & II, Uri, Dhauliganga, Dulhasti and Uri II has been derived from the tariff order issued for FY by CERC. Annual fixed charges (AFC) for the remaining stations were not available, and therefore, the cost of power purchase for FY has been increased by 3%. The energy charges have been calculated by dividing 50% of the AFC by the design energy and normative auxiliary consumption of the plant. The net charges payable have been derived after deducting the state royalty share of power. SJVNL: For Nathpa Jakhri HEP station, annual fixed charges (AFC) as specified in the respective CERC tariff order for the control period of FY has been considered. For Rampur HEP, since the Annual fixed charges (AFC) for the station for FY was not available, therefore, the AFC approved for FY has been escalated by 3% per annum to determine the fixed cost for FY The energy charges have been calculated by dividing 50% of the AFC by the design energy and normative auxiliary consumption of the plant. The net charges payable have been derived after deducting the state royalty share of power. THDC: For Tehri station annual fixed charges (AFC) as specified in the respective CERC tariff order for the control period of FY has been considered. For Koteshwar HEP where CERC tariff order was not available, the AFC for FY has been considered from the recent power purchase bills of FY and escalated by 3% for FY The energy charges have been calculated by dividing 50% of the AFC by the design energy and normative auxiliary consumption of the 148 Uttarakhand Electricity Regulatory Commission

163 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY plant. The net charges payable have been derived after deducting the state royalty share of power. NPCIL: For NPCIL plants, power purchase bills for FY has been increased by 3% to arrive at the cost for FY IPPs and Private Projects: The cost of power available from IPPs and other private stations are as per tariff determined by UERC and for Sasan as per the tariff bid by the developer for each year. The tariff for the small solar power plants has been considered as per the tariff bid by the developer. Cost of Power from new stations: For CGS projects, which are under development, the rate has been considered based on the provisional tariff considered by the Commission in the Tariff Order for FY For those stations which are under construction by the private developers, the tariff laid down in PPA/relevant regulations or the tariff determined by the Commission has been considered. Cost of Free Power: The cost of free power has been calculated for FY based on the approach adopted by the Commission in its earlier Tariff orders. The rate of state royalty power has been considered equal to the average rate of power procured by the Petitioner from large hydel stations. Cost of Injection and Withdrawal Charges of Banking: The Petitioner has submitted that it has considered Rs. 1.00/kWh towards such charges. Cost of RPO Obligations: The Petitioner has considered REC floor price of Rs for Solar and Rs for non-solar to meet its RPO targets. The Petitioner has projected the average power purchase cost of Rs. 3.43/kWh for FY Water Tax - The Petitioner requested the Commission to consider the impact of Water Tax in determination of ARR for the Petitioner. Section 17 of The Uttarakhand Water Tax on Electricity Generation Act, 2012 specifies as follows: Uttarakhand Electricity Regulatory Commission 149

164 Order on True-up for FY , APR for FY & ARR for FY (1) The user shall be liable to pay the Water Tax under the Act at such rates as the Government may by notification fix in this behalf. (2) The State Government may review, increase, decrease or vary the rates of the Water Tax fixed under this section from time to time in the manner it deems fit. The State Government vide the notification dated November 7, 2015 notified the applicable rates of Water Tax. The Petitioner in its Petition has submitted that the impact of water tax is Rs Crore on the basis of actual water tax paid in FY The Commission in its MYT Order dated had computed the likely impact of Water Tax for the Petitioner for FY to FY as Rs Crore. However, considering the actual water taxes paid in FY the Commission has considered water taxes to be paid as claimed by the Petitioner. The same shall be trued up based on the actual amount paid by the Petitioner for FY without considering the variation of the same as efficiency gain or loss. The Commission directs the Petitioner to submit all the relevant information along with the supporting documents for substantiating the actual expenses incurred on account of Water Tax, for FY and FY along with its proposals for True up for FY and FY The Commission has estimated the cost of power purchase from various sources as detailed below: 150 Uttarakhand Electricity Regulatory Commission

165 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Table 4.31: Approach of the Commission in estimating the Cost of Power Purchase Source UJVN Ltd. NHPC Ltd., THDC Ltd., SJVN Ltd. NTPC Ltd. NPCIL Renewable energy sources Sasan UMPP State Gas Stations Greenko Budhil Hydro Additional purchase for fulfilling RPO Upcoming Stations Open Access for Banked Energy Water Tax Approach of the Commission in estimating the cost of power purchase The Commission has considered the approved Tariff of UJVN Ltd. (10 LHPs) for FY As per the GoU Notification No. 601/1(2)/04(1)-1/2007 dated May 31, 2017, GoU imposed a cess of Rs. 0.30/kWh and royalty of Rs. 0.10/kWh on saleable energy generated from hydro generating stations which are under commercial operation for 10 or more years with cost of generation below Rs. 2/kWh with effect from the date of notitication. Hence additional impact on account of same has been considered. For SHPs, the Commission has considered the applicable Tariff for those generating stations as specified in the Renewable Energy Regulations or Orders of the Commission. For the generating stations for which the Tariff Order for FY has been issued by the Central Electricity Regulatory Commission, the approved Tariff for FY has been considered. For other stations, the latest approved Tariff has been considered with annual escalation of 3%. For the generating stations for which the Tariff Order for FY has been issued by the Central Electricity Regulatory Commission, the approved AFC for FY has been considered. For estimating the Energy Charges for FY , to avoid substantial impact of quarterly FSA, the weighted average rate of actual Energy Charges for the months of October 2017 to December 2017 has been considered with an escalation of 7%. The tariff for NPCIL stations has been considered based on the actual billing during FY which have been escalated by 3% to determine the costs for FY The applicable tariffs for the respective generating stations within the State have been considered as per the Tariff Orders issued by the Commission in accordance with the Renewable Energy Regulations and the Tariff specified in the Renewable Energy Regulations. The applicable tariff for FY as per the PPA has been considered. The tariff for Beta Station has been considered as Rs. 4.70/kWh as provisionally approved by the Commission. With regard to Kashipur and Shravanthi stations the AFC approved by the Commission for FY has been considered. The Energy charges have been considered on the basis of weighted average rate of actual Energy Charges for the months of October 2017 to December 2017 with an escalation of 7%. The AFC approved by the Commission for FY has been considered alongwith truing up impact of FY & FY The Tariff for the additional purchase for fulfilling the Non-Solar RPO and Solar has been considered as Rs. 1500/REC and Rs. 3500/REC respectively. For upcoming renewable generating stations within the State, the applicable Tariff as per the Renewable Energy Regulations has been considered. For Kishanganga, Meja and Unchahar IV, a tariff of Rs. 4/kWh has been considered. Ppen access charges for banking corresponding to Deficit Energy has been considered on the basis of PGCIL per unit transmission charges of FY Water tax of Rs Crore has been considered on the basis of that claimed by UPCL. Uttarakhand Electricity Regulatory Commission 151

166 Order on True-up for FY , APR for FY & ARR for FY Cost of Free Power As regards, the rate of power purchase for free power, the Commission, in its Tariff Order dated March 18, 2008 had stipulated as under: As of now, as per State Government s letter dated March 11, 2003, the rate applicable for utilisation of Free Power by UPCL is average pooled cost of power purchase from Central Generating Stations. The Government of India s Electricity (Removal of Difficulty) Third Order, 2005 issued vide its notification dated June 8, 2005 on the subject stipulates as follows: 2. Disposal of free electricity received by a State Government from hydro generating stations The State Government receiving free electricity from hydro power generating stations shall have discretion to dispose off such electricity in the manner it deems fit according to the provisions of the Act. Provided that if such electricity is sold by the State Government to a distribution licensee, the concerned State Commission shall have powers to regulate the price at which such electricity is procured by the distribution licensee. As per the statutory framework, the Commission is empowered to regulate the price at which the UPCL will purchase free power from GoU. The Commission in its MYT Order dated May 06, 2013 for the first Control Period revised the methodology for computing free power rate and had stated as follows:... The Commission, accordingly, in the interest of consumers of the State has revisited the methodology adopted by it for computation of rate of free power. The previous methodology no more hold good on account of steep price revisions in the rates of energy available from firm sources. Moreover, considering that fuel costs are increasing exponentially and the demand supply gap are likely to increase further in future rendering the distribution utilities to depend on infirm/short/medium term sources. Further, the Commission is of the view that the free power rate should reflect a fair price considering the segment pertaining to dominant firm source from which maximum power is procured by the distribution utility in the State. For the State of Uttarakhand whose electricity demand is predominantly met through large hydro generating stations, the free power rate should reflect the tariff for electricity generated through large hydro generating stations. The Commission, therefore, 152 Uttarakhand Electricity Regulatory Commission

167 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY has revised the methodology for computation of rate of free power and has considered free power rate equal to the average rate of power procured by the Petitioner from Large Hydrogenerating stations... The Commission observes that GoU has imposed water tax on Hydro generating stations located in the State and has also additionally levied cess and royalty of Rs. 0.40/kWh on it. It is also observed that the Petitioner had to pay additional Rs Crore on account of water tax in FY and will also be paying substantial amount as cess and royalty on energy procured from UJVN Ltd from May 31, The Commission is of the view that water tax and royalty, if considered for computation of free power rate shall lead to double impact on the consumers of the State as the consumers shall not only be bearing the burden of water tax, cess and royalty but also the embedded cost of the same in the calculation of the free power rate. Therefore, in the interest of consumers of the State, the Commission for computing free power rate has excluded water tax, cess and royalty paid by State as well as Central Generating Stations. The Commission ha,s accordingly, computed the free power rate for FY as follows: given below: Table 4.32: Summary of Free Power Rate for FY Particulars Quantum Total Cost Average Cost MU Rs. Crore Rs./kWh UJVN Ltd. (9 LHPs) Maneri Bhali II NHPC THDC SJVNL Greenko Koldam Average The summary of estimated power purchase cost for FY is as shown in the Table Uttarakhand Electricity Regulatory Commission 153

168 Order on True-up for FY , APR for FY & ARR for FY Table 4.33: Summary of power purchase cost for FY Claimed Approved Station PP at State Average PP at State Average Total Cost Total Cost periphery Rate periphery Rate MU Rs. Crore Rs./kWh MU Rs. Crore Rs./kWh UJVN Ltd. UJVN Ltd. (9 LHPs) Maneri Bali II Small Hydro Royalty & Cess Water Tax Total UJVN Ltd NHPC Salal Tanakpur Chamera I Chamera II Chamera III Uri Dhauliganga Dulhasti Sewa II Uri II Parbati III Kishanganga Free Power-Tanakpur Free Power- Dhauliganga Total NHPC THDC Tehri HEP Free Power-Tehri HEP Koteshwar HEP Free Power- Koteshwar HEP Total THDC NTPC Singrauli STPS Rihand STPS Rihand I Rihand II Rihand III Unchahar TPS Unchahar I Uttarakhand Electricity Regulatory Commission

169 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Table 4.33: Summary of power purchase cost for FY Claimed Approved Station PP at State Average PP at State Average Total Cost Total Cost periphery Rate periphery Rate MU Rs. Crore Rs./kWh MU Rs. Crore Rs./kWh Unchahar II Unchahar III Anta CCPP Auraiya CCPP Dadri CCPP Dadri (NCTPP) Jhajjar Kahalgaon TPS Koldam Unchahar IV Total NTPC NPCIL Narora APP Rajasthan APP Total NPCIL SJVNL Nathpa Jhakri HEP Rampur HPS Total SJVNL Other Renewable Free Power-Vishnu Prayag Sasan UMPP Gama Kashipur CCPP Shravanti gas plant Beta gas plant Total Gas Bhyunder Ganga Meja Power Plant Greenko Budhil Hydro GVK Srinagar Open Access Charges for banked energy Total The Commission, further, directs the Petitioner to seek prior approval of the Commission, in case the variation in power purchase quantum or total power purchase cost in any quarter exceeds by more than 5% of the approved power purchase quantum and cost for the respective quarter worked out on pro-rata basis from the total approved quantum and cost for FY as Uttarakhand Electricity Regulatory Commission 155

170 Order on True-up for FY , APR for FY & ARR for FY indicated in the Table below, failing which, the Commission may disallow power purchases so made while Truing up of the ARR for FY Table 4.34: Quarterly Power Purchase approved by the Commission for FY Quarter Power Purchase Quantum Power Purchase Cost (MU) (Rs. Crore) April June July September October December January March Total The base Energy Charges of thermal stations (base fuel cost) for the purpose of computation of FCA is given in the Table below: Table 4.35: Energy Charges of Thermal Generating Stations for FY Generating Station Energy Charges (State Periphery) (Rs./kWh) Singrauli STPS Rihand STPS Rihand I Rihand II Rihand III Unchahar TPS Unchahar I Unchahar II Unchahar III Anta CCPP Auraiya CCPP Dadri CCPP Dadri (NCTPP) Jhajjar Kahalgaon TPS Gama Infraprop Shravanthi Energy Beta Power Cost of Meeting RPO Target As discussed earlier, the Petitioner, in order to meet its RPO Targets will have to additionally procure MU and MU from Solar and non-solar generating stations respectively. The Commisison has factored in the cost towards meeting the RPO targets at the rate of Rs. 3500/REC for solar and Rs. 1500/REC for non-solar as proposed by the Petitioner. The cost, 156 Uttarakhand Electricity Regulatory Commission

171 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY thus, works out to be Rs Crore. As the cost of solar generation is under steep decline, the Petitioner should first seek to buy actual power in deficit months and REC should be an option of last resort to meet solar as well as non-solar RPO. However, it should be ensured that their tariffs at State periphery should not exceed Rs. 4.75/kWh, i.e. inclusive of PoC charges & losses. 4.7 Transmission Charges Inter-State Transmission Charges payable to PGCIL The Petitioner submitted that actual transmission charges paid for FY have been considered to compute average per unit rate of transmission charges for FY The per unit PGCIL charge for FY has been calculated using the amount paid and energy coming from outside the State during the same period. The per kwh rate calculated has been escalated by 5% per annum and then multiplied by the projected power purchase quantum to be received through PGCIL network for FY The Petitioner has proposed the Inter-State Transmission Charges of Rs Crore for FY The Commission has considered the energy received through PGCIL network during April 2017 to December 2017 of FY and the actual amount paid to PGCIL for computing per kwh rate. The Commission has then considered 4% escalation per annum on the rate derived for FY to determine the rate for FY which has then been applied on the energy projected to be received through PGCIL network in FY Accordingly, the Inter-State Transmission charges approved for FY is Rs Crore Intra-State Transmission Charges payable to PTCUL The Petitioner submitted that the Intra-State Transmission Charges for FY have been projected by considering the ARR approved by the Commission vide its MYT Order dated April 05, 2016 for PTCUL. The Commission has approved the Annual Transmission Charges for PTCUL of Rs Crore for FY vide its Order dated March 21, Hence, the Commission has considered the same in the approval of ARR for FY for the Petitioner Transmission Charges The Transmission Charges claimed by the Petitioner and approved by the Commission for Uttarakhand Electricity Regulatory Commission 157

172 Order on True-up for FY , APR for FY & ARR for FY FY is as shown in the Table given below: 4.8 SLDC Charges Table 4.36: Transmission Charges for FY (Rs. Crore) Particulars Claimed by UPCL Approved Inter-State Transmission Charges Intra-State Transmission Charges Total The Petitioner has claimed SLDC charges of Rs Crore for FY by considering the ARR approved by the Commission vide its MYT Order dated April 05, The Commission has approved the SLDC Charges of Rs Crore for FY vide its Order dated March 21, Hence, the Commission has included the same in the ARR for FY for the Petitioner. 4.9 GFA and Additional Capitalisation GFA base for FY and FY The Commission vide its Order dated April 05, 2016 on approval of ARR for the second Control Period had approved the capitalisation of Rs Crore for FY and Rs Crore for FY As against the same, the Petitioner, in its Petition has proposed the capitalisation of Rs Crore and Rs Crore for FY and FY respectively. The Petitioner in its Petition has submitted that in order to achieve the anticipated load growth and target loss reduction, it has carried out detailed analysis of capital investment required for FY and FY The Petitioner further submitted that the investment plan has been projected based on various technical and physical requirements carried out by the staff and, thereafter, reviewed by the senior management. The Petitioner with regard to cost submitted that the same has been projected based on the historical trends of UPCL and cost of various equipment in FY with suitable escalation for FY The Petitioner further submitted that in cases where recent cost estimates were not available, the Petitioner has considered cost of these materials in FY , discovered through market mechanisms or inputs from technical staff with suitable escalations. The Petitioner projected capital expenditure for the 2 years as Rs Crore. Out of this, Rs Crore are proposed for Central schemes like R-APDRP, DDUGJY and IPDS while the 158 Uttarakhand Electricity Regulatory Commission

173 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY remaining Rs Crore are proposed for the internal schemes proposed by UPCL. The Petitioner further submitted that the capital investment planned for the next two years is expected to achieve the following benefits: a) Growth development plan to meet the load growth b) Loss reduction c) System reliability and safety improvement d) Creation of Infrastructure Facilities & other miscellaneous works The Petitioner has further submitted various schemes to achieve the above targets as shown below: a) Growth Development Plan to meet the load growth: i. Construction of 33/11 kv Substation & associated 33 kv and 11 kv Lines for strengthening of Distribution System ii. iii. iv. Augmentation of Existing 33/11 kv substations Release of New PTW Connections Installation of meters for giving new connections v. Deen Dayal Upadhyay Grameen Jyoti Yojana vi. vii. viii. Installation of Breakers 20 Nos- 33 kv Breakers Construction of 19 CSS where two transformers are installed at same place Laying of LT lines for new connections b) Loss reduction i. Installation of Capacitor Bank at 33/11 kv substations ii. iii. iv. Implementation of R-APDRP Part A scheme Implementation of R-APDRP Part B scheme Implementation of IPDS v. Implementation of AMR (Other than R-APDRP) vi. vii. Replacement of Mechanical Meters with Electronic Meters and Installation of Electronic meters in un-metered connections Laying of 11 kv and 33 kv covered conductor for forest area Uttarakhand Electricity Regulatory Commission 159

174 Order on True-up for FY , APR for FY & ARR for FY viii. ix. Laying of 11 kv ABC cable Laying of LT ABC in theft prone area x. Replacement of defective single and three phase meters xi. xii. Pre-Paid Metering Laying of 11 kv and 33 kv underground cables c) System reliability & safety improvement: i. Installation of Additional Distribution Transformers ii. Installation of LT protection system on the transformers, fencing of transformers, installation of poles and guard wires, reconductoring of lines, etc. d) Creation of infrastructure facilities & other misc. works: i. Procurement of Sub-station and consumer meter testing equipment ii. Consumer care centres, E-payment of bills and Cash collection centres The Petitioner in its Petition estimated that the new expenditure incurred towards central schemes in FY would be capitalized in the ratio of 50% and 50% in FY and FY whereas new expenditure incurred in FY shall be entirely capitalised in FY While the balance capital expenditure shall be capitalised as 25% every year in FY and FY Additionally, the opening CWIP at the beginning of FY has been estimated by the Petitioner to be capitalised in the ratio of 50:50 during FY and FY The Petitioner has, accordingly, revised the additional capitalisation to Rs Crore and Rs Crore for FY and FY respectively. The capital expenditure and additional capitalisation as proposed in the Petition and revised Petition is as shown in the Table below: Table 4.37: Proposed Capital Expenditure and Capitalisation for FY and FY (Rs. Crore) Particulars Proposed Capital Capitalization expenditure As per Tariff Petition FY FY Total The Commission has gone through the submissions of the Petitioner. It is observed that the 160 Uttarakhand Electricity Regulatory Commission

175 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Petitioner has projected higher capitalisation in FY and FY than that approved in the MYT Order dated April 05, The Commission in its MYT Order had observed that the Petitioner in the past had projected higher capitalisation at the time of tariff determination, however, the actual capitalisation historically achieved by the Petitioner is considerably lower. The actual GFA addition carried out by UPCL in the last five years is as shown in the Table below: Table 4.38: Actual GFA addition of UPCL (Rs. Crore) Year Amount FY FY FY FY FY * *Excluding De-Cap of Rs Cr, net add cap Rs Crore In comparison to the capitalisation achieved during the last four years, the capitalisation proposed for FY and FY is considerably higher. The Commission directed UPCL to submit the status of capital works (both physical and financial) which has been proposed in FY and FY In response UPCL again submitted the details of capital expenditure proposed by it without giving the status of the proposed work. The Commission in its MYT Order had already taken a view on the capital expenditure after detailed analysis and, therefore, the Commission finds no reason to revise the same considering the historical achievement with regard to the capitalisation. The Commission has, therefore, considered the capitalisation for FY and FY as approved in MYT Order dated April 05, However, during the Annual Performance Review/Truing-up exercise, the Commission shall consider the Capitalisation on actual basis subject to capitalisation of only those Schemes which fulfill the conditions as stipulated by the Commission. The Petitioner has proposed the draft Capitalization Process & Repair and Maintenance Policy in the current Petition. The Petitioner has proposed certain assumption in the draft policy that needs further clarification and accordingly the Commission is not approving the draft capitalization and R&M policy submitted by the Petitioner in these proceedings and will take a view on the same separately. The Commission has, accordingly, approved the following capitalization and GFA for FY Uttarakhand Electricity Regulatory Commission 161

176 Order on True-up for FY , APR for FY & ARR for FY Table 4.39: GFA base approved by the Commission for FY (Rs. Crore) FY FY Particulars Claimed by Claimed by Approved UPCL UPCL Approved Opening GFA GFA addition during the year Closing GFA Means of Finance The Commission has approved the funding of the approved capitalisation for FY and FY by considering the average of the actual funding pattern of the Petitioner s capitalisation during FY to FY The Commission, as discussed above, has considered the capitalisation as approved in the MYT Order for the second Control Period and, therefore, the financing of the approved capitalisation has also been considered as same as considered in the MYT Order dated April 05, 2016 which is as shown in the table below. Table 4.40: Means of Finance approved by the Commission (Rs. Crore) Particulars FY FY Capitalisation Financing Debt Equity Grant/Deposit Works Total Interest and Finance Charges The Petitioner submitted that the interest expenses have computed considering the closing loan approved by the Commission for FY in its APR Order dated March 29, 2017 after carrying out following adjustments. a) Difference in approved loans and actual loans for FY b) Difference in loan from internal resources from FY on account of revision in means of finance for the period FY to FY New loans for FY and FY have been considered as per the means of funding of capitalization provided in the Petition while the repayment has been considered equivalent to the 162 Uttarakhand Electricity Regulatory Commission

177 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY depreciation for FY and FY in line with the UERC Tariff Regulations, The Petitioner has considered weighted average rate of interest of 12.22%, which is equivalent to the weighted average rate of interest as per audited accounts for FY The Petitioner submitted that the interest on GPF loan shall be claimed based on the actual interest during the truing up for the respective year. Accordingly, the Petitioner has proposed the interest of Rs Crore for FY In addition to it, the Petitioner has considered interest on loan of Rs Crore against REC Old Loan as per the repayment schedule laid down in Tariff Order for FY dated 23 rd October, The Petitioner has further considered financing charges of Rs Crore for FY The Petitioner has claimed the interest on consumer security deposit of Rs Crore for FY The Petitioner has claimed the guarantee fee of Rs Crore for FY , equivalent to the actual fees paid by the Petitioner to the State Government in FY Regulation 27 of the UERC Tariff Regulations, 2015 specifies as follows: 27. Interest and finance charges on loan capital and on Security Deposit (1) The loans arrived at in the manner indicated in Regulation 24 shall be considered as gross normative loan for calculation of interest on loan. (2) The normative loan outstanding as on shall be worked out by deducting the cumulative repayment as admitted by the Commission up to from the gross normative loan. (3) The repayment for each year of the Control Period shall be deemed to be equal to the depreciation allowed for that year (5) The rate of interest shall be the weighted average rate of interest calculated on the basis of the actual loan portfolio at the beginning of each year applicable to the project: (6) The interest on loan shall be calculated on the normative average loan of the year by applying the weighted average rate of interest. Uttarakhand Electricity Regulatory Commission 163

178 Order on True-up for FY , APR for FY & ARR for FY The Commission has considered the closing loan balance for FY as opening loan balance for FY Thereafter, the Commission has considered the loan addition during FY as per the approved means of finance for FY The Commission has considered the closing loan balance for FY as the opening loan balance for FY The Commission has considered the loan addition during FY as per the means of finance approved above. The Commission has considered the normative repayment equivalent to the approved depreciation for the year. The Commission has considered the interest rate of 9.24% which is the actual weighted average rate of interest for FY The Commission has determined the interest on loan by applying the interest rate of 9.24% on the amount of average of the opening loan & closing loan excluding the loan additions corresponding to the assets capitalised during the year. The Commission has not allowed interest on additions during the year as the Petitioner capitalises the assets at the end of the financial year and during the year, whatever interest accrues on the loan portion corresponding to the capital expenditure, the same is Interest during construction and is capitalised as CWIP. The Commission has considered the Interest on Security Deposit same as that projected by the Petitioner. The interest on loan approved by the Commission for FY is as shown in the Table given below: Table 4.41: Interest on Loan approved by the Commission for FY (Rs. Crore) Particulars Claimed Allowable Opening Loan balance Drawal during the year Repayment during the year Closing Loan balance Interest Rate 12.22% 9.24% Interest on Loan Interest on CSD Total Interest In addition to above, the Commission has considered interest on account of REC Old Loan of Rs Crore. With regard to guarantee fee, the Commission has considered the same amount as approved for FY , i.e. Rs Crore. The guarantee fee considered by the Petitioner for FY equivalent to the guarantee fee for FY also includes the provisions for penalty to be paid to the State Government on account of non-payment of Guarantee Fee and also includes excess provisioning of Rs Crore which cannot be allowed for the reasons already dealt in the previous section. 164 Uttarakhand Electricity Regulatory Commission

179 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY The financing charges of Rs Crore as considered for FY has also been considered for FY Thus, the total interest expenses approved for FY works out to Rs Crore as against the claim of Rs Crore Depreciation The Petitioner submitted that the asset class wise depreciation has been computed considering the projected capitalisation for each year and as per the rates of depreciation specified in the UERC Tariff Regulations, Accordingly, the Petitioner has proposed the depreciation of Rs Crore for FY Regulation 28 of the UERC Tariff Regulations, 2015 specifies as follows: 28. Depreciation (1) The value base for the purpose of depreciation shall be the capital cost of the asset admitted by the Commission. Provided that depreciation shall not be allowed on assets funded through Consumer Contribution and Capital Subsidies/Grants. (2) The salvage value of the asset shall be considered as 10% and depreciation shall be allowed up to maximum of 90% of the capital cost of the asset.... (4) Depreciation shall be calculated annually based on Straight Line Method and at rates specified in Appendix - II to these Regulations. The Petitioner has claimed depreciation on the average of opening and closing balances of the depreciable GFA for the year. However, as observed from the audited accounts till FY of the Petitioner, the Petitioner follows the practice of capitalising the assets on the last day of the Financial Year. Nothing has been brought on record by the Petitioner to show that the asset is capitalised when it is put to use. Infact, the Petitioner in its accounts also calculates depreciation on the straight line method on opening GFA. Hence, the Commission has adopted the similar approach as adopted by it in the previous Tariff Orders for allowing the depreciation on the opening GFA. The Petitioner in the current proceedings has submitted that preparation of Fixed Assets Registers of UPCL for FY to FY has been awarded to M/s RSA & Co. and the same shall be submitted to the Commission by March 31, Uttarakhand Electricity Regulatory Commission 165

180 Order on True-up for FY , APR for FY & ARR for FY In the absence of complete Fixed Asset Register, the Commission at this stage has considered the weighted average rate of 5.21% computed for FY and has applied the same on the opening depreciable GFA for FY below: The depreciation approved by the Commission for FY is as shown in the Table given Table 4.42: Depreciation approved for FY (Rs. Crore) Particulars Claimed Allowable Opening GFA Grants Depreciable opening GFA Net addition during the year (less Grant) Closing GFA Depreciation rate 5.21% 5.21% Depreciation Operation and Maintenance expenses Regulation 84 of the UERC Tariff Regulations, 2015, with regard to the Operation and Maintenance expenses, specifies as follows: 84. Operation and Maintenance Expenses (1) The O&M expenses for the first year of the Control Period will be approved by the Commission taking into account actual O&M expenses for last five years till Base Year subject to prudence check and any other factors considered appropriate by the Commission. (2) The O&M expenses for the nth year and also for the year immediately preceding the Control Period i.e., FY shall be approved based on the formula given below:- O&M n = R&M n + EMP n + A&G n Where O&Mn Operation and Maintenance expense for the nth year; EMPn Employee Costs for the nth year; R&Mn Repair and Maintenance Costs for the nth year; A&Gn Administrative and General Costs for the nth year; (3) The above components shall be computed in the manner specified below: EMP n = (EMP n-1) x (1+G n) x (CPI inflation) R&Mn = K x (GFA n-1) x (WPI inflation) and 166 Uttarakhand Electricity Regulatory Commission

181 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY A&Gn = (A&G n-1) x (WPI inflation) + Provision Where EMP n-1 Employee Costs for the (n-1)th year; A&Gn-1 Administrative and General Costs for the (n-1)th year; Provision: Cost for initiatives or other one-time expenses as proposed by the Distribution Licensee and approved by the Commission after prudence check. K is a constant specified by the Commission in %. Value of K for each year of the control period shall be determined by the Commission in the MYT Tariff order based on Distribution Licensee s filing, benchmarking of repair and maintenance expenses, approved repair and maintenance expenses vis-à-vis GFA approved by the Commission in past and any other factor considered appropriate by the Commission; CPIinflation is the average increase in the Consumer Price Index (CPI) for immediately preceding three years; WPIinflation is the average increase in the Wholesale Price Index (CPI) for immediately preceding three years; GFAn-1 - Gross Fixed Asset of the distribution licensee for the n-1th year; 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 Distribution Licensee s filings, benchmarking and any other factor that the Commission feels appropriate: Provided that in case of a distribution licensee is governed by Government pay structure, the Commission may consider allowing a separate provision in Employee expenses towards the impact of VII th Pay Commission. Provided that repair and maintenance expenses determined shall be utilised towards repair and maintenance works only. The O&M expenses include Employee expenses, R&M expenses and A&G expenses. In accordance with Regulation 84 of the UERC Tariff Regulations, 2015, the O&M expenses for the third year of the Control Period, i.e. FY shall be determined by the Commission taking into account the actual O&M expenses of the previous years and any other factors considered appropriate by the Commission. The submission of the Petitioner and the Commission s analysis on the O&M expenses for FY is detailed below. Uttarakhand Electricity Regulatory Commission 167

182 Order on True-up for FY , APR for FY & ARR for FY Employee Expenses The Commission had approved the employee expenses of Rs Crore for FY in its MYT Order dated April 05, As against the same, the Petitioner in its Petition has proposed employee expenses of Rs Crore as per the UERC Tariff Regulations, The Petitioner has submitted that it has considered the closing normative gross employee expenses of FY as the opening base (EMP n-1) for computation of normative employee cost in FY Similarly, for FY , the closing employee expenses for FY have been considered as base in line with the methodology followed by the Commission. Further, escalation factor, i.e. CPI inflation has been considered as 5.35%, which is the average increase in CPI for preceding three years till the base year (FY to FY ). The Petitioner submitted that based on the projected recruitment of employees it has considered Gn factor for FY as 20% and nil for FY based on the addition in the number of employees. Further, the capitalisation for FY has been considered as 15.63% based on the actual capitalization rate for FY The Commission has computed the employee expenses in accordance with the UERC Tariff Regulations, In accordance with the UERC Tariff Regulations, 2015, the Gn (growth factor) is to be considered in the computation of employee expenses. The Commission, in the approval of the Business Plan for the second Control Period from FY to FY , based on the approved HR Plan computed the Gn factors of 3.23% and 3.28% for FY and FY respectively based on the recruitment of 338 employees per year in FY and FY The Commission during the Technical Validation Session asked UPCL to submit the status of recruitment proposed by it for FY and FY UPCL submitted that against the vacancy of 77 posts for Office Assistant-III advertised in FY , list of 67 candidates have been provided to UPCL by Uttarakhand Pravidhik Shiksha Parishad. With regard to posts for 496 Technician Grade-2, the Petitioner submitted that the same has been stopped by GoU vide letter No. 31/2014 dated and the matter is pending before Hon ble Industrial Tribunal, Haldwani. The Petitioner further submitted that it is in the process to fill around 225 posts comprising of Jr. Engineer, Assistant Accountant and Draughtsman and submitted the status as follows. 168 Uttarakhand Electricity Regulatory Commission

183 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Group C C C Table 4.43: Status of recruitment as submitted by the Petitioner for FY and FY Post Junior Engineer (E&M) Junior Engineer (Civil) Assistant Accountant No. of Vacancies C Draughtsman 19 C Office Assistant- III 77 Total 302 Current Status According to additional staff structure vide G.O. No.801/I(2)/ (2)- 08/2002 dated Revised Adhiyachan for 160 posts of JE-E&M and 06 post of JE-Civil has been sent to Adhinastha Sewa Chayan Ayog vide letter No dated According to additional staff structure vide G.O. No.801/I(2)/ (2)- 08/2002 dated Adhiyachan for 40 posts of Assistant Accountant has been sent to Adhinastha Sewa Chayan Ayog vide letter No dated Remark Advertisement was published on by Uttarakhand Adhinastha SewaChayan Ayog. Written exam for the post of Junior Engineer (Trainee)- (E&M) and (Civil) held on Corporation letter no. 397-Dir (HR)/UPCL dated , letter No Dir(HR)/ UPCL/ KF-2 dated , letter no Dir(HR)/ UPCL/KF-2 dated & letter no Dir(HR)/ UPCL/KF-2 dated have also been sent to Uttarakhand Adhinastha Sewa Chayan Ayog to expedite the recruitment process of the aforesaid posts. Adhiyachan for 19 posts of Draughtsman has been sent to Written exam for the post of Adhinastha Sewa Chayan Draughtsman held on Ayog vide letter No dated Advertisement was released on Written exam held on by Uttarakhand Pravidhik ShikshaP arishad. List of 67 selected candidates has been provided to UPCL by Uttarakhand Pravidhik Shiksha Parishad As per direction of Hon'ble High Court, Nainital dated in SPA No. 524 of 2015," the corporation will not fill up the posts, through this selection process, which are occupied by the persons who have been appointed on contract basis through UPNL...". The Hon'ble Industrial Tribunal, Haldwani issued award dated in Adjudication No.31/2014. A new writ petition is also filed by Shri.Vikas Kumar (one of the selected candidates) in Hon'ble High Court, Nainital. Through Corporation letter no Dir (HR) /UPCL/ KF-2 dated & letter no Dir (HR) /UPCL/ KF-2 dated letters have been sent to the Govt. of Uttarakhand for the permission to fill up the posts of direct recruitment. Uttarakhand Electricity Regulatory Commission 169

184 Order on True-up for FY , APR for FY & ARR for FY As observed from the above, selection of candidates are yet to be done and, therefore, the chances that the above post shall be filled up in FY is negligible. The Commission, therefore, has considered that 67 employees who have been selected for the post of Office Assistant-III would be joining the services in UPCL by Further, as evident from the above Table, for the post of Assistant Account not even advertisement has been issued and, therefore, the same has not even been considered to be filled up even in FY Recruitment in balance 185 posts (166 posts of JE and +19 posts of Draughtsman) has been considered to be completed in FY The Petitioner also submitted that it has sought permission from GoU to fill up another 105 posts of Assistant Engineers and others in FY though it was cancelled by GoU vide Govt. letter no. 1537/1(2)/ (2)-14/2016 dated Since the permission has still not been granted by GoU, therefore, the Commissionn has not considered the same. In this regard, it would also be relevant to point out that the State Government vide its Order dated while approving the pay and allowances in accordance with the recommendations of the Seventh Pay Commission, had freezed the recruitment/selection in all the posts. Further, in posts where recruitment process had already been initiated, such recruitments are also subject to the approval of the State Government. Hence, it is unlikely that actual recruitment would exceed the recruitment of employees considered in this Order. Thus, the Commission has considered the addition in manpower as 67 (OA-III) and 185 (JE+Draughtsman) during FY and FY respectively. Against the same, the number of employees retiring during FY and FY has been shown as 327 and 196 respectively. Thus, the Gn factors based on the recruitment and retirement details submitted by the Petitioner works out to 0.00% for both FY and FY In accordance with UERC Tariff Regulations, 2015, CPI inflation which is the average increase in the Consumer Price Index (CPI) for the preceding three years is to be considered. The Commission has calculated the annual growth in values of CPI (overall) based on the average of preceding three full years upto FY as 5.35%. The Commission has considered the gross normative employee expenses approved in the true up for FY for projecting the employee expense for FY and FY in accordance with the UERC Tariff Regulations, Further, the Commission has considered the capitalisation rate of employee expenses as 17.44% based on the actual rate of capitalisation for FY 170 Uttarakhand Electricity Regulatory Commission

185 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY In its MYT Order, the Commission had considered the impact of Seventh Pay Commission to the tune of 20% of the approved net employee expenses and had allowed certain provision to the Petitioner for FY to FY The Petitioner in the current Petition has submitted that Govt. of Uttarakhand vide letter dated directed the Petitioner to bear the additional liability on account of Seventh Pay Commission revision in salaries in two parts. The arrears arising for first six months on account of revision, i.e to are to be paid during FY and the remaining payment for to in FY The Petitioner submitted that the payout of arrears on account of the recommendation of 7 th Pay Commission has been estimated at Rs. 2.5 Crore per month. The Petitioner submitted that as per the directions of the GoU, the payout for six months has been included in FY while the additional expenditure in terms of arrears and additional employee cost for FY and FY has been included in FY based on the same monthly estimate. The Petitioner requested the Commission to trueup the actual payment at the time of truing-up for the respective years. The Petitioner, accordingly, has claimed an impact towards the pay revision of Rs Crore to be allowed in FY The Commission has gone through the submissions of the Petitioner. The Commission directed the Petitioner to submit the basis for computing pay revision impact of Rs Crore per month. The Petitioner submitted the calculations for the same. In additional submission made by the Petitioner, it was submitted that it has paid arrears of Rs Crore for the month of December, 2017 and January, It was also submitted that the pay for the month of February, 2018 was being prepared. The Petitioner further submitted that due to calculation of TDS from salaries for FY , the actual freezing of pay roll for the month shall be completed by third week of March, 2018 and, therefore, actual figures relating to payment of arrears in FY will only be available after freezing of pay roll, i.e. by March end. In this regard, the Government Order dated stipulates that payment of arrears w.e.f shall be made in cash while separate orders shall be passed for payment of arrears for the period to In this regard, the Petitioner Company vide its Order dated held that the payment of Pay arrears for the period to shall be done during FY and the payment of arrears pertaining to the period to shall be done in FY Hence, during FY , the impact of VII Pay Commission would be to Uttarakhand Electricity Regulatory Commission 171

186 Order on True-up for FY , APR for FY & ARR for FY the extent of payment of arrears for the period to and also the impact of increase in current pay. Hence, the Commission has considered the revised claim of Rs Crore (Rs Crore for 18 months) as the impact of VII Pay Commission for FY However, the Petitioner is directed to maintain separate details of the amount paid as arrears to its employees on account of implementation of the recommendations of VII Pay Commission. The Commission would carry out the truing up for FY and FY based on the actual impact of VII Pay Commission including arrears and no sharing of gains and losses on this account would be allowed. The normative employee expenses approved by the Commission for FY are as shown in the Table below: Table 4.44: Employee Expenses approved by the Commission for FY (Rs. Crore) Particulars Claimed by UPCL Approved EMPn Gn 0.00% 0.00% CPIinflation 5.35% 5.35% EMPn = (EMPn-1) x (1+Gn) x (1+CPIinflation) Capitalisation rate 15.63% 17.44% Less: Employee expenses capitalised Net Employee expenses Enhanced impact of pay Revision Total Employee expenses R&M Expenses The Commission had approved the R&M expenses of Rs Crore for FY in its MYT Order dated April 5, As against the same, the Petitioner has proposed R&M expenses of Rs Crore. The Petitioner submitted that R&M expenses have been computed as per UERC Tariff Regulations, The Commission has determined the R&M expenses in accordance with UERC Tariff Regulations, The Commission has considered the K factor of 2.67% as approved in the MYT Order dated April 5, The Commission has considered the opening GFA for FY The Commission has considered the WPI inflation of 1.07% which is the average increase in the Wholesale Price Index (WPI) for FY to FY The R&M expenses approved by the Commission for FY are as shown in the Table 172 Uttarakhand Electricity Regulatory Commission

187 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY below: Table 4.45: R&M Expenses approved by the Commission for FY (Rs. Crore) Particulars FY Claimed by UPCL Approved K 2.80% 2.67% GFAn WPIinflation 1.07% 1.07% R&Mn = K x (GFAn-1) x (1+WPIinflation) A&G Expenses The Commission had approved the A&G expenses of Rs Crore for FY in its MYT Order dated April 5, The Petitioner, in its Petition, has proposed the A&G expenses for FY as Rs Crore as per the UERC Tariff Regulations, The Commission has considered the approved normative A&G expenses in the true up for FY for projecting the A&G expenses for FY and FY The Commission has considered the WPI inflation of 1.07% which is the average increase in the Wholesale Price Index (WPI) for FY to FY The Commission has considered the capitalisation rate of 36.66%, the same as trued up for FY The Commission in addition has also considered the License Fee of Rs Crore as per the license fee specified by the Commission. Further, the Commission has approved provision towards data centre cost as well as consultancy charges paid to Que Next for data forecasting as the Petitioner has incurred expenses of Rs Crore in FY The Commission has projected the same for FY based on the WPI inflation for FY and FY which works out to Rs Crore. In addition to the normative A&G expenses, the Petitioner has submitted that it had identified some newly introduced recurring expenses and has proposed an additional 'Provision needed for activities such as upkeep of the data centre and other works carried out under the R- APDRP scheme. These additional expenses relates to network connectivity charges, facility management charges, annual maintenance charges for software solutions & hardware installed as part of the R-APDRP works. The Petitioner also submitted that the expenditure on account of such heads was not included in the earlier years and are, therefore, not covered under the normative A&G expense approved by the Commission that were considered on the base year of FY / Uttarakhand Electricity Regulatory Commission 173

188 Order on True-up for FY , APR for FY & ARR for FY FY The Petitioner has estimated an amount of Rs Crore in FY and Rs Crore in FY against various heads including AMC of software and hardware implementation as part of R-APDRP works, annual subscription of licenses and software, bandwidth charges for connectivity, etc. The detailed list of additional expenses under A&G expenses submitted by the Petitioner is provided in the Table below: Table 4.46: Additional Provisioning for Data Centre (Rs. Crore) S. No. Particulars FY18 FY19 Description 1. Expenditure done on SMS Gateway Network Bandwidth Service Provider (M/s Tatatele Servises) Bandwidth charges 3. Executives for Data Centre Call Center staff provided by outsource agency running on 24x7 basis at Dehradun for handling consumer complaints 4. Expenditure on MPLS Consists of Connectivity charges for links at DC/DR/site offices across VPN to BSNL Uttarakhand 5. AMR Cost (Idea Cellular) Cost of Automatic Meter Reading installed at Substations and Distribution Transformer. 6. AMC services (M/s Wipro Provide AMC services for the installed system like DG, Electrical Panels, Ltd. DRC-Haldwani) Fire Detection, Fire Suppression, Rodent etc. at DR Haldwani 7. AMC Services (M/s Provide AMC services for the installed system like DG, Electrical Panels, Nikom Infrasolution Pvt Fire Detection, Fire Suppression, Rodent etc. at DR Haldwani Ltd.) 8. AMC Services (Redington DC AMC Cost for installed Hardware at Data Center Dehradun consists of India Ltd.) various server and storage 9. License Cost (M/s Sify IBM software License Cost for the installed IBM Tivoli and IBM Network Technologies Ltd) management software. Microsoft License Cost 10. (M/s Ricoh India Ltd.) Microsoft Software License for the installed microsoft software and OS 11. FMS Cost Facility Management Services in which vendor will provide the support for the installed system for 5 years from Aug 2015 i.e. upto July 2020 Hardware AMC Cost (DR Hardware AMC Cost for the installed hardware at Disaster Recovery Center AMC Cost) Haldwani 13. Misc. expenditure Consists of various expenses like insurance of DC/DR, Consulting charges of CA, LAN installation in offices, procurement of small IT equipment s etc. 14. GIS AMC Cost Software AMC Cost. It consists of Arc GIS/Arch FM software AMC cost which has to be paid for the period from Unified IT consultant IT consultant will be hired to provide the IT roadmap for UPCL and for policy formation for future IT systems 16. Technical Support Services for m-power Software M/s Fluentgrid Ltd for handling the changes which are coming in the commercial softwares like Metering, Billing, Collections etc due to change in requirement/regulations/policies etc. 17. AMC Cost m-power Annual maintenance charges for the m-power software Manpower for SCADA Consists of manpower cost which will be hired for running the SCADA Operations operations on 24x7 basis in Dehradun Additional A&G expense against Data Centre cost and other works under 19. Total R-APDRP The Petitioner also submitted that it had received an in-principle approval for the proposed 174 Uttarakhand Electricity Regulatory Commission

189 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY one-time cost for hardware, software and supply of modems required for implementing GPRS based Integrated Automatic Meter Reading System on 12,000 consumers to be executed on turnkey basis vide Commission s Order dated 28 th September, The Petitioner estimated an additional annual cost of Rs Crore for O&M expenses towards meter reading along with analysis report and has requested the Commission to allow an additional provision against the same to meet the O&M expenses arising out of these new installations for FY In this regard, it is pointed out that O&M expenses and in particular A&G expenses is a controllable expense and the endeavour of the Petitioner should be to incur the same prudently and keep it to a bare minimum. The Commission has allowed certain provision towards data centre cost for FY as dealt above. Further, certain items claimed under upkeep of Data Centre and other works carried out under R-APDRP Scheme relates to Repairs and Maintenance expenses as have been booked by the Petitioner also in FY as discussed in Chapter 3 of the Order and will be covered under the R&M expenses. The Petitioner is directed to book these expenses separately under the relevant accounting head, i.e. R&M expenses or A&G expenses and claim the same during truing up of the respective years. With reference to the additional annual cost of Rs Crore for O&M expenses towards meter reading along with analysis report under IAMR, the Commission in its Order dated has already held as under: (4) With regard to O&M expenses of Rs Crore for a period of 5 years for the IAMR System as mentioned in Petitioner s submissions dated & , the Commission does not agree with the same and is of the view that these O&M expenses are exorbitantly high. Keeping in view of higher O&M expenses, the licensee should revisit the scope of O&M works specified for the said project and prepare a mechanism for inhouse data analysis and preparation of report by licensee s officers/staff, as this would not only reduce the proposed O&M expenses but also be beneficial for the licensee in developing its in-house capability as well as reducing its over dependency on the external agencies.... The Petitioner shall revisit the scope of O&M works specified for the said project as suggested by the Commission at para 10 (4) above in order to minimize the Operation & Maintenance expenses of the project. Uttarakhand Electricity Regulatory Commission 175

190 Order on True-up for FY , APR for FY & ARR for FY However, it is surprising to note that the Petitioner has again projected a cost of Rs Crore under this head despite Commission s findings contrary to the same. The Petitioner is again directed to revisit the scope of O&M works specified for the said project and prepare a mechanism for inhouse data analysis and preparation of report by licensee s officers/staff failing which the same may be disallowed by the Commission. The Petitioner is also directed to book expenses separately under O&M expenses for the expenses related to IAMR. The normative A&G expenses approved by the Commission for FY are as shown in the Table below: Table 4.47: A&G Expenses approved by the Commission for FY (Rs. Crore) Particulars Claimed Allowable A&Gn WPIinflation 1.07% 1.07% Gross A&G expenses Capitalisation rate 31.11% 36.66% Less: A&G expenses capitalized Net A&G expenses Provision (Data Centre) License Fee A&Gn = A&Gn-1 x (1+WPIinflation) + Provision O&M Expenses below: The O&M expenses approved by the Commission for FY are as shown in the Table Table 4.48: O&M Expenses as approved by the Commission for FY (Rs. Crore) Particulars FY Claimed by UPCL Approved Employee expenses R&M expenses A&G expenses Total O&M expenses Interest on Working Capital The Petitioner has submitted that the interest on working capital for FY has been proposed in accordance with UERC Tariff Regulations, Accordingly, the Petitioner has proposed the IWC of Rs Crore for FY Regulation 33(2) of the UERC Tariff Regulations, 2015 specifies as follows: 176 Uttarakhand Electricity Regulatory Commission

191 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY (2) Distribution a) The Distribution Licensee shall be allowed interest on the estimated level of working capital for the financial year, computed as follows: (i) Operation and maintenance expenses for one month; (ii) Maintenance 15% of operation and maintenance expenses; plus (iii) Two months equivalent of the expected revenue from sale of electricity at prevailing tariffs; (iv) Capital required to finance such shortfall in collection of current dues as may be allowed by the Commission; minus (v) Amount held as security deposits under clause (a) and clause (b) of sub-section (1) of Section 47 of the Act from consumers and Distribution System Users; minus (vi) One month equivalent of cost of power purchased, based on the annual power procurement plan. The Commission has determined the interest on working capital for FY in accordance with the UERC Tariff Regulations, The Commission has computed the interest on working capital in accordance with UERC Tariff Regulations, One Month O&M Expenses The annual O&M expense approved by the Commission is Rs Crore for FY Based on the approved O&M expenses, one month s O&M expenses work out to Rs Crore for FY Maintenance Spares The Commission has considered the maintenance spares as 15% of annual O&M expenses in accordance with UERC Tariff Regulations, 2015, which works out to Rs Crore for FY Receivables The Commission has approved the receivables for two months equivalent to the expected Uttarakhand Electricity Regulatory Commission 177

192 Order on True-up for FY , APR for FY & ARR for FY revenue from the sale of electricity at the net revenue requirement of Rs Crore for FY , which works out to Rs Crore for FY Capital required to finance shortfall in collection of current dues The Petitioner has claimed Rs Crore towards the capital required to finance the shortfall in collection of current dues. The Commission has approved the collection efficiency of 99.00% for FY while approving the Business Plan of UPCL for the second Control Period of FY to FY In accordance with the provisions of the UERC Tariff Regulations, 2015 the Commission has approved the capital required to finance shortfall in collection of current dues as shown in the Table given below: Table 4.49: Capital required to finance the shortfall in collection of current dues approved by the Commission Particulars Legend FY Net Revenue Requirement (Rs. Crore) A Collection efficiency approved B 99.00% Difference C=100%-B 1.00% Short fall in current dues (Rs. Crore) CxA Adjustment for security deposits and credit by power suppliers The Petitioner has proposed the amount held as security deposit as Rs Crore and one month of power purchase cost as Rs Crore totalling to Rs Crore for FY The Commission has allowed fortnightly billing of variable charges to the gas generators in the State as they have to make the payment to GAIL on fortnightly basis. Hence, the Commission has relaxed the requirement of adjustment of power purchase cost of one month to 15 days in case of the three gas generators in the State to facilitate UPCL in meeting the power purchase payments to them. For other generators the adjustment of one month would continue. The Commission has also considered the same amount of security deposit as proposed by the Petitioner and, accordingly, the Commission has approved the total amount of Rs Crore for FY as the amount held as security deposits and credit by power suppliers. Based on the above, the total working capital requirement of the Petitioner for FY , works out to Rs. (8.91) Crore (negative amount). The Commission has, therefore, not approved 178 Uttarakhand Electricity Regulatory Commission

193 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY interest on working capital for FY Return on Equity The Petitioner has considered the opening Equity for FY as Rs Crore. The Petitioner has considered the equity addition during the year as per the proposed financing plan for the year. The Petitioner has proposed the Return on Equity at the rate of 16.50% on the average equity for the year. Accordingly, the Petitioner has proposed the Return on Equity of Rs Crore for FY Regarding the Return on Equity, Regulation 26 of the UERC Tariff Regulations, 2015 specifies as follows: 26. Return on Equity (1) Return on equity shall be computed on the equity base determined in accordance with Regulation 24. Provided that, Return on Equity shall be allowed on account of allowed equity capital for the assets put to use at the commencement of each financial year. (2) Return on equity shall be computed on at the base rate of 15.50% for thermal generating stations, transmission licensee, SLDC and run of river hydro generating station and at the base rate of 16.50% for the storage type hydro generating stations and run of river generating station with pondage and distribution licensee on a post-tax basis. In accordance with the UERC Tariff Regulations, 2015, Return on Equity is allowable on the opening equity for the year. Hence, the Commission has determined the Return on Equity for FY considering the eligible opening equity for return purposes. The Commission has considered the closing eligible equity for return purposes approved for FY as the opening balance for FY Thereafter, the Commission has considered the equity addition during FY as per the approved means of finance for FY The Commission has considered the closing balance for FY as the opening balance for FY The Return on Equity approved by the Commission for FY is as shown in the Table below: Uttarakhand Electricity Regulatory Commission 179

194 Order on True-up for FY , APR for FY & ARR for FY Table 4.50: Return on Equity approved by the Commission for FY (Rs. Crore) Particulars Claimed by UPCL Approved Opening Equity Addition during the year Closing Equity Rate of Return 16.50% 16.50% Return on Equity Income Tax The Petitioner has not claimed any Income Tax in its ARR proposals for FY Regulation 34 of the UERC Tariff Regulations, 2015 specifies as follows: 34. Tax on Income Income Tax, if any, on the income stream of the regulated business of Generating Companies, Transmission Licensees, Distribution Licensees and SLDC shall be reimbursed to the Generating Companies, Transmission Licensees, Distribution Licensees and SLDC shall be reimbursed to the Generating Companies, Transmission Licensees, Distribution Licensees and SLDC as per actual income tax paid, based on the documentary evidence submitted at the time of truing up of each year of the Control Period, subject to prudence check. As stated above, Income Tax is admissible at the time of Truing up and, hence, the Commission has not considered any Income Tax in the approval of ARR for FY Provision for Bad and doubtful debts The Petitioner has proposed provision for bad debts up to 1% of the estimated annual revenue requirement subject to actual writing off of bad debts in the previous years.the Petitioner further submitted that receivables for sale of power equivalent to Rs Crore were transferred to UPCL on under the scheme of division of Assets and Liabilities between UPPCL & UPCL. As against these receivables an amount equivalent to Rs Crore was also transferred to UPCL towards provision for Bad and Doubtful Debts. The Petitioner further submitted that most of these receivables received under the transfer scheme are irrecoverable and needs to be Written Off. The Petitioner further submitted that as per the directions of the Commission it has drafted a policy for Provisioning & Writing Off of Bad and Doubtful Debts which has been submitted along with the Petition and has requested the Commission to approve this scheme and also authorize the 180 Uttarakhand Electricity Regulatory Commission

195 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Petitioner to write off the receivables received under transfer scheme as per the provisions of this policy. Regulation 31 of the UERC Tariff Regulations, 2015 specifies as follows: 31. Bad and doubtful debts (1) The Commission may allow a provision for bad and doubtful debts upto one percent (1%) of the estimated annual revenue of the distribution licensee, subject to actual writing off bad debts by it in the previous years. Provided further that where the total amount of such provisioning allowed in previous years for bad and doubtful debts exceeds five (5) per cent of the receivables at the beginning of the year, no such appropriation shall be allowed which would have the effect of increasing the provisioning beyond the said maximum. As discussed in Chapter 3 of the Order, the Petitioner has chosen to ignore the provisions of Rs. 230 Crore inherited by it from UPPCL against the opening debtors of Rs. 619 Crore. The Transfer Scheme agreed by the two Corporation dates back to the year It cannot be ruled out that out of Rs. 619 Crore inherited by UPCL, some amount may be bad and doubtful by now which has to be written off by the Petitioner with the total amount of provisions available with it. However, the Petitioner has not put on record any documentary evidence substantiating that most of these receivables received under the transfer scheme are irrecoverable and needs to be written off. The Commission in the previous Tariff Order had directed the Petitioner to carry out an audit of receivables and also identify and classify the same. Though the Petitioner has submitted a draft bad debt policy, however, the same needs to be supported by audit report of receivables. The Commission as of now has not considered the provision for bad and doubtful debts in the approval of ARR for FY in accordance with the UERC Tariff Regulations, Further, the Commission is not approving the draft bad debt policy submitted by the Petitioner in these proceedings and will take a view on the same separately. The Commission, therefore, directs the Petitioner to submit the audit report of receivables identifying and classifying the same in detail within 6 months from the date of this Order. The Commission shall consider writing off of bad debts for FY upon submission of the same at the time of truing up of FY Uttarakhand Electricity Regulatory Commission 181

196 Order on True-up for FY , APR for FY & ARR for FY Non-Tariff Income The Petitioner has proposed non-tariff income of Rs Crore for FY In absence of any yardstick for estimating the non-tariff income of the Petitioner, the Commission provisionally accepts the same for FY The same shall, however, be Trued up based on the actual audited accounts for the year Adjustment of revenue from Free Power The Petitioner in its Petition has submitted that 75% of the cross-subsidy in respect of BPL/ PTW consumers has been adjusted from the cost of free power and the impact of the same has been passed on to the subsidizing categories, i.e. HT-Industrial & Non-domestic. An amount of Rs Crore has been estimated and the same has been reduced from the Gross ARR for FY The Commission in this regard asked the Petitioner to submit the following: a) Reasons for proposing the adjustment b) Regulation under which it has proposed this adjustment c) Whether State Government has accorded the approval. If yes, documentary evidence for such approval. d) If approval has not been accorded, submit revised ARR and Tariff Proposal excusing such adjustment. The Petitioner in response to the above submitted that the mandate of Electricity Act, 2003 and Tariff Policy is to reduce the level of cross-subsidy. With a view to reduce the level of crosssubsidy the adjustment was proposed. The Petitioner further submitted that it has proposed the said adjustment under Regulation 16(5)(b) which states as follows: A statement of proposed tariffs containing full details of calculation of any subsidy received, due or assumed to be due from the State Government, the purpose consumers to whom it is directed, and showing how the subsidy is reflected in the current and proposed tariff applicable to those consumers. With regards to having approval of GoU, the Petitioner stated that the ARR and Tariff Petition is approved by Board of Directors (BoD) of the Petitioner Company and the Government Representatives (Principal Secretary/Secretary/Additional Secretary) are members of BoD. The 182 Uttarakhand Electricity Regulatory Commission

197 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY Petitioner, however, submitted that no written communication have been received so far from GoU. The Commission has gone through the submissions of the Petitioner and is of the view that the revenue from free power belongs to the Government and, therefore, the Petitioner cannot propose to adjust the same without the written consent from GoU. In this regard, the Commission vide its letter dated January 10, 2018 had asked the State Government if it intends to allow utilisation of revenue from free power as proposed by UPCL. However, till the date of the Order no communication has been received from the State Government. The Commission has, therefore, not considered proposed adjustment of the revenue from free power for reduction of cross subsidy. The Commission also directs the Petitioner to refrain from such financial engineering in its future proposals in the absence of firm assurances/commitments from the State Government which results in misleading all the stakeholders Treatment of past year adjustments The Commission in its MYT Order dated April 05, 2016 had approved the recovery of past year provisioned amount on account of material cost variance and write off of liabilities towards cost of power purchase. The Commission had determined the past year adjustments of Rs Crore with carrying cost to be returned by the Petitioner. The Commission further adjusted the true up of capital related expenses of the past years leaving behind Rs Crore to be refunded in three equal instalments out of which an amount of Rs Crore and Rs Crore was adjusted in the MYT Order in FY and APR Order dated March 29, 2017 and balance Rs Crore along with carrying cost amounting to Rs Crore have to be passed on in FY The amount to be adjusted on account of the same is as shown in the Table below: Table 4.51: Past Year Adjustment approved for FY (Rs. Crore) Past Year Adjustments Revised Estimate Opening for FY Addition (Adjustment) (139.16) Closing Interest rate (as approved for WC borrowings) 14.05% Carrying Cost Final Closing Gap to be adjusted in FY Further, as discussed in Chapter 3 of this Order the Commission is adjusting excess amount towards cost of free power allowed from FY to FY to the Petitioner amounting to Rs Crore from the ARR of FY Uttarakhand Electricity Regulatory Commission 183

198 Order on True-up for FY , APR for FY & ARR for FY Revenue Requirement for FY Based on the above, the Revenue Requirement approved by the Commission for FY is as shown in the Table below: Table 4.52: Revenue Requirement approved by the Commission for FY (Rs. Crore) S. No. Particulars Claimed by UPCL Approved 1. Power Purchase Cost Adjustment of Free Power (Excess Allowed) (100.74) 3 Truing up of UJVN Ltd. (47.09) 4. Transmission Charges PGCIL PTCUL SLDC Charges Interest on Loan Depreciation O&M expenses Interest on Working Capital Return on Equity Aggregate Revenue Requirement Less: Non-Tariff Income Add: True up impact Gap/(surplus) Free Power Adjsutment Cross Subsidy (191.14) 15. Previous year adjustment (158.71) (158.71) 16. Net Revenue Requirement Revenue at Existing Tariff Tariff. The Petitioner has projected the revenue of Rs Crore for FY at the approved By applying the approved Tariff for FY in Tariff Order dated , the Commission has estimated the total consumer category wise revenue for FY as Rs Crore. The revenue at existing Tariff as proposed by the Petitioner and estimated by the Commission is shown in the Table given below: 184 Uttarakhand Electricity Regulatory Commission

199 4. Petitioner s Submissions, Commission s Analysis, Scrutiny and Conclusion on Annual Revenue Requirement for FY S. No. Consumer Category Table 4.53: Revenue for FY at existing Tariff (Rs. Crore) Proposed by the Petitioner Sales (MU) Revenue Average (Rs. Crore) Billing Rate (Rs./kWh) Estimated by the Commission Revenue (Rs. Crore) Sales (MU) Average Billing Rate (Rs./kWh) 1. RTS-1: Domestic 2,986 1, RTS-2: Non- Domestic 1, RTS-3: Public Lamps RTS-4: Private Tube Wells RTS-5: Government Irrigation Systems 6. RTS-6: Public Waterorks RTS-7: Industry 6,366 3, LT Industry HT Industry 6,015 3, RTS-8: Mixed Load RTS-9: Railway Traction Revenue from Incremental Sales Total , Revenue Gap for FY at existing Tariff Based on the net revenue requirement of Rs Crore (including the proposed True up amount for FY ) and revenue at existing Tariff of Rs Crore, the Petitioner has proposed the revenue gap of Rs Crore to be recovered by way of proposed Tariff for FY Considering the net revenue requirement of Rs Crore and revenue at existing Tariff of Rs Crore, the Commission has approved the revenue gap of Rs Crore for FY The Commission has approved the Retail Tariff for FY to cover the approved revenue gap of Rs Crore.The revenue gap for FY proposed by the Petitioner and approved by the Commission is as shown in the Table given below: Uttarakhand Electricity Regulatory Commission 185

200 Order on True-up for FY , APR for FY & ARR for FY Table 4.54: Revenue Gap for FY (Rs. Crore) Particulars Proposed by the Petitioner Approved Net Revenue Requirement Revenue at existing Tariff Revenue Gap Uttarakhand Electricity Regulatory Commission

201 5. Tariff Rationalisation, Tariff Design and Related Issues 5.1 Tariff Rationalisation and Tariff Design for FY General In Chapter 4 of this Order, it has been concluded that the revenue projected to be earned by UPCL during FY at approved tariffs vide Tariff Order dated will be Rs Crore. Against this, the ARR approved by the Commission for FY including gap and surplus on account of truing up of previous years works out to Rs Crore, leaving a total gap of Rs Crore. In view of the objections received and the Petitioner s submissions, the Commission considers it appropriate to first take a view on the tariff rationalisation measures suggested by the Petitioner and the concerns voiced by other stakeholders Petitioner s Proposals The Petitioner submitted that the tariff proposal has been formulated with an attempt to keep the impact on the consumers to the minimum possible extent and at the same time not defer a large portion of recovery on the tariff for the coming years. The Petitioner further submitted that Section 61(g) of the Electricity Act, 2003 states that the appropriate Commission should be guided by the objective that the tariff progressively reflects the efficient and prudent cost of supply of electricity. The Petitioner further submitted that the Additional Energy Charge (AEC) as approved by the Commission vide its Review Order dated August 03, 2017 on True-up for FY , Annual Performance Review for FY and Annual Revenue Requirement for FY has been considered to be subsumed in the proposed increase in fixed and energy charges and, therefore, has not been proposed separately. Some of the key alterations proposed by the Petitioner in the retail tariffs for FY are as follows: Loss Based Additional Surcharge The Petitioner submitted that the Commission in the Tariff Order for FY had introduced the concept of Loss based Additional Surcharge to be applied to consumers based on Uttarakhand Electricity Regulatory Commission 187

202 Order on True-up for FY , APR for FY & ARR for FY the loss in the specific zone/ sub-division. A concept paper was also issued by the Commission subsequently in this regard. The Petitioner submitted that it has undertaken several measures in the past which has resulted in reducing its distribution losses to 16.68% in FY The Petitioner also submitted the Division wise loss levels. It is observed that losses in some of the divisions/subdivisions are still very high than the reasonable level of losses. The Petitioner, therefore, requested the Commission to reconsider its approach for introduction of Loss based Additional Surcharge in such divisions which would help in discouraging pilferage activities by the consumers in the respective areas Disconnection for consumers exceeding 110% of their Contracted Load/Demand consecutively in three billing cycles The Petitioner has proposed disconnection of consumers exceeding 110% of their contracted load / demand consecutively in three billing cycles in a financial year. The Petitioner submitted that it has been proposed in view of the fact that such excess demand drawn by the consumer is unplanned on the part of the distribution licensee and causes loss/ damage to the distribution system. The Petitioner further proposed that these consumers shall be reconnected once they establish reduction in their load or apply for enhancement of their connected load/ demand Prepaid metering The Petitioner submitted the Tariff proposal for prepaid metering. The salient features of Prepaid Metering proposed by Petitioner are as follows: 1. The option of Pre-paid metering shall be available for all categories of consumers upto 25 kw load under LT category. Prepaid Metering shall be mandatory for new Temporary LT connections, for Advertisements/Hoardings and for Government connections upto 25 kw. 2. There shall be a minimum recharge of Rs. 100 and the maximum limit of recharge shall be Rs. 15,000 for both single phase and three phase connections. Validity of the recharge shall be continued till the amount is available in the account of the consumer. Any recharge shall be allowed only when the 20 digit special meter reading code shall be made available by the consumer. 188 Uttarakhand Electricity Regulatory Commission

203 5. Tariff Rationalsation, Tariff Design and Related Issues 3. As regards the charges for testing of meter, the Petitioner shall recover the amount as approved by the Commission under Schedule of Miscellaneous Charges directly from such prepaid consumers as is done for postpaid consumers and shall not be charged from the recharge amount. 4. In case, the consumer opting for Prepaid Metering have outstanding arrears, the Petitioner shall adjust 20% of the past arrears or 50% of the recharge amount, whichever is higher from the recharge voucher, subject to the maximum of the outstanding arrears. Further, the maximum limit of recharge as mentioned above, shall not be applicable in case of consumers having outstanding arrears and accordingly, such consumers having past arrears will have to take minimum recharge of more than 20% of the outstanding arrears. 5. The Petitioner shall make necessary provisions to provide friendly credit hours/limit to the consumers, in order to ensure uninterrupted supply to the consumer in the event of expiry of the balance during non-working hours, i.e. night time or during holiday, so as to provide reasonable time to the consumer to procure the recharge voucher at the next possible working hours or working day. However, the charges for the electricity consumed between expiry of balance during non-working hours and subsequent recharge voucher shall be adjusted from the recharge voucher. 6. All the Prepaid meters will be provided with an alarm to indicate low credit. 7. As per the guiding principles and Section 47(5) of the Electricity Act, 2003, the Petitioner shall not charge any security deposit as is required in post-paid connections but price equivalent to the material cost, i.e. cost of meter and associated equipment s shall be charged as material security which shall be returned after adjusting for the depreciation at the time of permanent disconnection. The material security deposit for FY shall be Rs. 5000/- for single phase connection and Rs 10,000/- for three phase connection. 8. The consumer shall be allowed only one transfer from postpaid to prepaid or otherwise in a financial year. 9. Minimum Consumption Guarantee (MCG), voltage rebate/surcharge, low power factor surcharge and excess load penalty shall not be applicable for prepaid connections. Uttarakhand Electricity Regulatory Commission 189

204 Order on True-up for FY , APR for FY & ARR for FY A rebate of 4% of Energy Charges for Domestic Category and 3% of Energy Charges for other categories shall be applicable as per tariff schedule for the consumers availing this scheme and the rebate shall only be applicable after installation and operationalization of Prepaid meters. 11. No rebate shall be applicable on Part (A) of RTS-10, i.e. Temporary Supply for Illumination & Public Address Needs. 12. Fixed charge in respect of other domestic consumers (para 2 (1.2) of the RTS -1) shall be Rs. 70/kW/month. 13. The solar water heater rebate shall be adjusted as follows:- a. The rebate for first month of implementation of prepaid metering scheme shall be credited immediately on the first recharge. Thereafter, rebate shall be credited on monthly basis if recharge is done every month. b. In case recharge is not being done on monthly basis, then based on the capacity of Solar Water Heater installed by the consumer, solar water heater rebate would be credited for all the past months for which the rebate was due either at the time of recharge or when the consumer approaches UPCL Commission s Views on Tariff Rationalisation Measures The Commission believes that tariff rationalisation is a dynamic and ongoing process and is essential to accommodate the socio-economic and technological changes taking place in the system over a period of time. The following Sections discuss the tariff rationalisation measures suggested by the Petitioner, Respondents, and the Commission s view on the same Loss Based Additional Surcharge The Petitioner itself has mentioned that it has undertaken several measures in the past which has resulted in reducing its distribution losses to 16.68% in FY The Petitioner requested the Commission for introduction of Loss based Additional Surcharge in such divisions where the losses are higher as the same would help in discouraging pilferage activities by the consumers in the respective areas. 190 Uttarakhand Electricity Regulatory Commission

205 5. Tariff Rationalsation, Tariff Design and Related Issues As discussed in subsequent Chapter, the Petitioner s performance on the issues related to metering and billing needs to be substantially improved and the Petitioner has not been complying with the directions issued by the Commission. The Commission would like to highlight here that the Petitioner has only proposed the concept in its Petition and has not given any concrete proposal with loss based additional surcharge to be levied alongwith revenue impact etc. There have been responses from the consumers in this regard that why should a honest consumer be loaded with the burden of losses of other consumers who are engaged in such malpractices. The Commission agrees with such views of the consumers. It is the duty of the licensee to control theft of electricity and it cannot shift its duty to the consumers. Besides, even if loss based additional surcharge is introduced, consumer who was indulging in theft of electricity would continue to do so rather they will have all the more incentive to steal electricity as it would save them in monetary terms. While on the flip side such mechanism would burden the honest consumers who pay their bills on time and do not indulge in such practices including theft of electricity. Hence, the Commission is of the view that at overall loss level of 16.68% it would not be appropriate to burden the honest consumers of divisions having higher loss levels on account of inefficiencies of the Petitioner. The Commission has, therefore, not approved any loss based additional surcharge Disconnection for consumers exceeding 110% of their Contracted Load/Demand consecutively in three billing cycles. The Petitioner has proposed disconnection of consumers exceeding 110% of their contracted load / demand consecutively in three billing cycles in a financial year. In this regard, several stakeholders have submitted that this is the issue related to Supply Code and not relevant to the current tariff determination proceedings. Deliberations were also held on this issue in SAC meeting during which the stakeholders submitted that the Petitioner is mixing up Supply Code issue with the current tariff determination matter. The Commission agrees with the views of the stakeholder that this issue is related to the Supply Code and hence, without going into the merit the Commission has not considered the request of the Petitioner in these tariff proceeding on grounds of maintainability. Uttarakhand Electricity Regulatory Commission 191

206 Order on True-up for FY , APR for FY & ARR for FY Merger of Slabs for levying Fixed Charges for Domestic Category The Commission in its Tariff Order for FY issued on Apri1 11, 2015 after following the due consultation process by inviting comments on in-house paper decided to specify the fixed charges for domestic consumers linked to the consumption and approved the differential fixed charges linked to the consumption as follows: For Consumption upto first 100 units/month For Consumption between units/month For Consumption between units/month For Consumption between units/month For Consumption between units/month For Consumption above 500 units/month As per the existing slab structure for Domestic Category, there are 6 slabs for levying the fixed charges linked to consumption, while for energy charges, there are only 4 slabs. The Commission as a one more step towards tariff rationalisation measure and simplifying tariff structure has decided to reduce the slabs for levying fixed charges for Domestic category from 6 slabs to 4 slabs by aligning to the same slabs as applicable for energy charges. Accordingly, the differential fixed charges linked to consumption shall be as per the following slabs: For Consumption upto first 100 units/month For Consumption between units/month For Consumption between units/month For Consumption above 400 units/month Merger of three categories RTS-3: Public Lamp, RTS-5: Government Irrigation System and RTS-6: Public Water Works The Commission in its Tariff Order dated March 29, 2017 had changed the tariff for RTS-3 and RTS-5 Category from kwh based tariff to kvah based tariff considering the Petitioner s proposal. Currently, the tariffs for these three categories, i.e. RTS-3, RTS-5 and RTS-6 is kvah based tariff and further the tariff of all these three categories is generally designed by the Commission to keep it close to the Average Cost of Supply. The Commission as a step further towards tariff rationalisation and simplifying tariff structure has decided to merge the existing three categories, 192 Uttarakhand Electricity Regulatory Commission

207 5. Tariff Rationalsation, Tariff Design and Related Issues i.e. RTS-3: Public Lamp, RTS-5: Government Irrigation System and RTS-6: Public Water Works into a single category Government Public Utilities Category. The tariff designed for this category is discussed in subsequent paras of the Order Change in Consumption level for BPL/Lifeline Domestic Consumers As per the current Tariff Schedule, lower tariff is specified for BPL/Lifeline Domestic Consumers, i.e. Consumers below Poverty Line and Kutir Jyoti having load upto 1 kw and consumption upto 30 units per month. Some of the stakeholders requested to increase the consumption level of 30 units per month to 100 units per month for this category. The Commission has analysed the average consumption of this category which works out to around 55 units per month. The consumption level of 30 units per month was specified in the Tariff Order for FY and it has not been revised after FY Considering the facts, that average consumption of this category works out to around 55 units per month and consumption level has not been revised for long time, the Commission has decided to increase the consumption level from existing 30 units per month to 60 units per month. In case the consumption of consumer in this category exceeds 60 units per month, the tariff applicable for other domestic consumers shall be applicable Fixed Charges, Minimum charges and Minimum Consumption Guarantee It is a well-accepted economic principle that the fixed costs of the Utility should be recovered to a certain extent through fixed charges to ensure revenue stability. At the same time, the Commission recognises that if the entire fixed cost is recovered through fixed charges, then the utility shall have no incentive to be concerned about the sales and, hence, quality of supply may suffer. Historically, the recovery of fixed costs has been done through a mix of minimum charges and fixed charges. Levy of Minimum Consumption Guarantee Charges (MCG) is a way of ensuring minimum revenue to the utility from the consumers, however, if the consumption exceeds the specified units, then no MCG charges are levied on the consumers and the entire charges are recovered by the utility through energy/fixed charges. The fixed charge component reflecting the fixed cost of providing the service to the consumer and the energy charge component reflecting the cost of energy actually consumed should ideally be taken in the two-part tariff structure. Uttarakhand Electricity Regulatory Commission 193

208 Order on True-up for FY , APR for FY & ARR for FY Section 45(3) of the Electricity Act, 2003 also provides for levy of fixed charges. The relevant Section is reproduced below: The charges for electricity supplied by a distribution licensee may include: (a) a fixed charge in addition to the charge for the actual electricity supplied;... Further, the licensee is incurring fixed cost directly attributable to individual consumers such as meter reading, bill preparation, bill distribution and collection, which should ideally be allocated to and recovered from each consumer. One of the guiding factors mentioned in Section 61 of the Electricity Act, 2003 for specifying terms and conditions of tariffs is that the tariff has to be gradually cost reflective. Considering that levy of higher fixed charges should not impact the consumers adversely, the Commission, in its Tariff Order dated March 18, 2008, introduced a nominal fixed charge for all the categories as a progression towards designing a two part tariff structure linked to the cost structure. Further, in its subsequent Tariff Orders for FY to FY , considering the level of proportion of fixed costs as a percentage of total costs of UPCL and level of revenue recovery from fixed charges, the Commission had marginally increased the fixed charges for most of the categories to increase the revenue recovery from fixed charges and at the same time avoiding tariff shock to any consumer category. The Commission in its Tariff Order dated March 18, 2008 had mentioned that ideally, the fixed charges should be levied on the basis of contracted/sanctioned load for all the categories. However, for domestic category, considering the data on sanctioned load which had number of consumers having contracted load in fractions (< 1 kw) and also considering the quality of metering and billing data, the Commission introduced the fixed charges on per connection basis. The Commission in its Tariff Order dated October 23, 2009, specified different fixed charges on per connection basis for domestic consumers having contracted/sanctioned load upto 4 kw and consumers having contracted/sanctioned load above 4 kw. Further, during the tariff proceedings for FY , the Commission floated an in-house paper on the issue of Fixed Charges based on consumption and the Commission after detailed deliberations in its Order dated April 11, 2015 introduced consumption based fixed charges for domestic consumers. 194 Uttarakhand Electricity Regulatory Commission

209 5. Tariff Rationalsation, Tariff Design and Related Issues At the approved tariffs, the recovery from Fixed Charges from the consumers for FY is estimated to be around 13% against the total fixed cost incidence on the Petitioner of about 37% of the licencee s ARR for FY The Commission in its Tariff Order dated March 18, 2008 had re-introduced the Minimum Consumption Guarantee (MCG) Charges for the industrial category and in its Tariff Order dated October 23, 2009 re-introduced the Minimum Consumption Guarantee (MCG) Charges for the Non- Domestic Category. The Commission in its Order dated April 11, 2012 had introduced MCG for metered PTW category also. Some of the stakeholders submitted that the MCG burdens the consumers with additional charges and results in wasteful consumption of electricity. They also represented that the MCG on seasonal industry should be abolished as it encourages unnecessary wastage of electricity by consumers during off season. Some of the stakeholders also represented that due to demand supply shortage situation, load shedding is being carried out by UPCL and, hence, MCG should either be abolished or reduced. Some of the stakeholders also submitted that due to MCG, they are either forced to consume/waste electricity during off season or are penalized to pay the energy charges for electricity not consumed by them during off season which is against the principles of energy efficiency. The Commission in its Order dated April 11, 2015 taking into cognisance the various representations received for reduction in MCG and also in line with its plan for gradual elimination of MCG reduced the MCG to 50 units/kwh/month for all those Non-Domestic sub-categories on which MCG were earlier specified as 60 units/kw/month. For HT industries the same was revised to 100 kvah/kva/month from the earlier level of 110 kvah/kva/month. For Atta chakkis, the MCG was revised to 30 units/kw/month from the earlier level of 40 units/kw/month. For PTW category the MCG was reduced to 60 units/bhp/month from earlier level of 70 units/bhp/month. The Commission in its Tariff Order dated March 18, 2008 had mentioned that it may review the continuation of the MCG charges in subsequent Tariff Orders. The Commission is of the view that Fixed/Demand Charges are now applicable for all the categories. The basic objective of Fixed/Demand Charges as well as MCG charges is to ensure certain level of revenue to the Utility even when the consumer is not consuming any electricity. Considering the progress towards loss reduction and improvements achieved by UPCL with respect to metering and billing issues and Uttarakhand Electricity Regulatory Commission 195

210 Order on True-up for FY , APR for FY & ARR for FY suggestions of various stakeholders, the Commission as a step towards tariff rationalisation measure and simplifying tariff structure has decided to abolish the levy of MCG charges for entire Industrial category and for Non-Domestic consumers. In any case the total additional recovery from MCG in a year is only about Rs. 20 Crore and hence, it will not have any substantial impact on the Petitioner Continuous Supply Surcharge The Petitioner has proposed to continue the continuous supply surcharge of 15% for industries opting for continuous supply. The Commission, in its Tariff Order dated October 23, 2009, had approved continuous supply 15% of the Energy Charge for consumers opting for supply during restricted hours (continuous). Further, all the consumers had an option to opt for continuous supply irrespective of whether they were on dedicated independent feeder or on mixed feeder. In accordance with the above provision, even if a single consumer in mixed feeder opted for continuous supply, its benefit got extended to all the consumers on that mixed feeder. This was a sort of discrimination amongst the consumers who had opted for continuous supply on mixed feeder and those who had not opted for continuous supply on mixed feeder as both enjoyed the benefit of continuous supply irrespective of the fact that they were paying any continuous supply surcharge or not. On the other hand, if the supply on the mixed feeder was required to be cut during rostering, the supply of continuous supply consumer also got unintentionally cut. The Commission in order to rectify this anomaly had taken a view in its Tariff Order dated April 10, 2010 that the option of continuous supply should be made available only to consumers who are connected on a dedicated independent feeder or industrial feeder provided that all the industrial consumers on such feeder opt for continuous supply option. The Commission was also of the view that considering the supply shortage position, this option was to be provided only to the continuous process industries requiring continuous supply due to continuous nature of their process. In this connection, the Commission would like to refer to Regulation 3(2) of UERC (Release of new HT & EHT Connections, Enhancement and Reduction of Loads) Regulations, 2008, which provides that loads for all HT consumers having continuous processes, irrespective of load applied for, shall be released through independent feeder only. The Commission in its Tariff Order dated April 10, 2010 had, therefore, decided that with effect from May 1, 2010, the option of continuous 196 Uttarakhand Electricity Regulatory Commission

211 5. Tariff Rationalsation, Tariff Design and Related Issues supply shall remain available only to continuous process industries operating twenty four hours a day and for seven days in a week without any weekly off. Further, this option was only to be available to continuous process industries connected through an independent feeder or industrial feeder provided that all the industrial consumers on such feeder opted for continuous supply option and for availing such an option, they were required to pay 15% extra energy charges at revised tariff with effect from May 1, 2010 or from the date of connection, whichever is later till 31st March, 2011 irrespective of actual period of continuous supply option. Further, the Commission in its Tariff Order dated April 10, 2010 also decided that the load shedding would be applicable for all the consumer categories except continuous process industries availing continuous supply option and, hence, the Commission abolished the mechanism of allowing utilisation of power upto 15% of the contracted load by industrial consumers who did not opt for continuous supply. In its Tariff Order for FY dated May 24, 2011, Tariff Order for FY dated April 11, 2012, MYT Order dated May 06, 2013 and APR Order dated April 10, 2014 the Commission decided to continue with the same provisions for Continuous Supply as approved in its Order dated April 10, The Commission in its ARR/Tariff Order dated April 11, 2015 after detailed deliberations on the issue after floating the in-house paper extended the option of continuous supply to noncontinuous process industries in addition to the continuous process industries. In these tariff proceedings, the Commission has received mixed responses from various stakeholders. Some of the industries submitted that the continuous supply surcharge be reduced. The Commission would like to clarify that the State of Uttarakhand is still facing power shortage and UPCL is procuring short term power from market to meet the demand. Even for FY , the Commission has estimated a deficit of about MU in winter months during November to March in the requirement of UPCL which is of substantial nature. The Commission has estimated a surplus of about MU during May, 2018 to October, 2018 in the requirement of UPCL for FY which would be banked with other States to offset the deficit during winter months. Hence, the Commission does not find any reason to abolish the continuous supply surcharge altogether as during winters UPCL is still having deficit. However, the deficit in winter months has reduced as compared to previous years (deficit considered by the Commission in winter months of FY was 822 MU). Considering the fact that the deficit has reduced as compared Uttarakhand Electricity Regulatory Commission 197

212 Order on True-up for FY , APR for FY & ARR for FY to previous year and views of stakeholders, the Commission has decided to reduce the continuous supply surcharge from 15% of energy charges to 10% of energy charges. The Commission will review the same once the aforesaid deficit in UPCL s requirement is wiped off. Further, some of the stakeholders submitted that UPCL is also charging continuous supply surcharge on power availed through open access and has requested the Commission to exempt continuous supply surcharge on the same. In this regard, the Commission had approved continuous supply surcharge in its Tariff Order dated October 23, 2009 to the industrial consumers of UPCL seeking continuous power supply option and it was understood that the Petitioner for making available continuous supply of power to such industry consumers would resort to contracting of requisite capacity with the generating stations or short term procurement through traders/exchange or through UI route. However, when such industry consumers who has opted for continuous supply option sources power under open-access then UPCL is free from its obligations to provide uninterrupted power by procuring the same on short term basis. Moreover, while projecting the sales/consumption for industrial category, the quantum of power drawn by industrial consumers through open access is already reduced meaning thereby that there is absolutely no cost incidence on the Petitioner w.r.t. power purchase cost on account of such consumers drawing power under open access. Hence, there is a merit on the representations of the stakeholders. Accordingly, the Commission makes it explicitly clear not to charge continuous supply surcharge on power sourced by an industrial consumers under open access. The option of continuous supply shall only be available to continuous and non-continuous industries connected on an independent feeder or industrial feeder provided that all the industrial consumers on such feeder opt for continuous supply option. The existing non-continuous process industrial consumers opting for continuous supply shall pay 10% extra energy charges with effect from April 01, 2018 or in case of new consumers from the date of connection, till March 31, 2019 irrespective of actual period of continuous supply. However, in case of re-arrangement of supply through independent feeder, the Continuous Supply Surcharge shall be applicable from the date of energisation of aforesaid independent feeder till March 31, 2019, irrespective of actual period of continuous supply option. 198 Uttarakhand Electricity Regulatory Commission

213 5. Tariff Rationalsation, Tariff Design and Related Issues In this regard, the Commission would like to clarify certain key issues, pertaining to applicability conditions for existing and new continuous and non-continuous supply consumers in order to avoid any misinterpretation of the conditions, and the same are discussed as under: Consumers who have opted for Continuous supply shall continue to remain Continuous Supply Consumers and they need not to apply again for seeking continuous supply option. Such consumers shall pay 10% extra energy charges, in addition to the energy charges approved, w.e.f. April 01, 2018 till March 31, However, in case of any pending dispute with UPCL in the matter of continuous supply on certain feeders, those consumers will have to apply afresh, for availing the facility of continuous supply by April 30, The new applicants for continuous supply of power (including those who are applying afresh as per above) can apply for seeking the continuous supply option at any time during the year. However, continuous supply surcharge for such existing consumers shall be applicable with effect from May 01, 2018 till March 31, UPCL shall provide the facility of continuous supply within 7 days from the date of application, subject to fulfilment of Conditions of Supply as mentioned in Clause 6 under Tariff Schedule of RTS-5. However, in case of re-arrangement of supply through independent feeder, UPCL shall provide the facility of continuous supply from the date of completion of work of independent feeder subject to fulfilment of Conditions of Supply and the continuous supply surcharge on such consumers shall be applicable from the date of energisation of aforesaid independent feeder till March 31, 2019, irrespective of actual period of continuous supply option. The existing consumers availing continuous supply option, who wish to discontinue the continuous supply option granted to them earlier, will have to communicate, in writing, to UPCL latest by April 30, 2018 and they shall continue to pay continuous supply surcharge alongwith the tariff approved in this Order till April 30, Further, in this regard, if due to withdrawal by one consumer from availing continuous supply option on a particular feeder, the status of other continuous supply consumers in that feeder is affected, then UPCL shall inform all the affected consumers in writing, well in advance. Uttarakhand Electricity Regulatory Commission 199

214 Order on True-up for FY , APR for FY & ARR for FY UPCL shall not change the status of a continuous supply feeder to a non-continuous supply feeder. UPCL/PTCUL shall take up augmentation, maintenance and overhauling works on top priority, specially in the sub-stations where circuit breakers, other equipments, etc. are in dilapidated condition and, thereby, shall ensure minimisation of interruptions of the continuous supply feeders. UPCL/PTCUL shall carry out periodical preventive maintenance of the feeders supplying to continuous supply consumers. The licensees shall prepare preventive maintenance schedule, in consultation with continuous supply consumers, well in advance, so that such consumers can plan their operations, accordingly. Continuous supply surcharge shall not be applicable on power procured by industrial consumers through open access Tariff Categorisation for HT Industries and Load Factor based Tariff The Commission has considered the stakeholders/industries responses and observed that some of the consumers have again raised the issue of load factor based tariff for HT Industries. Some of the stakeholders submitted that the load factor based tariff for HT Industries is discriminatory as well as against the provisions of the Act, Tariff Policy and the Commission s Tariff Regulations. The Commission would like to highlight Section 62(3) of the Act, which empowers the Appropriate Commission, while determining the tariff, to differentiate according to the consumer s load factor, power factor, voltage, total consumption of electricity etc. Section 62(3) of the Act is reproduced below: The Appropriate Commission shall not, while determining the tariff under this Act, show undue preference to any consumer of electricity but may differentiate according to the consumer's load factor, power factor, voltage, total consumption of electricity 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 (emphasis added). Regulation 92(2) of UERC Tariff Regulations, 2015, specifically empowers the Commission to design load factor based tariffs for any category of consumers and is reproduced below: 200 Uttarakhand Electricity Regulatory Commission

215 5. Tariff Rationalsation, Tariff Design and Related Issues The Commission, shall not, while determining the tariff, show undue preference to any consumer of electricity but may differentiate according to consumer s load factor, voltage, total consumption of electricity during any specified period or 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. The Commission in its Order dated April 11, 2015 after detailed deliberations in response to the in-house paper had modified the slabs for load factor based tariff from three slabs to two slabs. Further, as discussed in Chapter 2 of the Order, some of the stakeholders submitted that the principle applied for the categorisation of the industry on the basis of load factor should be on the principle of higher the load factor, lower the tariff as prevalent in other States. They further expressed that the higher load factor implies that the consumer consumes nearly as much as it has contracted for and has paid the demand charges accordingly, and the Utility stands to benefit by higher load factor because the utility is able to sell more electricity which it has arranged for meeting the demand of the consumer. They further opined that if the load factor is lower, the utility would find itself having contracted more power from generating companies than it would be able to sell to the consumers and in this process may suffer loss. The Commission does not agree with the views of the stakeholders that higher load factor implies that the Utility stands to benefit from selling more electricity which it has arranged for meeting the demand of the consumer and load incidence on the system matches with the contracted demand/load of the consumers of the State. The Commission would like to clarify that there is diversity in time of usage of electricity by different consumers and, hence, the actual simultaneous maximum demand of all the consumers put together shall always be less than the summation of their contracted loads. Further, nowhere, the Utility makes the power purchase arrangement equivalent to the contracted demand of its consumers. Further, increase or decrease of the contracted load, and/or, the load factor, by consumer does not actually influence the consumption pattern of consumers including diversity factor and, hence, the actual simultaneous maximum demand is the basis for contracting power from different sources by the licensee rather than the contracted load/load factor of the consumers. Further, the utilisation of the contracted capacity from firm sources by UPCL for State consumption is more than 90% and balance surplus the Petitioner uses for Banking during summer/monsoon months in order to take it back during winter months when it has apparent deficit supply vis-a-vis demand. With the increase in load factor of Uttarakhand Electricity Regulatory Commission 201

216 Order on True-up for FY , APR for FY & ARR for FY consumers, the energy requirement of the Utility will further increase, and the Petitioner will be left with no surplus power to Bank during summer/monsoon months in order to take back during deficit winter months. This inability of the Petitioner will require to purchase power at marginal price i.e. the Petitioner will have to purchase costlier power to meet the increase in energy requirement at higher load factor. The two part tariff tends to encourage high consumption as the same reduces the effective per unit composite rate. Accordingly, to correct this, tariff also needs to increase in a manner so as to achieve a near uniform composite rate. To achieve this, demand and energy charges will have to increase with every small increase in contracted demand or load utilization percentage. Although theoretically possible, such an approach would make the tariffs too complex, incomprehensible and will pose serious problems in implementation. There is, therefore, a trade-off between the simplicity of the tariff structure and precision in correcting the above distortion. The Commission s attempt has been to strike a balance between the two by choosing a uniform rate of demand charge and different rates of energy charges linked to the consumption levels represented by the Load Factor. The Commission has avoided sharp increases in energy charges and has infact modified the three slabs prevalent earlier to only two slabs in its previous Tariff Order dated April 11, As had been illustrated by the Commission in its previous Tariff Orders in case of single energy charge, without any load factor slabs, the effective tariff of an intended cross-subsidising consumer goes down steeply with increasing load factor, thereby reducing the quantum of crosssubsidy charged from it. After a threshold level of load factor, this structure leads to an undesirable anomaly that the effective tariff becomes lower than the average Cost of Supply and the consumer instead of being subsidising consumer becomes subsidised consumer. Thus, this structure apart from leading to the above said anomaly is highly inequitable amongst the consumers of same category with consumers having low load factor being loaded with much higher effective tariff and making up for loss on account of lower effective tariff even below the average cost of supply paid by high load factor consumers. Transition from subsidising consumer to subsidised consumer with increasing load factor is not only incorrect but is also highly undesirable. Some of the stakeholders represented that the tariff structure for HT Industries should also be telescopic. In Uttarakhand, as the cross-subsidies are very low, the tariff needs to be corrected at different load factors to ensure that steepness of the effective tariff curve does not reduce the cross- 202 Uttarakhand Electricity Regulatory Commission

217 5. Tariff Rationalsation, Tariff Design and Related Issues subsidies to very low level or make them negative (subsidised). Further, there is a practical difficulty in implementing slabs of tariffs for excess consumption only, due to ToD tariffs in vogue. Apportionment of various slabs of consumption for different time slots would be very complicated and would result in disputes between licensee and consumers as consumer would like to book cheapest load factor slab (1st slab) against peak hour consumption and highest load factor slab (last slab) against off-peak hour consumption. The licensee, on the other hand, would like to book first load factor slab against off-peak consumption and the last load factor slab under peak hour consumption. Thus, this structure would unnecessarily complicate the billing process and would also lead to disputes. Due to these reasons, the Commission is not implementing telescopic slab based tariff for HT industrial consumers. The above reasoning can be easily explained by taking an example with the figures of approved tariff (Demand Charges Rs. 320/kVA/month and Energy Charges in two slabs of Rs and 3.85/kVAh for FY , where Average Cost of Supply was taken as Rs. 4.70/kWh and average tariff from HT industrial consumers including ToD surcharge and rebate was designed to be Rs. 5.17/kWh. It is evident that in case of single energy charge of Rs. 3.60/kVAh and demand charge of Rs. 320/kVA/month, without any load factor slabs, the effective tariff of an intended cross-subsidising consumer goes down steeply with increasing load factor, thereby reducing the quantum of cross-subsidy charged from it. After a threshold level of load factor, this structure leads to an undesirable anomaly that the effective tariff becomes lower than the average Cost of Supply and the consumer instead of being subsidising consumer becomes subsidised consumer. Thus, this structure apart from leading to the aforesaid anomaly is highly inequitable amongst the consumers of the same category with consumers having low load factor being loaded with much higher effective tariff and making up for loss on account of lower effective tariff even below average Cost of Supply paid by high load factor consumers. The same applies to the condition if telescopic slab energy charges for HT industries [Demand Charges: Rs. 320/kVA/monthly, Energy Charges: for consumption upto LF 40%: Rs. 3.50/kVAh & for consumption exceeding LF 40%: Rs kvah] are considered the reduction in effective tariffs is almost similar to the case where single energy charges are approved without any slab. The Table & Graph below shows these anomalies of consumers getting cross-subsidised falling below average cost of supply after a particular load factor and wide range of tariffs over different load factors with the single energy charge without any slab and Uttarakhand Electricity Regulatory Commission 203

218 (7)=(3)+ (4) (8)=(3)+ (5) (9)=(3)+(6) (10)=(7)/(2x ) (11)=(8)/(2x ) (12)=(9)/(2x ) -13 (14)=(10/13)-1 (15)=(11/13)-1 (16)=(12/13)-1 Load Factor Consumption (kvah) Demand Charge (Rs./ kva) Single EC of Rs.3.60 /kvah Telescopic Tariff Approved Tariff Single EC of Rs.3.60/ kvah Telescopic Tariff Approved Tariff Single EC of Rs.3.60/kVah Telescopic Tariff Approved Tariff Rs./ kwh Single EC of Rs.3.60 /kvah Telescopic Tariff Approved Tariff Energy Charge (Rs./kVah) Total Amount Effective Tariff (Rs.kWh) Cost of Supply Cross Subsidy % Order on True-up for FY , APR for FY & ARR for FY telescopic slabs. Increase of cross-subsidisation of HT industry with increasing load factor (particularly > 45%) is not only incorrect but also highly undesirable. Table 5.1: Effective Tariff & Cross-subsidy for HT Industry having contracted load 1 kva 25% % 17.28% 17.28% 30% % 10.69% 10.69% 35% % 5.99% 5.99% 40% % 2.46% 2.46% 45% % 0.58% 7.50% 50% % -0.92% 5.30% 55% % -2.15% 3.51% 60% % -3.17% 2.01% 65% % -4.04% 0.74% 70% % -4.78% -0.34% 75% % -5.43% -1.28% 80% % -5.99% -2.10% 85% % -6.49% -2.83% 90% % -6.93% -3.48% 95% % -7.33% -4.05% 100% % -7.68% -4.57% Graph 1 : Effective HT Industrial Tariff 204 Uttarakhand Electricity Regulatory Commission

219 5. Tariff Rationalsation, Tariff Design and Related Issues Hence, in view of the above, the Commission is continuing with the existing load factor based tariff structure for HT Industry Time of Day Tariff Regarding Time of Day Tariff, the stakeholders requested the following: Abolish the morning peak hours. Morning peak hours in winter season should be from 8 A.M. to 9:30 A.M. in place of existing 6 A.M. to 9:30 A.M. The ToD charges should be at existing levels. The rebate of 10% for consumption during off-peak hours should be increased to 20%/25%. The Commission in its Tariff Order for FY dated April 10, 2010 approved the peak hour rate as 50% higher than the normal hour rate for Industrial Category. Further, in case of HT industries, the Commission has specified the peak hour rate as 50% higher than the normal hour rate applicable for highest load factor slab, i.e. energy charge for load factor above 50% for all the HT industrial consumers. The Commission kept the rebate during off peak hours to 10% to incentivise the shift in consumption from peak hours to off peak hours. The Commission, in each of its tariff determination exercise, has been analysing the shift from the peak hours to normal and off-peak as well as the consumption pattern during the peak and off-peak hours in the State. The Commission has analysed the unrestricted load curves of summer as well as the winter month to assess the consumption during peak hour period during these months. The load curves for the days having highest peak load in the months of summer and winter season, have been examined and the same are graphically presented below: Uttarakhand Electricity Regulatory Commission 205

220 Order on True-up for FY , APR for FY & ARR for FY Chart 1: Load Curve for 10 h January 2018 (MW) [Winter Month] Morning Peak Demand 2149 MW at 9.00 AM Evening Peak Demand MW at 8.00PM Chart 2: Load Curve for 2 th Feb 2018 (MW) [Winter Month] Morning Peak Demand 2134 MW at 8.00 AM Evening Peak Demand 1879 at 7.00 PM 206 Uttarakhand Electricity Regulatory Commission

221 5. Tariff Rationalsation, Tariff Design and Related Issues Chart 3: Load Curve for 15th April, 2017 (MW) [Summer Month] Peak Demand 1917 MW at 8.00 PM No Morning Peak Chart 4: Load Curve for 18 th May, 2017 (MW) [Summer Month] Peak Demand 1946 MW at 9.00 PM No Morning Peak It is observed from the above graphical presentations that during the winter season both morning as well as evening peak demand exists in the State. Infact, in the months of January and February, the morning peak demand has been found to be even more pre-dominant than the Uttarakhand Electricity Regulatory Commission 207

222 Order on True-up for FY , APR for FY & ARR for FY evening peak demand. From Chart 1&2 illustrating the load curve for January 10, 2018 & February 02, 2018 respectively, it can be observed that the demand starts rising from 6.00 a.m. till it reaches the peak at about 8.00 a.m. & then start falling around 9.00 a.m. in the morning & flattens by around a.m. Hence, the request of the stakeholders regarding change in morning peak hours cannot be accepted since it would defeat the demand side management through tariffs in vogue in the State. Further, it is seen from above graphs that the overall system peak of Uttarakhand State during the year is significantly observed in the morning hours also besides evening peak. The Commission feels the need for DSM and having ToD tariff as a measure for ensuring curtailment of morning as well as evening peaks. Considering all these aspects, the Commission in the present Order is continuing with the existing Peak, Normal and Off Peak hour duration for ToD metering slots and peak hour surcharge. Considering the views of various stakeholders and in order to incentivise the consumers for shifting the demand from Peak hours to Off Peak hours, the Commission has increased the off-peak hour rebate from existing level of 10% to 15% in energy charges Prepaid metering The Commission recognises that Prepaid Metering is expected to provide better services to the consumers, improve and secure the cash flow of the Petitioner and also lead to reduction in consumer grievance and dissatisfaction to the consumers. Hence, after detailed deliberations on the proposals of the Petitioner, the Commission approves the following conditions for Pre-Paid Metering: a) The option of Pre-paid metering shall be available for all categories of consumers upto 25 kw load under LT category. Prepaid Metering shall be mandatory for new Temporary LT connections, for Advertisements/Hoardings and for Government connections upto 25 kw. b) There shall be a minimum recharge of Rs. 100 and the maximum limit of recharge shall be Rs. 15,000 for both single phase and three phase connections. Validity of the recharge shall be continued till the amount is available in the account of the consumer. Any recharge shall be allowed only when the 20 digit special meter reading code shall be made available by the consumer. 208 Uttarakhand Electricity Regulatory Commission

223 5. Tariff Rationalsation, Tariff Design and Related Issues c) As regards the charging for testing of meter, the Petitioner shall recover the amount as approved by the Commission under Schedule of Miscellaneous Charges directly from such prepaid consumers as is done for postpaid consumers and shall not be charged from the recharge amount. d) The Petitioner shall issue an advertisement in the newspapers within 15 days of the issue of this Order, briefly mentioning salient features of the Prepaid Metering Scheme for LT consumers upto 25 kw to provide an option to the consumer to express their interest to opt for the Prepaid metering scheme latest by June 15, It may be noted that the objective of calling applications for Prepaid metering shall be primarily for the purpose of estimation of the requirement of such meters based on the demand of the Scheme. Based on the requests received from the consumers opting for Prepaid metering, UPCL shall implement the Prepaid metering in a phased manner. Further, the Petitioner may also allow prepaid metering services to the consumers who could not submit their request within the stipulated time given in the advertisement and opt for it subsequently. e) The Petitioner is also directed to prepare a Salient Features of the Prepaid Metering Scheme (in 1-2 pages) and circulate the same along with the bills of May, 2018 to all the eligible consumers, i.e. LT consumers upto 25 kw, to facilitate wide circulation as well as to provide salient features of the proposed mechanism of the Prepaid Metering Scheme. f) In case, the consumer opting for Prepaid Metering have outstanding arrears, the Petitioner shall adjust 20% of the past arrears or 50% of the recharge amount, whichever is higher from the recharge voucher, subject to the maximum of the outstanding arrears. Further, the maximum limit of recharge as mentioned above, shall not be applicable in case of consumers having outstanding arrears and accordingly, such consumers having past arrears will have to take minimum recharge of more than 20% of the outstanding arrears. g) The Petitioner shall make necessary provisions to provide friendly credit hours/limit to the consumers, in order to ensure uninterrupted supply to the consumer in the event of expiry of the balance during non-working hours, i.e. night time or during holiday, so as to provide reasonable time to the consumer to procure the recharge voucher at the next possible working hours or working day. However, the charges for the electricity Uttarakhand Electricity Regulatory Commission 209

224 Order on True-up for FY , APR for FY & ARR for FY consumed between expiry of balance during non-working hours and subsequent recharge voucher shall be adjusted from the recharge voucher. h) All the Prepaid meters will be provided with an alarm to indicate low credit. i) As per the guiding principles and Section 47(5) of the Electricity Act, 2003, the Petitioner shall not charge any security deposit as is required in post-paid connections but price equivalent to the material cost, i.e. cost of meter and associated equipment s shall be charged as material security which shall be returned after adjusting for the depreciation at the time of permanent disconnection. The approved material security deposit for FY is Rs. 5000/- for single phase connection and Rs 10,000/- for three phase connection. j) The consumer shall be allowed only one transfer from postpaid to prepaid or otherwise in a financial year. k) Voltage rebate/surcharge, low power factor surcharge and excess load penalty shall not be applicable for prepaid connections. l) A rebate of 4% of Energy Charges for Domestic Category and 3% of Energy Charges for other categories shall be applicable as per tariff schedule for the consumers availing this scheme and the rebate shall only be applicable after installation and operationalization of Prepaid meters. Provided that no rebate shall be applicable on (i) of Para 1 of RTS-8, i.e. Temporary Supply for Illumination/Public Address/ceremonies and festivities/functions/ temporary shops not exceeding 3 months. Provided further that the fixed charge in respect of other domestic consumers [(1.2) of para 2 of the RTS -1] shall be Rs. 55/kW/month. m) The solar water heater rebate shall be adjusted as follows:- i. The rebate for first month of implementation of prepaid metering scheme shall be credited immediately on the first recharge. Thereafter, rebate shall be credited on monthly basis if recharge is done every month. ii. In case recharge is not being done on monthly basis, then based on the capacity of Solar Water Heater installed by the consumer, solar water heater rebate would be credited for all the past months for which the rebate was due either at the time of recharge or when the consumer approaches UPCL. 210 Uttarakhand Electricity Regulatory Commission

225 5. Tariff Rationalsation, Tariff Design and Related Issues Accounting of Electricity Consumption for Departmental Employees The Commission in its Tariff Orders had not been allowing the impact of concessional supply to departmental employees including pensioners of UPCL, UJVN Ltd. and PTCUL and has been considering revenue corresponding to the ABR of domestic consumers. However, UPCL is booking the consumption of departmental employees and pensioners on unmetered basis, i.e. UPCL is charging a fixed charge approved by it in the year 2009 based on designation. The Average CoS which was about Rs per unit in FY has increased to Rs per unit in FY Further, concerns have been raised by several stakeholders regarding unmetered billing to its departmental employees that too at a rate which was approved way back in The Commission is aware of the provisions of the UP Electricity Reforms Act, 1999, UP Reforms Transfer Scheme, 2000 & UP Reorganisation Act, 2000 regarding the employees of erstwhile UPSEB. However, it has been the view of the Commission that if UPCL has to give any benefits to its employees it has to be from its own resources and the same cannot be passed on to the consumers. Accordingly, the Commission further to streamline the accounting of departmental employee consumers directs the Petitioner to bill all departmental employees consumers including pensioners on the basis of rates approved for RTS-1 Domestic Category from April 01, The Petitioner shall include the consumption and revenue details of these consumers at the Tariff Rates applicable to domestic consumers in the monthly CS-3 and CS-4 statements. As regards the concession provided to these consumers, the Petitioner is directed to show the same separately as expenses in its accounts Treatment of Revenue Gap As concluded in Chapter 4 of the Order, the revenue at existing tariffs leaves a revenue gap of Rs Crore to meet the Net Revenue Requirement for FY , post adjustment of the revenue surplus and gap determined after truing up of expenses and revenue based on the audited accounts for FY The Commission had approved the tariffs applicable for various categories with effect from April 01, 2017 vide its Order dated March 29, The Petitioner further submitted that the Additional Energy Charge (AEC) as approved by the Commission vide its Review Order dated August 03, 2017 on True-up for FY , Annual Performance Review for FY and Annual Revenue Requirement for FY has been considered to be subsumed in the proposed increase in fixed and energy charges and, therefore, has not been proposed separately. Uttarakhand Electricity Regulatory Commission 211

226 Order on True-up for FY , APR for FY & ARR for FY The Commission vide its Order dated August 3, 2017 on the Review Petition filed by UPCL for review of Commission s Tariff Order for FY dated March 29, 2017 approved the recovery of Additional Energy Charge (AEC) for the last three quarters of FY The relevant extract of the Commission s Review Order is reproduced below: the Petitioner is hereby authorized to recover the AEC amount by levying AEC on various consumer categories at the rates indicated in Annexure-I during the last three quarter of FY Thus, the AEC approved by the Commission vide its Order dated August 3, 2017 is applicable till March 31, 2018 only. Accordingly, the Commission while computing the tariffs at existing revenue for FY has not considered the AEC component and has calculated revenue at approved tariffs as per Tariff Order dated The Commission in order to recover the gap has revised the tariffs for FY The approved tariff will be applicable from April 1, 2018 and will be effective till revised by the Commission Cross Subsidy As per the provisions of Tariff Policy, the Regulatory Commission has to reduce the cross subsidies with respect to the cost of supply in a gradual manner. The Commission in its Tariff Order for FY had computed the cross subsidies for different category of subsidising consumers which were in accordance with the Tariff Policy. The Commission has now revised the tariffs and has ensured that the cross subsidies have broadly reduced with respect to previous levels with few exceptions as discussed while discussing the cross subsidy levels at approved tariffs Category-wise Tariff Design The Commission has designed the category-wise tariffs for full recovery of approved Net Revenue Requirement for FY The category-wise tariffs approved by the Commission are discussed below and are also shown in the Approved Rate Schedule placed at Annexure-1. These rates shall be effective from April 1, 2018 and shall continue to be applicable till further revised by the Commission. 212 Uttarakhand Electricity Regulatory Commission

227 5. Tariff Rationalsation, Tariff Design and Related Issues RTS-1: Domestic Tariff The Commission, while recognising the fact that BPL/lifeline consumers were one of the most economically weaker sections of the consumers, in its Tariff Order for FY had approved a tariff of Rs. 1.50/kWh for such consumers when the average cost of supply was Rs. 2.28/kWh. Considering the fact that the Tariff Policy permits that the tariffs for such BPL/lifeline consumers can be determined at 50% of the average cost of supply, the Commission in order to gradually reduce the cross subsidy and also to enable the licensee to recover some of its Fixed Cost, in its Tariff Order for FY dated May 24, 2011 had introduced a Fixed Charges of Rs. 5/connection/month which was further nominally increased every year. Since the average cost of supply has increased further, therefore, with a view to reduce the cross-subsidy, the fixed charges of BPL/lifeline consumer have been retained at existing level of Rs. 18/connection /month and energy charges have been revised to Rs. 1.61/kWh. In this regard, it is important to note that currently, the BPL consumers are paying fixed charges of Rs 18/connection/month and Energy Charges of Rs 1.61/kWh including AEC. Thus, there is practically no change in tariff for BPL consumers. For other domestic consumers, the fixed charges have been marginally increased to enhance the recovery from fixed charges. The energy charges for lowest slab, i.e. consumption upto 100 units/month have been nominally increased from the existing level of Rs. 2.55/kWh to Rs. 2.65/kWh. The energy charges for the second slab, i.e. for consumption between units/month have been fixed as Rs. 3.45/kWh. The energy charges for the third slab, i.e. for consumption between units/month have been fixed as Rs. 4.70/kWh and for consumers having consumption above 400 units/month, the energy charges have been fixed at Rs. 5.40/kWh. For single point bulk supply connections, the energy charges have been increased to Rs. 4.25/kWh from Rs. 4.05/kWh and fixed charges have been increased to Rs. 70/kW/month from Rs. 60/kW/month. Currently, in addition to existing tariff, the Domestic Consumers are also paying AEC of Rs 0.20/kWh. Hence, there will be no effective tariff increase for most of the domestic consumers. A comparison of the tariff, i.e. existing, proposed by the Petitioner and that approved by the Commission, is given in the Table below: Uttarakhand Electricity Regulatory Commission 213

228 Order on True-up for FY , APR for FY & ARR for FY Table 5.2: Tariff for Domestic Consumers Existing Tariff UPCL Proposed Tariff Approved S. No Description Fixed Charge (Per Month) Energy Charges Fixed Charge (Per Month) Energy Charges Fixed Charge (Per Month) Energy Charges RTS-1: Domestic 1.1 Life Line Consumers 1.2 Other Domestic Consumers (i) Units/Month (ii) Units/Month (iii) Units/Month (iv) Units/Month (v) Units/Month (vi) Above 500 Units/Month Rs. 18/ Connection Rs. 45/ Connection Rs. 70/ Connection Rs. 110/ Connection Rs. 135/ Connection Rs. 180/ Connection Rs. 210/ Connection 2 Single point bulk supply Rs. 60/kW Rs. 1.50/kWh Rs. 2.55/kWh Rs. 3.30/kWh Rs. 4.50/kWh Rs. 4.50/kWh Rs. 5.10/kWh Rs. 5.10/kWh Rs. 4.05/kWh Rs. 20/ Connection Rs. 55/ Connection Rs. 85/ Connection Rs. 135/ Connection Rs. 165/ Connection Rs. 220/ Connection Rs. 255/ Connection Rs. 75/kW Rs. 1.65/kWh Rs. 3.10/kWh Rs. 4.05/kWh Rs. 5.50/kWh Rs. 5.50/kWh Rs. 6.25/kWh Rs. 6.25/kWh Rs. 4.95/kWh Rs. 18/ Connection Rs. 55/ Connection Rs. 80/ Connection Rs. 135/ Connection Rs. 135/ Connection Rs. 220/ Connection Rs. 220/ Connection Rs. 70/kW Rs. 1.61/kWh Rs. 2.65/kWh Rs. 3.45/kWh Rs. 4.70/kWh Rs. 4.70/kWh Rs. 5.40/kWh Rs. 5.40/kWh Rs. 4.25/kWh RTS 1-A: Concessional Snowbound Area Tariff A comparison of the tariff, i.e. existing, proposed by the Petitioner and that approved by the Commission, is given in the Table below: Table 5.3: Concessional Tariff for Snowbound Areas Existing Tariff UPCL Proposed Tariff Approved S. No Description Fixed Charge (Per Month) Energy Charges Fixed Charge (Per Month) Energy Charges Fixed Charge (Per Month) Energy Charges RTS-1A: Snowbound 1 Domestic Rs. 18/ Connection 2 Non-Domestic Rs. 18/ upto 1 kw Connection 3 Non-Domestic Rs. 18/ above 1 kw Connection &upto 4 kw 4 Non-Domestic above 4 kw Rs. 30/ Connection Rs. 1.50/kWh Rs. 1.50/kWh Rs. 2.25/kWh Rs. 3.40/kWh Rs. 20/ Connection Rs. 20/ Connection Rs. 20/ Connection Rs. 35/ Connection Rs. 1.65/kWh Rs. 1.65/kWh Rs. 2.50/kWh Rs. 3.75/kWh Rs. 18/ Connection Rs. 18/ Connection Rs. 18/ Connection Rs. 30/ Connection Rs. 1.61/kWh Rs. 1.61/kWh Rs. 2.36/kWh Rs. 3.51/kWh RTS-2: Non-Domestic Tariff For Non-domestic consumers, the Commission has marginally increased the energy charges and fixed charges to enable the licenses to recover its fixed cost and revenue gap. Further, as 214 Uttarakhand Electricity Regulatory Commission

229 5. Tariff Rationalsation, Tariff Design and Related Issues discussed earlier the MCG for this category has been abolished. The Commission has separately specified the tariff for concessional sub-category of educational institutions, hospitals and charitable institutions, which shall include: Government/Municipal Hospitals; Government/Government Aided Educational Institutions; and Charitable Institutions registered under the provisions of Income Tax Act, 1961 and whose income is exempted from tax under this Act. The existing tariff, tariff proposed by the licensee and that approved by the Commission is given in Table below: Sl. No. Description Fixed / Charges (Per Month) Table 5.4: Tariff for Non-domestic consumers Existing Tariff UPCL Proposed Tariff Approved Fixed / Fixed / Demand Demand Energy Energy Energy MCG Charges MCG Charges Charges Charges Charges (Per (Per Month) Month) 1 Government, Educational Institutions and Hospitals etc. Rs. 55/ Rs. 4.30/ Rs. 65/ 1.1 Upto 25 kw kw kwh kw 1.2 Above 25 kw Rs. 65/ kva Rs. 4.00/ kvah 2 Other Non-Domestic Users Upto 4 kw and consumption Rs. 60 / Rs. 4.45/ 2.1 upto 50 units kw kwh per month 2.2 Others upto 25 kw not covered in 2.1 above 2.3 Above 25 kw 3 4 Single Point Bulk Supply above 75 kw Independent Advertisement Hoardings Rs. 65 / kw Rs. 65 / kva Rs. 65 / kva Rs. 80/ kw Rs. 5.25/ kwh Rs. 5.15/ kvah Rs. 5.05/ kvah Rs. 5.50/kWh 50 kvah /kva /month & 600 kvah/ kva/annum 50 kvah /kva /month & 600 kvah/ kva/ annum 50 kvah /kva /month & 600 kvah/ kva/ annum Rs. 75/ kva Rs. 70 / kw Rs. 75 / kw Rs. 75 / kva Rs. 75 / kva Rs. 95/ kw Rs 5.10/ kwh Rs. 4.75/ kvah Rs. 5.30/ kwh Rs. 6.25/ kwh Rs. 6.15/ kvah Rs. 6.00/ kvah Rs. 6.55/kWh 50 kvah /kva /month & 600 kvah/ kva/annum 50 kvah /kva /month & 600 kvah/ kva/ annum 50 kvah /kva /month & 600 kvah/ kva/ annum Rs. 60/ kw Rs. 70/ kva Rs. 65 / kw Rs. 70 / kw Rs. 70 / kva Rs. 70 / kva Rs. 85/ kw Rs. 4.35/ kwh Rs. 4.05/ kvah Rs. 4.55/ kwh Rs. 5.35/ kwh Rs. 5.25/ kvah Rs. 5.15/ kvah Rs. 5.80/kWh MCG Nil Uttarakhand Electricity Regulatory Commission 215

230 Order on True-up for FY , APR for FY & ARR for FY RTS-3: Government Public Utilities As discussed earlier, the Commission has decided to merge the existing three categories RTS-3: Public Lamp, RTS-5: Government Irrigation System and RTS-6 : Public Water Works into a single category Government Public Utilities Category. The tariff for this category has been approved in such a manner so that the average billing rate for this category is close to average cost of supply. The existing tariff, tariff proposed by the licensee and that approved by the Commission is given in the Table below: Table 5.5: Tariff for Public Lamps Existing Tariff UPCL Proposed Tariff Approved Description Fixed / Demand Charges (Per Month) Energy Charges Fixed / Demand Charges (Per Month) Energy Charges Fixed / Demand Charges (Per Month) Energy Charges Public Lamps Urban (Metered) Rural (Metered ) Rs. 55/kVA Rs. 45/kVA Rs. 4.75/ kvah Rs. 4.75/ kvah Rs. 65/kVA Rs. 55/kVA Rs. 5.80/ kvah Rs. 5.80/ kvah Rs. 60/kVA Rs. 50/kVA Rs. 4.85/ kvah Rs. 4.85/ kvah Description Government Irrigation System Fixed / Demand Charges (Per Month) Table 5.6: Tariff for Government Irrigation System Existing Tariff UPCL Proposed Tariff Approved Fixed / Fixed / Demand Energy Demand Energy Charges (Per Charges Charges (Per Charges Month) Month) Rs. 55/kVA Rs. 4.60/ kvah Rs. 65/kVA Rs. 5.65/ kvah Rs. 60/kVA Energy Charges Rs. 4.85/ kvah Description Urban Rural Table 5.7: Tariff for Public Water Works Existing Tariff UPCL Proposed Tariff Approved Fixed / Demand Charges (Per Month) Rs. 55/kVA Rs. 45/kVA Energy Charges Rs. 4.70/ kvah Rs. 4.70/ kvah Fixed / Demand Charges (Per Month) Rs. 65/kVA Rs. 55/kVA Energy Charges Rs. 5.75/ kvah Rs. 5.75/ kvah Fixed / Demand Charges (Per Month) Rs. 60/kVA Rs. 50/kVA Energy Charges Rs. 4.85/ kvah Rs. 4.85/ kvah 216 Uttarakhand Electricity Regulatory Commission

231 5. Tariff Rationalsation, Tariff Design and Related Issues RTS-4: Private Tube Wells/Pump Setsand Agriculture Allied Activities The Commission in order to gradually reduce the cross subsidy in this category has increased the energy charge from Rs 1.75/kWh to Rs 1.84/kWh for this category of consumers. Currently, the consumers of this category are paying Energy Charges of Rs 1.84/kWh including AEC. Thus, there is practically no change in tariff for this category. The existing tariff, tariff proposed by the licensee and that approved by the Commission are given in the Table below: Table 5.8: Tariff for Private tube Wells/ Pump Sets Existing Tariff UPCL Proposed Tariff Approved Category Fixed / Demand Energy Minimum Fixed / Demand Energy Minimum Fixed / Demand Energy Charges (Per Month) Charges Charges Charges (Per Month) Charges Charges Charges (Per Charges Month) RTS-4: Private Tube-wells / Pumping sets Rs. 1.75/ Metered Nil kwh RTS-4A: Agriculture Allied Activities Rs. 1.75/ Metered Nil kwh RTS-5: Industry - Nil - Nil Rs. 2.15/ kwh Rs. 2.15/ kwh - Nil - Nil Rs. 1.84/ kwh Rs. 1.84/ kwh Minimum Charges The Commission while determining the tariff of HT and LT Industries has taken into consideration the average cost of supply and cross subsidy. Further, as discussed above, the Commission has decided to retain the peak hour rate as 50% higher than the normal hour rate applicable for highest slab, i.e. with load factor above 40% for all the HT industrial consumers and increase the off peak hour rebate from 10% to 15%. Further, consumers opting for continuous supply as per eligibility given in this Order shall have to pay 10% additional energy charges as continuous supply surcharge only on energy supply made by UPCL, i.e. the surcharge will not be applicable if power is sourced through open access. Further, as discussed earlier the MCG for this category has been abolished. The existing tariff, tariff proposed by the licensee and that approved by the Commission for LT Industry is given in the Table below: - - Uttarakhand Electricity Regulatory Commission 217

232 Order on True-up for FY , APR for FY & ARR for FY Fixed Category Charges (Per Month) RTS-5: Industry LT Industry 1. LT Industries (upto 25 kw) 2. LT Industries (above 25kW & upto 75 kw) Rs. 140/ kw Rs. 140/ kva Table 5.9: Tariff for LT Industries Existing Tariff UPCL Proposed Tariff Approved Energy Charges Rs. 4.20/ kwh Rs. 3.85/ kvah MCG *50 kwh/ kw/month & 600 kwh /kw/annum 50 kvah/ kva/month & 600 kvah /kva/ annum Fixed Charges (Per Month) Rs. 180/ kw Rs. 180/ kva Energy Charges Rs. 5.15/ kwh Rs. 4.70/ kvah MCG *50 kwh/ kw/month & 600 kwh /kw/annum 50 kvah/ kva/month & 600 kvah /kva/ annum Fixed Charges (Per Month) Rs. 145/ kw Rs. 145/ kva Energy Charges MCG Rs. 4.25/ kwh Rs. 3.90/ kvah * 30 kwh/kw/month and 360 kwh/kw/annum for Atta Chakkis The existing tariff and tariff proposed by the licensee for HT Industry is given in the Table below: Sl. No. Category Table 5.10: Existing and Proposed Tariff for HT Industries Load Factor Energy Charges (Rs./kVAh) Existing Tariff Fixed /Demand Charges (Rs./kVA) 1 HT Industry having contracted load above 88kVA/75 kw (100 BHP) MCG Charges Energy Charges (Rs./kVAh) UPCL Proposed Tariff Fixed /Demand Charges (Rs./kVA) MCG Charges Contracted Load up to 1000 kva Contracted Load More than 1000 kva Upto 40% 3.65 Rs. 285/kVA of 4.32 Rs. 335/kVA Above 40% 4.00 the billable demand 100 kvah/kva/ month & of the billable demand Upto 40% 3.65 Rs. 345/kVA of kvah 4.32 /kva/annum Rs. 390/kVA the billable Above 40% 4.00 demand 4.72 of the billable demand 100 kvah/kva /month &1200 kvah /kva/ annum 218 Uttarakhand Electricity Regulatory Commission

233 5. Tariff Rationalsation, Tariff Design and Related Issues The approved tariff for HT Industry is given in Table below: Table 5.11: Approved Tariff for HT Industry Energy Fixed S. Charges Charges Category Load Factor No Rs./kVA/ Rs./kVAh month 1 HT Industry having contracted load above 88kVA/75 kw (100 BHP) Contracted Upto 40% 3.85 Rs. 295/kVA 1.1 Load up to of the billable Above 40% kva demand Contracted Upto 40% 3.85 Rs. 355/kVA Load More 1.2 of the billable than 1000 Above 40% 4.20 demand kva RTS-6: Mixed Load MCG kvah/kva of contracted load The Commission has increased the tariff for this category to reduce the level of cross subsidy. The existing tariff, tariff proposed by the licensee and that approved by the Commission is given in the Table below: ---- Description RTS-6: Mixed Load Mixed Load Single Point Bulk Supply above 75 kw including MES as deemed licensee Fixed / Demand Charges Per Month) Table 5.12: Tariff for Mixed Load Existing Tariff UPCL Proposed Tariff Approved Tariff Fixed / Fixed / Energy Demand Energy Demand Charges Charges Charges Charges Per Month) (Per Month) Energy Charges Rs. 70/kW Rs. 4.75/kWh Rs. 85/kW Rs. 5.80/kWh Rs. 75/kW Rs. 4.80/kWh RTS-7: Railway Traction The existing tariff, tariff proposed by the licensee and that approved by the Commission is given in Table below: Description RTS-7: Railway Traction Table 5.13: Tariff for Railway Traction Existing Tariff UPCL Proposed Tariff Tariff Design Fixed / Demand Charges (Per Month) Rs. 240/kVA Energy Charges Rs. 4.25/ kvah Fixed / Demand Charges (Per Month) Rs. 295/kVA Energy Charges Rs. 5.20/ kvah Fixed / Demand Charges (Per Month) Rs. 245/kVA Energy Charges Rs. 4.35/ kvah Uttarakhand Electricity Regulatory Commission 219

234 Order on True-up for FY , APR for FY & ARR for FY Revenue for FY Considering the revised tariffs, the Commission has computed the projected revenue at the approved tariffs from each category for FY The summary of category-wise projected revenue for FY is given in the following Table: S. No. Table 5.14: Summary of Category Wise Projected Revenue Category Sales Revenue Average Billing Rate (ABR) MU Rs. Crore Rs./Unit 1. RTS-1: Domestic RTS-2: Non Domestic RTS-3: Govt. Public Utilities RTS-4: Private Tube Wells RTS-5: Industry LT Industry HT Industry RTS-6: Mixed Load RTS-7: Railway Traction Additional Sales (Efficiency improvement) Total The estimated revenue for FY at approved tariffs works out to Rs Crore, as against the net ARR of Rs Crore worked out after adjusting trued-up surplus/gaps of previous years leaving a surplus of Rs Crore with UPCL. The Commission has left some surplus while designing the tariffs as the exact impact of all the tariff rationalisation measures approved by the Commission cannot be estimated at this stage. The Commission will consider the actual sales and revenue while carrying out the truing up for FY Cross Subsidy As discussed above, the Commission has designed the tariffs for various categories with an objective of gradually reducing the cross subsidy with respect to average cost of supply. The extent of category-wise cross-subsidy at approved tariffs computed at average cost of supply is given in the Table below: 220 Uttarakhand Electricity Regulatory Commission

235 5. Tariff Rationalsation, Tariff Design and Related Issues Category Table 5.15: Cross Subsidy at Average Cost of Supply Approved Average Billing Rate (ABR) Average Cost of Supply (ACoS) ABR / ACoS Cross Subsidy Rs./kWh Rs./kWh % % RTS-1: Domestic % % RTS-2: Non Domestic % 15.63% RTS-3: Govt. Public Utilities % 4.61% RTS-4: Private Tube Wells % % RTS-5: Industry LT Industry % 9.17% HT Industry % 9.78% RTS-6: Mixed Load % 1.42% RTS-7: Railway Traction % 7.02% The comparison of Cross Subsidy at approved tariffs with respect to the average cost of supply in Tariff Order for FY and as approved in this Tariff Order for FY is given below: Table 5.16: Cross Subsidy at Approved Tariffs in FY and FY Category Cross Subsidy at Approved Cross Subsidy at Approved Tariff for FY Tariff for FY RTS-1: Domestic % % RTS-2: Non Domestic 15.75% 15.63% RTS-3: Govt. Public Utilities 2.76% 4.61% RTS-4: Private Tube Wells % % RTS-5: Industry LT Industry 9.28% 9.17% HT Industry 9.95% 9.78% RTS-6: Mixed Load 1.52% 1.42% RTS-7: Railway Traction 7.15% 7.02% The Commission while designing the tariffs for FY has reduced the cross subsidies for most of the categories with respect to approved tariffs for FY and has ensured to bring the cross-subsidy levels within the range specified in the National Tariff Policy. Further, it can be seen from the Table above, cross-subsidies of all the subsidising consumers is within the range of 120% as required in the Tariff Policy. Further, once the cross-subsidy level has been reduced to be within +20%, there is no mandate under the Act or Tariff Policy to reduce it further. The criteria of ± 20 % of the average cost of supply for all the categories including subsidised categories depends upon the consumption mix of the Licensee. However, in case of the Petitioner, the consumption mix is skewed towards subsidising categories having almost two third of total sales, while the consumption by subsidised Uttarakhand Electricity Regulatory Commission 221

236 Order on True-up for FY , APR for FY & ARR for FY categories is around one third of the total consumption. Therefore, in case of Petitioner, though the tariff for all the subsidising categories have been within 120% of the overall average cost of supply of the Petitioner, the average tariff for some of the subsidised categories is less than 80% of the overall average cost of supply of the Petitioner. Hon ble Appellate Tribunal of Electricity, in its Judgment dated February 28, 2012, in Appeal No. 159 of 2011 has expressed similar views. The relevant extract given in Para 16 of the Judgment is reproduced as under:... Provision of restricting cross subsidy to +/- 20% in Tariff Policy is applicable to areas where proportion of both the categories, subsidizing and subsidized, are comparable. The same yard stick cannot be applied in areas where consumer mix is highly biased in favour on one category. 5.4 Open Access Charges Uttarakhand Electricity Regulatory Commission (Terms and Conditions of Intra State Open Access) Regulations, 2015 inter-alia specify wheeling charges applicable on the customers seeking open access through distribution system, based on the category/nature of open access these customers come under in accordance with the Regulations. In this regard, Regulation 20(2) specifies as under: Wheeling charges payable to distribution licensee, by an open access customer for usage of its system shall be as determined as under: Wheeling Charges = (ARR PPC TC) /(PLSD X365) ( Rs./MW/Day) Where, ARR=Annual Revenue Requirement of the distribution licensee for the relevant year PPC= Total Power Purchase Cost of distribution licensee for the relevant year TC = Total transmission charges paid by distribution licensee for State and Inter-State transmission system for the relevant year PLSD= Total Peak load served by the concerned distribution system for the previous year 222 Uttarakhand Electricity Regulatory Commission

237 5. Tariff Rationalsation, Tariff Design and Related Issues Provided where Open Access is allowed up to contracted load, embedded open access consumer shall pay wheeling charges as determined by the Commission in the following manner: WC Embedded consumer = WC [FC*0.85*12*1000/365] (in Rs./MW/day) Where, WC Embedded consumer = Net wheeling charges for embedded consumers WC= Wheeling charges as determined by the Commission in accordance with the methodology specified in Regulation 20(2) contained in Chapter 5 of these regulations. FC= Fixed/demand charges in Rs/kVA/month as per rate schedule approved in the Tariff Order for the relevant year. For the purpose of conversion of kva into kw power factor of 0.85 has been taken. Note: In case Wheeling Charges for Embedded consumer worked out as above becomes negative, such charge shall be zero. Provided that wheeling charges shall be payable on the basis of Approved Capacity. Provided where open access is allowed beyond the contracted load, embedded open access consumer shall pay wheeling charges for the excess load as determined by the Commission in the following manner: WC For excess load allowed= (ARR PPC TC) /(PLSD X365) ( Rs./MW/Day) The PLSD during FY is 2149 MW. Hence, in accordance with the methodology provided in the aforesaid Regulations, the wheeling charges payable by customers seeking open access for FY (applicable upto 31st March, 2019) shall be: Table 5.17: Wheeling Charges approved for FY Description Rs./MW/day Wheeling Charges 9284 Embedded open access consumers who have been allowed open access up to the contracted load shall not pay the wheeling charge as above who shall otherwise pay net wheeling charges calculated in accordance with the methodology specified in the regulations and the same works out to Rs. 0/MW/day for HT industry consumers having contracted load above 1000 kva and Rs. 1040/MW/day for HT industry consumers having contracted load upto 1000 kva. Non- Uttarakhand Electricity Regulatory Commission 223

238 Order on True-up for FY , APR for FY & ARR for FY Domestic consumers shall pay wheeling charges of Rs. 7328/MW/day. Moreover, embedded open access consumers who have been allowed open access beyond the contracted load shall pay wheeling charges for the excess load equal to Rs. 9284/MW/day. However, where a dedicated distribution system for open access has been constructed for exclusive use of an open access customer, the wheeling charges for such dedicated system shall be worked out by the distribution licensee for its respective system and shall get it approved by the Commission and will be borne entirely by such open access customer till such time the surplus capacity is allotted and used by other open access customers, where after, the cost of the above system will be shared on pro-rata basis depending upon open access capacity allotted to them. Provided that wheeling charges shall not be levied on the open access customers connected to the transmission system at 132 kv and above voltage levels. The distribution losses applicable to open access customers for FY shall be the pooled average system distribution losses, i.e % considered in this Order. Cross subsidy surcharge applicable, in accordance with the Regulations, to open access customers for FY have been determined as Rs. 0.49/kWh for HT industrial consumers and Rs. 0.79/kWh for non-domestic consumers. The Petitioner is hereby directed that the wheeling charges and cross subsidy surcharge recovered from open access customers shall be shown separately under the separate head of income in its ARR/Tariff filings. The Petitioner in its Petition had submitted that the open access consumers with UPCL are of embedded nature, who buys power from UPCL as well as through open access as per their financial suitability. However, in case these open access consumers choose to buy power from UPCL in place of open access, then the Petitioner is required to supply power to them as per their contracted capacity with it. Accordingly, the Petitioner is required to have an arrangement of power sufficient to meet the requirement of these open access Consumers including the quantum which they were buying earlier through open access. In case any Consumer goes for open access, then the Power Purchase commitments of the Petitioner becomes stranded and, therefore, the open access consumers are required to bear fixed component of power purchase cost of the Petitioner. The Petitioner further submitted that absence of suitable additional surcharge levied to the open access consumer would result in undue burdening on the other consumers of the licensee. Accordingly, it had proposed levying additional surcharge on the open access consumers. 224 Uttarakhand Electricity Regulatory Commission

239 5. Tariff Rationalsation, Tariff Design and Related Issues The Commision, had pointed out deficiencies in the submissions made by UPCL with reference to calculation of additional surcharge. During the Meeting of Advisory Committee, submitted that they have proposed an additional surcharge of Rs per kwh based on the average fixed cost of the total power purchase and the issue of levying additional surcharge would be examined in accordance with the provisions of the Regulations and also the practices being followed in other States and modify its proposal accordingly. However, no revised proposal has been submitted till date. The Commission accordingly, advises the Petitioner to submit a fresh Petition, if required, in accordance with the Regulations clearly demonstrating that some power remained stranded due to open access consumers. Uttarakhand Electricity Regulatory Commission 225

240 6. Review of Commercial Performance of UPCL 6.1 General Uttarakhand, the 27 th State of India was created on as the 10 th Himalayan State of the country blessed with abundant natural resources with an approx. 53,483 sq. km area and presently having a population of approximately Lakh. The Electricity Distribution Network is managed by Uttarakhand Power Corporation Limited (UPCL) the sole distribution licensee in the State. UPCL had been entrusted to cater to the Transmission & Distribution Sector inherited after the de-merger from UPPCL (erstwhile UPSEB) since The Electricity Act, 2003 mandated the separation of Transmission functions under Power Sector Reforms. Consequently, on , the Power Transmission Corporation Limited (PTCUL) was formed to maintain & operate EHV Transmission lines & substations in the State. Today UPCL, the sole power distribution utility in the State caters to the sub transmission & distribution network which includes substations & distribution lines in 13 districts of Uttarakhand namely Dehradun, Pauri, Tehri, Uttarkashi, Rudraprayag, Chamoli, Haridwar, Pithoragarh, Bageshwar, Almora, Nainital, Champawat, & Udhamsingh Nagar, details of which are given below in Table 6.1 & 6.2. S. No. Table 6.1: Detail of Substations (S/s) maintained by UPCL as on Name of District Nos. 66/11 KV S/s 33/11 KV S/s 11/0.415 KV S/s No. of Total MVA No. of Total MVA Total MVA Nos. Nos. Transformers capacity Transformers capacity capacity Garhwal Zone 1. Dehradun Uttarkhashi Pauri Tehri Chamoli Rudraprayag Total Garhwal Zone Haridwar Zone 7. Haridwar Total Haridwar Zone Kumaon Zone 8. Nainital U.S.Nagar (Kashipur, Bazpur Jaspur) Almora Bageshwar Total Kumaon Zone Rudrapur Zone 12. U.S.Nagar (Rudrapur, Sitarganj) Pithoragarh Champawat Total Rudrapur Zone Total UPCL Uttarakhand Electricity Regulatory Commission

241 6. Review of Commercial Performance of UPCL S.No. Table 6.2: Detail of Lines maintained by UPCL as on Name of District 66 KV Line (In Km.) 33 KV Line (In Km.) 11 KV Line (In Km.) LT Line (In Km.) Garhwal Zone 1. Dehradun Uttarkhashi Pauri Tehri Chamoli Rudraprayag Total Garhwal Zone Haridwar Zone 7. Haridwar Total Haridwar Zone Kumaon Zone 8. Nainital U.S.Nagar (Kashipur, Bazpur Jaspur) Almora Bageshwar Total Kumaon Zone Rudrapur Zone 12. U.S.Nagar (Rudrapur, Sitarganj) Pithoragarh 68.5* Champawat Total Rudrapur Zone Total UPCL On examination of the details of sub-stations and lines maintained by UPCL as on vis-a-vis as on , it has been observed that UPCL was able to increase its total transformation/sub-station capacity and total line length by 476 MVA and 10,865 Kms. respectively in last one year as detailed below: Table 6.3: Increase in Assets of UPCL in last one year ( to ) Description 33 kv 11 kv LT Total Substation Capacity as on Substation Capacity as on Net Increase in Substation Capacity (in MVA) Line length as on (in Km) Line length as on (in Km) Net Increase in Line length (in Km) The Distribution network of UPCL as on contains four Zones namely Garhwal, Haridwar, Kumaon & Rudrapur having total eleven Circles containing 41 Divisions. The new division which have been formed in FY upto are namely Bhikiyasain, Khatima, Uttarakhand Electricity Regulatory Commission 227

242 Order on True-up for FY , APR for FY & ARR for FY Mohanpur, Jwalapur, Ramnagar (Roorkee) and Bhagwanpur (Roorkee). The State has a distinct advantage over other comparable States as a small number of consumers consume major share of power for which a Key Consumer Cell (KCC) has been constituted. Hence, a large portion of revenue of the Petitioner comes from these KCC consumers. There were Lakh consumers as on , and Lakh consumers as on This increase of total 1,05,144 consumers during the year was primarily in Domestic category (84%). The Consumer Mix, Consumption pattern & Revenue pattern for FY & FY are elaborated below: Consumer Mix during FY & FY In FY , out of the total approximately Lakh consumers in the State, there were 87.46%-Domestic consumers, 10.33%-Non-Domestic consumers and only 0.57% consumers of the Industrial category. It is seen that these industrial (HT+LT Industries) consumers accounted for around 55.54% of the total consumption of the State and contribute to about 60.67% of Petitioner s revenue. The following Chart depicts the consumers mix in the State during FY CHART 1: Consumer Mix (FY ) In FY , out of the total approximately Lakh consumers in the State, there were 87.29%-Domestic consumers, 10.46%-Non-Domestic consumers and only 0.58% consumers of the Industrial category. It is seen that these industrial (HT+LT Industries) consumers accounted for around 54.92% of the total consumption of the State and contribute to about 61.76% of Petitioner s revenue. The following Chart depicts the consumers mix in the State during FY Uttarakhand Electricity Regulatory Commission

243 6. Review of Commercial Performance of UPCL CHART 2: Consumer Mix (FY ) Besides above, it has been observed that despite Commission s specific directions not to indicate un-metered category details in its Commercial Diary and also no energy should be booked in this account. The Petitioner in its Commercial Diary for FY , i.e. CS 3 and CS 4 is still booking Energy/Revenue in the consumer categories, viz. RTS-3 (Unmetered) and RTS-4 (Unmetered). Such action of distribution licensee is a clear violation of the Commission s directions. Hence, the Commission again directs UPCL not to indicate any un-metered category in its commercial diary and should ensure that no energy should be booked, in this account. In absence of the corrective action at UPCL s end, action under provisions of Act/Rules/Regulations would be initiated Consumption Pattern during FY & FY In FY , it was observed that with respect to total consumption of the State, the consumption of Industrial consumers (HT+LT Industries) was 55.54% and for Domestic & Non- Domestic consumers the consumption was 23.22% & 10.86% respectively. The following Chart shows the consumption pattern in the State during FY Uttarakhand Electricity Regulatory Commission 229

244 Order on True-up for FY , APR for FY & ARR for FY CHART 3: Consumption Pattern during FY In FY , it was observed that with respect to total consumption of the State, the consumption of Industrial consumers (HT+LT Industries) was 54.92% and for Domestic & Non- Domestic consumers the consumption was 23.51% & 11.10% respectively. The following Chart shows the consumption pattern in the State during FY CHART 4: Consumption Pattern during FY Comparison of consumption pattern in FY & FY depicts that %age share of Industrial consumption has slightly decreased by 0.62%, whereas, %age share of domestic consumption has increased by 0.29% and the %age share of non-domestic consumption has increased by 0.24%. With regard to the decrease in energy consumption of Industrial consumers, the Commission is of the view that the flexibility to the consumers to source its power requirements from any of the generating sources within or outside the State under open access, installation of 230 Uttarakhand Electricity Regulatory Commission

245 6. Review of Commercial Performance of UPCL solar rooftops under Net Metering Scheme and encouragement of energy efficient equipments are the main reasons for the same. The Commission is of the opinion that the volume of power being sold by the Petitioner to this category of consumers may get reduced progressively in case the Petitioner does not improve its performance and ensure quality and reliable supply of power at competitive rates for its consumers. Moreover, as Industries are subsidising consumers, therefore, reduction in revenue from Industries would significantly affect the commercial viability of the Distribution Business. The following Table gives the quantum of power traded through Exchanges (Open Access) by the Embedded Open Access Consumers which are increasing year on year and measures have to be taken by UPCL to ensure reliable and quality supply to the industries at reasonable prices to the arrest increase in open access sales. Table 6.4: Quantum of Power Traded through Open Access Year Quantum (MU) FY FY FY FY FY FY Revenue Pattern during FY & FY With regard to the revenue from sale of energy during FY , the contribution of Industrial consumers was 60.67% [HT Industrial consumers was 57.62%, LT industrial consumers was 3.05%] whereas Domestic consumers were contributing around 16.42%. The following Chart shows the Revenue Pattern of various consumer categories in the State. CHART 5: Revenue Mix in FY Uttarakhand Electricity Regulatory Commission 231

246 Order on True-up for FY , APR for FY & ARR for FY With regard to the revenue from sale of energy during FY , the contribution of Industrial consumers was 61.76% [HT Industrial consumers was 58.55%, LT industrial consumers was 3.21%] whereas Domestic consumers were contributing around 16.60%. The following Chart shows the Revenue Pattern of various consumer categories in the State. CHART 6: Revenue Mix in FY On comparing the revenue pattern of FY and FY , it is noticed that the %age revenue share of Industrial Consumers, non-domestic & domestic consumers with respect to the total revenue had increased by 1.09%, 0.39% & 0.18% respectively. This is a welcoming signal that %age revenue from the subsidising category of consumers, i.e. Industrial & Non-domestic consumers have slightly increased in FY Commission s Analysis and Directions on Commercial Performance The Commission has been monitoring & reviewing the performance of the Petitioner based on the information/reports submitted by it. Infact, higher distribution losses in distribution system are detrimental to financial and commercial viability of the Petitioner. Therefore, analysis of Petitioner s performance especially in respect of metering, billing and revenue collection is vital with the focus on reducing the Aggregate Technical and Commercial (AT&C) losses of the Petitioner. The Commission from its very first Tariff Order has been issuing various directions/orders in this regard from time to time. However, the Petitioner has always been noncompliant. The Commission had, therefore, decided to monitor the commercial performance of the Petitioner in a more structured manner on a monthly basis and, accordingly, various formats were issued to the Petitioner vide Commission s letter UERC/7/CL/152/ /284 dated Uttarakhand Electricity Regulatory Commission

247 6. Review of Commercial Performance of UPCL with the direction to submit the above information in these Formats regularly for each month by 15 th day of the next month. Despite, the specific directions issued by the Commission in its previous Tariff Orders, the Petitioner had neither been submitting the periodical reports timely nor in accordance with the prescribed formats. Considering the fact that the Petitioner encompasses 35 number of Distribution Divisions in the State, the Commission felt the need to monitor UPCL on Distribution Division basis. In order to quantify the improvement on month on month basis of any of the performance indicators, it is necessary that Division-wise targets on each parameter be provided by the licensee which would make the whole monitoring process more meaningful. Hence, the Commission vide its letter no. UERC/5/Tech/112/ /1622 dated issued following revised Commercial Performance Monitoring formats directing UPCL to submit information on these formats in hard as well as in soft copy (MS-excel file in CD) on regular basis latest by 25 th day of the next month from January, 2015 onwards. Table 6.5: Revised Formats prescribed by the Commission vide letter dated S. No. Description Format 1. No. of Consumers 1 2. Quarterly Targets of NA/NR/IDF/ADF/RDF 2 3. Status of Not Accessible (NA) Consumers (in Percentage) 2(A) 4. Status of Not Read (NR) Consumers (in Percentage) 2(B) 5. Status of Identified Defective Meters (IDF) (in Percentage) 2(C) 6. Status of Appeared Defective Meters (ADF) (in Percentage) 2(D) 7. Status of Reading Defective Meters (RDF) (in Percentage) 2(E) 8. Quarterly Targets of IDF Meters/Mechanical Meters/Un-metered Consumers/Ghost Consumers 3 9. Status of Identified Defective Meters (IDF) 3(A) 10. Status of Un-metered Consumers 3(B) 11. Status of Mechanical Meters 3(C) 12. Status of Ghost Consumers 3(D) 13. Status of Not Billed (NB)/Stop Billed (SB) Cases Status of Outstanding Arrears MRI Status of KCC Consumers Status of Revenue realisation per unit of Energy Sold Status of AT&C Losses of UPCL 8 However, the Commission has observed that the Distribution Licensee has been inconsistent in furnishing the Commercial Performance Monitoring reports on the aforesaid formats in hard as Uttarakhand Electricity Regulatory Commission 233

248 Order on True-up for FY , APR for FY & ARR for FY well as in soft copy (MS-excel file in CD) on regular basis in accordance with the directions, i.e. latest by 25 th day of the next month. The Commission has observed that the Petitioner has not only been inconsistent in furnishing the Commercial Performance Monitoring reports within the stipulated time frame but also has failed to submit Format - 2 & Format- 3 alongwith the report of the first month of the Financial Year, i.e. alongwith the report of April, The Commission has observed that despite categorically mentioning in the guidelines of the prescribed Formats regarding submission of Quarterly Targets in the first month of the Financial Year i.e. April, 2017, the Petitioner submitted the Quarterly Targets in Format-2 & Format-3 to the Commission as late as July, 2017 i.e. vide its letter no dt for Garhwal, Haridwar & Rudrapur Zones and vide letter no dt for Kumaon Zone. The Commission is of the view that the basic purpose of advance target setting for each quarter is to enable analysis of actual performance vis-a-vis target performance of the licensee. In the absence of advance target setting, comparative analysis is rendered impossible which clearly shows a lackadaisical approach of the Petitioner towards compliance of the provisions of the Act/Regulations and directions of the Commission. Therefore, the Commission again directs Petitioner to submit monthly Commercial Performance Monitoring reports strictly in the prescribed formats on regular basis, so as to reach the Commission latest by 25 th day of the following month and without fail furnish the Quarterly Targets as per prescribed Format - 2 & 3 alongwith the Commercial Performance Monitoring report for the month of April, The Commission s analysis on the information submitted by the Petitioner for the period to through its various submissions is being discussed in the following paragraphs: Metering The Commission in its earlier Tariff Orders had been repeatedly giving directions to the Petitioner to energise new connections (including metering of unmetered connections) with the static/electronic meters and to replace all old mechanical meters with new electronic/static meters in accordance with CEA Regulations. 234 Uttarakhand Electricity Regulatory Commission

249 6. Review of Commercial Performance of UPCL However, the Commission has observed that the Petitioner has a lackadaisical approach in furnishing correct report in this regard to the Commission in the prescribed formats. The reports pertaining to various performance parameters on metering and other issues have been analysed and findings thereof are being discussed below: Status of NA/NR, IDF/ADF/RDF The Commission vide its Tariff Order dated , had issued directions to the Petitioner to reduce the percentage NA/NR cases to below 2% in the entire State latest by , failing which the concerned Chief Engineer (Distribution), Superintending Engineer (Distribution), Executive Engineer (Distribution) & Executive Engineer (Test) shall be held responsible for non-compliance of the Commission s directions and appropriate action under the Act/Rules/ Regulations may be initiated. UPCL in its compliance of directives has submitted that UPCL vide its letter No dated has directed all its field officers to reduce the %age NA/NR cases to below 2% latest by and subsequently in a review meeting dated the field officers were directed to achieve the level of NA/NR cases to below 2%. However, on examination of the Quarterly Targets submitted by UPCL in Format-2, it is observed that the target set for NA/NR cases at the end of 3 rd quarter of FY in 22 divisions out of total 36 divisions were exceeding 2% which shows that the Petitioner is bound to fail in complying with the directions of the Commission issued in the Tariff Order dated Taking a strong exception, the Commission is of the view that the Petitioner indeed requires improvement at division level in order to reduce provisional billing cases and aim for achievement of overall target set for NA/NR cases in the State in accordance with the Orders of the Commission. Hence, UPCL is required to diligently monitor & pursue each Distribution Division rigorously so as to align its actual percentage of NA/NR billing with the targets in accordance with the Commission s Orders/directions. The Commission has observed that the percentage of provisional billing cases namely NA/NR, RDF/ADF/IDF, furnished in prescribed formats 2(A), 2(B), 2(C), 2(D) & 2(E) for FY are still at alarmingly high levels vis-a-vis total number of billed consumers as shown in the Table given below: Uttarakhand Electricity Regulatory Commission 235

250 Order on True-up for FY , APR for FY & ARR for FY Table 6.6: Status of Provisional Billing viz. NA/NR/IDF/ADF/RDF Status As on 31st As on 31st As on 31st As on 31st As on 31st As on 31st March 2013 March 2014 March 2015 March 2016 March 2017 Dec 2017 NA (%) NR (%) IDF (%) ADF (%) RDF (%) Total (%) Total Billed Consumers (Nos.) 16,47,224 16,64,159 17,42,507 18,15,454 19,15,855 19,94,335 From the above Table, it is observed that there has been an increase in total percentage of NA/NR, IDF/ADF/RDF cases in FY (upto ) which is not at all close to the directions/provisions of the SOP Regulations issued by the Commission. Wherein, the total provisional billing cases should be within 3% of the total number of consumers of the licensee, whereas as per the Table above, the IDF cases itself are 4% which is one of the constituents of provisional billing basis and constitute only a portion of such billing basis, therefore, it can be said that the Petitioner has to put in concerted efforts to bring the overall provisional billing percentage to within 3% of the total number of consumers in plain as well as hill areas of the State. On further examination of Quarterly Targets furnished by UPCL vis-a-vis actual progress made in the field as on , it has been observed that UPCL was not able to comply with the directions of the Commission to bring NA/NR cases below 2% in the entire State by , but has also failed to achieve its own Quarterly Targets by the end of 3 rd Quarter of FY In only 1 division namely Haldwani (R), the Petitioner was able to comply with the directions of the Commission for bringing NA/NR cases below 2% by Whereas, as on the overall percentage of NA/NR cases remains grim as 28 divisions still have NA/NR cases more than 5% which shows that the Petitioner has shown lackadaisical approach in reducing NA/NR cases. The Commission is of the view that despite numerous directions issued to the Petitioner for reducing and bringing the provisional billing cases within 3%, the Provisional billing cases are still 12.83% as on Moreover, NA/NR cases alone are around 8% which reflects abysmal performance of the Petitioner in bringing down the provisional billing percentage in the State. Therefore, giving last opportunity to the licensee, the Commission again directs the Petitioner to reduce the percentage NA/NR cases to below 2% in the entire State latest by , failing which the concerned Chief Engineer (Distribution), Superintending Engineer (Distribution), 236 Uttarakhand Electricity Regulatory Commission

251 6. Review of Commercial Performance of UPCL Executive Engineer (Distribution) & Executive Engineer (Test) shall be held responsible for noncompliance of the Commission s directions and appropriate action under the Act/Rules/ Regulations would be initiated Replacement of Improper, Non-Functional, Stop/Stuck up defective meters (referred to as Identified defective meters (IDF)) In this regard, the Commission vide its Tariff Order dated had directed the Petitioner to restrict percentage defective meters (IDF) to 3% in plain as well as in hilly areas of the State upto , failing which the concerned Chief Engineer (Distribution), Superintending Engineer (Distribution), Executive Engineer (Distribution) & Executive Engineer (Test) shall be held responsible for non-compliance of the Commission s directions and appropriate action under the Act/Rules/Regulations may be initiated. UPCL in its compliance of directives has submitted that due to shortage of manpower the desired results could not be achieved. Therefore, a tender for replacement of defective meters has been floated in July, 2017 and the target to maintain the level of defective meters below 3% in all areas (Urban and Rural) will be achieved by the end of September, On examination of the Quarterly Targets submitted by UPCL in Format-2, it is observed that the target set for IDF cases at the end of 3 rd quarter of FY in 10 divisions out of total 36 divisions were exceeding 3% which shows that the Petitioner is expected to not only fail in achieving its own targets but is also expected to fail in complying with the directions of the Commission issued in the Tariff Order dated Taking a strong exception, the Commission is of the view that the Petitioner indeed requires improvement at division level in order to reduce provisional billing cases and aim for achievement of overall target set for IDF cases in the State in accordance with the Orders of the Commission. Hence, UPCL is required to diligently monitor & pursue each Distribution Division rigorously so as to align its actual percentage of IDF cases with the targets in accordance with the Commission s Orders/directions. Circle-wise number of defective meters reported by the Petitioner in the prescribed format 3(A) is shown in the Table given below: Uttarakhand Electricity Regulatory Commission 237

252 Order on True-up for FY , APR for FY & ARR for FY S. No. Name of Circle No. of Defective Meters as on Table 6.7: Status of Defective Meters No. of Defective Meters as on No. of Defective Meters as on No. of Defective Meters as on No. of Defective Meters as on No. of Defective Meters as on % of Defective Meters as on EDC Dehradun (R) EDC Roorkee EDC Haridwar EDC Srinagar EDC Dehradun EDC Kashipur EDC Rudrapur EDC Ranikhet EDC Haldwani EDC Tehri EDC Pithoragarh Total From the above Table, it can be seen that the Petitioner had managed to reduce only 14,895 number of defective meters in FY (upto ) which shows that the activity of replacement of defective meters was not taken seriously at the Petitioner s end due to which as on the percentage defective meters in UPCL s network were 4% of the total number of billed consumers, i.e. 19,94,335 as on the aforesaid date. It is observed that the Petitioner has blatantly failed to comply with the directions of the Commission as the total percentage of defective meters as on was 4.27% which is more than the targeted 3% IDF cases as directed by the Commission vide its Tariff Order dated It is an admitted fact that by expeditious replacement of defective meters on the basis of well laid down defective meter replacement programme, the Petitioner will not only be able to control this menace but will also comply with the provisions of SOP Regulations. Moreover, on examination of Quarterly Targets furnished by UPCL in Format-2 & Format-3 vis-a-vis actual progress made in the field as on , it has been observed that in only 21 nos. divisions out of 40 divisions in the State as on , the Petitioner was able to achieve actual IDF cases percentage below the target level of 3% IDF cases. However, instead of improving in other remaining divisions the IDF cases exceeded 3% in 23 out of 41 divisions as on This clearly shows arbitrariness in the meter replacement programme of the Petitioner. 238 Uttarakhand Electricity Regulatory Commission

253 6. Review of Commercial Performance of UPCL The Commission is of the view that although there has been an improvement in IDF cases, but still the overall progress made by the Petitioner does not comply with the directions of the Commission. Therefore, the Petitioner is directed to restrict percentage defective meters (IDF) to 3% in plain as well as in hilly areas of the State by , failing which the concerned Chief Engineer (Distribution), Superintending Engineer (Distribution), Executive Engineer (Distribution) & Executive Engineer (Test) shall be held responsible for non-compliance of the Commission s directions and appropriate action under the Act/Rules/Regulations would be initiated Un-metered Consumers The Commission in its previous Tariff Order dated , had taken a view that since the number of unmetered consumers has been reduced to Nil in the month of November 2016, therefore, from December 2016 onwards any un-metered consumer, if found, in any of the Petitioner s record or billing ledger shall be treated as mis-declaration/wrong reporting by the Petitioner in its monthly Commercial Performance Monitoring reports and appropriate action under Act/Regulations may be initiated against the concerned officers of the Petitioner including Executive Engineer (Distribution) of the concerned Division. The status of Un-metered consumers as furnished by the Petitioner in the prescribed format 3(B) is given below: Status Nos. of Unmetered Consumers As on 3/14 Table 6.8: Status of Unmetered Consumers As on 3/15 As on 3/16 As on 3/17 As on 4/17 As on 5/17 As on 6/17 As on 7/17 As on 8/17 As on 9/17 As on 10/17 As on 11/ As on 12/17 From the above Table, it is inferred that the Petitioner has been able to reduce the number of the un-metered consumers to Nil in the month of December, Replacement of Mechanical Meters The Commission vide its Order dated had directed the Petitioner to consolidate its complete database for Mechanical Meters including areas not covered under R-APDRP/IPDS Schemes. Further, the Commission had also directed the Petitioner to prepare a division-wise firm plan for replacement of all the existing Mechanical Meters by Electronic/Static Meters within next 2 Uttarakhand Electricity Regulatory Commission 239

254 Order on True-up for FY , APR for FY & ARR for FY years and submit the same along-with the prescribed Format-3 of Commercial Performance Monitoring report for the month of April 2017 and ensure that 50% of the existing mechanical meters are replaced by Electronic/Static meters latest by given below:- The status of mechanical meters furnished by the Petitioner in the prescribed format 3(C) is Status Balance Mechanical Meters to be replaced by Electronic Meters Table 6.9: Status of Mechanical Meters As on 31st March 2012 As on 31st March 2013 As on 31st March 2014 As on 31st March 2015 As on 31st March 2016 As on 31st March 2017 As on 31st December From the above Table, it is observed that only 35,184 mechanical meters were replaced in FY (upto ) while as per direction of the Commission issued in its Tariff Order dated , the Petitioner was required to replace atleast 56,750 (i.e. half of the number of Mechanical meters as on ) Mechanical Meters by which is approx. 14,000 in each quarter. It is an established fact that by replacing the mechanical meters with electronic meters, the Petitioner will not only comply with the prevailing SOP Regulations but will be able to record its energy supplied more accurately/precisely and, thus, billed energy. Therefore, the Petitioner will have an incentive in terms of increase in its revenue if it takes all necessary steps for replacing all remaining mechanical meters including those not covered under R-APDRP/IPDS/DDUGJY funded schemes in a planned and time-bound program. The Commission is of the view that the Petitioner cannot absolve itself from complying with the provisions of the CEA Regulations on meters and directives issued by the Commission in this regard from time to time. It has been observed that the Petitioner has invariably failed to comply with the directions of the Commission in past with regard to replacement of Mechanical Meters by Electronic Static Meters. It is observed that although replacement of mechanical meters with electronic meters has been highest in FY (upto ), i.e. in last 7 years and this also reflects Petitioner s endeavours in this regard, however, the same requires consistent efforts for achieving the targets as set by the Commission. 240 Uttarakhand Electricity Regulatory Commission

255 6. Review of Commercial Performance of UPCL The Commission directs the Petitioner to ensure complete replacement of Mechanical Meters by Electronic Meters well before Ghost/Fictitious Consumers The Commission in its previous Tariff Order dated , had directed the Petitioner to write off ghost/fictitious/non-existent consumers from its billing database under a transparent policy framed by the Petitioner latest by , failing which appropriate action under Act/Regulations may be initiated against the concerned officers of the Petitioner including Executive Engineer (Distribution) of the concerned Division. The status of Ghost/Fictitious consumers furnished by the Petitioner in the prescribed format 3(D) is given below: Status Nos. of Ghost/Fictitious Consumers Table 6.10: Status of Ghost/Fictitious Consumers As on 31st March 2013 As on 31st March 2014 As on 31st March 2015 As on 31st March 2016 As on 31st March 2017 As on 31st December From the above Table, it can be seen that the Petitioner was able to write-off ghost/fictitious/non-existent consumers from its billing database. The Commission is of the view that existence of such consumers in the database prevents proper energy accounting resulting in erroneous figures of Aggregate Technical & Commercial losses (AT&C losses). On examination of the Commercial Performance Monitoring report submitted by the Petitioner it has been observed that the Petitioner was able to write-off ghost/fictitious/nonexistent consumers in the month of July, 2017 and since then ghost consumers has been reported to be Nil in subsequent monthly reports. Hence, the Petitioner is directed to ensure that no new ghost/fictitious/non-existent consumers should appear in its billing database Billing The Commission, vide its earlier Tariff Orders, and various directions issued from time to time in this regard has been directing the Petitioner to improve its quality of billing, bill distribution and revenue collection system. It is noted that the Petitioner has made a beginning in this direction Uttarakhand Electricity Regulatory Commission 241

256 Order on True-up for FY , APR for FY & ARR for FY and has developed a system for internet based online view/payment of electricity bill besides bill payment facility also through Common Service Centers (CSCs) situated across the State for its consumers which has not only benefitted the consumers of the State but has also improved the overall billing and bill collection system of the Petitioner. However, the Commission is of the view that still a majority of consumers are located in remote hilly/rural areas and they may not avail internet based online facilities hence, a lot of scope for improvement in billing, bill distribution and bill collection system is required at the Petitioner s end for consumers residing in such areas NB & SB Cases The Commission, in its Tariff Order dated , had taken a serious note of the continued non-compliance by the Petitioner with regard to NB/SB cases and had decided to give last opportunity to the Petitioner for liquidating and finalising at least 25% of the NB/SB cases latest by , failing which appropriate action under the Act/Rules/Regulations would be initiated against the Petitioner for the continued non-compliance of the directions of the Commission. The Petitioner, in its instant Tariff Petition under status of compliance of directives has submitted that it has identified 1,81,026 electricity connections lying disconnected and being shown in the data base as Not billed/stop billed. The arrear against these connections is Rs Crore in the record. UPCL has prepared an action plan to settle these cases in FY by Writing Off fictitious arrears and irrecoverable arrears and to collect the recoverable amount. Field officers have been directed to take action as per this action plan circulated vide letter No dated The Petitioner s submission in the prescribed Format-4 of Commercial Performance Monitoring Report pertaining to Not Billed (NB) and Stop Billed (SB) is being presented in the Table given below: Table 6.11: Status of NB & SB Cases Status As on 03/13 As on 03/14 As on As on 03/15 03/16 No. of NB/SB NB Cases SB As on 03/17 As on 12/ From the above Table, it is evident that the no. of NB/SB cases has decreased only by 5.82% in FY (upto ) w.r.t. the cases in FY , which indicates that the Petitioner has shown least interest in reducing these NB/SB cases. In this regard, the Commission had categorically directed the Petitioner to liquidate and finalise atleast 25% of such cases whereas, the 242 Uttarakhand Electricity Regulatory Commission

257 6. Review of Commercial Performance of UPCL trend shows no significant improvement which clearly indicates that the Petitioner has failed to comply with the directions of the Commission. On examining the progress made by the Petitioner in past years, it has been observed that the Petitioner has clearly failed to comply with the specific directions of the Commission for realising atleast 25% of the NB/SB cases. Therefore, taking a serious note on the continued non-compliance by the Petitioner with regard to non-liquidation and finalisation of NB/SB cases, the Commission directs the Petitioner to liquidate and finalise atleast 5% of the NB/SB cases in each quarter and submit quarterly report before the Commission. In absence of the same, action under the provisions of Act/Rules/Regulations may be initiated against the Petitioner Outstanding Arrears The Commission in its Tariff Order dated had directed the Petitioner to make sincere efforts in mobilizing its resources throughout the year for collection of Arrears under a structured receivable management programme besides taking corrective actions against the habitual defaulters. The Petitioner in its instant Tariff Petition under status of compliance of directives has submitted that division-wise Annual and Daily Revenue Collection Targets have been fixed for achieving 14.75% AT&C losses. given below:- The status of Outstanding Arrears furnished by the Petitioner in the prescribed Format- 5 is Table 6.12: Status of Outstanding Arrears Description As on 03/14 As on 03/15 As on 03/16 As on 03/17 As on 10/17 Arrear No. Amount Amount Amount Amount Amount No. No. No. No. (Rs. Lac) (Rs. Lac) (Rs. Lac) (Rs. Lac) (Rs. Lac) Arrear>=5 Lac =<Arrear<5 Lac Lac=<Arrear<1 Lac Lac=<Arrear< Lac 0.05 Lac=<Arrear< Lac Total Uttarakhand Electricity Regulatory Commission 243

258 Order on True-up for FY , APR for FY & ARR for FY From the above Table, it is evident that the Petitioner has not been able to reduce number of arrear cases and rather the same are increasing on year-on-year basis and has reached to an all time high of 2,27,957 in FY (upto ). The Commission is of the view that the Petitioner has been lackadaisical towards collection of arrears and lacks seriousness in laying down a planned programme/roadmap. This is a grave concern for the financial health of the Petitioner and may weed away the Petitioner s financial viability since 2.27 Lakh cases of arrears (which is around 11% of the total consumers of the Petitioner) have been pending as on with a staggering amount of Rs Crore pending recovery by the Petitioner which is about 16.95% of the Petitioner s approved Net ARR for FY , i.e. Rs Crore. The comparison of Outstanding Arrears furnished by the Petitioner in the above Table vis-avis Outstanding Arrears shown in the Commercial Diary, i.e. CS-4 is given below:- Table 6.13: Comparison of Outstanding Arrears (Rs. Crore) Description As per Commercial Performance Monitoring report (excluding Arrears of amount below Rs. 5,000) As per CS-4 report (including Arrears of amount below Rs. 5,000) As on As on As on As on From the above Table, it has been observed that the Petitioner has not made enough efforts in recovering its arrears in FY (upto ) due to which the total arrear to be realized as on as per CS-4 report is Rs Crore which is more than 35% of its approved Net ARR for FY Further, from the above Table, it is observed that total amount of arrears below Rs to be recovered by the Petitioner as on & were Rs Crore & Rs Crore respectively, which shows that the Petitioner is not only failing in collecting its high arrear amounts (Rs. 5,000 & above) but has also failed to collect the low arrear amounts (below Rs. 5000). Moreover, on examination, it has been observed that the Petitioner was able to liquidate/decrease its 16.68% arrear amounts in FY and only 9.83% in FY whereas, its performance has further, deteriorated in FY (upto ) as the amount of arrears instead of decreasing in FY (upto ) have actually increased by 28.44% which shows that the Petitioner has not taken enough measures for early recovery of the arrears. 244 Uttarakhand Electricity Regulatory Commission

259 6. Review of Commercial Performance of UPCL The Commission is of the view that the Petitioner has to understand the gravity of the situation and should abstain from its legacy practice of remaining callous about arrears throughout the year and waking up in the last quarter of the Fiscal Year. This by all standards in any commercial organization is an in-appropriate practice and inculcates un-professional work culture in the organisation especially for the young field officers who adapt the same and are misguided by the false belief in the wrong historical practice. Therefore, the Commission hereby directs the Petitioner to make sincere efforts in mobilizing its resources throughout the year for collection of Arrears under a structured receivable management programme besides taking corrective actions against the habitual defaulters Load Factor of KCC Consumers The Commission in its Tariff Order dated had directed the Petitioner that KCC consumers having less load factor should be closely monitored and average consumption pattern and abnormality in consumption pattern should be checked and duly analysed. The Commission also directs the Petitioner to check KCC consumers who are repeatedly exceeding their sanctioned/contracted demand and take corrective action in such cases. The Petitioner in its instant Tariff Petition under status of compliance of directives has submitted that monitoring of KCC consumers is being done on a regular basis at Key Consumer Cell. The load factor of the KCC consumers, as submitted by the Petitioner in the prescribed Format-6 of Commercial Performance Monitoring Report has been shown in Table given below: Table 6.14: Status of KCC Consumers Description As on 03/13 As on 03/14 As on 03/15 As on 03/16 As on 03/17 As on 12/17 Total KCC Consumers *Abnormal cases L.F<10% L.F>10% *Abnormal cases- Consumers exceeding sanctioned demand, Consumers having CT, PT by-pass Tamper Report, unbalanced Tamper Report & any other Tamper Report. From the above Table, it can be observed that as on , number of consumers having load factor less than 10% were 9822, which is around 43.17% of the total number of KCC consumers. To this the Commission is of the view that the consumers having load factor less than 10% are in Uttarakhand Electricity Regulatory Commission 245

260 Order on True-up for FY , APR for FY & ARR for FY alarmingly high numbers. Moreover, 3518 consumers which is 15.46% of the total number of KCC consumers are falling under abnormal cases out of which majority comprises of consumers who have exceeded their sanctioned/contracted demand. The Commission is of the view that the Petitioner has total billed consumer base of about Lakh consumers in the State, out of which 22,751 consumers (Industrial category consumers having load 5 kw & above and Commercial category consumers having load 10 kw & above) as on , have been identified as Key Consumers (KCC). These key consumers which are only about 1% of the total consumer base of the Petitioner contribute nearly 70% of its total annual revenues. Therefore, the Commission directs the Petitioner that KCC consumers having less load factor should be closely monitored and average consumption pattern and abnormality in consumption pattern should be checked and duly analysed. The Commission also directs the Petitioner to check KCC consumers who are repeatedly exceeding their sanctioned/contracted demand and take corrective action in such cases Status of Revenue realisation per unit sold The Commission in its Tariff Order dated had directed the Petitioner to ensure that the data furnished in Commercial Performance Monitoring report should match with its Commercial Diary, i.e. CS-4 data and the Petitioner should ensure that in all future submissions of Commercial Performance Monitoring reports the Average Realisation Rate should be calculated on the basis of recoveries on account of Realisation Against energy dues only and the realisation shown should exclude recoveries from duties/cess, etc. Further, the realisation against energy dues should clearly bifurcate realisation against current dues & realisation against past dues. The Petitioner in its instant Tariff Petition under status of compliance of directives has submitted that data in Commercial Performance Monitoring report is being submitted as per directions of the Commission. However, on examination it has been observed that despite Commission s specific direction that Average Realisation Rate should be calculated on the basis of recoveries on account of realisation against energy dues only and the realisation shown should exclude recoveries from duties/cess etc. and realisation against energy dues should clearly bifurcate realisation against current dues & realisation against past dues, the Petitioner is showing realisation 246 Uttarakhand Electricity Regulatory Commission

261 6. Review of Commercial Performance of UPCL against arrears and duties/cess in its revenue realisation and calculating realisation per unit energy sold accordingly. The status of Revenue Realisation per unit sold furnished by the Petitioner in the prescribed Format-7 is given below:- Year Table 6.15: Status of Revenue Realisation per unit sold Sold Energy (MU) Total Revenue Realization (Rs. Lac)* Average Realization Rate (Rs./unit) Average Power Purchase Cost per Unit sold (Rs./unit) Approved /Truedup Average Cost of Supply (Rs/Unit) FY FY FY FY FY FY (October, 2017) *Including Duties/Cess/DPS & other recoveries On examination, it has also been observed that in FY , the total Revenue Realization, i.e. Rs. 5,55,300 Lakh submitted by the Petitioner in Format-7 of Commercial Performance Monitoring reports is actually inclusive of arrears of Rs. 43, Lakh. The Commission again directs the Petitioner to ensure that the data furnished in Commercial Performance Monitoring report should match with its Commercial Diary, i.e. CS-4 data and the Petitioner should ensure that in all future submissions of Commercial Performance Monitoring reports the Average Realisation Rate should be calculated on the basis of recoveries on account of Realisation Against energy dues only and the realisation shown should exclude recoveries from duties/cess, etc. Further, the realisation against energy dues should clearly bifurcate realisation against current dues & realisation against past dues, failing which appropriate action shall be initiated against the Petitioner/Licensee Billing and Bill Collection System Taking cognizance of various consumer complaints received by the Commission in writing and also during public hearing, the Commission earlier had directed the Petitioner to improve its existing Bill Collection System. Further, the Commission vide its Order dated had imposed a consolidated penalty of Rs. 1,00,000 and recurring additional penalty of Rs. 2,500 per day Uttarakhand Electricity Regulatory Commission 247

262 Order on True-up for FY , APR for FY & ARR for FY on UPCL for non-compliance of its directions with respect to bill collection system. However, not much has improved except for new Bill Collection Centres constructed under R-APDRP schemes. The Commission in its Order dated in the matter of Petitioner s request on waiver and refund of penalty imposed by the Commission vide its Order dated , had held as under: as a last attempt to induce Petitioner to work in right earnest for meeting the requirement of Order dated , the recovery of penalty due after is kept in abeyance till final disposal of this Petition. A view on waiver or recovery would be taken after assessing performance of the Petitioner on following: (a) actions taken to augment and upgrade its prevailing Bill Collection System in order to make it consistent with the Commission s Order dated within six months from the date of issuance of this Order. Bimonthly report of action taken to be furnished to the Commission. (b) actions taken to extend the bill collection facility/services integrating all the Common Service Centers (CSC) situated across the State within six months from the date of issuance of this Order and submit monthly progress report with number of CSCs integrated during the month latest by 15 th day of next month (c) submit comprehensive Action Plan latest by including distinct focus/plan for Bill Collection System in rural and urban areas of the State in accordance with the orders/direction by the Commission in this regard for effective implementation of the direction issued at para (a) above. Thereafter, the Commission vide its Tariff Order dated had directed the Petitioner to comply with the directions issued in the Commission s Order dated , failing which appropriate action under the Act/Rules/Regulations would be taken against the Petitioner for the continued non-compliance of the directions of the Commission. Further, the Commission had also directed the Petitioner to expedite integrating Common Service Centres (CSCs) available in State with its billing system under the agreement executed between UPCL & Common Service Centre E- Governance Services India Ltd., New Delhi. However, in the absence of compliance of the aforesaid directions, the Commission issued a show cause notice and, thereafter, the Commission in its Order dated had observed that the Petitioner s response to the issue was inadequate and routine and that the Petitioner even after an elapse of more than 11 years had failed to implement the directions of the Commission issued in the matter of Bill Collection System. Further, the Commission in its aforesaid Order had also 248 Uttarakhand Electricity Regulatory Commission

263 6. Review of Commercial Performance of UPCL observed that even after a passage of almost a year since Commission s Order dated , the total number of CSCs integrated with UPCL s system were only 909 which were not even 50% of the total 2000 number of CSCs situated across the State. Accordingly, the Commission in its Order dated had directed the Petitioner to deposit the outstanding penalty amount from upto and continue paying daily penalty of Rs. 2500/- within 30 days of close of the each calendar month till such time each of the directions as given in the Order dated & of the Commission in the matter of Bill Collection System has been fully complied with. In compliance to the same, the Petitioner vide its letter No dated deposited an amount of Rs. 53,30,000/- against the penalty amount for the period from to The Petitioner, in its instant Tariff Petition, under status of compliance of directives has submitted that the amount of penalty paid by it upto is Rs Crore and on its request, the Commission vide letter no dated withheld the penalty for next six months subject to completion of bill collection facilities and integration of all functional CSCs in the State by the said period. Further, the Petitioner has submitted that tender for developing facilities at bill collection centres have been invited and the work is expected to get completed within 6 months from the date of the LOA. In this regard, the Commission is of the view that the Petitioner should be cautious in ensuring timely compliance of the directions of the Commission as the relaxation given to the Petitioner against deposition of penalty amount is subjective and any further delay/laxity on account of the Petitioner in this regard may result in reinstating of the penalty followed by stern action against the Petitioner. Actively monitoring the matter, the Commission through its various letters sought the progress of creation of new bill collection centres and integration of CSCs situated across the State with UPCL s system. Meetings with regard to integration of CSCs with the Petitioner and Additional Secretary (IT), GoU were held in the Commission s office on and , wherein several pertinent issues were raised and resolved. The Commission during the aforesaid meeting also directed the Petitioner to make widespread publicity/ Advertisement/workshop of the bill collection facilities & list of Villages Level Entrepreneurs (VLEs) under CSC operating in the vicinity of various electricity Sub-division/division officers of Uttarakhand Electricity Regulatory Commission 249

264 Order on True-up for FY , APR for FY & ARR for FY UPCL across the State. The Commission hereby directs the Petitioner to complete the works of bill collection facilities and integration of all CSCs in the State latest by , in absence of which, stern action under the provisions of the Act/Rules/Regulations would be initiated against it. Moreover, the Commission directs the Petitioner to make widespread publicity/ Advertisement/workshop of the bill collection facilities & list of VLEs operating in the vicinity of various electricity Sub-division/division officers of UPCL across the State. 6.3 Energy Audit The Commission in its earlier Tariff Orders had been reiterating its direction for conducting the energy audit of 11 kv feeders and submit the audit report before the Commission. Moreover, the Commission in its Tariff Order dated had directed the Petitioner to provide/maintain the system metering at each feeder, T points, DTs and consumers in its distribution network so that effective energy auditing can be done. The Commission is of the view that proper energy accounting can throw-up several actionable issues which, when addressed, shall result in marked reduction in distribution losses in the Petitioner s network. The Petitioner in its instant Tariff Petition under status of compliance of directives has submitted that all the metering points at 33 kv level has been completed in all directions except Srinagar, Kotdwar, Rudraprayag, Gopeshwar and Narayanbagar divisions. Further, the Petitioner has submitted that meters on DTs in 31 Towns of R-APDRP project area have already been installed and 952 nos. of meters are proposed to be installed at existing DTs in towns other than R-APDRP towns under IPDS Scheme for which BOQ have been finalised. Guaranteed Technical Particulars (GTP) approval and material mobilization is under progress. On this, the Commission is of the view that in order to have an effective energy accounting & auditing system, metering at each feeder, T points, DTs and consumers in a distribution network are mandatory. Therefore, it is important to bring the entire distribution network under the ambit of robust metering system. Therefore, the Petitioner is directed to provide/maintain the metering system at each feeder, T points, DTs and consumers in its distribution network for effective energy auditing and accounting. The Petitioner is directed to submit compliance report in this regard by , failing which appropriate action may be taken against the Petitioner in accordance with the Act/Rules/Regulations. 250 Uttarakhand Electricity Regulatory Commission

265 Year Input Energy (MU) Energy Sold (MU) Assessment (Rs Lac) Collection (Rs Lac) Distribution Loss (%) Approved Distribution Loss (%) Collection Efficiency (%) Actual AT&C Loss (%) Computed AT&C losses (Based on Approved Norms) (%) 6. Review of Commercial Performance of UPCL 6.4 AT&C Losses From the above comprehensive analysis of metering, billing & collection activities of the Petitioner, it is evident that still a lot of improvement, especially in the areas of provisional billing, replacement of Mechanical Meters, replacement of Defective Meters and Outstanding Arrears is required. The AT&C losses of the Petitioner as on as per Commercial Performance Monitoring report are 29.30%. The reason for such high AT&C loss is primarily high distribution losses and low collection efficiency till The Commission in its previous Orders had also categorically directed the Petitioner to ensure completion of the R-APDRP works within the specified time lines and also to achieve the specified target for reduction of AT&C losses to the extent of 15% in the selected towns within the stipulated timeframe for availing the benefits of conversion of loan into grant. In case, the Petitioner fails to do so, the servicing cost/cost of the loan in whole or part may not be allowed as pass through in the ARR. Similar directions were issued by the Commission in its Order dated pertaining to Capital Investment for the Integrated Power Development Scheme (IPDS) Project, Ministry of Power (MoP), Government of India (GoI). Therefore, the Commission is of the view that with the above linkage of cost of funding with the AT&C loss achievement, such programs can be construed as a double edged sword, which might cause adverse financial impact in case the Petitioner fails to achieve the required reduction in AT&C losses of the target area. The status of AT&C losses of UPCL for the last six financial years furnished by the Petitioner in the prescribed Format-8 is given below: Table 6.16: Status of AT&C Losses of UPCL FY FY FY FY FY FY FY (upto Oct,17) Uttarakhand Electricity Regulatory Commission 251

266 Order on True-up for FY , APR for FY & ARR for FY It is evident from the above Table, that Petitioner s distribution loss levels are higher than the approved levels. Further, the actual AT&C losses for the above period are higher than computed AT&C losses on the basis of approved level of distribution losses & collection efficiency in respective Tariff Orders except in case of FY , Fy where substantial amount of Government dues were recovered by the Petitioner. From the above Table, it is observed that the collection efficiency in FY was %, however, on examination of the collection data vis-a-vis CS-4 data, it has been observed that the collection of Rs. 5,55,300 Lakh as indicated in the above Table is inclusive of arrears of Rs. 43, Lakh. Whereas, for calculation of AT&C losses, the Realisation against Current Year Assessment should only be considered and should be exclusive of arrears of previous years. It is because of this superficial collection efficiency of % as indicated in the above Table the AT&C losses of the Petitioner are coming to 14.92% in FY The Commission is of the view that the major component of AT&C losses are the distribution losses which basically comprises of Technical and Commercial losses. Further, the Commission is of the view that since Technical & Commercial losses are more in LT network in comparison to HT network, hence, it is apparent that in order to substantially reduce AT&C losses, the Petitioner needs to strengthen its LT network. During the field visits of the officers of the Commission in EDD- Pauri & EDD- Kotdwar, it has come to the notice that some of the villages in rural areas of the hill district are being supplied power through GI wire instead of ACSR conductors which are generally being used in the distribution network. In this regard, it is observed that such installations not only contribute in increasing line losses but at the same time are hazardous towards safety of the men and material. Moreover, the dilapidated condition of the GI wires of the rural netwoks and improper maintenance of protection system at 33/11 kv sub-station, leads to a situation of grave concern. Therefore, the Petitioner is directed to indentify such feeders/spans where the power distribution network is on GI wire and replace them with the ACSR or bettor conductors latest by and submit a compliance report under affidavit on the same. Moreover, the Petitioner is also directed to prepare and submit an action plan for checking and refurbishment of protection systems at various 33/11 kv sub-stations latest by Uttarakhand Electricity Regulatory Commission

267 6. Review of Commercial Performance of UPCL In the following paragraphs the trend of losses in other category of consumers (excluding HT consumers) and HT consumption in the State is being discussed. The trend of losses in other category of consumers (excluding HT consumers) is shown in the Chart given below: Chart 7: Distribution Loss in consumer category other than HT consumers From the above chart, it is observed that the losses for consumers other than HT consumers have decreased in FY which shows that the Petitioner has put in some efforts in reducing Distribution losses for other categories, however, still the losses for consumers other than HT consumers are almost twice the approved distribution losses which is unacceptable. Therefore, concerted efforts are required by the Petitioner for reducing the distribution losses for the consumers other than HT consumers also. In light of the above, it should be the foremost endeavour of the licensee to reduce the distribution losses at LT level within the acceptable limits. The Petitioner should take up the following works at the earliest for reducing the AT&C losses: 1. The Petitioner must replace all mechanical meters in a time-bound manner in all the divisions on a war footing. It is a known fact that the cost incurred in purchasing the electronic meter shall be recovered within no time as there shall be substantial increase in the revenue of the Petitioner. Uttarakhand Electricity Regulatory Commission 253

268 Order on True-up for FY , APR for FY & ARR for FY The Petitioner must ensure that no ghost/fictitious/non-existent consumers existing in its billing database. 3. The Petitioner must conduct planned regular actions for early recovery of outstanding arrears. 4. The Petitioner must analyse KCC consumers having load factor less than 10% on a regular basis and lay down mechanism for checking inspection/tamper analysis/condition monitoring of MRI reports and metering equipments. 5. The Petitioner must ensure that all the meters of the consumers are read and their bills prepared and distributed within time. The Petitioner shall also ensure that no provisional bills namely NA/NR are issued for more than two billing cycles in accordance with the provision of Electricity Supply Code Regulation, Divisional head must be held accountable for not controlling provisional billings. The Petitioner should make efforts to always issue computerized bills to its consumers requiring no human intervention. 6. The Petitioner should prepare a time bound plan/programme to replace all the bare overhead conductors with insulated aerial bunched conductors (AB conductor) in theft prone areas alongwith effective monitoring mechanism for its implementation. 7. The Petitioner should also prepare a time bound plan/programme for segregation of rural feeders into Agriculture and Non-Agriculture load basis which would be an effective measure for segregation of theft/pilferage of electricity in Agriculture and Non- Agricultural usage in villages/rural areas. 8. The Petitioner should make extra efforts to get the arrears realised from the defaulting Government departments. The Commission is of the view that the Petitioner should promote and implement the pre-paid metering so that revenue recovery can be enhanced and problems related to accumulation of arrears is resolved. 9. Replace the GI wire based power distribution system with suitable conductor so that technical losses in the system can be reduced and the same would also help in improving the quality of power supply to the consumers. 254 Uttarakhand Electricity Regulatory Commission

269 6. Review of Commercial Performance of UPCL 10. The Petitioner have to ensure that meters are installed at each point of energy accounting and are kept in proper working condition. 11. The Petitioner should also develop GIS based consumer indexing database in areas other than the areas covered under R-APDRP/IPDS, which shall be helpful in providing prompt services to consumer and shall be helpful in planning the new connections, transformer augmentation, phase change, localising fault, supply restoration and other services to consumers necessarily provided by any distribution utility having consumer services orientation as its vision & mission. 6.5 Commission s Analysis and Directions on Financial Performance The Commission has been monitoring & reviewing the performance of the Petitioner based on the information/reports submitted by it. The Commission in its Tariff Order dated carried out the analysis of financial performance of UPCL based on its statement of accounts in certain key areas. In line with the same methodology, the key performance ratios after taking into account the financial performance of UPCL in FY based on the audited financial statements are detailed below Liquidity Ratio Liquidity ratios analyzes the ability of a company to pay off both its current liabilities as they become due as well as their long-term liabilities as they become current. In other words, these ratios show the cash levels of a company and the ability to turn other assets into cash to pay off liabilities and other current obligations. Liquidity is not only a measure of how much cash a business has. It is also a measure of how easy it will be for the company to raise enough cash or convert assets into cash. Assets like accounts receivable, trading securities, and inventory are relatively easy for many companies to convert into cash in the short term. Thus, all of these assets go into the liquidity calculation of a company Quick Ratio or Acid Test Ratio It is the ratio of (current asset inventories) and current liabilities. The quick ratio or acid test ratio is a liquidity ratio that measures the ability of a company to pay its current liabilities when they become due with only quick assets. Quick assets are current assets that can be converted to Uttarakhand Electricity Regulatory Commission 255

270 Order on True-up for FY , APR for FY & ARR for FY cash within 90 days or in the short-term. Cash, cash equivalents, short-term investments or marketable securities and current accounts receivable are considered quick assets excluding inventories. The quick ratio is often called the acid test ratio. The acid test shows how well a company can quickly convert its assets into cash in order to pay off its current liabilities. It also shows the level of quick assets to current liabilities. Higher quick ratios are more favourable for companies because it shows that there are more quick assets than current liabilities. A company with a quick ratio of 1 indicates that quick assets equals current liabilities. This also shows that the company could pay off its current liabilities without selling any long-term assets. Chart 8: UPCL Quick Ratio from FY to FY As can be seen from above graph, UPCL s Quick Ratio was almost 1 in the FY & FY and thereafter, shows a downward linear trend in the ensuing years, thus, showing the Corporation s inability to maintain its liquidity over a period of time, the primary reasons for the same could be its inability to realise its dues from the consumers and in turn discharging the current liabilities which are also increasing. Further, based on the financial performance of UPCL in FY , the situation has further deteriorated and the ratio has declined from 0.35 in FY to 0.32 in FY Uttarakhand Electricity Regulatory Commission

271 6. Review of Commercial Performance of UPCL Current Ratio It is the ratio of current assets and current liabilities. The current ratio is a liquidity and efficiency ratio that measures a firm's ability to pay off its short-term liabilities with its current assets. The current ratio is an important measure of liquidity because short-term liabilities are due within the next year, thus, implying that a company has a limited amount of time in order to raise the funds to pay for these liabilities. Current assets like cash, cash equivalents, marketable securities and inventories can easily be converted into cash in the short term. This means that companies with larger amounts of current assets will more easily be able to pay off current liabilities when they become due without having to sell off long-term, revenue generating assets. A higher current ratio is always more favourable than a lower current ratio because it shows the company can more easily discharge the current liabilities. A Current Ratio of less than 1 indicates a high working capital leveraging and highly risky position since it indicates that the Current Liabilities are not fully backed up by the Current Assets and in the event of default, the Company may resort to selling its Assets to meet out its debts. Chart 9: UPCL Current Ratio from FY to FY As can be seen from the above graph, apart from initial few years upto FY , UPCL is not able to maintain its current assets in proportion to its current liabilities, thus, showing a highly leveraged position on the part of the Corporation. The current ratio mainly indicates that how much times the short term liabilities are backed by the current assets, in case of UPCL as can be seen from Uttarakhand Electricity Regulatory Commission 257

272 Order on True-up for FY , APR for FY & ARR for FY above graph, in the past five years UPCL is not able to maintain the said ratio to even as low as 0.5 which is way low than the industry standard of 1. This indicates that for discharging its current liabilities, UPCL will either have to resort to liquidating its long term assets or borrow additional working capital loans. This also is an indicator that on one side UPCL has failed to recover its current and past dues from the consumers efficiently and on the flip side the current liabilities have been used to finance the long term assets of UPCL. The Commission has been pointing out towards this issue in its previous Tariff Orders that assets are being financed through current liabilities. UPCL has been claiming every year that internal resources are being used to finance certain asset additions. The internal resources in UPCL s case are nothing but funds which should have been used to discharge its current liabilities like Govt. Dues (Royalty, duties, PDF etc), instead have been utilised in creation of long term assets. In this regard, the Petitioner is directed to carry out the age-wise analysis of its current liabilities outstanding as on and based on the ageing analysis determine how much of the same would be required to be discharged and how much excess provision exists in the same so that the same may be reversed and submit the same to the Commission within 3 months from the date of Order Operating Cash Flow Ratio It is the ratio of cash flow from operation and the current liabilities. It is a measure of how well current liabilities are covered by the cash flow generated from a company's operations. The operating cash flow ratio can gauge a company's liquidity in the short term. Using cash flow as opposed to income is considered a cleaner, or more accurate measure to analyse the financial health of a company & also its operations. The operating cash flow ratio is a measure of the number of times a company can pay off current debts with cash generated in the same time period. A higher number means a company can cover its current debts more times, which is a good thing. Companies with a high or increasing operating cash flow ratio are in good financial health. Those that are struggling to cover liabilities may be in trouble, at least in the short term. 258 Uttarakhand Electricity Regulatory Commission

273 6. Review of Commercial Performance of UPCL Chart 10: UPCL Operating Cash Flow Ratio from FY to FY As can be seen from the above graph, cash flow from operating activities is hardly able to meet its current liabilities. UPCL is struggling to cover its current liabilities, at least in the short term. In FY and FY , cash flow operating ratio is negative due to huge losses on account of high distribution losses and poor collection efficicency resulting into negative Cash flow from Operating Activities. Further, in FY this ratio has dipped down to 0.02 from 0.08 in FY In all the years the ratio is less than 1 which indicates that the company has generated less cash in the period than it needed to pay off its short-term liabilities. This may signal a need for more capital Solvency Ratio Solvency ratios, also called leverage ratios, measures a company's ability to sustain operations indefinitely by comparing debt levels with equity, assets, and earnings. In other words, solvency ratios identify going concern issues and a firm's ability to pay its bills in the long term. Solvency ratios focusses more on the long-term sustainability of a company instead of the current liability payments. Better solvency ratios indicate a more creditworthy and financially sound company in the long-term. Uttarakhand Electricity Regulatory Commission 259

274 Order on True-up for FY , APR for FY & ARR for FY Interest Coverage Ratio It is a ratio of EBIT (operating Income) during a given period and the amount a company spends in interest payment on its debts during the same period. The interest coverage ratio is used to determine how easily a company can pay interest on outstanding debt. Essentially, the interest coverage ratio measures how many times over a company could pay its current interest payment with its available earnings. In other words, it measures the margin of safety a company has for paying interest during a given period, which a company needs in order to survive future (and perhaps unforeseeable) financial hardship should it arise. A company s ability to meet its interest obligations is an aspect of a company s solvency, and is, thus, a very important factor in the return for shareholders. The lower a company s interest coverage ratio is, the more its debt expenses burden on the company. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. 1.5 is generally considered to be a bare minimum acceptable ratio for a company and a tipping point below which lenders will likely refuse to lend the company more money, as the company s risk for default is too high. Moreover, an interest coverage ratio below 1 indicates the company is not generating sufficient revenues to service its interest expenses. If a company s ratio is below 1, it will likely need to spend some of its cash reserves in order to meet the difference or borrow more, which will be difficult for reasons stated above. Otherwise, even if earnings are low for a single month, the company risks falling into bankruptcy. Generally, an interest coverage ratio of 2.5 is often considered to be a warning sign, indicating that the company should be careful not to dip further. Chart 11: UPCL Interest Coverage Ratio from FY to FY Uttarakhand Electricity Regulatory Commission

275 6. Review of Commercial Performance of UPCL As can be seen from the above graph, UPCL was suffering losses in most of the financial years and was hardly able to meet its interest liability. The standard ratio is 1.5 times and it can be seen from the above graph, that only in FY UPCL earned sufficient profit to maintain the ratio above the standard ratio Profitability Ratio Profitability ratios compares income statement accounts to show a company's ability to generate profits from its operations. Profitability ratios focus on a company's return on investment in inventory and other assets. These ratios basically show how well companies can achieve profits from their operations. Profitability is also important to the concept of solvency and going concern Return on Total Assets It is a ratio of EBIT during a given period and average Fixed Assets. The ratio is considered to be an indicator of how effectively a company is using its assets to generate earnings before contractual/statutory obligations are paid. The greater a company's earnings in proportion to its assets (and the greater the coefficient from this calculation), the more effectively that company is said to be using its assets. This ratio allows to see the relationship between organisation s resources and its income, and it can provide a point of comparison to determine if an organization is using its assets more or less effectively than it had done previously. Chart 12: UPCL Return on Assets Ratio from FY to FY Uttarakhand Electricity Regulatory Commission 261

276 Order on True-up for FY , APR for FY & ARR for FY As can be seen from the above graph, UPCL earnings through its operations is not in parity with the investment made in building up its fixed assets over a period of time Gross Margin Ratio Gross margin is the difference of average sales revenue and the average direct cost, ie. Power purchase cost in case of the Petitioner. Accordingly, gross margin ratio is the ratio of gross margin and the operating expenses of the company. Higher gross margin ratios are more favorable indicating that the company will have more money to pay its operating expenses. Chart 13: UPCL Gross Margin Ratio from FY to FY As can be seen from above graph, UPCL is having a positive gross margin ratio except for FY This indicates that the company is able to sell power at a rate higher than the procurement cost of the same, however, the overall ratio is not on the much higher side, with a maximum going upto 0.51 in FY , indicating that the company would be left with meagre funds to meet its operational cost other than power procurement expense, and may land up in facing losses over a period of time Operating or Activity Ratio Repair & Maintenance to Net Fixed Assets The maintenance expense to fixed assets ratio allows to understand the age or condition of the company's equipment. An increase to a company's repairs and maintenance expense to fixed 262 Uttarakhand Electricity Regulatory Commission

277 6. Review of Commercial Performance of UPCL assets ratio over time can signal ageing equipment or assets that are being pushed to their operating limits. Chart 14: UPCL R&M to Net Fixed Asset Ratio from FY to FY It can be seen from the above graph, that UPCL is incurring R&M expenses on an average of 3% of the Net Fixed Assets. UPCL appears to be performing fairly on this ratio aspect merely on account of the reason that it has been continuously receiving funds (grants) from GOI under various schemes of MOP, GOI namely APDRP, RAPDRP, IPDS etc. which besides covering development of new substaions/lines also include funding on augmentation/strengthening of old/existing assets, thus, reducing the requirements of Repair & Maintenance of old assets, as the same are either replaced by new assets or are augmented & strengthened Repair & Maintenance to Inventory Ratio This ratio depicts the relation between the R&M expenses to Net Inventory maintained by the Corporation. In case of UPCL, being an Electricity Distribution Company, the inventory is not converted into sales as part of the operations carried out by the entity. Further most of the project works are getting done by the Corporation on turn-key basis, wherein the material and labour is supplied by the Contractor, thus denying the need for maintenance of inventory for said purpose. The maintenance of inventory would be required by the Corporation for the purposes of meeting its requirement of Repair & Maintenance works as may be carried out from time to time during the course of its operation. In view of the above, the calculation of inventory turnover ratio would not Uttarakhand Electricity Regulatory Commission 263

278 Order on True-up for FY , APR for FY & ARR for FY hold good for the discoms like UPCL wherein the inventory is being maintained not for the purposes of sale, but to meet out the expenses arising in the course of operation. Hence, a customized ratio has been worked upon to analyse the relation between the inventories maintained by the entity and how much of the same is being actually used during the year for meeting the R&M expenses while carrying out the operations of the entity. The formulae for the same is as follows: R&M Expenses/Average Inventory. Chart 15: UPCL R&M to Inventory Ratio Trend from FY to FY As can be seen from above graph UPCL is having an average inventory ratio between 0.30 to 0.40, which indicates that almost 40% of the average inventory maintained by the company is being consumed for meeting out the R&M expenses during the year which also suggests that inventory being maintained by UPCL is at a very high level. The capital inventory of Rs Crore as on is very high considering the net additions to the GFA of Rs Crore during FY and R&M expenses of Rs Crore during the year. The Commission finds inventory levels maintained by UPCL as very high. As can be seen from the above graph, during FY & FY the aforesaid ratio has shown an absurd variation. This is because of the reason that in both FY and FY , UPCL has shown nil inventory under Current Assets in its audited financial statements, rather it had shown the entire amount under the Fixed Assets as inventory for Capital Works. In this regard, UPCL has given disclosure in its audited financial statements for showing the entire inventory under Fixed Assets as reproduced below: 264 Uttarakhand Electricity Regulatory Commission

279 6. Review of Commercial Performance of UPCL Based on the consumption pattern of inventory comprising of stores and spares in the past, company is of the view that substantial portion of such inventory shall be consumed in future for construction/erection of the capital assets. Since the identification/determination of inventory to be consumed for other than capital purpose is not possible at this stage, the whole inventory of stores and spares has been classified as "Inventory for Capital Works. The company has not identified any obsolete, slow moving and dead stock except for those lying in the Centralised Stores Division as all the items in the store are useable in spite of the fact that they are very old. It appears that inventory levels have been so maintained so as to consume them in future for construction/erection of the capital assets. For future consumption maintaining such inventory level is a risky proposition as not only funds are blocked in purchasing the inventory but also the inventories carry holding costs. There is also a risk of loss/damages and obsolescence in technology if the inventories remain in stock for a long period of time as in power sector technologies are evolving with time. Considering this as a prima-facie lapse on the part of the Petitioner with regard to inventory management, the Petitioner is directed to submit the following details within one month of the date of Order failing which appropriate action will be initiated under the Act: a) List of inventory as on b) The accounting policies adopted in measuring inventories, including the cost formula used; c) Basis on which inventories issued: FIFO/LIFO/etc. and reason for choosing the same. d) Whether any inventory classification, such as ABC analysis has been done? If yes the same may be submitted and if no, reason for the same may be furnished? e) Whether the inventories are verified physically? If yes, the periodicity of the same, alongwith the report of last physical verification. If physical verification is not being conducted reasons for the same? Efficiency Ratio The efficiency ratio is typically used to analyze how well a company uses its assets and liabilities internally. An efficiency ratio can calculate the turnover of receivables, the repayment of liabilities, the quantity and usage of equity, and the general use of inventory and machinery. Uttarakhand Electricity Regulatory Commission 265

280 Order on True-up for FY , APR for FY & ARR for FY Average Collection Period Number of days of receivable represents collection period or age of receivables for distribution utilities. This measures effectiveness of a distribution utilities credit and collection efforts in allowing credit to customers, as well as its ability to collect cash from them. This comparison is used to evaluate how long customers are taking to pay a company. A low figure is considered best, since it means that a business is locking up less of its funds in accounts receivable, and so can use the funds for other purposes. Also, when receivables remain unpaid for a reduced period of time, there is less risk of payment default by customers. It is calculated based on the following formulae: Average Collection Period: 365x(Average account receivables Revenue from sale of power). Chart 16: UPCL Number of days of Receivable from FY to FY Although, the collection period of receivables of UPCL shows a trend of improvement, it has come down from 520 days in FY to 121 days in FY , yet it is moderately high as compared to the national average of receivables in FY 2013 of 117 days. The collection period of 121 days reflects that UPCL takes almost 4 months to collect its dues. This is an area of concern and needs immediate and corrective action. There are other utilities in the country which have a collection period of less than 60 days. The Petitioner is directed to submit within 3 months, an action plan to improve its collection period. 266 Uttarakhand Electricity Regulatory Commission

281 6. Review of Commercial Performance of UPCL Collection Efficiency Ratio The Collection efficiency ratio represents the efficiency and effectiveness of the dues recovery processes of the entity on periodic basis. With respect to power distribution/retail sector, a higher ratio represents that there are well established procedure for recovery mechanism and the sales of the company are being channelled through metered connections. On the contrary, a lower ratio may represent a very lenient approach of the Corporation in recovering its due from the consumers and lack of stringent processes to deal with the defaulting consumers. The Commission in its MYT Order dated , while approving the Business Plan of UPCL for second control period, has approved the collection efficiency for FY as 98.75%. In the present case, the Commission has calculated the Collection Efficiency ratio of UPCL for FY (Apr 17 to Nov 17) under the four broad Tariff categories, viz. Domestic Consumers, Non-Domestic Consumers, Industrial Consumers and Govt. Utilities, based on the CS-4 report submitted by UPCL. The Collection Efficiency ratio has been calculated based on the following formulae = Realisation of (Current Assessment+Arrears) Current Assessment Chart 17: UPCL Collection Efficiency for FY (April 17 to November 17) As can be seen from the above graph, compared to overall Collection Efficiency approved by the Commission for FY of 98.75%, UPCL has not been able to meet the same in any of the months in FY (April 17 to November 17). Further as can be seen from above, the rising Uttarakhand Electricity Regulatory Commission 267

282 Order on True-up for FY , APR for FY & ARR for FY graphs on monthly basis clearly indicates that during the initial months of the year the collection efficiency ranges between 50% to 60%, which is gradually increasing towards the later parts of the year. Moreover, as far as collection from Govt. Utilities is concerned, the same too lower in the initial months and going upto maximum of 40% in the month of November of the current financial year. This trend clearly shows that the organization will be facing financial crunches during the initial months due to lack of adequate collection, and may have to resort to outside borrowings to meet the cost of operations. This in turn will lead to imposition of additional financial burden on the organization in the form of interest cost and ultimately the effect of inefficiency would have to be borne by the consumers. If proper measures to ensure the timely collection of revenues from the consumers is taken right from the beginning and also timely action against the defaulters are taken then a discipline in collections could have been maintained and the required funds to meet the operational needs of the organization would be readily available in the form of revenue from sales at no extra cost. It has been observed based on the Petitions submitted by the UPCL and also on the basis of audited financial statements of various years, that UPCL has been resorting to over draft (OD) funding at high rate of interest to meet its operation cost which could surely be avoided if a proper discipline in collection of the assessed revenue is maintained on periodic basis. In this regard, the Commission directs UPCL to submit a plan to demonstrate as to how it will work in the direction of improving its actual collection so that the gap between the actual collection efficiency and the collection efficiency approved by the Commission may be brought to minimum Conclusion After analyzing the data related to the Petitioner s Commercial Performance, it is concluded that the Petitioner has to take immediate action in eliminating Ghost consumers, Provisional billing cases (NA/NR/IDF), replacing mechanical meters which are adversely inflicting upon the Petitioner s commercial & financial viability. The performance improvement can be done by judiciously allocating the responsibilities in field as well as at Corporate level. Moreover, the Petitioner should understand the significance of Commercial Performance Monitoring Reporting mechanism and should bring sincerity in its 268 Uttarakhand Electricity Regulatory Commission

283 6. Review of Commercial Performance of UPCL approach towards it. Further, a sense of belongingness/ownership has to be inculcated in every employee of the Petitioner s Organisation. Further, it is imperative to highlight that the Commercial Performance Reporting mechanism not only brings transparency in the system but also is an eye-opener for the Petitioner for taking timely corrective actions. Therefore, authenticity of reports is of paramount importance. The Petitioner is required to strengthen its Commercial Wing so that timely authentic reports are furnished to the Commission and it shall also help in prompt dissemination of information within the organization which shall be beneficial for the Petitioner as well as for consumers of the State. Considering the business spread of the Petitioner among its constituent divisions, the Commission is of the view that performance monitoring of the Petitioner should be done at its each Distribution Division levels. For this purpose, it is imperative that Division-wise target setting on each parameter should be provided by the Petitioner in the first month of the Fiscal Year itself, so that the whole Technical & Commercial monitoring process becomes meaningful with conclusive inference on quantitative improvement on month on month basis. Uttarakhand Electricity Regulatory Commission 269

284 7. Commission s Directives The Commission in its previous Orders had issued a number of specific directions to the Petitioner with an objective of attaining operational efficiency, efficient manpower deployment and streamlining the flow of information. These objectives would be beneficial not only for the sector but also for the Petitioner s company, both in terms of short and long term perspective. These directions aim at creating a conducive, competitive and healthy environment for the Petitioner to provide good quality of electricity supply and service to the consumers of Uttarakhand at optimum and affordable costs. This Chapter deals with the compliance status and the Commission s views thereon on the directives issued vide Multi Year Tariff Order for FY dated April 5, 2016, APR Order for FY dated March 29, 2017 as well as the summary of new directions (given in preceding Chapters of this Order) for compliance and implementation by the Petitioner. 7.1 Compliance to the Directives Issued in Tariff Order for FY dated March 29, Performance Report The Commission directed the Petitioner that any wrong reporting/anomalies under affidavit in its submissions would not be accepted and repetition of such errors may result in action against the Petitioner under the provisions of Act/Rules/Regulations. The Commission again directed the Petitioner to submit monthly Commercial Performance Monitoring reports strictly in the prescribed formats on regular basis, so as to reach the Commission latest by 25 th day of the following month. The Petitioner in the proceedings of APR Order for FY submitted that the observation on wrong reporting was for two different figures of unmetered consumers as on March 31, These different figures were reported by the field units in their two different submissions. The Petitioner also mentioned that that as per direction of the Commission, further submission shall be made as per the data shown in monthly commercial performance monitoring reports. The Commission in its APR Order dated March 29, 2017 directed the Petitioner as follows: 270 Uttarakhand Electricity Regulatory Commission

285 7. Commission s Directives The Commission directs Petitioner to submit monthly Commercial Performance Monitoring reports strictly in the prescribed formats on regular basis, so as to reach the Commission latest by 25 th day of the following month and without fail furnish the Quarterly Targets as per prescribed Format - 2 & 3 alongwith the Commercial Performance Monitoring report for the month of April, Petitioner s Submissions In compliance to the above directions, the Petitioner submitted the said report for the month of July, 2017 has been submitted to the Commission vide UPCL s letter no. 4256/UPCL/RM/UERC-10, dated Quarterly targets of performance(replacement of Mechanical Meters, defective meters and reduction in NA/NR Cases) in prescribed format 2 & 3 has also been submitted to the Commission vide UPCL s letter no. 2789/ UPCL/ RM/ UERC-10, dated As regards replacement of Mechanical Meters, defective meters and reduction in NA/NR Cases, the Petitioner submitted that the Officers of the Company at various levels are doing efforts but the desired results could not be achieved mainly due to shortage of manpower and therefore a tender for replacement of mechanical meters and defective meters was floated in July, 2017 which is under finalization. The target to maintain the level of defective meters below 3% in all the areas (Urban and Rural) will be achieved by the end of September, Similarly, all the Mechanical Meters shall be replaced by the end of September, Field Officers have been directed to reduce NA / NR Cases i.e. below 2% in both hilly and plain areas as per direction of the Commission. The Commission has noted the submissions of the Petitioner. The Commission observes that the Petitioner has not been punctual in its submissions of monthly reports. The Commission directs the Petitioner to submit the monthly as well as quarterly status report as per the directions of the Commission by 10 th of following month/quarter without fail Sales The Commission directed the Petitioner to issue instructions to the field offices to record the sales of the departmental employees based on meter reading and submit compliance of the same alongwith each APR/Tariff Petition. The Commission directed the Zonal Chiefs, the Circle Chief and the Executive Engineers to Uttarakhand Electricity Regulatory Commission 271

286 Order on True-up for FY , APR for FY & ARR for FY examine the data pointed out with reference to their Divisions for FY and submit the justification to the Commission within 45 days of the date of Order on the above discrepancies failing which action may be initiated against them individually by the Commission under Section 142 of the Electricity Act, The Petitioner in the proceedings of APR Order for FY submitted that UPCL, vide its letter no. 1575/UPCL/RM/C-12, dated directed its field officers to record the sales of departmental employees based on meter reading and 4613 Departmental Employees/Pensioners have been ledgerized so far. UPCL also submitted that the Field officers have been directed to take action as per the directions of the Commission with regard to deficiencies pointed out in the Commercial Data for FY They have also been directed to submit the compliance report as per the direction of the Commission. The Petitioner further submitted that it is in the process to get its billing information verified, i.e. Input Energy, Billed Energy, Assessment and Collection for FY UPCL vide its letter no. 1061/UPCL/CE/CCP-II/15/ (Feedback), dated November 21, 2016 awarded the work to M/s Feedback Infra Private Limited, New Delhi. The work has been targeted to be completed within six months from the date of work order. The Commission in its APR Order dated March 29, 2017 provided final opportunity to UPCL to rectify such errors and, accordingly, directed UPCL to rectify such anomalies else the Commission would examine the matter and if required necessary corrections to this extent would be made in the subsequent years. Further, the Zonal Chiefs, the Circle Chiefs and the concerned Executive Engineers are hereby directed to examine the data with reference to their Divisions for FY and for FY and submit the justification to the Commission within 45 days of the date of Order on the above discrepancies failing which action may be initiated against them individually by the Commission under Section 142 of the Electricity Act, 2003 and also against the Directors of the Petitioner Company. The Commission further directed UPCL to submit the findings of the study being carried out on sales, average load factor, average billing rate for FY The Commission also directed UPCL to meter all these consumers and submit compliance report within one month from the date of this Order and also submit the bills for 132 unmetered domestic consumers raised during FY within 30 days of the date of Order. The Commission further 272 Uttarakhand Electricity Regulatory Commission

287 7. Commission s Directives directed UPCL to meter all the consumers and submit the bills for 228 unmetered PTW consumers raised during FY within 30 days of the date of Order. Petitioner s Submission In compliance to the above directions, the Petitioner submitted that the matter was discussed by the Director (Operation) with the field officers and during discussions it was observed that the discrepancies in the commercial data is mainly due to the reason that at the time of revision of bills pertaining to prior period, amount is reduced from the assessment but the corresponding consumption is not reduced from the billed units. As regards the summary of findings of the study, the Petitioner submitted that UPCL vide its letter no. 1061/UPCL/CE/CCP-II/15/ (Feedback), dated had awarded the work to M/s Feedback Infra Private Limited, New Delhi. The consultant submitted its final report in August, The findings of the consultant are as follows:- Table 7.1: Findings of UPCL s Consultant on Sales Audit for FY Particulars As per Consultants report As per Commercial Diary Billing Efficiency 81.67% 81.99% Collection Efficiency % % AT&C Loss 12.94% 12.85% The Petitioner further submitted that there is only minor difference in the actuals as compared to Consultants findings. As regards metering of all consumers, the Petitioner has submitted that all consumers of domestic and PTW Categories have been metered. Further, with regard to bills of unmetered domestic and PTW connections, the Petitioner submitted that the bills of unmetered domestic and PTW Consumers raised in FY have been submitted to the Commission vide UPCL s letter no. 2014/UPCL/RM/C-13, dated and no. 2618/ UPCL/RM/C-13, dated The Commission has noted the submissions of the Petitioner. The Commission as discussed in Chapter 3 of this Order while approving sales for FY observed similar anomalies in the ABR of PTW category wherein the ABR was less than the energy charge. The Commission has therefore carried out necessary adjustment in the revenue and sales in this regard. However, the Petitioner is directed to instruct its field offices to carry out the corresponding corrections in Uttarakhand Electricity Regulatory Commission 273

288 Order on True-up for FY , APR for FY & ARR for FY sales also in cases where billing is withdrawn. In future if such instance comes to the knowledge of the Commission, punitive action under Section 142 of the Electricity Act, 2003 may be taken against the errant officers of UPCL Load Shedding The Commission directed the Petitioner to obtain the prior approval of the Commission for load shedding to be carried out continuously for certain number of hours in a day for 15 or more days. The Petitioner in the proceedings of APR Order for FY submitted that no load shedding has been carried out by UPCL in any area continuously for certain number of hours in a day for 15 or more days and prior approval of the Commission shall be obtained as and when required as per the direction of the Commission. The Commission in its APR Order dated March 29, 2017 directed the Petitioner as follows: The Commission directs the Petitioner to obtain the prior approval of the Commission for load shedding to be carried out continuously for certain number of hours in a day for 15 or more days. Petitioner s Submission In compliance to the above directions, the Petitioner submitted that no load shedding has been carried out by UPCL in any area continuously for certain number of hours in a day for 15 or more days. Further, prior approval of the Commission shall be obtained as and when required as per direction of the Commission. The Petitioner has further stated that UPCL has also prepared a policy on power cuts. The policy was approved by the Board of UPCL in the meeting held on and the Petitioner has also submitted to the Commission. The Commission has taken note of the Petitioner s reply. The Commission, hereby, once again directs the Petitioner to obtain the prior approval of the Commission for load shedding to be carried out continuously for certain number of hours in a day for 15 or more days. 274 Uttarakhand Electricity Regulatory Commission

289 7. Commission s Directives AT&C Losses The Commission directed the Petitioner to regularly incorporate monthly target level alongside actual level of Distribution losses as directed by the Commission vide its Order dated March 4, 2013 in the Petitioner s future submissions. The Petitioner in the proceedings of APR Order for FY submitted that Division wise monthly targets of distribution losses has been fixed by Corporate Office and circulated to the field officers vide UPCL s letter dated July 29, The Commission in its APR Order dated March 29, 2017 directed the Petitioner as follows: The Commission directs the Petitioner to regularly incorporate monthly target level alongside actual level of Distribution losses as directed by the Commission vide its Order dated March 4, 2013 in the Petitioner s future submissions. Petitioner s Submissions In compliance to the above directions, the Petitioner submitted that the division wise target of distribution losses for FY has been fixed and circulated to the field officers. These targets have also been submitted to the Commission alongwith the Commercial Performance Report. The Commission has taken note of the Petitioner s reply. As discussed in Chapter 3 of this Order, the distribution losses in case of EDD, Narayanbagar, Rudraprayag, Roorkee, Bageshwar, Vikasnagar, Uttarkashi, EDD, Dharchula are still above 30%. The Commission directs the Petitioner to submit division wise action plan to reduce the losses in the above divisions to below 20% within one month from the date of issuance of this Order. The Commission further with regard to relaxtion sought by the Petitioner in distribution loss is of the view that UPCL s inaction and continuous high level of inefficiency does not allow it to seek revision of the loss trajectory approved by the Commission, which if allowed would defeat the intent of the MYT framework. Accordingly, the Petitioner is directed to abstain from seeking relaxation in this regard in every ensuing Tariff Petition once the issue has been settled by the Commission. Uttarakhand Electricity Regulatory Commission 275

290 Order on True-up for FY , APR for FY & ARR for FY Power Purchase Quantum and Cost The Commission directed the Petitioner to restrict the net drawal from the grid within its drawal schedules in order to ensure grid discipline. The Commission directed the Petitioner to seek prior approval of the Commission, in case the variation in power purchase quantum or power purchase cost in any quarter exceeded by more than 5% of the approved power purchase quantum and cost for the respective quarter worked out on pro-rata basis from the total approved quantity and cost for FY as indicated in the Table 5.6 of the Order, failing which, the Commission may disallow such additional power purchase cost while truing up the ARR for FY The Commission directed the Petitioner to prepare its power purchase plan for the next three years and initiate the bidding process to meet the deficit, if any. The Petitioner was directed to submit an action plan in this regard within 15 days of the date of the Order. The Petitioner was also directed to ensure compliance of the Regulations issued by the Commission from time to time, failing which any consequent liability would be to the account of the Petitioner. The Petitioner in the proceedings of APR Order for FY submitted that it is restricting its net drawal from the grid within the net drawal schedules. However, in case of excess demand over availability, overdrawal is made within permissible limit to comply with the directions of the Commission and in the interest of grid discipline. The Commission in its APR Order dated March 29, 2017 taking serious note of the non compliance of earlier direction directed the Petitioner to seek prior approval of the Commission, in case the variation in power purchase quantum or total power purchase cost in any quarter exceeds by more than 5% of the approved power purchase quantum and cost for the respective quarter worked out on pro-rata basis from the total approved quantum and cost for FY , failing which, the Commission may disallow power purchases so made while Truing up the ARR for FY Petitioner s Submissions In compliance with the above directions, the Petitioner submitted that the details of approved and actual power purchases for the first quarter of FY were submitted to the 276 Uttarakhand Electricity Regulatory Commission

291 7. Commission s Directives Commission vide UPCL s letter no. 3442/UPCL/UERC, dated The details of which are as under: Table 7.2: Power Purchase for 1 st Quarter of FY as submitted by the Petitioner S. No. Particulars MU Rs. Crore 1. Power Purchase approved in the Tariff Order 2. Power Purchase allowed up to 105% of Actual power purchase The Petitioner submitted, the actual power purchases were less than the approved power purchases during second quarter of FY The actuals of power purchases for the third quarter of FY are being compiled and approval shall be sought if the actuals of power purchases exceeds by more than 5 % of the approved power purchases. The Commission directs the Petitioner to seek prior approval of the Commission, in case the variation in power purchase quantum or total power purchase cost in any quarter exceeds by more than 5% of the approved power purchase quantum and cost for the respective quarter worked out on pro-rata basis from the total approved quantum and cost for FY , failing which, the Commission may disallow power purchases so made while Truing up the ARR for FY The Commission in Chapter 3 of this Order had observed that the Petitioner has utilised professional service for cost effective power procurement and the Commission has considered the additional cost on this account, however, since professional services have been availed therefore, the Commission directs the Petitioner that it should neither overdraw power at frequency below Hz nor resort to load shedding due to improper procurement planning. Further, any drawal below Hz shall not be allowed by the Commission Fixed Assets Register The Commission directed the Petitioner to expedite the process and submit the Fixed Assets Register updated upto within 3 months of the date of the Order and Fixed Assets Register updated upto within 6 months of the date of the Order. The Petitioner in the proceedings of APR Order for FY submitted that Fixed Assets Registers of UPCL were being prepared from M/s L.B. Jha & Co., Chartered Accountants, Kolkata Uttarakhand Electricity Regulatory Commission 277

292 Order on True-up for FY , APR for FY & ARR for FY for FY to FY and were submitted to the Commission. The Pettioner submitted that the Fixed Assets Register for FY & FY was expected to be completed by the end of March, 2017 and fixed assets register for FY shall be prepared immediately after the finalisation of Fixed Assets Registers for FY & The Commission in its APR Order dated March 29, 2017 directed the Petitioner to expedite the process and submit the Fixed Assets Register updated upto within 3 months of the date of the Order and the Fixed Assets Register updated upto within 6 months of the date of this Order. Petitioner s Submissions In compliance with the above directions, the Petitioner submitted that the Fixed Assets Registers of UPCL were being prepared from M/s L.B. Jha & Co., Chartered Accountants, Kolkata for FY to FY and were submitted to the Commission. Due to imposition of Model Code of Conduct in State of Uttarakhand from to , New Tender for Preparation of Fixed Asset Register of UPCL for the FY to FY could not be floated. Tender was called on and the due date of opening was The tender was extended 3 times to , and as 1 party had only applied for the same till Finally, Part I was opened on and Part II on The Petitioner submitted that M/s RSA & Co., Chartered Accountants has been awarded the work on for Preparation of Fixed Assets Registers of UPCL for FY , FY & FY with time target of 6 months upto the end of December The firm has updated the Fixed Assets Register for FY to FY of all the units under Electricity Distribution Circle, Rudrapur and for FY and of Urban Distribution Division (South), Dehradun. The CA firm has assured that they shall submit the Fixed Asset Registers for all the Divisions within the prescribed time i.e. before Further, the Work order for updation of Fixed Assets Register for FY has also been issued to the same CA firm with time target of for completion. Thereafter, the exercise of checking and verifying the FAR submitted by M/s RSA & Co. shall be done and so, Fixed Asset Registers of UPCL for FY to FY shall be completed in all respect for onward submission to the Commission by Uttarakhand Electricity Regulatory Commission

293 7. Commission s Directives The Commission has taken note of the compliance on Fixed Asset Register. The Commission observes that the Petitioner has not submitted the fixed asset register for FY and FY The Commission, hereby, once again directs the Petitioner to expedite the process and submit the Fixed Assets Register updated upto within 1 months of the date of the Order and the Fixed Assets Register updated upto within 3 months of the date of this Order and start preparation of Fixed Asset Register for FY Depreciation The Commission directed the Petitioner to maintain proper Fixed Asset Register showing amongst others the date of capitalisation of each asset, their location, alongwith the accumulated depreciation on the same and submit the same along with the next Tariff filings and also claim depreciation based on the rates as specified in the Regulations for each class of asset. The Petitioner in the proceedings of APR Order for FY submitted that Fixed Assets Registers of UPCL were prepared from FY to FY by M/s L.B. Jha & Co., Chartered Accountants, Kolkata in which the details as required by the Commission were not available. The Petitioner also submitted that the instructions have been issued to field units to maintain records of Fixed Assets in the manner prescribed by the Commission, so that the desired details can be incorporated in the Fixed Assets Registers. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to maintain proper Fixed Asset Register showing amongst others the date of capitalisation of each asset, their location, along with the accumulated depreciation on the same and submit the same along with the next Tariff filings and claim depreciation in line with its practice followed in the accounts. Petitioner s Submissions In compliance to the above directions, the Petitioner submitted that the Fixed Assets Registers of UPCL were prepared from FY to FY by M/s L.B. Jha & Co., Chartered Accountants, Kolkata in which the details as required by the Commission were not available. The Petitioner also submitted that the instructions have been issued to field units to maintain records of Fixed Assets in the manner prescribed by the Commission, so that the desired details can be incorporated in the Fixed Assets Registers. The Petitioner further submitted that Depreciation has been claimed in the Petition as per the direction of the Commission. Uttarakhand Electricity Regulatory Commission 279

294 Order on True-up for FY , APR for FY & ARR for FY The Commission has noted the submissions of the Petitioner Return on Equity The Commission directed the Petitioner to look into the issue of creating long term assets from current liability and take appropriate remedial action for correcting this practice. Further, the Petitioner was directed to expedite the matter and submit the details of assets created by mode other than loan/grants/subsidies/deposit works/consumer contributions from FY onwards and submit the source of such finances duly validating the same from their cash flow and fund flow statements from FY within 3 months of issue of the Order. The Petitioner in the proceedings of APR Order for FY submitted that Fixed Assets are created out of various sources like loans from various Financial Institutions, Grants, Deposits and Internal Resources (including Equity). The fund received towards Security Deposit from Consumers as well as Retention money from Suppliers/Contractors are also utilised for creation of Fixed Assets, which are clubbed under the heading of Other Current Liabilities. Therefore, a portion of Fixed Assets are also created through Current Liabilities, which is shown under Internal Resources. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to take note of the findings of the Commission in this Order and claim RoE strictly in accordance with the same and not cling to its own set of figures without assigning any reasons for the difference in the two set of figures submitted before the Commission. Petitioner s Submissions In compliance with the above directions, the Petitioner submitted that, as per our calculations less amount of Equity was recognized by the Commission. The Petitioner further submitted that the Commission for computation of equity invested in creation of capital assets, first considered the amount of loan and grants and thereafter 30% of the balance considered as equity. The Petitioner submitted that the approach adopted is not correct. The Petitioner submitted that 30% equity is invested in the assets financed through REC Loan/ District and State Plan Loans. UPCL submitted that it has mentioned the same in the petition filed before the Commission to review various issues of the Tariff Order including computation of equity and return on the same. The Commission vide its review order dated directed UPCL to raise this issue in 280 Uttarakhand Electricity Regulatory Commission

295 7. Commission s Directives the ARR & Tariff Petition for FY Accordingly, this issue has been raised in this petition giving details of the case with justification. The Commission has taken note of the Compliance as regards RoE Employee Expenses The Commission directed the Petitioner to expedite the recruitment process and also submit a quarterly status report to the Commission detailing the steps taken by it in this regard and also the status of the recruitments planned. The Petitioner in the proceedings of APR Order for FY submitted the status of direct recruitment. The Petitioner also submitted that Adhiyachan for the 225 posts. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to submit a plan of action regarding the recruitment process within one month of the issue of Tariff Order. Petitioner s Submissions In compliance with the above directions, the Petitioner submitted the status of direct recruitment as shown in the Table given below: Group Post Table 7.3: Recruitment Status as submitted by the Petitioner No. of Vacancies B Accounts Officer 11 B Law Officer 2 B Assistant Engineer (E&M) 47 B Assistant Engineer (Civil) 7 Total 67 Current Status Remark Result & other action withheld vide Govt Letter No. 574/I(2)/ (2)14/2016 dated According to the instructions given by the Government through Letter No.1155/I(2) /2016/06(2)-14/2016 dated , the selection procedure has started and is under process. Advertisement has Through Corporation letter no.3966/ Dir (HR) /UPCL/ been released on Camp dated a letter has been sent to Govt. to seek further directions regarding the declaration of the result of written examination and starting with the Written Exam for these interview procedure. Reply is being awaited. posts held on Presently, through Corporation letter no.6305/ Dir (HR) /UPCL/ KF-22 dated & letter no.10402/ Dir (HR) /UPCL/ KF-22 dated reminders have been sent to Govt. to seek further directions regarding the declaration of the result of written examination and starting with the interview procedure. Uttarakhand Electricity Regulatory Commission 281

296 Order on True-up for FY , APR for FY & ARR for FY The Petitioner also submitted that the following posts has been sent/under process to Uttarakhand Pravidhik Shikha Parishad:- Group Table 7.4: Posts Under-Process as submitted by the Petitioner Post No. of Vacancies C Office Assistant-III 77 C Technician Grade Current Status Advertisement was released on Written exam held on by Uttarakhand Pravidhik Shiksha Parishad. Advertisement has been released on by Uttarakhand Pravidhik Shiksha Parishad. Recruitment process withheld as per directions of GoU till further orders. Remark List of 67 selected candidates has been provided to UPCL by Uttarakhand Pravidhik Shiksha Parishad. As per direction of Hon'ble High Court, Nainital dated in SPA No. 524 of 2015, " the corporation will not fill up the posts, through this selection process, which are occupied by the persons who have been appointed on contract basis through UPNL...". Presently, the matter is pending before Hon'ble Industrial Tribunal, Haldwani. Final Argument of UPCL completed, Judgement awaited. A new writ petition is also filed by some of the selected candidates in Hon'ble High Court, Nainital [WP(M/S) No.12 of 2017, Km.Tanu & others V/s Uttarakhand Power Corporation Ltd. & others], which is also pending before Hon'ble High Court, Nainital. On Hon'ble High Court ordered to list the matter after 3 weeks. Information has been provided to the Govt.of UK through Corporation letter no.4016-dir (HR)/ UPCL-22 dated regarding the present situation of the aforesaid posts. The recruitment for the post of TG-2 has been stopped by Govt. vide letter No. 31/2014 dated Total 573 Presently, the matter is pending before Hon'ble Industrial Tribunal, Haldwani. 282 Uttarakhand Electricity Regulatory Commission

297 7. Commission s Directives The Petitioner also submitted that Adhiyachan for the following posts has been sent/under process to Uttarakhand Adhinastha Sewa Chayan Ayog:- Group Table 7.5: Posts Under-Process as submitted by the Petitioner Post No. of Vacancies Current Status Advertisement has been released on by Uttarakhand Adhinastha Sewa Chayan Ayog. Remark C Junior Engineer (E&M) 160 C Junior Engineer (Civil) 6 C Assistant Accountant 40 C Draughtsman 19 Total 225 Earlier, the tentative date for the written exam for the post of Junior Engineer (Trainee)- (E&M) and (Civil) was Presently, it is scheduled to be held on As per the direction given by the Chairman, UERC on dated , corporation letter No.397-Dir (HR)/UPCL date was sent to Uttarakhand Adhinastha Sewa Chayan Ayog to speed up the recruitment process of these 225 posts. Corporation letter no Dir(HR)/ UPCL/KF-2 dated , letter no Dir(HR)/ UPCL/KF-2 dated & letter no Dir(HR)/ UPCL/KF-2 dated has also been sent to Uttarakhand Adhinastha Sewa Chayan Ayog to expedite the recruitment process of the aforesaid posts. Date for the written examination for the post of Assistant Accountant not yet fixed by Uttarakhand Adhinasth Seva Chayan Ayog. Written exam for the post of Draughtsman held on According to additional staff structure vide G.O. No.801/I(2)/ (2)-08/2002 dated Revised Adhiyachan for 160 posts of JE-E&M and 06 post of JE-Civil has been sent to Adhinastha Sewa Chayan Ayog vide letter No dated According to additional staff structure vide G.O. No.801/I(2)/ (2)-08/2002 dated Adhiyachan for 40 posts of Assistant Accountant has been sent to Adhinastha Sewa Chayan Ayog vide letter No dated Adhiyachan for 19 posts of Draughtsman has been sent to Adhinastha Sewa Chayan Ayog vide letter No dated The Commission has taken note of the compliance on recruitment of employees. Uttarakhand Electricity Regulatory Commission 283

298 Order on True-up for FY , APR for FY & ARR for FY Bad &Doubtful Debts The Petitioner was directed to finalize the Policy within three month of the date of Order and submit the same for approval of the Commission. UPCL was directed to submit the basis of arriving at the ageing of debtors within one month of the date of Order. The Petitioner in the proceedings of APR Order for FY submitted that the policy has been prepared and was put up to the Audit Committee in the meeting held on June 24, Audit Committee directed to get the same examined and verified through a firm of Professional Chartered Accountants. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to submit the bad debt policy within three months from the date of this Order. Petitioner s Submissions In compliance with the above directions, the Petitioner submitted that, UPCL has identified 1,81,026 electricity connections lying disconnected and being shown in the data base as Not billed/stop billed. The arrear against these connections is Rs Crore in the record. UPCL has prepared an action plan to settle these cases in FY by Writing Off fictitious arrears and irrecoverable arrears and to collect the recoverable amount. The Petitioner submitted that the field officers have been directed to take action as per this action plan circulated vide letter no. 1843/UPCL/RM/N-20, dated The Petitioner further submitted the draft bad debt policy. The Commission has taken note of the Petitioner submission. Though the Petitioner has submitted a draft bad debt policy however, the same needs to be supported by audit report of receivables. The Commission, therefore, directs the Petitioner to submit the audit report of receivables identifying and classifying the same in detail within 6 months from the date of this Order. The Commission shall consider writing off of bad debts for FY upon submission of the same at the time of truing up of FY Uttarakhand Electricity Regulatory Commission

299 7. Commission s Directives Reliability Indices The Commission directed the Petitioner to submit monthly report on Reliability Indices in the format prescribed by the Commission vide letter no. 1200/UERC/Tech/9/2010 dated September 28, These reports should also be submitted in MS-Excel soft form. The Petitioner in the proceedings of APR Order for FY submitted that the monthly report of reliability indices for the month of April, 2016 has been submitted to the Commission vide UPCL s letter no. 1830/ UPCL/ RM/ SM, dated The Commission in its APR Order dated March 29, 2017 directed the Petitioner to submit the monthly report on Reliability Indices on regular basis. Petitioner s Submissions In compliance with the above directions, the Petitioner submitted that steps have been taken at Corporate Office to ensure that the said report is timely submitted to the Commission on regular basis. The report for the month of August, 2017 has been submitted to the Commission vide UPCL s letter no. 4054/UPCL/RM/SM, dated The details of SAIFI, SAIDI & MAIFI for the month of August, 2017 as submitted are as follows:- Table 7.6: Details of SAIFI, SAIDI & MAIFI for the month of August, 2017 Particulars Urban Feeder Rural Feeder SAIFI 33 no. 40 no. SAIDI 864 minutes 1264 minutes MAIFI 13 no. 11 no. The Commission has noted the Petitioner s reply on Reliability Indices. The Commission once again directs the Petitioner to submit the monthly report on Reliability Indices on regular basis Voltage wise Cost of Supply The Commission directed the Petitioner to submit the action plan along with the timelines by which the Petitioner will be completing the work as per the action plan, within one month of issue of the Order. The Petitioner in the proceedings of APR Order for FY submitted that it has identified all the points where metering is required at 33 kv voltage level and a detailed plan was Uttarakhand Electricity Regulatory Commission 285

300 Order on True-up for FY , APR for FY & ARR for FY submitted to the Commission vide UPCL s letter no. 2941/D(O)/UPCL/C-4, dated November 1, As per this plan, the work of 33 kv Metering was targeted to be completed by August 31, The status of metering was reported to the Commission vide UPCL s letter no. 3293/D(O)/UPCL/C-4, dated November 2, 2016 with the request to grant time upto December 31, 2016 for completion of the work. The Petitioner also submitted that Meters on DT s under 31 Towns of R-APDRP project area have already been installed. 952 nos of meters are proposed to be installed at DT s under IPDS scheme in Towns other than R-APDRP Towns. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to expedite the activities in this regard and submit quarterly report on the status of metering alongwith an Action Plan to conduct Energy Audit & also related costs to determine the Voltage-wise Cost of Supply. Petitioner s Submissions In compliance with the above directions, the Petitioner submitted that Metering at 33 KV voltage level has been completed in all divisions except Srinagar, Kotdwar, Rudraprayag, Gopeshwar and Narayanbagar divisions. The division-wise progress is as follows (As on ): Table 7.7: Division-wise Progress of Metering at 33 kv S.No. Name of Division Target Progress 1. Srinagar Kotdwar Rudraprayag Narayanbagar Gopeshwar 6 4 Total The Petitioner also submitted that Meters on DT s under 31 Towns of R-APDRP project area have already been installed. 952 nos of meters are proposed to be installed at DT s under IPDS scheme in Towns other than R-APDRP Towns for which BoQ have been finalized, GTP approval and material mobilization is under progress. The Petitioner further submitted that the work of Preparation of Fixed Assets Register for FY to has been awarded to M/s RSA&Co., Chartered Accountants on who have started the work and the work will be completed by Uttarakhand Electricity Regulatory Commission

301 7. Commission s Directives The Commission has taken note of the submissions of the Petitioner on Voltage wise cost of supply. The Commission once again directs the Petitions to expedite the activities in this regard and submit quarterly report on the status of metering alongwith an Action Plan to conduct Energy Audit & also related costs to determine the Voltage-wise Cost of Supply by the end of FY Demand Side Management Measures The Commission directed the Petitioner to submit the report on various Demand Side Management measures at regular quarterly intervals to the Commission. The Petitioner in the proceedings of APR Order for FY submitted that GoU on October 30, 2015 approved a scheme for distribution of LED Bulbs in Uttarakhand. Under the scheme all domestic consumers and Non-domestic consumers (up to 10 kw) would be provided three LED Bulbs at a price of Rs. 105 per bulb (now Rs. 95 per bulb). There was a target of lacs LED distribution under the scheme lacs LED bulbs have been distributed so far. 75% cost of the LED bulbs in respect of BPL Consumers & 25% cost in respect of Domestic Consumers having monthly consumption of 100 units is being borne by GoU. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to submit the report on various Demand Side Management measures at regular quarterly intervals to the Commission. Petitioner s Submissions In compliance with the above direction, the Petitioner submitted that upto March, 2017 a total of lacs LED bulbs have been distribution in the State. Out of which 2.02 lacs 7W LED bulbs to BPL consumers & 1.98 lacs 7W LED bulbs to other domestic consumers, having consumption upto 100 units have been distributed on subsidized rates. Further, distribution of 9W LED bulbs, 20W LED Tube Light & 50W Energy Efficient Ceiling Fans has also been initiated in the State with effect from 10th April, 2017 onwards. The status of distribution is as follows: Uttarakhand Electricity Regulatory Commission 287

302 Order on True-up for FY , APR for FY & ARR for FY Table 7.8: Status of Distribution of Energy Efficient Equipments Month 9W LED Bulbs 20W EE Tube Lights 50W 5 Star Rated Fans April, May, June, July, August, September, Total The Commission has taken note of the submissions of the Petitioner. The Commission, hereby, re-directs the Petitioner to submit the report on various Demand Side Management measures at regular quarterly intervals to the Commission Issues raised by the Petitioner again despite Commission s ruling in previous Tariff Orders The Commission directed the Petitioner to not raise such issues again in the subsequent ARR and Tariff Petitions on which the Commission have already taken the decision and given its ruling in the previous Tariff Orders, failing which, the Commission may reject the Petition upfront. The Petitioner in the proceedings of APR Order for FY submitted that this ARR and Tariff filing is being done keeping in view the direction issued by the Commission and provisions of Law in the matter. The Commission in its APR Order dated March 29, 2017 redirected the Petitioner to not raise such issues again in the subsequent ARR and Tariff Petitions on which the Commission have already taken the decision and given its ruling in the previous Tariff Orders, failing which, the Commission may reject the Petition upfront. Petitioner s Submissions The Petitioner submitted that this ARR and Tariff filing is being done keeping in view the direction issued by the Commission and provisions of Law in the matter. The Commission has noted the Petitioner s reply in this regard. 288 Uttarakhand Electricity Regulatory Commission

303 7. Commission s Directives Metering of unmetered connections The Commission in its APR Order dated March 29, 2017 directed that from December 2016 onwards any un-metered consumer, if found, in any of the Petitioner s record or billing ledger shall be treated as mis-declaration/wrong reporting by the Petitioner in its monthly Commercial Performance Monitoring reports and appropriate action under Act/Regulations may be initiated against the concerned officers of the Petitioner including Executive Engineer (Distribution) of the concerned Division. Petitioner s Submissions The Petitioner submitted that as per information received from the field officers, there is no unmetered connection in Domestic and PTW Categories. The Commission has taken note of the Petitioner s submission Interest on GPF Trust The Commission directed the Petitioner to expedite the Audit of Accounts of the trust to ensure that audit is completed by June 30, 2016 and to submit the audit report to the Commission by July 31, The Petitioner in the proceedings of APR Order for FY submitted that UPCL vide its letter no. 1854/UPCL/RM/C-11, dated May 1, 2015 submitted the copies of Audited Accounts of UPCL Employees GPF Trust for the period from FY to FY The Petitioner further submitted that the work of preparation of Accounts and Audit of the same for the remaining period is under progress and shall be provided to the Commission by December 31, The Commission in its APR Order dated March 29, 2017 directed the Petitioner to submit the audit report to the Commission within one month from the date of issue of the Order. Petitioner s Submissions In compliance with the above direction, the Petitioner submitted that UPCL vide its letter no. 1854/UPCL/RM/C-11, dated May 1, 2015 submitted the copies of Audited Accounts of UPCL Employees GPF Trust for the period from FY to FY Further, UPCL vide its letter no. 2081/UPCL/RM/C-13, dated submitted the copies of Audited Accounts of UPCL Uttarakhand Electricity Regulatory Commission 289

304 Order on True-up for FY , APR for FY & ARR for FY Employees GPF Trust for the period from FY to FY Also UPCL vide its letter no. 4713/UPCL/RM/C-13, dated submitted the copies of Audited Accounts of UPCL Employees GPF Trust for the period from FY to FY The Commission has taken note of the compliance made by the Petitioner Power Purchase Expenses (Including Transmission Charges) The Petitioner was directed to separately claim the cost of the energy returned under banking during truing up exercise of FY and not show the same as adjustment from the provisions. The Commission directed the Petitioner to put in place a mechanism for recording the arrears paid in a year for submission along with its claim of truing up for the respective year in the absence of which the Commission shall take an appropriate view regarding the allowable power purchase cost while carrying out the truing up exercise. The Petitioner in the proceedings of APR Order for FY submitted that as directed by the Commission, the cost of inward banking energy in FY shall be claimed in FY (during truing-up exercise), i.e. the year in which the energy has been returned. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to include the provisioning amount of Rs Crore towards banked power in the Petition for truing up of FY (Ref Para 3.1.3) Petitioner s Submissions The petitioner submitted that the cost of net inward banking amounting to Rs Crore in FY was reflecting in the Audited Accounts for the said year. However, UPCL did not claim the same in the True-up as per the direction earlier issued by the Commission. The cost needs to be allowed in the year in which the banked energy is returned but the Commission wrongly deducted Rs Cr. from the claim of UPCL of power purchase. The Petitioner further submitted that it had filed a petition before the Commission to review various issues of the Tariff Order including this issue. The Commission vide its review order dated had allowed this cost to UPCL. The Commission has taken note on the Petitioner s Submission on Power Purchase expenses. 290 Uttarakhand Electricity Regulatory Commission

305 7. Commission s Directives Deficit/Surplus Power The Commission directed the Petitioner to put its sincere efforts to procure the deficit energy through a mix of long term arrangements, medium term arrangements and short term purchases optimizing the cost of power purchase and reliable power. Further, the procurement should be through transparent process of bidding and not on mutual agreements as has been the practice of UPCL. UPCL was directed to submit a comprehensive plan as to how it intends to meet the deficit within one month of the date of Order. The Petitioner in the proceedings of APR Order for FY submitted that the desired revised plan has been submitted to the Commission vide UPCL s letter no. 3012/UPCL/Com, dated September 1, The Commission in its APR Order dated March 29, 2017 directed the Petitioner to bank the surplus energy during the month of April 2017 to September 2017 and withdraw the same in the month of October 2017 to March 2017 and the Petitioner should put in sincere efforts to suffice its requirement of power during deficit period/lean hydro generation period from the surplus energy available during the high hydro generation period through appropriate banking arrangements/agreements. Petitioner s Submissions The Petitioner submitted that as per direction of the Commission, the banking of surplus energy has been agreed with Punjab State Power Corporation Limited as per details given below:- Month Table 7.9: Details of Banking Arrangement done in FY Name of the Bidder Quantum of power to be supplied by UPCL (MW) Energy (MU) Return period Quantum of power to be taken back by UPCL(MW) Energy (MU) Jun Dec Jul Jan PSPCL Aug Feb Sep Mar Total energy (MW/ MU) Uttarakhand Electricity Regulatory Commission 291

306 Order on True-up for FY , APR for FY & ARR for FY The Petitioner further submitted that the above arrangement of banking of power has been approved by the Commission vide its order dated The details of banking from April, 2017 to October, 2017 are as follows:- Table 7.10: Details of Advance Banking Month Quantum Energy No of days (MW) (MU) Remarks Apr & May "As & when" basis Jun Firm & "As and When" basis Jul Firm & "As and When" basis Aug Firm Basis Sep Firm & "As and When" basis Oct As and When" basis Total The Commission has taken note of the Petitioner s submission. The Commission directs the Petitioner to bank the surplus energy during the month of May 2018 to September 2018 and withdraw the same in the month of October 2018 to March Status of NA/NR, IDF/ADF/RDF The Commission directed the Petitioner to reduce the percentage of NA/NR cases to below 2% in both Hill & Plain area of the State latest by The Petitioner in the proceedings of APR Order for FY submitted that for the improvement in the financial and operational efficiency of the Company, UPCL prepared an efficiency plan and circulated the same to the Field Officers vide letter no. 1629/UPCL/RM/N-38, dated March 23, In this efficiency plan, the NA/NR cases have been targeted to be below 2% in both Hill & Plain areas by December 31, A copy of the plan was submitted to the Commission vide UPCL s letter no. 2481/UPCL/RM/C-12, dated July 13, As on December 31, 2016, the NA/NR Cases were 5.87%. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to reduce the percentage NA/NR cases to below 2% in the entire State latest by , failing which the concerned Chief Engineer (Distribution), Superintending Engineer (Distribution), Executive Engineer (Distribution) & Executive Engineer (Test) shall be held responsible for non-compliance of the Commission s directions and appropriate action under the Act/Rules/Regulations may be initiated. 292 Uttarakhand Electricity Regulatory Commission

307 7. Commission s Directives Petitioner s Submissions In compliance with the above direction, the Petitioner submitted that UPCL vide its letter dated directed all the field officers to reduce the percentage of NA/NR Cases to below 2% latest by During the review meeting held on under the Chairmanship of Managing Director, the field officers were directed to achieve the level of NA/NR Cases to below 2% latest by The Petitioner further submitted that as on the NA & NR Cases were 3.29% and 2.46% respectively. The Commission directs the Petitioner to reduce the percentage NA/NR cases to below 2% in the entire State latest by , failing which the concerned Chief Engineer (Distribution), Superintending Engineer (Distribution), Executive Engineer (Distribution) & Executive Engineer (Test) shall be held responsible for non-compliance of the Commission s directions and appropriate action under the Act/Rules/Regulations would be initiated Replacement of Improper, Non-Functional, Stop/Stuck up defective or IDF Meters The Petitioner was directed to restrict percentage of defective meters (IDF) to 3% in plain areas upto and upto in hill areas of the State, failing which appropriate action under the Act/Rules/Regulations would be taken against the Petitioner for the continued noncompliance of the directions of the Commission. The Petitioner in the proceedings of APR Order for FY submitted that for the improvement in the financial and operational efficiency of the Company, UPCL prepared an efficiency plan and circulated the same to the Field Officers vide letter no. 1629/UPCL/RM/N-38, dated March 23, In this efficiency plan, the IDF cases have been targeted to be brought at the level of 3% in plain areas up to and up to in Hill areas of the State. The Petitioner further submitted that as on December 31, 2016, the IDF Cases were 5.27%. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to restrict the percentage of defective meters (IDF) to 3% in plain as well as in hilly areas of the State upto , failing which the concerned Chief Engineer (Distribution), Superintending Engineer (Distribution), Executive Engineer (Distribution) & Executive Engineer (Test) shall be held responsible for non-compliance of the Commission s directions and appropriate action under the Act/Rules/Regulations may be initiated. Uttarakhand Electricity Regulatory Commission 293

308 Order on True-up for FY , APR for FY & ARR for FY Petitioner s Submissions As regards the replacement of defective meters, the Petitioner has submitted that the Officers of the Company at various levels are doing efforts but the desired results could not be achieved mainly due to shortage of manpower. Therefore, a tender for replacement of defective meters was floated in July, 2017 which is under finalization. The target to maintain the level of defective meters below 3% in all the areas (Urban and Rural) will be achieved by the end of September, The defective meters as on are 4.38%. The Petitioner is once again directed to restrict the percentage defective meters (IDF) to 3% in plain as well as in hilly areas of the State upto , failing which the concerned Chief Engineer (Distribution), Superintending Engineer (Distribution), Executive Engineer (Distribution) & Executive Engineer (Test) shall be held responsible for non-compliance of the Commission s directions and appropriate action under the Act/Rules/Regulations would be initiated Replacement of Mechanical Meters The Commission directed the Petitioner to replace all the existing mechanical meters by static/electronic meters by December 31, 2016 & consolidate its complete database for mechanical meters including areas not covered under R-APDRP/IPDS Schemes. The Petitioner in the proceedings of APR Order for FY submitted that for the improvement in the financial and operational efficiency of the Company, UPCL prepared an efficiency plan and circulated the same to the Field Officers vide letter no. 1629/UPCL/RM/N-38, dated March 23, In this efficiency plan, the mechanical meters have been targeted to be replaced with the electronic meters by December 31, The mechanical meters as on and were respectively 1,27,074 and 1,24,459. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to consolidate its complete database for mechanical meters including areas not covered under R- APDRP/IPDS Schemes. Further, the Commission directs the Petitioner to prepare a division-wise firm plan for replacement of all the existing mechanical meters by electronic/static meters within next 2 years and submit the same along-with the prescribed Format-3 of Commercial Performance 294 Uttarakhand Electricity Regulatory Commission

309 7. Commission s Directives Monitoring report for the month of April 2017 and ensure that 50% of the existing mechanical meters are replaced by electronic/static meters latest by Petitioner s Submissions In compliance with the above direction, the Petitioner submitted that the Officers of the Company at various levels are doing efforts but the desired results could not be achieved mainly due to shortage of manpower. Therefore, a tender for replacement of mechanical meters and defective meters was floated in July, 2017 which is under finalization. All the mechanical meters shall be replaced by the end of September, The Petitioner further submitted that 1,13,499 mechanical meters was in March, 2017 which has been reduced to 88,545 in July, The Commission directs the Petitioner to ensure complete replacement of Mechanical Meters by Electronic Meters well before Ghost/Fictitious Consumers The Commission directed the Petitioner to write off ghost/fictitious/non-existent consumers from its billing database under a transparent policy framed by the Petitioner latest by September 30, The Petitioner in the proceedings of APR Order for FY submitted that the number of ghost consumers as on March 31, 2016 and August 31, 2016 are 710 and 682 respectively. The Commission in its APR Order dated March 29, 2017 directed the Petitioner to write off ghost/fictitious/non-existent consumers from its billing database under a transparent policy framed by the Petitioner latest by , failing which appropriate action under the Act/Regulations may be initiated against the concerned officers of the Petitioner including Executive Engineer (Distribution) of the concerned Division. Petitioner s Submissions In compliance with the above direction, the Petitioner submitted that UPCL has identified 1,81,026 electricity connections lying disconnected and being shown in the data base as Not billed/stop billed. The arrear against these connections is Rs Crore in the record. UPCL has prepared an action plan to settle these cases in FY by Writing off fictitious arrears and irrecoverable arrears and to collect the recoverable amount. Field officers have been directed to take Uttarakhand Electricity Regulatory Commission 295

310 Order on True-up for FY , APR for FY & ARR for FY action as per this action plan circulated vide letter no. 1843/UPCL/RM/N-20, dated The Petitioner further submitted that Ghost /Fictitious Consumers are included in the NB/SB Consumers. The Petitioner is directed to ensure that no new ghost/fictitious/non-existent consumers should appear in its billing database NB & SB Cases The Commission directed the Petitioner to liquidate and finalize NB/SB cases and set a target of realization from at least 25% of these cases within 6 months from the date of issuance of the Order. The Petitioner in the proceedings for APR Order of FY has submitted that the number of NB & SB cases as on August 31, 2016 is 1,55,841. The Commission in its APR Order dated March 29, 2017 directed the Petitioner gave last opportunity to the Petitioner for liquidating and finalising at least 25% of the NB/SB cases latest by , failing which appropriate action under the Act/Rules/Regulations would be initiated against the Petitioner for the continued non-compliance of the directions of the Commission. Petitioner s Submissions In compliance with the above direction, the Petitioner submitted that UPCL has identified 1,81,026 electricity connections lying disconnected and being shown in the data base as Not billed/stop billed. The arrear against these connections is Rs Crore in the record. The Petitioner has further prepared an action plan to settle these cases in FY by Writing Off fictitious arrears and irrecoverable arrears and to collect the recoverable amount. Field officers have been directed to take action as per this action plan circulated vide letter no. 1843/UPCL/RM/N-20, dated The Commission has taken a serious note of the continued non-compliance by the Petitioner with regard to NB/SB cases the Commission directs the Petitioner to liquidate and finalise atleast 5% of the NB/SB cases in each quarter and submit quarterly report before the Commission. In absence of the same, action under the provisions of Act/Rules/Regulations may be initiated against the Petitioner. 296 Uttarakhand Electricity Regulatory Commission

311 7. Commission s Directives Outstanding Arrears The Commission directed the Petitioner to make sincere efforts in mobilizing its resources to continuously make efforts throughout the year for collection of arrears under a structured receivable management programme besides taking corrective actions against the habitual defaulters. The Commission also directed the Petitioner to lay down standard procedure for receivables management and submit the same to the Commission within one month of issuance of this Order. The Petitioner in the proceedings for APR Order of FY has submitted that a receivable management program has been prepared for collection of arrears. This program is circulated to the Field Officers vide UPCL s letter dated July 8, A copy of this letter has been submitted to the Commission vide letter no. 2481/UPCL/RM/C-12, dated July 13, The Petitioner also submitted that recovery of arrears from Government categories amounting to Rs Crore has also been done during FY (up to October). The Commission in its APR Order dated March 29, 2017 directed the Petitioner to make sincere efforts in mobilizing its resources throughout the year for collection of arrears under a structured receivable management programme besides taking corrective actions against the habitual defaulters. Petitioner s Submissions The Petitioner in compliance to the above submitted that UPCL vide its letter no. 1597/UPCL/RM/L-17, dated and no. 1654/UPCL/RM/L-17, darted fixed the division wise Annual and Daily Revenue Collection Targets. These targets have been issued to achieve 14.75% AT&C Losses as approved by the Commission in its Tariff Order dated This will improve the collection period of UPCL. On issuance of order dated on the review petition of UPCL, UPCL revised its targets vide letter no. 3354/UPCL/RM/L-17, dated The Petitioner further submitted that with a view to recover Arrears and Writing Off of fictitious and irrecoverable arrears, UPCL has identified 1,81,026 electricity connections lying disconnected and being shown in the data base as Not billed/stop billed. The arrear against these connections is Rs Cr. in the record. UPCL has prepared an action plan to settle these cases in FY by Writing Off fictitious arrears and irrecoverable arrears and to collected the Uttarakhand Electricity Regulatory Commission 297

312 Order on True-up for FY , APR for FY & ARR for FY recoverable amount. Field officers have been directed to take action as per this action plan circulated vide letter no. 1843/UPCL/RM/N-20, dated This will improve the collection period. The Commission hereby directs the Petitioner to make sincere efforts in mobilizing its resources throughout the year for collection of Arrears under a structured receivable management programme besides taking corrective actions against the habitual defaulters Status of KCC Consumers The Commission directed the Petitioner that the KCC consumers having less load factor should be closely monitored and average consumption pattern and abnormality in consumption pattern should be checked and duly analysed. The Commission also directed the Petitioner to check KCC consumers who are repeatedly exceeding their sanctioned/contracted demand and take corrective action in such cases. The Petitioner in the proceedings for APR Order of FY has submitted that monitoring of KCC consumer is being done on regular basis. The Commission again directed the Petitioner that KCC consumers having less load factor should be closely monitored and average consumption pattern and abnormality in consumption pattern should be checked and duly analysed. The Commission also directs the Petitioner to check KCC consumers who are repeatedly exceeding their sanctioned/contracted demand and take corrective action in such cases. Petitioner s Submissions The Petitioner submitted that the monitoring is being done on regular basis. The Commission directs the Petitioner that KCC consumers having less load factor should be closely monitored and average consumption pattern and abnormality in consumption pattern should be checked and duly analysed. The Commission also directs the Petitioner to check KCC consumers who are repeatedly exceeding their sanctioned/contracted demand and take corrective action in such cases. 298 Uttarakhand Electricity Regulatory Commission

313 7. Commission s Directives Status of Revenue realisation per unit sold The Commission directed the Petitioner to take immediate steps to frame a time bound programme for realisation of pending arrears/dues and submit a report on the action taken for realisation of arrears, amount of arrears, arrears remaining outstanding and reasons for nonrealisation of these arrears/dues should be submitted to the Commission within three months of the issuance of the Order. The Petitioner in the proceedings for APR Order of FY submitted that Division wise targets have been fixed for recovery of revenue arrears from Non- Government Categories for FY amounting to Rs. 161 Crore. Further, outstanding arrear against Government categories amounting to Rs. 325 Crore. approx. has also been targeted to be recovered during FY The Commission directed the Petitioner to ensure that the data furnished in Commercial Performance Monitoring report should match with its Commercial Diary, i.e. CS-4 data and the Petitioner should ensure that in all future submissions of Commercial Performance Monitoring reports the Average Realisation Rate should be calculated on the basis of recoveries on account of Realisation Against energy dues only and the realisation shown should exclude recoveries from duties/cess, etc. Further, the realisation against energy dues should clearly bifurcate realisation against current dues & realisation against past dues. Petitioner s Submissions The Petitioner submitted that it is being done as per the directions of the Commission. The Commission again directs the Petitioner to ensure that the data furnished in Commercial Performance Monitoring report should match with its Commercial Diary, i.e. CS-4 data and the Petitioner should ensure that in all future submissions of Commercial Performance Monitoring reports the Average Realisation Rate should be calculated on the basis of recoveries on account of Realisation Against energy dues only and the realisation shown should exclude recoveries from duties/cess, etc. Further, the realisation against energy dues should clearly bifurcate realisation against current dues & realisation against past dues, failing which appropriate action shall be initiated against the Petitioner/Licensee. Uttarakhand Electricity Regulatory Commission 299

314 Order on True-up for FY , APR for FY & ARR for FY Billing and Collection System The Commission directed the Petitioner to comply with the directions issued in the Commission s Order dated in the matter of Bill Collection System, failing which appropriate action under the Act/Rules/Regulations would be taken against the Petitioner for the continued non-compliance of the directions of the Commission. The Commission further directed the Petitioner to expedite integrating CSCs available in the State with its billing system under the agreement executed between UPCL & Common Service Centre E-Governance Services India Ltd., New Delhi. The Petitioner in the proceedings for APR Order of FY submitted that the integration of UPCL s bill payment collection system was done with the Common Service Centre also known as Dev Bhhomi Jan Suvidha Kendra in the month of May, 2015 & the application is running successfully thereafter. The Commission directed the Petitioner to continue paying daily penalty of Rs. 2500/- which shall be paid within 30 days of the close of each calendar month till such time each of the directions as given in the Order dated & of the Commission has been fully complied. Petitioner s Submissions The Petitioner submitted that the penalty for the period upto August, 2017 has been deposited to the Commission vide UPCL s letter no. 3533/UPCL/Com/RMC-9/CE, dated The amount of penalty paid by is Rs Cr. Further, on the request of UPCL, Commission vide its letter no. UERC/5/Tech/441/ /1039, dated withheld the penalty for next sixth months subject to completion of bill collection facilities and integration of all the functional Common Service Centre in the State by the said period. In this connection, it is also submitted that tender for developing facilities at the collection centers as per the direction of Commission has been invited as per details given herein below: 300 Uttarakhand Electricity Regulatory Commission

315 7. Commission s Directives 4 S. No Name of Zone Haridwar Zone U.S. Nagar Zone Kumaon Zone Garhwal Zone Table 7.11: Status of Creation of facilities at the collection centers Awarded Cost of Name of L-1 bidder LOA Date work (Rs.) M/s Royal Infra Power Corp., Muzafarnagar (UP) M/s National Construction Rudrapur 1,64,84,138, ,10,22, Targeted date of Completion 6 month from the date of LOA M/s National 3,82,73, Construction Rudrapur Part I of the tender has been opened on The tender is expected to be finalized upto The completion period of this tender shall also be 6 month from the date of LOA. The Petitioner subsequently submitted that the tender for Garwhal Zone has also been awarded in the month of December The Commission hereby directs the Petitioner to complete the works of bill collection facilities and integration of all CSCs in the State latest by , in absence of which, stern action under the provisions of the Act/Rules/Regulations would be initiated against it. Moreover, the Commission directs the Petitioner to make widespread publicity/ Advertisement/workshop of the bill collection facilities & list of VLEs operating in the vicinity of various electricity Subdivision/division officers of UPCL across the State Energy Audit The Commission directed the Petitioner to provide meters at each feeder, T points, DTs & consumers in the distribution network so that effective energy auditing can be done & proper energy accounting can throw-up several actionable issues which, when addressed, will result in marked improvement in distribution loss. The Petitioner in the proceedings for APR Order of FY submitted that UPCL has identified all the points where metering is required at 33 kv voltage level and a detailed plan was submitted to the Commission and as per this plan, the work of 33 kv metering was targeted to be completed by and requested to grant time upto for completion of the work. The Commission directed the Petitioner to provide/maintain the metering system at each feeder, T points, DTs and consumers in its distribution network for effective energy auditing and Uttarakhand Electricity Regulatory Commission 301

316 Order on True-up for FY , APR for FY & ARR for FY accounting. The Petitioner is directed to submit compliance report in this regard by , failing which appropriate action will be taken against the Petitioner in accordance with the Act/Rules/Regulations. Petitioner s Submissions The Petitioner submitted that the Metering at 33 KV voltage level has been completed in all divisions except Srinagar, Kotdwar, Rudraprayag, Gopeshwar and Narayanbagar divisions. The division-wise progress is as follows (As on ) Table 7.12: Division wise Progress of Energy Auditing S.No. Name of Division Target Progress 1. Srinagar Kotdwar Rudraprayag Narayanbagar Gopeshwar 6 4 Total The Petitioner further submitted that the Meters on DT s under 31 Town of R-APDRP project area have already been installed. 952 nos. of meters are proposed to be installed at existing DT s under IPDS scheme in Towns other than R-APDRP Towns for which BoQ have been finalized, GTP approval and material mobilization is under progress. The Petitioner is directed to provide/maintain the metering system at each feeder, T points, DTs and consumers in its distribution network for effective energy auditing and accounting. The Petitioner is directed to submit compliance report in this regard by , failing which appropriate action may be taken against the Petitioner in accordance with the Act/Rules/Regulations Transfer of Distribution Business from UJVN Ltd. to UPCL (Reference Para of Tariff Order dated ) The Commission directed the Petitioner and UJVN Ltd. to comply with the directions of the Commission in all respect by and submit compliance report in the matter by , failing which appropriate action shall be initiated against both the utilities in accordance with the provisions of the Act/Regulations. The Petitioner in the proceedings for APR Order of FY submitted that in compliance 302 Uttarakhand Electricity Regulatory Commission

317 7. Commission s Directives of direction issued by the Commission, 129 consumers at Dakpatthar and 13 consumers at Dhakrani site of UJVN Ltd. have already been taken by UPCL but remaining consumers of Dhalipur & Koti site could not be taken over by UPCL as UJVN Ltd. have not provided the security deposit, verification details and application forms of the consumers. The Commission directed both the utilities i.e. UPCL & UJVN Ltd. to complete the taking over/handing over of distribution business in all respect by and submit the compliance report in the matter by , failing which appropriate action shall be initiated against the concerned Nodal Officers responsible for the same in accordance with the provisions of the Act/Regulations. Petitioner s Submissions UPCL vide various letters has directed the Nodal officers and concerned divisions to complete the taking over distribution business from UJVNL. The connections of Dakpather and Dhakrani which were provided by UJVNL has been taken over by UPCL. Whereas detail of connections provided by UJVNL pertaining of Koti site was incomplete, so UPCL has requested UJVNL to provide proper details. In addition to this a 11 KV line which is required to be constructed for Koti site has been approved and its construction is under progress. UJVNL has also informed that Connections of Chilla site are also to be handed over to UPCL, for which survey of lines and verification of connections is under progress. The Commission directs both the utilities i.e. UPCL & UJVN Ltd. to complete the taking over/handing over of distribution business in all respect by and submit the compliance report in the matter by , failing which appropriate action shall be initiated against the concerned Nodal Officers responsible for the same in accordance with the provisions of the Act/Regulations Departmental Employees The Commission directed the Petitioner to install meters at all its offices and sub-stations, if not installed, within one month of the date of the Order and submit report to the Commission by May 15, The Commission directed the Petitioner to carry out 100% metering of its departmental employees, to take regular meter readings and to maintain separate energy account of all its Uttarakhand Electricity Regulatory Commission 303

318 Order on True-up for FY , APR for FY & ARR for FY employees on a monthly basis. The Commission directs the Petitioner to submit a compliance report of the same within one month of the issuance of the Order. The Petitioner in the proceedings for APR Order of FY submitted that the Field Officers were directed to meter all the connections of UPCL offices, sub-stations and departmental employees. Further, direction has been issued to concerned officers of UPCL to ledgerise departmental connections and to maintain separate energy account on monthly basis nos. of departmental connections have already been ledgerised so far. All Executive Engineers have been directed to complete the ledgerisation of departmental connections. The Commission has taking a strong view directed UPCL to take immediate action on the directions of the Commission and report compliance to the Commission within one month of the date of Order. UPCL was further directed to complete the ledgerisation of all the departmental employees including retired employees availing the facilities within one month of the date of Order. Thereafter, UPCL is required to take meter readings of all the departmental employees including retired employees on monthly basis and issue bills to them. UPCL is required to submit the copies of the bills issued by the end of each month to the Commission. Petitioner s Submissions The Petitioner submitted that UPCL vide its letter dated directed field officers to meter all the connections of UPCL offices, sub-stations and departmental employees and to ledgerise all the departmental employees including retired employees. Further, submitted that UPCL vide its letter no. 2927/UPCL/RM/L-20, dated specified the mechanism for billing of the energy consumed in the colonies of UJVNL & PTCUL and their substations. The Petitioner also submitted that 5343 connections of departmental employees and pensioners of UPCL, UJVNL and PTCUL have already been metered an recorded in ledger. Copies of the bills which has been submitted to the Commission vide UPCL s letter no. 2618/UPCL/RM/C-13, dated Field officers have been directed to meter and record in ledger all the connections of the departmental employees / pensioners of UPCL, UJVNL & PTCUL. They have also been directed to take regular meter reading and to do regular billing of these employees. All the departmental employees of UPCL shall be recorded in ledger by December, UPCL has requested UJVNL & PTCUL for list of their departmental connections to be recorded in ledger, but the final list is still awaited. On the basis of discussion held between the 304 Uttarakhand Electricity Regulatory Commission

319 7. Commission s Directives officers of UPCL and PTCUL, the Petitioner submitted that all the departmental employees of PTCUL shall be recorded in ledger by December, On the basis of discussion held with the officers of UJVNL so far, the Petitioner submitted that the exact time frame cannot be given for recording in ledger their departmental employees. However, the work of recording in ledger all the departmental employees is in progress. UPCL is directed to submit the bills of all the departmental employees for FY within 2 months of the date of the Order before the Commission. UPCL is also directed to reconcile the figures of departmental employees in the commercial data as well as that claimed for calculation of employee expenses and submit the same to the Commission within 2 months of the date of the Order Location of Installation of Meters The Commission directed Executive Engineer, EDD Pithoragarh to submit a detailed compliance report on action taken for shifting of the meters to a safer location in or around the premises within one month of the date of Order. Further, the Commission directed the Chief Engineer, Rudrapur Zone, UPCL and Executive Engineer, EDD Pithoragarh, UPCL to take necessary action and submit the compliance report within one month of the date of the Order. The Commission further directed the Petitioner to examine this issue in other Divisions also and, if required, the Field Officers may be directed to take corrective actions. Petitioner s Submissions UPCL vide its letter no. 1858/UPCL/RM/C-13, dated directed all the field officers to ensure that meters of the consumers are installed at safer locations. The Petitioner is directed to submit quarterly status report with regards to shifting of meters for all divisions to the Commission Transfer of Petitioner s Personnel The Commision directed the HR Department, UPCL to identify such employees who have been posted in the same department for a period more than that stipulated in the aforesaid Policy, and take necessary action as per the Policy and report compliance within 03 months of the date of Order. Uttarakhand Electricity Regulatory Commission 305

320 Order on True-up for FY , APR for FY & ARR for FY Petitioner s Submissions The Petitioner has submitted that action is being taken as per the direction of Commission and the compliance report in the matter has also been submitted to the Commission. The Petitioner is directed to submit the status of number of employees that have been posted in the same department for a period more than that stipulated in the aforesaid Policy to the Commission by Water Tax The Commission directed the Petitioner to submit all the relevant information along with supporting documents for substantiating the actual expenses incurred on account of Water Tax for FY along with its proposals for True up for FY The Petitioner in the proceedings of APR for FY submitted that the desired information shall be provided to the Commission along with the proposal for true-up for FY The Commission directed the Petitioner to submit all the relevant information along with the supporting documents for substantiating the actual expenses incurred on account of Water Tax for FY and FY along with its proposals for True up. Petitioner s Submissions The Petitioner submitted the desired details along with the current Petition. The Petitioner is directed to submit all the relevant information along with the supporting documents for substantiating the actual expenses incurred on account of Water Tax for FY and FY along with its proposals for True up Open Access Charges The Petitioner was directed that the wheeling charges and cross subsidy surcharge recovered from open access customers shall be shown separately under the separate head of income in its ARR/Tariff filings from next year onwards. Further, the Petitioner was directed that the amount received from PTCUL, in lieu of transmission charges collected by PTCUL from long/medium term open access customers be shown separately under non-tariff income in the 306 Uttarakhand Electricity Regulatory Commission

321 7. Commission s Directives ARR/Tariff filings from next year onwards and should not be reduced from the Transmission charges payable to PTCUL. The Petitioner in the proceedings of APR of FY submitted that it has created separate heads in the accounts to separately capture the information of wheeling charge and cross subsidy surcharge recovered from the Open Access Consumers. The Petitioner further submitted that the transmission Charges collected by PTCUL from the long term/medium term Open Access consumers and adjusted in the Transmission Charges payable to PTCUL shall be shown in a separate head under Non- Tariff Income. The Commission directed that the wheeling charges and cross subsidy surcharge recovered from open access customers shall be shown separately under the separate head of income in its ARR/Tariff filings. Further, the Petitioner was directed that the amount received from PTCUL, in lieu of transmission charges collected by PTCUL from long/medium term open access customers be shown separately under non-tariff income in the ARR/Tariff filings and should not be reduced from the Transmission charges payable to PTCUL. Petitioner s Submissions The Petitioner in compliance to the above submitted that following new heads have been created in the Accounts to separately capture the information of wheeling charge and cross subsidy surcharge recovered from the Open Access Consumers: Table 7.13: Accounting Heads for booking Revenue received under Open Access Account Head Description Wheeling Charges Cross Subsidy Surcharge Wheeling Charges (L&H Power above 100 HP) Cross Subsidy Surcharge (L&H Power above 100 HP) The Petitioner further submitted that these charges have been shown separately in the ARR/Tariff Filing for FY and amount received from PTCUL in lieu of Transmission charges collected by PTCUL from open Access Consumers has been shown under Non-Tariff Income in FY The Commission has noted the submissions of the Petitioner. Uttarakhand Electricity Regulatory Commission 307

322 Order on True-up for FY , APR for FY & ARR for FY The Petitioner is once again directed that the wheeling charges and cross subsidy surcharge recovered from open access customers shall be shown separately under the separate head of income in its ARR/Tariff filings Tariff Hike UPCL was directed to submit the details of the category-wise energy consumed & amount thereon of those areas where bills have been waived off & also the details if any subsidy in this regard has been received from GoU, within one month of the date of the Order. The Petitioner in compliance submitted that Government of Uttarakhand vide its order no. 1275/I(2)/ /2013, dated directed to waive off the Domestic Electricity Bills of the disaster affected area for the period from to Further, GoU vide its letter no. 215/I(2)/ /13/2013, dated , in respect of Hon ble Chief Minister s Ghoshna No. 453/2013 informed that the Electricity Bills of the Consumers residing in Vikaskhand Dharchula and Munsiyari of District Pithoragarh shall be waived off from to As against the above orders of GoU, UPCL vide its letter dated requested GoU to release Rs lakh towards the billing amount to be waived off. GoU vide its order no. 1411/XXXI- 14/ , dated released Rs lakh, which has been adjusted in the consumer bills. Balance amount of Rs lakh is awaited from GoU. Further, GoU vide its letter no. 1022/I(2)/ /2013 Vh-lh-] dated directed UPCL to Waive Off the Electricity Bills of the Commercial establishments (Hotel,Restaurant,Lodge,Dhaba,Sarai and Dharamshala) situated in the Yatra Route from Gangnani to Gangotri Dham, Badkot to Yamnotri Dham, Joshimath to Badrinath Dham and Tilwara to Shri Kedarnath Dham. In this connection UPCL vide its letter dated requested GoU to released Rs Crore towards the billing amount to be waived off. The payment of this amount is awaited from GoU. The Petitioner has submitted copies of all the references made hereinabove has been submitted to the Commission vide UPCL s letter no. 2618/UPCL/RM/C-13, dated The Commission directs the Petitioner to follow up for the balance payments pending from GoU and intimate the receipt to the Commission. 308 Uttarakhand Electricity Regulatory Commission

323 7. Commission s Directives Collection Efficiency UPCL was directed to explore the possibility of waiving the service charges being recovered from the consumers on payment of bills using its payment gateway & submit the compliance on the same to the Commission within one month of the date of the Order. Petitioner s Submissions The Petitioner submitted that presently 3 agencies i.e. M/s Tech Process Payment Services Limited, M/s My Mobile Payment Limited and CSC e- Governance of India Limited are providing bill collection services to UPCL. During FY the Petitioner submitted the details of payment collected through these agencies and service charge borne by UPCL / Consumers as follows: S. No. Table 7.14: Details of payment collected through the Bill Collection Agencies No. of bills whose Who borne Amount payment has been service collected received charge (Rs. lakh) Service charge including tax (Rs. lakh) UPCL Consumer Total The Petitioner further submitted that no. of transactions will increase in future and the service charge will also increase. Presently, about Rs. 1 Cr. is being borne by the consumers as service charge for payment of the bills which is about 0.22% of the amount collected. This value will increase in future. Keeping in view the low amount of the service charge presently being borne by the Consumers may be borne by UPCL if the said amount is approved as expenditure in the ARR of UPCL. The Commission has noted the submissions of the Petitioner. As discussed in Chapter 2 of this Order the Commission is of the view that it will assist UPCL in getting payments credited to its accounts quickly and it also saves it towards holding and carrying cost of cash. Hence, UPCL is directed not to charge any service charges from the consumers on payment of bills using its payment gateway & submit the compliance on the same to the Commission within one month of the date of the Order. Uttarakhand Electricity Regulatory Commission 309

324 Order on True-up for FY , APR for FY & ARR for FY Metering & Billing The Commission directed UPCL to provide following services to the consumers namely restoration of power, voltage fluctuation, metering and billing related etc. as per Orders/Supply Code/SOP Regulations of the Commission. The Commission also directed the Petitioner to start adjusting the Open Access energy in the consumer bill in the same month/billing cycle within one month of issue of this Order. The Commission further directed UPCL to submit an action plan for compliances of the Judgments referred by Shri Mandok of Hon ble Allahabad High Court & Hon ble Supreme Court within one month of the date of the Order. Petitioner s Submissions The Petitioner submitted that UPCL vide its letter no. 1531/UPCL/RM/C-13, dated directed all the Chief Engineers (Distribution), Superintending Engineers (Distribution), Executive Engineers (Distribution) and Executive Engineers (Test) to provide Consumer Services as per orders / supply code / SOP Regulations of the Commission. As regards direction issued in the matter of adjusting open access energy in the consumer bill in the same month / billing cycle, the Petitioner submitted that presently the work of adjusting open access energy is being done manually by the field units. This adjustment is being given in the next month of transaction. This work has been planned through software under R-APDRP Cell, which will take some time and the software will be operative by the end of March, 2018 and thereafter the open access energy will be adjusted through software in the same month / billing cycle. However, field units vide O.M. dated have been directed to adjust the open access energy in the bill for the month of the transaction. With regard to action plan for compliance of Judgment of Hon ble High Court the Petitioner submitted the suggestion made by Shri G. D. Mandhok as follows: a. As per Section 185 (1) of the Electricity Act, 2003, the Indian Electricity Act, 1910 is repealed and the provisions of Electricity Act, 2003 are applicable now. As per Section 55 (1) of the Electricity Act, 2003, Central Electricity Authority issued CEA (Installation and Operation of Meters) Regulations, 2006 as amended from time to time. As per Regulation 7 (2) of these Regulations, Consumer Meter may be installed either at the 310 Uttarakhand Electricity Regulatory Commission

325 7. Commission s Directives consumer premises or outside to consumer premises. Hence, Judgment issued by the Hon ble High Court in the matter in 1977 as per the provisions of Indian Electricity Act, 1910 is not relevant now. b. As regards providing meter reading cards to the consumers, it is submitted that the reading of the consumers is taken now through hand held device and the bill is delivered to the consumer at the time of meter reading. All bills are available with the consumers wherein meter reading is available therefore there is no need now for meter reading cards. c. As regards demand for separate disconnection notice from the Electricity Bill it is submitted that as per the Judgment issued by the Hon ble Courts, the consumer may be issued Electricity Bill cum disconnection notice. The Commission has noted the compliances submitted by the Petitioner. In this regard, the Commission directs the Petitioner to submit the status of implementation of adjusting the open access energy through the software under R-APDRP Cell latest by May 31, Construction of 33/11 kv Sub-station The Commission directed UPCL to speed-up the construction process and submit the update on its status to the Commission within one month of this Order. Petitioner s Submissions The Petitioner has submitted the following status has been reported to the Commission vide UPCL s letter no. 4312/UPCL/RM/C-13, dated : 1. The work has been allotted to M/s Mittal Machines (P) Ltd vide C&P L.O.A. No-1115 dated The period for construction is 9 months form date of handover of land. 2. The land was handed over to the contractor for the construction of the substation on Therefore the date of start for above work is The completion period is 9 months from the date of start as per agreement and will be completed by March BOQ has been approved and Land Development work is under progress. Uttarakhand Electricity Regulatory Commission 311

326 Order on True-up for FY , APR for FY & ARR for FY The Commission has noted the compliance submitted by the Petitioner LED Distribution The Commission directed UPCL to submit status report on the LED distribution scheme alongwith the future course of action planned by the Petitioner in this regard within one month of issuance of this Order. Petitioner s Submissions The Petitioner submitted that upto March, 2017 a total of lacs LED bulbs have been distribution in the State. Out of which 2.02 lacs 7W LED bulbs to BPL consumers & 1.98 lacs 7W LED bulbs to other domestic consumers, having consumption upto 100 units have been distributed on subsidized rates. The Petitioner submitted that distribution of 9W LED bulbs, 20W LED Tube Light & 50W Energy Efficient Ceiling Fans has also been initiated in the State w.e.f. 10th April, 2017 onwards. The status of distribution is as follows: Table 7.15: Status of Distribution of Energy Efficient Equipments Month 9W LED Bulbs 20W EE Tube Lights 50W 5 Star Rated Fans April, May, June, July, August, September, Total The Commission has noted the compliance submitted by the Petitioner Defective Metering Correction The Commission directed UPCL to submit a report on the factual position alongwith its comments on the issues raised by the above stakeholders within one month of issuance of this Order. 312 Uttarakhand Electricity Regulatory Commission

327 7. Commission s Directives Petitioner s Submissions The Petitioner submitted that UPCL vide its letter no. 2291/Dir(Opr.)/UPCL/C-4, dated reported as follows to the Commission regarding Defective Meter Correction:- It is submitted that UPCL is not agree with the stakeholder s view as if connections (CT or PT) are not in order then the quantum of energy recorded less/high will depend on many number of Parameters and thus the exact amount of energy can be known through check meter with separate CT/PT. However, in this case assessment should be made from the date since when the connection gone wrong. As regards availability of suggestion box for people at different places in the State so as to ensure maximum participation during Tariff proceedings, the Petitioner submitted that action shall be taken by UPCL in the matter as per the direction of the Commission. The Commission has noted the compliance submitted by the Petitioner Online Load Survey Reports The Commission directed UPCL to take up this suggestion and submit the factual position and also Action Plan for implementation of the above suggestions of the stakeholders with one month of the issuance of this Order. Petitioner s Submissions The Petitioner submitted that load survey data is a bulky data and providing such data on web platform will heavily load the UPCL portal. However, load survey report may be provided to the Consumers on payment of charges as specified on the Tariff Order. This information has been provided to the Commission vide UPCL s letter no. 2014/UPCL/RM/C-13, dated The Commission has noted the compliance submitted by the Petitioner Delay in Fault Rectification The Commission directed UPCL to follow the Electricity Supply Code Regulations for its fault rectifications. Petitioner s Submissions UPCL vide its letter no. 1858/UPCL/RM/C-13, dated directed all the field Uttarakhand Electricity Regulatory Commission 313

328 Order on True-up for FY , APR for FY & ARR for FY officers to provide the Electricity connection within 15 days where no infrastructure is required to be extended. Further, they are also directed to release new connections within time as stipulated in the Regulations. The Commission has noted the compliance submitted by the Petitioner Proof of Ownership The Commission directed the Petitioner to submit the details regarding the process of releasing of connections alongwith the status of the connection released in Almora within one month of the date of Order. Petitioner s Submissions The Petitioner submitted that in this case, consumer had applied for a temporary connection alongwith a copy of driving license as identity proof and a copy of lease deed as ownership proof. The desired information has been provided to the Commission vide UPCL s letter no. 2014/UPCL/RM/C-13, dated The Commission has noted the compliance submitted by the Petitioner Tariff Revenue The Petitioner was directed to properly account for the revenues from tariff as well as nontariff income. Petitioner s Submissions The Petitioner submitted that it is being done as per the direction of Commission. The Commission has noted the compliance submitted by the Petitioner Distribution Loss Trajectory The Petitioner was directed to abstain from seeking relaxation in this regard in every ensuing Tariff Petition once the issue has been settled by the Commission. Petitioner s Submissions The Petitioner submitted that the Commission while fixing the distribution loss trajectory for the control period from FY to FY , did not consider the actual losses of the Company 314 Uttarakhand Electricity Regulatory Commission

329 7. Commission s Directives and therefore UPCL prayed the Commission to fix the loss reduction target considering the actual losses of the Company for the previous years. Moreover, the Petitioner submitted that the level of distribution losses as fixed by Commission is less than the losses as fixed by the Ministry of Power, Government of India. As discussed in Chapter 4 of this Order, the Petitioner is directed to abstain from seeking relaxation in this regard in every ensuing Tariff Petition once the issue has been settled by the Commission Impact of Seventh Pay Commission The Petitioner was directed to maintain separate details of the amount paid as arrears to its employees on account of implementation of the recommendations of VII Pay Commission. Petitioner s Submissions The Petitioner submitted that the said details shall be maintained as per the Commission s direction. The Commission has noted the compliance submitted by the Petitioner Prepaid Metering The Petitioner was directed to submit the details of such new connections issued from December 01, 2016 and the number of prepaid connections thereon. UPCL is also required to submit the number of prepaid meters available with it within one month of the date of Order. Petitioner s Submissions In compliance of direction issued by Commission, UPCL procured 5000 no. single phase and 1000 no. three phase prepaid meters so far. The petitioner submitted the status of prepaid meters installed on monthly basis from December, 2016 is as follows: Uttarakhand Electricity Regulatory Commission 315

330 Order on True-up for FY , APR for FY & ARR for FY Table 7.16: Status of Prepaid Meter installed on monthly basis Month No. of Prepaid Meters Installed December, 2016 Nil January, 2017 Nil February, 2017 Nil March, 2017 Nil April, 2017 Nil May, 2017 Nil June, July, August, September, October, November, (upto ) The Commission has noted the compliance submitted by the Petitioner Current Ratio The Petitioner was directed to carry out the age-wise analysis of its current liabilities outstanding as on and based on the ageing analysis determine how much of the same would be required to be discharged and how much excess provision exists in the same so that the same may be reversed and submit the same to the Commission within 3 months from the date of Order. Petitioner s Submissions The Petitioner submitted age wise position of creditors for power purchase as on was submitted to the Commission vide UPCL s letter no. 2751/UPCL/RM/C-13, dated , as follows: Age 0 to 3 months - Rs Cr. Age 3 to 6 months - Rs Cr. Age more than months - Rs Cr. Total - Rs Cr. The Petitioner further submitted age-wise position of Creditors for Power purchase as on is as follows: Age 0 to 3 months : Rs Cr. 316 Uttarakhand Electricity Regulatory Commission

331 7. Commission s Directives Age 3 to 6 months : Rs Cr. Age more than 6 months : Rs Cr. Total : Rs Cr. Further the Peitioner submitted a sum of Rs Cr. was reversed in FY pertaining to excess provision for expenses made in previous years. The Commission has noted the compliance submitted by the Petitioner Repair & Maintenance to Inventory Ratio The Petitioner was directed to submit the following details within one month of the date of Order: a) List of inventory as on b) The accounting policies adopted in measuring inventories, including the cost formula used; c) Basis on which inventories issued: FIFO/LIFO/etc. and reason for choosing the same. d) Whether any inventory classification, such as ABC analysis has been done? If yes the same may be submitted and if no, reason for the same may be furnished? e) Whether the inventories are verified physically? If yes, the periodicity of the same, alongwith the report of last physical verification. If physical verification is not being conducted reasons for the same? Petitioner s Submissions The Petitioner submitted that the desired information has been submitted to the Commission vide UPCL s letter no. 2668/UPCL/RM/C-13, dated The Commission has noted the compliance submitted by the Petitioner Average Collection Period The Petitioner was directed to submit within 3 months, an action plan to improve its collection period. Uttarakhand Electricity Regulatory Commission 317

332 Order on True-up for FY , APR for FY & ARR for FY Petitioner s Submissions The Petitioner submitted that UPCL vide its letter no. 1597/UPCL/RM/L-17, dated and no. 1654/UPCL/RM/L-17, dated fixed the division wise Annual and Daily Revenue Collection Targets. These targets have been issued to achieve 14.75% AT&C Losses as approved by the Commission in its Tariff Order dated This will improve the collection period of UPCL. On issuance of order dated on the review petition of UPCL, UPCL revised its targets vide letter no. 3354/UPCL/RM/L-17, dated Further with a view to recovery of Arrears and Writing Off of fictitious and irrecoverable arrears, UPCL has identified 1,81,026 electricity connections lying disconnected and being shown in the data base as Not billed/stop billed. The arrear against these connections are Rs Cr. in the record. UPCL has prepared an action plan to settle these cases in FY by Writing Off fictitious arrears and irrecoverable arrears and by collecting the recoverable amount. Field officers have been directed to take action as per this action plan circulated vide letter no. 1843/UPCL/RM/N-20, dated This will improve the collection period. The Commission has noted the compliance submitted by the Petitioner. The Petitioner is directed to submit within 3 months, an action plan to improve its collection period. 7.2 Fresh Directives Departmental Employees The Commission further to streamline the accounting of departmental employee consumers directs the Petitioner to bill all departmental employees consumers on the basis of rates approved for the RTS-1 Domestic Category from April 01, 2018.The Petitioner shall include the consumption and revenue details of these consumers at the Domestic Tariff Rate in the monthly CS-3 and CS-4 statements. As regards the concession provided to these consumers, the Petitioner is directed to show the same separately as expenses in its accounts. (Refer ) Billing UPCL is directed to explore this option at least in urban areas which will not only improve its financial position but also will aid in proper identifying cases of NA/NR/IDF/ADF 318 Uttarakhand Electricity Regulatory Commission

333 7. Commission s Directives etc. and will provide relief to the consumers also and submit its report in the matter within 3 months of the date of the Order. (Refer ) Temporary Connection The Commission directs the Petitioner to issue instructions to its field/ distribution division officers to issue the proper temporary connections with prepaid meters for functions like marriages, ceremonies and other similar purposes and should not provide any illegal connection. (Refer ) Collection Efficiency The Commission directs UPCL to make efforts to achieve the collection efficiency targets approved by the Commission. (Refer ) Views of State Advisory Committee The Commission directs UPCL to address the concerns raised by the Members of the Advisory Committee and submit an Action Taken Report within one month of the date of Order. (Refer ) Cost of Free Power Further, the Petitioner is also directed to submit the details of cost of free power as booked in the accounts, cost of free power trued up by the Commission and the amount remitted to GoU by the Petitioner in this regard from FY to FY within 3 months of the date of the Order. (Refer 3.2.3) Depreciation The Commission directs the Petitioner to claim depreciation in line with its practice followed in the accounts. (Refer ) Bad Debt In this regard, UPCL is again directed to refrain itself from treating rectification of wrong billing made in the earlier period as writing off the bad debts. (Refer 3.3.3) Uttarakhand Electricity Regulatory Commission 319

334 Order on True-up for FY , APR for FY & ARR for FY Distribution Loss The Commission directs the Petitioner to submit division wise action plan to reduce the losses in the above divisions to below 20% within one month from the date of issuance of this Order. (Refer 4.3) Impact of VII Pay Commission The Petitioner is directed to maintain separate details of the amount paid as arrears to its employees on account of implementation of the recommendations of VII Pay Commission. (Refer ) Additional A&G Expenses The Petitioner is directed to book these expenses separately under the relevant accounting head, i.e. R&M expenses or A&G expenses and claim the same during truing up of the respective years. (Refer ) Adjustment of Free Power The Commission also directs the Petitioner to refrain from such financial engineering in its future proposals in the absence of firm assurances/commitments from the State Government which results in misleading all the stakeholders. (Refer ) Consumer Mix The Commission directs UPCL not to indicate any un-metered category in its commercial diary and should ensure that no energy should be booked, in this account. In absence of the corrective action at UPCL s end, action under provisions of Act/Rules/Regulations would be initiated. (Refer 6.1.1) Conductor Augmentation The Petitioner is directed to indentify such feeders/spans where the power distribution network is on GI wire and replace them with the ACSR or better conductors latest by and submit a compliance report under affidavit on the same. 320 Uttarakhand Electricity Regulatory Commission

335 7. Commission s Directives Moreover, the Petitioner is also directed to prepare and submit an action plan for checking and refurbishment of protection systems at various 33/11 kv sub-stations latest by (Refer 6.4) Inventory Management Considering the high level of inventories maintained by UPCL, the Commission feels the same as a prima-facie lapse on the part of the Petitioner with regard to inventory management, the Petitioner is directed to submit the following details within one month of the date of Order failing which appropriate action will be initiated under the Act: a) List of inventory as on b) The accounting policies adopted in measuring inventories, including the cost formula used; c) Basis on which inventories issued: FIFO/LIFO/etc. and reason for choosing the same. d) Whether any inventory classification, such as ABC analysis has been done? If yes the same may be submitted and if no, reason for the same may be furnished? e) Whether the inventories are verified physically? If yes, the periodicity of the same, alongwith the report of last physical verification. If physical verification is not being conducted reasons for the same? (Refer 6.5.4) Collection Efficiency In this regard, the Commission directs UPCL to submit a plan to demonstrate as to how it will work in the direction of improving its actual collection so that the gap between the actual collection efficiency and the collection efficiency approved by the Commission may be brought to minimum. (Refer ) 7.3 Conclusion Having considered the submissions made by the Petitioner, the responses of various stakeholders and the relevant provisions of the Electricity Act, 2003 and Regulations of the Commission, the Commission hereby approves that: Uttarakhand Electricity Regulatory Commission 321

336 Order on True-up for FY , APR for FY & ARR for FY (i) Uttarakhand Power Corporation Ltd., the distribution and retail supply licensee in the State will be entitled to charge the tariffs from consumers in its licensed area of supply as given in the Rate Schedule for FY annexed hereto as Annexure- 1. These Tariffs will be effective from April 01, (ii) Uttarakhand Power Corporation Ltd., the distribution and retail supply licensee in the State will realize from consumers of Electricity in the State, miscellaneous charges as listed out in Annexure- 2 of this Order and shall not recover any other charge, fee, deposit etc., unless approved by the Commission. (iii) The above tariffs shall continue to be applicable till revised by the Commission. The Petitioner shall forward a report on compliance of the directions given in this Order within the time stipulated for compliance. (Subhash Kumar) Chairman 322 Uttarakhand Electricity Regulatory Commission

337 8. Annexures 8.1 Annexure 1: Rate Schedule Effective from A. General Conditions of Supply 1. Character of Service i) Alternating Current 50 Hz., single phase, 230 Volts (with permissible variations) up to a load of 4 kw. ii) Alternating Current 50 Hz, three phase, 4 wire, 400 Volts or above (with permissible variations) for loads above 4 kw depending upon the availability of voltage of supply. 2. Conditions for New Connections i) Supply to new connections of more than 75 kw (88 kva) and up to 2550 kw (3000 kva) shall be released at 11 kv or above, loads above 2550 kw (3000 kva) and upto 8500 kw (10000 kva) shall be released at 33 kv or above and loads above 8500 kw (10000 kva) shall be released at 132 kv or above. ii) All new connections shall be given with meter conforming to CEA Regulations on Installation and Operation of Meters. iii) All new 3 phase connections above 4 kw shall be released with Electronic Tri-vector Meter having Maximum Demand Indicator. iv) All new Single Point Bulk Connection shall be given only for Load of more than 75 kw. v) Consumers having motive loads of more than 5 BHP shall install Shunt Capacitor of appropriate rating and conforming to BIS specification. vi) All new connections at HT/EHT should be released only with 3 phase 4 wire meters. 3. Point of Supply Energy will be supplied to a consumer at a single point. 4. Billing in Defective Meter (ADF/IDF), Meter Not Read/Not Accessible (NA/NR) and Defective Reading (RDF) Cases 323 Uttarakhand Electricity Regulatory Commission

338 Order on True-up for FY , APR for FY & ARR for FY In NA/NR cases, the energy consumption shall be assessed and billed as per average consumption of last one year average consumption (as per the Electricity Supply Code) which shall be subject to adjustment when actual reading is taken. Such provisional billing shall not continue for more than two billing cycles at a stretch. Thereafter, the licensee shall not be entitled to raise any bill on provisional basis. In case of Appear defective meter (ADF) Identified defective meter (IDF) and Reading defect (RDF) cases, the consumers shall be billed on the basis of the average consumption of the past three billing cycles immediately preceding the date of the meter being found or being reported defective (as per the Electricity Supply Code). These charges shall be leviable for a maximum period of three months or two billing cycle in case of bi-monthly billing only during which time the licensee is required to replace the defective meter. Thereafter, the licensee shall not be entitled to raise any bill without correct meters. The checking and replacement of defective meter cases namely IDF and ADF and defective reading cases namely RDF shall be done by the licensee in accordance with Regulation of the Electricity Supply Code. 5. Billing in case of domestic metered consumers in rural/hilly areas whose meters are not being read For cases relating to domestic metered consumers in rural/hilly areas, where meter reading is either not being taken regularly or taken randomly over delayed interval of time, the provisional billing under these circumstances for such consumers shall be done at the normative levels of consumption as given below, which shall be subject to annual adjustment based on actual meter reading. Category Normative Consumption Domestic (Rural-Hilly Areas) 30 kwh/kw/month Domestic (Rural-Other Areas) 50 kwh/kw/month For this purpose, the contracted load shall be rounded off to next whole number. Billing on this basis is subject to annual adjustment and the licensee is to ensure meter reading of such consumers at least once a year. 6. Billing in New Connection or conversion from unmetered to metered Cases For cases such as new connections or conversion of unmetered to metered connection, where past reading is not available, the provisional billing shall be done at the normative levels of 324 Uttarakhand Electricity Regulatory Commission

339 8. Annexures consumption as given below, which shall be subject to adjustment when actual reading is taken. Category Normative Consumption Domestic (Urban) 100 kwh/kw/month Domestic (Rural-Hilly Areas) 30 kwh/kw/month Domestic (Rural-Other Areas) 50 kwh/kw/month Non-domestic (Urban) 150 kwh/kw/month Non-domestic (Rural) 100 kwh/kw/month Private Tube Wells 60 kwh/bhp/month Industry LT Industry 150 kwh/kw/month HT Industry 150 kvah/kva /month For this purpose, the contracted load shall be rounded off to next whole number. Billing on this basis shall continue only for a maximum period of 2 billing cycles, during which the licensee should ensure actual reading. Thereafter, the licensee shall not be entitled to raise any bill without correct meter reading. In all other categories, 1st bill shall be raised only on actual reading. 7. Delayed Payment Surcharge (DPS) (for all categories except PTW) In the event of electricity bill rendered by licensee, not being paid in full within 15 days grace period after due date, a surcharge of 1.25% on the principal amount of the bill which has not been paid, shall be levied from the original due date for each successive month or part thereof until the payment is made in full without prejudice to the right of the licensee to disconnect the supply in accordance with Section 56 of the Electricity Act, The licensee shall clearly indicate in the bill itself the total amount, including DPS, payable for different dates after the due date, after allowing for the grace period of 15 days, taking month as the unit as shown exemplified below: EXAMPLE: Amount payable by Due date Due Date Rs. 100/- 1 st May 2018 On or Before 16 th May 2018 Rs. 100/- Amount Payable After 16 th May 2018 Rs After 1 st June 2018 Rs Uttarakhand Electricity Regulatory Commission 325

340 Order on True-up for FY , APR for FY & ARR for FY Solar Water Heater rebate If consumer installs and uses solar water heating system, rebate of Rs. 100/- p.m. for each 100 litre capacity of the system or actual bill for that month whichever is lower shall be given subject to the condition that consumer gives an affidavit to the licensee to the effect that he has installed such system, which the licensee shall be free to verify from time to time. If any such claim is found to be false, in addition to punitive legal action that may be taken against such consumer, the licensee will recover the total rebate allowed to the consumer with 100% penalty and debar him from availing such rebate for the next 12 months. 9. Prepaid Metering Prepaid metering scheme approved by the Commission in this Order shall be applicable. A rebate of 4% of energy charges for Domestic category (RTS-1 and RTS-1A) and 3% of energy charges for Other LT consumers shall be allowed to the consumers under the Prepaid Metering Scheme from the date of installation and operationalisation of Prepaid Meters. However, no rebate shall be applicable on RTS-8, i.e. Temporary Supply. Solar water rebate as provided above in the Rate Schedule shall be applicable on prepaid consumers also subject to fulfillment of conditions provided therein. 10. Rebate/surcharge for availing supply at voltage higher/lower than base voltage (i) For consumers having contracted load upto 75 kw/88 kva - If the supply is given at voltage above 400 Volts and upto 11 kv, a rebate of 5% would be admissible on the Energy Charge. (ii) For consumers having contracted load above 75 kw/88 kva In case the supply is given at 400 Volts, the consumer shall be required to pay an extra charge of 10% on the bill amount calculated at the Energy Charge. (iii) For consumers having contracted load above 75 kw/88 kva In case of supply at 33 kv the consumer shall receive a rebate of 2.5% on the Energy Charge. (iv) For consumers having contracted load above 75 kw/88 kva and receiving supply at 132 kv and above, the consumer shall receive a rebate of 7.5% on the Energy Charge. (v) All voltages mentioned above are nominal rated voltages. 326 Uttarakhand Electricity Regulatory Commission

341 8. Annexures (vi) No rebate or surcharges would be applicable on consumers having pre-paid connections. 11. Low Power Factor Surcharge (not applicable to Domestic, PTW categories and also to other categories having kvah based Tariff) (i) On the consumers without Electronic Tri Vector Meters who have not installed shunt capacitors of appropriate ratings and specifications, a surcharge of 5% on the current energy charges shall be levied. (ii) On consumers with Electronic Tri Vector Meters, a surcharge of 5% on current energy charges will be levied for having power factor below 0.85 and upto 0.80 & a surcharge of 10% of current energy charges will be levied for having power factor below (iii) No surcharge would be applicable on consumers having pre-paid connections. 12. Excess Load/Demand Penalty (Not applicable to Domestic, Snow bound and PTW categories) In case of consumers where electronic meters with MDI have been installed, if the maximum demand recorded in any month exceeds the contracted load/demand, charges for such excess load/demand shall be levied equal to twice the normal rate of fixed/demand charge as applicable. Such excess load penalty shall be levied only for the month in which maximum demands exceeds contracted load. However, no excess load penalty would be applicable on consumers having prepaid connections. Example: (i) For consumers where fixed charges on the basis of contracted load/demand have been specified: Contracted load 30 kw, Maximum Demand 43 kw, Excess Demand 43-30=13 kw, Rate of Fixed Charges= Rs. 70/kW Fixed Charges for contracted load = 30 x 70=Rs Fixed Charges for excess load = 13x (2 x70) =Rs Total Fixed Charges = = Rs (ii) For industrial consumers billed on billable demand: Uttarakhand Electricity Regulatory Commission 327

342 Order on True-up for FY , APR for FY & ARR for FY Contracted demand 2500 kva, Maximum Demand 2800 kva, Billable Demand =2800 kva Excess Demand = =300 kva, Rate of Demand Charges= Rs. 355/kVA Demand Charges for contracted demand =2500 x 355=Rs Demand Charges for excess demand = 300x (2 x 355) =Rs Total Demand Charges = = Rs Single Point Bulk Supply for Domestic, Non Domestic and Mixed Load Categories (i) (ii) Single Point Bulk Supply connection shall only be allowed for Sanctioned/Contracted Load above 75 kw with single point metering for further distribution to the end users. However, this shall not restrict the individual owner/occupier from applying for individual connection. The person who has taken the single point supply shall be responsible for all payments of electricity charges to the Licensee and collection from the end consumer as per tariff prescribed for such consumer. The Licensee shall ensure that tariff being charged from end consumer does not exceed the prescribed tariff for the concerned category of the consumer. (iii) The person who has taken the single point supply shall also be deemed to be an agent of Licensee to undertake distribution of electricity for the premises for which single point supply is given under seventh proviso to section 14 of the Electricity Act, 2003 and distribution licensee shall be responsible for compliance of all provisions of the Act and Rules & Regulations thereunder within such area. (iv) Single Point Bulk Supply under Domestic shall only be applicable for Residential Colonies/Residential Multistoreyed Buildings including common facilities (such as Lifts, Common Lighting and Water Pumping system) of such Residential Colonies/Residential Multistoreyed Buildings. In case these Residential Colonies/Residential Multistoreyed Buildings also have some shops or other commercial establishments, the tariff of Mixed Load shall be applicable for such premises. 328 Uttarakhand Electricity Regulatory Commission

343 8. Annexures (v) Single Point Bulk Supply Under Non-Domestic shall only be applicable for Shopping Complexes/Multiplex/Malls. 14. Rounding off (i) The contracted load/demand shall be expressed in whole number only and fractional load/demand shall be rounded up to next whole number. Example: Contracted/Sanctioned Load of 0.15 kw shall be reckoned as 1 kw for tariff purposes. Similarly, contracted/sanctioned load of kw/kva shall be taken as 16 kw/kva. (ii) All bills will be rounded off to the nearest rupee. 15. Other Charges Apart from the charges provided in the Rate of Charge and those included in the Schedule of Miscellaneous Charges, no other charge shall be recovered from the consumer unless approved by the Commission. Uttarakhand Electricity Regulatory Commission 329

344 Order on True-up for FY , APR for FY & ARR for FY B. Tariffs 1. Applicability RTS-1: Domestic This schedule shall apply to supply of power to: (i) Residential premises (including premises of Departmental Employees & Pensioners of UPCL, PTCUL and UJVN Ltd.) for light, fan, power and other domestic purposes including common facilities (such as Lifts, Common Lighting and Water Pumping system) (ii) Single Point Bulk Supply above 75 kw for Residential Colonies, Residential Multistoreyed buildings where energy is exclusively used for domestic purpose including common facilities (such as Lifts, Common Lighting and Water Pumping system) of such Residential Colonies/Residential Multistoreyed Buildings (iii) Places of worship, i.e. Mandir, Masjid, Gurudwara, Church, etc. (only for standalone places of worship and not for the places of worship which have other facilities such as Dharamshala, Community Hall, Dormatories, etc. attached with it) (This rate schedule shall also be applicable to consumers having contracted load upto 2 kw as also consumption upto 200 kwh/month and who are using some portion of the premises mentioned above for non-domestic purposes. However, if either contracted load for such premises is above 2 kw or consumption is more than 200 kwh/month, then the entire energy consumed shall be charged under the appropriate Rate Schedule unless such load is segregated and separately metered.) 2. Rate of Charge 1) Domestic 1.1)BPL/Life line consumers Description Fixed Charges* Energy Charges Below Poverty Line and Kutir Jyoti having load upto 1 kw and consumption upto 60 units per month 1.2) Other Domestic Consumers Rs. 18/ connection/month Rs. 1.61/kWh Upto 100 units per month Rs. 55 /month Rs. 2.65/kWh units per month Rs. 80 /month Rs. 3.45/kWh units per month Rs. 135/month Rs. 4.70/kWh Above 400 units per month Rs. 220/month Rs. 5.40/kWh 2) Single Point Bulk Supply Rs. 70/kW/month Rs. 4.25/kWh *Fixed Charges in case of other domestic consumers for the month shall be charged at the rates equivalent to the total consumption in the month. 330 Uttarakhand Electricity Regulatory Commission

345 8. Annexures RTS-1A: Snowbound 1. Applicability This schedule shall apply to supply of power to: (i) (ii) Domestic and non-domestic consumers in snowbound areas. This Schedule applies to areas notified as snowbound/snowline areas by the concerned District Magistrate. 2. Rate of Charge Description Fixed Charges Energy charges 1) Domestic Rs. 1.61/kWh 2) Non-domestic upto 1 kw Rs.18/connection/month Rs. 1.61/kWh 3) Non-domestic more than 1 kw & upto 4 kw Rs. 2.36/kWh 4) Non-Domestic more than 4 kw Rs. 30/connection/month Rs. 3.51/kWh 3. All other conditions of this Schedule shall be same as those in RTS-1. Uttarakhand Electricity Regulatory Commission 331

346 Order on True-up for FY , APR for FY & ARR for FY Applicability RTS-2: Non-Domestic This schedule should apply to supply of power to: 1.1 (i) Government/Municipal Hospitals (ii) Government/Government Aided Educational Institutions (iii) Charitable Institutions registered under the Income Tax Act, 1961 and whose income is exempted from tax under this Act. 1.2 Small Non Domestic Consumers with connected load upto 4 kw and consumption upto 50 units per month. 1.3 Other Non-Domestic Users including single point bulk supply above 75 kw for shopping complexes/multiplex/malls including common facilities (such as lifts, common lighting and water pumping system). 1.4 Independent Advertisement Boards/Hoardings - All commercial (road side / roof top or on the side of the buildings etc.) standalone independent advertisement hoardings such as private advertising sign posts/ sign boards/ sign glows/flex that are independently metered through a separate meter. 2. Rate of Charge S. No. Description Fixed Charges Energy charges (i) Government/Municipal Hospitals (ii) Government/Government Aided Educational Institutions 1.1 (iii) Charitable Institutions registered under the Income Tax Act, 1961 and whose income is exempted from tax under this Act (a) Upto 25 kw Rs. 60/ kw Rs. 4.35/ kwh (b) Above 25 kw Rs. 70/ kva Rs. 4.05/ kvah Other Non-Domestic Users (a) Small Non-Domestic Consumers with connected load upto 4 kw and 1.2 consumption upto 50 units per month* Rs. 65 / kw Rs. 4.55/ kwh (b) Others upto 25 kw not covered in 1.2(a) above Rs. 70 / kw Rs. 5.35/ kwh (c) Above 25 kw Rs. 70 / kva Rs. 5.25/ kvah 1.3 Single Point Bulk Supply** Rs. 70 / kva Rs. 5.15/ kvah 1.4 Independent Advertisement Hoardings Rs. 85/kW Rs. 5.80/kWh * If consumption exceeds 50 units/month, then on the entire energy consumed tariff as per sub-category 1.2(b) shall be charged 3. Other Conditions ** For loads above 75 kw for shopping complexes/multiplex/malls 3.1 ToD Meters shall be read by Meter Reading Instrument (MRI) only with complete dump with phasor diagram, Tamper Reports, full load survey reports etc. shall be downloaded for the purpose of complete analysis. 3.2 All consumers above 25 kw shall necessarily have ToD Meters. 332 Uttarakhand Electricity Regulatory Commission

347 8. Annexures 3.3 No meter shall be read at zero load or very low load. Licensee shall carry appropriate external load and shall apply the same, wherever, necessary to take MRI at load. 3.4 Copy of MRI Summary Report shall be provided alongwith the Bill. Full MRI Report including load survey report shall be provided on demand and on payment of Rs. 15/ Bill. Uttarakhand Electricity Regulatory Commission 333

348 Order on True-up for FY , APR for FY & ARR for FY RTS-3: Govt. Public Utilities 1. Applicability This schedule shall apply to supply of power to: (i) Public lamps including street lighting system, traffic control signals, lighting of public parks, etc. The street lighting of Harijan Bastis and villages are also covered by this Rate Schedule. (ii) State Tubewells, World Bank Tubewells, Pumped Canals and Lift irrigation schemes, Laghu Dal Nahar etc., (iii) Irrigation system owned and operated by any Government department. (iv) Public Water Works, Sewage Treatment Plants and Sewage Pumping Stations functioning under Jal Sansthan, Jal Nigam or other local bodies and Plastic Recycling Plants. 2. Rate of Charge Category Fixed Charges* Energy Charge Urban (Metered) Rs. 60/kVA/month Rs. 4.85/ kvah Rural (Metered) Rs. 50/kVA/month Rs. 4.85/ kvah * The Urban and Rural differentiation will apply only for supply of power to 1(i) & 1(iv) above. 3. Maintenance Charge for Public Lamps In addition to the Rate of Charge mentioned above, a sum of Rs. 10/- per light point per month shall be charged for operation and maintenance of street lights covering only labour charges where all material required will be supplied by the local bodies. However, the local bodies will have the option to operate and maintain the public lamps themselves and in such case no maintenance charge will be charged. 4. Provisions of Street Light Systems In case, the maintenance charge, as mentioned above, is being charged then the labour involved in the subsequent replacement or renewals of lamps shall be provided by the licensee but all the material shall be provided by the local bodies. If licensee provides material at the request of local body, cost of the same shall be chargeable from the local body. 334 Uttarakhand Electricity Regulatory Commission

349 8. Annexures The cost involved in extension of street light mains (including cost of sub-stations if any) in areas where distribution mains of the licensee have not been laid, will be paid for by the local bodies. Uttarakhand Electricity Regulatory Commission 335

350 Order on True-up for FY , APR for FY & ARR for FY Applicability RTS-4: Private Tube Wells/ Pumping Sets This schedule shall apply to supply of power to private tube-wells/pumping sets for irrigation purposes and for incidental agricultural processes confined to chaff cutter, thrasher, cane crusher and rice huller only. However, the tariff applicable for RTS-4 shall only be applicable if such incidental agricultural processes are being carried out for agricultural produce of the connection sanctioned for irrigation purposes. 2. Rate of charge Fixed Charges Energy Charges Category Rs./BHP/Month Rs./kWh RTS 4: PTW (Metered) Nil Payments of bills and Surcharge for Late Payment The bill shall be raised for this category twice a year only, i.e. by end of December (for period June to November) and end of June (for period December to May). The bill raised in December may be paid by the consumer either in lump-sum or in parts (not more than four times) till 30 th April next year for which no DPS shall be levied. Similarly, bill raised in June may be paid by 31 st October without any DPS. In case consumer fails to make payment within the specified dates, a 1.25% per month for the period (months or part thereof) shall be payable on the outstanding amount. 336 Uttarakhand Electricity Regulatory Commission

351 8. Annexures RTS-4A: Agriculture Allied Activities 1. Applicability This schedule shall apply to supply of power for use in nurseries growing plants/saplings, polyhouses and other units growing flowers/vegetables and fruits including mushroom cultivation which doesn t involve any kind of processing of product except for storing and preservation. 2. Rate of charge Category RTS 4(A): Agricultural Allied Services Fixed Charges Rs./BHP/Month Energy Charges Rs./kWh Nil 1.84 Uttarakhand Electricity Regulatory Commission 337

352 Order on True-up for FY , APR for FY & ARR for FY RTS-5: LT and HT Industry 1. Applicability This schedule shall apply to supply of power to: (i) Industries and /or processing or agro- industrial purposes, power loom as well as to Arc/Induction Furnaces, Rolling/Re-rolling Mills, Mini Steel Plants and to other power consumers not covered under any other Rate Schedule. (ii) The vegetable, fruits, floriculture & Mushroom integrated units engaged in processing, storing and packaging in addition to farming and those not covered under RTS-4A shall also be covered under this Rate Schedule. 2. Specific Conditions of Supply (i) All connections shall be connected with MCB (Miniature Circuit Breaker) or Circuit Breaker / Switch Gear of appropriate rating and BIS Specification. (ii) The supply to Induction and Arc Furnaces shall be made available only after ensuring that the loads sanctioned are corresponding to the load requirements of tonnage of furnaces. The minimum load of 1 Tonne furnace shall in no case be less than 400 kva and all loads will be determined on this basis. No supply will be given for loads below this norm. (iii) Supply to Steel Units shall be made available at a voltage of 33 kv or above through a dedicated individual feeder only with check meter at sub-station end. Difference of more than 3%, between readings of check meter and consumer meter(s), shall be immediately investigated by the licensee and corrective action shall be taken. (iv) Supply to all new connections with load above 1000 kva should be released on independent feeders only with provisions as at (iii) above. 338 Uttarakhand Electricity Regulatory Commission

353 8. Annexures Description 1. LT Industry having contracted load upto 75kW (100 BHP) Energy Charge Fixed /Demand Charge per month 1.1 Contracted load up to 25 kw Rs. 4.25/kWh Rs. 145/ kw of contracted load 1.2 Contracted load more than 25 kw Rs. 3.90/kVAh Rs. 145/ kva of contracted load 2. HT Industry having contracted load above 88 kva/75 kw (100 BHP) Load Factor # Rs./ kvah 2.1 Contracted Load up to 1000 kva 2.2 Contracted Load More than 1000 kva Upto 40% 3.85 Above 40% 4.20 Upto 40% 3.85 Above 40% 4.20 Rs. 295/kVA of the billable demand* Rs. 355/kVA of the billable demand*. * Billable demand shall be the actual maximum demand or 80 % of the contracted load whichever is higher. #For tariff purposes Load Factor (%) would be deemed to be = Consumption (excluding the energy received through open access)during the billing Maximum Demand or Contracted Demand whichever is less x No. of period 100 hours in the billing period Provided that in cases where maximum demand during the month occurs in a period when open access is being availed by the consumer, then maximum demand for the purpose of computation of load factor shall be that occurring during the period when no open access is being availed. 3. Time of Day Tariff (i) The rates of energy charge given above for LT industry with load more than 25 kw and HT industry shall be subject to ToD rebate/surcharge. (ii) ToD Meters shall be read by Meter Reading Instrument (MRI) only with complete dump with phasor diagram, Tamper Reports, full load survey reports etc. shall be downloaded for the purpose of complete analysis and bills shall be raised as per ToD rate of charge. (iii) No meter shall be read at zero load or very low load. Licensee shall carry appropriate external load and shall apply the same, wherever, necessary to take MRI at load. Uttarakhand Electricity Regulatory Commission 339

354 Order on True-up for FY , APR for FY & ARR for FY (iv) Copy of MRI Summary Report shall be provided along with the Bill. Full MRI Report including load survey report shall be provided on demand and on payment of Rs. 15/ Bill. (v) ToD Load shall be as under: Season/Time of day Winters to Summers to Morning Peak hours Normal hours Evening Peak Hours Off-peak Hours hrs hrs hrs hrs hrs hrs hrs The, ToD Rate of Energy Charges shall be as under: For LT Industry Energy Charge during Normal Hours Peak Hours Off-peak Hours Rs. 3.90/kVAh Rs. 5.85/kVAh Rs. 3.22/kVAh For HT Industry Load Factor* Energy Charge during Normal Hours Peak Hours Off-peak Hours Upto 40% Rs. 3.85/kVAh Rs. 6.30/kVAh Rs. 3.27/kVAh Above 40% Rs. 4.20/kVAh Rs. 6.30/kVAh Rs. 3.57/kVAh * Load Factor shall be as defined in Clause 2 above 4. Seasonal Industries Where a consumer having load in excess of 18 kw (25 BHP) and ToD meter and avails supply of energy for declared Seasonal industries during certain seasons or limited period in the year, and his plant is regularly closed down during certain months of the financial year, he may be levied for the months during which the plant is shut down (which period shall be referred to as offseason period) as follows: (i) The tariff for Season period shall be same as Rate of Charge as given in this schedule. (ii) Where actual demand in Off Season Period is not more than 30% of contracted load, the energy charges for Off-Season period shall be same as energy charges for Season period given in Rate of Schedule above. However, the contracted demand in the Off Season period shall be reduced to 30%. 340 Uttarakhand Electricity Regulatory Commission

355 8. Annexures (iii) During Off-season period, the maximum allowable demand will be 30% of the contracted demand and the consumers whose actual demand exceeds 30% of the contracted demand in any month of the Off Season will be denied the above benefit of reduced contracted demand during that season. In addition, a surcharge at the rate of 10% of the demand charge shall be payable for the entire Off Season period. Terms and Conditions for Seasonal Industries (i) The period of operation should not be more than 9 months in a financial year. (ii) Where period of operation is more than 4 months in a financial year, such industry should operate for at least consecutive 4 months. (iii) The seasonal period once notified cannot be reduced during the year. The off-season tariff is not applicable to composite units having seasonal and other categories of loads. (iv) Industries in addition to sugar, ice, rice mill, frozen foods and tea shall be notified by Licensee only after prior approval of the Commission. 5. Factory Lighting The electrical energy supplied under this schedule shall also be utilised in the factory premises for lights, fans, coolers, etc. which shall mean and include all energy consumed for factory lighting in the offices, the main factory building, stores, time keeper s office, canteen, staff club, library, creche, dispensary, staff welfare centres, compound lighting, etc. 6. Continuous and Non-continuous supply (i) Continuous Process Industry as well as non continuous process industrial consumers connected on either independent feeders or industrial feeder can opt for continuous supply. For industrial feeder, all connected industries will have to opt for continuous supply and in case any consumer on industrial feeder does not wish to opt for continuous supply, all the consumers on such feeder will not be able to avail continuous supply. Such Industrial consumers who opt for continuous supply shall be exempted from load shedding during scheduled/unscheduled power cuts and during restricted hours of the period of restriction in usage approved by the Commission from time to time, except load shedding required due to emergency breakdown/shutdown. Uttarakhand Electricity Regulatory Commission 341

356 Order on True-up for FY , APR for FY & ARR for FY (ii) Consumers who are existing Continuous Supply Consumers shall continue to remain Continuous Supply Consumers and they need not apply again for seeking continuous supply. Such consumers shall pay 10% extra energy charges, in addition to the energy charges given above, w.e.f. April 01, 2018 till March 31, However, in case of any pending dispute with UPCL in the matter of continuous supply on certain feeders, those consumers will have to apply afresh, for availing the facility of continuous supply, by April 30, (iii) The new applicants for continuous supply of power (including those who are applying afresh as per above) can apply for seeking the continuous supply option at any time during the year. However, continuous supply surcharge for such consumers shall be applicable with effect from May 1, 2018 till March 31, UPCL shall provide the facility of continuous supply within 7 days from the date of application, subject to fulfilment of Conditions of Supply. (iv) In case of re-arrangement of supply through independent feeder, UPCL shall provide the facility of continuous supply from the date of completion of work of independent feeder subject to fulfilment of Conditions of Supply and the Continuous Supply Surcharge on such consumers shall be applicable from the date of energisation of aforesaid independent feeder till 31 st March 2019, irrespective of actual period of continuous supply option. (v) In case of a new consumer (new connection) opting continuous supply, 10% extra energy charges as Continuous Supply Surcharge shall be applicable from the date of new connection till 31 st March 2019, irrespective of the actual period of continuous supply. (vi) The existing consumers availing continuous supply option, who wish to discontinue the continuous supply option granted to them earlier, will have to communicate, in writing, to UPCL latest by April 30, 2018 and they shall continue to pay continuous supply surcharge alongwith the tariff approved in this Order till April 30, Further, in this regard, if due to withdrawal by one consumer from availing continuous supply option on a particular feeder, supplying to other continuous supply consumers as well, the status of other continuous supply consumers on that feeder is 342 Uttarakhand Electricity Regulatory Commission

357 8. Annexures affected, then UPCL shall inform all the affected consumers in writing, well in advance. (vii) The Continuous Supply Surcharge shall not be applicable on the power procured by the industrial consumers through open access. (viii) UPCL shall not change the status of a continuous supply feeder to a non-continuous supply feeder. (ix) UPCL/PTCUL shall take up augmentation, maintenance and overhauling works on top priority, specially in the sub-stations where circuit breakers, other equipment, etc. are in dilapidated condition and, thereby, shall ensure minimisation of interruptions of the continuous supply feeders. (x) UPCL/PTCUL shall carry out periodical preventive maintenance of the feeders supplying to continuous supply consumers. The licensees shall prepare preventive maintenance schedule, in consultation with continuous supply consumers, well in advance, so that such consumers can plan their operations accordingly. (xi) The Licensee should show the energy charges and continuous supply surcharge thereon separately in the bills. 7. Demand Charges for HT Industry If the minimum average supply to any HT Industry Consumers is less than 18 hours per day during the month, the Demand Charges applicable for such HT Industry Consumer shall be 80% of the approved Demand Charges for HT Industry. Uttarakhand Electricity Regulatory Commission 343

358 Order on True-up for FY , APR for FY & ARR for FY RTS 6: Mixed Load 1. Applicability This schedule applies to single point bulk supply connection of more than 75 kw where the supply is used predominantly for domestic purposes (with more than 60% domestic load) and also for other non-domestic purposes. This schedule also applies to supply to MES. 2. Rate of Charge The following rates shall apply to consumers of this category Fixed Charges Rs. 75/kW/month Energy Charges Rs. 4.80/kWh 3. Other conditions Apart from the above, other conditions of tariff shall be same as those for RTS-1 consumers. However, excess load penalty shall be applicable as per clause 12 of General Conditions of Supply. 344 Uttarakhand Electricity Regulatory Commission

359 8. Annexures RTS 7: Railway Traction 1. Applicability This schedule applies to Railways utilizing power for traction purposes. 2. Rate of Charge The following rates of energy and demand charge shall apply to this category: 3. Other conditions Demand Charges Energy Charges Rs./kVA/month Rs./ kvah 245/- Rs Apart from the above, other conditions of tariff shall be same as those for General HT Industries under RTS-5 consumers except applicability of ToD tariff and surcharge for continuous supply. Uttarakhand Electricity Regulatory Commission 345

360 Order on True-up for FY , APR for FY & ARR for FY RTS-8: Temporary Supply 1. Applicability (i) This schedule shall apply to temporary supplies of light, fan and power loads for all purposes including illumination/public address/ceremonies and festivities/functions/ temporary shops not exceeding three months. (ii) This schedule shall also apply for power taken for construction purposes including civil work by all consumers including Government Departments. Power for construction purposes for any work / project shall be considered from the date of taking first connection for the construction work till completion of the work / project. However, use of electricity through a permanent connection sanctioned for premises owned by the consumer for construction, repair or renovation of existing building, shall not be considered as unauthorised use of electricity as long as the intended purpose/use of the building/apartments being constructed is same/permissible in the sanctioned category of the connection. 2. Rate of Charge The rate of charge will be corresponding rate of charge in appropriate Schedule Plus 25%. The appropriate rate schedule for the temporary supplies for cane crusher upto 15 BHP given for maximum period of four (4) months will be RTS Uttarakhand Electricity Regulatory Commission

361 8. Annexures 8.2 Annexure 2: Schedule of Miscellaneous Charges Sl. No 1 Nature of Charges Checking and Testing of Meters Unit Approved (Rs.) a. Single Phase Meters Per Meter b. Three Phase Meters Per Meter c. Recording Type Watt-hour Meters Per Meter d. Maximum Demand Indicator/ LT CT operated Meters Per Meter e. Tri-vector Meters/ HT Meters with CT/PT Per Meter f. Ammeters and Volt Meters Per Meter g. Special Meters Per Meter h. Initial Testing of Meters Per Meter NIL 2 Subsequent testing and installation other than initial testing Per Meter Disconnection and Reconnection of supply on consumers request or non-payment of bill (for any disconnection or reconnection the charge will be 50%) a. Consumer having load above 100 BHP/75 kw Per Job b. Industrial and Non Domestic consumers upto 100 BHP/75 kw Per Job c. All other categories of consumers Per Job Replacement of Meters a. Installation of Meter and its subsequent removal in case of Temporary Connections b. Changing of position of Meter Board at the consumer's request Checking of Capacitors (other than initial checking) on consumer's request: Per Job Per Job a. At 400 V/ 230 V Per Job b. At 11 kv and above Per Job Uttarakhand Electricity Regulatory Commission 347

362 Order on True-up for FY , APR for FY & ARR for FY Annexure 3: Public Notice 348 Uttarakhand Electricity Regulatory Commission

363 8. Annexures Uttarakhand Electricity Regulatory Commission 349