TARIFF ORDER 2014 CESC

Transcription

1 KARNATAKA ELECTRICITY REGULATORY COMMISSION TARIFF ORDER 2014 OF CESC (Under MYT Framework) ON ANNUAL PERFORMANCE REVIEW FOR FY13 & APPROVAL OF ARR & RETAIL SUPPLY TARIFF FOR FY15 12 th May th and 7 th Floors, Mahalaxmi Chambers 9/2, M.G. Road, Bangalore Phone: / Fax: Website:

2 C O N T E N T S CHAPTER PAGE NO. 1 Introduction Brief History of CESC CESC at a Glance No. of Consumers, Sales and revenue details for FY Summary of Filing & Tariff Determination Process Background for Current Filing Preliminary Observations of the Commission Public Hearing Process Consultation with the Advisory Committee of the Commission 3 Suggestions /Objections and Replies Sri Vasu, Hon ble M.L.A, Chamaraja Constituency, Mysore Sri Aswathnarayan, Hon ble M.L.C, List of persons who filed written objections List of persons who made oral submissions during Public hearing on Tariff Related Issues Quality of Power Supply Issue of Compliance to the Commission s Directives Issues regarding Wheeling and Banking Specific request by the Objectors Commission s Findings 31 4 Annual Performance Review for FY CESC s application for APR for FY CESC s Submission CESC s Financial Performance as per Audited Accounts for FY13 5 Revised Annual Revenue Requirement for FY Revised ARR for FY 15 CESC s Filing APR for FY13 & FY Annual Revenue Requirement for FY Capital Investments for FY Sales Forecast for FY Distribution Losses for FY Power Purchase for FY O & M Expenses ii

3 5.2.6 Depreciation Interest and Finance Charges Interest on loans Interest on Working Capital Interest on Consumer Deposit Return on Equity Other Income Fund towards Consumer Relations / Consumer Education Abstract of ARR for FY Segregation of ARR into ARR for Distribution Business and ARR for Retail Supply Business 5.5 Gap in Revenue for FY Determination of Tariff for FY Tariff Application Statutory provisions guiding determination of Tariff Consideration for Tariff setting Revenue at Existing Tariff and deficit for FY Other Issues Determination of wheeling charges Wheeling within CESC area Wheeling of Energy using Transmission network or network of more than one licensee Charges for Wheeling energy by RE sources( Non REC route) to consumers in the State Charges for Wheeling energy by RE sources Wheeling energy from the State to a consumer outside the State and for those opting for renewable energy certificate. 6.7 Other Tariff related issues Effect of Revised Tariff Summary of Tariff order Commissions Order iii

4 LIST OF TABLES TABLE NO. CONTENT PAGE NO. 4.1 ARR for FY13 -CESC s submission Financial performance of CESC for FY Approved and Actual sales for FY ESCOMs source wise power purchase for FY CESCs source wise power purchase for FY O&M Expenses of CESCs Approved O&M expenses as per Tariff Order dtd Normative O&M expenses for FY Approved uncontrollable O&M expenses -FY Total O&M expenses for FY Allowable Depreciation for FY Capital works approve and actual expenditure for FY Allowable Interest on Loans FY Allowable Interest on Working Capital for FY Allowable Interest and Finance Charges FY Other debits - CESC s Submission Allowable Other debits Allowable Return on Equity Approved ARR for FY13 as per APR Additional subsidy for FY Proposed ARR for FY Revised Capex proposal for FY Approved Retail Sales for FY Approved distribution losses for FY Source wise power procurement proposal submitted by CESC for FY ESCOMs Approved Power Purchase FY Approved power purchase for FY O&M expenses - CESC s proposal Computation of Inflation Index for FY Approved O&M expenses for FY Depreciation for FY 15 CESC s Proposal Approved Depreciation for FY Interest and Finance charges for FY15- CESC s proposal Interest on Loans CESC s Proposal Approved Interest on Loans for FY iv

5 5.16 Approved Interest on working capital for Fy Interest on consumer deposits CESC s proposal Approved Interest on consumer deposits for FY Approved Interest on finance charges for FY Approved RoE for FY Approved consolidated ARR for FY Segregation between distribution business and retail supply business 5.23 Approved Revised ARR for Distribution Business Approved revised ARR for Retail Supply Business Revenue gap for Fy Revenue Deficit for FY Wheeling Charges LIST OF ANNEXURES SL. NO. DETAILS OF ANNEXURES PAGE NO. I Approved energy and cost for FY II Proposed and approved revenue for FY III Electricity Tariff v

6 ABBREVIATIONS AAD AEH ABT A&G AG APDRP APR APV ARR ATE ATL BBMP BEE BJ BMAZ CESC BNC BPL BRAZ BWSSB CAG CAGR CDT CERC CE CEA CESC CGR CGS CKM CMD CPI CPRI CoS Advance Against Depreciation All Electric Home Availability Based Tariff Administrative & General Expenses Accountant General Accelerated Power Development and Reforms Programme Annual Performance Review Above Poverty Line Annual Revenue Requirement Appellate Tribunal for Electricity Anti Theft Law Bruhut Bangalore Mahanagara Palike Bureau of Energy Efficiency Bhagya Jyothi Bangalore Metropolitan Area Zone Bangalore Electricity Supply Company Billing & Collection Below Poverty Line Bangalore Rural Area Zone Bangalore Water Supply & Sewerage Board Comptroller & Auditor General Compound Annual Growth Rate Commission Determined Tariff Central Electricity Regulatory Commission Chief Engineer Central Electricity Authority Chamundeshwari Electricity Supply Corporation Consumer Growth Rate Central Generating Stations Circuit Kilometre Chairman & Managing Director Consumer Price Index Central Power Research Institute Cost of Service vi

7 DA DC DC LINES DCB DG PLANT DMS DPR DRUM DSM DTC EC EHT EHV EOU ERC ES&D CODE ESCO ESCOMs FC FDSC FEC FAC FY FEV GESCOM GFA GIS GoI GoK HESCOM HP HT HV Hz IDC IP SETS IPPs KEB Dearness Allowance Direct Connection Double Circuit Lines Demand Collection & Balance Diesel Generating Plant Distribution Management System Detailed Project Report Distribution Reforms, Upgrade & Management Demand Side Management Distribution Transformer Centre Energy Charges Extra High Tension Extra High Voltage Export Oriented Units Expected Revenue From Charges Electricity Supply & Distribution Code Electricity Service Companies Electricity Supply Companies Fixed Charges Foreign Debt Service Charges Fuel Escalation Charges Fuel Adjustment Cost Financial Year Foreign Exchange Variation Gulbarga Electricity Supply Company Gross Fixed Assets Geographical Information System Government of India Government of Karnataka Hubli Electricity Supply Company Horse Power High Tension High Voltage Hertz Interest During Construction Irrigation Pump Sets Independent Power Projects/ Producers Karnataka Electricity Board vii

8 KER Act KERC KJ KM/Km KPCL KPTCL KV KVA KW KWH LDC LT MAT MD MESCOM MFA MGHE Station MIS MNR MoP MU MUSS MVA MVAR MW MYT NFA NTPC O&M PCKL PFC PGCIL PKCL PLF POCA PPA PPCA PRDC Karnataka Electricity Reform Act Karnataka Electricity Regulatory Commission Kutira Jyothi Kilometre Karnataka Power Corporation Limited Karnataka Power Transmission Corporation Limited Kilo Volts Kilo Volt Ampere Kilo Watt Kilo Watt Hour Load Despatch Centre Low Tension Minimum Alternate Tax Managing Director Mangalore Electricity Supply Company Miscellaneous First Appeal Mahatma Gandhi Hydro Electric Station Management Information System Meter Not Recording Ministry of Power Million Units Master Unit Sub Station Mega Volt Ampere Mega Volt Ampere Reactive Mega Watt Multi Year Tariff Net Fixed Assets National Thermal Power Corporation Operation & Maintenance Power Corporation of Karnataka Ltd., Power Finance Corporation Limited Power Grid Corporation Of India Limited Power Corporation of Karnataka Ltd., Plant Load Factor Power Purchase & Other Cost Adjustment Power Purchase Agreement Power Purchase Cost Adjustment Power Research & Development Consultants viii

9 PTC RE RGGVY R&M RLMS ROE ROR RTPS SC & ST SC LINE SEB SERCs SLDC SPV T&D TCs TERI TPC TRL UG CABLES VC VVNL WPI YOY Power Trading Corporation Rural Electrification Rajiv Gandhi Grameena Vidyuth Yojana Repair and Maintenance Rural Load Management System Return on Equity Rate of Return Raichur Thermal Power Station Schedule Caste & Schedule Tribe Single Circuit Line State Electricity Board State Electricity Regulatory Commissions State Load Despatch Centre Special Purpose Vehicle Transmission & Distribution Transformer Centres The Energy & Resource Institute Tanirbavi Power Company Total Revenue Management Underground Cables Variable Charges Visvesvaraya Vidyuth Nigama Limited Wholesale Price Index Year on Year ix

10 KARNATAKA ELECTRICITY REGULATORY COMMISSION, BANGALORE Dated this 12 th day of May, Order on CESC s Annual Performance Review for FY13 and Revised ARR & Retail Supply Tariff for FY15 In the matter of: Application of CESC in respect of the Annual Performance Review for FY13 and Revised ARR & Retail Supply Tariff for FY15 under Multi Year Tariff framework. Present: Shri M.R.Sreenivasa Murthry Chairman Shri H.D.Arun Kumar Shri D.B.Manival Raju Member Member O R D E R The Chamundeshwari Electricity Supply Corporation Ltd., (hereinafter referred to as CESC) is a Distribution Licensee under the provisions of the Electricity Act 2003, and has on & filed the following applications for consideration and orders: a) Approval of the Annual Performance Review for the financial year FY13 and Revision of ARR for FY15. x

11 b) Approval of the revised distribution and Retail Supply Tariff for the financial year (FY15). In exercise of the powers conferred under Sections 62, 64 and other provisions of the Electricity Act, 2003, read with KERC (Terms and conditions for Determination of Tariff for Distribution and Retail Sale of Electricity) Regulations 2006, and other enabling Regulations, the Commission has carefully considered the applications and the views and objections submitted by the consumers and other stakeholders. Commission s decisions are given in this order, Chapter wise. The xi

12 CHAPTER 1 INTRODUCTION 1.0 Brief History of CESC: Chamundeshwari Electricity Supply Corporation Ltd., (CESC) is a DistributionLicensee under Section 14 of the Electricity Act, 2003(hereinafter referred to as the Act). CESC is responsible for purchase of power, distribution and retail supply of electricity to its consumersand also providing infrastructure for open access, Wheeling and Banking in its area of operation which includes five Districts of the State as indicated below: 1. Mysore 2. Hassan 3. Mandya HASSAN MANDYA CE SC, KODAGU MYSORE CH NAGAR 4. ChamarajNagara 5. Kodagu CESC is a registered company under the Companies Act, 1956, incorporated on 19 th August, CESC commenced its operations on 1 st April, Further, the Madikeri Division (Kodagu District) which was earlier under MESCOM was transferred to CESC with effect from 1 st April, xii

13 At present CESC s area of operations is structured as follows: O&M Zones O&M Circles O&M Divisions VV Mohalla Mysore Works Circle NR Mohalla Nanjangud Hunsur Chamarajnagar Mysore O&M Circle Kolegala Madikeri Mysore zone Hassan CR patna Hassan Circle Arasikere HN Pura Mandya Pandavapura MandyaCircle Nagamangala Maddur These O & M divisions of CESC are further divided into sixty O&M subdivisions with accounting / non accounting sections. xiii

14 The section offices are the base level offices looking into operation and maintenance of the distribution system in order to provide reliable and quality power supply to CESC s consumers. 1.1 CESC at a glance: The profile of CESC is as indicated below: Sl. No. Particulars (As on ) Statistics 1. Area Sq. km Districts Nos Taluks Nos Population lakhs Consumers Nos 25,37, Energy Sales in FY13 MUs Zone Nos DTCs Nos Assets (including current assets) Rs. in Crores HT lines Ckt. kms LT lines Ckt. kms Total employees strength: A Sanctioned Nos B Working Nos Revenue Demand in FY13 Rs. in Crores Revenue Collection in FY13 Rs. in Crores xiv

15 1.2 Number of Consumers, Sales in MU and Revenue details of CESC in FY13 is as follows: xv

16 CESC has filed its application for approval of Annual Performance Review for FY13, revised Annual Revenue Requirement (ARR) and Retail Supply Tariff for FY15. CESC s application, the objections / views of stakeholders thereon and the Commission s decisions on the approval of Annual Performance Review for FY13, Revision of ARR and the Retail Supply Tariff for FY15 are discussed in detail in the subsequent Chapters of this Order. xvi

17 CHAPTER 2 SUMMARY OF FILING & TARIFF DETERMINATION PROCESS 2.0 Background for Current Filing: The Commission in its Tariff Order dated 6 th May, 2013 had approved the ERC for FY14 to FY16 and the Retail Supply Tariff of CESC for FY14 under MYT principles for the control period of FY14 to FY16. CESC in its present application filed on29 th November, 2013 has sought approval for the Annual Performance Review for FY13 based on the audited accounts and application filed on 13 th December, 2013 for revision of ARR for the 2 nd year of the third control period i.e. FY15 and Retail Supply Tariff for FY Preliminary Observations of the Commission After a preliminary scrutiny of applications the Commission had communicated its observations to CESC on 31 st December, 2013 which were mainly on the following points: Details to be furnished in formats Sales Forecast Power Purchase O&M Expenses Distribution losses Capex CESChas furnished its replies on 4 th January, 2014.The replies furnished by CESC are considered in the respective Chapters of this Order. xvii

18 2.2 Public Hearing Process As per the Karnataka Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff for Distribution and Retail Sale of Electricity) Regulations, 2006, read with the KERC Tariff Regulations, 2000, and KERC (General and Conduct of Proceedings) Regulations, 2000, the Commission vide its letter dated 20 th January, 2014 treated the application of CESC as petition and directed CESC to publish the summary of ARR and Tariff proposals in the newspapers calling for objections, if any, from interested persons. Accordingly, CESC has published the same in the following newspapers: Name of the News Paper Language Date of Publication Deccan Herald English 6/2/2014 Times of India & Kannada Prabha Kannada 7/2/2014 Vijayakarnataka CESC s application on APR of FY13, revision of ARR and Tariff for FY15 were also hosted on the web sites of CESC and the Commission for the ready reference and information of the general public. In response to the application of CESC, the Commission has received twenty statements / letters of objections. CESC has furnished its replies to all these objections. The Commission has held a Public Hearing on at Mysore. The details of the written / oral submissions made by various stake holders and the response from CESC thereon have been discussed in Chapter - 3 of this Order. 2.3 Consultation with the Advisory Committee of the Commission xviii

19 The Commission has also discussed the proposals of KPTCL and all ESCOMs in the State Advisory Committee meeting held on 5 th May, During the meeting the following important issues were also discussed: Projection of Power availability for FY15 Performance of KPTCL / ESCOMs during FY13 Major items of expenditure of KPTCL / ESCOMs Members of the Committee have offered valuable suggestions on the proposals. The Commission has taken note of these suggestions while passing the order. xix

20 CHAPTER 3 SUGGESTIONS / OBJECTIONS AND REPLIES The Commission undertook the process of public consultation in order to obtain suggestions/views/objections from the interested Stake-holders on the Tariff Applications filed by ESCOMs. In the written submissions as well as during the public hearing some Stake-holders and public have raised several objections to the Tariff Applications filed by ESCOMs. Among them, the following Hon ble Members of Karnataka Legislative Assembly and Legislative Council have expressed their views as mentioned below: 3.1 Sri.Vasu, Hon ble M.L.A., Chamaraja Constituency, Mysore. The Hon ble Member of the Legislative Assembly, Chamaraja Constituency, Mysore has communicated his views in writing that ESCOMs have not collected the arrears from consumers and therefore, it is not appropriate to revise the tariff. He has also opined that honest consumers are being penalized by increasing the tariff and at the same time, nonpaying consumers are benefitted by non recovery of their arrears. Therefore, he has requested the Commission to take up tariff determination only after ESCOMs collect arrears. Further, the Hon ble Legislative Assembly Member has stated that transmission losses and increasing costs have to be monitored seriously and every year Management Audit has to be conducted to improve the quality of administration. He has stated that the post of Technical Advisor in the Commission is vacant and during the tariff determination process, the services of an experienced Technical Advisor is necessary and important. Hence, he has advised the Commission to defer the tariff revision till the post of Technical Advisor is filled up. xx

21 3.2 Sri Aswathnarayan, Hon ble M.L.C. The Hon ble Member of the Legislative Council has attended the public hearing on the Tariff and ARR Application filed by BESCOM, convened on at KERC Office, Bangalore and expressed concern that electrical accidents are occuring frequently and demanded that ESCOMs should take serious note of the alarming accidents causing deaths of both human beings and animals. The Hon ble Legislative Council Member requested the Commission to instruct ESCOMs to prevent electrical accidents to save precious human and animal lives. The Hon ble Member also stated that, people are ready to pay a higher tariff provided ESCOMs ensure continuous and quality power supply. He also brought to the notice of the Commission that there often was no power supply in Nelamangala taluk even to draw water for bathing cattle. He opined that power supply during the night would not help the farmers as it would endanger their lives. Commission s views: The Commission has taken note of the views expressed by the Hon ble Members of the State Legislature. 3.3 List of persons who filed written objections:- Sl. Application No. No. Names & Addresses of Objectors 1 CA-01 Sri. N. Ravindranath, Madhuvanahalli, Kollegal 2 CA-02 Sri. T.N. Sudarshan, Secretary General, Federation of Karnataka Chamber of Commerce and Industry (FKCCI), Bangalore. 3 CA-03 Sri. M.S. Sreenevas, M/s Renewable Energy Developers Association of Karnataka (REDAK) Bangalore. 4 CA-04 Sri. A. Padmanabha, Hon. General Secretary, KASSIA, Bangalore CA-05 Sri Prem Chand, Chief Electrical Traction Engineer, South Western xxi

22 Railway. 6 CA-06 Sri. K. Ravindra Prabhu, Vice President, KIADB Industrial Manufacturers Association (KIAMA). 7 CA-07 Sri. M.N. Suryanarayana, General Secretary, Akhila Bharatiya Grahak Panchayat, Mysore. 8 CA-08 Sri. A. Lokesha, Financial Advisor & Chief Accounts Officer, BWSSB. 9 CA-09 Sr. Krishna Bhat, Koodanahally Estate, Belagodu Post, Sakaleshpur Taluk. 10 CA-10 Sri. Anil Savur D, Secretary, The Karnataka Planters Association, Chikmagalur. 11 CA-11 Sri. C.A. Subbaiah (Nanda), Vice President, The Kodagu Small Growers Association, Sidapur, Kodagu. 12 CA-12 Sri. N.A. Appaiya, Chairman, Codagu Planters Association, Kodagu. 13 CA-13 Sri. Venkatesh, Hon. General Secretary, Laghu Udyog Bharati- Karnataka, Bangalore. 14 CB-01 M/s. Doddanavar Global Energy Pvt Ltd. 15 AE-01 Sri. B.G. Shetkar, President Bidar Chamber of Commerce & Industry. 16 AE-02 Sri. Anantharamaih, Senior Citizen. 17 AE-03 Sri. Bharatarshabha Dasa, Head-Communication & Public Relations, ISKCON. 18 AE-04 Sri. T.M Vijaya Bhaskar, Additional Chief Secretary to Government, Department of Rural Development & Panchayat Raj, Bangalore. 19 AE-05 Sri. Raghavendra Gupta, Indus Towers Ltd, Bangalore. 20 AE-06 Sri. B.S. Shetty, President, Indian Wind Power Association (Karnataka State Council). 3.4 List of the persons who made oral submissions during the Public Hearing on SL.No. Names & Addresses of Objectors 1 Sri. Anand Rao, HPC Ltd, Hassan. 2 Sri. Shridhar Prabhu Advocate for FKCCI. 3 Sri. K. Ravindra Prabhu, KIAMA & Chamber of Commerce & Industry 4 Sri. Manjunath & Sri Sathish, KASSIA 5 Sri. C.A. Subbaiah, Coffee Growers Association, Kodagu 6 Sri. Theerthamallesh, IP Set Users Association & Karnataka Growers Federation & Sri Mohmad Mujahid Alam, Hassan District Planters Association 7 Sri. Nagabhushana Aradhya, Mysore 8 Sri. Ravindranath, Kollegal 9 Sri. M.N. Suryanarayana, Akhila Bharatiya Grahat Panchayat, Mysore. 10 Sri. Bharatarshabha Dasa, Head-Communication & Public Relations, ISKCON. 11 Smt. Savitha Ranganath, RTI Consumer Activist, THE CALL, Mysore 12 Sri. Bhaskar, Assistant Executive Engineer, Kaveri Neeravari Nigama, Mysore. xxii

23 13 Sri. Vasanth, Ex- Vice President, State Electrical Contractors Association, Karnataka. 14 Sri. V.S. Arbatti, Advocate, BWSSB. 15 Sri. Puttaswamy, Secretary, Karnataka State Electrical Contractors Association, Mysore. 16 Sri. M.D. Rajanna, Mandya. 17 Sri. D. Sundararaju, Senior Civil Electrical Engineer, Railways, Mysore. 18 Sri. N. Sundaram Bogadi, Mysore. The above persons have raised several issues concerning tariff, quality of power supply, compliance of Commission s directives, wheeling and banking and some of them have made specific requests concerning the tariff category. The following are the objections and comments received on various issues relating to CESC s application and the response of CESC:- 3.5 Tariff related issues: 1) CESC has not filed the tariff petition before 30 th November, 2013 as per the Clause of MYT Regulations. The petition for revision of tariff has not been filed by an authorised person of CESC and is liable to be rejected on this ground. CESC s Response: CESC has stated that, APR for FY13 was filed on 29 th November, 2013 and the Commission had granted time to file tariff petition up to 13 th December, The tariff petition is filed within the time extension granted by the Commission. The petition has been filed by the person authorised by the Board. 2) CESC has not filed the Annual Accounts as per the Companies Act, 1956 and as per the directions of Hon ble APTEL in Appeal No. 108 xxiii

24 of 2010 and that the petition is not in conformity with the Regulations 2.1(iv), 2.1(vii) and of KERC MYT Regulations. Further, form A-5 in the filing is blank. CESC has not filed the petition as per the Chapter 2, Clause 2.8, of the Regulations and failed to furnish the Perspective Plan, Depreciation, Advance against Depreciation as required under Regulations. Further, the application may be rejected as CESC has failed to furnish the data of past two years preceding the base year as per Clause 3.10 of the Regulations. CESC s Response: CESC has worked out the requirement of power based on the sales forecast duly considering the T&D losses and estimated availability of energy. CESC has filed its tariff petition as per the Regulations and the Perspective Plan for the period from FY14 to FY18 to the Commission on CESC has prudently projected its expenditure and due consideration was given for the preceding two years of the base year while filing the petition. 3) CESC while filing APR of FY13 has indicated a gap of Rs Crores in FY12, which needs to be disallowed. CESC s Response: CESC has prayed for approval of APR for FY13 as per the contents of Chapter 1 to 9 in the filing. 4) Revenue deficit of Rs Crores is arrived at without taking into account the subsidy allocation of GoK. xxiv

25 CESC s Response: The subsidy receivable from GoK as at the end of FY 2013 is Rs Crores, which has been already considered for calculation of income on accrual basis. The gap of Rs Crores has been arrived at based on the expected income and expenditure for FY15. Collection of arrears does not reduce gap, as Mercantile Accounting principles are followed (on accrual basis). The collection of arrears will only reduce the receivables and not the gap. The revenue deficit of Rs Crores for FY15 has been arrived at after considering the subsidy receivable from GoK. 5) CESC has spent Rs Crores as against the approved power purchase cost of Rs Crores for FY13. CESC s Response: The power purchase cost depends on the allocation of power and cost of power purchased and the actual sales depends on the usage by end consumers. 6) The ERC filed by CESC contains many inaccurate assumptions and has no proper advance planning in procurement of Power. CESC s Response: The application for ARR and Tariff Revision for FY15 has been filed as per the requirements under Section 61 & 62 of the Electricity Act 2003 read with relevant Regulations. 7) CESC has procured high cost power of MU at an average cost of Rs per unit. CESC has not taken approval of the xxv

26 Commission for purchase of medium term power costing Rs Crores during FY13, which is in violation of Regulations, for which the License issued to CESC has to be revoked. CESC s Response: All power purchases made by CESC, Mysore are authorized and approved by the Commission. No un-authorised power purchases are made on medium term basis and all procurements are made as per PPA. 8) The cost of power procured by CESC from UPCL should not be passed on to consumers as the same has not been approved by the Commission. CESC s Response: The provisional tariff fixed by GoK/CERC has been paid to UPCL and the PPA between ESCOMs and UPCL is yet to be approved by the Commission. 9) The compensation paid to the generators pursuant to the Order passed by the GoK under Section 11 should have been paid by the Government and cannot be passed on to the consumers. CESC s Response: The issue of compensation for power supplied under Section 11 will be decided by the Commission and the issue of invocation of Section 11 by the Government is pending before the Court. xxvi

27 10) As per the Tariff Policy, the tariff to be fixed should be within +/- 20 % of the cost to serve. Since the cost to serve of CESC has not been approved by the Commission, it is not possible to verify whether the proposed tariff is within limits. CESC s Response: CESC has not furnished any comments. 11) As the Fixed charges of Rs.5 has been increased in the last tariff revision by the Commission, without any request from ESCOMs, the same needs to be withdrawn by the Commission. CESC s Response: There has been no revision in the fixed charges by the Commission in the Tariff Order dated ) CESC has not furnished the details as to whether the peak load is reduced after the implementation of the ToD tariff. If the peak load is not reduced, compulsory adoption of Time of the Day tariff should be cancelled. CESC s Response: ToD meters have been provided to all installations of 500 KVA and above. Currently, there has been no significant change in the peak load or the consumption and revenue in respect of these installations has come down. xxvii

28 13) It is requested to fix the tariff on the basis of cost of supply and reduce the cross subsidy being paid by the industrial consumers to make them viable. CESC s Response: CESC has not furnished any comments. 14) Since the gap between the supply and demand is increasing day by day, it is suggested that Government should consider alternative sources of generation with small gestation periods to fill the gap instead of purchasing short term power at high cost. The low cost power from Hydel and Thermal sources are to be utilised at optimum level and PLF of KPC Thermal Plants need to be improved, to meet the growing demand. CESC s Response: CESC has not furnished any comments 15) The uniform tariff hike sought by all ESCOMs is not justifiable as the cost of distribution differs in ESCOMs. CESC s Response: CESC has not furnished any comments 16) CESC has not clarified whether it has considered the unauthorised IP Sets while claiming the subsidy from GoK and has not furnished details of the total amount due from GoK as on date. The sale to unmetered category has been increased and the information of xxviii

29 year wise trajectory for the increase/decrease in unmetered category data is not furnished. CESC s Response: As on February 2014, CESC has regularized Nos. of un-authorized IP sets. CESC is in the process of regularizing all the remaining IP sets. The IP installations are being billed as per the consumption recorded in the meters of Distribution Transformer Centers (DTCs) having predominant IP set installations in the area and the bills are being claimed from GoK for regularized IP sets. 17) CESC has not taken adequate measures to recover old dues amounting to Rs.9000 Crores from the consumers, local bodies etc. CESC should take serious measures to collect the arrears and fix responsibility on the officers concerned and levy penalty for non/under performance. CESC s Response: The CESC has been taking steps as per prevailing Rules and Regulations to recover dues. It is submitted that it has been trying continuously to monitor the level of receivables and initiate appropriate actions for speedy recovery. 18) The Solar Water Heater rebate should be increased to Rs.100/- to encourage installation of the same. The solar energy incentive has to be increased to encourage people to go in for the alternate source of energy in a big way. It is suggested that, the rates of LT Domestic Consumers is lowered a bit and increase the rates of power consumers so that the LT Domestic Consumers get some relief. xxix

30 CESC s Response: The GoK together with the MNRE has introduced subsidy linked Solar Roof Top PV grid systems for household and apartments in the city which has been implemented in Mysore also. CESC would continue to take action to encourage solar generation as per the Solar Policy to be issued by GoK. 19) CESC has not indicated any steps to improve its efficiency to transfer the benefit of efficiency gains to the consumers and in the absence of any specific gains, the application is not maintainable. CESC s Response: CESC has furnished all the details about efficiency measures in the applications for filing of APR for FY13 and ERC/Tariff Revision for FY15 and also in the replies to the preliminary observations of the Commission in respect of APR for FY13 and ERC/Tariff Revision for FY15. Further, it is taking steps to reduce the losses and improve efficiency through schemes like, separation of feeders, HVDS, NJY, RAPDRP programme, metering of installations, reducing LT : HT ratio, regularisation of unauthorised IP sets and disconnection of installations having long pending dues. 3.6 Quality of power supply: 20) There is a large disparity in the load shedding protocol being followed by CESC in the rural and urban areas. The rural areas are getting only 10 to 12 hours supply as against 24 hours supply being provided to the urban areas. The tariff hike proposed by CESC considers a uniform hike of 66 paise to all categories of consumers while there is discrimination in the quality of services provided. There are delays in addressing issues like rectification and replacement of sagging wires, slant and xxx

31 deteriorated/broken poles in rural areas. CESC should provide toll free numbers for lodging complaints and adequate service centres with vehicles for rural areas for timely redressal of the complaints. It is suggested that the proposed tariff increase should be based on the quantity and quality of power supply and operational efficiency. CESC s Response: To bridge the demand supply gap, CESC is purchasing power from other States as well as IPPs for catering to both urban and rural areas. CESC is forced to resort to load shedding when there is shortage in generation. The spread of distribution network in rural areas is more widespread and locating and rectifying faults takes time. CESC has taken action to rectify and replace sagging wires, slant and deteriorated/broken poles in rural areas. CESC has provided a single toll free number viz., for urban and rural consumers to lodge their complaints. Meanwhile, action is being taken to open a Section Office in Madhuvanahalli to improve the quality of supply. 21) As per Section 23 of the EA 2003, CESC should have taken approval of the Commission for load shedding, but, is resorting to unscheduled load shedding on its own, which is adversely affecting the industries. There has been a tariff hike of Rs.1.21 per unit during the last four years and an additional hike of Re should not be considered as the Distribution Companies are not supplying quality power to the consumers and are not informing the consumers about the load shedding in advance. CESC s Response: CESC is supplying 6 Hrs 3 phase and 9 Hrs 1 phase supply to the rural areas and 24 Hrs to Industries and Urban areas. The load shedding is carried out only when there is a shortage of power supply or system constraint and xxxi

32 the same is being informed to the consumers. Load shedding is resorted to only during emergencies and the HT industries are informed over phone and SMS besides notifying in newspapers whenever there is a scheduled interruption. 22) Continuity of power supply in rural areas is not maintained by CESC as stipulated and the interruptions are very high with unscheduled load shedding and low voltage problems. The Distribution Transformer failure is increasing year by year and CESC has failed to control it. The energy auditing is not being conducted for all the DTCs. Even after NJY implementation with huge number of transformers, the failure rate has not come down. The distribution losses have not been reduced in spite of implementation of HVDS and NJY schemes. The power supply is erratic and irregular. CESC s Response: After the rural feeders have been bifurcated, the transformer failure rate has come down. The transformer failure for the year was % and for (up to December 2013) has been 9.33%. Analysis of performance of NJY feeders is being conducted and the same will be submitted to GoK. The energy audit is being carried out by CESC and the report is regularly submitted to the Commission. All efforts are made to reduce the distribution losses. The distribution loss in FY12 was 16.2% and the same has been reduced to 15.07% in FY Issues on compliance to the Commission s directives: 23) CESC has failed to complete DTC metering within the stipulated time and estimates the IP consumption. The Commission should not load the cross subsidy element of IP set consumptions arrived at as per estimates to the paying category of consumers. xxxii

33 CESC s Response: As on February, 2014, out of a total of DTCs in the urban areas, 8260 DTCs have been metered. In the rural areas, out of a total of DTCs, 8934 DTCs have been metered. 24) CESC has not installed Time Switches to all the street lights even after two years of Commission s directions. CESC has serviced many street light connections without installing meters. CESC s Response: CESC has submitted that the Mysore City Corporation has to provide Timer Switches for street lights. CESC has offered technical inputs and requested Mysore City Corporation to take up the work immediately. 25) It is suggested that independent feeders be provided to the industries to reduce interruptions. CESC s Response: Considering the nature of certain industries that require continuous power, industrial feeders have been provided for such consumers. At present, there are 54 industrial feeders in CESC jurisdiction. 26) CESC has not complied with the directives of the Commission. The progress of NJY is very poor and CESC has not quantified the improvements achieved in rural areas after completion of NJY. CESC has not shown any seriousness in complying with the directives of the Commission viz., HVDS, DSM in agriculture, DTC metering, reduction of distribution losses, reducing HT: LT ratio, xxxiii

34 energy audit, improving reliability, reducing accidents, metering of IP sets & BJ/KJ installations and 100% metering of installations. The enumeration of the IP sets and regularisation of unauthorised IP sets have not been taken up seriously by CESC. The Consumer Indexing and GPS mapping have not been completed. CESC has not initiated any action to introduce the pre-paid meters. CESC s Response: CESC has sincerely made attempts to comply with all the directives of the Commission. The status on various issues is as under: i. HVDS: As per the Government of Karnataka directive to implement HVDS in one Sub Division, the Sub-division of K.R.Pet Taluk has been identified for implementation of HVDS. ii. DTC metering: As on February, 2014, in the urban areas, out of a total of DTCs, 8260 DTCs have been metered. In the rural areas, out of a total of DTCs, 8934 DTCs have been metered. iii. Reduction of distribution losses: The distribution loss in FY12 which was 16.2% has been reduced to 15.07% in FY13 and transformer failures have reduced after the bifurcation of rural feeders in the NJY programme. The works of Niranthara Jyothi Phase -1 is expected to be completed by April 2014 and that of Phase -2 by September An analysis of the feeders after bifurcation indicates an average energy savings between 10-25%. iv. Reducing HT: LT ratio: At present the HT/LT ratio of CESC is 1:2.05. Action has been taken to improve the network efficiency by adopting projects like HVDS, UNIP & proper planning of E & I works. Action is taken to improve the HT/LT Ratio to 1:1 by using smaller capacity transformers to greater extent and implementation of HVDS. v. Reducing accidents: CESC regularly conducts Safety Programs to educate employees as well as the consumers on safety aspects xxxiv

35 vi. vii. M/s Energy Efficiency Service Limited, New Delhi are providing energy efficient pump sets for 1337 Nos. of IP sets on four feeders in Malavalli Taluk, Mandya District and the same is in progress. Metering of IP sets: 800 numbers of meters have been fixed to the DTCs predominantly feeding to IP sets. The total numbers of unauthorized IP sets as on Feb 2014 is 77907, out of which Nos. have been regularized. Due to resistance from the farming community, metering of IP sets could not be done. New installations that are being serviced are provided with energy meters. 3.8 Issues regarding Wheeling and Banking: 27) REDAK has stated that, the Commission has considered banking facility as per the Wheeling and Banking Order of 2008 and further extended the same till 31st March, CESC has not provided detailed calculations of the loss suffered by it on a yearly basis on account of the banking facilities extended to RE sources. CESC has sought restriction of banking facility to only one month as against the provision of one year. The proposal of collecting wheeling charges equivalent to distribution losses as determined by the Commission or on the basis of actuals, when the distribution network is used, is against the provisions of Electricity Act Hence, it is requested not to alter the Wheeling and Banking charges. Also, CESC has not made any specific prayer about the cross subsidy charges. It is requested to remove the cross subsidy charge as is done for the Solar and Municipal Solid Waste Plants. CESC s Response: As per the Regulations, there is a provision for the Non-Conventional Energy (NCE) generators to bank power. Due to the uncertainty of this nature of power, it is observed that the generators bank power when the grid is in surplus condition and withdrawals take place when there is xxxv

36 shortage in the grid. CESC would then have to meet their demand by procuring high cost power. Further, the wheeling charge determined by the Commission is only 5% against the actual distribution losses level of CESC which is around 15% to 16%. CESC has requested the Commission to revise the wheeling charges and provide the banking facility on a monthly basis. 28) (DGEPL) has requested for discontinuing cross subsidy charges levied on Wind Projects in the State as wind power cannot be traded in open market and should be supplied within the State. It has stated that, the ESCOMs are claiming the demand charges in the bills as well as factoring in the ARR calculations. CESC s Response: The tariff fixed for some category of consumers is below the average cost of supply and to make good the revenue losses, the cross subsidy is being levied on the consumers having paying capacity. The cross subsidy surcharge is collected to compensate revenue loss to the Company when the consumers opt for open access and wheeling. The demand charges are a part of the tariff determined by the Commission. 29) Indian Wind Power Association has stated that, the detailed calculations in respect of Wheeling and Banking charges are not clearly mentioned in the tariff petition and the data on the quantum of energy banked during the month, utilized by ESCOMs, market rate during the time of banking as well as selling energy to the consumer and UI rate during the Peak and Off-peak period are not furnished CESC s Response: xxxvi

37 CESC has stated that, every month the statement showing the details of energy generated, banked and wheeled are being sent to each and every generator as per the norms set by KERC in its Order dated CESC has worked out a methodology for collection of difference in UI charges at the time of injection and drawal and requested SLDC / KERC to indicate the correctness of the method to implement, vide letter dated Study of Ul rate prevailing during all transactions with reference to Wheeling and Banking, slot wise (peak and off peak) cannot be made until meters are provided at the generation and drawal points of generators and until consumers under Wheeling and Banking agreement are made ABT compliant. The calculation sheet determining the Wheeling and Banking charges, both in terms of paisa and % is submitted and the same is made available in page 21 in Observations Section. CESC will abide by the Orders of the Commission from time to time in the matter of wheeling and banking. 3.9 Specific request by the Objectors: 30) KASSIA has requested that the MSME (Micro Small and Medium Enterprises) Sector has to be exempted from tariff hike due to universal recession in the Sector and erratic power supply conditions. The energy intensive industries like Foundries, Forging Shops, Steel Mill and Blow Moulding Heat Treatment shops in Karnataka are not able to compete with the neighbouring States due to higher cost of power and need reduction in tariff for survival. CESC s Response: xxxvii

38 The categorisation of consumers comes under the purview of the Commission and CESC will abide by the categorisation of the consumers by the Commission. 31) South Western Railway has objected to the proposed hike in tariff quoting extract of Article 287 of the Constitution of India and claiming it is a public utility serving the common man and sought to be exempted from the proposed tariff hike. Railways has stated that, the increase in power tariff may result in hike in railway tariff and, in turn, the transportation of coal may also become costlier resulting in higher cost of generation of thermal power. The Railways have sought the tariff to be changed to single part from the existing two part tariff. Further, the Railways has sought reduction of cross subsidy charges, provide rebate for their proposed electrification projects and residential quarters and incentivise them for improving PF above 0.9. CESC s Response: CESC has stated that, the tariff hike of 66 paise per unit is sought in respect of all categories except in LT4a and BJ/KJ to bridge the shortfall in ARR for FY15 and CESC would abide by the Order of the Commission issued from time to time. 32) BWSSB has stated that the tariff has to be reduced considering the nature and purpose for which the electricity supply is utilised by it and its social obligation to provide water to all categories of citizens which includes BPL and EWS consumers. It has stated that, the power tariff at present accounts for 64% of the revenue of BWSSB and is the single largest item of expenditure, and the proposed hike of 66 paise per unit in power tariff would result in additional burden of Rs.50 Crores to BWSSB. xxxviii

39 CESC s Response: CESC would abide by the Orders issued by the Commission from time to time. 33) The Karnataka Planters Association and others have raised objections for the proposed hike of tariff for LT4 category stating that, LT4 category has to be re-categorised by clubbing LT4c (i) with LT4(a) and LT4 (b) with LT4 c (ii). Instead of classifying IP sets based on the Horse Power, the classification should be based on whether the growers are small or large as mentioned in the Indian Coffee Act 1955, without considering the paying capacity of the consumer. It is requested that, Coffee growers with less than 10 HP pump set should be included in LT4 (a) category as the capacity of IP set pump used depends on the depth of source, water availability, type of irrigation and the area to be irrigated. It is suggested that, the LT4 c (i) and (ii) categories are to be clubbed into one category considering the paying capacity of Coffee growers while determining the tariff as against the existing categorization based on the capacity of pump set. It has become very difficult for the Coffee growers to sustain due to high cost of fertilizers, shortage of labour and volatile prices. Any increase in existing tariff would increase the burden on the Coffee growers. The Coffee plantations use IP sets for a period of 6 weeks in a year during February and March and only as back up when rains fail. Hence, it is requested to be considered as a seasonal industry with tariff concession. It is stated that, coffee is not being treated on par with other agricultural produce. While the State Government bears the energy charges for all other agricultural pump sets, the Coffee and other plantations are not xxxix

40 being given this benefit. It is requested to include Coffee growers in LT4 (a) category. In response to the information sought by the Commission during the previous public hearing about the cost of power consumption for irrigating Coffee Plantations, the objectors have submitted that, one round of blossoming with irrigation (By Rainfall) and backing irrigation (By IP Set), the cost of power consumed is about Rs.650 per acre and would increase to Rs.900 per acre if tariff is hiked as proposed. CESC s Response: CESC has stated that, it will abide by the Tariff Order of the Commission. 34) The International Society for Krishna Consciousness has requested that, they may be considered under the Tariff category of LT2a (i) instead of the present HT2b (i) as they are a Religious and Charitable Society, providing mid-day meals to over 13 Lakh children in India under the Akshay Patra Programme. CESC s Response: The categorisation of consumers comes under the purview of the Commission. However, ISKCON being a Religious and Charitable Institution, the Commission may consider its classification under HT2c (i) and LT-2 a (i). 35) The Department of Rural Development and Panchayat Raj has stated that, it caters to the water supply requirement of the Grama Panchayath level with a social responsibility and has bore wells and mini water supply schemes. The Power supply extended to villages is mostly by Single Phase and hardly 6 hrs of 3 xl

41 phase supply is extended for which the tariff is uniform as that of urban areas. Without proper metering water supply and street lights, the ESCOMs claim electricity bill as per the connected load which will result in higher burden to the Rural Development and Panchayath Raj Department. Hence, it is requested that, the tariff of LT6 may be fixed at Rs.1.51 per unit (Tariff for IP sets in BESCOM area). CESC s Response: CESC has stated that, it will abide by the Tariff Orders passed by the Commission. The outstanding dues from street light and drinking water projects under Gram Panchayat are Rs Crores as on Dec After the bifurcation of the feeders under the NJY programme, the loads of rural areas and IP sets will be segregated and the power supply situation will improve. 36) Indus Towers has stated that, it has more than 1,10,000 telecom towers spread over the whole of India with about 9800 towers in Karnataka and the connected load of a typical telecom tower varies from 5 KW to 25 KW per site and is charged at LT3 Commercial Tariff. It has requested that, the telecom tower connections have to be classified under a separate category under Commercial Tariff with lesser tariff slab owing to social nature of the service rendered to last mile connectivity to the rural consumers in communication. It is requested to implement the AMR technology to reduce the cost of billing and meter reading and also to improve accuracy of metering. The Open Access facility needs to be provided to the LT level telecom towers needs so that, the load on the utility and procurement of expensive power are reduced. xli