ORDER OF THE WEST BENGAL ELECTRICITY REGULATORY COMMISSION FOR THE YEAR CASE NO: TP 40 / IN RE THE TARIFF APPLICATION OF

Transcription

1 ORDER OF THE WEST BENGAL ELECTRICITY REGULATORY COMMISSION FOR THE YEAR IN CASE NO: TP 40 / IN RE THE TARIFF APPLICATION OF DPSC LIMITED FOR THE YEARS , AND UNDER SECTION 64(3)(a) READ WITH SECTION 62(1) AND SECTION 62(3) OF THE ELECTRICITY ACT, 2003 DATE:

2 CHAPTER 1 INTRODUCTION 1.1 The West Bengal Electricity Regulatory Commission (hereinafter referred to as the Commission ) was constituted by the Government of West Bengal in the year 1999 in terms of section 17 of the Electricity Regulatory Commissions Act, 1998 (hereinafter referred to as the 1998 Act ). The 1998 Act, along with some other Acts, was repealed by section 185 of the Electricity Act, 2003 (hereinafter referred to as the Act) which came into force with effect from The first proviso to section 82 (1) of the Act has ensured continuity of the Commission - along with that of all other State Electricity Regulatory Commissions by laying down that the State Electricity Regulatory Commission, established by a State Government under section 17 of the 1998 Act (and some other enactments) and functioning as such immediately before coming into force of the Act, shall be the State Commission for the purposes of the Act. 1.2 The functions of a State Commission are laid down in section 86 of the Act. Of its many functions, a State Commission has to discharge the function of determination of tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State. Further, section 62 (1) of the Act also requires the Appropriate Commission to determine the tariff in accordance with the provisions of the Act for supply of electricity by a generating company to a distribution licensee, for transmission of electricity, for wheeling of electricity as also for retail sale of electricity. 1.3 The Commission, therefore, has all the powers and authority under the Act to determine the tariff as laid down in the Act and these powers and authority are in continuation of similar powers and authority that were enjoyed by the Commission under section 29 of the 1998 Act. 1.4 DPSC Limited (hereinafter referred to as DPSCL) is a distribution licensee in the State of West Bengal for supply of electricity in Ranigunj - Asansol belt of the State. It was a licensee under the provisions of the Indian Electricity Act, 1910 (since repealed) and has become a deemed licensee in terms of the West Bengal Electricity Regulatory Commission 2

3 first proviso to section 14 of the Act, with effect from i.e. the date of coming into force of the Act. 1.5 In terms of the provisions of the Act, therefore, the Commission is fully empowered to determine the tariff in respect of DPSCL. 1.6 The Commission already passed tariff orders for eight years in respect of DPSCL. These were orders that determined tariffs for the years , , , , , , and respectively. 1.7 A generating Company or a licensee, whose tariff is to be determined by the Commission as per the provisions of the Act, is now required to prepare the application for determination of tariff for a control period under the multi-year tariff framework complying with the provisions of the West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2007, as amended (hereinafter referred to as the Tariff Regulations) and submit the same to the Commission within the specified date. Though as per the Tariff Regulations the last date for submission of the application to the Commission by a generating company or a licensee for determination of tariff for the second control period comprising three years from to (hereinafter referred to as the second control period) was 1 March, 2008, the Commission, after considering the prayers of some licensees for extension of last date for submission of the aforesaid application to the Commission, extended the last date for the purpose upto 31 May, Since, however, 31 May, 2008 and 1 June, 2008 were holidays, in terms of the provision contained in the West Bengal Electricity Regulatory Commission (Conduct of Business) Regulation, 2007, a generating company or a licensee was at liberty to submit the aforesaid application for determination of tariff to the Commission on the next working day i.e. on 2 June, Accordingly, DPSCL, complying with the provisions of the Tariff Regulations, prepared the application for determination of its tariffs for the second control period and submitted the same to the Commission on This tariff West Bengal Electricity Regulatory Commission 3

4 application was admitted by the Commission and was numbered as TP- 40/ DPSCL was thereafter directed to publish, as required under section 64(2) of the Act, the gist of the tariff application, as approved by the Commission, in at least four daily newspapers having wide circulation in the area of supply of DPSCL. The gist was accordingly published simultaneously on 17 June, 2008 in Bartaman, The Statesman, Prabhat Khabar and Dainik Lipi. The publication invited the attention of all interested parties, stake holders and the members of the public to the application for the determination of tariff of DPSCL for the second control period and requested for submission of objections, comments etc., if any, on the tariff application to the Commission by 18 July, 2008 at the latest. Opportunities were also afforded to all to inspect the tariff application and take copies thereof Only one set of objections / comments has been received within the due date, i.e These objections / comments have come from West Bengal State Electricity Distribution Company Limited (WBSEDCL). These have been dealt with in Chapter 3 of this tariff order. West Bengal Electricity Regulatory Commission 4

5 CHAPTER 2 THE CASE OF DPSCL 2.1 DPSCL has submitted the instant application under Regulation 2.7 of the Tariff Regulations for approval of its tariffs for the control period, covering the years to DPSCL is now a deemed licensee for distribution of electricity in the Ranigunj Asansol belt of West Bengal. Besides DPSCL, two other distribution licensees viz. Damodar Valley Corporation (DVC) and WBSEDCL, the successor distribution entity of the West Bengal State Electricity Board, also operate within DPSCL s licensed area. The licensed area of DPSCL stretches over 619 square kilometers, the bulk of which is within the command area of DVC. 2.3 In spite of being the first power utility in the area, DPSCL s business expansion was hampered by the provisions of the Damodar Valley Corporation Act, Also under the terms of the licence granted by the State Government, its operating voltage was restricted to between 550 Volts and 30 kilo Volts. 2.4 As a result of these restrictions, which continued till the Act came into force, DPSCL could neither increase its depleting generation base, nor cater to Low Tension or High Tension consumers needing power at voltages of 33 kv and above. Consequent to the above, DPSCL caters to a select class of consumers needing power at voltage of 11 kv. As of end March 2008, DPSCL catered to a total of 472 consumers, giving a consumer density of less than 1 per sq. km of its licensed area. 2.5 Even though the operational restrictions are now gone, DPSCL s ability to aggressively increase its market share is hampered by its 11 kv transmission and distribution network, which restricts transmission of electricity over long distances and the capacity to feed substantial demand centre loads. The overloading of the existing transmission lines adversely affects the quality of power made available to the consumers as well as increases line losses. DPSCL has, therefore, commenced from a phased programme of augmenting its transmission and distribution system through the commissioning of new West Bengal Electricity Regulatory Commission 5

6 distribution stations nearer the load centres, where energy was previously being fed from great distances and establishing a 33 kv transmission network by erecting new 33 kv lines or converting existing 11 kv lines to 33 kv. 2.6 Even though the applicant hopes to reach a position to cater to the power requirements of its existing and intending consumers through augmentation of its transmission and distribution network, the lack of adequate generation base is a big constraint in increasing market share. 2.7 DPSCL feels that its Dishergarh power station, having a derated capacity of 12.2 MW, is becoming increasingly uneconomic to run and needs to be shut down as soon as other sources for replacing its generation are established. However, shutting down of the power station cannot be done without finding alternative employment opportunities for the personnel who will be rendered surplus. The applicant is exploring the possibility of undertaking Operation and Maintenance contracts of small sized captive power plants, where the personnel rendered surplus at Dishergarh power station after its shut down may be productively deployed. 2.8 The 30 MW Chinakuri power station was financed by Eastern Coalfields Ltd in to provide alternative sources of power in the absence of adequate supplies from DVC, who was and continues to remain the main source for meeting the applicant s system energy requirements. Here also, the restriction of capacity size under the DVC Act came to operate, leading to limiting of the unit size to 10 MW. The small unit sizes of the plant also limits its ability to compete with the generation cost of larger power plants. 2.9 At present, around 78% of DPSCL s total system requirement is met through imports of power from DVC and WBSEDCL. This factor, combined with the comparatively higher cost of generation of its own power plants, make it imperative for identifying cheaper sources of power, preferably through own generation of adequate capacity that will enable efficiencies of scale to be achieved. DPSCL had mentioned in its submission to the Commission in its tariff West Bengal Electricity Regulatory Commission 6

7 application for of its plans to set up a 500 MW power station at Dishergarh in replacement of the existing power station DPSCL has subsequently submitted a petition to the Commission seeking its initial approval to the proposal and seeking its consent for undertaking some preliminary work relating to land acquisition, appointment of engineers for the project, route survey for rail linkage, obtaining environmental clearance for the project and also for incurring the preliminary expenditure, estimated at around Rs.25 crore, in connection therewith, pending grant of final approval to the capital investment proposal. The petition is presently under consideration of the Commission DPSCL is hopeful that on implementation of the proposed Dishergarh power station project and the transmission and distribution network augmentation plans, it will be able to maintain its competitive edge and level of service to its consumers The applicant has assumed that generation at its two power plants will be in accordance with the Plant Load Factor (PLF) specified in the Tariff Regulations. DPSCL has, however, stated that it is facing continuous problem regarding supply of coal to its power stations, due to lack of coal linkage for the required quantity, thus adversely affecting the generation at the power plants. DPSCL has stated that while it is making all attempts for enhancement of coal linkage quantity, delay in obtaining the same will adversely affect generation at its power stations during the control period The nationalized coal companies are now selling coal through e-auction with reserve price, which is higher than the current listed price for the relevant grade. Supply is made to the highest bidder. DPSCL has proposed that till such time as the coal linkage is suitably revised, it be permitted, for optimal utilization of the plant capacity, to meet the shortfall of coal supply required to ensure achievement of the normative PLF at the Chinakuri power station through the e- auction route, subject to the resultant higher generation cost not exceeding the weighted average rate of power purchase during the year. West Bengal Electricity Regulatory Commission 7

8 2.14 It has been stated that the applicant has filed a petition to the Commission praying for relaxation of Station Heat Rate for the Dishergarh power station. DPSCL has prayed that the same be taken into consideration at the time of determination of tariffs The tariff application of DPSCL for the years to has been prepared in compliance with the provisions of the Tariff Regulations and the West Bengal Electricity Regulatory Commission (Conduct of Business) Regulations, DPSCL has attempted to follow the principle of average cost of supply in fixing the tariffs for its consumers. Seasonal tariff rates were introduced from for the majority of the consumers of DPSCL. However, since the bulk of the expenditure of DPSCL is on the purchase cost of power from DVC, which follows uniform tariff throughout the year, it has been submitted that the seasonal tariffs introduced results in distorting the uniform cash flows of DPSCL throughout the year, since the major portion of expenditure incurred is immune to seasonal variation. DPSCL has, however, acknowledged that with planned increase of power from WBSEDCL, which charges seasonal tariffs, the effect of seasonal tariffs on cash flows is likely to be minimized As per DPSCL, TOD tariffs introduced for HT category of consumers have been poorly received, and sales to TOD consumers constituted around 25% of the total HT sales by volume. However, 21% of such sales constituted sales to WBSEDCL, excluding which, sales to other HT consumers under TOD tariff was only 4%. The principal reason for such poor response is that a major portion of the HT consumers are the collieries of Eastern Coalfields Ltd, which operate on a 24 hour basis and, due to operational reasons, have more or less uniform requirement of power throughout the day and are, therefore, unable to switch to TOD tariffs. A very small section of HT consumers having contract demand of less than 50 KVA have switched to TOD tariffs, though the response from HT Industrial consumers (non collieries) having contract demand of more than 50 kva has been more encouraging. West Bengal Electricity Regulatory Commission 8

9 2.18 DPSCL has proposed to introduce Fixed Charge for Medium & Low voltage consumers having contract demand of less than 30 kva, in accordance with regulation 3A.2.1 of the Tariff Regulations and Demand Charges for L & MV consumers having contract demand of 30 kva and more and all HV consumers as per regulation 3A.3.2 of the Tariff Regulations. Such Fixed Charge and Demand Charge are proposed to be progressively increased each year, since they are presently considerably below the ceiling specified in the aforesaid regulations The applicant s sales projections have been made on the basis of seasonal 5 year CAGR trends. In view of most of the consumers of DPSCL being industrial and commercial consumers, it has been felt appropriate to use a moving CAGR rate in place of a fixed one in order to capture sales variations due to economic cycles The Commission had in and , on the basis of inputs from WBSEDCL, projected decreased sales to the latter due to commissioning of new sub-stations in the applicant s area of operations. Such drastic reductions of sales have failed to materialize. In view of the above, the applicant s sales projections for WBSEDCL have also been made on the basis of 5 year CAGR in the absence of any concrete information to the contrary DPSCL has attempted to comply with all necessary procedures specified in the Tariff Regulations for projection of demand and sales subject to limitation of unavailability of past data in some cases based on which future projections were to be made. In such case, the applicant has sought to explain the basis followed and hopes that the same will be found acceptable DPSCL continues to be dependant on DVC and WBSEDCL for meeting the bulk of its energy requirement, which is anticipated to continue in the next three years. A final verdict is yet to be reached on the tariffs of DVC for the 5 year period ending since the Hon ble Central Electricity Regulatory Commission (CERC) is yet to complete the review of its tariff order, as directed by the Hon ble Appellate Tribunal for Electricity. The cost of power purchase from DVC has West Bengal Electricity Regulatory Commission 9

10 accordingly been worked out on the basis of their present power tariffs. DPSCL has observed that the Hon ble CERC is required to approve revision of DVC tariffs for the period to Such period also includes the two years of and covered by the present application. In the absence of any information on the future tariffs of DVC, as maybe approved by the Hon ble CERC, DPSCL has assumed that the present tariff structure will continue. Suitable revision of the tariffs for and after taking into consideration revisions of DVC tariffs, if any, can therefore only be undertaken at the time of submission of the application for Annual Performance Review once the Hon ble CERC s tariff order for DVC is issued The purchase of power constitutes a major element of cost for DPSCL and increases in power purchase costs after fixation of tariff can only be made post facto on approval of the FPPCA application for the year. The inevitable delay in billing such charges to the consumers after approval of the FPPCA application leads, as per DPSCL, to considerable resentment amongst its consumers, especially since majority of them, being industrial or commercial entities, contend that they have been unable to factor in the additional cost at the time of production and are now saddled with irrecoverable expenses. Also, in some industries engaged in steel and cement, cyclical variation in demand patterns compel the consumers to reduce or shut down production occasionally. Hence, at the time of such adversity, it becomes difficult for the consumers to meet claims for past years, forcing them to seek further relaxation of the instalment facility already granted by the Commission at the time of approving the FPPCA application DVC revises its fuel surcharge rates at half yearly intervals, and charges provisional fuel surcharge rate for the succeeding half year at 2 paise / kwh more than the final fuel surcharge rate determined for the immediately preceding half year. Consequent to the increase of coal prices from mid December, 2007, DVC have indicated that their final fuel surcharge rate for the half year ended March 2008 will increase by about 6 to 7 paise per kwh over that charged provisionally. Such increases in fuel surcharge rates are likely to be effected by DVC in the West Bengal Electricity Regulatory Commission 10

11 future also. DPSCL has, therefore, assumed certain increases in the fuel surcharge rates of DVC and WBSEDCL in the forthcoming years covered by the present tariff application, as indicated in the relevant Forms and the Commentary of Annexure 1 and has prayed that the Hon ble Commission will permit fixation of tariff after consideration of the assumptions made DPSCL proposes to commission a new 33/11 kv substation at Gopalpur for import of power from WBSEDCL s Kanyapur 220 kv substation. This will constitute a new import point from WBSEDCL and will meet the growth of demand in the Dishergarh distribution area as well as be an alternative source to replace Dishergarh power station generation once the plant is shut down. Import from WBSEDCL at the existing Bankola import point is also intended to be increased after reinforcement and reorganization of the WBSEDCL transmission network in that area. As a result of such plans to augment import of power from WBSEDCL, as has been directed by the Hon ble Commission in past tariff orders, the percentage of import from WBSEDCL in comparison to total import will increase from the present 4% to 21% in , with the resultant cost savings made thereby being passed on to the consumers DPSCL also intends to import power in bulk from WBSEDCL and for such purpose, proposes to amend its plan for setting up a 132 kv substation at J.K.Nagar to a 220 kv substation for import of 100 MVA of power from WBSEDCL, whose in principle approval has already been received. This will enable DPSCL to replace more expensive DVC power with cheaper power from WBSEDCL. In the present petition, DPSCL has sought the Commission s consent to incur an initial expenditure of Rs.132 lakh payable to WBSEDCL for supervision of the work associated with the proposed project The applicant has adopted certain assumptions for projecting future expenses and the same have been classified in he Commentary to Annexure 1 of the tariff application The wage agreement with DPSCL s employees expired on 31 March 2007 and negotiations are going on for its renewal. Pending renewal of agreement on the West Bengal Electricity Regulatory Commission 11

12 revised pay scales and structures, the projections on employees cost have been made on the existing pay scales and structures. After execution of new agreement, the variations in expenditure will be shown in the applications for Annual Performance Review (APR) for the concerned years DPSCL has stated that the instant application has been submitted for determination of tariffs for the control period comprising the years to as per Tariff Regulations The information in the specified forms which are required to be submitted financial year-wise are actuals for previous years, estimated for base year and projections for the ensuing years. The requisite data have been submitted accordingly, other than for some quantitative data for past years, where, in the absence of adequate data, necessary break-up has been made on the basis of data available for the last year. Actual figures are based on audited accounts for the respective years, with suitable adjustment / re-arrangements, where necessary As required, a Perspective Plan and a Capital Investment Plan have been submitted by the applicant for approval of the Commission. However, the applicant submits that pending finalization and audit of its accounts for the year ended 31 March 2008, it has been unable to finalize the capital costs incurred on various projects under execution or completed during the year. The applicant, therefore, craves leave to submit the detailed costs of the capital projects and reasons for variation with approved cost in the application for APR for the year It has been stated that the estimations for the year and projections for the period to are based on certain assumptions and estimates, detailed in the submissions on the Revenue Requirement Form and Annexures thereto. It has also been stated that the submissions also contain detailed justifications for the Annual Revenue Requirements (ARR) for the ensuing years. West Bengal Electricity Regulatory Commission 12

13 2.33 The projected ARR for , and arers lakh, Rs lakh and Rs lakh respectively and the projected revenues for the aforesaid years at present tariff, net of surcharges and rebates, are Rs lakh, Rs lakh and Rs lakh respectively It has been stated that the projected revenue at the current rates are inadequate to cover estimated cost of sales of energy even without consideration of Normative Return and Special Allocations and adjusting the same with other income for these years, revenue gaps to be covered by increase in tariff are Rs lakh, Rs lakh and Rs lakh for , and respectively. The average increase over current average tariff that is required to cover the gap for each year works out to paise / kwh for , paise / kwh for and paise / kwh for Accordingly, paise / kwh, paise / kwh and paise / kwh have been proposed by the applicant as average tariffs for , and respectively The applicant has submitted that since the proposed Revenue Requirements and consequential tariff rates have been arrived at after consideration of certain future increases in fuel and power purchase costs, the possibility of subsequent FPPCA claims on the consumers will be substantially reduced if the present proposals are accepted DPSCL has referred to the various directions given by the Commission to DPSCL in its tariff order for and has stated that it has strived to comply with those directions of the Commission during the course of the year and intimated such compliance to the Commission from time to time. DPSCL, however, has again submitted in the attached volume of the tariff application all such reports and submissions together for convenience. These have been dealt with in Annexure 8B to Chapter 8 of this order DPSCL has reported that its relationship with its consumers remained cordial throughout. Except for some instances of low voltage, which the applicant is trying to rectify, all consumers attending the Consumers Meet have expressed West Bengal Electricity Regulatory Commission 13

14 their satisfaction with the level of service provided by DPSCL. The applicant had also, in the course of the year, taken various measures to make the consumers aware of different tariff schemes, the importance and necessity of energy conservation and audit and the grievance redressal mechanism in place. Save for one instance relating to an old claim of service charge, no other consumer has approached the Grievance Redressal forum or the Ombudsman, it has been reported 2.38 In conclusion, DPSCL has prayed for confirmation of the revenue requirements for the years to including the Normative Return and Special Allocation claims for the years on the basis of the Forms, Annexures and submissions made in Volumes A and B of the tariff application ; approval of the Schedule of Rates as detailed in Forms under Annexure 3; grant of increases of tariff in accordance with the above submissions; approval of the capital investment plans for the years to ; permission for submission of additional information / documents / action taken reports, as may be required by the Commission; and permission for the proposed tariffs to be increased with effect from 1 st April of each year. West Bengal Electricity Regulatory Commission 14

15 CHAPTER - 3 OBJECTIONS, COMMENTS, ETC. 3.1 As mentioned in paragraph 1.9, the gist of the tariff application for the second control period was published by DPSCL on 17June, 2008 in Bartaman, The Statesman, Prabhat Khabar and Dainik Lipi inviting the attention of the interested parties, stakeholders and the members of the public to the tariff application of DPSCL for the second control period and requesting for submission of objections, comments etc., if any, on the tariff application to the Commission within Opportunities were also afforded to all to inspect the tariff application and take copies thereof. 3.2 By , i.e. the due date, only one set of objections / comments has been received by the Commission. The objections / comments have come from West Bengal State Electricity Distribution Company Limited (WBSEDCL). 3.3 The objections and comments of WBSEDCL are noted below WBSEDCL is continuing to purchase electricity from DPSCL at 11 KV on radial mode at different off-take points to meet the power requirement of L & MV consumers of Asansol area DPSCL has projected the sale of power to WBSEDCL at 11 KV for the radial feeders at MU, MU and MU for the years , and respectively whereas WBSEDCL in its tariff application has proposed to reduce the quantum of power purchase from DPSCL gradually at 205 MU, 100 MU and 50 MU in the years , and respectively for supplying power to the own consumers of WBSEDCL as the grid power of WBSEDCL will be extended to the consumers of the above area through newly commissioned Asansol 220 KV sub-station While projecting the above sale to WBSEDCL at radial feeders, DPSCL has also sought enhancement of average basic rate (Monsoon rate) for the second control period to P/Kwh, P/Kwh and P/Kwh for Normal, Peak and Off-peak period respectively for the year with a hike of approximately West Bengal Electricity Regulatory Commission 15

16 Tariff Order of DPSCL for the year % for all periods from existing rate. Similarly, DPSCL Limited has proposed the increase of rate of sale to WBSEDCL in the years and also as follows: Existing Rate proposed by DPSCL in P/Kwh Normal Peak Off-Peak In this context, WBSEDCL likes to submit that as advised by the Commission, WBSEDCL is contemplating to take over portion of load from DPSCL to its own grid in Asansol area and also supply additional power to DPSCL in existing and new points to meet their demand. WBSEDCL, therefore, prays to the Commission that a uniform rate may be considered for Inter licensee sale of power between WBSEDCL and DPSCL DPSCL has also projected the purchase of power from WBSEDCL at MU, MU and MU for the years , and respectively whereas WBSEDCL in its tariff application has proposed the quantum of above power sale to DPSCL at 60.0 MU for all the three years from to WBSEDCL has, therefore, requested the Commission to consider the above points while computing the power purchase cost of DPSCL and tariff for supply to WBSEDCL by DPSCL for the years , and and prayed that the Commission may pass an appropriate order, as deemed fit and proper, keeping in view the facts stated above. 3.4 The Commission has taken note of the aforesaid objections / comments and has carefully considered them. The points agitated hereinabove have been dealt with by the Commission in the relevant portion of the instant tariff order. West Bengal Electricity Regulatory Commission 16

17 CHAPTER 4 LAW POINTS ON HEARING 4.1 The question of affording an opportunity of hearing to the consumers in the process of determination of tariff has come up on different occasions in various manners. It is, therefore, necessary to give the matter our consideration and clarify the position taken by the Commission in this behalf. 4.2 Before we deal with this point we clarify that in the instant determination of tariff for DPSCL no hearing has been given either to DPSCL or to any of the consumers or public. However, the Commission has considered the suggestions and objections received while passing the instant tariff order. 4.3 Commission is of the considered opinion that under the Act, the legislators have deliberately excluded any scope of hearing while determining the tariff under section 62 read with section 64 of the Act. Section 64 of the Act contains the procedure for determination of tariff. A bare reading of section 64 of the Act and its sub-sections clearly shows that while issuing a tariff order under section 64(3) of the Act, the Commission is required to consider all suggestions and objections received from the public. However, if the application under section 64(1) of the Act is found to be not in accordance with the provisions of the Act and rules and regulations made thereunder or the provisions of any other law for the time being in force, the Commission is empowered to reject the application of a generating company or a licensee after giving a reasonable opportunity of being heard to such licensee or generating company. Therefore, section 64(3)(b) of the Act limits the scope of hearing only in case of outright rejection of the application of a generating company or a licensee made under section 64(1) of the Act. This may be mentioned that under the Act the Commission has been entrusted with different kinds of functions. Determination of tariff under section 62 read with section 64 of the Act is only one of such functions. In respect of some functions, the statute has clearly mandated the Commission to provide hearing. Examples of some such functions are to be found in proviso to section 15 (6) (b), proviso to section 57 (2), section 142 and section 143 of the Act. These may be seen in contrast to sections 19(3), 63, 128 (6) and 130 of the Act where the scope of hearing has deliberately been excluded. It may also be noted West Bengal Electricity Regulatory Commission 17

18 that if tariff is determined under section 63 of the Act through a process of bidding, no hearing is required to be given to anyone. 4.4 Moreover, in line with the Act, the Commission has also made the Tariff Regulations. Regulation of the Tariff Regulations also excludes the scope of any hearing either to a licensee or to a generating company or to the consumers or to the public while determining tariff. 4.5 We are, therefore, of the opinion that under section 64 (3) (a) of the Act read with regulation of the Tariff Regulations, no hearing is to be given either to a licensee or to a generating company or to the consumers or to the public. What is required is consideration of suggestions and objections received from the consumers and / or public. 4.6 This point of law, as to whether in view of section 64 of the Act hearing is to be given to the licensee and consumers at large before tariff is determined, was an issue in a writ petition being W.P (W) of 2004 filed before the Hon ble High Court, Calcutta in which the Commission was one of the respondents. The Hon ble Justice Pinaki Chandra Ghosh by an order dated , having considered the judgment of the Hon ble Supreme Court reported in (2002) 8 SCC 715, inter alia, held that :.After going through the said Regulations it appears to me that hearing was not contemplated under the said Section 64 of the said Act and the Regulations framed thereunder. Therefore, in my opinion, not granting of a hearing to the petitioner cannot said to be violation of natural justice after construing the said Act and the Regulations framed thereunder. Therefore, in my opinion, it cannot be said that at this stage the said order has been made arbitrarily or any violation of natural justice The aforesaid order dated 4 October, 2004 of the Hon ble Justice Pinaki Chandra Ghosh was challenged before the Hon ble Division Bench of the West Bengal Electricity Regulatory Commission 18

19 Hon ble High Court in an appeal being MAT 596 of The Hon ble Division Bench comprising of Hon ble Justice Aloke Chakrabarti and Hon ble Justice S P Talukdar affirmed the order of the Ld. Single Judge by an order dated 25 February, 2005 and, inter alia, held that : After due consideration of the relevant provisions of the Act, 2003 and having regard to the submission made by the learned Counsel for the parties, we think that what is required at the stage of determination of tariff is consideration and not `hearing 4.8 However, the said writ petition was dismissed for default by an order dated by Hon ble Justice Aniruddha Bose due to non-appearance of the Ld. Advocate for the writ petitioner. We record here that we are aware of the fact that the aforesaid orders were interim in nature and in view of the aforesaid order dated dismissing the writ petition being W.P (W) of 2004 for default, the earlier orders of Hon ble High Court, Calcutta do not exist. However, we have recorded the relevant part of the aforesaid two orders only for the fact that the view taken by the Commission was accepted by the Hon ble High Court, Calcutta while passing the interim orders prior to dismissal of the writ petition on the ground of non-appearance of the Ld. Advocate for the writ petitioner. 4.9 The Commission, therefore, is passing the instant tariff order for DPSCL for the year without giving hearing to DPSCL or any objector or any one but after taking into consideration all suggestions and objections received. West Bengal Electricity Regulatory Commission 19

20 CHAPTER 5 SALES, ENERGY BALANCE & VARIABLE COST 5.1 DPSCL is supplying electricity in its area of supply covering 619 square kilometers. The consumer base is mainly industrial. Around 24%, 23% and 22% of the energy in its system, are projected to come from its two own generating stations presently in operation, for the years , and respectively. The balance energy need has been proposed to be met by purchase from DVC and WBSEDCL. The energy balance of DPSCL, thus, depends on its future sales, estimated distribution loss and in-house consumption at its offices and sub-stations. 5.2 Demand Side of Energy DPSCL projected sale of electricity of the order of MU, MU and MU in the years , and respectively. Out of the above sales volume, the projected sales to WBSEDCL at 11 KV radial feeder connected to DPSCL system are MU, MU and MU in , and respectively in order to meet the demand of the consumers of WBSEDCL. According to WBSEDCL, however, its requirement of energy from DPSCL will be gradually reduced and will be 205 MU, 100 MU and 50 MU in , and respectively because the concerned consumers will be fed from WBSEDCL s own grid. For the year , the projection of DPSCL has been admitted as its projection matches with the trend of the previous years. However, for the reasons adduced by WBSEDCL, the demands as projected by WBSEDCL have been admitted for and Following table will show the admitted energy requirement for sale by DPSCL. Energy Requirement for Sale by DPSCL Sl. As Admitted Particular Unit No Energy sale to consumer MU Energy sale to WBSEDCL MU Total sale of energy MU Own Consumption DPSCL has claimed 3.0 MU as in-house consumptions in its sub-stations and colonies. Such claim is found to be reasonable compared with the consumptions of and The Commission, therefore, decides to keep such consumptions at the same level for the years , and West Bengal Electricity Regulatory Commission 20

21 5.2.3 Distribution Loss The distribution loss for , and are allowed on the basis of the projections by DPSCL that are also in accordance with the norms as specified in the Tariff Regulations Demand Side Energy Requirement of DPSCL Based on the analyses as done in the foregoing paragraphs, the total energy requirement by DPSCL will, thus, come as under: Demand Side Energy Requirement of DPSCL Sl. As Admitted Particular Unit No Energy sale to consumers MU Energy for own consumption MU Energy sale to WBSEDCL MU Sub-total sale of energy ( ) MU Distribution loss rate % Distribution Loss MU Total Requirement ( ) MU Supply Side of Energy The Commission is now to take up the examination of the supply side of energy, i.e., (i) sent-out energy from the own generating stations of DPSCL and (ii) purchase from outside sources Sent out Energy from own Generating Stations DPSCL owns Dishergarh Thermal Power Station (DTPS) with de-rated capacity of 12.20MW and also Chinakuri Thermal Power Station (CTPS) having capacity of 3x10MW, out of which 2x10MW capacity is under the operating lease from Eastern Coalfields Limited (ECL). The sent-out energy from these two power stations on the basis of norms as specified in the Tariff Regulations has been projected by DPSCL and the same is admitted by the Commission as shown below: Ex-Bus Generation Proposed by DPSCL and Admitted by the Commission Sl. Dishergarh Chinakuri Particulars Unit No Capacity MW PLF % Generation MU * * * 4 Aux. Rate % Aux. Consumption MU Ex-Bus Generation MU * At 80% PLF the value is not as submitted by DPSCL West Bengal Electricity Regulatory Commission 21

22 5.3.2 Purchase of Energy Tariff Order of DPSCL for the year DPSCL s liability to supply power to WBSEDCL at 11 KV will reduce gradually resulting in reduction of its energy requirement. Such reduction shall be effected by DPSCL against purchase of power from DVC, which is a costly source. DPSCL s proposal to purchase such power from West Bengal Green Energy Development Corporation Limited in order to meet its obligation to purchase electricity from renewable and co-generation sources of electricity in pursuance of the relevant Regulations of the Commission has been taken into consideration. Accordingly, the admitted power purchase quanta against the proposal of DPSCL are given in the following table. Energy Purchase By DPSCL Sl. As Proposed As Admitted Energy Purchase From Unit No WBSEDCL MU DVC MU WBGEDCL MU Total DPSCL MU Energy Balance Sl. No. Based on the analyses done and decisions recorded in the earlier paragraphs, the statement of Energy Balance for DPSCL for the years , , is as below. Energy Balance As Proposed As Admitted Particulars Ex-bus energy from own generation Energy purchase from WBSEDCL Energy purchase from DVC Energy from WBGEDCL Total Available Energy to DPSCL ( ) Energy sale to consumer Energy for own consumption Energy sale to WBSEDCL Total sale of energy (6+7+8) Distribution loss rate Distribution Loss Total Utilisation (9+11) DPSCL s Submission on Fuel Cost DPSCL has submitted that the lower Plant Load Factor (PLF) in of its generating stations was due to lower availability of coal during and, according to DPSCL, in the process DPSCL had less generation of 8.74 MU in West Bengal Electricity Regulatory Commission 22

23 DTPS and MU in CTPS in In view of such lower generation arising out of low availability of coal, according to DPSCL, the following submissions have been made by DPSCL: a) The recommended annual PLF for DTPS and CTPS, as specified in the Tariff Regulations, are 40% and 80% respectively. Though DPSCL has not reduced the normative PLF in its proposal for determination of tariff for the period from to , it has submitted that in case of non-availability of coal as per requirement, such normative PLF for may not be attained. b) In line with its prayer in the application filed to the Commission by DPSCL on , DPSCL has requested for consideration of normative station heat rate as 5695 Kcal/Kwhr for DTPS at par with actual of of that power station. For CTPS, DPSCL has requested for gross station heat rate at the level of 3866 Kcal/Kwhr at par with actuals of While pleading for such higher station heat rates, DPSCL has adduced reason that the higher station heat rates as actually achieved for its power stations in were due to lower PLF arising out of lower availability of coal. 5.6 Commission s view on DPSCL s Submissions Commission has analyzed the submission of DPSCL in paragraphs 1.3 to 1.7, 1.9 to 1.14 and 5.1 to 5.3 in Annexure I in Volume A(II) of the tariff application of DPSCL for to and has reached to the following conclusions as described below: The referred recommendations of Central Electricity Authority (CEA) as mentioned in paragraph 1.6 of the above mentioned submission have been shown in detail by two letters of CEA vide No. 7/4(49)A-2004-OMD/4427 and No. PLG/2/4(49)/4426 both dated (vide page 219 and 220 in Annexure I in the Volume A(II) of the tariff application of DPSCL for to ). On this issue the observations of the Commission are as follows: a) The contents of the above mentioned letters of CEA show that on the basis of information furnished by DPSCL, CEA has considered gross TG heat rates as 3703 Kcal/ Kwhr for CTPS and 5532 Kcal/ Kwhr for DTPS on the basis of tariff order of the Commission as mentioned in the aforesaid letters. b) It may be mentioned in this connection that the Commission has never allowed such gross TG heat rates as mentioned in the letters of CEA. In fact, in the tariff order for the year of DPSCL, the Commission had West Bengal Electricity Regulatory Commission 23

24 mentioned specific coal consumption rate and corresponding heat rate separately for the power station of DPSCL as a whole. Heat rate of a power station as a whole was the station heat rate on the basis of which the coal required for that year was computed. In no way that heat rate could be considered as TG heat rate at any stage of such computation. Even DPSCL has never contested this issue at any stage. c) On the basis of such data on gross TG heat rate, boiler efficiency and plant load factor which have been mentioned in the above letters of CEA, the computed annual coal requirements stand at such figures which have been recommended by CEA in the aforesaid letters. Such calculations are shown in the following table. COMPARISON OF COAL REQUIREMENT Sl. No. Particulars Unit Dishergarh TPS Chinakuri TPS 1 CEA considered installed Capacity MW CEA Calculated coal requirement per Annum MT CEA Considered Corresponding TG Heat Rate Kcal/kwhr CEA Considered Corresponding PLF % CEA Considered boiler efficiency % Gross Station Heat Rate (3/5) Kcal/Kwhr GCV of Coal as per CEA Kcal/Kg Total Generation at 90 0 PLF MU Total Heat MKcal TOTAL COAL REQUIRED BASED ON GROSS SHR (9/7)X1000 MT In other words, if such figures of coal requirements of MTPA and MTPA for DTPS and CTPS respectively as per CEA s letters are considered, then the gross station heat rates of CTPS and DTPS should have been 7092 Kcal/ Kwhr and 4356 Kcal/Kwhr respectively, which were never allowed by the Commission in any of its tariff orders. These values are much higher in comparison to CEA s own findings in 2003 of 5391 Kcal/Kwhr and 3888 Kcal/Kwhr for DTPS and CTPS respectively. d) In view of the above discussions, the Commission does not take into cognizance the above figures of CEA Now let us analyze the information and records from DPSCL s own submissions to find out whether the coal quantity available to DPSCL is sufficient to produce the target generation for at the normative station heat rate as specified in the Tariff Regulations. West Bengal Electricity Regulatory Commission 24

25 a) According to orders dated and of the Ministry of Coal, Government of India, the total long term coal linkage available with DPSCL is as follows: Order Dated Power Station Capacity Allotted Coal in MT / annum x 10 MW MW Total MW In addition to the above long term linkage, it transpires from the letters of DPSCL to the Joint Secretary, Ministry of Coal (vide letters dated , and ) that between and there were two incidents of one time allocation of coal (of MT each) to DPSCL totaling MT. Accordingly, if both the long term and two incidents of one time allocations of MT each are considered, the total available coal between and stands as follows: Coal Supply Head Quantity in MT per Annum Through long term linkage for Through long term linkage for Coal through one time allocation as revealed in the letters dated , and Total Allotted Coal As per Annual Report of DPSCL, for the year the total coal procured was MT out of which was consumed by power stations as per actual station heat rates. If transit and handling losses of 0.75% allowed in the tariff order for is considered, then the total requirement of coal in was MT. If such quantity is deducted from the total quantity of allotted coal in and the balance quantity available for stands at ( ) MT, i.e MT. The opening stock of coal as on has not been taken into consideration in the above calculations. Had such value of opening stock been taken into consideration, then the availability of coal in would have been further higher than MT. Again, from another side it may be observed that the coal supplied against the letter dated was supplied in Thus the coal supplied according to long term linkage and one time allocation in was about ( ) MT i.e. about MT. Thus the coal available in was about MT. The following two tables will show that the said allotted coal was sufficient for DPSCL in to generate more (41.45 MU and MU from DTPS West Bengal Electricity Regulatory Commission 25