National Electric Power Regulatory Authority

Transcription

1 National Electric Power Regulatory Authority Islamic Republic of Pakistan Registrar NEPRA Tower, Ataturk Avenue (East) G-511, Islamabad Ph: , Fax: Web: No. NEPRA/TRF-237-1ESCO-2013/ January Subject: Determination of the Authority in the matter of Petition filed by Islamabad Electric Supply Company Ltd. for Determination of its Consumer end Tariff Pertaining to the FY 'Case # NEPRA/TRF ESCO Dear Sir, Please find enclosed herewith the subject Determination of the Authority along with Annexure-I, 11, 111, IV, V, VI & VII (67 pages) in Case No. NEPRA/TRF-237- IESCO The Determination is being intimated to the Federal Government for the purpose of notification of the approved tariff in the official gazette pursuant to Section 31(4) of the Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997) and Rule 16(11) of the National Electric Power Regulatory Authority (Tariff Standards and Procedure) Rules, Please note that only the Order of the Authority at para 24 of the Determination along with Annexure-I (Fuel Price Adjustment Mechanism), Annex-III (Schedule of Electricity Tariffs), Annex-1V (IESCO Power Purchase Price), Annex-V (Terms and Conditions) and Annex-VII (Summary of Directions) needs to be notified in the official Gazette. Enclosure: As above Secretary Ministry of Water & Power `A' Block, Pak Secretariat Islamabad CC: 1. Secretary, Cabinet Division, Cabinet Secretariat, Islamabad. 2. Secretary, Ministry of Finance, `Q' Block, Pak Secretariat, Islamabad. ( Syed Safeer Hussain )

2 National Electric Power Regulatory Authority (NEPRA) PETITION NO: NEPRA/TRF-237/IESCO-2013 TARIFF DETERMINATION FOR ISLAMABAD ELECTRIC SUPPLY COMPANY (IESCO) DETERMINED UNDER NEPRA TARIFF (STANDARDS AND PROCEDURE) RULES Islamabad 722. January, 2014

3 Abbreviations CpGenCap The summation of the capacity cost in respect of all CpGencos for a billing period minus the amount of liquidated damages received during the months CPPA Central Power Purchasing Agency DISCO Distribution Company DM Distribution Margin FY Financial Year GOP Government of Pakistan GWh Giga Watt Hours KV Kilo Volt kw Kilo Watt kwh Kilo Watt Hour MW Mega Watt NEPRA National Electric Power Regulatory Authority O&M Operation and Maintenance PPP Power Purchase Price PYA Prior Year Adjustment RAB Regulatory Asset Base RORB Return on Rate Base SRO Statutory Regulatory Order T&D Transmission and Distribution TOU USCF Time of Use The fixed charge part of the Use of System Charges in Rs./kW/Month N, ( 2

4 DETERMINATION OF THE AUTHORITY IN THE MATTER OF PETITION FILED BY ISLAMABAD ELECTRIC SUPPLY COMPANY (IESCO) FOR DETERMINATION OF ITS CONSUMER END TARIFF CASE NO. NEPRA/TRF/213/IESCO-2013 PETITIONER Islamabad Electric Supply Company Limited (IESCO), Street No. 40, G-7/4, Islamabad. INTERVENER Warid Telecom (Pvt) Limited COMMENTATOR News reporter REPRESENTATION 1. Mr. Malik Muhammad Yousaf Awan, Chief Executive Officer 2. Najam Javaid, Finance Director 3. Mr. Tariq Mehmood, Director General (HR) 4. Mr. Riaz Qadeer Bukhari, Customer Services Director 5. Kawish Shriat ullah, Chief Engineer / Technical Director 6. Khalid Masood, Additional DG (IS) 7. M. Naeem Aslam, Company Secretary 8. Miss Uzma AD Legal 3

5 The Authority, in exercise of the powers conferred on it under Section 7(3) (a) read with Section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, Tariff Standards and Procedure Rules, 1998 and all other powers enabling it in this behalf, and after taking into consideration all the submissions made by the parties, issues raised, evidence/record produced during hearings, and all other relevant material, hereby issues this determination / zi (Maj (Rtd) Haroon Rashid) Member (Habib ul allh Khilji) Member )) -I yllv (Khawaja Muhammad Naeem) Vice Chairman 4

6 1. Background and Brief History 1.1 Islamabad Electric Supply Company Limited (IESCO), hereinafter called the Petitioner", being a Distribution Licensee of NEPRA filed a petition for the determination of its consumer-end tariff in terms of Rule 3(1) of Tariff Standards & Procedure Rules-1998 ("Rules"). The grounds and basis of the Petition along with relief sought as per Rule 3(2)(b) & (c) of Rules are described as under: 1.2 GROUNDS OF PETITION The Petitioner stated that it has been filing tariff petition, review motions and adjustments applicable as per procedure, laid down by the Authority and is submitting this tariff petition primarily to safeguard against the increased costs, expenses and to ensure that it continues to function as an efficient and profitable organization. As per the Petitioner its existing tariff does not adequately cater for its proposed revenue requirements for years on account of increase in asset base, inflationary trend, replacement hiring costs, repair and maintenance, unforeseen increases in power purchase price and litigation costs and so forth. 1.3 Summarizing the grounds, the Petitioner submitted following material facts as forming basis of the tariff petition for FY : Increase in asset base, inflationary trend, replacement hiring costs, repair and maintenance Reduction in claimed O&M expenses )=. Increase in Power Purchase Price and projected increase Increase in interest charges and working capital requirement AJK issue relating to payment at the reduced rate Issue relating to cellular and telecom companies vis a vis peak and off peak timings Improved investment plan in view of its objectives for the FY Recalculation of the Return on Rate Base. Exclusion of Late Payment Surcharge from Non-tariff income. Revision of criteria for Lifeline consumption and consumers. 2. RELIEF SOUGHT 2.1 The Petitioner has sought the following relief: Tariff for the FY be determined based on submissions made in the present tariff application. )=. Investment be allowed for Rs.10,752 million. Distribution Margin amounting to Rs.12,418 million be allowed. \ 1\1ER R 0 NEPRA AUTHORITY t 5 \sib

7 )=. Prior year adjustment amounting to Rs.19,535 million be allowed. Interest on working capital be allowed as Rs. 1,676 million for FY and Rs. 3,534 million for FY Line losses be 9.5% for the FY )=. After having all effects in the tariff the required average sales rate/tariff as worked out Rs.16.69/KWh may be allowed as per "proposed schedule of consumer end electricity tariff". NEPRA to allow flexibility in respect of implementing the post-retirement benefit plan into a separate fund/trust. )=. Policy regarding Lifeline consumers may be revised for the FY NEPRA to approve Fuel Adjustment charges based on the submission. NEPRA to condone any inadvertent omissions/errors/rounding off difference / shortcomings submitted in this Petition. )=. Any other relief, order or directions which NEPRA may deem fit in respect of the tariff determination. 3. PROCEEDINGS: 3.1 In terms of rule 4 of the Rules, the Petition was admitted by the Authority on 19th August, In compliance of the provisions of sub-rules (5) & (6) of the Rule 4 and Rule 5, notices of admission and hearing were sent to the parties which were considered to be affected or interested. An advertisement in this regard was also published in the leading national newspapers with the title and brief description of the petition on 22nd August, FILING OF OBJECTIONS/ COMMENTS: 4.1 Comments/replies and filing of intervention request, if any, was desired from the interested person/ party within 7 days of the publication of notice of admission i.e. August 22, 2013 in terms of Rule 6 & 8. In response thereof, no comments or intervention request was filed within the stipulated time. However, an intervention request from Warid Telecom (Pvt) Limited was filed on 30th August, 2013, which was barred by time. However, the same was accepted by the Authority to provide an opportunity to the intervener to state its ground for objection to the pleadings of the Petitioner. Warid Telecom ( Pvt) Limited, submitted the following comments; 4.2 Warid Telecom (Pvt) Limited Intervener Relief sought by Warid Telecom is as below. 4Z- NEPRA AuTeitoo" 6

8 Warid wishes to specifically object to the contents of the tariff petition to the extent that the Petitioner is requesting the Authority to reconsider the installation of TOU metering system for cellular companies. Warid maintains that the TOU metering system was validly installed and there is no reason or circumstances permitting or warranting the reconsideration of the said system in respect of cellular companies. the Petitioner's request is not accompanied by any material or substance and the applicant is entitled to be provided with further information on which the instant request is being based. Warid has repeatedly submitted to the competent Authorities that it is entitled to electricity connections at the industrial tariff and that the various distribution companies are in violation of law in denying such connections to Warid. the Petitioner has not made out any grounds for increase in tariff. Since the request of the Petitioner for reconsideration of the TOU metering system for cellular companies was not properly advertised, further time should be granted and this matter should be separately determined 5. FRAMING OF ISSUES 5.1 Following issues were framed to be considered during the hearing and for presenting written as well as oral evidence and arguments:- i) Whether the concerns raised by the Intervener are justified? ii) Whether the Petitioner has complied with the directions of the Authority? iii) Whether the Petitioner's projected purchase of 8,788 GWhs and sales of 7,953 GWhs units for the FY , is reasonable? iv) Whether the Petitioner's proposed transmission and distribution losses of 9.5% for the FY , are justified? v) Whether the Petitioner's projected Power Purchase cost of Rs 95,596 million (Rs /kwh) for the FY , is justified? vi) Whether the Petitioner's projected O&M Cost of Rs 9,785 million (Rs 1.23 /kwh) for the FY after accounting for inflation/increments, is justified? vii) Whether the Petitioner's proposed depreciation charge of Rs 1,688 million (Rs 0.21 /kwh) for the FY after accounting for projected additions to Fixed Assets, is justified? viii) Whether the Petitioner's projected Return on Regulatory Asset Base of Rs 2,945 million (Rs 0.37 /kwh) for the FY , is justified? 0 HEPRA?-3 fit AUTHORITY L=. 7

9 ix) Whether the Petitioner's projected Other Income of Rs 2,000 million (Rs 0.25 /kwh) for the FY , is reasonable? x) Whether the Petitioner's proposed Investment plan of Rs 10,752 million for the FY , is justified? xi) -Whether the request of Petitioner to allow financing cost on the debt allocated to the Petitioner by Power Holding (Pvt.) Ltd. for onward payment to CPPA, is justified? xii) Whether the proposed revenue requirement of Rs 132,758 million at an average sale rate of Rs /kwh for the FY , is justified as against the Authority's approved average sale rate of Rs /kwh for the FY ? xiii) Whether prior year Adjustment calculated by the Petitioner is accurate? xiv) What are the comments of Petitioner on the proposal for determination of uniform fixed charges for Agriculture consumers? xv) Whether the proposed consumer-end tariff for FY as submitted by the Petitioner is based on cost of service study conducted by USAID? xvi) Whether the Petitioner's miscellaneous requests merit consideration? 5.2 In addition to above, the Authority has decided to form an issue pertaining to the future tariff determination methodology in the matter of the Petitioner. On the basis of pleadings, evidence/record produced and arguments raised during the hearing, issuewise findings are given as under: 6. HEARING 6.1 The pleadings so available on record were examined by the Authority in terms of rule 9 of Tariff Rules; accordingly in order to arrive at just and informed decision, it was decided to conduct a hearing into the matter on 4'h September In compliance of Rule 5 of Tariff Rules notice of admission/hearing were sent to the concerned parties and published in the leading newspapers on 22nd August, As per the schedule, the hearing was conducted on 4'h September, 2013 at Nepra Main Office, Islamabad. During the hearing, the Petitioner was represented by Mr. Malik Muhammad Yousaf Awan, Chief Executive Officer, of the Petitioner along with his financial and technical team. The Interveners and general public also participated in the hearing. During the hearing, following comments were received by one of the Media Representative; Various DISCOs raise excess bill to the consumers. This allegation has been proved against Lahore electric Supply Company (LESCO) and two days earlier in case of the Petitioner. The dues of industrial and commercial consumers are being passed on to the public sector consumers. For instance, a bill of Rs 6 million was charged to Benazir Bhutto Hospital to park the units. Upon internal inquiry by the Petitioner, the concerned official admitted of parking excess units on the directions of relevant SDO 8

10 This practice is on-going and we need answer as to when this practice will discontinue? 6.2 The Petitioner responded to the concerns of the Commentator during hearing and stated that this was an error which was pointed out by the internal team and was corrected on a timely basis. There was no other intention to park units involved in this incident or as a whole. Errors are part of the operations and are also corrected. 7. Issue #1. Future tariff determination methodology with respect to the consumer end tariffs of XWDISCOs. 7.1 Change of tariff determination title for the next tariff Petition In terms of section 31(4) of NEPRA Act, 1997, the consumer-end tariffs for XWDISCOs is determined by NEPRA and intimated to the Government of Pakistan for notification in the official gazette. Once it is notified, it remains effective until the new tariff is notified by the GOP. Effectively, the Authority "considers" (not to be understood as "accepts") the actual/audited results of a certain financial year ( test year ) along with the projected increases in different components of costs, for future period, does its due diligence and determines the consumer-end tariff for future which remains in place ( after notification ) until a new tariff is determined and notified by the GOP. Although, the current title of the Authority's determinations speaks for itself with respect to the annual tariff determination regime, however, for the sake of other stakeholders, the Authority has felt that the subject / title of the petitions and determinations of XWDISCOs does not clearly specifies its objective. In view thereof, the Authority has decided to change the title for its decision as " Tariff determination based on the projected results of the FY " and at the same time making it mandatory for the Petitioner to specify the "test year' on which it has based its petition. (In the instant case, it is the actual results for the FY ). This change would be applicable on for the next tariff petition With the aforementioned change, the Petitioner would keep on coming to the Authority for the adjustments of its base tariff on monthly, quarterly and annual basis. If under any unusual change or circumstances, the Petitioner feels that it requires the Authority to reconsider its base rate, it may file a petition for the redetermination of its consumer end tariff, based on the actual/audited results of a test year (which may be latest audited year or a projected financial year immediately succeeding an audited financial year) By simply changing the subject/title of the determination the following advantages are expected to yield NEPRA j AUTHORITY.74 0 _70 9

11 No. NEPRA/TRF-237/IESCO Improve the understanding of, Interveners, Commentators & different stakeholders. It would encourage the GOP to notify the consumer-end tariff with immediate effect only. It would encourage XWDISCOs to get their incremental cost approved from the Authority before it starts incurring it. Assessment of annual revenue requirement Under the changed title, the Authority would continue determining revenue requirement on annual basis and would continue to project monthly PPP references as; - lesser revenue is generated in winter which is compensated by higher revenue generated in the summer; - changes in generation mix resulting in lower PPP in wet seasons (with greater hydel generation) compensating high PPP in winter (with greater generation reliance on RFO); - there is huge variation in T&D Losses due to seasonal fluctuation However, certain adjustments like impact of losses, variation in capacity transfer price and UoSC, impact of extra or lesser purchases of units would be made on quarterly basis as per the existing practice. Thus, following components of tariff are subject to annual assessment; Assessment of T&D losses target. Assessment of Sales target. Impact of Consumer mix variance. Month wise assessment of reference values with respect to PPP (including energy, capacity & transmission charges). Assessment of Distribution Margin, and ; Assessment of prior period assessment, if any The Petitioner may file a review on the Authority's assessment as per Rules. Quarterly Adjustments The quarterly adjustments would also be done for the FY as per the following scope. Thus, the scope of quarterly adjustments would be limited to; 1. The adjustments pertaining to the capacity and transmission charges 10

12 2.The impact of T&D losses on the components of PPP. 3.Adjustment of Variable O&M as per actual. Monthly Fuel Adjustments The existing practice with respect to the adjustments on account of variation in fuel cost component of PPP on monthly basis would continue for the FY This adjustment reflects in the consumers' monthly bill as Fuel Adjustment Charge In view of any abnormal changes the Authority may review these references along with any quarterly adjustment. Here it is pertinent to mention that PPP is pass through for all the DISCOs ( variable cost ) and its monthly references would continue to exist irrespective of the financial year, unless the new Schedule of Tariff (SOT) is notified by the GOP. The recovery of fixed cost Distribution Margin & Prior Year Adjustment (DM & PYA) would also be done on the currently notified regulated sales. 8. Issue #2. Whether the concerns raised by the Intervener and Commentator are justified? 8.1 The Petitioner in its petition stated that it still maintains that the organizations in the telecom sector and all Offices have been unduly advantaged by the installation of TOU meters and no distinction can be made between off peak and peak hours due to the nature of services provided by this sector. The Petitioner stated that conversion to a TOU meter is only viable for consumers who are aware of the rules and are able to alter their consumption patterns to maximize plan benefits. Therefore, the installation of TOU meters be disallowed for all such consumers including cellular and telecom companies. According to the Petitioner, such companies avail post installation benefits of TOU meters and cause a negative impact on the average sale rate. One of the Representative of Telecom Sector argued that Cellular companies load requirement remains constant throughout the day, months and years. Hence, they cannot avail benefit of only off peak rates rather they have to use and pay, for the energy at peak rates as well. 8.2 The Authority after considering the arguments of both parties has decided; To hold separate hearing for reconsideration of TOU meters installation for cellular companies inviting and involving all the stakeholders. To consider the Petitioner's request for increase in tariff after proper analysis and allow only prudently incurred cost. 8.3 The Authority considers that the issue of overbilling needs to be monitored by the Petitioner on real time basis so that any such event must be avoided in advance. ER REG (ie\ "1 '73 NEPRA AuTHGRIT 11

13 Further, in case the Commentator has any specific issue to come up pertaining to overbilling should file a complaint in the consumer's affair division, NEPRA. 9. Issue #3. Whether the Petitioner has complied with the direction of the Authority passed in the determination pertaining to the FY ? 9.1 The Authority issued several directions in the tariff determination for the FY ; the compliance of each is discussed under the relevant heads of issue. However, one of the directions is discussed below; 9.2 In the tariff determination pertaining to the FY , the Authority discussed the amount receivable from Government of Azad Jammu & Kashmir (AJK) which amounted to Rs. 10,076 million as on 30th June, 2012 and directed the Petitioner in para 15.2 of the said determination to take up the recovery of this amount with GoP under intimation to the Authority. 9.3 The Petitioner vide its letter dated 29th May, 2013 submitted a summary of total receivable from Government of AJK and informed the Authority that none of the relevant Ministries has responded on the issue. Subsequently, during the hearing of the instant petition, the Petitioner apprised the Authority that receivable from Govt of AJK has swelled to Rs. 15,131 million as on 30th June, 2013 despite the Petitioner's efforts and agitating the issue with the Ministry of Water & Power for early settlement. The Petitioner also requested the Authority to intervene in this regard. 9.4 The Petitioner's claim for making serious efforts for recovery of outstanding amount was not supported/submitted with any correspondence or communications. As a result thereof the amount of receivable has increased by about 50%. The Authority considers that this is a very serious matter, which not only hampers the performance of the Petitioner but also adds to the circular debts this resulting in increased load shedding. It appears that an expected follow up was not there from the Petitioner's side as it has failed to show or submit any series of communications with the relevant ministries. Consequently, the recent figure of AJK receivables has swelled to an alarming figure of Rs. 15,131 million. The Authority considers that since the matter is between the GOP and the Petitioner, therefore the Authority's intervention is not required. 9.5 In view thereof, the Petitioner is directed to take up the matter seriously with the GoP and submit relevant communications in this regard to the Authority. 10. Issue # 4. Whether the Petitioner's projected purchgse of 8,788 GWh and sales units of 7,953 GWh for the FY , are reasonable? 12

14 No. NEPRA/TRF-237/IESCO while justifying the projected receipt and sale of units for the FY , the Petitioner has provided the following information: Years Purchase units Sale units GWh ,044 7, ,061 7, ,071 7, ,396 7, ,502 7, ,330 7, (provisional) 8,574 7, (projected) 8,788 7, During the hearing, the Petitioner stated that the average increase in units sold in the last three years remained 1.61% and based on this figure and taking into account an increase of 0.82%, the sale units are forecasted as here under; Gwh Receipt of units 8,788 Less: Units 9.50% 835 Sale of Units 7, Although, there is an inbuilt mechanism for adjusting actual variation in sales against the estimated sales, yet in order to avoid unnecessary fluctuations in the consumer-end tariff it is appropriate to make realistic assessment of the purchases and sales. Moreover, it is also important for the assessment of monthly reference fuel cost for making monthly fuel cost adjustment pursuant to Section 31(4) of Regulation of Generation, Transmission and Distribution Act (XL 1997). In view thereof, the Authority has carried out a detailed exercise for estimating station wise generation pertaining to the FY On the basis of 3 year's actual trend of purchase of power and prevailing circular debt issue, it is estimated that in the FY the overall system generation will be about 88,362 GWh After adjusting for the permissible transmission losses of 3.0% about 85,711 GWh are expected to be delivered to the distribution companies; the estimated share for the Petitioner from the pool for FY , is accordingly assessed as 8,202 GWh Gas against 8,788 GWh projected in the instant case. After incorporating the T&D losses target for the FY discussed below ) the sales target for the same period worked out as 7,427 GWhs. 11. Issue #5. Whether the Petitioner's p oposed transmission and distribution losses of 9.5% for the FY are justified? \G p\ner R.ct- -5;:, i., 0 c.) wnepra c _, ui..., AUTHgRITY,..e ):!. 13

15 11.1 The Petitioner has requested a T&D losses target of 9.50% for the FY The actual T&D losses of the Petitioner over the last few years were as below: Years T&D Losses in % % % % % % % 2013 (provisional) 9.44% 2014 (projected) 950% 11.2 The Petitioner, while justifying its requested losses, stated that further reduction in losses is implausible given that it is nearing saturation and investment in the system is primarily carried out to maintain the system and to control the losses due to expansion in the system, specifically rural electrification. Further, during the hearing, the Petitioner reiterated that it has undertaken village electrification which caused increase in losses and the investment programs is aimed at sustaining the losses due to increase in customer base The Authority observed that the Petitioner had submitted the same argument as it was placed before the Authority during the last year tariff petition i.e. pertaining to the FY The Authority, while deciding the case, concluded that the Petitioner failed to submit any break-up of losses in terms of increase in losses caused by system expansion and contribution of investment programs, in sustaining the existing level of losses. Again in the instant petition, the Petitioner has failed to substantiate its claim with any working or reconciliation The Authority, in order to judge the accuracy of Petitioner's claims, the Authority directed the Petitioner to conduct a study of its existing distribution network from an Independent Consultant. The direction was aimed at assisting the Petitioner in identifying potential areas for improvements and to carry out investments with technical advisories. It was further directed that the TORs of the study should include study of losses on 132 kv, 1 lkv and below and to submit completion timelines by 31s1 March, The Authority also brought on record in the said tariff determination that study of losses on LT lines is a huge task and therefore, allowed the Petitioner t \() L1.1 NEPRA AUTHORITY.1" 0: 14

16 No. NEPRA/TRF-237/1E5C select a reasonable sample of LT lines in order to carry out study and clarify the situation The Petitioner was inquired of the compliance with Authority's directives vide NEPRA's letter no dated 3rd April, 2013 and letter no dated 10'h May, In response to these letters, the Petitioner responded vide letter no /FD/IESCO dated 3rd May, 2013 and requested for extension in time of one month for submission of reply on the directives. Subsequently, the Petitioner sent letter vide no. FDI/CPC/ /19383 dated 29'h May, 2013 containing responses on compliance with Authority's directives. With regard to the study of losses, the Petitioner submitted that its technical department is working to develop timelines for the study and the Authority will be informed accordingly in the next week. However, nothing was heard from the Petitioner in the indicated timeline The Petitioner filed the tariff petition on 26th July, 2013 and referred to the same letter of 29th May, 203 was referred, without providing any further details on the status of compliance. It was only during the hearing of the instant petition, when the Authority was informed that it has initiated the process of hiring the Consultant and the study of losses to be conducted on the following two lines ; T&D losses study to be carried out by the Consultant with IESCO to provide all the required field data. T&D losses study to be carried out by Consultant along with physical verification of network data The Authority observed that the Petitioner has not even shared its detailed TORs of the study with the Authority. The aforementioned two points do not guarantee any timelines for the completion of the said study, it does not clarify as to which software would be used for the study and last but not the least it does not ensure that whether the study would be carried out on low voltage lines i.e. below 11KV line and what would be the sample size of the same In view of aforementioned, the Authority is constrained to conclude that the Petitioner has not taken Authority's direction, with respect to the study of T&D losses, seriously. The study, as mentioned above was aimed at identifying the areas of improvement for the Petitioner. Keeping in view the Petitioner's attitude with respect to the compliance in this regard the Authority does not accept it's argument of `saturation point of losses' Further, the Petitioner's request of allowing 9.50% level of T&D losses for the FY is not justified, keeping in view the Petitioner's actual results of 9.44% for the NEPRA -< AUTHORITY 15

17 No. NEPRA/TRF-237nESCO-2013 FY The Petitioner justified its requested level of losses on the grounds that it is undertaking regular village electrification which will lead to an increase in losses. The regular hourly load shedding was also referred by the Petitioner, which according to it cause damage to the transformers and lead to increase in technical losses. The Authority is of the opinion that the Petitioner should undertake only such village electrification which is feasible and duly supported by technical evaluation. If any village electrification project results in enhancing the existing level of T&D losses, the excessive losses must be monetized and should be treated as a part of the project cost in the technical evaluation of the project. Any exception to this order shall bear onus to the Petitioner and the Authority shall not allow any increase in loss to cater for such an expansion. As regard the Petitioner's stance on increase in technical losses caused by damaged transformers and load shedding, the Authority is of the opinion that it is not valid, considering the fact that the Authority allows investments aimed at improving the Petitioner's distribution system. In addition to aforementioned, the Authority also allows routine maintenance expenses to cater the work which is not in capital nature Based on the aforementioned arguments, the Authority while declining the Petitioner's request of setting a losses target of 9.50% sets target of 9.44% for the FY The Authority further directs the Petitioner to share the TOR's of the study with the technical division of the Authority not later than 31" March, The Authority has also decided to initiate a separate proceedings against the Petitioner, for non compliance, under the relevant law. 12. Issue #6. Whether the Petitioner's proposed Investment plan of Rs 10,752 million for the FY , is justified? 12.1 The Petitioner has requested Rs. 10,752 million to execute its development/ investment plan for the FY in the areas of Distribution of Power (DOP), Energy Loss-Reduction (ELR), ERP, Secondary Transmission & Grid (STG), Call centre, Housing Plan and others. The break-up of proposed investment provided by the Petitioner is as under: Particulars Rs. In Million DOP 627 ELR 420 STG 5,623 ERP 260 Call Centre 9 Housing Plan. /

18 Others 3,500 Total 10, The Petitioner plans to fund the aforementioned investments through; Loans Own Resources Capital Contributions/Deposit Works Total Rs. 5,338 million Rs. 1,914 million Rs. 3,500 million Rs. 10,752 million 12.3 During the hearing, the Petitioner presented following break-up of requested investment: Particulars Description Proposed Expense in FY Actual Expense for FY Rs. in million DOP Civil Works DOP-HT DOP-LT DOP-OTHERS DOP TOTAL ELR ELR-HT ELR-LT ELR TOTAL STG STG-WB 1,644 3,388 STG-ADB 665 2,235 STG TOTAL 5,623 2,309 ERP 260 Call Centre 9 Housing 313 Plan Others 3,500 2,694 Total 10,752 5, The Petitioner has not submitted any details of work to be performed under DOP or ELR with the Petition or during presentation. However, a list of orks under STG 17

19 along with their costs is attached with the petition. This primarily includes the construction / rehabilitation of 132 kv transmission lines and grid stations. However, no cost/benefit analysis of the works has been provided. With respect to ERP, the Petitioner stated that it is planning to implement ERP system with a total investment of Rs. 756 million. Out of this amount, a sum of Rs. 260 million will be required in FY The Petitioner also included the establishment of a Call centre, aimed at enhancing customer relationship management tool. As per the Petitioner, the total investment required for this head is Rs. 9.2 million with a recurring expense of Rs. 30 million per annum. In addition to aforementioned, the Petitioner informed the Authority that a housing plan is approved by its Board of Directors (BoD), as per the following details: Financial Year Rs. In Million Total 1, The Petitioner also apprised the Authority about a transport replacement plan under the head of Others. As per the Petitioner, this plan is desired by BoD to cut down the cost by replacement of old vehicles of 80s and 90s attracting heavy repair and running outlay. The management has prepared phase wise replacement plan involving overall investment of Rs. 494 million over five years with a net saving of Rs. 67 million. The expenditure in first year is proposed to be Rs. 103 million As mentioned above, although Petitioner's petition includes some details on the subject of proposed investments for the FY yet it has failed to provide any details with respect to the benefits achieved by the investments carried out last year. The Authority has already discussed above, the Petitioner's argument of " reaching losses at a saturation level". The Authority considers that the argument of the Petitioner is not valid. Further, the cost benefit analysis for the instant proposed investments i.e. request for the FY is not provided. It appears as if the objective of FORM 27 ( B ) was not clear to the Petitioner. Despite the aforementioned reasons, the Authority cannot ignore the requirement of investments in order to improve the system and to meet the T&D losses target of 9.44% set by the Authority for the FY It is to be noted that the purpose of the required information is to monitor the effectiveness of these investments The information provided by the Petitioner revealed that it carried out capital expenditure of Rs. 5,905 & Rs. 4,792 million during the FY and FY \14E R R6-6, sal '1-;-1 (./C) NEPRA _...1 4WTHORIT 18

20 respectively. (during the FY , the net actual investments remained around Rs. 4,766 million). The aforementioned amounts include the impact of consumer contribution to the extent of Rs. 3,023 million & Rs. 2,194 million respectively. Thus, net capital investments carried out through loans and own resources, works out as 2,882 million and Rs. 2,597 million during the FY and FY respectively While evaluating the Petitioner's request pertaining to the housing plan, the Authority has observed that it has not substantiated its request with proper justification and rationale as who would ultimately bear the cost of the requested housing plan and how it is so vital for the Petitioner, that it has decided to shift these funds from its system up gradation to a real estate development. The Authority observes that a simple approval of BOD, does not endorse the prudence of the requested investment. In view thereof, the Authority has decided not to allow the requested housing plan investment till the time the Authority is convinced that the proposed investment is necessary As regards the investment with respect to ERP, the Authority encourages the Petitioner to undertake this investment while allowing the proposed implementation plan, the Petitioner is directed to also include the billing system in the said implementation plan. The Authority feels that the proposed transport replacement plan will not only improve the operational efficiency of the Petitioner but will also reduce the vehicle running and maintenance expenses. According to the Petitioner the expected saving in this regard will be about Rs. 130 million in the first year. In view of aforementioned, the Authority has decided to allow subject to the condition that correlated it with the actual On the issue of call centre, during the hearing, the Authority raised some serious observations with respect to the functioning of the call centre as how it would make an ordinary life of a consumer better. Considering the fact that the idea was the first of its kind, the Authority, decided to take a separate presentation on the issue. The same was conducted on 9th of January, 2014, which was attended by the CEO, Additional DG (IT) and other professionals of the Petitioner. The Petitioner briefed about the flow of complaints along with the timing of its redressal. The Petitioner also highlighted the accountability process, if consumer complaint is not redressed in it specified time The Authority after careful evaluation of the proposal, is convinced that the requested call centre would improve the customers satisfaction and services. Hence, the Authority has decided to allow the cost of proposed call centre. Moreover the Petitioner is directed to print the call centre's number on the consumer bills alongwith its advertisement on different media channels. The Authority also directs the Petitioner to submit daily complaint reports to its Consumer Affair Division and tote -9> cy\ NEPRA "21 AUTHORITY 19 (:))

21 Member Consumer Affair would be given access to the Petitioner's system so that he may be able to monitor the complaint rederessal any time he deem fit The Authority while allowing investments for any control period has to keep in view the past trend of investment made by the Petitioner along with its funding arrangements and its previous trend of closing CWIP and transferring of useful assets from CWIP to operating assets. Based thereon, it is expected that the Petitioner would be able to undertake the investment of Rs. 7,700 million during the FY including the impact of consumer contributions of Rs. 3,500 million). Here it is pertinent to mention that the existing mechanism of determining RORB is self adjusting with respect to the benefits of investments, thus any investments beyond Authority's assessment, carried out by the Petitioner during the FY ( which is desirable ), would be catered for in next year's returns. 13. Issue # 7. Whether the Petitioner's calculation of Prior Period Adjustment is correct? 13.1 The Petitioner, during the hearing submitted the following details with respect to the Prior Period Adjustment ; Rs. Million 13.2 Impact of Late notification 22,256 PPP Ref Diff Impact (12,349) FPA Unrecovered 6,602 Quarterly Adjustment (709) Sales Mix Variance 1,309 RORB ,327 RORB ,101 Total PYA 19, The adjustments requested in the RORB for the last two years is discussed under the relevant head. As regard the issue of unrecovered FPA the Petitioner has already informed the Authority that it has raised subsidy claims for the same in line with the directions of the Authority; therefore, the same is not considered in the instant case. The Authority has observed that the Petitioner has not accounted for the impact of TDS claims for the whole FY 12-13, consequent to the GOP's notification dated 5th August, Keeping in view the aforementioned and the latest decision of th 20

22 J. Decision of the Authority in the matter of Islamabad Electric Supply Company Limited Authority with respect to the FPA, the Petitioner's PYA in the instant case has been assessed as follows; Rs. Million Notified reference PPP during the FY ,070 Assessed Distribution Margin for the FY ,268 Assessed PYA for the FY ,495 Add ; 1st Qrt's PPP adjustment pertaining to the FY Add; 2nd Qrt's PPP adjustment pertaining to the FFY (577) Add; 3rd Qrt 's PPP adjustment pertaining to the FY (700) Add; 4th Qrt's PPP adjustment pertaining to the FY (880) Less ; Regulated PPP recovery on notified rates during the FY ,899 Less; Regulated DM recovery on notified rates during FY ,330 Less; Regulated PYA recovery on notified rates during FY ,568 Add; Net impact of assessed & actual Other Income for the FY Add; Impact of Consumer Mix Variance for the FY ,566 Total Unrecovered/ (Over recovered) Costs for the FY (2,448) 13.4 In the tariff determination pertaining to the FY , the Authority discussed the negative revenue adjustment of Rs. 1,212 million in the consumer mix variance computation by the Petitioner under para The Authority disallowed the adjustment and directed the Petitioner to submit Auditor's certificate in this regard The Petitioner vide its letter dated 29th May, 2013, informed the Authority that its Board of Directors have changed auditors for the FY due to which relieving auditors have to spare time from their busy schedule. The Petitioner further stated that its management is working to set modalities of the desired certificate with the auditors and upon receipt NEPRA will be informed accordingly. Subsequently, the Petitioner requested the Authority to allow to obtain the same certificate from its existing auditors. ' 13.6 The Authority after consideration of the Petitioner's request has decided to accept the Petitioner's request for obtaining the certificate from its existing auditor. The said certificate shall however be provided not later than 31st March, Issue # 8. Whether the petitioner's projected O&M cost of Rs. 9,785 million (Rs. 1.23/kWh) for the FY is justified? 14.1 The Petitioner requested an amount of Rs. 9,785 million on account of O&M cost. It has been stated that the Petitioner's O&M expenses include salary and other benefits, repair and maintenance, traveling allowance, vehicle maintenance allowance d 21

23 other operating costs related to its distribution and supply business. A history of O&M expenses of the Petitioner is provided as here under: Description 2009 Salaries & Other Benefits Maintenance Expenses Traveling Expenses Vehicle Running Expenses Other Expenses Audited 2010 Audited 2011 Audited 2012 Audited Rs. in million 2013 Provisional 2014 Requested 2,569 2,928 3,927 4,788 7,004 7, Total 3,675 4,049 5,108 6,129 8,640 9,785 Draft Financial Statements were used as audited statements were not available till the finalization of this order Salaries Wages & Other Benefits The Petitioner in its petition and during the hearing submitted that the increase in employees' salaries is uncontrollable and based on the increase announced by the Federal Government. Further, the petitioner pleaded that it is striving to ensure an efficient, coordinated and economical distribution system and to build, maintain and operate the system more systematically, it will be employing a highly skilled and technically proficient team to manage all aspects of the distribution of power to ensure that all key commercial interest of all stakeholders are maintained, protected and prioritized. Based on the forecasted revision of salary rates in FY 13-14, the petitioner has estimated an increase in this expense by 10% over last year provisional expense Incorporating the aforementioned increase the Petitioner requested an amount of Rs. 7,754 million for the FY on account of Salaries, wages & other benefits. In order to make fair assessment of the salaries & wages, the Petitioner's provisional accounts for the FY and audited accounts for the previous years were analyzed. It was observed that the actual expense under the head of Salaries, wages & other benefits increased by Rs. 2,215 million (46.25%) in the FY NEPRA AUTHORITY 22

24 Upon the scrutiny of record, it was observed that the increase is primarily owing to excess provision made on account of post retirement benefits. The increase in actual salaries, wages and benefits is 14% which is based on GOP increases allowed under adhoc allowance, conveyance allowance and annual increment During the tariff determination pertaining to the FY , the Authority allowed only replacement hiring whereby an employee is hired in lieu of a retiring employee, taking cognizance of the fact that the Petitioner's work force is retiring each year and if their replacements are not made, the Petitioner would not be able to perform efficiently and effectively. In this particular scenario no additional / incremental cost could be incurred by the Petitioner. The Petitioner intimated the Authority that as on 30th June, 2012, the financial impact of recruitments carried out during FY and onwards is Rs. 665 million. The Authority directed the Petitioner to get the reported figure verified by its Auditor and if it intends to carryout replacement hiring in future, it must procure a certificate from the Auditor, certifying that the recruitment is done as replacement hiring with no additional/incremental cost impact. Any other additional recruitment must be linked with the comprehensive recruitment plan which would link the additional work, quantified benefits and would base on best utility practices The Petitioner vide its letter dated 29th May, 2013, informed the Authority that its Board of Directors has changed auditors for the FY due to which relieving auditors have to spare time from their busy schedule. The Petitioner further stated that its management is working to set modalities of the desired certificate with the auditors and upon receipt the Authority will be informed accordingly. However, subsequently, the Petitioner vide its letter no. FDI/IESCO/20788 dated 27th June, 2013 and letter no. FDI/IESCO/CPC/3404 dated 19th October, 2013 informed the Authority that the previous Auditors M/s KPMG Taseer Hadi & Co, have refused to the request of the Petitioner as the issuance of separate certificate on one of the component of Audited Accounts is not feasible, considering it involves lengthy procedures for seeking internal approval as well as NOC from existing Auditors. Subsequently, the Petitioner requested the Authority to grant approval for obtaining the desired certificate from current auditors i.e., M/s Ernst & Young Chartered Accountants In light of the importance of this certificate for future assessments, the Authority has decided to accept the request of Petitioner. The Petitioner is directed to obtain the said certificate and submit it not later than 31st March, Yet again in the absence of the required certificate, the Authority cannot consider the impact of additional recruitment from and onwards. In view thereof, the Authority has decided to 23

25 disallow the cost of replacement hiring until the Petitioner submits the required certificate from its Auditor Considering the overall liquidity position in the power sector and in order to ensure that the Petitioner fulfils its legal liability with respect to the post retirement benefits, the Authority in its determination pertaining to the FY , directed the Petitioner to create a separate fund in this regard before 30th June 2012, which is allowed by IAS Creation of funds would ensure that the Petitioner records it liability more prudently as the funds would be transferred to a separate legal entity. In addition to that these independent funds would generate their own profits, if kept separate from the company's routine operations. The Petitioner, vide letter no. IESCO/FDI/CPC/6456 dated 4th January, 2013 informed the Authority that it has registered a pension fund with concerned Authorities and the same was reproduced in para of the decision for FY The Authority thereby concluded that future assessment of post retirement benefits will be based on the amount transferred in the fund. However, during the hearing for tariff determination, the Petitioner informed the Authority that its Provident fund has not been registered as presently the same is managed by WAPDA. The Petitioner pleaded that it does not have required human resource, cash flows ( because of high receivables ), higher cost of PPP and on going litigations pertaining to FPA etc. As per the Petitioner, keeping in view the existing financial stress it can only build the fund from its own resources, however in order to comply with the Authority's direction fund can be built through loans from bank by hypothecating receivables or fixed assets whichever is more feasible while negotiating with the financial institution subject to concurrence of existing local and foreign donors The Authority considers that its directions pertained to the post retirement benefits which included both Pension and provident fund. The same was a well considered decision of the Authority and the Petitioner is required to register both pension and provident fund. The plea of Petitioner that currently provident fund is managed by WAPDA and it cannot create it for known reasons is not acceptable on the grounds that it is an expense of Petitioner which is reported in its financial statements. Hence, should be managed by the Petitioner. Another relevant point is that Authority has been allowing the provision for the post retirement benefits, thus its argument of cash flow constraints and funding from Banks is also not valid. In view of aforementioned discussion the Authority again directs the Petitioner to comply with its directions not later than 30th June, Otherwise the Authority would constrained to proceed against the Petitioner under relevant law. Till such time the Authority has decided to take the actual payments instead of provision for post retirement benefits and once the funds has been created the Authority would allow the actual payments to the funds, in this regard 24

26 On the issue of retired WAPDA employees before 1998, the Authority in its determination dated Jan 10, 2012, decided to hold separate meeting on the subject whereby the arguments of the Petitioner and WAPDA could be heard in the light of available evidences. Pursuant to which a presentation on the subject was given by the Petitioner on 30th May, 2013 and WAPDA's point of view was also heard separately. Subsequently, a final meeting on the subject was held on 22nd January, The following concluding and implementations points were emerged out of a long brain storming session; The matter not only pertains to the Petitioner but also to all the XWDISCOs, and GENCOs. In the light of Business Transfer Agreement ( BTA ) and subsequent Supplementary Business Agreement ( SBTA ), Pension SOPs 2002 and subsequent changes thereafter, the issue solely pertains between WAPDA, XWDISCOs and GENCOS. The issue has two components, one is the accumulated effect till 30th June, 2012 and the other is the subsequent ownership of these retired employees as the SBTA is not clear on it. Since aforementioned agreements were signed mutually between WAPDA and Others hence the Authority directed the WAPDA and Other ( including Petitioner ) to come up clearly on the settlement modality of accumulated costs in this regard till 30th June 2012 and a way forward for the future payments of these retired employees not later than 30th June, The Authority has noted with great concern that the Petitioner failed to comply with the Authority's directions in this regard. The Authority considers that the matter needs to be resolved expeditiously failing which the costs not settled will not be considered as part of O&M expenses While assessing the Salaries, wages & other benefits ( including post retirement benefits as discussed above), the GOP's recent announcement of 15% increase as adhoc allowance, increase in post retirement benefits on actual payments, 5% annual increment along with its effect on other benefits has been accounted for. Here it is pertinent to mention that the base expense taken excludes the impact of additional recruitments of Rs. 715 million [ Rs. 665 million + Rs. 50 million ( impact of annual increment )]. The GOP's recent increase with respect to the post retirement benefits has been taken on actual payments Based on the discussion made in the preceding paragraphs, incorporating GOPs recent increases and annual assessments of salaries & wages for the FY of other DISCOs, the Authority has assessed Rs. 4,627 million on account of salaries, wages and 25

27 other benefits for the FY Maintenance Expenses The Petitioner requested Rs. 840 million on account of repair and maintenance. The Petitioner has requested an increase of 20% over the provisional figure of Rs. 700 million for the FY The Petitioner has not given any basis for the projection The Petitioner's request has not been duly supported with the verifiable documentary evidence without which the authenticity of the claim cannot be substantiated. Despite the aforesaid the fact remains that the Petitioner has to incur some expenses on the repair & maintenance which are not only affected by the inflation but also with the variation in the gross assets in operation due to addition of new consumers in the system and new investments The Petitioner's request has been examined on the basis of its past trend and it is observed that the requested amount of Rs. 840 million is on the higher side therefore needs to be rationalized. Keeping in view, past trend and comparison with other DISCOs, the repair and maintenance cost of Rs. 545 million has been assessed for the FY in the instant case Traveling Expenses The Petitioner in its Petition requested an amount of Rs. 244 million for the FY The requested amount is 12% more than the actual cost ( Rs. 217 million ) on this account as per the draft accounts for the FY The Petitioner has not given any basis for the projection This is a matter of record that the GOP enhanced the daily rates both ( special & normal ) for the employees from grade 1-16, by an average of 90%, with effect from Pt July No increase was granted for the employees from grade 17 and above. Again the same was raised on 17th August, 2012, which was increased for all the employees, starting from Grade 1 22, whereby the major rate increase was with respect to Grade 17 and above The Petitioner while requesting the Rs. 244 million for the FY , has not substantiated its request with any evidence or details of the actual TA claims designation wise, pertaining to the last year to justify its requested increase under this head Based on the above discussion, comparison with other DISCOs and Petitioner's actual results after the GOP's increase the A h rity has decided to allow this cost to the tune of Rs. 170 million for the FY 26

28 14.5 Vehicle Running Expenses The Petitioner requested Rs. 367 million under the head of Vehicle maintenance for the FY The actual cost on this account as per the draft accounts for the FY was Rs. 313 million. The requested amount is 17% more than the actual figure for the FY Apart from aforementioned, no further rationale or evidence has been provided by the Petitioner in order to substantiate its requested increase The matter of the fact is that the Vehicle maintenance cost is not only affected by the fuel prices but also with the variation in the number of vehicles of the Petitioner, which in turn is dependant on the distribution area of the Petitioner In view of the aforementioned arguments, available evidence/information, past trend, increasing fuel prices and comparison with other DISCOs,the Authority has decided to allow this cost to the tune of Rs. 298 million under the head of vehicle running cost Other Expenses The Petitioner requested Rs. 580 million for the FY , pertaining to the expenses like rent, rates & taxes, power, light and water, bills collection charges, postage, telephone, office supplies, insurance expense, overhead expenses, Auditor's remuneration, NEPRA fee and charges, advertisement & publicity, provision of obsolete stores, miscellaneous expenses etc. The Petitioner has requested this amount more or less based on the average of the annual increase in the audited figures of last three financial years. Apart from aforementioned, no further rationale or evidences has been provided by the Petitioner in order to substantiate its claim. The actual Other expenses as per the draft accounts for the FY remained as Rs. 406 million In view thereof, considering the past trend and comparison with the other DISCOs, it could be observed that the request of the Petitioner on this account is not justified and needs to be rationalized. Hence, the Authority has decided to assess the cost of Rs. 447 million on the account of Other expenses. 15. Issue # 9. Whether the Petitioner's proposed depreciation charge of Rs 1,688 million (Rs 0.21 /kwh) for the FY , is justified? 15.1 The Petitioner in its petition requested a depreciation charge of Rs. 1,688 million for the FY The Petitioner based its request on applying actual depreciation rates on proposed fixed asset base The depreciation expense allowed to the petitioner for FY amounted to Rs. 1,549 million. Whereas, the amortization of deferred credit was assessed as Rs. 827 million, therefore, het depreciation charge passed on to the consumers was assessed as Rs. 722 million. 27

29 15.3 In order to make fair assessment, the Authority keeps in view the investments approved by it for the year. The Authority considers that after taking into account new investments, the Gross Fixed Assets in Operation for the FY will be Rs. 58,213 million. Accordingly the requested depreciation charge for the FY appears to be justified.thus, the Authority has decided to allow Rs. 1,688 million under the head of depreciation After carefully examining the relevant details and information pertaining to the deferred credit and amortization as per the accounts for the FY & FY , the Authority has projected amortization of deferred credit to the tune of Rs. 911 million for the FY , thus passing on the benefit to this extent to the consumers. Accordingly, the consumers would bear net depreciation of Rs. 777 million. 16. Issue # 10. Whether the Petitioner's projected Return on Regulatory Asset base of Rs 2,945 million is justified? 16.1 The return requested by the Petitioner for FY is Rs. 2,945 million using a Return on rate of 10.86%. In addition, the Petitioner has also requested amounts of Rs. 1,101 million and Rs.1,327 million under the head of RORB for the FY and FY respectively, as prior period adjustment. The Petitioner argued that the rationale for the Authority's assessment was that it calculated WACC on the concept of optimal capital structure and that if the Petitioner had any grievance against it did not agitate the assessed concept in the due process of tariff determination. The Petitioner argued that its requested WACC was calculated on the same analogy as deliberated in the Authority's determination pertaining to Wapda Hydro, which was issued in November 2011, having same sort of business and holding, wherein under Para 13, the Authority has allowed 45:55 Debt Equity ratio. Thus, the Authority's notion of optimum capital structure for the Petitioner is a clear discrimination and requires immediate remedial action. In addition, the Petitioner, further agitated that its actual cost of debt must be used, in the computation of Weighted Average Cost of Capital (WACC). The Petitioner contented that its request is in line with the Authority's determination in this regard with respect to WAPDA Hydro. As per the Petitioner, the loans carried in its financial statements cost 17% and on an actual basis its cost of debt is worked out as 15.63%, hence, the same may be used for calculation of WACC. The Petitioner, while discussing the rational given by the Authority in tariff determination for the FY 12-13, stated that Authority's stance on fixing KIBOR plus basis is that it may yield a revolving WACC rate. However, the Petitioner's view is that KIBOR is a benchmark in financial transactions which is adjusted at reasonable intervals for variations. On same basis, the generation companies are allowed adjustments by the Authority and cost of debt is mentioned in KIBOR or some other international benchmark. As per the Petitioner, the cost of debt f, 1E PR yam. Ic3 28 1"--)

30 XWDISCOs was also set on similar basis, however, it has not been adjusted over time for variations. Therefore, the Petitioner has requested Authority to redetermine the cost of debt Furthermore, the Petitioner submitted that the Authority has relied on the asset beta of developed markets, reasoning that no XWDISCO is listed on the stock exchange. It was argued that RORB must be calculated keeping in view the local business environment. Lastly, the Petitioner requested that that the WACC for earlier periods may also be adjusted and its financial benefit may be given in tariff for the FY as prior period adjustments According to Rule 17(3)(iii) of the Tariff Standards and Procedure Rules 1998, tariffs should allow licensee a rate of return which promotes continued reasonable investment in equipment and facilities for improved and efficient service. For reliable supply of electricity the company has to be made viable for which the company should be allowed comparable return of similar business. In the earlier tariff determinations, the Rate of Return allowed to the Petitioner was the Weighted Average Cost of Capital (WACC) comprising of two components (i) Cost of debt & (ii) Cost of Equity. On the basis of above adjustment mechanism, the return allowed to the petitioner for FY amounted to Rs. 2,356 million The argument raised by the Petitioner w.r.t., Debt to Equity ratio, cost of debt and asset beta has been discussed in detail in the tariff determination for FY under para 20.5 to However, some of the new points raised by the Petitioner in the instant petition are discussed hereunder; 16.5 The Petitioner, while contending the Authority's assessed asset beta did not came up with any specific asset beta which in the Petitioner's point of view is the true reflector of the local industry. A simple statement that asset beta must be reflective of local industry, dose not make Petitioner's case. On the issue of using actual cost of debt for the calculation of WACC, the Authority has considered Petitioner's loans which are KIBOR based. The relent loans bearing a mark up of 17 %, to which the Petitioner is referring, are not being paid as yet. The markup which is appearing on the Petitioner's Income Statement is KIBOR based. Lastly, the assessment of debt equity ratio on the concept of optimum capital structure in the matter of Petitioner, whereby it has compared it with the Authority's determined ratio with respect to WAPDA Hydro, the Authority considers that the comparison of both is not relevant as WAPDA Hydro is engaged in generation business whereas the Petitioner is involved in the distribution business. Secondly, the Authority while allowing the investments to WAPDA Hydro disallows certain investments and accordingly while determining RORB in the matter of WAPDA 0 73 W INEPRA AUTHORITY 12'. 29

31 No. NEPRA/TRF-237nESCO-2013 Hydro, assessed its returns on average RAB of assessed RABs only ( average of assessed for the last year and projected year) i.e. it totally ignored the actual investments carried out by WAPDA Hydro. Further, the debt on WAPDA Hydro' case is actually paid. Thus, this results in an abnormal debt equity ratio as referred by the Petitioner. On the contrary the Authority while allowing investments to the XWDISCOs encourages them to carry out as many investments as they could, therefore the return is on audited RAB for a year. Since the instant Petition is not comparable with WAPDA Hydro; therefore the Petitioner's argument does not carry weight and is not valid. In view of aforementioned, the Authority has decided to use a post tax rate of return on which would guarantee interest payments and return on the assumed optimum capital structure of 80:20 ( Debt ; Equity ). For the FY , after considering the available record, latest 10 year PIB Bond auction, and current interest rates fluctuations, decided to use the same WACC rate of 10.86% as it used last year. Here it is pertinent to mention that the Authority would reconsider WACC of the Petitioner, once the KIBOR is stabilized or at least is entered into a consolidation phase In the Authority's opinion the Rate of Return should be reasonable enough, sufficient to assure the confidence in the financial soundness of the utility company, and should be adequate to maintain and support its credit and enable it to raise money necessary for the proper discharge of its public service. The Authority considers that from the investor's or the company's point of view it is important that there be enough revenue not only for operating expenses but also for the capital cost of the business including the service of its debt. The Authority further considers that return to the equity owner should commensurate with the return on investment of other enterprises having comparable risks. Thus, using Post tax rate of return, the Authority has assessed Rs.2,696 million as return on rate base as per the following calculations: Description FY Actual Rupees in Million FY Projected Opening fixed assets in operation 46,779 52,056 Assets Additions during the year 5,277 6,157 Closing Fixed Assets in Operation 52,056 58,213 Less: Accumulated Depreciation 14,663 16,351 Net Fixed Assets in operation 37,393 41,862 + Capital Work in Progress (Closing) 6,565 8,108 Total Fixed Assets 43,958 49,970 Less: Deferred Credit 20,834 23,423 Total 23,124 q6,547/ 30

32 Average Regulatory Assets Base 24,835 Return on Rate 10.86% 2, Issue # 11. Whether the Petitioner's projected Other Income of Rs 2,000 million (Rs 0.25 /kwh) for the FY is reasonable? 17.1 The Petitioner has projected Rs. 2,000 million as other income for the FY excluding late payment surcharge. The other income as per the provisional accounts for the FY remained as Rs. 2,330 million. According to the information provided, the other income includes amortization of deferred credit, meter and rental income, profit on bank deposit, sale of scrap, income from non-utility operations and commission on PTV fees and miscellaneous. The Petitioner further requested for exclusion of late payment surcharge from the assessment of other income. As per the Petitioner, the amalgamation of late payment surcharge with working capital concept or conditioning it with Power Supply Agreement with CPPA is not appropriately deliberated by the Authority. As per the Petitioner, the working capital covers normal business cycle gap, whereas LPS is levied when the default goes beyond the normal business cycle. The petitioner further re-submitted its grounds for the subject request, as already re-produced and addressed in para 13.1 to para 13.4 of the Petitioner's determination for the FY On the issue of excluding late payment surcharge form the other income, it is pointed out CPPA on various fora agitated this issue to off-set the two mark up recovered from the consumers as late payment against the mark up paid by the CPPA to the power producers as penalty for late payment. The Authority declined the request on the ground that each company is different legal entity and in the absence of any sale/purchase agreements between CPPA and the DISCO, passing on such cost is legally not sustainable. The Authority further directed CPPA to enter into relevant bilateral agreements no later than 15th March Subsequently, this deadline was extended till 30th June, Considering the fact that no progress was made by the XWDISCO's ( expect GEPCO) in this regard, the Authority during the process of tariff determination pertaining to the FY 12-13, directed the Petitioner to submit comments on draft Power Sale Agreement submitted by GEPCO, not later than 31st March, The Petitioner vide its letter dated 29th May, 2013 informed the Authority that comments will be forwarded in the next week. However, subsequently during the hearing for tariff determination, the Petitioner admitted that such an agreement already exists by the name of Electricity Supply Agreement dated 29th June, 1998 (Agreement) signed between WAPDA and IESCO and a novation to this agreement is also signed on 28th February, 1999 with NTDC. Further, it has examined the clauses / terms & conditions of the aforementioned PSA whic are sufficient to regulate the relationship between the Petitioner and IC/CPPA L4,1 NEPRA 7:< AUTHORITY E' 31 --?>

33 No. NEPRA/7'RF-237/IESCO The Authority has been deducting Other Income from the Distribution Margin of the Petitioner considering it a non regulated Income for a DISCO. After considering the sequence of events and the relevant clauses of the aforementioned agreement, the Authority is of the view that even if that contract existed, it was not operational. In order to make it effective a meaningful consultative process with the major stakeholders has to be initiated. In view thereof, the Authority has decided to conduct a detailed and comprehensive brain storming session on the each clause of the contract. The discussion will include all the stakeholders with the relevant professionals of XWDISCOs and CPPA. The Authority intends to conduct this session not later than 30th March, Till then the Authority has decided to continue its previous practice; accordingly the same is included in the other income In view thereof, the Authority has decided to assess Rs. 2,330 million as Other Income which also includes late payment surcharge. 18. Issue #12. Whether the request of Petitioner to allow financing cost on the debt allocated to the Petitioner by Power Holding (Pvt.) Ltd. For onward payment to CPPA, is justified? 18.1 The Petitioner in its petition and during the hearing submitted that it should be allowed financing cost for the FY on the loan obtained by Power Holding company for meeting the obligations towards the generation companies and oil companies The Authority while deciding the tariff petition for the FY , has already adjudicated on the matter, after a comprehensive discussion. The Authority considers that the Petitioner has not submitted any new rationale or evidence on which the Authority can adjudicate. In view thereof, the Authority maintains it earlier decision in this regard During the last year's tariff determination, the Authority directed the Petitioner to submit its genuine working capital requirements. In compliance to that the Petitioner in its petition and during the hearing submitted the following data; Description Months Amount (Rs. In Million) Receivable 2 23,781 O&M Expenses Stores & Spares Total Working Capital requirement 25,243 Interest on Working Capital (@ 14%)... 3,534 32

34 18.4 As per the Petitioner, the consumers are invoiced after a month of electricity consumption, whereas it is obligated to discharge its liabilities within a month of purchasing power. In addition to this, the Petitioner claimed that it has to bear highest cost in periods of low consumption which is a burden on its cash. According to the Petitioner it has the maximum payables, accumulated on account of CPPA that attracts further charges in form of delayed payment surcharge. It was further pleaded by referring to Rule 17(3)(v) and submitting that if the working capital is not allowed the tariff shall not reflect the marginal cost principles. The same is also allowed to certain generation companies 18.5 The Authority after careful consideration of the Petitioner's provided working is of the view that the Petitioner's working was not in accordance with the international practices and principles. The working capital requirement is normally worked out considering the current receivables and current payables. Further, the Petitioner has failed to correlate between its date of invoice from CPPA and its billing to the consumers. The Authority considers that the working capital requirement worked out by the Petitioner is abnormally high, which would adversely affect the consumers; therefore being without judicious basis and against the consumer's interest is declined. 19. Issue # 13. Whether the proposed revenue requirement of Rs 132,758 million at an average sale rate of Rs /kwh for the FY , is justified? 19.1 Annual Revenue Requirement comprises of the following: 1. Power Purchase Price 2. Impact of T&D Losses 3. Distribution Margin i) O&M Expenses ii) Depreciation, RORB and Other Income 4. Prior Year Adjustment 19.2 For the assessment of annual revenue requirement the each components of average tariff is discussed in detail in the succeeding paragraphs Power Purchase Price (PPP) All the power generated from different sources is procured by the Central Power Purchasing Agency (CPPA) on behalf of DISCOs at the rates as per the Power Purchase Agreements (PPAs) as per the Authority's determination. The overall power purchase cost constitutes a pool price which is transferred to the DISCOs according 33

35 a mechanism prescribed by the Authority and notified by the Federal Government in its Official Gazette. The Power Purchase Price has been projected, which in turn formulates the reference values for the monthly fuel adjustments & quarterly adjustments with respect to Capacity and Transmission Charges From all the available sources i.e. hydel, thermal-gas, thermal-oil, nuclear, coal and imports, a total of 88,362 GWh power is expected to be generated during the FY The estimated/projected source-wise generation and cost of electricity is given in the following table: Description Generation Energy Charges GWh Share Rs. Million Share Hydel 30, % 23, % Coal % % HSD 1, % 23, % Thermal - RFO 31, % 566, % Thermal - Gas 20, % 115, % Nuclear 3, % 4, % Mixed 1, % 11, % Import from Iran % 3, % Wind % % Total 88, % 726, % Capacity Charge 218,136 Total Generation Cost 944, Here it is pertinent to mention that the aforementioned energy charge includes variable O&M charges. But as per the tariff methodology, variable O&M charges would not be made part of monthly fuel adjustment and would be adjusted as part of quarterly adjustment. From the above table it is clear that 34% of total generation is expected on Residual Fuel oil (RFO) but its share in overall energy cost is to be around 78%, which means that variation in generation mix and oil prices will have great impact on the cost of generation and will ultimately affect the consumer-end tariff. The RFO prices over the last year have shown an increasing trend. During the FY , the RFO price was projected at an average of Rs. 74,167 metric ton [excluding Sales Tax and including freight ] per metric ton, whereby the RFO prices during the first half of the FY have touched a peak of around Rs. 78,000 [excluding Sales Tax and including freight] per metric ton. The RFO prices in Pakistan are not only affected by the international market but also by the Pak Rupee devaluation. For the FY , RFO prices have been assumed on an average of Rs. 80,748 per metric ton [excluding Sales Tax and including freight] after incorporatin 34

36 the possible determinants of RFO prices. Following the previous generation trend, approximately 1.38% generation is expected to be generated on HSD due to the ongoing shortage of gas supply. The aforementioned generation is assumed in the light of ECC decision in the matter of Sapphire, Halmore, Orient and Saif whereby one turbine of these plants would run on HSD throughout the year. For the FY , the HSD prices are being assumed on an average of Rs per litre [excluding Sales Tax]. The gas prices are also projected as per the latest OGRA's notification with a cushion of expected increase The generation cost is transferred to the DISCOs according to the Transfer Price Mechanism (TPM) as prescribed by the Authority in its latest determination with respect to NTDC: NTDC shall charge the DISCOs formed consequent to the unbundling of WAPDA (termed as XWDISCOs) and KESC, a transfer charge for procuring power from approved generating companies (termed as CPGENCOs) and its delivery to DISCOs for a billing period as under: XTC = Where: XTC = XCTC = XETC = XCTC + XETC Transfer charge to XWDISCOs & KESC Capacity Transfer Charge to XWDISCOs & KESC Energy Transfer Charge to XWDISCOs & KESC XCTC = CpGenCap + USCF XWD Where: (i) CPGenCap = the summation of the capacity cost in respect of all CPGencos in Rs for a billing period minus the amount of liquidated damages received during the month. (ii) XWD = the sum of the maximum demand of the XWDISCOs & KESC in kw recorded during a billing period at all the delivery metering points at which power is received by the XWDISCOs & KESC. (iii) USCF the fixed charge part of the use of system charges in Rs per kw per month. 35

37 Where: XW Us (kwh) (i) (ii) CPGenE X\VUs the summation of the variable charge rate (Rs per kwh) approved for each of the CPGenCOs times the energy in kwh procured from the respective CPGENCO during the billing period. the summation of the energy units (kwh) recorded at the delivery metering point of all the XWDISCOs & KESC during a billing period. Energy transfer charge shall be calculated on the basis of units delivered after adjusting target transmission losses up to a maximum of 3%. NTDC shall, for the purpose of clarity intimate to all DISCOs the generation part of the Transfer Charge during a billing period by deducting from the Transfer Charge the Transmission Charge or Use of System Charges According to the above mechanism Rs. 19,850 million and Rs. 1,852 million is the share of the Petitioner on account of CpGenCap and USCF respectively for the FY The overall fixed charges comprising of CpGenCap and USCF in the instant case work out as Rs. 21,702 million, which translate into Rs. 1,200/kW/month or Rs.2.65/kWh The annual PPP for the FY in the instant case works out as Rs. 90,924 million. With the projected purchase of 8,202 GWh for the same period the average PPP turns out to be as Rs / kwh (Annex IV). On the basis of 9.44 % T&D losses, the PPP per kwh is assessed as Rs /kwh Considering the timing of the determination the Authority has decided to include quarterly adjustment pertaining to the first quarter of the FY In the matter of Petitioner the 1st quarters PPP adjustment works out as Rs. (660) million Revenue Requirement Based on the assessments made in the preceding paragraphs the Revenue Requirement for the FY is assessed as per the following details; 1. Power Purchase Price CpGenE CpGenCap Rs. 69,222 Million Rs. 19,850 Million Rs. 90,924 Million ER R 1.21 Elkirzproi ufk AUTHORITY (-30 36

38 USCF Rs. 1,852 Million 2. Distribution Margin O&M Cost Rs. 6,105 Million Depreciation Rs. 1,688 Million RORB Rs. 2,696 Million Gross DM Rs. 10,488Million Less: Other Income Rs. 2,330Million Net DM Rs. 8,158Million Prior Year Adjustment 1st Qrt's Adjustment Total Assessed Revenue Requirement Rs. 7,544 Million Rs. (2,197) Million Rs. ( 660) Million Its. 96,226 Million Based on the targeted sales of 7,427 GWh for the FY , the Petitioner's average sale rate works out Rs /kWh, consisting of Rs.12.24/kWh of adjusted PPP, Rs. 1.10/kWh of DM, Rs. ( 0.09) of 1st Qrt Adjustment and Rs.(0.30)/Kwh of Prior Year Adjustment This revenue would be recovered from the consumers during the FY , through the projected units of 7,427 GWh, as per Annex II. 20. Issue # 14. What are the comments of Petitioner on the proposal for determination of uniform fixed charges for Agriculture consumers? 20.1 MEPCO in its tariff petition pertaining to the FY , submitted that the consumer of agriculture tariff D-2 having sanctioned load less than 5 KW has to pay the fixed charges on the basis of sanctioned load in kilowatt even if no energy is consumed, whereby for the rest of the agricultural categories these are Rs. 350/month minimum fixed charges, in case no energy is consumed, which is highly contrary when compared with D-2 agriculture consumers. The Petitioner requested the Authority that minimum fixed charges of tube well tariff D-1(a) & D-1(b) should be like wise of tariff B-2 i.e. Rs. 2000/- The Authority consideres that since the matter pertains to all the XWDISCOs hence, it would be dealt in the tariff determinations of the subsequent year. In view thereof, an issue was framed in all the XWDISCOs hearing and comments were sought on it On this matter the Petitioner stated that it has negligible component of agriculture consumers but still is of the view that, application of fixed charges to all types of consumers is beneficial for XWDISCOs. 37

39 No. NEPRA/TRF-2374ESCO The Authority after careful consideration of the Petitioner's comments and MEPCO's observations has decided to set minimum fixed charges of tube well tariff D-1(a) & D- 1(b) i.e. when no energy is consumed as Rs. 2,000/month. 21. Issue # 15. Whether the proposed consumer-end tariff for FY as submitted by the Petitioner based on cost of service study conducted by USAID? 21.1 The Authority was aware of the fact that USAID PDP has conducting cost of service study for the Petitioner. It was observed that the Petitioner totally ignored the said study in its petition. In order to check the quality of the study the Authority decided to take a separate presentation from the PDP team the subject matter. The study was submitted to the Authority for its consideration. The PDP team submitted that the Cost of Service (CoS) study for the Petitioner fully allocates it's costs/revenue requirements to all consumer categories based on certain allocation criteria in order to arrive at category wise cost of electricity provision. This study has been conducted using the standard globally accepted embedded cost methodology. The way the Cost of Service study progresses from initial inputs to final result is shown in the diagram below. Step wise Progression of Cost of Service tit Inputs Accounting Data Process Account Identification a) Rate Base, b) Revenue Steps Step l Sales & Billing Data Meter & Losses Data Functionalization of Rate Base & Revenue Requirements a) Generation, b) Transmission, c) Classification of Functionalized Rate Base and Revenue Requirements a) Demand, b) Energy, c) Customer S ep 2 Step 3 Allocation Factors Allocation of Classified Costs to Customer Classes a) Residential, b) Commercial, c) Industrial, d) Step 4 Regulatory Rules Rate Design a) Revenue-to-Cost Ratio, b)rate Design & Step 5 NEPRA, /It'll-1(1m Ty 38

40 It was submitted that CoS study has been completed using a spreadsheet (MS Excel) based model. The inputs in the Cost of Service model are based on accounting, sales & billing as well as meter & losses data. The initial step in CoS study involves identification of rate base and calculation of total cost/revenue 21.2 It was submitted that the study has been completed using a spreadsheet (MS Excel) based model. The inputs in the Cost of Service model are based on accounting, sales & billing as well as meter & losses data. The initial step in CoS study involves identification of rate base and calculation of total cost/revenue requirements. The rate base and revenue requirements are then segregated based on the function that these are related to i.e. generation, transmission, distribution and customer service. The functionalized rate base and revenue requirements are then classified as demand, energy or customer related. The classified costs are allocated to consumer categories based on a number of allocation factors to arrive at the cost of service for each category. This cost is then compared with current revenue received from each category to find out whether the revenue-to-cost ratio for a category is less than 1 (in which case it is being charged less than its cost of service) or greater than 1 (in which case it is being charged at greater than its cost of service). This leads to formulation of new tariff design It was further submitted that it is relatively straight forward to segregate total costs/revenue requirements into generation, transmission and distribution related costs. The distribution related costs as well as all capital assets are further sub-divided into Primary (132/66 kv), Transformers (HT lines), Secondary (LT lines), Services and Meter. These costs are then further classified as energy, demand or customer related costs. For example cost of Transformer station equipment of above 50 kv is classified to Primary distribution meaning that all customers irrespective of whether they are supplied at voltage level of 132,11,0.4 or 0.2 kv will bear their respective shares in this cost. The proportionate sharing has been decided after deliberation with stakeholders. Similarly, Transformer station equipment of below 50 kv has been classified as Secondary distribution meaning that customers supplied at 132 kv will not be charged for cost of this equipment and it will instead be divided between 11, 0.4 and 0.2 kv level customers. In the same way, all cost items have been classified. The cost allocation among consumer categories has been performed utilizing a number of allocation factors. For example, total generation related energy cost is allocated among consumer categories based on units of electricity supplied to each category. The T&D losses are catered for in this allocation mechanism. T&D losses at each voltal. - drop are taken as 2.6% at 132 kv, 5.95% at 11 kv, 2.85% at 0.4 kv and 0.25% 39

41 21.4 The demand related portion of generation cost is allocated to all customer categories based on the respective share of each category in the peak demand of the Petitioner. To determine this share, the peak demand day for the Petitioner during the year was identified. The load data for all feeders of the Petitioner for this peak demand day has been collected and based on weighted average share of different consumer categories in each feeder, the aggregate share of each category in Petitioner's peak demand has been calculated. After adjustment of losses, this share is used to allocate demand related portion of generation cost as well as transmission cost. Same methodology is employed to allocate distribution related primary, transformer, secondary, services and meter costs among consumer categories. Once the cost allocation has been completed, the total cost of providing electricity to each customer category including its breakdown into generation, transmission and distribution costs is available. For tariff design purposes, this allocated cost is then compared with current revenue received to identify the scope for increase/decrease in rates of each consumer category The Authority after careful consideration of the methodology presented by the PDP Team principally agrees with the main parameters of the study. However, unless the Petitioner files its proposed consumer-end tariff design ( on the same methodology) along with the numbers showing that what has cost it to serve a particular consumer category ( last year based on actual results using USoAs), the Authority cannot take the desired benefit of that. In view thereof, the Authority directs the Petitioner to submit its next tariff petition based on the cost of service study conducted by PDP Team. 22. Issue # 16. Whether the Petitioner's miscellaneous requests merits consideration? 22.1 The Petitioner has raised certain requests in addition to those discussed above. The same are addressed as below: 22.2 Exclusion of Late Payment Surcharge from Other income The matter has been discussed above Automatic fuel price adjustment mechanism The Petitioner has submitted the following requests for review of monthly fuel price adjustment (FPA) mechanism : Implement mechanism for passing through of the variation in power purchase costs (FPA as well as losses adjustment and other costs) over to the consumers on a monthly basis; 40

42 Determine a fixed levy for every kwh consumed towards 'Fuel price adjustment account' The Authority after careful review of the Petitioner's request is of the view that considering the uniform regime it cannot implement mechanism for passing through of the variation in power purchase costs (FPA as well as losses adjustment and other costs) over to the consumers on a monthly basis; as it would result in differential per unit PPP adjustment for different XWDISCOs. The suggestion of levying for every kwh consumed towards 'Fuel price adjustment account' is also not workable as the Authority cannot do projection over already projected value.i.e. monthly projected FPA. It would also result in overbilling of a consumer which is not fair to the consumer. In view of aforementioned, the Authority rejects the Petitioners pleas and decides to continue with existing FPA regime Application of domestic tariff for government offices, educational institutes and Mosques The Petitioner stated in the tariff petition that all government offices, educational institutes and mosques are billed under domestic tariff category and hence enjoy slab benefits and subsidized rates for life-line consumers. The Petitioner requested to exclude these consumers from domestic category to any new category having same rates but no lifeline facility or slab benefits The Authority considers the Petitioner request as prudent considering the financial cost incurred by the petitioner in serving these consumer categories and their paying capacity as healthy as compared to other consumers in life-line category. Therefore, the Authority has decided to address the matter separately by involving all the stakeholders in an independent hearing and has decided to sought comments on this matter from all XWDISCOs Introduction of fixed charges: The Petitioner has again raised request before the Authority to introduce fixed charges for industrial consumers based on higher of current MDI or 50% of sanctioned load as it is facing huge losses The Petitioner while arguing on the issue of fixed charges has not substantiated its claim with proper working or rationale which would justify its claimed losses. Therefore, the Authority declines the Petitioner's request and encourages it to plead its case with proper supporting financials and working for possible consideration by the Authority. NEPRIk AUTIIICMITY 41

43 wad Decision of the Authority in the matter of Islamabad Electric Supply Company Limited 22.6 Changing Terms & Conditions of Life line Consumers In the tariff petition pertaining to the FY , the Petitioner requested for revision in the policy for lifeline consumers for the FY The Commentator in the hearing for tariff determination of FY 12-13, Mian Aftab Ahmed, objected to the Petitioners' request and the Intervener, The Network for Consumer Protection also objected to the request terming it as detrimental to poor consumers In the tariff petition pertaining to the FY , the Petitioner reiterated its request and requested the Authority to formulate a policy for setting Lifeline consumer tariff. The Petitioner gave following parameters for its request: i. The criteria for lifeline consumers may be stipulated as those consumers having an average consumption of 50 units during the last three months. Consumers which presently fall in the category of lifeline due to low consumption by virtue of non-occupancy, metering error etc in specific months will be barred automatically. ii. The lifeline tariff may be determined as a minimum 50% of the average tariff In addition to this, the Petitioner submitted that the extension of lifeline facility to non-deserving consumers result in loss to GoP in shape of extra subsidies. Further, the Petitioner pointed out the following: i. Only consumption of premises is not a valid basis for defining as life line consumer. ii. lifeline consumers may not be those only whose recorded consumption is less than a given limit. iii. Criteria being consumption based, there are consumers with good paying capacity but enjoying this facility. iv. Less consumption of a premises in a month may be the result of different reasons including: a. Less use or occasionally occupied residence of a multi houses owner. b. Theft of energy resulting in less recorded consumption. c. Direct hooking by a well off consumer In order to avoid this misuse of facility, the Petitioner has proposed the following: i. Lifeline consumers need to be selected from the consumers having single phase electric connection with a limited sanctioned load upto 2 kw or 3kW. ii. No three phase connection consumers or those having sanctioned load of more than 5 kw should be brought in lifeline consumers list In order to address the issue, the Authority directed all the DISCOs to submit their respective comments in the tariff determinations pertaining to the FY ,In 42

44 . Nilo ' Decision of the Authority in the matter of Islamabad Electric Supply Company Limited response to this direction, DISCOs filed separate comments and agreed to the proposal of IESCO in principal Considering the nature of the proposal that will effect the consumers below lifeline, the Authority has decided to conduct separate hearing on this issue after involving all the stakeholders and taking informed decision based on the outcome of this hearing. 23. Summary of Directions 23.1 The summary of all the directions passed in this determination are reproduced hereunder; To share the TOR's of the study with the technical division of the Authority not later than 31" March, To complete the study of T&D losses pertaining to 11 KV and below. To print the call centre's number on the consumer bills along its advertisement on different media channels. The Authority also directs the Petitioner to submit daily complaint reports to it Consumer Affair Division and the Member Consumer Affair would be give access to the Petitioner's system so that he may be able to monitor the complaint rederessal any time he deem fit. To submit the certificate of negative revenue adjustment of Rs. 1,212 million in the consumer mix variance computation by the Petitioner pertaining to the FY from its existing auditor and the compliance in this regard must be made not later than 31" March, To get the reported figure of additional recruitments verified by its Auditor and if it plans to carryout replacement hiring, a certificate from the Auditor of the Petitioner certifying that the recruitment is done as replacement hiring with no additional/incremental cost impact not later than 31st March, To complete the creation of Independent Post retirement benefits funds not later than 30th June, WAPDA and Others ( including Petitioner ) to come up clearly on the settlement modality of accumulated costs in this regard not later than one month from the issuance of this determination. To conduct a brain storming session include all the stakeholders with the relevant professionals of XWDISCOs and CPPA on different provisions of draft PSA not later than 31st March, To submit the next tariff petition under the changed title and based on the cost of service study conducted by PDP Team. nepra AU _T Mom," i< x0 43

45 Decision of the Authority in the matter of Islamabad Electric Supply Company _Limited 24. ORDER From what has been discussed above, the Authority hereby determines the tariff of the petitioner Company for the Financial Year as under:- I. Islamabad Electric Supply Company (IESCO) is allowed to charge its consumers such tariff as set out in the schedule of tariff for IESCO annexed to the determination. II. III. IV. The actual variation in fuel cost component of power purchase price against the reference fuel cost component shall be adjusted on monthly basis without taking into account the T&D losses. The monthly fuel price adjustment shall be based on the actual information submitted by CPPA. IESCO is allowed to charge the users of its system a "Use of system charge" (UOSC) equal to: i) Where only 132 kv system is involved (1 L) UOSC = DM x ( ) ii) iii) Where: Where only 11 kv distribution systems is involved. UOSC = DM (1 L) (1-0.05) Paisa I kwh 'Where both 132 kv and 11 kv distribution systems are involved. UOSC = DM x L) ( Paisa / kwh Paisa I kwh Distribution Margin for FY is set at Rs 1.10/kWh. 1' will be the overall percentage loss assessment for the year set at 9.44% or FY The residential consumers will be given the benefit of only one previous slab. V. The Order part, Annex-I, III, IV, V & VII annexed with determination is intimated to the Federal Government for notification in the official gazette under Section 31(4) of the NEPRA Act. CJ A.,A W C.) 0?EPRA j UTii6;;Z"j1"Y Q

46 Annex-I FUEL PRICE ADJUSTMENT MECHANISM Actual variation in fuel cost component against the reference fuel cost component for the corresponding months will be determined according to the following formula Fuel Price variation = Actual Fuel Cost Component - Reference Fuel Cost Component Where: Fuel Cost Component would include Energy Charge without Variable O&M. Fuel Price variation is the difference between actual and reference fuel cost component Actual fuel cost component is the fuel cost component in the pool price on which the DISCOs will be charged by CPPA in a particular month; and Reference fuel cost component is the fuel cost component for the corresponding month projected for the purpose of tariff determination as per Annex-IV of the determination; The fuel price adjustment determined by the Authority shall be shown separately in the bill of the consumer and the billing impact shall be worked out on the basis of consumption by the consumer in the respective month..j LLI! 0, \\/ 54E12 R A A LI THIJ RITY ti \ 4 5

47 Annex -II Description Islamabad Electric Supply Company (IESCO) Estimated Sales Revenue on the Basis of New Tariff Sales GWh Sales Mix Tariff (NEPRA) Fixed Charge Rs./kW/ Month Variable Charge Rs./ kwh 0 Revenue (as per NEPRA) Fixed Variable Total Charge Charge Rs.Million Rs.Million Rs. Million Residential Up to 50 Units % ,045 1,045 For peak load requirement less than 5 kw Units % ,427 11, Units % ,636 13, Units % ,016 5,016 Above 700 Units % ,321 2,321 For peak load requirement 5 kw& above Time of Use (TOU) - Peak % ,065 1,065 Time of Use (TOU) - Off-Peak % ,192 3,192 Total Residential 3, % - 37,703 37,703 Commercial - A2 For peak load requirement less than 5 kw % ,981 4,981 For peak load requirement 5 kw & above Regular % Time of Use (TOU) - Peak % ,686 1,686 Time of Use (TOU) - Off-Peak % ,191 6,013 Total Commercial % ,220 13,078 Industrial B % B1 Peak % B1 Off Peak % B % B2 - TOU (Peak) % B2 - TOU (Off-peak) % ,104 3,507 B3 - TOU (Peak) % B3 - TOU (Off-peak) % ,072 4,401 B4 - TOU (Peak) % ,604 1,604 B4 - TOU (Off-peak) % ,137 8,984 Single Point Supply for further distribution Total Industrial 1, % 1,616 19,213 20,829 C I (a) Supply at 400 Volts-less than 5 kw % C 1(b) Supply at 400 Volts- 5 kw & % Time of Use (TOU) - Peak % Time of Use (TOU) - Off-Peak % C2 Supply at 11 kv % ,674 1,776 Time of Use (IOU) - Peak % Time of Use (TOU) - Off-Peak % ,779 3,036 C3 Supply above 11 kv % Time of Use (TOU) - Peak % Time of Use (TOU) - Off-Peak % ,505 1,620 Agricultural 'rube-wells - Tariff D Total Single Point Supply % 550 8,353 8,903 Scarp % Agricultual Tube-wells % Time of Use (TOU) - Peak % Time of Use (TOU) - Off-Peak % Total Agricultural % 67 1,080 1,147 Public Lighting - Tariff G % ,112 1,112 Tariff H - Residential Colonies attached to industries % Tariff K - AJK % ,822 13,393 Time of Use (TOU) - Peak % Time of Use (TOU) - Off-Peak Tariff K -Rawat Lab Sub-Total % ,997 14,568 Total Revenue 7, % 3,662 92,564 96,227 Xr;\i7"'- ::R 1?> if,?i EPRA AUTHORITY

48 Annex-III Sr. No. TARIFF CATEGORY / PARTICULARS FIXED CHARGES VARIABLE CHARGES a) For Sanctioned load less than 5 kw Rs/ kw/ M Rs/ kwh i Up to 50 Units For Consumption exceeding 50 Units ii Units iii Units iv Units v Above 700 Units b) For Sanctioned load 5 kw & above - - Peak Off-Peak Time Of Use As per the Authority's decision residential consumers will be given the benefits of only one previous sl Under tariff A-1, there shall be minimum monthly customer charge at the following rates even if no energy is consumed. a) Single Phase Connections: Rs. 75/- per consumer per month b) Three Phase Connections: Rs. 150/- per consumer per month Di Sr. No. TARIFF CATEGORY / PARTICULARS a) For Sanctioned load less than 5 kw b) For Sanctioned load 5 kw & above c) Time Of Use FIXED CHARGES Rs/kW/M VARIABLE CHARGES Rs/ kwh Peak Off-Peak Under tariff A-2, there shall be minimum monthly charges at the following rates even if no energy is consumed. a) Single Phase Connections; Rs. 175/- per consumer per month b) Three Phase Connections: Rs. 350/- per consumer per month Page 1 of 4 41

49 Annex-III Sr. No. SCHEDULE OF ELECTRI ARIFFS ABAD ELECTRIC SUPPLY COMPANY B INDUSTRIAL SUPPL TARIFF CATEGORY / PARTICULARS FIXED CHARGES Rs/kW/M VARIABLE CHARGES Rs/ kwh B1 Upto 25 kw (at 400/230 Volts) B2(a) exceeding kw (at 400 Volts) Time Of Use Peak Off-Peak B1 ( b) Up to 25 KW B2(b) exceeding kw (at 400 Volts) B3 For All Loads up to 5000 kw (at 11,33 kv) B4 For All Loads (at 66,132 kv & above) For B1 consumers there shall be a fixed minimum charge of Rs. 350 per month. For B2 consumers there shall be a fixed minimum charge of Rs. 2,000 per month. For B3 consumers there shall be a fixed minimum charge of Rs. 50,000 per month. For B4 consumers there shall be a fixed minimum charge of Rs. 500,000 per month. Sr. No. C -1 TARIFF CATEGORY / PARTICULARS For supply at 400/230 Volts FIXED CHARGES Rs/kW/M VARIABLE CHARGES Rs/ kwh a) Sanctioned load less than 5 kw Sanctioned load 5 kw & up to 500 kw b) C -2(a) For supply at 11,33 kv up to and including 5000 kw C -3(a) For supply at 66 kv & above and sanctioned load above 5000 kw Time Of Use Peak Off-Peak C -1(c) For supply at 400/230 Volts 5 kw & up to 500 kw C -2(b) For supply at 11,33 kv up to and including 5000 kw C -3(b) For supply at 66 kv & above and sanctioned load above 5000 kw Page 2 of 4 8

50 Annex-III EDULE OF ELECTRICITY TARIFFS LECTRIC SUPPLY C Any IESCO) Sr. No. D-1(a) D-2 D-1(b) TARIFF CATEGORY / PARTICULARS SCARP less than 5 kw Agricultural Tube Wells SCARP and Agricultural 5 kw & above FIXED CHARGES Rs/kW/M VARIABLE CHARGES Peak Rs/ kwh Off-Peak Under Agriculture tariff, there shall be minimum monthly charges Rs.2000/- per consumer per month, even if no energy is consumed. Note:- The consumers having sanctioned load less than 5 kw can opt for TOU metering. Sr. No. TARIFF CATEGORY / PARTICULARS E-1(i) Residential Supply E-1(ii) Commercial Supply E-2 Industrial Supply FIXED CHARGES Rs/kW/M VARIABLE CHARGES Rs/ kwh For the categories of E-1(i&ii) above, the minimum bill of the consumers shall be Rs. 50/- per day subject to a minimum of Rs.500/- for the entire period of supply, even if no energy is consumed. SO DUSTRIAL SU Note: 125% of relevant industrial tariff Tariff-F consumers will have the option to convert to Regular Tariff and vice versa. This option can be exercised at the time of a new connection or at the beginning of the season. Once exercised, the option remains in force for at least one year. Sr. No. TARIFF CATEGORY / PARTICULARS FIXED CHARGES Rs/kW/M VARIABLE CHARGES Rs/kWh Street Lighting Under Tariff G, there shall be a minimum monthly charge of Rs.500/- per month per kw of lamp capacity installed. Page 3 of 4 -I- 9

51 Annex-III Sr. No. TARIFF CATEGORY / PARTICULARS FIXED CHARGES VARIABLE CHARGES Rs/kW/M Rs/ kwh Residential Colonies attached to industrial premises Sr. No. TARIFF CATEGORY / PARTICULARS FIXED CHARGES VARIABLE CHARGES Rs/kW/M Rs/ kwh 1 Azad Jammu 8s Kashmir (AJK) Peak Off-Peak Time Of Use Rawat Lab Page 4 of 4 50

52 IESCO Power Purchase Price Annex-1V Name July August September October November December January February March April May June Total Units Purchased by DISCOs (GWh) ,202 kwh Fuel Cost Component Variable O&M CpGenCap USCF Total PPP in Rs./kWh Rs. in Million Fuel Cost Component 7,097 7,009 5,894 5,280 4,262 5,493 6,337 4,553 5,075 4,804 5,650 5,823 67,277 Variable O&M ,945 CpGenCap 1,716 1,809 1,613 1,585 1,510 1,581 1,582 1,498 1,676 1,403 1,971 1,905 19,850 USCF ,852 PPP 9,209 9,212 7,864 7,177 6,028 7,359 8,200 6,297 7,027 6,471 7,969 8,113.,..._90,92,/ It is clarified that PPP is pass through for all the DISCOs and its monthly references would continue to exist irrespective of the financial year, unless the new SOT is revised and noted by the GO

53 * To be duly adjusted in case of day light tipie saving Annex-V TERMS AND CONDITIONS OF TARIFF (FOR SUPPLY OF ELECTRIC POWER TO CONSUMERS BY DISTRIBUTION LICENSEES) GENERAL DEFINITIONS PART-I The Company, for the purposes of these terms and conditions means Islamabad Electric Supply Company (IESCO) engaged in the business of distribution of electricity within the territory mentioned in the licence granted to it for this purpose. 1. "Month or Billing Period", unless otherwise defined for any particular tariff category, means a billing month of 30 days or less reckoned from the date of last meter reading. 2. "Minimum Charge", means a charge to recover the costs for providing customer service to consumers even if no energy is consumed during the month. 3. "Fixed Charge" means the part of sale rate in a two-part tariff to be recovered on the basis of "Billing Demand" in kilowatt on monthly basis. 4. "Billing Demand" means the highest of maximum demand recorded in a month except in the case of agriculture tariff D2 where "Billing Demand" shall mean the sanctioned load. 5. "Variable Charge" means the sale rate per kilowatt-hour (kwh) as a single rate or part of a two-part tariff applicable to the actual kwh consumed by the consumer during a billing period. 6. "Maximum Demand" where applicable, means the maximum of the demand obtained in any month measured over successive periods each of 30 minutes duration except in the case of consumption related to Arc Furnaces, where "Maximum Demand" shall mean the maximum of the demand obtained in any month measured over successive periods each of 15 minutes duration. 7. "Sanctioned Load" where applicable means the load in kilowatt as applied for by the consumer and allowed/authorized by the Company for usage by the consumer. 8. "Power Factor" means the ratio of kwh to KVAh recorded during the month or the ratio of kwh to the square root of sum of square of kwh and kvarh,. 9. Point of supply means metering point where electricity is delivered to the consumer. 10. Peak and Off Peak hours for the application of Time Of Use (TOU) Tariff shall be the following time periods in a day: * PEAK TIMING OFF-PEAK TIMING Dec to Feb (inclusive) 5 PM to 9 PM Remaining 20 hours of the day Mar to May (inclusive) 6 PM to 10 PM -do- June to Aug (inclusive) 7 PM to 11 PM -do- Sept to Nov (inclusive) 6 PM to 10 PM -do- Page 1 of 9 52

54 11. "Supply", means the supply for single-phase/three-phase appliances inclusive of both general and motive loads subject to the conditions that in case of connected or sanctioned load exceeding 4 kw supply shall be given at three-phase. 12. "Consumer" means a person of his successor-in-interest as defined under Section 2(iv) of the Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997). 13. "Charitable Institution" means an institution, which works for the general welfare of the public on no profit basis and is registered with the Federal or Provincial Government as such and has been issued tax exemption certificate by Federal Board of Revenue (FBR). 14. NTDC means the National Transmission and Dispatch Company. 15. CPPA means Central Power Purchasing Agency (CPPA). 16. The "Authority" means "The National Electric Power Regulatory Authority (NEPRA)" constituted under the Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997). GENERAL CONDITIONS 1. "The Company shall render bills to the consumers on a monthly basis or less on the specific request of a consumer for payment by the due date. 2. The Company shall ensure that bills are delivered to consumers at least seven days before the due date. If any bill is not paid by the consumer in full within the due date, a Late Payment Surcharge of 10% (ten percent) shall be levied on the amount billed excluding Govt. tax and duties etc. In case bill is not served at least seven days before the due date then late payment surcharge will be levied after 7th day from the date of delivery of bill. 3. The supply provided to the consumers shall not be available for resale. 4. In the case of two-part tariff average Power Factor of a consumer at the point of supply shall not be less than 90%. In the event of the said Power factor falling below 90%, the consumer shall pay a penalty of two percent increase in the fixed charges determined with reference to maximum demand during the month corresponding to one percent decrease in the power factor below 90%. PART-I1 (Definitions and Conditions for supply of power specific to each consumer category) A-1 RESIDENTIAL AND GENERAL SERVICES 1. This Tariff is applicable for supply to; i) Residences, ii) Places of worship, iii) Approved religious and charitable institutions, iv) Government and Semi-Government Offices and institutions, v) Government Hospitals and Dispensaries, vi) Educational institutions. 2. Consumers hiving sanctioned load less than 5 kw shall be billed on single-part kwh rate i.e. A-1 (a) tariff. Page 2 of 9 53

55 3. All new consumers having sanctioned load 5 kw and above shall be provided T.O.0 metering arrangement and shall be billed on the basis of tariff A-1(b) as set out in the Schedule of Tariff. 4. All existing consumers having sanctioned load 5 kw and above shall be provided T.O.0 metering arrangement and convert to A- 1(b) Tariff. A-2 COMMERCIAL 1. This tariff is applicable for supply to commercial offices and commercial establishments such as: i) Shops, ii) Hotels and Restaurants, iii) Petrol Pumps and Service Stations, iv) Compressed Natural Gas filling stations, v) Private Hospitals/Clinics/Dispensaries, vi) Places of Entertainment, Cinemas, Theaters, Clubs; vii) Guest Houses/Rest Houses, viii) Office of Lawyers, Solicitors, Law Associates and Consultants etc. 2. Consumers under tariff A-2 having sanctioned load of less than 5 kw shall be billed under a Single-Part kwh rate A-2(a) 3. All existing consumers under tariff A-2 having sanctioned load 5 kw and above shall be billed on A-2(b) tariff till such time that they are provided T.O.0 metering arrangement; thereafter such consumers shall be billed on T.O.0 tariff A-2(c). 4. The existing and prospective consumers having load of 5 kw and above can opt for T.O.0 metering arrangement and A-2(c) tariff. 5. All existing consumers under tariff A-2 shall be provided T.O.0 metering arrangement by the Company-and converted to-a-2 (c) Tariff. 6. All new connections having load requirement 5 kw and above shall be provided T.O.0 meters and shall be billed under tariff A-2(c). B INDUSTRIAL SUPPLY Definitions 1. "Industrial Supply" means the supply for bona fide industrial purposes in factories including the supply required for the offices and for normal working of the industry and also for water pumps and tube-wells operating on three phase 400 volts, other than those meant for the irrigation or reclamation of agricultural land. 2. For the purposes of application of this tariff an "Industry" means a bona fide undertaking or establishment engaged in manufacturing, value addition and/or processing of goods. 3. This Tariff shall also be available for consumers having single-metering arrangement such as; i) Poultry Farms ii) Fish Hatcheries and Breeding Farms and iii) Software houses Conditions An industrial consumer shall have the option, to switch over to seasonal Tariff-F, provided his connection is seasonal in nature as defined under Tariff-F, and he undertakes to abide by the terms and conditions of Tariff-F and pays the difference of security deposit rates previously deposited and those applicable to tariff-f at the time of acceptance of option for seasonal tariff. Seasonal tariff will be applicable from the date of commencement of Page

56 season, as specified by the customers at the time of submitting the option for Tariff-F. Tariff- F consumers will have the option to convert to corresponding Regular Industrial Tariff category and vice versa. This option can be exercised at the time of obtaining a new connection or at the beginning of the season. Once exercised, the option will remain in force for at least one year. B -1 SUPPLY AT 400 VOLTS THREEPHASE AND/OR 230 VOLTS SINGLE PHASE 1. This tariff is applicable for supply to Industries having sanctioned load upto a 25 kw. 2. Consumers having sanctioned load less than 25 kw shall be billed on single-part kwh rate. B-2 SUPPLY AT 400 VOLTS 1. This tariff is applicable for supply to Industries having sanctioned load of more than 25 kw up to and including 500 kw. 2. All existing consumers under tariff B-2 shall be provided T.O.0 metering arrangement by the Company and converted to B-2(b) Tariff. 3. All new applicants i.e. prospective consumers applying for service to the Company shall be provided T.O.0 metering arrangement and charged according to the applicable T.O.0 tariff. B-3 SUPPLY AT 11 kv AND 33 kv 1. This tariff is applicable for supply to Industries having sanctioned load of more than 500 kw up to and including 5000 kw and also for Industries having sanctioned load of 500 kw or below who opt for receiving supply at 11 kv or 33 kv. 2. If, for any reason, the meter reading date of a consumer is altered and the acceleration/retardation in the date is up to 4 days, no notice shall be taken of this acceleration or retardation. But if the date is accelerated or retarded by more than 4 days, the fixed charges shall be assessed on proportionate basis for the actual number of days between the date of the old reading and the new reading. 3. The supply under this Tariff shall not be available to a prospective consumer unless he provides, to the satisfaction and approval of the Company, his own Transformer, Circuit Breakers and other necessary equipment as part of the dedicated distribution system for receiving and controlling the supply, or, alternatively pays to the Company for all apparatus and equipment if so provided and installed by the Company. The recovery of the cost of service connection shall be regulated by the NEPRA eligibility criteria. 4. All B-3 Industrial Consumers shall be billed on the basis of T.O.0 tariff given in the Schedule of Tariff. B-4 SUPPLY AT 66 kv, 132 kv AND ABOVE 1. This tariff is applicable for supply to Industries for all loads of more than 5000 kw receiving supply at 66 kv, 132 kv and above and also for Industries having load of 5000 kw or below who opt to receive supply at 66 kv or 132 kv and above. 2. If, for any reason, the meter reading date of a consumer is altered and the acceleration/retardation in the date is up to 4 days, no notice shall be taken of this acceleration or retardation. But if the date is accelerated or retarded by more than 4 days, the fixed charges shall be assessed on proportionate basis for the actual number of days between the date of the old reading and the new reading. 3. If the Grid Station required for provision of supply falls within the purview of the dedicated system under the NEPRA Eligibility Criteria, the supply under this Tariff shall not be available to such a prospective consumer unless he provides, to the satisfaction and approval of the Company, an independent grid station of his own including Land, Building, Transformers, Circuit Breakers and other necessary equipment and apparatus as part of the Page 4

57 dedicated distribution system for receiving and controlling the supply, or, alternatively, pays to the Company for all such Land, Building, Transformers, Circuit Breakers and other necessary equipment and apparatus if so provided and installed by the Company. The recovery of cost of service connection shall be regulated by NEPRA Eligibility Criteria. 4. All B-4 Industrial Consumers shall be billed on the basis of two-part T.O.0 tariff. C SINGLE POINT (SINGLE-METERING) SUPPLY "Single-Point Supply" for the purpose of this Tariff, means the supply given at one point: i) To a licensee converted from a bulk supply status (who was procuring power from IESCO as a consumer prior to grant of license to IESCO) for the purpose of further distribution within its respective exclusive territory and jurisdiction. ii) To a mix-load consumer not reselling to any other consumer such as residential, commercial, tube-well and others. General Conditions If, for any reason, the meter reading date of a consumer is altered and the acceleration/retardation in the date is up to 4 days no notice will be taken of this acceleration or retardation. But if the date is accelerated or retarded by more than 4 days the fixed charges shall be assessed on proportionate basis for actual number of days between the date of old reading and the new reading. C-I SUPPLY AT 400/230 VOLTS L This Tariff is applicable to a consumer having mix-load at a single metering arrangement at 400 volts, having sanctioned load of up to and including 500 kw. 2. Consumers having sanctioned load less than 5 kw shall be billed on single-part kwh rate i.e. C-I(a) tariff'. 3. All new consumers having sanctioned load 5 kw and above shall be provided T.O.0 metering arrangement and shall be billed on the basis of Time-of-Use (T.O.U) tariff C-1(c) given in the Schedule of Tariff. 4. All the existing consumers governed by this tariff having sanctioned load 5 kw and above shall be provided T.O.0 metering. C-2 SUPPLY AT 11 kv AND 33 kv 1. This tariff is applicable to consumers receiving supply at 11 kv or 33 kv at one-point metering arrangement and having sanctioned load of up to and including 5000 kw. 2. The supply under this Tariff shall not be available to a prospective consumer unless he provides, to the satisfaction and approval of the Company, his own Transformer, Circuit Breakers and other necessary equipment as part of the dedicated distribution system for receiving and controlling the supply, or, alternatively pays to the Company for all apparatus and equipment if so provided and installed by the Company. The recovery of the cost of service connection shall be regulated by the NEPRA eligibility criteria. 3. All new consumers shall be provided TOU metering arrangement and shall be billed on the basis of tariff C-2(b) as set out in the Schedule of Tariff. 4. Existing consumers governed by this tariff shall be provided with T.O.0 metering arrangement and converted to C-2(b). C-3 SUPPLY AT 66 kv AND ABOVE 1. This tariff is applicable to consumers having sanctioned load of more than 5000 kw receiving supply at 66 kv and above. 2. If the Grid Station required for provision of supply falls within the purview of the dedicated system under the NEPRA Eligibility Criteria, the supply under this Tariff shall not be available to such a prospective consumer unless he provides, to the satisfaction and approv Page 5 56

58 of the Company, an independent grid station of his own including Land, Building, Transformers, Circuit Breakers and other necessary equipment and apparatus as part of the dedicated distribution system for receiving and controlling the supply, or, alternatively, pays to the Company for all such Land, Building, Transformers, Circuit Breakers and other necessary equipment and apparatus if so provided and installed by the Company. The recovery of cost of service connection shall be regulated by NEPRA Eligibility Criteria. 3. Existing consumers governed by this tariff shall be provided with T.O.0 metering arrangement and converted to C-3(b). 4. All new consumers shall be provided TOU metering arrangement and shall be billed on the basis of tariff C-3(b) as set out in the Schedule of Tariff. D AGRICULTURAL SUPPLY "Agricultural Supply" means the supply for Lift Irrigation Pumps and/or pumps installed on Tube-wells intended solely for irrigation or reclamation of agricultural land or forests, and include supply for lighting of the tube-well chamber. Special Conditions of Supply 1. This tariff shall apply to: i) Reclamation and Drainage Operation under Salinity Control and Reclamation Projects (SCARP): ii) Bona fide forests, agricultural tube-wells and lift irrigation pumps for the irrigation of agricultural land. iii) Tube-wells meant for aqua-culture, viz. fish farms, fish hatcheries and fish nurseries. iv) Tube-wells installed in a dairy farm meant for cultivating crops as fodder and for upkeep of cattle. 2. If, for any reason, the meter reading date of a consumer is altered and the acceleration/retardation in the date is up to 4 days, no notice shall be taken of this acceleration or retardation. But if the date is accelerated or retarded by more than 4 days, the fixed charges shall be assessed on proportionate basis for the actual number of days between the date of the old reading and the new reading. 3. The lamps and fans consumption in the residential quarters, if any, attached to the tube-wells shall be charged entirely under Tariff A-1 for which separate metering arrangements should be installed. 4. The supply under this Tariff shall not be available to consumer using pumps for the irrigation of parks, meadows, gardens, orchards, attached to and forming part of the residential, commercial or industrial premises in which case the corresponding Tariff A-1, A-2 or Industrial Tariff B-1, B-2 shall be respectively applicable. D-1 (a) 1. This tariff is applicable to all Reclamation and Drainage Operation pumping under SCARP related installation having sanctioned load of less than 5 kw. 2. Consumers having sanctioned load less than 5 kw shall be billed on single-part kwh rate i.e. D-1(a) tariff given in the Schedule of Tari D-1 (b) Page 6 of 9 57

59 1. This tariff is applicable to all Reclamation and Drainage Operation pumping under SCARP related installation and other consumers falling under Agriculture Supply having sanctioned load of 5 kw and above. 2. All new consumers having sanctioned load 5 kw and above shall be provided TOU metering arrangement and shall be charged on the basis of Time-of- Use (T.O.U) tariff D- 1(b) given in the Schedule of Tariff. 3. All the existing consumers having sanctioned load 5 kw and above shall be provided T.O.0 metering arrangements. D-2 1. This tariff is applicable to consumers falling under Agriculture Supply having sanctioned load less than 5 kw excluding SCARP related installations. E -1 TEMPORARY RESIDENTIAL/COMMERCIAL SUPPLY Temporary Residential/Commercial Supply means a supply given to persons temporarily on special occasions such as ceremonial, religious gatherings, festivals, fairs, marriages and other civil or military functions. This also includes supply to touring cinemas and persons engaged in construction works for all kinds of single phase loads. For connected load exceeding 4 kw, supply may be given at 400 volts (3 phase) to allow a balanced distribution of load on the 3 phases. Normally, temporary connections shall be allowed for a period of 3 months which can be extended on three months basis subject to clearance of outstanding dues. Special Conditions of Supply 1. This tariff shall apply to Residential and Commercial consumers for temporary supply. 2. Ordinarily the supply under this Tariff shall not be given by the Company without first obtaining security equal to the anticipated supply charges and other miscellaneous charges for the period of temporary supply. E -2 TEMPORARY INDUSTRIAL SUPPLY "Temporary Industrial Supply" means the supply given to an Industry for the bonafide purposes mentioned under the respective definitions of "Industrial Supply", during the construction phase prior to the commercial operation of the Industrial concern. SPECIAL CONDITIONS OF SUPPLY 1. Ordinarily the supply under this Tariff shall not be given by the Company without first obtaining security equal to the anticipated supply charges and other miscellaneous charges for the period of temporary supply. 2. Normally, temporary connections shall be allowed for a period of 3 months, which may be extended on three months basis subject to clearance of outstanding dues. F SEASONAL INDUSTRIAL SUPPLY "Seasonal Industry" for the purpose of application of this Tariff, means an industry which works only for part of the year to meet demand for goods or services arising during a particular season of the year. However, any seasonal industry running in combination with one or more seasonal industries, against one connection, in a manner that the former works in one season while the latter works in the other season (thus running throughout the year) will not be classified as a seasonal industry for the purpose of the application of this Tariff. Page 7 of 9 5 8

60 Definitions 1. "Year" means any period comprising twelve consecutive months. 2. All "Definitions" and "Special Conditions of Supply" as laid down under the corresponding Industrial Tariffs shall also form part of this Tariff so far as they may be relevant. Special Conditions of Supply 1. This tariff is applicable to seasonal industry. 2. Fixed Charges per kilowatt per month under this tariff shall be levied at the rate of 125% of the corresponding regular Industrial Supply Tariff Rates and shall be recovered only for the period that the seasonal industry actually runs subject to minimum period of six consecutive months during any twelve consecutive months. The condition for recovery of Fixed Charges for a minimum period of six months shall not, however, apply to the seasonal industries, which are connected to the Company's Supply System for the first time during the course of a season. 3. The consumers falling within the purview of this Tariff shall have the option to change over to the corresponding industrial Supply Tariff, provided they undertake to abide by all the conditions and restrictions, which may, from time to time, be prescribed as an integral part of those Tariffs. The consumers under this Tariff will have the option to convert to Regular Tariff and vice versa. This option can be exercised at the time of obtaining a new connection or at the beginning of the season. Once exercised, the option will remain in force for at least one year. 4. All seasonal loads shall be disconnected from the Company's Supply System at the end of the season, specified by the consumer at the time of getting connection, for which the supply is given. In case, however, a consumer requires running the non-seasonal part of his load (e.g., lights, fans, tube-wells, etc.) throughout the year, he shall have to bring out separate circuits for such load so as to enable installation of separate meters for each type of load and charging the same at the relevant Tariff. 5. Where a "Seasonal Supply" consumer does not come forward to have his seasonal industry re-connected with the Company's Supply System in any ensuing season, the service line and equipment belonging to the Company and installed at his premises shall be removed after expiry of 60 days of the date of commencement of season previously specified by the consumer at the time of his obtaining new connection/re-connection. However, at least ten clear days notice in writing under registered post shall be necessary to be given to the consumer before removal of service line and equipment from his premises as aforesaid, to enable him to decide about the retention of connection or otherwise. No Supply Charges shall be recovered from a disconnected seasonal consumer for any season during which he does not come forward to have his seasonal industry re-connected with the Company's Supply System. G PUBLIC LIGHTING SUPPLY "Public Lighting Supply" means the supply for the purpose of illuminating public lamps. Definitions "Month" means a calendar month or a part thereof in excess of 15 days. Special Conditions of Supply Page 8 of 9 59

61 H Definitions The supply under this Tariff shall be used exclusively for public lighting installed on roads or premises used by General Public. RESIDENTIAL COLONIES ATTACHED TO INDUSTRIES This tariff is applicable for one-point supply to residential colonies attached to the industrial supply consumers having their own distribution facilities. "One Point Supply" for the purpose of this Tariff, means the supply given by one point to Industrial Supply Consumers for general and domestic consumption in the residential colonies attached to their factory premises for a load of 5 Kilowatts and above. The purpose is further distribution to various persons residing in the attached residential colonies and also for perimeter lighting in the attached residential colonies. "General and Domestic Consumption", for the purpose of this Tariff, means consumption for lamps, fans, domestic applications, including heated, cookers, radiators, airconditioners, refrigerators and domestic tube-wells. "Residential Colony" attached to the Industrial Supply Consumer, means a group of houses annexed with the factory premises constructed solely for residential purpose of the bonafide employees of the factory, the establishment or the factory owners or partners, etc. Special Conditions of Supply The supply under this Tariff shall not be available to persons jvho meet a part of their requirements from a separate source of supply at their premises. Page 9 of 9 6

62 List of Interested /Affected Parties to send the Notices of Admission/ Hearing regarding Petition filed Petition filed by Islamabad Electric Supply Co. Ltd. (IESCO) for the Determination of its Consumer-end Tariff Pertaining to the FY A. Secretaries of various ministries 1. Secretary Cabinet Division Cabinet Secretariat Islamabad 2. Secretary Ministry of Industries & Production 'A' Block, Pak Secretariat Islamabad 3. Secretary Ministry of Water & Power 'A' Block, Pak Secretariat Islamabad 4. Secretary Ministry of Finance 'Q' Block, Pak Secretariat Islamabad 5. Secretary Ministry of Commerce A-Block, Pak Secretariat Islamabad 6. Secretary Privatization Commission EAC Building Islamabad 7 Secretary Planning and Development Division `P' Block, Pak Secretariat Islamabad 8. Secretary Ministry of Petroleum & Natural Resources 'A' Block, Pak Secretariat Islamabad 6I

63 9. Secretary Irrigation & Power Department Govt. of Punjab Near Old Anarkali, Lahore 10. Director General National Tariff Commission Ministry of Commerce State Life Building No. 5, Blue Area Islamabad B. Chambers of Commerce and Industry, Telecom Companies & General Public 1. President The Federation of Pakistan Chamber of Commerce and Industry Federation House, Main Clifton Karachi Chief Capital Office The Federation of Pakistan Chamber of Commerce & Industry Aiwan-e-Sanat-o-Tijarat Road, Sector G-8/1, Islamabad. 3. President Islamabad Chamber of Commerce & Industry Chamber House, Aiwan-e-Sanat-o-Tijarat Road, G-8/1, Islamabad 4. President Senior Citizen Foundation of Pakistan 5-P, Markaz G-7, Sitara Market Islamabad 5. Chairman All Pakistan Textile Mills Association (APTMA) APTMA House, 44-A, Lalazar P.O. Box 5446 Moulvi Tamizuddin Khan Road Karachi 6. SHEHRI 206-G, Block 2, P.E.C.H.S Karachi TheNetwork for Consumer Protection Flat No. 5, 40-A, Ramzan Plaza 62

64 G-9 Markaz, Islamabad 8. PTCL Corporate Head Quarters, Block E G-8/4, Islamabad Chief Executive Officer Mobilink Mobilink House 1-A Kohistan Road, F-8 Markaz Islamabad 10. Chief Executive Officer Ufone (Emirates Telecommunication Corporation Group) 13-B, F-7 Markaz Jinnah Super, Islamabad 11. Chief Executive Officer Telenor Pakistan (Pvt) Limited 13-K, Moaiz Centre Bhittai Road F-7 Markaz, Islamabad 12. Chief Executive Officer Zong CMPak Limited Kohistan Road, F-8, Markaz Islamabad 13. Chief Executive Officer Warid Telecom (Pvt) Limited P.O. Box 3321 Lahore 14. Chairman Pakistan Telecommunication Authority (PTA) PTA Headquarters building F-5/1. Islamabad 3 63

65 C. Power Companies 1. Chairman Pakistan Engineering Council Attaturk Avenue (East), G-5/2 Islamabad 2. Member Power WAPDA 738 WAPDA House Shahra-e-Quaid-e-Azam Lahore 3. Managing Director Pakistan Electric Power Company (PEPCO) 721-WAPDA House Shahrah-e-Quaid-e-Azam Lahore 4. Chief Operating Officer CPPA Room 107 WAPDA House Shaharah-e-Qauid-e-Azam LAHORE 5. Managing Director Private Power and Infrastructure Board (PPIB) House No. 50, Sector F-7/4 Nazimuddin Road Islamabad 6. President Institute of Electrical & Electronics Engineers of Pakistan (IEEEP) 4 Lawrence Road Lahore 7. President The Institute of Engineers Pakistan IEP Roundabout Engineering Centre Gulberg III Lahroe D. Petitioner 1. Chief Executive Officer Islamabad Electric Supply Co. Ltd. Street # 40, Sector G-7/4, Islamabad

66 ./- Za National Electric Power (ZIT).--' Regulatory Authority (NEPRA) NOTICE OF ADMISSION/PUBLIC HEARING PETITION FILED NY ISLAMANAD ELECTRIC SUPPLY COMPANY (IESCO) FOR THE DETERMINATION OF ITS CONSUMER-END TARIFF PERTAINUIG TO THE FY braL.1 c s Al stakeholders. interested/affected persons and the general public are notified that Islamabad Esecthc Supply Company (IESCO) has tiled a petition mth the National Electric Poser Regulatory AuLonty (NEPRA) for the determination of as consumer-end tand pertaining to the FY SALIENT FUTURES OF THE PETITION 1. The petitioner has prayed fax the denrimnabon of cis consumer-end tat* pertanthg lo the Financial Year approval of Olunbution Mamin I.56lON11. Investment for Rs melon. line losses % and average sales rale/tariff at Rs.16 69/kWh with thecamgarvoise Land as staled in table below 2. I is also danhed that Me Admission at the petition Reddy IESCO for detemunation of Its consumer and Land pertaining to FY is not to be construed as the approval of lane by NEPRA. DestnyAlen Ilev nisi 444 Ow FY Fined Ver. Charges Charms. 118AW110 Ps JICAM MOM 111marmed Amer., VI s! Road Ver. Charges Charges Illsiklah iii.iirmial -A i Fs, Pty Low Recrinimem IA. mow 1 IAN Up :14 SO %Inds Mr..alive 8 So lao unit par monlet It 00 10// ow Acrim Units par tl GO 1700 ai per mono F., feel UAW A ASw 1 rm. a Clay Mu,- P444 zs to Tim al Day i TOW 041-hi 17 OD 12 SO Teal Oemweac Camormal at Fur DAM 1440 mlp 444ner *ea man SW/ 7400 WO 1 65 Os Peak 4440,m / ow* Roque/ CO Tons 0 Oa! ITOUI -Pt.* 440 ZS ao 400 lie so Tme al Day -TOW Teal Commerv4I Mc SI A11 ia00230 meal SO a SCOM 4400 Amy Mien ne "aid _al Ilia ups is kw ti ) LAO - IOU "Atil 000 Amos 440 ZS Ca (0. - TOU 'Cl O I? JO mu Pan: WO SCOOKVI 01,33 so 420 a as be le oe ' O - TOU M, es ADAM All SOXIKW11./33 A of wo S. - YOU (Paoli al nada OW= iv sot amps le CO OA - MU I /461 1 SO Wadi Ire NV MOM , Tam ineasmos -1 lim b Pawl 401., SW 1w~ OW C-114I Fe, re rcorreo me. ism irui, sinv C = w aro up a SOO CIO _ Taw al 0.0 (11:118 C- he :Pty 410 ZS to 00 Time el Ng r1012) O- 114 JO& halt t 11 SO C-24a1 S. a 114 n mi II 30 Tom 0/ 0 0 MIA- C aem HI 00 TAMA/ Oat (TOM C C-3181 al Mow a/ use Movo Ma Tom al Ow (TOM - C Y.'. a COY!Mal - C- solo 05-Pma y -, Veal sinew mum timers gm own. iftwoliolim Auntroloral T Urn 0 S ,4as ran 511W 15 GO 14 so aonnaasat Tea Wel ZO , Twee WM TWA SEW 4 ma.. aseii /44301A01 7i0AA MA 3.W A stew 011-Osii SO TAW Agneuftrel TeAseml Ton114) Punic Leave Tee -4 si Ea w maimq Como* 4laMe II km - two is lt 22 tee at Der acte At Mil Peak alo time 0 Oar (TOUT - 8 la Oa PAM Rawal till 42 iir Is CO 3. In Isms at hies 6 of NEPRA (Tana Standard/ A Ptocedures) Rules any in messed person who desires to participate in the proceedings may Re an intememon newest Mein seven days froth the dale at publication at pus nonce. Such intim/neon request shall slate die name and address of the person ling the same. obiecoons and the memoir n which such person is or itt *My to be substantially and specifically of by any dipermination in ins proceedings. The MIehe request may also contain the contentions at the person making to same. the relief sought and the andante. 0 any. in support of the case. In the intervention request. the intervener may speceicalay admit. deny or vthlain the facts slated in the petition and may also stale additional facts which we relevant and necessary Ion reaching a 'RN and informed decision in Ihe proceedings The intemention request Owl be Signed yanked and supported by means of an Ada vie in the same manner as in the case of the pecan. The intongtnto SRO also same a copy of the intervention request duly attested as nue copy on the pendoner or his suthonzed representative and the pettener may file a colander to the intervemon request which shied* Ned before the commencement ot Ilieheaiing. 4. Any person may also kle the comments in the matter rein 7 days at the publication and trie Authority, 4 deemed le. may permit parappabon of such person into Pi proceedings and also may consorter those coinments in the Mal determination. - S. Ad slakeholders and interested I affected persons we also informed that AI order lo arise at a lust and informed decision. the Authonty has also decided to hold a hearing in the subject maser accorelmg to the dale tune and venue as mentioned WOE. Date: Time: Venue All canhnunications should be addressed to: September 1, 2013 (Wednesday) a.m. NEFRA main Office. 0-5/2. Islamabad llogiatrat NE PRA 2nd Floor. OPF Building, Shahrati-e4amhuriat, 6-512, Islamabad. Phone; Fag: E.mml: office nepra cog. pa Per turban leteneettee add inraleml tee erodes visit Pin wm.ti im -

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