TARIFF ORDER OF THE WEST BENGAL ELECTRICITY REGULATORY COMMISSION IN CASE NO: TP 34 / 07-08 IN RE THE TARIFF PETITION OF WEST BENGAL STATE ELECTRICITY TRANSMISSION COMPANY LIMITED UNDER SECTION 64(3)(a) READ WITH SECTION 62(1) OF THE ELECTRICITY ACT, 2003 FOR THE YEAR 2007 2008 DATE: 26.07.2007
Tariff Order of WBSETCL for the year 2007 2008 CHAPTER - 1 INTRODUCTION 1.1 The West Bengal State Electricity Regulatory Commission (referred to as the Commission hereinafter) was constituted by the State Government of West Bengal in 1999 in pursuance of the provisions of Section 17 of the Electricity Regulatory Commissions Act, 1998. The latter, along with the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 was repealed by dint of Section 185 of the Electricity Act, 2003, (referred to as the Act hereafter) which came into force with effect from 10 th June 2003. The first proviso of Section 82(1) of the Electricity Act, 2003 has ensured continuity of the Commission along with that of all other State Electricity Regulatory Commissions by laying down that the State Electricity Regulatory Commissions established by a State Government under Section 17 of the Electricity Regulatory Commissions Act, 1998 (and a few other State enactments), and functioning as such immediately before the appointed date, shall be the State Commissions for the purposes of the Electricity Act, 2003. 1.2 The functions of a State Commission have been specified in Section 86 of the Electricity Act, 2003. One of the main functions of a State Commission relates to determination of tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within a State. Further, Section 62(1) of the Act also requires the appropriate Commission to determine the tariff in accordance with the provisions of the Act, for supply of electricity by a generating company to a distribution Licensee, for transmission, for wheeling as also for retail sale of electricity. 1.3 The Commission has, therefore, all the powers and authority under the Electricity Act, 2003 to determine the tariff, as laid down in the Act, and these powers and authority are in continuation of similar powers and authority that were enjoyed by West Bengal Electricity Regulatory Commission 2
Tariff Order of WBSETCL for the year 2007-2008 the Commission under Section 29 of the Electricity Regulatory Commission Act, 1998. 1.4 The West Bengal State Electricity Board, a State Electricity Board constituted under Section 5 of the Electricity (Supply) Act 1948 after being reorganized in terms of Section 131 of the Electricity Act, 2003 has been replaced by (i) West Bengal State Electricity Transmission Company Limited and (ii) West Bengal State Electricity Distribution Company Limited w.e.f 1.4.2007 in accordance with a transfer scheme viz., West Bengal Power Sector Reforms Transfer Scheme 2007 notified by Govt. of W.B vide No.12-PO/O/III/3R-29/2006 dated 25.1.2007. Whereas the functions and business in transmission activities and load despatch activities have been transferred to and vested in West Bengal State Electricity Transmission Company Limited (hereinafter referred to as WBSETCL), the functions and business in distribution activities and activities related to hydro undertakings have been transferred to and vested in West Bengal State Electricity Distribution Company Limited (hereinafter referred to as WBSEDCL). Both WBSETCL and WBSEDCL are deemed to be licensees under the Electricity Act, 2003 in terms of fifth proviso to Section 14 of the Act and the area of operation for both WBSETCL and WBSEDCL covers the whole State of West Bengal excepting generally those areas of operation that are covered by other licensees but in some cases coinciding with the areas of operation of some other licensees. In exercise of powers conferred under Sub-section 1 of Section 39, the Govt. of W.B has notified and authorised vide No.89-PO/O/III/3R-5/2007 dated 26.3.2007 West Bengal State Electricity Transmission Company Limited to function as State Transmission Utility w.e.f 1.4.2007. 1.5 The Commission had determined the annual tariff in favour of West Bengal State Electricity Board for seven consecutive years starting from 2000-01. The tariff petition for the year 2007-08 on the basis of multi year framework in terms of West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) West Bengal Electricity Regulatory Commission 3
Tariff Order of WBSETCL for the year 2007-2008 Regulation 2007 has now been submitted by West Bengal State Electricity Transmission Company Limited, one of the successor entities of West Bengal State Electricity Board. The petition is for determining the tariff for transmission charges for one year control period under multi year tariff framework. 1.6 It has been stipulated in clause 2.5.2 of the WBERC (Terms & Conditions of Tariff) Regulation 2007 that for first control period, filing of petition for tariff may be made 7 days before the commencement of the control period. In view of the fact that the successor Transmission Company of WBSEB came into existence from 1.4.2007, it was appealed by the petitioner that they may be allowed 30 days of additional time from the date of commencement of the control period, the date of commencement of control period being 1.4.2007. The Commission allowed 15 days of additional time to WBSETCL for filing its tariff petition meaning thereby that the tariff petition of WBSETCL shall be submitted to the Commission by 16.4.2007 (15.4.2007 being a Sunday). Accordingly, the Commission has proceeded to admit the tariff petition of WBSETCL on 17.4.2007 which was submitted to the Commission on 16.4.2007. The Commission, however, takes this opportunity to advise the petitioner that this additional time has been allowed to prepare the tariff petition subsequent to the formation of WBSETCL on 1.4.2007 only for the year 2007-08 and should not be taken as precedence by WBSETCL or any other licensee for future years. 1.7 The tariff petition in question admitted by the Commission was marked as No.TP- 34 / 07-08. After admission of the same WBSETCL was directed to publish the gist of the tariff petition as approved by the Commission in newspapers of which one will be in either Ananda Bazar Patrika or Bartaman, one in either The Statesman or The Telegraph, one in a Hindi daily with substantial readership in the State and one in an English daily with all India readership (preferably The Economic Times or the Business Standard). The gist of the petition was West Bengal Electricity Regulatory Commission 4
Tariff Order of WBSETCL for the year 2007-2008 published simultaneously in Ananda Bazar Patrika, The Telegraph, Sanmarg, Business Standard and Aajkal on 25.4.2007. 1.8 While publishing the gist of the tariff petition, the insertions in the newspapers called upon all interested parties and members of the public to file objections or make comments on the petition. They were also afforded opportunities for inspection of the petition and take copies of the same in terms of the relevant provisions of the WBERC (Conduct of Business) Regulations, 2007. 1.9 The intra-state power transmission system comprising of 2 numbers of 400 KV lines terminated at Jeerut and Arambagh substations along with 3 numbers of 220 KV lines terminated at Gokarna, Satgachhia and Durgapur substations constructed by West Bengal Power Development Corporation Ltd. (WBPDCL) at a total cost of Rs.299.97 crore had so long been treated as a dedicated line of Bakreshwar Thermal Power Station of WBPDCL for the purpose of determination of generation tariff of that station. 1.10 It came out from a submission of some additional information by WBSETCL, on requisition, that the aforesaid substations are also connected with 400 KV and 220 KV lines (as applicable) for transmitting the power from other state sector generating stations, NTPC etc. causing to and fro flow of power through the abovementioned 400 KV and 220 KV lines. 1.11 In view of this, above referred transmission system de-facto forms part of the transmission system of WBSETCL. The Commission, therefore, intends to consider operation and maintenance expenses of the referred lines and substations as well as the costs of depreciation, interest and return for the assets of these lines for the purpose of determination of tariff of WBSETCL for recovery from their beneficiaries after excluding such assets from the total assets of WBPDCL. West Bengal Electricity Regulatory Commission 5
Tariff Order of WBSETCL for the year 2007-2008 1.12 The Commission decided to bring the above facts to the notice of all interested parties, stakeholders and members of public through publication in the newspapers inviting objections and comments, if any. Accordingly, notices were published on 25.5.2007 simultaneously in The Telegraph, The Statesman, Ananda Bazar Patrika, Aajkal, Business Standard and Sanmarg. Copies of the notice were also sent to all those who either obtained copy of the tariff petition of WBPDCL and / or WBSETCL and / or submitted objections / comments in the matter of tariff petition of WBPDCL. Written objections or comments or suggestions, if any, were invited for submission to the Commission latest by 5.6.2007 with the opportunity to collect copy of the additional information submitted by WBSETCL on the subject on payment of usual fees up to 4 th June, 2007. 1.13 The objections / comments / suggestions etc. received within the stipulated date have been summarized in Chapter 3. West Bengal Electricity Regulatory Commission 6
Tariff Order of WBSETCL for the year 2007 2008 CHAPTER - 2 THE CASE OF THE WBSETCL, 2007-2008 2.1 West Bengal State Electricity Transmission Company Limited (WBSETCL) in its tariff petition has claimed that the aggregated assets and liabilities in WBSETCL in terms of West Bengal Power Sector Reforms Transfer Scheme 2007 as notified by the Govt. of W.B has been considered for estimating expenditures under different heads. 2.2 WBSETCL has further claimed that the assets and liabilities were prepared as per the balance-sheet of West Bengal State Electricity Board as on 31.3.2006. The assets and liabilities added or deleted during the year 2006-07 relating to transmission functions of WBSEB has been stated to have been considered towards the assessment of assets and liabilities at the beginning of 2007-08. 2.3 WBSETCL has further pointed out that since the duties and functions of WBSETCL is to transmit power to all agencies within the State of West Bengal in an efficient and economic manner in coordination with the generating company operating in the State and since the duties and functions of State Load Despatch Centre (SLDC) of WBSEB are also to be carried out by WBSETCL, augmentation of existing EHV lines & sub-station and construction of new EHV sub-station & lines have been undertaken by WBSETCL while the modernization of existing infrastructure of SLDC is already done along with proper metering of all inter-section points with other licensees for smooth implementation of ABT. 2.4 WBSETCL has considered the power purchased by WBSEDCL from all of the State and Central sector generating stations for transmission through the transmission system of WBSETCL. The evacuated power generated at the hydel power station and Purulia Pump Storage Project of WBSEDCL have also been considered for transmission through the transmission system of WBSETCL. West Bengal Electricity Regulatory Commission 7
Tariff Order of WBSETCL for the year 2007-2008 2.5 WBSETCL in its tariff petition has considered 4% technical loss in its transmission system as per the provisions made in the WBERC (Open Access) Regulations, 2007. 2.6 Total energy purchased at 400 / 220 / 132 KV by WBSEDCL from State sector and Central sector generating stations including the energy purchased from traders, DVC and DPL and required to be transmitted through transmission system of WBSETCL has been projected for the year 2007-08 at a level of 22332 MU. With the grid loss in the transmission system of C.T.U being estimated at 208 MU the net energy purchase during 2007-08 has been computed as 22124 MU. Total net energy availability from the hydel power station has been projected at 483 MU during the year 2007-08 which is to be transmitted through WBSETCL system. In addition, 850 MU has been projected as available from Purulia Pump Storage Project for transmission to WBSEDCL. 2.7 With the total energy injected into the transmission system of WBSETCL for transmission to WBSEDCL projected by the petitioner as 23457 MU and 4% technical loss in WBSETCL system (939 MU), the total net energy transmitted to WBSEDCL has been projected at 22518 MU. 2.8 Total summarized revenue requirement of WBSETCL for the year 2007-08 has been estimated by the petitioner at Rs. 40,960.85 lakhs. The allocated transmission capacity during the year 2007-08 has been estimated as 2,570.55 MW.The transmission charge has been computed by WBSETCL at Rs.1,32,789.00 per MW / month. 2.9 Out of the above annual requirement of Rs. 40,960.85 lakhs, Rs.4,839.03 lakhs has been projected as employees cost. WBSETCL has stated to have considered the staff strength as per the provisions of West Bengal Power Sector Reforms Transfer Scheme, 2007. The petitioner claims that the element of D.A has been considered as per the order of Govt. of W.B issued from time to time in West Bengal Electricity Regulatory Commission 8
Tariff Order of WBSETCL for the year 2007-2008 the year 2006-07 and has considered the merger of 50% D.A with the basic pay of the employees w.e.f 1.4.2007. It has been pointed out that any further rise in D.A will come as an additional expenditure. Overtime has claimed to have been allowed only to technical staff for attending emergency breakdown beyond normal hours. 2.10 Repair & maintenance expenses have been estimated for the year 2007-08 as Rs.1,370.05 lakhs. The petitioner has tried to justify the expenditure by explaining that considering the requirement for delivering reasonably uninterrupted quality power and repair & maintenance cost due to commissioning of many new transmission sub-stations and lines under JBIC and other funding, the estimated expenditure is reasonable compared to the total transmission system. 2.11 It has been estimated by the petitioner that Rs. 1,412.91 lakhs will be required during 2007-08 to meet the administration and general expenses, rent and taxes, legal charges and auditor fee. After capitalization of the expenditure the cost on this account has been computed as Rs. 1,271.84 lakhs. 2.12 Depreciation for the year 2007-08 has been projected by WBSETCL as Rs. 8,717.00 lakhs stated to have been based on depreciation up to 90% of the original cost of the assets, calculated annually based on straight-line method at the prescribed rates. 2.13 Total interest payable on loans from Govt. and other financial institutions in the year 2007-08 has been worked out by the petitioner as Rs. 192.12 crore. After capitalization, net interest of Rs. 104.44 crore has been considered in the revenue expenditure for the year. West Bengal Electricity Regulatory Commission 9
Tariff Order of WBSETCL for the year 2007-2008 2.14 While calculating the return on equity, the petitioner has considered the allocation of equity to WBSETCL at Rs.720 crore in terms of West Bengal Power Sector Reforms Scheme, 2007 notified by Govt. of W.B and as per the balance-sheet as on 31.3.2006. An amount of Rs.52.00 crore has been stated by the petitioner to have already been invested from its own fund in transmission projects during 2006-07 which has also been included in the equity for 2007-08. An additional amount of Rs.132.94 crore which is likely to be invested during the year 2007-08 from petitioner s own fund in execution of transmission project has also been considered as equity participation of WBSETCL and the return on equity has been calculated accordingly as Rs. 11,739.00 lakhs. 2.15 In terms of WBERC (Terms & Conditions of Tariff) Regulation, 2007, a reserve of 0.25% of the value of Gross Fixed Assets amounting to Rs.575.54 lakhs has been included by the petitioner in the revenue requirement of 2007-08 as one part of special allocation. In addition Rs.40.23 lakhs has also been included as special allocation in revenue requirement as primary expenses written off (one fifth of expenses for fees paid to the Company Law Board for incorporation of WBSETCL including fees paid to the Consultants). 2.16 Interest on working capital, bad debt and receivable subsidy have been projected as nil while the income from sources other than sale of energy has been projected to be Rs. 373.51 lakhs. West Bengal Electricity Regulatory Commission 10
Tariff Order of WBSETCL for the year 2007 2008 CHAPTER - 3 OBJECTIONS Objections against the Tariff Petition of West Bengal State Electricity Transmission Company Ltd (2007-2008) 3.1 Objections to / comments on the tariff petition of West Bengal State Electricity Transmission Company Ltd. (WBSETCL) the gist of which was published on 23.4.2007 were received from (1) M/s. Bharat Chamber of Commerce (BCC) and (2) M/s. Sri Vasavai Industries Ltd. (SVIL) within the stipulated date. The objections to / comments on the notice published in the newspapers on 25.5.2007 were received only from WBSEDCL within the stipulated date. (i) BCC in their submissions has mentioned that the expenses under different heads such as, employees cost, repairs and maintenance expenses, administration and general expenses, depreciation, interest and finance charges, unforeseen exigencies and return on equity has been submitted in the tariff petition by WBSETCL without giving any detailed break up under the respective heads. BCC has appealed to the Commission to direct WBSETCL to review its petition giving these details so that BCC may justifiably comment on the tariff petition. In the opinion of BCC even the bifurcation of the assets and liabilities of erstwhile WBSEB has not been spelt out properly and no comparative study has been made with respect to actual expenses incurred under such heads. (ii) Objecting to the requirement of additional assets in respect of transmission network BCC has opined that a detailed load-flow study is essential to justify the creation of these additional assets. (iii) BCC has appealed to the Commission to direct WBSETCL to restrict the total loss in the transmission system to 1% expressing the view that total loss cannot be more than 1% to 2% in an EHV system as there is no West Bengal Electricity Regulatory Commission 11
Tariff Order of WBSETCL for the year 2007-2008 scope for theft of energy or such other loss. BCC has appealed for disallowing the total loss of 5% claimed by WBSETCL. BCC has also appealed for disallowance of overtime allowance claimed by WBSETCL as in the opinion of BCC no break down of EHV transmission network is normally anticipated and the availability of such transmission network should be around 95% by regular routine maintenance and through hotline maintenance. (iv) (v) (vi) (vii) BCC has prayed that the expenditure under repair and maintenance be restricted to the extent of prescribed guidelines based on the percentage of the gross block of assets. WBSETCL, according to BCC, has not submitted any basis of calculation for arriving at the repair and maintenance cost of Rs.1370.05 lakh for 2007-08. According to the calculation of BCC the interest claimed by WBSETCL works out to be 25% of the total revenue requirement of Rs.409.60 crore. It has appeared to BCC that the interest rate charged by Govt. of W.B is very high and BCC has appealed that the Commission may request the State Govt. to bring down the rate of interest so that this high burden of interest is not passed on to the consumers in the tariff. BCC has opined that unforeseen exigencies cannot be considered in tariff computation without valid justification. BCC has prayed that WBSETCL be directed to claim such expenses on the basis of actual figures. BCC has also suggested that if a provision of such reserve has to be made then the actual expenses incurred should be reported in next tariff petition and any variation from the provisions made should be suitably adjusted. BCC has suggested that year-wise comparative study of the tariff allowed by the Commission be made by WBSETCL to ascertain how the tariff varies and whether consumers, especially the industrial consumers have West Bengal Electricity Regulatory Commission 12
Tariff Order of WBSETCL for the year 2007-2008 been unnecessarily burdened. BCC has further suggested that WBSETCL should have compared their transmission charges with other agencies like DVC, DPL etc. to ensure that tariff of the industrial consumers does not become more than average cost of supply or the actual cost of supply. (viii) (ix) BCC has on the basis of their calculation of few items of expenses opined that in percentage terms based on revenue requirements the employees cost, cost of interest and finance charges, cost on depreciation and unforeseen exigencies have appeared to be arbitrary and very much on the higher side. BCC has prayed to the Commission to issue proper guidelines for allowances of expenses under these heads. Regarding the proposal of WBSETCL to augment its transmission capacity the BCC has commented upon the proposed increase of Rs.441.80 crore in capital expenditure over that of 2006-07. This expenditure according to BBC is an astounding increase of 111% over 2006-07 whereas according to the papers available to BCC the total power availability for sale is only 12.6% over that of 2005-06. BCC has felt that a huge increase in capital expenditure to handle a small increase in total power available is not justified. BCC has also opined that if such increase is for the transmission requirement for future years then it should be spelt out clearly. BCC also suggested that entire capital expenditure should not be shown as a revenue requirement for one year but should be amotised / spread over a number of years. In the opinion of BCC the increase in capital expenditure of Rs.369.10 crore outside plan is much more than the increase in planned capital expenditure of Rs.72.70 crore. West Bengal Electricity Regulatory Commission 13
Tariff Order of WBSETCL for the year 2007-2008 (x) According to the submission of BCC, doubling of electricity duty from 7.5% to 15% by Govt. of W.B was done in order to remove cross subsidy in the tariff and the State Govt. according to BBC was supposed to transfer this money to the Electricity Board to provide direct subsidy to the weaker section of the society. BCC has prayed to the Commission to pursue with the Govt. of West Bengal to honour its commitment and use the money for its rightful purpose. 3.2 Sri Vasavi Industries Ltd. (SVIL), a ferro alloy plant in Bishnupur, Bankura, supplied at 132 KV from Bishnupur Grid substation has submitted that the 132 KV line through which electricity is supplied to SVIL has not been included in the assets of WBSEDCL under the transfer scheme notified by Govt. of W.B. It has, therefore, appeared to the objector that 132 KV line built by SVIL which is not even included in the asset of WBSETCL shall be treated as dedicated transmission line under Section-2 (16) of act. According to the objector no distribution assets of WBSEDCL is used for supply to SVIL. The objector has argued that tariff of SVIL should therefore be determined on the basis of generation & transmission cost only and none of the expenses below 132 KV should be considered for calculating the tariff of 132 KV consumers. In the opinion of the objector the petitioner has wrongly worked out the equity base taking into consideration the capital work even in progress which is according to the objectors not according to the Act. The objector has appealed to the Commission to arrive at reasonable capital as per Regulation 31/WBERC which can qualify for consideration of the return on equity. The objector has also appealed for allowing hearing to the objector for meaningful interaction that could facilitate determination of reasonable tariff for all consumers inclusive of 132 KV consumers like SVIL. 3.3 In response to the notice published by the Commission in the newspapers on 25.5.2007 WBSEDCL has submitted their opinion in connection with the intra- West Bengal Electricity Regulatory Commission 14
Tariff Order of WBSETCL for the year 2007-2008 state power transmission system comprising of 2 numbers of 400 KV and 3 numbers of 220 KV transmission line constructed by WBPDCL along with their Bakreshwar Thermal Project at a total cost of Rs.299.97 croe. According to WBSEDCL since the aforesaid transmission lines emanating from Bakreshwar TPS, terminated at different substations of WBSETCL are being utilized for receiving power from other generating stations and also for enabling to and fro flow of power, it has been argued that these transmission lines can not be construed as dedicated transmission line. WBSEDCL has suggested that since the aforesaid transmission line form a part of state transmission system being operated and maintained by WBSETCL the cost on account of interest, depreciation and return for these lines be considered in the transmission charge of WBSETCL after excluding these costs from the tariff of Bakreshwar TPS of WBPDCL. It has also been pointed out that WBSETCL is already maintaining these lines and the cost on O&M is also to be included in the O&M cost of WBSETCL as in earlier years. 3.4 The Commission has taken note of the objections / suggestions made by the objectors on the tariff petition of the WBSETCL for 2007 08 and given them due consideration. The extent of the Commission s agreement or disagreement with those objections / suggestions will be reflected in the concerned portions of the tariff order hereinafter. West Bengal Electricity Regulatory Commission 15
Tariff Order of WBSETCL for the year 2007 2008 CHAPTER 4 LAW POINTS ON HEARING AND REPRESENTATION OF INTEREST OF THE CONSUMERS 4.1 The question of affording an opportunity of hearing to the consumers in the process of determination of tariff has come up on different occasions in various manners. It is, therefore, necessary to give the matter our consideration and clarify the position taken by the Commission in this behalf. 4.2 Before we deal with this point we clarify that in the instant determination of tariff for WBSETCL no hearing has been given either to WBSETCL or to any of the consumers or public. However, the Commission has considered all the suggestions and objections received from the consumers and / or public while passing the instant tariff order. 4.3 Commission is of the considered opinion that under the Act, the legislators have deliberately excluded any scope of hearing while determining the tariff under section 62 read with section 64 of the Act. Section 64 of the Act contains the procedure for determination of tariff. A bare reading of section 64 of the Act and its sub-sections clearly show that while issuing a tariff order under section 64(3) of the Act, Commission is required to consider all suggestions and objections received from the public. However, if the application under section 64(1) of the Act is found to be not in accordance with the provisions of the Act and rules and regulations made thereunder or the provisions of any other law for the time being in force, Commission is empowered to reject the application of a generating company or a licensee after giving a reasonable opportunity of being heard to such licensee or generating company. Therefore, section 64(3)(b) of the Act limits the scope of hearing only in case of outright rejection of the application of a generating company or a licensee made under section 64(1) of the Act. This may be mentioned that under the Act the Commission has been entrusted with different kinds of functions. Determination of tariff under section 62 read with section 64 of the Act is only one of such functions. In respect of West Bengal Electricity Regulatory Commission 16
Tariff Order of WBSETCL for the year 2007 2008 some functions, the statute has clearly mandated the Commission to provide hearing. Examples of some such functions are to be found in proviso to section 15 (6) (b), proviso to section 57 (2), section 142 and section 143 of the Act. These may be seen in contrast to sections 19(3), 63, 128 (6) and 130 of the Act where the scope of hearing has deliberately been excluded. It may also be noted that if tariff is determined under section 63 of the Act through a process of bidding, no hearing is required to be given to anyone. 4.4 Moreover, in line with the Act Commission has also made the Tariff Regulations. Regulation 2.10.1 of the Tariff Regulations also excludes the scope of any hearing either to a licensee or to a generating company or to the public while determining tariff. 4.5 We are, therefore, of the opinion that under section 64 (3) (a) of the Act read with regulation 2.10.1 of the Tariff Regulations, no hearing is to be given either to a licensee or to a generating company or to the consumers or to the public. What is required is consideration of suggestions and objections received from the consumers and / or public. 4.6 This point of law, as to whether in view of section 64 of the Act hearing is to be given to the licensee and consumers at large before tariff is determined, was an issue in a writ petition being W.P.16166 (W) of 2004 filed before the Hon ble High Court, Calcutta in which the Commission was one of the respondents. The Hon ble Justice Pinaki Chandra Ghosh by an order dated 04.10.2004, having considered the judgment of the Hon ble Supreme Court reported in (2002) 8 SCC 715, inter alia, held that :.After going through the said Regulations it appears to me that hearing was not contemplated under the said Section 64 of the said Act and the Regulations framed thereunder. Therefore, in West Bengal Electricity Regulatory Commission 17
Tariff Order of WBSETCL for the year 2007 2008 my opinion, not granting of a hearing to the petitioner cannot said to be violation of natural justice after construing the said Act and the Regulations framed thereunder. Therefore, in my opinion, it cannot be said that at this stage the said order has been made arbitrarily or any violation of natural justice.. 4.7 The aforesaid order dated 4 October, 2004 of the Hon ble Justice Pinaki Chandra Ghosh was challenged before the Hon ble Division Bench of the Hon ble High Court in an appeal being MAT 596 of 2005. The Hon ble Division Bench comprising of Hon ble Justice Aloke Chakrabarti and Hon ble Justice S P Talukdar affirmed the order of the Ld. Single Judge by an order dated 25 February, 2005 and, inter alia, held that : After due consideration of the relevant provisions of the Act, 2003 and having regard to the submission made by the learned Counsel for the parties, we think that what is required at the stage of determination of tariff is consideration and not `hearing 4.8 However, the said Writ petition was dismissed for default by an order dated 29.03.2007 by Hon ble Justice Aniruddha Bose due to non-appearance of the Ld. Advocate for the writ petitioner. We record here that we are aware of the fact that the aforesaid orders were interim in nature and in view of the aforesaid order dated 29.03.2007 dismissing the writ petition being W.P. 16166 (W) of 2004 for default, the earlier orders of Hon ble High Court, Calcutta do not exist. However, we have recorded the relevant part of the aforesaid two orders only for the fact that the view taken by the Commission was accepted by the Hon ble High Court, Calcutta while passing the interim orders prior to dismissal of the writ petition on the ground of non-appearance of the Ld. Advocate for the writ petitioner. West Bengal Electricity Regulatory Commission 18
Tariff Order of WBSETCL for the year 2007 2008 4.9 The Commission, therefore, is passing the instant tariff order for WBSETCL for the year 2007-08 without giving hearing to WBSETCL or any objector but after taking into consideration all suggestions and objections received from the public. West Bengal Electricity Regulatory Commission 19
Tariff Order of WBSETCL for the year 2007 2008 CHAPTER 5 DETERMINATION OF FIXED CHARGES 5.1 The total amount of fixed charges projected by WBSETCL is Rs.41334.36 lakh. The total income to be generated from different non-tariff sources has been estimated to be Rs.373.51 lakh. Hence, net amount of fixed charges claimed comes to Rs.40960.85 lakh. The Commission has taken up a prudent analysis of the charges claimed under different heads with reference to reasonableness. 5.2 Employees Cost. The employees cost estimated by WBSETCL with reference to the total number of employees engaged in the functions, business and undertakings forming part of Transmission and Load dispatch functions of former WBSEB is for a total amount of Rs. 4839.03 lakh. It has been clarified that the estimation is based on the latest order of the State Government releasing DA and merger of 50% of that with the basic pay. The Commission has viewed the projected amount with reference to the un-audited actual expenditure incurred by erstwhile WBSEB for the functions relating to transmission services in the year 2006 07. The expenditure was stated to be Rs. 5842.61 lakh as against the amount now being claimed by WBSETCL. One of the objectors has found the projection to be arbitrary and on the high side. But the projected amount is smaller than the comparable amount in 2006 07. The reduction in projected expenditure is mainly due to creation of a separate employees terminal benefit through bonds to take care of the liabilities in this regard. The projected amount is found to be admissible. 5.3 Repairs & Maintenance Expenses. WBSETCL has asked for an amount of Rs.1370.05 lakh towards repairs and maintenance expenses including the cost of consumable stores and spares. The projected amount is found only 1.7% higher than the amount allowed to former West Bengal Electricity Regulatory Commission 20
Tariff Order of WBSETCL for the year 2007 2008 WBSEB for maintenance of the transmission lines in the previous year. The favourable result arising from the aforesaid comparison leads to admission of the projected amount. 5.4 Administration and General Expenses. Administration and general expenses projected by WBSETCL are as under: Rs. in lakhs (a) Rent, Rates and Taxes 62.86 (b) Legal Charges 19.56 (c) Audit Fees 16.50 (d) Other Admn. & General Charges 1172.92 Total 1271.84 The expenditures as projected above are inclusive of the expenses to be incurred from the functional head office of the applicant. The Commission has viewed the projected expenditures under above heads of accounts with reference to estimated expenditure incurred by erstwhile WBSEB during 2006 07 and the projected amounts are found reasonable. 5.5 Interest & Finance Charges. 5.5.1 The interest & finance charges have been projected as under: Rs. in lakh (a) Interest on capital borrowing 10444.50 (b) Interest on Bonds for Pension Fund 2295.00 West Bengal Electricity Regulatory Commission 21
Tariff Order of WBSETCL for the year 2007 2008 (c) Other Finance Charges 13.17 Total 12752.67 WBSETCL has provided the computations of interest charges on its capital borrowings. It has explained that the outstanding balances of borrowing from different sources at the beginning of the year 2006-07 have been arrived at after making adjustments of repayments made as well as the fresh borrowing with the amounts of outstanding borrowing as on 1 st April 2006 shown in the Schedule A of the West Bengal Power Sector Reforms Transfer Scheme, 2007. The amounts considered in the computations are as under: Rs. in lakh Outstanding balance as on 01.04.2007 210165.00 Less: Scheduled repayment during 2007-08 9261.00 Net 200904.00 Add: Fresh borrowing during 2007-08 58523.00 Projected balance at the end of 2007-08 259427.00 The total amount of chargeable interest works out to Rs.21509.00 lakh out of which the amount of Rs.10444.50 lakh is chargeable to revenue account and the balance is to be capitalized. 5.5.2 To take care of the unfunded liability towards staff terminal benefits on actuarial determination, 8.5% Bonds were issued and the amount pertains to WBSETCL has been considered as Rs.270.00 crores in Schedule A to the West Bengal Power Sector Reforms Transfer Scheme, 2007. The annual interest charge on these Bonds comes to Rs.2295.00 lakh and the same is admitted. West Bengal Electricity Regulatory Commission 22
Tariff Order of WBSETCL for the year 2007 2008 5.5.3 The total amount of Rs.13.17 lakh projected towards other finance charges which include an amount of Rs. 4.49 lakh towards fees and expenses for restructuring. In the absence of any clarifications as to what restructurings are contemplated, we are not allowing the same. The balance amount towards guarantee commission and bank charges totaling to Rs. 8.68 lakh is admitted. One of the objectors has found that the interest rate charged by the State Government of West Bengal is very high and has pleaded for a lowering of the interest rate. The Commission however is of its considered opinion that there is no scope to differ from the dispensations contained in the West Bengal Power Sector Reforms Transfer Scheme, 2007, on this score. 5.6 Depreciation. The amount of chargeable depreciation, computed at the rates prescribed in the Commission s Tariff Regulations, comes to Rs.8717.00 lakh and the same is admitted. 5.7 Cost of Capital payable to other Agency. The intra-state transmission system comprising of two numbers of 400 KV and three numbers of 220 KV lines terminating at Jeerat, Arambag, Gokarna, Satgachia and Durgapur respectively constructed by the West Bengal Power Development Corporation Limited (WBPDCL) along with its Bakreswar power station, forms an integral part of the transmission system being operated by WBPDCL. The annual carrying charges of the assets are found as under: Rs. in lakh (i) Interest on loan from Govt. of West Bengal 1188.00 (ii) Depreciation 1498.54 West Bengal Electricity Regulatory Commission 23
Tariff Order of WBSETCL for the year 2007 2008 (iii) Return on equity 838.76 Total 3525.30 In this regard, the paragraphs 7.1, 7.2 and 7.3 of the Commission s Tariff Order dated 26.07.2007 for WBPDCL for the year 2007-08 may be referred to. WBSETCL needs to pay this total amount to WBPDCL in twelve (12) equal monthly installments. 5.8 Fringe Benefit Taxes. The fringe benefit tax of Rs.29.00 lakh claimed by WBSETCL is admitted provisionally subject to adjustment on actual basis in the subsequent tariff revision orders. 5.9 Writing-off of Deferred Revenue Expenses. WBSETCL has proposed to write-off the preliminary formation expenses of the Company including the fees paid to the Company Law Board and consultancy fees in five annual equal installments of Rs.40.23 lakh. The Commission admits the same. 5.10 Reserve for Unforeseen Exigencies. The provision of the reserve for unforeseen exigencies @ 0.25% of the total gross value of fixed assets of Rs.230215.00 lakh works out to Rs.575.54 lakh. One of the objectors has objected to the very concept of a reserve for such contingencies. However, this is now a part of the Tariff Regulations [vide item (i) under sub-head Gross Aggregate Revenue Requirement for transmission of paragraph 3.1 of Schedule 3 pertaining to regulations 2.2.4 and 2.8.2.2(a) ibid] and this provision has to be followed. As for utilization of this fund, regulations 4.11.1 and 4.11.2 ibid lays down all about how the same is to be invested. The West Bengal Electricity Regulatory Commission 24
Tariff Order of WBSETCL for the year 2007 2008 same is allowed. WBSETCL will require to invest and utilize this amount of reserve in the manner as provided in the Commission s Tariff Regulations, 2007. 5.11 Returns 5.11.1 On the issue of returns, one of the objectors has opined against inclusion of works in progress in the equity base for the purpose of computation of the returns. The Commission has strictly followed the provisions in regulations 4.6.1.1 and 4.6.1.2 of the WBERC (Terms and Conditions of Tariff) Regulations, 2007 in working out the equity base and calculating the returns on the same. As a matter of fact, the value of the capital works-in-progress as on 31.03.2006 has not been counted for this purpose. 5.11.2 The equity capital of WBSETCL specified in the Schedule A to the West Bengal Power Sector Reforms Transfer Scheme, 2007, notified by the Government of West Bengal is for an amount of Rs.72000.00 lakh as on 31 st March 2006. The value of the capital works in progress as on that date was Rs.100800.00 lakh as per the abridged Balance Sheet in the aforesaid Schedule. The addition in the capitalized cost of assets projected to be made by WBSETCL during the financial years 2006-07 and 2007-08 are shown as under: Rs. in lakh 2006-07 16184.00 2007-08 102916.00 Total 119100.00 Less: Value of capital works-in-progress As on 31.03.2006 (-) 100800.00 Net amount 18300.00 West Bengal Electricity Regulatory Commission 25
Tariff Order of WBSETCL for the year 2007 2008 The notional additional equity deployment @ 30% of the amount of Rs.18300.00 lakh comes to Rs.5490.00 lakh. 5.11.3 The average equity base and the returns allowable to WBSETCL for the year 2007-08 works out as under: Rs. in lakh i) Equity at the beginning of the period 72000.00 ii) Addition to capitalized cost of assets 18300.00 iii) 30% of the addition to the capitalized cost of assets 5490.00 iv) Equity Base at the end of the period 77490.00 v) Average Equity Base for the period (i + iv)/2 74745.00 vi) Return @ 14% on Average Equity Base 10464.30 5.12 Income from other sources WBSETCL has projected a total amount of Rs. 373.51 lakh as income from other sources including interest from bank balances. It has been observed that it is also to get an estimated amount of another 864.26 lakh towards handling, scheduling and system operation charges from users of transmission system. The total amount of income from other sources is, thus, being considered Rs. 1237.77 lakh. West Bengal Electricity Regulatory Commission 26
Tariff Order of WBSETCL for the year 2007 2008 CHAPTER - 6 AGGREGATE REVENUE REQUIREMENT 6.1 We are now summarizing the Aggregate Revenue Requirements (ARR) of WBSETCL in the form of fixed charge to be recovered by it from the beneficiaries of the transmission system during the year 2007-08. STATEMENT OF REVENUE REQUIREMENTS Sl No Particulars As projected Rs. in lakh As admitted Rs. in lakh 1 Employees' cost 4839.03 4839.03 2 Repairs & Maintenance 1370.05 1370.05 3 Administration & General charges (a) Rent, Rates & Taxes 62.86 62.86 (b) Legal charges 19.56 19.56 (c ) Audit fees 16.50 16.50 (d) Others 1172.92 1172.92 4 Interest & Finance charges (a) On capital borrowings 10444.50 10444.50 (b) Interest on Bonds for Terminal benefits to employees 2295.00 2295.00 (c ) Other Finance charges 13.17 8.68 5 Depreciation 8717.00 8717.00 6 Cost of capital payable to other agencies 3525.30 7 Fringe benefit tax 29.00 29.00 8 Writing-off of Deferred Revenue expenses 40.23 40.23 9 Reserve for unforeseen exigencies 575.54 575.54 10 Returns 11739.00 10464.30 11 Gross Revenue required 41334.36 43580.47 12 Income from other sources (373.51) (1237.77) 13 Aggregate Revenue Requirement 40960.85 42342.70 West Bengal Electricity Regulatory Commission 27
Tariff Order of WBSETCL for the year 2007 2008 DETERMINATION OF THE RATE FOR RECOVERY OF TRANSMISSION CHARGES. CHAPTER - 7 TARIFF ORDER 7.1 The amount of revenue requirement includes a sum of Rs. 3525.30 lakh towards the cost of capital of Bakreswar Transmission system as referred in paragraph 5.7. This amount is to be paid by WBSETCL to WBPDCL in equal monthly installment. 7.2 After determination of the Aggregate Revenue Requirement (ARR) for the year 2007-08, the commission is now to fix the rate for recovery of the same from the transmission system users in accordance with the provisions of item No.6 in the Schedule-3 of the Commission s Tariff Regulations, 2007. In terms of item No.8 of the aforesaid Schedule, WBSETCL is to maintain separate function-wise accounts for transmission system and State Load Despatch Centre and provide the Commission with the data in that regard. Being the first year of its functioning as a separate and independent entity, WBSETCL could not make the desired segregation of function-wise data and as such, the fixed charges admitted by the Commission under different heads of accounts as shown in the Statement of Aggregate Revenue Requirement in the previous chapter are for all its functions together. The rate at which the amount of Aggregate Revenue will be recovered by WBSETCL from its system users will include all the three components of the transmission tariff i.e., charges for use of the transmission network, system operation charges and reactive power charges. It is, however, to mention here that WBSETCL has got no variable cost to recover from its system users besides the fixed charges as admitted by the Commission in the Statement of Aggregate Revenue Requirement. West Bengal Electricity Regulatory Commission 28
Tariff Order of WBSETCL for the year 2007-2008 7.3 As per the submissions of WBSETCL, at present WBSEDCL is the sole longterm user of its transmission network and some other agencies use the same on short term basis on casual requirements. The projected quantum of energy that has been considered to be conveyed through its system is, thus, based on the projected quantum of power purchase by WBSEDCL from all the State and Central sector generating stations as well as the sent out energy from its Hydel power stations and Purulia pumped storage project. The evacuation system of the sent out power from the referred generating stations of WBSEDCL are also connected with the transmission system of WBSETCL. 7.4 In regard to the transmission charges payable by the licensees or the open access customers, the computations are to be based on the capacity allocated to each beneficiary based on average of daily peak demand on annual basis. The average of the daily peak of the system demand has been projected as 3159.58 MW (vide data submitted in Format 1.14 prescribed in the Commission s Tariff Regulations, 2007). The Commission considers to arrive at the unit rate of recovery of transmission charges taking into account the figure of 3159.58 MW, as projected by WBSETCL. Such recoverable charges are to be expressed in Rs./MW/month for the long-term customers and in Rs./MW/day for short-term customers on the basis of MW to be served by the system. The unit rate of recovery of transmission charges from the transmission system users, thus, works out as under: i) Recoverable ARR Rs.42342.70 lakh ii) Average System Demand on the basis of average of the daily peak 3159.58 MW iii) Rate for long-term users Rs.42342.70lakh/3159.58 MWx12 = Rs.1,11,678/MW/month. West Bengal Electricity Regulatory Commission 29
Tariff Order of WBSETCL for the year 2007-2008 iv) Rate for short-term users Rs.1,11,678/- x0.25/30 v) Rate payable by short-term users in case of uncongested transmission network, shall be as under:- (a) Upto 6 Hours in a day in one block (b) More than 6 Hours and upto 12 Hours in a day in one block (c) More than 12 Hours and upto 24 Hours in a day in one block = Rs.930.65/MW/day. 1/4 th of the rate for shortterm customers. ½ of the rate for short-term customers. at full rate for short-term customers: Provided that the rates as mentioned in (v) above will not be applicable to those short-term customers who have their drawal point within the State of West Bengal and injection point outside the State. Provided also that the rate for payment of transmission charges payable by a short-term customer, where capacity has been reserved through bidding process, shall be in terms of Regulation No: 10.5 of the Commission s Open Access Regulations, 2007. 7.5 In terms of Regulation No: 8.2.1 of the Commission s Co-generation and Generation of Electricity from Renewable Sources of Energy Regulations, 2006, the transmission charges payable for open access to be availed of by such generators, shall be two-third of the rate of such charges applicable for long-term and short-term users as the case may be. 7.6 This tariff shall be applicable from the billing month of / pertaining to April 2007 and onwards. Adjustments if any shall be made in the bills for the months of October and November 2007. The transmission charges shall be recovered on monthly basis from long-term customers and the short-term customers shall pay on daily basis. West Bengal Electricity Regulatory Commission 30
Tariff Order of WBSETCL for the year 2007-2008 7.7 The realizations of the revenue from its transmission system users are supposed to meet the Aggregate Revenue Requirement (ARR) of WBSETCL. The recovery of such revenue over the concerned year on piecemeal basis, may result in under or over recovery of the total amount of fixed charges. It is, therefore, stipulated that the amount of any such under or over recovery will be dealt with suitably at the time of subsequent determination of transmission charges and rates of recovery on the basis of the audited accounts of WBSETCL. 7.8 The licensee shall present to the Commission a gist of the Order along with the names of at least four leading dailies (at least one of which shall be in English, one in Hindi and the rest in Bengali) within three working days from the date of receipt of this Order for approval of the Commission and on receipt of the approval shall publish the approved gist in those newspapers within five days from the date of receipt of the approval of the Commission. 7.9 In view of recent implementation of transmission of electricity as a separate activity in the State Power scenario, the Commission refrains from issuing any further directive in this tariff order to WBSETCL at this stage and reserves its directives in future on the basis of performance and requirement of transmission service. Sd/- Sd/- Sd/- R. P. SAMADDAR PRITITOSH RAY S. N. GHOSH MEMBER MEMBER CHAIRPERSON DATE: 26.07.2007 West Bengal Electricity Regulatory Commission 31
Corrigendum to the Tariff Order dated 26.07.2007 of the Commission in respect of West Bengal State Electricity Transmission Company Limited in TP 34 / 07-08 Annexure E to the Minutes of the 106 th meeting of the West Bengal Electricity Regulatory Commission held at 1400 hrs. on 1 st August 2007 Correction of typographical errors / apparent mistakes in the Tariff Order 26.07.2007 in respect of West Bengal State Electricity Transmission Company Limited for the year 2007-08. ****************************************************************************************** West Bengal State Electricity Transmission Company Limited: Page Nomenclature No. 29 Sl. iii) Rate for long-term users in last column Existing Description Rs. 42342.70 lakh/3159.58 MW x 12 = Rs. 1,11,678/MW/month Corrected Description Rs. 42342.70 lakh/3159.58 MW x 12 = Rs. 1,11,678/MW/month subject to adjustment as per clause 9.2 of Schedule 3 of West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2007 Sd/- Sd/- Sd/- (R. P. SAMADDAR) PRITITOSH RAY S. N. GHOSH MEMBER MEMBER CHAIRPERSON DATE: 01.08.2007