BIHAR ELECTRICITY REGULATORY COMMISSION Case 54 of 2015 Tariff Order Truing-up for FY 2014-15, Annual Performance Review (APR) for FY 2015-16, Annual Revenue Requirement (ARR) for FY 2016-17 to FY 2018-19 and Determination of Tariff for FY 2016-17 for BIHAR STATE POWER TRANSMISSION COMPANY LIMITED (BSPTCL) Issued on 21 st March, 2016 (With effect from 1 st April, 2016)
CONTENTS ORDER... 1 1. Introduction... 5 1.1 Bihar Electricity Regulatory Commission (BERC)... 5 1.2 Functions of BERC... 5 1.3 Bihar State Power Transmission Company Limited (BSPTCL)... 6 1.4 Profile of BSPTCL... 7 1.5 Commission s Orders issued earlier to BSPTCL... 7 1.6 Admission of Current Petition and Public Hearing Process... 8 1.7 Approach of this order... 9 1.8 Contents of this order... 10 2. Summary of Petition filed by BSPTCL for Truing-up for FY 2014-15, Annual Performance Review for FY 2015-16 and Annual Revenue Requirement for FY 2016-17 to FY 2018-19... 12 2.1 Summary of the petition for Truing-up for FY 2014-15, Annual Performance Review for FY 2015-16 and Aggregate Revenue Requirement (ARR) for control period FY 2016-17 to FY 2018-19.... 12 2.2 Request to the Commission... 14 3. Stakeholder s Objections / Suggestions, Petitioner s Response and Commission s Observation16 3.1 Introduction... 16 3.2 Stakeholders Objections / Suggestions, BSPTCL s Response and Commission s Observations... 16 4. Truing up for FY 2014-15... 23 4.1 Background... 23 4.2 Performance of Transmission System... 24 4.3 Capital Investment... 27 4.4 Gross Fixed Assets... 29 4.5 Depreciation... 30 4.6 Interest and Finance Charges... 33 4.7 Employee cost... 37 4.8 Repairs and Maintenance (R&M) Expenses... 39 4.9 Administration & General (A&G) Expenses... 40 4.10 Allocation of Holding Company Expenses... 41 4.11 Total O & M expenses... 42 4.12 Interest on working capital... 43 4.13 Return on Equity... 46 4.14 Income Tax/Minimum Alternate Tax (MAT)... 49 4.15 Net Prior period income... 49 4.16 Non-Tariff Income... 49 4.17 Annual Fixed Charges / Transmission ARR for FY 2014-15... 50 4.18 Revenue Gap / (Surplus) for FY 2014-15... 52 5. Performance Review of FY 2015-16... 55 5.1 Background... 55 5.2 Performance of Transmission System... 56 5.3 Capital Investment Plan... 57 5.4 Capitalisation... 65 5.5 Funding of Capital Expenditure... 67 5.6 Interest during Construction (IDC)... 70 5.7 Gross Fixed Assets... 71 5.8 Depreciation... 72 5.9 Interest on Loans... 75 5.10 Operation and Maintenance (O&M) Expenses... 78 5.10.1 Inflation Index... 78 Bihar Electricity Regulatory Commission P a g e i
5.10.2 Employee Costs... 78 5.10.3 Repairs and Maintenance (R&M) Expenses... 80 5.10.4 Administration and General (A&G) Expenses... 82 5.10.5 Allocation of Holding Company Expenses... 83 5.10.6 Summary of Operations and Maintenance (O&M) Expenses... 85 5.11 Interest on working capital... 85 5.12 Return on Equity... 87 5.13 Income Tax / Minimum Alternate Tax (MAT)... 91 5.14 Non-Tariff Income... 92 5.15 Transmission charges for FY 2015-16... 92 5.16 Revenue Gap / (Surplus) for FY 2015-16 (RE)... 94 6. Determination of Aggregate Revenue Requirement (ARR) for FY 2016-17 to FY 2018-19 and Transmission Tariff for FY 2016-17... 96 6.1 Background... 96 6.2 Existing Transmission System... 96 6.3 Performance of Transmission System... 97 6.4 Capital Investment Plan... 98 6.5 Capitalisation... 106 6.6 Funding of Capital Expenditure... 107 6.7 Interest During Construction (IDC)... 110 6.8 Gross Fixed Assets... 111 6.9 Depreciation... 112 6.10 Interest on Loans... 114 6.11 Operation and Maintenance (O&M) Expenses... 117 6.11.1 Inflation indexation... 117 6.11.2 Employee Costs... 119 6.11.3 Repairs and Maintenance (R&M) Expenses... 120 6.11.4 Administration and General (A&G) Expenses... 122 6.11.5 Allocation of Holding Company Expenses... 123 6.11.6 Summary of Operations and Maintenance (O&M) Expenses... 124 6.12 Return on Equity... 125 6.13 Income tax / Minimum Alternate Tax (MAT)... 128 6.14 Interest on working capital... 128 6.15 Non-Tariff Income... 130 6.16 Annual Fixed Cost / charges... 131 6.17 Revenue surplus approved in truing up for FY 2014-15... 132 6.18 Approved Transmission Charges for the control period of FY 2016-17 to FY 2018-19... 133 7. Compliance of Directive... 135 7.1 Background... 135 7.2 Directives issued and status of compliance... 135 7.2.1 Directive 1: Transmission Loss... 135 7.2.2 Directive 2: Separate ARR for SLDC... 136 7.2.3 Directive 3: Energy Auditing of Transmission System... 137 7.2.4 Directive 4: Scheme-wise details of capital expenditure and capitalisation... 138 Annexure-I... 139 Annexure II... 145 Bihar Electricity Regulatory Commission P a g e ii
LIST OF TABLES Table 2.1: ARR claimed in Truing-up for FY 2014-15... 12 Table 2.2: Revenue (Gap) / Surplus claimed for FY 2014-15... 13 Table 2.3: Revised ARR proposed in APR for FY 2015-16... 13 Table 2.4: Revenue (Gap)/ Surplus proposed for FY 2015-16... 13 Table 2.5 ARR projected for FY 2016-17 to FY 2018-19... 14 Table 2.6 Revenue (Gap) / Surplus projected for FY 2016-17 to FY 2018-19... 14 Table 4.1: Transmission Losses for FY 2014-15 projected by the Petitioner... 24 Table 4.3: Capital investment approved in truing up for FY 2014-15... 29 Table 4.4: Gross Fixed Assets proposed for truing up for FY 2014-15... 29 Table 4.5: Gross Fixed Assets approved in truing up for FY 2014-15... 30 Table 4.6: Depreciation proposed in truing up for FY 2014-15... 31 Table 4.7: Weighted average effective rate of depreciation for FY 2014-15... 32 Table 4.8: Depreciation approved in truing up for FY 2014-15... 33 Table 4.9: Interest on loans and average rate of interest proposed for FY 2014-15... 34 Table 4.10: Interest on loans proposed in truing up for FY 2014-15... 34 Table 4.11: Interest & finance charges approved in truing up for FY 2014-15... 37 Table 4.12: Employee Expenses proposed for FY 2014-15... 37 Table 4.13: Employee Expenses approved in truing up for FY 2014-15... 38 Table 4.14: R&M Expenses proposed for FY 2014-15... 39 Table 4.15: R&M Expenses approved in truing up for FY 2014-15... 40 Table 4.16: Administration and General Expenses proposed for FY 2014-15... 40 Table 4.17: Administration and General Expenses approved in truing up for FY 2014-15... 41 Table 4.18: Holding company expenses proposed in truing up for FY 2014-15... 42 Table 4.19: Holding company expenses approved in true up for FY 2014-15... 42 Table 4.20: Total O&M Expenses proposed in true up for FY 2014-15... 42 Table 4.21: Total O&M Expenses approved in truing up for FY 2014-15... 43 Table 4.22: Norms for working capital requirement... 43 Table 4.23: Interest on working capital projected for FY 2014-15... 44 Table 4.24: Interest on working capital approved in truing up for FY 2014-15... 45 Table 4.25: Return on Equity claimed in truing up for FY 2014-15... 46 Table 4.26: Return on Equity approved in truing up for FY 2014-15... 48 Table 4.27: Non-tariff income claimed in truing up for FY 2014-15... 49 Table 4.28: Non tariff income considered in truing up for FY 2014-15... 50 Table 4.29: Annual Fixed Charges proposed in truing up for FY 2014-15... 50 Table 4.30: Annual Fixed Charges approved in truing up for FY 2014-15... 52 Table 4.31: Revenue Gap projected in true up for FY 2014-15... 53 Table 4.32: Revenue Gap approved in truing up for FY 2014-15... 53 Table 5.1: Transmission loss for FY 2014-15 and FY 2015-16 projected by BSPTCL... 56 Table 5.2: Revised Transmission Loss Trajectory Projected by the Petitioner... 57 Table 5.3: Revised capital investment plan proposed by the Petitioner... 64 Table 5.4: Capital Investment considered by the Commission... 65 Table 5.5: Year-wise Capitalisation proposed by the Petitioner... 65 Table 5.6: Capitalisation of capital expenditure considered by the Commission for FY 2015-16 and for MYT period from FY 2016-17 to FY 2018-19... 67 Bihar Electricity Regulatory Commission P a g e iii
Table 5.7: Funding of Capital expenditure proposed by the Petitioner:... 67 Table 5.8: Scheme wise funding of capital expenditure considered by the Commission... 68 Table 5.9: Scheme wise funding of Capital expenditure considered by the Commission... 69 Table 5.10: Scheme wise funding of capital expenditure considered by the Commission for FY 2015-16 (RE)... 69 Table 5.11: Projected IDC for FY 2015-16... 70 Table 5.12: Approved IDC for FY 2015-16... 71 Table 5.13: Gross Fixed Assets projected for FY 2015-16... 71 Table 5.14: Gross Fixed Assets approved in review for FY 2015-16... 72 Table 5.15: Projected Depreciation for FY 2015-16... 72 Table 5.16: Approved Depreciation for FY 2015-16... 74 Table 5.17: Projected Interest on Loan for FY 2015-16... 75 Table 5.18: Interest & finance charges approved for FY 2015-16... 77 Table 5.19: Weightage of indexation/inflation factor... 78 Table 5.20: Employee Cost for FY 2015-16 (RE) projected by the Petitioner... 79 Table 5.21: Approved Employee Cost for FY 2015-16... 80 Table 5.22: Projected Repairs and Maintenance expenses for FY 2015-16... 81 Table 5.23: Approved R&M expenses for FY 2015-16... 82 Table 5.24: Proposed Administration and General Expenses for FY 2015-16... 82 Table 5.25: Approved Administration & General Expenses for FY 2015-16... 83 Table 5.26: Expenses of Holding Company projected for FY 2015-16... 84 Table 5.27: Allocation of Expenses of Holding Company approved for FY 2015-16... 85 Table 5.28: Total O&M cost approved for FY 2015-16 (RE)... 85 Table 5.29: Norms for working capital requirement... 86 Table 5.30: Projected Interest on working capital for FY 2015-16... 86 Table 5.31: Approved Interest on working capital for FY 2015-16... 87 Table 5.32: Projected Return on Equity for FY 2015-16... 88 Table 5.33: Approved Return on Equity for FY 2015-16... 91 Table 5.34: Projected non tariff income for FY 2015-16... 92 Table 5.35: Non tariff income approved for FY 2015-16... 92 Table 5.36: Projected Annual Fixed Charges/ (ARR) for FY 2015-16... 93 Table 5.37: Approved Annual Fixed Charges / ARR for FY 2015-16... 94 Table 5.38: Projected revenue Gap / (Surplus) for FY 2015-16... 94 Table 5.39: Approved revenue gap / (surplus) for FY 2015-16... 95 Table 6.1: Power Transformer Capacity (in MVA)... 96 Table 6.2: Transmission Line Length (in Ckt Kms)... 96 Table 6.3: Transmission loss trajectory projected by BSPTCL... 97 Table 6.4: Revised capital investment plan proposed by the Petitioner... 104 Table 6.5: Capital Investment considered by the Commission... 106 Table 6.6: Year-wise Capitalisation proposed by the Petitioner... 106 Table 6.7 : Capitalization considered from FY 2015-16 to FY 2020-21... 107 Table 6.8: Capitalisation of capital expenditure considered for control period of FY 2016-17 to FY 2018-19... 107 Table 6.9: Funding of Capital expenditure proposed... 108 Table 6.10: Scheme wise funding of capital expenditure considered... 109 Table 6.11: Summary of funding of Capital expenditure considered... 109 Bihar Electricity Regulatory Commission P a g e iv
Table 6.12: Capital expenditure, capitalisation and funding of capitalisation approved for control period of FY 2016-17 to FY 2018-19... 110 Table 6.13: Projected IDC for MYT control period... 110 Table 6.14: Approved IDC for control period of FY 2016-17 to FY 2018-19... 111 Table 6.15: Gross Fixed Assets projected for control period of FY 2016-17 to FY 2018-19... 111 Table 6.16: Gross Fixed Assets approved for MYT control period... 112 Table 6.17: Projected Depreciation for MYT control period... 112 Table 6.18: Depreciation approved for control period of FY 2016-17 to FY 2018-19... 113 Table 6.19: Projected Computation of Interest on Loan for MYT control period... 114 Table 6.20: Interest & Finance charges approved for the control period of FY 2016-17 to FY 2018-19... 116 Table 6.21: Weightage of indexation/inflation factor... 118 Table 6.22: Projected Employee Cost for MYT control period... 119 Table 6.23: Approved Employee Cost for the control period of FY 2016-17 to FY 2018-19... 120 Table 6.24: Projected R&M expenses for MYT control period... 121 Table 6.25: Approved R&M expenses for the control period of FY 2016-17 to FY 2018-19... 121 Table 6.26: Projected Administration and General Expenses for MYT control period... 122 Table 6.27: Approved Administration & General Expenses for the control period of FY 2016-17 to FY 2018-19... 122 Table 6.28: Expenses of Holding Company projected for MYT control period... 124 Table 6.29: Allocation of Holding Company Expenses approved for the control period of FY 2016-17 to FY 2018-19... 124 Table 6.30: Total O&M expenses projected for MYT control period... 124 Table 6.31: Total O&M cost approved for the control period of FY 2016-17 to FY 2018-19... 125 Table 6.32: Projected Return on Equity for MYT control period... 125 Table 6.33: Approved Return on Equity for the control period of FY 2016-17 to FY 2018-19... 127 Table 6.34: MAT projected for MYT control period... 128 Table 6.35: Norms for working capital requirement... 128 Table 6.36: Projected Interest on working capital for MYT control period... 129 Table 6.37: Approved Interest on working capital for the control period of FY 2016-17 to FY 2018-19... 130 Table 6.38: Projected non tariff income for MYT control period... 130 Table 6.39: Non tariff income approved for the control period of FY 2016-17 to FY 2018-19... 130 Table 6.40: Projected Annual Fixed charges / ARR for MYT control period... 131 Table 6.41: Annual Fixed charges /ARR approved for the control period of FY 2016-17 to FY 2018-19... 132 Table 6.42: Summary of trued up Approved Revenue Surplus of FY 2014-15 to be carried forwards to ARR of FY 2016-17... 133 Table 6.43: Energy to be handled by BSPTCL during FY 2016-17 Considered by the Commission (MU)... 133 Table 6.44: Approved Transmission charges for FY 2016-17... 134 Bihar Electricity Regulatory Commission P a g e v
ABBREVIATIONS A&G Administration and General Expenses ACT Electricity Act. 2003 ARR Aggregate Revenue Requirement BERC Bihar Electricity Regulatory Commission BSHPS Bihar State Hydro Power Station BSEB Bihar State Electricity Board BSPHCL Bihar State Power (Holding) Company Limited BSPTCL Bihar State Power Transmission Corporation Limited BTPS Barauni Thermal Power Station CAGR Compounded Annual Growth Rate CAPEX Capital Expenditure CEA Central Electricity Authority CERC Central Electricity Regulatory Commission CGS Central Generating Station CTU Central Transmission Utility CWIP Capital Work in Progress DISCOM Distribution Company FC Fixed Charges FPPCA Fuel and Power Purchase Cost Adjustment FY Financial Year GFA Gross Fixed Asset KBUNL Kanti Bijlee Utpadan Nigam Limited KVA Kilo Volt Ampere KVAH Kilo Volt Ampere Hour KWH Kilo Watt Hour MoP Ministry of Power MU Million Unit MVA Mega Volt Ampere MW Mega Watt MYT Multi-Year Tariff NBPDCL North Bihar Power Distribution Company Limited NFA Net Fixed Asset NHPC National Hydro Power Corporation NTPC National Thermal Power Corporation O&M Operation and Maintenance PLF Plant Load Factor R&M Repair and Maintenance RE Revised Estimates RoE Return on Equity SAC State Advisory Committee SBPDCL South Bihar Power Distribution Company Limited SERC State Electricity Regulatory Commission TPS Thermal Power Station Bihar Electricity Regulatory Commission P a g e vi
In the matter of: Bihar Electricity Regulatory Commission Ground floor, Vidyut Bhawan II Jawahar Lal Nehru Marg, Patna 800021 Case No: 54 of 2015 Truing up for Financial year 2014-15, Annual Performance Review (APR) for FY 2015-16 and determination of Annual Revenue Requirement (ARR) for the Control Period FY 2016-17 to 2018-19 and Transmission tariff for 2016-17 for Bihar State Power Transmission Company Limited. AND Bihar State Power Transmission Company Limited Petitioner Present: Sri. S.K. Negi - Chairman Sri. S. C. Jha - Member Sri. Rajeev Amit - Member ORDER (Passed on 21 st of March 2016) The erstwhile Bihar State Electricity Board (BSEB) has been restructured on functional basis with effect from 1 st November, 2012 into five successor companies under Bihar State Electricity Reforms Transfer Scheme, 2012 vide notification no. 17 dated 30.10.2012 issued by Energy Department, Government of Bihar, namely; 1. Bihar State Power Holding Company Limited (BSPHCL) 2. Bihar State Power Generation Company Limited (BSPGCL) 3. Bihar State Power Transmission Company Limited (BSPTCL) 4. North Bihar Power Distribution Company Limited (NBPDCL) 5. South Bihar Power Distribution Company Limited (SBPDCL) Bihar Electricity Regulatory Commission P a g e 1
BSPHCL had earlier filed the Multi Year Tariff (MYT) petition for control period of three years i.e. for FY 2013-14 to FY 2015-16 on behalf of the successor Transmission Company on 14 th November, 2012. The Commission approved the Multi Year ARR for the years FY 2013-14 to 2015-16 for BSPTCL, in the order dated 15 th March, 2013. BSPTCL had filed the petition for Annual Performance Review (APR), for FY 2013-14 and redetermination of ARR and Transmission tariff for FY 2014-15 on 14 th November 2013. The Commission issued the order dated 28 th February 2014, Reviewing the ARR for FY 2013-14, re-determining the Annual Revenue Requirement (ARR) and Transmission Tariff for FY 2014-15. BSPTCL had also filed the petition for Truing up for FY 2013-14, Annual Performance Review for FY 2014-15 and re-determination of Annual Revenue Requirement for FY 2015-16 on 01-12.2014. The Commission issued the Tariff Order on 12 th March, 2015 truing up ARR for FY 2013-14, Reviewing ARR for FY 2014-15 and re-determining Annual Revenue Requirement and Transmission Tariff for FY 2015-16 for transmission of electricity by Bihar State Power Transmission Company Limited (BSPTCL) in the State of Bihar. Tariff Regulations specify that the Transmission Companies shall file Annual Revenue Requirement (ARR) and the Tariff Petition complete in all respects along- with requisite fee as specified in the BERC (Fees, Fines and charges) Regulations, 2005 on or before 15 th November of the preceding year. Accordingly, the BSPTCL filed the present petition for Truing up for FY 2014-15, review of ARR of FY 2015-16 and determination of ARR for control period FY 2016-17 to FY 2018-19 and Transmission tariff for FY 2016-17 on 28 th December, 2015. Regulation 22(1) of the Tariff Regulations, 2007 provides that the Commission shall undertake a review along with next Tariff Order, of the expenses and revenue approved by the Commission in the current year s Tariff order. Regulation 22(2) of Tariff Regulations, 2007 provide that the Commission shall undertake, after audited accounts of the year are made available, truing-up of the expenses and revenue approved in the review of previous year tariff order. Bihar Electricity Regulatory Commission P a g e 2
In e xercise of the powers vested in Bihar Electricity Regulatory commission under Section 62(1)(d) read with Section 64 (3) and Section 64(3)(a) of the Electricity Act, 2003 and Bihar Electricity Regulatory Commission (Terms and conditions for Determination of Tariff) Regulations 2007 (hereinafter referred to as Tariff Regulations ) and other enabling provisions in this behalf, the Commission has issued this order, Truing up ARR for FY 2014-15, Reviewing ARR for FY 2015-16, determining the ARR for control period FY 2016-17 to FY 2018-19 and Transmission Tariff for transmission of electricity by Bihar State Power Transmission Company Limited to NBPDCL and SBPDCL. As per Regulation 6(5) of the Tariff Regulations and for providing adequate opportunities to all stakeholders and general public for making suggestions/objections on the petitions as mandated under section 64(3) of the Electricity Act, 2003, the Commission directed BSPTCL to publish the petition in abridged form as public notice in newspapers having wide circulation in the State inviting suggestions/objections on the tariff petition. Accordingly BSPTCL published the tariff petition in the abridged form as public notice in various newspapers. The petition was also placed on the BSPTCL s website. The last date of submission of suggestions/objections was fixed as 07.02.2016. The Commission, in order to ensure transparency in the process of dealing with the above petition and for providing proper opportunity to all stakeholders and general public for making suggestions/objections on the tariff petition, decided to hold the public hearing in its office at Patna and accordingly the Commission held public hearing in the Court Room, BERC office at Patna 08.02.2016. The above petition submitted by BSPTCL was also placed before the State Advisory Committee on 15.02.2016 and the various aspects were discussed by the Committee. The Commission took the advice of the State Advisory Committee on the petition of BSPTCL during the meeting of the Committee. The Commission took into consideration the facts presented by the BSPTCL in its petition and subsequent various filings, the suggestion/objections, received from stakeholders, consumer organizations, general public and State Advisory Committee and response of the Bihar State Power Transmission Company Limited. Bihar Electricity Regulatory Commission P a g e 3
The Commission taking into consideration all the facts which came up during the public hearing and meeting of the State Advisory Committee, has trued up ARR for FY 2014-15, reviewed the ARR for FY 2015-16 and determined the ARR for the control period FY 2016-17 to FY 2018-19 and Transmission tariff for FY 2016-17. BSPTCL has estimated the Annual Revenue Requirement (ARR) of Rs. 226.00 Crore in the true up for FY 2014-15 against which the Commission has approved Rs. 209.72 Crore. BSPTCL has projected ARR of Rs. 392.53 Crore in the review for FY 2015-16 (RE) against which the Commission has approved Rs. 254.64 Crore. BSPTCL has projected the annual revenue requirement of Rs. 532.33 Crore for FY 2016-17 against which the Commission has approved Rs.277.84 Crore. The Commission has approved the transmission charges of 10.40 paisa/kwh. This order shall be effective from 1 st April 2016 and shall remain till 31 st March 2017 or till the next tariff order of the commission. This order will be placed on the website of the Commission and copies will be sent to BSPHCL, BSPGCL, BSPTCL, NBPDCL, SBPDCL, Department of Energy of Government of Bihar, Central Electricity Regulatory Commission, Central Electricity Authority and all State /Joint Electricity Regulatory Commissions. Sd/- Rajeev Amit Member Sd/- S. C. Jha Member Sd/- S.K. Negi Chairman Bihar Electricity Regulatory Commission P a g e 4
1. Introduction 1.1 Bihar Electricity Regulatory Commission (BERC) The Bihar Electricity Regulatory Commission (hereinafter referred to as Commission or BERC ) was constituted by the Government of Bihar under Section 17 of the Electricity Regulatory Commission Act, 1998 vide Government of Bihar notification 1284 dated 15 th April 2002. The Electricity Regulatory Commission Act, 1998 along with Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948 was repealed by Section 185 (1) of the Electricity Act, 2003 (hereinafter referred to as the Act ). The first proviso of Section 82 (1) has ensured continuity of the Bihar Electricity Regulatory Commission by laying down that the State Electricity Regulatory Commission established by the State Government under Section 17 of Electricity Regulatory Commission Act, 1998 and functioning as such, immediately before the appointed date, shall be the State Electricity Regulatory Commission for the purpose of the Act. 1.2 Functions of BERC As per Section 86 of the Electricity Act 2003, the State Commission shall discharge the following functions, namely: a) determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State. Provided that where open access has been permitted to a category of consumers under section 42, the State Commission shall determine only the wheeling charges and surcharge thereon, if any, for the said category of consumers; b) regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State; c) facilitate intra-state transmission and wheeling of electricity; d) issue licenses to persons seeking to act as transmission licensees, distribution Bihar Electricity Regulatory Commission P a g e 5
licensees and electricity traders with respect to their operations within the State; e) promote co-generation and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee; f) adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration; g) levy fee for the purposes of this Act; h) specify State Grid Code consistent with the Indian Electricity Grid Code specified with regard to grid standards; i) specify or enforce standards with respect to quality, continuity and reliability of service by licensees; j) fix the trading margin in the intra-state trading of electricity, if considered, necessary; and k) discharge such other functions as may be assigned to it under this Act. 1.3 Bihar State Power Transmission Company Limited (BSPTCL) The Government of Bihar under the provision of Bihar Electricity Reforms Transfer Scheme 2012 notified vide Notification 17 dated 30.10.2012 of the Energy Department, Govt. of Bihar restructured the Bihar State Electricity Board with effect from 1 st November, 2012. The Generation, Transmission and Distribution Businesses of the erstwhile Bihar State Electricity Board were transferred to four successor companies with one Holding Company as listed below: 1) Bihar State Power Holding Company Limited (BSPHCL) 2) Bihar State Power Generation Company Limited (BSPGCL) 3) Bihar State Power Transmission Company Limited (BSPTCL) 4) North Bihar Power Distribution Company Limited (NBPDCL) and 5) South Bihar Power Distribution Company Limited (SBPDCL) The Government of Bihar vide notification dated 30 th October 2012, notified the Bihar Electricity Regulatory Commission P a g e 6
provisional opening assets and liabilities of the transferee companies based on the audited account of erstwhile BSEB as on 1 st April, 2011. The value of assets and liabilities stand transferred from the erstwhile Bihar State Electricity Board to the transferee companies, including the Bihar State Transmission Company Limited. Assets and liabilities (gross block, loans and equity), as on the date mentioned in the notification, have been considered by the Commission in line with the Financial Restructuring Plan (FRP) as approved by the Government of Bihar. 1.4 Profile of BSPTCL BSPTCL is a company registered under the provision of Companies Act 1956 and is a fully owned subsidiary company of BSPHCL BSPTCL owns and operates the transmission system above 33kV i.e at 132kV, 220kV and 400kV system in Bihar state. The existing transmission system as on October, 2015 is as given below: Voltage of Substations Transformers capacity (MVA) 1 400 kv -- - 75 2 220 kv 11 4230 1784 3 132 kv 97 7330 6758 1.5 Commission s Orders issued earlier to BSPTCL Length of Lines (CKM) BSPHCL had filed the Multi Year Tariff (MYT) petition on behalf of BSPTCL, BSPGCL and combinedly for SBPDCL & NBPDCL for determination of Annual Revenue Requirement (ARR) for the control period of three years of FY 2013-14 to FY 2015-16 on 12 th November, 2012. The Commission issued the Tariff Order on 15 th March, 2013 approving Annual Revenue Requirement for the control period FY 2013-14 to FY 2015-16 for BSPTCL, BSPGCL and for SBPDCL & NBPDCL together and also determined generation tariff, transmission tariff and retail supply tariff for FY 2013-14 effective from 1 st April, 2013. BSPTCL had filed the petition for Annual Performance Review (APR) for FY 2013-14, revised Annual Revenue Requirement for FY 2014-15 and determination of Transmission Charges for FY 2014-15 on 14 th November, 2013. The Commission Bihar Electricity Regulatory Commission P a g e 7
issued the Order on 28 th February 2014 for approval of APR for FY 2013-14, determination of revised ARR for FY 2014-15 and Transmission Charges for FY 2014-15 effective from 1 st April, 2014. BSPTCL filed the petition for true up of FY 2013-14, APR for FY 2014-15, revised ARR for FY 2015-16 and determination of Transmission Charges for FY 2015-16 on 1 st December, 2014 and the Commission issued the order on 12 th March, 2015 for approval of true up for FY 2013-14, review for FY 2014-15, revised ARR for FY 2015-16 and also determined Transmission Charges for FY 2015-16 effective from 1 st April, 2015. 1.6 Admission of Current Petition and Public Hearing Process BSPTCL has filed the present MYT petition on 28 th December, 2015 for Truing-up for FY 2014-15, Annual Performance Review (APR) for FY 2015-16 and for approval of Annual Revenue Requirement (ARR) for the control period FY 2016-17 to FY 2018-19 and determination of Transmission Charges for FY 2016-17 under Section 62 of Electricity Act 2003 read with Bihar Electricity Commission (Terms and Conditions for Determination of Tariff) Regulations, 2007. On preliminary verification of the petition, the Commission has admitted the petition as Case 54 of 2015. In accordance with section 64 of the Electricity Act, 2003 and sub clause 6(5) of BERC (Terms and Conditions of Determination of Tariff) Regulations, 2007, the Commission directed the BSPTCL to publish the petition in the abridged form in at least two daily newspapers, one in English and the other in Hindi, having wide circulation in the State inviting objections and suggestions from its stakeholders on the ARR and Tariff Petition filed by it. BSPTCL was also directed to publish the schedule for Public Hearings along with the public notice inviting objections/suggestions. The public notices were published in the following newspapers as given below: No Name of the Date of First Language News Paper Publication 1 Hindustan Hindi 22.01.2016 2 Times of India English 22.01.2016 Bihar Electricity Regulatory Commission P a g e 8
The tariff petition was also placed on the website of BSPTCL for inviting objections and suggestions on the petition and copies of the petition along with Annexures were also made available for sale in the office of the Chief Engineer (Transmission), BSPTCL. The interested parties/stakeholders were asked to file their objections/ suggestions on the Petition on or before 05.02.2016. The commission also uploaded the Petition on its website. The Commission has received one (1) written objections/suggestions from M/s. Bihar Industries Association, Patna. The Commission directed the Petitioner to submit the replies/response to the suggestions/ objections to the Commission vide Letter BERC/Case 54/2015-256 dated 9 th February, 2016. The proposal of BSPTCL was also placed before the State Advisory Committee (SAC) in its meeting held on 15 th February, 2016 and various aspects of the petition was discussed by the Committee. The Commission took the advice of the State Advisory Committee on the petition filed by BSPTCL during the meeting of the Committee. The minutes of the meeting are given in Annexure-I. The public hearing was conducted as scheduled in the Court Room of BERC on 8 th February, 2016. A note on the main issues raised by the objectors in the written submissions and also in the public hearing in respect of the petitions, along with the response of BSPTCL and the Commission s views on the response, are given in Chapter-3. 1.7 Approach of this order The BERC (Terms and Conditions for Determination of Tariff) Regulations, 2007 provides for truing up of previous year (FY 2014-15), Review of current year (FY 2015-16) and for determination of ARR for the control period FY 2016-17 to FY 2018-19 and Transmission Charges for ensuring year i.e. FY 2016-17 The BSPTCL has now approached the Commission with the present petition for Truing-up for FY 2014-15, for Performance Review for FY 2015-16, Annual Revenue Requirement for FY 2016-17 to FY 2018-19 and determination of Transmission Bihar Electricity Regulatory Commission P a g e 9
Charges for FY 2016-17. The Commission has examined the petition and observed that certain additional data/information and clarifications are required for taking up detailed analysis of the Petition. The Commission directed the petitioner to submit the additional data/ information and clarifications in the following references: 1. Letter Case 54/2015-39 dated 08.01.2016. 2. Letter BERC/Tariff/2016-17/83 dated 15.01.2016. 3. Letter Case 54/2015-176 dated 21.01.2016. 4. Letter Case 54/2015-177 dated 21.01.2016. 5. Letter Case 54/2015-240 dated 04.02.2016. The Petitioner has submitted additional information/data/clarifications in the following Letter No s: 1. Letter Nil dated 21.01.2016. 2. Letter 20 dated 25.01.2016. 3. Letter 23 dated 25.01.2016. 4. Letter 42 dated 11.02.2016. 5. Letter 58 dated 17.02.2016 The Commission has undertaken Truing-up for FY 2014-15, Annual Performance Review (APR) for FY 2015-16 and determination of Annual Revenue Requirement (ARR) for the control period FY 2016-17 to FY 2018-19 and Transmission Charges for FY 2016-17 based on the BERC (Terms and Conditions for Determination of Tariff) Regulations, 2007. 1.8 Contents of this order The order is divided into Seven (7) chapters for BSPTCL as detailed below: 1. The First Chapter provides a background of BSPTCL, Commission s Orders in earlier years, the Petition, details of public hearing process, and the approach adopted for this order. 2. The Second Chapter contains a summary of Tariff petition of BSPTCL. 3. The Third Chapter provides a brief account of the public hearing process, Bihar Electricity Regulatory Commission P a g e 10
including the objections raised by stakeholders, Petitioner s response and Commission s views on the same. 4. The Fourth Chapter deals with the Truing-up for FY 2014-15 filed by BSPTCL. 5. The Fifth Chapter deals with the Annual Performance Review for FY 2015-16 filed by BSPTCL. 6. The Sixth Chapter deals with the Annual Revenue Requirement for the control period FY 2016-17 to FY 2018-19 and Transmission Charges for FY 2016-17. 7. The Seventh Chapter deals with the Compliance of Directives issued in tariff order for FY 2015-16. Bihar Electricity Regulatory Commission P a g e 11
2. Summary of Petition filed by BSPTCL for Truing-up for FY 2014-15, Annual Performance Review for FY 2015-16 and Annual Revenue Requirement for FY 2016-17 to FY 2018-19 2.1 Summary of the petition for Truing-up for FY 2014-15, Annual Performance Review for FY 2015-16 and Aggregate Revenue Requirement (ARR) for control period FY 2016-17 to FY 2018-19. The summary of Truing up for FY 2014-15, Annual Performance Review for FY 2015-16 and Aggregate Revenue Requirement (ARR) for control period FY 2016-17 to FY 2018-19 are as given in Tables below: Table 2.1: ARR claimed in Truing-up for FY 2014-15 FY 2014-15 Approved in Approved in Claimed MYT Order Tariff Order in dated dated True up 15.03.2013 12.03.2015 1 O & M Expenses 107.05 125.24 141.52 A Employee expenses 91.66 83.96 93.35 B R&M expenses 10.03 28.81 36.51 C A&G expenses 5.36 6.70 8.47 D Holding Company Expenses allocated - 7.54 3.19 Less: O&M Exp Capitalized 1.78-2 Depreciation 60.25 37.66 59.01 3 Interest & Finance charges 52.11 23.89 18.53 4 Interest on Working Capital 10.63 9.27 8.42 5 Return on equity 32.90 41.19 16.59 6 MAT 3.32 7 Gross Annual Revenue Requirement 262.93 237.25 247.39 8 Less: Non Tariff Income 0.61 30.90 21.39 9 Net Revenue Requirement 262.32 206.35 226.00 Bihar Electricity Regulatory Commission P a g e 12
Table 2.2: Revenue (Gap) / Surplus claimed for FY 2014-15 1 2 3 Aggregate Transmission Charges Less: Earlier Approved Annual Transmission Charges for the year Revenue (Gap)/Surplus for the year Approved in MYT Order dated 15.03.2013 FY 2014-15 Approved in by BERC Order dated 12.03.2015 Proposed for Review (RE) 262.32 206.35 226.00 262.32 262.32 206.35 55.97 (19.65) Table 2.3: Revised ARR proposed in APR for FY 2015-16 Approved in MYT Order Dated 15.03.2013 Approved In Order Dated 12.03.2015 Proposed for Review (RE) 1 O&M expenses 130.11 132.21 177.25 2 Employee Cost 116.97 90.88 106.59 3 R&M expenses 10.80 31.19 42.45 4 A&G expenses 6.02 7.25 24.21 5 Holding company 0.00 4.82 4.00 6 Less: O&M expenses 3.68 1.93-7 Interest & Finance 61.28 48.88 56.96 8 Interest on working 13.02 11.77 15.52 9 Depreciation 67.58 61.83 98.55 10 Return on Equity 32.90 62.20 67.15 11 Minimum Alternate 10.90 12 Total Fixed Cost / ARR 304.89 316.90 426.33 13 Less: Non tariff 0.73 33.99 33.80 14 Net Fixed Cost/ ARR 304.16 282.91 392.53 Table 2.4: Revenue (Gap)/ Surplus proposed for FY 2015-16 Approved in MYT Order Dated 15.03.2013 FY 2014-15 Approved in Order Dated 12.03.2015 Proposed for Review (RE) 1 Aggregate Transmission Charges 304.16 282.91 392.53 2 Less: Approved Annual Transmission Charges 304.16 304.16 282.91 3 Revenue (Gap)/Surplus for the year 0.00 21.25 (109.62) Bihar Electricity Regulatory Commission P a g e 13
Table 2.5 ARR projected for FY 2016-17 to FY 2018-19 Projected for Projected for Projected for FY 2016-17 FY 2017-18 FY 2018-19 1 O&M expenses 200.54 230.42 262.60 2 Employee Cost 113.48 122.69 134.02 3 R&M expenses 52.86 71.16 89.45 4 A&G expenses 29.20 31.57 34.13 5 Holding company 5.00 5.00 5.00 6 Less: O&M expenses - - - 7 Interest & Finance 80.63 117.04 137.30 8 Interest on working 19.75 27.16 35.26 9 Depreciation 144.89 203.74 255.38 10 Return on Equity 103.78 142.63 169.48 11 Minimum Alternate 18.23 26.00 31.38 12 Total Fixed Cost / ARR 567.82 746.99 891.40 13 Less: Non tariff 35.49 37.26 39.13 14 Net Fixed Cost/ ARR 532.33 709.73 852.27 Table 2.6 Revenue (Gap) / Surplus projected for FY 2016-17 to FY 2018-19 Projected for Projected for Projected for FY 2016-17 FY 2017-18 FY 2018-19 1 Aggregate Revenue Requirement 532.33 709.73 852.27 2 Less: Approved Annual Transmission Charges *** *** *** 3 Revenue (Gap)/Surplus 532.33 709.73 852.27 2.2 Request to the Commission BSPTCL has requested the Commission to: a) Admit this petition; b) Examine the proposal submitted by the Petitioner in the petition for a favourable dispensation; c) Pass suitable orders with respect to the True-up for FY 2014-15 for Rs. 226 Crores, APR for FY 2015-16 for Rs. 392.53 Crores and ARR for FY 2016-17 for Rs. 532.33 Crores. d) Approve the transmission charges as per the proposal and allow relaxation in tariff norms wherever sought for; e) Pass separate order for the Petitioner against the present petition; f) Permit to propose suitable changes to the respective ARRs, prior to the final Bihar Electricity Regulatory Commission P a g e 14
approval by the Hon ble Commission. g) Condone delay in filing petition for determination of ARR for FY 2016-17 and any inadvertent omissions/errors/short comings and permit BSPTCL to add/change/ modify/alter this filing and make further submissions as may be required at a future date. h) Pass such Order as the Commission may deem fit and appropriate keeping in view the facts and circumstances of the case. Bihar Electricity Regulatory Commission P a g e 15
3. Stakeholder s Objections / Suggestions, Petitioner s Response and Commission s Observation 3.1 Introduction In response to the public notice inviting objections/suggestions of the stakeholders on the Tariff petition filed by BSPTCL, one (1) written objection has been filed by M/s. Bihar Industries Association, Patna vide their letter dated 6 th February, 2016. The Public Hearing as scheduled was held in the Court Room, BERC office, Patna on 8 th February, 2016 wherein the representative of M/s. Bihar Industries Association, Patna has put forth their comments and suggestions before the Commission in the presence of the Petitioner, BSPTCL. The Commission has examined the issues and concerns voiced by the representative of M/s Bihar Industries Association, Patna in their written comments as well as those made in the public hearing and also the response of the Petitioner thereon. The comments/suggestions submitted by the stakeholder in response to the ARR petition, the replies given by the Petitioner and the views of the Commission have been summarized under various sub-heads as given below: 3.2 Stakeholders Objections / Suggestions, BSPTCL s Response and Commission s Observations Issue 1: Annexure to the tariff petition The annexure stated to have been enclosed to the tariff petition are not made available on the website of the licensee or the Commission. Petitioner s submission: The tariff petition submitted to the Commission by the Petitioner includes annexure also. BSPTCL has also requested through public notice to obtain the hard copy of the tariff petition by hand from the Chief Engineer Transmission (O&M). Commission s Observation: The Commission has noted the objection and response of the Petitioner. However, the Commission has considered the data furnished in the Annexure after prudence check. Bihar Electricity Regulatory Commission P a g e 16
Issue 2: Transmission loss The Commission in the Tariff Order for FY 2013-14 had observed that: Further from the audited annual accounts for FY 2013-14 (Statement-9), the Commission noted that transmission losses during FY 2012-13 was 4.07%. With huge capital investment plan under progress, the petitioner could nave reduced the transmission loss by 0.05% and achieved the approved loss trajectory of 4.02% for FY 2013-14. The Commission do not consider any basis/justification for revising the transmission loss trajectory approved for FY 2013-14 in the tariff order dated 15 th March 2013. While approving the above loss level, the Commission has set target for FY 2014-15 at 3.97% and for FY 2015-16 at 3.92%. As per the Petitioner statement itself, the BSPTCL has taken up the work of improvement in the interstate transmission infrastructure including creation of new grid substation. Therefore, the transmission loss in FY 2014-15 should have been less than 4.02% transmission loss as per audited annual accounts. In view of the above, it would not be proper for the Commission to allow more transmission loss in FY 2014-15 than FY 2013-14. It is relevant also to note that there is no chance of leakage of energy in the transmission system by the consumers. Petitioner s submission: The Commission approved the transmission loss at 4.02% in truing up for FY 2013-14 and fixed the transmission loss trajectory at 3.97% for FY 2014-15 and at 3.92% for FY 2015-16 in the Tariff order dated 12 th March 2015. The actual transmission loss is at 5.11% in FY 2014-15 as per the audited accounts. BSPTCL has taken various measures for augmentation and R&M of the existing transmission assets which are more prone to loss due to ageing conductors/equipments and the effect may be apparent in the coming two-three years. Therefore, request of BSPTCL to approve transmission loss at 5.11% for FY 2014-15 is based on the Audit Report. Bihar Electricity Regulatory Commission P a g e 17
Commission s Observation: The Commission has considered the transmission loss in truing-up for FY 2014-15 at 3.97% as approved in the Tariff Order for FY 2014-15. Issue 3: Gross Fixed Assets / Depreciation The value of opening GFA has been considered including value of land for computation of depreciation. Details may be obtained from BSPTCL for new assets created, source of funding, etc. The value of GFA has been increased and the rate of depreciation has been decreased so that the depreciation on the assets created through grants may be minimized. The Commission may allow justified depreciation claim as done during the truing up of FY 2013-14. Petitioner s submission: The opening GFA as on 1 st April 2014 has been considered as per audited balance sheet and depreciation after deduction of value of land has been claimed in truing up for FY 2014-15. As per Accounting Standard 12 (AS 12), the Grants should be recognized in the Profit and Loss statement in the proportions in which depreciation on those assets is charged. Relevant extract of AS-12 is reproduced for reference: Government grants related to specific fixed assets should be presented in the balance sheet by showing the grant as a deduction from the gross value of the assets concerned in arriving at their book value. Where the grant related to a specific fixed asset equals the whole, or virtually the whole of the cost of the asset, the asset should be shown in the balance sheet at a nominal value. Alternative, government grants related to depreciable fixed assets may be treated as deferred income which should be recognized in the profit and loss statement on a systematic and rational basis over the useful life of the asset i.e. such grants should be allocated to income overt the periods and in the proportions in which depreciation on those assets is charged. Grants related to non-depreciable assets should be credited to capital reserve under this method. However, f a grant related to a non-depreciable asset requires the fulfillment of certain obligations, the grant should be credited to income over the same period over which the cost of meeting such obligations is charged to Bihar Electricity Regulatory Commission P a g e 18
income. The deferred income balance should be separately disclosed in the financial statements. Commission s Observation: The Commission has noted the objection and reply of the Petitioner. The Commission has computed the depreciation duly reducing the value of land and applying weighted average rate of depreciation on average depreciable GFA and average grants during FY 2014-15 to arrive at net depreciation for FY 2014-15. Issue 4: Interest and Finance charges The Commission has approved closing loan of Rs.207.25 crore for FY 2013-14 in truing up which should have been adopted as opening loan by BSPTCL. However, BSPTCL has considered opening loan at Rs.225.74 Crore. Further normative repayment equivalent to depreciation is considered of zero while working out the closing loan for FY 2014-15. Addition of loan during FY 2014-15 also requires source of loan and confirmation whether this has been done by the fund provided by the GoI under BRGF special plan. Petitioner s submission The interest and finance charges are claimed at Rs.18.52 crore as per audited annual accounts for FY 2014-15. Commission s observation The Commission has considered opening loan for FY 2014-15 same as that of closing loan of FY 2013-14 and computed the interest expenses on normative basis in terms of BERC (Terms and Conditions for Determination of Tariff) Regulations, 2007. Issue 5: O&M expenses The O&M expenses approved by the Commission in truing up for FY 2013-14 and claimed by the Petitioner for FY 2014-15 are summarized below: Bihar Electricity Regulatory Commission P a g e 19
No Claimed by BSPTCL for true up for 2013-14 Approved in true up for 2013-14 Now claimed in true up for FY 2014-15 A B C D E % increase F=(E- D)/D*100 1 Employee cost 77.57 77.57 93.35 20.00% 2 A & G expenses 6.20 6.19 8.47 36.00% 3 R & M expenses 59.01 26.62 36.51 37.00% 4 Holding Company expenses allocated 1.11 1.11 3.19 208.00% 5 Less: Capitalised 6 Net O&M expenses 143.89 111.49 141.52 27.00% From the above, the Commission can appreciate the fact that the increase in almost all components of O&M is abnormal and it will not be justified to pass it on to the consumers without proper scrutiny and validation. The increase in R&M expenses is too high and increase in salary of 20% is also high. The power procurement work is being processed by the Bihar Power Infrastructure Company (BPIC) a joint venture company of BSPGCL on behalf of BSPTCL. So this also reduces the burden of salary. Petitioner s submission The actual employee cost includes employer contribution towards terminal benefits like pension, leave encashment and gratuity which are not considered in true up for FY 2013-14. The total expenditure under employee cost for FY 2013-14 is including employer s contribution of terminal benefits. There is only 8% hike in FY 2014-15 as compared to previous year. The main reasons for hike in A&G expenses is due to increase in advertisement expenses, security guard charges, fees & subscription and technical fees incurred for inspection of materials. The R&M expenses include spares & tools purchased and issued for maintenance works and do not include cost of new equipment. The holding company expenses allocated has been actually incurred. Bihar Electricity Regulatory Commission P a g e 20
Commission s observation The Commission has noted the objection and reply of the Petitioner. The Commission has analysed the O&M expenses claimed vis-à-vis the O&M expenses reported in the audited annual accounts for FY 2014-15. The Commission having aptly discussed the issue under Employee cost, R&M expenses, A&G expenses and Holding company expenses in the truing up for FY 2014-15 has considered the O&M expenses in term of BERC (Terms and Conditions for Determination of Tariff) Regulations 2007.. Issue 6: Interest on working capital BSPTCL has worked out the working capital and has taken Rs.45.10 crore as receivables for 2 month. It is not understandable as to how receivables of 2 months has been taken as Rs.45.10 crore, when the net revenue requirement claimed by BSPTCL is Rs.226 crore for FY 2014-15. Petitioner s submission The Receivables has been calculated on the basis of gross transmission charge of Rs.270 Crore collected from NBPDCL and SBPDCL as per audited accounts for FY 2014-15. Commission observation The Commission has computed the working capital requirement and interest on working capital in truing up for FY 2014-15 in terms of BERC (Terms and Conditions for Determination of Tariff) Regulations 2007.. Issue 7: Closing Revenue Gap (Surplus) for FY 2013-14 The Commission has worked out a surplus of Rs.48.92 crore in the Tariff Order dated 12.03.2015 which should be opening revenue surplus and the Commission should adjust from the ARR approved for FY 2014-15. Petitioner s submission The comment has already been complied in Tariff Order dated 12.03.2015 Bihar Electricity Regulatory Commission P a g e 21