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5.0
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NESCO’S REPLY TO
CLARIFICATIONS AND QUERIES OF THE COMMISSION Shri S.K.Anand, Managing Director,
NESCO submitted a set of clarification in response to the consumer’s objections to
the Retail Tariff application, 2001-02 and Revenue Requirement application, 2002-03. |
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5.1
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Validity and Frequency of
Retail Tariff Application
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5.1.1
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Referring to the maintainability of
the tariff application, NESCO was of the view that the retail tariff application
was as per Section 26 of the Orissa Electricity Reform Act, 1995.
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5.1.2
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Audited Accounts: The
accounts of the company for the year 1998-99 has been duly audited by the statutory
auditor of the company. As the company was a wholly owned subsidiary of GRIDCO Ltd during
1998-99, the said accounts along with the report of the statutory auditor were sent to the
Accountant General, Orissa under section 619(3) and (4) of the Companies Act 1956. After
completion of the audit and reports by the C&AG of India, the accounts for the year
1998-99 will be finally adopted in the Annual General Meeting of the Company. Considering
the closing balances of 1998-99, the accounts of the company for the year 1999-00 as well
as 2000-01 have been prepared and duly audited by joint statutory Auditors for Income Tax
purposes, the copy of which has already been submitted to the Hon’ble Commission. As
soon as the C&AG audit for the year 1998-99 will be completed, the statutory auditors
will sign the accounts for 1999-00 and 2000-01.
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5.1.3
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The proposal of Emami Paper Mills to
reclassify the consumer has not been conceded by the licensee. NESCO stated that the
existing classification as per Regulation 80 of the OERC was quite exhaustive and no
amendments were necessary.
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5.2
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Cost of Employees, Material
Costs, A&G Expenses
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5.2.1
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Reacting to the objectors’
view that there has been an abnormal increase in employees and A&G expenses, NESCO
clarified that the increase in employees cost was not due to the so called multiplicity of
organisations but due to normal increase. NESCO maintained that certain increases in
A&G expenses were unavoidable because of creation of independent and stand alone
corporate entities. The licensee clarified that these expenses for 2001-02 were as per
expenses already incurred in 1999-00 and 2000-01 for which the accounts were duly audited
by company auditors and submitted to the Commission.
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5.2.2
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The expenditure on account of
employees and A&G for 2002-03 has been estimated based on the actual expenditure of
2001-02 upto August, 2001. Expenses towards contribution to PF, pension, gratuity,
training and bonus etc. have been shown separately as per requirements of the OERC
formats.
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5.3
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Interest on Power Bond
The interest payable on account of power bond being normal in character, should be
charged to the distribution business.
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5.4
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Distribution Loss
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5.4.1
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NESCO stated that the licensee was
committed to reduce the Distribution Losses and was taking several steps through metering,
system improvement, regularisation of illegal consumers and vigilance checking etc. NESCO
maintained that it was not feasible to eliminate tampering and bypassing of meters in toto
due to vast geographical area and large a number of consumers. It may be noted that growth
of input in LT segment without matching growth in the HT/EHT segment leads to increase in
overall Distribution Loss.
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5.4.2
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NESCO has estimated to reduce the
Distribution Loss by 3% in the year 2002-03. The revenue requirement for 2002-03 has been
calculated considering the system loss projection at 44%. Reacting to the objectors’
comparison of the loss percentage of NESCO with that of SOUTHCO, NESCO clarified that the
LT performance in SOUTHCO has been historically good as compared to other DISTCOs. The
loss percentage prevailing in NESCO is a legacy of the past and it would take a lot of
time and may require changes in the socio-economic conditions to achieve the loss levels
as of SOUTHCO.
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5.5
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Pilot Study to Asses Technical
and Non-technical losses NESCO stated that the study group has completed the
survey and the results of the pilot study should be binding and applicable to the licensee
after due consideration of various factors like consumer mix, pattern of distribution
network etc. in the study. |
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5.6
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Concessional Tariff for Power
Intensive Industries
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5.6.1
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Reacting to the proposal of the
Ferro Chrome Plant, Jajpur Road for Concessional Tariff for Power Intensive Industry in
the HT category, NESCO stated that it would not be able to supply power at the rates
suggested by Ferro Chrome Plant.
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5.6.2
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Reacting to FACOR’s view that
the special tariff offered would not be viable for them, NESCO stated that FACOR alongwith
other EOUs were demanding allocation of NTPC power out of unallocated share of central
stations for which GRIDCO had raised separate power bills on NESCO for the period from
April, 1999 to January, 2001. The average NTPC rate charged by GRIDCO during this period
was of the order of Rs.245.43 paise per unit. NESCO maintained that in comparison to the
NTPC rates, the special tariff offered by the licensee was more competitive, if the
consumer achieved higher load factor. NESCO clarified that it would not be able to supply
power at rates suggested by FACOR.
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5.7
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Tariff for Colony Consumption NESCO
clarified that the procedure of allowing only 10% of the total consumption at a reduced
tariff was very much liberal. |
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5.8
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Power Factor Incentive Replying
to the objectors’ point on Power Factor Incentive, NESCO stated that an industrial
consumer should have almost unity power factor and in no case the same should be below
90%. |
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5.9
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Payment of DPS NESCO
stated that the inadequacy in cash inflows to meet the cash requirement had forced the
licensee to default in payment to GRIDCO thereby creating liability of Delayed Payment
Surcharge (DPS). Reacting to the objectors’ view that the DPS should be dispensed
with. The licensee stated that when it paid DPS to GRIDCO, it was entitled to recover DPS
on its entire receivables through tariff. |
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5.10
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Metering and Meter Rent NESCO
stated that the metering project was being rigorously executed and monitored for
maximisation of benefit. Emphasis was given for procurement of best quality meters. NESCO
has not proposed any increase in existing meter rent. |
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5.11
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Emergency
Supply to the Industries
Referring to emergency supply to the industries, NESCO requested the
Commission to keep a provision of minimum guaranteed off-take by the consumers in
the Emergency Supply category such that the licensee did not incur loss while making the
power available to such consumers who would draw power only as per their requirement and
as and when they want. |
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5.12
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Poor Consumer Service and
Redressal System NESCO stated that it was making sincere efforts for improving
consumer services and redressal of consumer grievances through its existing departmental
network and system. Effective steps have been taken to form village committees and conduct
Bijli Adalats. Constant efforts were made for improvement of the supply condition as well
as providing proper metering for the benefit and satisfaction of the consumers. The
complaints of the consumers were being promptly attended and redressed within reasonable
time period. |
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5.13
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Power Failure NESCO
stated that tripping of lines could not be totally eliminated for consumers availing power
supply at 33 KV or less. Tripping of 33 KV feeders was also due to grid failure in many
cases. System improvement works were being carried out in various areas of NESCO in order
to provide better quality of power to the consumers. |
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5.14
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Rural Electrification Work NESCO
stated that the licensee has not programmed to make any RE work during 2001-02 or 2002-03.
There was therefore no scope for deducting any such RE subsidy from the revenue expenses
of either 2001-02 or 2002-03. NESCO maintained that the RE works depended on Government
policy and provision of Government subsidy. |
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5.15
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Response to issues raised by
Director (Tariff), OERC
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5.15.1
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The load forecast for 2002-03
submitted to GRIDCO at 3065 MU has been revised hence the NESCO’s projection of the
quantum of the power purchase at 2292.203 MU made in the ARR application may be treated as
Power Purchase requirement of the licensee for the said year.
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5.15.2
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An affidavit has been filed
separately for the actual sales data for the six months period ending 30.09.2001. It is
further clarified that the total revenue billed for each category is the aggregate revenue
which includes energy charges, fixed charges, meter rent, DPS, customer charges etc.
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5.15.3
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NESCO has proposed T&D loss
levels of 47.41% in the RST application and 44.35% in the ARR application. These figures
are different from those furnished in the business plan and submitted to the GOO wherein
loss levels of 46.98% for 2001-02 and 40.77% for the 2002-03 were proposed. The loss
figures mentioned in the business plan were subsequently revised and were sent to the GOO
for its ready reference. The same figures were considered by the High Power Committee
during its evaluations.
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5.15.4
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NESCO is of the considered view
that the Commission should agree to the special rate tariff for the industries even though
no commitment from the licensee to bear the differential financial burden is made
available. This is because it involves the industrial development in the state and if
these industries were to be closed down in the absence of a special rate it would have
repercussions for the financial health of NESCO besides the associated problems like
unemployment, social problems etc.
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5.15.5
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The accounts for the year 1999-00
and 2000-01 have been compiled and after receipt of the audit certificate from the
Accountant General of Orissa, the same shall be audited latest by August, 2002.
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5.15.6
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Although the working capital is
included in the capital base calculation, separate claim for interest on working capital
has been made by the licensee for 2001-02 and 2002-03. Reasonable return has not been
claimed as the capital base turns out to be negative in 2001-02 and 2002-03. The
inadequacy of cash inflows to meet fully the cash liabilities has resulted in delay in
payment to GRIDCO which has called for payment of DPS. NESCO requests the Commission to
approve the same for revenue requirement. Interest on working capital of Rs.52.13 crore
has been shown towards DPS on BST dues.
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5.15.7
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Against our billing of Rs.331.63
crore in 1999-00 and Rs.326.32 crore in 2000-01, NESCO has been able to collect the sums
of Rs.245.79 crore in 1999-00 and Rs.279.82 crore in 2000-01. Therefore, the percentage of
average collection to billing over the two-year period comes to 79.88%. The inadequacy of
cash inflows as compared to the cash outflows has forced NESCO to delay payment to GRIDCO
which has resulted in DPS.
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5.15.8
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NESCO prays that the lease premium
as claimed may be allowed under the revenue requirement of the licensee. The licensee has
included a sum of Rs.148.80 lakhs for 2001-02 and 2002-03 as lease rent under A&G
expenses. The licensee has obtained meters and capacitors valued at Rs.525.93 lakhs from
BSES Ltd. and BSES Infrastructure Finance company Ltd. on operating lease terms and the
same has not been capitalised so far and as such does not form part of Gross Fixed Asset
upto 31.03.2001. This follows from the accounting policy of the Commission which states
that the values of leased assets are to be capitalised if the lease is a finance lease and
is to be charged to the profit and loss account if it is an operating lease.
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