5.0

GRIDCO’s RESPONSE TO OBJECTIONS
GRIDCO has submitted the first rejoinder to objections on 08.12.2000, followed by clarifications on 23.12.2000 and 08.01.2001 to queries of Director (Tariff) and objections of objectors raised on 15.12.2000.

5.1

Demand Estimation

5.1.1

Energy Requirement
GRIDCO has objected to the methodology of calculating the energy sale to DISTCOs based on projected sale of DISTCOs and an assumed T&D loss level as it does not reflect the actual power drawals by the DISTCOs. Projections of energy requirement of DISTCOs made by GRIDCO were realistic and needs to be accepted.

5.1.2

Simultaneous Maximum Demand
GRIDCO has submitted that the simultaneous maximum demand has been based on actual demand of distribution companies for five months and projected demand for seven months based on demand furnished by distribution companies. Projections were realistic and hence should be accepted.

5.1.3

Contract demand and billing demand
It has not yet been able to conclude any agreement with DISTCOs on contract demand and has requested the Commission to direct DISTCOs to conclude the BSA amendment.

5.1.4

Supply to EOUs
On the issue of billing for EOU raised by NESCO, GRIDCO has said that according to OERC Case No.1/2000 EOUs continue to be beneficiaries of NTPC power exclusively from the unallocated quota even after 31.03.99. Further, while calculating the pool cost of power for Bulk Supply Tariff for 1999-2000, OERC had not taken into account the requirement of EOUs. Billing cannot be changed until the requirement of EOUs is included in the pool cost. In the present calculation, GRIDCO has treated energy consumed by the EOUs as part of its bulk supply to DISTCOs. On 23.12.2000 they further clarified that there was no existing agreement of GRIDCO with EOUs. GOO had written to Govt. of India not to allocate power for EOUs. In spite of the letter CEA has reallocated power of NTPC to EOUs during March, 2000.

5.2

Transmission losses
GRIDCO has stated that it has adopted the gross method. They have said that energy transaction of March, 2000 have been used to explain the losses which shows that 4% projected by GRIDCO was realistic.

5.3

Power Procurement-least cost drawal

5.3.1

GRIDCO has submitted that energy drawal for the DISTCOs was realistic. The Hydro procurement plan was based on the hydro levels at the reservoirs and on Agenda Note for 59^{th Hirakud Coordination Committee Meeting. They have said that Commission in Dec’99 tariff order had taken hydro procurement based on that year’s reservoir levels. Therefore, the objectors view that design availability should be taken for 2000-01 would not be legally correct and they request the Commission to be consistent in their methodology.}

5.3.2

The allegation that hydro power was low because of non payment of dues to OHPC was incorrect and has been denied by GRIDCO. They have then said that projections made by objectors were unrealistic. Drawal from Machkund for just six months was 147.082 MU and CPP supply was infirm and drawal from CPP has been based on actuals during May-Aug, 2000. On 23.12.2000 they have annexed the latest generation plan of OHPC which shows a drawal of 2798.30 MU from the four old stations of OHPC and 1710.44 MU from Indravati. The reservoir levels as on 01.12.2000 have been also submitted. They however have requested Commission not to change the generation plan as proposed by GRIDCO in its application. In a revision to application dt.02.01.2001, GRIDCO has changed its stand and requested Commission to consider drawal from OHPC as projected by the OHPC on 22.12.2000.

5.3.3

Regarding generation from state thermal sources it has clarified that OPGC machines were having downtime and so it may not be able to reach projections made by GRIDCO. For TTPS, GRIDCO has stated that it had projected generation based on PLF of for seven months. It had not accepted the PLF of 57.5% as proposed by NTPC before CERC. It has clarified that it had taken up steps with Nalco to maximise generation and supply to Nalco. However, the availability from CPPs was uncertain and may not be more than 365 MU during FY 2001.

5.4

Power Procurement Costs

5.4.1

GRIDCO has submitted that the costing of power made by objectors based on Commission’s order dated December’99 would not reflect true position of increase in cost of power as the cost of power of different stations change over a period of time due to change in cost of fuel, addition of capacity, additional capitalisation.

5.4.2

For Indravati on 08.12.2000 it stated that the number of machines scheduled to be in operation during FY 2001 was different than the number of machines in FY 2000 and so rates proposed by it were realistic. On 23.12.2000 GRIDCO recalculated the rates of Indravati and proposed rates of 56.54 paise/unit for April to Sep’2000, 63.61 paise/unit for Oct’2000 to Jan’2001 and 70.68 paise/unit for Feb’2001 to March’2001.

5.4.3

For TTPS on 08.12.2000 it stated according to PPA the expenditure on renovation and modernisation would be incorporated for purpose of determination of revised tariff and therefore the renovation expenses capitalised upto FY 2001 has to be taken into account.

5.4.4

Further, CERC has to determine tariff for TTPS and therefore GRIDCO has adopted the rates proposed by NTPC before CERC. On 23.12.2000 it has clarified in response to query of Director (Tariff) if Commission does not accept the proposed revision of costs as no order has been passed by CERC then the additional assets if any may be allowed as surcharge as and when CERC passes the order. They have annexed revised tariff calculation of TTPS.

5.5

Central Sector Stations

5.5.1

The income tax of the central sector stations was levied on the constituents as per the existing agreements and tariff notification from Govt. of India.

5.5.2

For central sector stations the GRIDCO had taken NTPC petitions before CERC for revision of fixed charges due to capitalisation and Foreign Exchange Rate variation. These were true costs which would be effective as and when CERC passed any order. If the Commission did not consider the costs then additional costs when approved by CERC would increase financial burden of GRIDCO. It has requested Commission that if those costs were not accepted by Commission in absence of CERC order then it should allow those costs as surcharge from effective date of proposed BST FY 2001.

5.6

Transmission lines
They have clarified that the Rangit-Siliguri and Malda-Bongaigaon are under commercial operation since December, 1998 and April, 2000 respectively and therefore are recognised costs which will be approved by CERC in due course. These costs, therefore, may be accepted by OERC. These PGCIL lines transfers surplus Eastern Region power to other regions and hence help in reducing NTPC tariff rates in Eastern Region.

5.7

Evacuation from Eastern Region
They have stated that new PGCIL lines being constructed will be used to ease surplus power in Eastern Region. GRIDCO is fully safeguarding its interest on issues related to NTPC and PGCIL as it has filed objections before CERC on tariff norms proposed by NTPC for TTPS and also against revision of fixed charges for super thermal stations. It has also petitioned before CERC not to consider payment of incentive to TSTPS and KhSTPS till there is load demand of Eastern Region to absorb full generation availability.

5.8

Transmission Costs

5.8.1

Employee Costs

5.8.1.1

GRIDCO has clarified that employee costs were based on audited accounts of FY 1999 and projections for FY 2000 and FY 2001. The objector’s view that employee costs should be based on approved costs of FY 2000 was not realistic as the provisional costs of 1999-00 were higher than the approved costs. They have denied any wasteful expenditure.

5.8.1.2

As regards retirement benefits they have clarified that according to Accounting Standard AS-15 (Accounting for retirement benefits in the financial statements of employers) the employer should mandatorily provide for incremental liabilities through an Actuarial valuation. They have said that provision of Rs.39.07 crores for FY 1999 has been done as per the actuarial valuation and provision of Rs.27.4 for FY 2001 has been accordingly worked based on rates of D.A. Further, it has stated that GRIDCO has not applied for recovery of liability of FY 1999, and has asked for recovery of Rs.27.4 crores for terminal benefits pertaining to FY 2001. On 23.12.2000 they have provided details of terminal benefit granted to employees in 1999-00.

5.8.2

A&G expenses
GRIDCOs projection for FY 2001 is nominally higher than actual expenditure of FY 1999. No wasteful expenditure has been incurred with regard to A&G expenses.

5.8.3

Repair & Maintenance expenses
The R&M program suffered in the FY 2000 on account of cyclone. The provision for FY 2001 would be spent as materials have been procured and so may be allowed.

5.8.4

Expenditure for restoring cyclone damages
GRIDCO has requested that as on this issue the Commission has given an order the same treatment should be given in tariff. On 08.01.2001 it has clarified that Special Relief Commissioner had allocated Rs.4 crores out of Calamity Relief Fund (CRF) as Govt. grant and Rs.15 crores out of National Fund for Calamity Relief Fund (NFCR) as loan to energy department during 1999-00 towards repair/restoration of transmission network damaged due to cyclone. However, Department of Energy, Govt. of Orissa vide letter No. 6687 dt.05.06.2000 intimated that the sanction of loan to the tune of Rs.15 crores to GRIDCO from NFCR was irregular and needs to be refunded. Upto 14.12.2000, Rs.40.8523 crores had been incurred on repair and damaged assets. Commission vide letter dt.13.07.2000 had accepted Rs.13.27 crores. The balance of Rs.23.58 crores (Rs.40.85-Rs.13.27-Rs.4 crores) may be kept in view by Commission for future consideration. Further, they have stated that entire cyclone restoration work was expected to cost Rs.43 crores. They have stated that only Rs.4 crores has been received as grant from GOO out of CRF.

5.8.5

Depreciation
To the issues raised on depreciation by objectors, GRIDCO has replied that the issues had been raised in earlier tariff hearings and Commission had already settled the issue. GRIDCO has restated that base line for calculation of the value of fixed assets have been the transfer scheme dated 01.04.96 and additions made thereafter on the basis of accounts and information received from field accounting units. GRIDCO has also already initiated the process of preparing an Asset Register. The required information on addition of assets has been furnished in formats prescribed by OERC.

5.8.6

Interest on long term liabilities
GRIDCO has denied that any loan from PFC not related to transmission network has been included in loan amount. They have annexed the details of PFC loans. Further, the power purchase bonds issued to various generators became a necessity to ensure continuity in power supply and to reduce the liability on account of delayed payment. The loan amount from LIC has remained constant at Rs.140.66 crores and interest on the loan as per audited accounts was Rs.28.39 crores. Compounding of overdue interest was a standard commercial practice followed by financial institutions and same has been done by LIC and GRIDCO had to pay this compound interest.

5.8.7

Appropriation to Contingency Reserve
GRIDCO has followed the provision of Sixth Schedule in proposing Contingency Reserve and so cannot remain at same level as FY 2000.

5.9

Capital Base

5.9.1

Original Cost of fixed assets
GRIDCO has replied to this issue by saying that as per para XVII(6) of Sixth Schedule the original cost in respect of any asset is the sum of the cost of the asset to the licensee including certain other costs such as erection charges, interest etc. In the instant case the cost of assets include cost of assets transferred to GRIDCO by State Govt. and subsequent addition to their cost.

5.9.2

Capital expenditure
GRIDCO has stressed the need for investments which would strengthen the existing network to comply with operating standards of OERC and to meet future load growth. In a further clarification on 23.12.2000, GRIDCO has said that capital expenditure has been geared towards critical projects for crucial evacuation facilities, and improving supply conditions at load centres. They have given details of EHT lines which were critical and with addition of new lines/substations there would be further reduction in T&D loss, improvement in voltage and reliability of power supply.

5.9.3

Stores

5.9.3.1

The amount proposed as stores was reasonable. The capital stores of Rs.46.3 crores maintained at project site was controlled by EHT construction Division and therefore has been treated as part of CWIP. The source of funding was the same as that of the schemes undertaken for CWIP.

5.9.3.2

The capital advance of Rs.25 crores was from 1998-99 which was part of CWIP. The capital advance was kept constant with decreased outflow towards bills of the capital works to respective contractors/suppliers. There was no overall impact on the CWIP except for accounting treatment.

5.9.4

Calculation of capital base
GRIDCO has stated that it has funded only about 20.30% of the projects from funding agencies and therefore denies the allegations that GRIDCO makes no investment from own sources.

5.9.5

Reasonable Return
Loans taken by GRIDCO for creation of distribution assets have been shown as loans to distribution companies. The fixed assets taken in capital base calculations only relate to transmission assets.

5.10

Miscellaneous Receipts
The miscellaneous receipts have been deducted from revenue requirement as shown in TRF-5 (modified). It has further said that the rates of wheeling charges to MP may be kept at same level i.e. 17.5 paise/unit as they have appealed for the same before Hon’ble Orissa High Court.

5.11

Rebates
The rebate has been in place to encourage timely payment by DISTCOs. The rebate scheme proposed by DISTCOs was not acceptable to GRIDCO as it would defeat the purpose of providing rebate. The rebate would be allowed for payments made through Escrow also.

5.12

Levy of overdrawal charges
GRIDCO has not agreed to the methodology suggested by the DISTCOs of charging an year end adjustment for realising the higher cost resulting for drawal in excess of projected energy requirement. If the cost escalation would be included in revenue requirement for next year all the BST consumers would share the additional cost instead of being borne by the overdrawing DISTCOs. The tariff design should encourage greater accuracy in load forecasting methodologies adopted by the DISTCOs and discipline in system operation.

5.13

Transmission Tariffs
GRIDCO has not agreed to the statement that power flow by displacement method to Madhya Pradesh & Andhra Pradesh was given by GRIDCO for receiving wheeling charges @17.5 paise/unit for this transmission was a distortion of facts. The tariff for inter state transmission has to be decided by CERC and decision may be dependent on number of factors not influencing the case of transmission within the state. OERC is to decide transmission tariff within the State after commencement of Reform Act, 1995. The GoO resolution of 09.11.92 has lost its legal sanctity. The transmission charge of PGCIL varies from month to month and does not include transmission loss. Regarding methodology it has stated that in last tariff order Commission had decided that postage stamp method would be appropriate method for transmission tariff.

5.14

Legal sanctity of transmission tariff
GRIDCO has stated that definition of tariff covers specified services and hence covers charges for transmission. Section 14 of Reform Act, 1995 recognises transmission of electricity as a business. Section 15 provides for grant of licensee to transmit electricity in a area of transmission by OERC. Sub-section(4) provides that the conditions included in the license may require the licensee to establish a tariff or calculate its charges from time to time in accordance with requirements prescribed by the Commission. GRIDCO has been granted license for Transmission and Bulk Supply business by OERC. Further, the Electricity Regulatory Commission Act, 1998 shall not apply to Commission established under Reform Act, 1995 due to the saving clause given in section 41 of Electricity Regulatory Commission Act, 1998.

5.15

Other Issues

5.15.1

GRIDCO has stated that function of Commission is to regulate the tariff and charges payable keeping in view both the interest of consumers as well as the consideration that the supply and distribution cannot be maintained unless the charges for electricity are reasonably levied. Hence charges are to be made keeping both the interests in consideration.

5.15.2

On the issue of Rating Committee and that tariff cannot be revised before 3 years, GRIDCO has stated Section 26(7) of Reform Act, 1995 specifically has provided that there shall be no Rating Committee. Further, in Section 57 (A) nowhere it is stated that tariff cannot be revised before three years. It provides that charges fixed by State Government shall be in operation for such period not exceeding three years as the State Government may specify in the order.

5.13.3

GRIDCO has stated that the present application is in no way affected by the fact that case is pending before Hon’ble High Court. The present application to be effective after 01.01.2001 after approval of Commission is not related to case pending in Hon'ble High Court as the present application was not for review or modification of earlier order.

5.13.4

On consultation with CAC it has stated that Commission was required to consult CAC before giving its orders and not before accepting application or before hearing.

5.13.5

On suggestion of multi year tariff it has stated that issue cannot be decided in the present application, as it needs consideration of all related aspects and guidelines of OERC.

5.13.6

Interstate sales have been kept out of calculation of revenue requirement to insulate consumers from trading risks.

5.13.7

No reply has been furnished to issues not related to the transmission and bulk supply business such as metering interruption, projections and impositions of penalty for supply of non-standard power to consumers.

5.13.8

For improvement of reliability of power supply, GRIDCO was investing in new lines and substations which showed that it was fulfilling conditions of license.

5.13.9

The allegation that there was no nexus between purchase of power and the sale of energy has been denied by GRIDCO as energy purchase has been calculated by adding transmission loss to the projected energy sale.

5.13.10

Rural electrification, energisation & LI points, cheaper power supply through Kutir Jyoti was no longer the concern of GRIDCO and so claim of subsidy from Govt. does not rise.

5.13.11

GRIDCO has stated that the application has been given as per provisions of law and is bonafide. It has submitted its audited accounts for 98-99 and that this was no ground to disallow tariff application as alleged.

5.13.12

Proposal of CESCO for introduction of force majeure clause in the Bulk Supply Tariff was vague.

5.13.13

To the issue of methodology to be specified by Commission it has explained that Chapter V of Regulations, 1996 deals with the methodology and procedure in relation to tariffs. In accordance with these regulations the Commission has prescribed methodologies and procedures from time to time.

5.13.14

The issues raised by NALCO had been raised in last years tariff filing proceedings have been resolved by Commission and do not require any consideration afresh. The case was also pending before the Hon’ble Orissa High Court.

5.13.15

GRIDCO has finally stated that allegations not specifically admitted may be treated as denied.