6.0

Commission’s OBSERVATIONS AND Analysis on GRIDCO’s Proposal
The filings of GRIDCO made under Section 26(4) of the Reform Act, 1995 and subsequent information and clarifications filed before us have been scrutinised, written and oral representations of the objectors have been carefully examined and the views expressed in the meeting of the Commission Advisory Committee convened for the purpose of consultation on the tariff determination have been taken into account.

6.1

The Committee Advisory Commission specifically discussed the issues of subsidy, cross-subsidy, percentage of T&D loss, percentage of transmission loss, advisability of differential BST among the distribution companies and uniform retail tariff for the whole State. Some of the Members raised issues specific to the interest groups they represent. But there was near unanimity with regard to the certain issues. It was felt that T&D loss was still high and should be brought down at least by 5% every year so as to justify tariff increase. It was also felt that installation of meters and consumer services were far from satisfactory. While the suggestion for uniform retail tariff for the whole State was put forward by most of the members, the proposal did not find favour with the representatives of the DISTCOs.

6.1.1

Before we record our observations and orders on general and specific aspects of GRIDCO proposal and proceed to determine tariff, we may indicate the perspective, principles and the regulatory environment in which tariff has been determined by us in the later part of this order.

6.1.2

During the state-owned SEB days, tariff in Orissa was historically based on nature and purpose of use. The State Govt. subsidised the consumers belonging to the economically weaker domestic class and agricultural irrigation to a considerable extent possibly on considerations of affordability and public policy.

6.1.3

The present reform scenario under Reform Act, 1995 has given a go by to the administrative price mechanism, Govt. intervention and subsidy of any kind except cross-subsidy. GRIDCO is a corporatised entity which has taken over the transmission and distribution business on 01.4.96. It was expected that the newly formed GRIDCO would turn around by 1997-98 based on assumption of substantial reduction in T&D loss, increased load growth, investment for system improvement and tariff increase. The assumptions were not realistic and did not materialise to a great degree. The cost of power substantially went up due to revaluation of assets of OHPC and transfer of TTPS to NTPC. The revenue requirement further went up due to additional depreciation on account of revaluation of assets of GRIDCO and distribution companies. For instance, the cost of power which was Rs.469 crores in the FY 1994-95 went up to Rs.1199 crores by the year 1997-98. Unfortunately the assumption of load growth failed to materialise and the pace of reduction of T & D loss has not been upto expectation. The quantum of purchase of power remaining same, total cost went up substantially on account of revaluation of assets as a part of the reform process.

6.1.4

No provision was made by the Government of Orissa to provide subvention or subsidy to GRIDCO, successor of State Electricity Board during the transitional phase from a state-owned, state supported entity to a viable transmission and distribution licensee. Such support was needed for socially purposive but un-economic measures such as rural electrification, supply to urban poor, for meeting massive debt service burden and for meeting accumulated losses.

6.1.5

The Commission is convinced that subsidies are not in harmony with the spirit of the Reform Act, 1995. In any case, the government cannot afford to grant subsidies to companies or consumers for the electricity they consume. However, it is also quite clear that during the transition from the highly subsidised State monopoly situation to an economically viable self sustaining electricity industry, there has to be certain amount of financial support in the form of subsidy and subvention. Investments to improve the system have immediate impact on tariff whereas the effect of improvement and the gains of efficiency take considerable time. It was perhaps necessary for the State government to give some sort of financial support in the form of subvention or subsidy during the transitional period. This is why the Governments of Andhra Pradesh, Gujarat and Utter Pradesh have been providing subsidies during the first few years of reform. The above named states have provided Rs.1585 crores, Rs.1260 crores and Rs.790 crores respectively as subsidy in the FY 2000-01. As a result of total withdrawal of subsidies in Orissa, the tariff rise has to be of considerable magnitude if cost reflective tariff has to be adopted for 2000-01. In response to the Commission’s query to ascertain whether Govt. was prepared to grant subsidy or subvention to reduce the impact of tariff increase, the State Govt. has clearly stated that they are not in a position to provide subsidy or subvention which could have resulted in lower Bulk Supply Tariff and enhanced financial viability of GRIDCO.

6.1.6

In the post-reform era the Orissa Electricity Regulatory Commission has been addressing the issue of tariff setting in accordance with the Reform Act, 1995 in a pragmatic manner. Sec. 26 of the Reform Act, 1995 and the financial principles laid down in Sec. 57 & 57(A) of the Act, 1948 have been the guiding factors in tariff setting. Further, it is the economic and financial principles which have played key role in deciding the tariff structure and in determining charges for various categories of consumers.

6.1.7

It was discernible from the filings before OERC that the currently proposed tariff would have to be much higher as compared to those of the immediate previous years even after pruning all expenditure items by the Commission on the same lines as in the past. The Commission is faced with a formidable predicament in balancing the interest of the ultimate end-users i.e. the consumers vis-a-vis the financial health of the licensee as defined under Sec.26(2) and Sec.11(1)(e) of the Reform Act, 1995. Many objectors had alleged that there should be no revision in tariff since licensees have not brought about desired improvements and had not been able to reduce the T & D loss substantially. We ourselves have been very much concerned with the performance of the licensees and have been suo motu monitoring in various ways. We agree that price of electricity has to be linked to performance. But ground realities have to be considered and it has to be admitted that Distribution Companies cannot bring about improvement overnight because of historical, technical and socio-economic reasons. Secondly, tariff fixation and other aspects cannot wait till after performance improves to the desires extent. We may quote, the authority of Hon’ble Orissa High Courts’ observations in Appeal No.51 of 2000 decided on December 22, 2000:

"One cannot but agree with the sentiments expressed by Shri K. N. Jena regarding the inefficiency in the services provided as well as inaction/failure on the part of the various Distribution Companies in checking the growing menace of pilferage of electric energy by unauthorised persons. This is a matter which can be looked into by the Regulatory Commission in future, but this cannot be a ground to set at naught the fixation of tariff".

6.1.8

Another recurring objection against tariff increase has been the constraint of affordability. The domestic consumers have urged to leave them out of tariff increase because they cannot afford and they cannot pass on the burden which the commercial and industrial consumers can do. On the other hand commercial and industrial consumers have pleaded that their products cannot be competitive and therefore their tariff should be reduced rather than increased. Every category has pleaded that tariff, if increased, should be for other categories. We cannot ignore the affordability factor because safeguarding interest of consumers is one of the main parameters in tariff fixation. But affordability cannot be the prime consideration. We are constrained to observe that these objections are mostly due to inadequate understanding of financial, economic and legal parameters of tariff determination. Electricity industry licensees may be expected to gird their loins, reduce expenditure, reduce T & D loss and improve consumer service. But that industry also has to survive and that is why Section 11(1)(e) of OER Act mandates that the supply and distribution industry cannot be maintained unless the charges for the electricity supplied are reasonably levied and collected. Licensees of electricity supply and distribution cannot be expected to forego their legitimate dues and charge low rate to ameliorate financial stringency of any category of consumers or to make industrial consumers competitive in national and international market.

6.1.9

It is the duty of the Commission to scrutinise the claims of licensee with a fine tooth-comb and allow only useful assets for capital base and only properly/prudently incurred expenditure for revenue requirement. But after we do so whatever Revenue requirement finally is determined has to be allowed to be raised through tariff. This is the position in Law and has to be appreciated by the consumers of all categories. Keeping the above objective in view, the Commission has gone ahead in deciding the various parameters regarding determination of revenue requirement and tariff of the licensee in an endeavour to strike a balance between the interests of end consumers on one hand and financial viability of licensee on the other.

6.1.10

It is because of our concern for the views of various categories of consumers that the Commission has decided to leave a gap between the approved revenue requirement and the revenue to be garnered through this tariff order for recovery in future. This decision has been taken in exercise of power vested in the Commission under subsection (3) of Section 26 to depart from the factors specified in the Sixth Schedule. Strict adherence to the Sixth Schedule will result in what may be called tariff shock in view of sudden rise in tariff. The industrial load growth in Orissa has been in the negative and hence full increase to fill the revenue gap may allow further shrinkage in the electricity demand. We therefore consider it appropriate not to permit the entire gap to be recovered in this year's tariff. Once efficiency gains bridge the gap such departure will possibly not be needed.

6.1.11

The Commission’s analysis of GRIDCO’s proposal and its finding as to reasonableness of various items and determination of the extent to which the expenses projected shall be considered to be "properly incurred" in the context of the Sixth Schedule as well as other parameters stipulated in Section 26 of the Reform Act, 1995 need to be given at length.

6.2

Quantum of Power Purchase

6.2.1

Out of GRIDCO’s estimated revenue requirement of Rs.1937.90 crores for the year 2000-01 cost of power alone accounts for Rs.1432.20 crores or 73.90% of the total requirement. Since cost of power constitutes the major chunk of expenditure, it is extremely important that the power purchase is done scrupulously following the concept of least cost combination of power procurement while maintaining the system stability.

6.3

Demand Estimation and Power Procurement Proposal of GRIDCO

6.3.1

GRIDCO has stated that WESCO, CESCO and SOUTHCO have provided their forecast of monthly energy requirement and maximum demand sub-station wise. NESCO has provided only an annual forecast. The energy forecast provided by the DISTCOs includes supply to the Export Oriented Units (EOUs). GRIDCO had also stated that if OERC approves the proposed treatment of EOU sale as a part of DISTCOs supply then GRIDCO will modify the present method of billing from the date of approval. Subsequently GRIDCO was asked to clarify the following issues by Director (Tariff) on 15.12.2000 as follows :-

Whether there was any agreement for utilisation of NTPC power during off-peak hours to the EOUs

Whether there was any fresh allocation of power to the EOUs from the unallocated quota of the central station by CEA

If any allocation exists, whether steps have been taken by the interested  parties requesting cancellation of allocation to the EOUs

6.3.2

GRIDCO in its rejoinder to OERC Query dtd.23.12.2000 stated that there is no existing agreement of GRIDCO with the EOUs. The supplementary agreement entered by GRIDCO with the EOUs for the supply of NTPC power during off-peak hours was valid upto 31.3.99. An order allocating power from the unallocated share of NTPC stations of Eastern Region has been passed by CEA in March 2000 in favour of FACOR, Ispat Alloys, Charge Chrome Plant of Bamanipal of TISCO, Nava Chrome, Meramundali and IDC. But this allocation order has not been followed up with tripartite agreements among NTPC, GRIDCO and EOUs. Hence, notwithstanding the finding given by us for earlier years, we have to note that there is no legal or contractual framework for direct supply of NTPC power to EOUs during 2000-01. GRIDCO had requested Govt. of Orissa to move the Ministry of Power, Govt. of India not to allocate power to the EOUs in the State of Orissa out of the unallocated share of NTPC stations and to allocate the same power on firm basis to other States. The Govt. of Orissa vide letter dtd.27.11.99 had also requested the Ministry of Power, Govt. of India not to continue with allocation of power to the EOUs from the unallocated share. Govt. of Orissa also stated that the EOUs will be supplied power from the DISTCOs on continuous basis (24 hours).

6.3.3

A verification of the global accounts issued by the Eastern Regional Electricity Board for the months of April to August, 2000 indicate that there has been no drawal by GRIDCO during off-peak hours from the unallocated share of NTPC stations for use of EOUs. GRIDCO’s forecast includes consumption by the EOUs as a part of its bulk supply to DISTCO. Taking all these factors into consideration the Commission accepts the proposition of GRIDCO for inclusion of energy consumed by EOUs as a part of its bulk supply to DISTCOs.

6.3.4

GRIDCO has reported that at the time of filing, it had the actual data for energy and demand for five months (April 2000 to August 2000). Therefore, the demand forecast has been modified to incorporate these actuals for the five months and the forecast provided by the DISTCOs has been considered for the balance period in respect of WESCO, CESCO and SOUTHCO. In case of NESCO, the actuals for the first five months is taken and for the balance period the forecast is based on the average of last five months for EHT loads and previous years pattern for non-EHT load adjusting for cyclone effect. Accordingly, the picture of annual energy requirement is given in Table : 5.

Table : 5
Annual Energy Requirement

6.3.5

The annual energy requirement for the DISTCOs has been projected as 10820.44 for the year 2000-01 by GRIDCO.

6.3.6

GRIDCO is required to purchase power from the various generating units and deliver to the DISTCOs which would also include direct sale to EHT consumers. In the process of delivery of this power, transmission loss occurs in the system which is estimated to be 4% by GRIDCO. Thus out of the energy purchased from the generators at EHT bus 4% is deemed to have been lost in transmission and the balance is supposed to be delivered to the DISTCOs. Therefore, based on this assumption GRIDCO is required to purchase 10820.44/0.96 = 11271.29 MU from the generators (DF 1).

6.3.7

Demand charge is proposed to be charged at the actual simultaneous maximum demand or 80% of the contract demand whichever is higher in the month for the DISTCOs. GRIDCO has stated to have written to the DISTCOs to submit their contract demand at various grid supply points. GRIDCO has adopted the figure of contract demand based on the maximum of the monthly demand forecast provided by the DISTCOs incorporating the actual data available for five months of the year 2000-01 which comes to 1949.40 MVA.

Table : 6
Contract Demand (Page 38/42 of main text)

6.3.8

GRIDCO in its BST application initially had proposed a contract demand of 1949.40 MVA and billing demand of 1560 MVA as 80% of 1949.4 MVA. GRIDCO in query to the clarification has reported that no agreement with DISTCOs could be concluded despite several discussions on the subject. GRIDCO, therefore, request OERC to adopt a billing demand the average SMD of 1735.7 MVA based on five months of actual demand and the projection at the rest of financial year as indicated in Table : 7.

Table : 7

(para 2.1.2, page 14/32 clarification to queries on BST application 2000-01)

6.3.9

The Commission has examined the evidential document supplied by GRIDCO about energy drawal from the months April, 2000 to August, 2000 along with the projections made by the various DISTCOs. Based on this study the Commission has considered it prudent to accept the actual consumption for the first five months of the year 2000-01 and extrapolated it to determine the energy requirement of the balance seven months to derive the figure of energy sale by GRIDCO to various DISTCOs in line with the concept approved in the last tariff order of dtd.30.12.99. Accordingly, the figures are in Table : 8.

Table : 8

6.3.10

It is worthwhile to examine that the estimate of power sale by GRIDCO to DISTCOs works out little higher i.e. 10820.44 MU compared to 10603.97 MU or a difference of 216.47 MU.

6.3.11

It is worth mentioning that some of the objectors namely UCCI, INDAL, Shri R.C. Padhi, Retd. Chief Engineer, CII have suggested that the quantum of power purchased by GRIDCO for the year 2000-01 should be back calculated based on the quantum of power to be sold by the DISTCOs and adopting a normative loss level varying from 30-32.5%. By their calculation GRIDCO’s revenue requirement should be based on a total requirement of 8303.711 MU (30% loss) to 9500 MU (32.5%).

6.3.12

The Commission however considers that GRIDCO should not bear the burden of the losses of the distribution utilities and the estimated actual quantum of power purchase should be the criteria for determining the expenses of power purchase allowable to GRIDCO. Based on this criteria the Commission approves a total of 11011.39 MU as energy requirement by GRIDCO for FY 2000-01.

Table : 9
(Figures in MU)

6.3.13

Similarly the Commission also examined the maximum demand figures considered by GRIDCO for the purpose of billing to various DISTCOs and calculated the average of the maximum demand of the last five months to determine the average billing demand for different DISTCOs which are in Table : 10.

6.3.14

The Commission approves 1753.51 MVA as the billing demand for the year 2000-01.

6.4

Computation of Transmission Loss

6.4.1

GRIDCO in para 2.2 of the main text of the BST application has stated to have used the gross method for determination of transmission loss as approved by OERC earlier instead of the net method of computation. GRIDCO has re-stated that irrespective of the method of computation, the transmission loss in MU is the same whether gross or net method of computation of transmission loss is adopted. Therefore, GRIDCO should be allowed full recovery of units lost in transmission.

6.4.2

The calculation of transmission loss in EHT system submitted by GRIDCO in OERC Form No. TRT 8 is shown as 4.11% of the gross output. In this transaction the input of 1076.38 MU for EREB has neither been shown in the input nor output side of the calculation. By not considering this GRIDCO has calculated the transmission loss on net basis and not on gross basis as approved by the Commission. In query to the clarification GRIDCO has stated that some amount of energy lost in the system is not attributable to the system and is to be realised proportionately for all users of the system.

6.4.3

GRIDCO in modified Table 34 of the clarification has stated that a sum of Rs.26.5 crores is to be deducted from miscellaneous receipt due to 4% loss on wheeling of power to MP. The rate adopted for such energy lost in transmission has been calculated at NTPC rate or the marginal cost of power purchase. GRIDCO has further clarified that the cost of the lost units on account of wheeling to outside states is deemed to have been recovered within the levy of transmission charge billed to other states. Since GRIDCO gets paid in full for the units lost in transmission on account of wheeling to outside the state it is imperative that the energy exported to EREB is treated both as an input and as an output for the purpose of calculation of transmission loss. Therefore, the calculation furnished by GRIDCO in form No. DF 3 is modified incorporating 1076.38 MU exported to EREB as per the details in Table : 11.

Table : 11

6.4.4

The objectors in general had stated that the huge investment made by GRIDCO during the last four years should be reflected in some tangible form and result in reducing the existing level of 4% transmission loss to 3.5%. The Commission has examined as indicated above and by actual calculation has arrived at the figure of 3.67% and accordingly approves 3.70% for the purpose of computation of transmission loss.

6.5

Sources of Power

6.5.1

The quantum of power purchased by OSEB/GRIDCO since 1992-93 onwards is indicated in Table : 12 generating station-wise.

Table : 12
(Units in MU)

* This includes purchase for sale to AP, CPPs and EOUs

6.5.2

GRIDCO has stated that the power procurement plan has been developed based on a monthly forecast of demand and supply to reflect the reality of load despatch and to demonstrate merit order procurement.

6.5.3

GRIDCO has stated that the station wise procurement plan is determined by the following factors.

• Provisions of the Power Purchase Agreements and relevant Government of India Notifications

• For Hydro stations, current status of generating units, their performance and water level in the reservoirs

• Availability of generators, considering their maintenance schedules

• Energy requirement of the DISTCOs for the month

• Least cost order of all generators for determining station wise procurement for that month

6.5.4

In its present form, the order on ABT causes a significant increase in cost of power purchased from Central Generating Stations, due to their low PLF and high availability. GRIDCO has further stated that this application does not consider the impact of Availability Based Tariff (ABT) as it has been stayed by CERC.

6.5.5

Commission analyses purchase of power from the various generating stations on the principle of economic load despatch, least cost ordering of generation, power availability from the generating stations based on PPA, availability of thermal stations for the year, analysis of generation for the past years and technical constraints, if any, for drawal.

6.5.6

Generating stations of OHPC, OPGC and TTPS of NTPC are totally dedicated for Orissa and GRIDCO has the contractual obligation for payment of the entire fixed cost in respect of these stations along with the fixed share of Machhkund Hydro Electric Project. Power purchased from Upper Indravati Hydro Electric Project for the year 2000-01 and from the captive power plants have been charged on the basis of single part tariff that is, totally variable.

6.5.7

GRIDCO has also certain allocated percentage of share in three super thermal stations of NTPC located in the eastern region namely Farraka (West Bengal), Kahalgaon (Bihar), Talcher Super Thermal (Orissa). For the year 2000-01, the fixed cost of these stations is payable in proportion to the power drawn along with the variable charge which essentially works out to be a single part tariff that is, totally variable until the issue of ABT is decided.

6.5.8

In examining the power purchase plan of GRIDCO, the Commission proposes to assign highest priority to purchase from the generating stations which are dedicated for Orissa and for which GRIDCO is obliged to pay the entire fixed cost. Only when the requirement of power exceeds the availability from these stations, power will have to be procured from other generating stations in the ascending order of their variable cost otherwise known as merit order operation.

6.6

Quantum of Power Purchase
The procurement of power, generator wise, is discussed below :-

6.6.1

OHPC :
OHPC owns and operates the following power stations of the State :-

Hirakud
Balimela
Upper Kolab
Rengali
Upper Indravati Hydro Electric Project

OHPC also has a fixed share in Machhkund hydro electric project.

6.6.2

Machhkund : This Hydro Power Station is a joint venture of Govt. of Orissa and Govt. of Andhra Pradesh with a capacity of 114.5 MW. GRIDCO has projected a drawal of 288.68 MU for the year 2000-01 based on actual generation for five months (April-August, 2000) and forecast for balance period (September, 2000 - March, 2001) considering the performance of the power stations during the same months for the year 1997-98.

6.6.2.1

Many of the objectors have suggested a drawal of 322 MU as the drawal from Machhkund during the first six months has been 172.34 MU and the reservoir level of Machhkund is comparable to earlier years.

6.6.2.2

The water level at Jalaput reservoir as on 01.12.2000 is 2743.15 ft. as against 2746 ft. on 01.12.99. During the year 1999-00 GRIDCO had drawn 337.65 MU and has drawn 123.73 MU during first five months of the year 2000-01. Since the water potential for this year is lower than the previous year GRIDCO should endeavour to draw at least Orissa’s full share from this generating station i.e. 302 MU.

6.6.3

Hirakud, Rengali, Balimela, Upper Kolab

6.6.3.1

GRIDCO had initially proposed (on September, 2000) a total drawal of 2953.18 MU from Hirakud, Balimela, Upper Kolab and Rengali power stations based on reservoir level of 31.8.2000. The proposed drawal according to the plan submitted by GRIDCO, from the four power stations of OHPC has been shown in Table : 13 (Page 16, 17 and Revised DF-14 of Main Text).

Table : 13

6.6.3.2

GRIDCO had stated in para 2.3.1 of the main text that the year 2000-01 is a poor monsoon year for Orissa with rains failing in catchment areas of reservoir. The latest available data on reservoir levels as on 31^{st of August for five years shows a significantly lower figure on 31.8.2000 compared to those of the previous years (Ref. Table 9, Page 16 of main text). It has been observed that reservoir levels for ensuing year are closest to FY 1997-98 in case of Balimela, FY 1998-99 in case of Rengali and Upper Kolab and that Hirakud reservoir levels are one of the worst since 1996-97.}

6.6.3.3

GRIDCO had stated that the generation plan for the year 2000-01 incorporates five months actual generation and for the balance period the generation for various stations has been estimated using the correlation to the reservoir levels of different years as indicated in para 6.5.2.4.

6.6.3.4

Objector like UCCI has stated that the procurement from the four above mentioned hydro stations of OHPC should not be based on an annual estimation as availability would depend on the inflow to reservoirs during monsoon months, reservoir level of 31.3.2001 and the lowest drawal level to be reached during water year 01-02. Therefore, they have suggested to take either design availability or average of eight year’s availability from 1992-93 to 1999-00. Based on this, they project a figure of 3721 MU. CII projects a figure of 3200 MU based on the analogy given above. We find that Shri R.P. Mohapatra in his written submission dtd.23.12.2000 has suggested a drawal of 2953.2 MU from OHPC.

6.6.3.5

GRIDCO in its rejoinder dtd.08.12.2000 has stated that the objectors have objected to the tariff being set on low hydro procurement in FY 2001 on the ground that the position of reservoir level in FY 2002 may be different. Last year under similar circumstances the objectors had given the rational of high hydro availability on reservoir levels and urged the Commission to accept the power procurement plan during 1999-00 which the Commission had accepted. GRIDCO, therefore, requested that the Commission should base the hydro procurement on the reservoir level on FY 2000 as it had done in December, 1999 order.

6.6.3.6

OHPC has submitted a revised generation plan for the above four stations on 22.12.2000 showing a total generation of 2798.30 MU.

6.6.3.7

We find that GRIDCO had not agreed to the revised generation plan of OHPC as submitted in its clarification dtd.23.12.2000. However, on 02.01.01 in a fresh filing termed as revision to rejoinder to queries and objections raised during hearing on the BST Application FY 2001 it has changed its stand and requests the Commission to approve procurement as proposed by OHPC.

6.6.3.8

The Commission examined the generation plan submitted by OHPC and the revised procurement plan proposed by GRIDCO for the year 2000-01 in its fresh filing on 02.01.01 as shown in Table : 14.

Table 14

6.6.3.9

In view of the revised generation plan of OHPC being based on the reservoir levels of 01.12.2000, the Commission thinks it prudent to accept the generation plan as proposed by OHPC and GRIDCO i.e. 2798.30 MU from the four stations of OHPC. Procurements from the four stations are discussed hitherto.

6.6.3.10

Hirakud : The combined installed capacity of Hirakud power system i.e. Hirakud and Chiplima taken together, is 331.50 MW with an annual availability of 1174 MU. The Full Reservoir Level (FRL) is 630 ft. and the minimum draw down level is 590 ft. GRIDCO states that the reservoir level of Hirakud is one of the worst this year. It has also stated that based on the latest reservoir level, irrigation requirement, evaporation losses and non-monsoon inflows, as projected by the Water Resources Dept., Govt. of Orissa for the Hirakud Coordination Committee meeting on September, 2000 a generation of 197.41 MU is projected from Sept., 25, 2000 to March, 31, 2001. Taking the actual generation upto 24^{th September, 2000 during the current year the projected drawal would be 616.72 MU as initially proposed by GRIDCO.}

6.6.3.11

6.6.3.12

OHPC has stated that there has been a generation of 505.635 MU from 4/2000 to 11/2000 and the anticipated generation during the four months from 12/2000 to 3/2001 is 68.45 MU and thus estimates the total generation at 574.04 MU. As this forecast has been revised by OHPC based on the latest reservoir levels as on 01.12.2000 and this has been accepted by GRIDCO, the Commission thinks it prudent to accept the generation figure given by OHPC and, therefore, accepts the figure of 574.04 MU for the year 2000-01 and a drawal of 568.30 MU (after accounting for auxilliary consumption).

6.6.3.13

Rengali : The installed capacity of this power station is 250 MW (5 X 50) with an annual energy availability of 86 MW or 750 MU. GRIDCO in para 2.3.1.2 of the main text of the BST application has stated that they proposed to procure 924.49 MU during the year 2000-01. This is also corroborated in the procurement plan given in DF 14. GRIDCO has further stated that this projection is based on the generation achieved in 1998-99 when reservoir level is closest to current level. As on 31.8.1998 the reservoir level of Rengali was 115.01 metres compared to 116.32 metres as on 31.8.2000. During the year 1998-99 there is a total drawal of 889.763 MU by GRIDCO from this power station. Going by logic of GRIDCO power availability from this power station should be close to the figure of 1998-99. GRIDCO’s projection of 924.49 MU from this power station for the year 2000-01 appears to be erroneous and possibly it has been interchanged with that of figures of Balimela Power Station. OHPC in three successive projections has given three different figures as given below.

Feb., 2000	873 MU (OHPC letter No. 1917 dtd.02.02.2000)
Oct., 2000	733.01 MU (OHPC letter No. 14775 dtd.24.10.2000)
Dec., 2000	721.871 MU (OHPC letter No. 17221 dtd.22.12.2000)

6.6.3.14

An examination of the forecast made by OHPC on 22.12.2000 shows that 645.502 MU has been generated from 4/2000 to 11/2000. The anticipated generation from 12/2000 to 3/2001 is 76.369 MU. Thereby a total generation of 721.871 MU is expected to be generated by 3/2001. As this forecast has been revised by OHPC based on the latest reservoir levels as on 01.12.2000 and this has been accepted by GRIDCO, the Commission thinks it prudent to accept the generation figure given by OHPC and, therefore, accepts the figure of 721.871 MU for the year 2000-01 and a drawal of 714.65 MU.

6.6.3.15

Balimela : This is a 360 MW power station with availability of 135 MW or 1183 MU. GRIDCO in para 2.3.1.3 of the main text of the BST application has stated that they proposed to procure 870.04 MU for the ensuing year. This assumption is based on the actual generation for five months (April to August, 2000) and forecast for balance period Sept. to Mar. 2001) which is based on that achieved for the same months till FY 1997-98, when the reservoir level is closest to the current level till 2000. As on 31.8.97 Balimela reservoir level was 1456.7 ft. compared to 1456.5 ft. as on 31.8.2000. During the year 1997-98 GRIDCO had drawn 891.48 MU. GRIDCO’s projection of 870.04 MU in DF 14 seems to have been interchanged with that of the generation figure of Rengali power station. OHPC made three projections during the year 2000 about generation of this power station as given below.

Feb., 2000	1100 MU (OHPC letter No. 1917 dtd.02.02.2000)
Oct., 2000	1070.135 MU (OHPC letter No. 14775 dtd.24.10.2000)
Dec. , 2000	1005.892 MU (OHPC letter No. 17221 dtd.22.12.2000)

6.6.3.16

An examination of the forecast made by OHPC on 22.12.2000 shows that 802.949 MU has been generated from April - November, 2000. The anticipated generation from December, 2000 to March, 2001 is 202.943 MU. Thereby a total generation of 1005.892 MU is expected to be generated by March, 2001. As this forecast has been revised by OHPC based on the latest reservoir levels as on 01.12.2000 and this has been accepted by GRIDCO, the Commission thinks it prudent to accept the generation figure given by OHPC and, therefore, accepts the figure of 1005.892 MU for the year 2000-01 and a drawal of 995.83 MU.

6.6.3.17

GRIDCO does not seem to have exercised adequate caution while submitting the estimate of generation from Rengali and Balimela power stations. The Commission has noted with displeasure the indifferent attitude shown by GRIDCO in its filing in this regard.

6.6.3.18

Upper Kolab : This power station located in Southern Orissa has an installed capacity of 320 (4 X 80) MW and the annual energy availability is 95 MW or 832 MU. GRIDCO has made a projection of 541.94 MU for drawal of power from Upper Kolab for the year 2000-01 based on actual generation for five months from April-August, 2000 and forecast for the balance period (Sept. - March, 2001) which is based on that achieved for the same months in FY 1998-99 when the reservoir levels were closest to current level. On 31.8.98 the reservoir level was 850.41 metres as against 849.10 metres on 31.8.2000. As on 01.12.2000 the reservoir level is 850.16 metres. Generation projection made by OHPC for this power station on three different occasions is given below.

Feb., 2000	725 MU (OHPC letter No. 1917 dtd.02.02.2000)
Oct., 2000	518.81 MU (OHPC letter No. 14775 dtd.24.10.2000)
Dec. ,2000	518.81 MU (OHPC letter No. 14775 dtd.24.10.2000)

6.6.3.19

An examination of the forecast made by OHPC on 22.12.2000 shows that 402.218 MU has been generated from April - November, 2000. The anticipated generation from December, 2000 to March, 2001 is 122.548 MU. Thereby a total generation of 524.766 MU is expected to be generated by March, 2001. As this forecast has been revised by OHPC based on the latest reservoir levels as on 01.12.2000 the Commission thinks it prudent to accept the generation figure given by OHPC and this has been accepted by GRIDCO, therefore, accepts the figure of 524.766 MU for the year 2000-01 and a drawal of 519.52 MU.

6.6.3.20

The total drawal from the four generating stations of OHPC approved by the Commission is in Table : 15.

Table : 15

6.6.3.21

Upper Indravati : The firm availability of Upper Indravati Hydro Electric Project with a proposed installed capacity of 4X150 MW is 1942.38 MU. The first and second units of the generating station were commissioned in 1999-00. The third unit was commissioned during September, 2000 and the fourth unit is likely to be commissioned in February, 2001. GRIDCO had initially proposed to procure 1263.02 MU in the ensuing year and has explained that evacuation of Upper Indravati generation is constrained by the single 315 MVA auto-transformer and the single 400 kV Rengali-Jeypore PGCIL feeder and evacuation is also affected by shut down. The Commission in its BST order dtd. 30.12.99 (Case No. 12 of 99) had directed GRIDCO to concentrate on better evacuation facilities for drawing more power from Indravati.

6.6.3.22

OHPC in its letter No. 1917 dtd.02.02.2000 had already indicated GRIDCO its capability of supplying 1800 MU during 2000-01. Even in its latest generation plan dtd. 22.12.2000 OHPC projects a generation of 1727.715 MU. Contrary to this, GRIDCO had initially estimated only a drawal of 1263.02 MU from this power station for the year 2000-01 citing constraint in evacuation. In this connection, in response to Commission’s query GRIDCO has clarified that due to non-availability of towers, conductors and due to right off way problem the 220 kV Indravati-Theruvali DC line (1^{st line) could not be completed. GRIDCO has stated that every effort is being made to complete this line within this Financial Year.}

6.6.3.23

An examination of the forecast made by OHPC on 22.12.2000 shows that 994.64 MU has been generated from April - November, 2000. The anticipated generation from December, 2000 to March, 2001 is 733.075 MU which is equivalent to 275 MW. Thereby a total generation of 1727.715 MU is expected to be generated by March, 2001. In a fresh filing made on 02.01.01 termed as Revision to rejoinder to queries and objections raised during hearing on the BST Application FY 2001 GRIDCO has revised its procurement schedule from Indravati as proposed by OHPC. As this forecast has been revised by OHPC based on the latest reservoir levels as on 01.12.2000 and accepted by GRIDCO now, the Commission thinks it prudent to accept the generation figure given by OHPC and, therefore, accepts the figure of 1727.715 MU less auxilliary i.e. 1710.44 MU for the year 2000-01.

6.6.3.24

From the above analysis of hydro generation availability, it is estimated that GRIDCO would be able to draw a total of 4810.74 MU of Hydro power within the State during 2000-01 as detailed below :-

Four generating stations of OHPC	2798.30 MU
Machhkund	302.00 MU
Indravati	1710.44 MU
	-------------------------
	4810.74 MU

6.6.3.25

Since the Commission has estimated the power requirement for 2000-01 at 11011.39 MU, the balance requirement i.e. (11011.39 - 4810.74) 6200.65 MU has to be purchased from other sources.

6.6.4

Dedicated Thermal Power Stations

6.6.4.1

Talcher Thermal Power Station (TTPS) : This 460 MW generating station located almost at the centre of the State is owned and operated by NTPC but fully dedicated for the State. In terms of the PPA entered between GRIDCO (OSEB) and NTPC the plant load factor of TTPS was to be maintained at 62.78% with an auxiliary consumption of 11.75% for 1999-00. Since TTPS is a dedicated power station of the State, its entire fixed cost has to be paid by GRIDCO on account of contractual obligation. GRIDCO had prepared the procurement plan for TTPS by considering the actual generation of past 5 months and adopting for the balance forecast provided by NTPC and has arrived at the figure of 2108.72 MU for the year 01. During the year 1999-00 GRIDCO has drawn 2035.96 MU.

6.6.4.2

GRIDCO has submitted that NTPC in December’99 proposed a generation plan for TTPS indicating a station generation of 2538.65 MU (PLF - 63%). Subsequently NTPC filed a petition before the CERC to approve TTPS tariff and provided GRIDCO the indicative tariff computation for FY 01 to FY 05 which shows a generation of 2039 MU for FY 01 to 05 which corresponds to a PLF of 57.5%. NTPC has justified this reduction as the PLF was 57.25% for FY 00 and 55.9% in first 5 months of the year 2000-01. Further, NTPC has increased the auxiliary consumption to 12% from 11.75%.

6.6.4.3

The PPA for TTPS was for a period of 5 years with effect from 08.03.95. Clause 14 of the said PPA provides that the agreement shall continue to operate till the agreement is formally reviewed, extended or replaced. On account of clause 14 of the PPA, the Commission considers the quantum of generation should be calculated at a PLF of 62.78% as was existing for the year 1999-00 until a final decision is taken on the matter by CERC and a fresh PPA is signed with GRIDCO. Thus the Commission approves a drawal of 2232.53 MU for the year 2000-01 which is within the target set by NTPC for TTPS in their generation plan given in December, 1999.

6.6.4.4

Ib Thermal (OPGC) : Orissa Power Generation Corporation owns the thermal generating stations at Ib with an installed capacity of 420 MW. The normative availability at a plant load factor of 68.49% of Ib TPS is 380.10 MW i.e. 2280.57 MU. During 1999-00, 2839.67 MU was drawn by GRIDCO from this station.

6.6.4.5

GRIDCO in para 2.3.5 of the main text of BST application has stated that the procurement schedule of OPGC is based on actuals for five months and generation & maintenance schedule provided by OPGC for the balance period.

6.6.4.6

OPGC in their generation plan of 25.01.2000 had projected station target generation of 2900 MU with auxilliary consumption of 290 MU thereby showing a net availability of 2610 MU at GRIDCO bus. As GRIDCO’s projection of 2658.63 MU is close to OPGC’s generation schedule, the Commission accepts the figure of 2658.63 MU for the year 2000-01 from this station.

6.6.5

Power Purchase from Central Power Stations

6.6.5.1

Central Generating Stations : GRIDCO has submitted that Orissa has a share in NTPC stations located in the Eastern Region as well as Chukha Hydro Electric Project of Bhutan and a share in Rangit Hydro Electric Project of Sikkim from which GRIDCO is unwilling to procure power because of its high cost. The energy available to GRIDCO depends on the generation and share in these stations in a month. GRIDCO has also submitted a statement of energy drawal for the first five months of the FY 2001 in its filing. The Commission considers that this drawal from Central Generating Stations should be limited to the barest minimum in keeping with the concept of least cost combination of power procurement, contractual obligation with the central generating station and inadvertent power flow to the system. The Commission, therefore, decides to limit the quantum of drawal from the central generating stations for the pooled power to the actual quantity drawn during the first five months of FY 2001 only as more than that quantity cannot be accommodated in the least cost combination of power procurement for consumers of Orissa. Any extra purchase from central generating station can be made only for export outside Orissa in a commercially remunerative arrangement.

6.6.5.2

Rangit : This is a 3X20 MW hydro station in Sikkim that commenced generation from February, 2000. GRIDCO has been assigned a share of 10 MW by CEA on 17.4.2000 and booked on first charge basis on a provisional rate of 211 paise/unit for FY 2000-01 as approved by CERC. GRIDCO has stated that they have intimated Member Secretary, EREB on 14.8.2000 about their unwillingness to procure this costly power from Rangit HEP and has requested for no booking on account of this HEP from August, 2000. GRIDCO has not considered any procurement from Rangit HEP for the current year’s application except 14.61 MU that was assigned to it for the period of April-July, 2000 as per actual drawal. The Commission approves a drawal of 14.61 MU from Rangit for FY 2001.

6.6.5.3

Chukha : Orissa has a share of generation from Chukha Hydro Power Station in Bhutan which is received through the Eastern Regional Electricity Grid. During the year 1999-00 GRIDCO had drawn 148 MU from this station. GRIDCO has proposed a drawal of 214.59 MU based on monthly share of 17.4% and actual drawal upto date of filing. Based on the principle dealt in para 6.12.1 of this order Commission approves a drawal of 132.64 MU for the FY 2000-01.

6.6.5.4

Talcher Super Thermal Power Station (Kaniha) : This generating station with an installed capacity 1000 MW (2 X 500) is owned and operated by the National Thermal Power Station. Orissa has an allocated share of 26.2% in this generating station which works out to 262 MW. During 1999-00, GRIDCO had drawn 495.681 MU. For the year 2000-01, GRIDCO proposes a drawal of 991.09 MU. The Commission approves a drawal of 309.69 MU.

6.6.5.5

Farakka Super Thermal Power Station (West Bengal) : This is another generating station owned and operated by National Thermal Power Corporation with an installed capacity of 1600 MW. Orissa has an allocated share of 14.69% i.e. 235 MW in this generating station. During 1999-00, GRIDCO had drawn 238.307 MU and the proposed drawal for the year 2000-01 is 432.32 MU. The Commission approves a drawal of 90.01 MU.

6.6.5.6

Kahalgaon Super Thermal Power Station (Bihar) : Installed capacity of this generating station is 840 MW. Orissa has an allocated share of 16.07% i.e. 135 MW. During 1999-00 Financial Year 5.875 MU were drawn from this station. Projection for the year 2000-01 made by GRIDCO is 91.93 MU. As no energy has been drawn from this station during the months April-August, 2000, the Commission, therefore, assigns nil drawal from this station for the purpose of least cost combination of power procurement.

6.6.5.7

Captive Power Plants (CPPs) : The Captive Power Plants of the State supplied 650.263 MU to GRIDCO in 1999-00. The power supply from these stations is not firm in nature and is supplied to the system as and when available and required. GRIDCO has stated that procurement from CPPs during the months May-July, 2000 was between 20 to 25 MU per month. The procurement from CPPs for the balance months has been restricted to the levels of May-July, 2000 considering substantial cut back in generation by NALCO. GRIDCO has, accordingly proposed to draw 254.53 MU from the CPPs. Some of the objectors have suggested that drawal from CPPs should be maximised. According to our analysis, the cost of power of CPP is cheaper than the total cost/unit from the central stations including Chukha Hydro Electric Project. This has been a poor hydrology year and Commission has already advised the licensee to maximise drawal from CPPs for the FY 2000-01. After taking into consideration the power availability from OHPC, OPGC, TTPS and Central Generating Stations the balance requirement of power i.e. 762.53 MU should at least be drawn from the CPPs within the State. Therefore, the Commission approves a drawal of 762.53 MU from the Captive Power Plants.

6.6.5.8

A summary of GRIDCO’s proposal for purchase of power generating station wise and the Commission’s approved quantum of purchase is given in Table : 16.

Table : 16

6.7

Cost of Power

6.7.1

GRIDCO in para 2.3 in the main text of the BST application have stated that the procurement plan has been developed on a monthly forecast of demand and supply to reflect the reality of load despatch and demonstrate merit order procurement. The cost of procurement is not linear and depends on the magnitude of purchase in a month in respect of central stations. Therefore, aggregation of power purchase will mean ignoring the despatch order and the cost implication. GRIDCO, therefore, has proposed a monthly forecast unlike annual aggregation to account for the seasonal availability of hydro power and also to take care of scheduled maintenance of various generating stations.

6.7.2

The Commission has examined this suggestion of GRIDCO. It is observed that GRIDCO is dependent on purchase of power from OHPC including Upper Indravati and Machhkund, OPGC, TTPS, CPPs within the State and the central generating stations. Bound by the PPAs, GRIDCO has to pay the fixed cost in respect of all the dedicated stations within the State. Costing of power on monthly basis from the dedicated stations will not make a difference at the normative level of operation as the fixed costs have to be paid calculated on an annual basis.

6.7.3

An accurate level of monthly requirement is yet to be established through a scientific method of load forecasting by distribution companies. As far as the central generating stations are concerned, the cost per unit of these stations is variable in nature and the rate of this power can be correctly ascertained only after the actual level of generation is known at the end of the year. The Commission, for determination of the cost of power of central generating station, has relied on the normative parameters subject to adjustment at the end of the year. Keeping the above position in view, the Commission has calculated the cost of power based on the annual requirement of GRIDCO for the year 2000-01.

6.7.4

Implementation of the Availability Based Tariff (ABT) will require accurate level of forecasting linked to financial penalty/incentive for over drawal and under drawal. Unless correct load forecasting, generation scheduling, variation in load pattern is communicated online enormous financial implications to the utilities will be unavoidable. Keeping this object in view it is time that both the distribution licensee as well as the Bulk Supply and Transmission licensee must prepare the ground work for implementation of the scheme by having frequency related metering in position wherever required along with communication links and load forecasting arrangements. Therefore, the technique of annual aggregation now being followed will undergo a sea change once ABT in place.

6.7.5

The cost of power in respect of generating companies and generating stations, analysed and approved by the Commission in the following paragraphs, are best estimates of the Commission based on extant rules and orders of appropriate authorities, currently valid PPAs and other relevant factors. They do not supplant the jurisdiction of other statutory authorities like Central Electricity Regulatory Commission to determine the rate of power generated by central sector generating stations and transmission charges payable to the central transmission utility, changes in statutory rates like income tax, water cess and changes in contractual provisions.

6.7.6

OHPC

6.7.6.1

Machhkund : The cost of power from Machhkund is projected as 8 paise/unit as in the previous year 1999-00. This cost is accepted by the Commission for the year 2000-01.

6.7.6.2

Hirakud, Rengali, Balimela and Upper Kolab : GRIDCO has submitted a tariff calculation sheet prepared by OHPC for purchase of power from OHPC for the year 2000-01 (OERC Form TRT-1). The interim PPA for the Financial Year 1998-99 to FY 2000-01 between OHPC and GRIDCO has been separately submitted by GRIDCO to the Commission for approval on dtd. 27.7.2000 (ED-8). This has been recorded as a proceeding by the Commission vide Case No. 15/2000 and the matter is under process for finalisation. GRIDCO in its application at para 2.4.1 has stated that the interim PPA submitted to the Commission proposes rate of 50.07 paise/unit for energy supplied by these stations and is adopted for this application. GRIDCO has further stated that OHPC cost is taken as variable cost (given the provisions of the interim PPA) as against treating this cost as fixed in the previous year’s BST application which reflected the then prevailing arrangement. An examination of the bills (April-August, 2000) raised on GRIDCO shows that OHPC is billing GRIDCO @ 49 paise/unit (Addl. ED-6). Clause 6 of the interim PPA is reproduced below :-

"The provisional tariff for sale of energy from OHPC power stations to GRIDCO for the year 1998-99, 1999-00 & 2000-01 shall be 49 paise/unit as indicated at Annex-I. Energy supplied in shall be 49 paise/unit as indicated at Annex-I. Energy supplied in committee will be treated as secondary energy, the cost of which will be paid in accordance with OERC."

6.7.6.3

The rate of 50.07 paise/unit as proposed by GRIDCO is not acceptable to the Commission as the parties in the interim agreement already agreed to a provisional tariff of 49 paise/unit for the period of interim agreement. Since the power purchase bills by OHPC are being raised @ 49 paise/unit, the Commission, therefore, approves a rate of 49 paise/unit for 2000-01 subject to final approval of the PPA and adjustment of cost of power, if any, at an appropriate date. OHPC being a dedicated station of the State, the expenses on this account may be treated as a part of fixed cost even though the total cost payable to OHPC is related to the quantum of energy supplied by OHPC which may be variable in nature.

6.7.6.4

Upper Indravati Hydro Electric Project (UIHEP) : GRIDCO has submitted that according to PPA 70% of the total fixed cost shall be charged on commissioning of the first unit, 80% on commissioning of the second unit, 90% on commissioning of the third unit and full capital cost recovery at commissioning of the fourth unit. GRIDCO has also stated that until all four units come into operation, the PPA proposes a single part tariff on energy sent out from this station for the year 2000-01.

6.7.6.5

The PPA for Upper Indravati was approved by OERC vide order dtd. 23.3.2000 (Case No. 17/99) wherein OERC directed exclusion of Rs.131.68 crores from the project capital cost for computation of tariff. GRIDCO has stated that it has worked out a tariff computation based on the reduced project cost. In its tariff computation statement (TRT-11) the cost of procurement from Upper Indravati has been given as 97.09 paise/unit for April-September, 2000, 109.23 paise/unit for September-January, 2001 and 121.37 paise/unit for February-March, 2001.

6.7.6.6

After examination of the proposed rate, the Commission sought clarification from GRIDCO on the actual interest paid and the loan repayment schedule for determining the tariff for different stages of the commissioning. In its clarification dtd.28.10.2000 GRIDCO stated that it had not yet received the interest and loan repayment schedule from OHPC and it shall be submitting on receipt of the same from OHPC.

6.7.6.7

This issue was raised again by Director (Tariff) during the hearing dtd.15.12.2000 as the Commission had in the mean time received the loan repayment and interest repayment schedule from OHPC. In its clarification to Director (Tariff) dtd. 23.12.2000 GRIDCO has recalculated the Upper Indravati tariff (Annex-I) and has revised the rates of Indravati for FY 2001 as given in Table : 17.

Table: 17

6.7.6.8

The rate recalculated by GRIDCO is examined at Commission’s end. Clause 9.3 of the schedule 5 of UIHEP PPA provides that "for calculation of tariff the approved project cost will be apportioned as detailed below and the designed energy will be taken as 1942.38 MU.

After commissioning of Unit I	70% of the Project Cost
After commissioning of Unit II	80% of the Project Cost
After commissioning of Unit III	90% of the Project Cost
After commissioning of Unit IV	100% of the Project Cost

6.7.6.9

OHPC has intimated that for 2000-01, a sum of Rs.34.93 crores has been paid towards interest to PFC and Rs.1.6 crores towards guarantee commission. There has been no payment to Government towards interest. Depreciation has been limited to Rs.30.61 crores which is linked to repayment of PFC loan.

6.7.6.10

Based on the aforesaid provision the rate re-calculated by GRIDCO in the Table : 17 for different stages of commissioning is accepted. For the year 2000-01 due to commissioning in stages the average rate works out to 63.27 paise/unit. The Commission approves this average rate for the purpose of determination of cost of power from this station.

6.7.6.11

With the approval of PPA, it is necessary that the tariff for the year 1999-00 be recalculated by the concerned authorities accordingly.

6.7.7

Talcher Thermal Power Station (TTPS) : GRIDCO has submitted that the fixed cost of the station i.e. Rs.183.61 crores is based on a submission filed by NTPC before CERC for the FY 2000-01. GRIDCO has also stated that NTPC has adopted different parameters than that existing in the PPA as per the details given below :-

• PLF 57.5% from 62.78%

• Heat rate 3300 K. Cal/Kwh from 3200 K. Cal/Kwh

  • Auxilliary consumption 12% from 11.75%

  • Specific oil consumption 7 ml. from 10 ml.

6.7.7.1

According to GRIDCO, NTPC has stated that the station parameters signed in its earlier PPA could not be achieved and proposes what is an achievable target. In view of this argument GRIDCO in its initial filing has adopted the NTPC tariff computation for FY 2001 which gives a variable charge of 55.66 paise/unit. GRIDCO has proposed a variable charge of 60.76 pause/unit based on the cost of fuel, (coal and oil) and its calorific value of the latest bills for August, 2000.

6.7.7.2

During the course of the tariff hearing GRIDCO was asked to clarify why the tariff of TTPS system has not been based on the existing PPA which provides for continuation of the existing terms and conditions till the PPA is rescinded/revised/renewed. In response to this GRIDCO has replied on 23.12.2000 that the tariff for TTPS ended on 31.3.2000. As per the ERC Act NTPC has filed a petition before CERC for approval of tariff as this station is owned by a Govt. of India undertaking i.e. NTPC even though fully dedicated for the State. NTPC proposes a fixed cost of Rs.184.7 crores for TTPS. The tariff when approved will become effective from 01.4.2000. GRIDCO has further suggested that if the Commission does not recognise the additional cost as the tariff norms have not yet been approved by CERC then the additional cost may be allowed as a surcharge from the effective date of the proposed BST FY 2001 consequent to CERC passing the order.

6.7.7.3

After analysis of the proposal of GRIDCO the Commission feels that as CERC has not yet revised the tariff norms of the extant PPA between NTPC (TTPS) and GRIDCO, Commission has based its calculation for TTPS in terms of the various parameters for the year 1999-00 as outlined in the said PPA. The significant parameters are :-

• Station PLF of 62.78%

• Auxilliary consumption of 11.75%

• Heat rate of 3200 K. Cal./Kwh

• Specific oil consumption 10 ml./Kwh

6.7.7.4

Fixed Cost : GRIDCO has initially proposed a fixed cost of Rs.183.62 crores which has been revised to Rs.159.7 crores on 23.12.2000 which has been calculated as Rs.151.44 crores at the Commission’s end as analysed in Table : 18.

Table: 18

6.7.7.5

The Commission for the purpose of calculation of fixed cost has accepted the norms as agreed in the PPA for the year 1999-00 between GRIDCO and NTPC. Hence there is difference in figures in respect of Operation & Maintenance expenses and the Interest on Loan calculated by GRIDCO. With regard to Renovation & Modernisation expenses GRIDCO has considered Rs.150 crores upto FY 2001. But the expenditure towards R&M for Phase-I and Phase-II upto March, 2000 was found to be Rs.125.09 crores. The additional fixed cost for this station has been worked out on this investment of Rs.125.09 crores but adopting the norms fixed in the PPA i.e. @ Rs.1.7 lakhs/month for each crore of additional investment.

6.7.7.6

Variable Charge : GRIDCO had initially proposed a variable charge of 60.57 paise/unit as in DF-14 and a variable charge of 60.76 paise/unit was proposed in Main Text. Subsequently, in its reply dtd. 23.12.2000 GRIDCO has revised the auxilliary consumption to 11.75% and heat rate 3200 K. Cal/Kwh. On this basis the variable charge proposed is 59 paise/unit.

6.7.7.7

Commission has based its calculation of variable cost on the cost of fuel (coal & oil) and the calorific value has been averaged for a period of 12 months, based on the cost of coal & oil and calorific value for the first five months of the year 2000-01 and projection made for the rest of seven months based on the figures of the months of August, 2000. Accordingly, the Commission approves the variable charge of 58.97 paise/unit.

6.7.7.8

Miscellaneous Charges : GRIDCO has proposed that as an year end adjustment, water cess and water charges for the ensuing year are based on the actual billing in the year 1999-00 and is estimated to be Rs.0.072 crores and Rs.0.569 crore respectively. Income Tax is estimated at Rs.47.757 crores based on advance tax paid for April, 99 to February, 2000 and annualised. The Commission approves the amount proposed by GRIDCO on account of Water Cess and Water Charges and accordingly, approves a figure of Rs.0.64 crores. The Commission calculated the tax and accepts a figure of Rs.47.76 crores for the purpose of Income Tax as proposed.

6.7.7.9

The Commission, therefore, approves a total rate of 148.48 paise/unit as against a rate of 170.51 paise/unit proposed by GRIDCO.

6.7.8

Orissa Power Generation Corporation (OPGC) plant at Ib Valley : GRIDCO in its tariff computation has proposed the fixed cost charge for this plant as Rs.251.82 crores. The fixed cost computation of GRIDCO as per ED-11 filed with the Commission is Rs.251.78 crores which is the revised figure in accordance with terms of PPA. Therefore, the Commission has accepted the figure of Rs.251.78 crores as submitted in ED-11.

6.7.8.1

Variable Charge : GRIDCO has proposed the variable charge at 48.24 paise/unit based on the tariff computation in ED-11. The Commission accepts a rate of 48.24 paise/unit against variable charge.

6.7.8.2

Fuel Price Adjustment : GRIDCO has proposed a FPA of 4.52 paise/unit based on the fuel prices of August, 2000 in DF-14 and while in Main Text they have proposed 4.46 paise/unit for FPA. This has been examined at the Commission’s end. The cost of fuel (coal & oil) and the calorific value has been averaged for a period of 12 months, based on the cost of coal & oil and calorific value for the first five months of the year 2000-01 and projection made for the rest of seven months based on the figures of the months of August, 2000. Accordingly, the Commission approves the FPA of 4.51 paise/unit.

6.7.8.3

Miscellaneous Charges : GRIDCO has proposed as year end charges :

• Incentive of Rs.21.52 crores computed on 87.82% availability

• Land Tax and Water Cess of Rs.0.92 crores, which is the actual billing to GRIDCO in FY 2000

• Extra oil consumption due to backing down/tripping of Rs.1.10 crores, which is the actual billing to GRIDCO in FY 2000

• Electricity Duty of Rs.0.08 crores, which is the actual billing to GRIDCO in FY 2000

6.7.8.4

This has been examined at the Commission’s end. Incentive has been taken as Rs.12.39 crores based on drawal of 2658.63 MU without taking deemed generation into consideration. The other elements of miscellaneous charges of Rs.2.10 crores comprising of Land Tax & Water Cess, Extra oil consumption and Electricity Duty have been accepted by the Commission.

6.7.8.5

On the above basis, the Commission approves a rate of 152.91 paise/unit as against a unit rate of 156.36 paise/unit proposed by GRIDCO.

6.7.9

Captive Power Plants (CPPs) : GRIDCO has submitted that the rate of 77 paise/unit for purchase of power from Nalco along with fuel price escalation was agreed between Nalco, Govt. of Orissa and OSEB on 1^{st of June, 1994. GRIDCO has proposed a rate of 93.76 paise/unit based on actual bills by Nalco for August, 2000. This rate has been accepted by the Commission for power purchase from CPPs.}

6.7.10

Central Power Stations

6.7.10.1

Transmission Loss : Transmission losses occurring in the central lines are shared by the constituents of Eastern Region. This loss is calculated at 2.49% by GRIDCO and accordingly the fixed charge and variable charges are adjusted to account for the losses in the central transmission system. The losses calculated by the Commission works out to 2.44% based on the global accounts of April to August, 2000.

6.7.10.2

Transmission Charge for PGCIL Lines : GRIDCO has stated that Govt. of India Notification dtd. 04 December, 1998, 11 May, 1999, 14 May, 1999 together notified tariffs of Farakka, Kahalgaon, Talcher and Chukha transmission system as well as Rangit/Melli and Rangit/Raman lines. The CERC has passed interim orders for payment of 80%, 88% and 80% of the fixed cost indicated by PGCIL in their application for Dehri-Karmanasha, Jeypore-Gazuwaka and Budhipadar-Korba transmission lines. PGCIL has submitted application to CERC for tariff fixation for Rangit-Siliguri and Malda-Bongaigaon transmission system. GRIDCO has considered the annual fixed charges for all the above based on the order or application as applicable. GRIDCO has further stated that PGCIL is eligible for incentive for availability of 95%. GRIDCO has assumed an availability level of 99% for computation of incentive for the year 2000-01 based on their past performance. GRIDCO has stated that income tax of Rs.9.413 crores payable by PGCIL based on the amount paid by PGCIL for FY 2000 has been considered for the FY 2000-01.

6.7.10.3

GRIDCO has also reported that for recovery of annual maintenance cost of special type energy meters for Rs.0.05 crores and foreign exchange rate variation of Rs.5.18 crores is considered for the ensuing year by PGCIL. GRIDCO estimates its share of transmission charges based on actual forecast drawal from EREB to be Rs.28.86 crores, out of a total of Rs.314.58 crores as transmission charges for central generating stations in the Eastern Region.

6.7.10.4

Computation of transmission charges proposed by GRIDCO was analysed by the Commission. In their clarification dtd.13.11.2000 to the Commission GRIDCO stated that towards Jeypore-Gazawaka line GRIDCO has admitted Rs.36.91 crores as per CERC order. In response to Director (Tariff)’s query raised during the hearing they have further clarified in their rejoinder dtd.23.12.2000 that the Rangit-Siliguri and Malda-Bongaigaon lines are under commercial operation since 12/98 and 4/2000 respectively. However, the transmission charges for these two lines are yet to be approved by CERC. It is found from the PGCIL bills that GRIDCO has been receiving bills on account of Rangit-Siliguri but bills for Malda-Bongaigaon are yet to be received. It has been decided that for the year 2000-01 the transmission costs of Malda-Bongaigaon lines will not be considered. Accordingly, as against the proposal of Rs.279.1 crores towards transmission costs for the various PGCIL lines a total of Rs.219.98 crores is accepted by the Commission.

6.7.10.5

The proposal of GRIDCO on account of miscellaneous charges is accepted by the Commission as in Table : 19.

Table : 19            

6.7.10.6

Therefore, a total of Rs.252.98 crores is accepted for the purpose of determination of rate of transmission charges for the year 2000-01 to be payable by GRIDCO on the energy drawn in PGCIL transmission lines, subject to further adjustment on account of decision of CERC on various issues relating to transmission line costs. Accordingly, a rate of 13.67 paise/unit is approved as transmission charges payable by GRIDCO for central transmission system which is exclusive of central transmission loss and when adjusted for central transmission loss the rate works out to 14.01 paise/unit.

6.7.11

Chukha : GRIDCO has stated that as per Govt. of India notification dtd. August 26, 1999 the power purchase cost from Chukha Hydro electric station has been taken

• As 100 paise/unit for the period from June-September, 2000 and

• 150 paise/unit for balance period (April-May, 2000 and October, 2000 - March, 2001)

• A further 5 paise/unit is added to the above rates based on PGCIL letter dtd.Nov.1999 to the Eastern Region beneficiaries, levied for the Power Trading Corporation (PTC)

6.7.11.1

The effective procurement cost of GRIDCO is higher and it has to bear PGCIL line losses and PGCIL transmission charges. The annual average rate/unit of Chukha power thus has been proposed as 142.27 paise/unit inclusive of central line losses. The Commission accepts the rates as proposed above as they are based on Govt. of India notifications. A rate of 142.13 paise/unit is approved for 2000-01 inclusive of transmission charges and central transmission losses.

6.7.12

Rangit : GRIDCO has proposed a rate of 233.4 paise/unit inclusive of central transmission charges and central losses in Table-16 of Main Text for a total drawal of 14.6 MU from this station. This has been calculated based on the provisionally approved rate by CERC @ 211 paise/unit for the FY 2000-01. The Commission has based its calculation on this approved rate and accordingly has worked out a total rate of 230.28 paise/unit inclusive of central transmission charges and central transmission loss.

6.7.13

Central Thermal Power Station : Under ERC Act, the tariff in respect of the Central Power Stations will be determined by the Central Electricity Regulatory Commission from 15.5.99 onwards.

6.7.13.1

The Ministry of Power, Govt. of India have notified the tariff in respect of the Talcher Super Thermal Power Station Kaniha (Orissa), Farakka Super Thermal Power Station (West Bengal), Kahalgaon Super Thermal Power Station (Bihar) under Section 43(A) of The Act, 1948 prior to 15.5.99. This tariff is, therefore, current and has not been replaced as yet.

6.7.13.2

The Commission has analysed the various parameters for calculation of tariff payable by GRIDCO for drawal of power from Central Thermal Stations.
Energy sent out ESO

Table : 20

*     Vide letter dtd.9th June, 1999 (ED-23)
**   Table-11, Page-19 of Main Text
^     ED-23

6.7.13.3

GRIDCO has made its ESO forecast for the Central Thermal Stations based on actual data for five months and the load generation balance report of Eastern Region for the remaining months of FY 2000-01. The Commission accepts the estimate of GRIDCO and has based its tariff calculation on this ESO forecast.

6.7.13.4

Fixed Cost : The fixed cost proposed by various central thermal stations based on Govt. of India notification is given in Table : 21.

Table : 21

6.7.13.5

GRIDCO has considered the last available notification rate for the ensuing year for Farakka and Kahalgaon.

6.7.13.6

Further in a rejoinder dtd.23.12.2000, GRIDCO has stated that the fixed costs for Farakka and Kahalgaon have been determined on the basis of audited account of 1996-97 and audited accounts of 1997-98 for Talcher STPS. The impact of additional capital expenditure capitalised in each FY during the tariff period from 01.7.96 to 31.3.2000 for FSTPS, 01.8.96 to 31.3.2000 for KhSTPS and 01.7.97 to 31.3.2000 for FSTPS were to be determined by Central Govt. immediately on finalisation of accounts. As provided in Govt. of India notification the effect of the foreign exchange variation payable to NTPC were to be determined by Govt. of India. A petition before CERC for determination of FERV and expense on capitalisation has been filed by NTPC. Taking into account the recent petition filed in CERC by NTPC for recovery of foreign exchange variation and capitalisation expenses, the fixed cost has been calculated by GRIDCO and proposed to the Commission.

6.7.13.7

This has been examined at Commission’s end. In the absence of any order by CERC the Commission provisionally approves the fixed cost as per the existing Govt. of India notification subject to final order of CERC. Accordingly, the fixed cost as proposed by GRIDCO and as approved by the Commission for the purpose of tariff calculation for 2000-01 is given in Table : 22

Table : 22

6.7.13.8

GRIDCO has requested the Commission that as no order has been passed by CERC the Commission should allow the recovery of additional cost as a surcharge from the effective date of the proposed BST FY 2001 as and when CERC passes the order. The Commission finds it proper that additional charges if any, on account of CERC order are recovered by GRIDCO after finalisation of accounts of the corresponding year.

6.7.13.9

Variable Charge : GRIDCO has proposed the variable cost charges for central thermal stations based on the prevailing Govt. of India notification.

Table : 23

6.7.13.10

The Commission has accepted the rates as provided in Govt. of India notification as outlined above. The rates of variable charges inclusive of adjustment for central line losses proposed by GRIDCO and accepted by the Commission is given in Table : 24.

Table : 24

6.7.13.11

Fuel Price Adjustment : FPA has been calculated by GRIDCO on the basis of actual bills for the period April to August, 2000. For the balance period the parameters (cost and calorific value of coal and oil) as per bill of August, 2000 has been adopted.

6.7.13.12

The Commission accepts this principle for calculation of FPA. The rates of FPA as proposed by GRIDCO and as approved by the Commission is given in Table : 25.

Table : 25

    *As proposed in DF-14 given in Main Text. However, these figures are at variance with figures given in para 2.4.9.3, page 25 of Main Text.

6.7.13.13

Miscellaneous Charges (Income Tax, Incentive, Water Cess and Water Charges) :
GRIDCO has projected the year-end adjustment for water cess, water charges, incentive and income tax. All year end charges are based on actual bills of NTPC received by GRIDCO during FY 1999 and FY 2000. GRIDCO has stated that year-end charges adjusting for the central line losses for FY 01 is 27.87 paise/unit for TSTPS, 30.46 paise/unit for FSTPS and 26 paise/unit for KSTPS (para 2.4.9.4 of Main Text).

6.7.13.14

The Commission has analysed the various charges as below :-

6.7.13.15

Income Tax has been estimated for all the three stations based on actual amount paid towards income tax for April, 99 to February, 2000 and annualised as in Table : 26.

Table : 26

6.7.13.16

The Commission approves an amount of Rs.357.14 crores towards income tax for 2000-01 for all these stations which is as proposed by GRIDCO.

6.7.13.17

In respect of water cess and the calculations based on the bills of FY 1999-00 for Farakka and Kahalgaon and in respect of TSTPS it is based on the actuals of FY 2000 (DF-19). A comparative picture of the proposal of GRIDCO and approval of the Commission in respect of each station is given in Table : 27.

<

Table : 27

6.7.13.18

Incentive payable to CGS for FY 2001 is computed on an availability of 90% (PLF + deemed generation) by GRIDCO. For the purpose of calculation of incentive estimated deemed generation in respect of these stations have been considered by the Commission based on the performance of first six months i.e. April, 99 to September, 99 as per bills given by NTPC for incentive. According to that consideration the availabilty in respect of these three stations are given in Table : 28.

Table : 28

6.7.13.19

Incentive is payable @ one paise/unit for PLF exceeding for each percentage rise over the normative PLF of 68.49%. Therefore, incentive payable for FY 2000-01 in respect of each of the stations approved by the Commission is in Table : 29.

Table : 29

6.7.13.20

The rate of miscellaneous charges inclusive of central line losses as proposed by GRIDCO and as approved by the Commission is in Table : 30.

Table : 30

*As proposed in DF-14 given in Main Text. However these figures are at variance with the figures shown in in para 2.4.9.4, page-25 of Main Text.

6.7.13.21

Commission approves a figure of Rs.1164.56 crores towards total cost of power. GRIDCO’s proposed cost of power from various generating stations and the Commission’s approved cost in respect of each station is summarised in Table : 31.

Table : 31
Comparison of Power Purchase Costs for 2000-01
GRIDCO’s Proposal

Note : (Central transmission loss of 2.49% for central stations included) Commission’s Approval

Note : (Central transmission loss of 2.44% for central stations included)

6.8

Rebate for Prompt Payment from the Generators
The PPA between the generators and GRIDCO provides for a rebate of 2.5% on the gross power bill if payment is made through Letter of Credit. 1% rebate on the billed amount is allowed when payment is made within 30 days. In case of payment beyond the due date, delayed payment surcharge @ 2% per month on the billed amount is payable by GRIDCO to the generators.

6.8.1

GRIDCO has proposed interest on working capital to meet the expenses in connection with payment of dues of the power bill to the generators. The Sixth Schedule to The Act, 1948, allows an amount of working capital on items other than the cost of generation and purchase of energy. The Commission is of the view that unless a reasonable amount of working capital is allowed to the licensee, it may be difficult on its part to meet the interest expenses on short term borrowings made to pay for the cost of power in time to avail the rebate and avoid delayed payment surcharge.

6.8.2

While the DISTCOs can access the security deposit of the consumers on which they do not pay any interest to the consumers, they do not pay any security deposit to GRIDCO for their power purchase. GRIDCO, therefore, does not have any resources to clear its dues in time if the DISTCOs do not make payment to GRIDCO in time. Considering the above, the Commission has decided that for the purpose of calculation of revenue requirement, the cost of power should be calculated at its gross value and not after excluding rebate. This will offset the shortfall on account of interest on working capital utilised to pay power dues which is not permitted under the Sixth Schedule of the Act, 1948.

6.9

Transmission Cost

6.9.1

The operating expenditure on bulk supply and transmission of energy excluding cost of power procurement has been grouped under the head Transmission Cost.

6.9.2

The anticipated expenditure projected by GRIDCO under various components of the transmission cost has been carefully examined with a view to determine the expenditure which can be considered to be properly incurred for pass through in tariff for 2000-01. The prudence of expenditure for 2000-01 has been examined with reference to the audited accounts of GRIDCO’s transmission licence for the year 1998-99 as GRIDCO has not yet submitted the audited accounts for the year 1999-00 due by September, 2000.

6.9.3

As per licensee condition No.7.2 (d) "the licensee shall, in respect of each separate business (whether or not held by or carried out through a separate company) deliver to the Commission, a copy of each interim profit and loss account not later that three months after the end of the period to which it relates and copies of the accounting statement and the auditors report not later than six months after the end of the financial year to which they relate".

6.9.4

GRIDCO was holder of both the Transmission and Bulk Supply License and Distribution and Retail Supply Licensee for the year 1998-99. Further as per the transfer notification No.16019 dt.15.11.1998. GRIDCO is under obligation to finalise the accounts of Distribution Companies for the year ending 31^{st March, 1999.}

6.9.5

The accounts of GRIDCO for the year 1998-99 has not been properly segregated and separate accounts for the Distribution Business have not been submitted.

6.9.6

The Commission in its letter dt.24.03.2000 did not agree for extension of time for submission of Annual Audited Accounts for financial year 1998-99, for it did not find it appropriate to do so.

6.9.7

The Commission is very much concerned that in spite of the above, the licensee has failed to submit the audited accounts in time.

6.9.8

Orissa Small Scale Industries Association, in their written submission stated that the licensee have not maintained their Annual Accounts properly and correctly. Hence, the licensee should be directed to produce their Annual Accounts prior to submission of their application and more particularly, GRIDCO should be directed to produce copies of annual audited accounts from 1995-96 to 1999-00 and serve a copy on the objector.

6.9.9

Countering the objection GRIDCO replied that the audited accounts for financial year 1998-99 has been made available to OERC. The accounts for the year financial 1999-00 is being compiled.

6.9.10

Non-submission of accounts by the licensee as prescribed under para 7.2 of the licensee is a contravention of the license condition and as provided in condition 24.1, the licensee is liable for penal action under the relevant provisions of the Act.

6.9.11

The Commission directs GRIDCO to make available, the duly segregated and audited accounts of transmission and distribution business for the year 1998-99, and Annual Audited Accounts for the year 1999-00 and also file an explanation separately defending why action as per law should not be initiated for non-submission accounts for the year 1998-99 and 1999-00 in time.

6.9.12

Based on the available information as filed and subsequent clarifications submitted by GRIDCO, the transmission costs are analysed by the Commission as under :

6.10

Employees Cost

6.10.1

GRIDCO in OERC form TRF-13(a) has submitted detailed item wise expenditure under the head of "Employees Cost" for the year FY 1998-99 (Audited Actuals), provisional actual for FY 2000 and estimates for FY 2001. According to this estimate GRIDCO has projected an expenditure of Rs.81.17 crores for the purpose of revenue requirement excluding an amount of Rs.12.22 crores towards expenses capitalised. The estimate of FY 2000-01 is based on an annual rise of 3% for basic pay, 10% rise for DA over the previous year and 6% annual rise in respect of other allowances, bonus, Medical Allowance, LTC and Misc. expenses. GRIDCO has also estimated an annual rise of 31% on interim relief of Staff and encashment of EL, staff welfare expenses over the previous year.

6.10.2

The data and figure submitted by GRIDCO has duly been examined with the audited actuals of 1998-99. In respect of pay a rise @ 3% per annum over the base is considered to determine the basic pay for FY 2000-01. In respect of Dearness Allowance the 10% rise on basic projected by GRIDCO is without any reason. The Commission took into consideration the prevailing rate of DA of 38% effective from 1^{st of July, 2000 and has accordingly estimated expenditure for FY 2001. In respect of medical expenses, reimbursement of house rent, encashment of EL, GRIDCO had estimated certain percentage of annual rise over the previous year. The Commission considers that these expenses are related to the basic pay/DA of the employees concern. Keeping these objective in view, expenses on these heads have been recalculated and indicated in Table : 32.}

6.10.3

Terminal Benefits : GRIDCO has claimed a sum of Rs.27.36 crores in the revenue requirement towards terminal benefit for the FY 2000-01 as against Rs.11.68 crores allowed in the tariff of 1999-00. During the course of the hearing it was raised by the Director (Tariff) to indicate the actual amount of terminal benefit granted to the employees during 1999-00 and the status of accounts of the Pension Trust Fund. GRIDCO in its clarification has submitted that :

• The actual amount of terminal benefit granted to the employees during 1999- 00 is Rs.31.87 crores.

• Accumulated balance of employers contribution towards Employees Provident Fund in the PF Trust will be transferred to the Pension Trust after the accounts of 1998-99 and 1999-00 are audited and getting the necessary approval from concerned authorities. The audited accounts of PF Trust 1997-98 has been attached as ED-9.

• The transfer of funds from RPFC had been pending before the Hon'ble High Court for a long time. The judgement in favour of GRIDCO was delivered on 19.12.2000. GRIDCO is in process of lodging its claim for the transfer of accumulated balance of funds to it. The same will be transferred to the Pension Trust Funds after its receipt.

• Rs.150 crores of bonds will be issued by GRIDCO to the Pension Fund as a part of the transfer scheme, 1996 after finalisation of Pension Trust Account 1998-99 and 1999-00 and approval of guarantee of state government.

6.10.4

GRIDCO in clarification to the queries on BST Application for FY 2001 at para 3.13 has stated that as per the transfer scheme GRIDCO inherited all existing pensioners of OSEB. Further as per the second transfer scheme GRIDCO is liable for payment of terminal liabilities for all employees retiring on or before 31^{st March, 1999. Besides, there has also been revision on minimum basic pension and family pension drawn from Rs.260/- to Rs.1275/-. All these had significant impact on the payment of terminal benefits of GRIDCO and are estimated at Rs.25 crores for FY 2000. The same has been projected on pro-rata basis of for FY 2001 and stands at Rs.27.36 crores.}

6.10.5

The report of the Actuarial Valuer has been submitted to the Commission. As stated earlier GRIDCO has projected a pro-rated figure for the provision of terminal benefits considering the basic pay and DA as the base. The Commission agrees to the concept proposed by GRIDCO and recalculates the provision relating to terminal benefit due to the change in DA for the year FY 2001. The Commission provisionally accepts the terminal benefits for Rs.25.22 crores subject to final adjustment as per the audited accounts for the year 2000-01.

6.10.6

In the light of above observation, the relevant figures on Employees Cost and related expenses are reflected in Table : 32.

Table : 32
Details of Employee Cost (Rs. in crores)

6.10.7

The total Employees Cost chargeable to revenue is Rs.76.31 crores. A comparative table showing the Employees Cost from 1998-99 onwards is given in Table : 33.

Table : 33

6.11

Repair & Maintenance Expenses

6.11.1

GRIDCO has proposed an amount of Rs.23.74 crores towards R&M expenses for the year 2000-01 (TRF-14). The Commission in its order dtd.30.12.99 had allowed an amount of Rs.19.84 crores towards R&M expenses, being 1.5% of the gross fixed asset at the beginning of the year. In the disaggregated audited accounts for the year 1997-98, expenditure on this head was only Rs.9.65 crores.

6.11.2

In the tariff order dated December 30, 1999, the requirement of R&M for 1999-00 was calculated assuming a normative of 1.5% of the gross fixed asset of the company, a practice followed in PGCIL who also operate a transmission system like GRIDCO. This normative percentage was being applied on the re-valued assets of GRIDCO as on 01.04.1996 with subsequent additions. Applying this percentage on the fixed asset of Rs.1322.00 crores at the beginning of the year, a sum of Rs.19.84 crores was allowed for R&M expenses for 1999-00 against Rs.17.36 crores approved by the Commission for the year 1998-99. Actual R&M expenditure as revealed from the audited accounts is Rs.12.36 crores for 1998-99 and provisional figure for the year 1999-00 is Rs.13.46 crores. GRIDCO has stated that the R&M programme suffered during 1999-00 on account of cyclone and subsequent shift in efforts to rehabilitation of affected lines and sub-station. The material meant for R&M in FY 2000 have been procured and its utilisation is under progress due to above delay.

6.11.3

Higher provision in the previous tariff orders towards R&M expenses entitled licensee to recover more than what they actually spent. As stated earlier the material procured in the year 1999-00 is under the process of utilisation. The expected rise in expenditure as shown above for the year 1999-00 is 9% over 1998-99. Accordingly a percentage rise of 9% is considered prudent for estimating the requirement towards R&M expenses over the provisional figure of 1999-00. Hence the Commission approves an amount of Rs.14.67 crores as reasonable for the financial 2000-01.

6.11.4

A comparative picture of R&M expenses is given in Table : 34.

Table : 34

6.12

Administration & General Expenses

6.12.1

A&G expenses include expenses on property related expenses, communication expenses, professional charges, other expenses including expenses on auditing, advertisement, materials related expenses and licensee fees. GRIDCO proposes an amount of Rs.19.85 crores towards A&G expenses for the FY 2000-01 excluding expenses capitalisation of Rs.1.47 crores. The actuals as per audited accounts of 1998-99 and provisionals for 1999-00 is of the order of Rs.18.28 crores and Rs.18.05 crores respectively. GRIDCO in its application while projecting an annual growth forecast of 4.2% has stated that cost control measures has helped contain the rise in A&G expenses. Commission does not find any perceptible austerity measures and obviously no reduction of cost. Moreover the earlier order of the Commission has not been adhered to as the licensee has spent Rs.19.38 crores against Commission’s approval of Rs.11.91 crores. The Commission, therefore, considers an annual increase of 8% towards inflation over the previous year’s approved figure of Rs.10.88 crores excluding Rs.1.03 crores as expenses to be capitalised. In addition to above an amount of Rs.50 lakhs is allowed towards licence fee. The Commission accordingly approves an amount of Rs.12.25 crores towards A&G expenses excluding capitalisation expenses of Rs.1.47 crores for 2000-01. Any expenditure on A&G expenses incurred over and above the approved figure without proper justification cannot be allowed to be passed on to the consumers.

6.13

Approved Investment for Restoring Damages

6.13.1

The Commission in its order dtd.13.7.2000 has approved Rs.13.27 crores towards restoration of damages caused by cyclone in 1999 and directed GRIDCO to treat the same as deferred revenue expenditure for recovery over a period of three years. Accordingly, GRIDCO has proposed to recover an amount of Rs.4.42 crores for the FY 2000-01.

6.13.2

Some of the objectors objected to the inclusion of expenditure on restoration damages due to cyclone in revenue requirement. Orissa Grahak Mahasangha has stated that as per the press note, the Govt. of India as well as the State Govt. have advanced funds to GRIDCO for restoration of damages. More over GRIDCO must have insured its installations and got compensated by the insurer. Any part of the expenditure towards restoration of cyclone damage should not be reflected in the BST. Similarly, representatives of UCCI & CII stated that the expenditure on accounts of restoration of damage due to cyclone should not be passed on to the revenue account but may be treated as a part of capital expenditure. CII has stated that due to cyclone damage lot of major maintenance work will be charged to capital expenditure. An amount of Rs.4.42 crores towards restoration of cyclone damage is for a special repair and hence is to be charged to capital account. However, if OERC has agreed earlier for this provision in revenue account this may need reconsideration.

6.13.3

Some of the objectors have also stated that GRIDCO should itself bear the cost of damage if no insurance has been done by them and if at all the provision of Rs.4.42 crores is included it should be considered for interest only and not for capital base determination as it does not add to any additional capital benefit.

6.13.4

The Commission has taken into consideration the objections raised by various objectors about the treatment of expenditure for restoration of damages due to cyclone. GRIDCO stated in their clarification dtd.08.01.2001 that they have received a sum of Rs.4.00 crores as grant from Govt. of Orissa.

6.13.5

Regarding objector’s view of treating this capital expenditure or revenue expenditure have been examined. The Commission did not consider the expenditure on account of restoration of damage due to cyclone as capital expenditure as it is of revenue nature. Such expenditure were intended for restoring the assets to its original level of use and therefore, it did not add to the asset base of the company. Passing of the expenditure considered reasonable in the revenue requirement in one go would have burdened the consumers and given a rate shock. The Commission therefore, vide its order dtd.13.7.2000 directed that expenditure of Rs.13.27 crores is allowed as expenditure for this purpose of restoration of cyclone damage. The allowed expenditure of Rs.13.27 crores shall be treated as deferred revenue expenditure to be recovered through tariff amortised over a period three years. Interest obligation if any accrued for the purpose of funding the aforesaid service, R&M shall be eligible for recovery through tariff. Hence, Rs.4.42 crores is accepted as an expenditure for calculation of revenue requirement the year 2000-01.

6.14

Interest on Loan

6.14.1

In para 3.1.6 of its application, GRIDCO has under the head "Interest on Long Term Liabilities" proposed interest expense chargeable to revenue account at Rs.173.48 crores excluding interest during construction of Rs.63.92 crores for the year 2000-01 totalling to Rs.237.40 crores. The total loan liability of GRIDCO estimated to be Rs.2192.89 crores as on 31.3.01.
Item wise analysis of loans are made hereafter.

6.14.2

Securitisation of power purchase dues :
The interest claimed relate to Govt. Guaranteed bonds amounting to Rs.667.56 crores (Addl. DF-24) raised during the financial year 1997-98 and 1998-99 to meet the current liabilities for payment to the various generating agencies towards cost of power purchase. Due to the failure of GRIDCO to make payment to the generators for outstanding dues, bonds were issued with the guarantee of the State Government for securitising the dues of the generators. The details submitted by GRIDCO with regard to various bonds issued by them were provided in Addl. DF-24 in the clarification to queries in October, 2000. The same is reproduced in Table : 35.

Table : 35

6.14.3

The bonds intended for securitisation of Rs.667.56 crores are the continuation of balance since 31.3.99 as indicated in the table above. Other than providing a statement about bonds and about acceptance of the entire loan liability GRIDCO has not made any specific request in this year’s application for consideration of interest on bonds even though the same was explicitly disallowed by the Commission in the tariff order 1999-00. It is also to be stated here that the issue of securitisation of dues for the year 1999-00 is before the Commission as a separate filing. The interest on these bonds for Financial Year 2000-01 is Rs.100.63 crores.

6.14.4

GRIDCO received a loan of Rs.120 crores on 27.3.99 from Govt. of Orissa for payment to OPGC (Addl. DF-23). The interest on account of this Govt. loan for the FY 2001 is Rs.15.60 crores calculated @ 13%. Thus the total interest on account of securitisation of dues and Govt. loan towards meeting the power purchase liability of GRIDCO works out to Rs.116.63 crores.

6.14.5

In this connection, Shri R.C. Padhi, Chief Engineer -Electrical (Retd.) in his objection had stated that interest on bonds towards arrear energy dues and interest on loans not for capital formation should not be allowed. Shri R.P. Mohapatra, Chief Engineer Electrical & Member (Retd.), OSEB also objected to the passing of interest on GRIDCO bonds amounting to Rs.100.63 crores to revenue requirement. He has stated that the Commission has already disallowed it in the last tariff order of GRIDCO. In spite of cash flow problem, GRIDCO has not taken effective steps to recover its energy bills. In this connection he stated that the amount payable by DISTCOs as per bills for August, 2000 was Rs.968.52 crores. The consumers cannot bear the interest cost on account of non-payment of current liabilities.

6.14.6

Conversion to bonds became necessary due to the inability of GRIDCO to realise its receivables from the consumers. Passing on such a burden attributable to the past action of GRIDCO which should have realised its receivables from the consumers in time will result in rate shock and will retared the reform process. The logic given by the licensee that higher financial burden has been avoided by securitisation does not appeal to us because it is not reasonable to burden the present consumers on account of the past and present inefficiency of the Licensee in realising its dues. Bonds amounting to Rs.667.56 crores and the Govt. loan of Rs.120.00 crores for payment of OPGC dues are not meant for creation of assets or improvement of efficiency or for expenses in respect of its licensed activity for the current year. Notwithstanding the fact that the petition of the licensee for securitisation of dues is pending before the Commission, it is decided that the interest attributable to conversion of bonds and interest on loan against overdues of power purchase payables are disallowed for the purpose of calculation of revenue requirement for the FY 2001.

6.14.7

World Bank Loan

6.14.8

Loan from HIW
The loan balance for HIW works for construction of 400 kV line from Meramundali to Mendhasala will be Rs.82.54 crores as on 31.3.2001. Interest including ICICI bill discounting is claimed @ 15% per annum. Total interest on this account is estimates to be Rs.6.51 crores (ADF-22).

6.14.9

State Govt. Loan
The Govt. of Orissa has given a loan of Rs.185.42 crores to GRIDCO for payment of dues of OPGC towards energy bills and construction of transmission lines. Out of Rs.185.42 crores GRIDCO utilised Rs.120 crores towards payment of energy bills which has been treated in para 6.14.4 under securitisation of power purchase dues. Balance amount of Rs.65.42 crores has been utilised for construction of transmission lines the interest burden on which is calculated as Rs.8.50 crores @ 13% per annum.

6.14.10

GRIDCO in their clarification dtd.03.10.2000, stated that Rs.120 crores of loan taken on 27.3.99 is having a moratorium period upto 27.3.02 and payable thereafter in twelve equal installments ending on 27.3.14. Repayment terms for balance amount of loan are yet to be finalised.

6.14.11

Zero Coupon Bond
GRIDCO had issued a Bond to State Govt. for an amount of Rs.400 crores as per Transfer Notification dt.01.04.1996. This bond does not carry any interest for the first five years. FY 2000-01 being fifth year as per Govt. Notification referred above. No interest is accrued for the financial year 2000-01 on Zero Coupon Bond.

6.14.12

Loan from Central Govt.
An amount of Rs.11.26 crores was drawn in 87-88 from Central Govt. for transmission network on which an interest of Rs.1.01 crores for the FY 01 payable has been calculated @ 9.25% (TRF-16).

6.14.13

Loan from PFC
For the purpose of construction of EHT line and sub-stations loan receipt of GRIDCO from PFC, will be Rs.253.35 crores including working capital loan of Rs.19.43 crores by 31.03.2001 at an interest rate of 16.5% (ADF-25). The interest on PFC loan for the financial year 2000-01 will be Rs.26.37 crores.

6.14.14

Loan from REC
The loan receipt from REC Ltd. by GRIDCO for construction of EHT line and sub-station will be Rs.147.92 crores by 31.3.01 on which an interest of Rs.20.37 crores is payable (ADF-26).

6.14.15

LIC Loan
LIC loan of Rs.140.66 crores drawn during the period from 1981 to 1996 carries an interest rate of 14% per annum. No amount has been drawn after 01.4.96 and no repayment has been done after 01.4.96. The interest on this account for the year FY 2001 is claimed as Rs.28.53 crores which includes a compound interest of Rs.12.12 crores and interest of Rs.33 crores over and above the normal interest of Rs.16.07 crores payable by 31.3.2001. GRIDCO was asked to clarify why the compound interest of Rs.12.12 crores should be allowed to be charged to revenue. It is pertinent to note that due to compounding of interest, the average interest rate goes up to 20.3% from simple rate of interest of 14% (ADF-27).

6.14.16

GRIDCO in their clarification submitted on 23.12.2000 stated that pending the settlement of dispute regarding the mortgage of assets the repayment plan is not finalised.

6.14.17

OSEB Bonds
GRIDCO inherited public bonds issued by OSEB during 1981 to 1989 to the tune of Rs.109 crores for meeting working capital expenses repayable between FY 1997 to FY 2010 with varying rates of interest from 7.25% to 11.5%. Interest payable on this account for the year FY 2001 is Rs.2.44 crores on an outstanding balance of Rs.20.13 crores. As this loan pertains prior to incorporation of GRIDCO, the Commission considers the interest on this loan allowable for the purpose of revenue requirement.

6.14.18

Pension Trust Bond
GRIDCO has claimed an interest of Rs.4.53 crores for the FY 01 for bonds for pension trust of Rs.30.20 crores. In the note to the account of 1998-99 at para 11 under the heading of Retirement Benefit it is stated that the bonds to the pension trust fund are yet to be issued. The audit certificate to the accounts has been issued on 28.9.2000. Since the bonds are yet to be issued the Commission does not consider it appropriate to allow an expenditure of Rs.4.53 crores for recovery from the revenue requirement chargeable to the consumers.

6.14.19

Short term loan & Cash Credit
GRIDCO has shown a balance of Rs.28.75 crores as short-term loan from bank and Rs.5.26 crores as cash credit for meeting short term working capital needs on which an interest of Rs.3.51 crores and Rs.0.71 crores has been claimed.

6.14.20

Capitalisation of Interest
Analysis of the capital expenditure schedule of major investments (in TRF-2), indicated that a sum of Rs.737 crores excluding interest during construction has been planned for execution of various transmission projects during 1998-99 to 2000-01.

6.14.21

Interest during Construction has been projected at Rs.63.92 crores for the purpose of capitalisation for financial year 2000-01. While examining OERC form TRF-2, it is revealed that an amount of Rs.12.85 crores has been considered as interest of OECF Funded Project. But the said loan has not been included in the loan statement (TRF-16 and TRF-3). Therefore, the Commission is convinced that the sum of Rs.12.85 crores does not constitute a part of the interest capitalised. As such, the projected estimate of Rs.63.92 crores should be reduced by Rs.12.85 crores. Hence the Commission allows Rs.51.07 crores towards capitalisation of interest.

6.14.22

A statement of loans of GRIDCO since the year ending 1998-99 upto FY 01 is given in Table : 36.

Table : 36

6.14.23

After analysis of facts and figures of the preceeding paragraph the Commission approves the interest expenses chargeable to revenue for the year 2001 as Rs.65.51 crores as against Rs.173.48 crores proposed by GRIDCO as in Table : 37.

Table : 37
Loan and Interest Liability of GRIDCO (Rs. in crores)

6.14.24

An year wise analysis of interest approved by OERC is given in Table : 38.

Table : 38
Year wise Analysis of Interest (Rs. in crores)

6.15

Depreciation
GRIDCO has proposed Rs.78 crores towards depreciation expenses for the year 2000-01 computed on the basis of the rates notified by the Ministry of Power. It has also furnished an asset wise calculation of depreciation from the FY 1999 upto the FY 2001. GRIDCO has stated that it began its operation with transferred assets on 01.4.96. Depreciation is charged based on audited annual accounts of FY 1997 and FY 1998 on the transferred value and addition and deletion thereafter. None of the major assets of GRIDCO could therefore, be depreciated in excess of 90%. However, GRIDCO would be in a position to furnish the exact details of assets only after the asset registers are prepared for the field units.

6.15.1

As GRIDCO inherited many of the assets which has been in the system for a very long time and might have exhausted their economic life they were asked to reflect such of the assets which have completed their asset life in form No. TRF-23. In response to that GRIDCO clarified that GRIDCO has been vested with a net fixed useful asset of Rs.1957.7 crores as on 01.4.96. GRIDCO has charged the depreciation on this value of assets at the rate notified by GoI from time to time irrespective of the depreciation charges prior to the date of transfer. Further, GRIDCO has expressed its inability to provide information as required in Form No. TRF-23 due to lack fixed asset register.

6.15.2

GRIDCO further insist that as it has inherited all its assets on 01.4.96 and that the highest rate of depreciation of the transmission asset being 7.8%, none of the transmission asset of GRIDCO can be depreciated in excess of 90% by FY 01. In other words, GRIDCO wants to establish that as far as GRIDCO is concerned irrespective of the age of assets for the purpose of calculation of depreciation the assets are being treated as new.

6.15.3

The issue of depreciation and asset register as stated earlier has been raised by number of objectors. Some of the objectors have agreed that the provision of Rs.78 crores as requested by GRIDCO may be allowed but the depreciation recovered till 31.3.96 are to be identified on different blocks of assets. Recovery of depreciation must stop once 90% of original cost is recovered.

6.15.4

Shri R.C. Padhi, Retd. C.E. stated that no depreciation recovery after recovery of 90% of the original cost of the particular asset should be made. If such accepted norms as per statutory provisions are to be violated there has to be a special justification for the same should be on record. Shri R.P. Mohapatra has stated that depreciation should be calculated on the basis of notification Ministry of Power, Govt. of India dtd. March, 1994. He also stated that asset being second hand the rate of depreciation has to be determined by the competent Govt. in each case "having regard to the nature, age and conditions of the assets at the time acquisition". He had also made a point that in case of 30-40% of the total assets procured by OSEB depreciation upto 90% of asset value must have been recovered on which no depreciation should be charged.

6.15.5

The Commission, therefore, may allow depreciation for assets created before March, 94 at the earlier rates pending notification by Govt. of Orissa for 60% of the assets pending creation of the asset register. The amount of depreciation allowable to the licensee shall be less than 50% of the amount claimed in the revenue requirement.

6.15.6

Shri B.N. Das, Retd. Member (TDC), OSEB appearing on behalf of UCCI stated that correct calculation of depreciation as per Govt. of India’s circular should be made after dividing the assets into blocks at the time of revision of percentage of depreciation, if it is not possible for OERC to deviate from Govt. of India norms. Depreciation already collected and balance to be collected for each block of assets should be exhibited in a register by GRIDCO and DISTCOs within a time frame to be fixed by OERC. The issue of revaluation of assets and consequent depreciation calculation on assets received at the time of transfer have been raised in earlier tariff orders and have been disposed of by us. However, we may briefly deal with it again to reiterate Commission’s finding.

6.15.7

The Commission in its conceptual issues on tariff paper in Issue No. 6 has stated that "tariff will be based on depreciated book value as set out in the transfer scheme adjusted for subsequent addition and depreciation." The Commission in its previous tariff order has already accepted the transfer value of assets appearing in the Transfer Scheme notification by Govt. of Orissa for determination of the book value assets. Obviously the base line for calculation of fixed assets has been the Transfer Scheme Notification dt.01.04.96 which has been sanctified by legislation and therefore, beyond scrutiny of the Commission. In view of this we are unable to sustain the objections raised in this regard.

6.15.8

The auditors of GRIDCO in the audit report dtd. 28.9.2000 have stated that the company has not maintained Fixed Assets register showing quantitative details and situation of the Fixed Assets. Further, the company has not carried out physical verification of Fixed Assets during the year and the properties of the company have not been insured.

6.15.9

The Commission, therefore, directs GRIDCO to make good the deficiencies noted by the statutory auditors before 30^{th of September, 2001 i.e. well before the filing of revenue requirement (15th December to 31st December, 2001) for the year 2002-03. Once the asset register is built recovery upto 90% of the asset value can be monitored.}

6.15.10

According to the provisions of the Electricity (Supply) Act, 1948, depreciation for the year should be calculated on the gross fixed asset existing at the beginning of the year. Audited Accounts of GRIDCO for the year 1998-99 revealed that the gross fixed asset of transmission as on 31.3.99 is Rs.1175 crores. During 1999-00 an amount of Rs.102 crores is transferred to asset in use. Thus total gross fixed asset as on 31.3.2000 is Rs.1277 crores on which depreciation for the year 2000-01 has been calculated. The Commission accordingly approves an amount of Rs.78 crores for depreciation for the year FY 2001 as shown in Table : 39.

Table : 39
Calculation of depreciation (Rs. in crores)

6.16

Contribution to Contingency Reserves
GRIDCO has proposed Rs.6.38 crores towards contribution to contingency reserve under Para-IV of Sixth Schedule of the Act, 1948. As per provision of Para-IV of the Sixth Schedule, such contingency reserve amount should not be less than one quarter of 1% not more than one-half of 1% of the original cost of fixed assets. One-half of the 1% of Rs.1277 crores works out to Rs.6.38 crores. Thus, the Commission considers the provision of Rs.6.38 crores proposed by the licensee as reasonable.

6.17

Capital Base

6.17.1

Original Cost of Fixed Asset
For the purpose of calculation of original cost of fixed assets, GRIDCO has proposed a figure of Rs.1586.77 crores as on 31.3.2001 (TRF-23).

6.17.2

The gross value of asset as on 31.3.99 in the audited accounts of 1998-99 is Rs.1175.17 crores. The addition to fixed assets in the years 1999-00 and 2000-01 are Rs.101.70 crores and Rs.309.90 crores respectively (TRF-23). Consumers’ contribution for deposit work is to be deducted from the original cost of fixed assets for the purpose of determination of capital base as per para XII of Sixth Schedule of The Act, 1948. GRIDCO in its clarification to queries of OERC submitted in form TRF-25 that there is no contribution on capital account from the consumers. As verified from Audited Accounts of the year 1998-99 under Schedule-2 Reserves Surpluses, the consumer contribution as on 31.3.99 stands at Rs.15.77 crores. Therefore, the original cost of fixed assets less contribution for deposit work works out to Rs.1571.00 crores from the figure of Rs.1586.77 crores proposed by GRIDCO.

6.17.3

The asset position including year to year addition as given by GRIDCO is reflected in Table : 40 which is accepted by the Commission.

Table : 40

6.17.4

In this connection, the asset position as estimated by the Commission on the basis of submission made by GRIDCO in the tariff filing 1999-00 is reproduced below (Para 6.25.1.3, OERC Case No. 12/99).

6.17.5

It may be observed that for the purpose of calculation of capital base the closing balance for the year 1999-00 was accepted as Rs.1429.90 crores which stands modified to Rs.1276.87 crores after finalisation of the accounts for the year 1998-99. This discrepancy is on account of a much lower level of asset addition i.e. Rs.57.57 crores compared to the projection of Rs.204.50 crores for the year 1998-99. The effect of this has been enhancement of the capital base and enhanced depreciation expenses. Its effect is also to be felt in calculation of interest/return. Benefits availed by the licensee on account of this inflated capital base resulting in higher BST for FY 2000 need to be adjusted against the losses if any incurred by the company within the performance parameters fixed by the Commission. Similarly surplus if any determined after finalisation of accounts will be adjusted against the revenue requirement of the succeeding year.

6.18

Original cost of work-in-progress

6.18.1

The original cost of works in progress projected by GRIDCO would be Rs.718.32 crores on 31.3.01. Table-42 shows the opening balance of WIP, Capital expenditure, Interest during construction, Transfer to fixed asset and closing balance of WIP as projected by GRIDCO.

6.18.2

The position of cost of WIP as approved in the tariff order for the FY 1999-00 vide Case No.12/99 dtd.30.12.99 is reproduced in Table : 43.

6.18.3

The Commission’s observation is that the original cost of WIP is on the rise from year to year and likely to reach a figure of Rs.718.32 crores as projected by GRIDCO for the year ending 2000-01 which brings no immediate tangible benefit to the consumers. The planning of works should have been carried out in a manner so as to get the benefits of investment early. It seems that large number of projects have been taken up simultaneously and kept incomplete resulting in far too much of unproductive assets. The licensee should have done well to identify and arrange the projects in order of priority so that system could improve and consumers could get the benefit of investments made in completed works. The licensee cannot achieve financial viability unless asset management and inventory control are prudently taken up as in case of private sector companies. And in any case the burden of unproductive investment and avoidable excessive inventory cannot be passed on to the consumer.

6.18.4

Even the DISTCOs have questioned the capability and prudence of GRIDCO in carrying out the capital works as projected in the tariff application. These expenses have been incurred in addition to the expenditure proposed for repair and maintenance works. DISTCOs have urged that tangible benefit in terms of reduction of transmission losses and improvement in system reliability due to this massive expenditure should be brought out by GRIDCO as the financial impact in servicing the capital cost would be a burden on the consumers. Even though the funding is done through borrowings which may not affect the capital base, the cost of these borrowings has an impact on the revenue requirement and tariff.

6.18.5

GRIDCO in its rejoinder has stated that all the capital works have been undertaken by GRIDCO after careful evaluation of the necessity to carry out such works. The existing network is not capable of meeting the operating standards prescribed by OERC at all points of supply. The proposed capital works will strengthen the existing network to comply with the operating standards of OERC to a great extent and to meet the future load growth to some extent.

6.18.6

GRIDCO in clarification to the Director (Tariff)’s query regarding stock of Rs.46.3 crores for carrying out capital construction work clarified that the aforesaid store are maintained at the project site, controlled by the EHT Construction Divisions and are incorporated as a part of capital work in progress. Since both in spirit and practice these are part of CWIP under the provisions of the Act, 1948 and rules framed thereunder it is included in this BST Application. The source of funding is same as that of the schemes undertaken from CWIP.

6.18.7

The Commission after examination of the figures comes to the conclusion that the advance pending allocation to capital works to the tune of Rs.25.71 crores continuing since FY 1998-99 should not be allowed to earn a return to the licensee as it is not adding directly to the construction work in progress. Therefore, for the purpose of calculation of capital base the Commission disallows this amount of Rs.25.71 crores and accepts an amount of Rs.692.61 crores as CWIP. The Commission also observes that the legitimacy of an advance to the tune of Rs.25.71 crores pending allocation over years is doubtful.

6.19

Intangible Assets

6.19.1

GRIDCO proposes a sum of Rs.6.12 crores towards intangible assets. In para 3.2.3 of the main text of the application it has stated that the figure for the year as per the audited accounts of 1997-98 is Rs.2.70 crores and that for the year 1998-99 is Rs.8.60 crores. In response to the Commission’s query GRIDCO has furnished the details of intangible assets comprising of preliminary expenses and deferred revenue expenditure cuased for raising finance which are amortised over the life of the bonds. GRIDCO has furnished the details given in Table : 44.

6.19.2

The Commission approves a sum of Rs.6.12 crores as intangible assets for the year 2000-01.

6.20

Compulsory Investment under Sixth Schedule

6.20.1

GRIDCO in its application has stated that the compulsory investment in accordance with the Sixth Schedule of the Act, 1948 for the year 2000-01 is Rs.11.30 crores. The investment proposed on the basis of appropriation approved Rs.4.96 crores for the current year and Rs.6.40 crores for the ensuing year 2001.

6.20.2

In this connection it is pertinent to mention that as per IV(2) of the Sixth Schedule of the Act, 1948, the sums appropriated to contingency reserve should be invested in securities authorised under the Indian Trust Act, 1882 (2 of 1882) and such investment should be made within a period of six months of the close of year of account in which appropriation is made. In other words, funds accumulated under the head Contingency Reserve upto FY 1999-00 should have been invested by September, 2000. The Licensee has not produced any evidence of any investment in the scheduled securities as prescribed in the Sixth Schedule of the Act, 1948. Therefore, while calculating the capital base, the Commission cannot allow inclusion of the said amount of compulsory investment proposed by GRIDCO for purposes of calculating capital base. It is pertinent to mention here that the Commission in its order dtd.30.12.99 in Case No. 12/99 at para 6.28.2 had disallowed the proposed investment as the licensee then also did not produce any proof of investment for the FY 1998-99 to be invested by September, 1999. The licensee does not seem to have taken note of this observation of the Commission while making this BST application for the year 2000-01. It is also important that the licensee should take note of the legal provision as provided the Sixth Schedule of the Act, 1948 and made investment in specified security to meet contingency requirement. The Commission also directs that the licensee should take appropriate steps for making compulsory investment and produce proof of such investment during the next tariff hearing.

6.21

Working Capital

6.21.1

Average cost of stores
According to para XVII(e)(i) of the Sixth Schedule to the Act, 1948, a sum equal to of one-twelfth of the sum of book cost of stores, materials and supplies including fuel on hand at the end of each month of the year of account should be taken into account as working capital for calculating the capital base. GRIDCO has proposed Rs.30.80 crores. GRIDCO has stated that the stores indicated above are O&M stores for use as current assets in repairs and maintenance of the system. GRIDCO has also stated that capital stores are maintained at the project sites controlled by the EHT Construction Divisions and are incorporated within capital work in progress. GRIDCO has stated that the capital and O&M stores as per GRIDCO are estimated for the year FY 01 is Rs.77.10 crores of which capital stores (recorded as stores only at year end and only in books) are Rs.46.30 crores. Therefore, they have requested for provision of Rs.30.80 crores as the value of stores for the purpose of calculation of capital base.

6.21.2

The Commission examined the proposal of GRIDCO. A stock of three months’ consumption of materials at any particular point of time can be considered reasonable. Accordingly the Commission approves one-forth of the total annual consumption of materials i.e. Rs.3.67 crores as reasonable for the purpose of working capital for stores to be included in the capital base.

6.22

Average Cash and Bank Balance

6.22.1

GRIDCO has proposed Rs.20.20 crores for the FY 2000-01 based on the actual out turn for the year 1999-00 computed on the basis of the provisions laid down in Sixth Schedule of the Act, 1948. GRIDCO in form TRF-11 has given the provision of monthly cash balance from October, 99 to March, 2000. GRIDCO submits that for the FY 2001 that the same average monthly balance to be considered for inclusion in capital base. GRIDCO has also stated that it would be in a position to provide this detail for all three previous years and for FY 1999-00 in the next tariff application. As stated in para XVII(1)(e)(ii) of the Sixth Schedule of the Act, 1948, an amount equal to 1/12 of the sum of cash & bank balances and call and short term deposits at the end of each month of the year of account, not exceeding the sum specified therein can be included in capital base.

6.22.2

The Commission feels that liquid funds are needed for the payment of Employees' Cost and Administrative & General Expenses pending collection of receivables from the consumers. The normative lead time between the supply of electricity to the consumers and collection of tariff is considered two months. Hence, the fund requirement for two months payment of Employees’ Cost and Administrative & General Expenses would be appropriate for meeting working capital requirement in the form of cash and bank balance. Calculated on the aforesaid basis, the amount works out to Rs.14.76 crores. The Commission, therefore, approves a sum of Rs.14.76 crores as cash and bank balance for meeting working capital requirements.

6.23

Loan

6.23.1

GRIDCO has stated that its loan liability as on 31.3.01 will be Rs.2192.89 crores (TRF-16) but for the purpose of calculation of capital base Rs.1245.10 crores has been considered for the FY 2000-01. GRIDCO’s Justification of accepting the figure of Rs.1245.10 crores has been given by in Table-7 of the clarification to queries dtd.30.10.2000 which is also exhibited in Col. 1 & 2 of the below.

6.23.2

In light of the proposal of GRIDCO, the Commission examined the suitability of various loans for the computation of Capital Base. The Commission considers that out of the above loans, loans mentioned below have not been utilised for capital formation.

Loans not considered for calculation of capital base

6.23.3

GRIDCO has obtained loan of Rs.185.42 crores out of which Rs.120 crores has been utilised for meeting the power purchase liability of OPGC as explained in para 6.14.4 of this order. GRIDCO bonds of Rs.667.56 crores were issued for meeting unpaid dues to generating as detail in para 6.14.3 of this order. Bonds for pension of Rs.30.20 crores has been explain in para 6.14.18 of this order.

6.23.4

Zero coupon bonds of Rs.400 crores issued to Govt. of Orissa forms a part of the asset base of GRIDCO as per the Transfer Scheme Notification dated 01.4.96 has to be deducted. Therefore, this bond of Rs.400 crores should also be deducted from the asset base for the purpose of computation of Capital Base. The loan details for the computation of Capital Base as proposed by GRIDCO and approved by the Commission is given in Table : 45.

Table : 45

6.23.5

The Commission, therefore, approves the amount of Rs.1375.13 crores to be deducted from the total assets for determination of Capital Base.

6.23.6

Based on the forgoing observations, the Commission finds that capital base for 2000-01 for the purpose of Sixth Schedule of the Act, 1948 has to be taken as Rs.566.73 crores (vide Annex-II to this Order) against Rs.782.04 crores proposed by GRIDCO.

6.24

Reasonable Return

6.24.1

GRIDCO has calculated the reasonable return by multiplying the standard rate of 13% (8% bank rate plus 5%) on capital base as on 31.3.99. One half of one percent on the amount borrowed from organisations or institutions has also been added to this amount. Thus, GRIDCO has proposed an amount of Rs.107.89 crores towards reasonable return. We are unable to accept this figure as we have not approved the base figure of capital base. Reasonable return calculated in accordance with Govt. of India, Ministry of Power notification dated 5th May, 1999 works out to Rs.80.55 crores on a capital base of Rs.566.48 crores as in Table : 46.

Table : 46

6.24.2

Thus the total reasonable return approved by the Commission is Rs.80.55 crores.

6.25

Miscellaneous Receipt

6.25.1

The Licensee had proposed an amount of Rs.37.90 crores as miscellaneous receipt for the year 2000-01. The break up is in Table : 47.

Table : 47

6.25.2

The Commission has considered the miscellaneous receipts as proposed by GRIDCO. The figure of Rs.50.30 crores proposed on account of wheeling charges for power outside the State is accepted. The Commission in para 6.32.9 of this Order has decided on transmission tariff at 31 paise/unit for wheeling power inside the State. Based on this, the receipts on this account comes to Rs.9.00 crores.

6.25.3

GRIDCO had initially indicated a sum of Rs.25.90 crores as deductible from miscellaneous receipt due to 4% loss for wheeling of power to MP. GRIDCO was asked to clarify why the loss of Rs.25.9 crores has been shown as deductible from miscellaneous revenue.

6.25.4

GRIDCO in clarification to queries stated that energy wheeled to MP for FY 2001 is taken at the same level as FY 2000 at 2875.3 MU. This includes transmission loss at 4% i.e. 115 MU. Since the power procurement for inclusion in GRIDCO’s revenue requirement has been computed only for sale to DISTCOs the cost of power for this 115 MU is deemed to be recovered from MP within the levy of 17.5 paise/unit which is the wheeling charge payable by MP. MP is provided with power from NTPC stations of EREB and the loss of 115 MU is thus priced at an average of NTPC rate of 230.5 paise/unit (Revised from 225.4 P/U) which amounts to Rs.26.51 crores (Revised from Rs25.9 crores). GRIDCO has suggested that the receipt on this account of loss of Rs.26.51 crores has to be deducted from the miscellaneous receipt since the equivalent cost of power purchase has not been considered in the revenue requirement. Since the Commission has accepted the gross principle of determination of loss of Orissa system cost of lost units on account of wheeling of power States outside Orissa is considered deductible from miscellaneous receipt for the year 2000-01. Accordingly a modified table regarding composition of miscellaneous receipt is given in Table : 48 considering transmission loss of 3.7% and transmission tariff of 31 paise/unit. The Commission approves a total of Rs.35.87 crores as miscellaneous receipt.

Table : 48
Composition of Miscellaneous Receipts

6.25.5

The Commission approves GRIDCO’s expenditure for the purpose of revenue requirement for the year 2000-01 as Rs.1415.72 crores as against the proposal of Rs.1812.85 crores. The Commission has considered a provision of Rs.6.38 crores for contribution to contingency reserve as proposed by GRIDCO. The Commission has approved reasonable return of Rs.80.55 crores against Rs.107.89 crores proposed by GRIDCO. The Net Revenue Requirement is as below :-

	(Rs. in crores)
Expenditure for the year 2000-01 (Annex-I)	1415.72
Contribution to contingency reserve	6.38
Reasonable return (Annex-II)	80.55
Total Revenue Requirement	1502.65
Less Miscellaneous Revenue	35.87
Net Revenue Requirement	1466.78

6.25.6

The expected revenue from the DISTCOs based on the rates approved by the Commission is Rs.1466.78 crores over a 12 months period. Considering the aforesaid observations, clear profit for the full year works out to Rs.80.55 crores (Annex-III). The reasonable return permissible to the licensee is Rs.80.55 crores. There is no excess or deficit of clear profit over reasonable return.

6.26

Rebate

6.26.1

The provision of rebate for timely payment of bills proposed by GRIDCO has been examined by the Commission. GRIDCO has estimated the amount of rebate to distribution companies on bulk supply bills as Rs.48.70 crores (Revised estimate). While calculating the revenue requirement for 2000-01, GRIDCO claims this amount of Rs.48.70 crores as an expenditure to be recovered through BST.

6.26.2

DISTCOs have objected to the concept of treating rebate to DISTCOs as an expenditure for GRIDCO.

6.26.3

Since rebate is likely to incentivise DISTCOs to make early payment to GRIDCO, it will enable GRIDCO to earn similar rebate from the generators. There is no likelihood of any financial liability to GRIDCO. The Commission, therefore, does not consider it appropriate to treat any rebate allowed to DISTCOs as expenditure for inclusion in revenue requirement.

6.27

Bulk Supply Tariff Design

6.27.1

The proposal of GRIDCO for Bulk Supply Tariff comprising (i) demand charge and (ii) energy charge has been examined by the Commission. GRIDCO had proposed to recover the fully embedded costs of supply proposing three alternate scenarios as given in Table : 49.

Table : 48
Tariff Structure Options

6.27.2

For the purpose of BST 2000-01, GRIDCO has proposed the first option of Demand Charge Rs.322.8/KVA/month and 117 paise/unit for Energy Charge.

6.27.3

As we have approved considerably lower revenue requirement than what is projected by GRIDCO, we cannot approve any of the above three options. However, we consider it reasonable to approve Demand Charge at the same rate as for 1999-00 namely Rs.200/KVA/month because average cost of power for 2000-01 is almost at the same level as for 1999-00. After calculating the revenue flow from the Demand Charge at the rate of Rs.200/KVA/month, the balance has to be realised through Energy Charge. A crucial issue for determination is whether GRIDCO should charge uniform or differential rate of BST for the four Distribution Companies. The implications of uniform BST is that the retail tariff has to be considerably different in the four Distribution Companies. This may be analysed at some length in the succeeding paragraphs.

6.27.4

A comparison of energy estimated to be sold as approved by the Commission, the maximum system demand imposed by the various distribution companies and the system load factor of the utilities are in Table : 50.

Table : 50

6.27.5

Further the difference in the nature of load of the utilities are exhibited in Table : 51.

Table : 51
DISTCOs consumption profile

6.27.6

Analysis of the facts given in two tables above would indicate that the load factor of the four companies are not uniform and the volume of energy consumption and the time of the occurrence of the peak demand are different from utility to utility. There is wide variation in the HT & EHT loads among the four distribution utilities. For example, for one of the utilities it is of the order of 11.67% while in two other utilities it is more than 30%. This kind of variance amply demonstrates the kind of loading to which the EHT system of GRIDCO is subjected to. In other words this is a reflection on the capacity utilisation of the existing infrastructure as the EHT/HT loads constitute significant component of total load of the GRIDCO’s system. Analysis of the facts given in two tables above would also indicate that the load factor of the four companies are not uniform and the volume of energy consumption, the time of the occurrence of the peak demand are different from utility to utility. The analysis also brings out the kind of zonal variations that exists in the power supply system of Orissa which were not of consequence in the unitary structure of power distribution under a monolithic State Electricity Board.

6.27.7

Many of the objectors during the course of the public hearing stressed the desirability of having a differential bulk supply tariff for ensuring uniform retail tariff throughout the State. We also find that uniform bulk supply tariff for all four companies will confer undue benefit on regions and companies who have inherited the legacy of better consumer composition with larger number of subsidising category of consumers and much lesser number of LT supply obligation with attendant handicap. In the early year of reform, different retail tariff for different regions in the State has a lesser degree of acceptability. Industries having units at different places will have to pay a different rate depending on the location of plants. It is not that this is irregular, but such regional variations may have to be deferred, in the early years of reform. It is relevant to note that the Electricity Bill, 2000 due to be tabled in the Parliament to be applicable to whole of India proposes that as far as possible, similarly placed consumers in different areas of a State pay similar tariff.
Taking all the above factors into consideration the Commission determines the Bulk Supply Tariff as follows.

6.27.8

Determination of Demand and Energy Charge

6.27.8.1

Demand Charge is levied in consonance with the philosophy of realisation of cost in proportion to the capacity requirement of the utilities. Energy charge is recovered in proportion to the actual quantum of energy consumed by the utilities.

6.27.8.2

Taking into account the facts presented to the Commission and the detailed analysis made in the preceding paragraphs, the Commission approves the following rates for bulk supply tariff applicable to the various distribution licensees effective from 1^{st February, 2001.}

CESCO	Demand charge: Energy charge:	Rs.200/KVA/month 99.00 paise/unit
WESCO	Demand charge: Energy charge:	Rs.200/KVA/month 101.74 paise/unit
NESCO	Demand charge: Energy charge:	Rs.200/KVA/month 100.00 paise/unit
SOUTHCO	Demand charge: Energy charge:	Rs.200/KVA/month 90.00 paise/unit

6.27.8.3

The Commission has approved GRIDCO’s revenue requirement for the year 2000-01 as Rs.1466.78 crores. GRIDCO is expected to recover the entire revenue requirement at the approved tariffs over a period of 12 months.

6.27.8.4

Since the Bulk Supply Tariff approved in this order will be effective from 1^{st February, 2001 the licensee will be permitted to carry forward the gap between the expected revenue and the approved revenue requirement for 2000-01 within the benchmarks approved by the Commission for adjustment during the future years.}

6.27.8.5

In calculating the expected aggregate revenue for 2000-01, the revenue earning by GRIDCO from export of power to APSEB has not been taken into account. GRIDCO in his application has stated that the sale outside the State has turned out to be loss making on a merit order basis (as against a pool cost basis) from the months of May, 2000 onwards. GRIDCO on that consideration has proposed to exclude the sale to other State from this application.

6.27.8.6

Some objectors have stated that GRIDCO has entered into agreement with APTRANSCO for supply of electricity @ Rs.2.28/unit (inclusive of wheeling charges) which is detrimental to the interests of consumers in Orissa. They have said that cheapest power should be available to consumers within Orissa and the costlier power may be sold to outside consumers. They have pointed out that GRIDCO buys NTPC power @ Rs.2.32/unit and in addition pays transmission charges to PGCIL. NTPC power, therefore, is costlier than the rate at which power is sold to APTRANSCO. They have stated that the said agreement is detrimental to the interest of the consumers within the state of Orissa and ought not to be permitted.

6.27.8.7

GRIDCO in its rejoinder has stated that inter-State sales have been kept out of the calculation of revenue requirement to insulate the consumers of Orissa from the trading risks.

6.27.8.8

The Commission after analysis of GRIDCO’s presentation, the objections raised during the hearing and GRIDCO’s rejoinder considers the proposal of GRIDCO to keep the transactions related to inter-state sale out of purview of the least cost power procurement plan due to the uncertainties involved in the transaction. The Commission directs that loss, if any, on account of inter-state sale should not be passed on to the consumers of the State and will have to be borne by GRIDCO.

6.27.8.9

Implementation of the ABT will completely change the complexion of power procurement requiring aggressive marketing for bi-lateral sale, re-assessment of share allocation of central generating stations, evacuation arrangements to make it a profitable venture due to strategic location of the State linking Eastern, Western and Southern Regional Power Systems. Therefore, advance planning should be carried out for metering, communication and related commercial arrangements so that GRIDCO is not caught off-guard.

6.28

Billing Demand

6.28.1

GRIDCO in para 2.1.2 of BST Application stated that DISTCOs have not provided forecast of simultaneous maximum demand which is in use for determination demand charges. It has further stated in its clarification of October, 2000 that as per the directions of OERC the bulk supply agreement with DISTCOs regarding definition of the term Demand Charge and Contract Demand with DISTCOs could not be decided. In keeping with this GRIDCO in its BST application proposed a contract demand 1949.4 MVA and a billing demand of 1735.7 MVA which was the average SMD as per five months of actual demand and projection for rest of the financial year.

6.28.2

WESCO, NESCO and SOUTHCO have stated that as per para 6.40.4 of OERC order dtd.30.12.99 in Case No.12/99, OERC had suggested that each DISTCOs should have one system contract demand and it considered prudent to fix the levy of demand charge as per MD recorded or 80% of the contract demand whichever is higher. OERC also noted that the present method of measurement (arithmetic summation of demand at all interface points) was approved only as a short term measure to be substituted by method of measuring the simultaneous maximum demand through appropriate metering (vectorial summation of demand at all interface points) which GRIDCO should introduce early.

6.28.3

As a follow up of above BST order, the DISTCOs were expecting that GRIDCO would ask DISTCOs to specify the system contract demand desired by each DISTCO and would start implementation of 80% rule. However, we find that GRIDCO has not followed the above course of action but has sent proposal to specify contract demand for each point of supply separately. Thus GRIDCO has tried to avoid the existing system of working out maximum demand of DISTCOs and the concept of simultaneous maximum demand. This is not acceptable and is clearly against the OERC’s order in this regard. This would also burden DISTCOs with unnecessarily high demand charges, which is again exactly opposite to what OERC has said in para 6.40.3 of its Order dtd.30.12.99 (… distribution licensees are not burdened with unnecessarily high demand charge …). Further, OERC has not sanctioned any such method of levying maximum demand charges in any of their earlier orders.

6.28.4

SOUTHCO, WESCO and NESCO have in their objections said that GRIDCO in its letter has suggested new clauses for the definitions of Contract Demand, Demand Charges and Maximum Demand, which refer to each point of supply. The DISTCOs are not aggreable to have separate contract demand for each point of supply. Accordingly, the DISTCOs have requested the Commission to direct GRIDCO to follow its earlier order and the concept of simultaneous maximum demand as desired by the Commission. Further, GRIDCO should also be directed to install appropriate meters so that simultaneous maximum demand for a DISTCO as a whole can be measured as a vectorial summation of demands at all the interface points. They have further argued that the profile of the consumers of DISTCOs is retail in nature and a large portion of the demand at the DISTCO end is not contracted. DISTCOs have no control over the consumption pattern of its consumers and there are always changes in demand profile due to seasonal variations. This implies that DISTCOs have no control over the level of demand in their area and the demand variation is a risk that is borne by the licensee but the DISTCOs should not be penalised for this variation. Therefore, they propose that the concept of contract demand should not be considered for DISTCOs and demand charges should be levied on the basis of the total maximum demand recorded.

6.28.5

GRIDCO in its proposal has stated that it has written to DISTCOs to submit their contract demand at various grid supply points. The DISTCOs are required to furnish the load demand for a period of five years by 31^{st of December of each year at each grid point of supply. But the DISTCOs have argued that this forecast should not be utilised for the purpose of levy of demand charge and the DISTCOs should have one contract demand and it should be prudent to levy of demand charge as per MD recorded or 80% of contract demand whichever is higher. The Commission examined the proposal of GRIDCO and the objections raised by the DISTCOs during the hearing. The Commission notes with dissatisfaction that the GRIDCO and the DISTCOs have not taken adequate steps for finalisation of Bulk Supply arrangement on sound commercial basis of risk and responsibility allocation. The Commission further reiterates that appropriate meters and software should be installed by GRIDCO for recording of simultaneous maximum demand for the DISTCOs as a whole which will take care of the vectorial summation of demands of all the interface points of each DISTCOs separately. The Commission as in the last year approves the present method of arrangement (arithmetic summation of) only as a temporary measure until arrangement for simultaneous maximum demand is put in place. The Commission further directs that the demand charge should be billed as per the maximum demand being recorded now or 80% of the total contract demand for the area of supply of the licensee whichever is higher.}

6.29

Overdrawal Charges

6.29.1

GRIDCO stated that the DISTCOs require much more energy than the projected energy schedule of the month which result in drawal of costlier power of NTPC. These excess monthly drawals are met from more expensive sources. GRIDCO has requested that any additional drawal beyond schedule for about one percent can be considered within year end adjustment. GRIDCO has further requested OERC to approve realisation of monthly energy cost of excess drawal beyond one percent of the projected figure of that month through the costliest power of the month plus wheeling charges and transmission loss.

6.29.2

GRIDCO further suggested that in the absence of firm commitment towards contract demand by DISTCOs the monthly projected demand should be considered as the contract demand of the month and overdrawal penalty may be levied @ 1.5 time of the normal demand charge for the demand in excess of the contract demand of the month.

6.29.3

In response to GRIDCO’s proposal, WESCO, NESCO and SOUTHCO have suggested that drawal in excess of projected energy by DISTCOs should be charged as an year end adjustment. Further sum total of projected energy requirement of the four DISTCOs should be compared with the sum total of actual energy drawn by all four DISTCOs. Any cost escalation due to excess drawal by all the four DISTCOs put together could be included in the revenue requirement for the next year.

6.29.4

The Commission analysed the proposal of GRIDCO and DISTCOs. Acceptance of DISTCOs suggestion for allowing the entire expenditure on account of excess consumption over the approved figure could mean that all power purchase cost incurred irrespective of the normative level of power purchase approved by the Commission could be allowed for tariff. GRIDCO being the carrier of this energy should not be unduly burdened due to failures if any, by the DISTCOs in making their projections. The Commission, therefore, approves that any expenditure for excess purchase of power over the approved annual quantum of energy should be reimbursed by the DISTCOs in proportion to their excess consumption. Such excess drawal should be billed by GRIDCO at the actual cost of power purchase plus transmission charges and transmission losses, if any and payable as an year end adjustment. However any additional purchase by the DISTCOs over the approved requirement would be reviewed by the Commission and the expenditure of the DISTCOs shall be limited to the normative level of power purchase approved by the Commission.

6.29.5

Much as the Commission would have liked to go for levy of overdrawal charges on monthly forecasting basis in the interest of efficient management of power system, looking at the present operational standard of the DISTCOs the Commission directs that the DISTCOs should put the mechanism of monthly forecast in place and at appropriate time the Commission may decide to levy overdrawal charge on monthly drawal basis.

6.29.6

The Commission also further directs that the projections made by the DISTCOs and the level of power purchase by GRIDCO will be reviewed at the end of each quarter by the Commission to maintain both financial economy and operational efficiency of the system.

6.29.7

With regard to levy of penalty on demand charges the DISTCOs have stated that GRIDCO is not liable for any penalty to generators on account of overdrawal. Therefore, they have requested the OERC to reject the proposal to levy of penal demand charge. Further as GRIDCO was not in a position to measure the simultaneous maximum demand, overdrawal charges from DISTCOs would be unwarranted. Considering all aspects the Commission has decided not to accept proposal of GRIDCO for levy of overdrawal charges on demand mainly because GRIDCO is not required to pay any overdrawal charge on demand to the generators in the present scenario.

6.30

Rebate
The proposal submitted by GRIDCO and the alternative suggestion of the DISTCOs was examined at the Commission’s end. The Commission approves that on payment of the monthly bill, the Retail and Distribution Licensees shall be entitled to a rebate of

• Two percent (2%) of the amount of the monthly bill (excluding arrears), if full payment is made within 48 hours of the presentation of the bill.

• One and half percent (1.5%) of the amount of the monthly bill (excluding arrears), if a minimum of 85% of the whole amount (excluding arrears) is paid within 48 hours of the presentation of the bill and one percent (1%) on the balance amount if paid in full within 15 days from the date of the presentation of the bill.

• One percent (1%) on the amount of the monthly bill (excluding arrears), if full payment is made within 15 days from the date of the presentation of the bill.

6.31

Delayed Payment Surcharge

6.31.1

The monthly charges as calculated with other charges and surcharge on account of delayed payments, if any, shall be payable by the Retail and Distribution Licensee within 30 days from the date of bill. If payment is not made within the said period of 30 days, delayed payment surcharge at the rate of 2% (two percent) per month shall be levied pro-rata for the period of delay from the due date, i.e. from the 31^{st day of the bill, on the amount remaining unpaid (excluding arrears on account of delayed payment surcharge).}

6.32

Transmission Tariff

6.32.1

GRIDCO in its application of September, 2000 submitted a calculation of transmission cost for the year 2000-01 which was subsequently modified in their filing of October, 2000. Accordingly GRIDCO estimated the transmission cost with reasonable return at Rs.494.90 crores for FY 2000-01. GRIDCO also estimated that the system is likely to handle a total of 10820.4 MU for supply to DISTCOs and another 300 MU for wheeling inside the State. On the basis of these assumptions, GRIDCO has proposed that the wheeling charge for transmission of power at 220/132 kV line shall @44.50 paise/unit

6.32.2

The Commission issued fresh guidelines to know the cost details of 400 kV, 220 kV, 132 kV, 66 kV lines, sub-station bays in respect of all grid sub-stations for the purpose of determination of allocation of transmission charges to the various distribution zones. The concept of cost separation was intended to identify the backbone transmission system meant for use of all utilities of the State. It was also intended to find out the cost involvement of radial transmission systems meant for exclusive use of different DISTCOs. Another requirement was to know the cost of interconnection of captive generating stations which are exclusively intended for exchange of power between GRIDCO and the captive units. Information along these lines may perhaps be helpful in determining the transmission charges on a more scientific basis.

6.32.3

GRIDCO in response to the Commission’s query has expressed its inability to furnish information in formats issued by the Commission in the absence of fixed asset register. It has submitted that it is making all efforts to compile a ‘fixed asset register’. The Commission has considered the representation of the licensee but directs that the licensee must ensure that the desired information is furnished during the next tariff filing.

6.32.4

Similarly, with regards to the performance data, GRIDCO has not submitted the details about the voltage fluctuation in the system, abstracts of unscheduled tripping, failure of transformers and availability of transmission lines for power supply. These parameters are necessary for analysing the performance of the utility. GRIDCO has stated that it maintains most of the operational information on manual basis and is unable to compile full detail for these formats. It is however making every effort to install an operational MIS which will address these concerns and will be capable for providing information to the OERC. In this aspect also the Commission directs that GRIDCO must comply with the stipulation made by the Commission before the next tariff filing.

6.32.5

Some objectors have stated that power is being wheeled to MP and AP by utilisation of the transmission line of GRIDCO and a rate of 17.5 paise/unit is being realised as transmission charge. The transmission loss for both the inter-state and intra-state transmission remains same and the power wheeled to MP and AP are central sector power and are deemed to be wheeled through the GRIDCO’s transmission line. Acceptance of a uniform tariff of 17.5 paise/unit both for inter-state and intra-state lines will obviate the discrepancy between the two transmissions charges inter-state and intra-state transmission tariff.

6.32.6

The OERC decides the transmission charges on embedded cost basis taking cost of transmission and the energy handled in the system and the rate arrived at is applicable for use of transmission system within the State. The tariff for inter-state transmission has to be decided by CERC and the decision may be dependent upon a number of factors that may be different from the parameters adopted by OERC for transmission within the State.

6.32.7

The proposal for calculation of transmission charges by considering the total energy handled by the system including those being wheeled to State and outside Orissa also examined. As explained in the preceeding paragraph Transmission charge for inter-State transmission is determined by CERC. It will be entirely irrelevant/inappropriate to determine a rate which cannot be applied for inter-State transmission which is outside the purview of OERC. Therefore, the Commission has taken into account the revenue earned on account of wheeling to States outside Orissa and adjusted it against the total revenue requirement of GRIDCO. Therefore, the computation of wheeling charge is based on the transmission cost and the energy sold to distribution company and energy wheeled to the CPPs.

6.32.8

Some of the objectors have raised the issue of the provisions of various agreements subsisting with GRIDCO and have prayed for exclusion of transactions under these agreements from purview of tariff orders to be passed by OERC. The Commission is of the view that subsisting legally enforceable agreements and contracts as protected under the provisions of the Reform Act, 1995 shall remain unaffected by the revision of this tariff but every other transaction of power shall be subject to the tariff determined in this Order and any other conditions prescribed in the OERC (Conditions of Supply) Code, 1998.

6.32.9

After detailed examination of facts and figures, the Commission approves a total transmission cost of Rs.338.09 crores for the year 2000-01. The Commission has approved the sale figure of 10603.97 MU for the DISTCOs and wheeling of 300 MU to CPPs. Applying the principle of embedded cost, the transmission tariff per unit works out to 31.01 paise/unit rounded off to 31 paise/unit which is hereby approved. When a CPP is located away from an industrial units the energy utilised by the industrial unit is deemed to have been transmitted over GRIDCO’s transmission system from the CPP wherever agreement exists. This rate shall be applicable on the quantum of energy consumed by such industrial units. This rate shall also be applicable for transmission of power from outside the State to an industry located inside the State through the use of GRIDCO’s EHT transmission system.

6.33

Transmission Loss for Wheeling
GRIDCO has proposed that out of energy the supplied to transmission and bulk supply licensee for transmission, 4% shall be deducted towards transmission loss and balance is liable to be delivered at delivery point at 220/132 kV. The Commission has approved a transmission loss of 3.7%. It is, therefore, decided that the energy consumed by an industry supplied by a CPP situated at a distant location or wheeling of power from outside the State to an industry within the State, 3.7% of the energy will be deemed to have been lost in transmission on which also transmission charges shall be levied.

6.34

Delayed Payment Surcharge
GRIDCO has proposed delayed payment surcharge for delay in payment of transmission charges as detailed in modified DF-20 (Clarification to queries on BST FY 01). The Commission approves that the monthly charges as calculated with other charges and surcharge on account of delayed payments, if any, shall be payable within 30 days from the date of bill. If payment is not made within the said period of 30 days, delayed payment surcharge at the rate of 2% (two percent) per month shall be levied pro-rata for the period of delay from the due date, i.e. from the 31^st day of the bill, on the amount remaining unpaid (excluding arrears on account of delayed payment surcharge).

7.0

The Commission does not approve the Transmission and Bulk Supply Charge as proposed by M/s. GRIDCO and directs for implementation of Bulk Supply Tariff, Transmission Charges and Other Charges as determined by the Commission in this order to be effective from Ist February, 2001 till further orders.
The application of M/s. GRIDCO is disposed of accordingly.

(H. SAHU) M E M B E R	(D. K. ROY) C H A I R M A N
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