4.0

OBJECTIONS DURING HEARING :

4.1

BRIEF SUMMARY OF THE OBJECTIONS RAISED BY VARIOUS OBJECTORS

The Commission has considered all the objections raised by various objectors. Some of the objections were found to be of general nature whereas others were specific to the proposed tariff filing for the financial year 2000-01. Based on their nature and type, these objections may be categorised broadly as indicated below.

4.2

High Transmission and Distribution Losses

Almost all the interveners strongly objected to high T&D loss assumed by the SOUTHCO for calculating its revenue requirement. The objectors pointed out that the estimation of loss is not accurate as many of the meters are either defective or not existing. Therefore OERC should not allow the total loss to exceed 32% out of which 3.5% should be EHT loss and 28.5% should be distribution loss. Unfortunately the benchmark of T&D Loss has been kept constant by the Commission in its order dated Nov, 1998 and Dec, 1999. This benchmark percentage should be brought down.

4.3

Consumer Service

Consumer Service is in a deplorable stage. Complaints are not registered by SOUTHCO authorities. They are not keeping proper accounts of consumer complaints. "Users' Committees" should be formed to certify the quality level of services offered by a DISTCO failing which there should no increase in tariff.

4.4

Effective date for implementation of the tariff proposal

Some of the objectors, like Shri R.P. Mohapatra of Jayadev Vihar, have suggested that the tariff proposal should be effective from 1st April 2001. This will have the following advantages over the other timings followed by OERC.

• Audited accounts of the previous year will be available before the tariff for the ensuing year is determined. Complete set of information like Billing determinants and Expected Revenue from charges can be filed by the licensee.

• The reservoir levels of the HEP - at the beginning of the storage season (1st November) will be known enabling a more accurate prediction of hydro power availability.

• The tariff shall be available for a full financial year.

• Reduction in T&D loss for ensuing year can be estimated based on actuals of previous year.

• The Data Base of the licensee can be made more authentic.

4.5

Necessity for a Pilot study

Pilot studies should be undertaken in selected urban and rural feeders in each DISTCO to determine technical and commercial losses. Until that is done the percentage of loss claimed by Distribution Companies should not be relied upon as such claims are without any basis.

4.6

Cost of Employees, material cost, A&G expenses

Many of the objectors have pointed out that the cost of employees, material cost, A&G expenses are quite high. They should be pruned as per OERC norms and fixed at 6% higher over the corresponding figures approved by OERC for 1999-2000.

4.7

Provision for bad debts

Provisions of bad debts for 2000-01, proposed by SOUTHCO is too high and should not be accepted. The Commission should only make a token provision for bad debt, as allowing high volume bad debt will be a premium on inefficiency.

4.8

Load Factor Billing

The licensee has not followed the directions of OERC like installation of meters. Therefore, load factor billing should not continue indefinitely, and should be brought down. Many objectors feel that it should be limited to three billing cycles only. The load factor should be reduced from 20% to 10% in case of DOMESTIC consumers.

4.9

Multi Year Tariff

Tariff for consumers should be fixed for a period of 5 years and should not change every year at least for industrial consumers. Tariff is based on many factors. Hence some indicative price may be projected for future years to enable the industries to plan their future strategy of operation.

4.10

Calculation of Interest on loan

Interest on loan should be charged which does not include any penal interest. Interest should not be charged on expenses which does not result in addition of assets. There should not be any interest charged to working capital loan. DPS paid to GRIDCO should not be passed on to consumers.

4.11

Calculation of Reasonable Return

Reasonable return should be recalculated after debiting consumer's contribution and following GOI circular of May, 1999. Reasonable return for investments made upto 15.10.91 should be calculated separately and not at 13%. The later rate is applicable to investments made after 16th October, 1991 and till 31st March, 1999.

4.12

Contingency Reserve

Contingency Reserve should be kept at 1999-2000 approved level.

4.13

Calculation of Depreciation

The licensees within a time frame fixed by OERC should exhibit depreciation for each block of assets in a register. It should be calculated on the basis of GOI notification of 1994.

4.14

Special appropriation for previous losses

Special appropriation for previous losses should not be allowed as the loss has arisen due to failure of licensee to obey the directives of OERC with regard to loss level.

4.15

High rate for excess drawals

DISTCOS should sign agreement with GRIDCO for monthly demand and annual energy. Penalty for excess demand should not be passed on to consumers and excess annual drawal of energy should be paid for at the highest cost of energy actually procured over the quantum assumed in BST.

4.16

Power Tariff for Salt Industry

The Humma & Binchanapalli Salt Production & Sale Co-operative Society Ltd, Surla, Ganjam has pointed out that salt industry is seasonal like agriculture and operates between January and June. It does not operate during the rest part of the year. As in agriculture, electrical energy is used for lifting sea water. As such power tariff for salt industry should be at par with that of irrigation.

4.17

Simultaneous Maximum Demand for Railways

The South Eastern Railway,. Garden Reach, Calcutta has represented that while the proposed BST & GRIDCO allows the benefit of simultaneous maximum demand to SOUTHCO, the latter does not pass on the benefit to Railways.

4.18

Interruption, Low Voltage and Unreliable Supply

Due to power interruption, low voltage and unreliable supply, consumers are put to unnecessary harassments. Sometimes, costly machines are damaged due to low voltage. Consumer standard as prescribed by OERC should be strictly adhered to.

4.19

Unauthorised and illegal abstraction of Electricity

Despite persistent objection by genuine consumers unauthorised and illegal abstraction of electricity has not stopped. This has resulted in higher tariff for the honest consumers.

4.20

Uniform level of distribution loss

All three BSES companies, NESCO, WESCO and SOUTHCO have projected the same distribution loss of 38% though the sales and sales mix under EHT, HT and LT substantially differ between these DISTCOS. Hence, this percentage seems to have been arbitrarily determined and is unreliable.

4.21

Uniformity in RST

A number of objectors opined that the Commission may have differential BST but RST should be uniform throughout the state.

4.22

Incentives for High Load Factor

A number of objectors representing industries have pleaded for higher incentive for industries operating at load factor above 60%. Some objectors have suggested incentive for consumption above 80%.

4.23

Rebate for power supply interruption and poor voltage regulation

There should be rebate for power supply interruption and poor voltage since there is penalty for overdrawal and for not maintaining specified power factor. The over-drawal penalty for Railways should be withdrawn altogether. Alternatively overdrawal upto 120% of contract demand should be free from any penalty during peak period also.

4.24

Negative net worth of SOUTHCO

Shri R.P.Mohapatra stated that net worth of SOUTHCO has been eroded and has become negative. Taking the security deposit of Rs.20 crores from consumers and promoter's equity of Rs.5.00 crores, the net worth works out to minus fifteen crores of rupees.

4.25

Alarming bad debt position of SOUTHCO

The bad debt position of SOUTHCO is alarming. It has been increased over the Govt. period. There is no effort by the management to decrease the bad debt to a manageable level.

4.26

Issues raised by Director (Tariff) during hearing on 19.12.2000

During hearing Director (Tariff), OERC sought clarification from SOUTHCO on the following issues:-

(a) SOUTHCO has estimated a sale of 951.74 MU during the year 2000-01. The voltage wise sale figures are as follows :-

SOUTHCO proposes acceptance of loss level at 38%. So the total power to be purchased from GRIDCO = 951.74/(1-0.38) = 1535.07 MU

Loss at EHT is taken as zero by SOUTHCO.

So power available for sale at HT = 1535.07 – 129.72 = 1405.35 MU

Sale at HT & LT = 206.22 + 615.80 = 822.02 MU

So the T&D loss = 41.51%

Similarly, it can be shown that the T&D loss level varies from licensee to licensee. But it is not understood how all the three licensee proposed same level of T&D loss for the year 2000-01.

(b) Till date none of the licensee have carried out any pilot study to distinguish between commercial and technical loss by installation of meters at distribution transformer end including 100% metering for consumers connected to those transformers. They must carry out a pilot study for determination of commercial and technical loss for the period of January, 2001 to April, 2001 and furnish the report to the Commission.

(c) Interest on loan : It includes penal interest of Rs.6.87 crores towards subsidiary loan from GRIDCO and Rs.1.03 crores towards World Bank loan. This is due to non-payment of installment in time. SOUTHCO has to clarify why it should be included in revenue requirement.

(d) Carry forward of past losses : SOUTHCO has made a provision of Rs.9.02 crores towards previous loss to be recovered through tariff. SOUTHCO must state the reason for pass through of such losses.

(e) Security Deposit : SOUTHCO may explain why security deposit of consumers has not being deducted for computation of capital base.

(f) Capital Expenditure : SOUTHCO proposed to incur capital expenditure amounting Rs.36.04 crores (34.16 + 1.88 IDC) only in the year 2000-01. The break up of the expenditure is given below.

4.26.1

It is seen from the above that there is a big gap between the figures proposed during 1999-00 tariff filing and 2000-00 filing. Although Commission in their last order has excluded RE works for the purpose of calculation of capital base, still the expenditure approved by the Commission is much higher than the actual achievement during 1999-00.

4.26.2

SOUTHCO has to explain why the capital expenditure cannot be reduced to a comparative level as per the achievement of last year.