5.0

WESCO’S REPLY TO THE OBJECTIONS

5.1

The Managing Director of WESCO replied to the various issues raised by the objectors.

5.1.1

In its rejoinder to the above objections WESCO stated that the Retail Tariff application submitted by WESCO to OERC is well within the provisions of OER Act and Sixth Schedule of the Electricity Supply Act, 1948. The Distribution and Retail Supply License also requires the Licensee to submit its revenue requirement for the ensuing financial year to OERC. WESCO have submitted the Revenue Requirement for 2000-01 and have requested an adjustment in tariff to meet the revenue requirement. This is in accordance with the Regulatory Frame Work prevailing in the State of Orissa.

5.2

Need for increase in energy charges

5.2.1

The proposed increase in tariff is based on a reasonably accurate estimate of the revenue requirement of 2000-01. Audited accounts for the financial year 1999-2000 have been made available to the commission. The projections given by WESCO in it’s retail tariff application are in line with the audited results for 1999-00. Since the proposed tariff would be applicable for only part of the year, WESCO will have a huge deficit for the year 2000-01.

5.2.2

In order to ensure the viability of the power sector in the state of Orissa, it is necessary to balance the interest of the licensee and at the same time protect the consumers from a steep increase in tariff. The proposal submitted by WESCO has attempted to do the same.

5.2.3

A large number of LT consumers, however, continue to pay tariffs significantly lower than their cost of supply. The process of cross-subsidisation has to be gradually dispensed with due to socio-economic reasons. OERC has recognised the need to bring the tariffs for all consumer categories to their respective costs of supply. In order to avoid sharp increases in tariffs, the OERC has recognised that this process would be completed over time, and that cross subsidies would continue to exist till such time.

5.2.4

The increases in energy charges asked for in our tariff proposal for various categories of consumers is commensurate with the revenue requirement of WESCO.

5.3

Loss Reduction

5.3.1

WESCO is committed to reduce distribution losses and provide improved quality of services. WESCO has already embarked on a massive metering plan and system improvement schemes to curb distribution losses and improve the performance, the progress of which is reported to OERC. However, the benefit of all the above would accrue only over a period of time. The distribution loss during the financial year 2000-01 targeted to a level of 38% is a stiff target and forms a reasonable basis for the tariff proposal.

5.4

Consumer Services

5.4.1

WESCO is making sincere efforts for improving consumer services and redressal of consumer grievances through its existing departmental network and system. In this connection, efforts have been made to form village committees and hold Bijli Adalats and for improvement of supply conditions as well as providing proper metering for the benefit and satisfaction of the consumers.

5.5

General

5.5.1

WESCO would like to clarify as under :

5.5.1.1

WESCO's application has been submitted basing on the present BST tariff and the question of resorting to high cost power does not arise.

5.5.1.2

WESCO is not in a position to consider the suggested differential bulk supply tariff as WESCO suffered huge loss of Rs.60.00 crores.

5.5.1.3

Objection raised in different paragraphs are not correct. Calculation made by objector regarding revenue requirement are not correct and based on facts.

5.5.1.4

Metering projects are rigorously executed and monitored for maximization of benefit.

5.5.1.5

Present regulatory mechanism provides calculation of revenue requirement and tariff adjustment once in a year.

5.5.1.6

Question of allowing more than 10% of the total consumption by HT industry as colony consumption does not arise since allowing 10% of HT consumption as colony consumption is a liberal consideration.

5.5.1.7

WESCO is not in a position to consider the suggestion of consolidated tariff for new industries with 25/50/75/100 MVA maximum demand and guaranteed load factor of 80% as the rate proposed by them are lower than existing special tariff rate for 100 MVA consumer.

5.5.1.8

Regarding penalty for overdrawal reasons mentioned by South Eastern Railway do not justify withdrawal of overdrawal penalty. Overdrawal penalty is necessary in a system, to regulate engineering and financial aspect.

5.5.1.9

There is no justification for upward revision of power factor incentive/prompt payment incentive since earlier provision have considerably affected the revenue scheme of WESCO.

5.5.1.10

Figures given by WESCO on debts, bad debts, interest on loan and interest on working capital are as per the requirements.

5.5.1.11

WESCO finalise the audited accounts for 1999-00 but the data for the period 26.11.98 to 31.03.99 have been furnished by WESCO to GRIDCO for account compilation of 1998-99.

5.6

WESCO’S RESPONSE TO ISSUES RAISED BY DIRECTOR (TARIFF)

5.6.1

Distribution Loss

5.6.1.1

In earlier tariff orders OERC had defined the difference between total purchase and total sale as distribution loss. WESCO submitted that it had followed the same methodology for calculation of distribution loss in tariff application. In the list of queries of Director (Tariff) to WESCO, the distribution loss had been computed after removing the sale and purchase of EHT consumers. This method of calculation was neither correct nor was in line with the method adopted by OERC earlier.

5.6.1.2

The loss figures for the BSES companies for 1999-00 were ranging between 42 to 44% and the companies have targetted to bring the same to 38%. This also implied each company would achieve different rate of loss reduction with a common target. OERC might appreciate that there was no inconsistency in setting the loss target of 38% for the distribution company.

5.7

Pilot Study

5.7.1

Regarding the suggestion for pilot study to quantify T&D loss at different voltage of supply WESCO submitted that to carry out such studies necessary meters, metering units, meter boxes needed to be procured which would take at least 4 months. Besides all defective meters had to be replaced, unmetered supply to be metered, consumer data to be sanitized and unauthorised connections to be regularised prior to conducting such a study. WESCO therefore anticipated that such a study could be started some time in April 2001 and the first set of results would be available by September 2001. WESCO proposed to carry out a study on 25 nos. of distribution transformers in the initial stage.

5.8

Security Deposit

5.8.1

Following the Sixth Schedule ‘Capital Base’ meant the capital investment made for long term use by the licensee for the creation of long term assets as well as funds committed for long term working capital use. Thus licensee was eligible to get reasonable rate of return on its long term capital investment.

5.8.2

Going by the current practice no part of the consumer security deposit was used for long term investment. On the other hand when an agreement was terminated the consumer security deposit was refunded/adjusted against the consumer’s energy charges. Hence the consumer security deposit was not deducted from the asset base for calculation of capital base. WESCO further pointed out that in the transfer document also the consumer security deposit had not been shown under long term liability.

5.9

Penal Interest on Loan

5.9.1

WESCO submitted that it had not been able to make timely payment of loan installments due to poor cash inflows and the earlier deficit tariff order. The payment of penal interest was therefore not due to the inefficiency of WESCO. The licensee requested OERC to approve penal interest on loan.

5.10

DPS to GRIDCO

5.10.1

As pointed out above the inadequacy of cash inflows to meet the cash outflows had forced WESCO to delay its payment to GRIDCO and subsequently pay DPS. WESCO submitted that the previous tariff order was a deficit order and revenues from tariff were not adequate to meet the expenses. The licensee requested OERC to approve the DPS figures.

5.11

Carry Forward of Past Losses

5.11.1

Following the Sixth Schedule special appropriation could be made sufficient to cover previous losses. The losses incurred by WESCO during 1999-00 was of the order of Rs.58.19 crores. WESCO has proposed to include an amount of Rs.20.34 crores only for recovery through tariff in the ensuing year to avoid a sharp increase in tariff. The balance loss would be recovered through tariffs in future years. The licensee confirmed that the loss had been due to inadequate tariffs and the same needed to be recovered.

5.12

Valuation of Assets

5.12.1

WESCO’s assets had been acquired from GRIDCO as on 01.04.1999 and the value of the assets as on that date was the purchase price for the licensee. WESCO treated the assets as new even if the assets were second hand. WESCO had computed depreciation treating assets as new.