4.0

OBJECTIONS DURING HEARING

The Commission admitted twenty-four objections against Retail Supply Tariff application, 2001-02 and seven objections against the Revenue Requirement application, 2002-03 for personal hearing. Some of the objections were of general nature and others were specific to the tariff filing of 2001-02 and Revenue Requirement of the licensee for 2002-03. Summary of these objections based on issues raised are presented below:

4.1

Validity and Frequency of Retail Tariff Application

Some objectors suggested that the tariff application of the licensee is not maintainable and tariff once fixed should not be revised within a financial year.

4.2

Classification of Consumers

Some objectors stated that the tariff application of CESCO had no legal base as the classification of consumers to which the tariff was to be made applicable was not done by the DISTCOs nor was approved by the Commission.

4.3

Audited Accounts

Most objectors stated that the licensee has submitted its financial statements based on provisional accounts, which should not be accepted by the Commission. They suggested that the audited accounts for the FY 1998-99, 1999-00 and 2000-01 should be submitted to the Commission as early as possible.

4.4

Some objectors maintained that consumption, contract demand and the number of consumers did not appear to have any relationship meaning thereby that the data submitted by CESCO were erroneous.

4.5

The licensee has not given any basis of measuring T&D Loss either in its entirety or at different voltage levels. The loss was computed taking into account even the zero loss EHT energy input into the system. Some objectors commented that when a large chunk of consumers were unmetered or possessing defective meters, the declared loss levels by the licensee could not be accurate. Further, it was stated by the objectors that the losses projected by the licensee were mostly different from those projected by World Bank. It was widely felt by the objectors that a pilot study be conducted with full fledged metering based on sample survey so that reliable estimate of loss levels could be obtained.

4.6

All expenses of CESCO were projected at a higher level and therefore needed to be scrutinised. Some objectors maintained that the Orissa’s power cost should have been one of the lowest considering the large-scale availability of hydropower and most thermal stations were pithead ones. The cost of employees, material cost and A&G expenses were excessive and the same should be pruned as per OERC norms. The expenses for consultants were also excessive. R&M expenses should be limited to 2.5% of fixed assets. Legal expenses need to be curtailed and CESCO should not be engaged in frivolous litigation.

4.7

There were strong objections to high T&D losses assumed by the licensee for calculating its revenue requirements for 2001-02 and 2002-03. It was disappointing that Distribution Loss after six years of reform was still at 47%. The objectors maintained that CESCO’s loss estimation was not accurate as most consumers did not have meters or had defective meters. Therefore, OERC should not allow the total loss to exceed 32% out of which transmission loss should be 3.5% and distribution loss 29.53% for FY 02.

4.8

Provision for Bad Debts

Bad debt should not be allowed unless CESCO makes efforts to collect arrears. OERC should only make a token provision for bad debt. Allowing 15% of incremental arrears as bad debt is a premium for inefficiency.

4.9

The objectors stated that the licensee has not followed the directions of OERC on many matters including installation of meters and correction of defective meters. Hence load factor billing should not be continued indefinitely and the same should brought down to 10% in case of domestic category.

4.10

Some objectors pleaded for a multi-year tariff for industrial consumers, which should be fixed for a period of five years with provision for variation due to power procurement cost.

4.11

Interest payable to revenue was projected at higher level. Interest may be maintained at the level allowed by OERC.

4.12

Reasonable return at a flat rate of 16% not allowable.

4.13

Depreciation may be allowed only after an asset register is formed. Depreciation should not be allowed on assets reaching their salvage value. Further Depreciation may be calculated on the basis of the 1994 GOI Notification for assets created after March, 1994. Earlier norms relating to Depreciation should apply to older assets.

4.14

Some objectors stated that OERC should not allow any provision for previous loss. In fact, previous loss is not chargeable to tariff, they maintained.

4.15

Drawal of power on account of excessive loss over and above permitted by OERC should be borne by CESCO.

4.16

Industry bodies pleaded for a multi-year concessional tariff for industry. They said that inadequate HT and EHT load growth in the state indicated that there was something wrong with industrial tariff. Other objectors argued against such concessional tariff for industry.

4.17

In case of large industries, the security deposits should be reduced to only one month average billing instead of prevailing two months average billing.

4.18

Irrespective of the purchase value of the assets, the “original cost of the fixed assets” shall be the depreciated book value going by the Sixth Schedule.

4.19

The levy of demand charge and the monthly minimum charge on a connected load upto 100 KVA is unreasonable and is against the interest of the small-scale industries.

4.20

Some objectors stated that the meter rent charged was high and the consumers were not allowed to purchase their own meters.

4.21

Some objectors suggested that a reduction in BST could be helpful in reducing retail tariff. They provided alternative calculations of a lower retail tariff based on assumptions of a lower BST.

4.22

Since power factor penalty is levied for power factor of less than 90%, a power factor incentive should be given for power factors above 90% at the same rate.

4.23

Most objectors complained of interruption in supply, low voltage, unreliable supply and supply of power for a few hours in certain areas.

4.24

Unauthorised and illegal abstraction of electricity has resulted in higher tariff for the honest consumers. Therefore power theft should be stopped abruptly.

4.25

If the rural electrification is to be carried out by separate agencies, then the revenue requirement on account of such electrification should be treated separately.

4.26

The objectors felt that there was time overrun of PMU work leading to non-realisation of the benefits of such projects by the consumers in time.

4.27

NALCO Tariff

Instead of a tariff of 450 paise per unit for emergency supply to Nalco, a tariff of three times the energy charge Nalco gets from GRIDCO against its export should be maintained. Further, wheeling of power from CPP, Angul may be permitted for Nalco Bhawan and Nalco Nagar Township at Bhubaneswar.

4.28

Mahanadi Coal Fields Ltd. pleaded for a low power factor penalty instead of the prevailing one.

4.29

Some objectors stated that bills were not served in time depriving them of the rebate facility

4.30

The proposed hike in reconnection charges was excessive.

4.31

Uniform RST Across Zones

The objectors agreed for a uniform RST across zones, which could be achieved by varying BST.

4.32

Surcharge on over-dues payable to GRIDCO due to inefficiencies of CESCO should not be allowed.

4.33

Most objectors felt that tariff proposed by CESCO was contrary to the general level of inflation prevailing in the country.

4.44

Capacity to pay of the consumers is not taken into consideration for fixation of tariff. Industries for example cannot be asked to pay tariff beyond sustainable level.

4.45

CLARIFICATION SOUGHT BY DIRECTOR (TARIFF), OERC

1. CESCO in its revenue requirement application for FY 2002-03 has proposed distribution loss at 43% whereas for the same year in its business plan it has shown the same at 39.35%. Similarly for FY 2001-02 in the tariff application, distribution loss is proposed at 44% but in the business plan, it is shown at 40.94%. Justification for this discrepancy may be provided.

2. In the RST proposal for 2001-02 the distribution loss is shown at 44% whereas the same for the year 2001-02 in the ARR application of 2002-03 is shown at 45%. This may be justified.

3. In the form T-7 (expected revenue from existing tariff) and T-8 (tariff provision proposal) rebate has been taken for 100% of consumption. This may be justified.

4. Audited accounts for the year 1998-99, 1999-00 and 2000-01 have not been submitted.

5. CESCO has proposed Rs.298.97 crore in 2001-02 and Rs.560.59 crore in 2002-03 of previous losses to be passed on to consumers under special appropriation. How would the licensee justify the amounts without audited accounts?

6. As per the provisions of para IV of the Sixth Schedule to the Electricity Supply Act, 1948 the licensee shall have to appropriate specified sum out of the revenue to contingencies reserve every year. CESCO in its revenue requirement for the year 2001-02 has not proposed any amount. The contingency reserve is created for specified purpose. CESCO may clarify the reasons for not claiming the same.

7. In the Form F-17 of ARR 2002-03 it is found that as on 31.03.2002 receivables from consumers is estimated at Rs1048.47 crore and as on 31.03.2003 the same is estimated at Rs.1210.83 crore as against the billing of 624.76 crore for the year 2001-02 and 737.98 crore for the FY 2002-03. It means 610 days of sales for the year 2001-02 and 596 days for the year 2002-03 are in the receivables, which are to be collected from the consumers. Why the licensee should be allowed DPS of Rs.97.62 crore for 2001-02 and 140.40 crore for 2002-03 on power purchase liability while they are unable to collect the huge arrears from the consumers.

8. Average rate as indicated in the Format T-6 for last 7 months has been calculated at Rs.3.05 per unit for FY 2001-02. But in the Format T-7 (calculation of expected revenue) it has been indicated at Rs.2.76 per unit. This huge difference in the average rate shows much less revenue and does not appear to be correct. This may be explained.

9. There is a gap in the revenue requirements and expected revenue for the FY 2002-03. How does the licensee plan to bridge the gap?

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