5.0

GRIDCO's RESPONSE TO OBJECTIONS

5.1

Demand estimation

5.1.1

Energy requirement

GRIDCO has also submitted that the power procurement proposed by GRIDCO is based on the proposals submitted to it by DISTCOs. Some discrepancy has been noticed in power procurement projection given by DISTCOs to GRIDCO and projection given in their tariff application. DISTCOs need to explain the discrepancy.

5.1.1.1

GRIDCO has rejected the alternative demand forecast made by some objectors by stating that the assumptions behind these forecasts have not been explained. The transmission loss calculation is incorrect in some cases.

5.1.2

Simultaneous Maximum Demand, Contract Demand and Billing Demand

GRIDCO has replied that there is no justification for changing the method of computation of measurement of SMD because ultimately GRIDCO's revenue from such charges has to match its revenue requirement. The method of computation of SMD has little bearing on the whole issue. GRIDCO does not find the proposal of DISTCO's for reducing demand charges to be reasonable.

5.1.3

Levy of Overdrawal charge

GRIDCO is not supposed to submit the certified and complete set of bills to DISTCOs but shall submit the same to the Commission.

5.1.4

Transmission losses

There is no problem in metering the activities of GRIDCO and the transmission loss based on actual figures and not assumptive ones. GRIDCO considers that the transmission loss cannot be substantially reduced. GRIDCO also requested the Commission to ignore the loss figure suggested by some DISTCOs, as this is based on one month's data. GRIDCO also replied that the revision of tariff is not dependent only on a single parameter and objection to the tariff revision proposal for not achieving desired loss level does not appear to be logical and judicious.

5.1.4.1

GRIDCO has also submitted that the increase in transmission loss from 4% to 4.6% is due to exclusion of energy flow in IB-Budhipadar-Korba line connected to the western grid. GRIDCO has submitted a business plan to reduce the transmission loss by 0.2% every year and the transmission loss will come down to 3.7% by 2006-07. The request made by objectors for allowing 3.5% transmission loss is not supported with evidential documents and, therefore, should be accepted.

5.1.5

Power procurement: Least cost drawal

GRIDCO replied that its power procurement plan is based on least-cost combination of power to be procured from various generating stations. Hence, GRIDCO has no plan for purchase of high cost power when low cost power is available in the State. GRIDCO is making all efforts to draw maximum power from OHPC and during FY 2001-02, the drawal will be more than the estimated volume. GRIDCO is making every endeavour to draw maximum power from CPP as well.

5.1.6

Power procurement costs

The existing PPA between GRIDCO and OPGC has been approved by GOO and the same has been submitted to OERC for approval. OERC has initiated the required proceedings. GRIDCO has received a proposal for two-part tariffs relating to Rengali and Upper Kolab stations of OHPC. GRIDCO is scrutinising the proposal.

5.1.6.1

GRIDCO has also rejected the cost estimates proposed by some objectors and stated that GRIDCO has considered station-wise cost of power based on the energy bills, year-end adjustment bills, tariff notifications and PPA. Continuance of rates approved by the Commission last year will put GRIDCO into loss in power procurement and will increase its overall loss.

5.1.6.2

GRIDCO has pointed out that the case on CERC order on tariff norms is pending in the Hon'ble High Court of Delhi and, therefore, the argument that the fixed costs should be reduced is premature. Till orders are passed by the appropriate authority, the change in the tariff of generating stations cannot be considered.

5.1.6.3

GRIDCO has requested the courts to implement ABT on prospective basis and not on retrospective basis. In case GRIDCO's prayer is not acceded to by the courts, GRIDCO may incur losses for which it has prayed the Commission to pass the loss in the next BST.

5.1.7

Transmission costs

5.1.7.1

Employee cost, A&G, R&M expenses

GRIDCO is taking utmost care for incurring judicious expenditure on employees cost, O&M cost and A&G expenses. GRIDCO has denied that the increase in administrative and operational expenses is significant and unnecessary. Because of increase in cost of operation and cost of material, these costs are bound to increase. Increase in R&M expenses is due to additional repair and maintenance expenses needed for upkeep of system and restoration after flood damage during 2001-02. A&G expenses for FY 2002 include the stamp duty payable on bonds payable to generators.

5.1.7.2

GRIDCO has also refuted the allegation that it is disobeying the Commission's order. The Commission allows certain normative amounts under different heads for passing on to the tariff proposal and the actual expenditure can be different due to a number of factors.

5.1.7.3

GRIDCO has informed that while DISTCOs are paying pension to their employees who have retired after 01.4.99, GRIDCO is discharging the liability of those retired before 01.4.99 and, therefore, comparison of pension liabilities of GRIDCO vis-a-vis DISTCOs is irrelevant.

5.1.7.4

GRDICO has also rejected the alternative cost proposals suggested by the objectors.

5.1.8

Depreciation and absence of asset register

Pre-1992 rates of depreciation should not apply as the assets have been revalued and transferred to GRIDCO under Transfer Scheme Rules, 1996

5.1.9

Interest on long term liabilities

GRIDCO has stated that it has filed a petition before the Commission regarding interest on bond issued to power suppliers and the decision is awaited. The LIC loan is disputed regarding mortgage of assets only. The calculation of interest is according to the existing loan agreement and the Commission approved the same in its Tariff Order in case no. 27/2000.

5.1.9.1

GRIDCO is contributing towards the pension trust and GRIDCO is required to recover at least the interest for such huge investment made towards pension trust in its Tariff. GRIDCO has requested the state Government to convert ZCB to equity, which is under consideration of the government. A part of ZCB is due for conversion during this year. Hence, GRIDCO has requested the Commission to consider such conversion while calculating tariff for FY 2002.

5.1.10

Capital Base

5.1.10.1

Original cost of fixed assets

GRIDCO replied that the Commission has decided the issue of revaluation of assets in its earlier orders. As this is in pursuance of Transfer Scheme Rules, 1996 neither OHPC nor GRIDCO has any control over the same.

5.1.11

Capital expenditure

GRIDCO replied that no specific example of delay in execution of PMU projects has been cited. Accordingly, the contention of the objector not to allow interest on loan component is not acceptable. Investment made by GRIDCO mostly accounts for improvement in the system voltage reliability of power supply while simultaneously reducing the transmission loss to some extent.

5.1.12

Calculation of capital base

Objectors have argued that like previous years, zero coupon bonds should be excluded from the capital base calculation.

5.1.13

Reasonable return

Some objectors have pleaded that the Commission should follow GOI notification in 1999 on reasonable return and calculate return based on vintage of the assets.

5.1.14

Miscellaneous receipts

SOUTHCO and WESCO requested GRIDCO to furnish bills for power wheeled to other states and alleged that the entire power from OPGC was being injected to MP. Such miscellaneous income should be excluded from the revenue requirement.

5.1.15

Transmission tariffs

GRIDCO maintained that the method of billing for power transmitted through displacement has been approved by OERC. The question of availability of cheaper power at Choudwar grid and billing at higher tariff to consumers of Choudwar has no relevance to the subject.

5.1.15.1

As ICCL is using the transmission system of GRIDCO, they are required to pay the necessary wheeling charges/transmission tariff as approved by the Commission.

5.1.15.2

GRIDCO also maintained that no agreement/contract excepting enforceable agreement/contract is valid under OER Act, 1995. Therefore, the contention that GRIDCO cannot levy transmission tariff because of the existing agreement is incorrect. The Policy Guidelines of development of micro/ mini/ small hydro electric projects issued by Government of Orissa is not a policy directive and is not applicable to the present proceedings.

5.1.15.3

GRIDCO has objected to comparison of its transmission charges with that of PGCIL as the basis of calculation is different. It is also factually incorrect to state that PGCIL is charging 10 p/u, as the rate varies from month to month and does not include transmission loss.

5.1.15.4

GRIDCO has reiterated that the proposed wheeling charge is to encourage the CPPs to give additional power to GRIDCO, as the power from CPP is very cheap. Besides, CPPs have helped in stabilising the power supply for improvement of voltage at load centres where CPPs are located. It cannot be compared to the situation of power wheeling from Kaniha to Meramundali or from Farakka to State of Orissa.

5.1.16

Legal sanctity of transmission tariff

GRIDCO replied that fixation of wheeling charge at 10 paise/unit is conditional and is subject to transfer of power to western region. The matter is to be taken up by CEA/MoP with Government of Orissa and hence, CEA's recommendation is not in the final stage and not applicable. Moreover, CERC orders are applicable to inter-state wheeling of power from Orissa to MP and not for intra-state wheeling. CERC order on wheeling to MP has been contested in the Orissa High Court by GRIDCO and the case is pending final disposal.

5.1.17

Export of power

GRIDCO has taken up the matter of sale of surplus power to AP, Karnataka, Delhi and other states. APTRANSCO is not willing to enter into long term PPA, as AP is going to be power surplus with commissioning of Simadri power and BSES thermal power station. AP may not purchase any power from GRIDCO on expiry of the present agreement on 31.3.2002. GRIDCO is in constant dialogue with EREB and CEA to sort out the technical constraints for evacuation of power from GRIDCO system.

5.1.17.1

GRIDCO refuted the allegation that it procured costly power and sold cheap power from Machkund. GRIDCO replied that it procured power from TSTPS and FSTPS at an average rate of 191.73 paise/unit, which is less than the rate at which power is sold to APTRANSCO.

5.1.18

Other issues

It would not be proper to await the decision of the state government on the Kanungo Committee as appropriate tariff is required for improvement of financial health of GRIDCO.

5.1.18.1

The proposed increase in tariff is 46% and not 60% claimed by the objectors.

5.1.18.2

GRIDCO has completed its audited accounts for 1998-99 and submitted the same before OERC. The audited accounts for 1999-00 and 2000-01 are likely to be completed and filed with the Commission soon. The application for FY 2002 is based on the management account and there is no bar in accepting the management account for the purpose of revenue requirement.

5.1.18.3

GRIDCO is investing in new lines and substations to ensure improved reliability of power supply. In fact, the outage rate has been reduced considerably and reliable, uninterrupted power supply is generally available from GRIDCO's EHT substations.

5.1.18.4

The OER Act specifically provides that no rating committee shall be formed. Hence, the provision Section 57 A(2) of the Electricity (Supply) Act, 1948 is not applicable.

5.1.18.5

GRIDCO is agreeable to pay the escalation on landed cost of coal and fuel oil to NALCO. GRDICO has received the revised escalation claim by NALCO without any supporting details. GRIDCO will consider the request on receipt of the documents.

5.1.18.6

NALCO's establishments at Bhubaneswar fall under the command area of CESCO and GRIDCO cannot wheel power from NALCO's CPP to above places.

5.1.18.7

The Commission in every order in the past has considered various objections and recorded them either for rejection or acceptance as the case may be. Hence the question of throwing the objection to dustbin after receipt does not arise.

5.1.18.8

As the Commission is bound to decide the tariff within 90 days as per provision contained in the OER Act. Hence, time specified by the Commission in the process of tariff proceedings appears to be reasonable.

5.1.18.9

Function of the Commission has been clearly defined in the OER Act and the proposal of the objector that the Commission should directly procure power is totally untenable.

5.1.18.10

It is not clear how a single-part or two-part tariff does affect GRIDCO.

5.1.18.11

Electricity tariff is not the only consideration for an unit to remain economically viable.

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