3.0

NESCO’S PROPOSAL

3.1

The North Eastern Supply Company of Orissa Ltd. (NESCO) is carrying out the business of distribution and retail supply of electricity in four Districts and a part of one district of State of Orissa namely Mayurbhanj, Keonjhar, Bhadrak, Balasore and major part of Jajpur. The company receives bulk supply from GRIDCO at several interconnected points at HT and EHT.

3.2

The profile of the company as on 31 March 2001 portrays a graphic account of current activities.

Total no. of consumers	-	3,11,804
Total input in MU	-	2443
Total billing in MU	-	1357
Total billing in lakhs of rupees	-	30778.97
33 KV lines (in Kms.)	-	1881.2
11KV lines (in Kms.)	-	11317.17
LT lines (in Kms.)	-	14125.15
33/11KV sub-stations	-	182 nos.
11/0.4 KV sub-stations	-	8380 nos.

3.3

The comparative figure of consumption at different voltage levels as well as energy purchase in MU from the FY 98-99 onwards with a projection for the future periods is taken from various filings with the Commission & tabulated to serve as an indicator about pattern of consumption in the area of licence.

Table-1
Energy Sale & Purchase

3.4

Sale Mix Analysis

The voltage wise sale mix of consumers is given in the table below to indicate that the consumption is getting skewed in favour of LT which has been taken from technical format T-1 and RST application for the FY 2000-01,para-3 of the RST application of 2001-02 for the FYs 1999-00 and 2000-01 and the same data in respect of FY 2002 and 2003 has been taken from technical format T-1 of RR application 2002-03.

Table-2
Sale mix variation

FY 2001-02

3.5

NESCO in its RST application of FY 01-02 has stated that there exists a very high degree of non-technical loss in its LT distribution system. It expects a growth rate of 24% in the domestic category for the year 2001-02 on the assumption that during the ensuing year a large number of consumers may be inducted into the billing net in addition to regular checking of meters in order to achieve the targeted growth rate.

3.6

NESCO estimates a growth of 23% in respect of commercial consumption and 22% in respect of irrigation consumer due to aggressive metering policy and regularization of hooking consumers and stoppage of pilferage and unauthorised abstraction of energy.

3.7

In respect of HT consumers it expects a negative growth due to closure of TISCO Unit at Joda for about 3 months and switching over of industrial consumers to captive generation and reduction in demand.

3.8

Equal apprehension has been expressed by NESCO in respect of EHT consumption due to recession in Ferro Chrome sector resulting in either shut down or sub-optimal operation of the Ferro Chrome industries in Orissa,

FY 2002-03

3.9

NESCO estimates a growth rate of 10% in domestic category, 12% for commercial category and 7% for irrigation category for FY 2002-03 based on the trend of the previous year.

3.10

It expects a growth rate of 2% in HT category based on the pattern of consumption available upto 2001-02 and a meagre rise of about only 1% in EHT category based on the consumption trend of the preceeding year and expecting revival of one of the EOUs.

3.11

REVENUE REQUIREMENT

3.11.1

The licensee is required to meet the cost of power purchase from GRIDCO, the cost of distribution which covers expenses on account of employees, administration and general expenses, repair and maintenance expenses, depreciation, interest on loan, appropriation to contingency reserve and provision for bad and doubtful debts. In addition to this, the licensee is expected to earn a reasonable return on its capital base based on the methodology prescribed in the Sixth Schedule to the Electricity Supply Act, 1948. The cost of power purchase covers not only the cost of power required to meet the need of the end users but also it covers the cost of energy lost on account of technical and commercial losses of the distribution system. The licensee is also required to meet the cost of capital of new investments needed to improve system reliability and quality of power supply.

3.11.2

The licensee earns its only source of revenue through retail supply tariff from the consumers of electricity within its area of license. A summary of proposals of its revenue requirement and the expected revenue at the present tariff for the year 2001-02 as proposed by the licensee is presented in the table below.

Table : 3 : 3
(Rs. in crore)

3.11.3

NESCO in its application of 2001-02 has stated that during its operation for the last two and half years the tariff awards of OERC on 30 December 1999 and 19 January 2001 were found to be notional as certain concessions allowed to industrial consumers by the Commission had completely nullified the effect of RST revision. Similarly, the increase granted in the RST order of 19.01.2001 was found to be inadequate to meet the actual and anticipated expenses of the licensee and the Commission disallowed certain legitimate and reasonable expenses and under-estimated the power purchase expenses. NESCO continued to incur losses from 1^st April 1999 on account of these factors. This trend continued for the years 2000-01 and 2001-02.

3.11.4

NESCO in its application has stated that in the last two tariff orders, the Commission has adopted a method of rationalization of tariff for creating a consumer friendly environment allowing concessions which had serious financial implications coupled with heavy increase in BST which totally nullified the effect of tariff revision.

3.11.5

NESCO has stated that in its last tariff order of January 2001, a sale rate of 269.98 paise per KWH was determined by the Commission which was lower than the average cost of supply of 281 paise per unit leading to a revenue gap which is likely to further go up if the supplementary special agreement with a reduced per unit rate is approved for the EOUs. Finally, NESCO states that even if the company was able to achieve 100% collection efficiency, the increase in revenue granted vide RST order dt.19.01.2001 currently in force for FY 2001-02 will be far less than the increase in cost of power due to upward revision of BST. The last increase in BST and the resultant increase in RST tariff led to closure of power intensive ferro-chrome units thereby severely affecting the financial position of NESCO.

3.12

Distribution loss

NESCO in its application has stated that it has set a target to reduce losses in the LT sector to achieve an overall estimated loss of 47% in the FY 2001-02 in spite of heavy reduction in HT and EHT consumption. The pilot project for loss study as directed by the Commission has been taken up and the report has also been submitted to the Commission. For the FY 2002-03, it propose to double its efforts and outlay on metering and monitoring of consumers targeting a reduction of 3% loss to achieve a distribution system loss of 44% during the year. Accordingly, it has requested OERC to accept the distribution loss of 44% while computing its revenue requirement for the year 2002-03.

3.13

Tariff Revision Proposal

3.13.1

NESCO has proposed an overall tariff rise of 32% to compensate for the shortfall in revenue requirement for the year 2001-02. It has also requested to carry forward a substantial portion of losses incurred by it for recovery in future tariff and has requested OERC to give a relief in BST considering NESCO’s present financial condition.

3.13.2

NESCO proposes to move towards a cost based tariff structure for which a minimum increase of 30 paise per unit has been suggested in EHT/HT category and a rise of 60-130 paise per unit has been proposed for different consumers in LT category. No change has been proposed in tariff for Kutir Jyoti consumers. It also proposes modification to the monthly minimum fixed charges for various categories of consumers.

3.14

Cross-subsidy

3.14.1

NESCO submits that if the Commission deems it necessary for phasing out cross-subsidy at a faster pace, the Commission can consider the proposal for State Government subsidy to compensate the utility for the financial implications of the proposed measure. It has stated that on account of limited capacity of EHT industry for cross-subsiding LT sector, the need for state subsidy for LT sector is all the more necessary. Thus, the State Government has a significant role to play in balancing the varying interest of different classes of consumers. It has requested OERC to come out with appropriate direction in this regard.

3.14.2

It has proposed no change in the special tariff for consumers with load of 100 MVA and above and a guaranteed monthly load factor of 80%.

3.15

Special tariff for consumers with load of 25 MVA and above and having high load factor

3.15.1

NESCO has proposed to offer a special single part tariff for industrial consumers having contract demand of 25 MVA and above subject to achieving load factor of at least 70% in the relevant month.

For load factor of 70% or above but less than 80%: Rs.2.40 per KWh

For load factor of 80% or above but less than 90%: Rs.2.30 per KWh

For load factor of 90% or above : Rs.2.20 per KWh

3.15.2

The above rate would be a consolidated rate and no separate power factor incentive or rebate for payment would be available to these consumers.

3.15.3

The above special rates are based on the present BST and upon any revision of the same the above special rates would be revised.

3.16

NESCO’s prayer for 2001-02

• Approval of the proposed retail tariff and charges

• Confirmation of the revenue requirement

• Confirmation of expected revenue from the proposed tariff

• Permission to carry forward the gap between expected revenue and the revenue requirement in 2001-02 and the unabsorbed past loss for adjustment in future years.

3.17

Financial year 2002-03

The revenue requirement and the expected revenue for the year 2002-03 as projected by NESCO is given in the table below :

Table : 4 : 4
(Rs. in Crore)

3.18

NESCO’s prayer for 2002-03

• Confirmation of revenue requirement for NESCO

• Permission for submission of an amended revenue requirement statement (if required) along with a tariff revision proposal after the tariff order for BST and RST order for 2001-02 is released by OERC.

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