NESCO

4.0	OBJECTIONS DURING HEARING As stated at para 2.1.4 and 2.1.5 the Commission admitted twenty objections against Retail Supply Tariff application for 2001-02 and four objections against the Revenue Requirement application for 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. A summary of these objections based on issues raised is presented below:
4.1	Validity and Frequency of Retail Tariff Application Some objectors suggested that the tariff application of the licensee was not maintainable and tariff once fixed should not be revised within a financial year.
4.2	Audited Accounts Most objectors stated that the licensee had submitted its financial statements based on provisional accounts, which should not be accepted by the Commission. Some of the objectors further emphasized that DISTCOs and OERC should agree to get all DISTCOs financial accounts audited by A.G. Orissa.
4.3	Maintenance of Asset register Most of the objectors raised the issue of non-maintenance of asset register by the licensee without which, they said, depreciation can not be calculated accurately.
4.4	High Transmission & Distribution Losses The objectors stated that Nesco’s projection of T&D loss at 47% appeared to be fallacious when it is compared with that of SOUTHCO. They stated that the losses should have been reduced, given the negative load growth. Some objectors maintained that the T&D losses were at 46.94% in 1995 and remained at the same level even today despite significant investment in metering and system improvement, privatisation of distribution. They suggested that the T&D loss should be permitted at 32% comprising 3.5% transmission loss and 28.5% distribution loss. Some objectors pointed out that when a large chunk of consumers were unmetered or having defective meters, the declared loss levels by the licensee appeared to be unrealistic. The licensee was overstating the loss to claim higher revenue requirement. The losses should not be more than 30% in 2002-03.
4.5	Cost of Employees, Material Cost, A&G Expenses The cost of employees, material cost and A&G expenses were excessive and the same should be pruned as per OERC norms. R&M costs for 2002-03 have been projected at a very high level.
4.6	Interest on Loan Interest on loan component should not be taken into Revenue Requirement since all PMU projects have landed up in cost- and time-overrun. No interest payment during 2002-03 should be allowed on loans which does not add to capital formation.
4.7	Provision for Bad Debts
4.7.1	Bad debt should not be allowed unless NESCO makes efforts to collect arrears. OERC should only make a token provision for bad debt. An expert committee may be constituted to look into the bad debts.
4.7.2	Shri R.P. Mohapatra raised specific points regarding issue of receivables. It was stated that the list of debtors against whom the debts have been written off is not available and subsequently the arrears have not been removed from the ledger. He pointed out that as per Transfer Notification out of the arrear revenue collected by the licensee prior to 01.4.99, 50% was to be paid to GRIDCO, which is their legitimate due.
4.8	Load Factor Billing Load Factor Billing is no solution to un-metered supply. The licensee should replace the defective meters instead of resorting to load factor billing. This also acts as a disincentive for the company not to go for metering.
4.9	Depreciation 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. Some objectors stated that assets of GRIDCO and OHPC should be subject to pre-92 Depreciation norms. Depreciation for 2002-03 may be calculated strictly as per Electricity Supply Act-1948.
4.10	Provision for Previous Losses Some objectors stated that OERC should not allow any provision for past losses as a pass through in tariff.
4.11	Concessional Tariff for Industries Some objectors suggested for reduction of tariff for Power Intensive Industry in the HT category to Rs.1.65 per unit irrespective of their load factor. They also further argued for a single part tariff without demand charges. Other objectors suggested that the tariff for Power Intensive Industry should be reduced to Rs.1.80 per unit at load factor upto 60% and to Rs.1.50 per unit at higher load factors. Power Intensive Industry deserved preferential treatment in view of its higher load factor higher consumption of energy.
4.12	Special Scheme for EOUs Tariff proposed for Power Intensive EOUs by NESCO would not be suitable to the industries. The objectors feel that a concessional tariff of Rs.1.80 per unit upto 60% load factor and Rs.1.50 per unit above 60% load factor with no demand charges might be appropriate. They referred to the Government of Orissa direction to NESCO to offer competitive tariff to EOUs after necessary approval from OERC. On the our hand, some objectors felt that a preferential treatment to EOUs would constitute to a burden to the licensee as well as the general consumers as costing power has to be procured to meet such demand.
4.13	Sub Category for Export Oriented Power Intensive Industries The Export Oriented Power Intensive Industries should be considered as a sub category of Power Intensive Industry considering their load factor and consumption volume.
4.14	Special Tariff for Above 25 MVA ISPAT Alloys submitted that as the T&D loss for its category of consumers was 0%, the tariff should be reduced further. It also suggested that the tariff below 70% load factor should be telescopic, similar to the load factor above 70%.
4.15	Non-Competitive Tariff Electricity tariff in Orissa were nearly four times those prevailing in Europe, South Africa, Australia, America and Korea and therefore were un-competitive.
4.16	Tariff and Inflation Prices throughout the country were static and those of the agricultural produce were lower than the support price fixed by the Government. Therefore tariff hike is unwarranted.
4.17	Tariff for large industries Emami Paper Mills suggested a single part tariff at Rs.3.55 per unit, which is the average rate for large industries at 50% load factor. It suggested a surcharge of 10% if the maximum demand exceeded 3,500 KVA or if the emergency drawl exceeded 1008 hours.
4.18	Capital Base Irrespective of the purchase value of the assets, the "original cost of the fixed assets" should be at the depreciated book value as per the Sixth Schedule.
4.19	Reasonable Return The Reasonable Return should be linked to vintage of the assets.
4.20	Demand Charges Industries having a connected load of 100 KW or more are presently categorised as large industries and are forced to have a contract demand agreement of minimum 110 KVA irrespective of the actual contract demand. As a result, the industries are forced to pay higher Demand Charges. With easy availability of static trivector meters, this anomaly could have been warded off. Medium industries should be allowed to have a separate contract demand agreement irrespective of connected load.
4.21	Demand Charge for Power Cut Period The objectors stated that NESCO should not levy Demand Charge even for the power cut period every month.
4.22	Meter Rent Some objectors stated that the Meter rent for trivector and other static meters were too high when meter prices have fallen drastically. The meter rent may be fixed for a period of five to ten years.
4.23	Reduction in BST The UCCI submitted elaborate calculation on determination of the revenue requirement for NESCO by considering a loss level of 3.5% loss for EHT and 29.5% loss at HT and LT. They have also proposed scrutiny of interest on securitization of arrear of GRIDCO, payment of DPS, treatment of bad debt and pleaded that the shortfall in revenue requirement should be bridged by reduction in BST.
4.24	Multi-Year Tariff Some objectors requested the Commission to consider fixation of tariff for a period of five years so as to ensure predictability and certainty.
4.25	Tariff for Colony Consumption Ferro Alloys Corporation submitted that since the company was drawing power at 132 KV, its colony consumption should also be charged at industrial tariff.
4.26	Power Factor Penalty/Incentive Power Factor Incentive should be provided for Power Factor above 90%. The objectors suggested a two-slab system as follows: 1% for every 1% increase in power factor above 90% upto and including 95%; 2% for every 1% increase above 95%. Some objectors were of the view that the earlier scheme of Power Factor Incentive of maintaining Power Factor over 90% and upto unity should be reintroduced as the industries have invested in equipments to maintain high power factor.
4.27	Interruption, Low Voltage and Unreliable Supply Most objectors registered their resentment about interruption unreliable and irregularity in power supply low voltage and unscheduled power cut. Even industries suffered more than 15 hours of power cut per month.
4.28	Unauthorized and Illegal Abstraction of Electricity Unauthorized connections remain unchecked and the procedure of availing temporary and permanent connections is cumbersome. The objectors pleaded that NESCO should be asked to tighten its belt to reduce the theft of power and improve revenue connection. Rampant power theft continues unabated in connivance with some employees of NESCO.
4.29	Poor Consumer Service and Redressal System NESCO lacks urgency in attending consumer complaints regarding interruption, low voltage, erroneous billing. Though there was abnormal tariff increase between 1992-2001, there was no corresponding improvement in quality and reliability of supply, efficiency of operation and consumer service. The redressal mechanism of consumer grievance at GRF and Bijuli Adalat level is not satisfactory.
4.30	Rural Electrification Work 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.
4.31	Billing Issues The objectors stated that NESCO was levying additional fixed charge of Rs.30 per KW illegally. A new average billing system has been introduced by NESCO without taking meter reading. Such arbitrary, illegal and coercive measures must be stopped.
4.32	Uniform RST Across Zones The objectors suggested for a uniform RST across zones, which could be achieved by differential BST.
4.33	DPS Payments DPS payments and penal interest on default of loan repayment should not be passed on to the consumers. Some objectors suggested that the DPS should be dispensed with as the rate was very high.
4.34	Emergency supply to CPPs Some objectors requested for relaxing the condition for emergency supply for CPPs. At present, industries with CPPs could avail emergency power subject to the limit of 25% of largest units. They requested that this limit should be raised to 75% of the capacity/co-generation plants to reduce the burden on smaller industries.
4.35	Overdrawl Ispat Alloys suggested that the existing system of 120% of overdrawl during off peak hours might be extended on 24 hours basis without any penalty.
4.36	Some of the objectors proposed that the Commission may please consider the following recommendations of the High Power Committee on Power Sector Reform: Setting aside up valuation of assets of OHPC. Keeping upvaluation assets of GRIDCO in abeyance. Keeping payment of interest to Government except IBRD loan in abeyance before considering proposals for revision of tariff submitted by licensees. All these are in line with OERC tariff order dt.19.10.2001 in case No.27 of 2000 and OERC order dt.16.03.2001 in case No.29/30 of 2001.
4.37	Queries by Director (Tariff) NESCO in its revenue requirement application for 2002-03 has assessed the total power purchase to be 2291.203 MU whereas in the load forecast submitted to GRIDCO the power purchase requirement it has been stated as 3065 MU. This discrepancy may be clarified. Affidavit for the average rate billed for the past of six months for 2001-02 (T-6) should be submitted. In the revenue requirement application, the T&D loss level proposed for the year 2002-03 is 44.35% whereas for the same year in the Business Plan, it is shown at 40.77%. Similarly, in the tariff application for 2001-02 T&D loss is proposed at 47.41% but in the Business Plan, it is shown as 46.98%. Justification for this discrepancy may be provided. Is NESCO you committed to absorb the difference between the special tariff and actual tariff as proposed by it for some of the specified categories of industries and will not pass on to the consumers through revenue requirement. Audited accounts for the year 1999-00 and 2000-01 have not been submitted. Working capital has already been included in the capital base for the calculation of reasonable return. Why the licensee has claimed further interest on working capital of Rs.52.13 crore in its revenue requirement. Further, para 8.2.10 in the application, it is mentioned that for the same financial year an amount of Rs.25.65 crore would payable to GRIDCO. This mis-match of figure may be clarified. From F-25, it is found that as on 31.03.2001 receivables were 268.08 crore against the billing of Rs.326.32 crore for the year 2000-01. It means 300 days of sale as receivables in arrears which are to be collected from the consumers. The licensee is only able to collect 60 days of sale which is prime reason for non-payment of GRIDCO’s dues by WESCO. Why the licensee should be allowed DPS on power purchase liability while they are unable to collect 300 days sale from the consumers. NESCO has asked for 1.48 crore towards lease rent for the year 2001-02. It is understood that the licensee has taken some meters on financial lease from BSES Ltd. This being so, as per the accounting policy issued to the licensee, the assets under financial lease should be treated as assets in the book of the lease for which lease rental need not be paid. This may be got clarified.