3.0

SOUTHCO'S PROPOSAL

3.1

The Southern Electricity Supply Company of Orissa Ltd. (SOUTHCO) is carrying out the business of distribution and retail supply of electricity in eight Districts of State of Orissa namely Ganjam, Gajapati, Kandhamala, Boudh, Rayagada, Koraput, Nawarangpur and Malkanagiri. 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 gives a pen picture about its current activities.

Total consumer	-	3,81,970
Total input in MU	-	1552.70
Total billing in MU	-	875.431
Total billing in rupees lakhs	-	22829.65 (Source:F-17 of RR 02-03)
33 KV lines (in Kms.)	-	2747.66
11KV lines (in Kms.)	-	11717.715 Source:
LT lines (in Kms.)	-	9351.193  SOUTHCO
33/11KV sub-stations	-	183 nos., 381.54 MVA General data
11/0.4 KV sub-stations	-	8122 nos., 479.29 MVA dt.28.8.01

3.3

The comparative figure of consumption at different voltage levels as well as energy purchase in MU from the FY 1998-99 onwards with a projection for the future periods is taken from various filings with the Commission and tabulated to serve as an indicator about pattern of consumption in the area of licensee.

Table-1
Energy Sale & Purchase

3.4

Sale Mix Analysis

3.4.1

The voltage wise sale mix of consumers in percentage is given in the table to indicate that the consumption is getting skewed in favour of LT which has been taken from table-II of the RST application of 2000-01 for the FYs 1998-99 and 1999-00 and the same data in respect of FY 2000-01, 2001-02 and 2002-03 has been taken from technical format T-1 of RR application 2002-03.

Table-2
Sale mix variation

FY 2001-02

3.5

The licensee 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.

3.6

It expects a growth rate of 12% in the domestic category for the year 2001-02 based on the estimated increase in number of consumers for the first quarter of the financial year.

3.7

It also estimates a growth of 9% in respect of commercial consumption and 8% in respect of irrigation consumer due to aggressive metering programme.

3.8

In respect of HT consumers it estimates a growth rate of 8% based on the consumption trend and increase in number of industries at the end of the first quarter of the financial year 2001-2002.

3.9

The estimated growth rate is 12% in respect of EHT consumers based on the consumption trend of the first quarter of the financial year 2001-2002.

FY 2002-03

3.10

For determination of the consumption for the FY 2002-03.

3.11

SOUTHCO estimates a growth rate of 6% in domestic category, 3% for commercial category and 5% for irrigation category over the previous year. This is based on the metering programme and trend of consumption for the year 2001-02.

3.12

Similarly it expects a growth rate of 6% in HT category based on the pattern of consumption available upto 2001-02 and expected drawal by large industrial consumers.

3.13

REVENUE REQUIREMENT

3.13.1

The licensee is required to meet the cost of power purchase from GRIDCO, the cost of distribution, covering 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 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.

3.13.2

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 taken from the filings before the Commission is given in the table below.

Table : 3
(Rs. in Crore)

3.13.3

SOUTHCO in its application of 2001-02 has stated that during their operation for the last two and half years the tariff order made by 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. On account of these factors, SOUTHCO continued to incur losses from 1st April 1999 which trend continues for the year 2000-01 and 2001-02.

3.13.4

SOUTHCO has stated that in spite of RST increase announced by OERC, the margin available to SOUTHCO even with 100% collection efficiency is grossly inadequate to meet the operational expenses. As a result of this, there is substantial increase in financial loss to SOUTHCO.

3.14

Distribution loss

SOUTHCO 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 38% in the FY 2001-02. The pilot study as directed by the Commission has been taken up. The interim results of pilot study indicate that overall distribution loss in SOUTHCO is likely to be of the order of 41%. In the revenue requirement application for FY 2002-03, SOUTHCO has stated that for the FY 2001-02, they have set a targeted system loss reduction of 5% which they now consider to be impossible due to recession in industrial sector, lower consumption by HT & EHT categories and growth of load in LT sector. For the FY 2002-03, they have proposed a target of reduction of 2% to achieve a distribution system loss of 39% during the year. Accordingly, they have requested OERC to accept the distribution loss of 39% for computing their revenue requirement for the year 2002-03.

3.15

Tariff Revision Proposal (Tariff schedule as per existing and as proposed -Annex-D1 & Annex -D2 )

3.15.1

SOUTHCO has proposed an overall tariff rise of 37% 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 them for recovery in future tariff.

3.15.2

SOUTHCO 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. SOUTHCO also has proposed modification to the monthly minimum fixed charges for LT categories of consumers.

3.16

Cross-subsidy

3.16.1

SOUTHCO submits that if the Commission feels 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 as the State Government has a significant role to play in balancing the varying interest of different classes of consumer. The request to OERC is to come out with appropriate direction in this regard.

3.16.2

SOUTHCO 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%.

3.17

Prayer 2001-02

SOUTHCO has requested for

• Approval of the proposed retail tariff and charges

• Confirmation of the revenue requirement

• Confirmation of expected revenue from proposed tariff for SOUTHCO

3.18

Financial year 2002-03

The revenue requirement and the expected revenue for the year 2002-03 as projected by SOUTHCO is given in the table.

Table : 4
(Rs. in Crore)

3.19

Prayer 2002-03

SOUTHCO has requested for confirmation of revenue requirement for FY 2002-03.

• Confirmation of revenue requirement for SOUTHCO

• 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.

3.20

In its submission dated 30 March 2002 filed before the Commission SOUTHCO has requested that the revenue requirement for the years 2001-02 and 2002-03 may be considered while fixing the tariff. In case, there is any gap left between expected revenue and revenue requirement to avoid sharp increase in tariff, the unabsorbed past loss may be adjusted in future years.

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