6.33

Load factor billing

As opined by some of the objectors, it is true that it is the statutory obligation on the part of the licensee to replace meters. Load factor billing has been prescribed for a limited period the meter remains defective/or the consumer goes without meter to serve as a disincentive for the consumer and help adoption of metering by consumers. Hence, the Commission directs that the load factor billing should continue as per the existing tariff.

6.34

Incentive for maintaining high power factor

6.34.1

For the first time, the Commission in its tariff order dt.30.12.99 introduced an incentive to encourage improvement in power factor above 90%. Subsequently, the limit was raised to 97% in the RST order dt.19.01.2001. SOUTHCO estimates that the rebate alone on this account to HT/EHT consumers will be of the order of Rs.2.87 crore during the FY 2001-02.

6.34.2

Some objector opined that for the health of electrical machinery it is risky to maintain power factor between 97% and unity power factor lagging because there is every chance of high voltage when suddenly some load gets off from the circuit.

6.34.3

It should be kept in view that the industries for better protection of their installation should follow prudent operational practice installing protective devices, so as to isolate the equipment during abnormal transient condition arising out of sudden load throw off or tripping of meter or feeders.

6.34.4

Further, as indicated below the KVA demand of the industry decreases as the PF improves, there by benefiting the consumer on account of higher demand charge.

PF	KVA	Excess KVA
201	1	0
0.99	1.01	0.01
0.98	1.02	0.02
0.97	1.031	0.031
0.96	1.042	0.042

6.34.5

Similar provision of power factor incentive/rebate have been recommended by other State Regulatory Commissions such as Gujurat Electricity Regulatory Commission, U.P. Electricity Regulatory Commission, Maharashtra Electricity Regulatory Commission where incentive is allowed for maintaining PF above 95%. Hence, the Commission does not consider it necessary to make change in the existing provision with regard to power factor incentive.

6.35

Incentive for prompt payment

6.35.1

Some objectors suggested for relaxation of the rebate period of 48 hours. SOUTHCO in its RST application for the year 2001-02 has estimated that the rebate on account of prompt payment within 48 hours of presentation of bill during the FY 2001-02 will be order of Rs.0.66 crore in addition to an amount of Rs.0.64 crore on account of rebate of 10 paise/unit. Hence, it is expected that to avail such heavy amount of rebate, consumers should put extra efforts and make payment of bills in time.

6.35.2

As per Commission's order, certain categories of consumers are entitled to a rebate of 1% of the amount of the monthly bill (excluding arrears and electricity duty) if payment is made within 48 hours of the presentation of the bill. When a cash discount is allowed for payment within a specified period, the cost of credit can be computed. For instance, if 15 days credit is offered with a stipulation of 1% cash discount for payment within 48 hours (two days), excluding the day for service of the bills, it means that the cost of deferment of payment by 12 days is 1%. If payment is made 12 days earlier than the due date, 1% of the amount can be saved, which amounts to an annual attractive saving rate of 30%.

6.35.3

If cash discount is not availed, the effective rate of interest will work out to 30.3%. The rational for availing trade credit should be it's saving in cost over the form of short term financing, its flexibility and convenience. Stretching trade credits or accounts payable results in cash discount foregone.

6.35.4

As an example, Mahanadi Coal Field with a monthly bill of Rs.8 crore gets a rebate of Rs.8 lakh per month or nearly a crore of rupees over a period of one year. It is in the interest of the consumer to avail the cash benefit or pay the normal charges i.e. within 15 days from the date of bill.

6.35.5

This practice of prompt payment is followed by the generators for raising bills against GRIDCO and by GRIDCO to DISTCOs also. In this age of SATCOM, FAX, Internet and STD commercial benefits must dictate and guide not only the functioning of the licensee but those of the consumers also.

6.35.6

It has been reported by the licensees that a number of consumers are availing this prompt payment rebate. The objections have come mostly from the various Departments of the Government for fear of audit objections for not availing the rebate due to their cumbersome official procedure within their organization before releasing payment for consumption of electricity. For them 48 hours may not be adequate and they may not be able to avail the prompt payment rebate. In that case, they can pay the normal charges within the due date of 15 days and convince the audit about their difficulty of not availing the rebate or alternatively streamline the procedure to avail the rebate as a commercial incentive for the Government

6.35.7

In view of this, the Commission does not consider it necessary to depart from its past order regarding incentive on prompt payment.

6.36

Metering of street lights

6.36.1

Issues that street light metering has not been done and billing is done on load factor basis was raised during the course of the hearing. In this regard, Commission would like to convey that meetings were taken by this Commission with Director, Municipal Administration, Government of Orissa, Chief Executives of Municipalities and Managing Directors of DISTCOs on 11.04.2001 and 19.04.2001 to resolve the issues on metering of street lights.

• It was agreed in the meeting that inspection to assess the connected load would be taken up by Municipality and DISTCOs.

• A single agreement for street lighting will be executed for a municipal area.

• Wherever metering is in place, the rates applicable for street lighting category should be implemented.

• Until metering is in place, calculation of consumption for the purpose of billing will have to be mutually worked out by the municipalities and DISTCOs considering the connected load and the number of burning hours for street lighting. Preferably average 11 hours burning of the lamps may be adopted due to seasonal variation. No maintenance should be carried out during day time which requires avoidable consumption of electricity.

• The switching ON and OFF of street lights will be done by the staff of the licensee. Replacement of bulbs, fittings and maintenance thereof shall be carried out by the municipal staff.

6.36.2

The licensees should take adequate steps to comply with the decisions taken in the joint meeting with the Director, Municipal Administration, Government of Orissa and Chief Executives of Municipalities, as stated above.

6.37

Industrial policy framed by Government of Orissa

An issue was raised by the Orissa Small Scale Industries Association that the proposed amendment in tariff by the licensee is directly against the Industrial Policy Resolution (IPR) of Government of Orissa. This is clarified that Industrial policy differentiating categories and conferring benefits change from time to time on various considerations. Electricity charges are to be non-discriminatory from economic point of view and it is neither desirable nor possible to synchronize the pricing in keeping with changes from industrial and financial angle. However, if the State Government desires to extent any benefit to a class or group of consumers, they can do so under Section 12(3) of OER Act, 1995 by providing subsidy.

6.38

Salt Production Industries

6.38.1

The Commission carefully examined the submission made by the M/s Humma and Binchanapali Salt Production and Sales Cooperative Society Ltd., Ganjam requesting treatment of salt industry at par with Irrigation pumping & Agriculture and not under general category. They submitted that electricity is used only for pumping of brine to the salt field for manufacture of salt during production season i.e. normally from January to June every year. There is no use of electricity during off-season. They have also stated that this industry also employs a large number of seasonal labours and the process of production of salt is very similar to agricultural production for which they should be treated at par with Irrigation pumping & Agriculture and not under general industry category. We would like to observe that the salt industry does not fit into the present classification of agricultural irrigation pumping category as defined in OERC Distribution (Condition of Supply) Code, 1998. Further, the classification of Irrigation pumping & Agriculture with lower tariff is a historical legacy targeted to promote agricultural production. We would like to clarify that if the nature of their operation is seasonal they will not be paying any energy charges during the off-season period when no energy is consumed. Hence, we are unable to accede to the request.

6.38.2

The objection raised by some objectors (OCA) that bi-monthly domestic bills are increasing loss to the licensee is not correct as the licensee is already retaining charges of supply of two months against security deposit which can be utilized as working capital.

6.39

Multi-year Tariff

6.39.1

In course of the hearings, the utilities as well as some of the respondents spoke about the element of uncertainty and risk inherent in an annual tariff setting exercise and they pleaded for introduction of a multi-year tariff regime which would reduce such uncertainty and bring in predictability. We, too are conscious of the need for greater certainty in the regulatory treatment of a host of issues having direct impact on tariff setting. It shall be our endeavor to set in motion a multi-year tariff regime effective from April, 2003 for FY 2003-04 after wide publicity and valued consultation with all the stakeholders. We have, in fact, initiated preparation of a five-year sectoral plan covering generation, transmission and distribution which will provide key inputs to this exercise. The draft consultation document which is currently under finalisation will also be brought out to facilitate the process of such consultation and obtain comments from the various stakeholders.

6.39.2

The utilities have to improve upon their own performance within a stipulated time frame by upgrading their managerial skills and efficiency by scrupulously adhering to certain operational norms like reduction in the level of loss, attaining certain level of billing and collection efficiency, setting a target for investment and avoiding time and cost overruns in execution of projects, etc. This calls for fixing a target to be achieved over a "Control period" than a target confining to a single year to provide a kind of predictability to the consumers, their own shareholders and to the Regulatory Commission. The Commission considers it prudent and desirable to go for a multi-year tariff regime for which the utilities should conform themselves to a multi-year target setting in the areas stated above. We also feel that the FY 2001-02 should be considered as the base year for all calculations as suggested by the Kanungo Committee.

6.39.3

Some objectors raised the issue that the licensee should accept the payment by account payee cheque instead of demand draft.

6.39.4

As per the existing provision in OERC Distribution Code, 1998 (Regulation 1993), the bill amount shall be paid by the consumer either in cash or by bank draft or by banker's cheque or where specifically allowed by the licensee by account payee cheque or credit cards. Hence, the facilities are already available in the OERC Regulation.

6.39.5

Some of the objectors advocated in favour of uniform retail tariff throughout the state . Historically, uniform tariffs have been used in Orissa, and indeed in all states of India, in spite of significant cost differences to serve different geographic areas. Prices that differ in relation to differences in cost generally make better use of society's resources than uniform tariffs.

6.39.6

Some objectors suggested for reduction of cross subsidies. As has already been dealt in the Retail Supply Tariff order of the Commission dated 19.01.2001, the tariff structure that this Commission inherited was a highly distorted one. In the past years by rationalising the tariff structure it has been ensured that there is a progressive increase in the rate of tariff for those who are paying less than the average cost of supply. The Commission in future tariff revisions will take steps for rationalization of tariff i.e. gradually adopting a uniform rate for all consumer categories using electricity on the same voltage of supply which is a good measure of the cost of supply or thereby reduce the cross subsidy between groups of consumers.

6.39.7

The question of a reasonable railway traction tariff raised by the S.E. Railway so as to maintain a railway traction tariff, not exceeding that of HT industrial consumer was also highlighted for consideration by OERC. The Commission would like to clarify that the railway traction tariff in Orissa is at par with that of HT or EHT consumers depending upon the voltage of supply as the tariff structure has been totally linked to the voltage of supply. Railway traction tariff is lower in Orissa. Therefore railways should have no grouse on this account.

6.39.8

The railways had also raised the issue of a single part tariff which is today applicable only to very large industries with a guaranteed off-take to which category the railways does not belong.

6.39.9

The second issue relates to the prevalent maximum demand charge in Orissa. It needs to be clarified that the Commission does not propose to make any change to the current maximum demand charge in force. Railway further concern about recording and charging of maximum demand for individual supply points as per the existing system turned out to be totally unrealistic as the railways were moving loads for all substations along this track. In this connection, the Railways quoted the letter of Ministry of Energy CEA, New Delhi dated 21.10.1988 proposing billing on the basis of simultaneous maximum demand recorded in contiguous substation of the SEBs. It may be mentioned here that the railway traction supply is from the EHT network of the GRIDCO and the billing is done by the various supply companies to the railways in their area of license. Therefore, the Commission is of opinion that the issue should be mutually discussed by the railways with the four distribution companies and their views on the matter may be placed before the Commission for taking a holistic view.

6.39.10

The railways also proposed that the integration period of 30 minutes for measurement of maximum demand in respect of railway traction has been changed to 15 minutes. The railways requested that the OERC may consider restoration of integration period 30 minutes as per the earlier method which is also in confirmity with the clause No.2(8) of Electricity Supply Act, 1948.

6.39.11

The Commission deliberated on this issue and observed that 30 minute integration period for all categories has been provided in the Regulation of ASEB, Ahmedabad Electricity Company, MPSEB, HSEB, DVP, Gujurat, Maharashtra, Tamil Nadu. Fifteen minute integration period has been provided by UPERC, APERC for loads more than 4000 KVA, and for railway traction by WBSEB. There are SEBs with one hour integration period also.

6.39.12

The railways earlier have made a case that there can be growth of traction only if the cost of tariff matches the cost of diesel locomotion. Keeping this fact in view, the Commission will consider favourably the adoption of 30 minute integration period which can reduce the overall tariff for railways. It will be, therefore, desirable to discuss the issue along with the issue of simultaneous maximum demand due to feed extension for meeting the demand of the rolling stocks after discussion with the various supply companies of the state. The railways and DISTCOs may mutually discuss and come up with a proposal for consideration of the Commission. This will require amendment of the supply regulation OERC Distribution (Condition of Supply) Code, 1998. Till such time the present arrangement shall continue.

6.40

Consumer Service

6.40.1

Construction Power

Objection was raised by M/s. Aditya Aluminium that the industries under construction may be classified separately and no demand charge should be levied on construction power. There seems to have no logic behind the objection as the licensee is to arrange/book, the quantum of power as per the contract demand and pay fixed charge against the said quantum of power which he has to recover from the consumer.

6.40.2

Observations for over drawal penalty clause

For the purpose of calculation of minimum demand there should not be any differentiation between peak or off peak hours. As such we do not accept the proposal of the objector for any change in existing tariff order.

6.40.3

Observation for incentive higher consumption

6.40.3.1

Some objectors such as M/s. Mahanadi Coal fields Ltd. pleaded that load factor as per standard nomenclature should be based on Maximum Demand and should have no relation with Contract Demand.

6.40.3.2

It is clarified that, for the purpose of calculation of incentive energy, the standard terminology of Load Factor has not been used, rather it is only the ratio of the total number of units consumed during a given period to the total number of units that would have been consumed had the contract demand or the maximum demand whichever is higher was maintained through out the same period.

6.40.3.3

It may be noted that the incentive tariff for HT/EHT category of consumers was introduced in the OERC RST order dt. 30.12.99 where incentive energy was considered above the load factor of 50% of contract demand. Further as mentioned in the OERC RST order dt. 19.01.2001 "Some objectors objected to recording of load factor during the FY 1999-00 in excess of 100% in the filing made by the licensee on the ground that it had an element of absurdity. As prescribed in OERC Condition of Supply Regulation, 1998 load factor of a consumer under no circumstances can exceed 100%" Therefore consumption ratio was adopted in place of load factor for determination of incentive energy. It is further clarified that for the purpose of calculation of incentive energy, power factor should be taken as 0.9 for conversion from KVA to KW or MVA to MW.

6.40.4

Treatment of Past Losses

6.40.4.1

With regard to the treatment of past losses, the Commission would like to clarify that in the absence of audited accounts of the licensees, it is difficult to determine the extent of loss that could have been admissible within the provisions of the Sixth Schedule to the Supply Act, 1948. A decision on this issue can be taken only when the accounts are compiled and audited in accordance with the relevant regulations of OERC.

6.40.4.2

The Commission observes with displeasure about non-maintenance of the asset register by licensees inspite of its earlier direction. The Commission directs that maintenance of asset register must be completed latest by 31 August and compliance reported

6.40.5

Demand charges during statutory power cut

The levy of demand charge during the period of statutory power cut has to be dealt in accordance with he relevant conditions of OERC (condition of supply) Code,1998.

6.40.6

Meter Rent

The Commission examined the issue of rents chargeable for the meters supplied by the licensee and does not consider it necessary to make any change the rate already fixed by the Commission in its order dtd.19.01.2001.

6.40.7

Quality of Supply & Service

Interruption, low voltage and unreliable supply is a matter of serious concern to the Commission which is taking appropriate steps to verify the data furnished by the licensee in this regard through an affidavit to the Commission. The Commission also is taking effective steps for monitoring of these parameters for meeting the supply standards as prescribed by it.

6.40.8

Unauthorised and Illegal abstraction of electricity

The issue of unauthorised abstraction of electricity is one of the principal causes of high commercial losses in the licensee's system which is being monitored every month at the Directors' Level Meeting. The licensees must take the help of law and order authorities and the Commission is committed to allow any additional expenditure on account of curbing the theft and unauthorised abstraction of electricity which must be taken up vigorously and it shall continue to be monitored at the Commission's level.

6.40.9

Rural Electrification

The rural electrification work to be taken up by the licensee as a capital grant. In this connection, the Kanungo Committee have suggested for setting up of Rural Engineering, Planning Organisation (REPO) and Rural Electrification Planning Units (REPU) under Government of Orissa to monitor R.E. and L.I. works. As and when REPO AND REPU start functioning it is believed R.E. & L.I. works will be expedited.

6.40.10

Special Tariff for Power Intensive Industries

6.40.10.1

The Commission has taken a decision to continue with the tariff structure approved vide its tariff order dtd.19.01.2001 in respect of all categories of consumers supplied by the distribution and retail supply licensee. In this connection, the Commission also examined the issues regarding a special tariff of the power intensive categories of industries. Some of the objectors also submitted that a preferential treatment to the EOUs was a burden to a licensee and the general consumer, as costly power has to be procured to meet such demand. The Commission reiterate its commitment for rationalisation of the tariff structure linked to the voltage of supply. Keeping the above objective in view, incentive tariff has already been introduced for consumers of contract demand of 110 KVA and above available power supply at HT or EHT in the previous tariff orders. That automatically reduces the per unit cost of electricity with a higher level of consumption as the fixed cost in the form of maximum charge gets distributed over a larger number of units.

6.40.10.2

The Commission however, has taken note of very special nature of some of the industries who provide continuous high load factor to the system and in the process provides a support during the off-peak hours as base loads besides dissuading such units from setting up CPPs. On the other hand this helps in getting cross subsidy from such classes of consumers to other classes of consumers who are charged below the level of cost of supply. This has also to be weighed against the option of having an industry within its fold of supply of a licensee with a lower profit margin and the option of not having the industry at all. The Commission has favourably considered in the past the above option and have allowed signing of special agreement with a proposal of guaranteed off-take at a rate lower than the normal rate applicable to similar class of industries.

6.40.10.3

The Commission in its past orders had approved tariff for consumers with a contract demand with 100 MVA and above with a guaranteed load factor of 80% @ 200 paise/unit without levy of any demand charge. The Commission has approved a rate of 182 paise/unit with a guaranteed load factor of 90% and a contract demand of 50 MW in respect of INDAL by approving for entry into special agreement between INDAL and WESCO. This rate is linked to the Bulk supply Tariff approved in the Commission's order dtd.19.01.2001. This rate will undergo a change on account of revision in Bulk Supply Tariff.

6.40.10.4

The Commission will examine such special agreements for approval as and when it is placed before the Commission provided the rates are within the parameters indicated above.

6.40.10.5

Any licensee willing to enter into special agreement with a rate other than that for a particular category can do so provided the licensee undertakes to absorb the difference between the revenue at the approved rate and the rate at which it proposes to enter into a special agreement with any industry. However, entry into special agreement should be non-discriminatory in nature i.e. consumers falling into same category should be offered similar rates.

6.41

Emergency power supply to CPPs

The Commission examined the request for raising the level of emergency power availability to 75% of the capacity/co-generation plants to reduce the burden on the smaller industries. The Commission would like to clarify that in the tariff order dtd.19.01.2001, a rate of 380 paise/unit has been fixed for emergency power supply to CPP. The order does not stipulate levy of any demand charge for emergency power supply to CPPs.

6.42

The revenue requirement estimated by SOUTHCO has been duly examined at the Commission's end.

6.43

Corrective measures and alternative calculation of revenue requirement

6.43.1

During the tariff hearing the State Government did not appear and participate despite due services of notice. It even failed to attend the Commission Advisory Committee Meeting in this connection. The Commission has received no assistance or commitment from the State Government and has had to proceed in the absence of Government's participation. It may be mentioned that during the Workshop on 09.01.2000, organized by the Department of Energy, Government of Orissa, the Commission made a presentation elaborating the various corrections as outlined in para 6.43.6 (A) below. In the circumstances, the Commission has been constrained to recommend several measures as listed below for approval by the Government of Orissa w.e.f. 01.04.2001 to bring down the cost of power, cost of transmission of GRIDCO and cost of distribution. In view of the urgency and importance of the measures for consumers of the State and for the electricity industry and success of the State policy of reforms, it is absolutely essential that the State Government should communicate their decision on the recommendations without delay, in order that the Commission may give effect to the alternative calculation of revenue requirement. Everyday of delay causes huge avoidable cost to the consumers and the revenue gap of the licensees will go on snowballing beyond control.

6.43.2

The terms and conditions for purchase of power from OHPC by GRIDCO is governed by the power purchase agreement between OHPC and GRIDCO. The interim PPA between OHPC and GRIDCO for purchase of power from OHPC old stations upto 31 March 2001 has been approved by OERC with certain observations. Both OHPC and GRIDCO have been directed to submit the PPA to OERC for approval. The new PPA in respect of these stations effective from 01.04.2001 has not yet been received till date. Based on the latest commercial practice OERC directs that parameters like O&M escalation, return on equity and depreciation in respect of these stations will be calculated in accordance with the norms given in this order. The Commission also decides to apply lower rate of depreciation (pre-92 rates) for transmission and distribution assets to bring down the cost of supply to the consumer.

6.43.3

Similarly the Commission would like to depart with respect to the O&M escalation, ROE and depreciation norms in respect of UIHEP to bring down the input cost of power.

6.43.4

(a) OHPC old stations

1. O&M escalation taken as per the weighted average of growth of Wholesale Price Index and Consumer Price Index for FY 2001-02 which works out to 2.5%. The same rate has been adopted for FY 2002-03.

2. Return on Equity is calculated @ 12% on OHPC's own investment of Rs 22.56 crore.

3. Depreciation has been allowed to the extent of loan repayment during the year.

(b) UIHEP

1. O&M escalation taken as per the weighted average of growth of WPI and CPI for FY 2001-02 which works out to 2.5%. The same rate has been assumed for FY 2002-03.

2. ROE has been calculated @12% on equity of Rs.298.70 crore.

3. Depreciation has been allowed to the extent of loan repayment during the year.

(c) GRIDCO & DISTCOs

Depreciation has been calculated at pre-92 rate for years 2001-02 and 2002-03 both in respect of transmission and distribution business.

6.43.5

The Commission is entrusted with heavy responsibility as per Section 11 of the OER Act, 1995 under the head "Functions of the Commission". It would be appropriate to quote the relevant portion of the above section.

"11(1) Subject to the provisions of this Act, the Commission shall be responsible to discharge, amongst others, the following functions, namely-

1. to aid and advise, in matters concerning generation, transmission, distribution and supply of electricity in the State ;

2. to regulate the working of licensees and to promote their working in an efficient, economical and equitable manner;……….

6.43.6

(A) In view of the above provisions, the Commission would be failing in discharging its responsibilities without giving proper advice to the State Govt. for adopting the corrective steps to bring the reforms back to rails. Commission has applied the following correctives in determining the revenue requirement for FY 2001-02 and 2002-03:-

1. Interest on GRIDCO bond issued by DISTCOs for the power purchase loan liabilities has been calculated @8.5% for FY 2001-02 and FY 2002-03

2. Interest on World Bank loan has been calculated in terms of its original sanction treating 70% as loan and 30% as grant for FY 2002-03

3. Interest on all existing bonds issued by GRIDCO have been calculated @8.5% for FY 2001-02 and FY 2002-03 assuming resecuritisation of the same.

4. New bonds of Rs.638 crore to be issued against power purchase liabilities of CPSU's as on 28.02.2001 have been calculated @8.5% for FY 2002-03.

5. Impact of zero coupon bonds of Rs.400 crore issued by GRIDCO to Government of Orissa against upvaluation of assets has not been considered for FY 2001-02 and FY 2002-03.

6. Outstanding loans from REC and PFC have been assumed for resecuritisation with a tax free rate of 8.5%.

7. In view of swapping of Government and GRIDCO dues, interest on Government loan of Rs.168.71 crore has not been allowed as a pass through for FY 2002-03.

8. Interest on GOO loans has not been allowed arising out of upvaluation of OHPC assets.

9. GOO loan of Rs.576.57 crore has been treated as loan on perpetuity.

(B) The Commission therefore advises Government of Orissa under section 11(1)(a) of the OER Act, 1995 to approve the correctives w.e.f. 01.04.2001 as outlined in this para from (i) to (ix) above to bring down the cost of power for the year 2001-02 and 2002-03.

6.43.7

In this context the Commission deems it fit and proper to review the whole question of revaluation of the assets of the erstwhile OSEB and Government of Orissa, at the time of revesting of the same with GRIDCO and OHPC and the impact of the revaluation on the tariff to be fixed now and in future. At the time of revesting GRIDCO and OHPC were wholly owned Government companies. Section 23(4) of the OER Act, 1995 did not require any such revaluation. When the assets of the OSEB vested in the State Government, the State Government paid nothing for it and did not incur any expenses. The revaluation seems to have been purely notional, agreed to between State Government on the one hand and GRIDCO and OHPC on the other hand, the latter being Government companies at that time. Clause 2 of the statutory orders dated 01.04.1996 vesting assets with GRIDCO and OHPC runs as follows.

"In accordance with section 24 of the Act, the fair value shall be duly determined of the property or rights in the undertaking involved at the time of transfer to or involvement of any person or body other than the wholy owned Government company or companies."

No such fresh and due determination of fair value appears ever to have been done - not even at the time of involvement of DISTCOs operating under the aegis of private investor. There may have been some reason (like credit worthiness of GRIDCO and OHPC), at the material time, for state and GRIDCO/OHPC agreeing to some notional revaluation, but the Commission does not think any such reason to be relevant for the purpose of tariff setting, involving rights of consumers and third parties or useful in the context of present realities in the industry. The Commission therefore in the public interest has attempted to nullify the effects of revaluation in the present tariff setting.

6.43.8

Based on the observations of the preceding paragraphs of this order and prudent commercial consideration relying on the existing purchase power agreements, relevant rules, orders and evidential documents placed before the Commission. The Commission determine the revenue requirement for the FY 2001-02 as well as for the year 2002-03. Accordingly the revenue requirement as estimated in two scenarios (i) with correctives (ii) without correctives for 2001-02 is given in Table : 24. Details of calculation of revenue requirement is given in Annex-A1.

Table : 24
(Rs. in Crore)

6.43.9

The revenue requirement for FY 2002-03 in both the scenarios (i) with correctives and (ii) without correctives as per our recommendation regarding cost of power and cost of transmission based on the principles enunciated in the earlier paragraphs of this order is given in Table : 25. Details of calculation of revenue requirement is given in Annex-A2.

Table : 25
(Rs. in Crore)

6.43.10

It is evident from the calculations given in Table above that it will require a very stiff upward revision in Retail Supply Tariff in respect of all consumers of the State if the correctives proposed by the Commission is not accepted by the government for immediate implementation. Incidentally, the correctives applied by the Commission are, by and large, in line with those of Kanungo Committee recommendation with minor modifications and few additional measures.

6.43.11

In this connection, the recommendation of the Kanungo Committee is very pertinent wherein they had advised an external financial support other than debts to the tune of Rs.3240 crore during a transition period of 4 years from 2001-02 to 2004-05 to keep the tariff structure static at the current level and proposing to raise it by about 18% in the year 2005-06. It is expected that the Government will consider the advice of the Commission in this regard and take immediate steps so as to avoid a stiff rise of tariff to all classes of consumers particularly when State Government may not be in a position to provide financial support as contemplated in the Kanungo Committee report.

6.43.12

However, if the decision of the Govt. of Orissa goes contrary to the advice tendered by the Commission, the revenue requirement for the FY 2001-02 and 2002-03 as determined without applying the correctives shall be due for recovery from the consumers.

6.44

Expected revenue from charges

The expected revenue from charges in respect of all the DISTCOs have been determined by the Commission as explained in para 6.9.5.2 of this order in Table 15 & 16.

6.45

For the purpose of RST 2001-02, the licensee has given a proposal which is given in annex to this order.

6.45.1

In para 6.43.8 the revenue requirement has been calculated by applying necessary correctives to power and transmission cost payable to GRIDCO and distribution cost.

6.45.2

Any revision of tariff in accordance with the OER Act, 1995 can be applied prospectively. The reason is that a clear seven day's notice before its implementation is necessary under Sec. 26(5) of the OER Act, 1995. Revision of tariff cannot be done in case of the FY 2001-02, which is already over. This situation arose because of deficiencies on the part of the licensees to submit the revenue requirement and tariff application in complete shape in time. As such, the tariff revision proposal for the year 2001-02 submitted by the licensee is rejected.

6.45.3

As observed in para 6.43.12 if the decision of the Govt. of Orissa goes contrary to the recommendations made by Commission the revenue requirement for the year 2001-02 as determined in this order without applying the correctives shall be due for recovery. Since the FY 2002 is already over and no fixation of tariff is possible with retrospective effect, the Commission will treat the gap between the revenue requirement and expected revenue for the FY 2001-02 as a regulatory gap for recovery at a future date.

6.45.4

In as much as tariff proposals for FY 2001-02 have been rendered infructuous, GRIDCO and DISTCOs propose that the Commission proceed under Section 26 (6) of the OER Act, 1995 to determine tariff for FY 2002-03 on the basis of revenue requirement for that year as approved by the Commission. Hence the Commission has proceeded under section 26(6) to determine tariff under section 26(6) of the OER Act, 1995 for the FY 2002-03.

6.45.4.1

The Commission have made several recommendations to the Government of Orissa for their implementation w.e.f. 01.04.2001. Accordingly the Commission have determined the Retail Supply Tariff applying all correctives based on its recommendations to the Government. If a decision to the contrary is taken by the Government the revenue requirement for the FY 2002-03 as determined without applying the correctives shall be due for recovery from the consumers. It will raise the revenue requirement by Rs.416.64 crore on the basis of our present estimate. A tariff schedule is given in the Annex-D3.

6.45.5

This is based on the assumption that the existing retail supply tariff as approved by OERC in order dated 19.01.2001 shall continue upto 31.07.2002 and the rates indicated in Annex-D3 shall be valid from 01.08.2002 to 31.03.2003 provided the recommendation as indicated earlier are not accepted by the Government latest by 15 July 2002.

6.45.6

This tariff effective from 01.08.2002 shall be subject to such proportionate reduction as may be necessary to the extent the Government accepts the recommendation made by the Commission. The reductions being purely arithmatical in nature shall take effect without any further proceeding for amendment under section 26(6) of the OER Act 1995. However it is made clear that in case of such reduction a fresh notification under section 26(5) of the OER Act will be made by the licensees with the approval of OERC.

6.45.7

Finally, the Commission orders as follows with reference to the prayers of the applicant. The Commission does not approve the retail supply tariff as proposed by SOUTHCO for 2001-02 and rejects the tariff revision proposal.

6.45.8

The Commission also does not approve the revenue requirement for the FY 2002-03 as proposed by SOUTHCO and directs for implementation of Retail Supply Tariff as determined by the Commission in this order to be effective after expiry of seven days of the publication by the licensee under section 26(5) of the OER Act 1995.

6.45.9

In case the recommendations made by the Commission for necessary correctives for determination of revenue requirement are accepted in toto by the Government, the retail supply tariff as approved by OERC in order dated.19.01.2001 shall continue unchanged after 31.07.2002.

6.45.10

Pursuant to order dated 19.04.2002 of the Hon'ble High Court of Orissa the order is not being notified to SOUTHCO in terms of section 26(6) but is filed in sealed cover in the Hon'ble High Court of Orissa.

The application of M/s SOUTHCO is disposed off accordingly.