arr for 5th control period - karunadu · 500 85% 3499.62 66 2309.75 2309.75 2309.75 5.10 5 btps...

ARR FOR 5TH CONTROL PERIOD

MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 64

CHAPTER – 5

Annual Revenue Requirement for the 5th Control Period

(FY-20 to FY-22)

Every Distribution Licensee shall file an application for approval of Annual

Revenue Requirement (ARR) and Expected Revenue from Charges (ERC) under the Multi

Year Tariff framework for the Control Period as per KERC (Terms and Conditions for

Determination of Tariff for Distribution and Retail Sale of Electricity) Regulations, 2006

and its amendments.

A principle for computation of Annual Revenue Requirement (ARR) of the

Distribution Licensee is laid down in chapter-III of MYT regulations -2006 framed by the

Commission. Computation of ARR of each year of the Control period shall comprise of

the following, namely:

(a) Power Purchase Costs } for Retail Supply

(b) Transmission and SLDC Charges } Business

(c) Operation and maintenance expense

(d) Interest on loan capital

(e) Return on equity

(f) Depreciation

(g) Interest on working capital

(h) Taxes on Income

(i) Other expenses if any

(j) Less: Non-tariff income, income from Other Business.

The contents of the MYT filing as per the Chapter II of the MYT regulations are:

ARR for Distribution Business:

The ARR for Distribution Business under the MYT framework shall contain the

following:

https://www.karnataka.gov.in/kerc/Regulations/Regulations/FinalRegulationsonMYT-DistributionTariffMay2006.pdfhttps://www.karnataka.gov.in/kerc/Regulations/Regulations/FinalRegulationsonMYT-DistributionTariffMay2006.pdf



(a) The Operation and Maintenance (O&M) costs which include employee-related

costs, repairs & maintenance costs and administrative & general costs, estimated

for the Base Year and the actuals for the previous two years prior to the Base

Year in complete detail, together with the forecast for each year of the Control

Period based on the norms proposed by the Distribution Licensee including

indexation and other appropriate mechanisms;

(b) Detailed scheme/project-wise Capital Investment Plan with a capitalization

schedule covering each year of the Control Period;

(c) A proposal for appropriate capital structure to meet the capital investment plan

with details of cost of financing including interest cost on debt and return on

equity;

(d) Range of Distribution losses (upper and lower) for each year of the Control Period

for the purpose of incentive / penalties. The Distribution Licensee shall file a

trajectory of the loss levels in respect of technical and commercial losses for each

of the years of the control period, backed up by proper studies to justify the loss

levels indicated;

(e) Details of depreciation and capitalization schedule for each year of the Control

Period;

(f) Description of external parameters proposed for indexation;

(g) Details of taxes on income;

(h) Any other relevant expenditure;

(i) Proposals for sharing of gains and losses;

(j) Proposals for efficiency parameter targets;

(k) Proposals for rewarding efficiency in performance;

(l) Expected revenue from charges at the existing tariff including non-tariff income;

and

(m) Any other matters considered appropriate.

ARR for Retail supply Business:

The ARR for Retail Supply Business shall contain;

(a) Power purchase costs for each year of the Control Period.

(b) All other items mentioned for the distribution business to the extent applicable

and in accordance with the cost allocation statement.



(c) Expected revenue from charges at the existing tariff including non- tariff income,

tariff from wheeling of electricity, income from Other Business, Receipts on

account of cross-subsidy surcharge and additional surcharge if any.

(d) Any other matters considered appropriate.

Based on the above Principles, the following cost are estimated

as under:

Power Purchase Costs:

Estimated Power availability and Power Purchase Cost for Multi Year Tariff for 5th

Control Period 2019-20 to 2021-22:

1.0 BESCOM is procuring power from various sources like hydel, thermal, nuclear,

non-renewable sources like wind, solar, biomass co-generation & Mini hydel

through long term/medium term contracts. The rates are mutually agreed in

contracts approved by the State/Central Commission based on prevailing Tariff

Regulations.

1.1 The quantum of energy required for control period 2019-20 to 2021-22 is as

furnished below:

Table 5.1

SL. No Year Energy Requirement In MW

1. 2019-20 34091.02

2. 2020-21 35491.68

3. 2021-22 37009.65

2.0 Source wise power availability details:-

Government of Karnataka vide order dtd: 24.04.2018 had approved share of

allocation for power purchase payment to various sources for the FY 2018-19. The same

percentage of share of allocation is considered for MYT Control Period 2019-20 to 2021-

22.



2.1 State Owned Generating Stations of KPCL:-

A. KPCL Hydel:-

The power is procured from KPCL Hydel stations as per power purchase

agreement dtd: 22.05.2010 based on Tariff norms approved by the State Commission

vide order dtd: 03.08.2009. The actual energy purchased upto FY-18 is more than the

designed energy in most of the Hydel Power stations. As such the following quantum of

energy is considered for control Period FY-20 to FY-22 as furnished below:

Table 5.2

Sl.

No

Name Capaci

ty 100%

in Mw

Design

Energy 100% in

Mw

Energy

as per actuals

Mu

Share

of Allocat

ion in

%

BESCOM share in Mu AV.PP

Rate Ps/uni

t

2019-20 2020-21 2021-22

1 Sharavathi Valley

Project

1090 3737.95 4906.41 1.431 70.21 70.21 70.21 44.65

2 Kalli Valley Project 955 2058.77 3129.82 2 62.60 62.60 62.60 96.22

3 Varahi Valley Project 230 848.69 1079.22 17.917 193.36 193.36 193.36

126.50

4 Bhadra & Bhadra

Right Bank

39.2 50.49 48.1 17.917 8.60 8.60 8.60 456.13

5 Ghataprabha 32 84.97 72.36 17.917 12.96 12.96 12.96 175.75

6 Kadra 150 419.90 365.42 17.917 65.47 65.47 65.47 180.2

7 Kodasalli 120 372.48 348.39 17.917 62.42 62.42 62.42 150.8

8 Gerusoppa 240 442.62 513.09 17.917 91.93 91.93 91.93 160.20

9 Aalmatti 180 286.00 442.40 17.917 79.27 79.27 79.27 125.20

10 Shiva & Shimsha 59.2 252.00 242.74 17.917 43.49 43.49 43.49 135.40

11 Munirabad 28 65.00 91.44 17.917 16.38 16.38 16.38 105.50

12 MGHE-JOG 139.2 119.00 211.37 17.917 37.87 37.87 37.87 160.45

Total 8737.87 11450.65 744.56 744.56 744.56

B. KPCL Thermal:-

The power is procured from KPCL thermal stations as per terms & conditions

agreed in power purchase agreements. The Tariff norms for RTPS 1 to 7 and BTPS unit

1 are approved by commission by vide order dt 3.8.2009. The annual fixed cost and

variable cost is approved for RTPS 1x250Mw(8th Unit) and BTPS unit 2, vide order dtd:



25.02.2015.The Tariff for BTPS Unit 3 and Raichur Thermal Power Corporation Ltd.,

(RPCL) at Yeramarus is yet to be approved and as per PPA the tariff filed before

Commission by KPCL/RPCL is considered. The 370 Mw Yelahanka gas based power

plant is expected during last quarter of FY-20 and the fixed cost and variable cost given

by KPCL is considered. The power availability as per agreed PPA at target norms, actual

energy procured and corresponding average rate for said power is as below.

Table 5.3

The average PP cost of the thermal station stated above is on higher side. Hence

the energy is considered under merit order in respective year as below:

Table 5.4 SL.No

Name BESCOM’s share Energy in Mu

2019-20 2020-21 2021-22

1 RTPS 1 to 7 4574.16 4894.35 5341.18

2 RTPS 1x250 (8th unit) 850 901 928.03

3 BTPS Unit 1 1059 1155 1351

4 BTPS Unit2 1081 1177 1373

5 BTPS Unit 3 1280 1375.79 1475.79

6 RPCL-YTPS 605 762.55 785.43

7 Yelahanka gas Plant 510 378.47 378.47

SL.

No

Name Capacity

in Mw

PAF/

PLF

Target

Availability in Mw

% of

Allocation

BESCOM’s share Average

PP Cost Ps/Unit 2019-20 2020-21 2021-22

1 RTPS 1

to 7

1470 72% 8437.14 68.4 5771.00 5771.00 5771.00 490.25

2 RTPS

1x250(8th

unit)

250 85% 1703.27 66 1124.16 1124.16 1124.16 540.10

3 BTPS Unit 1

500 80% 3241.20 66 2139.19 2139.19 2139.19 5.20

4 BTPS

Unit 2

500 85% 3499.62 66 2309.75 2309.75 2309.75 5.10

5 BTPS

Unit 3

700 85% 4899.47 66 3233.65 3233.65 3233.65 5.8

6 RPCC-

YTPS

1600 85% 11228.57 66 7410.86

7410.86

7410.86

6.1



C. Central Generating Stations:

Ministry of Power, Government of India allocates the power of Central Generating

Stations to all States in the country. The Thermal stations and Atomic stations situated

in southern region & thermal station of NTPC in Talcher is allocated to Karnataka

ranging from 8.5%, 10.40%, and 17% to maximum of 34% for various power stations.

BESCOM is allocated this power at share of allocation approved by Government of

Karnataka. BESCOM is having bilateral contract with Damodar Valley Corporation. The

Tariff of thermal stations of Central Generating Stations approved by the Central

Electricity Regulatory Commission and Tariff of the atomic stations is approved by

department of atomic energy. The ex-bus generation available as per details furnished

by CGS to CEA Karnataka’s share, BESCOM’s share and average PP cost of the CGS for

control period is furnished as below.

i. NTPC Table 5.5

Sl.

No Name

Energy

Availability

in MU

Karnatak

a share of

allocation

%

BESCO

M share

%

Energy Availability Average

PP rate

Ps/UNI

T 2019-20 2020-21 2021-22

1

RSTPS I &

II 13886 18.28 48.7226 1236.76 1236.76 1236.76 395.62

2 RSTPS III 3238 19.37 48.7226 305.59 305.59 305.59 325.2

3 Talcher II 13280 17.79 48.7226 1151.08 1151.08 1151.08 274.95

4 Simhadri II 5846 17.76 48.7226 505.86 505.86 505.86 490.75

5 Vallur I &II 8670 10.4 48.7226 439.32 439.32 439.32 620.4

6

Kudgi I,

II&III 16535.22 53.96 61.00 5442.67 5442.67 5442.67 630.7

ii. NLC Table 5.6

Sl.

No Name

Target

Availability

in Mw

Karnatak

a share of

allocation

%

BESCO

M share

%

Target Availability Average

PP Cost

Ps/UNIT 2019-20 2020-21 2021-22

1 NLC Stage 1 3310 22.51 48.7226 363.02 363.02 363.02 375.20

2 NLC Stage 2 4421 22.78 48.7226 490.69 490.69 490.69 375.2

3

NLC

Expansion 1 2792 25.61 48.7226 348.38 348.38 348.38 450.52

4

NLC

Expansion 2 1731.54 25.75 48.7226 217.24 217.24 217.24 530.6

5 NTPL 6160 20.18 48.7226 605.66 605.66 605.66 520.25



iii. Atomic Stations Table 5.7

Sl.

No Name

Target Availability

in Mw

Karnataka share of

allocation %

BESCOM

share %

Target Availability Average PP Cost

Ps/UNIT 2019-20 2020-21 2021-22

1 MAPS 2404 8.5 48.7226 99.56 99.56 99.56 290.00

2

Kaiga unit 1

& 2 2791 31.57 48.7226 429.3 429.3 429.3 385.05

3

Kaiga unit 3

& 4 2718 34.07 48.7226 451.18 451.18 451.18 3850.5

4

Kudankulam

unit 1 5220 23.29 48.7226 592.34 592.34 592.34 420.50

5 Kudankulam unit 2 5760 22.1 48.7226 620.22 620.22 620.22 420.50

iv. DVC Table 5.8

Sl.

No Name

Energy

Availability

in MU

Karnataka

share of

allocation

%

BESCOM

share %

Energy Availability

Average

PP Cost

Ps/UNIT 2019-20 2020-21 2021-22

1

DVC Mejia unit

7&8 1489.2 20.00 48.7226 145.12 145.12 145.12 386.50

2 DVC Koderma unit 1&2 1861.5 20.00 48.7226 181.39 181.39 181.39 386.50

v. Bundled Power Table 5.9

Sl.

No Name

Energy

Availability

in Mw

BESCOM

share % Energy Availability

2019-20 2020-21 2021-22

1 NTPC NVVN 499.54 46.643 233 233 233

2 NTPC NSM 2 1865.23 46.643 870 870 870

D. Major Independent Power Producer:-

Udupi Power Corporation Ltd is a thermal power plant having installed capacity

of 1200MW (600MWx2 units). Out of 1200MW, 101.5 Mw is the share of Punjab State

Power Corporation Ltd (PSPCL), 1080 MW is the share of ESCOM’s of Karnataka. The



remaining 18.50 Mw is traded by Udupi Power Corporation Ltd under Open Access. The

tariff of Udupi Power Corporation Ltd is governed by Central Electricity Regulatory

Commission Tariff Regulations. The tariff for control period FY 14 to FY 19 is yet to be

approved by Central Electricity Regulatory Commission. Hence tariff already approved

for control period 2010-2014 excluding secondary fuel oil cost in annual fixed cost is

considered for control period FY 20 to FY 22. The ex-bus availability and rate for control

period FY 20 to FY 22 of Udupi Power Corporation Ltd is as below.

Table 5.10

Sl.

No Name

Capacity in

Mw

Karnataka

share of

allocation %

BESCOM

share %

Target Availability AVERAGE

PP Cost

Ps/UNIT 2019-20 2020-21 2021-22

1 UPCL 1080 7522.99 65.28 4911.00 4911.00 4911.00 565.20

The energy requirement for control period is considered in merit order as the rate

is on higher side.

E. Jurala & TB dam power:-

Jurala hydel power of 117 Mw is allocated to Karnataka and remaining 117 Mw

to Telangana (Andhra Pradesh). The Tariff is approved by Telangana State Electricity

Regulatory Commission (TSERC). The amount being paid for 2018-19 and energy is

considered for control period 2019-20 to 2021-22.

The 1/5th share of revenue expenditure and energy from TB dam is to be shared

between two States, Karnataka & Andhra Pradesh/Telangana. The energy and cost

considered for 2019-20 to 2021-22 is detailed below.

Table 5.11

Sl. No

Name Energy in MU Amount Rs in Cr.

BESCOM share %

BESCOM shares 2019-20 to 2021-22

Energy in

Mu

Amt Rs in

Crs

1 Jura project 90.72 58.66 17.917 16.254 10.51

2 TB Dam 17.93 1.62 17.917 3.212 6.29

F. Non-Conventional Energy Sources:- (NCE Sources)

BESCOM is procuring power from NCE sources like Biomass, wind, Mini hydel &

Solar by executing long term power purchase agreements, at the rates agreed & PPAs



are approved by the State commission. Further, BESCOM is procuring power from

bagasse based co-generation power plants by executing the medium contracts at the

rate approved by State Commission vide order dt 11.4.2017. Some of the points in the

Tariff order dt 11.4.2017 is under review by State Commission in a review petition filed

by ESCOM’s.

The actual generation & cost for 2017-18 along with new projects commissioned

during 2018-19 & power from expected new projects during control period 2019-20 to

2021-22 is considered as detailed below:

Table 5.12

Sl. No

Name Capacity in Mw

2019-2020 2020-2021 2021-2022

Energy in MU

Amt in Rs in Crs

AV PP Cost

Energy in MU

Amt in Rs in Crs

AV PP Cost

Energy in MU

Amt in Rs in Crs

AV PP Cost

1 Co-generation 305

575 269.68 4.69 575 284.05 4.94 575 284.05 4.94

2 Mini hydel 181.4 342.53 108.58 3.17 342.53 108.58 3.17 342.53 108.58 3.17

3 Biomass 56.5 63.87 35.19 5.51 63.87 35.19 5.51 63.87 35.19 5.51

4 Wind 1400 2926.92 1041.94 3.56 2926.92 1041.94 3.56 2926.92 1041.94 3.56

5 Solar:-

a) Mega Solar Plant 321 380 247.76 6.52 399 260.15 6.52 399 260.15 6.52

b) Land owned

Framer Scheme ( 1 to 3MW) 152 220 150.04 6.82 224.40 153.04 6.82 224.40 153.04 6.82

c) Taluka wise Scheme 536 776 372.48 4.80 814.8 391.10 4.80 814.8 391.10 4.80

d) NTPC-NVVN and NTPC -NSM Scheme (Pavagada), KPCL 315 566 296.63 5.24 566 296.63 5.24 566 296.63 5.24

e) SECI-VGF

Scheme 480 700 336 4.50 735 352.80 4.50 771.75 370.44 4.5

f) Solar New park Pavagada 650 200.01 57 2.85 996.54 284.01 2.85 1366.56 389.47 2.85

Total 4396.9 6750.33 2915.29 4.32 7644.06 3207.50 4.33 8050.83 3330.59 4.33



i. Transmission Charges

a. KPTCL Transmission charges:-

BESCOM has to pay transmission charges for using KPTCL’s transmission

system. The Transmission charge paid by BESCOM for FY 19 is considered at an

increase of Rs 180 Crore every year (increase of Rs. 15 Crore per month) as below:

Table 5.13

Year Transmission Charges

Rs in crore

2019-20 1740

2020-21 1920

2021-22 2100

KPTCL is filing MYT for transmission tariff for control period FY 20 to FY 22. Any

increase in transmission charges claimed by KPTCL over and above the amount

considered by BESCOM in the instant tariff filing, approved the same by this Hon’ble

Commission may be allowed as a pass through in the tariff of BESCOM and to recover

the same from the consumer tariff.

G. PGCIL Transmission charges:-

Central Electricity Regulatory Commission determines the transmission charges

payable to PGCIL for each quarter by all States in the Country by collecting the Load

injection & withdrawal details from National Load Despatch Centre (NLDC) & Regional

Load Despatch Centers (RLDC). The transmission charges is on increasing trend year

on year due to addition of new capacities. The present transmission charges paid by

BESCOM as per Regional Transmission Account (RTA) is considered with an increase of

Rs 10% over previous year in control period FY 20 to FY 22, as furnished below.

Table 5.14

SL. No Particulars Amount Rs in Crs

2018-19 2019-20 2020-21 2021-22

1 POC Charges

1007.44 1105.70 1193.70 1301.70

2 HVDC CHARGES

66.84 67.84 68.84 69.84

3 Reliability Support charges

102.36 103.36 104.36 105.36

4 Loss STOA/MTOA Credits

151.20 151.20 151.20 151.20

5 Net transmission charges 1025.70 1125.70 1215.70 1325.70



H. Other charges:-

BESCOM has to pay for revenue expenditure incurred by PCKL, SLDC as

approved by State Commission in KPTCL Transmission Tariff Order and Posoco charges

(SRLD charges). The charges paid for FY 19 with an increase of 5% is considered for

control period FY 20 to FY 22 as below.

Table 5.15

SL. No Particulars FY 19 Rs in crore

FY 20 Rs in crore

FY -21 Rs in crs

FY 22 Rs in crs

1 PCKL Revenue expenditure 3.20 3.36 3.36 3.36

2 SLDC Charges 15.26 16.02 16.02 16.02

3 POSOCO Charges 0.29 0.30 0.30 0.30

By considering the above facts the energy available & probable power purchase

cost for the control period FY 20 to FY 22 is as below.

Table 5.16

Sl. No

Source

2019-2020 2020-2021 2021-2022

Energy

in MU

Amt in Rs in

Crs

Avg PP

Cost

Energy

in MU

Amt in Rs in

Crs

Avg PP

Cost

Energy

in MU

Amt in Rs in

Crs

Avg PP

Cost

1

KPCL

Thermal 9959.16

6330.64 4.30 10644.16 733.18 6.89 11632.90 7943.45 6.83

2

KPCL

Hydel 744.56 99.25 1.28 744.56 102.23 1.37 744.56 102.23 1.37

3

Other

Hydel 19.46 8.96 3.77 19.46 10.8 3.77 19.46 10.80 3.77

4 CGS 13403.72 6027.89 4.50 13174.84 6092.70 4.62 13174.84 6100.80 4.63

5 UPCL 3214.6 1867.11 5.81 3264.6 1958.89 6.00 3387.06 2081.41 6.15

6

NCE

Projects 6750.33 2915.29 4.33 7644.06 3207.50 4.33 8050.83 3330.59 4.33

7

KPTCL

Transmission

charges 1740 1920 2100

8

PGCIL

Transmis

sion

charges 1125.70 1215 1325.70

9 Other charges 19.68 19.68 19.68

10 Total 34091.83 20134.53 5.91 35491.68 21859.97 6.16 37009.65 23014.66 6.22



I. Renewable Purchase Obligation (RPO)

BESCOM has to meet the target solar& non-solar RPO fixed by Karnataka

Electricity Regulatory Commission every year. As per draft KERC (Procurement of

energy from Renewable Sources) (Sixth Amendment) Regulations, 2018, BESCOM has

to achieve 12% Non- Solar RPO for FY 20 to FY 22 and 7.25%, 8.5%, & 10.5% Solar

RPO respectively for FY 20 to FY 22. The estimated RPO based on available Non-Solar

and solar power during control period FY20 to FY 22 is as shown below.

Table 5.17

SL.No Name 2019-20 2020-21 2021-22

1

Total Energy excluding Hydel

Generation In MU 33327.81 34727.66 36244.98

2 Non-Solar RPO 12% 12% 12%

a Target energy at 12% In MU 3999.38 4167.32 4349.40

b Estimated energy available In MU 3908.32 3908.32 3908.32

C Surplus Energy Deficit energy(-) In MU -91.06 -258.99 -441.08

3 Solar RPO

Target RPO (%) 7.25% 8.5% 10.5%

Target Energy In MU 2416.27 2951.85 3805.72

Estimated Energy available In MU 2842.01 3735.74 4142.51

Surplus (+)/ Deficit (-) in MU 425.74 783.89 336.79

4

Set off deficit non-solar RPO against

surplus solar RPO in MU -91.06 -258.99 -441.08

5 Surplus Solar RPO - in Mu 334.68 524.90 -104.29

It could be seen from the above, there is surplus solar RPO of 334.68 Mu and

524.90 Mu for FY 20 and FY 21 respectively and there is deficit of Non-Solar RPO of

104.29 Mu during FY 22. The Hon’ble Commission is requested to permit BESCOM to

carry forward the surplus solar RPO of FY 20 and FY 21 and set off the deficit non-solar

RPO of FY 22. However, the figures may vary depending on actuals during respective

years.



Sales and Distribution Loss for FY-19 and 5th control period (FY-

20 to FY-22):

The Commission, in its Tariff Order dated 14.05.2018, had approved sales of

28286.75MU for FY-19. For computing sales for FY-19, half yearly (from Apr-18 to Sept-

18) figures are considered. For the remaining period of FY 19, the sales under BJ/KJ

and IP set are altered slightly for arriving at the final figures of FY19. Compounded

Annual Growth Rate upto 10 years are calculated. The Maximum, Minimum & average

CAGR are computed. Using an empirical formula the growth rates are calculated. For

the 5th control period from FY-20 to FY-22, the growth rates calculated as per the

empirical formula are considered except for few categories. The sales under BJ/KJ and

IP set are calculated based on average/specific consumption. The same is illustrated

during each category wise briefing in Chapter 4. It is projected that future

increase/growth will be both because of relocation/migration and natural growth. It is

also envisaged that the land use pattern will continue to change in future which will

have some impact on industrial and commercial activity. The details of energy in MU

and distribution loss in percentage for the 5thcontrol period are shown in the table below:

Table 5.18 Rs. Crs.

Particulars FY-19 FY-20 FY-21 FY-22

Total energy sales projected MU 27235 28912 30140 31471

Sales growth rate projected in

MU 6.16% 4.25% 4.42%

Distribution Loss In % 12.5 12.4 12.3 12.2

Energy at IF Points in MU 31125.83 33004.3 34366.6 35843.84

Transmission Loss in % 3.08 3.19 3.17 3.15

Energy at Gen. Points in MU 32114.97 34091.83 35491.68 37009.64

Energy Input growth rate in

percentage 6.16% 4.11% 4.28%

Average MW Requirement 3666 3892 4052 4225

Peak MW requirement at LF of

74% 4954 5259 5475 5709



Capital Investment Plan:

Capital Investment Plan is formulated for enhancing and upgrading the

Infrastructure so as to enable BESCOM to cater to increasing demand, releasing new

connections under Residential, Commercial, Industrial and Agriculture categories and

Renovation/Modernization works to be taken up during the period between 2019-20

and 2021-22. While formulating the scheme, expected load Growth up to 2021-22 has

been considered.

Capital Investment Plan is prepared keeping in view the following Objectives:

1. System Reliability Improvement

2. Growth development plan for meeting the load growth

3. Creation of infrastructure facilities including administration buildings

4. New Service Connections

5. Up-gradation of existing system

6. Reduction in DTC Failure Rates.

Due to technology up gradation, Innovations, Statutory adherence, System

compulsion etc., and Capital investment plan may vary in the future. The detailed

proposed Capital Investment Plan is furnished below.

Hence the proposed capital investment plan will prone for deviations in the future

years. Any changes in the proposal that may happen in due course will be brought to

the kind knowledge of the Commission for approval.

Capital Investment plans, Capitalization of the past five years are tabulated

below:

Table 5.19 Rs. Crs.

Sl.No. Year FY-14 FY-15 FY-16 FY-17 FY-18

1 Capital Investment Approved

848 763 1374.31 2000 3272.32

2 Capital Deployed 1057 1495 1374.32 1318.25 1979.01

3 Assets Categorized 812 743 1770.27 1370.03 1522.66

4 % of Deployment over approved capital Investment

125% 196% 100% 66% 60%

5 % of Assets categorized over Capital Deployed

77% 97% 129% 69% 47%



From the above table, capital investment plan has increased from FY-16 onwards.

This is due to technology up gradations and some approved projects of Government of

India/Karnataka.

BESCOM has significant capital expenditure plans with respect to investments

for infrastructure improvement, feeder separation program, village and household

electrification etc.

The need to extend and expand our networks is driven by increases in electricity

demand. Bangalore is the most densely populated and expensive part of the State. We

also face additional operational challenges from the urban environment. Our urban

customers are typically more sensitive to power cuts and require us to do more of our

work out-of-hours or at weekends - fitting this in between high profile public events.

We also have to deal with congestion under pavements and roads due to road

widening, metro works, White topping roads, etc., which increases the complexity of

what we do. We also regularly have to put our equipment into small spaces and often

underground to minimize how much land we use. This leads to higher costs to install

and maintain our equipment. We are also aware of our responsibility to ensure that

BESCOM’s electricity network is fit for purpose and comparable to other urban cities in

terms of resilience, quality of supply, and the ability to deliver new connections. In order

to ensure this, our Capital Investment plan proposes Rs. 11029 Crores of strategic

investment including capex for model sub division, Model village from FY-20 to FY-24

as shown below:

Table 5.20 Rs. Crs.

Sl.

No.

Particular of the works under Major/ Minor heads

FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24

1 Ganga kalyana Works 82.81 80.00 80.00 80.00 80.00

2 Service connection works 60.77 66.85 73.54 75.00 77.00

3 Water Works 21.52 23.67 26.04 28.00 30.00

4 11 KV Evacuation line 182.17 185.00 190.00 195.00 200.00

5 Providing Additional DTC's /Enhancement of DTCs

75.16 77.00 80.00 82.00 84.00



6

Strengthening of HT network including OH/UG cable, Covered conductor and AB cable

253.42 258.75 260.00 262.00 265.00

7

Strengthening of LT network including OH/UG cable, Covered conductor and AB cable

195.32 197.00 200.00 205.00 210.00

8 SDP Progress 30.00 30.00 30.00 30.00 30.00

9 Local planning, Safety works, Emergency / Calamity Works

85.27 93.80 95.00 97.00 100.00

A E&I Total 986.45 1012.07 1034.58 1054.00 1076.00

10 Smart grid & EV 41.78 45.96 50.00 50.00 50.00

11 NJY 50.00 25.00 0.00 0.00 0.00

12 DDUGJY 165.00 90.75 82.50 0.00 0.00

13 IPDS 275.00 151.25 137.50 0.00 0.00

14 Civil 110.00 100.00 100.00 100.00 100.00

15 IT initiative 75.64 77.00 80.00 80.00 80.00

16 Meters and Commercial (with relevant accessories)

247.83 250.00 200.00 200.00 200.00

17 DSM 96.03 100.00 100.00 100.00 100.00

18 UNIP 100.00 80.00 60.00 60.00 60.00

19 HVDS 121.00 61.00 0.00 0.00 0.00

20

Erection of distribution transformer centers using 11 mts Spun poles

49.39 0.00 0.00 0.00 0.00

21 Model Sub division 580.44 290.22 0.00 0.00 0.00

22 Technology Innovative Center 25.07 27.58 30.34 33.37 36.71

23 Corporate reserve fund 50.00 50.00 50.00 50.00 50.00

24 Auto reclosure and sectionalizer

50.00 0.00 0.00 0.00 0.00



25 Model Village 50.00 10.00 0.00 0.00 0.00

26 Smart city 100.00 80.00 0.00 0.00 0.00

B Projects Total 2187.19 1438.76 890.34 673.37 676.71

C Grand Total (A+B) 3173.64 2450.83 1924.92 1727.37 1752.71

Operation and Maintenance expenses:

BESCOM is computing O&M expenses as per the norms prescribed by the

Commission in its MYT regulations-2006:

“2.5.1 a) The Operation and Maintenance (O&M) costs which include employee-related

costs, repairs & maintenance costs and administrative & general costs, estimated for the

Base Year and the actual for the previous two years prior to the Base Year in complete

detail, together with the forecast for each year of the Control Period based on the norms

proposed by the Distribution Licensee including indexation and other appropriate

mechanisms; “

Clause 3.10 of 2nd amendment to KERC (Terms and Conditions for

Determination of Tariff for Distribution and Retail Sale of Electricity) Regulations, 2015,

is reiterated:

“3.10 Operation and Maintenance expenses:

Operation and Maintenance expenses shall be computed in the following manner:

(i) The Distribution licensee in its first or subsequent filings shall submit the consolidated

O&M expenses comprising of Employee Cost, Repair and Maintenance and

Administrative and General expenses, excluding contributions towards pension and

gratuity, Newly defined Contributory Pension Scheme and leave encashment if any, for

the Base Year of the control period and for two years preceding the Base year.

(ii) The O&M expenses for the Base Year of the control period shall be computed based on

the latest audited accounts, best estimates of Licensee of the actual O&M expenses for

relevant years and other factors considered relevant.



(iii) The O&M expenses for each financial year of the control period shall be

computed/projected considering the O&M expenses reckoned for the Base Year

excluding uncontrollable employee cost duly considering the growth in the number of

consumers, inflation and efficiency factors for each distribution licensee as follows:

Formula :( 1+ consumer growth rate +inflation rate-efficiency factor)* O&M expenses for

the base year

(iv) The contribution towards pension and gratuity, Newly defined Contributory Pension

Scheme and leave encashment if any, shall be accounted separately as uncontrollable

O&M expenses computed on the basis of latest actuarial valuation report.

(v) Employee cost proposed to be incurred on accounting of wage revision, if any, and

proposed recruitments during the control period shall be factored in separately as

addition of O&M expenses.

The Commission in its Tariff Order dated 11.01.2008 approved the following

formula for approval of O&M expenses.

O&M Cost t = O&M Cost t-1 * (1 + WII + CGI – X)

Where,

‘O&M Cost t’ is the normative O&M cost approved by the Commission for the

financial year.

‘WII’ is the weighted inflation index of CPI and WPI (CPI 70% WPI 30%) based on the

contribution of employee cost, R&M and A&G towards the total O&M cost.

‘CGI’ is the Consumer growth index, which is linked to increase (CAGR) in no of

consumers.

‘X’ is the efficiency factor. For BESCOM the Commission fixes the same as 1%

As per the above norms, BASE YEAR means, the financial year immediately

preceding the first year of the Control Period. Hence FY-19 is considered as base year

for the 5th control period. FY-17 and FY-18 is considered as two years preceding the

Base year.

Actual Operation and Maintenance expenses (O&M) expenses for the years

preceding the base year as per annual accounts are as under:



Table 5.21 Rs. Crs.

Sl. No. Particulars FY-17 FY-18

1 R&M Expenses 78.55 86.46

2 Employee cost 879.97 1118.43

3 Administrative & General Expenses 194.72 250.78

O&M Cost in Rs. Crs. 1153.24 1455.67

The half yearly O&M figures for FY-19 as on Sept-18 are available. Based on the

half year figures, estimated FY-19 figures are as under:

Table 5.22 Rs. Crs.

Sl.No. Particulars FY-19 (As on 30.09.2018)

1 R&M Expenses 50.85

2 Employee cost 641.64

3 Administrative & General Expenses 138.83

O&M Cost in Rs. Crs. 831.32

It is to state that the O&M expenses for FY-19 have been computed by doubling

the half year figures. Thus estimation for the base year is Rs.1662.64 Crs.

Table 5.23

Sl. No. Particulars FY-16 (As on

30.09.2012)

FY-16

( Projected)

1 R&M Expenses 50.85 101.7

2 Employee cost 641.64 1283.28

3 Administrative & General Expenses 138.83 277.66

O&M Cost in Rs. Crs. 831.32 1662.64



Estimation of O&M expenses as per Commission approved formula is under:

Central Electricity Regulatory Commission (CERC) vide notification dated

06.04.2018 notified the escalation rates 2018 for Inflation rate, escapable transmission

charges for payment by arriving composite series of CPI at 55% and WPI at 45%.

BESCOM is adopting the same inflation rate with the composite series based on actuals

expenditure for last 5 years are tabulated below:

Weighted Inflation index is to be computed taking the Consumer Price Index (CPI

(IW)) as weight age of employee cost to the total O&M expense and Whole Sale Price index

(WPI) as weight age of R&M and A&G expenses to the total O&M expenses.

Table 5.24

Rs. Crs.

Sl.

No Particulars FY14 FY15 FY16 FY17 FY18 AVERAGE

1 R&M Expenses 51.65 54.94 83.37 78.55 86.46 70.99

2 Employee cost 755.66 807.10 880.25 879.97 1118.43 888.28

3 Administrative &

General Expenses 154.84 197.31 214.96 194.72 250.78 202.52

Total 962.15 1059.35 1178.58 1153.24 1455.67 1161.80

% of Employees

Cost 79% 76% 75% 76% 77% 76%

Hence, 76% of CPI being the weight age of employee cost to the total O&M expense

and 24% of WPI being the weight age of R&M and A&G expenses to the total O&M

expenses is considered for arriving at the Weighted Inflation Index (WII).

Composite series are tabulated considering actual of CPI and WPI for the years

2006 to 2017 as considered by CERC. For calendar year 2018 to 2022, it is based on

the 6 years moving average. Tabulations are as follows:

Table 5.25 Rs. Crs.

Year WPI CPI 24% of WPI 76%of CPI Composite

series



1 2 3 4=24% of

(2)

5=76% of

(3) 6=(4+5)

2006 70.2 122.9 16.53 93.97 110.49

2007 73.6 130.8 17.33 100.01 117.33

2008 80 141.7 18.83 108.34 127.17

2009 81.9 157.1 19.28 120.11 139.40

2010 89.7 175.9 21.12 134.49 155.61

2011 98.2 191.5 23.12 146.42 169.53

2012 105.7 209.3 24.88 160.03 184.91

2013 111.1 232.2 26.16 177.53 203.69

2014 114.8 246.9 27.03 188.77 215.80

2015 110.3 261.4 25.97 199.86 225.83

2016 110.3 274 25.97 209.72 235.69

2017 114.1 281 26.86 215.00 241.86

2018 115.5 293 27.19 224.16 251.35

2019 116.2 303 27.36 231.93 259.30

2020 116.5 313 27.42 239.12 266.55

2021 117.5 321 27.66 245.67 273.33

Note: WPI and CPI from 2006 to 2017 are figures as per CERC notification and

from 2018 to 2022 is on 6 years moving average.

Weighted Inflation Index is calculated considering the 12 years data and the

statistical formula adopted by CERC for the purpose of escalation of inflations.

Table 5.26

Year

Composit

e series

YT/Y

1=Rt

Ln

Rt

Year-

1(t-1)

Product

[(t-1) x

(Ln Rt)

YT/

Y1=

Rt

Ln

Rt

Year-

1(t-1)

Product

[(t-1) x

(Ln Rt)

YT/Y

1=Rt

Ln

Rt

Year-

1(t-1)

Product

[(t-1) x

(Ln Rt)

2006 110.49

2007 117.33

2008 127.17



2009 139.40 1.10 0.09 1 0.09

2010 155.61 1.22 0.20 2 0.40 1.12 0.11 1 0.11

2011 169.53 1.33 0.29 3 0.86 1.22 0.20 2 0.39 1.09 0.09 1 0.09

2012 184.91 1.45 0.37 4 1.50 1.33 0.28 3 0.85 1.19 0.17 2 0.35

2013 203.69 1.60 0.47 5 2.36 1.46 0.38 4 1.52 1.31 0.27 3 0.81

2014 215.80 1.70 0.53 6 3.17 1.55 0.44 5 2.19 1.39 0.33 4 1.31

2015 225.83 1.78 0.57 7 4.02 1.62 0.48 6 2.89 1.45 0.37 5 1.86

2016 235.69 1.85 0.62 8 4.94 1.69 0.53 7 3.68 1.51 0.42 6 2.49

2017 241.86 1.90 0.64 9 5.79 1.74 0.55 8 4.41 1.55 0.44 7 3.09

2018 251.35 1.98 0.68 10 6.81 1.80 0.59 9 5.31 1.62 0.48 8 3.84

2019 259.30 2.04 0.71 11 7.84 1.86 0.62 10 6.21 1.67 0.51 9 4.60

2020 266.55 1.91 0.65 11 7.13 1.71 0.54 10 5.38

2021 273.33 1.76 0.56 11 6.20

A = Sum of

"product" 37.77 34.67 30.00

B= 6 times (6 x

A) 226.64 208.04 179.99

C= (n-1) x n x

(2n-1); n = No.

of Years of data

= 12 3036.00 3036.00 3036.00

D = B/C 0.07 0.07 0.06

g (Exponential

Factor) =

Exponential (D)

-1 0.08 0.07 0.06

e = Annual

Escalation Rate

(%) = g x100 7.75 7.09 6.11

Thus estimated Weighted Inflation Index (WII) for FY-20, FY-21 to FY-22 will be 7.75%,

7.09% & 6.11% respectively.

Consumer growth Index (CGI):



To compute the consumer growth rate, 4 year Compounded Annual Growth

(CAGR) is worked out considering the actual consumers existing from FY-15 to FY-18.

Table 5.27 Rs. Crs.

Sl. No. Year No. of consumers existing as on

31st of March

1 FY-15 9444518

2 FY-18 11244760

3 3 Years CAGR 5.99%

Considering the above indices, an estimated O&M charge for FY-20 to FY-22 on

normative basis is computed as under:

Table 5.28 Rs. Crs.

Sl.No. Particulars FY-19 FY-20 FY-21 FY-22

1 Inflation index in% 7.75 7.09 6.11

2 Consumer Growth Index

in % 5.99 5.99 5.99

3 BESCOM efficiency in % 1 1 1

4 Base year O&M Cost 1662.64

O&M expenses t-year=

0&M (t-1)*(1+WII+CGI-X)

(Rs.Crs)

1874.44 2100.89 2334.00

In order to ensure quality service and to cope with the increasing consumers in

BESCOM, new workforce needs to be added which will result in increase in employees

cost. As the second phase of reforms are started, Central/State Government may initiate

new reforms process that may result in increase in the employees cost. It is prayed

before the Commission to allow the expenses that may arise on account of new

recruitment and further reform process, which are uncontrollable.



Since the Employee cost works out to 76% of O&M cost, R&M and A&G

expenditure is apportioned at the rate of 6% and 18% respectively.

Table 5.29 Rs. Crs.

Sl.

No. Particulars FY-20 FY-21 FY-22

1 R&M Expenses 112.47 126.05 140.04

2 Employee cost 1424.57 1596.67 1773.84

3 A&G Expenses 337.40 378.16 420.12

Total 1874.44 2100.89 2334.00

Depreciation:

BESCOM is computing Depreciation as per the norms prescribed by the

Commission in its MYT regulations-2006 and its amendments:

Clause 3.8.1 of 2nd amendment to KERC (Terms and Conditions for

Determination of Tariff for Distribution and Retail Sale of Electricity) Regulations, 2015,

is reiterated:

3.8.1 Depreciation shall be computed in the following manner, namely:

i) The value base for the purpose of depreciation shall be the historical cost

of the asset.

ii) Depreciation shall be calculated annually based on straight-line method

over the useful life of the asset and at the rates prescribed in CERC

guidelines/ Notifications issued from time to time.

iii) The residual life of the asset shall be considered as 10% and depreciation

shall be allowed up to maximum of 90% of the historical capital cost of the

asset. Land is not a depreciable asset and its cost shall be excluded from

the capital cost while computing 90% of the historical cost of the asset.



iv) Depreciation on assets created out of Consumer Contribution/Grants shall

be excluded for the purpose of computation of ARR.

For the purpose of projected depreciation computation for the 5th control period

following assumptions are considered:

1) Actual closing Gross Fixed Assets (GFA) as per audited accounts of FY-18.

2) Estimated Additions and Retirement of assets for FY-19 and for FY-20 to FY-22

are based on the average for the past five years.

3) Since, the Capital Investment Plan comprises of the spill over works of the past

years, 75% of the capex envisaged during each year of the Control period is

booked on that year and 90% of the booked cost will be capitalized.

4) Capital work in progress at the end of previous year will be categorized in the

succeeding year of the Control period.

5) Depreciation rates as specified by CERC is applied on 90% of the Closing Gross

fixed Asset of each year of the control period.

6) Ministry of Corporate Affairs (MCA) has issued Indian Accounting Standards (IND

AS), which is applicable to BESCOM from FY-17 with comparative period of one

year. In pursuance with Ind AS 20, Government Grants/subsidies received from

the Government or other authorities towards capital expenditure as well as

consumer’s contribution to capital works are treated initially under deferred

income and taken to fixed assets based on commissioning of the assets and

depreciation is charged in accordance with the class of assets it belongs.

Capital Expenditure (Capex) envisaged for each year of the Control period.

Table 5.30 Rs. Crs.


Capital Expenditure (Capex)

envisaged 2836.44 3173.64 2450.83 1924.92



Estimated Booking Cost at

(75% of the Capex) 2127.33 2380.23 1838.12 1443.69

Assets categorized ( 90% of

booking Cost) 1914.60 2142.21 1654.31 1299.32

Gross fixed assets at the beginning year (FY-18 closing balance), average

additions and retirements for the past five years and estimations for the second half of

FY-19 are as under.

Table 5.31 Rs. Crs.

Particulars FY-18 Total of FY-19

Opening Gross Fixed Asset (GFA) 10454.8 11974.27

Add: Additions during the year 1881.71 1914.60

Less: Retirement 362.24 214

Closing GFA 11974.27 13674.89

Depreciation envisaged for each year of the Control period, considering average

depreciation rate of 5.28%.

Table 5.32 Rs. Crs.


Opening Gross Fixed Asset

(GFA) 11974.27 14028.89 16304.92 18092.21

Add: Additions during the

year 1914.60 2142.21 1654.31 1299.32

Less: Retirement 213.98 230.17 241.02 249.44

Add. Consumer

Contribution 354.00 364.00 374.00 384.00

Closing GFA 14028.89 16304.92 18092.21 19526.09

90% of GFA 12626.00 14674.43 16282.99 17573.48

Average Dep. Rate (In %) 5.28% 5.28% 5.28% 5.28%

Depreciation 666.65 774.81 859.74 927.88



Less: Depreciation with

drawn from Consumer

contribution/subsidies

plus withdrawal of

depreciation

131.35 148.64 166.42 184.66

Depreciation charged to

the Tariff 535.31 626.17 693.33 743.22

Interest and finance charges:

Interest and finance charges includes following costs.

Interest on loan capital

Interest on Working Capital

Interest payable in consumer Security Deposit/ meter security Deposit.

Other interest and Finance charges

Interest on loan capital:

BESCOM is computing the interest on loan capital as per the norms prescribed

by the Commission in its MYT regulations-2006 and its amendments.

Projection of interest for each of the control period is on following basis.

Loan outstanding as on 31.03.2018 as per provisional accounts duly

considering the rate of interest, and terms of repayment

For FY-19, loan existing as on 30.09.2018 and the estimation for the next

half year is considered for computation of interest.

For financing of future capital cost of projects, a Debt: Equity ratio of 70:30

is adopted as per the norms framed by the Commission under 3.7.1 of

MYT regulations



Loan Capital outstanding as on 31.03.2018 and loan wise details

are as under:

Table 5.33 Rs. Crs.

Sl.No. PARTICULARS Loan outstanding as

on 31.03.2018

A Secured loans

1 Loan from REC (DTC metering) 138.52

2 Loan from REC NJY PHASE-2) 230.54

3 Loan from REC (APDRP Counterpart funding) (53.3327)

4 Loan from REC APDRP (10 TOWNS) 1.67

5 Loan from PFC APDRP (PART-A) 146.65

6 Loan from PFC APDRP (PART-B) 58.73

7 Loan from PFC APDRP (PART-B) COUNTER FUNDING

149.79

8 PFC-DRUM

9 REC-HVDS 211.69

10 REC_UAIP 238.05

11 REC-General capex 130.45

12 REC-Static meters 105.82

13 REC-rggvy-12th plan 3.12

14 REC-NJY phase-3 600.74

15 REC_HVDS-phase2 158.67

16 Loans from commercial bank-SBI 710.94

17 Loans from commercial bank-BOI 57

18 Loans from commercial bank-Canara 533.27

19 Loans from commercial bank-bank of Maharashtra

191

20 Loans from commercial bank-SBM 0



21 Loans from commercial bank-Bank of Baroda 75

TOTAL 3741.65

B Un -Secured loans

1 Loans from GOK-PMGY 0.44

2 Loans from GOK-APDRP 20.85

3 Loans from GOK-INT FREE 0.94

4 Loans from GOK-RGGY 6.88

5 Loans from GOK-JICA 407.48

6 Power sector automation

TOTAL 436.59

TOTAL A+B 4178.24

Loan for FY-19:

For FY-19 up to Sept-18, Rs.461.36 Crs. has been booked towards Capex through

long term loans. BESCOM seeks out loans to an extent of Rs. 534.41 Crs. Banks are

yet to sanction the loan. Thus it is estimated that total borrowings for FY-19 will be

Rs.996 Crs. Hence, interest provision to an extent of 3 months is provided for Rs.534.41

Crs.

Interest on new loan capital:

Capex envisaged for each year of the control period is as under:

Table 5.34 Rs. Crs.


Capex with own funds 2258 2725 2132 1627

70% of Capex 1581 1908 1492 1139

90% of INVESTMENT 1423 1717 1343 1025

Internal Resource 426.76 515.08 402.94 307.48

Borrowings 995.77 1201.86 940.19 717.45



‘For financing of future capital cost of projects, a Debt: Equity ratio of 70:30

should be adopted ‘is the norms fixed by the Commission.

The share of equity i.e., 30% of the future capital cost will be met through

Equity contribution for planned Capital Works GoK

Consumer Security deposit

Return earned on equity for each of the control period.

As Balance sheet of BESCOM will not support any more borrowings from the

Commercial Banks. Government of Karnataka is also not releasing the equity for the

planned works.

It is obvious that BESCOM will have request loans from Power Finance

Corporation or other Financial Institutions recommended by the Ministry of Power,

Government of India. The rates of interest of Central Government financial institutions

are usually higher than the Commercial Banks. Hence following assumptions are

considered for projecting the interest.

3 years moratorium period for repayment of loan

Term loan be 10 years and repayment is on quarterly basis

Reserve Bank of India Base rate at 8.85% to 9.45% plus 200 basis points

i. Means of Finance:

Internal resources generated though collection of Government of Karnataka (GoK)

Loan, MMD, Addl. MMD, and Return on Equity is considered as the internal resources

for the capex plan.

ii. Debt Equity ratio:

Table 5.35 Rs. Crs.

Loan Capital FY-19 FY-20 FY-21 FY-22

Capex after removing GoK grants 1423 1717 1343 1025

Internal Resource 427 515 403 307

Borrowings 996 1202 940 717



Debt Ratio 70% 70% 70% 70%

Equity Ratio 30% 30% 30% 30%

iii. Borrowings:

Interests on the existing loans are computed taking the repayment schedule into

consideration. Weighted average rate of interest paid for FY-17 and FY-18 is calculated

based on the actual interest paid to the closing balance. The arrived average rate of

interest for FY-18 is applied for the future years.

It is proposed to raise the funds required for the capex plan through various

financial institutions and Commercial banks. In the recent years, it was difficult to borrow

loans from the commercial banks and presumed new borrowings will be from the financial

institutions of Central Government. Hence, REC lending rates of 11 % as on 19th of June

2018 of the year is considered. The new loan drawl for the first year will be spread over to

the whole year; hence interest is computed for 50% of the borrowings of that particular

year. For subsequent years, 50% of the loan drawn for the current year and 100% of the

previous years is reckoned for computation of interest.

Loan repayment schedule for the loan outstanding and as per the existing

commitments and fresh borrowing as per Capital investments is as follows.

Table 5.36 Rs. Crs.

Sl.

No. Interest on capital loans FY-18 FY-19 FY-20 FY-21 FY-22

1 Opening balance of capital

loans

4,017

4,178

4,737

5,400

5,672

2 less: Repayments

263

437

538

668

802

3 Closing balance(1-2)

3,754

3,741

4,198

4,732

4,870

4 New Borrowings

425

996

1,202

940

717

5 Closing balance(3+4)

4,178

4,737

5,400

5,672

5,588



Computation of interest on the existing Loan for control period:

Table 5.37 Rs. Crs.

Particulars FY-17 FY-18 FY-19 FY-20 FY-21 FY-22

Opening balance of capital

loans 3361 4017 4178 4737 5400 5672

Average Repayments 173 263 437 538 668 802

Closing balance as at the

end of the year 3188 3754 3741 4198 4732 4870

Interest 320 343 342 384 432 445

Rate of interest 10.04% 9.14% 9.14% 9.14% 9.14% 9.14%

*Actual

Computation of interest on the fresh Loan for control period:

Table 5.38 Rs.

Crs.

Particulars FY-20 FY-21 FY-22

Fresh borrowings envisaged 1,201.86 940.19 717.45

50% of the borrowings 600.93 470.10 358.73

Borrowings considered for interest

computation 600.93 1,671.95 2,500.78

Interest (RBI declared interest rate +200

base points) 68.81 191.44 286.34

11.45% 11.45% 11.45%

Abstract of interest on Loan capital:

Table 5.39 Rs. Crs.


Interest on existing loan capital 383.74 432.50 445.16

Interest on new loan capital 68.81 191.44 286.34

Total 452.55 623.94 731.50



Interest on working capital:

Norms fixed by the Commission for the purpose of computation of interest on

working capital as per MYT regulations are as under:

3.11.1 Working capital shall cover:

a) Operation and maintenance expenses for one month;

b) Maintenance spares @ 1% of the historical cost of assets at the

beginning of the year and

c) Receivables equivalent to two month’s average revenue.

3.11.2 The Commission for the purpose of ARR, shall consider the allowable

interest on working capital calculated on normative basis at the rate of interest

as per the latest available base rate as notified by RBI plus 250 basis points

or the weighted average rate of interest on working capital proposed by the

distribution licensee, whichever is lower.

Provided that, during annual performance review, the Commission shall

consider the allowable interest on working capital calculated on normative

basis at the allowable base rate of interest as on 1st April of the financial year

as notified by the RBI plus 250 basis points. If the actual expenditure is less

than the normative amount, the allowable interest on working capital shall be

limited to actual expenditure plus 50% of the difference between the actual

expenditure and the amount as calculated on normative basis. Provided further

that, during the APR, if the actual expenditure exceeds the normative amount

calculated above, the total amount of allowable interest on working capital

shall be limited to the amount as calculated on the normative basis.

Table below depicts the estimated cost towards working capital.

Table 5.40 Rs. Crs.


1/12th Operation and Maintenance 156.20 175.07 194.50

1% of Gross fixed assets at the beginning of

the year 140.29 163.05 180.92

2 months Receivables 3,348 3,490 3,644

Estimated Working Capital 3644.47 3828.28 4019.75



Rate of Interest 11.45% 11.45% 11.45%

Interest (RBI base rate as on Nov 2018 is

between 8.85 to 9.45 plus 200 basis

points)

417.29 438.34 460.26

Interest on consumer Security deposit and Meter Security

Deposit:

Norms fixed by the Commission for the purpose of payment of interest on

Consumer Security deposit vide regulation 8 of KERC (Security Deposit) Regulations-

2007 are as under

“The Licensee shall pay interest on Security Deposit (ISD, ASD & Meter Security

Deposit) of the Consumer as specified under K.E.R.C. (Interest on Security Deposit)

Regulations, 2005”

As per Regulations, 2005 ‘interest on security deposit of the consumer at the

Bank Rate prevailing as on 1st April of the financial year for which interest is due’

Following assumptions are made for the purpose of computation of interest on

Consumer Security deposits.

Average security deposit collected in the past three years is approximately Rs.300

Crs. Hence, it is presumed that on an average Rs. 200 Crs., will be collected in each

year of the control period.

Reserve Bank of India, Bank rate at 6.75 per cent per annum as on Nov 2018 is

considered for the future years for computing the interest on security deposit.

Table 5.41 Rs. Crs.


Security Deposits (ISD and ASD) 4296.21 4596.21 4896.21

Interest on security deposits proposed in Crs. 289.99 310.24 330.49

Rate of interest paid 6.75% 6.75% 6.75%



Other interest and Finance charges for FY-20 to FY-22 is considered at approx.

Rs. 20 Crs., for the 5th control period being the actual of FY-18.

Expenses capitalized:

The expenses capitalized for the control period is shown in the table below:

Table 5.42 Rs. Crs.


Interest & other expenses capitalized 99.75 104.74 109.97

Commission requested to allow the same.

Consolidated Interest and Finance Charges:

Table 5.43 Rs. Crs.


Interest on Loan Capital 452.55 623.94 731.50

Interest on Working Capital 417.29 438.34 460.26

Interest on Consumer Security Deposit 289.99 310.24 330.49

Other Interest & Finance Charges 20 20 20

Less: Expense capitalised 99.75 104.74 109.97

Total 1080.09 1287.78 1432.28

Other Debits and Prior period Credits:

The Commission has not been considering the projections for other debits and

Prior period Credits for the reason that, the same cannot be estimated beforehand.

Hence, the same is not estimated. However, the Commission is requested to allow these

amounts based on actual.



Return on Equity:

BESCOM is computing RoE as per MYT regulations 2006 and its amendments.

As per Regulation 3.5 on Capital Investment read with Regulation 3.9.1 on Return on

Equity, Distribution Licensee has to consider the normative allowable equity base at

30% on the Gross Fixed Assets excluding assets created out of consumer contribution.

Table 5.44

Finan

cial

Year

Particulars GFA Debt Equity

Normat

ive

Debt

@70%

of GFA

Normativ

e Equity

@30% of

GFA

% of

actua

l debt

on

GFA

% of

actual

equity

on

GFA

FY-19

Opening

Balance 11974 4178 858 8382 3592 35% 7%

Closing

Balance 14029 4737 1155 9820 4209 34% 8%

FY-20

Opening

Balance 14029 4737 1155 9820 4209 34% 8%

Closing

Balance 16305 5400 1498 11413 4891 33% 9%

FY-21

Opening

Balance 16305 5400 1498 11413 4891 33% 9%

Closing

Balance 18092 5672 1894 12665 5428 31% 10%

FY-22

Opening

Balance 18092 5672 1894 12665 5428 31% 10%

Closing

Balance 19526 5588 2352 13668 5858 29% 12%

From the above table it is seen that the estimated amounts of debt and equity are

within the normative levels with reference to the opening and closing balance of each of

the 5th control period.



Accordingly, the Return on Equity for the 5th control period is computed as

follows:

Table 5.45 Rs. Crs.

Particulars FY-18 FY-19 FY-20 FY-21 FY-22

Opening balance of paid up share

capital 546.91 546.91 546.91 546.91 546.91

Share deposit 464.58 656.42 820.42 984.42 1148.42

Average Equity addition during

the year 191.84 164.00 164.00 164.00 164.00

Reserve and Surplus -290.56 -157.58 21.44 253.62 547.22

Less: Meter Security Deposit

capitalised -54.81 -54.81 -54.81 -54.81 -54.81

Total Equity 857.96 1154.94 1497.96 1894.14 2351.74

Return on Equity @ 15.5% 132.98 179.02 232.18 293.59 364.52

Income Tax is not included in MYT for 5th Control period. Hence, Commission is

requested to allow income tax as per actuals.

Other Income:

Other income includes following items.

Interest Income

Profit on sale of Stores

Rental from Staff quarters

Value of materials found excess during physical verification

Rebate for collection of Electricity duty

Interest subsidy received under National Electricity Fund scheme

Misc. Recoveries

Incentives received



Actuals of Other income and projections are as under:

Table 5.46 Rs. Crs.

Particulars FY-16 FY-17 FY-18 FY-19 FY-20 FY-21 FY-22

Interest Income 8.28 6.56 6.73 6.73 6.73 6.73 6.73

Profit on sale of Stores -0.71 -0.36 -3.07 0 0 0 0

Loss/gains relating to

fixed deposits 0 -4.38 -7.25 0 0 0 0

Rental from Staff

quarters 3.56 2.49 2.04 2 2 2 2

Value of materials found

excess during physical

verification

0.23 0.01 0.04 0.09 0.09 0.09 0.09

Rebate for collection of

Electricity duty* 3.04 3.66 3.69 4.20 4.40 4.55 4.71

Incentives received 116.78 129.12 192.54 146.15 155.94 164.87 155.65

Miscellaneous recoveries 36.03 73.83 100.35 70.07 81.42 83.95 78.48

Interest subsidy received

under National Electricity

Fund scheme

21.87 20 20 20 20

Total 167.21 210.93 317 249 271 282 268

It is presumed that rental from staff quarters will decrease by 3% due to decrease

in HRA rates to the Urban and Rural areas by the Government of Karnataka.

There is increase in miscellaneous recoveries during FY-18 when compared to

FY-17 due to collection of application charges during recruitment process of Asst.

Engineers, Asst. Accounts Officers and Junior Engineers during FY-18. This is

not a repetitive income. Hence, averages of the past years are considered.

An average increase in incentive for prompt payment of power purchase bills is

considered for FY-19 and the 5th control period.

In order to provide interest subsidy on loans raised by distribution companies to

improve the distribution network, National electricity Fund (NEF), an interest

subsidy scheme has been set up. Under the scheme, loan amount sanctioned by



lenders during the financial year 2012-13 & 2013-14 for capital projects in

distribution sector duly approved by the Steering Committee shall be eligible to

take the benefits of interest subsidy for a tenure of 13 years based on annual

evaluation as per guidelines.

On the basis of the other income earned by BESCOM in the past three years and

considering nominal escalation the Other Income for the future years are

computed.

Projected abstract of ARR for FY-19 and 5th control period from

FY-20 to FY-22 is shown in the table below:

Table 5.47 Rs. Crs.

Sl. No Particulars FY-19 FY-20 FY-21 FY-22

Revenue at existing tariff in Rs. Crs.

1 Revenue from tariff and Misc. Charges 17,454.98 18,130.47 18,867.78 19,675.01

2 Tariff Subsidy from BJ/KJ 149.21 149.21 149.21 149.21

3 Tariff Subsidy from IP 2,197.91 2,464.33 2,530.93 2,597.53

Total Revenue 19802.11 20744.01 21547.92 22421.75

Expenditure in Rs. Crs.

4 Power Purchase Cost 14765.18 17249.15 18705.29 19569.28

5 Transmission charges of KPTCL 1528.66 1740.00 1920.00 2100.00

6 Transmission charges of PGCIL 1025.70 1125.70 1215.00 1325.70

7 SLDC Charges 18.39 19.68 19.68 19.68

Power Purchase Cost including cost

of transmission 17337.93 20134.53 21859.97 23014.66

8 Employee Cost 1283.28 1424.57 1596.67 1773.84

9 Repairs and Maintenance 101.7 112.47 126.05 140.04

10 Admin & General Expenses 277.66 337.40 378.16 420.12

Total O&M Cost 1,662.64 1,874.44 2,100.89 2,334.00

11 Depreciation 535.31 626.17 693.33 743.22

Interest & Finance Charges

12 Interest on Loans

341.93

452.55

623.94

731.50

13 Interest on Working capital 380.00

417.29

438.34

460.26

14 Interest on consumer deposits 269.74

289.99

310.24

330.49

15 Other Interest & Finance charges 20

20.00

20.00

20.00

16

Less interest & other expenses

capitalized 95

99.75

104.74

109.97

Total Interest and Finance charges 916.67 1080.09 1287.78 1432.28



17 Return on Equity 179.02 232.18 293.59 364.52

18

Funds towards Consumer

Relations/Consumer 1 1 1 1

19 Other Income 249 271 282 268

ARR 20383 23678 25954 27622

GAP -581 -2934 -4406 -5200

Sales 27235.10 28911.76 30139.51 31470.89

Average cost of supply 7.48 8.19 8.61 8.78

Segregation of ARR into Distribution and Retail Supply

Business:

The Consolidated ARR has been segregated into ARR for Distribution

Business and ARR for Retail Supply Business based on BESCOM’s internal

committee report.

Segregation of Costs

Table 5.48 Rs. Crs.

Particulars Distribution

Business Retail Supply

Business

Power purchase cost 100%

R&M Expenses 62% 38%

Employee Expenses 52% 48%

A&G Expenses 62% 38%

Depreciation 71% 29%

Interest & Finance Charges 16% 84%

Other Debits (incl. Prov for Bad debts)

53% 47%

Other (Misc.)-net prior period credit

19% 81%

Other Income 51% 49%

ROE 100%



Accordingly, the following are the ARR for the Distribution Business and the Retail

Supply Business:

ARR for Distribution Business –FY19 & control period (FY-

20 to FY-22):

Table 5.49 Rs. Crs.

Sl.

No. Particulars

FY-19 FY-20 FY-21 FY-22

1 R&M Expenses 63.05 69.73 78.15 86.82

2 Employee Expenses 667.31 740.78 830.27 922.40

3 A&G Expenses 172.15 209.19 234.46 260.47

4 Depreciation 380.07 444.58 492.26 527.68

5 Interest & Finance

Charges 146.67 172.81 206.04 229.17

6 Other Debits (incl. Prov

for Bad debts) 0.00 0.00 0.00 0.00

7 Other (Misc.)-net prior

period credit 0.00 0.00 0.00 0.00

Total 1429.24 1637.09 1841.19 2026.54

8 ROE 179.02 232.18 293.59 364.52

9 Other Income 127.11 138.00 143.92 136.51

NET ARR 1,481.15 1,731.28 1,990.86 2,254.56

ARR for Retail Supply Business – FY19 & control period (FY-20

to FY-22)

Table 5.50 Rs. Crs.

Sl. No.


1 Power purchase cost inclusive of transmission charges and SLDC Charges

17337.93 20134.53 21859.97 23014.66



2 R&M Expenses 38.65 42.74 47.90 53.22

3 Employee Expenses 615.97 683.80 766.40 851.44

4 A&G Expenses 105.51 128.21 143.70 159.65

5 Depreciation 155.24 181.59 201.06 215.53

6 Interest & Finance Charges

770.00 907.27 1081.73 1203.12

Total 19023.30 22078.13 24100.77 25497.61

7 Other Income 122.13 132.58 138.27 131.15

8 Fund towards Consumer Relations / Consumer Education

1.00 1.00 1.00 1.00

NET ARR 18902.17 21946.55 23963.50 25367.46

Gap in Revenue for FY-20:

Table 5.51 Rs. Crs.

Particulars FY-20

Annual Revenue Requirement (ARR) 23678

Revenue from Sale of power 20744

Revenue Gap (2934)

Business Plan:

The Business Plan for the period of 5 years (FY-20 to FY-24) has already been

submitted to the Commission vide letter dated 14.09.2018.

arr for 5th control period - karunadu · 500 85% 3499.62 66 2309.75 2309.75 2309.75 5.10 5 btps...

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