arr/tariff proposals of discoms for fy 2005-06 suggestions/objections by k.raghu 01/03/2005

ARR/TARIFF PROPOSALS OF DISCOMS FOR FY 2005-06

Suggestions/objections

by

K.Raghu01/03/2005

2

IT Payer or IT Assessee?

• In their revised proposals on tariffs applicable to Agriculture, Discoms have notified that ‘IT Payers’ are exempted from ‘Free Power Policy’.

• Where as the Govts new policy on supply of power to Agriculture exempts all the ‘IT Assessees’ from the ‘Free Power Policy’

• The same may please be clarified.

3

Clarity on >3 connections/family

• Agricultural Tariffs notified by Discoms exempts farmers having more than 3connections/family from the free power scheme.

• It may please be clarified whether ‘all the connections’

or

‘connections in excess of 3Nos’

of a family consisting more than 3 connections are exempted from free power policy.

4

Allocation of Subsidy Among Discoms

• Presently APERC is allocating Govt subsidy among all the Discoms

• Procedure for such allocation is not clearly stated in the ARR

• Para 858 (b) of Tariff Order for FY2005 merely states that ‘each Discom gets the subsidy commensurate to the extent of energy sales projected in each subsidised category’

• The above procedure is adopted to arrive at the subsidy allocations for each Discom

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Discom Subsidy(cr)

As per Para 858(b)

Subsidy as per ERC(cr)

Excess/Less

(cr)

EPDCL 187.84 194.38 6.54

CPDCL 524.22 464.30 (-)59.92

SPDCL 319.43 334.05 14.62

NPDCL 271.41 310.54 39.13

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• It can be seen that CPDCL got Rs 59.92 crore less subsidy

• NPDCL has replied that average revenue realisation and cost-to-serve for individual categories are not similar in all DISCOMs which have been considered by the Commission while allocating the subsidies.

• Other DISCOMs have not responded to the above query.

7


Discom

Cost to Serve for Domestic consumers

(FY 2006)

Cost to serve

For Agriculture(Paise/unit)

(FY 2006)

SPDCL 411.00 148.57

NPDCL 383.28 149.90

CPDCL 444.44 175.00

EPDCL 426.00 165.80

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• Higher the cost to serve for subsidised sections…higher will be the share in Govt subsidy.

• It is not clear how in spite of higher CoS for both Domestic and Agriculture sectors, CPDCL got less share of Govt. subsidy than what is due to it.

• The same may please be clarified.

9


• Variations in CoS for similar categories in different Discoms is mainly due to several assumptions made in Cost-to-serve analysis.

• Many of these assumptions are questionable

• We request the Commission to adopt transparent and rational approach in allocating Government subsidy among Discoms

• This may also become the most contentious issue with the arrival of parallel/private Discoms.

10

Open Access Consumers to share the Burden of NCE power

• Commission should allow the burden of NCE power to be shared between consumers of Discoms and OA consumers as per the Section 86(e)

• Burden of NCE power = {Tariff applicable to NCE projects - Average cost of power purchase by APTRANSCO (Excluding NCE power)} x Total units purchased from NCE projectsAbout Rs 290 crore

• Share of Open Aceess Consumers =(4500 MU/24000MU) x Rs 290 cr = Rs 55 crore( Agriculture consumption is excluded as per FSA formula )This works out to Rs 55 cr/ 450 cr units = 13 ps/unit.

• We request the commission to pass on this burden onto the OA consumers.

11

Estimation of wheeling Charges

• Till now the commission is considering only network costs and T&D losses for the estimation of wheeling charges.

• Section 42(2) of the EA,2003 states that ‘…in determining the charges for wheeling, it shall have due regard to all relevant factors including such cross subsidies, and other operational constraints:’

• The above section makes it very clear that the wheeling charge shall also have cross subsidy as one of its components.

• We request the Commission to allow a part of the cross subsidy component to be passed on to the wheeling charges

12

Collect Surcharge from Open Access Consumers

• Section 42(2) of EA,2003 provides for collection of Surcharge from Open Access Consumers to compensate for the loss of Cross Subsidy

• This shall be collected from 10.06.2003 ie. From the date of effectiveness of EA,2003.

• Commission issued draft proposals and conducted public hearing on the issue of determination of Surcharge to be levied on Open Access Consumers

• So far no decision is taken on the above matter• It is learnt that the Commission is waiting for the

‘National Tariff Policy’ to be announced by the MOP.

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• But it may become extremely difficult to collect arrears towards surcharge from existing OA consumers if it is delayed any further.– 250Cr.units x2years x 40ps/unit ( CERCs

recommendations on surcharge…20% of Power procurement price of Discoms)

= Rs 200 crore

• We request the Commission to start collecting some nominal amount towards Surcharge (also arrears towards surcharge) from OA consumers till the final orders are issued.

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• National Tariff Policy is yet to be finalised.

• Commission and utilities through their interventions should ensure that all the existing OA consumers (ie. OA consumers prior to EA,2003) are clearly brought under this Surcharge net in the National Tariff Policy.

• Otherwise it will lead to many legal complications.

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Commission to Fix Only Ceiling Tariff

• At present Commission is fixing retail tariffs for the end consumers, which are inflexible for the Discoms.

• Section 62(a) of EA,2003 states that ‘…in case of distribution of electricity in the area by two or more distribution licensees, the Appropriate commission may, for promoting competition among distribution licensees, fix only maximum ceiling of tariff for retail sale of electricity’.

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Commission to Fix Ceiling Tariff Only

• There is no reason why this provision should be used only when there are two or more discoms operating in one area.

• In fact the above provision can be more useful even when there are no parallel distribution companies.

• Commission may fix only the ceiling tariff for a particular consumer category, and give freedom to Discom to fix its own tariff, subject to the ceiling tariff fixed by the commission.

17

Commission to Fix Ceiling Tariff Only

• Commission need not allow additional subsidy to Discoms on that count.

• This will encourage Discoms to manage their purchases and sales more effectively and increase sales to subsidising sectionso Ex: introduce TOD tariffs with better incentive structures for

certain power intensive consumers – EA,03 provides for TOD metering and its effectiveness

depends on flexibility given to Discoms in fixing tariff, subject to certain controls

o Better utilisation of overdrawals from Transco

• Hence, we request the Commission to fix only maximum ceiling of tariff for retail sale of electricity.

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Unauthorised vs Theft of Electricity

• There are certain provisions in the EA,2003, which need immediate clarification by the Commission, that are creating confusion among all the stakeholders.

• Section 126 and Section 135 deal with unauthorised use of electricity and Theft of electricity, respectively

• From the above two sections it is not clear how to classify the cases of use of electricity ‘through tampered meter’.

• The same may please be clarified

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Thank you

arr/tariff proposals of discoms for fy 2005-06 suggestions/objections by k.raghu 01/03/2005

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