SCO
NO. 220-221, SECTOR 34-A,
Petition No.15 of 2008
Date of Hearing : 23.6.2009
Date of Order :
19.8.2009
In the matter of: Petition/Representation by the Punjab
State Electricity Board for Amendment/Modification/Substitution of the
provisions of the Tariff Regulations, 2005.
AND
In the matter of: Punjab State Electricity Board, The
Mall,
Present: Shri Jai Singh Gill, Chairman
Smt.
Baljit Bains, Member
For petitioner: Shri
Anirudh Tewari, IAS, Member/F&A
Shri R.K. Bansal,
C.E./ARR & TR
Shri H.S. Chaudhary,
Director/TR(Finance)
Shri Balkar
Singh, Dy.CAO/TR
Shri Anand
K. Ganeshan, Advocate
ORDER
This petition has been filed by the
Punjab State Electricity Board (Board) seeking amendments in Regulations 28,
30, 20 and 16 of the PSERC (Terms and Conditions for Determination of Tariff)
Regulations 2005 (Tariff Regulations). After the petition was admitted on
21.10.2008, a Background Paper on the proposed amendments was prepared by the
office of the Commission which was put to public notice on 25/26.4.2009 and
comments/objections invited. In response, comments were filed only on behalf of
the Board. The petition was heard on 23.6.2009 when the petitioner reiterated
the plea taken in the petition and filed further submissions on 25.6.2009.
After due consideration, the Commission passes this order on the issues
involved in this petition.
Regulation 28 :
O&M Cost
This Regulation provides that Operation
and Maintenance expenses (O&M expenses) shall mean Employees Expenses, Repair
and Maintenance expenses (R&M expenses) and Administrative and General
expenses (A&G expenses). The Board’s prayer for amendment in this
Regulation is, however, confined to employee and R&M expenses only. In the
case of the former, the Board has submitted that Regulation 28 provides for
O&M expenses including employee cost as approved by the Commission for the
year 2005-06 to be considered as the base for determination of such costs in
the subsequent years. The Board’s plea is that while increases in salary could
continue to be linked to the whole sale price index (WPI), there is a need to consider
allowing payments on account of terminal benefits, medical reimbursement, leave
travel allowance and leave encashment on actual basis. As regards the
apportionment between these two items of cost, the Commission had in the draft
Regulations that were put to public notice proposed that the consolidated
average of other employee cost in the years 2005-06 to 2007-08 be taken into
account. The Board has, however, urged that the proportion between these two
costs as existing in 2002-03 be taken into reckoning. With regard to R&M
expenses, the petitioner has urged that in view of the fact that its
generation, transmission and distribution assets are mainly old and require
higher outlays for repair and maintenance, such costs should be allowed on
actual basis. In case of any abnormal increase in O&M expenses, prudency of
the same could be checked by the Commission and allowed accordingly.
The Commission notes that the Board
has taken steps to reduce its employee strength and the same has come down from
85130 in 2002-03 to 68067 in 2008-09. While the employee cost of the Board
still remains on the very high side, it also needs to be borne in mind that the
right-sizing of the Board can only be a gradual process and till such time that
the Board reaches an optimum staff strength, higher employee cost would inevitably
be incurred. It is also a fact that the Board has no control over terminal
benefits, medical reimbursement, leave travel allowance and leave encashment in
the case of retirees and BBMB employee expenses and thus, any enhancement
purely on WPI basis may not adequately compensate the Board. Due note has also
to be taken of periodic revisions in pensions which are, by and large, linked
to those of the State Govt. employees and such enhancement cannot be adequately
taken care of by annually applying WPI increase on base costs determined by the
Commission in 2005-06. The Commission, accordingly, finds some merit in the plea
of the Board and decides that the employee cost of the Board as an integrated
utility may be considered in two parts. The first part constituting of terminal
benefits, leave encashment, leave travel allowance, medical reimbursement
including fixed medical allowance of pensioners and share of BBMB employees
expenses would be allowed on actual basis. The second part consisting of all other
expenses accounted for under different sub-heads of employee costs taken
together would continue to be linked to WPI increases in accordance with the
current practice. The proportion between these two costs is based on the
consolidated average cost of the years 2005-06 to 2007-08 considering that
Regulation 28 (4)(a) of the Tariff Regulations lays down that O&M expenses
approved by the Commission for the year 2005-06 shall be considered as base
O&M expenses for determination of such expenses in the subsequent years. The
Commission also is of the view that any exceptional increase in employee cost
on account of pay revision would need to be separately considered. The
Commission is, however, unable to agree that R&M expenses should not be
linked to costs determined in the base year (2005-06). Increase in R&M
expenses has to be on a normative basis and cannot be allowed in an open ended
manner. Regulation 28 has been amended accordingly.
Regulation 30 :
Working Capital
The Board has
pleaded that Regulation 30 of the Tariff Regulations restricts working capital
to costs on account of fuel, power purchase and O&M expenses for one month
ignoring the fact that CERC regulations allow fuel cost for two months in the
case of non-pit head generating stations. It is also submitted that working
capital requirements need to factor in the time taken for collecting
receivables which may be assumed as two months as per the practice followed by
CERC in its regulations. In addition, the Board contends that Regulations should
also provide working capital for one year’s requirement of spares and inventory
for generation, transmission and distribution.
The Commission is inclined to agree
that working capital allowed to an integrated utility should provide for two
months requirements of fuel cost and should also include a suitable provision
for maintenance spares as per CERC norms. The Commission is, however, unable to
agree with regard to receivables also being provided for in working capital
needs as all costs likely to be incurred by the utility have already been
provided for in Regulation 30 which has been amended on the above lines.
Regulation 20 :
Fuel Cost
The Board has
submitted that the Commission had earlier been allowing fuel cost estimates based
on net calorific value until 2005-06 but after the coming into force of the
Tariff Regulations, it has adopted norms of gross calorific value, transmission
loss, auxiliary consumption, oil consumption etc. as prescribed by CERC for
central generating stations. The Board has argued that while the Commission has
gone by CERC norms in determining fuel costs, it has however not adopted CERC
methodology for arriving at those norms. The Board has clarified that CERC had
carried out a detailed study of different thermal plants and observed the
actual parameters of these plants for a period of 2-3 years before fuel cost
parameters were fixed. On the other hand, it is pointed out that the Commission
has not conducted any study but only adopted CERC parameters. It is further
urged that it is inappropriate to apply these parameters to thermal stations of
the Board which cannot be compared to central generating stations as the
Board’s plants are comparatively older. The Board has referred to the decision of UP SERC in
adopting relaxed norms in such a case and to the order of the Gujrat SERC
wherein a detailed study is proposed to be undertaken and relaxed norms adopted
in the interim. The Board has urged the Commission to conduct a study on
similar lines in order to determine operational parameters for its plants and
in the meanwhile to determine station heat rate and other parameters as per
actuals. In the matter of generation incentive, the Board has suggested that
the same should be permitted based on target PLF as is done in the case of CERC
rather than linking it to projected availability of the plant.
The Commission notes that CERC
determines technical standards and operational norms of coal fired stations
based, by and large, on CEA’s recommendations. Considering the wider implications
of operational norms for the power sector as a whole, CEA had in Dec 2003
constituted an expert committee with representatives from central utilities,
state generating companies, equipment manufacturers and consultants. With a
view to ensuring that the inputs of major stake holders are taken into account
while determining these norms, this committee had, as a part of its
deliberations, obtained and considered data of several generating plants
including those of the Board. In addition, some NTPC stations and other
utilities were also inspected with a view to ascertaining the methodology on
the basis of which data was being provided. This committee then recommended
operational norms for units ranging in size from 210 MW to 500 MW which have,
by and large, been adopted by CERC. CEA had also inter alia observed that
deviation of operating heat rate showed no correlation with age or make of the
unit and that old units from some of the utilities have showed very low
deviation. The Commission finds little merit in the plea of the Board that its
plants cannot be appropriately compared with central generating stations. In
this respect, it is noted that two out of the three power plants of the Board
have standardized equipment similar to central generating stations and
performance parameters in either case ought to be identical. CEA has clearly
delinked deviation of critical operating parameters from the age of a plant.
Moreover, CERC norms apply to all central generating stations irrespective of
age. In the case of the third power station which is undoubtedly of older
vintage with 110 MW generating units, the Commission is already applying
relaxed norms adopted by CERC in the case of similarly aged central generating
stations of Tanda and Talcher. The Commission is, therefore, not convinced of
the need for undertaking another study and is inclined to go by CERC norms that
have been adopted on the basis of a detailed study undertaken of plants similar
in most respects to those of the Board. These norms also include taking into
account gross calorific value of coal as fired (GCV) which is why the
Commission has adopted a similar practice. As regards the orders passed by
other Commissions, the Commission notes that the generating stations in those
cases are of much smaller capacity and not comparable with the Board’s plants. Moreover,
the norms that have been relaxed pending a study have not been determined by
CERC. As regards the grant of generation incentive, the Commission’s approach
has all along been to grant this with reference to the projected generation of
a plant depending on its maintenance schedule without any consideration of the
plant load factor. The Commission is of the view that this methodology is,
perhaps, more appropriate in determining actual performance of a thermal plant.
It may be added, however, that no penalty is imposed on the Board in the event
of PLF of any plant being less than 80% on account of its non availability. For
all these reasons, the Commission finds insufficient justification to amend
Regulation 20.
Regulation 16 :
T&D Losses
Regulation 16 of the Tariff
Regulations interalia provides that a T&D loss reduction trajectory
previously determined by the Commission before coming into force of these
Regulations would continue to be taken into consideration for the purposes of
tariff determination. The Board’s plea is that even though it has achieved
significant efficiency-gains in its operations, yet the road map for T&D
loss reduction determined by the Commission in Tariff Order of 2004-05 could
not be achieved for a variety of reasons. The Board has further pointed out
that it was completely impractical to reduce T&D losses from 23.92% as they
stood in 2006-07 to 19.5% for 2007-08 as envisaged by the Commission. The Board
has, accordingly, pleaded that the Commission needs to re-determine the
trajectory by taking the actual losses of the Board as a starting point and
projecting a yearly decrease linked to the Board’s actual investments in specific
measures aimed at the reduction of T&D losses.
The Commission
notes that Regulation 16 provides for T&D loss targets already fixed would
remain in force for the specified period. However, the T&D loss reduction targets
determined by the Commission was for the period starting from 2004-05 to 2007-08
and clearly a new exercise was to be undertaken from 2008-09. Regulation 16 otherwise
merely provides for the manner in which the Board would submit data on the
basis of which the Commission would determine the T&D loss targets. As the
earlier trajectory fixed by the Commission is no longer relevant at this stage
and new milestones have in any case to be determined, the Commission sees no
reason for effecting any amendment to Regulation 16.
This petition is disposed of in
accordance with the Commission’s findings on each issue as above.
Sd/-
Sd/-
(Baljit Bains) (Jai Singh Gill)
Member
Chairman
Place :
Dated :