PUNJAB STATE ELECTRICITY REGULATORY COMMISSION

SCO NO. 220-221, SECTOR 34-A, CHANDIGARH        

                                   

 

                                                                       Petition No.31 of 2010

                                                                              Date of hearing: 15.12.2010

                                                                          Date of Order: 19.1.2011

 

 

In the matter of:          Petition for re-determination of the cost of supply and surcharge as directed by the Hon’ble Appellate Tribunal for Electricity vide its order dated 16.7.2010 in Appeal No.192 of 2009.

 

                                                            AND

 

In the matter of:         1.         M/s Mukesh Steels Limited, Giaspur Road, Ludhiana

2.         M/s Raj & Sandeep Ltd., Vill, P.O. Jandiali, Chandigarh Road, Ludhiana.

                                                          

Versus

 

                                   Punjab State Power Corporation Limited (earlier known as Punjab State Electricity Board)

 

 

Present:                     Shri Jai Singh Gill, Chairman

                                   Shri Satpal Singh Pall, Member

                                 Shri Virinder Singh, Member  

 

For the Petitioner:    Shri Tajender K.Joshi Advocate    

 

For the PSPCL:        Shri Ravinder Gautam, SE/TR-II        

   

                                                                  

ORDER

           

1.         M/s Antarctic Industries Limited and others filed Appeal No.192 of 2009 before the Appellate Tribunal for Electricity (APTEL)  against the imposition of surcharge on large supply consumers with contract demand exceeding 2500 KVA catered at 11 KV in accordance with the Commission’s Tariff Order for the year 2009-10. This appeal was decided by APTEL’s order dated 16.7.2010 wherein it was held that even though the Commission was empowered to impose such a surcharge, its rate as adopted by the Commission was devoid of a rational basis and the appellants were directed to approach the Commission and place material before it for re-determining the quantum of surcharge leviable. The Commission was, after consideration of the material submitted by the appellants, directed that the rate of surcharge may be fixed in proportion to the incremental transmission losses, transformation losses and charges for use of the 66/11KV transmission system. This petition has been filed by Mukesh Steels Limited and another pursuant to the above directions of APTEL.

 

2.         It is stated in the petition that the then Punjab State Electricity Board had on 22.5.2003 issued an internal memo which indicated that a 11KV feeder with a 63 sq mm ACSR conductor has a capacity of 4839 KVA at 0.85 Power factor assuming a maximum conductor temperature of 70 degree centigrade, a voltage drop of upto 6% and a maximum line length of 3.5 km. It is stated in that memo that consumers fed at 11 KV who wish to enhance their contract demand (CD) upto 4000 KVA would be asked to bear transformation losses @ 3% and further incremental line losses @ 2%. It is further submitted that transformation and line losses were determined on the basis of 0.85 power factor whereas presently the induction furnace industry is maintaining a power factor of 0.95 and as such actual losses would be much lower. Moreover, the losses assumed in the memo referred to above were at a temperature of 70 degree centigrade which normally does not occur and prevailing lower temperatures would result in further reduction of losses. It is pointed out that in the case of Waryam Steels, the meter was found defective and PSPCL compared the consumption of the grid meter with the meter installed in the premises of the customer and found that losses were between 0.2% to 0.3% which are much less than those indicated in the above mentioned memo. It is further argued that notwithstanding losses as indicated by the Board and brought out above, technical data of distribution transformers available in the market shows that in no case can transformation losses be more than 0.5 to 0.7%. Such data obtained from different manufacturers of transformers has accordingly been furnished. It is also contended that a common transmission system is used by consumers catered at 11 KV supply with contract demands both below and above 2500 KVA and there is no rationale in imposing surcharge on the basis of contract demand being above 2500 KVA. It is also urged that tariff of the petitioner has been designed at 11 KV supply and thus there is little reason to levy any surcharge in the first place. In the light of the above, it is prayed that if surcharge has to be re-determined, it can not in any case be more than 1.5% and that too after first designing the tariff at 66 KV.

 

3.         PSPCL in its reply submitted on 11.11.2010 has mentioned that circular of 2003 referred to by the petitioner relates to specific temperature conditions as per the Standard Manual of Instructions whereas temperature of the conductor can be much higher during the period of intensive loading. As regards power factor, it is pointed out, that all power intensive units have to maintain a factor of 0.90 as per the General Conditions of Tariff and Schedule of Tariff approved by the Commission. In respect of transformation losses, PSPCL contends that these can practically go upto 3% with higher conductor temperature and power factor going below 0.9%. It is pointed out that APTEL has, while deciding the appeal of Antarctic Industries Limited, clearly observed that loss levels of 0.5% relate to losses in a generation transformer which is more sophisticated but would not be applicable in the case of 66/11 KV transformers normally used in the distribution system. In so far as line losses are concerned, PSPCL has pointed out that it would be misleading to rely upon the example of Waryam Steels referred to by the petitioner since overall line length in the case of this consumer was a mere 500 meters whereas such losses depend on the actual length of the line, size of conductor and the contract demand. It is also pointed out that the petitioner cannot challenge the rationale of surcharge levied only on consumers with contract demands in excess of 2500 KVA as APTEL has upheld, in principle, the imposition of such surcharge. Thus, if surcharge is to be imposed, a cut-off point has to be prescribed beyond which it becomes applicable and this has been determined as CD above 2500 KVA in the Conditions of Supply and General Conditions of Tariff and Schedule of Tariff approved by the Commission. PSPCL has also forwarded data in respect of consumers paying surcharge which brings out the CD approved, capacity, cost and carrying cost of the power transformer feeding the consumers, transformation losses, line losses and the total cost of operation and maintenance (O&M) of the feeding sub-station.

 

4.         The information furnished by PSPCL to justify the imposition of surcharge was made available to the petitioner. In written arguments submitted on 15.12.2010, the petitioners have interalia commented upon this data and pointed out that the transformation losses of 2% taken into account are excessive. Furthermore, it is mentioned that PSPCL has assumed that there would be only one transformer at the feeding sub-station whereas in actual fact there would be multiple transformers installed thus reducing the overall cost per transformer to PSPCL. It is also pointed out that PSPCL has projected O&M cost of Rs.28 lac for each feeding sub-station which again seems to be inflated. The petitioner has also contested the manner in which carrying cost of 20% has been worked out based on a Return on Equity of 15% and O&M cost of 5%. On the other hand, it is pointed out that the ARR for the year 2009-10 reflects a total carrying cost of a power transformer as 23.86% of the capital cost which includes expenses such as employee cost, Repair & Maintenance/Administration & General costs in addition to depreciation, interest and return on investment. It is argued, thus, that the assumption of 20% cost only on account of Return on Equity and O&M cost is inflated and untenable.

 

5.         The Commission has heard both the petitioner and PSPCL and carefully considered the material placed on record. Before going into the question of working out the appropriate quantum of surcharge that would be payable, it is necessary to recount the backdrop in which the surcharge came to be imposed and discuss some of the issues raised by the petitioner in that context. At the outset, it needs to be observed that the former Punjab State Electricity Board had adopted a policy whereby consumers with high contract demand were required to shift to higher voltages with a view to decreasing losses inherent in effecting supply at voltages of 11 KV or below. Moreover, it was also felt that the benefit of public expenditure on strengthening the transmission system should accrue to a larger number of consumers rather than the additional transformer capacity so created being dedicated only to a few high end consumers. Seen in this light, it would be evident that levy of surcharge as prescribed had the twin component of compensation for higher losses incurred as well as prescribing the disincentives for high end consumers continuing to be catered at lower voltages. If surcharge is then to be levied, it is inevitable that a cut off point has to be prescribed in terms of contract demand after which such charges become applicable. Catering of supply at higher voltages where CD is in excess of 2500 KVA has been prescribed by the Commission in its Conditions of Supply and there is no force in the contention that the arbitrary determination of this cut off point would make the imposition of surcharge on that basis untenable. Similarly, it is difficult to accept the plea of the petitioner that the existing tariff is designed for supply at 11 KV and thus there is no rationale in imposing surcharge on consumers who are catered at this voltage. In this context, it is relevant to refer to para 48(ii) of APTEL’s order in the appeal of Antarctic Industries where it has been observed that the contention of transformation and incremental line losses already being included in the tariff cannot be accepted as such losses which accrue due to failure to conversion from 11 to 66 KV are entirely different from the transmission and distribution losses of the system. In the light of the above findings, this issue has clearly been settled and cannot be raised again as is sought to be done by the petitioner. The petitioner also claims that taking all factors into account, surcharge can in no case exceed 1.5%. It is noted that in putting forth this plea, the petitioners have taken only transformation and line losses into account whereas APTEL’s order further indicates that not only the above two factors but the cost for use of additional transmission system has also to be taken into consideration.

 

6.         The Commission, having taken note of the petitioner’s objections with regard to data submitted by PSPCL to justify the surcharge leviable, sought additional information relating to consumers who were liable to pay surcharge. PSPCL has furnished this data which is appended to this order and forms the basis on which levels of surcharge is proposed to be determined. It will be noted therefrom that:

(a)               It includes CD and consumption of individual consumers in 2009-10, capacity of the 66 KV sub-station and the pro-rata cost attributable to the consumers on the basis of actual installed capacity of the sub-station.

(b)               Total cost of the supplying 66 KV sub-station has been computed after adding the cost of different components for creation of such a sub-station.

(c)               Transformation losses have been taken as 0.5% only and not as initially reported by PSPCL. Even though APTEL has observed that 0.5% may be the losses in a generation transformer, this lower figure has been adopted as improvements in transformer design might have further reduced the transformation losses.

(d)               Line losses at 11 KV have been worked out as the average of those actually accruing in the case of individual consumers and average length of the  66 KV feeder has been assumed to be 2 kms. In addition, the cost of two 66 KV bays has also been included.

(e)               O&M charges have been taken as reported by PSPCL. Significantly, the petitioner while commenting that these charges are excessive has made no effort to rebut the contention of PSPCL in this respect.

(f)                 Carrying cost has been worked out assuming ROE of 14% and O&M cost of 5%. The plea of the petitioner that this seems unreasonable given the actual carrying cost of a power transformer claimed by PSPCL in its ARR for the year 2009-10 cannot be accepted since such projections in the ARR are actually the assumed break-up of generation, transmission and distribution costs and not the actual costs being incurred.

 

7.         The Commission notes that taking into account the various elements of cost as detailed in the Appendix, the additional costs borne by PSPCL in the case of consumers paying 10 and 17.5 % surcharge works out to 4.96% and 5.88% respectively.

 

8.         To ascertain the reasonability of the levy of 10 and 17.5% surcharge, the Commission has also attempted to ascertain the extra expenditure that would be  incurred by those consumers who shift from 11 KV and obtain supply at 33/66 KV. The relevant data was obtained from PSPCL for the year 2009-10 which indicates that consumers with contract demand above 4000 KVA required to be catered at 66 KV would bear additional cost for creation of a 66 KV sub-station and associated infrastructure which corresponded to 6.74% surcharge after accounting for 3% rebate availed at this voltage. In the case of consumers with contract demand between 2500 and 4000 KVA, proposing to obtain supply at 66 KV, the surcharge equivalent would work out to 5.68%. It is, thus, seen that the figures of surcharge leviable on the basis of assumed transformation/line losses and carrying cost as brought out in para 7 above correspond roughly to the results obtained when additional cost incurred by consumers shifting to higher voltages is taken into account. However, the Commission, in line with the directions of APTEL is inclined to rely on figures obtained after working out actual carrying cost and transformation/line losses. However, if the surcharge payable is determined on the basis of these costs alone then there might be no incentive to shift to the requisite voltages while considerations of public policy, on the other hand, dictate that it would be desirable to ensure that the shift to the prescribed voltages be effected. With a view to attain this objective, the Commission deems it necessary to add a penal element while determining surcharges that need to be imposed. Accordingly, the Commission deems it fair and reasonable that those consumers who do not comply with rational policy prescriptions on supply voltage must bear extra cost as compared to those who have made additional investments and are obtaining supply at the requisite voltages. Taking this into account, the Commission determines that consumers presently liable to pay surcharge of 10 and 17.5% will pay a revised surcharge of 7 and 10% respectively.

 

            Sd/-                                                  Sd/-                                              Sd/-

   (Virinder Singh)                       (Satpal Singh Pall)                      (Jai Singh Gill)

    Member                                      Member                                           Chairman                                      

    Chandigarh

    Dated: 19.1.2011

 

Click here for appendix