PUNJAB STATE ELECTRICITY REGULATORY COMMISSION
SCO 220-221 SECTOR-34-A
CHANDIGARH

PETITION NO. 12 OF 2004


IN THE MATTER OF :
ANNUAL REVENUE REQUIREMENTS AND TARIFF APPLICATIONS FILED BY
PUNJAB STATE ELECTRICITY BOARD FOR THE FINANCIAL YEAR 2004-05.


PRESENT :
                                                    Mr. R. S. Mann, Chairman
                                                    Mr. L. S. Deol, Member


Date of Order : November 30, 2004.


ORDER

The Commission, in exercise of the powers vested in it under Section 62 and 86 of The Electricity Act, 2003 and all other powers enabling it in this behalf, passes this order and determines the ARRs and the Tariff for supply of electricity by the Punjab State Electricity Board for the year 2004-05. This is the third Tariff Order of the Commission determining the tariff with reference to the Annual Revenue Requirements and Tariff Applications submitted by the PSEB. Before passing this order, the Commission has considered the facts presented by the Board in its various filings, the objections received by the Commission from various consumer organizations and individuals, the observations of the Government of Punjab and the response of the Punjab State Electricity Board to the objections from public. The issues raised by the public have also been heard in public hearings held at Ludhiana and Chandigarh. The responses of the Board as given in writing and in the public hearing held on September 3, 2004 at Chandigarh have been heard and considered by the Commission. The State Advisory Committee constituted by the Commission under Section 87 of The Electricity Act, 2003 has also been consulted and all other relevant facts and material on record have been perused.

1.1     BACKGROUND

The first Tariff Order of the Commission for the financial year 2002-03 was issued on September 6, 2002. The Commission was guided by the principles laid down in Section 29 of the ERC Act, 1998 in determination of tariff. To this purpose, the Commission first examined the Annual Revenue Requirement proposal of the Board for the year and determined the realistic level of Total Revenue Requirement as Rs.6803.14 crores against requirement of Rs.7857.78 crores projected by the PSEB. The Commission then determined average cost of supply by dividing the total expenditure in the Annual Revenue Requirement with the total number of units supplied. The average cost of supply thus worked out was used by the Commission to calculate the level of cross subsidy required or made available by each consumer class with reference to existing level of tariff. The Commission then proceeded to determine the tariff rates of various categories of consumers. To this purpose, the Commission was first confronted with the issue of tariff fixation for agriculture pump set consumers who were availing free supply till then. The Commission had already made assessment of consumption of all agricultural pump set users based on the actual consumption projected by the Board in previous years on the basis of sample meter readings, study conducted by Punjab Agriculture University in this regard, study conducted by World Bank in Haryana and the consumption levels fixed by other State Electricity Regulatory Commissions. Accordingly the Commission had fixed the norms of 1700 kwh/kw/year for consumption in agriculture sector for the year 2002-03. This worked out to 5235 MUs against the proposal of 5986 MUs projected by the Board for the year. The Commission also decided to introduce a tariff of 200 Ps/Kwh or Rs.212/BHP/month against free supply being provided to this sector till then in view of various factors given in the Tariff Order and the provisions of ERC Act, 1998. The State Government was approached to know about its willingness to extend subsidy to agricultural pump set users and domestic category. The State Government vide its letter dated 2.9.2002 conveyed its willingness to grant subsidy to the tune of Rs.800 crores during the year to be allocated to agricultural sector supply and domestic consumers belonging to Schedule Caste category with connected load upto 300 Watts to give 50 units of free power per month. The Commission agreed to the allocation of Rs.750 crores to agricultural pump set users and Rs.50 crores to Schedule Caste domestic consumers. Taking this subsidy into account the tariff chargeable from agricultural pump set users was fixed at Rs.60 per B.H.P. per month on un-metered supply or 57 paise per unit on metered supply. The State Government through letter dated 4.9.2002 further indicated its willingness to extend full subsidy to neutralize the effect of annualisation in case of agricultural pump set users for the period from April 1 to July 31, 2002. The Commission decided that additional subsidy payable by the Government on this account shall be Rs.100 crores, in addition to subsidy of Rs.800 crores already committed by the Government. Vide letter dated 22.10.2002 the State Government further requested to levy the subsidized rates w.e.f. 1.10.2002 instead of 1.8.2002 on agricultural pump sets and for that purpose it committed to provide Rs.50 crores additional subsidy to the PSEB. The Commission agreed to it.

The Commission also decided to increase the tariff of subsidized categories of consumers by 11% while the tariff of subsidizing categories of consumers was increased by 8% only. The Commission thus, restructured tariff so as to bring all the categories of consumers nearer to the average cost of supply and reduce level of cross subsidy substantially. The Commission also issued directives to the Board laying down performance parameters on various issues including reduction in T&D losses, generation level to be attained by its own thermal plants, station heat rate, employees cost and also to improve quality of supply of power and service to the consumers.

The Board filed the Annual Revenue Requirement for the financial year 2003-04 and in order to meet this requirement the Board also filed tariff application vide letter dated December 30, 2002 for revision of tariff rates. The Board also filed revised ARR for the year 2002-03. In these filings, the Board had projected the revenue gap of Rs.1862 crores for the year 2003-04 and Rs.1401 crores for the year 2002-03 over and above the tariff increase amounting to Rs.1461 crores allowed by the Commission in the Tariff Order dated September 6, 2002. The Board proposed to capture the impact of the revenue gap of Rs.1862 crores during the financial year 2003-04 through tariff increase ranging upto 48% in various categories of consumers, while the revenue gap of Rs.1401 crores for the year 2002-03 was proposed by the Board to be converted into Regulatory Asset to be recovered subsequently.

The Commission examined the Annual Revenue Requirement proposal of the Board and determined realistic level of revenue gap for the year 2002-03 as Rs.324.94 crores against Rs.1401 crores projected by the Board. The Commission further determined a revenue gap of Rs.162.16 crores for the year 2003-04 against the revenue gap of Rs.1862 crores projected by the Board. Thus, the combined revenue gap of Rs.487.10 crores only had to be made good by the Commission through tariff revision.

The Board in its ARR and Tariff Application filing for the year 2003-04 had proposed to convert the revenue gap of Rs.1401 crores projected for the year 2002-03 into a Regulatory Asset to be recovered from the consumers in future years and proposed tariff hike only to capture the projected revenue gap of Rs.1862 crore proposed for the year 2003-04. However, in view of the drastically reduced revenue gap as determined by the Commission, the Commission decided to convert only Rs.150 crores out of the combined gap of Rs.487.10 crores into Regulatory Asset. This Regulatory Asset of Rs.150 crores was proposed to be recovered from the consumers and the Board in equal proportion during two years viz. 2004-05 and 2005-06. The revenue gap of Rs.351.17 crores which also included interest on Regulatory Asset was proposed to be recovered from the consumers during the year 2003-04 through tariff revision approved by the Commission. The Commission had agreed to adopt this device to protect the revenue interest of the Board and also to ensure that the consumers are not subjected to an unusually high dose of tariff escalation so soon after the previous tariff increase made w.e.f. August, 2002. The second Tariff Order of the Commission for the financial year 2003-04 was issued on May 23, 2003.

1.2     ARRs AND TARIFF PROPOSAL FOR 2004-05

The Board had initially filed its ARR and Tariff Revision Application for the year 2004-05 on December 8, 2003. However, on the direction of the State Government, the Board had filed an application on February 27, 2004, seeking the withdrawal of the ARR and Tariff Application for the year 2004-05 on the grounds of exceptional circumstances and one-time restructuring efforts of the Board being underway. The Commission in its Order dated April 6, 2004 allowed the Board to withdraw the ARR and Tariff Application filed by it and to file the new ARRs and Tariff Applications for the segregated entities of the Board by May 31, 2004.

The ARR and TA were accordingly filed by the Board on May 31, 2004. According to the Board, in order to meet the requirements of the Act, action on various areas relating to unbundling etc. remained under consideration of the State Government. However, for various reasons including application of Model Code of Conduct during the Parliamentary Elections process, action on the matter was delayed. Accordingly, under clause 172 (a) of the Act, the State Government requested the Government of India, for an extension of six months for implementation of the provisions of the Act in Punjab. The approval of Government of India to authorize the PSEB to continue to function as State Transmission Utility and a licensee for a further period of six months beyond June 10, 2004 was accorded vide letter dated June 2/4, 2004.

In the ARR, the PSEB filed the gross Annual Revenue Requirement (ARR) of Rs.8187 crores, including transmission and system operation activities cost for the year 2004-05 and applications for revision of tariffs on May 31, 2004 within the dead line indicated by the Commission. On scrutiny, it was observed that the ARRs and tariff proposals needed revision on account of a number of shortcomings.

Firstly, as per the Tariff Order for 2003 -04, norm of agricultural consumption @1650 kwh/kw/year was approved by the Commission which was less than the norm of 1700 kwh/kw/year, adopted by the Commission for the year 2002-03. This was on account of the fact that while 2002-03 was more or less a drought year, 2003-04 was a normal monsoon year. It was expected that this norm will be continued for assessing agriculture consumption for the future year as well, till the revised norms are approved by the Commission. However, in the ARR filings submitted by the Board much higher norm for agricultural consumption has been adopted. Secondly, the revised tariff proposed by the Board, with a view to recover ARR, is based on 12 months applicability, whereas, the actual time for the recovery of the same is likely to be about 6 months only taking into consideration the time involved in the processing of ARRs & Tariff Applications and completion of formalities under the Electricity Act, 2003 and Regulations framed thereunder.

Moreover, the Board worked out the additional Annual Revenue Requirement of Rs.787 crore for 2004-05. However, of this total revenue requirement, the Board proposed to cover only 392 crore during the year through imposition of tariff and balance was proposed to be created as Regulatory asset to be recovered through tariff in future years. Creation of Regulatory Asset can be justified only in extremely unavoidable circumstances or when costs are of one time nature which justify their spreading over a number of years or when the cost of supply is likely to go down in future years. As such loading of this cost in future years when the cost of supply could go up due to delicensing, open access and unbundling, it could again result in greater tariff shock. Apart from above, in the tables depicting energy sales for different years, the revised estimates for the year 2003-04 were indicated, whereas figures for actual sale were required to be supplied. The data on the basis of which revenue requirement was worked out had a number of other discrepancies and inconsistencies as well. The Commission communicated the deficiencies noticed in the filings of the Board vide its letter No. 2332/PSERC dated 17.6.2004 requesting the Board to furnish its response thereto.

The PSEB submitted required additional data/information vide PSEB letter No. 395/CC/DTR-102 Vol.-VI dated June 30, 2004. The Commission after due scrutiny took the proposals for ARRs and Tariff Applications on record as Petition No.12 of 2004 on July 12, 2004.

The PSEB has proposed a net expenditure of Rs.7974 crores in the ARR and a reasonable return of Rs.213 crores . After accounting for non-tariff income of Rs.330 crores, the ARR as proposed by the PSEB is Rs. 7857 crores for the year 2004-05. The PSEB has estimated the revenue from existing tariff as Rs.7070 crores, thus projecting a revenue gap of Rs.787 crores. However, the tariff increase proposed by the PSEB is only to generate additional revenue of Rs. 392 crores. It is proposed by the Board to carry forward the remaining revenue gap as Regulatory Asset, along with the additional revenue gap of Rs. 68 crores projected for the year 2003-04.

1.3     INVITATION OF OBJECTIONS AND PUBLIC HEARINGS

The Commission decided to treat the matter in a transparent manner by holding public hearings in accordance with the provisions of Section 62 and 64 of The Electricity Act, 2003. The Commission also decided to follow the procedure laid down by the Commission under the Tariff Regulations issued in accordance with the Electricity Regulatory Commissions Act, 1998 for determination of tariff the terms and conditions of which were decided to be continued by the Commission vide notification dated July 8, 2004, published in the Punjab Government Gazette dated July 16, 2004, till the new Tariff Regulations are framed by the Commission under The Electricity Act, 2003. In this connection, it was noted by the Commission that there is no inconsistency between the Tariff Regulations approved by it under the Electricity Regulatory Commissions Act, 1998 and the Electricity Act, 2003 and as such there was no problem or illegality in continuing the existing tariff regulations for some more period till the new tariff regulations are framed by the Commission. In any case, in case of any inconsistency, the provisions of Electricity Act, 2003 only were to be applicable. Accordingly, public notice was issued in leading newspapers of the State inviting objections from general public. The public notice was published in The Tribune, The Hindustan Times, Ajit, Punjab Kesri and Aaj Di Awaaj on July 15, 2004.

Copies of the ARRs and Tariff Applications for the year 2004-05 were made available in the offices of the Chief Engineer, Commercial, PSEB, Patiala, Liaison Officer, PSEB Guest House, # 248 Sector 19-A, Chandigarh and also in the offices of all Chief Engineers (Operation) and all Superintending Engineers-in-charge of Operation Circles of the Board.

Vide public notice, objectors were advised to file 7 copies of their objections with the Secretary of the Commission upto August 16, 2004, with an advance copy to the PSEB. It was specifically stated in the public notice that after perusing the objections received in response to the notification, the Commission may conduct public hearings on dates which would be notified by the Commission in due course.

The Commission received 45 written objections in all within the due date expressing concern over the proposed increase in tariff charges, the working of PSEB, T&D losses, Employees Cost, Monthly Minimum Charges, Two Part Tariff and a number of other issues related to tariff. Some of these objections were not in the format prescribed by the Commission and were not supported by affidavits, but the Commission, using its inherent powers as laid down under Conduct of Business Regulations, took cognizance of all the objections irrespective of whether they fulfilled the requirements or not, so as to meet the ends of justice. 29 additional written objections were received after the due date and upto 16.9.2004 either during the public hearings organized by the Commission or in the office of the Commission. The Commission decided to take all objections received upto 16.9.2004 into account. Out of the 74 objections received and taken on record, 29 are on affidavit and 45 are without affidavits. But all these objections were considered and taken into account by the Commission. 4 references received after the extended due date i.e. 16.9.2004 were taken into consideration as suggestions by the Commission.

The State Government was also approached by the Commission through letter dated 6.8.2004 and 2.9.2004 to give its views on the ARRs & Tariff Applications of the Board and the issues raised therein by the Commission. The State Government made its submissions in writing vide their D.O. Letter No.11/182/03-EB 5/18712 dated Sept. 24, 2004 on the ARRs and tariff filings of PSEB. In the reply, the Government has given its position on various issues involved.

Number of objections received from different categories of consumers/ individuals/ consumer groups/ organizations and others in response to the public notice issued for inviting objections from general public are detailed below :



SI. No.	Category	No. of Objections
1.	Chambers of Commerce	7
2.	Consumer protection and Grievance Redressal Forum	6
3.	Defence	1
4.	Farmer Unions	3
5.	Individuals	7
6.	Industrial Associations	18
7.	Industry	12
8.	PSEB Engineers Association	2
9.	Railways	2
10.	Rural consumers Welfare Association	1
11.	Schools	10
12.	Social Welfare Trusts	2
13.	SOS Children’s Village	1
14.	Telecom – BSNL	1
15.	Trade unions	1
Total		74



The list of objectors is given in Annexure- I to this Chapter.

PSEB submitted its replies to all the written objections raised by various consumers/ consumer organizations, copies of which were supplied to respective objectors.

The Commission decided to hold public hearings at Ludhiana and Chandigarh. Public notices were published on August 1, 2004 and August 21, 2004 in the leading Newspapers namely The Tribune, Indian Express, Punjab Kesri, Jagbani and Punjabi Tribune informing the objectors, the consumers and general public about the holding of public hearings at the following places on the dates shown against each of them :



Venue	Date & Time of Public Hearing	Category of consumers to be heard
LUDHIANA Bachat Bhawan, Mini Secretarial, Jagraon Road, Ludhiana	August 24, 2004 11.00 AM to 1.30 PM (To be continued in the afternoon, if necessary)	All consumers / Organizations based at Ludhiana.
CHANDIGARH Commission Office i.e. SCO 220-221, Sector 34-A, Chandigarh.	August 30, 200410.30 AM to 1.30 PM(To be continued in the afternoon, if necessary)	All consumers except Industry, Agricultural consumers and staff unions of the Board.
CHANDIGARH Commission Office i.e.SCO 220-221, Sector 34-A, Chandigarh.	August 31, 200410.30 AM to 1.30 PM	Industry
CHANDIGARH Commission Office i.e.SCO 220-221, Sector 34-A, Chandigarh.	August 31, 20043.00 PM onward	Staff Unions of the Board and other organizations.
CHANDIGARH Commission Office i.e.SCO 220-221, Sector 34-A, Chandigarh.	September 2, 200410.30 AM to 1.30 PM	Agricultural consumers and their unions.
CHANDIGARH Commission Office i.e.SCO 220-221, Sector 34-A, Chandigarh.	September 2, 20043.00 PM onwards.	Open for all.



In the public notices, it was also intimated that the Commission will conduct the public hearing at Chandigarh on September 3, 2004 in which PSEB will reply to objections raised by public in writing and during public hearings and make presentation of its case.

The public hearings were held as per schedule and objectors, general public and the Board were heard by the Commission. The brief of issues discussed in public hearings is given in Chapter -6.

1.4     STATE ADVISORY COMMITTEE

The State Advisory Committee constituted by the Commission under Section 24 of the Electricity Regulatory Commissions Act, 1998 was notified on May 21, 2003 and published in the Punjab Government Gazette of May 30, 2003. Regarding constitution of the State Advisory Committee there is no major deviation between The Electricity Act, 2003 and Electricity Regulatory Commissions Act, 1998 under which the State Advisory Committee was constituted by the Commission. The only change of obligatory nature i.e. inclusion of the Secretary of the State Government incharge of the Department dealing with Consumer Affairs and Public Distribution System as ex-officio member of the Committee under the new Act had already been carried out in the existing Advisory Committee vide notification dated March 5, 2004. In view of the likelihood of receipt of the ARRs and tariff Applications of the Board or its successor entities by May 31 ,2004, the term of the State Advisory Committee was extended by three months upto August 29, 2004 vide notification dated May 21, 2004 published in the Punjab Government Gazette Notification of June 4, 2004. The ARRs and the Tariff Applications for the year 2004-05 were discussed at a meeting of the State Advisory Committee convened for the purpose on August 27, 2004. The minutes of meeting of State Advisory Committee are enclosed as Annexure –II to this chapter.

The Commission has thus ensured that the due process contemplated under The Electricity Act and the Regulations of the Commission was followed at every stage and adequate opportunity was given to all the persons concerned to present their viewpoint.

Annexure- I List of Objectors



Sl. No.	Name of the objector with address	No. of objections received (Sl.No. of objection in the receipt register)
1.	Sh.Suraj Parkash Bansal, 424, Kamla Nehru Nagar, Bathinda.	1 (1)
2.	Sh.Gurdial Singh Jassel, Headmaster, Dashmesh High School, Moga, Faridkot –142001	1 (2)
3.	Smt.Gurmit Kaur, Headmistress, Dashmesh High School, Moga - 142001.	1 (3)
4.	Sh. Ashwani Gupta C/o Shree Raj Agro Allied Industries, G.T.Road, Village Allour, Khanna.	1 (4)
5.	D.S.Blossom High School, Moga.	1 (5)
6.	Smt. Kiran Arora, Headmaster/Headmistress, Navyug High School (Recognised), Abohar-152116.	1 (6)
7.	Manager, Raja Rinkupal High School, Abohar.	1 (7)
8.	Principal, Amrit Model High School, Abohar.	1 (8)
9.	Manager, Divine Light Public Middle School, Abohar.	1 (9)
10.	Sh. S.C. Ralhan, President, Ludhiana Hand Tools Association, E-184, Focal Point, Ludhiana -141010.	4 (10,54,69,70)
11.	Sh. P.D.Sharma, President, Apex Chamber of Commerce & Industry, Punjab, Room No.212, 2nd Floor, Savitri Complex, Post Bag No.740, G.T.Road, Ludhiana-141003.	1 11
12.	Manager, Anmol Middle School (Recognised), 1- Nai Abadi, Abohar,.	1 (12)
13.	Sh. A. Puri, General Manager (Projects), Punjab Alkalies & Chemicals Ltd., SCO No.125-127, Sector 17-B, Chandigarh-160017.	2 (13,71)
14.	Sh. Inderjit Singh Pardhan, President, Chamber of Industrial & Commercial Undertakings, M.C. Block No.2, 2nd Floor, Gill Road, Ludhiana – 141003	3 (14,46,68)
15.	Sh. Angad Singh, Col. (Retd.), General Secretary , The Consumers Protection & Grievances Redressal Forum, # 1504, Phase 3B-2, S.A.S.Nagar (Mohali).	2 (15,50)
16.	Sh. Narottam Dass, Chief Electrical Distribution Engineer, Northern Railway, Baroda House, New Delhi.	2 (16,58)
17.	Principal, H.S.Public School, Street No.4, Dharam Nagri, Abohar.	1 (17)
18.	Sh. S.S. Chhillar, GIS Limited ( Unit: North India Spinning Mills) Vill.Akbarpur, Post Box No.1, Ahmedgarh -148021, Distt. Sangrur.	1 (18)
19.	Sh.R.S.Sachdeva, Co-Chairman, Punjab Committee, PHDCCI, 107 Sector 18-A, Chandigarh -160018.	3 (19,64,72)
20.	Sh.R.S.Sachdeva, President, Gas Manufacturers Association of Punjab, SCO No.2420 (Ground Floor), Sector 22-C, Chandigarh – 160022.	1 (20)
21.	Sh.Varinder Kapur, General Secretary, United Cycle & Parts Manufacturers Association, Near Campa Cola Chowk, Gill Road, Ludhiana–141003.	1 (21)
22.	Sh. Keshav Sachdev, President & CEO, DCM Engg. Products, Asron, P.Box No.5, Ropar- 140001.	3 (22,73,74)
23.	Sh. S.P.Oswal, Past Chairman, Punjab State Council, Confederation of Indian Industry, Northern Region, Sector 31-A, Dakshin Marg, Chandigarh -160030.	1 (23)
24.	Sh. P.S.Virdi, President, The Consumers Protection Forum (Regd.), H.No. 1009, Phase 10, S.A.S.Nagar (Mohali).	2 (24,48)
25.	Sh.K.K.Garg, President, North India Induction Furnace Association, Punjab, Room No.212, 2nd Floor, Savitri Complex, G.T.Road, Ludhiana -141 003.	1 (25)
26.	Sh.Sandeep Jain, Chairman (Punjab Chapter), All India Induction Furnaces Association, 209, M.G. House Community Centre, Wazirpur Industrial Area, Delhi-110 052.	2 (26,59)
27.	Sh. H. N.Singhal, Corporate Manager (Personnel & Admn.), Nahar Industrial Enterprises Limited, Focal Point, Ludhiana -141 010.	1 (27)
28.	Sh. Man Mohan Singh, DGM/MM o/o Chief General Manager/Telecom, Punjab Circle, Bharat Sanchar Nigam Limited, Plot No.2, Admn. Building, Sector 34-A, Chandigarh.	1 (28)
29.	Sh. Jaswant Singh Birdi, General Secretary, Cycle Trade Union (Regd.), Gill Road, Miller Ganj, Deshprem Complex, Gobindpura, Ludhiana -141 003.	1 (29)
30.	Sh. Gurmeet Singh, President, Mohali Industries Association, Association Bhawan, Bay No.143-144, Opp. E.S.I. Hospital, Industrial Phase VII, S.A.S. Nagar (Mohali) -160 055.	1 (30)
31.	Sh.A.K.Mehra, Director, Siel Limited, 5th Floor,Kirti Mahal, 19-Rajendra Place, New Delhi -110 008.	1 (31)
32.	Sh. Dinesh K. Sindwani, Secretary, Steel Furnace Association of India (Punjab Chapter),C/o Vardhman Special Steels, C-58 Focal Point, Ludhiana -141 010.	1 (32)
33.	Sh. Davinder Singh R/o Vill. Aluna Tola, P.O. Aluna Palla, Tehsil Payal, Distt. Ludhiana -141 414.	1 (33)
34.	Sh.R.P.Bhatia, Zonal Chairman, Steel Re-Rolling Mills Association of India & All India Induction Furnaces Association, Zonal Office: Bhatia Steel Complex, G.T.Road, Mandi Gobindgarh- 147301 (Punjab).	1 (34)
35.	Sh. R.P.Bhatia, Trustee, Mahant Parbhat Puri Social Welfare Trust, Back Side Petrol Pump, Amloh Road, Mandi Gobindgarh -147 301 (Punjab)	1 (35)
36.	Sh.Padamjit Singh, Patron, PSEB Engineers Association, 45- Ranjit Bagh, Near Modi Mandir, Passey Road, Patiala -147 001.	1 (36,53)
37.	Sh.Vinod Vashisht, President, All India Steel Re-Rollers Association, Ram Mandir, G.T.Road, Mandi Gobindgarh -147301	1 (37)
38.	Sh.Mohinder Gupta, President, Mandi Gobindgarh Induction Furnace Association, c/o Gian Castings, New Grain Market, Mandi Gobindgarh – 147 301	1 (38)
39.	Sh. Darshan Singh Bedi, Sant Ice Factory,723, Sant House, Brown Road, Ludhiana -141 008	1 (39)
40.	Sh. Ramesh Talwar, H.No.678-680, Navrang, Bagh Jhanda Singh, Amritsar.	1 (40,62,66,67)
41.	Sh. Vijay Talwar, General Secretary, National Electricity Consumers Association (Regd.), 1051, Dada Colony, Industrial Area, Jalandhar-144 004.	1 (41)
42.	Sh. Joginder Kumar, President, The Ludhiana Electroplaters Association, Gambhir Market, Gill Road, Ludhiana – 141 003.	1 (42)
43.	Sh. R.P.Bhatia, Trustee,Gobindgarh Educational & Social Welfare Trust, G.E.S.T. Complex, G.T.Road, Mandi Gobindgarh – 147 301.	1 (43)
44.	Sh. Rakesh Aggarwal, General Secretary,Derabassi Industries Association (Regd.) , Northern Chemoils Ltd., 29/6, Industrial Area-II, Chandigarh .	1 (44)
45.	Chief Engineer/MES, Jalandhar Zone,Jalandhar Cantt – 145 005.	1 (45)
46.	Headmistress, Mini Middle School, (Recognised) 10- Nai Abadi, Abohar (Ferozepur)	1 (47)
47.	Sh.Gursaran Singh, President, The Goraya Regd. Factory Owners’ Association, Goraya-144 409, Distt. Jalandhar, Punjab.	1 (49)
48.	Sh.Baldev Singh Barkandi, Chief General Secretary, Bharti Kissan Union Punjab (Regd.) H.O: Basti Abdulapur, Ludhiana-3.	1 (51)
49.	Sh. Baldev Singh Mianpur, President, Bharti Kisan Union, Punjab, Office : Room No. 8,Kisan Bhawan, Sector- 35 A, Chandigarh.	1 (52)
50.	Sh.Balwinder Singh Bhundar, Convener, Kissan Wing (Akali Dal) and General Secretary, Shiromani Akali Dal, Kothi No. 254, Sector 11, Chandigarh.	1 (55)
51.	Lt.Col. Harinder Singh, Village Director, SOS Children’s Village, Rajpura, Pb. ITI Road Rajpura Town -140 401, Distt. Patiala, Punjab.	1 (56)
52.	Sh. Swaran Singh, Prop. Shiva Cold Store, C.187-188, Focal Point, Patiala.	1 (57)
53.	Sh. P.L.Garg, Advisor, Consumer Welfare Council (Regd.), 2- Bhanamal Trust Lane, The Mall, Bathinda -151001	1 (60)
54.	Sh. Gurbax Singh, Joint Manager, FCI (Retd.) Kothi No. 33, Phase 3B-1, S.A.S.Nagar (Mohali), Distt. Ropar.	1 (61)
55.	Sh. S.K.Seth, Authorised Signatory, Indian Acryclics Limited, SCO No.49-50, Sector 26, Madhya Marg, Chandigarh – 160019	1 (63)
56.	Sh. Gurjinder Singh, Secretary, Punjab 24 Hours (3 PH 3 Wire) Rural Power Consumers/ Users Welfare Association, Vill. Pandrali, P.O. Chanarthal Kalan, Distt. Fatehgarh Sahib, Punjab.	1 (65)



Annexure-II Minutes of the Meeting of the State Advisory Committee of the Punjab State Electricity Regulatory Commission held on August 27, 2004 at 11.00 A.M. in the office complex of the Commission

The meeting of the State Advisory Committee was held in the office of the Commission at Chandigarh on August 27, 2004. The following were present :-



1.	Shri R.S.Mann	Ex officio Chairman
2.	Shri L.S.Deol	Ex officio Member
3.	Shri S.S.Johl, Vice Chairman, State Planning Board	Member
4.	Shri Samir Kumar, Spl. Secy, Food & Supplies & Consumer Affairs, Pb	Representative on behalf of Secy Food & Supplies (Ex offcio member)
5.	Shri S.P.Oswal, CII	Member
6.	Shri Amarjit Goyal, PHD CCI	Member
7.	Shri S.C.Arora, Chief Cost Control & Reduction, PSEB	Member
8.	Shri Param Hans Singh, CE, SO&C, PSEB	Member
9.	Shri Narottam Das, Chief Electrical Distribution Engineer, Northern Railway	Member
10.	Shri Y.P.Mehra, Ex. Member, PSEB	Member
11.	Shri T.S.Gujral, Ex. Member, PSEB	Member
12.	Shri R.N.Gupta, CE (Retd.), PSEB	Member
13.	Shri Ramesh Talwar, Amritsar	Spl. Invitee
14.	Col Angad Singh (Retd.) Gen. Secy. Consumer Protection Forum, Mohali	Spl. Invitee
15.	Shri P.S.Jindal,	Director/PSERC



2.          The Chairman welcomed Members and special invitees of the State Advisory Committee and thanked everyone present for having spared time to attend the meeting. Thereafter, the Chairman initiated the discussions and stated that during the last two meetings of the Committee, many useful opinions and suggestions had come forth and the same proved very useful to the Commission in issue of its tariff orders. The Chairman informed that the tariff structures ordered by the Commission in its tariff orders have been implemented by the Board in toto. Chairman briefly pointed out that one of the main functions and responsibilities assigned to the State Commission is determination of tariff in a fair and transparent manner for various categories of consumers in the State. The objects of the State Advisory Committee as laid down in Electricity Act, 2003 were also elucidated. The Chairman mentioned that the Commission is to function in a transparent and rational manner and its orders can be challenged in the Tribunal. The Chairman indicated that under the Electricity Act, 2003, many additional functions have been assigned to the Commission for which further interaction with some of the Members of the Committee may be required.

3.          The Chairman briefly explained the procedure for determination of tariff by the Commission. It was explained that all the revenue requirements of the Board are judiciously examined and only the prudent expenses are allowed for working out the revenue requirement of the Board. If the total annual revenue requirement of the Board so worked out is at variance from the expected revenue at the prevailing tariffs then the tariffs are modified to enable the Board to recover its justified costs.

The Chairman informed the Committee that the Board has filed the Annual Revenue Reports and Tariff Applications for the year 2004-05 wherein total additional revenue requirement of Rs.787 crores has been worked out. Further, the Board has assessed an additional revenue requirement of Rs. 68 crore for the year 2003-04 as well. In its tariff application for the year 2004-05, the Board has proposed to capture only Rs.392 crores out of total additional revenue requirement of Rs.787 crores for the year 2004-05 through tariff increase and remaining revenue gap of 2004-05 alongwith Rs.68 crore of 2003-04 is proposed to be carried forward as Regulatory Asset.

4.          The Chairman further informed that the Commission had issued public notice inviting objections from the public on the filings of the Board. The objections were received from public and thereafter public hearings were being held to hear the objections of the public. The Commission would also hold public hearing to listen to replies and views of the Board in public. The Commission had also invited comments from Government of Punjab on the filings of the Board which were yet to be received. It was mentioned by the Chairman that except Industry and a few DS consumers, most of the objectors have not made detailed comments on the filings of the Board.

5.          Chairman pointed out that the important points covered in the Agenda need to be commented upon by the Members to enable the Commission to form its opinion while passing the order. The Members may also comment on the following important issues before the Commission:

         
i)               Assessment of Agriculture Consumption – The present method of assessing the AP consumption by the Board is not sufficiently reliable and is primarily based on reading of only a very small sample of total population of tubewells. After detailed analysis of the norms adopted by other Commissions, the results of sample meter reading , World Bank report on the issue undertaken in Haryana and the study conducted earlier by PAU, the norm of agriculture consumption @ 1700 Kwh/Kw/year was fixed for 2002-03 which was substantially a drought year. The norm for the agricultural consumption for the year 2003-04 was fixed at 1650 Kwh/Kw per year, considering the fact that 2003-04 was normal monsoon year. Commission also advised the Board to get a study carried out from PAU for assessing the agriculture consumption on a realistic and fair basis. PAU was also requested to furnish an Interim Report. This Interim Report which has since been received, could however not be accepted by the Commission as the very basis of the study was not reliable and many important parameters effecting electricity consumption of tubewells had been ignored.

ii)               The Commission feels that it had been somewhat liberal to the Board while passing the previous two tariff orders. Even the view of the Government was that stringent operational parameters need to be set for the Board. The Board had, however, not come up to the expectation of the Commission. The Commission had determined tariff so as to ensure recovery of all legitimate costs of the Board as well as 3 % ROR in both its tariff orders. Accordingly, the Board should have come in profit in the first year itself. But it is surprising that the Board was still in losses especially considering the revenue requirement for the current year as projected by the Board. The Board does not seem to be bothered about its losses and there was no substantial improvement in the working of Board. More determined efforts are needed to bring about internal efficiencies in the Board. The Chairman requested the Committee Members to give their opinion on how to bring about the change in attitude of the Board. Also the position needs to be appreciated by the Government of Punjab .


6.          With these remarks, the Chairman invited the Members for their valuable views.

7.          Dr. S.S.Johl was of the view that the system of flat rate supply to AP consumers is harmful for all and it results in wastage of electricity, depletion of underground water and degradation of ecology, soil etc. The electricity must be metered even though the energy rate may be initially fixed very low. He advocated segregation of village supply feeders from tubewells supply feeders and tubewell supply to be 3 phase supply only. He was of the opinion that the Government subsidy should cover the capital cost and not the running cost which must be paid by the A.P. consumers. . The subsidy from the Government should be w.r.t. average cost of supply and not w.r.t. the tariff rate determined by the Commission. Dr. Johl was also of the view that the farmers need to be encouraged for diversification of crops. To this purpose, some compensation could be provided by the Government. The electricity thus saved can be used for meeting needs of Industry. He also suggested other measures to regulate energy supply to the agricultural sector. Dr. Johl felt that the norm of 1650 Kwh/Kw/year fixed for A.P. consumption was fair and adequate.

8.          On the issue of category-wise cost of supply, Dr. Johl opined that this may not work as the cost of supply in rural areas is much more. Also, there is no need for continuing subsidy to this sector for many years. This aspect must be kept in mind while determining the tariff. Regarding D.S tariff, Dr. Johl mentioned that there should be only two slabs i.e. upto 300 units and above 300 units. Mr. Johl also observed that no increase in tariff should be allowed. The Board should reduce its cost by reducing its staff strength, minimizing theft of power and increasing internal efficiencies. Shri Johl brought out that farmers located in Kandi areas have to install higher capacity motors due to need for providing deep tubewells for same level of water out put. Therefore, there is need for allowing concessional tariff to A.P consumers in Kandi area.

9.          Shri S.P.Oswal, representing CII was of the opinion that Commission is a judicial body and from its point of view it is immaterial whether the Government appreciates the situation or not. He opined that whatever are the orders of the Commission, the Government is obliged to comply with the same. He brought out non compliance of directives issued by Commission in last Tariff Order by the Board. He appreciated the approach followed by the Commission in its two tariff orders, but expressed dissatisfaction on the working of the Board and the Government. He mentioned that Government must be made to move, and it is the Government which should bear the burden of unjustified costs of the Board being the owner of the Board. These costs should in no case be passed on the consumers. Shri Oswal further pointed that the State Government has failed to reapportion the capital cost of Ranjit Sagar Dam Project between Irrigation and Power sector. Ranjit Sagar Dam Project was mainly an Irrigation (including flood control) project and as such major portion of the cost should be loaded to the Irrigation Sector. By overcharging cost to power sector, the ARR of the Board had been substantially inflated due to higher interest, depreciation and return on fixed assets.

10.          Regarding T & D losses, Shri Oswal emphasized the need for accounting and energy audit. He observed that the Board is not adhering to its committed T & D loss reduction targets given in the first ARR. On the issue of employees cost, Shri Oswal desired the Commission to stick to its decision of capping this cost at Rs.1250 crores.If the Board desires any further increase, it must provide due justification for the same. Shri Oswal expressed satisfaction on the proposal of the Board regarding high voltage rebate and power factor rebate. It was, however, desired that utilization factor for each industrial category needs to be indicated by the Board so that justification of different fixed charges for each category through two part tariff could be analysed. Shri Oswal was also of the opinion that once contract demand has been declared by the consumer, the same should form the basis for billing and not the connected load. As such, there will be no logic of checking of this connected load by the Board staff. Shri Oswal also desired that Commission must indicate the time schedule of eliminating the cross-subsidy as stipulated in Electricity Act, 2003. He also opined that return on net fixed assets should be computed as per latest CERC guidelines i.e. debt: equity ratio of 70:30 and ROE @ 14% on equity component.

11.          Shri S.C.Arora, Chief Cost Control & Reduction, PSEB informed the Committee that the Board has started working on the calculation of T&D losses at circle level. He pointed out that energy input of all 11 KV feeders is metered and by the end of year, feeder-wise losses would be available except those feeding AP loads.

12.          Shri Amarjit Goyal of PHD Chamber of Commerce and Industry stressed the need for implementation of the directives issued by the Commission in its two Tariff Orders. He stated that there is lot of theft in the Board which is being covered under Agriculture consumption. According to Shri Goyal, the apportionment of Ranjit Sagar Dam cost needs to be corrected as the project was basically conceived as flood control and irrigation project and not as a power project. Shri Goyal stressed that PHD Chamber had never asked for two part tariff but had been requesting the Board and the Commission to base Advance Consumption Deposit, Service Connection charges & Monthly Minimum Charges on Contract Demand and not on connected load. He was also of the opinion that once the demand is indicated, no reference of connected load is required and as such, no load checking needs to be there.

13.          Shri T.S.Gujral, Ex. Member, PSEB, stated that the Agriculture consumption norm of 1650 Kwhr/Kw/year approved by the Commission for the year 2003-04 was reasonable and does not need any review. For reduction of T&D losses, Shri Gujral opined that PSEB should focus on high energy consuming area like Ludhiana, Gobindgarh, Mohali where the work of energy accounting should be completed and accountability established for the officer incharge for unusual or excessive losses. Shri Gujral also suggested that meters should be installed on all tubewells and all concerned transformers where feeders had been segregated for supply. This will help in better assessment of AP consumption and detection of unauthorized load etc. Shri Gujral also stressed the need for cheaper power purchases in order to reduce cost of the Board. Regarding the terminal benefit of Rs.250/- crores, Shri Gujral pointed out that the liability has not been accepted by the Board and as such need not be considered by the Commission as yet.

14.          Shri Angad Singh, General Secretary, Consumer Forum, Mohali pointed out that Board supplies power only for 10-12 hours in a day and as such imposition of MMC is not justified. He stressed for internal reforms in the Board, namely accountability of individual officers, energy audit, increase in efficiency level, decrease in staff strength and elimination of political interference. He opined that Board employees though well paid, are nor efficient or well behaved. He also suggested that minimum slab for D.S. should be 100 units and there is no case for upward revision of rates.

15.          Shri Y.P. Mehra, Ex-member PSEB congratulated the Commission on its two tariff orders. He was of the view that various efficiency norms fixed by the Commission are very reasonable and need to be enforced. He pleaded for proper apportionment of Ranjit Sagar Dam cost. He pointed out that full AP cost needs to be paid by the Government based on average cost of supply. No loans need to be taken by the Board for non-productive works. Shri Mehra apprehended that higher auxiliary consumption of thermal plants may be in an effort to reduce T&D losses of the Board artificially. On two part tariff, Shri Mehra pleaded that contract demand should form basis for working out Monthly Minimum Charges, Advance Consumption Deposit etc. and there was no need for changing to two part tariff. According to him, this proposal would bring disparity within a class of consumers. He also stressed for tariff based on KVAH metering which would take care of power factor also. Shri Mehra was also against annualisation. He favoured implementing the tariff order for one year from the date of order. He desired that the Commission should seek details from the Board to explain other charges being levied by the Board along with justification of each. He pleaded for graded Monthly Minimum Charges for Domestic Supply category. Shri Mehra informed that the general industry consumers are not in favour of two part tariff. He also suggested for deferment of transmission tariff.

16.          Shri R.N.Gupta, CE(Retd.) PSEB suggested for graded rebate for high voltage consumers. He also stressed about the need to look into lower demand charges suggested for Railway Traction.

17.          Shri Ramesh Talwar, Amritsar was critical of the working of the Board. He stated that documents of the Board are unreliable. According to him there were about 48% losses in the Board as compared to 25% being shown in the books of the Board. Shri Talwar emphasized the need for setting up of a nuclear Power Station in Punjab. He also stressed for use of molasses for generation of power in the State. He also pleaded for water harvesting and use of solar energy. Shri Talwar desired the Commission to adopt a stiff attitude towards the Board in determining parameters/ norms for its performance and efficiencies.

18.          Shri Narottam Das, Chief Electrical Distribution Engineer, Northern Railway spoke about the over staffing in the Board. He suggested that the surplus staff should be adjusted against posts lying vacant in various offices of the Board. He suggested that timely payment of bills should be made attractive through grant of incentive. He was in favour of two part tariff but with the condition that any request for change in contract demand should be expeditiously dealt with by the Board. Shri Das suggested that the power factor incentive should start from the same point and at the same rate as penalty. He also suggested for graded rebate for supply on higher voltages. Shri Das further desired that the billing should not be made applicable from the back date as the consumers were not given the opportunity for reducing their Contract Demand. Shri Narottam Das suggested for exploring the possibility of installing prepaid electronic meters in Punjab which would ensure collection efficiency.

The meeting ended with vote of thanks to the Chair.



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