Chapter-6
Brief Summary of Objections Raised, Response of PSEB and
Commission’s views
6.1 TRANSMISSION & DISTRIBUTION (T&D) LOSSES
Objections Raised
A number of consumer Organizations/consumers who filed their objections and participated in the public hearings criticized the Board for not achieving the targets for T&D losses fixed by the Commission for the year 2003-04 and opined that the T&D losses need reduction. Nahar Industrial Enterprises Ltd. and Derabassi Industries Association were of the view that if average tubewell consumption is taken as 1650 kwh/kw/year as directed by the Commission instead of consumption of 1850 kwh/kw/year adopted by the Board in the ARR for 2004-05, the T&D losses for the year 2004-05 indicated by the Board as 24% would increase to 26.5%.The CII and PACL pointed out that since higher T&D losses over the limit approved by the Commission are due to inefficiency on the part of PSEB, burden on this account should not be imposed on the consumers. The CII worked out lower sale realization of Rs. 73 crores on this account. All India Steel Re-rollers Association and Mandi Gobindgarh Induction Furnace Association suggested that the Board should not be permitted T&D losses more than 23.25% as already specified by the Commission.
Response of PSEB
PSEB submitted that the Commission approved T&D losses at 25.52% for the year 2002-03 at an approved level of un-metered agriculture consumption. PSEB undertook metering for energy audit and also engaged an independent agency to assess the consumption of agriculture pumpsets. Pending such results the Commission fixed the target for T&D losses at 24.5% for the year 2003-04. However, the losses for 2003-04 have been estimated by PSEB at 25.35% and it was stated that these higher losses be seen against backdrop of the fact that power availability during March, 04 increased by 13.1% over the availability for March, 03 and the power cuts during FY 2003-04 were only 47% in comparison to the corresponding period of the previous year. The marginally higher level of losses than the approved level was due to technical losses involved in providing higher quantum of energy to agriculture consumers in rural areas and not due to an increase in commercial losses associated with theft of energy. It was further stated that the work of energy audit is significantly under way. Outsourcing has also been permitted by PSEB in theft prone localities by providing release of single point connection. The PSEB has taken up ambitious plan for upgradation of sub stations & bifurcation of heavily loaded feeders to reduce losses. In addition to above, instructions had already been issued that any employee of the Board if found indulging in theft or found abetting in making theft of energy, minimum punishment shall be dismissal from service. The Board stated that it has fixed target of achieving a loss level of 24% for the year 2004-05 which is quite reasonable and Board is confident of achieving this target.
View of the Commission
The Commission decides to allow the revenue requirement for the year 2004-05 with T&D losses at 23.25% adopting normative agricultural consumption. The issue is discussed in detail in Chapter – 7.
6.2 FUEL COST AND TRANSIT LOSS OF COAL
Objections Raised
Many consumer organizations objected to high transit loss of coal in case of GNDTP. PACL pointed out that PSEB has achieved transit losses of 2.58% and 1.57% for coal in respect of GHTP and GGSTP respectively against limit of 3% specified by the Commission but the transit losses for the GNDTP are much higher. It was suggested that effort should be made in respect of GHTP and GNDTP to achieve lower losses of 1.57% and Commission should revise the target for achieving coal transit losses to 2% against 3%. Chamber of Industrial and Commercial Undertakings mentioned that the saving of at least Rs.34 crores will be achieved during 2004-05 by limiting the transit loss to 3% in case of GNDTP. It was further stated that total expenditure on the cost of coal can further be reduced by mixing 20% imported coal with 80% indigenous coal and by purchasing coal of appropriate calorific value from the suppliers selling coal at the lowest market rate. CII recommended lowering the norm of specific oil consumption from the value adopted by the PSEB in case of GNDTP and GGSTP.
Response of PSEB
PSEB submitted that there was an error in coal weighment bridge at GNDTP which was showing up higher transit losses. The problem has since been rectified and the transit losses during first quarter of the year 04-05 for GNDTP were observed at 2.99% which are within the limit approved by the Commission. The Board, however, conveyed its disagreement with the downward lowering of the transit losses as the Board has no control over the extent of transit losses and any disallowance against actuals would adversely affect the commercial viability of the Board.
As for mixing up the indigenous coal with imported coal is concerned the Board assured to evaluate the suggestion and considered it pre-mature to comment on the economics of the proposal. However, it was pointed out that imported coal has rarely been used for power generation. It was further stated that since power plants in Punjab are located at a considerable distance from shore, the benefits of imported coal available to coastal states would not apply to Punjab to the same extent.
View of the Commission
The Commission decides to improve the norm for transit loss of coal for all the thermal plants. This issue is discussed in detail in Chapter - 7.
6.3 EMPLOYEES AND EMPLOYEES’ COST
Objections Raised
Most of the consumers/consumer organizations advocated reduction in number of employees and criticized the Board for not restricting the Employees Cost during 2003-04 within the limit specified by the Commission. They also raised the issue of exorbitantly high projected Employees Cost of Rs.1775 crores in the ARR for the year 2004-05 against the Employees Cost amounting to Rs.1250 crores approved by the Commission for the year 2003-04 and clear indication of the Commission to further lower this limit.
PACL and CII proposed that PSEB should not be allowed to exceed the amount of expenses authorized by the Commission for the year 2003-04. PHD Chamber of Commerce & Industry, Gas Manufacturers Association of Punjab, CII, North India Induction Furnace Association, Nahar Industrial Enterprises Ltd., Mohali Industries Association objected to the inclusion of Rs. 250 crores on account of non-funded terminal liabilities in the Employees’ Cost and requested withdrawal of the same. Siel Ltd. pointed out that projected Employees’ Cost of Rs.1775 crores works out to 77 paise per unit while the national average was about 41 paise per unit as per the Planning Commission report for the year 2000-01 which works out to about 50 paise per unit for the year 2004-05 assuming escalation of 5% per annum. It was thus emphasized that the Employees’ Cost needed reduction.
Mr. Balwinder Singh Bhunder, Convener Kissan Wing (Akali Dal) and General Secretary Shiromani Akali Dal, however, pointed out that there had been big reduction in number of employees of the Board as no recruitment has taken place for the last many years.
Response of PSEB
The Board submitted that Employees’ Cost of Board includes expenditure on salary, dearness allowance, overtime, various other allowances and terminal benefits. The computation of salary is estimated at Rs.637 crores for the year 2004-05. The corresponding amount for the year 2003-04 is Rs.625 crores. The expenditure being incurred towards payment of pension is also included in Employees’ Cost. Considering 59% dearness allowance at the base level for FY 04-05, the arrears of D.A. have also been computed based on the months of payments. The increase in pensionary charges in Employees’ Cost has been worked out in view of the retirement of 1800-2000 employees every year. Impact of increase in DA to the existing pensioners has also been taken into account. The arrears on account of pay have been computed at Rs.33 crores for FY 2004-05.
It was submitted that total Employees’ Cost charged to revenue account as per provisional accounts is Rs.1395.47 crores for FY 03-04 and it is projected as Rs.1775.40 crores for FY 2004-05 inclusive of unfunded terminal liabilities. The Board has provided for an additional liability of Rs.250 crores towards unfunded pension liability in the ARR for FY 2004-05 based on actuarial valuation report. The report has indicated an amount of Rs.5400 crores towards past unfunded pension liability to be recovered over 20 years. The Board further stated that though the process of unbundling/corporatisation is still under way it has been prudently provided considering that this liability has been clearly identified for recovery and the financial restructuring plan being finalized by Government of Punjab does not indicate taking over this liability.
View of the Commission
The Commission decides to revise the ceiling of Employees’ Cost to the actual level for the year 2002-03 i.e. Rs.1274. 66 crores and Employees’ Cost expenses over this ceiling are not allowed as pass through. This issue is discussed in detail in
Chapter-7 and Chapter-8.
6.4 APPORTIONMENT OF RANJIT SAGAR DAM PROJECT COST BETWEEN BOARD AND THE IRRIGATION DEPARTMENT
Objections Raised
Many consumer organizations/consumers objected to the disproportionate apportionment of the RSD Project cost between irrigation and power generation. PACL pointed out that at present, about Rs 4200 crores have been loaded in the assets of PSEB on account of RSD project whereas for a similar size hydro plant, the allocation for power generation should not be more than Rs.1500 crores, the remaining amount should be allocated to irrigation usage. This will bring down interest and depreciation cost.
Similar views were expressed by the CII. To substantiate their argument they have quoted provisions of para 4(2), Chapter 1, CERC Tariff Regulations, 2004 viz. ‘ in relation to multi-purpose hydro-electric projects , with irrigation, flood control and power components, the capital cost chargeable to the power component of the project only shall be considered for determination of tariff ’. CII also pointed out that the Commission should disallow the unjustified costs in the nature of depreciation, interest, ROR being incurred by the Board in respect of overcapitalized value of RSD Project. It has appealed to the Commission to determine the reasonable cost of the RSD Project to be shared by PSEB which should be commensurate with the average power supply capacity of 150 MW and the same be used for tariff determination purpose as an interim relief to the consumers till a final settlement takes place between the State Government and PSEB.
Gas Manufacturers Association of Punjab and Nahar Industrial Enterprises, Derabassi Industries Association and The Consumer Protection Forum also objected to an amount of Rs.2500 crores as loan liability on account of RSD cost which would result in reduction of Rs.250 crores in the interest charges.
Response of PSEB
The Board submitted that it had apprised the State Government on the relevant facts on the matter on various occasions in the past as would be evident from the previous submissions of the Board to the Commission during processing of previous orders. The Govt. had promised to look into the matter and is expected to resolve it while formulating the financial restructuring plan for restructuring the Board. Till a decision is reached by Government the Board will be bound to provide assets according to their value as per Books of the Board.
View of the Commission
The Board should take up the matter earnestly with the Government for early settlement of the issue.
6.5 MONTHLY MINIMUM CHARGES (MMC)
Objections Raised
Many consumers/consumer organizations have objected to charging of monthly minimum charges. CII has proposed that MMC should be based on 70% of the contract demand instead of 80% as proposed by the Board as actual demand in general remains around 70%. It was also pointed out that PSEB has not explained the basis for proposing demand charges of Rs.250 per KVA per month for PIU/Arc furnaces and Rs.100 per KVA for the general industry on 80% of the contract demand and suggested that MMC for PIU/Arc Furnace industry should be the same as the rate proposed for LS (HT) general industrial consumers. Steel Furnace Association of India also felt that the limit of 80% of the contract demand for charging MMC is too high and suggested that the demand should be taken as highest of the actual maximum demand, 75% of the highest billing demand recorded during preceding 12 months and 50% of the contract demand.
Mohali Industries Association suggested that MMC rates for all types of industries should be same. PHDCCI, Steel Re-rolling Mills Association of India, Derabassi Industries Association, All India Induction Furnace Association and Shree Raj Agro Allied Industries proposed that MMC, if at all to be imposed should be on annual basis and not monthly basis. Chamber of Industrial and Commercial Undertakings argued that MMC should not be charged from industrial consumers as PSEB has failed to provide un-interrupted supply of desired quality. The Consumer Welfare Council requested that MMC should not be increased.
Response of PSEB
The Board submitted that the existing practice of charging MMC to LS consumers has been proposed to be discontinued by the Board and a two part tariff has been introduced in accordance with the demands of the cross-section of the industry and industry associations for introduction of two part tariffs featuring demand charges based on contracted demand and separate energy charges. In the tariff order for FY 2003-04 the Commission had also directed the Board to evaluate the possibility of introducing two-part tariffs. The fixed charges have initially been proposed lower for the general industry to keep the associated fixed costs lower. The fixed charges are also lower than the existing MMC.
View of the Commission
The Commission decides to retain the existing practice of MMC wherever applicable in case of all the categories of consumers. The Commission also decides to reduce MMC by 10%. This issue is discussed in detail in Chapter–9. .
6.6 TWO PART TARIFF
Objections Raised
Most of the consumer groups who have expressed their views about two part tariff have either opposed it totally or suggested need of modifications in the proposed tariff. Derabassi Industries Association asserted that two part tariff was not acceptable to them as it suffered from many shortcomings viz. small consumers and units operating in single/double shift will have to pay very high equated average price, billing system shall become very complex giving rise to disputes, corruption and management problems and there will be no certainty to the consumer with respect to cost of energy which will disturb costing and profitability of industrial consumers. It was further intimated that PSEB earlier had two part tariff which had to be changed to single tariff due to various problems.
Mandi Gobindgarh Induction Furnace Association and All India Steel Re-rollers Association also requested that two part tariff proposal be rejected as it is disadvantageous to consumers having lower energy consumption. It was also mentioned that proposal of demand charges of Rs.100 per KVA for large supply general industry consumers and Rs. 250 for PIU category is discriminatory. PHDCCI, DCM Engineering Products and Steel Furnace Association of India submitted that with two part tariff the rate per KWh will vary from month to month they also supplied detailed calculations to indicate that their energy bill with proposed two part tariff for the first 6-7 months of the year 2004 works out to be about 6% to 12% more than the bill with existing tariff. CII and All India Induction Furnace Association suggested that to reduce wide disparity in overall rate applicable to a consumer, the Board must fix an overall maximum rate as had been prevalent earlier when two part tariff was in vogue. Two part tariff as suggested in ARR was also not acceptable to Mohali Industries Association and Apex Chamber of Commerce & industry (Punjab).
Nahar Industrial Enterprises and North India Induction Furnace Association conveyed acceptance to two part tariff only if the demand charges were based on the actual recorded demand and not sanctioned contract demand and the rates per KVA for Arc and Induction furnaces and other PIUs were made same as for general industry. CII also suggested that MMC should be based on 70% of the contract demand while preparing the bill based on two part tariff, the demand charges should be worked out taking actual demand reached during the month and total amount of the bill including demand charges and energy charges should be compared with the MMC and whichever is higher of the two should be payable by the consumer. Gas Manufacturers Association of Punjab and PHDCCI wanted ACD, MMC, Service Connection Charges based on consumer’s contract demand and tariff should continue to be single part based on Kwh/Kvah.
Response of PSEB
PSEB submitted that it has introduced two part tariffs for LS industry based on feedback received from industries associations, featuring demand charges based on contracted demand and separate energy charges. In the tariff order for FY 2003-04 the Commission had also directed the Board to evaluate the possibility of introducing two part tariff. The Board pointed out that two part tariffs have the following advantages over single part tariffs:
- Higher consumption for the same contracted demand automatically results in lower overall charges for consumers, thereby leading to better load factor management.
- Load imbalances get better addressed as KVA based demand charges automatically benefit the consumers who have a higher power factor.
- For consumers with a higher load factor the effective tariff is reduced due to higher capacity utilization.
The Board further submitted that the charges for General industry and PIU have been proposed at separate levels considering the consumption characteristics of the two sets of consumers. The load factor for PIU consumers is considerably higher than the load factors of general industry, it leads to a higher utilization of assets and also a much higher revenue and investment recovery for the Board for the assets in service vis-à-vis the general industry. The Board has therefore proposed correspondingly higher demand charges and slightly lower energy charges for the PIU consumers as compared to the general industry.
As regard month-on-month variations in the bill, it was submitted that the consumers can make a reasonable estimate of the monthly energy consumption and associated charges, to fix product prices. The Board itself makes projection of its operations for the entire ensuing year and proposes tariffs based on these expectations.
It was submitted that the tariff increase for LS industry on an average has been proposed at 4.6% and the average increase sought for PIU consumer works out to less than 4%. PSEB has proposed to significantly rationalize the tariff of the various categories and reduce cross-subsidies with much higher increases sought for the subsidized categories. It was further intimated that the first quarter of FY 2004-05 has witnessed poor hydrology and scanty snow-cover in upper reaches of the Himalayas, leading to lower availability from hydro projects including BBMB. The power purchase cost during the first quarter of the current year was higher by about 46% in comparison to the corresponding months of the previous year. The PSEB submitted that the per unit cost of power from all external and internal sources to the Board for FY 2004-05 is expected to witness a significant jump in comparison to the previous year. The Board is therefore unable to provide a relief to the industry in tariffs at this juncture.
View of the Commission
The Commission decides to continue the practice of Single Part Tariff for Large Supply and Railway Traction consumers for the current year. The Commission directs PSEB to prepare a detailed and well considered proposal in this regard and submit the same alongwith its ARR and Tariff Application for the year 2005-06. This issue is discussed in detail in Chapter - 9.
6.7 MMC FOR ICE FACTORIES AND COLD STORAGES
Objections Raised
Sant Ice Factory pointed out that MMC on their industry is charged in two categories viz. off season MMC and peak season MMC as such an ice factory is required to pay MMC for the whole year whether factory is running at its full capacity or not. In case an Ice factory opts for LS tariff, it is required to pay Rs.0.35 per unit more than general industry LS consumer. It was further submitted that the profitability of ice units is quite low as compared to other industries and the low profits earned during peak season are eaten away by MMC during closure of factory during off-season. It was, therefore, requested that either MMC imposed on ice factories should be withdrawn or excess consumption during peak season be adjusted against off-season MMC and LS, MS consumers be treated at par in case of ice factories.
Shiva Cold Store objected to very high MMC of Rs.450/KW for cold stores against MMC of Rs.120/KW for General Industry.
Response of PSEB
The PSEB submitted that according to section 61 (g) of the Electricity Act, 2003, the tariff for all categories are required to progressively reflect the cost of supply of electricity and also reduce and eliminate cross subsidies within a period to be specified by the Commission. In this context, the PSEB has taken conscious efforts in the petition to remove discrimination between categories and to rationalize the rate structure and would endeavour to continue doing so to move the tariff towards the economic cost of the supply. The Board submitted that it is not in a position to accommodate the request of equalizing the rates for Large Supply and Medium Supply categories and reducing the tariff/ MMC for Ice factories.
The Board further pointed out that the tariff for seasonal industry is fixed in such a way that MMC is levied at higher rate during seasonal period and is nominal during off-season based on utilization factor for such industries during seasonal and off season period. MMC is levied to ensure minimum fixed recovery against the obligation of the Board to make the supply available to consumer. The PSEB further submitted that the tariff of general industry cannot be levied for seasonal consumers as consumption profile is different from the general industry. The consumption pattern of seasonal consumers is heavily skewed during seasonal period while the Board has to keep network capacity booked for such consumers throughout the year.
View of the Commission
The Commission decides to continue the present system of charging MMC from ice factories/cold storages. The issue is discussed in detail in Chapter - 9.
6.8 INCENTIVE FOR HIGHER POWER FACTOR
Objections Raised
Apex Chamber of Commerce and Industry and many industrial consumers organizations have objected to the proposal of the Board to raise the lower limit of power factor from 0.88 to 0.90 for levy of surcharge in case power factor falls below this limit. It was also suggested that since surcharge is proposed to be imposed for power factor below this limit as such the incentive should also start from this limit in case a consumer maintains power factor better than this level instead of present proposal of the Board for incentive above 0.95 power factor.
Ludhiana Hand Tools Association and Chamber of Industrial and Commercial Undertakings proposed that there should not be any restriction on quantum of incentive proposed to be limited to 2% in the Tariff Application of the Board. It was further stated that the incentive should not be extended to the Induction furnace units as their design is such that the power factor is maintained at 0.98 or above without making any special effort in this regard. PACL suggested that the upper limit of incentive for improvement in power factor be raised to 4% instead of 2%. PHD Chamber of Commerce and Industry and Nahar Industrial Enterprises, Siel Ltd. and Derabassi Industries Association criticized the proposal of lower percentage rate for giving incentive for maintaining power factor above the specified limit and higher rate for levy of surcharge for low power factor. CII and Siel Ltd. recommended that power factor incentive should be 0.5% for every 1% increase in power factor above 90% upto 95% and 1% for every 1% increase in power factor above 95% without any ceiling.
Response of PSEB
The Board submitted that power factor rebates and surcharges apply to consumption charges. The Board has indicated that apart from separate incentive proposed for maintaining higher power factor, the KVA based demand charges automatically benefit the consumers who have a higher power factor. The Board also submitted that the penalty for maintaining a low power factor than the prescribed minimum is to serve as a disincentive to the consumers as it leads to a deterioration of the grid supply parameters.
The Board submitted that power factor rebates and surcharges apply to consumption charges. The Board has indicated that apart from separate incentive proposed for maintaining higher power factor, the KVA based demand charges automatically benefit the consumers who have a higher power factor. The Board also submitted that the penalty for maintaining a low power factor than the prescribed minimum is to serve as a disincentive to the consumers as it leads to a deterioration of the grid supply parameters.
However, the Board has also indicated that it is open to the Commission to consider alternate provision of incentive at 90% for the general industry and at 95% for PIU at suitable levels, keeping overall revenue neutrality for the Board from the category.
View of the Commission
The Commission decides to implement the revised threshold limit of 0.90 power factor for LS, MS and RT consumers from July 1, 2005. In the meanwhile the Board would serve adequate notice upon consumers to enable them to take necessary steps for improvement of power factor. The Commission further decides to allow incentive for higher power factor for LS, MS and RT consumers w.e.f. July 1, 2005. This issue is discussed in detail in Chapter–9.
6.9 REBATE FOR POWER SUPPLY AT HIGHER VOLTAGE
Objections Raised
Steel Furnace Association of India, CII, PACL & North India Induction furnace Association and a number of other organizations of industrial consumers welcomed the proposal of PSEB to increase the percentage of rebate from 3% to 6% to consumers receiving supply at 33KV & above. It was, however, felt that the rebate was not adequate and further requested that H.T. rebate should be on total consumption charges i.e. demand charges, energy charges and any other component which forms part of cost of energy as applicable.
Ludhiana Hand Tools Association and Chamber of Industrial and Commercial Undertakings were of the view that since Board has specified the supply voltage at which heavy loads can be fed, the question of high voltage rebate does not arise and the rebate of 3% already allowed should also be withdrawn. Derabassi Industries Association and PHD Chamber of Commerce and Industry opined that the proposed surcharge of 17.5% for Arc and Induction Furnaces getting supply at 11 KV is very much on the higher side.
Northern Railway requested that 6% rebate proposed for large supply consumers getting supply at 33 KV and above may also be extended to Railways as it draws power at 132KV and 220KV.
Response of PSEB
The Board submitted that the provision of supply at higher voltage levels by the Board causes significant cost saving to the Board in terms of infrastructure provisioning for supply and associated savings in technical losses. Thus, the provision of incentives has been proposed considering these cost savings to the Board and the persistent demand across the industry to share these savings in costs with the consumer. It was pointed out that the incentive has been proposed by the Board considering such incentives in other states and financial implications to the Board. The Board considered level of incentive appropriate at this stage and stated that a higher rebate would cause lower revenues to the Board, requiring the Board to propose higher base rates for industry.
Regarding surcharge for supply at 11 KV to Arc and Induction Furnaces, it was submitted that tariff applicable to various categories are worked out at a base voltage level for each category. The rebates /surcharges to incentivise/penalize the consumers for shifting from the base voltage to higher/lower voltage have been structured keeping in view the likely additional transformation and line loss saved/incurred by the Board by such shift.
The tariffs have been computed for railways without considering the voltage rebate . If the rebate is to be included the base tariffs would require upward revision to preserve the revenue neutrality to the Board.
View of the Commission
The Commission decides to allow 3% rebate on energy consumption charges for power supply to Large Supply consumers catered supply at 33KV/66 KV and 5% rebate on energy consumption charges for consumers with supply voltage at 132 KV/ 220 KV. This issue is discussed in detail in Chapter – 9.
6.10 FREE / SUBSIDIZED POWER SUPPLY TO EMPLOYEES
Objections Raised
Chamber of Industrial & Commercial Undertakings pointed out that the PSEB has not indicated the cost of free supply to the employees and the revenue that would have been collected without free supply should be added to the main Revenue of Board.
Response of PSEB
The Board submitted that free power is being supplied to its employees as an employee welfare incentive. It was further pointed out that similar facilities exist in many other Public Departments/Corporations/ Boards across the States. It was further pointed out that in order to maintain quality and reliable supply, round the clock motivated manpower is essential. Hence, withdrawal of this incentive at this stage will prove counter-productive. Therefore, the Board requested the Commission to allow the PSEB to continue this benefit to its employees.
View of the Commission
For the year 2002-03, it was reported by the Chief Accounts Officer, PSEB that the component of free power supply to the employees is charged to the employees cost as ‘Staff Welfare Expenses’ and credited to revenue. The employees’ cost has been capped by the Commission at an overall level.
6.11 REVENUE ARREARS AND REALIZATION
Objections Raised
Chamber of Industrial and Commercial Undertakings brought out that the Board in its ARR and Tariff Application for the year 2002-03 had attached a list of consumers who were defaulters of more than Rs.10 lac and informed that more than Rs.200 crores were due from the defaulters. The Chamber opined that the exact amount may be much more. The Chamber further intimated that the defaulting amount has not been mentioned in the petition for 2004-05, the same is required to be recovered from the consumers and recovered amount indicated in revenue receipt.
Response of PSEB
The Board submitted that the Board does not claim any provision for bad & doubtful debts or write-off of past receivables in the ARR. Default of payment by consumers, however, is reflected in the working capital requirement of the utility. The Board further intimated that the collections of the Board are close to 100%, one of the highest among the utilities in various States. It was pointed out that the working capital is projected to be lower during FY 2004-05. No additional liability has therefore, been shown in the ARR on account of these amounts.
View of the Commission
The Commission notes that the pre-actuals of the sundry debtors for sale of power (arrears from consumers) outstanding for realization from the consumers, other than interstate sale of power are Rs.500.43 crores as on March 31, 2004. The Commission reiterates its advice conveyed in the Tariff Order for 2003-04 that arrears be analyzed age-wise and steps initiated by the PSEB towards improving the collection efficiency. This will help in reducing the working capital requirements.
6.12 PEAK LOAD EXEMPTION CHARGES
Objections Raised
PACL objected to imposition of Peak Load Exemption Charges by the PSEB on power consumption during peak load hours every day as Commission had not approved these additional charges on power consumed in its order dated May 23, 2003. It was brought to the notice of the Commission that PSEB is charging exorbitantly high charges of 180 paise per unit over and above normal tariff for load upto 65% of the contract demand and 270 paise per unit over and above normal tariff for load more than 65% upto 100% of the contract demand during peak load hours.
CII also considered the peak load consumption charges to be unjustified because power supplied during peak load hours is a part of the total power whether generated by its own power plants or purchased by the Board cost of which has already been taken into account by the Board while arriving at the average cost per unit delivered to the consumers. It was opined that if these charges are to be levied to discourage demand during peak load hours, the rate should be brought down to Re.1 per unit payable over and above the normal charges. It was further submitted that peak load charges should be levied on the basis of actual energy consumption during peak load hours instead of present practice of KWs sanctioned for peak load hours multiplied by number of peak load hours as on many occasions it might not be possible to supply power during peak load hours due to one reason or the other. PACL requested to reduce these charges to 50 paise for load upto 60% of the contract demand and 70 paise for load above 60% of the contract demand.
Siel Ltd. considered the peak load charges unjustified as continuous process industries do not create high peak load demand. It was also suggested by some objectors that the peak load charges should be levied on the consumers who consume power only during peak-load hours. Steel Furnace Association of India submitted that the Arc Furnace Consumers fed through independent feeders are allowed to avail 5% of the contract demand during peak load hours without payment of PLEC. Such consumers are allowed to avail additional load to the extent of 2.5 % of the sanctioned contract demand on payment of PLEC. However in such cases PLEC is levied on total load allowed including exempted load of 5% which is unjustified. It was requested that PLEC be charged on the incremental load i.e. beyond the exemption limit of 5%. Shree Raj Agro Allied Industries requested that consumer should be given written notice at least one week before any change in time of PLR.
Response of PSEB
PSEB has responded saying that penalty for exceeding the load during peak load hours is absolutely essential to maintain grid discipline and its safety and integrity. It was further submitted that the Board accounts for the total power purchase cost incurred, including peak-hour purchases as well as the revenue from the consumers to avail supply during peak hours at a higher rate in its ARR. The Board submitted that it would look into the issue of communication problems regarding the change in PLR timings, so as not to give undue inconvenience to consumers.
It was further submitted that non-levy of these charges from continuous process industries would distribute the burden of the costs during these hours to other consumers as well who are not availing such supply and would not be correct. The Board opined that it is also incorrect to say that the peak load charges should be levied on other consumers, who consume only during peak-load hours rather than continuous process industries. These consumers (mostly domestic and commercial) are scattered across the State and with marginal individual loads and consuming higher only during certain hours of the day leading to peak-supply periods. Cutting-off supply to such consumers would require cutting-off supply to most parts of the State and would not be practical apart from having significantly wider implications for the State. Levy of PLEC charges on such consumers is also not practical considering that the marginal consumption for each of these consumers would not justify installation of tri-vector meters at their premises. The industrial consumers on the other hand are large loads and fitted with tri-vector meters. The load-regulation is therefore imposed on the industry and specified at the time of release of the connection to the industry. The practice of load regulation in industry during peak-hours is also consistent with similar practices being followed by other States facing peak hour shortages.
View of the Commission
The Commission decides to continue the present system of recovering PLEC at the existing rates. This issue is discussed in detail in Chapter – 9.
6.13 O&M EXPENDITURE
Objections Raised
PACL has objected to the projected O&M requirement of the Board amounting to Rs.242.70 crores for the year 2004-05 against utilization of only Rs.189.66 crores during the year 2003-04 vis-à-vis provision of Rs.236.16 crores approved by the Commission which also indicates that the funds for O&M were diverted for other purposes. CII has proposed O&M expenses amounting to Rs.200 crores for the year 2004-05 after applying impact of inflation @ 5% over Rs.190 crores spent by the PSEB during year 2003-04. Siel Ltd. has quoted CERC Tariff Order dated 01.04.2004 wherein it has allowed 4% annual escalation in O&M cost of Generation Projects and Transmission systems and has proposed O&M cost for the year 2004-05 as Rs.198 crores. The Consumer Protection Forum and a number of other consumer groups have also objected to the projected increase in O&M expenses for the year 2004-05.
Response of PSEB
The Board submitted that the O&M carried out in FY 03-04 should not be used as a guide to gauge the expenditure on O&M proposed for FY 04-05. This was on account of severe cash deficit position of the Board leading to inadequate upkeep of system. With improving financial health of Board, it has earmarked higher quantum of O&M of its plants to improve consumer service & quality of supply. It was pointed out that CERC norms of 4% year-on-year escalation for central stations is for a healthy expenditure base with no shortage of funds. It was further intimated that Centre was charging 2.5% of the gross fixed assets on O&M and the Board was considerably below this norm for the year 2004-05.
View of the Commission
The Commission decides to allow O&M expenses at the pre-actual level for the year 2003-04 increased by inflationary effect only. O&M expenses are dealt in detail in Chapter-7.
6.14 ADMINISTRATION AND GENERAL EXPENSES
Objections Raised
PACL pointed out that PSEB has incurred Rs.45.71 crores on Administration & General Expenses against Rs.40.10 crores approved by the Commission for the year 2003-04. As such Board has not tried to limit its expenses in accordance with the allocation made by the Commission. PACL has objected to the A & G expenses of the Board for the year 2004-05, projected as Rs.50 crores and suggested that the increase should not be more than the inflation rate of 5%. CII has suggested A & G expenses as Rs.48 crores for the year 2004-05, after applying 5% inflation effect on pre-actual administration charges for the year 2003-04 amounting to Rs.46 crores.
Response of PSEB
It was submitted that the Administration & General expenses of the Board broadly include expenditure on traveling, conveyance, rents, taxes, telephones, electricity & water charges and other miscellaneous items. The Board constantly strives to provide better service to consumers. Inflationary year-on-year increases are not sufficient to compensate for cost incurred in operation e.g. provision of mobile phones to senior officers of the Board at field locations has significantly improved response time in addressing problems. Similarly, the Board is computerizing its field offices, bill collection & processing centres and complaint centres for fast operations. These measures call for higher IT consumables, not incurred in the past. Cost incurred for such improvements in operations cannot be captured through inflationary increases. The Board submitted that expenditure at the level proposed in the petition is justified.
View of the Commission
The Commission decides to allow A&G expenses to the tune of Rs.43.23 crore against amount of Rs. 50 crore projected by PSEB. The A&G expenses are dealt in detail in Chapter - 7.
6.15 AUXILIARY CONSUMPTION
Objections Raised
PHD Chamber of Commerce and Industry, North India Induction Furnace Association, Derabassi Industries Association and Nahar Industrial Enterprises pointed out that in ARR the auxiliary consumption for GNDTP, Lehra Mohabat and Ropar has been projected as 11%, 9.6% and 9.34% respectively while in case of NTPC stations the auxiliary consumption is much lower. PHDCCI has requested the Commission to impress upon the Board to reduce these losses to 6 to 7%. Gas Manufacturers Association of Punjab intimated that in case of NTPC station (Unchahar) auxiliary consumption is just 8.65%. CII has pointed out that the reason advanced by PSEB for providing higher losses for the FY 2004-05 is that transformation and excitation losses, not provided earlier, have now been accounted for. It was intimated that CERC (Terms and Conditions) Regulations, 2004 [para 61(V)] states that auxiliary consumption be restricted to 9% for coal based generating stations of 200MW/250MW capacity. CII further suggested that Auxiliary consumption target of 9% be achieved for 2004-05. Mandi Gobindgarh Induction Furnace Association also objected to the proposed higher percentage of Auxiliary consumption over and above the level approved by the Commission for the year 2002-03 and 2003-04.
Response of PSEB
The Board pointed out that the operating parameters of Lehra Mohabat and Ropar largely adhere to the benchmarks for new stations and in certain cases improve upon them. In case of GNDTP, Bhatinda it has already been mentioned that the plant is very old and has been operating beyond the originally stipulated useful life. As such the benchmarks for pithead central generating stations cannot be applied to units in Punjab.
View of the Commission
The Commission decides to allow auxiliary consumption at the levels actually achieved by the Board during 2003-04. This issue is dealt in detail in Chapter - 7.
6.16 CONCESSIONS FOR NIGHT POWER SUPPLY (TOD TARIFF)
Objections Raised
Ludhiana Hand Tools Association, Apex Chamber of Commerce & Industry (Punjab), Punjab Alkalies and Chemicals Limited and some other industrial consumers requested that concessional tariff be introduced for night consumption by providing TOD tariff, as is being done in some of the states. The objectors further indicated that the Board was directed by the Commission to implement TOD tariffs for FY 2004-05, and in the compliance status Board had stated that it has low demand from 15th December to 15th February. It was proposed that TOD tariffs could initially be implemented at least for these two months. It was further requested that the night tariff should be Rs.1.80 less than the normal rate as the Board is charging Rs.1.80 more than the normal rate during peak hours.
PACL requested that in case TOD tariff is not accepted by the Commission, the continuous power industry like PACL should be exempted from Peak Load Exemption Charges. GIS Ltd. pointed out that their consumption is same through out the day and night, but night load tariff rates are not applied to them which amounts to discrimination. United Cycle & Parts Manufacturers Association, North India Induction Furnace Association, Steel Re-rolling Mills Association of India and SIEL Ltd. also requested the Commission for implementation of night load concessional rate tariff.
CII recommended that night load concessional tariff should be made applicable to all industrial consumers who are having electronic meters and having TOD consumption facility in the meter. CII pointed out that the contention of the Board that no surplus power is available with the Board is not correct as during 2003-04, 18292 lac units were backed down. It opined that it would be economical to keep the plants running instead of backing them down as the power available from these plants costs much less than the power purchased from out side sources. Steel Furnace Association of India also expressed views identical to those expressed by CII and National Electricity Consumers Association suggested that PSEB should purchase power at cheap rates during night hours from central generating stations or from other sources and make TOD tariff applicable. This will encourage more industries to the State which is the dire need of the society.
Response of PSEB
Further, the Board indicated that the first quarter of FY 2004-05 has witnessed poor hydrology and scanty snow-cover in upper reaches of the Himalayas, leading to lower availability from hydro projects, for the period April – July, 2004. The power purchases for the period have gone up by about 22%. Hence, the Board is of the view that there would be no lean demand period during FY 2004-05 for the introduction of this scheme. The Board also maintained that the levy of Peak Load Exemption Charges during peak load hours is in fact a form of TOD tariff.
View of the Commission
The Commission decides not to introduce TOD tariff or night power supply tariff. This issue is discussed in detail in Chapter – 9.
6.17 ENERGY BUDGET & COST OF POWER PURCHASE
Objections Raised
Nahar Industrial Enterprises, Derabassi Industries Association, Steel Furnace Association of India, Gas Manufacturers Association of India, North India Induction Furnace Association and PHDCCI pointed out that according to ARR for the year 2004-05, the purchase of power is estimated to increase by a huge sum of Rs.840 crores whereas generation cost has reduced by Rs.100 crores only. The Association opined that some criterion must be fixed in this regard and arbitrary purchase of power may not be allowed from costly sources. PSEB must obtain approval of the Commission for huge increase in purchase of power. Siel Ltd. submitted that if PLF of the thermal plants is improved, auxiliary consumption is restricted to lower levels, improvement is made in transmission losses it will make additional power available thereby resulting in lesser requirement for power purchase.
PACL pointed out that purchase of excess power by PSEB from outside sources in order to honour the agreements at the cost of backing down its own generating units is unjustified. Chamber of Industrial and Commercial Undertakings pointed out that rate of power purchase from various sources varies from Rs.0.68 per unit to Rs. 3.49 per unit. It was suggested that PSEB should purchase the maximum power from Salal and Baira Siul and balance from other suppliers in the ascending order of cost. The Consumers Protection Forum stated that the purchase of power worth Rs.2314 crores was necessitated due to drought conditions in the state, such an expenditure on account of natural calamity is required to be met with Chief Minister’s Relief Fund.
Response of PSEB
The PSEB stated that it strictly follows the merit order principles in power procurement and its actions are subject to the scrutiny of the Commission. The Board has proposed certain procurements from trading sources in its petition to sustain the sale growth projection.
It is submitted that the first quarter of FY 2004-05 has witnessed poor hydrology and scanty snow cover in the upper reaches of Himalayas, leading to lower availability from hydro projects including BBMB by more than 25% for the period April to July 2004, compared to the corresponding period of the previous year. The power purchase for the period has also gone up by about 22%, including higher overdrawals from the Northern Grid at frequency linked UI rates. It was further stated that the Board has also been running its generating stations at consistantly high PLF touching 99% for GHTP during a month and no backing down is currently being made.
View of the Commission
The Commission has examined the issue at length keeping in view the scanty snow cover and inadequate rain in the catchment areas of Hydro Electric Projects of the Northern Region resulting in substantial loss of hydel generation. The Thermal Plants of the Board shall be operated at the optimum level and power purchased in merit order. The Commission allows the Board to purchase power for Rs.2171.22 crores against power purchase cost of Rs.2314.31 crores projected by PSEB. It is the effort of the Commission to ensure that consumers are supplied adequate power during the year. Power Purchases are discussed in detail in Chapter – 7.
6.18 LESS SUBSIDY CLAIMED FROM THE STATE GOVERNMENT
Objections Raised
CII brought out that Board had shown total subsidy of Rs.857 crores from the Government in 2003-04, Rs.807 crores on account of AP consumers and Rs.50 crores for schedule caste users. Further, the Board had indicated sale to Agriculture Sector in 2003-04 as 6243 MU and as per Tariff Order of 2003-04, the Government had provided subsidy of Rs.1.43 per unit to agricultural consumers on the basis of which subsidy due from the Government works out to Rs.943 crores. It was thus highlighted that subsidy amounting to Rs.86 crores was received less by The Board from the Government during year 2003-04.
Response of PSEB
No Comments.
View of the Commission
The Commission has allowed agricultural consumption for the year 2003-04 as per normative consumption fixed by the Commission. The subsidy payable and actually received has to be reconciled between the Board and the Government.
6.19 MAINTENANCE SCHEDULE
Objections Raised
Chamber of Industrial and Commercial Undertakings observed that power shortage occurs in the months of June to September every year due to paddy. It was suggested that PSEB be directed to observe maintenance schedule of thermal or hydro units to be so regulated that none of the units is opened for maintenance during these months for major or minor repairs.
Response of PSEB
PSEB submitted that the maintenance schedule is developed in a manner that it minimizes power outage due to such issues. The system operations wing carries out a detailed annual exercise in this regard. The capital maintenance of GNDTP was long overdue and could not be postponed any further and hence had to be scheduled.
View of the Commission
The Commission upholds the views of the Board. The Commission directs the PSEB to reduce the period of outage of generating machines and improve upon PLF to the maximum extent.
6.20 GENERAL INDUSTRY TARIFF Vs PIU TARIFF
Objections Raised
Shree Raj Agro Allied Industries submitted that tariff for both the classes of industry viz. general industry and PIUs should be the same. It was brought out that earlier the tariff for PIUs was more than that for general industry. In the year 2003-04, the tariff for both the categories was same. It was further stated that according to proposal for the year 2004-05 , the Board has suggested power tariff of Rs.3.20 per unit for PIUs and Rs.3.40 per unit for general industry and requested that tariff for steel rolling mills should also be made Rs.3.20 per unit.
Steal Furnace Association of India pointed out that in the proposal of PSEB for the year 2004-05, though the energy charges for PIUs are lower by 20 paise from the tariff of general industry, the demand charges are substantially higher at Rs.250 per KVA as compared to Rs.100 per KVA in case of general industry. The Association appealed to the Commission to reject the proposal of PSEB to charge higher demand charges from PIU / EAF as compared to the general industry.
PACL did not find any justification on the part of Board in classifying NFL as general industry and PACL which is also a continuous industry as PIU.
Response of PSEB
PSEB submitted that since the load factor for PIU consumers is considerably higher than the load factors of general industry, it leads to a higher utilization of assets and a much higher revenue and investment recovery for the Board for the assets in service vis-à-vis the general industry. The Board has therefore proposed correspondingly higher demand charges and slightly lower energy charges for the PIU consumers as compared to the general industry.
The Board further pointed out that it classifies chloro-alkaline units and electrolytic process industry as PIU considering that the nature of their load imposes similar loading conditions on the PSEB grid network as that of the arc/induction furnaces. The classification is therefore in order.
View of the Commission
The Commission decides to examine the issue in detail at the time of consideration of revised proposal of the Board for introduction of Two Part Tariff for Large Supply consumers. The issue is discussed in detail in Chapter – 9.
6.21 METER RENTAL
Objections Raised
Shree Raj Agro Allied Industries submitted that the Board recovers an amount of Rs.990/- each month from consumers on account of meter rent, which is unreasonable as it is the duty of the supplier to measure the item i.e. electricity which is being sold. The Board is recovering this amount on the defective and outdated meters and has already recovered the cost of meters ten times more than the original cost in the shape of monthly rent which amounts to unfair trade practice.
Response of PSEB
It was submitted by the PSEB that it provides the option to the consumer for bearing the cost of the meter as one time payment. Only, if the consumer opts for provision of a meter by the Board, the Board charges a nominal meter rent in accordance with the Sales regulations, considering a fair assessment of the life of the meter. The quantum of meter rent is also reviewed periodically for upward/downward revision considering the market value of the type of the meter. It is therefore incorrect to say that the meter rent is being arbitrarily charged from the consumers without any scientific basis.
View of the Commission
The Commission directs the Board to supply full justification of the charges. The Commission would examine the matter at the time of finalization of regulations.
6.22 OCTROI
Objections Raised
Shree Raj Agro Allied Industries and some consumers submitted that the Board should not be allowed to charge the octroi duty from the customers as in case of electricity there is no such material which actually enters the town.
Response of PSEB
PSEB submitted that Punjab Govt. vide notification No. 14/3/98/LG-III/8686 dated 26.2.99 has levied octroi @ 4 paise per unit on consumption/use and sale of electricity in various cities/towns under the jurisdiction of Municipal Corporations, Municipal Committees/Councils/Nagar Panchayats, Notified Area Committees in Punjab.
View of the Commission
Since octroi is being charged in compliance of the notification issued by the State Government, the octroi is allowed to be charged .
6.23 SLABS IN DOMESTIC SUPPLY CATEGORY
Objections Raised
Different consumer groups expressed contradictory views on proposed DS slabs. The Consumer Protection and Grievances Redressal Forum objected to the modification of the lower tariff slab from 1-100 to 1-50. It was opined that even domestic consumers living below poverty line will be consuming more than 50 units in a month. PACL suggested that subsidized power should be supplied to only those consumers whose monthly consumption is upto 50 units.
United Cycle & Parts Manufacturers Association suggested that slabs of tariff may be adopted as 0-300 units, 301-600 units and above 600 units. SIEL Limited felt that DS consumer is highly subsidized and proposed that either a further slab of 500 or more units be created with tariff equivalent to NRS category or there should be surcharge of 10% on the billed amount if the bill is more than Rs.1500/- per month. Dera Bassi Industry Association was of the opinion that there was no need to have 4 slabs and existing 3 slabs may continue with per unit rate as Rs.2.30 upto 100 units.
Response of PSEB
The Board submitted that proposed tariffs have been framed keeping in view the interest of all classes of consumers in the category. The Board has proposed a lifeline tariff slab of 50 units to protect the interests of the poorest consumers, while the tariffs applicable for the relatively wealthier sections have been progressively rationalized. The PSEB is guided by the principles enshrined in the Electricity Act, 2003 and tariff for all categories are required to progressively reflect the average cost of supply of electricity, which has been worked out by the Board as Rs.3.54/KWh for the year 2004-05. It was further stated that the cross subsidy is to be progressively reduced and eliminated. Even at the proposed tariffs the average billing rate for domestic consumer works out to Rs.2.94/KWh which is below the average cost of supply projected by the PSEB for the year 2004-05. Since no subsidy is being extended by the Govt. for normal domestic consumers and cross subsidies from other categories have to be eventually eliminated, the Board could ill-afford to sustain the existing tariff.
View of the Commission
The Commission decides to continue with the existing three slabs in the Domestic Supply category. This issue is discussed in detail in Chapter – 9.
6.24 LATE PAYMENT SURCHARGE
Objections Raised
PACL and Consumer Welfare Council, Bhatinda objected to very high late payment surcharge of 10% and proposed it not to be more than 2% per month. CII also expressed similar views and suggested that late payment surcharge should be based on prevailing interest rate. National Electricity Consumers Association (NECA) also pointed out that PSEB is charging 10% late payment surcharge even if the bill is paid late by one day which is very harsh. NECA and CII requested the Commission to approve reasonable surcharge of 1% per month on the unpaid amount or part thereof.
Response of PSEB
The Board submitted that the surcharge is levied with a view to discourage the consumers from making delayed payments. Owing to the acute financial crisis faced by Board, it is becoming increasingly difficult to carry any overdue receivables on its books of accounts. Such outstanding payments bear serious working capital implications for the Board as the borrowing capacity of Board to raise capital at reasonable rates gets eroded in market. The Board also submitted that facility of late payment surcharge is available to facilitate payment of outstanding amounts during a certain grace period provided to consumers before proceeding for disconnection. This is to save the consumer from inconvenience of securing a reconnection and the avoidable delay involved in the same. It was further stated that it is only because of the high surcharge that collection efficiency of the Board is being maintained at 100%. Any reduction in surcharge would also reduce the disincentive for non payment and would cause a fall in collections. The Board submitted that the charges levied as such were justified.
View of the Commission
The Commission decides to continue with the existing practice of levying late payment surcharge at the existing rates. This issue is discussed in detail in
Chapter - 9.
6.25 RURAL & AGRICULTURAL CONSUMERS
Objections Raised
Mr. Balwinder Singh Bhunder, Convener Kissan Wing (Akali Dal) and General Secretary Shiromani Akali Dal objected to higher power cuts on rural feeders than urban feeders. He opined that the estimated AP consumption norm of 1700 Kwh/Kw/year was on higher side and requested that meters be installed at transformers to assess correct AP consumption.
Bharati Kissan Union pleaded that Tariff for AP consumers be reduced as the quality of electricity being supplied to these consumers is much inferior to the electricity being supplied to other categories of consumers. It was further pointed out that whereas, the complaints of electrical faults are attended to very promptly in case of other categories of consumers, the faults for feeders supplying power to tube-wells are not sometimes attended to for days. The Union also objected to much longer power cuts on AP consumers as compared to other categories of consumers.
Bharati Kissan Union submitted that the tube-well motors of farmers do not work efficiently and burn down frequently as electricity supply voltage is generally low. The Union requested that PSEB should compensate the farmers for such a loss due to damage to motors. The Union demanded that uninterrupted, high quality power supply for 12 hours, at day time, be ensured for AP consumers.
Punjab 24 Hours (3 Ph 3 Wire) Rural Power Consumers/Users Welfare Association also highlighted the problem of longer power cuts and inferior quality of power on rural feeders as compared to the urban feeders.
Response of PSEB
The Board stated that it is trying its level best to supply adequate quality of power to all consumers. It was intimated that 700 overloaded 11 KV feeders having voltage drop greater than the prescribed limit have been identified and the work for bifurcation / augmentation of these lines is under progress. New distribution transformers are also being added in order to de-load the over loaded transformers. It was further submitted that the agriculture tubewells are mandated to have capacitors of adequate rating for reactive power compensation. Strict compliance of capacitor installation would significantly improve voltage profile in rural network.
The Board stated that work under scheme of urban pattern supply to rural areas is under way and feeders feeding agriculture load and domestic load are being separated. Out of 12428 inhabited villages in the State, 8428 villages stand covered under urban pattern. The supply to remaining 4000 villages is expected to be covered under this scheme within 2004-05. The quality of supply to rural consumers covered under urban pattern supply has improved due to feeder segregation from rural pattern. The Board denied that it has a malafide intention towards rural feeders in respect of power cuts. It was further submitted that the PSEB has to consider the interest of all consumers. However, there are supply exigencies which require regulation of supply in shortage situation and PSEB undertakes it in a manner so that the interest of all sections of the Society are taken care of.
View of the Commission
The Commission notes the poor quality of electric supply to the agricultural pump-sets and rural domestic consumers. The Commission directs the Board to take immediate measures to improve the quality of electricity being supplied to the agricultural pump-sets. The Commission further decides to allow concession to rural consumers as discussed in detail in Chapter – 7.
6.26 CROSS SUBSIDY
Objections Raised
Most of the consumers/consumer organizations emphatically stressed the need for eliminating subsidy on agricultural and domestic consumption and requested for specifying the period for eliminating the cross subsidy. Chamber of Industrial and Commercial Undertaking and National Electricity Consumers Association quoted a Supreme Court judgement in a case of West Bengal SERC Vs CESC wherein it was clearly mentioned that cross subsidy should be stopped and in case the Government wanted to give power to agriculture sector at cheaper rate then the loss so incurred to the Board should be borne by the Government. The Consumer Protection Forum and All India Steel Re-rollers Association stressed the need of accurate assessment of the power supply to the farmers. It was further suggested that energy meters be provided for all AP consumers within two years.
North India Induction Furnace Association pointed out that despite the proposed increase in agricultural tariff by the PSEB the AP consumer is still proposed to be subsidized to the extent of Rs.1.50/Kwh. The Consumer Protection and Grievances Redressal Forum submitted that the Board had supplied electricity worth Rs.1200 crores to save rice crop. If the opportunity cost of electricity withdrawn from industrial and domestic consumer and diverted to agriculture sector is considered the total cost would be around Rs.6000 crores. It was suggested that the cropping pattern in Punjab be changed and instead compensation be paid to the farmers for diversifying the crops to oil seeds, pulses and herbs instead of rice.
Mr. Balwinder Singh Bhunder, Convener Kissan Wing (Akali Dal) and General Secretary Shiromani Akali Dal advocated free power for AP consumers.
Response of PSEB
The PSEB submitted that the difference between tariffs and costs for AP category is met through a combination of subsidies and cross-subsidies. The subsidies extended to certain consumer categories in accordance with the directions of the State Govt. are compensated by the State Government in accordance with the provisions of the Electricity Act, 2003. Hence there is no loss to the Board on account of supply to the AP consumers. The Board further submitted that it is not feasible to eliminate cross-subsidy abruptly. However, the Commission is mandated with the responsibility of progressive removal of cross-subsidy, and the same will be adhered to by the Board.
The PSEB submitted that the difference between tariffs and costs for AP category is met through a combination of subsidies and cross-subsidies. The subsidies extended to certain consumer categories in accordance with the directions of the State Govt. are compensated by the State Government in accordance with the provisions of the Electricity Act, 2003. Hence there is no loss to the Board on account of supply to the AP consumers. The Board further submitted that it is not feasible to eliminate cross-subsidy abruptly. However, the Commission is mandated with the responsibility of progressive removal of cross-subsidy, and the same will be adhered to by the Board.
The Board, further, appreciated the concern of the consumers regarding agricultural reforms. The Board agreed that less water-intensive crops should be promoted for lesser demand on PSEB system and for improvement of water table. However, it opined that such policies are driven by Government initiative and schemes and Board has little say in the matter.
Regarding free power to AP consumers, it was stated that the Board gets subsidy from State Govt. for supply of subsidized power to agriculture consumers below cost of service for quantum approved by the Commission in the process of tariff for the year. It was further stated that such policies are framed with the initiative of the Govt. and Board has no say in the matter.
View of the Commission
The Commission had been working to progressively reduce the cross subsidy and it has consistently and substantially been reduced in last two years. However, the existing practice of cross subsidy to the subsidized sectors namely Domestic and Agricultural category will continue for the year 2004-05. This is discussed in detail in Chapter – 10.
6.27 FUEL SURCHARGE
Objections Raised
North India Induction Furnace Association, Dera Bassi Industries Association and PHDCCI submitted that no surcharge should be levied over MMC and guidelines for fuel surcharge may be fixed once for all. Steal Re-rolling Mills Association of India proposed that decision for imposing fuel surcharge should be based on yearly basis and decision be taken after proper discussion with the Association and after taking Commission into confidence.
Response of PSEB
The Board submitted that the fuel surcharges primarily relate to increase in variable costs of the stations and are driven by external influences. The sources of power purchase also bill the Board for such surcharges every quarter. It was stated that the Board is not in a position to pay these surcharges, if there is no corresponding arrangement for their recovery from the consumers. The Board had also proposed a comprehensive Fuel and Power Purchase Adjustment Formula in its previous petition for consideration of the Commission.
View of the Commission
The Commission has already examined the matter in detail and the draft regulations containing Fuel Cost Adjustment Formula have been put on the website for inviting public objections. The objections will be kept in view at the time of finalizing the regulations.
6.28 KVA/KVAH TARIFF
Objections Raised
PHDCCI submitted that KVA/KVAh based tariff be introduced with effect from
2004-05 as was assured by the Board last time. It was further suggested that it can be introduced at least for large supply category where electronic meters have been installed and such facility exists. It will obviate need for power factor surcharge and other incentives. North India Induction Furnace Association pointed out that if billing is shifted from KWH to KVAh, every industrialist will be tempted to improve power factor to as near to unity as possible to reduce his monthly bill, this will also help the State in reduction of line losses. The PSEB Engineers Association asserted that introduction of KVAh based tariff is a powerful mechanism for ensuring economy and efficiency.
Response of PSEB
The Board submitted that it has proposed two part tariff as a first step in this direction and a power factor incentive has also been provided. Need for KVAh based tariff can be considered in future. The Board in its meeting on October 14, 2004 submitted that there would be wide fluctuations in revenue if Kvah based tariff is introduced. It was further stated that the proposal would be submitted after carrying out detailed study.
View of the Commission
The Commission decides that the Board should bring out a detailed paper on the introduction of Kvah tariff in the ARR for 2005-06. This issue is discussed in detail in Chapter – 9.
6.29 ANNUALISATION
Objections Raised
Most of the consumer groups strongly objected to proposed annualisation of the tariff. PHDCCI and Dera Bassi Industries Association requested that the change in tariff may be applied with effect from the date of award for a period of one year. Steal Furnace Association of India and National Electricity Consumers Association opposed the annualisation on the ground that delay caused in submission and consideration of tariff is not attributable to the consumers at all and it is not possible for the industry to recover additional charges on the products sold in the past, the price of which was fixed on the basis of tariff prevailing at that time. All India Steal Re-rollers Association and Mandi Gobindgarh Induction Furnace Association pointed out that since withdrawal of the earlier application filed by the Board was on account of direction given by the State Government, the difference of amount, if any, should be recoverable from the State Government.
Response of PSEB
The Board submitted that withdrawal of the earlier petition for ARR and Tariff Revision was for reasons external to the Board, as such the Board should be permitted to recover the lost revenues on account of delayed application of tariff increases through annualisation of tariff or any other suitable mechanism. The Board intimated that the State Government had expressed its inability to provide subventions on this account and advised the Board to approach the Commission for a suitable mechanism. The Board accordingly approached the Commission for tariff annualisation in view of the unprecedented circumstances mentioned in the petition. The Board further pointed out that it had proposed recovery of only 50% of the revenue gap for FY 2004-05 to avoid any tariff shock to the consumers. The remaining gap has been proposed to be carried forward for recovery to subsequent years. As the Tariff Order is likely to be applicable only for half year, the tariffs at the proposed levels are roughly equivalent to the tariff levels for recovery of the entire revenue gap for FY 2004-05 within the year itself through proposed tariffs.
View of the Commission
The Commission decides to make the revised tariff effective from October 1, 2004. This issue is discussed in detail in Chapter – 10.
6.30 REVIEW OF CRITERIA FOR SP / MS / LS CATEGORIES
Objections Raised
Steal re-rolling Mills Association of India pointed out that criteria for classification of load into various categories was laid down from the time of British Rulers when the rate of industrialization was very poor. It was suggested that in view of the changed time categories of SP, MS, LS may now be kept at 100 KW, 500 KW and above 500 KW.
Response of PSEB
The Board submitted that it had noted down the suggestion and pointed out that it had extensively deliberated on the classifications of consumers in various categories while framing the proposed tariff structure. Due consideration was given to the feedback received from various industry associations and Board had tried to accommodate the suggestions within the means of the Board.
View of the Commission
The Commission decides to continue the existing categories in the industrial sector. This is discussed in detail in Chapter – 9.
6.31 MIXED LOAD
Objections Raised
DCM Engineering Products submitted that PSEB has not indicated tariff for mixed type of loads. It was further stated that there are large supply consumers with mixed type of load of power intensive and general category. PSEB through commercial circular 11/95 had allowed differential tariff on segregation and approval of the same by the PSEB. It called for installation of separate metering equipment by the industry. The DCM further submitted that their general and intensive category loads are in the ratio 40% & 60% and requested that PSEB should propose tariffs for mixed category loads. It was also suggested that demand charges for mixed loads should be at a uniform rate of Rs.125 per KVA.
Response of PSEB
The Board submitted that charges for General Industry and PIU have been proposed at separate levels considering the consumption characteristics of the two types of consumers, among other considerations. In view of these facts the Board conveyed its disagreement with the proposal that demand charges for the mixed load (40% general and 60% intensive) should be at Rs.125/KVA of the sanctioned contract demand.
View of the Commission
The Commission decides to continue with the existing practice of charging tariff in this regard.
6.32 FORCE MAJEURE
Objections Raised
CII pointed out that PSEB vide its notification dated 14.1.97 provided some relief in MMC to arc/induction furnaces in case of suspension of production for at least seven consecutive days for some reasons beyond the control of the consumers. It was opined that the relief allowed was very nominal as the consumer was not exempted from payment of MMC and the only relief given was that MMC is payable at the rate applicable to the general industry instead of higher rate applicable to arc/induction furnaces. CII and Steel Furnace Association of India proposed amendment in Force Majeure clause as under :
‘In the event of failure / damage of power transformer or furnace transformer, failure on the part of PSEB to supply power or normal supply hours reduced through specific order of the Board, fires, explosions, labour disputes, strikes, lock-outs, casualty or accidents, epidemic, cyclone, lightning, floods, earthquakes, wars, revolution, drought, civil commotion regulation, ordinance, demand or Government requirement or any other cause whatsoever similar or dissimilar to these which are beyond the scope of the consumers and Board, the consumer shall be entitled to proportionate reduction in MMC provided that such closure or reduced working hours continue at least for seven days consecutively in a billing cycle month directly as a consequence of the above conditions.’
DCM Engineering Products submitted that Force Majeure should be on the same lines as specified in various power purchase agreements of the PSEB. It further stated that strikes and lock-outs be included in conditions for force majeure and relief to be provided during force majeure may also be specified.
Response of PSEB
The Board clarified that the existing force majeure clause includes the situation of natural calamities such as earthquakes, floods and lightening. Further, the clause also includes the lockouts due to labour problem and failure/damage of EHV power transformer (33KV and above). The Board opined that existing force majeure clause covers most of the force majeure events as per the general industry practice and hence there is no need to amend the force majeure events. The Board also pointed out that relief in MMC provided under force majeure conditions is adequate and the Board did not propose any amendment in the same.
View of the Commission
The Commission decides not to add any event for allowing benefit of Force Majeure clause or extending the relief admissible under the clause. This is dealt in detail in Chapter – 9.
6.33 THEFT OF ENERGY
Objections Raised
Mr. Balwinder Singh Bhunder, Convener Kissan Wing (Akali Dal) and General Secretary Shromani Akali Dal, Chandigarh stressed the need to check the theft of energy. Mohali Industries Association, Dera Bassi Industries Association and Nahar Industrial Enterprises suggested that in-built safeguards be provided to curb theft of energy so that no harassment is caused to the consumer with good track record. No FIR be lodged in theft case unless the case detected by PSEB subordinate staff has been thoroughly examined by high level committee of PSEB officers and representatives of local industry. It was opined that theft of energy is not possible without the connivance of the PSEB staff. The PSEB Engineers Association enumerated the high-tech methods being adopted for theft of energy even on electronic meters. Sh. Gurbaksh Singh, Joint Manager FCI (Retd.) asserted that theft of electricity through kundi connections must be checked. Sh. Ramesh Talwar submitted that PSEB employees should be accountable for theft of energy.
The Consumer Protection Forum pointed out that as per statement of the Chief Administrator, PUDA, published in H.T. dated 24.7.04 there are 1560 unauthorized colonies in Punjab. The residents of these colonies indulge in power theft on large scale. It was further stated that the Chairman, PSEB had admitted in his speech at SAS Nagar on 10.8.04 that there is loss of about Rs.400 crores due to theft of power. The Commission was requested to direct PSEB to work out losses and cost thereof to be recovered from persons at fault. It further prayed that expenditure of such losses should not be accounted while working out tariff.
Response of PSEB
The Board submitted that it is making all efforts to arrest losses due to theft and unauthorized use of energy. In this regard the Board has taken various steps towards energy audit including feeder/distribution transformer(DTR)/ consumer indexing so that feeder-wise and DTR-wise losses could be determined. This would significantly help in identification of high theft incidence areas, energy accountability and fixing of responsibility of the employees through penalty/reward mechanism. The Board intimated that it has also stepped up its theft detection drives and the assessment amount during FY 2003-04 is significantly higher than FY 2002-03. The Board is also following up with the state Government to open Police Stations dedicated to energy theft for expeditious settlement of theft cases. In addition to the above instructions have already been issued that if any employee of the Board is found indulging in theft or found abetting in making theft of energy, minimum punishment shall be dismissal from service. Out sourcing has also been permitted by PSEB in theft prone localities by providing release of single point connection. Up coming and existing private and Government colonies can also be out sourced to Developer or Society.
View of the Commission
The Commission has noted that the initiatives taken by the Board have not yielded any noticeable positive results. There is need to review these initiatives. The Commission advises the Board to make serious efforts to reduce the commercial losses.
6.34 DISCRIMINATION BETWEEN GOVERNMENT RECOGNIZED UNAIDED AND AIDED PRIVATE SCHOOLS
Objections Raised
Dashmesh High School, Moga ; Navyug High School, Abohar; Raja Rinkupal High School, Abohar and many other schools submitted that all Government recognized private aided and unaided schools were previously charged tariff at domestic rates while other private schools and unrecognized schools were charged tariff at commercial rates. The rates were amended by the PSEB in 1999 and accordingly, the Government recognized private aided schools continued to be charged domestic rates but tariff for Government recognized private unaided schools was changed to commercial rates. It was submitted that since both the private schools aided and unaided are recognized by Education Department of the Government and do same type of work the Government recognized unaided schools be treated at par with Government aided schools.
It was also requested that all schools use electricity for five/six hours a day during summer when the fans are working and that too for three/four months. The bills are charged on load basis for whole year. Since schools are not commercial establishment electricity be charged on actual consumption.
Response of PSEB
The PSEB submitted that according to the current petition, the tariff increase sought by it for the domestic category is more than 10%, which is one of the highest among various categories. PSEB submitted that it is constrained to add any other class of consumers in the subsidized categories until the State Government compensates the Board for the provision of such supply at subsidized rates.
The Board stated that a certain minimum level of revenue has to be ensured against the load commitment made by the consumer to the utility and the utility in turn, arranges requisite facilities and infrastructure for provision of supply. More than 50% of the cost incurred by the Board is fixed in nature. The Board partly recovers these fixed charges from various consumers through MMC. The MMC is fixed on the basis of reasonable levels of consumption for various categories and load sanctioned/ contracted to the consumer. The PSEB further stated that it does not have a provision of seasonal tariffs in the NRS category and is therefore unable to accommodate the request of the respondent.
View of the Commission
The Commission decides to continue charging the private un-recognized and private unaided but recognized educational institutions under NRS category. The Commission further decides to continue charging MMC from the educational institutions as per prevailing provisions. This issue is dealt in detail in Chapter - 9.
6.35 CHANGE OF CUSTOMER STATUS OF BSNL FROM COMMERCIAL
TO INDUSTRIAL
Objections Raised
BSNL submitted that they are being charged commercial tariff. It has quoted a Supreme Court Judgement in case of Christian Medical College Versus ESIC decided on 23.11.2000 and stated that BSNL be considered industry in view of the above said legal position. It further stated that Department of Telecom has been corporatized into a company under the name of Bharat Sanchar Nigam Limited. On its becoming a corporatized body, the Finance Act 2002-03 accorded it the status of industrial undertaking. It was, therefore, requested that the customer status of telephone exchanges be changed from commercial to industrial.
Response of PSEB
PSEB has submitted that since no manufacturing process is involved in the operation of BSNL, the Board finds no force in the request of the objector to cover them in the industrial tariff.
View of the Commission
The Commission decides not to change the category of telephone exchanges of BSNL for the present. However, the Commission would like to have feed back from the consumer regarding tariff policy being followed in other States for billing the telephone exchanges. This is dealt in detail in Chapter – 9.
6.36 DEPRECIATION
Objections Raised
PACL objected to the increase in depreciation cost from Rs.549.06 crores to Rs.576.12 crores and submitted that the depreciation amount should be less every year based on written down value method assuming asset value to be the same. It further stated that the depreciation should be charged to the consumers only on the performing assets basis.
National Electricity Consumers Association opined that depreciation should be charged in accordance with the law under provision of the Electricity Supply Annual Rates Act 1985 wherein procedure for calculating fixed assets and provision for depreciation is given.
Response of PSEB
The Board submitted that depreciation has been charged as per Electricity (Supply) Annual Accounts Rules, 1985 and the Central Govt. norms for various asset categories uniformly applicable to all SEBs. According to rules, depreciation is based on straight line method and not based on WDV method.
The Commission had approved depreciation charges of Rs.683.70 crores for FY2003-04. The depreciation for the year 2004-05 has been estimated by Board by applying the average function-wise depreciation rates for the year 03-04 on the opening value of assets at beginning of the year. The depreciation as projected for the year 2004-05 works out to Rs.576.12 crores.
View of the Commission
The Commission decides to provide depreciation on the basis of straight line method as per Electricity ( Supply ) Annual Accounts Rules, 1985 on the value of assets as on April 1, 2004. This issue is dealt in detail in Chapter - 7
6.37 INTEREST ON LOANS
Objections Raised
Chamber of Industrial and Commercial Undertaking mentioned that Board has shown Rs.1011 crores as expenditure in the form of interest charges in respect of the amount borrowed from various sources as the Board was running in loss. The main reason for the Board running into loss was free supply to agriculture sector at the directions of the Punjab Government as such the Government should bear the interest charges and not the consumers. PHDCCI, North India Induction Furnace Association, Nahar Industrial Enterprises, Mohali Industries Association and Dera Bassi Industries Association also expressed that the interest on loans taken by the Board for giving tubewell connections should be received from the Government or alternatively Government loan be reduced correspondingly.
CII stated that the claim of PSEB to interest cost amounting to Rs.1141 crores is unreasonable as the Commission has approved interest cost of Rs.996 crores for the year 2003-04. It further pointed out that high cost of interest is on account of funds raised to meet deficit created by undisbursed subsidies from the State Government and also towards utilization of the borrowed funds to meet excessive cost of RSD project. It was submitted that in no way these excessive costs incurred on account of interest can be passed on to the consumers. SIEL Ltd. suggested that high interest loans should be swapped immediately. Steel Furnace Association of India pointed out that interest is being charged on the loans taken by PSEB from the Punjab Government but no interest is being claimed by PSEB from the Government on undisbursed subsidy.
Response of PSEB
The Board submitted that it has apprised the State Government on the relevant facts in the matter including Government loans and unpaid subsidy on various occasions in the past. The Govt. is looking into the matter and is expected to resolve the matter while formulating the financial restructuring plan of the Board. It was further stated that efforts of the Board regarding restructuring of the loan portfolio to reduce interest burden has already been detailed in the petition in response to the concerned directives of the Commission . Information regarding further such initiatives after the filing has also been provided to the Commission separately.
View of the Commission
The Commission decides to allow interest and finance charges of Rs.875.62 crore (net) after capitalization of Rs.68.69 crore against Rs.1010.71 crore projected by PSEB in the revenue requirement for the year 2004-05. This issue is discussed in detail in Chapter – 7.
6.38 TARIFFS FOR RAILWAY TRACTION
Objection Raised
Chief Electrical Distribution Engineer, Northern Railway, New Delhi requested the Commission that Railway Traction tariff be brought down below the level of industrial tariff, since traction tariff has a cascading effect on freight/fare for each commodity/user. It was also requested by the Railway authorities that :
- Billing demand should be 65% of the contract demand or as recorded during the month whichever is higher for Railway Traction load.
- The rebate of 6% proposed for large supply consumers availing supply at 33KV and above should also be given to Railways since power is drawn at 220 KV and 132 KV.
- Railway should be exempted from payment of penalty charges for exceeding the contract demand, considering unique nature of traction load as trains are required to be bunched in a particular zone due to accidents, public agitation etc. causing demand to exceed for a short spell.
- Revision of contract demand should be made effective from date of application without linking it with other issues.
- Maximum demand charges and demand violation charges should be levied by taking simultaneous maximum demand at all metering points.
- For consumption other than traction, levy of domestic tariff for domestic supply either by providing separate domestic connection or by installing sub-meter along with bulk supply meter instead of bulk tariff as is being done at present.
- The octroi should not be levied on railways for supply points at Kurali and Anandpur Sahib in the light of Article 287 of the Constitution of India.
Response of PSEB
Comments of the Board on the issues are as under :
- More than 50% of the cost incurred by the Board is fixed in nature . The Board partly recovers these fixed charges from various consumers either through MMC or fixed component of tariffs. The Board has also provided incentive in the current tariff petition for power factor rebate, as such lowering of demand charges below 80% of the contract demand would necessitate higher fixed charges per unit to maintain the revenue neutrality from the consumers in the category.
- The tariffs have been computed for railways without considering the voltage rebate. If the rebate for supply voltage is to be included, then the base tariff would require an upward revision to preserve the revenue neutrality to the Board.
- Any withdrawal of the traction load beyond contract demand attracts a penalty to serve as a disincentive to the consumer. Such excesses lead to overloading of the system and increase losses in the system. The provision for imposition of the penalty is in order.
- The process of approval for enhancement of contract demand would need to consider the network capabilities to cater to the additional demand. In case the system strengthening is not required, the Board shall be in a position to accede to the request. However, in case system strengthening is required , the demand could be enhanced only after completion of the works and the time–frame cannot be committed in advance. The Board would make its best endeavours to meet the enhanced demand at the earliest possible.
- The metering and billing of railways is done separately on the basis of the contract demand at individual supply point. The Board cannot afford the actual demand to exceed the contract demand at the supply point as this would lead to overloading in the system, and increased losses in the network. Measurement and billing on the basis of simultaneous maximum demand can only be applicable when the network of the PSEB is robust enough to supply the entire load of the consumer from any supply point .
- The non-traction load of railways is a mixed load with consumption falling across various categories viz. domestic, commercial etc. PSEB charges such consumers with mixed load characteristics under bulk supply category. The tariff for bulk supply is kept between that of domestic and commercial supply. Further, no tariff increase has been proposed for bulk supply and the existing tariffs are comparable to the proposed tariff for domestic category.
- Punjab Govt. vide notification No. 14/3/98/LG-III/8686 dated 26.2.99 has levied octroi @ 4 paise per unit on consumption/use and sale of electricity in various cities/towns under the jurisdiction of Municipal Corporations, Municipal Committees/Councils/Nagar Panchayats, Notified Area Committees in Punjab.
View of the Commission
The Commission decides to continue the existing practice of Single Part Tariff for Railway Traction. After receipt of revised proposal of the Board for introduction of Two Part Tariff, the matter would be reviewed. However, the Commission has reduced the tariffs applicable for this category by 10% as per discussion in
Chapter-10. This issue is dealt in detail in Chapter – 9.
6.39 RATIONALIZATION OF TARIFF FOR DEFENCE CATEGORY
Objection Raised
Chief Engineer, Jalandhar Zone, MES approached the Commission with the request that:
i) A separate category for Defence be provided in the categories of consumers or MES be placed in Licensee category on the grounds that :
a) Defence is not a profit making commercial or industrial consumer.
b) Predominantly, Defence is domestic consumer.
c) The entire take over point, stepping down arrangement and distribution is created/maintained by them from their own funds, spending a colossal amount of money.
ii) Energy should be charged on the basis of actual meter consumption and the clause of MMC should not be applicable on defence.
iii) Tariff should be approved with retrospective effect from December 10, 2002 to allow adjustment for excess tariff paid.
Army Authorities have further intimated that as a result of sustained efforts made by them by approaching CERC and other SERCs, many of the SEBs/SPCs have evolved a rationalized tariff structure in recent past.
Response of PSEB
The PSEB submitted as under :
i) The MES is being charged the rates applicable to Bulk Supply consumers due to the fact that the load of Military Establishments is mixed load comprising residential colonies, offices and some commercial establishments. For such bulk supply consumers having power requirement for different purposes a separate bulk supply category has been approved by the Commission. The tariff of the bulk supply has been kept between the domestic and NRS category considering the mixed load. Therefore, the Board opines that the applicability of the BS in this case is in order.
The grant of a separate tariff as a licensee to the MES is the privilege of the Commission. However, such tariff should only be granted as and when the Central Govt. issues its order on the matter for applicability throughout India.
ii) The Board charges MMC component in the tariff for Bulk Supply consumers in accordance with the tariffs approved. More than 50% of the cost incurred by the Board is fixed in nature. The PSEB has to pay for these expenses irrespective of the fact whether the energy is actually consumed by the consumer or not. The Board partly recovers these fixed charges from various consumers either through MMC or fixed component of tariffs.
iii) The Board disagrees with the request of the respondent for retrospective applicability of such tariffs and requests that the tariffs should only be applicable prospectively from the date of the order.
View of the Commission
The Commission has already decided to treat all Defence Establishments where further distribution to the colonies is the responsibility of the MES as deemed licensees under Section 14 of the Act. This issue is dealt in detail in Chapter – 9.
6.40 SOS CHILDREN’S VILLAGE RAJPURA, PUNJAB
Objection Raised
The SOS Children’s Village Rajpura, submitted that it is a charitable organization working for orphaned, destitute, abandoned and needy children of Punjab to provide environment and facility for their growth to become contributing members of the society. The organization further intimated that it is a bulk domestic user receiving power from 11 KV line and having its own transformer and its bi-monthly bill is about Rs. 90,000/-. It has requested for 50% concession on the electricity rates so that money saved could be utilized for the benefit of needy.
Response of PSEB
The Board submitted that according to Electricity Act, 2003, the tariffs of all categories are required to reflect the cost of supply of electricity and cross subsidies are progressively to be eliminated. The Board is, therefore, constrained to add any other class of consumers in subsidized category until the State Govt. expressly compensates Board for providing such supply at subsidized rates.
View of the Commission
The Commission decides to continue the present system of charging SOS Children’s Village. This issue is dealt in detail in Chapter – 9.
6.41 CONSIDERATION TO CHARITABLE TRUSTS
Objections Raised
Mahant Prabhat Puri Social Welfare Trust and Mandi Gobindgarh Educational & Social Welfare Trust, Gobindgarh have raised concern on being charged tariffs at Commercial rates. It has been submitted that since 100% Charitable Educational Institutions/ Organizations, serve the social cause without any profit motive they deserve special consideration and hence should be charged DS Tariff, so that the funds so saved can be better utilized for noble purposes.
Response of PSEB
The PSEB submitted that, according to section 61(g) of the Electricity Act, 2003, the tariff for all categories are required to progressively reflect the cost of electricity and also, reduce and eliminate cross-subsidies within a period specified by the Commission. The Board is therefore constrained to add any other class of consumers in the subsidized categories until the State Government expressly compensates the Board for provision of such supply at subsidized rates.
View of the Commission
The Commission decides to uphold the version of PSEB and not to add any more categories to the subsidized category of the consumers. This issue is dealt in detail in Chapter – 9.
6.42 WHEELING AND PARALLEL OPERATION CHARGES
Objections Raised
Indian Acrylics Limited pointed out that in case a generator is already a Board’s consumer and has paid the entire cost of the line, bay and connected equipment, no charges should be levied from the generator for wheeling or third party sale. Even Parallel Operation Charges introduced by the Board should not be recoverable. The nominal charges may be recovered towards Administrative Charges as infrastructure charges are being recovered through MMC. The same are, however, recoverable in case third party is not SEB’s consumer.
Further, it was stated that the Board is charging Parallel Operation Charges at the rate of Rs. 200/ KVA at 5% of the KVA capacity of the TG on a monthly basis which is highly unjustified in case of existing consumers who have already paid the cost of the connecting infrastructure in the first instance. It was requested that these charges need to be withdrawn. It was however opined that these charges are recoverable in case the generator/third party is not SEB’s consumer.
Response of PSEB
PSEB submitted that Parallel Operation charges are not a subject matter of consideration with reference to the ARR & Tariff Petition of the Board for FY 2004-05. It was, however, submitted that the levy is justified as the Board has to keep the provision for the load capacity in its supply and grid infrastructure. It was pointed out that the consumer himself admitted that it leads to inadvertent power flows, which could be significant in the event of failure of the generator. Such charges have also been allowed by State Regulatory Commissions in other States.
The PSEB further submitted that wheeling charges are justified for making use of the grid infrastructure for wheeling the energy to the consumers from the captive power plant. Non-recovery of cost associated with such usage of infrastructure would not be justifiable to the existing consumers of the Board. The Board also provides relief to the existing consumers by suitably passing the revenue earned from such wheeling in the ARR computation, while computing the revenue gap for the year. Further, the Electricity Act, 2003 also specifically allows levy of charges for wheeling. The PSEB intimated that such charges are also identified as legitimately recoverable in other States.
View of the Commission
The Commission directs the Board to furnish full justification of all the charges including parallel operation charges to be recovered from the various categories of consumers alongwith the ARR and Tariff Application for the year 2005-06. This issue is dealt with in detail in Chapter-9.
6.43 REGULATORY ASSET FOR FY 2004-05
Objections Raised
CII brought to the notice of the Commission that the Commission in its Tariff Order 2003-04 had directed the regulatory asset of Rs.150 crores to be recovered equally from the Board and consumers in two years. However, the Board intends to recover the full amount of the regulatory asset of Rs.150 crores from the consumers only, in two years along with a carrying cost of Rs.18.56 crores. CII did not agree with revenue deficit of Rs.219 crores shown by the Board for 2003-04, because certain expenditures had been claimed by the Board in utter defiance of the Commission’s Tariff Order for the year 2003-04.
Response of PSEB
The Board submitted that the efficiency improvements proposed to be undertaken by the Board under various heads have already been accounted for in the respective heads while projecting T&D Losses, interest costs, operational performance of generation, establishment, etc. Therefore there was no further scope for the Board to adjust an additional 50% of the approved regulatory asset for FY 2003-04 along with its financing costs. The PSEB, therefore, pleaded with the Commission to allow the entire amount of regulatory asset due for recovery in the ensuing year from the tariffs.
View of the Commission
The Commission has revised its Tariff Order for the year 2003-04. It has been observed that there is net surplus of Rs.262.43 crores with PSEB for the year 2003-04 based on the tariff already allowed by the Commission in the Tariff Order for the year 2003-04. As such the Regulatory Asset of Rs.150 crores gets automatically liquidated as the revenue receipts of PSEB for the year 2003-04 are more than the revenue requirement. This is dealt in detail in Chapter – 3.
6.44 TARIFF AND OTHER ISSUES
Objections Raised
The Consumer Protection and Grievances Redressal Forum, Mohali pointed out that personnel and expenses in B.B.M.B. were decided to be shared between Punjab and Haryana in the ratio 60:40. Though 60% expenses are being borne by Punjab, the employees’ strength of PSEB, on deputation to BBMB has reduced considerably. The Forum also made some suggestions for conducting raids at the consumer premises viz. the raid should not be conducted in the absence of the owner and it should be made on a day following which it is not a holiday so that it is possible for the consumer to deposit the penalty and get the connection restored. The identity of the person intimating pilferage of some consumer be kept secret and he should be suitably rewarded in case the information is found correct. It was further suggested that load of fan points be taken as 1/5 as all the fans do not run simultaneously.
The Goraya Regd. Factories Owners’ Association and others requested that since system of contract demand is being introduced for LS consumers no check be made of the connected load of the consumer, instead contract demand be checked. Other category of consumers such as SP, DS and NRS consumers be allowed to have option to adopt contract demand by installing their own MDIs. It was further submitted that there should not be any limit on connected load in case of LS consumers so long as load remains within sanctioned contract demand. In case of request by the consumer for extension in load where dedicated line exists and for which cost of line was initially met by the consumer, such an extension be granted immediately irrespective of the time limit of 5 years and no service connection charges be demanded until any augmentation of the line is required.
The Consumer Welfare Council, Bathinda requested that cheque payment should be received by the PSEB upto 4 PM.
Some of the consumers and consumer groups submitted that the cost amounting to Rs. 500/-, fixed for sale of a set of ARR and Tariff Application of the Board and other relevant documents, for inviting objections in this regard is very high and it may be difficult for some individuals or consumer groups to spend this amount.
Response of PSEB
The Board submitted that power generation allocation by BBMB to Punjab as well as the expenses in respect of operation of projects are shared in the same proportion. The concern of the objectors that expenses disproportionate to energy received from project are loaded on to consumers is not correct.
The Board stated that it has noted the suggestion regarding conducting raids and would examine feasibility of implementation of same. As regards publicity about reporting of theft and pilferage of electricity to PSEB, it is submitted that the Board has been publicizing through posters and media campaign at regular intervals in its offices and other public places to keep the identity of the informer secret and the same is actually kept secret.
PSEB further submitted that assessment of connected load is made as per the regulations of PSEB. Though the connected equipment of similar nature like fans, may not be used simultaneously, there is certain risk of damage to the grid infrastructure if the connected load is used simultaneously even occasionally during family function like marriage etc. without prior permission of the Board. Allowing indiscriminate increase in connected load to all consumers would amplify the risk manifold apart from increasing the losses in the system due to overloads. The Board submitted that methodology of assessment of sanctioned/ connected load formulated after careful deliberations is in order.
Regarding request that no check be made on connected load so long as the consumer’s maximum demand remains within sanctioned contract demand, the Board submitted that indiscriminate extension of connected load cannot be allowed by PSEB considering the collective risk it poses on the system losses and grid stability.
The Board conveyed its inability to allow option to the consumers in SP, DS, NRS category to avail contract demand system in view of operational problems and to avoid disputes unless Commission considers it appropriate to extend the facility to these categories as a whole rather than making it optional for the consumer.
In case of dedicated line, though asset has been erected at the cost of consumer, it remains the property of the Board for all purposes. As per CC No. 36/2004 dated June 15, 2004 the Board has decided to allow extension in load without recovery of per KW charges in case of independent feeder erected at the cost of consumer, even after five years, provided that the said line is capable of taking the additional load.
Regarding suggestion that payment through cheques be received upto 4.00 p.m., the Board assured to examine the possibility for implementation of the proposal.
View of the Commission
The Commission notes that the sharing of benefits being availed by the PSEB from BBMB power system and the expenses being borne by the Board are in the same ratio as such no change is required. The Commission directs the Board to examine expeditiously the feasibility of implementation of the demand made by the objectors regarding conducting of raids and extension in the time limit for making payment to the Board through cheques. The Board is directed to ensure that no avoidable harassment is caused to the consumers during the raids. The Commission also decides to continue with the practice of single part tariff for SP, DS and NRS consumers.
The Commission, after due consideration decides to reduce the cost of a set of ARR and Tariff Application of the Board and other relevant documents for tariff determination in future to Rs.100/-.
The Commission notes that PSEB has already decided to allow extension in load in case of independent feeders without recovery of per KW charges even after five years provided that the said line is capable of taking the additional load. Compliance regarding issues pertaining to the publicity for reporting of theft etc. is also being made.
6.45 OBSERVATIONS OF THE GOVERNMENT OF PUNJAB
The State Government was approached by the Commission through letter No. 2972 dated August 06, 2004 and No. 3425-26 dated September 02, 2004 to offer its comments on ARR and tariff application of the Board for the year 2004-05. The Government was also requested to offer its specific views on the important issues such as financial restructuring of the Board and apportionment of cost of Ranjit Sagar Dam Project, norm for agricultural consumption, reduction of cross subsidy and period for elimination of the cross subsidy, purchases of power mainly for subsidized sector namely agricultural and domestic consumers due to unprecedently poor monsoon, position reflected by the Board in ARR regarding non achievement of performance targets, proposal of the Board for converting revenue gap into regulatory asset and annualisation of the tariff in view of the availability of only six months for adjustment of annual revenue gap and agricultural tariff & level of subsidy which the Govt. may like to provide as well as the allocation of amount of this subsidy to particular category of consumers.
In its response, the State Govt. has pointed out that revision in tariff may not be the only instrument for meeting the ARR of PSEB. Other measures such as reduction in cost, improving operating efficiencies, reduction in T&D losses and manpower cost etc. are equally important and may be suitably considered by the Commission while making the tariff order.
The Govt. of Punjab has supported the view point of PSEB seeking annualisation of tariff rates for the year 2004-05 on account of withdrawal of earlier ARR and tariff petition and resubmission of the same in the end of May, 2004. It has been stated that PSERC may determine the revenue gap and the annualisation be allowed to the extent of this revenue gap. The State Govt., however, pointed out that PSEB was operating in monopolistic market condition, as such, PSERC may consider filing of PSEB for the year 2004-05 having regard to well established realistic norms of operating efficiencies.
Regarding financial restructuring of the Board and apportionment of costs of RSDP, the State Govt. has intimated that it is committed to clean the balance sheet of PSEB and companies to be carved out of it after unbundling. For this purpose, interest accrued on the Govt. loans upto March, 2002 to the tune of Rs.2228 crores has been adjusted against subsidies recoverable. The proposal to adjust about Rs.1444 crores as apportioned cost of RSDP to irrigation against Govt. loans are under active consideration of the Govt. It has further been pointed out that the Govt. has gone through the status review of the PSEB as per directions of the Commission in the Tariff Order for the year 2003-04 and it has been observed that there has been substantial progress in the areas of restructuring of loans of the Board, improvement in plant load factors particularly in the first 3-4 months of the current year and improvement in heat rate of various thermal stations. The State Govt. has observed that there has been some slow-down in bringing down the T&D and commercial losses but it needs to be appreciated that it requires heavy investment both for modernizing its T&D system and for metering agricultural consumers. The Punjab Government has recommended that Commission may consider revising the bench marks after hearing the PSEB.
Regarding norm for agricultural consumption, it has been opined that the existing norm of 1650 kwh/kw/year should continue for assessing the total agricultural consumption. However, it was suggested that for greater accuracy in assessment of agricultural consumption, there is urgent need to provide metering on transformers feeding pump sets.
With regard to reduction in cross subsidy and elimination of cross subsidy, it has been pointed out that Electricity Act, 2003 postulates reducing the cross subsidy in a phased manner over a period to be specified by the appropriate Commission. It may not be possible for the State to part with higher subsidies due to its own critical financial position and as such, the application of the utility may be processed by Commission in a manner which is fair to all players.
Regarding purchase of power this year mainly for subsidized sector, it has been stated that Govt. supports the PSEB to the extent that this year rainfall and snow cap has been very scanty resulting in shortage of almost 30% of the hydro power which is the cheapest. In order to ensure that power was available to all categories and to maintain required input in the agricultural season during the crucial time in the cropping cycle, the Board was required to make power purchases at higher rates than that of last year and in some instances at an incremental cost of upto Rs. 6.00 per unit. To offset the additional financial burden of the power utility, the Board needs to be supported as it would be difficult for the State Govt. to financially compensate the Board on this account. The Govt., therefore, has recommended that extra cost incurred by the Board to arrange additional power to meet requirement of all categories of consumers including AP consumers due to unprecedented drought like conditions upto the end of July, 2004 be passed through while working out the tariff rates for the year 2004-05.
The State Govt. had stated that since agricultural consumption is not metered at the moment, the reasons stated for marginal over run in T&D losses to 25.35% against the target of 24.5% due to higher agricultural power consumption during the year is debatable. The State Govt. has stated that since PSEB has proposed to reduce the losses from 25.35% to 24% by making suitable investment in improving and strengthening the T&D network, it is agreeable to the PSEB proposal of allowing the projected losses of 24% for the year 2004-05.
Regarding regulatory asset and annualisation, it has been stated that once revenue gap is determined by the PSERC the annualisation may also be allowed to the extent of revenue gap. However, the Govt. is not in favour of creating regulatory asset to be amortized in future. It has also been mentioned that the terminal benefits liability has to be built into the tariff on ‘pay as you go’ basis. The financial burden on account of past unfunded liability determined through actuarial valuation need not be included in the calculation in the current tariff as the requirement of building up such a fund would emerge only when new entities come up. It has further been suggested that the Commission may scrutinize the higher cost of power purchase with a view to determine the net revenue gap keeping in mind that PSEB will remain deficit in cheaper hydel power through out the year in view of the failure of the monsoon.
The Govt. has further stated that it is committed to provide subsidized power to the agricultural sector and free power to SC domestic consumers. The exact amount of subsidy will be conveyed after the Commission fixes the tariff for agricultural pump sets / domestic consumers. However, due to stressful financial position of the Govt., it may not be in a position to provide subsidy for this purpose more than what it had provided during the year 2003-04.
The Commission has taken due consideration of the views of the Government of Punjab. The Commission has made its conclusions on various issues on merit, after taking into consideration the submissions made by the Board, the objections of the concerned parties, the response of the Board thereon, the observations of the Government and other relevant factors. The detailed observations on each issue are included in subsequent chapters wherever the relevant issues have been discussed.
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