Chapter-7

Commission’s Analysis and Decisions on Revenue Requirement for the year 2004-05
A. CATEGORY-WISE ENERGY DEMAND (SALES) / T&D LOSSES AND TOTAL ENERGY REQUIREMENT

7.1     ENERGY SALES FOR THE YEAR 2004-05
    Proper projection of category-wise energy sales is very essential for the assessment of energy requirement to arrive at the quantum of power purchase requirement and for the assessment of revenue. The Commission has examined in this section in detail the category-wise sales projected by the PSEB in its ARR and Tariff Application.

    The consumption by all categories of consumers other than Agricultural pumpsets is metered. The consumption by Agricultural pumpsets is assessed by the PSEB based on a very limited sample metering. In the ARR and Tariff Application for 2004-05, PSEB projected aggregate sales within the State at 23139 MU for the year 2004-05 of which metered category amounts to 16667 MU and agricultural pumpsets 6472 MU. The Board arrived at the category-wise sales by assuming certain percentage increase over the revised estimates for the year 2003-04 as detailed in Table 7.1 below:

    Sl. No. Category 2003-04 2004-05
    Proposed by PSEB in ARR 2003-04 Revised Estimated Sales by PSEB contained in ARR 2004-05 Pre-actuals furnished by PSEB Projected Sales in ARR 2004-05 Increase over 2003-04 RE %
    1 Domestic 5491 5065 5259 5261 5553 6
    2 Non-Residential 1212 1235 1279 1279 1344 5.5
    3 Small Power 643 623 719 718 738 3
    4 Medium supply 1537 1541 1477 1479 1500 2
    5 Large supply 6260 6958 6727 6729 6902 3
    6 Public Lighting 86 127 102 103 117 15
    7 Bulk supply & Grid 371 416 500 498 513 3
    8Metered sales (within state) 15600 15965 16063 16067 16667  
    9 Agriculture 6288 5707 6243 6243 6472 3.7
    10 Total sales within the State 21888 21672 22306 22310 23139  
    11 Common pool 340 340 381 381 381  
    12 Outside State sales 460 460 426 426 426  
    13 Total (10+11+12) 22688 22472 23113 23117 23946  


    It is seen that the projected increase in sales of various metered categories of consumers other than public lighting is in the range of 2 to 6% and the projected growth for public lighting is 15%.

    In the ARR application proposals, the percentage increase over 2003-04 (RE) sales are stated to have been arrived at by the Board based on actual CAGRs for FY 98-02, FY 00-02, FY 01-03, actual growth in FY 03 over FY 02 and estimated growth in FY 04 over FY 03. However, it has been observed that there is no uniform criteria adopted by PSEB while arriving at the percentage increases for different categories.

    The Commission has, therefore, considered that a Cumulative Annual Growth Rate (CAGR) of last three years actuals may be taken to arrive at a realistic assessment of energy sales for the year 2004-05. The three year annual growth is considered instead of 5 years or 10 years annual growth, as recent three year annual growth gives the recent trend in growth which could be termed to be more realistic assessment. Therefore, the CAGR of three years actuals i.e. 2000-01 to 2003-04 is considered. The actuals for 2000-01 and 2003-04, the CAGR for three years and estimated sales based on CAGR for different metered categories are given in Table 7.2 below :

    Sl.

    No.

    Category

    Sales Actual

    CAGR (%)

    Estimated sales
    for 04-05

    2000-01

    2003-04

    1

    Domestic

    4261

    5261

    7.28

    5644

    2

    Non-Residential

    962

    1279

    9.96

    1406

    3

    Small power

    661

    718

    2.80

    738

    4

    Medium power

    1195

    1479

    7.37

    1588

    5

    Large power

    6266

    6729

    2.40

    6890

    6

    Public Lighting

    76

    103

    10.66

    114

    7

    Bulk and Grid Supply

    390

    498

    8.49

    540


    The estimated energy sales for the year 2004-05 in the table above are approved by the Commission.

    The estimated sales for the year 2004-05 projected by the PSEB and as approved by the Commission are given in Table 7.3 below :

    Sl.

    No.

    Category

    Projected by PSEB in ARR

    Approved by the Commission

    1.       

    Domestic

    5553

    5644

    2.       

    Non-Residential

    1344

    1406

    3.       

    Small Power

    738

    738

    4.       

    Medium supply

    1500

    1588

    5.       

    Large supply

    6902

    6890

    6.       

    Public lighting

    117

    114

    7.       

    Bulk and Grid supply including Railway traction.

    513

    540

    8.       

    Total metered sales.

    16667

    16920


    The Commission thus approves the metered sales of 16920 MU against 16667 MU projected by PSEB for the year 2004-05.
7.2     CONSUMPTION BY AGRICULTURE PUMP SETS
    Unlike the energy supplied to other consumers, the supply to the agricultural pump sets is almost entirely un-metered. The total quantum is thus not precisely measured but is only estimated. Unfortunately, the methodology employed till now for this purpose cannot be called very scientific so as to give figures which can be treated as fully dependable. In the ARR submitted for the year 2002-03, the PSEB stated that the energy estimation is based on sample metering of 3220 agricultural pump sets on 322 of the 11 KV feeders in different regions of the State. It was stated that an average consumption of 1930 kwh/kw/annum was arrived at for the year 2000-01 based on the total consumption of the pump sets derived from sample metering and the connected load during that year. The Commission in its Tariff Order for the year 2002-03 outrightly rejected such estimates on the ground that the sample size was too small since it represented only about 0.38% of the total population of about 8.5 lac pump sets in the State. Furthermore, the Commission noted that during the period 1994-95 to 2001-02, the average consumption estimated by PSEB on the basis of the above stated methodology showed a variation from 1552 to 1918 kwh/kw/year which in itself suggested that the figures are anything but accurate. The Commission then referred to an earlier study by the Punjab Agricultural University, a World Bank study for the State of Haryana on power consumed by the agricultural pump sets and the norms assumed for consumption by agricultural pump sets by other Regulatory Commissions and the views of the PSEB there on. Taking everything into consideration, the Commission concluded that the best approximation would be to assume a figure of 1700 kwh/kw/year as the norm for the entire state. Multiplying this figure by the total connected load of agricultural pump sets, the aggregate consumption of energy by the agricultural pump sets was arrived at. The figure thus determined by the Commission for the year 2002-03 was 5235 million units as against the estimate of 5986 million units given by the PSEB in the ARR.

    The matter of estimating the total energy consumption by agricultural pump sets during the year 2002-03 and for subsequent years was reviewed by the Commission in its Tariff Order for the year 2003-04. First of all, the Commission noted that while fixing the norm of 1700 kwh/kw/year for 2002-03, the Commission had been conscious of the fact that the year was turning out to be a year of substantial monsoon failure (the tariff order for the year 2002-03 was issued on September 6, 2002) necessitating higher energy consumption by the agricultural pump set owners, at least for the kharif crop and accordingly, a somewhat liberal norm of 1700 kwh/kw/year was fixed. Later, during the exercise for the processing of the ARR for 2003-04, the Commission obtained from the Board the actual consumption figures by the agricultural pump sets during the year 2002-03.The aggregate consumption shown was 5818 million units for a connected load of 3293991 KW. This gave a consumption of 1766 kwh/kw/year. Even though the Commission was fully conscious of the unreliability of the figures supplied by the Board with regard to agricultural consumption, especially the known bias in these figures for exaggeration, the Commission chose to accept them, as also certain other assertions made by the Board in this matter. Some of these assertions were because of drought conditions, agricultural pump sets were supplied 20% higher energy in the kharif season as compared to supply during the normal monsoon year ; of the total power supplied to agricultural sector, 70% is supplied during the kharif season and the balance 30% is supplied during the rabi season ; as a result of better timing of rains, the supply of power to the agricultural pump sets during the rabi season was much less than in a normal rainfall year. Making suitable adjustments for all these factors, the Commission concluded that for the entire year of 2002-03, it would be fair to say that the power supplied to the agricultural sector was 10% to 12% more than the supply for a normal year and accordingly, the consumption norm of 1766 kwh/kw/year given by the Board for the year needed to be reduced at least by 10% to get a reasonable norm for a normal year. Such calculations would give a norm of 1590 kwh/kw/year. However, in order to allow for a margin of error in the calculations and to keep a cushion for variable monsoons, the Commission decided to adopt the norm of 1650 kwh/kw/year to assess the requirement of power for the agricultural sector during the year 2003-04.

    The Commission in its first Tariff Order dated September 6, 2002 had asked the Board to get a detailed, rational and scientific study done for assessment of agricultural consumption from an independent and reputed agency. With the approval of the Commission, this study was entrusted to PAU. In August 2003, the PAU study team submitted an Interim Report (No. SESA/PSEB/03/05). The Interim Report states the objectives of the main study and these are as follows :- (a) examine the existing method of estimating electricity consumption by agricultural pump sets and find out the extent of variability in consumption norm (kwh/kw/month) within the feeders and amongst feeders ; (b) examine reason for the variability on consumption norm ; (c) examine efficiency of selected electric pump sets in the field ; (d) examine the effect of ground water level and rainfall on electricity consumption of tubewells assuming all other variables like supply hours etc. to be constant ; (e) modify or redesign if required, an efficient, cost effective, practically feasible and scientific methodology for the estimation of electricity consumption of agricultural pump sets ; (f) examine the number and distribution of existing sampling meters and / or addition of new sampling meters in the light of modified or redesigned methodology; and (g) examine the additional manpower and infrastructure requirements to implement the modified and / or redesigned methodology.

    The Interim Report states the objective of the Interim Report which is, ‘Examine the effect of underground water level and rainfall on electricity consumption of tubewells and assuming all other variables like supply hours etc. to be constant from available data’. Quite clearly, the Interim Report covers only one of the seven declared objectives of the main study, and this lone objective relates only to finding out the effect of ground water level and rainfall on electricity consumption of agricultural pump sets. Even in the study of this single objective, the Interim Report has listed in para 13.4 several major limitations. In these circumstances, when we’re looking for the determination of a dependable norm for an accurate estimation of aggregate energy consumption by the agricultural pump sets in the entire state, the findings of the Interim Report are of no use at all.

    The main findings of this Interim Report are (i) electricity consumption norm does not vary with variations in rain fall ; (ii) depth of water table significantly affected the total electricity consumption norm in three of the five areas into which the whole State was divided while in the remaining two areas, there was no such effect ; (iii) the average value of the total electricity consumption, for the whole of Punjab during 1997-98 to 2001-02 on the basis of sample meters studies of PSEB is 1746.94 kwh/kw/year.

    In the ARR for the year 2004-05, the Board has sought the help of the last finding stated above to buttress their view that the norm for consumption by agricultural pump sets should be fixed at 1854 kwh/kw/year instead of the norm fixed by the Commission at 1650 kwh/kw/year. It is not possible for the Commission to accept any such submission in view of the aforestated reasons and the all important fact that the figure of 1746.94 kwh/kw/year has been arrived at in the interim Report by adding an incremental value to a basic figure of agricultural consumption norm which is entirely based on the result deduced only from the sampling meters methodology of the PSEB based on a miniscule sample size, which has been categorically rejected by the Commission.

    Incidentally, if the findings of the interim report were to be treated as relevant and dependable, its conclusion that the electricity consumption norm does not vary with variations in the rainfall will be extremely embarrassing for the PSEB because the Board has been constantly stating that due to partial monsoon failure, the power requirements of the agricultural pump sets goes up very substantially.

    In the context of the above background, the Commission has decided not to use any of the findings of the interim report of the PAU study for the purpose of the present tariff order.

    Taking support from the interim report of the PAU study and basing their arguments and conclusions on the data collected through their meter sampling studies (without having significantly enlarged the size of the sample) and seeking to change the figures (supplied earlier by the Board itself) of the total connected load for the last two years, the Board has pleaded in the ARR application for the year 2004-05 that the norm for consumption by agricultural pump sets should be 1817 kwh/kw/year for the year 2002-03 and 1842 kwh/kw/year for the year 2003-04 as against the norm fixed for these two years by the Commission at 1700 kwh/kw/year and 1650 kwh/kw/year respectively. Adopting their own norms, the Board has worked out the aggregate agricultural consumption for these two years at levels much higher than the figures decided by the Commission. The Board has further highlighted the fact that more and more agricultural pump set owners are beginning to use submersible pumps, thereby consuming considerably more energy.

    During the interaction with the representatives of the agricultural pump set users, the Commission encountered the unanimous view that even if the PSEB uniformly and consistently supplied to everyone power for eight hours during the paddy season and for four to five hours during the rabi season, it was impossible that the aggregate supply to an average pump set will be more than 1600 hrs to 1650 hours in a year. It was also vehemently stated during these interactions that the Board never supplies power for eight hours every day during the whole of the paddy season. Even if the power is supplied, every pump set users is not able to use the energy for full period of supply due to defect in his own equipment.

    The Commission is unable to see any merit in the approach of the Board suggested above. The Commission has repeatedly stated that the results obtained from meter sampling studies of the Board cannot be regarded as dependable. In order to procure reliable information on this issue, the Commission, through its last two tariff orders had given several directives like increase of sample size to the level of 2% by December 2003, metering of transformers feeding pump sets, action plan to segregate lines feeding power to agricultural pump sets from those feeding power to rural households to enable better energy accounting and a proper record of the quality of power supplied. Unfortunately, no headway seems to have been made on any of these steps. Furthermore, as stated in the Tariff Order for the year 2003-04, the norm of 1650 kwh/kw/year for agricultural consumption was arrived at only on the basis of the information and data supplied by the PSEB, particularly with regard to the actual aggregate consumption in the agricultural sector and the total connected load of such consumers for the year 2002-03. Therefore, the norm of 1650 kwh/kw/year already fixed for the year 2003-04 cannot be modified.

    The year 2004-05 has turned out to be a year of substantial monsoon failure during the months of the kharif season and thus agricultural pump sets required more power than in a normal year. Accordingly, the Commission has decided to fix the norm of 1700 kwh/kw/year for 2004-05. It is possible that depending upon several factors, the actual average consumption by the agricultural pump set owners may be more than indicated here. This can be settled at the end of the year and after more authentic information is available.

    The three year CAGR for growth in connected load of agricultural sector for the year 2000-01 to 2003-04 comes to 6.46%. However, substantial AP load was declared under VDS during 2002-03 and 2003-04. Accordingly, the Commission has decided to assume a 5% growth in connected load for the year 2004-05. The Board had anticipated an increase of only 3.7% growth in agriculture consumption during 2004-05 over the agriculture consumption for 2003-04. The Commission has decided that tubewells under SP/MS and PSTC/Lift Irrigation are to be equated with AP tubewells as at para 7.18 of this chapter. Thus, Commission considers load growth of 5% to be reasonable.

    The Commission thus approves the agricultural consumption at the level of 6213 million units calculated on the norm of 1700 kwh/kw/year on a connected load of 3654963 KW by assuming 5% increase in connected load during 2004-05 over the actual connected load of 3480917 KW as on 31.3.2004.


CONTINUE