Petition No. 10 of 2005
Date of Hearing: January 27, 2006.
Date of Order: January 31, 2006.

The Punjab State Electricity Board (Board) vide its Petition No.10 of 2005 has requested for the approval of Fuel Cost Adjustment with effect from January 1, 2006. The Board has calculated the Adjustment Amount at Rs.20.79 crores and has worked out the chargeable Fuel Cost Adjustment Surcharge at 2.82 paise/unit for metered category and Rs.4.73 /BHP/Month for unmetered category.

2. The Commission has laid down the Fuel Cost Adjustment Formula as per Appendix-7 of the Conduct of Business Regulations, 2005 published in the Government of Punjab Gazette on April 22, 2005. The Fuel Cost Adjustment is, therefore, to be worked out in accordance with the formula already provided in the said Regulations.

3. As per the formula, following two types of costs are to be taken into account for working out Adjustment Amount:

   1. Change in fuel cost of Board’s own thermal stations; and

   2. Change in power purchase cost due to change in fuel cost alone for Central Generating Stations.

4. To arrive at the change in fuel cost from the level approved by the Commission for own thermal stations of the Board, the fuel cost for actual generation during the 2nd quarter has been worked out both ways; with the parameters including prices and Gross Calorific Value of Coal and Oil approved by the Commission in the Tariff Order for the year 2005-06 as well as with actual prices and Gross Calorific Value of Coal and Oil as intimated by the Board in the Petition, but keeping performance parameters as approved by the Commission in the Tariff Order. This works out to minus Rs.11.51 crores as per Annexure –I and II.

5. In order to arrive at the change in power purchase cost due to change in fuel cost alone for Central Generating Stations, the power purchase data made available by the Board in its Petition at Annexure -6 has been relied upon. It is noted that the Board has added power purchase from Rihand-II station also which is a new source and was not approved by the Commission while approving the Annual Revenue Requirement for the year 2005-06. However, the Board is incurring extra expenditure in making these power purchases on account of fuel cost variation. Accordingly, it is considered appropriate to take total purchase from NTPC stations into account, including the new sources for working out the Adjustment Amount required in power purchase cost on account of change in fuel cost. Power purchase from Rihand-I has been allowed by the Commission in the Tariff Order and for this, the variable cost of 70 paise/unit stands approved. As such, for the purpose of w! orking out this change in respect of Rihand-II station, the approved fuel cost has been taken same as that of Rihand-I station i.e. 70 paise/unit. The Board has also calculated difference on this basis. Accordingly, the total difference in variable cost for NTPC stations works out to Rs.34.06 crores as per the data provided by the Board in its Petition.

6. As per Fuel Cost Adjustment Formula changes in power purchase from all Central Generating Stations are to be allowed as a pass through, through FCA. Nuclear stations under NPC are also Central Generating Stations and accordingly, changes in power purchase cost from these stations on account of variation in nuclear fuel cost also need to be taken into consideration while working out FCA amount. As per calculations made in Annexure-6, the net effect of this change is increase of Rs.9.68 lacs. This amount, therefore, has to be added while working out FCA.

7. Accordingly, the Fuel Cost Adjustment Amount on account of variation in power purchase cost works out to Rs.34.15 crores (Rs.34.06 crores plus Rs.9.68 lacs). The total Fuel Cost Adjustment is Rs.22.64 crores (Rs.34.15 crores minus Rs.11.51 crores).

8. Adjustment of the first quarter is to be carried out while allowing FCA for the second quarter as the benefit of reduction in first quarter was not passed on to the consumers through tariff reduction. It is, therefore, not appropriate to increase tariff on account of enhanced fuel cost in second quarter without making adjustment of the reduction in fuel cost in the first quarter. The amount to be adjusted for the first quarter is minus Rs.10.73 crores as determined by the Commission at the time of passing order on the Fuel Cost Adjustment Petition for the first quarter.

9. With reference to the above, the calculation of Fuel Cost Adjustment is as per Annexure-III enclosed. The cumulative Adjustment Amount for the first and second quarter works out to Rs.11.91 crores and the Fuel Cost Adjustment chargeable from consumers shall be 2 paise/unit for metered category and Rs.3/BHP/Month for unmetered category.

10. There are always fluctuations in the fuel cost as can be seen from the variations in the first quarter and the second quarter. Since the cumulative FCA for six months now worked out is Rs.11.91 crores which is not substantial, the Commission is of the view that no change in tariff be made on account of FCA now. Instead, the differene may be taken into account at the time of processing of the Annual Revenue Requirement and Tariff Application of the Board for the year 2006-07 which will also involve review of the Tariff Order for the year 2005-06. This will obviate the need for frequent changes in tariff.

11. The Board was heard on the matter in the hearing held on January 27, 2006. The representatives of the Board agreed with the calculations made by the Commission except the fact that adjustment should be restricted to second quarter only and adjustment of first quarter need not be carried out at this stage. They, however, had no objection to making no changes in tariff on account of FCA now and carrying forward the adjustment amount to the tariff revision for the year 2006-07. The Commission sees no justification in not carrying out adjustments for the first quarter while allowing variation in FCA in the second quarter.

12. The Commission, therefore, approves the Adjustment Amount of Rs.11.91 crores cumulative for first two quarters. However, no change in the tariff at this stage is considered necessary. The adjustment amount shall be allowed alongwith Tariff Order for the year 2006-07.

Annexure -I

FUEL COSTS (COAL + OIL) FOR ACTUAL GENERATION DURING 2^ND QUARTER (JULY TO SEPT) OF 2005-06 WITH ACTUAL GROSS CALORIC VALUE AND PRICE OF COAL & OIL AS PER PSEB PETITION BUT RETAINING ERFORMANCE PARAMETERS AS APPROVED BY THE COMMISSION IN ITS TARIFF ORDER FOR THE YEAR 2005-06

Annexure -II

Annexure -III

FCA FOR THE SECOND QUARTER (JULY TO SEPTEMBER) OF 2005-06 TO BE CHARGED FROM JANUARY, 2006 ONWARDS