The Appellate Tribunal for Electricity (Tribunal) in its Order dated 1st November, 2007 decided various issues raised in Appeal No.119 of 2006 preferred by the Punjab State Electricity Board (PSEB) against the decisions of the PSERC (Commission) taken in the ‘Review’ exercise of 2005-06 which formed a part of the Tariff Order of 2006-07. The hon’ble Tribunal while disposing of this appeal upheld some contentions of PSEB and remanded the matter to the Commission for de-novo consideration. In the concluding portion, the hon’ble Tribunal has directed the Commission to pass fresh orders in respect of Issue Nos.1, 2 and 7 whereas a careful perusal of the order reveals that actually Issue Nos.1, 3 and 7 are to be looked into again.

          At the outset, it is relevant to clarify that the hon’ble Tribunal’s order was passed on 1.11.2007 whereas the Commission had already issued the Tariff Order for 2007-08 on September 17, 2007 which inter-alia, contained a ‘True up’ of 2005-06, ‘Review’ of 2006-07 and determination of ARR and Tariff for the year 2007-08. While the ‘Review’ exercise for a year is done to take into account the revised estimates of the licensee, the ‘True up’ exercise is based on the figures of actual income and expenditure depicted in the audited accounts. After the audited accounts for 2005-06 became available, the Commission undertook a ‘True up’ exercise to determine the allowable costs with reference to the actual figures of income & expenditure, the findings of which are incorporated in the Tariff Order of 2007-08. Issue Nos.1, 3 and 7 highlighted in the order of the hon’ble Tribunal are now discussed in the light of the review exercise for the year 2005-06 undertaken in the Tariff Order of 2006-07 and the True up which subsequently formed a part of the Tariff Order for 2007-08.

          In its appeal, PSEB had submitted that in its revised estimates it had indicated an investment of Rs.1281.00 crores for the year 2005-06 which is likely to go up to Rs.1450 crores whereas the Commission had approved the figure of Rs.1200.00 crores only in the Tariff Order of 2006-07. The hon’ble Tribunal has in Para 11 of its order directed the Commission to consider excess investment, if incurred during the year by PSEB, in the ‘Truing up’ exercise for the year 2005-06

          The Commission notes that PSEB had initially proposed an ambitious investment plan of Rs.1956.00 crores in its ARR and Tariff determination petition for the year 2005-06. Placing reliance on the actual capital investment of Rs.462.06 crores, Rs.336.20 crores and Rs.562.49 crores in the years 2001-02, 2002-03 and 2003-04 respectively, the Commission had approved an Investment Plan of Rs.1200.00 crores for the year 2005-06 in its Tariff Order of that year. In the revised estimates for 2005-06, PSEB had enhanced investment estimates to Rs.1281.00 crores while submitting data for the ARR & Tariff determination for 2006-07, against which the Commission had approved an investment of Rs.1200.00 crores in the ‘Review’ of 2005-06 in the Tariff Order of 2006-07. The Commission ‘Trued up’ its approvals of all the issues after taking into account the figures of income and expenditure as depicted in the audited accounts of PSEB for the year 2005-06. According to the audited accounts of 2005-06, PSEB had incurred total interest and finance charges of Rs.952.63 crores (net of capitalization of interest of Rs.99.84 crores) in arranging funds/loans for its day-to-day working and investments during 2005-06. In Para 2.14.1 of the Tariff Order of 2007-08, the Commission had ‘trued up’ interest cost of Rs.827.95 (952.63 - 124.68) crores for 2005-06 after disallowing the unjustified interest of Rs.24.68 crores for availing of working capital loan in excess of the prescribed norms and Rs.100.00 crores on account of diversion of capital funds for revenue purposes by PSEB. Thus, the Commission has already allowed the entire justified interest costs of loans including working capital and investment raised by PSEB for the year 2005-06. In view of this, the decision of the Commission in the ‘Review’ of 2005-06 stands already modified to the requisite extent.

          PSEB had contended that the Commission did not provide incentive to the extent of Rs.34.50 crores for the increased gross thermal generation of 788 MUs in the ‘Review’ of 2005-06. The Tribunal in Para 16 of its order has directed the Commission to consider the claim of PSEB as per the relevant Regulations.

          In Para 2.9.1 of the Tariff Order of 2007-08, the Commission has allowed incentives of Rs.48.04 crores for higher thermal generation of 887 MUs gross (808 MUs net) in all the three thermal generating stations of PSEB for the year 2005-06. Thus, the Commission has, in the “True up’ of 2005-06 incorporated in the Tariff Order of 2007-08, already allowed due incentives to PSEB for higher generation and no further relief on this account is warranted.

          PSEB has in this respect urged that the Commission employed different yardsticks while reviewing the power purchase costs for FY 2004-05 and FY 2005-06 wherein the actual cost was allowed in the case of the former while average rate of the past three year purchases was allowed for the latter. The Appellant had averred that the cost as per actual data for 11 months (April 2005 to February 2006) was higher than the average rate approved which resulted in under estimation of the power purchase cost for 2005-06 to the extent of Rs.120.83 crores. The hon’ble Tribunal has directed the Commission to take the actual costs of power procurement for 11 months and on that basis estimate the cost for the remaining one month and effect correction in the Tariff Order wherever required.

In this context the Commission notes that it accepted the revised estimates of Power Purchase and its cost as reported by PSEB at the time of ‘Review’ of 2004-05 in the Tariff Order of 2005-06. As regards power purchase cost allowed in the ‘Review’ of 2005-06, the Commission had worked out pro rata net requirement with reference to the power purchase cost approved by the Commission in the Tariff Order for the year 2005-06. However, in the ‘True up’ of 2005-06, incorporated in the Tariff Order of 2007-08 (Para 2.8), actual cost of power purchase of Rs.2404.92 crores for the year 2005-06 was allowed to PSEB, thus providing due relief to PSEB.

          In the light of the position brought out above, the Commission concludes that full relief in accordance with the hon’ble Tribunal’s order of 1st November 2007 has been made available to PSEB at the time of true-up of 2005-06 undertaken as a part of the Tariff Order for 2007-08 and no further action in this regard is now called for.