Petition No.17 of 2006
Date of hearing: November 28,2006
Date of order: May 8,2007

In the matter of:

Petition under Regulations 33 and 34 of the Punjab State Electricity Regulatory Commission (Open Access) Regulations, 2005.
In the matter of:

Steel Furnace Association of India (Punjab Chapter) c/o Upper India Steel Mfg. & Engg. Co. Ltd., Dhandari Industrial Focal Point, Ludhiana.

Shri Jai Singh Gill, Chairman
Smt. Baljit Bains, Member
Shri Satpal Singh Pall, Member
For the Petitioner:

Shri D.K.Sindhawani
Shri Amarjit Goyal
For the Board:
Sh. R.K.Singla, Director Tariff Regulations II


This petition has been filed by Steel Furnace Association of India (Punjab Chapter) seeking amendment to PSERC (Open Access) Regulations, 2005 particularly Regulation Nos.16, 17, 18, 22, 23 & 24. It is stated in the petition that the Commission has not adopted cost of supply methodology for determination of tariff to arrive at the cost of supply for different voltages, therefore the charges specified in these Regulations are onerous for the large supply consumers availing supply under Open Access Regulations. It is further stated that as the petitioner is drawing power on E.H.T. (66 KV) lines, the actual T&D losses can not be more than 3-4% and that the charges on this account should not be more than 1.5-2% instead of 10.375% as fixed by the PSERC. It is also stated that additional surcharge may not be levied on open access customers. The petitioner has stated that HPERC has capped the wheeling charges at 12 paise per unit whereas PSERC has fixed the same at 14 paise per unit.

The petition was admitted on September 27, 2006 and notice was issued to the PSEB. Reply on behalf of PSEB was filed on October 24, 2006. In the said reply it is stated that Open Access charges determined by the Commission are in no way onerous to the consumers seeking Open Access but rather these are very liberal keeping in view the decision and determination of similar charges by Central and other State Electricity Regulatory Commissions. It is further submitted in the reply that cost of supply methodology has not been recommended even in the National Tariff Policy which has provided that average cost of supply system may be adopted and tariff for various categories of consumers may be fixed +-20% of average cost of supply. PSEB has further stated that there is no comparison between Himachal Pradesh and Punjab due to different ground situations. PSEB has finally prayed that the petition may be dismissed. The petitioner and PSEB have also filed further written submissions reiterating their stands.

Arguments have been heard. PSERC Open Access Regulations were framed after following detailed procedure prescribed in The Electricity (Procedure for Previous Publication) Rules, 2005. Draft Regulations were circulated to all the stakeholders for inviting objections and such objections were duly considered by the Commission. The Regulations were got published in the State Government Gazette and were laid before the State legislature. However the issues raised by the petitioner are being discussed in the following paras.

In respect of the contention of the petitioner that the Commission has not adopted cost of supply methodology for determining the tariff, it is observed that it is not the intent of the legislature that the Commission should determine tariff based on cost of supply from the date of enforcement of the Electricity Act, 2003. Section 61 (G) of the Electricity Act envisages a gradual transition from the tariff loaded with cross subsidies to a tariff reflective of cost of supply to various classes and categories of consumers. In the National Tariff Policy also, it is clearly stated that by the end of the year 2010-11 tariffs are required to be fixed +-20% of the average cost of supply. The Commission therefore accepted the principle of average cost of supply for determination of tariff and consequentially open access charges and not categorywise or classwise cost of supply. The Appellate Tribunal vide its Order dated May 26, 2006 passed in respect of Tariff Orders for the years 2004-05 and 2005-06 has held that for the present the approach adopted by the Commission in determining tariffs based on the average cost of supply can not be faulted.

As the Commission decided to determine open access charges based on the average cost of supply, T&D losses were also based on average losses and not specific voltage level or categorywise losses. The Commission decided to allow only 50% of the aggregate T&D losses to be considered for determination of open access charges. For determination of surcharge the Commission decided that full loading of cross subsidy on the open access consumers may make open access unviable in the State. The Commission therefore decided that only one half of the current levels of cross subsidy will be the surcharge.

As regards additional surcharge the Commission decided that the same shall be leviable only when the licensee conclusively demonstrates that his obligation on fixed costs has been and continues to be stranded or that there is unavoidable obligation and incidence to bear fixed costs consequent to a contract. The obligation to demonstrate existence and extent of stranded costs rests with the licensee. Thus the decision of additional surcharge is to be taken by the Commission on a case to case basis.

It was not possible for the Commission to determine the transmission and wheeling cost separately in a fairly accurate and reliable manner. Therefore the Commission decided to go by the aggregate transmission and wheeling cost for determination of transmission and wheeling charges. As an open access consumer uses the distribution system only partially, the Commission was of the view that loading of full transmission and wheeling cost on the open access consumers will be unjustified. Therefore the Commission decided to levy 1/3rd of the aggregate transmission and wheeling charges for the relevant years on the long term open access consumers and only 25% of the aggregate transmission and wheeling charges for short term open access consumers.

It is evident from the above discussions that the Commission has, while framing the Open Access Regulations, kept in mind both the need to encourage open access and at the same time protect the interests of the Licensee. The issues raised by the petitioner are, on the whole, similar to those dealt with in Petition Nos 5/2003, 12/2003, 6/2004 and 9/2004 wherein the Commission has already expressed its views in detail in its order of January 25, 2006. In view of the above discussion, the Commission finds no merit in this petition which is dismissed.

(Satpal Singh Pall)
(Baljit Bains)(Jai Singh Gill)
Place: Chandigarh
Dated: May 8, 2007