PUNJAB
STATE ELECTRICITY REGULATORY
COMMISSION
SCO
NO. 220-221, SECTOR 34-A, CHANDIGARH.
Petition No. 4 of 2004.
Date of hearing : March 31,
2004.
Date of order :6.4.2004.
In the
matter of : ARR & Tariff Application
of Punjab State Electricity Board for the FY 2004-05 --
Application filed by the PSEB for withdrawal of ARR & Tariff
Application.
AND
In the matter of : Punjab State Electricity Board.
Present: Sh. R.S.Mann, Chairman.
Sh. L.S.Deol, Member
For the PSEB: Sh.
H.C. Sood, EIC/ Commercial.
Sh. B.D.Bansal, Director/ Sales.
For CII: Sh.S.P.Oswal, Ex-President, Punjab
State Council, CII.
ORDER:
1. The Punjab State Electricity Board filed its ARR
and Tariff Revision Application for the year 2004-05 on December
8, 2003.
After removal of the deficiencies by the Board as brought out by the Commission
in its various references,
the same was taken on record of the Commission on February
17, 2004. The
approval of the Commission for publication of a public notice for inviting
objections from public on the petition was conveyed to the Board on February
23, 2004.
2. On the directions of the Government as contained in its D.O.
letter No. 11/122/03-PE(S)/2497 dated 23.2.2004, the Board has filed an Application on February 27, 2004 seeking withdrawal of ARR and
Tariff Revision Application for the year
2004-05. The following prayers have been
made by the Board in its application:-
a) In
view of the peculiar and exceptional circumstances and one time restructuring
efforts of the Board being underway, the Board may be allowed to withdraw the
ARR and Tariff Revision Application for the year 2004-05 and it may be exempted
from getting the public notice published.
b) PSEB
may be permitted
to file revised ARR and Tariff Revision Application as soon as the details of
unfunded liabilities to meet with the pensionary
benefits etc. are available with the Utility, the effect of which is proposed
to be factored into the ARR for the year 2004-05 and shall be applicable to
unbundled entities of composite PSEB.
c) The
validity of the existing tariff be extended beyond March 31, 2004 till the new Tariff
proposals are finalized by the Commission on the basis of fresh ARR to be filed
by the Board.
d) The
Commission may also allow through appropriate changes in tariffs, the recovery
of the revised revenue gap including recognition of the unfunded pensionary liability, settlement of dues and receivables
with the State Government etc. as to be determined at the time of filing of the revised ARR and
Tariff Application for the year 2004-05.
3. The application was decided to be heard on March 22, 2004. The Commission later also
received a representation from Sh. S.P.Oswal, Immediate Past President of Confederation of
Indian Industry, Northern Region, requesting for hearing as and when the
request of the Board for withdrawal of ARR and Tariff Revision Application is
considered by the Commission. The representation
also stated that the industrial consumers were expecting a significant
reduction in the tariff rates in the coming year in view of the directives of
the Commission issued to the Board and State Government in earlier years. Now by withdrawal of ARR, the PSEB is
wishing to hold on to the higher rates of tariff for industrial consumers which
will be unjustified. It was further
stated that in case
the Board wants to withdraw the ARR, the tariff rates need to be
restored to the levels existing before setting up of the Commission till the
time financial restructuring is undertaken. It was also stated that the
Commission had already given reasonable time to the State Government and the
Board to undertake financial restructuring but no concrete steps have been
undertaken either by the State Government or the Board in this regard.
4. The representation of Sh. Oswal was considered by the Commission in its hearing on
March 22, 2004 and in view of the fact that the industrial consumers are also a
party directly affected by the withdrawal of the ARR And Tariff Application,
the Commission agreed to hear Sh. S.P.Oswal.
5. The petition was heard on March
31, 2004. The representatives of the Board submitted supplementary
affidavit and also stated that the Government and the Board are undertaking
exercise of restructuring and unbundling of the Board as mandated under the Electricity Act, 2003. As a result of this exercise, the Board may
undergo structural change and new successor entities will come into being
during the financial year 2004-05. Once the transfer scheme is approved by the
Government, the Board will be in position to know the exact constitution of the
new entities. In that case, filing of
separate ARR & Tariff Application by each of the successor entities
separately may be required in view of the provisions of the Act. Further, the financial restructuring plan may
also involve substantial change in the position of a number of items presently
exhibited in the balance-sheet of the Board.
The FRP transfer scheme and determination of other pre-requisites for
such transfer scheme will be developed by 3rd week of May and
therefore the Board has requested for withdrawal of ARR & Tariff
Application in view of the extra-ordinary circumstances involved. The Board also confirmed that it shall file
revised & updated ARRs.& Tariff petitions for the financial year 2004-05
including yearly liabilities in the revenue expenditure on account of past
unfunded liabilities relating to pensionary benefits,
settlement of various receivable/ payable between the State Government and PSEB
by or before the end of May, 2004. It
was further prayed that the present tariff structure be allowed to be continued
for atleast another six months i.e. till September 30, 2004 as a situation of
vacuum in tariff structure was inconceivable. Further, the Board requested that
the revenue gap as determined on the basis of revised ARR be allowed to the
Board through annualisation of tariff in the
remaining part of the year.
6. Sh. S.P.Oswal
reiterated his stand taken in the representation. He further stated that a number of industrial
units are getting sick due to the competition in the market and the units are
closing down. Unjustified high power
tariff is one of the reasons for high cost of production and inability to compete
in the market for the industries in Punjab. This was partially due to physical factor of
location of Punjab being distant from the coal sources
but also due to inefficiencies of the Board and discriminatory policies of the
Government. He showed resentment over
the proposal of the Board for withdrawal of ARR as according to him, this
implied continuance of present tariff structure for some more time. As against
this, industry was expecting some relief under the new tariff structure in view
of the mandatory requirement of Electricity Act, 2003 for bringing tariffs
nearer to the average cost of supply as well as the fact that real cost of
supply for the industrial consumers was already much lower than even overall
average cost of supply. He further stated
that restructuring should not come in the way of determination of tariff
separately for different functions of the Board namely generation, transmission
and distribution and that these separate tariffs could come into operation from
the date the new entities started operating separately. According to him, in any case, the
distribution tariff will not be affected by the restructuring exercise. He also stated that the Government is not
taking concrete steps for restructuring and revaluation of Ranjit
Sagar Dam. The consumers should, however, not be
adversely affected on this account.
7. The Commission has considered the mandatory provisions of the
Electricity Act 2003 and the Regulations made thereunder.
The position brought out by the Board and Sh.Oswal
has also been considered. It is true that the Act does not specifically provide
for annual submission of ARR and Tariff Application by the Utility. However, the general intent of the Act is
very clearly for determination of tariff with reference to the cost of service
of the Utility and this obviously involves determination of Annual Revenue
Requirement each year. Further, Regulation 4(1) of Tariff Regulations framed by
the Commission under the Electricity Regulatory Commissions Act,1998 clearly provides for submission of ARR each year by
the Utility. In any case, non-submission
of ARR by the Utility cannot be accepted in the ordinary course as in that case
the Utility expecting downward revision in tariff will always like to resort to
such a course of action thereby denying the consumers their justified and due
benefits. On the other hand, unbundling
of the Board is a one time exercise and
it may put
undue and extra burden on the Board and the Government. This also involves
financial restructuring which requires many fundamental issues to be sorted out
as a one time measure. In view of the
extraordinary circumstances, it is not inappropriate to allow extra time to the
Board for filing its ARR and Tariff Application as requested by them. However, some restrictions need to be put in
place to ensure that the Board keeps its commitment about submission of revised
ARR and also to ensure that the consumer interests are safeguarded. Further, the Commission noted that under
the Act, a separate transmission utility to be known as State Transmission
Utility (STU) has to be constituted latest by June 9, 2004 and the separate transmission utility so
constituted can not engage in the business of trading in electricity under
Section 39 of the Act. The Board is presently engaged in the business of
trading as it makes bulk purchases to distribute the electricity so
purchased. Thus, under the Act, it is
mandatory for the Board to segregate its transmission activity from its other
activities after June 9, 2004. This means that for major portion covering
about 10 months of the financial year, the Utility will no longer be one entity
but atleast two entities. In such a case, it is not appropriate for the
Commission to proceed with the ARR & Tariff Application of the unified
entity. It will be more appropriate if the ARRs.
& Tariff Applications for different entites to be
created as per the Act are separately projected and processed.
8. In view of all above, the Board is directed to file its ARRs. and Tariff Applications
keeping the above observations in mind and separating the transmission business
from other businesses of the Board as required under the Act.
9. It is, therefore, decided as
follows:-
(a)
The
Board is allowed to withdraw the ARR & Tariff Application already filed by
it and to file the new ARRs. and
Tariff Revision Applications for the financial year 2004-05 latest by 31st
May, 2004 unless the dead line is extended
by the Commission for exceptional reasons. The Commission has noted that the Board
itself has committed for filing of revised ARRs. and Tariff Applications by May 31, 2004 only.
(b)
The
present tariff structure shall continue till September 30, 2004 or the date of implementation of fresh
tariffs to be decided by the Commission, whichever is earlier. Date of September
30, 2004 has been
fixed keeping in view the fact that four months is the minimum period required
by the Commission for processing the ARRs. and Tariff Applications.
This period can not be curtailed further in view of the fact that the ARRs. and Tariff Applications for
the year 2004-05 may be filed separately for separate entities after unbundling
of the Board and will also involve items of cost towards restructuring which
will need in-depth study relating to their principles, determination of their
magnitude and consideration for their inclusion in the ARR. Further the normal procedure for
determination of tariff which includes inviting objections from public giving them 30 days notice as well as public hearing and validation
of data of the Board will also have to be observed.
(c)
In case
the Board fails to file its ARRs. & Tariff
Applications by the due date as indicated above, and if this results in
delaying the Commission’s orders on the ARRs. &
Tariff Applications beyond September 30, 2004, the Commission may, while allowing
continuation of present tariff structure beyond September 30, 2004, reduce the present tariff for any category/
categories of consumers till such time as new tariffs are decided by the
Commission for all the categories.
(d)
The
Board shall file new ARRs and Tariff Applications for
different entities separately
keeping in view the requirements of the Act on the matter.
(e)
The
matter regarding the prayer of the Board for annualisation
of the tariff shall be decided by the Commission at the time of determination
of Tariff based on new ARRs. & Tariff
Applications filed by the Board or by its successor entities.
Sd/- Sd/-
(L.S.Deol) (R.S.Mann)
Member Chairman
Place: Chandigarh.
Dated: 6.4.2004