Petition No. 9 of 2004.

Petitions No.5 of 2003, 6 of 2004 and 9 of 2004 have been filed with the prayer that the Petitioners may be allowed to import power from sources other than distribution licensee and that charges and other terms and conditions for wheeling and banking of power for such supply may be fixed. Petition No.12 of 2003 has been filed with the prayer that they may be allowed to wheel power from their captive power plant at Ropar to their Bathinda plant and charges for wheeling etc. may be fixed. All these petitions will be disposed of by this single order. The Punjab State Electricity Board, State of Punjab through Secretary, Power and Bhakra Beas Management Board have been made Respondents in the Petitions. The Respondents were required to file replies to the Petitions. The Petitioners were, thereafter, allowed to file rejoinder to the replies filed by the Respondents. Further submissions of the Respondents on the rejoinder of the Petitioners were! also allowed to be filed and are available on record of the case.

2. After going through the petitions, the replies and further submissions thereto and all other relevant facts, the Commission had earlier drafted an order dated April 7, 2004 in respect of PACL. As the basic issue was a new concept in power sector, especially in India, and various aspects of the same were still being deliberated and evolved at the national as well as state level, it was considered worthwhile to circulate the Draft Order to the concerned parties. Accordingly, the Draft Order was circulated to all concerned parties for their comments and observations. However, the Commission considered it expedient not to pass any final order but, instead, proceed to first frame Regulations on Open Access. But the observations of various parties on this Draft Order have also been taken on record of the Petitions and are available on the record of the Petitions.

3. The process, including hearing of the parties on individual Petitions, the framing of the Draft Order and the observations of the parties on the Draft helped the Commission to frame its views on various aspects involved in relation to Open Access. Accordingly, it was considered preferable to first frame the Regulations to provide a uniform basis for decisions in individual Petitions. Thereafter, the individual petitions could be decided as per the Regulations framed. Even Section 42(2) of the Electricity Act, 2003 provides that the State Commission shall introduce Open Access in such phases and subject to such conditions (including cross subsidies, and other operational constraints) as may be specified by it and in specifying the extent of Open Access in successive phases and in determining the charges for wheeling, it shall have due regard to all relevant factors including such cross subsidies and other operational constraints. Accordingly, it was cle! ar that State Commissions were to first decide on the conditions before deciding on the individual cases. In view of these requirements, the Commission undertook the exercise of framing the Draft Open Access Regulations. A public notice inviting objections/ comments from the general public on these Draft Regulations was published in various leading newspapers of the region on January 12, 2005. The Government and the Board were also approached to furnish their comments on the Draft Regulations. In all, eight objections were received in response to the public notice. The Government and the Board also furnished their observations. In fact, the Board sought number of extensions for filing its reply on the Draft Open Access Regulations and gave its observations in piecemeal – last being on February 28, 2005. Taking into account the provisions of the Electricity Act, 2003, observations of the Government and the Board as well as objections received from the general public and! all other relevant factors, the Commission finalized the Open Access Regulations and notified the same in the Government of Punjab Gazette on August 26, 2005. These Regulations came into force from their date of publication in the official Gazette i.e from August 26, 2005 itself. The Regulations inter alia provide the basic principles for fixation of various charges for availing Open Access by the Open Access customers seeking supply of electricity from any source other than the distribution licensee of his area within the State of Punjab.

4. While framing these Regulations, the Commission kept in view the basic premise that one of the main objectives for enactment of the Electricity Act, 2003 is to promote competition and protect the interests of the consumers. In fact, even the preamble of the Act clearly states so. The Statement of Objects and Reasons of the Act also provides that there is need to provide for new concepts like power trading and Open Access. Number of sections in the Act clearly provide for Open Access on both the transmission system and the distribution system owned by respective licensees, thereby allowing non-discriminatory access to these systems by any Open Access customer on payment of various charges. Even in payment of various charges, certain dispensations by way of waiving of surcharge in case of captive generating plants for carrying electricity to destination of their own use were allowed under the Electricity Act, 2003 under Sections 38, 39, 40 and 42. The ! intention of the Act is, therefore clear and unambiguous i.e. to promote competition in the Power Sector and to this purpose, promote Open Access on both transmission and distribution systems. The Tariff Policy recently notified by the Central Government on January 6, 2006 also emphasises the need to encourage Open Access. The Tariff Policy states that computation of cross subsidy charge should not be done in a manner that it constraints introduction of competition through Open Access and payment of all charges for Open Access should still leave some margin for benefit to the customer. At the same time, interest of distribution licensee also needs to be protected. The need for introduction of Open Access in a time bound manner has been emphasized to bring about competition in larger interest of the consumers. In order to act as per the provisions of the Act and the Tariff Policy laid down by the Central Government, and to make Open Access a reality and not a facility w! hich remains only on paper, it was imperative that various charges for availing the Open Access are fixed on realistic basis. These charges could not be made so high as to make Open Access uneconomical even to the keenest customers and even with reference to the cheapest sources of power available to them. At the same time, it was also to be ensured that the Power Utility does not loose its most paying customers and is left to supply power mainly to unviable sectors of agriculture and domestic consumers without adequate compensation. It was, therefore, important to balance the attainment of the objective of providing Open Access with the objective of maintaining the viability of the Power Utility. It was also important to ensure that the burden of providing Open Access to a select few does not result in abnormal or unjustified increase in tariffs of the remaining consumers of the State and their tariffs also remain reasonable. It was with these basic premises that the Commission laid down basic principles for determination of the Open Acc! ess charges in the Open Access Regulations.

5. For attaining the above objectives, number of meetings were held by the Commission and long deliberations and discussions took place before finalizing the Open Access Regulations. It will be worthwhile to bring out the gist of these deliberations and discussions in regard to major principles decided by the Commission. This is not only relevant but most important as the Open Access charges for all Petitions are to be decided as per the principles incorporated in the Open Access Regulations. Obviously, having framed the Regulations and having decided the basic principles for determination of Open Access charges, the Commission has to apply the same principles and determine the charges as per these principles in respect of each and every case and will not like to go beyond these Regulations in individual cases. Accordingly, the decision on the Petitions mainly rests on the principles already incorporated in the Open Access Regulations.

6. First of all, the Commission was faced with the issue of determination of cost of supply. In the State of Punjab, the Power Utility is a State owned public sector Utility namely the Punjab State Electricity Board. Being a vertically integrated Utility, the Board undertakes all activities in the power sector namely Generation, Transmission, Distribution and Trading. The Board does not have segregated costs for different activities being undertaken by it. The Commission has in the Tariff Regulations as well as in the Tariff Orders passed by it, demanded the Board to supply the embedded or category-wise costs and determine costs separately for each of its various activities. No such segregation has, however, been made available to the Commission as yet. Such separation of costs will automatically become a reality on unbundling of the Board. However, inspite of much talk of the same and reforms in power sector in the past few years, the Board still ! continues to be an integrated Utility. It has expressed its inability to the Commission to provide costs of supply separately for different activities undertaken by it. The Commission does not foresee much possibility of the unbundling of the Board or a realistic separation of costs of supply in near future. Accepting this as a reality, the Commission has been calculating cost of supply and determining tariff on the basis of ‘average cost of supply’ in its various Tariff Orders passed by it in the past. The Tariff Regulations approved by the Commission also provide for determination of tariff with reference to ‘average cost of supply’ in the first phase. It is only in the second phase after 10 years that the Commission will consider moving towards the category-wise cost of supply as a basis for determination of tariff. The Commission, therefore, accepts the principle of ‘average cost of supply’ for determination of Open Access charges as well and not category-wise or c! lass-wise costs of supply.

7. The Board continues to be an integrated Power Utility engaged both in transmission and distribution activity. The costs for these activities are not separated in the Board. As such, it is not possible for the Commission to determine the transmission and wheeling costs of the Board separately in a fairly accurate and reliable manner as yet. The Commission has, therefore, decided to go by the aggregate transmission and wheeling costs for determination of transmission and wheeling charges. However, it is also appreciated that an Open Access customer uses the distribution system only nominally. Accordingly, loading full transmission and wheeling costs of the Board on the Open Access customer will be unjustified and unfair. It is often stated that for Open Access, no wheeling charges should be levied and even transmission charges should correspond to the cost of supplying power at the voltage level at which Open Access customer is actually served. Taking! into account these factors, the Commission has decided to levy only 1/3rd of the aggregate transmission and wheeling charges determined by the Commission in the respective years on the long term Open Access customers. For the short-term Open Access customers, such charges are levied at only 25% of the aggregate transmission and wheeling charges determined by the Commission as no additional capacity is created in this case and only idle capacity is utilized. Out of the charges collected from the short term customers by the licensee, 25% are to be retained by the licensee and the remaining 75% are to be utilized for reduction of transmission and wheeling charges and retail tariff of the consumers.

8. It was further noted that being an integrated Utility, the Board has not segregated its transmission and distribution losses. Instead, only an estimation of aggregate transmission and distribution losses is made by the Board. Further, questions can be raised about the accuracy of such estimation as the estimation of T&D losses is based on the estimation of agricultural consumption where the supply is mostly un-metered. It has often been alleged both by the Government and the public that the Board tries to hide part of its actual T&D losses by exaggerating its agricultural consumption. Further, in keeping with the provisions of Electricity Act, 2003, and Tariff Regulations framed by the Commission, the Commission has fixed a multi-year trajectory for reducing T&D losses, which include technical and commercial losses. The Commission has decided that for determination of Open Access charges, it shall go by the normative T&D losses fixed by the Commis! sion as targets to be achieved by the Board in the relevant years. It is felt that reliable segregation of transmission and distribution losses at this stage is not possible with the present integrated structure of the Board and data made available by the Board to the Commission in this regard. Further, as the Commission has decided to go by the average cost of supply, the T&D losses will also have to be based on the average losses and not specific voltage level or category-wise losses. The Commission also appreciates the fact that Open Access customers will use the distribution system only nominally. Accordingly, to load aggregate T&D losses on them will be unfair. It was also noted that even other State Commissions have loaded only transmission loses on the Open Access customers and some of them have loaded even these losses with reference to particular voltage level at which supply is obtained by the Open Access customer. Keeping in view both the aspects, it was d! ecided to allow only 50% of the aggregate T&D losses to be considered for determination of Open Access charges.

9. For determination of surcharge, the Commission has decided to go by the definition of cross subsidy as laid down by it in Para 9.3 of the Tariff Order for the year 2005-06. As per this definition, the ‘cross subsidy’ is the difference between the average realization from the consumer category and the combined average unit cost of supply expressed as a percentage of combined average unit cost of supply. The reason for taking average realization instead of base tariff for a consumer category was that the Utility will be loosing out on revenue based on average realization and not merely base tariff in case such a consumer moves out of the utility’s system. It is relevant to point out here that average realization is higher than the base tariff for Large Supply consumers. This is due to inclusion of Peak Load Exemption Charges (PLEC) and Monthly Minimum Charges (MMC) as well as rebates and incentives for availing supply at higher than base voltage and ! non tariff income in the realization figures while the same are not included in the base tariff. Having already deliberated the issue at length in its latest Tariff Order and having defined the cross subsidy therein, the Commission sees no reason to deviate from this basic principle for the purpose of calculation of surcharge. However, the Commission realizes that full loading of cross subsidy on the Open Access customers may make the Open Access unviable in the State. In such a case, of all the Open Access charges, the surcharge alone will become of a magnitude which will render the Open Access uneconomical to all prospective Open Access customers. The Commission, therefore, decided that only one half of the current level of cross subsidy will be the surcharge. It is to be noted that the Board will not be a loser on account of such partial loading of surcharge on the Open Access customers as the Board will be allowed full recovery of its reasonable costs through tari! ff from other consumers continuing with the Board. Further, judging b y the Petitions presently pending with the Commission, total quantum of fall in recovery in this manner from the Open Access customers shall be marginal when compared with the Aggregate Annual Revenue Requirement of the Board. As such, this partial loading shall also not adversely affect other consumers continuing with the Board in any significant manner. The Commission, therefore, feels that charging of 50% of the cross subsidy as surcharge is a practical solution to make the Open Access a reality and is fair to all the stakeholders.

10. The Commission has decided that additional surcharge 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 the fixed costs consequent to a contract. Thus, obligation to demonstrate the existence and extent of stranded costs rests with the licensee. Similarly, for the period over which the costs will remain stranded. Accordingly, for additional surcharge, the decision is to be taken by the Commission on a case to case basis.

11. The Regulations provide for classification of Open Access customers in two categories namely long term customers availing Open Access for a period of five years or more and short term customers availing Open Access for a period of one year or less. In case any customer requires Open Access for a period of more than one year and upto 5 years, he shall have to apply and will be allowed the same from year to year on the basis of capacity available. The logic for this is clear. For the long term customers, the transmission and distribution capacities will be created, if not already available and the investment costs therefor will be fully allowed to be reimbursed to the Power Utility concerned because of long term commitment by the prospective customer. In case of short term customer, no additional capacity will be created and as such, no commitment on the part of the Power Utility can be made for a longer tenure than one year. In fact, even one year is ! quite liberal tenure of commitment to be allowed to short term customer. As there can be only two situations - one creation of additional capacities and the other without such additional creation, only the present capacities are made available – the classification made in the Regulations is fully justified and reasonable. If a consumer wants Open Access for a period between one year and 5 years, he has two choices. First, to become a long term customer and ensure availability of capacity and bear investment costs. Second to become a short term customer and reserve capacity for one year. In the latter case, he will have to take the risk of non availability of capacity in future years but he will avoid paying for the investment costs of creation of additional capacity.

12. In view of the broad outlines mentioned above and other relevant factors, the Commission has framed the Open Access Regulations and has notified the same.

13. After the notification of Open Access Regulations, the Petitioners were asked to amend their respective Petitions so as to bring the Petitions and the prayers contained therein in line with the principles incorporated in the Open Access Regulations. At this stage, many of the Petitioners, instead of bringing their Petitions in line with the Regulations, objected to the Regulations themselves and desired changes therein. As the submissions made by the Petitioners had also been taken into consideration while taking decision on these aspects in the Open Access Regulations, the submissions made by the Petitioners in this regard were not accepted by the Commission and it was decided to follow the Open Access Regulations in case of each individual case irrespective of the fact whether petitioners amended their Petitions or not.

14. The Commission has also framed Tariff Regulations after inviting comments from general public, the Board and the Government. The Tariff Regulations have been notified on December 2, 2005 and have become effective from the same date.

15. As already indicated above, having framed and notified the Open Access and Tariff Regulations determining the principles for fixation of various charges for availing Open Access, the Commission has to go by these principles while determining the individual petitions pending before it. The next step obviously is to determine the exact quantum of various charges in view of the Open Access and Tariff Regulations.

16. Accordingly, an attempt was made to fix various charges as per Open Access and Tariff Regulations notified by the Commission. The draft calculations so made were again circulated to all the Petitioners and the Board. For calculating such charges, the following methodology was adopted:

    1. The Board had filed its Annual Revenue Requirement for the year 2006-07 but the same was yet to be approved by the Commission. Normally, there is wide variation between the ARR filed by the Board and that approved by the Commission. As such, the ARR filing by the Board for the year 2006-07 may not have provided a correct basis for calculation of Open Access Charges for the year 2006-07. It was, therefore, felt that till the ARR for the year 2006-07 is approved by the Commission, the Open Access charges for the year 2005-06 as well as for the year 2006-07 may be calculated on the basis of ARR approved by the Commission for the year 2005-06. As and when the ARR of the Board for the year 2006-07 is approved by the Commission, the Open Access Charges for the year 2006-07 will get revised. The order for the same can be passed with the Tariff Order for the year 2006-07.

    2. For the purpose of calculation of Open Access Charges, the costs of the Utility need to be apportioned between generation, transmission and distribution. The Board, being an integrated Utility, has not furnished segregated ARRs for these functions. Accordingly, the Commission has also not yet gone into the question of apportionment of costs. In the meanwhile, the Annual Statements of Accounts of the Board depict various expenditures of the Board under these three functions. There are also some common expenses of the Board under each head, which have not been apportioned to any of these three functions. These common expenses are minimal especially when compared to the overall expenses of the Board. Accordingly, it has been decided to apportion the common expenses in the proportion of direct costs under each head. The aggregate of direct and apportioned expenditure will give total expenditure under each function namely, generation, transmission and di! stribution. The last Annual Statement of Accounts of the Board duly audited are for the year 2003-04. The Accounts for the year 2004-05 are yet to be audited. Accordingly, taking audited accounts for the year 2003-04 as the base, the apportionment of total expenditure under various heads on the basis of above principles was given in Statement-I. Same principle was adopted for apportionment of Fixed Assets.

    3. While apportioning expenditure as above, expenditure capitalized was not reduced from the respective expenditure heads. Further, the expenditure on fuel cost and power purchase cost was excluded as this was directly related to generation and was very substantial and its inclusion for the purpose of apportionment may have distorted the results.

    4. The ARR for the year 2005-06 approved by the Commission was apportioned amongst various functions in the same ratio in which the actual expenses for the year 2003-04 as per Paras above were apportioned.

    5. Total transmission and distribution capacity in the State was also to be determined for calculation of Open Access Charges. This was stated to be 5933.53 MW for transmission and 5963.68 MW for distribution as per the filing of the Board in connection with another Petition on Supply Deficit. Difference of about 30 MW was on account of NRSE projects which do not require transmission network for evacuation of power. The MW capacity for the year 2005-06 as at the end of the year was not yet available. The overall picture, however, matched with the installed capacity in Punjab and the share of the Board from common-pool projects. This installed capacity was, therefore, accepted. This position was given in Statement-II.

    6. The Statement -III indicated the various Open Access Charges to be paid by the Open Access customers, provisions under Open Access and Tariff Regulations governing the same, calculation of charges as per the Regulations based on trued up figures for the year 2003-04 (as the last audited accounts are for the year 2003-04) and calculations based on Tariff Order for the year 2005-06. Open Access charges as per Draft Order prepared on April 7, 2004 were also indicated to facilitate comparison.

    7. Statement –IV indicated the Open Access Charges as per Open Access and Tariff Regulations for a sample case and worked out the same in paise per unit for the specific case. A comparison was also drawn with the charges worked out as per draft Order prepared earlier and referred to in Para 2 of this Order.

17. Charges so calculated were furnished to all the petitioners and the Board for their comments and observations. These comments have since been received and have been taken into consideration by the Commission.

18. The Petitioners have not given any written submissions. In verbal submissions in the hearing held on December 26, 2005, the Petitioners have mainly objected to the fixation of surcharge with reference to realization as against base tariff and charging of 50% of aggregate transmission and distribution losses. In their submissions, they pleaded that the Commission should have gone by the base tariff and not by realization as the realization is unduly hiked due to unusual factors like PLEC and MMC which are not regular features for every consumer of that category and can, therefore, not be taken into consideration for working out the cross subsidy. They further pleaded that in case PLEC and MMC are taken into account for working out the realization, various rebates available to the Industry also need to be taken into account. They further stated that the Open Access customers will normally be taking supply at a very high voltage and, therefore, they wil! l only have transmission losses and effectively no distribution losses. Accordingly, charging of losses on the basis of aggregate transmission and distribution losses – even though half thereof – is unfair and unjustified.

19. Regarding determination of surcharge on the basis of realization as against base tariff, as already indicated above, the same is as per the Regulations already framed and notified by the Commission. The general reasons taken into consideration by the Commission are also given in Paras above. It is important to remember that PLEC and MMC are not unusual charges. MMC is applicable for each and every consumer in the State under the present tariff structure. PLEC are also applicable to all Industry availing power during peak hours. Accordingly, these are usual charges applicable on Large Supply consumers and need to be taken into account for calculation of cross subsidy and surcharge. It is also important to remember that Board loses out revenue based on average realization and not base tariff alone in case such consumers move out of the Board’s system. Further, rebates allowed by the Board to consumers for taking supply at voltage higher than base volta! ge, are taken into consideration while working out realization. Accordingly, the calculation of surcharge on the basis of realization is as per Regulations and is justified.

20. Regarding T&D losses, the calculations are in accordance with the Regulations and are justified in view of the reasons narrated in Para 8 above which were taken into consideration by the Commission while framing the Regulations.

21. The Board has given detailed observations vide its submissions dated January 3, 2006. The Board’s observations are mainly on the Regulations themselves and not so much on the application thereof. In certain cases, the specific Open Access and Tariff Regulations clarifying certain issues, have not been referred to or linked before making the observations. Both the Open Access Regulations and the Tariff Regulations have been finalized by the Commission after detailed deliberations and inviting comments from the Government, the Board and the general public. The Commission, therefore, sees no reason for changing the principles incorporated in these Regulations for determination of Open Access Charges. The observations of the Board are discussed issue-wise in the following paragraphs.

22. The Board has stated that in case of short term Open Access customers, both the CERC as well as the Commission have adopted recovery of 25% of the transmission charges. However, for long term Open Access customers, the Commission has adopted recovery of only one third of the transmission charges against 100% recovery as per CERC Regulations. It is true under Regulation 16 of the Open Access Regulations, the Commission has approved transmission and wheeling charges @ 1/3rd of the aggregate of the full transmission and wheeling charges determined by the Commission for the relevant years. The detailed reasons for this have already been stated in the preceding paragraphs. It is also to be noted that while the CERC has adopted 100% recovery of transmission costs alone, the Commission has adopted recovery @ 1/3rd for aggregate of full transmission and wheeling costs. As the Open Access customers will be using the distribution system only nominally, the re! covery of 1/3rd of aggregate of transmission and distribution costs is considered reasonable and fair.

23. The Board has also observed that while the CERC Regulations dated March 26, 2004 give in detail the methodology for determination of various components of transmission charges, the PSERC Regulations do not provide for any such detailed procedure or methodology. Accordingly, the Board has requested for either adoption of CERC methodology or notification of such methodology by the Commission.

    In this connection it is to be noted that Regulation 16 of the Open Access Regulations provides that the transmission and wheeling charges shall be determined by the Commission as per the appropriate Regulations framed by it. Further, Regulation 38 and 40 of the Tariff Regulations provide clearly the principles for determination of transmission and wheeling charges respectively. In addition, Regulation 28 of the Tariff Regulations gives the underlying principles for determination of O&M expenses for generation, transmission and distribution functions which finally contribute to determination of the Annual Transmission Charges and the Annual Wheeling Charges for the purpose of Section 38 and 40. Regulation 28 clearly provides that for generation functions within the State, the Commission shall be guided, as far as feasible, by the principles and methodology of CERC on the matter. For determining the O&M charges for transmission function within the State! , the Commission is to be again guided as far as feasible by the principles and methodology specified by CERC on the matter as amended from time to time. However, in such determination, the Commission is to keep in mind the fact that CERC Regulations mainly relate to inter State transmission of higher quantum of energy and on extra high voltage over long distances, whereas the transmission tariff to be determined by the Commission will be relating to intra-State transmission of lower quantum of energy at relatively lower voltages and over short distance. For distribution function, the Commission has given detailed methodology for working out the O&M expenses which is independent of the CERC Regulations as CERC does not deal with distribution functions. Other Tariff Regulations lay down principles for determination of other costs like interest, depreciation etc.

    As would be seen from the above, the Open Access and Tariff Regulations notified by the Commission provide detailed and adequate basis for working out the transmission and wheeling charges by the Commission and in fact, for generation and transmission functions, the principles and methodology laid down by the CERC Regulations are to be followed, as far as feasible. Thus, there is neither any mis-match nor any gap in the Regulations finalized by the Commission and no change is, therefore, called for.

24. The Board has further stated that CERC has classified long term Open Access customers as those availing Open Access for 25 years or more and has adopted 100% recovery of transmission charges from these customers. On the other hand, the Commission has classified long term Open Access customers as those availing Open Access for 5 years or more and has adopted only 1/3rd of the recovery of the transmission charges from these customers. According to the Board, this will result in non recovery of full capital cost from these customers and will also be discriminatory vis-a-vis State GENCOs and DISCOMs which will be required to pay 100% transmission charges.

    It is to be noted that while CERC is recovering only transmission charges, the Commission is recovering aggregate of transmission and wheeling charges. In view of the fact that the Open Access customers will be using the distribution system only nominally, 1/3rd recovery of aggregate of transmission and wheeling charges is considered quite reasonable and justified. Further, in case of CERC, the capital investment required for long term customers will be of much higher level. This is because in case of inter-state transmission and Open Access, the transmission is for higher quantum of energy over higher tension lines and over longer distance which is not the case in the intra-state transmission and Open Access. There is also no discrimination as the same principles will apply to every similarly placed person – whether State GENCOs or DISCOMs or any other person.

25. The Board has recommended further safeguards to eliminate any scope for undue profiteering under the scheduling mechanism by giving specific instances. It has been stated that CERC has not permitted more than 1% UI. Apparently, the Open Access Regulation 22 for ‘Unscheduled inter-change pricing’ has not been linked by the Board. This Regulation provides for adequate safeguards to avoid any profiteering by the customers.

26. The Board has further highlighted the difference in the principles adopted by CERC and the Commission in regard to O&M expenses, return and composition of capital costs. As per the Electricity Act, 2003, the CERC Regulations are only one of the guiding principles for determining of tariff by the State Commissions. These are not the sole criteria to be adopted by the State Commissions. Accordingly, the Commission is not bound by the CERC methodologies and principles. The Commission has, however, adopted these principles and methodologies wherever the same have been found feasible or relevant in the State context. In regard to the specific issues raised by the Board, the principles for determination of O&M expenses are already laid down in the Tariff Regulation 28. It will be seen therefrom that for generation and transmission functions, the Commission has already decided to be guided by the principles and methodologies of CERC as far as feasible. Reg! arding applicability of ROE vis-à-vis Return on Next Fixed Assets, the Commission has been allowing Return on Net Fixed Assets till its last Tariff Order for the year 2005-06. However, after notification of the Tariff Regulations by the Commission on December 2, 2005 and their coming into force from the same date, the Board will now be entitled to Return on Equity only and not Return on Net Fixed Assets. In fact, the Board was specifically asked to change its Annual Revenue Requirement and Tariff Application for the year 2006-07 to include ROE in place of Return on Next Fixed Assets. Regarding composition of capital cost, the new composition of capital cost will be applicable only to the new projects. The existing composition of the projects already commissioned or underway, is not to be changed at this belated stage. Accordingly, the submissions of the Board in this regard do not have much merit.

27. The Board has also worked out its transmission capacity at 3588.88 MW as against capacity of 5933.53MW for transmission and 5963.68 MW for distribution for the year 2004-05 adopted by the Commission in its calculation-sheets. The transmission and distribution capacities to be used for calculation purposes are already clearly defined under Regulation 38 and 40 of the Tariff Regulations. Going by these definitions, the transmission and distribution capacities adopted by the Commission are in order and are in fact as per the Board’s own submission in another petition filed by it before the Commission relating to Deficit Supply. The Commission, therefore, sees no reason for changing the transmission and distribution capacities.

28. According to the Board, the T&D losses pertaining to only PSEB system have been accounted for. The transmission losses of BBMB system also need to be considered separately and these will be in the range of 3-4%. The Commission is of the view that the charges for Open Access relating to BBMB system as well as losses and any other incidentals for use of BBMB system are not in the jurisdiction of this Commission. These need to be determined by CERC and will be paid by the Open Access customers in addition to the charges payable by them to the Board in case usage of BBMB system is involved. The Commission, therefore, would not adjudicate on this issue and would recommend the concerned parties to approach the CERC for decision in the matter.

29. The Board has objected to surcharge being levied at 50% of the cross subsidy only and has sought full recovery of cross subsidy. The detailed reasons for partial loading of cross subsidy have already been given in Paras 4 and 9 above. The partial recovery of cross subsidy is also as per the Regulations framed by the Commission and as such, no change in Open Access charges calculated is required on this account.

30. The Board has clarified that per MW per day charges worked out will be applicable on contracted MW capacity at the point of injection. This observation of the Board is correct and is in fact also borne out by the calculations made by the Commission. No change in calculations on this account is, therefore, called for.

31. The Board has further stated that in case of consumers who continue to be attached to its Grid, no drawal of energy against fixed charges may be allowed by the Commission. The status of a person as a consumer of the Board and as Open Access customer, is separate and different. Accordingly, in case an Open Access customer continues to be the consumer of the Board, he cannot claim any extra benefit from the Board in his capacity as Open Access customer only because he continues to be a PSEB consumer. Only, in such a situation there will be no stranded fixed costs of the Board to fulfill its obligation to supply and accordingly, no additional surcharge will be leviable on such Open Access customer for capacity upto the connected load as Board’s consumer.

32. The Board has further stated that in the calculations made by the Commission, the amount capitalized for the year 2003-04 has not been excluded and the expenditure is gross expenditure. The observation of the Board is correct. However, change in apportionment on this account will be very marginal. Further, the adjustment in apportionment will in any case be made for the year 2006-07 based on the audited accounts for the year 2004-05 wherein this correction will be carried out. Accordingly, no change is considered necessary at this stage.

33. The Commission further notes that in regard to the additional surcharge in the instant cases, the Board has not demonstrated continuation of stranded costs and accordingly, no additional surcharge is leviable in these cases. The Board has given some general calculations for working out the amount of additional surcharge vide its reference dated December 21, 2005 but has not demonstrated the fact of continuation of stranded fixed costs. Accordingly, no additional surcharge is leviable in the instant cases.

34. In view of above discussions, the Commission is of the view that no change in Open Access Charges calculated by it, is required.

35. While the Commission undertook the exercise of obtaining observations of concerned parties on the calculations of Open Access charges made by it, the Central Government has notified the Tariff Policy vide its Notification dated January 6, 2006. It is noted that some of the provisions in the Tariff Policy including those relating to determination of surcharge, transmission & distribution losses and transmission & distribution charges are not in line with the principles incorporated by the Commission in its Open Access and Tariff Regulations. The Commission, however, notes that Tariff Policy is only one of the guidelines to be followed by it while specifying terms & conditions for determination of tariff alongwith number of other such factors. It is not the sole criteria for specifying terms & conditions for determination of tariff by the State Commissions. Further, and more importantly, all the above relates primarily to specification of terms & condit! ions for determination of tariff under Section 61 of the Act. The determination of Open Access charges which are governed under Section 42 of the Act is to keep other factors also in view. Moreover, having already framed the Regulations, the Commission can presently go only by the terms & conditions already specified by it in the Open Access Regulations. In due course, Commission can take into consideration the Tariff Policy alongwith other relevant factors and decide whether the Open Access and Tariff Regulations themselves need to be revised in view of certain provisions contained in the Tariff Policy. As and when the Commission takes this view and amends the Regulations, the future Petitions seeking Open Access will be decided according to those Regulations. For the present, for Petitions pending with the Commission for a period of over two years, the Commission feels that it is fair and appropriate to go by the Open Access and Tariff Regulations already framed an! d notified by it.

36. Another linked issue is relating to the quantum of electricity received at the petitioner’s end to be the first charge or the last charge for the Petitioner in case the Open Access customer is also a consumer of the licensee. This issue has been dealt with in the Draft PACL order of April 7, 2004 referred to in Para 2 above and a clear view was taken therein. The petitioners have already submitted their view point in this regard. The Commission is clear that the licensee’s right on the electricity supply received at its end cannot be curtailed only because an Open Access customer has also come into the system. As the licensee has the obligation for universal supply, it is important and necessary to ensure that its first charge on the supply received upto the level contracted by it is maintained. As such, the licensee’s charge should be first and precede over the individual customer’s right. Accordingly, the Commission decides that at the injection poi! nt, the right of the distribution licensee over the electricity received will remain un-affected by the presence of the Open Access customer. On the other hand, at the delivery end in the consumer’s premises, the right of the person as Open Access customer will be the first charge over the power available to it with reference to the above principle. Any overdrawal will be taken as consumption of power as a consumer of electricity by the Open Access customer. The above principle will help determine the quantum of electricity for which charges will be applicable to the Open Access customer.

37. Accordingly, the Open Access Charges for the year 2005-06 leviable on the Petitioners, shall be as follows:

    1. Transmission and Wheeling Charges @ Rs.2891.33/MW/day for long term customers and Rs.2168.71/MW/day for short term customers.

    2. Operation Charges under Section 32 of the Act for long term customers and for short term customers @ Rs.3000/- per day or part thereof.

    3. Surcharge @ 35.50 paise per unit or say 36 paise per unit and nil in case of captive generating plants for supply of electricity to destination for its own use.

    4. T&D losses @ 11% to be compensated by additional injection at the injection point.

    5. Additional Surcharge: Nil.

    6. Unscheduled Inter-change Charges as per Regulation 22 of the PSERC (Open Access) Regulations, 2005.

    7. Reactive Energy Charges as per Regulation 38(c) of the PSERC (Determination of Tariff) Regulations, 2005 to be applicable with effect from April 1, 2006 at the rates prescribed by the CERC from time to time.

    8. Electricity Duty, Octroi and other taxes leviable as per law, will be extra.

    The Open Access Charges for the year 2006-07 will be determined by the Commission along with Tariff Order for that year. These will be decided keeping in view the Tariff Policy and the amendments, if any, made in Tariff and Open Access Regulations consequent to issue of Tariff Policy. In the meanwhile, the charges as allowed above, will continue. The same will be adjusted/ modified with effect from April 1, 2006 to bring them in line with the Tariff Order for the year 2006-07.

38. As per Regulation 10 of Open Access Regulations, 2005 framed by the Commission, the nodal agency for arranging long term Open Access shall be the State Transmission Utility (STU) and for short term Open Access, the nodal agency shall be the State Load Dispatch Centre (SLDC). Accordingly, the Petitioners may approach the STU or SLDC, as the case may be, for arranging Open Access.

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