SCO NO. 220-221, SECTOR 34-A,
Petition No.31 of 2010
Date of hearing: 15.12.2010
Date of Order: 19.1.2011
In the matter of: Petition for re-determination of the
cost of supply and surcharge as directed by the Hon’ble Appellate Tribunal for
Electricity vide its order dated 16.7.2010 in Appeal No.192 of 2009.
AND
In the matter of: 1. M/s
Mukesh Steels Limited,
2. M/s
Raj & Sandeep Ltd., Vill, P.O. Jandiali,
Versus
Punjab
State Power Corporation Limited (earlier known as Punjab State Electricity
Board)
Present: Shri Jai Singh Gill, Chairman
Shri Satpal Singh Pall, Member
Shri
Virinder Singh, Member
For the Petitioner: Shri Tajender K.Joshi Advocate
For the PSPCL: Shri Ravinder Gautam, SE/TR-II
ORDER
1. M/s
Antarctic Industries Limited and others filed Appeal No.192 of 2009 before the
Appellate Tribunal for Electricity (APTEL) against the imposition of surcharge on large
supply consumers with contract demand exceeding 2500 KVA catered at 11 KV in
accordance with the Commission’s Tariff Order for the year 2009-10. This appeal
was decided by APTEL’s order dated 16.7.2010 wherein it was held that even
though the Commission was empowered to impose such a surcharge, its rate as
adopted by the Commission was devoid of a rational basis and the appellants
were directed to approach the Commission and place material before it for
re-determining the quantum of surcharge leviable. The Commission was, after
consideration of the material submitted by the appellants, directed that the
rate of surcharge may be fixed in proportion to the incremental transmission
losses, transformation losses and charges for use of the 66/11KV transmission
system. This petition has been filed by Mukesh Steels Limited and another
pursuant to the above directions of APTEL.
2. It is
stated in the petition that the then Punjab State Electricity Board had on
22.5.2003 issued an internal memo which indicated that a 11KV feeder with a 63
sq mm ACSR conductor has a capacity of 4839 KVA at 0.85 Power factor assuming a
maximum conductor temperature of 70 degree centigrade, a voltage drop of upto 6%
and a maximum line length of 3.5 km. It is stated in that memo that consumers fed
at 11 KV who wish to enhance their contract demand (CD) upto 4000 KVA would be
asked to bear transformation losses @ 3% and further incremental line losses @
2%. It is further submitted that transformation and line losses were determined
on the basis of 0.85 power factor whereas presently the induction furnace
industry is maintaining a power factor of 0.95 and as such actual losses would
be much lower. Moreover, the losses assumed in the memo referred to above were
at a temperature of 70 degree centigrade which normally does not occur and prevailing
lower temperatures would result in further reduction of losses. It is pointed
out that in the case of Waryam Steels, the meter was found defective and PSPCL
compared the consumption of the grid meter with the meter installed in the
premises of the customer and found that losses were between 0.2% to 0.3% which are
much less than those indicated in the above mentioned memo. It is further
argued that notwithstanding losses as indicated by the Board and brought out
above, technical data of distribution transformers available in the market
shows that in no case can transformation losses be more than 0.5 to 0.7%. Such
data obtained from different manufacturers of transformers has accordingly been
furnished. It is also contended that a common transmission system is used by
consumers catered at 11 KV supply with contract demands both below and above 2500
KVA and there is no rationale in imposing surcharge on the basis of contract
demand being above 2500 KVA. It is also urged that tariff of the petitioner has
been designed at 11 KV supply and thus there is little reason to levy any
surcharge in the first place. In the light of the above, it is prayed that if
surcharge has to be re-determined, it can not in any case be more than 1.5% and
that too after first designing the tariff at 66 KV.
3. PSPCL
in its reply submitted on 11.11.2010 has mentioned that circular of 2003
referred to by the petitioner relates to specific temperature conditions as per
the Standard Manual of Instructions whereas temperature of the conductor can be
much higher during the period of intensive loading. As regards power factor, it
is pointed out, that all power intensive units have to maintain a factor of 0.90
as per the General Conditions of Tariff and Schedule of Tariff approved by the
Commission. In respect of transformation losses, PSPCL contends that these can
practically go upto 3% with higher conductor temperature and power factor going
below 0.9%. It is pointed out that APTEL has, while deciding the appeal of
Antarctic Industries Limited, clearly observed that loss levels of 0.5% relate
to losses in a generation transformer which is more sophisticated but would not
be applicable in the case of 66/11 KV transformers normally used in the
distribution system. In so far as line losses are concerned, PSPCL has pointed
out that it would be misleading to rely upon the example of Waryam Steels
referred to by the petitioner since overall line length in the case of this consumer
was a mere 500 meters whereas such losses depend on the actual length of the
line, size of conductor and the contract demand. It is also pointed out that the
petitioner cannot challenge the rationale of surcharge levied only on consumers
with contract demands in excess of 2500 KVA as APTEL has upheld, in principle,
the imposition of such surcharge. Thus, if surcharge is to be imposed, a
cut-off point has to be prescribed beyond which it becomes applicable and this has
been determined as CD above 2500 KVA in the Conditions of Supply and General
Conditions of Tariff and Schedule of Tariff approved by the Commission. PSPCL
has also forwarded data in respect of consumers paying surcharge which brings
out the CD approved, capacity, cost and carrying cost of the power transformer
feeding the consumers, transformation losses, line losses and the total cost of
operation and maintenance (O&M) of the feeding sub-station.
4. The information
furnished by PSPCL to justify the imposition of surcharge was made available to
the petitioner. In written arguments submitted on 15.12.2010, the petitioners have
interalia commented upon this data and pointed out that the transformation
losses of 2% taken into account are excessive. Furthermore, it is mentioned
that PSPCL has assumed that there would be only one transformer at the feeding
sub-station whereas in actual fact there would be multiple transformers
installed thus reducing the overall cost per transformer to PSPCL. It is also pointed
out that PSPCL has projected O&M cost of Rs.28 lac for each feeding sub-station
which again seems to be inflated. The petitioner has also contested the manner
in which carrying cost of 20% has been worked out based on a Return on Equity
of 15% and O&M cost of 5%. On the other hand, it is pointed out that the
ARR for the year 2009-10 reflects a total carrying cost of a power transformer
as 23.86% of the capital cost which includes expenses such as employee cost, Repair
& Maintenance/Administration & General costs in addition to depreciation,
interest and return on investment. It is argued, thus, that the assumption of
20% cost only on account of Return on Equity and O&M cost is inflated and
untenable.
5. The
Commission has heard both the petitioner and PSPCL and carefully considered the
material placed on record. Before going into the question of working out the appropriate
quantum of surcharge that would be payable, it is necessary to recount the backdrop
in which the surcharge came to be imposed and discuss some of the issues raised
by the petitioner in that context. At the outset, it needs to be observed that
the former Punjab State Electricity Board had adopted a policy whereby
consumers with high contract demand were required to shift to higher voltages
with a view to decreasing losses inherent in effecting supply at voltages of 11
KV or below. Moreover, it was also felt that the benefit of public expenditure
on strengthening the transmission system should accrue to a larger number of
consumers rather than the additional transformer capacity so created being
dedicated only to a few high end consumers. Seen in this light, it would be
evident that levy of surcharge as prescribed had the twin component of
compensation for higher losses incurred as well as prescribing the
disincentives for high end consumers continuing to be catered at lower
voltages. If surcharge is then to be levied, it is inevitable that a cut off
point has to be prescribed in terms of contract demand after which such charges
become applicable. Catering of supply at higher voltages where CD is in excess
of 2500 KVA has been prescribed by the Commission in its Conditions of Supply
and there is no force in the contention that the arbitrary determination of
this cut off point would make the imposition of surcharge on that basis
untenable. Similarly, it is difficult to accept the plea of the petitioner that
the existing tariff is designed for supply at 11 KV and thus there is no
rationale in imposing surcharge on consumers who are catered at this voltage.
In this context, it is relevant to refer to para 48(ii) of APTEL’s order in the
appeal of Antarctic Industries where it has been observed that the contention
of transformation and incremental line losses already being included in the
tariff cannot be accepted as such losses which accrue due to failure to
conversion from 11 to 66 KV are entirely different from the transmission and
distribution losses of the system. In the light of the above findings, this
issue has clearly been settled and cannot be raised again as is sought to be
done by the petitioner. The petitioner also claims that taking all factors into
account, surcharge can in no case exceed 1.5%. It is noted that in putting
forth this plea, the petitioners have taken only transformation and line losses
into account whereas APTEL’s order further indicates that not only the above
two factors but the cost for use of additional transmission system has also to
be taken into consideration.
6. The
Commission, having taken note of the petitioner’s objections with regard to
data submitted by PSPCL to justify the surcharge leviable, sought additional
information relating to consumers who were liable to pay surcharge. PSPCL has
furnished this data which is appended to this order and forms the basis on
which levels of surcharge is proposed to be determined. It will be noted
therefrom that:
(a)
It includes CD and
consumption of individual consumers in 2009-10, capacity of the 66 KV
sub-station and the pro-rata cost attributable to the consumers on the basis of
actual installed capacity of the sub-station.
(b)
Total cost of the
supplying 66 KV sub-station has been computed after adding the cost of
different components for creation of such a sub-station.
(c)
Transformation
losses have been taken as 0.5% only and not as initially reported by PSPCL.
Even though APTEL has observed that 0.5% may be the losses in a generation
transformer, this lower figure has been adopted as improvements in transformer
design might have further reduced the transformation losses.
(d)
Line losses at
11 KV have been worked out as the average of those actually accruing in the
case of individual consumers and average length of the 66 KV feeder has been assumed to be 2 kms. In
addition, the cost of two 66 KV bays has also been included.
(e)
O&M charges
have been taken as reported by PSPCL. Significantly, the petitioner while
commenting that these charges are excessive has made no effort to rebut the
contention of PSPCL in this respect.
(f)
Carrying cost
has been worked out assuming ROE of 14% and O&M cost of 5%. The plea of the
petitioner that this seems unreasonable given the actual carrying cost of a
power transformer claimed by PSPCL in its ARR for the year 2009-10 cannot be
accepted since such projections in the ARR are actually the assumed break-up of
generation, transmission and distribution costs and not the actual costs being
incurred.
7. The
Commission notes that taking into account the various elements of cost as
detailed in the Appendix, the additional costs borne by PSPCL in the case of
consumers paying 10 and 17.5 % surcharge works out to 4.96% and 5.88%
respectively.
8. To
ascertain the reasonability of the levy of 10 and 17.5% surcharge, the
Commission has also attempted to ascertain the extra expenditure that would be incurred by those consumers who shift from 11
KV and obtain supply at 33/66 KV. The relevant data was obtained from PSPCL for
the year 2009-10 which indicates that consumers with contract demand above 4000
KVA required to be catered at 66 KV would bear additional cost for creation of
a 66 KV sub-station and associated infrastructure which corresponded to 6.74%
surcharge after accounting for 3% rebate availed at this voltage. In the case
of consumers with contract demand between 2500 and 4000 KVA, proposing to
obtain supply at 66 KV, the surcharge equivalent would work out to 5.68%. It
is, thus, seen that the figures of surcharge leviable on the basis of assumed
transformation/line losses and carrying cost as brought out in para 7 above correspond
roughly to the results obtained when additional cost incurred by consumers shifting
to higher voltages is taken into account. However, the Commission, in line with
the directions of APTEL is inclined to rely on figures obtained after working out
actual carrying cost and transformation/line losses. However, if the surcharge
payable is determined on the basis of these costs alone then there might be no
incentive to shift to the requisite voltages while considerations of public
policy, on the other hand, dictate that it would be desirable to ensure that the
shift to the prescribed voltages be effected. With a view to attain this
objective, the Commission deems it necessary to add a penal element while determining
surcharges that need to be imposed. Accordingly, the Commission deems it fair
and reasonable that those consumers who do not comply with rational policy
prescriptions on supply voltage must bear extra cost as compared to those who
have made additional investments and are obtaining supply at the requisite
voltages. Taking this into account, the Commission determines that consumers
presently liable to pay surcharge of 10 and 17.5% will pay a revised surcharge
of 7 and 10% respectively.
Sd/- Sd/- Sd/-
(Virinder Singh) (Satpal Singh Pall) (Jai Singh Gill)
Member Member Chairman
Dated:
19.1.2011