Chapter 2

PUNJAB STATE ELECTRICITY REGULATORY COMMISSION
SCO NO. 220-221, SECTOR-34-A
CHANDIGARH

PETITION NO. 25 OF 2009

IN THE MATTER OF:

ANNUAL REVENUE REQUIREMENT

FILED BY THE PUNJAB STATE ELECTRICITY BOARD

FOR THE FINANCIAL YEAR 2010-11

PRESENT : Mr. Jai Singh Gill, Chairman

Mr. Satpal Singh Pall, Member

Mr. Virinder Singh, Member

Date of Order: April 23, 2010

ORDER

The Punjab State Electricity Regulatory Commission (Commission), in exercise of powers vested in it under the Electricity Act, 2003 (Act) passes this order determining the Annual Revenue Requirement (ARR) and Tariff for supply of electricity by the Punjab State Electricity Board (Board)/Successor Entities to consumers of the State of Punjab for the year 2010-11. The ARR filed by the Board, facts presented by the Board in its various filings, objections received by the Commission from consumer organizations and individuals, issues raised by the public in hearings held at Bathinda, Chandigarh, Ludhiana and Jalandhar, the responses of the Board to the objections and observations of the Government of Punjab (GoP) in this respect have been considered. The State Advisory Committee constituted by the Commission under Section 87 of the Act has also been consulted and all other relevant facts and material on record have been perused before passing this Order.

1.1 Background

The Commission has in its previous seven Tariff Orders determined tariff in pursuance of the ARRs and Tariff Applications submitted by the Board for the years 2002-03 to 2006-07, 2008-09 and 2009-10. Tariff Order for the year 2007-08 had been passed by the Commission in suomotu proceedings.

1.2 ARR for the year 2010-11

The Board filed the ARR for 2010-11 on 30.11.2009. Therein the Board had worked out a cumulative revenue gap of Rs.6575 crore for the year 2010-11 including carried over gaps of 2008-09 and 2009-10. As the petition filed by the Board did not contain any proposal to cover this gap a letter dated 1.12.2009 was issued to the Board asking it to submit a tariff or any other proposal to cover this gap. The Board in its response on 3.12.2009 replied that the Commission may determine the gap and fix tariff accordingly based on the details furnished by it in its ARR. The Commission took the ARR on record on 7.12.2009. On scrutiny it was noticed that the ARR was deficient in some respects and in its communication of 01.01.2010 the Commission sought further information which was furnished by the Board in its letters dated 28.1.2010, 25.2.2010 and 26.2.2010.

The Annual Revenue Requirement determined by the Commission in this Tariff Order is based on the petition filed by the Punjab State Electricity Board, operating as an integrated utility performing function of Generation, Transmission and Distribution of electricity. The tariff determination by the Commission is based on the audited accounts of 2008-09, revised estimates of 2009-10 and projections of 2010-11 as submitted by the Board.

The Commission notes that the GoP, in exercise of powers conferred under section 131, 132, 133 and other enabling provisions of the Electricity Act, 2003, has on April 16, 2010, notified that the Board constituted under section 5 of the Electricity Supply Act, 1948 has ceased to exist and stands replaced by two corporate entities namely Punjab State Power Corporation Ltd (POWERCOM) and Punjab State Transmission Corporation Ltd (TRANSCO), referred to as Successor Entities. The Government has also notified a Transfer Scheme in Notification No.1/9/08-EB(PR) /196 dated 16^th April, 2010 which details the process of classification/division of assets and liabilities, functions, transfer of personnel etc. between the two entities.

Clause 8, of the aforementioned Notification, clearly states that all pending proceedings by or against the Board on the Effective Date of Transfer (to be reckoned as 16.04.2010) of the undertaking to the Transferee shall not abate or discontinue or otherwise in any way be effected prejudicially by reasons of the transfer provided in this Scheme, and such proceedings may be continued by or against the Transferee(s). Accordingly, the Commission treats the ARR Petition filed by the Board on 30.11.2009, as a pending petition of POWERCOM and TRANSCO.

The Commission also observes that the Provisional Balance Sheets, ending 31.03.09, of the two successor entities, as appended to the above mentioned Notification shows significant variation when compared to the audited balance sheet of the integrated utility. The Commission understands that the Balance Sheet so determined is provisional and shall be firmed up in due course as would be evident from clause 9 of the Transfer Scheme which explicitly states that the classification and transfer under this scheme, is provisional and will be made final upon the expiry of 12 months from the Effective Date of Transfer or 6 months after the audited accounts are available, whichever is later. Also, clause 3 of the Transfer Scheme extinguishes and cancels all assets and liabilities of the Board towards GoP and vice-versa whereas in clause 5 they are restored and passed on to the Successor Entities as is seen from the provisional Balance Sheet of these entities wherein GoP loans have been shown as outstanding. In these circumstances, the Commission for the purpose of tariff determination deems proper to rely on the information filed by the Board in its ARR petition and not on the Provisional Balance Sheet, yet to be approved by the CAG.

Various charges approved in the Tariff Order of 2010-11 are based on prudent determination of generation, transmission & distribution cost and the formation of two separate entities as a result of unbundling may not immediately warrant re-determination of cost and further apportionment of revenue is possible as per GoP (Deptt of Power) Notification No 229 dated 16.04.2010. However, the Successor Entities would be free to submit fresh petitions which shall be duly considered by the Commission. During True Up and review of the ARR, the Commission generally adheres to existing norms and principles but consequent upon the implementation of the Transfer Scheme, it will be open to modification of norms when required in the subsequent ARRs.

1.3 Invitation of objections and public hearings

A public notice was published by the Board in the Tribune, The Hindustan Times, Dainik Bhaskar and Daily Ajit on December 17, 2009 inviting objections from the general public on the ARR filed by the Board. Copies of the ARR were made available on the website of the Board and in the offices of the Chief Engineer/Commercial, PSEB, Patiala, Liaison Officer, PSEB Guest House, near Yadvindra Public School, Phase-8, Mohali and also in the offices of all the Chief Engineers (Operation) and all the Superintending Engineers-in-charge of Operation Circles of the Board. In the public notice, objectors were advised to file their objections with the Secretary of the Commission upto January 19, 2010, with an advance copy to the Board. The public notice also indicated that after perusing the objections received, the Commission will conduct public hearings on the dates which would be subsequently notified.

The Commission received 24 written objections by 19.01.2010 and 16 additional written objections thereafter. The Commission decided to take all these objections into consideration.

Number of objections received from individual consumers, consumer groups, organizations and others are detailed below:

Sr. No.	Category	No. of Objections
1.	Chambers of Commerce	3
2.	Industrial Associations	10
3	Industry	11
4	Railways	1
5	PSEB Engineers/Employees Association	2
6	Individuals	10
7	Govt. of Punjab (GoP)	1
8	Forums	2
	Total	40

The list of objectors is given in Annexure-I to this Tariff Order. The Board submitted its comments to all the objections which were made available to the respective objectors.

The Commission decided to hold public hearings at Bathinda, Chandigarh, Ludhiana and Jalandhar. A public notice to this effect was published on 12.01.2010 in The Tribune, The Hindustan Times, Punjabi Tribune, Punjab Kesari and Times of India informing the objectors, consumers and the general public in this respect as per details hereunder :

Venue	Date & time of public hearing	Category of consumers to be heard.
BATHINDA Circuit House, Civil Lines, Near D.C.Residence, Bathinda.	Jan. 22, 2010 11.30 AM to 2.00 PM (To be continued in the afternoon, if necessary)	All consumers/organizations of the area
CHANDIGARH Commission Office i.e. SCO No.220-221, Sector 34-A, Chandigarh.	Jan. 25, 2010 10.30 AM to 1.30 PM	Industry
	3.00 PM onwards	Agriculture consumers and their unions
CHANDIGARH Commission Office i.e. SCO No.220-221, Sector 34-A, Chandigarh.	Jan. 27, 2010 10.30 AM to 1.30 PM	All consumers except Industry, Agriculture consumers and staff unions of the Board.
	3 PM onwards	Staff unions of Board and other organizations.
LUDHIANA Circuit House, Ferozepur Road, Ludhiana	Jan. 29, 2010 11 AM to 1.30 PM (To be continued in the afternoon, if necessary)	All consumers/ organizations of the area.
JALANDHAR Circuit House, Skylark Chowk, Opp. Skylark Hotel, Jalandhar.	Feb. 5, 2010 11 AM to 1.30 PM (To be continued in the afternoon, if necessary)		All consumers/ organizations of the area.

Through public notices published in different newspapers, it was intimated that the Commission will conduct a public hearing at Chandigarh on February 11, 2010 in which the Board will reply to written objections of the public and other issues raised during public hearings in addition to presenting its own case.

The public hearings were held as per schedule and objectors, general public and the Board were heard by the Commission. A summary of the issues raised, the response of the Board and the views of the Commission are contained in Annexure-II of this Tariff Order.

1.4 The Government was approached by the Commission through letter dated 21.12.2009 seeking its views on the ARR to which the Government responded on 10.3.2010, which has been taken note of by the Commission.

1.5 State Advisory Committee

The State Advisory Committee set up under Section 87 of the Act, discussed the Board’s ARR in a meeting convened for the purpose on 10.02.2010. The minutes of the meeting of the State Advisory Committee are enclosed as Annexure–III to this Order.

The Commission has thus taken the necessary steps to ensure that due process, as contemplated under the Act and Regulations framed by the Commission, is followed and adequate opportunity given to all stakeholders in presenting their views.

1.6 Compliance of Directives

In its previous Tariff Orders, the Commission had issued certain directives to the Board in the public interest. A summary of directives issued along with the comments of the Commission is given in Annexure-IV of this Tariff Order.

Chapter 2

True-up for the year 2008-09

2.1. Background

The Commission approved the ARR and Tariff for the year 2008-09 in its Tariff Order dated July 03, 2008 which was based on the costs and revenues estimated by the Board. The Board had furnished revised estimates for the year 2008-09 during the determination of ARR and Tariff for 2009-10 in which there were major differences in certain items of costs as well as projected revenues both in the revised estimates furnished by the Board and the approvals granted by the Commission. The Commission in its Tariff Order of the year 2009-10 reviewed its earlier approvals and re-determined the same based on the revised estimates made available by the Board. The Board has now furnished the audited accounts for the year 2008-09 which again vary in parts with the figures taken into account in the review of the year 2008-09 by the Commission. This chapter contains a final true up of the year 2008-09, based on the Audited Annual Statement of Accounts (audited accounts) for the year 2008-09 but without altering the principles and the norms approved earlier.

2.2. Energy Demand (Sales)

2.2.1. The sales projected by the Board during the determination of ARR for the year 2008-09, sales approved by the Commission in the Tariff Order of the year 2008-09, revised estimates furnished during determination of ARR of the year 2009-10, sales approved by the Commission in review and actual sales figures now given by the Board are summarized in Table 2.1 below.

Table 2.1: Energy Sales – 2008-09

(MUs)

Sr. No.	Category	Projected by PSEB during determination of ARR 08-09	Approved by the Commission in T.O. 08-09	Revised Estimates of PSEB during determination of ARR of 09-10	Approved by the Commission in review	Actual as in the ARR of 10-11	Now approved by the Commission
1	2	3	4	5	6	7	8
1	Domestic	6476	6449	6692	6456	6695	6695
2	Non-Residential	2039	2030	2067	1911	1967	1967
3	Small Power	734	748	731	712	743	743
4	Medium Supply	1571	1542	1555	1489	1556	1556
5	Large Supply	9394	9359	9081	8587	8747	8747
6	Public Lighting	153	149	147	137	147	147
7	Bulk Supply	485	497	507	477	480	480
8	Railway Traction	110	111	118	123	126	126
9	Total Metered sales (within State)	20962	20885	20898	19892	20461	20461
10	Agriculture pump sets	10014	9408	9766	8374	9349	8395
11	Total sales within the State	30976	30293	30664	28266	29810	28856
12	Common pool	303	303	303	303	302	302
13	Outside State sales	2036	2036	1541	2323	2515	2515
14	Total (11+12+13)	33315	32632	32508	30892	32627	31673

The Board has furnished the actual total sales at 32627 MUs for the year 2008-09 as per audited accounts including the theft of energy of 396 MUs. This theft of energy has not been apportioned to different consumer categories in the audited accounts but the Board in its ARR petition (Vol. 1) for the year 2010-11 has submitted category-wise sales for year 2008-09 by apportioning such energy to each category of consumers on pro-rata basis which is as per column 7 of Table 2.1.

2.2.2 Metered Sales: In metered sales, the Board has included 396 MUs of energy on account of theft. The revenue on this account has been shown as Rs.63.80 crore in the annual accounts which is not commensurate with the revenue accruing from sale of energy of 396 MUs to metered categories. In the tariff order for 2009-10, the Commission accepted the revenue and the sales figures for 2007-08 as per the audited accounts of the Board since the same were audited by AG (Punjab) but also directed the Board to correctly account for the amount assessed on account of theft. Now, the Board in its petition has submitted that in the books of account of year 2008-09, the theft of energy is still not segregated consumer categorywise and for the purpose of this ARR filing, the Board has again apportioned such energy to each category on a prorata basis. The Board has now submitted that the Commission had issued the Tariff Order for the year 2009-10 in September 2009 when almost half the year had already passed. Hence, the directives of the Commission could only be partly complied with during that year. The Board has assured that it has already issued instructions to the field staff, the impact of which would be visible only in the latter part of 2009-10.

The Commission notes that the Board had been asked to correctly account for the amount assessed on account of theft as per actual consumer categories only in the Tariff Order of 2009-10. Thus, action on the part of the Board could at best be taken for the year 2009-10 and this aspect will be considered by the Commission at the time of review for that year. Accordingly, the Commission estimates sales for the year 2008-09 on the basis of actuals given in the audited accounts for that year and adjusted by adding theft of energy to the extent of 396 MUs to different metered consumer categories on a pro-rata basis. The Commission, thus, approves metered sales within the State at 20461 MUs.

The Commission accepts common pool sales at 302 MUs and outside State sales as 2515 MUs on the basis of actuals as given in the audited accounts for 2008-09.

Metered sales now approved by the Commission are as shown in column 8 of Table 2.1.

2.2.3 AP Consumption: The Commission in its Tariff Order of the year 2008-09 approved AP consumption of 9408 MUs after allowing a normative growth of 5% over the revised approved consumption of 8960 MUs for the previous year (year 2007-08). While doing so, the Commission observed that the methodology of computing AP consumption on the basis of sample meter readings and connected load needs further refinement. Based on the observation of the Commission in the Tariff Order of 2008-09 and Board’s willingness to undertake a validation exercise through an independent agency, the Commission appointed M/s ABPS Infrastructure Advisory Private Limited (Agency) for estimation of AP Consumption reported by the Board for the year 2007-08 and first three quarters of 2008-09. A copy of the preliminary report submitted by the Agency to the Commission was sent to the Board for its comments. After taking into account the observations of the Board, the Agency recalculated AP consumption and a variation of 10.20% was observed between the consumption reported by the Board to the Commission and that computed by the Agency for the first three quarters of the year 2008-09.

The Board in its ARR petition has submitted that very little time was available to examine in detail both the approach adopted by the Agency and the estimated AP consumption based thereon and the final report of the Agency was received by the Board only a month before the tariff petition for 2010-11 was to be filed. The Board has, therefore, requested that it should be permitted to submit further comments on the final conclusions of the Agency after submission of the ARR in case need therefor is envisaged by the Board. However, the Board has made the following observations in the ARR petition:

· The Agency, in the preliminary report, had pointed out that the connected load in case of several meters was higher on account of VDS or other such reasons in comparison with the records being maintained by the Board. Based on these findings, the connected load of such meters was revised to calculate the consumption and thereafter the load factor. If the operating load is found to be higher than the load in the ledgers, then under such circumstances, the better way to estimate the load would be only through correct energy meters. Any normative calculation of the operating load/estimation of consumption can result in skewed consumption levels.

· The Agency has worked out the consumption of sample meters by applying a check that in case the consumption recorded by a meter is more than the theoretical consumption (calculated using formula i.e. connected load multiplied by hours of supply), then the theoretical consumption is to be considered for the purpose of calculating the load factor and vice versa. The Board has observed that once a meter is identified to be giving incorrect reading then the same meter should ideally be excluded from the study, which has not been done by the agency. The Board understands that in case a meter is showing excess consumption, the same may be a pointer towards theft, poor condition of equipment at the site, supply hours in excess of the average considered in the study etc, which cannot be ignored in this manner.

· The Agency, in the final report has, considered a motor efficiency of 80% across all the divisions. The Board understands that there are around 55-60% submersible motors and 40-45% monoblock motors installed by the farmers in the State. Moreover, the Board understands that even brand new motors have an efficiency of less than 50% for submersible motors and around 60-65% in case of monoblock motors. Consideration of such higher motor efficiency by the Agency has resulted in lower AP sales estimation.

The Commission observes that the points urged by the Board regarding manner in which agriculture consumption was computed for 3 quarters of the year 2008-09 are substantially the same as made at the time of considering the ARR for 2009-10. All these matters had been carefully considered by the Commission and there is, at the stage of true up, no scope to reopen the principles and norms on which these matters were earlier decided.

The Commission thus approves AP consumption of 8395 MUs by reducing the AP consumption of 9349 MUs by 10.20% based on the report of the Agency, for the year 2008-09.

2.3. Transmission and Distribution Losses (T&D Losses)

The Commission, in its Tariff Order of 2008-09, fixed the target of T&D losses at 19.50%. During the determination of ARR of 2009-10, the Board stated that T&D losses in 2008-09 would be 21.00% but the Commission retained T&D losses at 19.50% in the review. The Board has now intimated that actual losses in 2008-09 are 19.92% at the level of AP consumption computed by it. The Commission, however, sees no reason to accept T&D losses in excess of the target earlier fixed.

The Commission, therefore, retains the T&D losses at 19.50% as approved in the Tariff Order for the year 2008-09.

2.4. PSEB’S Own Generation

2.4.1. Thermal Generation: The station-wise generation projected by the Board during the determination of ARR by the Commission for the year 2008-09, generation approved by the Commission in the Tariff Order, revised estimates furnished by the Board during determination of ARR of 2009-10, generation approved by the Commission in the review, actuals now supplied by the Board with the ARR for 2010-11 and generation finally approved by the Commission is given in Table 2.2.

Table 2.2: Thermal Generation – 2008-09

(MUs)

Sr. No.	Station	Projected by PSEB during determination of ARR 08-09		Approved by the Commission T.O. 08-09		Revised Estimates by PSEB in ARR 09-10		Approved by the Commission T.O. 09-10		Actuals by PSEB submitted in ARR 10-11		Now approved by the Commission
Sr. No.	Station	Gross	Net	Gross	Net	Gross	Net	Gross	Net	Gross	Net	Gross	Net
1	2	3	4	5	6	7	8	9	10	11	12	13	14
1A	GNDTP Unit I&II	2411	2146	1542	1402	2748	2428	1562	1402	2846	2517	1562⁵	1390
1B	GNDTP Unit III&IV	2411	2146	1004	894	2748	2428	1284	1143	2846	2517	1284⁵	1143
2	GGSTP	9469	8655	9886	9046	9224	8434	9611	8794	9611	8809	9611	8794
3A	GHTP Stage-1	3265	2971	6127¹	5576	3391	3078	3532	3214	5610³	5126	5610	5105
3B	GHTP Stage-2	2800	2534	6127¹	5576	1160	1056	2078²	1891	5610³	5126	5610	5105
4	Total	17945	16306	18559	16918	16523	14996	18067	16444	18067⁴	16452	18067	16432

¹ Comprises of 3457 MUs by Stage 1 and 2670 MUs by Stage II.

²Includes 1168 MUs generated during trial runs.

³Includes 1168 MUs generated during trial runs of Unit III and Unit IV.

⁴ Against 18066 MUs gross generation submitted by the Board.

⁵ 1562 MUs generated by GNDTP Unit 1&2 and 1284 MUs by GNDTP Unit 3&4 (on the basis

of data supplied during processing of ARR for the year 2009-10).

Plant-wise generation is not available in the annual statement of accounts and as such the data supplied along with the ARR of 2010-11 and the generation figures validated by the Commission have been taken into account.

Accordingly, the Commission approves gross thermal generation for the year 2008-09 at 18067 MUs.

Auxiliary Consumption

The auxiliary consumption projected by the Board during determination of ARR by the Commission for the year 2008-09, auxiliary consumption approved by the Commission in the Tariff Order, revised estimates furnished during determination of ARR of 2009-10, auxiliary consumption approved by the Commission in the review, actuals now supplied by the Board with the ARR for 2010-11 and auxiliary consumption approved by the Commission is given in Table 2.3 below.

Table 2.3: Auxiliary Consumption – 2008-09

Sr. No.	Station	Projected by PSEB during determination of ARR 08-09	Approved by the Commission in T.O. 08-09	Revised Estimates by PSEB in ARR 09-10	Approved by the Commission in T.O. 09-10	Actuals by PSEB submitted in ARR 10-11	Now approved by the Commission
1	2	3	4	5	6	7	8
1A	GNDTP Unit I & II	11.00%	9.10%	11.66%	10.22%	11.57%	11.00%
1B	GNDTP Unit III & IV	11.00%	11.00%	11.66%	11.00%	11.57%	11.00%
2	GGSTP	8.60%	8.50%	8.56%	8.50%	8.34%	8.50%
3A	GHTP Stage I	9.00%	9.00%	9.21%	9.00%	8.71%	9.00%
3B	GHTP Stage II	9.50%	9.00%	9.00%	9.00%	8.35%	9.00%

It is observed that actual auxiliary consumption now reported by the Board is marginally higher for GNDTP and lower for GGSTP and GHTP than the approved levels. The Commission observes that the auxiliary consumption of GGSTP and GHTP Thermal Plants has been approved on normative basis, whereas for GNDTP, the Commission has been adopting the operational norms of Tanda Thermal Plant. In its Tariff Order for the Year 2009-10, the Commission had fixed the auxiliary consumption of GNDTP Bhatinda based on an order of CERC approving the revised operating norms of the Tanda Thermal Plant after its R&M works.

The Commission had revised auxiliary consumption as 10.22% for GNDTP Units 1&2 for the year 2008-09 in the Tariff Order for 2009-10 after reducing 1.78% (0.95+0.83%) from the norm of 12% fixed by CERC for the Tanda Thermal Station. On re-examination, the Commission observes that it would be inappropriate to effect a deduction of 0.95% as this represents the losses in the generator transformer, unit auxiliary transformer, station transformer and excitation power which are theoretically occurring both in Bathinda and Tanda station. Thus, a deduction of 0.83% alone would be justified as that is the energy consumption on account of the three stage water cooling system existing at Tanda but not in GNDTP. On that basis, auxiliary consumption for GNDTP Unit 1&2 would work out to 11.17 (10.22+0.95). However, the Commission finds no justification in allowing auxiliary consumption after R&M works of Units 1&2 in excess of the pre R&M value. Assuming that the auxiliary consumption in the case of Unit 1&2 is less than 11% and that for Unit 3&4 in excess thereof, the Commission compositely determines auxiliary consumption for all 4 units of GNDTP at 11%.

In view of the above, the Commission approves the auxiliary consumption of 11.00%, 8.50% and 9.00% for GNDTP, GGSTP and GHTP respectively.

The net thermal generation on this basis works out to 16432 MUs as shown in column 14 of Table 2.2.

The Commission further observes that the Board has not been able to achieve gross and net thermal generation originally approved.

The Board has under-achieved the target by 492 MUs (18559-18067) gross and 486 MUs (16918-16432) net as compared to generation originally approved, as shown in Table 2.2. The Commission takes into account the loss in thermal generation of 492 MUs gross (486 MUs net) and disapproves consequential additional power purchase requirement to that extent. This is discussed further in para 2.9.

2.4.2. Hydel Generation: The station-wise generation submitted by the Board to the Commission during determination of ARR and Tariff for the year 2008-09, generation approved by the Commission in its Tariff Order, revised estimates furnished by the Board during determination of ARR of 2009-10, generation approved by the Commission in review and actuals now furnished by the Board and those accepted by the Commission are given in Table 2.4.

Table 2.4: Hydel Generation – 2008-09

(MUs)

Sr. No.	Hydel Station	Projected by PSEB during determination of ARR 08-09	Approved by Commission in TO 08-09	RE by PSEB in ARR 09-10	Approved by Commission in TO 09-10	Actuals by PSEB in ARR 10-11	Now approved by Commission
1	2	3	4	5	6	7	8
1	Shanan	507	507	507	532	532	532
2a	UBDC Phase 1	432	432	311	140	339	339
2b	UBDC Phase 2	432	432	311	199	339	339
3	RSD	1586	1612	1539	1474	1474	1474
4	MHP	1074	1074	797	1122	1132	1132
5	ASHP	596	587	726	751	689	689²
6	Micro Hydel	6	6	8	4	10	10
7	Total own hydel
a	Gross	4201	4218	3888	4222	4175	4175
b	Net Own Hydel	4027	4056	3841	4005	4131¹	4020³
8	PSEB Share from BBMB
a	Net Share	4187	4187	4256	4473	4307	4307
b	Add Common pool share	303	303	303	303	302	302
c	Less External losses	165	163	168	166
d	Net Share from BBMB	4325	4327	4391	4610	4610	4609
9	Total Net Hydel (Own + BBMB)	8352	8383	8232	8615	8741	8629

1. Net of auxiliary consumption (7.18 MUs) and transformation loss (36.83 MUs).

2. Net of diversion of 62 MUs to BBMB on account of extra power generation at ASHP owing to diversion of water from NHC to AHC.

3. Own generation is net of

· HP share (free) in RSD @ 4.6% (68 MUs).

· Royalty to HP in Shanan (53 MUs).

· Transformation losses @ 0.5% (21 MUs).

· Auxiliary consumption @ 0.5% for RSD generation of 1474 MUs and UBDC Stage-1 generation of 140 MUs (having static exciters) and @ 0.2% for others (13 MUs).

The actual gross hydel generation from the Board’s own hydel stations for the year 2008-09 is 4175 MUs and the Commission accepts the same. While calculating the net generation, the Board has not deducted the free HP share in RSD and royalty in Shanan. In line with the principle being followed in such sales, the Commission has worked out net hydel generation by deducting HP share in RSD and royalty in Shanan along with the auxiliary consumption and transformation losses. Net hydel generation for the year 2008-09 thus works out to 4020 MUs. The actual net availability from BBMB is 4609 MUs which the Commission accepts.

The Commission, therefore, approves net hydel generation for the year 2008-09 at 4020 MUs from the Board’s own generation and 4609 MUs as net share from BBMB as shown in table 2.4.

2.5. Power Purchase

The Commission in its Tariff Order of 2008-09 approved net power purchase of 14669 MUs. During determination of ARR of 2009-10, the Board furnished revised estimates for net power purchase of 15575 MUs during presentation on 10.06.09 but in review, the Commission approved 12680 MUs only. The Board has now submitted net purchases during 2008-09 of 14851 MUs (net) as per audited accounts. This matter is further discussed in para 2.8.

2.6. Energy Balance

2.6.1. The details of energy requirement and availability for 2008-09 approved by the Commission in review in the Tariff Order of 2009-10 and the actuals now furnished by the Board are given in Table 2.5. The energy balance, including T&D losses along with sales and availability now approved by the Commission is depicted in column 6 of Table 2.5.

Table 2.5: Energy Balance – 2008-09

(MUs)

Sr. No.	Particulars	Approved by the Commission in T.O. 09-10	Actual by PSEB in ARR 10-11	Now approved by the Commission	Sales & actual T&D losses as per approved energy available
1	2	3	4	5	6
A) Energy Requirement
1	Metered Sales	19,892	20,461	20,461	20,461
2	Sales to Agriculture Pumpsets	8,374	9,349	8,395	8,395
3	Total Sales within the State	28,266	29,810	28,856	28,856
4	Loss percentage	19.50%	19.92%	19.50%	22.21%
5	T&D losses	6,847	7,416	6,990	8,239
6	Sales to Common pool consumers	303	302	302	302
7	Outside State Sales	2,323	2,515	2,515	2,515
8	*Total requirement*	37,739	40,043	38,663	39,912
B) Energy Available
9	Own generation (Ex-bus)
10	Thermal	16,444	16,451	16,432	16,432
11	Hydro(Including share from BBMB and common pool consumers	8,615	8,741	8,629	8,629
12	Purchase net	12,680	14,851	14,851	14,851
13	Total Available	37,739	40,043	39,912	39,912

2.6.2. The total energy requirement now approved by the Commission considering T&D losses at 19.50% is 38663 MUs (net) as against 40043 MUs projected by the Board, whereas total energy availability now approved is 39912 MUs (net). The difference of 1249 MUs (net) between energy requirement and energy availability is owing to the underachievement of T&D loss target as discussed in para 2.3 and depicted in columns 5 & 6 of Table 2.5. Higher T&D loss over and above the level approved by the Commission has resulted in increased net power purchase to the extent of 1249 MUs (8239 - 6990) MUs. The matter is further discussed in para 2.9.

The Commission approves the total energy requirement for the year 2008-09 at 38663 MUs (net) after retaining T&D losses at 19.50%.

2.7. Fuel Cost

2.7.1. In its Tariff Order of 2008-09, the Commission approved the fuel cost as Rs. 2742.62 crore for a gross thermal generation of 18559 MUs. In review, this cost was revised to Rs. 2978.85 crore for the then approved gross generation of 18067 MUs. Details of approved fuel cost in the Tariff Order of 2008-09 and review are given in Table 2.6.

Table 2.6: Fuel Cost – 2008-09

Sr. No.	Station	As per T.O. 08-09		As per Review in T.O. 09-10
Sr. No.	Station	Gross Generation (MUs)	Fuel Cost (Rs.crore)	Gross Generation (MUs)	Fuel Cost (Rs.crore)
1	2	3	4	5	6
1	GNDTP Unit I&II	1542	214.17	1562	264.81
2	GNDTP Unit III&IV	1004	172.10	1284	233.25
3	GGSTP	9886	1480.84	9611	1581.42
4	GHTP	6127	875.51	5610	899.37
5	Total	18559	2742.62	18067	2978.85

2.7.2. The Board in its ARR of 2010-11 has indicated actual fuel cost for 2008-09 for a gross generation of 18067 MUs as Rs.3154.35 crore (including fuel cost for infirm power) whereas in the audited accounts of 2008-09, the total generation expenses are Rs. 3175.23 (3171.49+ 3.74) crore net of capitalisation. These comprise of Rs.3064.65 crore for coal and oil consumption, Rs.36.27 crore for other fuel related costs including octroi, contract handling charges, siding charges etc., Rs.49.39 crore for fuel related losses including transit losses and Rs.21.17 crore for other operating expenses such as cost of water, lubricants, consumable stores and station supplies. Out of these, Rs.21.17 crore booked towards other operating expenses do not form part of the fuel cost and are being considered under repair and maintenance expenses in para 2.11. Thus, the net fuel cost as per audited accounts is taken as Rs. 3154.06 (3175.23 – 21.17) crore.

2.7.3. The actual fuel cost intimated by the Board for 2008-09 in its ARR of 2010-11 for a gross thermal generation of 18067 MUs is based on calorific value and price of coal / oil as given in Table 2.7A. The fuel cost on account of generation of GHTP Stage II during its trial run has been proposed as actually incurred by the Board. The Board has submitted that the units cannot be expected to run at the normative levels during trial runs and according to the CERC Regulations (2004-09) a grace period of 180 days is to be provided for stabilization of the unit. The Board has further stated that in case of PSEB, the period under consideration was the trial operations prior to declaration of COD of the project while the stabilization period is supposed to commence after COD of the project.

The Commission observes that effective from 1^st April 2006, CERC in its notification no.L-7/25(5)/2003-CERC dated 27.09.07 has done away with the provision for relaxation in operating parameters for generating stations during the stabilization period. As such the Commission does not find any merit in the submission of the Board that the operating parameters of GHTP stage II unit should be relaxed and be considered on an actual basis.

Table 2.7A: Calorific Value and Price of Coal and Oil as submitted

by the Board for 2008-09

Sr. No.	Station	As considered by PSEB
Sr. No.	Station	Calorific value of coal (kCal/Kg)	Calorific Value of Oil (K.cal/Ltr)	Price of Oil (Rs/KL)	Price of coal including transit loss (Rs./MT)	Transit loss (%)
1	2	3	4	5	6	7
1	GNDTP	4239	10000	28297	2449	1.41%
2	GGSTP	4019	10000	30712	2518	2.20%
3	GHTP	4077	9400	28347	2531	1.69%

2.7.4. Fuel cost being a major item of expense, the Commission thought it prudent to get the same validated. The finally accepted values are indicated in Table 2.7B.

Table 2.7B: Calorific Value and Price of Coal and Oil as approved
by the Commission for 2008-09

	As accepted by the Commission
Station	Gross Calorific value of coal (kCal/Kg)	Calorific Value of Oil (K.cal/Ltr)	Price of Oil (Rs/KL)	Price of coal including transit loss (Rs./MT)	Transit loss (%)	Price of coal excluding transit loss (Rs./MT) (computed)
	1	2	3	4	5	6
GNDTP	4239	10181	28297	2449	1.41%	2414.5
GGSTP	4019	10000	30712	2518	2.20%	2462.6
GHTP	4077	9400	28347	2531	1.69%	2488.2

2.7.5. With regard to Station Heat Rate (SHR) of GGSTP, the Board has pointed out that the average aging for the turbines of 6 units as on 30.9.2009 was 14.89% and that in these circumstances, the efficiencies of the boiler and other plant assemblies are bound to decline from their designed values. Accordingly, the proposed SHR of 2700 Kcal/Kwh would be a more realistic assessment. In respect of GNDTP, the Board has brought out that certain elements of renovation and modernization of Unit 1 and 2 had not been undertaken in 2008-09 which had led to higher fuel costs for these units. However, with the completion of the said works, the SHR for these units has since improved. The Commission notes that similar submissions regarding the performance parameters of the Board’s Thermal Plants were made at the time when the ARR for 2009-10 came up for consideration and that the Commission had, after taking all relevant factors into account, decided these issues. The Commission is of the view that the principles and norms on which these matters were decided can not be reopened during true up for the year 2008-09 and accordingly, performance parameters as fixed in the Tariff Order of the previous year are proposed to be retained.

2.7.6. In the ARR for the year 2009-10, the Board had not reported any consumption of imported coal for the year 2008-09. This was also verified at the power stations at the time of validation when it was noted that a substantial quantity of coal from the Board’s captive coal mine (PANAM) was used during 2008-09 which is priced F.O.R. destination. The price of coal and corresponding calorific values given in the ARR of the Board (Table 2.7A) and those validated by the Commission (Table 2.7B) are weighted average values of coal, including PANAM coal.

2.7.7. The Commission has now approved revised gross thermal generation of 18067 MUs (2846 MUs for GNDTP, 9611 MUs for GGSTP and 5610 MUs for GHTP) as discussed in para 2.4.1. The fuel cost for different thermal stations corresponding to generation now approved has been worked out, based on the parameters adopted by the Commission in its Tariff Order of 2008-09. Price and calorific value of coal and oil has been adopted as validated and accepted by the Commission.

2.7.8. No transit loss has been allowed for PANAM coal while arriving at fuel cost as prices according to the contract are on F.O.R. destination basis. In case of coal other than PANAM coal, transit loss of 2% has been allowed by the Commission.

2.7.9. On the above basis, fuel cost for the year 2008-09 for different thermal stations corresponding to actual generation is given in Table 2.8.

Table 2.8: Approved Fuel Cost 2008-09

Sr. No.	Item	Derivation	Unit	Approved for 2008-09
Sr. No.	Item	Derivation	Unit	GNDTP (I&II)	GNDTP (III&IV)	GGSTP	GHTP	Total
1	2	3	4	5	6	7	8	8
1	Generation	A	MU	1562	1284	9611	5610	18067
2	Heat Rate	B	k.cal/kWh Generated	2850	3000	2500	2500
3	Specific oil consumption	C	Milli litre/kwh	2.00	3.50	2.00	2.00
4	Calorific value of oil	D	k.cal/litre	10181	10181	10000	9400
5	Calorific value of coal	E	k.cal/kg	4239	4239	4019	4077
6	Overall heat	F = (A x B)	G.cal	4451700	3852000	24026675	14024800
7	Heat from oil	G = (A x C x D) / 1000	G.cal	31805	45753	192213	105466
8	Heat from coal	H = (F-G)	G.cal	4419895	3806247	23834462	13919334
9	Oil Consumption	I=(Gx1000)/D	KL	3124.00	4494.00	19221.34	11219.84
10	Transit loss of coal	J	%	2.00	2.00	2.00	2.00
11	Total Coal Consumption excluding transit loss	K=(H*1000)/E	MT	1042792	898013	5930180	3414221
12	Quantity of PANAM coal	L	MT	601019	494051	2452406	2635682
13	Quantity of coal other than PANAM coal excluding transit loss.	M=K-L	MT	441773	403962	3477774	778539
14	Quantity of coal other than PANAM coal including transit loss	N=M/(1-J)	MT	450789	412206	3548749	794427
15	Total Quantity of coal required	O=L+N	MT	1051808	906257	6001155	3430109
16	Price of Coal without transit loss	P	Rs. / T	2414.50	2414.50	2462.60	2488.20
17	Price of Oil	Q	Rs./KL	28297	28297	30712	28347
20	Total cost of oil	R=Q x I / 10⁷	Rs.crore	8.84	12.72	59.03	31.80
21	Cost of coal	S=O x P/10⁷	Rs.crore	253.96	218.82	1477.84	853.48
22	Total Fuel cost	T= R+S	Rs.crore	262.80	231.54	1536.87	885.28	2916.49

* Quantity of Panam coal where not given for different units of a plant has been considered on pro-rata basis of generation.

The Commission, thus, approves the fuel cost at Rs. 2916.49 crore for gross generation of 18067 MUs for the year 2008-09.

2.8. Power Purchase Cost

2.8.1. The Commission, in its Tariff Order for the year 2008-09, approved a cost of Rs. 4186.33 crore for purchase of 15381 MUs (gross). In review, the Commission revised it to Rs. 4414.59 crore for the purchase of 13307 MUs (gross), inclusive of 4.71% external losses.

2.8.2. The actual gross power purchase for the year 2008-09 now reported by the Board is 15587.42 MUs (gross) including unscheduled interchange (UI) of 483.07 MUs. The net power purchase after accounting for external losses of 4.73% is 14851 MUs. The actual cost of power purchase for 2008-09 as per ARR 2010-11 is Rs. 5184.05 crore. The power purchase cost as per audited accounts for 2008-09 is also Rs. 5184.05 crore.

The Commission observes that as per previous practice, requirement of power purchase at the time of review is taken based only on the energy balance as determined in the Tariff Order for the relevant year and approved accordingly. However, at the time of true up, the actual quantum of power purchased has been allowed since it has been obtained by the Board and supplied to the consumers of different categories.

Going by the same practice, the Commission thus approves a cost of Rs.5184.05 crore for purchase of 14851 MUs net.

2.9. Expenses Disapproved by the Commission

2.9.1. Expenses disapproved on account of higher T&D losses: As discussed in para 2.3, the Board has under achieved the T&D loss target approved by the Commission. As per Tariff Regulations, the entire loss on account of failure to achieve T&D targets set by the Commission is to be borne by the licensee. As brought out in para 2.6, T&D loss level higher than that approved by the Commission has resulted in increased power purchase to the extent of 1249 MUs (net), the pro-rata cost of which based on power purchase cost approved in para 2.8 works out to Rs.435.99 (5184.05 x 1249 / 14851) crore.

The Commission, therefore, disapproves expenses to the extent of Rs. 435.99 crore on accounts of higher T&D losses.

The effect of this is reflected at Sr. No. 14(i) of Table 2.14.

2.9.2. Expenses disapproved for lower thermal generation: The Commission has noted that there is lower thermal generation to the extent of 492 MUs gross (486 MUs net) and consequent increase in power purchase as discussed in para 2.4.1. The station wise decrease in gross generation compared to the generation approved in the Tariff Order of 2009-10 is 275 (9886-9611) MUs for GGSTP and 517 (6127-5610) MUs for GHTP. For GNDTP there is an increase in generation of 300 (2546-2846) MUs.

The net saving in fuel cost for different stations corresponding to this variation in generation based on cost now approved works out to Rs.73.36 crore as given in Table 2.9.

Table 2.9: Decrease in Fuel Cost due to lower Generation for 2008-09

Sr. No.	Station	Now Approved by the Commission		Increase / Decrease in fuel cost due to more/less generation
Sr. No.	Station	Generation (MUs)	Fuel Cost (Rs. crore)	Increase /Decrease in Generation (+/-) (MUs)	Increase /Decrease in Fuel Cost (+/-) (Rs. crore)
1	GNDTP	2846	495	(+) 300	(+) 52.18
2	GGSTP	9611	1537	(-) 275	(-) 43.98
3	GHTP	5610	885	(-) 517	(-) 81.56
4	Total	18067	2917	(-) 492	(-) 73.36

The increase in power purchase on account of lower generation is 486 MUs net. The cost of 486 MUs (net) based on power purchase cost approved as per para 2.8 works out to Rs.169.65 crore ((5184.05/14851)*486). Accordingly, the net increase in power purchase cost is Rs.96.29 (169.65 - 73.36) crore.

The Commission therefore determines an amount of Rs.96.29 crore as disincentive on account of lower thermal generation.

The effect of this is reflected at Sr. No. 14 (ii) of Table 2.14.

2.10 Employee Cost

2.10.1 The Commission, in its Tariff Order for the year 2008-09, approved employee cost of Rs.1773.55 crore. In the review, in accordance with PSERC Tariff Regulations, the Commission revised the employee cost to Rs.1768.19 crore by applying the wholesale price index (WPI) of 8.41% to the approved employee cost of Rs.1631.02 crore for 2007-08.

2.10.2 The employee cost, as per audited accounts of the Board for 2008-09, is Rs.2319.86 crore (gross). The net cost after reducing capitalization amount of Rs.117.82 crore is Rs.2202.04 crore. However, as per audit notes, the employee cost has been understated by Rs.6.58 crore and taking that into account, the employee cost of the Board comes to Rs.2208.62 crore.

2.10.3 The Commission also finds no justification in allowing additional employee cost on account of assets added during the year as laid down in Regulation 28 (6) of the PSERC Tariff Regulations. It is relevant to mention here that as per the Appellate Tribunal’s Judgement dated May 26, 2006, employee cost of the Board will remain capped until performance parameters of the Board improve.

2.10.4 The Commission is, thus, only to adjust employee cost for 2008-09 in accordance with the annual variations in the rate of WPI as on 1^st April of the year. In line with the principle adopted in the past, average increase in WPI of 8.41% in the year 2008-09 is considered to allow the employee cost. The Commission, therefore, retains the employee cost of Rs.1768.19 crore by allowing an increase of 8.41% over the approved employee cost of Rs.1631.02 crore for the year 2007-08.

The Commission, thus, approves the employee cost of Rs.1768.19 crore for the year 2008-09.

2.11 Repairs and Maintenance (R&M) Expenses

2.11.1 The Commission approved R&M expenses of Rs. 323.19 crore in its Tariff Order of 2008-09. In the review, the R&M expenses were revised to Rs. 339.56 crore, allowing

· an increase of 8.41% in WPI over the R&M expenses approved for the year 2007-08 and

· R&M expenses for the additional assets of Rs.1914.67 crore approved as added during 2008-09, assuming these remained in use for six months in the year.

2.11.2 R&M expenses as per the audited accounts of the Board for the year 2008-09 are Rs. 341.78 crore. This figure is inclusive of operating expenses of Rs. 21.17 crore as discussed in Para 2.7.2. Reducing capitalized expenses of Rs.3.24 crore, the actual R&M cost for the year 2008-09, works out to Rs. 338.54 crore. However, as per audit notes, these expenses have been understated to the extent of Rs.3.16 crore. Thus, the actual R&M expenses for the year 2008-09 work out to Rs.341.70 crore.

2.11.3 The PSERC Tariff Regulations provide for allowing an increase in O&M expenses (which include R&M expenses) in proportion to the increase in WPI. The base R&M expenses of Rs. 296.00 (286.91+9.09) crore are being considered to allow these expenses for the year 2008-09 which include approved R&M expenses of Rs.286.91 crore for 2007-08 and an amount of Rs.9.09 crore being R & M expenses allowed for six months on fixed assets added during the year. Thus, after allowing an average WPI increase of 8.41% for the year over the base R&M expenses of Rs. 296 crore, the allowable R&M expenses work out to Rs.320.89 crore for assets of Rs. 16424.12 crore as on April 1, 2008, as determined by the Commission after taking into account audit notes.

2.11.4 According to Regulation 28 (6) of the PSERC Tariff Regulations, R&M expenses for fixed assets added during the year are to be considered on pro-rata basis from the date of commissioning. As per audited accounts for 2008-09, fixed assets added during the year are valued at Rs. 2011.03 crore. However, as per audit notes, these fixed assets are understated by Rs. 54.97 crore. Taking the audit notes into account, the value of the assets added during the year works out to Rs. 2066 crore. The dates of commissioning of these assets are neither available in the accounts nor in the ARR of the Board. Therefore, R&M expenses for the assets added are being considered assuming that these assets remained in service of the Board for six months on an average during 2008-09. The average percentage rate of R&M expenses of Rs.320.89 crore for assets of Rs.16424.12 crore works out to 1.95% (320.89/16424.12*100). By applying the average rate of 1.95%, the allowable R&M expenses for the additional fixed assets added during the year work out to Rs.20.14 crore. Thus, allowable R&M expenses for the year 2008-09 work out to Rs.341.03 (320.89 + 20.14) crore.

The Commission, accordingly, allows R&M expenses of Rs. 341.03 crore for the year 2008-09.

2.12 Administration and General (A & G) Expenses

2.12.1 In the Tariff Order of 2008-09, the Commission approved A&G expenses of Rs.79.29 crore. In the review of 2008-09, these expenses were approved at Rs.71.93 crore being net of capitalization of Rs.23.43 crore as claimed by the Board.

2.12.2 As per the audited accounts of the Board, the A&G expenses for the year 2008-09 are Rs.90.73 crore (gross). The net expenses for the year work out to Rs.70.96 crore after reducing capitalized expenses of Rs.19.77 crore.

2.12.3 Regulation 28 of the PSERC Tariff Regulations provides for allowing annual increase in the approved O&M expenses (which include A&G expenses) based on average increase in WPI over the year. The base A&G expenses for 2008-09 work out to Rs.68.07 (66.00 + 2.07) crore which include approved A&G expenses of Rs.66.00 crore for 2007-08 and an amount of Rs.2.07 crore being A&G expenses allowed for six months on fixed assets added during the year. Accordingly, after allowing average WPI increase of 8.41% over the base A&G expenses of Rs.68.07 crore, expenses allowable for 2008-09 work out to Rs. 73.79 crore for assets valued at Rs.16424.12 crore as on 1^st April, 2008. The average percentage rate of allowable A&G expenses works out to 0.45% i.e. (73.79/16424.12*100).

2.12.4 The Commission adopts the same principle for allowing A&G expenses for fixed assets added during the year as has been applied to R&M expenses. Accordingly, the average rate of 0.45% is applied to the additional assets of Rs. 2066 crore added during 2008-09 for arriving at allowable A&G expenses of Rs.4.65 crore. Thus, allowable A&G expenses for the year work out to Rs. 78.44 (73.79 + 4.65) crore for the year 2008-09 against which the Board has claimed expenses of Rs.70.96 crore on actual basis.

The Commission, therefore, approves A&G expenses of Rs.70.96 crore as claimed by the Board for the year 2008-09.

2.13 Depreciation Charges

2.13.1 The Commission approved depreciation charges of Rs.783.34 crore for the year 2008-09 in the Tariff Order of 2008-09. In the review, these charges were revised to Rs.721.50 crore based on the revised estimates of the Board.

2.13.2 In its ARR for 2010-11, the Board has claimed depreciation charges of Rs.693.73 crore which are net of capitalized depreciation of Rs.2.41 crore for the year 2008-09. The Commission has noted that the depreciation charges as per audited accounts are also at Rs.693.73 crore (net) as claimed by the Board. However, as per audit notes on the Annual Accounts for 2008-09, these expenses have been understated by an amount of Rs.8.62 crore and taking this into account, depreciation charges for the year work out to Rs.702.35 crore for 2008-09.

The Commission, therefore, approves depreciation charges of Rs.702.35 crore for the year 2008-09.

2.14 Interest and Finance Charges

2.14.1 The Commission approved net Interest and Finance charges of Rs.767.48 crore in its Tariff Order for the year 2008-09 after disallowing interest cost of Rs.100 crore of the Board and Rs.209.32 crore of interest on GoP loans on account of diversion of capital funds for revenue purposes. In the review of 2008-09, the Interest & Finance charges were revised to Rs. 537.66 crore.

2.14.2 The amount of Interest and Finance charges (gross) as per audited accounts for 2008-09 is Rs.1446.12 crore. After reducing capitalized interest charges of Rs.251.53 crore, the net interest charges come to Rs.1194.59 crore. The Interest and Finance charges claimed by the Board and as allowed by the Commission are detailed in Table 2.10 below.

Table 2.10: Interest and Finance charges

(Rs. crore)

Sr. No.	Description	Interest as depicted in accounts	Interest payable on GoP loans but not accounted for in accounts for 2008-09	Amount disallowed by Commission	Amount allowed by Commission
1.	Interest on institutional loans taken by the Board	602.48	-	6.78	595.70
2.	Interest on loans taken for Rajpura Thermal Plant (RTP) being privately developed on BOO basis	16.25	-	16.25	0.00
3.	Interest payable on GoP loans	0	219.19	-	219.19
4.	Interest for short-term loans of Rs.1362 crs.	151.05	-	-	151.05
5.	Interest on GPF	112.65	-	-	112.65
6.	Lease rentals	0.04	-	-	0.04
7.	i) Interest to consumers on security deposits ii) Short provision for interest on security deposits as per audit notes not accounted for by the Board in accounts.	70.48 70.61	-	-	141.09
8.	Discount to consumers for advance payment of bills	52.45	-	52.45	0
9.	Sub Total	1076.01	219.19	75.48	1219.72
10.	Interest on Working Capital Loans (569.54-151.05)	418.49	-	313.54	104.95
11.	Finance charges for capital loans	22.23	-	17.04	5.19
12.	Total (9+10+11)	1516.73	219.19	406.06	1329.86
13.	Less capitalization	251.53	-	-	251.53
14.	Net Interest & Finance charges (12-13)	1265.20	219.19	406.06	1078.33
15.	Less interest disallowed on account of diversion of capital funds				262.34
16.	Interest allowed (14-15)				815.99

The interest and finance charges allowable to the Board are discussed in the ensuing paragraphs.

2.14.3 The Commission, in its Tariff Order, approved an Investment Plan of Rs.2000 crore for the year 2008-09. In the review, the Commission revised the Investment Plan to Rs.1475.28 crore after deducting investment of Rs.442.62 crore and Rs.6.61 crore on Rajpura and Gidderbaha Thermal Plants which are being/proposed to be developed on BOO basis. The net requirement of loans of Rs.1117.18 crore was approved after adjustment of consumers’ contribution of Rs.215.58 crore (considered at previous year’s level) and incentive grant of Rs.142.52 crore received under APDRP scheme from Govt. of India. In the ARR of 2010-11, the Board has claimed actual capital investment of Rs.1924.52 crore which is the same as was claimed in the ARR of 2009-10. However, net capital expenditure of the Board for 2008-09 works out to Rs.1481.90 crore after deducting an investment of Rs.442.62 crore on Rajpura Thermal Plant being developed by a private company on BOO basis. No investment on account of Gidderbaha Thermal Plant has been reflected in the audited accounts. As per the audited accounts, consumers’ contribution, Grants & Subsidies received towards cost of capital assets for the year 2008-09 are at Rs.327.56 (72.27 +255.29) crore which amount was available with the Board with no interest cost. Hence, the actual requirement for capital loans works out to Rs.1154.34 (1481.90-327.56) crore. The interest on loans availed by the Board for capital expenditure works out to Rs.618.73 crore in 2008-09. This is inclusive of interest of Rs.16.25 crore on account of interest on loans taken for Rajpura Thermal Plant which is being privately developed. Thus, the net interest on institutional loans works out to Rs.602.48 crore. However, the Board’s interest liability on allowable loans of Rs.1154.34 crore works out to Rs.595.70 crore on proportionate basis as worked out in Table 2.11.

Table 2.11 Interest on Capital Loans

(Rs. crore)

Sr. No.	Particulars	Loans o/s as on 31.3.08	Receipt of loans	Repayment of loans	Loans o/s as on 31.3.09	Amount of interest
1	2	3	4	5	6	7
1	As per data furnished by Board (other than GoP loans & WCL)	5960.53	1292.63	921.50	6331.66	602.48
2	Approved by Commission (other than GoP loans & WCL)	5960.53	1154.34	921.50	6193.37	595.70

2.14.4 As per the audited accounts of the Board, GoP loans of Rs.1712.91 crore as on March 31, 2008 decreased to Rs.1660.52 crore by March 31, 2009. Interest payable on the loan amount works out to Rs.219.19 crore for 2008-09 by applying an average rate of interest of 13.20%. The Commission observes that the Board has claimed ‘Nil’ interest payable on GoP loans in the audited accounts for the year 2008-09. The Commission, however, allows interest of Rs.219.19 crore for GoP loans on accrual basis in order to arrive at the gross interest payable in 2008-09. However, after adjusting Rs.162.34 crore disallowed on account of diversion of capital funds for revenue purposes as discussed in Para 2.14.11, an amount of Rs.56.85 crore is determined as interest payable on GoP loans. This amount will be further adjusted as discussed in Para 2.14.12.

2.14.5 In the Tariff Order of 2009-10, the Commission allowed an interest of Rs.140.15 crore on short term loans of Rs.1362.00 crore raised to replace GoP loans recalled by the Govt. The Commission now approves interest of Rs.151.05 crore on short term borrowings by applying an interest rate of 11.09 % on the basis of the interest claim for short term borrowings reflected in the audited accounts.

2.14.6. In the ARR of 2008-09, the Board claimed interest on GPF amounting to Rs.105 crore which was allowed by the Commission. In the review, the Commission revised these expenses to Rs.115 crore as claimed by the Board. However, in the ARR of 2010-11, the Board has claimed these expenses at Rs.112.65 crore which is the same as reflected in the Board’s audited accounts. This being a statutory expenditure, the interest charges on this account are, accordingly allowed.

2.14.7. The Commission approved lease rentals of Rs.0.05 crore in the Tariff Order of 2008-09 which were retained in the review in Tariff Order of 2009-10. In the ARR of 2010-11, the Board has claimed lease rentals of Rs.0.04 crore which tallies with the audited accounts of the Board for 2008-09. The Commission, accordingly, approves this expenditure on actual basis.

2.14.8. In the Tariff Order of 2008-09, the Commission allowed interest on consumers’ security at Rs.4.20 crore as claimed by the Board. In the review, these charges were revised to Rs.4.97 crore after allowing 5% increase in the actual interest of Rs.4.73 crore paid to consumers in the previous year. In the ARR of 2010-11, the Board has claimed an interest of Rs.70.48 crore being interest paid to the consumers on their security deposits. The Commission observes that as per audit notes to the audited accounts of 2008-09, these expenses have been understated by Rs.70.61 crore due to short provision of interest on security deposits. After taking into account the audit notes, the interest payable to the consumers will work out to Rs.141.09 crore for the year 2008-09. The expenditure being obligatory is approved at Rs.141.09 crore.

The Commission observes that the Board has claimed an amount of Rs.52.45 crore under ‘Interest & Finance Charges’, being discounts allowed to the consumers for advance payment of bills. However, as this amount is being utilized by the Board for its revenue expenditure, its requirement of working capital is set off to this extent. Therefore, the Commission does not approve any interest on this account.

2.14.9 In the Tariff Order of 2008-09, the Commission approved interest of Rs.98.64 crore as interest on normative working capital of Rs.758.75 crore for the year. This expenditure was revised to Rs.97.73 crore on normative working capital of Rs.796.76 crore. In the ARR of 2010-11, the Board has claimed interest of Rs.569.54 crore for the working capital which is inclusive of interest on loans of Rs.1362 crore as allowed in para 2.14.5. This interest has been computed on the actual quantum of working capital loans availed of by the Board. However, the allowable working capital loans admissible on normative basis are brought out in Table 2.12 below:

Table 2.12: Working Capital Requirement

Sr. No.	Particulars	Rs. crore
1	One month Fuel Cost	243.04
2	One month Power Purchase Cost	432.00
3	One month Employee cost	147.35
4	One month A&G cost	5.91
5	One month R&M Expenses	28.42
6	Total Working Capital Required	856.72

The allowable working capital loans work out to Rs.856.72 crore on normative basis on which interest charges comes to Rs.104.95 crore at an interest rate of 12.25% being the PLR of SBI as on April 2008. Accordingly, interest charges of Rs.104.95 crore are allowed.

2.14.10 In the Tariff Order of 2008-09, the Commission approved finance charges of Rs.11.75 crore at the rate of 0.66% for allowable loans of Rs.1781 crore. In the review, the Commission approved these charges at Rs.5.03 crore by applying the rate of 0.45% as claimed by the Board for allowable loans of Rs.1117.18 crore against Rs.13.52 crore claimed by the Board for fresh borrowings of Rs.2989.30 crore. In the ARR for the year 2010-11, the Board has claimed finance charges of Rs.22.23 crore which is the same as depicted in the audited accounts for loans of Rs.1292.63 crore actually availed of by the Board. The Board has not provided any justification for claiming higher finance charges. Therefore, the Commission considers it appropriate to apply the rate of 0.45% for allowable loans of Rs.1154.34 crore for the year 2008-09 and allows finance charges of Rs.5.19 crore.

2.14.11 The Commission has also re-determined the diversion of capital funds for revenue purposes at Rs.2624.76 crore based on the Board’s audited accounts for the year 2008-09 as given in Table 2.13:

Table 2.13: Diversion of Capital Funds

(Rs. crore)

Sl. No.	Item	Year 2008-09
1	Net Fixed Block	10385.69*
2	Works in progress (WIP) during the year	3004.72**
3	Inventory at Const. Stores	176.53
4	Total (1+2+3)	13566.94
5	Less Consumers’ contribution and grants & subsidy towards cost of capital assets	3270.41
6	Balance capital base (4-5)	10296.53
7	Requirement of Loans +equity	10296.53
8	Average GoP Loans for the year	1686.71
9	Other loans (other than NPL & TSPL)	7049.15
10	Equity	2946.11
11	SBI Bonds (Debt servicing charges taken over by GoP)	637.35
12	GPF utilized by Board ( Accumulations in GPF Less amount invested)	601.97
13	Actual Loans + Equity (8+9+10+11+12)	12921.29
14	Less capital base	10296.53
15	Amount diverted (13-14)	2624.76
16	Less Bonds for which debt servicing under-taken by GoP	637.35
17	Balance diverted amount (15-16)	1987.41
18	Interest effect @13.20% (Average rate of interest on GoP loans)	262.34

*This figure is worked out as Rs.10385.69 (10339.34+54.97-8.62) crore after taking into account the effect of audit notes i.e (I) assets were understated by Rs.54.97 crore (II) depreciation was understated by Rs.8.62 crore.

**This figure is worked out as Rs.3004.72(3264.57-204.88-54.97) crore after taking into account the audit notes i.e i) assets of Rs.204.88 crore relate to Irrigation Department of Shahpur Kandi ii)Completed assets of Rs.54.97 crore are shown as WIP.

The diversion of capital funds for revenue purposes for the year works out to Rs.2624.76 crore out of which debt servicing of SBI bonds of Rs.637.35 crore will have no effect on interest charges of the Board as the same has been taken over by the GoP. Therefore, the net diverted amount carrying interest liability is Rs.1987.41 crore on which interest works out to Rs.262.34 crore at an average rate of 13.20% (being average rate of interest on GoP loans of Rs.1660.52 crore as on March 31, 2009). This interest of Rs.262.34 crore is being disallowed from the interest cost on account of diversion of capital funds for 2008-09.

In this regard, the Commission retains its decision to disallow interest cost of Rs.100 crore of the Board on account of deficiencies in its working and the balance of Rs.162.34 crore is to the account of the GoP. The latter amount is being adjusted against interest of Rs.219.19 crore payable on GoP loans as determined in para 2.14.4.

2.14.12 The Commission, in para 2.14.13 of the Tariff Order of 2009-10, determined the actual interest on GoP loans paid in excess to the Govt. by the Board at Rs.333.08 (289.92 + 43.16) crore for the years 2006-07 and 2007-08. In its Order dated September 13, 2007, the Commission had held that the interest paid in excess by the Board is to be refunded by the GoP. As discussed in para 2.14.4 and 2.14.11 an amount of Rs.56.85 crore is determined as payable by the Board to GoP. Adjusting this amount, the net sum payable by the GoP to the Board works out to Rs.276.23 (333.08-56.85) crore. This amount is being carried forward to para 2.16.4.

2.14.13 In the ARR of 2008-09, the Board had claimed an amount of Rs.82.40 crore as interest capitalized against which the Commission allowed Rs.22.29 crore as per practice for capitalization of interest invariably followed by the Commission. In the review, the Commission allowed capitalization charges at Rs.135.77 crore as claimed by the Board. In the ARR of 2010-11, the Board has claimed capitalization of interest charges of Rs.251.53 crore which is the same as per the Board’s audited accounts. Accordingly, the Commission approves capitalization of interest charges of Rs.251.53 crore for the year 2008-09.

Accordingly, the Commission approves the net Interest and Finance charges of Rs.815.99 crore for the year 2008-09.

2.15 Return on Equity

2.15.1 In the Tariff Order of 2008-09, the Commission, in accordance with Regulation 25 of the PSERC Tariff Regulations, approved a Return on Equity of Rs.412.46 crore calculated at 14% on the equity of Rs.2946.11 crore as on April 01, 2008. In the review, the Commission retained Return on Equity at Rs.412.46 crore for that year. As per the audited accounts of the Board for the year 2008-09, GoP equity in the Board remained unchanged at Rs.2946.11 crore.

Accordingly, the Commission retains Return on Equity at Rs.412.46 crore for the year 2008-09 as approved earlier.

2.16 Subsidy and Other Amounts Payable by the GoP

2.16.1 As per the audited accounts for the year 2008-09, total subsidy of Rs.2601.73 crore has been paid by the GoP to the Board.

2.16.2 The subsidy payable by the GoP is now trued up as under:

· AP Consumption: The Commission has accepted AP consumption at 8395 MUs on which revenue @ 240 paise per unit works out to Rs.2014.80 crore. The consumers were not billed any amount on this account. Thus, Rs.2014.80 crore (exclusive of meter rentals and service charges of Rs.7.00 crore) was payable by the GoP as AP subsidy.

· Scheduled Castes (SC) Domestic Supply (DS) Consumers: The Commission notes that as per the decision of the GoP, Scheduled Castes DS consumers with a connected load of upto 1000 watts will be given free power upto 200 units per month. The Board has claimed subsidy of Rs.225.28 crore besides meter rentals and service charges of Rs.18.34 crore on this account. Accordingly, the Commission approves subsidy of Rs.243.62 crore under this head.

· Non-SC Below Poverty Line (BPL) Consumers: The GoP had also decided to give free supply of power upto 200 units per month to Non-SC BPL DS consumers with connected load upto 1000 watts. The Board has claimed subsidy of Rs.1.98 crore inclusive of meter rentals and service charges of Rs. 0.11 crore on this account. The Commission approves the same.

2.16.3 On the above basis, total subsidy payable by the GoP for the year 2008-09 works out to Rs.2267.40 (2014.80 +7.00+243.62 +1.98) crore.

2.16.4 The subsidy payable to the Board for 2008-09 was paid by the GoP in a staggered manner, not in keeping with the methodology specified by the Commission for making such payment. The Board has claimed that it had to meet its revenue requirements by taking short term loans at an average interest rate of 11.09% (effective short term rate based on the Board’s ARR) from the open market to cover for deficit on account of late payment of subsidy. The Commission, in the review of 2008-09, had determined interest of Rs.42.98 crore for delayed payment of subsidy. The amount of interest has now been re-worked to Rs.55.05 crore on payable subsidy of Rs.2267.40 crore.

In para 2.16.2 of the Tariff Order of 2009-10 (true up of 2007-08), the Commission determined total arrears of subsidy payable by the GoP upto the year 2007-08 as Rs.97.83 crore.

Thus, subsidy of Rs.2420.28 (2267.40+55.05+97.83) crore is now determined as payable by the GoP to the Board for the year 2008-09 against subsidy of Rs.2601.73 crore already paid, resulting in excess payment of subsidy of Rs.181.45 crore. This is being carried forward to para 5.4.

However, the GoP will be liable to pay an amount of Rs. 276.23 crore as discussed in para 2.14.12. This is being carried forward to para 3.15.

2.17 Prior Period Expenses

In its ARR for 2010-11, the Board has claimed prior period expenses of Rs.107.60 crore being payments pertaining to the previous years but made during the year 2008-09. As per the audited accounts, the prior period expenses are Rs.107.60 crore inclusive of Rs.3.08 crore on account of employee cost. The Board has not intimated the period to which the expenses on account of employee cost pertain. These expenses are disallowed assuming that these expenses pertain to the period during which the employee cost of the Board remained capped.

Accordingly, the Commission approves prior period expenses of Rs.104.52 crore for the year 2008-09.

2.18 Non-Tariff Income

2.18.1 The Commission approved non-tariff income of Rs.412.00 crore for the year 2008-09 in the Tariff Order of 2008-09. This was increased to Rs.442.57 crore in the Tariff Order of 2009-10 based on revised estimates of the Board.

2.18.2 As per the audited accounts of the Board for the year 2008-09, the ‘other income’ of the Board is Rs.303.03 crore. Besides this, an amount of Rs.104.38 crore is deducted from the sale of power and counted towards non-tariff income of the Board [as per para 2.19.2]. Accordingly, as per audited accounts of the Board, non tariff income works out to Rs.407.41 crore. In addition, the subsidy of Rs.7.00 crore for AP consumers and Rs.18.45 crore for SC and Non-SC BPL Domestic Supply consumers has been received from the GoP on account of meter rentals and service charges which also forms part of non tariff income for 2008-09. Taking these receipts into account, the non-tariff income of the Board for the year amounts to Rs.432.86 (303.03+104.38+7.00+18.45) crore.

2.18.3 The Commission, in para 5.9 of the Tariff Order of 2009-10, had directed the Board to report the final outcome of the audit notes on the Board’s accounts for the year 2007-08 regarding its miscellaneous income failing which the non tariff income of the Board would be re-determined on the basis of those audit notes. As per the audit notes, the Misc income was understated to the extent of Rs.151.10 crore and comprised of (i) deposits of Rs.103.89 crore outstanding for more than 3 years, (ii) deposits of Rs.0.97 crore received against burnt meters and (iii) advance of Rs.46.24 crore received against sale of scrap. During processing of the ARR, the Board had intimated that out of Rs.103.89 crore, Rs.60.00 crore relates to receipts on account of Central Plan Assistance and efforts were being made to identify the details of the remaining amount. However, the Board has not submitted any clarification regarding the remaining amount of Rs.43.89 crore under the head ‘deposits outstanding’. Regarding deposits on account of burnt meters, the Board has submitted that it is a continuing process and due credit has been reflected in the Suspense Schedule for the year 2008-09. Similar treatment has been given to the advance against sale of scrap. This explanation of the Board is not acceptable as any credit to the Suspense account is made pending final credit in the books of account. Further clarification sought on this account did not yield any results. Therefore, the Commission is left with no alternative but to treat the balance amount of Rs.91.10 (43.89+0.97+46.24) crore as understated miscellaneous income of the Board and count the same towards non-tariff income of the Board for the year 2008-09. Accordingly, the non tariff income of the Board for the year is determined at Rs.523.96 (432.86+91.10) crore.

The Commission accordingly, approves Non-Tariff Income at Rs. 523.96 crore for the year 2008-09.

2.19 Revenue from Sale of Power

2.19.1 The Commission approved the revenue from tariff at Rs.11231.11 crore (including GoP subsidy of Rs.2602 crore) in the Tariff Order for the year 2008-09. In the review, the revenue from sale of power was revised to Rs.11139.38 crore inclusive of GoP subsidy.

2.19.2 In the audited accounts for 2008-09, the revenue actually received from sale of power is Rs.9010.34 crore excluding GoP subsidy. This revenue includes non-tariff income of Rs.104.38 crore on account of meter rentals and service charges (Rs.81.47 crore), wheeling charges (Rs.2.07 crore) and miscellaneous charges other than peak load exemption charges (Rs.20.84 crore). These receipts have been accounted for in the non-tariff income and are hence deducted from the head ‘revenue from sale of power’. Therefore, net revenue from sale of power works out to Rs.8905.96 (9010.34-104.38) crore. Besides, the Board had received subsidy of Rs. 2601.73 crore and Rs.0.08 crore on account of revenue grant. However, subsidy of Rs.2267.40 crore determined as payable for 2008-09 in para 2.16 of this Tariff Order includes an amount of Rs.25.45 crore related to meter rentals and service charges which is a part of non-tariff income for the year. Accordingly, after adding subsidy of Rs.2241.95 (2267.40-25.45) crore paid by the GoP to the Board, total revenue from sale of power amounts to Rs.11147.91 crore.

The Commission, therefore, approves the revenue from sale of power at Rs.11147.91 crore for the year 2008-09.

2.20. Other Debits and Extraordinary Items

2.20.1 The audited accounts of the Board for the year 2008-09, show ‘other debits and extraordinary items’ at Rs.5.80 crore. However, as per audit notes, these are understated by i) Rs.16.65 crore on account of loss on the manufacture of PCC Poles shown as receivable ii) Rs.3.95 crore due to non-charging of expenditure incurred on survey/feasibility study of projects, which have not matured/sanctioned iii) Rs.4.65 crore due to wrong adjustment of expenses incurred under liabilities for expenses iv) Rs.0.13 crore outstanding against deceased employees and (v) Rs.1.93 crore outstanding in respect of idle labour in TLSC divisions which were required to be written off. Accordingly, the actual figure under this head works out to Rs.33.11 (5.80+16.65+3.95+4.65+0.13+1.93) crore.

The Commission allows an expenditure of Rs.33.11 crore for the year 2008-09 on this account.

2.21 Fringe Benefit Tax (FBT)

The audited accounts of the Board indicate that Rs.4.90 crore was paid as Fringe Benefit Tax (FBT) which is the same as claimed by the Board in the ARR.

This being a statutory payment, the Commission approves the amount of Rs.4.90 crore for the year 2008-09.

2.22 True up of ARR for 2008-09

2.22.1 In view of the above analysis, the trued up revenue requirement for the year 2008-09 is as per details given in Table 2.14.

Table 2.14: Revenue Requirement

(Rs. crore)

Sr. No.	Item of Expense	Approved by Commission in T. O. for 2008-09	Approved by Commission in T. O. for 2009-10	Actuals as per Annual Accounts for 2008-09	Final approval by Commission
1	2	3	4	5	6
1	Cost of fuel	2742.62	2978.85	3154.06	2916.49
2	Cost of power purchase	4186.33	4414.59	5184.05	5184.05
3	Employee cost	1773.55	1768.19	2202.04	1768.19
4	R&M expenses	323.19	339.56	338.54	341.03
5	A&G Expenses	79.29	71.93	70.96	70.96
6	Depreciation	783.34	721.50	693.73	702.35
7	Interest & finance charges	767.48	537.66	1194.59	815.99
8	Carrying cost of gap	102.15	-
9	Return on Equity @ 14%	412.46	412.46	412.46	412.46
10	Prior period expenses			107.60	104.52
11	Other Debits and Extraordinary items			5.80	33.11
12	Fringe Benefit Tax	4.56	4.98	4.90	4.90
13	Total revenue requirement	11174.97	11249.72	13368.73	12354.05
14	i) Less expenses disapproved due to higher T&D loss ii) Less expenses disapproved due to less generation				435.99 96.29
14	iii)Add Additional incentive for higher thermal generation in 2007-08*				24.16
15	Revenue requirement	11174.97	11249.72	13368.73	11845.93
16	Less: non tariff income	412	442.57	407.42	523.96
17	Net revenue requirement	10762.97	10807.15	12961.31	11321.97
18	Revenue from tariff	11231.11	11139.38	11507.77	11147.91
19	Gap (surplus (+)/ deficit (-)	468.14	332.23		(-)174.06
20	Gap (deficit (-) for the year 2007-08	(-)717.78	(-)803.31		(-)803.31
21	Total gap (deficit) (-)	(-)249.64	(-)471.08	(-)1453.54	(-)977.37
22	Energy sales (MUs)	32,632	30,892	32,627	31673

*As per Order dated April 16, 2010 of the Commission in Petition No 23 of 2009.

From the true up for the year 2008-09, it is noted that there is a gap (deficit) of Rs.174.06 crore against a gap (surplus) of Rs.332.23 crore determined earlier by the Commission in the review of 2008-09 in the Tariff Order dated September 8, 2009. After adding a cumulative gap (deficit) of Rs. 803.31 crore for the year 2007-08, the total gap (deficit) works out to Rs. 977.37 crore which is being carried forward for adjustment in the next year.

Chapter 3

Review for the Year 2009-10

3.1 Background

3.1.1 The Tariff Order of the Commission for 2009-10 contained its approvals of costs and revenue projections based on the Board’s estimates for different items of costs to be incurred and revenue likely to accrue during the year. The Board has, in its ARR for the year 2010-11, now furnished revised estimates for 2009-10.

3.1.2 There are differences in certain items of costs as well as revenues between the approvals granted by the Commission and the revised estimates now furnished by the Board. The Commission considers it appropriate and fair to re-visit and review the approvals granted by it in the Tariff Order (2009-10) with reference to the revised estimates now made available by the Board but without altering the principles and norms adopted earlier. These matters are discussed in the succeeding paragraphs.

3.2 Energy Demand (Sales)

3.2.1 Metered Energy Sales

The Board has re-estimated energy sales to metered categories for 2009-10 on the basis of actuals for the first 6 months (April ‘09 to Sept ‘09) and by applying category wise half yearly Cumulative Annual Growth Rate (CAGR) of the second half year for the period 2005-06 to 2008-09, to the corresponding actual category wise sales in the second half of 2008-09.

The Commission has estimated sales to metered categories for 2009-10 on the basis of actual sales for first 6 months of 2009-10 (April ‘09 to Sept ‘09) submitted by the Board in its ARR petiton and by applying category wise half yearly CAGR for the 3 year period from 2005-06 to 2008-09, to the corresponding actual category wise sales during second half of 2008-09. As per last three year CAGR of second half sales, two of the categories (medium supply and public lighting) show a negative growth rate but the Commission has considered 0% growth rate as the Board has not furnished any information on negative growth in respect of these two categories. The Commission has worked out the estimated sales to metered categories as 21092 MUs for the year 2009-10 (detailed in Table 3.1) as against 21379 MUs projected by the Board.

Table 3.1: Estimated Energy Sales during 2009-10

(MUs)

Sr. No.	Category	Sales during 2^nd Half of 05-06 (actual)	Sales during 2nd Half of 08-09 (actual)	3 year CAGR during 2^nd Half of 06 to 2^nd Half of 09	Sales during 1st half of FY 09-10	Estimated sales during 2nd Half of 09-10	Estimated sales for 2009-10 (6+7)
1	2	3	4	5	6	7	8
1	Domestic	2589	3335	8.81%	3671	3629	7300
2	Non-Residential	745	998	10.24%	1078	1100	2178
3	Small Power	352	362	0.94%	377	365	742
4	Medium Supply	806	732	-3.16%	777	732	1509
5	Large Supply	3957	4329	3.04%	4158	4461	8619
6	Public Lighting	67	66	-0.50%	62	66	128
7	Bulk Supply	223	236	1.91%	244	240	484
8	Railway Traction	52	57	3.11%	73	59	132
9	Metered Sale (Within State)	8791	10115		10440*	10652	21092

* Against 10438 projected by the Board

3.2.2 The Commission has retained sales to common pool consumers at 302 MUs as indicated by the Board as they are based on the actual figures of sales to common pool for 2008-09. The Outside State sales projected by the Board in the ARR for 2010-11 as 1383 MUs have been subsequently revised to 297 MUs as furnished by the Board in its letter dated January 28, 2010 due to change in accounting procedure for sale/purchase of banking power from 2009-10. The Commission is of the view that the change in accounting procedure can be considered from 2010-11 but for 2009-10 accepts the Outside state sales of 1383 MUs as projected by the Board in the ARR.

The metered energy sales projected by the Board during determination of ARR for the year 2009-10, those approved by the Commission in the Tariff Order, the revised estimates furnished by the Board and metered energy sales now approved by the Commission are given in Table 3.2.

Table 3.2: Metered Energy Sales - 2009-10

(MUs)

Sr. No.	Category	Projected by PSEB during determination of ARR 09-10	Approved by the Commission in T.O. 09-10	Revised Estimates of PSEB during determination of ARR of 10-11	Approved by the Commission in review
1	2	3	4	5	6
1	Domestic	7240	6960	7336	7300
2	Non-Residential	2320	2145	2135	2178
3	Small Power	741	722	768	742
4	Medium Supply	1590	1522	1607	1509
5	Large Supply	9812	9278	8741	8619
6	Public Lighting	158	148	148	128
7	Bulk Supply	531	500	495	484
8	Railway Traction	118	123	149	132
9	Metered sales (within State)	22510	21398	21379	21092
10	Common pool	302	303	302	302
11	Outside State sales	1307	1307	297	1383
12	Total (9+10+11)	24119	23008	21978	22777

Metered sales of 21092 MUs within the state, common pool sales of 302 MUs and Outside State sales of 1383 MUs are now approved by the Commission as per details shown in Table 3.2.

3.2.3 AP Consumption

The Commission in its Tariff Order of 2009-10 approved AP consumption of 9814 MUs after applying a normative growth of 5% twice over the consumption of 8902 MUs worked out by the Commission for the year 2007-08 against 11699 MUs projected by the Board.

The Board, in its ARR for 2010-11, has given revised estimates of AP consumption for 2009-10 based on the reported consumption during the first half of 2009-10 and by applying the average CAGR (7.87%) of the last three years for second half sales on the corresponding reported sales of the second half of 2008-09 which works out to 10363 MUs.

The Commission has over the last several years been attemnpting to fine-tune the methodology of computing agricultural consumption with a view to ensuring that estimates are as accurate as possible. In that context, the Commission had in the Tariff Order for 2009-10 directed the Board to take the following specific measures:

a) Monthly division-wise consumption recorded by sample meters be made available directly to the Commission by the agency undertaking this work.

b) Furnish to the Commission the following information, division-wise and on a monthly basis:

(i) Data on the load of each sample meter, initial and final meter readings, total connected load of AP sample meters and total consumption recorded by sample meters.

(ii) Details of increase/decrease in sample meter loads alongwith total connected load of each division.

(iii) Data on actual AP supply hours.

c) Sample meter readings in excess of what can possibly be consumed with the given supply hours and connected load not to be taken into account for evaluation of AP factor and division-wise details of such meters to be furnished every month.

d) Faulty/non-functional sample meters be replaced in a time bound manner and in no case these will exceed 10% of the total sample meters in a division during any month of the year.

e) The size of sample meters be gradually increased to 10% of the total number of AP connections.

In compliance thereof, the Board has promised to take suitable action with regard to (d) and (e) above. In respect of the remaining, the action taken on their part is either incomplete or inconclusive. Till these matters are finally addressed by the Board, the Commission would find it difficult to rely entirely upon the results of the present methodology adopted in computing agricultural consumption. Moreover, the Commission notes that while the Board had in the ARR of 2009-10 projected AP consumption of 11699 MUs, the same has since been revised and reduced to 10363 MUs. The Commission also observes that the methodology of arriving at the latest projected AP consumption of 10363 MUs is to take consumption on the basis of sample meter readings for the first 6 months of 2009-10 and then project a CAGR of 7.87 % on the Board’s own figure of AP consumption in the second half of 2008-09. The Commission has already taken the view that AP consumption reported by the Board for 2008-09 as a whole is on the higher side and the same has been reduced by 10.20 % in the Tariff Order for 2009-10. Thus, the total figure of AP consumption arrived at by the Board for 2009-10 based upon an obviously erroneous methodology can not be accepted. In these circumstances, the Commission is inclined to retain AP consumption of 9814 MUs as approved in the last Tariff Order as there is no conclusive basis to revise earlier estimated consumption as proposed by the Board in the current ARR.

3.3 Transmission and Distribution Losses (T&D Losses)

The Board had projected T&D losses at 19.5% for 2009-10 which represented a reduction of 3.03% from losses of 22.53% for 2007-08 and 1.5% from the level of 21% for 2008-09, in its ARR for the year. These losses for year 2007-08, 2008-09 and 2009-10 were based on AP consumption of 10030 MUs, 9766 MUs and 11699 MUs respectively. The Commission in its previous Tariff Order (2009-10) had decided to reduce AP consumption reported by the Board by 11.25% and 10.20% for the years 2007-08 and 2008-09 respectively. On the basis of revised estimates of AP consumption, the T&D losses for the years 2007-08 and 2008-09 were determined at 25.12% and 24.07% respectively. After considering the issue of T&D losses in its entirety, the Commission fixed T&D loss target for the year 2009-10 at 22%.

The Board in its ARR for 2010-11 has projected revised estimates of T&D losses of 19.50% for 2009-10. This revised loss level proposed by the Board does not take into account the revision of AP consumption as considered by the Commission in the Tariff Order for 2009-10. If the approach adopted by the Commission is to be considered, the revised T&D losses for the year 2009-10 will work out to 22.18%.

The Commission finds no justification for reviewing the T&D losses fixed in the Tariff Order of 2009-10 and thus, retains the T&D loss level at 22.0% for the year 2009-10 as fixed earlier.

3.4 Energy Requirement

The total energy requirement to meet the demand of the system is the sum of estimated metered energy sales including common pool and Outside State sales, estimated AP sales and T&D losses. The total energy requirement for 2009-10 projected during determination of ARR of 2009-10, approved by the Commission in its Tariff Order and revised estimates finally furnished by the Board ( in the ARR of 2010-11) including subsequent clarifications/amendments and now approved by the Commission is given in Table 3.3.

Table 3.3: Energy Requirement for the year 2009-10

(MUs)

Sr. No.	Particulars	Projected by PSEB during determination of ARR 09-10	Approved by the Commission in T.O. 09-10	Revised Estimates by PSEB in ARR of 10-11	Now approved by the Commission
1	2	3	4	5	6
1	Metered Sales within the State	22510	21398	21379	21092
2	Agriculture Consumption	11699	9814	10363	9814
3	Total sales within State (1+2)	34209	31212	31742	30906
4	Common pool sales	302	303	302	302
5	Outside State sales	1307	1307	297	1383
6	Total sales	35818	32822	32341	32591
7	T&D Losses on item at Sr. No. (3)
(a)	Percentage	19.50%	22%	19.50%	22%
(b)	MUs	8287	8803	7689	8717
8	Total energy input required	44105	41625	40030	41308

The revised energy requirement for 2009-10 with T&D loss of 22% is determined as 41308 MUs, which has to be met from the Board’s own generation (thermal & hydel), share from BBMB, purchases from Central Generating Stations and other sources.

3.5 PSEB’s Own Generation

3.5.1 Thermal Generation: The Board has in the ARR for the year 2010-11 estimated the gross generation for 2009-10 based on actual generation of the respective plants upto Sept. 2009 and estimating the revised generation for the second half of 2009-10 on the basis of maintenance schedule of the respective plants during the second half of 2009-10.

The Commission has, however, obtained the actual gross generation of different stations for the year 2009-10 till the end of Feb, 2010. The actual gross generation for the first eleven months of 2009-10 as supplid by the Board vide letter dated 05.03.10 is summarized in Table 3.4(A) below:

Table 3.4(A): Gross Thermal Generation from April 09 to Feb 2010

(MUs)

Station	Period (April 09 to Feb 2010)
GNDT Unit I & II	1417
GNDTP Unit III & IV	1147
GGSTP	9246
GHTP Unit I, II & III	5124
GHTP Unit IV	1685
Total Gross Generation	18619

As the actual station-wsie generation for the eleven months of 2009-10 is available with the Commission, the Commission decides to determine the gross generation for the month of March, 2010 on prorata basis based on the basis of actual gross generation for the first eleven months of 2009-10. The station-wise generation projected by the Board during determination of ARR of 2009-10, generation approved by the Commission in its Tariff Order for that year, revised estimates now supplied by the Board in its letter dated 5.3.2010 and the generation approved by the Commission is given in Table 3.4(B).

Table 3.4(B): Thermal Generation 2009-10

(MUs)

Sr. No.	Station	Projected by PSEB in ARR 2009-10		Approved by the Commission T.O. 2009-10		Revised Estimates by PSEB in ARR 2010-11		Now approved by the Commission
Sr. No.	Station	Gross	Net	Gross	Net	Gross	Net	Gross	Net
1	2	3	4	5	6	7	8	9	10
1 (a)	GNDTP Unit I &II	2330	2062	1580	1419	2702	2388	1546⁴	1376
1 (b)	GNDTP Unit III & IV	2330	2062	1221	1087	2702	2388	1251⁴	1113
2	GGSTP	9200	8409	9966	9119	9564	8765	10086	9229
3 (a)	GHTP, Stage I	3220	2930	6948	6323	7317¹	6700²	7428³	6760
3 (b)	GHTP, Stage II	3504	3189	6948	6323	7317¹	6700²	7428³	6760
4	Total	18254	16590	19715	17948	19583	17853	20311	18478

1. Comprising of 5495 MUs by GHTP unit 1,2 & 3, 1247 MUs of infirm power by GHTP unit 4 and 575 MUs of post COD power from GHTP unit 4.

2. Comprises of 5012 MUs by GHTP unit 1,2 & 3, 1165 MUs of infirm power by GHTP unit 4 and 523 MUs from GHTP unit 4.

3. Comprises of 5590 MUs by GHTP unit 1,2 & 3 and 1838 MUs (including infirm power) from GHTP unit 4.

4. Total estimated generation of 2797 MUs proportioned against GNDTP unit 1&2 and GNDTP unit 3&4 on the basis of ratio of actual generation for the period April 09 to Feb 2010 for GNDTP unit 1&2 and GNDTP unit 3&4.

The Commission approves gross thermal generation for the year 2009-10 at 20311 MUs, against 19583 MUs projected by the Board in the ARR.

Auxiliary Consumption & Net Generation

The plant-wise auxiliary consumption projected by the Board during determination of ARR of 2009-10, auxiliary consumption approved by Commission in the Tariff Order of that year, the revised figures projected by the Board in the ARR of 2010-11 and the figures now approved by the Commission are given in Table 3.4(C).

Table 3.4 (C): Auxiliary Consumption 2009-10

Sr. No.	Station	Projected by PSEB in ARR 2009-10	Approved by the Commission in T.O. 2009-10	Revised Estimates by PSEB in ARR 2010-11	Now Approved by the Commission
1	2	3	4	5	6
1 (a)	GNDTP Unit I & II	11.50%	10.22%	11.64%*	11.00%
1 (b)	GNDTP Unit III & IV	11.50%	11.00%	11.64%*	11.00%
2	GGSTP	8.60%	8.50%	8.36%*	8.50%
3 (a)	GHTP Stage-I	9.00%	9.00%	8.42%*	9.00%
3 (b)	GHTP Stage-II	9.00%	9.00%	8.42%*	9.00%

* Computation based on the actual data submitted for first six months & projected for the remaining six months of 2009-10.

The Commission in its Tariff Order for 2009-10 approved auxiliary consumption for GGSTP and GHTP at 8.5% and 9% respectively as per CERC norms. In case of GNDTP, the Commission approved auxiliary consumption at 10.22% for Unit I & II and 11% for Unit III & IV of GNDTP. However, as discussed in para 2.4.1 of this Order, the auxiliary consumption for all the four units of GNDTP has been approved at 11%. The revised estimates of auxiliary consumption reported by the Board are on the higher side in case of GNDTP and are on lower side in case of GGSTP and GHTP, when compared with the levels approved by the Commission. The Commission is inclined to continue adaptation of normative auxiliary consumption for GGSTP and GHTP as approved in the Tariff Order of 2009-10 and also approves auxuiliary consumption of 11% in case of all units of GNDTP.

Net thermal generation on this basis has been worked out to 18478 MUs as shown in Table 3.4(B).

3.5.2 Hydel Generation: The Board has submitted the revised estimates of hydel generation for 2009-10 in the ARR of 2010-11. The Board has furnished the actual plant-wise hydel generation for the first six months of the year 2009-10 (April 09 to Sept. 09) and for the next six months (October 09 to March 10) has projected generation by RSD and UBDC to be same as in 2004-05, considering the present reservoir position at the start of the depletion period to be almost identical to that prevailing during 2004-05 in case of the RSD reservoir. For Shanan and ASHP, the availability has been projected based on last three years average for the corresponding months. The revised availability (net) from BBMB and Common Pool share has been projected at 3689 and 302 MUs respectively, which has been computed by taking into consideration the actual availability till Sept 09. The external losses for the BBMB energy (excluding Common Pool share) has been considered by the Board at 3.70%.

The Commission has obtained from the Board, the actual gross generation of different hydel stations including BBMB share for the period April 2009 to January 2010 and tentative generation for the month of February 2010. However, gross generation for the months of February 2010 and March 2010 has been determined on the basis of actual achieved by the Board for the month of January 2010. The gross generation for the period April 2009 to March 2010, computed in this manner, is almost the same as the projections made by the Board. Accordingly, gross generation for hydel stations including BBMB share has been accepted by the Commission as per the projections submitted by the Board in the ARR.

The station-wise generation projected by the Board during determination of ARR for 2009-10, generation approved by the Commission in its Tariff Order, the revised estimates now submitted by the Board in the ARR for 2010-11 and generation now approved by the Commission is given in Table 3.5.

Table 3.5: Hydel Generation - 2009-10

(MUs)

Sr.No.	Hydel generation	Projected by PSEB in ARR of 2009-10	Approved by Commission in Tariff Order 2009-10	RE by PSEB in ARR 2010-11	Now accepted by the Commission
1	2	3	4	5	6
1	Shanan	515	515	496	496
2 (a)	UBDC Phase 1	448	448	381	381
2 (b)	UBDC Phase II	448	448	381	381
3	RSD	1744	1743	1200	1200
4	MHP	1257	1257	793	793
5	ASHP	695	695	603¹	603
6	Micro Hydel	7	7	9	9
7 (a)	Gross Own Hydel	4665	4665	3482²	3482
7 (b)	Net Own Hydel	4604	4494	3436 ³	3346 ⁴

8	PSEB Share from BBMB
(a)	Gross Share	4323	4323	3689⁵	3689⁵
(b)	Add Common pool share	302	303	302	302
(c)	Less External losses	171	171
(d)	Net Share from BBMB	4454	4455	3991	3991

9	Total Net Hydel (Own + BBMB)	9058	8949	7427	7337

Notes

1. Net of 5.75 MUs diverted to BBMB from ASHP as a result of diversion of water from NHC to AHC upto Sept 09.

2. Includes Royalty to HP in Shanan and HP share in RSD @ 4.6%.

3. Net of Auxiliary consumption of 7 MUs and transformation losses of 39 MUs.

4. Own generation is

· Net of auxiliary consumption @ 0.5% for RSD generation of 1200 MUs and UBDC stage-1 generation of 157 MUs (calculated on pro-rata basis taking actual generation by UBDC stage-1 and UBDC stage - 2 in 2008-09) having static exciters and @ 0.2% for others (11 MUs).

· Net of transformation losses @ 0.5% (17 MUs).

· HP share (free) in RSD @ 4.6% (55 MUs).

· Royalty to HP in Shanan (53 MUs).

5. Net of external transmission loss.

The Commission, thus, approves revised hydel generation for the year 2009-10 at 3346 MUs (net) from own hydel stations and 3991 MUs (net) (including common pool share) as share from BBMB as shown in Table 3.5.

3.6 Power Purchase

3.6.1 To meet the energy demand, the Board projected power purchase at 18457 MUs (net) during determination of ARR for 2009-10. The Commission in its Tariff Order for the year approved power purchase at 14728 MUs (net).

3.6.2 The Board has furnished revised estimates of power purchase for 2009-10 at 15836 MUs (net) in its ARR for 2010-11 and further revised to 14750 MUs during presentation on 11.02.2010. The revised total energy requirement during 2009-10 including common pool share and Outside State sales and T&D losses is determined as 41308 MUs as discussed in para 3.4. The energy available from the Board’s own generating stations including its share from BBMB is 25815 (18478 MUs thermal generation and 7337 MUs of hydel generation including share from BBMB) as approved in para 3.5. The balance energy requirement works out to 15493 MUs (net) which has to be met through purchases from Central Generating Stations and other sources.

The Commission, accordingly, approves the revised power purchase at 15493 MUs (net) for 2009-10.

3.7 Energy Balance

3.7.1 Details of energy requirement and energy availability projected during determination of ARR for 2009-10, approved by the Commission in its Tariff Order, revised estimates supplied by the Board in the ARR of 2010-11 including subsequent clarifications/amendments and now approved by the Commission is given in Table 3.6.

Table 3.6: Energy Balance – 2009-10

(MUs)

Sr. No.	Particulars	Projected by PSEB during determination of ARR 09-10	Approved by the Commission in T.O. 09-10	Revised Estimates by PSEB in ARR of 10-11	Now approved by the Commission
1	2	3	4	5	6
A) Energy Requirement
1	Metered Sales	22,510	21,398	21,379	21,092
2	Sales to AP consumers	11,699	9,814	10,363	9,814
3	Total Sales within the State	34,209	31,212	31,742	30,906
4	Loss percentage	19.50%	22.00%	19.50%	22.00%
5	T&D losses	8,287	8,803	7,689	8,717
6	Sales to Common pool consumers	302	303	302	302
7	Outside State Sales	1307	1307	297	1,383
8	Total requirement	44,105	41,625	40,030	41,308
B) Energy Available
9	Own generation (Ex-bus)
10	Thermal	16,590	17,948	17,853	18,478
11	Hydro	4,604	4,494	3,436	7,337
12	Share from BBMB (incl.share of common pool consumers	4,454	4,455	3,991	7,337
13	Purchase net	18,457	14,728	14,750	15,493
14	Total Available	44,105	41,625	40,030	41,308

3.8 Fuel Cost

3.8.1 The Commission in its Tariff Order of the year 2009-10 approved fuel cost of Rs.3195.93 crore for gross thermal generation of 19715 MUs. The Board in its ARR of 2010-11 has revised estimates of fuel cost to Rs 3501.75 crore for gross thermal generation of 19583 MUs based on estimated calorific value and price of coal / oil for 2009-10 as given in Table 3.7. The fuel cost worked out by the Board is based on the actual parameters for the first six months and the projected values for the remaining six months of the year 2009-10.

The Board, while projecting the price of coal for 2009-10, has considered escalation of 5% on account of coal price hike by Coal India Limited for estimating the coal cost for the second half of the year. Further, the Board while projecting the price of oil for 2009-10, has considered escalation of 10% on the actual average price for the respective generating stations during the first half of 2009-10.

Table 3.7: Calorific Value and Price of Coal and Oil as submitted

by the Board for 2009-10

Sr.No.	Station	Gross Calorific value of coal (kCal/Kg)	Calorific Value of Oil (Kcal/Ltr)	Price of Oil (Rs/KL)	Price of coal (Rs/MT)	Transit loss
1	2	3	4	5	6	7
1	GNDTP	4102 (H1) 4100 (H2)	10000	24081 (H1) 26489 (H2)	2517 (H1) 2643 (H2)	1.84%(H1) 2.00% (H2)
2	GGSTP	3979 (H1) 4015 (H2)	10000	22613 (H1) 24874 (H2)	2652 (H1) 2785 (H2)	0.94% (H1) 2.20% (H2)
3	GHTP (Unit 1 to 3)	4023 (H1) 4025 (H2)	9400	29167 (H1) 32084 (H2)	2589 (H1) 2718 (H2)	1.22% (H1) 2.00% (H2)
4	GHTP (Unit 4)	4025 (H2)	9400	33000 (H2)	2800 (H2)	2.00% (H2)

H1: April 09 to Sep 09 & H2: Oct 09 to Mar 10

Fuel cost being the major item of expense, the Commission thought it prudent to get the same verified. The calorific value of the coal & oil and price of the coal & oil as validated and accepted by the Commission are indicated in Table 3.8. These values are based on data ending Sept. 09.

Table 3.8: Calorific Value and Price of Coal and Oil as accepted

by the Commission for 2009-10

Sr. No.	Station	Gross Calorific value of coal (kCal/Kg)	Calorific Value of Oil (K.cal/Ltr)	Price of Oil (Rs/KL)	Price of coal including transit loss (Rs./MT)	Transit loss	Price of coal excluding trasit loss
1		1	2	3	4	5	6
1	GNDTP	4102	10000	24081	2517	1.84%	2471
2	GGSTP	3979	10000	22613	2652	0.74 *%	2633
3	GHTP	4023	9400	29167	2589	1.22%	2558

* Upto Oct 2009

3.8.2 The Commission has also taken into account the coal quantity received from PANAM (Board’s captive coal mine) as submitted by the Board. The price of the coal and corresponding calorific values given by the Board (Table 3.7) and those validated by the Commission (Table 3.8) are weighted average values of coal, including PANAM coal.

3.8.3 The gross generation considered in the estimation of fuel cost is 20311 MUs which includes 1247 MUs of infirm power generated during trial runs of GHTP Unit IV. The fuel cost for different stations corresponding to generation now approved has been worked out in table 3.9 below, based on the parameters adopted by the Commission in its Tariff Order of 2009-10 and considering the price and calorific value of coal and oil as validated and accepted by the Commission.

3.8.4 No transit loss has been allowed for PANAM coal while working out fuel cost as prices according to the contract are on F.O.R. destination basis. In case of coal other than PANAM coal, transit loss of 2% has been allowed by the Commission.

Table 3.9: Fuel Cost – 2009-10

Sr. No.	Item	Derivation	Unit	Approved Fuel Cost 2009-10
Sr. No.	Item	Derivation	Unit	GNDTP (I&II)	GNDTP (III&IV)	GGSTP	GHTP	Total
1	2	3	4	5	6	7	8	9
1	Generation	A	MU	1546	1251	10086	7428	20311
2	Heat Rate	B	k.cal/kWh Generated	2825	3000	2500	2500
3	Specific oil consumption	C	Milli litre/kwh	1.00	3.50	1.00	1.00
4	Calorific value of oil	D	k.cal/litre	10000	10000	10000	9400
5	Calorific value of coal	E	k.cal/kg	4102	4102	3979	4023
6	Overall heat	F = (A x B)	G.cal	4367450	3752905	25215641	18570075
7	Heat from oil	G = (A x C x D) / 1000	G.cal	15460	43784	100863	69823
8	Heat from coal	H = (F-G)	G.cal	4351990	3709121	25114778	18500251
9	Oil Consumption	I=(Gx1000)/D	KL	1546.00	4378.39	10086.26	7428.03
10	Transit loss of coal	J	%	2	2	2	2
11	Total Coal Consumption excluding transit loss	K=(H*1000)/E	MT	1060943	904223	6311578	4598484
12	Quantity of PANAM coal	L	MT	690283 *	558552 *	2559355	2900000

13	Quantity of coal other than PANAM coal excluding transit loss.	M=K-L	MT	370661	345670	3752223	1698484
14	Quantity of coal other than PANAM coal including transit loss	N=M/(1-J)	MT	378225	352725	3828799	1733146
15	Total Quantity of coal required	O=L+N	MT	1068508	911277	6388154	4633146
16	Price of Coal	P	Rs. / MT	2471	2471	2633	2558
17	Price of Oil	Q	Rs./KL	24081	24081	22613	29167
20	Total cost of oil	R=Q x I / 10⁷	Rs.crore	3.72	10.54	22.81	21.67
21	Cost of coal	S=O x P/10⁷	Rs.crore	263.99	225.15	1681.72	1184.98
22	Total Fuel cost	T= R+S	Rs.crore	267.71	235.69	1704.53	1206.65	3414.58
23	Cost of Genration Per unit	T/A	Paise Per unit	173	188	169	162

* The total quantity of PANAM coal has been apportioned between GNDTP 1 & 2 and GNDTP 3 & 4 on the basis of approved generation for 2009-10.

The Commission, therefore, approves the revised fuel cost at Rs. 3414.58 crore for a generation of 20311 MUs.

3.9 Power Purchase Cost

3.9.1 The Commission in its Tariff Order of 2009-10 approved a cost of Rs. 4746.59 crore for purchase of 15456 MUs (gross) while the Board has in its ARR for the year 2010-11 given revised estimates of Rs. 5746 crore for purchase of 16818 MUs (gross). Subsequently, the Board in its letter dated Jan 28, 2010 has submitted revised power purchase cost because of correction in Outside State sale, according to which Rs. 4999.37 crore has been projected for power purchase of 15613 MUs (gross). The Board has estimated the revised power purchase cost for 2009-10 based on the first six months actual cost of Rs. 3121.06 crore for 9905 MUs and estimated cost of Rs. 1878.31 crore for estimated power purchase of 5708 MUs during second half of 2009-10.

3.9.2 As discussed in para 3.6, the requirement of 15493 (net) is to be met through purchases from Central Generating Stations and other sources. The transmission loss external to the Board’s system has to be added to arrive at the quantum of gross energy to be so purchased. The Board has stated that the actual external losses in the first six months of the year are 4.84%. For the full year, the Board has assumed the external losses as 5.48% to compute the power purchase cost.

The actual external transmission losses incurred by the Board during 2008-09 were 4.73%. The Commission, therefore, decides to allow external losses @ 4.73% which were actually incurred by the Board in 2008-09. After adding 4.73% losses, the gross energy required to be purchased works out to 16262 MUs (15493 MUs + external losses of 769 MUs).

The Commission decides to accept the power purchase cost of Rs. 3121.06 crore incurred by the Board for the purchase of 9905 MUs during the first six months of 2009-10. Further, the Commission notes that the Board has purchased 2471 MUs at a cost of Rs. 727.59 crore during the period from Oct 2009 to Dec 2009. The Commission decides to determine the power purchase cost for the balance requirement of 6357 MUs (16262-9905) on prorata basis based on the actual cost incurred by the Board for the period Oct 2009 to Dec 2009 of 2009-10, Accordingly, the prorata amount for purchase of 6357 MUs works out to Rs. 1871.79 crore. Therefore, the total power purchase cost for 2009-10 woks out to Rs. 4992.85 crore.

The Commisison in its Tariff Order for the year 2009-10 had limited the cost of power purchase from traders to an average rate of 621.24 paise per unit. It had also been decided that the cost of power purchased from traders in excess of the approved quantum of 1073 MUs will be admissible only at an average rate of realization per unit of 402.46 paise.

The Board in its ARR has shown purchase of 1731 MUs from the traders during the first six months of 2009-10 at an average rate of 609.35 paise per unit, whereas the Commission had allowed 1073 MUs for the full year in the Tariff Order for 2009-10. Since the Tariff Order for 2009-10 was issued in the month of Sep 2009, the Commission does not consider it fair to penalize the Board for the purchase of an additional quantum of 658 (1731-1073) MUs from the traders during the first six months of 2009-10. However, the Commision takes note of the purchase of an additional 82.8 MUs by the Board from the traders during Oct. 2009 to Dec. 2009 at an average rate of 675.60 paise per unit and only allows a rate of 402.46 paise per unit therefor. The additional cost (Rs. 22.62 crore) incurred by the Board for purchase of 82.8 MUs at the excess rate of 273.14 (675.60-402.46) paise per unit is disallowed.

The Commission in its Order 2009-10 has also decided not to allow additional UI surcharge leviable under CERC’s UI Regulations for overdrawal of power when frequency is below 49.2 Hz. The Board in its letter dated 28.01.10 has intimated the additional amount payable for UI drawal below frequency 49.2 Hz for the period from April 09 to Nov. 09 as Rs. 13.84 crore. Since the Tariff Order for 2009-10 was issued in the month of Sep 2009, therefore, the Commission decides not to penalize the Board for the UI drawal below frequency 49.2 Hz during the first six months of 2009-10 and has disallowed the surcharge paid on UI drawal amounting to Rs. 58.35 lac for the months of Oct. 2009 & Nov. 2009.

The Commission, therefore, approves the revised power purchase cost of Rs. 4969.65 (4992.85 - 22.62- 0.5835) crore for the now determined purchase of 16262 MUs gross.

3.9.3 The Commission had in its tariff Order of 2009-10 mentioned that any change in fuel cost from the level approved by the Commission would be passed on to the consumers as Fuel Cost Adjustment (FCA). The Board filed petitions (17/2009 & 24/ 2009) for approval of FCA for the first and second quarters of 2009-10. The petiton for the first quarter was dismissed being belated, and the petiton for the second quarter was pending for want of information from the Board. The Commission observes since the variable cost of fuel has been validated upto Sep, 2009 and the power purchase cost has been given on the basis of actual power purchase cost for the first six months of 2009-10, the FCA petitions may be deemed to be disposed off accordingly.

3.10 Employee Cost

3.10.1 In the ARR of 2009-10, the Board claimed employee cost of Rs.3454.68 crore for 2009-10. The Commission, in its Tariff Order for 2009-10, worked out the employee cost in accordance with the amended provisions of the Tariff Regulations at Rs.2113.36 crore inclusive of Rs.737.43 crore towards terminal benefits. However, the Commission restricted the employee cost to Rs.1856.60 crore as per past practice, holding that extra employee cost in line with the amended regulations would be allowed only when the roadmap for revising staff strength of the Board, on the basis of the on-going manpower study, is made available.

3.10.2 In the ARR of 2010-11, the Board projected employee cost of Rs.2746.73 crore net of capitalization of Rs.120.00 crore. This is inclusive of Rs.300 crore on account of pay revision for the period August 2009 to March 2010. The Board submitted revised employee cost for 2009-10 taking into account the decision of the GoP in Circular No 9/1/2010-2PP/572 dated 27.01.2010 whereby retirement was deferred for the period 22.01.2010 to 31.12.2010. The details are tabulated below:

Table 3.10: Employee cost projected by the Board

(Rs. crore)

Sr. No	Particulars	As per ARR	Revised Estimates
1	Basic Pay	1162.65
2	Overtime	11.52
3	Dearness Allowance	459.04
4	Fixed medical Allowance	44.45
5	Other Allowances	186.49
6	Bonus/ Generation Incentive	90.86
7	Medical Expenses Reimbursement	13.03
8	Workman's compensation	0.17	0.15
	Total (1 to 8)	1968.21	1986.68
	Terminal Benefits
9	Earned Leave Encashment	73.93	64.19
10	Gratuity	109.99	95.41
11	Commutation of Pension	0	0
12	Ex-gratia	0	0
13	BBMB share	70.92	70.92
	Total (9 to 13)	254.84	230.52
	Pension Payments
14	Basic Pension	561.71	555.28
15	Dearness pension	0	0
16	Dearness Allowance	0	0
17	Any other expense	81.97	81
	Total	643.68	636.28
	Total Expenses	2866.73	2853.48
Less:	Amount capitalised	120	119.43
	Net Employee Cost	2746.73	2734.05

3.10.3 The Commission notes that the above mentioned circular of the GoP has been quashed by the Hon’ble Punjab & Haryana High Court in its Order dated 29.03.2010. Consequent upon this Order, the GoP/Board retired employees due for retirement in the period January 22, 2010 to March 31, 2010 and also retained the retirement age at 58 years. However, the cost pertaining to terminal benefits of such employees will arise in the year 2010-2011 and is therefore being considered in Chapter 4 of the Tariff Order.

3.10.4 The amended provisions of the PSERC Tariff Regulations provide for determination of employee cost in two parts:

· Terminal benefits including BBMB share on actual basis.

· Increase in other expenses limited to average increase in Wholesale Price Index.

As per revised estimates, the Board has claimed net employee cost of Rs.2734.05 crore for 2009-10 inclusive of terminal benefits of Rs.866.80 crore. These terminal benefits include impact of pay revision and are allowable on actual basis.

As per amended regulations, increase in other employee cost is to be limited to average WPI increase. However, the average annual increase in WPI for 2009-10 is not available and the data for the first 9 months (April ’09 to December ’09) shows an average WPI increase of less than 2%. The Commission considers the 9 month average increase in WPI of 2% or less as unusual, being attributable to worldwide recession. In such a situation it deems it prudent to allow an adhoc increase of 5% for working out enhancement in other employee cost for 2009-10. Applying this increase to the base figure of Rs.1310.41 crore which was the other employee cost determined for 2008-09 in the previous Tariff Order, would result in such cost increasing to Rs.1375.93 crore. Thus, allowable expenses as per amended regulations work out to Rs.2242.73 (866.80+1375.93) crore.

3.10.5 The Commission also observes that the Board claimed Rs.250 crore on account of pay revision (other than terminal/pension benefits) for the period (August 2009 to March 2010) in terms of Regulation 28(8)(b) of the amended Tariff Regulations which provides for consideration of any exceptional increase such as a pay revision. However, the pay revision actually came into effect in November 2009 and the increased expenses on this account (November 2009 to 31^st March 2010) come to Rs.156.25 crore. This does not include enhancement of terminal benefits as the same is allowed in full by the Commission in para 3.10.4 above. However, the Commission observes that the additional amount of Rs.156.25 crore has been based on the total employee expenses being actually incurred by the Board. On the other hand, the Commission has been determining employee costs of the Board on a normative basis in accordance with its Regulations and thus the increase because of pay revision has to be allowed on the normative figure of employee cost and not on the actual as projected by the Board. The Commission has taken into account the employee cost claimed by the Board for the years 2007-08, 2008-09 and 2009-10 (projection) and the cost allowed by the Commission in those years. It is noted that on an average for all three years, the employee cost allowed by the Commission is 28.48% less than the amount actually claimed by the Board. The Commission is, therefore, of the view that the claim of the Board for an increased sum of Rs.156.25 crore for pay revision during 2009-10 needs also to be reduced by 28.48%. A reduction of this order amounts to Rs.44.50 crore and the allowable cost on this account would be Rs.111.75 crore.

3.10.6 Based on paras 3.10.4 and 3.10.5 given above, revised employee cost for the year 2009-10 comes to Rs.2354.48 (866.80+1375.93+111.75) crore. The Commission has also to take into account its observations in the Tariff Order of 2009-10 when employee cost which worked out to Rs.2113.36 crore as per the Commission’s Regulations had been restricted to Rs.1856.60 crore keeping in view the Board’s failure to draw up a road map for revising its staff strength. Unfortunately, the same position holds good as of now. Accordingly, the Commission imposes a cut of Rs.100 crore for the Board’s inability to decide upon this crucial issue. The impact of this cut is being reflected in para 4.9.7 of this Tariff Order.

The Commission, accordingly, approves employee cost of Rs.2354.48 (2242.73+111.75) crore for 2009-10.

3.11 Repair and Maintenance (R&M) Expenses

3.11.1 In the ARR of 2009-10, the Board projected R&M expenses of Rs.406.80 crore against which the Commission approved Rs.376.14 crore. In the ARR of 2010-11 R&M expenses have been revised to Rs.385.93 crore net of capitalization of Rs.3.69 crore.

3.11.2 Regulation 28 (4) (b) of the PSERC Tariff Regulations provides for adjusting base O&M expenses (which include R&M expenses) in proportion to increase in WPI. The base R & M expenses of Rs.361.17 (341.03+20.14) crore are being considered to allow the expenses for 2009-10 which include approved R&M expenses of Rs.341.03 crore for 2008-09 and an amount of Rs.20.14 crore being R& M expenses allowed for six months on fixed assets added during the year.

As discussed in para 3.10.4, the Commission allows an adhoc increase of 5% over the base R&M expenses. Accordingly, Rs.379.23 crore is determined as allowable R&M expenses for assets worth Rs.18490.12 (16424.12+2066) crore as on April 1, 2009.

3.11.3 In the ARR of 2010-11, the Board has claimed R&M expenses of Rs.30.47 crore for fixed assets of Rs.3159.40 crore added during the year on a pro-rata basis from the date of commissioning. However, the Commission notes that the Board’s claim of additional fixed assets added in 2009-10 appears to be on the higher side as against the audited figures of the earlier years. The Commission, in its Tariff Order of 2004-05, directed the Board to maintain a Fixed Asset Register but despite that, the Board was unable to submit actual figures of addition in fixed assets when that information was sought while processing the ARR of 2010-11. The Board has also expressed its inability to provide information with regard to the date of commissioning of each asset on the plea that a large number of assets of different categories are added during the year. In the circumstances, the Commission determines additional fixed assets added in 2009-10 on the basis of the consolidated average annual increase of assets during the previous three years which comes to 7.81%. On this basis, the value of additional assets created in 2009-10 works out to Rs.1444.08 crore. These assets are considered to have remained in service of the Board for six months during the year. R&M expenses of Rs.379.23 crore allowable as per para 3.11.2 are 2.05% of the value of total assets of Rs.18490.12 crore. Applying the same percentage to additional assets of Rs.1444.08 crore created in 2009-10, the allowable expenses work out to Rs.14.80 crore. Total expenses allowable for assets of Rs.19934.20 (18490.12+1444.08) crore for the year, thus, comes to Rs. 394.03 (379.23+14.80) crore. The Board has, however, claimed Rs.385.93 crore only as R&M expenses and the same are allowed. The Commission will in future seek from the Board details of fixed assets added as well as written off during a particular year and the proformae for submission of ARR will be suitably amended accordingly.

The Commission, accordingly, approves R&M expenses at Rs.385.93 crore for 2009-10 as claimed by the Board.

3.12 Administration and General (A&G) Expenses

3.12.1 In the ARR of 2009-10, the Board projected A&G expenses of Rs.76 crore net of capitalization of Rs.24.13 crore. The same was allowed being within the permissible norms. The Board, in the ARR of 2010-11, has revised A&G expenses to Rs.75.95 crore net of capitalization of Rs.20 crore.

3.12.2 Regulation 28 (4) (b) of the PSERC Tariff Regulations provides for allowing annual increase in the approved O&M expenses (which include A&G expenses) based on average increase in WPI over the year. The base A&G expenses for 2009-10 work out to Rs.75.20 (70.96+4.24) crore which include approved A&G expenses of Rs.70.96 crore and an amount of Rs.4.24 crore being A&G expenses allowed for six months on fixed assets added during the year. As earlier discussed, the Commission proposes to allow an adhoc increase of 5% over the base A&G expenses. Accordingly, Rs.78.96 crore is determined as allowable A&G cost for assets worth Rs.18490.12 crore as on April 1, 2009.

3.12.3 As per Regulation 28 (6) of the PSERC Tariff Regulations, A&G expenses are allowable for additional assets added during the previous year on a pro-rata basis from the date of commissioning of assets. As discussed in para 3.11.3, fixed assets approved to be added during the year are considered as having remained in service of the Board for six months on an average during the year. The average percentage rate of A&G expenses of Rs.78.96 crore for assets of Rs.18490.12 crore works out to 0.43% (78.96/18490.12*100) which when applied to the additional fixed assets of Rs.1444.08 crore, results in additional expenses of Rs.3.10 crore, assuming that these assets remained in service for six months. Thus, allowable A&G expenses for total assets of Rs.19934.20 (18490.12+1444.08) crore work out to Rs.82.06 (78.96+3.10) crore. The Board has, however, claimed Rs.75.95 crore as A&G expenses in the ARR of 2010-11.

The Commission, therefore, allows A&G expenses at Rs.75.95 crore for 2009-10 as claimed by the Board.

3.13 Depreciation Charges

3.13.1 The Board projected depreciation charges of Rs.969.99 crore in the ARR of 2009-10 against which the Commission approved Rs.826.02 crore in the Tariff Order for the same year. In the ARR of 2010-11, the Board has revised these charges to Rs.792.96 crore for assets valued at Rs.18431.76 crore as on April 01, 2009 by applying the average depreciation rates of 2008-09. However, as discussed in para 2.11.4 and 3.11.2 of this Order, assets were determined at Rs.18490.12 crore as on April 1, 2009 after taking into account the audit notes to the Annual Accounts of the Board enhancing the asset value by Rs.54.97 crore. Thus, depreciation charges are to be allowed for assets valued at Rs.18490.12 crore instead of Rs.18431.76 crore in service as on April 1, 2009. As the nature of assets of Rs.54.97 crore is not known, these assets are considered under the category ‘Others’. The function-wise average rates of depreciation for 2009-10 are worked out from the information supplied by the Board for 2008-09 and the same rates are applied for allowing depreciation in 2009-10. Accordingly, the depreciation charges work out to Rs.791.10 crore as detailed in Table 3.11.

Table 3.11: Depreciation charges

	(Rs. crore)		% Rate	(Rs. crore)		% Rate
Item	Assets as on April 1, 2008	Depreciation charges for 2008-09	% Rate	Assets as on April 1, 2009	Depreciation charges for 2009-10	% Rate
1	2	3	4	5	6	7
Thermal	3,020.44	137.22	4.543%	4319.19	196.22	4.543%
Hydro	5,847.98	133.42	2.281%	5957.44	135.89	2.281%
Internal combustion	2.68	0.00	0.00%	2.68	0.00	0.00%
Transmission	1,965.69	96.01	4.884%	2040.46	99.66	4.884%
Distribution	5,447.20	325.25	5.971%	5975.25	356.78	5.971%
Others	140.13	1.83	1.306%	195.10	2.55	1.306%
Total	16,424.12	693.73		18490.12	791.10

The Commission, accordingly, approves depreciation charges of Rs.791.10 crore for 2009-10.

3.14 Interest and Finance Charges

3.14.1 In the ARR of 2009-10, the Board claimed Interest and Finance charges of Rs.1585.61 crore for 2009-10 against which the Commission approved an amount of Rs.1048.57 crore. In the ARR of 2010-11, the Board has revised the net Interest and Finance charges for 2009-10 to Rs.1624.54 crore inclusive of Finance charges of Rs.12.00 crore. Details of the claim are given in Table 3.12.

Table 3.12: Interest & Finance Charges as claimed by the Board

(Rs. crore)

Sr. No.	Description	Interest as depicted in ARR
1	Interest on institutional loans (inclusive of Rs.37.81 crore for loans taken for RTP)	831.56
2	Interest on GoP loans	0.00
3	Interest on GPF	115.00
4	Lease rentals	0.02
5	Interest to consumers	164.21
6	Sub-total	1110.79
7	Interest on WCL	576.34
8	Discount to consumers for advance payment	0.24
9	Finance charges for loans	12.00
10	Total (6+7+8+9)	1699.37
11	Less capitalization	74.83
12	Net Interest & Finance charges (10-11)	1624.54

The Interest & Finance charges allowable to the Board are discussed in ensuing paragraphs.

3.14.2 Investment Plan

The Commission, in its Tariff Order of 2009-10, approved an Investment Plan of Rs.2000 crore. In the ARR of 2010-11, the Board submitted a revised investment plan of Rs.2724.55 crore for 2009-10. This includes an amount of Rs.2055.40 crore under the head ‘Transmission and Distribution’ which is inclusive of the requirements of the APDRP scheme and Rs.194.03 crore for rural electrification (PMGY). The revised investment plan, also includes a sum of Rs.2 crore for the Gidderbaha Thermal Plant which is being developed on BOO basis which is deductible from the Board’s Investment Plan for the year. However, the monthly expenditure report submitted by the Board shows an expenditure of only Rs.1476.44 crore upto January 31, 2010 and it appears unlikely that the Board would be able to effect the proposed investment of Rs.2724.55 crore during the remaining two months of 2009-10. On the basis of capital expenditure actually incurred upto the end of January, 2010, the proportionate expenditure for the months of February and March, 2010 would be Rs.295.28 crore. Accordingly, the likely capital expenditure for the year 2009-10 would be Rs.1771.72 (1476.44 + 295.28) crore. On this basis, the Commission approves an investment plan of Rs.1800 crore for 2009-10. However, increase in actual capital investment, if any, will be considered by the Commission during true up.

The Board has also admitted to a receipt of Rs.23.93 crore as a grant under APDRP on account of investment component grant during 2009-10. In addition, the Board has received consumer’s contribution of Rs.302.21 crore upto January 31, 2010 and after raising it proportionately, estimated receipts on this account during the year work out to Rs.362.65 crore. Accordingly, actual loan requirement for this level of investment works out to Rs.1413.42 (1800-23.93-362.65) crore.

In the ARR of 2010-11, interest on loans availed by the Board is depicted as Rs.831.56 crore inclusive of a deductible amount of Rs.37.81 crore on account of a loan taken for the Rajpura Thermal Plant which is being built privately on BOO basis leaving net interest on borrowings of the Board to be Rs.793.75 (831.56-37.81) crore. However, interest on allowable loans (other than WCL & GoP loans) is Rs.669.29 crore as given in Table 3.13.

Table 3.13

(Rs. crore)

Sr. No.	Particulars	Loans as on 31.3.09	Receipt of loans	Repayment of loans	Loans as on 31.3.10	Amount of interest
1	2	3	4	5	6	7
1	As per data furnished by Board (other than WCL & GoP loans)	6331.66	3831.80	1072.31	9091.15	793.75
2	Approved by Commission (other than WCL & GoP loans)	6331.66	1413.42	1072.31	6672.77	669.29

3.14.3 Interest on GoP Loans

In the Tariff Order of 2009-10, the Commission approved interest of Rs.225.48 crore on GoP loans payable by the Board. However, this amount was adjusted against interest disallowed on account of diversion of capital funds for revenue purposes.

In the Annual Statement of Accounts for 2008-09, outstanding GoP loans are shown at Rs.1660.52 crore but as per GoP’s letter dated March 10, 2010, loans of Rs.1140.43 crore have been adjusted by the GoP against the unpaid subsidy leaving balance GoP loans of Rs.520.09 crore. On these loans, interest payable works out to Rs.210.46 crore for the year 2009-10 by applying an average rate of 13.20% per annum. Out of this interest, an amount of Rs.162.34 crore is disallowed on account of diversion of capital funds for revenue purposes as discussed in para 3.14.11. Thus, net interest payable on GoP loans works out to Rs.48.12 (210.46-162.34) crore.

3.14.4 Interest on loans taken to replace re-called GoP Loans

As decided earlier in para 2.14.5 of this Order, interest on loans of Rs.1362.00 crore raised to replace re-called GoP loans adjusted against unpaid subsidy by the GoP is allowed at an average rate of 11.09% per annum. Thus, interest of Rs.151.05 crore is approved on this account.

3.14.5 Interest on G.P. Fund

The Board has claimed interest of Rs.115 crore on GP Fund accumulations. The interest of Rs.115 crore on G.P. Fund, being a statutory payment, is allowed as claimed by the Board.

3.14.6 Lease Rental

In the ARR of 2010-11, the Board has claimed an amount of Rs. 0.02 crore as lease rental for the year 2009-10 which the Commission allows.

3.14.7 Finance Charges

In its Tariff Order for 2009-10, the Commission allowed finance charges of Rs.5.53 crore applying a rate of 0.31% on the total borrowing requirement of Rs.1784.42 crore. As per revised estimates, the Board has claimed Finance charges of Rs.12 crore for fresh borrowings of Rs.3831.80 crore. The rate of Finance charges as per revised estimates of the Board work out to 0.31% of the proposed borrowings. The Commission has, however, approved net loan requirement of Rs.1413.42 crore in para 3.14.2 above. Applying a rate of 0.31% to the approved borrowings of Rs.1413.42 crore, Finance charges are worked out at Rs.4.38 crore for 2009-10 which are allowed.

3.14.8 Interest on Consumers’ Security Deposits

In the Tariff Order of 2009-10, interest on consumers’ deposits was not allowed for 2009-10 as the same was payable after 31.03.10. In the ARR of 2010-11, the Board has claimed Rs.164.21 crore towards interest on consumers’ security deposits for 2009-10. As per Annual Accounts of the Board, there is a balance of Rs.1266.00 crore as on 31^st March, 2009 under this head but the amount of security deposits as on 31^st March, 2010 is not available yet. Accordingly, interest of Rs.164.21 crore as claimed by the Board is allowed.

3.14.9 Capitalization of Interest and Finance Charges

The Commission, as per past practice, capitalizes the interest excluding interest on working capital in the ratio of net works in progress to total capital expenditure. Based on this principle and the expenditure as reflected in the revised estimates, the Commission approves capitalization of interest and finance charges of Rs.170.64 crore for 2009-10 against capitalization of Rs.57.82 crore approved in the Tariff Order of 2009-10.

3.14.10 Working Capital

In the Tariff Order for 2009-10, the Commission approved working capital of Rs.1466.92 crore with interest cost of Rs.179.70 crore. In the revised estimates, the Board projected working capital loans of Rs.1797.52 crore which was further revised by the Board to Rs.1735.27 crore. The interest liability on this amount works out to Rs.212.57 crore.

The working capital requirement as per amended Regulations works out to Rs.1640.39 crore and interest thereon comes to Rs.200.95 crore by applying the short term PLR of 12.25% of the State Bank of India as on April 2009. The details of working capital requirement as per amended Regulation 30 and allowable interest are depicted in Table 3.14.

Table 3.14: Working capital requirement

(Rs. crore)

Particulars	Approved by Commission
Two months Fuel Cost	569.10
One month Power Purchase Cost	414.14
One month Employee Cost	196.21
One month Administration and General Expenses	6.33
One month Repair and Maintenance Expenses	32.16
Maintenance spares @ 15% of O&M expenses (2354.48 EC+385.93 R&M + 75.95 A&G)	422.45
Total requirement for working capital	1640.39
Interest Rate	12.25%
Interest	200.95

Accordingly, the Commission approves interest of Rs.200.95 crore on working capital requirement for 2009-10.

3.14.11 Diversion of Capital Funds

The Commission, in para 2.14.11 of this Order has re-determined the diversion of capital funds for revenue purposes at Rs.2624.76 crore based on the Boards’ Audited Accounts of 2008-09. Diversion of capital funds for the year 2009-10 is estimated on the same basis and will be firmed up on the availability of audited accounts for that year. Of this amount, Rs.1987.41 crore is the net diversion carrying interest bearing liability. Interest @ 13.20% (being average rate of interest on GoP loans) on diverted funds of Rs.1987.41 crore comes to Rs.262.34 crore for 2009-10. This interest of Rs.262.34 crore on account of diversion of capital funds is being disallowed from the interest cost for 2009-10.

In this regard, the Commission retains its earlier decision to disallow interest cost of Rs.100 crore out of this amount on account of deficiencies in the working of the Board and further decides that the balance disallowance of interest of Rs.162.34 crore is to the account of the GoP. Accordingly, after adjustment of this disallowed interest against the interest of Rs.210.46 crore due on GoP loans worked out in para 3.14.3, net interest payable to the GoP works out to Rs.48.12 crore. This amount is carried forward to para 3.15

In view of the above, Interest and Finance charges for 2009-10 are allowed as per Table 3.15.

Table 3.15: Interest and Finance charges (Rs. crore)

Sr. No.	Particulars	Interest approved in Tariff Order 2009-10	Loans as on 31.3.09	Receipt of loans	Repayment of loans	Loans as on 31.3.10	Interest approved by Commission
1	2	3	4	5	6	7	8
1	Approved by Commission (other than WCL & GoP loans)	660.96	6331.66	1413.42	1072.31	6672.77	669.29
2	GoP loans	225.48	1660.52	0	1140.43	520.09	210.46
3	Int. on loans taken to replace GoP loans of Rs.1362 crore.	163.44					151.05
4	Interest on GPF	125.00					115.00
5	Lease rental	0.03					0.02
6	Total (1+2+3+4+5)	1174.91	7992.18	1413.42	2212.74	7192.86	1145.82
7	Add Finance charges	5.53					4.38
8	Add Interest on Consumers’ security Deposits	197.53					164.21
9	Total Gross Interest and Finance charges	1377.97					1314.41
10	Less capitalization	57.82					170.64
11	Net Interest and Finance charges (9-10)	1320.15					1143.77
12	Add: Interest on working capital	179.70					200.95
13	Total Interest (11+12)	1499.85					1344.72
14	Less: Disallowed on a/c of diversion: a) Board - Rs.100 crore b) GoP - Rs.162.34 crore	451.28					262.34
15	Balance Interest and Finance charges (13-14)	1048.57					1082.38

Accordingly, the Commission approves net Interest and Finance charges of Rs.1082.38 crore for 2009-10.

3.15 Subsidy

3.15.1 In para 6.4.1 of the Tariff Order of 2009-10, the requirement of subsidy for 2009-10 was determined at Rs.3144.25 crore for AP consumers, SC Domestic and Non-SC BPL DS consumers. Other amounts recoverable from the GoP include outstandings of Rs. 260.37 crore upto 2008-09 and Rs.125.80 crore which was the unadjusted interest disallowed on account of diversion of capital funds in 2009-10. Thus, total subsidy and other amounts payable by the GoP to the Board for 2009-10 were approved at Rs.3530.42 (3144.25+260.37+125.80) crore.

3.15.2 Based on the true-up of 2008-09, subsidy amounting to Rs.2420.28 crore is determined as payable by the GoP to the Board in 2008-09 while Rs.2601.73 crore has already been paid resulting in excess payment of Rs.181.45 crore upto 2008-09. The amount of subsidy payable by GoP to the Board for 2009-10 is revised as under:

· AP Consumption: The Board in its ARR petition for 2010-11 has claimed AP consumption for 2009-10 at 10363 MUs on which subsidy payable is Rs.2953.34 crore. The Commission has, however, revised AP consumption for 2009-10 to 9814 MUs as discussed in para 3.2.3 of this Order. AP revenue for consumption of 9814 MUs @ 285 paise per kwh works out to Rs.2796.99 crore, which is also in line with the subsidy approved in the Tariff Order for 2009-10. The GoP has recently decided that AP consumers are to be charged Rs.50/- BHP per month with effect from 22.1.2010 and that amount is to be recovered bi-annually. The total connected load as on 1.1.2010 is reported to be 9466448 BHP (7061970.21KW). On this basis, AP consumers are liable to pay Rs.108.57 crore for the period 22.1.2010 to 31.3.2010 and consequently, subsidy payable by the GoP during 2009-10 would be Rs.2688.42 crore. However, the additional revenue will only accrue to the Board during 2010-11 and as such its effect will be considered in the next financial year. Accordingly, the Commission retains AP subsidy payable by the GoP for 2009-10 at Rs.2796.99 crore.

· Meter Rentals and Service Charges: There is no change in the subsidy of Rs.8.00 crore determined in the Tariff Order for 2009-10 as payable on account of meter rentals and service charges in respect of AP consumers.

· Scheduled Castes (SC) Domestic Supply (DS) consumers: The GoP had decided to supply free power upto 200 units to Scheduled Castes DS consumers with connected load upto 1000 watts with effect from October 2, 2006. As per the ARR for 2010-11, the Board has claimed subsidy amounting to Rs.335.62 crore (inclusive of meter rentals and service charges of Rs.13.13 crore), which is in line with the subsidy approved in the Tariff Order for 2009-10. However, as per decision dated 22.1.2010 of the GoP, subsidy now allowable has been reduced to 100 units for consumers with connected load of upto 1000 Watts to Scheduled Castes DS consumers. However, an amount of Rs.335.62 crore is being considered for calculation of subsidy since the details about the number of consumers in the category has not so far been furnished by the Board. Therefore, the reduced subsidy as per GoP decision will be considered in the true up on actual basis.

The Commission, thus, approves subsidy of Rs.335.62 crore.

· Non-SC Below Poverty Line (BPL) DS consumers: In addition, the GoP had also decided to give free supply of power upto 200 units per month to Non-SC BPL DS consumers with connected load of upto 1000 watts with effect from December 1, 2006. The amount of subsidy claimed by the Board on this account works out to Rs.3.64 crore inclusive of meter rentals and service charges amounting to Rs.0.17 crore, which is in line with the subsidy approved in the Tariff Order for 2009-10. However, as per decision of GoP dated 22.1.2010, subsidy on power supply allowable to this category of consumers has been reduced to 100 units but the Commission has no option but to retain an amount of Rs.3.64 crore as subsidy payable as the Board has not been able to provide the revised figures in this respect. The reduced subsidy on this account will be determined at the time of true up in the next Tariff Order.

The Commission, therefore, approves subsidy of Rs.3.64 crore inclusive of meter rentals and service charges of Rs.0.17 crore.

Accordingly, the subsidy payable for 2009-10 has been retained at Rs.3144.25 (2796.99 +8.00+335.62+3.64) crore.

3.15.3 Interest on Delayed Payment of Subsidy

The GoP has paid subsidy due to the Board in 2009-10 initially in staggered monthly installments and subsequently by adjusting a loan amount of Rs.1140.43 crore and Rs.270.22 crore of ED payable by the Board to the GoP. However, the Commission has observed that not only has there been delay in payment of subsidy to the Board but the same has not been paid at the beginning of the month for which it is due as specified by the Commission in para 6.4.2 of the Tariff Order of 2009-10. In accordance with past practice, the Commission, with a view to compensating the Board on this account, levies interest on the delayed payment of subsidy @11.09% (effective interest on short term loans as per the ARR of the Board) which works out to Rs.60.02 crore during 2009-10. This amount will, however, need to be recalculated as subsidy payable will decrease consequent upon GoP’s recent decision to reduce subsidy in the case of AP and SC/BPL DS consumers. This exercise would be taken up at the time of true-up of the year 2009-10, in the next Tariff Order.

Accordingly, the subsidy payable for 2009-10, inclusive of interest on delayed payment of subsidy, determined as payable by the GoP to the Board is Rs.3204.27 (3144.25+60.02) crore.

Besides this, the GoP is liable to pay an amount of Rs.276.23 crore (as discussed in paras 2.14.12 & 2.16) on account of non-refund of excess interest paid by the Board. The Commission has been emphasizing the importance of reducing amounts other than subsidy that are payable to the Board. This is imperative in the context of the mounting debt of the Board and its precarious financial position. As discussed in para 3.14.3 and 3.14.11 above net interest due on GoP loans for 2009-10 is Rs.48.12 crore. This amount is being adjusted against the non-refunded amount of Rs.276.23 crore after which the net amount payable to the Board works out to Rs.228.11 (276.23-48.12) crore. This is carried forward to para 5.4.

3.16 Return on Equity

3.16.1 In accordance with Regulation 25 of the PSERC Tariff Regulations, the Commission in the Tariff Order of 2009-10 permitted a Return on Equity at the rate of 14% on an equity base of Rs.2946.11 crore, which worked out to Rs.412.46 crore.

3.16.2 In the ARR for 2010-11, the Board has claimed ROE @ 15.5 % (pre-tax) to be grossed up to 23.48% as provided in the CERC Regulations. The PSERC Tariff Regulations stipulate that CERC Regulations are to be followed “as far as possible”. The Commission notes that the Board has been unable to effect requisite improvements in critical performance parameters such as T&D losses and employee cost. Moreover, the Board continues to be a loss making entity and any increase in ROE may not for that reason alone be justified. Accordingly, the Commission finds no justification to allow ROE at higher rates and allows ROE of Rs.412.46 crore at 14% of the total paid up capital of the Board.

Accordingly, the Commission approves Return on Equity of Rs.412.46 crore for 2009-10.

3.17 Non-Tariff Income

In the Tariff Order of 2009-10, the Commission approved non-tariff income of Rs.444.03 crore as claimed by the Board. In the ARR of 2010-11, the Board, has revised the non-tariff income for the year 2009-10 to Rs.494.30 crore. This amount includes Rs.67 crore on account of recovery of theft of energy which has been counted towards revenue from tariff. Therefore, this is reduced from Non-tariff income. The subsidy receivable from the GoP on account of meter rentals and service charges for AP, SC DS and Non-SC BPL DS consumers amounting to Rs.21.30 (8.00+13.13+0.17) crore is to be accounted for as non-tariff income. Thus, non-tariff income for the year 2009-10 works out to Rs.448.60 (494.30-67+21.30) crore.

The Commission, accordingly, approves Rs.448.60 crore as the Non-Tariff income of the Board for 2009-10.

3.18 Revenue from Existing Tariff

The Board has revised the estimates of revenue at existing tariff in its letter of 28.01.2010 to Rs.12227.86 crore (inclusive of subsidy of Rs.3144.25 crore) against Rs.12775.37 crore approved by the Commission in the Tariff Order of 2009-10. However, as discussed in para 3.17, an amount of Rs.67 crore is to be added to the revenue on account of theft of energy. In addition, there is no justification to deduct Rs.354.87 crore on account of reduced revenue receipts from consumers availing discount against advance payment of bills. Moreover, the Board’s revised estimates are based on energy sales of 32341 MUs, whereas, the Commission has determined such sales as 32591 MUs. Taking these factors into account, the Commission now revises revenue from existing tariff to Rs.12784.67 crore as given in table 3.16 below.

Table 3.16: Revenue from Existing Tariff for 2009-10

(Rs. crore)

Sr. No.	Category of consumers	As projected by Board			As approved by Commission
Sr. No.	Category of consumers	Energy sales (MUs)	Tariff rates (paise/unit)	Revenue (Rs. in crore)	Energy sales (MUs)	Tariff rates (paise/unit)	Revenue (Rs. in crore)
1	2	3	4	5	6	7	8
1	Domestic
a)	Up to 100 units	2663	282	751	2650	282	747.30
b)	101-300 units	2904	428	1243	2890	428	1236.92
c)	Above 300 units	1769	452	799	1760	452	795.52
	Total (a+b+c)	7336		2793	7,300		2779.74
2	NRS	2135	491	1048	2,178	491	1069.40
3	Public lighting	148	482	72	128	482	61.70
4	Industrial Consumers
a)	SP	768	392	301	742	392	290.86
b)	MS	1607	433	696	1,509	433	653.40
c)	LS	8741	433	3785	8,619	433	3732.03
	Total (a+b+c)	11116		4782	10,870		4676.29
5	Bulk Supply
a)	HT	462	436	201	451	436	196.64
b)	LT	33	463	15	33	463	15.28
	Total (a+b)	495		216	484		211.92
6	Railway Traction	149	512	76	132	512	67.58
7	Common pool	302	331	100	302	331	100
8	Outside State	297	555	165	1383	555	767.57
9	Total (1 to 8)	21978		9252.00	22777		9734.20
10	AP subsidy	10363	285	0.00	9,814	285	2796.99
11	Total (9+10)	32341		9252.00	32591		12531.19
12	Add: PLEC, MMC. Other charges			186.48			186.48
13	Add: Recovery on account of theft of energy			67.00			67.00
14	Less: Revenue Loss on Sale to Discounting Categories			354.87
15	Add: Subsidy from GoP			3144.25
16	Grand Total	32341		12294.86	32591	-	12784.67

The Commission, therefore, approves revenue from existing tariff at
Rs.12784.67 crore for energy sales of 32591 MUs for 2009-10.

3.19 Revenue Requirement

A summary of the review for 2009-10 as discussed in the preceding paragraphs is given in Table 3.17

Table 3.17: Revenue Requirement for 2009-10

(Rs.crore)

Sr. No.	Item of Expense	As per Board in ARR 09-10	Approved by Commission in	Revised estimates by Board	Now Approved by the Commission
Sr. No.	Item of Expense	As per Board in ARR 09-10	T. O. for 09-10	Revised estimates by Board	Now Approved by the Commission
1	2	3	4	5	6
1	Cost of fuel	3047.00	3195.93	3501.75	3414.58
2	Cost of power purchase	7264.61	4746.59	4999.37	4969.65
3	Employee cost	3454.68	1856.60	2734.05	2354.48
4	R&M expenses	406.80	376.14	385.93	385.93
5	Admin & General Exp	76.00	76.00	75.95	75.95
6	Depreciation	969.99	826.02	792.96	791.10
7	Interest charges	1585.61	1048.57	1624.54	1082.38
8	Carrying cost of gap		209.96
9	Return on Equity	412.46	412.46	681.56	412.46
10	Fringe Benefit Tax	5.51	0.00	0.00	0.00
11	Other Debits and Extraordinary items	4.81	0.00	0.00	0.00
12	Total revenue requirement	17227.47	12748.27	14796.11	13486.53
13	Less: non tariff income	444.03	444.03	427.30	448.60
14	Net revenue requirement (12-13)	16783.44	12304.24	14368.81	13037.93
15	Revenue from existing tariff	12442.00	12775.37	12294.86	12784.67
16	Gap for 2009-10	(-) 4341.44	(+) 471.13	(-) 2073.95	(-) 253.26
17	Gap for the year 2008-09 & 2007-08	(-) 4205.00	(-) 471.08	(-) 1453.54	(-) 977.37
18	Net gap (16 + 17)	(-) 8546.44	(+) 0.05	(-) 3527.49	(-) 1230.63

Review for 2009-10 indicates that there is now a gap (deficit) of Rs.253.26 crore for 2009-10. After adjustment of cumulative deficit of Rs.977.37 crore upto 2008-09, against the deficit of Rs.253.26 crore of 2009-10, the total deficit works out to Rs.1230.63 crore at the end of 2009-10. This deficit is being carried forward to the next year for adjustment.

Chapter 4

Annual Revenue Requirement for 2010-11

4.1 Energy Demand (Sales)

4.1.1 Metered Energy Sales: The Board has projected metered energy sales for 2010-11 based on category wise Compounded Annual Growth Rate (CAGR) of three years from 2005-06 to 2008-09. The 3 year CAGR has been worked out from audited metered sales for the period 2005-06 to 2008-09 which has then been applied to the revised estimates of metered sales of respective categories for 2009-10 to arrive at energy sales projections for 2010-11. The Board has also proposed application of CAGR in case of Railway Traction category since the Board has observed a significant increase in consumption during the first half of 2009-10 in comparison to the sales during the previous year for the same period. Details of the Board’s projections are in Table 4.1.

Table 4.1: Energy Sales to Metered Categories as per ARR - 2010-11

(MUs)

Metered Energy Sales	2008-09 (Actual)	2009-10 (RE)	2010-11 (Projections)
1	2	3	4
Domestic	6695	7336	7894
Non-Residential	1967	2135	2355
Small Power	743	768	784
Medium Supply	1556	1607	1639
Large Supply	8747	8741	9212
Public Lighting	147	148	157
Bulk Supply	480	495	508
Railway Traction	126	149	155
Total Sales (within the state)	20461	21379	22705

The Commission has estimated category wise sales within the State for 2010-11 for all categories, including Railway Traction, by applying 3 years CAGR (2005-06 to 2008-09), on sales for the year 2009-10 now approved in Chapter-3. Actual sales for the years 2005-06 and 2008-09, 3 year CAGR for 2005-06 to 2008-09 as calculated by the Commission, sales now approved for 2009-10 and estimated sales in 2010-11 for different metered categories within the State are given in Table 4.2.

Table 4.2: 3- Year CAGR & Estimated Metered Sales within the State – 2010-11

(MUs)

Sr. No.	Category	2005-06 (Actuals)	2008-09 (Actuals)	3 year CAGR (2005-06 to 2008-09)	Sales now approved for 2009-10	Estimated sales for 2010-11
1	2	3	4	5	6	7
1	Domestic	5354	6695	7.74%	7300	7865
2	Non-Residential	1461	1967	10.42%	2178	2405
3	Small Power	695	743	2.25%	742	759
4	Medium Supply	1462	1556	2.10%	1509	1541
5	Large Supply	7450	8747	5.50%	8619	9093
6	Public Lighting	122	147	6.41%	128	136
7	Bulk Supply	444	480	2.56%	484	496
8	Railway Traction	111	126	4.32%	132	138
9	Total Sales within State	17099	20461		21092	22433

4.1.2 Sales to common pool consumers and Outside State sales

The Board has projected sales to common pool and outside State consumers for the year 2010-11 as below:

Category	2009-10(RE) ( MUs)	Projection for 10-11 (MUs)
Sales to common pool consumers	302	302
Sales outside State	297	125

Sale to common pool consumers for 2010-11 is based on actual figures of such sales for 2008-09 with no change being foreseen in this category.

The Outside State sales of 1211 MUs projected by the Board in the ARR for 2010-11 has been subsequently revised to 125 MUs by the Board (in its letter dated January 28, 2010) owing to change in accounting procedure for sale/purchase of banked power from 2009-10. The Board further intimated in its letter dated 17^th March, 2010 that it has inadvertently shown Outside State sale of 125 MUs and revenue of Rs. 69 crore for 2010-11, and clarified that Outside State sale of 125 MUs includes the free share of 72 MUs of Himachal Pradesh at the rate of 4.6% of gross generation from RSD hydro electric project (HEP) and royalty of 53 MUs to HP from Shanan HEP. The expected revenue from royalty of 53 MUs to HP has been intimated by the Board as Rs. 5.4 crore. The Commission deducts 72 MUs from Outside State sales as this is a free share of HP from RSD, and accordingly accepts the Outside State sales of 53 MUs (royalty to HP from Shanan).

The Commission approves Outside State sale at 53 MUs for the year 2010-11 as also the sale of 302 MUs to common pool consumers.

The total estimated metered sales for the year 2010-11 depicted by the Board and approved by the Commission are given in Table 4.3.

Table 4.3: Metered Sales - 2010-11

(MUs)

Sr. No.	Metered Category	Projected by Board	Approved by the Commission
1	2	3	4
1	Domestic	7894	7865
2	Non-Residential	2355	2405
3	Small Power	784	759
4	Medium Supply	1639	1541
5	Large Supply	9212	9093
6	Public Lighting	157	136
7	Bulk Supply	508	496
8	Railway Traction	155	138
9	Total within State	22704*	22433
10	Common pool	302	302
11	Outside State sales	125	53
12	Total Sales (9+10+11)	23131	22788

* As against 22705 shown in the ARR

The Commission, thus, approves metered sales at 22788 MUs against 23131 MUs projected by the Board.

4.1.3 AP Consumption: The Board, in the ARR of 2010-11, has projected AP consumption at 11245 MUs for 2010-11 by applying CAGR of last three years (8.51%) over the estimated sales for 2009-10.

The Commission, during the true-up of 2008-09 had approved AP consumption of 8395 MUs by reducing the Board’s projection of 9349 MUs by 10.20% based on the report of the Agency engaged for estimation of AP consumption for 2007-08 and first three quarters of 2008-09. As discussed in para 3.2.3 of this Tariff Order, the Board’s response to the directives given in Tariff Order of 2009-10 are not conclusive and thus its estimates are not considered reliable. The Commission decides to estimate AP consumption for the year 2010-11 by applying 5% increase over sales of 9814 MUs approved by the Commission for 2009-10. AP consumption for the year 2010-11 on this basis works out to 10305 MUs, which the Commission approves.

4.1.4 Total Energy Demand (Sales)

The total metered sales, AP consumption, common pool and Outside State sales projected by the Board and as approved by the Commission are given in Table 4.4

Table 4.4: Total Energy Sales for 2010-11

(MUs)

Sr.No.	Category	Projected by the Board	Approved by the Commission
1	Total metered sales within the state	22704	22433
2	AP consumption	11245	10305
3	Total sales within the State (1+2)	33949	32738
4	Sales to common pool consumers	302	302
5	Outside State sales	125	53
6	Total sales (3+4+5)	34376	33093

The Commission, thus, approves total energy sales to different categories of consumers at 33093 MUs including common pool and Outside State sales.

4.2 Transmission and Distribution Losses (T&D Losses)

The Board has projected transmission and distribution losses at 18% for 2010-11 which represents a reduction of 1.5% from losses of 19.5% in 2009-10 and 1.92% from the loss level of 19.92% in 2008-09. The Board’s estimated T&D losses for the year 2008-09 and 2009-10 and projections for 2010-11 have been based on AP consumption of 9349 MUs, 10363 MUs and 11245 MUs respectively. It is, however, necessary to assess the performance of the Board in reduction of its T&D losses on the basis of AP consumption actually approved by the Commission. This is brought out in Table 4.4 (A):

Table 4.4 (A)

(%)

Year	T&D loss level fixed by the Commission	T&D loss level reported by the Board	T&D losses based on AP consumption approved by the Commission
2004-05	23.25	24.27	24.59
2005-06	22.00	25.07	25.38
2006-07	20.75	23.92	24.25
2007-08	19.50	22.53	25.12
2008-09	19.50	19.92	22.21
2009-10	22.00	19.50
2010-11	20.00	18.00

The Commission has been repeatedly observing that the Board has not been able to achieve the loss reduction trajectory as was earlier approved by the Commission or even the adhoc loss levels prescribed by the Commission for the years 2008-09 and 2009-10. The Commission has also been pointing out that there is a need to identify specific measures that the Board would like to initiate to reduce these losses in a phased manner and to monitor the implementation thereof in a quantifiable manner every year. As most of the proposed initiatives of the Successor Entities are capital intensive, the Commission has also been emphasizing the need for completing base line surveys and thereafter conducting systematic energy audits so that comprehensive action in the area of T&D loss reduction can be taken by the Successor Entities.

These matters have been discussed with the Board on several occasions consequent upon the issue of the Tariff Order for 2009-10. Emphasis in those discussions was laid on fixing year-wise targets in implementing loss reduction measures such as conversion to HVDS system, replacement of electro-mechanical meters, installation of capacitors on 11 KV feeders, shifting of meters outside residential premises and the completion of base line surveys followed by systematic energy audits. The Board has now intimated the progress achieved in this respect and the proposed course of action in 2010-11. It was informed that 82000 AP connections have already been converted into HVDS and a total of 2.50 lac such connections will also be covered by HVDS by the end of March 2011. The Board has also indicated that additional 2100 MVAR capacitors will be installed during 2010-11 besides paying greater attention to maintenance to ensure that existing capacitors including those installed on distribution transformers are functional. In respect of shifting of meters outside consumer premises, it was stated that 5 lac such meters have already been shifted and an additional 42 lac are proposed to be shifted by end of March 2011; electronic meters will replace electro-mechanical meters in parallel with this exercise. Referring to the completion of base line surveys and initiation of energy audit, the Successor Entities proposes to implement them as part and parcel of its IT plan for which the order will be placed shortly and is scheduled to be implemented in 18 months thereafter.

The Commission appreciates the fact that the Successor Entities has fixed annual performance targets for specific steps aimed at the reduction of T&D losses. It has also framed time-lines for the implementation of IT plan which includes acquisition of data with regard to Regulatory Information Management System (RIMS) and the undertaking of base line surveys including conducting of energy audits. The Commission now expects that the Successor Entities will suitably pursue these measures and ensure their timely implementation. If possible, priority needs to be assigned to base line surveys and energy audits while implementing the IT plan.

The targeted reduction of T&D losses and the actual achievement by the Board has been brought out in table 4.4 (A). The Commission’s earlier trajectory for loss reduction targeted that the Board would achieve T&D losses of 19.5% in 2007-08 after which fresh targets were to be prescribed by the Commission. However, the Board’s consistent inability to achieve reduction in accordance with the trajectory earlier determined had made it necessary for the Commission to retain the loss level in the year 2008-09 at 19.5% but the Commission noted that as against this, the estimated losses of the Board were 22.21% after taking AP consumption computed by the Commission into account. For reasons brought out in para 4.2 of the Tariff Order for 2009-10, the Commission had revised the T&D loss targets for 2009-10 to 22%. It is observed that the Successor Entities now seems to be approaching the entire issue of T&D loss reduction in a more comprehensive and systematic manner and for that reason it should be able to achieve better results. The Abraham Committee envisages a normative loss reduction of 2% annually where the losses in a particular entity are more than 20%. Accordingly, the Commission fixes T&D loss targets for 2010-11 at 20% and taking the recommendations of this Committee further into account, the loss trajectory for the years 2011-12 and 2012-13 is also determined at 19% and 18%.

4.3 Energy Requirement (Input)

The total energy requirement is the sum of estimated energy sales including common pool and Outside State sales and T&D losses. The projected energy sales, T&D losses and energy requirement as reported by the Board and approved by the Commission for the year 2010-11 are given in Table 4.5.

Table 4.5: Energy Requirement - 2010-11

(MUs)
Sr. No.	Particulars	As projected by the Board for 10-11	As approved by the Commission
1	2	3	4
1	Metered Sales within State	22704	22433
2	AP consumption	11245	10305
3	Total sales within State (1+2)	33949	32738
4	Common pool sales	302	302
5	Outside State sales	125	53
6	Total sales	34376	33093
7	T&D losses on item (3)	18.00%	20%
7	T&D losses on item (3)	7452	8185
8	Total energy input required (6+7)	41828	41278

The overall energy requirement as shown by the Board is higher by 550 MUs than that approved by the Commission on account of difference in metered sales, Outside State sales, AP consumption and T&D losses determined by the Commission. The energy requirement thus works out to 41278 MUs which has to be met from the Successor Entities’s own generation (thermal & hydel) including share from BBMB and purchases from Central Generating Stations and other sources. These issues are discussed in succeeding paras.

4.4 PSEB’s Own Generation

4.4.1 Thermal Generation: The Board has projected generation for the year 2010-11 at 2280 MUs, 9500 MUs and 6565 MUs for GNDTP, GGSTP and GHTP {4786 MUs for GHTP Units I, II & III and 1779 MUs for Unit IV} respectively, stating that the gross generation in 2010-11 of GNDTP, GGSTP and GHTP Unit I, II & III has been worked out on the basis of envisaged availability in line with the planned maintenance schedule for various units. The gross generation of GHTP Unit IV has been worked out assuming that the unit has been commissioned in December 2009.

Plant Availability

The Board has submitted that -

· The Plant Availability of GNDTP for 2010-11 has been projected as 71.22% in the ARR. The reason for reduced availability has been stated as, scheduled Renovation and Modernization work planned on the two units (Unit-III & IV) and also the annual over hauling of the Units I & II, besides consideration of forced outages of 3.85% on the plant.

· The Plant Availability for GGSTP for 2010-11 has been projected at 91.98%, based on the planned maintenance schedule of its units in 2010-11 for a total of 99 days (Unit-1:26 days; Unit-3:43 days and Unit-5:30 days) and also taking into account average forced outages of the plant.

· The Plant Availability for GHTP (Unit I, II and III) for 2010-11 has been projected at 86 % on the basis of planned maintenance schedule of Unit-I (43 days ), Unit-II (43 days ) and Unit-III (35 days) and past trends in the forced outage duration of the stage-I.

· In the case of GHTP Unit IV, plant availability has been projected at 92.50% on the basis of plant maintenance schedule of 23 days.

The availability of GNDTP, GGSTP and GHTP – Stage I based on maintenance schedules (excluding forced outages as projected by the Board) for the year 2010-11, is calculated by the Commission as 75.07%, 95.48% and 88.22% respectively. Units 3&4 of GHTP Stage-II have been commissioned recently and data for past three years is not available. The Commission has assumed the average availability of 90% during 2010-11 for the purpose of calculating gross generation.

The Commission has assessed availability and generation for the year 2010-11 based on the average of actual availability and generation for the three years (2006-07 to 2008-09). The actual availability and generation of the thermal plants for 2006-07, 2007-08 and 2008-09 along with average of three years generation and availability are as given in Table 4.6.

Table 4.6: Actual Availability and Generation – 2006-07 to 2008-09

Sr. No.	Station	FY 2006-07	FY 2007-08	FY 2008-09	Average of the 3 years
1	GNDTP
	Generation (MUs)	2221	3008	2846	2692
	Availability (%)	64.90%	87.53%	89.15%	80.53%
2	GGSTP
	Generation (MUs)	9770	9806	9611	9729
	Availability (%)	90.20%	91.64%	89.92%	90.59%
3	GHTP Stage I (Units I&II)
	Generation (MUs)	3443	3508	3532	3494
	Availability (%)	94.30%	94.81%	95.98%	95.03%

Considering the projected availability in 2010-11 and the actual availability/ generation in 2006-07, 2007-08 and 2008-09, gross generation for 2010-11 has been computed in Table 4.7.

Table 4.7: Availability, Gross Generation and PLF of Existing Thermal Plants

- 2010-11

Sr.No.	Station	Three year average availability	Three year average generation (MUs)	Assessed by the Commission for 2010-11
				Availability as per mtc. Schedules for 2010-11	Generation (MUs) (4x5) / 3	PLF (Calculated)


1	2	3	4	5	6	7
1	GNDTP	80.53%	2692	75.07%	2509	65.09%
2	GGSTP	90.59%	9729	95.48%	10254	92.90%
3	GHTP Stage I	95.03%	3494	88.22%	3244	88.17%

The Board in the ARR has stated that Unit IV of GHTP will be operational from December 2009. However, Unit IV has achieved COD in January, 2010. Thus Unit IV will be available for full year in 2010-11. The Commission has calculated gross generation of 4032 (1980+2052) MUs for GHTP Unit III & IV for 2010-11. Total gross generation from the thermal plants during the year 2010-11 will, therefore, be as given in Table 4.8.

Table 4.8: Gross Thermal Generation - 2010-11

(MUs)

Sr.No.	Station	Approved Generation
1	GNDTP	2509
2	GGSTP	10254
3 (a)	GHTP Stage I	3244
3 (b)	GHTP Stage II (Unit 3)	1980
3 (c)	GHTP Stage II (Unit4)	2052
	Total	20039

Accordingly, the Commission assesses the total gross Thermal generation as 20039 MUs.

Performance parameters

The PSERC Tariff Regulations provide that for determining the cost of generation of each generating station, the Commission shall be guided, as far as feasible, by the principles and methodology of CERC, as amended from time to time. This approach has been adopted by the Commission in its previous Tariff Orders from 2005-06 onwards. CERC has in its notification No.L-7/145(160)/2008-CERC dated Jan 19, 2009 framed Regulations for Determining Terms and Conditions for Electricity Tariff for the five year period beginning April 1, 2009 wherein operation norms for thermal plants have also been prescribed. These new norms of CERC will be followed by the Commission in the estimation of fuel cost for 2010-11. CERC has, however, not specified any norms for 110 MW units and the Commission has in the case of GNDTP adopted the norms specified for Tanda station of NTPC, which like GNDTP, has 4 units of 110 MW each. The Commission notes that Units I and II of GNDTP have been put on commercial operation on 31.5.2007 and 19.1.2006 respectively, after completion of Renovation and Modernisation (R&M) works. The Commission has decided to adopt SHR value for GNDTP Units I & II as per CERC Tariff Regulations effective from April 1, 2009, in which CERC has also revised operational norms of Tanda thermal power station after its R&M. Accordingly, the SHR value of 2825 Kcal/kWh has been taken for calculating fuel cost for GNDTP Units I & II. For Units-III and IV of GNDTP, the Commission has no reason to alter the norms adopted as R&M in respect of unit III has been recently taken up and for Unit IV it is yet to commence.

Auxiliary Consumption & Net Generation

The Commission has adopted CERC norms for assessment of net generation of GGSTP and GHTP and considered various issues and submissions regarding Auxiliary consumption of GNDTP Units in para 2.4.1. Accordingly, auxiliary consumption for the year 2010-11 has been fixed at 11.00%, 8.50% and 9.00% for GNDTP, GGSTP and GHTP respectively. Auxiliary consumption and net generation from the three thermal generating stations as projected by the Board and approved by the Commission for 2010-11 is given in Table 4.9.

Table 4.9: Generation and Auxiliary Consumption for Thermal Plants – 2010-11

(MUs)

Sr. No.	Station	Projected by the Board			Approved by the Commission
		Gross Generation	Auxiliary Consumption	Net Generation	Gross Generation	Auxiliary Consumption	Net Generation
1	2	3	4	5	6	7	8
1	GNDTP	2280	264	2016	2509	276	2233
	Units-I&II
	GNDTP		11.60%			11.00%
	Units-III&IV
2	GGSTP	9500	808	8692	10254	872	9382
			8.50%			8.50%
3	GHTP Stage-I	6565	591	5974	7276	655	6621
	GHTP Stage-II		9.00%			9.00%
4	Total	18345	1663	16682	20039	1803	18236

Net thermal generation approved by the Commission is 18236 MUs against 16682 MUs projected by the Board.

4.4.2 Hydel Generation: In the ARR for 2010-11, the Board has estimated hydel generation from its own stations for the year 2010-11 based on the three years’ average of gross generation for 2006-07, 2007-08 and 2008-09 which is also in line with the Commission’s approach in its earlier Tariff Orders. The generation projected by the Board and the generation approved by the Commission is given below in Table 4.10.

Table 4.10: Own Hydel Generation – 2010-11

(MUs)

Sr. No.	Station	Generation projected by the Board for 10-11	Actual Generation			Generation estimated by the Commission (Based on 3 year average)
Sr. No.	Station	Generation projected by the Board for 10-11	06-07	07-08	08-09
1	2	3	4	5	6	7
1	Shanan	522	496	540	532	523
2	UBDC Stage 1	384	162	184	140	162
3	UBDC Stage 2	384	223	244	199	222
4	RSD	1564	1679	1538	1474	1564
5	MHP	1222	1171	1362	1132	1222
6	ASHP	688	666	710	689	688
7	Micro Hydel	8	8	7	10	8
8	Total own generation (Gross)	4388	4405	4585	4175	4389

The Commission approves estimated gross generation of 4389 MUs from the Successor Entity’s own hydel stations. The Commission also approves the Successor Entity’s share and Common Pool share from BBMB as projected by the Board and depicted in Table 4.11.

Table 4.11: Total Hydel Generation - 2010-11

(MUs)

Sr. No.	Station	Projected by the Board for 10-11	Approved by the Commission
1	2	3	4
1	Shanan	522	523
2	UBDC	384	384
3	RSD	1564	1564
4	MHP	1222	1222
5	ASHP	688	688
6	Micro Hydel	8	8
7	Total own generation (Gross)	4388	4389
8	Total own generation (Net)	4342¹	4281³
9	BBMB
i)	Successor Entity share	4102²	4102
ii)	Common Pool share	302	302
iv)	Availability (Net)	4404	4404
10	Total Availability (Net)	8746	8685

1. Board’s Projection for own generation is net of auxiliary consumption and transformation losses (46 MUs).

2. Board’s projection of BBMB share is net of external transmission losses based on the actual level of losses @ 3.7 % in 2008-09.

3. Commission’s Assessment of own generation is net of:

§ HP share (free) in RSD @ 4.6% (72 MUs)

§ Auxiliary consumption @ 0.5% for RSD generation and UBDC stage-1 generation (on previous year’s pattern) and 0.2% for others (14 MUs)

§ Transformation losses @ 0.5 % (22 MUs)

The Commission, thus, approves net hydel generation of 8685 MUs for the year 2010-11.

4.4.3 Total Availability of energy from the Successor Entity’s own stations and BBMB: The approved net generation from own thermal and hydel station of the Successor Entity and share from BBMB is given in Table 4.12.

Table 4.12: Net Own Generation - 2010-11

Sr. No.	Station	Energy available (ex-bus) (MUs)
1	2	3
1	Thermal Stations	18236
2	Hydel Stations (Own)	4281
3	Share from BBMB (including 302 MUs share of common pool consumers)	4404
4	Total own Availability	26921

The Commission approves the total energy available from the Successor Entity’s own generating stations including share from BBMB as 26921 MUs.

4.5 Purchase of Power

4.5.1 The total energy required to meet the demand during 2010-11 including Common Pool and Outside State sales is 41278 MUs as discussed in para 4.3. The energy available from own generating stations of the Successor Entity including its share from BBMB is 26921 MUs as approved in para 4.4.

4.5.2 The balance requirement of 14357 MUs (net) has to be met through purchases from Central Generating Stations and other sources. This is against a requirement of 16404 MUs (net) projected by the Board for the year 2010-11.

4.6 Energy Balance

4.6.1 The energy balance which takes into account the approved energy sales to different categories of consumers, T&D losses and energy availability is given in Table 4.13.

Table 4.13: Energy Balance – 2010-11

(MUs)

Sr. No.	Particulars	Projected by the Board	Approved by the Commission
1	2	3	4
A	Energy Requirement
1	Metered Sales within state.	22704	22433
2	Sales to AP consumers	11245	10305
3	Total sales within state (1+2)	33949	32738
4	T&D Losses	7452	8185
5	Common pool	302	302
6	Outside State sales	125	53
7	Total Requirement (3+4+5+6)	41828	41278

B	Energy Availability
1	Own generation (ex-bus)
a)	Thermal	16682	18236
b)	Hydel	4342	4281
2	Share from BBMB (including share of common pool consumers = 302)	4404	4404
3	Purchase (Net)	16404	14357
4	Total Availability	41832*	41278

* Against 41831 shown by the Board.

4.7 Fuel Cost

4.7.1 Fuel Cost Projected by the Board: The Board has projected fuel cost of Rs. 3622.83 crore for a total generation of 18345 MUs during the year 2010-11 based on operational parameters and fuel prices as detailed in Table 4.14.

Table 4.14: Fuel Parameters projected by the Board - 2010-11

Sr.No.	Station	PLF (%)	Station Heat Rate (kcal/kwh)	Transit loss of coal (%)	Coal Price including transit loss (Rs/MT)	Calorific value of coal (kcal/kg)	Price of Oil (Rs/KL)	Specific oil consumption (ml/kwh)	Calorific Value of oil (kcal/litre)
1	2	3	4	5	6	7	8	9	10
1	GNDTP	59.15	3010	2.00	2775	4100	29138	2.50	10000
2	GGSTP	86.07	2697	2.00	2924	4015	27362	1.50	10000
3	GHTP
(i)	Stage-I (Units-I,II&III)	81.54	2500	2.00	2854	4025	35292	2.00	9400
(ii)	Stage-II (Unit- IV)	81.2	2500	2.00	2950	4025	35000	2.00	9400

4.7.2 The Board has submitted that the performance parameters and coal transit loss of all the three stations as submitted by the Board may be approved without any disallowance in the light of the following:

· The Station Heat Rate (SHR) for GHTP – Stage I and Stage II has been taken as 2500 Kcal/kWh as per CERC norms. For GGSTP, the SHR has been taken at 2697 Kcal/kWh on the basis of previous year’s data which is lower than the SHR of Badarpur Thermal Station as allowed by CERC and is reasonable considering the fact that two of the six units at GGSTP are more than 22 years old.

· The price of oil has been projected by considering an escalation of 10% on the actual average price for the respective generating stations till Sept. 2009.

· The price of coal for FY10-11 has been projected by considering an escalation of 5% on the actual average coal prices for the respective stations till Sept’09 and keeping in view the recent coal price hike by Coal India Limited (CIL).

4.7.3 Fuel Cost approved by the Commission

Gross Generation

The gross generation of thermal plants for the year 2010-11 has been discussed in para 4.4.1 and summarized in Table 4.8.

Station Heat Rate

The CERC has laid down norms of gross SHR for coal based thermal power generating stations as given in Table 4.15.

Table 4.15: CERC Norms for Gross Station Heat Rate

Sr. No.	Unit size / Plant	SHR norm (kcal/kwh)
1	2	3
1	200/210/250 MW sets	2500
2	500 MW and above sets	2425
3	Talcher Thermal Power Station	2950
4	Tanda Thermal Power Station	2825

On the above basis, the Commission approves SHR at 2500 kcal/kWh for GGSTP and GHTP. As CERC has not specified any norm for units installed at GNDTP, the Commission has decided in para 4.4.1 to allow SHR of 2825 kcal/kwh for GNDTP Unit I & II based on the CERC norms for Tanda TPS. In case of GNDTP Units III and IV, the Commission has decided to continue with SHR of 3000 kcal/kwh as allowed for these two units in its previous orders. The Commission has considered the same norm while computing the fuel cost for FY 09-10 as well.

Coal Transit Loss

The Commission has permitted Transit Loss of 2% for all power plants in its earlier orders. However, no such loss is taken into account in the case of PANAM coal which is priced on F.O.R. destination basis.

Price and Calorific Value of Coal & Oil

Fuel cost being a major item of expense, the actual calorific value, price and transit loss of coal and oil for the first six months of 2009-10 were verified and the results are given in Table 4.16.

Table 4.16: Validated Calorific Value & Price of Coal & Oil and Transit Loss of Coal – 2009-10

Sr. No.	Station	Calorific value of coal (kCal/Kg)	Calorific Value of Oil (K.cal/Ltr)	Price of Oil (Rs/KL)	Price of coal including transit loss (Rs./MT)	Transit loss	Price of coal excluding transit loss
1		1	2	3	4	5	6
1(a)	GNDTP (Unit I & II)	4102	10000	24081	2517	1.84%	2471
1(b)	GNDTP (Unit III & IV)	4102	10000	24081	2517	1.84%	2471
2	GGSTP	3979	10000	22613	2652	0.74 *%	2633
3	GHTP	4023	9400	29167	2589	1.22%	2558

* Upto Oct 2009

In working out the cost of coal for the year 2010-11, the Commission has considered the price and calorific value of coal as validated for the first six months of 2009-10. The price and calorific value of coal indicated above are the weighted average values of coal, including PANAM coal.

Specific Oil Consumption & Calorific Value of Oil

The Board has projected the Specific Oil Consumption at GNDTP, GGSTP and GHTP as 2.50, 1.50 and 2.0 ml/kwh respectively.

The Commission has adopted CERC norms for oil consumption as in the case of other performance parameters of thermal plants. As per CERC Regulations effective from 1.4.2009, the Commission approves 1 ml/kwh specific oil consumption for GNDTP Unit I & II, GHTP and GGSTP. In case of GNDTP Units III & IV, the Commission has decided to continue with specific oil consumption of 3.5 ml/kwh as allowed in the earlier years since R&M in respect of Unit III has been recently taken up and for Unit IV it is yet to commence.

Based on the above, the fuel cost assessed for the year 2010-11 is as given in Table 4.17.

Table 4.17: Fuel cost (Coal and Oil) – 2010-11

Sr. No.	Item	Derivation	Unit	Approved for 2010-11
Sr. No.	Item	Derivation	Unit	GNDTP (I&II)	GNDTP (III&IV)	GGSTP	GHTP	Total
1	2	3	4	5	6	7	8	8
1	Generation	A	MU	1534*	975*	10254	7276	20039
2	Heat Rate	B	k.cal/kWh Generated	2825	3000	2500	2500
3	Specific oil consumption	C	Milli litre/kwh	1.00	3.50	1.00	1.00
4	Calorific value of oil	D	k.cal/litre	10000	10000	10000	9400
5	Calorific value of coal	E	k.cal/kg	4102	4102	3979	4023
6	Overall heat	F = (A x B)	G.cal	4333550	2925000	25635000	18190000
7	Heat from oil	G = (A x C x D) / 1000	G.cal	15340	34125	102540	68394
8	Heat from coal	H = (F-G)	G.cal	4318210	2890875	25532460	18121606
9	Oil Consumption	I=(Gx1000)/D	KL	1534.00	3412.50	10254.00	7276.00
10	Transit loss of coal	J	%	2	2	2	2
11	Total Coal Consumption excluding transit loss	K=(H*1000)/E	MT	1052708	704748	6416545	4504500
12	Quantity of PANAM coal	L	MT	733679	466321	2221100	2000000
13	Quantity of coal other than PANAM coal excluding transit loss.	M=K-L	MT	319030	238426	4195445	2504500
14	Quantity of coal other than PANAM coal including transit loss	N=M/(1-J)	MT	325540	243292	4281067	2555613
15	Total Quantity of coal required	O=L+N	MT	1059219	709614	6502167	4555613
16	Price of Coal without transit loss	P	Rs. /M T	2471	2471	2633	2558
17	Price of Oil	Q	Rs./KL	24081	24081	22613	29167
20	Total cost of oil	R=Q x I / 10⁷	Rs.crore	3.69	8.22	23.19	21.22
21	Cost of coal	S=O x P/10⁷	Rs.crore	261.70	175.32	1711.73	1165.33
22	Total Fuel cost	T= R+S	Rs.crore	265.39	183.54	1734.92	1186.55	3370.40
23	Fuel Cost per unit	U= T/A	Paise	173	188	169	163	168

* Gross generation of 2509 MUs apportioned on the basis of plant availability of 91.78% and 58.36% of GNDTP unit I&II and GNDTP unit III and IV respectively.

Based on the generation and operational parameters, approved by the Commission above, cost of fuel for the year 2010-11 works out to Rs. 3370.40 crore for thermal generation of 20039 MUs (gross) as detailed in Table 4.17, which the Commission approves.

Fuel Cost Adjustment (FCA)

Any change in the fuel cost from the level approved by the Commission is to be passed on to the consumers as FCA. Punjab State Electricity Regulatory Commission (Conduct of Business) Regulations, 2005 contain the FCA formula according to which any change in fuel cost would be passed on to the consumers with the prior approval of the Commission.

4.8 Power Purchase

4.8.1 Projection by the Board: The Board has projected a cost of Rs.5137.61 crore for purchase of 17322 MUs (gross) in 2010-11 in its letter dated 28.01.2010. It has submitted that in 2010-11, the total energy requirement within the state is expected to increase approximately by 6.96%, whereas the net thermal availability is expected to go down by 6.56% on account of the maintenance schedule of a number of units while the net hydel availability (Own stations and BBMB) is expected to increase by 17.76% during the year FY10-11 as compared to FY09-10. In order to assess power purchase requirement, the Board has taken the following into account:

· Availability projections from old stations (stations in existence for last 3 years) are based upon the average of energy received in the years 2006-07 to 2008-09. For Unchahar-III, Dulhasti, Tala and Tehri stations, energy has been projected based on average energy availability in FY07-08 & FY08-09.

· Modified accounting procedure of purchase and sale of power under banking arrangement w.e.f. 1.04.09. Under the earlier system, power received under banking arrangement was treated as power purchased and power returned was considered as sale of power. Under the new accounting procedure implemented from 1.04.09, only the net sale/purchase of power under banking arrangement is being accounted for.

· The following new power stations have been considered commercially operational:

§ Unit I of Malana-II from June 2010 & Unit 2 from July 2010. The Successor Entity has entire 100 MW share in this plant.

§ Unit 3 of Kahalgaon stage-II (3x500 = 1500 MW) from October 2009. Successor Entity has considered its share as 18 MW.

§ Unit 1 of Maithon Power Project (2x525 = 1050 MW) from December, 2010. Out of a total of 300 MW share of Successor Entity, 150 MW has been considered, accordingly.

§ RAPP 5 (220 MW) from Dec. 2009 and RAPP 6 (220 MW) from Feb. 2010. Successor Entity share has accordingly been considered as 45 MW.

§ Unit 1 of SEWA-II (3x40 = 120 MW) from January 2010, Unit 2 from February 2010 and Unit 3 from March 2010. The overall share of Successor Entity has been considered as 17 MW.

§ Four modules of Bawana Gas based Project (1370 MW) from April 2010, May 2010, July 2010 and September 2010 respectively. Successor Entity’s share has been considered as 137 MW.

§ Unit 1 of Durgapur Thermal Project (2x500 = 1000 MW) (DVC) from December, 2010 and Unit 2 from February 2011. Accordingly, energy corresponding to Successor Entity share of 200 MW has been considered.

§ Unit 1 of Raghunathpur Thermal Project (2x600 = 1200 MW) (DVC) from March 2011. Energy corresponding to Successor Entity share of 75 MW (total share 150 MW) has been considered.

§ Unit 1 of Nagarjuna Thermal Project (2x507.5 = 1015 MW) from April 2010 and Unit 2 from July 2010. Successor Entity share has been considered as 102 MW.

§ Unit 1 of Koteshwar HEP (4x100 = 400 MW) from October 2010, Unit 2 from December 2010, Unit 3 from February 2011 & Unit 4 from March 2011. Successor Entity share has been considered as 25.5 MW.

§ Unit 1 of Parbati-III HEP (4x130 = 520 MW) from January 2011, Unit 2 from February 2011 and Unit 3 from March 2011. Successor Entity has total share of 80 MW in the project.

§ Unit I of Chamera-III HEP (3x77 = 231 MW) from December 2010, Unit 2 from January 2011 & Unit 3 from February 2011. Successor Entity has a total share of 23 MW.

§ Unit 1 of Uri-II HEP (4x60 = 240 MW) from November 2010, Unit 2 from December 2010, Unit 3 from January 2011 & Unit 4 from February 2011. Successor Entity has a total share of 39 MW.

4.8.2 Requirement of Energy through Purchase: As discussed in para 4.5.2, the requirement of 14357 MUs (net) has to be met through purchases from Central Generating Stations and other sources. The transmission loss external to the Successor Entity’s system has to be added to arrive at the total quantum of energy to be purchased.

4.8.3 Transmission Loss External to Successor Entity System: For net purchase of 16404 MUs, the Board has shown gross purchase of 17322 MUs after adding average transmission loss of 5.30% as external to its system.

The Commission has, however, considered external loss at a weighted average of 4.73% based on the actual such loss in the year 2008-09. The gross energy to be purchased, thus, works out to 15070 MUs (14357 MUs + external transmission losses 713 MUs) instead of 17322 MUs projected by the Board.

4.8.4 Entitlement from Central Generating Stations: In order to estimate the energy entitlement of the Board from different Central Generating Stations (CGSs), the Commission has considered the average of the actual energy purchased by the Board for three years (2006-07, 2007-08 and 2008-09). Based on the above, the plant wise energy available from NTPC, NHPC and NPC stations is depicted in Table 4.18, Table 4.19 and Table 4.20.

Table 4.18: Successor Entity’s Entitlement from NTPC stations – 2010-11

Sr. No	Station	Capacity	Firm Allocation		Energy entitlement based on 3 year average	Actual Share allocation based on 3 year average (%)
		MW	%	MW	MUs	%
1	2	3	4	5	6	7
1	Anta (GF)	419	11.69	49	297	13.59
	Anta (RF)*				20	11.40
	Anta (LF)*				42	14.48
2	Auriya (GF)	663	12.52	83	468	13.52
	Auriya (RF)*				29	8.83
	Auriya (LF)*				62	15.18
3	Dadri (GF)	830	15.90	132	684	16.60
	Dadri (RF))*				31	11.06
	Dadri (LF)*				179	15.27
4	Singrauli	2000	10.00	200	1619	11.49
5	Rihand I	1000	11.00	110	917	12.45
6	Rihand II	1000	10.20	102	914	11.70
7	Unchahar I	420	8.57	36	284	9.02
8	Unchahar II	420	14.28	60	500	15.77
9	Unchahar III*	210	8.10	17	156	9.59
10	Farrakka (ER)*	1600			296	9.73
11	Kahalgaon I (ER)*	840			588	14.33
12	Kahalgaon 2 (ER)**	1000	8.31	83	701	8.31

* Due to unavailability of data for three years (2006-07 to 2008-09), energy entitlement and actual share allocation has been calculated based on the data for two years (2007-08 and 2008-09)

** Energy entitlement and share allocation taken as projected by Board for 2010-11 in the ARR as the past data is unavailable.

Table 4.19: Successor Entity’s Entitlement from NHPC stations – 2010-11

Sr. No.	Station	Capacity	Firm Allocation		Energy entitlement based on 3 year average	Share allocation based on 3 year average
		MW	%	MW	(MUs)	(%)
1	2	3	4	5	6	7
1	Bairasul	180	46.50	84	302	47.33
2	Salal	690	26.60	184	854	26.63
3	Tanakpur	94	17.93	17	67	16.17
4	Chamera I	540	10.20	55	223	11.04
5	Chamera II	300	10.00	30	168	12.85
6	Uri	480	13.75	66	382	12.95
7	Dhauliganga*	280	10.00	28	138	12.16
8	Dulhasti*	390	8.28	32	248	11.43
9	URI-II-**	240	16.25	39	50
10	Sewa-II**	120	14.17	17	76
11	Parbati-III**	390	20.51	80	15
12	Chamera-III**	231	9.96	23	11

* Due to unavailability of data for three years (2006-07 to 2008-09), energy entitlement and actual share allocation has been calculated based on the data for two years (2007-08 and 2008-09)

** Energy entitlement and share allocation taken as projected by Board for 2010-11 in the ARR as the past data is unavailable.

Table 4.20: Successor Entity’s Entitlement from NPC stations – 2010-11

Sr. No	Station	Capacity	Firm Allocation		Energy entitlement based on 3 year average	Share allocation based on 3 year average*
Sr. No		MW	%	MW	MUs	%
1	2	3	4	5	6	7
1	NAPP	440	11.59	51	87	12.82
2	RAPP 3	220	22.73	50	229	23.95
3	RAPP 4*	220	22.73	50	233	24.83
4	RAPP 5&6**	440	10.20	45	296

* Due to unavailability of data for three years (2006-07 to 2008-09), energy entitlement and actual share allocation has been calculated based on the data for two years (2007-08 and 2008-09)

** Energy entitlement and share allocation taken as projected by Board for 2010-11 in the ARR as the past data is unavailable.

4.8.5 Cost of Power Purchase

(a) Central Generating Stations (CGS)

Terms and Conditions of Tariff Regulations issued by CERC in January 2009 are applicable for all Central Generating Stations from April 1, 2009 onwards. However, CERC is yet to issue Tariff Orders for individual Central Generating Stations. The Board has submitted in the ARR petition that pending final determination of station wise tariff, all Central Generating Companies (except NPCIL for NAPP/ RAPP plants, whose tariffs are governed by the guidelines of Deptt. of Atomic Energy) are provisionally raising the bills at the tariff approved by CERC for the year 2008-09. In this Order, therefore, the Commission has decided to take fixed charges as per bills for Sept. 2009. These fixed charges will be reviewed in the subsequent Orders of the Commission once CERC issues tariff orders for the Central Generating Stations based on the new Tariff Regulations.

NTPC Stations

Fixed Cost

As per CERC Regulations, fixed cost is payable in proportion to the share allocation of the Successor Entity in each of the Central Generating Stations and the Commission has accepted this principle. The annual fixed charges (AFC) in the case of NTPC stations have been considered as per bills for Sept., 2009.

Variable Cost

The Commission has assessed variable cost for 2010-11 as per NTPC bills for Sept., 2009 for different stations. In cases where the bills are not available (Auriya R/F), the Commission has decided to approve the charges projected by the Board for 2009-10.

Incentive and Other Charges

The incentive and other charges are provisionally approved as projected by the Board for the year 2010-11.

NHPC Stations

Fixed Cost

CERC Regulations provide that fixed cost is payable in proportion to the share allocation of the Successor Entity in each of the Central Generating Stations and the Commission has accepted this principle. AFC in the case of NHPC stations have been considered as per bills for Sept., 2009.

Variable Cost

The Commission has assessed variable cost for 2010-11 as per NHPC bills for Sept., 2009 for different Central Generating Stations. In case of URI-II, Sewa-II, Parbati-III and Chamera-III where the bills are not available, variable cost has been taken as projected by the Board in the ARR for 2010-11.

Incentive and Other Charges

The incentive and other charges are provisionally approved as projected by the Board for the year 2010-11.

NPC Stations

The power purchase rate for NAPP and RAPP-3 & 4 stations has been considered by the Commission as per bills for Sept., 2009. For RAPP-5&6 stations, the power purchase rate as of RAPP-3&4, has been considered by the Commission.

(b) Power Purchase Tariff for NRSE Plants (including Jalkheri) and Short Term Power Purchase within the State and rate of power purchase from NJPC and Tehri

Quantum and the cost of power purchase from New & Renewable Sources of Energy (NRSE) Plants (including Jalkheri) and short term power purchases within the state are provisionally approved as per the Board’s projections.

The energy entitlement and the actual power allocation for NJPC and Tehri have been taken on the basis of data for two years (2007-08 and 2008-09) as data for earlier years is not available. The annual fixed charges and variable charges for NJPC and Tehri are based on the bills for Sept., 2009.

(c) Power Purchase Rates for Banking

The Board has intimated net power purchase under banking from HPSEB, Rajasthan, UPCL, J&K and through traders as (-) 95 MUs, (-) 10 MUs, 10MUs, (-) 33 MUs and 205 MUs respectively. It has been clarified by the Board that net power purchase figures have been reflected in the ARR on account of a change in accounting procedure for sale/purchase of banked power from 2009-10 and the figures reflected are net of purchase and sale of power from each source during 2010-11. The rate of banked power taken by the Board is tentative and the actual rate/amount will be reflected as per the contract agreement, at the time of review/true-up. The Commission does not approve the revised methodology proposed by the Board. However, the Commission provisionally accepts the net power purchase and its rate/cost under banking from HPSEB, J&K, UPCL and Rajasthan and through traders as per Board’s projections. The Successor Entity is directed to submit the source wise power purchase and sale figures under banking as were being submitted in its previous ARRs, at the time of review for the year 2010-11. The copies of the contracts entered with various States/Utilities /Traders are also to be submitted along with the ARR.

(d) Rates for Power Purchase from New Plants

Quantum and the cost of power purchase from new plants (Koteshwar, Durgapur TPS, Raghunathpur TPS, Bawana Gas and Nagarjuna TPS) has been provisionally approved as projected by the Board.

(e) Power Purchase from Traders and through UI

The power available from all Central Generating Stations and other sources including banking is 15619 MUs. Taking into account the gross power purchase requirement of 15070 MUs, there is a surplus of 549 MUs which is proposed to be priced at the average rate of power purchase in 2010-11 (250 paise per unit). On this basis the surplus power purchase of 549 MUs will fetch a revenue amounting to Rs.137.25 crore which is proposed to be adjusted as revenue earned by the Board.

However, the Commission notes that the average rate of power purchased through traders as also the UI power purchase rate is increasing every year. Additional power purchased through traders or UI at high cost and supplied in increasing quantities to any category of consumers is not commercially viable. In these circumstances, the Successor Entity has little option but to undertake Demand Side Management practices and effect power purchases in a judicious manner. Keeping in mind the escalating cost of power purchase in each successive year, the Commission deems it necessary that such purchases be kept within the costs approved. Accordingly, the Commission decides that the cost of power purchase from traders/UI, if required, will be admissible only at an average rate of realization per unit of 427.31 paise of 2010-11. The Successor Entity may, in case of purchases effected owing to emergent circumstances, approach the Commission for any relaxation when the costs of 2010-11 come up for review/true-up.

The Commission reiterates that the Successor Entity needs to purchase power in a judicious and economic manner and also resort to demand management practices, if necessary, to maintain its commercial viability.

(f) Transmission Charges

The Board has projected transmission charges payable in 2010-11 to PGCIL as Rs.276.05 crore which the Commission approves. In addition, the Commission also approves Open Access charges (for banked energy) of Rs 6.95 crore for 2010-11. The Board has also projected the open access charges (long term and short-term traders) at Rs.36.28 crore. The Commission approves Rs.14.35 crore on proportionate basis for traded power of 1351 MUs against 3415 MUs projected by the Board because short term purchases are not required as per the energy balance.

Based on the above, the cost of power purchase for the year 2010-11 is worked out as detailed in Table 4.21.

Table 4.21: Power Purchase Cost - 2010-11

Sr. No.	Source	Purchase (MUs)	AFC (Rs. crore)	PSEB share (%)	VC (Ps/ Unit)	FC (Rs. crore)	VC (Rs.crore)	Others (Rs.crore)	Total (Rs.crore)
1	2	3	4	5	6	7	8	9	10
I	NTPC
1	ANTA (G/F)	297	91.16	13.59	100.98	12.39	29.99	2.04	44.42
2	ANTA (R/F)	20		11.40	322.05		6.44		6.44
3	ANTA (L/F)	42		14.48	760.73		31.95		31.95
4	AURAIYA (G/F)	468	136.87	13.52	124.53	18.51	58.28	5.46	82.25
5	AURAIYA (R/F)	29		8.83	374.05		10.85		10.85
6	AURAIYA (L/F)	62		15.18	883.96		54.81		54.81
7	DADRI GAS (G/F)	684	185.40	16.60	123.18	30.78	84.26	10.73	125.77
8	DADRI (R/F)	31		11.06	398.61		12.36		12.36
9	DADRI (L/F)	179		15.27	724.41		129.67		129.67
10	SINGRAULI	1619	352.49	11.49	108.75	40.50	176.07	12.78	229.34
11	RIHAND –I	917	344.02	12.45	99.78	42.83	91.50	15.07	149.40
12	RIHAND -II	914	526.68	11.70	104.65	61.60	95.65	10.14	167.40
13	UNCHAHAR-I	284	142.46	9.02	155.41	12.85	44.14	4.88	61.87
14	UNCHAHAR-II	500	177.87	15.77	156.49	28.04	78.25	7.37	113.65
15	UNCHAHAR-III	156	148.10	9.59	156.49	14.20	24.41	2.04	40.65
16	FARAKKA	296	518.33	9.73	174.52	50.41	51.66	2.89	104.95
17	KAHALGAON – I	588	316.79	14.33	149.40	45.40	87.85	5.32	138.57
18	KAHALGAON –II	701	515.38	8.31	144.15	42.83	101.05	0.02	143.90
	Sub Total	7787				400.33	1169.16	78.74	1648.23
II	NHPC
19	BAIRA SIUL	302	52.87	47.33	38.80	14.22	11.72	0.84	26.78
20	SALAL	854	176.74	26.63	32.90	26.74	28.10	2.63	57.47
21	TANAKPUR	67	46.82	16.17	59.40	4.30	3.98	0.33	8.61
22	CHAMERA-I	223	199.53	11.04	68.90	12.52	15.36	1.28	29.16
23	CHAMERA-II	168	347.37	12.85	133.20	25.36	22.38	1.52	49.26
24	URI	382	274.26	12.95	61.00	20.18	23.30	3.32	46.81
25	DHAULIGANGA	138	177.02	12.16	89.70	12.23	12.38	1.19	25.79
26	DULHASTI	248	497.40	11.43	150.00	32.30	37.20	4.95	74.45
27	URI-II	50			280.30		14.02		14.02
28	SEWA-II	76			280.30		21.30		21.30
29	PARBATI-III	15			280.30		4.20		4.20
30	CHAMERA-III	11			280.30		3.08		3.08
	Sub Total	2534				147.86	197.02	16.06	360.93
III	NPC
31	NAPP	87		12.82	203.97		17.75		17.75
32	RAPP-3	229		23.95	286.62		65.64		65.64
33	RAPP-4	233		24.83	286.62		66.78		66.78
34	RAPP-5&6	296			286.62		84.84		84.84
	Sub Total	845					235.00		235.00
IV	Other Sources
35	Co-Gen. incl. Jalkheri	203			383.46		77.84		77.84
36	Short term power purchase within Punjab	152			415.88		63.21		63.21
37	NJPC	706	1312.43	14.63	114.10	109.13	80.55	9.67	199.36
38	Tehri*	253	657.00	8.86	250.00	33.06	63.25	1.69	98.00
	Sub-total	1314				142.19	284.86	11.37	438.41
V	Net Banking
39	HPSEB	-95			290.00		-27.55		-27.55
40	Rajasthan	-10			290.00		-2.90		-2.90
41	UPCL	10			290.00		2.90		2.90
42	J&K	-33			290.00		-9.57		-9.57
43	Net Banking Through Traders	205			290.00		59.45		59.45
44	Open Access Charges of Banking (39 to 43)							6.95	6.95
	Sub Total	77					22.33	6.95	29.28
VI	New Plants
45	Koteshwar (THDC)	30			262.50	9.59	7.88	0.22	17.69
46	Durgapur TPS (DVC) ER	367			262.70		96.41		96.41
47	Raghunathpur TPS (DVC) ER	47			262.70		12.35		12.35
48	Bawana Gas (NR)	827			309.05		255.58		255.58
49	Nagarjuna TPS (SR)	440			262.70		115.59		115.59
	Sub Total	1711				9.59	487.81	0.22	497.62
VII	Traders (Long Term)
50	Tala	106			184.00		19.50		19.50
51	Baghlihar	624			369.00		230.26		230.26
52	Malana-II	251			264.00		66.26		66.26
53	Maithon (TATA)	370			258.00		95.46		95.46
	Sub-total	1351					411.48		411.48
VIII	Traders (Short Term)
54	Short-term purchase	0					0.00		0.00
55	Open Access Charges (Traders)							14.35	14.35
VII	Other Charges
56	PGCIL						276.05		276.05
	Total	15619				699.97	3083.72	127.68	3911.37

* - Fixed Charges as per bill are Rs.18000/MW/day and computed as Rs.657 crore per year taking plant capacity as 1000 MW.

The Commission approves power purchase cost at Rs.3774.12 (3911.37-137.25) crore for power purchase of 15070 MUs (gross).

4.9 Employee Cost

4.9.1 The Board, in the ARR, has projected net employee cost at Rs.3566.57 crore for 2010-11, net of capitalization of Rs.126.00 crore. This is inclusive of Rs.525 crore for the first instalment of arrears of pay and also includes Rs.450 crore on account of pay revision for 2010-11. The details are tabulated below:

Table 4.22: Employee cost projected by the Board

(Rs. crore)

Employee Cost	FY 08-09 (Actual)	FY 09-10	FY 10-11 (Projected)
Employee Cost	FY 08-09 (Actual)	RE (As per ARR)	FY 10-11 (Projected)
1	2	3	4
Gratuity	100.48	109.99	122.47
Pension + Commuted pension	418.24	561.71	604.86
Leave encashment	59.2	73.93	81.83
Any other expense	81.28	81.97	86.07
BBMB	58.18	70.92	74.47
Terminal benefits – Total (1)	717.38	898.52	969.70
Salaries & other expenses
Basic salaries	911.88	1162.65	1364.63
Overtime	9.39	11.52	12.10
DA	468.35	459.04	408.49
Bonus/generation incentive	50.82	90.86	113.94
Payment under Workmen’s Compensation Act	0.24	0.17	0.18
Ex-gratia	-0.12	0	0
Other allowances (Fixed Medical, others) allowances, Medical Reimbursement)	161.92	243.97	298.53
Sub-Total (2)	1602.48	1968.21	2197.87
Gross Employee cost (1+2)	2319.86	2866.73	3167.57
Less: Capitalization	117.82	120	126
Net Employee cost	2202.04	2746.73	3041.57
Pay Commission arrears			525
Net Employee cost	2202.04	2746.73	3566.57

Clarifying the basis on which these costs have been worked out, the Board has stated that:

· It has not considered WPI indices for projecting the expenses in 2010-11. Instead, an increase of 5% has been considered for making such projections. However, for making the projections, the base year (2009-10) expenses were considered as inclusive of Rs.450.00 crore being the annual recurring liability on account of pay revision.

· Impact of pay arrears is considered to be disbursed in two equal yearly instalments starting from 2010-11. The one time liability has been estimated to be around Rs.525.00 crore in 2010-11 and a similar amount will be considered in the tariff petition for 2011-12.

· The aforementioned assumptions have also been used to project the escalation in terminal benefits as also the expenses of staff on deputation to the BBMB.

4.9.2 The Board has submitted that the initial report on manpower study (for determining manpower requirements across different functions such as Generation, Transmission, Distribution, Accounts, Finance, Secretariat, Vigilance and all other departments) has recently been submitted by the consultants. It has been further stated that the Board is currently in the process of analyzing the findings of the reports based on which it will consider proceeding to the second phase. The final report of the study will be shared with the Commission, once it is available.

4.9.3 The Board has also intimated that it plans to roll out a pilot project in Patiala city to rationalize manpower. The project involves reorganization of the distribution staff under a refined two tier system wherein the existing staff will be reorganized on functional basis to handle technical and commercial functions separately. The project does not involve any additional financial liability and would lead to a reduction of around 10-12% in the deployed workforce. If successful, the project will be replicated in the entire State.

The Board has admitted that there may not be any measure to right size the manpower of the utility immediately but it would implement firm measures to control the manpower costs in the medium and long term. Reference has also been made to a host of other measures being undertaken to control employee cost including freezing fresh recruitment, complete ban on creation of new posts, outsourcing of security works, reduction in generation incentive by 10%, withdrawal of compassionate appointments to dependents of deceased employees, getting current or new expansion projects executed through the existing manpower which has enhanced the employee productivity etc. The Board has also clarified that new technical personnel have been inducted to ensure high standards of employee productivity.

4.9.4 The amended provisions of the PSERC Tariff Regulations, provide for determination of employee cost in two parts:

· Terminal benefits including BBMB share on actual basis.

· Increase in other expenses limited to increase in Wholesale Price Index.

The Board has claimed net employee cost of Rs.3041.57 crore for 2010-11 inclusive of terminal benefits of Rs.969.70 crore which includes impact of pay revision. The Commission also notes that the terminal benefits pertaining to employees who were to retire in the period January 2010 to 31^st March 2010 would become payable in the current year. Accordingly the terminal benefits of Rs.31.72 crore, as reported by the Board, pertaining to the period January 2010 to March 2010 are also allowed. Thus, the Commission allows terminal benefits of Rs.1001.42 (969.70 + 31.72) crore.

As per amended regulations, increase in other employee cost is to be limited to average WPI increase. The average annual WPI increase for the year 2010-11 would only be available next year and it is the normal practice of the Commission to apply the WPI increase of the previous year while allowing enhancement in employee cost. However, such a practice is relevant only in a situation where there is a gradual increase in WPI each year. The average annual increase in WPI for 2009-10 is not available and the data for the first 9 months (April 2009 to December 2009) shows an average WPI increase of less than 2%. The Commission considers the 9 month average increase in WPI of 2% or less as abnormal being caused by the worldwide economic recession. In this situation, the Commission does not consider it prudent to adopt the actual 9 month increase in WPI for 2009-10 to consider enhancement of employee cost for 2010-11 and approves 5% ad-hoc increase for working out the increase in the other employee cost for 2010-11. The allowable other employee cost works out to Rs.1444.73 crore after applying an increase of 5% over Rs.1375.93 crore determined in 2009-10. Thus, allowable expenses as per amended regulations work out to Rs.2446.15 (1001.42+1444.73) crore for 2010-11.

4.9.5 The Commission also observes that the Board has claimed Rs.375 crore on account of pay revision (other than terminal/pension benefits) in the year 2010-11. The Commission has already decided in para 3.10.5 of this Order to reduce the amount claimed on account of pay revision by 28.48%. Applying the same rationale to the claimed enhancement of Rs.375 crore in 2010-11, the Commission disallows an amount of Rs.106.80 crore. The allowable cost on this account, therefore, comes to Rs.268.20 crore.

4.9.6 The Board has also claimed Rs.525 crore in 2010-11 as arrears of pay based on the recommendations of the 5^th Pay Commission. As decided in para 4.9.5 above, the Commission disallows an amount of Rs.149.52 crore, being 28.48% of the total claim of the Board. Accordingly, the claim of arrears of pay is restricted to Rs.375.48 crore.

4.9.7 The Commission notes that in para 4.9.4 of the Tariff Order for 2009-10, the employee cost allowed to the Board in that year was approved at Rs.1856.60 crore against a cost of Rs.2113.36 crore worked out as per the amended Tariff Regulations. This deduction was effected on account of the continuing failure of the Board to conclude the study reportedly commissioned for determining manpower norms afresh and taking further action on that basis. Even though, it is now reported that a preliminary report of the study has since been submitted, the fact remains that the position remains substantially the same even now as no final conclusions of the study are available nor has any policy decision been taken in this respect. For these reasons, the Commission deems it appropriate that a further disallowance needs to be made in the employee cost allowable to the Successor Entities till such time as the study is concluded and action based thereon initiated. However, taking into account the fact that disallowances have already been made on the Board’s claim on account of pay revision and arrears, the Commission limits further disallowance to only Rs.100 crore as discussed in para 3.10.6.

The Commission, therefore, approves employee cost of Rs.2989.83 (2446.15+268.20+375.48-100) crore for 2010-11 to the Successor Entities.

4.10 Repair and Maintenance (R&M) Expenses

4.10.1 The Board has projected net R&M expenses at Rs.429.24 crore inclusive of Rs.56.00 crore for additional assets likely to be added during the year for 2010-11. The Board has clarified that additional R&M expenses have been calculated taking into account the additional assets likely to be added during the year as envisaged in Regulation 28 (6) of the PSERC Tariff Regulations. Further, the Board has considered 5% escalation on the revised estimates of R&M expenses for 2009-10 to project R&M expenses for 2010-11.

4.10.2 The Board has stated that although the expenses for 2010-11 are projected with 5% escalation but the assets created by PSEB relating to generation, transmission and distribution are largely old assets which require significant amount of repair and maintenance. The Board submitted that with ageing, the quantum of such expenses is bound to increase in future which is further influenced by a number of other factors such as overloading of equipments leading to equipment failures, availability of time for system maintenance, timely availability of raw materials etc. According to the Board, while allowance of such expenditure based on increase in WPI indices may cover part of such expenses, the same may not be able to address the other factors leading to increase in the overall quantum of such expenses.

4.10.3 Regulation 28 (4) (b) of the PSERC Tariff Regulations provides for adjusting base O&M expenses (which include R&M expenses) in proportion to increase in WPI. The base R&M expenses of Rs.400.44 (385.93+14.51) crore are being considered to allow the expenses for 2010-11 which include approved R&M expenses of Rs.385.93 crore for 2009-10 and an amount of Rs.14.51 crore being R&M expenses allowed for six months on fixed assets approved as additions during the year. As discussed in para 4.9.4, the WPI increase for the year 2010-11 is not available, therefore, the Commission allows an adhoc increase of 5% over the base R&M expenses. Accordingly, Rs.420.46 crore is determined as allowable R&M expenses for projected assets worth Rs.19934.20 (18490.12+1444.08) crore as on April 1, 2010. However, the Board has claimed R&M expenses of Rs.373.24 crore.

4.10.4 As regards claim of Rs.56 crore of the Board towards R&M expenses for additional assets of Rs.2778.28 crore likely to be added during 2010-11 in terms of the PSERC Tariff Regulations, the Commission is of the view that the increase in R&M expenses demanded on this account cannot be allowed at this stage and will be considered at the time of review next year.

As the claim of the Board of Rs.373.24 (429.24-56.00) crore for the existing assets is within the allowable limit, R&M expenses are allowed at Rs.373.24 crore to the Successor Entities.

The Commission, therefore, approves Rs.373.24 crore as R&M expenses for 2010-11.

4.11 Administration and General (A&G) Expenses

4.11.1 The Board has projected Administration and General expenses at Rs.79.75 crore, net of capitalization of Rs.21.00 crore, for the year 2010-11.

4.11.2 The Board has submitted that it has been consistently making efforts to reduce the A&G costs. This has resulted in an increase of only 1.81% under this head from Rs.69.92 crore in FY 07-08 to Rs.70.96 crore in FY 08-09. The Board has stated that it has not considered the WPI increase for projections of the said expenses as it believes that these expenses are incidental to governing the entire power system operations in the State.

4.11.3 Regulation 28 (4) (b) of the PSERC Tariff Regulations provides for allowing annual increase in the approved O&M expenses (which include A&G expenses) based on average increase in WPI over the year. The base A&G expenses for 2010-11 work out to Rs.78.84 (75.95+2.89) crore which include approved A&G expenses of Rs.75.95 crore for 2009-10 and an amount of Rs.2.89 crore being A&G expenses allowed for six months on fixed assets approved as additions during the year. As discussed in para 4.9.4, the WPI increase for the year 2010-11 is not available, therefore, the Commission allows an adhoc increase of 5% over the base A&G expenses. Accordingly, Rs.82.78 crore is determined as allowable A&G cost for assets worth Rs.19934.20 crore as on April 1, 2010.

4.11.4 However, the Board has claimed A&G expenses of Rs.79.75 crore for 2010-11. The Commission notes that the claim of the Board is within the permissible norms prescribed in Regulation 28 of the PSERC Tariff Regulations and is, therefore, allowed.

The Commission accordingly, approves the A&G expenses of Rs.79.75 crore for 2010-11 to the Successor Entities.

4.12 Depreciation Charges

4.12.1 The Board has estimated depreciation charges of Rs.952.44 crore for the year 2010-11 based on the assets of Rs.21591.16 crore as on April 1, 2010. However, as discussed in para 3.11.3 of this Order, the value of total assets as on April 1, 2010 is determined at Rs.19934.20 crore. The Board has projected additions of Rs.3159.40 crore to the fixed assets against which the Commission has approved additions of Rs.1444.08 crore which are apportioned under different categories in the same ratio as projected by the Board in the ARR.

4.12.2 The Commission applies the average percentage rates of depreciation (net) for 2010-11 which are derived from the audited accounts for 2008-09. By applying these rates, depreciation for 2010-11 works out to Rs.863.68 crore for assets of Rs.19934.20 crore as on April 1, 2010. Details of function-wise depreciation charges are given in Table 4.23.

Table-4.23: Depreciation charges

Sr. No.	Item	Assets as on April 1, 2009 (Rs. crore)	Rate (%)	Depreciation charges for 2009-10 ( Rs. crore)	Assets as on April 1, 2010 (Rs. crore)	Rate (%)	Depreciation charges for 2010-11 (Rs. crore)
1	2	3	4	5	6	7	8
1	Thermal	4319.19	4.543%	196.22	4879.64	4.543%	221.68
2	Hydro	5957.44	2.281%	135.89	5964.37	2.281%	136.05
3	Internal Combustion	2.68	0.00%	0.00	2.68	0.00%	0.00
4	Transmission	2040.46	4.884%	99.66	2340.25	4.884%	114.30
5	Distribution	5975.25	5.971%	356.78	6506.38	5.971%	388.50
6	Others	195.10	1.306%	2.55	240.88	1.306%	3.15
	Total	18490.12		791.10	19934.20		863.68

The Commission accordingly approves depreciation charges of Rs.863.68 crore for 2010-11 to the Successor Entities.

4.13 Interest and Finance Charges

4.13.1 The Board has claimed interest and finance charges of Rs.1923.01 crore (net) as per details given in Table 4.24 below.

Table- 4.24: Projected Interest & Finance charges

Sr. No.	Source of loan	FY 2010-11 (Rs. crore)
1	Institutional loans	1169.66
2	GoP Loans	0.00
3	GPF	120.00
4	Lease rentals	0.04
5	Interest to Consumers	176.00
6	Total	1465.70
7	Working Capital Loans	596.90
8	Grand Total	2062.60
9	Less: Capitalization	154.59
10	Net Interest	1908.01
11	Finance charges	15.00
12	Total Interest and Finance charges	1923.01

The Interest and Finance charges allowed to the Successor Entities are discussed in the ensuing paragraphs.

4.13.2 Investment Plan

The Board has proposed an investment plan of Rs.4944.22 crore in the ARR for 2010-11 which includes an investment of Rs.227.50 crore under R&M of GNDTP Bathinda unit III & IV based on an RLA study. With a view to reduce T&D losses (including APDRP Schemes) and improve its power system performance, the Board has also proposed to spend Rs.2906.76 crore in 2010-11 under Transmission & Distribution head. Further, the Board has included the investment of Rs.600 crore for Gidderbaha Thermal Plant which is being privately developed on BOO basis. In the past Tariff Orders, the Commission has not considered the investment on private projects developed on BOO basis to determine the capital Investment Plan. After excluding capital expenditure towards Gidderbaha Thermal Plant, net investment requirement of the Successor Entities works out to Rs. 4344.22(4944.22-600) crore.

It is noted that for 2009-10, an Investment Plan of Rs.2724.55 crore was projected by the Board in the ARR for 2010-11 against which actual expenditure reported by the Board till January 2010 is Rs.1476.44 crore. The Commission has approved Investment Plan of Rs.1800 crore for 2009-10 based on the actual expenditure incurred by the Board upto January 2010. The Commission observes that the Board invariably proposes an ambitious Investment Plan every year but actual capital expenditure is no where near the proposed plan. However, considering the need of the Successor Entities to make substantial investments in transmission and distribution network for providing uninterrupted and reliable power supply to the consumers and considering the level of approved investments in previous years, the Commission now allows an investment plan of Rs.2500 crore for 2010-11. However, increase in actual capital investment, if any, will be considered by the Commission during review. After adjustment of consumers’ contribution of Rs.362.65 crore considered at the level of 2009-10, the actual loan requirement works out to Rs.2137.35 (2500-362.65) crore.

In the recent past, the Commission has been accepting the opening balance of loans as projected by the Board to work out interest on proportionate basis for the loans allowable. This methodology was adopted since the loans estimated by the Commission were close to the figures claimed by the Board. However, during processing of ARR for 2010-11, it was observed that the closing balance of outstanding loans of the Board as on 31^st March, 2010 was Rs.9091.15 crore against which the Commission had worked out the closing balance at Rs.6672.77 crore. The difference between the two figures being very high, the Commission deems it prudent to adopt the balance of loans as per its own estimation depicted in Table 3.13 for calculation of interest for the year 2010-11. Accordingly, interest on loans other than WCL & GoP loans works out to Rs.764.33 crore on proportionate basis (considering net receipt of loans for six months on an average during the year) as given in Table 4.25.

Table 4.25 Interest and Finance charges

(Rs. crore)

Sr. No.	Particulars	Loans as on 31.3.10	Receipt of loans	Repayment of loans	Loans as on 31.3.11	Amount of interest
1	2	3	4	5	6	7
1	As per data furnished by Board (other than WCL & GoP loans)	9091.15	4889.70	1172.23	12808.62	1169.66
2	Approved by Commission (other than WCL & GoP loans)	6672.77	2137.35	1172.23	7637.89	764.33

4.13.3 Interest on GoP Loans

The Board has shown outstanding GoP loans of Rs.1660.52 crore as on April 1, 2010. However, as per GoP letter dated March 10, 2010, loans of Rs.1140.43 crore have been adjusted by the GoP against the unpaid subsidy. Thus, outstanding GoP loans as on April 1, 2010 are reduced to Rs.520.09 crore. By applying an average rate of 13.20% per annum, interest payable on outstanding loans works out to Rs.68.65 crore for the year 2010-11. An amount of Rs.162.34 crore is disallowed on account of diversion of capital funds for revenue purposes and attributed to the GoP as discussed in para 4.13.11. After adjusting the interest of Rs.68.65 crore against disallowed interest of Rs.162.34 crore, the GoP is liable to pay Rs.93.69 (162.34-68.65) crore to the Successor Entities. This amount is carried forward to para 5.4.

4.13.4 Interest on Loans taken to replace the GoP Loans

As decided earlier in para 2.14.5 of this Order, interest on loans of Rs.1362 crore raised to replace re-called GoP loans adjusted against unpaid subsidy by the GoP is allowed at an average rate of 9.58% per annum as claimed by the Board for commercial loans for 2010-11. Thus, interest of Rs.130.48 crore is approved on this account.

Besides this, the GoP has also adjusted loans of Rs.1140.43 crore against unpaid subsidy vide letter dated March 10, 2010. The Commission is of the considered view that the Successor Entities will have to raise loans of equivalent amount from the market to meet shortage of funds on this account. Therefore, the Commission allows interest of Rs.109.25 crore @ Rs.9.58% per annum for 2010 -11 on this account.

Thus, Rs.239.73 (130.48+109.25) crore is allowed as interest on loans taken to replace the recalled/adjusted GoP loans.

The Commission observes that the recall/adjustment of GoP loans, results in the Board raising money at lower rates of interest as compared to the interest presently payable. However, the Board has currently been obtaining considerable relief from the payment of interest to GoP as a substantial amount of interest otherwise payable is being disallowed on account of diversion of capital loans towards revenue purposes. As will be evident from para 3.14.3 of this Order, the interest payable against GoP loans before adjustment would be Rs.210.46 crore against the actual interest liability of Rs.48.12 crore. Given the financial position, GoP needs to seriously consider compensating the Successor Entities to the extent they are disadvantageously placed on account of adjustment of GoP loans against subsidy payable.

4.13.5 Interest on G.P. Fund

The Board has claimed interest of Rs.120 crore on GP Fund accumulations. The interest on GP Fund being statutory payment is allowed.

4.13.6 Lease Rental

The Board has claimed lease rental of Rs.0.04 crore which is allowed for 2010-11.

4.13.7 Interest on Consumers’ Security Deposits

According to Regulation 17 of the PSERC (Electricity Supply Code & Related Matters), Regulations, 2007, the consumers of the Board are to be paid interest on their security deposits with the Board w.e.f. January 1, 2008. Accordingly, the Commission in its Tariff Order for 2009-10 approved the interest on security deposits payable during the year. Further, interest on consumers’ deposits of Rs. 164.21 crore has been allowed for 2009-10 as discussed in para 3.14.8.

As regards the Board’s claim of interest of Rs.176 crore due for the year 2010-11, the same will be payable during the year 2011-12 and will be considered by the Commission in the Tariff Order for the subsequent year.

4.13.8 Finance Charges

The Board has claimed finance charges of Rs.15 crore which works out to 0.31% of the proposed fresh borrowings of Rs.4889.70 crore. The Commission has, however, approved actual loan requirement of Rs.2137.35 crore for investment purposes. The finance charges on this loan requirement at a rate of 0.31% work out to Rs. 6.63 crore which are approved for 2010-11.

4.13.9 Capitalization of Interest and Finance Charges

In its previous Tariff Orders, the Commission allowed capitalization of interest, excluding interest charges on working capital, in the ratio of net works in progress to total capital expenditure. Based on the same principle, the Commission approves capitalization of interest and finance charges of Rs.170.22 crore for the year 2010-11.

4.13.10 Working Capital

The Board has projected a working capital requirement of Rs.1982.90 crore and estimated the interest charges at Rs.242.91 crore by applying a rate of 12.25% based on the short term PLR of the State Bank of India. The working capital requirement as per amended Regulations works out to Rs.1679.56 crore. Interest on the approved normative working capital requirement of Rs.1679.56 crore, works out to Rs.205.75 crore by applying the short term PLR of 12.25% of the State Bank of India as on April 2009. The details of working capital requirement as per amended Regulation 30, is depicted in Table 4.26.

Table 4.26: Working Capital Requirement

(Rs.crore)

Particulars	Approved by Commission
Two months Fuel Cost	561.73
One month Power Purchase Cost	314.51
One month Employee Cost	249.15
One month Administration and General Expenses	6.65
One month Repair and Maintenance Expenses	31.10
Maintenance spares @ 15% of O&M Expenses (2989.83+373.24+79.75)	516.42
Total requirement for working capital	1679.56
Interest Rate	12.25%
Interest	205.75

Accordingly, the Commission approves interest of Rs.205.75 crore on working capital requirement for 2010-11.

4.13.11 Diversion of Capital funds

The Commission, in para 2.14.11 of this Order has re-determined the diversion of capital funds for revenue purposes at Rs.2624.76 crore based on the Boards’ audited accounts for 2008-09. Net diversion carrying interest bearing liability of Rs.1987.41 crore is estimated on this basis for the year 2010-11. Applying an interest @ 13.20% (being average rate of interest on GoP loans) on diverted funds of Rs.1987.41 crore works out to Rs.262.34 crore for 2010-11, which is disallowed.

In this regard, the Commission retains its decision to disallow interest cost of Rs.100 crore of the Successor Entities and further decides that the balance disallowance of interest of Rs.162.34 crore is to the account of the GoP. Accordingly, after adjustment of this disallowed interest of Rs.162.34 crore against the interest due on GoP loans amounting to Rs.68.65 crore worked out in para 4.13.3, interest payable by the GoP to the Successor Entities works out to Rs.93.69 crore. This is being carried forward to para 5.4.

Table 4.27: Interest and Finance charges

(Rs. crore)

Sr. No.	Particulars	Loans as on 31.3.10	Receipt of loans	Repayment of loans	Loans as on 31.3.11	Amount of interest
1	2	3	4	5	6	7
1	Approved by Commission (other than WCL & GoP loans)	6672.77	2137.35	1172.23	7637.89	764.33
2	GoP loans	520.09	0	0	520.09	68.65
3	Int. on loans taken to replace GoP loans of Rs.1362 crore and for adjusted loans of Rs.1140.43 crore					239.73
4	Interest on GPF					120
5	Lease rental					0.04
6	Interest to consumers					0
7	Total (1+2+3+4+5+6)	7192.86	2137.35	1172.23	8157.98	1192.75
8	Add Finance charges					6.63
9	Total gross Interest & Finance charges					1199.38
10	Less capitalization					170.22
11	Net Interest and Finance charges (9-10)					1029.16
12	Interest on working capital					205.75
13	Total Interest (11+12)					1234.91
14	Less: Disallowed on a/c of diversion: a) Board - Rs.100 crore b) GoP - Rs.162.34 crore					262.34
15	Balance Interest and Finance charges (13-14)					972.57

Accordingly, the Commission approves net Interest and Finance charges of Rs.972.57 crore for 2010-11.

4.14 Interest Cost of the Approved Gaps for 2008-09 and 2009-10

4.14.1 In the ARR of 2010-11, the Board submitted that it has to raise short term loans from the market for meeting the gap on account of revenue deficits. The Commission, accordingly, allows interest on the approved gaps determined during review and true up.

4.14.2 In the Tariff Order of 2009-10, the Commission allowed interest of Rs.209.96 crore for the year 2009-10 for the approved consolidated gaps of Rs.439.51 crore upto the year 2006-07, Rs.803.31 crore for the year 2007-08 and Rs.471.08 crore for the year 2008-09.

4.14.3 The Commission notes that on the basis of review for the year 2008-09 in the Tariff Order of 2009-10, there was a revenue surplus of Rs.332.23 crore for the year 2008-09. However, in the true up of 2008-09 which forms a part of this Order, there is an approved gap (deficit) of Rs.174.06 crore which would be available to the Successor Entities as revenue only after the tariff of 2010-11 is revised and hence there is justification for allowing carrying costs for this gap for a total period of two years consisting of six months for 2008-09, one year for 2009-10 and six months for 2010-11. Accordingly, by applying a rate of 12.25%, being the short term PLR of State Bank of India as on April 2008 & April 2009 (and also for 2010-11), the Commission allows interest of Rs. 42.64 crore. The Successor Entities are also directed to account for this carrying cost in their accounts as a separate item, so that this cost could be accounted for in the true up of the subsequent year.

4.14.4 The Commission notes that on the basis of review for 2009-10, the Commission has determined a gap (deficit) of Rs.253.26 crore. Accordingly, by applying a rate of 12.25%, being the short term PLR of State Bank of India as on April 2009 for a period of 6 months for 2009-10 and also for a period of 6 months for 2010-11, the carrying cost allowable for this revenue gap of Rs. 253.26 crore works out to Rs.31.02 crore.

The Commission accordingly approves total carrying cost of Rs.73.66 (42.64+31.02) crore for the approved gaps of Rs. 174.06 crore of 2008-09 and Rs.253.26 crore of 2009-10.

4.15 Return on Equity

In the ARR for 2010-11, the Board has claimed ROE @ 15.5 % (pre-tax) to be grossed up to 23.48% as provided in the CERC Regulations. The PSERC Tariff Regulations stipulate that CERC Regulations be followed ‘as far as possible’. The Commission notes that the Board has been unable to effect requisite improvements in critical performance parameters such as T&D losses and employee cost. On account of aforementioned reasons, the Commission finds no justification to allow ROE as per CERC Regulations. The Commission, thus, retains ROE at 14% and allows ROE at Rs.412.46 crore.

The Commission, therefore, approves Return on Equity of Rs.412.46 crore for 2010-11 to the Successor Entities.

4.16 Non-Tariff Income

The Board has projected non-tariff income of Rs.519.01 crore for 2010-11. This is inclusive of Rs.70.35 crore on account of theft of energy which is being considered towards Revenue of the Successor Entities. Therefore, the non-tariff income of the Successor Entities works out to Rs.448.66 (519.01-70.35) crore.

The Commission, therefore, approves the Non-Tariff Income of Rs.448.66 crore for 2010-11.

4.17 Revenue from Existing Tariff

The Revenue from existing tariff projected by the Board for the year 2010-11 is Rs.13119.24 crore including revenue from AP consumption. As discussed in para 4.16 above, an amount of Rs.70.35 crore on account of theft of energy is to be counted towards Revenue of the Successor Entities. Therefore, as per Board’s estimates, Revenue from existing tariff works out to Rs.13189.59 (13119.24+70.35) crore. However, the expected revenue from existing tariff on the basis of sales approved by the Commission works out to Rs.12740.82 crore as given in Table 4.28.

Table 4.28: Revenue from Existing Tariff

Sr. No.	Category of consumers	Approved by the Commission
Sr. No.	Category of consumers	Energy sales (MUs)	Tariff rates (paise/unit)	Revenue (Rs. in crore)
1	2	3	4	5
1	Domestic
a)	Up to 100 units	2855	282	805.11
b)	101-300 units	3115	428	1333.22
c)	Above 300 units	1895	452	856.54
	Total (a+b+c)	7865		2994.87
2	NRS	2405	491	1180.86
3	Public lighting	136	482	65.55
4	Industrial Consumers
a)	SP	759	392	297.53
b)	MS	1541	433	667.25
c)	LS	9093	433	3937.27
	Total (a+b+c)	11393		4902.05
5	Bulk Supply
a)	HT	463	436	201.87
b)	LT	33	463	15.28
	Total (a+b)	496		217.15
6	Railway Traction	138	512	70.66
7	Common pool	302		100.00
8	Outside State	53		5.40
9	Total (1 to 8)	22788		9536.54
10	AP	10305	285	2936.93
11	Total (9+10)	33093		12473.47
12	Add: PLEC, MMC, Other charges			197.00
13	Add: Recovery on account of theft of energy			70.35
14	Grand Total	33093		12740.82

Note: The slab-wise energy sales for domestic supply & Bulk Supply are taken in the same ratio as for 2009-10.

The Commission, as such, approves revenue from existing tariff at Rs.12740.82 crore for 2010-11.

4.18 Revenue requirement

The summary of the revenue requirement of the Successor Entities for the year 2010-11 as analyzed in the preceding paragraphs is given in Table 4.29.

Table 4.29: Revenue Requirement for 2010-11

(Rs. crore)

Sr. No.	Item of expense	Proposed by the Board	Approved by the Commission
1	2	3	4
1	Cost of fuel	3622.83	3370.40
2	Cost of power purchase	5137.61	3774.12
3	Employee cost	3566.57	2989.83
4	R&M expenses	429.24	373.24
5	A&G expenses	79.75	79.75
6	Depreciation	952.44	863.68
7	Interest charges	1923.01	972.57
8	Return on Equity	681.56	412.46
9	Total revenue requirement	16393.01	12836.05
10	Add consolidated gap for 2009-10	3527.49	1230.63
11	Gross revenue requirement (9+10)	19920.50	14066.68
12	Less Non-Tariff income	448.66	448.66
13	Less Revenue from existing tariff	13189.59	12740.82
14	Net Gap for 2010-11	(-)6282.25	(-)877.20
15	Add carrying cost of Gaps		73.66
16	Total gap for 2010-11	(-)6282.25	(-)950.86
17	Energy sales (MUs)	34376	33093

The total cumulative gap (deficit) for 2010-11 is determined at Rs.950.86 crore. The Annual Revenue Requirement for 2010-11 is assessed at Rs.12836.05 crore with energy sales of 33093 MUs. The average cost of supply with this revenue requirement comes to 387.88 paise/unit. The combined average cost of supply works out to 427.29 paise/unit (14140.34 /33093 MUs) after taking into account the ARR of Rs. 12836.05 crore for 2010-11, approved gap of Rs.1230.63 crore for 2009-10 and carrying cost of Rs.73.66 crore for the approved gaps.

Chapter 5

Determination of Tariff

5.1 Annual Revenue Requirement

5.1.1 The Commission has determined the ARR of the Successor Entities for the year 2010-11 at Rs.12836.05 crore. It has simultaneously undertaken a true up of the year 2008-09 consequent upon the availability of audited accounts which has resulted in a cumulative revenue gap (deficit) of Rs.977.37 crore. The review of 2009-10 indicates a deficit of Rs.253.26 crore, resulting in a consolidated gap of Rs.1230.63 crore at the end of 2009-10.

5.1.2 The combined impact of these exercises and the approved carrying cost of gaps indicate a gross revenue requirement of Rs.14140.34 crore for the year 2010-11 of the Successor Entities. After making adjustment on account of non-tariff income and revenue from tariff at the existing level, the revenue gap accepted by the Commission for 2010-11 is Rs.950.86 crore.

5.2 Determination of Retail tariff

5.2.1 In determining tariff, the Commission is guided by the principles laid down in Section 61 of the Act as well as its own Regulations which provide the framework for working out the ARR of a Power Utility and tariff for different categories of consumers. The Commission has also kept in mind the relevant aspects of the National Electricity Policy, National Tariff Policy, the norms adopted by it in earlier Tariff Orders and inputs received from consumers during the process of public hearings.

5.2.2 Income from tariff at existing rates taken into account for working out the percentage increase in tariff required to cover the gap, does not include income from sales to common pool consumers, Outside State sales and Peak Load Exemption Charges (PLEC).

5.2.3 The consolidated revenue gap of Rs.950.86 crore for the year 2010-11 of the Successor Entities is, thus, required to be covered with an increase of 7.58% in the existing tariff including MMC and theft of energy charges across all categories, except common pool consumers, Outside State sales and PLEC.

5.2.4 The provisions of the Act, Tariff Policy and the Commission’s own Regulations require that there be a gradual reduction of cross-subsidies. Therefore, with this end in view, the Commission decides to increase the tariff of Domestic Supply consumers with consumption upto 100 unit, by 29 paise/unit. In the case of AP consumers, the increase will be 35 paise/unit, being the highest subsidized category. The tariff for other consumer categories and MMC will increase by 5.72% and 7.58% respectively. There will be no change in PLEC. The existing and revised tariffs are indicated in Table 5.1.

Table 5.1: Existing and Revised Tariff for the Year 2010-11

Sr. No.	Category of consumers	Existing Tariff		Revised Tariff approved by the Commission
Sr. No.	Category of consumers	Energy Rate (paise/kwh)	MMC (Rs/kw or part thereof)	Energy Rate (paise/kwh)	MMC(Rs)
A)	PERMANENT SUPPLY
1	Domestic
a)	Upto 100 units	282	35	311	Loads upto 100 KW Rs.38/KW, loads exceeding 100 KW Rs.34/KVA
b)	101 to 300 units	428		452
c)	Above 300 units	452		478
2	Non-Residential	491	126	519	Loads upto 100 KW Rs.136/KW, loads exceeding 100 KW Rs.122/KVA
3	Public lighting	482	As per 8 hrs / Day	510	As per 8 hrs / Day
4	Agricultural Pumpsets	i) Without Govt. subsidy 285 Ps / kwh or Rs.283/ BHP / Month	NA	i) Without Govt. subsidy 320 Ps / kwh or Rs.273/ BHP / Month	NA
4	Agricultural Pumpsets	ii) With Govt. subsidy 0	NA	ii) With Govt. subsidy Rs.50/ BHP / Month or 59 Ps / unit	NA
5	Industrial
a)	Small power	392	104	414	112/KW
b)	Medium	433	138	458	148KW
c)	Large
i)	General industry	433	124 /KVA	458	133 /KVA
ii)	PIU	433	326 /KVA	458	351/KVA
iii)	Arc Furnace	433	326 /KVA	458	351 /KVA
6	Bulk Supply (including MES)
	HT	436	204 /KVA	461	219/KVA
	LT	463	204 /KW	489	219/KVA
7	Railway Traction	512	208 /KVA	541	224/KVA

B) SEASONAL INDUSTRY : COTTON GINNING, PRESSING AND BAILING PLANT, RICE SHELLERS / HULLER MILLS, RICE BRAN STABILIZATION UNITS (WITHOUT T.G. SETS) (SP, MS, LS)
a)	During Season (From 1^st Sept to 31^st May next year)
	SP	392	381	414	410/KW
	MS	433	381	458	410/KW
	LS	433	343 /KVA	458	369 /KVA
b)	Off season
	SP	464	NA	491	NA
	MS	497	NA	525	NA
	LS	497	NA	525	NA
C) ICE FACTORY & ICE CANDIES AND COLD STORAGE
a)	Season (April to July)
	SP	392	519	414	558/KW
	MS	433	519	458	558/KW
	LS	433	468 /KVA	458	503/KVA
b)	Off Season
	SP	392	104	414	112/KW
	MS	433	104	458	112/KW
	LS	433	93 /KVA	458	100/KVA
D) GOLDEN TEMPLE, AMRITSAR AND DURGIANA TEMPLE, AMRITSAR
a)	First 2000 units	Free	N.A.	Free	N.A.
b)	Beyond 2000 units	349	N.A.	369	N.A.
E) TEMPORARY SUPPLY
i)	Domestic	771	Rs.640 or Rs.127/KW whichever is higher	815	Rs.689 or Rs.137/KW whichever is higher
ii)	NRS	771	Rs.1281 or Rs.321/KW whichever is higher	815	Rs.1378 or Rs.345/KW whichever is higher
iii)	Industrial (SP,MS & LS)	As per tariff approved at A(5) above for permanent supply + 100%	Rs.513/KW of sanctioned load for SP and MS and Rs. 461/KVA for LS	As per tariff approved at A(5) above for permanent supply + 100%	Rs.552/KW of sanctioned load for SP and MS and Rs. 496/KVA for LS
iv)	Wheat Thresher	-do-	-do-	-do-	-do-
v)	Fairs, exhibition & melas Congregations	Bulk supply tariff as at A(6) + 50%	Rs.5128 per service	Bulk supply tariff as at A(6) + 50%	Rs.5517 per service

vi)	Touring Cinemas
a)	Lights and fans	771	For (a) and (b) Rs. 1281 or Rs. 321/KW of sanctioned load whichever is higher	815	For (a) and (b) Rs. 1378 or Rs. 345/KW of sanctioned load whichever is higher
b)	Motive load	Rate for Industrial permanent supply as at A(5) + 100%		Rate for Industrial permanent supply as at A(5) + 100%

Notes:

i. SC and non SC BPL, Domestic consumers with connected load upto 1000 watts will be given 100 units of free power per month in view of Govt subsidy;

ii) AP consumers and consumers mentioned in (i) above will not be charged service charges and meter rentals in view of Govt subsidy;

iii). All other charges including rentals and deposits which were being collected by the Board as per Schedule of General Charges, Supply Code and General Conditions of Tariff & Schedules of Tariff approved by the Commission, will be continued to be charged by the Successor Entities at the existing rates till these are reviewed by the Commission;

iv) Operating conditions of MMC will continue to be as specified in the relevant Schedule of Tariff;

v) Consumers obtaining one point supply for providing electricity to ultimate users in the Co-operative Group Housing Societies/Residential Colonies/Commercial Complexes/Shopping Malls/Industrial Estates etc. will be eligible for rebate as specified in the Conditions of supply approved by the Commission;

vi. Checking of load of DS consumers will continue to be suspended.

5.3 Effect of revised tariff on cross subsidy

5.3.1 The Commission in its Tariff Regulations has defined cross subsidy for a consumer category as the difference between the average realisation per unit from that category and the combined average cost of supply, expressed in percentage terms. The total quantum of cross subsidy generated and utilized in the system as worked out in Tariff Order 2009-10 is depicted in Table 5.2.

Table 5.2: Aggregate quantum of cross subsidy for the year 2009-10

(Combined average cost of supply = 402.76 paise/unit)

Sr. No	Category	Energy Sales (MUs)	Existing tariff (paise / unit)	Revenue with existing tariff (Rs. crore)	PLEC + MMC etc. (Rs. crore)	Non tariff income (Rs. crore)	Total Revenue (Rs. crore) (5+6+7)	Expected Revenue with average cost (Rs. crore)	Cross Subsidy generated (+) Utilised (-) (8-9)
1	2	3	4	5	6	7	8	9	10
1	Domestic
a)	Upto 100	3902	282	1100.36	29.53	54.99	1184.88	1571.57	-386.69
b)	101-300	2016	428	862.85	15.26	28.40	906.51	811.96	94.55
c)	>300 units	1042	452	470.98	7.89	14.68	493.55	419.68	73.87
	Total	6960		2434.19	52.68	98.07	2584.94	2803.21
2	NRS	2145	491	1053.20	16.23	30.22	1099.65	863.92	235.72
3	Public Lighting	148	482	71.34	1.12	2.09	74.55	59.61	14.94
4	Industrial
a)	SP	722	392	283.02	5.46	10.17	298.65	290.79	7.86
b)	MS	1522	433	659.03	11.52	21.44	691.99	613.00	78.99
c)	LS	9278	433	4017.37	194.34	130.72	4342.43	3736.81	605.61
	Total	11522		4959.42	211.32	162.33	5333.07	4640.60
5	Bulk Supply
a)	HT	449	436	195.76	3.40	6.33	205.49	180.84	24.65
b)	LT	51	463	23.61	0.39	0.72	24.72	20.54	4.18
	Total	500		219.37	3.79	7.05	230.21	201.38
6	Railway Traction	123	512	62.98	0.93	1.73	65.64	49.54	16.10
7	Common Pool	303		84.00	0.00	4.27	88.27	122.04	-33.77
8	Outside State	1307		798.00	0.00	0.00	798.00	526.41	271.59
9	AP	9814	285	2796.99	0.00	138.27	2935.26	3952.69	-1017.43
10	Total	32822		12479.49	286.07	444.03	13209.59	13219.40	1428.06
10	Total	32822		12479.49	286.07	444.03	13209.59	13219.40	-1437.89

5.3.2 The position of cross subsidy levels in the system during the year 2010-11 with revised tariffs (as approved in para 5.2) is indicated in Table 5.3.

5.3.3 Category-wise MMC income has been computed by apportioning the same in the ratio of energy sale to different categories, except AP, Common Pool and Outside State sales. Income from theft of energy has been computed for various categories except Common Pool and Outside State by apportioning the same in the ratio of their sale. Similarly, the non-tariff income has been apportioned in the ratio of energy sale to different categories, except Outside State sales while PLEC has been loaded to the LS category.

Table 5.3: Aggregate quantum of cross subsidy

for the year 2010-11 at revised tariff

(Combined average cost of supply = 427.29 paise/unit)

Sr. No	Category	Approved Energy Sales (MUs)	Proposed Tariff (paise / unit)	Revenue with Proposed Tariff (Rs. crore)	PLEC + MMC etc. (Rs. crore)	Non tariff income (Rs. crore)	Total Revenue (Rs. crore) (5+6+7)	Expected Revenue with average cost (Rs. crore)	Cross Subsidy generated (+) Utilised (-) (8-9)
1	2	3	4	5	6	7	8	9	10
1	Domestic
a)	Upto 100	2855	311.00	887.91	21.80	38.77	948.47	1219.91	-271.44
b)	101-300	3115	452.00	1407.98	23.78	42.30	1474.06	1331.01	143.05
c)	>300 units	1895	478.00	905.81	14.47	25.73	946.01	809.71	136.30
	Total	7865		3201.70	60.05	106.80	3368.54	3360.64
2	NRS	2405	519.00	1248.20	18.36	32.66	1299.21	1027.63	271.58
3	Public Lighting	136	510.00	69.36	1.04	1.85	72.25	58.11	14.13
4	Industrial
a)	SP	759	414.00	314.23	5.79	10.31	330.33	324.31	6.01
b)	MS	1541	458.00	705.78	11.77	20.93	738.47	658.45	80.01
c)	LS	9093	458.00	4164.59	155.42	123.48	4443.49	3885.35	558.14
	Total	11393		5184.60	172.98	154.71	5512.29	4868.11
5	Bulk Supply
a)	HT	463	461.00	213.44	3.53	6.29	223.27	197.84	25.43
b)	LT	33	489.00	16.14	0.25	0.45	16.84	14.10	2.74
	Total	496		229.58	3.79	6.74	240.11	211.94
6	Railway Traction	138	541.00	74.66	1.05	1.87	77.59	58.97	18.62
7	Common Pool	302	0.00	100.00		4.10	104.10	129.04	-24.94
8	Outside State	53	0.00	5.40		0.00	5.40	22.65	-17.25
9	AP	10,305	320.00	3297.60	23.82	139.93	3461.36	4403.22	-941.87
10	Total	33093		13411.09	281.09	448.66	14140.84	14140.31	1256.03
10	Total	33093		13411.09	281.09	448.66	14140.84	14140.31	-1255.50

The cross subsidy likely to be generated at the revised level of tariff comes to Rs.1256.03 crore against which Rs.1255.50 crore cross subsidy is required leaving a surplus of Rs.0.53 crore.

5.3.4 Taking into account the quantum of cross subsidy in each consumer category determined in the Tariff Order of 2009-10 (Table 5.2) and as per revised tariffs brought out in Table 5.3, the gross quantum of cross subsidy from each category for the years 2009-10 and 2010-11 (revised tariff) is given in Table 5.4.

Table 5.4: Aggregate quantum of cross subsidy – comparison

Average Cost of supply 402.76 paise/unit for the year 2009-10

Average cost of supply 427.29 paise/unit for the year 2010-11

Sr. No.	Consumer categories	Quantum of Cross Subsidy in absolute terms
		2009-10		2010-11
		Energy Sales (MUs)	Cross Subsidy (Rs crore)	Energy Sales (MUs)	Cross Subsidy (Rs crore)
1	2	3	4	5	6
1	Domestic
a)	Upto 100	3902	-386.69	2855	-271.44
b)	101-300	2016	94.55	3115	143.05
c)	>300 units	1042	73.87	1895	136.30
	Total	6960		7865
2	NRS	2145	235.72	2405	271.58
3	Public Lighting	148	14.94	136	14.13
4	Industrial
a)	SP	722	7.86	759	6.01
b)	MS	1522	78.99	1541	80.01
c)	LS	9278	605.61	9093	558.14
	Total	11522		11393
5	Bulk Supply
a)	HT	449	24.65	463	25.43
b)	LT	51	4.18	33	2.74
	Total	500		496
6	Railway Traction	123	16.1	138	18.62
7	Common Pool	303	-33.77	302	-24.94
8	Outside State	1307	271.59	53	-17.25
9	AP	9814	-1017.43	10305	-941.87
10	Grand Total	32822	1428.06	33093	1256.03
10	Grand Total	32822	-1437.89	33093	-1255.50

5.3.5 Further, the cross subsidy levels based on the tariffs determined in 2009-10 and 2010-11 (revised tariff) in %age terms is brought out in Table 5.5.

Table 5.5: Cross Subsidy Levels

Sr. No.	Consumer Category	Exiting Tariff				Revised Tariff
		Combined Average Cost of supply 402.76 paise/unit				Combined Average Cost of supply 427.29 paise/unit
		2009-10				2010-11
		Energy Sales (MUs)	Total Revenue (Rs crore)	Realisation per unit (Paise per unit)	Cross Subsidy levels (%)	Energy Sales (MUs)	Total Revenue (Rs crore)	Realisation per unit (Paise per unit)	Cross Subsidy levels (%)
1	2	3	4	5	6	7	8	9	10
1	Domestic
a)	Upto 100	3902	1184.88	303.66	-24.61%	2855	948.47	332.21	-22.25%
b)	101-300	2016	906.51	449.66	11.64%	3115	1474.06	473.21	10.75%
c)	>300 units	1042	493.55	473.66	17.60%	1895	946.01	499.21	16.83%
	Total	6960	2584.94	371.4		7865	3368.54	428.30
2	NRS	2145	1099.65	512.66	27.29%	2405	1299.21	540.21	26.43%
3	Public Lighting	148	74.55	503.72	25.07%	136	72.25	531.25	24.33%
4	Industrial
a)	SP	722	298.65	413.64	2.70%	759	330.33	435.22	1.86%
b)	MS	1522	691.99	454.66	12.89%	1541	738.47	479.21	12.15%
c)	LS	9278	4342.43	468.04	16.21%	9093	4443.49	488.67	14.37%
	Total	11522	5333.07	462.86		11393	5512.29	483.83
5	Bulk Supply					0
a)	HT	449	205.49	457.66	13.63%	463	223.27	482.22	12.86%
b)	LT	51	24.72	484.71	20.35%	33	16.84	510.30	19.43%
	Total	500	230.21	460.42		496	240.11	484.09
6	Railway Traction	123	65.64	533.66	32.50%	138	77.59	562.25	31.58%
7	Common Pool	303	88.27	291.32		302	104.10	344.70
8	Outside State	1307	798	610.56		53	5.40	101.89
9	AP	9814	2935.26	299.09	-25.74%	10305	3461.36	335.89	-21.39%
	Grand Total	32822	13209.59	402.46		33093	14140.84	427.31

As per Regulations framed by the Commission, tariff is to be determined in such a way that it progressively reflects combined average unit cost of supply. The Commission observes that, in consonance with the PSERC Tariff Regulations, there is a reduction in the cross subsidy levels of both the subsidized and subsidizing categories as compared to 2009-10.

5.4 Government Subsidies

5.4.1 After determining the ARR and tariff for the year 2010-11, the Commission in its letter No.248/PSERC/Dir/T-110 dated 07.04.2010 (Annexure-IX), solicited the views of the GoP regarding its intention to extend subsidy to any consumer or class of consumers under Section 65 of the Act. The said letter indicated the implications if GoP continued its present policy of subsidizing AP consumers, SC DS consumers and Non-SC BPL DS consumers as under:

· In its ARR for the year 2010-11, the Board has projected AP consumption of 11245 MUs against which the Commission has estimated the same to be 10305 MUs in para 4.1.3 of this Tariff Order. The revenue from AP consumption of 10305 MUs @ 320 paise/unit (which translates into Rs. 273/BHP/Month) works out to Rs.3297.60 crore.

· Total connected load of AP sets as intimated by the Board is 7061970 (Metered 79273 + Unmetered 6982697) KW as on January 1, 2010. This connected load is inclusive of 87393 KW on account of two bulbs of 40 watts each allowed free of charge to each of the 1092412 AP consumers. After reducing this load of 87393 KW, the net AP connected load works out to 6974577 (7061970 – 87393) KW or 9349299 BHP as on January 1, 2010. The Commission notes that in the past there has been an annual increase of approximately 10% in the AP connected load. By applying the average rate of increase of 2.5% for three months, the connected load as on 31^st March, 2010 comes to 7148941 KW. Further, by assuming a mean average increase of 5% in the year, the connected load during the first six months (April to September, 2010) works out to 7506388 KW or 10062182 BHP.

The Commission notes that the GoP has recently decided to charge an amount of Rs.50/BHP per month which will be recoverable from AP consumers bi-annually. With a connected load of 10062182 BHP, as indicated above, an amount of Rs.603.73 crore will become payable by AP consumers for the year 2010-11. After adjustment of this amount, AP subsidy will work out to Rs.2693.87 (3297.60 – 603.73) crore.

· Meter Rental and Service Charges: In addition, subsidy of Rs.9.00 crore on account of meter rentals and service charges in respect of AP consumers is also payable by the GoP for the year 2010-11.

Accordingly, the total AP subsidy of Rs.2702.87 (2693.87 + 9.00) crore will be payable by the GoP for the year 2010-11.

· Scheduled Castes (SC) Domestic Supply (DS) consumers: As per recent GoP decision of 22-01-2010 subsidy allowable to this category with connected load upto 1000 watts has been reduced to 100 units per month. The Board has indicated an annual consumption of 973.83 MUs by such consumers on which basis an amount of Rs.302.86 crore @ 311 paise/unit will be the subsidy payable by the GoP. Besides, meter rentals and service charges of Rs.15.03 crore as claimed by the Board are also liable to be paid by GoP. Accordingly, total subsidy of Rs.317.89 crore will be payable by the GoP for the year 2010-11 on this account.

· Non-SC Below Poverty Line (BPL) DS consumers: GoP has also decided that subsidy to non SC BPL DS consumers with a connected load upto 1000 watts has been reduced to 100 units per month. The Board has claimed consumption of 8.29 MUs for these consumers which results in subsidy payable by the GoP amounting to Rs.2.58 crore @ 311 paise/unit. Besides, meter rentals and service charges of Rs.0.20 crore are also payable by GoP which makes the total subsidy under this head to Rs.2.78 crore in 2010-11.

Thus, total requirement of subsidy for the year 2010-11 is Rs.3023.54 crore.

5.4.2 For the year 2009-10, the Commission has determined a subsidy of Rs.3204.27 crore inclusive of interest of Rs.60.02 crore on delayed payment of subsidy as discussed in para 3.15 of this Tariff Order. However, an amount of Rs.108.57 crore will be recoverable from AP consumers for the period January 22, 2010 to March 31, 2010. After adjustment of this amount against payable subsidy of Rs.3204.27 crore, net subsidy for 2009-10 is Rs.3095.70 crore. Against this amount, the GoP has paid/adjusted an amount of Rs.3144.25 (1733.60 + 1140.43 + 270.22) crore during the year. Thus, the GoP has paid excess subsidy of Rs.48.55 crore in 2009-10.

5.4.3 For the year 2008-09, the Commission has trued up payable subsidy at Rs.2420.28 crore against which GoP has paid Rs.2601.73 crore which resulted in excess payment of subsidy of Rs.181.45 crore, as discussed in para 2.16 of this Tariff Order.

5.4.4 The Commission in para 6.4.2 of the Tariff Order of 2009-10 specified the manner of payment of subsidy in advance monthly instalments. As the Tariff Order for the current year is being issued in the month of April 2010, the subsidy amount of Rs.230 crore paid in excess by the GoP is being adjusted as part payment towards first instalment of subsidy for the month of April 2010. After this adjustment, the GoP will be required to pay subsidy of Rs.2793.54 crore in advance monthly instalments during the year 2010-11 of which Rs.21.96 crore is payable in the month of April 2010.

On the above basis, subsidy payable by GoP during 2010-11 is detailed in Table 5.6.

Table 5.6 : Requirement of Subsidy for 2010-11

(Rs. crore)

Subsidy payable by the GoP	AP +Meter rentals and service charges	SC DS + Meter rentals and service charges	Non-SC BPL + Meter rentals and service charges	Total
2010-11
Subsidy payable for AP consumption (@ 320 paise/unit) and SC/non SC BPL DS consumers (@ 311 paise/unit)	3297.60 (+) 9.00 3306.60	302.86 (+)15.03 317.89	2.58 (+)0.20 2.78	3627.27
Less Recovery from AP consumers @ Rs.50/BHP/month on estimated connected load of 10062182 BHP determined after allowing increase @ 5% over previous year load	603.73	-	-	603.73
Total subsidy payable by the GoP for 2010-11	2702.87	317.89	2.78	3023.54

2009-10
Subsidy payable as determined in para 3.15	2796.99 (+)8.00 2804.99	335.62		3.64	3144.25
Add : interest payable for delayed payment of subsidy					60.02
Total subsidy payable					3204.27
Less amount recoverable @ Rs.50/ BHP/month from AP consumers for the period January to March, 2010 as determined in para 3.15 (to be firmed up on actual basis)	108.57
Net subsidy payable for 2009-10	3095.70
Less subsidy already paid / adjusted	i) Amount paid Rs. 1733.60 ii) Adjusted against GoP loans Rs. 1140.43 iii) Adjusted against ED Rs. 270.22 3144.25
Subsidy paid in excess	48.55		-
2008-09
Amount of subsidy paid in excess as determined in para 2.16	181.45		-
Total subsidy paid in excess	230.00		-
Excess paid subsidy adjusted against first instalment payable for April 2010	Subsidy Instalment for April 2010 251.96 Amount adjusted 230.00 Balance amount payable for April 21.96 2010		(-) 230.00
Balance total subsidy and interest payable by the GoP upto March 31, 2011.	2793.54*

* exclusive of amount refundable by GoP.

The GoP in its letter dated 13.4.2010 (Annexure-X) has accorded approval for the grant of subsidy for the current year. Keeping this decision of GoP in view, the Commission has incorporated the same in the tariff structure in Table 5.1.

5.4.5 GoP in its letter No. 11/120/2008-PE2/971 dated 26.03.2010 and letter No.11/120/2008/Energy Branch 2/1033 dated 1.4.2010 has decided to absorb the increase in tariff of consumers (all sections) for the period 1.4.2009 to 8.9.2009. It has also agreed to refund the increased tariff consequent upon issue of Tariff Order for 2009-10 and the same amount is to be paid to the Successor Entities by GoP in six equated advance monthly instalments. The amount of subsidy calculated in the preceding paras does not include the impact of the refundable amount on account of increased tariff for the said period.

The Commission, therefore, approves a total subsidy of Rs.2793.54 (3023.54 – 230) crore payable by the GoP to the Successor Entities for the year 2010-11.

The Commission has also determined an amount of Rs.228.11 crore as excess interest refundable by the GoP to the Successor Entities as discussed in para 3.15 of this Tariff Order. In addition, an amount of Rs.93.69 crore is payable by the GoP to the Successor Entities being the unadjusted amount disallowed for diversion of capital funds as discussed in para 4.13.11 of this Tariff Order. Cumulatively thus, Rs.321.80 (228.11 + 93.69) crore is payable by the GoP to the Successor Entities during the year 2010-11.

5.5 Tariff for purchase of NRSE Power

As per NRSE Policy–2006, notified by the Govt. and adopted by the Commission in its order dated 13/12/07, the rates for purchase of power from such projects during the year 2010-11 are as under:-

Biomass, Urban/Municipal/Industrial liquid/solid waste to energy and Wind power projects

423 Paise/Unit

Mini/Micro Hydel, Bagasse/Biomass based Co-generation

392 Paise/Unit

Solar energy

852 Paise/Unit

5.6 Separate tariff for each Function

5.6.1 Separate tariffs have been determined for generation, transmission & distribution in compliance with the directions of the Appellate Tribunal for Electricity (ATE) by segregating the ARR of 2010-11 based on the information furnished by the Board in its letter dated 23/02/2010 and the audited accounts of 2008-09.

The allocation under each head (generation, transmission and distribution) is detailed at Annexure-V and ROE is trifurcated proportionately on the value of fixed assets of each function. In addition, the consolidated gap and carrying cost of gaps upto 2009-10 has been computed in proportion to the revenue requirement (in Table 5.7) of each function.

5.6.2 The segregated ARR on the above basis is given in Table 5.7. The generation function has also been further divided into thermal and hydel taking into account the fact that the Regulations for determining the tariff for these are different.

Table 5.7: Segregation of ARR for 2010-11

(Rs. crore)

Sr. No.	Item of expense	Generation			Transmission	Distribution	Total
Sr. No.	Item of expense	Hydel	Thermal	Total	Transmission	Distribution	Total
1	2	3	4	5	6	7	8
1	Cost of fuel	0.00	3,370.40	3,370.40	0.00	0.00	3,370.40
2	Cost of power purchase	0.00	0.00	0.00	0.00	3,774.12	3,774.12
3	Employee cost	148.59	417.08	565.68	252.64	2,171.81	2,989.83
4	R&M expenses	102.12	149.26	251.38	41.02	80.84	373.24
5	A&G expenses	3.88	5.57	9.45	14.48	55.82	79.75
6	Depreciation	168.59	173.08	341.67	123.07	398.85	863.68
7	Interest charges	418.98	132.95	551.93	110.39	310.15	972.57
8	Return on Equity	134.30	97.42	231.72	45.99	134.71	412.46
9	Total revenue requirement	976.47	4,345.76	5,322.23	587.59	6,926.30	12,836.05
10	Add: Consolidated Gap and carrying cost of gap ending 2009-10	99.22	441.58	540.80	59.71	703.79	1,304.29
11	Gross revenue requirement (9+10)	1,075.69	4,787.34	5,863.03	647.30	7,630.09	14,140.34

5.7 Generation tariff

5.7.1 The PSERC Tariff Regulations specify that the generation tariff will have the same components as laid down in the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations 2004 as amended from time to time. CERC by its notification dated 19^th January, 2009 issued the Tariff Regulations for generation & transmission projects for the period 2009-14.

5.7.2 As per CERC Regulations, generation tariff comprises of:

(i) Annual Fixed Charges (AFC) which include interest, depreciation, return on equity, O&M expenses, interest on working capital and cost of secondary fuel and;

(ii) Energy (variable) charges (for recovery of primary fuel cost).

These charges are recoverable on the basis of norms for thermal plants and hydel plants and are specific for each power plant.

5.7.3 In the case of thermal plants, AFC is payable on achievement of normative plant availability of 85%, whereas in the case of hydel stations, full AFC is payable on achievement of plant availability of 90%.

5.7.4 The Commission has assessed plant wise AFC on the basis of data provided by the Board as reproduced at Annexure-VI whereas proportion of generation cost under each head is given in Annexure-VII. Accordingly, the total revenue requirement for each plant is computed and indicated in Annexure-VIII. The plant wise AFC approved for 2010-11 is given in Table 5.8.

Table - 5.8: Annual Fixed Charges – Generation – 2010-11

Sr. No.	Plant	Annual Capacity Charges ( Rs. in crore)	Net Generation (MUs)	Fixed Charges (paise/unit)
1	2	3	4	5
A	Thermal Plants	1,473.26
1	GGSTP	688.16	9382	73
2	GNDTP	254.19	2233	114
3	GHTP	530.90	6621	80

B	Hydel Plants	1,075.71
1	RSD	684.67	1475	464
2	Mukerian	83.27	1212	69
3	UBDC	47.22	380	124
4	Shanan	22.11	522	42
5	Anandpur Sahib	49.64	684	73
6	Micro Hydel	2.25	8	282
7	Bhakra Complex	67.91		NA
8	Dehar & Pong	118.63		NA

The AFC for hydel plants at Sr. No. (B) 7 and (B) 8 are determined by BBMB.

Accordingly, the total AFC recoverable in the case of thermal and hydel plants are:

i) Thermal - Rs.1,473.26 crore

ii) Hydel - Rs.1,075.71 crore

5.7.5 The AFC for both thermal and hydro plants will be payable on achievement of target availability as discussed in para 5.7.3.

5.7.6 Variable (energy) charges for thermal plants

The variable (energy) charges for a thermal plant are the primary fuel cost to be paid to the generators and are computed as cost per unit of ex-bus energy (energy sent out). As per approved ARR for 2010-11, the total fuel cost, excluding the cost of secondary fuel oil, for all the three thermal plants (including GHTP Stage - II) is Rs.3314.08 crore. These costs have been worked out plant wise and the variable charges per unit of energy for each plant are given in Table 5.9.

Table 5.9: Variable (energy) charges – 2010-11

Sr. No.	Particulars	GNDTP	GGSTP	GHTP
1	2	3	4	5
1	Primary Fuel Cost (Rs. In crore)*	437.02	1711.73	1165.33
2	Net Generation (MUs)	2,233	9,382	6,621
3	Variable Charge per unit (Rs./kWh)	1.96	1.82	1.76

* The plant wise fuel cost has been taken as approved by the Commission in Chapter - 4 instead of
as apportioned in Annexure – VIII.

5.7.7 Total Energy charges for generating plants

The total energy charges (fixed and variable) for generating plants as determined by the Commission are given in Table 5.10.

Table 5.10: Total energy charges – 2010-11

Sr. No.	Plant	Fixed Charges (paise/unit)	Variable Charges (paise/unit)	Total Charges (paise/unit)
Sr. No.	Plant	Fixed Charges (paise/unit)	Variable Charges (paise/unit)	Total Charges (paise/unit)
1	2	3	4	5 = 3 + 4
A	Thermal Plants
1	GGSTP	73	182	255
2	GNDTP	114	196	310
3	GHTP	80	176	256

B	Hydel Plants
1	RSD	464	-	464
2	Mukerian	69	-	69
3	UBDC	124	-	124
4	Shanan	42	-	42
5	Anandpur Sahib	73	-	73
6	Micro Hydel	282	-	282

5.8 Transmission Tariff

5.8.1 The PSERC Tariff Regulations specify that transmission tariff will have the following components:

i) Operation charges

ii) Reactive energy charges

iii) Charges for use of the network

5.8.2 The Board has not supplied the State Load Despatch Centre (SLDC) costs to arrive at the SLDC Operation charges. The reactive energy charges for Intra-State Open Access are to be realized from the customers as per the Regulations already notified by the Commission. Hence, only the charges for use of network are being assessed.

5.8.3 Charges for use of network are to be calculated in accordance with the methodology specified in the PSERC Tariff Regulations. The revenue requirement for transmission for 2010-11 works out to Rs.647.30 crore as given in Table 5.7 and the transmission capacity as furnished by the Board in the ARR for 2010-11 is 7009 MW. However, as per PSERC Tariff Regulations, the transmission capacity for working out the transmission charges shall be the sum of generating capacities connected to the transmission system and contracted capacities of other long term transactions handled by the system of the transmission licensee. Accordingly, on the basis of such information furnished by the Board in the ARR for 2010-11, the transmission capacity works out to 7790.50 MW. On this basis, the Commission determines the charges for use of the transmission network at Rs.2276/MW/Day.

5.9 Distribution / Wheeling

The revenue requirement for distribution for 2010-11 as per Table 5.7 is Rs.3855.97 crore (excluding the power purchase cost) while the distribution capacity is 6978 MW as furnished by the Board. However, as per PSERC
Tariff Regulations, the distribution capacity for working out the wheeling charges shall be the sum of import of power at each interface point of exchange of power at electrical boundary of distribution licensee and generation from captive plants and cogeneration plants (to the extent fed into the grid) and plants generating electricity from renewable sources of energy located in the area of such licensee. The distribution capacity thus works out to 7859.50 MW (7790.50 + 69.00). Accordingly, the Commission determines wheeling charges as Rs.13441/MW/Day.

5.10 Open Access Charges

As per the Open Access Regulations notified by the Commission, the Open Access charges for the year 2010-11 are computed in Table 5.11.

Table 5.11: Open Access Charges – 2010-11

Sr. No.	Open Access Charges
1	Transmission charges	Rs. 2276/MW/Day
2	Wheeling charges	Rs. 13441/MW/Day
3	Transmission + Wheeling charges payable by long term customers	Rs. 5238/MW/Day
4	Transmission + Wheeling charges payable by short term customers	Rs. 3143/MW/Day
5	Transmission + Wheeling charges for wheeling of power from NRSE projects	@ 2% of energy injected to the State grid irrespective of the distance
6	T&D losses
	(i) For voltages at 66 kv and above @ 30% of normative T&D losses	6%
	(ii) For voltages below 66 kv @ 50% of normative T&D losses	10%
7	Surcharge	Nil
8	Other charges such as additional surcharge, operation charges, UI charges, reactive energy charges shall be levied as per the Open Access Regulations/Tariff Regulations notified by the Commission.

Note: Examples of computation of Open Access Charges are provided in Annexure XI

5.11 Cost of supply and Cross subsidy

In compliance with the Order of the ATE dated 26.5.2006, the Board was asked in the Tariff Order for 2007-08 to initiate a study for determination of cost of supply of electricity to different classes and categories of consumers. The Board, in its letter dated 17.02.2010 has intimated that limited tenders have been floated to five firms for submitting the bids to engage consultants which will be opened on 02.03.2010. In the light of ATE’s directions, the Successor Entity needs to ensure that the process of engaging consultants for carrying out the proposed study is expedited and the findings of the study as well as its own views thereon are submitted to the Commission as early as possible.

5.12 Date of Effect

The Commission notes that the ARR of the Successor Entities for the year 2010-11 covers the complete financial year. The recovery of tariff, therefore, has to be such that total revenue requirement of the Successor Entities for the year 2010-11 is recovered in this period.

The Commission, therefore, decides to make the revised tariffs applicable from April 01, 2010 and the tariff structure determined above shall remain operative till March 31, 2011.

This Order is signed and issued by the Punjab State Electricity Regulatory Commission on this the 23^rd day of April, 2010.

Date: April 23, 2010

Place: CHANDIGARH

Sd/-	Sd/-	Sd/-
(VIRINDER SINGH)	(S.S. PALL)	(JAI SINGH GILL)
MEMBER	MEMBER	CHAIRMAN

CERTIFIED

Sd/-

(NAMITA SEKHON)

SECRETARY

PUNJAB STATE ELECTRICITY REGULATORY COMMISSION

CHANDIGARH

Jan. 22, 2010

Jan. 25, 2010

Jan. 27, 2010

Jan. 29, 2010

Feb. 5, 2010

Table 2.11 Interest on Capital Loans

3.11.1 In the ARR of 2009-10, the Board projected R&M expenses of Rs.406.80 crore against which the Commission approved Rs.376.14 crore. In the ARR of 2010-11 R&M expenses have been revised to Rs.385.93 crore net of capitalization of Rs.3.69 crore.

As discussed in para 3.10.4, the Commission allows an adhoc increase of 5% over the base R&M expenses. Accordingly, Rs.379.23 crore is determined as allowable R&M expenses for assets worth Rs.18490.12 (16424.12+2066) crore as on April 1, 2009.

3.12.1 In the ARR of 2009-10, the Board projected A&G expenses of Rs.76 crore net of capitalization of Rs.24.13 crore. The same was allowed being within the permissible norms. The Board, in the ARR of 2010-11, has revised A&G expenses to Rs.75.95 crore net of capitalization of Rs.20 crore.

5.3 Effect of revised tariff on cross subsidy

5.3.2 The position of cross subsidy levels in the system during the year 2010-11 with revised tariffs (as approved in para 5.2) is indicated in Table 5.3.

5.3.5 Further, the cross subsidy levels based on the tariffs determined in 2009-10 and 2010-11 (revised tariff) in %age terms is brought out in Table 5.5.

Table 5.5: Cross Subsidy Levels

5.4 Government Subsidies

This Order is signed and issued by the Punjab State Electricity Regulatory Commission on this the 23rd day of April, 2010.

This Order is signed and issued by the Punjab State Electricity Regulatory Commission on this the 23^rd day of April, 2010.