Chapter 4

Compliance of Commission’s Directives

The PSERC has a statutory function under the EA, 2003 namely to guide the Board into becoming an efficient and commercially viable entity and to function at an improving level of efficiency. The Directives issued each year have tried to address this objective and also prepare the Board for the changed scenario envisaged under the Act. Measures to address quality of service being rendered to consumers have also been given due importance.

Compliance with the Directives issued in public interest, in the previous Tariff Orders, had not been entirely satisfactory. In light thereof, the Commission had advised the Board that increase in Tariff would be rendered increasingly difficult if adequate compliance with the Directives was not demonstratively achieved.

While broad compliance has been demonstrated by the Board with the Directives issued in 2004-05, the Commission has to conclude that the objective of turning the Utility into an efficient and commercially viable Utility is far from achieved. The performance of the Board has to be adjudged with reference to its achievements in each financial year over the earlier period based on targets fixed by the Commission. To give perspective to the targets so fixed, these are benchmarked with the performance of other Utilities also. From this perspective, it would be reasonable to say that while the PSEB’s generation wing is efficiently run, the same cannot be said of its transmission and distribution components.

The detailed replies furnished by the PSEB have been discussed ad-seriatum hereunder. 4.1.1. Directive 1: Establishment Of Depreciation Reserve Fund

The Board is directed to submit a proposal regarding creation of Depreciation Reserve Fund in its ARR for the FY 2005-06 or during its processing. The proposal should contain a proper system to ensure that money in the proposed Depreciation Reserve Fund is not diverted by the Board for unauthorized purposes.

PSEB Response

Vide Memo No 739 dated 12-5-2005, PSEB has replied : PSEB would like to submit that while the principles outlined in terms of the logic of the Commission cannot be disputed, the logic for creation of a separate Depreciation Reserve Fund is unclear. PSEB would like to submit that it has not come across any instance of such a Depreciation Reserve Fund in any corporate or state entity and would like to seek the guidance of the Commission in outlining what is the exact nature that the Commission has in mind.

Comments of PSERC:

The issue is discussed in detail in Para 8.7 of Chapter 8.

The Board is directed to submit a detailed proposal for creation of a separate General Provident Fund (GPF) Account in its ARR for the FY 2005-06 or during its processing. The proposal should contain a specific system to ensure that deposits in General Provident Fund Accounts of the employees are deposited in this account without any undue delays and withdrawals from this Account are restricted to authorized purposes only.

PSEB Response:

Vide Memo No 739 dt 12-5-2005, PSEB has explained as follows: “A part of the provident fund contribution of the employees is currently being utilized by the Board to fund its capital investment plan. The Board is providing interest on this amount in its account to ensure that the assured return is provided to the employees as per the provisions of the GPF Scheme”. The Board has also highlighted that it had obtained specific permission from the Government of Punjab to utilize employees PF contribution for capital expenditure and till date there has been no case of delay in payment of PF benefits to any retiree/employee of the Board for shortage of Funds.

Comments of PSERC:

The Commission has advised the Board to deposit all new GPF accretions in a separate GPF account. For detailed comments, refer to Chapter 8, Para 8.8. In this regard Directive has been issued at Para 10.11, Chapter 10.

The Board is directed to create Regulatory Reserve of the level approved by the Commission and the details of the same may be supplied to the Commission in its ARR for the year 2005-06 or during its processing. The Regulatory Reserve would be used for the purposes to be determined by the Commission.

PSEB Response:

The Board has submitted revised estimates for 2004-05 during the processing of the ARR for 2005-06. The revised estimates indicate substantial loss during 2004-05 as against a surplus of Rs.291 crores indicated in the Tariff Order. In view of the losses incurred during 2004-05, it will not be feasible for PSEB to create a Regulatory Reserve at this point of time.

Comments of PSERC:

Since there is no surplus with the Board after review of estimates for FY 2004-05 (Reference Chapter 3), Regulatory Reserve automatically gets liquidated.

The Board is directed to carry out energy audit of all 11 KV and higher voltage feeders supplying electricity to individual consumers. Energy audit is also required to be carried out for all 33 KV and higher voltage feeders/ lines and grid substations. The energy audit needs to be carried out monthly and responsibility fixed where there are variations. After completion of metering on all consumers by June 9, 2005 as per Section 55 of the Electricity Act, 2003, energy audit can be undertaken and feeder-wise losses worked out. Adequate steps should be taken to minimize commercial losses. This would require immediate replacement of defective/ dead stop/ tampered meters and intensive checking of consumers to detect pilferage of energy. Employees conniving with the consumers need to be penalised.

PSEB Response:

PSEB has informed that it has commenced the process of consumer energy accounting. It has also informed that while the process of energy accounting has commenced, corrective measures can be contemplated only after data for a reasonable period is available and therefore sought the indulgence of the Commission to provide such time as is reasonable to undertake corrective measures. PSEB has highlighted that substantive implementation measures can be expected only after metering of the Distribution Transformers is completed and data from these meters become available for analysis.

Further, the Board has narrated the following measures taken by it in compliance of the Directive:

Periodic energy audit : As outlined in the ARR, reports are being prepared for reporting circle wise/ division wise distribution losses. Such reports are being generated from April, 2003.

Feeder-wise losses: The process of determination of feeder-wise losses on all feeders at 33 KV and above, and feeders supplying consumers at high voltage has commenced.

Fixing of responsibilities: In order to ensure greater accountability, the JE incharge of the respective feeder has been made accountable for the preparation of feeder-wise energy accounting / audit. As and when sufficient database gets built up, appropriate corrective measures would be undertaken by PSEB.

Steps to be taken to minimize commercial losses: The Board is continuing with the process of replacement of defective meters as well as the process of intensive checking of consumers to detect pilferage and has separately sought revocation of suspension of verification of loads of DS consumers.

Penalty for employees conniving with consumers: Appropriate measures including dismissal from service have already been outlined in case any incidence of any employees conniving with consumers on thefts is detected. Vide Memo No.879/ARR/DTR-216, the Board has conveyed that while during three years 2001-04, in all 105 disciplinary cases on account of theft were initiated and 58 cases were decided upto March 2004, in the year 2004-05 upto November 30, 2004 itself, 50 cases were initiated and 21 cases were finally decided.

T & D Loss Reduction

PSEB has submitted that there has been significant reduction in the T & D losses in the past years, where the T&D losses have reduced from 30.82% in FY 2000-01 to 25.35% in FY 2003-04. Board has also highlighted that it has drawn up an ambitious target and programme to reduce the T & D losses from the present level to 20.5% by the end of Tenth Plan. The year to year T&D loss reduction programme that the Board has now set for itself is as under: -

In order to achieve such a loss reduction programme, the Board has targeted reduction in technical and commercial losses. The key measures to reduce technical losses being proposed by the Board include bifurcation of feeders and de-loading of transformers; increase in HT/LT ratio; location of distribution transformers at load centers and addition of line capacitors on the overloaded feeders.

For reduction of commercial losses, the Board proposes to augment/up-grade the present enforcement system and to provide tamper proof static metering in all segments of the power system and as well as at all consumers premises. This would require an investment of around Rs.2500 crores in Tenth Plan. The key measures in this regard include fixing of increased accountability as outlined earlier, intensive checking of theft prone and seasonal SP and MS industry and areas as identified through energy accounting measures. The Board has also introduced outsourcing of energy supply, billing and collection of identified theft-prone localities by providing single point connection to the village panchayat and distribution & collection of energy bills through them.

Performa For reporting of detection of Energy Thefts for each Zone”

No report

Comments of PSERC:

The Commission notes the commencement of energy auditing with some satisfaction. Given that regular reports are being generated since 2003, the plea of the PSEB that “….As and when sufficient database gets built up, appropriate corrective measures would be undertaken by PSEB…..” appears to be misplaced. Data from April 2003 to April 2005 is adequate as a database for corrective actions to be taken by the Board. The Board should now move to the next level i.e. fixation of responsibility. In this context, it is not adequate to fix responsibility at JE level only. Responsibility needs to be fixed at each level wherever losses are high and negligence or connivance is found. There is also no mention of a system of incentives and disincentives w.r.t efficiency in reducing T& D losses.

The Commission notes that inspite of the emphasis laid on reduction of T&D losses by the Commission and the Board’s numerous initiatives reportedly taken by it, no improvement in the T&D losses of the Board has actually taken place. Detailed discussion on the issue is at Para 7.2 of Chapter 7.

An analysis of Sample Energy Audit Reports filed by the Board will highlight the scope for reduction in T & D losses. In zones such as Border and West, losses are as high as 40% to 43% against the State average of 25%. Conversely, the Central Zone which comprises city areas of Ludhiana and Khanna reflects overall T & D losses of 18.2% only. The key measures enumerated supra by the Board to reduce technical losses are steps in the right direction and the Commission would be interested in final results obtained in reducing both technical & commercial losses in the power system. Attention is invited to Directives at Para 10.1 and Para 10.15 of Chapter 10.

The Board is directed to increase the sample size of meters installed for assessment of agricultural consumption. The number of meters should not be less than 2% of the total number of AP sets in the state. The Board is also directed to ensure that final report from the PAU is received within three months of issue of this Tariff Order. The Board is further directed to compare the normative electricity consumption computed on the basis of sample meters with that of 11 KV feeders supplying power exclusively for the tubewells.

PSEB Response

On the sample size of meters: Based on Commission’s directive, the Board undertook a review of the defective meters and has replaced them. Against required identified meters of 17,360 meters, 14,808 meters have already been installed, which together with 31217 meters installed on the new connections released after July 2003 yield a sample of 46025 meters, which is close to 5% of the population of AP connections.

On final report from Punjab Agricultural University (PAU): Board has undertaken detailed discussions with PAU to expedite the study and submit the report at the earliest, and the final report would be prepared by July 31, 2005.

On comparison of the normative electricity consumption: The Board has submitted that although approach of the Commission to compare the data based on sample meters has some merit, it is of the view that such a comparison over a short period would result in erroneous inferences and would be relevant over a period of one full year. Subsequently, data for comparison of AP consumption of Sangrur (256, 11 KV feeders) and Patiala (133, 11 KV feeders) Circles for the period of April 2004 to January 2005 has been supplied on April 14, 2005.

Comments of PSERC

The Board has effected compliance with the directive pertaining to sample size of meters partly. The reading of these sample meters need to be taken regularly and their accuracy ensured to have reliable data-base for measuring agricultural consumption. Regarding normative electricity consumption, it is not adequate to come to conclusion on the basis of results of few feeders alone. Detailed data-base needs to be built up taking all exclusive feeders supplying power to AP consumers. Attention is also invited to Para 7.1.3 of Chapter 7. Apropos PAU Report, the Board may ensure submission of the final report by the dates committed. In this connection, fresh Directive No.10.2 in Chapter 10 may be referred.

PSEB is directed to implement the directions already given by the Commission in Tariff Orders for the year 2002-03 and 2003-04, in letter and spirit to reduce the manpower costs to the level approved by the Commission by taking effective measures and therefore, improve financial health of the Board on sustainable basis. It is essential so that the new entities to be carved out under the Electricity Act, 2003 become financially viable to compete with the new players in the scenario envisaged in the Act. Also, proposals for determination of performance parameters for deciding the approved level of employees costs in future years may also be submitted.

PSEB Response

The Board has submitted that the employee costs consist of two components, viz the number of the employees and the salary structure of the employees. In the Board, both are a result of historic reality. Long-term rationalization of the number of employees can be considered only after due consideration of the desegregation of the Board, the preparation of the organization structure and the required manpower plan for each of the disaggregated entities.

Notwithstanding the above, the Board has stated that it has consciously and voluntarily taken several measures to curtail costs. A complete ban on fresh recruitment has reduced manpower by almost 15,000. Approximately 12,000 posts are currently lying vacant and a more rapid reduction would be dysfunctional to the operations of the Board. PSEB has also modified its earlier pension scheme for new recruits and replaced it with Contributory Pension Scheme. Its policy of compassionate appointment has been replaced with a Welfare Scheme introduced on November 23, 2004.

Given that there is very little scope for rationalization of the salary structure in the immediate term, the Board has averred that number of employees cannot be expected to decrease. This is because even though there is a reduction in the number of employees, the retiring employees would have substantial one-time retirement benefits in the year of retirement to be followed by annual pension liabilities for the future. In the absence of an Employee Trust to meet these liabilities, these remain un-funded liabilities which need to be financed from the sector, or by external borrowings to bridge this gap which, in turn, would result in the Board accumulating long-term loans to fund revenue expenditure. Such increase in loans & its interest have to be recovered at some point of time either from consumers or from the State Government.

Moreover, the Board has made out a case to show that employee productivity has shown significant improvements, both in financial parameters like Revenues (17% improvement on a year to year basis), as well as on operational parameters like Energy (7% improvement on year to year basis) and network handled (6.5% growth in year to year basis) as per details below :

Performance Indicators

Board has outlined certain typical employee performance parameters supra that could form the basic framework for measuring and monitoring employee performance when highlighting its performance over the past few years. However It has also sought time to undertake a more detailed assessment of the approaches being adopted by other utilities and submit a detailed proposal during the processing of the ARR Petition.

Comments of PSERC:

The Commission notes that despite steps reportedly taken by the Board, the employees costs have been consistently rising in the Board. These need to be controlled especially in view of the low productivity even vis-a-vis other power utilities and all India averages. Detailed discussion in this regard is in Para 7.9 of Chapter 7. In this regard fresh Directive under Para 10.10 in Chapter-10 may be referred.

The Commission directs the Board to confirm the completion of Fixed Assets Registers within six months and ensure that these are updated regularly.

PSEB Response:

With the introduction of Commercial Accounting System, the register of all the assets are being maintained at the level of accounting units as per instructions contained in the Electricity (Supply) Annual Accounts Rules, 1985. The FAR for assets acquired before these Rules are being maintained at the Head office level. These are checked by Statutory Auditors. No adverse comments in this regard are on record in the audit reports. The Board has also submitted that it recognises the need for undertaking an audit but has requested the indulgence of the Commission to dove-tail the process of FAR with the proposed restructuring in order to ensure minimal duplication of effort.

Comments of PSERC:

The Board is directed to take appropriate steps to improve quality of service, especially quality of supply to its consumers. The quality of power being supplied to consumers, especially in the rural areas, needs substantial improvement. Adequate steps need to be taken so that reliable, uninterrupted and quality power is made available to the consumers for the maximum possible period.

PSEB Response:

The Board has outlined the pro-active steps taken by it to improve quality of service, especially to Rural Domestic Consumers by providing Urban Pattern Supply (UPS) to its Rural Domestic Consumers by segregating Agriculture load from other loads in rural areas.

1. The Board has already covered about 9000 out of 13,123 villages/deras/ basties/ dhanies under the UPS Scheme and would complete implementing the scheme in other villages during the year 2005-06. Segregation of AP load would also help to boost the rural economy by encouraging small-scale industry in the villages. To this purpose, the Board has resorted to outsourcing.

2. The Board has set-up call centres to provide timely response to consumer complaints and queries. Implementation of computerized IT planning for efficient and prompt customer service is an important ingredient of APDRP scheme. PSEB has already completed 100% consumer indexing upto DT level and billing of all categories of consumers except, AP has already been computerized. Moreover, 200 Sub-divisions stand covered under computerised cash collection plan and remaining sub-divisions shall be covered shortly. Consultants have been engaged for preparation and implementation of comprehensive IT on-line plan under APDRP to be completed in the next two years.

3. Board has taken up upgradation and modernization of the distribution and sub-transmission system of towns/cities. A total of 25 such Schemes amounting to Rs. 741.18 Crores have been approved by the MOP/GOI under APDRP. These schemes envisage erection/argumentation/bifurcation of 11 KV feeders, creation of ring main system to ensure reliability of supply, introduction of IT for better consumer services, replacement of obsolete sub station equipment and creation/augmentation of grid sub-stations for better voltage profile, which would improve the quality of supply. Under these schemes, the Board has already erected 544 KM of 11 KV lines and added 2237 Distribution Transformers in the system. In addition, 2331 Nos. transformers have been de-loaded under APDRP. Substantial progress for up gradation and renewal of 11 KV distribution system is expected in the coming months. 54 No. 11 KV feeders have already been de-loaded and work on 89 feeders is in progress.

4. Under APDRP, 12 Transmission works amounting to Rs. 14.82 crore have been completed and 14 No. works amounting to Rs. 32.32 crore have been identified for execution on turnkey basis. 21 Transmission works amounting to Rs.37.43 crore are under execution and are expected to be completed soon.

5. PSEB has installed Electronic Machines (Sevak Machines) in Mohali Area for facilitating round the clock payment of Electricity Bills. Similar Machines are being installed at nine other locations. PSEB has tied up with the Post Offices to facilitate the payment of Electricity bills. PSEB has introduced DROP BOX facility for facilitating consumers making payment of their electricity bills through cheques.

Boards’ Reliability Index for the Electricity supply in urban areas as per the CEA guidelines has been above 98% during the current financial year. The Board understands the need of consumer feedback on various initiatives being taken by the Board for improving quality of service. In this regard a TOR has been floated by it to appoint an independent agency to conduct a consumer satisfaction survey, which will cover all categories of consumers. A copy of TOR has been attached herewith as Annexure 12.4. The process of approval of Consultant is likely to be over by April 2005. PSEB would like the Commission to give its view on the proposed TOR.

Comments of PSERC:

Segregation of feeders and Urban Pattern Supply (UPS) Scheme projected for completion by June 30, 2005, will be a significant achievement for the Board since parity between supply to urban and rural domestic consumers has been a longstanding demand of Punjab’s rural consumers.

Regarding survey on the state of consumer satisfaction apropos the quality of services rendered by the PSEB, the Commission observes that PSEB would be better served if it were to suo-moto analyse and streamline the functioning of the initiatives that the PSEB has already introduced through the Consumer Service Centres, Call centres and Circle Control rooms and disseminate the findings thereof to its employees in the field for prompt redressal of grievances. Attention is invited to Directive at Para 10.3, Chapter 10.

The Board is directed to prepare a detailed and well considered proposal for introduction of Two Part Tariff for LS and Railway Traction categories and submit the same to the Commission along with its ARR and Tariff Application for the next year. The proposal of the Board should cover other categories as well especially MS & SP, if not some others also.

PSEB Response

PSEB is proposing Two-Part Tariff structure for all its consumer categories, except Agriculture, which would be charged on Single-Part Tariff basis (Flat Fixed charges per BHP of sanctioned load for Agriculture-Unmetered consumers, while Energy Charges per unit for Agriculture-Metered Consumers), the details of which are provided in this Petition detailing the Tariff revision proposal

Comments of PSERC:

This Directive has been complied with. Attention is invited to Chapter 8, Para 8.1 where the proposal has been examined in detail and Directive at Para 10.4, Chapter 10 of this Order.

The Board is directed to come up with a suitable and practical proposal for identification and assessment of unauthorized load installed by DS consumers. The Board is directed to submit the proposal along with its ARR and Tariff Application for the year 2005-06 or during its processing immediately thereafter. Meanwhile, the Board is directed to suspend the checking of connected load for DS consumers.

PSEB Response:

PSEB has furnished a detailed justification for its assertion that the Directive seeking to suspend the verification of connected load for DS consumers would have serious implications on the overall loss-reduction and revenue enhancement programme and has therefore requested the Directive be revoked with immediate effect.

Comments of PSERC:

The Directive has been partly complied as Board has not submitted a practical proposal for identification and assessment of unauthorized load installed by DS consumers. Consequently the Commission has reiterated its Directive to the PSEB regarding suspension of checking of load of domestic consumers during the current year also. However this would be subject to the exceptions detailed in Chapter 8, Para 8.4.

The Board is directed to submit a detailed paper on the introduction of KVAH tariff at least for Medium Supply, Large Supply and Railway Traction categories in the ARR for FY 2005-06

PSEB Response

The experience from other states, which have introduced KVAH tariff for their HT consumers, has revealed that it had adversely affected the revenue of the power utilities of these States. PSEB is at the verge of unbundling and can ill afford to experiment with the introduction of KVAH tariff, which may result in loss of revenue. Further this tariff is not likely to be beneficial to the Board as the power factor of HT consumers (~ 90% +) is already better than most of other states. In view of the above, PSEB requests the Commission that KVAH tariff may not be introduced at this stage.

Comments of PSERC:

This Directive has not been complied with. The Commission reiterates its Directive to the Board to carry out a study for practicability of introducing KVAH tariff (Reference Chapter 10, Para 10.6). Attention is also invited to Chapter 8, Para 8.10 for a discussion on KVAH tariff.

The Board is directed to submit a detailed proposal for revision of General Conditions of Tariff in line with the Electricity Act, 2003. The proposal may be submitted either along with ARR 2005-06 or during the processing of the same.

PSEB Response:

The Board has submitted a proposal regarding General Conditions of Tariff to align them with the provisions of the Electricity Act, 2003 during the processing of the ARR Petition.

Comments of PSERC:

This Directive has been complied with as the Board has submitted a detailed proposal for revision of General Conditions of Tariff in line with the Electricity Act, 2003. Attention is invited to Chapter 8, Para 8.14 for details on this issue.

The Board is directed not to issue, without prior approval of the Commission, any commercial circulars effecting tariff structure already approved by the Commission through this Tariff Order.

PSEB Response

The Board has noted the Directive of the Hon'ble Commission and will attempt to ensure its full compliance and shall seek approval of the Hon’ble Commission before issuing any Commercial Circular effecting tariff structure approved by the Commission.

Comments of PSERC

The Directive is reiterated for full compliance by the PSEB. In this regard fresh Directive has been issued at Para 10.17 Chapter 10.

The Board is directed to furnish full justification of parallel operation charges being recovered from consumers. The detailed proposal may be submitted with the next ARR and Tariff Application for the year 2005-06 or during the processing of the same.

PSEB Response:

The Board has furnished a detailed justification for Parallel Operation Charges (POC) from Captive Power plants (CPPs) and have suggested guiding principles for the determination of the POC. They have also highlighted the benefits enjoyed by consumers which include uninterrupted and reliable power supply, with better voltage regulation and also initial active and reactive components of starting current and in terms of electrical performance. In order to provide the above benefits to the CPPs, PSEB is required to maintain its systems, at a cost, which is not recovered from the CPPs through the charges for the contracted demand. Hence, the case for POC.

Comments of PSERC:

This Directive has been complied with. The PSEB has furnished a rationale and also quoted precedents to support the levy of POC. Attention is invited to Chapter 8, Para 8.13, where the arguments offered have been duly considered.

The Board is directed to prepare revised Metering Plan and take requisite action to provide correct meters on all consumers to meet with the requirement of Section 55 of the Electricity Act, 2003. Copy of the Metering Plan be supplied to the Commission.

PSEB Response:

In the context of compliance of the provisions of Section 55 of the Electricity Act, 2003 as desired by the Commission, the Board has submitted that the following key aspects are relevant:

1. Need for installation of correct meters as per the regulations of the Authority within two years of date of notification, viz by June 9, 2005;

2. Extension in the above period for any class or area requires appropriate notification by the State Commission (in this case, the PSERC);

3. Need for compliance with any directions of CEA by any generating company or licensee on appropriate meters for energy accounting and Audit.

Installation of correct meters as per regulations of the Authority

Board has informed that it has undertaken metering of all categories of its consumers except agriculture. These meters are as per the regulations of the CEA and thus, Board is in compliance with provisions of Section 55 of the Electricity Act, 2003 except for supply relating to agriculture consumers.

Extension of Period for any class of Consumer or Area

The total number of Agriculture consumers are about 8.81 lacs out of which metering has been done on 46025 connections. PSEB has sought an extension for metering of AP consumers till March 2007.

Compliance with Metering directives of CEA by generation and Licensees

CEA has not yet issued directions to any generating company or licensee on installation of appropriate meters for energy accounting and Audit. Metering at various feeders and boundary limits between various disaggregated entities, have been duly provided in the Metering Plan. The detailed Metering Plan for FY 05 and FY 06 is enclosed in Volume 2 of this Petition.

Comments of PSERC:

Extension in period for metering of AP consumers by March 31, 2007 has been allowed by the Commission. This Directive can be stated to have been only partly complied. Analysis of data furnished in the Metering Plan indicates that the Metering Plan requires to be corrected and resubmitted. Attention is invited to Directive at Para 10.9, Chapter 10.

The Commission directs the Board to reduce Coal Transit loss from approved ceiling of 2% in 2004-05 to 1% in 3 years with yearly reduction target of 0.33% for all the thermal plants.

PSEB Response:

PSEB has furnished detailed reasons why it would be unfair and unrealistic to expect PSEB to arrive at any material mechanism for reduction in transit losses as outlined by the Commission. Based on the above rationale, as well as the experiences of other states, PSEB has urged the Commission to review its directive in this regard to allow transit losses at actuals subject to a maximum of 3%

Comments of PSERC:

Since transit loss of coal has direct bearing on the cost of coal and ARR as such efforts should be made to minimize it bearing in mind that the CERC norm in this regard is 0.8%. For details on this issue attention is invited to Chapter 7, Para 7.7.

The Commission directs the Board to reduce the period of outage of machines at all the stations by critically examining maintenance schedules of all the machines to the extent possible to improve upon the generation.

PSEB Response:

PSEB has informed that that the current level of outages in stations is mainly due to the fact that GNDTP is over 25 years old, GGSSTP is over 15-20 years old. Even after investments, drastic improvement in outages is unlikely, given the age of the stations. Board has therefore sought the indulgence of the Commission to keep the age of the assets in mind and comparable performance of machines with similar age group before setting performance targets in line with CERC order in terms of Auxiliary Consumption, Station Heat rate and other performance parameters on par with relatively new Power stations.

Comments of PSERC:

For compliance of this Directive attention is invited to generation and operational parameters in Chapter 7, Para 7.4 of this order and Review of 2004-05 at Chapter 3, Para 3.3 of this order.

Background To Directives Partly Complied

While Compliance of fresh Directives issued vide Chapter 11 of Tariff Order 2004-05 has been discussed under Paras 4.1.1 to 4.1.17. The Directives which were partly complied in previous orders have been taken up hereunder in light of Board’s replies. Compliance by the Board with specific Directives issued by the Commission vide various Tariff Orders is tabulated hereunder for a snapshot of the status on these Partly Complied Directives. Subsequently these are discussed ad seriatum in greater detail w.r.t Board’s replies.

Summary of Directives And PSEB’s Response

The following table furnishes a snapshot of the compliance of the Commission’s Directives issued in Tariff Orders for the years 2002-03 and 2003-04, at a glance.

Chapter 4, Directive 1 of T.O.2004-05

A timeframe needs to be laid down for the completion of the various steps outlined in the PSEB reply along with penalty clauses for delays in implementation. The Commission proposes to review the envisaged plan for computerization and billing. This may be communicated to the Commission on priority. Report on pilot project on remote Metering has still not been intimated to the Commission. The project was time bound and the report should be furnished without further delay.

PSEB’s reply

PSEB has informed that the Board has engaged M/s. Puncom as Consultants for implementation of Computerization plan of the Board. Consultants shall study the present system in the PSEB and accordingly prepare the road map. The detail of key areas to be covered by the Consultants and the timeframe for the same has been attached as Annexure 12.1. of ARR Petition.

Comments of PSERC

The Management Information System (MIS) needs to be strengthened and that the Board is aware of the limitations of the existing MIS is beyond dispute. With the allocation of Rs 53 crores under the APDRP schemes for Punjab the resources are already available to the Board.

The Commission had provided some guidelines in the Tariff Order for 2004-05 wherein it was stated that PSEB needs an Enterprise Resource Planning (ERP) system which would include among others the issue of interest and rebate on deposits with the Board etc. It was suggested that a complete in-house exercise be done from bottom–up to determine the requirements of the MIS wherein PSEB staff and officers should be involved from all levels and liaison with other Utilities who have completed this work. It is presumed that the terms of reference to consultants, have incorporated the suggestions alongside a time frame for implementation and penalty clauses for delays therein. Report on pilot project on remote metering has still not been intimated to the Commission. In this regard fresh Directive has been issued at Para 10.14, Chapter 10.

Chapter 4, Directive 2 of T.O.2004-05

However, the data requisitioned by the Commission was (Tariff Order for 2003-04, Para 3.2.2) from all existing 11KV incoming/outgoing feeders and all consumers supplied power at 33 KV and above. The PSEB has not provided any reason for its failure to furnish this data.

PSEB Reply

The Board has explained that the Commission in Para 4.1.2 of Tariff Order for FY 2004-05 has agreed to the PSEB submission on infrastructure requirements for Cost of Supply study. The Board would like to submit that the unbundling of Board is at advanced stage of discussions and the Board is in the process of taking views from all stakeholders on the proposed desegregation. The Board feels it will be more appropriate to conduct a cost of supply study once the proposed sector structure is in place and PSEB would like to seek the concurrence of the Commission on the same.

Comments of PSERC

The Board had agreed to carry out this study on a priority basis and the Commission will expect data with the next ARR filing of the Utility.

Chapter 4, Directive 3 of T.O.2004-05

The Board has already introduced the incentive scheme among certain category of consumers such as DS, NRS, SP and AP. Response of Public to the scheme needs to be assessed and intimated to the Commission. The Board may also assess the advisability of allowing rebate instead of interest. The Board is directed to examine the possibility of extending this scheme to the categories of consumers presently not covered.

PSEB’s reply

PSEB has submitted that the Board had started the scheme for Advance Payment of Energy Bills for the Domestic, SP and AP category consumers on 16th May, 2003. The Board intended to extend this scheme gradually to other categories of consumers depending on the response from the domestic, SP and AP consumers. It has taken number of steps for promotion of this scheme and has examined the response to this scheme in the month of February 2005. The total amount received by the Board from May 03 to January 05 was Rs. 207.89 lakhs from Domestic and SP consumers against an expenditure of Rs.14.82 lakhs incurred by the Board for implementing this scheme. On the presumption that the Board would have earned an interest of Rs.9 lakhs for the amount of Rs.207.89 lakhs received and therefore, the net loss to the Board on account of advance deposit scheme is Rs.5.82 lakhs. Now since, the Commission has issued a directive to extend this scheme to all the categories of consumers, the same is being considered by the Board and a Commercial circular shall be issued accordingly.

Comments of PSERC

The Commission perceives the response to this relatively new initiative whereunder the PSEB has collected Rs.207.89 lakhs from May 03 to January 05 from Domestic and SP consumers against an expenditure of only Rs.14.82 lakhs as encouraging It is not clear how the interest earned has been computed at Rs.9 lakhs or whether the fact of this money being available as a low cost infusion into the working capital stream of the PSEB has also been incorporated. The Commission would like a detailed analysis incorporating these issues. For the present the Commission feels that MS and LS categories of consumers should also be covered under this scheme since, as already stated, they account for 8.9% and 39.4% ie almost 48% of total metered sales. This will impact substantially on improving the cash flow and thus the financial position of the Utility. Upon getting their response the whole scheme can be reviewed after a reasonable duration. In this regard fresh Directive has been issued at Para 10.16, Chapter 10.

Directive 13, from Chapter 4 of T.O.2004-05

PSEB was directed in the last tariff order to explore possibilities of rescheduling its loans and negotiate with Financial Institutions to reduce the interest rates on old loans in view of the downward trend in interest rates with the help of Government of Punjab. Also there should be no diversion of funds from capital account to meet revenue deficit. Interest cost of expenditure not prudently incurred cannot be passed through Tariff. The Commission intends to limit expenditure under this head.

PSEB’s Reply

The PSEB has submitted that all existing loans from LIC, REC and commercial banks were restructured in compliance with Commission’s directive. In case of PFC loans, there is a specified limit upto which restructuring is allowed in a financial year.

PSEB has availed full limit and will complete the process of restructuring of PFC loans, but Non-SLR Bonds and SLR Bonds could not be restructured, as per terms of the scheme. However PSEB has exercised the call option to replace bonds with cheaper debt. Regarding the 14% loan from GoP, the Board has submitted that these shall be restructured in the FRP proposed for the Board.

Regarding alleged diversion of funds Board has argued that this happened prior to the formation of the Commission and if during that period the consumers had paid a tariff closer to cost of supply, this diversion would not have been required. Regarding the increase in interest burden due to loans taken on account of unpaid subsidy by the GoP, the Board has submitted that it has apprised the State Government on the relevant facts including Government loans and unpaid subsidy and GoP is looking into the matter and is expected to resolve the matter while formulating the Ffinancial Restructuring Plan of the Board.

View of Commission

Attention is invited to Commission’s views which are discussed at Chapter 7, Para 7.13.

Directive 16, from Chapter 4 of T.O.2004-05

Regarding levy of security deposit presently named ACD and Service Connection Charges, the Commission decides to continue the prevailing system. These issues will be considered at the time of finalization of regulations under section 47 of the Act.

PSEB’s Reply

PSEB has submitted that in compliance with the Commissions Directive on MMC, Board has proposed two-part tariff for all categories of consumers in the ARR and Tariff Revision Petition for FY 2005-06.

Comments of PSERC

This Directive is complied with. However the Commission has presently decided to continue with single part tariff for all categories. (Refer Chapter 8, Para 8.1) even while the two part tariff proposal is put to scrutiny to assess its feasibility for implementation. These issues will consequently be considered at the time of finalization of ‘Electricity Supply Code and Related Matters’ regulations.