ARR submission of CESU ARR 2011-12 Projected Power purchase cost1808.82 Employee Cost329.42 A&G Cost61.28 R&M Cost62.55 Depreciation88.74 Bad Debts17.86 Interest & Finance charges97.42 Reasonable return11.64 Amortization of Regulatory Asset0 Truing up of Revenue Gap for FY 2009-100 Contingency Reserve0 Total ARR2477.73 Sale of Power at existing tariff 1786.05 Other Revenue 20.27 Total Revenue Relisation 1806.32 Revenue Gap with existing Tariff 671.42 Excess revenue with proposed tariff 532.15 Proposed Revenue Gap 139.27 In Rs. Cr.
Tariff Proposal of CESU The licensee requests the Hon’ble Commission to accept the proposal of ARR and bridge the revenue gap through combination of – grant/subsidy from the state govt., – reduction in BST and/or – increase in RST in appropriate manner.
Proposed Tariff Domestic consumers for (0 to 100 unit)from Rs. 1.40 to 2.50 PU Kutir Jyoti consumers (<30 units per month)From Rs. 30 to 100 per month MMFC for domestic categoryRs 60/month for one KW and Rs 50/month for every additional KW. MMFC for domestic categoryRs 80/ month for 1st KW and Rs 70/month every additional KW Demand charges to MI consumersshould be revised and made at par that of LI consumers. Energy charges slab for HT and EHT consumers(Up to 60% - 1 st Slab) (>60% = 70% - 3 rd Slab) Over drawl benefit up to 120% of CD during off peak period to HT and EHT consumers Recommended to be withdrawn
Proposed Tariff Rationalisation Measures – To consider actual AT&C loss in FY 2009-10 as base level and also Abraham Committee recommendation of percentage reduction for setting of AT &C loss. – Allow past losses as regulatory assets to be set off in future years through tariff along with interest. – To issue an order to bridge the revenue gap by revision of tariff and / or by Government Subsidy.
Annual Revenue Requirement CESU ARR 2010-11 Approved 2011-12 Projected % Change Power purchase cost 1159.951808.8255.94 Employee Cost 223.63329.4247.31 A&G Cost 35.8661.2870.89 R&M Cost 51.1962.5522.19 Depreciation 30.4588.74191.43 Bad Debts 22.0217.86-18.89 Interest & Finance charges 49.3797.4397.35 Reasonable return 11.64 0.00 Amortization of Regulatory Asset 000 Truing up of Revenue Gap for FY 2009-10 000 Less Expenses Capitalized 000 Contingency Reserve 000 Total ARR 1584.112477.7456.41 Observation: -CESU has proposed 56% hike in ARR for 2011-12
ARR Cost Component-Power Purchase Cost Issues: 1.Utilization of proposed power 2.Higher demand forecasts 3.Higher Distribution Loss 4.Lower Collection Efficiency 5.Higher AT & C Loss 6.Higher loss in LT and HT network
Utilization of Proposed Purchased Power Observation: - 35% power purchased is loss and actual sale is 65%
13 Demand Forecasting (In MU) Sale/ Purchase FY 2010-11FY 2011- 12 Projection in ARR % Change over 2010-11 Revised Estimates Number of Consumers Projection in ARR Revised Estimates (Based on actual data of Six months) % Change in (Rev Est. over Projection) As on 1/4/2010 As on 1/4/2011 % Change LT2255.652129.91-5.57 2609 22.50 1156568141839922.64 HT951.99929.1-2.40 1077 15.93 2313276119.37 EHT916.921414.6154.28 1526 7.86 202210.00 Total Sale 41254474 8.465212.0816.51 Total Purchase 74027168 -3.167968.0811.16 Observation: Utilities demand forecast is on higher side. This will result in higher power purchase cost in ARR and corresponding impact on consumers Submission : Excess power purchase cost is mainly due to excess loss at LT level. Utilities should be directed to drastically reduce the LT loss level.
Distribution Loss (%) Approved in ARR Approved in BP Actual AuditedPerformance 2007-08 29.33041.5+ 11.5 2008-09 29.3 40.3+ 11 2009-10 26.3 39+ 12.7 2010-11 25.37 ? 2011-12 24 ? Observation : There is huge gap in projected (35.59%) and approved (24%) distribution loss. Further, trend of actual distribution loss is increasing. Submission: Loss of revenue realization / higher energy purchase due to (10.59%, 843.85 MU, 191.55 Cr) higher distribution loss should not be allowed to passed on to consumer.
Collection Efficiency (%) Approved in ARR Approved in BP Actual AuditedPerformance 2007-08 92 94.1 2.1 2008-09 95 91.8 - 3.2 2009-10 98 96.7 - 1.3 2010-11 98 ? 2011-12 99 ? Observation: Collection efficiency proposed is in line with targets approved in BP. LT collection efficiency up to Sept 09 (Actual) is 96%. Submission: Nominal DPS to LT consumers if allowed could help to improve the collection efficiency.
AT & C Loss (%) Approved in ARR Approved in BP Actual AuditedPerformance 2007-08 3535.645 +9.4 2008-09 32.832.8445.2 + 12.36 2009-10 27.827.7741 + 12.23 2010-11 26.86 ? 2011-12 24.76 ? Observation: Licensee has proposed 35.14% AT &C Loss 100% Metering covered till Sept 2009 out of which 87% meters are in working condition.. Low Agriculture Consumption. This implies that the reason for higher AT&C loses could be 1)Lower HT to LT ratio. 2)Poor Power factor 3)Aged transmission lines and poor jointing 4)Less energy Audits 5)Faulty meters and metering 6)Higher thefts
Distribution Loss excluding EHT consumption FY 2009-10 Actual FY2010-11 Proposed FY 2010-11 Revised Estimates FY 2011- 12 Proposed Overall Distribution Loss 39.00%44.28%37.59%34.59% Distribution Loss Excluding EHT consumption 47.51%50.54%46.83%42.78% Distribution Loss Approved in BP 25.37%24% LT Distribution Loss Approved in ARR 29.4% Observation: Distribution loss in HT and LT level is much higher than the overall distribution loss (taking together LT, HT and EHT consumption) and approved distribution loss in BP. Submission: Utility needs to explore various measures to reduce LT and HT distribution loss. Further, faulty metering and power theft needs to be drastically reduced with the help of dedicated flying squad and energy police stations. Such energy police stations directly controlled by senior police officer attached to energy department could improve the efficiency of energy police station.
ARR cost component – Employee Cost Observation: The utility has proposed the Employee cost of Rs 329.42 Cr in ARR with 47.31% hike from the earlier FY 2010-11 Employee Cost per unit of Energy Purchase (Paise/Unit) % Rise in FY 11-12 over FY 08-09 FY 08-09 (App)FY 09-10 (App)FY 10-11 (App)FY 11-12 (Prop) CESU30.7932.2334.8341.3434.27 SOUTHCO47.0445.6256.5799.12110.72 NESCO21.9626.6728.8159.88172.72 WESCO19.3621.6026.7055.80188.21
ARR cost component – A&G Cost Observation: Utility has proposed A&G expenses of Rs. 61.28 Cr for FY 2011-12 which are 70.89% higher than that of approved expenses for FY 2010-11. Submission: Most of the A&G expenses projected by the utility are based on 7% hike from the current year in line with LTTS order. Further, utility has proposed higher expenses under the heads Rent rate and Taxes, legal expenses, consultancy charges, technical fees, advertisement, inspection fees, franchisee expenses, group insurance, special police stations, SAP, AMR etc without any detailed supporting plan and breakup of cost components. These expenses shall not be allowed to pass through in the ARR. A&G Cost (Paise/Unit) % Rise in FY 11-12 over FY 08-09 FY 08-09 (App)FY 09-10 (App)FY 10-11 (App)FY 11-12 (Prop) CESU4.964.775.597.6955.04 SOUTHCO6.516.847.5813.79111.94 NESCO3.123.683.347.11128.08 WESCO3.683.553.975.9160.48
ARR cost component – R&M Observation : Utility has proposed Rs. 62.55 Cr as R&M expenses. These expenses were projected as 5.4% of the opening GFA. (Rs. 1158.25 Cr. at the beginning of FY-2011-12) Submission: Utilities GFA approved by commission as on 31.03.2010 were 855.35Cr. Utility has projected the GFA as Rs. 1158.25 Cr. at the beginning of ensuring year. Which seems to be on higher side. Therefore Hon. Commission should consider the new additional GFA (during FY 10-11) over and above approved GFA of Rs. 855.35 and equivalent R&M be allowed to pass through in the ARR.
ARR cost component-Interest & Financial Charges Observation: Utility has proposed Rs 97.43 Cr as net interest charges in the ARR. This includes the major component of interest on world bank loan Rs. 79.38 Cr. Submission: Proposed interest charges should be reviewed with actual interest payments during FY 10-11.
ARR cost component – Provision for Bad Debt Observation: Utility has proposed Rs 17.86 Cr as provision for Bad Debt by considering 99% collection efficiency as against 99% approved in BP. Submission: Provision of bad dept 1% of revenue from sale of power is in line with the collection efficiency targets approved in BP.
ARR cost component-RoE Observation: As proposed equity capital is constant for the current and ensuring year. There is no equity capital infusion. Hence the Return on Equity should remain same as that of approved for FY 2010-11. Submission: Licensee has proposed Rs 11.64 Cr as RoE which is same as that of last years approved RoE which may be accepted.
Per Unit Distribution Cost Per Unit Distribution Cost (Paise /Unit) % Rise in FY 10-11 over FY 09-10 % Rise in FY 11-12 over FY10-11 FY 09-10 (App)FY 10-11 (App)FY 11-12 (Prop) CESU61.9966.0783.956.5827.06 SOUTHCO80.1193.11165.6516.2377.92 NESCO53.2553.31108.740.11103.98 WESCO41.7748.9992.5917.3089.01
Consumer category Number of Consumers FY 10-11FY 11-12Difference % Increase in Consumers Total LT consumers11,56,56814,18,33926177122.63 Total HT consumers2313276144819.37 Total EHT consumers2022210.00 Grand Total11,58,90114,21,18226228122.63 Observation: About 50 % of energy is proposed to be sold to LT consumers. Year on Year growth in LT consumers is 22% Minor change in LT tariff has considerable impact on ARR. As the LT consumer base is increasing there is likely possibility of further reduction of collection efficiency This will increase pressure of cross subsidy on HT and EHT consumers. Growth in LT consumers
Consumer category Number of Consumers Position as on 01.04.2010 Position as on 01.04.201 1 Addition in FY 2010-11 % Increase (1/4/10 to 1/4/11) Proposed Addition during FY 2011-12 % Increase (1/4/11 to 1/4/12) LT Domestic10,21,46111,23,60710214610.00?? Kutir Jyoti <=30 kWh11,3611,72,2191608581415.88?? Total LT domestic10,32,82212,95,82626300425.46?? Observation: The growth of BPL consumers is increasing due to GoI / GoO rural electrification schemes : growth in FY 2010-11 ( 1415%) & anticipated in FY 2011-12 ( ??? % ) as per submission in ARR. It is predicted that the cumulative BPL consumer in Orissa will raise to 40 lakh by end of 2011-12, accordingly the BPL consumers in CESUs area will further increase. Submission: In above situation, it will be difficult to maintain the EHT, HT & LT tariff so as to keep the cross subsidy within (+ / - ) 20% of average cost of supply. The subsidized BPL tariff should be strictly made applicable to the consumer having monthly energy consumption of 30 units. The OERC may recommend GoO to give upfront subsidy to DISCOM to cater the BPL consumer in the state. Growth in Kutir Jyoti / BPL consumers
28 Submission of Consumer Counsel CESUs projection of purchase forecasts are on higher side due to higher losses at HT and LT level. Cost of power of Rs 191.55 Cr due to higher distribution loss should not be allowed to pass through in ARR. Nominal DPS to LT consumers if allowed could help to improve the collection efficiency. The Utility has not taken any step to reduce distribution loss in the line of recommendations of the Kanungo Committee and OERC. Utility needs to explore various measures to reduce LT and HT distribution loss. Faulty metering and power theft needs to be drastically reduced with the help of dedicated flying squad and energy police stations. Such energy police stations if directly controlled by senior police officer attached to energy department could improve the efficiency police station. Higher A&G expenses should not be allowed to pass through in the ARR. Higher R&M should not be allowed to pass through in the ARR. Licensee should make effort to collect arrears in order to reduce deficit. ARR can be reduced by increasing collection efficiency, reducing losses and measures suggested by consumer counsel in the submission.. Hon. Commission may kindly consider all above facts and decide the retail tariff in the best interest of all category of consumers.