1. 1 ARR and Transmission Tariff Proposal of OPTCL for FY 2007-08 Together, let us light up our lives. ORISSA ELECTRICITY REGULATORY COMMISSION

2. 2 Transmission Assets of OPTCL Voltage Level (KV) Length of Line in Ckt-Km No. of Bays 400460.5027 2204482.37181 1324613.06515 330.00716 250.005 110.0062 Total9555.931506 OPTCL has 75 grid sub-stations including switching Stations.

3. 3 Sources of Revenue for 2007-08 Sl.No.Customer MU approved for 2006-07 MU proposed to be Handled (2007-08) Rate (P/U) Energy Handled before Transmission Loss (MU) Amount Rs. Crore 1.CESCO 41645060225060111.32 2.NESCO 4169411022411090.42 3.WESCO 46004925224925108.35 4.SOUTHCO 1750190522190541.91 Total DISTCO 1468316000 352.00 5. Emergency sale to CPP 1201022100.22 6. Wheeling of ICCL power 350 20022210.534.63 7. Wheeling of NALCO power 10022105.262.32 Total 1515316310 16325.79359.17  OPTCL will earn miscellaneous receipt of Rs.3 crore from inter-state wheeling of 300 MU @10 paise/unit.

4. 4 Revenue Requirement Item Approval for FY 2006-07 OPTCL’s Proposal for FY 2007-08 Employee Cost115.16182.12 A&G Cost14.8914.79 Repair & Maintenance Cost36.0054.00 Depreciation43.5152.95 Advance against Depreciation48.0984.18 Interest on Long Term Liabilities68.03116.38 Interest on Working Capital-15.13 Reasonable Return-8.40 a) Sub-Total325.68527.96 b) Pass Through Expenses138.33 c) Additional Expenses (Contingency Reserve + GCC Expense) 12.5912.05 d) Total ARR (a + b + c)678.33 e) Less inter-state wheeling5.003.00 f) Net Transmission Cost (ARR) = d - e333.27675.33 Note : (i) No. of employees 5022 (ii) OPTCL should provide actuals for 2005-06 and first half of 2006-07 in respect of revenue requirement.

5. 5 Repair & Maintenance Expenses YearApprovedActual 1999-0019.849.51 2000-0114.679.90 2001-0215.998.81 2002-0317.439.35 2003-0413.357.03 2004-0514.074.59 2005-0614.806.94 2006 - 0736.00 (Provisional) 2007- 08-54.00 (Proposed)  Actual R & M Expenses have been much less compared to the approved figures.

6. 6 Principal as on 01-04-07 Interest Approved for 2006-07 Interest Proposed for 2007-08 Total Govt. Loans428.261.04 27.27 Total Institutional Loans60.906.387.35 Total Secured Loan612.2052.8649.15 Total GRIDCO Bonds120.0312.7510.65 Total Deposit from EHT Consumers 25.51-1.36 Other Loans and Finance charges--- Total1246.9173.0395.78 Less Interest Capitalization5.00 New Projects Loans in 2007-08228.9020.60 Grand Total1475.8168.03116.38 Loan Details (Rs Crore)

7. 7 Depreciation & AAD The detailed Statement of Fixed Assets and block-wise computation of depreciation is given as under: Rs. in Crore Fixed Assets Depreciation Rate prescribed by CERC Gross Block (01-04-2005) (As per GoO Transfer Notification) Gross Block As on 01-04- 2007 (Provisional) Proposed Depreciation For 2007-08 (Rate as per CERC) Land and Rights 33.40 - Buildings 1.80%64.58 1.16 Plant and Machinery- (Other Civil Work) 1.80%4.13 0.07 Plant and Machinery 2.57%730.14 18.76 Plant and Machinery - (Lines, Cables & Network Assets) 2.57%923.361,258.2932.34 Vehicles 18.00%1.23 0.22 Furniture, Fixture 6.00%1.67 0.10 Office Equipment 6.00%4.77 0.29 Total 1763.292098.2252.95  OPTCL proposes Advanced Against Depreciation (AAD) of Rs. 84.18 cr based on CERC norm.  OPTCL should have provided loan repayment schedule and compared the same with allowed depreciation to justify the necessity of AAD.

8. 8 Pass Through Expenses  The details of past losses & estimated uncovered gap during FY 2005-06 & FY 2006-07, are shown in the table below: Summary of uncovered expensesAmount (Rs. in Cr.) Sl. NoItemsUn-Covered Gap 1 Loss for FY 2005-06 (based on Provisional Accounts for FY 2005-06) 9.94 2 Expected Uncovered gap during FY 2006-07 Employees Cost including Terminal Benefits for 2006-07 (Prorated based on Apr'06 to Sep'06) 168.33 OERC Approval for 2006-07 115.16 53.17 3Interest on Loans As per Repayment Schedule 111.65 OERC Approval for 2006-07 68.03 43.62 4Repayment of Principal As per Repayment Schedule 122.95 OERC Approval for Depreciation & Advance Against Depreciation 91.60 31.35 Total 138.08  What about transmission charges on account of export of power and Open Access customers?

9. 9 Excess or Deficit in ARR & Tariff Design Excess or Deficit in ARR for 2007-08 is shown below: ItemTariff Proposal for 2007-08 Total Net ARR to be raised through Tariff (Rs. Crore) 675.33 Expected Revenue at existing Transmission Tariff i.e. 22 P/U (Rs Cr.) 359.17 Excess or Deficit in ARR (Rs Crore)316.16 Tariff Options : Option 1 : Monthly Fixed Transmission Cost for Recovery (Rs Crore) 56.28 Option 2 : Total Energy for Transmission (MU)16310 Proposed Transmission Tariff (P/U)41.41

10. 10 Schedule of Transmission Charges Transmission Charge @ Rs.56.28 crore per month or @ 41.41 P/U shall be applicable for the purpose of transmission energy from generator end to the substation. Transmission charge shall be applicable on prorata basis on quantum of energy delivered to long-term customers. Long Terms Open Access Charges shall be Rs. 9937.48/MW/Day and Short Term Open Access Charges shall be Rs. 2484.37/MW/Day in addition to other applicable charges and losses. Rebate shall be 2% of the amount of the monthly bill if full payment is made within 48 hours of presentation of bill. 1.5% of the amount of monthly bill, if a minimum of 85% of whole amount is paid within 48 hours and 1% on the balance amount if paid in full within 15 days. 1% of the monthly bill if full payment is made within 15 days from the date of presentation of the bill. DPS : If the payment is not made within 30 days, DPS @ 2% shall be levied prorata for the period of delay from the due date. Duty & Taxes : ED levied by the State Government and any other Statutory levy/duty/tax/cess/toll imposed under any law shall be charged over and above the Tariff.

11. 11 Time & Cost Overrun OPTCL is required to justify the huge amount of loan (Rs 228.90 cr) taken for new projects during 2007-08. OPTCL does not make cost-benefit analysis of delaying a project and also the revenue earning thereof. Delay in completion of the on going projects has added to interest during construction. This has raised project cost and finally transmission tariff. Why the same shall be allowed in revenue requirement?

12. 12 Views of Stakeholders

13. 13 Views of Stakeholders Transmission Costs: Some stakeholders estimate employees cost at Rs 128.69 crore while some others stated this should be based on the approved cost for 2006-07. Others stated that in absence of the figures relating to man-power for 2006-07 & 2007-08, the projection of employees cost at Rs. 182.12 crore is not justified. OPTCL has proposed O&M cost of Rs. 250 crore based on CERC norms mentioned for inter-State transmission system of Power Grid Corp of India. OPTCL’s proposal for investment towards Contingency Reserve does not find support in the OERC Tariff Regulation, 2004 and National Tariff Policy. No reasonable return may be allowed to OPTCL along the lines of thinking adopted for the year 2006-07. The R&M cost, depreciation and interest cost have been over stated and should be determined based on the norms adopted by the Commission for 2006-07.

14. 14 Views of Stakeholders Transmission Costs: Cont… The Original Cost of Fixed Assets should not be based on the up rated value of the assets as on 01.04.1996. Depreciation calculated by OPTCL at Rs 52.98 crore for 2007-08 needs detailed verification and may have to be trimmed. Some stakeholders considered depreciation of Rs 43.51 crore to be allowed during 2007-08. Regarding short fall of repayment of loan over and above the allowed depreciation, OPTCL may negotiate with the Banks / FIs for a longer tenure or moratorium for repayment of Principal. Some have suggested that advance against depreciation might be disallowed. Advance against depreciation is disallowed in the National tariff policy based on which ATE has also disallowed the same. OPTCL has not provided a comparative chart of loan repayment and allowable depreciation to justify provision of AAD.

15. 15 Views of Stakeholders Tariff: National Electricity policy envisaged a tariff mechanism sensitive to distance, direction and quantum of flow. The Commission may determine transmission tariff for 2007-08 based on the approved norms for 2006-07. Taking the quantum of energy handled as 16310 MU, the transmission tariff has been calculated at 17.3 P/U by one stakeholder. Further, there is scope to reduce tariff to 15 P/U. Some stakeholders estimated transmission tariff at 13 paisa per unit. Transmission tariff should not be made applicable to CGPs operating in the State for wheeling of their power. Wheeling charges for the CGPs should be reduced. Proposed STOA rate appears to be higher as compared to those in the neighboring states. LTOA charges may be fixed at Rs 4052.79/MW/day and STOA charges at Rs 1013.20/MW/day for 2007-08.

16. 16 Views of Stakeholders Transmission Loss: Most stakeholders did not agree with OPTCL’s proposal of 5% transmission loss. The reasons stated to enhance the “transmission loss” to 5.00%, against the target of 3.70% is unacceptable. Based on the previously allowed loss figure of 3.58% in 2003-04 and stipulated reduction of 0.3% per year, the present allowable transmission loss for 2007-08 should be 2.38% only. However, transmission loss of 3% may be allowed during 2007-08. Some submitted that the transmission loss should be less than 4%. SOVEN KANUNGO COMMITTEE had recommended a stepwise reduction of transmission loss so that the same is brought down to a level at par with that of CTU (i.e. the POWER GRID) by 2007. OPTCL should be directed to reduce the transmission loss to a level below 3% in coming 3 years starting from 2007-08 with a base level loss of 4% as approved by the Commission for 2006-07.

17. 17 Views of Stakeholders Finance : An amount of approx Rs. 75 crore may be allowed towards interest payable against OPTCL’s proposal of Rs. 116.38 crore. Some stakeholders computed the interest on loan based on the principle adopted by OERC and put the same at Rs 41.15 crore. As the loan base is yet to be divided in to capital expenditure loan and working capital loan, no interest on loan be allowed to OPTCL in the ARR 2007-08. The amount claimed for pass through of previous losses and liabilities, needs a detailed examination by OERC. The claim made by OPTCL towards past losses has no merit as these items were already dealt in the ARR of 2006-07.

18. 18 Views of Stakeholders Transmission Projects: Delay in completion of the on going projects has added to interest during construction. This has raised project cost and finally transmission tariff. Why the same shall be allowed in revenue requirement? OPTCL has not furnished firm dates to complete the ongoing transmission lines. OPTCL should be directed to complete all the projects as per the target dates fixed by the Commission. OPTCL’s filing do not indicate as to how many lines at different voltage levels are operating under normative surge impedance loading as per CERC guidelines. The ARR application does not throw any light on transmission planning and systematic investment required to construct the EHT lines / substations to develop the requisite evacuation system in order to meet the additional power demand of 9000 MW of Orissa Power Sector by 2010/2011.

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