ARR

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ORISSA ELECTRICITY REGULATORY COMMISSION
Together, let us light up our lives.

• ARR Price Proposal
• of
• GRIDCO For FY 2007-08 and Views of
  Stakeholders
• February 15, 2007

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• GRIDCOs
• ARR PRICE APPLICATION
• FOR
• FY 2007-08

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Demand for and Sale of Power

• GRIDCO has filed ARR Price application for
  2007-08 for its bulk supply activity.
• GRIDCO and DISTCOs have furnished the following
  projections regarding demand and sale of power

Avg. of the
GRIDCO's
OERC
DISTCOs'
Actual from
Projection
Item
Approval
Projection
4/06 to 10/06
2006-07
2007-08
2007-08
SMD (MVA)
2226.76
3193.88
2400.00
2290.95
Sale to DISTCOs (MU)
14683.00
17549.30
16000.00
8674.65
120.00
Sale to CGPs (MU)
10.00
1.15
-
-
-
Export (MU)
Total Sale (DISTCOs
14803.00
16010.00
8675.80
CGP) (MU)
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Distco-wise Demand for and Sale of Power

• Distco-wise breakup of demand for and sale of
  power as projected by Distcos and Gridco are
  furnished in the table below

SMD (MVA) SMD (MVA) Sale to DISTCOs (MU) Sale to DISTCOs (MU)
Distcos Projection Gridcos Projection Distcos Projection Gridcos Projection
CESU 962.00 791.12 5225.00 5060.00
NESCO 768.00 588.14 5119.00 4110.00
WESCO 1142.54 716.86 5300.06 4925.00
SOUTHCO 321.34 303.88 1905.25 1905.00
All Distcos 3193.88 2400.00 17549.31 16000.00

• Discrepancies between Gridcos and Distcos
  projections may be explained.

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Transmission Loss and Power Procurement

• GRIDCO projects transmission loss of 5.00 for
  2007-08 based on first six months of 2006-07.
• A total energy procurement of 16,852.63 MU for
  the ensuing year has been considered.
• 16801.22 MU shall be drawn from both State and
  Central generators.
• The shortfall of 51.41 MU shall be met from
  outside the State _at_ 600 P/U.
• Total power purchase and the costs thereof have
  been projected as follows

Year OERC Approval (2006-07) Actual from 4/06 to 10/06 GRIDCOs Proposal (2007-08)
Power Purchase (MU) 15414.79 9554.03 16801.22
Power Purchase Costs (Rs. Crore) 1756.84 1054.24 2164.46
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Revenue Requirement, 2007-08

• GRIDCOs proposal of Revenue Requirement for
  2007-08 along with those of approved ones for
  2006-07 are presented in the table below

(Rs. Crore)
Item OERC Approval 2006-07 GRIDCOs Projection 2007-08
A. Power Purchase Cost 1756.84 2164.46
B. Uncovered Expenses 480.12 677.01
Proposal for pass through of past losses towards repayment of principal 480.12 497.49
Arrear fixed cost charges of TTPS after adjustment of Tariff revision of TSTPS FSTPS 103.93
NTPCs claim towards arrear Income tax 26.28
Amount paid/payable to OPGC during 2006-07 39.36
Differential Fixed Costs of TTPS for 2006-07 (Rs195.01 cr revised Fixed Costs minus Rs185.06 cr as approved by OERC) 9.95
C. Total of other expenses ( Interest, Employee, AG Cost etc.) 209.06 187.16
Interest Cost 204.34 180.72
Other Cost (Employee, AG Cost etc.) 4.72 6.44
D. Return on Equity - 60.62
Total Revenue Requirement (A B C D) 2446.02 3089.25

• Clarification may be given whether GRIDCOs
  Projection of Power Purchase Cost at Rs. 2164.46
  cr includes export figures. Further ROE of Rs
  60.62 cr is claimed in the absence of equity base.

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Pass through of past losses and uncovered
expenses

• The accumulated loss of GRIDCO as on 31.03.2006
  stands at Rs1002.20 Cr as per audited balance
  sheet.
• GRIDCO proposes a sum of Rs.677.01 crore to be
  passed on to tariff under this head during
  2007-08.

Rs. Crore
Sl. No.
GRIDCOs Proposal
Item
1
Proposal for pass through of past losses towards
repayment of principal
497.49
2
Arrear fixed cost charges of TTPS after
adjustment of Tariff revision of TSTPS FSTPS
103.93
3
NTPCs claim towards arrear Income Tax
26.28
Amount paid / payable to OPGC during 2006-07
4
39.36
Dirrerential Fixed Costs of TTPS for 2006-07 (Rs
195.01 cr revised fixed Costs minus Rs. 185.06
cr as approved by OERC
5
9.95
TOTAL
677.01
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Other Expenses

• GRIDCOs proposal relating to interest and
  establishment costs are presented in the table
  below

Rs. Crore
GRIDCO's
Sl.
Particulars
Proposal for
No.
2007-08
1
Interest Cost
180.72
Other Costs
2
a
Employee Cost
3.09
b
2.03
AG Cost
c
ERLDC, NLDC fees and SLDC
1.32
Scheduling Charges
Sub-Total - Other Costs
6.44
Total (12)
187.16
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Expected Revenue from Charges, 2007- 08

• GRIDCOs proposal for net total revenue receipts
  for 2007-08 at the existing rates (along with the
  approved figures for 2006-07) are presented in
  the table below

(Rs. Crore)
GRIDCO's
OERC Approval
Proposal
Item
(2006-07)
(2007-08)
1. Revenue from Demand Charges
534.42
864.00
2. Revenue from Energy Charges
1240.02
2221.95
3. Misc. Other Receipts
167.06
3.30
- Sale to CGPs
36.96
3.30
- Export
-
-
- Unscheduled Interchange
-
-
- Receivable from DISTCOs
110.10
-
- Receivable from outside States
20.00
-
4. Net Total Receipts (12-3)
1941.50
3089.25
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Tariff Proposal, 2007-08

• GRIDCOs proposal for demand and energy charges
  for 2007-08 are presented in the table below

Year Demand Charges (Rs/ KVA) GRIDCOs Proposal for Energy Charges (P/U)
2007-08 300 138.87
Average Energy Charge 192.87
Rise over current average energy charge_at_120.88 P/U 59.56
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Views of Stakeholders
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Views of Stakeholders

• Legal Issues
• The ARR application filed by GRIDCO for
  determination of price is not tenable as the
  Commission has no authority under law and more
  particularity u/s 62 of E. Act. 03, to determine
  tariff on the application of a non-licensee i.e.
  GRIDCO.
• Functioning of GRIDCO as trading company/
  licensee is unnecessary that too in the absence
  of competition.
• Notice so published inviting objections does not
  conform to the requirements.
• The procedure/method adopted by the Commission
  should be made simple and inexpensive to enable
  the public to participate.
• The Commission may kindly examine whether the
  licensee has complied with the directions,
  conditions of licensee etc. issued by the
  Commission?

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Views of Stakeholders

• Energy Availability
• Some stakeholders put the total power
  availability at 18,815 MU as compared to 16,801
  MU projected by GRIDCO.
• It is pointed out that GRIDCO has not
  independently assessed the availability of hydro
  power for 2007-08, but has merely accepted the
  figure submitted by OHPC based on design
  energy.
• Availability of power from hydel stations should
  be considered on the basis of the reservoir
  levels of the stations in the current year and
  their generation performance levels in the first
  seven months of FY 07.

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Views of Stakeholders

• Energy Availability Cont
• Some stakeholders have taken into account the
  design energy of the hydel plants, their
  performances in the earlier years and the
  reservoir levels on the 1st day of October 2006
  for computing hydro power availability.
• They submit that the availability of power from
  State hydro stations would be 7128 MU in FY 08 as
  against GRIDCOs proposal of 5856 MU.
• GRIDCO should schedule for higher capacity
  availability from OHPC through suitable
  incentives.
• Some estimate the availability from CGPs at 630
  MU as against GRIDCOs proposal of 540 MU.

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Views of Stakeholders .. Contd.

• Demand Energy Requirement
• OERC should scrutinize the projections given by
  DISTCOs and GRIDCO and arrive at actual
  requirement of power and approve the same.
• One objector has agreed to the DISTCOs
  projection of SMD and energy requirement as
  opposed to those projected by GRIDCO.
• The quantum of energy estimated by GRIDCO for
  sale to Distcos may not be considered as the
  Distcos have submitted their requirement in their
  respective ARR. The drawl of energy submitted by
  the Distcos may be considered.

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Views of Stakeholders .. Contd.

• Demand Energy Requirement Cont
• There would be surplus of energy during 2007-08
  to the extent of 213 MU (as against a deficit
  projection of 51.41 MU by GRIDCO) which may be
  sold through UI at the peak hours.
• For Simultaneous Maximum Demand, OERC may accept
  GRIDCOs figure as DISTCOs figures can not be
  correct.
• The average SMD as proposed by NESCO, WESCO
  SOUTHCO are 673 MVA, 950 MVA and 300 MVA
  respectively and the same may be taken for
  computation of Revenue of GRIDCO.

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Views of Stakeholders .. Contd

• Transmission Losses
• Most objectors are critical of GRIDCOs
  projection of transmission loss at 5.
• The Licensee has miserably failed to arrest the
  high transmission loss.
• The average transmission loss in the OPTCL system
  has been taken as 5 which contradicts the
  recommendations of the High Power Committee.
• The method of transmission loss computation
  adopted by GRIDCO is not acceptable to the three
  reliance companies.
• GRIDCO should examine with OPTCL and determine
  the sections of transmission lines where higher
  transmission loss is occurring.

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Views of Stakeholders .. Contd.

• Pass Through of Past Losses Uncovered Expenses
  
• All losses of erstwhile OSEB and subsequently of
  GRIDCO from retail sale were kept in GRIDCOs
  book and distribution privatized with zero loss.
• Past losses now suggested to be passed on to the
  consumers, are due to un-prudent expenditure by
  GRIDCO which was in excess of the amount approved
  by OERC.
• GRIDCO has also requested for pass through of all
  the past losses to the extent of repayment of
  loans and liabilities which the Commission may
  examine.

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Views of Stakeholders .. Contd.

• Pass Through of Past Losses Uncovered Expenses
  Cont
• Past losses are mostly on account of the
  licensees inefficient operation and are,
  therefore, not payable.
• GRIDCO should pray for a central subsidy to wash
  off all past losses. Incidentally a major part of
  these losses went as gains to central generating
  companies.
• The Commission should reject treatment of past
  loss and direct GRIDCO to adjust the same against
  its earnings from ABT and power trading.

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Views of Stakeholders .. Contd.

• Revenue Requirement Tariff
• Commission may decide the status of GRIDCO and
  then say whether GRIDCO is authorized to file an
  ARR instead of charging only 4 margin.
• Revenue receipt will increase due to sale of
  additional power as assumed by GRIDCO.
• Revenue expenses on transmission will decrease as
  consumers should not pay the interest on bonds on
  account of arrear energy charges.
• Expenditure will decrease if pass through claims
  of GRIDCO are critically scrutinized by OERC.
• The cost of procurement of power will decrease
  substantially if the factors determining the cost
  of power are scrutinized.

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Views of Stakeholders contd.

• Revenue Requirement Tariff Cont
• There is no justification in proposing any
  increase in Bulk Supply Price for FY 2007-08 by
  GRIDCO.
• OERC allowed increase in BST during 2006-07 which
  encouraged GRIDCO to inflate its claims.
• The Commission should scrutinize the Application
  of GRIDCO and reduce the BST for the FY 2006-07.
• The prices should be differentiated for peak and
  off-peak supply and the tariff should include
  variable cost of generation at actual levels and
  reasonable compensation for capacity charges.
• GRIDCOs proposal for a steep increase in BST, if
  accepted, will only help to close many industries
  and deny power to many households.

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Views of Stakeholders contd.

• GRIDCO should avail of cheaper loans to pay back
  costlier loans taken earlier.
• Interest allowed in ARR for NTPC Bond may be
  trued up.
• Similar principles may be followed while
  approving the interest cost for 2007-08.
• Interest towards securitization as well as
  capital of securitization should not be passed on
  to the ARR.
• Commission need not consider the ROE of Rs. 60.62
  crore as proposed by the licensee.
• OPTCL may be directed to limit the transmission
  losses to a figure less than the approved loss of
  4 for 2006-07.

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• VIEWS OF GRIDCO/STAKE HOLDERS REQUESTED ON THE
  FOLLOWING ISSUES

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Issues in BSP 2007-08

• Projection of a rise of 7.65 in consumption for
  the year 2007-08.
• Hefty rise in demand projected needs attention.
• GRIDCOs projection of transmission loss of 5.
• Latest reservoir levels in hydel stations and
  maximization of drawl.
• Justification of allocation of power from KhSTPS.
• Maximization of drawl from CGPs.
• Justification of claim of past losses uncovered
  expenses to the tune Rs. 677.01 crore.
• Interest cost of Rs 180.72 crore.

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Thank You