INTRODUCTION

From its inception it has been the endeavor of the Punjab State Electricity Regulatory Commission (PSERC) to ensure that its proceedings are so conducted that the entire process of tariff determination is open, accessible, participatory and completely transparent. The process of inviting objections and conducting public hearings reflects the Commission?s policy to associate all stakeholders and incorporate their key concerns in both the process of tariff determination and also ensure accountability of the Utility to consumers. A vibrant and well informed grassroots consumer movement is the most effective aide for any Regulatory supervision.

Objections are received in the prescribed format, on affidavit, each year. While the numbers of objections are declining, over time, the quality of presentation and documentation of those filed has improved substantially with each year. The Commission would like to place on record its appreciation to the participating consumers and organizations for the comprehensive inputs received through the Objections and the Public hearings. A heartening development this year has been the participation of a large number of Gram Panchayats, Nagar Councils and representatives of rural consumers.

Consumer vigilance is a significant factor in maintaining quality. The Supply Code, which will incorporate quality standards for supply of electricity and regulations pertaining to ?Forum? and ?Ombudsman? to enforce the said quality standards for consumers protection and redressal of their grievances is in an advanced stage of formulation.

The main issues that have been raised by the Objectors this year have been placed in three broad categories which have been discussed hereunder :

·         Technical Objections

·         Non-Technical Objections

·         Commercial Objections

Detailed replies have been furnished to each Objector by the Board.  An opportunity for personal hearing and soliciting the response of the Board?s representatives has also been afforded during the Public hearings. While an attempt has been made to include a wide cross-section of the objections filed, and the Boards? views thereon, the details in the narrative hereunder are constrained by space. Hence attention is also invited to Chapter 2 (True-up of 2003-04) Chapter 3 (Review of 2004-05), Chapter 8 (Tariff Related issues)  and Chapter 9 (Determination of Tariff) for more details and the View of the Commission.

Objections Raised

T&D Losses: Consumers and Consumer Organizations who attended the Public hearings of the Commission were unanimous in stating that the high T&D losses reflected on the functioning of the Board, its ineffectiveness in identifying technical losses through energy audit, and in curtailing theft. If technical and commercial losses could be curtailed, it would result in lower power purchase, lower costs and greater availability of energy.

Confederation of Indian Industry, Northern Region(CII) has stated that T&D loss @ 22% as fixed by the Commission for 2005-06 works out to 6733 MU as against 7864 MU projected by the Board, and this would save  Rs.346 crores @ Rs 3.06/unit. SIEL Ltd has commented that the external transmission losses taken as 4% for FY 06 are very high. Mandi Gobindgarh Induction Furnance Association(MGIFA), Consumer Protection and Grievances Redressal Forum Regd (CPGRF), Steel Furnace Association of India (SFAI) and Commercial and Industrial Undertakings(CICU)have all objected to T&D losses of 24% which should be scaled down to 22%. Steel Re-rolling Mills Association of India (SRRMAI) has suggested that a special Experts? agency should be appointed to conduct an in-depth study for checking theft and leakages. Punjab Alkalies and Chemicals Ltd (PACL) feels increase in agriculture consumption is the reason for higher T&D losses, and should be compensated by the GoP or else supply limited upto the hours approved by the Commission and not loaded on other categories. PSEBEA has offered several useful suggestions including installation of LT shunt capacitors for every tubewell and for ACs in DS/NRS premises, registering of FIR for theft of energy cases above 10 KW under Section 135 of the Act and also stated that Directive No 10 of Commission would give a setback in the efforts to check unauthorized loads as permissible under the Act. 

Theft : Mr S P Bansal of Bhatinda has attached copies of press clippings to substantiate large scale theft of energy. CICU and PACL have also drawn attention to large scale theft. CPGRF has objected to the Board?s action of retaining 19 employees who were convicted in corruption cases, and suggested that anti-theft legislation can be implemented as been done in Andhra Pradesh and West Bengal.

Energy Audit: AISRRA and MGIFA have submitted that as the Board has installed electronic meters on all 11 KV feeders, it can now establish transmission losses upto 11 KV supply and determine cost of supply to LS consumers. They have sought suitable time bound directions to the Board by the Commission for metering of electricity by March 2006.  PSEBEA has again offered valuable suggestions such as putting loss figures of urban/industrial feeders on the website, assigning responsibility of each 11 KV feeder to a feeder manager who could be JE or AJE, and providing energy meters at every distribution transformer.

            Response of PSEB

The Board has submitted that the T&D losses were assessed at 27% for 2003-04 based on AP Consumption of 1650 KWH/KW/year. Even if the Commission?s Orders are accepted by the Board, the T&D loss reduction trajectory for the future years should be fixed considering the T&D losses of 27% and AP Consumption Norm of 1650 KWH/KW/Year for 2003-04 as the base and provide appropriate increase in the AP consumption for recognizing the effect of depleting water table and the shift towards submersible pumpsets as discussed in Para on AP Consumption in the ARR Petition. The Board has further asserted that T&D losses in Punjab are one of the lowest and the Commission should consider the loss level in the neighboring states like Delhi, Rajasthan & Haryana etc. and loss trajectory being allowed by the respective SERCs.  Any further reduction in T&D loss cannot be substantial in view of the fact that the loss level has already reached a plateau.

The Board has explained that it is considering the option of underground service lines, shifting of meters near the gate of the house etc. in theft prone areas.  Instructions have already been reiterated on 6.6.2002 informing that if any employee of the Board is indulging in theft or found helping in making theft of energy, minimum punishment shall be dismissal from service. A compulsory rotation of staff in ME labs and Enforcement Wing is being enforced. Public is invited to report cases of theft/pilferage and connivance of employees.  However, the Board admits that it is yet to make a significant dent in technical and commercial losses. The Board has noted the suggestions made by PSEBEA and shall examine the same for implementation.

It is making all efforts to address the operational bottlenecks, feeder codification, consumer indexing and ascertaining of feeder-wise losses for implementation of energy accounting. The Board is compiling monthly/quarterly reports on the feeder-wise loss levels, which are analyzed in CCR office and instructions issued to the concerned officers to take corrective action. Regarding suggestions made by PSEBEA, the Board appreciates the need for energy audit and has been taking steps, details of which are given in Para 20.4, page 70 of the ARR petition.

            View of  the Commission

The Commission decides to fix the Target for T&D losses at 22% for the year 2005-06.  This issue is discussed in detail in Chapter 7, Para 7.2.  The Commission has also noted that the Board has commenced Energy Auditing, hence it reiterates its advice to the Board to make serious efforts to reduce technical and commercial losses and enforce accountability of officers and staff for this purpose. Directive No. 11.10 of Chapter-11 of the Tariff Order for the year 2004-05 was issued to prevent harassment of consumers and will continue conditionally subject to the discussion in Chapter 8, Para 8.4.  Attention is invited to Directive at Para 10.1, Chapter 10.

Objections Raised

CII and SFAI have submitted that the Board has estimated agriculture consumption at 7364 MU considering 1814 kwh/kw/year norm for the year 2005-06. However, the Commission in its Tariff Order for the year 2004-05 has approved a norm of 1650 kwh/kw/year and has allowed 5% annual increase in the connected load, which gives energy consumption of 6332 MU, i.e. a difference of 1032 MU, and thus @ Rs.3.06/unit would result in saving of power purchase of Rs.316 crores. Bhartiya Kisan Union (BKU) has submitted that there should be 12 hours continuous power supply to agricultural consumers, and increase in capacity according to load augmentation. They have made a plea for agricultural consumers to be treated on par with domestic consumers. PSEBEA has suggested that the consumption of pumpsets can be assessed by deducting metered domestic consumption from energy sent out on 11 KV tubewell feeders, and factoring in the line losses. They have also emphasized the need for compulsory metering and capacitor installation on AP motors.

Response of PSEB

The Board has submitted that since the Commission had accepted the sample meter readings for 2002-03, they should accept the readings now available from an enhanced sample size of 5%. It has informed that the ongoing PAU study has concluded that electricity consumption norm does not vary with rainfall, since farmers use DG sets to meet their residuary requirement. The study has however found a correlation between electricity consumption and water table depletion and increased number of submersibles in the tubewell population. Electricity consumption increases by 2.95% for every one metre drop in water table (water table has been depleting in the state of Punjab @ 0.23 metre per annum). The share of submersible pumpsets, which was 11 % in 2001-02 has increased to 24% in 2004-05. Submersible pumpsets consume 25-40% more power than monoblock pumpsets of the same rating as the water table is depleting with passage of time.

The Board has also detailed its efforts to supply adequate, quality power to all consumers. 700 overloaded 11 KV feeders have been identified and the work for bifurcation / augmentation of these feeders is under progress. New distribution transformers are being added, and strict compliance of capacitor installation enforced to improve voltage profile. Out of 12428 inhabited villages in the State, 8428 villages stand covered under UPS. The supply to remaining 4000 villages is expected to be covered under this scheme within the current year. The Board also explained that supply exigencies require regulation in shortage situations and the Board undertakes power cuts in a manner that ensures the interest of all sections of Society.  The Board has noted the suggestions of the PSEBEA and will consider their implementation.

   View of the Commission

The Commission decides to allow agricultural consumption of 7000 MU for 2005-06. The issue is discussed in detail in Chapter 7, Para 7.1.3. Attention is invited to Directive at Para 10.2, Chapter-10.

Objections Raised

Nahar Industrial Enterprises (Nahar) and PHD Chamber of Commerce and Industry (PHDCCI) have pointed out that inspite of thermal generation being lower, the R & M expenditure has increased by 11%. SIEL Limited has pointed out that financial losses which incurred due to the delay of 4 months for carrying out R&M works in the second unit of GNDTP Bathinda plant should be recovered from M/s NASL or borne by the Board. They have also objected to comparison of GHTP plant commissioned in 1997-98 with Tanda & Talchar stations of NTPC which are very old. They have queried, whether there is justification in Board?s claiming extra generation incentive when the Board is already paying incentive for higher PLF and low secondary fuel consumption to the workers and these are being passed on to consumers through Employee Cost. The Plant Availability Factor(PAF) for GNDTP increased by 10% over FY 05, but the Plant Load Factor(PLF) increased by only 2%. Also the PLF of GGSTP & GHTP has reduced as compared with FY05, but with shortage conditions, there is no justification in reducing the in-house generation and increasing the quantum of purchases through traders. PACL, AISRRA, Rajpura Small Scale Industrial Association (RSSIA) and MGIFA have submitted that the PLF of GNDTP at 54.48% for the year 2005-06 is on the lower side. Associations have also commented on the cost of secondary fuel oil for 2005-06 being taken for all three stations as Rs14000/ Kilolitre when the rates of oil for three stations would be different depending upon the transportation cost, type of secondary fuel and whether they attract octroi or not. PSEBEA has highlighted the Draft Tariff principles for determining operating norms for generation namely, ?norms to be relatable to past performance, to be capable of achievement and at normative levels not lower of normative or actuals? and requested  for its consideration in the Tariff Order.

Station Heat Rate : Siel Limited has submitted that for the two stations other than GNDTP Bhatinda, the Station Heat Rate has been calculated from the date of commissioning which includes the period for which the plant remained shut down which is not justified. Under the same DIN 1943 standards, factors of ageing have been provided differently. The capital maintenance works of Turbine and Generator undertaken at huge cost are totally ignored. PSEBEA has however requested for allowing higher Station Heat Rate based on DERC order for IP station( 3235) of 1974 vintage and Rajghat TPS (3200) of 1990 vintage. They have pointed out that the Board?s ARR does not take into account decline in boiler efficiency @.06% per year and consequential degradation in SHR.

Fuel Cost & Transit Loss of Coal : CII has considered a transit loss of 1.67% for all stations for 2005-06 based on the Commission?s norm. Based on this, it has found that the Board has claimed 86959 tons of coal lost in transit, in excess of the approved limit, thereby increasing the purchase cost of coal by Rs.20 crores. AISRRA, MGIFA, CICU, SFAI and PACL have all submitted that the Board should achieve lower transit loss for its thermal stations. SRRMAI has proposed that proper grade of coal should be arranged and coal washeries installed to tackle the high ash content. Ramesh Talwar and SRRMAI have suggested commissioning of Nuclear Power Plants as a cheap and non-polluting alternative source of energy. PSEBEA, Nahar and PHDCCI have stated that the basic idea behind using imported coal is to have better efficiency as the cost of imported coal at Rs.183 crores on a net generation of 10662 MU translates into a fuel cost increase of 17.16 paise/unit.

Auxiliary Consumption :  CII, SIEL Ltd, MGIFA and SFAI have objected to the auxiliary consumption of the Board?s thermal plants which is higher than CERC norms of 9%. SIEL Ltd also rejected the justification given by the Board. PSEBEA has however requested for allowing higher Auxillary Consumption based on DERC order for IP station( 11.64%) of 1974 vintage and Rajghat TPS (11.28%) of 1990 vintage.

Fuel Surcharge: SRRMAI has requested that if any fuel surcharge is imposed, the decision should be based for the full financial year after hearing the grievances of the consumers.

Maintenance Schedule: CICU has stated that the maximum power shortage occurs in the months of June to September every year due to paddy. The Board should be so directed that the maintenance schedule of units should be planned accordingly.

Response of PSEB

The Board has submitted that the R&M cost for the FY 2005-06 has been projected on the higher side because of the planned maintenance schedule of the thermal plants which are over 25 years (GNDTP) and 20 years (GGSTP) old. Regarding the recovery from M/s NASL due to delayed completion of R&M works of Unit II of GNDTP Bhathinda, Board has stated that liquidity damages shall be claimed as per the agreement. The Board has admitted that GHTP plant has inadvertently been compared with Tanda and Talcher stations of NTPC but feels that Board should get an incentive for outperforming the CERC norms for thermal stations. The incentive factored in the employees cost is for outperforming the CERC norms. Regarding the cost of secondary fuel being taken as Rs 14000 / Kilolitre, the Board has submitted that although the prices were different for the three stations but since the variation is not very large it was considered appropriate to project a representative average cost for all the three stations. The PLF in respect of GGSTP and GHTP are comparable to CERC norms. Regarding the improvement in PLF of GNDTP station being low when compared with the improvement in the availability factor, the Board has submitted that GNDTP station currently has the highest per unit generation cost amongst the three thermal stations. Therefore while implementing the merit order principle, it attracts the maximum backing down. The Board has requested the Commission to consider the GOI?s Draft Tariff Policy for Tariff Order and truing-up.

Station Heat Rate : The Board has submitted that the guaranteed heat rate, ageing factor and boiler efficiency considered for SHR calculations are based on the norms provided by M/s BHEL, supplier of the plant for the respective stations. While the calculations have factored the generator efficiency for GHTP station, the same has inadvertently been missed while calculating the station heat rate for GGSTP and GNDTP stations.  The detailed workings are attached in Vol-2 of the Tariff Petition.

Fuel Cost & Transit Loss of Coal :The Board has submitted that the reasons for high transit losses have been discussed in detail in the Tariff Petition (Volume - I, Page 102 - 107). The Board has no further submissions on this matter and even the limited reduction noticed in the current Financial Year is on account of the fact that it had appointed an agent for supervising the transportation of coal from collieries to the Board. No substantial results can be expected without the cooperation of the Coal India and Indian Railways. The Board is exploring various options for cheaper power generation, which includes gaseous fuel based plants. The provision of Rs.183 crores is for 7.2 lakh tons of imported coal, which the Board is buying during FY 05-06 under a Directive issued by GOI.

Auxiliary Consumption :The Board has stated that its stations are more efficient on Auxiliary Consumption in comparison to similar aged stations and requested the Commission to approve actuals. It has explained that auxiliary consumption varies with type of equipment installed at individual plants and gross generation level. Any significant improvement will require capital-intensive modernisation of the older stations. The Board has noted the suggestion of installing separate meters for recording the consumption of units under maintenance.

Fuel Surcharge: The Board has submitted that the observation has been noted.

Maintenance Schedule : The Board has explained that maintenance schedules are developed in a manner that it minimizes power outage. The Systems Operations Wing carries out a detailed annual exercise in this regard.

View of the Commission

The Commission has noted the objections and has taken the issues raised into account in framing the efficiency norms and operational parameters for thermal generation. The Board may furnish the report regarding recovery of compensation / liquidated damages for delay in completion of R&M works of GNDTP Unit-II. Attention is invited to Chapter 7, Para 7.4.1(Thermal Generation) and 7.7(Fuel Cost).

Objections raised

SIEL Limited and SFAI have submitted that prediction of the Board for FY-06 as almost a dry year is unjustified and the projection of hydel generation should be based on average of last three years which is 8146 MU against 6948 MU taken by the Board (increase of 1198 MU). CII has taken 90% of the Hydel power generation of 9287 MU in 2002-03 for projecting generation in 2005-06 which works out to be 8175 MU, which is 1227 MU more than 6948 MU as considered by the Board.

Response of PSEB

The Board has submitted that there is no scientific basis of projecting hydel generation as it varies with the level of snowfall and rainfall in any year. Hydel generation in 2004-05 has been very low and hence it was felt appropriate to project the hydel generation at 2004-05 level. Any increase or decrease can be factored during the time of true-up at the actuals.

View of the Commission

The Commission decides to take average of last three years excluding 2004-05 for which actuals are not yet available. This translates to 8261 MU against 6948 MU projected by the Board. For details attention is invited to Chapter 7, Para 7.4.2 where the issue has been discussed in detail.

Objections raised

Nahar and PHDCCI have stated that the Board?s assumption that consumption by large supply consumers would not increase due to open access is erroneous. MGIFA and AISRRA have stated that Commission has approved sales of 23940 MU whereas the revised estimates prepared by the Board show sales of 24559 MUs, and inspite of the increase in the sales, the corresponding increase has not come forth in revenue receipts. Siel Ltd has stated that the abnormal increase in AP Set consumption in Kandi area from 45 MU to 136 MU lacks justification, and the increase in energy sales thereto by 8.59% is on the higher side. Taking the growth rate of 5% (increase in April-Sept 2004 over corresponding period of last year), the projected agriculture sales work out to be 6554 MU instead of 7364 MU. The difference of 640 MU on account of approved agricultural sales as 6213 MU in 2004-05 Tariff Order and proposed sales of 6853 MU will reflect a loss of Rs.200 crores and this diversion of power by the Board without authorization of the Commission, should not be passed on to  the consumers.

Response of PSEB

The Board has submitted upto the time of preparation of the ARR for the FY 2005-06, 5 large industrial consumers (with Contract Demand of 161.52 MVA, annual energy consumption of 647 MU) had already filed petition to the Commission for Open Access/ Captive consumption, which would result in loss of revenue of around Rs.78.37 crores (FY03-04) to the Board, based on which the Board has projected the same energy consumption for the large supply consumers for the FY 2005-06. The Board has explained that the difference in receipts could be either due to the difference in proportion of consumers assumed by the Commission or the variation in sales to different categories. Regarding the increase in AP sale by 8.59%, the Board has submitted that the AP consumption growth was projected to be higher due to additions to the AP connected load on account of new connections released in
2004-05 and the voluntary load disclosure scheme.

View of the Commission

The Commission decides to approve consumption of LS category at 6979 MU on par with 2004-05 levels. The issue is discussed in detail in Chapter-7, Para 7.1.2. The Commission has noted the Objectors concerns regarding receipts from tariffs. It would like to clarify that while it sanctions ARR on projections/ norms, subsequently accounts are trued-up as per actuals/audited final accounts. Hence the increased sales revenue will automatically be factored in. Apropos Agricultural Consumption, the Commission has approved consumption of 7000 MU and attention of Objectors is invited to Chapter 7, Para 7.1.3.

Objections Raised

Many consumers and consumer organizations have objected to the large allocation sought for power purchase by the Board. Nahar, PHDCCI, M.C Moga, SFAI and PACL have all pointed out to the huge increase in power purchase budget for the year 2005-06 (150% over 2003-04 budget and 108% over R.E for the year 2004-05).  Er YP Mehra,(Retd) Former Technical Member PSEB has filed his objections after attending the State Advisory Committee on 1^st April 2005 and has stated that power purchase budget prepared by the Board is more than 200% of the purchases made during the normal year 2003-2004.  Siel Limited has stated that rate of power purchase from PTC/NVVNL is indicated @ Rs 2.98/unit for FY05 and Rs 3.06/unit for FY06, against Rs.2.06/unit for FY-04, which is an increase of 44.7% for FY05 and 48.5% for FY06 respectively and is abnormally high. It has further said that the mode of procurement of power is not disclosed and external transmission losses taken by Board as 4.1% for FY05 and 4% for FY06 seem to be excessive.

CII has submitted that excess estimated energy requirement of 2163 MU and low thermal and hydel generation by 1396 MU has resulted in additional power purchase of 3559 MU. Based on merit order purchase norm as approved by the Commission, CII has reduced the cost of additional 3559 MU purchased from PTC/NVVNL @
Rs.3.06/unit, by Rs.1133 crores, (also including 4.029% external loss). AISRRA, RSSIA and MGIFA have stated that the Board should be directed by the Commission to purchase more power to ensure uninterrupted supply of electricity and eliminate power cuts. Further since Board is buying power at less cost (i.e. at average rate of Rs.1.65 per unit) and selling it at higher cost, its revenues will also increase. Board should buy more power for selling to the consumers at Rs.3 per unit. PSEBEA has submitted that in the existing situation of power shortages, the Board is forced to overdraw at high rates of UI charges to meet demand thus impacting on power purchase costs. It has stated that in this scenario, power purchase costs should be allowed on ?actuals? as has also been provided in the Draft Tariff Policy.

Response of PSEB

The Board has to meet the gap between the total demand and the availability from its generating units by purchasing power from other sources. All measures are taken to ensure that maximum procurement is made from low cost stations and Merit Order is strictly followed. The increase in costs is a consequence of the changes in system demand and cost of supply from various stations. The power purchase cost is based on the estimated level of power purchase to meet the power requirement of the State. The availability from thermal stations is based on their maintenance schedule and in case of hydro generation at 2004-05 level. Any differences, would be trued up in the next year. The external transmission losses depend on the source of procurement since for power procured from some other grid, the losses for Northern grid, as well as the other grid are charged to the Board?s account. The week-wise losses data is published by the respective grid on its website. It has further submitted that Rs.1.65 per kwh is weighted average cost for 2003-04 from various sources including firm allocation of CGS, banking by neighbouring states, NJPC, PTC and NVVNL. The incremental power purchase can only be made from PTC/ NVVNL and the average cost for such purchase is Rs.2.98/unit for 2004-05, which is expected to increase to Rs.3.06 in the next financial year. The Board makes these purchases to ensure reasonable continuity of power supply in the state. Excessive power purchase at this price would result in higher cost of supply and consequent higher tariff.

View of the Commission

The Commission has examined the matter of estimating hydel generation in Chapter 7, Para 7.4.2 and accordingly approved power purchase of Rs.2259.66 crores against purchase of Rs.3553 crores projected by the Board. Attention is also invited to issues regarding power purchases discussed in Chapter 7, Para 7.8.

Objections Raised

i)          Voltage-wise cost of Supply: GIS Ltd has submitted that while fixing tariff only normal line losses should be considered. Siel Limited has reflected on the urgent need to reduce the average cost and cross-subsidization to make tariff consistent with actual cost of power. CII and SFAI have submitted that Commission should adopt voltage-wise cost of supply for different categories of consumers for tariff determination, and specify a time frame for elimination of cross subsidy to comply with Section 61 of the Act. They have recommended that the Commission may compute its own estimates of cost of supply to different categories of consumers as was done by HERC. SFAI has submitted that with the proposed withdrawl of HT Rebate @ 3% and impact of fixed charges @ Rs 150/KVA of Contract Demand as proposed by the Board, there is increase of 68 paise per unit to 86 paise per unit depending on the load utilization factor of different EAF units of  the State which is highly unjustfied.

ii)         Gram Panchayats request for lower tariff for Mansa Block : Gram Panchayat Rajrana, Karandi, Sangha, Luharkhera have objected that the increase in tariff would lead to increase in their bills, and also due to low water level even high capacity pumpsets draw less water.

iii)         Tariff and Energy Charges comparison with neighboring States and Inventory Control : CTU has stated that HPSEB is charging lower fixed and energy charges from its consumers, and the Board should be asked to reduce its unwarranted expenses by adopting strict measures for inventory control.

iv)        Improvement in Quality of Service and Energy Conservation : With regard to Commission?s Directive on improvement in quality of service, PSEBEA has submitted that Association finds it difficult to implement it, particularly with regard to application of power cuts. The first priority in giving better quality of power supply is to minimize power cuts. They have enumerated the existing problems which include, no capacity addition since past 5 years, low frequency over-drawls attracting high charges going upto Rs.5.70 per unit, NRLDC not permitting over drawl at frequency below 49 Hz as per provisions of IEGC, and large number of complaints relating to consumer billing.

PSEBEA?s Solutions for these problems include Information Technology upgradation plan, a full fledged wing on energy conservation, which would directly benefit consumers by way of improvement in energy availability, reduced power cuts, better voltage, reduced outages due to reduction in transformer failure rate and overall reduction in tariffs resulting from reduced losses. They have also identified several thrust areas including a campaign at grassroots level for installation of LT shunt capacitors, implementation of KVAH tariff and suggested adoption of AT&C norms for the Board.

Response of PSEB

i)          Regarding voltage-wise cost of supply, the Board has submitted that the determination of the cost-of-service, particularly on a voltage-wise basis would require substantial efforts for putting in place the appropriate infrastructure and conducting studies thereafter to obtain credible and consistent results.  Such a study would take 10 -12 months and would give more meaningful results when they are carried out for the disaggregated utilities after the implementation of the transfer scheme. Till such time, the cross subsidy is being determined with reference to the average cost of supply.

ii)         The Board has submitted that the Act provides the legal framework for Open Access in transmission, and consumers are free to explore the option of purchasing power from alternate sources to minimize their cost. Accepting the Objectors request for a separate tariff for a particular area will amount to discrimination within the same category of consumers and hence cannot be accepted.

iii)         The Board has submitted that the costs in the state of Himachal Pradesh are lower because of low cost hydel generation, and the Board has well defined procedures for inventory control.

iv)        The Board is committed to providing uninterrupted power supply to all its consumers. The imposition of power cuts cannot be completely ruled out in a power deficit country where there is limited power available for purchase. Power cuts not only affect the consumers but also the Board revenues. The Board has engaged M/S Puncom as consultants for implementation of computerization plan in the Board. The Board has also explained that it is creating awareness regarding conservation of energy through paper reading contests, especially in schools covering different districts of Punjab, Kisan Melas organized by PAU and their various regional centers, wherein literature, banners, posters etc are distributed and there is personal interaction with farmers also. Regarding adopting AT&C norms, the Board has stated that the Commission may issue suitable instructions.

View of the Commission

The Commission is presently following the principle of average cost of supply. Attention is invited to Chapter 10, Para 10.3  of the Tariff Order 2004-05 and Chapter-9, Paras 9.2 and 9.3 of this order.

While appreciating the efforts made by the Panchayats to participate in the Public hearings, the Commission upholds the Boards? view, regarding decrease in tariff to a sub-category.

Regarding comparison of tariffs with HP, the Commission is in agreement with the views expressed by the Board.

The suggestions of PSEBEA regarding quality of supply and energy conservation have been noted by the Board and the Commission. Attention in this regard is invited to Chapter 8, para 8.16 regarding Power Cuts and Regulatory Measures and
Chapter-10, Para 10.3 wherein Directives have been issued to the Board for improvement in quality of service and energy conservation. Regarding AT&C norms, the Commission has noted the suggestion for its introduction. Attention is invited to Directives at Para 10.3 and 10.15 of Chapter 10.

Objections Raised

Almost every consumer organization expressed its objection in strong terms to the rising employee costs of the Board.  CII, PACL, AISRRA, MGIFA and SFAI have all highlighted that the Board has claimed Rs.1700 crores as employee cost for 2005-06 against Rs.1274.66 crores approved for 2004-05.  SRRMAI has stated that the total manpower must be reduced to at least one-third.  Cycle Trade Union has objected to the employees salary cost not  commensurate with the decreasing number of employees.

The CPGRF has pointed out that the Board is over-staffed (16.2 employees per 1000 consumers) and automation should be introduced. It has stated that Shah Pur Kandi Dam has a staff of 11,000 personnel and they are being paid almost Rs.11 crores for doing no work.  CII and SFAI have also submitted that the employee cost in percentage terms is one of highest in the country.  CII, PACL, AISRRA, MGIFA and SFAI have all strongly urged the Commission not to allow any increase in the employee cost and direct the Board to meet its increased employee cost liability, if any, through improvement in efficiency parameters.

PSEBEA has submitted that there is a shortage of technical personnel in thermal plants and has requested the Commission to direct the Board to employ technical manpower from NTPC on contract basis for 1 year, particularly to maximize generation in paddy season. In the interim period of 1 year, training and recruitment can be done.  It has highlighted the shortage of AEs in the field, SSOs for manning the 132KV & 220KV grid stations which will reflect adversely upon the reliability of power supply and major breakdowns. Similar problems are anticipated in the case of 66KV & 33KV grid substations in various sub-divisions. A stable transfer policy should be in place. Scientific manpower planning would be possible only if a time and motion study is carried out at each level. In this case, the list of responsibilities and duties assigned to each category is drawn up and the time required to perform each duty is evaluated. GOI, Ministry of Power guidelines stipulate that 1.5%-5% of employee expenses should be earmarked for training and that this amount should be passed through tariff.

CICU has submitted that if the Board wants to give free power supply to the employees then revenue which would otherwise have been collected, should be added to the main revenue stream. They have estimated subsidy for free power by taking 80,000 regular employees of the Board and 75 units per month given to each employee, the total amount @ Rs.3.85/unit comes out to Rs.28.875 crores.

Response of PSEB

The Board has submitted that the increase in salaries & allowances is mainly due to merger of DA to the extent of 50% of Basic, in pursuance of adoption of Fifth Pay Commission Report by the State, on which the Board had little control. The Employees Cost has increased from Rs.1277.93 crores in 2002-03 to Rs.1700 crores in 2005-06. The Board?s pay and allowances to its employees are linked to the increase in pay and allowances of State Government employees. More than 90% of the increase in costs is on account of uncontrollable aspects like DA increase, annual increments, merger of DA with DP, increase in terminal benefits on account of retirements etc.

The Board is improving its competitiveness on other heads like A&G expenses, O&M expenses, Interest cost, Cost of Generation etc. There have been no additions to the overall manpower, barring some specific need based recruitments which were unavoidable. Redeployment of manpower is being used to address various issues. However, large-scale redeployment would require reskilling and retraining. Such a Human Resource exercise is expected to be a part of the impending unbundling and reforms process. The Board has also justified that free power is being supplied to its employees as an employee welfare incentive and similar facilities exist in other States.

View of the Commission

The Commission decides to allow cumulative increase of 15.61% on the approved cost of Rs.1274.66 crores in 2002-03, in employees? cost which works out to Rs 1473.63 for 2005-06. This issue is discussed in detail in Chapter 7, Para 7.9. Free power supply to the employees is charged to the employees cost as ?Staff Welfare Expenses? and also credited to revenue. The employees? cost has been allowed by the Commission at an overall level, as discussed supra. Attention is invited to Directive at Para 10.10, Chapter 10.

Objections Raised

CII and SFAI have submitted that excessive costs in the form of interest, depreciation and Rate of Return (ROR) pertaining to over allocated amount to RSD project should be disallowed (RSD capitalization is overstated by Rs.2719 crores) and not passed on to the consumers.

Siel Limited and PACL have objected that the cost of RSD project apportioned to Irrigation Department is yet to be taken over by GoP and as a result, consumers are being burdened through tariff. Siel Limited has further stated that as the average PLF of hydel projects is 50%, therefore only 50% of total capital cost of Rs.5340.3 crores should be capitalised and the balance should be borne by GoP. The reduction in ARR on this account should be taken forward as Regulatory Reserve with interest and benefit given to consumers in the ensuing years.

Response of PSEB

The Board has informed that the Commission had, in its last Tariff Order, advised the GoP and the Board to look into the matter. The Board is discussing the matter with GoP and once the consultations reach a final stage, details shall be furnished to the Commission.

View of the Commission

The issue is already discussed in detail in Chapter 8, para 8.4 of Tariff Order 2004-05.  The Board should take up the matter earnestly with the Government for early settlement of the issue.

Objections Raised

The CPGRF has stated that the Board should deal strictly with the defaulters: cut the power supply and reconnect only when the bill is paid. CICU has raised objection that though the exact defaulting amount has not been reflected by the Board, it will surely be more than Rs.400 crores. The Board has not shown these figures in the petition for 2005-06 and also the recoveries effected from defaulters. The CII has submitted that the arrears due from Government departments should be reduced from the interest due to GoP or atleast the interest on the amount should be set off against interest due to GoP.

Response of PSEB

The Board has submitted that it is taking all necessary steps for recovery of defaulting amounts on account of electricity bills from Punjab Government  Departments.

View of the Commission

The Commission decides that arrears be analyzed age-wise and steps initiated by the Board towards recovery of receivables with Government Departments and other defaulting consumers. For details attention is invited to Chapter 8, Para 8.6. Attention is invited to Directive at Para 10.13, Chapter 10.

Objections Raised

Siel Limited and SFAI have submitted that the Board has projected R&M expenses at Rs.265 crores, an increase of 23.3% over expenses approved by the commission in FY05 which is very much on the higher side and unjustifiable. It has further stated that taking the inflation rate of 6%, the cost should be Rs.208.93 crores for FY 06. CII has stated that the O & M expenditure should be increased by 5% inflation rate which works out to be Rs.207 crores against Rs.265 crores claimed by the Board.

Response of PSEB

The Board has submitted that the R&M expenditure carried out during FY 2003-04 should not be used to benchmark the expenditure proposed for FY 2005-06. The amount was low in 2003-04 on account of severe cash deficit position of the Board, but with its improving financial health, the Board has sought a higher allocation for R&M for upkeep of its plants and network, with a view to improving the quality of supply.

View of the Commission

The Commission decides to allow O&M expenses claimed in full at Rs.265 crores. Attention is invited to Chapter-7, Para 7.10 for details regarding O&M expenses.

Objections Raised

Siel Limited and CII have submitted that an increase of 5% may be allowed over the Commission?s approved A&G expenditure for FY 05, and Rs.45 crores be allowed against Rs.55 crores claimed by the Board.

Response of PSEB

The A&G expenses of the Board broadly include expenditure on travelling, conveyance, rents, taxes, telephone, electricity and water charges and other miscellaneous expenses. The Board constantly strives to provide better service to its consumers. Inflationary year on year increases are not sufficient to compensate the Board for costs on investments incurred for improvement in operations.

View of the Commission

The Commission decides to allow A&G expenses to the tune of Rs.50.31 crores by allowing 5% increase over the approved expenditure of Rs.47.91 crores for the year 2004-05, against Rs.55 crores projected by the Board. The A&G expenses are dealt with in detail in Chapter 7, Para 7.11.

Objections Raised

PHDCCI, AISRRA and MGIFA have objected that inspite of the increase in agricultural consumption by 15%, Government subsidy has been only Rs.940.38 crores in 2004-05 and Rs.1010.5 crores in 2005-06. It has also stated that the Board has understated the subsidy while presenting the ARR. The mismatch, between the agricultural consumption and the subsidy claimed, needs to be reconciled and the Board should be directed to file complete account of ?Subsidy Receivable? from the Government. SFAI has strongly urged the Commission that the burden of interest attributable to non-recovery of subsidies from the Government should not be allowed to be passed on to the consumers. PSEBEA has submitted that payment of AP cash subsidy in advance should be done by the State Government as also in line with Section 65 of the Act.

Response of PSEB

The Board has submitted that the Government subsidy for AP and weaker section is not a fixed number and varies with the level of AP consumption and subsidy offered by the Government. So, it is incorrect to say that the subsidy by the Government to AP and weaker section is fixed. With regard to lesser subsidy received by the Board in 2002-03 and 2003-04, the Board has submitted that there are two subsidized rates approved by the Commission for AP Consumers, i.e. a per unit rate of Re 0.57 per kwh and a flat rate of Rs. 60/BHP/month. All payments in respect of the AP consumers are billed at the flat tariff rate whereas the GoP subsidy is received based on a per unit rate. The subsidy worked out by the Commission for 2005-06 is based on per unit tariff. A part of the difference appearing in the statement furnished in the objection is because of this. The other reason is the difference in the approved AP consumption and the actual consumption. The Board would like to confirm that subsidy payments have been revised by the Hon?ble Commission on the basis of actual AP consumption for 2002-03. The Commission may issue appropriate instructions for advance payment of subsidy in compliance of the provisions of the Act.

View of the Commission

The State Government has already confirmed vide its letter dated June 7, 2005 that it would provide additional subsidy of Rs.68.25 crores necessitated by truing up of AP consumption / load for the years 2003-04 and 2004-05. For details, attention is also invited to Chapter 2, Para 2.16, Chapter 3, Para 3.14.5, Chapter 7, Para 7.13.6 and Chapter 9, Para 9.6 of this order.

Objections Raised

SRRMAI, CICU and PHDCCI have stated that the State Government has increased the Electricity Duty to 10% advalorem which on the whole has increased the total energy charges per KWH. PHDCCI has stated that octroi at the rate of 4 paise per KWH  being levied should be withdrawn as no octroi is being levied in any other state of India. CPGRF has also requested the State Government to reduce electricity duty and octroi.

Response of PSEB

The Board has submitted that the observation on electricity duty/octroi comes under the jurisdiction of Government of Punjab and, therefore, the Board would not like to comment on this.

View of the Commission

Since Electricity Duty and octroi are being charged in compliance of the notification issued by the State Government, the Commission has no comments in the matter.

Objections Raised  

SRRMAI has pointed out that the State Government should bear the financial loss against concessions given to any class of consumers, so that the Board does not have to take interest bearing loans to meet its working capital requirements which is charged on the ARR.  GIS Limited has submitted that the industry should not be charged any extra amount for subsidies granted by the Board to any other segment. PACL, CII and SFAI have submitted that section 61 of the Act warrants the elimination of cross subsidies within a timeframe to be specified by the Commission. PACL has further submitted that subsidy to AP and lowest slab of domestic categories has further increased in tariff order of Commission for 2004-05, since decrease in tariff was because of decrease in average cost of supply and not because of decrease in cross subsidy.

PACL, AISRRA, GIFAI and Er.Y.P.Mehra have all strongly proposed elimination of cross subsidy in a timeframe specified by the Commission. CICU has quoted a Supreme Court judgement in case of West Bengal vs CERC which clearly mentions that cross subsidisation should be stopped and in case the Government wants to give cheaper power to the agriculture sector, then the loss should be borne by the State Government.

Response of PSEB

The Board has submitted that in the ARR and Tariff Petition for the Year 2005-06, the Board has proposed an increase in cost based tariff for AP consumption. This has been done to ensure that the cross subsidy level does not increase from the existing level. Board has mandated metered supply to all categories and time bound reduction of cross subsidies in a phased manner. Cross-subsidy is an inherited issue in the power sector and Board appreciates the need for its time bound elimination. The Commission in its Tariff Order for 2004-05 has considered the issue of cross subsidy while determining the tariff and the level of cross subsidy has been brought down. The tariff proposed in the ARR for 2005-06 is on similar lines and the increase has been factored in for different categories in a manner that the level of cross subsidy is reduced from the earlier years. Till a detailed cost of supply study is conducted, the cross subsidy is being determined with reference to the average cost of supply.

View of the Commission

The Commission had been working to progressively reduce the cross subsidy which has been substantially reduced in the last two years. Attention is invited to discussion in Chapter 10, Para 10.3 of Tariff Order 2004-05 and Chapter 9, Para 9.7 of this order.

Objections Raised

PHDCCI and Er.Y.P.Mehra have pointed out that it is unclear whether the assets sold under lease finance have been deducted while calculating the net assets value for charging depreciation. It has been further stated that an amount of Rs.250 crores is being shown as addition to the assets of thermal plant when no new assets have been created. Siel Limited has pointed out that expenditure incurred to construct RSD and Shahpur Kandi Project should not be charged to the Board exclusively.

CII has estimated depreciation charge of Rs.470 crores for the year 2004-05, however, the Board has claimed Rs.624 crores, which is Rs.154 crores more on account of excess capitalization of RSD. PACL has submitted that depreciation cost has shot up from Rs.576.12 crores, as approved by the Commission, to Rs.624 crores, and that the depreciation amount is increasing despite there being no additions to fixed assets. Typically depreciation provision should decline every year based on Written Down Value (W.D.V.) method and should be computed only on performing assets. AISRRA has stated that the Utility has failed to create a fund for depreciation amount as directed by the Commission.

Response of PSEB

The Board has clarified that leased assets are not included in the Gross Fixed Assets and therefore, any deduction on this account is not warranted.

The Board has submitted that the additions to fixed assets are on account of major repair and maintenance (R&M) at various plants of the Board. The major chunk is Rs.231 crores, which has been proposed for capitalization on account of major R&M scheduled at GNDTP Bhatinda Unit I & II. Regarding excess capitalization of RSD, the Board has submitted that it is tackling the matter of RSD cost allocation and its impact on the Depreciation amount shall be incorporated once the final settlement is reached with Government of Punjab. Regarding the issues involved in Shahpur Kandi Project, the Board has submitted that the project is at a preliminary stage and NHPC is preparing the Detailed Project Report (DPR) for this project. Once the DPR is finalised, the Board shall discuss the matter with GoP to finalise the cost sharing. It has further submitted that depreciation has increased from Rs.576.12 crores to Rs.624 crores on account of capitalisation during the year. The gross block of assets has increased from Rs.13407.35 crores to Rs.13941.35 crores on account of additions in transmission and distribution assets. Further the Board would like to submit that the depreciation is charged on Straight Line Method and therefore the contention that the depreciation amount should be less every year is incorrect. Regarding the creation of Depreciation Reserve Fund, the Board has sought guidance of the Commission.

View of the Commission

The Commission decides to continue with the existing method of providing for depreciation until the finalization of FRP and unbundling of the Board. This issue is discussed in detail in Chapter 7, Para 7.12.  Regarding Depreciation Reserve Fund, attention is invited to Chapter 8, Para 8.7, where the issue is discussed in detail.

Objections Raised

AISRRA, MGIFA and Siel Limited have submitted that re-negotiation of interest on loans and advances need to be carried out as per the directive of Commission and the Board should press upon the Punjab Govt to swap its 14% loan to low interest debt. CICU and CII have stated that interest on funds raised on capital account but diverted towards revenue expenditure should not be considered as part of cost of supply of power (funds diverted Rs.4412 crores @ 11% interest). This fact was also recorded by the Commission in the Tariff order for 2004-05. Also the interest provided on excess capitalization of RSD should also be reduced from interest cost (11% of Rs.2719 crores). Therefore, in its alternative computation, CII has reduced interest cost by Rs.784 crores (Rs.485 crores + Rs.299 crores) and considered Rs.183 crores as interest cost for the year 2005-06 against Rs.967 crores estimated by the Board. MGIFA has sought complete information regarding huge amount of finance charges paid by the Board. Er YP Mehra has observed that GoP loan of Rs.5000 crores standing against the Board, comprises the loan on account of Thein Dam and various un-productive works executed at the instance of GoP, and Board should not be burdened with its servicing cost.

Response of PSEB

The Board 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. Non-SLR Bonds and SLR Bonds could not be restructured. However, the Board has exercised the call option to replace them with cheaper debt. Regarding the 14% loan from GoP, the Board has explained that prior to 2002, the Government of Punjab used to determine the tariffs and during the period 1997- 2002, in absence of any tariff increase and supply of free power to AP Consumers, the Board had no other option but to raise loans to fund its operations. The alleged diversion of funds happened prior to the formation of the Commission. Even the GoP has affirmed that the Commission is not legally bound to resolve the issues that pertain to the period prior to its formation. 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, who is expected to address the matter in the FRP of the Board.

Board has clarified that outstanding loan amount as on 31.3.05 is Rs. 4537.53 crores as against Rs. 5000 crores pointed out by the Objector. No specified instance of unproductive work has been pointed out so as to require rebuttal.

View of the Commission

The Commission decides to allow interest and finance charges of Rs.811.41 crores (net) after capitalization of Rs.102.20 crores. against Rs. 966.70 crores projected by the Board in the revenue requirement for the year 2005-06. This issue is discussed in detail in Chapter -7, Para 7.13. The Commission also notes that GOP Loans continue to be at rates from 12.2%- 14 % which need to be restructured urgently.

Objections Raised

PHDCCI has pointed out that there exist deficiencies in the ARR petition particularly in respect of  Agriculture Consumption, T&D Losses, Power purchase, low thermal/hydel generation, employees cost and steep rise in respect of other allowances from Rs 115 to Rs.160 crores, no increase in Government subsidy, huge investment plan without any justification. Municipal Council, Moga, Devidayal, Surinder Sachdeva, Harpal Singh Sidhu, Satpal, Raj Kumar Goel have all submitted that the ARR has not provided full data for consideration of the consumer. Unit costs of Hydel Generation have not been shown in the ARR. PACL and MGIFA have stated that the Board should be asked to submit the revised ARR, considering the base figures as approved by the Commission.

MGIFA has further stated that the Board has failed to provide information with regard to projected contract demand for the year 2005-06, cross subsidy being provided to each category of consumers and basis for determining fixed charges at different rates. The Board has also not considered the Directives issued by Commission while framing the present ARR. MGIFA has submitted that the Board has failed to clarify the position regarding the estimated revenue from 23940 MU projected to be sold during 2004-05, where the expected revenue was Rs.7333.13 crores, whereas the Board in fact sold 24559 MU and showed a recovery of Rs.6979 crores.

Response of PSEB

The Board has taken the revised numbers for the FY 2004-05 in the ARR based on the actuals of first half of FY 2004-05. The Board has furnished information in respect of the cost of generation in case of thermal stations, the cost of power purchase from different sources, employee cost etc in the Formats prescribed by the Commission. The Board has explained that, the main reason for projecting these numbers instead of the norms approved by the Hon?ble Commission was to make the ARR as close to reality as possible. Filing an ARR based on the norms laid down by the Commission would have negated the spirit of the Act wherein a Utility is required to approach the Commission with its projected revenue requirement for tariff fixation. Since there is no variable cost in case of Hydel Generation, the Commission has not prescribed any format for the same. Wherever Directive is issued, the Board is in the process of compliance of Directive. The Board has projected an ARR of Rs.9364 crores for the FY 2005-06 as compared to the revised estimates of Rs.8411 crores for the current year. So, there is an increase of 11% in the ARR for the FY 2005-06, which should be seen in the context of increase in energy sales by 5.5% and 6% annual inflation.

View of the Commission

The Commission always validates the data furnished in the ARR and relies upon actuals to estimate the projections, wherever possible. This will be borne out from the detailed discussions in Chapter 7 of this Order on ARR. Attention is also invited to Directive at Para 10.14, Chapter 10.

Objections Raised

The CPGRF has asked the Board/Punjab Government to provide information about the one page advertisement appearing in almost all newspapers on 28th Feb 2005. It has also objected to the Board?s payment of Rs.5.32 crores as commission to a private firm for settlement of claim with Railways, since both are Government Agencies. The CPGRF has further stated that pollution control measures adopted at GGSTP Ropar were not  upto the standard and hence penalty of Rs.5.43 crores had to be paid by the Board to Pollution Control Board (PCB), which could have been avoided.

Response of PSEB

The Board has submitted that the advertisements are released to inform the stakeholders about development/ initiatives being taken by the Board. Foundation Stone Ceremony at Bhatinda was a major milestone in the Power Sector in Punjab and it was felt appropriate to inform the general public. The Board has justified engagement of professional liaison agents stating that settlement of claim with Railways could be effected only after using their services. Regarding penalty imposed by PCB, the Board has submitted that the GGSTP was commissioned in 1980, hence norms prevalent at that time were met. Now a consultant has been appointed for suggesting corrective measures.

View of the Commission

The Commission reiterates its observation that the Board should be run as an efficient commercial organization and that its decisions should be tested on the touchstone of profitability and commercial viability. The Commission regards the penalty imposed by the PCB as attributable to lack of timely action by the Board and advises expeditious action in future.

6.20     HUGE INVESTMENT

Objections Raised

PHDCCI has demanded justification in regards to the huge investments planned to be made towards Shahpur-Kandi Project (Rs.100 crores), Doraha Gas Plant (Rs.100 crores) and Thermal Plant at Lehra Mohabbat (Rs.810 crores). Er YP Mehra has stated that Investment Plan has been framed without accounting for charges in respect of ACD, service connection charges and net return under the ARR every year.

Response of PSEB

The Board has submitted that the amounts indicated in the Investment Plan for 2004-05 and 2005-06 are attached in format 1.1(F) of the ARR. The Government of Punjab has approved the investment plan for 2004-05 and investment plan for 2005-06 has already been submitted to the State Government for its approval.

View of the Commission

The Commission decides to approve an Investment Plan of Rs.1200 crores against Rs. 1956 crores proposed by the Board. Attention is invited to details in Chapter 7, Para 7.13.2.

Objections Raised

i)          Surplus/Abandoned Properties: PHDCCI and SFAI have submitted that surplus/ abandoned land lying with the Board is not properly utilized and it should be disposed off so that the Board?s high cost loans can be repaid.

ii)         Return On NFA: SRRMAI has submitted that the Board should not get more than 3% as return as it is a service organization and it is its basic responsibility to supply power at minimum possible rates. It falls under Semi-Government Organization and there should be transparency and proper accountability in the whole system. CII has submitted that the net fixed assets have been overstated with the excess capitalization of RSD by     Rs. 2363 crores, which need to be reduced from net fixed assets for calculating Return on Investment (ROI). Accordingly, it has worked out Return on Net Assets (ROFA) as Rs.135 crores.

iii)         Regarding separate cash flow statement: CII has stated that the Board should prepare a separate Income and Expenditure Account, Cash Flow Statement and Balance Sheet based on costs approved by the Commission.

iv)        Audited Balance Sheet: Cycle Trade Union has demanded the audited balance sheet of the Board for the year 2003-04 to see the facts and figures of the ARR and Tariff Petition in real terms.

v)         Discussions on Report of Expert Committee: PHDCCI has stated that the report on Expert Committee submitted more than few years back for financial restructuring of the Board should be made available and discussed with consumer representatives.

vi)        GP Fund: PSEBEA has submitted that the diversion of money deposited in GPF account by the Board to other works is in violation of accounting procedures and the Commission should direct the Board and Government that the funds of employees be restored in a separate fund before taking any steps for unbundling.

vii)        Withholding of APDRP Funds by Government of Punjab: PSEBEA has objected to the retaining of APDRP Funds by GoP for one year, and has submitted that the Board is compelled to pay interest on these funds which are being used by Government. An APDRP fund of Rs.124.76 crores was given by GoI to GoP in Jan 04 and retained by GoP till December 2004 and then transferred to the Board which should have rather been transferred within 15 days. It has submitted that Commission may direct GoP to desist from retaining APDRP funds in future and ensure that the interest on such funds are not loaded on to the ARR/consumers.

Response of PSEB

i)          The Board has submitted that it has initiated the process of identifying the surplus land last year. It has already identified some places, but feels that the amount on such realization may not be significant enough to bring any major impact on outstanding loans and interest.

ii)         The Board has submitted that it has claimed 3% Rate of Return (ROR) as per the provisions of the Electricity Supply Act, 1948. It has further submitted that it is tackling the matter of RSD cost allocation and its impact on the Return on NFA shall be incorporated once the final settlement is reached.

iii)         The Board has submitted that the Income and Expenditure Account, Cash Flow Statement and Balance Sheet prepared by the Board are sufficient for drawing a comparison between the actual cost (which is available in the Audited Accounts) and approved expenditure (which is available in the Commission?s Tariff Orders). The Board is not clear on the benefits of preparing separate final accounts based on costs approved by the Commission.

iv)        The Board has submitted that the pre-actual accounts have already been furnished and it is given to the Commission.

v)         The Board has submitted that the Expert Committee had submitted their report on FRP and the GoP will take suitable action. Therefore, Board would not like to comment on this.

vi)        The Board recognizes the need for creation of an independent Trust to be funded jointly through contributions from employees and appropriate contribution from the employer, in order to meet the Provident Fund obligations. The Board would like to seek the indulgence of the Hon? ble Commission to defer the applicability of this directive till the creation of corporate entities.

vii)        The Board has submitted that the Commission may issue necessary directions to GoP regarding withholding of APDRP funds, to ensure timely flow of funds to the Board.

View of the Commission

Return on NFA continues to be allowed as per past practice as discussed in Chapter 7, Para 7.14.

Regarding separate cash flow statement, the Commission agrees with the reply of the Board.

The Board is directed to make available a copy of audited accounts to the Objector on payment of due charges.

Regarding discussion on Report of Expert Committee, this matter falls within the purview of the GoP.

Directive to the Board already stands issued in Chapter 11, Para 11.2 of Tariff Order 2004-05 to prevent diversion of General Provident Funds and is discussed in
Chapter 8, Para 8.8 of this order. Attention is also invited to Directive at Para 10.11 Chapter 10 of this Order.

Regarding release of APDRP funds, a detailed report has been sought from the Board.

C.        COMMERCIAL OBJECTIONS

Objections Raised

Most of the consumer organizations/consumers have vehemently opposed the introduction of Two Part Tariff as proposed by the Board. CII, Nahar and PHDCCI have suggested modifications taking the plea that this will not only affect the LS consumers, but also a large number of DS and NRS consumers whose demand/load factor is low. They have stated that billing will get complicated, and have suggested recovery of ACD, Service Connection Charges and MMC based upon KVA demand instead of KW.

Many organizations have submitted that present per unit tariff has been fixed after taking into consideration all costs including fixed charges. Siel Ltd. has explained that with the introduction of fixed charges, the energy charges should have been reduced.  Levy of different fixed charges for LS-general category(Rs.100/- per kw/month) and LS-PIU (Rs.150/- per kw/month) is discriminatory and with the introduction of fixed charges, the existing PLEC charges should be abolished. CICU has opined that fixed charges will inflate monthly bills to the tune of 20% to 25% per month in the case of LS consumers having Contract Demand around 500 KVA, whereas the Board has shown it to be only 14%.  PACL speaking for continuous process industry where the load factor is high, have demanded that Single Part Tariff should continue, and in case Two Part Tariff is to be made applicable, then fixed charges should be charged voltage-wise.

NIIFA, SRMAI, CPGRF, RSSIA, AISRRA, MGIFA, LSRRA and ACCI have all submitted their argument against the introduction of Two Part Tariff.   They have argued that the Board?s proposal is not substantiated with relevant data and the basis for calculations. CII has submitted a detailed proposal suggesting that ARR should be re-determined, after excluding various over stated expenses and an overall per KWH rate worked out, and apportionment of such overall rate should be made in two parts, i.e. Fixed Charges and Energy Charges. Fixed Charges should be levied on the actual recorded demand and not on the sanctioned contract demand, since actual demand of EAF/PIU consumers is generally between 50%-60% of the contract demand. SFAI has also submitted a detailed objection on these lines. SFAI and Ludhiana Hand Tools Association have also suggested charging of an overall capping rate, and that levy of fixed charges should be on pro-rata basis depending upon the period  for which power supply is given to consumers due to Peak Load Hour Restrictions, Breakdowns and Power cuts.

Surinder Sachdeva of Kotkapura has submitted that the Board has not given any justification for increase in tariff rates for D.S. category to the extent of 23%, N.R.S tariff by 20% and S.P. tariff by 18%. Er YP Mehra who filed his objection after attending the State Advisory Committee Meeting (ACM) on Ist April 2005 pointed out in the matter of Two Part Tariff and Paralleling Charges that the proposal of the Board for both these points was not favoured by the Members of ACM, and Chairman informed that a separate meeting would be held before any decision is taken. Nagar Councils of Malerkotla, Gobindgarh and Derabassi have all requested for reduction of Street Light tariff. Cycle Trade Union, Ludhiana has requested for fixing lower rates than as proposed by the Board, for different category of consumers.

Response of PSEB

The Board has filed a comprehensive reply explaining the underlying principles of the design of Two-Part Tariff. For details of Board?s submissions, attention is invited to Chapter 8, Para 8.1 where the issue has been discussed. Regarding Street Light Tariff, the Board has submitted that it is not possible to reduce the tariff as it will amount to an increase in the level of subsidy.

View of the Commission

The Commission decides to postpone introduction of Two Part Tariff and continue with Single Part Tariff. Attention is invited to Chapter-8, Para 8.1.  Also, attention is invited to Chapter 9 of this order where rationale underlying determination of tariff for various categories of consumers has been discussed in detail. Attention is invited to Directive at Para 10.4, Chapter 10 of this Order.

Objections Raised

Ludhiana Electroplaters Association, AISRRA and CPGRF want the MMC to be discontinued. SRRMAI has submitted that there should be no MMC for small, medium and large supply units. M.C. Moga has pointed out that as per ARR, MMC shall be discontinued for all categories except temporary supply, but MMC for public lighting has not been abolished and in addition to MMC, fixed charges have also been proposed @ Rs 75/KW per month. It has also stated that the existing basis of 8 hours for public lighting is very high and should not be more than 6 hours per day. Bhagwanpura Sugar Mills has submitted that during the off-season of sugar mill the MMC should be based on contracted demand and not on sanctioned connected load.

Punjab Rice Millers Association and Kotkapura Rice Millers Association have suggested that the fixed charges may be charged during season, but not during off season, their industry being seasonal (September/October to March/April). It has further been requested that the fixed charges should be same @ Rs 75 per KVA for LS and MS  during the season. Bhagwanpura Sugar Mills has submitted that off-season tariff should be available for sugar mills also.

Response of PSEB

The Board has submitted comprehensive details for the rationale behind charging MMC and fixed charges. The demand for reducing the MMC levy from 8 hours to 6 hours would not be relevant as the Board has proposed to discontinue MMC for all categories. For application of Fixed Charges for the seasonal period, the Board has clarified that the Fixed Charges would be applicable for the entire year. While fixing the tariff the effect of seasonality has been considered and the request for exempting the seasonal establishments from payment of Fixed Charges for the off season period cannot be accepted.

View of the Commission

The Commission decides to retain the existing practice of MMC. Attention is invited to Chapter 8, Paras 8.1 and 8.15 where the issue is discussed in detail.

Objections Raised

The CPGRF has submitted that there should not be any change in the present slab system and the first slab of 0-30 units is too small. PACL feels that by implementing the UPS Scheme in the villages, the base of domestic consumers will increase by huge numbers, and this will lead to increase in the cross subsidy level since all consumers shall continue to get first 100 units of electricity on subsidized rates.

Response of PSEB

The Board, in principle agrees with the proposal of two slabs i.e. 0-100 and 100 & above for the purpose of simplicity. However, a slab of 0-30 was proposed to be introduced to provide lower tariff to weaker section in line with Draft National Tariff Policy.  

View of the Commission

The Commission decides to continue with the existing slab structure for Domestic Supply. This issue is discussed in detail in Chapter-8, Para 8.2.

Objections Raised

SRRMAI has submitted that there is an urgent need for granting incentives against increase of Power Factor (PF) in the best interest of energy conservation. PHDCCI however has reiterated that the threshold PF limit should be lowered to 0.85 and penalties/rebate should be treated on equal footing. Siel Limited has proposed that incentive be provided to industry for PF above 90%. The incentive may be @ 0.5% for PF between 90-95% and @ 1% for PF above 95% with no restriction on maximum benefit. SFAI strongly urged the Commission to lower the threshold limit of PF applicable to EAF consumers to 0.88 in view of practical difficulties.

Response of PSEB

The Board has submitted that the PF rebates and surcharge apply to consumption charges (demand charges, energy charges and any other component which forms part of the cost of energy, as applicable). Apart from the separate incentive proposed for maintaining higher power factor, the KVA base demand charges automatically benefit the consumers who have a higher power factor. The proposed incentives have therefore been framed considering such incentives in other states and the financial implications to the Board. The request for lower threshold limit and the incentive @ 0.5%/1% for every 1 % improvement in the power factor from the Objector could not be accepted. It has further submitted that the incentive for higher power factor for Bulk Consumers has been fixed considering number of factors. The request for lower threshold limit of PF (to 0.88) cannot be accepted.

View of Commission

The Commission has already decided this issue in its Tariff Order for the year
2004-05. For more details, attention is invited to Chapter 9, Para 9.7 of Tariff Order
2004-05.

Objections Raised

CII and SFAI have strongly objected to the current proposal of Board to allow rebate only to those consumers who get supply at a voltage higher than that prescribed under the Board?s norms for a particular connected load. SRRMAI has stated that Natural Justice demands a rebate for factories running at 220 KV/132 KV/66 KV(with own substations) should be the same as per the practice followed by other SEBs.  CII, Nahar and PHDCCI have requested the Commission to allow or enhance HV rebate.  SFAI has requested for a rebate higher than 6% to consumers receiving supply at 66 KV and above. PACL has objected to the Board?s proposal for calculating high voltage rebate based on connected load and has stated that in case two part tariff is made applicable, high voltage rebate should be applicable on Energy as well as Demand Charges. AISRRA and MGIFA have objected to the rebate not being linked with actual savings and that the appropriate rebate for 33 KV connection and above should be 10%. Devki Devi Jain Memorial College for Women has objected to the proposal for abolishing the discount for 11 KV NRS and DS consumers which it feels will discourage the consumers who have made heavy investments on their installations. SFAI has submitted that with the proposed withdrawl of HT Rebate @ 3% and impact of fixed charges @ Rs 150/KVA of Contract Demand as proposed by the Board, there is increase of 68 paise per unit to 86 paise per unit depending on the load utilization factor of different EAF units of  the State which is highly unjustfied.

Response of PSEB

The Board submits that the tariffs applicable to various categories are worked out at a base voltage level for each category. The rebates offered to incentivise the consumer for shifting from the base voltage to a higher voltage have been structured keeping in view the likely saving in transmission losses by the Board by such shift and the signal to be provided to the consumer. The request for continuing this rebate to all consumers connected at 33 KV and above and increasing the rate to 6% could not be accepted.

View of Commission

The Commission decides to continue the existing system. The issue is also dealt in detail in chapter-8 para 8.11 of the order. Attention is also invited to Directive at Para 10.7, Chapter 10.

Objections raised

Siel Limited, GIS and Punjab Rice Millers Association (PRMA) have submitted that with the introduction of fixed charges, the existing PLEC charges should be abolished. SFAI has submitted that PLEC should be charged based on actual consumption (KWH) and only on the incremental load availed by the consumers and also the incremental charge should not be more than Re 1/ KWH. PACL has stated that the Board is charging 180 paise per unit, over and above normal tariff for load, upto 65% of contract demand during peak load hours and 270 paise per unit, over and above normal tariff, for more than 65% to 100% of contract demand during peak load hours i.e. 1800 hours to 2100 hours every day. Speaking for the continuous process industry, PACL has opined that loading this industry with PLEC due to reasons attributable to some other class of consumers is unfair and unlawful. PACL has also stated that the Board is considering PLEC as non-tariff income which is incorrect and that PLEC should be determined by the Commission at nominal rates. Harpal Singh Siddhu, Satpal and Raj Kumar Goel have submitted that Peak Load Hour Restrictions should be imposed based on the availability of electricity and it should not be imposed permanently.

Response of PSEB

The Board has reproduced the relevant text from the Tariff Order 2004-05 wherein the Commission had considered the matter of Peak Load Hour Restrictions and PLEC charges in detail and used this as an argument to support the PLEC charges imposed by the Board.

View of the Commission

The Commission decides to continue the present system of recovering PLEC at the existing rates. For details attention is invited to Chapter 9, Para 9.9 of Tariff Order 2004-05 where the issue has been discussed in detail.

Objections Raised

PHDCCI and SFAI have submitted that the Board vide commercial circular No. 36/2004 dated 15.06.2004 has issued instructions regarding service connection charges from industrial consumers, and have requested for its retrospective applicability.

Response of PSEB

In its reply to objection raised by PHDCCI, the Board disagreed with the request of the retrospective applicability of such charges. However, in its reply to objection raised by SFAI, the Board sympathized with consumers having connected load more than 1 MW, and has assured that it will consider the matter at the appropriate level and take a decision accordingly.

View of the Commission

This Commission will take up this issue separately under the Supply Code, which is being finalized.

6.29     CONCESSIONS FOR NIGHT POWER SUPPLY (TOD TARIFF)

Objections Raised

SRRMAI and SFAI speaking for continuous process industries have brought out that the Induction Furnaces, Arc Furnaces, and other Electro-Chemical Industries which are running throughout the year for all hours except peak load hours, are paying the maximum revenue every month to the Board, and deserve TOD Rebate in the Power Tariff. SFAI has pointed out that the existing scheme of the Board which gives benefit to industries having load above 1MW and operating during night hours(9.00PM to 5.00AM) is not leading to any benefit to the EAF Industry and has suggested that it be amended, so that concessional tariff is available to all LS/PIU/EAF consumers. GIS and Siel Limited have submitted that suitable incentives should be incorporated for night consumption.

Response of PSEB

The Board has submitted that the night load concession tariff is applicable to industry, which operates only in the night. This scheme cannot be extended to all categories of consumers because of limited availability of surplus power in the night hours. The Board has intimated that it is still in an energy-deficit situation and the surcharge for consumption during the restricted peak hours that prevail at present in effect results in TOD like structures for those categories where the charges are applicable. Introduction of TOD Tariffs be deferred for the present, and a comprehensive study shall be carried out by the Board this year for finalizing the proposal for TOD Tariff.

View of the Commission

The issue of TOD tariff has been dealt with in detail in Chapter 9, Para 9.6 of Tariff Order 2004-05.

Objections Raised

PACL has objected to the high late payment surcharge of 10% per month and proposed that it should not be more than 2.5% per month.

Response of PSEB

The Board has explained that the high surcharge enables the Board to maintain collection efficiency at 97%. Any reduction would reduce the disincentive for non-payment and cause a fall in collections. Further, the Board has also indicated its inability to offer any incentives to the industrial consumers who opt for advance payment of electricity bills since cost of working capital for both the Industry and Board are at par.

View of the Commission

The Commission decides to continue the existing practice of levying late payment surcharge at the existing rates. Attention is invited to Chapter 9, Para 9.5 of Tariff Order 2004-05 wherein the views of the Commission on the subject have been presented in detail. Attention is also invited to Directive at Para 10.16, Chapter 10.

Objections Raised

SRRMAI and Mr R.P Bhatia have suggested a change in the slab structure. SRRMAI has stated that categories of Small & Medium Power may be increased from 50 KW to 100 KW and from 100 KW to 250 KW respectively, so that small and medium sectors are able to increase their production to a certain extent. Siel Limited has requested that the Board should create a category of Large Consumers having load more than 10 MW, which should be given some benefits commensurate with savings accruing to the Board as is being done in UP and Gujarat. UPSEB is already giving a rebate of 2.5% on billed amount and Gujarat is giving rebate of 30 paise per unit to all such consumers having load more than 10 MVA. This will also directly benefit the Board as there will be only one bill, one metering point and one dedicated transmission feeder against twenty 1MW consumers, resulting in direct savings in investments and manpower etc.

Response of PSEB

Board has explained that the slabs have been determined on the basis of Industrial Policy Guidelines and with the passage of time Small Scale Industrial Units have grown and are required to shift to MS and LS categories. The Board has submitted that it has noted the suggestion regarding creating another category of large consumers having load more than 10 MW.

View of the Commission

The Commission decides to continue the existing categories for the industrial sector.  The Commission would also invite the attention of the Objector to Chapter 9, Para 9.14 of Tariff Order 2004-05 wherein the views of the Commission on the subject have been spelt out in detail.

Objections Raised

The CPGRF has pointed out that advertisements released with regard to supply of electricity are not adhered to and such advertisements should not be inserted at the cost of the consumer. It has further offered suggestions for rates of compensation if Utility fails to comply with standards of performance for adequate and quality power. Kotkapura Rice Millers Association & Industries Association, Kotkapura have suggested compensation for power cuts through reduced Monthly Minimum Charges.

Response of PSEB

The Board is committed to providing uninterrupted power supply to all its consumers. However, power cuts cannot be ruled out as ours is a power deficit country and there is limited power available for purchase. Further, power cuts not only affect the consumers , but also revenues of the Board and hence the request for adjustment of MMC/Average Bill on this account cannot be accepted.

View of the Commission

The Commission is seized of the matter and is putting in place the Supply Code which will incorporate quality standards for supply of electricity. Regulations pertaining to ?Forum? and ?Ombudsman? to enforce the quality standards for Consumers Protection and Grievances Redressal are also in an advanced stage of formulation. Attention is also invited to Directive at Para 10.3, Chapter 10.

Objections Raised

Chief Electricity Distribution Engineer, Northern Railways, New Delhi has requested the Commission to have reasonable tariffs and pointed out that the proposed hike in tariff for 2005-06 by 22.5% is far above the inflation rate.

For Response of PSEB and View of the Commission

Attention of the Objector is invited to Chapter 9, Para 9.18 of Tariff Order 2004-05 wherein the reply of the Board and the views of the Commission on the substance of these objections have been dealt with in considerable detail. For objections regarding Two Part Tariff, attention is invited to Chapter 8, Para 8.1 of this Order.

Objections Raised

SRRMAI has submitted that for energy conservation and to maintain minimum optimum contract demand, KVAH Tariff should be introduced particularly for LS/PIU Category in which case there would be no requirement of Two Part Tariff. PHDCCI feel that KVAH tariff has not found favour with the Board because the Board?s tariff policy penalises consumers with low power factor but helps consumers with high power factor. PSEBEA has submitted that KVAH based tariff should be implemented for LS, MS, SP and NRS category of consumers.

For Response of PSEB and View of the Commission

Attention of the Objector is invited to Chapter 8 para 8.10 of this Order wherein the substance of these objections has been dealt with. Attention is invited to Directive at Para 10.6, Chapter 10.

Objections Raised

SFAI has proposed that discount should be given to bulk consumers whose cost of supply is low due to nominal T&D losses. It has mentioned that MSEB has a scheme whereunder it allows a graded rebate from 1%-5% where consumption exceeds one million units per month. SIEL Ltd has objected to the fixed charges which have been proposed @ Rs.100 per KW for LS-General Industry category, whereas for LS-PIU category, these have been proposed @ Rs 150 per KW, which is discrimination against the PIU category. SRRMAI has submitted that the PIU category with higher load factor deserve lower tariffs.

For Response of PSEB and  View of the Commission

Attention of the Objector is invited to Chapter 8, Para 8.1 where substance of the objection is dealt with.  

Objections Raised

Rajeev Garg, a resident of Patiala has compiled data to show that the cost of meters, rentals for meters and metering cubicles, security for meters need to be brought down suitably, in view of reduction of cost in the market and reduced bank rate.  He has also suggested that in case of damaged HT CT/PT units, requiring replacement of parts only, instead of recovering the full cost of the unit, only cost of replacement be charged. When the unit cannot be brought to health, the full cost of the unit needs to be reduced by both the amount of monthly rentals already paid by the consumer to the Board and residual value of the ill unit and  to be increased by bank interest payable on the cost of the unit.

For Re            sponse of PSEB and  View of the Commission

Attention of the Objector is invited to Chapter 8, Para 8.5 wherein the substance of these objections has been dealt with. Attention is invited to Directive at Para 10.8,Chapter 10.

Objections Raised

SFAI has proposed an amendment in Force Majeure clause. 

Response of PSEB

The Board opined that existing Force Majeure clause covers most of the events as per the general industry practice but they will look into the suggestion made by the Objectors.

View of the Commission

The Commission would invite the attention of the Objector  to Chapter 9, Para 9.12 of Tariff Order 2004-05 wherein the views of the Commission on the substance of this objection has been dealt in detail.

Objections Raised

Shastri Model School, Mohali has submitted that the Government recognized unaided schools should be treated at par with Government aided schools. Mahant Parbhat Puri Social Welfare Trust and Gobindgarh Educational & Social Welfare Trust have raised concerns on being charged tariffs at commercial rates. Both have requested that Domestic Tariff should be charged instead of NRS Tariff.

For Response of PSEB and  View of the Commission

Attention of the Objector is invited to Chapter 9, Para 9.21 of Tariff Order 2004-05  wherein the substance of these objections has been dealt with.

Objections Raised

Nahar Industrial Enterprises and PHDCCI have objected to the Board?s recovery  of parallel operation charges stating that even those consumers are charged who are not in a position to run in parallel and also that the Board has not come out with figures of any expenditure incurred where paralleling has been done. Nahar has also said that the Board has been imposing paralleling charges for full year for seasonal industries like Sugar Industry when these run for hardly three months in a year. Nahar has also objected to the imposition of various charges such as one time permission charges, paralleling charges, ACD charges and technical charges which are discouraging for Captive Power Plants (CPPs) run on bio-fuels and not in keeping with the spirit of Open Access envisaged under the Act. Ramesh Talwar also sought encouragement for CPPs.

For Response of PSEB and View of the Commission

Attention of the Objector is invited to Chapter 8 para 8.13 wherein the substance of these objections has been dealt with.   

Objections Raised

i)          Penalty on Excess Demand: CII and SFAI have stated that the Board has proposed a very heavy penalty rate of 200% of the normal rate on excess KVA demand.  SFAI has suggested that there should be tolerance of 10% in contract demand and penalty should not be more than 15-20%.

ii)         Permissible Transformer Capacity: SFAI has submitted that the limit of transformer capacity of 120% in case of HT consumers having supply voltage of 33 KV & above should be enhanced to atleast 150% without payment of additional service connection charges.

iii)        Miscellaneous Charges: Nahar and PHDCCI want the Board  to submit detailed proposal giving full justification for various charges.

iv)        AC Load Computation: The CPGRF has submitted that as the domestic consumer uses only one air conditioner at a time, the load should be worked out on power plug basis i.e.  taking one-third of total power plugs.

v)         Quality of Meters : CPGRF has submitted that Electronic Meters being installed are not of good quality and has referred to writ petition filed at Delhi Court by an individual consumer regarding Electronic Meters.

vi)        Refund in cases of Clubbing : The CPGRF has stated in the matter of clubbing of meters that the amount overcharged from the consumers must be refunded.

vii)       Miniature Circuit Breaker (MCB) and sealed Energy Meters: S.S. Cheema and others have submitted that the utility should assess the connected load by installing MCB of the designed ampere value. This MCB can be sealed along with the energy meter and the installation charges may be recovered from the consumers.

viii)      Commissions Directive for Load Checking of DS Consumers: The PSEBEA has pointed out that power intensive appliances such as ACs and Geysers overload the system and damage the Distribution Transformers. They have requested for revocation of ban on DS load checking stating that the Directive No 10 of the Commission would give a setback to the efforts of the Board to check unauthorized loads under the Act.

Response of PSEB

i)          The Board has submitted that Penalty for breach of contract demand should be kept at the proposed level to ensure that it acts as a deterrent for the consumers and the consumers take timely sanction for any increase in their contract demand. In a Two-Part Tariff structure, where the fixed charges are based on contract demand, it becomes important to ensure that the contract demand is properly recorded.

ii)         The Board has submitted that the request for increasing the capacity norm for transformer in case of EAF consumer is noted. The Board shall examine the matter in greater detail in the Sales Regulations under revision.

iii)         General Terms & Conditions of Supply/Sales Regulations govern Other Charges. Objectors may raise their objection regarding Other Charges when the Commission processes the Board?s application.

iv)        Regarding the working of Power Load, the Board has submitted that the observation is noted. The Board will examine the matter and issue instructions accordingly.

v)         About the issue of Electronic Meters installed by the Board not being of good quality, the Board has submitted that it procures Electronic Meters from reputed manufacturers through press tender, meeting technical requirements as per relevant BIS. These meters are tested at Supplier?s Works in the presence of Board?s officers and are also tested in the Board?s Meter Testing Lab before installation. The Board is very particular about quality of Electronic Meters, and has rejected 1 lakh meters as manufacturing defects were reported by the field staff.

vi)        Regarding the issue of clubbing of meters, the Board has clarified that this matter is not related to Tariff Petition. The Association should approach C.E. Commercial with the relevant documents to seek relief in this matter.

vii)        Regarding MCBs, the proposal can be considered when KVAH based tariffs are introduced.

viii)       The Board has requested the Commission for revoking the ban on checking of connected load of DS Consumers in the ARR Petition, since any suspension of this process would have serious implications on the overall loss-reduction and revenue enhancement programme and is against the interests of the honest consumers. The verification of connected load is not merely to obtain increased revenues for the Board, but is also an important tool for planning of loads. There exist appropriate means of redressal of any genuine and legitimate grievances of affected consumers at the Consumer Grievance Cell of the Board. Therefore, the argument for suspension of this legitimate drive is specious and tenuous.

View of the Commission

Regarding Penalty on excess demand, the Commission endorses the view of the Board. The issue is dealt with in Chapter 8, Para 8.12.

Regarding Transformer capacity and Miscellaneous Charges, the Commission feels that these are non-tariff issues which can be taken up separately. Attention is invited to Chapter 8, Para 8.14 regarding General Conditions of Tariff, Directive at Para 10.5, Chapter 10.

Regarding AC Load Computation, the Board may examine the matter and issue instructions accordingly.

Regarding quality of electronic meters, the Commission agrees with the steps enumerated by the Board for ensuring quality energy meters.

Regarding Clubbing of Meters, attention is invited to Chapter 8, Para 8.3.

The proposal regarding MCBs is not practically feasible, presently.

Regarding DS load checking, Directive will continue with partial relaxation in cases of theft of energy. Attention is invited to Chapter 8, Para 8.4.

In response to D.O. letter No. 800 dated 3.3.2005 addressed to the Chief Secretary, Punjab, vide which the Commission had sought the viewpoint of the State Government on various aspects of ARR and Tariff Applications of the Board for the year 2005-06, response of GoP has been conveyed vide Secretary Power D.O. No. 11/21/2005/ 325 dated 3-5-05. The Government has appreciated the Commission giving it an opportunity to give its comments both in writing and in discussions and has given parawise comments as under on the issues raised in the Commission?s letter under reference.

Para -1: No Comments.

Para -2:  Regarding Revenue Gap of Rs.1878 crores for 2005-06 : Comments detailed in Para -5 below.

Para -3: Regarding Phasing out of Cross Subsidy under the Act : For determining the cross subsidy levels, the average cost of supply needs to be taken. The phasing out of cross subsidy needs to be done gradually as has also been mentioned in the Draft National Tariff Policy.

Para -4:  Regarding  Section 65 : No Comments.

Para - 5: (a) Regarding Agricultural Consumption:  In this para, the Commission has asked for Government?s views on the norms of agricultural consumption. It has also been mentioned that the Commission has adopted a norm of 1650 Kwh/Kw/year for a normal year. This was increased to 1700 Kwh/Kw/year for 2004-05 in view of the substantial failure of the monsoons.  For the year 2005-06 the Board has proposed a norm of 1814 Kwh/Kw/year.  The Government has examined the matter in detail and is of the view that till there is a credible method of measuring agricultural consumption, the Commission could continue assessing the agricultural consumption at 1650 Kwh/Kw/Year.  In the long run however, it is imperative that this norm be fixed in a scientific and rational manner on the basis of reliable data.  Towards this end, the Commission had, in its tariff orders of 2002-03 and 2003-04, directed the Board to install meters on the distribution transformers supplying power to agricultural pump sets within one year.  However, the Board has achieved little progress in this regard.  Moreover, in view of the apprehended resistance from the farmers to individual metering and the logistics involved in reading the meters it is unlikely that reliable information would be available very soon.  It is therefore, suggested that notwithstanding any decision on the individual agricultural consumer metering issue the Commission must emphasize the installation & reading of meters on the distribution transformers feeding agricultural pump sets and allow the cost of such installation in the tariff.  Readings from the Distribution transformer meters would be the most appropriate method evaluating the agriculture pump sets consumption.  Sample metering of agriculture pumps sets cannot be used as the sole method of evaluation.

Para -5 (b)      Regarding T& D Losses : The Commission has raised the issue of T & D losses and has, inter-alia, mentioned that if loss reduction targets  are not met the Commission would continue with its policy of penalizing the Board. In this regard it is pointed that the Commission admits that the T & D loses are not measured but are assessed and the norm adopted for agricultural consumption substantially affects this assessment.  However, as the norm for agricultural consumption is merely an educated guess, the assessment of the T & D losses is also likely to be inaccurate. In such circumstances, the policy of the Commission to penalize the Board by disallowing the entire cost of power purchased equivalent to the non-achieved target of reducing losses will be self defeating.  Such heavy penalties will not in any way help in meeting the loss reduction targets.  On the contrary, this is counter productive as it financially weakens the utility and impacts its ability to attract investments for bringing improvements in the transmission and distribution systems to reduce the
T& D losses.

It may also be mentioned that in the tariff order of 2004-05 the Commission has held that the T & D losses for the year 2003-04 worked out to be 27% against the target of 24.5% (though the Board indicated this as 25.35%). Yet, for the year 2004-05 the Commission had fixed the targets for T &D losses at 23.25% ( a reduction of 1.25% over the loss level fixed for 2003-04 viz 24.5%), and for 2005-06 it has fixed the target at  22%.  Though the desirability of bringing down the T & D losses is beyond question, the Commission  needs to be more realistic in its approach and needs to refix the targets in this regard.  While determining the improvement trajectories it is more appropriate to set the initial  starting point at the ?actual levels?  instead of the ?desired levels.?  Therefore, it would not be realistic and fair to ask the Board to bring down its losses to 23.25% in 2004-05 and 22% in 2005-06 when its actual losses in 2003-04 were as high as 27% as per the Commission?s own order.  It is worth mentioning that the Gujarat State Regulatory Commission is understood to have revised the T &D loss reduction target from 26.67% to 32.36% for the year 2003-04.  The national average figures for T &D Losses are 34% and even the better utilities have had to revise their figures of actual T &D Losses from time to time. Furthermore non-achievements of such unrealistic targets, if they continue to invite such harsh penalties, would leave the Board progressively poorer and less able to raise the capital required for making technical improvements in the system. It is, therefore, suggested that the Commission may also revise the targets for reduction in T&D losses. These may need to be revisited when agriculture consumption is more authentically determined.

Para -5 (c) Regarding Employees Cost : It has been mentioned that employees cost in the Board is one of highest in the country and the Commission has decided to cap it at the level of 2002-03 i.e. Rs.1274 crores. The Board had demanded an increase of over  Rs.400 crores in its ARR for  2005-06. The Commission has hinted that its policy is in line with the Government?s earlier observations on the ARR and tariff applications of the Board for the year 2002-03, wherein the Government had commented that the Board needs to reduce its manpower cost and bring the ratio to at least 3.5 employees per million units sold against the then ratio of 4.10. Though the Government is concerned about the high employee cost, capping the cost does not seem possible as is evident in the Government itself. Total number of employees can and has been capped. Moreover, the Board has been making efforts to reduce its excessive manpower.  There has been a complete ban on recruitment in the Board since 1996. Though the Board is facing a shortage of personnel in some technical categories it has not resorted to fresh recruitment except for some SDOs and Revenue Accountants. Instead it has tried to make up the shortfall through redeployment of its existing manpower. The actual number of employees has gone down from 88994 in 2001-02 to 80,091 in 2004-05.   However, in spite of the decrease in manpower the total employee cost has gone up due to annual increments, hike in DA and terminal benefits etc. But the Board?s performance on several parameters such as employees per million units of energy sold, and employees per thousand consumers has improved in the last few years.

Furthermore, the Commission had separately agreed that terminal liabilities should be met on ?Pay as you go? basis.  In line with this it would be appropriate to separate this component and provide for it in full. The policy decision taken by the Board regarding replacement of compassionate appointments with a liberal financial package also needs to  be factored in to the tariff as part of the terminal liabilities  as this would ensure non-recruitment of non-essential, unskilled and unqualified staff. The employees cost is a legitimate historical component of the cost of supply and should be allowed as pass through especially when the Board has not increased its employee strength in the last several years.

Para  -5 (d)     Regarding Apportionment of RSD Assets: The Government has already taken a decision to apportion the cost of RSD in the ratio of 79.1% and 20.9% between the Board and the Irrigation Department.

Para  -5 (e)     Regarding Principles to be followed for Tariff Fixation: The Government had agreed with the Commission and had advocated the view that the normative principles based on realistic norms of operating efficiencies be followed.  However, the stringent norms/targets fixed by the Commission in respect of T & D losses and employee costs and penalties for non achievements have resulted in a huge revenue gap.  Therefore, the Commission is requested to revise these norms realistically keeping in view the historical baggage being carried by the utility and comparison with the achievements made by the other utilities in the country after setting up of the Regulatory framework. The norms must be achievable and the trajectories need to be decided and if need be reviewed in consultation with the utility (and the Government if necessary).

Para - 5 (f)     Regarding Creation of Regulatory Asset: As regards the  creation of a Regulatory asset of Rs.876 crores mentioned in the Commission?s letter, it would be  premature to comment on it because the ARR, tariff and the revenue gap are yet to be determined by the Commission.  However, the revenue gap needs to be met in full through the tariff on year-to-year basis barring certain exceptions.

Para - 5 (g)    Regarding projected loss for 2004-05: The projected loss of Rs.1431 crores for the year 2004-05 is a result of the adverse Tariff Order of 2004-05 given by the Commission. The Board has gone in an appeal against these orders in the Punjab & Haryana High Court. The verdict of the court would have to be implemented and the figures of the projected loss would accordingly have to be recast. If a tariff revision becomes necessary, the Commission would need to take appropriate action, which may entail the creation of a regulatory asset.

It is also brought to the notice of the Commission that the 2004-05 Tariff Order has adversely affected the FRP proposals of the Government. The financial situation of the State is well known to you and additional losses created by such a harsh order have affected the cleaning up of the Balance Sheets for the proposed new entities Notwithstanding this the FRP is being worked out. The Commission may kindly work out tariff as per the existing financial situation of the Board. The Commission might also consider revisiting the issue of disallowing interest on loans as this practice will adversely impact on the utility?s credit worthiness and cast a damper on investment in the sector. It may also be confirmed by the Commission that return on equity would be available on actual equity upto 30% and would be included in tariff computation irrespective of the performance of the Utility.

View of the Commission

It would be stated that through these comments, the Government of Punjab have by and large supported the approach and proposal of the Board on the ARR, except on assessment of agricultural consumption.

The above views of the State Government seem to be at variance with their views sent on the ARRs of the Board for the earlier three years, especially for the years 2002-03 and 2003-04. Some of the significant principles for the ARR determination and tariff fixation suggested earlier by the Government were as follows:-

i)                    While the State Govt. recognizes the need for recovery of cost of supply, the inefficiencies of the Board can not be passed on to the consumers. Increase in tariff should cover such costs, which remain unmet despite achieving adequate efficiency levels. It would, therefore, be more appropriate to determine the Annual Revenue Requirement of the Board on the basis of certain well established and efficient norms of operation rather than the cost plus principle. Specifically, the Board may be directed to draw up a roadmap for reducing transmission and distribution losses, establishment costs, pilferage and leakages, fuel costs etc. and implement the same in a definite timeframe starting from the first year i.e. 02-03.

ii)                   Increase in the ARR for bridging the revenue gap should not be only through increase in tariff but it should be a mixture of increase in tariff, subvention in the form of budgetary support from the Government, improvement in operational performance and cutting costs of the Board.

iii)                 While determining the ARR and revising the tariffs, the Commission may strike a delicate balance between the concerns of all the stakeholders, namely, the consumers, the Board and the State Government.

iv)                 The GOP considered in detail the Board?s ARR proposals for the year 2002-03. The State Govt. specifically commented that target of 1.75% for reduction of T&D losses proposed by the Board was too low and that in the year 2002-03, T&D losses should be brought down to 22.5%. The employees? costs should not be more than Rs.1123.83 crores worked on a ratio of 3.5 employees per million units of energy sold. On interest charges, the GOP observed that the intention of the law cannot be that costs, which do not result into adequate benefits to the consumers, are also passed on to them.

Adopting the above mentioned norms and principles, the State Government worked the ARR of the Board for the year 2002-03 at only Rs.5981.20 crores against Board?s claim of Rs.7857.78 crores. It may be mentioned that for the year 2002-03, the Commission fixed T&D loss reduction target at 25.52%, the employees? costs at Rs.1274.66 crores and the size of the ARR at Rs.6862.09 crores as per Tariff Order for the year 2004-05.  In all other matters also, the Commission displayed the same equitable, balanced and pragmatic approach. The Commission followed the same principles in its next two Tariff Orders, and it intends to adhere to these for the current Tariff Order. The Commission believes that its approach is strictly as per the requirements of law and Regulations framed and notified by the Commission and substantially accommodates and reconciles the views and interests of all the stakeholders. Otherwise also, even though the Commission has not formally adopted Multi-Year Tariff fixation as per the requirement of law, it is the policy of the Commission that its approach should be consistent and should not change from year to year, except for exceptional and well explained reasons. The Commission is also fully conscious of the fact that its approach has to be totally neutral to the nature of ownership of the Utility. In the foreseeable future, when private licensees also become active players, the principles being enunciated by the Commission will have to be applied uniformly to assess and determine their ARRs. The exact position/decision of the Commission on individual items like T&D losses, AP consumption, interest deductions etc. is explained in Chapter 7 of this Tariff Order.

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