ARR & Price Proposal ARR & Price Proposal ofof

GRIDCOGRIDCO For FY 2007-08 and For FY 2007-08 and

Views of Stakeholders Views of Stakeholders

February 15, 2007February 15, 2007

Together, let us light up our lives.

ORISSA ELECTRICITY REGULATORY COMMISSIONORISSA ELECTRICITY REGULATORY COMMISSION

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GRIDCO’sGRIDCO’s

ARR & PRICE APPLICATIONARR & PRICE APPLICATION

FOR FOR

FY 2007-08FY 2007-08

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Demand for and Sale of Power• GRIDCO has filed ARR & Price application for 2007-08 for its

bulk supply activity.• GRIDCO and DISTCOs have furnished the following

projections regarding demand and sale of power:

ItemOERC

Approval 2006-07

DISTCOs' Projection 2007-08

GRIDCO's

Projection

2007-08

SMD (MVA) 2226.76 3193.88 2400.00

Sale to DISTCOs (MU) 14683.00 17549.30 16000.00

Sale to CGPs (MU) 120.00 10.00

Export (MU) - -Total Sale (DISTCOs + CGP) (MU)

14803.00 16010.00

Avg. of the

Actual from4/06 to 10/06

2290.95

8674.65

1.15

-8675.80

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Distco-wise Demand for and Sale of Power

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

SMD (MVA) Sale to DISTCOs (MU)

Distcos Projection

Gridco’s Projection

Distcos Projection

Gridco’s Projection

CESU 962.00 791.12 5225.00 5060.00

NESCO 768.00 588.14 5119.00 4110.00

WESCO 1142.54 716.86 5300.06 4925.00

SOUTHCO 321.34 303.88 1905.25 1905.00

All Distcos 3193.88 2400.00 17549.31 16000.00

• Discrepancies between Gridco’s and Distcos’ projections may be explained.

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Transmission Loss and Power Procurement

• GRIDCO projects transmission loss of 5.00% for 2007-08 based on first six months of 2006-07.

• A total energy procurement of 16,852.63 MU for the ensuing year has been considered.• 16801.22 MU shall be drawn from both State and Central generators.• The shortfall of 51.41 MU shall be met from outside the State @ 600 P/U.• Total power purchase and the costs thereof have been projected as follows:

Year OERC Approval (2006-07)

Actual from 4/06 to 10/06

GRIDCO’s Proposal

(2007-08)

Power Purchase (MU) 15414.79 9554.03 16801.22

Power Purchase Costs (Rs. Crore)

1756.84 1054.24 2164.46

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Revenue Requirement, 2007-08• GRIDCO’s proposal of Revenue Requirement for 2007-08 along with those of

approved ones for 2006-07 are presented in the table below: (Rs. Crore)

Item

OERC Approval

2006-07

GRIDCO’s Projection

2007-08

A. Power Purchase Cost 1756.84 2164.46

B. Uncovered Expenses : 480.12 677.01

Proposal for pass through of past losses towards repayment of principal 480.12 497.49

Arrear fixed cost charges of TTPS after adjustment of Tariff revision of TSTPS & FSTPS

103.93

NTPC’s claim towards arrear Income tax 26.28

Amount paid/payable to OPGC during 2006-07 39.36

Differential Fixed Costs of TTPS for 2006-07 (Rs195.01 cr revised Fixed Costs minus Rs185.06 cr as approved by OERC) 9.95

C. Total of other expenses ( Interest, Employee, A&G Cost etc.) : 209.06 187.16

Interest Cost 204.34 180.72

Other Cost (Employee, A&G Cost etc.) : 4.72 6.44

D. Return on Equity - 60.62

Total Revenue Requirement (A + B + C +D) 2446.02 3089.25

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

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Pass through of past losses and uncovered expenses

• The accumulated loss of GRIDCO as on 31.03.2006 stands at Rs1002.20 Cr as per audited balance sheet.

• GRIDCO proposes a sum of Rs.677.01 crore to be passed on to tariff under this head during 2007-08.

Sl. No.Item GRIDCO’s

Proposal

1 Proposal for pass through of past losses towards repayment of principal

497.49

2 Arrear fixed cost charges of TTPS after adjustment of Tariff revision of TSTPS & FSTPS

103.93

3 NTPC’s claim towards arrear Income Tax 26.28

4 Amount paid / payable to OPGC during 2006-07 39.36

5 Dirrerential Fixed Costs of TTPS for 2006-07 (Rs 195.01 cr revised fixed Costs minus Rs. 185.06 cr as approved by OERC

9.95

TOTAL 677.01

Rs. Crore

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Other Expenses• GRIDCO’s proposal relating to interest and establishment

costs are presented in the table below:

Rs. Crore

Sl. No.

ParticularsGRIDCO'sProposal for

2007-08

1 Interest Cost 180.722 Other Costs:a Employee Cost 3.09b 2.03c

A&G Cost

1.32ERLDC, NLDC fees and SLDC Scheduling Charges Sub-Total - Other Costs:Total (1+2) 187.16

6.44

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Expected Revenue from Charges, 2007- 08 • GRIDCO’s proposal for net total revenue receipts for 2007-08 at the

existing rates (along with the approved figures for 2006-07) are presented in the table below:

(Rs. Crore)

ItemOERC Approval

(2006-07)

GRIDCO's Proposal

(2007-08)

1. Revenue from Demand Charges 534.42 864.002. Revenue from Energy Charges 1240.02 2221.953. Misc. & Other Receipts 167.06 3.30- Sale to CGPs 36.96 3.30- Export - -- Unscheduled Interchange - -- Receivable from DISTCOs 110.10 -- Receivable from outside States 20.00 -4. Net Total Receipts (1+2-3) 1941.50 3089.25

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Tariff Proposal, 2007-08

• GRIDCO’s proposal for demand and energy charges for 2007-08 are presented in the table below:

Year Demand Charges (Rs/ KVA)

GRIDCO’s Proposal for Energy Charges (P/U)

2007-08 300 138.87

Average Energy Charge 192.87

%Rise over current average energy charge@120.88 P/U

59.56%

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Views of Stakeholders

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Views of StakeholdersLegal Issues:• The ARR application filed by GRIDCO for determination

of price is not tenable as the Commission has no authority under law and more particularity u/s 62 of E. Act. 03, to determine tariff on the application of a non-licensee i.e. GRIDCO.

• Functioning of GRIDCO as trading company/ licensee is unnecessary that too in the absence of competition.

• Notice so published inviting objections does not conform to the requirements.

• The procedure/method adopted by the Commission should be made simple and inexpensive to enable the public to participate.

• The Commission may kindly examine whether the licensee has complied with the directions, conditions of licensee etc. issued by the Commission?

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Views of Stakeholders

Energy Availability:

• Some stakeholders put the total power availability at 18,815 MU as compared to 16,801 MU projected by GRIDCO.

• It is pointed out that GRIDCO has not independently assessed the availability of hydro power for 2007-08, but has merely accepted the figure submitted by OHPC based on “design energy”.

• Availability of power from hydel stations should be considered on the basis of the reservoir levels of the stations in the current year and their generation performance levels in the first seven months of FY 07.

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Views of StakeholdersEnergy Availability: Cont…• Some stakeholders have taken into account the design energy of

the hydel plants, their performances in the earlier years and the reservoir levels on the 1st day of October 2006 for computing hydro power availability.

• They submit that the availability of power from State hydro stations would be 7128 MU in FY 08 as against GRIDCO’s proposal of 5856 MU.

• GRIDCO should schedule for higher capacity availability from OHPC through suitable incentives.

• Some estimate the availability from CGPs at 630 MU as against GRIDCO’s proposal of 540 MU.

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Views of Stakeholders .. Contd.Demand & Energy Requirement:• OERC should scrutinize the projections given by DISTCOs

and GRIDCO and arrive at actual requirement of power and approve the same.

• One objector has agreed to the DISTCOs’ projection of SMD and energy requirement as opposed to those projected by GRIDCO.

• The quantum of energy estimated by GRIDCO for sale to Distcos may not be considered as the Distcos have submitted their requirement in their respective ARR. The drawl of energy submitted by the Distcos may be considered.

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Views of Stakeholders .. Contd.

Demand & Energy Requirement: Cont…

• There would be surplus of energy during 2007-08 to the extent of 213 MU (as against a deficit projection of 51.41 MU by GRIDCO) which may be sold through UI at the peak hours.

• For Simultaneous Maximum Demand, OERC may accept GRIDCO’s figure as DISTCOs’ figures can not be correct.

• The average SMD as proposed by NESCO, WESCO & SOUTHCO are 673 MVA, 950 MVA and 300 MVA respectively and the same may be taken for computation of Revenue of GRIDCO.

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Views of Stakeholders .. Contd…Transmission Losses:

• Most objectors are critical of GRIDCO’s projection of transmission loss at 5%.

• The Licensee has miserably failed to arrest the high transmission loss.

• The average transmission loss in the OPTCL system has been taken as 5% which contradicts the recommendations of the High Power Committee.

• The method of transmission loss computation adopted by GRIDCO is not acceptable to the three reliance companies.

• GRIDCO should examine with OPTCL and determine the sections of transmission lines where higher transmission loss is occurring.

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Views of Stakeholders .. Contd.

Pass Through of Past Losses & Uncovered Expenses:

•All losses of erstwhile OSEB and subsequently of GRIDCO from retail sale were kept in GRIDCO’s book and distribution privatized with zero loss.

•Past losses now suggested to be passed on to the consumers, are due to un-prudent expenditure by GRIDCO which was in excess of the amount approved by OERC.

•GRIDCO has also requested for pass through of all the past losses to the extent of repayment of loans and liabilities which the Commission may examine.

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Views of Stakeholders .. Contd.

Pass Through of Past Losses & Uncovered Expenses: Cont…

•“Past losses” are mostly on account of the licensee’s inefficient operation and are, therefore, not payable.

•GRIDCO should pray for a central subsidy to wash off all past losses. Incidentally a major part of these losses went as gains to central generating companies. •The Commission should reject treatment of past loss and direct GRIDCO to adjust the same against its earnings from ABT and power trading.

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Views of Stakeholders .. Contd.Revenue Requirement & Tariff:• Commission may decide the status of GRIDCO and then

say whether GRIDCO is authorized to file an ARR instead of charging only 4% margin.

• Revenue receipt will increase due to sale of additional power as assumed by GRIDCO.

• Revenue expenses on transmission will decrease as consumers should not pay the interest on bonds on account of arrear energy charges.

• Expenditure will decrease if pass through claims of GRIDCO are critically scrutinized by OERC.

• The cost of procurement of power will decrease substantially if the factors determining the cost of power are scrutinized.

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Views of Stakeholders …contd.

Revenue Requirement & Tariff: Cont… • There is no justification in proposing any increase in Bulk Supply

Price for FY 2007-08 by GRIDCO.

• OERC allowed increase in BST during 2006-07 which encouraged GRIDCO to inflate its claims.

• The Commission should scrutinize the Application of GRIDCO and reduce the BST for the FY 2006-07.

• The prices should be differentiated for peak and off-peak supply and the tariff should include variable cost of generation at actual levels and reasonable compensation for capacity charges.

• GRIDCO’s proposal for a steep increase in BST, if accepted, will only help to close many industries and deny power to many households.

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Views of Stakeholders …contd.

• GRIDCO should avail of cheaper loans to pay back costlier loans taken earlier.

• Interest allowed in ARR for NTPC Bond may be trued up.

• Similar principles may be followed while approving the interest cost for 2007-08.

• Interest towards securitization as well as capital of securitization should not be passed on to the ARR.

• Commission need not consider the ROE of Rs. 60.62 crore as proposed by the licensee.

• OPTCL may be directed to limit the transmission losses to a figure less than the approved loss of 4% for 2006-07.

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

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Issues in BSP: 2007-08

• Projection of a rise of 7.65% in consumption for the year 2007-08.

• Hefty rise in demand projected needs attention.

• GRIDCO’s projection of transmission loss of 5%.

• Latest reservoir levels in hydel stations and maximization of drawl.

• Justification of allocation of power from KhSTPS.

• Maximization of drawl from CGPs.

• Justification of claim of past losses & uncovered expenses to the tune Rs. 677.01 crore.

• Interest cost of Rs 180.72 crore.

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Thank You