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Transmission Assets of OPTCL

A Presentation on ARR & Tariff Proposal of OPTCL for FY 2008-09 Analysis/Objections/Suggestions February 6, 2008 By Dr. Shibalal Meher (Consumer Counsel) Nabakrushna Choudhury Centre for Development Studies, Bhubaneswar. Transmission Assets of OPTCL. Sources of Revenue for 2008-09.

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Transmission Assets of OPTCL

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  1. APresentation onARR & Tariff Proposal of OPTCL for FY 2008-09Analysis/Objections/Suggestions February 6, 2008ByDr. Shibalal Meher(Consumer Counsel)Nabakrushna Choudhury Centre for Development Studies,Bhubaneswar

  2. Transmission Assets of OPTCL

  3. Sources of Revenue for 2008-09

  4. Revenue Requirement (Rs crore)

  5. Excess or Deficit in ARR & Tariff Design

  6. Analysis of the Proposal

  7. Revenue Gap of OPTCL during 2008-09 (Rs in Crore)

  8. OPTCL’s Proposal (excluding SLDC) to recover Annual Fixed Cost including past losses • Through recovery on monthly basis @ Rs 52.94 Crore per month • Or @ 33.05 P/U from 1.4.2008

  9. Deficit Reduction • Non transfer of past losses (Rs 108.32 Crore) • Reduction in fixed cost • Employee cost • R & M Cost • Non allowing of reasonable return.

  10. Deficit Reduction (Contd…) • Reducing the interest on loan. • Justification of huge loan for new projects? • Delay in completion of ongoing projects added to interest. Cost-benefit analysis of delaying a project? • Advance against Depreciation • Whether it satisfies the CERC norm? Is cumulative loan repayment > cumulative depreciation?

  11. Deficit Reduction (Contd…) • Reduction in Transmission loss • Kanungo Committee had recommended a step wise reduction of transmission loss to brought down a level at per with that of Power Grid.

  12. Fixed Cost of OPTCL (Rs in Crore)

  13. BROAD TARIFF RELATED ISSUES RAISED BY OBJECTORS (To be addressed by OPTCL)

  14. Issues emerge from the objections/ suggestions submitted by the Objectors • Functioning of OPTCL • The separation of OPTCL from GRIDCO is only cosmetic and the Hon’ble Commission may direct that OPTCL function as an independent Engineering Organisation with full fledged independent Board of Directors. • OPTCL has to produce all relevant documents since 2000-01 till 2007-08 regarding how much funds are allowed by the Hon’ble Commission in operation and maintenance head and how much they have spent during that period. • The sub-stations and lines of OPTCL are not properly maintained by OPTCL due to want of skilled manpower. OPTCL should therefore appoint skilled labourers in the sub-station maintenance work.

  15. Issues emerge from the objections (Contd..) • OPTCL should produce before the Commission what action it has taken to meet the line and sub-station connectivity of electricity supply to all through RGGBY and BJY load. • The provision for revenue requirement of Rs 250 crores for line and sub-station are not clear. Those line will commission during 2008-09 should be mentioned with specific date. • Cost of Fixed Assets • The Original cost of Fixed Assets shall only be the book value and the tariff is not to be considered on the basis of the up rated value.

  16. Issues emerge from the objections (Contd..) • Employee Cost • According to some objectors the employee cost of OPTCL may be allowed at Rs 135.94 crore subject to the computation of terminal benefit provision. • Repair and Maintenance Expenses • Most of the R&M expenditure envisaged in the ARR of OPTCL are either the capital expenditure as it increased the life as well as capacity of the asset or the non R&M expenditure like security personnel charges, etc., which should not be treated as R&M. • The equipments including power transformer, circuit breakers CTs, PT/CVTs, new relays, energy meters, etc. cannot be treated as spare parts under R&M which is allowed as per the CERC norms. The capital expenditure on new and original equipments is to be capitalized and the interest & depreciation charges shall only be allowed in the ARR.

  17. Issues emerge from the objections (Contd..) • As per the ATE direction, the R&M expenditure with 6% hikes over and above Rs 15.00 crore in each year since 2006-07 is only Rs 18.59 crore. • A&G Expenses • A&G expenses should be fixed on a normative basis as per clause 5(E) of the OERC Regulation, 2004. • It is submitted that Rs 14.79 crore may be allowed to OPTCL towards A&G expenses for FY 2008-09.

  18. Issues emerge from the objections (Contd..) • Supervision charges • There is no justification to claim supervision charges for bay extension, lines, switching station @ 16%, being constructed by EHT consumers on behalf of OPTCL. The Commission may reduce the ARR of OPTCL to the extent of the full or part value of supervision charge in accordance with the provisions relating to misc. revenue under the Electricity Act, 2003.

  19. Issues emerge from the objections (Contd..) • Provision for bad debt • Since all the DISTCOs are paying the transmission charges in full, the provision for bad debt is unfounded and should not be allowed in the ARR of OPTCL. • Interest Cost and Financial charges • The interest amount would be reduced to Rs 25.18 crore as against the claim of Rs 115.16 crore. • The Hon’ble Commission should not allow the actual capital cost and interest during construction of delayed works. • Depreciation • Hon’ble Commission vide order dated 22.3.2005 vide clause 6.22 has adopted the principle to allow the depreciation at pre 92 rate, i.e. 3.13% on gross fixed assets. Based on that principle the depreciation may be considered as Rs 64.53 crore.

  20. Issues emerge from the objections (Contd..) • Advance against Depreciation • Hon’ble ATE has directed to exclude the advance against depreciation in the OPTCL ARR 2006-07. Hence, this may be excluded in computation of the OPTCL ARR for FY 2008-09. • Contingency Reserve • OPTCL may be allowed Rs 5 crore towards contingency reserve for 2008-09 instead of Rs 13.10 crore proposed by OPTCL. • Reasonable Return • OPTCL may not be allowed reasonable return on the similar lines as the Hon’ble Commission has decided ARR and tariff order for OPTCL in previous years.

  21. Issues emerge from the objections (Contd..) • Interest on Working Capital • The loan base taken for computation of interest on loan includes the loan availed by GRIDCO and subsequently transferred to OPTCL towards working capital. As the loan is yet to be divided into capital expenditure loan and working capital loan, no interest on loan be allowed to OPTCL. • Pass through of past losses • The claim made by OPTCL towards past losses has no merit as the same items are already dealt in the ARR 2007-08 and Hon’ble Commission accordingly allowed the related expenses in the ARR of OPTCL.

  22. Issues emerge from the objections (Contd..) • Transmission Tariff • The Hon’ble Commission may determine the transmission tariff for the FY 2008-09, based on the approved parameters for the FY 2007-08. • OPTCL has proposed increase in transmission tariff without any improvement in the quality of transmission and reduction in the transmission loss. • One of the objectors (IMFA) submitted that there is no actual transmission of electricity from the point of injection at Choudwar to the point of delivery at Therubali. Since power is being transmitted through the method of displacement there is no such transmission loss, the objector deserves special treatment and is not liable to pay any transmission charges and if at all liable, is to pay the same as applicable to the inter-state sale of power.

  23. Issues emerge from the objections (Contd..) • Income from Inter-state wheeling • The Hon’ble ATE had directed the Commission to consider Rs 17.50 crore towards the income from wheeling for FY 2006-07. The same figure may be considered while computing the wheeling income of OPTCL. • Energy Handling & System Availability during 2008-09 • NESCO, WESCO and SOUTHCO have estimated the availability of energy at 21100 MU from different sources as against 19110 MU estimated by OPTCL. • Supply of Electricity • OPTCL may give an undertaking through an affidavit that they will supply quality energy with proper voltage to all consumers of the state.

  24. Issues emerge from the objections (Contd..) • Transmission Loss • The transmission loss for FY 2008-09 would be less than 4% and may not be considered for more than 4%. • The transmission loss of 5% against the earlier target of 3.70% is unacceptable. The quantum of power transmitted remains more or less the same as that in the year 2006-07. Hence, under no circumstances the transmission loss be allowed as 4.5% for the year 2008-09. • The transmission loss should not be allowed at 5%, which would remain between 3.28% and 4%.

  25. Issues emerge from the objections (Contd..) • Hon’ble Commission in its tariff orders dated 22.3.2007 has dealt the various cost proposed by OPTCL and allowed transmission cost of Rs 376.73 crore against the proposal of Rs 678.34 crore. Therefore, transmission cost proposed by OPTCL for FY 2008-09 may be scrutinized critically. • One objector requested the Hon’ble Commission not to allow transmission loss for more than 3% at least from this year onwards

  26. Thank You

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