Tariff Order WBSEDCL

ORDER OF THE

WEST BENGAL ELECTRICITY REGULATORY COMMISSION FOR THE YEAR 2011 2012 AND 2012 2013

IN CASE NO: TP 53 / 12 13

IN RE THE TARIFF APPLICATION OF THE WEST BENGAL

STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED

FOR THE YEARS 2011 2012, 2012 2013 AND 2013 2014

UNDER SECTION 64(3)(a) READ WITH SECTION 62(1) AND

SECTION 62(3) OF THE ELECTRICITY ACT, 2003

Date : 01.12.2012

Tariff Order of WBSEDCL for the year 2011 2012 and 2012 2013

CHAPTER 1 INTRODUCTION

West Bengal Electricity Regulatory Commission 2

1.1 The West Bengal Electricity Regulatory Commission (hereinafter referred to as the

Commission) was constituted by the Government of West Bengal in the year 1999 in

terms of section 17 of the Electricity Regulatory Commissions Act, 1998, now

repealed by section 185 of the Electricity Act, 2003 (hereinafter referred to as the

Act) which came into force with effect from 10.06.2003. The first proviso to section

82(1) of the Act has ensured continuity of all the State Electricity Regulatory

Commissions, which were established by a State government under section 17 of

the 1998 Act (and some other enactments) and functioning as such immediately

before coming into force of the Act and shall be the State Commission for the

purpose of the Act.

1.2 The functions of a State Commission have been specified in Section 86 of the

Electricity Act, 2003. One of the main functions of a State Commission relates to

determination of tariff for generation, supply, transmission and wheeling of electricity,

wholesale, bulk or retail, as the case may be, within a State. Further, Section 62(1)

of the Act also requires the appropriate Commission to determine the tariff in

accordance with the provisions of the Act, for supply of electricity by a generating

company to a distribution Licensee, for transmission, for wheeling as also for retail

sale of electricity.

1.3 The Commission has, therefore, all the powers and authority under the Electricity

Act, 2003 to determine the tariff, as laid down in the Act.

1.4 WBSEDCL is deemed to be licensee under the Electricity Act, 2003 in terms of fifth

proviso to Section 14 of the Act. The Commission determined the tariff of WBSEDCL

for the first control period (2007 2008) and the second control period (2008 2009,

2009 2010 and 2010 2011) under the then regulations related to tariff.

1.5 West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff)

Regulations, 2011 has come into effect with effect from 25th April, 2011. The said

Tariff Regulations, 2011 was further amended by notifying the West Bengal

Tariff Order of WBSEDCL for the year 2011 2012 2012 2013

West Bengal Electricity Regulatory Commission

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Electricity Regulatory Commission (Terms and Conditions of Tariff) (Amendment)

Regulations, 2012 in the extra ordinary edition of The Kolkata Gazette dated 27th

August, 2012.

1.6 A generating Company or a licensee, whose tariff is to be determined by the

Commission as per the provisions of the Act, is now required to submit their

application for determination of tariff for the ensuing years of the third control period

under the multi-year tariff framework complying with the provisions of the West

Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff)

Regulations, 2011 (hereinafter to be referred as Tariff Regulations). Though as per

the Tariff Regulations the last date for submission of the application to the

Commission by a generating company or a licensee for determination of tariff for the

third control period comprising three years from 2011 2012 to 2013 2014

(hereinafter referred to as the third control period) was 28.5.2011, the Commission,

after considering the prayers of WBSEDCL for extension of date for submission of

the aforesaid application to the Commission, extended the date for the purpose upto

28th July, 2011. Subsequently, WBSEDCL submitted application for extension of date

time to time, latest on 31st October, 2011. WBSEDCL further prayed in their tariff

application that on receiving the new tariff structure arising out of finalization of the

plan for subsidization of certain category of the consumers by State Government and

re-determination of tariff in pursuance to Appellate Tribunal of Electricitys order

dated 4th April, 2011, and in view of the requirement to satisfy ERP (Enterprise

Resource Planning) based billing system, WBSEDCL was required some time to

finalize the tariff application for the third control period. They further prayed to be

condoned for the delay in submission of tariff application.

1.7 WBSEDCL, complying with the provisions of the Tariff Regulations, prepared the

application for determination of its tariff for the third control period and submitted the

same to the Commission on 5th April, 2012 which was considered by the Commission

and numbered as TP-53/12-13.

Tariff Order of WBSEDCL for the year 2011 2012 2012 2013


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1.8 After admission of the application, WBSEDCL was directed to publish the gist of the

tariff application, as approved by the Commission, in the newspapers and also in

their website, as specified in the Tariff Regulations. The gist was, accordingly,

published simultaneously on 10th April, 2012 in Pratidin, The Hindu Business Line,

Ekdin and also in The Times of India. The gist along with the tariff application was

also posted in the website of WBSEDCL. The publication invited the attention of all

interested parties, stake holders and the members of the public to the application for

determination of tariff of WBSEDCL for the third control period and requested for

submission of suggestions, objections and comments, if any, on the tariff application

to the Commission by 14th May, 2012 at the latest. Opportunities were also afforded

to all to inspect the tariff application and take copies thereof.

1.9 Objections to / comments on the aforementioned tariff petition of WBSEDCL for the

third control period were received by the Commission from the following objectors

within the stipulated time i.e., 14th May, 2012.

1. Jayashree Textiles, A unit of Aditya Birla Nuvo Ltd.

2. Hooghly Chamber of Commerce & Industry

3. Eastern India Textile Mills Association

4. The West Bengal Cold Storage Association

5. Eastern Railway

6. South Eastern Railway

7. ABECA

8. Balaji Paper and Newsprint Pvt. Ltd.

9. Eastern India Textile Mills Association

10. Hooghly Alloys & Steels Co. Pvt. Ltd.

11. Chief Engineer, Kolkata Zone, MES

12. ARVAC Forge Cast Ltd

1.10 Objections and suggestions on the tariff application in question received by the

Commission within the stipulated period i.e. 14th May, 2012 have been dealt with

separately in Chapter 3.


CHAPTER 2 THE CASE OF WBSEDCL


2.1 West Bengal State Electricity Distribution Company Limited (WBSEDCL) in its tariff

petition has claimed that the total distribution equity of WBSEDCL in terms of

restructuring order of State Government was Rs.222300.00 lakh as on 01.04.2007.

The equity added during the year 2008 - 2009 was Rs.8471.99 lakh being the assets

of West Bengal Rural Energy Development Corporation Limited (in short

WBREDCL) as handed over to WBSEDCL as per Government Order no. 100-

PO/O/III/4M-12/2005 dated 20.03.2009 and during the year 2009 2010 was Rs.

25068.01 lakh for restructuring of WBREDCL as per Government Order No. 108-

PO/O/III/4M-12/2005 dated 31.03.2009. Considering the same, equity base

considered by the petitioner at the beginning of the year 2010 - 2011 has been

arrived at Rs.255840.00 lakh. No equity addition has been projected by the

applicant during the years 2011 2012, 2012 2013 and 2013 2014. WBSEDCL

has claimed permitted return on the average equity base for the years 2011 2012,

2012 2013 and 2013 2014 in accordance with the provision of the Tariff

Regulations as the entire equity.

2.2 WBSEDCL has claimed to have taken the following measures to reduce the

distribution loss (both technical and commercial):

(a) Regular monitoring of revenue, collection and distribution loss,

(b) Conduct of raids by Security and Loss Prevention Wing,

(c) Introduction of High Voltage Distribution Supply (H.V.D.S.) primarily for power

supply to irrigation consumers,

(d) Installation of meters in the premises of un-metered irrigations, Kutir Jyoti /

Lokdeep consumers and street light points,

(e) To facilitate energy audit mapping and documentation of entire power

network of WBSEDCL, Geographical Information System (GIS) has been

stated to have been taken up and is under progress,

(f) Spot billing facility for all categories of L & MV consumers under many

customer care centres is stated to be already in place and such billing facility

has been envisaged to be extended further,



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(g) Implementation of distribution transformer metering to locate loss prone

areas,

(h) Restructured Accelerated Power Development and Reform Programme (in

short RAPDRP) (Part A) for 62 towns are under progress for installation of

IT infrastructure for assessment and monitoring of loss on regular basis,

(i) R-APDRP (Part B) for 45 towns are also to be taken up shortly for reducing

AT&C loss of those towns.

2.3 WBSEDCL has submitted that projection of the energy balance has been arrived

based on the estimated consumption, loss in distribution system of WBSEDCL and

loss in transmission system of WBSETCL at the normative level as per Tariff

Regulations. They also submitted that the petitioner has to consider the loss in

central and state grid, as applicable.

2.4 WBSEDCL has claimed that with fast growing expanding distribution network,

additional consumers are being added with WBSEDCLs system during last few

years. WBSEDCL states that based on the trend of increase of consumers in last five

years, consumer strength of WBSEDCL has been projected for the years 2011

2012, 2012 2013 and 2013 2014.

2.5 Accordingly, 10636.28 MU has been projected to be consumed by the consumers

under L&MV category in the year 2011 2012. Under the same category in the year

2012 2013 and 2013 2014 the petitioner has projected the consumption under

the same category to be 11719.76 MU and 12926.69 MU respectively. Under the

HV & EHV category consumption in the year 2011 2012 has been projected to be

8425.50 MU while under the same category 9332.44 MU and 10340.24 MU

respectively have been projected to be the consumption during the years 2012

2013 and 2013 2014.

2.6 Total sale of energy to own consumers of WBSEDCL has been projected as

19061.78 MU in the year 2011 2012, 21052.20 MU in the year 2012 2013 and

23266.93 MU in the year 2013 2014. T&D loss has been projected at a level of



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24.93% for the year 2011 2012 but considered on the normative basis at a level of

17.75% and 17.50% respectively for the years 2012 2013 and 2013 2014.

2.7 The petitioner has projected sale of total energy to other licensees like CESC, DPL

and DPSCL at a level of 1270.00 MU, 2308.66 MU and 2875.92 MU respectively in

the years 2011 2012, 2012 2013 and 2013 2014. The projection of sale of

energy to licensees has been stated to have been made on the basis of present

trend of drawal by CESC upto February, 2012, the present trend of drawal by DPL

and as per projection given by DPSCL in the MYT application for third control period.

2.8 In terms of an agreement signed between the Govt. of W.B and Govt. of Sikkim the

petitioner has claimed that 40 MU of energy being 20% of the sent out generation

from Rammam Hydel station Stage-II shall be supplied to Sikkim each year of the

control period.

2.9 Sale of incidental surplus energy to the persons other than consumers and licensee

during 2011 2012, 2012 2013 and 2013 2014 has been estimated by the

petitioner to be at a level of 657.00 MU, 3649.00 MU and 2005.00 MU respectively.

WBSEDCL also considered 1283.00 MU of power in the year 2011 2012 only

towards banking of power through swap arrangement without selling due to low

market price or non-availability of buyer to purchase power through cash arising out

of volatile market condition. The above considerations have been made taking into

account surplus energy to be made available from the new projects / extension

projects of WBPDCL / DPL after meeting the requirement of the own consumers, the

licensees of the State & Government of Sikkim and considering the energy required

in the pumping mode of PPSP.

2.10 Sent out generation available from the hydel power stations of WBSEDCL has been

projected to be 405.856 MU in 2011 2012, 442.433 MU in 2012 2013 and 442.53

MU in 2013 2014. Out of the two main hydel station of WBSEDCL namely

Rammam and Jaldhaka, Rammam is working at reasonably high PLF. The

generation at Jaldhaka was suspended during 2009 2010 and 2010 2011 due to

renovation and modernization work. However, according to WBSEDCL, the



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generation at Jaldhaka has started during the year 2011 2012. It is also submitted

by WBSEDCL that the installation of a new unit of 9 MW capacity at stage-I of

Jaldhaka Hydel Power Station is expected to be completed by July, 2012 thereby

enhancing the capacity of Stage I to 36 MW from the existing capacity of 27 MW.

The generation at TCF Hydel Power Station as stated by the petitioner, cannot be

achieved by WBSEDCL at the designed value stated to be due to constraints

towards release of 330 cusec of water as per DPR for non-completion of Dauk-nagar

Main Canal by I & W Department and frequent shut down of Main Canal for long

periods. Annual generation at PPSP at a level of 850.00 MU during the years 2012

2013 and 2013 2014 has been estimated by the petitioner and has been said to be

according to the system requirement during peak hours considering optimum

utilization of the surplus energy mainly during off peak hours. However, for the year

2011 2012, the same has been considered at 749.244 MU as per generation trend

upto February, 2012. WBSEDCL is maintaining diesel generation plant only at

Rudranagar in Sagar Island. Energy available from this diesel generating station has

been estimated at a level of 0.88 MU, during all the ensuing years of third control

period.

2.11 Gross generation available from renewable and co-generation sources, as per

WBSEDCL, has been estimated to be 116.03 MU, 150.30 MU and 150.30 MU during

the years 2011 2012, 2012 2013 and 2013 2014, respectively.

2.12 To discharge the function of a distribution licensee, WBSEDCL continues to

purchase power in the same manner as was being followed by erstwhile WBSEB

from different agencies namely West Bengal Power Development Corporation Ltd.

(WBPDCL), The Durgapur Projects Ltd. (DPL), Dishergarh Power Supply

Corporation Ltd. (DPSCL), Damodar Valley Corporation (DVC), National Thermal

Power Corporation Ltd. (NTPC), National Hydel Power Corporation (NHPC) and

Power Trading Corporation (PTC). It is also submitted by WBSEDCL that

conventional power will also be purchased directly from the new units of WBPDCL,

NTPC, NHPC, other generators and from electricity traders to meet the system

demand of WBSEDCL during the ensuing years of the third control period.



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WBSEDCL will also purchase power from different renewable and co-generation

sources of energy during the years of the third control period.

2.13 The planning of power purchase has been claimed by WBSEDCL to have been done

keeping in view the following aspects.

(a) Estimated system demand for the ensuing years based on the projected load

growth.

(b) Maximum generation that may be available from the hydel power stations of

WBSEDCL.

(c) Commitment to meet the peak system demand.

(d) Requirement of pumping energy for optimum utilization of PPSP to meet the

system demand.

2.14 WBSEDCL claimed that besides purchasing power through grid system, they will

also purchase some quanta of power in radial mode from DVC at Asansol, Burdwan

and other areas, from DPL (at 33 KV & 11 KV) in and around Durgapur area and

from DPSC (at 11 KV) at Asansol area, Govt. of Sikkim (at 11 KV) at Rangpoo area

and WBREADA (11 KV) at Frezerganj area for catering its own consumers during

the years under third control period.

2.15 It has been claimed by the petitioner that while computing the quantity of purchase of

power from WBPDCL during the ensuing years under third control period, they have

considered the net energy available to WBSEDCL from all the generating stations of

WBPDCL based on the actual performance upto February, 2012, excepting BKTPS

stage-II and STPS (Units V & VI). However, as stated by WBSEDCL, for BKTPS

stage II and STPS (Units V & VI), the PAF is considered as per the norms due to

the fact that the performance of these power stations during the year 2011 2012

was nearer to the normative PAF.

2.16 WBSEDCL has claimed that the energy charge and capacity charges for all the

generating stations of WBPDCL are considered based on the following parameters:



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a) The capacity charges for all power stations of WBPDCL for the year 2012 2013

and 2013 2014 have been estimated based on norms given in the Tariff

Regulations.

b) For the year 2011 2012, the capacity charge and energy charge including

Monthly Fuel Cost Adjustment are considered as per actual upto February 2012

and capacity charge rate and energy charge rate including MFCA for March 2012

are considered from that of February 2012.

c) For the year 2012 2013, the energy charge rate is considered as per energy

charge rate including MFCA of February, 2012.

d) Energy charge rate for the year 2013 2014 is considered with annual escalation

rate of 6.66% as provided for indigenous coal supply in CERC notification no.

Eco 1/2011-CERC dated 31.03.2011 over the energy charge rate of 2012

2013.

2.17 WBSEDCL has estimated own consumption at the offices and substations for 2011

2012, 2012 2013 and 2013 2014 at 40 MU, 42 MU and 44 MU respectively.

2.18 Considering the projected sent out generation from its own generating stations,

power purchase from different agencies and the projected sales, energy

consumption at own premises, WBSEDCL has projected the energy balance for the

years 2011 2012, 2012 2013 and 2013 2014 also.

2.19 WBSEDCL submitted that considering the programme taken during the year 2011

2012 (Upto February, 2012), they have projected 1190.00 MU and 834.55 MU to be

received through power swap-in during the years 2011 2012 and 2012 2013

respectively. WBSEDCL also projected the short term power purchase to the tune of

990.00 MU, 364.55 MU and 1000.00 MU for the years 2011 2012, 2012 2013

and 2013 2014 respectively mostly during the months March and April in order to

bridge up the gap between supply of power and system demand which usually

occurs during the months mentioned above.

2.20 The petitioner has projected Rs.848522.00 lakh as total power purchase cost for the

year 2011 2012 while for the years 2012 2013 and 2013 2014 the power



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purchase cost has been estimated to be Rs.1067741.00 lakh and Rs.1201642.00

lakh respectively. This power purchase cost includes the cost of purchase of

estimated quantum of infirm power from the units under stabilization.

2.21 Transmission charges payable to WBSETCL for the energy required to be

transmitted by the petitioner through WBSETCL system has been projected as Rs.

98306.44 lakh for the year 2010 2011. Rs. 99654.57 lakh and Rs. 111121.04 lakh

have been projected for the years 2012 2013 and 2013 2014 respectively.

However, WBSEDCL has not claimed any amount for SLDC charges during the

ensuing years under the third control period.

2.22 An amount of Rs. 92001.70 lakh has been estimated as employees cost for the year

2011 - 2012. For the years 2012 2013 and 2013 2014 employees cost have

been projected as Rs. 93554.18 lakh and Rs. 99407.93 lakh respectively.

2.23 The petitioner has considered a D.A hike @ 9% each year for the third control period

i.e., 2011 2012, 2012 2013 and 2013 2014. Moreover, increase in pay in

respect of employee cost has been considered @ 3% as per normal increment over

basic and grade pay for the ensuing years 2011 2012, 2012 2013 and 2013

2014. WBSEDCL further claimed that terminal benefits are reduced in the ensuing

years 2011 2012, 2012 2013 and 2013 2014 as the service of newly recruited

employees are not covered under the pension scheme of WBSEDCL. The

capitalization rate of employee cost is considered 100% for RE works and 15% for all

other Non-RE works.

2.24 The petitioner has projected Repair & Maintenance (R&M) cost including

consumables for the year 2011 2012 to be Rs.16911.80 lakh. WBSEDCL has

claimed that distribution assets of WBSEDCL are increasing rapidly due to RGGVY

programme and other work such as R-APDRP Part A, feeder segregation work etc.

of WBSEDCL. WBSEDCL has added various distribution assets and generation

assets for its generating stations in the year 2011 2012. In order to deliver power

with reasonable quality parameters and to reduce instances of outages for the widely

scattered large consumer base, the expenditure of R & M works of WBSEDCL has



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been increased in the year 2011 2012 mainly due to increase in expenditure for

maintenance of line, cables and networks. For the years 2012 2013 and 2013

2014 the petitioner has claimed to have estimated the R&M cost following the actual

trend upto December, 2011 and has projected Rs.18617.32 lakh for the year 2012

2013 and Rs.20498.58 lakh for the year 2013 2014.

2.25 Rs. 8772.59 lakh has been estimated and claimed by the licensee as administration

and general expenses for the year 2011 2012. The petitioner has further tried to

justify this expenditure which is stated to be due to increase of distribution network

and consumer strength and to fulfill the requirement of the large consumer strength,

WBSEDCL has to introduce different services, besides existing facilities, following

the guidelines given in the Regulations to match the requirement of large consumer

base. Due to shortage of staff, WBSEDCL has claimed to have decided to outsource

some of its services and the estimated expenditure of Rs. 16414.24 lakh has been

considered for the year 2011 2012 to meet the cost of outsourcing. For the years

2012 2013 and 2013 2014, Rs. 24554.88 lakh and Rs. 29565.45 lakh

respectively has been estimated by the licensee as cost of outsourcing considering

growth of those activities and actual upto December, 2011.

2.26 The petitioner has claimed provision for bad debt to the tune of Rs. 85.80 lakh, Rs

94.38 lakh and Rs. 103.82 lakh respectively for the years 2011 2012, 2012 2013

and 2013 2014 on normative basis as per provisions of regulations of the Tariff

Regulations.

2.27 The petitioner has projected capitalization of expenses for employees cost,

administrative and other expenditure and other finance charges under the

construction activities following the existing policy of WBSEDCL for the years 2011

2012, 2012 2013 and 2013 2014.

2.28 WBSEDCL has also claimed an amount of Rs. 3025.00 lakh for 2011 2012, Rs.

3675.00 lakh for 2012 2013 and Rs. 4008.00 lakh for 2013 2014 respectively for

establishing and maintaining communication network set up for the complaint

management mechanism as per West Bengal Electricity Regulatory Commission



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(Standard of Performance of Licensee Relating to Consumer Services) Regulations,

2010.

2.29 The capitalization of interest during the years 2011 2012, 2012 2013 and 2013

2014 has been projected following the same policy.

2.30 Cost of depreciation of assets of WBSEDCL which will be in service during the year

2011 2012 has been stated to have been computed by the petitioner at Rs.

33259.30 lakh on the basis of the methodology stipulated in the Schedule A of the

Tariff Regulations of WBERC. The detail of the calculation of depreciation has been

given in the prescribed format in Volume II of their petition. Depreciations for the

years 2012 2013 and 2013 2014 have been projected as Rs. 36779.07 lakh and

Rs. 40694.00 lakh respectively.

2.31 WBSEDCL has projected Rs. 37295.88 lakh towards interest on borrowed capital,

Rs. 13005.00 lakh towards interest on Bonds and Rs. 603.64 lakh towards other

finance charges for the year 2011 2012. Similarly, for the years 2012 2013 and

2013 2014, they have projected Rs. 38578.10 lakh and Rs. 38879.02 lakh as

interest on borrowed capital, Rs. 13005.00 lakh and Rs. 13005.00 lakh towards

interest on Bond and Rs. 625.46 lakh and Rs. 651.88 lakh towards other finance

charges, respectively. The petitioner has provided the computations showing actual

amounts of interest chargeable in revenue accounts in the Form-C to Annexure 1

in Volume II of their petition.

2.32 WBSEDCL claimed that while computing the interest on loan, they have considered

a new loan of Rs. 106600.00 lakh to be taken in the ensuing years under the third

control period for the purpose of procurement of meter and other materials for

extending distribution service level network.

2.33 WBSEDCL claimed that interest amount payable to consumers on the security

deposit amount in the ensuing years 2011 2012, 2012 2013 and 2013 2014

has been estimated as per existing procedure on the estimated security deposit of

those years computed based on sale growth and tariff growth of respective year.



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WBSEDCL has projected Rs. 2870.44 lakh, Rs. 3315.31 lakh and Rs. 3829.19 lakh

for the ensuing years of 2011 2012, 2012 2013 and 2013 2014 respectively.

2.34 Regarding interest on working capital requirement, WBSEDCL has submitted that,

based on the directive of the Commission vide paragraph 8.11 of its tariff order for

2008 2009, they have not considered any working capital for the year 2011 2012

but has considered Rs. 18579.00 lakh and Rs. 35470.70 lakh for the years 2012

2013 and 2013 2014 respectively to meet up the gap between working capital

requirement and security deposit amount lying with them. Accordingly, WBSEDCL

has claimed interest on working capital to the tune of Rs. 2601.76 lakh and Rs.

4965.77 lakh for the years 2012 2013 and 2013 2014 respectively.

2.35 The petitioner has claimed Rs. 3011.09 lakh, Rs. 3512.56 lakh and Rs. 3721.09 lakh

towards reserve for unforeseen exigencies on normative basis as per the Tariff

Regulations for the years 2011 2012, 2012 2013 and 2013 2014 respectively.

2.36 WBSEDCL has proposed to release a part of the regulatory asset created on the

additional expenditure of WBSEDCL due to revision of pay and allowances as per

ROPA, 2009, at Rs. 62500.00 lakh, Rs 1000.00 lakh and Rs. 8600.00 lakh during the

year 2011 2012, 2012 2013 and 2013 2014 respectively.

2.37 WBSEDCL has also proposed to consider the impact of APR of WBSEDCL for 2009

2010 and the impact of instalments payment claimed by WBPDCL against the

revision of tariff of their new units in the ARR for the years under the third control

period.

2.38 WBSEDCL has also proposed to allow special appropriation on account of the

followings:

a) Additional amount of capacity charge claimed by NTPC Limited for the period

2004 2005 to 2010 2011 arising out of additional capitalization of assets as

per order of Honble Appellate Tribunal for Electricity.



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b) Additional charges to be borne by WBSEDCL on account of increased tariff of

NTPC power stations for the period from 2009 -2010 to 2010 2011 in addition

to the normal power purchase cost for the year 2011 2012.

c) Additional claim of DVC for supply of ;power from Mejia Power Station for the

period 2007 2008 to 2010 2011 and also for radial power supply for the

period from 2009 2010 to 2010 2011 due to the tariff order passed for Units V

& VI of Mejia TPS by CERC.

2.39 Total expenditure of Rs.1338659.51 lakh has been computed by the petitioner and

after excluding the revenue earned from other income, from bulk supply and supply

to Sikkim, expenses attributable to export and taking into account the benefits

passed on to the consumers, interest credit on depreciation and U.I earning of

previous year the annual revenue required from sale of energy to its consumers has

been estimated by the petitioner as Rs. 1117029.82 lakh for 2011 - 2012. Similarly,

for the years 2012 2013 and 2013 2014 total expenditure of Rs. 1530998.93 lakh

and Rs. 1712422.17 lakh respectively have been projected by the petitioner and after

aforesaid deductions estimated for those years, the ARR from sale of energy to its

own consumers have been projected as Rs. 1235858.35.00 lakh and Rs.

1419318.98 lakh respectively.

2.40 With projected revenue requirement of Rs. 1117029.82 lakh proposed by the

petitioner from sale of 19061.77 MU of energy to its own consumers, the average

cost of supply per unit has been computed by the petitioner to be 586.01 paise / kWh

for the year 2011 2012. Similarly, the average cost of supply for the years 2012

2013 and 2013 2014 have been projected at Rs. 587.04 paise / kWh and 610.01

paise / kWh respectively.

2.41 WBSEDCL has also requested to accommodate increase in power purchase cost

arising out of any new tariff order or APR order or FPPCA order on WBPDCL, DPL,

DPSCL, DVC, NTPC or NHPC power stations, etc., which are in addition to what is

mentioned in paragraph 2.40 above.



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2.42 Changes proposed by WBSEDCL in their tariff for 2011 2012, 2012 2013 and

2013 2014 are as follows.

(a) The existing B-ID tariff categories are segregated into two L&MV tariff

categories such as B-ID (Industrial) for L&MV industrial consumers and B-ID

(Commercial) for L&MV Commercial consumers who have contract demand

in between 50 KVA and 125 KVA.

(b) One new L&MV tariff category as Rate C-ID for other L&MV consumers who

have contract demand in between 50 KVA and 125 KVA has been proposed.

(c) The demand charge, fixed charge and energy charge for different categories

of supply have been proposed to be revised.

(d) Voltage wise graded load factor rebate and surcharge have been proposed

for EHV and HV industrial consumers and also for industrial consumers under

Rate B-ID (Industrial) category for 2011 2012, 2012 2013 and 2013

2014 separately.

(e) WBSEDCL has also proposed separate rate for P.F. rebate and surcharge for

the years 2011 2012, 2012 2013 and 2013 2014 for those categories of

consumers to whom those are applicable at present.

(f) WBSEDCL has also proposed revised rates for meter rentals, meter testing

charges, fuse call charges, etc.

(g) Rebate on energy charge for industrial consumers taking supply at 33 KV and

66 KV has been proposed by the petitioner to be 1% of the energy charge

and the same has been proposed for 132 KV at 2%.

(h) Additional rebate of 30 paise per kWh on energy charge has been proposed

for consumers taking supply at 33 KV or above whose contract demand is

1.50 MVA or above and whose load factor is not less than 75% in the billing

period and whose recorded maximum demand during the billing period is not

less than 80% of the contract demand subject to payment of bill within due



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date. However, for the consumer supply at above 33 KV, the contracted load

will be 10 MV and above.

(i) Rebate for timely payment for the year 2011 2012 has been proposed to be

1% of the billing amount excluding meter rent, taxes, duties, levies and

arrears for those consumers who are already getting such rebate in the year

2011 2012 as well as for Street Light category.

(j) To encourage one time payment for three months bill and to minimize

transaction, a special rebate of 10 paise / unit on energy charge has been

proposed for domestic and commercial consumers under L&MV category

who are covered under quarterly billing system under normal or normal-TOD

tariff scheme provided the payment is made for the quarter at a time within

the due date stipulated for the first month of the quarter.

(k) 1% rebate in addition to the timely payment rebate is proposed to be given to

the consumers who will pay energy bills through e-payment facility within due

date on introduction of it by the petitioner.

(l) Hatchery has been proposed to be included in Rate A (Cm-III) and Cinema

hall are proposed to be considered as commercial consumers.

Tariff Order of WBSEDCL for the yeas 2011 2012 and 2012 2013

CHAPTER - 3 OBJECTIONS AND SUGGESTIONS


3.1 Twelve objectors have provided their objections and suggestions within due date of

14.05.2012 in response to invitation of objections and suggestions on the MYT

application of WBSEDCL for 3rd control period. The documents submitted within due

date of receiving of such objections and suggestions have been considered in this

tariff order only. The suggestions and objections submitted by the objectors which

are relevant to the submitted MYT application of WBSEDCL for 3rd control period,

are discussed below:

3.2 On generation aspect to WBSEDCL, HCCI has objected to showing the conservative

generation plan by WBSEDCL from their own generating station allegedly without

any reason and thus HCCI preferred to consider design energy. In such a context

the Commission has following observations. The conventional hydro system

generation, being must run generation if available for operation, depends on the

availability of water which is fully dependent on the climatic condition of each year

and thus no normative parameter has been considered in this aspect. However if

climatic condition is satisfactory in terms of design parameter but the availability of

machine is less than the normative parameter then such deviation is accounted for

in Annual Performance Review (APR). For Purulia Pumped Storage Project (PPSP)

the generation depends on number of factors such as system demand, its pattern,

availability of cheaper peak power and also on the overall conduciveness of the

system to operate PPSP. Thus in tariff order the trend of the past years has been

considered for future projection. However, while projecting sent-out/ generation from

any sources in case any year is already past or partially past, actual generation

figure for the year is preferred if the year has fully past and the generation/ sent-out

figures are estimated after taking into effect the actual portion for a partially past

year. Accordingly energy availability is calculated. Thus, while considering energy

balance for 2011-12, the energy amount on actual basis has been considered to the

extent possible as the year has already passed over. For 2012-13 and 2013-14 the

generation/ sent-out has been estimated based on latest trend as explained in

Chapter - 4. But where specific deviation has been made that has also been

mentioned in the relevant paragraph of this order.

Tariff Order of WBSEDCL for the years 2011 2012 and 2012 2013


3.3 On O&M expenses of generating station, HCCI has requested that such O&M

expenses should be allowed strictly in accordance with the norms prescribed in the

MYT regulations. Commission dealt the matter along same line in chapter 5.

3.4 On Power purchase cost the submissions by the objectors along with the views of

the Commission are as follows.

3.4.1 Regarding power purchase expenses Jayashree Textiles has stated that

Commission should exercise strict prudence check while allowing such expenses.

Commission noted the point.

3.4.2 ABECAs submissions are as follows.

i. The power purchase cost should be done on the basis of present tariff rate

and not on the basis of future tariff.

ii. The cost of coal per MT allowed by the Commission to the licensee is much

more than listed coal prices of Coal India Ltd.

iii. According to ABECA by having 100% capacity utilization of DPL & WBPDCL

the demand can be met without sourcing power from other sources.

iv. To minimize cost of power of WBPDCL and DPL by increasing their PLF and

lowering T&D loss, by reducing their Return on equity and by disallowing the

unforeseen exigencies and Bad Debt.

On the above issues Commissions views are as follow:

The contention of ABECA in (i) above has been considered in view of the availability of mechanism of power purchase cost recovery through MVCA in

case there is any increase in power purchase price.

In the submitted application of the instant licensee there is no scope of allowing higher coal price and thus the point (ii) is not relevant.



The WBSEDCLs peak demand is of the order of 4900 MW for its own command area and another 550 MW to 750 MW is required to supply to CESC. Whereas

the availability from WBPDCL at 100% capacity utilization is 3493 MW. Similarly

the maximum possible surplus from DPL considering its 100% capacity utilization

of installed capacity is 310 MW. Moreover 100% capacity utilization of installed

capacity in longer perspective is mere theoretical from technological aspects.

Thus ABECAs contention as per (iii) above does not seem to have merits.

On issue (iv) above the cost reduction issue of power from WBPDCL and DPL is related to the tariff applications of WBPDCL and DPL. Thus Commission does

not intend to deal such matter in this order.

3.4.3 On quantum of procurement of power by WBSEDCL from WBPDCL, HCCI has the

following observations:

i) Projected purchase of power from WBPDCL is in lesser quantity than the

normative generation of WBPDCL which has resulted in procurement

proposal for short-term power from traders/exchange at high cost.

ii) The normative generation level of WBPDCL should be considered for

purchase of power from them by WBSEDCL.

iii) In case past performance is considered instead of normative generation for

WBPDCL and lower than benchmark (normative) generation level are

considered for WBPDCL generation, then the capacity charges should be

reduced pro-rata on account of lower plant availability factor.

iv) According to HCCI though WBSEDCL considers the past trend to be the sole

reason for assumption of conservative generation from WBPDCL generation

plant for ensuing years of 3rd control period, in certain years of the past the

energy received by WBSEDCL are much higher than the conservative

projections made by it for the 3rd control period.

On the above issue the Commission is of the view that WBSEDCLs projection on

the basis of past trend may not be inappropriate since real time situation in the past



shows that WBPDCL has failed to provide normative generation for some of its

plants. This has resulted into distorted energy balancing scenario which is reflected

by wide variation in projection vis--vis actual energy sold to persons other than

licensee and consumers in tariff order and APR respectively as is being detailed out

in paragraph 5.27 of this order. As a consequential impact the consumers are likely

to be burdened with increased tariff through FPPCA/APR in future as well as there is

likely to be shortage of cash flow in real time operation. On the other hand

WBPDCLs norms cannot be resolved as it will tantamount to rewarding the

inefficiency of WBPDCL. Accordingly, WBSEDCLs projection of energy on the basis

of past trend of different sources has been considered by the Commission. Thus

Commission has preferred to consider the actual sent out energy of WBPDCL from

each power station of WBPDCL for recently fully/ partially passed years to capture

the current trend of performance after due consideration of the outliers. In fact the

lower level of performance as shown in table under the paragraph 4.4(i) of this order

by Sagardighi Thermal Power Station (SgTPS) in first six months compared to same

period of 2011-12 shows the necessity to depend upon average performance of a

longer period specially from points of view of energy balancing of a licensee or power

purchase planning. The matter is being detailed in Chapter 4 of this order where due

explanation is provided wherever necessary. For capacity charge recovery the

suggestion of HCCI has been well taken and accordingly the capacity charge

payable to WBPDCL has been considered in this order.

3.4.4 Regarding power purchase from DPL, HCCI has mentioned that WBSEDCL has not

substantiated the load growth of DPL. The Commission feels that the essential issue

being the availability of power to WBSEDCL from DPL. In that context the

Commission observes that WBSEDCL has already shown the decreasing trend in

sale of surplus power by DPL to WBSEDCL in the last few years. As there is no new

unit to be commissioned by DPL during 3rd control period and there will be at least

normal growth in DPL command area, supply from DPL to WBSEDCL is not likely to

improve any further.



3.4.5 HCCIs view on conservative estimates of energy received from Bhutan without

substantiated reasons has been noted by the Commission. Commission on scrutiny

of Annexure-5 of Appendix-A of the MYT application of WBSEDCL for 3rd control

period found that Govt. of Bhutan has already intimated the beneficiaries of the

power stations of Bhutan through Eastern Regional Power Committee (ERPC) on

reduction in quantum of energy for each year. Accordingly, the reduction in quantum

of sent out power as projected is accepted by the Commission.

3.4.6 On capacity charges of NTPC Power Stations HCCIs view is that WBSEDCL has

estimated capacity charges at higher proportion than the proportion of energy it has

considered from the Farakka STPS (FSTPS) and Talcher TPS (TTPS). In this

context Commission likes to draw the attention to the fact that capacity charge does

not reflects always the delivered energy. Such capacity charge may also include

back-down periods due to low demand. Thus capacity charge recoverable during a

period may not be necessarily proportional to the actual delivered energy in

comparison to normative generation. Thus, the HCCIs objection on grounds of non-

commensurable capacity charge in respect to energy delivered cannot be accepted.

The same trend of the demand pattern and back-down level can be considered to

remain more or less same during the 3rd control period. Accordingly the recovery of

capacity charge from 2011-12 to 2013-14 is appropriately dealt with in Chapter 5.

3.4.7 The objectors view that the purchase of energy from Maithon Right Bank of only

508 MU in FY 2012-13 instead of 1016 MU as proposed for FY 2013-14 without

substantial reason has been noted by the Commission. Maithon Right Bank Project

Unit-2 has started supply of power commercially from 24th July, 2012 as reported by

WBSEDCL in response to Commissions letter vide no. WBERC/TP-53/11-12/0995

dated 01.10.2012, which was raised in accordance to the Tariff Regulations.

Accordingly the energy from such source for 2012-13 is being modified to 857 MU.

3.4.8 The HCCI has objected to the purchase of power in short-term mode as according to

them such purchase is consequent to the non-achievement of distribution loss

norms, which means that short-term power is always required to meet the shortage

arising out of non-achievement of distribution loss norms. In many instances it is



required to meet the actual shortage in supply also. Moreover for 2012-13 and 2013-

14 WBSEDCL has made the energy balance on the basis of normative loss only. It is

also found that the proposed volume of short term power purchase is only a small

part as shown below:

Particulars 2011-12 2012-13 2013-14 Short-term power purchase (MU) 990.00 364.55 1000.00Total power purchase (MU) 29862.00 32221.05 34006.00Percentage of short-term power purchase (MU) 3.32 % 1.13% 2.94%

Moreover, the distribution loss takes place over the time period under consideration

more or less equally whereas short-term power is procured for a very small part of

that period only. In such circumstances it cannot be said that the procured power

under short-term mechanism is also supplementing the power for excess distribution

loss due to non-achievement of distribution loss in those part of the period under

reference when there is no supply from short-term sources.

Thus, the contention of HCCI that the short-term power is consequent to non-

achievement of distribution loss norms cannot be accepted.

On the issue of price of such short-term power Commission would deal with the

matter in Chapter-4.

3.5 On distribution loss the submission of the objectors along with the view of the

Commission are as follows:

3.5.1 ARCVAC Forge Cast Pvt. Limited has suggested for following merit order dispatch

principle for disallowing cost of excess distribution loss. In this context, the

Commission feels that this is not logical as this will be tantamount to say that only

high cost energy contributes towards distribution loss. In fact, the power purchase at

different rates are sourced at different instant of time throughout the year and more

or less distributed over the year according to demand pattern and loss occurs at

each and every instant of time under the same law of physics. Thus, it cannot be

said that power procured at higher cost will be considered for disallowed portion due



to high distribution loss. According to the Commission weighted average price of

pooled power purchase is to be considered as a rational approach for disallowance

of excess power purchase cost for excess distribution loss over the normative loss.

3.5.2 Regarding distribution loss, the West Bengal Cold Storage Association (WBCSA)

has mentioned that the distribution loss for the year 2011-12 may be fixed at 17.49%

for the purpose of computation of revenue requirement though the distribution loss

as stated by WBSEDCL in their application is 24.93% for the year 2011-12. In this

context it needs to be mentioned that for determination of revenue requirement by

WBSEDCL the distribution loss has been considered only at the normative level for

the concerned year so that the excess loss is not allowed to pass through to the

consumers.

3.5.3 Regarding distribution loss ABECA has proposed that it should not be allowed more

than 9% and opposes the claim in excess of 9% distribution loss. ABECA has not

provided any details in establishing their claim. As normative parameters on such

issue has already been fixed in the Tariff Regulations after inviting objection &

suggestions, only such norms of distribution loss will be considered in this order.

3.6 On transmission charges the submission of the objectors along with the views of the


3.6.1 On STU charges the objection by HCCI is primarily on the following points:

i. The STU charges payable by WBSEDCL shall be based on ARR determined

for WBSETCL by the Commission for the year 2011-12, 2012-13 and 2013-

14 which is also a suggestion from ABECA.

ii. The charges for intra-state transmission line that are being recovered through

POC charges of Inter-state transmission charges shall not be recovered

through STU charges

3.6.2 The claim of enhanced CTU charges payable by WBSEDCL as per point of

connection (POC) method has been kept pending due to legal issues at the time of



submission of tariff application. ABECA have suggested to furnish the court order of

legal dispute by WBSEDCL and after that the Commission may consider the merit of

the claim of WBSEDCL regarding CTU charges.

3.6.3 The view in 3.6.1(i) has been considered by the Commission and the matter related

to 3.6.1(ii) is in the scope of tariff order of WBSETCL and thus is not being dealt

here. On the issue of 3.6.2 Commission asked the status of the legal cases from

WBSEDCL vide letter no. WBERC/TP-53/11-12/0995 dt. 01.10.2012 and

WBERC/TP-53/11-12/1078 dated 19.10.2012 which were issued in accordance to

the Tariff Regulations. In response it reveals that though legal case is pending the

payment of POC charges has been implemented. The matter has been further dealt

with in Chapter 5.

3.7 On Employee Cost the submission of objectors along with the views of the


3.7.1 On Employee Cost, both HCCI and Jayashree Textiles have mentioned that

employee cost increase is 35% in 2011-12 over 2010-11. According to them

regarding the employees cost, the actual employees cost in FY 2010-11 of

WBSEDCL was 855.45 crore which constitutes of an abnormal expense amounting

to Rs.171.81 crore towards provision for terminal benefit on account of revision in the

ceiling of gratuity amount which means normal employees cost during FY 2010-11 is

Rs.683.64 crore (Rs.855.45 less 171.81 crore). Thus, according to the objector, the

projected employee cost of Rs. 920.02 crore for FY 2011-12 which is 34% higher

than the normal employee cost for 2010-11, is abnormal by any standard.

3.7.2 ABECA have opposed the increased pay and allowances of the employees since the

revised pay and allowances of WBSEDCL is effective from 01.04.2008 and the Tariff

Order for 2008-09, 2009-10 and 2010-11 was passed on the basis of revised pay

effective from 01.04.2008. So there is no reason for revision of Tariff on the ground

of revised pay and allowance. ABECA have also suggested that WBSEDCL should

furnish detailed list of staff grade wise pay fixation as per revision of pay and

allowances and arrear of pay allowed to the staff individually along with specific order



of the licensee in this regard. They have also requested to consider the difference

that arises after tariff order in the APR on the basis of actual and audited report.

3.7.3 The objectors sought to reason out against the proposed employee cost by

WBSEDCL is not properly justified due to following reasons.

i. The way of normalization of employee cost is being done by HCCI/

Jayashree Textile through reducing the employee cost in 2010-11 by an

amount of the terminal benefit is not justifiable as such component will also

be an eligible amount for each year including in the year 2011-12 which has

the terminal benefit amount in the employee cost for 2011-12.

ii. The employee cost of WBSEDCL in 2010-11 as per the annual accounts of

WBSEDCL stands at Rs 856.00 crore.

iii. The pay structure of the employee is governed under the rules framed under

Revision of Pay and Allowance (ROPA), 2009 of WBSEDCL and thus is to be

taken into consideration as wage revision does not imply that increase in cost

for such wage revision is for one time only and such cost will have no future

increase with the inflationary trend.

iv. Objectors view of not allowing increased employee cost at this point of tariff

determination stage with an ultimate intention to consider such increased cost

on actually incurred basis at later stage, i.e., APR stage cannot be

considered by the Commission as this will affect the cash flow of the licensee,

the consequence of which will be the requirement of extra financing cost.

Such extra cost would imply extra tariff at a later stage.

3.8 The objector HCCI in its objection on O&M costs has referred to different regulations

and model regulations without however mentioning the purpose of such referencing.

HCCI has claimed that WBSEDCL claim O&M expenses under various

nomenclatures. HCCI also provides a comparative study on O&M expenses for per

unit of sales in different States.



On the above observation, the objectors view on different elements of O&M cost

has been taken into consideration by the Commission in accordance with the Tariff

Regulations and the elements which are not considered as elements of O&M cost

under Tariff Regulations are considered separately in a manner as has been dealt

with in the Tariff Regulations.

3.9 On the issues of Administrative and General Expenses the submission of the

objectors along with the views of the Commission are as follows:

3.9.1 Regarding Administrative and General Expenditure ABECA have suggested that the

claim on the basis of actual cost incurred by WBSEDCL at the time of furnishing the

proposal is to be considered. The point is noted and has been dealt with in Chapter

5.

3.9.2 On Other Administrative and General (A&G) expenses HCCI stated that WBSEDCL

has considered a year on year escalation of 17% in the MYT period. According to

HCCI such high escalation in A&G expenses should not be allowed to WBSEDCL

and marginal increase linked with inflation indices may only be permitted. HCCI has

also drawn the attention that there is no specific reference in the tariff application of

capitalization. On the issue of capitalization Commission finds that in paragraph 5.9

of Volume-1 in the MYT application WBSEDCL deals with the capitalization issue.

The annual accounts of 2011-12 have also shown the capitalization. On the other

issue Commission noted the point and dealt with the issue in Chapter 5 of this order.

3.9.3 On individual components of Administrative & General Expenses for distribution such

as Rent, Legal charges and Auditor fees, HCCI has objected that the expenses have

been considered with a high growth rate. HCCI is also of the opinion that such cost

can be considered during APR only on actual basis. As rent, Auditors fee and legal

charges are parts of controllable item of Administrative and General expenses,

overall excess cost, if any, with respect to above heads may not be allowed during

APR due to the ceiling in Administrative and General Expenses on account of being

a controllable item. Thus the suggestion of HCCI for considering such cost on actual

basis in APR in general cannot be accepted. Moreover, there are issues like



financing cost for any cash gap and tariff impact. Considering all the above aspects

and other information available in the application submitted by WBSEDCL and

annual accounts, the Commission decides the amount to be admitted in Chapter-5.

3.10 ABECA have also opposed the proposal of increase in R&M cost due to increase in

consumer base.

On repair and maintenance expenses, HCCI has stated that increase in the

expenses shall be reflective of the inflationary index.

On this account Commission is of the opinion that increase in consumer base along

with matching distribution network shall also be reflective parameters while deciding

the repair & maintenance cost. Improving the service quality is also a major relevant

parameter.

3.11 On the point of cost of outsourcing HCCIs views are as follows:

i) The cost of outsourcing should not be allowed to WBSEDCL as there is very

little rationale with regard to its nature, cost and effectiveness and having no

results demonstrated by WBSEDCL for the cost supposedly incurred.

ii) Certain jobs and services can be performed effectively through outsourcing

but to consider that around 15,000- 20,000 contracted employees would be

required by WBSEDCL is implausible and unconvincing.

iii) Jobs like substation and line maintenance were previously being done by the

own staff of WBSEDCL.

iv) Measures such as Online billing, spot billing, etc are novel ways of billing but

it does not entail that some new jobs are now being taken up by WBSEDCL.

The expenses on spot billing should be demonstrated by a reduction in the

A&G expenses of WBSEDCL as it is only an alternate way of bill distribution.

On the above issues the Commission is of the view that



i) WBSEDCL has raised claim in accordance with the provisions in the Tariff

Regulations.

ii) On the issue of number of contracted employee and rationality of it, from

HCCIs submission it cannot be found that why such numbers are implausible

and what are the reasons on which it can be said unconvincing. On scrutiny,

Commission finds in the annual accounts of WBSEDCL for 2011-12 the

consumer strength has already increased to 106.73199 lakh from 85.65 lakh

in 2010-11 which shows an increase of 24.61% by a single year.

Simultaneously Commission also observes that the employee in regular

establishment has been reduced significantly in the last control period

whereas consumer strength is increasing rapidly as shown in the following

table.

2009 2010 2011 2012 No of Employee in thousands 24072 19236 18851 17932No of Consumer in lakh 7246759 7622178 8565374 10673202N.B: a) No. of consumers available from Annual Reports and Accounts of WBSEDCL b) No. of employee for 2009 available from APR application and c) No. of employees for 2010, 2011 and 2012 from MYT tariff application for the year

2011-12, 2012-13 and 2013-14.

It is also to be noted that due to reduction in employee in regular

establishment its impact on employee cost has been duly considered by the

Commission while admitting employee cost. Under such circumstances

commission feels that with the increasing consumer strength and decreasing

trend of own employee the outsourcing has merit for discharging of statutory

obligations. Thus Commission proceeds to determine the outsourcing cost

that is required to be admitted for the ensuing years of 3rd control period.

iii) The expenses claimed for new Sub-station and lines are for operating

personnel which are new.



iv) The expenses of spot billing are basically replacement of the existing job.

Thus this expenditure, being totally outsourced job, shall be passed as a part

of outsourcing cost and not under the Administrative and General Expenses.

On scrutiny it is found from the application of WBSEDCL that WBSEDCL has

claimed outsourcing cost on number of items which are being dealt with in

Chapter 5 of this order.

3.12 In the point of interest on loan HCCI has stated that interest on loans may be

allowed only after considering our objections in respect of capital investment,

programme proposed by WBSEDCL. As no details, justification of capex schemes

has been provided and no investment approvals furnished, the capital investment

plan proposed by WBSEDCL is liable to be rejected. Consequently the interest on

long term loans has to be recomputed considering no eligible drawals of loan. In

addition HCCIs observation is that interest expense claimed by WBSEDCL does not

commensurate with the capitalization sought by WBSEDCL in the MYT period.

HCCI says that interest on R-APDRP loan should not be allowed in tariff as such

loan will be converted into grant. HCCI also raised question about inadequacy of

detailing on certain loan such as REC Limited Package, loans from Bank/RECL

and for different schemes under plan and Non-plan other than securitization of CPS

outstanding.

The capital expenditure programme under R-APDRP Part A and R-APDRP Part

B scheme has already been approved by the Commission in case no. WBERC/OA-

68/2009-10 and WBERC/OA-118/10-11 vide order dated 23.04.2010 and

01.09.2011 respectively. Thus as long as the loan of R-APDRP Part A or R-

APDRP Part B is not being converted into grant partly or fully its interest will be

eligible to be admitted by the Commission if such interest is payable in the

concerned year. Other schemes such as RGGVY, APDRP do not require any

investment approval as those schemes were introduced by the Government of India

at a period when such investment approval was not required by the licensee in

accordance with the then regulation of the Commission applicable at that time.

However, such schemes, being approved by the concerned nodal department/



agency of Government of India, the due diligence has been done by different

concerned authority and thus do not require any fresh investment approval at this

stage of the projects which has already attained finality and thus will be considered

for interest calculation purpose.

Regarding inadequacy of data for certain loans such as REC Limited Package,

loans from Bank/RECL and for different schemes under plan and Non-plan other

than securitization of CPS outstanding, the details have been gone through by the

Commission from the Annual Accounts of 2011-12 and accordingly dealt with in

Chapter 5.

3.13 On interest on Consumer Security Deposit the HCCI has apprehension that the

amount claimed by WBSEDCL is not adjusted in bills paid to the consumers in toto.

The Commission cannot act merely on the basis of apprehension of any person

unless there is at least some prima facie instances of any anomaly on the related

issue. Moreover in case of non-receiving of interest on security deposit consumer

has appropriate remedial measures under the law. However the issue is dealt with in

Chapter 5.

3.14 On the issue of bad debt the submission of different objectors along with the view of

the Commission are as follows:

3.14.1 ABECA have suggested that WBSEDCL should furnish the detailed chart of

defaulting consumers and unrealized amount from them and steps taken to realize

the amount. Before furnishing such data no amount should be allowed to WBSEDCL

on this account.

3.14.2 HCCI has referred to regulation 5.10 of the Tariff Regulation.

3.14.3 The comments of objector at 3.14.1 and 3.14.2 have been noted and is duly dealt

with in chapter 5 in accordance with the Tariff Regulations for due consideration.

3.15 On the issue of Minimum Alternate Tax HCCI refers regulation 5.13.1 and rely on the

point that it is allowable and to be recovered as pass through element. Commission



is of the opinion that the regulation has to be looked into with the following points

also.

a) The regulation does not say that such pass through cannot be done at tariff

determination stage.

b) Where Minimum Alternate Tax is mandatory for payment at certain frequency

within the period under consideration then just after the payment has been

made, it cannot be recovered normally at such frequent interval through

revision of tariff as it is under fixed cost head.

c) MAT as deposited can be allowed by the Commission without the

assessment order.

In view of the above fact the licensee is required to pay the tax in a quarterly

frequency. Thus to ensure proper cash flow the projected amount of MAT is required

to be passed through the tariff order subject to truing up in the APR as in the mid

way of a year separate order on this small amount cannot be brought out as it is not

rational.

3.16 On the issue of unforeseen exigencies the submission of the objectors and the view

of the Commission are as follows:

3.16.1 According to ABECA unforeseen exigencies is not a cost at all and as per the Act

this cannot be included in the ARR and thus they suggest to refund the accumulated

fund with income derived out of such fund to the consumers through reduction of the

said accumulated amount from the ARR for the year 2011-12, 2012-13, 2013-14 and

no fund is to be allowed further.

3.16.2 On the other hand HCCI feels that Reserve for unforeseen exigencies may be

allowed by the Honble Commission only after strict prudent check duly verifying that

such reserves are invested in interest paying securities and the interest income

earned on such reserve are ploughed back / netted-off while claiming the reserve for

unforeseen exigencies of subsequent years.



3.16.3 Commission is of the opinion that the expenditure for unforeseen exigencies is

statutorily approved cost and has been maintained to serve the purpose for which it

is created. Commission noted the points in 3.16.1 and 3.16.2 and duly dealt with in

Chapter 5.

3.17 On the issue of interest on Working Capital the objectors submission along with the

Commissions view are given below:

3.17.1 On interest on Working Capital the objection of HCCI is with respect to the

provisional amount of security deposit which according to HCCI shall be static over

the MYT period. On the contrary, WBSEDCL has claimed interest on security deposit

in an increasing trend at Rs 28.70 crore, Rs 33.15 crore and Rs 38.29 crore in 2011-

12, 2012-13 and 2013-14 respectively thereby implying that it has considered a

yearly increase in security deposits from consumers. According to HCCI, WBSEDCL

has ignored to take this increase into account while computing the interest on

working capital. HCCI has submitted that the Commission should take this anomaly

into account and suitably adjust the computations in respect of interest of working

capital.

3.17.2 Regarding interest on Working Capital ABECA have opposed the same stating the

reason that as the Commission directed WBSEDCL to invest the Security Deposit

received from the consumers as Working Capital there would be no need to claim

any amount as interest on Working Capital. Secondly they opposed the rate of

Interest on Working Capital @ 14% whereas the rate of interest payable on Security

Deposit is 6%. According to them interest on Working Capital shall be 6%. They

have also suggested to direct WBSEDCL to furnish details of the security deposit

held by WBSEDCL till date and to submit the status report regarding quantum of

Security Deposit, utilization of such deposit and rate of interest paid by them to the

consumers before entertaining the claim of WBSEDCL on interest on Working

Capital.

3.17.3 Commission noted the point in 3.17.1 and dealt with this accordingly in Chapter 5.

Regarding the issue of 3.17.2 Commission cannot ignore the need of additional



working capital requirement within normative level as provided in the Tariff

Regulations if the security deposit of consumer is not sufficient to cover the

normative working capital requirement. Moreover as such working capital

requirement beyond the amount collected from security deposit of consumer is

required to be mobilized in the form of loan from financial institutions or market, thus

the interest on such loan is bound to be at market driven rate. Thus commission is

bound by the regulation to provide the interest as specified in the regulation.

3.18 On capital investment issue objections put forwarded by HCCI are as follows:

1. The detailed break-up of the capital investment with respect to schemes,

justifications etc. have not been provided by the Petitioner. Further the additional

capitalization may not be allowed by the Honble Commission as the filing made

do not strictly adhere with the requirements of Regulation 5.1 and 5.2 of the

MYT Regulations and the status of investment approvals mandated under

Regulation 2.8.2.3 is neither known nor available with the Petition. In such case,

the capital investment plan should be out rightly rejected by the Honble

Commission.

2. Without prejudice to the above, the capitalization towards assets created

pursuant to RGGVY and R-APDRP scheme and through consumer

contributions and other grants, etc. should be segregated from the other capex

schemes. Depreciation on assets created under RGGVY, R-APDRP scheme

and through consumer contributions and other grants etc. should not be allowed

in the ARR.

3. The depreciation which has already been claimed on assets created under

RGGVY, R-APDRP scheme and through consumer contributions and other

grants etc. should be clawed back and given effect in the MYT order.

In addition to the above objection, HCCI raised the question that whether WBSEDCL

is entitled to recover

i) Capital created out of consumers contribution or grant.



ii) Depreciation of asset formed through consumers contribution or grant.

iii) While finding out equity on normative basis, whether the asset created out of

consumers contribution or grant will be considered.

In fact, the question of recovery of capital created out of consumers contribution

or grant is not very clear. However the values of such asset are not considered

as equity base. In case of normative equity calculation the mater is dealt with in

Chapter 5 of this order. However, depreciation on the assets formed through

consumers contribution or grant is recoverable as such amount is required for

future replacement of such assets on expiry of their life.

Regarding the issue raised on capital expenditure programme or investment

proposal in relation to depreciation and normative equity the points raised by

HCCI have been noted and accordingly dealt with in chapter 5 while arriving at

the depreciation and equity base and appropriate direction has been given in

chapter-10 to WBSEDCL to provide details so that during APR the truing up can

be done on the basis of such details.

3.19 Regarding depreciation ABECA have proposed to furnish detailed item wise

depreciation amount with life span of each item and repayment of loan out of such

depreciation. Balaji Paper & Newsprint Pvt. Ltd. has referred statutory auditors para

in relation to fixed asset registers. This issue of fixed asset registers was reported in

annual accounts of 2009-10 for not following CARO, 2003. The same annual

accounts show that figures of fixed assets with depreciation and value of

depreciated assets are available accounting unit wise and accounting code wise.

Such report also reveals that the job of identification and verification of fixed assets

has already undertaken by the company and has been completed for assets

capitalized upto 31.03.2008 and the balance work was in progress. Subsequently

such issues are not reported in the annual accounts of 2010-11 and 2011-12. Thus it

implies that such fixed asset now is being maintained more comprehensively.

Moreover, Commission observes that WBSEDCL has furnished the information

related to depreciation and repayment of loan in a manner as specified in the Tariff



Regulations. However, direction has been provided in relation to this issue as

already explained in paragraph 3.18.

3.20 Regarding return on equity ABECA have suggested that the rate of return should not

be allowed at more than the RBI rate of interest as WBSEDCL is being a

government company and before the enactment of the Electricity Act 2003,

WBSEDCL would have earned 3%.surplus. In this context commission will follow the

Tariff Regulations which has gone through previous publications.

3.21 On the issue of distribution loss level vis-a-vis lease rentals HCCIs view is that if the

expenses of R-APDRP is allowed then the loss trajectories prescribed in the MYT

regulations need to be revised. In this context the Commissions view is that the cost

of such R- APDRP Part A is limited only to 62 towns in the State covering about 15

lakh consumers only (as provided in the details of the scheme of R-APDRP Part-A

during investment approval). For R-APDRP Part-A there is no conditionality of any

targeted AT&C loss. Such target has been provided only for R-APDRP Part-B

scheme which is under implementation phase and as per programme those projects

will be completed beyond the period of 3rd Control Period. Thus the benefit of loss

reduction of such project is not expected within this 3rd Control Period. Moreover,

merely on the basis of a small part of the area of supply of the licensee the norms of

the distribution loss for the whole area of supply cannot be changed as such type of

improvement programme is a natural process undertaken by any licensee while they

are being offered with the normative target. Furthermore on the point of expenses on

MPLS-VPN connectivity the matter shall be looked into in the light of need of

discharging regulatory obligation of the licensee under SOP Regulation as

mentioned by WBSEDCL in addition to other purpose for which such network is

being used.

3.22 On other Incomes HCCI has objected to the conservative estimates of WBSEDCL in

respect of income from investments and bank balances which roughly translates to a

paltry return of 4% according to them and asked for detailed investigation by the

Commission. HCCI also mentioned that a normative rate of interest of 8% on FDR



balance for allowing the income from investment and bank balances including FDR

income.

Commission has observed that Investment amount of Rs. 577.12 crore for the year

2010-11 is reflected in the Annual Accounts for the year 2010-11 under Schedule-10

which is shown as cash and bank balance. This head indicates that such balance is

temporary in nature and is for the closing date of the Accounts. This implies that

such amount is not expected to be continued throughout the year at the same level.

Thus the accrued interest as shown in the audited accounts of Rs 39.79 crore in the

Note no. 24 of Annual Account of 2011-12 is being admitted by the Commission and

accordingly dealt with in Chapter 5 of this order.

3.23 The submission of the objector in relation to sale to other licensee along with the

view of the Commission are as follows:

3.23.1 On the question of sale of energy to other licensee, HCCIs submissions are:

i. Increase in power purchase cost and cost of supply of WBSEDCL is around

14.23% and 16.50% respectively, the increase in sale price to other licensee

considered in MYT projections is only 4.17%.

ii. The basis of arriving at the sale price projected for sale to other licensee has

not been explained in the MYT Petition.

iii. It is unclear why WBSEDCL would supply power to other licensee at lower

than its cost of supply.

iv. Price for sale to other licensee shall be at the cost of supply of that respective

year or at a price which factors in the year on year increase in power

purchase cost and cost of supply in FY 2011-12 over FY 2010-11.

3.23.2 ABECA have pointed out that sale of power to CESC Ltd is at a rate less than the

rate of power purchase from Central Generating Company and Bhutan. ABECA have

also mentioned that WBSEDCL purchases power from CESC Ltd. and CESC Ltd.

also purchases power from WBSEDCL and both are pleading the tariff hike of each



other. ABECA suggested the drawal of power of CESC Ltd. from WBSEDCL should

be adjusted with the power drawal of WBSEDCL from CESC Ltd.

3.23.3 In this context Commissions view is that the purchase price of power by one

licensee from another licensee is being regulated keeping in view of the interest of

the consumers of both the licensees. Moreover, the market price trend and long term

power purchase cost from new Power Stations are also looked into before deciding

such price. Otherwise any reduction in load demand of any seller licensee due to

replacement of such demand by other new sources may affect the consumers of the

referred selling licensee severely as they may require to bear the liability of

compensation of such business loss. Moreover, the demand pattern of the purchaser

licensee and any other conditions under which purchase are taking place are also

required to be looked into. Moreover, there is wide disparity in retail tariff among the

licensees due to such type of inter-licensee selling prices which are also required to

bring under control to a reasonable extent gradually. Further, the proposal for selling

power by WBSEDCL to other licensee at a rate not less than the costlier sources

does not have any merit as the demand of such licensees is historically met from

long past and the costlier power procurement decisions are taken at different time to

meet the increasing demand of both own consumer and other licensee. In fact,

Commission is required to strike a balance on different aspects for such purchase of

power. On the basis of such factors the purchase price for power by different

licensees is required to be set in their Tariff Order.

3.24 On share of benefit passed on to consumers the objection of HCCI is primarily on the

two aspects:

The projected selling rate considered for sale of power to persons other than consumers and licensees and for the notional sale of power against swap

out, and

While computing the presumptive gains, due consideration has not been provided to the fact that lower sales were reported to persons other than



consumers and licensee as there was a significant under-achievement of

distribution losses.

The licensees are penalized by disallowance of expenditure arising out of under

achievements of distribution losses and thus the Commission is of the view that they

cannot be penalized for second time on the basis of notional gain on account of

notional sale as claimed by the objector.

The other point has been only noted by the Commission but not accepted the logic

as the expenses due to swap out is also considered for reducing the ARR to be

borne by the consumers and license

Tariff Order WBSEDCL

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