ARR & Price Proposal of GRIDCO For FY and Views of Stakeholders February 15, 2007 Together, let us light up our lives. ORISSA ELECTRICITY REGULATORY COMMISSION

2 GRIDCO’s ARR & PRICE APPLICATION FOR FY

3 Demand for and Sale of Power GRIDCO has filed ARR & Price application for for its bulk supply activity. GRIDCO and DISTCOs have furnished the following projections regarding demand and sale of power: Item OERC Approval DISTCOs' Projection GRIDCO's Projection SMD (MVA) Sale to DISTCOs (MU) Sale to CGPs (MU) Export (MU) -- Total Sale (DISTCOs + CGP) (MU) Avg. of the Actual from 4/06 to 10/

4 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 NESCO WESCO SOUTHCO All Distcos Discrepancies between Gridco’s and Distcos’ projections may be explained.

5 Transmission Loss and Power Procurement GRIDCO projects transmission loss of 5.00% for based on first six months of A total energy procurement of 16, MU for the ensuing year has been considered MU shall be drawn from both State and Central generators. The shortfall of MU shall be met from outside the 600 P/U. Total power purchase and the costs thereof have been projected as follows: YearOERC Approval ( ) Actual from 4/06 to 10/06 GRIDCO’s Proposal ( ) Power Purchase (MU) Power Purchase Costs (Rs. Crore)

6 Revenue Requirement, GRIDCO’s proposal of Revenue Requirement for along with those of approved ones for are presented in the table below: (Rs. Crore) Item OERC Approval GRIDCO’s Projection A. Power Purchase Cost B. Uncovered Expenses : Proposal for pass through of past losses towards repayment of principal Arrear fixed cost charges of TTPS after adjustment of Tariff revision of TSTPS & FSTPS NTPC’s claim towards arrear Income tax26.28 Amount paid/payable to OPGC during Differential Fixed Costs of TTPS for (Rs cr revised Fixed Costs minus Rs cr as approved by OERC) 9.95 C. Total of other expenses ( Interest, Employee, A&G Cost etc.) : Interest Cost Other Cost (Employee, A&G Cost etc.) : D. Return on Equity Total Revenue Requirement (A + B + C +D) Clarification may be given whether GRIDCO’s Projection of Power Purchase Cost at Rs cr includes export figures. Further ROE of Rs cr is claimed in the absence of equity base.

7 Pass through of past losses and uncovered expenses The accumulated loss of GRIDCO as on stands at Rs Cr as per audited balance sheet. GRIDCO proposes a sum of Rs crore to be passed on to tariff under this head during Sl. No. Item GRIDCO’s Proposal 1Proposal for pass through of past losses towards repayment of principal Arrear fixed cost charges of TTPS after adjustment of Tariff revision of TSTPS & FSTPS NTPC’s claim towards arrear Income Tax Amount paid / payable to OPGC during Dirrerential Fixed Costs of TTPS for (Rs cr revised fixed Costs minus Rs cr as approved by OERC 9.95 TOTAL Rs. Crore

8 Other Expenses GRIDCO’s proposal relating to interest and establishment costs are presented in the table below: Rs. Crore Sl. No. Particulars GRIDCO's Proposal for Interest Cost Other Costs: aEmployee Cost3.09 b2.03 c A&G Cost 1.32 ERLDC, NLDC fees and SLDC Scheduling Charges Sub-Total - Other Costs: Total (1+2)

9 Expected Revenue from Charges, GRIDCO’s proposal for net total revenue receipts for at the existing rates (along with the approved figures for ) are presented in the table below: (Rs. Crore) Item OERC Approval ( ) GRIDCO's Proposal ( ) 1. Revenue from Demand Charges Revenue from Energy Charges Misc. & Other Receipts Sale to CGPs Export- - - Unscheduled Interchange- - - Receivable from DISTCOs Receivable from outside States Net Total Receipts (1+2-3)

10 Tariff Proposal, GRIDCO’s proposal for demand and energy charges for are presented in the table below: YearDemand Charges (Rs/ KVA) GRIDCO’s Proposal for Energy Charges (P/U) Average Energy Charge %Rise over current average energy P/U 59.56%

11 Views of Stakeholders

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

13 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 , 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.

14 Views of Stakeholders Energy Availability: Cont… Some stakeholders have taken into account the design energy of the hydel plants, their performances in the earlier years and the reservoir levels on the 1st day of October 2006 for computing hydro power availability. They submit that the availability of power from State hydro stations would be 7128 MU in FY 08 as against 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.

15 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.

16 Views of Stakeholders.. Contd. Demand & Energy Requirement: Cont… There would be surplus of energy during to the extent of 213 MU (as against a deficit projection of 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.

17 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.

18 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.

19 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.

20 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.

21 Views of Stakeholders …contd. Revenue Requirement & Tariff: Cont… There is no justification in proposing any increase in Bulk Supply Price for FY by GRIDCO. OERC allowed increase in BST during which encouraged GRIDCO to inflate its claims. The Commission should scrutinize the Application of GRIDCO and reduce the BST for the FY 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.

22 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 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 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

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

24 Issues in BSP: Projection of a rise of 7.65% in consumption for the year 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 crore. Interest cost of Rs crore.

25 Thank You