1. 1 Analysis of OPTCL’s ARR and Transmission tariff for FY 2011-12 By: World Institute of Sustainable Energy, Pune (Consumer Counsel) 4 th February, 2011

2. Proposal of OPTCL

3. 3 Proposed Revenue Requirement for FY 11-12 (Rs Cr) Employee Cost952.06 R&M Cost93.89 A&G Cost38.34 Interest on loan111.30 Interest on Working Capital59.08 Depreciation156.40 Return on Equity24.81 Sub-total1435.88 Pass through expenses127.25 Contingency Reserve15.16 Bad & Doubtful Debt0.10 GCC Expense0.30 Total gross requirement: 1578.69 Rs Crore

4. Analysis of ARR and Transmission Tariff

5. 5 Transmission loss

6. 6 Employee cost incl. terminal benefits (Rs Cr.) ItemProposed for 2009-10 Approved for 2009-10 Proposed for 2010-11 Approved 2010-11 Proposed 2011-12 Gross amount498.99186.17875.78290.22961.66 Less capitalization7.61 10.66 9.60 Net employees cost491.38178.56865.12279.56952.06 10-11 Approved11-12 Proposed Basic pay +GP62.1298.57 DA 20.50 62.1 HRA9.3219.71 Provision towards arrear pay49.0349.04 Terminal benefit140.20717.25* Others9.0514.99 Less capitalization10.669.60 Total279.56952.06 *Including payment of differential pension and pensionary benefits

7. Employee cost incl. terminal benefits (contd.) Submission OPTCL has requested 241% rise in employee cost including terminal benefit in ARR of FY 2011-12 Basic Pay + GP: Yearly escalation of 3% shall be allowed over the Commissioned approved amount of 2010-11 DA: The DA proposed for 2011-12 (63%) seems to be on higher side and therefore may be reviewed HRA: The HRA Proposed for 2011-12 (20% ) may be reviewed according to Govt norms Terminal benefit: may be finalized as per independent valuation report 7

8. 8 R&M and A&G Expenses (Rs Cr.) R&M ApprovedActual 2004-0514.074.59 2005-0614.806.94 2006-0736.0011.31 2007-0847.0016.52 2008-0953.8815.66 2009-1047.0054.03 2010-1160.0016.16 (upto Sept’10) 98.14 (proposed) 2011-12 93.89 (proposed) Particulars Proposed FY 2011-12 a) O&M71.93 b) Telecom R&M13.10 c) Civil Works2.80 d) IT6.06 Total R&M 93.89 (56.48% increase over approved) 09-10 approved 10-11 Projection 10-11 approved 11-12 projection % increase over 10- 11approved A&G Expenses14.3526.9915.1438.34153.24%

9. R&M and A&G Expenses (contd. Submission The approved and actual R&M expenses in last few years reveal that OPTCL actually incurred less than 50% expenditure on R&M (except 2009-10); therefore, consumer should not be burdened with excessive projected R&M expenses As per OPTCL Business Plan 5.5% yearly escalation in A&G expenses shall be allowed to pass through in ARR (i.e. Rs. 15.97 Cr against projection of Rs 38.34 Cr for FY 2011-12) 9

10. 10 O&M Expenses as per CERC O&M Expenses as per CERC Norms for FY 2011-12 Segregation of BaysBaysRs Lakh/ bay O&M (Rs Cr) 765 kv081.990.00 400 kv3358.5719.33 220 kv22441.0091.84 132 kv and below138429.28405.24 TOTAL O&M EXPENSES FOR BAYS516.40 Segregation of EHT linesCkt kM(Rs Lakh / Ckt km)O&M (Rs Cr) Single Circuit (Bundled conductor with four or more sub-conductors)00.6000.00 Single Circuit (Twin & Triple Conductor)245.2010.4000.98 Single Circuit (Single Conductor)3872.5530.2007.75 Double Circuit (Bundled conductor with four or more sub-conductors)01.0510.00 Double Circuit (Twin & Triple Conductor)276.7340.7011.94 Double Circuit (Single Conductor)6852.4580.30120.63 TOTAL O&M EXPENSES FOR LINES31.29 TOTAL O&M EXPENSES FOR BOTH LINES & BAYS547.70 Projected O&M: 1084.29 Rs Crore (Employee:952.06, R&M:93.89, A&G:38.34); whereas as per CERC Regulation it can be reduced by nearly 50%

11. 11 Loan liability Observation: OPTCL has proposed new loans of 903.82 Crore @11% to be availed in FY 2011-12 OPTCL has reported State Govt (cash loan) balance of the tune of Rs 2 Cr. And requested to allow Rs 0.26 Cr as a interest component of that in the ARR Submission New loan interest 68.94 Cr shall not to be passed through in the ARR of FY 2011-12 Interest on State Govt. (Cash loan) should be kept in abeyance as per Govt directive

12. Capex Plan 12 Capex Projected: Capex plan given in ARR for 2011-12 (Rs Cr.) Capex Plan submitted on 12.07.2010 (Rs Cr.) O&M291.15106.52 Telecom73.65142.5 Information Technology12.6613.32 TP & Con. (Excluding Deposit Works)591.62720.38 Civil Works35.16 Total Capital Expenditure1004.24982.72 Observation: The reasons for variation in expenses under O&M and telecom reported in earlier capex plan and ARR submission need to be verified

13. 13 Gross fixed asset and depreciation Gross fixed asset As on 1-4-2009 (actual) Addition in 09- 10 (Given in ARR 11-12)As on 1-4-2010 Addition in 10-11 (Given in ARR 11-12) As on 1-4- 2011 (Rs Cr.) Option 1:1924.48163.842088.32453.742542.06 Option2: 2478.16 (OERC Approved in 10-11 order) 453.74 2931.90 Particulars Depreciation Rate CERC Depreciation @ Pre-92 Rate Gross Block (01- 04-10) (Provn.) Gross Block (01-04- 11) (Projected) Deprcn. for FY 11-12 -CERC Deprcn. 11- 12 @ Pre-92 Land and Rights0.00% 34.7540.870.00 Buildings3.34%1.80%73.1686.032.871.55 P & M(Other Civil works)3.34%1.80%4.315.060.170.09 Plant & Machinery5.28%3.80%1153.311356.2171.6151.54 Plant & Machinery (Lines, Cables etc)5.28%2.57%1302.561531.7280.8739.37 Vehicles9.50%12.86%1.431.690.160.22 Furniture, Fixture6.33%4.55%2.222.620.170.12 Office Equipment6.33%9.00%7.358.640.550.78 TOTAL (Rs Cr.)2579.093032.84156.4093.67

14. Gross fixed asset and depreciation Submission: Consumer counsel has calculated the Gross Fixed Asset by taking reference 0f OERC actual and approved GFA as on 1.04.2009 and 1.04.2010 respectively After addition the yearly addition (09-10 & 10- 11 as given in ARR), the GFA arrived are lower than that claimed by OPTCL Commission may consider the GFA as determined in the previous slide 14

15. 15 Return on equity, Reserve & others Observation: Equity claimed by OPTCL: Rs 160.07 Cr – 60.07 (old) + 48.05 (received) + 51.94 (expected) Submission: Commission shall not allow RoE on ol d equity and expected equity base Reasonable RoE = 48.05 * 15.5% = Rs 7.45 Cr (claimed RoE - Rs 24.81 Cr) Disallow the claim for further Contingency reserve Interest on working capital, bad debts and pass through expenses shall not be pass through in ARR

16. 16 Summary of ARR (2011-12) ITEMSApproved for 09-10 Approved for 2010-11 Proposed for FY11-12 10-11 Vs. 09-10 11-12 vs 10-11 Employees Cost including Terminal Benefits 173.11279.56 952.06 61.49% 240.5% R&M Cost 97.0060.00 93.89 -38.14% 56.48% A&G Cost 14.3515.14 38.34 5.51% 153.24% Interest on Loan Capital 70.5353.39 111.30 -24.30% 108.47% Depreciation 66.0776.60 156.40 15.94% 104.18% Repayment obligation 44.36- Return on Equity 0.004.35 24.81 Interest on Working Capital 0.00- 59.08 Sub-Total 415.42 489.041435.88 17.72% 193.61% Special Appropriation 39.37 Pass Through Expenses - 127.25 Contingency Reserve 9.08- 15.16 Bad & doubtful debt Debts 0.00- 0.10 GCC Expense including SLDC charges 0.150.82 0.30 Total (Rs Cr.) 424.65529.23 1578.69 24.63% 198.3% Less Misc. Receipts 30.5048.30 5.00 Annual Revenue Requirement (Rs Cr.) 394.15480.93 1573.69 22.02% 227.2% Transmission Charges (paise/unit) 20.50 23.5068.68 14.64% 192.2%

17. 17 Proposed Transmission tariff Sl NoCustomerMURate (P/U)Loss (%)MU including LossAmount (Rs. Cr.) 1CESU772223.507722181.47 2NESCO546523.505465128.43 3WESCO672023.506720157.92 4SOUTHCO284823.50284866.93 Total DISTCOs22755 534.74 5Emergency Sale1023.5010.000.24 6Wheeling of IMFA5023.53.952.031.22 7Wheeling of NALCO10023.53.9104.062.45 Total22915 22921538.65 Total Annual Revenue Requirement for FY 2011-12. 1573.69 Total Million Units proposed for Wheeling in MU22915 Less: Revenue to be earned from LTOA Customers at the existing Transmission Charge @ 23.5 P/U 538.65 Deficit in ARR for FY 11-12 at the existing Transmission Charge @ 23.5 P/U-1035.04 Proposed transmission tariff (P/U)68.68

18. 18 Open access charges 2010-112011-12 Long term OA charges (Rs / MW/ Day) 5640.0016482.02Proposed increase of 192% Short term OA charges (Rs / MW/ Day) 1410.004120.51

19. Summary OPTCL has claimed a hike of 192% in transmission tariff which will increase the cost of electricity at consumer end The increase in transmission tariff is resulted due to higher claim of OPTCL in following components: Employee cost incl. terminal benefits and pension/R&M expenses/ A&G expenses/ Interest on new loan and old state govt. loans/ Gross fixed asset and depreciation/ RoE, Contingency reserve, Interest on working capital and pass through expenses Commission may consider the submission of consumer counsel and reduce the transmission tariff at reasonable level

20. 20 Thank you