1. 1 A Presentation on ARR & Tariff Proposal of SLDC for FY 2008-09 Analysis/Objections/Suggestions February 8, 2008 By Dr. Shibalal Meher (Consumer Counsel) Nabakrushna Choudhury Centre for Development Studies, Bhubaneswar

2. 2 Annual revenue Requirement ItemRs in Crore Employee cost5.11 R&M cost for both SLDC & ULDC6.85 A&G cost3.58 Depreciation0.06 Provision for reinvestment4.50 Total ARR20.10

3. Determination of Annual Fee OPTCL proposes the basis for determination of annual fee as Capital Cost_(Rs)____ Total Generation capacity (MW)

4. Determination of Operating Charges OPTCL proposes the basis for determination of operating charges as Annual operating charges_(Rs)_ Total Generation capacity (MW)

5. 5 Details of proposed Levy ARR (Rs crore)20.10 Capital cost amortised (Rs crore)0.7012 Operating charges (Rs crore)15.60 Total generation capacity (MW)2195 SLDC charges (MW) Annual fee (Rs/MW/PA)3195 Operating charges (Rs/MW/Month)5923 Scheduling & system operation charges (Rs/Day) 3000

6. 6 BROAD TARIFF RELATED ISSUES RAISED BY OBJECTORS (To be addressed by SLDC)

7. 7 Functioning –When SLDC is working under the direct control of the OPTCL, how can it function as an independent and autonomous entity. –In accordance with the Electricity Act, 2003, the Orissa Grid Code Regulations and the observations of the CERC, the SLDC, even though functioning in the STU should be unable to operate in an independent and transparent manner. –Various wings suggested to be established should have definite operations and operation of one wing should not overlap with that of other. But the staff suggested by OPTCL does not prove so. This structure will give rise to serious problems in operation and inflated staff requirement will help in inefficient operation. Issues emerge from the objections/ suggestions submitted by the Objectors

8. 8 –It is necessary to scrutinize the staff proposed so work can be carried out efficiently. The whole work can be easily managed by 25% of the staff proposed by OPTCL. –When only 2600 MW power is being handled by SLDC, does it justify so much of elaborate staff arrangement, entitling huge expenditure? All these works can be managed by a skeleton staff against huge staff proposed by OPTCL. –Whether the annual charges and operating charges will be collected on MW per year basis or Unit basis from generating stations and transmission licensees? –From when will the energy received from the Central Sector plants/EREB which flows through OPTCL transmission lines monitored by SLDC/ULDC be billed? Issues emerge from the objections (Contd..)

9. 9 Annual Revenue Requirement –OPTCL has submitted an unusually inflated ARR for the SLDC. –The applicant should file actual staff strength, employees cost, A&G expenditure and R&M expenses for the year 2006-07 and from 1.4.2007 to 30.9.2007. Employee Cost –An amount of Rs 5.11 crore have been provided towards Employee Cost for employees whose post has not yet been sanctioned nor have they been employed. This amount seems to be pretty high and may be pruned to 25% of the amount requested for. –Another objector has suggested that a token provision of Rs 2.00 crore may be allowed for FY 2008-09 to be reviewed after sanction of posts. Issues emerge from the objections (Contd..)

10. 10 A&G Expenses –The amount sanctioned for SLDC should be deducted from the ARR of OPTCL based on an escalation of 5.2% over the previous year provision. R&M Expenses –Claiming extra charge by SLDC towards R&M need not be permitted. The claim of Rs 6.88 crore to meet the annual R&M expenditure by both SLDC and ULDC needs proper examination. –The R&M charges of Re. 1 crore for an asset of Rs. 1.17 crore does not seem to be justified. Provision of reinvestment for infrastructure for EBC and ULDC project –Rs 4.50 crore have been provided under head ‘Provision of reinvestment for infrastructure for EBC and ULDC project’. These works are capital cost and hence should not be included in ARR. Issues emerge from the objections (Contd..)

11. 11 Annual Fees –While calculating annual SLDC fee, the capirtal cost of Rs 303.85 lakh have been considered. However, annual fee is treated as revenue requirement, which is supposed to be calculated on revenue expenditure only. The interest on Rs 4.5 crore capital expenditure and the recovery of capital is not to be paid during the year 2008-09, when the expenditure is being incurred during 2008-09. Hence, investment cost and rate of interest for calculation of capital cost would be nil for 2008-09. –OPTCL has calculated 2 sets of annual SLDC fees. However, the method of calculation of annual fee is quite confusing. Issues emerge from the objections (Contd..)

12. 12 Operating Charges –Any operating charge by the SLDC should be a part of the OPTCL charge and to be charged at per Unit basis in their transmission charges only and not to be charged on cost per MW basis. –It has not been clearly mentioned in the application submitted by OPTCL as to from whom this will be charged generating system or transmission licensee. The Act in sec. 32 (3), provides this charge to be collected from transmission licensee and not from stake holders like DISTCOs and CPPs. –OPTCL has calculated 2 sets of annual operating charges. However, the method of calculation is quite confusing. –It is not known in what circumstance and under which authority OPTCL suggests to collect Rs 3000/day as scheduling system operating charges when all the costs for operation and maintenance of SLDC and ULDC have already covered under the annual fee and operating charges. Issues emerge from the objections (Contd..)

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