chhattisgarh state electricity regulatory · pdf filebased on the available data and...

Chhattisgarh State Electricity Regulatory Commission Irrigation Colony, Shanti Nagar, Raipur (CG.) Pin-492001

Phone: 91-771-4048788, Fax: 2445857 Website: cserc.gov.in, Email: [email protected]

In the matter of Approval of Capital Investment Plan filed by Chhattisgarh State Power Distribution Company Ltd. for FY2013-14

to FY2015-16.

Petition No. 54 of 2012(M)

M/s Chhattisgarh State Power Distribution

Company Limited ..... Petitioner

Present: Manoj Dey, Chairman

Vinod Shrivastava, Member

ORDER

(Passed on 10.04.2013)

1. Chhattisgarh State Power Distribution Company Limited (herewith called

‘CSPDCL’) is a successor company of Chhattisgarh State Electricity

Board (CSEB) and is a deemed distribution licensee under the provisions

of Electricity Act, 2003 (The Act).

2. Based on the principles contained in Sections 61 and 62 of the

Electricity Act 2003, the National Electricity Policy and the Tariff Policy

notified by the Central Government, the Commission notified the

regulations namely Chhattisgarh State Electricity Regulatory

Commission (Terms and Conditions for determination of tariff according

to Multi-Year Tariff principles and Methodology and Procedure for

determination of Expected revenue from Tariff and Charges)

Regulations, 2012 (herewith referred as ‘MYT Regulations 2012’) on 6th

October 2012.

3. As per Regulation 2.1 (d) of these regulations, the scope of regulations

covers the distribution licensee in the state. Accordingly, CSPDCL is

covered by the said regulations.

4. The Regulations 7 of the MYT Regulations, 2012 relate to filing of

Capital Investment Plan by the entities covered by the MYT Regulations

2012. The relevant portion is reproduced for ready reference.

“7. CAPITAL INVESTMENT PLAN

7.1 The Generating Company, Transmission Licensee, and Distribution Licensee shall file for approval of the Commission a capital investment plan by 31st October 2012. The capital investment plan

should cover the entire Control Period, with details for each year of

the Control Period.

Capital Investment Plan Order (for CSPDCL) FY 2013-14 to FY 2015-16

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7.2 The capital investment plan may be in respect of new generation projects or transmission/distribution schemes (for lines, sub

stations, bays, etc.) for capacity addition/ enhancement or

renovation of existing capacities on completion of life or work required due to change in law, or deferred execution of work

included in original scope or efficiency improvement or such works

of value more than Rs. 1Crore which may be expedient for safe operation of the system.

(a) The capital investment plan shall show separately, on-going

projects that will spill over into the Control Period, and new projects (along with justification) that will commence in the

Control Period but may be completed within or beyond the

Control Period. The capital investment plan shall contain the

scheme details, justification for the work, capitalization schedule, capital structure and cost benefit analysis (where

applicable)....”

5. Accordingly, CSPDCL submitted the instant petition for approval of its

Capital Investment Plan for the control period FY2013-14 to FY 2015-16

on dated 07.12.2012. After due verification, it was registered on

11.12.2012 as petition No 54 of 2012(M).

6. A Technical Validation Session (TVS) on the petition was held on

29.12.2012 in the office of Commission. During the validation session,

the utility was asked to submit clarifications / additional information for

prudent analysis of the proposals mentioned in the petition.

7. During scrutiny certain additional information was felt necessary, the

utility was directed to submit such details and the same have been

taken on record. The Capitalization schedules for each of the scheme

has been estimated based on the status report filed by the utility and

additional information received during TVS.

8. The utility was directed to publish gist of its proposals in the news

papers in the form of a public notice inviting suggestions and objections

on the same. The petition was uploaded on the website of the

Commission and also on the website of the company and made it public.

21 days time was granted for submission of e comments/ suggestions/

objections on the petition.

9. A notice for hearing scheduled on 26.02.2013, in the office of

Commission, was published separately on 19.02.2012 in Navbharat

Bilaspur, Central Chronicle Raipur and Hari-Bhoomi Raipur.

10. Neither any comment from any stakeholder was not received nor was

any objection presented in the hearing.

11. On 5th March 2013, a meeting of State Advisory Committee was


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convened and a presentation on the Capital Investment Plan filed by

CSPDCL was organized for the stakeholder.

12. Based on the available data and information, the Commission is issuing

this order and approving in-principal the Capital Investment Plan

proposed by the utility with respect to capital expenditure plans to the

extent and as per observations/ directives mentioned in attached

documents.

13. The scheme proposed by the utility can mainly be bifurcated in two

broad category i.e. Govt. Funded scheme and partly / fully CSPDCL

funded schemes.

14. The Govt. funded schemes includes 6 different schemes out of which

four are only State Govt. funded schemes and two are mainly funded by

the Central Govt. with counter funding from State Govt.

15. The fully State Govt. funded schemes are Electrification of Govt. schools

and hospitals, Agricultural pump energization and RE works other then

RGGVY, Mukhyamantri Shahri Vidyutikaran Yojna and other

developmental works funded through Backward Region Growth Fund,

Integrated Action Plan and Pradhikarans (namely Bastar Vikas

Pradhikaran, Surguja Vikas Pradhikaran and Anusuchit jati Vikas

Pradhikaran). The aggregate proposal for the above 4 schemes for the

control period is Rs. 981 Cr. As these schemes are proposed to be fully

funded by way of grant from the State Govt. without any implication on

account of return on equity, interest on loan and depreciation, we do

not intend to deliberate on the schemes in detail. However, it is made

clear that this will not absolve utility from exercising all round prudence

at its own end and bring to the knowledge of the State Govt. (Energy

Department as well as the Finance Department) all the implications of

the schemes. In this context, specific reference is invited to the letter of

the Principal Secretary, Finance, Govt. of Chhattisgarh dated

17.02.2012 addressed to the Secretary Energy, Govt. of Chhattisgarh

with a copy to the Secretary, CSERC, wherein it was desired that if any

capital investment proposed to be made by Power Companies through

grant from Govt. of Chhattisgarh then such proposal shall be submitted

to the Commission only after approval of the State Govt. CSPDCL was

asked to confirm the funding from the State Govt. No specific

confirmation for the plan period has been received, however, CSPDCL

vide its submitted dated 07.03.2013 has confirmed that the actual

execution shall be limited to the grants received from the State Govt.


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Further, a copy of the petition was also forwarded to the Govt. of

Chhattisgarh (Finance Department as well as Energy Department) on

13.02.2013; however, no comments have been received from either of

the departments.

In light of the above, we refrain from scrutiny of the schemes

and leave it to the utility to take up these schemes with the State Govt.

Even at the risk of repetition, we reiterate that any asset created under

these schemes shall not qualify for consideration in GFA (to the extent it

relates to regulatory accounts) and no consequential impact on the

financial cost component shall lie in the tariff.

16. Out of the other two Govt. funded schemes, the first one is Rajiv Gandhi

Grameen Vidyutikaran Yojna (RGGVY). The scheme was introduced by

the Govt. of India in April, 2005. As per this scheme, all the villages/

hamlets have to be electrified and electricity access has to be given to

rural households, including free of cost connections to the BPL families.

CSPDCL has submitted that under this scheme, 90% of the project cost

is released as advance, which is convertible into grant after fulfilment of

certain mandatory conditions, whereas the balance 10% amount is

given by the respective State Government.

CSPDCL has further submitted that the RGGVY has preset conditions for

implementation which are enumerated below;

(a) Preparation of district wise detailed project reports for execution on

turn-key basis.

(b) Involvement of central public sector undertaking of power ministry

in implementation of some project.

(c) Certification of electrified village by the concerned Gram

Panchayat.

(d) Deployment of franchisee for the management of rural distribution

for better consumer service and reduction in loss.

(e) Undertaking by State for supply of electricity with minimum daily

supply of 6 to 8 hours of electricity in the RGGVY network.

(f) Making provision of requisite revenue subsidy by the State.

(g) Determination of Bulk Supply Tariff (BST) for franchisee in a

manner that ensure commercial viability.

As per CSPDCL submission, in Chhattisgarh, RGGVY is applicable in all

the 27 districts, thereby covering all the villages in the state. It however

excludes those villages which are already been electrified using solar


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power or the villages that fall within forest area. Under RGGVY, the GOI

has sanctioned funds totalling Rs 1336 crore for various projects across

the state of Chhattisgarh. Of the sanctioned amount, nearly Rs 679

crore was spent until 31.08.2012, of which Rs 417 crore was spent

during the control period FY11-FY13.

In the instant plan CSPDCL has proposed to incur an expenditure

of Rs. 600 crores during FY 2013-14 to FY 2015-16. The scheme wise

investment plan as submitted by CSPDCL is reproduced below:-

Sl. No. Particulars 2013-14 2014-15 2015-16

Target PHY FIN PHY FIN PHY FIN

1 UE & DE Villages 255 - 192 - 192 -

2 Villages for intensive

electrification 104 - 77 - 77 -

3 33 KV line (Km.) 131.2 4.9 98.4 3.6 98.4 3.6

4

33/11 KV S/s

i) New (Nos.) 2 2.5 1 1.3 1 1.3

ii) Addl. (Nos.) 2 1.5 1 0.8 1 0.8

iii) Aug. (Nos.) - - - - - -

5 11 KV line (Km.) 3,680.2 65.5 2,760.2 49.1 2,760.2 49.1

6

Single Phase

Distribution

Transformer 2,496 20.0 1,871 15.0 1,871 15.0

7

Three Phase

Distribution

Transformer 216 3.7 162 2.7 162 2.7

8 LT Line (Km.) 2,486.8 67.9 1,865.1 50.9 1,865.1 50.9

9 Service connections

(BPL) 89,724 19.7 67,294 14.8 67,294 14.8

10 Other schemes

(under preparation) 64.4 - 61.8 - 11.8

Total 250.0 200.0 150.0

Being a Govt. funded scheme with the aim of socio-economic

development of the rural areas, we do not intent to deliberate on the

ratio or nitty-gritty of the schemes. However, as stated in the earlier

para and previous orders too, it is made amply clear that responsibility

of fulfillment of mandatory conditions for conversion of advance (loan

from REC) into grant lies wholly and squarely on CSPDCL and in no case

loading on ARR / tariff shall be allowed on capitalization of the aforesaid

expenditure. We also direct CSPDCL to bring the conditionality attached

to the scheme, to the notice of Govt. of Chhattisgarh so that at a later

date complications may not be faced. Further, without entering into


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details we have some prima-facie observations on the plan submitted

by CSPDCL. We advise the utility to revisit the plan in light of these

observations:-

(a) The proposed plan includes proposals of Rs. 138 crores (64.4 Cr.

for FY 13-14, Rs. 61.8 Cr. For FY 14-15 and Rs. 11.8 Cr. For FY 15-

16) under the head “Other Schemes (under preparation)”. We fail

to understand that how the schemes which are still under

preparation can be included in a capital plan. It is a settled

principle that to qualify as a capital expenditure, the work has to be

clearly indentified after ascertaining the feasibility and execution

plan. In our opinion, the sub head may not qualify for consideration

in the plan.

(b) As per the performance report the amount spent in the previous

control period was Rs. 416.6 crores, in comparison to the same the

target for the instant control period appears to be quite ambitious.

Further, the phasing also indicates much higher level of target in

the first year of control period (Rs. 250 crores) than the last year

of the control period (Rs. 150 crores). We observe that normally

execution in the later years is faster than the initial years.

Accordingly, CSPDCL may review the plan and targets for FY 2013-

14 and FY 2015-16 may be swapped.

CSPDCL is also directed to bring the above observations to the notice of

the State Govt.

17. The other Govt. funded scheme is Re-structured Accelerated Power

Development and Reform Programme (R-APDRP). The Government of

India approved the R-APDRP during XI Plan as a central sector scheme.

The key objective of this scheme is stated to expedite the reform

process in the distribution segment. The objectives are as follows:

� Improving financial viability of state power utilities

� Reduction of AT & C losses

� Improving customer satisfaction

� Increasing reliability and quality of power supply

CSPDCL has submitted that R-APDRP is being implemented under the

aegis of Ministry of Power (MoP), Government of India. The program

focuses on establishment of reliable and automated system for

sustained collection of accurate base line data, adoption of IT in the

area of energy accounting and reduction of AT&C loss. All the 22


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towns/cities of Chhattisgarh, with population more than 30,000 (as per

census 2001), have been covered under this scheme.

The scheme has two components, one is part-A for establishing

information technology based energy accounting and audit system

leading to verifiable base-line AT&C loss levels in the project areas and

the other is part-B for investments in strengthening of the distribution

network leading to reduction in loss levels.

18. For part-A of the scheme, 100% of the project cost is provided as

normal loan from the government on which interest is payable.

Subsequently 100% of the loan amount of Part A as well as the interest

amount can be converted into grant on completion of the project. The

maximum period for completion of works under this Part has been fixed

as 3 years from the date of sanction of DPR or 18 months from the date

of issue of LOI for appointment of ITIA/SIA, whichever is earlier.

Under Part–A following activities have been proposed by CSPDCL:-

i. Establishment of enabling IT Infrastructure to establish base

line data and verify AT&C loss figures of all the 22 towns for

which 20 DPRs have been prepared/ sanctioned

ii. Installation of Supervisory Control and Data Acquisition /

Distribution Management System (SCADA/DMS) applicable for

the towns having population more than 4 lakh and annual input

energy more than 350MU. For this work, 2 towns namely Raipur

and Durg-Bhilai-Charoda complex have been selected and the

DPRs prepared and sanctioned.

CSPDCL has informed that the time limit of 3 years for execution of

project for conversion of loan into grant has expired on 03.09.2012. It

has also submitted copies of its representations and correspondence

done by the State Govt. with Ministry of Power, Govt. of India regarding

request for extension of time period for implementation of Part-A

activities.

We note that these project reports were prepared by CSPDCL and

vetted by the State Govt. and the Central Govt. The Commission has

made it clear at time and again that even if the loan from the Govt. is

not converted into grant for any reason whatsoever, the investment

shall not qualify for consideration in the ARR / Tariff determination

process. It may be in the utility’s own interest to ensure proper

pursuance and to make it clear to the State Govt. that if the eventuality


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of non conversion of loan into grant arises then the State Govt. support

will be needed to meet the liability of loan repayment.

The R-APDRP part-A plan is indicated to have two components - SCADA

and IT Project (details not submitted by CSPDCL). At this juncture, we

wish to advise that implementation of SCADA in the two cities namely

Raipur and Durg-Bhilai-Charoda complex is very ambitious plan which

needs to be reviewed looking to the practical constraints. It is true that

funding is to be provided by the Central / State Govt. and there may

not be any direct loading on the consumers per se. However, it is only

one side of the coin. We observe that the SCADA has two components -

one is Supervisory Control and other is Data Acquisition System (DAS).

Implementation of DAS may be needed for monitoring purposes and

may not call for big investment on the system side as well as

infrastructure side, however, implementation of Supervisory Control

involve a very high cost of the system automation which may be much

higher than the cost of SCADA itself. One need not to be an expert of

rocket science to appreciate that to implement supervisory control all

the 33/11 kV S/s in the two towns will have to be completely

refurbished. All isolators will have to be replaced by new motorized

isolators and many of the panels/equipments would have to be

replaced. Further, it is a material fact that as on this date none of the

switch yard of any of the power station of CSPGCL or EHT S/s of

CSPTCL is operating through supervisory control system. Also SCADA is

installed in the SLDC, since so many years, however, the operational

execution of the supervisory control system could not be implemented

till date. Under such a situation implementation of supervisory control

system in 33/11 KV S/s and maintenance of the same on a long run

seems to be a remote feasibility. Further, it is ironical that in the instant

plan nothing has been mention regarding the expenditure which will be

needed for renovation of the 33/11 KV S/s in the two cities. Obviously

such renovation will not get support from the Central Govt. under R-

APDRP scheme and the cost will lie on the consumer without any

significant return from such investment. Even on the IT front, where it

is stated that the complete cost is met by Govt. funding, we have

noticed that investment on civil works has been shown for installation of

SCADA system which is proposed to be financed through debt & equity,

for which a claim may arise to qualify for ROE, interest and depreciation

in the tariff computation.


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In light of the above observations and looking to the fact that ultimately

it is public money which is going to be put on stake, we are constrained

to direct CSPDCL that if possible the plan may be reviewed and DAS

may be considered instead of SCADA. It is also directed that the views

of the Commission shall also be brought to the knowledge of State

Govt. which is the prime stakeholder and sole shareholder of the utility.

19. Part-B of R-APDRP is intended for improvement, strengthening and

augmentation of the distribution network system to reduce AT & C loss

up to 15%. 19 DPRs of 21 towns of Chhattisgarh State are stated to

have been sanctioned by MoP/GoI. The maximum period for completion

of works under this part has been fixed as 5 years from the date of

sanction of the project DPR. 25% for the Part-B projects shall be

provided as normal loan by the government on which interest is

payable. 50% of project cost and interest can be converted in to grant

on achieving the target of 15% loss on a sustained basis for 5 years in

the project area.

On the funding part, CSPDCL has informed that GOI vide two separate

letters, sent in July 2011 and February 2012, approved a total amount

of Rs 710 crore, covering 16 towns in the state of Chhattisgarh. A

corresponding loan amount of Rs 177 crore, at the rate of 25% of the

project cost, was also sanctioned by GOI. Momentum on the

implementation of R-APDRP projects is stated to have gathered pace in

the current financial year.

Following the ratio adopted in the previous paras, we do not intend to

interfere in the Govt. funded schemes, however, there are few

observations which we wish to put on record in the wider public

interest:

� From the performance review, it appears that the previous control

period target was Rs. 135 crores, the project was sanctioned to the

tune of Rs. 710 crores and the loan of Rs. 177.6 crores was also

sanctioned yet the amount spent in the control period FY 11-13 (up

to 31.08.2012) was only Rs. 0.7 crore. As the scheme is stated to

be focused on reduction of AT&C loss up to 15%, it is imperative

that faster implementation may be in the wider interest of the

utility and community both. The target proposed for the control

period is Rs. 596.6 crores (Rs. 365.4 Crs. for FY 13-14 Rs. 131.1

Cr. For FY 14-15 and Rs. 100 Crs. For FY 15-16). Utility would do

well if the schemes are prioritized and monitored closely to achieve


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the targeted loss reduction. The balance costing (50%) will qualify

for consideration in tariff only when the desired reduction in loss is

achieved.

� On the funding part, it is noted that CSPDCL has to fund 75% of

the project cost. It has proposed to fund this portion through mix

of debt & equity. Debt is indicated to be 95% of such cost. Thus,

effectively only 3.75% of the total project cost shall be funded

through equity. We are of the opinion that high debt may pose

considerable financial strain in the long run due to high DSCR.

Utility may review the funding option.

Utility may take appropriate action in the above context.

20. After the aforesaid discussion on the Govt. funded schemes, now we

turn to the partly or fully CSPDCL funded schemes. These schemes are

broadly categorized in five categories i.e. ST(N) scheme, ND scheme,

loss reduction scheme, proposal for EITC and proposal for civil works.

The combined proposal for all these schemes is Rs. 2608.3 crores.

Before proceeding for scheme wise deliberation, we deem fit to review

the achievements in the last three years vis-a-vis the plan for the next

three years.

Particulars Three years 01/04/08 to

31/03/11

Three Years 01/04/09 to

31/03/12


31/03/13 (Estimated)


31/03/16 (Proposal)

Addition in 33 KV Line (KM) 2317 1859 1568 4877

Addition in 11 KV Line (KM) 12317 11657 8392 21058

Addition in LT Line (KM) 27336 24226 17226 14712

Addition in Distribution Transformers (No)

17602 15589 10728 29923

The above table clearly indicates that the physical targets for the plan

period are on a higher side then what has been achieved in the

comparable period for the last three years. It is worthwhile to note that

the above comparison do not include the capital work on loss reduction

programme which is proposed to be taken on a very ambitious scale in

the instant control period. We have also gone through the status report

filed by the utility which compares the achievement in financial terms

for the last control period. The total capital expenditure under all the

schemes put together in the control period FY 11-13 was Rs. 1364.4


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crores (up to 31.08.2012). The CAPEX plan for the next three years (FY

2013-14 to FY 2015-16) is Rs. 4879.9 crores.

Clearly the proposed plan is not only too ambitious but appears to

outstretch the physical and financial limits of implementation. It is in

this perspective that the schemes have been reviewed and the plan has

been revised to fit into the canvas of feasibility and practicability.

21. Sub Transmission and System Improvement Scheme (ST&SI): It

is stated that addition of new substations is required to cater to the

increasing demand in the state to ensure quality of supply and reduction

of losses. For the last control period, the target approved by the

Commission was of Rs. 240 Crores. Against the same, achievement up

to 31.08.2012 was Rs. 152.3 crores. The utility has attributed the

underperformance to operational challenges it is facing in executing

some of these projects. In physical terms, CSPDCL expressed hope that

by the end of control period it shall be able to complete 129 numbers

33/11 KV S/s. Now for the instant control period, it has set a target of

196 S/s and a total capital expenditure of Rs. 484 crores. No

explanation has been given for the whooping rise in the projected plan

expenditure (more than 3 times of the expenditure up to 31.08.2013).

Cost per S/s also appears to be very high in comparison to the previous

plan.

Looking to the proposed investment in loss reduction scheme,

particularly HVDS scheme in the rural area and R-APDRP part-B in the

urban area, we expect that there should be substantial savings in the

technical losses in the system which in turn will provides some relief in

the requirement for additional investment towards system stability. We

accordingly approve capital expenditure of Rs. 180 crores financial for

the instant control period. The year wise expenditure to be considered is

Rs. 55 crores, Rs. 60 crores, Rs. 65 crores for FY 13-14, FY 14-15 and

FY 15-16 respectively. On the physical front, utility in the additional

submission had submitted list of 67, 65 and 64 numbers S/s which are

proposed for FY 13-14, FY 14-15 and FY 15-16 respectively. However, it

is noted that the list of S/s is circle wise and neither priorities have been

assigned nor any technical parameters have been provided which can

be used for prioritization by the Commission. Therefore, we refrain from

deciding the list of S/s which can be taken up during each year of

control period. The utility is directed to prepare the priority list which

shall be submitted to the Commission at the earliest and in no case


CSERC of 22

later than 30th June, 2013. We also note that the funding has been

indicated at debt equity mix of 90:10, the same may be revisited for the

reasons stated earlier in the order.

22. Normal Development scheme (ND): It is stated that the Normal

development scheme predominantly covers the work required for

extending the power supply to the consumers i.e. releasing of

connections. The scheme also encompasses some quality improvement

initiatives such as distribution system strengthening, installation of

distribution transformers and capacitors to provide quality power supply

to the consumers. The expenditure incurred upto 31.08.2012 was

Rs.283.9 crores and the proposed expenditure is Rs. 550 crores. In

physical terms the comparison is as under:-

S. No Particulars

Achievement

in Control

period FY 11-13

Target for

control period

FY 14-16

1 33K.V. Line (K.m.) 481 870

2 33/11KV S/s 8 32

3 11KV Line (K.m.) 1263 1600

4 L.T.Line K.m. 1269 1900

5

Distribution Transformer

i. New (No’s) 3822 5350

ii.Aug. (Nos.) 928 1450

6

Service Connection

I. Single Phase (Nos.) 244755 420000

ii. Three phase (No’s) 28943 53000

iii. H.T. Connection (Nos.) 416 630

iv. St. Light Point (Nos.) 5208 11800

From the above, it is apparent that plan figures are very high and

unrealistic. With high stress on RAPDRP – part B and loss reduction

scheme normal development work at the cost of utility is expected to be

much lower.

CSPDCL in its own submission has indicated that approximately 40% of

the schemes are funded by the consumer contribution. Accordingly, it is

estimated that out of the Rs. 284 crore expenditure incurred on the

above schemes utility might have to fund Rs. 170 crores from its own

sources.

Looking to the above, we are of the opinion that a total expenditure of

Rs. 340 crores (about 20% higher than achievement in previous control

period) may be sufficient for the normal development schemes in the

instant control period. In the aforesaid capital expenditure utility share

is determined as Rs. 200 crores in the control period and the year wise


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expenditure in the plan is considered as Rs. 60 crore, Rs. 65 crore and

Rs.75 crore for FY 13-14, FY 14-15 and FY 15-16 respectively. However,

there is no restriction for additional work funded through the consumer

contribution.

23. Loss Reduction including HVDS and feeder separation Schemes:

It is stated that loss reduction schemes target reduction in the overall

technical & commercial losses (T&C losses) in the distribution system.

T&C losses can be broken up in two categories: 1) Technical loss and 2)

Commercial loss. CSPDCL plans reduction in the technical losses by

investing in the revamp of LT distribution systems, replacement of

conductors, implementation of HVDS system, etc. At the same time, the

company plans to reduce commercial losses by laying AB Cables in theft

prone areas, setting up pole mounted metering boxes at consumer

premise, installing Automated Meter Reading system, etc.

We appreciate the move towards loss reduction programme, on a long

run basis. This is an investment which is going to benefit the utility and

community both. The reduction of commercial losses will lessen the

burden on the honest consumer and the reduction in technical losses

will not only decrease the power purchase cost but will also assist in

reducing the capital investment needs on the infrastructure

development in the Generation, Transmission and Distribution functions.

On a hind sight, it also implies arresting the carbon foot prints and

environment degradation which has become a major challenge to the

mankind. As per additional submission made by CSPDCL on 08.03.2013

the pilot project on 2 feeders at O&M Division Kawardha has yielded

very good result and the distribution losses which were 57.13% at the

end of year 2009-10 has now come down to 38.78% at the end of

2011-12. We also notice that the HVDS scheme offers significant

opportunity in financial terms as these schemes have shorter payback

period in comparison to the other capital investment opportunity. As

such, they can be easily financed through banks also.

In the last control period the target was Rs. 261.4 crores with Rs. 130

crores for HVDS scheme and balance Rs. 131.4 crores for another loss

reduction schemes. Against the above target, expenditure up to

31.08.2012 was Rs. 5.6 crores on HVDS schemes and Rs. 97.5 crores

on non HVDS schemes. In the instant control period proposal has been

submitted for Rs. 1250 crores (About Rs. 1000 crores for HVDS

schemes and Rs. 250 crores for non HVDS scheme). Regarding the


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proposal for the instant control period, discrepancy was noted in the

figures quoted in the different tables. Therefore, clarification was sought

from CSPDCL, the utility has submitted the revised figures vide its

additional submission dated 08.03.2013. We have relied on the details

submitted through additional submission. During analysis, we have noted

that the cost benefit analysis submitted for the HVDS scheme suffers from

some infirmity regarding calculation of expected input units after

implementation of the scheme. We have revised the calculations. We also

noted that CSPDCL has relied on computation of payback period by

multiplying the saving in input units with the average cost of supply (taken

as Rs. 4.02 per unit). In our opinion due to reduction in losses the savings

cannot be calculated in terms of average cost of supply. The savings

depend upon the nature of the loss being arrested. In case of reduction in

technical losses, the input unit requirement goes down and in such case

after adjusting for distribution losses at 33 and 11 KV and transmission

losses in the EHT grid, the saving should be computed in terms of

reduction in power purchase cost. On the other hand, in case of reduction

in commercial losses the savings occur in terms of higher sold units

keeping the input unit constant. In such case, additional sold units should

be multiplied with the average billing rate (ABR) of LT consumers to work

out the gain through implementation of the scheme. As the breakup of

technical and commercial losses is not readily available, we have worked

out the savings and corresponding payback from both the perspective for

prioritizing the divisions where this scheme offers higher potential. The list

of divisions with number of feeders and estimated cost, arranged in the

sequence of their tentative payback period is annexed with the order as A-I

& A-II. Based on the data submitted by the utility, and following the saving

in input unit methodology (as adopted by CSPDCL) it appears (from A-I)

that Ambikapur, Bilaspur (O&M) and Champa Division offer the best three

payback period of about one year followed by Raigarh I and Raigarh II with

payback period of about 2 years. Kanker, Pendra Road, Shakti and Mungeli

offer a payback period of 2-3 years and Akaltara, Saraipali, Dhamtari,

Mahasamund and Kawardha offer a payback period of 4 to 5 years.

We are of the view that in the first year i.e. FY 13-14, 73 feeders of the top

three Divisions may be taken up for conversion to HVDS system with a cost

of Rs. 116.07 crores. In the next year, 90 feeders of next two divisions

with a cost of Rs. 143.08 crores may be taken up, followed by conversion

of 146 feeders of next four divisions with a cost of Rs. 232.14 crores. Thus

the total investment on the HVDS in the control period is expected to be

Rs. 491.29 crores. We also approve investment of Rs. 158.71 crores on


CSERC of 22

non HVDS loss reduction schemes (a substantial increase of more than

50% from the achievement till 31.08.2012). Thus the total capital

investment considered for the control period on the loss reduction scheme

stands at Rs. 650 crores. As financing of the normal development works

may not have debt component (due to practical difficulty in preparation of

DPR and bankability of such project), if needed, the debt equity ratio for

the loss reduction schemes may be considered at higher value of 90:10 so

as to ease the equity infusion requirement. The year wise expenditure

considered in the plan period is as under:

Particulars FY 13-14 F5 14-15 FY 15-16 Control Period Total

HVDS Scheme 116.07 143.08 232.14 491.29

Non HVDS Schemes 63.93 56.92 37.86 158.71

Total 180.00 200.00 270.00 650.00

It is further made clear that unlike other schemes, the investment

considered for loss reduction schemes is not the sealing limit, rather it

is minimum desired level. If feasible, utility may take up additional work

too, however, generally pay back priority should be followed.

24. Investment Plan for Energy Info Tech Centre (EITC): CSPDCL has

proposed an investment of Rs. 189 crores on EITC during the control

period. The investment has been categorized in the three major heads

i.e. SAP & hardware (Rs. 48 crores), Network & Security (Rs. 38 crores)

and other IT projects & miscellaneous (Rs. 103 crores).

We have gone through the justification given for each of the scheme

and based on the deliberations and past experience, decide as under:-

24.1 SAP & Hardware

(a) SAP licenses: we appreciate that with the growth of

computerization, additional licenses may be required. However, the

increase in number of licensees is to be planed carefully based on

the “need to know principle” and budgeting should be done in a

progressive manner. Accordingly, we allow capital expenditure of

Rs. 2 crores, Rs 3 crores and Rs. 4 crores in the year FY 13-14, FY

14-15 and FY 15-16 respectively.

(b) SAP Additional modules: Three additional modules namely

Employees Self Services (ESS), Quality Management (QM) and

Sales and Distribution (SD) have been proposed at a total cost of

Rs. 10 crores. However, we note that the benefit of existing


CSERC of 22

modules is yet to be reaped fully. Further the additional modules

are not of urgent nature and may wait for some time. Accordingly,

we direct the proposal to be differed.

(c) SAP Functional Upgradation: It is proposed in name of ensuring

better productivity, ease in supervision, material management,

customer relationship management, upgradation of ERP software

and hardware. Total investment of Rs. 8 crores has been proposed.

After deliberations, we allow CAPEX of Rs. 1 crores, Rs 1 crores and

Rs. 2 crores in the year FY 13-14, FY 14-15 and FY 15-16

respectively.

(d) Hardware Upgradation: CSPDCL has proposed to invest Rs. 18

crores during the control period on hardware upgradation. We

understand that in the IT field upgradation is needed from time to

time, however, the proposal given by the utility is on very high

side. The investment is allowed at Rs. 2 crores, Rs 4 crores and Rs.

4 crores in the year FY 13-14, FY 14-15 and FY 15-16 respectively.

Thus the total investment on SAP & Hardware is allowed at Rs. 24

crores.

24.2 Network & Security

(a) Network & Security augmentation: Need of network security is

well recognized, however, it is noted that with the change in

technology, the augmentation of network security is no more one-

off capital investment. The system augmentation to meet the

challenges posed by the hackers, viruses and other internal &

external threats is now an embedded part of network management.

Thus, such investment is not a capital expenditure rather it is a

routine operation and maintenance expenditure. As such, we are

unable to consider the proposed investment as capital investment,

however, at the same time, we direct the utility that all the steps to

ensure proper security of the network should be taken with due

earnest. If needed, utility may ask for accommodation in the O&M

charges based on the actual expenditure incurred on network

security in the last three years.

(b) IT & Cyber Security: This is proposed as one time investment

and the same is allowed as proposed.

(c) ISO 27001 Compliance & ITIL Framework: Based on the

discussions, the investment on the proposal is now being allowed


CSERC of 22

but differed to the year 2015-16.

(d) DR set-up for existing Systems: The need for data recovery set

up is appreciated, accordingly, we concur with the proposal.

(e) OFC Connectivity in 3 Towns: We don’t find enough force in the

proposal, as such, the proposal is turned down.

(f) IPv6 Deployment: This is stated to be a mandatory requirement

and as such, the same is allowed as proposed.

Thus the total investment on network & security is allowed at Rs.13

crores.

24.3 Other IT Project & Miscellaneous

(a) R-APDRP modules roll-out in non R-APDRP Towns : CSPDCL

has proposed to extend R-APDRP modules to non APDRP towns

also. Such extension will involve GIS mapping and establishment of

base line data. We note that rolling out of RAPDRP modules to non

RAPDRP is not going to yield any worthwhile return. The experience

foretells that even GIS mapping becomes useless if the data is not

updated and maintained frequently. In the present scheme of

things the data gathered from rolling out of such modules may be

worthless by the time implementation becomes due. Utility would

do better to focus on the RAPDRP part itself where it has to achieve

a loss reduction level of 15% in 22 towns. Diversion of resources is

not expected to bring in any commercial benefit to the utility or to

the society. We are of the conscious opinion that a capital

investment should be well focused, targeted and able to bring in

identifiable and measureable benefits. The proposal is turned down

on merits.

(b) Smart Grid Implementation: Smart grid implementation is a

fairly new concept and at present this is being experimented in the

States/Metros which are reeling under severe power shortages.

Chhattisgarh do not fall in this category. We will do better to wait

for the results of experiences at other places and as such, the

scheme is differed.

(c) PCs, Printers & Scanners: It is stated that the procurement of

these equipments for the utility has been consolidated under this

head and no separate capital proposal is being included under any

other scheme. We principally agree with the need for purchase of

new machines, accordingly, we allow provision of Rs. 2 crore for


CSERC of 22

each year of the control period. However, utility is directed to

ensure that in case of replacements, capitalization of such

investment should be accompanied with the decapitalization on the

same account.

(d) System Software & S/w development: CSPDCL submitted that

new system software will be required for running in-house

applications developed for intra-departmental working. The capital

expenditure is allowed @ Rs. 1 Cr/year during the control period.

(e) IT Building along with System Shifting: The need for separate

IT building is agreeable, however, the proposal seems to be on

higher side, as such, an investment of Rs. 5 Cr is allowed during

control period.

The total investment on other IT project is allowed as Rs.14 Cr.

Thus total investment on EITC is approved for Rs. 50 Cr. during the

control period. The year wise break up is tabulated are as under :-

SN DETAILS 2013-14 2014-15 2015-16 Total

1 SAP & Hardware

A SAP License 2 3 4 9

B SAP Additional Modules 0

C SAP Functional Upgradation 1 1 2 4

D Hardware Upgradation 2 4 4 10

Subtotal SAP & Hardware 5 8 10 23

2 Network & Security 0

A Network &Security Upgradation 0 0 0 0

B IT & Cyber Security 1 1

C ISO 27001 Compliance & ITIL Framework 2 2

D DR Setup for Existing Framework 5 5

E OFC Connectivity in 3 Towns 0

F IPv6 Development 5 5

Subtotal Network & Security 1 5 7 13

3 Other IT Project & Miscellaneous

A R-APDRP module roll-out in non R-APDRP Town 0

B Smart Grid Implementation 0

C PCs, Printers & Scanners 2 2 2 6

D System Software & S/w development 1 1 1 3

E IT Building along with System Shifting 1 4 0 5

Sub Total Other IT Project & Miscellaneous 4 7 3 14

EITC Total 10 20 20 50

It is advised that funding arrangement may be revisited at debt equity

ratio of 80:20, as the mix proposed in plan seems highly optimistic.

25. Investment Plan for Civil Construction Work: CSPDCL has

proposed investment in civil construction work for- zone office building

(New / Renovation old building), control rooms in S/s of SCADA

building, Residential quarters for employees, Lineman Training Centre,


CSERC of 22

Executive Hostel, Central Training Institute, Distribution Centre building,

Control Room building at 33/11 KV Substation, Administrative Office

building for EDs/CEs for Raipur & Durg, Cement Concrete road /

Culverts / Drains in the S/s, Welfare Centre building, Customers Care

Centre, Hospital building and Area Stores shed, Area fencing / boundary

wall, etc. Total investment of Rs. 135 crores is projected during the

control period. It is stated that loan shall be arranged from M/s HUDCO

at a debt equity mix of 80:20.

We have gone through the proposal. In the main petition list of works to

be taken was not provided. On query, CSPDCL has submitted the same

in its additional submission. However, it is noted that priority of the

works has not been mentioned and variety of works ranging from

erection of chain link mash, boundary wall, culverts, mooram road

control room for panels, offices for JE/AE/EE at zone/division offices /

sub stations have been mentioned in bulk. It is also noted that in

previous business plan no such approval was sought. As per normal

practice the works related to boundary wall, fencing, culvert, road, etc.

should be part of the estimate for the building / substation itself.

Normally they are envisaged as a separate asset, however, from the

submissions made it appear that in some cases, particularly the old

substations, there are cases where such works were not executed and

as such they pose severe problem in efficient and smooth O&M.

As such, we agree for completion of such works. These works along with

renovation of Control rooms (including upgradation of control rooms for

installation of R-APDRP panels) and fencing may be taken up on the first

priority. Scheme also includes proposals for construction of residential

quarters for the employees. We also agree with the proposal for

Executive Hostel and Training Centre. Instead of erection of new

lineman training centre, the centre at Gudihari can be renovated. Need

based renovation of O&M offices, where required.

We are of the view that except for remote places, where arranging

accommodation is extremely difficult, construction of quarters by the

utility is not an attractive option. From the employee point of view also

it results in additional tax liability on deemed income.

We have also noted that a proposal has been submitted regarding

extension of EITC building, but EITC has proposed a new building for

integration of its functions. Thus the proposal from civil department is

duplication in contradiction


CSERC of 22

In view of the above, we are pruning up the capital expenditure for civil

works during the control period to Rs. 36 crore for the control period.

The investment is allowed at Rs. 10 crores, Rs 12 crores and Rs. 14

crores in the year FY 13-14, FY 14-15 and FY 15-16 respectively.

In absence of marked priority, we refrain from deciding the list of

schemes. CSPDCL should prioritize the works itself and submit the list of

works to be taken up during each year of control period as per CAPEX

allowed by 30th June 2013.

26. Capitalization plan :

In an ideal condition the capitalization for any scheme is considered in

the year in which the last trench of capital investment is made.

However, the capital investments estimated sometimes fail to fructify in

time for various reasons, as such, looking to the past trend, we are

inclined to consider 70% of the ideal value for consideration in the ARR

/ tariff computation on front end basis. The same shall be revisited and

adjusted as per actual at the time of trueup. The summary of the year

wise capital expenses and capitalization considered for ARR is tabulated

here as under:-

Particulars 2013-14 2014-15 2015-16 Total

ST (N) Schemes 55 60 65 180

ND Scheme (CSPDCL Share) 60 65 75 200

Loss Reduction Scheme 180 200 270 650

EITC SAP & IT Project 10 20 20 50

Civil Works 10 12 14 36

Total Capex (CSPDCL) 315 357 444 1116

Capitalization @ 70% of Capex 221 250 311 781

The actual capitalization shall be accounted and adjusted at the time of

true up when realistic values will be available. We are of the view that

except for the schemes allowed by Commission normally no expense

may qualify for additional capitalization at the time of tariff

determination / true up. For works approved in the previous orders, it is

noted that at the time of ARR / Tariff estimation, capitalisation of such

schemes was considered, now the same shall be revisited during the

true up. For the purpose of ARR, subject to appropriate check, GFA as in

provisional accounts for FY 2011-12 shall be considered. Such check

may include (but not limited to) scheme-wise comparison of actual

capitalisation vis-a-vis the approved plan. Additional capitalisation for

FY 2012-13 shall be revisited as per status considered in this order.


CSERC of 22

However, on receipt of any new information the extent of loading of

capitalization in ARR / Tariff determination may be reviewed

appropriately.

We feel it imperative to stress that on completion of the schemes, at

the time of true up of ARR of respective years, CSPDCL shall be under

obligation to provide, details of actual expenses incurred and capitalized

on each of scheme. It must be understood, loud and clear, that If the

utility fails to provide such details at the time of true up, the additional

GFA to such extent, may not qualify for consideration in computation of

ARR and tariff and the cost and consequences shall rest wholly and

squarely on the utility itself.

27. General observations:

27.1 As stated in the previous orders and provided in the regulations too,

we reiterate, that in case of emergency situations, causing threat to

life and property, work may be taken up by the utility on its own.

However, in such cases the petition for expost facto approval should

be submitted at the first available opportunity with due justification.

The Commission, subject to its satisfaction with exigency stated and

prudent scrutiny of cost, may accord approval for such additional

capitalization.

27.2 Further, it may be noted that the authorities can not be allowed to

take shelter of regulatory process to run away from their functional

responsibility. It must be understood loud and clear that the

responsibility of detailed budgeting, financial planning and

administrative/technical approval of various proposals rests unfettered

on the management of the utility. The tariff order or business plan

order should not be construed or projected as a substitute for detail

financial budgeting or planning.

27.3 Last but not the least, the approval of the schemes does not imply that

Commission has given any blanket approval for capitalization of such

expenses. It must be borne by all and one, that all the approvals

granted by the Commission are only in-principle approvals and such

approval / concurrence by the Commission does not in any way

absolve or dilute the responsibility and liability of the competent

authorities to adhere to prudence check on technical requirement and

detailed specifications. Similarly canons of financial propriety shall

have to be applied with undiminished force and vigor. Regulatory

process only ensures test on some broad parameters. Executive


CSERC of 22

authorities must do their duty of exercising prudence check, un-

trembled by the consideration that such costs or proposals have

passed the test of regulatory scrutiny. If at any point of time,

Commission comes to know about any irregularity, then such costs

shall not be considered for capitalization ‘ab-initio’.

28. Commission's Directives

28.1 For government funded schemes, it shall be the responsibility of the

utility to coordinate with the government and execution should be in

accordance to the funding.

28.2 Priority of implementation of the schemes and their completion should

be decided by CSPDCL. For taking up work under different schemes

criterion should be laid out for deciding the priority.

28.3 Effort should be made by CSPDCL for completion of all the schemes

within scheduled period. Specific attention should be paid to the loss

reduction schemes. They will prove to be life line of the distribution

utility in the long run. Circle wise progress of such schemes and the

benefits derived should be submitted to the Commission quarterly.

Other directives such as study of load on existing system and load growth,

prioritization of schemes, swapping of high cost loans, creation and

maintenance of asset register etc. contained in the previous orders, unless

superseded, shall remain in force.

Sd/-

(Vinod Shrivastav) Member

Sd/-

(Manoj Dey) Chairman

Expected Input

(LU)

Saving in Input

(LU)Saving in Cr Rs

Pay back

Period (Yr)

Ambikapur 18 28.62 7,036 3057 56.55% 46.00% 5661 1,375 35 1

Bilaspur (O&M) 36 57.24 6,161 3010 51.14% 34.00% 4561 1,600 40 1

Champa 19 30.21 3,293 1226 62.77% 50.00% 2452 841 21 1

Raigarh I 22 34.98 6,345 4157.1 34.48% 24.00% 5470 875 22 2

Raigarh-II 68 108.1 5,519 2,039 63.10% 43.10% 3583 1,936 49 2

Kanker 22 34.98 2,877 1448.27 49.65% 38.00% 2336 541 14 3

Pendra Road 14 22.26 2,126 1198 43.65% 34.00% 1815 311 8 3

Sakti 60 95.4 3,768 1,420 62.30% 42.30% 2461 1,307 33 3

Mungali 50 79.5 3,513 1,854 47.20% 28.20% 2582 931 24 3

Akaltara 28 68.3 1,893 694 63.40% 38.40% 1127 766 19 4

Saraipali 62 98.4 4,673 2,389 48.87% 25.25% 3197 1,477 37 3

Dhamtari 18 28.6 4,871 3,917 19.60% 15.00% 4608 263 7 4

Mahasamund 65 103.4 4,308 2,890 32.90% 17.00% 3482 826 21 5

Kawardha 77 99.5 3,905 2,401 38.50% 23.00% 3118 787 20 5

Khairagarh 20 31.8 1,221 822 32.70% 20.70% 1037 184 5 7

Raipur(O&M) 65 103.4 5,362 3,997 25.50% 17.00% 4816 546 14 7

Feeders Yrly Invest. Cum. Invest. Yrly Gain Cum. Gain Eff. Power Purchase Rate 2.5

First Year 73 116 116 95 47.58

Second Year 90 143 259 30 157.52

Third Year 146 232 491 55 309.88 1st Year 2nd Yr 3rd Yr

Total 309 491 41% 61% 63%

Recovery of Investment

HVDS cost benefit analysis - Savings on Input Unit (Reduction in Technical losses only)

DivisionHVDS Feeder

Prov. (No.)

Est. cost (Rs

Cr.)

Input units

(LU)Units Solf (LU)

Loss

2011-12

%

Expected loss

after HVDS

%

CSPDCL CIP ORDER 2013- ANNEXURE -I

Calaculated Pay Back

Page 1 of 2

Expct. Sold

Units (LU)Addl Sales (LU)

Gains

(Cr Rs)

Pay back

Period (Yrs)

Ambikapur 18 28.62 7,036 3057 56.55% 46.00% 3799 742 22 1

Raigarh I 22 34.98 6,345 4157.1 34.48% 24.00% 4822 665 19 2

Bilaspur (O&M) 36 57.24 6,161 3010 51.14% 34.00% 4066 1,056 31 2

Champa 19 30.21 3,293 1226 62.77% 50.00% 1647 421 12 2

Saraipali 62 98.4 4,673 2,389 48.87% 25.25% 3493 1,104 32 3

Raigarh-II 68 108.1 5,519 2,039 63.10% 43.10% 3140 1,101 32 3

Kanker 22 34.98 2,877 1448.27 49.65% 38.00% 1783 335 10 4

Pendra Road 14 22.26 2,126 1198 43.65% 34.00% 1403 205 6 4

Mungali 50 79.5 3,513 1,854 47.20% 28.20% 2522 668 19 4

Sakti 60 95.4 3,768 1,420 62.30% 42.30% 2174 754 22 4

Dhamtari 18 28.6 4,871 3,917 19.60% 15.00% 4140 223 6 4

Akaltara 28 68.3 1,893 694 63.40% 38.40% 1166 472 14 5

Mahasamund 65 103.4 4,308 2,890 32.90% 17.00% 3576 686 20 5

Kawardha 77 99.5 3,905 2,401 38.50% 23.00% 3007 606 18 6

Khairagarh 20 31.8 1,221 822 32.70% 20.70% 968 146 4 7

Raipur(O&M) 65 103.4 5,362 3,997 25.50% 17.00% 4450 453 13 8

Plan Feeders Yrly Invest. Cum. Invest. Yrly Gain Cum. Gain 2.900

First Year 76 121 121 71 36

Second Year 81 129 249 44 129

Third Year 154 245 494 67 278 1st Year 2nd Yr 3rd Yr

Total 311 494 30% 52% 56%

HVDS cost benefit analysis - Gains though Addl. Sales (Reduction in Commercial losses only)

DivisionHVDS Feeder

Prov. (No.)

Est. cost

(Rs Cr.)

Input units

(LU)Units Solf (LU)

Loss

2011-12

%

Expected loss

after HVDS

%

Recovery of Investment

Calaculated Pay Back

ABR (LT)

CSPDCL CIP ORDER 2013- ANNEXURE -II

Page 2 of 2

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