introduction papers/staff paper for true up for... · 2013-02-25 · staff paper based on ndmc’s...

Staff Paper based on NDMC’s Petition for true up for FY 2011-12, and ARR for FY 2013-14

Introduction

1.1 New Delhi Municipal Council (NDMC), one of the Distribution Licensees, has

filed the Petition for approval of true up for FY 2011-12, and Revised Aggregate

Revenue Requirement (ARR) and corresponding determination of tariff for FY

2013-14.

1.2 This Staff Paper contains the summary of the Petition filed by NDMC for approval

of true up for FY 2011-12 (based on audited accounts), and ARR and tariff of FY

2013-14 (based on projections).

1.3 For the purpose of comparison, the Staff Paper includes figures approved in the

Multi Year Tariff (MYT) Order dated March 07, 2008 (referred to as ‘MYT Order

2008’ hereafter), Order dated August 26, 2011 (referred to as ‘Aug 2011 Order’

hereafter), and MYT Order dated July 13, 2012 (referred to as ‘MYT Order’

hereafter).

1.4 As per the DERC MYT Regulations, the Tariff for FY 2013-14 shall be based on the

ARR approved by the Commission, which broadly has the following components:

a) Power Purchase cost

b) Operation and Maintenance (O&M) expenses

Employee expenses

Administrative & General (A&G) expenses

Repair & Maintenance (R&M) expenses

c) Return on Capital Employed (RoCE)

d) Depreciation

e) Non-tariff income

1.5 The Commission shall true up the uncontrollable parameters (Sales and Power

Purchase) vis-a-vis the audited accounts of the Distribution Licensee after

prudence check for FY 2011-12.

1.6 For controllable parameters, any surplus or deficit on account of O&M expenses


shall be to the account of the Distribution Licensee and shall not be trued up in the

ARR. Depreciation and RoCE shall be trued up as first Control Period (FY 2007-08

to FY 2011-12) has come to an end, based on the capital expenditure and

capitalization undertaken by the Distribution Licensee for each year of the Control

Period vis-à-vis capital expenditure and capitalization approved by the

Commission in the MYT Order 2008 and Aug 2011 Order.

Truing Up for FY 2011-12

Energy Sales and Revenue

1.7 In its Petition, NDMC has submitted that its actual energy sales in FY 2011-12 were

1246.54 MU compared to energy sales of 1293.72 MU approved by the

Commission for FY 2011-12 in the August 2011 Order. Since energy sales are

treated as an uncontrollable factor, NDMC has requested the Commission to

approve true up of sales and revenue for FY 2011-12 based on its audited accounts,

as shown below:

Table 1: Sales and Revenue for FY 2011-12

Sr.

No. Category

Aug 2011 Order As Per Petition

Sales

(MU)

Revenue

(Rs. Crore)

Sales

(MU)

Revenue

billed

(Rs. Crore)

Revenue

Collected

(Rs. Crore)

1 Domestic 258.88 75.53 243.89

# #

A Single Delivery Point 94.34 31.71 86.46

B Separate Delivery Point 145.87 37.07 141.63

C Domestic Power 18.66 6.74 15.80

2 Non Domestic 254.89 124.75 247.70

A Single Phase 50.10 22.09 48.95

B Three Phase 204.80 102.66 198.75

3 Mixed Load 726.17 399.90 713.78

A Supply at 11 kV(HT) 514.96 269.16 510.99

B Supply on LT where

supply is given from 3.72 2.47 3.96


Sr.

No. Category

Aug 2011 Order As Per Petition

Sales

(MU)

Revenue

(Rs. Crore)

Sales

(MU)

Revenue

billed

(Rs. Crore)

Revenue

Collected

(Rs. Crore)

NDMC sub station

C

Supply on LT where

applicant provides built

up space for sub-station

207.48 128.28 198.83

4 Small Industrial Power 0.31 0.15 0.31

5 Public Lighting 8.81 3.17 12.95

6 Others 8.66 4.04 7.69

7 DMRC 36.00 12.00 20.23

8 Total 1293.72 619.54 1246.54 645.96 642.18

#NDMC Petition doesn’t contain the breakup of revenue billed and revenue collected.

This information is sought from the licensee.

AT&C Loss for FY 2011-12

1.8 In its Petition, NDMC has submitted the actual AT&C loss and Distribution loss

figures for FY 2011-12, which are higher than the loss level target set for FY 2011-

12. The following table shows the actual AT&C loss along with Distribution loss

and Collection Efficiency for FY 2011-12 vis-à-vis that approved in the August

2011 Order:

Table 2: AT&C Losses for FY 2011-12

Particulars As per Aug 2011 Order As per Petition

Distribution Losses 9.60% 11.51%

Collection Efficiency 100.00% 99.40%

AT&C Losses 9.60% 12.02%

Power Purchase Requirement

1.9 The quantum of power purchase is based on the sales of energy by the Licensee as

well as the loss levels. Higher sales require a greater quantum of power to be


purchased. Similarly, higher loss levels also require a proportionately greater

amount of power purchase by the Licensee because it needs to meet the sales (in

MU) after accounting for various losses in the process of supplying electricity.

1.10 The energy sale for that year is grossed up by the loss levels for the year, to arrive

at the required quantum of power purchase for that year in the following manner:

Quantum of Power Purchase (MU)= EnergySales

(1- Distribution Loss(%)/100

1.11 The table below shows the actual sales, loss levels and power purchase for FY

2011-12, as submitted by the Licensee:

Table 3: Power Purchase Requirement (MU) for FY 2011-12

Particulars FY 2011-12

As per Aug 2011 Order As per Petition

Sales 1293.72 1246.54

Distribution Loss 9.60% 11.51%

Power Purchase Requirement 1431.11 1408.59

Power Purchase Cost

1.12 As per the DERC MYT Regulations, 2007, the Licensee is allowed to recover the

cost of power procurement from sources approved by the Commission for supply

to its consumers. The following power procurement sources are approved by the

Commission:

a) State Generators

b) Central Generating Stations

c) Intra-State and Inter-State Trading Licensees

d) Bilateral Purchases

e) Bulk Suppliers

f) Independent Power Producers

g) Non-conventional Energy Generators


h) Any generation business of the Distribution Licensee

1.13 NDMC, in its Petition, has submitted that the variation between the approved and

the actual power purchase expenses is on account of change in quantum and cost

of power and consequent changes in the transmission charges payable on account

of change in the quantum of power purchase and difference between actual

transmission charges paid by NDMC vis-a-vis the transmission charges approved

by the Commission.

1.14 The following table shows the comparison of actual power purchase quantum and

cost as submitted by NDMC in its Petition and the power purchase quantum and

cost approved by the Commission in the Aug 2011 Order.

Table 4: Power Purchase details for FY 2011-12

S. No

Stations

Aug 2011 Order As per Petition

Quantum (MU)

Cost (Rs. Cr.)

Quantum (MU)

Cost (Rs. Cr.)

1 Dadri TPS 830.50 259.69 736.22

569.22 2 Badarpur TPS 720.03 287.73 658.81

3 Pragati Power I 585.51 173.48 642.90

213.35 4 PPCL-III (Bawana) 74.28 30.23 14.75

5 IPGCL-GTPS 4.38 1.85

5.07 2.42 6 IPGCL - Rajghat 1.98 0.95

7 Short Term Bilateral Purchase - - 26.23 14.34

Gross Power Purchase 2216.68 753.97 2083.98 799.33

8 Short Term Bilateral Sale 724.24 260.72 621.79 144.28

Total Power Purchase 1492.44 493.25 1462.19 655.05

Transmission Charges

9 Inter-State Transmission Charges 18.68 22.95

10 Intra-State Transmission Charges 118.76 91.79

Total Power Purchase Cost including Transmission Charges 1492.44 630.69 1462.19 769.79


1.15 NDMC has accordingly requested to allow the net power purchase cost after

adjustment of revenue from sale of surplus power as Rs 655.05 crore for FY 2011-

12.

O&M Expenses

1.16 NDMC submitted that Operation and Maintenance (O&M) expenses for the

period from FY 2007-08 to FY 2010-11 have been Trued-up by the Commission in

the respective True-up Orders for the said financial year. NDMC submitted that it

has considered the O&M expenses for FY 2011-12 same as that approved by the

Commission in its Tariff Order.

1.17 The Petitioner further submitted that it has followed the same methodology as

previously approved by the Commission to arrive at the allocation of Total

Administration and Civil Engineering Department expenses (which have been

calculated on actual basis for FY 2011-12) to Electricity Distribution Business.

1.18 The summary of total O&M expenses, after application of the efficiency factor as

approved by the Commission for the Control Period, is provided in the table

below:

Table 5: Approved and Proposed O&M Expenses for FY 2011-12 (Rs. Crore)

Particulars

FY 2011-12

As per Aug 2011

Order As per Petition

O&M Expenses 131.92 131.92

Efficiency factor 4% 4%

Net O&M expenses 126.64 126.64

Administration and Civil

Engineering Department expenses 45.37 119.47

Depreciation

1.19 According to the DERC MYT Regulations, 2007, depreciation charges are not to be

trued up on an annual basis and shall be trued up only once at the end of the


Control Period. NDMC has submitted that the depreciation expense has been

determined by applying the rate of depreciation of 3.6% approved by the

Commission on the average Gross Fixed Assets (GFA) during the year.

1.20 The Licensee has submitted the following figures of depreciation incurred for FY

2011-12. The table also shows the amount approved by the Commission in its

previous Orders:

Table 6: Depreciation for the Control Period from FY 2007-08 to FY 2011-12 (Rs. Crore)

Particulars

FY

2007-08

FY

2008-09

FY

2009-10

FY

2010-11

FY

2011-12

Total

Approved by the

Commission 13.49 17.43 23.85 30.04 34.63 119.44

Actual Depreciation 13.49 17.43 23.85 30.44 35.60 120.81

Return on Capital Employed (RoCE)

1.21 According to the DERC MYT Regulations, 2007, RoCE is not trued up on an

annual basis and shall be trued up only once at the end of the Control Period.

NDMC has stated that it has computed RoCE as per the methodology approved by

the Commission in its previous Orders, as tabulated hereunder:

Table 7: RoCE (Including Supply Margin) for the Control Period from FY 2007-08 to FY

2011-12 (Rs. Crore)

Particulars

FY

2007-08

FY

2008-09

FY

2009-10

FY

2010-11

FY

2011-12

Total

Approved by the

Commission 17.74 29.79 48.42 66.37 80.41 242.73

Actual RoCE 18.67 30.82 57.38 78.16 97.85 282.88

1.22 Rate of return on the Debt component (i.e., 11.50% p.a.) for FY 2011-12 has been

retained at the same level as approved by the Commission in its previous MYT

Order.


Non‐Tariff Income

1.23 Apart from the revenue earned in accordance with the tariff schedule from

supplying power to consumers, Distribution Licensees also earn income from

other sources such as interest received on deposits; charging meter rent from

consumers; delayed payment surcharge levied on bills that are paid late; sale of

scrap, etc. This income is called Non-Tariff Income (NTI) and it needs to be

deducted from the Aggregate Revenue Requirement of the Licensee.

1.24 NDMC has submitted the NTI at Rs. 21.35 Crore for FY 2011-12 as against Rs. 10.13

Crore approved in the August 2011 Order and is as shown in the table below.

Table 8: Non Tariff Income for FY 2011-12

Sr. No

Particulars As per August 2011 Order

As per Petition

1 Meter Rent 1.53 0.00

2 MDI 0.94 11.09

3 Misuse 3.51 3.68

4 Burnt Meter 0.04 0.03

5 Surcharge 0.45 0.98

6 New Connection/reconnection fee

0.29 0.27

7 Recovery of storage charges 0.91 -

8 Recovery of deposit work 0.56 4.06

9 Other income from lapsed deposits

1.63 -

10 Other Receipts (petty items commercial)

0.27 1.23

Total 10.13 21.35

Aggregate Revenue Requirement (ARR)

1.25 On the basis of the costs incurred in FY 2011-12 and after deducting the Non Tariff

Income, the Aggregate Revenue Requirement for FY 2011-12 as submitted by

NDMC is given in the table below:


Table 9: Aggregate Revenue Requirement for FY 2011-12 (Rs. Crore)

Sl.

No Particulars

As per August

2011 Order

As per

Petition

1 Net Power Purchase Cost 493.21 655.05

2 Inter-State transmission Charges 18.68 22.95

3 Intra-State transmission Charges 118.76 91.79

4 O&M expenses 126.64 126.64

5 Depreciation 34.63 35.60

6 RoCE including Supply Margin 80.41 97.85

7 Administrative & Civil Engineering

Department Expenses allocated to electricity 45.37 119.47

8 Less: Non Tariff Income 10.13 21.35

9 Total Costs 907.57 1127.99

10 Employee Cost capitalised 10.01 -

11 Aggregate Revenue Requirement 897.57 1127.99

12 Revenue from sale of power 686.07 642.18

13 Revenue Surplus/(Gap) (211.50) (485.81)

14 Revenue Gap as % of Revenue Realized* 31% 76%

*Computed by the Commission

Revenue Gap

1.26 NDMC submitted that in the Aggregate Revenue Requirement for the first Control

Period, all components except RoCE and Depreciation have been considered same

as that approved by the Commission in the respective True-Up Orders. Based on

the RoCE and Depreciation for the first Control Period as discussed above and the

net gap of FY 2011-12, NDMC has submitted the revenue gap of Rs. 180.60 Crore

for the first Control Period, as given in the below Table:


Table 10: Revenue Gap for the first Control Period (Rs. Crore)

Particulars

FY

2007-08

FY

2008-09

FY

2009-10

FY

2010-11

FY

2011-12

Opening (Gap)/Surplus 21.89 238.59 552.62 467.89 299.80

Annual Revenue Requirement

for the year 278.57 241.53 650.76 801.54 1127.99

Revenue for the year 483.46 519.67 519.76 598.64 642.18

Surplus/(Gap) for the year 204.89 278.14 (131.00) (202.90) (485.81)

Closing Revenue

Surplus/(Gap) 226.78 516.74 421.62 264.99 (186.01)

Carrying Cost 9.50% 9.50% 9.50% 9.50% 9.50%

Carrying Cost for the year 11.81 35.88 46.28 34.81 5.41

Closing Revenue

Surplus/(Gap) 238.59 552.62 467.89 299.80 (180.60)

ARR of FY 2013-14

Energy Sales and Revenue

1.27 NDMC has projected the energy sales at 1483.67 MU for FY 2013-14 as shown in

the Table below, based on 9 months actual sales for FY 2012-13 and it has

requested the Commission to approve the same.

Table 11: Energy Sales for FY 2013-14 (MU)

Category

FY 2013-14

Sales as per

MYT Order

(MU)

Sales as per

Petition

(MU)

Revenue

projected as

per Petition

(Rs. Crore)

Domestic 256.43 291.72 122.72

Non-Domestic 222.43* 284.25 223.55

Mixed Load 770.79* 849.53 604.61

Small Industrial Power 0.33 0.33 0.19

Public Lighting 15.28 7.98 5.47

Others 12.15 10.05 5.58


Category

FY 2013-14

Sales as per

MYT Order

(MU)

Sales as per

Petition

(MU)

Revenue

projected as

per Petition

(Rs. Crore)

DMRC 40 40 20.55

Total 1317.43 1483.67 982.66

*Non-Domestic load of more than 100kW is considered under Mixed Load Category

AT&C Loss

1.28 NDMC has projected the distribution losses at the same level as approved by the

Commission in the MYT Order. NDMC has projected the collection efficiency at

99% as projected in its MYT Tariff Petition for the second Control Period. The

AT&C losses projected by NDMC for FY 2013-14 are given in the Table below:

Table 12: Proposed AT&C losses for FY 2013-14

Particulars

FY 2013-14

Approved in

MYT Order

As per

Petition

Distribution Losses 10.10% 10.10%

Collection Efficiency 100.00% 99.00%

AT&C loss level 10.10% 11.00%

Power Purchase Requirement

1.29 The quantum of power purchase is decided by the sales of energy expected by the

Licensee, as well as the loss levels projected/approved. Higher expected sales

require a greater quantum of power to be purchased. Similarly, higher loss levels

also require a proportionately greater amount of power purchase by the Licensee

because it needs to meet the expected sales (in MU) after accounting for various

losses in the process of supplying electricity.


1.30 The energy sale for that year is grossed up by the loss levels for the year, to arrive

at the required quantum of power purchase for that year in the following manner:

Quantum of Power Purchase (MU)= EnergySales

(1- Distribution Loss(%)/100

1.31 The table below shows the projected sales, distribution loss levels and power

purchase quantum for FY 2013-14 as submitted by the Licensee:

Table 13: Power Purchase Requirement (MU) for FY 2013-14

Particulars

FY 2013-14

Approved in

MYT Order

As per

Petition

Sales 1317.43 1483.67

Distribution Loss 10.10% 10.10%

Power Purchase Requirement 1465.44 1650.36

Power Purchase Cost 1.32 As per the DERC MYT Regulations, 2011, power purchase cost is uncontrollable

and the Licensee is allowed to recover the cost of power procurement from sources

approved by the Commission for supply to its consumers.

1.33 NDMC, in its Petition, has submitted that for projecting power purchase from the

generating stations for FY 2013-14, it has considered the values approved by the

Commission in its MYT Order for the second Control Period dated July 13, 2012.

1.34 NDMC has further submitted that the transmission charges payable to DTL and

PGCIL and other charges payable to SLDC/RLDC have been considered same as

that approved by the Commission in its MYT Order for the second Control Period

dated July 13, 2012.

1.35 Further, NDMC has submitted that it has revised the quantum of surplus power

available based on the revised sales for FY 2013-14 and has also revised the rate for

sale of surplus power to Rs 3/kWh on the basis of prevailing rate for sale of

surplus power.


Table 14: Power Purchase details for FY 2013-14

S. No

Stations

Approved in MYT Order As Per Petition

Quantum (MU)

Cost (Rs. Cr.)

Quantum (MU)

Cost (Rs. Cr.)

1 Dadri TPS 798.45 322.87 798.45 322.87

2 Badarpur TPS 675.23 329.87 675.23 329.87

3 Pragati Power I 620.41 209.33 620.41 209.33

4 PPCL-III (Bawana) 722.97 325.34 722.97 325.34

5 IPGCL-GTPS 4.99 2.14 4.99 2.14

6 IPGCL - Rajghat 2.11 1.09 2.11 1.09

7 Short Term Bilateral Purchase 0 0 0 0

Gross Power Purchase 2824.17 1190.65 2824.17 1190.65

8 Short Term Bilateral Sale 1271.39 508.56 1086.47 325.94

Net Power Purchase 1552.78 682.09 1737.70 864.71

Transmission Charges

9 Inter-State Transmission Charges 22.55 22.10^

10 Intra-State Transmission Charges 70.23$ 62.66^

11 SLDC Charges 6.16^

Total Power Purchase Cost including Transmission Charges 1552.78 774.87 1737.7 955.63 Notes:$ includes SLDC Charges ^transmission and SLDC charges submitted include rebate on account of timely payment whereas approved values excludes the rebate

1.36 NDMC has accordingly requested to allow the power purchase cost of Rs 955.63

crore for FY 2013-14 including transmission charges.

O&M Expenses

1.37 NDMC has submitted that it has considered the O&M expenses during FY 2013-14

in accordance with the O&M expenses approved by the Commission in the MYT

Order for FY 2012-13 to FY 2014-15.

1.38 NDMC has considered an allocation of 19% of the salary head of its

Administrative department towards its electricity distribution business as per the

methodology approved by the Commission. For the projection of Administrative


Expenses and Civil Engineering Department Expenses for FY 2013-14, NDMC has

considered annual escalation of 5% over the actual Administrative Expenses for FY

2011-12.

Table 15: Approved and Proposed O&M Expenses for FY 2013-14 (Rs. Crore)

Particulars

FY 2013-14

Approved in MYT


Net O&M expenses 151.14 151.14

Administration and Civil

Engineering Department expenses 45.37 131.71

Total 196.51 282.85

Depreciation

1.39 NDMC has submitted that the depreciation expense have been determined by

applying the rate of depreciation of 3.6% approved by the Commission on the

average Gross Fixed Assets (GFA) during the year.

Table 16: Depreciation for FY 2013-14 (Rs. Crore)

Particulars

FY 2013-14

Approved in

MYT Order

As per

Petition

Depreciation 39.70 40.84

Return on Capital Employed (RoCE)

1.40 NDMC has stated that it has computed RoCE for FY 2013-14 as per the DERC MYT

Regulations, 2011. Rate of return on the Debt (i.e., 11.50% p.a.) for FY 2011-12 has

been kept at the same level as that approved by the Commission in its previous

Orders.


Table 17: RoCE (Including Supply Margin) for FY 2013-14 (Rs. Crore)

Particulars

FY 2013-14

Approved in

MYT Order As per Petition

Regulated Rate Base (RB) Opening 797.41 855.83

∆AB (8.06) (9.20)

Investments in the year 31.64 31.64


Consumer Contribution - -

Change in Working Capital 8.30 12.86

RB Closing 795.86 859.48

Regulated Rate Base (RRB) 799.89 864.09

Equity 0% 30%

Debt 100% 70%

Rate of Return on Equity 16% 16%

Rate of Return on Debt 11.50% 11.50%

WACC 11.50% 12.85%

Return on Capital Employed 91.99 111.04

Non- Tariff Income

1.41 NDMC has considered the Non-Tariff Income of Rs. 21.41 Crore for FY 2013-14 in

accordance with the MYT Order for FY 2012-13 to FY 2014-15.

Aggregate Revenue Requirement (ARR)

1.42 NDMC submitted that while computing the ARR for FY 2013-14, it has considered

the same figures for all the above heads, as that approved in MYT Tariff Order

dated July 13, 2012 as shown in the ARR Table below:


Table 18: Proposed ARR for FY 2013-14 (Rs. Crore)

Particulars

FY 2013-14

Approved in MYT


Power Purchase Cost 658.28 864.71

Inter-State Transmission Charges 22.10 22.10

Intra-State Transmission Charges 62.66 62.66

SLDC Charges 6.16 6.16

Net Operation and Maintenance Expenses 151.14 151.14


Administrative & Civil Engineering

Department Expenses allocated to electricity 45.37 131.71

RoCE 91.99 111.04

less: Non Tariff Income 21.41 21.41

Aggregate Revenue Requirement 1055.98 1368.95

Treatment of Revenue Gap and Proposed Tariff Hike

1.43 NDMC has submitted that the Revenue Requirement for FY 2013-14 is Rs. 1368.95

Crore and the revenue at existing tariff would amount to Rs. 982.66 Crore. NDMC

has projected revenue gap of FY 2013-14, as shown in the following table:

Table 19: Tariff Proposal (Rs. Crore)

Particulars FY 2013-14

Revenue Requirement 1368.95

Revenue at existing Tariff 982.66

Net (Gap)/Surplus (386.29)

Net Gap as % of Revenue* 39.31%

*Computed by the Commission

Tariff Revision Proposal

1.44 NDMC has submitted that there is a net gap of Rs 180.60 Crore including the

carrying cost for the first Control Period. NDMC has proposed a 20% hike in tariff

across consumer categories to meet the projected revenue gap.

introduction papers/staff paper for true up for... · 2013-02-25 · staff paper based on ndmc’s...

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