Commissions Comments by tyndale


									                    Commission’s Comments                                               KPTCL Reply
1. Perspective Plan:
   With reference to the Load Forecast report submitted by           The Revised addendum report on Long Term Demand
   KPTCL, the Commission vide its letter no. 1/01/2/1992             Forecast based on actual consumption pattern from
   dated 8th January 2007 had asked KPTCL to clarify whether         April 06 to December 06 is enclosed. The business
   approval of the Commission is sought for the Long Term Load       plan and Vision 2020 / perspective plan are enclosed
   Forecast and in case Commission‟s approval is required            herewith.
   KPTCL shall furnish a Business Plan justifying the Long
   Term Load Forecast. However KPTCL has not clarified in the
   matter and has also not submitted the business plan as
   directed by the Commission. In the absence of the above, the
   Commission is constrained to accept the Long Term Load
   Forecast submitted by KPTCL.
   The MYT regulations of the Commission require the filing the
   filing of perspective plan by the licensee for the said period.
   The licensee needs to expedite the submission of the same
   including the business plan. KPTCL in its reply had indicated
   that the Business Plan would be submitted to the
   Commission within 2/3 weeks, which is yet to be furnished.

   The Commission further brings to the notice of KPTCL that
   the perspective plan should be consistent with the present
   filings and in case of any deviation, KPTCL shall have to
   modify the filings as per the per respective plan.
   In view of the above, KPTCL is directed to submit Load
   forecast along with Business Plan as also the Perspective

2.   Capital Investment:
                                                                     As desired by the Hon‟ble Commission Format 1 and 2
     I) Interest& Finance charges on new loans:                      for the completed works in respect of Stations and
                                                                     lines during 2006-07 is submitted. The expenditure
     The Commission, considering the ATE order, seeks the            indicated in the Statement pertains to completed
     details of the scheme-wise capitalization for completed works   works only. However, lot of investment is there in the
     during FY 06 & FY 07 (upto December 06) to exercise             form of ongoing works and this is a continuous
     prudence check on the investments with respect to time and      process. Hence Hon‟ble Commission is requested to
     cost overruns. For this purpose necessary formats have          allow the proposed investment in full.
     already been sent to KPTCL.
                                                                     As stated earlier, KPTCL would like to reiterate that all
     Further, the interest component would not be included in        items of expenditure are proposed based on
     the ARR as the consumer is required to pay only for the used    estimations for the future period and the Hon‟ble
     and useful assets. KPTCL will have to modify the ARR to this    commission also all along determined the tariffs based
     extent. This is consistent with the ATE order and the           on projections. Hence it is once again requested that
     economic principles of regulatory framework.                    the Hon‟ble commission to consider Interest and
                                                                     Finance charges as proposed by KPTCL.
     In the absence of such details, the Commission would not be
     able to justify the ATE directive of ensuring that the It will not be out of place to mention here that the
     investments are prudent and the benefits accrue to the KPTCL makes investments after its programmes are
     customers.                                                    cleared by a Technical Committee consisting of experts
                                                                   in the field of transmission and distribution. Hence
     ii) The Commission has not so far accepted the Load Forecast investments made are considered prudent and of
     Report for the reason stated earlier. After KPTCL resubmits potential use to the consumers. It is felt that once
     the Long Term Forecast complying with the Commission‟s such investment programmes are cleared by the
     directives in the matter, the Commission will review the long technical co-ordination committee they need not be
     term forecast, which shall also include a review of the subject to one more check. This is also mentioned by
     assumptions on econometric variables, relationship with the Hon‟ble Appellate Tribunal.
     electricity growth, etc KPTCL also needs to substantiate the
     statement that “Higher investment is proposed to achieve
     reliable and quality power supply through a robust
     transmission network and also to complete previous back log

of works” by giving a break up of investment to substantiate Business Plan and        addendum load forecast are
the requirement of                                           enclosed.
    Load growth
    Loss reduction
    Increased quality of supply and
    Previous back logs

iii) KPTCL has just listed out the break up of stations            The status of the works as on 12.03.07
proposed, but has not furnished any reasoning for deviations
                                                                   Stations commissioned -                     57
on the targeted level of stations. KPTCL also needs to provide
                                                                   Works under execution –                   212
the actual outlay incurred on the completed works and
                                                                   Works tendered -                            91
outputs targeted by the completed stations in terms of load
                                                                   Works to be tendered –                     29
growth, loss reduction, quality improvements, etc.
                                                                   DPRs to be prepared –                      85
                                                                   Proposals to be approved by TAC -          17
In order to establish the prudence on capital expenditure for
                                                                   Total -                                   491
FY 06 & 07 the Commission directs KPTCL to furnish capital
expenditure details of completed and commissioned stations
                                                                    Main reason for slippages in the target is due to
and also provide the base cost and interest charges for the
                                                              delay in supply of power transformers by the
same separately as per the formats already specified by the
                                                              manufacturers because of non availability of
Commission. These details are required to comply with the
                                                              transformer bushings. The manufacturers were ready
orders of the ATE.
                                                              to supply the transformers without bushings, but this
                                                              was not accepted as the transformer without bushing
iv) KPTCL needs to expedite the submission of these formats
                                                              does not serve any purpose. It is also observed that
to the Commission. In case KPTCL fails to furnish the above
                                                              nowadays bushings has become a monopolized item
details, the Commission will not allow the corresponding
                                                              as only a few manufacturers are manufacturing the
expenses in the ARR.
                                                              porcelain bushings and large number of transformer
                                                              manufacturers have to depend upon them. It is seen
                                                              that commissioning of 8 number of stations are held
                                                              up for want of transformer bushings. Similarly for
                                                              want of breakers also, the stations works are delayed.
                                                              Supply of breakers is also once again linked with

porcelain      insulators.    It     is   observed that
commissioning of 7 Number of stations is getting
delayed due to delay in supply of breakers. Now
supply of bushings and insulators is improving and it
is hoped that the supply of transformers and breakers
eases in the coming months.
       Further agitation against the verdict of Cauvery
Tribunal has also affected the works in the southern
part of the state, as the agencies are facing lot of
difficulties in getting the skilled laborers.

     In many cases the station works are completed
but the transmission line works not completed for
want of 1. Clearance from the Forest Department. 2.
Road cutting permission from BMP, BDA etc. 3. Court
cases and 4. ROW problems.
     The ongoing works are being closely monitored.
Review meetings are being conducted every month at
corporate office level with the agencies and KPTCL
officers.  Managing     Director      and   Director
Transmission are reviewing each and every case and
interacting with the concerned agencies. The issues
are being discussed threadbare and sorted out. With
this mechanism in place, It is hoped to achieve
maximum progress in the coming months.

The details of completed and commissioned stations in
the prescribed formats are enclosed

3.   Transmission Losses:
                                                                   Investment on 110 kV and 66 kV stations would result
      Commission has already set a target for reduction of T&D     in increase in Transmission loss due to increase in
     losses and the same has been furnished to CEA. The            Transmission network, no load loss and full load
     Commission had indicated a target for Transmission loss       copper loss of the power transformer.       Hence ,
     reduction from 4.18% in FY 06 to 4.06% in FY 07, which the    commission may reconsider actual overall loss
     ATE has also upheld in its order. As such KPTCL has to        furnished.    Further, the Transmission Loss in
     adhere to the target fixed by the Commission. The             Southern Region in 400 kV system is 4.10% ( Mar 06
     Commission would allow only the approved loss levels.         to Sept 06). Hence the loss furnished by KPTCL is
                                                                   comparable. It is estimated that nearly 1147 MU will
     The remark of KPTCL that the investment on 110 kV and be saved on account of commissioning of new stations.
     66kV station would result in reduction in distribution losses
     and contribute the increase in transmission losses is a It is a known fact that increasing the number of
     general statement which is not acceptable unless stations increases the capacity of the system to handle
     substantiated by the results of load flow studies             increased   loads.    Had   KPTCL     not  increased
                                                                   investments on 110KV and 66 KV stations the grid
                                                                   would not have been able to handle increase in
                                                                   consumption down the line. The Hon‟ble Commission
                                                                   is aware that consumption in the State has increased
                                                                   by an average of 20 percent over the last year and
                                                                   projections of growth in major cities in the State
                                                                   indicate a growth of upto 2 percent in the ensuing
                                                                  Unfortunately, increase in load also means that more
                                                                  electricity has to flow on the grid. This increased
                                                                  consumption increases technical losses that are
                                                                  evident from the formula , Loss= I*I*R
                                                                  That is loss is directly proportional to the square of
                                                                  the current flowing through a conductor.

        (i)   Voltage wise loss determination is an essential part        The Voltage wise loss details will be available after
              of the regulations. Non-availability of similar             implementation of integrated SCADA.        Integrated
              accuracy class meters and metering equipment is             SCADA will enable reading of parameters on real time
              not sufficient ground for the licensee not to file the      basis.
              loss levels at various voltage levels. The loss levels at
              different voltage levels shall have to be furnished on
              the basis of available metering arrangement. Hence
              explanation given by KPTCL in this regard is not
              acceptable to the Commission.
4.                                                                        The amounts indicated are as per audited annual
       O & M Expenses                                                     accounts. Further it is submitted that consequent to
        (i)   There is large deviation year on year observed in the       large scale recruitment of AEs/ JEs, Assistant
              filing above. The licensee needs to substantiate the        Lineman, and AEEs/ AAOs, the expenses are bound
              reasons for such deviation.                                 to increase.   ( 100 AEs, 283 JEs, 1000 Station
        (ii)  The objective of an MYT regime is to bring in               Attendants, 370 ALM etc were recruited during 2006))
              certainty and transparency in the determination of          KPTCL also has taken Karnataka Electricity
              costs or building efficiency targets in to the cost         Regulatory Commission‟s directions on consumer care
              approvals. For this purpose, the Commission has             very seriously and wish to adhere to those norms
              directed the KPTCL to submit a norm for O&M                 hence the increase in expenditure. We need ground
              expenditure based on key cost drivers which may             level staff so that norms of Karnataka Electricity
              include linkage to asset base (GFA, line length Bays        Regulatory Commission on consumer satisfaction can
              etc.,) linkage to inflation, linkage to energy business     be achieved.
              growth etc., In this regard the Commission directs
              the KPTCL to file or propose O & M cost based on            Further it is submitted that , at present, the system of
              normative formulate instead of absolute values as           accounting O & M expenses separately for lines and
              submitted in the current filings. In case the above         stations is not followed in KPTCL. However, from FY
              details are not furnished, the Commission would be          08 onwards KPTCL intends to adopt this system of
              constrained to proceed on its own                           accounting and provide necessary details in future
             As discussed above the licensee needs to come up             filings. Hence Hon‟ble Commission is requested to
     with norm for projecting O&M expenses as per clause 3.11.2           consider the O & M expenses filed by KPTCL.

     of the MYT Regulations. The Commission requires actual bay
     wise details.
5.   IV R & M Expenses:                                         The projections are based on the historical data.
                                                                However, in view of additional plant and machinery
     Year on year data show that the average increase is only expected to come up in future due to aggressive
     7.5% while KPTCL is seeking as an increase of 10%, the investments, especially in Stations, it is necessary to
     Commission directs KPTCL to substantiate for the increase have a proactive maintenance system in place. For
     claimed.                                                   this purpose an increase of 10% is felt absolutely
                                                                necessary and it is a conservative estimate.. Hence,
                                                                Hon‟ble Commission is requested to consider the
                                                                R & M expenses filed by KPTCL.

                                                                         The projections are based on the historical data,
        V.    A & G Expenses:                                            which shows an average increase of 12%. However
6.                                                                       KPTCL requested for 10% only. Furhter, it is
     The Regulations require KPTCL to file for a consolidated O&M        submitted that in 2006 alone KPTCL recruited around
     expense, though an individual determination of              A&G,    1700 new staff, which would certainly increase the A
     employee and R&M can be considered along with indexation,           & G expenses Hence , Hon‟ble Commission is
     the licensee has to file for a consolidated index for the control   requested to consider the A & G expenses filed by
     period.                                                             KPTCL.

7.   Interest and Finance Charges.                                KPTCL ties up loans for new works from financial
                                                                  institutions every year. Loans for ongoing works are
     The Licensee needs to furnish scheme wise/source wise decided in the year of commencement of the work.
     capitalization schedule to carry out a prudence check on the These institutions are public sector undertakings such
     investments and the corresponding cost, Loans from „others‟ as the Power Finance Corporation and the Rural
     needs to be elaborated.                                      Electrification Corporation who have standard rates of
                                                                  lending. Other financial institutions are public sector
                                                                  banks. Decisions on loans from these banks are taken
                                                                  based on the „current‟ rates of interest and other
                                                                  terms and conditions that are negotiated based on the
                                                                  quantity of loan. Banks for these loans are mentioned

                                                                     as „others‟. Loans may also be swapped from time to
                                                                     time if cheaper loans are available in the market..

                                                                     All borrowing for capital works is cleared by a
                                                                     borrowing sub-committee that consists of the
                                                                     Principal Secretary, Finance and the Principal
                                                                     Secretary, Energy Department of the Government of
                                                                     Karnataka. This committee satisfies itself as to the
                                                                     amount of loan, the rate of loan, the financial
                                                                     institution from where the loan is proposed to be

     Form T19 of KPTCLs filing pertains to Energy Flow Diagrams. It is a typographical error. It refers to T 9.
     However, KPTCL in its reply referred to Form T19 towards
     borrowings from working capital.       Commission seeks a
     clarification regarding the same.

8.   SLDC Charges:
                                                                     Details sought are enclosed.
     The Commission requires the break up of SLDC expenses but
     the licensee has provided the break up of SLDC charges
     charged to Generators/Licensee. Expenses shall include the
     components of SLDC expenditure (ARR) viz, employee
     expenses, admin expenses, interest expenses, if any, etc. The
     details of the same are to be provided by KPTCL.

                                                                     KPTCL has tied up loans for on-going works with
9.   Loan-wise details:                                              financial institutions and the banks. Details of all
     The Commission presumes that the licensee would have had        loans tied up is enclosed.
     discussions with prospective lenders in arriving at the terms   For some of the new works to be taken up in the year
     and conditions they would be seeking during the control         07-08 loans will be tied up during the year 07-08. This
     period. Based on this, the Commissions seeks the details of     is a very normal procedure well accepted in financing
     loan drawl schedule and capitalization for at least the first   of capital works.
     year, FY 08, loan wise and scheme wise.
                                                                     The Budget for 07-08 is under preparation and loan
                                                                     drawal schedules will be available as soon as the
                                                                     budget is firmed up.

                                                                     As the quantum of auxiliary consumption is very
10. Auxiliary Consumption:                                           meager (i.e 21MU out of 40,000 MU input) including it
    As per the regulations, the auxiliary consumption of the         in the O & M Costs is not going alter the calculation of
    licensee needs to be provided as part of O&M expense and         transmission charges. Hence , Hon‟ble commission is
    not while calculating the transmission charges. Therefore,       requested to consider the calculation of transmission
    the licensee has to explain if the auxiliary consumption has     charges as filed. However in future filings, auxiliary
    been included as part of the O&M expenditure as consistent       consumption will be included as part of O & M Costs.
    with the Regulation. If not, the licensee may have to modify
    the calculation of transmission charges, if required and
    include the same in same in the O&M cost norms.
11. TBPCL CLAIMS;                                                    A methodology to account the TBPCL charges during
    As per ATE order, KPTCL has to create a Regulatory Asset for     control period and for creation of regulatory asset is
    the amounts payable/paid to TBPCL in order to amortize the       evolved and communicated to ESCOMs for necessary
    same over a certain period. To comply with the said order,       action.
    whether KPTCL has created the regulatory asset may be
    confirmed. Documentary proof (Such as journal Vouchers for
    creation of the regulatory asset) may be furnished. The
    transfer of said asset to ESCOM has to be done through
    necessary debit advise. The Copies of the debit advises may

      also be furnished to the Commission to enable            the
      Commission to take steps to implement the ATE order.

12.   Basis for Load Growth:
                                                                     The Revised Addendum Report on Long Term Demand
      The Commission has directed KPTCL to link up its load Forecast based on actual consumption pattern from
      forecast with the business plan, which is yet to be furnished. April 06 to December 06 is enclosed. Further, the
      For the reasons stated earlier, the Commission has not Business plan is also enclosed.
      accepted the Load Forecast submitted by KPTCL . In case of
      any deviation between the load forecast and business plan,
      the ERC shall have to be revised suitably.

13. Benchmarking of System Parameters:                             KPTCL besides reiterating its earlier reply further
                                                                   submits that as transmission utitility, KPTCL will have
      Commission directs KPTCL to limit itself to data relevant to to look into the power system as a whole in the State
      it‟s network and submit the same in the ERC filing. The and hence down scream data also needs to be taken
      reduction in losses downstream would be dealt with into consideration while benchmarking system
      separately.                                                  parameters.

14. PRDCL Report:
    The Commission is of the view that load projection is only one   The Revised Addendum Report on Long Term Demand
    of the components for projecting the investment                  Forecast based on actual consumption pattern from
    requirements.    As discussed earlier, the Commission is         April 06 to December 06 is enclosed. Further, the
    expecting the investment plans in terms of load growth,          Business plan is also enclosed.
    quality of supply, loss reduction etc. Those details when
    furnished by the licensee should be able to substantiate that
    the PRDCL report is the basis for forecasting the investment
    requirements to meet the load growth only. Further the
    investment plan should be linked to its business plan.

      KPTCL has stated that the basis of the capital investment
      plan submitted before the Commission is pending approval

     from the KPTCL Board. The Commission made a note of the
     same and directs KPTCL to furnish the approved plans only.

15. Manpower studies:
     Since M/s. TECSOK have submitted draft report to KPTCL, Draft Report submitted by M/s Technical Consultancy
    the same may be submitted to the Commission for reference. Services Organization of Karnataka (TECSOK) is
    Further the Commission notes that the study is pending for a enclosed.
    long time.
16. Target Availability:

     KPTCL has provided details of availability of only its Hoody Details for the entire transmission system enclosed.
     substation. The Commission seeks the Aggregate data for the
     entire transmission system as per Annexure-1 of the MYT

17   Revenue at existing Tariff.                                            As already submitted, subsequent to ATE Order on
     Commission vide its letter dated 2.11.2006 has directed KPTCL to       KPTCL tariff, KPTCL had requested the commission on
     place suitable proposals at an appropriate time for implementation     25-09-2006 to enhance the transmission tariff based
     of the ATE Order. But KPTCL has unilaterally assumed the rate at       on the ATE order, as the expenses claimed by KPTCL
     26.23 paise and has claimed the same from ESCOMs without any           were based on the items approved by ATE, details of
     authority which amounts to violation of ATE as well as                 which, were with KERC. This was followed by another
     Commission‟s order. The cash flow problems cannot be reason for        request letter dated 12-10-2006. This submission was
     unilateral fixing of rates. The statues and regulation require that    made to the Hon‟ble Commission in order to avoid
     the excess charges levied are recoverable from licensees. The
                                                                            retrospective revision of tariff of KPTCL and also to
     Commission takes this act of the licensee very seriously and
                                                                            ensure that KPTCL get its legitimate revenue in time.
     directs the licensee to revert back to the earlier tariff. It is the
     function of the Commission to determine or revise tariffs and the      KPTCL was hopeful that the Hon‟ble Commission will
     licensee cannot charge tariff more than the tariffs set by the         consider this request while passing the tariff orders of
     Commission. The Commission shall look into the under recoveries        ESCOM‟s.
     or over recoveries and ensure appropriate treatment to safeguard
     the interests of the consumers and the licensee.
                                                                            The Hon‟ble Commission, after passing of ESCOMs
                                                                            tariff order, replied on 02-11-2006 that it will consider

the request of revision of transmission charges in
accordance with the ATE Order and directed KPTCL to
place proposal before the commission at an
appropriate time. It is submitted that the Hon‟ble
Commission could have allowed transmission charges
based on the ATE Order while determining the tariff
of ESCOM‟s as all details of the claim were already
with it and carried out truing up to that extent, as
there is no hard and fast rule that truing up shall be
done only at the end of the year, more so when the
claim was based on the figures already available.
Further, if commission desired a proposal from KPTCL
for re-fixing the tariff at the time of determining
ESCOM‟s tariff, KPTCL would have submitted the
same.     Unfortunately the reply from the Hon‟ble
Commission came only on 2nd November 2006
providing no opportunity to KPTCL to give the
proposal and get the rates revised.

        The comment of the commission that KPTCL
has assumed at the rate of 26.23 paise and has
claimed the same from ESCOM‟s without any
authority which amounts to violation of order, is
concerned,      it is submitted that there is neither
violation of ATE order nor commission‟s order. As
KPTCL had addressed letter to the commission as
long back          on 25/11/2006 duly informing the
commission that KPTCL is billing ESCOM on the basis
of tariff allowed by ATE and ESCOMs were requested
to file their ERC taking into account the enhanced
tariff, KPTCL has assumed the rate of 26.23 paise per
unit and claimed from ESCOMs in anticipation and

pending approval of KERC.

      However as a matter of information, KPTCL
would like to inform the Hon‟ble Commission that the
KPTCL though is billing ESCOMs at a rate of 26.23
paise, it is not realizing these charges fully from all
the ESCOMs.

       The above explanation may please be accepted
and appropriate orders may please be passed duly
revising transmission charges of KPTCL immediately.

                                List of Enclosures

1. Addendum to Long-term Load Forecast

2. KPTCL Business Plan

3. Vision 2020

4. Details of Capital Expenditure ( Format 1 and 2)

5. Details of all loans tied up for on going works

6. Break up of SLDC Charges

7. Target Availability calculations for entire system

8. Draft Report on Man Power Requirement


Replies to Preliminary Observations on MYT filing


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