HARYANA ELECTRICITY REGULATORY COMMISSION
SCO 180, SECTOR 5, PANCHKULA 134 109, HARYANA   

 CASE NO. HERC/PRO – 6 OF 2001

 Date of Order:  February 16, 2002 

In the matter of the petition filed by HVPN for approval of proposal for revision of existing LT industrial connections with load above 50 KW upto 70 KW to HT.

 ORDER

1.            Haryana Vidyut Prasaran Nigam Ltd., Shakti Bhawan, Panchkula, Haryana, (hereinafter referred to as HVPN) was granted licence for carrying on the business of distribution and retail supply of electricity for the entire state of Haryana in February 1999 by Haryana Electricity Regulatory Commission (hereinafter referred to as HERC) set up under Haryana Electricity Reform Act. 1997 (hereinafter referred to as Reform Act.). On an application by HVPN, HERC by an order dated 21.4.1999,  permitted HVPN to carry on the business of distribution and retail supply of electricity in the North and South Zone through its two newly formed subsidiary companies viz Uttar Haryana Bijli Vitran Nigam Ltd. (hereinafter referred to as UHBVN) and Dakshin Haryana Bijli Vitran Nigam Ltd. (hereinafter referred to as DHBVN) respectively.

2.           The petitioner (HVPN) has stated that with a view to arrest the overall losses and improve the quality of supply, the petitioner decided to supply electricity on 11 KV to the consumers having connected load above 50 KW. The petitioner has further stated that due notice/copy/copies of the sales circular regarding conversion of the existing and new L.T. industrial connection with load above 50 KW upto 70KW to H.T. industrial connection as well as other connected circulars issued by UHBVN and DHBVN about the proposed revision were sent to all industrial associations and notices in this regard were published in the newspapers and that meetings were also held with different industrial associations in this regard. Copies of the sales circular No. 8/99 dated 27.9.99, sales circular No. 9/99 dated 12.10.99 and sales circular No. 12/99 dated 10.12.99 and sales circular No. 8/2000 dated 28.2.2000 and sales circular No. 46/2000 dated 5.9.2000 all issued by UHBVN have been enclosed with the petition.

3.     The petitioner states that Proposed Revisions were notified by the petitioner with the bonafide belief that this action was within the competence of the petitioner in terms of section 49 of Electricity Supply Act. 1948 read with the provisions of the General Clauses Act / the Haryana General Clauses Act and of the supply contract.

4.     It has been further stated by the petitioner that the Proposed Revision and the said sales circulars were challenged by consumers by filing Civil Writ Petitions (CWP) before the Hon’ble Punjab and Haryana High Court on various grounds in which notices were served on the Discoms and the HERC. The Civil Writ Petitions were fixed on July 2, 2001 for arguments before a Division Bench of Hon’ble Punjab and Haryana High Court. The Hon’ble judges of the Division Bench disposed of all the CWPs by their order dated 2.7.2001 with a direction to the Discoms to make the representation within one month to the HERC on the said matter and thereafter HERC would decide the representation as per law, within four months. In the meantime, the Hon’ble High Court directed that the proposed revision should not be enforced.

5.     Pursuant to the said order of the Hon’ble High Court, the petitioner has filed the present petition seeking approval of the Proposed Revision and directions for suitable implementation of the so approved proposed Revision.

6.     The petitioner has sought approval, inter-alia, on the grounds which are stated to be independent and without prejudice to each other viz.

a)          The Proposed Revision and the consequent change in the supply conditions is in consonance with the best practices in  other developed countries.

b)         The Proposed Revision is consistent with the objects and purpose of the Reform Act.

c)           The Proposed Revision is beneficial for all genuine consumers who would reap advantages of H.T. tariff which is lower than the L.T. Tariff and which is bound to be lowered further in future either in real terms or even nominal terms and that there would be major benefits of the Proposed Revisions in classification to the electricity sector of the State and all honest consumers some of which are enumerated below: -

i.              In view of higher losses and the imperative to reduce them a need has been felt by the petitioners to plan and augment the supply network with a view to minimise system costs. Keeping long term perspective on system planning in mind, it would be optimal to convert the existing L.T. network to H.T. in a phased manner, investment costs notwithstanding. The petitioner submits that in this context it may be appropriate to consider H.T. supply to consumers even with 30 KW load.

ii.             Direct tapping of L.T. Lines or the distribution transformer and the consequent theft would be eliminated alleviating the burden of theft borne by the utilities and consumers.

iii.           Industrial consumers would get better voltage because of the elimination of local distribution system and associated disturbances.

iv.          The problem of tampering of meter would be obviated as the input metering would be on 11 KV.

v.            The utility would achieve loss reduction, which would ultimately translate into lower tariff for all consumers and not  just for L.T. or H.T.industrial consumers.

vi.           H.T. tariff would be applicable to the affected consumers, which is currently 19 paisa per unit lower than L.T. tariff.

vii.         As per Reform Act, cross subsidies would be phased out in future leading to alignment of tariffs with cost of service. H.T. consumer will benefit substantially from such alignment, which will benefit the affected consumers also.

d)           The Proposed Revision does not cause any prejudice to the L.T. and H.T. consumer of the petitioners.

7.            The petitioner believes that the costs of conversion from L.T. to H.T. must be recovered as a pass through to the consumer. In view of the difficulties associated with making one time payment for implementing the Proposed Revisions, the petitioners have offered the facility of making the payment of Rs. 6500/- per month for a period of two years.

8.            The petitioners have submitted that the present petition may be considered as a  filing for approval of the Proposed Revision and the sales circulars considering the following basic legal submissions in the alternative and without prejudice to each other.

a.            The petitioners are empowered in law to establish and revise the terms and conditions of supply to its consumers in terms of section 49 of the Electricity Supply Act. 1948 read with the provision of General Clauses Act/Haryana General Clauses Act and the supply contract.

b.             In the alternative and without prejudice to the submission made in (a) above, the petitioners are in any case seeking the approval of the Proposed Revisions in classification placed on record.

9.     The Commission issued public notices in four News Papers i.e. The Tribune, Indian Express, Punjab Kesri on 16.11.2001 and Hindustan Times on 17.11.2001 for holding public hearing on 6th December 2001 at Red Bishop, Panchkula. Subsequent hearings were held in the matter on 28^th December 2001 and 16^th January 2002. On 16^th January, 2002, the hearing on the petition was concluded. Written objections were received from 60 consumers as per Annexure to this order.

10.   The Commission heard the views of the petitioner and the objector consumers during the public hearings at Panchkula. Arguments were advanced by the above noted representatives of the organisations mentioned against each of them.

11.   The commission has considered all the written objections filed along with affidavit and opportunity was also given to all the objectors/their representative to make oral submissions during public hearings. The commission allowed persons from the public, who had not filed their objections in the prescribed from or within the time allowed, to make their oral submission.

12.   The written objections and various submissions made during the hearings are briefly given below:

i.               Application was not filed as directed by Hon’ble High Court within a month of the date of the order i.e. 2^nd July, 2001.  The petition was filed on 19^th October, 2001.  Therefore, the petition should be rejected.

ii.            The petitioner was not competent to revise the terms and conditions of supply under section 49 of Electricity Supply Act, 1948,

iii.          The proposed re-categorisation of affected consumers is tantamount to revision of tariff and as per section 26(7) of Reform Act, tariff cannot be revised more frequently than once in any financial year.  The tariff was last revised with effect from 1.9.2001 in F.Y. 2001-2002.  Hence the present proposal is liable to be rejected.

iv.         The affected consumer will have to spend about Rs.2.5 lakh for which no provision was made in the original Project Report and hence it is not possible to invest this amount now.

v.            Changing the condition of supply to 11 KV from 440 volts as agreed earlier is abuse of monopolistic position of the petitioner.

vi.          Most of the affected consumers don’t have the space for installing the equipment necessary to receive supply at 11 K.V.

vii.        The affected consumers don’t have the expertise required to maintain the transformer and other equipment connected with H.T. supply.

viii.       By this re-categorisation of L.T. industrial consumers, the petitioner alone stands to gain and should therefore make the necessary investment.  The proposed change is not in the interests of the affected consumers because (a) they have to spend about Rs.2.5 lakhs each (b) voltage improvement even if achieved will not be of much help in the face of erratic supply of power (c) the affected consumers would not have filed writ petitions in the High Court if the change had been in their interests.

ix.           Re-categorisation of consumers can not apply to existing consumers and should apply to prospective consumers only.

x.            The petition does not disclose the number of consumers with connected load between 50 K.W. and 70 K.W.  It does not quantify the reduction in line losses sought to be achieved by the proposed change.  It does not specify how much power is consumed by them vis-à-vis total consumption of the State.  It does not specify how much extra expenditure will have to be borne by the affected consumers in terms of enhancement of MMC, low power factor, MDI penalty, peak load charges.  It does not specify how the formula for charging 24 instalments of Rs.6500/- each has been worked out.

xi.           In Punjab, Himachal Pradesh and Chandigarh, consumers with 50-70 K.W. connected load are getting L.T. supply.  In Haryana also there should be no change.

xii.        One of the reasons stated for the proposed change is to check theft of energy.  Theft cannot take place without the connivance of petitioner’s staff.  Failure of the petitioner to control its staff cannot be a legitimate ground for the proposal.

13.    In response to the objections, the petitioner has submitted:-

(i)          The petitioner had filed an application on 27.7.2001 which was returned by the Commission asking the petitioner to file the petition as per procedure prescribed.  The petition as per procedure was filed on 19.10.2001.

(ii)        The petitioner is well within its legal right to amend any terms and conditions of supply duly agreed to by the consumers at the time of taking supply.

(iii)       In any case, the petitioner has come before the Commission for approval of the proposed Revision.

(iv)      The question of provision under the Project Report while setting up the industry is not pertinent as changes do occur during the course of time which are beyond the scope of project Report.

(v)        There is no question of abuse of monopolistic position by the petitioner under a regulatory regime.

(vi)      The question of non-availability of space for transformer and metering equipment for H.T. supply is a consumer specific matter and cannot be generalised.  In most of the consumer premises enough space is available for the purpose.  There may be odd industries located in bylanes of old cities where the space can be a constraint.  However, this can be overcome by installing the transformer on H pole structure which does not occupy any space.

(vii)    The ground of lack of expertise to maintain the transformer and equipment for H.T. supply is not tenable as any person running an industry has a large number of equipments which operate on power and are maintained by the consumer himself.

(viii)   The intention of the utility is not to secure any financial gain by lowering the qualifying limit of connected load for industrial consumers to 50 K.W. for supply of power at 11 K.V.  The change of limit from 70 K.W. to 50 K.W. is primarily aimed at improving the ratio of L.T. line to H.T. line.  The cost of Rs.2.5 lakh has been indicated by the objector themselves.  Actually, the cost will differ depending on the location of the industry.

(ix)    Re-categorisation cannot apply only to prospective consumers as such an act would be discriminatory in nature and bad before law.

(x)        There are about 3886 consumers between 50 KW and 70 KW connected load.  Out of these, 1449 consumers already have dedicated transformers.  The reduction in line losses to be achieved is difficult to quantify as it will depend on the length of L.T. line or 11 K. V. line, the size of conductor and the loads to be fed through these lines.  However, for same loads and without change of conductor size, the conversion from L.T. to 11 K.V. brings about a reduction in line losses to the extent as low as 1/625^th of original losses on L.T.  The reduction in line losses will benefit both the utility and the consumer as the tariff rates allowed take cognisance of the line losses which are also paid for by the consumers.  The total monthly consumption of L.T, consumers in UHBVN is about 6000 lakh units per month out of which L.T. industrial consumers in 50-70 KW category (2139) consume about 107 lakh units accounting for 1.8%.  The difference in rate of MMC between 150 per KW in L.T. and Rs.200/- per KVA for H.T. is offset by the fact that MMC for L.T. consumers is based on connected load in KW while in case of H.T. consumers MMC is chargeable on the declared contract demand which could be much less than the actual connected load.  The cost of Rs.1,56,000 was calculated taking into account a typical conversion of an average connection and 24 monthly instalments of Rs.6500/- were allowed for the facility of consumers.

(xi)      The practice followed in neighbouring states cannot be compared with Haryana as the tariff structure and the terms and conditions of power supplied are entirely different.

(xii)     There is no denying the fact that there is large scale theft being committed by the power consumers as indicated by the low load factor of L.T. industrial consumers.  Secondly, the direct beneficiaries of theft being the consumers themselves, the connivance of the utility staff is also attracted by them.  By supplying power on 11 K.V., it is true that unscrupulous consumers would find it difficult to pilfer power.  The meters are installed at the premises of the consumers and it is a known fact that a large number of unscrupulous consumers are tempted to tamper with the meter for stealing electricity.  If metering is done on H.T., tampering of meters will become difficult.  11 KV meters are checked regularly and hence tampering with them is not easy.  During 2001-2002, a large number of consumers were apprehended stealing power.

14.          We first take up the legal issues raised by the objectors.

(A)   The objectors have argued that as per orders of the Hon’ble High Court of Punjab and Haryana, application was to be filed by the petitioner with the Commission within one month of the order (2.7.2001) but in fact the application was filed by the petitioner on 19.10.2002.  From the records of the Commission we find that the application was filed by the petitioner on 27^th July, 2001 but the petitioner was asked to file a proper petition in accordance with the procedure prescribed in the Haryana Electricity Regulatory Commission (Conduct of Business) Regulations.  Such a petition was filed only on 19.10.2001.  The Commission is not inclined to take a strictly legal view in the matter and reject the petition of HVPN  on this ground alone as contended by the objectors.

(B)        The objectors have contested the petitioner’s claim that they had a right  to revise the terms and conditions of supply under section 49 of Electricity Supply Act, 1948 and the proposed revision was fully within their competence. A reading of section 56 and sub-section 3(vi) thereof, of the Reform Act shows that to the extent this Act has made specific provisions, the provisions of section 49 of the Electricity Supply Act, 1948 shall not apply in the State.  The Reform Act has made a provision in Section 26(7) that the licensee shall not amend any tariff unless the amendment has been approved by the Commission.  According to sub-section (9) of Section 26 of Reform Act, ‘tariff’ means a schedule of standard prices or charges for specified services which are applicable to all such specified services provided to the type or types of customers specified in the tariff.  By lowering the ceiling of applicability of L.T. industrial tariff from 70 KW to 50 KW, the petitioner has, in our view, amended the tariff which he is not competent to do in view of section 26(7) of the Reform Act.  The matter was never before brought before the Commission for approval.  In our view,  the sale circulars No.8/99 of 27.9.1999, No.9/99 of 12.10.1999, No.12/99 of 10.12.1999, No.8/2000 of 28.2.2000 and No.46/2000 of 5.9.2000 issued by the petitioners without the approval of the Commission were beyond the competence and jurisdiction of the petitioners.

15.         The Commission directs that the petitioner will submit to the Commission any other such sale circulars concerning any matter connected with tariff such as categorisation of consumers, terms and conditions of supply etc. issued by the petitioner after 16^th August, 1998 for orders of the Commission within 15 days of this order.

16.         The petitioners have also submitted that in the alternative the Commission may consider the present petition as a filing for approval of the proposed Revision and the sales circulars already issued.  In this connection, we would like to refer to section 26(7) of the Reform Act again.  This section clearly prescribes that no tariff or part of any tariff required by sub-section (6) may be amended more than once in any financial year except in respect of any changes expressly permitted under the terms of any fuel surcharge formula prescribed.  On an application by the petitioner, the tariff was amended by the Commission with effect from 1.9.2001.  Hence, another revision till 31^st March, 2002 is not permissible.  Since the date of proposed revision has been left by the petitioner to the Commission, we shall examine the proposed revision on merits on the basis of objections raised and the replies and information furnished by the petitioner.

17.   The petitioner was asked by the Commission to furnish the following information on the basis of sample study of 450 affected consumers including consumers from each circle and for various range of load by taking the data for at least one year.

a.             Cost benefit analysis of the proposed revisions

b.            Total estimated cost of the complete scheme, expected loss reduction, expected increase in revenue and the pay back period.

18.   The petitioner has submitted separate information in respect of UHBVN and DHBVN which is briefly given below:-

(a)    UHBVN
UHBVN has based its study on data pertaining to 271 affected consumers and the major conclusions given are indicated below:-

(i)           The distribution transformers feeding the affected consumers are located at an average distance of 50 meters from the premises of such consumers

(ii)         Based on requirement of material for a typical average consumer, the total material cost to be borne by an affected consumer would be Rs.1.75 lakh including the metering equipment cost.  The additional cost of metering enclosure may vary from Rs.10,000 to Rs.20,000/- depending on the location of individual consumer.  According to the calculation of UHBVN, the net additional expenditure to be borne by the consumer, taking into account the lower H.T. Tariff would be Rs.1380/- p.m.  This is based on interest on investment of Rs.1.75 lakhs, transformation losses and the saving on account of lower H.T. tariff.  This does not include the cost of repair & maintenance of such assets.  HVPN is charging 12% of the cost for this purpose.  If this is included, the extra expenditure to be borne by a consumer would come to Rs.1380 + Rs.1750/- = Rs.3130/-.p.m.

(iii)       The utility will be required to bear the cost of laying an average of 50 meters of 11 KV line per consumer requiring an expenditure of Rs.35,000/-.  The total estimated expenditure to be borne by UHBVN will be around Rs.2139 x 35,000 = Rs.7.49 crores.  The total cost of conversion would be Rs.43.38 crores, out of which an expenditure of Rs.35.89 crores will require to be met by the consumers.

(iv)       The conversion would result in a saving of average distribution loss of 28.6 units per month per affected consumer on an average consumption of 5500 units per month per consumer.  The saving would be Rs.122 per month per consumer and the pay back period for investment of Rs.35,000/- would be 286 months i.e. 23 years & 10 months.  The pay back period may be longer if the savings per month are discounted for present value and the element of interest is also taken into account.

(b)   DHBVN
DHBVN has based its study on cost data pertaining to 300 affected consumers out of which, 90 consumers have dedicated transformers. The total cost of conversion of 1747 affected consumers would be Rs.29.07 crores.  The cost to be borne by individual affected consumer has not been indicated separately.

19.        The main advantages which according to the petitioner will flow from the proposed revision are:-

(a)        System losses will be reduced by conversion of related L.T. network to H.T.  The reduction of such losses will translate into lower tariffs for all classes of consumers as they are even now paying for lines losses to a considerable extent.

(b)        Theft of electricity would be checked as

(i)    direct tapping of H.T. lines is difficult

(ii)        The problem of tampering with energy meters by consumers would be obviated as the input metering would be on 11 K.V.

(c )  Consumers between 50 KW and 70 KW will get H.T. tariff which currently is 19 paise/Kwh lower than L.T. tariff

(d)        The affected consumers will get better voltage of supply

20.         We shall examine these one by one:-

(A)    According to the sample data furnished by UHBVN, there will be a reduction of average distribution loss of 28.6 units per month on an average consumption of 5500 units per month per consumer.  This would mean a saving of Rs.122 per month per consumer after an investment of Rs.35,000/- per consumer.  If we take an interest rate of 12% per annum for such borrowing, there will be an interest charge of Rs.350.- p.m. as against a claimed saving of Rs.122/- p.m.  Evidently such an expenditure cannot be called ‘prudent’.

        The affected consumers are stated to be consuming about 1.8% of the total consumption of all L.T. industrial consumers.  In the absence of any reliable statistics from the petitioners, we are not convinced that the proposed revision will result in any perceptible reduction in system losses and therefore the claimed benefits for the consumers in the shape of lower tariff are illusory at present.

(B)    (i)    The petitioner claims that the direct tapping of the H.T. line is difficult but the petitioner has not been able to state as to how much of H.T. line will get converted into H.T. line by the proposed revision.  In our view, the extent of conversion to H.T. by the proposed revision will be negligible, considering the vast net work  of L.T. lines which will continue to remain exposed for direct tapping.  Although  the financial analysis given by the petitioner is flawed, it indicates that the pay back period for this investment would be as long as 286 months i.e. 23 years & 10 months  when the economic life span of a distribution system is around 25 years.

(ii)          The petitioner has also claimed that tampering with H.T. metering system is not easy.  The Commission has reservations about this claim as in H.T. metering system, an energy meter differs only in that it has inputs from C.T. & P.T. and for all purposes it is a L.T. class of equipment which is susceptible to tampering like other meters.

(C)   While it may be true that the affected consumers after proposed revisions will get supply at 19 paise/Kwh less, the fact remains that on the whole they will pay a few thousands of rupees more every month, besides having to repay the principal amount borrowed to meet the initial estimated expenditure of Rs.1.75 lakh.  The affected consumers are understandably opposed to the move for proposed revision when no visible gains to them have been convincingly demonstrated.

(D)   The promised gain of better quality power to affected consumers has also not been quantified and remains vague.  The consumer evidently thinks that this is a mirage.  Even otherwise, the tariff charged is for supply of quality power in terms of voltage, frequency and wave form.

(E)   The Commission notes that the proposed revision will affect a very small percentage of about 5.63% of total L.T. industrial consumers who are already operating at a load factor of about 15% which is far higher than the average load factor of about 8.6% for entire L.T. industrial consumers indicating that the load factor of L.T. industrial consumers with connected load of less than 50 KW is very low.  The Commission directs HVPN to prepare a separate loss reduction plan in respect of all L.T. industrial consumers having load factor of less than 10% adopting a bottom up approach for priority in action.

(F)    It is claimed by the petitioner that proposed revisions will bring about an increase of 3% in the load factor of affected consumers raising it to 18% from 15%.  The petitioner has not been able to demonstrate how the consumption pattern of an L.T. industry will change just by changing the supply voltage.  The increase in load factor could be due to passing on of transformation losses to the consumer which goes to the disadvantage of the consumer and is not consistent with the object and purpose of the Reform Act.      

(G)   The terms and conditions of supply to consumers were framed prior to introduction of reform process in power sector in Haryana and may not fully  cover the interests of the petitioner as well as the consumers.  HVPN is directed to expedite submission of the modified terms and conditions of supply as per direction already  given in  the Commission’s order of August 11, 2001 on Annual Revenue Report for Distribution and Retail Supply Business for 2001-2002 and Distribution and Retail Supply Tariffs.

21.         In view of our discussion of various issues in the foregoing paragraphs, we pass the following orders:-

(1)        We quash the impugned sales circulars issued by the petitioner.  They appear to have been issued without in-depth analysis of the relevant issues.

(2)        The ‘proposed revisions’ are disallowed as they are not considered to be either in the interests of the affected consumers or the petitioner.

(3)        The petitioner will either refund or adjust in the next bill all moneys deposited by affected L.T. industrial consumers in compliance with the sales circulars which have been quashed by this order.

1.     In view of the provision of section 9(3) of the Haryana Reform Act, 1997, I express my difference of opinion as under:-

(a)   After having heard the arguments of the petitioner and objectors and taking their under mentioned views in consideration for the betterment of both:-

(i)        Better voltage stabilization

(ii)       Reduction in number of interruptions

(iii)     Reduction on LT: HT ratio

(iv)     By reducing the chance of any kundi connection as it has to be done on HT side before the HT meter.

(v)      The consumer will get advantage of lower HT tariff than the LT tariff. At present the HT tariff is lower by 19 paise than LT tariff.

(vi)     At present 1449 out of total 3886 consumers already have dedicated transformers installed at their premises.

(vii)   The consumers have no objection if the cost of conversion is borne by the utility.

2.     In view of above, I am of the opinion that approval should be granted for reduction in lower ceiling of connected load from 70 KW to 50 KW for HT category. The entire cost of conversion involved for existing consumers in L.T. category from 70 KW to 50 KW is to be borne by the petitioner/utility and later on recovered from the converted consumers out of the tariff differential between HT and LT category. The proposed revision for lowering the ceiling of connected load from 70 KW to 50 KW for HT category for releasing new connections be allowed. 

 ORDER

In terms of Section 9(3) of the Reform Act, the Haryana Electricity Regulatory Commission passes the following orders being the view of the majority:-

(1)   The impugned sales circulars issued by the petitioner are quashed.

(2)   The ‘proposed revision’ of existing L.T. industrial connections with connected load above 50 KW upto 70 KW to HT industrial connections is disallowed.

(3)   The petitioner will either refund or adjust in the next bill all moneys deposited by affected L.T. industrial consumers in compliance with the sales circulars which have been quashed by this order.

            This order is signed, dated and issued by the Haryana Electricity Regulatory Commission on 16^th February, 2002.

Dated: 16^th February 2002
Place :  Panchkula

Annexure

List of persons/organizations who filed objections