HARYANA ELECTRICITY REGULATORY COMMISSION
S.C.O 180, SECTOR 5, PANCHKULA. HARYANA-134 109, 

CASE NO. HERC/PRO – 4 OF 2002

Date of hearing:  31.05.2002
                               02.07.2002

Date of Order: 16.07.2002

Petitions filed by Group Housing Societies regarding waiver of operation and maintenance charges.

ORDER

18 Group Housing Societies mentioned in “Annexure “ filed petitions before the Commission against the charging of operation and maintenance charges by the UHBVNL. First hearing of the petitions was held on 31.05.2002 in which all petitioners present at the hearing  were heard.  The HVPNL was directed to file the following information:

1.     Whether the assets supplied by Group Housing Societies etc. are entered in the books of accounts of the licensee and if so and at what point of time.

2.     Whether operation and maintenance charges are not to be paid by the Group Housing Societies in case of 90% occupancy.

3.     What diversity factor was used in working out the capacity of transformer to meet the load of a group housing society.

The case was taken up on 02.07.2002 but the HVPNL did not file the information as directed by the Commission vide its order on 31.05.2002. The hearing could not therefore be  held on 2.7.2002 and had to be  declared closed.

1.0     First the Petitioners were heard and the following common points emerged during the hearing:-

1.     The group Housing Society (GHS) is developing and constructing the distribution net work from existing H.T. mains of the Licensee up to the supply point to individual applicant of GHS at its own cost.  The Licensee is approving the quantities & quality of material, layout of equipment.  GHS has installed all electrical equipment like transformer, HT cable,, LT cable i.e. main HT line upto individual meter.

2.     The Licensee is charging 26.5% of the total cost of the installed equipment ,as assessed by the licensee, as Operation and Maintenance (O&M) charges  inclusive of 1.5% as the inspection charges for a period of 5 years. The O&M charges approximately cost  Rs.5600- 6000 per member/owner of a flat of the GHS  which is an additional burden for flat owner as compared to the other urban house owners of Haryana.

3.     This net work up to metering point forms part of the assets of the licensee, Operation and Maintenance charges on which are recovered through the tariff from all the consumers and therefore recovery of any charges like inspection and O&M charges for the distribution net work are totally unjustified and unlawful. 

4.     The O&M charges are already a part of Tariff as applicable to the other resident of urban estates in Haryana, GHS should not be forced to pay it twice.

5.     The flat owners of Group Housing Society are being discriminated as compared to the other residents of urban state of Haryana being asked to deposit these additional O&M charges.

6.     HUDA while creating infrastructure in various sectors has already deposited the O&M charges with the Licensee.

7.     The Arawali Cooperative Group Housing Society Ltd., stated that the A.E.E., Sub Urban Sub Division, Panchkula arbitrarily assessed the cost of the transformer, other equipments & cables etc. as Rs. 3,86,917/- as against the actual cost of Rs. 1,89,692/- as intimated to him by the society vide letter dated 31-02-2000.   That the arbitrary assessment of cost as Rs. 3,86,917/- was done by the A.E.E Suburban Sub Division only to Levy higher O&M and inspection charges.

8.     It was pleaded by G.H.S:-

a)     That each applicant of G.H.S falls under the category of Domestic consumers and therefore must be treated at par with the other urban domestic consumers.

b)     That as per prevalent practice & policy, the Licensee should make available the electric supply at consumer’s meter point through the service lines and transformers installed at its own cost.

c)     That neither any charges towards O&M of the service line and transformer nor its rental is being charged by the Licensee from  other domestic consumers in  the state.

d)     That the tariff being charged by the Licensee for electric supply to Urban Domestic Consumers is supposed to include all expenses on the transmission & distribution  upto metering point in addition to the administration and O&M charges.

e)     That the Group Housing Societies have been discriminated against and have been coerced to bear not only the capital expenditure on the transformers, other electric equipments, and service cables but also their O&M and inspection charges at an exorbitant rate.

f)      That in view of the above averments, the O&M and inspection charges recovered  by the Licensee from the society for providing electric connections are unjustified.

        9.     The petitioners have prayed:-

(i)     That the individual consumers in a group housing society applying for  service connection should not be discriminated and  be treated at par with the other urban domestic consumers in the State of Haryana. 

(ii)   The cost of developing the net work and O&M charges including inspection charges paid by the Society should be reimbursed  along with interest due thereon as these are unjustified and unlawful. 

2.0  Reply by Licensee 

(ii)   The Licensee i.e. HVPNL has stated in its reply vide Memo  No.Ch-16/SE/RAU/Dist-Lic-5/Vol-IX Dated 13.3.2002 that:-

a)     As per the State Government Policy, the Societies are required to lay the infrastructure in the developed area and to maintain it for a period of 5 years at their own cost.

b)     As per the policy guidelines, the Colonizers (including HUDA, Housing Board and HSIDC) are required to maintain the infrastructure including Electricity Distribution system provided by the Colonizer.  In the case of Electricity infrastructure, once it is connected with the power supply system of the Licensee, it cannot be allowed to be handled by the Colonizer as the entire system gets integrated with the grid.   Therefore,  the Utility takes up this responsibility on behalf of the Colonizer for a period of 5 years.

c)     Moreover, the load growth of these Housing Societies/Colonies/Estates is quite gradual.  In the meantime, the licensee has to incur heavy expenditure on operation and maintenance of the distribution system at a heavy cost.

d)     For defraying the expenditure incurred on the operation & maintenance of the distribution system laid by the Colonizer, the operation & maintenance charges @ 5% of the estimated cost of the infrastructure is recovered on annual basis for a period of 5 years.

e)     The amount so recovered is treated as “Other income”

f)      Therefore, it would kindly be appreciated that the O&M charges being recovered by the Colonizer/Housing Societies are in lieu of the services being provided by the Licensee for operation & maintenance of the infrastructure laid by them which was the basic responsibility of the Colonizer/Housing Society for a period of 5 years.

        The Licensee also stated that the charges being asked for are correctly recoverable as per the prevailing instructions contained in Haryana State Electricity Board’s (HSEB’s) Circular No. 51/Sd-2/Panchkula/88/HUDA Dt. Panchkula the  16.8.88, No. 141/Bd-2(i)Panchkula/88/HUDA Dated 8.1.90 & No. 181/Bd-2(1)PKL/90/HUDA Dated 15.5.91. No additional charges have either been demanded or recovered.

2.1   The Licensee has also clarified in reference to the observation at Sl -(1.0) (6) of the petition that HUDA provides L.T/H.T lines and services upto outside the premises of plots/G.H Societies.  Further transformation to low voltage from high voltage and laying of cables and net work upto electric meters of House Owners is done by the Society and HUDA does not charge any amount for that.

2.2   The Licensee has, while furnishing written reply to certain points raised by the staff during the hearing of Licensee’s application for Annual Revenue Requirement (ARR) required for Distribution and Retail supply for the F.Y-2002-03, given the following information.

UHBVNL Reply

a)     The private colonizer/HUDA lays the lines and system for the supply of electricity to its consumers for which he prepares estimate and gets it approved from the Nigam.  Based upon its estimated cost, he is required to deposit O&M charges @ 25%.  This payment in case of HUDA is sought for in 2 annual instalments of 12.5% each and in case of other colonizers, this amount is got deposited in lump-sum.

b)     The O&M charges so received are treated as income @ 1/5^th of O&M charges per annum for 5 years.

C&d) The O&M charges got deposited from private colonizers/HUDA is a token for its running/maintenance including repairs, Estt & Admn. Charges.  The O&M charges on the lines and system are separately booked under the R&M estimates separately drawn by the department for the whole system which also includes system laid by private colonisers/HUDA.  As such the expenditure booked in R&M cannot be segregated amongst the expenditure incurred for the system laid by private colonisers/HUDA and incurred on other system of the Nigam.

         The lines and system laid by private colonisers becomes property of the Nigam, the moment it is connected with the main system of the Nigam.  As such, its running and maintenance becomes the liability of the Nigam.  The assets created by private colonisers/HUDA are therefore, required to be accounted for in the books of the Nigam as its property created out of the consumers contribution, by debit, to Fixed Assets and by contra credit to Consumers contribution.  But no such adjustment is presently being carried out.  The amount of the consumer contribution shown in the Balance Sheet pertains only to deposit works, material supplied by the consumer etc.  Instructions are being issued for accountal of these assets.

DHBVNL REPLY

        The factual position as prevailing in the field is that the developer/Group Housing Societies submit the electrification plan which is approved by the Licensee and the electrification work is carried out as per approved plan.  The developers purchase their own material and carry out the installation work.  The material so procured is also approved by the Licensee as also the electrification work.  The Licensee charges 1.5% of the cost of electrification work towards supervision charges which includes approval of material and the installation thereof.  In addition to this, 25% of the cost of the electrification estimate is got deposited as O&M charges towards cost of maintenance of the system laid  by the developer/Housing Societies for first 5 years.  These O&M charges are to meet with expenditure on operation and maintenance of the distribution system laid down by the developer for first 5 years when the load growth of these colonies/Housing  Societies/Estates is very small.

a)     Where the development agencies like HUDA install certain equipments and transfer them to the Utility, the value of such assets is shown as consumer’s contribution on the credit side/liabilities of  the balance sheet by creating assets but such assets are included under one and the same head of account under FAR.

b)     Advance O&M charges received from these consumers are treated as Deposit from HUDA / Private colonisers for O&M charges.  This head is cleared by 1/5^th of the amount each year by credit to revenue.

c)     Expenses incurred out of advance O&M charges are booked to the normal head of O&M charges of the fixed assets of DHBVNL .

d)     No separate head is maintained for expenses, if any, incurred on these assets.

e)     The basic concept was that once an area is developed by any colonizer, the power Utility would not get the requisite return/revenue as the plot holders may construct the buildings as per their own requirement and normally it takes more than 5 years before a sizeable portion of the developed area was actually converted into a residential/ non-residential colony and electricity connections were released, resulting in reasonable return to the Licensee.  Worthwhile to mention that the O&M charges @ 12% to 25% are as per instructions issued by the then HSEB(now HVPN).

3.0    We now take up the issues arising from the submissions made by the petitioners & the Licensee.

The following issues emerges:-

1.     Issue of discrimination with respect to adoption of different practice/procedure(Terms and Conditions) for similar/category of domestic  consumers in Urban area.

2.     Issue of fixing legal responsibility & obligation for developing distribution net work upto supply point at the consumer’s premises.

3.     Issue of justification of charging separate O&M and inspection charges from individual consumer of GHS.

(1&2)- Section-22 of Indian Electricity Act, 1910 which states that  “Where the energy is supplied by a licensee, every person within the area of supply, shall, except in so far as is otherwise provided by the terms and conditions of the licence, be entitled, on application, to a supply on the same terms as those on which any other person in the same area is entitled in similar circumstances to a corresponding supply.”

        The condition No.19.1(a) specified in the License issued by the Commission to the Distribution Licensee also states that “ Subject to the other provisions of this licence, the Licensee shall, on the application of the owner or occupier of any  premise within the Area of Supply, provide connection to the Licensee’s Distribution system for the purpose of providing a Supply of Electricity to those premises, including the laying of any required distribution mains.”

        Reading both together it is very clear that Licensee shall be responsible for providing supply to premises of all consumers including the laying of any required distribution main.  In a recent order dated February 26,2002 in the matter of petition filed by Sh. Vajinder Singh Malik, General Secretary, HEWO Apartments, Sector 15-II, Gurgaon in respect of non-implementation of the Haryana Electricity Regulatory Commission order Dated 22.5.2001 by the Dakshin Haryana Bijli Vitran Nigam Ltd.,(DHBVNL) a subsidiary of Haryana Vidyut Parasaran Nigam Ltd., the Commission has directed the HVPNL in para-3.5 on page-7&8 of the order that “ henceforth, it would be the responsibility of the Licensee of each Distribution Company (presently HVPNL) to develop theft proof service connection net work up to Meter at its own cost and to recover only the consumers share as per approved terms and conditions of service.  Consumer shall not be asked to execute any work forming part of such service connection.”

3)     The supply line laid up to Meter at the consumer premises becomes a part of the Licensee’s assets after it is electrically charged even though it  might have been constructed out of  consumers contribution.  The cost of such network including supervision is recovered from all consumers as a part of tariff & Licensee therefore, is not affected by the degree of occupancy of the flats by the consumers of G.H.S.  

        The responsibility of Operation & Maintenance (O&M) of all assets of Licensee lies with Licensee alone for which a maximum of 3% of Gross Fixed Assets (GFA) is allowed as O&M charges in the Annual  Revenue Requirement(ARR) of Licensee for each Financial Year.  The O&M charges are recovered by the Licensee from the consumers through tariff approved by the Commission. 

        Licensee has not been  authorised by the Commission to recover  charges other than those included and allowed by the Commission in its tariff orders & hence Commission consider the act of the Licensee to recover 25% O&M charges and 1.5% inspection charges from a specified group of individual consumers of GHS as discriminatory & unjustified  and amounts to recovery of  these charges once from  the petitioner & again through A.R.R.

4.0    We,  therefore, order  the Licensee to:-

(a)   Treat the impugned Circular No.51/Sd-2/Panchkula/88/HUDA dt. Panchkula the 16.8.88, No. 141/Bd-2(i)Panchkula/88/HUDA Dt. 8.1.90 & No. 181/Bd-2(i)PKL/90/HUDA Dt. 15.5.91 issued by the erstwhile HSEB & appended by the Licensee in its reply, as inoperative from 1.1.2001 the date from which the first Distribution and Retail supply tariff order of the Commission was made effective and

(b)    as a result, the petitioners covered under (a) above shall be entitled to refund/ adjustment of the entire O&M charges including inspection charges paid by them  to the Licensee through  the future energy bills in 12 month period along with interest due thereon @ 10% per annum.

Dt:12.7.2002.

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)   The view taken that the recovery of O&M charges and supervision charges should be discontinued retrospectively are not correct. It will be unfair to pass an order in retrospect and be inoperative from January 2001 and ask the Licensee to refund/adjustment of the entire O&M charges including inspection charges paid by them to the Licensee through the future energy bills in 12 month period along with interest due thereon @ 10% per annum.

(b)   There are three alternatives to supply electricity to the Group Housing Societies: -

(i)    The Group Housing Society approaches the Licensee for the electrification of a housing complex. They shall be covered under bulk domestic category of consumers. A single point bulk supply connection has to be applied for / taken by the Group Housing Society.

(ii)    In case the Group Housing Society is not ready to take a bulk supply connection, then individual house owner should approach the Licensee for release of a connection. The Licensee should release connection to such individuals like any other applicant irrespective of the fact that he is a part of the Group Housing Society.

(iii)   Group Housing Society lays down the distribution network as a part of its infrastructure development activity. Then it is saddled with the responsibility of operating & maintaining it for 5 years.

(c)    At present the Group Housing Societies are going with the third option. Therefore, Group Housing Societies has to take over the responsibility of the O&M charges of the system for the period till sufficient load is connected to the system and pay 5% O&M charges per year for 5 years till their occupancy reaches 90% and not 25% in advance. They should continue to pay 1.5% of cost of electricity work  as supervisory / inspection charges.

(d)    The Group Housing Society should not claim the best of all the options. They should either take a single point bulk supply connection or individual house owner should approach the Licensee to release the connection like any other domestic consumer.

(LT. Col. (Retd) Raghbir Singh)
Member

Order

1)     In terms of section 9(3) of Haryana Electricity Reform Act 1997, majority order of Sh. Ramesh Chandra, Chairman and Sh. K.S. Chaube, Member is the order of the Commission.

2)     The Commission order the Licensee to:-

(a)   Treat the impugned Circular No.51/Sd-2/Panchkula/88/HUDA dt. Panchkula the 16.8.88, No. 141/Bd-2(i)Panchkula/88/HUDA Dt. 8.1.90 & No. 181/Bd-2(i)PKL/90/HUDA Dt. 15.5.91 issued by the erstwhile HSEB & appended by the Licensee in its reply, as inoperative from 1.1.2001 the date from which the first Distribution and Retail supply tariff order of the Commission was made effective and

(b)    as a result, the petitioners covered under (a) above shall be entitled to refund/ adjustment of the entire O&M charges including inspection charges paid by them  to the Licensee through  the future energy bills in 12 month period along with interest due thereon @ 10% per annum.

3)    This order is signed dated and issued by the Haryana Electricity Regulatory Commission on 16^th July 2002.

Place: Panchkula
Date: 16.07.2002

     Annexure

List of Group Housing Societies, who have filed petitions for Waiver of Operation & Maintenance Charges.