Order dated Jan 13, 2004 on Review Petition in respect of ARR filed by HVPNL for its T&BS Business for the FY 2003-2004

HARYANA ELECTRICITY REGULATORY COMMISSION
SCO 180, SECTOR 5, PANCHKULA. HARYANA-134109

In the matter of Review Petition seeking review of the Order dated 12^th August 2003 passed by the Haryana Electricity Regulatory Commission (the Commission) in Case No. HERC / PRO – 5 of 2002 in respect of Annual Revenue Requirement (ARR) and Transmission & Bulk Supply Tariffs (BST) filing by Haryana Vidyut Prasaran Nigam Limited (HVPNL), having its registered office at Shakti Bhawan, Sector – 6 Panchkula, for the Transmission and Bulk Supply business (T&BS) for the financial year 2003-04.

This order relates to the review petition filed by HVPNL seeking review of the Order dated 12^th August 2003 passed by the Commission in Case No. HERC / PRO – 5 of 2002 in respect of ARR and BST filing by HVPNL for its Transmission and Bulk Supply business for the financial year 2003-04.

(1) The Haryana Electricity Regulatory Commission (hereinafter referred to as the Commission) passed its Order on August 12, 2003 in respect of Case No. HERC / PRO – 5 of 2002 regarding the Annual Revenue Requirement for FY 2003-04 and Bulk Supply & Transmission Tariffs filing by HVPNL for its Transmission and Bulk Supply business. HVPNL filed a review petition on 15/09/2003 seeking review, reconsideration and reversal of certain findings and observations of the said order. The filing was made under Section 10 (1) (h) of the Haryana Electricity Reform Act, 1997 read with Regulations 109, 114 to 120 of the Haryana Electricity Regulatory Commission (Conduct of Business) Regulations, 1999. As per the certified true copy of the resolution the Whole Time Directors and Chairman of HVPNL approved the review petition in circulation on 7-9-2003 and authorized Shri. A.K. Nandwani, Superintending Engineer / RAU & Tariff of the Company to sign, execute, certify, file and pursue the review petition.

(2) Paragraph 109 of the HERC (Conduct of Business) Regulations requires that the Commission may on its own motion or on the application of any party or person concerned review any order or decision within 30 days after making any decision, direction or Order other than an award by the Commission in any arbitration. Accordingly, the Registrar of the Commission put up the Review Petition filed by HVPNL, to the Commission that the review petition was barred by time and hence the Commission may first decide the ‘delay condonation’ part of the petition. The Commission condoned the delay and the petition was accepted.

(3) Public Notices were issued in Hindi in the Dainik Jagaran, and in English in The Hindustan Times and Times of India for holding a hearing on the review petition on 11-12-2003 at 11.00 AM in Red Bishop, Sector – 1, Panchkula. The interested persons / organizations were invited to file their comments / objections to the review petition under consideration by 28th November 2003.

(4) On December 11, 2003, the Commission heard the Intervener Shri. Rajesh of MDU Rohtak and the petitioner, HVPNL. The Commission also gave an opportunity to the Managing Director of Haryana Power Generation Corporation Limited (HPGCL) to submit on behalf of the petitioner. The Commission raised certain queries and clarifications and directed HVPNL at the hearing to submit certain clarifications and information. The petitioner vide its memo no. Ch-56/F-40/Vol IV dated 1/1/2004 filed additional information in support of purchase of power from Magnum Power Generation Company. HPGCL filed revised invoices for the period April 2003 to November 2003 and a provisional cost statement showing the cost of generation for FY 2002-03 vide its Memo No. 11472 dated 31/12/2003.

(5) In paragraphs 7,8,9,10 & 11 of the review petition, the petitioner has sought review / modification of some of the issues referred to in HERC / PRO – 5 of 2002 approving the Annual Revenue Requirement for FY 2003-04 and Bulk Supply and Transmission Tariffs for its Transmission and Bulk Supply business. The Commission would like to deal with the issues raised in the review petition on merits.

(6) The review petition, the supplementary submissions, submissions made during the hearing and clarifications and evidences submitted by HPGCL on January 2nd 2004, are dealt with here under.

In all five issues have been raised by HVPNL in its petition for review of the impugned Order relating to Transmission and Bulk Supply business. These issues are as following:

The petitioner has sought review of Volume of Power purchase allowed by the Commission from four sources viz. 1). Narora Atomic Power Plant 2) Magnum Power Generation Co. 3) Malana Hydro Power Station and 4) Bhakra Beas Management Board (BBMB). A comparative table of the Volume from these sources proposed by the petitioner and allowed by the Commission is as follows.

Sources	*HVPNL proposed (MU)*	*HERC allowed (MU)*
NAPP	400	170
Magnum	160	0
Malana	300	0
BBMB	3065	3285

Under the ABT regime, the shares in Nuclear Power Stations are booked as first charge. There is no scheduling for this power. Accordingly, the states having share in NPC projects would have to take this power as first charge. Haryana has a share of 28.10 MW in NAPP. The actual energy drawl from this source during the last three years have been 574 MUs (against an energy entitlement of 386 MUs) in FY 2000-01, 378 MUs (against an energy entitlement of 262 MUs) in FY 2001-02 and 423 MUs (against an energy entitlement of 306 MUs) in the financial year 2002-03. Thus, even if overdrawals of the petitioner are excluded, Haryana would have to take its entitled share as first charge. Consequently, the Commission may allow extra purchase of power from NAPP (NPC) as per entitlement.

The broad issue raised here by the petitioner pertains to determination of the entitled share of Haryana from this particular source viz. Narora Atomic Power Plant (NAPP) of Nuclear Power Station.

The Commission observes that the Capacity of NAPP is 440 MW. The petitioner has submitted that its entitlement from this source is 28.10 MW. Consequently, Haryana has 6.39% share in NAPP capacity.

As per the Central Electricity Authority’s (CEA) generation schedule prepared for FY 2003-04 in consultation with the generators after taking into account the generation program including available capacity of the Station, performance of the generating station, planned maintenance requirement, average forced outages during the last few years etc, the gross generation target determined for NAPP is 3040 million units, availability net of auxiliary consumption works out to 2660 million units. Consequently, 6.39 percent share of the projected net generation works out to 170 million units.

The petitioner argued during the Public hearing that the percentage share allocation is in terms of MW of capacity. The Commission is aware of this fact and would like to state that the CEA’s projected gross generation is based on the relevant norms including plant capacity in terms of MW. Consequently, it would be a mere mathematical identity whether to first work out the capacity share and then work out in terms of respective energy entitlement or first work out the gross generation (as done by the CEA) of the station as a whole and then reduce the same for auxiliary consumption to arrive at net energy generated and finally work out percentage allocation in terms of million units of energy to the respective beneficiary. Hence, the Commission finds no reasons to allow the submission of the petitioner.

The basic issue relating to Magnum power is two folds 1) the petitioner has already drawn 26.3 million units of energy from this source during April – August 2003 i.e. before the pronouncement of the Commission’s order on ARR relating to FY 2003-04 wherein the mentioned period falls 2) the UI (Unscheduled Interchanges) rate varies from 0.00 paise to 420 paise depending on the grid frequency ranging from 50.5 Hz to 49.0 Hz. While as ordered by the Commission the petitioner allows payment of fixed charges of 129 Paise to Magnum, UI power beyond 300 Paise would be costlier than Magnum, hence the Commission may allow the cheaper option i.e. Magnum power if the variable rate is less than the UI rate.

The Commission, in all its previous Orders on Transmission and Bulk Supply ARR including the one under review has stated that the petitioner should plan its procurements so as to minimize the power purchase cost. It boils down to minimizing procurement from expensive sources. However, in view of Memo No. Ch-56/F-40/Vol IV dated 1/1/2004 received from the petitioner, wherein it has been stated that “….due to extreme winter season, the power demand in the entire Northern Region has gone up, thereby leaving hardly any surplus capacity which could be tapped by Haryana under UI drawl”, and the fact that CERC notified variable rates for liquid fuel firing for the Gas Stations in which Haryana has firm allocation i.e. Faridabad CCGT, Dadri CCGT, Anta CCGT and Auraiya CCGT which are on the higher side as compared to the variable cost of Magnum power, the Commission accepts the contention of the petitioner. The Commission directs that such power may be scheduled during the peak load hours only and only under exceptional circumstances as mentioned above.

The Commission would adjust the difference in volume and cost, if any, through FSA mechanism.

The Commission, in principle, does not discourage purchase of power from time to time at cheaper rates. However, to reiterate again the Commission would be reluctant to allow any overdrawals or purchase of power from un-approved source / approved source by the petitioner during low grid frequency period. The licensee may like to renegotiate the rate with the IPP in question and submit PPA afresh for approval of the Commission.

The Commission has disallowed power procurement from Power Trading Corporation (Malana Power). HVPNL has submitted a copy of the MoU signed with PTC in January 2003, which was to be followed by a regular PPA for purchase of Malana Power for a period of 3 years commencing from 5-7-2002 (to 4-7-2005). This power is sourced from PTC which is an authorized Central Power Trading Company and there is no element of multi – state purchase and hence not under the purview of the Central Electricity Regulatory Commission (CERC). The Power given to Himachal Pradesh is a liability on the project; being the royalty paid for utilization of topography and being the home state. HVPNL has already drawn 195 million units from this source up to August 2003. This being a relatively cheaper peaking power may be allowed to be purchased upto the contractual period.

Procurement from PTC (Malana Power) again involves two basic issues 1) the power procurement is through PTC and not directly from the project i.e. Malana. 2) 195 million units of energy has already been drawn before the Commission’s order on ARR for that period was pronounced disallowing Malana power.

The Commission has expressed its views time and again that all power procurement (except short period arrangements) should be based on a valid and approved PPA. Without a valid PPA all procurements are illegal and the Commission may not allow the same. The petitioner began procurement from this source as early as 5-7-2002, more than one and a half year ago but no PPA has been submitted to the Commission for approval. In the light of letter no. C/PTC/MD-II/HVPN-Malana/ 4128 dated 16th September 2003 from CERC; the Commission in principle agrees with the fact that determination of tariff for Malana power does not fall within the purview of CERC and is a matter purely between HVPNL and PTC. The Commission advises that a PPA with PTC (for Malana power) be finalized at the earliest and got approved from the Commission. However, considering the current acute power shortage in the state, the Commission accepts the submission of the petitioner as an exception. The Commission directs HVPNL to finalize PPA with PTC for Malana power and submit the same for approval of the Commission within three months.

As far as the second issue is concerned i.e. the actual drawl that has already taken place, the Commission would adjust the difference in volume and cost through FSA mechanism.

The Commission has increased power purchase from BBMB sources from the petitioner’s proposed 3065 million units to 3285 million units. The petitioner’s proposal was based on the targets fixed by BBMB and hence there is no reason to differ from the targeted generation. BBMB powerhouse has never generated the level of purchases allowed by the Commission during the last four years. Thus the Commission should reduce the volume of power allowed to be purchased from this source to the level proposed by the petitioner.

The Commission has described at length the methodology of working out projected volume of power from BBMB sources. The allowed volume was based on CEA’s gross generation targets for the financial year 2003-04 reduced by auxiliary consumption as per CEA’s norm and the share of Haryana worked out in the respective BBMB stations viz. Bhakra & Uprating, Dehar and Pong.

As per the CEA’s generation schedule finalized in March 2003 after discussions with the generators, performance of generators, planned maintenance requirement, average forced outages during last few years etc, the targets finalized for FY 2003-04 are as follows:

BBMB	Installed Cap. (MW)	Generation Target (MU)
Bhakra	1275.00	4300
Ganguwal & Kotla	162.25	1100
Dehar	990.00	3000
Pong	360.00	1250
Total	2787.25	9650.00

Considering an auxiliary consumption of 0.5% and share of Haryana in the respective stations of BBMB, the energy available to the petitioner works out to 3285 million units, which the Commission has allowed to be purchased. The Commission finds no merit in petitioner’s submission and hence, no reason to review its order on this issue.

The Commission has allowed transmission loss (interstate and intrastate) as 4.5% against the proposed 6.0% for FY 2003-04. The loss approved i.e. 4.5% is compared to 7.76% in FY 2000-01, 7.84% in FY 2001-02, 6.66% in FY 2002-03. The trend during December 2002 – August 2003 shows a variation of 1.86% to 4.47%. Therefore, the transmission losses need to be reexamined giving due consideration to the interstate losses and be allowed at the petitioner’s proposed level of 6.00%.

The petitioner has raised the issue of the transmission losses allowed by the Commission during previous years and the range of variation.

The transmission losses allowed by the Commission during previous years were constrained due to lack of interface meters. Hence, the same was based on a series of assumptions. The Commission had also stated that these would be subject to revision once the interface meters are installed. Unfortunately, the Commissioning of interface metering was inordinately delayed. Therefore, the losses allowed in the past have no bearing on the loss level allowed in the ARR under review, as sufficient data recorded by the interface meters exist to take a more realistic view.

The transmission loss during FY 2002-03 as per the data submitted by HVPNL was 5.73% of the gross power purchased by it during the year.

The petitioner has executed a number of system (transmission) improvement works during FY 2002-03 and continues to do so in FY 2003-04. The Commission has commended the result. The transmission loss data received from the petitioner for FY 2002-03 and FY 2003-04 (up till November 2003) has been plotted hereunder to establish a distinct and definite declining trend.

As is evident from the above plot Transmission loss during FY 2003-04 (till November) is 4.6%. The Commission observes that the monthly transmission losses during FY 2003-04 have been at lower levels as compared to the corresponding period of FY 2002-03. Consequently, as per the trend, the transmission loss during FY 2003-04 is expected to be less than 4.5%; the loss level allowed by the Commission in its order dated 12th August 2003.

In light of the above, the Commission is of the view that the transmission loss allowed by the Commission in its order under review need not be revised upwards. The utilities should work towards further reduction of the transmission loss from the levels already achieved till November 2003.

HPGCL has been billing HVPNL on a single rate of Rs. 2.5151 per KwH. The Commission has approved different rates for different projects viz. Rs.2.28/KwH for Faridabad Thermal, Rs. 2.39/KwH for Panipat Thermal and Rs.0.5683/KwH for WYC (hydel). Since HPGCL charges only the break-even rate from the petitioner based on its actual performance the same should be allowed. The lower rate during the earlier year was an aberration due to adjustment of excess depreciation charged and on account of depreciation and refund received from the Coal companies.

While allowing power purchase rate from HPGCL, the Commission had rejected the provisional Cost Sheet of HPGCL for FY 2002-03 and FY 2003-04 filed by the petitioner as they were not based on any third party certified base. The accounts of HPGCL have not been audited after FY 2000-01; hence the base available to the Commission for taking a view on HPGCL’s cost was the audited accounts of HPGCL for FY 2000-01, which is a distant past. The Commission had no option but to accept the un-audited accounts of HPGCL for FY 2001-02 filed by the petitioner for working out the rates after making adjustments for the aberrations wherever possible, rate for PTPS units 6 was considered based on the rates of similar size plant of more or less the same vintage, and finally a single weighted average rate for PTPS was allowed. Similarly the rate for FTPS too was considered based on the rate of similar size plant of more or less the same vintage.

It needs to be appreciated that the various factors that go into rate making i.e. Cost of capital including initial spares is dependant on management decision (tendering process and end result in terms of comparable costs), technology, operating practices, station heat rate (degradation over time) auxiliary consumption, specific oil and coal consumption, O&M costs etc are dependant on unique plant lay outs and hence will not be uniform across the different units of HPGCL. The hydel unit (WYC) would have an entirely different cost structure. Consequently, a pooled rate would have been illogical.

In the absence of sufficient data, the Commission, in the past, had been allowing a single rate based on the invoices raised by HPGCL and submitted to the Commission by HVPNL. However, as the volume of purchase from this source increased from 3000 MUs in FY 1999-2000 to more than 5500 MUs in FY 2002-03, and is expected to go up further, the Commission decided to look at Unit Wise / Project Wise authentic generation cost details. In the absence of any such details the Commission was left with no alternative but to base its order on the Un-audited accounts of HPGCL for FY 2001-02 and in certain cases cost approximation based on plants of more or less similar size and vintage in the region.

The petitioner proposed a single rate of Rs. 2.5150 per KwH for HPGCL power in their FY 2003-04 Transmission and Bulk Supply ARR. The review petition filed by HVPNL mentions a single rate of Rs. 2.5151 / KwH. While in his oral submission the Managing Director of HPGCL mentioned the rate of Rs. 2.46 per KwH. The revised bills dated 8/12/2003 provided by HPGCL for the period April 2003 to November 2003 have also supported the rate of Rs.2.46 per KwH. The statement submitted by HPGCL providing details of sale of power to HVPNL and payments received during the period April 2003 to November 2003 clearly shows that the amount paid by HVPNL was at a single rate of Rs. 2.46 per KwH and not at the rates allowed by the Commission. This fact also negates the contention of HGPCL made during the public hearing that they are in a state of acute cash shortage whereas they have received an amount of Rs. 8729.3 million against the billed amount of Rs. 9790.5 million, November 2003 billing cycle may still be under way.

The provisional unit wise technical and financial details submitted by HPGCL vide its Memo No. 11427 dated 31/12/2003 for FY 2002-03 does indicate cost escalation. The Commission is of the view that after finalization of the accounts it would adjust the difference in cost, if any, through FSA mechanism.

The basis for allowing the rate for power procured from sources such as Unchahar, Salal, Bairasiul and Chamera has already been discussed in the Commission’s order on FY 2003-04 ARR and BST. The rates were based on annual average rate during FY 2002-03 with a mark up wherever applicable as per the latest invoices available to the Commission till the time of passing of the Order. The Commission reiterates once again that the rates are best possible estimates and the actual could be more or less for which an adjustment mechanism exists. Thus the Commission is not convinced to revise the rates of a few selected stations mentioned by the HVPNL in its review petition. The rates of all other stations except a few negotiated rates may also vary from the projected rates allowed by the Commission and, hence, there is no rationale for piecemeal revisions.

The Commission has not take cognizance of the reactive energy charges, which is a reality under the ABT regime. HVPNL has already paid Rs. 27.9 million to the Central Pool Account of reactive energy in the current year up to July 2003. Besides this payment on account of reactive energy account with States is yet to be made as REB is finalizing methodology of rising claims. Thus the petitioner may be allowed an amount of Rs. 150 million towards the cost of reactive energy.

The reactive energy charge paid by the petitioner is a legitimate expenditure of Transmission and Bulk Supply business of the petitioner. However, there has to be a mechanism for recovery of the same from the distribution companies. The Bulk Supply and Transmission tariffs application of the petitioner had no such proposal except a statement that HVPNL will recover reactive energy charges as and when paid on account of bills raised by NREB / NRLDC. The Commission cannot take cognizance of such a statement while deciding rates or the rate design. In future, the petitioner should always support its statements with authentic documents including invoices and concrete proposal for consideration of the Commission. Therefore the Commission finds no grounds for reviewing its order on this issue.

The Compliance of the Commission’s order that the petitioner should file FSA on a quarterly basis within one month of the completion of each quarter for which FSA is being claimed is not possible. The exact cost of power purchase is not available to the licensee before two months from the close of the quarter. Therefore filing of FSA may be allowed with a gap of minimum three months from the close of quarter.

The filing of FSA is an un-related issue to the ARR and BST order of the Commission. The method, mechanism and formula for filing the same are a part of Tariff Regulations notified by the Commission. Consequently, it cannot be a subject of review; being extraneous to the Commission’s Order under review.

This order is signed, dated and issued by the Haryana Electricity Regulatory Commission on the 13^th day of January 2004.

Lt. Col. (retd.) Raghbir Singh	Chairman
Shri S.C. Katyal	Member
Shri T.R. Dhaka	Member

T.R. Dhaka	S.C. Katyal	Lt. Col (retd.) Raghbir Singh
(Member)	(Member)	(Chairman)

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