Objections to BESCOM’s proposed tariff hike of Rs.0.75 per unit

Dear Madam/Sir
We request you to use the below content to file your/organisation objections.
.............................................................................
29th October 2010

The Receiving Officer
KARNATAKA ELECTRICITY REGULATORY COMMISSION
6th & 7th Floor, Mahalaxmi Chambers, # 9/2, M.G.Road, Bangalore 560 001

Objections to BESCOM’s proposed tariff hike of Rs.0.75 per unit

Reference: BESCOM’s application to KERC dated 13/8/2010

Reasons for objections

1.KERC regulations not adhered to:

a.Late filing and no reasons given: After Tariff order 2009 was issued on 25/11/09 the present filing should have been filed by BESCOM in Dec 2009, but was filed in mid August 2010. No reason is provided. As a measure of penalty for late filing it would be appropriate that the new tariff if at all, is made applicable only for the remainder period of FY 11 and that no regulatory asset is created for the period 1/4/10 to the date of issue of the Tariff order 2010.

b.No Annual Review of performance for FY10: As per clause 2.8 of 2006 Regulation, BESCOM should have filed an application for annual performance review for FY 10 by 30/11/2009. They did not file even along with the present filing. Therefore Interest & finance charges approved for FY 10 now needs to be deleted from FY 11 expenditure. Without the annual review any deficit or surplus of FY 10 cannot be taken forward to the second control period.

c.Non-submission of data for conducting prudence checks on completed capita works in FY 10: Was neither submitted by 31/3/2010 nor along with the present filing.

2.Balance Sheet (form A-2 at page 164 of ERC filing) without explanation:

a.Increase in fixed assets in FY 10 is not proportional to availability of funds. As against the availability of loan funds of Rs. 976.18 cr, the gross block is estimated to go up only by Rs. 376.82 cr. No explanation for such low asset creation when higher levels of funds are deployed.

b.Capital works in progress: During FY 10, capital works in progress was only 187.91 cr against availability of loan funds of Rs. 976.18 cr. No explanation.

c.Assets not in use: Conveniently shown entry in this column as zero for all the years FY 9 to FY 13. Not furnished figures with appropriate explanations.

d.Receivables against sale of power: Entry against this column is consistently very high in the range of 1700 cr for all the years FY 10 to FY 13. No explanation for keeping such heavy amounts pending realization. No explanation on action to be taken to bring down the figures drastically.

e.Other current liabilities: FY 09 figures are 572.25 cr. In FY10 the figure has jumped steeply to 1232.49 cr. No explanation for such a steep increase in other current liabilities.

3.Faulty forecast:

a.There is a consistent negative growth w.r.t the forecast:
i.2006 forecast of 20343 MUs for FY 10; ended up in 17222 MUs actuals in FY 10 .
ii.Whopping minus 18%. No explanation.

b.Not buying additional power when shortage is anticipated. This resulted in extensive load shedding and “choking” of consumers

c.Has referred to the KERC Load Forecasting regulations of 2009, implying that they have followed these regulations. But it is clear that they have not done so. The regulations calls for periodic forecasts and are supposed to contain both peak load (MW) and energy (MUs) in these forecasts. There is no evidence that this has been done at all.

4.Substandard quality of Service:

a.Basically no definition for ‘quality’
b.Frequent load shedding – with out justifiable reasons
c.Absence of load shedding schedule
d.Continued restricted power supply to certain categories of customers (6 hour, 8 hour, 20 hour and 22 hour supply)
e.Failure to forecast near correctly.
f.Distribution system failure – loss of 16%

5.Incorrect cost projection based on incorrect facts/figures/reasoning – Savings that can be effected

a.Assumption of availability of hydel power 20% less than normal presuming bad monsoon while all the reservoirs except Supa are near full with copious rain continuing even now.. Taking only 10 % less, availability of hydel power, saving will be 125 crores.

b.There is mismatch between the input cost increase which is around 13% and the proposed rate increase of 25%, hence we object to the increase proposed.

c.Unacceptable down sizing of power supply from KPCL Thermal: From 7836.79 MU in FY 08 to 7071 MU in FY 10. Now to 6583 MU in FY . If 7071 MU is supplied , savings will be Rs 26 crores

d.Short term purchases of 3265 MU (794 MU @ Rs. 5.60 per unit and 2471 MU @ Rs. 3.50) which works out to 17% of total proposed purchases of 23,039MU.
i.At normal times 17% is a very high figure for short-term purchases.
ii.Why purchase at Rs. 5.60 while available at Rs. 3.50 per unit.
iii.Purchasing all short term purchase at Rs. 3.50 / unit saves Rs. 167 crores.

6.Formula not stuck to while working O&M:

a.In Tariff order 2009 dt 25/11/2009 on the revised ERC and Retail Supply Tariff for FY 10, KERC had worked out the O&M Expenses for FY 10 by applying the formula @ 509.73 crores. This will be the basis for working out the O&M expenses for the control period FY 11 to FY 13 and not the so-called actual figures. The calculations shown are not correct.

b.Employee’s revision of pay scales from 1/4/10 (FY11) (additional expenditure of 89.48 cr)when the pay revision commission/committee is yet to be constituted can be postponed by FY12 with this, (O&M) expenses in FY 11 works out to only 581.86 cr & not Rs. 723.77cr proposed by BESCOM. Savings in (O & M ) cost will be Rs 142 crores

7.After deducting Rs. 593.61 cr as Govt subsidy, the net gap projected by BESCOM FY 11 as Rs. 1074 cr can be brought down to Rs. 396 cr by the savings in expenses. This may only need a small percentage increase if at all, to bridge the gap

8.Unscientific and discriminatory proposal to impose uniform increase in per unit charges across all categories of consumers (viz 0.75 p/unit or any increase determined by KERC) to meet the Gap:

a.Weaker sections of society who consume in the 2 slabs of 0 to 30 units and 31 to 100 units per month are forced with 33% increase in tariff while the middle and upper class who would consume above 100 units will pay about 22% more.

b.By adopting increase in the same percentage basis for all categories and sub categories analomies such as in (a) above will be minimised .

Prayer:

Keeping all the above factors in view we pray:
-There be no hike OR if at all - in the range of Rs. 0.20 to Rs. 0.25 per unit
-To increase to safeguard the interests of the weaker section of the society there be no increase in the lowest 2 slabs (up to 100 Units).

For/On behalf of
- Sd -