1

Analysis of OPTCL’s ARR and Transmission

tariff for FY 2011-12

By:World Institute of Sustainable Energy, Pune

(Consumer Counsel)4th February, 2011

Proposal of OPTCL

3

Proposed Revenue Requirement for FY 11-12 (Rs Cr)

R&M Cost7%

A&G Cost3%

Interest on loan8%

Interest on Working Capital

4%

Return on Equity2%

Depreciation11%

Employee Cost65%

Employee Cost 952.06

R&M Cost 93.89

A&G Cost 38.34

Interest on loan 111.30

Interest on Working Capital 59.08

Depreciation 156.40

Return on Equity 24.81

Sub-total 1435.88

Pass through expenses 127.25

Contingency Reserve 15.16

Bad & Doubtful Debt 0.10

GCC Expense 0.30

Total gross requirement: 1578.69 Rs Crore

Analysis of ARR and

Transmission Tariff

5

Transmission loss

3.00

3.50

4.00

4.50

5.00

5.50

Approved (%) 4.00 4.00 5.00 4.50 4.00 4.00 3.90

Actual audited (%) 4.60 5.04 4.82 4.52 4.11 3.89 3.90

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

(upto Sept,10)

2011-12 (Propos

ed)

6

Employee cost incl. terminal benefits (Rs Cr.)

Item Proposed for 2009-10

Approved for 2009-10

Proposed for 2010-11

Approved 2010-11

Proposed 2011-12

Gross amount 498.99 186.17 875.78 290.22 961.66

Less capitalization 7.61 7.61 10.66 10.66 9.60

Net employees cost

491.38 178.56 865.12 279.56 952.06

  10-11 Approved 11-12 Proposed

Basic pay +GP 62.12 98.57

DA 20.50 62.1

HRA 9.32 19.71

Provision towards arrear pay 49.03 49.04

Terminal benefit 140.20 717.25*

Others 9.05 14.99

Less capitalization 10.66 9.60

Total 279.56 952.06

*Including payment of differential pension and pensionary benefits

Employee cost incl. terminal benefits (contd.)

Submission• OPTCL has requested 241% rise in employee cost

including terminal benefit in ARR of FY 2011-12• Basic Pay + GP: Yearly escalation of 3% shall be

allowed over the Commissioned approved amount of 2010-11

• DA: The DA proposed for 2011-12 (63%) seems to be on higher side and therefore may be reviewed

• HRA: The HRA Proposed for 2011-12 (20% ) may be reviewed according to Govt norms

• Terminal benefit: may be finalized as per independent valuation report

7

8

R&M and A&G Expenses (Rs Cr.)

R&M Approved Actual

2004-05 14.07 4.59

2005-06 14.80 6.94

2006-07 36.00 11.31

2007-08 47.00 16.52

2008-09 53.88 15.66

2009-10 47.00 54.03

2010-11 60.00 16.16 (upto Sept’10)

98.14 (proposed)

2011-12   93.89 (proposed)

Particulars Proposed FY 2011-12

a) O&M 71.93

b) Telecom R&M

13.10

c) Civil Works 2.80

d) IT 6.06

Total R&M 93.89

(56.48% increase over approved)

 

09-10 approved

10-11 Projection

10-11 approved

11-12 projection

% increase over 10-11approved

A&G Expenses 14.35 26.99 15.14 38.34 153.24%

R&M and A&G Expenses (contd.

Submission• The approved and actual R&M expenses in last

few years reveal that OPTCL actually incurred less than 50% expenditure on R&M (except 2009-10); therefore, consumer should not be burdened with excessive projected R&M expenses

• As per OPTCL Business Plan 5.5% yearly escalation in A&G expenses shall be allowed to pass through in ARR (i.e. Rs. 15.97 Cr against projection of Rs 38.34 Cr for FY 2011-12)

9

10

O&M Expenses as per CERC

O&M Expenses as per CERC Norms for FY 2011-12

Segregation of Bays Bays Rs Lakh/ bay O&M (Rs Cr)

765 kv 0 81.99 0.00

400 kv 33 58.57 19.33

220 kv 224 41.00 91.84

132 kv and below 1384 29.28 405.24

TOTAL O&M EXPENSES FOR BAYS 516.40

Segregation of EHT lines Ckt kM (Rs Lakh / Ckt km)

O&M (Rs Cr)

Single Circuit (Bundled conductor with four or more sub-conductors)

0 0.600 0.00

Single Circuit (Twin & Triple Conductor) 245.201 0.400 0.98

Single Circuit (Single Conductor)3872.55

30.200 7.75

Double Circuit (Bundled conductor with four or more sub-conductors)

0 1.051 0.00

Double Circuit (Twin & Triple Conductor) 276.734 0.701 1.94

Double Circuit (Single Conductor)6852.45

80.301 20.63

TOTAL O&M EXPENSES FOR LINES 31.29

TOTAL O&M EXPENSES FOR BOTH LINES & BAYS 547.70

Projected O&M: 1084.29 Rs Crore (Employee:952.06, R&M:93.89, A&G:38.34); whereas as per CERC Regulation it can be reduced by nearly 50%

11

Loan liability

Observation:• OPTCL has proposed new loans of 903.82 Crore

@11% to be availed in FY 2011-12• OPTCL has reported State Govt (cash loan)

balance of the tune of Rs 2 Cr. And requested to allow Rs 0.26 Cr as a interest component of that in the ARR

Submission• New loan interest 68.94 Cr shall not to be passed

through in the ARR of FY 2011-12• Interest on State Govt. (Cash loan) should be kept

in abeyance as per Govt directive

Capex Plan

12

Capex Projected:

Capex plan given in ARR for 2011-12 (Rs Cr.)

Capex Plan submitted on 12.07.2010 (Rs Cr.)

O&M 291.15 106.52

Telecom 73.65 142.5

Information Technology 12.66 13.32

TP & Con. (Excluding Deposit Works) 591.62 720.38

Civil Works 35.16  

Total Capital Expenditure 1004.24 982.72Observation:The reasons for variation in expenses under O&M and telecom reported in earlier capex plan and ARR submission need to be verified

13

Gross fixed asset and depreciation

Gross fixed asset

As on 1-4-2009 (actual)

Addition in 09-10 (Given in ARR 11-12) As on 1-4-2010

Addition in 10-11 (Given in ARR 11-12)

As on 1-4-2011 (Rs Cr.)

Option 1: 1924.48 163.84 2088.32 453.74 2542.06

Option2:

2478.16 (OERC

Approved in 10-11 order)

453.742931.90

Particulars

Depreciation Rate CERC

Depreciation @ Pre-92 Rate

Gross Block (01-04-10) (Provn.)

Gross Block (01-04-11)

(Projected)

Deprcn. for FY 11-12 -CERC

Deprcn. 11-12 @ Pre-92

Land and Rights 0.00% 0.00% 34.75 40.87 0.00 0.00

Buildings 3.34% 1.80% 73.16 86.03 2.87 1.55

P & M(Other Civil works) 3.34% 1.80% 4.31 5.06 0.17 0.09

Plant & Machinery 5.28% 3.80% 1153.31 1356.21 71.61 51.54

Plant & Machinery (Lines, Cables etc) 5.28% 2.57% 1302.56 1531.72 80.87 39.37

Vehicles 9.50% 12.86% 1.43 1.69 0.16 0.22

Furniture, Fixture 6.33% 4.55% 2.22 2.62 0.17 0.12

Office Equipment 6.33% 9.00% 7.35 8.64 0.55 0.78

TOTAL (Rs Cr.) 2579.09 3032.84 156.40 93.67

Gross fixed asset and depreciation

Submission:• Consumer counsel has calculated the

Gross Fixed Asset by taking reference 0f OERC actual and approved GFA as on 1.04.2009 and 1.04.2010 respectively

• After addition the yearly addition (09-10 & 10-11 as given in ARR), the GFA arrived are lower than that claimed by OPTCL

• Commission may consider the GFA as determined in the previous slide

14

15

Return on equity, Reserve & others

Observation:• Equity claimed by OPTCL: Rs 160.07 Cr – 60.07

(old) + 48.05 (received) + 51.94 (expected)Submission:• Commission shall not allow RoE on ol d equity and

expected equity base• Reasonable RoE = 48.05 * 15.5% = Rs 7.45 Cr

(claimed RoE - Rs 24.81 Cr)• Disallow the claim for further Contingency reserve • Interest on working capital, bad debts and pass

through expenses shall not be pass through in ARR

16

Summary of ARR (2011-12)ITEMS Approved

for 09-10 Approved for 2010-11

Proposed for FY11-12

10-11 Vs. 09-10

11-12 vs 10-

11

Employees Cost including Terminal Benefits

173.11 279.56952.06

61.49% 240.5%

R&M Cost 97.00 60.00

93.89-38.14% 56.48

%

A&G Cost 14.35 15.14

38.345.51% 153.24

%

Interest on Loan Capital 70.53 53.39

111.30-24.30% 108.47

%

Depreciation 66.07 76.60

156.4015.94% 104.18

%

Repayment obligation 44.36 -  

Return on Equity 0.00 4.35 24.81

Interest on Working Capital 0.00 - 59.08

Sub-Total 415.42

489.04 1435.8817.72% 193.61

%

Special Appropriation   39.37  

Pass Through Expenses   - 127.25

Contingency Reserve 9.08 - 15.16

Bad & doubtful debt Debts 0.00 - 0.10

GCC Expense including SLDC charges 0.15 0.82 0.30

Total (Rs Cr.)424.65 529.23

1578.6924.63% 198.3

%

Less Misc. Receipts 30.50 48.30 5.00

Annual Revenue Requirement (Rs Cr.)394.15 480.93

1573.6922.02% 227.2

%

Transmission Charges (paise/unit)20.50

23.50 68.6814.64% 192.2

%

17

Proposed Transmission tariff

Sl No

Customer MURate

(P/U)Loss (%)

MU including Loss

Amount (Rs. Cr.)

1 CESU 7722 23.5 0 7722 181.47

2 NESCO 5465 23.5 0 5465 128.43

3 WESCO 6720 23.5 0 6720 157.92

4 SOUTHCO 2848 23.5 0 2848 66.93

  Total DISTCOs 22755     22755 534.74

5 Emergency Sale 10 23.5 0 10.00 0.24

6 Wheeling of IMFA 50 23.5 3.9 52.03 1.22

7 Wheeling of NALCO 100 23.5 3.9 104.06 2.45

  Total 22915     22921 538.65

Total Annual Revenue Requirement for FY 2011-12. 1573.69

Total Million Units proposed for Wheeling in MU 22915

Less: Revenue to be earned from LTOA Customers at the existing Transmission Charge @ 23.5 P/U

538.65

Deficit in ARR for FY 11-12 at the existing Transmission Charge @ 23.5 P/U

-1035.04

Proposed transmission tariff (P/U) 68.68

18

Open access charges

2010-11 2011-12

Long term OA charges (Rs / MW/ Day)

5640.00 16482.02 Proposed increase of 192%

Short term OA charges(Rs / MW/ Day)

1410.00 4120.51

Summary

• OPTCL has claimed a hike of 192% in transmission tariff which will increase the cost of electricity at consumer end

• The increase in transmission tariff is resulted due to higher claim of OPTCL in following components:

• Employee cost incl. terminal benefits and pension/R&M expenses/ A&G expenses/ Interest on new loan and old state govt. loans/ Gross fixed asset and depreciation/ RoE, Contingency reserve, Interest on working capital and pass through expenses

• Commission may consider the submission of consumer counsel and reduce the transmission tariff at reasonable level

20

Thank you