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1. A GLANCE OF DELHI POWER SCENARIO

1.1 Introduction

The power sector has been in the pioneering to determine the growth potential of India. As the

economy continues to surge ahead, electrification and electricity services have been expanding

concomitantly to support Indian economy. Present installed power capacity of India is 149391.91

MW. India has the potential to generate more power by conventional and non-conventional sources and

demand of power is also increasing rapidly. Today, the Indian power system with its extensive

regional grids--fast maturing in to an integrated national grid-- and its millions of kilometers of

transmission and distribution lines established across the country, are truly symbolic of the successes

of India's economic growth. There is one national grid and five regional grids which are interconnected

and Delhi is connected with northern grid.

Restructuring of

Delhi's power sector and the subsequent events have attracted a lot of attention. The Delhi power

sector has witnessed some major efficiency gains (i.e. significant reductions in the aggregate

technical and commercial losses) after restructuring and improvements in some aspects of quality

of supply and consumer service.

The State Electricity Board has the responsibility of arranging the supply of electricity and fixing

of tariff. But, they had generally been unable to take decisions on tariffs in a professional and

independent manner and tariff determination in practice had been done by state governments.

The tariffs were being determined by the Govt. taking into account the socio economic

consideration like free / subsidized electricity supply. As a result the state electricity utilities

could not generate sufficient funds to invest in generation to meet the Incremental demand.

There were/are wide gaps between incremental demand and incremental capacity. Cross subsidy

also reached unsustainable level.

To address this issue and to keep the price determination function away from Government, the

Electricity Regulatory Commissions Act 1998 was enacted empowering the Electricity

Regulatory Commissions established under this Act to determine the tariff in a transparent

manner and also to enable the state utilities to recover the costs including return on investment.

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In the mean time some of the states have enacted their own Reforms Act and introduced reforms

like unbundling and privatization. The long-term interest of the consumers can only be served if

reasonably priced electricity is available over the long-run. Political interests would best be

served by depoliticizing tariffs, which would be beneficial to consumers in the long-term through

improved quality and reliability of supply.

With the Electricity Regulatory Commission Act, 1998, there were too many Laws on

Electricity. The Electricity Act 2003 was enacted with the following objectives.

To consolidate the laws relating to generation, transmission, distribution, trading, and use

of Electricity.

To take measures conducive to development of Electricity industry.

To promote competition in Electricity Industry.

To protect the interest of Consumers.

To ensure supply of Electricity in all areas.

To rationalize Electricity Tariff.

To ensure Transparent Policies.

Constitution of Electricity Regulatory Commissions and establishment of Appellate Tribunal As

per Section 62 of the Electricity Act 2003 the appropriate commission shall determine the tariff.

As per Section 61 of said Act the commissions shall be guided, inter- alia by the Multi Year

Tariff principles and National Tariff Policy, while specifying the Terms and Conditions for

determination of tariff.

A cursory reading of Sub section( 4) of 62 and sub section (6) of 64 implies that tariff will

normally be determined for one year to take effect from first April of financial year. Thus, the

tariff determined by the Commission will continue to be in force for more than one year unless it

is amended / revised. However, the Act also provides for determination of tariff under Multi

Year tariff principles, so that the different tariff applicable to each year of the control period is

determined in a single process.

In this context, this report focuses on an area related to the issues Tariff Orders by DERC for

various consumer categories, with the objective to make the electric supply available to the

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consumers at the least cost, by effort to keeping the constant price for electricity and at the same

time compensating the investor with fair rate of return. Thus, tariff order analysis across

The all three Licensee‟s for four fiscal years (FY‟04 – FY‟08) was carried out to determine the

consistency in respective State Commissions approach in fixing the tariffs.

In this project special care has been taken to understand the multi year tariff framework and to

learn about the ways in which it is being implemented by Delhi Electricity regulatory

commission. To get a fine grasp of the theme, the whole cycle of procedures starting from issue

of regulations of tariff determination till the performance review process, has been discussed in

context to Delhi Distribution Companies.

And regarding the power sector the statement of the chief minister SHEILA DIXIT –“the Delhi

reforms is a success story”, also say that operation, quality of power supply, management of the

power sector have been improved and in the way of improvement.

1.2 Earlier Scenario of Delhi power sector

Pre-privatization scenario of Delhi power sector is shown in the following table.

Table A: Pre-privatization scenario of Delhi power sector

Pre- Privatization Profile of Delhi System

Area of supply 1480 Sq. Km.

Population 13.8 Million

Peak Load 2879 MW

Energy Input 17362 MU

Per Capita Consumption 1260 kWh

AT&C losses estimated at over 50% at the time of privatization.

Infrastructure in bad shape for want of investment since govt. support would be soaked

by losses leaving hardly any room for infrastructural development.

Load shedding was 558 MU as against 19686 MUs supplied during FY 2002-03.

Transformer failure rate was as high as 15%.

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Annual GNCTD support to power sector was Rs.1200 Cr. Year.

1.3 Transfer scheme

The Government of National Capital Territory of Delhi (GoNCTD) had, in exercise of the

powers conferred by Section 60 read with Sections 15 and 16 of DERA 2000 notified the Delhi

Electricity Reform (Transfer Scheme) Rules, 2001 (Transfer Scheme) on 20th

November 2001,

paving the way for unbundling of the erstwhile Delhi Vidut Board (DVB) into six entities on the

functional lines of Generation, Transmission and Distribution. As per the Transfer Scheme, the

functions of DVB had been unbundled into the following six companies/entities and the

distribution business had been taken over by three Joint Venture Companies on 1st July 2002, the

effective date of Transfer Scheme:

1. Indraprastha Power Generation Company Limited (GENCO), to which the generation

assets of existing Indraprastha Thermal Power Station, Rajghat Thermal Power Station

and Gas Turbine Power station have been transferred ;

2. Delhi Power Supply Company Limited (TRANSCO), the Transmission Company to

which the existing transmission assets of DVB have been transferred;

3. Central-East Delhi Electricity Distribution Company Limited (DISCOM 1); the

Distribution Company now renamed as BSES Yamuna Power Limited for Distribution in

Central and East Delhi;

4. South-west Delhi Electricity Distribution Company Limited (DISCOM 2); the

Distribution Company now renamed as BSES Rajdhani Power Limited for Distribution in

South and West Delhi;

5. North North-West Delhi Distribution Company Limited (DISCOM 3); the Distribution

Company now renamed as North Delhi Power Limited for Distribution in North North-

West Delhi;

6. Delhi Power Company Limited (Holding company) a company that holds shares in

GENCO, TRANSCO and the three Distribution Companies (DISCOMs) and the residual

liabilities of the erstwhile DVB.

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7. In addition, Pragati Power Corporation Limited (PPCL), a Generation Company, also

existed with installed capacity of two units of 104MW each and one unit of WHRU of

120MW (CCGT).

Outcomes borne out of reforms

GNCTD unbundled the power sector in Delhi with the policy directions, inter-alia

setting loss reduction target to private players for the five years period at 17% as

also yearly targets. The Discom-wise and year-wise targets and actual

achievement secured from 2002-03 to 2008-09 are as follows:

Table B: AT&C losses for the years 2002-2009 (All figures are in %)

During the five years of effect of policy direction the power tariffs in NCT of Delhi on an

average increased by 23% as against 44% increase projected by SBI Capital Market Ltd.

Report. SBI Caps were consultant appointed by GNCTD. The year-wise projections and

actual tariff increase during the period of policy directions are as follows:

Opening loss levels Policy Direction Period MYT Period

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

BYPL 57.2 Target 56.45 54.7 50.7 45.05 39.95 34.77 30.52

Achieveme

nt

61.89 54.29 50.12 43.89 39.03 29.8 23*

BRPL 48.1 Target 47.55 46 42.7 36.7 31.1 26.69 23.46

Achieveme

nt

47.4 45.06 40.64 35.53 29.92 27.17 20*

NDPL 48.1 Target 47.6 45.35 40.85 35.35 31.1 22.03 20.35

Achieveme

nt

47.79 44.86 33.79 26.52 23.54 18.44 15.1*

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Table C: Loss reduction during the years 2002-2007

2002-03 2003-04 2004-05 2005-06 2006-07 Commutative

2002-03 to

2006-07

Projection

10%

10% 10% 5% 3% 44%

Actual

Nil

5.18% 10% 6.6% Nil 23%

The existing tariffs (without subsidy support) are the lowest in the country at the existing

AT&C losses levels in NCT of Delhi.

Effective loss reduction measures such as, annual loss reduction targets coupled with

incentives for over achievements for the entire control period 2008-11, has resulted in

faster reduction of AT&C losses.

DISCOMs have been provided CISF support in the absence of support of Local Police.

Cost of CISF Personnel is reimbursed in the tariff.

Low Tension Aerial Bunched Conductor (LT ABC) Cabling has helped in reduction of

theft in theft prone areas with quicker pay back period.

Replacement of old electromechanical meters with new electronic meters as per CEA

Regulations has helped improve revenue realization

Almost 100% metering of supply and 100% collection efficiency have also contributed to

improving sectorial health in NCT of Delhi.

Focused capital investment with the approval of DERC for execution of works.

AT&C loss reduction levels as on 31.03.2009 Discom-wise were as follows, vis-à-vis

2002-03:

Table D: Comparison of Loss Reduction

Year BRPL BYPL NDPL

2002-03 48.1% 57.2% 48.1%

2008-09 20% 23% 15.1%

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Power sourcing through long term PPAs, now assigned to DISCOMs w.e.f. 01.04.2007,

and has been able to address the power requirements generally. To meet the peak

demand bilateral, banking and UI arrangements are resorted to by the DISCOMs. Intra-

State ABT has been introduced in Delhi w.e.f. 01.04.2007 (First in any State of India).

Load shedding in terms of MUs was down from 558 MUs in 2002-03 to 136 MUs in

2007-08.

Transformer failure rate down to less than 1% from 15% from 2002-03.

Up gradation / Augmentation of transformers and feeders has lent greater stability to

distribution system, better load balancing, fewer breakdowns due to transformer failure

mean more continuous and better quality of supply in terms of voltage etc.

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2. ABOUT THE ORGANIZATION

2.1 History of Electricity in Delhi:

The history of electricity in Delhi dates back to 1905 when M/s John Fleming Company

was awarded the license as per Indian Electricity Act, 1903, for generation and

distribution of power in Delhi. Electricity those days was a luxury and the privilege of the

high ranking British officials and a few rich people. It was a rare and costly commodity

with a perception of being dangerous. In fact even rich Indian accepted this at a much

later stage. M/s John Fleming Company was replaced by the Delhi Tramway and

Lighting Company, which was subsequently renamed as Delhi Electricity Supply &

Traction Company. In 1939, The Delhi Central Electric Power Authority (DCEPA) was

formed to run the services. In 1951, the DCEPA was taken over by the Delhi State

Electricity Board, constituted under Indian Electricity (Supply) Act 1948. In 1958, Delhi

Electricity Supply Undertaking came into existence and was once again converted to

Delhi Vidyut Board in 1997. In July 2002, Delhi Vidyut Board unbundled into five

successor entities – the three distribution companies, a transmission and a holding

company. Two of the three distribution companies have been handed over to BSES,

and one to TATA POWER.

2.2 About BSES:

BSES Limited is India's premier utility engaged in the generation, transmission and

distribution of electricity. Formerly, known as Bombay Suburban Electric Supply Limited,

it was incorporated on 1st October 1929, for the distribution of electricity in the suburbs

of Mumbai, with a pioneering mission to make available uninterrupted, reliable, and

quality power to customers and provide value added services for the development of the

power and infrastructure sectors.

BSES caters to the needs of 2.07 million consumers over an area of 384 sq. km. with a

maximum system demand of approximately 1198 MVA. With 7 decades in the field of

power distribution, the Electricity Supply Division of BSES has achieved the distinction

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of operating its distribution network with 99.98% on-line reliability and has a distribution

loss of only 29.9%.

BSES was amongst the first utilities in India to adopt computerization in 1967 to meet

the increasing workload and to improve services to its customers. With a view to

optimally utilize trained manpower and expertise in the field of power, the company

commenced contracting activities in 1966 by undertaking turnkey electrical contracts,

thermal, hydro and gas turbine installations and commissioning contracts, transmission

line projects etc.

BSES set up its own 500 MW Thermal Power Plant and the first 2 x 250 MW units of

Dahanu Power Station were synchronized and began commercial operation during

1995- 1996. A dedicated 220 kV double circuit transmission line network with three 220

/ 33 kV receiving stations have been installed to evacuate the power to the distribution

area of the Company. This demonstrates BSES’ in-house capabilities ranging from

engineering, operation & maintenance of power plants and transmission and distribution

systems.

BSES through international competitive bidding acquired an equity stake of 51% in

three of the four Distribution Companies of Orissa. At present, BSES along with its

subsidiaries provide electricity to more than 2.7 million consumers in an area covering

about 1,23,000 sq. km with an estimated population of 34 million.

In July 2002, Delhi Vidyut Board unbundled into five successor entities – the three

distribution companies, a transmission and a holding company. Two of the three

distribution companies have been handed over to BSES, and one to TATA POWER.

As a part of its active support to the privatization process, BSES has recently acquired

an equity stake of 51% in two of the three Distribution Companies of Delhi after

unbundling and privatization of the erstwhile Delhi Vidyut Board. The two distribution

companies, BSES Rajdhani Power Limited covering South and West areas and BSES

Yamuna Power Limited covering Central and East regions provide electricity to around

22 lakhs consumers spread across an area of 960 sq kms (approx).

BSES became part of the Reliance Group on January 18, 2003.

BSES will be renamed ‘Reliance Energy’ to reflect the change in ownership, and to

leverage brand equity of Reliance.

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The new name ‘Reliance Energy’ will directly communicate association with the

internationally respected Reliance Group, and reflect the larger dimension of BSES’

future plans. So presently BSES deals with mainly distribution sector in the country

2.3 BSES Delhi

Following the privatization of Delhi‟s power sector and unbundling of the Delhi Vidyut

Board in July 2002, the business of power distribution was transferred to BSES Yamuna

Power Limited (BYPL) and BSES Rajdhani Power Limited (BRPL). These two of the

three successor entities distribute electricity to 22.6 lakh customers in two thirds of

Delhi. The Company acquired assets, liabilities, proceedings and personnel of the Delhi

Vidyut Board as per the terms and conditions contained in the Transfer Scheme.

2.3.1 BSES Rajdhani Power Limited (BRPL)

BRPL distributes power to an area spread over 750 sq. km with a population density of

1360 per sq km. Its‟ over 12.2 lakh customers are spread 19 districts across South and

West areas including Alaknanda, Khanpur, Vasant Kunj, Saket, Nehru Place,

Nizamuddin, Sarita Vihar, Hauz Khas, R K Puram, Janakpuri, Najafgargh, Nangloi,

Mundka, Punjabi Bagh, Tagore Garden, Vikas Puri, Palam and Dwarka. Since taking

over distribution, BSES‟ singular mission has been to provide reliable and quality

electricity supply. BSES has invested over Rs 3500 crore on upgrading and augmenting

the infrastructure which has resulted in a record reduction of AT&C losses. From a high

of 63. % AT&C losses in BYPL area the losses have come down to 29.8% a record

reduction around 33%.Similarly, in BRPL area AT&C losses have been reduced from

52.% to 27.% - a record reduction of 29%.

2.3.2 BSES Yamuna Power Limited (BYPL)

BYPL distributes power to an area spread over 200 sq kms with a population density of

4230 per sq km. Its 10.4lakh customers are spread over 14 districts across Central and

East areas including Chandni Chowk, Daryaganj, Paharganj, Shankar Road, Patel

Nagar, G T Road, Karkardooma, Krishna Nagar, Laxmi Nagar, Mayur Vihar, Yamuna

Vihar, Nand Nagri and Karawal Nagar.

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BYPL distributes power to an area spread over 200 sq kms with a population density of

4230 per sq km. Its 10.4lakh customers are spread over 14 districts across Central and

East areas including Chandni Chowk, Daryaganj, Paharganj, Shankar Road, Patel

Nagar, G T Road, Karkardooma, Krishna Nagar, Laxmi Nagar, Mayur Vihar, Yamuna

Vihar, Nand Nagri and Karawal Nagar.

2.3.3 Geographical Reach

Fig: Delhi Distribution Area

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2.4 Business of the Organization

2.4.1 Delhi Supply Division:

Caters to an area of 950 sq. Kms.

Supply Area covers South Delhi, East Delhi, West Delhi and Central Delhi.

Consumers include houses, residential complexes, high rise buildings, commercial

Complex medium and large industrial houses, government establishment like Airport,

Worship places, Milk Dairy, Mother Dairy and Municipal Hospitals, Sewerage

projects etc.

Caters to more than 22 lakh consumers.

Provides highly reliable and continuous supply.

All consumers are given metered supply only.

Reliability 99.99 %

SN Particular Unit BYPL (East&

Central)

BRPL(South

West)

BSES

Delhi

1. Area sq. km 200 750 950

2. Customer

density

Cons/sq

km

4230 1360 1964

3. Total

Registered

Customers

Lacs 10.4 12.2 22.6

4. Peak Demand MW 900 1420 2320

5. Consumption

per year

MU 5000 8000 13000

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2.4.2 Operational Statistics

Supply area 960 sq. kms(approx)

No. of Consumers Above 22 lakhs

Population covered Above 80 lakhs

System peak 5320 MW(approx)

Power Transformer 6024 MVA

No. of Dist. substations 9338(approx)

Dist Transformer capacity 5178.411 MVA

Power Factor 0.99

66 kV Capacitors 459.91 MVAr

33 kV Capacitors 226.52 MVAr

11 kV Capacitors 852.97 MVAr

LT Capacitors 297.20 MVAr

HT Mains 6285 kms (approx)

LT Mains 12240 kms(approx)

Street Light Poles 298089(approx)

2.5 DELHI DISTRIBUTION NETWORK

66/33/11 kV Sub Transmission Network.

Receiving Stations.

SALIENT FEATURES

1. Unit type system at 66/33/11 kV radial system

2. Open Ring type system at 11 kV Mesh Network.

3. Partial Ring type system at L T Secondary Distribution level.

4. Distribution system with overhead cum underground cable network.

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2.6 CONSUMER PROFILE

Load Domestic Commercial Industrial

Key

Consumer

Cell

Total

Company BYPL BRPL BYPL BRPL BYPL BRPL BYPL BRPL BYPL BRPL

0-10 kw 751925 937092 228826 170057 35120 18171 1295 2555 1017166 1127875

11-44

kw 10729 40905 8358 14041 6593 6807 1377 3254 27057 65007

44-100

kw 87 96 195 230 407 587 2200 3721 2889 4634

>100 kw 0 0 0 0 0 0 348 1247 348 1247

Total 762741 978093 237379 184328 42120 25565 5220 10777 1047460 1198763

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2.7 Formation of the DERC

The Govt. of India had enacted the Electricity Regulatory Commissions Act, 1998 (No.14 of

1998) on 2nd July, 1998 with the objective of providing for the establishment of a Central

Electricity Regulatory Commission and State Electricity Regulatory Commissions,

rationalization of electricity tariff, transparent policies regarding subsidies, promotion of

efficient and environmentally benign policies and for matters connected therewith or

incidental thereto.

2.8 About the DERC

I. The Delhi Electricity Regulatory Commission (hereinafter referred to as „DERC‟) was

constituted by the GoNCTD on 3 March, 1999 and it became operational from 10

December, 1999.

II. The Commission‟s approach to regulation is driven by the Electricity Act 2003, the

National Electricity Plan, the National Tariff Policy and the Delhi Electricity Reform

Act 2000 (hereinafter referred to as „DERA‟). The Act mandates the Commission to

take measures conducive to the development and management of the electricity

industry in an efficient, economic and competitive manner.

III. Prior to the year 2001, Delhi Vidyut Board (hereinafter referred to as „DVB‟) was the

sole entity handling all functions of generation, transmission and distribution of

electricity in the National Capital Territory of Delhi (hereinafter referred to as

„Delhi‟). The Government of National Capital Territory of Delhi (hereinafter referred

to as „GoNCTD‟), however, notified the Delhi Electricity Reform (Transfer Scheme)

Rules, 2001 (hereinafter referred to as „Transfer Scheme‟) on 20 November, 2001 and

provided for unbundling the functions of DVB into different entities handling

generation, transmission and distribution of electricity.In the unbundling of the Delhi

Power sector 49% share kept by the DVB and the remaining 51% share given to the

Operating company.

Following is the list of the companies:-

Generating companies

IPGCL(Indraprastha generating company limited)

PPCL (Pragati power corporation limited)

Transmission company DTL (Delhi Transco Limited)

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Distribution Company

1. - NDPL (North Delhi Power Limited a joint

venture of DVB and Tata power)

2.- BSES Rajdhani Power Limited (Brihanmumbai

suburban Electric Supply ,a group of Reliance)

3.- BSES Yamuna Power Limited

2.9 Functions of the Commission

Functions of the Delhi Electricity Regulatory Commission in four groups are

following:-

1. The Commission derives its powers from DERA as well as from the Act. The major

functions assigned to the Commission under the DERA are as follows:

(a). to determine the tariff for electricity, wholesale, bulk, grid or retail and for the use of

the transmission facilities;

(b) To regulate power purchase, transmission, distribution, sale and supply;

(c) To promote competition, efficiency and economy in the activities of the electricity

industry in the National Capital Territory of Delhi;

(d) To aid and advise the Government on power policy;

(e) To collect and publish data and forecasts;

(f) To regulate the assets, properties and interest in properties concerned or related to the

electricity industry in the National Capital Territory of Delhi including the conditions

governing entry into, and exit from the electricity industry in such manner as to

safeguard the public interest;

(g) To issue licenses for transmission, bulk supply, distribution or supply of electricity;

(h) To regulate the working of the licensees; and

(i) To adjudicate upon the disputes and differences between licensees.

2. The functions assigned to the Commission under the Act are as follows:

“Section 86 (1) The State Commission shall discharge the following functions,

namely: -

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(a) determine the tariff for generation, supply, transmission and wheeling of electricity,

wholesale, bulk or retail, as the case may be, within the State: Provided that where

open access has been permitted to a category of consumers under Section 42, the State

Commission shall determine only the wheeling charges and surcharge thereon, if any,

for the said category of consumers.

(b) regulate electricity purchase and procurement process of distribution licensees

including the price at which electricity shall be procured from the generating

companies or licensees or from other sources through agreements for purchase of

power for distribution and supply within the State;

(c) Facilitate intra-state transmission and wheeling of electricity;

(d) Issue licenses to persons seeking to act as transmission licensees, distribution

licensees and electricity traders with respect to their operations within the State;

(e) promote cogeneration and generation of electricity from renewable sources of energy

by providing suitable measures for connectivity with the grid and sale of electricity to

any person, and also specify, for purchase of electricity from such sources, a

percentage of the total consumption of electricity in the area of a distribution licensee;

(f) Adjudicate upon the disputes between the licensees and generating companies and to

refer any dispute for arbitration;

(g) Levy fee for the purposes of this Act; (h) specify State Grid Code consistent with the

Grid Code specified under Clause (h) of sub-section (1) of Section 79;

(i) Specify or enforce standards with respect to quality, continuity and reliability of

service by licensees;

(j) Fix the trading margin in the intra-state trading of electricity, if considered, necessary;

(k) Discharge such other functions as may be assigned to it under this Act.

3. The State Commission shall advise the State Government on all or any of the

following matters, namely: -.

(i) Promotion of competition, efficiency and economy in activities of the electricity industry;

(ii) Promotion of investment in electricity industry;

(iii) Reorganization and restructuring of electricity industry in the State;

(iv) Matters concerning generation, transmission, distribution and trading of electricity or any

other matter referred to the State Commission by that Government.”

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4. As part of the tariff related provisions of the Act, the State Electricity Regulatory

Commission (SERC) has to be guided by the National Electricity Policy (NEP),

National Tariff Policy (NTP) and the National Electricity Plan.

2.10 About Other Distribution companies

Till 31 March, 2007, Delhi Transco Limited (DTL) was the sole entity responsible for

the bulk procurement and bulk supply of power in Delhi.

All the DISCOMs in Delhi had to purchase power from DTL at an approved Bulk

Supply Tariff (BST) based on their capacity to pay. On 28 June, 2006, GoNCTD

issued a set of Policy Directions for making power supply arrangements in Delhi from

1 April, 2007. These Policy Directions were issued under Section 108 of the

Electricity Act 2003 (hereinafter referred to as the „Act‟) and stated the following:

-“ With effect from 1 April, 2007, the responsibility for arranging supply of power in

Delhi shall rest with the Distribution Companies in accordance with the provisions of

the Electricity Act 2003 and also the National Electricity Policy. The DERC may

initiate all measures well in advance so that necessary arrangements are put in place.”

The business of Bulk Supply of electricity is no longer a part of the business of DTL,

and the same is now vested with the distribution licensees (DISCOMs) of the State,

w.e.f. 1 April, 2007.

The table E portrays the area under different companies and it covers the area of 5 companies

Table E: Area of DISCOMs in GoNCTD (sq.mt)

Area under the Delhi DISCOMs

NDPL 501.496 Sq. km

BRPL 691.494 Sq. km

BYPL 159.999 Sq. km

MES 45.888 Sq. km

NDMC 42.197 Sq. km

Details about the distribution companies are following

1. North Delhi Power Limited (NDPL)

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NDPL is a company incorporated under the Companies Act, 1956 and is entrusted

with the business of distribution and retail supply of electricity in the specified area of

North and North West of Delhi in the NCT of Delhi (as specified in the Transfer

Scheme).

2. BSES Rajdhani Power Limited (BRPL)BRPL is a company incorporated under the

Companies Act, 1956 and is entrusted with the business of distribution and retail

supply of electricity in the specified area of South West of Delhi in the NCT of Delhi

(as specified in the Transfer Scheme).

3. New Delhi Municipal Council (NDMC) In 1911 the British Government decided to

shift the capital of India from Calcutta to Delhi. On 12th December 1911, it was announced

that Delhi would be the place of residence of the Viceroy and the new administrative centre.

A Committee was constituted to select the site for the new capital. A number of sites were

examined and finally Raisina Hill was selected for building the new capital of India. The

English town planners led by Edwin Lutyens and Herbert Baker and others created the

present New Delhi with avenues dominated by the palace of the Viceroy (now Rashtrapati

Bhawan), Circular Pillar Palace, known as Parliament Secretariat building, green spaces,

parks and gardens. he NDMC area bounded by the junction of Pusa Road and Upper Ridge

Road towards east along the New Link Road, the Panchkuian Road up to its junction with the

Old Gurgaon Road; thence towards northeast along the Old Gurgaon Road and Chelmsford

Road up to the New Delhi Railway Station; thence towards south and south east along the

railway line up to its junction with the Hardings Bridge; thence towards south along the

Mathura Road; up to its junction with Lodhi Road; thence towards south along the Lodhi

Road; up to its junction with the first road leading to Lodhi Colony; thence towards south

along the first road leading to Lodhi Colony up to its junction with the Ring Railway; hence

towards south along the railway line up to its junction with Qutab Road; thence towards south

along the Qutab Road up to to its junction with Kushak Nallaha; thence towards east along

the Kaushak Nulla up to its junction with the Boundary of the Corporation and along the

south boundary of the Medical Enclave up to its junction with the Ring Road near Gwalior

Potteries; thence towards north-west along the Ring Road up to its junction with Kitchner

Road, thence towards north along the Upper Ridge up to the starting point.

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3. OBJECTIVE

3.1. Objective of Study

The primary aim of the project is to critically analyze the recent tariff revision controversy

between DERC (Delhi Electricity Regulatory Commission) and Delhi Discom BSES Yamuna

Power Limited, in the State of Delhi.

Study includes methodology use for the tariff determination by the commission and true up

and adjustment of ARR components.

3.2. Scope of the Study

The project throws light onto the petition filed by BSES for tariff determination on

MYT basis, Aggregate Revenue Requirement and the responses of the State Electricity

Regulatory Commission (DERC).

My study is includes to the different objections by stakeholders on multiple issues in

tariff order and petitioners view as well as commissions view and decision on the

objections.

The scope of the study is limited the controversy over petition filed by BYPL, and true

up for the MYT control period year 2008-09

My analysis is limited to the combined implications of commissions‟ and petitioners‟

views on the ARR of Retail Supply Tariff.

The data furnished in the report is the approved data available as secondary data in the

complete order issued by DERC.

The conclusion documented in the report is limited to my own learning process and

views.

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4. KEY SECTIONS OF THE ACT AND TARIFF POLICY

RELATED TO ARR, MYT, TARIFF DETERMINATION

ELECTRICITY ACT 2003 should be the primary text one should be referring to and be

followed while preparing a report like this. The same was done and all other data were

gathered and read in context to this apex regulation and its understanding.

Section 3 of Electricity Act 2003 states that, the centre government will formulate the

National Electricity Policy and National Tariff Policy with the consultation of state

government and state commission.

Section 12, 13& 14 of Electricity Act 2003 states that the commission has the power to

provide the license and without the license from the commission, no one enter in the

transmission, distribution or trading of power.

Section 42 of Electricity Act 2003 states that, the State Commission shall introduce open

access in such phases and subject to such conditions, (including the cross subsidies, and

other operational constraints) as may be specified within one year of the appointed date by it

and in specifying the extent of open access in successive phases and in determining the

charges for wheeling, it shall have due regard to all relevant factors including such cross

subsidies, and other operational constraints.

Section 110 of Electricity Act 2003, The Central Government shall, by notification,

establish an Appellate Tribunal to be known as the Appellate Tribunal for Electricity to

hear appeals against the orders of the adjudicating officer or the Appropriate Commission

under this Act.

Section 61 of Electricity Act 2003 states that, the appropriate Commission shall specify the

Terms and Conditions for the determination of tariff and in doing so, shall be guided, among

others, by Multi-Year Tariff principles.‟

MYT Guidelines in National Electricity Policy and National Tariff Policy is one other major

content followed which specifies regarding MYT in as:

Para 5.4.4 of the National Electricity Policy stipulates the need for the multiyear tariff. The

Para is reproduced below

“Conducive business environment in terms of adequate returns and suitable

transitional model with predetermined improvements in efficiency parameters in

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Distribution business would be necessary for facilitating funding and attracting

investments in distribution. Multiyear tariff (MYT) framework is an important

structural incentive to minimize risks for Utilities and consumers, promote efficiency

and rapid reduction of system losses. It would serve public interest through economic

efficiency and improved service quality. It would also bring greater predictability to

consumer tariffs by restricting tariff adjustment to known indicators such as power

purchase prices and inflation indices.”

Para 5 (3) (h) of the Tariff Policy specifies the following:-

i. The MYT framework is to be adopted for any Tariff to be determined from 1st April

2006

ii. The framework should feature a five year control period. However, the initial control

period may be of three years duration for transmission and distribution on account of

data uncertainties and practical considerations.

iii. The Commission may state assumptions in MYT for the first control period in case of

lack of reliable data and fresh control period may be stated as and when more reliable

data becomes available.

iv. Where operations for previous years have been much below the norms, the initial

starting point in determining the revenue requirement and the improvement

trajectories should be recognized at the relaxed levels and not at desired levels.

v. Suitable bench marking studies may be conducted to establish “decide performance

standards”.

vi. Once revenue requirements are established, the Commission should focus on

regulation of output and not the input cost elements.

vii. Uncontrollable cost should be recovered speedily to ensure that future consumers are

not burdened with past costs.

viii. The uncontrollable cost would include (but not limited to) :

fuel cost

Cost on account of inflation

Taxes

Variation in power purchase unit cost including on account of Hydro /

Thermal mix in case of adverse natural events.

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Para 8.1 of the Tariff Policy specifies the following under “Implementation of MYT

framework”.

I. The implementation of MYT should

Minimize risks for Utilities and Consumers

Promotes Efficiency and appropriate reduction of system losses.

Attract investments

Bring greater predictability to consumer tariff on the whole by restricting tariff

adjustment to known indicator on power purchase prices and inflation indices.

II. The framework should be applied to both public and private Utilities.

III. The State Commission should introduce mechanism for sharing of excess profit and

losses with the consumers as part of overall MYT framework.

IV. The Licensee shall have the flexibility of charging lower tariff than the tariff approved

by the Commission if competitive conditions require so without having a claim on

additional revenue requirement on this account.

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5. MULTI YEAR TARIFF (MYT) REGULATION

Section 61 of the act states that the appropriate commission, for determining the terms and

conditions for the determination of tariff, shall be guides inter-alia, by multiyear tariff

principles. Multiyear tariff (MYT) framework is to be adopted for any tariffs to be

determined from April 1, 2006. The framework should feature a five year control period. The

initial control period may however be of 3 years duration for transmission and distribution if

deemed necessary by the regulatory commission on account of data uncertainties and

practical consideration.

5.1. Multi Year Tariff Framework

5.1.1. The distribution part of the electricity sector in Delhi was privatized with the effect

from 1 July, 2002 and tariffs in Delhi were governed by the policy directions issued

by GoNCTD, vide its notification of 22 November, 2001 and as amended on 31 May,

2002.

5.1.2. Although the Act was passed in 2003 , it ensured that provisions on the enactments

specified in the DERA (Delhi Act NO.2 of 2001), not inconsistent with the provisions

of the Act remain applicable to Delhi, as it was a part of the Schedule referred to in

Section 185 of the Act.

5.1.3. As the validity of these notifications ended on 31 March, 2007, the Commission

decided to adopt Multi Year Tariff (MYT) principles for determination of tariffs, in

line with the provisions in Section 61 of the Act.

5.1.4. The Commission designed the MYT framework in the State and set long term

performance targets for entities engaged in generation, transmission and distribution.

Simultaneously, the Commission segregated costs into two categories; first which are

expected to be easily controlled by the entity and a second category over which an

entity does not have significant control. The Commission would set targets for each

year of the Control Period for the items or parameters that are deemed to be

“controllable” and which shall include: Operation & Maintenance (O&M) Expenses.

AT&C losses, Quality of Supply etc.

5.1.5. Any financial losses arising out of the under-performance with respect to the targets

specified by the Commission for the “controllable” parameters shall be to the

Licensee‟s account. The Commission in the subsequent sections has discussed the

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Circumstances under which the controllable parameters shall be trued-up during the

Control Period.

5.1.6. The MYT framework is also designed to provide predictability and reduce regulatory

risk. This can be achieved by approval of a detailed capital investment plan for each

entity, considering the expected network expansion and load growth during the

Control Period. The longer time span enables the distribution company to propose its

investment plan with details on the possible sources of financing and the

corresponding capitalization schedule for each investment.

5.2. Basic Crux

MYT is a tariff determination system where the tariff setting exercise is done for a number of

years in one go. The desired bench marks are set by regulator for adherence by the licensee or

generator for a number of years i.e. for the control period.

The Multi Year Tariff has the following advantages:

5.2.1. It makes the tariff more predictable therefore leading to better revenue cycle

management.

5.2.2. It ensures to an extent that the costs are recovered in a more mechanistic manner.

5.2.3. It reduces the burden on regulators as well as on the Utilities. They can concentrate on

their core activities.

5.2.4. It provides for transparent and stable system of incentives.

5.2.5. It is expected to lead to greater private sector interest in investment in the power

sector.

However, the successful implementation of MYT system depends on the availability of

reliable information regarding the sector, preparedness and involvement of all participants.

5.3. Background of MYT Regulations

5.3.1. The power sector in Delhi was privatized with effect from 1st July, 2002 and the

electricity tariffs in Delhi were governed by the Policy Directions issued by GoNCTD

vide its notification of 22nd

November, 2001 and as amended on 31st May, 2002.

5.3.2. The important parameters involved in determination of tariffs during this Control

Period, (also known as Policy Direction Period) included the following:

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a) Reduction of Aggregate Technical and Commercial(AT&C) Losses by at least 17

percent during the period 2002 to 2007;

b) The distribution licensee to earn at least a return of 16 percent on the issued and paid

up capital and free reserves invested into fixed or any other assets in the distribution

business;

c) Electricity tariffs of the three distribution license4es to be identical till the end of

2006-07;

d) A particular method for computation and treatment of over achievement and under

achievement made by the distribution licensee vis-à-vis the targets of AT&C loss

level; and

e) The Government to give a transitional loan support of Rs 3450 Cr to the Delhi

Transco Limited (DTL) to bridge the gap between its revenue requirement and bulk

supply tariff.

5.3.3. The Electricity Act2003 requires the State Commission to specify the Terms and

Conditions for the determination of tariff. Under Section 61 of the Act, the Delhi

Electricity Regulatory Commission will consider the following factors, while

determining the tariff:

a) the principles and methodologies specified by the Central DERC for determination

of the tariff applicable to generating companies and transmission licensees;

b) the generation, transmission, distribution and supply of electricity are conducted on

commercial principles;

c) the factors which would encourage competition, efficiency, economical use of the

resources, good performance and optimum investments;

d) safeguarding of consumers‟ interest and at the same time , recovery of the cost of

electricity in a reasonable manner;

e) the principles rewarding efficiency in performance;

f) multiyear tariff principles;

g) that the tariff progressively reflects the cost of supply of electricity and

progressively reduce the cross subsidies within the period to be specified by the

Appropriate DERC;

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5.3.4. Post policy direction period, the DERC has adopted a comprehensive Multi Year

Tariff (MYT) regime covering principles on addressing issues of:

a) determination of AT&C losses;

b) power purchase and consumer sales variation;

c) approval of operating and capital cost, and

d) Ensuring quality of supply to consumers.

5.3.5. In this context, the DERC has framed Regulations specifying the Terms and

Conditions for determination of tariff for Generation, Transmission and Distribution

of electricity under the Multi Year Tariff ( MYT) framework for the period FY 2007-

08 to FY 2010-11. The DERC will be guided by the principles and methodologies

specified in Section 61 of the Act, and by regulations issued by CERC for generation

and transmission tariff, and the decisions taken in Forum Of Regulators (FOR) in

accordance with National Tariff policy.

5.4. The MYT consultation process

5.4.1. The Delhi Electricity regulatory Commission prepared draft Regulations based upon

the Multi Year Tariff principles for Generation, Transmission and Distribution of

electricity, along with a MYT Consultative Paper which highlighted the various issues

which were to be debated before the finalization of the said Regulations.

5.4.2. These draft Regulations and MYT Consultative Paper were posted on the DERC‟s

website and a notice to this effect was published in the leading newspapers seeking

comments from public and stakeholders. The said public notice was published in the

leading newspapers viz. Times of India (English), Pioneer (English), Hindustan Times

(English), Hindustan (Hindi), Hamara Masqsad (Urdu) and Educator (Punjabi) on

11.10.2006.

5.4.3. In response to the said public notice, the DERC received submissions from various

stakeholders. These responses and suggestions have been considered by the DERC

while finalizing these Regulations. A public hearing was held in this regard on

27.11.2006 in the DERC.

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5.5. Objectives of Multi Year Tariff Regulations

5.5.1. Continue and improve upon the existing incentivization framework to reward

performance and promote efficiency;

5.5.2. Provide regulatory certainty to the investors and consumers by promoting

transparency, consistency and predictability of regulatory approaches;

5.5.3. Ensure financial viability of the sector to attract investments and safeguard

consumers‟ interest; and

5.5.4. Develop equitable risk sharing mechanism between utility and consumers.

5.6. Control Period

The Control Period specified by DERC in MYT Regulations is 2007-2011(till March

2011).The control period will provide flexibility to the utilities in planning their

investments, costs and performance improvement.

5.7. Controllable and uncontrollable parameters

5.7.1. Controllable parameters in generation

Station heat rate;

Availability;

Auxiliary energy consumption;

Operation & maintenance expenses;

Plant load factor

Financing cost which includes cost of debt(interest) ,cost of equity(return);and

depreciation

5.7.2. Controllable parameters in transmission

Availability of transmission system;

Operation & maintenance expenses;

Return on capital employed;

Depreciation

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5.7.3. Controllable parameters in Distribution

AT&C losses, which shall be measured as the difference between the units input into

the distribution system and the units realized(units billed and collected) wherein the

units realized shall be equal to the product of units billed and collection efficiency;

Distribution losses, which shall be measured as the difference between total energy

input for sale to all its consumers and sum of the total energy billed in its License

area in the same year;

Collection efficiency, which shall be measured as ratio of total revenue realized to

the total revenue billed for the same year. The revenue realization from arrears

relating to the DVB period, electricity duty and late payment surcharge shall be

included for computation of collection efficiency;

Operation and Maintenance Expenditure which includes employee expenses, repairs

and maintenance expenses , administration and general expenses and other

miscellaneous expenses viz. audit fees, rents, legal fees etc;

Return on Capital Employed;

Depreciation;

Quality of supply.

5.7.4. Uncontrollable parameters in generation

Supply of coal

Gross generation output

5.7.5. Uncontrollable parameters in transmission

Reactive energy charges

Unscheduled Interchange(UI) charges

5.7.6. Uncontrollable parameters in distribution

Sales mix;

Power purchase cost;

Transmission charges paid to DTL, Power Grid if any, which is the central

transmission utility;

Transmission charges paid to SLDC, NRLDC; and

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Wheeling charges (in case distribution network of other distribution licensees is used

for procurement of power).

5.8. Filing of Business Plan and ARR Petition

The generating companies, transmission and distribution licensees (utilities) will submit

their Business Plans and Aggregate Revenue Requirement (ARR) petitions for the

Control Period to the DERC, for determination of tariffs during the Control Period.

5.8.1. CAPITAL INVESTMENTS

a) As per MYT regulations, the DERC will undertake comprehensive review of the

capital investment plans which has to be filled along with Business Plan of the

licensee and generating companies and approve the amount of capital investment to

be undertaken during the Control Period.

b) The actual capital expenditure incurred annually will be monitored but no adjustments

would be made for the observed differences on an annual basis. Adjustment for the

actual capital investment vis-à-vis approved capital investment will be done at the end

of the Control Period.

5.8.2. OPERATION & MAINTANANCE

a) The operation & maintenance (O&M) expenses comprise of cost incurred on a day-

to-day taxes, legal charges, and audit and other charges. The DERC has proposed to

conduct a detailed analysis of each element of O&M costs and approve a

consolidated basis in order to run the business efficiently. These costs include:

b) Employee expenses, which include”: wages and salaries” and “contribution to

employee funds”;

c) Repair and Maintenance expenses; and

d) Administrative & General expenses, including expenses on rents, rates and

value for O&M expenses for the first year of the Control Period to be increased in

subsequent years of the Control Period on a pre determined principle as specified in

the regulations. The O&M expenses have been treated as controllable parameter and

any loss or gain on account of the same will not be adjusted in the ARR of the

licensee.

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5.8.3. RETURN ON CAPITAL EMPLOYED

The principle for providing return to the transmission and distribution licensee

has been based on the principle of Return on Capital Employed (RoCE) on a regulated

rate base, with the weighted average cost of capital to be determined independently for

each year of the control period.

In case of generating companies, the principle for providing return has been based

on the Return on Equity.

5.8.4. DEPRECIATION

The DERC has adopted the rates of depreciation stipulated by the CERC in

Generation Tariff Regulations, 2004, and has also provided for Advance against

depreciation (AAD) should the need arise.

5.9. Features of Generation Tariff in MYT Regulations

Norms of Operation

a) The DERC has specified norms of operation for the generating stations for

determination of tariffs for each year of the Control Period. The norms of operation for

existing generating stations may be changed by DERC considering the expected

efficiency improvements based on the Business Plan of the generating companies

b) Norms of operation for new generating stations have been taken as specified in the tariff

regulations issued by CERC.

c) The DERC has also specified the formula for Fuel Price Adjustment (FPA) to be used

for calculation of any variation in the fuel price from the values approved by the DERC

in its MYT order. The variation in fuel prices will be adjusted on a monthly basis. The

generating companies have to separately indicate rate of energy charges at base price of

primary and secondary fuel and the fuel price adjustment.

5.10. Features of Transmission Tariff in MYT Regulations

The DERC has provided an incentive to the Transmission Licensee for achieving a

higher level of annual transmission system availability vis-à-vis the target level specified by

the DERC. This is in line with the practice followed by CERC for determination of

transmission tariff.

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5.11. Features of Distribution Tariff in MYT Regulations

5.11.1. Segregation of wheeling and retail supply business

The DERC has approved a framework recognizing the necessity to consider the”

retail supply business” and the “network business” of the distribution licensees

separately. The DERC will determine separate components of the distribution tariff

as;

a) Wheeling tariff, to recover the cost of “network business”- will reflect Capital

Servicing Costs(depreciation, interest on loans, interest on working capital and

return on equity), O&M costs( employee costs, R&M costs, A&G costs), and

related network business costs(true-ups, incentives, penalties).

b) Retail Supply Tariff, to recover the power purchase costs, transmission costs, any

other costs clearly attributable to the supply business, distribution losses, and cross

subsidies.

5.11.2. This segregation will be useful to determine non-discriminatory tariff for consumers

permitted open access under section 42 of the Act.

5.12. Sales Projections

a) The regulations envisage that the sales quantum and consumer mix are dependent

to a large extent on factors beyond the control of licensee.

b) In view of recognizing the need for providing universal service obligations, energy

sales have been considered as uncontrollable for the first Control Period.

5.13. AT&C Loss Reduction during the First Control Period/Policy

Direction Period

5.13.1. During the first Control Period (2002-07) Policy Direction Period, Delhi adopted

AT&C loss (Aggregate Technical & Commercial Loss) as a measure of efficiency

Which measured the difference between units input into the distribution system and

the units for which payment is collected or realized. The opening level of losses was

determined by the DERC vide its Order on “Bulk Supply Tariff and Opening Level of

AT&C Losses” for the three Distribution Licensees on 22Febraury 2002.

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5.13.2. AT&C = UI-UR X 100

UI

= (1-UR) X 100

UI

= (1 – UB X AR X 1) X 100

AB UI

= (1-UB X AR) X 100

UI AB

AT&C = Aggregate Technical & Commercial Loss

UI = Units Input, UR = Units Realized

UB = Units Billed, AR = Amount Realized

AB = Amount Billed

5.13.3. AT&C loss reduction target for Policy Direction Period from FY 2002-03 till FY

2006-07 was used as a bidding parameter for privatizing the distribution system.

GoNCTD had stipulated minimum loss reduction target of 20 percent from the

baseline loss levels, which was later agreed at 17 percent over a period of 5 years for

each of the three licensees.

5.13.4. The incentivization framework specified that any benefit of loss reduction beyond

the target level but below the government stipulated minimum level was shared

equally between consumer and licensee. Any revenue loss due to underachievement in

target loss reduction was borne by the licensee.

5.13.5. Substantial capital investments were made by the distribution licensees for

improving the distribution network and reducing the technical & commercial losses.

Government support in the form of special courts for power theft related cases, police

support during theft control drives, deployment of CISF, etc are also being provided

to the licensees.

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5.14. AT&C Loss Reduction targets for the MYT Control Period

5.14.1. The AT&C loss targets have been fixed base on the past achievements on loss

reduction, capital expenditure programs, review of the consumer mix of Delhi,

metering status, etc.

a) The Abraham Committee report for release of APDRP funds has provided insights

into existing levels of losses across several urban centres of India. It mentions that

“AT&C Losses have been brought below 20 percent in 212 towns in the country of

which 169 towns have brought AT&C losses below 15 percent”;

b) Loss levels in similar private urban distribution licensees, such as Ahmadabad

Electricity Company, BEST and BSES, Mumbai were in the range of 10 percent – 14

percent in FY 2004-05;

c) During 2002-06, NDPL has been able to reduce AT&C losses by 21.6 percent ( from

48.1 percent to 26.52 percent); and

d) Delhi is an urban area with very small number of agricultural consumers and almost

100 percent retail consumer metering.

5.14.2. Based on the existing efficiency and incentivization framework, the DERC has

finalized the AT&C loss targets and incentivization framework for the Control Period

a) AT&C loss levels have been specified at 17 percent for NDPL and BRPL, 22

percent for BYPL and 10 percent for NDMC at the end of the Control Period;

b) Equal sharing of benefits between the licensee and the contingency reserve ( which

is used for consumer benefit), on account of gains arising out of better performance

vis-à-vis the approved AT&C loss target; and

c) Licensees (DISCOMs) to retain all the gains accruing out of achieving loss levels

below 15 percent for NDPL and BRPL, 20 percent for BYPL and 9 percent for

NDMC.

5.15. Contingency Reserve

The DERC has also created a Contingency Reserve (CR) for each licensee at the start

of the Control Period for minimizing the impact of uncontrollable factors on retail tariffs and

ensure tariff stability across the Control Period.

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5.16. Annual Truing Up Mechanism

The DERC will review variations in approved values of uncontrollable parameters

through an annual truing up mechanism while there will be no adjustment for variations in

controllable items. Annual truing-up will be carried out for variations due to sales and power

purchase costs.

5.17. Profit Sharing

The regulations also contain a profit sharing mechanism to provide benefits of better

performance of the licensee to the consumers (via contingency reserve) and to provide

incentives to licensee for achieving better efficiency than the targets set by the DERC.

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6. TARIFF ORDERS

MAJOR ORDERS ISSUED BY DERC

The major orders that were issued by the Delhi Electricity Regulatory

Commission for the National Capital Territory of Delhi in the area of distribution are as

follows:

a) Orders on rationalization of tariff for Delhi Vidyut Board, January 16, 2001.

b) Order on Annual Revenue Requirement (ARR) for 2001-02 and Tariff Determination

principles for the years 2002-03 till 2005-06 for Delhi Vidyut Board on May 23,

2001.

c) Order on joint petition for determination of Bulk Supply Tariff for the period till

March 31, 2002 and determination of opening levels of Aggregate Technical &

Commercial Losses on February 22, 2002.

d) Orders on ARR for the three DISCOMs for financial years 2002-03 till 2009-10.

e) Orders on the Multi Year and Tariff orders for the distribution companies.

f) Aggregate Revenue Requirement and MYT petitions for the DISCOMs for the

financial year 2009-10.

Tariff orders for DISCOMs have been organized in to five chapters:-

1. The first chapter provides a historical background including information regarding

the Commission, an overview of the MYT framework and details of the tariff setting

process;

2. The second chapter provides a detailed account of the Public Hearing process,

including the objections raised by various stakeholders, Petitioner‟s responses and

the Commission‟s views on the responses;

3. The third chapter details the process of true-up of the previous years;

4. The fourth chapter analyses the Aggregate Revenue Requirement for Wheeling and

Retail Supply Business for the Control Period; and

5. The fifth chapter details the possible options for of determination Wheeling and Retail

Supply Tariff for all consumer categories, and the approach adopted by the

Commission.

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6.1. Filling of the Petition for Control Period

Filling of petition (all the discoms have to fill their petition for the determination of the

ARR and tariff for the One FY not less than the 120 day of commencement of the FY )

Acceptance of petition (Regulatory discrepancies and hearing on that, final

direction to petitioner)

Interaction with the petitioner (interaction regularly and time to time on

different issue, queries raised by the commissions and as well as by petitioner

and their meetings on that ,list of the meeting on different dates)

Public Hearing ( inviting response from the stakeholders by publishing the

notice in daily newspapers in around 4-5 languages newspaper, record the

response and arrange the public hearing schedule for the different issues given

by stakeholders)

Periodic review (The Petitioner is directed to submit the revised Aggregate

Revenue Requirement and corresponding tariff adjustments in accordance

with MYT Regulations.)

6.2. Responses from the different Stakeholders

Public hearing scheduled on the month of January in the present of the all the stakeholder and

the petitioners. The Petitioner was given an opportunity to respond to the views and objections

of the stakeholders.

Here is the list of the major comments/ objections raised by various stakeholders in the

response to the MYT petition submitted, the replies given by the Petitioner and the views

of the Commission have been given on the following objections/ comments.

Cross - Subsidy

Rationalization of Fixed Charges

Billing based on kVAh

AT&C Loss Reduction

Metering

Theft of Electricity

Street Lighting

Load Shedding

Delhi Metro Rail Corporation (DMRC)

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Railways Traction Tariff

Tariff for Delhi International Airport Limited (DIAL)

Tariff Policy (Uniform/Differential Tariff)

Meter Testing

Meter Reading

Time of Day Metering

Two part tariff for domestic consumers

Energy Conservation and demand side management

Electronic metering

Etc……

6.3. True-Up mechanism

In the process of true up the regulatory commission trued up all the parameters of the ARR till

the FY 2007-08. Trued up has been done once or sometime second time as per requirement.

But after the implementation of the MYT regulation all the parameters has been divided into

two parts and controllable parameters will not be true up as per the MYT regulation only in

case of some part of these factors will be true up. And uncontrollable parameters will be true

up at the end of the year.

6.4. Aggregate Revenue Requirement

Aggregate revenue requirement for the one financial year is subdivided into the two parts:-

ARR for the retail supply

ARR for the wheeling business

The Petitioner files its submission for determination of Aggregate revenue

Requirement for whole FY. The Commission has carried out a detailed analysis of

the Petitioner submission as required under the MYT Regulations and the computation of

ARR based on Commission‟s analysis is produced in this section. In the process of ARR

determination the Commission held several rounds of technical discussions with the

Petitioner to validate the submitted information. The Commission had also directed the

petitioner to submit additional information, where required, and also provide clarifications on

various issues, where felt necessary. The Commission considers all information submitted by

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The Petitioners. This includes the audited accounts up to FY 08-09, information provided

in the formats prescribed under MYT Regulations, replies to queries raised during

discussions and also replies to the queries raised during the public hearing.

The main components of the ARR are following:-

o Cost of the power purchase

o Inter-state transmission charges

o Intra-state transmission charges

o SLDC fees and charges

o Operation and maintenance cost

o Depreciation

o Advance against Depreciation

o Other Expenditure

o Cost of capital employed

o Less: interest and other expenditure capitalized

o Less: non tariff income

o Income tax provision.

Total of the above component add and use to calculate the ARR for the financial year.

6.5. Tariff Design

The Commission has considered following components for tariff designing of the

DISCOMs. The details of the given point will be taken in subsequent chapter of this report.

1. Uniform v/s differential Tariff

2. Cross-subsidization in Tariff structure

3. Consolidated Sector Revenue Gap/(Surplus)

4. Cost of service.

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7. PRINCIPLES FOR DETERMINATION OF ARR

7.1. ARR for Retail Supply Business

The Aggregate Revenue Requirement for the Retail Supply Business of the Distribution

Licensee, for each year of the Control Period, shall contain the following items;

(a) Cost of power procurement;

(b) Transmission & Load Dispatch charges;

(c) Supply Margin; and

(d) Corrections for “uncontrollable” factors.

7.2. Cost of Power Procurement

I.) Quantum of Power Purchase - The Licensees shall forecast sales for each customer

category and sub-categories for all years of the Control Period in their Business Plan filings,

for the Commission‟s review and approval. The Commission approved category-wise sales

forecast shall be applied along with AT&C loss trajectory for estimating the Licensees‟

power procurement requirement for each year of the Control Period.

II.) Distribution Licensee shall be allowed to recover the cost of power it procures from

sources approved by the Commission, viz. Intra-state and Inter-state Trading Licensees,

Bilateral Purchases, Bulk Suppliers, State generators, Independent Power Producers, Central

generating stations, non-conventional energy generators, generation business of the

Distribution Licensee and others, for supply to consumers of Retail Supply Business;

Provided that the Distribution Licensee shall propose the cost of power procurement taking

into account the fuel adjustment formula specified for the generating stations and net

revenues through bilateral exchanges and Unscheduled Interchange (UI) transactions;

Provided further that where the Licensee utilizes a part of the power purchase approved or

bulk supply allocated or contracted for the Retail Supply Business for its Trading Business,

the Distribution Licensee shall provide an Allocation Statement clearly specifying the cost of

power purchase that is attributable to such trading activity.

7.3. AT&C Losses

I.) The Licensee shall propose loss reduction trajectory for each year of the Control Period

based on targets specified in clause 4.8 of these Regulations. For any year of the Control

Period, loss reduction should be at least 20% of the total loss reduction target for the Control

41

Period. The Commission shall examine the filings made by the Licensee for the AT&C loss

trajectory for each year of the Control Period and approve the same with modification as

considered necessary.

II.) In case the actual AT&C loss is worse than the loss level approved by the Commission,

the Licensee has to absorb the financial loss arising from such performance.

7.4. Distribution Loss

I.) The Licensee shall propose baseline distribution loss levels and loss reduction trajectory

for each year of the Control Period.

II.) The Distribution Licensee shall also propose voltage-wise losses for each year of the

Control Period for the determination of voltage-wise cost of supply and determination of

voltage-wise Wheeling Tariff. The Commission shall examine the filings made by the

Licensee for the distribution loss trajectory for each year of the Control Period.

7.5. Transmission, Load Dispatch & Wheeling Charges

I.) The Distribution Licensee shall be allowed to recover transmission and load dispatch

charges payable to the Transmission Licensees (Central Transmission Utility, State

Transmission Utility etc.) and System Operators (Regional Load Dispatch Centre, State Load

Dispatch Centre etc.) for access to and use of the inter-state transmission system, intra-state

transmission system and availing load dispatch services in accordance with the tariffs

approved from time to time by CERC and appropriate State Commissions, as the case may

be.

II.) The Distribution Licensee shall also be allowed to recover the Wheeling Charges in case

the distribution network of other Distribution Licensee is used for procurement

Of power for the Retail Supply Business.

7.6. Working Capital

I.) Working capital for retail supply of electricity shall consist of

(a) Receivables for two months of revenue from sale of electricity; and

(b) Operation and maintenance expenses for one month;

(c) Less: power purchase costs for one month.

42

7.7. Supply Margin

I.) The Commission shall specify a retail supply margin for the Retail Supply Business in

MYT order based on the Allocation Statement provided by the Distribution Licensee.

The costs allocated to Retail Supply Business as per Allocation Statement shall be considered

while determining supply margin.

II.) The Commission shall specify the retail supply margin in such manner that the return

from the Wheeling Business and Retail Supply Business shall not exceed 16% of equity.

7.8. Corrections for uncontrollable factors

The Licensee shall file its proposals for the pass through of gains/losses on variations in

“uncontrollable” items of ARR. The Licensee shall also furnish the details of the

“controllable items” of the ARR for scrutiny of the Commission.

7.9. Truing Up Mechanism

I.) These Regulations do not provide for any truing up for controllable items.

II.) Variations on account of uncontrollable items like energy sales and power purchase cost

shall be trued up. Truing-up shall be carried out for each year based on the actual/audited

information and prudence check by the Commission;

Provided that if such variations are large, and it is not feasible to recover in one year alone,

the Commission may take a view to create a regulatory asset, as per the guidelines provided

in clause 8.2.2 of the National Tariff Policy.

III.) The Regulations also provide for creation of a Contingency Reserve (CR) at the

beginning of the Control Period in the ARR. The Licensee shall be permitted to use funds

from such provision, with the prior approval of the Commission, to compensate

The uncontrollable variations instead of tariff adjustments and thereby ensuring tariff stability

in the Control Period.

IV.) The Commission, to ensure tariff stability, may include the trued-up costs in the

subsequent Control Period‟s ARR instead of including in the year succeeding the relevant

year of the Control Period.

43

8. MULTI YEAR TARIFF PROCESS

The Multi Year Tariff filing shall be in such form and in such manner as may be decided by

the Commission and as per the provisions of Conduct of Business Regulations. The

Licensee shall also submit the Multi Year Tariff filing in electronic format to the

Commission.

8.1. Multi-Year Filings for the Control Period

Beginning of the Control Period - Business Plan Filings

The Distribution Licensee shall file for the Commission‟s approval, on 1st April of the year

proceeding the first year of the Control Period or any other date as may be directed by the

Commission, a Business Plan approved by the Board of Directors.

The Business Plan shall be for the entire Control Period and shall, inter-alia, contain;

(a) Sales/Demand Forecast for each customer category and sub-categories for each year of

the Control Period;

(b) AT&C Loss reduction trajectory along with distribution loss trajectory and collection

efficiency for each year of the Business Plan;

(c) Power Procurement Plan based on the sales forecast and distribution loss trajectory for

each year of the business plan period. The power procurement plan should also include

Energy Efficiency and Demand Side Management measures;

(d) The Capital Investment Plan shall take into account the sales/demand forecast, power

procurement plan, distribution loss trajectory, targets for quality of supply, etc. The

investment plan shall be consistent with the perspective plan drawn by the State Transmission

Utility, and shall include the corresponding capitalization schedule and financing plan;

(e) The appropriate capital structure and cost of financing (interest on debt) and return on

equity, terms of the existing loan agreements, etc;

(f) The Operation and Maintenance (O&M) costs estimated for the Base Year and two years

prior to the Base Year with complete details, together with the forecast for each year of the

Business Plan Period based on the proposed efficiency in operating costs, norms for O&M

cost allowance including indexation and other appropriate mechanism;

(g) Details of depreciation based on the fair life of the asset and capitalization schedules for

each year of the Control Period;

44

(h) A set of targets proposed for other controllable items such as collection efficiency, bad

debts, working capital, quality of supply targets, etc. The targets shall be consistent with the

capital investment plan proposed by the Licensee;

(i) Proposals for other items such as external parameters used for indexation (inflation, etc);

(j) The filings in addition to the Business Plan periods shall also contain the data for the cost

and revenue parameters for the Control periods.

8.2. Annual Filings during the Control Period

8.2.1. ARR and Tariff Filings

I.) The Distribution Licensee shall file an application for approval of Wheeling Tariff and

Retail Supply Tariff for each year of the Control Period, not less than 120 days before the

commencement of the first year of the Control Period or such other date as may be directed

by the Commission.

II.) The Wheeling Tariff shall be determined for each year of the Control Period at the

Beginning of the Control Period. The Licensee shall propose capacity based Wheeling Tariff.

The Licensee shall also specify the distribution losses voltage-wise to provide for adjustment

of losses in the system.

III.) The filings for Wheeling Tariff shall contain the following:

(a) The Distribution system or network usage forecast for each year of the Control Period

consistent with the Business Plan;

(b) Proposals for computation of tariffs for Wheeling of electricity for each of the years of the

Control Period, including the losses and the procedure thereof;

(c) Proposals for Non-Tariff Income with item-wise description and details;

(d) Proposals in respect of income from Other Businesses like Consultancy Services,

Convergence, Training Facilities, etc;

(e) The proposed Wheeling Tariff shall be voltage-wise;

(f) Expected Revenue from the proposed Wheeling Tariff including additional surcharge, etc.

IV.) The filings for Retail Supply Tariff shall contain the following:

(a) Licensee shall submit proposal for retail sale of electricity for the consumers pertaining to

Retail Supply Business, which shall include tariffs for each consumer category, slab-wise and

45

Voltage wise. The proposed tariff may also be based on energy charges, demand charges,

minimum charges, etc along with the tariff rationalization measures;

(b) Proposals for Non-Tariff Income with item-wise description and details;

(c) Each tariff proposal submitted by the Distribution Licensee shall be supported with a cost-

of-service model allocating the costs of the licensed business to each category of consumers

based on voltage-wise costs and losses;

(d) The proposals of the Licensee should demonstrate that the tariffs are progressively

reflecting the cost of supply;

(e) Expected Revenue from the proposed Retail Supply Tariff, and other matters considered

appropriate by the Distribution Licensee, including incentive schemes to consumers, cross

subsidy surcharge, etc.

8.2.2. Review during the Control Period

I.) The Distribution Licensee shall submit information as part of annual review on actual

performance to assess its performance vis-à-vis performance targets approved by the

Commission at the beginning of the Control Period.

II.) The Licensee shall submit the revised ARR and corresponding tariff adjustments 120

days before the commencement of the Financial Year. The revised estimates shall be required

because of trued-up costs on account of uncontrollable variations, profit sharing mechanism

for exceeding the targets, and implementation of performance framework for quality of

supply targets.

8.2.3. Review at the end of the Control Period

I.) Towards the end of the Control Period, the Commission shall seek to review if the

implementation of the principles laid down in these Regulations has achieved their intended

objectives. While doing this, the Commission shall take into account, among other things, the

industry structure, sector requirements, consumer and other stakeholder expectations and

Licensee‟s requirements at that point in time. Depending

On the requirements of the sector to meet the objects of the Act, the Commission may revise

the principles for the second Control Period.

II.) The end of the first Control Period shall be the beginning of the second Control Period

and the Licensee shall follow the same procedure unless required otherwise by the

46

Commission. The Commission shall analyses the performance of the Licensee with respect to

the targets set out at the beginning of the first Control Period and based on the actual

performance, expected efficiency improvements and other factors prevalent; determine the

initial values for the next Control Period.

8.3. Government Support for Social Causes

Any class of consumers, be it a consumer below the poverty line, school, hospital etc,

desirous of seeking Government support by way of subsidy, shall approach the Government

of NCT of Delhi for this purpose. It would be the discretion of the Government of NCT of

Delhi to consider giving subsidy to any class of consumers it so desires; Provided that the

amount towards social causes and subsidy for a particular year of the Control Period shall be

paid at least in four equal quarterly installments and in advance to the period to which it is

applicable; Provided further that no such direction of the State Government shall be operative

if the subsidy payment is not made in accordance with the provisions contained in this section

and the tariff fixed by the Commission shall be applicable from the date of issue of orders.

8.4. Disposal of Application

8.4.1. The Commission shall process the filings made by the Distribution Licensee in

accordance with these Regulations and the Conduct of Business Regulations.

8.4.2. Based on the Distribution Licensees‟ filings, objections/ suggestions from public and

other stakeholders, the Commission may accept the application with such

modifications and/or such conditions as may be deemed just and appropriate and

issue, within 120 days of the receipt of the application and after considering all

suggestions and objections from public and other stakeholders, an Order containing,

inter alia targets for controllable items and the approved ARR for the Wheeling

Business and the ARR for the Retail Supply Business along with the Wheeling

Charges and Retail Supply Tariff.

8.5. Periodic Review

8.5.1. To ensure smooth implementation of the Multi Year Tariff (MYT) Framework, the

Commission may undertake periodic reviews of Licensees‟ performance during the

47

Control Period, to address any practical issues, concerns or unexpected outcomes that

may arise.

8.5.2. The Distribution Licensee shall submit information as part of annual review on actual

performance to assess the performance vis-à-vis the targets approved by the

Commission at the beginning of the Control Period. This shall include annual

statements of its performance and accounts including latest available audited/actual

accounts and the tariff worked out in accordance with these Regulations.

8.5.3. The Licensee shall submit the revised Aggregate Revenue Requirement and

corresponding tariff adjustments 120 days before the commencement of the Financial

Year.

8.5.4. The Commission may also specify any modifications to the forecast of the

Distribution Licensee for the remainder of the Control Period, with detailed reasons

for the same.

8.6. Truing Up for the Period up to Commencement of MYT order

8.6.1. Performance review and adjustment of variations of the Distribution Licensees for

year FY 2006-07 and period between 1st April 2007 and commencement of MYT

tariff order shall be done based on the actual/audited information and prudence checks

by the Commission and shall be considered during the Control Period.

8.7. Miscellaneous

8.7.1. Issue of Orders and Practice Directions

a). Subject to the provision of the Act and these Regulations, the Commission may, from time

to time, issue Orders and Practice directions in regard to the implementation of these

Regulations and procedure to be followed on various matters, which the Commission has

been empowered by these Regulations to direct, and matters incidental or ancillary thereto.

b). Notwithstanding anything contained in these Regulations, the Commission shall have the

authority, either suo-moto or on a petition filed by any interested or affected party, to

determine the tariff of any Licensee.

8.7.2. Powers to remove difficulties

If any difficulty arises in giving effect to any of the provisions of these Regulations, the

Commission may, by a general or special order, not being inconsistent with the provisions of

48

These Regulations or the Act, do or undertake to do things or direct the Licensee to do or

undertake such things which appear to be necessary or expedient for the purpose of removing

the difficulties.

8.7.3. Power of Relaxation

The Commission may in public interest and for reasons to be recorded in writing, relax any of

the provision of these Regulations.

8.7.4. Interpretation

If a question arises relating to the interpretation of any provision of these Regulations, the

decision of the Commission shall be final.

8.7.5. Saving of Inherent Powers of the Commission

Nothing contained in these Regulations shall limit or otherwise affect the inherent powers of

the Commission from adopting a procedure, which is at variance with any of the provisions

of these Regulations, if the Commission, in view of the special circumstances of the matter or

class of matters and for reasons to be recorded in writing, deems it necessary or expedient to

depart from the procedure specified in these Regulations.

8.7.6. Enquiry and Investigation

All enquiries, investigations and adjudications under these Regulations shall be done by the

Commission through the proceedings in accordance with the provisions of the Conduct of

Business Regulations.

8.7.7. Power to Amend

The Commission, for reasons to be recorded in writing, may at any time vary, alters or

modify any of the provision of these Regulations by amendment.

49

9. ANALYSIS OF ARR COMPONENTS

9.1 Capital Expenditure

The Commission had elaborated that the substantial R&M works were essential to meet the

need of the hour in short term, but in long term, the system improvement will be achieved

through Capital Investments. The Commission also opined that the execution of capital works

would result in strengthening the distribution system, which in turn will call for lesser R&M

works.

The Commission expects that the execution of capital works will result in further

strengthening the distribution system, and thereby resulting in reduction in R&M expenses.

For instance, the frequent transformer failures require more R&M works, but with the

replacement/augmentation of transformers under various capital works schemes, the rate of

transformer failure will fall, thus reducing the overall value of R&M works. The Commission

expects that the benefits of the capital investment made in FY 2003-04 would have already

started flowing.

Table F: Trends of capital expenditure

Sr.

No

DIS.

Co.

2004-05

2005-06

2006-07

2007-08 2008-09

Petition Approved

true up

Petition Approved

true up

Petition Approved

true up

Petition Approved Petition Approv

ed

1 BYPL 1539.2 414.42 1165 298.92 359.74 209.08 281 117.53 295.11 300

2 BRPL 1148.94 538.75 1400 618.54 488.25 306.21 380 128.24 484 390.85

3 NDPL 290.38 338.2 361.11 431 285.08 271 333 325 188 225

9.1.1 Impact of the Accelerated Investment on the Annual Revenue

Requirement (ARR)

Proposal of accelerated investment as compared to the normative levels of

investment would result in higher costs in the initial years due to increase in depreciation,

interest, O&M costs and return on equity and free reserves.

The Commission believes that the acid test for accepting these proposals of accelerated

investments is that there should be no impact of these investments on ARR for the current

50

Year as well as for the future years. In other words, these investments should be tariff

neutral.

To establish the need for investments in the Delhi Power Sector, the Commission had

considered the Comprehensive Study Report on the Transmission and Sub-transmission

System of Delhi prepared by the Central Electricity Authority (CEA) in March 2004, for the

X Plan (up to FY 2006-07). The CEA had assessed the proposed network addition by the

TRANSCO, BRPL and BYPL. CEA had identified the capital works that need to be

implemented in the X Plan Period.

The CEA report has following points:

“The new lines and substations planned by BRPL and BYPL are such that all

lines and substations are optimally loaded. The sub-transmission works for

strengthening/reinforcement of the system in BRPL and BYPL area for meeting

power demand during the X Plan period have been identified. CEA has suggested 17

nos. of 66 kV and 13 nos. of 33 kV substations along with new 66 kV and 33 kV

lines/cables for meeting the growth in load. CEA had also suggested that the 11 kV

and 0.4 kV works should be implemented to correspond to the commissioning of the

66 kV and 33 kV substations.CEA had recommended that BRPL and BYPL might

identify and replace the old switchgears and cables wherever it is necessary.

- CEA had recognized the need to constitute a Standing Committee comprising

senior officers of TRANSCO, BRPL and BYPL in order to coordinate and sort out the

issues arising during implementation and timely completion of the works as per the

target.

The Report had recognized the need for substantial augmentation and investment in the

Delhi Power System till FY 2006-07.

CEA in its report had identified the capital investments, which are significantly higher

than the investments identified by the technical consultants at the time of restructuring. The

CEA had carried out this study recently and hence this study reflects the need of the system

based on the prevalent network conditions. Hence, the Commission considered the CEA

Report as the base while assessing the capital investment plan.

51

9.1.2. TRAJECTORY OF CAPITAL INVESTMENT(BYPL)

Figure 3: Trends of capital expenditure BYPL

The graph shows the changing trend in the capital investments by BYPL over the years from

financial year 2003 to financial year 2011. The capital investment of a company mainly

comprises of the proposed investments like those due to commonwealth games, distribution

network development commitment, up-gradation of network, implementation of HV/LV

schemes,SCADA,automated meters and other related schemes. The investment of the

company in the earlier years was too high due to the costs involved in the initial setup and

thus it rose to Rs. 425 Cr. after the MYT regulations came the investment is decreasing and it

came to Rs. 125 Cr. a fall of Rs. 300 Cr. After the MYT,the investment is increasing due to

the new systems that are being employed in the distribution network. The investment is not

showing any particular trend but it increased a lot in FY 05. It is because BYPL has

purchased a large amount of good in FY 05 from its sister company REL at a rate which was

exorbitant to give it a profit of 68% and continued to show the usage of investment in the

next years. As a result a lot of amount was disallowed by Commission in the next years after

thorough inspection.

52

MYT control period

The Petitioners submitted its Business Plan including details of proposed Capital

Investment to be made during the Control Period. The Petitioner submitted that load

forecast and investment requirements for the Control Period have been projected

considering the upcoming load growth, Commonwealth Games - 2010, DDA Master

Plan - 2021, commitment of GoNCTD to make Delhi a world class City etc.

The Petitioner has also submitted that while developing the investment plan due

weightage has been given to facets such as reduction of AT&C loss, strengthening of

existing system, automation, and routine up-gradation for development of distribution

network with the aim to maintain a reliable and quality power supply to its consumer.

The schemes proposed under the Capital Investment plan are broadly categorized as:

EHV schemes, HV/LV schemes (Distribution schemes), Capacitors, SCADA,

Distribution Management Systems, Geographical Information System (GIS),

Automated Meter reading (AMR), Meters and Accessories, LTMP (modernization of

LT distribution system), various civil works and other related schemes.

Commission’s analysis:-

Clause 4.14 of Delhi Electricity Regulatory Commission (Terms & Conditions for

Determination of Wheeling Tariff and Retail Supply Tariff) Regulations, 2007

stipulates as under:

“The Commission shall review the actual capital investment at the end of each year of the

Control Period. Adjustment to depreciation and return on capital employed for the actual

capital investment vis-à-vis approved capital investment shall be done at the end of Control

Period”.

In compliance to the said requirement, the Commission held separate Review

Meetings with BRPL/BYPL/NDPL and DTL. The meeting with BYPL was held on

25th March, 2009 wherein the CEO of BYPL attended the meeting.

The Commission emphasized that Capital expenditure and capitalization would need

to be seen separately. The capital expenditure has to be reviewed w.r.t. schemes

proposed by the DISCOMs, approval by the Commission and actual expenditure

against approved schemes (along with the opening and closing levels of CWIP). This

would indicate the progress in implementation of approved schemes. The year-wise

53

Capitalization has to be compared to the capitalization approved in the MYT Order further

impact in the fixed cost in Tariff.

. The Commission emphasized that as per MYT Regulations, any shortfall in Capital

Expenditure with respect to the figures considered in the MYT Order dated 23

February, 2008 shall be considered at the end of the MYT Control Period. Necessary

adjustment to various parameters relating to capital expenditure will be done at the

end of the Control Period along with the carrying cost.

9.2. Operation & Maintenance Expenses

Operation & Maintenance expenses includes:-

1. Employee expenses

2. Administrative and general expenses

3. Repairs and maintenance expenses

Table G: O & M Expenses of various years

Operation &

Maintenance

Name

of the

DISCOM

POLICY DIRECTION PERIOD

2004-05 2005-06 2006-07

Petition Approved Approved

true up Petition Approved

Approved

true up Petition Approved

Approved

true up

Employee

Expenses (Net of

Capitalization )

BYPL 154.94 118.7 127.31 155.38 131.38 132.23 132.89 132.78 99.29

BRPL 185.85 139.42 145.8 188.03 150.47 153.38 199.91 165.73 177.48

NDPL 125.73 119.4 125.05 139.99 126.91 131.38 151.02 138.68 144.91

A & G expenses

(Net of

Capitalization)

BYPL 22.99 12.11 16.62 24.48 17.28 29.68 27.89 22.68 40.1

BRPL 39.58 17.29 29.04 37.33 30.2 48.47 48.45 42.42 66.65

NDPL 23.65 18.94 25.98 21.5 19.97 32.42 24.85 22.29 30.96

R & M expenses

BYPL 41.14 31.31 46.19 49.89 48.04 48.04 47.73 47.73 47.73

BRPL 62.88 52.57 68.99 74.51 71.75 71.75 70.98 70.98 70.98

NDPL 63.86 32.16 53.68 55.61 55.83 51.64 57.25 57.25 51.99

54

Operation &

Maintenance

Name

of the

DISCOM

MYT PERIOD

2007-08 2008-09

Petition Approved Approved

true up Petition Approved

Approved

true up

Employee

Expenses (Net of

Capitalization )

BYPL 163.67 107.29 107.29 180.89 133.57

BRPL 231.88 136.55 136.55 254.24 168.46

NDPL 159.49 121.67 121.67 153.89 145.01

A & G expenses

(Net of

Capitalization)

BYPL 46.04 40.01 40.01 55.44 41.67

BRPL 74.01 64.99 64.99 82.14 67.68

NDPL 39.92 30.92 30.92 40.92 32.21

R & M expenses

BYPL 41.88 32.25 32.25 54.66 44

BRPL 97.07 72.08 72.08 114.4 90.84

NDPL 67.02 57.48 57.48 68.96 72.16

9.2.1. TRAJECTORY OF EMPLOYEE EXPENSES

Figure 10: Trends of employee expenses in BYPL

55

As seen in the graph above which shows the changes in the employee expenses over the

period fron FY03 to FY11. The employee expenses comprises of the salaries and wages of

the employees, new recruitment costs, benefits cost and VRS costs. The employee expenses

are rising from FY03 to FY11 is due to the benefits that are given to the employees like

dearness allowance and other allowances. As the employees are increasing so expenses are

also increasing propotionally. It has almost reached till Rs. 200 Cr. and will go up further

more. Although the projected figures of FY 07 shows that the expenses would be much

higher to Rs. 270 Cr. if the regulations were not being applied. The expenses are rising but

still they are less than what it would have been earlier.

9.2.2. TRAJECTORY OF A&G EXPENSES

Figure 11: Trends of A&G expenses in BYPL

The graph above shows the changes in the A&G (administrative & general) expenses

over the years from FY03 to FY11. These expenses comprises of the expenditure that occur

due to the rent, taxes, consultancy charges , license fees, stationary charges, advertisement,

water and other charge that the company had to borne. In the earlier year the companies A&G

expenses were less as compared to the years after the MYT was applied. The A&G expenses

of BYPL are increasing from Rs. 10 Cr. to Rs. 60 Cr. with a change of Rs 50 Cr. from FY03

to FY11. These expenses rise with the diversification of the company as there will be more

workplaces and resulting into more expenses. After the MYT regulations came into picture

the expenses are increasing at a constant rate of about Rs. 10 Cr. each year as there is more

56

commitment of work. Also the company‟s projected figures are also showing that the A&G

expenses are lower than it. The present amount is almost Rs. 2 Cr. less than the projected

ones.

9.2.3. TRAJECTORY OF R&M EXPENSES

Figure 12: Trends of R&M expenses in BYPL

The graph above shows the changes in the R&M expenses over the years from FY03 to

FY11. These expenses comprises of stores & spares, buliding, computer, meter reading

expenses, call centre charges for the wheeling and retail supply business. The expenses for

BYPL are increasing every year from Rs. 20 Cr. in FY03 it has reached to nearly Rs. 70 Cr.

in FY11. After the MYT regulations came into existence there is much increase in the

expenses as there is lot of new work that is to be done and the related cost goes high. But

after the MYT period the rise in the expenses is gradual and it is rising at Rs. 20 Cr. each

year. Since the future expenses are planned in the control period and the MYT period that is

why BYPL is showing such an increase in its expenses. The projections of the expenditure

according to FY 07 shows that there is a drastic increases in these expenses which is a cause

of concern for the company. It is to be checked that why the expenses are reaching Rs. 70 Cr.

whereas they have to be only Rs. 19 Cr.

57

9.3. Tariff structure

Retail tariff

There were four important elements in the Policy Directions issued by the GNCTD, which

are relevant from the point of view of analysis of tariff design & philosophy.

1) Retail tariffs across the three DISCOMs have to be uniform over the tenure of Policy

Directions i.e. up to FY 2006-07.

2) Determination of a Differential BST payable to TRANSCO for power purchase by each

DISCOM based on the paying capacity of the respective DISCOMs.

3) Government Support for bridging gap of TRANSCO

4) Concept of AT&C loss and the treatment of over/under achievement in AT&C losses by

the DISCOMs.

The requirement of uniform retail tariff across the three DISCOMs in Delhi implied that the

tariff for a particular category of consumer shall be uniform till the end of FY 2006-07,

irrespective of geographical location of the consumer. This requires that the uniform retail

tariff for all the DISCOMS had to be determined by considering the ARR of TRANSCO and

all DISCOMs simultaneously, after providing a minimum of 16% return for each DISCOM.

The determination of Bulk Supply Tariff had to be inter-linked with revenues through the

retail tariff and individual parameters including AT&C losses of DISCOMs. Further, the

other important aspect of Policy Directions is the support envisaged to be provided by

GoNCTD to TRANSCO to bridge the revenue gap of the TRANSCO and the Bulk Supply

Tariff it receives from the DISCOMs. The provisions of the Policy Directions in this regard

are as follows:

“The Government will make available to Transmission Company an amount of up to,

approximately, Rs. 3450 Crore during the period 2002-03 to 2006-07 as loan to be repaid by

the Transmission Company to the Government in a manner agreed to between the

Transmission Company and the Government”.

The Policy Directions laid down performance targets/efficiency level to be achieved by the

Distribution Companies measured in terms of AT&C loss.

58

The category wise tariff design approach of the commission is explained as follows:

9.3.1. Domestic Tariff

The Commission has designed the tariff structure for domestic consumers keeping in view

the following factors :( Common to all)

Two part tariff

The Commission in its previous Tariff Order dated June 26, 2003 introduced two part tariff

for domestic consumers, i.e., fixed charges and energy charges and abolished minimum

charges and meter rent. The fixed charge in two-part tariff represents the fixed component of

charges, which is independent of consumption level and depends on the fixed cost incurred

by the Utility in supplying electricity. The Commission had explored the following drivers

for levy of fixed charges to domestic consumers:

Per connection per month

Per kW of Sanctioned Load per month (Existing Mechanism)

Fixed Charges linked to consumption

Slab system based on sanctioned load

Reduction in the number of consumption slabs

The Commission had received suggestions as regards reduction/modification in the number

of consumption slabs in the domestic category during previous year‟s tariff process as well as

the current process.

.

9.3.2. J J Clusters

The Commission had separately dealt with the tariff for J J Clusters while processing the

Petition filed by DISCOMs in the matter of “Waiver of Development Charges for JJ

Clusters” and issued the Order on March 26, 2004. In this Order, the Commission had

approved the tariff for J J Clusters and had mentioned that in addition to the cost borne by the

consumer for the infrastructure, for the energy consumed, every consumer will pay Rs.

175.00 per month. The Commission considering the fact that these consumers belong to

economically weaker sections of the society had not increased the tariff and has retained the

tariff at Rs. 175.00 per month. The Commission expressed that this will result in several

benefits to the system such as these consumers will become part of network which will avoid

unpredictable overloading of system & this will also increase the revenue substantially which

otherwise would have to be borne by other consumers.

59

9.3.3. Non-Domestic Tariff

The commission had specified KWh based tariff only. The overall increase for this

category is as follows average 5% increase in energy charges FY 2004-05 & 1 % increase in

FY 2005-06. FY 2006-07 the same tariff is continued by commission.

9.3.4. Industrial Tariff

Industrial category of consumers consist of two sub-categories, viz., Small Industrial Power

(SIP) with load up to 100 kW and Large Industrial Power (LIP) with load more than 100 kW.

The overall decrease in tariff for this category was 4% for FY 2004-05, marginal decrease for

FY 2005-06 & no change FY 2006-07.

9.3.5. Public Lighting

The commission had only increased energy charges by around 6% FY 2004-05 around 12%

FY 2005-06 & no change for FY 2006-07

9.3.6. Railway Traction

The commission had not changed the tariff for railway traction.

Comparison of projected and actual tariff hike:-

Table H Hike in tariff amount in the policy direction period and MYT period

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

Commutative

2002-03 to

2006-07

2007-08 2009-10

Projection 10% 10% 10% 5% 3% 44% N/A N/A

Actual Nil 5.18% 10% 6.60% Nil 23% 1% Nil

Privatization of the distribution became a success story. It proved its importance for the

consumers also. Government‟s projections for increase in tariff were too high as compare to

the actual increment in the tariff. Government‟s projections before the MYT period total

increase in commutative tariff were 44% but actual increase in tariff was 23% only. And in

the first MYT period it was increased by overall around 1%, and then it‟s constant.

60

Some important points on the change in tariff for the different group of consumers.

1. In tariff schedule for the fiscal year 2001 there were no fix charges or energy charges

for JJ clusters. Later on Delhi government given the fix charges for the JJ clusters and

said to the discoms to done complete metering in the JJ clusters by 2010. They fix the

Rs 175/ month charges for the one connection in the JJ Clusters of Delhi for the load

less than the 200 units.

2. Domestic lighting charges in the fiscal year 2002 were low for the energy but the they

were higher in case of the fixed/demand charges. After the year 2002 the charges for

the domestic lighting has been increased. The charges are divided in the slabs as per

the consumption of energy and connected load. As government planned that the tariff

must not be increase year by year, we observed that since year 2006-07 the tariff is

approximate constant, in some cases it has been increased by 5 paisa /unit (domestic).

3. Non-domestic consumers have to pay high tariff as compare to the other category.

Income from Non domestic consumers (commercial) is use for the cross subsidy

compensation. Later on the year 2002 the charges for the non domestic consumers

have been increased. The charges are divided in the slabs as per the consumption of

energy and connected load. The present tariff for the non domestic consumer is

highest in Delhi Rs.5.40 and Rs.4.65.

4. In Delhi there are so many small, medium and large industries are consuming a lot of

power.

They are also the high tariff payer from the cost to supply.

5. Agriculture consumer get benefit of the cross subsidy. They pay least tariff for the

connected load demand charge and also low energy charges.

6. There are also different types of load connected in Delhi just like

Mushroom cultivation

Public lighting

Delhi Jal board

DMRC (Delhi Metro Railway Corporation)

Railway traction

Temporary Connection

61

Table I: Tariff Structure for various years

Particular

FY 2001-02 FY 2003-04 FY 2006-07

Fixed charges Energy charges Fixed charges

Energy

charges Fixed charges

Energy

charges

DOMESTIC RS/Kw/month paisa/Kwh RS/Kw/month paisa/Kwh RS/Kw/month paisa/Kwh

JJ Cluster -------------- ---------------- -------------- -------------- 175Rs/month

Domestic Lighting/Fan

and Power

mini.charges 60

RS/Kw/month 10

0-100 150 175 24/month 240

101-200 210 235 24/month 240

201-400 300 325 60/month 390

401 above 360 385 12 Rs/kw/month 460

Domestic Lighting/Fan

and Power on 11KV

Single delivery point for

CGHS

mini.charges

150

RS/Kw/month as above 10 as above 12 Rs/kw/month

same as

above

Domestic Lighting in

unelectrified left out

pocket:

mini.charges

150 /Kw/month as above as above 12 Rs/kw/month

same as

above

Non- Domestic

Non- Domestic (low

tension)

150

Rs/KVA/month 500 20 515 50 535

Mixed load ( High

Tension)

200

Rs/KVA/month 465

200

Rs/KVA/month 500 50 490

Industrial

Small industrial

mini.charges

200

RS/Kw/month 410 20 445 50 500

Large Industrial

200

RS/KVA/month 340

200

Rs/KVA/month 450

Rs

150/KVA/month 430

Agriculture ---------- 75 10 110 12 150

Mushroom Cultivation

mini.charges

100

RS/Kw/month 200 20 250 24 300

Public Lighting Maintenance

charges@Rs

60/month/street

lighting point

Street Lighting 360 385 73 460

Signals and Blinkers 360 385 460

Railway Traction

200

Rs/Kw/month As per 3.2 As per 3.2 As per 3.2 Rs150/KVA/month 375

DMRC ---------- ------------ --------------

230 PAISA /

KVA RS75/KVA/month 230

62

Particular

FY 2007-08 FY 2009-10

Fixed charges

Energy

charges Fixed charges

Energy

charges

DOMESTIC RS/Kw/month paisa/Kwh RS/Kw/month paisa/Kwh

JJ Cluster 175Rs/month 175Rs/month

Domestic Lighting/Fan

and Power

0-100 24/month 245 24/month 245

101-200 24/month 245 24/month 245

201-400 60/month 395 60/month 395

401 above 12 Rs/kw/month 465 12 Rs/kw/month 465

Domestic Lighting/Fan

and Power on 11KV

Single delivery point for

CGHS 12 Rs/kw/month

same as

above 12 Rs/kw/month

same as

above

Domestic Lighting in

unelectrified left out

pocket: 12 Rs/kw/month

same as

above 12 Rs/kw/month

same as

above

Non- Domestic

Non- Domestic (low

tension) 50Rs / kw/month 540 50Rs / kw/month 540

Mixed load ( High

Tension) 150Rs/kVA/month 495 150Rs/kVA/month 495

Industrial

Small industrial 50 505 50 505

Large Industrial 150 435 150 435

Agriculture 12 155 12 155

Mushroom Cultivation 24 305 24 305

Public Lighting

Street Lighting 73 465 73 465

Signals and Blinkers 465 465

Railway Traction 150 380 150 360

DMRC 75 300 75 300

63

9.4. Power purchase Cost

Power Purchase Expenditure is the single largest expense of any DISCOMs. In Delhi, power

purchase cost comprises approximately 95% of the total estimated revenue requirement of

Delhi Transco Limited paid by DISCOMs. Power purchase cost is a function of not only

generation within the State and power imported from outside the State, but also of the

generation and power purchase mix. Hence, in comparing tariffs across States, one needs to

appreciate the variance in tariffs on account of the sources from where the power is procured.

The power purchase cost had been estimated with utmost care based on the most efficient

way of procuring power from the generating stations through long term/short term

arrangements or through bilateral purchases agreements. The Commission had exercised due

caution in estimating power purchase cost of the Petitioner. The Commission had made

reasonable assumption for PLF, auxiliary consumption, transmission losses and weighted

average allocation of the DISCOMs to arrive at the quantum of energy available for the

DISCOMs. The Commission had reallocated all existing PPAs among the three distributions

Companies namely BRPL, BYPL and NDPL in proportion to the energy drawn by them. The

Commission‟s estimates indicate that licensee would have surplus energy available from long

term arrangements for each year of the Control Period than required quantum of power.

However, the Commission had considered that the Petitioner needs to purchase Power

through short term arrangements to meet seasonal peak demand.

Table J: PP Cost for various years

Power Purchase Cost

Name

of the

DISCO

M

For year

2004-05 2005-06 2006-07

Petition Approved Approved

true up Petition Approved

Approved

true up Petition Approved

Approved

true up

BYPL 643 668 798.4 859 798.9 921.3 942.64 964.53 989.16

BRPL 1281 1343 1654 1779 1789 1876 1867 1923 2095.91

NDPL 859 849 1104.7 1170.4 1196.4 1203 1251 1242 1309.34

64

Name

of the

DISCO

M

MYT Period

2007-08 2008-09

Petition Approved Approve

d true up Petition Approved

Approv

ed true

up

BYPL 1213.72 978.92 939.35 1162.26 1169.2

BRPL 2506.03 2149.4 2,527.60 2436.25 2250.4

NDPL 1760.99 1659.66 1846.15 1795.59 1599

The Commission has exercised due caution in estimating power purchase cost of the

Petitioner. The Commission has made reasonable assumption for PLF, auxiliary

consumption, transmission losses and weighted average allocation of the DISCOMs

to arrive at the quantum of energy available for the Petitioner. In the estimates for FY 08

Following power generating stations have been considered for the purpose of

estimation of power availability for the Control Period .

(a)Power Generating Stations within Delhi

(i) Indraprastha Power Generating Company Limited (IPGCL)

(ii) Pragati Power Corporation Limited (PPCL)

(iii) Badarpur Thermal Power Station (BTPS)

(b)Purchase from Central Generating Stations of NTPC, NHPC, NJPC and NPC

(c) Tehri and Tala Hydro Electric Power Stations

(d) Purchase through bilateral short term arrangements and banking arrangements.

(e) New Plants expected to be commissioned during the Control Period.

Allocation of the Petitioner in Generating Stations

Reassignment of PPAs

The Commission had reallocated all existing PPAs among the three distribution

companies namely BRPL, BYPL and NDPL in proportion to the energy drawn by them

from the date of unbundling to February(115)/Engg./DERC/2006-07/ dated 31 March,

2007.

65

Allocation of pre existing PPA

BYPL BRPL NDPL

27.24% 43.58% 29.18%

The Commission has followed methodology similar to the Petitioner‟s approach for

estimating cost of power purchase. Assumption made by the Commission for estimation of

power purchase cost is listed below:

The Commission has derived annual fixed charges (in proportion to the

Petitioner‟s share) applicable in FY08 and FY09 for various central sector

generating stations from the relevant Tariff Order issued by CERC. The

annual fixed charges for FY10 and FY11 have been considered at same level

as that for FY09 on the assumption that any increase in Operation &

Maintenance cost will be offset by the decrease in other fixed charges.

The fixed cost for State generating stations is taken as approved by the

Commission in respective MYT Order for the Control Period FY08 to FY11.

The variable cost including Fuel Price Adjustment (FPA) for the Control

Period has been based upon the power purchase data for FY07, as submitted

by DTL. An escalation of 3% and 4% has been applied for coal and gas/liquid

fired plants respectively on the variable cost for subsequent years.

For nuclear plants, based on the actual power purchase bill for FY07, single

part tariff with 1% annual escalation has been considered.

For hydro stations net charges payable has been derived after deducting the free

share of power.

Incentives payable are calculated as applicable for generation above target PLF.

Income tax and any other charges payable has been considered at the same level as

actual paid in FY07.

Total power purchase cost has been estimated considering fixed charges, variable

charges, FPA, Income tax, incentive and other charges.

66

10. CRITICS:-

10.1 SUMMARY OF THE PETITION FILED BY BYPL

1.1 This section contains a summary of the components of the petition submitted by BYPL

for the Commission‟s approval.

Energy Sales

1.2 Giving the actual category-wise sales figures for 2008-09, BYPL has submitted that its

energy sales were 3964 MU in 2008-09 although the quantum of sales approved in the MYT

Order for that year was only 3516 MU. On the basis of this trend, BYPL has projected sales

of 4505 MU in 2009-10 and 5010 MU in 2010-11, as against the projections made earlier in

the MYT Order.

1.3 Since sales are treated as an uncontrollable factor, BYPL has requested the Commission

to approve the revised projections instead of the comparatively lower sales approved for these

years in the MYT Order (applicable for the years 2008-09 and 2010-11) and the subsequent

True Up Order of 2009 (applicable for the year 2009-10), as shown below.

AT&C Losses BYPL has submitted the actual loss figures for 2008-09, which are better than the loss level

targets set in the MYT Order. As per the profit sharing mechanism laid down in the MYT

Regulations, the gains from this over-achievement of target are to be shared between the

consumers and the licensee.

Table 2 below shows the actual figures in 2008-09 of certain parameters, along with what

was approved in the MYT Order. The table also shows projections for 2009-10 and 2010-11

as approved in the MYT Order, which BYPL has retained in its petition.

67

Energy Balance 1.6 The energy balance for a licensee shows the balance between power purchase quantum,

energy lost due to the prevailing loss level and the final energy available for sale during the

year.

1.7 The quantum of power purchase is decided by the expected sales of energy by the

licensee, as well as the loss levels projected/approved. Higher expected sales require a greater

quantum of power to be purchased. Similarly, higher loss levels also require a proportionately

greater amount of power purchase by the licensee because it needs to meet the expected sales

(in MU) after accounting for various losses in the process of supplying electricity.

1.8 The energy sales for a year are grossed up by the loss levels for the year, to give the

required quantum of power purchase for that year in the following manner:

Quantum of power purchase (MU) = Energy sales (1 – Distribution Loss (%))

1.9 Table 3 below shows the actual sales, loss levels and power purchase for the year 2008-09

by the licensee, and give the projections for 2009-10 and 2010-11.

Power Purchase Cost 1.10 As per the MYT Regulations, 2007, power purchase cost is uncontrollable and the

licensee is allowed to recover the cost of power procurement from various sources.

1.11 BYPL in its petition has submitted that the actual rate at which it purchased power in the

year 2008-09 was lower than the rate approved for the year in the MYT Order, but the

quantum of power purchase in 2008-09 was much higher than the approved quantum in the

MYT Order. BYPL has stated that the actual rate for 2008-09 was Rs. 2.43/unit as opposed to

the approved rate of Rs. 2.56/unit, but the actual quantum of power purchased in 2008-09 was

5282.6 MU which is much more than the 4943 MU approved for that year in the MYT Order.

Hence, BYPL has submitted that it incurred a higher power purchase cost (Rs. 1282 crores)

in 2008-09 than the amount approved in the MYT Order (Rs. 1267 crores).

1.12 Tables 4 (a) and (b) show the power purchase quantum and rate of purchase submitted

by BYPL for the Commission‟s approval for the years 2008-09 (actual), 2009-10 and 2010-

68

11 (projected) along with the cost approved by the Commission in the MYT Order

(applicable for 2008-09 and 2010-11) and the True up Order (applicable for 2009-10).

1.13 Table 5 below shows the power purchase cost submitted by BYPL for the Commission‟s

approval for the years 2008-09 (actual), 2009-10 and 2010-11. The table also shows the

amounts approved by the Commission earlier in the MYT Order (applicable for the years

2008-09 and 2010-11) and in the True up Order (applicable for the year 2009-10) issued by

the Commission.

69

Past Period ATE Order 1.14 BYPL appealed to the Appellate Tribunal for Electricity (hereinafter referred to as

„ATE‟) seeking review/modification of the MYT Order issued by the Commission, after

which the ATE issued an Order dated October 6, 2009. The salient features of the ATE Order

are detailed below:

(a) Reactive energy charges: The ATE allowed BYPL to recover the Reactive Energy

Charges incurred by it on the basis that these charges are a part of the power procurement

cost. Hence, BYPL was allowed to recover reactive energy charges of Rs. 0.98 crores through

tariff.

(b) R&M Expenses: BYPL has submitted that the Commission in its MYT Order had not

approved its entire R&M expenses for the years 2004-05, 2005-06 and 2006-07. On

appealing to the ATE, the ATE Order held that BYPL‟s entire R&M expenses, as shown in

its audited accounts, should be allowed by the Commission. Due to this the following

amounts now need to be trued up and have been included by BYPL in the ARR calculation

for the year 2010-11, as shown in Table 6.

(c) SVRS Pension: As per the ATE Order, the Commission must allow BYPL the expenses

incurred towards retirement of those who opted for the Special Voluntary Retirement Scheme

(SVRS) and include the same in its ARR computation. The same has been shown below.

(d) Increase in employee expenses corresponding to expansion in consumer base: The ATE

Order held that the Commission shall true up the additional employee expenses of BYPL

incurred due to increase in its consumer base. On account of this, the additional O&M

expenses projected by BYPL after factoring in the increase in consumers up to the year 2010-

11 are shown below.

70

(e) A&G expenses: The Commission in its MYT Order had not approved the entire A&G

expenses proposed by BYPL. Following the ATE Order on the same, the

Licensee has submitted the remaining amount of A&G expenses to be trued up, as shown

below in Table 9.

1.15 Hence, the total year on year impact due to implementation of the ATE Order as detailed

above, is shown in Table 10.

1.16 On a carry-forward basis, the net impact of the ATE Order has been shown by BYPL in

its petition as given below.

71

O&M Expenditure 1.17 As detailed in the previous section, although O&M expenditure has been considered to

be a “controllable” element according to the MYT Regulations, 2007, due to various factors

outside the licensee‟s control, several deviations from the planned trajectory need to be taken

into account by the Commission.

1.18 BYPL has stated the following reasons in its petition for true-up of O&M costs:

8 (a) Impact of Sixth Pay Commission on the pay of DVB employees: The Commission in its

MYT Order had recognised the uncontrollable nature of Sixth Pay Commission

recommendations in determination of employee expenses incurred on ex-DVB employees

during the Control Period. It has accordingly considered a provisional increase @10% in the

total employee expenses w.e.f. January 2006 and had stated that a true-up would be done later

based on the actual impact. BYPL has now submitted that it has already paid a sum of Rs.

67.78 crores (Rs. 7.26 crores in 2008-09 and Rs. 60.52 crores in 2009-10) but has considered

Rs. 24.50 crores in 2008-09 as per the methodology adopted by the Commission read with

the ATE Order. The balance for ex-DVB employees will be paid in 2009-10 and has been

considered accordingly.

(b) Impact of Sixth Pay Commission on the pay of non-DVB employees: As per the ATE

Order, a salary hike comparable to the Sixth Pay Commission‟s recommendations for

employees other than ex-DVB employees shall also be allowed in true up process in case

expenditure in that account has already been incurred. BYPL is yet to release any amount on

this account.

(c) Correction of inflation-linked indexation for employee cost and A&G expenses: The

MYT Regulations, 2007 say that employee cost and A&G expenses shall be linked to an

inflation-based index that takes into account the inflation indices of the immediate past five

years. However, while fixing the tariff for FY 2007-08, the Commission had taken inflation

figures for FY 2001-02 to FY 2005-06 because the figures for FY 2006-07 were not available

then. However, now that inflation indices for FY 2006-07 are available, the Commission has

to replace the provisional computation for FY 2007-08 with confirmed figures by correcting

the indexation.

1.19 BYPL has submitted that due to the above mentioned reasons, the O&M costs it

incurred in year 2008-09 are much higher than what was approved in the MYT Order. Hence

it has requested the Commission for a true-up of costs and revision of ARR.

1.20 Table 12 below shows the proposed O&M expenses for year 2008-09, 2009-10 and

2010-11 along with the expenses approved in the MYT Order.

72

Depreciation 1.21 According to the MYT Regulations, 2007, depreciation charges are not to be trued up on

an annual basis and shall be trued up only once at the end of the control period

(Year 2007-08 to year 2010-11). Hence, BYPL has assumed the same depreciation as

allowed by the Commission in its MYT Order for the purpose of ARR computation.

1.22 Table 13 shows the depreciation cost as submitted by the licensee for 2008-09, 2009-10

and 2010-11. The petition figures shown in Table 13 are the amounts that were proposed in

the licensee‟s petition before the issue of the MYT Order. The amounts showed as approved

are the amounts approved earlier in the MYT Order issued by the Commission.

Return on Capital Employed (RoCE) 1.23 Like depreciation, Return on Capital Employed is not reviewed on an annual basis and

will be trued up only once at the end of the control period (year 2007-08 to year 2010-11).

Hence, for the purpose of ARR calculation, BYPL has assumed the same RoCE as allowed

by the Commission in its MYT Order.

1.24 The Regulated Rate Base on which the return is calculated includes the original cost of

Fixed Assets and the Working Capital less the accumulated depreciation. The licensee has

submitted that it has calculated the RRB after considering the methodology specified in the

MYT Regulations, 2007. The Weighted Average Cost of Capital (WACC) and the Cost of

Debt have also been computed as per the MYT Regulations, according to the licensee‟s

submission.

1.25 BYPL has submitted the following amounts as the Return on Capital Employed for the

years 2008-09, 2009-10 and 2010-11, along with the RoCE approved in the MYT Order.

Non Tariff Income (NTI) 1.28 Apart from the revenue earned in accordance with the tariff schedule from supplying

power to consumers, Distribution licensees also earn income from other sources such as

interest received on deposits, loans and advances; delayed payment surcharge levied on bills

73

that are paid late; sale of scrap, etc. This income is called Non-Tariff Income (NTI) and it

needs to be subtracted from the total expenditure of the licensee in order to compute the

licensee‟s Aggregate Revenue Requirement of the licensee.

1.29 BYPL has proposed the following amounts as NTI for the years 2008-09, 2009-10 and

2010-11. The amounts showed as „approved‟ are the amounts approved earlier in the MYT

Order (applicable for the years 2008-09 and 2010-11) and the True up Order (applicable for

the year 2009-10) issued by the Commission.

Aggregate Revenue Requirement (ARR) 1.30 On the basis of the costs incurred in the year 2008-09, and projections for 2009-10 and

2010-11, and after subtracting the Non Tariff Income for each of the three years, BYPL has

projected the following Aggregate Revenue Requirement.

Revenue from Sale of Power 1.31 BYPL has submitted that it achieved greater sales in the year 2008-09 than projected in

the MYT Order and has shown the energy sales of 2008-09, along with projections for 2009-

10 and 2010-11, as given below in Table 18.

Revenue Gap 1.32 BYPL has submitted that is after reducing the revenue obtained from tariff at existing

rates from its Aggregate Revenue Requirement, it is facing a revenue gap as shown below in

Table 19.

74

Tariff Proposal 1.33 In order to recover the entire gap of Rs 1308.86 crores submitted by BYPL, the tariff

(fixed and energy charges) will need to be increased by 60.04% across all consumer

categories.

1.34 BYPL has also suggested some tariff rationalization measures, as given below:

(a) Proposal for implementation of Automatic Power Purchase Price Adjustment mechanism:

BYPL submits that at present, due to the methodology of true-up of power purchase costs on

the basis of actual audit accounts, it takes two years for legitimate power purchase costs to be

passed on to the consumers due to which future consumers have to bear the burden of past

revenue gap along with the carrying cost. Therefore, BYPL has requested the Commission to

institute a mechanism for automatic Power Purchase Price Adjustment on quarterly basis, and

has proposed details of the same.

(b) Tariff intervention to address under declaration of load: BYPL has proposed that the

provision of charging fixed charges based on Maximum Demand Indicator (MDI) reading for

the Domestic category should be reintroduced in the tariff, since increase in demand by any

consumer category more than the sanctioned load leads to overloading in the system and

increases losses in the network.

(c) Uniform fixed charges up to the load of 5.0 kW: BYPL has stated that most Domestic

consumers have a connected load greater than 2 kW although their sanctioned load is less

than 2 kW. BRPL has submitted that this gives undue advantage to consumers who have not

increased their declared load to the actual connected load, while consumers of other billed

load are paying the fixed charges. To avoid this, the licensee has requested the Commission

to rationalize the slab-based fixed charges.

(d) kVAh billing for industrial and non-domestic consumers with MDI greater than 10 kW:

The licensee has requested that for industrial and non-domestic consumers with MDI greater

than 10 kW, it should be entitled to charge kVAh tariff since it encourages consumers to

improve their power factor which eventually helps the system by less loading and reduction

in losses.

(e) Public Hoardings/ display boards using electricity for lighting to be charged on separate

tariff: BYPL has submitted that hoardings/public display boards that use high energy

consuming luminaries cause a significant wastage of energy. The licensee submits that such

hoardings/public display boards may be considered for billing under separate category at a

tariff higher than the Non-Domestic category. However, hoardings/public display boards

using LED devices for lighting may be provided with appropriate incentive to encourage

more efficient use of electricity.

(f) Introduction of time differential tariffs for Consumers with Load > 10 kW for demand side

management: BYPL has submitted that Time Differential Tariffs would result in

smoothening of demand curve which ultimately results in savings for the consumers by way

of lower power purchase cost. BRPL has suggested that the Commission may review the

75

possibility of introduction of time differential tariffs for consumers, say for load > 10 kW to

start with, through informed deliberations with stakeholders.

Controversy: -

The basic and controversy between DERC and Discom‟s is based on very few but important

and fundamental principles.

The Delhi Discom BSES Yamuna Power limited filled their tariff revision petition on dated

05.01.2010 for true up for the year 2008-09 and determination of ARR for the Year 2010-11

and same were published with media and websites of DERC .Public notice to elicit

responses/objections from stakeholders was issued and public hearing was held over three

days. After considering all relevant materials, tariff orders were under preparation in

Respect of each of the three private Discorns.

One day before the tariff orders could be formally issued, DERC

Has received a communication from the State Government. The said

Communication states that the three Discoms have made certain representations to the State

Government. It goes on to say:

As the issues raised by the Distribution Companies as well as the issue of burdening future

consumers with past liabilities are issues which are very serious in nature, the

Government in exercise of its power under Section 86(2)(iv) directs the DERC to give

statutory advice and clarification to the Government on the issue raised by the Distribution

companies in the enclosed representations as well as on the issues covered under clause

5.4(h)-4 of the National Tariff Policy. The Government further directs under Section 108 of

the Electricity Act 2003 that the DERC will not issue the tariff order till the statutory advice

Given by the Commission has asked for is thoroughly examined by the Government and the

Government gives a go ahead for passing of tariff orders.

Then DERC seek the Opinion of Solicitor General of India in this matter where Solicitor

General advised DERC to proceed with some principles saying it quasi-judicial Function and

NCT Government should not intervene.

Mean while DERC recorded following Observations studding the Presentation filed by

BSES Yamuna Power limited.

i. Highest Cash Profit of Rs. 157.33 Crore in 2009-10 which

increased from 16.89 Crore in 2007-08, an increase of

831% in two years only.

ii. Tangible Net worth in 2009-10 is Rs. 320.06 crores which

increased from Rs. 224.20 crores in 2008-09 (43%

increases) and from Rs. 38.54 crores in 2004-05 (730%

increase)

iii. Current Ratio is 2.47:1 in 2009-10 against ratio 0.87:1 in

2004-05 which shows ideal health of company as on date.

76

iv. High net cash accrual of Rs. 71.65 Crore against 3.66 cr in

2004-05.

v. Long term Debt/Equity Ratio improved considerably in

2009-10 to 5.32 from 9.10 in 2004-05.

vi. Debt Service Coverage Ratio (DSCR) is 0.70 in 2009-10.

vii. Interest service coverage Ratio (ISCR) is 2.03 in 2009-10.

The report of the credit rating agency CARE was highlighted where CARE have rated BSES

as BBB+ (Triple B plus) for long-term borrowing and PR3 (PR three) for short-term

borrowing. These are fairly reasonable credit rating. BBB denotes moderate safety for timely

servicing of debt obligations which carry moderate credit risk. BSES‟s rating is higher than

BBB as BBB+ is between BBB and A. The rating agency CARE in its latest available report

dated March 2009 mentions the following important figures for three years on the basis of

which good rating has been given to BSES.

DERC further said that Despite good financial position of BSES and fairly good credit

rating, as mentioned above, they have chosen to say, in their representation, that their net

worth is negative/inadequate even though the tangible net worth as on 31.03.2010 is Rs. 320

crores. Although they shall appreciate that the factual position as reflected in the audited

books of accounts and in the report of the credit rating agency are entirely different from that

mentioned by them in their representation which indicates that they have not given correct

facts in their representation to the GoNCTD on 03.05.2010. It is also relevant to note that the

77

audited accounts from 2004-05 to 2009-10 have been submitted to DERC by them only and

the report of the credit rating agency CARE is also based on audited accounts only.

Further Some Points made by BSES was counter attacked by DERC which can be mentioned

as below.

BYPL made Apprehension that lenders will put a ban on fresh lending.

DERC said that No letter from the any lender has been presented by BSES to establish that

they have refused loan on the ground that net worth from the lenders‟ perspective is negative.

On the contrary, the credit rating assigned by CARE in March 2010 to BSES is BBB+ (Triple

B+) (upgraded from BBB in 2009) for long term bank facility and PR3 (PR three) for short

term bank facility.

BYPL said they have Negative/inadequate net worth from the lenders perspective

DERC attacked saying that it is not correct. The tangible net worth at the end of FY 2009-10

is Rs. 320.06 crores, it has increased by 730% from 38.54 crores in 2004-05 to 320.06 crores

in 2009-10. CARE report also calculates tangible net worth on the same basis as in Annexure

A as the net worth for 05-06; 06-07 & 07-08 in both statements (Annexure A&B) are same.

When the tangible net worth is so substantial, by no stretch of imagination it can be said to be

inadequate or negative.

BYPL said that Borrowing limits are over stretched and there is no further possibility of

borrowing unless banks are able to see a suitable way forward for recovery of their

outstanding.

Whereas DERC made statement that BBB+ is third best possible rating given to corporate

out of only eight credit ratings available for the purpose of obtaining loans.

BYPL said that Debt equity ratio is negative13.6.

DERC cleared that Annexure Submitted shows the ratios from FY 2004-05 to 2009-10. The

Debt Equity Ratio in FY 2009-10 is 5.32 (and not negative 13.6 as claimed by them in the

representation). The total debt/net-worth has also come down to 5.76 in 2009-10 from 9.40 in

2007-08.

It is noticed from the Annexure 5 to their representation that while calculating the debt equity

ratio, they have deducted regulatory gap of Rs. 262.55 crores from the equity so that the total

equity has become negative Rs. 112.28 crores. This is against norms of accounting standards.

First of all, there is no basis for regulatory gap of Rs. 262.55 crores. Second, there is no basis

for deduction of this amount from the equity as accounting norms do not provide for this.

Third, it is seen that they have not mentioned on what date the debt equity ratio has been

calculated by you in Annexure 5. Fourth, the debt equity ratio calculated by CARE even for

past years in their report is also never negative.

BYPL: Debt service coverage ratio is 0.16.

DERC replied that Debt service coverage ratio is 0.70 (and not 0.16 as mentioned by BYPL).

Calculation of debt service coverage ratio by BYPL is also not correct in Annexure 5 because

again regulatory gap has been deducted from the EBIDTA, against the norms of accounting

standards. It is strange that BYPL are deducting regulatory gap from equity also and from

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EBIDTA also. It is misleading to show the ratio on the basis of figures outside audited books

of accounts.

BYPLcalculated Revenue gap of Rs. 235 crores up to FY 2008-09. But as per DERC they

said that the actual revenue gap up to FY2008-09 is not Rs.235 crores and will be known only

after Tariff Order. It may be a much lower figure or even a surplus. It is misleading to say

that the gap is Rs. 235 crores, knowing full well that true up order is pending. A licensee can

never state that their petition is the final word as it is always subject to prudence check and

public hearing and all information relating to tariff determination has to be placed before all

stakeholders.

BYPL: An additional revenue gap of Rs. 766 crores for FY 2009-10.

DERC replied that the figure of Rs.766 crores stated by BYPL is again mere projection in the

petition filed on 15 December 2009 and is not based on any audited/authenticated figures. It

is only the energy account surplus or gap (i.e. Income from energy sale minus power

purchase cost) which is relevant and not the difference between projection and power

purchase cost differential.

Audited accounts were ready with them on 28th April 2010 and even then these figures in

their representation to the government submitted on May 3, 2010 is not based on the accounts

but on the estimates made at the time of filing of the petition. They could have given the

actual surplus on the basis of audited accounts. It is misleading to present such projection or

estimate as the real figure, as they have done in the representation, without even referring to

the figures in audited accounts already available with them.

The above-mentioned factual position is based on the audited accounts submitted by BYPL.

10.3 Critical Analysis: - As per the total Scene observed from the above case the author of this paper has some

view which are extremely personal views shall not taken in any unlawful way.

1) As advised by Solicitor General of India it was made clear to

go ahead with Quassi –judicial function but it is quiet un

appreciable for DERC that their internal differences came out

with public and media.

2) It is observed that there are two groups formed in DERC which

is quiet harmful for such a judicial and public interest

commission.

3) As per my Opinion chairman alleged the one of the members

saying that he counsellor to the Discom which is not right as

judicial person.

4) Members of DERC were not responding to Correspondence of

Chairman of DERC which shows their extreme differences.

5) Thorough discussions were not carried out with DERC

members and Chairman which shows ill functioning of

Organisation.

6) The Representation by BSES should have been submitted with

Audited reports but they fail to make it.

7) Most of the Ratios and Statement submitted by Discoms are

based on Projections instead of real Audited accounts reports.

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8) BSES Should have Supported their statement of power

Purchase costs with the ground realities that the new power

plants are delaying like Bawana has been delaying by Six

months and Dadri and Domodhar Vally for more than two

months, but they fail to do so.

9) Efficient Power Procurement Operations should be adopted by

BYPL so that the raising power purchase cost should not be

encouraged at any stage.

10) As Law Says it is domain of Regulator to make Regulatory

assets.BYPL and others made it in their Presentation which

really should be avoided.

11) Power Purchase cost Projections by BYPL for Future are not

Supported by Authentic documents which makes poor

influence on DERC.

12) There seem to be inconsistency between Different statements

and papers submitted by BYPL to various agencies. It is safe

that those are Projections, but should have more Consistency to

make good Impression.

13) Proper and immediate regulation for fuel adjustment charges

should be brought by DERC.

14) Both Discoms and Regulator Should have Consumer Oriented

attitude as public is misleading by media.

15) NCT Government should have strategic Policy regarding the

Autonomy and Discipline of DERC.

11 CONCLUSIONS

Delhiites can rule out any kind of electricity tariff revision this year as DERC chairman and

two members are unable to reach a consensus on tariff in Delhi. It may be occurred after

common wealth games in October.

New appointees in DERC would be likely to review the situation afresh before

reaching the final decision on what Delhi Should pay for power. The decision not likely to be

implemented before next year.

As DERC Chairman Berjinder Singh is due for retirement in September, it seems that

whole Controversy will come to end in Favor of Delhi Discoms.A hike in tariff next year will

be on the board mainly due to delay in Commissioning dates of mega projects and increase in

Gas prices.Bawana has been Delayed by almost six months, Dadri and DVC delayed more

than two months. This means longer durations where Discoms have to Purchase power from

outside. If the number adds up, the commission could be forced to announce a hike in 2011.

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12 REFERENCES

References

National Electricity Policy and National Tariff Policy

Multi Year Tariff Regulation Delhi, 2007

Delhi Electricity Regulatory Commission (Terms and Conditions of Tariff)

Regulations, 2004, & 2005

Delhi Electricity Regulatory Commission (Conduct of Business) Regulations, 2004

NDPL, BRPL & BYPL petition of ARR for FY 2008-09 to 2010-11 & Multi Year

Tariff for FY 2008-09

Electricity Act 2003

Electricity Regulatory Commission 1998

Various orders related to tariff determinations by DERC.

Websites

www.derc.gov.in

www.cerc.gov.in

www.powermin.gov.in

www.cea.nic.in

www.bsesdelhi.com

www.ndplonline.com

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12. ANNEXTURE-I

LIST OF TABLES & FIGURES

Table A: Pre-privatization scenario

Table B: AT&C losses

Table C: Loss reduction

Table D: Comparison of loss reduction

Table E: Area of DISCOMs

Table F: Trends of capital expenditure

Figure 1: Trends of capital expenditure NDPL

Figure 2: Trends of capital expenditure BRPL

Figure 3: Trends of capital expenditure BYPL

Table G: O & M Expenses of various years

Figure 4: Trends of employee expenditure NDPL

Figure 5: Trends of A&G expenditure NDPL

Figure 6: Trends of R&M in NDPL

Figure 7: Trends of employee expenses in BRPL

Figure 8: Trends of A&G expenses in BRPL

Figure 9: Trends of R&M expenses in BRPL

Figure 10: Trends of employee expenses in BYPL

Figure 11: Trends of A&G expenses in BYPL

Figure 12: Trends of R&M expenses in BYPL

Table H: Hike in tariff amount in the policy direction period and MYT period

Table I: Tariff Structure for various years

Table J: PP Cost for various years

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ANNEXTURE-II

LIST of ABREAVIATION

AAD: Advance against Depreciation

ABT: Availability based Tariff

AMR: automated Meter Reading

APDRP: Accelerated Power development reform Program me

ARR: Aggregate Revenue Requirement

AT&C: Aggregate Technical & Commercial

A&G: Administrative & General

BARC: Bhabha Atomic Research Centre

BEE: Bureau of Energy Efficiency

BEST: Brihanmumbai Electric Supply & Transport Undertaking

BRPL: BSES Rajdhani Power Limited

BSES: Bombay Suburban Electric Supply

BST: Bulk Supply Tariff

BYPL: BSES Yamuna Power Limited

CAG: Controller and Auditor General of India

CERC: Central Electricity Regulatory Commission

CFL: Compact Fluorescent Lamp

CPRI: Central Power Research Institute

DA: Dearness Allowance

DERA: Delhi Electricity Reform Act

DERC: Delhi Electricity Regulatory Commission

DESU: Delhi Electricity Supply Undertaking

DIAL: Delhi International Authority Limited

DISCOM: Distribution Company.

DJB: Delhi Jal Board

DMRC: Delhi Metro Rail Corporation

DSM: Demand Side Management

DTL: Delhi Transco Limited

DVB: Delhi Vidyut Board

EA: Electricity Act

ERTL: Electronics Regional Test Laboratory

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FOR: Forum of Regulators

FPA: Fuel Price Agreement

FY: Financial Year

GoNCTD: Government of National Capital Territory of Delhi

GENCO: Generation Company

HRA: House Rent Allowance

HVDC: High Voltage

HV/LV: High Voltage/ Low Voltage

IEGC: Indian Electricity Grid Code

ISI: Indian Standard Institution

JJ CLUSTER: Jhugghi Jhopadi Cluster

MCD: Municipal Corporation of Delhi

MERC: Maharashtra Electricity Regulatory Commission

MES: Military Engineering Services

MMC: Monthly Minimum Charges

MMRDA: Mumbai Metropolitan Region Development Authority

MLHT: Mixed Load High Tension

MYT: Multi Year Tariff

NABL: National Accreditation Board for Testing & Calibration Laboratories

NCT: National Capital Territory

NDLT: Non Domestic Low Tension

NDMC: New Delhi Municipal Corporation

NDPL: North Delhi Power Limited

NGO: Non Government Organization

NRLDC: Northern Regional Load Dispatch Centre

O&M: Operation & Maintenance

PPA: Power Purchase Agreement

REL: Reliance Energy Limited

REL-D: Reliance Energy Limited- Distribution

RoCE: Return on Capital Employed

ROR: Rate of Return

R&M: Repair & Maintenance

SCADA: Supervisory Control and Data Acquisition

SLDC: State Load Dispatch Centre

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STU: state Transmission Utility

TOD: Time of Day

TPC-D: Tata Power Company- Distribution

TRANSCO: Transmission Company

T&D: Transmission & Distribution

UI: Unscheduled Interchange

VRS: Voluntary Retirement System