Bangalore Electricity Supply Company Limited Truing up for FY-14 and ARR for FY-16

Bangalore Electricity Supply Company Limited Truing up for FY-14 and ARR for FY-16

CHAPTER – 6

ANALYSIS OF TARIFF ORDER 2014

Commission issued the Tariff order for FY-14 on 06.05.2013 and thefollowing issues are analyzed:

• Sales and Revenue
• Fixed and variable cost
• Cross subsidy levels
• Source wise power purchase

1. Sales and Revenue:Approved V/s Actuals:

Metered & un- metered and HT & LT sales ratios:

On 06.05.2013, Commission approved tariff hike for the year FY-14 at an average of 24 paise per unit. In reality, the following points can be seen from the above table:

Average 24 paise per unit was obtained under LT category but not in HT category.

Though the targeted sale are not achieved in both LT and HT categories, there is huge financial impact for not achieving the targeted sales under HT ie., about 848 Mu less than the targeted sales resulting to revenue short of 842 Cr. which means to say that the revenue is short by Rs.10 per unit.

There is a perfect match between, metered un- metered sales and also HT LT sales ratios. However, the requisite cross subsidy component was reduceddue to less consumption in HT category sales from the approved sales. The reduction in HT category sales in BMAZ area (Both Industrial and Commercial) reduced the expected cross subsidy. A small extent of lossin cross subsidy is also contributed tocreation of new tariff for Hospitals and Education institutions.

As per Tariff order 2013, the average tariff proposed to be increased was 24 paise/unit. Commission approved Non Tariff income to the tune of 8paise per unit out of the revised tariff increase of 24 paise per unit. The non tariff income to 37% of average increase in tariff. Since this is non tariff revenue, it cannot be expected before hand. Commissionis requested not to consider the non tariff income as estimated revenue while determining the tariff.

1. Fixed and Variable cost: Approved V/s Actuals & Proposed for Truing up:

From the above data, it could be seen that:

Actual variable cost per unit is higher than the approved variable cost.Though, Fuel Cost Adjustment Charges (FAC) is in force from FY-14, it is not come to rescue, actual fixed cost per unit is decreased against the approved fixed cost.

Reduction in the realization rate is also contributes for the Gap.

Commission is requested to revisit the FAC formula for faster recovery of variable charges.

1. Cross subsidy levels:

Based on the above table, cross subsidy level from different tariff approved V/s Actuals and Proposed for truing up is computed as under:

• Over all Cross Subsidy contribution is reduced by 3% as per final accounts and reduced by 5% as per the ARR proposed for Truing up for FY-14.

• Cross subsidy contribution to an extent of 14% is not realized from HT category. That too in BMAZ area, it is 16%.

• Increase in cross subsidy requirement by 3% under Domestic- urban(Tariff applicable to Bangalore and urban areas) tariff further burdens the system.

• Commission is truing up only the expenditure but not on the receipts. The Commission is requested to carry the balance cross subsidy portion to the respective tariff while determining the tariff.

1. Source wise power Purchase : Approved V/s Actuals:

It could be seen from the table that 2237.2Mu of energy was less purchased, where as power purchase cost reduced to an extent of Rs. 78.75Crs.

For Analysis purpose, energy and the cost considered for energy balance is ignored and the computation is as under:

It could be seen from the above table, Power purchase cost per unit is increased from all sources except KPCL-Hydel. Break-up is as under:

Total Rs. 541.66Crs. increased due to increase in the rates of power purchase.

• 81% of total increase ie.,, Rs.441.73Crs. attributable to designated source ie., KPCL thermal, CGS and IPP’s,

• 24% of total increase ie., Rs.132.01Crs increased due to increase in unit cost with respect to Short term

• 5% of savings to the total increase ie., Rs.34.5 in hydel and NCE sources reduces the burden .

There is urgent need in faster recovery of variance in the power purchase cost from the designated source.

Approved Vs Realized tariff – Tariff wise and Division wise

LT-Domestic (LT2a (i)): Actual rate of realization (Avg Rs.4.49 per unit) line is little bit higher than Commission approved Tariff (Avg. Rs.4.45 per unit) It is good sign. However, Kengari, Peenya, Rajarajeswarinagar and Rajajinagar Divisions of Bangalore Metropolitan Area shows the realization below the approved level.

LT-Domestic (LT2a(i)) : Actual rate of realization (Avg Rs.3.69 per unit) line is little bit higher than Commission approved Tariff (Avg. Rs.3.66 per unit) It is good sign. However, 50:50 % of Rural Divisions are above and below the level of approved Tariff

LT-Comml (LT3a(i)) : Actual rate of realization (Avg Rs.7.86 per unit) is marginally ie., 3paise below the Commission approved Tariff (Avg. Rs.7.89 per unit). However , Majority (8 divisions out of 13) divisions of Bangalore Metropolitan Area, the realization rate below the approved level of Tariff.

LT-Comml (LT3a(ii)) : Actual rate of realization (Avg Rs.7.31 per unit) is far below the Commission approved Tariff (Avg. Rs.7.62 per unit). Except Nelamangala , all Rural Division’s realization rate is below the level of approved Tariff.

LT-Industrial (LT5a): Actual rate of realization (Avg Rs.5.95 per unit) is below the Commission approved Tariff (Avg. Rs.6.07 per unit). However , Majority (7 divisions out of 13) divisions of Bangalore Metropolitan Area, the realization rate below the approved level of Tariff.

LT-Industrial (LT5b): Actual rate of realization (Avg Rs.6.30 per unit) is above the Commission approved Tariff (Avg. Rs.5.82 per unit). Except Kolar, Chintamain, Ramanagar, the rest of Rural Divisions rate of realization is above the approved level .

LT-6 Water Supply: Actual rate of realization (Avg.6.97 per unit) line is abnormally higher the Commission approved Tariff.

LT-6 Water Supply: Actual rate of realization (Avg.7.30 per unit) line is abnormally higher the Commission approved Tariff

LT-6 Street light: Actual rate of realization (Avg.6.25 per unit) line is abnormally higher the Commission approved Tariff(Avg. Rs.4.84 per unit) This abnormality in water supply and street light actual rate of realization is included with the interest component. 30 to 75% of increase in rate over the Commission approved rates is due to levy of interest on dues payable by local bodies.

LT-6 Street light: Actual rate of realization (Avg.8.11 per unit) line is abnormally higher the Commission approved Tariff(Avg. Rs.4.84 per unit) This abnormality in water supply and street light in actual realization rate whcih includes interest component. 30 to 75% of increase in rate over the Commission approved rates is due to levy of interest on dues payable by local bodies.

LT-7 Temporary: Actual rate of realization (Avg.6.25 per unit) line is abnormally higher the Commission approved Tariff may be due to higher weekly minimum.

LT-7 Temporary: Actual rate of realization (Avg.6.25 per unit) line is abnormally higher the Commission approved Tariff may be due to higher weekly minimum

HT-1 Water Supply: Actual rate of realization (Avg.4.31 per unit) line is above the Commission approved Tariff(Avg. rate Rs.4.24) Abnormal rate of realization in KGF, Hiriyur, Chikkaballapur,Nelamangal,Chitradurga, Tiputur, Madhugiri and Kolar is mainly due to low consumption .

HT-2a(i) HT-Industrial: Actual rate of realization (Avg.5.37 per unit) line is much below the Commission approvedTariff ( Avg. rate Rs.6.22).

HT-2a(ii) HT-Industrial(Rural):Actual rate of realization (Avg.5.74 per unit) line is much below the Commission approved Tariff(Avg. rate Rs.6.14.

HT-2b(i) Commercial(urban): Actual rate of realization (Avg.7.90 per unit) line is much below the Commission approved Tariff(Avg. rate Rs.8.03).

HT-2b(ii) HT-Commll(Rural): Actual rate of realization (Avg.5.85per unit) line is much below the Commission approved Tariff(Avg. rate Rs.7.79 per unit).

HT-2c(i) HT- Govt /Charitable Hospitals/Education institutions: As per earlier Tariff Order ie., 30.04.2012, tariff applicable to this category is HT-industrial. Due to new categorization, realization rate is droped to Rs.5.54 per unit as against Rs.5.73 per unit ie. ,Actual ARR of industrial tariff .

HT-2c(ii) HT- Private Hospitals/Education institutions: As per earlier Tariff Order ie., 30.04.2012, tariff applicable to this category is HT-Comml. Due to new categorization, realization rate is dropped to Rs.7.27 per unit as against Rs.8.02 per unit ie., actual ARR of Comml tariff

HT-4 Residentrial : : Actual rate of realization (Avg5.94per unit) line is higher than the Commission approved Tariff(Avg. rate Rs.5.39 per unit).

HT-4 Temp : Actual rate of realization (Avg. 10.52per unit) line is higher than the Commission approved Tariff(Avg. rate Rs.9.63 per unit).

Division wise Tariff wise consumption per installationin BESCOM

Domestic consumption per installation per month- Urban

Note; for the purpose of computation, only number of installations read and billed is considered

Domestic consumption per installation per month- Rural

Note; for the purpose of computation, only number of installations read and billed is considered

Commercial consumption per installation per month- Urban

Commercial consumption per installation per month- Rural

IP consumption per installation per month

LT-Industrial –Urban < 5HP

LT-Industrial–Rural<5HP

LT-Industrial –Urban -5 to 40 HP

LT-Industrial –Rural -5 to 40 HP

LT-Industrial –Urban -40 to 67 HP

LT-Industrial –Rural -40 to 67 HP

Chapter 6Page 1