1
Analysis of OPTCL’s ARR and Transmission
tariff for FY 2011-12
By:World Institute of Sustainable Energy, Pune
(Consumer Counsel)4th February, 2011
Proposal of OPTCL
3
Proposed Revenue Requirement for FY 11-12 (Rs Cr)
R&M Cost7%
A&G Cost3%
Interest on loan8%
Interest on Working Capital
4%
Return on Equity2%
Depreciation11%
Employee Cost65%
Employee Cost 952.06
R&M Cost 93.89
A&G Cost 38.34
Interest on loan 111.30
Interest on Working Capital 59.08
Depreciation 156.40
Return on Equity 24.81
Sub-total 1435.88
Pass through expenses 127.25
Contingency Reserve 15.16
Bad & Doubtful Debt 0.10
GCC Expense 0.30
Total gross requirement: 1578.69 Rs Crore
Analysis of ARR and
Transmission Tariff
5
Transmission loss
3.00
3.50
4.00
4.50
5.00
5.50
Approved (%) 4.00 4.00 5.00 4.50 4.00 4.00 3.90
Actual audited (%) 4.60 5.04 4.82 4.52 4.11 3.89 3.90
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
(upto Sept,10)
2011-12 (Propos
ed)
6
Employee cost incl. terminal benefits (Rs Cr.)
Item Proposed for 2009-10
Approved for 2009-10
Proposed for 2010-11
Approved 2010-11
Proposed 2011-12
Gross amount 498.99 186.17 875.78 290.22 961.66
Less capitalization 7.61 7.61 10.66 10.66 9.60
Net employees cost
491.38 178.56 865.12 279.56 952.06
10-11 Approved 11-12 Proposed
Basic pay +GP 62.12 98.57
DA 20.50 62.1
HRA 9.32 19.71
Provision towards arrear pay 49.03 49.04
Terminal benefit 140.20 717.25*
Others 9.05 14.99
Less capitalization 10.66 9.60
Total 279.56 952.06
*Including payment of differential pension and pensionary benefits
Employee cost incl. terminal benefits (contd.)
Submission• OPTCL has requested 241% rise in employee cost
including terminal benefit in ARR of FY 2011-12• Basic Pay + GP: Yearly escalation of 3% shall be
allowed over the Commissioned approved amount of 2010-11
• DA: The DA proposed for 2011-12 (63%) seems to be on higher side and therefore may be reviewed
• HRA: The HRA Proposed for 2011-12 (20% ) may be reviewed according to Govt norms
• Terminal benefit: may be finalized as per independent valuation report
7
8
R&M and A&G Expenses (Rs Cr.)
R&M Approved Actual
2004-05 14.07 4.59
2005-06 14.80 6.94
2006-07 36.00 11.31
2007-08 47.00 16.52
2008-09 53.88 15.66
2009-10 47.00 54.03
2010-11 60.00 16.16 (upto Sept’10)
98.14 (proposed)
2011-12 93.89 (proposed)
Particulars Proposed FY 2011-12
a) O&M 71.93
b) Telecom R&M
13.10
c) Civil Works 2.80
d) IT 6.06
Total R&M 93.89
(56.48% increase over approved)
09-10 approved
10-11 Projection
10-11 approved
11-12 projection
% increase over 10-11approved
A&G Expenses 14.35 26.99 15.14 38.34 153.24%
R&M and A&G Expenses (contd.
Submission• The approved and actual R&M expenses in last
few years reveal that OPTCL actually incurred less than 50% expenditure on R&M (except 2009-10); therefore, consumer should not be burdened with excessive projected R&M expenses
• As per OPTCL Business Plan 5.5% yearly escalation in A&G expenses shall be allowed to pass through in ARR (i.e. Rs. 15.97 Cr against projection of Rs 38.34 Cr for FY 2011-12)
9
10
O&M Expenses as per CERC
O&M Expenses as per CERC Norms for FY 2011-12
Segregation of Bays Bays Rs Lakh/ bay O&M (Rs Cr)
765 kv 0 81.99 0.00
400 kv 33 58.57 19.33
220 kv 224 41.00 91.84
132 kv and below 1384 29.28 405.24
TOTAL O&M EXPENSES FOR BAYS 516.40
Segregation of EHT lines Ckt kM (Rs Lakh / Ckt km)
O&M (Rs Cr)
Single Circuit (Bundled conductor with four or more sub-conductors)
0 0.600 0.00
Single Circuit (Twin & Triple Conductor) 245.201 0.400 0.98
Single Circuit (Single Conductor)3872.55
30.200 7.75
Double Circuit (Bundled conductor with four or more sub-conductors)
0 1.051 0.00
Double Circuit (Twin & Triple Conductor) 276.734 0.701 1.94
Double Circuit (Single Conductor)6852.45
80.301 20.63
TOTAL O&M EXPENSES FOR LINES 31.29
TOTAL O&M EXPENSES FOR BOTH LINES & BAYS 547.70
Projected O&M: 1084.29 Rs Crore (Employee:952.06, R&M:93.89, A&G:38.34); whereas as per CERC Regulation it can be reduced by nearly 50%
11
Loan liability
Observation:• OPTCL has proposed new loans of 903.82 Crore
@11% to be availed in FY 2011-12• OPTCL has reported State Govt (cash loan)
balance of the tune of Rs 2 Cr. And requested to allow Rs 0.26 Cr as a interest component of that in the ARR
Submission• New loan interest 68.94 Cr shall not to be passed
through in the ARR of FY 2011-12• Interest on State Govt. (Cash loan) should be kept
in abeyance as per Govt directive
Capex Plan
12
Capex Projected:
Capex plan given in ARR for 2011-12 (Rs Cr.)
Capex Plan submitted on 12.07.2010 (Rs Cr.)
O&M 291.15 106.52
Telecom 73.65 142.5
Information Technology 12.66 13.32
TP & Con. (Excluding Deposit Works) 591.62 720.38
Civil Works 35.16
Total Capital Expenditure 1004.24 982.72Observation:The reasons for variation in expenses under O&M and telecom reported in earlier capex plan and ARR submission need to be verified
13
Gross fixed asset and depreciation
Gross fixed asset
As on 1-4-2009 (actual)
Addition in 09-10 (Given in ARR 11-12) As on 1-4-2010
Addition in 10-11 (Given in ARR 11-12)
As on 1-4-2011 (Rs Cr.)
Option 1: 1924.48 163.84 2088.32 453.74 2542.06
Option2:
2478.16 (OERC
Approved in 10-11 order)
453.742931.90
Particulars
Depreciation Rate CERC
Depreciation @ Pre-92 Rate
Gross Block (01-04-10) (Provn.)
Gross Block (01-04-11)
(Projected)
Deprcn. for FY 11-12 -CERC
Deprcn. 11-12 @ Pre-92
Land and Rights 0.00% 0.00% 34.75 40.87 0.00 0.00
Buildings 3.34% 1.80% 73.16 86.03 2.87 1.55
P & M(Other Civil works) 3.34% 1.80% 4.31 5.06 0.17 0.09
Plant & Machinery 5.28% 3.80% 1153.31 1356.21 71.61 51.54
Plant & Machinery (Lines, Cables etc) 5.28% 2.57% 1302.56 1531.72 80.87 39.37
Vehicles 9.50% 12.86% 1.43 1.69 0.16 0.22
Furniture, Fixture 6.33% 4.55% 2.22 2.62 0.17 0.12
Office Equipment 6.33% 9.00% 7.35 8.64 0.55 0.78
TOTAL (Rs Cr.) 2579.09 3032.84 156.40 93.67
Gross fixed asset and depreciation
Submission:• Consumer counsel has calculated the
Gross Fixed Asset by taking reference 0f OERC actual and approved GFA as on 1.04.2009 and 1.04.2010 respectively
• After addition the yearly addition (09-10 & 10-11 as given in ARR), the GFA arrived are lower than that claimed by OPTCL
• Commission may consider the GFA as determined in the previous slide
14
15
Return on equity, Reserve & others
Observation:• Equity claimed by OPTCL: Rs 160.07 Cr – 60.07
(old) + 48.05 (received) + 51.94 (expected)Submission:• Commission shall not allow RoE on ol d equity and
expected equity base• Reasonable RoE = 48.05 * 15.5% = Rs 7.45 Cr
(claimed RoE - Rs 24.81 Cr)• Disallow the claim for further Contingency reserve • Interest on working capital, bad debts and pass
through expenses shall not be pass through in ARR
16
Summary of ARR (2011-12)ITEMS Approved
for 09-10 Approved for 2010-11
Proposed for FY11-12
10-11 Vs. 09-10
11-12 vs 10-
11
Employees Cost including Terminal Benefits
173.11 279.56952.06
61.49% 240.5%
R&M Cost 97.00 60.00
93.89-38.14% 56.48
%
A&G Cost 14.35 15.14
38.345.51% 153.24
%
Interest on Loan Capital 70.53 53.39
111.30-24.30% 108.47
%
Depreciation 66.07 76.60
156.4015.94% 104.18
%
Repayment obligation 44.36 -
Return on Equity 0.00 4.35 24.81
Interest on Working Capital 0.00 - 59.08
Sub-Total 415.42
489.04 1435.8817.72% 193.61
%
Special Appropriation 39.37
Pass Through Expenses - 127.25
Contingency Reserve 9.08 - 15.16
Bad & doubtful debt Debts 0.00 - 0.10
GCC Expense including SLDC charges 0.15 0.82 0.30
Total (Rs Cr.)424.65 529.23
1578.6924.63% 198.3
%
Less Misc. Receipts 30.50 48.30 5.00
Annual Revenue Requirement (Rs Cr.)394.15 480.93
1573.6922.02% 227.2
%
Transmission Charges (paise/unit)20.50
23.50 68.6814.64% 192.2
%
17
Proposed Transmission tariff
Sl No
Customer MURate
(P/U)Loss (%)
MU including Loss
Amount (Rs. Cr.)
1 CESU 7722 23.5 0 7722 181.47
2 NESCO 5465 23.5 0 5465 128.43
3 WESCO 6720 23.5 0 6720 157.92
4 SOUTHCO 2848 23.5 0 2848 66.93
Total DISTCOs 22755 22755 534.74
5 Emergency Sale 10 23.5 0 10.00 0.24
6 Wheeling of IMFA 50 23.5 3.9 52.03 1.22
7 Wheeling of NALCO 100 23.5 3.9 104.06 2.45
Total 22915 22921 538.65
Total Annual Revenue Requirement for FY 2011-12. 1573.69
Total Million Units proposed for Wheeling in MU 22915
Less: Revenue to be earned from LTOA Customers at the existing Transmission Charge @ 23.5 P/U
538.65
Deficit in ARR for FY 11-12 at the existing Transmission Charge @ 23.5 P/U
-1035.04
Proposed transmission tariff (P/U) 68.68
18
Open access charges
2010-11 2011-12
Long term OA charges (Rs / MW/ Day)
5640.00 16482.02 Proposed increase of 192%
Short term OA charges(Rs / MW/ Day)
1410.00 4120.51
Summary
• OPTCL has claimed a hike of 192% in transmission tariff which will increase the cost of electricity at consumer end
• The increase in transmission tariff is resulted due to higher claim of OPTCL in following components:
• Employee cost incl. terminal benefits and pension/R&M expenses/ A&G expenses/ Interest on new loan and old state govt. loans/ Gross fixed asset and depreciation/ RoE, Contingency reserve, Interest on working capital and pass through expenses
• Commission may consider the submission of consumer counsel and reduce the transmission tariff at reasonable level
20
Thank you