KARNATAKA ELECTRICITY REGULATORY COMMISSION

TARIFF ORDER 2017

ANNUAL PERFORMANCE REVIEW FOR FY16

&

REVISED ANNUAL REVENUE REQUIREMENT FOR FY18

&

REVISED TRANSMISSION TARIFF FOR FY18

OF

KPTCL

11th April 2017

6th & 7th Floor, Mahalaxmi Chambers

9/2, M.G. Road, Bengaluru-560 001

Phone: 080-25320213 / 25320214

Fax : 080-25591412 / 25320338

Website: www.karnataka.gov.in/kerc - E-mail: kerc-ka@nic.in

ii

C O N T E N T S

CHAPTER

Page

No. Order page 1

1.0 KPTCL-A brief Profile of the State Transmission utility 3

1.1 KPTCL At a Glance 4

1.2 Transmission capacity of KPTCL in FY16 4

2.0 Tariff Application Process 6

2.1 Background 6

2.2 Commission’s Directives & Compliance by KPTCL 6

2.3 Public hearing Process

6

2.4 Consultation with Advisory Committee of the

Commission

7

3.0 Public Consultation – Suggestions / Objections and

replies

8

3.1 List of persons who filed written objections 8

4 Annual Performance Review for FY16 12

4.0 KPTCL’s application for APR for FY16 12

4.1 KPTCL’s Submission 12

4.2 KPTCL’s Financial Performance as per Audited

Accounts for FY16

13

4.3 Annual Performance Review for FY16 14

4.3.(i) Transmission Losses for FY16 15

4.3.(ii) System Availability 15

4.3.(iii) Incentive for system Availability 17

4.3(iv) Operation and Maintenance Expenses 18

4.3(v) Depreciation 22

4.3(vi) Capital Expenditure Prudence Check- 22

4.3(vii) Interest and Finance Charges 36

4.3(viii) Interest on Working Capital 37

4.3(ix) Other Debits 38

4.3(x) Return on Equity 38

4.3(xi) Provision for Taxation 40

4.3(xii) Net Prior Period Charges 40

4.3(xiii) Exceptional Items 41

4.3.(xiv) Other Expenses Capitalised 42

4.3(xv) Other Income 43

4.3(xvi) SLDC Charges 43

4.3(xvii) Abstract of Approved ARR for FY16 as per APR 44

4.4 Treatment of Gap in Revenue for FY16 45

5.1 Approved ARR for FY18 46

5.1(i) Revised Transmission Tariff for FY18 47

5.1(ii) SLDC Charges 50

5.2 Other Issues 52

5.3 Commission’s Order 53

APPENDIX 54

iii

LIST OF TABLES

Table

No.

Content Page

No.

4.1 KPTCL’s Filing – APR FY16 13

4.2 Financial Performance of KPTCL – FY16 14

4.3 Incentive for reduction in transmission losses in FY16 15

4.4 Transmission System Availability FY16 16

4.5 Incentive for better transmission System Availability 17

4.6 Length of Transmission lines and No. of bays 20

4.7 Computation of Inflation Rates 20

4.8 Approved Normative O & M Expenses for FY16 21

4.9 Approved Allowable O & M Expenses for FY16 21

4.10 Progress of Works relating to Substations, Lines and

Augmentation works for FY16

23

4.11 Details of Ongoing Works 24

4.12 Details of works for which KPTCL has not incurred Capex during

FY16

24

4.13 Details of year-wise Ongoing Works 25

4.14 Sample Projects- Zone-wise selection 27

4.15 Sample Projects- Work-wise nature of Works 27

4.16 Cost Details of selected works 28

4.17 Gist of Prudence Check findings 29

4.18 Summary of Works having cost overrun 30

4.19 Summary of Works having time overrun 31

4.20 Details of Amounts Disallowed in APR FY16 33

4.21 Allowable Interest and Finance Charges 36

4.22 Allowable Interest on Working Capital 37

4.23 Return on Equity –KPTCL submission 38

4.24 RoE on Additional Equity for FY16 39

4.25 Status of Deb Equity Ratio for FY16 39

4.26 Allowable RoE for Fy16 40

4.27 Other Expenses Capitalised as per Audited accounts of KPTCL 42

4.28 SLDC Charges for FY16 – KPTCL’s Submission 43

4.29 Allowable SLDC Charges for FY16 44

4.30 Abstract of Approved ARR for FY16 as per APR 44

5.1 Approval Annual Revenue Requirement for FY18 46

5.2 Revised ARR for FY18 47

5.3 ESCOM wise capacity Allocation- As per Tariff Order dated

30.03.2016

47

5.4 ESCOM-wise Capacity Allocation for FY18 48

5.5 ESCOM wise capacity Allocation for FY16-as per annual

accounts

48

5.6 ESCOM-wise estimated Transmission Capacity addition for FY18 49

5.7 Transmission Charges Payable by ESCOMs for FY18 49

5.8 SLDC Charges –Approved for FY18 in T.O.2016 50

5.9 Revised SLDC Charges for FY16 50

5.10 Revised Transmission Charges for Short-term Open Access

Consumers FY18

51

iv

ABBREVIATIONS

ABT Availability Based Tariff

A & G Administrative & General Expenses

ALDC Area Load Dispatch Centre

APR Annual Performance Review

ARR Annual Revenue Requirement

ATE Appellate Tribunal for Electricity

BESCOM Bangalore Electricity Supply Company

BST Bulk Supply Tariff

CAPEX Capital Expenditure

CERC Central Electricity Regulatory Commission

CEA Central Electricity Authority

CESC Chamundeshwari Electricity Supply Corporation

CPI Consumer Price Index

CWIP Capital Work in Progress

DA Dearness Allowance

DPR Detailed Project Report

EA Electricity Act

EC Energy Charges

ERC Expected Revenue From Charges

ESAAR Electricity Supply Annual Accounting Rules

ESCOMs Electricity Supply Companies

FoR Forum of Regulators

FY Financial Year

GESCOM Gulbarga Electricity Supply Company

GFA Gross Fixed Assets

GoI Government Of India

GoK Government Of Karnataka

GRIDCO Grid Corporation

HESCOM Hubli Electricity Supply Company

HP Horse Power

HRIS Human Resource Information System

ICAI Institute of Chartered Accountants of India

IFC Interest and Finance Charges

IEGC Indian Electicity Grid Code

IW Industrial Worker

KASSIA Karnataka Small Scale Industries Association

KEB Karnataka Electricity Board

KER Act Karnataka Electricity Reform Act

KERC Karnataka Electricity Regulatory Commission

KM/Km Kilometre

KPCL Karnataka Power Corporation Limited

KPTCL Karnataka Power Transmission Corporation Limited

KV Kilo Volts

KVA Kilo Volt Ampere

KW Kilo Watt

v

KWH Kilo Watt Hour

LDC Load Despatch Centre

MAT Minimum Alternate Tax

MD Managing Director

MESCOM Mangalore Electricity Supply Company

MFA Miscellaneous First Appeal

MIS Management Information System

MoP Ministry of Power

MU Million Units

MVA Mega Volt Ampere

MW Mega Watt

MYT Multi Year Tariff

NFA Net Fixed Assets

NTP National Tariff Policy

O&M Operation & Maintenance

P & L Profit & Loss Account

PCKL Power Corporation of Karnataka Ltd.

P & G Trust Pension & Gratuity Trust

PLR Prime Lending Rate

PPA Power Purchase Agreement

R & M Repairs and Maintenance

ROE Return on Equity

ROR Rate of Return

ROW Right of Way

SBI State Bank of India

SCADA Supervisory Control and Data Acquisition System

SERCs State Electricity Regulatory Commissions

SLDC State Load Despatch Centre

SRLDC Southern Regional Load Dispatch Centre

STU State Transmission Utility

TAC Technical Advisory Committee

TSA Transmission System Availability

TCC Total Contracted Capacity

TR Transmission Rate

WPI Wholesale Price Index

WC Working Capital

vi

KARNATAKA ELECTRICITY REGULATORY COMMISSION

BENGALURU - 560 001

Dated 11th April, 2017

In the matter of:

Application of KPTCL in respect of the Annual Performance Review for

FY16, Revised Annual Revenue Requirement for FY18 and Revised

Transmission Tariff for FY18.

Present: Shri M.K. Shankaralinge Gowda Chairman

Shri H.D. Arun Kumar Member

Shri D.B. Manival Raju Member

O R D E R

The Karnataka Power Transmission Corporation Ltd (hereinafter

referred to as KPTCL) is a Transmission Licensee, under the

provisions of the Electricity Act, 2003. KPTCL has filed its

application on 16th November 2017, under the provisions of the

KERC (Terms and Conditions for Determination of Transmission

Tariff) Regulations 2006, has prayed for, among other things, to

approve its actual ARR and Revenue gap for FY16 based on the

audited annual accounts and to carry over the revenue gap of

FY16 to the ARR of FY18 for recovery from the ESCOMs from

01.04.2017.

vii

In exercise of the powers conferred under Sections 62, 64 and other

provisions of the Electricity Act, 2003 and the KERC (Tariff) Regulations,

2000 read with the KERC (Terms and Conditions for Determination of

Transmission Tariff) Regulations 2006, and other enabling Regulations,

the Commission has considered the application of the KPTCL and also

the views and objections submitted by the consumers and other

stakeholders. The item-wise analysis, review and the Commission’s

decisions thereon are brought out in the subsequent Chapters of this

Order.

viii

CHAPTER – 1

INTRODUCTION

1.0 KPTCL – A brief Profile of the State Transmission Utility:

The Karnataka Power Transmission Corporation Ltd., (KPTCL) is a

transmission licensee under Section 14 and a State Transmission utility

under Section 39 of the Electricity Act, 2003 (hereinafter, referred to as

the Act).

The KPTCL is a Company registered under the Companies Act, 1956,

incorporated on 28th July, 1999 and having commenced its operations

from 1st August, 1999. It continued to perform the functions of

Transmission and Distribution utilities, which were carried out by the

erstwhile the Karnataka Electricity Board (KEB).

The KPTCL became a Transmission Company due to unbundling of

transmission and distribution business in Karnataka, effective from 1st

June, 2002. The Distribution business was vested with the newly created

Distribution Companies (ESCOMs).

Thereafter, as per the Electricity Act, 2003, the KPTCL became an

exclusive wires company, with effect from 10th June, 2005 and its bulk

power purchase activity was vested with the newly formed Power

Company of Karnataka Ltd., (PCKL).

The KPTCL enables the ESCOMs to serve nearly 221 lakh consumers of

different categories spread all over the State covering an area of 1.92

lakh square kilometers. To transmit power the KPTCL operates 1088 sub-

stations and 34237.35 CKms of transmission lines with voltages of 66 kV

and above.

ix

To enable operation and maintenance of the system, KPTCL has six

transmission zones, each headed by a Chief Engineer; fifteen circles,

each headed by a Superintending Engineer; and forty-seven divisions,

each headed by a Executive Engineer. There are thirty-two

Transmission line and substation maintenance sub-divisions which are

involved in operation and maintenance of the transmission system in

Karnataka. Besides this, there are fifteen Transmission works divisions to

take care of the construction activities related to intra-state

transmission system across the State of Karnataka.

There are fourteen relay Testing Divisions for maintenance of protective

relays, and meters and to conduct pre-commissioning tests of all new

sub-stations, besides calibrating all interface meters on periodical basis.

1.1 KPTCL at a glance:

1.2

Transmission capacity of KPTCL in FY16:

The total transmission capacity in the State was 18615 MW during FY16

and the ESCOM-wise transmission capacity for FY16 is as follows:

Sl.

No Particulars (As on 31-03-2016) 2015-16

1. Generation Capacity (connected to

Transmission System) MW 17827.40

a) KPC Hydro and Thermal MW 7232

b) CGS (Karnataka Share) MW 2694

c) NCE, IPPs and Others MW 7901

2. No. of Receiving Sub-Stations

/Length of Tr. Lines

Nos./CKms.

a) 400 kV Nos./CKms. 4/2683

b) 220 kV Nos./CKms. 97/10970

c)110 kV Nos./CKms. 388/10237

d)66 kV Nos./CKms. 604/10449

3. Assets as at the end of FY16 Rs. in

Crores

14048

4. Total employees:

a) Sanctioned Nos. 10858

b) Working Nos. 10384

5. Demand Charges for Transmission

of Power to ESCOMs (FY16)

Rs. in

Crores

2606.51

6. Collections of transmission charges Rs. in

Crores

2483.45

Source: KPTCL Annual Accounts

x

ESCOM WISE TRANSMISSION CAPACITY IN MW – FY16

Source: KPTCL Replies to Preliminary Observations-Annexure- H

xi

CHAPTER – 2 TARIFF APPLICATION PROCESS

2.1 BACKGROUND:

The Commission had approved the ARR and transmission tariff for KPTCL for

FY16 in its MYT Order dated 6th May, 2013 and revision of transmission tariff

in Tariff Order of 2015. The KPTCL in its application dated 16th November,

2016, has sought approval of the revised ARR under APR for FY16 and carry

forward the deficit of FY16 to the ARR of FY18 and revise the transmission

tariff.

2.2 Commission’s Directives and Compliance by KPTCL:

The Commission, in its Tariff Order dated 30th March, 2016, has issued directives

on various matters pertaining to transmission system maintained and operated by

the KPTCL. The Commission has directed the KPTCL to ensure full compliance

of the directives in a time bound manner.

The summary of the directives issued by the Commission and compliance by the

KPTCL thereof, is appended vide Appendix-1, to this Order.

2.3 Public Hearing Process:

On receipt of the application of the KPTCL dated 16th November, 2016,

the Commission communicated its preliminary observations on the

application on 5th December, 2016. The KPTCL has furnished its replies

on 17th December, 2016.

The Commission in its letter dated 10th January, 2017, has treated the

application of the KPTCL as petition in terms of the Tariff Regulations

subject to further verification and validation. Accordingly, the KPTCL

was directed to publish a summary of the application in the

newspapers within a week, in accordance with the Clause 5(1) of the

KERC (Tariff) Regulations, 2000, as amended on 1st February, 2012.

In compliance of the above directions of the Commission, the KPTCL

has published the summary of its application in the following

newspapers on 13th & 14th January, 2017.

xii

Deccan Herald

The Hindu

Prajavani

Udayavani

The KPTCL’s Application for APR for FY16 was also made available on the

web-sites of the KPTCL & the KERC. In response to the notices published in

the above newspapers, calling for objections on the APR for FY16, and

revision of transmission tariff of the KPTCL for FY18, the Commission has

received two written objections.

The Commission held a Public Hearing on 21st February, 2017, in its Court

Hall. Objections raised and the responses from the KPTCL thereon, are

discussed in Chapter – 3 of this Order.

2.4 Consultation with Advisory Committee of the Commission: A meeting of the Advisory Committee of the Commission was held on

08.03.2017. The members of the Committee discussed the various issues

involved in the KPTCL’s application and offered valuable suggestions. These

suggestions have been taken note of by the Commission while finalising this

Order.

xiii

CHAPTER – 3

PUBLIC CONSULTATION - SUGGESTIONS / OBJECTIONS &

REPLIES

As per the provisions of Section 64 of the Electricity Act, 2003, in order

to obtain suggestions / views / objections from the interested stake-

holders on the KPTCL’s application for Annual Performance Review for

FY16 and Revision of ARR and Transmission Tariff Application for FY18,

the Commission undertook the process of public consultation.

The Commission conducted a Public Hearing on 21st February, 2017 to

enable the Stakeholders to make oral submissions on the KPTCL’s

application. During the hearing the KPTCL representatives made a brief

presentation of its activities, progress of work and the efforts in

improving the quality and reliability of power besides highlighting the

efforts to reduce transmission losses. They also justified the prayers

made in the application.

In the written submissions as well as in the oral submissions made during

the public hearing, some of the Stake-holders and public have raised

objections to the Application filed by KPTCL. The names of the persons

who filed written objections and made oral submissions are given

below:

3.1 Persons who have submitted written objections

Sl.

No

Application

No. Name & Address of Objectors

1 KA-01 The General Manager (Commercial), CESC Corporate

Office, Mysuru.

2 KB-01 Sri.G.Manjunath, Chandapura, Bangalore.

Persons who made oral submissions during the Public Hearing on

21.02.2017

SL. No. Names & Addresses of Objectors

1 Sri. Mallappa Gowda, Chairman, Energy Committee, KASSIA

xiv

A gist of the written objections raised and the KPTCL’s replies thereon is as

follows:

Objections by Stakeholders Replies by KPTCL 1. Inspite of the Commission passing

tariff order every year to see that

the KPTCL is not under loss, a gap

of Rs.103.23 Crores has been shown

for FY16, which should not be

considered.

The KPTCL has made a net profit of

Rs.178.11 Crores for FY16 and if the

P&G contribution of Rs.532.74

Crores is not considered, the total

profit would be Rs.762.28 Crores.

This profit should be factored into

the ARR for FY18. Hence, the

approved transmission charges for

FY18 at Rs.3171.28 Crores needs to

be revised and accordingly the

transmission charges for CESC

should be reduced.

KPTCL has stated that, as per

clause 3.10 of MYT Regulations,

KPTCL is entitled for a normative

“Profit” (Return on Equity) of 15.5%

on the equity which works out to

Rs.384.73 Crores. As per Audited

Accounts the profit earned is

Rs.178.11Crores. The O & M

expenses are considered based on

the normative limits as provided in

the MYT Regulations, whereas in P &

L accounts, actual expenses are

accounted. The Audited Accounts

provide a factual position of profit

or loss without including any

normative (mandatory) profit. Thus,

the Audited Accounts and Annual

Revenue Requirement (ARR) for the

purpose of tariff are two different

statements whose end results would

invariably differ.

Commission's Views: The Commission has taken note of the objection and the

reply thereon. The Commission has dealt with the matter appropriately in the

relevant chapter of the Tariff Order.

2. The lines and substations are

being not completed within the

targeted time, sometimes taking

more than 10 years for

completion. Due to this, the

project cost will increase

manifolds causing loss to the

ESCOMs.

KPTCL has stated that, the target of

completion of 220 kV substation and

transmission lines is 18 months and for

110kV/66Kv, the time duration

allotted would be 12 months. In most

of the cases the projects are

completed within the above time

limits. However, when there are Right

of Way (RoW) problems, the projects

get delayed.

Commission's Views: The reply furnished by KPTCL is noted. However, the

Commission directs the KPTCL to endeavour to complete the projects within

the scheduled date of completion, to avoid inconvenience to the consumers

and to reduce its own financial burden caused due to delay in the

completion of the works.

KPTCL is awarding works in excess of

SR rates resulting in increased cost

burden to the ESCOMs.

KPTCL has stated that, the SR rates

are indicative and is the basis for

preparing the estimates of the

Projects. The tenders are invited

xv

through e-procurement for

construction of substations and lines.

The projects are awarded to the

lowest bidders. Sometimes the lowest

quoted bid rate may be more than

estimates prepared based on the SR

rates. In such cases the Central

Procurement Committee approves

the same before awarding the

tenders.

Commission's Views: The reply furnished by KPTCL is acceptable. However,

KPTCL shall ensure that the rates being paid are not too high as compared to

other Southern States.

3. An amount of Rs.134.40 Crores is

shown as contribution to P&G

trust, which has increased the

deficit.

The Pension and Gratuity trust is

created as per the law. KPTCL is

making annual contribution to the

trust in respect of employees

appointed before 01.04.2006 as per

the Actuarial valuation report from

the authorized Actuary. For the

employees appointed after

01.04.2006, KPTCL is contributing to

the contributory pension scheme

applicable to such employees.

Hence, the contribution of Rs.134

Crores paid to the P&G trust is proper.

Commission's Views: The Commission has dealt this matter appropriately in

the relevant chapter of the Tariff Order.

4. KPTCL has shown Rs.5.51 Crores

towards expenditure on Medical

reimbursement for FY16. This is not

in accordance with ESI rules.

While making the medical

reimbursements, KPTCL follows

Medical Attendance Rules, adhering

to the rates prescribed in GoK orders

and the Central Government Health

services (CGHS). The employees of

KPTCL are not covered under the ESI

Scheme.

Commission's Views: The reply furnished by KPTCL is noted.

5. KPTCL is showing high

maintenance expenditure even

though there is no problem in the

transmission system.

KPTCL has stated that, the

maintenance cost is fixed by the

Commission as per the Regulations.

The same is comparatively less than

other States.

Commission's Views: The reply furnished by KPTCL is noted.

6. Whenever a private party requests

for shifting, KPTCL is undertaking

the work of shifting of the

transmission lines at the cost of the

company instead of getting the

work done on self-execution basis,

Specific instances in support of the

objection are not furnished for taking

suitable action against the

concerned.

Commission's Views: The Commission takes note of the reply furnished by

xvi

KPTCL. The Stakeholders are advised to furnish specific instances with facts

and figures without generalizing the issue.

xvii

Gist of the submissions made and KPTCL’s replies given during the

Public Hearing, held on 21.02.2017

SL

No Objections Replies by KPTCL

1 The ESCOMs should have

objected to the tariff revision

claimed by KPTCL, but, no

ESCOM has come forward to file

the objections.

KPTCL has stated that, written

objections could be submitted by

any interested parties/stakeholders.

Accordingly, CESC has filed the

objections and hence it cannot be

said that ESCOMs have not objected

to the application.

2 KTPCL should state as to how the

depreciation is claimed on the

substation projects which are

delayed.

KPTCL has stated that, it has

computed the depreciation charges

as per the relevant Accounting

Standards.

3 The status of substations

proposed around Nelamangala

and Vasanthanarasapura should

be disclosed.

KPTCL has stated that, the projects

proposed are at different stages of

implementations and it would furnish

a list of such works.

4 The repairs and maintenance

works at Peenya substation and

reconductoring of Peenya –

Byadarahalli station has helped

500 industries and reduced the

load shedding. Similarly, the

other substations and line

maintenance

should be taken up.

KPTCL has stated that, it has invited

tenders to procure spare transformers

to ensure speedy replacement of

failed power transformers. It has also

arranged for rectification of the

cable joints to ensure reliability of

power.

5

Repairs of damaged 220kV UG

cable between 220kV HAL

substation and Hoody has taken

more than 6 months for want of

spares. KPTCL should explain the

reasons for delay.

KPTCL has stated that, the cable

jointing work is a specialized work

which has to be carried out by the

experts in the field. The KPTCL has

taken action to rectify the faults.

6 The Employees cost and the P&G

contribution from KPTCL is very

high and needs to be controlled.

KPTCL has stated that, since it is

mandatory to pay the P&G

contributions, the amount is being

provided for, as per rules.

7 A Manpower study should be

conducted to realistically

estimate the manpower

requirement and to increase the

efficiency.

KPTCL has stated that, it will conduct

a study and submit the report to the

Commission.

Commission's Views: The Commission has taken note of the replies furnished

by the KPTCL and also notes that, the replies in general are acceptable. The

Commission directs KPTCL to improve its network such that, it can

accommodate the future growth in generation and loads in the State.

xviii

CHAPTER – 4

ANNUAL PERFORMANCE REVIEW FOR FY16

4.0 KPTCL’s application for APR for FY16:

The KPTCL, in its application dated 16th November, 2016, has requested

for taking up its Annual Performance Review (APR) for the FY16 based

on its Audited Accounts.

The Commission, in its Tariff Order dated 6th May, 2013 (MYT Order) had

approved an Annual Revenue Requirement (ARR) of Rs. 2599.03 Crores

for FY16. The revised ARR after considering the revenue gap on

account of APR for FY14 was Rs. 2606.52 Crores as per the

Commission’s Tariff Order dated 2nd March, 2015 for FY16.

Now, in this Chapter, the Commission has reviewed the Annual

Performance for FY16 based on the application filed by the KPTCL, the

Audited Accounts for FY16 and its replies to the Commission’s

preliminary observations. The item-wise analysis of expenditure and

decisions of the Commission are as follows:

4.1 KPTCL’s Submission:

The KPTCL has submitted its proposal for consideration during APR for

FY16 with the details of revenue earned and item-wise expenditure

incurred as follows:

xix

TABLE – 4.1

KPTCL’s filing – APR FY16

Amount in Rs. Crores

Sl.

No Particulars

As Approved

– T.O. dated

06.05.2013 &

02.03.2015

As per

Filing

Revenue 2606.52 2758.93

Expenditure

1 O&M Expenses 847.54 900.22

2 Depreciation 652.95 635.17

3 Interest & Finance Charges 709.18 438.71

4 Interest on working capital 74.07 3.22

5 Return on Equity 575.24 384.73

6 Provision for taxation 0.00 51.42

7 Other Debits 0.00 2.99

8 Extraordinary items 0.00 532.75

9 Net Prior Period Charges 0.00 29.45

Less

10 SLDC charges 0.77 0.00

11 Interest & Finance Charges

capitalized 103.63 0.00

12 Other Expenses capitalized 38.55 0.00

13 Other Income 117.00 116.50

14 Carry forward deficit as per APR of

FY14 7.49 0.00

NET ARR 2606.52 2862.16

Gap in Revenue for FY16 (103.23)

The KPTCL has reported a deficit of Rs.103.23 Crores for the FY16 and

has proposed to carry forward this gap in revenue to be collected

along with the ARR for FY18.

4.2 Financial Performance of KPTCL as per Audited Accounts for FY16:

The overview of the financial performance of KPTCL for the FY16, as per

its Audited Accounts, is as follows:

xx

TABLE – 4.2

Financial Performance of the KPTCL – FY16

Amount in Rs. Crores

As per the Audited Accounts, the KPTCL has earned a profit of

Rs.178.11 Crores for the FY16. Considering the surplus earned by the

Company in the previous years, the cumulative surplus as at the end of

FY16 is Rs.577.47 Crores (inclusive of profit in the FY16).

4.3 Annual Performance Review for FY16:

The Annual Performance Review for the FY16 has been taken up duly

considering the actual revenue and expenses reported by KPTCL as

per the Audited Accounts as against the expenses approved by the

Commission in its Tariff Order dated 6th May, 2013.

The Commission, in accordance with the provisions of the KERC (Terms

and Conditions for Determination of Transmission Tariff) Regulations,

2006, as amended, has taken up the Annual Performance Review of

the KPTCL for the FY16. The analysis of item wise expenditure and the

decisions of the Commission thereon are discussed in the following

paragraphs:

Sl.

No Particulars FY16

Revenue (including other income) 2875.44

Expenditure

1 O&M Expenses 944.96

2 Depreciation 636.19

3 Interest & Finance Charges 486.86

4 Income tax 51.42

5 Other Debits 106.37

6 Extraordinary items 532.75

7 Net Prior Period Charges 29.46

Less

8 Interest and Finance charges

capitalized 44.93

9 Other expenses capitalized 45.75

Total Expenditure 2697.33

Profit for the Year 178.11

xxi

i) Transmission Losses for FY16:

The Commission had approved the annual average transmission loss of

3.90% for the FY16. The KPTCL, in its filing, has reported the transmission

loss of 3.535%.

The Commission in its Tariff Order dated 6th May, 2013, had fixed the

target of transmission loss at 3.90% for the FY16 on the basis of the

methodology suggested by the KPTCL, wherein the total energy at

interface points of the ESCOMs is deducted from the energy input from

generation bus into the KPTCL grid, to arrive at the transmission loss in

KPTCL system.

The actual transmission loss of 3.535% reported by the KPTCL is based

on the input energy and energy supplied at interface points of the

KPTCL transmission system exclusively. Since the actual transmission loss

is less than the lower limit of the approved range of transmission loss

(3.80% to 4.00%) for the FY16, the Commission decides to allow

incentive on such lower actual transmission loss for the FY16 as detailed

below:

TABLE – 4.3

Incentive for Reduction in Transmission loss in FY16

Particulars FY16

1% of RoE (Rs. Crs.) 3.88

Lower level of approved Tr. Loss in % 3.80

Actual Transmission Loss in % 3.535

Decrease in loss level beyond targeted lower

band

in percentage point. 0.265

Incentive for reduction in Transmission losses -

Rs. Crs 2.06

50% to be shared with the ESCOMs and

balance to be retained by KPTCL - Rs. Crs. 1.03

ii) System Availability:

KPTCL’s Submission: -

xxii

The Transmission System Availability as submitted by the KPTCL for the

FY16, is as follows:

TABLE – 4.4

Transmission System Availability – FY16

Name of

the

Transmission

Zone

Total No

of AC Tr.

Lines

%

Availability

Total

No

of

ICT's

%

Availability

Total No

of

switched

BUS

reactors

%

Availability

%

Availability

for the

system

Bagalkote

Zone 374 96.57% 522 99.78% 0 0.00% 98.44%

Bengaluru

Zone 358 99.74% 558 99.89% 4 100.00% 99.83%

Kalaburagi

Zone 223 99.65% 347 99.91% 0 0.00% 99.81%

Hassan

Zone 198 99.03% 301 99.61% 3 99.83% 99.38%

Mysuru

Zone 160 99.95% 256 99.92% 0 0.00% 99.93%

Tumakuru

Zone 110 98.99% 375 99.89% 4 95.09% 99.65%

TOTAL 1423 98.76% 2359 99.84% 11 98.13% 99.43%

Commission’s Analysis:

The Commission had forwarded the Transmission System Availability

(TSA) data submitted by the KPTCL to all the ESCOMs for their

view/comments. MESCOM, CESC and HESCOM have concurred with

the TSA as submitted by KPTCL, But, BESCOM and GESCOM have not

furnished any comments.

The Commission has verified the system availability data and found

certain inconsistencies like, inappropriate Surge Impedance Loading

(SIL) indicated for some of the transmission lines, incorrect names of the

conductors used for transmission lines and lower availability shown in

respect of some of the transmission lines. The observations were

forwarded to the KPTCL with a direction to submit revised computation

of Transmission System Availability, after complying with the

observations.

xxiii

The KPTCL has resubmitted the availability computation, after

incorporating the Commission’s observations and confirmed that, the

transmission availability has not altered and remains at 99.43% only. The

Commission, based on the statement of KPTCL, has considered the TSA

at 99.43%.

The transmission availability of FY16 at 99.43% falls short of its declared

TSA for FY15 which was at 99.50%. The Commission directs KPTCL to

consistently improve its TSA, by monitoring and taking remedial

measures for the transmission elements which have shown lower

availability.

iii) Incentive for Transmission System Availability:

As per the provisions of the Regulation 3.17(1) of KERC (Terms and

Conditions for Determination of Transmission Tariff) Regulations, 2006,

the transmission licensee is allowed an incentive for achieving system

availability above the target availability of 98%. Hence considering the

actual availability at 99.43% for FY16 and the net ARR, as indicated

later in this order, the allowable incentive for the FY16 is as detailed

below:

TABLE – 4.5

Incentive for better Transmission System Availability

Sl.No. Particulars FY16

1 System Target Availability 98%

2 Actual System Availability for the

FY16 99.43%

3 No incentive allowed beyond

99.75% as per MYT Regulations 99.75%

4 Availability beyond target levels 1.43%

5 Approved ARR under APRFY16 Rs.

Crores 2341.35

6 Incentives for Availability beyond

target Availability ( Sl.no.4*5/1) Rs.

Crores.

34.16

7 50% to be shared with the ESCOMs

and balance to be retained by

KPTCL Rs. Crs 17.08

Thus, the total incentive earned by the KPTCL on account of

transmission loss reduction and better system availability for the FY16 is

xxiv

Rs.34.16 Crores. The Commission hereby approves sharing of the gains

with ESCOMs in the ratio of 50:50. Thus the total incentive on account

of better system availability and reduction of transmission losses

achieved by KPTCL beyond the targets set by the Commission for FY16

is Rs.18.11 Crores.

Further, as discussed in the subsequent paragraphs of this Chapter,

based on the prudence check reports for FY16, an amount of Rs.0.35

Crores towards interest and depreciation pertaining to imprudent

investments attributable to KPTCL is deducted from allowable the

incentives of Rs.18.11 Crores.

Thus, the Commission directs the KPTCL to recover Rs.17.76 Crores from

the ESCOMs in proportion to their transmission capacity allocated for

the FY16.

iv) Operation and Maintenance Expenses:

KPTCL’s Submission:

KPTCL in its application has reported that the net actual O&M Expenses

incurred for FY16 is Rs.900.22 Crores (excluding expenses capitalized,

SLDC Charges & Other expenses shared by ESCOMs). This includes

Employee costs of Rs.676.62 Crores, Administrative & General Expenses

of Rs.70.39 Crores and Repairs & Maintenance expenses of Rs.153.21

Crores.

The Commission in its Tariff Order dated 6th May, 2013, had approved

O&M Expenses of Rs.808.99 Crores inclusive of additional O & M

expenses of Rs.160.38 Crores on account of P&G contribution for FY16.

Thus the actual O&M Expenses reported by KPTCL is more than the

approved expenses by Rs.91.23 Crores.

The KPTCL in its application has requested the Commission to approve

O & M expenses as per actuals. Further, the KPTCL has computed the

O&M expenses of Rs.916.99 as per the KERC norms which is lower than

xxv

the actual expenses incurred. Further, KPTCL has submitted the

breakup of O&M expenses for transmission lines and bays wherein

major cost is incurred towards maintenance of bays as compared to

the cost incurred on maintenance of lines.

In addition to the normal O&M expenses, KPTCL has claimed an

amount of Rs.134.40 Crores towards contribution to Pension and

Gratuity Trust including contribution on employees covered under the

Newly Defined Contributory Pension Scheme (NDCPS).

Commission’s Analysis and decisions:

As per Clause 2.5.1 of the MYT Regulations, the values of the base year

of the Control period are being determined based on the latest

audited accounts available, best estimates for the relevant years and

other factors considered appropriate by the Commission, and after

applying the tests for determining the controllable and uncontrollable

nature of various items.

In accordance with the MYT Regulations, the O&M expenses are

treated as controllable expenses of the transmission licensee. KPTCL

has been incurring its O&M expenses under Employees Cost,

Administrative and General Expenses and Repairs and Maintenance

expenses. The audited accounts for FY16 indicate the actual expenses

incurred under these items of expenditure. Besides these expenses,

KPTCL has been making contributions to the Pension and Gratuity Trust

and contribution to employees covered under NDCPS. The

Commission considers the contribution made to P&G trust as

uncontrollable expense.

Based on the above stated items of expenditure, the normative O & M

expenses are determined considering the actual O & M expenses

incurred by the KPTCL, actual number of Bays and Circuit Kilometers of

transmission lines in the KPTCL and the actual inflation rate for the year.

The normative O & M expenses have been computed based on the

actual O & M expenses, number of Bays and Circuit Kilometers of

xxvi

transmission lines during the base year (FY11 - FY13) and applying the

inflation factor for the relevant years. The Commission has been

consistently adopting this approach to work out the O & M expenses,

as provided for in the MYT Regulations, besides allowing additional

employee cost treated as uncontrollable O & M cost.

The Commission in its Tariff Order dated 6th May, 2013, while approving

the O&M expenses for FY16 had considered 20854 No. of Bays and

33889 Ckt. Kms of transmission Lines as projected by the KPTCL.

However, as per the actual data reported by the KPTCL in its replies to

the preliminary observations of the Commission dated 20th December,

2016, the No. of Bays is 21053 and the length of transmission lines is

34237.34 Ckt. Kms. as detailed below:

TABLE-4.6

Length of Transmission Lines and No. Bays

Transmission Lines-

Voltage class:

Transmission lines

(in Circuit kms as

on 31.03.2016)

400 KV 2683.32

220 KV 10948.85

110 KV 10193.61

66 KV 10411.56

TOTAL 34237.34

Type of Bay Nos. as on

31.03.2016

Line Bay 5248

Transformer bay 2364

PT Bay 1510

Capacitor Bank Bay 855

11 KV Bay 11076

Total 21053

xxvii

As in the earlier Tariff Orders dated 2nd March, 2015 and 30th March,

2016, the Commission has decided to continue computation of

composite inflation index based on 80% weightage to CPI and 20%

weightage to WPI. Based on this composite inflation index, the

Commission has computed the inflation factor based on the similar

methodology adopted by the CERC in its orders on escalation rates

issued from time to time, as shown below:

TABLE-4.7

Computation of Inflation Rate

Year WPI CPI Composite

Series Yt/Y1=Rt Ln Rt

Year

(t-1)

Product

[(t-1)* (LnRt)]

2004 98.72 111.1 108.624

2005 103.37 115.8 113.314 1.04 0.04 1 0.04

2006 109.59 122.9 120.238 1.11 0.10 2 0.20

2007 114.94 130.8 127.628 1.17 0.16 3 0.48

2008 124.92 141.7 138.344 1.27 0.24 4 0.97

2009 127.86 157.1 151.252 1.39 0.33 5 1.66

2010 140.08 175.9 168.736 1.55 0.44 6 2.64

2011 153.35 191.5 183.87 1.69 0.53 7 3.68

2012 164.93 209.3 200.426 1.85 0.61 8 4.90

2013 175.35 232.2 220.83 2.03 0.71 9 6.39

2014 182.00 246.90 233.92 2.15 0.77 10 7.67

2015 177.03 261.42 244.542 2.25 0.81 11 8.93

A= Sum of the product column 37.56

B= 6 Times of A 225.37

C= (n-1)*n*(2n-1) where n= No of years of data=12 3036.00

D=B/C 0.07

g(Exponential factor)= Exponential (D)-1 0.0771

e=Annual Escalation Rate (%)=g*100 7.71

Considering the inflation rate of 7.71%, the normative O & M expenses

for the FY16 will be as follows:

TABLE – 4.8

Approved Normative O & M Expenses – FY16

Particulars FY16

O&M cost in terms Rs. thousands/Bay 112.80

O&M cost in terms Rs. thousands/ckt. Km of Line 157.43

Inflation rate in % 7.71

No. of Bays 21053.00

Length of Line in ckt. Kms 34237.34

O&M Expenses for Bays (Rs. Crs) 237.47

O&M Expenses for Lines (Rs. Crs) 539.00

TOTAL O&M Expenses as per Norms (Rs. Crs) 776.47

xxviii

The Commission in its tariff order dated 6th May, 2013, while approving

the O & M expenses for the FY16 had considered an amount of

Rs.160.38 Crores towards contribution to Pension and Gratuity Fund.

These additional expenses were treated as uncontrollable O & M

expenses besides the normative O & M expenses which are treated as

controllable O&M expenses.

As per the audited accounts for the FY16, the KPTCL has incurred

Rs.134.34 Crores towards P&G contribution. The Commission decides

to allow the actual contribution to P&G Trust incurred by KPTCL in

addition to the controllable normative O&M expenses to enable the

KPTCL to meet its O&M expenses.

Based on the above discussions, the allowable O & M expenses for the

FY16 are as follows:

TABLE – 4.9

Approved Allowable O & M expenses for FY16

Amount in Rs. Crores

Particulars FY16

Total normative O&M Expenses 776.47

Additional employee cost 134.34

Total O&M Expenses allowable in Rs. Crs. 910.82

Thus, the Commission hereby approves O & M expenses of Rs.910.82

Crores for the FY16.

v) Depreciation:

KPTCL, in its application has claimed an amount of Rs.635.17 Crores

towards depreciation as against an amount of Rs. 652.95 Crores

approved in the Tariff Order dated 6th May, 2013. As per the audited

accounts, KPTCL has indicated an amount of Rs. 635.17 Crores towards

depreciation after capitalization of Rs.1.01 Crores for FY16. Thus, the

actual depreciation is less by Rs.17.78 Crores as compared to the

approved amount.

As per the provisions of the KERC (Terms and Conditions for

Determination of Transmission Tariff) Regulations, 2006 as amended, the

xxix

Commission has determined the allowable depreciation duly

considering the actual average gross block of fixed assets for FY16.

As per the audited accounts for FY16, the depreciation before

capitalization is Rs.636.19 Crores. The claim of Rs.0.22 Crores of

depreciation of assets of SLDC has been factored in SLDC charges

separately. The capitalized amount of depreciation of Rs.1.01 Crores is

considered under ‘other expenses capitalized’ as discussed in

subsequent paragraphs of this Chapter. After excluding the withdrawal

of depreciation of Rs.37.58 Crores, towards assets created out of

consumer contribution and grants, the net depreciation for FY16 works

out to Rs.598.39 Crores.

Thus, the Commission decides to consider depreciation of Rs.598.39

Crores for the FY16.

vi) Capital Expenditure for FY16:

a) Capital Expenditure of KPTCL:

KPTCL’s Submission:

As per the application for APR for FY16, the KPTCL has achieved a

capital expenditure of Rs.1278.81 Crores, as against the Commission

approved capex of Rs.1400 Crores for FY16. KPTCL has furnished the

progress of construction of substations, transmission lines and

Augmentation of substation/lines during FY16 as follows:

xxx

Table-4.10

Progress of works relating to Substations,

Lines and Augmentation for FY16

Particulars Target Achievement***

Substations (No.s) 33

220kV 3

110kV 10

66kV 17

Total 30

Lines (Ckms) 727.59

400kV 33.30

220kV 651.14

110kV 172.49

66kV 176.77

Total 1033.70

Augmentation

(Nos) 40

110kV 36

66kV 44

Total 80 *** includes spill over works of the previous years

Commission’s analysis:

The Commission has observed that, out of the above completed and

commissioned works, many works are yet to be categorized as assets

during FY16, even after 6 to 8 months of their

completion/commissioning. Details of such works are as under:

a) In respect of thirty numbers of substation works completed

during FY16, fifteen number of substations which are completed

and commissioned between June, 2015 and December, 2015,

have not been categorized during FY16.

b) In respect of eighteen number of Line works completed during

FY16, nine Line works which have been completed between

May, 2015 and December, 2015, are not categorized during

FY16.

c) In respect of Augmentation works, fifty-five works out of total

eighty works which were completed between June, 2015 and

December, 2015, have not been categorized during FY16.

xxxi

This shows that, a large number of works though completed and

commissioned, have not been categorized as assets even after a

lapse of six to eight months in the respective financial years. KPTCL

should have monitored the implementation of the projects to ensure

their completion and categorization within the targeted time. Delay in

categorization of assets leads to understatement of value of

categorized assets and under-charge of depreciation thereon.

KPTCL has shown a huge number of substations, lines and

augmentation works in the category of on-going/spill over works. The

details of such works and the cost incurred for the on-going works

during FY16 is shown below:

Details of on-going works of Stations, Lines and Augmentation works

and cost incurred during for FY16:

Table-4.11

Details of ongoing works during FY16

Particulars

No of

works

Ongoing

Cost incurred

during FY16 in Rs.

Crores

Substations 74 322.72

Lines 46 697.11

Augmentation 60 26.81

Total 1046.64

From the above table it is noted that, the KPTCL has incurred a capex

of Rs.1046.64 Crores for the spill-over/ongoing works during FY16, out of

the total incurred capex of Rs.1278.81 Crores. It is also to be noted here

that, out of the total number of works shown as on-going works, KPTCL

has not incurred any capex for many spillover/ongoing works during

FY16 which indicates that, there is no progress in these works

continuously. The details of the works for which KPTCL has not incurred

capex during FY16 are:

TABLE-4.12

The details of the works for which KPTCL has not incurred capex during

FY16

Particulars

No of

works

Ongoing

No of Ongoing works for

which KPTCL has not

incurred capex in FY16

Substations (No.s) 74 39

Lines (Nos) 46 24

xxxii

Augmentation

(No.s)

60 40

Further, there are many works continued under on-going works for the

past five to ten years. The details showing the number of ongoing

works, from the year of commencement is indicated below:

TABLE-4.13

Details showing the number of ongoing works

Particulars

Total on

going

works

No. of works in on-going categories from the year of commencement

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Substations

(No.s) 74 2 8 0 2 3 2 2 7 1 6 37

Lines (No.s) 46 0 5 0 0 6 5 0 3 5 9 13

Augmentati

on (No.s) 60 4 3 5 5 11 32

It is to be noted from the above that -

i) In respect of substations, fifteen works are found to be

continuing under on-going works category which was

commenced well before 2010 and even after a lapse of six

years they have not been completed and commissioned.

ii) In respect of Lines, eleven works are found to be continuing in

on-going works category which was commenced well before

2010 and even after a lapse of from six years they have not

been completed and commissioned.

iii) in respect of Augmentation works of 60 number in on-going

category, seventeen works are continuing from 2011 -2014,

which are additional transformer works, but are not completed

and commissioned even after a lapse of 3- 6 years. KPTCL

should have taken a serious note of this to avoid huge delay in

completion, since, these projects will not have any external

impediments like RoW or litigations to cause slowing down in the

progress.

In view of the above observations KPTCL is directed to monitor the

progress of capital works regularly to ensure that, the ongoing works

are completed within a definite time frame, besides ensuring

categorization of assets which are already completed and

xxxiii

commissioned. Further, the Commission after reviewing the progress

achieved in the capex for FY16 decides to allow the capex of

Rs.1278.81 Crores, subject to disallowance, if any, as per the results of

the prudence check of capital expenditure for FY16, as discussed

below.

b) Prudence check of capital expenditure and material procurement of

KPTCL for FY16:

The Commission has got the Prudence check of Capital Expenditure

for FY16, done through third party verification of the capital works

categorized and also the material procurement of KPTCL during FY16.

This was taken up in two parts:

i. Prudence check of execution of the capital works of the FY16:

ii. Prudence check of Material Procurement process of the FY16:

i. Prudence check of execution of the capital works of the FY16:

The capital expenditure proposed by the KPTCL, in its tariff application

every year, is being allowed by the Commission subject to prudence

check of the completed and categorized works. The capital

expenditure incurred by the KPTCL for FY16 is Rs.1278.81, as against the

approved Capex of Rs.1400 Crores and the outlay on works

categorized during FY16 is Rs.925.16 Crores, which includes spill over

works of the earlier years as well as new works of FY16.

Commission had entrusted the Prudence check of capital expenditure,

to M/s RSA & Co, a Consultant from Kolkata, selected through a

transparent process of e-tendering.

M/s RSA & Co has conducted the prudence check as per the terms of

the reference prescribed in the bid documents and the scope of the

work as well as the guidelines to conduct prudence check issued by

the Commission.

xxxiv

KPTCL had furnished a list of capital works which were categorized

during FY16 with a capital outlay of Rs. 742.59 Crores against 1575 no.

of works. Against this, the Consultants has selected samples with a total

expenditure of Rs.327.68 Crores incurred against 136 works. The

samples so selected cover 44.13% of the total categorized works. The

selected samples contained 76 number of works costing above 3

Crores and 60 numbers of works costing below 3 Crores. M/s RSA & Co

has stated that, the sampling has been done to ensure coverage of all

types of works covering the geographical area and also relatively high

value items of works. The summary of works selected for prudence

check is provided in the table below:

TABLE – 4.14

Sample projects – Zone wise selection

Zone Project costing above

Rs.3 Crores

Project costing above

Rs.3 Crores

Total

Total No.

of Works

No. of

Sample

works

Total No.

of Works

No. of

Sample

works

Total No.

of Works

No. of

Sample

works

Bagalkot 18 11 271 10 289 21

Bengaluru 39 23 462 11 501 34

Hassan 18 11 184 11 202 22

Kalaburagi 21 12 222 13 243 25

Mysuru 128 8 13 4 141 12

Tumakuru 29 11 170 11 199 22

Total 253 76 1322 60 1575 136

TABLE – 4.15

Sample projects – work-wise Nature of work

Type of work

Project costing

above Rs.3

Crores

Project costing

above Rs.3

Crores

Total

Total

No. of

Works

No. of

Sample

works

Total

No. of

Works

No. of

Sample

works

Total

No. of

Works

No. of

Sample

works

Substations 54 40 33 8 87 48

Lines 61 29 22 06 83 35

Exclusive lines 8 0 0 0 8 0

Augmentation

of lines 6 3 16 0 22 3

Augmentation

of substations 31 2 200 20 231 22

other 93 2 1051 26 1144 28

Total 253 76 1322 60 1575 136

xxxv

The details of the cost of works for the selected samples, are provided

in the table below:

TABLE -4.16

Cost Details of Selected Samples Particulars No.s Amount in Rs.

Cores

Projects costing above Rs.3 Crores 76 296.84

Projects costing below Rs.3 Crores 60 30.85

Total 136 327.68

The prudence check analysis was carried out keeping in view the

following points:

Guidelines for conducting prudence check prescribed by this

Commission

Parameters defined for three phases of Capital expenditure viz.

Planning, Implementation & Post execution.

Parameters on which each project was tested are:

o Schedule of implementation,

o Cost of implementation,

o Objectives realized,

o Quality of execution,

o Pro-activeness of investment,

o Preparation of DPR/Estimate,

o Cost Benefit Analysis and

o Alternatives considered.

After completing the prudence check work, the Consultant has

submitted a report. Gist of the findings is as follows:

xxxvi

TABLE-4.17

Gist of Prudence check findings for FY16

Particulars Numbers Amount in

Rs. Crores.

No. of works costing Rs.3 Crores and above considered as

sample & Cost 76 296.84

No. of works costing less than Rs.3 Crores considered as

sample & Cost 60 30.84

Total number of sample selected & Cost 136 327.68

No. of works costing Rs.3 Crores and above not meeting

the norms of prudence as stipulated in the guidelines

issued by this Commission

01 10.9

No. of works costing less than Rs.3 Crores not meeting the

norms of prudence as stipulated in the guidelines issued by

this Commission

03 0.61

Total number of sample selected not meeting the

prudence norms & Cost 04 11.51

The following works are stated to be not meeting the norms

of the prudence:

1. Bangalore transmission zone: 66/11 kV Srigandhada

Kavalu substation (Rs. 3.98 Crores), remains unutilized, as

BESCOM has not connected any 11kV feeder to take

the load from the substation.

2. Bagalkote transmission zone: 110kV Malaghan

substation in Sindagi taluk, (0.35 Crores), one of the two

transformers in the substation is not functioning since

June, 2016.

3. Bagalkote transmission zone: 2*10 MVA, 110/11kV

substation (Rs.6.92 Crores), only 4 feeders out of the

estimated 12 numbers of 11kV feeders have been

connected by HESCOM resulting in only 39.62% load on

the substation, even after repeated communication

from KPTCL.

4. Kalaburagi transmission zone: Replacement of failed

10MVA transformer in 220kV shahapur substation (Rs.0.26

Crores- the works was completed on 4.4.2015. But the

xxxvii

same is inoperative since 30-8-2015.

Further, the consultant has stated that, in case of two

works costing Rs.3.98 Crores in respect of 66/11 kV

Srigandada Kavalu substation in BESCOM area and

Rs.6.92 Crores for 2*10 MVA,110/11kV Takkalakki

substation in HESCOM area, the non-prudence may not

be attributable to KPTCL as per the observations shown

below:

a. It is observed that the 66/11 kV Substation

Srigaadakavalu, Bangalore Zone remains

unutilized in spite of it being ready in all respect as

BESCOM has not connected required load

through 11kV feeders to the station. In this case

KPTCL may not be penalized for the project not

meeting prudence norms. The responsibility

should be fixed on the BESCOM for its failure to

execute the required number of 11kV feeders

from this substation.

b. It is observed that 2*10MVA, 110/11kV Sub-Station

at Takkalakki, Bagalkote Zone is loaded to 39.62%

only and remains unutilized to its full capacity in

spite of it being ready in all respect as HESCOM

has not connected estimated number of 11kV

feeders to the station (only 4 feeders out of 12

feeders are connected). In this case KPTCL may

not be penalized for the project not meeting

prudence norms. The responsibility should be

fixed on the HESCOM for its failure to provide load.

xxxviii

The consultant has stated that, they could not deduce two projects, as

they were short closed works, which are yet to be completed by

KPTCL. That, these two works somehow, could be ascertained as non-

deducible only after physical verifications.

A summary of the works found to be having cost and time over-run is

given in the following Table:

Table – 4.18

Summary of Works having Cost Overrun

Particulars No cost over

run

Within

10% 10-25 %

Above

25%

Rs.3 Crores and

above 31 27 13 03

below Rs.3 Crores 47 05 06 02

Table – 4.19

Summary of Works having Time Overrun

Particulars

Within

Year

Between one

and two

Years

Above two

Years

Rs.3 Crores and

above 39 11 24

below Rs.3 Crores 43 13 04

The consultant has made a few key observations in the prudence

check Report as follows:

i. Primary objectives were not clearly defined in any project.

ii. System of post execution analysis of the works is not in place

iii. There are no nodal/focal point for records & details which is

essential for any validation/analysis exercise.

iv. The project data provided in the prescribed format was in most

cases incomplete and did not have vital details necessary for

grading.

v. The field officers are not aware of the relevance/objective of

the prudence check exercise or even post execution analysis.

vi. There is no centralized recording system for store materials.

vii. No system exists for quarterly/yearly analysis of stock position for

identification of slow moving/non-moving items.

viii. KPTCL has not followed the capital expenditure guidelines

issued by KERC in all respects.

The consultants have made the following recommendations:

xxxix

a) The area of project monitoring may be extended to procure

and monitor details of performance of the capital works post-

commissioning.

b) The field officers are required to be made aware of the capital

expenditure guidelines.

c) There should be a system of comprehensive post-execution

evaluation and KPTCL should follow a system of post-execution

productivity approval of the Capital works commissioned.

Further, the DPRs/Estimates should quantify the primary and

secondary objectives to be achieved

d) Centralized store accounting and monitoring system should be

put in place. KPTCL should also adopt a system of ABC analysis

of stock of materials and KPTCL should implement the system of

periodical (annual) physical verification of stores.

e) KPTCL should have a system of speedy approvals of deviations

so that delay in execution on that account is minimized.

f) KPTCL should develop a strong and effective Vendor rating

system.

g) KPTCL should have central data repository of information which

would provide all the details of a project and the project data

in the format prescribed by KERC should be submitted within a

specified period after commissioning of the project.

In respect of the 3rd work stated above as not meeting the norms of

prudence, the Commission is of the opinion that, the 2*10MVA,

110/11kV Sub-Station at Takkalakki, Bagalkote Zone having a load of

39.62% can be treated as meeting the norms of prudence check, as

the loads on the transmission substations are to be loaded in stages.

Further, the Commission directs HESCOM to expedite the process of

connecting estimated number of feeders to the substation to reap the

maximum benefit.

The Commission has noted that, the following two projects not meeting

the norms of prudence in BESCOM and HESCOM are to be attributed

to KPTCL as stated below:

xl

a) 33 KV Chunchunur Link Line from 110 KV Katakol Substation: The

link line with a cost of Rs.131.20 Lakh was completed on 07-07-

2015 and was categorized in the end of FY16. This line was

constructed to reduce the load of 20 MVA transformer at

Yeragatti substation. However, it was observed that the line was

not commissioned, as the 20 MVA 110/33 kV transformer at

Katakol Substation was not available.

b) 11 KV New Feeder/link line under RAPDRP scheme, from Attibele

MUSS for bifurcation of F-15 feeder by using 3*400 Sq. mm UG

Cable costing Rs.99.17L. in Chandapura Division: The main

objective of drawing a new feeder from Attibele substation was

to release load on heavily loaded lengthy feeder F-15 of

Attibele MUSS. Though the new feeder is capable of carrying

load it is not charged due to non-availability of breaker at the

substation as KPTCL was required to install the circuit breaker.

The Commission has forwarded the Final Report of the Prudence

Check of KPTCL submitted by the consultant, prudence check reports

of BESCOM and HESCOM which includes the non-prudent works

attributable to KPTCL, seeking its views on the report. The KPTCL was

also asked to furnish justification, if any, on the projects treated as non-

prudent to be treated as meeting to the norms of prudence to reach

the Commission on or before 20th March, 2017.

KPTCL, however, in its letter dated 21st March, 2017 has requested the

Commission for one-weeks’ time for submitting the replies, on the

ground that, the reports have been sent to different sections and it will

be receiving the replies within a week’s time. The Commission has

noted that, KPTCL has not taken the issue seriously and treated it in a

casual manner. It had sufficient time and resources to gather

information about the work and explain the shortcomings noticed by

the consultant. Thus, its request for grant of further time is not justified.

xli

Hence, the Commission decides to disallow the interest and

depreciation on the capex of the works not meeting the norms of

prudence, as follows:

TABLE – 4.20

Details of Amounts disallowed in APR FY16 Sl

NO Particulars

Amount in

Rs. Crores

1 Total cost of categorized works eligible for prudence check 742.59

2 Total cost of the sample works 327.26

3 Cost of sample works not meeting prudence norms 11.51

4 Cost of sample works not meeting prudence norms

attributable to other companies like BESCOM and HESCOM 10.90

5 Net capex which is not meeting prudence norms as per the

Report of Prudence check of KPTCL 0.61

6 The capex not meeting the prudence norms at Rs.0.61

Crores is 0.206% of cost of total sample of Rs.296.17 Crores

in the category of substations. When this is escalated to the

total population of substations with a cost of Rs.419.36

Crores

0.86

7 The capex not meeting prudence norms in BESCOM and

HESCOM attributable to KPTCL

(HESCOM 1.312 Crores + BESCOM0.9917 Crore)

2.3037

8 Total amount of capex termed as not meeting the

prudence norms 3.167

9 Amount to be disallowed towards works not meeting

prudence norms calculated on the basis of weighted

average interest & weighted average depreciation on the

capex to be disallowed.

0.348

Thus, the Commission decides to disallow an amount of Rs.0.348 Crores

and factor the same in the allowable incentives payable by ESCOMs to

KPTCL for FY16.

ii. Prudence check of Material Procurement process of the FY16:

The execution of capital works in KPTCL is being done through turnkey

contracts as well as partial turnkey contracts. In the process, the KPTCL

procures major materials like, Power transformers, Circuit Breakers and

conductors etc., and issues them to the partial turnkey contractor for

carrying out the Labour contract works as per award. In view of the

fact that, a large quantity of major materials is being procured by the

KPTCL every year, the Commission decided to review material

procurement process of major materials as a part of prudence check,

to ensure that, the procurement is made out in a cost effective

xlii

manner without compromising the operational needs. Hence, the

consultant was directed to look into the procurement process of the

KPTCL, and analyze the process.

M/s RSA & Co has stated that, they have reviewed procurement of

material in respect of major materials costing Rs.9.698 Crores made

during FY16. The details of the procurement of materials were

collected from the procurement section of KPTCL and the procedure

followed for procurement of material was analyzed. A sample of

tenders floated for procurement of material was checked.

Procurement of major materials like Power transformers, Circuit Breaker,

conductors and transmission line tower parts was analyzed. To assess

the idle stock position, movement of material especially bulk/ high

value materials during the financial year was checked.

The Consultant has stated that, the Major procurements have been

done centrally from the Corporate Office of the KPTCL and have

observed the following:

i. Tendering process has been followed and process of material

procurement is transparent. Online tendering system is being

followed whereby by entire tendering process is carried out

through tendering and procurement portal.

ii. NIT for procurement of materials is published in the newspapers

having wide circulation. Material procurement by field offices

are limited to low value items and mostly related to

maintenance works.

iii. Most of the works are being awarded on Total Turnkey basis

wherein all the materials required for the specific work is

required to be procured by the contractor as part of the

contract.

iv. In case of Partial Turnkey (PTK) contract, where material is

provided by KPTCL, the materials are being supplied either by

instant/works specific procurement or from the stock of

materials available with the stores.

xliii

v. Movement of stocks during period was analyzed. It was

observed that there is no system in place to identify fast moving,

slow moving & non-moving items on yearly basis.

vi. There is no system of categorization of material as per ABC

system which is essential for effective stock control.

vii. Apart from procured materials, stocks also include materials

which are released from any work, failed transformers and

repaired transformers etc.

On analyzing the movement of stock to identify slow moving/non-

moving items, it was observed that there are stocks which have not

been utilized for over 3 years. Total values of such non-moving items

amount to Rs.13.35 crores. It was also observed that there are obsolete

items valued at 10% of the cost amounting to Rs.30.63 Lakhs.

The Commission having taken note of the recommendations of the

Consultants:

a) Directs KPTCL to implement the recommendations in the matter

of execution of capital works, creation of awareness on capital

expenditure guidelines among the officers and maintenance of

a centralized data base of the works in progress and the works

completed. KPTCL should coordinate with ESCOMs to complete

the works in time, wherever the upstream and downstream

infrastructures are to be created simultaneously so as to

complete such works in time.

b) Directs KPTCL to strictly monitor the material stock and take

necessary action to utilize/clear the non-moving stock and

report the compliance in this regard to the Commission.

vii) Interest and Finance Charges:

The KPTCL has claimed an amount of Rs.486.86 Crores towards Interest

and Finance charges. The Commission in its tariff order dated 6th May,

2013, had approved an amount of Rs.709.18 Crores for FY16. Thus, the

actual Interest and Finance charges is less than the approved amount

by Rs.222.32 Crores

xliv

The Commission has considered the opening balance of long term

loans, new loans availed and repayment of loans made during FY16 as

per the Audited Accounts as per the data furnished under Format T-9.

Based on the opening and closing balances of long term loans, the

average loan for the year FY16 works out to Rs.4842.15 Crores. The

actual amount of interest on capital loans incurred is Rs.483.64 Crores

for FY16 (excluding interest of Rs. 3.22 Crores on short-term loans). The

weighted average rate of interest works out to 9.99%. The details of the

allowable interest on capital loans are as follows:

TABLE – 4.21

Allowable Interest and Finance Charges Amount in Rs. Crores

Particulars FY16

Secured Loans 4851.58

Unsecured Loans 7.20

Total 4858.78

Add new Loans 530.00

Less Repayments 563.27

Total loan at the end of the year 4825.52

Average Loan 4842.15

Interest on long term loans (as filed) 483.64

Weighted average rate of interest based on the

actual interest proposed on long term loans in

FY16 as per audited accts in %

9.99%

Allowable Interest on long term loans 483.64

Since the weighted average rate of interest is comparable with the

prevailing interest rates for long term loans, the Commission decides to

allow actual interest on long term loans and finance charges of

Rs.483.64 Crores for FY16. Further, considering the actual capitalization

of interest of Rs.44.93 Crores, the net interest on long term loans and

finance charges works out to Rs.438.71 Crores.

Thus the Commission decides to allow net interest and finance charges

of Rs.438.71 Crores for FY16.

viii) Interest on Working Capital:

xlv

The Commission in its Tariff Order dated 6th May, 2013, had approved

an amount of Rs. 74.07 Crores towards interest on working capital as

per the provisions under MYT Regulations. KPTCL, in its audited

accounts for FY16, has indicated an amount of Rs.3.22 Crores towards

interest on short term borrowings. Accordingly, as per the norms under

MYT Regulations as amended, KPTCL is entitled to interest on working

capital for FY16 as follows:

TABLE – 4.22

Allowable Interest on Working Capital Amount in Rs. Crores

Particulars FY16

One-twelfth of the amount of O&M Exp. 75.90

Opening GFA as per Audited Accts 13122.74

1% of Opening balance of GFA 131.23

One-sixth of the expected revenue from Transmission

user at the prevailing tariffs 459.82

Total Working Capital 666.95

Rate of Interest (% p.a.) 11.75%

Interest on Working Capital 78.37

Actual interest on working capital as per audited

accounts 3.22

Allowable normative interest on working capital as

per Regulations 40.79

Thus, the Commission decides to allow the interest on working capital

of Rs.40.79 Crores for FY16.

ix) Other Debits:

As per the Audited Accounts for FY16, KPTCL has indicated an amount of

Rs.106.37 Crores towards other debits. This includes an amount of

Rs.103.38 Crores towards interest on outstanding power purchase dues.

However, this amount has not been factored in the application filed for

APR for FY16. As the cost of power purchase including interest is not a

component of transmission charges, the Commission hereby decides

not to consider this expenditure for the purpose of the annual review of

performance for FY16. The balance amount of Rs.2.99 Crores relates to

cost of decommissioning of assets, small and low value items written

off, interest on delayed compensation, losses relating to fixed assets ,

miscellaneous losses and write offs.

xlvi

The Commission therefore, decides to allow an amount of Rs.2.99

Crores towards other debits for FY16.

x) Return on Equity:

KPTCL in its application for APR of FY16, has claimed an amount of

Rs.384.73 Crores towards return on equity for FY16 as follows:

TABLE – 4.23

Return on Equity - KPTCL’s Submission

Amount in Rs. Crores

Calculation of RoE FY16

Paid up share capital and share deposits 2075.32

Capital Reserves and Surplus 406.80

Total Equity 2482.12

RoE @ 15.50% 384.73

The Commission in its Tariff Order dated 6th May, 2013, had approved

RoE of Rs.575.24 Crores, inclusive of MAT.

The Commission, in accordance with the MYT Regulations has

considered the equity, based on the amount of paid up share capital,

share deposits and accumulated balance of surplus in profit and loss

account under ‘Reserves and Surplus’ of the audited accounts for

FY16.

Further, as reported by the KPTCL, additional equity of Rs.87 Crores has

been received from Government of Karnataka in three installments.

Considering the actual date of receipt of this additional equity as per

the amended Regulations dated 18th May, 2016, the allowable return

on this additional equity has been computed as follows:

TABLE – 4.24

RoE on Additional Equity for FY16

Additional Equity received during

FY16- GoK Order/Date

Amount

in Rs.

Crores

Received

on

No. of

Months

equity is

put to use

RoE allowed

in Rs. Crores

EN 16 PSR 2015 dated 18.03.2016 22 26.03.2016 0 0.00

EN 16 PSR 2015 dated 24.02.2016 40 26.02.2016 1 0.52

EN 16 PSR 2015 dated 09.11.2015 25 17.11.2015 4 1.29

xlvii

Return on Equity allowed on Additional Equity Infusion in FY16 1.81

Further, in compliance of the Orders of the Hon’ble ATE in Appeal

No.46/2014, wherein it was directed to indicate the opening and

closing balances of gross fixed assets along with break-up of equity

and loan component in the Tariff Order henceforth, the details of GFA,

debt and equity (net-worth) for FY16 is indicated as follows:

TABLE – 4.25

Status of Debt Equity Ratio for FY16

Amount in Rs. Crores

Particulars GFA Actual

Debt

Actual

Equity

(Net-

worth)

Normative

Debt @

70% of

GFA

Normative

Equity @

30% of

GFA

%age

of

actual

debt

on

GFA

%age

of

actual

equity

on

GFA

Closing

Balance

14047.90 4825.52 2759.79 9833.53 4214.37 34.35% 19.65%

From the above table it is seen that the actual debt equity ratio is

within the normative debt equity ratio of 70: 30 on the closing balances

of GFA for FY16.

Based on the above, the Commission has considered to allow RoE at

15.5% of equity besides allowing the taxes separately as per actuals as

reported in the audited accounts. Accordingly, the allowable RoE for

FY16 is as follows:

TABLE – 4.26

Allowable RoE for FY16

Amount in Rs. Crores

Particulars FY16

Paid Up Share Capital as on 01.04.2015 2075.32

Share Deposit 20.00

Reserves and Surplus 399.35

Total Equity 2494.68

Allowable RoE @ 15.50% 386.67

RoE on additional equity 1.81

Total RoE for FY16 388.48

xlviii

Thus, the Commission approves an amount of Rs.388.48 Crores towards

RoE for FY16.

xi) Provision for Taxation:

KPTCL in its Audited Accounts has indicated an amount of Rs.51.42

Crores towards Income Tax for FY16. Since the Commission has

allowed RoE @ 15.5% without considering allowable MAT, the

Commission decides to allow the actual expenses towards payment of

Income Tax of Rs.51.42 Crores for FY16.

xii) Net Prior Period Charges:

KPTCL in its Audited Accounts has indicated an amount of Rs.90.93

Crores as net prior period charges and Rs. 61.47 Crores as net prior

period credits for FY16. This amount pertains to net of prior period

income consisting of excess provision for depreciation and other

income in prior periods and expenses pertaining to under provision of

depreciation, employee cost and other administrative expenses.

Thus, the Commission decides to allow an amount of Rs.29.46 Crores as

net prior period credits for FY16.

xiii) Exceptional items:

KPTCL in its Audited Accounts has indicated an amount of Rs.527.79

Crores being the KPTCL portion of arrears of contribution to P&G Trust

not released by the Government of Karnataka. The same amount has

been claimed in the APR for FY16. Also an amount of Rs.4.96 Crores

has been claimed as exceptional items of expenditure as per the

audited accounts for FY16.

The Commission in its preliminary observations had asked the KPTCL to

furnish reasons /justifications for inclusion of this amount in the audited

accounts for FY16 and claiming the same as an item of expenditure in

APR of FY16 to be recovered from the consumers as part of the

transmission charges during FY18 in contravention of the Commission’s

decision in Tariff Order 2016.

xlix

In its replies to the Commission’s preliminary observations, KPTCL has

stated that it has included an amount of Rs. 527.79 Crores towards

KPTCL portion of arrears of contribution to P&G Trust not released by

the Government of Karnataka, in accordance to the directions issued

by the Energy Department, GoK vide Letter No. EN 26 PSR 2016/P3

dated 16.09.2016.

The Commission in its Order dated 30th March, 2016 has already dealt

with this issue and has observed that:

a) As per Rule 4(13) of the Karnataka Electricity Reforms (Transfer of Undertakings

of KPTCL and its Personnel to Electricity Distribution and Retail Supply

Companies) Rules, 2002, notified by the Government on 31.05.2002, the State

Government is liable for funding the pension and gratuity liability of existing

pensioners as on the effective date of Second Transfer Scheme.

b) The Government, as per its order dated 19.12.2002, has adopted “pay as you

go” approach to meet the pension and gratuity requirements of existing

pensioners on the effective date of second transfer Scheme. With this

arrangement, the GoK is liable to meet the pension and gratuity requirement

of existing pensioners

In view of the above as per the provisions of the prevailing Rules and

Government Orders issued thereon, the Commission had earlier

decided that this liability cannot be passed on to the consumers,

through tariff.

Despite this Order of the Commission, KPTCL has gone ahead to factor

in this amount its books of accounts for FY16, besides claiming this

amount in the APR for FY16, whereas, this liability should have been

borne by the Government of Karnataka.

The Commission hereby reiterates its earlier decision that, as per Rule

4(13) of the Karnataka Electricity Reforms (Transfer of Undertakings of

KPTCL and its Personnel to Electricity Distribution and Retail Supply

Companies) Rules, 2002, notified by the Government on 31.05.2002

and the Government Order No. DE 15 PSR 2002 Dated 19.12.2002, the

l

amount in question is liable to be borne by the Government of

Karnataka only.

In view of the above, the Commission is unable to allow an amount of

Rs.527.79 Crores being the GoK liability towards arrears of contribution

to P&G Trust in the APR for FY16. The Commission hereby directs KPTCL

to claim this amount from the Government besides withdrawing the

debit of Rs.532.75 Crores in its accounts.

The amount of Rs. 4.96 Crores pertains to the expenditure incurred on

account of sundry debtors written off as per the audited accounts of

KPTCL for FY16. The Commission is decides to allow the same in the APR

for FY16.

xiv) Other Expenses Capitalized:

KPTCL in its audited accounts has factored an amount of Rs.44.74

Crores towards capitalization of employee cost, A&G and R&M

expenses as detailed below:

TABLE – 4.27

Other Expenses Capitalized as per Audited Accounts of KPTCL

Amount in Rs. Crores

Particulars FY16

Repairs and Maintenance 0.05

Administration and General Expenses 6.48

Employee Cost 38.21

Total expenses capitalized 44.74

As per audited accounts of KPTCL, an amount of Rs.1.01 Crores is

accounted towards capitalization of depreciation on assets.

Considering this amount, the Commission allows Rs.45.75 Crores

towards capitalization of other expenses for FY16.

xv) Other Income:

KPTCL in its audited accounts has indicated an amount of Rs.116.50

Crores as other income for FY16. This amount also includes the

withdrawal of depreciation of Rs.37.58 Crores on assets created out of

consumer contribution / grants. This amount has already been

li

factored while computing the allowable depreciation for FY16. The

balance amount of Rs.78.92 Crores which mainly pertaining to rent

from staff quarters, rent from ESCOMs, interest on investments / bank

deposits and profit on sale of stores/released assets etc., is treated as

other income.

Thus, the Commission decides to consider an amount of Rs.78.92

Crores as non-tariff income for the purpose of APR for FY16.

xvi) SLDC Charges:

KPTCL in its filing has indicated the SLDC charges separately for FY16 as

detailed below:

TABLE – 4.28

SLDC Charges for FY16-KPTCL’s Submission Amount in Rs. Crores

Sl.No. Particulars FY 16

1 Employee cost 11.19

2 A & G Expenses 7.92

3 R & M Expenses 0.61

4 Depreciation 0.22

Total 19.94

The Commission in its order dated 6th May, 2013 had approved SLDC

Charges of Rs.20.97 Crores for FY16. However, considering the actual

SLDC charges of Rs.19.94 Crores incurred during FY16 as per KPTCL’s

filing, the Commission decides to allow adjustment of the reduction in

SLDC charges of Rs.1.03 Crores to be shared by ESCOMs as detailed

below:

TABLE – 4.29

Allowable SLDC Charges for FY16

lii

Amount in Rs. Crores

Particulars

Capacity

Allocation

in MW

SLDC

Charges

for FY16 as

per APR

SLDC Charges

for FY16 as

approved in

Order dated

2nd

March,2015

Difference

to be

adjusted

in FY18

BESCOM 8623 9.24 10.53 -1.29

MESCOM 1615 1.73 1.82 -0.09

CESC 2252 2.41 2.10 0.31

HESCOM 4000 4.28 3.91 0.37

GESCOM 2125 2.28 2.61 -0.33

TOTAL 18615 19.94 20.97 -1.03

The above said excess amount of SLDC charges shall be adjusted in

the SLDC charges payable by ESCOMs to KPTCL in FY18 as discussed in

the subsequent chapter of this Order.

xvii) Abstract of Approved ARR for FY16 as per APR:

Based on the decisions discussed above, the consolidated Statement

of approved ARR as per APR for FY16 is as follows:

TABLE – 4.30

Abstract of approved ARR for FY16 as per APR

Amount in Rs. Crores

Sl.

No Particulars

FY16

(Revised

02.03.2015)

As filed

(30.11.2016)

As per

APR

1 Revenue from Transmission of

power 2606.52 2758.93 2758.93

2 Expenditure

Employee Cost 676.62

Repairs & Maintenance 153.21

Admin & General Expenses 70.39

i Total O&M Expenses 847.54 900.22 910.82

ii Depreciation 652.95 635.17 598.39

iii Interest & Finance Charges 709.18 441.93 483.64

iv Interest on working capital 74.07 0.00 40.79

v Return on Equity 575.24 384.73 388.48

vi Provision for taxation 0.00 51.42 51.42

vii Other Debits 0.00 2.99 2.99

viii Extraordinary items 0.00 532.75 4.96

liii

Less

ix

Interest & Finance Charges

capitalised 103.63 0.00 44.93

x Other Expenses capitalised 38.55 0.00 45.75

xi Other Income 117.00 116.50 78.92

xii Net Prior Period Charges 0.00 29.45 29.46

xiii Carry forward of deficit as per

APR of FY14 7.49 0.00

xiv SLDC Charges 0.77 0.00 0.00

3 Net ARR 2591.54 2862.16 2341.35

4.4 Treatment of Gap in Revenue for FY16:

As against an approved ARR of Rs.2591.54 Crores and KPTCL’s

proposed ARR of Rs.2862.16 Crores, the Commission after the annual

review of performance, decides to allow an ARR of Rs.2341.35 Crores

for FY16. Considering the actual revenue of Rs.2758.93 Crores, there is a

surplus in Revenue of Rs.417.58 Crores for FY16.

The Commission decides to carry forward an amount of Rs.417.58

Crores being the surplus for FY16, to the approved ARR for FY18 as

discussed in the subsequent chapter of this Order.

liv

CHAPTER – 5

ANNUAL REVENUE REQUIREMENT FOR FY18

5.1 Approved ARR for FY18:

KPTCL in its application dated 16th November, 2016, has requested the

Commission to carry forward the deficit of Rs. 103.23 Crores of FY16 to

the approved ARR of FY18, and determine the revised transmission

tariff for FY18.

Commission’s Analysis and Decision:

The Commission in its Tariff Order dated 30th March, 2016 had

approved ARR and Transmission tariff for FY17 – FY19. As per this Tariff

Order, the Commission had approved an ARR of Rs.3171.28 Crores for

FY18 as detailed below:

TABLE – 5.1

Approved ARR FY18

Amount in Rs. Crores.

Sl.

No Particulars As approved

Expenditure

1 O&M Expenses 1216.59

2 Depreciation 735.51

3 Interest & Finance Charges 623.75

4 Interest on working capital 89.00

5 Return on Equity 661.48

Less

6 Interest & Finance Charges

capitalized 52.80

7 Other Expenses capitalized 49.44

8 Other Income 52.82

NET ARR 3171.28

lv

KPTCL in its application has sought to add the revenue gap of FY16 to

the approved ARR of FY18 without any changes in the existing

approved ARR for FY18 as per the Commission’s order dated 30th

March, 2016.

As discussed in the previous chapter, the Commission has decided to

carry forward the surplus amount of Rs.417.58 Crores based on the APR

for FY16. Considering this surplus, the revised ARR for FY18 would be as

follows:

TABLE – 5.2

Revised ARR for FY18

Amount in Rs. Crores.

Particulars FY18

Approved ARR for FY18 as per tariff order

dated 30th March, 2016

3171.28

Surplus as per APR for FY16 417.58

Revised ARR for FY18 2753.70

Accordingly, the Commission decides to approve the revised ARR of

Rs.2753.70 Crores for FY18.

i) Revised Transmission tariff for FY18:

The Commission in its Tariff Order dated 30th March,2016 had

considered the following ESCOM-wise transmission capacity for FY18:

TABLE- 5.3

ESCOM wise capacity Allocation- As per Tariff Order dated

30.03.2016

ESCOMs Capacity

Allocation in

MW

BESCOM 11003

MESCOM 1615

CESC 2253

lvi

HESCOM 3999

GESCOM 2635

TOTAL (MW) 21505

The transmission tariff determined for FY18 was Rs1, 22,889 per MW per

Month.

The Commission in its preliminary observations had sought ESCOM-wise

transmission capacity to be considered for FY18. As per the replies of

KPTCL dated, 20th December, 2016, the following is the revised

transmission capacity projections for FY18:

TABLE- 5.4

ESCOM wise capacity Allocation for FY18

ESCOMs Capacity

Allocation in

MW

BESCOM 11271

MESCOM 1573

CESC 2423

HESCOM 3787

GESCOM 3060

TOTAL (MW) 22113

The Commission notes that, the above said projected transmission

capacity for FY18 is based on the actual transmission capacity of 20158

MW in FY16, as stated in the replies to the preliminary observation

made by the Commission. However, as per the annual report /

audited accounts of KPTCL for FY16, the following is ESCOM- wise

transmission capacity in FY16:

TABLE- 5.5

ESCOM wise capacity Allocation for FY16-as per annual accounts

ESCOMs Capacity

Allocation in MW

BESCOM 8623

MESCOM 1615

CESC 2252

HESCOM 4000

GESCOM 2125

TOTAL (MW)* 18615

*As per the Annual Audited Accounts

lvii

Based on the above said actual transmission capacity in FY16 and

considering the projections proposed by KPTCL for FY17 & FY18, the

estimated ESCOM-wise transmission capacity for FY18 will be as follows:

TABLE- 5.6

ESCOM-Wise Estimated Transmission Capacity for FY18

ESCOMs Capacity

Allocation in MW

BESCOM 10068

MESCOM 1615

CESC 2252

HESCOM 4000

GESCOM 2635

TOTAL (MW) 20570

Considering this estimated transmission capacity for FY18, the

transmission charges to be recovered from the ESCOMs and long term

users of transmission network are determined as follows:

TABLE – 5.7

Transmission Charges payable by ESCOMs for FY18

Particulars Capacity

Allocation

in MW

Transmission

charges for

FY18 Rs. Crores

per annum

Transmission

charges for

FY18 Rs. Crores

per Month

BESCOM 10068 1347.80 112.32

MESCOM 1615 216.20 18.02

CESC 2252 301.47 25.12

HESCOM 4000 535.48 44.62

GESCOM 2635 352.75 29.40

TOTAL (MW) 20570 2753.70 229.47

The revised transmission charge for FY18 is Rs.1,11,558 per MW per

month.

lviii

ii) SLDC Charges:

The Commission in its Tariff Order dated 30th March, 2016 had

approved the ESCOM-wise SLDC charges for FY18 as follows:

TABLE – 5.8

SLDC charges – Approved for FY18 in Tariff Order 2016

Amount in Rs. Crores

ESCOMs

Capacity

Allocation

In MW

Share of SLDC Charges

included in ARR of ESCOMs

BESCOM 11003 13.20

MESCOM 1615 1.94

CESC 2253 2.70

HESCOM 3999 4.80

GESCOM 2635 3.16

TOTAL 21505 25.80

The revised SLDC charges as per the APR for FY16 and approved ARR

for FY18 as per the Commission’s Order dated 30th March, 2016 (duly

considering the revised transmission capacity), to be collected from

ESCOMs during FY18 are as follows:

TABLE – 5.9

Revised SLDC charges of FY16 Amount in

Rs. Crores

Particulars

Capacity

Allocation

in MW

SLDC

Charges

for FY16

as per

APR

SLDC

Charges for

FY16 as

approved

in Order

dated 2nd

March,

2015

Difference

to be

adjusted

in FY18

Revised

Transmission

Capacity

for FY18

Revised

SLDC

Charges

for FY18

Net SLDC

Charges

to be

collected

in FY18

1 2 3 4 5 6 7 8 (7-5)

BESCOM 8623 9.24 10.53 -1.29 10068 12.63 11.33

MESCOM 1615 1.73 1.82 -0.09 1615 2.03 1.94

CESC 2252 2.41 2.10 0.31 2252 2.82 3.14

HESCOM 4000 4.28 3.91 0.37 4000 5.02 5.39

GESCOM 2125 2.28 2.61 -0.33 2635 3.30 2.97

TOTAL 18615 19.94 20.97 -1.03 20570 25.80 24.77

lix

The Commission decides to allow KPTCL to adjust the above net excess

/ under recovery of Rs.1.03 Crores collected from the ESCOMs towards

SLDC charges for FY16 with the approved SLDC charges of Rs.25.80

Crores for FY18. Thus the net SLDC charges recoverable during FY18

works out to Rs.24.77 Crores.

Transmission Charges and SLDC Charges for all Open Access

Consumers:

The Commission notes that, apart from the ESCOMs, the open access

consumers are also availing the services of the SLDC and hence they

should also bear the expenses incurred by the SLDC.

Based on the total transmission capacity and the allowable SLDC

expenses for FY18, the Commission decides to allow the SLDC to

collect Rs.34.36 per MW per day for all open access transactions from

1st April, 2017 as charges towards SLDC expenditure. This is apart from

the transmission charges payable to KPTCL. The KPTCL and SLDC

are also directed to account this income separately and report to the

Commission while submitting its proposal for APR of FY18.

As determined above, the transmission charges of Rs. Rs.1,11,558 per

MW per month is applicable for all long term open access consumers

for FY18.

Further, the revised transmission charges for short term open access

consumers for FY18 are as follows:

TABLE – 5.10

Revised transmission charges

for short term Open Access consumers - FY18

Duration of Open Access

(Rs/MW)

Transmission

Charges

Amount in Rs/MW

SLDC Charges in

Rs/MW/Day

More than 12 hrs & up to

24 hrs in a day in one

block

916.91

34.36 More than 6 hrs & up to 12

hrs in a day in one block 458.46

Up to 6 hrs in a day in one

block

229.23

lx

5.2 Other issues:

KPTCL, in its application has requested to direct the ESCOMs to:

i) Pay the transmission charges through ESCROW arrangement.

ii) Pay transmission charges in full without subjecting it to

deduction towards rebate.

iii) Not to effect deduction of auxiliary consumption charges in the

transmission bill till the Commission determines the tariff for the

same.

iv) Order refund of amounts recovered without any authority by

ESCOMs towards Auxiliary consumption and rebate.

Commission’s view and decision:

The Commission notes that the issues excluding the auxiliary

consumption charges raised by KPTCL are beyond the scope of

determination of transmission tariff and hence Commission is unable to

take up these issues in these proceedings. These issues are dealt with in

the Transmission Agreement already entered into between KPTCL and

the ESCOMs during 2012. Disputes arising out of implementation of the

Agreement could be settled through mutual discussions to arrive at a

consensus. If they are not settled, KPTCL may file appropriate petition

before the Commission under Section 86(1) (f) of the Electricity Act,

2003.

As regards fixation of tariff for Auxiliary Consumption of KPTCL

Substations, the Commission has determined the tariff at the State’s

Average Power purchase cost, as approved by the Commission, from

time to time. This has been dealt with in detail, in ESCOM’s Tariff Orders.

lxi

5.3 Commission’s Order:

1. In exercise of the powers conferred on the Commission under

Sections 62 and 64 and other provisions of the Electricity Act 2003,

the Commission hereby approves the revised ARR as per Annual

Performance Review for FY16 and determines and notifies the

revised ARR and transmission tariff of KPTCL for FY18 as approved in

this Order.

2. The tariff determined in this Order shall come into effect from 1st

April, 2017.

3. This Order is signed dated and issued by the Karnataka Electricity

Regulatory Commission at Bengaluru, this day, the 11th April, 2017.

Sd/- Sd/- Sd/-

(M.K. Shankaralinge Gowda) (H.D.Arun Kumar) (D.B.Manival Raju)

Chairman Member Member

lxii

APPENDIX-1

COMMISSION’S DIRECTIVES AND COMPLIANCE BY THE KPTCL

The Commission, in its Tariff Order dated 30th March, 2016 and in the

earlier Tariff Orders under the MYT framework, had issued the following

directives for compliance by the KPTCL. The compliance is discussed in

this section.

1. Reactive Power compensation and restoration of failed

Capacitors:

The Commission had taken note of the availability of 3913.61 MVAR

capacitors in the KPTCL system against the installed capacity of

5588.32 MVAR. The Commission therefore had directed the KPTCL to

develop an action plan for restoration of failed capacitors

immediately, and submit a monthly status report.

Compliance by the KPTCL:

As directed, the KPTCL had submitted compliance during the first quarterly

review meeting held in the Commission for the 1st quarter (April to June 2016),

informing the Commission about achieving 81 per cent progress. It was informed

by KPTCL that a budget provision of Rs. 1361 lakh has been made in the in its

General Budget for FY17, for installation of capacitor Banks, which is a major

step towards achieving reactive compensation and efficient grid management and

that action is being taken for installation of Capacitor Banks in Bengaluru city in a

big way. On the restoration of failed capacitors, while submitting the progress

report up to 31.10.2016 KTCL has submitted that:

I. Out of 162 number of capacitor banks (1127.24 MVAR) which were out of

service, 46 number of capacitor banks (263.24 MVAR) were restored by

June, 2016. Further, during the period from 1st July up to 31st October,

2016, 20 number of capacitor banks (91.15MVAR) have been restored and

put into service.

lxiii

II. The remaining 96 number of capacitor banks (772.85 MVAR) will be

restored by 31.03.2017.

III. The details of 11 KV class capacitor banks proposed to be added in

different Transmission Zones during 2016-17, are as follows:

Sl. No. Transmission

Zone

Capacity

in MVAR

Targeted

date of

completion

1 Bagalkot 258.10 15.12.2016

2 Mysuru 60.90 11.12.2016

3 Hassan 136.30 11.12.2016

4 Tumakuru 281.30 15.12.2016

5 Kalaburagi 98.60 11.12.2016

6 Bengaluru 708.80

LoI to be

issued

shortly

Total 1544.00

The Information regarding reactive power charges paid by

KPTCL to CTU, is as follows:

Reactive Energy charges paid by Karnataka from 01.04.2015 to

31.03.2016.

Period Amount Bill &

Date

Payment of reactive energy charges by

KPTCL for the week 27.04.2015 TO

03.05.2015

132725.00

15.05.2015

Payment of reactive energy charges by

KPTCL for the week 29.02.2016 to

06.03.2016.

1881388.00

19.03.2016

Note: Paid duly collecting funds from

ESCOMs

Commission’s Views

The Commission notes that the capacitors which have failed in various

substations are not being restored immediately once they are

declared faulty. As a result, KPTCL is not achieving the desired reactive

compensation and efficient grid management. Noting that the KPTCL

has paid large sums towards reactive energy charges to the CTU, the

Commission is of the view

lxiv

that, if the transmission system is maintained efficiently by

commissioning of capacitors, with adequate capacity in the

transmission system, the question of paying reactive energy charges to

CTU would not arise. The KPTCL shall consider the importance and the

necessity to restore all the failed capacitors and put them back to

service, so as to maintain them in a healthy condition in the

transmission system, for effective reactive power management which

would help in achieving reduction of transmission losses, improvement

in bus voltages and minimize/avoidance of payment of reactive

energy charges to the CTU. Therefore, it is necessary that the targeted

time for restoration of failed capacitors of 772.85 MVAR capacity

indicated in the compliance report as March, 2017, shall be met so as

to commission them in various substations for maintaining an efficient

transmission system.

Further, taking note of the KPTCL’s proposal to install 11 kV class

capacitor banks in the substations located in its Transmission Zones,

the Commission hereby directs the KPTCL to take immediate measures

to ease the transmission constraints in Bengaluru Transmission network

by expediting the work of installation of capacitors.

The Commission reiterates its directives that the KPTCL shall restore all

the failed capacitors within a definite time frame and submit monthly

status reports thereon to the Commission regularly.

2. Transmission System Availability (TSA) – Monthly Report:

The Commission had directed that the KPTCL shall submit the monthly

reports of Transmission System Availability duly certified by the SLDC

with effect from March, 2015.

Compliance by the KPTCL

The Transmission System Availability (TSA) for the financial year ending

31.03.2016, duly certified by the SLDC, has been submitted to the Commission

vide letter No. KPTCL / B36/21474/2015-16/226-36, dated 23.07.2016. Further,

transmission system availability for the months of April 2016, May 2016 and June

lxv

2016 duly certified by the SLDC was submitted to the Commission vide letter No.

KPTCL/B36/41613/2016-17/296-306 dated 31.08.2016.

The KPTCL has also furnished the response to the Commission’s observations on

TSA for FY16 vide letter No. KPTCL/B36/21474/2015-16/465 dated 09.12.2016.

Further, the Zone-wise, Month-wise, TSA reports have been furnished till

September, 2016. The TSA for the month of October, 2016 is being computed

based on the reports from the six transmission zones and the same will be

submitted in the near future.

Commission’s Views:

The Commission notes that the KPTCL is not submitting the Zone-wise

and Month-wise Transmission System Availability reports regularly. The

Commission also notes that the KPTCL has submitted the transmission

system availability for the FY16, duly attending to the data gaps and

inconsistencies pointed out by the Commission, in respect of the

transmission system elements. The Commission, after examining the TSA

reports, has reckoned the Transmission System Availability achieved by

the KPTCL for the FY16 at 99.43 per cent which is more than the target

availability of 98 per cent. As the TSA to be reckoned has a bearing on

the incentives to be allowed, it is necessary that the KPTCL,

henceforth, submits the data to the Commission, after carrying out

proper scrutiny at various levels in the organisation, to ensure that

correct Transmission System Availability is reckoned for the State.

The Commission is of the view that any delay in restoration of the failed

power transformers in the substations, would affect the transmission

system availability to the area catered by such transformers and

therefore the same needs to be addressed by the KPTCL to ensure

maintaining of continuity of power supply to the consumers. The

Commission directs the KPTCL to take necessary action to maintain

elements of the transmission system in a healthy condition by carrying

out maintenance works as per the schedule, conduct Condition

Monitoring of the substation equipment and Residual Life Assessment

(RLA) tests for the old equipment in the substations, to ensure proper

reliability in power supply.

lxvi

The Commission reiterates that the KPTCL shall submit the monthly

reports of Transmission System Availability duly certified by the SLDC,

regularly to the Commission.

3. Directive on MIS & Implementation of Intra-state ABT :

The KPTCL was directed to improve its Management Information

System in its filing to give greater details and explain the basis for

all the projections indicating the sources of data and the

method of estimating projected values. The Commission had

noted that the progress in MIS needs improvement, as it had

resulted in the KPTCL furnishing inconsistent data at different

points of time.

The Commission, besides reiterating its earlier directives, had directed the KPTCL

to furnish consistent data on time regarding the following:

i) Details of Transmission Losses

ii) Voltage-wise Losses

iii) Implementation of Intra-State ABT [

The Commission had directed the KPTCL to furnish the status of implementation

of the Intra-State ABT. Further, the Commission had also directed the KPTCL to

furnish the ESCOM-wise UI charges to ensure that the cost of over drawal of

power at frequencies below the permissible band, should be borne by the

respective ESCOMs.

Compliance by the KPTCL

As directed, the KPTCL had reported the compliance on implementation of Intra-

State ABT during the first quarter review meeting held in the Commission. The

progress made and difficulties faced by the KPTCL were presented before the

Commission. Further, during the second quarter review, the KPTCL had reported

the following status about implementation of Intra-state ABT in the State.

a. The KPCL is providing 15-minute block day ahead schedule for the

RTPS and BTPS. The KPTCL is also in the process of replacing the

meters by ABT compliant meters at all IF points, to facilitate deviation

settlement.

lxvii

b. Billing and monitoring mechanism is in place using SCADA data and

the Intra-State ABT bills (CGS portion) are being sent to the ESCOMs.

After all the ESCOMs communicate about the acceptance of the

mechanism, the same would be commercially enabled.

A brief account of the status of implementation of Intra State ABT is as follows:

i. Weekly Intra-State ABT Bills at 220kV level using the SCADA data

are being generated from April, 2013, based on the methodology

finalized by the SLDC and the same are being sent to all ESCOMs as

well as to the Commission.

ii. As directed by the Commission, the KPTCL will send monthly Mock

bills every month regularly.

iii. The methodology adopted explaining the various factors involved

along with detailed procedure for arriving at UI calculation has

already been sent to all ESCOMs requesting them to furnish their

opinion / comments.

iv. The CESC, GESCOM and MESCOM have accepted the methodology

adopted by the KPTCL. Further, clarifications were sought from the

HESCOM and also the Officers from the company have visited the

SLDC and interacted on the subject. However, the HESCOM and

BESCOM have not yet communicated their acceptance in writing of

the proposed methodology, for total implementation.

v. The Commission during the review meeting held on 5th October, 2016,

has directed the KPTCL and ESCOMs to speed up implementation of

ABT duly bringing State owned Generators in the ambit of Intra-State

ABT. The Managing Directors and Officers of ESCOMs present in the

meeting have agreed in principal for implementation of the Intra-State

ABT using SCADA data.

vi. Further, the KPCL has taken up replacement of energy meters at

Interface points by ABT compliant meters. In this regard, the KPCL

has been requested to speed up the work.

lxviii

vii. After obtaining due acceptance from the HESCOM and BESCOM, and

also compliance from KPCL on fixing of ABT meters, KPTCL will

implement the Intra-State ABT from 1st of April, 2017.

Commission’s Views

The Commission notes with displeasure that the KPTCL and ESCOMs

have not implemented the Intra-State ABT despite agreeing to the

same in the several Review Meetings held by the Commission. Also,

during the meetings held with KPTCL/ESCOMs on 30th March, 2016 and

5th October, 2016, it was stressed that the implementation of the Intra-

State ABT in the State would lead to efficient management of power

generation, supply, distribution and use. In fact, all the ESCOMs

including the BESCOM and HESCOM who participated in such

meetings had consented in principle to implement the Intra-State ABT,

duly agreeing to the methodology to be adopted for implementation.

In spite of this, it is seen that there has been an inordinate delay in

implementation of the Intra-State ABT in the State. The current status is

that the KPTCL/ESCOMs have only conducted the mock exercises that

too at 220 kV level but have totally failed to implement the Intra-State

ABT regime fully in the State which is aimed at bringing in discipline in

all facets of power management. In this regard, the KPTCL shall follow

up with all the participants and stakeholders to expedite

implementation of the Intra-State ABT regime fully in the State.

The Commission therefore, directs the KPTCL and ESCOMs to take

suitable measures to achieve full implementation of the Intra-State ABT

and report compliance thereon to the Commission within one month

from the date of this Order and thereafter report the status/progress

every month regularly.

4. Directive on Energy Audit

The Commission had directed KPTCL to prepare and submit the metering plan for

energy audit of the KPTCL grid system, voltage level-wise such as 400 KV, 220

lxix

KV etc., to the Commission. It was also directed that the work of procurement of

metering equipment with accessories and their installation shall also be

completed. It was also directed to ensure that accuracy class of CT/PT shall

match with that of meters duly ensuring that combined class of accuracy of

complete metering system shall be within the specified accuracy class, so as to

measure the parameters accurately and that the interface metering system shall be

in conformity with the CEA (Installation and Operation of Meters) Regulations,

2006, and its amendments from time to time.

The Commission had directed the KPTCL to furnish voltage-wise losses on a

monthly basis. Further, the KPTCL was directed to maintain the entire Interface

metering system in a healthy condition, as accurate readings of the meters are

required to be recorded for accurate energy audit/accounting purpose. This is also

one of the sound practices to be followed by any power transmission utility.

Compliance by the KPTCL

The month-wise voltage-wise transmission losses for the year 2015-16 were

furnished to the Commission vide letter No. KPTCL / B36/21458/2015-16/60

dated 06.05.2016. Further, the details up to July’16 were submitted to the

Commission vide letter No. KPTCL/B36/21458/2016-17/271 dated 23.08.2016.

Also, month-wise voltage-wise transmission losses till October, 2016, are

furnished in Annexure-B of APR filing.

Commission’s Views:

The Commission notes that the KPTCL has submitted the consolidated

figures of transmission losses for the FY16. The KPTCL needs to furnish the

voltage-wise transmission losses on a monthly basis, regularly to the

Commission.

Further, the KPTCL is directed to continue to analyse the losses

occurring in the transmission system and on the basis of energy audit

conducted, take suitable measures to ensure bringing down the losses

with a view to achieving an efficient system of transmission of power.

The Commission reiterates its directive to the KPTCL to furnish voltage-

wise losses on a monthly basis, regularly.

5. Directive on Quality of Service:

lxx

The Commission had directed that, KPTCL shall take all measures to improve the

Reliability & Quality of Supply i.e., reduction in interruptions and maintenance of

good voltage in the transmission system. That the KPTCL shall display on its

website the details of interruptions of major substations and lines with maximum

and minimum voltage at station bus of each substation on a monthly basis.

The Commission had directed the KPTCL to take note of the permissible

frequency band for operation of the grid between 49.95 –50.05 Hz as per the

IEGC (latest amendment) Regulations of the CERC. Also, as per the decision

taken in the meeting of the Forum of Regulators (FoR) held during June 11 & 12,

2009, the penal UI charges for any over drawal will not be allowed to be passed

on to the consumers through tariff. Any such penal charges have to be borne by

the ESCOMs from their own finances. In the light of this, the KPTCL, through

SLDC/ALDCs, shall take necessary steps to avoid over drawal from the Southern

grid when frequency level goes below 49.95 Hz to ensure that payment of

additional UI charges is avoided.

Compliance by the KPTCL:

The SLDC is adhering to the IEGC norms as amended from time to time, by the

CERC, in grid operation. As for auditing of protective system, the Relay Testing

wing of KPTCL has taken measures to audit the protective system in the

transmission system.

Further, the details of interruptions that occurred in the transmission system are

being displayed on the KPTCL’s website. Presently, the SLDC is uploading major

400 kV and 220 kV interruptions on daily basis on KPTCL’s website under “load

curve” details. Regarding displaying the details of interruptions in other voltage

classes, action is being taken to upload the same by the concerned zonal chief

engineers.

Commission’s Views:

The Commission is of the view that the protection audit of the transmission

system covering all the transmission zones shall be carried out regularly by the

KPTCL to ensure safe grid management in the State.

lxxi

Further, the SLDC shall ensure that grid frequency as per the IEGC norms, as

amended from time to time, is adhered to, in grid operation.

The KPTCL is directed to take action to display on its website the details of

interruptions occurring in its transmission system duly indicating the maximum

and minimum voltage at station bus of each substation, on a monthly basis

regularly. The KPTCL is directed to report compliance in this regard, to the

Commission regularly, every month.

KPTCL is also directed to display on its website, on a daily basis, the details

of daily load curve, (Maximum and Minimum demand), generation of power

source-wise and the details of source-wise outages with a view to make the

general public aware of the power situation in the State.

6. Directive on Capital Works Programme:

The KPTCL was directed to:

a) Submit the details of capex actually incurred and

capitalisation of assets in the formats already prescribed by

the Commission to undertake necessary prudence check

during Annual Performance Review.

b) Maintain separate accounts with respect to the costs incurred

in respect of lines and bays respectively.

Compliance by the KPTCL:

The details of capex for the year 2015-16 as per the prescribed formats has been

submitted to the Commission vide letter No. KPTCL/B36/41603/2015-16/336-39,

dated 28.09.2016 and revised data was also furnished vide letter No.

KPTCL/B36/41604/2016-17/405, dated 28.10.2016.

Further, the information relating to costs incurred in respect of lines and bays for

FY16 are furnished to the Commission based on the Audited Accounts are

enclosed.

Commission’s views:

lxxii

The Commission is of the view that the KPTCL needs to submit the

details of the capex incurred and capitalisation of assets as per the

formats prescribed by the Commission and any other details sought

relating to capex, within the time prescribed, to enable it to conduct

prudence check during the APR. In this regard, the Commission directs

the KPTCL shall continue to,

i. Submit the details of capex incurred and capitalisation of

assets to undertake necessary prudence check during the

APR.

ii. Maintain separate accounts with respect to the costs incurred in

respect of lines and bays.

7. Directive on Studies conducted:

The Commission had directed the KPTCL to have a fresh look into

its manpower requirements keeping in view the /

computerisation of its operational and financial activities and

also keeping in view the technological advancements and the

changed organisational set-up.

The Commission in its earlier Tariff Orders had directed the KPTCL

to complete the manpower studies at the earliest and submit the

interim report of ASCI.

[Compliance by the KPTCL

It was submitted by the KPTCL that the ASCI’s final report on manpower studies

was referred to an internal Committee to finalize an exhaustive list of the

recommendations that can be implemented in the KPTCL along with justifications

in costs and or efficiency for each of its recommendations. The Committee has

submitted its recommendations and also it made a presentation before the

Management of KPTCL.

Further, on a cursory look at the internal Committee report has revealed that, for

implementation of the recommendations, additional posts need to be sanctioned

throughout the State in various substations, offices, stores etc. This would result in

lxxiii

additional employee cost. Hence, with a view to bring down the costs, the internal

Committee report has been referred back to the operational heads of the KPTCL

to have a relook and suggest suitable measures to cut down on the employees’

cost.

Commission’s Views:

The Commission views with displeasure that the KPTCL has not

been able to take a view on the recommendations suggested

by the Consultants, in their manpower study report. The

Commission notes that this issue has been pending for a long

time for want of a decision by the KPTCL. The KPTCL shall

expedite action to finalise its views on the manpower study

recommendations and implement the same for ensuring

optimum utilisation of its manpower and to minimise the

operational costs, in the organisation.

The Commission reiterates its directive to the KPTCL to ensure

implementation of a proper manpower planning strategy with a

view to ensure optimum use of human resources and to minimise

the operational costs and submit a compliance report thereon to

the Commission, within three months from the date of issue of this

Order.

8. Directive on prevention of electrical accidents:

The Commission had directed the KPTCL to prepare an action

plan to effect improvements in the transmission network and

implement safety measures to prevent electrical accidents. The

detailed Transmission Line and Sub-Station division-wise action

plans were to be submitted to the Commission within two months

of the date of Tariff Order.

Compliance by the KPTCL:

lxxiv

It is submitted by the KPTCL that The Zonal Chief engineers are

regularly monitoring the improvement works taken up as per the

action plan, in their jurisdiction, to minimise accidents and the

Zone-wise action plan for prevention of electrical accidents in

transmission system has been submitted to the Commission vide

letter No. KPTCL/B36/33093/16-17/354-67, dated 07.10.2016.

Further, action is being taken to complete the rectification of identified hazardous

installations in the transmission network. In this regard, Zonal Chief Engineers

have been directed to expedite implementation of the planned works under action

plan. Also, training regarding safety aspects is being imparted to employees

regularly at the HRD centre of KPTCL.

Commission’s views:

The Commission notes that most of the works planned under the

action plan for effecting improvements to the transmission

system by the KPTCL have not been completed but they are

either in the early stage of estimate preparation or lined up for

execution or in the process of execution at various stages,

indicating that the effecting improvements to the network, is

taking place at a snail’s pace. This needs to be expedited to

ensure that the hazardous works are identified and rectification

of hazardous installations in the transmission network is

completed at the earliest, to prevent possible accidents to the

human beings and the livestock.

Further, KPTCL shall take necessary measures aimed at

prevention of electrical accidents in its transmission system by

conducting regular review of such works.

Also, necessary action for continuous awareness on electrical

safety aspects including sensitising of its staff is undertaken so as

to sustain the campaign on safety aspects.

lxxv

The Commission reiterates its directive to the KPTCL to regularly submit

its action plan for prevention of electrical accidents in the transmission

line and substations.