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Determination of Tariff for Generation and Distribution Order dated 20-06-2013

TAMIL NADU ELECTRICITY REGULATORY

COMMISSION----------------------------------------------------------------

Determination of Tariff for Generation and

Distribution

---------------------------------------------

T.P. No. 1 of 2013

Order dated: 20-06-2013(effective from 21-06-2013)

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TAMIL NADU ELECTRICITY REGULATORY COMMISSION

(Constituted under section 82 (1) of Electricity Act 2003)

(Central Act 36 of 2003)

PRESENT : Thiru. K.Venugopal Member

Thiru. S.Nagalsamy Member

T.P. No. 1 of 2013

Date of Order: 20-06-2013

In the matter of: Determination of Tariff for Generation and Distribution

In exercise of the powers conferred by clauses (a), (c),(d) of sub-section (1) of section 62 and

clause (a) of sub-section(1) of section 86 of the Electricity Act 2003, (Central Act 36 of 2003) and

all other powers hereunto enabling in that behalf and after considering the views of the State

Advisory Committee meeting held on 26.4.2013 and after considering suggestions and objections

received from the public during the Public hearings held on 03.05.2013, 08.05.2013, 10.05.2013,

and 17.05.2013, as per sub-section (3) of section 64 of the said Act, the Tamil Nadu Electricity

Regulatory Commission, hereby, passes this order for Generation and Distribution Tariff.

This Order shall take effect on and from the June 21, 2013.

Sd/- Sd/-

(S. Nagalsamy) (K.Venugopal)

Member Member

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Tamil Nadu Electricity Regulatory Commission Page 3

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TABLE OF CONTENTS

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List of Abbreviations

Abbreviation Description

A & G Administration and General Expenses

ABC Aerial Bunched Cables

ABR Average Billing RateAPTEL Appellate Tribunal for Electricity

ARR Aggregate Revenue Requirement

CAGR Compounded Annual Growth Rate

CEA Central Electricity Authority

CERC Central Electricity Regulatory Commission

CFL Compact Fluorescent Lamps

CGS Central Generating Station

COS Cost of Supply

CPP Captive Power Plant

CSD Consumer Security Deposit

CWIP Capital Work in Progress

DA Dearness AllowanceEA Electricity Act

ED Electricity Duty

FRP Financial Restructuring Plan

FY Financial Year

GFA Gross Fixed Assets

G.O. Government Order

GPF General Provident Fund

GoTN Government of Tamil Nadu

HT High Tension

HVDS High Voltage Distribution System

kWh Kilo-watt Hour

LT Low TensionLTOA Long Term Open Access

MU Million Units

MW Mega-watt

MYT Multi-Year Tariff

NTI Non Tariff Income

O & M Operation & Maintenance

PF Power Factor

PLF Plant Load Factor

R & M Repair & Maintenance

O & M Operation & Maintenance

RoE Return on Equity

SLDC State Load Despatch CentreSTOA Short Term Open Access

T&D Transmission & Distribution

TANGEDCO Tamil Nadu Generation and Distribution Corporation Ltd.

TANTRANSCO Tamil Nadu Transmission Corporation Ltd.

TNEB Tamil Nadu Electricity Board

TNERC Tamil Nadu Electricity Regulatory Commission

ToD Time of Day

TP Tariff Policy

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A1:

INTRODUCTION

Preamble

1.1 Consequent to the enactment of the Electricity Regulatory Commissions Act 1998(Central Act 14 of 1998), the Government of Tamil Nadu (GoTN) constituted the

Tamil Nadu Electricity Regulatory Commission (TNERC) vide G.O.Ms.No.58,

Energy (A1) Department, dated 17-03-1999.

1.2 The Commission issued its firsttariff order (Order No 1 of 2002) under Section 29 ofthe Electricity Regulatory Commission Act, 1998, on 15-03-2003 based on the

petition filed by the Tamil Nadu Electricity Board (TNEB) on 25-09-2002.

1.3 Electricity Regulatory Commission Act, 1998 was repealed and the Electricity Act2003 (Central Act 36 of 2003) was enacted with effect from 10-06-2003.

1.4 The Commission notified the Tamil Nadu Electricity Regulatory Commission (Terms

and Conditions for Determination of Tariff) Regulations 2005 (herein after calledTariff Regulations) on 03-08-2005under Section 61 read with Section 181 of the Act.

1.5 The Commission issued separate order (Order No. 2 of 2006) on Transmissioncharges, Wheeling charges, Cross Subsidy surcharge and Additional surcharge on15-

05-2006, based on the petition filed by TNEB on 26-09-2005 under Section 42 of the

Act.

1.6 The Commission had issued its first Renewable Energy Tariff Order on 15-05-2006.Later in 2009, Commission has issued technology wise second Renewable Energy

Tariff Orders. Further on 31-07- 2012, the Commission issued its third Tariff Order

with respect to renewable energy sources.

1.7 The Commission notified the TNERC (Terms and Conditions for Determination ofTariff for Intra state Transmission / Distribution of Electricity under MYT

Framework) Regulations, 2009 (herein after called MYT Regulations) on 11-02-2009.

1.8 Subsequently, TNEB filed an application for determination of tariff with AggregateRevenue Requirement (ARR) for all functions on 18-01-2010, which was admitted by

the Commission after initial scrutiny on 09-02-2010. The Commission issued its

second Retail Tariff Order on 31.07.2010 (Order No. 3 of 2010).

1.9 TNEB was formed as a statutory body by the Government of Tamil Nadu (GoTN) on01-07-1957 under the Electricity (Supply) Act 1948.The Board was primarily

responsible for generation, transmission, distribution and supply of electricity in the

State of Tamil Nadu.

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1.10 Government of Tamil Nadu, in G.O (Ms) No 114 Energy Dept, dated 08-10-2008accorded in principle approval for the re-organisation of TNEB by establishment of a

holding company, namely TNEB Ltd and two subsidiary companies, namely Tamil

Nadu Transmission Corporation Ltd (TANTRANSCO) and Tamil Nadu Generation

and Distribution Corporation Ltd (TANGEDCO) with the stipulation that the

aforementioned companies shall be fully owned by the Government.

1.11 Tamil Nadu Generation and Distribution Corporation Ltd. was incorporated on 01-12-2009 and started functioning as such with effect from. 01-11-2010.

1.12 Subsequently TANGEDCO filed tariff petition for determination of tariff forGeneration and Distribution for the year FY 2012-13, the Commission scrutinised and

reviewed the same. After a thorough review the thirdOrder of the Commission on

determination of Generation and Retail Tariff was passed on 30-03-2012 (Order No. 1

of 2012).

Tariff Filing

1.13 The Tamil Nadu Generation and Distribution Corporation Ltd. (TANGEDCO) hasfiled its application before the Commission on 19-02-2013 for final true-up and

approval of Aggregate Revenue Requirement (ARR) for the year 2010-11based on 5

months audited accounts, provisional true-up and approval of ARR for the year 2011-

12 based on provisional accounts, Annual Performance Review (APR) for the year

2012-13 based on estimates and its Multi Year Tariff petition for 2013-14 to 2015-16

along with tariff revision for 2013-14. There was a delay of 81 days in filing this

Petition and the Petitioner filed an Interim Application for condoning the delay of 81

days.

1.14 The Commission has written three letters to TANGEDCO directing them to file theTariff Petition for FY 2013-14. Copies of letters dated 8thJanuary 2013, 21stJanuary2013 and 8

thFebruary 2013 are placed as Annexure I. After hearing the submissions

of TANGEDCO, the Petition was admitted on 21-02-2103 after condoning the delay

and registered as T.P. No 1 of 2013. Copy of the admission order is placed as

Annexure II

Procedure Adopted

1.15 Regulation 7 (2) of Tariff Regulation specifies the following:The applicant shallpublish, for the information of public, the contents of the application in an abridged

form in English and Tamil newspapers having wide circulation and as per the

direction of the Commission in this regard. The copies of Petition and documents filedwith the Commission shall also be made available at a nominal price, besides hosting

them in the website.

1.16 The public notice containing the salient details with regard to the petition wasapproved and communicated to TANGEDCO on 28-02-2013, with a direction to

arrange publication of the notice in news papers and it was published on 02-03-2013.

The written objections/suggestions/views from stakeholders were invited by 02-04-

2013.

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1.17 The TANGEDCO published the public notice in the following newspapers on March02, 2013.

a) The New Indian Express (English Daily);b) The Deccan Chronicle (English Daily);

c) Dinamani (Tamil Daily) andd) Makkal Kural (Tamil Daily)

1.18 The Petition was placed before the State Advisory Committee on 26-04-2013. The listof Members who participated in the meeting is detailed as Annexure III to this Order.

1.19 The list of stakeholders who have submitted written objections/suggestions/viewsregarding the petition in response to the public notice are detailed in Annexure IV and

Objections/suggestions/views are included in Chapter A2.

1.20 The Commission conducted public hearing at the following places on the dates noted

against each:

Date Day Place Venue

03-05-2013 Friday ChennaiTamil Isai Sangam, Raja Annamalai Mandram, (Near

High Court),5, Esplanade Road, Chennai- 108

08-05-2013 Wednesday TiruchirappalliKalaiarangam Thirumana Mahal,

(Near central bus stand), Tiruchirappalli

10-05-2013 Friday Madurai

Platinum Jubilee Hatsun Aauditorium, Tamil Nadu

Chamber of Commerce and Industry, 178-B

Kamarajar Salai, Madurai

17-05-2013 Friday Coimbatore Corporation Kalaiarangam, R.S. Puram, Coimbatore

1.21 The lists of participants in each public hearing, is attached as Annexure V to thisOrder. The views / comments / objections raised by the participants are discussed in

Chapter A2.

The Electricity Act, 2003, Tariff Policy (TP) and Regulations

1.22 Section-62 of the Act stipulates the guiding principles for determination of Tariff bythe Commission and mandates that the Tariff should progressively reflect cost of

supply of electricity, reduce cross-subsidy, safeguard consumer interest and

recover the cost of electricity in a reasonable manner.

Section-62 (1) of Act states as under:

Section-62 (1):

1. The Appropriate Commission shall determine the tariff in accordance with provisions ofthis Act for

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a. supply of electricity by a generating company to a distribution licensee: Providedthat the Appropriate Commission may, in case of shortage of supply of electricity,

fix the minimum and maximum ceiling of tariff for sale or purchase of electricity

in pursuance of an agreement, entered into between a generating company and a

licensee or between licensees, for a period not exceeding one year to ensure

reasonable prices of electricity;

b. transmission of electricity ;

c. wheeling of electricity;

d. retail sale of electricity.

Provided that in case of distribution of electricity in the same area by two or more

distribution licensees, the Appropriate Commission may, for promoting competition

among distribution licensees, fix only maximum ceiling of tariff for retail sale of

electricity.

Similarly, the objectives stipulated in the Tariff Policy are as under:

4.0 Objectives of the policy

The objectives of this tariff policy are to:

a. Ensure availability of electricity to consumers at reasonable and competitive rates;

b. Ensure financial viability of the sector and attract investments;

c. Promote transparency, consistency and predictability in regulatory approachesacross jurisdictions and minimise perceptions of regulatory risks;

d. Promote competition, efficiency in operations and improvement in quality of supply.

1.23 In the State of Tamil Nadu, Tamil Nadu Electricity Regulatory Commission inexercise of powers vested in it under the Electricity Act, 2003 (Act) passes the Tariff

Orders.

Transfer scheme

1.24 The proposal for Assets Transfer and Employee transfer called as Tamil Nadu

Electricity Board (Reorganization and Reforms) Transfer Scheme 2010 was notifiedby the Government of Tamil Nadu vide G.O. (Ms).No.100 Energy (B2) Department

dated 19th Oct 2010 with the effective date of implementation as 1st Nov 2010. Based

on the above notification TNEB has been re-organized from 1st Nov 2010.

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1.25 This Transfer Scheme is provisional and addresses various issues like transfer ofassets, revaluation of assets and partly addresses the issue of accumulated losses. This

Transfer Scheme envisages deployment of staff of the erstwhile TNEB to

TANGEDCO and TANTRANSCO. The Commission in its earlier Tariff Order No. 3

of 2010 dated 31-07-2010 had suggested in line with the National Electricity Policy

(para 5.4.3) and Tariff Policy that the accumulated losses should not be passed on tothe successor entities and financial restructuring has to be resorted to clean up the

Balance Sheet of the successor companies and allow them to start on a clean slate so

that the successor entities could start performing better. The statutory advices that

have been sent to the Government of Tamil Nadu in this regard are appended as

Annexure VI. The Commission has also issued a statutory advice with regard to the

establishment of a separate Generating Company and establishment of four

Distribution Companies so that the performance of these companies can be improved

and efficiently monitored, which will enable proper investments and growth of the

individual company. This document is appended as Annexure VII.

1.26 Subsequently, as per the request of TNEB Limited, the second provisional transfer

scheme was notified by the State Government vide G.O. (Ms.) No.2, Energy (B2)department, dated 2nd January 2012 with amendment in the restructuring of Balance

Sheet of TNEB for the successor entities i.e. TANGEDCO and TANTRANSCO,

considering the audited balance sheet of TNEB for FY 2009-10 and it had extended

the provisional time for final transfer of assets and liabilities to the successor entities

of erstwhile TNEB up to 31st October 2012. The same has been appended as

Annexure VIII.

1.27 This Transfer Scheme is also provisional and is subject to revision. The transactionsfor 7 months i.e. from 1st April 2010 to 30th October, 2010 do not get reflected in the

opening balance sheet of the TANGEDCO as specified in the Transfer Scheme.

Impact of Provisional Balance Sheet:

a) According to Rule 9 (1) of Transfer Scheme, 2010 issued on 19th October 2010, the

transfer of assets and liabilities under the scheme is provisional and will be made final

upon the expiry of 12 months from the effective date of transfer.

b) The date was extended through notification dated 3rd January 2012 for additional 1

year i.e. upto 31st October 2012 for final transfer of assets and liabilities to successor

entities of erstwhile TNEB.

c) As on the date of filing of this petition, TANGEDCO and TANTRANSCO has sought

permission for extension of 6 months i.e. up to 30.04.2013 for final transfer of assets

and liabilities to successor entities of erstwhile TNEB and the same has beenapproved by GoTN through G.O.Ms(23) dated 8

th March 2013 (Annexure IX).

TANGEDCO and TANTRANSCO have now sought an extension for another six

months i.e. upto 31st October 2013 for final transfer of assets and liabilities to

successor entities of erstwhile TNEB and the same has been addressed to the GoTN

for approval and notification.

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d) In the absence of availability of opening balances based on the final Notification of

GoTN, as per transfer scheme, TANGEDCO has considered the opening balance as

per the provisional transfer scheme notified on 2nd

January 2012.

1.28 Hence, Commission is of the view that once the final transfer scheme is notified by

the State Government, the impact due to revision in the opening balance of FixedAssets, Loan and Equity may have to be revisited and accounted during the tariff

determination process of the concerned year.

Unbundling of TNEB - 1stNovember 2010

1.29 TNEB was unbundled on 1.11.2010. Consequently it started functioning as twoseparate entities namely TANGEDCO and TANTRANSCO. While TANGEDCO

was made responsible for generation and distribution, TANTRANSCO was made

responsible for transmission activities within the State.

1.30 The Commission in its Tariff Order issued on 31st July 2010 as well as 30th March2012 had indicated that the accumulated losses upto the date of unbundling will have

to be dealt with in accordance with the National Electricity Policy and Tariff Policy.

The Commission had also clearly indicated that any losses incurred after 1.11.2010

only are being dealt with in various Tariff Orders subsequent to unbundling. In this

connection, the Commission would like to extract the following three paragraphs from

the Tariff Petition filed by TANGEDCO for the financial year 2013-14.

10.19.6 As per the Tariff Order, the Honble Commission had expressed a view that

the accumulated losses up to the date of unbundling will have to be dealt with in

accordance with Para 5.4.3 of the National Electricity Policy and Tariff Policy. The

provisions of the National Electricity Policy and Tariff Policy envisages that the gap

at the time of unbundling will have to be sorted out by financial restructuring andsupport from the Government rather than passing on the accumulated losses to the

successor entities.

10.19.7 In line with the National Tariff Policy, National Electricity policy and as per

the Tariff Order dated 30th March 2012, TANGEDCO have not claimed any relief on

account of accumulated losses prior to unbundling on 1-11-2010 in the given petition.

The similar stand was taken in the earlier petition also.

10.19.8 The proposal of TANGEDCO is to create regulatory assets for the

unrecovered deficit post unbundling only. TANGEDCO would like to submit that even

though it has requested for creation of regulatory asset of the amount which is

unrecovered deficit after claiming part as a tariff hike, all efforts has been undertakento reduce such deficit and are under process to carry out Financial Restructuring

Plan under the guidance of State Government.

1.31 The revenue gaps arising subsequent to unbundling were dealt with as RegulatoryAsset in the Order of the Commission dated 30th March 2012 and is being discussed

again in this Order.

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Brief Note on Tariff Filing and Public Hearing

1.32 In this Order Commission has dealt with important matters such as tariff schedule,new capacity additions by TANGEDCO, Regulatory Asset Amortisation etc.

1.33 The Commission appreciates the concerns expressed by various stake holders both inthe written comments submitted by them to the Commission as well as the concerns

expressed during the Public Hearings held at Chennai on 3rd

May 2013, Tiruchirapalli

on 8th

May 2013, at Madurai on 10th

May 2013 and at Coimbatore on 17th

May 2013.

1.34 The Commission directs TANGEDCO to properly monitor the on-going projects sothat they get commissioned without further delay. The projects which were scheduled

to get commissioned last year have not been commissioned so far and have to be

commissioned at the earliest. TANGEDCO should also ensure that the

TANTRANSCO completes all the associated transmission system for evacuation of

power from the generating stations which are getting commissioned during the year

2013-14 so that power generated from the generating stations are transmitted up to the

load centres without any bottle necks. The TANGEDCO should ensure that the poweravailable at the sub-stations is taken up to the consumption points by way of

appropriate distribution system. All these capacity addition as well as system

strengthening plans will have to be carried out through a well structured business plan

and individual schemes catering to the need of the business plan. All such plans and

schemes shall be submitted in accordance with the Terms and Conditions of Tariff

Regulations 2005, MYT Regulations as well as Licensing Conditions to the

Commission.

1.35 The submission for approval in this regard so far has been unsatisfactory. TheCommission has been addressing the utilities by way of letters as well as by way of

directions. The compliance to such letters and directions will have to be taken

seriously and must be met without fail.

1.36 Further, list of correspondence with TANGEDCO in regard to data gaps and repliesfurnished are given in Annexure X.

1.37 Various suggestions and objections that were raised on TANGEDCOs Petition afterissuance of the Public Notice both in writing as well as during the Public Hearing,

along with TANGEDCOs reply and the Commission's views have been detailed in

Chapter A2 of this Order.

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1.38 Unmetered supply in the State relates mainly to agriculture and hut consumption.TANGEDCO has been assuming the AT&C loss level by arriving at the consumption

of agriculture and huts. This issue was also a subject matter of Appeal before the

Honble Appellate Tribunal of Electricity. In its last two orders, the Commission has

estimated agricultural consumption based on the CEA formula. The Commission had

also directed TANGEDCO to furnish sample data of the metered connections foragricultural supply for FY2012-13. The data so provided was analysed, and it was

observed that the average consumption per HP had increased by 9.2% over that of FY

2011-12. Based on this data the average hours of supply per day amounted to 3.67

hrs/day which is marginally higher than that for FY 2011-12. The Commission

recognizing the fact that FY2012-13 was a year of severe shortage of power along

with being a drought year, took the view that it is improbable that the agricultural

supply hours could have been higher than that of the previous year. Hence the

Commission has assumed the average consumption per HP at the same rate as in

FY2011-12. Based on the same data the energy requirement for agriculture has been

estimated for the second control period. Similarly, estimates have been made for

consumption by huts duly reflecting the number of huts with and without televisions

and also factoring in the consumption on account of distribution of free CFL lamps,mixers, grinders and fans.

1.39 TANGEDCO in its petition this year has proposed tariff hike for two categories ofconsumers namely Hut and Agriculture Category, tariff rates and conditions for all

other categories is proposed to be as per prevailing tariff order dated 30th March

2012.

Fixed Charges for Tariff Category LT-1B for Hut Consumers to be increasedfrom Rs. 60/Month/Service to Rs. 125/Month/ Service.

Fixed Charges for Tariff Category LT-IV for Agriculture Consumers to beincreased from Rs. 1750/HP/Annum to Rs. 2500/HP/Annum.

1.40 The cost of entire consumption on account of huts as well as on account ofagricultural consumption is being borne by the Government of Tamil Nadu by way of

subsidy under Section 65 of the Electricity Act 2003. In this matter, GoTN has given

commitment letter No. 2369/A1/2013 dated 10th

June 2013 detailing provision of

tariff subsidy to LT IB and LT IV categories of electricity consumers. GoTN has also

stated that the budget provision for necessary additional expenditure has already been

made in the budget for the year FY 2013-14 and a formal order of GoTN in this

regard will be issued shortly. The commitment letter received from GoTN is placed at

Annexure XI. The GoTN has further clarified vide letter No. 2369/A1/2013 dated

10th

June 2013 that the subsidy for other category of consumers as provided in FY2012-13 would continue for FY 2013-14 and necessary G.O will be issued separately.

This letter has been appended as Annexure XII.

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Applicability of Order

1.41 This Order will come into effect from 21-06-2013. The Generation and Retail Tariffcontained in this order will be valid till 31-03-2014. TANGEDCO shall file necessary

petition in accordance with the Regulations in a timely manner to enable the

Commission to pass the next Tariff Order in time.

Layout of the Order

1.42 This Order is organised into seven Chapters:

Chapter A1 provides details of the tariff setting process and the approach ofthe Order;

Chapter A2 provides a brief of the Public Hearing process, including thedetails of comments of various stakeholders, the Petitioners response and

views of the Commission thereon;

Chapter A3 provide details/ analysis of the final true up for FY 2010-11,provisional true-up for FY 2011-12 and annual performance review for FY

2012-13;

Chapter A4 provides analysis of the petition for determination of theAggregate Revenue Requirement for FY 2013-14 to FY 2015-16;

Chapter A5 provides details of determination of Open access charges andRetail Supply Tariff for all consumer categories, and the approach adopted by

the Commission in determining the tariff;

Chapter A6 gives the tariff schedule applicable for the consumers; and

Chapter A7 provides details of the Directives of the Commission forcompliance by TANGEDCO.

1.43 The Order contains the following Annexure, which are an integral part of the TariffOrder.

Annexure I Copies of letters written to TANGEDCO directing them to filethe Tariff Petition for FY 2013-14

Annexure II Copy of the admission order

Annexure III The list of participants at the State Advisory Committeemeeting.

Annexure IV The list of stakeholders who have submittedobjections/suggestions/views regarding the petition in response to the public

notice.

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Annexure V The lists of participants at each public hearing.

Annexure VI Copy of the statutory advices given by the Commission sent tothe Government of Tamil Nadu.

Annexure VII Copy of statutory advice of the Commission regarding theunbundling of TANGEDCO into a separate Generating Company and four

Distribution Companies.

Annexure VIII Copy of second provisional transfer scheme as notified bythe State Government vide G.O. (Ms.) No.2, Energy (B2) department, dated

2nd January 2012.

Annexure IX Copy of extension for finalization of transfer scheme upto 30th

April 2013 notified by the State Government vide G.O.Ms(23) dated 8th

March

2013

Annexure X List of letters of TANGEDCO with regard to data gaps andreplies.

Annexure XI Copy of Commitment letter received from GoTN for providingthe tariff subsidy to Agriculture and Hut consumers.

Annexure XII Copy of Letter received from GoTN extending the subsidy forother category consumers in FY 2013-14.

Annexure XIII Copy of Letter received from GoTN regarding amortizationof regulatory asset.

Approach of the order

1.44 Commission in its last order had stated that the Capital Account and the RevenueAccount has not been maintained separately in the course of operation of TNEB and

an attempt is being made in this order to segregate the same to bring financial

discipline in the successor entities.

The Commission has adopted the Multi Year Tariff (MYT) approach for tariff

determination since its tariff order in FY 2010-11. The first control period of 3 years

was upto FY 2012-13, during which time the Commission has issued two tariff orders

during FY 2010-11 and FY 2012-13. The second control period spanning 3 yearsstarts this year i.e. in FY 2013-14 and is upto FY 2015-16.

1.45 The extract from the relevant portion of the TNERC (Terms and Conditions forDetermination of Tariff for Intra state Transmission / Distribution of Electricity under

MYT Framework) Regulations, 2009 regarding control period is extracted below.

3). Multi year Tariff framework

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i) Control Period

The control period under the MYT framework shall be for a duration of 3 years. The

year preceding the first year of the control period shall be the base year.

1.46 The broad approach adopted in this order is given below:

The Commission has taken into consideration the second provisional transferscheme as notified by the State Government vide G.O. (Ms.) No.2, Energy

(B2) department, dated 2nd January 2012 with amendment in the restructuring

of Balance Sheet of TNEB for the successor entities i.e. TANGEDCO and

TANTRANSCO.

The Commission has referred to the audited accounts of TANGEDCO for FY2010-11 (5 months) for truing up the expenses of the utility. The Commission

has undertaken a review of the various performance parameters as well as the

controllable cost factors. Based on the assessment the Commission have

arrived at the allowable ARR and revenue recovered by the utility. Also,Commission for the comparison purposes arrived at the approved figures for

FY 2010-11 (5 months) in its last order on a pro-rata basis.

The same exercise has been undertaken for the provisional true-up for FY2011-12 based on the provisional accounts and the ARR and revenue

recovered for the year have been arrived at.

For the FY 2012-13, Commission sought actual figures for the year fromTANGEDCO. Based on the information so obtained and based on provisions

of the Tariff regulation as well as trend in the approved costs in the previous

two years, the ARR and revenue recovered have been arrived at.

For the Second control period between FY 2013-14 to FY 2015-16 theCommission has extended the rationale adopted for allowing/ disallowing

various controllable components of the ARR for the first control period, to

project the ARR for the second control period and determine tariff for FY

2013-14.

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A2:

STAKEHOLDERS COMMENTS, TANGEDCOS REPLY AND

COMMISSIONS VIEW

2.1 The following section summarizes the views/ objections/ suggestions given bystakeholders in writing as well as at the public hearings. TANGEDCOs reply to these

views/ objections/ suggestions and the Commissions view on the same.

1.

General Issues

Stakeholder Comments

2.2 Commission is requested to appoint a consultant to study the entire operations andfinances of TANGEDCO to identify improvements that are needed to comply with the

Act & various policies and rules made there under.

2.3 Commission must direct Transfer of Assets & Liabilities to be completed by end ofJune 2013 and Audited Accounts as on 31.3.2013 prepared and published by

31.08.2013

2.4 The impact of FRP on the tariff is to be spelt out and the said agreement must bepublicised.

2.5 Commission to engage a Cost Accountant to make inter firm comparisons. Request toconsider Pan India and Abroad firms for costs of TANGEDCO, fix benchmark cost

and performance standards.

2.6 Financial Accounting, Cost Accounting Code & systems of TANGEDCO should bepublished so that it helps make meaningful comments on the petition.

2.7 Commission must reiterate that Generation and Distribution functions ofTANGEDCO should be separate. Unless this is done the costs of generation and

distribution cannot be accurately ascertained.

2.8 Commission to write to GoTN to drop Electricity tax as it distorts the tariff system.

2.9 Directives of Commission are not being adhered by TANGEDCO. TNERC isrequested to monitor the directives individually and intensively and make

TANGEDCO fall under the groove measure, monitor and manage and understand

that such directives are only for the performance improvements. Commission to direct

TANGEDCO to give a time bound plan to implement directives of the Commission

over the years. The progress report should be publicized at the end of each calendarquarter.

2.10 Power injected by OA consumers into the Grid to be deducted from their recordedconsumption when there is load shedding at the consumer end

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2.11 From the balance sheet of TANGEDCO it is noted that the current liabilities are morethan the current assets resulting in management of working capital requirement with

the current liabilities in which case inclusion of interest on working capital for the

total current assets is not correct and fair as no funds was actually deployed.

2.12 TNERC must also take strong action to curb tendency of non-performance both in thetechnical and financial fronts, if necessary by levying a fine say Rs.500.00 millionsfrom TANGEDCO. There is precedence with MERC on this score, to bring about a

disciplined approach. TANGEDCO is trying to play the same game as it has done a

couple of years back not asking for a tariff revision and requesting creation of

Regulatory Assets. TNERC may well earmark this fine from the revenues of 2013-

14 for certain specific purpose of improving normative parameters, which have

exceeded beyond limits.

2.13 TANGEDCO should have consumer representation within its organisation.

2.14 Commission to make a provision for instituting comprehensive and integrated

Information Management system within TANGEDCO

2.15 Commission to have a consumer advocacy cell based on KERC model.

2.16 Benefits of financial restructuring plan have not been furnished in the petition.

2.17 Tamil version of the Tariff Petition shall be made available.

2.18 Uninterrupted power supply shall be given in the night period.

2.19 TANGEDCO shall aggressively implement the demand side management.

2.20 Energy conservation shall be encouraged by using modern equipments. Renovationand modernization shall be undertaken in distribution lines.

2.21 Uninterrupted power supply shall be given to the farmers.

2.22 This public hearing should be conducted in two ways by the Commission.

To assess the performance and the ways to identify how to provide quality serviceby the TANGEDCO to public.

To increase the tariff.

2.23 White paper statement should be released about the TANGEDCOs accumulated loss.

2.24 White paper statement should be released about the future generation plan and how tomitigate this loss in future.

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2.25 Privatization of distribution particularly distribution in the city is mandatory as per thedirection dated 05-10-2012 issued by the Ministry of Power. It seems that

restructuring plan for TANGEDCOs accumulated loss has been announced and the

Government of Tamil Nadu has accepted the plan. This plan should be under

consideration.

2.26 Commission to pass an order to keep Deemed Demand concept in respect of thirdparty power.

2.27 Commission to insist on TANGEDCO to publicize the facts of agreement betweenGovernment and TANGEDCO as far as restructuring the losses are concerned

2.28 Identify ways to compensate the loss of TANGEDCO, rather than transferring thesame to Government.

2.29 Vacancies of Wiremen and other subordinate employees of TANGEDCO should befilled in all the TANGEDCO offices to provide good service to the public.

2.30 Smart meter system which is now used in foreign countries should be nowimplemented in Tamil Nadu. The consumers who consume power during peak hour

should be charged more.

2.31 It is stated that power can be produced at a cost of Rs.2.14. However, high costpower at the rate of Rs.17 to 18 is purchased from the private parties even after

restrictions by the Commission. The power purchase from high cost power stations

has been supplied to the MNCs at a lower cost.

2.32 Uninterrupted power supply should be given to the agricultural services as given inSEZ and in Chennai. All power generated at Neyveli, Kudankulam etc. to be given to

Agriculture in Tamil Nadu.

2.33 Uninterrupted power supply given to the MNCs shall be stopped.

2.34 Freebies were announced by the Government without considering the power shortageand without proper planning. The Commission should have pointed out the issue.

2.35 LED Street lighting is important in system T & D loss reduction. Recognize cleantechnologies like LED lighting and consider a preferential tariff

2.36 For energy conservation purpose LED lights may be fixed in all the streets of the

Villages, Towns, and cities instead of using tube lights.

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TANGEDCOs Reply

Appointment of consultant

2.37 The accounts of TANGEDCO are being audited by a firm of qualified chartered

accountants as per the requirements of the companies Act 1956.In addition to theabove, being a government company the functioning of TANGEDCO is also subject

to commercial and expenditure audit by the Accountant General. Moreover, the

Honble TNERC is vetting the tariff petition filed by TANGEDCO by appointing a

reputed consultancy firm. Hence, the necessity to appoint a consultant to go into the

entire operations and finances of TANGEDCO does not arise.

Final Transfer Scheme

2.38 The Board has approved the proposal to seek extension of time by another six monthupto 30th October 2013 for final transfer of assets and liabilities to the successor

entities of erstwhile TNEB and the proposal is under the consideration of Government

of Tamil Nadu. Steps are being taken to complete the audit of annual accounts for theFY 2012-13 and to place the same before the AGM of TANGEDCO on or before

30.09.2013 which is the time limit prescribed under the provisions of the companies

Act 1956.

Compliance of Directives

2.39 The status of progress on directives issued by Honble TNERC in tariff order dated30th March 2012 has been furnished in the tariff petition filed before the Honble

TNERC on 19th February 2013. The details of these directives are available on the

TNERC website.

Financial Restructuring Plan

2.40 At the time of submission of tariff petition to the Honble TNERC, the FRP processwas in its initial stage and hence the impact of the same could not be taken into

consideration in the tariff petition. The given details of the FRP are still being worked

out and if the same is finalised before the issuance of Tariff Order it will be submitted

to the Honble TNERC for its consideration.

Cost Accounting system of TANGEDCO

2.41 Each generation and distribution utilities in India have their own power source owing

to their geographical location. Hence, comparing the cost of TANGEDCO with otherutilities may not by itself give the desired results. However, steps are being taken to

conduct the cost audit by a qualified cost Accountant as per the requirements of the

Companies Act,1956.

Comparison with Other Utilities

2.42 The contention of the stake holder that the cost needs to be compared with other staterequires consideration of the following issues:

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(a)The difference in power generation mix and consumer mix

(b)Power purchase expenses considering the diversity in the sources.

(c)Geographical diversity in the state considering the key point that TANGEDCO

is supplying electricity to wide spread area of Tamil Nadu as compared toother states of India.

(d)Differential policies adopted by the State Government in relation to industrial,economic and agricultural sector.

(e)Considering the above parameters the comparison should be made on commonparameters.

Bifurcation of Generation and Distribution Function

2.43 These are the suggestion from the stake holders to the Honble Commission.

Electricity Tax

2.44 TANGEDCO submits that the issue relating to dropping of electricity tax does notcome within the purview of tariff revision exercise. It is a policy decision to be taken

by the Government of Tamil Nadu.

OA consumption to be deducted from recorded consumption

2.45 TANGEDCO submits that there is no such provision under the Act as well as in theRegulations notified by the Commission.

Levy of Demand Charges

2.46 The demand charges are intended to cover the fixed cost of TANGEDCO includinginterest, depreciation employee cost, repair and maintenance cost etc., and hence even

if there is no power supply the demand charges would be levied. The recovery of

fixed charges does not have any relevance to the hours of supply or the quantum of

energy supplied.

2.47 The Honble APTEL in appeal No:257 of 2012 preferred by The Southern India MillsAssociation (SIMA), Coimbatore against the Tariff Order No:1 of 2012

dated:30.03.2012 issued by the Honble TNERC has upheld the order of TNERC

with regard to levy of demand charges.

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Negative balance in Shareholders funds

2.48 As per the Tariff Order, the Honble Commission had expressed a view that theaccumulated losses up to the date of unbundling will have to be dealt with in

accordance with Para 5.4.3 of the National Electricity Policy and Tariff Policy. The

provisions of the National Electricity Policy and Tariff Policy envisages that the gapat the time of unbundling will have to be sorted out by financial restructuring and

support from the Government rather than passing on the accumulated losses to the

successor entities.

2.49 In line with the Tariff Policy, National Electricity policy and as per the Tariff Orderdated 30th March 2012, TANGEDCO have not claimed any relief on account of

accumulated losses prior to unbundling on 1-11-2010 in the given petition.

Supply of power to MNCs

2.50 There is no concession in tariff for the MNCs. Only uninterrupted power supply with

the tariff on par with other consumers is given.

Energy Efficiency Measures

2.51 TANGEDCO is taking steps to replace incandescent bulbs with CFLs in Villupuramand Kanyakumari districts. The same will be duplicated in other districts. Out of the

cost of Rs 60/- per CFL, TANGEDCO will pay Rs 45/- and consumer will pay Rs

15/-.

Commissions View

2.52 The Commission appreciates the concerns expressed by various stake holders both inthe written comments submitted by them to the Commission as well as the concerns

expressed during the Public Hearings held at Chennai on 3rd

May 2013, Tiruchirapalli

on 8th

May 2013, Madurai on 10th

May 2013 and Coimbatore on 17th

May 2013.

Transfer of Assets & Liabilities

2.53 The Transfer of Assets & Liabilities was to be completed by 30th April 2013. ButTNEB has sought for another 6 months extension from the Govt. The Commission is

of the opinion that this has to be completed at the earliest. The Commission directed

the utility to complete it as soon as possible through GoTN.

Financial Restructuring Plan

2.54 Commission would like to clarify that this issue can be examined only when the finalFRP scheme is submitted to the Commission.

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Segregation of Generation and Distribution business

2.55 Opinion of Commission on segregation of generation and distribution function wasconveyed as statutory advice on 27

th October 2010 which is annexed in this tariff

order.

Tamil Version of Petition must also be available

2.56 Commission has already given a direction on this matter to TANGEDCO for makingthe Tamil version of the Petition available.

Impact of freebies doled out by Government

2.57 Commission would like to reiterate that it functions within the powers derived fromthe Electricity-Act 2003 and cannot interfere in the policies of GoTN

Energy Efficiency and Demand Side Management

2.58 Demand Side Management is an effective tool to meet the demand supply positionin the short term. Being a cheaper option, it helps in meeting the demand as compared

to capacity addition. Also, it enables to reduce the carbon emission and defers the

investment to subsequent years.

2.59 It is necessary to create awareness among users for promoting Energy Conservationand Demand Side Management.

2.60 TANGEDCO should motivate the domestic and agriculture sector to adopt DSMmeasures. Awareness has to be created for using Star Labelled Appliances which may

cost more but would pay back by way of energy saving.

2.61 To facilitate DSM measures in the state, the Commission has notified the DSMregulation on 26

th February 2013. TANGEDCO is to submit relevant schemes for

implementing DSM and Energy Efficiency schemes to the Commission as specified

in the Regulation.

2.62 Use of CFLs should be encouraged with adequate arrangement for disposal ofunserviceable CFLs.

Restriction & Control

2.63 Various issues raised by stakeholders relating to Supply Code Regulations and R&COrders do not fall under the purview of present exercise of Tariff determination.

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Working Capital

2.64 Current liabilities are due to non payment of dues by TANGEDCO. HoweverCommission cannot assume that TANGEDCO will default and accordingly not allow

for any working capital. For the purpose of this order Commission is allowing

working capital based on norms laid out after considering available consumer securitydeposits.

Tax Exemption

2.65 On suggestions regarding waiving off electricity tax during the period of R&Cmeasures, the Commission would like to specify that Electricity Generation Tax or

Electricity Consumption Tax is in the domain of Government of Tamil Nadu.

Quality of Supply

2.66 As regards uninterrupted power supply, the Commission directs TANGEDCO to

maintain quality of supply as specified in Tamil Nadu Electricity DistributionStandards of Performance Regulations, 2004 as amended in which it specifies that

3. Quality of Service

Quality of service means providing uninterrupted, reliable electric supply at

stipulated voltage and frequency, which will be the end result of its planning,

designing of network, operation and service management to ensure stability in supply

and prompt compliance of consumers complaints on metering and billing. The supply

with frequent power failure, fuse of calls, voltage fluctuations will not ensure

continuity in supply. These factors determine the degree of satisfaction of the

consumers.

2.67 Also, the Commission feels that if the capacity addition would be on time, asdiscussed in later chapters, the power supply situation should improve in the second

control period leading to improved supply hours.

2.68 TANGEDCO is also required to take all necessary steps to ensure quality of service asper regulations.

2.

Delay in filing


2.69 The inordinate delay on the part of TANGEDCO had been condoned by theCommission. We regret that this should not have been done and instead the

Commission could have suo motu revised the tariff. There is precedence of this type

in one of the orders of West Bengal Electricity Regulatory Commission.

2.70 The tariff petition which had to be filed in November 2012, has been filed only inFebruary 2013. The reason for the delay shall be informed to the public.

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TANGEDCOs Reply

2.71 The delay in filing of the tariff petition has been caused mainly because of thefollowing reasons.

The Financial Restructuring Plan (FRP) which was notified by theGovernment of India on 5

th October, 2012 was in the process of being

finalized with multitude of meetings with various bankers during the months

of October, November and December of 2012.

Thereafter the audit of accounts for the year FY 2011-12 was under processand was completed by 31

stJanuary 2013.

Commissions View

2.72 Commission had been monitoring the filing of the petition vis--vis the due date offiling it i.e. 30

th November 2012. The commission had through two letters to

TANGEDCO, called for immediate filing of the ARR and tariff petition. The petitionwas eventually filed on 19

thFebruary 2013. After hearing the submissions made by

TANGEDCO, the Commission condoned the delay in filing this petition. The

Commission has directed TANGEDCO to file its petition for ARR and tariff for the

next year by the appointed date.

3.

O&M Expenses


2.73 Inter-firm comparison of costs especially O & M costs for TANGEDCO should be

done.

2.74 In the O & M expenses, the employee cost is projected to increase by 50% (Table 83).The norm for the industry needs to be checked.

2.75 The Government of Tamil Nadu has accepted the loss of TANGEDCO of aboutRs.25,512 Crores as on 31.11.2010. But the Government has not agreed to take the

pension liability of the employees and termed it as employee expenses. If it is

considered as employee expenses the same can be passed on to the tariff which may

affect the public. Therefore, the Government shall take the pension contribution as a

liability. The Commission shall direct the TANGEDCO to implement the directions

given in 2010.

TANGEDCOs Reply

2.76 The employee expenses submitted in the tariff petition for FY 2012-13 is based on theactual expenses incurred. The Honble Commission in its last tariff order had

approved the employee cost for TANGEDCO based on the apportioning of expenses

between TANGEDCO and TANTRANSCO. The industry norms cannot be compared

due to the geographical diversity in the state and for the reasons that electricity is

being supplied to widespread areas within the state of Tamil Nadu.

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Commissions View

2.77 Commission is guided by following regulations

2.78 Regulation-25 of TNERC Tariff Regulations:

25. Operation and Maintenance Expenses

The operation and maintenance expenses shall be derived on the basis of actual

operation and maintenance expenses for the past five years previous to current year

based on the audited Annual Accounts excluding abnormal operation and

maintenance expenses, if any, after prudence check by the Commission. The

Commission may, if considered necessary engage Consultant / Auditors in the process

of prudence check for correctness.

The average of such normative operation and maintenance expenses after prudence

check shall be escalated at the rate of 4% per annum to arrive at operation and

maintenance expenses for current year i.e. base year and ensuing year.

The base operation and maintenance expenses so determined shall be escalated

further at the rate of 4% per annum to arrive at permissible operation and

maintenance expenses for the relevant years of tariff period.

2.79 However as submitted by TANGEDCO, Commission is of the view that it is notappropriate to project the expenses for the next control period based on the actual

expenses incurred prior to unbundling of power utilities. Hence in this order

Commission projects the O&M expenses for next control period based on the audited

accounts for FY 2010-11 and provisional accounts for FY 2011-12.

2.80 Commission acknowledges the usefulness of benchmarking of O&M expenses andcomparison with other utilities, however considering the fact that the utilities in the

state are still in transition such comparison will not be of much help in the early stages

of restructuring.

4.

Fuel Cost and FPAC


2.81 Increased use of oil by TANGEDCO is increasing the fuel cost and TNERC needs tospecifically pay attention. TANGEDCO should be asked to justify the fuel

consumption rates and costs by comparing with those of other similarly placed

utilities in India.

2.82 TANGEDCO should have submitted the Petition for Fuel Price Adjustment Charges(FPCA). It is said that it has been granted an extension of time of four months. It has

not been complied with. The Commission has asked for its readiness to submit the

same.

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2.83 TANGEDCO to justify the fuel consumption rates vis-a-vis other utilities in India andcompare costs of its coal thermal plants vis-a-vis Central Generating stations.

TANGEDCOs Reply

2.84 The claim for FPCA will be filed once the power situation in the state improves andR&C measures are lifted.

Commissions View

2.85 Adjusting FPAC charges in the middle of the year has been allowed by the ElectricityAct 2003 under section 62 sub section 4, which states:

No tariff or part of any tariff may ordinarily be amended, more frequently than once

in any financial year, except in respect of any changes expressly permitted under the

terms of any fuel surcharge formula as may be specified.

2.86 Also, the APTEL in its Order O.P. 1 of 2011 dated 11-11-2011 under para 65 (vi) hasstated that

(vi) Fuel and Power Purchase cost is a major expense of the distribution Company

which is uncontrollable. Every State Commission must have in place a mechanism for

Fuel and Power Purchase cost in terms of Section 62 (4) of the Act. The Fuel and

Power Purchase cost adjustment should preferably be on monthly basis on the lines of

the Central Commissions Regulations for the generating companies but in no case

exceeding a quarter. Any State Commission which does not already have such

formula/mechanism in place must within 6 months of the date of this order must put in

place such formula/ mechanism.

2.87 Hence in line with the in principle approval of the implementation of the FPCAmechanism in the State, the Commission has decided not to allow the 4% escalation

in fuel price as sought for by TANGEDCO in its petition for the current MYT period.

TANGEDCO shall file quarterly FPCA petitions to the Commission to recover the

actual cost of fuel incurred and the actual cost of power purchase, if the same are in

variance from the figures approved in this Tariff Order.

2.88 Therefore, the Commission clarifies that FPAC exercise is important and should beimplemented and it is irrespective of annual tariff increase.

2.89 TANGEDCO was allowed to withdraw FPCA Petition for filing a corrected Petition.

However, they did not do it and filed the Tariff Petition beyond the due-date. Afterthe issue of this order, TANGEDCO shall file FPCA Petition every quarter as no

escalation has been considered for future power purchase and fuel price adjustment.

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5. Generation and Power Purchase


2.90 TANGEDCO should explain how NLCs 600 MW station of the same vintage as

Ennore is functioning well. In the context TANGEDCO should refer the coal handlingissues to NTPC. Cost from TANGEDCO plants is higher when compared to CGS i.e.

the cost of power purchase from TANGEDCOs own power is Rs. 4.36 p.u where as

cost of power purchase from Central Generating stations is only Rs. 3.01 p.u. This

shows that TANGEDCOs fuel management is inefficient.

2.91 TANGEDCO should be asked to give cost comparison of its coal based generatingstations with those of CGS to justify higher prices.

2.92 In estimating the Capital Costs, capitalization of the new plants shows greatdivergence (Table 63). MTPS III has a cost of about Rs 6 Crores per MW while

NCTPS Stage II has a cost of Rs 4.85 Crores. The difference needs to be explained.

2.93 Power Generation in TANGEDCOs own plants like Valathur and Mettur is gettingdelayed. Action shall be taken to speed up the works.

2.94 Delay in starting generation in existing power generation stations like Mettur,Valuthur, Kuthalam etc. should be explained.

2.95 TANGEDCO to present the actual conditions of Mettur 600 MW plant before thepublic so as to know the status of money spent

2.96 There is no need for private power generation. Government should make

arrangements for own generation.

2.97 Power cut has been reduced due to 3000 MW generated by the Wind Mills. But windmills are not permitted to generate and due to that about 1000 MW is wasted. On the

other hand 40% power cut still exists. High frequency is stated to be the reason for not

permitting the wind mills to generate. Action should be taken to utilize the entire

power generated by the wind mills during May to September.

2.98 It has been announced that Sandynallah Hydro Electric Project will be completed in10 years to meet the variations in the wind generation. The project shall be completed

within a short span of time.

2.99 The power generated by the wind mills is consumed by various consumers in differentdistricts. The wind energy has to be adjusted for peak hour, non peak hour and

normal hours. It is doubtful whether the accounting of wind energy is done properly

by the TANGEDCO. Since it is not possible to take readings in the large number of

wind mills, readings furnished by the consumers may be used for billing resulting in

huge loss to the TANGEDCO. The Commission shall form rules and regulations for

adjustment of generation from wind mills.

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2.100 Commission in the last tariff order directed TANGEDCO not to purchase power fromthe four private parties GMR, PPN, Samalpatti and Madurai power corporation. But

TANGEDCO has purchased power from the four private parties. It may be clarified

whether the Commission is functioning as a spectator or regulator. Power was

purchased at a higher cost.

2.101 Automatic meter reading facility shall be provided in the wind mills to properlyaccount the wind generation.

2.102 The entire power i.e. 100% share from the Kudankulam, Kalpakkam and Neyveli hasto be allotted to Tamil Nadu. 2 Reactors are ready in Kudankulam and the total

capacity of 2000 MW of power can be generated. But only 950 MW was allotted for

Tamil Nadu.

2.103 New projects should be taken up to increase own generation and provideuninterrupted power supply instead of purchasing costly power from private players.

2.104 In Tamil Nadu quality of coal is very bad. Purchasing this kind of bad quality coal isthe only the reason for less generation. This should be avoided.

TANGEDCOs Reply

2.105 Till 2006, 2007 there was no shortage of power as there was no gap between thedemand and supply. After 2006, 2007 the demand increased due to economic

development and boom in the IT sector. Power plants cannot be installed within a

few months. For installing a 1 MW plant, it costs Rs 5 to 5.5 Crores/MW and takes

minimum of 4 years after work is started. Therefore, plans were drawn to install

power plants. The NTPC Vallur plant and North Chennai plant will come up by next

month. The NLC JV plant of 1000 MW is underway and will come in by end of the

year. By then, the demand will be equal to supply.

2.106 In the year 2012-2013, own thermal power stations performed well. Due to failure ofmonsoon, performance of hydro power stations were affected badly. Kuttalam gas

station has been put into service after attending the major repair work.

2.107 The coal prices in domestic and international market have witnessed hike during thepast and accordingly projection have been made in the tariff petition. The details of

fuel prices and cost have been submitted in the tariff petition.

2.108 About 4000 MW will be available as additional generation, power cut problem may

be resolved gradually and will be lifted by December 2013.

2.109 MTPS and NCTPS are allotted on the basis of EPC contract. The tenders wereselected on the basis of international competitive bidding. The foreign components

involved in MTPS (Rs.1914 Crores) is much more than the foreign component in

NCTPS projects (370.95 Crores) and hence, the cost per MW is higher.

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2.110 Power purchase from the IPPs is resorted to only to meet the demand especiallyduring summer and examination time. Even this got approved from TNERC

subsequently.

Commissions View

2.111 The Central Generating Stations viz. Kudankulam, Kalpakkam and NLC will notcome under the jurisdiction of the Tamil Nadu Regulatory Commission or under the

State Government. Hence, the views submitted in relation to these stations are not

within the purview of this State Commission.

2.112 The Commission directs the TANGEDCO to properly monitor the on- going projectsso that they are commissioned without further delay.

2.113 The TANGEDCO should also ensure that the TANTRANSCO completes all theassociated transmission system for evacuation of power from the generating stations

which are getting commissioned during the second control period, so that power

generated from the generating stations are transmitted up to the Load Centers withoutany bottle necks. Necessary upgradation of the distribution system shall also be done

by TANGEDCO for effectively carrying power to the consumers

2.114 TANGEDCO has not provided necessary information for approving capital cost.Commission is provisionally accepting the TANGEDCO submission.

2.115 As regards the generation cost of new capacity addition, the Commission directedTANGEDCO to file separate petition for the approval of capital cost and tariff

determination of new power plants. However, the Commission in this Tariff Order for

the purpose of power purchase has provisionally considered the fixed and variable

charges for new power plants.

2.116 Commissions Open Access Regulation 2005 specifies that open access customershall provide metering arrangement as per the applicable CEA regulation and meters

should have facility to communicate the readings to SLDC or as may be specified by

the Commission.

2.117 Cost comparison between ISGS and TANGEDCO generating stations has to be onlike to like basis. While most of the CGS are pit ahead stations, the generating stations

of TANGEDCO are load centre stations.

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6. AT&C Losses


2.118 TANGEDCOs argument in 3.29.8 in petition related to lesser computed Agricultural

consumption and revision of T&D loss trajectory is flawed. Neither a representativestudy was done for establishing norms for agricultural consumption per HP of

connected load, nor any metering has been done to assess and a thumb rule was

adopted so far for this purpose. No serious study has been done by TANGEDCO to

identify the 11 KV/22 KV feeders and take corrective action. In this context

Commission should allow T & D loss at 18% as claimed by TANGEDCO in the past.

2.119 The average purchase cost of power for TANGEDCO is Rs.3.77 per unit inclusive ofwheeling cost of 21.98 paisa per unit. The average tariff realized per unit from HT I

A Category consumers (Industries) is Rs 6.95 and that of HT III Category of

consumers (Commercial) is Rs 7.98. A huge burden is put on them destroying their

competitiveness and economic efficiency.

2.120 Committee should be formed to reduce the loss of TANGEDCO and limit should befixed in respect to the loss.

2.121 Efforts should be taken to reduce the T&D loss every year.

2.122 Misuse of tariff with dishonest intention is booked under theft of energy. Misuse ofenergy shall be booked under section 126 and bypassing the meters shall be booked

under theft of energy.

2.123 Electricity theft should be curtailed.

2.124 Agricultural related activities like nursery is booked under theft. The ElectricityBoard is booking the farmers under theft and even when represented to the District

Collector, the District Collector was also not in a position to help.

2.125 Loss incurred by TANGEDCO is due to theft of electricity and not due to freeelectricity provided to the farmers.

TANGEDCOs Reply

2.126 The agricultural consumption submitted in the tariff petition is based on 5% samplemeter reading as per the methodology adopted by the Honble TNERC in its last tariff

order dated 30th March 2012.

2.127 Theft of power is least in Tamil Nadu. To reduce the theft of energy, at Regional level17 enforcement squads under the control of the Inspector General of Police (IGP) is

operating and a Flying squad under the control of Chairman, TANGEDCO is

functioning. Squad comprising of Ex-servicemen are being utilized to detect the

power theft in the state.

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2.128 Distribution loss cannot be avoided which is around 20% now. To reduce thedistribution loss improvement work such as establishment of substation and

strengthening of lines are being taken.

Commissions View

2.129 The Commission initiated suo-motu proceedings against TANGEDCO for noncompliance in the matter of T&D loss determination as directed by it and the Honble

APTEL. The Commission in the absence of scientific study for loss determination,

has fixed the T&D loss level at 16.4% for FY 2013-14 and has clarified that it shall

assume loss percentage at 16% and 15.6% for FY 2014-15 and FY 2015-16

respectively, if necessary scientific study is not done

Documents

T.P. No. 1 of 2013 dated 20-06-2013