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ANNUAL REPORT : 2008-09 ANNUAL REPORT (APRIL 2008 – March 2009) TABLE OF CONTENTS Chapter Subject Page Number Introduction 1 1. Tariff 2 2. Delhi Power Sector: Development of Power Sector, 22 Services and Some Associated Issues 3. Law Division 26 4. Consumer Welfare 34 5. Audit & Accounts 39 DELHI ELECTRICITY REGULATORY COMMISSION 41 ANNUAL REPORT : 2008-09 INTRODUCTION The Delhi Electricity Regulatory Commission (DERC) was set-up in accordance with the provisions of erstwhile Electricity Regulatory Commissions (ERC) Act, 1998. ERC Act, 1998 was repealed by Electricity Act, 2003. The functions of State Commission have been prescribed in Section 86 of Electricity Act, 2003. In pursuance of the details of activities specified in the Section, the Commission sets goals and objectives for the ensuing year. The most salient among these being the determination of Aggregate Revenue Requirement (ARR) for each of the distribution utilities, including the electricity tariff to be effective for the ensuing year. In addition, the Commission also sets itself the task of drafting new Regulations with reference to provisions of Electricity Act, 2003 or making changes in the existing Regulations and in this process the Commission is guided by the National Electricity Policy (NEP) and National Tariff Policy (NTP) issued by the Government of India. The Commission convenes meetings of statutory Committees constituted in accordance with the provisions of Electricity Act, 2003, such as, the State Advisory Committee(SAC) under Section 87 of the Act. A brief account of the proceedings of the meetings of SAC held during the year have been covered in the Report. The trend of important parameters of licensees such as AT&C losses, Capital Expenditure, Power Purchase Cost at Discom Periphery, efficiency gains, etc. have been dealt with under specific title heads, over different chapters of the Report. The Report also gives the detail of the important cases in which Orders/ Regulations of the Commission were challenged in Courts/Appellate Tribunals for Electricity (ATE) while mentioning the outcome in some of the important cases. DELHI ELECTRICITY REGULATORY COMMISSION 1 ANNUAL REPORT : 2008-09 1.TARIFF 1.1 Tariff FY 2009-10 Demand Side Management(DSM), electronic metering, street lighting, independent audit, payment Among various functions assigned to the of bills through cheque, Delhi Metro Rail Corporation Commission, one of the important functions is to (DMRC), Delhi International Airport Ltd.(DIAL), Delhi determine the tariff for electricity- wholesale, bulk, Jal Board(DJB), Railway Traction Tariff, Security grid or retail and for the use of transmission facilities. Deposit, own power generation, Billing Cycle, JJ After inception, the Commission issued an Order clusters, Subsidized Tariff and other issues raised th on “Rationalisation of Tariff for DVB” on 16 January, by the stakeholders were discussed. 2001. Subsequent to the Transfer Scheme of DVB and issuance of the Policy directions for privatisation 1.2 Approach of the Order of electricity distribution business in Delhi, the Under the Multi Year Tariff Framework, the Commission has been issuing tariff orders annually Commission had projected the ARR for Discoms nd since 22 February, 2002. for each year of the Control Period i.e. FY 08 to FY The first Multi Year Tariff(MYT) Order for the Discoms 11 in the MYT Order issued on 23rd February, 2008. was issued on 23rd February, 2008 and the Discoms The MYT Regulations provide that actual expenses filed their petition for true up of the first year of the incurred by the Petitioner in respect of the Control period and determination of Aggregate uncontrollable parameters shall be trued up at the Revenue Requirement (Wheeling and Retail Supply end of the respective financial year based on the Tariffs) for the FY 2009-10 on 2nd December, 2008. actual/audited information. Therefore, the On preliminary scrutiny of the Petition, various Commission considered the true-up of the deficiencies were observed and the Discoms were uncontrollable parameters for FY 07-08, revised the advised to respond to the deficiency memoranda uncontrollable parameters like Sales, Purchase of and submit revised petitions. The revised petitions Power for FY 09-10 and made consequential of the Discoms were admitted on 19th December, adjustments in the Aggregate Revenue 2008. After admission of the petitions of the Requirement/Tariff for FY 09-10. Discoms, comments were sought from Public on various tariff issues for which a Public Notice was 1.3 Approach for True up of the FY 07- issued in the leading English and vernacular 08 newspapers. On repeated requests from the The true-up for FY 07-08 was carried out as per the stakeholders, the date for submission for comments provisions of the MYT Regulations. Under the MYT was extended twice by the Commission. Regulations, the components of expenses have The Commission conducted the Public Hearing from been segregated into Controllable and 25th to 27th February, 2009 wherein various issues Uncontrollable Parameters. such as, power procurement, water pumping The MYT Regulations provide that the Uncontrollable requirements, time differential tariffs, two part tariff Parameters shall be trued up based on the audited for domestic consumers, energy conservation, financial statements and the Controllable 2 DELHI ELECTRICITY REGULATORY COMMISSION ANNUAL REPORT : 2008-09 Parameters shall not be trued up. In light of the same, controllable parameters as well as forecasts for the the Commission trued up the uncontrollable uncontrollable parameters for each year of the parameters viz. power purchase cost, energy sales/ Control Period. The MYT Regulations do not allow revenue based on audited financial statements for the controllable parameters to be revisited even if FY 07-08. the controllable targets are fixed on the basis of un- Additionally, the Petitioner raised several other audited accounts. Therefore, the Commission did issues in its Petition, which were under Appeal not revise the controllable parameters and continued before the Hon’ble ATE at the time of issue of the with the MYT Order projections for controllable Order. Pending decision of the Hon’ble ATE on such parameters for FY 09-10. issues, the Commission continued with the stand The Clause 5.28 of MYT Regulations provides taken in this regard in the MYT Order. specifically for correction of uncontrollable factors for each year of the Control Period to be included in 1.4 Approach for the FY 08-09 the ARR of the retail supply business. Since the The Discoms in their petition requested for revision uncontrollable parameters i.e. power purchase of the Aggregate Revenue Requirement for FY 08- quantum/cost and sales are not under the control of 09 which was already determined by the the Discoms, the Commission in the Order Commission in the MYT Order issued in February, considered the revision of ARR of the Discoms for 2008. However, the Commission was of the opinion the FY 09-10 on account of the changes in that in accordance with the MYT Regulations, the uncontrollable parameters. true-up for FY 08-09 can be considered only on the basis of audited financial accounts. The Commission 1.6 Tariff Design was of the view that true up for FY 2008-09 will be The Commission believes that in an ideal case considered as and when a tariff petition based on electricity tariff for all categories of consumers should audited accounts is filed. be fixed on cost to serve basis. Therefore, in accordance with the provisions of the Act and the 1.5 Approach for FY 09-10 policies prescribed from time to time, the The Discoms submitted their revised Aggregate Commission made an attempt in the Tariff Orders Revenue Requirement for the FY 09-10 along with for FY 09-10 to reduce the prevailing cross-subsidy. the true up Petition for FY 07-08. The Commission Also, the Commission thinks that it would not be examined whether there was a basis for revisiting possible to increase the tariff of the subsidized the ARR under the MYT Framework which is already categories to the level of cost to serve over night. approved in the MYT Order. The Commission As a step towards tariff rationalization, the considered the submissions of the Petitioner at the Commission reduced the energy charges of all time of issue of MYT Order for the Control Period Industrial consumers, Bulk Consumers like DJB, and after prudence check, analysis and application DIAL, Railways, etc. in keeping with the provisions of MYT Regulations approved the targets for of the Electricity Act, 2003, Tariff Policy etc. and also DELHI ELECTRICITY REGULATORY COMMISSION 3 ANNUAL REPORT : 2008-09 guided by some of the Orders of the Hon’ble ATE. Commission’s View The tariff of Industrial consumers was reduced on a Recognizing the immense potential of saving from seasonal basis linking it to the movement of the energy conservation practices, the Commission Power Purchase cost in various seasons of the year. directed the Discoms to make Demand Side For the remaining categories of consumers including Management an integral part of their day to day domestic consumers, the Commission continued operations and to undertake planning, designing with the fixed and energy charges in the Tariff Order and implementation of appropriate DSM program for FY 09-10 similar to the fixed and energy charges on a sustained basis by creating DSM cells in their specified in the MYT Order. Companies. 1.7 Stakeholder’s Comments The Commission also recommended to the Government of NCT of Delhi for making use of 1.7.1 Energy Conservation and Demand Side energy efficient devices like CFL, LED, T-5 etc. Management (DSM) mandatory for consumers in NCT of Delhi. Views of the Stakeholders The Commission signed an MOU with Lawrence Berkeley National Laboratory, USA for exchange of The stakeholders acknowledged the huge potential information in the field of energy conservation, energy for savings from energy conservation practices and efficiency and DSM.